UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended March 31, 2002
[ ] 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 1-10813
-----------------------
PLM EQUIPMENT GROWTH FUND III
(Exact name of registrant as specified in its charter)
California 68-0146197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Montgomery Street,
Suite 1350, San Francisco, CA 94104
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (415) 445-3201
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
CONDENSED BALANCE SHEETS
(in thousands of dollars, except unit amounts)
(unaudited)
March 31, December 31,
2002 2001
------------------------------------
ASSETS
Equipment held for operating leases at cost $ 31,841 $ 37,731
Less accumulated depreciation (28,722) (33,833)
-----------------------------------
Net equipment 3,119 3,898
Cash and cash equivalents 4,681 10,141
Accounts receivable, net of allowance for doubtful
accounts of $501 in 2002 and $518 in 2001 2,104 420
Prepaid expenses and other assets 65 23
-----------------------------------
Total assets` $ 9,969 $ 14,482
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 185 $ 416
Due to affiliates 87 66
Lessee deposits and reserves for repairs 9 29
-----------------------------------
Total liabilities 281 511
-----------------------------------
Partners' capital:
Limited partners (9,871,210 depositary units as
of March 31, 2002 and December 31, 2001) 9,688 13,971
General Partner -- --
-----------------------------------
Total partners' capital 9,688 13,971
-----------------------------------
Total liabilities and partners' capital $ 9,969 $ 14,482
===================================
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
CONDENSED STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
(unaudited)
For the Three Months
Ended March 31,
2002 2001
---------------------------
REVENUES
Lease revenue $ 1,607 $ 1,970
Interest and other income 39 53
Net gain on disposition of equipment 172 3,842
---------------------------
Total revenues 1,818 5,865
---------------------------
EXPENSES
Depreciation and amortization 386 601
Repairs and maintenance 439 560
Equipment operating expenses 8 8
Insurance expenses 21 71
Management fees to affiliate 111 119
General and administrative expenses to affiliates 60 164
Other general and administrative expenses 139 429
(Recovery of) provision for bad debts (17) 30
---------------------------
Total expenses 1,147 1,982
---------------------------
Equity in net income (loss) of unconsolidated
special-purpose entity 34 (10)
---------------------------
Net income $ 705 $ 3,873
===========================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 456 $ 3,873
General Partner 249 --
---------------------------
Total $ 705 $ 3,873
===========================
Limited partners' net income per weighted-average
depositary unit $ 0.05 $ 0.39
===========================
Cash distributions $ 4,988 $ --
===========================
Cash distributions per limited partners'
weighted-average depository unit: $ 0.48 $ --
===========================
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Period from December 31, 2000 to March 31, 2002
(in thousands of dollars)
(unaudited)
Limited General
Partners Partner Total
------------------------------------------------
Partners' capital as of December 31, 2000 $ 9,316 $ -- $ 9,316
Net income 5,247 31 5,278
Cash distribution (592) (31) (623)
-----------------------------------------------
Partners' capital as of December 31, 2001 13,971 -- 13,971
Net income 456 249 705
Cash distribution (4,739) (249) (4,988)
-----------------------------------------------
Partners' capital as of March 31, 2002 $ 9,688 $ -- $ 9,688
===============================================
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
For the Three Months
Ended March 31,
2002 2001
----------------------------
OPERATING ACTIVITIES
Net income $ 705 $ 3,873
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 386 601
Net gain on disposition of equipment (172) (3,842)
Equity in net (income) loss from unconsolidated special-purpose entity (34) 10
Changes in operating assets and liabilities:
Accounts receivables, net 56 (485)
Restricted cash -- 125
Prepaid expenses and other assets (42) (21)
Accounts payable and accrued expenses (231) (102)
Due to affiliates 21 34
Lessee deposits and reserves for repairs (20) (185)
----------------------------
Net cash provided by operating activities 669 8
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (7) (44)
Distributions from unconsolidated special-purpose entity 34 66
Proceeds from disposition of equipment 77 5,422
----------------------------
Net cash provided by investing activities 104 5,444
----------------------------
FINANCING ACTIVITIES
Refundable payment made to transfer agent (1,245) --
Cash distribution paid to limited partners (4,739) --
Cash distribution paid to General Partner (249) --
----------------------------
Net cash used in financing activities (6,233) --
----------------------------
Net (decrease) increase in cash and cash equivalents (5,460) 5,452
Cash and cash equivalents at beginning of period 10,141 1,832
----------------------------
Cash and cash equivalents at end of period $ 4,681 $ 7,284
============================
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND III
(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 III (the Partnership) as of March 31, 2002 and December
31, 2001, the unaudited condensed statements of income for the three months
ended March 31, 2002 and 2001, the unaudited condensed statements of changes in
partners' capital for the period from December 31, 2000 to March 31, 2002, and
the unaudited condensed statements of cash flows for the three months ended
March 31, 2002 and 2001. 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, 2001, on file at the Securities and Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
The Partnership, in accordance with its limited partnership agreement, entered
its liquidation phase on January 1, 2000 and has commenced an orderly
liquidation of the Partnership's assets. The General Partner may no longer
reinvest cash flows and surplus funds in equipment. All future cash flows and
surplus funds, if any, are to be used for distributions to partners, except to
the extent used to maintain reasonable reserves. The General Partner filed a
certificate of dissolution on behalf of the Partnership with the Secretary of
State for the State of California on December 31, 2000, and following completion
of the liquidation of the Partnership, will file a certificate of cancellation.
During the liquidation phase, the Partnership's assets will continue to be
reported at the lower of carrying amount or fair value less cost to sell.
3. CASH DISTRIBUTIONS
Cash distributions are recorded when paid and may include amounts in excess of
net income that are considered to represent a return of capital. For the three
months ended March 31, 2002, cash distributions totaled $5.0 million. Cash
distributions to the limited partners of $4.3 million for the three months ended
March 31, 2002 were deemed to be a return of capital. There were no cash
distributions during the three months ended March 31, 2001.
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of March 31, 2002 and December 31, 2001
included $0.1 million due to FSI and its affiliate for management fees.
The Partnership did not incur any expenses to affiliates by jointly owned
equipment during the first quarter of 2002.The Partnership's proportional share
of the expenses incurred by an unconsolidated special-purpose entity (USPE)
during the first quarter of 2001 was $10,000.
PLM EQUIPMENT GROWTH FUND III
(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):
March 31, December 31,
2002 2001
--------------------------------------
Railcars $ 27,864 $ 32,305
Trailers 2,473 3,036
Marine containers 1,504 2,390
-------------------------------------
31,841 37,731
Less accumulated depreciation (28,722) (33,833)
-------------------------------------
Net equipment $ 3,119 $ 3,898
=====================================
As of March 31, 2002, all equipment in the Partnership portfolio was on lease
except for 107 railcars. As of December 31, 2001, all equipment in the
Partnership portfolio was on lease except for 100 railcars. The net book value
of the equipment off lease was $0.3 million as of March 31, 2001 and December
31, 2000.
Capital improvements to the Partnership's equipment of $7,000 and $44,000 were
made during the three months ended March 31, 2002 and 2001, respectively.
During the three months ended March 31, 2002, the Partnership disposed of marine
containers, trailers, and railcars, with an aggregate net book value of $0.4
million for aggregate proceeds of $0.6 million. During the three months ended
March 31, 2001, the Partnership disposed of aircraft, marine containers,
trailers, and railcars, with an aggregate net book value of $1.6 million for
aggregate proceeds of $5.4 million.
(this space intentionally left blank)
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
6. OPERATING SEGMENTS
The Partnership operates or operated primarily in four different segments:
aircraft leasing, railcar leasing, marine container leasing, and trailer
leasing. Each segment of equipment leasing engages in short-term and mid-term
operating leases to a variety of customers. The following tables present a
summary of the operating segments (in thousands of dollars):
Marine
For the three months ended Railcar Container Trailer All
March 31, 2002 Leasing Leasing Leasing Other(1) Total
-------------- ------- ------- ------- ------ -----
REVENUES
Lease revenue $ 1,479 $ 7 $ 121 $ -- $ 1,607
Interest income and other 13 -- -- 26 39
Gain on disposition of equipment 97 50 25 -- 172
----------------------------------------------------
Total revenues 1,589 57 146 26 1,818
----------------------------------------------------
COSTS AND EXPENSES
Operations support 386 -- 66 16 468
Depreciation 345 6 35 -- 386
Management fees to affiliates 105 -- 6 -- 111
General and administrative 84 -- 19 96 199
expenses
Provision for (recovery of) bad (26) -- 9 -- (17)
debts
----------------------------------------------------
Total costs and expenses 894 6 135 112 1,147
----------------------------------------------------
Equity in net income of an USPE -- -- -- 34 34
----------------------------------------------------
Net income (loss) $ 695 $ 51 $ 11 $ (52) $ 705
====================================================
Total assets as of March 31, 2002 $ 3,179 $ 42 $ 757 $ 5,991 $ 9,969
====================================================
Marine
For the three months ended Aircraft Railcar Container Trailer
March 31, 2001 Leasing Leasing Leasing Leasing All Other(2) Total
-------------- ------- ------- ------- ------- ------- -----
REVENUES
Lease revenue $ 185 $ 1,680 $ 12 $ 93 $ -- $ 1,970
Interest income and other 6 -- -- -- 47 53
Net gain on disposition of 3,699 90 32 21 -- 3,842
equipment
--------------------------------------------------------------
Total revenues 3,890 1,770 44 114 47 5,865
--------------------------------------------------------------
COSTS AND EXPENSES
Operations support 25 509 -- 45 60 639
Depreciation and amortization 151 395 9 46 -- 601
Management fees to affiliates 2 111 1 5 -- 119
General and administrative expenses 147 52 -- 20 374 593
Provision of bad debts -- 30 -- -- -- 30
--------------------------------------------------------------
Total costs and expenses 325 1,097 10 116 434 1,982
--------------------------------------------------------------
Equity in net loss of an USPE -- -- -- -- (10) (10)
--------------------------------------------------------------
Net income (loss) $ 3,565 $ 673 $ 34 $ (2) $ (397) $ 3,873
==============================================================
- -------------------------
(1) Includes certain assets not identifiable to a particular segment, such as
cash, prepaid expenses and certain accounts receivable. Also includes
certain interest income and costs not identifiable to a particular segment
such as certain operations support and general and administrative expenses.
Also includes the equity in the income of an entity that owned a marine
vessel.
(2) Includes certain interest income and costs not identifiable to a particular
segment such as certain operations support and general and administrative
expenses. Also includes the equity in the loss of an entity that owned a
marine vessel.
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
7. NET INCOME PER WEIGHTED-AVERAGE DEPOSITORY UNIT
Net income per weighted-average depository unit was computed by dividing net
income attributable to the limited partners by the weighted-average number of
depository units deemed outstanding during the period. The weighted-average
number of depository units deemed outstanding during the three months ended
March 31, 2002 and 2001 was 9,871,210.
8. CONTINGENCIES
The Partnership, together with affiliates, has initiated litigation in various
official forums in India and the United States against two defaulting Indian
airline lessees to repossess Partnership property and to recover damages for
failure to pay rent and failure to maintain such property in accordance with the
relevant lease contracts. The Partnership has repossessed all of its property
previously leased to these airlines, causing one of the airline lessees to cease
operations. In response to the Partnership's collection efforts, the airline
lessees filed counter-claims against the Partnership in excess of the
Partnership's claims against the airlines. The General Partner believes that the
airlines' counterclaims are completely without merit, and the General Partner
will vigorously defend against such counterclaims.
During 2001, an arbitration between one Indian lessee and the Partnership took
place and the Partnership was awarded a settlement. The General Partner and the
lessee are in the process of negotiating the settlement in a manner that
benefits all parties involved. The General Partner decided not to accrue the
amount of the settlement because collection of the settlement is remote. The
General Partner will continue to try to collect the full amount of the
settlement.
During 2001, the General Partner has decided to minimize its collection efforts
from the other Indian lessee in order to save the Partnership from incurring
additional expenses associated with trying to collect from a lessee that has a
limited ability to pay.
The Partnership is involved as plaintiff or defendant in various legal actions
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition or results of operations of
the Partnership.
9. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 2000, the General Partner began the liquidation phase of the
Partnership and commenced an orderly liquidation of the Partnership assets. The
General Partner is actively marketing the remaining equipment portfolio with the
intent of maximizing sale proceeds. During the liquidation phase of the
Partnership the equipment will continue to be leased under operating leases
until sold. The amounts reflected for assets and liabilities of the Partnership
have not been adjusted to reflect liquidation values. The equipment portfolio
continues to be carried at the lower of depreciated cost or fair value less cost
to dispose. Although the General Partner estimates that there will be
distributions after liquidation of assets and liabilities, the amounts cannot be
accurately determined prior to actual liquidation of the equipment. Upon final
liquidation, the Partnership will be dissolved.
The Partnership is not permitted to reinvest proceeds from the disposition of
equipment. These proceeds, in excess of operational cash requirements, are
periodically paid out to limited partners in the form of special distributions.
No special distributions were paid in the first quarter of 2002 and 2001. The
sales and liquidations occur because of the determination by the General Partner
that it is the appropriate time to maximize the return on an asset through sale
of that asset, and, in some leases, the ability of the lessee to exercise
purchase options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
COMPARISON OF PLM EQUIPMENT GROWTH FUND III'S (THE PARTNERSHIP'S) OPERATING
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating and asset-specific insurance expenses) on owned equipment
decreased during the three months ended March 31, 2002 compared to the same
period of 2001. Gains or losses from the sale of equipment, interest and other
income, and certain expenses such as depreciation and amortization and general
and administrative expenses relating to the operating segments (see Note 6 to
the unaudited condensed financial statements), are not included in the owned
equipment operation discussion because these expenses are indirect in nature,
not a result of operations but the result of owning a portfolio of equipment.
The following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Three Months
Ended March 31,
2002 2001
-------------------------------------
Railcars $ 1,093 $ 1,171
Trailers 55 48
Marine containers 7 12
Aircraft -- 160
Railcars: Railcar lease revenues and direct expenses were $1.5 million and $0.4
million, respectively, for the quarter ended March 31, 2002 compared to $1.7
million and $0.5 million for the quarter ended March 31, 2001. The reduction in
lease revenue and direct expenses in 2002 compared to 2001 was due to the
disposition of railcars over the past year.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and $0.1
million, respectively, for the quarter ended March 31, 2002, compared to $0.1
million and $45,000, respectively, during the same period of 2001.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$25,000, respectively, during the quarter ended March 31, 2001. There were no
aircraft lease revenues and expenses in the quarter ended March 31, 2002 as the
Partnership sold its wholly owned aircraft in 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.7 million for the quarter ended March 31, 2002
decreased from $1.3 million for the same period of 2001. Significant variances
are explained as follows:
(i) A $0.4 million decrease in general and administrative expenses was due
to a $0.2 million reduction in professional services in the first quarter
of 2002 compared to the same period of 2001 and a $0.1 million reduction in
allocations from the General Partner due to the reduction in the size of
the equipment portfolio.
(ii) A decrease of $0.2 million in depreciation and amortization expenses
in the first quarter of 2002 compared to the same period in 2001 reflects
the disposition of Partnership assets during 2002 and 2001.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the first quarter of 2002
was $0.2 million, resulting from the disposition of marine containers, railcars
and trailers, with an aggregate net book value of $0.4 million for aggregate
proceeds of $0.6 million. The net gain on the disposition of owned equipment for
the first quarter of 2001 was $3.8 million, resulting from the disposition of
aircraft, marine containers, railcars and trailers, with an aggregate net book
value of $1.6 million for aggregate proceeds of $5.4 million.
(D) Equity in Net Income (Loss) of an Unconsolidated Special-Purpose Entity
(USPE)
Equity in net income (loss) of USPEs represents the Partnership's share of the
net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method of accounting. This entity was a single purpose
entity that had no debt. Net income generated from the operation of
jointly-owned assets was $34,000 in the quarter ended March 31, 2002 compared to
a loss of $10,000 in the same period of 2001.
As of March 31, 2002 and 2001, the Partnership had no remaining interest in
entities that owned equipment. The Partnership's share of revenues and expenses
in jointly owned equipment was $34,000 and $0, respectively compared to $6,000
and $16,000, respectively, for the quarter ended March 31, 2001 The revenue in
2002 related to insurance proceeds from a marine vessel in which the Partnership
previously had an interest.
(E) Net Income
As a result of the foregoing, the Partnership had net income of $0.7 million in
the first quarter of 2002 compared to net income of $3.9 million in the first
quarter of 2001. The Partnership's ability to 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 three months ended
March 31, 2002 is not necessarily indicative of future periods. In the first
quarter of 2002, the Partnership distributed $4.7 million to the limited
partners or $0.48 per depository unit.
(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 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, and
contingencies and litigation. These estimates are based on our 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 signifigant judgments and estimates used in the preparation of our
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 a
loss on revaluation. Likewise, 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: On a regular basis, 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 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.
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 made
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, LIQUIDITY, AND DISTRIBUTIONS
For the three months ended March 31, 2002, the Partnership generated $0.7
million in operating cash (net cash provided by operating activities plus
non-liquidating distributions from an USPE) to meet its operating obligations
and fund distributions (total of $5.0 million for the three months ended March
31, 2002,) but also used undistributed available cash from prior periods and
proceeds from equipment dispositions of $4.2 million.
During the three months ended March 31, 2002, the Partnership sold owned
equipment and received aggregate proceeds of $0.1 million.
During the three months ended March 31, 2002, accounts receivable increased $1.7
million due to an increase of $1.2 million related to a receivable from the
Partnership's transfer agent related to an over funding of the first quarter
distribution and to $0.5 million in receivables related to asset dispositions
being outstanding on March 31, 2002. Similar receivables were not outstanding at
December 31, 2001.
During the three months ended March 31, 2002, accounts payable and accrued
expenses decreased $0.2 million due to the payment of $0.2 million in the first
quarter of 2002 for an aircraft repair that was accrued for as of December 31,
2001.
The General Partner has not planned any expenditure, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Significant asset sales may result in special distributions to the
partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts cannot
be accurately determined prior to actual disposal of the equipment.
(IV) OUTLOOK FOR THE FUTURE
The Partnership entered its liquidation phase on January 1, 2000. The General
Partner is seeking to selectively re-lease or sell assets as the existing leases
expire. Sale decisions may cause the operating performance of the Partnership to
decline over the remainder of its life. The General Partner filed a certificate
of dissolution on behalf of the Partnership with the Secretary of State for the
State of California in December 2000, and following completion of the
liquidation of the Partnership, the General Partner will file a certificate of
cancellation.
Several factors may affect the Partnership's operating performance in the
remainder of 2002 and beyond, including changes in the markets for the
Partnership's equipment and changes in the regulatory environment in which that
equipment operates.
Liquidation of the Partnership's equipment will cause a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership. Other factors affecting the Partnership's contribution in the year
2002 include:
1. The Partnership's fleet of both standard dry and specialized marine
containers is in excess of twelve years of age and is generally no longer
suitable for use in international commerce either due to its specific
physical condition, or lessees preferences for newer equipment. Demand for
the Partnership's marine containers will continue to be weak due to their
age.
2. Railcar loadings in North America have weakened over the past year.
Utilization and lease rates have been decreasing over this period. Railcar
contribution may decrease in 2002 as existing leases expire and renewal
leases are negotiated.
3. Industry-wide utilization of intermodal trailers decreased 8% in the first
quarter of 2002 compared to the first quarter of 2001. This has led to
lower contribution from the Partnership's trailers as existing leases
expire and renewals are negotiated.
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 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 those equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.
The Partnership intends to use cash flow from operations and proceeds from
disposition of equipment to satisfy its operating requirements, maintain working
capital reserves, and pay cash distributions to the unitholders.
(V) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q 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-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is currency devaluation risk.
During the first quarter of 2002, 67% of the Partnership's total lease revenues
equipment came from non-United States domiciled lessees. Most of the
Partnership's leases require payment in United States currency. If these
lessees' currency devalues against the U.S. dollar, the lessees could
potentially encounter difficulty in making the U.S. dollar denominated lease
payments.
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)
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 III
By: PLM Financial Services, Inc.
General Partner
Date: May 7, 2002 By: /s/ Stephen M. Bess
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Stephen M. Bess
President and Current Chief Accounting
Officer