Company Quick10K Filing
Quick10K
Atel Capital Equipment Fund Ix
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
ANDV Andeavor 20,203
MDIT Medite Cancer Diagnostics 19
FLXT Flexpoint Sensor Systems 9
SRGZ Star Gold 5
DPWW Diego Pellicer Worldwide 1
REAL4 Real Estate Associates IV 0
RRI GenOn Energy 0
CHNG Change Healthcare 0
AMGI Ameri Metro 0
CNHC CNH Industrial Capital 0
ZZHJC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements (Unaudited).
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 atel-20190630ex3111b42b0.htm
EX-31.2 atel-20190630ex3127a9dd1.htm
EX-32.1 atel-20190630ex3215a68a8.htm
EX-32.2 atel-20190630ex3224e5651.htm

Atel Capital Equipment Fund Ix Earnings 2019-06-30

ZZHJC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 atel-20190630x10q.htm 10-Q atel9_Current_Folio_10Q

vc

 

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended June 30, 2019

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

For the transition period from        to

Commission File number 000‑50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

California

94‑3375584

(State or other jurisdiction of
Incorporation or organization)

(I. R. S. Employer
Identification No.)

 

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111

(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 989‑8800

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

N/A

 

N/A

 

N/A

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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

Emerging growth company ☐

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒

The number of Limited Liability Company Units outstanding as of July 31, 2019 was 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 

 

 

 

ATEL CAPITAL EQUIPMENT FUND IX, LLC

INDEX

 

 

 

 

Part I.

Financial Information

3

 

 

 

Item 1. 

Financial Statements (Unaudited)

3

 

Balance Sheets, June 30, 2019 and December 31, 2018

3

 

Statements of Operations for the three and six months ended June 30, 2019 and 2018

4

 

Statements of Changes in Members’ Capital for the three and six months ended June 30, 2019 and 2018

5

 

Statements of Cash Flows for the three and six months ended June 30, 2019 and 2018

6

 

Notes to the Financial Statements

7

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

Item 4. 

Controls and Procedures

20

 

 

 

Part II. 

Other Information

21

 

 

 

Item 1. 

Legal Proceedings

21

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

21

 

 

 

Item 3. 

Defaults Upon Senior Securities

21

 

 

 

Item 4. 

Mine Safety Disclosures

21

 

 

 

Item 5. 

Other Information

21

 

 

 

Item 6. 

Exhibits

21

 

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND IX, LLC

BALANCE SHEETS

JUNE 30, 2019 AND DECEMBER 31, 2018

(in thousands)

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

 

2019

    

2018

 

 

(Unaudited)

 

 

 

ASSETS

 

 

  

 

 

  

Cash and cash equivalents

 

$

908

 

$

1,283

Accounts receivable, net

 

 

310

 

 

276

Due from Managing Member

 

 

34

 

 

21

Investment in securities

 

 

 5

 

 

 5

Equipment under operating leases, net

 

 

2,781

 

 

3,198

Prepaid expenses and other assets

 

 

63

 

 

77

Total assets

 

$

4,101

 

$

4,860

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL

 

 

  

 

 

  

 

 

 

 

 

 

 

Accounts payable and accrued liabilities:

 

 

  

 

 

  

Other

 

$

324

 

$

143

Deposits due lessees

 

 

 1

 

 

 1

Unearned operating lease income

 

 

51

 

 

44

Total liabilities

 

 

376

 

 

188

 

 

 

 

 

 

 

Commitments and contingencies

 

 

  

 

 

  

 

 

 

 

 

 

 

Members’ capital:

 

 

  

 

 

  

Managing Member

 

 

 —

 

 

 —

Other Members

 

 

3,725

 

 

4,672

Total Members’ capital

 

 

3,725

 

 

4,672

Total liabilities and Members’ capital

 

$

4,101

 

$

4,860

 

 

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands, except for units and per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

 

2019

    

2018

 

2019

    

2018

 

Revenues:

 

 

  

 

 

  

 

 

  

 

 

  

 

Leasing activities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Operating leases

 

$

556

 

$

490

 

$

1,076

 

$

962

 

Direct financing leases

 

 

 8

 

 

 —

 

 

15

 

 

 —

 

Gain on sales of equipment under operating leases

 

 

12

 

 

14

 

 

32

 

 

97

 

Other revenue

 

 

 1

 

 

15

 

 

 1

 

 

17

 

Total revenues

 

 

577

 

 

519

 

 

1,124

 

 

1,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

  

 

 

  

 

 

  

 

 

  

 

Depreciation of operating lease assets

 

 

85

 

 

87

 

 

160

 

 

170

 

Asset management fees to Managing Member and/or affiliates

 

 

22

 

 

14

 

 

44

 

 

28

 

Cost reimbursements to Managing Member and/or affiliates

 

 

44

 

 

108

 

 

95

 

 

219

 

Provision for credit losses

 

 

62

 

 

66

 

 

62

 

 

66

 

Impairment losses on equipment

 

 

238

 

 

 —

 

 

238

 

 

 —

 

Amortization of initial direct costs

 

 

 —

 

 

 —

 

 

 1

 

 

 1

 

Other management fees

 

 

16

 

 

 7

 

 

18

 

 

12

 

Professional fees

 

 

32

 

 

18

 

 

93

 

 

73

 

Outside services

 

 

17

 

 

21

 

 

45

 

 

60

 

Insurance

 

 

13

 

 

11

 

 

24

 

 

23

 

Marine vessel maintenance and other operating costs

 

 

41

 

 

15

 

 

164

 

 

15

 

Railcar and equipment maintenance

 

 

26

 

 

50

 

 

62

 

 

72

 

Income taxes and franchise fees

 

 

19

 

 

(14)

 

 

37

 

 

(13)

 

Storage fees

 

 

 4

 

 

 9

 

 

11

 

 

20

 

Postage

 

 

 —

 

 

 1

 

 

 4

 

 

 4

 

Printing and photocopying

 

 

 1

 

 

 1

 

 

 9

 

 

 7

 

Other

 

 

 3

 

 

 8

 

 

28

 

 

19

 

Total operating expenses

 

 

623

 

 

402

 

 

1,095

 

 

776

 

Other income, net

 

 

 —

 

 

 —

 

 

 1

 

 

 2

 

Net (loss) income

 

$

(46)

 

$

117

 

$

30

 

$

302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income:

 

 

  

 

 

  

 

 

  

 

 

  

 

Managing Member

 

$

 —

 

$

 —

 

$

73

 

$

 —

 

Other Members

 

 

(46)

 

 

117

 

 

(43)

 

 

302

 

 

 

$

(46)

 

$

117

 

$

30

 

$

302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per Limited Liability Company Unit (Other Members)

 

$

 —

 

$

0.01

 

$

 —

 

$

0.03

 

Weighted average number of Units outstanding

 

 

12,055,016

 

 

12,055,016

 

 

12,055,016

 

 

12,055,016

 

 

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands, except for units and per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

Other Members

 

Managing

 

 

 

 

    

Units

    

Amount

    

Member

    

Total

Balance March 31, 2019

 

12,055,016

 

$

3,771

 

$

 —

 

$

3,771

Net loss

 

 —

 

 

(46)

 

 

 —

 

 

(46)

Balance at end of June 30, 2019

 

12,055,016

 

$

3,725

 

$

 —

 

$

3,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

Other Members

 

Managing

 

 

 

 

    

Units

    

Amount

    

Member

    

Total

Balance December 31, 2018

 

12,055,016

 

$

4,672

 

$

 —

 

$

4,672

Distributions to Other Members ($0.07 per Unit)

 

 —

 

 

(904)

 

 

 —

 

 

(904)

Distributions to Managing Member

 

 —

 

 

 —

 

 

(73)

 

 

(73)

Net (loss) income

 

 —

 

 

(43)

 

 

73

 

 

30

Balance at end of June 30, 2019

 

12,055,016

 

$

3,725

 

$

 —

 

$

3,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

Other Members

 

Managing

 

 

 

 

    

Units

    

Amount

    

Member

    

Total

Balance March 31, 2018

 

12,055,016

 

 

4,265

 

$

 —

 

$

4,265

Net income

 

 —

 

 

117

 

 

 —

 

 

117

Balance at end of June 30, 2018

 

12,055,016

 

$

4,382

 

$

 —

 

$

4,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

Other Members

 

Managing

 

 

 

 

 

Units

    

Amount

    

Member

    

Total

Balance December 31, 2017

 

12,055,016

 

$

4,080

 

$

 —

 

$

4,080

Net income

 

 —

 

 

302

 

 

 —

 

 

302

Balance at end of June 30, 2018

 

12,055,016

 

$

4,382

 

$

 —

 

$

4,382

 

 

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF CASH FLOWS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

    

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

    

2019

    

2018

 

2019

    

2018

 

Operating activities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Net (loss) income

 

$

(46)

 

$

117

 

$

30

 

$

302

 

Adjustment to reconcile net (loss) income to cash provided by
operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales of equipment under operating leases

 

 

(12)

 

 

(14)

 

 

(32)

 

 

(97)

 

Depreciation of operating lease assets

 

 

85

 

 

87

 

 

160

 

 

170

 

Amortization of initial direct costs

 

 

 —

 

 

 —

 

 

 1

 

 

 1

 

Provision for credit losses

 

 

62

 

 

66

 

 

62

 

 

66

 

Impairment losses on equipment

 

 

238

 

 

 —

 

 

238

 

 

 —

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 Accounts receivable

 

 

(150)

 

 

(30)

 

 

(96)

 

 

(60)

 

Due from Managing Member and affiliates

 

 

(14)

 

 

 —

 

 

(13)

 

 

 —

 

Prepaid expenses and other assets

 

 

 9

 

 

(2)

 

 

14

 

 

 5

 

Accounts payable, Managing Member and affiliates

 

 

(66)

 

 

(49)

 

 

 —

 

 

(42)

 

Accounts payable, other

 

 

167

 

 

(35)

 

 

181

 

 

(25)

 

Unearned operating lease income

 

 

(17)

 

 

(4)

 

 

 7

 

 

15

 

Net cash provided by operating activities

 

 

256

 

 

136

 

 

552

 

 

335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Proceeds from sales of equipment under operating leases

 

 

13

 

 

21

 

 

44

 

 

244

 

Principal payments received on direct financing leases

 

 

 6

 

 

 —

 

 

 6

 

 

 —

 

Net cash provided by investing activities

 

 

19

 

 

21

 

 

50

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Distributions to Other Members

 

 

 —

 

 

 —

 

 

(904)

 

 

 —

 

Distributions to Managing Member

 

 

 —

 

 

 —

 

 

(73)

 

 

 —

 

Net cash used in financing activities

 

 

 —

 

 

 —

 

 

(977)

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

275

 

 

157

 

 

(375)

 

 

579

 

Cash and cash equivalents at beginning of period

 

 

633

 

 

863

 

 

1,283

 

 

441

 

Cash and cash equivalents at end of period

 

$

908

 

$

1,020

 

$

908

 

$

1,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

  

 

 

  

 

 

  

 

 

  

 

Cash paid during the period for taxes

 

$

47

 

$

14

 

$

51

 

$

17

 

 

 

See accompanying notes.

 

6

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member or Manager of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the initial Member’s capital investment.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of June 30, 2019,  12,055,016 Units remain issued and outstanding.

The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement. Pursuant to the terms of the Operating Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Company (See Note 5). The Company is required to maintain reasonable cash reserves for working capital, for the repurchase of Units and for contingencies. The repurchase of Units is solely at the discretion of AFS.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10‑K for the year ended December 31, 2018, filed with the Securities and Exchange Commission.

 

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10‑Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. 

Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant impact on the reported financial position or results of operations.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying unaudited financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after June 30, 2019 up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements, or adjustments thereto.

7

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Use of estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts.

Segment reporting:

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the three and six months ended June 30, 2019 and 2018, and long-lived tangible assets as of June 30, 2019 and December 31, 2018 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

 

 

    

2019

    

% of Total

 

    

2018

    

% of Total

 

 

Revenue

 

 

  

 

  

 

 

 

  

 

  

 

 

United States

 

$

1,097

 

98

%  

 

$

1,037

 

96

%

 

Canada

 

 

27

 

 2

%  

 

 

39

 

 4

%

 

Total

 

$

1,124

 

100

%  

 

$

1,076

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

    

2019

    

% of Total

 

    

2018

    

% of Total

 

 

Revenue

 

 

  

 

  

 

 

 

  

 

  

 

 

United States

 

$

568

 

98

%  

 

$

499

 

96

%

 

Canada

 

 

 9

 

 2

%  

 

 

20

 

 4

%

 

Total

 

$

577

 

100

%  

 

$

519

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30,

 

 

 

As of December 31,

 

 

 

    

2019

    

% of Total

 

    

2018

    

% of Total

 

 

Long-lived assets

 

 

  

 

  

 

 

 

  

 

  

 

 

United States

 

$

2,690

 

97

%  

 

$

3,107

 

97

%

 

Canada

 

 

91

 

 3

%  

 

 

91

 

 3

%

 

Total

 

$

2,781

 

100

%  

 

$

3,198

 

100

%

 

 

Investment in securities:

Purchased securities

The Company`s investment securities not registered for public sale that do not have readily determinable fair values are measured at cost minus impairment, and adjusted for changes in observable prices. There were no impaired securities or observable price changes at June 30, 2019 and December 31, 2018.  There were no investment securities sold or disposed of during the three and six months ended June 30, 2019 and 2018.

8

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Other income, net:

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

Per Unit data:

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

Equipment under operating leases, net and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 360‑20‑35‑3, over the periods of the lease terms contained in each asset’s respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360‑10‑35‑43).

The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Company’s quarterly impairment analysis, as described below. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet. Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis.

9

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Initial direct costs:

With the adoption of ASU No. 2016-02 certain costs associated with the execution of the Company’s leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. In 2018 and prior, the Company capitalized initial direct costs (“IDC”) associated with the origination of lease assets. IDC includes both internal costs (e.g., the costs of employees’ activities in connection with successful lease originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease basis based on actual contract term using a straight-line method for operating leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

 

Fair value:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company`s own estimates of assumptions that market participants would use in pricing the asset or liability.

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

Recent accounting pronouncements:

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.  In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors. In March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements. Collectively referred to hereafter as ASU No. 2016-02, these standards set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract to control an asset (i.e., lessees and lessors). The Company does not have any non-cancelable leases where it is a lessee.

 

10

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

ASU No. 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. These standards were effective as of January 1, 2019. Upon adoption, the Company applied the package of practical expedients that has allowed the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. Furthermore, the Company applied the optional transition method in ASU No. 2018-11, which has allowed the Company to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the adoption period, although the Company did not have an adjustment. Additionally, the Company’s leases met the criteria in ASU No. 2018-11 to not separate non-lease components from the related lease component; therefore, the accounting for these leases remained largely unchanged from the previous standard. 

 

The adoption of ASU No. 2016-02 and the related improvements did not have a material impact in our financial statements. Upon adoption, (i) amounts previously recognized as lessee reimbursements and other income, for the three and six months ended June 30, 2019, have been classified as lease or financing income, (ii) allowances for bad debts are now recognized as a direct reduction of operating lease income, and (iii) certain costs associated with the execution of the Company’s leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. Subsequent to January 1, 2019, provisions for credit losses relating to operating leases are now included in lease income in the Company’s financial statements.  Provisions for credit losses prior to January 1, 2019 were previously included in operating expenses in the Company’s financial statements and prior periods are not reclassified to conform to the current presentation.

 

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

 

In November 2018, the FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses (“ASU 2018-19”). The new standard clarifies certain aspects of the new current expected credit losses (CECL) impairment model in ASU 2016-13. The amendment clarifies that receivables arising from operating leases are within the scope of ASC 842, rather than ASC 326; however, it will be applicable to the Company’s note receivables and direct financing leases, if any. The effective date and transition requirements in this Update are the same as the effective dates and transition requirements in Update 2016-13, as amended by this Update, which is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements.

 

11

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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

 

3. Allowance for credit losses:

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

 

 

 

 

 

 

Accounts Receivable

 

 

Allowance

 

 

for Doubtful Accounts

  

 

Operating

 

     

Leases

Balance December 31, 2017

 

$

12

Provision

 

 

59

Balance December 31, 2018

 

 

71

Provision

 

 

62

Balance June 30, 2019

 

$

133

 

 

4. Equipment under operating leases, net:

The Company’s equipment under operating leases, net consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Depreciation/

    

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

 

Balance

 

Reclassifications,

 

Expenses or

 

Balance

 

 

December 31, 

 

Dispositions and

 

Amortization

 

June 30, 

 

 

2018

 

Impairment losses

 

of Leases

 

2019

Equipment under operating leases, net

 

$

2,909

 

$

(474)

 

$

(160)

 

$

2,275

Net investment in direct financing leases

 

 

 3

 

 

(3)

 

 

 —

 

 

 —

Assets held for sale or lease, net

 

 

276

 

 

224

 

 

 —

 

 

500

Initial direct costs, net of accumulated amortization

   of $3 at June 30, 2019 and December 31, 2018

 

 

10

 

 

(4)

 

 

 —

 

 

 6

Total

 

$

3,198

 

$

(257)

 

$

(160)

 

$

2,781

 

12

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Impairment of equipment under operating leases, net held for sale or lease:

 

Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the Company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract, if any. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets simultaneously, if held in quantity, or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.

As a result of these reviews, management determined that impairment losses existed; The Company recorded $238 thousand of impairment losses to reduce the fair value of certain equipment for both the three and six months ended June 30, 2019.  No impairment losses were recorded for the three and six months ended June 30, 2018.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was $85 thousand and $87 thousand for the respective three months ended June 30, 2019 and 2018, and was $160 thousand and $170  thousand for the respective six months ended June 30, 2019 and 2018.  Initial direct costs amortization expense related to the Company's operating leases was zero for the three months ended June 30, 2019 and 2018.  The Company recorded $1 thousand of initial direct cost amortization for the six months ended June 30, 2019 and 2018.

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

Operating leases:

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance

    

 

 

    

 

    

Balance

 

 

December 31, 

 

 

 

 

Reclassification

 

June 30, 

 

 

2018

 

Additions

 

/Dispositions

 

2019

Transportation, rail

 

$

11,961

 

$

 —

 

$

(141)

 

$

11,820

Marine vessels

 

 

11,362

 

 

 —

 

 

 —

 

 

11,362

Transportation, other

 

 

1,371

 

 

 —

 

 

(473)

 

 

898

Materials handling

 

 

331

 

 

 —

 

 

 —

 

 

331

 

 

 

25,025

 

 

 —

 

 

(614)

 

 

24,411

Less accumulated depreciation

 

 

(22,116)

 

 

(160)

 

 

140

 

 

(22,136)

Total

 

$

2,909

 

$

(160)

 

$

(474)

 

$

2,275

 

The average estimated residual value for assets on operating leases was 8% of the assets’ original cost at June 30, 2019 and 9% at December 31, 2018. There were no operating leases placed in nonaccrual status as of the same dates.

13

Table of Contents

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets on a fixed-term lease. Variable rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of operating lease revenues and totaled 556 thousand and $490 thousand for the three months ended June 30, 2019 and 2018 respectively, and $1.1 million and $962  thousand for the respective six months ended June 30, 2019 and 2018.

At June 30, 2019, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

 

 

 

 

 

    

Operating

 

 

Leases

Six months ending December 31, 2019

 

$

486

Year ending December 31, 2020

 

 

646

2021

 

 

193

2022

 

 

60

2023

 

 

12

 

 

$

1,397

 

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of June 30, 2019, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

 

 

 

Equipment category

    

Useful Life

Transportation, rail