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, 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 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 IV
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------------------------------------
<S> <C> <C>
Equipment held for operating leases $ 121,577 $ 131,783
Less accumulated depreciation (70,768 ) (73,508 )
------------------------------------------
Net equipment 50,809 58,275
Cash and cash equivalents 4,265 1,236
Restricted cash 675 575
Investments in unconsolidated special purpose entities 6,257 7,380
Accounts receivable, net of allowance for doubtful
accounts of $2,151 in 1996 and $775 in 1995 2,409 3,606
Notes receivable 58 325
Deferred charges, net of accumulated
amortization of $2,217 in 1996 and $2,144 in 1995 248 334
Prepaid expenses and other assets 36 111
------------------------------------------
Total assets $ 64,757 $ 71,842
==========================================
Liabilities:
Accounts payable and accrued expenses $ 1,479 $ 653
Due to affiliates 548 666
Prepaid deposits and reserve for repairs 3,525 3,248
Notes payable 30,800 30,800
------------------------------------------
Total liabilities 36,352 35,367
Partners capital:
Limited Partners (8,628,420 Limited
Partnership Units at September 30, 1996
and 8,643,770 Limited Partnership Units
at December 31, 1995) 28,405 36,475
General Partner -- --
------------------------------------------
Total partners' capital 28,405 36,475
------------------------------------------
Total liabilities and partners' capital $ 64,757 $ 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 nine months
ended September 30, ended September 30,
1996 1995 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 4,619 $ 4,927 $ 14,417 $ 15,043
Interest and other income 58 124 189 321
Net gain (loss) on disposition
of equipment (9 ) 87 2,626 515
--------------------------------------------------------------
Total revenues 4,668 5,138 17,232 15,879
Expenses:
Depreciation and amortization 2,513 3,141 7,363 9,152
Management fees to affiliate 239 287 659 806
Repairs and maintenance 739 777 4,399 1,824
Interest expense 751 909 2,252 2,410
Insurance expense to affiliates 47 60 142 208
Other insurance expense 133 74 397 354
Marine equipment operating expenses 557 572 1,597 1,848
General and administrative expenses
to affiliates 176 119 462 357
Other general and administrative
expense 162 199 618 525
Provision for (recovery of) bad debt expense (70 ) (100 ) 1,438 283
Loss on revaluation of equipment -- -- -- 417
--------------------------------------------------------------
--------------------------------------------------------------
Total expenses 5,247 6,038 19,327 18,184
--------------------------------------------------------------
Equity in net loss of unconsolidated special
purpose entities (74 ) -- (344 ) --
--------------------------------------------------------------
Net loss $ (653 ) $ (900 ) $ (2,439 ) $ (2,305 )
==============================================================
Partners' share of net (loss) income:
Limited Partners $ (744 ) $ (980 ) $ (2,712 ) $ (2,533 )
General Partner 91 80 273 228
--------------------------------------------------------------
Total $ (653 ) $ (900 ) $ (2,439 ) $ (2,305 )
==============================================================
Net loss per Depositary Unit (8,628,420
Units at September 30, 1996 and 8,643,903
Units at September 30, 1995 $ (0.09 ) $ (0.11 ) $ (0.31 ) $ (0.29 )
==============================================================
Cash distributions $ 1,818 $ 1,593 $ 5,455 $ 4,591
==============================================================
Cash distributions per Depositary Unit $ 0.20 $ 0.18 $ 0.60 $ 0.50
==============================================================
</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 nine months ended
September 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) (2,712 ) 273 (2,439 )
Cash distributions (5,182 ) (273 ) (5,455 )
Repurchase of Depositary Units (176 ) -- (176 )
----------------------------------------------------
Partner's capital at September 30, 1996 $ 28,405 $ -- $ 28,405
====================================================
</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 nine months
ended September 30,
1996 1995
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,439 ) $ (2,305 )
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 7,363 9,152
Net gain on disposition of equipment (2,626 ) (515 )
Loss on revaluation of equipment -- 417
Cash distribution from unconsolidated special purpose
entities in excess of loss 1,123 --
Changes in operating assets and liabilities:
Restricted cash (100 ) --
Accounts and notes receivable, net 1,464 (1,268 )
Prepaid expenses and other assets 75 77
Due to affiliates (118 ) 32
Accounts payable and accrued expenses 826 564
Prepaid deposits and reserve for repairs 286 (126 )
--------------------------------
Net cash provided by operating activities 5,854 6,028
--------------------------------
Investing activities:
Purchase of equipment and capitalized repairs (5,537 ) (10,301 )
Payments of acquisition fees to affiliates (247 ) (379 )
Payments of lease negotiation fees to affiliates (12 ) (84 )
Proceeds from disposition of equipment 8,602 6,049
--------------------------------
Net cash provided by (used in) investing activities 2,806 (4,715 )
--------------------------------
Financing activities:
Repurchase of Limited Partnership Units (176 ) (245 )
Cash distributions paid to Limited Partners (5,182 ) (4,363 )
Cash distributions paid to General Partner (273 ) (228 )
--------------------------------
--------------------------------
Net cash used in financing activities (5,631 ) (4,836 )
--------------------------------
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents 3,029 (3,523 )
Cash and cash equivalents at beginning of period 1,236 5,629
--------------------------------
Cash and cash equivalents at end of period $ 4,265 $ 2,106
================================
Supplemental information:
Interest paid $ 2,252 $ 2,252
================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 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 September 30, 1996, the statement of
operations for the three and nine months ended September 30, 1996 and 1995,
the statement of changes in Partners' capital for the year ended December
31, 1995, and the nine months ended September 30, 1996, and the statement
of cash flows for the nine months ended September 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 method of
accounting for 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>
September 30, December 31,
1996 1995
----------------------------------
<S> <C> <C>
50% interest in a Bulk Carrier $ 3,194 $ 3,458
14% interest in a Trust owning seven commercial aircraft (see
note below) -- 3,922
17% interest in a Trust owning six commercial aircraft (see note
below) 3,063 --
==================================
Net investments $ 6,257 $ 7,380
==================================
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
2. Investments in Unconsolidated Special Purpose Entities (continued)
The Partnership has a beneficial interest in one certain unconsolidated
special purpose entity that owns multiple aircraft (the Trusts). This Trust
contains provisions, under certain circumstances, for allocating specific
aircraft to the beneficial owners. During September 1996, PLM Equipment
Growth Fund V, an affiliated partnership which also has a beneficial
interest in the Trust, renegotiated its senior loan agreement and was
required, for loan collateral purposes, to withdraw the aircraft designated
to it from the Trust. The result was to restate the percentage ownership of
the remaining beneficial owners of the Trust beginning September 30, 1996.
This change has no effect on the income or loss recognized in the third
quarter of 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>
September 30, December 31,
1996 1995
----------------------------------------
<S> <C> <C>
Equipment held for operating leases:
Rail equipment $ 14,866 $ 14,907
Marine containers 15,913 17,355
Marine vessels 26,980 26,980
Aircraft 56,859 51,111
Trailers 6,959 6,944
Mobile offshore drilling unit -- 14,486
----------------------------------------
121,577 131,783
Less accumulated depreciation (70,768 ) (73,508 )
----------------------------------------
Net equipment $ 50,809 $ 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 September 30, 1996, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for two
commercial aircraft, five railcars, and 54 marine containers. The net
carrying value of equipment off-lease was $8.1 million at September 30,
1996. At December 31, 1995, 62 containers and one commercial aircraft were
off-lease with a net carrying value of $4.8 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
3. Equipment (continued)
During the nine months ended September 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 nine months ended September 30, 1996, the Partnership sold or
disposed of a mobile offshore drilling unit (rig), 239 marine containers,
one trailer, and two railcars with an aggregate net book value of $6.0
million for aggregate proceeds of $8.6 million. During the nine months
ended September 30, 1995, the Partnership disposed of 278 marine
containers, two aircraft, and 121 trailers with an aggregate net book value
of $5.6 million for proceeds of $6.1 million.
Periodically, PLM International. Inc., (the Company) will purchase groups
of assets whose ownership may be allocated among affiliated partnerships
and the Company. Generally in these cases, only assets that are on lease
will be purchased by the affiliated partnerships. The Company will
generally assume the ownership and remarketing risks associated with
off-lease equipment. Allocation of the purchase price will be determined by
a combination of third party industry sources, and recent transactions or
published fair market value references. During the nine months ended
September 30, 1996, the Company realized $0.7 million of gains on the sale
of 69 off-lease railcars purchased by the Company as part of a group of
assets in 1994 which had been allocated to PLM Equipment Growth Funds IV,
VI, VII, Professional Lease Management Income Fund I, L.L.C. and the
Company.
4. Cash Distribution
Cash distributions are recorded when paid and totaled $5.5 million and $4.6
million for the nine months ended September 30, 1996 and 1995,
respectively, and $1.8 million and $1.6 million for the three months ended
September 30, 1996 and 1995, respectively. Cash distributions related to
the third quarter results of $1.6 million will be paid on November 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 nine months ended September 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
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
5. Debt (continued)
General Partner. As of September 30, 1996, AFG had $27.8 million in
outstanding borrowings under the Committed Bridge Facility. Neither the
Partnership, TECAI, 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.
On October 31, 1996, the General Partner amended this agreement (for
details refer to "Liquidity and Capital Resources").
6. Subsequent Event
The loan agreements require the Partnership to maintain certain minimum net
worth ratios based on 33 1/3% of the fair market value of equipment plus
cash and cash equivalents. Current economic conditions coupled with the
increasing age of the Partnership's equipment, have resulted in decreased
market values for the Partnership's equipment and has required an optional
prepayment to be made in order to remain in compliance with the loan
covenants. As a result, in November of 1996, the Partnership will pay $1.6
million in principal and $0.2 million in prepayment fees.
<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, 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 third 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 September 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ 1,211 $ 1,000
Marine vessels 606 605
Trailers 380 376
Rail equipment 620 695
Marine containers 333 387
Mobile offshore drilling unit -- 87
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.3 million and $0.1
million, respectively, for the third quarter of 1996, compared to $1.3 million
and $0.3 million, respectively, during the same quarter of 1995. The increase in
lease revenue was due to the purchase of a Dash 8-300 aircraft at the end of the
second quarter of 1996, which was on-lease for the entire third quarter in 1996.
The increase was offset, in part, by the off-lease status of another aircraft in
the beginning of the third quarter in 1996 when compared to the same quarter in
1995, which was on-lease for the entire quarter. Direct expenses decreased due
to less repairs done on an off-lease aircraft, in the third quarter of 1996 when
compared to the same period in 1995;
Marine vessels: Marine vessel lease revenues and direct expenses were $1.6
million and $1.0 million respectively, for the third quarter of 1996, compared
to $1.4 million and $0.8 million, respectively, during the same quarter of 1995.
Lease revenue increased due to higher charter rates earned for a marine vessel
that switched from a utilization-based pooling arrangement to a fixed rate time
charter in the beginning of 1996. Direct expenses increased due to higher
estimated future drydock costs for both marine vessels in the third quarter of
1996 when compared to the same period in 1995;
Trailers: Trailer revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the third quarter of 1996, compared to $0.5 million
and $0.1 million, respectively, during the same quarter of 1995. Trailer net
contributions remained relatively the same from the third quarter of 1996
compared to the same quarter in 1995;
Rail equipment: Railcar lease revenues and direct expenses were $0.9 million and
$0.3 million, respectively, for the third 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 $0.3 million and $0.4
million, for the third quarters of 1996 and 1995, respectively. The number of
marine containers owned by the Partnership has been declining over the past
twelve months due to sales and dispositions, thus resulting in a decrease in
marine container net contributions;
Mobile offshore drilling unit (rig): The rig was sold in the second quarter of
1996, resulting in the elimination of contribution in the third quarter.
Revenues and expenses were $88,000 and $1,000, respectively, in the third
quarter of 1995.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $3.8 million for the quarter ended September 30,
1996, decreased from $4.2 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 $0.1 million decrease in interest expense resulted from a one-time
charge in 1995 related to interest owed to former charterers of one of the
Partnership's marine vessels. The claim relates to a cancellation of the charter
in January 1991. Interest was paid in the third quarter of 1995 from January
1991 until the final settlement date.
(C) Net gain (loss) on disposition of owned equipment
Net loss on disposition of equipment for the third quarter of 1996 totaled
$9,000 which resulted from the sale or disposal of 73 marine containers and one
trailer with an aggregate net book value of $150,000 for aggregate proceeds of
$141,000. For the third quarter of 1995, the $0.1 million net gain on
disposition of equipment resulted from the sale or disposal of 112 marine
containers and 121 trailers with an aggregate net book value of $1.7 million,
for aggregate proceeds of $1.8 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 September 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ (76 ) $ (117 )
Marine vessel 2 76
</TABLE>
Aircraft: Aircraft revenues and expenses were $0.2 million and $0.3 million,
respectively, for the third quarter of 1996, compared to $8,000 and $0.1
million, respectively, during the same quarter in 1995. The investment in a
trust owning 737-200A commercial aircraft was acquired at the end of the third
quarter of 1995. The net losses for the third quarter of 1996 and 1995 resulted
from the Partnership's accelerated depreciation method;
Marine vessel: As of September 30, 1996, the Partnership had a 50% interest in a
marine vessel. Marine vessels revenues and expenses were $0.4 million and $0.4
million, respectively, for the third quarter of 1996, compared to $0.3 million
and $0.2 million, respectively, during the same quarter in 1995. 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 resulting in an increase in expenses.
(E) Net Loss
As a result of the foregoing, the Partnership's net loss of $0.6 million for the
third quarter of 1996, increased from net loss of $0.9 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 third quarter of 1996, the Partnership distributed $1.7 million to the
Limited Partners, or $0.20 per Depositary Unit.
Comparison of the Partnership's Operating Results for the Nine Months Ended
September 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 nine months ended September 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 nine months
ended September 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ 1,358 $ 4,205
Marine vessels 2,104 1,815
Trailers 1,210 615
Rail equipment 1,769 2,161
Marine containers 1,106 1,103
Mobile offshore drilling unit 163 164
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $3.9 million and $2.5
million, respectively, for the nine months ended September 30, 1996, compared to
$4.6 million and $0.4 million, respectively, during the same period of 1995. The
decrease in revenue was due to the sale of two aircraft in 1995. In addition,
the decrease was attributable to another aircraft which came off lease in the
beginning of the third quarter in 1996, which was on-lease for the first nine
months in 1995. The decrease was offset, in part, by the purchase of a Dash
8-300 aircraft at the end of the second quarter of 1996. 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 required on another aircraft
before it can be re-leased;
Marine vessels: Marine vessel lease revenues and direct expenses were $5.0
million and $2.9 million, respectively, for the nine months ended September 30,
1996, compared to $4.6 million and $2.8 million, respectively, during the same
period of 1995. Lease revenue increased due to higher charter rates earned for a
marine vessel that switched from a utilization-based pooling arrangement to a
fixed rate time charter in the beginning of 1996. In addition, revenues
increased due to the higher profit sharing revenue earned on another marine
vessel in the nine months ended September 30, 1996, compared to same period in
1995. Direct expenses increased due to higher estimated future drydock costs for
both marine vessels in the nine months ended September 30, 1996 when compared to
the same period in 1995. However, marine operating expenses were higher for the
nine months ended September 30, 1995, due to repairs to a marine vessel's
railings caused by heavy weather damage;
Trailers: Trailer lease revenues and direct expenses were $1.5 million and $0.3
million, respectively, for the nine months ended September 30, 1996, compared to
$0.8 million and $0.2 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 $2.7 million and
$0.9 million, respectively, for the nine months ended September 30, 1996,
compared to $2.7 million and $0.5 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 $1.1 million and $1.1
million for the nine months ended September 30, 1996 and 1995, respectively.
Although net contribution have remained relatively the same from the nine months
ended September 30, 1995, to the same period in 1996, lease revenues have
decreased due to sales and dispositions of marine containers over the last
twelve months, offset by an increase in a group of containers in the second
quarter of 1996;
Mobile offshore drilling unit (rig): The rig was sold in the second quarter of
1996, resulting in the elimination of contribution in the third quarter. Rig
lease revenues and direct expenses were $0.2 million and $1,000, respectively,
for the nine months ended September 30, 1996, compared to $0.2 million and
$9,000, respectively, during the same period of 1995.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses remained constant at $12.8 million from the nine months
ended September 30, 1995, to the same period in 1996. Although indirect expenses
remained relatively the same, the variances between the periods were
significant. 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 $0.2 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 nine months of 1996 compared to the same period in 1995;
(c) A $1.1 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 nine months ended September 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) A $0.1 million decrease in interest expense from a one-time interest
charge in 1995. This interest was owed to former charterers of one of the
Partnership's marine vessels. The claim relates to a cancellation of the charter
in January 1991 until the final settlement date;
(C) 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 fair value less
cost to sell. This aircraft was sold in the second quarter of 1995. There was no
loss on revaluation of equipment in the nine months ended September 30, 1996.
(D) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the nine months ended September 30,
1996 totaled $2.6 million which resulted from the sale or disposal of 239 marine
containers, two railcars, one trailer, and a mobile offshore drilling unit, with
an aggregate net book value of $6.0 million for aggregate proceeds of $8.6
million. For the nine months ended September 30, 1995, the $0.5 million net gain
on disposition of equipment resulted from the sale or disposal of 278 marine
containers, two aircraft, and 121 trailers with an aggregate net book value of
$5.6 million, for aggregate proceeds of $6.1 million.
(E) Interest and other income
Interest and other income decreased $0.1 million during the nine months ended
September 30, 1996 due primarily to lower interest rates earned on cash balances
available for investments when compared to the same period of 1995.
<PAGE>
(F) 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 nine months
ended September 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft $ (215 ) $ (117 )
Marine vessels (129 ) 214
</TABLE>
Aircraft: Revenues and expenses were $0.8 million and $1.0 million,
respectively, for the nine months ended September 30, 1996, compared to $8,000
and $0.1 million, respectively, for the same period in 1995. The investment in a
trust owning 737-200A commercial aircraft was acquired at the end of the third
quarter of 1995;
Marine vessel: As of September 30, 1996, the Partnership had a 50% interest in a
marine vessel. Revenues and expenses were $1.2 million and $1.3 million,
respectively, for the nine months ended September 30, 1996, compared to $0.9
million and $0.7 million, respectively, for the same period in 1995. 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.
(G) Net Loss
As a result of the foregoing, the Partnership's net loss of $2.4 million for the
nine months ended September 30, 1996, decreased from net loss of $2.3 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 nine months ended September 30, 1996, is not
necessarily indicative of future periods. For the nine months ended September
30, 1996, the Partnership distributed $5.2 million to the Unitholders, or $0.60
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 maintain a net
worth ratio of at least 33.33% of the fair market value of equipment plus cash.
Current economic conditions coupled with the increasing age of the Partnership's
equipment, have resulted in decreased market values for the Partnership's
equipment and has required an optional prepayment to be made in order to remain
in compliance with the loan covenants. As a result, in November of 1996, the
Partnership will pay $1.6 million in principal and $0.2 million in prepayment
fees.
The General Partner has entered into a joint $50 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, 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 October 1996 to
expire on October 31, 1997 and increase the available borrowings for AFG to $50
million. The Partnership, TECAI, Fund I and the other partnerships may borrow up
to $35 million of the Committed Bridge Facility. 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 IV 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 October 31, 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 November 13, 1996, AFG had $39.7 million in outstanding borrowings under the
Committed Bridge Facility. Neither the Partnership, TECAI, 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 September 30, 1996, the
Partnership had repurchased 15,350 units for a total repurchase price of $0.2
million. These units repurchased during the nine months ended September 30, 1996
were a portion of the units identified for repurchase at December 31, 1995. From
inception through September 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: November 14, 1996
By: /s/ David J. Davis
----------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,265
<SECURITIES> 0
<RECEIVABLES> 2,409
<ALLOWANCES> 2,151
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 121,577
<DEPRECIATION> 70,768
<TOTAL-ASSETS> 64,757
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,405
<TOTAL-LIABILITY-AND-EQUITY> 64,757
<SALES> 0
<TOTAL-REVENUES> 17,232
<CGS> 0
<TOTAL-COSTS> 17,075
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,252
<INCOME-PRETAX> (2,439)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,439)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,439)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
