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 quarter ended September 30, 1997
or
[ ] 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 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 EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 35,373 $ 45,118
Less accumulated depreciation (26,545 ) (33,919 )
------------------------------------------
Net equipment 8,828 11,199
Cash and cash equivalents 4,132 1,864
Restricted cash 60 60
Investments in unconsolidated special-purpose entities 5,025 6,553
Accounts receivable, net of allowance for doubtful accounts
of $943 in 1997 and $139 in 1996 1,503 1,039
Prepaid expenses and other assets 2 34
------------------------------------------
Total assets $ 19,550 $ 20,749
==========================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 734 $ 457
Due to affiliates 475 121
Lessee deposits and reserve for repairs 163 753
------------------------------------------
Total liabilities 1,372 1,331
------------------------------------------
Partners' capital (deficit):
Limited partners (5,785,350 depositary units
as of September 30, 1997 and December 31, 1996) 18,401 19,641
General Partner (223 ) (223 )
------------------------------------------
Total partners' capital 18,178 19,418
------------------------------------------
Total liabilities and partners' capital $ 19,550 $ 20,749
==========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 2,385 $ 2,279 $ 6,818 $ 7,662
Interest and other income 38 145 127 235
Net gain on disposition of equipment 1,863 271 2,188 13,164
------------------------------------------------------------
Total revenues 4,286 2,695 9,133 21,061
------------------------------------------------------------
Expenses:
Depreciation and amortization 561 661 1,741 2,511
Repairs and maintenance 597 562 1,469 1,620
Interest expense - 246 - 909
Insurance expense 13 15 41 58
Management fees to affiliate 96 196 360 713
General and administrative expenses to affiliates 162 148 434 555
Other general and administrative expenses 128 126 388 397
Provision for bad debt 296 41 471 27
------------------------------------------------------------
------------------------------------------------------------
Total expenses 1,853 1,995 4,904 6,790
------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 178 9,016 (665 ) 8,866
------------------------------------------------------------
Net income $ 2,611 $ 9,716 $ 3,564 $ 23,137
============================================================
Partners' share of net income:
Limited partners $ 2,595 $ 9,620 $ 3,516 $ 22,907
General Partner 16 96 48 230
------------------------------------------------------------
Total $ 2,611 $ 9,716 $ 3,564 $ 23,137
============================================================
Net income per weighted-average depositary unit
(5,785,350 units as of September 30, 1997
and 1996) $ 0.45 $ 1.66 $ 0.61 $ 3.96
============================================================
Cash distributions $ 1,601 $ 1,690 $ 4,804 $ 6,753
============================================================
Cash distributions per weighted-average
depositary unit $ 0.27 $ 0.29 $ 0.82 $ 1.15
============================================================
Special distributions $ - $ 5,844 $ - $ 10,242
============================================================
Special distributions per weighted-average
depositary unit $ - $ 1.00 $ - $ 1.75
============================================================
Total distributions per weighted-average
depositary unit $ 0.27 $ 1.29 $ 0.82 $ 2.90
============================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
From the period ended December 31, 1995 to September
30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1995 $ 14,609 $ (275 ) $ 14,334
Net income 23,609 238 23,847
Repurchase of depositary units (163 ) - (163 )
Cash distributions (8,274 ) (84 ) (8,358 )
Special distributions (10,140 ) (102 ) (10,242 )
------------------------------------------------------
Partners' capital (deficit) as of December 31, 1996 19,641 (223 ) 19,418
Net income 3,516 48 3,564
Cash distributions (4,756 ) (48 ) (4,804 )
------------------------------------------------------
Partners' capital (deficit) as of September 30, 1997 $ 18,401 $ (223 ) $ 18,178
======================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
----------------------------------
Operating activities:
<S> <C> <C>
Net income $ 3,564 $ 23,137
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on disposition of equipment (2,188 ) (13,164 )
Depreciation and amortization 1,741 2,511
Equity in net loss (income) from unconsolidated special-
purpose entities 665 (8,866 )
Changes in operating assets and liabilities:
Restricted cash - 137
Accounts receivable, net (301 ) 547
Prepaid expenses and other assets 32 (18 )
Accounts payable and accrued expenses 277 (368 )
Due to affiliates 354 26
Lessee deposits and reserve for repairs (590 ) (105 )
----------------------------------
Net cash provided by operating activities 3,554 3,837
----------------------------------
Investing activities:
Payments for capital improvements (58 ) (59 )
Distributions from unconsolidated special-purpose entities 863 18,709
Proceeds from disposition of equipment 2,713 17,535
----------------------------------
Net cash provided by investing activities 3,518 36,185
----------------------------------
Financing activities:
Principal repayment under note payable - (21,000 )
Decrease in restricted cash - 85
Cash distributions paid to limited partners (4,756 ) (6,686 )
Cash distributions paid to General Partner (48 ) (67 )
Special distributions paid to limited partners - (10,140 )
Special distributions paid to General Partner - (102 )
Repurchase of depositary units - (163 )
----------------------------------
Net cash used in financing activities (4,804 ) (38,073 )
----------------------------------
Net increase in cash and cash equivalents 2,268 1,949
Cash and cash equivalents at beginning of period 1,864 1,474
----------------------------------
Cash and cash equivalents at end of period $ 4,132 $ 3,423
==================================
Supplemental information:
Interest paid $ - $ 922
==================================
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 168 $ --
==================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
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 PLM Equipment Growth Fund's (the
Partnership's) financial position as of September 30, 1997 and December 31,
1996, the statements of income for the three and nine months ended
September 30, 1997 and 1996, the statements of changes in partners' capital
from the period ended December 31, 1995 to September 30, 1997, and the
statements of cash flows for the nine months ended September 30, 1997 and
1996. 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, 1996, on file at
the Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Cash Distributions
Distributions are recorded when paid. Operating cash distributions were
$4.8 million and $6.8 million for the nine months ended September 30, 1997
and 1996, respectively. In addition, $10.2 million in special distributions
were paid to the partners during the nine months ended September 30, 1996.
This special distribution resulted from the disposition of partnership
equipment. No special distribution was paid during the nine months ended
September 30, 1997. Cash distributions to limited partners in excess of net
income are considered to represent a return of capital. During the nine
months ended September 30, 1997, cash distributions to unitholders of $1.2
million were deemed to be a return of capital. Cash distributions related
to the results from the third quarter of 1997 of $1.6 million, are payable
during November 1997.
4. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities (USPEs)
include the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
% Ownership Equipment 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12% Boeing 767-200 ER $ 2,746 $ 2,774
50% Product Tanker 1,598 2,090
50% Boeing 737-200 681 1,689
-----------------------------------------
Net investments $ 5,025 $ 6,553
=========================================
</TABLE>
The Boeing 737-200 aircraft was off lease as of September 30, 1997 and
December 31, 1996.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
5. Equipment
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-----------------------------------------
<S> <C> <C>
Railcar equipment $ 21,941 $ 21,909
Trailers 7,859 9,445
Marine containers 5,573 7,465
Aircraft and aircraft engines - 6,299
----------------------------------------
35,373 45,118
Less accumulated depreciation (26,545 ) (33,919 )
========================================
Net equipment $ 8,828 $ 11,199
========================================
</TABLE>
Revenues are earned by placing the equipment under operating leases, which
are generally billed monthly or quarterly. All of the Partnership's 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 either on mileage traveled or on fixed rates; rents for
all other equipment are based on fixed rates.
As of September 30, 1997, all equipment in the Partnership's owned
equipment portfolio was on lease or operating in PLM-affiliated short-term
trailer rental facilities, except for 25 marine containers and 2 railcars
with a net book value of $12,000.
In the third quarter of 1994, the Partnership ended its reinvestment phase
in accordance with the Limited Partnership Agreement; therefore, no
equipment was purchased during the nine months ended September 30, 1997 and
1996. Capital improvements to the Partnership's existing equipment of $0.1
million were made during the nine months ended September 30, 1997 and
September 30, 1996.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of marine containers, trailers, and an aircraft with an aggregate
net book value of $0.7 million for $2.9 million. During the nine months
ended September 30, 1996, the Partnership sold or disposed of offshore
supply vessels, marine containers, trailers, railcars, and an aircraft
engine with an aggregate net book value of $4.5 million for proceeds of
$17.7 million.
6. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner
were $0.1 million as of September 30, 1997 and December 31, 1996. The
Partnership's proportional share of USPE-affiliated management fees, of
$20,000 and $36,000, were payable as of September 30, 1997 and December 31,
1996, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
6. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the affiliated expenses incurred by
the USPEs during 1997 and 1996 is listed in the following table (in
thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
----------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance expense $ 32 $ 37 $ 131 $ 120
Management fees 28 63 166 149
Data processing and administrative
expenses 10 24 30 41
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine
insurance coverage for Partnership equipment and other insurance brokerage
services. TEI is an affiliate of the General Partner.
(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 the Partnership's Operating Results for the Three Months Ended
September 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the quarter ended September 30, 1997, compared to the same
period of 1996. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 1,172 $ 1,095
Trailers 302 295
Marine containers 271 195
Aircraft 35 122
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $1.6
million and $0.4 million, respectively, for the quarter ended September 30,
1997, compared to $1.5 million and $0.4 million, respectively, for the same
period of 1996. The increase in railcar contribution was due to higher average
lease rates, resulting in higher revenues in the third quarter of 1997, compared
to the same period of 1996.
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.1
million, respectively, for the quarter ended September 30, 1997, compared to
$0.4 million and $0.1 million, respectively, for the same period of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.3
million and $1,000, respectively, for the quarter ended September 30, 1997,
compared to $0.2 million and $2,000, respectively, for the same period of 1996.
The increase in marine container contribution was due to higher revenues in the
third quarter of 1997, compared to the same period of 1996.
Aircraft: Aircraft lease revenues and direct expenses were $36,000 and $1,000,
respectively, for the quarter ended September 30, 1997, compared to $0.1 million
and a $2,000, respectively, for the same period of 1996. Aircraft contribution
decreased in the third quarter of 1997 due to the disposition of an aircraft
during the third quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.2 million for the quarter ended September 30, 1997
decreased from $1.4 million for the same period of 1996. The variances are
explained as follows:
(1) A $0.1 million decrease in depreciation and amortization expenses from 1996
levels reflected the sale of certain assets during 1997 and 1996.
(2) A $0.3 million decrease in interest expense was due to repayment of the
Partnership's entire outstanding debt balance during 1996.
(3) A $0.1 million decrease in management fees to affiliate was due to a
decrease in the Partnership's operating cash flows. Management fees are based on
the greater of (i) 10% of cash flows or (ii) 1/12 of 1/2% of the net book value
of the equipment portfolio, subject to reduction in certain events, as described
in the Limited Partnership Agreement.
<PAGE>
(4) A 0.3 million increase in bad debt expense primarily reflected the
Partnership's evaluation of collectibility of certain receivable balances.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for the third quarter of 1997
totaled $1.9 million, and resulted from the sale of marine containers, trailers,
and an aircraft with an aggregate net book value of $2.1 million, for aggregate
proceeds of $0.2 million. Net gain on disposition of equipment for the third
quarter of 1996 totaled $0.3 million, which resulted mainly from the sale or
disposition of railcars, trailers, and marine containers with an aggregate net
book value of $0.1 million, for aggregate proceeds of $0.4 million.
(D) Interest and Other Income
Interest and other income decreased $0.1 million for the quarter ended September
30, 1997, when compared to the same period of 1996, due primarily to lower cash
balances available for investment.
(E) Equity in Net Income of Unconsolidated Special-Purpose Entities
Equity in net income of unconsolidated special-purpose entities represents net
income generated from the operation of jointly-owned assets accounted for under
the equity method (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Marine vessel $ 169 $ 152
Aircraft and aircraft engines 9 821
Mobile offshore drilling unit - 8,043
</TABLE>
Marine vessel: The Partnership's share of marine vessel revenues and expenses
was $0.7 million and $0.5 million, respectively, for the quarter ended September
30, 1997, compared to $0.6 million and $0.4 million, respectively, for the same
period of 1996. As of September 30, 1997 and 1996, the Partnership owned a 50%
investment in a marine vessel that earned higher lease rates during the third
quarter of 1997, compared to the same period of 1996.
Aircraft and aircraft engines: The Partnership's share of aircraft revenues and
expenses was $0.3 million and $0.3 million, respectively, for the quarter ended
September 30, 1997, compared to $1.1 million and $0.3 million, respectively, for
the same period of 1996. As of September 30, 1997, the Partnership owned a 50%
investment in a commercial aircraft and a 12% interest in another commercial
aircraft. The Partnership's share of the net contribution decreased the
Partnership liquidated its 70% and 50% investments in commuter aircraft and its
50% investment in an aircraft engine during 1996 as a result of the General
Partner's sale of the assets. The Partnership also liquidated its 50% investment
in an entity which owned an aircraft engine in the third quarter of 1997 at a
gain of $0.2 million.
Mobile offshore drilling unit: There were no mobile offshore drilling unit lease
revenues or direct expenses for the third quarter of 1997, compared to $8.1
million and $22,000, respectively, for the third quarter of 1996. The
Partnership liquidated its 55% investment in a mobile offshore drilling unit
during July 1996 as a result of the General Partner's sale of the asset.
(F) Net Income
As a result of the foregoing, the Partnership's net income of $2.6 million for
the third quarter of 1997 decreased from net income of $9.7 million during the
same period of 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the third quarter of 1997 is not
necessarily indicative of future periods. In the third quarter of 1997, the
Partnership distributed $1.6 million to the unitholders, or $0.27 per
weighted-average depositary unit.
<PAGE>
Comparison of the Partnership's Operating Results for the Nine Months Ended
September 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30, 1997, compared to the same
period of 1996. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 3,533 $ 3,666
Trailers 879 962
Marine containers 659 882
Aircraft and aircraft engines 250 352
Marine vessels - 143
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $4.6
million and $1.1 million, respectively, for the nine months ended September 30,
1997, compared to $4.9 million and $1.2 million, respectively, during the same
period of 1996. During 1996, the Partnership sold 15 railcars and 20
locomotives, resulting in lower revenue for the nine months ended September 30,
1997, compared to the same period of 1996.
Trailers: Trailer lease revenues and direct expenses were $1.3 million and $0.4
million, respectively, for the nine months ended September 30, 1997, compared to
$1.4 million and $0.4 million, respectively, during the same period of 1996. The
decrease in trailer contribution was due to the disposition of trailers.
Marine containers: Marine container lease revenues and direct expenses were $0.7
million and $4,000, respectively, for the nine months ended September 30, 1997,
compared to $0.9 million and $6,000, respectively, during the same period of
1996. The number of marine containers owned by the Partnership declined over the
past twelve months due to sales and dispositions. The result of this declining
fleet has been a decrease in marine container contribution.
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$0.3 million and $5,000, respectively, for the nine months ended September 30,
1997, compared to $0.4 million and $17,000, respectively, during the same period
of 1996. Aircraft contribution decreased in the nine months ended September 30,
1997 due to the disposition of an aircraft engine during the second quarter of
1996 and an aircraft during the third quarter of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.1
million and a credit of $4,000, respectively, for the nine months ended
September 30, 1996. The decrease in marine vessel contribution was due to the
sale of all offshore supply vessels during 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.4 million for the nine months ended September 30,
1997 decreased from $5.1 million for the same period in 1996. The variances are
explained as follows:
(1) A $0.8 million decrease in depreciation and amortization expenses from 1996
levels reflected the sale of certain assets during 1997 and 1996.
(2) A $0.9 million decrease in interest expense was due to repayment of the
Partnership's entire outstanding debt balance during 1996.
<PAGE>
(3) A $0.4 million decrease in management fees to affiliate was due to a
decrease in the Partnership's operating cash flows. Management fees are based on
the greater of (i) 10% of cash flows or (ii) 1/12 of 1/2% of the net book value
of the equipment portfolio, subject to reductions in certain events, as
described in the Limited Partnership Agreement.
(4) A 0.4 million increase in bad debt expense primarily reflected the
Partnership's evaluation of collectibility of certain receivable balances.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the nine months ended September 30,
1997 totaled $2.2 million, and resulted from the sale of marine containers,
trailers, and an aircraft with a net book value of $0.7 million, for proceeds of
$2.9 million. Net gain on disposition of equipment for the nine months ended
September 30, 1996 totaled $13.2 million, and resulted mainly from the sale of
offshore supply vessels with a net book value of $2.3 million, for proceeds of
$13.4 million. The remaining gain resulted from the sale or disposal of marine
containers, trailers, railcars, and an aircraft engine, with an aggregate net
book value of $2.2 million, for aggregate proceeds of $4.3 million.
(D) Interest and Other Income
Interest and other income decreased $0.1 million for the nine months ended
September 30, 1997, when compared to the same period of 1996, due primarily to
lower cash balances available for investment.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of unconsolidated special-purpose entities
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-----------------------------
<S> <C> <C>
Marine vessel $ 354 $ 35
Aircraft and aircraft engines (1,019 ) 779
Mobile offshore drilling unit - 8,052
</TABLE>
Marine vessel: The Partnership's share of marine vessel revenues and expenses
was $1.9 million and $1.5 million, respectively, for the nine months ended
September 30, 1997, compared to $1.6 million and $1.6 million, respectively,
during the same period of 1996. During 1997 and 1996, the Partnership owned a
50% investment in a marine vessel that earned higher lease rates during the nine
months ended September 30, 1997, compared to the same period of 1996.
Aircraft and aircraft engines: The Partnership's share of aircraft revenues and
expenses was $0.6 million and $1.6 million, respectively, for the nine months
ended September 30, 1997, compared to $2.3 million and $1.5 million,
respectively, during the same period of 1996. As of September 30, 1997, the
Partnership owned a 50% investment in a commercial aircraft and a 12% interest
in another commercial aircraft. The Partnership liquidated its 70% and 50%
investments in commuter aircraft and its 50% investment in an aircraft engine
during 1996 as a result of the General Partner's sale of the assets. The
Partnership liquidated its 50% investment in an entity which owned an aircraft
engine in the third quarter of 1997 at a gain of $0.2 million. The loss of $1.0
million for the nine months ended September 30, 1997 related to the
Partnership's 50% investment in a commercial aircraft. This aircraft was off
lease during the first nine months of 1997 and it had been on lease for the
first six months ended September 30, 1996. The commercial aircraft in which the
Partnership has a 12% investment operated at essentially break-even during the
first nine months of 1997.
Mobile offshore drilling unit: There were no mobile offshore drilling unit lease
revenues or direct expenses during the nine months ended September 30, 1997,
compared to $8.8 million and $0.7 million, respectively, during the same period
of 1996. The Partnership liquidated its 55% investment in the mobile offshore
drilling unit during July 1996 as a result of the sale of the asset.
<PAGE>
(F) Net Income
As a result of the foregoing, the Partnership's net income of $3.6 million for
the nine months ended September 30, 1997 decreased from $23.1 million during the
same period in 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the first nine months of 1997 is
not necessarily indicative of future periods. During the nine months ended
September 30, 1997, the Partnership distributed $4.8 million to the unitholders,
or $0.82 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
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 Limited Partnership Agreement. The Partnership currently has no
debt obligations. The Partnership relies on operating cash flows to meet its
operating obligations, maintain working capital reserves, and make cash
distributions to the limited partners.
For the nine months ended September 30, 1997, the Partnership generated $4.4
million in operating cash (net cash provided by operating activities, plus
distributions from unconsolidated special-purpose entities) to meet its
operating obligations and maintain the current level of distributions (total for
nine months ended September 30, 1997 of approximately $4.8 million) to the
partners, but used undistributed available cash from prior periods of
approximately $0.4 million. During the nine months ended September 30, 1997, the
General Partner sold equipment on behalf of the Partnership and realized
proceeds of approximately $2.9 million.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of marine containers, trailers, and an aircraft with an aggregate net
book value of $0.7 million for $2.9 million.
During the first quarter of 1996, the cash distribution rate was reduced to more
closely reflect current and expected net cash flows from operations. Continued
weak market conditions in certain equipment sectors and equipment sales have
reduced overall lease revenues in the Partnership. In addition, with the onset
of the equipment liquidation phase of the Partnership beginning in 1998, the
size of the Partnership's remaining equipment portfolio and, in turn, the amount
of net cash flows from operations, will continue to become progressively smaller
as assets are sold. Although operating distribution levels will be reduced,
significant asset sales may result in potential special distributions to
unitholders.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is approaching its orderly liquidation phase (beginning in
1998), the General Partner will be seeking to selectively re-lease or sell
assets as the existing leases expire. Sale decisions will cause the operating
performance of the Partnership to decline over the remainder of its life. The
General Partner anticipates that the liquidation of Partnership assets will be
completed by the scheduled termination of the Partnership at the end of 1999.
Throughout the remaining life of the Partnership, the Partnership may
periodically be making special distributions to the partners as asset sales are
completed.
(IV) 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.
<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 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: October 31, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,132
<SECURITIES> 60
<RECEIVABLES> 5,968
<ALLOWANCES> 943
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,373
<DEPRECIATION> 26,545
<TOTAL-ASSETS> 19,550
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<COMMON> 0
0
0
<OTHER-SE> 18,178
<TOTAL-LIABILITY-AND-EQUITY> 19,550
<SALES> 0
<TOTAL-REVENUES> 9,133
<CGS> 0
<TOTAL-COSTS> 4,904
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,564
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,564
<EPS-PRIMARY> 0
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