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
September 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>
September 30, December 31,
1997 1996
------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 126,417 $ 136,670
Less accumulated depreciation (80,981 ) (78,607 )
------------------------------------
Net equipment 45,436 58,063
Cash and cash equivalents 4,118 1,414
Restricted cash and marketable securities 5,963 5,966
Investments in unconsolidated special-purpose entities 9,399 11,138
Accounts and note receivable, net of allowance for doubtful
accounts of $1,472 in 1997 and $1,381 in 1996 1,353 1,515
Prepaid expenses and other assets 3 64
Deferred charges, net of accumulated amortization of
$307 in 1997 and $800 in 1996 348 491
------------------------------------
Total assets $ 66,620 $ 78,651
====================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 773 $ 1,505
Due to affiliates 645 1,297
Lessee deposits and reserves for repairs 7,007 7,552
Note payable 39,287 40,284
------------------------------------
Total liabilities 47,712 50,638
------------------------------------
Partners' capital:
Limited partners (9,871,073 depositary units as
of September 30, 1997 and December 31, 1996) 18,908 28,013
General Partner - -
------------------------------------
Total partners' capital 18,908 28,013
------------------------------------
Total liabilities and partners' capital $ 66,620 $ 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 Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 5,152 $ 4,555 $ 15,377 $ 13,924
Interest and other income 119 116 306 364
Net gain on disposition of equipment 734 5,494 858 6,347
------------------------------------------------------------
Total revenues 6,005 10,165 16,541 20,635
------------------------------------------------------------
Expenses:
Depreciation and amortization 3,544 3,010 10,644 7,100
Marine equipment operating expense 133 198 154 284
Repairs and maintenance 570 712 2,855 3,452
Interest expense 818 622 2,422 2,259
Insurance expense 54 73 165 233
Management fees to affiliate 290 241 883 749
General and administrative expenses to affiliates 187 122 540 492
Other general and administrative expenses 163 347 543 839
Provision for bad debt 138 155 93 784
------------------------------------------------------------
Total expenses 5,897 5,480 18,299 16,192
------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 104 6,968 446 6,905
------------------------------------------------------------
Net income (loss) $ 212 $ 11,653 $ (1,312 ) $ 11,348
============================================================
Partners' share of net income (loss):
Limited partners $ 82 $ 11,523 $ (1,702 ) $ 10,879
General Partner 130 130 390 469
------------------------------------------------------------
Total $ 212 $ 11,653 $ (1,312 ) $ 11,348
============================================================
Net income (loss) per weighted-average depositary unit
(9,871,073 units as of September 30, 1997 and
1996) $ 0.01 $ 1.17 $ (0.17 ) $ 1.10
============================================================
Cash distributions $ 2,598 $ 2,598 $ 7,793 $ 9,367
============================================================
Cash distributions per weighted-average
depositary unit $ 0.25 $ 0.25 $ 0.75 $ 0.90
============================================================
</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 September 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 income (loss) (1,702 ) 390 (1,312 )
Cash distributions (7,403 ) (390 ) (7,793 )
-------------------------------------------------
Partners' capital as of September 30, 1997 $ 18,908 $ - $ 18,908
=================================================
</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 Nine Months
Ended September 30,
1997 1996
-----------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (1,312 ) $ 11,348
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Net gain on disposition of equipment (858 ) (6,347 )
Depreciation and amortization 10,644 7,100
Equity in net income from unconsolidated special-purpose entities (446 ) (6,905 )
Sales-type lease income - (1,885 )
Changes in operating assets and liabilities:
Restricted cash and marketable securities 3 (230 )
Accounts and note receivable, net 162 831
Prepaid expenses and other assets 61 74
Accounts payable and accrued expenses (732 ) 270
Due to affiliates (652 ) 2
Lessee deposits and reserves for repairs (545 ) (481 )
----------------------------
Net cash provided by operating activities 6,325 3,777
----------------------------
Investing activities:
Payments for purchases of equipment - (28,540 )
Payments for capitalized improvements (156 ) (679 )
Payments of acquisition-related fees to affiliate - (1,569 )
Payments received from sales-type leases - 6,403
Distributions from unconsolidated special-purpose entities 2,185 16,214
Proceeds from disposition of equipment 3,140 13,297
----------------------------
Net cash provided by investing activities 5,169 5,126
----------------------------
Financing activities:
Proceeds from note payable - 19,148
Principal payments on note payable (997 ) (19,575 )
Cash distributions paid to limited partners (7,403 ) (8,898 )
Cash distributions paid to General Partner (390 ) (469 )
Repurchase of depositary units - (120 )
----------------------------
Net cash used in financing activities (8,790 ) (9,914 )
----------------------------
Net increase (decrease) in cash and cash equivalents 2,704 (1,011 )
Cash and cash equivalents at beginning of period 1,414 3,243
----------------------------
Cash and cash equivalents at end of period $ 4,118 $ 2,232
============================
Supplemental information:
Interest paid $ 2,631 $ 2,157
============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(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. (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 September 30, 1997 and December 31, 1996, the statements of
operations for the three months and nine months ended September 30, 1997 and
1996, the statements of changes in partners' capital for the period from
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
Cash distributions are recorded when paid and totaled $7.8 and $9.4 million for
the nine months ended September 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 $7.4 million during
the nine months ended September 30, 1997 were deemed to be a return of capital.
None of the cash distributions to the limited partners during the nine months
ended September 30, 1996 were deemed to be a return of capital. Cash
distributions related to the results from the third quarter of 1997 of $2.6
million, are payable during November 1997.
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>
% September 30, December 31,
Ownership Equipment 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17% Two trusts that own three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables $ 3,821 $ 4,564
56% Marine vessel 3,414 3,999
17% Trust that owns six commercial aircraft 2,164 2,575
---------------------------------
Investments in unconsolidated special-purpose entities $ 9,399 $ 11,138
=================================
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(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>
Equipment held for operating leases:
Aircraft and aircraft engines $ 64,832 $ 70,615
Rail equipment 34,811 35,733
Marine containers 9,821 13,146
Mobile offshore drilling unit 9,666 9,666
Trailers 7,287 7,510
--------------------------------------------
126,417 136,670
Less accumulated depreciation (80,981 ) (78,607 )
--------------------------------------------
============================================
Net equipment $ 45,436 $ 58,063
============================================
</TABLE>
As of September 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 45 railcars and 28 marine containers with an aggregate
carrying value of $0.4 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.
In the fourth quarter of 1996, 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. Capital improvements
to the Partnership's equipment of $0.2 million and $0.7 million were made during
the nine months ended September 30, 1997 and September 30, 1996, respectively.
During the nine months ended September 30, 1996, the Partnership purchased three
commercial aircraft and one mobile offshore drilling unit for $28.5 million, and
incurred acquisition fees of $1.3 million and lease negotiation fees of $0.3
million to FSI.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of marine containers, trailers, railcars, and an aircraft with an
aggregate net book value of $2.2 million for aggregate proceeds of $3.1 million.
During the nine months ended September 30, 1996, the Partnership disposed of
marine containers, railcars, aircraft engines, and trailers with an aggregate
net book value of $3.7 million for aggregate proceeds of $4.6 million. In
addition, the Partnership sold marine vessels with a carrying value, net of
drydock and selling expenses, of $3.3 million for proceeds of $8.7 million.
6. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner were
$0.6 million and $1.3 million as of September 30, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE-affiliated management
fees of $66,000 and $20,000 were payable as of September 30, 1997 and December
31, 1996, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND III
(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, are 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>
Management fees $ 43 $ 65 $ 132 $ 202
Insurance expense 17 25 69 80
Data processing and administrative
expenses 12 33 35 55
</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.
7. Subsequent Event
On October 2, 1997, the Partnership made an optional prepayment of $1.1 million
on the outstanding note payable using the proceeds from the sale of an aircraft
which was sold during the third quarter of 1997.
(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 (repair and maintenance, marine equipment
operating, and asset-specific insurance expenses) on owned equipment increased
for the quarter ended September 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 September 30,
1997 1996
------------------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 1,994 $ 1,055
Rail equipment 1,422 1,340
Mobile offshore drilling unit 404 302
Trailers 370 476
Marine containers 352 355
Marine vessels (138 ) 54
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$2.0 million and $40,000 million, respectively, for the quarter ended September
30, 1997, compared to $1.1 million and $28,000 million, respectively, during the
same period of 1996. The increase in contribution was due to higher revenues in
the third quarter of 1997, compared to the same period of 1996. The increase in
revenues was due to the acquisition of three commercial aircraft in September of
1996 and one off-lease aircraft that went back on lease during the first quarter
of 1997.
Rail equipment: Railcar lease revenues and direct expenses were $1.9 million and
$0.5 million, respectively, for the quarter ended September 30, 1997, compared
to $2.0 million and $0.7 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 third quarter of 1996 that were not
needed during the third quarter of 1997.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $0.4 million and $10,000, respectively, for the quarter
ended September 30, 1997, compared to $0.3 million and $4,000, respectively,
during the same period of 1996. The increase in contribution was due to higher
revenues resulting from the Partnership's acquisition of one mobile offshore
drilling unit in August 1996.
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the quarter ended September 30, 1997, compared to
$0.6 million and $0.1 million, respectively, during the same period of 1996. The
decrease in contribution was due to lower revenues caused by reduced trailer
utilization and the disposition of trailers.
Marine containers: Marine container lease revenues and direct expenses were $0.4
million and $2,000, respectively, for the quarter ended September 30, 1997,
compared to $0.4 million and $2,000, respectively, during the same period of
1996.
Marine vessels: Marine vessels lease revenues and direct expenses were zero and
$0.1 million, respectively, for the quarter ended September 30, 1997, compared
to $0.3 million and $0.2 million, respectively, for the third quarter of 1996.
The decrease in contribution from marine vessels in the third quarter of 1997
was due to the sale of all the Partnership's marine vessels during 1996. The
$0.1 million expense in the third quarter of 1997 was for supplemental insurance
for a sold vessel.
<PAGE>
(B) Indirect Operating Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.1 million for the quarter ended September 30, 1997
increased from $4.5 million for the same period of 1996. The variance is
explained as follows:
(1) An increase of $0.5 million in depreciation and amortization expense
from 1996 levels reflects the Partnership's depreciation on equipment purchased
in 1996, which was partially offset by the sale or disposition of certain
Partnership assets during 1997 and 1996.
(2) An increase of $0.2 million in interest expense was due to an increase
in the interest rate on the Partnership's note payable for the third quarter of
1997, compared to the same quarter of 1996.
(3) A decrease of $0.1 million in general and administrative expenses was
due primarily to decreased property taxes on equipment due to the disposition of
equipment.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the third quarter of 1997
was $0.7, which resulted from the disposition of marine containers, trailers, a
railcar, and an aircraft with an aggregate net book value of $1.7 million for
aggregate proceeds of $2.4 million. The net gain on the disposition of owned
equipment was $5.4 million in the third quarter of 1996, which resulted from the
disposition of vessels, marine containers, railcars, and trailers with an
aggregate net book value of $4.3 million for aggregate proceeds of $9.7 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 September 30,
1997 1996
-------------------------------------
<S> <C> <C>
Aircraft, aircraft engines, and rotables $ 158 $ 696
Marine vessels (54 ) (307 )
Mobile offshore drilling unit - 6,579
</TABLE>
Aircraft, aircraft engines, and rotables: The Partnership's share of aircraft
revenues and expenses was $0.6 million and $0.4 million, respectively, for the
quarter ended September 30, 1997, compared to $1.3 million and $0.6 million,
respectively, during the same period of 1996. The Partnership's share of
aircraft revenues for the quarter ended September 30, 1996 included the gain of
$0.7 million from the liquidation of the Partnership's 50% investment in an
aircraft engine. As of September 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 decrease in
contribution was 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 $0.3 million and $0.4 million, respectively, for the quarter ended
September 30, 1997, compared to $0.3 million and $0.6 million, respectively, for
the same period of 1996. The decreased loss from marine vessels was due to lower
repair and maintenance expenses and a lower depreciation expense for the quarter
ended September 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 $6.6 million and $20,000, respectively,
for the third 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.
<PAGE>
(E) Net Income
The Partnership's net income of $0.2 million in the third quarter of 1997
decreased from $11.7 million in the third 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 September 30, 1997 is not
necessarily indicative of future periods. In the third quarter of 1997, the
Partnership distributed $2.5 million to the limited partners, or $0.25 per
weighted-average depositary unit.
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 (repair and maintenance, marine equipment
operating, and asset-specific insurance expenses) on owned equipment increased
for the nine months ended September 30, 1997 when compared to the same period of
1996. The following table presents results by owned equipment type (in
thousands):
For the Nine Months
Ended September 30,
1997 1996
--------------------------------
Aircraft and aircraft engines $ 4,751 $ 2,089
Rail equipment 4,232 3,925
Trailers 1,296 1,312
Mobile offshore drilling unit 1,198 302
Marine containers 923 1,175
Marine vessels (143 ) 1,212
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$6.0 million and $1.2 million, respectively, for the nine months ended September
30, 1997, compared to $3.4 million and $1.3 million, respectively, during the
same quarter of 1996. The increase in contribution was due to higher lease
revenues for the nine months ended September 30, 1997, compared to the same
period of 1996. The increase in revenues was due to the acquisition of three
commercial aircraft during the third quarter of 1996 and one aircraft that was
off-lease in 1996 which went back on lease during the first quarter of 1997.
Rail equipment: Railcar lease revenues and direct expenses were $5.7 million and
$1.5 million, respectively, for the nine months ended 1997, compared to $5.8
million and $1.9 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 first nine months of 1996 that were not
needed during the same period of 1997.
Trailers: Trailer lease revenues and direct expenses were $1.5 million and $0.2
million, respectively, for the nine months ended September 30, 1997, compared to
$1.5 million and $0.2 million, respectively, during the same period of 1996.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $1.2 million and $31,000, respectively, for the nine months
ended September 30, 1997, compared to $0.3 million and $4,000, respectively,
during the same period of 1996. The increase in contribution was due to higher
revenues resulting from the Partnership's acquisition of one mobile offshore
drilling unit in August 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.9
million and $8,000, respectively, for the nine months ended September 30, 1997,
compared to $1.2 million and $9,000, 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.
<PAGE>
Marine vessels: Marine vessel lease revenues and direct expenses were zero and
$0.1 million, respectively, for the nine months ended September 30, 1997,
compared to $1.7 million and $0.5 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. The $0.1 million
expense in the third quarter of 1997 was for supplemental insurance for a sold
vessel.
(B) Indirect Operating Expenses Related to Owned Equipment Operations
Total indirect expenses of $15.2 million for the nine months ended September 30,
1997 increased from $12.3 million for the same period of 1996. The variance is
explained as follows:
(1) An increase in depreciation expense of $3.5 million from 1996 levels
reflects the Partnership's depreciation on equipment purchased in 1996, which
was partially offset by the sale or disposition of certain Partnership assets
during 1997 and 1996.
(2) An increase of $0.2 million in interest expense was due to an increase
in interest rate on the Partnership's note payable for the nine months ended
September 30, 1997, compared to the same period of 1996.
(3) An increase of $0.1 million in management fees was due to higher lease
revenue for the nine months ended September 30, 1997, compared to the same
period of 1996.
(4) A decrease of $0.7 million in bad debt expense from 1996 levels
primarily reflects increase in the General Partner reserve for uncollected
outstanding receivables in 1996 for an aircraft lessee that encountered
financial difficulties.
(5) A decrease of $0.2 million in general and administrative expenses was
primarily due to a decrease in Canadian receipts tax because of lower Canadian
revenues earned by railcars.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment was $0.9 million for the nine
months ended September 30, 1997, resulting from the disposition of marine
containers, trailers, railcars, and an aircraft with an aggregate net book value
of $2.2 million for aggregate proceeds of $3.1 million, compared to a net gain
of $6.3 million for the nine months ended September 30, 1996 from the
disposition of aircraft engines, marine vessels, marine containers, trailers,
and railcars with an aggregate net book value of $7.0 million for aggregate
proceeds of $13.3 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 interest income because of lower cash balances available for investment.
(E) 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 Nine Months
Ended September 30,
1997 1996
------------------------------------
<S> <C> <C>
Aircraft, aircraft engines, and rotables $ 588 $ 869
Marine vessels (142 ) (538 )
Mobile offshore drilling unit - 6,574
</TABLE>
<PAGE>
Aircraft, aircraft engines, and rotables: The Partnership's share of aircraft
revenues and expenses was $2.1 million and $1.5 million, respectively, for the
nine months ended September 30, 1997, compared to $2.9 million and $2.0 million,
respectively, during the same period of 1996. As of September 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 decrease in contribution was 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 $1.0 million and $1.1 million, respectively, for the nine months
ended September 30, 1997, compared to $1.0 million and $1.5 million,
respectively, for the same period of 1996. The decreased contribution from
marine vessels was due to lower repair and maintenance expenses and a lower
depreciation expense for the nine months ended September 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 $7.2 million and $0.6 million,
respectively, for the nine months ended September 30, 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.
(F) Net Income (Loss)
The Partnership had a net loss of $1.3 million for the nine months ended
September 30, 1997, compared to a net income of $11.3 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 nine months ended
September 30, 1997 is not necessarily indicative of future periods. The
Partnership distributed $7.4 million to the limited partners, or $0.75 per
weighted-average depositary unit, in the nine months ended September 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 nine months ended September 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
nine months ended September 30, 1997 of approximately $7.8 million) to the
partners. During the nine months ended September 30, 1997, the General Partner
sold equipment on behalf of the Partnership and realized proceeds of $3.1
million.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of marine containers, trailers, railcars, and an aircraft with an
aggregate net book value of $2.2 million for aggregate proceeds of $3.1 million.
During the second 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
1999, 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.
From January 1, 1997 through November 4, 1997, the Partnership repaid optional
prepayment of $2.1 million of the outstanding note balance as a result of asset
sales.
<PAGE>
(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
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 III
By: PLM Financial Services, Inc.
General Partner
Date: November 4, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,118
<SECURITIES> 5,963
<RECEIVABLES> 10,871
<ALLOWANCES> 1,472
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0
0
<OTHER-SE> 18,908
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<INCOME-PRETAX> (1,312)
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