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 March 31, 1998
[ ] 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>
March 31, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 78,889 $ 71,597
Less accumulated depreciation (32,322) (33,895 )
---------------------------------------
46,567 37,702
Equipment held for sale 2,920 --
Net equipment 49,487 37,702
Cash and cash equivalents 8,011 14,204
Restricted cash 698 792
Accounts receivable, less allowance for doubtful accounts
of $2,186 in 1998 and $2,524 in 1997 1,999 2,560
Investments in unconsolidated special-purpose entities 39,823 46,796
Net investment in direct finance lease 125 153
Prepaid expenses and other assets 97 181
Deferred charges, net of accumulated amortization of
$241 in 1998 and $212 in 1997 364 238
Equipment acquisition deposits -- 1,335
---------------------------------------
Total assets $ 100,604 $ 103,961
=======================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 745 $ 1,296
Due to affiliates 2,806 2,822
Lessee deposits and reserve for repairs 2,715 2,691
Note payable 30,000 30,000
---------------------------------------
Total liabilities 36,266 36,809
---------------------------------------
Partners' capital:
Limited partners (8,220,318 limited partnership units as of
March 31, 1998 and 8,247,264 as of December 31, 1997) 64,338 67,152
General Partner -- --
---------------------------------------
Total partners' capital 64,338 67,152
---------------------------------------
Total liabilities and partner's capital $ 100,604 $ 103,961
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
---------------------------------
<S> <C> <C>
Revenues
Lease revenue $ 4,464 $ 5,637
Interest and other income 94 50
Net gain on disposition of equipment 62 12
----------------------------------
Total revenues 4,620 5,699
Expenses
Depreciation and amortization 3,501 2,582
Management fees to affiliate 249 323
Repairs and maintenance 870 692
Equipment operating expenses 774 820
Interest expense 510 502
Insurance expense to affiliate (13) 69
Other insurance expense 115 202
General and administrative expenses
to affiliates 227 219
Other general and administrative expenses 239 361
Provision for (recovery of) bad debt 127 (159)
----------------------------------
Total expenses 6,599 5,611
----------------------------------
Equity in net income of unconsolidated
special-purpose entities 3,783 109
----------------------------------
Net income $ 1,804 $ 197
==================================
Partners' share of net income (loss):
Limited partners $ 1,587 $ (21)
General Partner 217 218
----------------------------------
Total $ 1,804 $ 197
==================================
Net income (loss) per weighted-average limited partnership unit
(8,239,561 units
and 8,283,484 units as of March 31,
1998 and 1997, respectively) $ 0.19 $ (0.00)
==================================
Cash distribution $ 4,339 $ 4,362
==================================
Cash distribution per weighted-average limited partnership unit $ 0.50 $ 0.50
==================================
</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, 1996
to March 31, 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
----------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1996 $ 75,790 $ -- $ 75,790
Net income 8,363 869 9,232
Repurchase of limited partnership units (486) -- (486)
Cash distribution (16,515) (869) (17,384)
------------------------------------------------------------
Partners' capital as of December 31, 1997 67,152 -- 67,152
Net income 1,587 217 1,804
Repurchase of limited partnership units (279) -- (279)
Cash distribution (4,122) (217) (4,339)
------------------------------------------------------------
Partners' capital as of March 31, 1998 $ 64,338 $ -- $ 64,338
============================================================
</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 Three Months
Ended March 31,
1998 1997
---------------------------
<S> <C> <C>
Operating activities
Net income $ 1,804 $ 197
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Net gain on disposition of equipment (62) (12 )
Equity in net income from unconsolidated
special-purpose entities (3,783) (109 )
Depreciation and amortization 3,501 2,582
Changes in operating assets and liabilities:
Restricted cash 94 6
Accounts receivable 304 (210 )
Prepaid expenses and other assets 84 61
Accounts payable and accrued expenses (269) (194 )
Due to affiliates (16) (12 )
Lessee deposits and reserve for repairs 24 389
-------------------------------
Net cash provided by operating activities 1,681 2,698
-------------------------------
Investing activities
Payments for equipment purchases and capital improvements (14,188) (5 )
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (1,265) --
Distributions from unconsolidated special-purpose entities 2,474 1,559
Distributions from liquidation of unconsolidated special-purpose entities 9,547 --
Payments of acquisition fees to affiliate (699) --
Payments of lease negotiation fees to affiliate (155) --
Principal payments on direct finance lease 27 38
Proceeds from disposition of equipment 1,003 130
-------------------------------
Net cash (used in) provided by investing activities (3,256) 1,722
-------------------------------
Financing activities
Payments of short-term note payable -- (1,286 )
Cash distribution paid to limited partners (4,122) (4,144 )
Cash distribution paid to General Partner (217) (218 )
Repurchase of limited partnership units (279) (413 )
-------------------------------
Net cash used in financing activities (4,618) (6,061 )
-------------------------------
Net decrease in cash and cash equivalents (6,193) (1,641 )
Cash and cash equivalents at beginning of period 14,204 3,017
-------------------------------
Cash and cash equivalents at end of period $ 8,011 $ 1,376
===============================
Supplemental information
Interest paid $ 510 $ 502
===============================
Supplemental disclosure of noncash investing and financing activities:
Sale proceeds included in accounts receivable $ 33 $ --
===============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 March 31, 1998 and December 31, 1997, the statements of
income and the statements of cash flows for the three months ended March 31,
1998 and 1997, and the statements of changes in partners' capital for the period
from December 31, 1996 to March 31, 1998. Certain information and note
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, 1997,
on file with the Securities and Exchange Commission.
2. Repurchase of Limited Partnership Units
In 1997, the Partnership agreed to repurchase up to 47,000 limited partnership
units for an aggregate purchase price of up to a maximum of $0.5 million. During
the three months ended March 31, 1998, the Partnership had repurchased 26,946
limited partnership units for $0.3 million. The General Partner may repurchase
the additional units in the future.
3. Cash Distributions
Cash distributions are recorded when paid and totaled $4.3 million and $4.4
million for the three months ended March 31, 1998 and 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
$2.6 million and $4.1 million for the three months ended March 31, 1998 and
1997, respectively, were deemed to be a return of capital. Cash distributions
related to the results from the first quarter of 1998, of $2.3 million, were
paid during the second quarter of 1998.
4. Transactions with General Partner and Affiliates
The Partnership's proportional share of the affiliated expenses incurred by the
unconsolidated special-purpose entities (USPEs) during 1998 and 1997 is listed
in the following table (in thousands of dollars):
For the Three Months
Ended March 31,
1998 1997
-----------------------------
Management fees $ 127 $ 93
Data processing and administrative
expenses 38 45
Insurance expense 1 13
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, provided certain marine insurance coverage for Partnership
equipment and other insurance brokerage services during 1998 and 1997. TEI did
not provide the same insurance coverage during 1998 as had been provided for
during 1997. These services were provided by an unaffiliated third party.
The balance due to affiliates as of March 31, 1998 included $0.2 million due to
FSI and its affiliates for management fees and $2.6 million due to affiliated
USPEs. The balance due to affiliates as of December 31, 1997 included $0.3
million due to FSI and its affiliates for management fees and $2.5 million due
to an affiliated USPE.
The Partnership's proportional share of USPE-affiliated management fees of $0.1
million was payable as of March 31, 1998 and December 31, 1997.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
4. Transactions with General Partner and Affiliates (continued)
During the three months ended March 31, 1998, the Partnership purchased an MD-80
at a cost of $13.4 and a portfolio of aircraft rotable components for $2.2
million and paid FSI $0.9 million for acquisition and lease negotiation fees. In
addition, FSI earned $0.1 million in acquisition and lease negotiation fees for
the $1.2 million hushkit installed on an aircraft in a USPE.
5. Equipment
Owned equipment held for operating leases is stated at cost. Equipment held for
sale is stated at the lower of the equipment's depreciated cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment held for operating leases are as follows (in thousands of
dollars):
March 31, December 31,
1998 1997
-----------------------------------
Aircraft $ 21,630 $ 11,919
Marine vessels 16,035 16,035
Rail equipment 15,636 15,657
Trailers 14,905 16,203
Marine containers 10,683 11,783
------------- --------------
78,889 71,597
Less accumulated depreciation (32,322 ) (33,895)
------------- --------------
46,567 37,702
Equipment held for sale 2,920 --
--------------
Net equipment $ 49,487 $ 37,702
============= ==============
As of March 31, 1998, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 83 marine
containers and 3 railcars. As of December 31, 1997, all of the equipment was on
lease or operating in PLM-affiliated short-term trailer rental facilities,
except for 92 marine containers and a railcar . The net book value of the
off-lease equipment was $0.4 million as of March 31, 1998 and December 31, 1997.
During the three months ended March 31, 1998, the Partnership completed the
purchase of an MD-80 Stage III commercial aircraft for $14.0 million, including
acquisition fees of $0.6 million that was paid to FSI for the purchase of this
equipment. The Partnership made a deposit of $1.3 million toward this purchase
in 1997, which is included in the December 31, 1997 balance sheet as equipment
acquisition deposit. Additionally, the Partnership purchased a portfolio of
aircraft rotable components for $2.3 million, including acquisition fees of $0.1
million that was paid to FSI for the purchase of this equipment.
During the three months ended March 31, 1998, the Partnership disposed of or
sold marine containers, trailers, and a railcar with an aggregate net book value
of $1.0 million for $1.0 million. The Partnership also reclassified a Boeing
737-200 with a net book value of $2.9 million to held for sale which was sold
during the second quarter of 1998 for proceeds of $7.4 million.
During the three months ended March 31, 1997, the Partnership disposed of or
sold marine containers and trailers with an aggregate net book value of $0.2
million for $0.3 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
6. Investments in Unconsolidated Special-Purpose Entities (USPEs)
The net investments in USPEs included the following jointly-owned equipment (and
related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------------------------------
<S> <C> <C>
64% interest in a trust owning a 767-200ER commercial aircraft $ 12,307 $ 12,854
53% interest in an entity owning a product tanker 9,420 9,881
30% interest in an entity owning a mobile offshore drilling unit 4,930 5,050
40% interest in a trust owning two commercial aircraft on direct
finance lease 4,591 4,591
55% interest in a trust owning two 737-200A commercial aircraft at March
31, 1998 and a 50% interest in a trust that owned four
737-200A commercial aircraft at December 31, 1997 4,514 6,614
50% interest in an entity that owns a container feeder vessel 2,570 2,812
20% interest in an entity that owns a handymax bulk carrier 1,491 1,513
17% interest in a trust that owned a commercial aircraft -- 3,491
Net investments $ 39,823 $ 46,796
============= =============
</TABLE>
As of March 31, 1998 and December 31, 1997, the Partnership had an interest in
trusts that own multiple aircraft (the Trusts). One of these Trusts contained
provisions, under certain circumstances, for allocating specific aircraft to the
beneficial owners. During the three months ended March 31, 1998, in this Trust,
the Partnership sold one of the two commercial aircraft assigned to it with a
net book value of $2.7 million for proceeds of $6.0 million. In addition, in the
same Trust, an affiliated program sold the aircraft designated to it.
During January 1998, the Partnership received the remaining liquidating proceeds
of $3.5 million from the sale of its 17% interest in a trust that owned a
commercial aircraft sold in 1997.
During the three months ended March 31, 1998, the Partnership increased its
investment in a trust owning two commercial aircraft by funding the installation
of a hushkit on an aircraft in the trust for $1.3 million, including acquisition
and lease negotiation fees of $0.1 million that was paid to FSI.
7. Debt
The General Partner entered into a short-term, joint $50.0 million credit
facility. As of March 31, 1998, American Finance Group, Inc., a subsidiary of
PLM International, Inc., had borrowings of $38.7 million under the short-term,
joint $50.0 million credit facility. No other eligible borrower had any
outstanding borrowings.
8. Contingencies
PLM International, Inc. (the Company) 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). The plaintiffs, who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who allegedly invested
in certain California limited partnerships for which FSI 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 (the Growth Funds).
The complaint asserts eight causes of action against all defendants, as follows:
fraud and deceit, suppression, negligent misrepresentation and suppression,
intentional breach of fiduciary duty, negligent breach of fiduciary duty, unjust
enrichment, conversion, and conspiracy. Additionally, plaintiffs allege a cause
of action against PLM Securities Corp. for breach of third-party beneficiary
contracts in violation of the National Association of Securities Dealers rules
of fair practice. Plaintiffs
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
8. Contingencies (continued)
allege that each defendant owed plaintiffs and the class certain duties due to
their status as fiduciaries, financial advisors, agents, general partner, and
control persons. Based on these duties, plaintiffs assert liability against the
defendants for improper sales and marketing practices, mismanagement of the
Growth Funds, and concealing such mismanagement from investors in the Growth
Funds. Plaintiffs seek unspecified compensatory and recissory damages, as well
as punitive damages, and have offered to tender their limited partnership units
back to the defendants.
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) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. On September 24, 1997, the district court denied plaintiffs'
motion and dismissed without prejudice the individual claims of the California
class representative, reasoning that he had been fraudulently joined as a
plaintiff. On October 3, 1997, plaintiffs filed a motion requesting that the
district court reconsider its ruling or, in the alternative, that the court
modify its order dismissing the California plaintiff's claims so that it is a
final appealable order, as well as certify for an immediate appeal to the
Eleventh Circuit Court of Appeals that part of its order denying plaintiffs'
motion to remand. On October 7, 1997, the district court denied each of these
motions. In responses to such denial, plaintiffs filed a petition for writ of
mandamus with the Eleventh Circuit, which was denied on November 18, 1997. On
November 24, 1997, plaintiffs filed with the Eleventh Circuit a petition for
rehearing and consideration by the full court of the order denying the petition
for a writ of mandamus, which petition was supplemented by plaintiffs on January
27, 1998.
On October 10, 1997, defendants filed a motion to compel arbitration of
plaintiffs' claims, based on an agreement to arbitrate contained in the limited
partnership agreement of each Growth Fund, and to stay further proceedings
pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition,
the district court granted the motion on December 8, 1997. On December 15, 1997,
plaintiffs filed with the Eleventh Circuit a notice of appeal from the district
court's order granting defendants' motion to compel arbitration and to stay the
proceedings, and of the district court's September 24, 1997 order denying
plaintiffs' motion to remand and dismissing the claims of the California
plaintiff. Plaintiffs filed an amended notice of appeal on December 31, 1997.
Appellate briefs have not yet been filed in this matter. The Company believes
that the allegations of the Koch action are completely without merit and intends
to continue to defend this matter vigorously.
On June 5, 1997, the Company 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 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 for
which FSI acts as the General Partner, including the Growth Funds. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
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, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, the defendants 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 motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. By memorandum and order dated October 23, 1997, the district
court denied the Company's petition to compel arbitration. On November 5, 1997,
the Company filed an expedited motion for leave to file a motion for
reconsideration of this order, which motion was granted on November 14, 1997.
The parties have agreed to have oral argument on the
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
8. Contingencies (continued)
reconsideration motion set for July 22, 1998. The state court action has been
stayed pending the district court's decision on this motion.
In connection with her opposition to the Company's petition to compel
arbitration, 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 Sections 1709 and 1710.
Plaintiff has also served certain discovery requests on defendants. Because of
the stay, no response to the amended complaint or to the discovery is currently
required. The Company believes that the allegations of the amended complaint in
the Romei action are completely without merit and intends to defend this matter
vigorously.
(this space intentionally left blank)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Partnership's Operating Results for the Three Months Ended
March 31, 1998 and 1997
(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 first quarter of 1998 when compared to the same quarter of
1997. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
------------------------------
<S> <C> <C>
Aircraft, aircraft engines, and components $ 889 $ 921
Rail equipment 865 867
Trailers 650 803
Marine containers 231 397
Marine vessels 99 894
</TABLE>
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $1.0 million and $0.1 million, respectively, for the three months
ended March 31, 1998, compared to $0.9 million and $24,000, respectively, during
the same period of 1997. The decrease in aircraft contribution was due to the
sale of a portfolio of aircraft engines and components during the fourth quarter
of 1997 and repairs that were required on one of the Partnership's aircraft
during the first quarter of 1998. The decrease in aircraft contribution was
offset in part, by the purchase of an MD-80 Stage III commercial aircraft and a
portfolio of aircraft rotable components during the first quarter of 1998.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.0
million and $0.2 million, respectively, for the three months ended March 31,
1998 and 1997.
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.2
million, respectively, for the three months ended March 31, 1998, compared to
$1.0 million and $0.2 million, respectively, during the same period of 1997. 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 $0.2
million and $2,000, respectively, for the three months ended March 31, 1998,
compared to $0.4 million and $3,000, respectively, during the same quarter of
1997. The number of 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 container contribution.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.3
million and $1.2 million, respectively, for the three months ended March 31,
1998, compared to $2.3 million and $1.4 million, respectively, during the same
period of 1997. The decrease in marine vessel contribution was due to the sale
of two marine vessels during the fourth quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.9 million for the quarter ended March 31, 1998
increased from $3.8 million for the same period in 1997. Significant variances
are explained as follows:
(1) A $0.9 million increase in depreciation and amortization expenses from
1997 levels reflects the purchase of certain assets during 1998 which was offset
in part by the sale of certain equipment during 1998 and 1997 and the
double-declining balance method of depreciation.
(2) A $0.3 million increase in the provision for bad debts reflects the
General Partner's evaluation of the collectibility of receivables due from
certain lessees. Also, during 1997, the Partnership collected certain
receivables that were previously reserved for as a bad debt.
(3) A $0.1 million decrease in management fees was due to lower lease
revenues earned by the Partnership during 1998 when compared to the same period
in 1997.
(4) A $0.1 million decrease in administrative expenses was due to lower
costs for professional services needed to collect balances due from certain
nonperforming lessees.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the first quarter of 1998
totaled $0.1 million, and resulted from the sale of marine containers, trailers
and a railcar with an aggregate net book value of $1.0 million, for $1.0
million. The net gain on the disposition of equipment for the first quarter of
1997 totaled $12,000, and resulted from the sale of marine containers and
trailers, with an aggregate net book value of $0.2 million, for $0.3 million.
(D) 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 of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
------------------------------
<S> <C> <C>
Aircraft $ 3,919 $ 227
Mobile offshore drilling unit 65 (11 )
Marine vessels (201) (107 )
-----------------------------
Equity in net income of USPEs $ 3,783 $ 109
=============================
</TABLE>
Aircraft: As of March 31, 1998, the Partnership owned an interest in an entity
that owns a Boeing 767 commercial aircraft, an interest in two commercial
aircraft on a direct finance lease, and an interest in a trust that holds two
commercial aircraft. As of March 31, 1997, the Partnership owned an interest in
an entity that owns a Boeing 767 commercial aircraft, an interest in two
commercial aircraft on a direct finance lease, an interest in a trust that held
six commercial aircraft, and an interest in a trust that held four commercial
aircraft. During the first quarter of 1998, revenues of $1.6 million and the
gain from the partial sale of an interest in the trust that held four commercial
aircraft of $3.3 million were offset by depreciation and administrative expenses
of $1.0 million. During the same period of 1997, lease revenues of $1.9 million
were offset by depreciation and administrative expenses of $1.7 million. The
decrease in lease revenues during the first quarter of 1998 was due to the
partial sale of the Partnership's interest in a trust during the first quarter
of 1998 and the sale of the Partnership's interest in another trust during the
fourth quarter of 1997. Depreciation and administrative expenses also decreased
as a direct result of these sales during 1998 and 1997.
Mobile offshore drilling unit: As of March 31, 1998 and 1997, the Partnership
owned an interest in a mobile offshore drilling unit. During the first quarter
of 1998, revenues of $0.3 million were offset by depreciation and administrative
expenses of $0.2 million. During the same period of 1997, revenues of $0.3
million were offset by depreciation and administrative expenses of $0.3 million.
The decrease in depreciation and administrative expenses was primarily due to
the double-declining balance method of depreciation.
Marine vessels: As of March 31, 1998, the Partnership owned an interest in
entities that own three marine vessels. As of March 31, 1997, the Partnership
owned an interest in entities that own two marine vessels. During the first
quarter of 1998, revenues of $1.1 million were offset by depreciation and
administrative expenses of $1.3 million. During the same period of 1997,
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 an interest in an additional entity that
owns a marine vessel during 1997.
(E) Net Income
As a result of the foregoing, the Partnership's net income for the period ended
March 31, 1998 was $1.8 million, compared to a net income of $0.2 million during
the same period of 1997. The Partnership's ability to acquire, 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 first
quarter of 1998 is not necessarily indicative of future periods. In the first
quarter of 1998, the Partnership distributed $4.1 million to the limited
partners, or $0.50 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the three months ended March 31, 1998, the Partnership generated $4.2
million in operating cash (net cash provided by operating activities, plus
distributions from USPEs) to meet its operating obligations, maintain working
capital reserves, and maintain the current level of distributions (total for the
three months ended March 31, 1998 of $4.3 million) to the partners, but also
used undistributed available cash from prior periods of $0.1 million.
During the three months ended March 31, 1998, the Partnership sold owned
equipment for $1.0 million and sold an interest in two USPEs for $9.5 million.
During 1998, the Partnership completed the purchase of an MD-80 Stage III
commercial aircraft for $14.1 million, including acquisition and lease
negotiation fees of $0.7 million that was paid to PLM Financial Services, Inc.
(FSI or the General Partner). FSI is a wholly-owned subsidiary of PLM
International, Inc. The Partnership made a deposit of $1.3 million toward this
purchase in 1997, which is included in the December 31, 1997 balance sheet as an
equipment acquisition deposit.
The Partnership also purchased a portfolio of aircraft rotable components for
$2.3 million, including acquisition and lease negotiation fees of $0.1 million
that was paid to FSI for this equipment. In addition, the Partnership increased
its investment in a trust that owns two commercial aircraft by funding the
installation of a hushkit on an aircraft for $1.3 million including acquisition
and lease negotiation fees of $0.1 million that was paid to FSI.
The General Partner entered into a short-term, joint $50.0 million credit
facility. As of May 13, 1998, PLM Equipment Growth Fund V had borrowings of $1.6
million and American Finance Group, Inc., a subsidiary of PLM International,
Inc., had borrowings of $39.6 million under the short-term joint $50.0 million
credit facility. No other eligible borrower had any outstanding borrowings.
(III) YEAR 2000 COMPLIANCE
The General Partner is currently addressing the year 2000 computer software
issue and is creating a timetable for carrying out any program modifications
that may be required. The General Partner does not anticipate that the cost of
those modifications allocable to the Partnership will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998, with earlier application permitted. The effect of adoption of these
statements will be limited to the form and content of the Partnership's
disclosures and will not impact the Partnership's results of operations, cash
flow, or financial position.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance in 1998 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 continuoually monitors both the
equipment markets and the performance of the Partnership's equipment in these
markets. The General Partner may decide 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 first seven years
of Partnership operations, which concludes December 31, 1999. The General
Partner believes that these acquisitions may cause the Partnership to generate
additional earnings and cash flow for the Partnership.
(VI) 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: May 13, 1998 By: /s/ Richard K Brock
-------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,709
<SECURITIES> 0
<RECEIVABLES> 4,185
<ALLOWANCES> (2,186)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 78,889
<DEPRECIATION> (32,322)
<TOTAL-ASSETS> 100,604
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<BONDS> 30,000
0
0
<COMMON> 0
<OTHER-SE> 64,338
<TOTAL-LIABILITY-AND-EQUITY> 100,604
<SALES> 0
<TOTAL-REVENUES> 4,620
<CGS> 0
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<INCOME-PRETAX> 1,804
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