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, 1997
[ ] 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 1-10813
-----------------------
PLM EQUIPMENT GROWTH FUND III
(Exact name of registrant as specified in its charter)
California 68-0146197
(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 III
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 134,861 $ 136,670
Less accumulated depreciation (84,267 ) (78,607 )
------------------------------------
Net equipment 50,594 58,063
Cash and cash equivalents 2,233 1,414
Restricted cash and marketable securities 6,119 5,966
Investments in unconsolidated special-purpose entities 9,645 11,138
Accounts and note receivable, net of allowance for doubtful
accounts of $1,336 in 1997 and $1,381 in 1996 1,279 1,515
Prepaid expenses and other assets 23 64
Deferred charges, net of accumulated amortization of
$453 in 1997 and $800 in 1996 396 491
------------------------------------
Total assets $ 70,289 $ 78,651
====================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 913 $ 1,505
Due to affiliates 856 1,297
Lessee deposits and reserves for repairs 7,404 7,552
Note payable 39,823 40,284
------------------------------------
Total liabilities 48,996 50,638
------------------------------------
Partners' capital:
Limited partners (9,871,073 depositary units as
of June 30, 1997 and December 31, 1996) 21,293 28,013
General Partner - -
------------------------------------
Total partners' capital 21,293 28,013
------------------------------------
Total liabilities and partners' capital $ 70,289 $ 78,651
====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 5,233 $ 4,683 $ 10,224 9,369
Interest and other income 93 118 188 249
Net gain on disposition of equipment 35 19 124 852
------------------------------------------------------------
Total revenues 5,361 4,820 10,536 10,470
------------------------------------------------------------
Expenses:
Depreciation and amortization 3,544 2,042 7,100 4,090
Marine equipment operating expense 14 56 20 86
Repairs and maintenance 870 2,101 2,285 2,740
Interest expense 807 757 1,604 1,637
Insurance expense 66 71 112 136
Management fees to affiliate 302 306 594 507
General and administrative expenses to affiliates 171 187 353 369
Other general and administrative expenses 236 281 381 518
(Recovery of) provision for bad debt (20 ) (89 ) (46 ) 629
------------------------------------------------------------
Total expenses 5,990 5,712 12,403 10,712
------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 157 6 342 (62 )
------------------------------------------------------------
Net loss $ (472 ) $ (886 ) $ (1,525 ) (304 )
============================================================
Partners' share of net (loss) income:
Limited partners $ (602 ) $ (1,016 ) $ (1,785 ) (643 )
General Partner 130 130 260 339
------------------------------------------------------------
Total $ (472 ) $ (886 ) $ (1,525 ) (304 )
============================================================
Net loss per weighted-average depositary unit
(9,871,073 units and 9,871,873 units as of
June 30, 1997 and 1996, respectively) $ (0.06 ) $ (0.10 ) $ (0.18 ) (0.07 )
============================================================
Cash distributions $ 2,598 $ 2,600 $ 5,195 6,769
============================================================
Cash distributions per weighted-average
depositary unit $ 0.25 $ 0.25 $ 0.50 0.65
============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1995 to June 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1995 $ 30,337 $ - $ 30,337
Net income 9,162 598 9,760
Repurchase of depositary units (120 ) - (120 )
Cash distributions (11,366 ) (598 ) (11,964 )
-------------------------------------------------
Partners' capital as of December 31, 1996 28,013 - 28,013
Net (loss) income (1,785 ) 260 (1,525 )
Cash distributions (4,935 ) (260 ) (5,195 )
-------------------------------------------------
Partners' capital as of June 30, 1997 $ 21,293 $ - $ 21,293
=================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
-----------------------------
<S> <C> <C>
Operating activities:
Net loss $ (1,525 ) $ (304 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Net gain on disposition of equipment (124 ) (852 )
Depreciation and amortization 7,100 4,090
Equity in net (income) loss from unconsolidated special-purpose entities (342 ) 62
Sales-type lease income - (398 )
Changes in operating assets and liabilities:
Restricted cash and marketable securities (153 ) (153 )
Accounts and note receivable, net 236 255
Prepaid expenses and other assets 41 (180 )
Accounts payable and accrued expenses (592 ) 1,144
Due to affiliates (441 ) 329
Lessee deposits and reserves for repairs (148 ) 80
----------------------------
Net cash provided by operating activities 4,052 4,073
----------------------------
Investing activities:
Payments for purchases of equipment - (5,500 )
Payments for capitalized improvements (137 ) (587 )
Payments of acquisition-related fees to affiliate - (303 )
Payments received from sales-type leases - 724
Distributions from unconsolidated special-purpose entities 1,835 1,734
Proceeds from disposition of equipment 725 4,350
----------------------------
Net cash provided by investing activities 2,423 418
----------------------------
Financing activities:
Proceeds from note payable - 4,600
Principal payments on note payable (461 ) (4,686 )
Cash distributions paid to limited partners (4,935 ) (6,430 )
Cash distributions paid to General Partner (260 ) (339 )
Repurchase of depositary units - (120 )
----------------------------
Net cash used in financing activities (5,656 ) (6,975 )
----------------------------
Net increase (decrease) in cash and cash equivalents 819 (2,484 )
Cash and cash equivalents at beginning of period 1,414 3,243
----------------------------
Cash and cash equivalents at end of period $ 2,233 $ 759
============================
Supplemental information:
Interest paid $ 1,772 $ 1,526
============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or 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 III (the
Partnership) as of June 30, 1997 and December 31, 1996, the statements of
operations for the three months and six months ended June 30, 1997 and 1996, the
statements of changes in partners' capital for the period from December 31, 1995
to June 30, 1997, and the statements of cash flows for the six months ended June
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
Cash distributions are recorded when paid and totaled $5.2 and $6.8 million for
the six months ended June 30, 1997 and 1996, respectively. Cash distributions to
unitholders in excess of net income are considered to represent a return of
capital. Cash distributions to unitholders of $4.9 million and $6.4 million
during the six months ended June 30, 1997 and 1996 were deemed to be a return of
capital.
4. Investments in Unconsolidated Special-Purpose Entities
The net investment in unconsolidated special-purpose entities (USPEs) included
the following jointly-owned equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>
% June 30, December 31,
Ownership Equipment 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
17% Two trusts that own three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables $ 3,622 $ 4,564
56% Marine vessel 3,589 3,999
17% Trust that owns six commercial aircraft 2,434 2,575
---------------------------------
Investments in unconsolidated special-purpose entities $ 9,645 $ 11,138
=================================
</TABLE>
5. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner were
$0.9 million and $1.3 million as of June 30, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE-affiliated management
fees of $46,000 and $20,000 were payable as of June 30, 1997 and December 31,
1996, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
5. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the affiliated expenses incurred by the
USPEs during 1997 and 1996, are listed in the following table (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 46 $ 70 $ 88 $ 137
Insurance expense 25 29 52 55
Data processing and administrative
expenses 12 60 24 63
</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.
6. Equipment
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------------------------------
<S> <C> <C>
Equipment held for operating leases:
Aircraft and aircraft engines $ 70,615 $ 70,615
Rail equipment 34,815 35,733
Marine containers 12,367 13,146
Mobile offshore drilling unit 9,666 9,666
Trailers 7,398 7,510
------------------------------------
134,861 136,670
Less accumulated depreciation (84,267 ) (78,607 )
------------------------------------
====================================
Net equipment $ 50,594 $ 58,063
====================================
</TABLE>
As of June 30, 1997, all equipment in the Partnership portfolio was either on
lease or operating in PLM-affiliated short-term trailer rental facilities, with
the exception of 22 railcars and 30 marine containers with an aggregate carrying
value of $0.2 million. As of December 31, 1996, all equipment in the Partnership
portfolio was either on lease or operating in PLM-affiliated short-term rental
facilities, with the exception of 1 aircraft, 32 marine containers and 67
railcars with an aggregate carrying value of $4.3 million.
During the six months ended June 30, 1997, the Partnership sold or disposed of
marine containers, trailers, and railcars with an aggregate net book value of
$0.6 million for aggregate proceeds of $0.7 million. During the six months ended
June 30, 1996, the Partnership sold or disposed of aircraft engines, marine
containers, trailers, and railcars with an aggregate net book value of $3.5
million for aggregate proceeds of $4.4 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
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (repair and maintenance, marine equipment
operating, and asset-specific insurance expenses) on owned equipment increased
for the quarter ended June 30, 1997, compared to the same period of 1996. The
following table presents results by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
------------------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 1,852 $ (40 )
Rail equipment 1,277 1,120
Trailers 526 425
Mobile offshore drilling unit 396 -
Marine containers 269 402
Marine vessels - 560
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$2.0 million and $0.1 million, respectively, for the quarter ended June 30,
1997, compared to $1.1 million and $1.2 million, respectively, during the same
period of 1996. The increase in contribution was due to higher revenues and
lower repair and maintenance expenses in the second quarter of 1997, compared to
the same period of 1996. The increase in revenues was due to one off-lease
aircraft that went back on lease during the first quarter of 1997. The repair
and maintenance expenses of $1.2 million in the second quarter of 1996 were for
repairs to this aircraft to prepare it for re-lease.
Rail equipment: Railcar lease revenues and direct expenses were $1.9 million and
$0.6 million, respectively, for the quarter ended June 30, 1997, compared to
$1.9 million and $0.8 million, respectively, during the same period of 1996. The
increase in railcar contribution resulted from running repairs required on
certain railcars in the fleet during the second quarter of 1996 that were not
needed during the second quarter of 1997.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.1
million, respectively, for the quarter ended June 30, 1997, compared to $0.5
million and $0.1 million, respectively, during the same period of 1996. All
trailers had made the transition to the PLM-affiliated short-term rental yards
as of June 30, 1997. Trailers earned higher lease rates while in the affiliated
short-term rental yards than they earned during the same period of 1996 while
they were on term lease. This increase was partially offset by lower revenues
caused by reduced trailer utilization.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $0.4 million and $14,000, respectively, for the quarter
ended June 30, 1997. The Partnership acquired and placed into lease service one
mobile offshore drilling unit in the third quarter of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.3
million and $2,000, respectively, for the quarter ended June 30, 1997, compared
to $0.4 million and $3,000, respectively, during the same period of 1996. The
number of marine containers owned by the Partnership has been declining due to
sales and dispositions. The result of this declining fleet and a decrease in
utilization has been a decrease in marine container contribution.
Marine vessels: Marine vessels lease revenues and direct expenses were $0.7
million and $0.1 million, respectively, for the second quarter of 1996. The
decrease of contribution from marine vessels in the second quarter of 1997 was
due to the sale of all the Partnership's marine vessels during 1996.
<PAGE>
(B) Indirect Operating Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.1 million for the quarter ended June 30, 1997
increased from $3.5 million for the same period of 1996. The variance is
explained as follows:
(1) An increase of $1.5 million in depreciation and amortization expense
from 1996 levels reflects the Partnership's depreciation on equipment purchased
in 1996, offset by the sale or disposition of certain Partnership assets during
1997 and 1996 and by the Partnership's use of the double-declining balance
method of depreciation.
(2) An increase of $0.1 million in bad debt expense primarily reflects the
Partnership's evaluation of collectibility of certain receivable balances.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the second quarter of
1997 was $35,000, resulting from the disposition of marine containers, trailers,
and railcars with an aggregate net book value of $0.3 million for aggregate
proceeds of $0.4 million. The net gain of $19,000 in the second quarter of 1996
resulted from the disposition of aircraft engines, marine containers, railcars,
and trailers with an aggregate net book value of $0.3 million for aggregate
proceeds of $0.3 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
-------------------------------------
<S> <C> <C>
Aircraft, aircraft engines and rotables $ 215 $ 91
Marine vessels (58 ) (84 )
Mobile offshore drilling unit - -
</TABLE>
Aircraft, aircraft engines, and rotables: The Partnership's share of aircraft
revenues and expenses was $0.7 million and $0.5 million, respectively, for the
quarter ended June 30, 1997, compared to $0.8 million and $0.7 million,
respectively, during the same period of 1996. As of June 30, 1997, the
Partnership had a partial beneficial interest in three trusts that hold nine
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
The increase in contribution was due to a lower depreciation expense, which was
partially offset by a decrease in revenues due to the liquidation of the
Partnership's 50% investment in an aircraft engine resulting the General
Partner's sale of the asset in the third quarter of 1996.
Marine vessels: The Partnership's share of revenues and expenses of marine
vessels was $0.3 million and $0.4 million, respectively, for the quarter ended
June 30, 1997, compared to $0.4 million and $0.5 million, respectively, for the
same period of 1996. The decrease in loss was due to a lower depreciation
expense for the quarter ended June 30, 1997, compared to the same period of
1996.
Mobile offshore drilling unit: The Partnership's share of revenues and expenses
of the mobile offshore drilling unit was $0.3 million and $0.3 million,
respectively, for the second quarter of 1996. The Partnership liquidated its 45%
investment in an entity that owned a mobile offshore drilling unit during 1996
as a result of the General Partner's sale of the asset.
(E) Net Loss
The Partnership's net loss of $0.5 million in the second quarter of 1997
decreased from a net loss of $0.9 million in the second quarter of 1996. The
Partnership's ability to acquire, operate, or liquidate assets, secure leases,
and re-lease those assets whose leases expire is subject to many factors.
Therefore, the Partnership's performance for the three months ended June 30,
1997 is not necessarily indicative of future periods. In the second quarter of
1997, the Partnership distributed $2.5 million to the limited partners, or $0.25
per weighted-average depositary unit.
<PAGE>
Comparison of the Partnership's Operating Results for the Six Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (repair and maintenance, marine equipment
operating, and asset-specific insurance expenses) on owned equipment increased
for the six months ended 1997 when compared to the same period of 1996. The
following table presents results by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
-------------------------------------
<S> <C> <C>
Rail equipment $ 2,810 $ 2,585
Aircraft and aircraft engines 2,756 1,034
Trailers 927 836
Mobile offshore drilling unit 794 -
Marine containers 571 820
Marine vessels (5 ) 1,158
</TABLE>
Rail equipment: Railcar lease revenues and direct expenses were $3.8 million and
$1.0 million, respectively, for the six months ended 1997, compared to $3.9
million and $1.3 million, respectively, during the same quarter of 1996. The
increase in railcar contribution resulted from running repairs required on
certain railcars in the fleet during the first six months of 1996 that were not
needed during the same period of 1997.
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$4.0 million and $1.2 million, respectively, for the six months ended June 30,
1997, compared to $2.3 million and $1.3 million, respectively, during the same
quarter of 1996. The increase of contribution was due to higher lease revenues
and a lower repair and maintenance expense for the six months ended June 30,
1997, compared to the same period of 1996. The increase in revenues was due to
one off-lease aircraft that went back on lease during the first quarter of 1997.
Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.1
million, respectively, for the six months ended June 30, 1997, compared to $1.0
million and $0.2 million, respectively, during the same quarter of 1996. The
increase in trailer contribution resulted from running repairs required on
certain trailers in the fleet during the first six months of 1996 that were not
needed during the same period of 1997.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $0.8 million and $20,000, respectively, for the six months
ended June 30, 1997. The Partnership acquired and placed into lease service one
mobile offshore drilling unit in the third quarter of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.6
million and $5,000, respectively, for the six months ended June 30, 1997,
compared to $0.8 million and $6,000, respectively, during the same period of
1996. The number of marine containers owned by the Partnership has been
declining due to sales and dispositions. The result of this declining fleet and
a decrease in utilization has been a decrease in marine container net
contribution.
Marine vessels: Marine vessel lease revenues and direct expenses were zero and
$5,000, respectively, for the six months ended June 30, 1997, compared to $1.4
million and $0.2 million, respectively, during the same period of 1996. The
decrease of contribution from marine vessels in 1997 was due to the sale of all
the Partnership's marine vessels during 1996.
<PAGE>
(B) Indirect Operating Expenses Related to Owned Equipment Operations
Total indirect expenses of $10.0 million for the six months ended June 30, 1997
increased from $7.8 million for the same period of 1996. The variance is
explained as follows:
(1) An increase in depreciation expense of $3.0 million from 1996 levels
reflects the Partnership's depreciation on equipment purchased in 1996, offset
by the sale or disposition of certain Partnership assets during 1997 and 1996
and by the Partnership's use of the double-declining balance method of
depreciation.
(2) A decrease of $0.7 million in bad debt expense from 1996 levels
primarily reflects the Partnership's evaluation of the collectibility of certain
receivable balances.
(3) A decrease of $0.1 million in general and administrative expense was
due to a decrease in Canadian receipts tax because of a decrease in Canadian
revenues earned by railcars.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment was $0.1 million for the six months
ended June 30, 1997, resulting from the disposition of marine containers,
trailers, and railcars, compared to the net gain of $0.9 million in the same
period of 1996, resulting from the disposition of aircraft engines, marine
containers, trailers, and railcars.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
------------------------------------
<S> <C> <C>
Aircraft and aircraft engines and rotables $ 431 $ 174
Marine vessels (89 ) (231 )
Mobile offshore drilling unit - (5 )
</TABLE>
Aircraft, aircraft engines, and rotables: The Partnership's share of aircraft
revenues and expenses was $1.4 million and $1.0 million, respectively, for the
quarter ended June 30, 1997, compared to $1.6 million and $1.4 million,
respectively, during the same period of 1996. As of June 30, 1997, the
Partnership had a partial beneficial interest in three trusts that hold nine
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
The increase in contribution was due to a lower depreciation expense, which was
partially offset by a decrease in revenues due to the liquidation of the
Partnership's 50% investment in an aircraft engine, resulting from the General
Partner's sale of the asset in the third quarter of 1996.
Marine vessels: The Partnership's share of revenues and expenses of marine
vessels was $0.7 million and $0.8 million, respectively, for the quarter ended
June 30, 1997, compared to $0.8 million and $1.0 million, respectively, for the
same period of 1996. The decrease in loss was due to a lower depreciation
expense for the six months ended June 30, 1997, compared to the same period of
1996.
Mobile offshore drilling unit: The Partnership's share of revenues and expenses
of the mobile offshore drilling unit was $0.6 million and $0.6 million,
respectively, for the second quarter of 1996. The Partnership liquidated its 45%
investment in a mobile offshore drilling unit during 1996 as a result of the
General Partner's sale of the asset.
(E) Net Loss
The Partnership had a net loss of $1.5 million for the six months ended June 30,
1997, compared to a net loss of $0.3 million in the same period of 1996. The
Partnership's ability to acquire, operate, or liquidate assets, secure leases,
and re-lease those assets whose leases expire is subject to many factors.
Therefore, the Partnership's performance in the six months ended June 30, 1997
is not necessarily indicative of future periods. The Partnership distributed
$4.9 million to the limited partners, or $0.50 per weighted-average depositary
unit in the six months ended June 30, 1997.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
The Partnership purchased its 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. In addition, the Partnership,
under its current loan agreement, does not have the capacity to incur additional
debt. Therefore, the Partnership relies on operating cash flow to meet its
operating obligations and to make cash distributions to the limited partners.
For the six months ended June 30, 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 six months ended June
30, 1997 of approximately $5.2 million) to the partners. During the six months
ended June 30, 1997, the General Partner sold equipment on behalf of the
Partnership and realized proceeds of $0.7 million.
During the first six months of 1997, the Partnership paid down $0.5 million of
the outstanding note balance as a result of asset sales.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is in its holding or passive 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 that the liquidation of Partnership assets will be completed by the
scheduled termination of the Partnership at the end of the year 2000.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements, pay loan principal on debt, and pay cash distributions
to the investors.
(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
Second amendment to the second amended and restated
limited partnership agreement
(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 III
By: PLM Financial Services, Inc.
General Partner
Date: August 8, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,233
<SECURITIES> 6,119
<RECEIVABLES> 10,981
<ALLOWANCES> 1,336
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 134,861
<DEPRECIATION> 84,267
<TOTAL-ASSETS> 70,289
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 21,293
<TOTAL-LIABILITY-AND-EQUITY> 70,289
<SALES> 0
<TOTAL-REVENUES> 10,536
<CGS> 0
<TOTAL-COSTS> 10,799
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,604
<INCOME-PRETAX> (1,525)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,525)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,525)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
SECOND AMENDMENT
TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PLM EQUIPMENT GROWTH FUND III
This Second Amendment ("Amendment") to the Amended and Restated Limited
Partnership Agreement ("Agreement") of PLM Equipment Growth Fund III
("Partnership") is executed as of November 21, 1996, by its general partner, PLM
Financial Services, Inc., a Delaware corporation ("General Partner"), pursuant
to Article XVIII of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Agreement.
RECITALS
The Partners entered into a Limited Partnership Agreement as of October
15, 1987, a First Amended and Restated Limited Partnership Agreement as of
February 9, 1988 and a Second Amended and Restated Limited Partnership Agreement
as of March 10, 1988.
The General Partner now amends the Agreement, pursuant to Article
XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's representations and obligations, to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General
Partner represents, warrants and agrees, and will take all action to ensure,
that this Amendment does not, and will not, detrimentally affect the Cash
Distributions of the Limited Partners or assignees or the management of the
Partnership by the General Partner.
Now, therefor, the Agreement is amended as follows:
1. Section 6.02 is amended to read in its entirety as follows:
"The General Partner shall not transfer its interest as General Partner
in the Partnership (which transfer shall be deemed as "withdrawal" of the
General Partner for purposes of Section 9.02) or its interest in the
Partnership's capital, earnings or assets (except in connection with the pledge
of the General Partner's assets or right in connection with loans or other
indebtedness) except (a) upon the approval of a majority in interest of the
Limited Partners, or (b) to an Affiliate upon its merger, consolidation with
another person or its transfer pursuant to a reorganization of all or
substantially all of its assets to another person, and the assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such successor or transferee shall on the date of such transfer, merger,
consolidation or reorganization assume all of the duties and obligations of the
General Partner set forth in this Agreement."
IN WITNESS WHEREOF, the General Partner has duly executed this
Amendment as of November 21, 1996.
PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners
By: /s/ J. Michael Allgood
------------------------
Vice President and Chief Financial Officer
