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, 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 33-32258
-----------------------
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 ____
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-----------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 126,471 $ 155,004
Less accumulated depreciation (73,333 ) (81,541 )
-----------------------------------
53,138 73,463
Equipment held for sale 5,627 -
-----------------------------------
Net equipment 58,765 73,463
Cash and cash equivalents 1,697 4,662
Restricted cash 150 553
Investments in unconsolidated special-purpose entities 19,837 12,673
Accounts and note receivable, net of allowance for doubtful
accounts of $823 in 1997 and $236 in 1996 4,387 3,508
Net investment in direct finance leases 1,973 2,282
Prepaid expenses and other assets 67 557
Deferred charges, net of accumulated amortization of
$877 in 1997 and $684 in 1996 507 721
-----------------------------------
Total assets $ 87,383 $ 98,419
===================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 1,070 $ 1,060
Due to affiliates 612 699
Lessee deposits and reserve for repairs 2,631 3,901
Short-term note payable 9,110 2,463
Note payable 33,500 38,000
-----------------------------------
Total liabilities 46,923 46,123
-----------------------------------
Partners' capital:
Limited partners (9,086,608 depositary units as of September
30,1997 and 9,169,019 as of December 31, 1996) 40,460 52,296
General Partner - -
-----------------------------------
Total partners' capital 40,460 52,296
-----------------------------------
Total liabilities and partners' capital $ 87,383 $ 98,419
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 7,218 $ 5,634 $ 23,556 $ 20,979
Interest and other income 61 426 190 831
Net gain on disposition of equipment 193 3,118 2,418 13,807
--------------------------------------------------------------
Total revenues 7,472 9,178 26,164 35,617
--------------------------------------------------------------
Expenses:
Depreciation and amortization 3,994 3,404 12,122 9,633
Marine equipment operating expense 1,277 1,250 5,289 4,887
Repairs and maintenance 787 710 2,208 1,865
Interest expense 618 686 1,935 2,127
Insurance expense to affiliate 146 184 582 589
Other insurance expense 290 177 742 781
Management fees to affiliate 374 330 1,149 1,076
General and administrative expenses
to affiliates 282 235 748 591
Other general and administrative expenses 158 206 497 583
Provision for bad debt 209 48 588 77
--------------------------------------------------------------
Total expenses 8,135 7,230 25,860 22,209
--------------------------------------------------------------
Equity in net income (loss) of unconsol-
idated special-purpose entities (189 ) 4 165 (498 )
--------------------------------------------------------------
Net income (loss) $ (852 ) $ 1,952 $ 469 $ 12,910
==============================================================
Partners' share of net income (loss):
Limited partners $ (1,044 ) $ 1,711 $ (107 ) $ 12,186
General Partner 192 241 576 724
--------------------------------------------------------------
Total $ (852 ) $ 1,952 $ 469 $ 12,910
==============================================================
Net income (loss) per weighted-average
depositary unit (9,114,033 units and
9,170,639 units as of September 30,
1997 and 1996, respectively) $ (0.11 ) $ 0.19 $ (0.01 ) $ 1.33
==============================================================
Cash distributions $ 3,825 $ 4,834 $ 11,520 $ 14,489
==============================================================
Cash distributions per weighted-average
depositary unit $ 0.40 $ 0.50 $ 1.20 $ 1.50
==============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
( A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1995 to September 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1995 $ 58,017 $ - $ 58,017
Net income 11,524 917 12,441
Repurchase of depositary units (79 ) - (79 )
Cash distributions (17,166 ) (917 ) (18,083 )
-------------------------------------------------------
Partners' capital as of December 31, 1996 52,296 - 52,296
Net income (loss) (107 ) 576 469
Repurchase of depositary units (785 ) - (785 )
Cash distributions (10,944 ) (576 ) (11,520 )
-------------------------------------------------------
Partners' capital as of September 30, 1997 $ 40,460 $ - $ 40,460
=======================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
------------------------------
<S> <C> <C>
Operating activities:
Net income $ 469 $ 12,910
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on disposition of equipment (2,418 ) (13,807 )
Equity in net (income) loss from unconsolidated
special-purpose entities (165 ) 498
Depreciation and amortization 12,122 9,633
Changes in operating assets and liabilities:
Restricted cash 403 147
Accounts and note receivable, net (586 ) (142 )
Prepaid expenses 490 (38 )
Accounts payable and accrued expenses 10 (9 )
Due to affiliates (87 ) (306 )
Lessee deposits and reserve for repairs (1,270 ) (81 )
-----------------------------
Net cash provided by operating activities 8,968 8,805
-----------------------------
Investing activities:
Payments for purchase of equipment and capital improvements (155 ) (31,235 )
Payments of acquisition-related fees to affiliate - (1,387 )
Payments of lease negotiation fees to affiliate - (308 )
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (9,110 ) (5,919 )
Liquidation of investment in equipment placed in
unconsolidated special-purpose entities - 10,455
Distributions from unconsolidated special-purpose entities 2,111 3,653
Principal payments received from direct finance leases - 240
Proceeds from disposition of equipment 5,379 29,028
-----------------------------
Net cash (used in) provided by investing activities (1,775 ) 4,527
-----------------------------
Financing activities:
Proceeds from short-term note payable 9,110 5,610
Payments of short-term note payable (2,463 ) (5,610 )
Payments of note payable (4,500 ) -
Cash distributions paid to limited partners (10,944 ) (13,765 )
Cash distributions paid to General Partner (576 ) (724 )
Repurchase of depositary units (785 ) (79 )
Payment for loan costs - (133 )
-----------------------------
Net cash used in financing activities (10,158 ) (14,701 )
-----------------------------
Net decrease in cash and cash equivalents (2,965 ) (1,369 )
Cash and cash equivalents at beginning of period 4,662 5,583
-----------------------------
Cash and cash equivalents at end of period $ 1,697 $ 4,214
=============================
Supplemental information:
Interest paid $ 1,993 $ 2,157
===========================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or 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, 1997 and December 31, 1996, the statements of
operations for the three and nine months ended September 30, 1997 and 1996, the
statements of changes in partners' capital for the period December 31, 1995 to
September 30, 1997, and the statements of cash flows for the nine months ended
September 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. Repurchase of Depositary Units
In 1996, the Partnership announced a plan to repurchase approximately 120,000
depositary units for an aggregate purchase price of up to $1.2 million. As of
September 30, 1997, the Partnership has repurchased 82,000 depositary units for
$0.8 million. The General Partner may repurchase the additional units in the
future.
4. Cash Distributions
Cash distributions are recorded when paid and totaled $3.8 million and $11.5
million for the three and nine months ended September 30, 1997, respectively.
Cash distributions to limited partners in excess of net income represent a
return of capital. All cash distributions to the limited partners for the nine
months ended September 30, 1997 were deemed to be a return of capital. None of
the cash distributions to the limited partners during the nine months ended
September 30, 1996 were deemed to be a return of capital. Cash distributions
related to the results from the third quarter of 1997, of $2.7 million, were
paid or are payable during October and November 1997, depending on whether the
individual limited partner elected to receive a monthly or quarterly
distribution check.
5. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities (USPEs) include
the following jointly-owned equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-----------------------------------
<S> <C> <C>
47.5% interest in an entity owning a product tanker $ 8,626 $ -
17% interest in two trusts owning three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables 3,827 4,565
25% interest in two commercial aircraft on direct finance lease 2,908 2,768
50% interest in an entity owning a bulk carrier 2,529 3,196
50% interest in an entity owning a product tanker 1,947 2,144
----------- -------------
Net investments $ 19,837 $ 12,673
=========== =============
</TABLE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
5. Investments in Unconsolidated Special-Purpose Entities (continued)
During the nine months ended September 30, 1997, the Partnership purchased an
interest in an entity owning a product tanker for $9.1 million and incurred
acquisition and lease negotiation fees of $0.5 million to FSI (the remaining
interest in this product tanker is owned by an affiliated partnership).
6. Equipment
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------------------------------
Equipment held for operating leases:
<S> <C> <C>
Aircraft $ 49,838 $ 57,205
Marine vessels 35,005 52,259
Marine containers 20,442 24,451
Rail equipment 11,500 11,406
Trailers 9,686 9,683
----------- ------------
126,471 155,004
Less accumulated depreciation (73,333 ) (81,541 )
----------- ------------
53,138 73,463
Equipment held for sale 5,627 -
----------- ------------
Net equipment $ 58,765 $ 73,463
=========== ============
</TABLE>
As of September 30, 1997, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities. As of December 31, 1996,
all of the equipment was on lease or operating in PLM-affiliated short-term
trailer rental facilities, except for 14 railcars. The net book value of the
equipment off lease was $0.2 million as of December 31, 1996.
Equipment held for sale is stated at the lower of the equipment's depreciated
cost or fair value less cost to sell. As of September 30, 1997, one marine
vessel, which is currently on lease and subject to a pending sale for $7.5
million, was held for sale. Also, two Metro III aircraft which are currently on
lease and subject to a pending sale for $1.3 million, were held for sale.
During the nine months ended September 30, 1997, the Partnership disposed of an
aircraft engine, marine containers, railcars, and trailers with an aggregate net
book value of $3.0 million for $5.4 million.
During the nine months ended September 30, 1996, the Partnership disposed of
marine containers, aircraft engines and 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.
7. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner were
$0.5 million and $1.0 million as of September 30, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE-affiliated management
fees of $0.1 million and $26,000 were payable as of September 30, 1997 and
December 31, 1996, respectively.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
7. 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):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 66 $ 89 $ 203 $ 227
Insurance expense 47 56 195 170
Data processing and administrative
expenses 15 42 47 65
</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.
Lease negotiation and equipment acquisition fees from the Partnership's
proportional share of USPEs of $0.5 million were paid or accrued to FSI during
the nine months ended September 30, 1997, and of $0.3 million were paid or
accrued to PLM Worldwide Management Services (WMS) during the nine months ended
September 30, 1996. WMS is a wholly-owned subsidiary of PLM International, Inc
(PLMI).
The balance due to affiliates as of September 30, 1997 includes $0.5 million due
to FSI and its affiliates and $0.1 million due to USPEs. The balance due to
affiliates as of December 31, 1996 includes $1.0 million due to FSI and its
affiliates and $0.3 million due from USPEs.
8. Debt
The General Partner entered into a short-term, joint $50.0 million credit
facility. As of September 30, 1997, the Partnership had borrowings of $9.1
million under the short-term joint $50.0 million credit facility and PLM
Equipment Growth Fund VI had $10.0 million in outstanding borrowings. No other
eligible borrower had any outstanding borrowings.
9. Contingencies
As more fully described by the Partnership in its Form 10-K for the year ended
December 31,1996, PLMI 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 March
6, 1997, the defendants removed 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), following which plaintiffs filed a
motion to remand the action to the state court. On September 24, 1997, the
district court denied plaintiffs' motion and dismissed without prejudice the
individual claims of the California class representative, reasoning that he had
been fraudulently joined as a plaintiff. On October 3, 1997, plaintiffs filed a
motion requesting that the district court reconsider its ruling or, in the
alternative, that the court modify its order dismissing the California
plaintiff's claims so that it is a final appealable order, as well as certify
for an immediate appeal to the Eleventh Circuit Court of Appeals that part of
its order denying plaintiffs' motion to remand. On October 7, 1997, the district
court denied each of these motions. On October 10, 1997, defendants filed a
motion to compel arbitration of plaintiffs' claims and to stay further
proceedings pending the outcome of such arbitration. PLMI believes that the
allegations of the Koch action are completely without merit and intends to
defend this matter vigorously.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
9. Contingencies (continued)
On June 5, 1997, PLMI 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 the Partnership, and filed the complaint on her own
behalf and on behalf of all class members similarly situated who invested in
certain California limited partnerships sponsored by PLM Securities, for which
FSI acts as the general partner, including the Partnership, PLM Equipment Growth
Funds IV, and VI, and PLM Equipment Growth & Income Fund VII.
PLMI 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 Partnership limited
partnership agreement, to which plaintiff is a party. Pursuant to an agreement
with plaintiff, PLMI and the other defendants withdrew their petition for
removal of the Romei action and their motion to compel arbitration, and on July
31, 1997, filed with the district court for the Northern District of California
(Case No. C-97-2847 WHO) a petition under the Federal Arbitration Act seeking to
compel arbitration of plaintiff's claims and for an order staying the state
court proceedings pending the outcome of the arbitration. In connection with
this agreement, plaintiff agreed to a stay of the state court action pending the
district court's decision on the petition to compel arbitration. On October 7,
1997, the district court denied PLMI's petition to compel and indicated that a
memorandum decision would follow. On October 22, 1997, the district court filed
its memorandum decision and order, explaining the reason for its denial of
PLMI's petition to compel. The district court reasoned that the plaintiff's
claims are grounded in securities law, and therefore, excluded from arbitration
under the terms of the Partnership agreement. On August 22, 1997, the plaintiff
filed an amended complaint with the state court alleging two new causes of
action for violations of the California Securities Law of 1968 (California
Corporations Code Sections 25400 and 25500), and for violation of California
Civil Code Section 1709 and 1710. PLMI will soon be required to respond to the
amended complaint, and a status conference has been set for December 5, 1997.
PLMI believes that the allegations of the amended complaint in the Romei action
are completely without merit and intends to defend this matter vigorously.
10. Subsequent Event
During October 1997, the short-term credit facility was amended and restated,
and extended the termination date of the facility to November 3, 1997. The
General Partner believes it will be able to extend the credit facility prior to
its expiration with similar terms.
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, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operation, and asset-specific insurance expenses) on owned equipment
increased during the three months ended September 30, 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 September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 2,393 $ 1,312
Marine vessels 902 544
Marine containers 524 675
Rail equipment 460 440
Trailers 450 351
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$2.4 million and $21,000, respectively, for the three months ended September 30,
1997, compared to $1.3 million and $10,000, respectively, during the same period
of 1996. The increase in aircraft contribution was due to the transfer of two
commercial aircraft into the Partnership from unconsolidated special-purpose
entities and the purchase of three commercial aircraft during the third quarter
of 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $3.0
million and $2.1 million, respectively, for the three months ended September 30,
1997, compared to $2.5 million and $2.0 million, respectively, during the same
period of 1996. The increase in marine vessel revenues was primarily due to one
marine vessel that did not earn lease revenues for one month of the third
quarter of 1996 while required dry docking was performed. The increase in marine
vessel expenses during the third quarter of 1997 was due primarily to higher
repairs and maintenance.
Marine containers: Marine container lease revenues and direct expenses were $0.5
million and $4,000, respectively, for the three months ended September 30, 1997,
compared to $0.7 million and $5,000, respectively, during the same quarter of
1996. The number of marine containers owned by the Partnership has been
declining over the past 12 months due to sales and dispositions. The result of
this declining fleet has been a decrease in marine container contribution.
Rail equipment: Rail equipment lease revenues and direct expenses were $0.6
million and $0.2 million, respectively, for the three months ended September 30,
1997 and 1996. Although the railcar fleet remained relatively the same size for
both quarters, the increase in railcar contribution resulted from a net increase
in lease revenues.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the three months ended September 30, 1997, compared
to $0.5 million and $0.2 million, respectively, during the same period of 1996.
A larger number of the Partnership's trailers were operating in the
PLM-affiliated short-term rental yards during the third quarter of 1997 when
compared to the same period of 1996. Trailers earn higher lease rates while in
the affiliated short-term rental yards than they earned while on term lease;
however, the trailers also incurred higher maintenance costs while in the
PLM-affiliated short-term rental yards.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.6 million for the quarter ended September 30, 1997
increased from $4.9 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $0.6 million increase in depreciation and amortization expenses from
1996 levels reflects the purchase of three commercial aircraft and the transfer
of two commercial aircraft from USPEs during 1996, which was offset in part by
the double-declining balance method of depreciation.
(2) A $0.2 million increase in bad debt expenses was due to an increase in
uncollectable amounts due from certain lessees.
(3) A $0.1 million decrease in interest expense was due to a lower balance
outstanding on the notes payable when compared to the same period of 1996.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the third quarter of 1997
totaled $0.2 million, which resulted from the sale of marine containers with an
aggregate net book value of $0.5 million, for proceeds of $0.7 million. Net gain
on disposition of equipment for the third quarter of 1996 totaled $3.1 million,
and resulted mainly from the sale of 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 marine containers with a net book value of $0.6 million, for
proceeds of $0.7 million.
(D) Interest and Other Income
Interest and other income decreased $0.4 million during the third quarter of
1997 when compared to the same period of 1996. Interest income decreased $0.2
million, due primarily to lower cash balances available for investment, and
other income decreased $0.2 million, due to a business interruption claim that
was received during 1996. No such claim was received during 1997.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft, rotable components, and aircraft engines $ 303 $ (149 )
Marine vessels (492 ) 153
</TABLE>
Aircraft, rotable components, and aircraft engines: As of September 30, 1997,
the Partnership had an interest in two trusts that own three commercial
aircraft, two aircraft engines, and a portfolio of aircraft rotables, and also
had an interest in two commercial aircraft on a direct finance lease. As of
September 30, 1996, the Partnership owned an interest in the two trusts that own
three commercial aircraft, two aircraft engines, and a portfolio of aircraft
rotables; owned an interest in a trust that held seven commercial aircraft; and
had just purchased an interest in a trust that held five commercial aircraft.
During the third quarter of 1997, revenues of $0.6 million were offset by
depreciation and administrative expenses of $0.3 million. During the same period
of 1996, lease revenues of $1.0 million were offset by depreciation and
administrative expenses of $1.2 million. The decrease in lease revenues and
administrative expenses was due to the transfer of two commercial aircraft from
the USPEs to the Partnership, and was offset in part by the revenue earned from
the interest in the direct finance lease that was purchased in the fourth
quarter of 1996.
Marine vessels: As of September 30, 1997, the Partnership owned an interest in
three marine vessels, one of which was purchased on the last day of the third
quarter. As of September 30, 1996, the Partnership owned an interest in two
marine vessels. During the third quarter of 1997, revenues of $1.0 million were
offset by depreciation and administrative expenses of $1.5 million. During the
same period of 1996, revenues of $1.0 million were offset by depreciation and
administrative expenses of $0.9 million. The primary reason for the increase in
depreciation and administrative expenses during 1997 was due to the purchase of
the additional marine vessel in the third quarter of 1997.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the quarter ended
September 30, 1997 was $0.9 million, compared to a net income of $2.0 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
is subject to many factors, and the Partnership's performance in the third
quarter of 1997 is not necessarily indicative of future periods. In the third
quarter of 1997, the Partnership distributed $3.6 million to the limited
partners, or $0.40 per weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Nine Months
Ended September 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operation, and asset-specific insurance expenses) on owned equipment
increased during the nine months ended September 30, 1997, when 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 Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 7,346 $ 4,154
Marine vessels 2,854 2,860
Marine containers 1,656 2,449
Rail equipment 1,577 1,264
Trailers 1,333 1,111
Mobile offshore drilling unit - 1,061
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$7.4 million and $63,000, respectively, for the nine months ended September 30,
1997, compared to $4.2 million and $31,000, respectively, during the same period
of 1996. The increase in aircraft contribution was due to the transfer of two
commercial aircraft into the Partnership from unconsolidated special-purpose
entities and the purchase of three commercial aircraft and a commuter aircraft
during the second and third quarters of 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $10.6
million and $7.8 million, respectively, for the nine months ended September 30,
1997, compared to $10.1 million and $7.3 million, respectively, during the same
period of 1996. The decrease in marine vessel contribution was primarily due to
an increase in marine operating expenses because of the transfer of two marine
vessels from a time charter, in which the charter pays certain marine operating
expenses, to a voyage charter, in which the owner/operator is responsible for
such expenses. This increase in operating expenses was offset in part by an
increase in the rate earned by the marine vessels when it transferred from time
charter to voyage charter. Also, one marine vessel that had been required to be
in drydock for a period of 1996, and not earning revenues, was back in service
and earning lease revenues during 1997.
Marine containers: Marine container lease revenues and direct expenses were $1.7
million and $14,000, respectively, for the nine months ended September 30, 1997,
compared to $2.5 million and $20,000, respectively, during the same quarter of
1996. The number of marine containers owned by the Partnership has been
declining over the past 12 months due to sales and dispositions. The result of
this declining fleet has been a decrease in marine container contribution.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.9
million and $0.3 million, respectively, for the nine months ended September 30,
1997, compared to $1.8 million and $0.5 million, respectively, during the same
period of 1996. Although the railcar fleet remained relatively the same size for
both quarters, the increase in railcar contribution resulted from a decrease in
running repairs required on certain of the railcars in the fleet during 1997
when compared to the same period of 1996.
Trailers: Trailer lease revenues and direct expenses were $2.0 million and $0.6
million, respectively, for the nine months ended September 30, 1997, compared to
$1.4 million and $0.3 million, respectively, during the same period of 1996. The
number of trailers that transferred to the PLM-affiliated short-term rental
yards increased during 1996, resulting in a larger number of the Partnership's
trailers operating in the rental yards during 1997 when compared to the same
period of 1996. Trailers earned higher lease rates while in the affiliated
short-term rental yards than they earned during the same period of 1996 while
they were on term lease; however, the trailers also incurred higher maintenance
costs.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $1.0 million and $0, respectively, for the nine months
ended September 30, 1996. The elimination of the mobile offshore drilling unit
contribution during 1997 was due to the sale of this equipment during the second
quarter of 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $17.0 million for the nine months ended September 30,
1997 increased from $14.1 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $2.5 million increase in depreciation and amortization expenses from
1996 levels reflects the purchase of three commercial aircraft and a commuter
aircraft, and the transfer of two commercial aircraft from USPEs during 1996,
offset in part by the double-declining balance method of depreciation.
(2) A $0.5 million increase in bad debt expenses was due to an increase in
uncollectable amounts due from certain lessees.
(3) A $0.1 million increase in administrative expenses due to the
additional allocation of rental yard costs incurred due to the increased number
of trailers in the PLM-affiliated short-term rental yards which was offset in
part by a decrease in auditing and legal fee expenses.
(4) A $0.2 million decrease in interest expense was due to a lower balance
outstanding on the notes payable when compared to the same period of 1996.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the nine months ended September
30, 1997 totaled $2.4 million, which resulted from the sale of an aircraft
engine, marine containers, railcars, and trailers with an aggregate net book
value of $3.0 million, for proceeds of $5.4 million. For the same period of
1996, the $13.8 million net gain resulted from the sale of a mobile offshore
drilling unit with a net book value of $10.7 million, for proceeds of $21.3
million, and marine containers, aircraft engines, and railcars with an aggregate
net book value of $4.5 million, for proceeds of $7.7 million.
(D) Interest and Other Income
Interest and other income decreased $0.6 million for the nine months ended
September 30, 1997 when compared to the same period of 1996, and was due
primarily to a $0.4 business interruption claim that was received during 1996.
No such claim was received during 1997. Additionally, interest income decreased
$0.2 million due to lower average cash balances available for investment
throughout most of the 1997 when compared to the same period of 1996.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft, rotable components, and aircraft engines $ 915 $ (393 )
Marine vessels (750 ) (105 )
</TABLE>
Aircraft, rotable components, and aircraft engines: As of September 30, 1997,
the Partnership has an interest in two trusts that own three commercial
aircraft, two aircraft engines, and a portfolio of aircraft rotables, and also
has an interest in two commercial aircraft on a direct finance lease. As of
September 30, 1996, the Partnership owned the interest in the two trusts that
own three commercial aircraft, two aircraft engines, and a portfolio of aircraft
rotables; owned an interest in a trust that held seven commercial aircraft; and
had just purchased an interest in a trust that held five commercial aircraft.
During the nine months ended September 30, 1997, revenues of $1.7 million were
offset by depreciation and administrative expenses of $0.8 million. During the
same period of 1996, lease revenues of $2.8 million were offset by depreciation
and administrative expenses of $3.2 million. The decrease in lease revenues and
administrative expenses was due to the transfer of two commercial aircraft from
the USPEs to the Partnership, and was offset in part by the revenue earned from
the interest in the direct finance lease that was purchased in the fourth
quarter of 1996.
Marine vessels: As of September 30, 1997, the Partnership owned an interest in
three marine vessels, one of which was purchased on the last day of the third
quarter. As of September 30, 1996, the Partnership owned an interest in two
marine vessels. During the nine months ended September 30, 1997, revenues of
$2.7 million were offset by depreciation and administrative expenses of $3.4
million. During the same period of 1996, lease revenues of $2.7 million were
offset by depreciation and administrative expenses of $2.8 million. The primary
reason for the increase in depreciation and administrative expenses during 1997
was due to the purchase of an additional marine vessel in the third quarter of
1997.
(F) Net Income
As a result of the foregoing, the Partnership's net income for the period ended
September 30, 1997 was $0.5 million, compared to a net income of $12.9 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
is subject to many factors, and the Partnership's performance during the nine
months ended September 30, 1997 is not necessarily indicative of future periods.
In the nine months ended September 30, 1997, the Partnership distributed $10.9
million to the limited partners, or $1.20 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the nine months ended September 30, 1997, the Partnership generated $11.1
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 nine months ended September 30, 1997 of $11.5 million) to the partners, but
also used undistributed available cash from prior periods of approximately $0.4
million.
During the nine months ended September 30, 1997, the General Partner sold
equipment and received proceeds of $5.4 million. The Partnership increased its
investments in unconsolidated special-purpose entities with the purchase of an
interest in an entity that owns a product tanker marine vessel (the remaining
interest in this product tanker belongs to an affiliated partnership) during
September 1997 for $9.1 million. FSI earned acquisition and lease negotiation
fees of $0.5 million from this transaction, which will be paid during the fourth
quarter of 1997.
The General Partner has entered into a short-term joint $50.0 million credit
facility. As of October 31, 1997, the Partnership had $9.1 million in
outstanding borrowings, PLM Equipment Growth Fund VI had $10.0 million in
outstanding borrowings; and American Finance Group, Inc., a wholly owned
subsidiary of PLM International, Inc., had $3.0 million outstanding. Neither PLM
Equipment Growth Fund IV, PLM Equipment Growth & Income Fund VII, TEC Aquisub,
Inc., an indirect wholly-owned subsidiary of FSI, nor Professional Lease
Management Income Fund I, LLC had any outstanding borrowings.
During October 1997, the short-term credit facility was amended and restated,
and extended the termination date of the facility to November 3, 1997. The
General Partner believes it will be able to extend the credit facility prior to
its expiration with similar terms.
(III) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance in 1997 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
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.
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,
and government or other regulations. 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 that these acquisitions may cause the Partnership to generate
additional earnings and cash flow for the Partnership.
(IV) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q contains
forward-looking statements that involve 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
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: October 31, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,847
<SECURITIES> 0
<RECEIVABLES> 4,387
<ALLOWANCES> (823)
<INVENTORY> 0
<CURRENT-ASSETS> 6,084
<PP&E> 126,471
<DEPRECIATION> 73,333
<TOTAL-ASSETS> 87,383
<CURRENT-LIABILITIES> 1,682
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 40,460
<TOTAL-LIABILITY-AND-EQUITY> 87,383
<SALES> 0
<TOTAL-REVENUES> 26,164
<CGS> 0
<TOTAL-COSTS> 25,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 588
<INTEREST-EXPENSE> 1,935
<INCOME-PRETAX> 469
<INCOME-TAX> 0
<INCOME-CONTINUING> 469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 469
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
