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 SEPTEMBER 30, 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 0-18789 _______________________ PLM EQUIPMENT GROWTH FUND IV (Exact name of registrant as specified in its charter) CALIFORNIA 94-3090127 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 450 CARILLON PARKWAY, SUITE 200 ST. PETERSBURG, FL 33716 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (727) 803-8200 _______________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED BALANCE SHEETS (in thousands of dollars, except unit amounts) (unaudited) September 30, December 31, 2002 2001 ================================ ASSETS Equipment held for operating leases, at cost. . . . . . $ 11,525 $ 15,811 Less accumulated depreciation . . . . . . . . . . . . . (8,362) (11,918) --------------- -------------- Net equipment . . . . . . . . . . . . . . . . . . . 3,163 3,893 Cash and cash equivalents . . . . . . . . . . . . . . . 6,677 8,879 Accounts receivable, less allowance for doubtful accounts of $50 in 2002 and $45 in 2001 . . . . . 140 82 Investment in an unconsolidated special-purpose entity. 968 1,197 Prepaid expenses and other assets . . . . . . . . . . . 41 21 --------------- -------------- Total assets . . . . . . . . . . . . . . . . . . . $ 10,989 $ 14,072 =============== ============== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses . . . . . . . . . $ 65 $ 293 Due to affiliates . . . . . . . . . . . . . . . . . . . 160 168 --------------- -------------- Total liabilities . . . . . . . . . . . . . . . . . 225 461 --------------- -------------- Commitments and contingencies Partners' capital: Limited partners (8,628,420 limited partnership units in 2002 and 2001) . . . . . . . . . . . . . . . . 10,764 13,611 General Partner . . . . . . . . . . . . . . . . . . . . -- -- --------------- -------------- Total partners' capital . . . . . . . . . . . . . . 10,764 13,611 --------------- -------------- Total liabilities and partners' capital. . . . . . $ 10,989 $ 14,072 =============== ============== See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF INCOME (in thousands of dollars, except weighted-average unit amounts) (unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 =========================================== REVENUES Lease revenue . . . . . . . . . . . . . . . . . $ 459 $ 634 $ 1,517 $ 2,185 Interest and other income . . . . . . . . . . . 38 72 95 251 Gain on disposition of equipment. . . . . . . . 10 16 659 3,471 ------- -------- -------- ------- Total revenues. . . . . . . . . . . . . . . 507 722 2,271 5,907 ------- -------- -------- ------- EXPENSES Depreciation. . . . . . . . . . . . . . . . . . 63 119 216 547 Repairs and maintenance . . . . . . . . . . . . 163 368 427 640 Equipment operating expenses. . . . . . . . . . 20 18 62 137 Management fees to affiliate. . . . . . . . . . 34 44 108 142 General and administrative expenses to affiliates . . . . . . . . . . . . . . 16 35 79 195 Other general and administrative expenses . . . 162 74 319 411 Provision for (recovery of) bad debts . . . . . (30) 1 4 15 ------- -------- -------- ------- Total expenses. . . . . . . . . . . . . . . 428 659 1,215 2,087 ------- -------- -------- ------- Equity in net income of unconsolidated special- purpose entities. . . . . . . . . . . . . 29 99 93 273 ------- -------- -------- ------- Net income. . . . . . . . . . . . . . . . . . . $ 108 162 $1,149 $4,093 ======= ======== ======== ======= PARTNERS' SHARE OF NET INCOME Limited partners. . . . . . . . . . . . . . . . $ 108 162 $ 949 $4,003 General Partner . . . . . . . . . . . . . . . . -- -- 200 90 ------- -------- -------- ------- Total . . . . . . . . . . . . . . . . . . . . . $ 108 162 $1,149 $4,093 ======= ======== ======== ======= Net income per weighted-average limited partnership unit. . . . . . . . . $ 0.01 0.02 $ 0.11 $ 0.46 ======= ======== ======== ======= Cash distribution . . . . . . . . . . . . . . . $ -- -- $3,996 $1,770 ======= ======== ======== ======= Cash distribution per weighted-average limited partnership unit. . . . . . . . . $ -- -- $ 0.44 $ 0.19 ======= ======== ======== ======= See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIOD FROM DECEMBER 31, 2000 TO SEPTEMBER 30, 2002 (in thousands of dollars) (unaudited) Limited General Partners Partner Total ========== ========= ======== Partners' capital as of December 31, 2000. $ 12,134 $ -- $12,134 Net income . . . . . . . . . . . . . . . . . 3,157 90 3,247 Cash distribution. . . . . . . . . . . . . . (1,680) (90) (1,770) --------- ---------- -------- Partners' capital as of December 31, 2001. 13,611 -- 13,611 Net income . . . . . . . . . . . . . . . . . 949 200 1,149 Cash distribution. . . . . . . . . . . . . . (3,796) (200) (3,996) --------- ---------- -------- Partners' capital as of September 30, 2002 $ 10,764 $ -- $10,764 ========== ========= ======== See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CASH FLOWS (in thousands of dollars) (unaudited) For the Nine Months Ended September 30, 2002 2001 ===================== OPERATING ACTIVITIES Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,149 $ 4,093 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation. . . . . . . . . . . . . . . . . . . . . . . 216 547 Gain on disposition of equipment. . . . . . . . . . . . . (659) (3,471) Equity in net income of unconsolidated special-purpose entities. . . . . . . . . . . . . . . . . . . . . . . . (93) (273) Changes in operating assets and liabilities: Restricted cash . . . . . . . . . . . . . . . . . . . . -- 125 Accounts receivable, net. . . . . . . . . . . . . . . . (60) 102 Prepaid expenses and other assets . . . . . . . . . . . (20) 13 Accounts payable and accrued expenses . . . . . . . . . (228) 189 Due to affiliates . . . . . . . . . . . . . . . . . . . (8) (9) Lessee deposits and reserve for repairs . . . . . . . . -- (217) ---------- -------- Net cash provided by operating activities . . . . . . 297 1,099 ---------- -------- INVESTING ACTIVITIES Payments for capitalized improvements . . . . . . . . . . . -- (2) Proceeds from disposition of equipment. . . . . . . . . . . 1,175 5,391 Distribution from unconsolidated special-purpose entities . 322 570 ---------- -------- Net cash provided by investing activities . . . . . . 1,497 5,959 ---------- -------- FINANCING ACTIVITIES Cash distribution paid to limited partners. . . . . . . . . (3,796) (1,680) Cash distribution paid to General Partner . . . . . . . . . (200) (90) ---------- -------- Net cash used in financing activities . . . . . . . . (3,996) (1,770) ---------- -------- Net (decrease) increase in cash and cash equivalents. . . . (2,202) 5,288 Cash and cash equivalents at beginning of period. . . . . . 8,879 2,742 ---------- -------- Cash and cash equivalents at end of period. . . . . . . . . $ 6,677 $ 8,030 ========== ======== See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (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 IV (the Partnership) as of September 30, 2002 and December 31, 2001, the unaudited condensed statements of income for the three and nine months ended September 30, 2002 and 2001, the unaudited condensed statements of changes in partners' capital for the period from December 31, 2000 to September 30, 2002, and the unaudited condensed statements of cash flows for the nine months ended September 30, 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, 1999, and has commenced an orderly liquidation of the Partnership's assets. The Partnership will terminate on December 31, 2009, unless terminated earlier upon sale of all equipment or by certain other events. During the liquidation phase, the Partnership may not reinvest cash flows and proceeds from asset dispositions into additional equipment. All future cash flows and surplus funds after payment of operating expenses, if any, are to be used for cash distributions to the partners, except to the extent used to maintain reasonable working reserves. During the liquidation phase, the Partnership's assets will continue to be recorded 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 a return of capital. For the nine months ended September 30, 2002 and 2001, cash distributions totaled $4.0 million and $1.8 million, respectively. No cash distributions were paid during the three months ended September 30, 2002 and 2001. Cash distributions of $2.8 million and $-0- to the limited partners for the nine months ended September 30, 2002 and 2001, respectively, were deemed to be a return of capital. 4. Transactions with General Partner and Affiliates ----------------------------------------------------- The balance due to affiliates as of September 30, 2002 and December 31, 2001 includes $13,000 and $21,000, respectively, due to FSI and its affiliates for management fees and $0.1 million due to an affiliated unconsolidated special-purpose entity (USPE). PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 4. Transactions with General Partner and Affiliates (continued) ----------------------------------------------------- The Partnership's proportional share of the expenses incurred by the USPE during 2002 and 2001 is listed in the following table (in thousands of dollars): For the Three Months For the Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 ========================================== Management fees. . . . . . . . . . $ 2 $ 4 $ 6 $ 13 Data processing and administrative expenses. . . . . . . . . . . . -- -- 2 -- These affiliated expenses reduced the Partnership's proportional share of the equity interest in income of the USPE. 5. Equipment --------- Owned equipment held for operating leases is stated at cost. The components of owned equipment were as follows (in thousands of dollars): September 30, December 31, 2002 2001 =============================== Railcars. . . . . . . . . . . $ 10,982 $ 13,239 Marine containers . . . . . . 543 2,572 --------------- -------------- 11,525 15,811 Less accumulated depreciation (8,362) (11,918) --------------- -------------- Net equipment. . . . . . . $ 3,163 $ 3,893 =============== ============== As of September 30, 2002, all equipment was on lease except for 121 railcars and 7 marine containers with an aggregate net book value of $1.0 million. As of December 31, 2001, all equipment was on lease except for 47 railcars with a net book value of $0.3 million. During the nine months ended September 30, 2002, the Partnership disposed of marine containers and railcars with an aggregate net book value of $0.5 million, for proceeds of $1.2 million. During the nine months ended September 30, 2001, the Partnership sold aircraft, marine containers and railcars with an aggregate net book value of $1.9 million, for proceeds of $5.4 million. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 6. Investment in an Unconsolidated Special-Purpose Entity ----------------------------------------------------------- The Partnership owns equipment jointly with affiliated programs. This is a single purpose entity that does not have any debt or other financial encumbrances. The table below sets forth 100% of the assets, liabilities, and equity of the Aero California Trust in which the Partnership has a 35% interest and the Partnership's proportional share of equity in the entity (in thousands of dollars): September 30, December 31, 2002 2001 ========================= Assets Receivables . . . . . . . . . . . . . . $ 420 420 Finance lease receivable. . . . . . . . 2,763 3,450 Other assets. . . . . . . . . . . . . . 6 9 ------- ------- Total assets. . . . . . . . . . . . . $3,189 $3,879 ======= ======= Liabilities Accounts payable. . . . . . . . . . . . $ 1 $ -- Due to affiliates . . . . . . . . . . . 2 39 Lessee deposits and reserve for repairs 420 420 ------- ------- Total liabilities . . . . . . . . . . 423 459 ------- ------- Equity. . . . . . . . . . . . . . . . . . 2,766 3,420 ------- ------- Total liabilities and equity. . . . . $3,189 $3,879 ======= ======= Partnership's share of equity . . . . . . $ 968 $1,197 ======= ======= The table below sets forth 100% of the revenues, direct and indirect expenses, and net income (loss) of the Aero California Trust in which the Partnership has a 35% interest, and an entity that owned a marine vessel in which the Partnership had an interest, and the Partnership's proportional share of income (loss) in each entity for the three and nine months ended September 30, 2002 and 2001 (in thousands of dollars): Aero Aero California California Trust Trust For the three months ended September 30, 2002 2001 - ------------------------------------------------------------------ Revenues . . . . . . . . . . . . . . . $ 119 $ 328 Less: Direct expenses. . . . . . . . . 5 6 Indirect expenses. . . . . . 29 39 ----------- ----------- Net income . . . . . . . . . . . . . $ 85 $ 283 =========== =========== Partnership's share of net income. . . . $ 29 $ 99 =========== =========== Aero Aero California California Montgomery Trust Trust Partnership For the nine months ended September 30,. 2002 2001 Total - ------------------------------------------------------------------------------------------ Revenues . . . . . . . . . . . . . . . $ 384 $ 1,011 $ -- $ -- Less: Direct expenses. . . . . . . . . 17 14 68 -- Indirect expenses. . . . . . 101 119 1 -- ----------- ----------- ------------- ------- Net income (loss). . . . . . . . . . $ 266 $ 878 $ (69) $ -- =========== =========== ============= ======= Partnership's share of net income (loss) $ 93 $ 307 (34)1 $ 273 =========== =========== ============= ======= 1 During 2000, the Partnership sold its 50% interest in the Montgomery Partnership that owned a bulk carrier. During 2001 the Partnership received additional expenses related to 2000. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 6. Investment in an Unconsolidated Special-Purpose Entity (continued) ----------------------------------------------------------- As of September 30, 2002 and December 31, 2001, the jointly owned equipment in the Partnership's USPE portfolio was on lease. 7. Operating Segments ------------------- The Partnership operates or operated in four different segments: aircraft leasing, railcar leasing, marine container leasing, and marine vessel leasing. Each equipment leasing segment 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 For the three months ended Aircraft Railcar Container September 30, 2002 Leasing Leasing Leasing Other 1 Total - ----------------------------------------------------------------------------------------------- REVENUES Lease revenue. . . . . . . . . . . . . . $ -- $ 452 $ 7 $ -- $ 459 Interest income and other. . . . . . . . -- -- -- 38 38 Gain (loss) on disposition of equipment. -- (7) 17 -- 10 --------- --------- ---------- --------- -------- Total revenues. . . . . . . . . . . . -- 445 24 38 507 --------- --------- ---------- --------- -------- COSTS AND EXPENSES Operations support . . . . . . . . . . . -- 168 -- 15 183 Depreciation . . . . . . . . . . . . . . -- 63 -- -- 63 Management fees to affiliates. . . . . . -- 34 -- -- 34 General and administrative expenses. . . -- 30 -- 148 178 Provision for bad debts. . . . . . . . . -- (30) -- -- (30) --------- --------- ---------- --------- -------- Total costs and expenses . . . . . . -- 265 -- 163 428 --------- --------- ---------- --------- -------- Equity in net income of USPE . . . . . . . 29 -- -- -- 29 --------- --------- ---------- --------- -------- Net income (loss). . . . . . . . . . . . . $ 29 $ 180 $ 24 $ (125) $ 108 ========= ========= ========== ========= ======== Total assets as of June 30, 2002 . . . . . $ 968 $ 3,286 $ 17 $ 6,718 $10,989 ========= ========= ========== ========= ======== Marine For the three months ended Aircraft Railcar Container September 30, 2001 Leasing Leasing Leasing Other 1 Total - ----------------------------------------------------------------------------------------------- REVENUES Lease revenue. . . . . . . . . . . . . . $ -- $ 635 $ (1) $ -- $ 634 Interest income and other. . . . . . . . -- -- -- 72 72 Gain (loss) on disposition of equipment. (4) -- 20 -- 16 ---------- --------- --------- ---------- ------ Total revenues. . . . . . . . . . . . (4) 635 19 72 722 ---------- --------- --------- ---------- ------ COSTS AND EXPENSES Operations support . . . . . . . . . . . 226 144 -- 16 386 Depreciation . . . . . . . . . . . . . . (1) 75 45 -- 119 Management fees to affiliates. . . . . . 2 42 -- -- 44 General and administrative expenses. . . 1 26 -- 82 109 Provision for (recovery of) bad debts. . -- 5 (4) -- 1 ---------- --------- --------- ---------- ------ Total costs and expenses . . . . . . 228 292 41 98 659 ---------- -------- ----------- --------- ------ Equity in net income of USPEs. . . . . . . 99 -- -- -- 99 ---------- -------- ----------- --------- ------ Net income (loss). . . . . . . . . . . . . $ (133) $ 343 $ (22) $ (26) $ 162 ========== ======== =========== ========= ====== 1 Includes certain assets not identifiable to a specific segment such as cash and prepaid expenses. Also includes interest income and costs not identifiable to a particular segment, such as certain general and administrative and operations support expenses. 2 Includes certain interest income and costs not identifiable to a particular segment, such as certain general and administrative and operations support expenses. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 7. Operating Segments (continued) ------------------- . . Marine For the nine months ended Aircraft Railcar Container September 30, 2002 Leasing Leasing Leasing Other 1 Total - ----------------------------------------------------------------------------------------- REVENUES Lease revenue. . . . . . . . . . . . $ -- $ 1,498 $ 19 $ -- $1,517 Interest income and other. . . . . . -- -- -- 95 95 Gain on disposition of equipment . . -- 499 160 -- 659 --------- -------- ---------- --------- ------ Total revenues. . . . . . . . . . -- 1,997 179 95 2,271 --------- -------- ---------- --------- ------ COSTS AND EXPENSES Operations support . . . . . . . . . -- 442 -- 47 489 Depreciation . . . . . . . . . . . . -- 191 25 -- 216 Management fees to affiliates. . . . -- 107 1 -- 108 General and administrative expenses. -- 92 -- 306 398 Provision for bad debts. . . . . . . -- 3 -- 1 4 --------- -------- ---------- --------- ------ Total costs and expenses . . . . -- 835 26 354 1,215 --------- -------- ---------- --------- ------ Equity in net income of USPE . . . . . 93 -- -- -- 93 --------- -------- ---------- --------- ------ Net income (loss). . . . . . . . . . . $ 93 $ 1,162 $ 153 $ (259) $1,149 ========= ======== ========== ========= ====== Marine Marine For the nine months ended Aircraft Railcar Container Vessel September 30, 2001 Leasing Leasing Leasing Leasing Other 2 Total - ---------------------------------------------------------------------------------------------------------- REVENUES Lease revenue. . . . . . . . . . . . . . $ 185 $ 1,971 $ 29 $ -- $ -- $2,185 Interest income and other. . . . . . . . 39 -- -- -- 212 251 Gain (loss) on disposition of equipment. 3,355 (15) 128 -- 3 3,471 --------- --------- ----------- --------- --------- ------ Total revenues. . . . . . . . . . . . 3,579 1,956 157 -- 215 5,907 --------- --------- ----------- --------- --------- ------ COSTS AND EXPENSES Operations support . . . . . . . . . . . 247 410 -- 27 93 777 Depreciation . . . . . . . . . . . . . . 144 246 157 -- -- 547 Management fees to affiliates. . . . . . 2 139 1 -- -- 142 General and administrative expenses. . . 126 70 -- -- 410 606 Provision for (recovery of) bad debts. . -- 16 -- -- (1) 15 --------- --------- ----------- --------- --------- ------ Total costs and expenses . . . . . . 519 881 158 27 502 2,087 --------- --------- ----------- --------- --------- ------ Equity in net income (loss) of USPEs . . . 307 -- -- (34) -- 273 --------- --------- ----------- --------- --------- ------ Net income (loss). . . . . . . . . . . . . $ 3,367 $ 1,075 $ (1) $ (61) $ (287) $4,093 ========= ========= =========== ========= ========= ====== 8. Net Income Per Weighted-Average Limited Partnership Unit -------------------------------------------------------------- Net income per weighted-average limited partnership unit was computed by dividing net income attributable to limited partners by the weighted-average number of limited partnership units deemed outstanding during the period. The weighted-average number of limited partnership units deemed outstanding during the three and nine months ended September 30, 2002 and 2001 was 8,628,420. 1 Includes interest income and costs not identifiable to a particular segment, such as certain general and administrative and operations support expenses. Also includes the provision for bad debts related to trailers. 2 Includes certain interest income and costs not identifiable to a particular segment, such as certain general and administrative and operations support expenses. Also includes the gain from the sale of a trailer and the recovery of trailer bad debts. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 9. Liquidation ----------- On January 1, 1999, the General Partner began the liquidation phase of the Partnership and commenced an orderly liquidation of the Partnership assets. Given the current economic environment, and offers received for similar types of equipment owned by the Partnership, the General Partner has determined it would not be advantageous to sell the remaining Partnership equipment at the current time. The General Partner will continue to monitor the equipment markets to determine an optimal time to sell. In the meantime, equipment will continue to be leased, and re-leased at market rates as existing leases expire. 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. (This space intentionally left blank) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ------------------------------------------------------------------- RESULTS OF OPERATIONS ------------------- (I) RESULTS OF OPERATIONS Comparison of the PLM Equipment Growth Fund IV's (the Partnership's) Operating - -------------------------------------------------------------------------------- Results for the Three Months Ended September 30, 2002 and 2001 - ------------------------------------------------------------------------ (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment increased during the three months ended September 30, 2002 compared to the same period of 2001. Gains or losses from the sale of equipment, and interest and other income and certain expenses such as management fees to affiliate, depreciation and general and administrative expenses relating to the operating segments (see Note 7 to the unaudited condensed financial statements), are not included in the owned equipment operation discussion because they 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 expenses by segment (in thousands of dollars): For the Three Months Ended September 30, 2002 2001 =================== Railcars. . . . . $ 284 $ 491 Marine containers 7 (1) Aircraft. . . . . -- (226) Railcars: Railcar lease revenues and direct expenses were $0.5 million and $0.2 million, respectively, for the third quarter of 2002, compared to $0.6 million and $0.1 million, respectively, during the same period of 2001. Railcar lease revenue decreased in the third quarter of 2002 compared to the same quarter of 2001 due to the disposition of railcars during 2002 and 2001. Marine containers: Marine container lease revenues were $7,000 for the third quarter of 2002, compared to $(1,000) during the same period of 2001. Lease revenues increased $8,000 during the third quarter 2002 compared to the same period of 2001 due to a reduction of lease revenues during the 2001 resulting from actual revenues in a previous quarter being less than had been estimated. A similar event did not occur during 2002. Aircraft: Aircraft lease revenues and direct expenses were $-0- and $0.2 million, respectively, for the third quarter of 2001. The Partnership's wholly-owned aircraft was sold during 2001. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $0.3 million remained relatively the same for the third quarter of 2002 and 2001. Significant variances are explained as follows: (i) A $0.1 million decrease in depreciation expenses from 2001 levels resulted from to the disposition of certain assets during 2002 and 2001; (ii) A $30,000 decrease in the provision for bad debts was due to the collection of receivables in 2002 that has been previously reserved for as a bad debt. A similar event did not occur in 2001; and (iii) A $0.1 million increase in administrative expenses was due to higher professional service costs. (C) Interest and Other Income Interest and other income decreased $34,000 due to a decrease in the interest rate earned on cash balances. (D) Gain on Disposition of Owned Equipment The net gain on the disposition of owned equipment for the third quarter in 2002 totaled $10,000, and resulted from the sale of marine containers and railcars with an aggregate net book value of $10,000, for proceeds of $20,000. The net gain on disposition of equipment for the third quarter of 2001 totaled $16,000, which resulted from the sale of marine containers and railcars with an aggregate net book value of $15,000, for proceeds of $31,000. (E) Equity in Net Income of an Unconsolidated Special-Purpose Entity (USPE) Equity in net income of an USPE represents the Partnership's share of the net income generated from the operation of a jointly owned asset accounted for under the equity method of accounting. This entity is single purpose and has no debt or other financial encumbrances. As of September 30, 2002 and 2001, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. The Partnership's share of aircraft revenues and expenses were $42,000 and $12,000, respectively, for the third quarter of 2002, compared to $0.1 million and $16,000, respectively, during the same period of 2001. Revenues decreased due to the leases for the aircraft in the trust being renegotiated at a lower rate. (F) Net Income As a result of the foregoing, the Partnership's net income was $0.1 million for the third quarter of 2002, compared to net income of $0.2 million during the same period 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 quarter ended September 30, 2002 is not necessarily indicative of future periods. Comparison of the Partnership's Operating Results for the Nine Months Ended - -------------------------------------------------------------------------------- September 30, 2002 and 2001 - ------------------------------- (A) Owned Equipment Operations Lease revenues less direct expenses on owned equipment decreased during the nine months ended September 30, 2002 compared to the same period of 2001. The following table presents lease revenues less direct expenses by segment (in thousands of dollars): For the Nine Months Ended September 30, 2002 2001 ==================== Railcars. . . . . $ 1,056 $1,561 Marine containers 19 29 Marine vessel . . -- (27) Aircraft. . . . . -- (62) Railcars: Railcar lease revenues and direct expenses were $1.5 million and $0.4 million, respectively, for the nine months ended September 30, 2002, compared to $2.0 million and $0.4 million, respectively, during the same period of 2001. Lease revenues decreased $0.5 million during the nine months ended September 30, 2002 compared to the same period of 2001 due to the disposition of railcars during 2002 and 2001. Marine containers: Marine container lease revenues were $19,000 for the nine months ended September 30, 2002, compared to $29,000 during the same period of 2001. Lease revenues decreased $10,000 due to the disposition of marine containers during 2002 and 2001. Marine vessel: Marine vessel reported direct expenses of $(27,000) during the nine months ended September 30, 2001 and related to actual expenses from a previous period being higher than had been estimated. The Partnership's last marine vessel was sold in 1999. Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.2 million, respectively, for the nine months ended September 30, 2001. The Partnership's wholly-owned aircraft was sold during 2001. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $0.8 million for the nine months ended September 30, 2002 decreased from $1.4 million for the same period in 2001. Significant variances are explained as follows: (i) A $0.3 million decrease in depreciation expense from 2001 levels resulted from the disposition of certain assets during 2002 and 2001; (ii) A $0.2 million decrease in administrative expenses from 2001 levels resulted from a decrease of $0.1 million due to lower professional costs and a decrease of $0.1 million resulting from lower allocations by PLM Financial Services, Inc. (the General Partner) for office services and data processing services; and (iii) A decrease of $34,000 in management fees to affiliate was due to lower lease revenues. (C) Interest and Other Income Interest and other income decreased $0.2 million due to a decrease in the interest rate earned on cash balances. (D) Gain on Disposition of Owned Equipment The net gain on the disposition of owned equipment for the nine months ended September 30, 2002 totaled $0.7 million, and resulted from the sale of marine containers and railcars with an aggregate net book value of $0.5 million, for proceeds of $1.2 million. The net gain on disposition of equipment for the nine months ended September 30, 2001 totaled $3.5 million, which resulted from the sale of aircraft, marine containers, and railcars with an aggregate net book value of $1.9 million, for proceeds of $5.4 million. (E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities Equity in net income (loss) of USPEs represents the Partnership's share of the net income or loss generated from the operation of jointly owned assets accounted for under the equity method of accounting. These entities are single purpose and have no debt or other financial encumbrances. The following table presents equity in net income (loss) by equipment type (in thousands of dollars): For the Nine Months Ended September 30, 2002 2001 ================== Aircraft. . . . . . . . . . . . . . $ 93 $ 307 Marine vessel . . . . . . . . . . . -- (34) -------- ------- Equity in net income of USPEs $ 93 $ 273 ======== ======= Aircraft: As of September 30, 2002 and 2001, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. The Partnership's share of aircraft revenues and expenses were $0.1 million and $41,000, respectively, for the nine months ended September 30, 2002, compared to $0.4 million and $47,000, respectively, during the same period in 2001. Revenues decreased due to the leases for the aircraft in the trust being renegotiated at a lower rate. Marine vessel: As of September 30, 2002 and 2001, the Partnership had no remaining interest in entities that owned marine vessels. During the nine months ended September 30, 2001, the Partnership's share of the entity that owned a marine vessel reported $34,000 in operating expenses due to actual operating expenses in 2000 being higher than previously reported. (F) Net Income As a result of the foregoing, the Partnership's net income was $1.1 million for the nine months ended September 30, 2002, compared to net income of $4.1 million during the same period 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 during the nine months ended September 30, 2002 is not necessarily indicative of future periods. During the nine months ended September 30, 2002, the Partnership distributed $3.8 million to the limited partners, or $0.44 per weighted-average limited partnership 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 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 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 investment in an USPE 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. 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 AND LIQUIDITY For the nine months ended September 30, 2002, the Partnership generated $0.6 million in operating cash (net cash provided by operating activities plus non-liquidating cash distributions from an USPE) to meet its operating obligations, maintain working capital reserves and make distributions (total for the nine months ended September 30, 2002 of $4.0 million) to the partners, and used undistributed available cash from prior periods and proceeds from equipment dispositions of approximately $3.4 million. During the nine months ended September 30, 2002, the Partnership disposed of owned equipment for aggregate proceeds of $1.2 million. Accounts receivable increased $0.1 million during the nine months ended September 30, 2002 due to the timing of cash receipts. Investment in an USPE decreased $0.2 million due to cash distributions of $0.3 million to the Partnership from the USPE offset, in part, by $0.1 million of income that was recorded by the Partnership from the USPE during the nine months ended September 30, 2002. Accounts payable decreased $0.2 million during the nine months ended September 30, 2002 due to the payment of an aircraft repair that had been accrued as of December 31, 2001. The General Partner has not planned any expenditures, nor is it aware of any contingencies that would cause the Partnership to require any additional capital. The Partnership is in 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 distributions to the partners. (IV) OUTLOOK FOR THE FUTURE The Partnership is in its liquidation phase. Given the current economic environment, and offers received for similar types of equipment owned by the Partnership, the General Partner has determined it would not be advantageous to sell the remaining Partnership equipment at the current time. The General Partner will continue to monitor the equipment markets to determine an optimal time to sell. In the meantime, equipment will continue to be leased, and re-leased at market rates as existing leases expire. 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. Several factors may affect the Partnership's operating performance during 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 and its investment in an USPE 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 during the remainder of 2002 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. The Partnership's fleet of 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; (2) Railcarfreightloadings in theUnited States and Canada decreased 1% and 3%,respectively,through the first nine months of 2002. There has been, however, a recent increase for some of the commodities that drive demand for those types of railcars owned by the Partnership. It will be some time, however, before this translates into new leasing demand by shippers since most shippers have idle railcars in their fleets; (3) The airline industry began to see lower passenger travel during 2001. The events of September 11, 2001, along with a recession in the United States have continued to adversely affect the market demand for both new and used commercial aircraft and to significantly weaken the financial position of most major domestic airlines. As a result of this, the Partnership has had to renegotiate the lease on its partially owned aircraft on a direct finance lease during 2001 that will result in a decrease in revenues during 2002. The General Partner believes that there is a significant oversupply of commercial aircraft available and that this oversupply will continue for some time. In addition, these events have had a negative impact on the fair market value of the Partnership's partially owned aircraft. The General Partner does not expect these aircraft to return to their September 11, 2001 values; and (4) 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. 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 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 partners. (V) FORWARD-LOOKING INFORMATION Except for the historical information contained herein, this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Partnership's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Partnership's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------------- The Partnership's primary market risk exposure is that of currency devaluation risk. During the nine months ended September 30, 2002, 72% of the Partnership's total lease revenues from wholly- and partially-owned equipment came from non-United States domiciled lessees. Most of the leases require payment in United States (U.S.) currency. If these lessees' currency devalues against the U.S. dollar, the lessees could encounter difficulty in making the US dollar denominated lease payments. ITEM 4. 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 and Chief 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 internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluations. (This space intentionally left blank) 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-Q of PLM Equipment Growth Fund IV. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and board of Managers: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 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-Q of PLM Equipment Growth Fund IV. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and board of Managers: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 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 IV By: PLM Financial Services, Inc. General Partner Date: November 13, 2002 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 IV (the Partnership), that the Quarterly Report of the Partnership on Form 10-Q for the period ended September 30, 2002, 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 IV By: PLM Financial Services, Inc. General Partner Date: November 13, 2002 By: /s/ James A. Coyne --------------------- James A. Coyne President Date: November 13, 2002 By: /s/ Richard K Brock ---------------------- Richard K Brock Chief Financial Officer