UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended June 30, 2001
[-] 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.)
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 IV
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
June 30, December 31,
2001 2000
------------------------------------
ASSETS
Equipment held for operating leases, at cost $ 16,738 $ 18,003
Less accumulated depreciation (12,572) (13,436)
------------------------------------
4,166 4,567
Equipment held for sale -- 1,931
------------------------------------
Net equipment 4,166 6,498
Cash and cash equivalents 7,336 2,742
Restricted cash 147 272
Accounts receivable, less allowance for doubtful
accounts of $18 in 2001 and $5 in 2000 106 171
Investments in unconsolidated special-purpose entity 2,960 3,143
Prepaid expenses and other assets 43 37
------------------------------------
Total assets $ 14,758 $ 12,863
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 136 $ 186
Due to affiliates 165 174
Lessee deposits and reserve for repairs 162 369
------------------------------------
Total liabilities 463 729
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of June 30, 2001 and December 31, 2000) 14,295 12,134
General Partner -- --
------------------------------------
Total partners' capital 14,295 12,134
------------------------------------
Total liabilities and partners' capital $ 14,758 $ 12,863
====================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENT0S OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months Ended
Ended June 30, June 30,
2001 2000 2001 2000
-----------------------------------------------------------
REVENUES
Lease revenue $ 643 $ 1,174 $ 1,551 $ 2,366
Interest and other income 112 24 178 86
Net gain on disposition of equipment 26 40 3,455 99
----------------------------------------------------------
Total revenues 781 1,238 5,184 2,551
----------------------------------------------------------
EXPENSES
Depreciation 126 611 428 1,200
Repairs and maintenance 133 319 272 568
Equipment operating expenses 23 23 118 71
Management fees to affiliate 51 69 98 147
General and administrative expenses
to affiliates 38 97 161 216
Other general and administrative expenses 112 156 336 277
Provision for (recovery of) bad debt expense (16) (34) 14 (146)
----------------------------------------------------------
Total expenses 467 1,241 1,427 2,333
----------------------------------------------------------
Equity in net income of unconsolidated special-
purpose entities 104 169 174 466
----------------------------------------------------------
Net income $ 418 $ 166 $ 3,931 $ 684
==========================================================
Partners' share of net income
Limited partners $ 373 $ 121 $ 3,841 $ 367
General Partner 45 45 90 317
----------------------------------------------------------
Total $ 418 $ 166 $ 3,931 $ 684
==========================================================
Limited partners' net income per weighted-average
partnership unit $ 0.04 $ 0.01 $ 0.45 $ 0.04
==========================================================
Cash distribution 908 886 1,770 1,794
Special cash distribution -- -- -- 4,541
----------------------------------------------------------
Total distribution $ 908 $ 886 $ 1,770 $ 6,335
==========================================================
Per weighted-average partnership unit:
Cash distribution $ 0.10 $ 0.10 $ 0.19 $ 0.20
Special cash distribution -- -- -- 0.50
----------------------------------------------------------
Total distribution per weighted-average partnership unit $ 0.10 $ 0.10 $ 0.19 $ 0.70
==========================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1999 to June 30, 2001
(in thousands of dollars)
Limited General
Partners Partner Total
---------------------------------------------------
Partners' capital as of December 31, 1999 $ 19,342 $ -- $ 19,342
Net income 492 405 897
Cash distribution (3,386) (178) (3,564)
Special cash distribution (4,314) (227) (4,541)
-------------------------------------------------
Partners' capital as of December 31, 2000 12,134 -- 12,134
Net income 3,841 90 3,931
Cash distribution (1,680) (90) (1,770)
----------------------------------------------------
Partner's capital as of June 30, 2001 $ 14,295 $ -- $ 14,295
====================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Six Months
ended June 30,
2001 2000
----------------------------
OPERATING ACTIVITIES
Net income $ 3,931 $ 684
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 428 1,200
Net gain on disposition of equipment (3,455) (99)
Equity in net income of unconsolidated special-purpose
entities (174) (466)
Changes in operating assets and liabilities:
Restricted cash 125 (100)
Accounts receivable, net 65 160
Prepaid expenses and other assets (6) 29
Accounts payable and accrued expenses (50) (149)
Due to affiliates (9) (24)
Lessee deposits and reserve for repairs (207) 77
---------------------------
Net cash provided by operating activities 648 1,312
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (2) (7)
Proceeds from disposition of equipment 5,361 401
Distribution from unconsolidated special-purpose entities 357 556
----------------------------
Net cash provided by investing activities 5,716 950
----------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (1,680) (1,704)
Cash distribution paid to General Partner (90) (90)
Special cash distribution paid to limited partners -- (4,314)
Special cash distribution paid to General Partner -- (227)
----------------------------
Net cash used in financing activities (1,770) (6,335)
----------------------------
Net increase (decrease) in cash and cash equivalents 4,594 (4,073)
Cash and cash equivalents at beginning of year 2,742 5,587
----------------------------
Cash and cash equivalents at end of period $ 7,336 $ 1,514
============================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or
the General Partner), the accompanying unaudited financial statements
contain all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund IV (the Partnership) as of June 30, 2001 and December 31, 2000, the
statements of income for the three and six months ended June 30, 2001 and
2000, the statements of changes in partners' capital for the period from
December 31, 1999 to June 30, 2001, and the statements of cash flows for
the six months ended June 30, 2001 and 2000. Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2000, on file with 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 the sale of
all equipment or by certain other events. 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. During the
liquidation phase, the Partnership's assets will continue to be recorded at
the lower of the carrying amount or fair value less cost to sell. The
General Partner anticipates that the liquidation of Partnership assets will
be completed by the end of the year 2001.
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 and six months ended June 30, 2001 and 2000, cash distributions
totaled $0.9 million and $1.8 million, respectively. In addition, during
the six months ended June 30, 2000, a $4.5 million special distribution was
paid to the partners from the proceeds realized on the sale of equipment
and liquidating distributions from unconsolidated special purpose entities
(USPEs). No special distributions were paid in the six months ended June
30, 2001. None of the cash distributions to the limited partners during the
six months ended June 30, 2001, were deemed to be a return of capital. Cash
distributions to the limited partners of $5.7 million for the six months
ended 2000 were deemed to be a return of capital.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (continued)
The balance due to affiliates as of June 30, 2001, includes $18,000 due to
FSI and its affiliate for management fees and $0.1 million due to an
affiliated USPE. The balance due to affiliates as of December 31, 2000
includes $27,000 due to FSI and its affiliate for management fees and $0.1
million due to an affiliated USPE. The Partnership's proportional share of
management fees related to USPEs of $12,000 and $9,000 were payable as of
June 30, 2001 and December 31, 2000, respectively.
The Partnership's proportional share of the affiliated expenses incurred by
the USPEs during 2001 and 2000 is listed in the following table (in
thousands of dollars):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
----------------------------------------------------------------
Management fees $ 4 $ 4 $ 9 $ 9
Data processing and administrative
expenses 2 -- 4 5
5. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
June 30, December 31,
2001 2000
----------------------------------------
Equipment held for operating leases
Railcars $ 13,238 $ 13,336
Marine containers 3,500 4,667
----------------------------------------
16,738 18,003
Less accumulated depreciation (12,572) (13,436)
----------------------------------------
4,166 4,567
Equipment held for sale -- 1,931
----------------------------------------
Net equipment $ 4,166 $ 6,498
========================================
As of June 30, 2001, all equipment was on lease except for 51 railcars with
a net book value of $0.5 million. As of December 31, 2000, all equipment
was on lease, except for an aircraft and 34 railcars with a net book value
of $0.7 million.
A Boeing 737-200 stage II commercial aircraft and Dash 8-300 commuter
aircraft, subject to pending contract for sale, was held for sale as of
December 31, 2000 at the lower of the equipment's depreciated cost or fair
value, less cost to sell.
During the six months ended June 30, 2001, the Partnership sold a
commercial aircraft, a commuter aircraft, marine containers and railcars
with an aggregate net book value of $1.9 million, for aggregate proceeds of
$5.4 million. During the six months ended June 30, 2000, the Partnership
sold marine containers, railcars, and trailers with an aggregate net book
value of $0.3 million, for aggregate proceeds of $0.4 million.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
6. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The Partnership's net investment in a USPE consisted of a 35% interest in
two Stage II commercial aircraft on a direct finance lease (and related
assets and liabilities) totaling $3.0 million and $3.1 million as of June
30, 2001 and December 31, 2000, respectively.
7. OPERATING SEGMENTS
The Partnership operates or operated in five different segments: aircraft
leasing, railcar leasing, marine container leasing, marine vessel leasing,
and trailer 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
June 30, 2001 Leasing Leasing Leasing All Other(1) Total
------------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ -- $ 625 $ 18 $ -- $ 643
Interest income and other 32 -- -- 80 112
Gain (loss) on disposition of (1) (15) 42 -- 26
equipment
----------------------------------------------------
Total revenues 31 610 60 80 781
COSTS AND EXPENSES
Operations support 8 131 -- 17 156
Depreciation -- 81 45 -- 126
Management fees to affiliates (3) 53 1 -- 51
General and administrative expenses 18 24 -- 108 150
(Recovery of) provision for bad -- (18) 3 (1) (16)
debts
----------------------------------------------------
Total costs and expenses 23 271 49 124 467
----------------------------------------------------
Equity in net income of USPEs 104 -- -- -- 104
----------------------------------------------------
----------------------------------------------------
Net income (loss) $ 112 $ 339 $ 11 $ (44) $ 418
====================================================
Total assets as of June 30, 2001 $ 3,107 $ 4,008 $ 264 $ 7,379 $ 14,758
====================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as certain operation support and general and administrative expenses.
(This space intentionally left blank)
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
7. OPERATING SEGMENTS (continued)
Marine Marine
For the three months ended Aircraft Railcar Container Vessel Trailer
June 30, 2000 Leasing Leasing Leasing Leasing Leasing All Other(1) Total
------------- ------- ------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ 196 $ 720 $ 27 $ -- $ 231 $ -- $ 1,174
Interest income and other -- -- -- -- -- 24 24
Gain (loss) on disposition of -- (9) 61 -- (12) -- 40
equipment
-------------------------------------------------------------------------
Total revenues 196 711 88 -- 219 24 1,238
COSTS AND EXPENSES
Operations support 79 165 2 -- 85 11 342
Depreciation 336 105 108 -- 62 -- 611
Management fees to affiliates 4 47 2 -- 16 -- 69
General and administrative expenses 33 29 -- -- 53 138 253
(Recovery of) provision for bad (9) (14) -- -- (11) -- (34)
debts
-------------------------------------------------------------------------
Total costs and expenses 443 332 112 -- 205 149 1,241
-------------------------------------------------------------------------
Equity in net income of USPEs 121 -- -- 48 -- -- 169
-------------------------------------------------------------------------
Net income (loss) $ (126) $ 379 $ (24 )$ 48 $ 14 $ (125) $ 166
=========================================================================
Total assets as of June 30, 2001 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438
=========================================================================
Marine Marine
For the six months ended Aircraft Railcar Container Vessel Trailer
June 30, 2001 Leasing Leasing Leasing Leasing Leasing All Other(1) Total
------------- ------- ------- ------- ------- ------- --------- -----
REVENUES
Lease revenue $ 185 $ 1,336 $ 30 $ -- $ -- $ -- $ 1,551
Interest income and other 38 -- -- -- -- 140 178
Gain (loss) on disposition of 3,359 (15) 108 -- 3 -- 3,455
equipment
-------------------------------------------------------------------------
Total revenues 3,582 1,321 138 -- 3 140 5,184
Costs and expenses
Operations support 21 266 -- 27 -- 76 390
Depreciation 145 171 112 -- -- -- 428
Management fees to affiliates -- 97 1 -- -- -- 98
General and administrative expenses 125 44 -- -- -- 328 497
Provision for (recovery of) bad -- 11 4 -- (1) -- 14
debts
-------------------------------------------------------------------------
Total costs and expenses 291 589 117 27 (1) 404 1,427
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 208 -- -- (34) -- -- 174
-------------------------------------------------------------------------
Net income (loss) $ 3,499 $ 732 $ 21 $ (61) $ 4 $ (264) $ 3,931
=========================================================================
Total assets as of June 30, 2001 $ 3,107 $ 4,008 $ 264 $ -- $ -- $ 7,379 $ 14,758
=========================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as certain operation support and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
7. OPERATING SEGMENTS (continued)
Marine Marine
For the six months ended Aircraft Railcar Container Vessel Trailer
June 30, 2000 Leasing Leasing Leasing Leasing Leasing All Other(1) Total
------------- ------- ------- ------- ------- ------- --------- -----
REVENUES
Lease revenue $ 392 $ 1,490 $ 42 $ -- $ 442 $ -- $ 2,366
Interest income and other 2 -- -- -- -- 84 86
Gain (loss) on disposition of -- (11) 126 -- (16) -- 99
equipment
-------------------------------------------------------------------------
Total revenues 394 1,479 168 -- 426 84 2,551
COSTS AND EXPENSES
Operations support 103 359 3 -- 128 46 639
Depreciation 671 219 185 -- 125 -- 1,200
Management fees to affiliates 8 101 2 -- 36 -- 147
General and administrative expenses 63 62 1 -- 114 253 493
(Recovery of) provision for bad (9) 4 -- -- (141) -- (146)
debts
-------------------------------------------------------------------------
Total costs and expenses 836 745 191 -- 262 299 2,333
-------------------------------------------------------------------------
Equity in net income of USPEs 311 -- -- 155 -- -- 466
-------------------------------------------------------------------------
Net income (loss) $ (131) $ 734 $ (23) $ 155 $ 164 $ (215) $ 684
=========================================================================
Total assets as of June 30, 2000 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438
=========================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as certain operation support and general and administrative expenses.
8. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income per weighted-average Partnership unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the
three and six months ended June 30, 2001 and 2000 was 8,628,420.
9. CONTINGENCIES
PLM International, (the Company) and various of its wholly owned
subsidiaries are defendants in a class action lawsuit filed in January 1997
and which is pending in the United States District Court for the Southern
District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the
court). The named plaintiffs are six individuals who invested in PLM
Equipment Growth Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V),
PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income
Fund VII (Fund VII), collectively (the Funds), each a California limited
partnership for which the Company's wholly owned subsidiary, PLM Financial
Services, Inc. (FSI), acts as the General Partner.
The complaint asserts causes of action against all defendants for fraud and
deceit, suppression, negligent misrepresentation, negligent and intentional
breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, and
control persons. Based on these duties, plaintiffs assert liability against
defendants for improper sales and marketing practices, mismanagement of the
Funds, and concealing such mismanagement from investors in the Funds.
Plaintiffs seek unspecified compensatory damages, as well as punitive
damages.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
9. CONTINGENCIES (continued)
In June 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action
filed in the San Francisco Superior Court, San Francisco, California, Case
No.987062 (the Romei action). The plaintiff is an investor in Fund V, and
filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in the Funds. The complaint alleges the
same facts and the same causes of action as in the Koch action, plus
additional causes of action against all of the defendants, including
alleged unfair and deceptive practices and violations of state securities
law. In July 1997, defendants filed a petition (the petition) in federal
district court under the Federal Arbitration Act seeking to compel
arbitration of plaintiff's claims. In October 1997, the district court
denied the Company' s petition, but in November 1997, agreed to hear the
Company's motion for reconsideration. Prior to reconsidering its order, the
district court dismissed the petition pending settlement of the Romei
action, as discussed below. The state court action continues to be stayed
pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle
the lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into
two parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to
$6.6 million. The final settlement amount will depend on the number of
claims filed by class members, the amount of the administrative costs
incurred in connection with the settlement, and the amount of attorneys'
fees awarded by the court to plaintiffs' attorneys. The Company will pay up
to $0.3 million of the monetary settlement, with the remainder being funded
by an insurance policy. For settlement purposes, the monetary settlement
class consists of all investors, limited partners, assignees, or unit
holders who purchased or received by way of transfer or assignment any
units in the Funds between May 23, 1989 and August 30, 2000. The monetary
settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the
extension (until January 1, 2007) of the date by which FSI must complete
liquidation of the Funds' equipment, (b) the extension (until December 31,
2004) of the period during which FSI can reinvest the Funds' funds in
additional equipment, (c) an increase of up to 20% in the amount of
front-end fees (including acquisition and lease negotiation fees) that FSI
is entitled to earn in excess of the compensatory limitations set forth in
the North American Securities Administrator's Association's Statement of
Policy; (d) a one-time repurchase by each of Fund V, Fund VI and Fund VII
of up to 10% of that partnership's outstanding units for 80% of net asset
value per unit; and (e) the deferral of a portion of the management fees
paid to an affiliate of FSI until, if ever, certain performance thresholds
have been met by the Funds. Subject to final court approval, these proposed
changes would be made as amendments to each Fund's limited partnership
agreement if less than 50% of the limited partners of each Fund vote
against such amendments. The equitable settlement also provides for payment
of additional attorneys' fees to the plaintiffs' attorneys from Fund funds
in the event, if ever, that certain performance thresholds have been met by
the Funds. The equitable settlement class consists of all investors,
limited partners, assignees or unit holders who on August 30, 2000 held any
units in Fund V, Fund VI, and Fund VII, and their assigns and successors in
interest.
The court preliminarily approved the monetary and equitable settlements in
August 2000, and information regarding each of the settlements was sent to
class members in September 2000. A final fairness hearing was held on
November 29, 2000, and on April 25, 2001 the federal magistrate judge
assigned to the case entered a Report and Recommendation recommending final
approval of the monetary and equitable settlements to the federal district
court judge. On July 24, 2001, the federal
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
9. CONTINGENCIES (continued)
district court judge adopted the Report and Recommendation, and entered a
final judgment approving both settlements. Monetary class members who
submitted timely claims will be paid their settlement amount out of the
monetary fund by the third-party claims administrator, calculated pursuant
to the formula set forth in the settlement agreement and court order. These
payments to qualifying class members will occur following the expiration of
the time for the filing of an appeal, assuming that no appeal is filed.
Similarly the equitable settlement will be implemented promptly at the same
time and assuming no appeal is filed. For those equitable class members who
submitted timely requests for the repurchase of their limited partnership
units, the respective partnerships will repurchase such units by December
31, 2001.
The Partnership is involved as plaintiff or defendant in various other
legal actions incidental to its business. Management does not believe that
any of these actions will be material to the financial condition of the
Partnership.
10. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 2000, the General Partner began the liquidation phase of the
Partnership with the intent to commence an orderly liquidation of the
Partnership assets. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodically declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed. The amounts reflected for assets and liabilities of the
Partnership have not been adjusted to reflect liquidation values. The
equipment portfolio continues to be carried at the lower of depreciated
cost or fair value less cost to dispose. Although the General Partner
estimates that there will be distributions after liquidation of assets and
liabilities, the amounts cannot be accurately determined prior to actual
liquidation of the equipment. Any excess proceeds over expected Partnership
obligations will be distributed to the Partners throughout the liquidation
period. Upon final liquidation, the Partnership will be dissolved.
In the six months ended June 30, 2000, the General Partner paid special
distributions of $0.50 per weighted-average limited partnership unit. No
special distributions were paid in the six months ended June 30, 2001. The
Partnership is not permitted to reinvest proceeds from sales or
liquidations of equipment. These proceeds, in excess of operational cash
requirements, are periodically paid out to limited partners in the form of
special distributions. The sales and liquidations occur because of certain
damaged equipment, the determination by the General Partner that it is the
appropriate time to maximize the return on an asset through sale of that
asset, and, in some leases, the ability of the lessee to exercise purchase
options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the PLM Equipment Growth Fund IV's (the Partnership's) Operating
Results for the Three Months Ended June 30, 2001 and 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the second
quarter of 2001 compared to the same period of 2000. Gains or losses from the
sale of equipment, and interest and other income and certain expenses such as
depreciation and general and administrative expenses relating to the operating
segments (see Note 7 to the 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 June 30,
2001 2000
---------------------------
Railcars $ 494 $ 555
Marine containers 18 25
Trailers -- 146
Aircraft (8) 117
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.1
million, respectively, for the second quarter of 2001, compared to $0.7 million
and $0.2 million, respectively, during the same period in 2000. The decrease in
railcar contribution in the second quarter of 2001 was due to the sale of
railcars in 2001 and 2000.
Marine containers: Marine container lease revenues and direct expenses were
$18,000 and $-0-, respectively, for the second quarter of 2001, compared to
$27,000 and $2,000, respectively, during the same period of 2000. The decrease
in marine container contribution in the second quarter of 2001 was due to the
sale of marine containers in 2001 and 2000.
Trailers: Trailer lease revenues and direct expenses were $-0- for the second
quarter of 2001, compared to $0.2 million and $0.1 million, respectively, during
the same period of 2000. The decrease in trailer contribution in the second
quarter of 2001 was due to the sale of all the Partnership's trailers in 2000.
Aircraft: Aircraft lease revenues and direct expenses were $-0- and $8,000,
respectively, for the second quarter of 2001, compared to $0.2 million and $0.1
million, respectively, during the same period of 2000. The decrease in aircraft
contribution in the second quarter of 2001 was due to the sale of aircraft in
2001 and 2000.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.3 million for the second quarter of 2001 decreased
from $0.9 million for the same period in 2000. Significant variances are
explained as follows:
(i) A $0.5 million decrease in depreciation expense from 2000 levels
resulted from a $0.4 million decrease due to the sale of certain assets during
2001 and 2000 and a $0.1 million decrease resulting from the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned.
(ii) A $0.1 million decrease in general and administrative expenses during
the three months ended June 30, 2001 compared to the same period of 2000 is due
to lower costs resulting from the sale of all the Partnership's trailers during
2000.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the second quarter of 2001 totaled
$26,000, which 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. For the
second quarter of 2000, net gain on disposition of equipment totaled $40,000,
which resulted from the sale of marine containers, trailers and railcars with an
aggregate net book value of $0.1 million, for proceeds of $0.1 million.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)
Net income generated from the operation of jointly-owned assets accounted for
under the equity method is shown in the following table by equipment type (in
thousands of dollars):
For the Three Months
Ended June 30,
2001 2000
---------------------------
Aircraft $ 104 $ 121
Marine vessel -- 48
---------------------------
Equity in net income of USPEs $ 104 $ 169
===========================
Aircraft: As of June 30, 2001 and 2000, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.1 million and $15,000, respectively, for the
second quarter of 2001, compared to $0.1 million and $14,000, respectively,
during the same period in 2000.
Marine vessel: As of June 30, 2001, the Partnership had no remaining interests
in entities that owned marine vessels. Marine vessel revenues and expenses were
$48,000 and $-0-, respectively, for the second quarter of 2000. Revenues
decreased $48,000 in the second quarter of 2001 due to the sale of the marine
vessel entity in which the Partnership owned an interest during the fourth
quarter of 2000.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.4 million for
the second quarter of 2001, compared to net income of $0.2 million during the
same period of 2000. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the quarter ended June 30, 2001 is
not necessarily indicative of future periods. In the second quarter of 2001, the
Partnership distributed $0.9 million to the limited partners, or $0.10 per
weighted-average limited partnership unit.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE
30, 2001 AND 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the six months
ended June 30, 2001 compared to the same period of 2000. The following table
presents lease revenues less direct expenses by segment (in thousands of
dollars):
For the Six Months
Ended June 30,
2001 2000
---------------------------
Railcars $ 1,070 $ 1,131
Aircraft 164 289
Marine containers 30 39
Trailers -- 314
Marine vessels (27) --
Railcars: Railcar lease revenues and direct expenses were $1.3 million and $0.3
million, respectively, for the six months ended June 30, 2001, compared to $1.5
million and $0.4 million, respectively, during the same period in 2000. The
decrease in railcar contribution in the six months ended June 30, 2001 was due
to the sale of railcars in 2001 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$21,000, respectively, for the six months ended June 30, 2001, compared to $0.4
million and $0.1 million, respectively, during the same period of 2000. The
decrease in aircraft contribution in the six months ended June 30, 2001 was due
to the sale of aircraft in 2001 and 2000.
Marine containers: Marine container lease revenues and direct expenses were
$30,000 and $-0-, respectively, for the six months ended June 30, 2001, compared
to $42,000 and $3,000, respectively, during the same period of 2000. The
decrease in marine container contribution in the six months ended June 30, 2001
was due to the sale of marine containers in 2001 and 2000.
Trailers: Trailer lease revenues and direct expenses were $-0- for the six
months ended June 30, 2001, compared to $0.4 million and $0.1 million,
respectively, during the same period of 2000. The decrease in trailer
contribution in the six months ended June 30, 2001 was due to the sale of all of
the Partnership's trailers in 2000.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.0 million for the six months ended June 30, 2001
decreased from $1.7 million for the same period in 2000. Significant variances
are explained as follows:
(i) A $0.8 million decrease in depreciation expense from 2000 levels
resulted from a $0.7 million decrease due to the sale of certain assets during
2001 and 2000 and a $0.1 million decrease resulting from the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned.
(ii) A $49,000 decrease in management fees to affiliate resulted from the
lower levels of lease revenues on owned equipment during the six months ended
June 30, 2001, compared to the same period in 2000.
(iii) The $0.2 million increase in the bad debt expenses was due to the
collection of $0.2 million receivable in the six months ended June 30, 2000 that
had previously been reserved for as bad debts. A similar recovery did not occur
in 2001.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 2001
totaled $3.5 million, which resulted from the sale of a commercial aircraft, a
commuter aircraft, marine containers, and railcars with an aggregate net book
value of $1.9 million, for aggregate proceeds of $5.4 million. For the six
months ended June 30, 2000, net gain on disposition of totaled $0.1 million,
which resulted from the sale of marine containers, railcars, and trailers with
an aggregate net book value of $0.3 million, for aggregate proceeds of $0.4
million.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Six Months
Ended June 30,
2001 2000
---------------------------
Aircraft $ 208 $ 311
Marine vessel (34) 155
---------------------------
Equity in net income of USPEs $ 174 $ 466
===========================
Aircraft: As of June 30, 2001 and 2000, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.2 million and $31,000, respectively, for the six
months ended June 30, 2001, compared to $0.3 million and $(35,000),
respectively, during the same period in 2000. The decrease in revenues of
$36,000 during the six months ended June 30, 2001 was due to a lower outstanding
principal balance on the finance lease compared to the same period of 2000. The
increase in expenses of $0.1 million was due to the collection of a receivable
that had been written-off as a bad debt during 2000. A similar event did not
occur during the same period of 2001.
Marine vessel: As of June 30, 2001, the Partnership had no remaining interests
in entities that owned marine vessels. Marine vessel revenues and expenses were
$-0- and $34,000, respectively, for the six months ended June 30, 2001 compared
to $0.1 million and $(37,000), respectively, during the same period in 2000.
Revenues decreased $0.1 million during the six months ended June 30, 2001 due to
the sale of the marine vessel entity in which the Partnership owned an interest
during the fourth quarter of 2000. Expenses increased $0.1 million due to the
receipt of $0.2 million for an insurance claim during the six months ended June
30, 2000. A similar event did not occur during the same period of 2001.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $3.9 million for
the six months ended June 30, 2001, compared to net income of $0.7 million
during the same period of 2000. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the six months
ended June 30, 2001 is not necessarily indicative of future periods. In the six
months ended June 30, 2001, the Partnership distributed $1.7 million to the
limited partners, or $0.19 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 2001, the Partnership generated $1.0 million
in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations, but
used undistributed available cash from prior periods and proceeds from equipment
sales of approximately $0.8 million to make distributions (total of $1.8 million
in the six months ended June 30, 2001) to the partners.
During the six months ended June 30, 2001, the Partnership sold a commercial
aircraft, a commuter aircraft, marine containers and railcars with an aggregate
net book value of $1.9 million, for aggregate proceeds of $5.4 million.
Restricted cash decreased $0.1 million during the six months ended June 30, 2001
due to the decrease in lessee deposits resulting from the return of security
deposits to the buyers who purchased an aircraft during the first quarter of
2001.
Accounts receivables decreased $0.1 million during the six months ended June 30,
2001 due to the timing of cash receipts.
Investments in USPEs decreased $0.2 million due to cash distributions of $0.4
million to the Partnership from the USPEs offset, in part, by $0.2 million of
income that was recorded by the Partnership's from the USPEs during the six
months ended June 30, 2001.
Accounts payable decreased $0.1 million during the six months ended June 30,
2001 due to the timing of payments to vendors.
Lessee deposits and reserve for repairs decreased $0.2 million during the six
months ended June 30, 2001 due to the decrease of $0.1 million in lessee
deposits resulting from the return of a security deposit to the buyer who
purchased an aircraft during the first quarter of 2001, and a decrease of $0.1
million in prepaid aircraft lease revenue due to the sale of an aircraft.
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 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. Although distribution levels may be reduced, significant asset sales
may result in potential 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.
(III) OUTLOOK FOR THE FUTURE
The Partnership is in its active liquidation phase. The General Partner is
seeking to selectively re-lease or sell assets as the existing leases expire.
Sale decisions will cause the operating performance of the Partnership to
decline over the remainder of its life. The General Partner anticipates that the
liquidation of Partnership assets will be completed by the scheduled termination
of the Partnership at the end of the year 2001.
Several factors may affect the Partnership's operating performance in 2001,
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 a 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 in the year 2001 include:
1. The cost of new marine containers have been at historic lows for the past
several years which has caused downward pressure on per diem lease rates for
this type of equipment.
2. Railcar loadings in North America for the first six months of 2001 were below
those of 2000. This decrease will lead to lower utilization and lower
contribution to the Partnership as existing leases expire and renewal leases 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 make an evaluation 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 investors.
(IV) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in 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 first six months of 2001, 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 U.S. dollar denominated lease
payments.
(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.
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: August 13, 2001 By: /s/ Stephen M. Bess
-------------------------
Stephen M. Bess
President and
Chief Accounting Officer