Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Statements contained in this Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The
Companys performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Funds performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.
ATEL Capital Equipment Fund VIII, LLC (the Company) is a California limited liability company that was formed in July 1998 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States.
The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. The offering was terminated in November 2000. Total proceeds of the offering were $135.7 million. During early 2001, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (Reinvestment Period) (defined as six full years following the year the offering was terminated), the Company reinvested cash flow in excess of certain amounts required to be distributed to the Other Members and/or
utilized its credit facilities to acquire additional equipment.
The Company may continue until December 31, 2019. However, pursuant to the guidelines of the Operating Agreement, the Company began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2006.
As of March 31, 2012, the Company continues in its liquidation phase. Accordingly, assets related to leases that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the Managing Member.
Results of Operations
The three months ended March 31, 2012 versus the three months ended March 31, 2011
The Company had net income of $422 thousand and $104 thousand for the three months ended March 31, 2012 and 2011, respectively. The results for the first quarter of 2012 reflect a decrease in total operating expenses offset, in part, by a reduction in total revenues when compared to the prior year period.
Total revenues for the first quarter of 2012 decreased by $92 thousand, or 6%, as compared to the prior year period. The net decrease in total revenues was largely due to the decrease in gain on sales of assets which was partially offset by an increase in operating lease revenues.
Gain on sales of lease assets declined by $187 thousand largely due to the lower number of railcars and containers sold during the current year period. The $190 thousand of gains realized during the first quarter of 2011 were derived from the sale of 24 railcars and containers. By comparison, only one railcar and one container were sold during the current year period.
Operating lease revenues increased by $109 thousand primarily as a result of higher rental income from the Funds vessel, which was in drydock status for a portion of the prior year period. Such increase in operating lease revenues was partially offset by the impact of continued run-off and dispositions of lease assets consistent with a Fund in liquidation.