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 33-32258
-----------------------
PLM EQUIPMENT GROWTH FUND V
(Exact name of registrant as specified in its charter)
California 94-3104548
(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 V
(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 $ 156,076 $ 159,314
Less accumulated depreciation (76,859 ) (85,564 )
------------------------------------
Net Equipment 79,217 73,750
Cash and cash equivalents 4,214 5,583
Restricted cash 76 223
Investments in unconsolidated special purpose entities 9,953 16,158
Accounts and note receivable, net of allowance for
doubtful accounts of $130 in 1996 and $54 in 1995 2,725 2,583
Net Investment in direct finance lease 2,376 2,637
Deferred charges, net of accumulated amortization of
$1,370 in 1996 and $1,202 in 1995 784 512
Prepaid expenses and other assets 231 193
------------------------------------
Total assets $ 99,576 $ 101,639
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 875 $ 890
Due to affiliates, net 807 1,116
Prepaid deposits and reserve for repairs 3,535 3,616
Note payable 38,000 38,000
-------------------------------------
Total liabilities 43,217 43,622
Partners' capital:
Limited Partners (9,169,019 Depositary Units at September 30,
1996 and 9,175,944 at December 31, 1995) 56,359 58,017
General Partner -- --
-------------------------------------
Total partners' capital 56,359 58,017
-------------------------------------
Total liabilities and partners' capital $ 99,576 $ 101,639
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(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 $ 5,528 $ 9,113 $ 20,648 $ 26,130
Interest and other income 532 201 1,162 805
Net gain on disposition of equipment 3,118 174 13,807 2,957
--------------------------------------------------------------
Total revenues 9,178 9,488 35,617 29,892
Expenses:
Depreciation and amortization 3,404 4,490 9,633 12,617
Management fees to affiliate 330 468 1,076 1,354
Repairs and maintenance 710 1,012 1,865 3,228
Interest expense 686 771 2,127 2,317
Marine equipment operating expenses 1,250 2,165 4,887 5,760
Insurance expense to affiliate 184 241 589 756
Other insurance expense 177 202 781 765
General and administrative
expenses to affiliates 235 116 591 370
Other general and administrative expenses 206 176 583 414
Provision for (recovery of) bad debts 48 (31 ) 77 (56 )
--------------------------------------------------------------
Total expenses 7,230 9,610 22,209 27,525
--------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special purpose entities 4 -- (498 ) --
--------------------------------------------------------------
Net income (loss) $ 1,952 $ (122 ) $ 12,910 $ 2,367
==============================================================
Partners' share of net income (loss):
Limited Partners $ 1,711 $ (363 ) $ 12,186 $ 1,641
General Partner 241 241 724 726
--------------------------------------------------------------
Total $ 1,952 $ (122 ) $ 12,910 $ 2,367
==============================================================
Net income (loss) per Depositary Unit
(9,169,019 Units in 1996 and 9,175,944
in 1995) $ 0.19 $ (0.04 ) $ 1.33 $ 0.18
==============================================================
Cash distributions $ 4,834 $ 4,831 $ 14,489 $ 14,510
==============================================================
Cash distributions per Depositary Unit $ 0.50 $ 0.50 $ 1.50 $ 1.50
==============================================================
</TABLE>
See accompanying notes to financial
statements.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1994 to September 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
----------------------------------------------------
<S> <C> <C> <C>
Partners' capital at December 31, 1994 $ 75,893 $ -- $ 75,893
Net income 1,077 968 2,045
Repurchase of Depositary Units (579 ) -- (579 )
Cash distributions (18,374 ) (968 ) (19,342 )
-----------------------------------------------------
Partners' capital at December 31, 1995 58,017 -- 58,017
Net income 12,186 724 12,910
Repurchase of Depositary Units (79 ) -- (79 )
Cash distributions (13,765 ) (724 ) (14,489 )
-----------------------------------------------------
Partners' capital at September 30, 1996 $ 56,359 $ -- $ 56,359
=====================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
1996 1995
-------------------------------------
<S> <C> <C>
Operating activities:
Net income $ 12,910 $ 2,367
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 9,633 12,617
Net gain on disposition of equipment (13,807 ) (2,957 )
Cash distributions from unconsolidated special purpose entities
in excess of loss 4,151 --
Changes in operating assets and liabilities:
Increase in restricted cash 147 (101 )
Accounts and note receivable, net (142 ) 1,649
Prepaid expenses and other assets (38 ) 69
Due to affiliates, net (306 ) 824
Accounts payable and accrued expenses (9 ) 728
Prepaid deposits and reserve for repairs (81 ) 1,001
-------------------------------------
Cash provided by operating activities 12,458 16,197
-------------------------------------
Investing activities:
Proceeds from disposition of equipment 29,028 13,422
Payments for purchase of equipment and capital
improvements (31,235 ) (22,662 )
Payments of acquisition-related fees to affiliate (1,387 ) (1,004 )
Payments of lease negotiation fees to affiliate (308 ) (223 )
Investment in equipment purchased and placed in
unconsolidated special purpose entities (5,919 ) --
Liquidation of investment in equipment placed in
unconsolidated special purpose entities 10,455 --
Finance lease payments received 240 --
-------------------------------------
-------------------------------------
Cash provided by (used in) investing activities 874 (10,467 )
-------------------------------------
Financing activities:
Proceeds from short term note payable 5,610 --
Payments of short-term note payable (5,610 ) --
Cash distributions paid to an affiliate (724 ) (726 )
Cash distributions paid to the limited partners (13,765 ) (13,784 )
Payments for loan costs (133 ) --
Repurchases of depositary units (79 ) (579 )
-------------------------------------
Cash used in financing activities (14,701 ) (15,089 )
-------------------------------------
Net decrease in cash and cash equivalents (1,369 ) (9,359 )
Cash and cash equivalents at beginning of period 5,583 20,200
-------------------------------------
Cash and cash equivalents at end of period $ 4,214 $ 10,841
=====================================
Supplemental information:
Interest paid $ 2,157 $ 1,436
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(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
V (the "Partnership") as of September 30, 1996, the statements of operations for
the three and nine months ended September 30, 1996 and 1995, the statements of
cash flows for the nine months ending September 30, 1996 and 1995, and the
statements of changes in partners' capital for the period December 31, 1994 to
September 30, 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, 1995, on file at the
Securities and Exchange Commission.
2. Repurchase of Depositary Units
At December 31, 1995, the Partnership agreed to repurchase approximately 7,900
Depositary Units for an aggregate purchase price of $90,000. As of September 30,
1996, the Partnership repurchased 6,925 Depositary Units for $79,000 The General
Partner anticipates that the remaining Units will be repurchased during the next
three months.
3. Investments in Unconsolidated Special Purpose Entities
During the second half of 1995, the Partnership began to increase the level of
its participation in the ownership of large-ticket transportation assets to be
owned and operated jointly with affiliated programs. This trend continued during
the early months of 1996.
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 the equity method of accounting the
Partnership's proportionate share is presented as a single net amount, equity in
net income (loss) of unconsolidated special purpose entities, under the previous
method, the Partnership's statement of operations 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.
During the nine months ended September 30, 1996, the Partnership purchased a
partial beneficial interest in a trust owning five commercial aircraft for $5.6
million and incurred acquisition and lease negotiation fees of $0.3 million to
PLM Transportation Equipment Corporation (TEC), an affiliate of the General
Partner.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
3. Investments in Unconsolidated Special Purpose Entities (continues)
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,
Ownership Equipment 1996 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50% Bulk carrier $ 3,225 $ 3,778
50% Product tanker 2,308 2,841
17% Two trusts owning three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables 4,412 5,334
14% Trust that owns seven commercial aircraft (see below note) 8 4,205
---------------------------------
Net investments $ 9,953 $ 16,158
=================================
</TABLE>
The Partnership had beneficial interests in two Unconsolidated Special Purpose
Entities that own multiple aircraft (the "Trusts"). These Trusts contained
certain provisions, under certain circumstances, for allowing the removal of
specific aircraft to the beneficial owners. A renegotiation of the Partnership's
senior loan agreement during the third quarter of 1996 (see note 6), required
the Partnership to remove from the Trusts the aircraft designated to the
Partnership for loan collateral purposes. As of September 30, 1996, the two
Boeing 737 aircraft, one of which was purchased during 1995 and the other which
was purchased during 1996, are now reported as owned equipment by the
Partnership.
4. Cash Distributions
Cash distributions are recorded when paid and totaled $4.8 million and
$14.5 million for the three and nine months ended September 30, 1996,
respectively. Cash distributions to Unit holders in excess of net income are
considered to represent a return of capital on a Generally Accepted Accounting
Principle (GAAP) basis. Cash distributions to the Limited Partners of $1.6
million and $12.1 million for nine months ended September 30, 1996 and 1995,
respectively, were deemed to be a return of capital. Cash distributions related
to the third quarter of 1996 results of $3.2 million were paid or are payable
during October and November, depending on whether the individual unit holder
elected to receive a monthly or quarterly distribution check.
5. Equipment
Owned equipment held for operating leases is stated at cost. The components
of equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------------------------
<S> <C> <C>
Marine vessels $ 52,259 $ 52,259
Mobile offshore drilling units -- 25,204
Marine containers 24,967 28,278
Aircraft 57,803 32,903
Rail equipment 11,358 11,041
Trailers 9,689 9,629
------------------------------------
156,076 159,314
Less accumulated depreciation (76,859 ) (85,564 )
====================================
Net equipment $ 79,217 $ 73,750
====================================
</TABLE>
As of September 30, 1996, all of the Partnership's equipment was on lease or
operating in PLM-affiliated short-term trailer rental yards except for 12
railcars and 2 trailers with an aggregate net book value of $0.1 million. As of
December 31, 1995, all of the Partnership's equipment was on lease or operating
in PLM-affiliated short-term trailer rental yards.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
5. Equipment (continued)
During the nine months ended September 30, 1996, the Partnership purchased four
commercial aircraft for $20.9 million and incurred acquisition and lease
negotiation fees of $1.1 million to TEC. Also, during the quarter ending
September 30 , 1996, two commercial aircraft which were part of the
Partnership's investment in a partial beneficial interest in a trust (see note
3) were transferred to the Partnership's owned equipment held for operating
lease.
During the nine months ended September 30, 1996, the Partnership disposed of 801
marine containers, 2 aircraft engines and 4 railcars with an aggregate net book
value of $4.5 million for proceeds of $7.7 million. The Partnership also sold a
mobile offshore drilling unit with a net book value of $10.7 million for
proceeds of $21.3 million.
During the nine months ended September 30, 1995, the Partnership disposed of
1,339 marine containers, one railcar, and one marine vessel with a net book
value of $5.8 million for proceeds of $5.7 million. The Partnership also sold 97
railcars, which were held for sale as of December 31, 1994, with a net book
value of $1.9 million at the date of sale for proceeds of $2.6 million and one
marine vessel, which was also held for sale, with a net book value of $4.0
million at the date of sale for proceeds of $5.1 million. Included in the gain
on sale of the marine vessels, is the unused portion of accrued dry docking and
commissions related to the sale, a net of $1.2 million.
6. Debt
On September 26, 1996, the existing senior loan agreement was amended and
restated to reduce the interest rate, to grant increased flexibility in
allowable collateral, to pledge additional equipment to the lenders and to amend
the loan repayment schedule from 16 consecutive equal quarterly installments to
20 consecutive quarterly installments with lower principle payments for the
first four payments. The Partnership incurred a loan amendment fee of $133,000
to the lender in connection with the restatement of this loan.
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 IV, 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 Inc., 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 the
Partnership or Fund I, 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 on May 31, 1996, to expire on May 23, 1997. The Committed
Bridge Facility also provides for a $5 million Letter of Credit Facility for the
eligible borrowers. Outstanding borrowings by Fund I, TECAI, AFG or PLM
Equipment Growth Funds III through VII reduce the amount available to each other
under the Committed Bridge Facility. Individual borrowings may be outstanding
for no more than 179 days, with all advances due no later than May 23, 1997. The
Committed Bridge Facility prohibits the Partnership from incurring any
additional indebtedness. Interest accrues at either the prime rate or adjusted
LIBOR plus 2.5% at the borrowers option and is set at the time of an advance of
funds. Borrowings by the Partnership are guaranteed by the General Partner. As
of September 30, 1996, AFG had $27,791,000 in outstanding borrowings and neither
the Partnership, Fund I, TECAI nor any of the other programs had any outstanding
borrowings.
On October 31, 1996, the General Partner amended this agreement (for details
refer to "Liquidity and Capital Resources").
<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 and aircraft engines $ 1,206 $ 1,463
Marine vessels 544 959
Trailers 351 368
Rail equipment 440 360
Marine containers 675 1,073
Mobile offshore drilling unit -- 636
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and
$10,000, respectively, for the three months ended September 30, 1996, compared
to $1.5 million and $8,000, respectively during the same quarter of 1995. The
decrease in aircraft contribution was due to the sale of two aircraft engines
during the third quarter of 1996. These engines were on lease for the entire
quarter during 1995 compared to being on lease for only part of the third
quarter of 1996;
Marine vessels: Marine vessel lease revenues and direct expenses were $2.5
million and $2.0 million, respectively, for the three months ended 1996,
compared to $3.6 and $2.6 million, respectively during the same quarter of 1995.
The decrease in marine vessel contribution was due primarily to two marine
vessels which are operating under a time charter during 1996 compared to
operating under a voyage charter during 1995. Marine vessels typically earn a
higher lease rate while under a voyage charter when compared to a time charter;
Trailers: Trailer lease revenues and direct expenses were $0.5 million and
$163,000, respectively, for the three months ended 1996, compared to $0.4
million and $42,000, respectively during the same quarter of 1995. The trailer
fleet remained virtually the same for both periods, however, over the past
twelve months the number of trailers in the PLM affiliated short-term rental
yards has increased due to term leases which expired. These trailers are now
earning a higher utilization rate while in the rental yards compared to the
fixed term leases. Due to the increase of trailers in the PLM affiliated
short-term rental yards, repairs to maintain these trailers in running condition
has also increased;
Rail equipment: Rail equipment lease revenues and direct expenses were $0.6
million and $164,000, respectively, for the three months ended 1996, compared to
$0.6 million and $242,000, respectively during the same quarter of 1995.
Although the railcar fleet remained relatively the same size for both quarters,
the increase in railcar contribution resulted from a decrease in running repairs
during 1996 which were required on certain of the railcars in the fleet during
1995;
Marine containers: Marine container lease revenues and direct expenses were $0.7
million and $5,000, respectively, for the three months ended 1996, compared to
$1.1 million and $13,000, respectively during the same quarter of 1995. The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and dispositions. The result of this declining
fleet has been a decrease in marine container net contribution.
Mobile offshore drilling unit: Mobile offshore drilling unit (MODU) lease
revenues and direct expenses were $0 for the three months ended 1996, compared
to $0.6 million and $0, respectively during the same quarter of 1995. The
decrease in the MODU contribution was due to the sale of this equipment during
the later part of the second quarter of 1996;
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $4.9 million for the quarter ended September 30,
1996, decreased from $5.4 million for the same period in 1995 due to a $0.5
million decrease in depreciation and amortization expenses from 1995 levels
reflecting the sale of certain assets during 1996 and 1995, and the double
declining balance method of depreciation;
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the third quarter of 1996 totaled $3.1
million which resulted mainly from the sale of two aircraft engines with a net
book value of $3.1 million, for proceeds of $6.1 million. The remaining gain
resulted from the sale or disposal of 260 marine containers with a net book
value of $0.6 million for proceeds of $0.7 million. For the third quarter of
1995, the $0.2 million net gain on disposition of equipment resulted from the
sale or disposal of 535 marine containers with a net book value of $0.7 million
for proceeds of $0.9 million
(D) Interest and other income
Interest and other income increased $0.3 million during the third quarter of
1996 due primarily to a business interruption claim of $0.2 million which was
received during 1996 and interest earned from the finance lease which was not in
place during 1995.
(E) Equity in net income (loss) of unconsolidated special purpose entities
represents net income 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, rotable components, and aircraft engines $ (149 ) $ (71 )
Marine vessels 153 98
</TABLE>
Aircraft, rotable components, and aircraft engines: As of September 30 1996, the
Partnership has a partial beneficial interest in two trusts which own 3
commercial aircraft, 2 aircraft engines and a portfolio of aircraft rotables.
The Partnership also had purchased a partial beneficial interest in two
additional trusts during 1996 which were transferred into equipment held for
operating lease during the later part of the third quarter of 1996 (see Note 3
and 4 to the financial statements). Revenues earned by these trusts during the
third quarter of 1996 of $1.0 million were offset by depreciation and
amortization expense, management fees and administrative costs of $1.2 million.
As of September 30 1995, the Partnership had a partial beneficial interest in
two trusts which own 3 commercial aircraft, 2 aircraft engines and a portfolio
of aircraft rotables which was purchased at the end of the third quarter 1995.
Revenues earned by these trusts during the third quarter of 1995 of $0.1 million
were offset by depreciation and amortization expense, and management fees of
$0.2 million.
Marine vessels: As of September 30, 1996, the Partnership owns a 50%-interest in
two marine vessels. The revenues generated by this equipment decreased $0.1
million when compared to the same period of 1995 due to one of the marine
vessels switching to a time charter during 1996 from a voyage charter during the
same period of 1995. Marine operating expenses also decreased $0.1 million as a
result of change in the lease. Marine vessels typically earn a higher lease rate
and incur higher marine operating expenses while operating under a voyage
charter when compared to a time charter. Depreciation expense decreased $0.1
million due to the double-declining balance method of depreciation.
(F) Net Income (loss)
As a result of the foregoing, the Partnership's net income of $2.0 million for
the third quarter of 1996, increased from net loss of $0.1 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 1996 is not necessarily indicative of future periods. In
the third quarter 1996, the Partnership distributed $4.6 million to the
Unitholders, or $0.50 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 and aircraft engines $ 3,824 $ 3,320
Marine vessels 2,860 2,988
Trailers 1,111 1,088
Rail equipment 1,264 1,376
Marine containers 2,449 3,120
Mobile offshore drilling unit 1,061 1,868
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $3.9 million and
$31,000, respectively, for the nine months ended 1996, compared to $3.3 million
and $23,000, respectively during the same period of 1995. The increase was due
to the purchase of nine aircraft during the later half of the second quarter
1995. This equipment was on lease for the entire nine months ended September 30,
1996 compared to being on lease for only four months during 1995;
Marine vessels: Marine vessel lease revenues and direct expenses were $10.1
million and $7.3 million, respectively, for the nine months ended 1996, compared
to $10.7 and $7.7 million, respectively during the same period of 1995. The
decrease in marine vessel contribution was due primarily to two marine vessels
which were operating under a voyage charter during the first six months of 1996
switching to a time charter during the third quarter of 1996 compared to
operating under a time charter during 1995. Marine vessels typically earn a
higher lease rate while under a voyage charter when compared to a time charter.
The decrease in net contributions was also attributable to the sale of one of
the Partnership's marine vessels during the later part of the second quarter of
1995;
Trailers: Trailer lease revenues and direct expenses were $1.4 million and $0.3
million, respectively, for the nine months ended 1996, compared to $1.2 and
$86,000, respectively during the same period of 1995. The trailer fleet remained
virtually the same for both periods, however, over the past twelve months the
number of trailers in the PLM affiliated short-term rental yards has increased
due to term leases which expired. These trailers are now earning a higher
utilization rate while in the rental yards compared to the fixed term leases.
Due to the increase of trailers in the PLM affiliated short-term rental yards,
repairs to maintain these trailers in running condition has also increased;
Rail equipment: Rail equipment lease revenues and direct expenses were $1.8
million and $0.5 million, respectively, for the nine months ended 1996, compared
to $1.9 million and $0.5 million, respectively during the same period of 1995.
The decrease in railcar contribution is due to the sale of 98 railcars during
the later month of the second quarter of 1995.
Marine containers: Marine container lease revenues and direct expenses were $2.5
million and $20,000, respectively, for the nine months ended 1996, compared to
$3.2 million and $38,000, respectively during the same period of 1995. The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and dispositions. The result of this declining
fleet has resulted in a decrease in marine container net contribution.
Mobile offshore drilling unit: Mobile offshore drilling unit (MODU) lease
revenues and direct expenses were $1.1 million and $1,000, respectively, for the
nine months ended 1996, compared to $1.9 million and $2,000, respectively during
the same quarter of 1995. The decrease in the MODU contribution was due to the
sale of this equipment during the later part of the second quarter of 1996;
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $14.1 million for the nine months ended September 30,
1996, decreased from $15.8 million for the same period in 1995 due to a $1.8
million decrease in depreciation and amortization expenses from 1995 levels
reflecting the sale of certain assets during 1996 and 1995. The double declining
balance method of depreciation was offset, in part, by the purchase of nine
aircraft during the later half of the second quarter 1995.
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the nine months ended September 30,
1996 totaled $13.8 million which resulted from the sale of a MODU with a net
book value of $10.7 million for proceeds of $21.3 million, 2 aircraft engines,
801 marine containers and 4 railcars with an aggregate net book value of $4.5
million for proceeds of $7.7 million. Net gain on disposition of equipment
during the nine months ended September 30, 1995, was realized on the disposal of
1,339 marine containers, two marine vessels, and 98 railcars with an aggregate
net book value of $11.7 million for proceeds of $13.4 million. Included in the
gain on sale of one of the marine vessels, is the unused portion of dry docking
reserves and commissions in the net amount of $1.2 million.
(D) Interest and other income
Interest and other income increased $357,000 during the nine months ended
September 30, 1996 due primarily to a business interruption claim of $0.3
million which was received during 1996 and interest earned from the finance
lease which was not in place during 1995. This increase was offset by a decrease
in interest income earned on cash investments during 1996 due to lower cash
available for investment.
(E) Equity in net loss of unconsolidated special purpose entities represents net
loss generated from the operation of jointly-owned assets accounted for under
the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1996 1995
----------------------------
<S> <C> <C>
Aircraft, rotable components, and aircraft engines $ (393 ) $ (71 )
Marine vessels (105 ) 533
</TABLE>
Aircraft, rotable components, and aircraft engines: As of September 30 1996, the
Partnership has a partial beneficial interest in two trusts which own 3
commercial aircraft, 2 aircraft engines and a portfolio of aircraft rotables.
The Partnership also had purchased a partial beneficial interest in two
additional trusts during 1996 which were transferred into equipment held for
operating lease during the later part of the third quarter of 1996 (see Note 3
and 4 to the financial statements). Revenues earned by these trusts during the
nine months ended September 30, 1996 of $2.8 million were offset by depreciation
and amortization expense, management fees and administrative costs of $3.2
million. As of September 30 1995, the Partnership has a partial beneficial
interest in two trusts which own 3 commercial aircraft, 2 aircraft engines and a
portfolio of aircraft rotables which was purchased at the end of the third
quarter 1995. Revenues earned by these trusts during the same period 1995 of
$0.1 million were offset by depreciation and amortization expense, and
management fees of $0.2 million.
Marine vessels: As of September 30, 1996, the Partnership owns a 50%-interest in
two marine vessels. The revenues generated by this equipment decreased $1.2
million when compared to the same period of 1995 due to one of the marine
vessels switching to a time charter during 1996 from a voyage charter during the
same period of 1995. Marine operating expenses decreased $0.4 when compare to
the same period of 1995 also due to the one marine vessel which switched to a
time charter during 1996 from a voyage charter during the same period of 1995.
Depreciation expense decreased $0.2 million due to the double-declining balance
method of depreciation..
(F) Net Income
As a result of the foregoing, the Partnership's net income of $12.9 million for
the nine months ended September 30, 1996, increased from net income of $2.4
million during the same period in 1995. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
during the duration of the Partnership is subject to many factors and the
Partnership's performance in the nine months ended September 30. 1996 is not
necessarily indicative of future periods. In the nine months ended September 30,
1996, the Partnership distributed $13.8 million to the Unitholders, or $1.50 per
Depositary Unit.
(II) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, DISTRIBUTIONS, AND
UNIT REDEMPTION PLAN
The Partnership purchased its initial equipment portfolio with capital raised
from its initial equity offering, and permanent debt financing of $38 million.
No further capital contributions from original partners are permitted under the
terms of the Partnership's Limited Partnership Agreement. The Partnership's
total outstanding debt, currently $38.0 million, can only be increased by a
maximum of $7.0 million subject to specific covenants in the existing debt
agreement. 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.
On September 26, 1996, the existing senior loan agreement was amended and
restated to reduce the interest rate, to grant increased flexibility in
allowable collateral, to pledge additional equipment to the lenders and to amend
the loan repayment schedule from 16 consecutive equal quarterly installments to
20 consecutive quarterly installments with lower principle payments for the
first four payments. The Partnership incurred a loan amendment fee of $133,000
to the lender in connection with the restatement of this loan.
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 IV, 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 Inc., 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 the Partnership or Fund I,
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 on
October 31, 1996, to expire on October 31, 1997 and increased the available
borrowings for AFG to $50 million. The Partnership, TECAI, Fund I and the other
partnerships collectively 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 11, 1996, AFG had $39,032,522
in outstanding borrowings and neither the Partnership, Fund I. TECAI nor any of
the other programs had any outstanding borrowings.
For the nine months ended September 30, 1996, the Partnership generated
sufficient operating cash to meet its operating obligations and make cash
distributions (total for nine months ending September 30, 1996 of approximately
$14.5 million) to the partners, but used undistributed available cash from prior
periods of $2.0 million. However, based on current operating lease revenues and
near-term trends, the General Partner made the decision to reduce the level of
cash distribution from 10% to 8% for the quarter ended September 30 1996. Cash
distributions will remain at the reduced rate until operating lease revenues and
near-term trends show improvement. During the nine months ended September 30,
1996, the General Partner sold equipment for $29.0 million while reinvesting
approximately $32.9 million (including capital improvements and fees).
Beginning January 1, 1994, the Partnership became obligated, under certain
conditions, to redeem up to 2% of the outstanding Depositary Units each year.
The purchase price to be offered for such outstanding Units will be equal to
110% of the unrecovered principal attributed to the Units - where unrecovered
principal is defined as the excess of the capital contribution attributable to a
Unit over the distributions from any source paid with respect to that Unit. At
December 31, 1995, the Partnership agreed to purchase approximately 7,900 Units
for an aggregate price of approximately $90,000. At September 30, 1996, the
Partnership repurchased 6,925 Depositary Units for $79,000. The General Partner
anticipates that the remaining Units will be repurchased during the next three
months with funds generated from operations.
(III) 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 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.
(this space intentionally left blank)
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
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 V
By: PLM Financial Services, Inc.
General Partner
Date: November 11, 1996 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
-15-
<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> 4,214
<SECURITIES> 0
<RECEIVABLES> 2,725
<ALLOWANCES> 130
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 156,076
<DEPRECIATION> (76,859)
<TOTAL-ASSETS> 99,576
<CURRENT-LIABILITIES> 875
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 56,359
<TOTAL-LIABILITY-AND-EQUITY> 99,576
<SALES> 0
<TOTAL-REVENUES> 35,617
<CGS> 0
<TOTAL-COSTS> 20,005
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 77
<INTEREST-EXPENSE> 2,127
<INCOME-PRETAX> 12,910
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,910
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
