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 March 31, 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, except unit amounts)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-----------------------------------
<S> <C> <C>
Equipment held for operating leases, at cost $ 44,667 $ 45,118
Less accumulated depreciation (34,130 ) (33,919 )
----------------------------------
Net equipment 10,537 11,199
Cash and cash equivalents 2,112 1,864
Restricted cash 60 60
Investments in unconsolidated special purpose entities 6,003 6,553
Accounts receivable, less allowance for doubtful accounts
of $291 at March 31, 1997, and $139 at December 31, 1996 980 1,039
Prepaid expenses and other assets 25 34
----------------------------------
Total assets $ 19,717 $ 20,749
==================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 303 $ 457
Due to affiliates 47 121
Security deposits 60 60
Lessee deposits and reserve for repairs 737 693
----------------------------------
Total liabilities 1,147 1,331
Partners' capital (deficit):
Limited partners (5,785,350 depositary units
at March 31, 1997 and at December 31, 1996) 18,801 19,641
General Partner (231 ) (223 )
----------------------------------
Total partners' capital 18,570 19,418
----------------------------------
Total liabilities and partners' capital $ 19,717 $ 20,749
==================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands, except per unit amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
-----------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 2,190 $ 2,842
Interest and other income 59 69
Net gain on disposition of equipment 76 11,338
----------------------------
Total revenues 2,325 14,249
Expenses:
Depreciation and amortization 596 963
Management fees to affiliate 138 140
Repairs and maintenance 354 437
Interest expense -- 401
Insurance expense to affiliates -- --
Other insurance expense 14 22
Marine equipment operating expenses -- --
General and administrative expenses to affiliate 155 191
Other general and administrative expenses 289 132
----------------------------
Total expenses 1,546 2,286
Equity in net loss of unconsolidated special purpose entities (26 ) (585 )
----------------------------
Net income $ 753 $ 11,378
============================
Partners' share of net income:
Limited partners $ 745 $ 11,264
General Partner 8 114
----------------------------
Total $ 753 $ 11,378
============================
Net income per weighted-average depositary unit (5,785,350 units
at March 31, 1997 and at 5,794,130 March 31, 1996) $ 0.13 $ 1.94
============================
Cash distributions $ 1,601 $ 3,375
============================
Cash distributions per weighted-average depositary unit $ 0.27 $ 0.58
============================
Special distributions $ -- $ 4,398
============================
============================
Special distributions per weighted-average depositary unit $ -- $ 0.75
============================
Total distributions per weighted-average depositary unit $ 0.27 $ 1.33
============================
</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 March 31,
1997
(in thousands)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) at 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) at December 31, 1996 19,641 (223 ) 19,418
Net income 745 8 753
Cash distributions (1,585 ) (16 ) (1,601 )
-----------------------------------------------------
Partners' capital (deficit) at March 31, 1997 $ 18,801 $ (231 ) $ 18,570
=====================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
----------------------------------
<S> <C> <C>
Operating activities:
Net income $ 753 $ 11,378
Adjustment to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 596 963
Net gain on disposition of equipment (76 ) (11,338 )
Equity in net loss of unconsolidated
special purpose entities 26 585
Changes in operating assets and liabilities:
Accounts receivable, net 59 62
Due to affiliates (74 ) (184 )
Prepaid expenses and other assets 9 (36 )
Restricted cash -- 1
Accounts payable and accrued expenses (154 ) (263 )
Security deposits -- (16 )
Lessee deposits and reserve for repairs 44 (16 )
----------------------------------
Net cash provided by operating activities 1,183 1,136
----------------------------------
Investing activities:
Payments for capital improvements and
equipment purchases -- (58 )
Proceeds from disposition of equipment 142 13,718
Distributions from unconsolidated
special purpose entities 524 83
----------------------------------
Net cash provided by investing activities 666 13,743
----------------------------------
Financing activities:
Principal repayment under note payable -- (8,130 )
Decrease in restricted cash -- 85
Cash distributions paid to Limited partners (1,585 ) (3,341 )
Cash distributions paid to General Partner (16 ) (34 )
Special distributions paid to Limited partners -- (4,354 )
Special distributions paid to General Partner -- (44 )
Repurchases of depositary units -- (163 )
----------------------------------
Net cash used in financing activities (1,601 ) (15,981 )
----------------------------------
Net increase (decrease) in cash and cash equivalents 248 (1,102 )
Cash and cash equivalents at beginning of period 1,864 1,474
----------------------------------
Cash and cash equivalents at end of period $ 2,112 $ 372
==================================
Supplemental information:
Interest paid $ -- $ 409
==================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 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 Partnership's financial position as of
March 31, 1997 and December 31, 1996, the statements of income for the
three months ended March 31, 1997 and 1996, the statements of cash flows
for the three months ended March 31, 1997 and 1996; and the statements of
changes in Partners' capital from the period ended December 31, 1995 to
March 31, 1997. 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. Reclassification
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Distributions
Distributions are recorded when paid. Operating cash distributions were
$1.6 million and $3.4 million for the three months ended March 31, 1997 and
1996, respectively. In addition, a $4.4 million special distribution was
paid to the partners during the three months ended March 31, 1996, from the
proceeds of seven offshore supply vessels sold in January 1996,
representing approximately 8% of the Partnership's portfolio on an original
cost basis. No special distributions was paid during the three months ended
March 31, 1997. During the quarter ended March 31, 1997, cash distributions
to unitholders of $0.8 million were deemed to be a return of capital.
Cash distributions of $1.6 million ($0.27 per weighted-average depositary
unit) were declared on April 25, 1997, and are to be paid on May 15, 1997,
to the unitholders of record as of March 31, 1997.
4. Investments in Unconsolidated Special Purpose Entities
The net investments in unconsolidated special purpose entities (USPE)
include the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
% Ownership Equipment 1997 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50% Product Tanker $ 1,743 $ 2,090
50% Boeing 737-200 1,634 1,689
12% Boeing 767-200 2,626 2,774
---------------------------------
Net investments $ 6,003 $ 6,553
=================================
</TABLE>
The Boeing 737-200 aircraft that the Partnership has a 50% investment
in was off-lease at March 31, 1997.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
5. General Partner and Transactions with Affiliates
Partnership management fees payable to an affiliate of the General Partner
were $29,000 and $103,000 at March 31, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE affiliated
management fees, of $148,000, and $36,000, were payable as of March 31,
1997 and December 31, 1996, respectively. The Partnership's proportional
share of USPE affiliated management fees expense during the three months
ended March 31, 1997 and 1996 was $108,000 and $63,000, respectively. The
Partnership's proportional share of USPE's data processing and
administrative expenses to affiliates was $8,000 and $25,000 during the
three months ended March 31, 1997 and 1996, respectively. The Partnership's
proportional share of USPE's marine insurance coverage paid to
Transportation Equipment Indemnity Company, Ltd. (TEI), were $61,000 and
$40,000 during the three months ended March 31, 1997 and 1996,
respectively. TEI is an affiliate of the General Partner.
6. Equipment
Owned equipment held for operating leases is stated at cost.
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------------------------------
<S> <C> <C>
Railcar equipment $ 21,909 $ 21,909
Marine containers 7,330 7,465
Aircraft and aircraft engines 6,299 6,299
Trailers 9,129 9,445
--------------------------------
44,667 45,118
Less accumulated depreciation (34,130 ) (33,919 )
================================
Net equipment $ 10,537 $ 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 on mileage traveled or a fixed rate; rents for all other
equipment are based on fixed rates.
As of March 31, 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 23 railcars
with carrying values of $156,362.
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 quarters ended March 31, 1997 and 1996.
Capital improvements to the Partnership's equipment of $58,000 were made
during the quarter ended March 31, 1996.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
6. Equipment (continued)
During the three months ended March 31, 1997, the Partnership sold or
disposed of marine containers and trailers with an aggregate net book value
of $66,187 for proceeds of $141,811. During the three months ended March
31, 1996, the Partnership sold or disposed of marine vessels, marine
containers, trailers, and railcars with an aggregate net book value of $2.4
million for proceeds of $13.7 million.
<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
March 31, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, marine
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the quarter ended March 31, 1997 when 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 March 31,
1997 1996
----------------------------
<S> <C> <C>
Railcar equipment $ 1,237 $ 1,307
Marine vessels -- 144
Aircraft 108 170
Trailers 300 387
Marine containers 182 382
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $1.5
million and $0.3 million, respectively, for the quarter ended March 31, 1997,
compared to $1.7 million and $0.4 million, respectively, for the same period of
1996. During 1996, the Partnership sold 15 railcars and 20 locomotives resulting
in lower revenues and expenses in the first quarter of 1997, compared to the
same period of 1996. In addition, the decrease in railcar contribution resulted
from running repairs required on certain of the railcars in the fleet during
1996 which were not needed during 1997.
Marine vessels: There was no lease revenues nor direct expense on marine vessels
for the quarter ended March 31, 1997, due to the sale of all the offshore supply
vessels were sold during 1996. Lease revenues and direct expenses were $0.1
million and a credit of $5,000, respectively, for the same period of 1996.
Aircraft: Aircraft lease revenues and direct expenses were $0.1 million and
$1,746, respectively, for the quarter ended March 31, 1997, compared to $0.1
million and a credit of $50,484, respectively, for the same period of 1996.
Aircraft contribution decreased in the first quarter of 1997 due to higher
repair and maintenance expenses for the quarter ended March 31, 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 March 31, 1997, compared to $0.5
million and $0.1 million, respectively, for the same period of 1996. The trailer
contribution decreased due to the sale of 41 trailers during the first quarter
of 1997, and 64 trailers during 1996. In addition, the trailer fleet is
experiencing lower utilization in the short-term rental yards.
Marine containers: Marine container lease revenues and direct expenses were $0.2
million and $1,600, respectively, for the quarter ended March 31, 1997, compared
to $0.4 million and $3,000, respectively, for the same period of 1996. The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and dispositions. In addition, the marine
container fleet has been experiencing lower utilization resulting in a decrease
in marine container contribution.
<PAGE>
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.2 million for the quarter ended March 31, 1997,
decreased from $1.8 million for the same period of 1996. The variances are
explained as follows:
(1) A $0.4 million decrease in depreciation and amortization expenses from 1996
levels reflecting the sale of certain assets during the first quarter of 1997
and during 1996.
(2) A $0.4 million decrease in interest expense due to repayment of the entire
Partnership's outstanding debt balance during 1996.
(3) A $0.2 million increase in bad debt expense primarily reflecting 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 first quarter of 1997
totaled $76,000 which resulted from the sale of marine containers and trailers
with an aggregate net book value of $66,000 for proceeds of $142,000. For the
first quarter of 1996, gain on sale totaled $11.3 million on the disposition of
equipment, primarily vessels, with a net book value of $2.4 million, for
proceeds of $13.7 million.
(D) 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 (see Note 4 to the financial statements).
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Aircraft and aircraft engines $ (116 ) $ (449 )
Marine vessels 90 (127 )
Mobile offshore drilling unit -- (9 )
============================
Equity in net income (loss) $ (26 ) $ (585 )
============================
</TABLE>
Aircraft and aircraft engines: The Partnership's share of aircraft revenues and
expenses were $0.1 million and $0.2 million, respectively, for the quarter ended
March 31, 1997, compared to $0.4 million and $0.9 million, respectively, for the
same period of 1996. As of March 31, 1997, the Partnership owned 50% and 12%
investments in 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 loss of
$0.1 million for the quarter ended March 31, 1997, related to the Partnership's
50% investment in a commercial aircraft. This aircraft was off lease during the
first three months of 1997. The Partnership's remaining 12% investment in a
commercial aircraft operated at essentially break even during the first quarter
of 1997.
Marine vessel: The Partnership's share of marine vessel revenues and expenses
was $0.6 million and $0.5 million, respectively, for the quarter ended March 31,
1997, compared to $0.5 million and $0.6 million, respectively, for the same
period of 1996. At March 31, 1997 and 1996, the Partnership owned a 50%
investment in a marine vessel. The increase in contribution in the first quarter
of 1997 resulted from lower marine operating expenses associated with the vessel
compared to the same period of 1996.
Mobile offshore drilling unit: The Partnership's share of mobile offshore
drilling unit revenues and expenses for the first quarter of 1996 were $0.4
million and $0.4 million, respectively. The Partnership liquidated its 55%
investment in the 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 $0.8 million for
the first quarter of 1997, decreased from net income of $11.4 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 during the duration
of the Partnership is subject to many factors and the Partnership's performance
in the first quarter of 1997 is not necessarily indicative of future periods. In
the first quarter of 1997, the Partnership distributed $1.6 million to the
unitholders, or $0.27 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 to make cash
distributions to the Limited Partners.
For the three months ended March 31, 1997, the Partnership generated sufficient
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 three months ended
March 31, 1997 of approximately $1.6 million) to the partners. During the three
months ended March 31, 1997, the General Partner sold owned equipment on behalf
of the Partnership and realized proceeds of approximately $142,000.
The General Partner has not planned any expenditures, nor is it aware of
any contingencies that would cause the Partnership to require any additional
capital to that mentioned above.
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 in 1997, 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.
(IV) OUTLOOK FOR THE FUTURE
Since the Partnership is approaching its orderly liquidation phase, 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 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 be periodically making
special distributions to the Partners as asset sales are completed.
<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: May 13, 1997 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,112
<SECURITIES> 60
<RECEIVABLES> 1,271
<ALLOWANCES> 291
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,667
<DEPRECIATION> 34,130
<TOTAL-ASSETS> 19,717
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,570
<TOTAL-LIABILITY-AND-EQUITY> 19,717
<SALES> 0
<TOTAL-REVENUES> 2,325
<CGS> 0
<TOTAL-COSTS> 1,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 753
<INCOME-TAX> 0
<INCOME-CONTINUING> 753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 753
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
