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 33-40093
-----------------------
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, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-----------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 81,568 $ 109,551
Less accumulated depreciation (37,958 ) (46,544 )
-----------------------------------
43,610 63,007
Equipment held for sale 10,525 -
-----------------------------------
Net equipment 54,135 63,007
Cash and cash equivalents 1,090 3,017
Restricted cash 1,416 1,285
Investments in unconsolidated special-purpose entities 47,463 42,119
Accounts receivable, net of allowance for doubtful accounts
of $1,659 in 1997 and $1,188 in 1996 3,374 3,253
Net investment in direct finance leases 179 254
Prepaid expenses and other assets 82 241
Deferred charges, net of accumulated amortization of
$284 in 1997 and $381 in 1996 264 349
-----------------------------------
Total assets $ 108,003 $ 113,525
===================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 869 $ 1,048
Due to affiliates 2,677 2,177
Lessee deposits and reserve for repairs 3,970 3,224
Short-term note payable 10,000 1,286
Note payable 30,000 30,000
-----------------------------------
Total liabilities 47,516 37,735
-----------------------------------
Partners' capital:
Limited partners (8,247,265 depositary units as of September
30, 1997 and 8,286,966 as of December 31, 1996) 60,487 75,790
General Partner - -
-----------------------------------
Total partners' capital 60,487 75,790
-----------------------------------
Total liabilities and partner's capital $ 108,003 $ 113,525
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 $ 5,687 $ 5,714 $ 17,070 $ 17,590
Interest and other income 124 57 370 374
Net gain (loss) on disposition of equipment (103 ) 623 (98 ) 7,163
------------------------------------------------------------
Total revenues 5,708 6,394 17,342 25,127
------------------------------------------------------------
Expenses:
Depreciation and amortization 2,529 3,132 7,676 9,421
Repairs and maintenance 1,085 752 2,834 2,378
Equipment operating expense 996 834 2,808 2,544
Interest expense 686 619 1,700 1,830
Insurance expense to affiliate 34 45 145 157
Other insurance expense 249 205 622 601
Management fees to affiliate 296 370 926 1,011
General and administrative expenses
to affiliates 244 203 636 719
Other general and administrative expenses 451 186 1,277 560
Provision for bad debt 374 12 429 824
--------------------------
------------------------------------------------------------
Total expenses 6,944 6,358 19,053 20,045
------------------------------------------------------------
Equity in net income (loss) of unconsol-
idated special-purpose entities (111 ) 5,276 (61 ) 4,194
------------------------------------------------------------
Net income (loss) $ (1,347 ) $ 5,312 $ (1,772 ) $ 9,276
============================================================
Partners' share of net income (loss):
Limited partners $ (1,564 ) $ 5,094 $ (2,424 ) $ 8,621
General Partner 217 218 652 655
------------------------------------------------------------
Total $ (1,347 ) $ 5,312 $ (1,772 ) $ 9,276
============================================================
Net income (loss) per weighted-average
depositary unit (8,260,608 units and
8,294,835 units as of September 30,
1997 and 1996, respectively) $ (0.19 ) $ 0.61 $ (0.29 ) $ 1.04
============================================================
Cash distributions $ 4,340 $ 4,363 $ 13,045 $ 13,102
============================================================
Cash distributions per weighted-average
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, 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 $ 85,430 $ - $ 85,430
Net income 7,418 873 8,291
Repurchase of depositary units (464 ) - (464 )
Cash distributions (16,594 ) (873 ) (17,467 )
-------------------------------------------------------
Partners' capital as of December 31, 1996 75,790 - 75,790
Net income (loss) (2,424 ) 652 (1,772 )
Repurchase of depositary units (486 ) - (486 )
Cash distributions (12,393 ) (652 ) (13,045 )
-------------------------------------------------------
Partners' capital as of September 30, 1997 $ 60,487 $ - $ 60,487
=======================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 (loss) $ (1,772 ) $ 9,276
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Net loss (gain) on disposition of equipment 98 (7,163 )
Equity in net (income) loss from unconsolidated
special-purpose entities 61 (4,194 )
Depreciation and amortization 7,676 9,421
Changes in operating assets and liabilities:
Restricted cash (131 ) 33
Accounts receivable (98 ) 762
Prepaid expenses 159 88
Accounts payable and accrued expenses (179 ) (459 )
Due to affiliates 500 62
Lessee deposits and reserve for repairs 746 270
-----------------------------
Net cash provided by operating activities 7,060 8,096
-----------------------------
Investing activities:
Payments for purchase of equipment (11 ) (13,924 )
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (10,603 ) (15,051 )
Distributions from unconsolidated special-purpose entities 5,198 5,171
Payments of acquisition fees to affiliate - (675 )
Payments of lease negotiation fees to affiliate - (152 )
Distributions from liquidation of unconsolidated special-purpose entities - 11,677
Principal payments received from direct finance leases 59 41
Proceeds from disposition of equipment 1,187 27,074
-----------------------------
Net cash (used in) provided by investing activities (4,170 ) 14,161
-----------------------------
Financing activities:
Proceeds from short-term note payable 10,551 9,000
Payments of short-term note payable (1,837 ) (9,000 )
Proceeds from short-term loan from affiliate 1,000 -
Payment of short-term loan to affiliate (1,000 ) -
Cash distributions paid to limited partners (12,393 ) (12,447 )
Cash distributions paid to General Partner (652 ) (655 )
Repurchase of depositary units (486 ) (463 )
-----------------------------
Net cash used in financing activities (4,817 ) (13,565 )
-----------------------------
Net (decrease) increase in cash and cash equivalents (1,927 ) 8,692
Cash and cash equivalents at beginning of period 3,017 2,600
-----------------------------
Cash and cash equivalents at end of period $ 1,090 $ 11,292
=============================
Supplemental information:
Interest paid $ 1,665 $ 2,011
=============================
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 43 $ 39
=============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 VI (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 up to 54,000 depositary
units for an aggregate purchase price of up to a maximum of $0.7 million. As of
September 30, 1997, the Partnership had repurchased 39,701 depositary units for
$0.5 million. The General Partner may repurchase the additional units in the
future.
4. Cash Distributions
Cash distributions are recorded when paid and totaled $4.3 million and $13.0
million for the three and nine months ended September 30, 1997, respectively.
Cash distributions to limited partners in excess of net income are considered to
represent a return of capital. Cash distributions to the limited partners of
$12.4 million and $3.8 million for the nine months ended September 30, 1997 and
1996, respectively, were deemed to be a return of capital. Cash distributions
related to the results from the third quarter of 1997, of $2.4 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) included
the following jointly-owned equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-----------------------------
<S> <C> <C>
64% interest in a trust owning a 767-200ER commercial aircraft $ 13,492 $ 15,453
52.5% interest in an entity owning a product tanker 10,108 -
50% interest in a trust that owns four commercial aircraft 7,241 8,410
30% interest in an entity owning a mobile offshore drilling unit 5,192 6,196
40% interest in two commercial aircraft on direct finance lease 4,652 4,429
50% interest in an entity owning a container feeder vessel 2,928 3,197
17% interest in a trust that owns six commercial aircraft 2,171 2,583
20% interest in an entity owning a handymax bulk carrier 1,679 1,851
----------- -----------
Net investments $ 47,463 $ 42,119
=========== ===========
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
5. Investments in Unconsolidated Special-Purpose Entities (continued)
During September 1997, the Partnership purchased an interest in an entity that
purchased a product tanker marine vessel for $10.6 million, including
acquisition and lease negotiation fees of $0.6 million to FSI (the remaining
interest in this product tanker belongs to an affiliated partnership).
6. Equipment
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------------------------------
<S> <C> <C>
Equipment held for operating leases:
Aircraft, aircraft engines, and
components $ 18,259 $ 18,259
Trailers 16,619 17,985
Marine vessels 16,036 41,263
Rail equipment 15,651 15,643
Marine containers 15,003 16,401
----------- ------------
81,568 109,551
Less accumulated depreciation (37,958 ) (46,544 )
------------
-----------
43,610 63,007
Equipment held for sale 10,525 -
----------- ------------
Net equipment $ 54,135 $ 63,007
=========== ============
</TABLE>
As of September 30, 1997, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 121 containers
and 6 railcars. As of December 31, 1996, all of the equipment was on lease or
operating in PLM-affiliated short-term trailer rental facilities, except for six
railcars. The net book value of the equipment off lease was $0.7 million and
$0.2 million as of September 30, 1997 and December 31, 1996, respectively.
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, two marine
vessels, which are currently on lease and subject to a pending sale for $18.3
million, were held for sale.
During the nine months ended September 30, 1997, the Partnership disposed of or
sold marine containers and trailers with an aggregate net book value of $1.3
million for $1.2 million.
During the nine months ended September 30, 1996, the Partnership disposed of or
sold marine containers, trailers, aircraft engines, and railcars with an
aggregate net book value of $5.8 million for proceeds of $6.7 million. The
Partnership also sold one marine vessel with a net book value of $14.6 million
for proceeds of $20.8 million. Included in the gain of $6.3 million from the
sale of the marine vessel was the unused portion of accrued drydocking of $0.1
million.
7. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner were
$0.3 million as of September 30, 1997 and December 31, 1996. The Partnership's
proportional share of USPE-affiliated management fees of $0.1 million and
$27,000 were payable as of September 30, 1997 and December 31, 1996,
respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 are 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 $ 125 $ 82 $ 319 $ 229
Data processing and administrative
expenses 32 50 85 82
Insurance expense 6 8 27 (9 )
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine insurance
coverage for Partnership equipment and other insurance brokerage services. TEI
is an affiliate of the General Partner.
The Partnership's proportional share of lease negotiation and equipment
acquisition fees of $0.6 million was incurred or paid by a USPE to FSI during
the nine months ended September 30, 1997. During the nine months ended September
30, 1996, the Partnership's proportional share of lease negotiation and
equipment acquisition fees of $0.6 million was incurred or paid by the USPEs to
PLM Worldwide Management Services, a wholly-owned subsidiary of PLM
International, Inc. (PLMI).
The balance due to affiliates as of September 30, 1997 included $0.3 million due
to FSI and its affiliates for management fees and $2.4 million due to a USPE.
The balance due to affiliates as of December 31, 1996 included $0.3 million due
to FSI and its affiliates for management fees and $1.9 million due to a USPE.
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 $10.0
million with the short-term joint $50.0 million credit facility and PLM
Equipment Growth Fund V had $9.1 million in outstanding borrowings. No other
eligible borrower had any outstanding borrowings
The Partnership's senior loan agreement requires that the Partnership maintain a
specific amount of consolidated debt to cash equivalents and equipment value.
Prior to obtaining additional debt under the short-term credit facility, the
Partnership obtained a waiver increasing the allowable consolidated debt to
$40.0 million. The Partnership's waiver will expire on December 15, 1997.
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
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
9. Contingencies (continued)
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.
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 PLM Equipment Growth Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in certain California limited partnerships sponsored by PLM Securities,
for which FSI acts as the general partner, including the Partnership, PLM
Equipment Growth Funds IV, and V, 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 PLM Equipment Growth Fund V
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 Events
During October 1997, the short-term credit facility was amended and restated to
decrease the available borrowings for American Finance Group, Inc. (AFG), a
subsidiary of PLMI, to $35.0 million and to extend the termination date of the
credit facility to December 2, 1997. The General Partner believes it will be
able to extend the credit facility prior to its expiration on similar terms and
increase the amount of available borrowings for AFG to $50.0 million.
<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, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the third quarter of 1997 when compared to the same quarter of
1996. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft, aircraft engines, and components $ 773 $ 826
Rail equipment 758 786
Trailers 733 738
Marine vessels 615 1,023
Marine containers 456 443
</TABLE>
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $0.8 million and $0.1 million, respectively, for the three months
ended September 30, 1997, compared to $1.0 million and $0.1 million,
respectively, during the same period of 1996. The decrease in aircraft
contribution was due to one aircraft being off-lease during the third quarter of
1997, compared to being on lease during the same period of 1996.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.0
million and $0.3 million, respectively, for the three months ended September 30,
1997, compared to $1.1 million and $0.3 million, respectively, during the same
period of 1996. Although the railcar fleet remained relatively the same size for
both quarters, the decrease in railcar contribution resulted from lower lease
revenues earned on railcars that were in the shop for required repairs during
1997.
Trailers: Trailer lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, for the three months ended September 30, 1997, compared
to $1.0 million and $0.2 million, respectively, during the same period of 1996.
The number of trailers 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 trailer contribution.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.4
million and $1.8 million, respectively, for the three months ended September 30,
1997, compared to $2.3 million and $1.3 million, respectively, during the same
period of 1996. The decrease in marine vessel contribution was due to one marine
vessel that required repairs during the quarter, which were not needed during
the same period of 1996. In addition, during the third quarter of 1997, drydock
expenses increased for two marine vessels. The increases in marine vessel
expenses were offset in part by an increase in lease revenues earned on two
marine vessels during 1997 when compared to the same period of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.5
million and $3,000, respectively, for the three months ended September 30, 1997,
compared to $0.4 million and $3,000, respectively, during the same quarter of
1996
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.6 million for the quarter ended September 30, 1997
increased from $4.5 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $0.4 million increase in the provision for bad debts reflects the
General Partner's evaluation of the collectibility of receivables due from
certain lessees.
(2) A $0.3 million increase in administrative expenses was due to
additional professional services needed to collect balances due from certain
nonperforming lessees.
(3) A $0.1 million increase in interest expense was due to a higher balance
outstanding on the notes payable when compared to the same period of 1996.
(4) A $0.6 million decrease in depreciation and amortization expenses from
1996 levels reflects the sale of certain assets during 1996 and 1997 and the
double-declining balance method of depreciation.
(5) A $0.1 million decrease in management fees was due to an increase in
the amount in the provision for bad debts expense account.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the third quarter of 1997
totaled $0.1 million, and resulted from the sale of marine containers and
trailers, with an aggregate net book value of $0.4 million, for $0.3 million.
For the third quarter of 1996, the $0.6 million net gain on the disposition of
owned equipment resulted from the sale or disposal of marine containers,
aircraft engines, trailers, and a railcar, with an aggregate net book value of
$3.0 million, for proceeds of $3.6 million.
(D) Interest and Other Income
Interest and other income increased $0.1 million during the third quarter of
1997, due primarily to the receipt of a business interruption claim. No such
claim was received during 1996. The increase in other income was offset, in
part, by lower interest income due to lower cash balances available for
investment throughout most of the quarter, 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 Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 109 $ (469 )
Marine vessels (218 ) (60 )
Mobile offshore drilling unit (2 ) 5,805
</TABLE>
Aircraft: As of September 30, 1997, the Partnership owned an interest in an
entity which owns a Boeing 767 commercial aircraft, an interest in two
commercial aircraft on a direct finance lease, and interests in two trusts that
hold ten commercial aircraft. As of September 30, 1996, the Partnership owned an
interest in an entity which owns a Boeing 767 commercial aircraft, an interest
in a trust that held seven commercial aircraft, and owned an interest in a trust
that held five commercial aircraft. During the third quarter of 1997, revenues
of $1.9 million were offset by depreciation and administrative expenses of $1.8
million. During the same period of 1996, lease revenues of $1.7 million were
offset by depreciation and administrative expenses of $2.2 million. The increase
in lease revenues during the third quarter of 1997 was due to the purchase of
the aircraft on a direct finance lease during the fourth quarter of 1996.
Depreciation and administrative expenses decreased, due primarily to the
double-declining balance method of depreciation.
Marine vessels: As of September 30, 1997, the Partnership owned an interest in
entities which own three marine vessels, one of which was purchased during the
third quarter 1997. As of September 30, 1996, the Partnership owned an interest
in two marine vessels. During the third quarter of 1997, revenues of $1.1
million were offset by depreciation and administrative expenses of $1.3 million.
During the same period of 1996, revenues of $0.4 million were offset by
depreciation and administrative expenses of $0.5 million. The primary reason for
the large increases in revenues and expenses was due to the purchase of one
additional marine vessel during 1997.
Mobile offshore drilling unit: As of September 30, 1997, the Partnership owned
an interest in a mobile offshore drilling unit (rig) that was purchased during
the fourth quarter of 1996. At September 30, 1996, the Partnership had sold its
interest in the rig during the latter part of the third quarter of 1996. During
the third quarter of 1997, revenues of $0.3 million were offset by depreciation
and administrative expenses of $0.3 million. During the same period of 1996,
revenues of $0.2 million and the $5.8 million gain from the sale of the rig were
offset by depreciation and administrative expenses of $0.2 million.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the period ended
September 30, 1997 was $1.3 million, compared to a net income of $5.3 million
during the same period of 1996. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the third
quarter of 1997 is not necessarily indicative of future periods. In the third
quarter of 1997, the Partnership distributed $4.1 million to the limited
partners, or $0.50 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,
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30, 1997 when compared to the
same period of 1996. The following table presents 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 $ 2,558 $ 2,999
Rail equipment 2,405 2,129
Marine vessels 2,258 2,815
Trailers 2,157 2,353
Marine containers 1,318 1,577
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$2.7 million and $0.1 million, respectively, for the nine months ended September
30, 1997, compared to $3.2 million and $0.3 million, respectively, during the
same period of 1996. The decrease in aircraft contribution was due to the sale
of two aircraft engines during the second quarter of 1996.
Rail equipment: Rail equipment lease revenues and direct expenses were $3.1
million and $0.7 million, respectively, for the nine months ended September 30,
1997, compared to $3.1 million and $0.9 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 fewer running
repairs during 1997 than were required on certain of the railcars in the fleet
during 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $7.2
million and $4.9 million, respectively, for the nine months ended September 30,
1997, compared to $6.5 million and $3.7 million, respectively, during the same
period of 1996. The increase in marine vessel lease revenues was due to the
purchase of two marine vessels during the second quarter of 1996 that were on
lease for the full nine months of 1997, compared to being on lease for only a
partial period of 1996. The increase in lease revenues from the purchased marine
vessels was offset, in part, by lower day rates earned on two other marine
vessels during 1997 when compared to 1996. Direct expenses increased $1.2
million during the nine months ended 1997, due primarily to repairs to one
marine vessel that were not needed during 1996. In addition, the same two marine
vessels that were purchased during 1996 had nine full months of expenses during
1997, compared to expenses for only a partial period of 1996.
Trailers: Trailer lease revenues and direct expenses were $2.7 million and $0.6
million, respectively, for the nine months ended September 30, 1997, compared to
$3.1 million and $0.8 million, respectively, during the same period of 1996. The
number of trailers 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 trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $1.3
million and $10,000, respectively, for the nine months ended September 30, 1997,
compared to $1.6 million and $9,000, 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.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $12.6 million for the nine months ended September 30,
1997 decreased from $14.3 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $1.7 million decrease in depreciation and amortization expenses from
1996 levels reflects the sale of certain assets during 1996 and 1997 and the
double-declining balance method of depreciation.
(2) A $0.4 million decrease in the allowance for bad debts reflects the
General Partner's evaluation of the collectibility of receivables due from
certain lessees.
(3) A $0.1 million decrease in management fees was due to an increase in
the amount in the provision for bad debt expense account and lower lease
revenues.
(4) A $0.1 million decrease in interest expense was due to a lower balance
remaining on the long-term note payable, offset partially by a higher average
balance outstanding in the short-term bridge note payable when compared to the
same period of 1996.
(5) A $0.6 million increase in administrative expenses was because of the
additional professional services needed to collect balances due from certain
nonperforming lessees.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of equipment for the nine months ended September
30, 1997 totaled $0.1 million, and resulted from the sale of marine containers
and trailers, with an aggregate net book value of $1.3 million, for $1.2
million. For the nine months ended September 30, 1996, the $7.2 million net gain
on the disposition of equipment resulted from the sale or disposal of marine
containers, aircraft engines, trailers, and a railcar, with an aggregate net
book value of $5.8 million, for proceeds of $6.7 million., In addition, one
marine vessel with a net book value of $14.6 million was sold for proceeds of
$20.8 million. Included in the gain of $6.3 million from the sale of the marine
vessel was the unused portion of accrued drydocking of $0.1 million.
(D) Interest and Other Income
Interest and other income remained relatively the same during the nine months
ended September 30, 1997 and 1996. Interest income during the nine months of
1997 decreased due to lower cash balances available for investment when compared
to the same period of 1996. This decrease was offset in part by the receipt of
$0.2 million in a business interruption claim during 1997.
<PAGE>
(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 $ 559 $ (1,398 )
Marine vessels (488 ) (131 )
Mobile offshore drilling unit (132 ) 5,723
</TABLE>
Aircraft: As of September 30, 1997, the Partnership owned an interest in an
entity which owns a Boeing 767 commercial aircraft, an interest in an entity
which owns two commercial aircraft on a direct finance lease, and interests in
two trusts that hold ten commercial aircraft. As of September 30, 1996, the
Partnership owned an interest in an entity which owns a Boeing 767 commercial
aircraft, an interest in a trust that held seven commercial aircraft, and an
interest in a trust that held five commercial aircraft. During the nine months
ended September 30, 1997, revenues of $5.7 million were offset by depreciation
and administrative expenses of $5.2 million. During the same period of 1996,
lease revenues of $4.6 million were offset by depreciation and administrative
expenses of $6.0 million. The increase of $1.1 million in revenues was due to
the purchase of an entity which owns two commercial aircraft on a direct finance
lease during 1997 and the purchase of a trust that held five commercial aircraft
during the latter half of the first quarter of 1996. The decrease of $0.8
million in depreciation and administrative expenses was due primarily to the
double declining balance method of depreciation
Marine vessels: As of September 30, 1997, the Partnership owned an interest in
entities which own three marine vessels, one of which was purchased during the
third quarter of 1997. As of September 30, 1996, the Partnership owned an
interest in two marine vessels. During the nine months ended September 30, 1997,
revenues of $1.9 million were offset by depreciation and administrative expenses
of $2.4 million. During the same period of 1996, revenues of $1.2 million were
offset by depreciation and administrative expenses of $1.3 million. The primary
reason revenues and expenses increased during 1997 was due to the purchase of
one of the marine vessels during the latter half of the first quarter of 1996.
In addition, revenues and expenses also increased due to the purchase of an
additional marine vessel during the third quarter of 1997.
Mobile offshore drilling unit: As of September 30, 1997, the Partnership owned
an interest in a rig that was purchased during the fourth quarter of 1996. In
the third quarter of 1996, the Partnership sold its interest in a rig. During
the nine months ended September 30, 1997, revenues of $0.8 million were offset
by depreciation and administrative expenses of $0.9 million. During the same
period of 1996, revenues of $0.7 million and the gain from the sale of the rig
of $5.8 million were offset by depreciation and administrative expenses of $0.8
million.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the nine months
ended September 30, 1997 was $1.8 million, compared to a net income of $9.3
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 nine months
ended September 30, 1997 is not necessarily indicative of future periods. In the
nine months ended September 30, 1997, the Partnership distributed $12.4 million
to the limited partners, or $1.50 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the nine months ended September 30, 1997, the Partnership generated $12.3
million in operating cash (net cash provided by operating activities, plus
distributions from unconsolidated special-purpose entities) to meet its
operating obligations, maintain working capital reserves, and maintain the
current level of distributions (total for the nine months ended September 30,
1997 of $13.0 million) to the partners, but also used undistributed available
cash from prior periods of $0.7 million.
During the nine months ended September 30, 1997, the Partnership sold equipment
for $1.2 million and purchased an interest in an entity that acquired a product
tanker marine vessel (the remaining interest in this product tanker belongs to
an affiliated partnership). The Partnership's interest in this purchase was
$10.6 million, including acquisition and lease negotiation fees of $0.6 million
payable to PLM Financial Services, Inc. (FSI or the General Partner). FSI is a
wholly-owned subsidiary of PLM International, Inc. The Partnership used the
short-term credit facility to finance the purchase. Proceeds from planned
equipment sales will be used to repay the short-term credit facility.
During May 1997, the Partnership borrowed $1.0 million from FSI in connection
with the product tanker marine vessel and was repaid during July of 1997.
The General Partner has entered into a short-term joint $50.0 million credit
facility. As of November 10, 1997, the Partnership had $2.0 million in
outstanding borrowings and PLM Equipment Growth Fund V had $3.6 million in
outstanding borrowings. Neither PLM Equipment Growth Fund IV, PLM Equipment
Growth & Income Fund VII, American Finance Group, Inc. (AFG), a wholly-owned
subsidiary of PLM International, Inc., 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 to
decrease the available borrowings for AFG to $35.0 million and to extend the
termination date of the credit facility to December 2, 1997. The General Partner
believes it will be able to extend the credit facility prior to its expiration
on similar terms and increase the amount of available borrowings for AFG to
$50.0 million.
The Partnership's senior loan agreement requires that the Partnership maintain a
specific amount of consolidated debt to cash equivalents and equipment value.
Prior to obtaining additional debt under the credit facility, the Partnership
obtained a waiver increasing the allowable consolidated debt to $40.0 million.
The Partnership's waiver will expire on December 15, 1997.
(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 if it determines that it cannot operate equipment
to 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 making payments
of expenses and loan principal, maintaining working capital reserves, and making
cash distributions, to acquire additional equipment during the second 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 VI
By: PLM Financial Services, Inc.
General Partner
Date: November 10, 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> 2,506
<SECURITIES> 0
<RECEIVABLES> 3,374
<ALLOWANCES> (1,659)
<INVENTORY> 0
<CURRENT-ASSETS> 4,464
<PP&E> 81,568
<DEPRECIATION> 37,958
<TOTAL-ASSETS> 108,003
<CURRENT-LIABILITIES> 3,546
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 60,487
<TOTAL-LIABILITY-AND-EQUITY> 108,003
<SALES> 0
<TOTAL-REVENUES> 17,398
<CGS> 0
<TOTAL-COSTS> 19,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 485
<INTEREST-EXPENSE> 1,700
<INCOME-PRETAX> (1,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,772)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
