-----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, DqKDxT3LzHJ2ghNlrUi+QmE84owYQ9xW8SXw1JYg2YOAdK1CAUTLML2u2wHoA5nl rmuXTm2TLENQdFSElwp8ew== 0000778793-96-000001.txt : 19960329 0000778793-96-000001.hdr.sgml : 19960329 ACCESSION NUMBER: 0000778793-96-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND CENTRAL INDEX KEY: 0000778793 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942992020 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15439 FILM NUMBER: 96540280 BUSINESS ADDRESS: STREET 1: ONE MARKET PLAZA STEUART ST TOWER STREET 2: STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1301 BUSINESS PHONE: 4159741399 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-K [x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995. [ ] 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 0-15439 ----------------------- PLM Transportation Equipment Partners IXC 1986 Income Fund (Exact name of registrant as specified in its charter) California 94-299202 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower Suite 900, 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 ______ PART I ITEM 1. BUSINESS (A) Background On October 5, 1985, PLM Financial Services, Inc. (FSI), a wholly-owned subsidiary of PLM International, Inc. (PLM International), filed a registration statement on Form S-1 with the Securities and Exchange Commission. The Form S-1 was filed with respect to a proposed offering of 160,000 limited partnership units (Units) in an equipment leasing program, PLM Transportation Equipment Partners IX 1986 Income Fund (Registrant). The Registrant's program consisted of four California limited partnerships: PLM Transportation Equipment Partners IXA 1986 Income Fund, PLM Transportation Equipment Partners IXB 1986 Income Fund, PLM Transportation Equipment Partners IXC 1986 Income Fund, and PLM Transportation Equipment Partners IXD 1986 Income Fund (each individually, the Partnership, together, the Partnerships). The Registrant's offering became effective on January 7, 1986. The Registrant's Partnerships engage in the business of owning and leasing a diversified portfolio of transportation equipment to be operated or leased to a variety of corporate lessees. FSI is the general partner (General Partner) of each of the Partnerships. The Partnerships were formed to engage in the business of owning and managing diversified pools of transportation equipment. The objectives of each Partnership are to invest in equipment which will: (i) generate cash distributions to investors on a quarterly basis; (ii)maintain substantial residual value for continued operation and ultimate sale; (iii) provide certain federal income tax benefits, including investment tax credits, to the extent available, in 1986 and tax deductions in excess of Partnership income during early years which investors may use to offset taxable income from other sources. (iv)to endeavor to reduce certain of the risks of equipment ownership by acquiring a diversified portfolio of varying equipment types. The 1986 Tax Reform Act (the Act) substantially altered some of the Partnership objectives. Specifically, the ability of investors in the Partnership to use tax deductions in excess of Partnership income to offset taxable income from other sources was not only limited in duration by the Act (no offsets were allowed after 1990), but also limited to a declining percentage that could be applied against other income beginning in 1987. The Act also eliminated the investment tax credit. (B) Management of Partnership Equipment The Partnerships have entered into equipment management agreements with PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI, for the management of the equipment. IMI has agreed to perform services necessary to manage transportation equipment on behalf of the Partnerships and to perform or contract for the performance of obligations of the lessor under the Partnerships' leases. In consideration for its services and pursuant to the Partnership Agreements, IMI is entitled to a monthly management fee. Management fees are calculated as 10% of cash flow available for distribution and are payable monthly (See Financial Statements, notes 1 and 2.) TEP IXA The offering of limited partnership units (the "Units") of PLM Transportation Equipment Partners IXA 1986 Income Fund (TEP IXA or the Partnership) closed on May 23, 1986, having sold 24,285 Units. FSI contributed $100 for its 1% general partnership interest in TEP IXA. As of December 31, 1995, TEP IXA owned the following equipment: 1 Metro III commuter aircraft, 90 trailers, 125 marine containers, and 10 tank railcars. During 1995, TEP IXA sold or disposed of one trailer and 10 marine containers. Additionally, the Partnership entered into a sales-type lease related to a commuter aircraft with a carrying value of $505,450 for a sales price equal to the present value of the future lease payments ($1,090,000) less a $50,000 reserve for estimated future costs of sale. Gross lease payments of $234,000 will be received over a one-year period, commencing in June 1995, with an additional balloon payment of $919,012 due at the end of the lease term. At December 31, 1995, approximately 99% of the Partnership's trailer equipment was being operated in rental yards owned and maintained by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental yards' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of other direct expenses of the rental yard operations are billed to the Partnership. All equipment was either held in short-term rental facilities operated by an affiliate or on lease as of December 31, 1995. Lessees of the TEP IXA equipment portfolio include, but are not limited to Burlington Northern Railroad Company and Trans Ocean Ltd. TEP IXB The offering of Units of PLM Transportation Equipment Partners IXB 1986 Income Fund (TEP IXB or the Partnership) closed on September 29, 1986, having sold 17,460 Units. FSI contributed $100 for its 1% general partnership interest in TEP IXB. As of December 31, 1995, TEP IXB owned the following equipment: 1 Metro III commuter aircraft (50% owned by TEP IXB and 50% owned by an affiliated partnership), 41 refrigerated over-the-road trailers, 30 marine containers, 14 covered hopper railcars, and one sidelift. During 1995, TEP IXB sold or disposed of 22 trailers and four marine containers. At December 31, 1995, all of the partnership's trailer equipment was being operated in rental yards owned and maintained by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental yards' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of other direct expenses of the rental yard operations are billed to the Partnership. With the exception of one trailer and one sidelift, all equipment was either held in short-term rental facilities operated by an affiliate or was on lease as of December 31, 1995. Lessees of the TEP IXB equipment portfolio include but are not limited to Sky West Airlines, Inc., Trans Ocean Ltd., and Burlington Northern Railroad Company. TEP IXC The offering of Units of PLM Transportation Equipment Partners IXC 1986 Income Fund (TEP IXC or the Partnership) closed on December 22, 1986, having sold 16,914 Units. FSI contributed $100 for its 1% general partnership interest in TEP IXC. As of December 31, 1995, TEP IXC owned the following equipment: 1 Metro III commuter aircraft (30% owned by TEP IXC and 70% owned by an affiliated partnership), 149 trailers, six refrigerated marine containers, and five covered hopper railcars. During 1995, TEP IXC sold or disposed of four trailers, five railcars, and one marine container. At December 31, 1995, approximately 99% of the Partnership's trailer equipment was being operated in rental yards owned and maintained by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental yards' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of other direct expenses of the rental yard operations are billed to the Partnership. All equipment was either held in short-term rental facilities operated by an affiliate or on lease as of December 31, 1995. The lessees of the TEP IXC equipment portfolio include but are not limited to Pel Air, Continental Baking Co., Greenbrier Leasing Corporation, and Trans Ocean Ltd. TEP IXD The offering of Units of PLM Transportation Equipment Partners IXD 1986 Income Fund (TEP IXD or the Partnership) closed on March 30, 1987, having sold 9,529 Units. FSI contributed $100 for the 1% general partnership interest in TEP IXD. As of December 31, 1995, TEP IXD owned the following equipment: 55 trailers and 171 marine containers. During 1995, TEP IXD sold or disposed of 45 marine containers and 30 trailers. At December 31, 1995, all of the Partnership's trailer equipment was being operated in rental yards owned and maintained by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental yards' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of other direct expenses of the rental yard operations are billed to the Partnership. All equipment in the TEP IXD portfolio was either held in short-term rental facilities operated by an affiliate or on lease as of December 31, 1995. Lessees of the TEP IXD equipment portfolio include but are not limited to Trans Ocean Ltd. (C) Competition (1) Operating Leases vs. Full Payout Leases. Generally, the equipment owned by the Partnerships is leased out on an operating lease basis wherein the rents owed during the initial noncancelable term of the lease are insufficient to recover the Partnerships' purchase price of the equipment. The short to mid-term nature of operating leases generally commands a higher rental rate than longer term, full payout leases and offers lessees relative flexibility in their equipment commitment. In addition, the rental obligation under the operating lease need not be capitalized on the lessee's balance sheet. The Partnerships encounter considerable competition from lessors utilizing full payout leases on new equipment, i.e., leases which have terms equal to the expected economic life of the equipment. Full payout leases are written for longer terms and for lower rates than the Partnerships offer. While some lessees prefer the flexibility offered by a shorter term operating lease, other lessees prefer the rate advantages possible with a full payout lease. Competitors of the Partnerships may write full payout leases at considerably lower rates, or larger competitors with a lower cost of capital may offer operating leases at lower rates, and as a result, the Partnerships may be at a competitive disadvantage. (2) Manufacturers and Equipment Lessors The Partnerships also compete with equipment manufacturers who offer operating leases and full payout leases. Manufacturers may provide ancillary services which the Partnerships cannot offer, such as specialized maintenance services (including possible substitution of equipment), training, warranty services, and trade-in privileges. The Partnerships compete with many equipment lessors, including, among others, ACF Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services Corporation, Greenbrier Leasing Company, Polaris Aircraft Leasing Corp., and other limited partnerships which lease the same types of equipment. (D) Demand The Partnerships invested in transportation-related capital equipment. With the exception of aircraft leased to passenger air carriers, the Partnerships' equipment is used primarily for the transport of materials. The following describes the markets for the Partnerships' equipment: (1) Commuter Aircraft In recent years, growth in the commuter aircraft industry has outpaced that of larger carriers. As larger operators have increasingly adopted a regional hub concept, air traffic has grown among commuter/regional airlines providing feeder service into these hubs. Many smaller communities served by 19-seat passenger aircraft do not generate sufficient air traffic to justify the 29 to 100-seat aircraft currently being acquired by larger operators. Recently, however, the U.S. Federal Aviation Administration (FAA) implemented regulatory actions requiring 19-seat passenger aircraft to come under the same operating rules as commercial jets. These changes will significantly impact direct operating costs for such smaller aircraft and will require the General Partner to remarket the Partnerships' Metro IIIs into international markets not affected by these regulations, a move it has already undertaken due to the higher lease rates achievable in these markets. Further, the industry-wide trend toward larger regional aircraft is expected to have a negative impact on demand for 19-passenger aircraft in the short term. (2) Marine Containers The container market ended 1994 with expectations that the strengthening market experienced late in the year would continue into 1995. Such was not the case as the usual seasonal slowdown during the post-Christmas time period extended longer than expected, and utilization in 1995 did not achieve 1994 levels. While per diem rates increased somewhat by summertime, they did not fully recover from the 8-12% decrease experienced during the preceding two years. Aggressive pricing by several major leasing companies attempting to capture greater market share is expected to put further pressure on refrigerated container utilization and per diem rates. In the secondary markets, there continues to be significant increases in supply as primarily operators dispose of large numbers of older equipment. Since the Partnerships own predominately older containers, they will continue to be impacted by these industry trends. During 1996, major leasing companies are expected to reduce purchases of new equipment in response to soft market conditions. This anticipated reduction in supply should lead to a strengthening in utilization and per diem rates later in the year as demand catches up to supply. (3) Railcars Nearly all the major railroads reported substantial revenue increases during 1995. As additional industry consolidation is expected in 1996, these mergers should produce further operating efficiencies leading to continued increases in revenues and profits. Car loadings rose approximately 3% during 1995 with chemicals, metals, and grain experiencing the largest gains. Car demand for liquefied petroleum gas and liquid fertilizer service was also strong throughout the year. The Partnerships' fleet experienced almost 100% utilization during 1995. The few cars out of service were undergoing scheduled maintenance or repair. The General Partner believes rates are at the top of the cycle for all types of cars owned by the Partnerships. With demand continuing high, rental rates for most types of cars owned by the Partnerships are expected to remain relatively strong during 1996. On the supply side, industry experts predict approximately 55,000 new car builds and 40,000 retirements for a net gain of about 1.2% in the total U.S. fleet during 1996. While car builders are still busy, orders are not coming in as rapidly as in the last two years, so it is likely additions will not significantly outpace retirements this year. (4) Over-the-Road Dry Trailers: The over-the-road dry trailer market remained strong in 1995 due to record freight movements and equipment utilization. The General Partner achieved excellent utilization levels in 1995 averaging over 85%. Current levels show some signs of softening demand in comparison to the record-setting levels of 1994, when users encountered up to 18 months of backlog for new equipment delivery. While new production is expected to decline over the next few years, this should not dramatically affect utilization levels, as plenty of older, obsolete equipment needs to be retired. The General Partner continues to transfer trailers with expiring lease terms to the short-term trailer rental facilities operated by PLM Rental, Inc. The General Partner believes the strong performance of units in these rental facilities reflects the demand for short-term leases mentioned above and expects this trend to continue as long as the current shortage of trailers exists. (5) Over-the-Road Refrigerated Trailers: After a record year in 1994, demand for refrigerated trailers softened in 1995. This softened demand affected overall performance in 1995. Adverse weather conditions reduced the volume of fresh fruit and produce available, so refrigerated equipment operators focused on hauling generic freight, adding to the dry freight market while reducing capacity and demand in temperature-controlled markets. Heavy consolidation in the trucking industry induced carriers to work off excess equipment inventory from 1994 levels. However, inventory is expected to return to more normal levels in 1996 and continue throughout the rest of the decade, as excess capacity is retired, newer refrigeration technology standards become more defined, and environmentally-damaging refrigerants are phased out of service. (E) Government Regulations The use, maintenance, and ownership of equipment is regulated by federal, state, local, and/or foreign governmental authorities. Such regulations may impose restrictions and financial burdens on the Partnerships' ownership and operation of equipment, which may affect the Partnerships' liquidity. Changes in government regulations, industry standards, or deregulation may also affect the ownership, operation, and resale of the equipment. Substantial portions of the Partnerships' equipment portfolio are either registered or operated internationally. Such equipment may be subject to adverse political, government, or legal actions, including the risk of expropriation or loss arising from hostilities. Certain of the Partnerships' equipment is subject to extensive safety and operating regulations which may require the removal from service or extensive modification, of such equipment to meet these regulations at considerable cost to the Partnership. Such regulations include (but are not limited to): (1) the Montreal Protocol on Substances that Deplete the Ozone Layer and the U.S. Clean Air Act Amendments of 1990 which call for the control and eventual replacement of substances that have been found to cause or contribute significantly to harmful effects on the stratospheric ozone layer and which are used extensively as refrigerants in refrigerated marine cargo containers, over-the-road trailers, etc.; (2) the U.S. Department of Transportation's Hazardous Materials Regulations which regulate the classification of and packaging requirements for hazardous materials and which apply particularly to the Partnerships' tankcars. ITEM 2. PROPERTIES The Partnerships neither own nor lease any properties other than the equipment they have purchased for leasing purposes. At December 31, 1995, each Partnership owned a portfolio of transportation equipment as described in Part I, Item 1. It is not contemplated that any more equipment will be acquired. The Partnerships maintain their principal offices at One Market, Steuart Street Tower, Suite 900, San Francisco, California 94105-1301. All office facilities are provided by FSI without reimbursement by the Partnerships. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Partnerships' limited partners during the fourth quarter of its fiscal year ended December 31, 1995. PART II ITEM 5. MARKET FOR THE PARTNERSHIPS' EQUITY AND RELATED UNITHOLDER MATTERS Pursuant to the terms of the Partnerships' Agreements, the General Partner is generally entitled to a 1% interest in the profits and losses and distributions of each Partnership. The General Partner also is entitled to a special allocation of net profit or gains from sale of each Partnerships' assets during the liquidation phase in an amount equal to one ninety-ninth of the aggregate of the capital contribution made by the Limited Partners. The General Partner is the sole holder of such interests. Ownership of the remaining 99% interest in the profits and losses and distributions of the respective Partnerships is represented as follows as of December 31, 1995:
TEP IXA TEP IXB TEP IXC TEP IXD Holders of Limited Partnership Units 1,008 614 533 328
There are several secondary exchanges which may purchase or facilitate transactions of limited partnership units. Secondary markets are characterized as having few buyers for limited partnership interests and, therefore, generally are viewed as inefficient vehicles for the sale of partnership units. There is no public market for the Units and none is likely to develop. Moreover, the Units are subject to substantial restriction on transferability. ITEM 6. SELECTED FINANCIAL DATA Table 5, below, lists selected financial data for the respective Partnerships: TABLE 5
For the years ended December 31, TEP IXA 1995 1994 1993 1992 1991 ------- -------------------------------------------------------------------------------------- Operating results: Total revenues $ 1,144,180 $ 752,029 $ 764,823 $ 1,041,370 $ 1,363,689 Gain (loss) on disposition of equipment 555,733 59,957 (53,590) 11,253 (29,549) Net income (loss) 473,623 (132,809) (179,977) 203,877 396,001 At year-end: Total assets $ 2,044,123 $ 1,855,487 $ 2,568,780 $ 3,413,824 $ 3,994,907 Total liabilities 43,300 30,418 111,336 68,331 39,768 Cash distributions $ 297,869 $ 499,566 $ 708,072 $ 813,523 $ 1,007,443 Per limited partnership unit: Net income (loss) $ 19.31 $ (5.41) $ (7.34) $ 8.31 $ 16.14 Cash distributions $ 12.14 $ 20.37 $ 28.87 $ 33.16 $ 41.07 TEP IXB Operating results: Total revenues $ 671,144 $ 962,681 $ 956,072 $ 1,024,899 $ 1,123,151 Gain on disposition of equipment 113,206 132,025 30,646 -- 14,108 Net income 83,006 279,472 282,593 386,866 383,457 At year-end: Total assets $ 1,158,613 $ 1,691,187 $ 2,275,596 $ 2,760,063 $ 3,159,146 Total liabilities 92,454 33,858 35,912 18,337 19,651 Cash distributions $ 674,176 $ 861,827 $ 784,635 $ 784,635 $ 724,935 Per limited partnership unit: Net income $ 4.71 $ 15.85 $ 16.02 $ 21.94 $ 21.74 Cash distributions $ 38.23 $ 48.87 $ 44.49 $ 44.49 $ 41.10
For the years ended December 31, TEP IXC 1995 1994 1993 1992 1991 ------- -------------------------------------------------------------------------------------- Operating results: Total revenues $ 916,158 $ 970,110 $ 837,998 $ 959,605 $ 869,896 Gain (loss) on disposition of equipment 229,599 2,561 14,139 (108,915) (22,314) Net income (loss) 259,541 154,881 36,888 65,987 (132,285) At year-end: Total assets $ 1,189,380 $ 1,849,532 $ 2,057,830 $ 2,494,437 $ 3,112,094 Total liabilities 44,063 56,790 31,384 21,764 17,141 Cash distributions $ 906,966 $ 388,585 $ 483,115 $ 688,267 $ 277,542 Per limited partnership unit: Net income (loss) $ 15.19 $ 9.07 $ 2.16 $ 3.86 $ (7.74) Cash distributions $ 53.09 $ 22.74 $ 28.28 $ 40.29 $ 16.24 TEP IXD Operating results: Total revenues $ 374,362 $ 583,442 $ 743,878 $ 790,599 $ 642,579 Gain on disposition of equipment 83,235 17,133 53,478 94,829 7,750 Net income $ 46,051 $ 193,690 $ 305,232 $ 269,939 $ 132,859 At year-end: Total assets $ 575,694 $ 1,390,092 $ 1,600,584 $ 1,715,979 $ 2,112,364 Total liabilities 8,338 5,060 10,588 7,221 64,018 Cash distributions $ 863,727 $ 398,654 $ 423,994 $ 609,527 $ 281,837 Per limited partnership unit: Net income $ 4.78 $ 20.12 $ 31.71 $ 28.04 $ 13.80 Cash distributions $ 89.74 $ 41.42 $ 44.05 $ 63.33 $ 29.28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (A) Sources The Partnerships' primary source of liquidity is operating cash flow. Proceeds realized from the sale or disposal of equipment are generally distributed to the partners. The Partnerships' original source of capital was proceeds from the initial public offering of limited partnership units. (B) Asset Sales 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 results unpredictably from the wear, tear, and general risk of normal operations. (C) 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 for the year ended December 31, 1995. As of December 31, 1995, the General Partner estimated the current fair market value of each Partnerships' equipment portfolio to be approximately : $2.9 million, $1.6 million, $1.9 million and $0.92 million for TEP IXA, TEP IXB, TEP IXC and TEP IXD, respectively. (D) Government Regulations The General Partner operates the Partnerships' equipment in accordance with current regulations (see Item 1 (E) 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 their portfolio. Additionally, regulatory systems vary from country to country, which may increase the burden to the Partnerships of meeting regulatory compliance for the same equipment operated between countries. 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. (E) Future Outlook The General Partner intends to continue its strategy of closely matching the level of cash distributions to that of net operating cash flows. However, as stated above, the difficulty in predicting market conditions precludes the General Partner from accurately determining the impact of this strategy on liquidity. The Partnerships will enter into their respective liquidation phase beginning in 1996 and will, pursuant to the original operating plan, continue to market equipment for sale as current lease terms expire. The General Partner has not planned any expenditures past January 1, 1996, nor is it aware of any contingencies, that would require capital resources additional to those discussed above. (F) Results of Operations - Year to Year Detail Comparison Comparison of the Registrant's Operating Results for the Years Ended December 31, 1995 and 1994 TEP IXA (A) Revenues (1) Lease revenue decreased to $547,246 in 1995 from $682,844 in 1994. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1995 1994 --------------------------------- Trailers $ 324,821 $ 438,918 Marine containers 118,625 130,722 Rail equipment 103,800 95,954 Aircraft -- 17,250 ================================= $ 547,246 $ 682,844 ================================= The decline was due primarily to the following: (a) Trailer revenue decreased $114,097 from 1994 levels due to the decline in utilization in the short-term rental facilities in 1995 compared to 1994 levels, and the sale or disposal of 12 trailers, one yardster and one forklift in 1994. Additionally, one trailer was disposed of in 1995; (b) Aircraft revenue decreased $17,250 due to the sale of a commuter aircraft in the second quarter of 1995 which was structured as a sales-type lease. The income from this lease financing is now reported as interest income; (c) Marine container revenue decreased $12,097 due to the disposal of 10 marine containers in 1995 and 6 in 1994, and a decline in utilization from 1994 levels; (d) Rail revenue increased $7,846 from 1994 levels due to a rental credit which was given to a current lessee in the first quarter of 1994. (2) Interest and other income increased to $41,201 in 1995 from $9,228 in 1994 due primarily to an increase of $31,000 in finance lease income as the Partnership entered into a sales-type lease related to a commuter aircraft, and secondarily to higher interest rates earned on invested cash. (3) For the year ended December 31, 1995, the Partnership realized a gain of $555,733 on the sale or disposition of one trailer, one commuter aircraft, and 10 marine containers, compared to the same period in 1994, where the Partnership realized a gain of $59,957 on the sale or disposition of 12 trailers, one yardster, one forklift, and six marine containers. The Partnership will receive future lease payments totaling $234,000 with an additional balloon payment of $919,012 at the end of the one-year lease term relating to the sales type lease of the commuter aircraft. (B) Expenses Total expenses for the years ended December 31, 1995 and 1994, were $670,557 and $884,838, respectively. The decrease in 1995 expenses was attributable primarily to decreased bad debt expense and depreciation expense, offset by increases in repairs and maintenance and general and administrative expense. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) increased to $192,738 in 1995 from $132,056 in 1994. This increase was due to the refurbishment required on the Partnership's aircraft which came off-lease in the beginning of 1995, partially offset by a decrease in repairs and maintenance for trailers in the short-term rental facilities. (2) Indirect Operating Expenses (defined as depreciation expense, management fees, bad debt expense and general and administrative expenses) decreased to $477,819 in 1995 from $752,782 in 1994. This change resulted from: (a) a decrease of $167,819 in bad debt expense due to the change in management's estimate of doubtful accounts in 1995; (b) a decrease in depreciation expense of $124,901 from 1994 levels resulting from the sale or disposal of one trailer, one commuter aircraft, and 10 marine containers in 1995; (c) an increase in general and administrative expense of $18,010 from 1994 levels due primarily to higher administrative costs associated with the short-term rental facilities in 1995 compared with 1994 levels due to a credit of $16,000 which was received on the short-term rental facilities in 1994 due to the closing one of the short-term rental facilities in 1994, no similar credit was received in 1995 and an increase in audit fees. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1995, was $473,623 compared with a net loss of $132,809 for the year ended December 31, 1994. In 1995, TEP IXA distributed $294,890 to the Limited Partners, or $12.14 per Unit. The Partnership's performance for the year ended December 31, 1995, is not necessarily indicative of future periods. TEP IXB (A) Revenues (1) Lease revenue decreased to $535,422 in 1995 from $813,960 in 1994. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1995 1994 --------------------------------- Trailers and tractors $ 224,499 $ 401,393 Aircraft 194,371 194,371 Rail equipment 81,637 178,641 Marine containers 34,915 39,555 ================================= $ 535,422 $ 813,960 ================================= The decline was due primarily to the following: (a) Trailer and tractor revenue decreased $176,894 due to the sale of 22 trailers during 1995, and a slight decline in utilization in the short-term rental facilities; (b) Railcar revenue decreased $97,004 due to the sale of the letro porter in the third quarter of 1994 and the off-lease status of the sidelift at the beginning of 1995; (c) Marine container revenue decreased $4,640 due to the disposal of four containers in 1995. (2) Interest and other income increased to $22,516 in 1995 from $16,696 in 1994 due primarily to higher interest rates and higher cash balances in interest bearing accounts. (3) For the year ended December 31, 1995, the Partnership realized a gain of $113,206 on the sale of 22 trailers and the disposition of four marine containers, compared to the same period in 1994, where the Partnership realized a gain of $132,025 on the sale of 13 tractors, six trailers, and one letro porter and the disposition of five marine containers. (B) Expenses Total expenses for the years ended December 31, 1995 and 1994 were $588,138 and $683,209, respectively. The decrease in 1995 expenses was attributable primarily to decreased depreciation expense, management fees to affiliates, and bad debt expense, partially offset by increased repairs and maintenance and general and administrative expenses. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) increased to $144,020 in 1995 from $127,540 in 1994. This change resulted primarily from an increase in the number of trailers coming off term leases requiring refurbishment prior to transitioning to the short-term rental facilities operated by an affiliate of the General Partner, and repairs required on several of the Partnership's railcars. (2) Indirect Operating Expenses (defined as depreciation and amortization expense, management fees, bad debt expense and general and administrative expenses) decreased to $444,118 in 1995 from $555,669 in 1994. This change resulted primarily from: (a) a decrease in depreciation expense of $102,009 from 1994 levels reflecting asset sales during 1995; (b) a decrease in management fees to affiliate of $11,895 from 1994 levels due to the lower levels of operating cash flow in 1995 compared to 1994. Management fees are calculated monthly as the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Gross Proceeds as defined in the Limited Partnership Agreement; (c) a decrease of $7,575 in bad debt expense due to change in management's estimate of doubtful accounts in 1995; (d) an increase in general and administrative expenses of $9,928 from 1994 levels. This reflects the increased administrative costs associated with the short-term rental facilities due to an increased volume of trailers operating in the facilities in 1995 as compared to 1994, and increase in audit fee. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1995, was $83,006 compared with net income of $279,472 for the year ended December 31, 1994. In 1995, TEP IXB distributed $667,434 to the Limited Partners, or $38.23 per Unit. The Partnership's performance for the year ended December 31, 1995, is not necessarily indicative of future periods. TEP IXC (A) Revenues (1) Lease revenue decreased to $667,893 in 1995 from $958,179 in 1994. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1995 1994 --------------------------------- Trailers and tractors $ 546,927 $ 767,520 Rail equipment 41,059 104,808 Aircraft 68,400 76,088 Marine containers 11,507 9,763 ================================= $ 667,893 $ 958,179 ================================= The decrease was due to the following: (a) Trailer revenue decreased $220,593 in 1995 as compared to 1994 levels, due primarily to lower utilization in the short-term rental facilities in 1995, as compared to 1994, and the sale of four trailers in 1995; (b) Rail revenue decreased $63,749 in 1995 compared to 1994. The decrease was due to the sale of five twin stack railcars in the first quarter of 1995; (c) Aircraft revenue decreased $7,688 in 1995 as compared to 1994 levels. The decrease resulted from the terms of the original lease agreement which called for a decrease in rate in 1995. (2) Interest and other income increased to $18,666 in 1995 from $9,370 in 1994 due primarily to higher interest rates and higher cash balances in interest bearing accounts. (B) Expenses Total expenses for the years ended December 31, 1995 and 1994 were $656,617 and $815,229, respectively. The decrease in 1995 expenses was attributable primarily to decreases in bad debt expenses, depreciation expense, general and administrative expense, repairs and maintenance, and management fees to affiliate. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) decreased to $162,539 in 1995 from $187,140 in 1994. This decrease was due to a decrease in the number of trailers coming off term lease requiring refurbishment prior to transitioning to the short-term rental facilities operated by an affiliate of the General Partner. (2) Indirect Operating Expenses (defined as depreciation expense, management fees, bad debt expense and general and administrative expenses) increased to $494,078 in 1995 from $628,089 in 1994. This change resulted primarily from: (a) a decrease in bad debt expense of $46,501 due to change in management's estimate of doubtful accounts in 1995; (b) a decrease in depreciation expense of $45,141 from 1994 reflecting asset sales during 1995 and 1994; (c) a decrease in general and administrative expenses of $31,796 primarily due to the decreased administrative costs associated with the short-term rental facilities due to decline in utilization in the short-term rental facilities, offset by an increase in audit fee; (d) a decrease in management fees of $10,573 due to decreased levels of operating cash flow during 1994. 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 Gross Proceeds as defined in the Limited Partnership Agreement. (3) During 1995, the Partnership realized a gain of $229,599 on the sale of four trailers, five railcars, and the disposition of one marine container, compared to the same period in 1994 when the Partnership realized a gain of $2,561 on the sale of four trailers and the disposition of three marine containers. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1995 was $259,541 compared with net income of $154,881 for the year ended December 31, 1994. In 1995, TEP IXC distributed $897,896 to the Limited Partners, or $53.09 per Unit. The Partnership's performance for the year ended December 31, 1995, is not necessarily indicative of future periods. TEP IXD (A) Revenues (1) Lease revenue decreased to $267,141 in 1995 from $545,035 in 1994. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1995 1994 --------------------------------- Trailers $ 188,529 $ 456,511 Marine containers 78,612 88,524 ================================= $ 267,141 $ 545,035 ================================= The decrease was due to the following: (a) Trailer revenue decreased $267,982 in 1995 as compared to 1994 levels, due to the sale of 30 trailers during 1995 and lower utilization in short-term rental facilities operated by an affiliate of the General Partner; (b) Marine container revenue decreased $9,912 in 1995 as compared to 1994 levels, primarily due to a decline in utilization levels in 1995 and the disposal of 45 20-foot dry marine containers during 1995. (2) Interest and other income increased to $23,986 in 1995 from $21,274 in 1994 due to an increase in interest rates and higher cash balances in interest bearing accounts. (3) Gain on disposition of equipment of $83,235 in 1995 resulted from the sale or disposal of 45 marine containers and 30 trailers. The gain on disposition of equipment in 1994 totaled $17,133 from the sale or disposal of 29 marine containers and two trailers. (B) Expenses Total expenses for the years ended December 31, 1995 and 1994 were $328,311 and $389,752, respectively. The decrease in 1995 expenses was attributable primarily to decreased depreciation and management fees, offset slightly by an increase in bad debt expense, repairs and maintenance, and general and administrative expenses. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) increased to $60,337 in 1995 from $57,449 in 1994. This change resulted primarily from the refurbishment of 30 trailers prior to being sold. (2) Indirect Operating Expenses (defined as depreciation and amortization expense, management fees, bad debt expense, and general and administrative expenses) decreased to $267,974 in 1995 from $332,033 in 1994. This change resulted from: (a) a decrease in depreciation expense of $61,957 from 1994 levels reflecting assets sales during 1995 and 1994; (b) a decrease in management fees to affiliate of $13,499 from 1994 levels due to the lower level of operating cash flow during 1995. 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 Gross Proceeds as defined in the Limited Partnership Agreement; (c) an increase of $9,471 in bad debt expense due to change in management's estimate of doubtful accounts in 1995. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1995 was $46,051 compared with net income of $193,690 for the year ended December 31, 1994. In 1995, TEP IXD distributed $855,090 to the Limited Partners, or $89.74 per Unit. The Partnership's performance for the year ended December 31, 1995, is not necessarily indicative of future periods. Comparison of the Registrant's Operating Results for the Years Ended December 31, 1994 and 1993 TEP IXA (A) Revenues (1) Lease revenue decreased to $682,844 in 1994 from $810,530 in 1993. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1994 1993 --------------------------------- Trailers $ 438,918 $ 537,584 Marine containers 130,722 151,216 Rail equipment 95,954 121,730 Aircraft 17,250 -- ================================= $ 682,844 $ 810,530 ================================= The decline was due primarily to the following: (a) Trailer revenue decreased $98,666 from 1993 levels due to the sale or disposal of 12 trailers, one yardster and one forklift, offset, in part by an increase in trailer revenues due to more trailers operating in short-term rental facilities in 1994, as compared to 1993. Trailers operating in short-term rental facilities generate higher per day revenue than term lease trailers; (b) Rail revenue decreased $25,776 from 1993 levels due to lower re-leased rate on the sidelift; (c) Marine container revenue decreased $20,494 due to the disposal of three 20 foot reefers and three 20 foot folding-end flat marine containers in 1994, and a decline in utilization from 1993 levels; (d) Aircraft revenue increased $17,250 due to the re-lease of an aircraft in December of 1994. This aircraft has been off-lease since the second quarter of 1992. (2) Interest and other income increased to $9,228 in 1994 from $7,883 in 1993 due primarily to higher interest rates earned on invested cash. (3) For the year ended December 31, 1994, the Partnership realized a gain of $59,957 on the sale or disposition of 12 trailers, one yardster, one forklift, and six marine containers, compared to the same period in 1993, where the Partnership realized a loss of $53,590 on the sale or disposition of 15 trailers and four forklifts. (B) Expenses Total expenses for the years ended December 31, 1994 and 1993 were $884,838 and $944,800, respectively. The decrease in 1994 expenses was attributable primarily to decreased repairs and maintenance, general and administrative expenses, depreciation expense, offset by increases in management fees to affiliate and bad debt expense. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) decreased to $132,056 in 1994 from $151,214 in 1993. This decrease was due to the repairs and maintenance required on the Partnership's off-lease aircraft during 1993, partially offset by an increase in the number of trailers coming off term lease in 1994, requiring refurbishment prior to transitioning into the short-term rental facilities operated by an affiliate of the General Partner. (2) Indirect Operating Expenses (defined as depreciation expense, management fees, bad debt expense and general and administrative expenses) decreased to $752,782 in 1994 from $780,186 in 1993. This change resulted from: (a) a decrease in depreciation expense of $37,812 from 1993 levels resulting from the sale or disposal of 12 trailers, one yardster, one forklift, and six marine containers in 1994; (b) a decrease in general and administrative expense of $22,312 from 1993 levels due primarily to lower administrative costs associated with the Partnership, partially offset by increases in certain trailer expenses associated with an increased number of the Partnership's trailers operating in the rental facilities in 1994; (c) an increase in management fees to affiliate of $20,011 from 1993 levels due to changes in the level of operating cash flow between the two years. Management fees are calculated monthly as the greater of 10% of Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Gross Proceeds as defined in the Limited Partnership Agreement; (d) an increase of $12,709 in bad debt expense due to General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees. (3) Loss on revaluation of equipment in 1993 resulted from the Partnership reducing the carrying value of a forklift to its current estimated net realizable value. No loss on revaluation of equipment was required in 1994. (C) Net Loss As a result of all of the foregoing, net loss for the year ended December 31, 1994 was $132,809 compared with a net loss of $179,977 for the year ended December 31, 1993. In 1994, TEP IXA distributed $494,570 to the Limited Partners, or $20.37 per Unit. The Partnership's performance for the year ended December 31, 1994, is not necessarily indicative of future periods. TEP IXB (A) Revenues (1) Lease revenue decreased to $813,960 in 1994 from $914,205 in 1993. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1994 1993 --------------------------------- Trailers and tractors $ 401,393 $ 468,153 Aircraft 194,371 194,371 Rail equipment 178,641 200,624 Marine containers 39,555 51,057 ================================= $ 813,960 $ 914,205 ================================= The decline was due primarily to the following: (a) Trailer and tractor revenue decreased $66,760 due to the sale of 13 tractors, one over-the-road reefer and five meat trailers, partially offset by an increase in trailer revenues as trailers completed the transition from term leases to operation in the short-term rental facilities. Trailers operating in short-term rental facilities generate higher per day revenue than term lease trailers; (b) Railcar revenue decreased $21,983 due to the sale of the letro porter, offset, in part, by an increase in revenue due to the re-lease of 13 railcars off-lease in 1993; (c) Marine container revenue decreased $11,502 due to the disposal of four 20 foot reefers and one 40 foot folding-end flat marine containers in 1994 and lower utilization in 1994 compared to 1993. (2) Interest and other income increased to $16,696 in 1994 from $11,221 in 1993 due primarily to higher interest rates and higher cash balances in interest bearing accounts. (3) For the year ended December 31, 1994, the Partnership realized a gain of $132,025 on the sale of 13 tractors, six trailers, and one letro porter and the disposition of five marine containers, compared to the same period in 1993, where the Partnership realized a gain of $30,646 on the disposal of four trailers. (B) Expenses Total expenses for the years ended December 31, 1994 and 1993 were $683,209 and $673,479, respectively. The increase in 1994 expenses was attributable primarily to increased repairs and maintenance, and general and administrative expenses, partially offset by decreased depreciation expense and management fees to affiliates. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) increased to $127,540 in 1994 from $61,048 in 1993. This change resulted primarily from an increase in the number of trailers coming off term leases requiring refurbishment prior to transitioning to the short-term rental facilities operated by an affiliate of the General Partner, and repairs required on several of the Partnership's railcars. (2) Indirect Operating Expenses (defined as depreciation and amortization expense, management fees, bad debt expense and general and administrative expenses) decreased to $555,669 in 1994 from $612,431 in 1993. This change resulted primarily from: (a) a decrease in depreciation expense of $82,420 from 1993 levels reflecting asset sales during 1994; (b) a decrease in management fees to affiliate of $22,789 from 1993 levels due to the lower levels of operating cash flow in 1994 compared to 1993. Management fees are calculated monthly as the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Gross Proceeds as defined in the Limited Partnership Agreement; (c) an increase in general and administrative expenses of $50,327 from 1993 levels. This reflects the increased administrative costs associated with the short-term rental facilities due to an increased volume of trailers operating in the facilities. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1994, was $279,472 compared with net income of $282,593 for the year ended December 31, 1993. In 1994, TEP IXB distributed $853,209 to the Limited Partners, or $48.87 per Unit. The Partnership's performance for the year ended December 31, 1994, is not necessarily indicative of future periods. TEP IXC (A) Revenues (1) Lease revenue increased to $958,179 in 1994 from $817,898 in 1993. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1994 1993 --------------------------------- Trailers and tractors $ 767,520 $ 662,276 Rail equipment 104,808 110,753 Aircraft 76,088 25,177 Marine containers 9,763 19,692 ================================= $ 958,179 $ 817,898 ================================= The increase was due to the following: (a) Trailer revenue increased $105,244 in 1994 as compared to 1993 levels, due primarily to more trailers operating in short-term rental facilities in 1994, as compared to 1993. Trailers operating in short-term facilities generate higher per day revenue than term lease trailers; (b) Aircraft revenue increased $50,911 in 1994 as compared to 1993 levels. The increase resulted from a commuter aircraft which was off-lease for the first eight months of 1993 compared to being on lease all of 1994; (c) Marine container revenue decreased $9,929 in 1994 as compared to 1993 levels, due primarily to a decline in utilization levels in 1993; (d) Rail revenue decreased $5,945 in 1994 compared to 1993. The decrease was due to a rail car coming off-lease in April of 1993 and being off-lease the entire 1994. (2) Interest and other income increased to $9,370 in 1994 from $5,961 in 1993 due primarily to higher interest rates and higher cash balances in interest bearing accounts. (B) Expenses Total expenses for the years ended December 31, 1994 and 1993 were $815,229 and $801,110, respectively. The increase in 1994 expenses was attributable primarily to increases in bad debt expenses, management fees to affiliate and general and administrative expense, offset by, decreased depreciation expense, and repairs and maintenance. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) decreased to $187,140 in 1994 from $206,521 in 1993. This decrease was due to the repairs and maintenance required on the Partnership's off-lease aircraft during 1993 and not required during 1994, partially offset by an increase in the number of trailers coming off term lease requiring refurbishment prior to transitioning to the short-term rental facilities operated by an affiliate of the General Partner. (2) Indirect Operating Expenses (defined as depreciation and amortization expense, management fees, bad debt expense and general and administrative expenses) increased to $628,089 in 1994 from $594,589 in 1993. This change resulted primarily from: (a) an increase in bad debt expense of $21,531 due to the General Partner's evaluation of the collectability of receivables due from trailer lessees; (b) an increase in management fees of $14,604 due to increased levels of operating cash flow during 1994. 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 Gross Proceeds as defined in the Limited Partnership Agreement; (c) an increase in general and administrative expenses of $12,157 primarily due to the increased administrative costs associated with the short-term rental facilities resulting from the increased volume of trailers operating in these facilities, partially offset by a reduction in transportation charges required to position the aircraft for re-leasing; (d) a decrease in depreciation expense of $14,792 from 1993 reflecting asset sales during 1994 and 1993. (3) During 1994, the Partnership realized a gain of $2,561 on the sale of four trailers and the disposition of three marine containers, compared to the same period in 1993 when the Partnership realized a gain of $14,139 on the sale or disposal of two trailers and one marine container. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1994 was $154,881 compared with net income of $36,888 for the year ended December 31, 1993. In 1994, TEP IXC distributed $384,699 to the Limited Partners, or $22.74 per Unit. The Partnership's performance for the year ended December 31, 1994, is not necessarily indicative of future periods. TEP IXD (A) Revenues (1) Lease revenue decreased to $545,035 in 1994 from $677,550 in 1993. The following table lists lease revenues earned by equipment type: For the year ended December 31, 1994 1993 --------------------------------- Trailers $ 456,511 $ 532,280 Marine containers 88,524 145,270 ================================= $ 545,035 $ 677,550 ================================= The decrease was due to the following: (a) Trailer revenue decreased $75,769 in 1994 as compared to 1993 levels, due to the off-lease status of 24 trailers at the end of 1994, low utilization in short-term rental facilities operated by an affiliate of the General Partner, and the disposal of two trailers in 1994 and five trailers (of which 4 trailers are in a sales-type lease) in 1993; (b) Marine container revenue decreased $56,746 in 1994 as compared to 1993 levels, primarily due to a decline in utilization levels in 1994 and disposal of 29 20-foot dry marine containers during 1994. (2) Interest and other income increased to $21,274 in 1994 from $12,850 in 1993. Due to higher interest rates and higher cash balances in interest bearing accounts. (3) Gain on disposition of equipment of $17,133 in 1994 resulted from the sale or disposal of 29 marine containers and two trailers. The gain on disposition of equipment in 1993 totaled $53,478 from the sale of 38 marine containers and five trailers. (B) Expenses Total expenses for the years ended December 31, 1994 and 1993 were $389,752 and $438,646, respectively. The decrease in 1994 expenses was attributable primarily to decreased depreciation, management fees and general and administrative expenses, offset slightly by an increase in bad debt expense. (1) Direct Operating Expenses (defined as repairs and maintenance and insurance) decreased to $57,449 in 1994 from $61,392 in 1993. This change resulted primarily from the smaller number of trailers operating in the short-term rental facilities requiring repairs and maintenance as compared to the same period in 1993. (2) Indirect Operating Expenses (defined as depreciation and amortization expense, management fees, bad debt expense, and general and administrative expenses) decreased to $332,303 in 1994 from $377,254 in 1993. This change resulted from: (a) a decrease of $21,204 in general and administrative expenses from 1993 levels resulting primarily from lower administrative costs associated with the Partnership; (b) a decrease in depreciation expense of $16,296 from 1993 levels reflecting assets sales during 1994 and 1993; (c) a decrease in management fees to affiliate of $14,383 from 1993 levels due to the lower level of operating cash flow during 1994. 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 Gross Proceeds as defined in the Limited Partnership Agreement; (d) an increase of $6,932 in bad debt expense due to the General Partner's evaluation of the collectability of receivables due from rental yard trailer lessees. (C) Net Income As a result of all of the foregoing, net income for the year ended December 31, 1994 was $193,690 compared with net income of $305,232 for the year ended December 31, 1993. In 1994, TEP IXD distributed $394,668 to the Limited Partners, or $41.42 per Unit. The Partnership's performance for the year ended December 31, 1994, is not necessarily indicative of future periods. Geographic Information The Partnerships operates their equipment in international markets. As such, the Partnerships are exposed to a variety of currency, political, credit and economic risks. Currency risks are at a minimum because all invoicing, with the exception of a small number of railcars operating in Canada, is conducted in U.S. dollars. Political risks are minimized generally through the avoidance of operations in countries that do not have a stable judicial system and established commercial business laws. Credit support strategies for lessees range from letters of credit supported by U.S. banks to cash deposits. Although these credit support mechanisms generally allow the Partnerships to maintain its lease yield, there are risks associated with slow-to-respond judicial systems when legal remedies are required to secure payment or repossess equipment. Economic risks are inherent in all international markets and the General Partner strive to minimize this risk with market analysis prior to committing equipment to a particular geographic area. Refer to the notes to the Financial statements for information on the revenues, income and assets in various geographic regions. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements for the Partnerships are listed on the Index to Financial Statements and Financial Statement Schedules included in Item 14 of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY As of the date of this Annual Report, the directors and executive officers of PLM International (and key executive officers of its subsidiaries) are as follows:
Name Age Position - -------------------------------------- ------------------- ------------------------------------------------------- J. Alec Merriam 60 Director, Chairman of the Board, PLM International, Inc.; Director, PLM Financial Services, Inc. Allen V. Hirsch 42 Director, Vice Chairman of the Board, Executive Vice President of PLM International, Inc.; Director and President, PLM Financial Services, Inc.; President, PLM Securities Corp., and PLM Transportation Equipment Corporation. Walter E. Hoadley 79 Director, PLM International, Inc. Robert L. Pagel 59 Director, Chairman of the Executive Committee, PLM International, Inc.; Director, PLM Financial Services, Inc. Harold R. Somerset 61 Director, PLM International, Inc. Robert N. Tidball 57 Director, President and Chief Executive Officer, PLM International, Inc. J. Michael Allgood 47 Vice President and Chief Financial Officer, PLM International, Inc. and PLM Financial Services, Inc. Stephen M. Bess 49 President, PLM Investment Management, Inc.; Vice President, PLM Financial Services, Inc. David J. Davis 39 Vice President and Corporate Controller, PLM International and PLM Financial Services, Inc. Frank Diodati 41 President, PLM Railcar Management Services Canada Limited. Douglas P. Goodrich 49 Senior Vice President, PLM International; Senior Vice President PLM Transportation Equipment Corporation; President PLM Railcar Management Services, Inc. Steven O. Layne 41 Vice President, PLM Transportation Equipment Corporation. Stephen Peary 47 Senior Vice President, General Counsel and Secretary, PLM International, Inc.; Vice President, General Counsel and Secretary, PLM Financial Services, Inc., PLM Investment Management, Inc., PLM Transportation Equipment Corporation; Vice President, PLM Securities, Corp. Thomas L. Wilmore 53 Vice President, PLM Transportation Equipment Corporation; Vice President, PLM Railcar Management Services, Inc.
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM International in September 1990, having served as a director since February 1988. In October 1988 he became a member of the Executive Committee of the Board of Directors of PLM International. From 1972 to 1988 Mr. Merriam was Executive Vice President and Chief Financial Officer of Crowley Maritime Corporation, a San Francisco area-based company engaged in maritime shipping and transportation services. Previously, he was Chairman of the Board and Treasurer of LOA Corporation of Omaha, Nebraska and served in various financial positions with Northern Natural Gas Company, also of Omaha. Allen V. Hirsch became Vice Chairman of the Board and a Director of PLM International in April 1989. He is an Executive Vice President of PLM International and President of PLM Securities Corp. Mr. Hirsch became the President of PLM Financial Services, Inc. in January 1986 and President of PLM Investment Management, Inc. and PLM Transportation Equipment Corporation in August 1985, having served as a Vice President of PLM Financial Services, Inc. and Senior Vice President of PLM Transportation Equipment Corporation beginning in August 1984, and as a Vice President of PLM Transportation Equipment Corporation beginning in July 1982 and of PLM Securities Corp. from July 1982 to October 1, 1987. He joined PLM, Inc. in July 1981, as Assistant to the Chairman. Prior to joining PLM, Inc., Mr. Hirsch was a Research Associate at the Harvard Business School. From January 1977 through September 1978, Mr. Hirsch was a consultant with the Booz, Allen and Hamilton Transportation Consulting Division, leaving that employment to obtain his master's degree in business administration. Dr. Hoadley joined PLM International's Board of Directors and its Executive Committee in September, 1989. He served as a Director of PLM, Inc. from November 1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988. Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since 1981. He was Executive Vice President and Chief Economist for the Bank of America from 1968 to 1981 and Chairman of the Federal Reserve Bank of Philadelphia from 1962 to 1966. Dr. Hoadley has also served as a Director of Transcisco Industries, Inc. from February 1988 through August 1995. Robert L. Pagel was appointed Chairman of the Executive Committee of the Board of Directors of PLM International in September 1990, having served as a director since February 1988. In October 1988 he became a member of the Executive Committee of the Board of Directors of PLM International. From June 1990 to April 1991 Mr. Pagel was President and Co-Chief Executive Officer of The Diana Corporation, a holding company traded on the New York Stock Exchange. He is the former President and Chief Executive Officer of FanFair Corporation which specializes in sports fans' gift shops. He previously served as President and Chief Executive Officer of Super Sky International, Inc., a publicly traded company, located in Mequon, Wisconsin, engaged in the manufacture of skylight systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis & Loewi, Inc., a Milwaukee-based investment firm. Mr. Pagel retired from Blunt, Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the brokerage and financial industries. Mr. Pagel has also served on the Board of Governors of the Midwest Stock Exchange. Harold R. Somerset was elected to the Board of Directors of PLM International in July 1994. From February 1988 to December 1993, Mr. Somerset was President and Chief Executive Officer of California & Hawaiian Sugar Corporation (C&H), a recently-acquired subsidiary of Alexander & Baldwin, Inc. Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating Officer, having served on its Board of Directors since 1978, a position in which he continues to serve. Between 1972 and 1984, Mr. Somerset served in various capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture company headquartered in Honolulu, Hawaii, including Executive Vice President - Agricultures, Vice President, General Counsel and Secretary. In addition to a law degree from Harvard Law School, Mr. Somerset also holds degrees in civil engineering from the Rensselaer Polytechnic Institute and in marine engineering from the U.S. Naval Academy. Mr. Somerset also serves on the Boards of Directors for various other companies and organizations, including Longs Drug Stores, Inc., a publicly-held company headquartered in Maryland. Robert N. Tidball was appointed President and Chief Executive Officer of PLM International in March 1989. At the time of his appointment, he was Executive Vice President of PLM International. Mr. Tidball became a director of PLM International in April, 1989 and a member of the Executive Committee of the Board of Directors of PLM International in September 1990. Mr. Tidball was elected President of PLM Railcar Management Services, Inc. in January 1986. Mr. Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith, Inc., he was Vice President, a General Manager and a Director of North American Car Corporation, and a Director of the American Railcar Institute and the Railway Supply Association. J. Michael Allgood was appointed Vice President and Chief Financial Officer of PLM International in October 1992. Between July 1991 and October 1992, Mr. Allgood was a consultant to various private and public sector companies and institutions specializing in financial operational systems development. In October 1987, Mr. Allgood co-founded Electra Aviation Limited and its holding company, Aviation Holdings Plc of London where he served as Chief Financial Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served as a First Vice President with American Express Bank, Ltd. In February 1978, Mr. Allgood founded and until June 1981, served as a director of Trade Projects International/Philadelphia Overseas Finance Company, a joint venture with Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served in various capacities with Citibank, N.A. Stephen M. Bess was appointed President of PLM Investment Management, Inc. in August 1989, having served as Senior Vice President of PLM Investment Management, Inc. beginning in February 1984 and as Corporate Controller of PLM Financial Services, Inc. beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc., beginning in December 1982. Mr. Bess was Vice President-Controller of Trans Ocean Leasing Corporation, a container leasing company, from November 1978 to November 1982, and Group Finance Manager with the Field Operations Group of Memorex Corp., a manufacturer of computer peripheral equipment, from October 1975 to November 1978. David J. Davis was appointed Vice President and Controller of PLM International in January 1994. From March 1993 through January 1994, Mr. Davis was engaged as a consultant for various firms, including PLM. Prior to that Mr. Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice President and Controller for ITEL Containers International Corporation which was located in San Francisco. Between May 1978 and April 1989, Mr. Davis held various positions with Transamerica Leasing Inc., in New York, including that of Assistant Controller for their rail leasing division. Frank Diodati was appointed President of PLM Railcar Management Services Canada Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and Sales for G.E. Railcar Services Canada Limited. Douglas P. Goodrich was appointed Senior Vice President of PLM International in March 1994. Mr. Goodrich has also served as Senior Vice President of PLM Transportation Equipment Corporation since July 1989, and as President of PLM Railcar Management Services, Inc. since September 1992 having been a Senior Vice President since June 1987. Mr. Goodrich was an Executive Vice President of G.I.C. Financial Services Corporation, a subsidiary of Guardian Industries Corp. of Chicago, Illinois from December 1980 to September 1985. Steven O. Layne was appointed Vice President, PLM Transportation Equipment Corporation's Air Group in November 1992. Mr. Layne was its Vice President, Commuter and Corporate Aircraft beginning in July 1990. Prior to joining PLM, Mr. Layne was the Director, Commercial Marketing for Bromon Aircraft Corporation, a joint venture of General Electric Corporation and the Government Development Bank of Puerto Rico. Mr. Layne is a major in the United States Air Force Reserves and senior pilot with 13 years of accumulated service. Stephen Peary became Vice President, Secretary, and General Counsel of PLM International in February 1988 and Senior Vice President in March 1994. Mr. Peary was Assistant General Counsel of PLM Financial Services, Inc. from August 1987 through January 1988. Previously, Mr. Peary was engaged in the private practice of law in San Francisco. Mr. Peary is a graduate of the University of Illinois, Georgetown University Law Center, and Boston University (Masters of Taxation Program). Thomas L. Wilmore was appointed Vice President - Rail, PLM Transportation Equipment Corporation, in March 1994 and has served as Vice President, Marketing for PLM Railcar Management Services, Inc. since May 1988. Prior to joining PLM, Mr. Wilmore was Assistant Vice President Regional Manager for MNC Leasing Corp. in Towson, Maryland from February 1987 to April 1988. From July 1985 to February 1987, he was President and Co-Owner of Guardian Industries Corp., Chicago, Illinois and between December 1980 and July 1985, Mr. Wilmore was an Executive Vice President for its subsidiary, G.I.C. Financial Services Corporation. Mr. Wilmore also served as Vice President of Sales for Gould Financial Services located in Rolling Meadows, Illinois from June 1978 to December 1980. The directors of the General Partner are elected for a one-year term or until their successors are elected and qualified. There are no family relationships between any director or any executive officer of the General Partner. ITEM 11. EXECUTIVE COMPENSATION The Partnerships have no directors, officers, or employees. The Partnerships have no pension, profit sharing, retirement, or similar benefit plans in effect as of December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners At December 31, 1995, no investor is known by the General Partner to beneficially own more than 5% of the Units of TEP IXA, TEP IXB, TEP IXC or TEP IXD. (b) Security Ownership of Management Neither the General Partner and its affiliates nor any officer or director of the General Partner and its affiliates beneficially own any Units of TEP IXA, TEP IXB, TEP IXC or TEP IXD. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (a) Transactions with Management and Others. During 1995, management fees paid or accrued to IMI were: $60,713, $43,650, $45,353 and $24,250 for TEP IXA, TEP IXB, TEP IXC and TEP IXD, respectively. During 1995, administrative services performed on behalf of the Partnerships were reimbursed to FSI and its affiliates as follows: $122,635, $96,118, $163,169 and $68,871 for TEP IXA, TEP IXB, TEP IXC and TEP IXD, respectively. (b) Certain Business Relationships None. (c) Indebtedness of Management None. (d) Transactions with Promoters None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Annual Report. (b) Reports on Form 8-K None. (c) Exhibits 4. Limited Partnership Agreement of Partnership. Incorporated by reference to the Partnership's Registration Statement on Form S-1 (Reg. No. 33-657) which became effective with the Securities and Exchange Commission on January 7, 1986. 10. Management Agreement between Partnership and PLM Investment Management, Inc. Incorporated by reference to the Partnership's Registration Statement on Form S-1 (Reg. No. 33-657) which became effective with the Securities and Exchange Commission on January 7, 1986. 24. Powers of Attorney. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Registrant has no directors or officers. The General Partner has signed on behalf of the Registrant by duly authorized officers. Date: March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND PARTNERSHIP By: PLM Financial Services, Inc. General Partner By: *_______________________ Allen V. Hirsch President By: /s/ David J. Davis ------------------------- David J. Davis Vice President and Corporate Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following directors of the Registrant's General Partner on the dates indicated. Name Capacity Date *________________________ Allen V. Hirsch Director-FSI March 27, 1996 *________________________ J. Alec Merriam Director-FSI March 27, 1996 *________________________ Robert L. Pagel Director-FSI March 27, 1996 * Stephen Peary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers-of-attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Stephen Peary - ----------------------- Stephen Peary Attorney-in-Fact SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Registrant has no directors or officers. The General Partner has signed on behalf of the Registrant by duly authorized officers. Date: March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND PARTNERSHIP By: PLM Financial Services, Inc. General Partner By: *_______________________ Allen V. Hirsch President By: /s/ David J. Davis ------------------------ David J. Davis Vice President and Corporate Controller * Stephen Peary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Stephen Peary ----------------------- Stephen Peary Attorney-in-Fact SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Registrant has no directors or officers. The General Partner has signed on behalf of the Registrant by duly authorized officers. Date: March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND PARTNERSHIP By: PLM Financial Services, Inc. General Partner By: *_______________________ Allen V. Hirsch President By: /s/ David J. Davis ---------------------- David J. Davis Vice President and Corporate Controller * Stephen Peary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Stephen Peary ----------------------- Stephen Peary Attorney-in-Fact SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Registrant has no directors or officers. The General Partner has signed on behalf of the Registrant by duly authorized officers. Date: March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND PARTNERSHIP By: PLM Financial Services, Inc. General Partner By: *_______________________ Allen V. Hirsch President By: /s/ David J. Davis ------------------------ David J. Davis Vice President and Corporate Controller * Stephen Peary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Stephen Peary ----------------------- Stephen Peary Attorney-in-Fact PLM TRANSPORTATION EQUIPMENT PARTNERS IX 1986 INCOME FUND (A Limited Partnership) INDEX TO FINANCIAL STATEMENTS (Item 14(a)) TEP IXA Page Report of Independent Auditors 32 Balance sheets at December 31, 1995 and 1994 33 Statements of operations for the years ended December 31, 1995, 1994, and 1993 34 Statements of changes in partners' capital for the years ended December 31, 1995, 1994, and 1993 35 Statements of cash flows for the years ended December 31, 1995, 1994, and 1993 36 Notes to financial statements 37-41 TEP IXB Report of Independent Auditors 42 Balance sheets at December 31, 1995 and 1994 43 Statements of income for the years ended December 31, 1995, 1994, and 1993 44 Statements of changes in partners' capital for the years ended December 31, 1995, 1994, and 1993 45 Statements of cash flows for the years ended December 31, 1995, 1994, and 1993 46 Notes to financial statements 47-50 PLM TRANSPORTATION EQUIPMENT PARTNERS IX 1986 INCOME FUND (A Limited Partnership) INDEX TO FINANCIAL STATEMENTS (Item 14(a)) TEP IXC Page Report of Independent Auditors 51 Balance sheets at December 31, 1995 and 1994 52 Statements of income for the years ended December 31, 1995, 1994, and 1993 53 Statements of changes in partners' capital for the years ended December 31, 1995, 1994, and 1993 54 Statements of cash flows for the years ended December 31, 1995, 1994, and 1993 55 Notes to financial statements 56-60 TEP IXD Report of Independent Auditors 61 Balance sheets at December 31, 1995 and 1994 62 Statements of income for the years ended December 31, 1995, 1994, and 1993 63 Statements of changes in partners' capital for the years ended December 31, 1995, 1994, and 1993 64 Statements of cash flows for the years ended December 31, 1995, 1994, and 1993 65 Notes to financial statements 66-69 All other financial statement schedules have been omitted as the required information is not pertinent or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. REPORT OF INDEPENDENT AUDITORS The Partners PLM Transportation Equipment Partners IXA 1986 Income Fund: We have audited the financial statements of PLM Transportation Equipment Partners IXA 1986 Income Fund as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Management's plans in regard to this matter are also described in note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PLM Transportation Equipment Partners IXA 1986 Income Fund as of December 31, 1995 and 1994 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. /S/ KPMG PEAT MARWICK LLP SAN FRANCISCO, CALIFORNIA March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS December 31,
ASSETS 1995 1994 -------------------------------------- Equipment held for operating leases, at cost $ 4,242,401 $ 7,462,921 Less accumulated depreciation (3,567,969) (5,944,395) -------------------------------------- Net equipment 674,432 1,518,526 Cash and cash equivalents 251,709 298,718 Accounts receivable, net of allowance for doubtful accounts of $57,022 in 1995 and $121,925 in 1994 107,933 34,620 Net investment in sales-type lease 1,003,564 -- Due from affiliates 2,941 -- Prepaid insurance 3,544 3,623 -------------------------------------- Total assets $ 2,044,123 $ 1,855,487 ====================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ -- $ 2,732 Accounts payable 23,272 4,112 Prepaid deposits and reserves 20,028 23,574 -------------------------------------- Total liabilities 43,300 30,418 Partners' capital (deficit): Limited Partners (24,285 units) 2,087,769 1,913,772 General Partner (86,946) (88,703) -------------------------------------- Total partners' capital 2,000,823 1,825,069 -------------------------------------- Total liabilities and partners' capital $ 2,044,123 $ 1,855,487 ======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF OPERATIONS For the years ended December 31,
1995 1994 1993 --------------------------------------------------- Revenues: Lease revenue $ 547,246 $ 682,844 $ 810,530 Interest and other income 41,201 9,228 7,883 Gain (loss) on disposition of equipment 555,733 59,957 (53,590) --------------------------------------------------- Total revenue 1,144,180 752,029 764,823 Expenses: Depreciation 310,524 435,425 473,237 Management fees to affiliate 60,713 60,966 40,955 Repairs and maintenance 182,936 122,538 140,618 Insurance expense 9,802 9,518 10,596 General and administrative expenses to affiliates 122,635 108,298 115,083 Other general and administrative expenses 48,850 45,177 60,704 Bad debt expense (64,903) 102,916 90,207 Loss on revaluation of equipment -- -- 13,400 --------------------------------------------------- Total expenses 670,557 884,838 944,800 --------------------------------------------------- Net income (loss) $ 473,623 $ (132,809) $ (179,977) =================================================== Partners' share of net income (loss): Limited Partners - 99% $ 468,887 $ (131,481) $ (178,177) General Partner - 1% 4,736 (1,328) (1,800) =================================================== Total $ 473,623 $ (132,809) $ (179,977) =================================================== Net income (loss) per Limited Partnership Unit (24,285 units) $ 19.31 $ (5.41) $ (7.34) =================================================== Cash distributions $ 297,869 $ 499,566 $ 708,072 =================================================== Cash distributions per Limited Partnership Unit $ 12.14 $ 20.37 $ 28.87 ===================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the years ended December 31, 1995, 1994, and 1993
Limited General Partners Partner Total ----------------------------------------------------- Partners' capital (deficit) at December 31, 1992 $ 3,418,991 $ (73,498) $ 3,345,493 Net loss (178,177) (1,800) (179,977) Cash distributions (700,991) (7,081) (708,072) ----------------------------------------------------- Partners' capital (deficit) at December 31, 1993 2,539,823 (82,379) 2,457,444 Net loss (131,481) (1,328) (132,809) Cash distributions (494,570) (4,996) (499,566) ----------------------------------------------------- Partners' capital (deficit) at December 31, 1994 1,913,772 (88,703) 1,825,069 Net income 468,887 4,736 473,623 Cash distributions (294,890) (2,979) (297,869) ----------------------------------------------------- Partners' capital (deficit) at December 31, 1995 $ 2,087,769 $ (86,946) $ 2,000,823 =====================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS for the years ended December 31,
1995 1994 1993 --------------------------------------------------- Operating activities: Net income (loss) $ 473,623 $ (132,809) $ (179,977) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss on revaluation of equipment -- -- 13,400 Gain (loss) on disposition of equipment (555,733) (59,957) 53,590 Depreciation 310,524 435,425 473,237 Changes in operating assets and liabilities: Accounts receivable, net (73,313) 57,790 51,550 Due from affiliates (2,941) 3,270 (3,270) Prepaid insurance 79 2,684 (2,270) Due to affiliates (2,732) 2,673 (32,085) Accounts payable (30,840) (78,411) 80,837 Prepaid deposits and reserves (3,546) (5,239) (5,747) ---------------------------------------------------- Net cash provided by operating activities 115,121 225,426 449,265 Investing activities: Proceeds from disposition of equipment 50,179 263,417 109,150 Payments received on sales-type lease 86,436 -- -- Payments for purchase of capital improvements (876) (25,793) -- --------------------------------------------------- Net cash provided by investing activities 135,739 237,624 109,150 Cash flows used in financing activities: Cash distributions paid to partners (297,869) (499,566) (708,072) --------------------------------------------------- Cash and cash equivalents: Net decrease in cash and cash equivalents (47,009) (36,516) (149,657) Cash and cash equivalents at beginning of year 298,718 335,234 484,891 --------------------------------------------------- Cash and cash equivalents at end of year $ 251,709 $ 298,718 $ 335,234 ===================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of presentation Organization PLM Transportation Equipment Partners IXA 1986 Income Fund, a California limited partnership (the Partnership) was formed on September 20, 1985. The Partnership engages in the business of owning and leasing transportation equipment. The Partnership commenced significant operations in June 1986. PLM Financial Services, Inc. (FSI) is the General Partner. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM International) and manages the affairs of the Partnership. The net income (loss) and distributions of the Partnership are allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner is entitled to an incentive fee equal to 15% of "Surplus Distributions" as defined in the Partnership Agreement, remaining after the Limited Partners have received a certain minimum rate of return. These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operations The equipment of the Partnership is managed, under a continuing equipment management agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI. IMI receives a monthly management fee from the Partnership for managing the equipment (see Note 2). FSI, in conjunction with its subsidiaries, syndicates investor programs, sells transportation equipment to investor programs and third parties, manages pools of transportation equipment under agreements with the investor programs, and is a General Partner of other Limited Partnerships. The Partnership will enter into its liquidation phase beginning in 1996 and the General Partner is actively pursuing the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Accounting for Leases The Partnership's leasing operations generally consist of operating leases. Under the operating lease method of accounting, the leased asset is recorded at cost and depreciated over its estimated useful life. Rental payments are recorded as revenue over the lease term. Lease origination costs are capitalized and amortized over the term of the lease. Translation of Foreign Currency Transactions The Partnership is a domestic partnership, however, a limited number of the Partnership's transactions are denominated in a foreign currency. The Partnership's asset and liability accounts denominated in a foreign currency were translated into U.S. dollars at the rates in effect at the balance sheet dates, and revenue and expense items were translated at average rates during the year. Gains or losses resulting from foreign currency transactions are included in the results of operations and are not material. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of presentation (continued) Depreciation Depreciation is computed on the double declining balance method based upon estimated useful lives of 15 years for rail equipment, 12 years for trailers, marine containers and aircraft and 8 years for tractors. The depreciation method changes to straight-line when annual depreciation expense using the straight-line method exceeds that calculated by the 200% declining balance method. Major expenditures which are expected to extend the useful lives or reduce future operating expenses of equipment are capitalized. Transportation Equipment 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 in close proximity to SFAS 121. In accordance with FASB 121, the Partnership reviews the carrying value of its equipment 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 for the year ended December 31, 1995. Equipment held for operating leases is stated at cost. Repairs and Maintenance Maintenance costs are usually the obligation of the lessee. If they are not covered by the lessee they are charged against operations as incurred. Net Income (Loss) and Distribution per Limited Partnership Unit Net income (loss) per Limited Partnership Unit is computed based on the number of Limited Partnership Units outstanding during the period (24,285 for 1995, 1994, and 1993). Cash distributions are recorded when paid. Cash distributions to investors in excess of net income are considered to represent a return of capital on a Generally Accepted Accounting Principles (GAAP) basis. Cash distributions to Limited Partners of $0, $494,570, and $700,991 in 1995, 1994, and 1993, respectively, were deemed to be a return of capital. Cash and Cash Equivalents The Partnership considers highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less as cash equivalents. 2. General Partner and Transactions with Affiliates An officer of FSI contributed $100 of the Partnership's initial net capital. Under the Equipment Management Agreement, IMI receives a monthly management fee equal to the greater of 10% of the Partnership's "operating cash flow" or 1/12 of 1/2% of the Partnership's "gross proceeds" as defined in the Partnership Agreement. Management fees of $5,059 were payable to IMI as of December 31, 1995 and 1994. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 2. General Partner and Transactions with Affiliates (continued) The Partnership reimbursed FSI and its affiliates $122,635 for administrative and other services performed on behalf of the Partnership in 1995 ($108,298 in 1994 and $115,083 in 1993). As of December 31, 1995, approximately 99% of the Partnership's trailer equipment has been transferred into rental facilities operated by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental facilities' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of indirect expense of rental facility operations are billed to the Partnership. At December 31, 1995, $2,941 was due from FSI and its affiliates ($2,732 was due to FSI and its affiliates at December 31, 1994). 3. Equipment The components of equipment at December 31, 1995 and 1994 are as follows:
Equipment held for operating leases: 1995 1994 ------------------------------------ Rail equipment $ 783,870 $ 783,870 Marine containers 1,420,872 1,526,759 Aircraft -- 3,076,382 Trailers 2,037,659 2,075,910 ------------------------------------ 4,242,401 7,462,921 Less accumulated depreciation (3,567,969) (5,944,395) ------------------------------------ Net equipment $ 674,432 $ 1,518,526 ====================================
Revenues are earned by placing the equipment under operating leases which are billed monthly or quarterly. Rents for all equipment are based on a fixed operating lease amount with the exception of marine containers and trailers in the rental facilities. The Partnership's marine containers are leased to the operator of utilization-type pools which includes equipment owned by unaffiliated parties. In such instances, revenues received by the Partnership consist of a specified percentage of lease revenues generated by leasing the pooled equipment to sub-lessees, after deducting certain direct operating expenses of the pooled equipment. All equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of December 31, 1995. With the exception of the commuter aircraft with a carrying value of $595,620, all equipment was either operating in rental facilities or on lease as of December 31, 1994. During 1995, the Partnership sold or disposed of one trailer and 10 marine containers. Additionally, the Partnership entered into a sales-type lease related to a commuter aircraft with a carrying value of $505,450 for a sales price equal to the present value of the future lease payments ($1,090,000) less a $50,000 reserve for future costs of sale. Gross lease payments of $234,000 will be received over a one-year period, commencing in June 1995, with an additional balloon payment of $919,012 due at the end of the lease term. The total net book value for the disposed or sold equipment was $534,446 with a total sales price of $1,140,179. During 1994, the Partnership disposed of or sold 12 trailers, one yardster, one forklift, and six marine containers with a net book value of $203,460 for proceeds of $263,417. All leases are being accounted for as operating leases except one finance lease on a commuter aircraft. Future minimum rentals receivable under non-cancelable leases at December 31, 1995 during each of the next five years are approximately; $81,300 - 1996; $51,500 - 1997; $0 - 1998; and thereafter. Contingent rentals based upon utilization amounted to $118,625 in 1995, $130,722 in 1994, and $151,216 in 1993. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 3. Equipment (continued) The lessees accounting for 10% or more of the total revenues during 1995, 1994 and 1993 were Trans Ocean Ltd. (22% in 1995, 19% in 1994, 19% in 1993), Cheyenne Express, Inc. (12% in 1993), and Burlington Northern Railroad (11% in 1994, 15% in 1993). The Partnership owns certain equipment which is leased and operated internationally. All leases relating to this equipment were denominated in U.S. dollars. The Partnership leases its aircraft, railcars and trailers to lessees domiciled in two geographic regions: Australia and North America. The marine containers are leased to lessees in different regions who operate the marine containers worldwide. The tables below set forth geographic information about the Partnership's equipment grouped by domicile of the lessee as of and for the years ended December 31, 1995, 1994, and 1993 (in thousands):
Revenues: Region 1995 1994 1993 ---------------------------------------------- Marine containers Various $ 118,625 $ 130,722 $ 151,216 Railcars North America 103,800 95,954 120,436 Trailers North America 324,821 438,918 538,878 Aircraft North America -- 17,250 -- ---------------------------------------------- Total revenues $ 547,246 $ 682,844 $ 810,530 ==============================================
The following table sets forth indentifiable net income (loss) information by equipment type by region (in thousands):
Net income (loss): Region 1995 1994 1993 ------------------------------------------------- Marine containers Various $ 46,547 $ 45,147 $ 53,505 Railcars North America 31,374 26,643 23,666 Trailers North America 88,902 7,024 165,357 Aircraft North America -- (161,162) (233,383) Australia 378,782 -- -- ------------------------------------------------- Total identifiable net income (loss) 545,605 (82,348) 9,145 Administrative and other net loss (71,982) (50,461) (189,122) ================================================= Total net income (loss) $ 473,623 $ (132,809) $ (179,977) =================================================
The net book value of these assets at December 31, 1995, 1994, and 1993 are as follows (in thousands):
Region 1995 1994 1993 ------------------------------------------------ Marine containers Various $ 190,132 $ 288,847 $ 390,233 Railcars North America 157,453 202,926 378,644 Trailers North America 326,847 431,133 622,015 Aircraft North America -- 595,620 740,667 ------------------------------------------------ Total equipment $ 674,432 $ 1,518,526 $ 2,131,559 ================================================
PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 4. Income Taxes The Partnership is not subject to income taxes as any income or loss is included in the tax returns of the individual Partners. Accordingly, no provision for income taxes has been made in the accounts of the Partnership. As of December 31, 1995, there were temporary differences of approximately $1,014,332 between the financial statement carrying values of assets and liabilities and the federal income tax bases of such assets and liabilities, principally due to differences in depreciation methods, and equipment reserves. 5. Investment in Sales-type Lease On May 30, 1995, the Partnership entered into a sales-type lease for the purpose of selling a commuter aircraft. The lease is structured with a one-year term commencing in June 1995. The lessee will make monthly payments of $19,500. Gross lease payments of $234,000 will be received over a one-year period, commencing in June 1995, with an additional balloon payment of $919,012 due at the end of the lease term. The components of the net investment in sales-type lease at December 31, 1995 is as follows in thousands): Total minimum lease payments $ 1,153,012 Less: Unearned income 149,448 ---------------------- 1,003,564 ====================== 6. Subsequent Event On January 31,1996, the lessee under the sales-type lease of the Metro III commuter aircraft exercised its option to buy the aircraft for $1 million. REPORT OF INDEPENDENT AUDITORS The Partners PLM Transportation Equipment Partners IXB 1986 Income Fund: We have audited the financial statements of PLM Transportation Equipment Partners IXB 1986 Income Fund as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Management's plans in regard to this matter are also described in note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PLM Transportation Equipment Partners IXB 1986 Income Fund as of December 31, 1995 and 1994 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /S/ KPMG PEAT MARWICK SAN FRANCISCO, CALIFORNIA March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS December 31,
ASSETS 1995 1994 -------------------------------------- Equipment held for operating leases, at cost $ 4,400,435 $ 5,309,856 Less accumulated depreciation (3,678,300) (4,180,140) -------------------------------------- Net equipment 722,135 1,129,716 Cash and cash equivalents 351,363 492,060 Accounts receivable, net of allowance for doubtful accounts of $29,460 in 1995 and $17,600 in 1994 82,668 66,451 Prepaid insurance 2,447 2,960 -------------------------------------- Total assets $ 1,158,613 $ 1,691,187 ====================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 3,637 $ 6,063 Accounts payable 72,569 11,411 Prepaid deposits 16,248 16,384 -------------------------------------- Total liabilities 92,454 33,858 Partners' capital (deficit): Limited Partners (17,460 units) 1,132,364 1,717,622 General Partner (66,205) (60,293) -------------------------------------- Total partners' capital 1,066,159 1,657,329 -------------------------------------- , $ 1,158,613 $ 1,691,187 ======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME For the years ended December 31,
1995 1994 1993 ------------------------------------------------ Revenues: Lease revenue $ 535,422 $ 813,960 $ 914,205 Interest and other income 22,516 16,696 11,221 Gain on disposition of equipment 113,206 132,025 30,646 ------------------------------------------------ Total revenues 671,144 962,681 956,072 Expenses: Depreciation 260,055 362,064 444,484 Management fees to affiliate 43,650 55,545 78,334 Repairs and maintenance 137,343 120,082 53,245 Insurance expense 6,677 7,458 7,803 General and administrative expenses to affiliates 96,118 87,839 28,817 Other general and administrative expenses 35,916 34,267 42,962 Bad debt expense 8,379 15,954 17,834 ------------------------------------------------ Total expenses 588,138 683,209 673,479 ------------------------------------------------ Net income $ 83,006 $ 279,472 $ 282,593 ================================================ Partners' share of net income: Limited Partners - 99% $ 82,176 $ 276,677 $ 279,767 General Partner - 1% 830 2,795 2,826 ================================================ Total $ 83,006 $ 279,472 $ 282,593 ================================================ Net income per Limited Partnership Unit (17,460 units) $ 4.71 $ 15.85 $ 16.02 ================================================ Cash distributions $ 674,176 $ 861,827 $ 784,635 ================================================ Cash distributions per Limited Partnership Unit $ 38.23 $ 48.87 $ 44.49 ================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the years ended December 31, 1995, 1994, and 1993
Limited General Partners Partner Total ------------------------------------------------------ Partners' capital (deficit) at December 31, 1992 $ 2,791,176 $ (49,450) $ 2,741,726 Net income 279,767 2,826 282,593 Cash distributions (776,789) (7,846) (784,635) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1993 2,294,154 (54,470) 2,239,684 Net income 276,677 2,795 279,472 Cash distributions (853,209) (8,618) (861,827) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1994 1,717,622 (60,293) 1,657,329 Net income 82,176 830 83,006 Cash distributions (667,434) (6,742) (674,176) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1995 $ 1,132,364 $ (66,205) $ 1,066,159 ======================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS for the years ended December 31,
1995 1994 1993 ------------------------------------------------- Operating activities: Net income $ 83,006 $ 279,472 $ 282,593 Adjustments to reconcile net income to net cash provided by operating activities: Gain from disposition of equipment (113,206) (132,025) (30,646) Depreciation 260,055 362,064 444,484 Changes in operating assets and liabilities: Accounts receivable, net (16,217) 10,324 (53,350) Prepaid insurance 513 2,339 (1,944) Due to affiliates (2,426) (1,931) (7,214) Accounts payable 61,158 482 7,800 Prepaid deposits (136) (605) 16,989 ------------------------------------------------- Net cash provided by operating activities 272,747 520,120 658,712 ------------------------------------------------- Investing activities: Proceeds from disposition of equipment 265,627 378,108 73,000 Payments for purchase of capital improvements (4,895) -- -- ------------------------------------------------- Net cash provided by investing activities 260,732 378,108 73,000 ------------------------------------------------- Cash flows used in financing activities: Cash distributions paid to partners (674,176) (861,827) (784,635) ------------------------------------------------- Cash and cash equivalents: Net increase (decrease) in cash and cash equivalents (140,697) 36,401 (52,923) Cash and cash equivalents at beginning of year 492,060 455,659 508,582 ------------------------------------------------- Cash and cash equivalents at end of year $ 351,363 $ 492,060 $ 455,659 =================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation Organization PLM Transportation Equipment Partners IXB 1986 Income Fund, a California limited partnership (the Partnership) was formed on September 20, 1985. The Partnership engages in the business of owning and leasing transportation equipment. The Partnership commenced significant operations in October, 1986. PLM Financial Services, Inc. (FSI) is the General Partner. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM International) and manages the affairs of the Partnership. The net income (loss) and distributions of the Partnership are allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner is entitled to an incentive fee equal to 15% of "Surplus Distributions" as defined in the Partnership Agreement remaining after the Limited Partners have received a certain minimum rate of return. These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operations The equipment of the Partnership is managed, under a continuing equipment management agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI. IMI receives a monthly management fee from the Partnership for managing the equipment (see Note 2). FSI, in conjunction with its subsidiaries, syndicates investor programs, sells transportation equipment to investors programs and third parties, manages pools of transportation equipment under agreements with the investor programs, and is a General Partner of other Limited Partnerships. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Accounting for Leases The Partnership's leasing operations generally consist of operating leases. Under the operating lease method of accounting, the leased asset is recorded at cost and depreciated over its estimated useful life. Rental payments are recorded as revenue over the lease term. Lease origination costs are capitalized and amortized over the term of the lease. Translation of Foreign Currency Transactions The Partnership is a domestic partnership, however, a limited number of the Partnership's transactions are denominated in a foreign currency. The Partnership's asset and liability accounts denominated in a foreign currency were translated into U.S. dollars at the rates in effect at the balance sheet dates, and revenue and expense items were translated at average rates during the year. Gains or losses resulting from foreign currency transactions are included in the results of operations and are not material. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation (continued) Depreciation Depreciation is computed on the double declining balance method based upon estimated useful lives of 15 years for rail equipment, 12 years for trailers, marine containers, and aircraft and 8 years for tractors. The depreciation method changes to straight-line when annual depreciation expense using the straight line method exceeds that calculated by the 200% declining balance method.Major expenditures which are expected to extend the useful lives or reduce future operating expenses of equipment are capitalized. Transportation Equipment 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 for the year ended December 31, 1995. Equipment held for operating leases is stated at cost. Repairs and Maintenance Maintenance costs are usually the obligation of the lessee. If they are not covered by the lessee they are charged against operations as incurred. Net Income (Loss) and Distributions per Limited Partnership Unit Net income (loss) per Limited Partnership Unit is computed based on the number of Limited Partnership Units outstanding during the period (17,460 for 1994, 1993, and 1992). Cash distributions are recorded when paid. Cash distributions to investors in excess of net income are considered to represent a return of capital on a Generally Accepted Accounting Principles (GAAP) basis. Cash distributions to Limited Partners of $585,258, $576,532 and $497,022 in 1995, 1994, and 1993, respectively, were deemed to be a return of capital. Cash and Cash Equivalents The Partnership considers highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less as cash equivalents. 2. General Partner and Transactions with Affiliates An officer of FSI contributed $100 of the Partnership's initial net capital. Under the Equipment Management Agreement, IMI receives a monthly management fee equal to the greater of 10% of the Partnership's "operating cash flow" or 1/12 of 1/2% of the Partnership's "gross proceeds" as defined in the Partnership Agreement. Management fees of $3,638 were payable to IMI as of December 31, 1995 and 1994. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 2. General Partner and Transactions with Affiliates (continued) The Partnership reimbursed FSI and its affiliates $96,118 for administrative and other services performed on behalf of the Partnership in 1995 ($87,839 in 1994 and $28,817 in 1993). As of December 31, 1995, approximately 99% of the Partnership's trailer equipment has been transferred into rental facilities operated by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental facilities' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of indirect expenses of rental facility operations are billed to the Partnership. At December 31, 1995, $3,637 was due to FSI and affiliates ($6,063 at December 31, 1994). 3. Equipment The components of equipment at December 31, 1995 and 1994 are as follows:
Equipment held for operating leases: 1995 1994 ------------------------------------ Rail equipment $ 867,300 $ 867,300 Marine containers 413,633 483,606 Aircraft 1,492,368 1,492,368 Trailers and tractors 1,627,134 2,466,582 ------------------------------------ 4,400,435 5,309,856 Less accumulated depreciation (3,678,300) (4,180,140) ------------------------------------ Net equipment $ 722,135 $ 1,129,716 ====================================
Revenues are earned by placing the equipment under operating leases and are billed monthly or quarterly. Rents for all equipment are based on a fixed operating lease amount with the exception of marine containers and trailers in the rental facilities. The Partnership's marine containers are leased to the operator of utilization-type pools which include equipment owned by unaffiliated parties. In such instances revenues received by the Partnership consist of a specified percentage of lease revenues generated by leasing the pooled equipment to sub-lessees, after deducting certain direct operating expenses of the pooled equipment. With the exception of one trailer and one sidelift with a carrying value of $79,024, all equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of December 31, 1995. With the exception of 19 trailers with a carrying value of $152,349, all equipment was either operating in rental facilities or on lease as of December 31, 1994. During 1995, the Partnership sold or disposed of 22 trailers and four marine containers with a net book value of $152,421 for proceeds of $265,627. During 1994, the Partnership sold or disposed of 13 tractors, six trailers, five marine containers, and one letro porter with a book value of $246,083 for proceeds of $378,108. The leases are being accounted for as operating leases. Future minimum rentals receivable under non-cancelable leases at December 31, 1995, during each of the next five years are approximately $87,480 - 1996; $38,280 - 1997; $36,720 - 1998; $0 - 1999; and thereafter. Contingent rentals based upon utilization amounted to $34,915 in 1995, $39,555 in 1994, and $51,057 in 1993. The lessees accounting for 10% or more of the total revenues during 1995, 1994 and 1993 were Skywest Airlines, Inc. (36% in 1995, 24% in 1994 and 21% in 1993), Coors Transportation Company, Inc. (17% in 1993), Van Wyk, Inc. (10% in 1994 and 15% in 1993), Burlington Northern Railroad Company (15% in 1993), and M&H Food Cos. (13% in 1994 and 12% in 1993). PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 3. Equipment (continued) The Partnership owns certain equipment which is leased and operated internationally. All leases relating to this equipment were denominated in U.S. dollars. The Partnership leases its aircraft, railcars and trailers to lessees domiciled in one geographic region: North America. The marine containers are leased to lessees in different regions who operate the marine containers worldwide. The tables below set forth geographic information about the Partnership's equipment grouped by domicile of the lessee as of and for the years ended December 31, 1995, 1994, and 1993 (in thousands):
Revenues: Region 1995 1994 1993 ----------------------------------------------- Marine containers Various $ 34,915 $ 39,555 $ 51,057 Railcars North America 86,537 178,641 133,425 Trailers and tractors North America 219,599 401,393 535,352 Aircraft North America 194,371 194,371 194,371 ----------------------------------------------- Total revenues $ 535,422 $ 813,960 $ 914,205 ===============================================
The following table sets forth identifiable income (loss) information by equipment type by region (in thousands):
Net income (loss): Region 1995 1994 1993 ---------------------------------------------- Marine containers Various $ 15,334 $ 11,418 $ 13,922 Railcars North America 52,837 4,195 9,904 Trailers and tractors North America 37,330 234,189 234,660 Aircraft North America 32,094 96,818 82,500 ---------------------------------------------- Total identifiable net income 137,595 346,620 340,986 Administrative and other netloss (54,589) (67,148) (58,393) ---------------------------------------------- Total net income $ 83,006 $ 279,472 $ 282,593 ==============================================
The net book value of these assets at December 31, 1995, 1994, and 1993 are as follows (in thousands):
Region 1995 1994 1993 --------------------------------------------------- Marine containers Various $ 61,730 $ 99,241 $ 149,909 Railcars North America 203,008 519,513 463,883 Trailers and tractors North America 235,269 205,536 735,347 Aircraft North America 222,128 305,426 388,724 --------------------------------------------------- Total equipment $ 722,135 $ 1,129,716 $ 1,737,863 ===================================================
4. Income Taxes The Partnership is not subject to income taxes as any income or loss is included in the tax returns of the individual Partners. Accordingly, no provision for income taxes has been made in the accounts of the Partnership. As of December 31, 1995, there were temporary differences of approximately $386,004 between the financial statement carrying values of assets and liabilities and the federal income tax bases of such assets and liabilities, principally due to differences in depreciation methods, and equipment reserves. REPORT OF INDEPENDENT AUDITORS The Partners PLM Transportation Equipment Partners IXC 1986 Income Fund: We have audited the financial statements of PLM Transportation Equipment Partners IXC 1986 Income Fund as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Management's plans in regard to this matter are also described in note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PLM Transportation Equipment Partners IXC 1986 Income Fund as of December 31, 1995 and 1994 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /S/ KPMG PEAT MARWICK LLP SAN FRANCISCO, CALIFORNIA March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS December 31, ASSETS
1995 1994 -------------------------------------- Equipment held for operating leases, at cost $ 4,920,653 $ 5,082,353 Less accumulated depreciation (4,119,232) (3,980,922) -------------------------------------- 801,421 1,101,431 Equipment held for sale -- 273,785 -------------------------------------- Net equipment 801,421 1,375,216 Cash and cash equivalents 248,504 312,230 Restricted cash 6,600 6,600 Accounts receivable, net of allowance for doubtful accounts of $9,684 in 1995 and $31,642 in 1994 110,417 106,868 Prepaid expenses and other assets 22,438 28,583 Due from affiliates -- 20,035 -------------------------------------- Total assets $ 1,189,380 $ 1,849,532 ====================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 3,523 $ -- Accounts payable 13,385 8,178 Prepaid deposits and reserves 27,155 48,612 -------------------------------------- Total liabilities 44,063 56,790 Partners' capital (deficit): Limited Partners (16,914 units) 1,208,326 1,849,276 General Partner (63,009) (56,534) -------------------------------------- Total partners' capital 1,145,317 1,792,742 -------------------------------------- Total liabilities and partners' capital $ 1,189,380 $ 1,849,532 ======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME For the years ended December 31,
1995 1994 1993 ----------------------------------------------- Revenues: Lease revenue $ 667,893 $ 958,179 $ 817,898 Interest and other income 18,666 9,370 5,961 Gain on disposition of equipment 229,599 2,561 14,139 ----------------------------------------------- Total revenues 916,158 970,110 837,998 Expenses: Depreciation 278,415 323,556 338,348 Management fees to affiliate 45,353 55,926 41,322 Repairs and maintenance 155,402 178,720 198,812 Insurance expense 7,137 8,420 7,709 General and administrative expenses to affiliates 163,169 183,308 129,868 Other general and administrative expenses 21,987 33,644 74,927 Bad debt expense (14,846) 31,655 10,124 ----------------------------------------------- Total expenses 656,617 815,229 801,110 ----------------------------------------------- Net income $ 259,541 $ 154,881 $ 36,888 =============================================== Partners' share of net income: Limited Partners - 99% $ 256,946 $ 153,332 $ 36,519 General Partner - 1% 2,595 1,549 369 =============================================== Total $ 259,541 $ 154,881 $ 36,888 =============================================== Net income per Limited Partnership Unit (16,914 units) $ 15.19 $ 9.07 $ 2.16 =============================================== Cash distributions $ 906,966 $ 388,585 $ 483,115 =============================================== Cash distributions per Limited Partnership Unit $ 53.09 $ 22.74 $ 28.28 ===============================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the years ended December 31, 1995, 1994, and 1993
Limited General Partners Partner Total ------------------------------------------------------ Partners' capital (deficit) at December 31, 1992 $ 2,522,408 $ (49,735) $ 2,472,673 Net income 36,519 369 36,888 Cash distributions (478,284) (4,831) (483,115) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1993 2,080,643 (54,197) 2,026,446 Net income 153,332 1,549 154,881 Cash distributions (384,699) (3,886) (388,585) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1994 1,849,276 (56,534) 1,792,742 Net income 256,946 2,595 259,541 Cash distributions (897,896) (9,070) (906,966) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1995 $ 1,208,326 $ (63,009) $ 1,145,317 ======================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS for the years ended December 31,
1995 1994 1993 ------------------------------------------------- Operating activities: Net income $ 259,541 $ 154,881 $ 36,888 Adjustments to reconcile net income to net cash provided by operating activities: (Gain) loss from disposition of equipment (229,599) (2,561) (14,139) Depreciation 278,415 323,556 338,348 Changes in operating assets and liabilities: Restricted cash -- -- (6,600) Accounts receivable, net (3,549) 26,472 (60,502) Prepaid expenses and other assets 6,145 2,465 (15,748) Due from affiliates 20,035 (13,519) (6,516) Due to affiliates 3,523 -- (13,183) Accounts payable 5,207 (14,091) 21,129 Prepaid deposits and reserves (21,457) 44,005 1,674 ------------------------------------------------- Net cash provided by operating activities 318,261 521,208 281,351 ------------------------------------------------- Investing activities: Proceeds from disposition of equipment 527,216 46,001 44,882 Payments for purchase of capital improvements (2,237) (3,925) -- ------------------------------------------------- Net cash provided by investing activities 524,979 42,076 44,882 Cash flows in financing activities: Cash distributions paid to partners (906,966) (388,585) (483,115) ------------------------------------------------- Cash and cash equivalents: Net increase (decrease) in cash and cash equivalents (63,726) 174,699 (156,882) Cash and cash equivalents at beginning of year 312,230 137,531 294,413 ------------------------------------------------- Cash and cash equivalents at end of year $ 248,504 $ 312,230 $ 137,531 =================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation Organization PLM Transportation Equipment Partners IXC 1986 Income Fund, a California limited partnership (the Partnership), was formed on September 20, 1985. The Partnership engages in the business of owning and leasing transportation equipment. The Partnership commenced significant operations in December 1986. PLM Financial Services, Inc. (FSI) is the General Partner. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM International) and manages the affairs of the Partnership. The net income (loss) and distributions of the Partnership are allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner is entitled to an incentive fee equal to 15% of "Surplus Distributions" as defined in the Partnership Agreement remaining after the Limited Partners have received a certain minimum rate of return. These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operations The equipment of the Partnership is managed, under a continuing equipment management agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI. IMI receives a monthly management fee from the Partnership for managing the equipment (see Note 2). FSI, in conjunction with its subsidiaries, syndicates investor programs, sells transportation equipment to investor programs and third parties, manages pools of transportation equipment under agreements with the investor programs, and is a General Partner of other Limited Partnerships. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Accounting for Leases The Partnership's leasing operations generally consist of operating leases. Under the operating lease method of accounting, the leased asset is recorded at cost and depreciated over its estimated useful life. Rental payments are recorded as revenue over the lease term. Lease origination costs are capitalized and amortized over the term of the lease. Translation of Foreign Currency Transactions The Partnership is a domestic partnership, however, a limited number of the Partnership's transactions are denominated in a foreign currency. The Partnership's asset and liability accounts denominated in a foreign currency were translated into U.S. dollars at the rates in effect at the balance sheet dates, and revenue and expense items were translated at average rates during the year. Gains or losses resulting from foreign currency transactions are included in the results of operations and are not material. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation (continued) Depreciation Depreciation is computed on the double declining balance method based upon estimated useful lives of 15 years for rail equipment, 12 years for trailers, marine containers, and aircraft, and 8 years for tractors. The depreciation method changes to straight line when annual depreciation expense using the straight-line method exceeds that calculated by the 200% declining balance method. Major expenditures which are expected to extend the useful lives or reduce future operating expenses of equipment are capitalized. Transportation Equipment 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 for the year ended December 31, 1995. 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 estimated net realizable value and is subject to a pending contract for sale. Repairs and Maintenance Maintenance costs are usually the obligation of the lessee. If they are not covered by the lessee they are charged against operations as incurred. Net Income (Loss) and Distributions per Limited Partnership Unit Net income (loss) per Limited Partnership Unit is computed based on the number of Limited Partnership Units outstanding during the period (16,914 for 1994, 1993, and 1992). Cash distributions are recorded when paid. Cash distributions to investors in excess of net income are considered to represent a return of capital on a Generally Accepted Accounting Principles (GAAP) basis. Cash distributions to Limited Partners of $640,950, $231,367 and $441,765 in 1995, 1994, and 1993, respectively, were deemed to be a return of capital. Cash and Cash Equivalents The Partnership considers highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less as cash equivalents for the purposes of this presentation. Lessee security deposits held by the Partnership are considered restricted cash. 2. General Partner and Transactions with Affiliates An officer of FSI contributed $100 of the Partnership's initial net capital. Under the Equipment Management Agreement, IMI receives a monthly management fee equal to the greater of 10% of the Partnership's "operating cash flow" or 1/12 of 1/2% of the Partnership's "gross proceeds" PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 2. General Partner and Transactions with Affiliates (continued) as defined in the Partnership Agreement. Management fees of $3,523 were payable to IMI as of December 31, 1995 and 1994. The Partnership reimbursed FSI and its affiliates $163,169 for administrative and other services performed on behalf of the Partnership in 1995 ($183,308 in 1994 and $129,868 in 1993). As of December 31, 1995, approximately 99% of the Partnership's trailer equipment has been transferred into rental facilities operated by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental facilities' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of indirect expenses of the rental facility operations are billed to the Partnership. At December 31, 1995, $3,523 was due to FSI and its affiliates ($20,035 was due from FSI and its affiliates at December 31, 1994). 3. Equipment The components of equipment at December 31, 1995 and 1994 are as follows:
Equipment held for operating leases: 1995 1994 ------------------------------------ Rail equipment $ 178,501 $ 178,501 Marine containers 137,548 160,473 Aircraft 913,188 913,188 Trailers and tractors 3,691,416 3,830,191 ------------------------------------ 4,920,653 5,082,353 Less accumulated depreciation (4,119,232) (3,980,922) ------------------------------------ 801,421 1,101,431 Equipment held for sale -- 273,785 ------------------------------------ Net equipment $ 801,421 $ 1,375,216 ====================================
Revenues are earned by placing the equipment under operating leases and are billed monthly or quarterly. Rents for all equipment are based on a fixed operating lease amount with the exception of marine containers and trailers in the rental facilities. The Partnership's marine containers are leased to the operator of utilization-type pools which include equipment owned by unaffiliated parties. In such instances revenues received by the Partnership consist of a specified percentage of lease revenues generated by leasing the pooled equipment to sub-lessees, after deducting certain direct operating expenses of the pooled equipment. All equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of December 31, 1995. With the exception of three railcars and three trailers, with a net book value of $189,876, all equipment was either operating in rental facilities or on lease as of December 31, 1994. During 1995, the Partnership sold or disposed of four trailers, one marine container, and five twin stack railcars with a net book value of $297,617 for proceeds of $527,216. During 1994, the Partnership sold or disposed of four trailers and three marine containers with a net book value of $43,440 for proceeds of $46,001. All leases are being accounted for as operating leases. Future minimum rentals receivable under non-cancelable leases at December 31, 1995 during each of the next five years are approximately $99,600 -1996; $7,800 - 1997; $0 - 1998; and thereafter. Contingent rentals based upon utilization amounted to $11,507 in 1995, $9,763 in 1994, and $19,692 in 1993. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 3. Equipment (continued) There were no lessees who accounted for 10% or more of total revenues during 1995,1994 and 1993. The Partnership owns certain equipment which is leased and operated internationally. All leases relating to this equipment were denominated in U.S. dollars. The Partnership leases its aircraft, railcars and trailers to lessees domiciled in two geographic region: Australia and North America. The marine containers are leased to lessees in different regions who operate the marine containers worldwide. The tables below set forth geographic information about the Partnership's equipment grouped by domicile of the lessee as of and for the years ended December 31, 1995, 1994, and 1993 (in thousands):
Revenues: Region 1995 1994 1993 ---------------------------------------------- Marine containers Various $ 11,507 $ 9,763 $ 19,692 Railcars North America 41,059 104,808 110,753 Trailers and tractors North America 546,927 767,520 662,276 Aircraft Australia 68,400 76,088 25,177 ---------------------------------------------- Total revenues $ 667,893 $ 958,179 $ 817,898 ==============================================
The following table sets forth identifiable income (loss) information by equipment type by region (in thousands):
Net income (loss): Region 1995 1994 1993 ---------------------------------------------- Marine containers Various $ 2,628 $ 1,916 $ 10,926 Railcars North America 269,662 44,848 34,075 Trailers and tractors North America 24,310 178,412 200,173 Aircraft Australia 11,683 18,995 (81,673) ---------------------------------------------- Total identifiable net income 308,283 244,171 163,501 Administrative and other net loss (48,742) (89,290) (126,613) ---------------------------------------------- Total net income $ 259,541 $ 154,881 $ 36,888 ==============================================
The net book value of these assets at December 31, 1995, 1994, and 1993 are as follows (in thousands):
Region 1995 1994 1993 -------------------------------------------------- Marine containers Various $ 22,393 $ 35,083 $ 62,913 Railcars North America 48,059 56,181 380,730 Trailers and tractors North America 582,305 810,532 1,044,038 Aircraft North America 148,664 199,635 250,606 -------------------------------------------------- Total equipment held for operating leases 801,421 1,101,431 1,738,287 Railcars held for sale: North America 273,785 -------------------------------------------------- Total equipment $ 801,421 $ 1,375,216 $ 1,738,287 ==================================================
PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 4. Income Taxes The Partnership is not subject to income taxes as any income or loss is included in the tax returns of the individual Partners. Accordingly, no provision for income taxes has been made in the accounts of the Partnership. As of December 31, 1995, there were temporary differences of approximately $271,713 between the financial statement carrying values of assets and liabilities and the federal income tax bases of such assets and liabilities, principally due to differences in depreciation methods, and equipment reserves. REPORT OF INDEPENDENT AUDITORS The Partners PLM Transportation Equipment Partners IXD 1986 Income Fund: We have audited the financial statements of PLM Transportation Equipment Partners IXD 1986 Income Fund as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Management's plans in regard to this matter are also described in note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PLM Transportation Equipment Partners IXD 1986 Income Fund as of December 31, 1995 and 1994 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. /S/ KPMG PEAT MARWICK LLP SAN FRANCISCO, CALIFORNIA March 27, 1996 PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS December 31,
ASSETS 1995 1994 -------------------------------------- Equipment held for operating leases, at cost $ 1,716,659 $ 3,041,954 Less accumulated depreciation (1,405,716) (2,332,144) -------------------------------------- Net equipment 310,943 709,810 Cash and cash equivalents 191,840 524,782 Accounts receivable, net of allowance for doubtful accounts of $33,793 in 1995 and $6,481 in 1994 48,723 116,088 Due from affiliates 7,639 1,744 Prepaid insurance and other assets 16,549 37,668 -------------------------------------- Total assets $ 575,694 $ 1,390,092 ====================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable 8,338 5,060 -------------------------------------- Total liabilities 8,338 5,060 Partners' capital (deficit): Limited Partners (9,529 units) 603,509 1,413,009 General Partner (36,153) (27,977) -------------------------------------- Total partners' capital 567,356 1,385,032 -------------------------------------- Total liabilities and partners' capital $ 575,694 $ 1,390,092 ======================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME For the years ended December 31,
1995 1994 1993 ----------------------------------------------- Revenues: Lease revenue $ 267,141 $ 545,035 $ 677,550 Interest and other income 23,986 21,274 12,850 Gain on disposition of equipment 83,235 17,133 53,478 ----------------------------------------------- Total revenues 374,362 583,442 743,878 Expenses: Depreciation 110,170 172,127 188,423 Management fees to affiliate 24,250 37,749 52,132 Repairs and maintenance 57,161 53,741 57,442 Insurance expense 3,176 3,708 3,950 General and administrative expenses to affiliates 68,871 83,259 88,460 Other general and administrative expenses 35,806 19,762 35,765 Bad debt expense 28,877 19,406 12,474 ----------------------------------------------- Total expenses 328,311 389,752 438,646 ----------------------------------------------- Net income $ 46,051 $ 193,690 $ 305,232 =============================================== Partners' share of net income: Limited Partners - 99% $ 45,590 $ 191,753 $ 302,180 General Partner - 1% 461 1,937 3,052 =============================================== Total $ 46,051 $ 193,690 $ 305,232 =============================================== Net income per Limited Partnership Unit (9,529 units) $ 4.78 $ 20.12 $ 31.71 =============================================== Cash distributions $ 863,727 $ 398,654 $ 423,994 =============================================== Cash distributions per Limited Partnership Unit $ 89.74 $ 41.42 $ 44.05 ===============================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the years ended December 31, 1995, 1994, and 1993
Limited General Partners Partner Total ------------------------------------------------------ Partners' capital (deficit) at December 31, 1992 $ 1,733,498 $ (24,740) $ 1,708,758 Net income 302,180 3,052 305,232 Cash distributions (419,754) (4,240) (423,994) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1993 1,615,924 (25,928) 1,589,996 Net income 191,753 1,937 193,690 Cash distributions (394,668) (3,986) (398,654) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1994 1,413,009 (27,977) 1,385,032 Net income 45,590 461 46,051 Cash distributions (855,090) (8,637) (863,727) ------------------------------------------------------ Partners' capital (deficit) at December 31, 1995 $ 603,509 $ (36,153) $ 567,356 ======================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS for the years ended December 31,
1995 1994 1993 ------------------------------------------------- Operating activities: Net income $ 46,051 $ 193,690 $ 305,232 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (83,235) (17,133) (53,478) Depreciation and amortization 110,170 172,127 188,423 Changes in operating assets and liabilities: Restricted cash -- -- Accounts receivable, net 67,365 (17,359) (20,416) Due from affiliates (5,895) 3,663 (5,407) Prepaid insurance and other assets 21,119 18,595 13,094 Prepaid deposits and engine reserves -- -- Due to affiliates -- (6,231) Accounts payable 3,278 (5,528) 9,598 ------------------------------------------------- Net cash provided by operating activities 158,853 348,055 430,815 Investing activities: Proceeds from disposition of equipment 371,932 47,315 54,879 Payments for capital improvements -- -- (1,734) ------------------------------------------------- Net cash provided by investing activities 371,932 47,315 53,145 Cash flows in financing activities: Cash distributions paid to partners (863,727) (398,654) (423,994) ------------------------------------------------- Cash and cash equivalents: Net (decrease) increase in cash and cash equivalents (332,942) (3,284) 59,966 Cash and cash equivalents at beginning of year 524,782 528,066 468,100 ------------------------------------------------- Cash and cash equivalents at end of year $ 191,840 $ 524,782 $ 528,066 =================================================
See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation Organization PLM Transportation Equipment Partners IXD 1986 Income Fund, a California limited partnership (the Partnership) was formed on September 20, 1985. The Partnership is engaged in the business of owning and leasing transportation equipment. The Partnership commenced significant operations in March 1987. PLM Financial Services, Inc. (FSI) is the General Partner. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM International) and manages the affairs of the Partnership. The net income (loss) and distributions of the Partnership are allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner is entitled to an incentive fee equal to 15% of "Surplus Distributions" as defined in the Partnership Agreement remaining after the Limited Partners have received a certain minimum rate of return. These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operations The equipment of the Partnership is managed, under a continuing equipment management agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI. IMI receives a monthlymanagement fee payable monthly from the Partnership for managing the equipment (see Note 2). FSI, in conjunction with its subsidiaries, syndicates investor programs, sells transportation equipment to investor programs, manages pools of transportation equipment under agreements with these programs, and is a General Partner of other Limited Partnerships. The Partnership will enter its 10th year of operation in 1996 and the liquidation phase will begin. The General Partner will actively pursue the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. Accounting for Leases The Partnership's leasing operations generally consist of operating leases. Under the operating lease method of accounting, the leased asset is recorded at cost and depreciated over its estimated useful life. Rental payments are recorded as revenue over the lease term. Lease origination costs are capitalized and amortized over the term of the lease. Translation of Foreign Currency Transactions The Partnership is a domestic partnership, however, a limited number of the Partnership's transactions are denominated in a foreign currency. The Partnership's asset and liability accounts denominated in a foreign currency were translated into U.S. dollars at the rates in effect at the balance sheet dates, and revenue and expense items were translated at average rates during the year. Gains or losses resulting from foreign currency transactions are included in the results of operations and are not material. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. Basis of Presentation (continued) Depreciation Depreciation is computed on the double declining balance method based upon estimated useful lives of 12 years for trailers, marine containers, and aircraft, and 8 years for tractors. The depreciation method changes to straight line when annual depreciation expense using the straight line method exceeds that calculated by the 200% declining balance method. Major expenditures which are expected to extend the useful lives or reduce future operating expenses of equipment are capitalized. Transportation Equipment 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 for the year ended December 31, 1995. Equipment held for operating leases is stated at cost. Repairs and Maintenance Maintenance costs are usually the obligation of the lessee. If they are not covered by the lessee they are charged against operations as incurred. To meet the maintenance obligations of certain aircraft engines, escrow accounts are prefunded by the lessees. Such prefunded amounts are included in the balance sheet as restricted cash and engine reserves. Net Income (Loss) and Distributions per Limited Partnership Unit Net income (loss) per Limited Partnership Unit is computed based on the number of Limited Partnership Units outstanding during the period (9,529 for 1994, 1993 and 1992). Cash distributions are recorded when paid. Cash distributions to investors in excess of net income are considered to represent a return of capital on a Generally Accepted Accounting Principles (GAAP) basis. Cash distributions to Limited Partners of $809,500, $202,915, and $117,574 in 1994, 1993 and 1992, respectively, were deemed to be a return of capital. Cash and Cash Equivalents The Partnership considers highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less as cash equivalents for the purposes of this presentation. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 2. General Partner and Transactions with Affiliates An officer of FSI contributed $100 of the Partnership's initial net capital. Under the Equipment Management Agreement, IMI receives a monthlymanagement fee equal to the greater of 10% of the Partnership's "operating cash flow" or 1/12 of 1/2% of the Partnership's "gross proceeds" as defined in the Partnership Agreement. Management fees of $1,985 and $3,607 were payable to IMI as of December 31, 1995 and 1994, respectively. The Partnership reimbursed FSI and its affiliates $68,871 for administrative and other services performed on behalf of the Partnership in 1995 ($83,259 in 1994 and $88,460 in 1993). As of December 31, 1995, all of the Partnership's trailer equipment has been transferred into rental facilities operated by an affiliate of the General Partner. Revenues collected under short-term rental agreements with the rental facilities' customers are distributed monthly to the owners of the related equipment. Direct expenses associated with the equipment and an allocation of indirect expenses of rental facility operations are billed to the Partnership. At December 31, 1995, $7,639 was due from FSI and its affiliates ($1,744 at December 31, 1994). 3. Equipment The components of equipment at December 31, 1995 and 1994 are as follows:
Equipment held for operating leases: 1995 1994 ------------------------------------ Marine containers $ 330,886 $ 417,961 Trailers 1,385,773 2,623,993 ------------------------------------ 1,716,659 3,041,954 Less accumulated depreciation (1,405,716) (2,332,144) ------------------------------------ Net equipment $ 310,943 $ 709,810 ====================================
Revenues are earned by placing the equipment under operating leases and are billed monthly or quarterly. Rents for all equipment are based on a fixed operating lease amount with the exception of marine containers and certain trailers. The Partnership's marine containers are leased to the operator of utilization-type pools which include equipment owned by unaffiliated parties. In such instances revenues received by the Partnership consist of a specified percentage of lease revenues generated by leasing the pooled equipment to sub-lessees, after deducting certain direct operating expenses of the pooled equipment. All equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of December 31, 1995. With the exception of 24 trailers with a carrying value of $224,848, all equipment was either operating in rental facilities or on lease as of December 31, 1994. During 1995, the Partnership sold or disposed of 45 marine containers and 30 trailers with a net book value of $288,697 for the proceeds of $371,932. During 1994, the Partnership sold or disposed of 29 marine containers and two trailers with a net book value of $30,182 for the proceeds of $47,315. Future minimum rentals receivable under this non-cancelable sales-type lease at December 31, 1995 during each of the next five years are approximately $0 - 1996; and thereafter. Contingent rentals based upon utilization amounted to $78,612 in 1995; $88,524 in 1994; and $145,270 in 1993. The lessees accounting for 10% or more of the total revenues during 1995, 1994, and 1993 were Trans Ocean Ltd. (16% in 1995, 16% in 1994, and 21% in 1993), and Van Wyk, Inc. ( 28% in 1994, and 24% in 1993). PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 1995 3. Equipment (continued) The Partnership owns certain equipment which is leased and operated internationally. All leases relating to this equipment were denominated in U.S. dollars. The Partnership leases its trailers to lessees domiciled in one geographic region: North America. The marine containers are leased to lessees in different regions who operate the marine containers worldwide. The tables below set forth geographic information about the Partnership's equipment grouped by domicile of the lessee as of and for the years ended December 31, 1995, 1994, and 1993 (in thousands):
Revenues: Region 1995 1994 1993 ---------------------------------------------- Marine containers Various $ 78,612 $ 88,524 $ 145,270 Trailers North America 188,529 456,511 532,280 ---------------------------------------------- Total revenues $ 267,141 $ 545,035 $ 677,550 ==============================================
The following table sets forth identifiable income (loss) information by equipment type by region (in thousands):
Income (loss): Region 1995 1994 1993 ---------------------------------------------- Marine containers International $ 98,892 $ 75,957 $ 137,332 Trailers North America (8,064) 164,251 209,262 ---------------------------------------------- Total identifiable income (loss) 90,828 240,208 305,232 Administrative and other income (loss) (44,777) (46,518) (41,362) ---------------------------------------------- Total income (loss) $ 46,051 $ 193,690 $ 305,232 ==============================================
The net book value of these assets at December 31, 1995, 1994, and 1993 are as follows (in thousands):
Region 1995 1994 1993 ---------------------------------------------- Marine containers International $ 64,062 $ 104,579 $ 145,535 Trailers North America 246,881 605,231 766,584 ---------------------------------------------- Total equipment $ 310,943 $ 709,810 $ 912,119 ==============================================
4. Income Taxes The Partnership is not subject to income taxes as any income or loss is included in the tax returns of the individual Partners. Accordingly, no provision for income taxes has been made in the accounts of the Partnership. As of December 31, 1995, there were temporary differences of approximately $295,089 between the financial statement carrying values of assets and liabilities and the federal income tax bases of such assets and liabilities, principally due to differences in depreciation methods. PLM TRANSPORTATION EQUIPMENT PARTNERS IX 1986 INCOME FUND INDEX OF EXHIBITS Exhibit Page 4. Limited Partnership Agreement of Registrant. * 10. Management Agreement between each Registrant and * PLM Investment Management, Inc. 24. Powers of Attorney * Incorporated by reference. See page 25 of this report. EX-24 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby constitute and appoint Robert N. Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM Financial Services, Inc., as General Partner of PLM Transportation Equipment Partners IXC 1986 Income Fund, to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM Transportation Equipment Partners IXC 1986 Income Fund, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 1996 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 1995. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 18th day of February, 1996. /s/ J. Alec Merriam ---------------------------------- J. Alec Merriam POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby constitute and appoint Robert N. Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM Financial Services, Inc., as General Partner of PLM Transportation Equipment Partners IXC 1986 Income Fund, to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM Transportation Equipment Partners IXC 1986 Income Fund, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 1996 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 1995. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 18th day of February, 1996. /s/ Robert L. Pagel ----------------------------------- Robert L. Pagel POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby constitute and appoint Robert N. Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM Financial Services, Inc., as General Partner of PLM Transportation Equipment Partners IXC 1986 Income Fund, to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM Transportation Equipment Partners IXC 1986 Income Fund, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 1996 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 1995. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 18th day of February, 1996. /s/ Allen V. Hirsch ----------------------------------- Allen V. Hirsch EX-27 3
5 12-MOS DEC-31-1995 DEC-31-1995 248,504 0 110,417 9,684 0 0 4,920,653 4,119,232 1,189,380 0 0 0 0 0 1,145,317 1,189,380 0 916,158 0 656,617 0 0 0 259,541 0 259,541 0 0 0 259,541 0 0
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