-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K5TpNrFbTEu3HOw+F5cT3wunrHRw8s48ZAPz/c9LSuGvSeQFCUYoiFQhe4sc06CG PdlcR8Wt41CrhpmgtUHxxg== 0000754714-96-000004.txt : 19961115 0000754714-96-000004.hdr.sgml : 19961115 ACCESSION NUMBER: 0000754714-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND CENTRAL INDEX KEY: 0000754714 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942946248 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14599 FILM NUMBER: 96661787 BUSINESS ADDRESS: STREET 1: ONE MARKET PLZ STEUART ST TOWER STREET 2: STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1301 BUSINESS PHONE: 4159741399 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended September 30, 1996. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-14598 PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (Exact name of registrant as specified in its charter) California 94-2946245 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower, Suite 800, San Francisco, CA 94105-1301 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (415) 974-1399 --------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS
September 30, December 31, 1996 1995 --------------------------------------- Equipment held for operating leases, at cost $ 3,732,989 $ 3,972,722 Less accumulated depreciation (3,556,768 ) (3,616,132 ) --------------------------------------- Net equipment 176,221 356,590 Cash and cash equivalents 416,818 293,808 Investment in unconsolidated special purpose entity -- 79,116 Accounts receivable, net of allowance for doubtful accounts of $26,718 in 1996 and $19,664 in 1995 78,711 135,320 Prepaid insurance 264 3,128 ======================================= Total assets $ 672,014 $ 867,962 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 4,641 $ 4,641 Accounts payable and accrued expenses 16,519 21,292 Prepaid deposits and engine reserves 8 260 --------------------------------------- Total liabilities 21,168 26,193 Partners capital (deficit): Limited Partners (22,276 units) 742,387 931,401 General Partner (91,541 ) (89,632 ) --------------------------------------- Total partners' capital 650,846 841,769 --------------------------------------- Total liabilities and partners' capital $ 672,014 $ 867,962 =======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF OPERATIONS
For the three months For the nine months ended September 30, ended September 30, 1996 1995 1996 1995 --------------------------------------------------------------------- Revenues: Lease revenue $ 94,091 $ 170,789 $ 289,005 $ 517,021 Interest and other income 2,408 4,863 8,496 28,042 Gain on disposition of equipment 3,040 6,199 32,674 29,029 --------------------------------------------------------------------- Total revenues 99,539 181,851 330,175 574,092 Expenses: Depreciation 52,357 68,579 160,238 209,873 Management fees to affiliate 16,331 13,923 41,767 41,768 Bad debt expense 19,502 25,944 12,646 38,701 Repairs and maintenance 25,782 53,357 70,983 129,305 General and administrative expenses to affiliates 14,067 28,346 62,503 95,703 Other general and administrative expenses 13,948 14,998 40,931 39,615 --------------------------------------------------------------------- Total expenses 141,987 205,147 389,068 554,965 Equity in net income of unconsolidated special purpose entity 245,732 -- 265,108 -- --------------------------------------------------------------------- Net income (loss) $ 203,284 $ (23,296 ) $ 206,215 $ 19,127 ===================================================================== Partners' share of net income (loss): Limited Partners - 99% $ 201,251 $ (23,063 ) $ 204,153 $ 18,936 General Partner - 1% 2,033 (233 ) 2,062 191 -------------------------------- ----------------------------- ======== Total $ 203,284 $ (23,296 ) $ 206,215 $ 19,127 ===================================================================== Net income (loss) per Limited Partnership Unit (22,276 units) $ 9.03 $ (1.04 ) $ 9.16 $ 0.85 ===================================================================== Cash distributions $ 99,047 $ 99,047 $ 297,138 $ 297,140 ===================================================================== Cash distribution per Limited Partnership Unit $ 4.40 $ 4.40 $ 13.21 $ 13.21 ===================================================================== Special cash distributions $ -- $ -- $ 100,000 $ -- ===================================================================== Special cash distributions per Limited Partnership Unit $ -- $ -- $ 4.44 $ -- ===================================================================== Total cash distributions per Limited Partnership Unit $ 4.40 $ 4.40 $ 17.65 $ 13.21 =====================================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1994 to September 30, 1996
Limited General Partner Partner Total ------------------------------------------------------------ Partners' capital (deficit) at December 31, 1994 $ 1,294,613 $ (85,963 ) $ 1,208,650 Net income 29,013 293 29,306 Cash distributions (392,225 ) (3,962 ) (396,187 ) ------------------------------------------------------------- Partners' capital (deficit) at December 31, 1995 931,401 (89,632 ) 841,769 Net income 204,153 2,062 206,215 Quarterly cash distributions (294,167 ) (2,971 ) (297,138 ) Special distributions (99,000 ) (1,000 ) (100,000 ) ------------------------------------------------------------- Partners' capital (deficit) at September 30, 1996 $ 742,387 $ (91,541 ) $ 650,846 =============================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 1995 ------------------------------------ Operating Activities: Net income $ 206,215 $ 19,127 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (32,674 ) (29,029 ) Depreciation 160,238 209,873 Income from unconsolidated special purpose entity in excess of cash distributions (224,028 ) -- Changes in operating assets and liabilities: Restricted cash -- (446 ) Accounts receivable, net 56,609 24,333 Prepaid insurance 2,864 2,984 Due to affiliates -- (12,652 ) Accounts payable and accrued expenses (4,773 ) (14,825 ) Prepaid deposits and engine reserves (252 ) (596 ) ------------------------------------ Cash provided by operating activities 164,199 198,769 ------------------------------------ Investing activities: Capitalized equipment repairs -- (45 ) Proceeds from disposition of equipment 52,805 76,658 Liquidation proceeds from unconsolidated special purpose entity 303,144 -- ------------------------------------ Cash provided by investing activities 355,949 76,613 ------------------------------------ Cash flows used in financing activities: Cash distributions paid to General Partner (3,971 ) (2,971 ) Cash distributions paid to Limited Partners (393,167 ) (294,169 ) ------------------------------------ Cash used in financing activities (397,138 ) (297,140 ) ------------------------------------ Net increase (decrease) in cash and cash equivalents 123,010 (21,758 ) Cash and cash equivalents at beginning of period 293,808 358,864 ------------------------------------ Cash and cash equivalents at end of period $ 416,818 $ 337,106 ====================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the Partnership's financial position as of September 30, 1996, the statements of operations for the three and nine months ended September 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to September 30, 1996 and the statements of cash flows for the nine months ended September 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment The components of owned equipment are as follows:
September 30, December 31, 1996 1995 -------------------------------------- Equipment held for operating leases: Trailers $ 3,324,757 $ 3,543,334 Marine containers 89,583 110,739 Rail equipment 318,649 318,649 -------------------------------------- 3,732,989 3,972,722 Less accumulated depreciation (3,556,768 ) (3,616,132 ) -------------------------------------- Net equipment $ 176,221 $ 356,590 ======================================
All of the equipment owned by the Partnership was either on lease or operating in PLM-affiliated short-term rental facilities as of September 30, 1996. With the exception of one trailer with a carrying value of $6,500, all of the equipment was on lease as of December 31, 1995. During the nine months ended September 30, 1996, the Partnership sold or disposed of nine trailers and eight marine containers with an aggregate net book value of $20,131 for proceeds of $52,805. During the nine months ended September 30, 1995, the Partnership sold or disposed of eight trailers and 11 marine containers with an aggregate net book value of $47,629 for proceeds of $76,658. 3. Liquidation and special distributions During the first quarter of 1995, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received, the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1996 3. Liquidation and special distributions (continued) assets and liabilites of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. During the nine months ended September 30, 1996, the General Partner paid special distributions of $4.44 per Limited Partnership Unit with proceeds from equipment liquidations. No special distributions was paid in the nine months ended September 30, 1995. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of equipment destructions, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. 4. Investment in Unconsolidated Special Purpose Entity Prior to 1996, the Partnership accounted for operating activities associated with joint ownership of rental equipment as undivided interests, including its proportionate share of each asset with similar wholly-owned assets in its financial statements. Under generally accepted accounting principles, the effects of such activities, if material, should be reported using the equity method of accounting. Therefore, effective January 1, 1996, the Partnership adopted the equity method to account for its investment in such jointly-held assets. The principle differences between the previous accounting method and the equity method relate to the presentation of activities relating to these assets in the statement of operations. Whereas, under equity accounting the Partnership's proportionate share is presented as a single net amount, "equity in net income (loss) of unconsolidated special purpose entities", under the previous method, the Partnership's statement of operations reflected its proportionate share of each individual item of revenue and expense. Accordingly, the effect of adopting the equity method of accounting has no cumulative effect on previously reported partner's capital or on the Partnership's net income (loss) for the period of adoption. Because the effects on previously issued financial statements of applying the equity method of accounting to investments in jointly-owned assets are not considered to be material to such financial statements taken as a whole, previously issued financial statements have not been restated. However, certain items have been reclassified in the previously issued balance sheet to conform to the current period presentation. During the nine months ended September 30, 1996, the Partnership sold its 31% investment in a commuter aircraft for $303,144. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS
September 30, December 31, 1996 1995 --------------------------------------- Equipment held for operating leases, at cost $ 4,460,572 $ 5,059,215 Less accumulated depreciation (4,179,692 ) (4,536,562 ) --------------------------------------- Net equipment 280,880 522,653 Cash and cash equivalents 811,144 551,094 Investments in unconsolidated special purpose entities 126,577 425,957 Accounts receivable, net of allowance for doubtful accounts of $11,510 in 1996 and $6,649 in 1995 72,844 143,225 Prepaid insurance 237 5,435 ======================================= Total assets $ 1,291,682 $ 1,648,364 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 7,026 $ 7,026 Accounts payable and accrued expenses 11,416 15,202 --------------------------------------- Total liabilities 18,442 22,228 Partners capital (deficit): Limited Partners (33,727 units) 1,409,009 1,758,377 General Partner (135,769 ) (132,241 ) --------------------------------------- Total partners' capital 1,273,240 1,626,136 --------------------------------------- Total liabilities and partners' capital $ 1,291,682 $ 1,648,364 =======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME
For the three months For the nine months ended September 30, ended September 30, 1996 1995 1996 1995 --------------------------------------------------------------- Revenues: Lease revenue $ 96,968 $ 272,726 $ 316,717 $ 855,499 Interest and other income 3,768 7,863 14,590 28,095 Gain on disposition of equipment 14,895 19,988 69,529 66,647 --------------------------------------------------------------- Total revenues 115,631 300,577 400,836 950,241 Expenses: Depreciation 60,477 127,707 189,848 386,745 Management fees to affiliate 32,944 21,080 70,767 66,889 Bad debt expense (79 ) 19,161 3,872 15,887 Repairs and maintenance 21,703 59,874 68,639 165,264 General and administrative expenses to affiliates 22,579 42,904 89,661 144,212 Other general and administrative expenses 11,981 15,137 44,846 38,534 --------------------------------------------------------------- Total expenses 149,605 285,863 467,633 817,531 Equity in net income of unconsolidated special purpose entities 569,504 -- 640,348 -- --------------------------------------------------------------- Net income $ 535,530 $ 14,714 $ 573,551 $ 132,710 =============================================================== Partners' share of net income: Limited Partners - 99% $ 530,175 $ 14,567 $ 567,815 $ 131,383 General Partner - 1% 5,355 147 5,736 1,327 =============================================================== Total $ 535,530 $ 14,714 $ 573,551 $ 132,710 =============================================================== Net income per Limited Partnership Unit (33,727 units) $ 15.72 $ 0.43 $ 16.84 $ 3.90 =============================================================== Cash distributions $ 156,815 $ 161,316 $ 576,447 $ 687,222 =============================================================== Cash distribution per Limited Partnership Unit $ 4.60 $ 4.74 $ 16.92 $ 20.17 =============================================================== Special cash distributions $ 100,000 $ 100,000 $ 350,000 $ 200,000 =============================================================== Special cash distributions per Limited Partnership Unit $ 2.94 $ 2.94 $ 10.27 $ 5.87 =============================================================== Total Cash Distributions per Limited Partnership Units $ 7.54 $ 7.68 $ 27.19 $ 26.04 ===============================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1994 to September 30, 1996
Limited General Partner Partner Total --------------------------------------------------------------- Partners' capital (deficit) at December 31, 1994 $ 2,622,019 $ (123,518 ) $ 2,498,501 Net income 173,422 1,752 175,174 Cash distributions (1,037,064 ) (10,475 ) (1,047,539 ) --------------------------------------------------------------- Partners' capital (deficit) at December 31, 1995 1,758,377 (132,241 ) 1,626,136 Net income 567,815 5,736 573,551 Quarterly cash distributions (570,683 ) (5,764 ) (576,447 ) Special distributions (346,500 ) (3,500 ) (350,000 ) --------------------------------------------------------------- Partners' capital (deficit) at September 30, 1996 $ 1,409,009 (135,769 ) 1,273,240 ===============================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 1995 -------------------------------------- Operating Activities: Net income $ 573,551 $ 132,710 Adjustment to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (69,529 ) (66,647 ) Depreciation 189,848 386,745 Income from unconsolidated special purpose entities in excess of cash distributions (386,849 ) -- Changes in operating assets and liabilities Restricted cash -- (550 ) Accounts receivable, net 70,381 71,180 Prepaid insurance 5,198 4,346 Due to affiliates -- (17,211 ) Accounts payable and accrued expenses (3,786 ) 1,581 Prepaid deposits and engine reserves -- 464 -------------------------------------- Cash provided by operating activities 378,814 512,618 -------------------------------------- Investing activities: Capitalized equipment repairs -- (191 ) Proceeds from disposition of equipment 121,454 136,648 Liquidation proceeds from unconsolidated special purpose entity 686,229 -- -------------------------------------- Cash provided by investing activities 807,683 136,457 -------------------------------------- Cash flows used in financing activities: Cash distributions paid to General Partner (9,264 ) (8,872 ) Cash distributions paid to Limited Partners (917,183 ) (878,350 ) -------------------------------------- Cash used in financing activities (926,447 ) (887,222 ) -------------------------------------- Net increase (decrease) in cash and cash equivalents 260,050 (238,147 ) Cash and cash equivalents at beginning of period 551,094 799,068 -------------------------------------- Cash and cash equivalents at end of period $ 811,144 $ 560,921 ======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the Partnership's financial position as of September 30, 1996, the statements of income for the three and nine months ended September 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to September 30, 1996, and the statements of cash flows for the nine months ended September 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment The components of owned equipment are as follows:
September 30, December 31, 1996 1995 ---------------------------------------- Equipment held for operating leases: Trailers $ 4,258,792 $ 4,833,449 Marine containers 201,780 225,766 ---------------------------------------- 4,460,572 5,059,215 Less accumulated depreciation (4,179,692 ) (4,536,562 ) ======================================== Net equipment $ 280,880 $ 522,653 ========================================
All of the equipment owned by the Partnership is either on lease or operating in PLM-affiliated short-term rental facilities as of September 30, 1996, and at December 31, 1995. During the nine months ended September 30, 1996, the Partnership sold or disposed of nine marine containers and 18 trailers with an aggregate net book value of $51,925 for proceeds of $121,454. During the nine months ended September 30, 1995, the Partnership sold or disposed of 15 marine containers and 14 trailers with an aggregate net book value of $70,001 for proceeds of $136,648. 3. Liquidation and special distributions During the first quarter of 1995, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1996 3. Liquidation and special distributions (continued) equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. During the nine months ended September 30, 1996, and 1995, the General Partner paid special distributions of $10.27 and $5.87 per Limited Partnership Unit, respectively, for proceeds from equipment liquidations. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of equipment destructions, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. 4. Investments in Unconsolidated Special Purpose Entities Prior to 1996, the Partnership accounted for operating activities associated with joint ownership of rental equipment as undivided interests, including its proportionate share of each asset with similar wholly-owned assets in its financial statements. Under generally accepted accounting principles, the effects of such activities, if material, should be reported using the equity method of accounting. Therefore, effective January 1, 1996, the Partnership adopted the equity method to account for its investment in such jointly-held assets. The principle differences between the previous accounting method and the equity method relate to the presentation of activities relating to these assets in the income statement. Whereas, under equity accounting the Partnership's proportionate share is presented as a single net amount, "equity in net income (loss) of unconsolidated special purpose entities", under the previous method, the Partnership's income statement reflected its proportionate share of each individual item of revenue and expense. Accordingly, the effect of adopting the equity method of accounting has no cumulative effect on previously reported partner's capital or on the Partnership's net income (loss) for the period of adoption. Because the effects on previously issued financial statements of applying the equity method of accounting to investments in jointly-owned assets are not considered to be material to such financial statements taken as a whole, previously issued financial statements have not been restated. However, certain items have been reclassified in the previously issued balance sheet to conform to the current period presentation. The "Investments in unconsolidated special purpose entities" includes 69% and 80% interests in two separate commuter aircraft. The General Partner sold one of the jointly-owned aircraft in which the Partnership holds an investment of 69% for $686,229 in the third quarter of 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (I) Results of Operations Comparison of the Partnerships' Operating Results for the Three Months Ended September 30, 1996 and 1995 TEP VIIB: (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the third quarter of 1996 when compared to the same quarter of 1995. The following table presents lease revenues less direct expenses by owned equipment type:
For the three months ended September 30, 1996 1995 ------------------------------ Trailers $ 60,225 $ 88,442 Railcar equipment 7,455 261 Marine containers 36 6,168
Trailers: Trailer lease revenues and direct expenses were $86,526 and $26,301, respectively, for the three months ended September 30, 1996, compared to $135,929 and $47,487, respectively during the same quarter of 1995. The decrease in net contribution was due to lower utlilization of trailers in the short-term rental facilities in the third quarter of 1996 when compared to the same quarter of 1995, and the disposition of five trailers in the third and fourth quarters of 1995 and nine trailers during the first nine months of 1996; Railcar equipment: Railcar lease revenues and direct expenses were $7,500 and $45, respectively, for the three months ended September 30, 1996, compared to $4,537 and $4,276, respectively, during the same quarter of 1995. Although the railcar fleet remained relatively the same size for both quarters, the increase in railcar contribution resulted from running repairs required on certain railcars in the fleet during 1995 which were not needed during 1996. In addition, early lease termination on four railcars in the third quarter of 1995 resulted in a $3,600 credit given back to the lessee; Marine containers: Marine container lease revenues and direct expenses were $66 and $30, respectively, for the three months ended September 30, 1996, compared to $6,230 and $62, respectively, during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $115,611 for the quarter ended September 30, 1996, decreased from $140,515 for the same quarter in 1995. The variances are explained as follows: (a) a $17,002 decrease in general and administrative expenses due to lower indirect costs associated with the short-term rental facilites due to the decreased volume of trailers operating in the facilites in the third quarter of 1996 as compared to the third quarter of 1995, and lower accounting costs; (b) a $6,442 decrease in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (c) a $3,869 decrease in depreciation and amortization expenses from 1995 levels reflecting the sale of certain assets during 1996 and 1995. (C) Net gain on disposition of equipment was $3,040 in the third quarter of 1996, from the disposition of one marine container and one trailer compared to a gain of $6,199 in the third quarter of 1995, from the disposition of six marine containers and five trailers. (D) Interest and other income Interest and other income decreased $2,455 during the third quarter of 1996 due primarily to lower interest income resulting from lower cash balances available for investments when compared to the same period of 1995. (E) Equity in net income of unconsolidated special purpose entity Equity in net income of unconsolidated special purpose entity was $245,732 and $11,286 for the three months ended September 30, 1996 and 1995, respectively, and represents the operating income generated from a 31% interest in a jointly owned commuter aircraft accounted for under the equity method and the gain ($236,700) resulting from the sale of this investment for proceeds of $303,144. (see Note 4 to the financial statements). (F) Net income The Partnership's net income of $203,284 in the third quarter of 1996, decreased from a net loss of $23,296 in the third quarter of 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the third quarter of 1996 is not necessarily indicative of future periods. In the third quarter of 1996, the Partnership distributed $98,057 to the Limited Partners, or $4.40 per Limited Partnership Unit. TEP VIIC: (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the third quarter of 1996 when compared to the same quarter of 1995. The following table presents lease revenues less direct expenses by owned equipment type:
For the three months ended September 30, 1996 1995 -------------------------------- Trailers $ 74,056 $ 107,416 Marine containers 420 7,395
Trailers: Trailer lease revenues and direct expenses were $96,503 and $22,447, respectively, for the three months ended September 30, 1996, compared to $165,600 and $58,184, respectively during the same quarter of 1995. The decrease in net contribution was due to lower utlilization of trailers in the short-term rental facilities in the third quarter of 1996 when compared to the same quarter of 1995, and the disposition of six trailers in the third and fourth quarters of 1995 and 18 trailers during the first nine months of 1996; Marine containers: Marine container lease revenues and direct expenses were $465 and $45, respectively, for the three months ended September 30, 1996, compared to $7,521 and $126, respectively during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $127,113 for the quarter ended September 30, 1996, decreased from $173,369 for the same period in 1995. The variances are explained as follows: (a) a $27,210 decrease in the general and administrative expenses from 1995 levels was due to decreased administrative costs associated with the short-term rental facilities; (b) a $19,240 decrease in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (c) a $11,670 decrease in depreciation and amortization expenses from 1995 levels reflecting the sale of certain assets during 1996 and 1995; (d) a $11,864 increase in management fees due to higher levels of operating cash flow during the comparable periods. Monthly management fees are calculated as the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Capital Contributions as defined in the Limited Partnership Agreement. (C) Net gain on disposition of equipment was $14,895 in the third quarter of 1996, from the disposition of five marine containers and two trailers, compared to a gain of $19,988 in the third quarter of 1995, from the disposition of four marine containers and six trailers. (D) Interest and other income decreased to $3,768 in the third quarter of 1996 from $7,863 in the third quarter of 1995. This decrease was primarily due to a lower interest rate earned on cash investments and lower cash balances available for investments in the third quarter of 1996 when compared to the same period of 1995. (E) Equity in net income of unconsolidated special purpose entities Equity in net income of unconsolidated special purpose entities of $569,504 and $45,421 for the three months ended September 30, 1996 and 1995, respectively, represents the operating income generated from jointly owned commuter aircraft accounted for under the equity method and the gain ($535,821) resulting from the sale of one jointly-owned aircraft for proceeds of $686,229 (see Note 4 to the financial statements). The increase in aircraft net contribution was due to the sale of one jointly owned commuter aircraft in the third quarter of 1996 with a gain of $535,821. (F) Net Income The Partnership's net income increased to $535,530 in the third quarter of 1996, from $14,714 in the third quarter of 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the third quarter of 1996 is not necessarily indicative of future periods. In the third quarter of 1996, the Partnership distributed $254,247 to the Limited Partners, or $7.54 per Limited Partnership Unit which included a special distribution of $2.94 per unit. Comparison of the Partnerships' Operating Results for the Nine Months Ended September 30, 1996 and 1995 TEP VIIB: (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the first nine months of 1996 when compared to the same period of 1995. The following table presents lease revenues less direct expenses by owned equipment type:
For the nine months ended September 30, 1996 1995 --------------------------------- Trailers $ 186,338 $ 281,037 Railcar equipment 22,091 13,220 Marine containers 7,811 18,437
Trailers: Trailer lease revenues and direct expenses were $258,604 and $72,266, respectively, for the nine months ended September 30, 1996, compared to $404,931 and $123,894, respectively, during the same period of 1995. The decrease in net contribution was due to lower utlilization of trailers in the short-term rental facilities in the first nine months of 1996 when compared to the same period of 1995, and the disposition of five trailers in the third and fourth quarters of 1995 and nine trailers during the first nine months of 1996; Railcar equipment: Railcar lease revenues and direct expenses were $22,500 and $409, respectively, for the nine months ended September 30, 1996, compared to $20,549 and $7,329, respectively, during the same period of 1995. Although the railcar fleet remained relatively the same size for both quarters, the increase in railcar contribution resulted from running repairs required on certain railcars in the fleet during 1995 which were not needed during 1996. In addition, early lease termination on four railcars in the third quarter of 1995 resulted in a $3,600 credit given back to the lessee. Marine containers: Marine container lease revenues and direct expenses were $7,901 and $90, respectively, for the nine months ended September 30, 1996, compared to $18,631 and $194, respectively, during the same period of 1995. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $316,303 for the nine months ended September 30, 1996, decreased from $385,454 for the same period in 1995. The variances are explained as follows: (a) a $30,520 decrease in general and administrative expenses from 1995 levels was due to decreased administrative costs associated with the short-term rental facilities; (b) a $26,055 decrease in bad debt expense was due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (c) a $12,576 decrease in depreciation and amortization expenses from 1995 levels reflecting the sale of certain assets during 1996 and 1995. (C) For the nine months ended September 30, 1996, the Partnership realized a gain of $32,674 on the sale or disposition of eight marine containers and nine trailers, compared to the same period in 1995 where the Partnership realized a gain of $29,029 on the sale or disposition of eight trailers and 11 marine containers. (D) Interest and other income decreased to $8,496 for the nine months ended September 30, 1996 from $28,042 for the same period of 1995. This decrease was primarily due to income earned from an early lease termination penalty on four railcars in the third quarter of 1995, and lower interest income earned due to lower cash balances available for investments when compared to the same period of 1995. (E) Equity in net income of the unconsolidated special purpose entity Equity in net income of unconsolidated special purpose entity was $265,108 and $34,816 for the nine months ended September 30, 1996 and 1995, respectively, and represents the operating income generated from a 31% interest in a jointly owned aircraft accounted for under the equity method and the gain ($236,700) resulting from the sale of this investment for proceeds of $303,144 (see Note 4 to the financial statements). (F) Net income The Partnership's net income of $206,215 in the nine months ended September 30, 1996, decreased from $19,127 in the first nine months of 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the first nine months of 1996 is not necessarily indicative of future periods. For the nine months ended September 30, 1996, the Partnership distributed $393,167 to the Limited Partners, or $17.65 per Limited Partnership Unit which included a special distribution of $4.44 per unit. TEP VIIC: (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the first nine months of 1996 when compared to the same period of 1995. The following table presents lease revenues less direct expenses by owned equipment type:
For the nine months ended September 30, 1996 1995 --------------------------------- Trailers $ 241,758 $ 368,975 Marine containers 3,533 22,994
Trailers: Trailer lease revenues and direct expenses were $313,025 and $71,267, respectively, for the nine months ended 1996, compared to $533,915 and $164,940, respectively during the same quarter of 1995. The decrease in net contribution was due to lower utlilzation of trailers in the short-term rental facilities in the first nine months of 1996 when compared to the same period of 1995, and the disposition of six trailers in the third and fourth quarters of 1995 and 18 trailers during the first nine months of 1996; Marine containers: Marine container lease revenues and direct expenses were $3,692 and $159, respectively, for the nine months ended 1996, compared to $23,399 and $405, respectively during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $396,207 for the nine months ended September 30, 1996, decreased from $496,732 for the same period in 1995. The variances are explained as follows: (a) a $62,170 decrease in the general and administrative expenses from 1995 levels due to decreased administrative costs associated with the short-term rental facilities due to decreased volume of trailers operating in these facilities; (b) a $30,218 decrease in depreciation and amortization expenses from 1995 levels reflecting the sale of certain assets during 1996 and 1995; (c) a $12,015 decrease in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (d) a $3,878 increase in managment fees due to higher levels of operating cash flow during the comparable periods. Monthly management fees are calculated as the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Capital Contributions as defined in the Limited Partnership Agreement. (C) For the nine months ended September 30, 1996, the Partnership realized a gain of $69,529 on the sale or disposition of 18 trailers and nine marine containers, compared to the same period in 1995, where the Partnership realized a gain of $66,647 on the sale or disposition of 14 trailers and 15 marine containers. (D) Equity in net income of unconsolidated special purpose entities Equity in net income of unconsolidated special purpose entities of $640,348 and $142,731 for the nine months ended September 30, 1996 and 1995, respectively, represents the operating income generated from jointly owned commuter aircraft accounted for under the equity method and the gain ($535,821) resulting from the sale of one jointly-owned aircraft for proceeds of $686,229 (see Note 4 to the financial statements). (E) Interest and other income decreased to $14,590 for the nine months ended September 30, 1996, from $28,095 compared to the same period of 1995. This decrease was primarily due to lower interest rate earned on cash investments in the first nine months of 1996. (F) Net Income The Partnership's net income increased to $573,551 for the nine months ended September 30, 1996, from $132,710 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the first nine months of 1996 is not necessarily indicative of future periods. In the nine months of 1996, the Partnership distributed $917,183 to the Limited Partners, or $27.19 per Limited Partnership Unit which included a special distribution of $10.27 per unit. (II) Asset Sales The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. Equipment sales and dispositions prior to the Partnerships' planned liquidation phase generally result from either the exercise by lessees of fair market value purchase options provided for in certain leases, or the payment of stipulated loss values on equipment lost or disposed of during the time it is subject to lease agreements. Such disposal of equipment is unpredictable and results from the wear, tear, and general risk of normal operations. As discussed in Note 3, the Partnerships have entered the portfolio liquidation phase as of the third quarter of 1995. During the nine months ended September 30, 1996, TEP VIIB sold or disposed of nine trailers and eight marine containers for $52,805, and TEP VIIC sold or disposed of 18 trailers and nine marine containers for $121,454. In addition, during the nine months ended September 30, 1996, TEP VIIB sold its 31% investment in a commuter aircraft for $303,144 and TEP VIIC sold its 69% investment in a commuter aircraft for $686,229. As discussed in Note 3, the General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. (III) Market Values In March 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is effective for years beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995, the effect of which was not material as the method previously employed by the Partnership was consistent with SFAS 121. In accordance with SFAS 121, the General Partner reviews the carrying value of its equipment portfolio at least annually in relation to expected future market conditions for the purpose of assessing recoverability of the recorded amounts. If projected future lease revenue plus residual values are less than the carrying value of the equipment, a loss on revaluation is recorded. No adjustments to reflect impairment of individual equipment carrying values were required during the nine months ended September 30, 1996. As of September 30, 1996, the General Partner estimated the fair market value of each Partnerships' equipment portfolio to be approximately: $1.3 million and $2.3 million for TEP VIIB and TEP VIIC, respectively. (IV) Government Regulations The General Partner operates the Partnerships' equipment in accordance with current regulations (see Item 1 (D) Government Regulations). However, the continuing implementation of new or modified regulations by some of the authorities mentioned previously, or others, may adversely affect the Partnerships' ability to continue to own or operate equipment in its portfolio. These on-going changes in the regulatory environment, both in the U.S. and internationally, cannot be predicted with any certainty and thus preclude the General Partner from accurately determining the impact of such changes on Partnership operations, purchases and sales of equipment. (V) Future outlook Pursuant to the original operating plan, the Partnerships entered into their liquidation phase during 1995 and the General Partner is actively pursuing the sale of all of the Partnerships' equipment with the intention of winding up the Partnerships and distributing all available cash to the Partners. (VI) Trends Inflation and changing prices did not materially impact the Partnerships' revenues or expenses during the reported periods. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND By: PLM Financial Services, Inc. General Partner Date: November 12, 1996 By: /s/ David J. Davis ------------------ David J. Davis Vice President and Corporate Controller EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 811,144 0 72,844 11,510 0 0 4,460,572 4,179,692 1,291,682 0 0 0 0 0 1,273,240 1,291,682 0 400,836 0 467,633 0 0 0 573,551 0 573,551 0 0 0 573,551 0 0
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