-----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, US2bVaR4MhEVE7cw+IKpPLk6AUBRRcrWDuVyLCqGSE2eAX+dJmHUc1U7uFCbxXYc wyk0+0BD7smd352YsEqj6g== 0000892875-97-000001.txt : 19970329 0000892875-97-000001.hdr.sgml : 19970329 ACCESSION NUMBER: 0000892875-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-23842 FILM NUMBER: 97566189 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 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 (fee required) For the Year Ended December 31, 1996 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| 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, 1996. Of the proceeds received, $11,875,000 was paid to ATEL Securities Corporation, a wholly owned subsidiary of ATEL Financial Corporation (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, 1996, the Partnership had purchased equipment with a total acquisition price of $186,962,134. 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 Partners, 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 Partners, would not satisfy the general credit rating criteria for the portfolio. At December 31, 1996, in excess of 75% of the equipment acquired had been leased to lessees with an aggregate credit rating of Baa or better or to such hospitals or municipalities. During 1996, 1995 and 1994, certain lessees generated significant portions of the Partnership's total lease revenues as follows: Percentage of Total Lease Revenues Lessee Type of Equipment 1996 1995 1994 ------ ----------------- ---- ---- ---- Burlington Northern Railroad Locomotives 16% 14% * The Pittston Company Mining 11% 12% 14% Tyson Foods, Inc. Tractors / Trailers * * 10% * Less than 10%. 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, 1996, 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 * - --------- ---------------- ---------- ---------- Furniture & fixtures $4,943,570 $3,019,239 $2,124,081 Mining equipment 4,713,880 4,132,745 1,017,804 Tractors & trailers 4,333,557 2,478,383 2,371,414 Refrigeration units 1,268,656 560,000 1,133,159 Construction 913,073 425,000 647,639 Helicopter 844,525 920,000 308,000 Copiers 712,776 689,530 293,609 Office automation 356,288 188,228 217,433 Containers 195,009 168,046 61,215 Other 70,200 39,000 50,292 Rail cars 35,263 22,425 2,943 --------------- ---------------- --------------- $18,386,797 $12,642,596 $8,227,589 =============== ================ ===============
* Includes only those expenses directly related to the production of the related rents. 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, 1996 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 18.48% Furniture and fixtures 24,112,157 12.90% 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 6.61% Earth moving 11,943,745 6.39% Transportation, rail cars 7,180,000 3.84% Printing 4,707,508 2.52% Office automation 4,075,613 2.18% Manufacturing, other 3,475,585 1.86% Agriculture 1,643,101 0.88% Airport ground support 1,564,975 0.84% Aircraft, helicopter 844,525 0.45% Other 508,964 0.27% Food processing 278,909 0.14% --------------- ---------------- $186,962,134 100.00% =============== ================
Purchase price excluding Percentage of total Industry of lessee acquisition fees acquisitions ------------------ ---------------- ------------ Transportation, rail $45,670,556 24.43% Mining 29,823,055 15.95% Oil & gas 21,301,523 11.39% Retail, foods 11,182,563 5.98% 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 4.45% Primary metals 7,526,037 4.03% Manufacturing, other 6,815,862 3.65% Manufacturing, auto/truck 6,690,185 3.58% Printing 4,707,508 2.52% Retail, apparel 3,365,947 1.80% Electric appliance manufacturing 1,744,543 0.93% Business services 1,602,345 0.86% Retail, general 613,998 0.33% Other 763,700 0.40% =============== ================ $186,962,134 100.00% =============== ================
For further information regarding the Partnership's equipment lease portfolio as of December 31, 1996, 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. Item 3. LEGAL PROCEEDINGS No material legal proceedings are currently pending against the Partnership or against any of its assets. 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. Holders As of December 31, 1996, a total of 7,188 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; $1.20 in 1999 and 2000. The rate for monthly distributions from 1994 operations was $0.0875 per Unit. The distributions were made in February 1994 through December 1994 and in January 1995. For each quarterly distribution (made in April, July and October 1994 and in January 1995) the rate was $0.2625 per Unit. Distributions were from 1994 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 1995 operations was $0.0875 per Unit. The distributions were made in February 1995 through December 1995 and in January 1996. For each quarterly distribution (made in April, July and October 1995 and in January 1996) the rate was $0.2625 per Unit. Distributions were from 1995 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 1996 operations was $0.09166 per Unit. The distributions were made in February 1996 through December 1996 and in January 1997. For each quarterly distribution (made in April, July and October 1996 and in January 1997) the rate was $0.275 per Unit. Distributions were from 1996 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:
1996 1995 1994 1993 ---- ---- ---- ---- Distributions of net income (loss) $0.23 $0.13 $0.08 ($0.03) Return of investment 0.86 0.92 0.89 0.43 --------------- ---------------- --------------- --------------- Distributions per unit 1.09 1.05 0.97 0.40 Differences due to timing of distributions 0.01 0.00 0.08 0.36 --------------- ---------------- --------------- --------------- Nominal distribution rates from above $1.10 $1.05 $1.05 $0.76 =============== ================ =============== ===============
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. Item 6. SELECTED FINANCIAL DATA The following table presents selected financial data of the Partnership for the years ended December 31, 1996, 1995 and 1994 and for the period from March 19, 1993 (commencement of operations) to December 31, 1993. This financial data should be read in conjunction with the financial statements and related notes included under Item 8 of this report.
1996 1995 1994 1993 ---- ---- ---- ---- Gross Revenues $24,987,922 $20,884,669 $10,809,456 $2,173,205 Net income (loss) $2,851,885 $1,627,911 $679,530 ($60,621) Weighted average Limited Partner Units (Units) outstanding 12,497,713 12,498,550 8,437,365 2,280,173 Net income (loss) per Unit, based on weighted average Units outstanding $0.2259 $0.1289 $0.0797 ($0.0263) Distributions per Unit, based on weighted average Units outstanding $1.09 $1.05 $0.97 $0.40 Total Assets $130,546,718 $136,475,349 $108,090,539 $41,256,114 Total Non-recourse Debt $41,496,203 $19,129,298 $6,136,233 None Total Partners' Capital $76,545,683 $87,372,135 $98,949,871 $36,832,316
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity For the Partnership, 1996 was an active investment year. Funds which have been received, but which have not yet been invested in leased equipment, are invested in interest-bearing accounts or high-quality/short-term commercial paper. 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 $90,000,000 revolving line of credit with a financial institution that includes certain financial covenants. The line of credit expires on October 28, 1997. As of December 31, 1996, the Partnership had $9,921,190 of borrowings under this line of credit and the remaining availability was $38,857,117. 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, 1996, commitments to purchase lease assets totaled $1,964,818. As of December 31, 1996, cash balances consisted of amounts reserved for distributions in January 1997, generated from operations in 1996 ($1,585,776) and working capital reserves. 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, 1996, the Partnership had borrowed $51,500,460. The remaining unpaid balance as of that date was $41,496,203. As of that date, the Partnership also had outstanding balances of $9,921,190 on a line of credit. The Partnership's expected long-term borrowings are to be non-recourse to the Partnership, that is, the only recourse of the lender will be 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: 1996 vs. 1995: In 1996, the Partnership's primary source of cash from operations was rents from operating leases. Revenues from operating and direct financing leases increased by $3,786,126 and interest expense increased by $2,740,810. The net effect of these increases was offset by fluctuations in the Partnership's operating assets and liabilities. Sources of cash from investing activities consisted primarily of proceeds from sales of lease assets ($5,900,451) and cash flows from direct financing leases ($4,396,705). Cash flows from those leases increased by $1,792,188 compared to 1995 as a result of acquisitions of assets placed on financing leases in 1995 and in 1996. The primary investing uses of cash were purchases of operating and direct financing lease assets. In 1996, the only sources of cash from financing activities were proceeds from non-recourse debt ($30,770,985) and borrowings under the line of credit ($18,098,333). Most, if not all, of the borrowings under the line of credit are expected to be repaid with the proceeds of non-recourse debt in 1997. The primary financing uses of cash were scheduled payments of non-recourse debt, repayments on the line of credit and distributions to the limited partners. 1995 vs. 1994: In 1995, the Partnership's primary source of cash from operating activities was rents from operating leases. Such lease rents are expected to remain the Partnership's primary source of cash from operating activities in future periods. Sources of cash flows from investing activities consisted of direct financing lease rents accounted for as reductions of the Partnership's net investment in direct financing leases and proceeds from sales of lease assets. A smaller amount of cash was received from leveraged leases. The primary use of cash in investing activities was the purchase of assets on operating, direct financing and leveraged leases and related initial direct costs. In 1995, the Partnership's sources of cash from financing activities consisted of non-recourse debt borrowings and borrowings on lines of credit. The primary uses of cash in financing activities were repayments of such borrowings 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). Because of the timing of the commencement of operations, the fact that the offering continued through November 15, 1994 and the fact that the initial portfolio acquisitions were not completed until 1996, the results of operations in 1994 and 1995 are not comparable and are not expected to be comparable to future periods. As of December 31, 1996, 24% of total equipment at cost (19% at December 31,1995 and 26% at December 31, 1994) was leased to lessees in the rail transportation industry. As of December 31, 1996, 16% of total equipment at cost (20% at December 31, 1995 and 17% at December 31, 1994) was leased to lessees in the mining industry. As of December 31, 1996, 11% of total equipment cost (13% at December 31, 1995 and less than 10% at December 31, 1994) was leased to lessees in the oil and gas industry. Leases are subject to the general partners' 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. 1996 vs. 1995: Operations in 1996 resulted in net income of $2,851,885 compared to $1,627,911 in 1995. Total revenues increased by $4,103,253 while expenses increased by $3,040,234. Operating lease revenues and direct financing lease revenues increased by $2,281,557 and $1,504,569, respectively. Both of these increases were the result of lease asset acquisitions in 1995 and in 1996. Gains on sales of assets increased by $391,843. The 1996 gains included $689,237 realized on the sale of assets leased to Barney's, Inc. (Barney's). See additional discussion below relating to this transaction. Depreciation and amortization expense increased by $751,100 due to the asset acquisitions in 1995 and 1996 noted above. Equipment management fees are related to the Partnership's gross lease rents and incentive management fees are related to the amounts distributed to the Limited Partners from "Operations", as defined in the Agreement of Limited Partnership. Both gross rents and such distributions increased in 1996 compared to 1995. These underlying increases gave rise to the increase in management fees. The increase in interest expense is directly related to increased debt balances in 1996 compared to 1995. The Partnership's provision for losses and impairments declined $731,719 compared to 1995. In 1995, a specific provision was made relating to the Barney's lease assets in the amount of $778,169. There were no similar defaults in 1996 for which specific reserves were considered necessary. 1995 vs. 1994: Operations in 1995 resulted in net income of $1,627,911 compared to $679,530 in 1994. As in 1994, the Partnership's main source of revenues was rents from operating leases. These rents increased from $9,773,188 in 1994 to $18,195,191 in 1995, an increase of 86%. The increase from 1994 to 1995 is due to the acquisition of operating lease assets during 1994 and 1995. Direct financing lease revenues also increased compared to 1994. This increase was also due to 1994 and 1995 asset acquisitions. For the first time, in 1995, the Partnership started to have significant amounts of assets come off lease due to scheduled lease terminations. The amount of assets sold was significant in 1995 whereas it had not been in 1994. Asset sales are expected to become more significant over the years as more of the Partnership's leases mature. In 1995, sales of such assets resulted in net gains of $933,289 compared to $2,564 in 1994. Gains or losses on such sales are not expected to be comparable from one year to another. Depreciation of operating lease assets is the Partnership's largest expense and is expected to remain so in the future. Depreciation and amortization increased from $8,135,951 in 1994 to $14,600,474 in 1995, a 79% increase. The increase is comparable to the increase noted above relating to operating lease revenues and is due to the same acquisitions of operating lease assets in 1994 and 1995. Interest expense has increased dramatically from $61,036 in 1994 to $1,222,050 in 1995. In 1995, the Partnership borrowed $14,593,242 on a non-recourse basis and borrowed $33,994,956 on lines of credit. In 1994, the Partnership had borrowed only $6,136,233, most of which was borrowed in the fourth quarter of that year. The timing of the borrowings and the increased amounts outstanding in 1995 compared to 1994 gave rise to the increase in interest expense noted in 1995. Equipment management fees are related to the Partnership's gross lease rents and incentive management fees are related to the amounts distributed to the Limited Partners from "Operations", as defined in the Agreement of Limited Partnership. Both gross rents and such distributions increased in 1995 compared to 1994. These underlying increases gave rise to the increase in management fees. The administrative costs of the Partnership tend to be the greatest during its initial years of operations. The offering was completed in late 1994 and these costs have declined somewhat since that time. In January 1996, Barney's, Inc. (Barney's), one of the Partnership's lessees, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Partnership's lease transaction had been financed primarily with non-recourse debt. In addition, the Partnership held certain deposits which it ultimately retained. The following table summarizes the cash flows relating to the lease transaction with Barney's through December 31, 1995: Purchase of lease assets, at cost ($3,365,947) Rents received and retained by the Partnership 1,241,443 Non-recourse debt proceeds received by the Partnership 2,021,084 ---------------- (103,420) Deposits received from lessee which were retained by the Partnership 124,235 ---------------- Net cash flows $20,815 ================ Effective January 1, 1995, the Partnership adopted Financial Accounting Standards Board Statement Number 121 (FAS 121). As a result, the Partnership established a reserve for the impairment of the value of assets leased to Barney's in the amount of $778,169. Of this amount, $557,563 related to the adoption of FAS 121. See Note 9 to the financial statements included as Item 8 of Part I of this report for additional information regarding the reserve. The Partnership's provision for losses and impairments increased by $952,855. The reserve related to Barney's constitutes the majority of the Partnership's provision for losses and impairments. The remainder was a general reserve. Reserves for losses were first established in the fourth quarter of 1994. The amounts provided, exclusive of the amounts related to Barney's, increased over 1994. Provisions for losses and impairments were made in one quarter in 1994 and were made in all four quarters in 1995. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Financial Statements and Notes to Financial Statements attached hereto at pages 11 through 26. REPORT OF 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, 1996 and 1995 and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1996. 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 generally accepted auditing standards. 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, 1996 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP San Francisco, California February 7, 1997 ATEL CASH DISTRIBUTION FUND V, L.P. BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS 1996 1995 ---- ---- Cash and cash equivalents $1,917,349 $2,401,318 Accounts receivable 2,889,713 2,377,496 Other assets 10,000 10,000 Investments in equipment and leases 125,729,656 131,686,535 ---------------- --------------- Total assets $130,546,718 $136,475,349 ================ =============== LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $41,496,203 $19,129,298 Line of credit 9,921,190 26,292,088 Accounts payable: Equipment purchases 464,604 14,097 General Partner 295,705 1,026,433 Other 284,929 814,853 Deposits due to lessees - 627,508 Accrued interest payable 232,808 381,631 Unearned lease income 1,305,596 817,306 ---------------- --------------- Total liabilities 54,001,035 49,103,214 Partners' capital: General Partner 51,087 22,568 Limited Partners 76,494,596 87,349,567 ---------------- --------------- Total partners' capital 76,545,683 87,372,135 ---------------- --------------- Total liabilities and partners' capital $130,546,718 $136,475,349 ================ =============== See accompanying notes. ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---- ---- ---- Revenues: Leasing activities: Operating leases $20,476,748 $18,195,191 $9,773,188 Direct financing leases 2,911,529 1,406,960 553,302 Leveraged leases 178,390 217,129 180,284 Gain on sales of assets 1,325,132 933,289 2,564 Interest income 39,898 124,308 294,207 Other 56,225 7,792 5,911 ---------------- --------------- --------------- 24,987,922 20,884,669 10,809,456 Expenses: Depreciation and amortization 15,351,574 14,600,474 8,135,951 Equipment and incentive management fees to General Partner 1,725,751 1,623,818 1,013,448 Interest expense 3,962,860 1,222,050 61,036 Provision for losses and impairments 255,294 987,013 34,158 Administrative cost reimbursements to General Partner 455,316 535,812 706,324 Professional fees 117,566 110,744 65,028 Other 428,631 176,847 113,981 ---------------- --------------- --------------- 22,296,992 19,256,758 10,129,926 ---------------- --------------- --------------- Income before extraordinary item 2,690,930 1,627,911 679,530 Extraordinary gain on early extinguishment of debt 160,955 - - ---------------- --------------- --------------- Net income $2,851,885 $1,627,911 $679,530 ================ =============== =============== Net income: General Partner $28,519 $16,279 $6,795 Limited Partners 2,823,366 1,611,632 672,735 ---------------- --------------- --------------- $2,851,885 $1,627,911 $679,530 ================ =============== =============== Income before extraordinary item per limited partnership unit $0.21 $0.13 $0.08 Extraordinary gain on early extinguishment of debt per limited partnership unit 0.02 - - --------------- ---------------- --------------- Net income per Limited Partnership unit $0.23 $0.13 $0.08 =============== ================ =============== Weighted average number of units outstanding 12,497,713 12,498,550 8,437,365
See accompanying notes. ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited Partners ---------------- General Units Amount Partner Total ----- ------ ------- ----- Balance January 1, 1994 4,412,259 $36,832,822 ($506) $36,832,316 Capital contributions 8,087,791 80,877,910 80,877,910 Less selling commissions to affiliates (7,683,401) (7,683,401) Other syndication costs to affiliates (3,533,403) (3,533,403) Distributions to Limited Partners ($0.97 per Unit) (8,223,081) (8,223,081) Net loss 672,735 6,795 679,530 --------------- ---------------- --------------- --------------- Balance December 31, 1994 12,500,050 98,943,582 6,289 98,949,871 Other syndication costs to affiliates (89,139) (89,139) Capital contributions rescinded (1,500) (15,000) (15,000) Distributions to Limited Partners ($1.05 per Unit) (13,101,508) (13,101,508) Net income 1,611,632 16,279 1,627,911 --------------- ---------------- --------------- --------------- Balance December 31, 1995 12,498,550 87,349,567 22,568 87,372,135 Limited Partnership Units repurchased (1,550) (5,512) (5,512) Distributions to Limited Partners ($1.09 per Unit) (13,672,825) (13,672,825) Net income 2,823,366 28,519 2,851,885 --------------- ---------------- --------------- --------------- Balance December 31, 1996 12,497,000 $76,494,596 $51,087 $76,545,683 =============== ================ =============== ===============
See accompanying notes. ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---- ---- ---- Operating activities: Net income $2,851,885 $1,627,911 $679,530 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,351,574 14,600,474 8,135,951 Provision for losses and impairments 255,294 987,013 34,158 Leveraged lease income (178,390) (217,129) (82,407) Gain on sales of assets (1,325,132) (933,289) (2,564) Extraordinary gain on early extinguishment of debt (160,955) - - Changes in operating assets and liabilities: Accounts receivable (512,217) (1,015,951) (692,153) Other assets - - (10,000) Accounts payable, General Partner (730,728) (362,779) 588,788 Accounts payable, other (529,924) 723,603 17,886 Accrued interest payable (148,823) 334,642 46,989 Deposits due to lessees (627,508) (217) 627,725 Unearned lease income 488,290 56,670 709,317 ---------------- --------------- --------------- Net cash provided by operating activities 14,733,366 15,800,948 10,053,220 Investing activities: Purchases of equipment on operating leases (16,665,304) (26,990,580) (56,464,037) Proceeds from sales of assets 5,900,451 6,930,477 22,572 Decrease (increase) of net investment in leveraged leases 458,388 (105,594) - Purchases of equipment on direct financing leases (1,639,128) (23,121,223) (13,324,151) Reduction of net investment in direct financing leases 4,396,705 2,604,517 1,513,782 Purchases of equipment on leveraged leases - (2,099,438) (3,444,120) Initial direct lease costs paid to General Partner (147,072) (1,818,287) (2,738,556) Purchase of residual value interests - (835,760) - ---------------- --------------- --------------- Net cash used in investing activities (7,695,960) (45,435,888) (74,434,510) Financing activities: Borrowings under line of credit 18,098,333 33,994,956 - Repayments of borrowings under line of credit (34,469,231) (7,702,868) (2,305,623) Proceeds of non-recourse debt 30,770,985 14,593,242 6,136,233 Repayments of non-recourse debt (8,243,125) (1,600,177) - Distributions to Limited Partners (13,672,825) (13,101,508) (8,223,081) Payment of syndication costs to General Partner - (89,139) (11,216,804) Limited Partnership Units repurchased (5,512) - - Capital contributions rescinded - (15,000) - Capital contributions received - - 80,877,910 Unadmitted subscriptions for Limited Partnership units - - (103,980) ---------------- --------------- --------------- Net cash (used in) provided by financing activities (7,521,375) 26,079,506 65,164,655 ---------------- --------------- --------------- Net (decrease) increase in cash and cash equivalents (483,969) (3,555,434) 783,365 Cash and cash equivalents at beginning of period 2,401,318 5,956,752 5,173,387 ---------------- --------------- --------------- Cash and cash equivalents at end of period $1,917,349 $2,401,318 $5,956,752 ================ =============== ===============
ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
1996 1995 1994 ---- ---- ---- Supplemental disclosures of cash flow information: Cash paid during the year for interest $4,111,683 $887,408 $14,047 ================ =============== =============== Schedule of non-cash transactions: Operating lease assets reclassified to direct financing leases $2,798,303 Less accumulated depreciation (773,303) ---------------- $2,025,000 ================ Operating lease assets reclassified to assets held for sale or lease $35,262 Less accumulated depreciation (1,070) ---------------- $34,192 ================
See accompanying notes. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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. Contributions in the amount of $600 were received as of October 6, 1992, $100 of which represented the General Partner's continuing interest, and $500 of which represented the Initial Limited Partners' capital investment (no other financial activity occurred in 1992). 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 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 born 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, 1996, the original terms of the leases ranged from one 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: Revenues from operating leases are recognized evenly over the life of the related 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. 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 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 2. Summary of significant accounting policies (continued): 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. 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. 1996 1995 ---- ---- Financial statement basis of net assets and liabilities $76,545,683 $87,372,135 Tax basis of net assets and liabilities 51,668,477 72,840,637 ---------------- --------------- Difference $24,877,206 $14,531,498 ================ =============== The following reconciles the net income reported in these financial statements to the loss reported on the Partnership's federal tax return (unaudited): 1996 1995 ---- ---- Net income per financial statements $2,851,885 $1,627,911 Adjustment to depreciation expense (18,949,366) (19,492,254) Adjustments to lease revenues 8,509,318 5,045,571 Extraordinary gain on extinguishment of debt (160,955) - Provision for losses 255,294 987,013 Adjustments to interest expense - (21,110) Other - 21,110 ---------------- --------------- Net loss per federal tax return ($7,493,824) ($11,831,759) ================ =============== Credit Risk: Financial instruments which potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents. 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. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 2. Summary of significant accounting policies (continued): 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. Per unit data: Net income and distributions per unit are based upon the weighted average number of units outstanding during the period. 3. Investments in equipment and leases: As of December 31, 1996, the Partnership's investments in equipment and leases consist of the following:
Depreciation Expense or Reclass- Amortization ifications or 1995 Additions of Leases Dispositions 1996 ---- --------- --------- ------------ ---- Net investment in operating leases $90,328,014 $17,115,811 ($14,163,444) ($5,968,276) $87,312,105 Net investment in direct financing leases 32,688,774 1,639,128 (4,396,705) 717,165 30,648,362 Net investment in leveraged leases 4,854,410 - (279,998) (262,125) 4,312,287 Assets held for sale or lease - - (4,992) 159,750 154,758 Residual value interests 835,760 - - - 835,760 Reserve for losses (1,021,171) (255,294) - 778,167 (498,298) Initial direct costs, net of accumulated amortization of $2,189,959 in 1996 and $1,497,737 in 1995 4,000,748 147,072 (1,183,138) - 2,964,682 --------------- --------------- ---------------- --------------- --------------- $131,686,535 $18,646,717 ($20,028,277) ($4,575,319) $125,729,656 =============== =============== ================ =============== ===============
ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 3. Investments in equipment and leases (continued): Operating leases: Property on operating lease consists of the following as of December 31, 1995, additions and dispositions during 1996 and as of December 31, 1996:
Reclass- ifications or 1995 Additions Dispositions 1996 ---- --------- ------------ ---- Transportation $34,422,258 $15,656,550 ($8,396,995) $41,681,813 Construction 24,075,113 - - 24,075,113 Materials handling 17,778,985 278,117 - 18,057,102 Mining 15,164,692 - - 15,164,692 Furniture and fixtures 10,475,743 - (3,365,947) 7,109,796 Manufacturing 2,834,155 641,430 - 3,475,585 Printing 2,325,000 - - 2,325,000 Office automation 2,076,126 539,714 (237,685) 2,378,155 Food processing 1,826,162 - - 1,826,162 Other 353,612 - (70,200) 283,412 --------------- ---------------- --------------- --------------- 111,331,846 17,115,811 (12,070,827) 116,376,830 Less accumulated depreciation (21,003,832) (14,163,444) 6,102,551 (29,064,725) --------------- ---------------- --------------- --------------- $90,328,014 $2,952,367 ($5,968,276) $87,312,105 =============== ================ =============== ===============
Direct financing leases: As of December 31, 1996, 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, 1996 and 1995:
1996 1995 ---- ---- Total minimum lease payments receivable $34,535,417 $35,859,268 Estimated residual values of leased equipment (unguaranteed) 8,936,243 7,195,484 ---------------- --------------- Investment in direct financing leases 43,471,660 43,054,752 Less unearned income (12,823,298) (10,365,978) ---------------- --------------- Net investment in direct financing leases $30,648,362 $32,688,774 ================ ===============
All of the property on leases was acquired in 1996, 1995, 1994 and 1993. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 3. Investments in equipment and leases (continued): At December 31, 1996, 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 ------------ ------ ------ ----- 1997 $17,030,636 $8,074,041 $25,104,677 1998 13,156,989 5,478,854 18,635,843 1999 8,864,598 4,949,017 13,813,615 2000 5,787,881 3,744,308 9,532,189 2001 3,941,207 3,003,681 6,944,888 Thereafter 9,061,351 9,285,516 18,346,867 --------------- --------------- ---------------- $57,842,662 $34,535,417 $92,378,079 =============== =============== ================ Leveraged leases: As of December 31, 1996, investment in leveraged leases consists of an air separation plant and materials handling equipment. The following lists the components of the Partnership's investment in leveraged leases as of December 31, 1996 and 1995:
1996 1995 ---- ---- Aggregate rentals receivable $5,149,595 $7,482,839 Less aggregate principal and interest payable on non-recourse loans (3,046,744) (4,915,644) Estimated residual value of leased assets 2,731,886 2,994,011 Less unearned income (522,450) (706,796) ---------------- --------------- Net investment in leveraged leases $4,312,287 $4,854,410 ================ ===============
4. Non-recourse debt: At December 31, 1996, 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 6.50% to 10.53%. The notes are secured by assignments of lease payments and pledges of assets. At December 31, 1996, the carrying value of the pledged assets is approximately $54,865,142. The notes mature from 1997 through 2015. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 4. Non-recourse debt (continued): Future minimum payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 1997 $7,318,530 $3,007,584 $10,326,114 1998 7,987,836 2,416,170 10,404,006 1999 6,149,056 1,831,354 7,980,410 2000 4,499,170 1,377,666 5,876,836 2001 4,337,075 1,005,577 5,342,652 Thereafter 11,204,536 4,616,457 15,820,993 --------------- ---------------- --------------- $41,496,203 $14,254,808 $55,751,011 =============== ================ =============== 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. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 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 1996, 1995 and 1994:
1996 1995 1994 ---- ---- ---- Selling commissions (equal to 9.5% of the selling price of the Limited Partnership units, deducted from Limited Partners' capital) $7,683,401 Reimbursement of other syndication costs $89,139 3,533,403 Acquisition fees equal to 3.5% of the equipment purchase price, for evaluating and selecting equipment to be acquired (not to exceed approximately 4.75% of Gross Proceeds, included in investment in leases) $147,072 1,818,287 2,738,556 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). 1,725,751 1,623,818 1,013,448 Administrative costs reimbursed to General Partner 455,316 535,812 706,324 ---------------- --------------- --------------- $2,328,139 $4,067,056 $15,675,132 ================ =============== ===============
6. Partners' capital: As of December 31, 1996, 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 Compensation. 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. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 6. Partners' capital (continued): 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. 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, 1996, 1995 and 1994, there were concentrations (greater than 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows: 1996 1995 1994 ---- ---- ---- Rail transportation 24% 19% 26% Mining 16% 20% 17% Petroleum and coal products 11% 13% * Food processing * 10% * * Less than 10%. During 1996, two customers comprised 16% and 11% of the Partnership's revenues from leases. During 1995, two customers comprised 14% and 12% of the Partnership's revenues from leases. During 1994, two customers comprised 14% and 10% 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 $90,000,000 revolving credit agreement with a group of financial institutions which expires on October 28, 1997. 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 1996, the Partnership had borrowed $18,098,333 under the line of credit. Repayments on the line of credit were $34,469,231 during 1996 and $9,921,190 remained outstanding as of December 31, 1996. At December 31, 1996, the rates on such borrowings varied from 7.12% to 8.25%. ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 8. Line of credit (continued): In addition, certain of the Affiliates had borrowed an aggregate of $9,821,300 under the warehouse facility as of December 31, 1996. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of December 31, 1996. At December 31, 1996, $38,857,117 was available under this agreement. During 1995, the Partnership had borrowed $33,994,956 under the line of credit. Of those amounts, $7,702,868 was repaid during 1995 and $26,292,088 remained outstanding as of December 31, 1995. 9. Extraordinary gain on extinguishment of debt: In January 1996, Barney's, Inc., one of the Partnership's lessees filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In accordance with Financial Accounting Standards Board Statement No. 121 (FAS 121) the Partnership determined that the assets under an operating lease to this particular lessee were impaired as of December 31, 1995. The Partnership estimated that only a portion of the contractual cash flows would be received under the lease. Under FAS 121, the estimated cash flows were discounted at the effective rate of the non-recourse debt related to the lease and the assets were written down to the present value of those cash flows. Assets and liabilities related to the lease transaction were as follows as of December 31, 1995: Assets at cost $3,365,947 Accumulated depreciation (1,287,475) ---------------- Book value of lease assets 2,078,472 Deposits from lessee (124,235) Non-recourse debt (1,733,741) ---------------- Net assets included in the Partnership's balance sheet as of December 31, 1995 before provision for impairment 220,496 Reserve for impairment (778,169) ---------------- Excess of non-recourse debt over net assets ($557,673) ================ On July 19, 1996, the assets subject to the lease were purchased by a third party. As part of the purchase and transaction restructure, the related non-recourse debt was extinguished by the lender and the Partnership received a small amount of cash proceeds. The sale resulted in a gain on the sale of the assets and a gain on the extinguishment of the related non-recourse debt. The following summarizes this transaction: Assets at cost $3,365,947 Accumulated depreciation at June 30, 1996 (1,573,580) ---------------- Book value of lease assets at June 30, 1996 1,792,367 Reserve for impairment (778,169) ---------------- Carrying value at June 30, 1996 1,014,198 Deposits from lessee retained by Partnership (124,235) ---------------- Excess of carrying value over deposits from lessee 889,963 Gross sales proceeds 1,579,200 ---------------- Gain on sale of assets $689,237 ================ ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 9. Extraordinary gain on extinguishment of debt (continued): Non-recourse debt $1,733,741 Gross sales proceeds used to extinguish non-recourse debt (1,572,786) ---------------- Extraordinary gain on extinguishment of debt $160,955 ================ Gross sales proceeds $1,579,200 Gross sales proceeds used to extinguish non-recourse debt (1,572,786) ---------------- Net cash proceeds to Partnership $6,414 ================ 10. Fair value of financial instruments: The Partnership has adopted Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," which requires disclosure of the fair value of financial instruments for which it is practicable to estimate fair value. 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 maturity of these instruments. Accounts payable, accrued interest and customer deposits: The carrying amounts of accounts payable, accrued interest and customer deposits approximate fair value because of the short 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, 1996 is $39,629,318. Line of credit: The carrying amount of the Partnership's variable rate line of credit approximates fair value. 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 the General Partner and affiliated companies pursuant to a corporate restructuring completed in July 1994. The outstanding capital stock of ATEL Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash, and was obtained in the restructuring in exchange for their capital interests in ATEL Financial Corporation. 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, ATEL Financial Corporation and their 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 F. Randall Bigony . . . . Senior Vice President and Chief Financial Officer of ACG, AFC, ALC, AIS and AEC Donald E. Carpenter . . . Vice President and Controller of ACG, AFC, ALC, AEC and AIS; Chief Financial Officer of ASC Vasco H. Morais . . . . . General Counsel for ACG, AFC, ALC, AIS and AEC William J. Bullock . . . . Director of Asset Management of AEC Jeffrey A. Schwager . . . Vice President - Syndication of ALC Russell H. Wilder . . . . Vice President - Credit of AEC John P. Scarcella . . . . Vice President of ASC A. J. Batt, age 60, 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 46, 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. F. Randall Bigony, age 39, joined ATEL in 1992 to review administrative operations within ATEL Financial Corporation and to develop and implement functional plans to support company growth. He currently oversees ATEL's accounting, MIS and treasury functions. From 1987 until joining ATEL, Mr. Bigony was president of F. Randall Bigony & Co., a consulting firm that provided financial and strategic planning services to emerging growth companies. From 1983 to 1987, he was a manager with the accounting firm of Ernst & Whinney, serving clients in its management consulting practice. Mr. Bigony received a B.A. degree in business from the University of Massachusetts and an M.B.A. degree in finance from the University of California, Berkeley. He is a founding board member and acting treasurer of the I Have a Dream Foundation Bay Area Chapter. Donald E. Carpenter, age 48, 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 38, 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 and a J.D. degree in 1986 from Golden Gate University Law School. Mr. Morais has been an active member of the State Bar of California since 1986. William J. Bullock, age 33, joined ATEL in 1991, as the director of asset management. He assumed responsibility for the disposition of off-lease equipment and residual valuation analysis on new lease transactions. Prior to joining ATEL, Mr. Bullock was a senior member of the equipment group at McDonnell Douglas Finance Corporation("MDFC") responsible for managing its $4 billion portfolio of leases. Mr. Bullock was involved in negotiating sales and renewals as well as preparing and inspecting equipment. Prior to joining MDFC in 1989, Mr. Bullock was the Senior Negotiator at Equitable Leasing (a subsidiary of GE Capital Equipment Corp.) in San Diego. At Equitable, he handled the end-of-lease negotiations and equipment dispositions of a portfolio comprised of equipment leased primarily to Fortune 200 companies. Mr. Bullock has been a member of the Equipment Lessors Association ("ELA") since 1987 and has authored ELA industry articles. He received a B.S. degree in Finance in 1987 from San Diego State University and is pursuing his M.B.A. Jeffrey A. Schwager, age 36, joined ATEL in 1991 as vice president - syndication and is responsible for acquiring transactions from intermediaries as well as debt and equity placement. Prior to joining ATEL, Mr. Schwager was a member of General Electric Capital Corporation's Institutional Financing Group. There, he was responsible for originating equipment lease and corporate finance opportunities, as well as soliciting equipment portfolios in conjunction with marketing a proprietary capital enhancement product. From 1985 through 1990, Mr. Schwager held several positions with Bank Ireland/First Financial, most recently Vice President Marketing, where he was responsible for originating and negotiating tax-oriented leveraged lease financings for Fortune 500 companies. From 1983 to 1985 Mr. Schwager was an Associate Consultant with The Bigelow Company, a middle market investment banking and management consulting firm, developing and implementing strategic plans for a number of clients. Prior to The Bigelow Company, he worked for Petro-Lewis Corporation as a joint-interest accountant. Mr. Schwager received his B.S. in Business Administration from Babson College in 1982, majoring in Finance and Entrepreneurial Studies. Russell H. Wilder, age 42, 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 at Davis. He has been awarded the Certified Lease Professional designation by the Western Association of Equipment Lessors. John P. Scarcella, age 35, 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 through December 31, 1996 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 revenues from "operating" leases and (ii) 2% of gross 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. 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 shall 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. 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 1996, 1995 and 1994. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners At December 31, 1996 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)
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 herein 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, 1996 and 1995 Statements of Operations for the years ended December 31, 1996, 1995 and 1994 Statements of Changes in Partners' Capital for the years ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 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 1996 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 From 10K for the period ended December 31, 1993 (File No. 33-53162) 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: 3/27/1997 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) 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 3/27/1997 - --------------------- chief executive officer of A. J. Batt ATEL Financial Corporation /s/ Dean Cash Executive vice president and 3/27/1997 - --------------------- director of ATEL Financial Dean Cash Corporation /s/ F. Randall Bigony Principal financial officer 3/27/1997 - ----------------------- of registrant; principal F. Randall Bigony financial officer of ATEL Financial Corporation /s/ Donald E. Carpenter Principal accounting officer 3/27/1997 - ------------------------ of registrant; principal Donald E. Carpenter accounting officer of ATEL 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. EX-27 2 FDS --
5 YEAR DEC-31-1996 DEC-31-1996 1,917,349 0 2,889,713 0 0 0 0 0 130,546,718 0 0 0 0 0 76,545,683 130,546,718 0 24,987,922 0 0 18,078,838 255,294 3,962,860 2,690,930 0 2,690,930 0 160,955 0 2,851,885 0 0
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