UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal quarter ended June 30, 1998.
[ ] 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 0-14599
PLMTRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME
FUND (Exact name of registrant as specified in its
charter)
California 94-2946248
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (415) 974-1399
---------------------------------
Indicate by 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
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 677,367 $ 1,295,164
Less accumulated depreciation (675,732) (1,291,640)
-------------------------------------------
Net equipment 1,635 3,524
Cash and cash equivalents 567,765 191,228
Accounts receivable, net of allowance for doubtful accounts of
$2,776 in 1998 and $3,227 in 1997 9,292 25,630
Prepaid insurance 205 913
-------------------------------------------
Total assets $ 578,897 $ 221,295
===========================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 6,839 $ 9,928
Due to affiliates -- 7,026
Total liabilities 6,839 16,954
Partners' capital:
Limited partners (33,727 units) 572,058 204,341
General Partner -- --
-------------------------------------------
Total partners' capital 572,058 204,341
-------------------------------------------
Total liabilities and partners' capital $ 578,897 $ 221,295
===========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 21,363 $ 54,668 $ 52,079 $ 126,863
Interest income 4,062 4,846 6,699 9,164
Net gain on disposition of equipment 99,477 211,449 158,094 252,407
-------------------------------------------------------------------
Total revenues 124,902 270,963 216,872 388,434
-------------------------------------------------------------------
Expenses:
Depreciation 982 35,994 1,091 91,076
Management fees to affiliate -- 21,079 21,079 42,159
Repairs and maintenance 7,027 14,160 11,636 28,986
General and administrative
expenses to affiliates 7,113 14,743 16,141 38,049
Other general and administrative expenses 9,779 18,322 17,326 32,492
-------------------------------------------------------------------
Total expenses 24,901 104,298 67,273 232,762
-------------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 412,153 12,154 439,349 25,110
-------------------------------------------------------------------
Net income $ 512,154 $ 178,819 $ 588,948 $ 180,782
===================================================================
Partners' share of net income:
Limited partners $ 511,353 $ 177,031 $ 586,735 $ 178,974
General Partner 801 1,788 2,213 1,808
------
--------------------------------- --------------------------------
Total $ 512,154 $ 178,819 $ 588,948 $ 180,782
===================================================================
Net income per weighted-average limited
partnership unit (33,727 units) $ 15.16 $ 5.25 $ 17.40 $ 5.31
===================================================================
Cash distributions $ -- $ -- $ -- $ 75,660
===================================================================
Cash distributions per weighted-average
limited partnership unit $ -- $ -- $ -- $ 2.22
===================================================================
Special cash distributions $ 80,001 $ 170,334 $ 221,231 $ 270,334
===================================================================
Special cash distributions per weighted-average
limited partnership unit $ 2.35 $ 5.00 $ 6.49 $ 7.94
===================================================================
Total cash distributions per weighted-average
limited partnership units $ 2.35 $ 5.00 $ 6.49 $ 10.16
===================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1996 to June 30,
1998
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of
December 31, 1996 $ 913,500 $ (140,776) $ 772,724
Net income 193,401 149,893 343,294
Cash distributions (74,903) (757) (75,660)
Special distributions (827,657) (8,360) (836,017)
--------------------------------------------------------------------
Partners' capital as of December 31, 1997 204,341 -- 204,341
Net income 586,735 2,213 588,948
Special distributions (219,018) (2,213) (221,231)
--------------------------------------------------------------------
Partners' capital as of June 30, 1998 $ 572,058 $ -- $ 572,058
====================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-----------------------------------------
<S> <C> <C>
Operating activities
Net income $ 588,948 $ 180,782
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 1,091 91,076
Net gain on disposition of equipment (158,094) (252,407)
Equity in net income from unconsolidated special-purpose
entity (439,349) (25,110)
Changes in operating assets and liabilities
Accounts receivable, net 15,954 18,918
Prepaid insurance 708 2,367
Accounts payable and accrued expenses (3,089) (4,323)
Due to affiliates (7,026) --
Net cash provided by (used in) operating activities (857) 11,303
Investing activities
Payment for capitalized repairs -- (1,435)
Proceeds from disposition of equipment 159,276 79,100
Liquidation distributions from unconsolidated
special-purpose entities 417,820 --
Distributions from unconsolidated special-purpose entity 21,529 316,709
Net cash provided by investing activities 598,625 394,374
Financing activities
Cash distributions paid to limited partners -- (74,903)
Cash distributions paid to General Partner -- (757)
Special distributions paid to limited partners (219,018) (267,631)
Special distributions paid to General Partner (2,213) (2,703)
Net cash used in financing activities (221,231) (345,994)
Net increase in cash and cash equivalents 376,537 59,683
Cash and cash equivalents at beginning of period 191,228 416,360
----------------------------------------
Cash and cash equivalents at end of period $ 567,765 $ 476,043
========================================
Supplemental information
Sale proceeds included in accounts receivable $ 2,616 $ --
========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Liquidation and Special Distributions
With the disposal of the majority of the equipment portfolio, the
Partnership's remaining assets were transferred into a liquidating trust on
July 1, 1998. The sole Beneficiaries of the liquidating trust are the
limited partners and the General Partner. The Trustees, as designated by
the General Partner, are three officers of the General Partner. The amounts
reflected as assets and liabilities of the Trust have not been adjusted to
reflect liquidation values. The equipment portfolio that is actively being
marketed for sale by the Trustees continues to be carried at the lower of
depreciated cost or fair value less estimated cost of disposal. Although
the Trustees estimate that there will be distributions to the Beneficiaries
after final disposal of assets and settlement of liabilities, the amounts
cannot be determined prior to actual disposal of the equipment. Cash
receipts (including proceeds from the sale of assets) in excess of expected
obligations and reasonable reserves will be distributed to the
Beneficiaries in the liquidating trust from time to time, and not less
often than annually. Upon final liquidation, the liquidating trust will be
dissolved.
For tax purposes, the liquidating trust will continue to be treated as a
partnership under Internal Revenue Regulation Section 301.7701-3(b)(1)(i).
Partnership tax returns will be filed until all the liquidating trust
assets are distributed.
The Trustees will send the Form 10-Q for the fiscal quarter ended June 30,
1998 which was reported to the Securities and Exchange Commission (SEC) to
all the beneficiaries in the liquidating trust. The Trustees will
discontinue all future filings of Form 10-Q and Form 10-K.
During the three months ended June 30, 1998, and 1997, the Partnership paid
special distributions of $2.35 and $5.00, respectively, per
weighted-average limited partnership unit. During the six months ended June
30, 1998 and 1997, the Partnership paid special distributions of $6.49 and
$7.94, respectively, per weighted-average limited partnership unit. During
the six months ended June 30, 1997, the Partnership also paid regular cash
distributions of $2.22 per weighted-average limited partnership unit.
Special distribution of $562,000, or $16.50 per weighted-average limited
partnership unit, relating to the results from the second quarter of 1998
were paid during the third quarter of 1998.
2. Opinion of Management
In the opinion of the management of PLM Financial Services Inc., the
General Partner, the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the Partnership's financial position as of June
30, 1998 and December 31, 1997, the statements of income for the three and
six months ended June 30, 1998 and 1997, the statements of changes in
partners' capital from December 31, 1996 to June 30, 1998, and the
statements of cash flows for the six months ended June 30, 1998 and 1997.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1997, on file at the
Securities and Exchange Commission.
Transactions with General Partner and Affiliates
There was no balance due to affiliates as of June 30, 1998. The balance due
to affiliates as of December 31, 1997 was $7,026 due to FSI and its
affiliate for management fees.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
4. Equipment
The components of owned equipment are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-----------------------------------------
<S> <C> <C>
Trailers $ 677,367 $ 1,295,164
Less accumulated depreciation (675,732) (1,291,640 )
-------------------------------------------
Net equipment $ 1,635 $ 3,524
===========================================
</TABLE>
All of the equipment owned by the Partnership was operating in
PLM-affiliated short-term rental facilities as of June 30, 1998 and
December 31, 1997.
During the six months ended June 30, 1998, the Partnership sold or disposed
of trailers with a net book value of $798 for proceeds of $158,892. During
the six months ended June 30, 1997, the Partnership sold or disposed of
marine containers and trailers with an aggregate net book value of $64,302
for proceeds of $316,709.
5. Investment in Unconsolidated Special Purpose Entity
During the six months ended June 30, 1998, the General Partner sold the
commuter aircraft in which the Partnership owned an 80% interest for
liquidating proceeds of $417,820. The net book value of this investment was
$0.
(this space intentionally left blank)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Transportation Equipment Partners VIIC 1985 Income Fund's (the
Partnership's) Operating Results for the Three Months Ended June 30, 1998 and
1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased for the quarter
ended June 30, 1998 when compared to the same period of 1997. The following
table presents lease revenues less direct expenses by owned equipment type:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-----------------------------------
<S> <C> <C>
Trailers $ 14,336 $ 37,189
Marine containers -- 2,508
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $21,363 and $7,027,
respectively, for the quarter ended June 30, 1998, compared to $52,122 and
$14,933, respectively during the same period of 1997. The number of trailers has
been declining over the past twelve months due to sales and dispositions. The
result of this declining fleet has been a decrease in trailer net contribution.
Marine containers: Marine container lease revenues and direct expenses were zero
for the quarter ended June 30, 1998, compared to $2,546 and $38, respectively
during the same period of 1997. The decrease in marine containers contribution
resulted from the sale of all of the Partnership's remaining containers during
1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $17,874 for the quarter ended June 30, 1998,
decreased from $89,327 for the same period in 1997. Significant variances are
explained as follows:
(1) A $35,012 decrease in depreciation expenses reflecting the disposition of
certain assets during 1998 and 1997.
(2) A $21,079 decrease in management fee due to PLM Investment Management, Inc.
(IMI), a wholly-owned subsidiary of the General Partner, foregoing the
management fee during the second quarter of 1998.
(3) A $15,362 decrease in the general and administrative expenses due to
decreased accounting costs and administrative costs associated with the
short-term rental facilities due to decreased volume of trailers operating in
these facilities.
(C) Net Gain on Disposition of Equipment
For the quarter ended June 30, 1998, the Partnership realized a gain of $99,477
on the sale or disposition of trailers. During the three months ended June 30,
1997, the Partnership realized a gain of $211,449 on the sale or disposition of
trailers and marine containers.
<PAGE>
(D) Equity in Net Income of Unconsolidated Special-Purpose Entity
Equity in net income of unconsolidated special-purpose entity was $412,153 and
$12,154 for the quarters ended June 30, 1998 and June 30, 1997, respectively.
This represented the Partnership's share of income generated from the investment
in an entity which owned an aircraft, accounted for under the equity method. As
of June 30, 1997, the Partnership owned an 80% investment in an entity that
owned a commuter aircraft. The General Partner sold the asset related to this
investment resulting in $417,820 in net gains to the Partnership, and the
Partnership received a liquidating distribution of $417,820 during the second
quarter of 1998.
(E) Net Income
As a result of the foregoing, the Partnership's net income increased to $512,154
in the second quarter of 1998 from $178,819 in the second quarter of 1997. The
Partnership's ability to operate or liquidate assets, secure leases, and
re-lease those assets whose leases expire during the duration of the Partnership
is subject to many factors, and the Partnership's performance in the second
quarter of 1998 is not necessarily indicative of future periods. In the second
quarter of 1998, the Partnership made special distributions of $79,200 to the
limited partners, or $2.35 per weighted-average limited partnership unit.
Comparison of the Partnerships' Operating Results for the Six Months Ended June
30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during the first
six months of 1998 when compared to the same period of 1997. The following table
presents lease revenues less direct expenses by owned equipment type:
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-----------------------------------
<S> <C> <C>
Trailers $ 40,443 $ 92,375
Marine containers -- 3,806
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $52,079 and $11,636,
respectively, for the six months ended 1998, compared to $122,977 and $30,602,
respectively during the same period of 1997. The number of trailers owned by the
Partnership has been declining over the past twelve months due to sales and
dispositions. The result of this declining fleet has been a decrease in trailer
contribution.
Marine containers: Marine container leases revenues and direct expenses were
zero for the six months ended 1998, compared to $3,886 and $80, respectively
during the same period of 1997. The decrease in marine container contribution
resulted from the sale of all the remaining containers during 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $55,637 for the six months ended June 30, 1998,
decreased from $202,080 for the same period in 1997. Significant variances are
explained as follows:
(1) a $89,985 decrease in depreciation expenses from 1997 levels reflecting the
sale of equipment during 1998 and 1997.
(2) a $35,378 decrease in the general and administrative expenses from 1997
levels was due to decreased administrative costs associated with the short-term
rental facilities.
(3) a $21,080 decrease in management fee due PLM Investment Management, Inc.
(IMI), a wholly-owned subsidiary of the General Partner, foregoing the
management fee during the second quarter of 1998.
(C) Net Gain on Disposition of Owned Equipment
For the six months ended June 30, 1998, the Partnership realized a gain of
$158,094 on the sale or disposition of trailers, compared to the same period in
1997, where the Partnership realized a gain of $252,407 on the sale or
disposition of trailers and marine containers.
(D) Equity in Net Income of Unconsolidated Special-purpose Entities
Equity in net income of unconsolidated special-purpose entities was $439,349 and
$25,110 for the six months ended June 30, 1998 and June 30, 1997, respectively.
This represented the Partnership's share of income generated from the
partnership's investment in an entity which owned an aircraft, accounted for
under the equity method. As of June 30, 1997, the Partnership owned an 80%
investment in an entity that owned a commuter aircraft. The General Partner sold
the asset related to this investment resulting in $417,820 in net gains to the
Partnership, and the Partnership received a liquidating distribution of $417,820
during the second quarter of 1998.
(E) Net Income
As a result of the foregoing, the Partnership's net income increased to $588,948
for the six months ended June 30, 1998, from $180,782 in the same period in
1997. The Partnership's ability to operate or liquidate assets, secure leases,
and re-lease those assets whose leases expire during the duration of the
Partnership is subject to many factors, and the Partnership's performance in the
six months ended June 30, 1998 is not necessarily indicative of future periods.
For the six months ended June 30, 1998, the Partnership made special
distributions of $219,018 to the limited partners, or $6.49 per weighted-average
limited partnership unit.
(II) ASSET SALES
As discussed in Note 1 to the accompanying financial statements and (V) below,
the remaining equipment is actively being marketed for sale.
(III) YEAR 2000 COMPLIANCE
The General Partner is currently addressing the year 2000 computer software
issue and creating a timetable for carrying out any program modifications that
may be required. It is not anticipated that the cost of those modifications
allocable to the Partnership will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998. The effect of adoption of these statements will be limited to the form
and content of the Partnership's disclosures and will not impact the
Partnership's results of operations, cash flow, or financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General Partner is reviewing the effect this standard will have on the
Partnership's financial statements.
(V) FUTURE OUTLOOK
With the majority of the equipment portfolio now liquidated, the General Partner
is actively pursuing the sale of all of the Partnership's equipment with the
intention of winding up the Partnership and distributing all available cash to
the Partners.
(VI) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
(This space intentionally left blank.)
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM TRANSPORTATION EQUIPMENT
PARTNERS VIIC 1985 INCOME FUND
By: PLM Financial Services, Inc.
General Partner
Date: August 14, 1998 By: /s/ Richard K Brock
-----------------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 567,765
<SECURITIES> 0
<RECEIVABLES> 12,068
<ALLOWANCES> 2,776
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 677,367
<DEPRECIATION> 675,732
<TOTAL-ASSETS> 578,897
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 572,058
<TOTAL-LIABILITY-AND-EQUITY> 578,897
<SALES> 0
<TOTAL-REVENUES> 216,872
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 588,948
<INCOME-TAX> 0
<INCOME-CONTINUING> 588,948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 588,978
<EPS-PRIMARY> 17.40
<EPS-DILUTED> 17.40
</TABLE>
