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, 1996.
[ ] 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 33-27746
-----------------------
PLM EQUIPMENT GROWTH FUND IV
(Exact name of registrant as specified in its charter)
California 94-3090127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Indentification No.)
One Market, Steuart Street Tower,
Suite 900, San Francisco, CA 94105-1301
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------------------------
<S> <C> <C>
Equipment held for operating leases $ 122,007 $ 131,783
Less accumulated depreciation (68,585 ) (73,508 )
--------------------------------
Net equipment 53,422 58,275
Cash and cash equivalents 3,546 1,236
Restricted cash 909 575
Investments in unconsolidated special purpose entities 7,093 7,380
Accounts receivable, net of allowance for doubtful
accounts of $ 2,221 in 1996 and $775 in 1995 2,874 3,606
Notes receivable 85 325
Deferred charges, net of accumulated
amortization of $2,174 in 1996 and $2,144 in 1995 291 334
Prepaid expenses and other assets (44 ) 111
--------------------------------
Total assets $ 68,176 $ 71,842
================================
LIABILITIES' AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,971 $ 653
Due to affiliates 968 666
Prepaid deposits and reserve for repairs 3,561 3,248
Notes payable 30,800 30,800
--------------------------------
Total liabilities 37,300 35,367
Partners capital:
Limited Partners (8,628,420 Limited
Partnership Units at June 30, 1996
and 8,643,770 Limited Partnership Units
at December 31, 1995) 30,876 36,475
General Partner -- --
--------------------------------
Total partners' capital 30,876 36,475
--------------------------------
Total liabilities and partners' capital $ 68,176 $ 71,842
================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars except per unit amounts)
<TABLE>
<CAPTION>
For the three months For the six months ended
ended June 30, June 30,
1996 1995 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 5,242 $ 4,850 $ 9,798 $ 10,116
Interest and other income 100 107 131 197
Net gain (loss) on disposition
of equipment 2,626 420 2,635 428
----------------------------------------------------------
Total revenues 7,968 5,377 12,564 10,741
Expenses:
Depreciation and amortization 2,445 2,988 4,850 6,011
Management fees to affiliate 214 234 420 519
Repairs and maintenance 2,372 589 3,660 1,047
Interest expense 750 750 1,501 1,501
Insurance expense to affiliates 54 44 95 148
Other insurance expense 127 120 264 280
Marine equipment operating expenses 486 543 1,040 1,276
General and administrative expenses
to affiliates 164 102 286 238
Other general and administrative
expense 218 180 456 326
Bad debt expense 599 419 1,508 383
Loss on revaluation of equipment -- -- -- 417
----------------------------------------------------------
----------------------------------------------------------
Total expenses 7,429 5,969 14,080 12,146
----------------------------------------------------------
Equity in net loss of unconsolidated special
purpose entities (123 ) -- (270 ) --
----------------------------------------------------------
Net loss $ 416 $ (592 ) $ (1,786 ) $ (1,405 )
==========================================================
Partners' share of net (loss) income:
Limited Partners $ 325 $ (672 ) $ (1,968 ) $ (1,553 )
General Partner 91 80 182 148
----------------------------------------------------------
Total $ 416 $ (592 ) $ (1,786 ) $ (1,405 )
==========================================================
Net loss per Depositary Unit (8,628,420
Units at June 30, 1996 and 8,643,903
Units at June 30, 1995 $ 0.04 $ (0.08 ) $ (0.23 ) $ (0.18 )
==========================================================
Cash distributions $ 1,819 $ 1,592 $ 3,637 $ 2,998
==========================================================
Cash distributions per Depositary Unit $ 0.20 $ 0.18 $ 0.40 $ 0.33
==========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the year ended December 31, 1994 and the six months
ended June 30, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-----------------------------------------------------
<S> <C> <C> <C>
Partners' capital at December 31, 1994 $ 46,776 $ -- $ 46,776
Net income (loss) (3,930 ) 319 (3,611 )
Cash distributions (6,124 ) (319 ) (6,443 )
Repurchase of Depositary Units (247 ) -- (247 )
----------------------------------------------------
Partners' capital at December 31, 1995 36,475 -- 36,475
Net income (loss) (1,968 ) 182 (1,786 )
Cash distributions (3,455 ) (182 ) (3,637 )
Repurchase of Depositary Units (176 ) -- (176 )
----------------------------------------------------
Partner's capital at June 30, 1996 $ 30,876 $ -- $ 30,876
====================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,786 ) $ (1,405 )
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 4,850 6,011
Net gain on disposition of equipment (2,635 ) (428 )
Loss on revaluation of equipment -- 417
Cash distributions from unconsolidated special
purpose entities in excess of income 287 --
Changes in operating assets and liabilities:
Restricted cash (334 ) --
Accounts and notes receivable, net 972 (532 )
Prepaid expenses and other assets 155 54
Due to affiliates 302 15
Accounts payable and accrued expenses 1,318 316
Prepaid deposits and reserve for repairs 323 (491 )
-------------------------------
Net cash provided by operating activities 3,452 3,957
-------------------------------
Investing activities:
Purchase of equipment and capitalized repairs (5,530 ) (1,337 )
Payments of acquisition fees to affiliates (247 ) (47 )
Payments of lease negotiation fees to affiliates (12 ) (8 )
Proceeds from disposition of equipment 8,460 4,312
-------------------------------
Net cash provided by (used in) investing activities 2,671 2,920
-------------------------------
Financing activities:
Repurchase of Limited Partnership Units (176 ) (248 )
Cash distributions paid to Limited Partners (3,455 ) (2,850 )
Cash distributions paid to General Partner (182 ) (148 )
-------------------------------
-------------------------------
Net cash used in financing activities (3,813 ) (3,246 )
-------------------------------
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents 2,310 3,631
Cash and cash equivalents at beginning of period 1,236 5,629
-------------------------------
Cash and cash equivalents at end of period $ 3,546 $ 9,260
===============================
Supplemental information:
Interest paid $ 1,501 $ 1,501
===============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc., the
General Partner, the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund IV (the "Partnership") as of June 30, 1996, the statement of
operations for the three and six months ended June 30, 1996 and 1995, the
statement of changes in Partners' capital for the year ended December 31,
1995, and the six months ended June 30, 1996, and the statement of cash
flows for the six months ended June 30, 1996 and 1995. 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, 1995, on file at the Securities and
Exchange Commission.
2. Investments in Unconsolidated Special Purpose Entities
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of transportation equipment as undivided
interests, including its proportionate share of each asset with similar
wholly-owned assets in its financial statements. Under generally accepted
accounting principles, the effects of such activities, if material, should
be reported using the equity method of accounting. Therefore, effective
January 1, 1996, the Partnership adopted the equity method to account for
its investment in such jointly-held assets.
The principle differences between the previous accounting method and the
equity method relate to the presentation of activities relating to these
assets in the statement of operations. Whereas, under equity accounting the
Partnership's proportionate share is presented as a single net amount,
"Equity in net income (loss) of unconsolidated special purpose entities",
under the previous method, the Partnership's income statement reflected its
proportionate share of each individual item of revenue and expense.
Accordingly, the effect of adopting the equity method of accounting has no
cumulative effect on previously reported partner's capital or on the
Partnership's net income (loss) for the period of adoption. Because the
effects on previously issued financial statements of applying the equity
method of accounting to investments in jointly-owned assets are not
considered to be material to such financial statements taken as a whole,
previously issued financial statements have not been restated. However,
certain items have been reclassified in the previously issued balance sheet
to conform to the current period presentation.
The net investments in unconsolidated special purpose entities include the
following jointly-owned equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------------------------
<S> <C> <C>
50% interest in a Bulk Carrier $ 3,729 $ 3,458
14% interest in a Trust owning seven commercial aircraft 3,364 3,922
===============================
Net investments $ 7,093 $ 7,380
===============================
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
3. Equipment
Owned equipment held for operating leases is stated at cost. Equipment held
for sale is stated at the lower of the equipment's depreciated cost or net
realizable value and is subject to a pending contract for sale.
Components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------------------------
<S> <C> <C>
Equipment held for operating leases:
Rail equipment $ 14,864 $ 14,907
Marine containers 16,339 17,355
Marine vessels 26,980 26,980
Aircraft 56,859 51,111
Trailers 6,965 6,944
Mobile offshore drilling unit -- 14,486
---------------------------------
122,007 131,783
Less accumulated depreciation (68,585 ) (73,508 )
---------------------------------
Net equipment $ 53,422 $ 58,275
=================================
</TABLE>
Revenues are earned by placing the equipment under operating leases which
are generally billed monthly or quarterly. Certain of the Partnership's
marine vessels and 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 June 30, 1996, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for one
commercial aircraft, two railcars, and 228 marine containers. The net
carrying value of equipment off-lease was $5.7 million at June 30, 1996. At
December 31, 1995, 62 containers and one commuter aircraft were off-lease
with a net carrying value of $4.8 million.
During the six months ended June 30, 1996, the Partnership acquired a Dash
8-300 aircraft for $5.5 million and paid acquisition and lease negotiation
fees of $0.2 million to PLM Transportation Equipment Corporation (TEC), a
wholly-owned subsidiary of the General Partner.
During the six months ended June 30, 1996, the Partnership sold or disposed
of a mobile offshore drilling unit (rig), 166 marine containers and two
railcars with an aggregate net book value of $5.8 million for aggregate
proceeds of $8.4 million. During the six months ended June 30, 1995, the
Partnership disposed of 166 marine containers and two aircraft with an
aggregate net book value of $3.9 million for proceeds of $4.3 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
4. Cash Distribution
Cash distributions are recorded when paid and totaled $3.6 million and $3.0
million for the six months ended June 30, 1996 and 1995, respectively, and
$1.8 million and $1.6 million for the three months ended June 30, 1996 and
1995, respectively. Cash distributions related to the second quarter
results of $1.6 million will be paid on August 15, 1996, depending on
whether the individual unitholder elected to receive a monthly or quarterly
distribution check. Cash distributions to unitholders in excess of net
income are deemed to be a return of capital. All distributions to limited
partners for the six months ended June 30, 1996 and 1995, were deemed to be
a return of capital.
5. Debt
The General Partner has entered into a joint $35 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, PLM
Equipment Growth Fund III, PLM Equipment Growth Fund V, PLM Equipment
Growth Fund VI, PLM Equipment Growth & Income Fund VII and Professional
Lease Management Income fund I ("Fund I"), all affiliated investment
programs, TEC Acquisub, Inc. ("TECAI"), an indirect wholly-owned subsidiary
of the General Partner, and American Finance Group, Inc. ("AFG"), a
subsidiary of PLM International, which may be used to provide interim
financing of up to (i) 70% of the aggregate book value or 50% of the
aggregate net fair market value of eligible equipment owned by an affiliate
plus (ii) 50% of unrestricted cash held by the borrower. The Committed
Bridge Facility became available on December 20, 1993, and was amended and
restated in June of 1996 to expire on May 23, 1997. The Committed Bridge
Facility also provides for a $5 million Letter of Credit Facility for the
eligible borrowers. Outstanding borrowings by Fund I, TECAI, AFG or PLM
Equipment Growth Funds III through VII reduce the amount available to each
other under the Committed Bridge Facility. Individual borrowings may be
outstanding for no more than 179 days, with all advances due no later than
May 23, 1997. The Committed Bridge Facility prohibits the Partnership from
incurring any additional indebtedness. Interest accrues at either the prime
rate or adjusted LIBOR plus 2.5% at the borrowers option and is set at the
time of an advance of funds. Borrowings by the Partnership are guaranteed
by the General Partner. As of June 30, 1996, PLM Equipment Growth Fund IV
had $9 million in outstanding borrowings under the Committed Bridge
Facility, and TECAI had $24.8 million. Neither the Partnership, AFG, Fund I
nor the other programs had any outstanding borrowings. Due to the loan
covenants of the senior debt, the Partnership cannot access this line of
credit at this time.
<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, 1996 and 1995
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance, marine
equipment operating, and asset specific insurance expenses) on owned equipment
decreased during the second quarter of 1996 when compared to the same quarter of
1995. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the three months
ended June 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ (198 ) $ 1,449
Marine vessels 1,062 533
Trailers 423 104
Rail equipment 406 725
Marine containers 464 414
Mobile offshore drilling unit 45 44
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.3 million and $1.5
million, respectively, for second quarter of 1996, compared to $1.5 million and
$0.1 million, respectively, during the same quarter of 1995. The decrease in
aircraft contribution was due to the sale of two aircraft in the second quarter
of 1995. Further net loss in the second quarter of 1996, of $1.3 million was due
to repairs needed on another aircraft before it can be re-leased;
Marine vessels: Marine vessel lease revenues and direct expenses were $2.0
million and $1.0 million respectively, for the second quarter of 1996, compared
to $1.5 million and $1.0 million, respectively, during the same quarter of 1995.
The increase was due to the higher profit sharing revenue earned on a marine
vessel in the second quarter of 1996 compared to the same period in 1995;
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the second quarter of 1996, compared to $0.2 million
and $0.1 million, respectively, during the same quarter of 1995. The increase
was due to the addition of 333 trailers in the first nine months of 1995;
Rail equipment: Railcar lease revenues and direct expenses were $0.9 million and
$0.5 million, respectively, for the second quarter of 1996, compared to $0.9
million and $0.2 million, respectively, during the same quarter of 1995.
Although the railcar fleet remained relatively the same size for both quarters,
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
1995;
Marine containers: Marine container lease revenues were $0.5 million and $0.4
million, for the second quarter of 1996 and 1995, respectively. Although the
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and dispositions, revenues have increased
slightly due to a group of containers which earned higher revenues in the second
quarter of 1996 compared to the same period in 1995;
Mobile offshore drilling unit (rig): Rig lease revenues remained relatively the
same from the second quarter of 1996 compared to the same quarter in 1995.
<PAGE>
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $4.4 million for the quarter ended June 30, 1996,
decreased from $4.5 million for the same period in 1995. The variances are
explained as follows:
(a) A $0.3 million decrease in depreciation and amortization expenses from
1995 levels reflecting the sale of certain assets during 1996 and 1995;
(b) A $0.2 million increase in bad debt expense reflecting the General
Partner's evaluation of the collectibility of receivables due from two aircraft
lessees that encountered financial difficulties;
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the second quarter of 1996 totaled $2.6
million which resulted from the sale or disposal of 79 marine containers, one
railcar, and a mobile offshore drilling unit with an aggregate net book value of
$5.6 million for aggregate proceeds of $8.2 million. For the second quarter of
1995, the $0.4 million net gain on disposition of equipment resulted from the
sale or disposal of 99 marine containers, and two aircraft with an aggregate net
book value of $3.7 million, for aggregate proceeds of $4.1 million.
(D) Equity in net loss of unconsolidated special purpose entities represents net
loss generated from the operation of jointly-owned assets accounted for under
the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>
For the three months
ended June 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ (74 ) $ --
Marine vessels (49 ) 73
</TABLE>
Aircraft: As of June 30, 1996, the Partnership owned a 14% interest in a trust
consisting of seven 737-200A commercial aircraft. This investment was acquired
in the third quarter of 1995;
Marine vessel: As of June 30, 1996, the Partnership had a 50% interest in a
marine vessel. At the end of 1995, this marine vessel switched from a bare-boat
charter to a time charter. Time charters have slightly higher revenues
associated with them since the owner pays for costs, such as operating costs,
normally borne by the lessees under bare-boat charters.
(E) Net Income (loss)
As a result of the foregoing, the Partnership's net income of $0.4 million for
the second quarter of 1996, increased from net loss of $0.6 million during the
same period in 1995. 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 second quarter of 1996 is not necessarily indicative of future periods.
In the second quarter of 1996, the Partnership distributed $1.7 million to the
Limited Partners, or $0.20 per Depositary Unit.
<PAGE>
Comparison of the Partnership's Operating Results for the Six Months Ended June
30, 1996 and 1995
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance, marine
equipment operating, and asset specific insurance expenses) on owned equipment
decreased during the six months ended June 30, 1996 when compared to the same
period of 1995. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ 326 $ 3,204
Marine vessels 1,497 1,210
Trailers 861 239
Rail equipment 1,149 1,465
Marine containers 773 716
Mobile offshore drilling unit 132 77
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $2.6 million and $2.3
million, respectively, for the six months ended June 30, 1996, compared to $3.3
million and $0.1 million, respectively, during the same period of 1995. The
decrease in revenue was due to the sale of two aircraft in 1995. Direct expenses
increased due to the overhaul of four engines on an aircraft that has been
off-lease since the end of 1994, and the repairs needed on another aircraft
before it can be re-leased;
Marine vessels: Marine vessel lease revenues and direct expenses were $3.4
million and $1.9 million, respectively, for the six months ended June 30, 1996,
compared to $3.2 million and $2.0 million, respectively, during the same period
of 1995. The increase was due to the higher profit sharing revenue earned on a
marine vessel in the six months ended June 30, 1996 compared to same period in
1995.
Voyage charters are short-term leases lasting the duration of specific voyages,
typically 30 to 45 days. Voyage charters have higher revenues associated with
them since the owner pays for costs, such as bunkers and port costs, normally
borne by the lessees under time or bare-boat charters. To position the
Partnership's marine vessel fleet for a potential upturn in the marine vessel
market, the Partnership has entered some of its marine vessels into voyage
charters and plans to enter into longer-term contracts as the market improves;
Trailers: Trailer lease revenues and direct expenses were $1.1 million and $0.2
million, respectively, for the six months ended June 30, 1996, compared to $0.3
million and $0.1 million, respectively, during the same period of 1995. The
increase in lease revenues was due to the addition of 333 trailers in the first
nine months of 1995;
Rail equipment: Railcar lease revenues and direct expenses were $1.8 million and
$0.7 million, respectively, for the six months ended June 30, 1996, compared to
$1.8 million and $0.3 million, respectively, during the same period of 1995.
Although the railcar fleet remained relatively the same size for both periods,
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
1995;
Marine containers: Marine container lease revenues were $0.8 million and $0.7
million, for the six months ended June 30, 1996 and 1995, respectively. Although
the number of marine containers owned by the Partnership has been declining over
the past twelve months due to sales and dispositions, revenues have increased
slightly due to a group of containers which earned higher revenues in the six
months ended June 30, 1996 compared to the same period in 1995;
Mobile offshore drilling unit (rig): Rig lease revenues remained relatively the
same for the six months ended June 30, 1996, compared to the same period in
1995.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $9.0 million for the six months ended June 30, 1996,
increased from $8.6 million for the same period in 1995. The variances are
explained as follows:
(a) A $1.1 million increase in bad debt expense reflecting the General
Partner's evaluation of the collectibility of receivables due from two aircraft
lessees that encountered financial difficulties;
(b) A $0.1 million increase in general and administrative expenses from
1995 levels resulting from the increased administrative costs associated with
the short-term rental facilities due to additional trailers now operating in the
facilities in the first six months of 1996 compared to the same period in 1995;
(c) A $0.8 million decrease in depreciation and amortization expenses from
1995 levels reflecting the sale of certain assets during 1996 and 1995;
(d) A $0.1 million decrease in management fees to affiliates, reflecting
the lower levels of lease revenues in the six months ended June 30, 1996, as
compared to the same period in 1995. Management fees are calculated as a monthly
fee equal to the lesser of (i) the fees which would be charged by an independent
third party for similar services for similar equipment or (ii) the sum of (A) 5%
of the Gross Lease Revenues attributable to equipment which is subject to
Operating Leases, and (B) 2% of the Gross Lease Revenues attributable to
Equipment which is subject to Full Payout Net leases, and (C) 7% of the Gross
Lease Revenues attributable to Equipment, if any, which was subject to per diem
leasing arrangements and thus is operated by the Partnership;
(e) Loss on revaluation of equipment of $0.4 million in 1995 resulted from
the reduction of the net book value of an aircraft to its estimated net
realizable value. This aircraft was sold in the second quarter of 1995. There
was no loss on revaluation of equipment in the six months ended June 30, 1996.
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the six months ended June 30, 1996
totaled $2.6 million which resulted from the sale or disposal of 166 marine
containers, two railcars and a mobile offshore drilling unit, with an aggregate
net book value of $5.8 million for aggregate proceeds of $8.4 million. For the
six months ended June 30, 1995, the $0.4 million net gain on disposition of
equipment resulted from the sale or disposal of 166 marine containers, and two
aircraft with an aggregate net book value of $3.9 million, for aggregate
proceeds of $4.3 million.
(D) Interest and other income
Interest and other income decreased $0.1 million during the six months ended
June 30, 1996 due primarily to lower cash balances available for investments
when compared to the same period of 1995.
(E) Equity in net loss of unconsolidated special purpose entities represents net
loss generated from the operation of jointly-owned assets accounted for under
the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ (139 ) $ --
Marine vessels (131 ) 137
</TABLE>
Aircraft: As of June 30, 1996, the Partnership owned a 14% interest in a trust
consisting of seven 737-200A commercial aircraft. This investment was acquired
in the third quarter of 1995;
Marine vessel: As of June 30, 1996, the Partnership had a 50% interest in a
marine vessel. At the end of 1995 this marine vessel switched from a bare-boat
charter to a time charter. Time charters have slightly higher revenues
associated with them since the owner pays for costs, such as operating costs,
normally borne by the lessees under bare-boat charters. In addition, lease
revenue decreased slightly as a result of this marine vessel being off-lease for
17 to 19 days in the first quarter of 1996 due to scheduled drydocking repairs.
(F) Net Loss
As a result of the foregoing, the Partnership's net loss of $1.8 million for the
six months ended June 30, 1996, decreased from net loss of $1.4 million during
the same period in 1995. 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 1996 is not necessarily indicative of future
periods. In the six months ended June 30, 1996, the Partnership distributed $3.4
million to the Unitholders, or $0.40 per 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 Partnership's Limited Partnership Agreement. In addition the
Partnership, under its current loan agreement, does not have the capacity to
incur additional debt. The Partnership relies on operating cash flow to meet its
operating obligations, make cash distributions to partners, and increase the
Partnership's equipment portfolio with any remaining available surplus cash.
The Partnership has one loan outstanding totaling $30.8 million. This loan
is due in three yearly principal payments of $8.2 million starting July 1, 1997,
and one final payment of $6.2 million on July 1, 2000. The interest on the loan
is fixed at 9.75%. The loan agreement requires the Partnership to a certain
minimum net worth ratio based on 33.33% of the fair market value of equipment
plus cash. Current market conditions have resulted in decreasing market values
for the Partnership's equipment portfolio, however, at June 30,1996, the
Partnership was in compliance with the debt covenants.
The General Partner has entered into a joint $35 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, PLM Equipment
Growth Fund III, PLM Equipment Growth Fund VI, PLM Equipment Growth Fund V, PLM
Equipment Growth & Income Fund VII Professional Lease Management Income fund I
("Fund I"), all affiliated investment programs, and TEC Acquisub, Inc.
("TECAI"), an indirect wholly-owned subsidiary of the General Partner, American
Finance Group, Inc. ("AFG"), a subsidiary of PLM International, which may be
used to provide interim financing of up to (i) 70% of the aggregate book value
or 50% of the aggregate net fair market value of eligible equipment owned by an
affiliate plus (ii) 50% of unrestricted cash held by the borrower. The Committed
Bridge Facility became available on December 20, 1993, and was amended and
restated in June 1996 to expire on May 23, 1997. The Committed Bridge Facility
also provides for a $5 million Letter of Credit Facility for the eligible
borrowers. Outstanding borrowings by Fund I, TECAI, AFG or PLM Equipment Growth
Funds III through VII reduce the amount available to each other under the
Committed Bridge Facility. Individual borrowings may be outstanding for no more
than 179 days, with all advances due no later than May 23, 1997. The Committed
Bridge Facility prohibits the Partnership from incurring any additional
indebtedness. Interest accrues at either the prime rate or adjusted LIBOR plus
2.5% at the borrowers option and is set at the time of an advance of funds.
Borrowings by the Partnership are guaranteed by the General Partner. As of
August 9, 1996, PLM Equipment Growth Fund VI had $9 million in outstanding
borrowings under the Committed Bridge Facility, and TECAI had $23.9 million.
Neither the Partnership, AFG, Fund I nor the other programs had any outstanding
borrowings. Due to the loan covenants of the senior debt, the Partnership cannot
access this line of credit at this time.
(III) REDEMPTION OF LIMITED PARTNERSHIP UNITS
Beginning January 1, 1993, and annually thereafter the Partnership was obligated
under certain conditions to redeem up to 2% of the outstanding Depositary Units
("Units") each year. The purchase price offered by the Partnership for the
outstanding Units is equal to 110% of the unrecovered principal attributable to
the Units. Unrecovered principal for any Unit will be equal to the excess of (i)
the capital contribution attributable to the Unit over (ii) the distributions
from any source paid with respect to the Unit. At June 30, 1996, the Partnership
had repurchased 15,350 units for a total repurchase price of $0.2 million. These
units repurchased during the six months ended June 30, 1996 were a portion of
the units identified for repurchase at December 31, 1995. From inception through
June 30, 1996, the Partnership has repurchased 121,580 units for a total
repurchase price of $1.6 million.
(IV) TRENDS
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors. Throughout 1995 and the first part of 1996, market
conditions, supply and demand equilibrium, and other factors varied in several
markets. In the marine container and refrigerated over-the-road trailer markets,
oversupply conditions, industry consolidations, and other factors resulted in
falling rates and lower returns. In the dry over-the-road trailer markets,
strong demand and a backlog of new equipment deliveries produced high
utilization and returns. The marine vessel, rail, and mobile offshore drilling
unit markets could be generally categorized by increasing rates as the demand
for equipment is increasing faster than new additions net of retirements.
Finally, demand for narrowbody Stage II aircraft, such as those owned by the
Partnership, has increased as expected savings from newer narrowbody aircraft
have not materialized and deliveries of the newer aircraft have slowed down.
These trends are expected to continue for the near term. These different markets
have had individual effects on the performance of Partnership equipment - in
some cases resulting in declining performance, and in others, in improved
performance.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
governmental or other regulations, and others. The unpredictability of some of
these factors, or of their occurrence, makes it difficult for the General
Partner to clearly define trends or influences that may impact the performance
of the Partnership's equipment. The General Partner continuously monitors both
the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may make an evaluation to reduce the
Partnership's exposure to equipment markets in which it determines that it
cannot operate equipment and achieve acceptable rates of return. Alternatively,
the General Partner may make a determination to enter equipment markets in which
it perceives opportunities to profit from supply-demand instabilities or other
market imperfections.
The Partnership intends to use excess cash flow, if any, after payment of
expenses, loan principal, and cash distributions to acquire additional equipment
during the first seven years of Partnership operations. The General Partner
believes these acquisitions may cause the Partnership to generate additional
earnings and cash flow for the Partnership.
<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 IV
By: PLM Financial Services, Inc.
General Partner
Date: August 9, 1996
By: /s/ David Davis
------------------------------
David Davis
Vice President and
Corporate Controller
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