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 March 31, 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)
March 31, | December 31, | |||||||||||||||||||
2003 | 2002 | |||||||||||||||||||
Assets | ||||||||||||||||||||
Equipment held for operating leases | $ | 66,759 | $ | 62,686 | ||||||||||||||||
Less accumulated depreciation | (45,331 | ) | (44,382 | ) | ||||||||||||||||
Net equipment | 21,428 | 18,304 | ||||||||||||||||||
Cash and cash equivalents | 4,736 | 8,286 | ||||||||||||||||||
Restricted cash | 410 | 410 | ||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts | ||||||||||||||||||||
of $460 in 2003 and $425 in 2002 | 993 | 944 | ||||||||||||||||||
Investments in unconsolidated special-purpose entities | 12,538 | 12,625 | ||||||||||||||||||
Deferred charges, net of accumulated amortization of | ||||||||||||||||||||
$403 in 2003 and $368 in 2002 | 347 | 342 | ||||||||||||||||||
Prepaid expenses and other assets | 286 | 273 | ||||||||||||||||||
Total assets | $ | 40,738 | $ | 41,184 | ||||||||||||||||
Liabilities and partners’ capital | |||||||
Liabilities: | |||||||
Accounts payable and accrued expenses | $ | 373 | $ | 449 | |||
Due to affiliates | 1,473 | 1,391 | |||||
Lessee deposits and reserve for repairs | 53 | 18 | |||||
Notes payable | 12,000 | 12,750 | |||||
Total liabilities | 13,899 | 14,608 | |||||
Commitments and contingencies | |||||||
Partners’ capital: | |||||||
Limited partners (7,730,965 limited partnership units in 2003 | |||||||
and in 2002) | 26,839 | 26,576 | |||||
General Partner | -- | -- | |||||
Total partners’ capital | 26,839 | 26,576 | |||||
Total liabilities and partners’ capital | $ | 40,738 | $ | 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 March 31, | |||||||||
2003 | 2002 | ||||||||
Revenues | |||||||
Lease revenue | $ | 1,994 | $ | 2,547 | |||
Interest and other income | 24 | 19 | |||||
Gain on disposition of equipment | 36 | 18 | |||||
Loss on disposition of equipment | (17 | ) | (4 | ) | |||
Total revenues | 2,037 | 2,580 | |||||
Expenses | |||||||
Depreciation and amortization | 1,025 | 1,030 | |||||
Repairs and maintenance | 298 | 311 | |||||
Insurance expenses | 64 | 37 | |||||
Management fees to affiliate | 81 | 141 | |||||
Interest expense | 154 | 249 | |||||
General and administrative expenses to affiliates | 45 | 56 | |||||
Other general and administrative expenses | 278 | 1,109 | |||||
Loss on impairment of equipment | 77 | -- | |||||
Provision for bad debts | 36 | 22 | |||||
Total expenses | 2,058 | 2,955 | |||||
Equity in net income (loss) of unconsolidated special-purpose entities | 284 | (95 | ) | ||||
Net income (loss) | $ | 263 | $ | (470 | ) | ||
Partners’ share of net income (loss) | |||||||
Limited partners | $ | 263 | $ | (470 | ) | ||
General Partner | -- | -- | |||||
Total | $ | 263 | $ | (470 | ) | ||
Limited partners' net income (loss) per weighted-average | |||||||
limited partnership unit | $ | 0.03 | $ | (0.06 | ) | ||
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, 2001 to March 31, 2003 |
(in thousands of dollars) |
(unaudited)
Limited Partners | General Partner | Total | ||||||||||||||||||||||||||
Partners’ capital as of December 31, 2001 | $ | 27,498 | $ | -- | $ | 27,498 | ||||||||||||||||||||||
Net loss | (1,096 | ) | -- | (1,096 | ) | |||||||||||||||||||||||
Canceled purchase of limited partnership units | 174 | -- | 174 | |||||||||||||||||||||||||
Partners’ capital as of December 31, 2002 | 26,576 | -- | 26,576 | |||||||||||||||||||||||||
Net income | 263 | -- | 263 | |||||||||||||||||||||||||
Partners’ capital as of March 31, 2003 | $ | 26,839 | $ | -- | $ | 26,839 | ||||||||||||||||||||||
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 Three Months Ended March 31, | ||||||||||||||||||||
2003 | 2002 | |||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net income (loss) | $ | 263 | $ | (470 | ) | |||||||||||||||
Adjustments to reconcile net income (loss) to net cash | ||||||||||||||||||||
provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation and amortization | 1,025 | 1,030 | ||||||||||||||||||
Amortization of debt placement fees | 31 | 74 | ||||||||||||||||||
Net gain on disposition of equipment | (19 | ) | (14 | ) | ||||||||||||||||
Loss on impairment of equipment | 77 | -- | ||||||||||||||||||
Provision for bad debts | 36 | 22 | ||||||||||||||||||
Equity in net (income) loss from unconsolidated special-purpose | ||||||||||||||||||||
entities | (284 | ) | 95 | |||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable, net | (70 | ) | 72 | |||||||||||||||||
Prepaid expenses and other assets | (13 | ) | (25 | ) | ||||||||||||||||
Accounts payable and accrued expenses | (76 | ) | 25 | |||||||||||||||||
Due to affiliates | 82 | 132 | ||||||||||||||||||
Lessee deposits and reserve for repairs | 35 | (2 | ) | |||||||||||||||||
Net cash provided by operating activities | 1,087 | 939 | ||||||||||||||||||
Investing activities | ||||||||||||||||||||
Payments for the purchase of equipment and capitalized repairs | (4,099 | ) | -- | |||||||||||||||||
Payment of acquisition fees to affiliate | (184 | ) | -- | |||||||||||||||||
Payment of lease negotiation fees to affiliate | (41 | ) | -- | |||||||||||||||||
Distribution from unconsolidated special-purpose entities | 371 | 645 | ||||||||||||||||||
Proceeds from disposition of equipment | 66 | 44 | ||||||||||||||||||
Net cash (used in) provided by investing activities | (3,887 | ) | 689 | |||||||||||||||||
Financing activities | ||||||||||||||||||||
Payment of notes payable | (750 | ) | (20,000 | ) | ||||||||||||||||
Proceeds from notes payable | -- | 15,000 | ||||||||||||||||||
Refund from limited partnership units not eligible for purchase | -- | 11 | ||||||||||||||||||
Net cash used in financing activities | (750 | ) | (4,989 | ) | ||||||||||||||||
Net decrease in cash and cash equivalents | (3,550 | ) | (3,361 | ) | ||||||||||||||||
Cash and cash equivalents at beginning of period | 8,286 | 8,051 | ||||||||||||||||||
| ||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 4,736 | $ | 4,690 | ||||||||||||||||
Supplemental information | ||||||||||||||||||||
Non cash cancellation of purchase of limited partnership units | $ | -- | $ | 174 | ||||||||||||||||
Interest paid | $ | 63 | $ | 63 | ||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or the General Partner), 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 March 31, 2003 and December 31, 2002, the unaudited condensed statements of operations for the three months ended March 31, 2003 and 2002, the unaudited condensed statements of changes in partners’ capital for the period from December 31, 2001 to March 31, 2003, and the unaudited condensed statements of cash flows for the three months ended March 31, 2003 and 2002. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in 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.
Effective with the filing of this quarterly report, the Partnership will file all future quarterly and annual reports as an SB filer as allowed under Regulation S-B until such point that the Partnership no longer qualifies to be an SB filer.
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 reinvest its cash flow, surplus cash and equipment disposition proceeds in 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. Reclassification
Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentations.
4. Cash Distributions
Cash distributions are recorded when declared. Cash distributions are generally paid in the same quarter they are declared and may include amounts in excess of net income that are considered a return of capital. No cash distributions were paid to the limited partners during the three months ended March 31, 2003 and 2002.
5. Transactions with General Partner and Affiliates
The balance due to affiliates as of March 31, 2003 and December 31, 2002, included $0.1 million due to FSI and its affiliates for management fees and $1.4 million and $1.3 million, respectively, due to affiliated unconsolidated special-purpose entities (USPEs).
During the three months ended March 31, 2003 and 2002, the Partnership’s proportional share of ownership in USPEs paid or accrued the following fees to FSI or its affiliates: management fees, $60,000 and $58,000, respectively; and administrative and data processing services, $5,000 and $20,000, respectively.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
5. Transactions with General Partner and Affiliates(continued)
These affiliate expenses reduced the Partnership's proportional share of the equity interest in the income of USPEs.
During the three months ended March 31, 2003, the Partnership purchased a fleet of 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.
6. Equipment
Owned equipment held for operating leases is stated at cost. The components of owned equipment were as follows (in thousands of dollars):
March 31, | December 31, | |||||||||||||||||
2003 | 2002 | |||||||||||||||||
Marine containers | $ | 24,114 | $ | 24,223 | ||||||||||||||
Railcars | 21,209 | 17,027 | ||||||||||||||||
Aircraft and components | 16,224 | 16,224 | ||||||||||||||||
Trailers | 5,212 | 5,212 | ||||||||||||||||
66,759 | 62,686 | |||||||||||||||||
Less accumulated depreciation | (45,331 | ) | (44,382 | ) | ||||||||||||||
Net equipment | $ | 21,428 | $ | 18,304 | ||||||||||||||
As of March 31, 2003, all owned equipment in the Partnership’s portfolio was on lease except for 336 railcars, aircraft components and 14 marine containers with an aggregate net book value of $5.4 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 three months ended March 31, 2003, the Partnership purchased a fleet of railcars for $4.3 million including acquisition fees.
During the three months ended March 31, 2003, the Partnership disposed of marine containers and railcars, with an aggregate net book value of $0.1 million for proceeds of $0.1 million. During the three months ended March 31, 2002, the Partnership disposed of marine containers and a railcar, with an aggregate net book value of $31,000 for proceeds of $45,000.
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". In 2003, the Partnership recorded an impairment of $0.1 million to owned aircraft components. 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 consi dered, among other factors, expected income to be earned from the asset, condition of the aircraft components, estimated sales proceeds and holding costs excluding interest. No reductions were required to the carrying value of the owned equipment during the first quarter of 2002.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
7. 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 March 31, 2003 and December 31, 2002 (in thousands of dollars):
Boeing | Aero | |||||
737-300 | California | Lion | ||||
As of March 31, 2003 | Trust1 | Trust2 | Partnership3 | Total | ||
Assets | ||||||||||||
Equipment less accumulated depreciation | $ | 11,838 | $ | -- | $ | 7,050 | ||||||
Receivables | 1,970 | 420 | 1,382 | |||||||||
Finance lease receivable | -- | 2,330 | -- | |||||||||
Other assets | -- | 114 | 7 | |||||||||
Total assets | $ | 13,808 | $ | 2,864 | $ | 8,439 | ||||||
Liabilities | ||||||||||||
Accounts payable | $ | 1 | $ | 2 | $ | 297 | ||||||
Due to affiliates | 7 | 2 | 56 | |||||||||
Lessee deposits and reserve for repairs | 1,970 | 420 | 155 | |||||||||
Total liabilities | 1,978 | 424 | 508 | |||||||||
Equity | 11,830 | 2,440 | 7,931 | |||||||||
Total liabilities and equity | $ | 13,808 | $ | 2,864 | $ | 8,439 | ||||||
Partnership’s share of equity | $ | 7,418 | $ | 976 | $ | 4,144 | $ | 12,538 | ||||
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 | 1,825 | 420 | 716 | |||||||||
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 | ||||
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)
7. Investments in Unconsolidated Special-Purpose Entities(continued)
The tables below set forth 100% of the revenues, direct and indirect expenses and net income (loss) of the entities in which the Partnership has an interest, and the Partnership‘s proportional share of income (loss) in each entity for the three months ended March 31, 2003 and 2002 (in thousands of dollars):
Boeing | Aero | ||||||||
For the three months ended | 737-300 | California | Lion | ||||||
March 31, 2003 | Trust1 | Trust2 | Partnership3 | Total | |||||
Revenues | $ | 465 | $ | 103 | $ | 1,861 | ||||||
Less: Direct expenses | 5 | 5 | 850 | |||||||||
Indirect expenses | 550 | 30 | 418 | |||||||||
Net income (loss) | $ | (90 | ) | $ | 68 | $ | 593 | |||||
Partnership’s share of net income (loss) | $ | (48 | ) | $ | 27 | $ | 305 | $ | 284 | |||
Boeing | Aero | ||||||||||
For the three months ended | 737-300 | California | Lion | ||||||||
March 31, 2002 | Trust1 | Trust2 | Partnership3 | Other | Total | ||||||
Revenues | $ | 465 | $ | 138 | $ | 1,560 | $ | -- | |||||||
Less: Direct expenses | 16 | 5 | 991 | -- | |||||||||||
Indirect expenses | 743 | 34 | 497 | 2 | |||||||||||
Net income (loss) | $ | (294 | ) | $ | 99 | $ | 72 | $ | (2 | ) | |||||
Partnership’s share of | |||||||||||||||
Net income (loss) | $ | (172 | ) | $ | 40 | $ | 38 | $ | (1 | ) | $ | (95 | ) | ||
As of March 31, 2003 and December 31, 2001, all jointly-owned equipment in the Partnership’s USPE portfolio was on lease.
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)
8. 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 | ||||||||||
March 31, 2003 | Leasing | Leasing | Leasing | Leasing | Leasing | Other1 | Total | ||||||||
Revenues | ||||||||||||||||||||||
Lease revenue | $ | -- | $ | 346 | $ | 669 | $ | 217 | $ | 762 | $ | -- | $ | 1,994 | ||||||||
Interest income and other | -- | -- | -- | -- | -- | 24 | 24 | |||||||||||||||
Gain (loss) on disposition of equipment | -- | -- | (17 | ) | -- | 36 | -- | 19 | ||||||||||||||
Total revenues | -- | 346 | 652 | 217 | 798 | 24 | 2,037 | |||||||||||||||
Expenses | ||||||||||||||||||||||
Operations support | -- | -- | 222 | 110 | 12 | 18 | 362 | |||||||||||||||
Depreciation and amortization | -- | 36 | 381 | 73 | 533 | 2 | 1,025 | |||||||||||||||
Interest expense | -- | -- | -- | -- | -- | 154 | 154 | |||||||||||||||
Management fees to affiliate | -- | 9 | 37 | 8 | 27 | -- | 81 | |||||||||||||||
General and administrative expenses | -- | -- | 65 | 36 | 19 | 203 | 323 | |||||||||||||||
Loss on impairment of equipment | -- | 77 | -- | -- | -- | -- | 77 | |||||||||||||||
Provision for bad debts | -- | -- | 36 | -- | -- | -- | 36 | |||||||||||||||
Total expenses | -- | 122 | 741 | 227 | 591 | 377 | 2,058 | |||||||||||||||
Equity in net income (loss) of USPEs | 305 | (21 | ) | -- | -- | -- | -- | 284 | ||||||||||||||
Net income (loss) | $ | 305 | $ | 203 | $ | (89 | ) | $ | (10 | ) | $ | 207 | $ | (353 | ) | $ | 263 | |||||
Total assets as of March 31, 2003 | $ | 4,144 | $ | 9,013 | $ | 8,692 | $ | 977 | $ | 12,133 | $ | 5,779 | $ | 40,738 | ||||||||
Marine | Marine | ||||||||||||||
For the three months ended | Vessel | Aircraft | Railcar | Trailer | Container | ||||||||||
March 31, 2002 | Leasing | Leasing | Leasing | Leasing | Leasing | Other2 | Total | ||||||||
Revenues | ||||||||||||||||||||||
Lease revenue | $ | -- | $ | 410 | $ | 917 | $ | 211 | $ | 1,009 | $ | -- | $ | 2,547 | ||||||||
Interest income and other | -- | -- | -- | -- | -- | 19 | 19 | |||||||||||||||
Gain (loss) on disposition of equipment | -- | -- | (4 | ) | -- | 18 | -- | 14 | ||||||||||||||
Total revenues | -- | 410 | 913 | 211 | 1,027 | 19 | 2,580 | |||||||||||||||
Expenses | ||||||||||||||||||||||
Operations support | (5 | ) | 21 | 167 | 138 | 11 | 16 | 348 | ||||||||||||||
Depreciation and amortization | -- | 47 | 236 | 73 | 651 | 23 | 1,030 | |||||||||||||||
Interest expense | -- | -- | -- | -- | -- | 249 | 249 | |||||||||||||||
Management fees to affiliate | -- | 17 | 64 | 10 | 50 | -- | 141 | |||||||||||||||
General and administrative expenses | -- | (4 | ) | 38 | 38 | 1 | 1,092 | 1,165 | ||||||||||||||
Provision for bad debts | -- | -- | 5 | 17 | -- | -- | 22 | |||||||||||||||
Total expenses | (5 | ) | 81 | 510 | 276 | 713 | 1,380 | 2,955 | ||||||||||||||
Equity in net income (loss) of USPEs | 37 | (132 | ) | -- | -- | -- | -- | (95 | ) | |||||||||||||
Net income (loss) | $ | 42 | $ | 197 | $ | 403 | $ | (65 | ) | $ | 314 | $ | (1,361 | ) | $ | (470 | ) | |||||
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)
9. Net Income (Loss) Per Weighted-Average Limited Partnership Unit
Net income (loss) per weighted-average limited partnership unit was computed by dividing net income (loss) 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 months ended March 31, 2003 and 2002 was 7,730,965 and 7,748,509, respectively.
10. Debt
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 June 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 June 30, 2003. Interest accrues either at the 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 March 31, 2003, there were no outstanding borrowings on this facility by the Partnership or any of the other eligible borrowers.
The Partnership made the regularly scheduled principal payment of $0.8 million to the lender of the notes payable during the three months ended March 31, 2003.
11. Commitments and Contingencies
PLM Transportation Equipment Corp. Inc. (TEC), a wholly owned subsidiary of FSI, arranged for the lease or purchase of a total of 1,050 pressurized tank railcars by (i) partnerships and managed programs in which FSI serves as the general partner or manager and holds an ownership interest (Program Affiliates) or (ii) managed programs in which FSI provides management services but does not hold an ownership interest or third parties (Non-Program Affiliates). These railcars will be delivered between 2002 - 2004. A leasing company affiliated with the manufacturer will acquire approximately 70% of the railcars and leasethem to a Non-Program Affiliate. The remaining 30% will either be purchased by other third parties to be managed by PLMI, or by the Program Affiliates. An affiliate of TEC will manage the leased and purchased railcars. Neither TEC nor its affiliate will be liable for these railcars. TEC estimates that the total value of purchased railcars will not exceed $26.0 million with approximately one third of the railcars being purchased in each of 2002, 2003, and 2004. As of March 31, 2003, $5.1 million in railcars had been purchased by Program Affiliates and FSI committed one Program Affiliate, other than the Partnership, to purchase $5.2 million in railcars during the remainder of 2003. Although FSI has neither determined which Program Affiliates will purchase the remaining railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
In 2003, FSI entered into three additional commitments to purchase a total of $12.1 million in railcars during 2003. 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.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
11. Commitments and Contingencies(continued)
Notes Payable/$30.0 million Term Loan Facility
See Note 10 for discussion of the Partnership’s note payable
Warehouse Credit Facility
See Note 10 for discussion of the Partnership’s warehouse credit facility.
Commitments and contingencies as of March 31, 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 | $ | 26,880 | $ | 18,438 | $ | 8,442 | $ | -- | $ | -- | ||||||||||||||||
Notes payable | 12,000 | 3,000 | 6,000 | 3,000 | -- | |||||||||||||||||||||
Line of credit | -- | -- | -- | -- | -- | |||||||||||||||||||||
$ | 38,880 | $ | 21,438 | $ | 14,442 | 3,000 | $ | -- | ||||||||||||||||||
12. 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 enti ty, 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 September 30, 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 Partnership has determined that it is not reasonably possible that it will be required to consolidate or disclose information about a variable interest entity upon the effective date of FIN 46.
13. Subsequent Event
During April 2003, the Partnership made its regularly scheduled debt payment of $0.8 million to the lenders of the notes payable.
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 March 31, 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 March 31, 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 8 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 expens es by segment (in thousands of dollars):
For the Three Months | |||||||||||
Ended March 31, | |||||||||||
2003 | 2002 | ||||||||||
Marine containers | $ | 750 | $ | 998 | |||||||
Railcars | 447 | 750 | |||||||||
Aircraft and components | 346 | 389 | |||||||||
Trailers | 107 | 73 | |||||||||
Marine vessel | -- | 5 |
Marine containers: Marine container lease revenues and direct expenses were $0.8 million and $12,000, respectively, for the three months ended March 31, 2003, compared to $1.0 million and $11,000, respectively, during the same quarter of 2002. The decrease in lease revenues of $0.2 million during the first quarter of 2003 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.
Railcars: Railcar lease revenues and direct expenses were $0.7 million and $0.2 million, respectively, for the three months ended March 31, 2003, compared to $0.9 million and $0.2 million, respectively, during the same quarter of 2001. A decrease in railcar lease revenues of $0.2 million was due to an increase in the number of off-lease railcars during 2003 compared to 2002. An increase in railcar direct expenses of $0.1 million in the first quarter of 2003 was due to an increase in the repairs and maintenance of $30,000 and an increase in insurance premiums of $24,000 compared to the same period of 2002.
Aircraft and components: Aircraft lease revenues and direct expenses were $0.3 million and $-0-, respectively, for the three months ended March 31, 2003, compared to $0.4 million and $21,000, respectively, during the same period of 2002. A decrease in aircraft and components lease revenues of $0.1 million was due to the aircraft components being off-lease during part of 2003 compared to the same period of 2002 when they were on-lease the entire period.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and $0.1 million, respectively, for the three months ended March 31, 2003 and 2002. Trailer contribution increased $34,000 due to lower repairs and maintenance costs when compared to the same period of 2002.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.7 million for the quarter ended March 31, 2003 decreased from $2.6 million for the same period in 2002. Significant variances are explained as follows:
(i) A $0.8 million decrease in general and administrative expenses during the three months ended March 31, 2003 was due to a $1.0 million debt prepayment penalty in the first quarter 2002 related to the Partnership’s note payable that did not occur during 2003 offset, in part, by a $0.1 increase in administrative services during 2003;
(ii) A $0.1 million decrease in interest expense resulted from lower average borrowings outstanding in the first quarter of 2003 compared to the same period of 2002;
(iii) A $0.1 million decrease in management fees was the result of a decrease of $29,000 due to lower lease revenues earned in the three months ended March 31, 2003 compared to the same period of 2002 and a decrease of $31,000 resulting from the decrease in the management fee rate paid by the Partnership;
(iv) A $5,000 decrease in depreciation and amortization expenses from 2002 levels reflects the increase of approximately $0.2 million caused by the purchase of a fleet of railcars during the three months ended March 31, 2003 offset by a decrease of $0.2 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 $0.1 million increase in the loss on impairment of equipment resulted from the Partnership reducing the carrying value of the owned aircraft components to their estimated fair value. No impairment of equipment was required during the first quarter of 2002.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the first quarter of 2003 totaled $19,000, and resulted from the sale of marine containers and railcars, with an aggregate net book value of $0.1 million for proceeds of $0.1 million. The net gain on the disposition of owned equipment for the first quarter of 2002 totaled $14,000, and resulted from the sale of marine containers and a railcar, with an aggregate net book value of $31,000 for proceeds of $45,000.
(D) Equity in Net Income (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 March 31, | ||||||||||
2003 | 2002 | |||||||||
Marine vessels | $ | 305 | $ | 37 | ||||||
Aircraft | (21 | ) | (132 | ) | ||||||
Equity in net income (loss) of USPEs | $ | 284 | $ | (95 | ) | |||||
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 vessels: As of March 31, 2003 and 2002, the Partnership owned an interest in an entity that owned a marine vessel. During the three months ended March 31, 2003, lease revenues of $1.0 million were offset by depreciation expense, direct expenses, and administrative expenses of $0.7 million. During the same period of 2002, lease revenues of $0.8 million were offset by depreciation expense, direct expenses, and administrative expenses of $0.8 million.
Marine vessel lease revenues increased $0.2 million during the three months ended March 31, 2003 due to higher charter rates earned during the first quarter of 2003 compared to the same period of 2002.
Marine vessel direct expenses decreased $0.1 million during the three months ended March 31, 2003 compared to the same period in 2002 due to lower operating expenses.
Aircraft: As of March 31, 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 first quarter of 2003, revenues of $0.3 million were offset by depreciation expense, direct expenses and administrative expenses of $0.4 million. During the same period of 2002, revenues of $0.3 million were offset by depreciation expense, direct expenses and administrative expenses of $0.5 million.
Aircraft revenues decreased $14,000 due to a lower outstanding principal balance on the finance lease compared to 2002.
Depreciation expense, direct expenses, and administrative expenses decreased $0.1 million during the three months ended March 31, 2003 resulting from the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income for the three months ended March 31, 2003 was $0.3 million, compared to a net loss of $0.5 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 first quarter of 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:
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 deprecation 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. Likew ise, if the net book value of the asset was reduced by an amount greater than the economic value has deteriorated, the Partnership may record a gain on sale upon final disposition of the asset.
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 three months ended March 31, 2003, the Partnership generated $1.1 million in operating cash to meet its operating obligations, purchase additional equipment, pay debt and interest payments and maintain working capital reserves.
During the three months ended March 31, 2003, the Partnership purchased a fleet of 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 $0.1 million.
Accounts receivable increased $49,000 during the three months ended March 31, 2003 due to the timing of cash receipts.
Investments in USPEs decreased $0.1 million during the three months ended March 31, 2003 due to cash distributions of $0.4 million from the USPEs to the Partnership offset, in part, by $0.3 million in income that was recorded by the Partnership for its equity interests in the USPEs.
Accounts payable decreased $0.1 million during the three months ended March 31, 2003 due to the timing of cash payments.
The Partnership made its scheduled principal payment of $0.8 million on the notes payable during the three months ended March 31, 2003. The Partnership is scheduled to make a quarterly debt payment of $0.8 million plus interest to the lenders of the notes payable each quarter. The cash for each payment will come from operations and equipment dispositions.
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 June 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 June 30, 2003. Interest accrues either at the 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 May 12, 2003, there were no outstanding borrowings on this facility by the Partnership or any of the other eligible borrowers.
PLM Transportation Equipment Corp. Inc. (TEC), a wholly owned subsidiary of FSI, arranged for the lease or purchase of a total of 1,050 pressurized tank railcars by (i) partnerships and managed programs in which FSI serves as the general partner or manager and holds an ownership interest (Program Affiliates) or (ii) managed programs in which FSI provides management services but does not hold an ownership interest or third parties (Non-Program Affiliates). These railcars will be delivered between 2002 - 2004. A leasing company affiliated with the manufacturer will acquire approximately 70% of the railcars and leasethem to a Non-Program Affiliate. The remaining 30% will either be purchased by other third parties to be managed by PLMI, or by the Program Affiliates. An affiliate of TEC will manage the leased and purchased railcars. Neither TEC nor its affiliate will be liable for these railcars. TEC estimates that the total value of purchased railcars will not exceed $26.0 million with approximately one third of the railcars being purchased in each of 2002, 2003, and 2004. As of May 12, 2003, $5.1 million in railcars had been purchased by Program Affiliates and FSI committed one Program Affiliate, other than the Partnership, to purchase $5.2 million in railcars during the remainder of 2003. Although FSI has neither determined which Program Affiliates will purchase the remaining railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.
In 2003, FSI entered into three additional commitments to purchase a total of $12.1 million in railcars during 2003. 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.
Commitments and contingencies as of May 12, 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 | $ | 26,880 | $ | 18,438 | $ | 8,442 | $ | -- | $ | -- | ||||||||||||||||
Notes payable | 11,250 | 3,000 | 6,000 | 2,250 | -- | |||||||||||||||||||||
Line of credit | -- | -- | -- | -- | -- | |||||||||||||||||||||
$ | 38,130 | $ | 21,438 | $ | 14,442 | 2,250 | $ | -- | ||||||||||||||||||
(IV) RECENT ACCOUNTING PRONOUNCEMENT
In January 2003,Financial Accounting Standards Boardissued 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 “v ariable 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 September 30, 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 Partnership has determined that it is not reasonably possible that it will be required to consolidate or disclose information about a variable interest entity upon the effective date of FIN 46.
(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 contribution during the remainder of 2003 and beyond include:
(1) The cost of new marine containers has been at historic lows for the past several years, which has caused downward pressure on per diem lease rates for this type of equipment. In addition, during 2003, a significant number of the Partnership’s marine containers currently on a fixed rate lease will be switching to a lease based on utilization. The General Partner anticipates that this will result in a significant decrease in lease revenues;
(2) Industry-wide chemical shipments, a good indicator for the demand of the types of railcars owned by the Partnership, were up 4% during the first quarter of 2003 compared to the same period of 2002 although growth in comparable shipments slowed during the month of March 2003. Overall industry-wide railcar utilization has been on a slightly positive trend since the third quarter of 2002. Recovery has been slowed by the uncertainties caused by the war in Iraq and the number of idle railcars owned by shippers in their fleet;
(3) Marine vessel freight rates are usually dependent upon the overall condition of the international economy. Freight rates earned by the Partnership’s partially owned marine vessel began to decrease during most of 2002. In the fourth quarter of 2002 and into 2003, freight rates for the Partnership’s partially owned marine vessel, which primarily carries clean petroleum products, started to increase due to an increase in oil prices caused by political instability in the Middle East and a shortage of heating oil and gasoline in the United States caused by refinery maintenance and clean product delivery problems out of Venezuela due to politi cal unrest;
(4) Market demand for new and used aircraft has been severely impacted by the poor financial condition of the airline industry caused by lower passenger travel following the events of September 11, 2001 and the war in Iraq. 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. During 2003, severe acute respiratory syndrome (SARS) has had a dramatic effect on passenger travel to countries in Asia . If this trend continues, it is possible that passenger travel will be reduced further.
In the first quarter of 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 lessee of the Partnership’s owned MD-80 commercial aircraft that is on lease until July 2008 has encountered financial difficulty and may go into bankruptcy. If the airline does go into bankruptcy, the aircraft could be returned to the Partnership prior to its lease expiration date or, alternatively, the Partnership could attempt to renegotiate with the carrier at a significantly lower lease rate. Due to the poor market condition for equipment of this type, if the equipment is returned prior to its lease expiration date, it may either be off-lease for a considerable period of time or re-leased at a substantially lower rate. In an effort to assist the airline to stay out of bankruptcy, the Partnership has agreed to reduce the lease payment due on this aircraft by approximately 5% a month.;
(5) Utilization of intermodal trailers owned by the Partnership was 54% in the three months ended March 31, 2003 which was approximately the same as the three months ended March 31, 2002. Industry-wide utilization of intermodal trailers was 48% in the three months ended March 31, 2003 compared to 53% in the same period of 2002. As the Partnership’s trailers are smaller than many shippers prefer, the General Partner expects utilization to decline over the next few years;
(6) The General Partner has seen an increase in its insurance premiums on its equipment portfolio and is finding it more difficult to find an insurance carrier with which to place the coverage. Premiums for aircraft have increased over 50% and for other types of equipment the increases have been over 25%. The increase in insurance premiums caused by the increased rate will be partially mitigated by the reduction in the value of the Partnership’s equipment portfolio caused by the events of September 11, 2001 and other economic factors. The General Partner has also experienced an increase in the deductible required to obtain coverage. This may have a negative impact on the Partnership in the event of an insurance claim; and
(7) The management fee rate paid by the Partnership was reduced by 25% for the period starting January 1, 2003 and ending June 30, 2005. The General Partner expects audit fees to increase during 2003 due to additional audit and accounting requirements resulting from Sarbanes-Oxley. The General Partner cannot estimate the amount of the increase in this fee at this point. In addition, as a result of the increase in off-lease equipment, 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. Alternat ively, 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 reinvest its cash flow, surplus cash, and equipment sale proceeds in 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. Surplus funds, if any, less reasonable reserves, may be distributed to the partners. 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, and pay cash distributions to the partners.
(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. The Partnership’s actual results could differ materially from those discussed here.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, evaluations were carried out under the supervision and with the participation of the General Partner's management, including its President andChief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon those evaluations, the President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes have been made in the Partnership’s in ternal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluations.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
(This space intentionally left blank)
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: May 12, 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: May 12, 2003 By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND VI
By: PLM Financial Services, Inc.
General Partner
Date: May 12, 2003 By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
CERTIFICATION
The undersigned hereby certifies, in their capacity as an officer of the General Partner of PLM Equipment Growth Fund VI (the Partnership), that the Quarterly Report of the Partnership on Form 10-QSB for the period ended March 31, 2003, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Partnership at the end of such period and the results of operations of the Partnership for such period.
PLM EQUIPMENT GROWTH FUND VI
By: PLM Financial Services, Inc.
General Partner
Date: May 12, 2003 By: /s/ James A. Coyne
James A. Coyne
President
Date: May 12, 2003 By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer