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 33-40093
-----------------------
PLM EQUIPMENT GROWTH FUND VI
(Exact name of registrant as specified in its charter)
California 94-3135515
(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 VI
(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 $ 109,996 $ 106,453
Less accumulated depreciation (43,821 ) (41,382 )
-----------------------------------
66,175 65,071
Equipment held for sale -- 14,607
-----------------------------------
Net equipment 66,175 79,678
Cash and cash equivalents 11,292 2,600
Restricted cash 1,265 1,298
Investments in unconsolidated special purpose entities 34,419 32,023
Accounts receivable, net of allowance for doubtful accounts
of $1,066 in 1996 and $245 in 1995 2,651 3,374
Net Investment in sales-type lease 278 --
Prepaid expenses and other assets 139 227
Deferred charges, net of accumulated amortization of
$1,210 in 1996 and $1,010 in 1995 382 429
Equipment acquisition deposits -- 2,328
-----------------------------------
Total assets $ 116,601 $ 121,957
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 393 $ 852
Due to affiliates and affiliated partnerships 2,021 2,785
Prepaid deposits and reserve for repairs 3,046 2,890
Note payable 30,000 30,000
-----------------------------------
Total liabilities 35,460 36,527
Partners' capital:
Limited Partners (8,286,966 Depositary Units at September 30,
1996 and 8,318,247 at December 31, 1995) 81,141 85,430
General Partner -- --
-----------------------------------
Total partners' capital 81,141 85,430
-----------------------------------
Total liabilities and partner's capital $ 116,601 $ 121,957
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 $ 5,701 $ 8,055 $ 17,577 $ 23,836
Interest and other income 70 137 387 518
Net gain on disposition of equipment 623 57 7,163 72
--------------------------------------------------------------
Total revenues 6,394 8,249 25,127 24,426
Expenses:
Depreciation and amortization 3,132 5,507 9,421 16,375
Management fees to affiliate 370 445 1,011 1,307
Repairs and maintenance 752 837 2,378 2,325
Interest expense 619 502 1,830 1,496
Marine equipment operating expenses 834 850 2,544 2,462
Insurance expense to affiliate 45 191 157 548
Other insurance expense 205 111 601 374
General and administrative
expenses to affiliates 203 252 719 805
Other general and administrative expenses 186 191 560 510
Provision for (recovery of) bad debts 12 (111 ) 824 211
--------------------------------------------------------------
--------------------------------------------------------------
Total expenses 6,358 8,775 20,045 26,413
--------------------------------------------------------------
Equity in net income of unconsolidated
special purpose entities 5,276 -- 4,194 --
--------------------------------------------------------------
Net income (loss) $ 5,312 $ (526 ) $ 9,276 $ (1,987 )
==============================================================
Partners' share of net income (loss):
Limited Partners $ 5,094 $ (745 ) $ 8,621 $ (2,644 )
General Partner 218 219 655 657
--------------------------------------------------------------
Total $ 5,312 $ (526 ) $ 9,276 $ (1,987 )
==============================================================
Net income (loss) per Depositary Unit
(8,286,966 Units in 1996 and
8,318,247 in 1995) $ 0.61 $ (0.09 ) $ 1.04 $ (0.32 )
==============================================================
Cash distributions $ 4,363 $ 4,378 $ 13,102 $ 13,137
==============================================================
Cash distributions per Depositary Unit $ 0.50 $ 0.50 $ 1.50 $ 1.50
==============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
( 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 $ 104,922 $ -- $ 104,922
Net income (loss) (2,850 ) 876 (1,974 )
Cash distributions (16,642 ) (876 ) (17,518 )
-------------------------------------------------------
Partners' capital at December 31, 1995 85,430 -- 85,430
Net income 8,621 655 9.276
Repurchase of Depositary Units (463 ) -- (463 )
Cash distributions (12,447 ) (655 ) (13,102 )
-------------------------------------------------------
Partners' capital at September 30, 1996 $ 81,141 $ -- $ 81,141
=======================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 (loss) $ 9,276 $ (1,987 )
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Net gain on disposition of equipment (7,163 ) (72 )
Cash distributions from unconsolidated special purpose entities
in excess of income 977 --
Depreciation and amortization 9,421 16,375
Changes in operating assets and liabilities:
Restricted cash 33 --
Accounts receivable, net 762 642
Prepaid expenses and other assets 88 174
Accounts payable and accrued expenses (459 ) (57 )
Due to affiliates 62 (65 )
Prepaid deposits and reserve for repairs 270 291
-----------------------------------
Cash provided by operating activities 13,267 15,301
-----------------------------------
Investing activities:
Payments for purchase of equipment (13,924 ) (4,686 )
Investment in and equipment purchased and placed in
unconsolidated special purpose entities (15,051 ) --
Payments of acquisition related fees to affiliate (675 ) --
Payments of lease negotiation fees to affiliate (152 ) --
Sales-type lease payments received 41 --
Distribution from liquidation of unconsolidated special purpose entity 11,677 --
Proceeds from disposition of equipment 27,074 738
-----------------------------------
Cash (used in) provided by investing activities 8,990 (3,948 )
-----------------------------------
Financing activities:
Proceeds from short term note payable 9,000 1,684
Payments of short-term note payable (9,000 ) --
Repurchase of depositary units (463 ) --
Cash distributions paid to General Partner (655 ) (657 )
Cash distributions paid to Limited Partners (12,447 ) (12,480 )
-----------------------------------
Cash used in financing activities (13,565 ) (11,453 )
-----------------------------------
Net increase (decrease) in cash and cash equivalents 8,692 (100 )
Cash and cash equivalents at beginning of period 2,600 6,246
-----------------------------------
Cash and cash equivalents at end of period $ 11,292 $ 6,146
===================================
Supplemental information:
Interest paid $ 2,011 $ 1,507
===================================
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 39 $ --
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 Partnership's financial position 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 ended 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. 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
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 of five commercial aircraft for $11.2
million and incurred acquisition and lease negotiation fees of $0.6 million to
PLM Transportation Equipment Corporation (TEC), an affiliate of the General
Partner. The Partnership also purchased a 50% ownership interest in a marine
vessel (the remaining interest in this marine vessel belongs to an affiliated
partnership) for $4.0 million including acquisition and lease negotiation fees
of $0.2 million incurred to TEC for this equipment. The Partnership made a
deposit of $0.4 million toward this purchase which is included in the balance
sheet as investments in unconsolidated special purpose entities at December 31,
1995.
The net investments in unconsolidated special purpose entities include the
following jointly-owned equipment (and related assets and liabilities) (in
thousands):
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
2. Investments in Unconsolidated Special Purpose Entities (continued)
<TABLE>
<CAPTION>
September 30, December 31,
% Ownership Equipment 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
64% 767-200ER commercial aircraft $ 16,145 $ 18,674
14% Trust that owns seven commercial aircraft (see note below) -- 3,962
17% Trust that owns six commercial aircraft (see note below) 3,059 --
50% Trust that owns four commercial aircraft (see note below) 9,725 --
45% Mobile offshore drilling unit -- 6,633
20% Handymax bulk carrier 1,943 2,376
50% Feeder vessel 3,547 378
--------------------------------
Net investments $ 34,419 $ 32,023
================================
</TABLE>
The Partnership has beneficial interests in two certain unconsolidated special
purpose entities that own multiple aircraft (the Trusts). These Trusts contain
provisions, under certain circumstances, for allocating specific aircraft to the
beneficial owners. During September 1996, PLM Equipment Growth Fund V, an
affiliated partnership which also has a beneficial interest in the Trust,
renegotiated its senior loan agreement and was required, for loan collateral
purposes, to withdraw the aircraft designated to it from the Trust. The result
was to restate the percentage ownership of the remaining beneficial owners of
the Trusts beginning September 30, 1996. This change has no effect on the income
or loss recognized during 1996.
Also during September 1996, the General Partner sold the mobile offshore
drilling unit in which the Partnership had a 45% interest. The Partnership
received a liquidating distribution of $11.7 million for its net investment of
$5.9 million
3. Repurchase of Depositary Units
At December 31, 1995, the Partnership agreed to repurchase approximately 32,400
Depositary Units for an aggregate purchase price of $0.5 million. As of
September 30, 1996, the Partnership has repurchased 31,281 Depositary Units for
$463,000 The General Partner anticipates that the remaining Units will be
repurchased during the next three months.
4. Equipment
Owned equipment held for operating leases is stated at cost. Equipment held
for sale is stated at the lower of the equipment's depreciated cost or net
realizable value and is subject to a pending contract for sale. The components
of equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
----------------------------------
<S> <C> <C>
Aircraft $ 11,918 $ 11,918
Marine vessels 41,263 25,228
Trailers 18,279 18,675
Aircraft engines and components 6,341 17,992
Marine containers 16,553 16,984
Rail equipment 15,642 15,656
----------------------------------
109,996 106,453
Less accumulated depreciation (43,821 ) (41,382 )
----------------------------------
66,175 65,071
Equipment held for sale -- 14,607
----------------------------------
Net equipment $ 66,175 $ 79,678
==================================
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
4. Equipment (continued)
As of September 30, 1996, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for ten railcars. At
December 31, 1995, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for two aircraft
engines. The net book value of the equipment off-lease was $0.3 million and $2.5
million at September 30, 1996, and December 31, 1995, respectively.
During the nine months ended September 30, 1996, the Partnership purchased two
marine vessels for $15.8 million including acquisition and lease negotiation
fees of $0.8 million incurred to TEC for this equipment. The Partnership made a
deposit of $1.5 million toward this purchase at December 31, 1995, which is
included in the balance sheet as equipment acquisition deposits along with
accrued fees of $0.8 million.
During the nine months ended September 30, 1996, 195 marine containers, 58
trailers, 4 aircraft engines and 2 railcars with an aggregate net book value of
$5.8 million were disposed of or sold, and the Partnership received proceeds of
$6.7 million. The Partnership also sold one marine vessel which was held for
sale as of December 31, 1995, with a net book value of $14.6 million at the date
of sale for proceeds of $20.8 million. Included in the gain of $6.3 million from
the sale of the marine vessel, is the unused portion of accrued drydocking of
$0.1 million.
During the nine months ended September 30, 1995, 234 marine containers, 36
trailers and 1 railcar with an aggregate net book value of $666,000 disposed of
or sold and the Partnership received proceeds of $738,000. Periodically, PLM
International. Inc., (the Company) will purchase groups of assets whose
ownership may be allocated among affiliated partnerships and the Company.
Generally in these cases, only assets that are on lease will be purchased by the
affiliated partnerships. The Company will generally assume the ownership and
remarketing risks associated with off-lease equipment. Allocation of the
purchase price will be determined by a combination of third party industry
sources, and recent transactions or published fair market value references.
During the nine months ended September 30, 1996, the Company realized $0.7
million of gains on the sale of 69 off-lease railcars purchased by the Company
as part of a group of assets in 1994 which had been allocated to the
Partnership, PLM Equipment Growth Funds IV, VII, Professional Lease Management
Income Fund I, L.L.C. and the Company.
5. Cash Distributions
Cash distributions are recorded when paid and totaled $4.4 million and
$13.1 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
Principles (GAAP) basis. Cash distributions to the Limited Partners of $3.8
million and $12.5 million for the nine months ended September 30, 1996 and 1995,
respectively, were deemed to be a return of capital. Cash distributions related
to the third quarter results of $2.4 million were paid or are payable during
September and October 1996, depending on whether the individual unit holder
elected to receive a monthly or quarterly distribution check.
6. Debt
The General Partner has entered into a joint $35 million credit facility (the
"Committed Bridge Facility") on behalf of the Partnership, PLM Equipment Growth
Fund III, PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, 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 (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
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
6. Debt (continued)
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 areguaranteed by the General
Partner. As of September 30, 1996, AFG had $27,791,000 in outstanding
borrowings. 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").
(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
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 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 $ 826 $ 1,156
Marine vessels 1,045 1,268
Trailers 725 981
Rail equipment 786 772
Marine containers 443 732
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$125,000, respectively, for the three months ended 1996, compared to $1.2
million and $55,000, respectively during the same quarter of 1995. The decrease
in aircraft contribution was due to the sale of two aircraft engines during 1996
which were on lease during the same period of 1995;
Marine vessels: Marine vessel lease revenues and direct expenses were $2.3
million and $1.3 million, respectively, for the three months ended 1996,
compared to $2.6 million and $1.3 million, respectively during the same quarter
of 1995. The decrease in marine vessel contribution was due to lower day rates
earned by two marine vessels when compared to the same period of 1995. The
decrease in marine vessel contribution was offset, in part, by an net increase
in the contribution from the purchase of two marine vessels during the fourth
quarter of 1995 and the sale of one marine vessel during the first quarter 1996;
Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the three months ended 1996, compared to $1.2 million
and $0.2 million, respectively during the same quarter of 1995. The number of
trailers 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 trailer net contribution. In addition, the trailer fleet is
experiencing lower utilization in the PLM affiliated short-term rental yards due
to soft market conditions;
Rail equipment: Rail equipment lease revenues and direct expenses were $1.06
million and $272,000, respectively, for the three months ended 1996, compared to
$1.03 million and $255,000, 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 running repairs required on
certain of the railcars in the fleet during 1995 which were not needed during
1996;
Marine containers: Marine container lease revenues and direct expenses were $0.4
million and $3,000, respectively, for the three months ended 1996, compared to
$0.7 million and $6,000, 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.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $4.5 million for the quarter ended September 30, 1996
decreased from $5.2 million for the same period in 1995. The significant
variances are explained as follows:
(a) A $0.9 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. These decreases were offset, in
part, by the purchase of two marine vessels during the first quarter of 1996;
(b) A $0.1 million increase in interest expense due to the increase in long term
debt of $7.3 million when compared to the same period of 1995;
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the third quarter 1996 totaled $0.6
million which resulted from the sale of 2 aircraft engines, 89 marine
containers, 1 railcar, and 4 trailers with an aggregate net book value of $3.0
million, for proceeds of $3.6 million. For the third quarter of 1995, the $0.1
million net gain on disposition of equipment resulted from the sale or disposal
of 77 marine containers and 10 trailers with an aggregate net book value of
$204,000, for aggregate proceeds of $261,000.
(D) Interest and other income
Interest and other income decreased $67,000 during the third quarter of 1996 due
primarily to lower cash balances available for investment throughout most of the
third quarter when compared to the same period of 1995.
(E) Equity in net income (loss) of unconsolidated special purpose entities
represents a 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 $ (469 ) $ (274 )
Marine vessels (60 ) (56 )
Mobile offshore drilling unit 5,805 (60 )
</TABLE>
Aircraft: As of September 30, 1996, the Partnership owned 64% of a Boeing 767
commercial aircraft and had acquired partial beneficial interests in two trusts
which hold 10 commercial aircraft during the later half of 1995 and the first
quarter of 1996. As of September 30, 1995, the Partnership owned the 64% of the
Boeing 767 commercial aircraft and had just purchased a partial beneficial
interest in a trust which held five commercial aircraft. During the third
quarter of 1996, lease revenues of $1.7 million were offset by depreciation and
administrative expenses of $2.2 million. During the same period of 1995, lease
revenues of $0.8 million were offset by depreciation and administrative expenses
of $1.1 million.
Marine vessel: As of September 30, 1996, the Partnership owned a 20% interest in
a marine vessel and a 50% interest in another marine vessel which was purchased
during the first quarter of 1996. As of September 30, 1995, the Partnership only
owned the 20% interest in the marine vessel. During the third quarter of 1996,
revenues of $0.4 million were offset by depreciation and administrative expenses
of $0.5 million. During the same period of 1995, revenues of $193,000 were
offset by depreciation and administrative expenses of $249,000.
Mobile offshore drilling unit: As of September 30, 1996, the Mobile offshore
drilling unit (rig) which was owned by two affiliated Partnerships was sold by
the General Partner. The increase of $5.7 million net contribution during the
third quarter 1996 resulted primarily from the gain on the sale of the rig.
During the third quarter of 1996, revenues of $0.2 million were offset by
depreciation and administrative expenses of $0.2 million. During the same period
of 1995, revenues of $293,000 were offset by depreciation and administrative
expenses of $353,000. The Partnership's share of the liquidating distributions
was $11.7 million.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net income of $5.3 million for
the third quarter of 1996, increased from a net loss of $0.5 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 third quarter of 1996 is not necessarily indicative of future periods. In
the third quarter of 1996, the Partnership distributed $4.1 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 $ 2,999 $ 3,499
Marine vessels 2,815 3,256
Trailers 2,340 3,091
Rail equipment 2,129 2,544
Marine containers 1,577 2,220
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $3.2 million and 0.3
million, respectively, for the nine months ended 1996, compared to $3.7 and $0.2
million, respectively during the same period of 1995. The decrease in aircraft
contribution was due to a lower re-lease rate earned on two aircraft engines
during the nine months ended September 30, 1996 when compared to the same period
during 1995;
Marine vessels: Marine vessel lease revenues and direct expenses were $6.5
million and $3.7 million, respectively, for the nine months ended 1996, compared
to $7.4 million and $4.1 million, respectively during the same period of 1995.
The decrease in marine vessel contribution during the nine months ended
September 30, 1996 was due to lower day rates earned by two marine vessels and
the sale of a marine vessel during the first quarter of 1996 offset, in part, by
the purchase of two marine vessels during the fourth quarter of 1995 when
compared to the same period of 1995;
Trailers: Trailer lease revenues and direct expenses were $3.1 million and $0.8
million, respectively, for the nine months ended 1996, compared to $3.8 million
and $0.7 million, respectively during the same period of 1995. The number of
trailers 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 trailer net contribution. In addition, the trailer fleet is
experiencing lower utilization in the PLM affiliated short-term rental yards due
to soft market conditions;
Rail equipment: Rail equipment lease revenues and direct expenses were $3.1
million and $0.9 million, respectively, for the nine months ended 1996, compared
to $3.1 million and $0.5 million, respectively during the same period of 1995.
Although the rail fleet remained relatively the same size for both periods, the
decrease in rail contribution resulted from running repairs required on certain
of the railcars in the fleet during 1996 which were not needed during 1995;
Marine containers: Marine container lease revenues and expenses were $1.6
million and $9,000, respectively, for the nine months ended 1996, compared to
$2.2 million and $20,000, 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.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $14.3 million for the nine months ended September 30,
1996, decreased from $16.2 million for the same period in 1995. The variances
are explained as follows:
(a) A $2.6 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. These decreases were offset, in
part, by the purchase of two marine vessels during the first quarter of 1996;
(b) A $0.3 million increase in interest expense due to the net increase in
short-term debt of $9.0 million which was in place for six months during 1996
compared to $1.7 million in short-term debt which was in place for one month
during the same period of 1995;
(c) A $0.6 million increase in bad debt expenses due to an increase in the
amount due from certain lessees;
(d) A $0.1 million decrease in management fees due to lower revenues earned,
when compared to the same period of 1995.
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the nine months ended September 30,
1996 totaled $7.2 million which resulted primarily from the sale of one marine
vessel which was held for sale as of December 31, 1995, with a net book value of
$14.6 million at the date of sale for proceeds of $20.8 million. Included in the
gain of $6.3 million from the sale of the marine vessel, is the unused portion
of accrued drydocking of $0.1 million. Other equipment sold or disposed of
included 195 marine containers, 58 trailers, 4 aircraft engines and 2 railcar
with an aggregate net book value of $5.8 million for proceeds of $6.7 million.
Net gain on disposition of equipment for the nine months ended September 30,
1995, totaled $72,000 which resulted from the sale or disposition of 234 marine
containers, 36 trailers and 1 railcar with an aggregate net book value of
$666,000 for proceeds of $738,000.
(D) Interest and other income
Interest and other income decreased $131,000 during the nine months ended
September 30, 1996 due primarily to the receipt of a business interruption claim
for $0.2 million during 1995. This reduction to other income was offset, in
part, by an increase in interest income due to higher cash balances available
for investments when compared to the same period of 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 nine months
ended September 30,
1996 1995
--------------------------
<S> <C> <C>
Aircraft $ (1,398 ) $ (718 )
Marine vessels (131 ) (99 )
Mobile offshore drilling unit 5,723 (175 )
</TABLE>
Aircraft: As of September 30, 1996, the Partnership owned 64% of a Boeing 767
commercial aircraft and had acquired a partial beneficial interests in two
trusts which hold 10 commercial aircraft during the later half of 1995 and the
first quarter of 1996. As of September 30, 1995, the Partnership only owned the
64% of the Boeing 767 commercial aircraft. During the nine months ended
September 30, 1996, revenues of $4.6 million were offset by depreciation and
administrative expenses of $6.0 million. During the same period of 1995,
revenues of $2.4 million were offset by depreciation and administrative expenses
of $3.1 million.
Marine vessel: As of September 30, 1996, the Partnership owned a 20% interest in
a marine vessel and a 50% interest in another marine vessel which was purchased
during the first quarter of 1996. As of September 30, 1995, the Partnership only
owned the 20% interest in the marine vessel. During the nine months ended
September 30, 1996, revenues of $1.2 million were offset by depreciation and
administrative expenses of $1.3 million. During the same period of 1995,
revenues of $425,000 were offset by depreciation and administrative expenses of
$524,000.
Mobile offshore drilling unit: As of September 30, 1996, the mobile offshore
drilling unit (rig) which was owned by two affiliated Partnerships was sold by
the General Partner. The increase of $5.9 million during the nine months ended
September 30, 1996, resulted primarily from the gain on the sale of the rig. The
Partnership's share of the liquidating distribution was $11.7 million. Revenues
of $0.7 million earned during the nine months ended September 30, 1996 were
offset by depreciation and administrative expenses of $0.8 million. During the
same period of 1995, revenues of $0.9 million were offset by depreciation and
administrative expenses of $1.1 million
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net income of $9.3 million for
the nine months ended September 30, 1996, increased from a net loss of $2.0
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 $12.4 million to the Unitholders, or $1.50 per
Depositary Unit.
(II) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering, and permanent debt financing of
$30 million. No further capital contributions from original partners are
permitted under the terms of the Partnership's Limited Partnership 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.
For the nine months ended September 30, 1996, the Partnership generated
sufficient operating cash to meet its operating obligations and maintain the
current level of distributions (total for nine months ended September 30, 1996
of approximately $13.1 million) to the partners. During the nine months ended
September 30, 1996, the General Partner sold equipment for $27.1 million while
reinvesting approximately $29.8 million (including capital improvements and
fees).
The General Partner has entered into a joint $50 million credit facility (the
"Committed Bridge Facility") on behalf of the Partnership, PLM Equipment Growth
Fund IV, PLM Equipment Growth Fund V, 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 (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,
AFG, TECAI 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 $39,033,000
in outstanding borrowings. Neither the Partnership, Fund I, TECAI nor any of the
other programs had any outstanding borrowings.
(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) Exhibits
None.
(b) Reports on From 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 VI
By: PLM Financial Services, Inc.
General Partner
Date: November 11, 1996 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,292
<SECURITIES> 0
<RECEIVABLES> 2,651
<ALLOWANCES> 1,066
<INVENTORY> 0
<CURRENT-ASSETS> 278
<PP&E> 109,996
<DEPRECIATION> (43,821)
<TOTAL-ASSETS> 116,601
<CURRENT-LIABILITIES> 393
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 81,141
<TOTAL-LIABILITY-AND-EQUITY> 116,601
<SALES> 0
<TOTAL-REVENUES> 25,127
<CGS> 0
<TOTAL-COSTS> 17,391
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 824
<INTEREST-EXPENSE> 1,830
<INCOME-PRETAX> 9,276
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,276
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
