-----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, Wyb2sTTgLjRhoLCl74xsQ4QXtLpAnO6coP/4r6w0UXsobyvHrksDnVQscG3PT+eH hJyNne4KZD7pma+klRUCSw== 0000847517-97-000003.txt : 19970811 0000847517-97-000003.hdr.sgml : 19970811 ACCESSION NUMBER: 0000847517-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM EQUIPMENT GROWTH FUND IV CENTRAL INDEX KEY: 0000847517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943090127 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18789 FILM NUMBER: 97653964 BUSINESS ADDRESS: STREET 1: STEUART STREET TOWER STE 900 STREET 2: C/O ONE MARKET PLAZA CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1399 BUSINESS PHONE: 4159741399 MAIL ADDRESS: STREET 1: ONE MARKET STREET 2: STEUART STREET TOWER STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1301 10-Q 1 . UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended June 30, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 33-27746 ----------------------- PLM EQUIPMENT GROWTH FUND IV (Exact name of registrant as specified in its charter) California 94-3090127 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Indentification No.) One Market, Steuart Street Tower, Suite 800, San Francisco, CA 94105-1301 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (415) 974-1399 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) BALANCE SHEETS (in thousands of dollars, except unit amounts)
June 30, December 31, 1997 1996 Assets: Equipment held for operating lease, at cost $ 89,818 $ 89,766 Less accumulated depreciation (53,934 ) (50,784 ) 35,884 38,982 Equipment held for sale - 5,524 Net equipment 35,884 44,506 Cash and cash equivalents 8,938 2,142 Restricted cash 552 552 Due from affiliates - 357 Investments in unconsolidated special-purpose entities 9,286 9,616 Accounts and notes receivable, net of allowance for doubtful accounts of $2,184 in 1997 and $2,329 in 1996 1,834 1,477 Deferred charges, net of accumulated amortization of $442 in 1997 and $414 in 1996 162 219 Prepaid expenses and other assets 30 140 Total assets $ 56,686 $ 59,009 Liabilities and partners' capital: Liabilities: Accounts payable and accrued expenses $ 936 $ 1,027 Due to affiliates 413 304 Lessee deposits and reserve for repairs 2,792 3,519 Notes payable 29,250 29,250 Total liabilities 33,391 34,100 Partners' capital: Limited partners (8,628,420 limited partnership units as of June 30, 1997 and December 31, 1996) 23,295 24,909 General Partner - - Total partners' capital 23,295 24,909 Total liabilities and partners' capital $ 56,686 $ 59,009
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF OPERATIONS (in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 Revenues: Lease revenue $ 3,423 $ 5,242 $ 6,808 $ 9,798 Interest and other income 617 100 717 131 Net gain on disposition of equipment 14 2,626 2,354 2,635 Total revenues 4,054 7,968 9,879 12,564 Expenses: Depreciation and amortization 1,786 2,445 3,568 4,850 Marine equipment operating expense 42 486 350 1,040 Repairs and maintenance 432 2,372 680 3,660 Interest expense 713 750 1,426 1,501 Insurance expense to affiliates (18 ) 54 49 95 Other insurance expense 67 127 196 264 Management fees to affiliate 184 214 368 420 General and administrative expenses to affiliates 122 164 357 286 Other general and administrative expenses 493 218 885 456 Provision for (recovery of) bad debt expense 122 599 (144 ) 1,508 Total expenses 3,943 7,429 7,735 14,080 Equity in net loss of unconsolidated special- purpose entities (13 ) (123 ) (124 ) (270 ) Net income (loss) $ 98 $ 416 $ 2,020 $ (1,786 ) Partners' share of net income (loss): Limited partners $ 7 $ 325 $ 1,838 $ (1,968 ) General Partner 91 91 182 182 Total $ 98 $ 416 $ 2,020 $ (1,786 ) Net income (loss) per weighted-average limited partnership unit (8,628,420 units and 8,638,241 units as of June 30, 1997 and 1996, respectively) $ 0.00 $ 0.04 $ 0.21 $ (0.23 ) Cash distributions $ 1,817 $ 1,819 $ 3,634 $ 3,637 Cash distributions per weighted-average limited partnership unit $ 0.20 $ 0.20 $ 0.40 $ 0.40
See accompanying notes to financial statements PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1995 to June 30, 1997 (in thousands of dollars)
Limited General Partners Partner Total Partners' capital as of December 31, 1995 $ 36,475 $ - $ 36,475 Net (loss) income (4,482 ) 363 (4,119 ) Cash distributions (6,908 ) (363 ) (7,271 ) Repurchase of limited partnership units (176 ) - (176 ) Partners' capital as of December 31, 1996 24,909 - 24,909 Net income 1,838 182 2,020 Cash distributions (3,452 ) (182 ) (3,634 ) Partner's capital as of June 30, 1997 $ 23,295 $ - $ 23,295
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Six Months Ended June 30, 1997 1996 Operating activities: Net income (loss) $ 2,020 $ (1,786 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Net gain on disposition of equipment (2,354 ) (2,635 ) Depreciation and amortization 3,568 4,850 Equity in net loss of unconsolidated special-purpose entities 124 270 Changes in operating assets and liabilities: Restricted cash - (334 ) Due from affiliates 357 - Accounts and notes receivable, net (357 ) 972 Prepaid expenses and other assets 110 155 Accounts payable and accrued expenses (671 ) 1,318 Due to affiliates 109 302 Lessee deposits and reserve for repairs 256 323 Net cash provided by operating activities 3,162 3,435 Investing activities: Purchase of equipment and payments for capitalized improvements (1 ) (5,530 ) Payments of acquisition fees to affiliates - (247 ) Payments of lease negotiation fees to affiliates - (12 ) Distributions from unconsolidated special-purpose entities 206 17 Proceeds from disposition of equipment 7,063 8,460 Net cash provided by investing activities 7,268 2,688 Financing activities: Repurchase of limited partnership units - (176 ) Cash distributions paid to limited partners (3,452 ) (3,455 ) Cash distributions paid to General Partner (182 ) (182 ) Net cash used in financing activities (3,634 ) (3,813 ) Net increase in cash and cash equivalents 6,796 2,310 Cash and cash equivalents at beginning of period 2,142 1,236 Cash and cash equivalents at end of period $ 8,938 $ 3,546 Supplemental information: Interest paid $ 1,426 $ 1,501
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1997 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc. (the General Partner), the accompanying unaudited financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the financial position of PLM Equipment Growth Fund IV (the Partnership) as of June 30, 1997 and December 31, 1996, the statements of operations for the three and six months ended June 30, 1997 and 1996, the statements of changes in partners' capital for the period from December 31, 1995 to June 30, 1997, and the statements of cash flows for the six months ended June 30, 1997 and 1996. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996, on file at the Securities and Exchange Commission. 2. Reclassifications Certain amounts in the 1996 financial statements have been reclassified to conform to the 1997 presentation. 3. Cash Distributions Cash distributions are recorded when paid and totaled $3.6 million and $3.6 million for the six months ended June 30, 1997 and 1996, respectively, and $1.8 million and $1.8 million for the three months ended June 30, 1997 and 1996, respectively. Cash distributions to unitholders in excess of net income are deemed to be a return of capital. Cash distributions to limited partners of $1.6 million and $3.5 million, respectively, for the six months ended June 30, 1997 and 1996, were deemed to be a return of capital. Cash distributions related to the results from the second quarter of 1997, of $1.2 million, were paid or are payable during July and August 1997, depending on whether the individual elected to receive a monthly or quarterly distribution check. 4. Investments in Unconsolidated Special-Purpose Entities The net investments in unconsolidated special-purpose entities (USPEs) included the following jointly-owned equipment (and related assets and liabilities) (in thousands):
June 30, December 31, 1997 1996 35% interest in two commercial aircraft on direct finance lease $ 4,131 $ 3,876 50% interest in an entity owning a bulk carrier 2,720 3,165 17% interest in a trust owning six commercial aircraft 2,435 2,575 Net investments $ 9,286 $ 9,616 5. Transactions with General Partner and Affiliates Partnership management fees of $0.3 million and $0.3 million were payable as of June 30, 1997 and December 31, 1996, respectively. The Partnership's proportional share of USPE management fees of $25,000 and $8,000 were payable as of June 30, 1997 and December 31, 1996, respectively. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1997 5. Transactions with General Partner and Affiliates (continued) The Partnership's proportional share of the affiliated expenses incurred by the USPEs during 1997 and 1996 is listed in the following table (in thousands): For the Three Months For the Six Months Ended June 30, Ended June 30, 1997 1996 1997 1996 Management fees $ 22 $ 69 $ 42 $ 102 Insurance expense 19 13 50 31 Data processing and administrative expenses 7 5 16 19
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine insurance coverage for Partnership equipment and other insurance brokerage services. TEI is an affiliate of the General Partner. The balance due from affiliates as of December 31, 1996 included $0.4 million due from TEI for settlement of an insurance claim for one of the Partnership's marine vessels that was sold in 1995. This settlement was received by TEI in December 1996 and received by the Partnership in 1997. 6. Equipment Components of owned equipment are as follows (in thousands):
June 30, December 31, 1997 1996 Equipment held for operating leases: Aircraft $ 43,314 $ 42,734 Marine containers 15,022 15,498 Rail equipment 14,872 14,867 Marine vessels 9,719 9,719 Trailers 6,891 6,948 89,818 89,766 Less accumulated depreciation (53,934 ) (50,784 ) 35,884 38,982 Equipment held for sale - 5,524 Net equipment $ 35,884 $ 44,506
Equipment held for sale is stated at the lower of the equipment's depreciated cost or fair value less costs to sell and is subject to a pending contract of sale. Equipment held for sale as of December 31, 1996 included a marine vessel, which was sold in the first quarter of 1997. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1997 6. Equipment (continued) As of June 30, 1997, all equipment was either on lease or operating in PLM-affiliated short-term trailer rental facilities, except for 1 aircraft, 3 railcars, and 109 marine containers. The net carrying value of off-lease equipment was $3.7 million as of June 30, 1997. As of December 31, 1996, 1 aircraft, 3 railcars, and 48 marine containers were off lease, with a net carrying value of $3.9 million. During the six months ended June 30, 1996, the Partnership acquired a Dash 8-300 aircraft for $5.5 million and paid acquisition and lease negotiation fees of $0.2 million to PLM Transportation Equipment Corporation, a wholly-owned subsidiary of the General Partner. During the six months ended June 30, 1997, the Partnership sold or disposed of marine containers, railcars, and a marine vessel with an aggregate net book value of $5.7 million and unused drydock reserves of $1.0 million, for aggregate proceeds of $7.1 million. During the six months ended June 30, 1996, the Partnership disposed of a mobile offshore drilling unit (rig), marine containers, and railcars with an aggregate net book value of $5.8 million, for aggregate proceeds of $8.4 million. 7. Contingencies PLM International, Inc. and various of its affiliates are named as defendants in a lawsuit filed as a class action on January 22, 1997 in the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action). On February 3, 1997, the state court filed an order conditionally certifying the class pursuant to the provisions of Rule 23 of the Alabama Rules of Civil Procedure (ARCP), as requested by plaintiffs in an ex parte motion filed on January 22, 1997. Defendants were not given notice of the motion, nor were they given an opportunity to be heard regarding the issue of conditional class certification. The order specifies that the class shall consist of (with certain narrow exceptions) all purchasers of limited partnership units in the Partnership, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund VII. In issuing the order, the court emphasized that the certification is conditional in accordance with Rule 23(d) of the ARCP, and that the plaintiffs will bear the burden of proving each requisite element of Rule 23 at the time of the evidentiary hearing on the issue of class certification. To date, no such hearing date has been set. The defendants filed a notice of removal of the Koch action from the state court to the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) on March 6, 1997, arguing that the parties are fully diverse for the purposes of diversity jurisdiction pursuant to 28 U.S.C. Section 1441. The plaintiffs filed a motion to remand the Koch action to the state court and defendants have responded to this motion. The federal court has not yet ruled on this motion, and defendants do not need to respond to the complaint until after such motion is decided. PLM International, Inc. believes that the allegations of the Koch action are completely without merit and intends to defend this matter vigorously. On June 5, 1997,PLM International, Inc. and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No. 987062 (the Romei action). The named plaintiff has alleged the same facts and the same nine causes of action as is in the Koch action (as described in the Partnership's Form 10-K for the year ended December 31, 1996), plus five additional causes of action against all of the defendants, as follows: violations of California Business and Professions Code Sections 17200, et seq. for alleged unfair and deceptive practices, a claim for constructive fraud, a claim for unjust enrichment, a claim for violations of California Corporations Code Section 1507, and a claim for treble damages under California Civil Code Section 3345. The plaintiff is an investor in PLM Equipment Growth Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in certain California limited partnerships PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1997 7. Contingencies (continued) sponsored by PLM Securities, for which PLM Financial Services, Inc. acts as the general partner, including the Partnership, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund VII. PLM International, Inc. and the other defendants removed the Romei action to the United States District Court for the Northern District of California (Case No. C-97-2450 SC) on June 30, 1997, based on the federal court's diversity jurisdiction. The defendants then filed a motion to compel arbitration of the plaintiffs' claims, based on an agreement to arbitrate contained in the PLM Equipment Growth Fund V limited partnership agreement, to which plaintiff is a party. A hearing on this motion to compel arbitration has been scheduled for August 22, 1997, although the district court may decide the motion without such argument. PLM International, Inc. believes that the allegations of the Romei action are completely without merit and intends to defend this matter vigorously. 8. Subsequent Event In July 1997, the Partnership paid the first annual principal payment of $8.3 million of the outstanding notes payable. (This space intentionally left blank.) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (I) RESULTS OF OPERATIONS Comparison of the Partnership's Operating Results for the Three Months Ended June 30, 1997 and 1996 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repair and maintenance, marine equipment operating, and asset-specific insurance expenses) on owned equipment increased during the second quarter of 1997 when compared to the same quarter of 1996. The following table presents lease revenues less direct expenses by owned equipment type (in thousands):
For the Three Months Ended June 30, 1997 1996 Aircraft $ 1,305 $ (198 ) Marine vessels 523 1,062 Rail equipment 443 406 Trailers 389 423 Marine containers 268 464 Mobile offshore drilling unit - 45
Aircraft: Aircraft lease revenues and direct expenses were $1.1 million and $(0.2) million, respectively, for the second quarter of 1997, compared to $1.3 million and $1.5, respectively, during the same period in 1996. The decrease in lease revenues in the second quarter of 1997 was due to the off-lease status of an aircraft, compared to the same period in 1996 when the aircraft was on lease for the entire quarter. The decrease was offset, in part, by the purchase of a Dash 8-300 aircraft at the end of the second quarter of 1996, which was on lease for the entire second quarter in 1997. Direct expenses decreased due to costs incurred in the second quarter of 1996 for repairs on one of the Partnership's aircraft, which were not required in the same period of 1997. In addition, repair costs for this aircraft that were accrued in 1996 were lower than estimated. These accruals were reversed in 1997. Marine vessels: Marine vessel lease revenues and direct expenses were $0.6 million and $0.1 million, respectively, for the second quarter of 1997, compared to $2.0 million and $1.0 million, respectively, during the same quarter of 1996. Marine vessel contribution decreased due to the sale of a marine vessel in January 1997. In addition, lease revenues decreased in the second quarter of 1997 for the remaining marine vessel due to lower re-lease rates as a result of a softer bulk carrier vessel market. Rail equipment: Railcar lease revenues and direct expenses were $0.9 million and $0.5 million, respectively, for the second quarter of 1997 and 1996. Rail equipment contributions remained the same due to the relative stability of the railcar fleet. Trailers: Trailer revenues and direct expenses were $0.5 million and $0.1 million, respectively, for the second quarter of 1997 and 1996. Trailer contributions remained the same due to the relative stability of the trailer fleet. Marine containers: Marine container lease revenues and direct expenses were $0.3 million and $3,000, respectively, for the second quarter of 1997, compared to $0.5 million and $4,000, respectively, during the same quarter of 1996. Marine container contributions decreased due to sales and dispositions over the past twelve months and lower utilization in the second quarter of 1997, compared to the same period in 1996. Mobile offshore drilling unit (rig): The rig was sold in the second quarter of 1996, resulting in the elimination of any contribution in the second quarter of 1997. Revenues and expenses were $46,000 and $0, respectively, in the second quarter of 1996. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $3.4 million for the quarter ended June 30, 1997 decreased from $4.4 million for the same period in 1996. The variances are explained as follows: (1) A $0.7 million decrease in depreciation and amortization expenses from 1996 levels reflects the sale of certain assets during 1997 and 1996 and the use of the double-declining balance depreciation method, which results in greater depreciation in the first years an asset is owned. (2) The $0.5 million decrease in bad debt expenses reflects the General Partner's evaluation of the collectibility of receivables due from certain lessees. (3) A $0.2 million increase in administrative expenses from 1996 levels resulted from additional legal fees needed to collect outstanding receivables due to the Partnership from aircraft lessees. (C) Interest and Other Income Interest and other income increased $0.5 million in the second quarter of 1997, compared to the same period in 1996, for the following reasons: (1) The recognition in 1997 of $0.4 million in loss-of-hire and general claim insurance recovery relating to generator repairs of one marine vessel sold in 1994. (2) An increase of $0.1 million in interest income due to higher cash balances in the second quarter of 1997, compared to the same period in 1996. (D) Net Gain on Disposition of Owned Equipment Net gain on disposition of equipment for the second quarter of 1997 totaled $14,000, and resulted from the sale or disposal of marine containers and trailers with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.1 million. For the second quarter of 1996, the $2.6 million net gain on disposition of equipment resulted from the sale or disposal of marine containers, a railcar, and a mobile offshore drilling unit with an aggregate net book value of $5.6 million, for aggregate proceeds of $8.2 million. (E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities Equity in net income (loss) of unconsolidated special-purpose entities (USPEs) represents net income (loss) generated from the operation of jointly-owned assets accounted for under the equity method (in thousands).
For the Three Months Ended June 30, 1997 1996 Aircraft $ 175 $ (74 ) Marine vessels (188 ) (49 )
Aircraft: As of June 30, 1997, the Partnership owned a 35% interest in a trust that owns two commercial aircraft on direct finance lease and a 17% interest in another trust that owns six commercial aircraft. As of June 30, 1996, the Partnership owned a 17% interest in a trust that owns six commercial aircraft. Aircraft revenues and expenses were $0.4 million and $0.2 million, respectively, for the second quarter of 1997, compared to $0.3 million and $0.4 million, respectively, during the same quarter in 1996. The contribution for the investment in a trust owning commercial aircraft on an operating lease is significantly impacted by depreciation charges, which are greatest in the early years due to the use of the double-declining balance method of depreciation. The trust is depreciating this aircraft investment over a period of six years. The investment in the trust owning the aircraft on direct finance lease was acquired at the end of 1996; accordingly, there was no contribution in the second quarter of 1996. Marine vessel: As of June 30, 1997, the Partnership had a 50% interest in an entity owning a marine vessel. Marine vessel revenues and expenses were $0.3 million and $0.5 million, respectively, for the second quarter of 1997, compared to $0.4 million and $0.5 million, respectively, during the same quarter in 1996. Lease revenues decreased in the second quarter of 1997 due to lower re-lease rates as a result of a softer bulk carrier vessel market. (F) Net Income As a result of the foregoing, the Partnership's net income was $0.1 million for the second quarter of 1997, compared to a net income of $0.4 million during the same period of 1996. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the second quarter of 1997 is not necessarily indicative of future periods. In the second quarter of 1997, the Partnership distributed $1.7 million to the limited partners, or $0.20 per weighted-average limited partership unit. Comparison of the Partnership's Operating Results for the Six Months Ended June 30, 1997 and 1996 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repair and maintenance, marine equipment operating, and asset-specific insurance expenses) on owned equipment increased during the six months ended June 30, 1997, compared to the same period of 1996. The following table presents lease revenues less direct expenses by owned equipment type (in thousands):
For the Six Months Ended June 30, 1997 1996 Aircraft $ 2,419 $ 326 Rail equipment 1,250 1,149 Trailers 776 861 Marine containers 669 773 Marine vessels 429 1,497 Mobile offshore drilling unit - 132
Aircraft: Aircraft lease revenues and direct expenses were $2.2 million and $(0.2) million, respectively, for the six months ended June 30, 1997, compared to $2.6 million and $2.3 million, respectively, during the same period of 1996. The decrease in lease revenues in the six months ended June 30, 1997 was due to the off-lease status of an aircraft, when compared to the same period in 1996 when the aircraft was on lease for the entire period. The decrease was offset, in part, by the purchase of a Dash 8-300 aircraft at the end of the second quarter of 1996, which was on lease for the six months ended June 30, 1997. Direct expenses decreased due to costs incurred for repairs on an aircraft and the overhaul of four engines on another aircraft in the six months ended June 30, 1996, which were not required in 1997. In addition, the repair costs for this aircraft that were accrued in 1996 were lower than estimated. These accruals were reversed in 1997. Rail equipment: Railcar lease revenues and direct expenses were $1.8 million and $0.6 million, respectively, for the six months ended June 30, 1997, compared to $1.8 million and $0.7 million, respectively, during the same period of 1996. Although the railcar fleet remained relatively the same size for both periods, the increase in railcar contribution resulted from running repairs required on certain of the railcars in the fleet during 1996, which were not needed during 1997. Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.2 million, respectively, for the six months ended June 30, 1997, compared to $1.1 million and $0.2 million, respectively, during the same period of 1996. Lease revenues decreased slightly in the six months ended June 30, 1997, compared to the same period in 1996, due to lower utilization in the PLM-affiliated short-term rental yards. Marine containers: Marine container lease revenues and direct expenses were $0.7 million and $8,000, respectively, for the six months ended June 30, 1997, compared to $0.8 million and $17,000, respectively, during the same period of 1996. Marine container contributions decreased due to sales and dispositions over the past twelve months and lower utilization in the six months ended June 30, 1997, compared to the same period in 1996. Marine vessels: Marine vessel lease revenues and direct expenses were $1.0 million and $0.6 million, respectively, for the six months ended June 30, 1997, compared to $3.4 million and $1.9 million, respectively, during the same period of 1996. Marine vessel contributions decreased due to the sale of a marine vessel in January 1997. In addition, lease revenues decreased in the six months ended June 30, 1997 for the remaining marine vessel, due to lower re-lease rates as a result of a softer bulk carrier vessel market. Mobile offshore drilling unit (rig): The rig was sold in the second quarter of 1996, resulting in the elimination of any contribution in the six months ended June 30, 1997. Revenues and expenses were $0.1 million and $0, respectively, in the six months ended June 30, 1996. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $6.5 million for the six months ended June 30, 1997 decreased from $9.0 million for the same period in 1996. The variances are explained as follows: (1) A $1.3 million decrease in depreciation and amortization expenses from 1996 levels reflects the sale of certain assets during 1997 and 1996 and the use of the double-declining balance depreciation method, which results in greater depreciation in the first years an asset is owned. (2) The $1.6 million decrease in bad debt expenses was due to the following: A $0.8 million decrease in the provision was due to the receipt of payments for unpaid invoices that were previously reserved, and a decrease of $0.8 million in bad debt expenses resulted from the General Partner reserving the uncollected outstanding receivables in 1996 for a certain lessee that encountered financial difficulties. No provision for this lessee was required in 1997. (3) A $0.1 million decrease in interest expense was due to a smaller principal balance in the six months ended June 30, 1997, compared to the same period in 1996. In November 1996, the Partnership paid down the outstanding debt by $1.6 million. (4) A $0.5 million increase in administrative expenses from 1996 levels resulted from additional legal fees needed to collect outstanding receivables due to the Partnership from aircraft lessees. (C) Interest and Other Income Interest and other income increased $0.6 million in the six months ended June 30, 1997, compared to the same period in 1996, due to the following: (1) The recognition in 1997 of $0.4 million in loss-of-hire and general claim insurance recovery relating to generator repairs on one marine vessel sold in 1994. (2) An increase of $0.1 million in interest income due to higher cash balances compared to the same period in 1996. (D) Net Gain on Disposition of Owned Equipment Net gain on disposition of equipment for the six months ended June 30, 1997 totaled $2.4 million, which resulted from the sale or disposal of marine containers, railcars, and a marine vessel, with an aggregate net book value of $5.7 million and unused drydock reserves of $1.0 million, for aggregate proceeds of $7.1 million. For the six months ended June 30, 1996, the $2.6 million net gain on disposition of equipment resulted from the sale or disposal of marine containers, railcars, and a mobile offshore drilling unit with an aggregate net book value of $5.8 million, for aggregate proceeds of $8.4 million. (E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities Equity in net income (loss) of unconsolidated special-purpose entities represents net income (loss) generated from the operation of jointly-owned assets accounted for under the equity method (in thousands).
For the Six Months Ended June 30, 1997 1996 Aircraft $ 355 $ (139 ) Marine vessels (479 ) (131 )
Aircraft: As of June 30, 1997, the Partnership owned a 35% interest in a trust that owns two commercial aircraft on direct finance lease and a 17% interest in another trust that owns six commercial aircraft. As of June 30, 1996, the Partnership owned a 17% interest in a trust that owns six commercial aircraft. Aircraft revenues and expenses were $0.9 million and $0.5 million, respectively, for the six months ended June 30, 1997, compared to $0.6 million and $0.7 million, respectively, during the same period of 1996. The contribution for the investment in a trust owning commercial aircraft on an operating lease is significantly impacted by depreciation charges, which are greatest in the early years due to the use of the double-declining balance method of depreciation. The trust is depreciating this aircraft investment over a period of six years. The investment in the trust owning the aircraft on direct finance lease was acquired in the latter part of 1996, and thus it had no contribution for the six months ended June 30, 1996. Marine vessel: As of June 30, 1997, the Partnership had a 50% interest in an entity owning a marine vessel. Marine vessel revenues and expenses were $0.5 million and $1.0 million, respectively, for the six months ended June 30, 1997, compared to $0.8 million and $1.0 million, respectively, during the same period in 1996. Lease revenue decreased in the six months ended June 30, 1997 due to lower re-lease rates as a result of a softer bulk carrier vessel market. (F) Net Income (Loss) As a result of the foregoing, the Partnership's net income was $2.0 million for the six months ended June 30, 1997, compared to a net loss of $1.8 million during the same period of 1996. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the six months ended June 30, 1997 is not necessarily indicative of future periods. In the six months ended June 30, 1997, the Partnership distributed $3.5 million to the limited partners, or $0.40 per weighted-average limited partnership unit. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY The Partnership has ended its reinvestment phase pursuant to its limited partnership agreement. Due to this, the Partnership is prohibited from borrowing funds through its short-term joint $50.0 million credit facility. For the six months ended June 30, 1997, the Partnership generated $3.4 million in operating cash (net cash provided by operating activities plus distributions from unconsolidated special-purpose entities) to meet its operating obligations and maintain the current level of distributions (total for the six months ended June 30, 1997 of approximately $3.6 million) to the partners, but also used undistributed available cash from prior periods of approximately $0.2 million. The cash distributions to be paid in August 1997 will be reduced from an annual rate of 4% to an annual rate of 3% to more closely reflect current and expected net cash flows from operations. In the third quarter of 1997, the cash distribution will be reduced from an annual rate of 3% to an annual rate of 2% to more closely reflect current and expected net cash flows from operations. Continued weak market conditions in certain equipment sectors and equipment sales have reduced overall lease revenues in the Partnership to the extent that reductions in distribution levels are now necessary. In addition, with the Partnership expected to enter the active liquidation phase in the near future, the size of the Partnership's remaining equipment portfolio and, in turn, the amount of net cash flows from operations will continue to become progressively smaller as assets are sold. Although distribution levels will be reduced, significant asset sales may result in special distributions to unitholders. In July 1997, the Partnership paid the first annual principal payment of $8.3 million of the outstanding notes payable. (III) OUTLOOK FOR THE FUTURE Since the Partnership is in its holding or passive liquidation phase, the General Partner will be seeking to selectively re-lease or sell assets as the existing leases expire. Sale decisions will cause the operating performance of the Partnership to decline over the remainder of its life. The General Partner anticipates that the liquidation of Partnership assets will be completed by the planned termination of the Partnership at the end of the year 2000. The Partnership intends to use cash flow from operations to satisfy its operating requirements, maintain working capital reserves, pay loan principal on debt, and pay cash distributions to the investors. (IV) FORWARD-LOOKING INFORMATION: Except for historical information contained herein, the discussion in this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Partnership's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Partnership's actual results could differ materially from those discussed here. (This space intentionally left blank.) PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits First amendment to the amended and restated limited partnership agreement. (b) Reports on Form 8-K None. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM EQUIPMENT GROWTH FUND IV By: PLM Financial Services, Inc. General Partner Date: August 7, 1997 By: /s/ Richard Brock --------------------------------- Richard Brock Vice President and Corporate Controller EX-27 2
5 1,000 6-MOS DEC-31-1997 JUN-30-1997 8,938 0 1,834 2,184 0 0 89,818 53,934 56,686 0 0 0 0 0 23,295 56,686 0 9,879 0 6,309 0 0 1,426 2,020 0 2,020 0 0 0 2,020 0 0
EX-10 3 FIRST AMENDMENT TO THE AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF PLM EQUIPMENT GROWTH FUND IV This First Amendment ("Amendment") to the Amended and Restated Limited Partnership Agreement ("Agreement") of PLM Equipment Growth Fund IV ("Partnership") is executed as of November 21, 1996, by its general partner, PLM Financial Services, Inc., a Delaware corporation ("General Partner"), pursuant to Article XVIII of the Agreement. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. RECITALS The Partners entered into a Limited Partnership Agreement as of March 13, 1989, and an Amended and Restated Limited Partnership Agreement as of May 22, 1989. The General Partner now amends the Agreement, pursuant to Article XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the Limited Partners, to the General Partner's representations and obligations, to cure any ambiguity or to correct any inconsistency that may exist among Sections 6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General Partner represents, warrants and agrees, and will take all action to ensure, that this Amendment does not, and will not, detrimentally affect the Cash Distributions of the Limited Partners or assignees or the management of the Partnership by the General Partner. Now, therefor, the Agreement is amended as follows: 1. Section 6.02 is amended to read in its entirety as follows: "The General Partner shall not transfer its interest as General Partner in the Partnership (which transfer shall be deemed as "withdrawal" of the General Partner for purposes of Section 9.02) or its interest in the Partnership's capital, earnings or assets (except in connection with the pledge of the General Partner's assets or right in connection with loans or other indebtedness) except (a) upon the approval of a majority in interest of the Limited Partners, or (b) to an Affiliate upon its merger, consolidation with another person or its transfer pursuant to a reorganization of all or substantially all of its assets to another person, and the assumption of the rights and duties of the General Partner by such Person; provided, however, that such successor or transferee shall on the date of such transfer, merger, consolidation or reorganization assume all of the duties and obligations of the General Partner set forth in this Agreement." IN WITNESS WHEREOF, the General Partner has duly executed this Amendment as of November 21, 1996. PLM FINANCIAL SERVICES, INC. a Delaware corporation, General Partner and as attorney-in-fact for and on behalf of the Limited Partners By: /s/ J. Michael Allgood ------------------------ Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----