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, 1996. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-15438 ----------------------- PLM Transportation Equipment Partners IXB 1986 Income Fund (Exact name of registrant as specified in its charter) California 94-2992019 (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 ______ PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS June 30, December 31, 1996 1995 ------------------------------------- Equipment held for operating leases, at cost $ 4,060,455 $ 4,242,401 Less accumulated depreciation (3,511,421 ) (3,567,969 ) ------------------------------------- Net equipment 549,034 674,432 Cash and cash equivalents 159,636 251,709 Accounts receivable, net of allowance for doubtful accounts of $59,970 in 1996 and $57,022 in 1995 89,043 107,933 Net investment in sales-type lease -- 1,003,564 Due from affiliates -- 2,941 Prepaid insurance 909 3,544 ------------------------------------- Total assets $ 798,622 $ 2,044,123 ===================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 5,059 $ -- Accounts payable 5,477 23,272 Prepaid deposits 2,854 20,028 ------------------------------------- Total liabilities 13,390 43,300 Partners' capital (deficit): Limited Partners (24,285 units) 884,334 2,087,769 General Partner (99,102 ) (86,946 ) ------------------------------------- Total partners' capital 785,232 2,000,823 ------------------------------------- Total liabilities and partners' capital $ 798,622 $ 2,044,123 ===================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME For the three months For the six months ended June 30, ended June 30, 1996 1995 1996 1995 ---------------------------- ------------------------------- Revenues: Lease revenue $ 109,072 $ 120,131 $ 220,209 $ 240,224 Interest and other income 1,880 3,021 12,845 7,095 Gain on disposition of equipment 42,312 535,795 44,981 545,340 ---------------------------- ------------------------------- Total revenues 153,264 658,947 278,035 792,659 Expenses: Depreciation 52,148 99,640 105,382 201,500 Management fees to affiliate 15,178 15,178 31,204 30,356 Repairs and maintenance 13,905 24,308 25,899 105,819 General and administrative expenses to affiliates 21,838 30,045 45,495 60,724 Other general and administrative expenses 22,034 26,829 42,965 38,812 ------------------------------- ---------------------------- Total expenses 125,103 196,000 250,945 437,211 ---------------------------- ------------------------------- Net income $ 28,161 $ 462,947 $ 27,090 $ 355,448 ============================ =============================== Partners' share of net income Limited Partners - 99% $ 27,879 $ 458,318 $ 26,819 $ 351,894 General Partner - 1% 282 4,629 271 3,554 ---------------------------- ------------------------------- Total $ 28,161 $ 462,947 $ 27,090 $ 355,448 ============================ =============================== Net income per Limited Partnership Unit - 24,285 units $ 1.15 $ 18.87 $ 1.10 $ 14.49 ============================ =============================== Cash distributions $ 68,216 $ 74,464 $ 142,681 $ 148,940 ============================ =============================== Cash distributions per Limited Partnership Unit $ 2.78 $ 3.04 $ 5.82 $ 6.07 ============================ =============================== Special cash distributions $ 100,000 $ -- $ 1,100,000 $ -- ============================ =============================== Special cash distributions per Limited Partnership Unit $ 4.08 $ -- $ 44.84 $ -- ============================ =============================== Total cash distribution per Limited Partnership Unit $ 6.86 $ 3.04 $ 50.66 $ 6.07 ============================ =============================== 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 period from December 31, 1994 to June 30, 1996 Limited General Partners Partners Total ---------------------------------------------------- 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 Net income 26,819 271 27,090 Quarterly cash distributions (141,254 ) (1,427 ) (142,681 ) Special distributions (1,089,000 ) (11,000 ) (1,100,000 ) ------------------------------------------------------ Partners' capital (deficit) at June 30, 1996 $ 884,334 $ (99,102 ) $ 785,232 ====================================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS For the six months ended June 30, 1996 1995 ---------------------------------- Operating activities: Net income $ 27,090 $ 355,448 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (44,981 ) (545,340 ) Depreciation 105,382 201,500 Changes in operating assets and liabilities Accounts receivable, net 18,890 11,981 Due to/from affiliates 8,000 (5,673 ) Prepaid insurance 2,635 2,196 Accounts payable (17,795 ) 48,463 Prepaid deposits (17,174 ) (47,101 ) ---------------------------------- Cash provided by (used in ) operating activities 82,047 21,474 ---------------------------------- Investing activities: Proceeds from disposition of equipment 64,997 32,157 Payments received on sales-type lease 1,003,564 -- Payments for purchase of capital improvements -- (876 ) ---------------------------------- Cash provided by investing activities 1,068,561 31,281 ---------------------------------- Cash flows used in financing activities: Cash distributions paid to General Partner (1,230,254 ) (147,451 ) Cash distributions paid to Limited Partners (12,427 ) (1,489 ) ---------------------------------- Cash used in financing activities (1,242,681 ) (148,940 ) ---------------------------------- Cash and cash equivalents: Net decrease in cash and cash equivalents (92,073 ) (96,185 ) Cash and cash equivalents at beginning of period 251,709 298,718 ---------------------------------- Cash and cash equivalents at end of period $ 159,636 $ 202,533 ================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting only of normal recurring accruals, to present fairly the Partnership's financial position as of June 30, 1996, the statements of income for the three and six months ended June 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to June 30, 1996, and the statements of cash flows for the six months ended June 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment Equipment held for operating leases is stated at cost. The components of equipment are as follows: June 30, December 31, 1996 1995 ------------------------------------ Rail equipment $ 783,870 $ 783,870 Marine containers 1,254,733 1,420,872 Trailers 2,021,852 2,037,659 ------------------------------------ 4,060,455 4,242,401 Less accumulated depreciation (3,511,421 ) (3,567,969 ) ------------------------------------ Net equipment $ 549,034 $ 674,432 ==================================== All equipment was either on lease or operating in PLM affiliated short-term rental facilities except one forklift with a net carrying value of $41,712 as of June 30, 1996. All equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of December 31, 1995. During the six months ended June 30, 1996, the Partnership sold or disposed of 10 marine containers and one trailer with an aggregate book value of $20,016 for proceeds of $64,997. In addition, additional proceeds of $2,629 was received for the commuter aircraft which was under sales-type lease. During the six months ended June 30, 1995, the Partnership sold or disposed of one trailer and five marine containers with an aggregate book value of $21,367 for proceeds of $32,157. 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. 3. Liquidation and special distributions During the first quarter of 1996, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be PLM TRANSPORTATION EQUIPMENT PARTNERS IXA 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 3. Liquidation and special distributions (continued) carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. During the six months ended June 30, 1996, the General Partner paid special distributions of $44.84 per Limited Partnership Unit which were the result of proceeds from the sale of the commuter aircraft. No special distributions was paid during the six months ended June 30, 1995. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of equipment destructions, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. 4. Investment in 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 was structured with a one year term commencing June 1995. The lessee was to make monthly payments of $19,500. Gross lease payments of $234,000 were to 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. During the first quarter of 1996, the lessee exercised its option to buy the aircraft for approximately $1 million. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS June 30, December 31, 1996 1995 ------------------------------------- Equipment held for operating leases, at cost $ 2,583,795 $ 2,908,067 Less accumulated depreciation (2,201,742 ) (2,408,060 ) ------------------------------------- Net equipment 382,053 500,007 Cash and cash equivalents 296,744 351,363 Investment in unconsolidated special purpose entity 115,415 222,128 Accounts receivable, net of allowance for doubtful accounts of $27,731 in 1996 and $29,460 in 1995 48,368 82,668 Prepaid insurance 649 2,447 ------------------------------------- Total assets $ 843,229 $ 1,158,613 ===================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 3,637 $ 3,637 Accounts payable and other liabilities 7,954 72,569 Prepaid deposits 68 16,248 ------------------------------------- Total liabilities 11,659 92,454 Partners' capital (deficit): Limited Partners (17,460 units) 900,121 1,132,364 General Partner (68,551 ) (66,205 ) -------------- -------------- -------- - Total partners' capital 831,570 1,066,159 ------------------------------------- Total liabilities and partners' capital $ 843,229 $ 1,158,613 ===================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ----------------------------- ----------------------------- Revenues: Lease revenue $ 70,109 $ 115,086 $ 147,601 $ 260,644 Interest and other income 3,643 5,081 7,738 11,372 Gain on disposition of equipment 17,915 55,010 29,766 72,554 ----------------------------- ----------------------------- Total revenues 91,667 175,177 185,105 344,570 Expenses: Depreciation 35,757 66,433 74,126 137,531 Management fees to affiliate 10,912 10,912 21,825 21,825 Repairs and maintenance 14,198 9,851 23,416 26,857 General and administrative expenses to affiliates 15,930 23,563 35,318 52,856 Other general and administrative expenses 11,892 1,956 22,401 44,398 ----------------------------- ----------------------------- Total expenses 88,689 112,715 177,086 283,467 Equity in net loss of unconsolidated special purpose entity (18,239 ) (39,106 ) -- ----------------------------- ----------------------------- Net income (loss) $ (15,261 ) $ 62,462 $ (31,087 ) $ 61,103 ============================= ============================= Partners' share of net income (loss) Limited Partners - 99% $ (15,108 ) $ 61,837 $ (30,776 ) $ 60,492 General Partner - 1% (153 ) 625 (311 ) 611 ----------------------------- ----------------------------- Total $ (15,261 ) $ 62,462 $ (31,087 ) $ 61,103 ============================= ============================= Net income (loss) per Limited Partnership Unit - 17,460 units $ (0.87 ) $ 3.54 $ (1.76 ) $ 3.46 ============================= ============================= Cash distributions $ 101,751 $ 133,900 $ 203,502 $ 369,425 ============================= ============================= Cash distributions per Limited Partnership Unit $ 5.77 $ 7.59 $ 11.54 $ 20.95 ============================= ============================= 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 period from December 31, 1994 to June 30, 1996 Limited General Partners Partners Total ---------------------------------------------------- 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 Net loss (30,776 ) (311 ) (31,087 ) Cash distributions (201,467 ) (2,035 ) (203,502 ) ---------------------------------------------------- Partners' capital (deficit) at June 30, 1996 $ 900,121 $ (68,551 ) $ 831,570 ==================================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS For the six months ended June 30, 1996 1995 -------------------------------- Operating activities: Net (loss) income $ (31,087 ) $ 61,103 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain on disposition of equipment (29,766 ) (72,554 ) Depreciation 74,126 137,531 Cash distributions from unconsolidated special purpose entity in excess of income accrued 106,713 -- Changes in operating assets and liabilities: Accounts receivable, net 34,300 30,145 Prepaid insurance 1,798 1,782 Due to affiliates -- (2,725 ) Accounts payable (64,615 ) (8,736 ) Prepaid deposits (16,180 ) 1,101 -------------------------------- Cash provided by operating activities 75,289 147,647 -------------------------------- Investing activities: Proceeds from disposition of equipment 73,594 175,606 Payments for purchase of capital improvements -- (2,120 ) -------------------------------- Cash provided by investing activities 73,594 173,486 Cash flows used in financing activities: Cash distributions paid to General Partner (201,467 ) (365,731 ) Cash distributions paid to Limited Partners (2,035 ) (3,694 ) -------------------------------- Cash used in financing activities (203,502 ) (369,425 ) -------------------------------- Cash and cash equivalents: Net decrease in cash and cash equivalents (54,619 ) (48,292 ) Cash and cash equivalents at beginning of period 351,363 492,060 -------------------------------- Cash and cash equivalents at end of period $ 296,744 $ 443,768 ================================ See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting only of normal recurring accruals, to present fairly the Partnership's financial position as of June 30, 1996, the statements of operations for the three and six months ended June 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to June 30, 1996, and the statements of cash flows for the six months ended June 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment Owned equipment held for operating leases is stated at cost. The components of owned equipment are as follows: June 30, December 31, 1996 1995 ---------------------------------- Rail equipment $ 867,300 $ 867,300 Marine containers 367,784 413,633 Trailers and tractors 1,348,711 1,627,134 ---------------------------------- 2,583,795 2,908,067 Less accumulated depreciation (2,201,742 ) (2,408,060 ) ---------------------------------- Net equipment $ 382,053 $ 500,007 ================================== With the exception of one sidelift with an aggregate net carrying value of $59,706, all equipment was either on lease or operating in PLM affiliated short-term rental facilities as of June 30, 1996. At June 30, 1996, a jointly-owned aircraft was subject to a pending sale contract. The investment in this aircraft was $115,415. With the exception of one trailer and one sidelift with a carrying value of $79,024, all equipment was on lease or operating in PLM affiliated short-term rental facilities as of December 31, 1995. During the six months ended June 30, 1996, the Partnership sold or disposed of seven trailers and two marine containers with an aggregate net book value of $43,828 for proceeds of $73,594. During the six months ended June 30, 1995, the Partnership sold or disposed of 14 trailers and three marine containers with an aggregate net book value of $103,052 for proceeds of $175,606. 3. Liquidation During the first quarter of 1996, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 3. Liquidation (continued) Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. 4. Investment in Unconsolidated Special Purpose Entity Prior to 1996, the Partnership accounted for operating activities associated with joint ownership of rental equipment as undivided interests, including its proportionate share of each asset with similar wholly-owned assets in its financial statements. Under generally accepted accounting principles, the effects of such activities, if material, should be reported using the equity method of accounting. Therefore, effective January 1, 1996, the Partnership adopted the equity method to account for its investment in such jointly-held assets. The principal differences between the previous accounting method and the equity method relates to the presentation of activities relating to these assets in the statement of operations. Whereas, under equity accounting the Partnership's proportionate share is presented as a single net amount, "equity in net income (loss) of unconsolidated special purpose entities", under the previous method, the Partnership's statement of operations reflected its proportionate share of each individual item of revenue and expense. Accordingly, the effect of adopting the equity method of accounting has no cumulative effect on previously reported partner's capital or on the Partnership's net income (loss) for the period of adoption. Because the effects on previously issued financial statements of applying the equity method of accounting to investments in jointly-owned assets are not considered to be material to such financial statements taken as a whole, previously issued financial statements have not been restated. However, certain items have been reclassified in the previously issued balance sheet to conform to the current period presentation. The "Investment in unconsolidated special purpose entity" includes a 50% interest in a commuter aircraft. 5. Subsequent Event On July 31, 1996, the General Partner sold an aircraft that the Partnership holds an investment of 50%. The Partnership received $442,500 for its $115,415 investment in the aircraft. The investment is included in "Investment in unconsolidated special purpose entity" at June 30, 1996. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS June 30, December 31, 1996 1995 --------------------------------------- Equipment held for operating leases, at cost $ 3,745,431 $ 4,007,465 Less accumulated depreciation (3,233,570 ) (3,354,708 ) --------------------------------------- Net equipment 511,861 652,757 Cash and cash equivalents 431,315 248,504 Investment in unconsolidated special purpose entity -- 133,363 Accounts receivable, net of allowance for doubtful accounts of $13,617 in 1996 and $9,684 in 1995 58,400 104,717 Prepaid insurance and other assets 728 22,438 --------------------------------------- Total assets $ 1,002,304 $ 1,161,779 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 3,523 $ 3,523 Accounts payable 8,762 12,939 --------------------------------------- Total liabilities 12,285 16,462 Partners' capital (deficit): Limited Partners (16,914 units) 1,054,581 1,208,326 General Partner (64,562 ) (63,009 ) -------------- -------------- --------- -- Total partners' capital 990,019 1,145,317 --------------------------------------- Total liabilities and partners' capital $ 1,002,304 $ 1,161,779 ======================================= See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ----------------------------- ----------------------------- Revenues: Lease revenue $ 81,683 $ 171,549 $ 188,321 $ 362,059 Interest and other income 4,758 7,435 7,673 13,976 Gain (loss) on disposition of equipment 16,513 (1,628 ) 18,201 234,444 ----------------------------- ----------------------------- Total revenues 102,954 177,356 214,195 610,479 Expenses: Depreciation 51,803 68,474 105,789 143,947 Management fees to affiliate 10,590 10,568 22,024 24,217 Repairs and maintenance 23,478 38,325 57,356 87,283 General and administrative expenses to affiliates 26,046 43,110 57,988 91,393 Other general and administrative expenses 34,712 6,200 40,332 14,742 ----------------------------- ----------------------------- Total expenses 146,629 166,677 283,489 361,582 Equity in net income of unconsolidated special purpose entity 124,093 -- 111,543 -- ----------------------------- ----------------------------- Net income $ 80,418 $ 10,679 $ 42,249 $ 248,897 ============================= ============================= Partners' share of net income: Limited Partners - 99% $ 79,614 $ 10,572 $ 41,827 $ 246,408 General Partner - 1% 804 107 422 2,489 ----------------------------- ----------------------------- Total $ 80,418 $ 10,679 $ 42,249 $ 248,897 ============================= ============================= Net income per Limited Partnership Unit (16,914 units) $ 4.71 $ 0.62 $ 2.47 $ 14.57 ============================= ============================= Cash distributions $ 98,774 $ 104,399 $ 197,547 $ 259,422 ============================= ============================= Cash distributions per Limited Partnership Unit $ 5.78 $ 6.11 $ 11.56 $ 15.18 ============================= ============================= Special distributions $ -- $ 450,000 $ -- $ 450,000 ============================= ============================= Special distributions per Limited Partnership Unit $ -- $ 26.34 $ -- $ 26.34 ============================= ============================= Total distributions per Limited Partnership Unit $ 5.78 $ 32.45 $ 11.56 $ 41.52 ============================= ============================= 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 period from December 31, 1994 to June 30, 1996 Limited General Partners Partners Total ------------------------------------------------------ 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 Net income 41,827 422 42,249 Cash distributions (195,572 ) (1,975 ) (197,547 ) ------------------------------------------------------ Partners' capital (deficit) at June 30, 1996 $ 1,054,581 $ (64,562 ) $ 990,019 ====================================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS For the six months ended June 30, 1996 1995 -------------------------------- Operating activities: Net income $ 42,249 $ 248,897 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (18,201 ) (234,444 ) Depreciation 105,789 143,947 Cash distributions from unconsolidated special purpose entity in excess of income accrued 133,363 -- Change in operating assets and liabilities Accounts receivable, net 46,317 24,080 Due from affiliates -- 15,308 Prepaid deposits and reserves -- (26,086 ) Prepaid expenses and other assets 21,710 4,682 Accounts payable and other liabilities (4,177 ) (3,545 ) -------------------------------- Cash provided by operating activities 327,050 172,839 -------------------------------- Investing activities: Proceeds from disposition of equipment 53,308 520,760 Payments for puchase of capital improvements -- (1,362 ) -------------------------------- Cash provided by investing activities 53,308 519,398 -------------------------------- Cash flows used in financing activities: Cash distributions paid to General Partner (195,572 ) (702,328 ) Cash distributions paid to Limited Partners (1,975 ) (7,094 ) -------------------------------- Cash used in financing activities (197,547 ) (709,422 ) -------------------------------- Cash and cash equivalents: Net increase (decrease) in cash and cash equivalents 182,811 (17,185 ) Cash and cash equivalents at beginning of period 248,504 312,230 -------------------------------- Cash and cash equivalents at end of period $ 431,315 $ 295,045 ================================ See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting only of normal recurring accruals, to present fairly the Partnership's financial position as of June 30, 1996, the statements of income for the three and six months ended June 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to June 30, 1996, and the statements of cash flow for the six months ended June 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment Equipment held for operating leases is stated at cost. The components of owned equipment are as follows: June 30, December 31, 1996 1995 ------------------------------------ Rail equipment $ 178,501 $ 178,501 Marine containers 114,623 137,548 Trailers and tractors 3,452,307 3,691,416 ------------------------------------ 3,745,431 4,007,465 Less accumulated depreciation (3,233,570 ) (3,354,708 ) ------------------------------------ Net equipment $ 511,861 $ 652,757 ==================================== All of the equipment was either on lease or operating in PLM-affiliated short-term rental facilities as of June 30, 1996. With the exception of two trailers with a carrying value of $16,119, all of the equipment was either on lease or operating in PLM affiliated short-term rental facilities as of December 31, 1995. During the six months ended June 30, 1996, the Partnership sold or disposed of seven trailers and one marine container with net book value of $35,107 for proceeds of $53,308. During the six months ended June 30, 1995, the Partnership sold or disposed of three trailers and five twin stack railcars with a net book value of $286,316 for proceeds of $520,760. 3. Liquidation and special distributions During the first quarter of 1996, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the PLM TRANSPORTATION EQUIPMENT PARTNERS IXC 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 3. Liquidation and special distributions (continued) liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. No special distributions were paid during the six months ended June 30, 1996. During the six months ended June 30, 1995, the General Partner paid special distributions of $26.34 per Limited Partnership Unit which were the result of proceeds from equipment liquidations. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of equipment destructions, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. 4. Investment in Unconsolidated Special Purpose Entity Prior to 1996, the Partnership accounted for operating activities associated with joint ownership of rental equipment as undivided interests, including its proportionate share of each asset with similar wholly-owned assets in its financial statements. Under generally accepted accounting principles, the effects of such activities, if material, should be reported using the equity method of accounting. Therefore, effective January 1, 1996, the Partnership adopted the equity method to account for its investment in such jointly-held assets. The principal differences between the previous accounting method and the equity method relates to the presentation of activities relating to these assets in the statement of operations. Whereas, under equity accounting the Partnership's proportionate share is presented as a single net amount, "equity in net income (loss) of unconsolidated special purpose entities", under the previous method, the Partnership's statement of operations reflected its proportionate share of each individual item of revenue and expense. Accordingly, the effect of adopting the equity method of accounting has no cumulative effect on previously reported partner's capital or on the Partnership's net income (loss) for the period of adoption. Because the effects on previously issued financial statements of applying the equity method of accounting to investments in jointly-owned assets are not considered to be material to such financial statements taken as a whole, previously issued financial statements have not been restated. However, certain items have been reclassified in the previously issued balance sheet to conform to the current period presentation. The "Investment in unconsolidated special purpose entity" includes a 30% interest in a commuter aircraft. This jointly owned commuter aircraft was sold for $270,538 on April 30, 1996. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS June 30, December 31, 1996 1995 --------------------------------------- Equipment held for operating leases, at cost $ 1,643,756 $ 1,716,659 Less accumulated depreciation (1,391,621 ) (1,405,716 ) --------------------------------------- Net equipment 252,135 310,943 Cash and cash equivalents 56,503 191,840 Accounts receivable, net of allowance for doubtful accounts of $32,902 in 1996 and $33,793 in 1995 43,915 48,723 Due from affiliates -- 7,639 Prepaid insurance and other assets 1,423 16,549 --------------------------------------- Total assets $ 353,976 $ 575,694 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 1,985 $ -- Accounts payable and other liabilities 3,352 8,338 --------------------------------------- 5,337 8,338 Partners' capital (deficit): Limited Partners (9,529 units) 386,979 603,509 General Partner (38,340 ) (36,153 ) --------------------------------------- Total partners' capital 348,639 567,356 --------------------------------------- Total liabilities and partners' capital $ 353,976 $ 575,694 ======================================= See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ----------------------------- ----------------------------- Revenues: Lease revenue $ 34,205 $ 75,733 $ 89,447 $ 155,271 Interest and other income 1,576 6,790 4,142 15,441 Gain on disposition of equipment 11,087 36,886 10,090 52,339 ----------------------------- ----------------------------- Total revenues 46,868 119,409 103,679 223,051 Expenses: Depreciation 22,976 25,507 46,539 61,460 Management fees to affiliate 5,955 5,956 11,911 12,339 Repairs and maintenance 5,952 10,540 17,177 32,419 Provision for (recovery of) bad debts 1,603 (764 ) (1,725 ) 41,352 General and administrative expenses to affiliates 10,150 18,741 25,567 28,914 Other general and administrative expenses 17,184 6,250 26,436 36,306 ----------------------------- ----------------------------- Total expenses 63,820 66,230 125,905 212,790 ----------------------------- ----------------------------- Net income (loss) $ (16,952 ) $ 53,179 $ (22,226 ) $ 10,261 ============================= ============================= Partners' share of net income (loss): Limited Partners - 99% $ (16,782 ) $ 52,467 $ (22,004 ) $ 10,158 General Partner - 1% (170 ) 532 (222 ) 103 ----------------------------- ---------------------------- Total $ (16,952 ) $ 53,179 $ (22,226 ) $ 10,261 ============================= ============================= Net income (loss) per Limited Partnership Unit (9,529 units) $ (1.76 ) $ 5.52 $ (2.31 ) $ 1.07 ============================= ============================= Cash distributions $ 48,245 $ 79,868 $ 96,491 $ 164,371 ============================= ============================= Cash distributions per Limited Partnership Unit $ 5.01 $ 8.30 $ 10.02 $ 17.08 ============================= ============================= Special distributions $ 100,000 $ 200,000 $ 100,000 $ 400,000 ============================= ============================= Special distributions per Limited Partnership Unit $ 10.39 $ 20.78 $ 10.39 $ 41.56 ============================= ============================= Total distributions per Limited Partnership Unit $ 15.40 $ 29.08 $ 20.41 $ 58.64 ============================= ============================= 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 period from December 31, 1994 to June 30, 1996 Limited General Partners Partners Total ------------------------------------------------------ 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 Net loss (22,004 ) (222 ) (22,226 ) Cash distributions (194,526 ) (1,965 ) (196,491 ) ------------------------------------------------------ Partners' capital (deficit) at June 30, 1996 $ 386,979 $ (38,340 ) $ 348,639 ====================================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS For the six months ended June 30, 1996 1995 -------------------------------- Operating activities: Net (loss) income $ (22,226 ) $ 10,261 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain on disposition of equipment (10,090 ) (52,339 ) Depreciation 46,539 61,460 Changes in operating assets and liabilities Accounts receivable, net 4,808 70,084 Due to/from affiliate 9,624 (5,895 ) Prepaid insurance and other assets 15,126 11,000 Accounts payable and other liabilities (4,986 ) (4,927 ) -------------------------------- Cash provided by operating activities 38,795 89,644 -------------------------------- Investing activities: Proceeds form disposition of equipment 22,359 338,662 -------------------------------- Cash provided by investing activities 22,359 338,662 -------------------------------- Cash flows used in financing activities: Cash distributions paid to General Partner (194,526 ) (558,727 ) Cash distributions paid to Limited Partners (1,965 ) (5,644 ) -------------------------------- Cash used in financing activities (196,491 ) (564,371 ) Cash and cash equivalents: Net decrease in cash and cash equivalents (135,337 ) (136,065 ) Cash and cash equivalents at beginning of period 191,840 524,782 -------------------------------- Cash and cash equivalents at end of period $ 56,503 $ 388,717 ================================ See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting only of normal recurring accruals, to present fairly the Partnership's financial position as of June 30, 1996, and the statements of operations for the three and six months ended June 30, 1996 and 1995, the statements of changes in partners' capital for the period from December 31, 1994 to June 30, 1996, and the statements of cash flows for the six months ended June 30, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, on file at the Securities and Exchange Commission. 2. Equipment Equipment held for operating leases is stated at cost. The components of equipment are as follows: June 30, December 31, 1996 1995 ------------------------------------ Marine containers $ 288,316 $ 330,886 Trailers 1,355,440 1,385,773 ------------------------------------ 1,643,756 1,716,659 Less accumulated depreciation (1,391,621 ) (1,405,716 ) ------------------------------------ Net equipment $ 252,135 $ 310,943 ==================================== All equipment owned by the Partnership was either on lease or operating in PLM-affiliated short-term rental facilities as of June 30, 1996. All of the equipment was either on lease or operating in PLM affiliated short-term rental facilities as of December 31, 1995. During the six months ended June 30, 1996, the Partnership sold or disposed of 22 marine containers and one trailer with an aggregate net book value of $12,269 for proceeds of $22,359. During the six months ended June 30, 1995, the Partnership sold or disposed of 30 trailers and 27 marine containers with an aggregate net book value of $286,323 for proceeds of $338,662. 3. Liquidation and special distributions During the first quarter of 1996, the Partnership completed its 10th year of operations. As originally anticipated by the General Partner, the Partnership will be liquidated in an orderly manner in its 11th and 12th years of operation. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodicially declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner PLM TRANSPORTATION EQUIPMENT PARTNERS IXD 1986 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 3. Liquidation and special distributions (continued) estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. During the six months ended June 30, 1996 and June 30, 1995, the General Partner paid special distributions of $10.39 and $41.56, respectively, per Limited Partnership Unit which were the result of proceeds from equipment liquidations. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of equipment destructions, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. 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, 1996 and 1995 TEP IXA (A) Revenues Total revenues of $153,264 for the quarter ended June 30, 1996, decreased from $658,947 for the same period in 1995, due primarily to lower gain on disposition on equipment, lower lease revenues, and lower interest and other income in the second quarter of 1996, compared to the same period in 1995. (1) Lease revenue decreased to $109,072 in the second quarter 1996, from $120,131 in the same period of 1995. The following table lists lease revenues earned by equipment type: For the three months ended June 30, 1996 1995 ------------------------------- Trailers $ 59,778 $ 71,754 Rail equipment 25,950 25,950 Marine containers 23,344 22,427 ------------------------------ $ 109,072 $ 120,131 ============================== The decline was due primarily to the following: (a) Trailer revenue decreased $11,976 due primarily to a decline in utilization in the short-term rental facilities in 1996, compared to 1995 levels. (2) For the quarter ended June 30, 1996, the Partnership realized a total gain of $42,312 on the disposition of nine marine containers and one trailer, compared to the same period in 1995, where the Partnership realized a gain of $535,795 on the sale or disposition of three marine containers and one aircraft which was structed as a sales-type lease. (B) Expenses Total expenses of $125,103 for the quarter ended June 30, 1996, decreased from $196,000 for the same period in 1995. The decrease in 1996 expenses was attributable to decreases in depreciation expense, general and administrative expenses, and repairs and maintenance. (1) Direct operating expenses (defined as repairs and maintenance) decreased to $13,905 in 1996, from $24,308 in 1995, due primarily to a decrease of aircraft repairs and maintenance due to the sale of the Partnership's commuter aircraft during the second quarter of 1995. (2) Indirect operating expenses (defined as depreciation expense, management fees, and general and administrative expenses) decreased to $111,198 in the second quarter 1996, from $171,692 in the same period in 1995. This change resulted primarily from: (a) a decrease in depreciation expense of $47,492 from 1995 levels reflecting asset sales or dispositions during 1996 and 1995; (C) Net Income The Partnership's net income of $28,161 in the second quarter 1996, decreased from $462,847 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the second quarter 1996, is not necessarily indicative of future periods. In the second quarter 1996, the Partnership distributed $166,534 to the Limited Partners, or approximately $6.86 per unit which included a special distribution of $4.08 per unit. TEP IXB (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the second quarter of 1996 when compared to the same quarter of 1995. The following table presents lease revenues less direct expenses by owned equipment type: For the three months ended June 30, 1996 1995 ------------------------------ Trailers $ 29,549 $ 27,604 Railcar equipment 20,577 21,568 Marine containers 5,857 6,101 Trailers: Trailer lease revenues and direct expenses were $42,334 and $12,785, respectively, for the three months ended June 30, 1996, compared to $38,324 and $10,720, respectively during the same quarter of 1995. The number of trailers was decreased from the second quarter of 1995 to the second quarter of 1996, however, over the past twelve months the number of trailers in the PLM affiliated short-term rental yards has increased due to term leases which expired. These trailers are now earning a higher utilization rate while in the rental yard compared to the fixed term lease; Railcar equipment: Railcar lease revenues and direct expenses were $21,870 and $1,293, respectively, for the three months ended June 30, 1996, compared to $21,870 and $302, respectively during the same quarter of 1995. The decrease of net contribution was due to needed running repairs in the second quarter of 1996 which was not required in the second quarter in 1995; Marine containers: Marine container lease revenues and direct expenses were $5,905 and $48, respectively, for the three months ended June 30, 1996, compared to $6,299 and $198, respectively during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining due to sales and dispositions. The result of this declining fleet has resulted in a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment Total indirect expenses of $74,123 for the three months ended June 30, 1996, decreased from $80,376 for the same period of 1995. The variance is explained as follows: (a) a decrease in depreciation expense of $9,851 from 1995 levels reflecting assets sales or dispositions during 1996 and 1995; (b) a $7,189 decrease in general and administrative expenses from 1995 levels was due to decreased administrative costs associated with the short-term rental facilities due to decreased volume of trailers operating in these facilities; (c) an increase of $10,785 in bad debt expense was due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees. (C) For the quarter ended June 30, 1996, the Partnership realized a gain of $17,915 on the sale or disposition of four trailers, compared to the same period in 1995, where the Partnership realized a gain of $55,010 on the sale or disposal of 13 trailers and two marine containers. (D) Interest and other income Interest and other income decreased $1,438 during the second quarter of 1996 due primarily to lower cash balances available for investments when compared to the same period of 1995. (E) Equity in net income (loss) of the unconsolidated special purpose entity Equity in net income (loss) of unconsolidated special purpose entity represents the net income (loss) generated from jointly-owned assets accounted for under the equity method (see Note 4 to financial statements). For the three months ended June 30, 1996 1995 -------------------------------- Aircraft $ (18,679 ) $ 27,474 Aircraft: the net loss of $18,679 compared to net income of $27,474 due to the offlease status of the aircraft in the second quarter of 1996. (F) Net Loss The Partnership incurred a net loss of $15,261 in the second quarter 1996, compared to a net income of $62,462 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the second quarter 1996, is not necessarily indicative of future periods. In the second quarter 1996, the Partnership distributed $100,733 to the Limited Partners, or approximately $5.77 per unit. TEP IXC (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the second quarter of 1996 when compared to the same quarter of 1995. The following table presents lease revenues less direct expenses by owned equipment type: For the three months ended June 30, 1996 1995 -------------------------------- Trailers $ 41,495 $ 101,730 Railcar equipment 14,705 10,778 Marine containers 1,572 1,712 Trailers: Trailer lease revenues and direct expenses were $72,293 and $30,798, respectively, for the three months ended June 30, 1996, compared to $143,501 and $41,771, respectively during the same quarter of 1995. The decrease of net contribution was due to lower utilization of trailers in the short-term rental facilities and the disposition of trailers; Railcar equipment: Railcar lease revenues and direct expenses were $7,800 and a credit of $6,905, respectively, for the three months ended June 30, 1996, compared to $9,175 and a credit of $1,603, respectively, during the same quarter of 1995. The increase of net contribution was due to lower repairs and maintance expenses in the second quarter of 1996 as compared to the second quarter of 1995, offset by decrease in lease revenue in the second quarter of 1996 than compared to the second quarter of 1995 due to the sale of five twin stack railcars in the second quarter of 1995 which reduced the second quarter 1996 results; Marine containers: Marine container lease revenues and direct expenses were $1,590 and $18 respectively, for the three months ended June 30, 1996, compared to $1,772 and $60, respectively during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining due to sales and dispositions. The result of this declining fleet has resulted in a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment Total indirect expenses of $122,718 for the three months ended June 30, 1996, increased from $113,525 for the same period of 1995. The variance is explained as follows: (a) an increase of $10,377 in bad debt expense was due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (b) an increase in general and administrative expenses of $2,723 due to higher indirect costs associated with the short-term rental facilities in the second quarter of 1996 as compared to the second quarter of 1995; (c) a decrease in depreciation expense of $3,928 from 1995 levels reflecting asset sales during 1995 and 1996. (C) For the quarter ended June 30, 1996, the Partnership realized a gain of $16,513 on the disposal of seven trailers compared to the same period in 1995, where the Partnership realized a loss of $1,628 on the sale of three trailers. (D) Interest and other income Interest and other income decreased $2,677 during the second quarter of 1996 due primarily to lower cash balances available for investments when compared to the same period of 1995. (E) Equity in net income of the unconsolidated special purpose entity Equity in net income of unconsolidated special purpose entity represents the net income generated from jointly-owned assets accounted for under the equity method (see Note 4 to financial statements). For the three months ended June 30, 1996 1995 ------------------------------ Aircraft $ 124,093 $ 4,177 Aircraft: The aircraft was sold in April of 1996 which incurred a gain of $134,192. (F) Net Income The Partnership's net income of $80,418 in the second quarter 1996, increased from $10,679 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the second quarter 1996, is not necessarily indicative of future periods. In the second quarter 1996, the Partnership distributed $97,786 to the Limited Partners, or approximately $5.78 per unit. TEP IXD (A) Revenues Total revenues of $46,868 for the quarter ended June 30, 1996, decreased from $119,409 for the same period in 1995, due primarily to lower lease revenues, a lower gain on sale of equipment, and lower interest and other income in the second quarter of 1996 as compared to the same period in 1995. (1) Lease revenues decreased to $34,205 in the second quarter 1996, from $75,733 in the same period in 1995. The following table lists lease revenue earned by equipment type: For the six months ended June 30, 1996 1995 ------------------------------ Trailers $ 24,671 $ 57,241 Marine containers 9,534 18,492 ------------------------------ $ 34,205 $ 75,733 ============================== The decline was due primarily to the following: (a) Trailer revenue decreased $32,570 due primarily to lower utilization in short-term rental facilities operated by an affiliate of the General Partner; (b) Marine container revenue decreased $8,958 primarily due to the disposal of equipment. (2) For the quarter ended June 30, 1996, the Partnership realized a gain of $11,087 on the disposal of 10 marine containers and one trailer, where the Partnership realized a gain of $36,886 on the sale or disposal of six trailers and 19 marine containers in the quarter ended June 30, 1995. (B) Expenses Total expenses of $63,820 for the quarter ended June 30, 1996, decreased from $66,230 for the same period in 1995. The decrease in 1996 expenses was attributable primarily to decreases in repair and maintenance, depreciation expense, offset by an increase in bad debt expense and general and administative expense. (1) Direct operating expenses (defined as repairs and maintenance) decreased to $5,952 in the second quarter 1996, from $10,540 in the same period in 1995. This change resulted primarily from the refurbishment of six trailers in the second quarter of 1995 prior to being sold. No similar costs were incurred in the second quarter of 1996. (2) Indirect operating expenses (defined as depreciation expense, management fees, bad debt expense, and general and administrative expenses) decreased to $57,868 in the second quarter 1996, from $55,690 in the same period in 1995. This change resulted primarily from: (a) a decrease in depreciation expense of $2,531 from 1995 levels, reflecting asset sales or dispositions during 1996; (b) an increase of $2,367 in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (c) an increase in administrative expense of $2,343 due to an increase in indirect costs associated with the short-term rental facilities as compared to the second quarter of 1995. (C) Net Income (loss) The Partnership incurred a net loss of $16,952 in the second quarter 1996, compared to a net income of $53,179 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the second quarter 1996, is not necessarily indicative of future periods. In the second quarter 1996, the Partnership distributed $146,763 to the Limited Partners, or approximately $15.40 per unit which included a special distribution of $10.39 per unit. Comparison of the Partnership's Operating Results for the Six Months Ended June 30, 1996 and 1995 TEP IXA (A) Revenues Total revenues of $278,035 for the six months ended June 30, 1996, decreased from $792,659 for the same period in 1995, due primarily to lower gain on the sale of assets, and lower lease revenue, offset by an increase in other income. (1) Lease revenue decreased to $220,209 in the six months ended June 30, 1996, from $240,224 in the same period of 1995. The following table lists lease revenues earned by equipment type: For the six months ended June 30, 1996 1995 ------------------------------ Trailers $ 115,096 $ 142,609 Rail equipment 51,900 51,900 Marine containers 53,213 45,715 ------------------------------ $ 220,209 $ 240,224 ============================== The decline was due primarily to the following: (a) Trailer revenue decreased $27,513 due to lower utilization of trailers in the short-term rental facilities in 1996, compared to 1995 levels; (b) Marine container revenue increased $7,498 due to higher utilization rate on certain containers in the first six months of 1996 when compared to the same period of 1995 , offset by the disposal of equipment; (2) For the six months ended June 30, 1996, the Partnership realized a gain of $44,981 on the sale or disposition of one trailer and 10 marine containers, compared to the same period in 1995, where the Partnership realized a gain of $545,340 on the sale or disposition of one trailer, five marine containers, and one commuter aircraft which was under the sales-type lease. (B) Expenses Total expenses of $250,945 for the six months ended June 30, 1996, decreased from $437,211 for the same period in 1995. The decrease in 1996 expenses was attributable to decreases in depreciation expense, repairs and maintenance, and all general and administrative expenses. (1) Direct operating expenses (defined as repairs and maintenance) decreased to $25,899 in 1996, from $105,819 in 1995. This decrease was due primarily to decrease in repairs and maintenance for trailers in the short-term rental facilities. In the first six months of 1995, repairs were made on former term lease trailers prior to transitioning into the short-term rental facilities. Additionally, the Partnership had a decrease in aircraft repairs and maintenance in 1996 due to the sale of the Partnership's commuter aircraft during the second quarter of 1995. (2) Indirect operating expenses (defined as depreciation expense, management fees, and all general and administrative expenses) decreased to $225,046 in the six months ended June 30, 1996, from $331,392 in the same period in 1995. This change resulted primarily from: (a) a decrease in depreciation expense of $96,118 from 1995 levels reflecting assets sales or dispositions during 1996 and 1995; (b) a decrease of $11,076 in general and administrative expenses from 1995 levels due to lower administrative costs associated with the Partnership. (C) Net Income The Partnership's net income decreased to $27,090 in the six months ended June 30, 1996, from $355,448 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the six months ended June 30, 1996, is not necessarily indicative of future periods. In the six months ended June 30, 1996, the Partnership distributed $1,230,254 to the Limited Partners, or approximately $50.06 per unit which included a special distribution of $44.84 per unit. TEP IXB (A) Owned equipment operations Revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expense) on owned equipment decreased in the six months ended June 30, 1996, when compared to the same period of 1995. The following table presents revenues less direct expenses by owned equipment type: For the six months ended June 30, 1996 1995 ------------------------------ Trailers $ 68,468 $ 86,341 Railcar equipment 42,156 33,885 Marine containers 12,692 14,331 Trailers: Trailer revenues and direct expenses were $91,055 and $22,587, respectively, for the six months ended June 30, 1996, compared to $110,827 and $24,486, respectively during the same period of 1995. The decrease of net contribution was due to lower utilization of trailers in the short-term rental facilities and the disposition of trailers; Railcar equipment: Railcar revenues and direct expenses were $43,740 and $1,584, respectively, for the six months ended June 30, 1996, compared to $37,897 and $4,012, respectively, during the same period of 1995. The increase in net contribution was due to a credit of $5,000 was given to the former lessee for the off-lease sidelift which reduced the revenue for the six months ended June 30, 1995, and running repairs required on certain railcars in the fleet in the first six months of 1995, which did not occur in 1996; Marine containers: Marine container revenues and direct expenses were $12,806 and $114, respectively, for the six months ended June 30, 1996, compared to $14,735 and $404, respectively during the same period of 1995. The number of marine containers owned by the Partnership has been declining due to sales and dispositions. The result of this declining fleet is a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment Total indirect expenses of $152,801 for the six months ended June 30, 1996, decreased from $211,173 for the same period of 1995. The variance is explained as follows: (a) a decrease of $23,316 in general and administrative expenses from 1995 levels. This reflects the decreased administrative costs associated with the short-term rental facilities, and lower data processing expense; (b) a decrease in depreciation expense of $21,756 from 1995 levels reflecting assets sales or dispositions during 1996 and 1995; (c) a decrease of $13,300 in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees. (C) For the quarter ended June 30, 1996, the Partnership realized a gain of $29,766 on the disposal of two marine containers and seven trailers compared to the same period in 1995, where the Partnership realized a gain of $72,554 on the sale of 14 trailers. (D) Interest and other income Interest and other income decreased $3,634 during the first six months of 1996 due primarily to lower cash balances available for investments when compared to the same period of 1995. (E) Equity in net income (loss) of unconsolidated special purpose entity Equity in net income (loss) of unconsolidated special purpose entity represents the net income (loss) generated from jointly-owned asset accounted for under the equity method (see Note 4 to financial statements). For the three months ended June 30, 1996 1995 ------------------------------- Aircraft $ (39,106 ) $ 53,793 Aircraft: The decrease of net contribution was due to the offlease status of the aircraft. (C) Net Income (loss) The Partnership incurred a net loss of $31,087 in the six months ended June 30, 1996, compared to a net income of $61,103 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the six months ended June 30, 1996, is not necessarily indicative of future periods. In the six months ended June 30, 1996, the Partnership distributed $201,467 to the Limited Partners, or approximately $11.54 per unit. TEP IXC (A) Owned equipment operations Revenues less direct expenses (defined as repairs and maintenance and asset specific insurance expenses) on owned equipment decreased during the first six months of 1996 when compared to the same period of 1995. The following table presents revenues less direct expenses by owned equipment type: For the six months ended June 30, 1996 1995 --------------------------------- Trailers $ 113,420 $ 211,452 Railcar equipment 13,305 20,500 Marine containers 3,216 4,798 Trailers: Trailer revenues and direct expenses were $169,463 and $56,043, respectively, for the three months ended June 30, 1996, compared to $296,829 and $85,377, respectively during the same quarter of 1995. The decrease of net contribution was due to lower utilization of trailers in the short-term rental facilities and the disposition of trailers; Railcar equipment: Railcar revenues and direct expenses were $15,600 and $2,295, respectively, for the three months ended June 30, 1996, compared to $26,110 and $5,610, respectively during the same quarter of 1995. The decrease of net contribution was due to the sale of equipment; Marine containers: Marine container revenues and direct expenses were $3,258 and $42, respectively, for the three months ended June 30, 1996, compared to $4,920 and $122 respectively during the same quarter of 1995. The number of marine containers owned by the Partnership has been declining due to sales and dispositions. The result of this declining fleet is a decrease in marine container net contribution. (B) Indirect expenses related to owned equipment Total indirect expenses of $225,109 for the six months ended June 30, 1996, decreased from $244,368 for the same period of 1995. The variance is explained as follows: (a) a decrease in depreciation expense of $12,673 from 1995 levels reflecting asset sales during 1996; (b) a decrease in general and administrative expenses of $7,521 due to lower administrative costs associated with the Partnership; (c) a decrease of $2,193 in managment fee due to lower levels of operating cash flow during the comparable periods. Monthly management fees are calculated as the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Capital Contributions as defined in the Limited Partnership Agreement; (d) an increase of $3,128 in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees. (C) For the six months ended June 30, 1996, the Partnership realized a gain of $18,201 on the sale of seven trailers and one marine container, compared to the same period in 1995, where the Partnership realized a gain of $234,444 on the sale of three trailers and five twin stack railcars. (D) Interest and other income decreased $6,303 due to a decrease in cash available for short-term investment. (E) Equity in net income of unconsolidated special purpose entity Equity in net income of unconsolidated special purpose entity represents the net income generated from jointly-owned asset accounted for under the equity method (see Note 4 to financial statements). For the six months ended June 30, 1996 1995 ------------------------------- Aircraft $ 111,543 $ 8,095 Aircraft: The increase of net contribution was due to the gain of $134,192 realized on the sale of the aircraft in April of 1996. (F) Net Income The Partnership's net income decreased to $42,249 in the six months ended June 30, 1996, from $248,897 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the six months ended June 30, 1996, is not necessarily indicative of future periods. In the six months ended June 30, 1996, the Partnership distributed $195,572 to the Limited Partners, or approximately $11.56 per unit. TEP IXD (A) Revenues Total revenues of $103,679 for the six months ended June 30, 1996 decreased from $223,051 for the same period in 1995 due primarily to lower lease revenues, a lower gain on sale of equipment, and lower interest and other income in 1996 compared to 1995. (1) Lease revenues decreased to $89,447 in the six months ended June 30, 1996, from $155,271 in the same period in 1995. The following table lists lease revenue earned by equipment type: For the six months ended June 30, 1996 1995 ------------------------------ Trailers $ 60,544 $ 114,451 Marine containers 28,903 40,820 ------------------------------ $ 89,447 $ 155,271 ============================== The decrease was due to the following: (a) Trailer revenue decreased $53,907 due primarily to lower utilization in short-term rental facilities operated by an affiliate of the General Partner; (b) Marine container revenue decreased $11,917 primarily due to the disposal of equipment. (2) For the six months ended June 30, 1996, the Partnership realized a gain of $10,090 on the sale or disposal of one trailer and 22 marine containers, compared to the same period in 1995, where the Partnership realized a gain $52,339 on the sale or disposal of 30 trailers and 27 marine containers. (3) Interest and other income decreased $11,299 due to a decrease in cash available for short-term investment. (B) Expenses Total expenses of $125,905 for the six months ended June 30, 1996, increased from $212,790 for the same period in 1995. The increase in 1996 expenses was attributable primarily to decreases in bad debt expense, repair and maintenance, depreciation, and general and administrative expenses. (1) Direct operating expenses (defined as repairs and maintenance) decreased to $17,177 in the six months ended June 30, 1996, from $32,419 in the same period in 1995. This change resulted primarily from the disposal of trailers. (2) Indirect operating expenses (defined as depreciation expense, management fees, bad debt expense, and general and administrative expenses) decreased to $108,728 in the six months ended June 30, 1996, from $180,371 in the same period in 1995. This change resulted primarily from: (a) a decrease of $43,077 in bad debt expense due to the General Partner's evaluation of the collectibility of trade receivables from trailer rental yard lessees; (b) a decrease in depreciation expense of $14,921 from 1995 levels, reflecting asset sales or dispositions during 1996; (c) a decrease of $13,217 in general and administrative expenses from 1995 levels due to lower administrative costs associated with the Partnership. (C) Net Income (loss) The Partnership incurred a loss of $22,226 in the six months ended June 30, 1996, compared to a net income of $10,261 in the same period in 1995. The Partnership's ability to operate or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors, and the Partnership's performance in the six months ended June 30, 1996, is not necessarily indicative of future periods. In the six months ended June 30, 1996, the Partnership distributed $194,526 to the Limited Partners, or approximately $20.41 per unit which included a special distribution of $10.39 per unit. (II) Asset Sales Equipment sales and dispositions result from General Partner decisions on liquidations, 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. During the six months ended June 30, 1996, 10 marine containers and one trailer owned by TEP IXA was sold for a total of $64,997. In addition, the lessee under the sales-type lease of the Metro III commuter aircraft exercised its option to buy the aircraft and the Partnership received proceeds totaling $1 million. Seven trailers and two marine containers owned by TEP IXB were sold for a total of $73,594; seven trailers and one marine container owned by TEP IXC were sold for $53,308; and 22 marine containers and one trailer owned by TEP IXD were sold or disposed of for $22,359. As discussed in note 3, the General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. (III) Market Values In 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 six months ended June 30, 1996. As of June 30, 1996, the General Partner estimated the current fair market value of each Partnerships' equipment portfolio to be approximately : $1.6 million, $1.4 million, $1.5 million and $0.90 million for TEP IXA, TEP IXB, TEP IXC and TEP IXD, respectively. (IV) Trends Inflation and changing prices did not materially impact the Partnerships' revenues or expenses during the reported periods. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM TRANSPORTATION EQUIPMENT PARTNERS IXB 1986 INCOME FUND By: PLM Financial Services, Inc. General Partner Date: August 9, 1996 By: /s/ David J. Davis ------------------- David J. Davis Vice President and Corporate Controller