10-Q 1 fund510q2q2001.txt REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2001 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2001 |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _______ to _______ Commission File Number 0-23842 ATEL Cash Distribution Fund V, L.P. (Exact name of registrant as specified in its charter) 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 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 |_| DOCUMENTS INCORPORATED BY REFERENCE None 1 Part I. FINANCIAL INFORMATION Item 1. Financial Statements. 2 ATEL CASH DISTRIBUTION FUND V, L.P. BALANCE SHEETS JUNE 30, 2001 AND DECEMBER 31, 2000 (Unaudited) ASSETS 2001 2000 ---- ---- Cash and cash equivalents $268,705 $1,571,943 Accounts receivable, net of allowance for doubtful accounts of $100,605 in 2001, none in 2000 1,620,612 2,299,308 Other receivables, net of allowance for doubtful accounts of $100,605 in 2000 - 1,309,783 Investments in leases 39,506,267 44,819,860 ----------------- ----------------- $41,395,584 $50,000,894 ================= ================= LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $13,481,519 $16,389,312 Line of credit 2,000,000 1,000,000 Accounts payable Other 791,964 860,649 General partner 317,754 76,886 Equipment purchases 1,352 1,352 Accrued interest expense 37,799 61,866 Unearned lease income 127,398 194,253 ----------------- ----------------- Total liabilities 16,757,786 18,584,318 Partners' capital: General partner 193,836 186,646 Limited partners 24,443,962 31,229,930 ----------------- ----------------- Total partners' capital 24,637,798 31,416,576 ----------------- ----------------- Total liabilities and partners' capital $41,395,584 $50,000,894 ================= ================= See accompanying notes. 3 ATEL CASH DISTRIBUTION FUND V, L.P. INCOME STATEMENTS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)

See accompanying notes. 4 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENT OF CHANGES IN PARTNERS' CAPITAL SIX MONTH PERIOD ENDED JUNE 30, 2001 (Unaudited)

See accompanying notes. 5 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)

6 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CASH FLOWS (Continued) SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)

See accompanying notes. 7 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 1. Summary of significant accounting policies: Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the general partners, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Organization and partnership matters: ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws of the State of California on September 23, 1992, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. The Fund does not make a provision for income taxes since all income and losses will be allocated to the Partners for inclusion in their individual tax returns. 3. Investment in leases: The Partnership's investment in leases consists of the following:

8 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 3. Investments in leases (continued): The following schedule provides an analysis of the Partnership's investment in property on operating leases by major classifications as of December 31, 2000, acquisitions and dispositions during the quarters ended March 31, 2001 and June 30, 2001 and as of June 30, 2001.

All of the property on operating leases was acquired during 1993, 1994, 1995, 1996 and 1997. At June 30, 2001, the aggregate amounts of future minimum lease payments are as follows: Year ending Direct December 31, Financing Operating Total ------------ --------- --------- ----- 2001 $ 957,874 $ 2,441,743 $ 3,399,617 2002 1,955,437 4,306,047 6,261,484 2003 428,734 1,689,714 2,118,448 2004 622,852 759,849 1,382,701 2005 496,654 821,534 1,318,188 Thereafter 4,514,770 4,639,279 9,154,049 ----------------- ---------------- ----------------- $ 8,976,321 $14,658,166 $ 23,634,487 ================= ================ ================= 9 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 4. Non-recourse debt: Notes payable to financial institutions are due in varying monthly and semi-annual installments of principal and interest. The notes are secured by assignments of lease payments and pledges of the assets which were purchased with the proceeds of the particular notes. Interest rates on the notes vary from 6.33% to 10.53%. Future minimum principal payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2001 $ 1,818,247 $ 465,474 $ 2,283,721 2002 2,725,049 694,127 3,419,176 2003 709,048 553,832 1,262,880 2004 453,006 513,642 966,648 2005 481,214 485,263 966,477 Thereafter 7,294,955 2,432,093 9,727,048 ----------------- ---------------- ----------------- $ 13,481,519 $ 5,144,431 $ 18,625,950 ================= ================ ================= 5. Related party transactions: The terms of the Agreement of Limited Partnership 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 General Partner and/or Affiliates earned the following fees and commissions, pursuant to the Agreement of Limited Partnership during the six month periods ended June 30, 2001 and 2000 as follows: 2001 2000 ---- ---- Equipment and incentive management fees $ 315,029 $ 491,787 Reimbursement of costs 414,801 195,594 ----------------- ----------------- $729,830 $687,381 ================= ================= 10 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 6. Partner's capital: The Fund is authorized to issue up to 12,500,000 Units of Limited Partnership interest in addition to the Initial Limited Partners. The Fund's Net Profits, Net Losses and Tax Credits are to be allocated 99% to the Limited Partners and 1% to the General Partner. As more fully described in the Agreement of Limited Partnership, available Cash from Operations and Cash from Sales or Refinancing shall be distributed as follows: First, 5% of Distributions of Cash from Operations to the General Partner as Incentive Management Fees. Second, the balance to the Limited Partners until the Limited Partners have received aggregate Distributions, as defined, 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, as defined. Third, the General Partner will receive as Incentive Management Fees, the following: (A) 10% of remaining Cash from Operations, as defined, (B) 15% of remaining Cash from Sales or Refinancing, as defined. Fourth, the balance to the Limited Partners. 7. Line of credit: The Partnership participates with the General Partner and certain of its Affiliates in a $62,000,000 revolving credit agreement with a group of financial institutions which expires on April 12, 2002. 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. The Partnership had $2,000,000 of borrowings under the agreement at June 30, 2001. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of June 30, 2001. 8. Other income: During the second quarter of 2001, the Partnership recognized a gain of $1,234,542 upon the receipt of proceeds from the bankruptcy of Schwegmann's Giant Supermarkets, a former lessee of the Partnership. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity 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 currently has available adequate reserves to meet contingencies, 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 June 30, 2001, the Partnership had borrowed $58,317,911. The remaining unpaid balance at that date was $13,481,519. Borrowings are to be non-recourse to the Partnership, that is, the only recourse of the lender is to the equipment or corresponding lease acquired or secured with the loan proceeds. The General Partner expects that aggregate borrowings in the future will be approximately 40% of aggregate equipment cost. In any event, the Agreement of Limited Partnership limits such borrowings to 40% of the total cost of equipment, in aggregate. The Partnership participates with the General Partner and certain of its affiliates in a $62,000,000 revolving line of credit with a group of financial institutions. The line of credit expires on April 12, 2002. No commitments of capital have been or are expected to be made other than for the acquisition of additional equipment. As of June 30, 2001, there were no such commitments. 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. Cash flows For both the three and six month periods in 2001 and 2000, the Partnership's primary source of cash flows from operations was rents from operating leases. In 2001 and 2000, the most significant source of cash from investing activities in both the six and three month periods was proceeds from sales of lease assets. Rents from direct financing leases were also significant in both the three and six month periods. In May 2001, the Partnership received payment on the amounts carried as notes receivable ($1,309,783). The Partnership has no other notes receivable. In 2001, the only financing source of cash was $3,000,000 borrowed on the line of credit. In 2000, there were no sources of cash from financing activities. Distributions to the Limited Partners was the primary financing use of cash and it did not change significantly from the prior year. Cash used to repay non-recourse debt has decreased as a result of scheduled debt reductions. 12 Results of operations The primary source of revenues is operating leases and is expected to remain so in future periods. As leases reach their scheduled terminations, the Partnership expects to either sell the assets or to re-lease them. Revenues from succeeding leases are usually lower than the amounts received on earlier leases. As a result, lease rents are expected to decline in future periods until all of the assets are sold. Operating lease revenues declined by $2,546,310 (from $5,469,468 in 2000 to $2,923,158 in 2001) for the six month periods and $1,288,675 (from $2,658,394 in 200 to $1,369,719 in 2001) for the three month periods. Depreciation is the Partnership's largest expense and is related directly to operating lease assets and revenues. Depreciation also decreased for both the three and six month periods as a result of these lease terminations. In 2001, sales of assets resulted in a gain of $213,005 for the six month period and a loss of $69,182 for the three month period compared to gains of $904,239 for the six month period and $754,161 for the three month period in 2000. Interest expense has declined for both the six and three month periods as a result of decreased total debt balances compared to 2000. Debt balances have been reduced as a result of scheduled debt payments. Management fees are related to lease revenues (equipment management fees) and the amounts of cash generated from operations which is distributed to the limited partners (incentive management fees). Lease revenues declined compared to 2000 as noted above. More of the distributions to the limited partners came from the proceeds of asset sales (on which no management fees are being paid) rather than from cash generated from operations. These gave rise to the decreases in management fees compared to 2000. PART II. OTHER INFORMATION Item 1. Legal Proceedings. The following is a discussion of legal matters involving the Partnership but which do not represent claims against the Partnership or its assets, except for the claim by Republic Financial Corporation described below. No other material legal proceedings are currently pending against the Partnership or against any of its assets. Schwegmann's Giant Supermarkets: In October 1997, Schwegmann's Giant Supermarkets defaulted on the timely performance of the lease payments, and certain other obligations under the lease, with respect to two of five locations of retail grocery store fixtures and equipment, with a receivable balance then 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 (a subsidiary of Kohlberg and Co.) ("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. On February 22, 2000, and then on September 20, 2000, two of the obligors under the original lease, Schwegmann Westside Expressway Inc. and Schwegmann Giant Supermarkets Partnership, filed for protection under Chapter 11 of the U.S. Bankruptcy Code, respectively. The Partnership has liquidated all equipment leased under their lease, resulting in net proceeds of $384,353.41, which represents 9.26% of original equipment cost. 13 The Partnership obtained and recorded a judgment against the lessee and guarantors in the approximate amount of $2.8 million, and pursued recovery of these liquidated damages, plus expenses, due under the lease. The lessee claimed sufficient assets to satisfy the claims of all secured creditors of the lessee; however, the lessee's assets are primarily relatively illiquid real property investments. The lessee received $15,000,000 in proceeds from a parcel of real property sold to a large home improvement retail chain, which amount was sufficient to pay off substantially all of the creditors, including the Partnership's claim of $2.8 million. As of this date, the Partnership has received in excess of $2.6 million in satisfaction of its claim, and the General Partner believes that it has a reasonable basis for assuming recovery of its remaining liquidated damages balance, in the approximate amount of $800,000 in full satisfaction of its claim. Pegasus Gold Corporation: On January 16, 1998, Pegasus Gold Corporation filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The initial meeting of creditors established by the U.S. Trustee's Office 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 (currently estimated at $2,211,902 as of February 14, 2001) were assigned to the lender. Consequently, the Partnership's exposure is no greater than the fair market residual value of the equipment under lease, currently estimated at $1,101,803. The reorganized lessee/debtor has assumed the Partnership's lease in the Bankruptcy Court and cured all past due payments which are now current. 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 at a level sufficient to make the lessee's operations profitable, and, consequently, any assessment of the impact of an adverse outcome of this matter remains uncertain. The original seven-year lease term expires on December 31, 2003. Quaker Coal Company: On December 31, 1997, Quaker Coal Company requested a moratorium on lease payments from January through March 1998. No lease payments were made by the lessee through June of 1998, and as a result, the General Partner declared the lease in default. Subsequently, the lessee cured the outstanding payments and eventually satisfied substantially all lease payments due under the Lease; however, the General Partner refused to waive the default and insisted on contractual damages. The General Partner filed a suit against the lessee for its contractual damages in the U.S. District Court of Northern California (the "Court") (Case No. 98-02971 THE). On June 16, 2000, the lessee filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The amounts of these damages have not been included in the financial statements included in Part I, Item 1 of this report. The Partnership obtained a stipulation for relief from the automatic bankruptcy stay to allow the Court to issue its ruling, and filed a request to participate on the Official Committee of Unsecured Creditors in the bankruptcy proceedings. The Partnership succeeded upon securing the return of its equipment, which has been liquidated, netting approximately 17% of the original equipment cost. The Court issued a ruling on March 4, 2001, denying the Partnership's claim for damages. The Lessee subsequently filed a claim against the Partnership, for reimbursement of its legal expenses. The General Partner believes the Court's decision is erroneous, as a matter law, and has filed an appeal of the decision in the U.S. District Court of Appeals. The lessee filed a plan of reorganization, which has been objected to by several large creditors, including the General Partner. These creditors are also seeking a formal role on the creditors committee or formation of their own committee. Currently, the likelihood of recovery of amounts above the payment of the lease rent and the liquidation of the equipment is speculative and highly uncertain. 14 Republic Transportation Finance, Inc.: On September 11, 2000, Republic Transportation Finance, Inc. and its parent, Republic Financial Corporation (collectively, "Republic"), filed suit against the Partnership, claiming relief in the approximate amount of $1,110,770, representing Republic's interpretation of their proceeds to a residual sharing arrangement. The Partnership does not dispute that remarketing proceeds are owed to Republic, merely the amount. The Partnership believes that Republic is entitled to approximately $587,317, based upon the Partnership's interpretation of the contract. The Partnership believes that the suit is without merit, and aggressively defend the action. Although the Partnership lost its request for dismissal of the suit for failure of establishing personal jurisdiction, and was prepared to defend on the merits of the case, it simultaneously sought an acceptable settlement. Although the Partnership believed it had a reasonable basis for prevailing, it agreed to settle this matter for a total of $750,000. Item 6. Exhibits And Reports On Form 8-K. (a)Documents filed as a part of this report 1. Financial Statements Included in Part I of this report: Balance Sheets, June 30, 2001 and December 31, 2000. Statements of operations for the six and three month periods ended June 30, 2001 and 2000. Statement of changes in partners' capital for the six months ended June 30, 2001. Statements of cash flows for the six and three month periods ended June 30, 2001 and 2000. Notes to the Financial Statements. 2. Financial Statement Schedules All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Report on Form 8-K None 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 8, 2001 ATEL CASH DISTRIBUTION FUND V, L.P. (Registrant) By: ATEL Financial Services, LLC General Partner of Registrant By: /s/ DEAN L. CASH ---------------------------------- Dean L. Cash President and Chief Executive Officer of General Partner By: /s/ PARITOSH K. CHOKSI ------------------------------------- Paritosh K. Choksi Executive Vice President of General Partner, Principal financial officer of registrant By: /s/ DONALD E. CARPENTER -------------------------------------- Donald E. Carpenter, Principal accounting officer of registrant 16

ATEL CASH DISTRIBUTION FUND IV L P 10-Q