.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 33-40093
-----------------------
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>
June 30, December 31,
1997 1996
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 107,619 $ 109,551
Less accumulated depreciation (50,630 ) (46,544 )
Net equipment 56,989 63,007
Cash and cash equivalents 1,235 3,017
Restricted cash 1,448 1,285
Investments in unconsolidated special-purpose entities 40,413 42,119
Accounts receivable, net of allowance for doubtful accounts
of $1,240 in 1997 and $1,188 in 1996 3,083 3,253
Net investment in direct finance leases 412 254
Prepaid expenses and other assets 121 241
Deferred charges, net of accumulated amortization of
$257 in 1997 and $381 in 1996 292 349
Total assets $ 103,993 $ 113,525
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 542 1,048
Due to affiliates 3,535 2,177
Lessee deposits and reserve for repairs 3,742 3,224
Short-term note payable - 1,286
Note payable 30,000 30,000
Total liabilities 37,819 37,735
Partners' capital:
Limited partners (8,247,265 depositary units as of June 30,
1997 and 8,286,966 as of December 31, 1996) 66,174 75,790
General Partner - -
Total partners' capital 66,174 75,790
Total liabilities and partner's capital $ 103,993 113,525
</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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 5,729 $ 6,521 $ 11,384 $ 11,876
Interest and other income 213 88 245 317
Net gain (loss) on disposition of equipment (7 ) 211 5 6,540
Total revenues 5,935 6,820 11,634 18,733
Expenses:
Depreciation and amortization 2,564 3,316 5,146 6,289
Repairs and maintenance 1,057 846 1,749 1,625
Equipment operating expense 991 1,005 1,812 1,710
Interest expense 512 688 1,014 1,211
Insurance expense to affiliate 43 52 111 112
Other insurance expense 171 198 373 396
Management fees to affiliate 307 348 630 641
General and administrative expenses
to affiliates 177 271 396 517
Other general and administrative expenses 462 216 823 374
Provision for bad debt 214 678 55 812
Total expenses 6,498 7,618 12,109 13,687
Equity in net income (loss) of unconsol-
idated special-purpose entities (59 ) (630 ) 50 (1,082 )
Net income (loss) $ (622 ) $ (1,428 ) $ (425 ) $ 3,964
Partners' share of net income (loss):
Limited partners $ (839 ) $ (1,646 ) $ (860 ) $ 3,527
General Partner 217 218 435 437
Total $ (622 ) $ (1,428 ) $ (425 ) $ 3,964
Net income (loss) per weighted-average
depositary unit (8,267,390 units and
8,298,812 units as of June 30, 1997
and 1996, respectively) $ (0.10 ) $ (0.20 ) $ (0.10 ) $ 0.43
Cash distributions $ 4,343 $ 4,365 $ 8,705 $ 8,739
Cash distributions per weighted-average
depositary unit $ 0.50 $ 0.50 $ 1.00 $ 1.00
</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 June 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Partners' capital as of December 31, 1995 $ 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) (860 ) 435 (425 )
Repurchase of depositary units (486 ) - (486 )
Cash distributions (8,270 ) (435 ) (8,705 )
Partners' capital as of June 30, 1997 $ 66,174 $ - $ 66,174
</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 Six Months
Ended June 30,
1977 1996
<S> <C> <C>
Operating activities:
Net income (loss) $ (425 ) $ 3,964
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Net gain on disposition of equipment (5 ) (6,540 )
Equity in net (income) loss from unconsolidated
special-purpose entities (50 ) 1,082
Depreciation and amortization 5,146 6,289
Changes in operating assets and liabilities:
Restricted cash (163 ) 28
Accounts receivable 231 651
Prepaid expenses 120 49
Accounts payable and accrued expenses (505 ) (242 )
Due to affiliates 358 (805 )
Lessee deposits and reserve for repairs 518 908
Net cash provided by operating activities 5,225 5,384
Investing activities:
Payments for purchase of equipment (6 ) (13,914 )
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (1,050 ) (15,051 )
Distributions from unconsolidated special-purpose entities 2,806 2.713
Payments of acquisition fees to affiliate - (675 )
Payments of lease negotiation fees to affiliate - (152 )
Principal payments received from direct finance leases 147 20
Proceeds from disposition of equipment 573 23,419
Net cash provided by (used in) investing activities 2,470 (3,640 )
Financing activities:
Proceeds from short-term note payable - 11,220
Payments of short-term note payable (1,286 ) (2,220 )
Proceeds from short-term loan from affiliate 1,000 -
Cash distributions paid to limited partners (8,270 ) (8,302 )
Cash distributions paid to General Partner (435 ) (437 )
Repurchase of depositary units (486 ) (463 )
Net cash used in financing activities (9,477 ) (202 )
Net (decrease) increase in cash and cash equivalents (1,782 ) 1,542
Cash and cash equivalents at beginning of period 3,017 2,600
Cash and cash equivalents at end of period $ 1,235 $ 4,142
Supplemental information:
Interest paid $ 1,005 $ 1,386
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 82 $ 44
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (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 June 30, 1997 and December 31, 1996, the statements of
operations for the three and six months ended June 30, 1997 and 1996, the
statements of changes in partners' capital for the period December 31, 1995 to
June 30, 1997, and the statements of cash flows for the six months ended June
30, 1997 and 1996. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
financial statements. For further information, reference should be made to the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, on file at the
Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Repurchase of Depositary Units
Pursuant to the Partnership repurchase plan, as of December 31, 1996, the
Partnership agreed to repurchase approximately 54,000 depositary units for an
aggregate purchase price of up to a maximum of $0.7 million. As of June 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 $8.7
million for the three and six months ended June 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
$8.3 million and $4.8 million for the six months ended June 30, 1997 and 1996,
respectively, were deemed to be a return of capital. Cash distributions related
to the results from the second quarter of 1997, of $2.4 million, were paid or
are payable during July and August 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>
June 30, December 31,
1997 1996
<S> <C> <C>
64% interest in a trust owning a 767-200ER commercial aircraft $ 14,030 $ 15,453
50% interest in a trust that owns four commercial aircraft 7,855 8,410
30% interest in an entity owning a mobile offshore drilling unit 5,441 6,196
40% interest in two commercial aircraft on direct finance lease 4,721 4,429
50% interest in an entity owning a container feeder vessel 3,159 3,197
17% interest in a trust that owns six commercial aircraft 2,442 2,583
20% interest in an entity owning a handymax bulk carrier 1,765 1,851
Deposit with an entity contracted to acquire a product tanker 1,000 -
Net investments $ 40,413 $ 42,119
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
5. Investments in Unconsolidated Special-Purpose Entities (continued)
During June 1997, the Partnership entered into a commitment to purchase an
interest in an entity that purchased a product tanker marine vessel (the
remaining interest in this product tanker will belong to PLM International, Inc.
or an affiliated partnership) during July 1997. The Partnership made a $1.0
million deposit toward this commitment, which is included in the balance sheet
as an investment in USPEs.
6. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner were
$0.4 million and $0.3 million as of June 30, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE-affiliated management
fees of $88,000 and $27,000 were payable as of June 30, 1997 and December 31,
1996, respectively.
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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Management fees $ 99 $ 74 $ 194 $ 147
Data processing and administrative
expenses 29 16 52 32
Insurance expense 8 (27 ) 21 (17 )
</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 the USPEs to PLM
Worldwide Management Services (WMS), a wholly-owned subsidiary of PLM
International, Inc., during the six months ended June 30, 1997 and 1996.
The balance due to affiliates as of June 30, 1997 included $0.4 million due to
its affiliates for management fees, a $1.0 million loan due to FSI (which was
repaid during July 1997), and $2.1 million due to an affiliated 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 an affiliated
USPE.
7. Equipment
The components of owned equipment are as follows (in thousands):
June 30, December 31,
Equipment held for operating leases: 1997 1996
Marine vessels $ 41,263 $ 41,263
Trailers 16,832 17,985
Rail equipment 15,648 15,643
Marine containers 15,617 16,401
Aircraft 11,919 11,919
Aircraft engines and components 6,340 6,340
107,619 109,551
Less accumulated depreciation (50,630 ) (46,544 )
Net equipment $ 56,989 $ 63,007
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
7. Equipment (continued)
As of June 30, 1997, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 142 containers
and 2 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 June 30, 1997 and December 31, 1996, respectively.
During the six months ended June 30, 1997, the Partnership disposed of or sold
marine containers and trailers with an aggregate net book value of $0.9 million
for $0.9 million, including $0.2 million from the sales-type lease related to
the sale of a group of trailers (see Note 8).
During the six months ended June 30, 1996, the Partnership disposed of or sold
marine containers, trailers, aircraft engines, and a railcar with an aggregate
net book value of $2.7 million for proceeds of $3.0 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.
8. Net Investment in a Sales-Type Lease
During the six months ended June 30, 1997, the Partnership entered into a
sales-type lease related to the sale of a group of trailers. Gross lease
payments of $0.3 million are to be received over a 39-month period, which
commenced in January 1997. The lessee has a $1 per unit buy-out option at the
lease expiration. The sale proceeds were $0.2 million, resulting in a gain at
lease inception of $39,000.
The components of the net investment in the sales-type lease as of
June 30, 1997 are as follows (in thousands):
1997
Total minimum lease payments $ 273
Less unearned income (66 )
$ 207
Future minimum rentals receivable under the sales-type lease as of June 30, 1997
for the next 33 months will be approximately $50,000 in 1997, $99,000 in 1998,
$99,000 in 1999, and $25,000 in 2000.
9. Debt
As of June 30, 1997, the Partnership had repaid its $1.3 million borrowing under
the short-term, joint $50.0 million credit facility that was outstanding on
December 31, 1996. Among the other eligible borrowers, American Finance Group,
Inc., a wholly-owned subsidiary of PLM International, Inc., had $7.1 million in
outstanding borrowings. Neither the Partnership, PLM Equipment Growth Fund IV,
PLM Equipment Growth Fund V, PLM Equipment Growth & Income Fund VII,
Professional Lease Management Income Fund I, L.L.C., nor TEC Acquisub, Inc. had
any outstanding borrowings.
The Partnership's 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 consolidated debt to $40.0 million for 104 days
after the execution date of the additional loan. The Partnership's waiver will
expire on October 27, 1997.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
10. Contingencies
PLM International, Inc. and various of its affiliates are named as defendants in
a lawsuit filed as a class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action). On
February 3, 1997, the state court filed an order conditionally certifying the
class pursuant to the provisions of Rule 23 of the Alabama Rules of Civil
Procedure (ARCP), as requested by plaintiffs in an ex parte motion filed on
January 22, 1997. Defendants were not given notice of the motion, nor were they
given an opportunity to be heard regarding the issue of conditional class
certification. The order specifies that the class shall consist of (with certain
narrow exceptions) all purchasers of limited partnership units in the
Partnership, PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, and PLM
Equipment Growth & Income Fund VII. In issuing the order, the court emphasized
that the certification is conditional in accordance with Rule 23(d) of the ARCP,
and that the plaintiffs will bear the burden of proving each requisite element
of Rule 23 at the time of the evidentiary hearing on the issue of class
certification. To date, no such hearing date has been set. The defendants filed
a notice of removal of the Koch action from the state court to the United States
District Court for the Southern District of Alabama, Southern Division (Civil
Action No. 97-0177-BH-C) on March 6, 1997, arguing that the parties are fully
diverse for the purposes of diversity jurisdiction pursuant to 28 U.S.C. Section
1441. The plaintiffs filed a motion to remand the Koch action to the state court
and defendants have responded to this motion. The federal court has not yet
ruled on this motion, and defendants do not need to respond to the complaint
until after such motion is decided. PLM International, Inc. believes that the
allegations of the Koch action are completely without merit and intends to
defend this matter vigorously.
On June 5, 1997, PLM International, Inc. and the affiliates who are also
defendants in the Koch action were named as defendants in another purported
class action filed in the San Francisco Superior Court, San Francisco,
California, Case No. 987062 (the Romei action). The named plaintiff has alleged
the same facts and the same nine causes of action as is in the Koch action (as
described in the Partnership's Form 10-K for the year ended December 31, 1996),
plus five additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, a claim for constructive fraud, a
claim for unjust enrichment, a claim for violations of California Corporations
Code Section 1507, and a claim for treble damages under California Civil Code
Section 3345. The plaintiff is an investor in PLM Equipment Growth Fund V, and
filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships
sponsored by PLM Securities, for which PLM Financial Services, Inc. acts as the
general partner, including the Partnership, PLM Equipment Growth Fund IV, PLM
Equipment Growth Fund V, and PLM Equipment Growth & Income Fund VII.
PLM International, Inc. and the other defendants removed the Romei action to the
United States District Court for the Northern District of California (Case No.
C-97-2450 SC) on June 30, 1997, based on the federal court's diversity
jurisdiction. The defendants then filed a motion to compel arbitration of the
plaintiffs' claims, based on an agreement to arbitrate contained in the PLM
Equipment Growth Fund V limited partnership agreement, to which plaintiff is a
party. A hearing on this motion to compel arbitration has been scheduled for
August 22, 1997, although the district court may decide the motion without such
argument. PLM International, Inc. believes that the allegations of the Romei
action are completely without merit and intends to defend this matter
vigorously.
11. Subsequent Events
During July 1997, the Partnership completed the purchase of an interest in an
entity to acquire a product tanker for $10.6 million, including acquisition and
lease negotiation fees of $0.5 million to WMS.
The Partnership has borrowed $10.0 million under the credit facility. These loan
proceeds were used to repay outstanding loans and to purchase an interest in an
entity owning the product tanker.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Partnership's Operating Results for the Three Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the second quarter of 1997 when compared to the same quarter of
1996. The following table presents revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft and aircraft engines $ 865 $ 1,099
Rail equipment 780 643
Marine vessels 749 1,295
Trailers 621 840
Marine containers 465 558
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$0.9 million and $0.1 million, respectively, for the three months ended June 30,
1997, compared to $1.2 million and $0.1 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 $1.0
million and $0.3 million, respectively, for the three months ended June 30,
1997, compared to $1.0 million and $0.4 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 running
repairs required on certain of the railcars in the fleet during the second
quarter of 1996, which were not needed during the same period of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.5
million and $1.7 million, respectively, for the three months ended June 30,
1997, compared to $2.6 million and $1.3 million, respectively, during the same
period of 1996. The decrease in marine vessel contribution was due to lower day
rates earned on two marine vessels during 1997 when compared to the same period
of 1996. In addition, one of the marine vessels required repairs during the
quarter, which were not needed during the same period of 1996.
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.2
million, respectively, for the three months ended June 30, 1997, compared to
$1.2 million and $0.3 million, respectively, during the same period of 1996. 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 contribution. In addition, the trailer fleet is
experiencing lower utilization in the PLM-affiliated short-term rental yards due
to soft market conditions.
Marine containers: Marine container lease revenues and direct expenses were $0.5
million and $3,000, respectively, for the three months ended June 30, 1997,
compared to $0.6 million and $3,000, respectively, during the same quarter of
1996. 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 contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.2 million for the quarter ended June 30, 1997
decreased from $5.5 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $0.8 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 $0.2 million decrease in interest expense was due to a lower balance
remaining in notes payable when compared to the same period of 1996.
(3) A $0.2 million increase in administrative expenses was due to
additional professional services needed in order to collect balances due from
certain non-performing lessees that were reserved for as a bad debt during prior
periods.
(4) A $0.5 million decrease in the allowance for bad debts was due to the
collection of unpaid invoices that had previously been reserved for bad debt.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the second quarter of
1997 totaled $7,000, and resulted from the sale of marine containers and
trailers, with an aggregate net book value of $0.7 million, for $0.7 million.
For the second quarter of 1996, the $0.2 million net gain on the disposition of
owned equipment resulted from the sale or disposal of marine containers,
aircraft engines, and trailers, with an aggregate net book value of $2.7
million, for proceeds of $2.9 million.
(D) Interest and Other Income
Interest and other income increased $0.1 million during the second quarter of
1997, due primarily to the receipt of a business interruption claim during the
second quarter of 1997. 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 June 30,
1997 1996
<S> <C> <C>
Aircraft $ 222 $ (482 )
Marine vessels (162 ) (97 )
Mobile offshore drilling unit (119 ) (51 )
</TABLE>
Aircraft: As of June 30, 1997, the Partnership owned an interest in 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 June
30, 1996, the Partnership owned an interest in a Boeing 767 commercial aircraft,
owned an interest in a trust that held seven commercial aircraft, and had just
purchased an interest in a trust that held five commercial aircraft. During the
second quarter of 1997, revenues of $1.9 million were offset by depreciation and
administrative expenses of $1.7 million. During the same period of 1996, lease
revenues of $1.7 million were offset by depreciation and administrative expenses
of $2.2 million.
Marine vessels: As of June 30, 1997 and 1996, the Partnership owned an interest
in two marine vessels. During the second quarter of 1997, revenues of $0.5
million were offset by depreciation and administrative expenses of $0.6 million.
During the same period of 1996, revenues of $0.5 million were offset by
depreciation and administrative expenses of $0.6 million. The primary reason net
contributions decreased was because one of the marine vessels earned a lower
on-lease day rate when compared to the same period of 1996.
Mobile offshore drilling unit: As of June 30, 1997, the Partnership owned an
interest in a mobile offshore drilling unit (rig) that was purchased during the
fourth quarter of 1996. As of June 30, 1996, the Partnership owned an interest
in a rig that was sold during the third quarter of 1996. During the second
quarter of 1997, revenues of $0.3 million were offset by depreciation and
administrative expenses of $0.4 million. During the same period of 1996,
revenues of $0.2 million were offset by depreciation and administrative expenses
of $0.3 million.
(F) Net Loss
As a result of the foregoing, the Partnership's net loss for the period ended
June 30, 1997 was $0.6 million, compared to a net loss of $1.4 million during
the same period of 1996. The Partnership's ability to operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors, and the Partnership's performance in the second quarter of 1997
is not necessarily indicative of future periods. In the second quarter of 1997,
the Partnership distributed $4.1 million to the limited partners, or $0.50 per
weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Six Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the six months ended June 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 Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft and aircraft engines $ 1,786 $ 2,173
Rail equipment 1,647 1,343
Marine vessels 1,643 1,807
Trailers 1,424 1,615
Marine containers 862 1,135
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$1.9 million and $0.1 million, respectively, for the six months ended June 30,
1997, compared to $2.3 million and $0.1 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 $2.1
million and $0.4 million, respectively, for the six months ended June 30, 1997,
compared to $2.0 million and $0.7 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 not needing the
running repairs during 1997 that were required on certain of the railcars in the
fleet during 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $4.8
million and $3.1 million, respectively, for the six months ended June 30, 1997,
compared to $4.2 million and $2.4 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 six 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 $0.7 million during the
six months ended 1997, due primarily to repairs needed to one marine vessel that
were not needed during 1996; also, the same two marine vessels that were
purchased during 1996 had six full months of expenses during 1997, compared to
repairs for only a partial period of 1996.
Trailers: Trailer lease revenues and direct expenses were $1.8 million and $0.4
million, respectively, for the six months ended June 30, 1997, compared to $2.2
million and $0.6 million, respectively, during the same period of 1996. 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 contribution. In addition, the trailer fleet is
experiencing lower utilization in the PLM-affiliated short-term rental yards due
to soft market conditions.
Marine containers: Marine container lease revenues and direct expenses were $0.9
million and $6,000, respectively, for the six months ended June 30, 1997,
compared to $1.1 million and $6,000, respectively, during the same quarter of
1996. 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 contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $8.1 million for the six months ended June 30, 1997
decreased from $9.8 million for the same period in 1996. The significant
variances are explained as follows:
(1) A $1.1 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 $0.2 million decrease in interest expense was due to a lower balance
remaining in notes payable when compared to the same period of 1996.
(3) A $0.3 million increase in administrative expenses was because of the
additional professional services needed to collect balances due from certain
non-performing lessees that were reserved for as a bad debt during prior
periods.
(4) A $0.7 million decrease in the allowance for bad debts was due to the
collection of unpaid invoices that had previously been reserved for bad debt.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the six months ended June 30,
1997 totaled $5,000, and resulted from the sale of marine containers and
trailers, with an aggregate net book value of $0.9 million, for $0.9 million.
For the six months ended June 30, 1996, the $6.5 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 $2.7 million, for proceeds of $3.0 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 decreased $0.1 million during the six months ended
June 30, 1997, due primarily to lower interest income caused by lower cash
balances available for investment throughout the period when compared to the
same period of 1996, which was offset in part by the receipt of $0.2 million in
a business interruption claim during 1997.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft $ 450 $ (929 )
Marine vessels (270 ) (71 )
Mobile offshore drilling unit (130 ) (82 )
</TABLE>
Aircraft: As of June 30, 1997, the Partnership owned an interest in 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 June
30, 1996, the Partnership owned an interest in a Boeing 767 commercial aircraft,
owned an interest in a trust that held seven commercial aircraft, and had just
purchased an interest in a trust that held five commercial aircraft. During the
six months ended June 30, 1997, revenues of $3.9 million were offset by
depreciation and administrative expenses of $3.4 million. During the same period
of 1996, lease revenues of $2.8 million were offset by depreciation and
administrative expenses of $3.7 million.
Marine vessels: As of June 30, 1997 and 1996, the Partnership owned an interest
in two marine vessels. During the six months ended June 30, 1997, revenues of
$0.9 million were offset by depreciation and administrative expenses of $1.1
million. During the same period of 1996, revenues of $0.8 million were offset by
depreciation and administrative expenses of $0.9 million. The primary reason
revenues and expenses increased was because of the purchase of one of the marine
vessels during the latter half of the first quarter of 1996. Revenues and
expenses during 1997 represent a full six-month period when compared to 1996;
revenues and expenses are only for a partial period.
Mobile offshore drilling unit: As of June 30, 1997, the Partnership owned an
interest in a rig that was purchased during the fourth quarter of 1996. As of
June 30, 1996, the Partnership owned an interest in a rig that was sold during
the third quarter of 1996. During the six months ended June 30, 1997 and 1996,
revenues of $0.5 million were offset by depreciation and administrative expenses
of $0.6 million.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the six months
ended June 30, 1997 was $0.4 million, compared to a net income of $4.0 million
during the same period in 1996. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the six months
ended June 30, 1997 is not necessarily indicative of future periods. In the six
months ended June 30, 1997, the Partnership distributed $8.3 million to the
limited partners, or $1.00 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the six months ended June 30, 1997, the Partnership generated $8.0 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 six months ended June 30, 1997 of approximately
$8.7 million) to the partners, but also used undistributed available cash from
prior periods of approximately $0.7 million. During the six months ended June
30, 1997, the General Partner sold equipment for $0.9 million.
During June 1997, the Partnership entered into a commitment to purchase an
interest in an entity that acquired a product tanker marine vessel (the
remaining interest in this product tanker will belong to PLM International, Inc.
or an affiliated partnership) during July 1997. The Partnership made a $1.0
million deposit toward this commitment, which is included in the balance sheet
as an investment in USPEs. The Partnership's interest in this purchase will be
$10.6 million, including acquisition and lease negotiationfees of $0.5 million
payable to PLM Worldwide Management Services (WMS). WMS 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 loan. The purchase of interest in the entity that acquired the
product tanker marine vessel was completed during July 1997.
The General Partner entered into a short-term, joint $50.0 million credit
facility. As of August 13, 1997, the Partnership had borrowings of $10.0 million
with the credit facility; American Finance Group, Inc., a wholly-owned
subsidiary of PLM International, Inc., had $13.9 million in outstanding
borrowings; and TEC Acquisub, Inc. had $7.2 million in outstanding borrowings.
Neither PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, PLM Equipment
Growth & Income Fund VII, nor Professional Lease Management Income Fund I,
L.L.C.
had any outstanding borrowings.
The Partnership's 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 consolidated debt to $40.0 million for 104 days
after the execution date of the additional loan. The Partnership's waiver will
expire on October 27, 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.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
First amendment to the amended and restated limited
partnership agreement.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND VI
By: PLM Financial Services, Inc.
General Partner
Date: August 13, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,683
<SECURITIES> 0
<RECEIVABLES> 3,083
<ALLOWANCES> (1,240)
<INVENTORY> 0
<CURRENT-ASSETS> 4,318
<PP&E> 107,619
<DEPRECIATION> (50,630)
<TOTAL-ASSETS> 103,993
<CURRENT-LIABILITIES> 4,077
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 66,174
<TOTAL-LIABILITY-AND-EQUITY> 103,993
<SALES> 0
<TOTAL-REVENUES> 11,634
<CGS> 0
<TOTAL-COSTS> 12,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> 1,014
<INCOME-PRETAX> (425)
<INCOME-TAX> 0
<INCOME-CONTINUING> (425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (425)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PLM EQUIPMENT GROWTH FUND VI
This First Amendment ("Amendment") to the Amended and Restated Limited
Partnership Agreement ("Agreement") of PLM Equipment Growth Fund VI
("Partnership") is executed as of November 21, 1996, by its general partner, PLM
Financial Services, Inc., a Delaware corporation ("General Partner"), pursuant
to Article XVIII of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Agreement.
RECITALS
The Partners entered into a Limited Partnership Agreement as of April
22, 1991, 1989, and an Amended and Restated Limited Partnership Agreement as of
December 20, 1991.
The General Partner now amends the Agreement, pursuant to Article
XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's representations and obligations, to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General
Partner represents, warrants and agrees, and will take all action to ensure,
that this Amendment does not, and will not, detrimentally affect the Cash
Distributions of the Limited Partners or assignees or the management of the
Partnership by the General Partner.
Now, therefor, the Agreement is amended as follows:
1. Section 6.02 is amended to read in its entirety as follows:
"The General Partner shall not transfer its interest as General Partner
in the Partnership (which transfer shall be deemed as "withdrawal" of the
General Partner for purposes of Section 9.02) or its interest in the
Partnership's capital, earnings or assets (except in connection with the pledge
of the General Partner's assets or right in connection with loans or other
indebtedness) except (a) upon the approval of a majority in interest of the
Limited Partners, or (b) to an Affiliate upon its merger, consolidation with
another person or its transfer pursuant to a reorganization of all or
substantially all of its assets to another person, and the assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such successor or transferee shall on the date of such transfer, merger,
consolidation or reorganization assume all of the duties and obligations of the
General Partner set forth in this Agreement."
IN WITNESS WHEREOF, the General Partner has duly executed this
Amendment as of November 21, 1996.
PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners
By: /s/ J. Michael Allgood
------------------------
Vice President and Chief Financial Officer
