UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal quarter ended September 30, 2003
[ ] 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 0-21806
_______________________
PLM EQUIPMENT GROWTH FUND VI
(Exact name of registrant as specified in its charter)
California | 94-3135515 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
235 3rdStreet South, Suite 200 | ||
St. Petersburg, FL | 33701 | |
(Address of principal | (Zip code) | |
executive offices) |
Registrant's telephone number, including area code: (727) 803-1800
_______________________
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. YesXNo ____
PLM EQUIPMENT GROWTH FUND VI |
(A Limited Partnership) |
CONDENSED BALANCE SHEETS |
(in thousands of dollars, except unit amounts) |
(unaudited)
September 30, | December 31, | |||||||||||
2003 | 2002 | |||||||||||
Assets | ||||||||||||
Equipment held for operating leases | $66,256 | $62,686 | ||||||||||
Less accumulated depreciation | (47,720) | (44,382) | ||||||||||
Net equipment | 18,536 | 18,304 | ||||||||||
Cash and cash equivalents | 6,766 | 8,286 | ||||||||||
Restricted cash | 410 | 410 | ||||||||||
Accounts receivable, less allowance for doubtful accounts | ||||||||||||
of $419 in 2003 and $425 in 2002 | 997 | 944 | ||||||||||
Investments in unconsolidated special-purpose entities | 10,389 | 12,625 | ||||||||||
Deferred charges, net of accumulated amortization of | ||||||||||||
$472 in 2003 and $368 in 2002 | 278 | 342 | ||||||||||
Prepaid expenses and other assets | 162 | 273 | ||||||||||
Total assets | $37,538 | $41,184 | ||||||||||
Liabilities and partners’ capital | |||||||
Liabilities: | |||||||
Accounts payable and accrued expenses | $ | 225 | $ | 449 | |||
Due to affiliates | 1,713 | 1,391 | |||||
Lessee deposits | 21 | 18 | |||||
Notes payable | 9,750 | 12,750 | |||||
Total liabilities | 11,709 | 14,608 | |||||
Commitments and contingencies | |||||||
Partners’ capital: | |||||||
Limited partners (7,730,965 limited partnership units) | 25,829 | 26,576 | |||||
General Partner | -- | -- | |||||
Total partners’ capital | 25,829 | 26,576 | |||||
Total liabilities and partners’ capital | $ | 37,538 | $ | 41,184 | |||
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND VI |
(A Limited Partnership) |
CONDENSED STATEMENTS OF OPERATIONS |
(in thousands of dollars, except weighted-average unit amounts) |
(unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||
Lease revenue | $ | 2,262 | $ | 2,350 | $ | 6,384 | $ | 7,321 | ||||||||||||||||||||||||||
Interest and other income | 12 | 97 | 53 | 137 | ||||||||||||||||||||||||||||||
Gain on disposition of equipment | 37 | 10 | 108 | 123 | ||||||||||||||||||||||||||||||
Loss on disposition of equipment | (4 | ) | (2 | ) | (26 | ) | -- | |||||||||||||||||||||||||||
Total revenues | 2,307 | 2,455 | 6,519 | 7,581 | ||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 1,231 | 977 | 3,620 | 3,014 | ||||||||||||||||||||||||||||||
Repairs and maintenance | 321 | 315 | 827 | 909 | ||||||||||||||||||||||||||||||
Equipment operating expense | 9 | 22 | 20 | 61 | ||||||||||||||||||||||||||||||
Insurance expense | 67 | 38 | 192 | 112 | ||||||||||||||||||||||||||||||
Management fees to affiliate | 90 | 131 | 274 | 407 | ||||||||||||||||||||||||||||||
Interest expense | 158 | 194 | 472 | 654 | ||||||||||||||||||||||||||||||
General and administrative expenses | ||||||||||||||||||||||||||||||||||
to affiliates | 95 | 23 | 165 | 153 | ||||||||||||||||||||||||||||||
Other general and administrative expenses | 263 | 376 | 904 | 1,810 | ||||||||||||||||||||||||||||||
Loss on impairment of equipment | 201 | -- | 278 | -- | ||||||||||||||||||||||||||||||
(Recovery of) provision for bad debts | (14 | ) | 2 | 19 | 31 | |||||||||||||||||||||||||||||
Total expenses | 2,421 | 2,078 | 6,771 | 7,151 | ||||||||||||||||||||||||||||||
Equity in net loss of unconsolidated | ||||||||||||||||||||||||||||||||||
special-purpose entities | (26 | ) | (290 | ) | (495 | ) | (600 | ) | ||||||||||||||||||||||||||
Net (loss) income | $ | (140 | ) | $ | 87 | $ | (747 | ) | $ | (170 | ) | |||||||||||||||||||||||
Partners' share of net (loss) income | ||||||||||||||||||||||||||||||||||
Limited partners | $ | (140 | ) | $ | 87 | $ | (747 | ) | $ | (170 | ) | |||||||||||||||||||||||
General Partner | -- | -- | -- | -- | ||||||||||||||||||||||||||||||
Total | $ | (140 | ) | $ | 87 | $ | (747 | ) | $ | (170 | ) | |||||||||||||||||||||||
Limited partners' net (loss) income per | ||||||||||||||||||||||||||||||||||
weighted-average limited partnership unit | $ | (0.02 | ) | $ | 0.01 | $ | (0.10 | ) | $ | (0.02 | ) | |||||||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND VI |
(A Limited Partnership) |
CONDENSED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL |
For the period from December 31, 2002 to September 30, 2003 |
(in thousands of dollars) |
(unaudited)
Limited Partners | General Partner | Total | ||||||||||||||||||||||||||
Partners’ capital as of December 31, 2002 | $ | 26,576 | $ | -- | $ | 26,576 | ||||||||||||||||||||||
Net loss | (747 | ) | -- | (747 | ) | |||||||||||||||||||||||
Partners’ capital as of September 30, 2003 | $ | 25,829 | $ | -- | $ | 25,829 | ||||||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND VI | ||||||||||||||||||||
(A Limited Partnership) | ||||||||||||||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
For the Nine Months Ended September 30, | ||||||||||||||||||||
2003 | 2002 | |||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net loss | $ | (747 | ) | $ | (170 | ) | ||||||||||||||
Adjustments to reconcile net loss to net cash | ||||||||||||||||||||
provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation and amortization | 3,620 | 3,014 | ||||||||||||||||||
Amortization of debt placement fees | 94 | 113 | ||||||||||||||||||
Net gain on disposition of equipment | (82 | ) | (123 | ) | ||||||||||||||||
Loss on impairment of equipment | 278 | -- | ||||||||||||||||||
Provision for bad debts | 19 | 31 | ||||||||||||||||||
Equity in net loss from unconsolidated special-purpose | ||||||||||||||||||||
entities | 495 | 600 | ||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable, net | (72 | ) | 522 | |||||||||||||||||
Prepaid expenses and other assets | 111 | (30 | ) | |||||||||||||||||
Accounts payable and accrued expenses | (224 | ) | 119 | |||||||||||||||||
Due to affiliates | 322 | 364 | ||||||||||||||||||
Lessee deposits | 3 | (24 | ) | |||||||||||||||||
Net cash provided by operating activities | 3,817 | 4,416 | ||||||||||||||||||
Investing activities | ||||||||||||||||||||
Payments for the purchase of equipment and capitalized repairs | (4,100 | ) | (2 | ) | ||||||||||||||||
Payment of acquisition fees to affiliate | (184 | ) | -- | |||||||||||||||||
Payment of lease negotiation fees to affiliate | (41 | ) | -- | |||||||||||||||||
Distribution from unconsolidated special-purpose entities | 1,741 | 1,567 | ||||||||||||||||||
Proceeds from disposition of equipment | 247 | 347 | ||||||||||||||||||
Net cash (used in) provided by investing activities | (2,337 | ) | 1,912 | |||||||||||||||||
Financing activities | ||||||||||||||||||||
Payment of notes payable | (3,000 | ) | (21,500 | ) | ||||||||||||||||
Payment of debt placement fees | -- | (42 | ) | |||||||||||||||||
Proceeds from notes payable | -- | 15,000 | ||||||||||||||||||
Canceled purchase of limited partnership units | -- | 174 | ||||||||||||||||||
Refund from limited partnership units not eligible for purchase | -- | 11 | ||||||||||||||||||
Net cash used in financing activities | (3,000) | (6,357) | ||||||||||||||||||
Net decrease in cash and cash equivalents | (1,520 | ) | (29 | ) | ||||||||||||||||
Cash and cash equivalents at beginning of period | 8,286 | 8,051 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 6,766 | $ | 8,022 | ||||||||||||||||
Supplemental information | ||||||||||||||||||||
Non cash cancellation of purchase of limited partnership units | $ | -- | $ | 174 | ||||||||||||||||
Interest paid | $ | 529 | $ | 441 | ||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the unaudited condensed financial position of PLM Equipment Growth Fund VI (the Partnership) as of September 30, 2003 and December 31, 2002, the unaudited condensed statements of operations for the three and nine months ended September 30, 2003 and 2002, the unaudited condensed statements of changes in partners’ capital for the period from December 31, 2002 to September 30, 2003, and the unaudited condensed statements of cash flows for the nine months ended September 30, 2003 and 2002. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted i n the United States of America have been condensed or omitted from the accompanying condensed 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, 2002, on file at the Securities and Exchange Commission.
2. Schedule of Partnership Phases
The Partnership is currently in its investment phase during which the Partnership uses cash generated from operations and proceeds from asset dispositions to purchase additional equipment. The General Partner believes these acquisitions may cause the Partnership to generate additional earnings and cash flow for the Partnership.
The Partnership may commit its cash flow, surplus cash and equipment disposition proceeds to purchase additional equipment, consistent with the objectives of the Partnership, until December 31, 2004. The Partnership will terminate on December 31, 2011, unless terminated earlier upon sale of all equipment and by certain other events.
3. Reclassifications
Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentations. These reclassifications did not have any effect on total assets, total liabilities, partners’ capital, or net (loss) income.
4. Transactions with General Partner and Affiliates
The balance due to affiliates as of September 30, 2003 and December 31, 2002, included $0.1 million due to PLM Financial Services, Inc. (FSI or the General Partner) and its affiliates for management fees and $1.6 million and $1.3 million, respectively, due to affiliated unconsolidated special-purpose entities (USPEs).
The Partnership’s proportional share of the affiliated expenses incurred by USPEs during 2003 and 2002 is listed in the following table (in thousands of dollars):
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||||
Management fees | $ | 30 | $ | 25 | $ | 151 | $ | 174 | |||||||||||
Data processing and administrative | |||||||||||||||||||
expenses | 4 | 2 | 11 | 51 |
These affiliate expenses reduced the Partnership's proportional share of the equity interest in the income of USPEs.
During the nine months ended September 30, 2003, the Partnership purchased railcars and paid FSI $0.2 million for acquisition fees and $41,000 for lease negotiation fees. No similar fees were paid during the same period of 2002.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
5. Equipment
Owned equipment held for operating leases is stated at cost. The components of owned equipment were as follows (in thousands of dollars):
September 30, | December 31, | ||||||||
2003 | 2002 | ||||||||
Marine containers | $23,662 | $24,223 | |||||||
Railcars | 21,158 | 17,027 | |||||||
Aircraft and components | 16,224 | 16,224 | |||||||
Trailers | 5,212 | 5,212 | |||||||
66,256 | 62,686 | ||||||||
Less accumulated depreciation | (47,720) | (44,382) | |||||||
Net equipment | $18,536 | $18,304 | |||||||
As of September 30, 2003, all owned equipment in the Partnership’s portfolio was on lease except for 170 railcars, a portfolio of aircraft components and 15 marine containers with an aggregate net book value of $1.3 million. As of December 31, 2002, all owned equipment in the Partnership's portfolio was on lease except for 15 marine containers and 183 railcars with an aggregate net book value of $0.9 million.
During the nine months ended September 30, 2003, the Partnership purchased railcars for $4.3 million including acquisition fees of $0.2 million.
During the nine months ended September 30, 2003, the Partnership disposed of marine containers and railcars, with an aggregate net book value of $0.2 million for proceeds of $0.2 million. During the nine months ended September 30, 2002, the Partnership disposed of marine containers and railcars, with an aggregate net book value of $0.2 million for proceeds of $0.3 million.
Equipment held for operating leases is stated at cost less any reductions to the carrying value as required byFinancial Accounting Standards Board(FASB) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". During the nine months ended September 30, 2003, the Partnership recorded an impairment of $0.2 million to owned aircraft components and $0.1 million to owned railcars.
During 2003, the Partnership marketed the aircraft components for re-lease or sale and this indicated to the General Partner that an impairment may exist. The General Partner determined the fair value of the aircraft components based on the valuation given by its independent third party aircraft equipment manager that considered, among other factors, expected income to be earned from the asset, condition of the aircraft components, estimated sales proceeds and holding costs excluding interest. Additionally, during 2003, the Partnership recorded an impairment of $0.1 million to 19 owned railcars with cracks in the seal weld. The General Partner determined that these railcars should be scrapped. This indicated that an impairment to these railcars may exist. The fair value of the railcars with this defe ct was determined by using industry expertise.
No reductions were required to the carrying value of the owned equipment during the nine months ended September 30, 2002.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
6. Investments in Unconsolidated Special-Purpose Entities
The Partnership owns equipment jointly with affiliated programs. These are single purpose entities that do not have any debt or other financial encumbrances. Ownership interest is based on the Partnership’s contribution towards the cost of the equipment in the USPEs. The Partnership’s proportional share of equity and income (loss) in each entity is not necessarily the same as its ownership interest. The primary reason for this difference has to do with certain fees such as management and acquisition and lease negotiation fees varying among the owners of the USPEs.
The tables below set forth 100% of the assets, liabilities, and equity of the entities in which the Partnership has an interest and the Partnership’s proportional share of equity in each entity as of September 30, 2003 and December 31, 2002 (in thousands of dollars):
Boeing | Aero | ||||||||
737-300 | California | Lion | |||||||
As of September 30, 2003 | Trust1 | Trust2 | Partnership3 | Total | |||||
Assets | ||||||||||||
Equipment less accumulated depreciation | $ | 9,485 | $ | -- | $ | 6,437 | ||||||
Receivables | -- | -- | 1,002 | |||||||||
Due from affiliate | 2,312 | 420 | -- | |||||||||
Finance lease receivable | -- | 1,917 | -- | |||||||||
Other assets | 1 | 71 | 1 | |||||||||
Total assets | $ | 11,798 | $ | 2,408 | $ | 7,440 | ||||||
Liabilities | ||||||||||||
Accounts payable | $ | 1 | $ | -- | $ | 259 | ||||||
Due to affiliates | 14 | 2 | 85 | |||||||||
Lessee deposits and reserve for repairs | 2,312 | 420 | 171 | |||||||||
Total liabilities | 2,327 | 422 | 515 | |||||||||
Equity | 9,471 | 1,986 | 6,925 | |||||||||
Total liabilities and equity | $ | 11,798 | $ | 2,408 | $ | 7,440 | ||||||
Partnership’s share of equity | $ | 5,959 | $ | 794 | $ | 3,636 | $ | 10,389 | ||||
Boeing | Aero | ||||||||
737-300 | California | Lion | |||||||
As of December 31, 2002 | Trust1 | Trust2 | Partnership3 | Total | |||||
Assets | ||||||||||||
Equipment less accumulated depreciation | $ | 12,355 | $ | -- | $ | 7,356 | ||||||
Receivables | -- | -- | 716 | |||||||||
Due from affiliate | 1,825 | 420 | -- | |||||||||
Finance lease receivable | -- | 2,425 | -- | |||||||||
Other assets | 3 | 137 | 10 | |||||||||
Total assets | $ | 14,183 | $ | 2,982 | $ | 8,082 | ||||||
Liabilities | ||||||||||||
Accounts payable | $ | -- | $ | 1 | $ | 548 | ||||||
Due to affiliates | 7 | 2 | 44 | |||||||||
Lessee deposits and reserve for repairs | 1,825 | 420 | 97 | |||||||||
Total liabilities | 1,832 | 423 | 689 | |||||||||
Equity | 12,351 | 2,559 | 7,393 | |||||||||
Total liabilities and equity | $ | 14,183 | $ | 2,982 | $ | 8,082 | ||||||
Partnership’s share of equity | $ | 7,733 | $ | 1,024 | $ | 3,868 | $ | 12,625 | ||||
The tables below set forth 100% of the revenues, direct and indirect expenses, loss on impairment of equipment and net income (loss) of the entities in which the Partnership has an interest, and the
1 The Partnership owns a 62% interest in the Boeing 737-300 Trust that owns a stage III commercial aircraft.
2 The Partnership owns a 40% interest in the Aero California Trust that owns two stage III commercial aircraft on a direct finance lease.
3 The Partnership owns a 53% interest in the Lion Partnership that owns a product tanker.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
6. Investments in Unconsolidated Special-Purpose Entities(continued)
Partnership‘s proportional share of income (loss) in each entity for the three and nine months ended September 30, 2003 and 2002 (in thousands of dollars):
Boeing | Aero | ||||||||
For the three months ended | 737-300 | California | Lion | ||||||
September 30, 2003 | Trust1 | Trust2 | Partnership3 | Total | |||||
Revenues | $ | 465 | $ | 86 | $ | 1,744 | |||||||
Less: Direct expenses | 4 | 4 | 1,383 | ||||||||||
Indirect expenses | 534 | 26 | 367 | ||||||||||
Net (loss) income | $ | (73) | $ | 56 | $ | (6) | |||||||
Partnership’s share of net (loss) income | $ | (55 | ) | $ | 22 | $ | 7 | $ | (26 | ) | |||
Boeing | Aero | ||||||||||
For the three months ended | 737-300 | California | Lion | ||||||||
September 30, 2002 | Trust1 | Trust2 | Partnership3 | Other | Total | ||||||
Revenues | $ | 465 | $ | 119 | $ | 1,013 | $ | -- | |||||||
Less: Direct expenses | 12 | 5 | 977 | (24 | ) | ||||||||||
Indirect expenses | 651 | 29 | 427 | -- | |||||||||||
Net (loss) income | $ | (198 | ) | $ | 85 | $ | (391 | ) | $ | 24 | |||||
Partnership’s share of net (loss) income | $ | (114 | ) | $ | 34 | $ | (216 | ) | $ | 6 | $ | (290 | ) | ||
Boeing | Aero | ||||||||
For the nine months ended | 737-300 | California | Lion | ||||||
September 30, 2003 | Trust1 | Trust2 | Partnership3 | Total | |||||
Revenues | $ | 1,395 | $ | 284 | $ | 5,700 | ||||||
Less: Direct expenses | 11 | 14 | 3,740 | |||||||||
Indirect expenses | 1,632 | 84 | 1,208 | |||||||||
Loss on impairment of equipment | 1,321 | -- | -- | |||||||||
Net (loss) income | $ | (1,569 | ) | $ | 186 | $ | 752 | |||||
Partnership’s share of net (loss) income | $ | (962 | ) | $ | 74 | $ | 393 | $ | (495 | ) | ||
Boeing | Aero | ||||||||||
For the nine months ended | 737-300 | California | Lion | ||||||||
September 30, 2002 | Trust1 | Trust2 | Partnership3 | Other | Total | ||||||
Revenues | $ | 1,395 | $ | 384 | $ | 4,009 | $ | -- | |||||||
Less: Direct expenses | 28 | 17 | 3,101 | (22 | ) | ||||||||||
Indirect expenses | 2,103 | 101 | 1,429 | -- | |||||||||||
Net (loss) income | $ | (736 | ) | $ | 266 | $ | (521 | ) | $ | 22 | |||||
Partnership’s share of net (loss) income | $ | (427 | ) | $ | 106 | $ | (285 | ) | $ | 6 | $ | (600 | ) | ||
In accordance to FASB No. 144, during 2003 the General Partner recorded an impairment of $1.3 million to a Boeing 727-300 commercial aircraft. Declining fair values of aircraft similar to the one owned by the USPE, indicated to the General Partner that an impairment to this aircraft may exist. The General Partner determined the fair value of the aircraft based on the valuation given by its independent third party aircraft equipment manager that considered, among other factors, expected income to be earned from the asset, condition of the aircraft, estimated sales proceeds and holding costs excluding interest. No reductions were required to the carrying value of the remaining jointly-owned equipment during the nine months ended September 30, 2002.
1 The Partnership owns a 62% interest in the Boeing 737-300 Trust that owns a stage III commercial aircraft.
2 The Partnership owns a 40% interest in the Aero California Trust that owns two stage III commercial aircraft on a direct finance lease.
3 The Partnership owns a 53% interest in the Lion Partnership that owns a product tanker.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
6. Investments in Unconsolidated Special-Purpose Entities(continued)
As of September 30, 2003 and December 31, 2002, all jointly-owned equipment in the Partnership’s USPE portfolio was on lease.
7. Operating Segments
The Partnership operates in five primary operating segments: marine vessel leasing, aircraft leasing, railcar leasing, trailer leasing and marine container leasing. Each equipment leasing segment primarily engages in short-term to mid-term operating leases to a variety of customers.
The following tables present a summary of the operating segments (in thousands of dollars):
Marine | Marine | ||||||||
For the three months ended | Vessel | Aircraft | Railcar | Trailer | Container | ||||
September 30, 2003 | Leasing | Leasing | Leasing | Leasing | Leasing | Other 1 | Total | ||
Revenues | ||||||||
Lease revenue | $-- | $518 | $855 | $174 | $715 | $-- | $2,262 | |
Interest income and other income | -- | -- | -- | -- | -- | 12 | 12 | |
Gain (loss) on disposition of equipment | -- | -- | (4) | -- | 37 | -- | 33 | |
Total revenues | -- | 518 | 851 | 174 | 752 | 12 | 2,307 | |
Expenses | ||||||||
Operations support | -- | -- | 294 | 68 | 16 | 19 | 397 | |
Depreciation and amortization | -- | -- | 666 | 72 | 490 | 3 | 1,231 | |
Interest expense | -- | -- | -- | -- | -- | 158 | 158 | |
Management fees to affiliate | -- | 12 | 45 | 6 | 27 | -- | 90 | |
General and administrative expenses | -- | 11 | 111 | 46 | -- | 190 | 358 | |
Loss on impairment of equipment | 140 | 61 | -- | -- | -- | 201 | ||
Recovery of bad debts | -- | -- | (14) | -- | -- | -- | (14) | |
Total expenses | -- | 163 | 1,163 | 192 | 533 | 370 | 2,421 | |
Equity in net income (loss) of USPEs | 7 | (33) | -- | -- | -- | -- | (26) | |
Net income (loss) | $7 | $322 | $(312) | $(18) | $219 | $(358) | $(140) | |
Total assets as of September 30, 2003 | $3,636 | $7,232 | $7,308 | $809 | $10,937 | $7,616 | $37,538 | |
Marine | Marine | ||||||||
For the three months ended | Vessel | Aircraft | Railcar | Trailer | Container | ||||
September 30, 2002 | Leasing | Leasing | Leasing | Leasing | Leasing | Other 2 | Total | ||
Revenues | ||||||||
Lease revenue | $-- | $409 | $784 | $175 | $982 | $-- | $2,350 | |
Interest income and other income | 71 | -- | -- | -- | -- | 26 | 97 | |
Gain on disposition of equipment | -- | -- | (2) | -- | 10 | -- | 8 | |
Total revenues | 71 | 409 | 782 | 175 | 992 | 26 | 2,455 | |
Expenses | ||||||||
Operations support | 6 | 1 | 179 | 164 | 10 | 15 | 375 | |
Depreciation and amortization | -- | 47 | 235 | 73 | 598 | 24 | 977 | |
Interest expense | -- | -- | -- | -- | -- | 194 | 194 | |
Management fees to affiliate | -- | 16 | 56 | 10 | 49 | -- | 131 | |
General and administrative expenses | 1 | 31 | 56 | 39 | -- | 272 | 399 | |
Provision for (recovery of) bad debts | -- | -- | 1 | 1 | -- | -- | 2 | |
Total expenses | 7 | 95 | 527 | 287 | 657 | 505 | 2,078 | |
Equity in net loss of USPEs | (210) | (80) | -- | -- | -- | -- | (290) | |
Net income (loss) | $(146) | $234 | $255 | $(112) | $335 | $(479) | $87 | |
1 Includes certain assets not identifiable to a specific segment such as cash, restricted cash, deferred charges and prepaid expenses. Also includes interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.
2 Includes interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
7. Operating Segments(continued)
Marine | Marine | ||||||||
For the nine months ended | Vessel | Aircraft | Railcar | Trailer | Container | ||||
September 30, 2003 | Leasing | Leasing | Leasing | Leasing | Leasing | Other 1 | Total | ||
Revenues | ||||||||
Lease revenue | $-- | $1,174 | $2,522 | $473 | $2,215 | $-- | $6,384 | |
Interest income and other income | -- | 5 | -- | -- | -- | 48 | 53 | |
Gain (loss) on disposition of equipment | -- | -- | (26) | -- | 108 | -- | 82 | |
Total revenues | -- | 1,179 | 2,496 | 473 | 2,323 | 48 | 6,519 | |
Expenses | ||||||||
Operations support | -- | (1) | 686 | 259 | 39 | 56 | 1,039 | |
Depreciation and amortization | -- | 36 | 1,821 | 218 | 1,538 | 7 | 3,620 | |
Interest expense | -- | -- | -- | -- | -- | 472 | 472 | |
Management fees to affiliate | -- | 39 | 134 | 18 | 83 | -- | 274 | |
General and administrative expenses | -- | 101 | 237 | 117 | -- | 614 | 1,069 | |
Loss on impairment of equipment | -- | 217 | 61 | -- | -- | -- | 278 | |
Provision for bad debts | -- | -- | 19 | -- | -- | -- | 19 | |
Total expenses | -- | 392 | 2,958 | 612 | 1,660 | 1,149 | 6,771 | |
Equity in net income (loss) of USPEs | 393 | (888) | -- | -- | -- | -- | (495) | |
Net income (loss) | $393 | $(101) | $(462) | $(139) | $663 | $(1,101) | $(747) | |
Equipment purchases and | ||||||||
capitalized improvements | $-- | $-- | $4,100 | $-- | $-- | $-- | $4,100 | |
Acquisition fees to affiliate | $-- | $-- | $184 | $-- | $-- | $-- | $184 | |
Marine | Marine | ||||||||
For the nine months ended | Vessel | Aircraft | Railcar | Trailer | Container | ||||
September 30, 2002 | Leasing | Leasing | Leasing | Leasing | Leasing | Other 1 | Total | ||
Revenues | ||||||||
Lease revenue | $-- | $1,228 | $2,591 | $559 | $2,943 | $-- | $7,321 | |
Interest income and other income | 71 | -- | -- | -- | -- | 66 | 137 | |
Gain on disposition of equipment | -- | -- | 10 | -- | 113 | -- | 123 | |
Total revenues | 71 | 1,228 | 2,601 | 559 | 3,056 | 66 | 7,581 | |
Expenses | ||||||||
Operations support | 1 | 22 | 557 | 424 | 31 | 47 | 1,082 | |
Depreciation and amortization | -- | 142 | 707 | 218 | 1,878 | 69 | 3,014 | |
Interest expense | -- | -- | -- | -- | -- | 654 | 654 | |
Management fees to affiliate | -- | 50 | 181 | 29 | 147 | -- | 407 | |
General and administrative expenses | 1 | 128 | 134 | 114 | 1 | 1,585 | 1,963 | |
Provision for bad debts | -- | -- | 14 | 17 | -- | -- | 31 | |
Total expenses | 2 | 342 | 1,593 | 802 | 2,057 | 2,355 | 7,151 | |
Equity in net loss of USPEs | (279) | (321) | -- | -- | -- | -- | (600) | |
Net income (loss) | $(210) | $565 | $1,008 | $(243) | $999 | $(2,289) | $(170) | |
8. Net (Loss) Income Per Weighted-Average Limited Partnership Unit
Net (loss) income per weighted-average limited partnership unit was computed by dividing net loss or income attributable to limited partners by the weighted-average number of limited partnership units deemed outstanding during the period. The weighted-average number of limited partnership units deemed outstanding during the three and nine months ended September 30, 2003 was 7,730,965. The weighted-average number of limited partnership units deemed outstanding during the three and nine months ended September 30, 2002 was 7,730,965 and 7,736,749, respectively.
1 Includes interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
9. Debt
The Partnership is a participant in a $10.0 million warehouse facility. The warehouse facility, which was scheduled to expire on September 30, 2003, was extended until December 31, 2003 during September 2003. As of September 30, 2003 and December 31, 2002, the Partnership had no borrowings outstanding under this facility.
The Partnership’s note payable has a drawdown period that was scheduled to expire on September 30, 2003. During the third quarter of 2003, this date was extended to December 31, 2003.
The Partnership made the regularly scheduled principal payments totaling $3.0 million to the lender of the notes payable during the nine months ended September 30, 2003.
10. Commitments and Contingencies
FSI arranged for the lease or purchase of up to 1,050 railcars with a delivery date between 2002 and 2004. FSI anticipates that 735 of these railcars will be leased by an entity other than the Partnership. The remaining 315 railcars costing approximately $23 million, will be purchased by FSI, the Partnership or an affiliated program. As of September 30, 2003, approximately 66% of these railcars have been purchased by FSI or an affiliated program for approximately $15 million. The remaining 34% of these railcars will be purchased in 2004. While FSI has not determined if the Partnership will purchase either the railcars originally purchased by FSI or any of the railcars remaining to be purchased under the agreement, it is possible the Partnership may purchase some railcars.
At September 30, 2003, railcars with an original equipment cost of $16.2 million were owned by FSI, some of which were purchased from the above transaction. While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
Commitments and contingencies as of September 30, 2003 are as follows (in thousands of dollars):
Less than | 1-3 | 4-5 | After 5 | ||||||||||||||
Current Obligations | Total | 1 Year | Years | Years | Years | ||||||||||||
Commitment to purchase railcars | $23,799 | 1 | $16,159 | $7,640 | $-- | $-- | |||||||||||
Notes payable | 9,750 | 3,000 | 6,000 | 750 | -- | ||||||||||||
Line of credit | -- | -- | -- | -- | -- | ||||||||||||
$33,543 | $19,159 | $13,640 | 750 | $-- | |||||||||||||
1 While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
11. Recent Accounting Pronouncements
In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation clarifies existing accounting principles related to the preparation of consolidated financial statements when the owners of an USPE do not have the characteristics of a controlling financial interest or when the equity at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from others. FIN 46 requires the Partnership to evaluate all existing arrangements to identify situations where the Partnership has a "variable interest," commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a "variable interest entity," commonly a thinly capitalized entity, and further determine whe n such variable interest requires the Partnership to consolidate the variable interest entities’ financial statements with its own. The Partnership is required to perform this assessment by December 31, 2003 and consolidate any variable interest entities for which the Partnership will absorb a majority of the entities’ expected losses or receive a majority of the expected residual gains. The General Partner has not completed its analysis and has not concluded on the impact that FIN 46 will have.
In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150)which establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard was to be effective for the Partnership’s quarter ending September 30, 2003. In October 2003, however, the FASB deferred the application of SFAS No. 150 indefinitely.
In September 2001, the Accounting Standards Executive Committee (AcSEC) issued an Exposure Draft on a Statement of Position, "Accounting for Certain Costs and Activities Related to Property, Plant and Equipment" (the "Proposed Statement"). On September 9, 2003, AcSEC voted to approve the Proposed Statement and is expected to present it to the FASB in the first quarter of 2004. At this time, it is unclear whether the Proposed Statement will be issued or in what form. If the existing Proposed Statement is issued, it would require the Partnership to modify its accounting policy for maintenance and repairs. Such costs would no longer be accrued in advance of performing the related maintenance and repairs; rather, the Proposed Statement requires these costs to be capitalized and amortized over their estim ated useful life.
12. Subsequent Event
During October 2003, a jointly owned Boeing 737-300 commercial aircraft, in which the Partnership has a 62% interest, required an engine overhaul totaling approximately $0.9 million. The General Partner believes that there are adequate engine reserves collected from the lessee to cover the cost of the overhaul and there will be no impact to the Partnership’s statement of operations. The Partnership will fund its proportional share of the engine overhaul from its balance in due to affiliates.
During October 2003, the General Partner amended the lease agreement with the lessee in an USPE that owns two commercial aircraft. Under the terms of the amendment, the lease will be extended for an additional three months after which, the lessee can purchase the aircraft for one dollar. This will result in an impairment of $0.4 million to this USPE. The Partnership’s proportional share of this impairment of $0.2 million related to this transaction will be recorded during the fourth quarter 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund VI’s (the Partnership’s) Operating Results for the Three Months Ended September 30, 2003 and 2002
(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 three months ended September 30, 2003, compared to the same period of 2002. Gains or losses from the disposition of equipment, interest and other income, and certain expenses such as management fees to affiliate, depreciation and amortization, loss on impairment of equipment and general and administrative expenses relating to the operating segments (see Note 7 to the unaudited condensed financial statements), are not included in the owned equipment operation discussion because these expenses are indirect in nature and not a result of operations, but the result of owning a portfolio of equipment. The following table presents lease revenues less direct e xpenses by segment (in thousands of dollars):
For the Three Months | |||||||||||
Ended September 30, | |||||||||||
2003 | 2002 | ||||||||||
Marine containers | $ | 699 | $ | 972 | |||||||
Railcars | 561 | 605 | |||||||||
Aircraft and components | 518 | 408 | |||||||||
Trailers | 106 | 11 |
Marine containers: Marine container lease revenues and direct expenses were $0.7 million and $16,000, respectively, for the three months ended September 30, 2003, compared to $1.0 million and $10,000, respectively, during the same period of 2002. The decrease in lease revenues of $0.3 million during the third quarter of 2003 compared to the same period of 2002 was due to some of the marine containers owned by the Partnership switching from a fixed lease rate to utilization based rate resulting in lower lease revenues. Additional marine containers owned by the Partnership will be converting from a fixed term lease to one based on utilization over the next 24 months. This is expected to cause lease revenues to decline further.
Railcars: Railcar lease revenues and direct expenses were $0.9 million and $0.3 million, respectively, for the three months ended September 30, 2003, compared to $0.8 million and $0.2 million, respectively, during the same quarter of 2002. An increase in railcar lease revenues of $0.2 million during the third quarter of 2003 was due to the purchase and lease of railcars during 2003. This increase was partially offset by a decrease of $0.1 million caused by the increase in the number of railcars off-lease compared to the same period of 2002. An increase in railcar direct expenses of $0.1 million in the third quarter 2003 was due to an increase in the repairs and maintenance of $0.1 million and by an increase in insurance expense of $22,000 compared to the same period of 2002.
Aircraft and components: Aircraft and components lease revenues and direct expenses were $0.5 million and $-0-, respectively, for the three months ended September 30, 2003, compared to $0.4 million and $1,000, respectively, during the same period of 2002. An increase in aircraft and components lease revenues of $0.2 million was due to the receipt of a loss deficiency from a former lessee of the aircraft components offset in part, by a decrease of $0.1 million due to the aircraft components being off-lease during the third quarter of 2003 compared to the same period of 2002 when they were on-lease. These aircraft components are being marketed for sale or lease. Due to the soft market condition for this type of equipment, they may be off-lease for a considerable period of time.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and $0.1 million, respectively, for the three months ended September 30, 2003 and 2002, compared to $0.2 million and $0.2 million, respectively, during the same period of 2002. The increase in trailer contributions of $0.1 million was due to lower repairs and maintenance compared to the same period of 2002.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.0 million for the quarter ended September 30, 2003 increased from $1.7 million for the same period in 2002. Significant variances are explained as follows:
(i) A $0.3 million increase in depreciation and amortization expenses from 2002 levels reflects the increase of approximately $0.6 million caused by the purchase of railcars during 2003 partially offset by a decrease of $0.3 million caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned;
(ii) Loss on impairment of equipment increased $0.2 million during 2003 and resulted from the Partnership reducing the carrying value of owned aircraft components by $0.1 million and owned railcars by $0.1 million to their estimated fair value. No impairment of equipment was required during the same period of 2002;
(iii) A $41,000 decrease in management fees was the result of a decrease of $10,000 due to lower lease revenues earned in the three months ended September 30, 2003 compared to the same period of 2002 and a decrease of $31,000 resulting from the temporary decrease in the management fee rate paid by the Partnership; and
(iv) A $41,000 decrease in general and administrative expenses during the three months ended September 30, 2003 resulted from lower mailing costs of $10,000, lower consulting fees of $18,000, lower legal fees of $16,000 and lower costs being charged to the Partnership for certain administrative services of approximately of approximately $48,000. These decreases were partially offset by increases of $0.1 million insurance costs.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the third quarter of 2003 totaled $33,000, and resulted from the sale of marine containers and railcars, with an aggregate net book value of $40,000 for proceeds of $0.1 million. The net gain on the disposition of owned equipment for the third quarter of 2002 totaled $8,000, and resulted from the sale of marine containers and a railcar, with an aggregate net book value of $0.1 million for proceeds of $0.1 million.
(D) Equity in Net Loss of Unconsolidated Special-Purpose Entities (USPEs)
Equity in net income (loss) of USPEs represents the Partnership's share of the net income or loss generated from the operation of jointly owned assets accounted for under the equity method of accounting. These entities are single purpose and have no debt or other financial encumbrances. The following table presents equity in net income (loss) by equipment type (in thousands of dollars):
For the Three Months | ||||||||||
Ended September 30, | ||||||||||
2003 | 2002 | |||||||||
Marine vessel | $ | 7 | $ | (210 | ) | |||||
Aircraft | (33 | ) | (80 | ) | ||||||
Equity in net loss of USPEs | $ | (26 | ) | $ | (290 | ) | ||||
The following USPE discussion by equipment type is based on the Partnership's proportional share of revenues, depreciation expense, direct expenses, and administrative expenses in the USPEs:
Marine vessel: As of September 30, 2003 and 2002, the Partnership owned an interest in an entity that owned a marine vessel. During the three months ended September 30, 2003, lease revenues of $0.9 million were offset by depreciation expense, direct expenses, and administrative expenses of $0.9 million. During the same period of 2002, lease revenues of $0.5 million were offset by depreciation expense, direct expenses, and administrative expenses of $0.7 million.
Marine vessel lease revenues increased $0.4 million during the three months ended September 30, 2003 due to higher charter rates earned during the third quarter of 2003 compared to the same period of 2002.
Marine vessel direct expenses increased $0.2 million during the three months ended September 30, 2003 compared to the same period in 2002 due to higher operating expenses.
Aircraft: As of September 30, 2003 and 2002, the Partnership owned an interest in two commercial aircraft on a direct finance lease and an interest in a Boeing 737-300 commercial aircraft. During the third quarter of 2003 and 2002, revenues of $0.3 million were offset by depreciation expense, direct expenses and administrative expenses of $0.4 million.
Aircraft contribution increased $47,000 due primarily to a decrease in depreciation expense caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned.
(E) Net (Loss) Income
As a result of the foregoing, the Partnership's net loss for the three months ended September 30, 2003 was $0.1 million, compared to a net income of $0.1 million during the same period of 2002. The Partnership's ability to acquire, operate, and liquidate assets, secure leases and re-lease those assets whose leases expire is subject to many factors. Therefore, the Partnership's performance in the third quarter of 2003 is not necessarily indicative of future periods.
Comparison of the Partnership’s Operating Results for the Nine Months Ended September 30, 2003 and 2002
(A) Owned Equipment Operations
Lease revenues less direct expenses on owned equipment decreased during the nine months ended September 30, 2003, compared to the same period of 2002. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):
For the Nine Months | |||||||||||
Ended September 30, | |||||||||||
2003 | 2002 | ||||||||||
Marine containers | $ | 2,176 | $ | 2,912 | |||||||
Railcars | 1,836 | 2,034 | |||||||||
Aircraft and components | 1,175 | 1,206 | |||||||||
Trailers | 214 | 135 |
Marine containers: Marine container lease revenues and direct expenses were $2.2 million and $39,000, respectively, for the nine months ended September 30, 2003, compared to $2.9 million and $31,000, respectively, during the same period of 2002. The decrease in lease revenues of $0.7 million during the nine months ended September 30, 2003 was due to certain marine containers owned by the Partnership switching from a fixed lease rate to utilization based rate resulting in lower lease revenues. Additional marine containers owned by the Partnership will be converting from a fixed term lease to one based on utilization over the next 24 months. This is expected to cause lease revenues to decline further.
Railcars: Railcar lease revenues and direct expenses were $2.5 million and $0.7 million, respectively, for the nine months ended September 30, 2003, compared to $2.6 million and $0.6 million, respectively, during the same period of 2002. Railcar lease revenues decreased $0.6 million primarily due to a higher number of off-lease railcars. This decrease was partially offset by an increase of $0.5 million compared to the same period of 2002 resulting from the purchase and lease of railcars during the nine months ended September 30, 2003.
Aircraft and components: Aircraft and components lease revenues and direct expenses were $1.2 million and $(1,000), respectively, for the nine months ended September 30, 2003, compared to $1.2 million and $22,000, respectively, during the same period of 2002. Although lease revenues remained relatively the same for both periods, an increase in aircraft and components lease revenues of $0.2 million was due to the receipt of a loss deficiency from the former lessee of the aircraft components offset in part, by a decrease of $0.3 million due to the aircraft components being off-lease during eight months of 2003 compared to the same period of 2002 when they were on-lease for nine months. Due to the soft market condition for this type of equipment, they may be off-lease for a considerable period of time.
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.3 million, respectively, for the nine months ended September 30, 2003, compared to $0.6 million and $0.4 million, respectively, during the same period of 2002. The decrease in trailer lease revenues of $0.1 million was due to lower utilization compared to the same period of 2002. The decrease of $0.2 million in trailer direct expenses was due to a decrease in the repairs and maintenance that resulted from lower utilization.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.8 million for the nine months ended September 30, 2003 decreased from $6.1 million for the same period in 2002. Significant variances are explained as follows:
(i) A $0.9 million decrease in general and administrative expenses during the nine months ended September 30, 2003 was due to a $1.0 million debt prepayment penalty in the first quarter 2002 related to the Partnership’s note payable, a similar event did not occur during 2003. This decrease was partially offset by a $0.1 increase in administrative services during 2003;
(ii) A $0.2 million decrease in interest expense resulted from lower average borrowings outstanding in the nine months ended September 30, 2003 compared to the same period of 2002;
(iii) A $0.1 million decrease in management fees was the result of a decrease of $0.1 million due to lower lease revenues earned in the nine months ended September 30, 2003 compared to the same period of 2002 and a decrease of $0.1 million resulting from the temporary decrease in the management fee rate paid by the Partnership;
(iv) A $0.6 million increase in depreciation and amortization expenses from 2002 levels reflects the increase of approximately $1.3 million caused by the purchase of railcars during the nine months ended September 30, 2003 partially offset by a decrease of $0.8 million caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned; and
(v) A $0.3 million increase in the loss on impairment of equipment resulted from the Partnership reducing the carrying value of the owned aircraft components by $0.3 million and railcars by $0.1 million to their estimated fair value. No impairment of equipment was required during the nine months ended September 30, 2002.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the nine months ended September 30, 2003 totaled $0.1 million, and resulted from the disposition of marine containers and railcars, with an aggregate net book value of $0.2 million for proceeds of $0.2 million. The net gain on the disposition of owned equipment for the nine months ended September 30, 2002 totaled $0.1 million and resulted from the disposition of marine containers and railcars, with an aggregate net book value of $0.2 million for proceeds of $0.3 million.
(D) Equity in Net Loss of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of USPEs represents the Partnership's share of the net income or loss generated from the operation of jointly owned assets accounted for under the equity method of accounting. These entities are single purpose and have no debt or other financial encumbrances. The following table presents equity in net income (loss) by equipment type (in thousands of dollars):
For the Nine Months | ||||||||||
Ended September 30, | ||||||||||
2003 | 2002 | |||||||||
Marine vessels | $ | 393 | $ | (279 | ) | |||||
Aircraft | (888 | ) | (321 | ) | ||||||
Equity in net loss of USPEs | $ | (495 | ) | $ | (600 | ) | ||||
The following USPE discussion by equipment type is based on the Partnership's proportional share of revenues, depreciation expense, direct expenses, administrative expenses and loss on impairment of equipment in the USPEs:
Marine vessels: As of September 30, 2003 and 2002, the Partnership owned an interest in an entity that owned a marine vessel. During the nine months ended September 30, 2003, lease revenues of $3.0 million were partially offset by depreciation expense, direct expenses, and administrative expenses of $2.6 million. During the same period of 2002, lease revenues of $2.1 million were offset by depreciation expense, direct expenses, and administrative expenses of $2.4 million.
Marine vessel lease revenues increased $0.9 million during the nine months ended September 30, 2003 due to higher charter rates earned during the nine months ended September 30, 2003 compared to the same period of 2002.
Marine vessel direct expenses increased $0.2 million during the nine months ended September 30, 2003 compared to the same period in 2002 due to higher operating expenses of $0.3 million partially offset by lower depreciation expense of $0.1 million caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned.
Aircraft: As of September 30, 2003 and 2002, the Partnership owned an interest in two commercial aircraft on a direct finance lease and an interest in a Boeing 737-300 commercial aircraft. During the nine months ended September 30, 2003, revenues of $1.0 million were offset by depreciation expense, direct expenses and administrative expenses of $1.0 million and a loss on the impairment of equipment of $0.8 million. During the same period of 2002, revenues of $1.0 million were offset by depreciation expense, direct expenses and administrative expenses of $1.3 million.
Aircraft revenues decreased $40,000 due to a lower outstanding principal balance on the finance lease compared to 2002.
Depreciation expense, direct expenses, and administrative expenses decreased $0.3 million during the nine months ended September 30, 2003. A decrease of $0.2 million resulted from the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned and a decrease of $0.1 million resulting from lower professional services expense. The $0.8 million increase in the loss on impairment of equipment resulting from the reduction of the carrying value of a Boeing 737-300 commercial aircraft to its estimated fair value. No impairment of equipment was required during the nine months ended September 30, 2002.
(E) Net Loss
As a result of the foregoing, the Partnership's net loss for the nine months ended September 30, 2003 was $0.7 million, compared to a net loss of $0.2 million during the same period of 2002. The Partnership's ability to acquire, operate, and liquidate assets, secure leases and re-lease those assets whose leases expire is subject to many factors. Therefore, the Partnership's performance in the nine months ended September 30, 2003 is not necessarily indicative of future periods.
(II) CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires PLM Financial Services, Inc. (FSI or the General Partner) to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, the General Partner reviews these estimates including those related to asset lives and depreciation methods, impairment of long-lived assets, allowance for doubtful accounts, reserves related to legally mandated equipment repairsand contingencies and litigation. These estimates are based on the General Partner's historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The General Partner believes, however, that the estimates, including those for the above-listed items, are reasonable and that actual results will not vary significantly from the estimated amounts.
The General Partner believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Partnership's financial statements:
Revenue recognition: Lease revenues are payable to the Partnership monthly and no significant amounts are calculated on factors other than the passage of time. The Partnership’s leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred.
The Partnership has an investment in an USPE that owns aircraft jointly with other affiliated programs. These aircraft are leased on a direct finance lease. The USPE’s revenues from the direct finance lease are based on a monthly amortization schedule.
Asset lives and depreciation methods: The Partnership’s primary business involves the purchase and subsequent lease of long-lived transportation and related equipment. The General Partner has chosen asset lives that it believes correspond to the economic life of the related asset. The General Partner has chosen a depreciation method that it believes matches the benefit to the Partnership from the asset with the associated costs. These judgments have been made based on the General Partner’s expertise in each equipment segment that the Partnership operates. If the asset life and depreciation method chosen does not reduce the book value of the asset to at least the potential future cash flows from the asset to the Partnership, the Partnership would be required to record an impairment loss. Lik ewise, if the net book value of the asset was less than the economic value, the Partnership may record a gain on sale upon final disposition of the asset.
Revenue recognition: Lease revenues are earned by the Partnership monthly and no significant amounts are calculated on factors other than the passage of time. The Partnership’s leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred.
Impairment of long-lived assets: Whenever circumstances indicate that an impairment may exist, the General Partner reviews the carrying value of its equipment and investments in USPEs to determine if the carrying value of the assets may not be recoverable, in consideration of the current economic conditions. This requires the General Partner to make estimates related to future cash flows from each asset as well as the determination if the deterioration is temporary or permanent. If these estimates or the related assumptions change in the future, the Partnership may be required to record additional impairment charges.
Allowance for doubtful accounts: The Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of the lessees to make the lease payments. These estimates are primarily based on the amount of time that has lapsed since the related payments were due as well as specific knowledge related to the ability of the lessees to make the required payments. If the financial condition of the Partnership’s lessees were to deteriorate, additional allowances could be required that would reduce income. Conversely, if the financial condition of the lessees were to improve or if legal remedies to collect past due amounts were successful, the allowance for doubtful accounts may need to be reduced and income would be increased.
Reserves for repairs: The Partnership accrues for legally required repairs to equipment such as dry docking for marine vessels and engine overhauls to aircraft engines over the period prior to the required repairs. The amount that is reserved for is based on the General Partner’s expertise in each equipment segment, the past history of such costs for that specific piece of equipment and discussions with independent, third party equipment brokers. If the amount reserved for is not adequate to cover the cost of such repairs or if the repairs must be performed earlier than the General Partner estimated, the Partnership would incur additional repair and maintenance or equipment operating expenses.
Contingencies and litigation: The Partnership is subject to legal proceedings involving ordinary and routine claims related to its business. The ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements. Estimates for losses from litigation are disclosed if considered possible and accrued if considered probable after consultation with outside counsel. If estimates of potential losses increase or the related facts and circumstances change in the future, the Partnership may be required to record additional litigation expense.
(III) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 2003, the Partnership generated cash from operations of $3.8 million to meet its operating obligations, purchase additional equipment, pay debt and interest payments and maintain working capital reserves.
During the nine months ended September 30, 2003, the Partnership purchased railcars for $4.1 million and paid FSI $0.2 million for acquisition fees and $41,000 for lease negotiation fees. The Partnership also disposed of owned equipment and received aggregate proceeds of $0.2 million.
Accounts receivable increased $0.1 million during the nine months ended September 30, 2003 due to the timing of cash receipts.
Investments in USPEs decreased $2.2 million during the nine months ended September 30, 2003 due to cash distributions of $1.7 million from the USPEs to the Partnership and a $0.5 million loss that was recorded by the Partnership for its equity interests in the USPEs.
Prepaid expenses decreased $0.1 million during 2003 due to the expense of insurance expenses during 2003 that were paid during 2002.
Accounts payable decreased $0.2 million during the nine months ended September 30, 2003 due to the timing of cash payments.
Due to affiliates increased $0.3 million during the nine months ended September 30, 2003 due to the receipt of additional engine reserves due to an USPE. During October 2003, a jointly owned Boeing 737-300 commercial aircraft, of which the Partnership has an 62% interest, required an engine overhaul totaling approximately $0.9 million. The Partnership will fund its proportional share of the engine overhaul from its balance in due to affiliates.
The Partnership made its scheduled principal payments totaling $3.0 million on the notes payable during the nine months ended September 30, 2003. The Partnership is scheduled to make a quarterly debt payment of $0.8 million plus interest to the lenders of the notes payable in the fourth quarter of 2003. The cash for this payment will come from operations and equipment dispositions. Under the terms of the amended loan agreement, the Partnership is able to borrow up to $15.0 million until December 31, 2003.
The Partnership is a participant in a $10.0 million warehouse facility. The warehouse facility is shared by the Partnership, PLM Equipment Growth Fund V, PLM Equipment Growth & Income Fund VII, Professional Lease Management Income Fund I, LLC and Acquisub LLC, a wholly owned subsidiary of PLM International Inc. (PLMI). The facility provides for financing up to 100% of the cost of the equipment and expires on December 30, 2003. Any borrowings by the Partnership are collateralized by equipment purchased with the proceeds of the loan. Outstanding borrowings by one borrower reduce the amount available to each of the other borrowers under the facility. Individual borrowings may be outstanding for no more than 270 days, with all advances due no later than December 31, 2003. Interest accrues either at t he prime rate or LIBOR plus 2.0% at the borrower’s option and is set at the time of an advance of funds. Borrowings by the Partnership are guaranteed by PLMI. The Partnership is not liable for the advances made to other borrowers.
As of November 13, 2003, Acquisub LLC had outstanding borrowings on the warehouse facility of $10.0 million. There were no other outstanding borrowings on this facility by the Partnership or any of the other eligible borrowers.
FSI arranged for the lease or purchase of up to 1,050 railcars with a delivery date between 2002 and 2004. FSI anticipates that 735 of these railcars will be leased by an entity other than the Partnership. The remaining 315 railcars costing approximately $23 million, will be purchased by FSI, the Partnership or an affiliated program. As of September 30, 2003, approximately 66% of these railcars have been purchased by FSI or an affiliated program for approximately $15 million. The remaining 34% of these railcars will be purchased in 2004. While FSI has not determined if the Partnership will purchase either the railcars originally purchased by FSI or any of the railcars remaining to be purchased under the agreement, it is possible the Partnership may purchase some railcars.
At September 30, 2003, railcars with an original equipment cost of $16.2 million were owned by FSI, some of which were purchased from the above transaction. While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
Commitments and contingencies as of September 30, 2003 are as follows (in thousands of dollars):
Less than | 1-3 | 4-5 | After 5 | ||||||||||||||
Current Obligations | Total | 1 Year | Years | Years | Years | ||||||||||||
Commitment to purchase railcars | $23,799 | 1 | $16,159 | $7,640 | $-- | $-- | |||||||||||
Notes payable | 9,750 | 3,000 | 6,000 | 750 | -- | ||||||||||||
Line of credit | -- | -- | -- | -- | -- | ||||||||||||
$33,543 | $19,159 | $13,640 | 750 | $-- | |||||||||||||
1 While FSI has neither determined if a Program Affiliates will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
(IV) RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003,Financial Accounting Standards Board (FASB)issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation clarifies existing accounting principles related to the preparation of consolidated financial statements when the owners of an USPE do not have the characteristics of a controlling financial interest or when the equity at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from others. FIN 46 requires the Partnership to evaluate all existing arrangements to identify situations where the Partnership has a "variable interest," commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a "variable interest entity," commonly a thinly capitalized entity, and further determine when such variable interest requires the Partnership to consolidate the variable interest entities’ financial statements with its own. The Partnership is required to perform this assessment by December 31, 2003 and consolidate any variable interest entities for which the Partnership will absorb a majority of the entities’ expected losses or receive a majority of the expected residual gains. The General Partner has not completed its analysis and has not concluded on the impact that FIN 46 will have.
In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150)which establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard was to be effective for the Partnership’s quarter ending September 30, 2003. In October 2003, however, the FASB deferred the application of SFAS No. 150 indefinitely.
In September 2001, the Accounting Standards Executive Committee (AcSEC) issued an Exposure Draft on a Statement of Position, "Accounting for Certain Costs and Activities Related to Property, Plant and Equipment" (the "Proposed Statement"). On September 9, 2003, AcSEC voted to approve the Proposed Statement and is expected to present it to the FASB in the fourth quarter of 2003. At this time, it is unclear whether the Proposed Statement will be issued or in what form. If the existing Proposed Statement is issued, it would require the Partnership to modify its accounting policy for maintenance and repairs. Such costs would no longer be accrued in advance of performing the related maintenance and repairs; rather, the Proposed Statement requires these costs to be capitalized and amortized over their esti mated useful life.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance during the remainder of 2003 and beyond, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad base of markets is intended to reduce its exposure to volatility in individual equipment sectors.
Other factors affecting the Partnership’s operations during the remainder of 2003 and beyond include:
(1) In 2003 a significant number of the Partnership’s marine containers on a fixed rate lease switched to a lease based on utilization. This resulted in a significant decrease in lease revenues. In addition, in 2005, the Partnership has additional marine containers that will switch from a fixed rate lease to a utilization lease. This may lead to further declines in lease revenues;
(2) Signs of economic recovery in the railcar segment continue to be mixed with some indicators showing less strength than previously forecasted. Total industrial production, the general driver of demand for railcars, is now projected to be unchanged in 2003. Chemical railcar loadings, the most important driver for the majority of the Partnership’s fleet, are now flat versus 2002 as reported by the American Association of Railroads. If manufacturing recovers, chemical and allied products carloadings are generally forecasted to grow in the fourth quarter of 2003 but not to rebound strongly until 2004. On the positive side, North Americ an railcar manufacturing capacity utilization, as reported informally by the manufacturers themselves, continues to demonstrate the increase noted at the end of the second quarter, and lead times have extended into the second quarter of next year. The speed of recovery in lease rates continues to be dependent on the number of idle railcars in fleets owned by various shippers and leasing competitors who have been very aggressive in quoted rates compared to historical norms;
(3) The Partnership’s partially-ownedmarinevessel isdesignated as a Clean Product Carrier and as such transports and trades on voyage and term charters with Clean Petroleum Products such as gasoline, jet fuel, clean diesel oil, condensate, etc. and on occasion clean chemicals in liquid form.Freight rates earned during the first three quarters of 2003 showed some strength compared with 2002. The first quarter benefited from the continued political turmoil in Venezuela and the start up of the Iraqi conflict. Higher crude oil prices and reduced supply of gasoline and jet fuels available on the United States East Coast (USEC) due to the shut down of the Venezuela supply channel, meant longer haul product supplies out of Europe and the Baltic to maintain inventories for USEC . The net effect was improved transportation rates for our product carrier during the first two quarters of 2003. In the third quarter of 2003, the daily rates started drifting slightly lower after both conflicts were resolved and the beginning of the summer season. The General Partner believes that the product markets will strengthen with the increase in worldwide economies, increase imports and demand in the fourth quarter 2003;
(4) Market demand for new and used aircraft has been severely impacted by the poor financial condition of the airline industry. The General Partner believes that there is a significant oversupply of commercial aircraft available, that has caused a decrease in aircraft fair market values and that this oversupply will continue for some time. The General Partner does not expect these aircraft to return to their pre-September 11, 2001 values.
In 2003 the Partnership’s owned aircraft components came off-lease. The General Partner is currently marketing this equipment for lease or for sale. Due to the poor market condition for equipment of this type, the equipment may be off-lease for a considerable period of time.
The General Partner considers the lessee of the Partnership’s owned MD-80 commercial aircraft a significant credit risk. The lessee has restructured leases (including a $5,000 a month reduction in the lease payment for the Partnership’s aircraft) and renegotiated labor contracts. If this aircraft were to be returned prior to its lease expiration in 2008, the aircraft could be off-lease for a significant period of time or re-leased at a significantly lower lease rate;
(5) Utilization of intermodal trailers owned by the Partnership was 58% in the three months ended September 30, 2003 which was approximately 2% below the three months ended September 30, 2002. Industry-wide utilization of intermodal trailers was 50% in the three months ended September 30, 2003 compared to 52% in the same period of 2002. As the Partnership's 45' trailers are smaller than the 48' trailers that many shippers prefer, the General Partner expects utilization to have little opportunity to increase over the next few years;
(6) The management fee rate paid by the Partnership was reduced by 25% for the period starting January 1, 2003 and ending September 30, 2005; and
(7) As a result of the increase in off-lease equipment in its railcar and aircraft fleet, the General Partner expects the Partnership will be paying higher remarketing and storage costs during the remainder of 2003.
The ability of the Partnership to realize acceptable lease rates on its equipment in the different equipment markets is contingent on many factors, such as specific market conditions and economic activity, technological obsolescence, and government or other regulations. The unpredictability of some of these factors, or of their occurrence, makes it difficult for the General Partner to clearly define trends or influences that may impact the performance of the Partnership's equipment. The General Partner continually monitors both the equipment markets and the performance of the Partnership's equipment in these markets. The General Partner may decide to reduce the Partnership's exposure to equipment markets in which it determines it cannot operate equipment to achieve acceptable rates of return. Alterna tively, the General Partner may make a determination to enter equipment markets in which it perceives opportunities to profit from supply/demand instabilities or other market imperfections.
The Partnership may commit its cash flow, surplus cash, and equipment sale proceeds to purchase additional equipment, consistent with the objectives of the Partnership, until December 31, 2004. The General Partner believes that these acquisitions may cause the Partnership to generate additional earnings and cash flow for the Partnership. The Partnership will terminate on December 31, 2011, unless terminated earlier upon sale of all equipment and by certain other events.
The Partnership intends to use cash flow from operations to satisfy its operating requirements, pay loan principal and interest on debt, purchase additional equipment and pay cash distributions to the partners.
The General Partner does not anticipate declaring any cash distributions to the partners until at least the end of the investment phase of the Partnership. Cash distributions when paid to the partners generally consist of both a return of and a return on capital. Cash distributions do not represent and are not indicative of yield on investment. Actual yield on investment cannot be determined with any certainty until conclusion of the Partnership and will be dependent upon the collection of all future contracted rent, the generation of renewal and/or re-lease rents and the residual value realized for each asset at its disposal.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-QSB contains forward-looking statements that involve risks and uncertainties, such as statements of the Partnership’s plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-QSB should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-QSB. There are a number of important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made herein. These factors include, but are not limited to, the collection of the Partnership’s contracted rents, the realization of residual proceeds, and future economic conditions.
ITEM 3. CONTROLS AND PROCEDURES
Limitations on the Effectiveness of Controls
The General Partner’s management, including it’s President and Chief Financial Officer (CFO), does not expect that our internal controls or disclosure control will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud, if any, within the Partnership have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Notwithstanding the forgoing limitations, we believe that our internal controls and disclosure control provide reasonable assurances that the objectives of our control system are met.
Quarterly Evaluation of the Partnership’s Disclosure Controls and Internal Controls
(1) Within the 90-day period prior to the filing of this report, the General Partner carried out an evaluation, under the supervision and with the participation of the General Partner’s management, including it’s President and CFO, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the President and CFO concluded that the Partnership’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Partne rship’s required to be included in the Partnership’s exchange act filings.
(2) There have been no significant changes in the Partnership’s internal controls or in other factors which could significantly affect internal controls subsequent to the date of the General Partner carried out its evaluations.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. 11 Sixth Amendment to the Warehouse Credit Agreement, dated September 30, 2003.
10.12 Third Amendment to Credit Agreement, dated September 30, 2003.
99.1 Certificate of President pursuant to Section 906 of Sarbanes - Oxley Act.
99.2 Certificate of Chief Financial Officer pursuant to Section 906 of Sarbanes - Oxley Act.
(b) Reports on Form 8-K
None.
CONTROL CERTIFICATION
I, James A. Coyne, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of PLM Equipment Growth Fund VI.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2003 By:
/s/ James A. Coyne
James A. Coyne
President
CONTROL CERTIFICATION
I, Richard K Brock, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of PLM Equipment Growth Fund VI.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2003 By:
/s/ Richard K Brock
Richard K Brock
Chief Financial Officer
(Principal Financial Officer)