UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1995.
[ ] 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 0-15436
-----------------------
PLM EQUIPMENT GROWTH FUND
(Exact name of registrant as specified in its charter)
California 94-2998816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 900, 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 ______
Indicate the number of units outstanding of each of the issuer's
classes of partnership units, as of the latest practicable date:
Class Outstanding at May 11, 1995
Limited Partnership Depositary Units 5,830,697
General Partnership Units: 1
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars)
ASSETS
March 31, December 31,
1995 1994
Equipment held for operating leases, at cost $ 107,982 $ 119,123
Less accumulated depreciation (64,116) (69,122)
---------- ----------
43,866 50,001
Equipment held for sale 3,357 --
---------- ----------
Net equipment 47,223 50,001
Cash and cash equivalents 2,095 2,542
Restricted cash 3,024 1,952
Accounts receivable, less allowance for
doubtful accounts of $186 at March 31, 1995,
and $203 at December 31, 1994 1,832 1,919
Prepaid expenses and other assets 203 210
Deferred charges, net of accumulated
amortization of $402 at March 31, 1995,
and $381 at December 31, 1994 24 45
---------- ----------
Total assets $ 54,401 $ 56,669
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,693 $ 1,921
Due to affiliates 131 230
Security deposits 624 518
Prepaid deposits and reserve for repairs 1,824 1,937
Note payable 28,000 28,000
--------- ---------
Total liabilities 32,272 32,606
Partners' capital (deficit):
Limited Partners (5,836,297 Depositary Units
at March 31, 1995, and 5,848,197
Depositary Units at December 31, 1994) 22,440 24,374
General Partner (311) (311)
--------- ---------
Total partners' capital 22,129 24,063
--------- ---------
Total liabilities and partners' capital $ 54,401 $ 56,669
========= =========
See accompanying notes to financial
statements.
1
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the Three Months Ended March 31,
(thousands of dollars, except per unit amounts)
1995 1994
----- -----
Revenues:
Lease revenue $ 6,020 $ 5,923
Interest and other income 77 61
Net gain (loss) on disposition of
equipment 643 (96)
------- -------
Total revenues 6,740 5,888
Expenses:
Depreciation and amortization 2,286 2,498
Management fees to affiliate 336 363
Repairs and maintenance 807 636
Interest expense 531 342
Insurance expense to affiliate 94 (28)
Other insurance expense 74 49
Marine equipment operating expenses 688 96
General and administrative
expenses to affiliates 218 136
Other general and administrative
expenses 103 265
------- -------
Total expenses 5,137 4,357
------- -------
Net income $ 1,603 $ 1,531
======= =======
Partners' share of net income:
Limited Partners $ 1,569 $ 1,516
General Partner 34 15
------- -------
Total $ 1,603 $ 1,531
======= =======
Net income per Depositary Unit
(5,836,297 units at March 31, 1995;
5,853,897 units at March 31, 1994) $ 0.27 $ 0.26
======= =======
Cash distributions $ 3,397 $ 3,385
======= =======
Cash distributions per Depositary Unit $ 0.58 $ 0.58
======= =======
See accompanying notes to financial
statements.
2
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period ended December 31, 1993 to March
31, 1995
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 38,047 $ (311) $ 37,736
Net (loss) income (43) 118 75
Repurchase of Depositary Units (168) -- (168)
Cash distributions (13,462) (118) (13,580)
---------- ---------- ----------
Partners' capital at
December 31, 1994 24,374 (311) 24,063
Net income 1,569 34 1,603
Repurchase of Depositary Units (140) -- (140)
Cash distributions (3,363) (34) (3,397)
---------- ---------- ----------
Partners' capital at
March 31, 1995 $ 22,440 $ (311) $ 22,129
========== ========== ==========
See accompanying notes to financial
statements.
3
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
(in thousands)
1995 1994
------ ------
Operating activities:
Net income $ 1,603 $ 1,531
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,286 2,498
Net (gain) loss on disposition of equipment (643) 96
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable,
net 87 (511)
Decrease in due to affiliates (99) --
Decrease in prepaid expenses
and other assets 7 10
(Increase) decrease in restricted cash (1,072) 995
Decrease in accounts payable
and accrued expenses (228) (260)
Increase in security deposits 106 3
(Decrease) increase in prepaid deposits
and reserve for repairs (113) 72
------- -------
Net cash provided by operating activities 1,934 4,434
------- -------
Investing activities:
Payments for capital improvements
and equipment purchases (12) (22)
Proceeds from disposition of equipment 1,168 53
------- -------
Net cash provided by investing activities 1,156 31
------- -------
Financing activities:
Cash distributions paid to partners (3,397) (3,385)
Repurchases of Depositary Units (140) (52)
------- -------
Net cash used in financing activities (3,537) (3,437)
------- -------
Net (decrease) increase in cash and
cash equivalents (447) 1,028
Cash and cash equivalents at beginning of period 2,542 3,556
------- -------
Cash and cash equivalents at end of period $ 2,095 $ 4,584
======= =======
Supplemental information:
Interest paid $ 508 $ 333
======= =======
See accompanying notes to financial
statements.
4
<PAGE>
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
1. 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 financial position of PLM Equipment Growth
Fund (the "Partnership") as of March 31, 1995, and the statements of
income and cash flows for the three months ended March 31, 1995, and 1994.
Certain information and footnote 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, 1994, on file
at the Securities and Exchange Commission.
2. Reclassification
Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.
3. Cash Distributions
Cash distributions are recorded when paid and totaled $3.4 million for
both the three months ended March 31, 1995 and 1994. Cash distributions to
Unitholders in excess of net income are considered to represent a return
of capital. Cash distributions to Unitholders of $1.8 million and $1.9
million for the three months ended March 31, 1995, and 1994, respectively,
were deemed to be a return of capital.
Cash distributions of $3.4 million ($0.575 per Depositary Unit) were
declared on March 16, 1995, and are to be paid on May 15, 1995, to the
Unitholders of record as of March 31, 1995.
4. Depositary Unit Repurchase Plan
The Partnership has engaged in a program to repurchase up to 250,000
Depositary Units. During the three months ended March 31, 1995, the
Partnership had repurchased 11,900 Depositary Units at a cost of $140,000.
As of March 31, 1995, the Partnership had repurchased a total of 148,703
Depositary Units at a cost of $2.2 million.
5
<PAGE>
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
5. Equipment
Equipment held for operating leases is stated at cost. Equipment held for
sale is stated at the lower of the equipment's depreciated cost or
estimated net realizable value and is subject to a pending contract for
sale.
The components of equipment are as follows (in thousands):
March 31, December 31,
1995 1994
Rail equipment $ 24,572 $ 26,041
Marine containers 9,602 9,819
Marine vessels 17,539 22,264
Aircraft and aircraft engines 29,622 34,321
Trailers 11,103 11,134
Mobile offshore drilling unit 15,544 15,544
--------- ---------
107,982 119,123
Less accumulated depreciation (64,116) (69,122)
--------- ---------
43,866 50,001
Equipment held for sale 3,357 --
--------- ---------
Net equipment $ 47,223 $ 50,001
========= =========
Revenues are earned by placing the equipment under operating leases which are
generally billed monthly or quarterly. Some of the Partnership's marine vessels
and some of its marine containers are leased to operators of utilization-type
leasing pools which include equipment owned by unaffiliated parties. In such
instances, revenues received by the Partnership consist of a specified
percentage of revenues generated by leasing the equipment to sublessees, after
deducting certain direct operating expenses of the pooled equipment. Rents for
railcars are based on mileage travelled or a fixed rate; rents for all other
equipment are based on fixed rates.
As of March 31, 1995, all equipment in the Partnership's portfolio was on lease
or operating in PLM-affiliated short-term trailer rental facilities except for
one commuter aircraft in which the Partnership owns a 50% interest with a
carrying value of $1.0 million, and 80 marine containers with a carrying value
of $1.3 million.
During the three months ended March 31, 1995, the Partnership sold or disposed
of 87 marine containers, six trailers, and 12 railcars with an aggregate net
book value of $0.6 million for proceeds of $1.2 million. During the three months
ended March 31, 1994, the Partnership sold or disposed of 101 marine containers,
seven trailers, and two tankcars with an aggregate net book value of $0.2
million for aggregate proceeds of $0.1 million.
As of March 31, 1995, equipment held for sale included the Partnership's 50%
interest in one commercial aircraft with a carrying value of $1.3 million, and
the Partnership's 50% interest in one marine vessel with a carrying value of
$2.1 million.
6
<PAGE>
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
6. Subsequent Event
In April 1995, the Partnership sold its 50% interest in one commercial aircraft
for its approximate carrying value of $1.3 million. In May 1995, the
Partnership sold its 50% interest in one marine vessel with a carrying value of
$2.1 million for approximately $2.3 million, net of selling costs. Included in
the gain on sale of the marine vessel is the unused portion of accrued
drydocking of $0.3 million. The aircraft and the marine vessel were included in
equipment held for sale at March 31, 1995.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
(A) Results of Operations - Quarter over Quarter Summary
The Partnership's net operating income before depreciation, amortization, and
gain/loss on sales declined by approximately 21% for the quarter ended March 31,
1995 from the same period in 1994. Reductions in operating income resulted from:
- - -A decrease in aircraft net contribution due to the sale of two commercial
aircraft during 1994 and due to a decrease in utilization rates in 1995;
- - -A decrease in marine container net contribution due to the sale of 566 marine
containers during 1994 and 87 marine containers during the three months ended
March 31, 1995;
- - -A decrease in marine vessel net contribution resulting from an increase in
operating expenses as one of the Partnership's marine vessels transitioned from
a "bareboat" charter, where the lessee pays for most operating costs, into a
timecharter operating in a marine vessel utilization pool, where all operating
costs and voyage costs, which are allocated on a pro rata basis within the pool,
are absorbed by the lessor.
The net effect of re-leases on Partnership net income was relatively small.
Interest expense increased as the base rate of interest on the Partnership's
floating rate debt rose.
(B) Financial Condition - Capital Resources, Liquidity, Distributions, and Unit
Redemption Plan
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from original partners are permitted under the
terms of the Partnership's Limited Partnership Agreement, while the
Partnership's total outstanding indebtedness, currently $28.0 million, cannot be
increased. The Partnership relies on operating cash flow to meet its operating
obligations and to make cash distributions to the Limited Partners.
For the quarter ended March 31, 1995, the General Partner generated
sufficient operating revenues to meet its operating obligations, but used
undistributed available cash from prior periods to maintain the current level of
distributions to the partners.
Pursuant to the Limited Partnership Agreement, the Partnership has ceased
to reinvest in additional equipment. The General Partner has attempted to
assemble an equipment portfolio capable of achieving a level of operating cash
flow for the remaining life of the Partnership sufficient to meet its
obligations and sustain a predictable level of distributions to the partners.
Equipment sales now result in liquidation of the Partnership's portfolio, with
proceeds being used for payment of debt or distributions to partners.
The Partnership's permanent debt obligation matures in September, 1995.
The General Partner intends to refinance part or all of this debt so that its
maturity coincides with the liquidation phase of the Partnership, and to retire
this refinanced debt with proceeds from sales of equipment during the
liquidation phase of the Partnership.
8
<PAGE>
(C) Depositary Unit Repurchase Plan
The Partnership has engaged in a program to repurchase up to 250,000 Depositary
Units. During the three months ended March 31, 1995, the Partnership had
repurchased 11,900 Depositary Units at a cost of $140,000. As of March 31, 1995,
the Partnership had repurchased a total of 148,703 Depositary Units at a cost of
$2.2 million.
Comparison of the Partnership's Operating Results for the Three Months Ended
March 31, 1995 and 1994
(A) Revenues
Total revenues of $6.7 million for the quarter ended March 31, 1995
increased from $5.9 million for the same period in 1994.
(1) Lease revenues were $6.0 million for the quarter ended March 31, 1995
compared to $5.9 million in the same quarter of 1994. The following table
presents lease revenues by equipment type:
For the three months ended
March 31,
(in thousands)
1995 1994
------ -----
Rail equipment $ 1,768 $ 1,774
Marine vessels 1,928 1,392
Aircraft 775 1,073
Trailers 659 574
Marine containers 444 577
Mobile offshore drilling unit 446 533
------- -------
$ 6,020 $ 5,923
======= =======
The increase in 1995 lease revenues resulted from:
(a) an increase of $0.5 million in marine vessel lease revenue resulting
from one of the Partnership's marine vessels transferring from bareboat charter
into a timecharter operating in a marine vessel utilization pool which earns
higher daily rates but also assumes all operational costs and voyage costs,
which are allocated on a pro rata basis within the pool;
(b) an increase of $0.1 million in trailer lease revenue resulting from
the purchase of 40 trailers during the second and third quarters of 1994;
(c) a decrease of $0.3 million in aircraft lease revenue resulting from
the sale of two commercial aircraft during the second and third quarters of
1994, and due to a decrease in utilization rates on an aircraft operating in a
charter operation;
(d) a decrease of $0.1 million in mobile offshore drilling unit lease
revenue due to a reduced re-lease rate as a result of the rig's repositioning to
the Gulf of Mexico during 1994 in order to capture greater long-term
opportunity;
(e) a decrease of $0.1 million in marine container lease revenue resulting
from the sale of 87 marine containers in the first quarter of 1995, and the sale
of 566 marine containers during 1994.
9
<PAGE>
(2) Net gain on disposition of equipment in the first quarter 1995 totaled $0.6
million from the sale or disposal of 87 marine containers, six trailers, and 12
railcars, with a net book value of $0.6 million for proceeds of $1.2 million,
compared to a net loss on disposition of equipment in the first quarter 1994
from the sale or disposal of 101 marine containers, seven trailers, and two
tankcars with a net book value of approximately $0.2 million for proceeds of
approximately $0.1 million.
(B) Expenses
Total expenses for the three months ended March 31, 1995 of $5.1 million
increased from $4.4 million for the same period in 1994. The increase in 1995
was primarily attributable to higher marine equipment operating expenses, repair
and maintenance, interest, and insurance expense, partially offset by lower
depreciation and amortization, and general and administrative expenses.
(1) Direct operating expenses (defined as repairs and maintenance, insurance
expenses, and marine equipment operating expenses) increased to $1.7 million in
the first quarter 1995 from $0.8 million in the same period in 1994. The
increase resulted from:
(a) an increase of $0.6 million in marine equipment operating expenses due
to one of the Partnership's marine vessels transferring from bareboat charter,
where the lessee is responsible for most operating costs, into a timecharter
operating in a marine vessel utilization pool where the Partnership is
responsible for all operating costs and voyage costs, which are allocated on a
pro rata basis within the pool;
(b) an increase of $0.2 million in repairs and maintenance expenses due to
one of the Partnership's marine vessels transferring from bareboat charter,
where the lessee is responsible for most repair and maintenance costs, into a
timecharter operating in a marine vessel utilization pool where the Partnership
is responsible for all repair and maintenance costs;
(c) an increase of $0.1 million in insurance expense which resulted from a
refund in the first quarter of 1994 from an insurance pool which the
Partnership's marine vessels participate due to lower than expected insurance
claims in the pool. A similar refund was not received in the first quarter of
1995.
(2) Indirect operating expenses (defined as depreciation and amortization
expense, management fees, interest expense, and general and administrative
expenses ) were $3.4 million in the first quarter of 1995 compared to $3.6 for
the same quarter of 1994. The decrease in indirect operating expenses resulted
from:
(a) a decrease of $0.2 million in depreciation and amortization expense from
1994 levels reflecting the Partnership's use of the double-declining
depreciation method and the sale of certain assets during 1995 and 1994;
(b) a decrease of $0.1 million in general and administrative expenses due to
an adjustment to decrease accrued expenses related to the repositioning of the
Partnership's offshore drilling unit, and a decrease in consulting and bad debt
expenses;
(c) an increase of $0.2 million in interest expense resulting from an
increase in the LIBOR rate of interest on the Partnership's debt.
10
<PAGE>
(C) Net Income
As a result of the foregoing, the Partnership's net income was $1.6 million in
the first quarter of 1995 compared to $1.5 million during the same period in
1994. The Partnership's ability to operate and 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
first quarter 1995 is not necessarily indicative of future periods. In the first
quarter 1995, the Partnership distributed $3.4 million to the Unitholders, or
$0.58 per Depositary Unit.
11
<PAGE>
Trends
Generally, Partnership performance continues to be sensitive to trends in those
industry segments in which the Partnership equipment is either subject to
frequent re-leasing activity, or is impacted by changing demand for particular
Partnership equipment. In the former case, the Partnership's trailers have been
subject to softening demand, particularly for refrigerated over-the-road units;
and its rig and vessels have been subject to relatively low rates in essentially
static markets. In the latter case, the Partnership's 10-12 year old marine
containers (the majority of its marine container portfolio) are being retired at
an increased rate as container manufacturers step up deliveries of new
containers; while demand for the Partnership's older Stage II aircraft and
engines has declined in the U.S. market, leading the General Partner to remarket
such equipment abroad. Currently, demand for Partnership equipment remains
strong in the rail and over-the-road dry van areas.
The General Partner monitors these equipment markets. In those markets in which
the cyclical nature of demand has short- to intermediate-term impact, the
General Partner expects that partnership performance will be subject to such
market fluctuations and will vary accordingly. In those markets in which demand
for Partnership equipment has dropped for unacceptable lengths of time, the
General Partner takes appropriate action to reduce the Partnership's exposure to
such events.
The Partnership intends to use excess cash flow, if any, after payment of
expenses, for loan principal and cash distributions to investors.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
13
<PAGE>
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.
PLM EQUIPMENT GROWTH FUND
By: PLM Financial Services, Inc.
General Partner
Date: May 11, 1995 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,095
<SECURITIES> 0
<RECEIVABLES> 2,018
<ALLOWANCES> 186
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 107,982
<DEPRECIATION> 64,116
<TOTAL-ASSETS> 54,401
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 22,129
<TOTAL-LIABILITY-AND-EQUITY> 54,401
<SALES> 0
<TOTAL-REVENUES> 6,740
<CGS> 0
<TOTAL-COSTS> 4,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 531
<INCOME-PRETAX> 1,603
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,603
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
