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
March 31, 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 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, except unit amounts)
<TABLE>
ASSETS
<CAPTION>
March 31, December 31,
1997 1996
---------------------------------
<S> <C> <C>
Equipment held for operating leases, at cost $ 89,595 $ 89,766
Less accumulated depreciation (52,438 ) (50,784 )
--------------------------------
37,157 38,982
Equipment held for sale -- 5,524
--------------------------------
Net equipment 37,157 44,506
Cash and cash equivalents 8,491 2,142
Restricted cash 552 552
Due from affiliates 357 357
Investments in unconsolidated special purpose entities 9,373 9,616
Accounts and notes receivable, net of allowance for doubtful
accounts of $2,061 in 1997 and $2,329 in 1996 1,755 1,477
Deferred charges, net of accumulated
amortization of $409 in 1997 and $414 in 1996 195 219
Prepaid expenses and other assets 67 140
--------------------------------
Total assets $ 57,947 $ 59,009
================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 748 $ 1,027
Due to affiliates 148 304
Lessee deposits and reserve for repairs 2,787 3,519
Notes payable 29,250 29,250
--------------------------------
Total liabilities 32,933 34,100
Partners' capital:
Limited partners (8,628,420 limited
partnership units at March 31, 1997
and at December 31, 1996) 25,014 24,909
General Partner -- --
--------------------------------
Total partners' capital 25,014 24,909
--------------------------------
Total liabilities and partners' capital $ 57,947 $ 59,009
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1997 1996
-------------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 3,385 $ 4,556
Interest and other income 100 31
Net gain on disposition of equipment 2,340 9
------------------------------
Total revenues 5,825 4,596
Expenses:
Depreciation and amortization 1,782 2,405
Management fees to affiliate 184 206
Repairs and maintenance 248 1,288
Interest expense 713 751
Insurance expense to affiliates 67 47
Other insurance expense 129 161
Marine equipment operating expenses 308 554
General and administrative expenses
to affiliates 235 122
Other general and administrative
expense 392 208
(Recovery of) provision for bad debt expense (266 ) 909
------------------------------
Total expenses 3,792 6,651
Equity in net loss of unconsolidated
special purpose entities (111 ) (147 )
------------------------------
Net income (loss) $ 1,922 $ (2,202 )
==============================
Partners' share of net income (loss):
Limited partners $ 1,831 $ (2,293 )
General Partner 91 91
------------------------------
Total $ 1,922 $ (2,202 )
==============================
Net income (loss) per weighted average limited
partnership unit (8,628,420
units at March 31, 1997
and 8,642,413 units at March 31, 1996) $ 0.21 $ (0.27 )
==============================
Cash distributions $ 1,817 $ 1,818
==============================
Cash distributions per weighted average limited
partnership unit $ 0.20 $ 0.20
==============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1995 to March 31,
1997
(in thousands)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------
<S> <C> <C> <C>
Partners' capital at December 31, 1995 $ 36,475 $ -- $ 36,475
Net income (loss) (4,482 ) 363 (4,119 )
Cash distributions (6,908 ) (363 ) (7,271 )
Repurchase of limited partnership units (176 ) -- (176 )
-------------------------------------------------
Partners' capital at December 31, 1996 24,909 -- 24,909
Net income 1,831 91 1,922
Cash distributions (1,726 ) (91 ) (1,817 )
--------------------------------------------------
Partner's capital at March 31, 1997 $ 25,014 $ -- $ 25,014
==================================================
</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 Three Months Ended
March 31,
1997 1996
----------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,922 $ (2,202 )
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 1,782 2,405
Net gain on disposition of equipment (2,340 ) (9 )
Equity in net loss of unconsolidated special purpose entities 111 147
Changes in operating assets and liabilities:
Restricted cash -- (100 )
Accounts and notes receivable, net (278 ) 861
Prepaid expenses and other assets 73 136
Due to affiliates (156 ) (192 )
Accounts payable and accrued expenses (279 ) 244
Lessee deposits and reserve for repairs (737 ) (119 )
Write-off of unused drydock accrual 990 --
----------------------------------
----------------------------------
Net cash provided by operating activities 1,088 1,171
----------------------------------
Investing activities:
Payments of capital improvements (1 ) (7 )
Distributions from unconsolidated special purpose entities 132 238
Proceeds from disposition of equipment 6,947 204
----------------------------------
Net cash provided by investing activities 7,078 435
----------------------------------
Financing activities:
Repurchase of limited partnership units -- (60 )
Cash distributions paid to Limited partners (1,726 ) (1,727 )
Cash distributions paid to General Partner (91 ) (91 )
----------------------------------
Net cash used in financing activities (1,817 ) (1,878 )
----------------------------------
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents 6,349 (272 )
Cash and cash equivalents at beginning of period 2,142 1,236
----------------------------------
Cash and cash equivalents at end of period $ 8,491 $ 964
==================================
Supplemental information:
Interest paid $ 713 $ 751
==================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI), 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 March 31, 1997 and December 31, 1996, the
statements of operations and cash flows for the three months ended March
31, 1997 and 1996, and the statement of changes in Partners' capital for
the period from December 31, 1995 to March 31, 1997. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1996, on file at the Securities and
Exchange Commission.
2. Reclassification
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Cash Distribution
Cash distributions are recorded when paid and totaled $1.8 million and $1.8
million for the three months ended March 31, 1997 and 1996. Cash
distributions related to the first quarter results of $1.7 million will be
paid during May 1997, 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. Cash distributions to limited partners of $0 and $1.7
million, respectively, for the three months ended March 31, 1997 and 1996,
were deemed to be a return of capital.
4. Investments in Unconsolidated Special Purpose Entities
The net investments in unconsolidated special purpose entities (USPE)
include the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
March 31 December 31,
1997 1996
------------------------------------
<S> <C> <C>
50% interest in an entity owning a bulk carrier $ 2,930 $ 3,165
17% interest in a trust owning six commercial aircraft 2,401 2,575
35% interest in two commercial aircraft on a direct finance
lease 4,042 3,876
------------------------------------
Net investments $ 9,373 $ 9,616
====================================
</TABLE>
5. General Partner and Transactions with Affiliates
Partnership management fees of $0.1 million and $0.3 million were payable
at March 31, 1997 and December 31, 1996, respectively. The Partnership's
proportional share of the USPE management fees of $17,000 and $8,000 were
payable as of March 31, 1997 and December 31, 1996, respectively. The
Partnership's proportional share of the USPE management fees expenses for
the quarter ended March 31, 1997 and 1996, respectively, was $20,000 and
$33,000. An affiliate of the General Partner is reimbursed for
administrative and data processing services directly attributable to the
Partnership, which were $0.2 million and $0.1 million for the quarter
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
5. General Partner and Transactions with Affiliates
ended March 31, 1997 and 1996, respectively. The Partnership's proportional
share of the USPE administrative and data processing expenses was $8,000
and $5,000 for the quarter ended March 31, 1997 and 1996, respectively.
The Partnership paid $67,000 and $47,000 at March 31, 1997 and 1996,
respectively, to Transportation Equipment Indemnity Company, Ltd. (TEI)
which provides marine insurance coverage and other insurance brokerage
services. The Partnership's proportional share of USPE marine insurance
coverage paid to TEI was $31,000 and $18,000 at March 31, 1997 and 1996,
respectively. TEI is an affiliate of the General Partner.
The balance in due from affiliates at March 31, 1997 and December 31,
1996, includes a $0.4 million due from TEI for a settlement on an insurance
claim for one of the Partnership's marine vessel which was sold in 1995.
This settlement was received by TEI in December of 1996.
6. 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>
March 31, December 31,
1997 1996
---------------------------------
Equipment held for operating leases:
<S> <C> <C>
Rail equipment $ 14,868 $ 14,867
Marine containers 15,364 15,498
Marine vessels 9,719 9,719
Aircraft 42,734 42,734
Trailers 6,910 6,948
--------------------------------
89,595 89,766
Less accumulated depreciation (52,438 ) (50,784 )
--------------------------------
37,157 38,982
Equipment held for sale -- 5,524
--------------------------------
Net equipment $ 37,157 $ 44,506
================================
</TABLE>
Equipment held for sale at December 31, 1996, included a marine vessel
which was sold in the first quarter of 1997.
As of March 31, 1997, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for one
aircraft, 23 railcars, and 85 marine containers. The net carrying value of
equipment off-lease was $4.0 million at March 31, 1997. At December 31,
1996, one aircraft, three railcars, and 48 marine containers were off-lease
with a net carrying value of $3.9 million.
During the three months ended March 31, 1997, the Partnership sold or
disposed of marine containers, trailers and a marine vessel with a net book
value of $5.6 million and unused drydock reserves of $1.0 million, for
proceeds of $6.9 million. During the three months ended March 31, 1996, the
Partnership disposed of marine containers and a railcar with an aggregate
net book value of $195,000 for aggregate proceeds of $204,000.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
7. Contingencies
As more fully described by the Partnership in its Form 10-K for the year
ended December 31, 1996, PLM International, Inc. and various of its
affiliates are named as defendants in a lawsuit filed as a class action on
January 22, 1997, in the Circuit Court of Mobile County, Mobile, Alabama,
Case No. CV-97-251. On February 3, 1997, the state court filed an Order
conditionally certifying the class pursuant to the provisions of Rule 23 of
the Alabama Rules of Civil Procedure (ARCP), as requested by plaintiffs in
an ex parte motion filed on January 22, 1997. Defendants were not given
notice of the motion, nor were they given an opportunity to be heard
regarding the issue of conditional class certification. The Order specifies
that the class shall consist of (with certain narrow exceptions) all
purchasers of limited partnership units in the Partnership, PLM Equipment
Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth &
Income Fund VII. In issuing the Order, the court emphasized that the
certification is conditional in accordance with Rule 23(d) of the ARCP, and
that the plaintiffs will bear the burden of proving each requisite element
of Rule 23 at the time of the evidentiary hearing on the issue of class
certification. To date, no such hearing date has been set. The defendants
filed a Notice of Removal of the lawsuit from the state court to the United
States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) on March 6, 1997, arguing that the
parties are fully diverse for the purposes of diversity jurisdiction
pursuant to 28 U.S.C. Section 1441. The plaintiffs filed a motion to remand
the class action to the state court and have responded to this motion.
Defendants do not need to respond to the complaint until after the federal
court decides the motion to remand. PLM International, Inc. believes the
allegations to be completely without merit and intends to defend this
matter vigorously.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Comparison of the Partnership's Operating Results for the Three Months
Ended March 31, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, marine
equipment operating, and asset specific insurance expenses) on owned equipment
decreased during the first quarter of 1997 when compared to the same quarter of
1996. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 1,119 $ 533
Marine vessels (94 ) 435
Trailers 405 445
Rail equipment 809 743
Marine containers 403 309
Mobile offshore drilling unit -- 87
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.1 million and $0.0
million, respectively, for the first quarter of 1997, compared to $1.3 million
and $0.8 million, respectively, during the same quarter of 1996. The decrease in
lease revenue was due to the off-lease status of an aircraft in the first
quarter in 1997 when compared to the same quarter in 1996, when it was on-lease
for the entire quarter. The decrease was offset, in part, by the purchase of a
Dash 8-300 aircraft at the end of the second quarter of 1996, which was on-lease
for the entire first quarter in 1997. Direct expenses decreased due to the
overhaul of four engines on an aircraft in the first quarter of 1996 that was
not required in 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.4
million and $0.5 million respectively, for the first quarter of 1997, compared
to $1.4 million and $1.0 million, respectively, during the same quarter of 1996.
Marine vessel contribution decreased due to the sale of a marine vessel in the
beginning of 1997. In addition, lease revenue decreased in the first quarter of
1997 for the remaining marine vessel due to lower re-lease rates as a result of
a softer bulk carrier vessel market.
Trailers: Trailer revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the first quarter of 1997 and 1996. Trailer
contributions remained the same due to the relative stability of the trailer
fleet.
Rail equipment: Railcar lease revenues and direct expenses were $0.9 million and
$0.1 million, respectively, for the first quarter of 1997, compared to $0.9
million and $0.2 million, respectively, during the same quarter of 1996.
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 the first quarter of 1996 which were
not needed during the first quarter of 1997.
Marine containers: Marine container lease revenues and direct expenses were $0.4
million and $3,000, respectively, for the first quarter of 1997, compared to
$0.3 million and $14,000, respectively, during the same quarter of 1996.
Although the marine container fleet has been declining due to sales and
dispositions, lease revenues increased due to a group of containers which earned
higher revenues in the first quarter of 1997 as compared to the same period in
1996.
Mobile offshore drilling unit (rig): The rig was sold in the second quarter of
1996, resulting in the elimination of contribution in the first quarter.
Revenues and expenses were $0.1 million and $0, respectively, in the first
quarter of 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.0 million for the quarter ended March 31, 1997,
decreased from $4.6 million for the same period in 1996. The variances are
explained as follows:
(a) A $0.6 million decrease in depreciation and amortization expenses from
1996 levels reflecting the sale of certain assets during 1997 and 1996 and the
200% declining balance depreciation method.
(b) The $1.2 million decrease in bad debt expenses is due to the following:
(1) A $0.6 million decrease in the reserve for a certain lessee resulting from
the receipt of payments of unpaid invoices which were previously reserved for
and the application of security deposits against uncollected outstanding
receivable, (2) during 1996, $0.8 million of the uncollected outstanding
receivables of a certain lessee that is no longer a lessee in this Partnership
were reserved for; and (3) during 1997 an increase of $0.2 million in reserves
were recorded reflecting the General Partner's evaluation of the collectibility
of receivables due from certain lessees.
(c) A $0.3 million increase in administrative expenses from 1996 levels
resulting from additional legal fees needed to collect outstanding receivables
due to the Partnership from aircraft lessees.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the first quarter of 1997, totaled $2.3
million which resulted from the sale or disposal of marine containers, trailers
and a marine vessel with a net book value of $5.6 million and unused drydock
reserves of $1.0 million, for proceeds of $6.9 million. For the first quarter of
1996, the $9,000 net gain on disposition of equipment resulted from the sale or
disposal of marine containers and a railcar with an aggregate net book value of
$195,000 for aggregate proceeds of $204,000.
(D) Equity in Net Loss of Unconsolidated Special Purpose Entities
Net loss generated from the operation of jointly-owned assets accounted for
under the equity method are as follows (in thousands).
<TABLE>
<CAPTION>
For the three months
ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 180 $ (66 )
Marine vessel (291 ) (81 )
</TABLE>
Aircraft: As of March 31, 1997, the Partnership owned a 35% interest in a trust
owning two commercial aircraft on direct finance leases and a 17% interest in
another trust which owns commercial aircraft. As of March 31, 1996, the
Partnership owned a17% interest in a trust that owns commercial aircraft.
Aircraft revenues and expenses were $0.4 million and $0.2 million, respectively,
for the first quarter of 1997, compared to $0.3 million and $0.4 million,
respectively, during the same quarter in 1996. The contribution for the
investment in a trust owning commercial aircraft on an operating lease is
significantly impacted by the depreciation charges which are greatest in the
early years due to the use of the 200% declining balance method of depreciation.
The Trust depreciates this aircraft investment over 6 years. The investment in
the trust owning the aircraft on direct finance leases was acquired at the end
of 1996 so it had no contribution in the first quarter of 1996.
Marine vessel: As of March 31, 1997 and 1996, the Partnership had a50% interest
in an entity which owns a marine vessel. Marine vessel revenues and expenses
were $0.2 million and $0.5 million, respectively, for the first quarter of 1997,
compared to $0.4 million and $0.5 million, respectively, during the same quarter
in 1996. Lease revenue decreased in the first quarter of 1997, due to lower
re-lease rates as a result of a softer bulk carrier vessel market.
<PAGE>
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income of $1.9 million for
the first quarter of 1997, increased from net loss of $2.2 million during the
same period in 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire during the duration
of the Partnership is subject to many factors and the Partnership's performance
in the first quarter of 1997 is not necessarily indicative of future periods. In
the first quarter of 1997, the Partnership distributed $1.7 million to the
limited partners, or $0.20 per weighted average depositary unit.
Financial Condition - Capital Resources and Liquidity
The Partnership has ended its reinvestment phase pursuant to its Partnership
Agreement. Due to this, the Partnership is prohibited from borrowing funds
through its short-term joint $50 million credit facility.
For the three months ended March 31, 1997, the Partnership generated
sufficient operating cash (net cash provided by operating activities plus
distributions from the unconsolidated special purpose entity) to meet its
operating obligations and maintain working capital reserves, but used
undistributed available cash from prior periods of approximately $0.6 million to
maintain the current level of distributions ($1.8 million) to the partners.
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, maintain working capital reserves, pay loan principal on
debt, and pay cash distributions to the investors.
<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: May 13, 1997
By: /s/ David J. Davis
-----------------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,491
<SECURITIES> 0
<RECEIVABLES> 1,755
<ALLOWANCES> 2,061
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 89,595
<DEPRECIATION> 52,438
<TOTAL-ASSETS> 57,947
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 25,014
<TOTAL-LIABILITY-AND-EQUITY> 57,947
<SALES> 0
<TOTAL-REVENUES> 5,825
<CGS> 0
<TOTAL-COSTS> 3,079
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 713
<INCOME-PRETAX> 1,922
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,922
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
