.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 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 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, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 89,818 $ 89,766
Less accumulated depreciation (53,934 ) (50,784 )
35,884 38,982
Equipment held for sale - 5,524
Net equipment 35,884 44,506
Cash and cash equivalents 8,938 2,142
Restricted cash 552 552
Due from affiliates - 357
Investments in unconsolidated special-purpose entities 9,286 9,616
Accounts and notes receivable, net of allowance for doubtful
accounts of $2,184 in 1997 and $2,329 in 1996 1,834 1,477
Deferred charges, net of accumulated amortization
of $442 in 1997 and $414 in 1996 162 219
Prepaid expenses and other assets 30 140
Total assets $ 56,686 $ 59,009
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 936 $ 1,027
Due to affiliates 413 304
Lessee deposits and reserve for repairs 2,792 3,519
Notes payable 29,250 29,250
Total liabilities 33,391 34,100
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of June 30, 1997 and December 31, 1996) 23,295 24,909
General Partner - -
Total partners' capital 23,295 24,909
Total liabilities and partners' capital $ 56,686 $ 59,009
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months Ended
Ended June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 3,423 $ 5,242 $ 6,808 $ 9,798
Interest and other income 617 100 717 131
Net gain on disposition of equipment 14 2,626 2,354 2,635
Total revenues 4,054 7,968 9,879 12,564
Expenses:
Depreciation and amortization 1,786 2,445 3,568 4,850
Marine equipment operating expense 42 486 350 1,040
Repairs and maintenance 432 2,372 680 3,660
Interest expense 713 750 1,426 1,501
Insurance expense to affiliates (18 ) 54 49 95
Other insurance expense 67 127 196 264
Management fees to affiliate 184 214 368 420
General and administrative expenses
to affiliates 122 164 357 286
Other general and administrative expenses 493 218 885 456
Provision for (recovery of) bad debt expense 122 599 (144 ) 1,508
Total expenses 3,943 7,429 7,735 14,080
Equity in net loss of unconsolidated special-
purpose entities (13 ) (123 ) (124 ) (270 )
Net income (loss) $ 98 $ 416 $ 2,020 $ (1,786 )
Partners' share of net income (loss):
Limited partners $ 7 $ 325 $ 1,838 $ (1,968 )
General Partner 91 91 182 182
Total $ 98 $ 416 $ 2,020 $ (1,786 )
Net income (loss) per weighted-average limited
partnership unit (8,628,420 units and 8,638,241
units as of June 30, 1997 and 1996, respectively) $ 0.00 $ 0.04 $ 0.21 $ (0.23 )
Cash distributions $ 1,817 $ 1,819 $ 3,634 $ 3,637
Cash distributions per weighted-average limited
partnership unit $ 0.20 $ 0.20 $ 0.40 $ 0.40
</TABLE>
See accompanying notes to financial statements
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1995 to June 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Partners' capital as of December 31, 1995 $ 36,475 $ - $ 36,475
Net (loss) income (4,482 ) 363 (4,119 )
Cash distributions (6,908 ) (363 ) (7,271 )
Repurchase of limited partnership units (176 ) - (176 )
Partners' capital as of December 31, 1996 24,909 - 24,909
Net income 1,838 182 2,020
Cash distributions (3,452 ) (182 ) (3,634 )
Partner's capital as of June 30, 1997 $ 23,295 $ - $ 23,295
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Operating activities:
Net income (loss) $ 2,020 $ (1,786 )
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Net gain on disposition of equipment (2,354 ) (2,635 )
Depreciation and amortization 3,568 4,850
Equity in net loss of unconsolidated special-purpose entities 124 270
Changes in operating assets and liabilities:
Restricted cash - (334 )
Due from affiliates 357 -
Accounts and notes receivable, net (357 ) 972
Prepaid expenses and other assets 110 155
Accounts payable and accrued expenses (671 ) 1,318
Due to affiliates 109 302
Lessee deposits and reserve for repairs 256 323
Net cash provided by operating activities 3,162 3,435
Investing activities:
Purchase of equipment and payments for capitalized improvements (1 ) (5,530 )
Payments of acquisition fees to affiliates - (247 )
Payments of lease negotiation fees to affiliates - (12 )
Distributions from unconsolidated special-purpose entities 206 17
Proceeds from disposition of equipment 7,063 8,460
Net cash provided by investing activities 7,268 2,688
Financing activities:
Repurchase of limited partnership units - (176 )
Cash distributions paid to limited partners (3,452 ) (3,455 )
Cash distributions paid to General Partner (182 ) (182 )
Net cash used in financing activities (3,634 ) (3,813 )
Net increase in cash and cash equivalents 6,796 2,310
Cash and cash equivalents at beginning of period 2,142 1,236
Cash and cash equivalents at end of period $ 8,938 $ 3,546
Supplemental information:
Interest paid $ 1,426 $ 1,501
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (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, 1997 and December 31, 1996, the
statements of operations for the three and six months ended June 30, 1997
and 1996, the statements of changes in partners' capital for the period
from December 31, 1995 to June 30, 1997, and the statements of cash flows
for the six months ended June 30, 1997 and 1996. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1996, on file at the Securities and
Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Cash Distributions
Cash distributions are recorded when paid and totaled $3.6 million and $3.6
million for the six months ended June 30, 1997 and 1996, respectively, and
$1.8 million and $1.8 million for the three months ended June 30, 1997 and
1996, respectively. Cash distributions to unitholders in excess of net
income are deemed to be a return of capital. Cash distributions to limited
partners of $1.6 million and $3.5 million, respectively, for the six months
ended June 30, 1997 and 1996, were deemed to be a return of capital. Cash
distributions related to the results from the second quarter of 1997, of
$1.2 million, were paid or are payable during July and August 1997,
depending on whether the individual elected to receive a monthly or
quarterly distribution check.
4. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities (USPEs)
included the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
35% interest in two commercial aircraft on direct
finance lease $ 4,131 $ 3,876
50% interest in an entity owning a bulk carrier 2,720 3,165
17% interest in a trust owning six commercial aircraft 2,435 2,575
Net investments $ 9,286 $ 9,616
5. Transactions with General Partner and Affiliates
Partnership management fees of $0.3 million and $0.3 million were payable
as of June 30, 1997 and December 31, 1996, respectively. The Partnership's
proportional share of USPE management fees of $25,000 and $8,000 were
payable as of June 30, 1997 and December 31, 1996, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
5. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the affiliated expenses incurred by the USPEs during 1997 and 1996
is listed in the following table (in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Management fees $ 22 $ 69 $ 42 $ 102
Insurance expense 19 13 50 31
Data processing and administrative
expenses 7 5 16 19
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine
insurance coverage for Partnership equipment and other insurance brokerage
services. TEI is an affiliate of the General Partner.
The balance due from affiliates as of December 31, 1996 included $0.4
million due from TEI for settlement of an insurance claim for one of the
Partnership's marine vessels that was sold in 1995. This settlement was
received by TEI in December 1996 and received by the Partnership in 1997.
6. Equipment
Components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Equipment held for operating leases:
Aircraft $ 43,314 $ 42,734
Marine containers 15,022 15,498
Rail equipment 14,872 14,867
Marine vessels 9,719 9,719
Trailers 6,891 6,948
89,818 89,766
Less accumulated depreciation (53,934 ) (50,784 )
35,884 38,982
Equipment held for sale - 5,524
Net equipment $ 35,884 $ 44,506
</TABLE>
Equipment held for sale is stated at the lower of the equipment's
depreciated cost or fair value less costs to sell and is subject to a
pending contract of sale. Equipment held for sale as of December 31, 1996
included a marine vessel, which was sold in the first quarter of 1997.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
6. Equipment (continued)
As of June 30, 1997, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 1 aircraft,
3 railcars, and 109 marine containers. The net carrying value of off-lease
equipment was $3.7 million as of June 30, 1997. As of December 31, 1996, 1
aircraft, 3 railcars, and 48 marine containers were off lease, with a net
carrying value of $3.9 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, a
wholly-owned subsidiary of the General Partner.
During the six months ended June 30, 1997, the Partnership sold or disposed
of marine containers, railcars, and a marine vessel with an aggregate net
book value of $5.7 million and unused drydock reserves of $1.0 million, for
aggregate proceeds of $7.1 million. During the six months ended June 30,
1996, the Partnership disposed of a mobile offshore drilling unit (rig),
marine containers, and railcars with an aggregate net book value of $5.8
million, for aggregate proceeds of $8.4 million.
7. Contingencies
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 (the
Koch action). 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 Koch action 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 Koch action to the state court and defendants have responded to this
motion. The federal court has not yet ruled on this motion, and defendants
do not need to respond to the complaint until after such motion is decided.
PLM International, Inc. believes that the allegations of the Koch action
are completely without merit and intends to defend this matter vigorously.
On June 5, 1997,PLM International, Inc. and the affiliates who are also
defendants in the Koch action were named as defendants in another purported
class action filed in the San Francisco Superior Court, San Francisco,
California, Case No. 987062 (the Romei action). The named plaintiff has
alleged the same facts and the same nine causes of action as is in the Koch
action (as described in the Partnership's Form 10-K for the year ended
December 31, 1996), plus five additional causes of action against all of
the defendants, as follows: violations of California Business and
Professions Code Sections 17200, et seq. for alleged unfair and deceptive
practices, a claim for constructive fraud, a claim for unjust enrichment, a
claim for violations of California Corporations Code Section 1507, and a
claim for treble damages under California Civil Code Section 3345. The
plaintiff is an investor in PLM Equipment Growth Fund V, and filed the
complaint on her own behalf and on behalf of all class members similarly
situated who invested in certain California limited partnerships
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
7. Contingencies (continued)
sponsored by PLM Securities, for which PLM Financial Services, Inc. acts as
the general partner, including the Partnership, PLM Equipment Growth Fund
V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund
VII.
PLM International, Inc. and the other defendants removed the Romei action
to the United States District Court for the Northern District of California
(Case No. C-97-2450 SC) on June 30, 1997, based on the federal court's
diversity jurisdiction. The defendants then filed a motion to compel
arbitration of the plaintiffs' claims, based on an agreement to arbitrate
contained in the PLM Equipment Growth Fund V limited partnership agreement,
to which plaintiff is a party. A hearing on this motion to compel
arbitration has been scheduled for August 22, 1997, although the district
court may decide the motion without such argument. PLM International, Inc.
believes that the allegations of the Romei action are completely without
merit and intends to defend this matter vigorously.
8. Subsequent Event
In July 1997, the Partnership paid the first annual principal payment of
$8.3 million of the outstanding notes payable.
(This space intentionally left blank.)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Partnership's Operating Results for the Three Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the second 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 June 30,
1997 1996
<S> <C> <C>
Aircraft $ 1,305 $ (198 )
Marine vessels 523 1,062
Rail equipment 443 406
Trailers 389 423
Marine containers 268 464
Mobile offshore drilling unit - 45
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.1 million and
$(0.2) million, respectively, for the second quarter of 1997, compared to $1.3
million and $1.5, respectively, during the same period in 1996. The decrease in
lease revenues in the second quarter of 1997 was due to the off-lease status of
an aircraft, compared to the same period in 1996 when the aircraft 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 second quarter in 1997. Direct expenses decreased due to costs
incurred in the second quarter of 1996 for repairs on one of the Partnership's
aircraft, which were not required in the same period of 1997. In addition,
repair costs for this aircraft that were accrued in 1996 were lower than
estimated. These accruals were reversed in 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.6
million and $0.1 million, respectively, for the second quarter of 1997, compared
to $2.0 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
January 1997. In addition, lease revenues decreased in the second quarter of
1997 for the remaining marine vessel due to lower re-lease rates as a result of
a softer bulk carrier vessel market.
Rail equipment: Railcar lease revenues and direct expenses were $0.9 million and
$0.5 million, respectively, for the second quarter of 1997 and 1996. Rail
equipment contributions remained the same due to the relative stability of the
railcar fleet.
Trailers: Trailer revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the second quarter of 1997 and 1996. Trailer
contributions remained the same due to the relative stability of the trailer
fleet.
Marine containers: Marine container lease revenues and direct expenses were $0.3
million and $3,000, respectively, for the second quarter of 1997, compared to
$0.5 million and $4,000, respectively, during the same quarter of 1996. Marine
container contributions decreased due to sales and dispositions over the past
twelve months and lower utilization in the second quarter of 1997, 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 any contribution in the second quarter of
1997. Revenues and expenses were $46,000 and $0, respectively, in the second
quarter of 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.4 million for the quarter ended June 30, 1997
decreased from $4.4 million for the same period in 1996. The variances are
explained as follows:
(1) A $0.7 million decrease in depreciation and amortization expenses from
1996 levels reflects the sale of certain assets during 1997 and 1996 and the use
of the double-declining balance depreciation method, which results in greater
depreciation in the first years an asset is owned.
(2) The $0.5 million decrease in bad debt expenses reflects the General
Partner's evaluation of the collectibility of receivables due from certain
lessees.
(3) A $0.2 million increase in administrative expenses from 1996 levels
resulted from additional legal fees needed to collect outstanding receivables
due to the Partnership from aircraft lessees.
(C) Interest and Other Income
Interest and other income increased $0.5 million in the second quarter of 1997,
compared to the same period in 1996, for the following reasons:
(1) The recognition in 1997 of $0.4 million in loss-of-hire and general
claim insurance recovery relating to generator repairs of one marine vessel sold
in 1994.
(2) An increase of $0.1 million in interest income due to higher cash
balances in the second quarter of 1997, compared to the same period in 1996.
(D) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the second quarter of 1997 totaled
$14,000, and resulted from the sale or disposal of marine containers and
trailers with an aggregate net book value of $0.1 million, for aggregate
proceeds of $0.1 million. For the second quarter of 1996, the $2.6 million net
gain on disposition of equipment resulted from the sale or disposal of marine
containers, a railcar, and a mobile offshore drilling unit with an aggregate net
book value of $5.6 million, for aggregate proceeds of $8.2 million.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of unconsolidated special-purpose entities (USPEs)
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft $ 175 $ (74 )
Marine vessels (188 ) (49 )
</TABLE>
Aircraft: As of June 30, 1997, the Partnership owned a 35% interest in a trust
that owns two commercial aircraft on direct finance lease and a 17% interest in
another trust that owns six commercial aircraft. As of June 30, 1996, the
Partnership owned a 17% interest in a trust that owns six commercial aircraft.
Aircraft revenues and expenses were $0.4 million and $0.2 million, respectively,
for the second 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 depreciation charges, which are greatest in the early
years due to the use of the double-declining balance method of depreciation. The
trust is depreciating this aircraft investment over a period of six years. The
investment in the trust owning the aircraft on direct finance lease was acquired
at the end of 1996; accordingly, there was no contribution in the second quarter
of 1996.
Marine vessel: As of June 30, 1997, the Partnership had a 50% interest in an
entity owning a marine vessel. Marine vessel revenues and expenses were $0.3
million and $0.5 million, respectively, for the second quarter of 1997, compared
to $0.4 million and $0.5 million, respectively, during the same quarter in 1996.
Lease revenues decreased in the second quarter of 1997 due to lower re-lease
rates as a result of a softer bulk carrier vessel market.
(F) Net Income
As a result of the foregoing, the Partnership's net income was $0.1 million for
the second quarter of 1997, compared to a net income of $0.4 million during the
same period of 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the second quarter of 1997 is not
necessarily indicative of future periods. In the second quarter of 1997, the
Partnership distributed $1.7 million to the limited partners, or $0.20 per
weighted-average limited partership unit.
Comparison of the Partnership's Operating Results for the Six Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the six months ended June 30, 1997, compared to the same period
of 1996. The following table presents lease revenues less direct expenses by
owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft $ 2,419 $ 326
Rail equipment 1,250 1,149
Trailers 776 861
Marine containers 669 773
Marine vessels 429 1,497
Mobile offshore drilling unit - 132
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $2.2 million and
$(0.2) million, respectively, for the six months ended June 30, 1997, compared
to $2.6 million and $2.3 million, respectively, during the same period of 1996.
The decrease in lease revenues in the six months ended June 30, 1997 was due to
the off-lease status of an aircraft, when compared to the same period in 1996
when the aircraft was on lease for the entire period. 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 six months ended June 30, 1997.
Direct expenses decreased due to costs incurred for repairs on an aircraft and
the overhaul of four engines on another aircraft in the six months ended June
30, 1996, which were not required in 1997. In addition, the repair costs for
this aircraft that were accrued in 1996 were lower than estimated. These
accruals were reversed in 1997.
Rail equipment: Railcar lease revenues and direct expenses were $1.8 million and
$0.6 million, respectively, for the six months ended June 30, 1997, compared to
$1.8 million and $0.7 million, respectively, during the same period of 1996.
Although the railcar fleet remained relatively the same size for both periods,
the increase in railcar contribution resulted from running repairs required on
certain of the railcars in the fleet during 1996, which were not needed during
1997.
Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the six months ended June 30, 1997, compared to $1.1
million and $0.2 million, respectively, during the same period of 1996. Lease
revenues decreased slightly in the six months ended June 30, 1997, compared to
the same period in 1996, due to lower utilization in the PLM-affiliated
short-term rental yards.
Marine containers: Marine container lease revenues and direct expenses were $0.7
million and $8,000, respectively, for the six months ended June 30, 1997,
compared to $0.8 million and $17,000, respectively, during the same period of
1996. Marine container contributions decreased due to sales and dispositions
over the past twelve months and lower utilization in the six months ended June
30, 1997, compared to the same period in 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.0
million and $0.6 million, respectively, for the six months ended June 30, 1997,
compared to $3.4 million and $1.9 million, respectively, during the same period
of 1996. Marine vessel contributions decreased due to the sale of a marine
vessel in January 1997. In addition, lease revenues decreased in the six months
ended June 30, 1997 for the remaining marine vessel, due to lower re-lease rates
as a result of a softer bulk carrier vessel market.
Mobile offshore drilling unit (rig): The rig was sold in the second quarter of
1996, resulting in the elimination of any contribution in the six months ended
June 30, 1997. Revenues and expenses were $0.1 million and $0, respectively, in
the six months ended June 30, 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $6.5 million for the six months ended June 30,
1997 decreased from $9.0 million for the same period in 1996. The variances
are explained as follows:
(1) A $1.3 million decrease in depreciation and amortization expenses from
1996 levels reflects the sale of certain assets during 1997 and 1996 and the use
of the double-declining balance depreciation method, which results in greater
depreciation in the first years an asset is owned.
(2) The $1.6 million decrease in bad debt expenses was due to the
following: A $0.8 million decrease in the provision was due to the receipt of
payments for unpaid invoices that were previously reserved, and a decrease of
$0.8 million in bad debt expenses resulted from the General Partner reserving
the uncollected outstanding receivables in 1996 for a certain lessee that
encountered financial difficulties. No provision for this lessee was required in
1997.
(3) A $0.1 million decrease in interest expense was due to a smaller
principal balance in the six months ended June 30, 1997, compared to the same
period in 1996. In November 1996, the Partnership paid down the outstanding debt
by $1.6 million.
(4) A $0.5 million increase in administrative expenses from 1996 levels
resulted from additional legal fees needed to collect outstanding receivables
due to the Partnership from aircraft lessees.
(C) Interest and Other Income
Interest and other income increased $0.6 million in the six months ended June
30, 1997, compared to the same period in 1996, due to the following:
(1) The recognition in 1997 of $0.4 million in loss-of-hire and general
claim insurance recovery relating to generator repairs on one marine vessel sold
in 1994.
(2) An increase of $0.1 million in interest income due to higher cash
balances compared to the same period in 1996.
(D) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 1997
totaled $2.4 million, which resulted from the sale or disposal of marine
containers, railcars, and a marine vessel, with an aggregate net book value of
$5.7 million and unused drydock reserves of $1.0 million, for aggregate proceeds
of $7.1 million. For the six months ended June 30, 1996, the $2.6 million net
gain on disposition of equipment resulted from the sale or disposal of marine
containers, railcars, and a mobile offshore drilling unit with an aggregate net
book value of $5.8 million, for aggregate proceeds of $8.4 million.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of unconsolidated special-purpose entities
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft $ 355 $ (139 )
Marine vessels (479 ) (131 )
</TABLE>
Aircraft: As of June 30, 1997, the Partnership owned a 35% interest in a trust
that owns two commercial aircraft on direct finance lease and a 17% interest in
another trust that owns six commercial aircraft. As of June 30, 1996, the
Partnership owned a 17% interest in a trust that owns six commercial aircraft.
Aircraft revenues and expenses were $0.9 million and $0.5 million, respectively,
for the six months ended June 30, 1997, compared to $0.6 million and $0.7
million, respectively, during the same period of 1996. The contribution for the
investment in a trust owning commercial aircraft on an operating lease is
significantly impacted by depreciation charges, which are greatest in the early
years due to the use of the double-declining balance method of depreciation. The
trust is depreciating this aircraft investment over a period of six years. The
investment in the trust owning the aircraft on direct finance lease was acquired
in the latter part of 1996, and thus it had no contribution for the six months
ended June 30, 1996.
Marine vessel: As of June 30, 1997, the Partnership had a 50% interest in an
entity owning a marine vessel. Marine vessel revenues and expenses were $0.5
million and $1.0 million, respectively, for the six months ended June 30, 1997,
compared to $0.8 million and $1.0 million, respectively, during the same period
in 1996. Lease revenue decreased in the six months ended June 30, 1997 due to
lower re-lease rates as a result of a softer bulk carrier vessel market.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $2.0 million for
the six months ended June 30, 1997, compared to a net loss of $1.8 million
during the same period of 1996. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the six months
ended June 30, 1997 is not necessarily indicative of future periods. In the six
months ended June 30, 1997, the Partnership distributed $3.5 million to the
limited partners, or $0.40 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
The Partnership has ended its reinvestment phase pursuant to its limited
partnership agreement. Due to this, the Partnership is prohibited from borrowing
funds through its short-term joint $50.0 million credit facility.
For the six months ended June 30, 1997, the Partnership generated $3.4 million
in operating cash (net cash provided by operating activities plus distributions
from unconsolidated special-purpose entities) to meet its operating obligations
and maintain the current level of distributions (total for the six months ended
June 30, 1997 of approximately $3.6 million) to the partners, but also used
undistributed available cash from prior periods of approximately $0.2 million.
The cash distributions to be paid in August 1997 will be reduced from an annual
rate of 4% to an annual rate of 3% to more closely reflect current and expected
net cash flows from operations. In the third quarter of 1997, the cash
distribution will be reduced from an annual rate of 3% to an annual rate of 2%
to more closely reflect current and expected net cash flows from operations.
Continued weak market conditions in certain equipment sectors and equipment
sales have reduced overall lease revenues in the Partnership to the extent that
reductions in distribution levels are now necessary. In addition, with the
Partnership expected to enter the active liquidation phase in the near future,
the size of the Partnership's remaining equipment portfolio and, in turn, the
amount of net cash flows from operations will continue to become progressively
smaller as assets are sold. Although distribution levels will be reduced,
significant asset sales may result in special distributions to unitholders.
In July 1997, the Partnership paid the first annual principal payment of $8.3
million of the outstanding notes payable.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is in its holding or passive liquidation phase, the
General Partner will be seeking to selectively re-lease or sell assets as the
existing leases expire. Sale decisions will cause the operating performance of
the Partnership to decline over the remainder of its life. The General Partner
anticipates that the liquidation of Partnership assets will be completed by the
planned 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.
(IV) FORWARD-LOOKING INFORMATION:
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that contain risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
(This space intentionally left blank.)
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
First amendment to the amended and restated limited
partnership agreement.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND IV
By: PLM Financial Services, Inc.
General Partner
Date: August 7, 1997
By: /s/ Richard Brock
---------------------------------
Richard Brock
Vice President
and Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,938
<SECURITIES> 0
<RECEIVABLES> 1,834
<ALLOWANCES> 2,184
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 89,818
<DEPRECIATION> 53,934
<TOTAL-ASSETS> 56,686
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,295
<TOTAL-LIABILITY-AND-EQUITY> 56,686
<SALES> 0
<TOTAL-REVENUES> 9,879
<CGS> 0
<TOTAL-COSTS> 6,309
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,426
<INCOME-PRETAX> 2,020
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,020
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PLM EQUIPMENT GROWTH FUND IV
This First Amendment ("Amendment") to the Amended and Restated Limited
Partnership Agreement ("Agreement") of PLM Equipment Growth Fund IV
("Partnership") is executed as of November 21, 1996, by its general partner, PLM
Financial Services, Inc., a Delaware corporation ("General Partner"), pursuant
to Article XVIII of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Agreement.
RECITALS
The Partners entered into a Limited Partnership Agreement as of March
13, 1989, and an Amended and Restated Limited Partnership Agreement as of May
22, 1989.
The General Partner now amends the Agreement, pursuant to Article
XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's representations and obligations, to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General
Partner represents, warrants and agrees, and will take all action to ensure,
that this Amendment does not, and will not, detrimentally affect the Cash
Distributions of the Limited Partners or assignees or the management of the
Partnership by the General Partner.
Now, therefor, the Agreement is amended as follows:
1. Section 6.02 is amended to read in its entirety as follows:
"The General Partner shall not transfer its interest as General Partner
in the Partnership (which transfer shall be deemed as "withdrawal" of the
General Partner for purposes of Section 9.02) or its interest in the
Partnership's capital, earnings or assets (except in connection with the pledge
of the General Partner's assets or right in connection with loans or other
indebtedness) except (a) upon the approval of a majority in interest of the
Limited Partners, or (b) to an Affiliate upon its merger, consolidation with
another person or its transfer pursuant to a reorganization of all or
substantially all of its assets to another person, and the assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such successor or transferee shall on the date of such transfer, merger,
consolidation or reorganization assume all of the duties and obligations of the
General Partner set forth in this Agreement."
IN WITNESS WHEREOF, the General Partner has duly executed this
Amendment as of November 21, 1996.
PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners
By: /s/ J. Michael Allgood
------------------------
Vice President and Chief Financial Officer
