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, 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)
CONDENSED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT UNIT AMOUNTS)
(UNAUDITED)
September 30, December 31,
2001 2000
------------------------------------
ASSETS
Equipment held for operating leases, at cost $ 16,496 $ 18,003
Less accumulated depreciation (12,463) (13,436)
------------------------------------
4,033 4,567
Equipment held for sale -- 1,931
------------------------------------
Net equipment 4,033 6,498
Cash and cash equivalents 8,030 2,742
Restricted cash 147 272
Accounts receivable, less allowance for doubtful
accounts of $19 in 2001 and $5 in 2000 69 171
Investments in unconsolidated special-purpose entity 2,846 3,143
Prepaid expenses and other assets 24 37
------------------------------------
Total assets $ 15,149 $ 12,863
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 375 $ 186
Due to affiliates 165 174
Lessee deposits and reserve for repairs 152 369
------------------------------------
Total liabilities 692 729
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of September 30, 2001 and December 31, 2000) 14,457 12,134
General Partner -- --
------------------------------------
Total partners' capital 14,457 12,134
------------------------------------
Total liabilities and partners' capital $ 15,149 $ 12,863
====================================
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,
2001 2000 2001 2000
-----------------------------------------------------------
REVENUES
Lease revenue $ 634 $ 1,110 $ 2,185 $ 3,476
Interest and other income 72 28 251 114
Net gain on disposition of equipment 16 154 3,471 253
----------------------------------------------------------
Total revenues 722 1,292 5,907 3,843
----------------------------------------------------------
EXPENSES
Depreciation 119 587 547 1,787
Repairs and maintenance 368 243 640 811
Equipment operating expenses -- (3) 28 29
Insurance expense 18 21 109 60
Management fees to affiliate 44 62 142 209
General and administrative expenses
to affiliates 35 106 195 322
Other general and administrative expenses 74 196 411 473
Provision for (recovery of) bad debt expense 1 (28) 15 (174)
Loss on revaluation of equipment -- 106 -- 106
----------------------------------------------------------
Total expenses 659 1,290 2,087 3,623
----------------------------------------------------------
Equity in net income of unconsolidated special-
purpose entities 99 83 273 549
----------------------------------------------------------
Net income $ 162 $ 85 $ 4,093 $ 769
==========================================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 162 $ 41 $ 4,003 $ 408
General Partner -- 44 90 361
----------------------------------------------------------
Total $ 162 $ 85 $ 4,093 $ 769
==========================================================
Limited partners' net income per weighted-
average partnership unit $ 0.02 $ 0.01 $ 0.46 $ 0.05
==========================================================
Cash distribution $ -- $ 885 $ 1,770 $ 2,679
Special cash distribution -- -- -- 4,541
----------------------------------------------------------
Total distribution $ -- $ 885 $ 1,770 $ 7,220
==========================================================
Per weighted-average partnership unit:
Cash distribution $ -- $ 0.10 $ 0.19 $ 0.30
Special cash distribution -- -- -- 0.50
----------------------------------------------------------
Total distribution per weighted-average
partnership unit $ -- $ 0.10 $ 0.19 $ 0.80
==========================================================
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, 1999 TO SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
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 4,003 90 4,093
Cash distribution (1,680) (90) (1,770)
----------------------------------------------------
Partner's capital as of September 30, 2001 $ 14,457 $ -- $ 14,457
====================================================
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,
2001 2000
----------------------------
OPERATING ACTIVITIES
Net income $ 4,093 $ 769
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 547 1,787
Net gain on disposition of equipment (3,471) (253)
Loss on revaluation of equipment -- 106
Equity in net income of unconsolidated special-purpose
entities (273) (549)
Changes in operating assets and liabilities:
Restricted cash 125 --
Accounts receivable, net 102 263
Prepaid expenses and other assets 13 44
Accounts payable and accrued expenses 189 (151)
Due to affiliates (9) (35)
Lessee deposits and reserve for repairs (217) (64)
----------------------------
Net cash provided by operating activities 1,099 1,917
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (2) (7)
Proceeds from disposition of equipment 5,391 1,767
Distribution from unconsolidated special-purpose entities 570 840
----------------------------
Net cash provided by investing activities 5,959 2,600
----------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (1,680) (2,545)
Cash distribution paid to General Partner (90) (134)
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) (7,220)
----------------------------
Net increase (decrease) in cash and cash equivalents 5,288 (2,703)
Cash and cash equivalents at beginning of year 2,742 5,587
----------------------------
Cash and cash equivalents at end of period $ 8,030 $ 2,884
============================
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 condensed financial position of PLM Equipment
Growth Fund IV (the Partnership) as of September 30, 2001 and December 31, 2000,
the condensed statements of income for the three and nine months ended September
30, 2001 and 2000, the condensed statements of changes in partners' capital for
the period from December 31, 1999 to September 30, 2001, and the condensed
statements of cash flows for the nine months ended September 30, 2001 and 2000.
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 financial statements. For further information, reference should be
made to the condensed 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 2002.
3. RECLASSIFICATION
Certain amounts on the 2000 financial statements have been reclassified to
conform to the 2001 presentation.
4. CASH DISTRIBUTIONS
Cash distributions are recorded when paid and may include amounts in excess of
net income that are considered to represent a return of capital. For the three
months ended September 30, 2001 and 2000, cash distributions totaled $-0- and
$0.9 million, respectively. For the nine months ended September 30, 2001 and
2000, cash distributions totaled $1.8 million and $2.7 million, respectively. In
addition, during the nine months ended September 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 nine months
ended September 30, 2001. None of the cash distributions to the limited partners
during the nine months ended September 30, 2001, were deemed to be a return of
capital. Cash distributions to the limited partners of $6.4 million for the nine
months ended 2000 were deemed to be a return of capital.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of September 30, 2001, includes $19,000 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 to FSI and its affiliate as of
September 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 Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
-------------------------------------------------------------
Management fees $ 4 $ 4 $ 13 $ 13
Data processing and administrative
expenses -- -- -- 5
6. EQUIPMENT
Owned equipment held for operating leases is stated at cost. Equipment held for
sale is stated at the lower of the equipment's depreciated cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment were as follows (in thousands of dollars):
September 30, December 31,
2001 2000
-----------------------------------
Equipment held for operating leases
Railcars $ 13,239 $ 13,336
Marine containers 3,257 4,667
------------ -----------
16,496 18,003
Less accumulated depreciation (12,463) (13,436)
------------ -----------
4,033 4,567
Equipment held for sale -- 1,931
------------ -----------
Net equipment $ 4,033 $ 6,498
============ ===========
As of September 30, 2001, all equipment was on lease except for 35 railcars with
a net book value of $0.3 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, were 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 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. The aircraft were reported as equipment held for
sale as of December 31, 2000. During the nine months ended September 30, 2000,
the Partnership sold all of its trailers, and certain marine containers and
railcars with an aggregate net book value of $1.5 million, for proceeds of $1.8
million.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITY
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 $2.8 million and $3.1 million as of September 30, 2001 and
December 31, 2000, respectively.
8. 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
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 (4) -- 20 -- 16
equipment
----------------------------------------------------
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 -- 5 (4) -- 1
debts
----------------------------------------------------
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
====================================================
Total assets as of September 30, 2001 $ 2,993 $ 3,949 $ 153 $ 8,054 $ 15,149
====================================================
(1) Includes certain assets not identifiable to a particular segment, such as
cash and prepaid expenses. Also includes interest income and costs not
identifiable to a particular segment, such as certain operations support
and general and administrative expenses.
(This space intentionally left blank)
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
8. OPERATING SEGMENTS (continued)
Marine Marine
For the three months ended Aircraft Railcar Container Vessel Trailer
September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------ ------- ------- ------- ------- ------- ----- -----
REVENUES
Lease revenue $ 196 $ 701 $ 20 $ -- $ 193 $ -- $ 1,110
Interest income and other -- -- -- -- -- 28 28
Gain (loss) on disposition of -- (3) 28 -- 129 -- 154
equipment
-------------------------------------------------------------------------
Total revenues 196 698 48 -- 322 28 1,292
COSTS AND EXPENSES
Operations support 23 151 2 -- 79 6 261
Depreciation 336 104 86 -- 61 -- 587
Management fees to affiliates 4 44 1 -- 13 -- 62
General and administrative expenses 39 20 -- -- 99 144 302
Recovery of bad debts -- (27) -- -- (1) -- (28)
Loss on revaluation of equipment -- -- -- -- 106 -- 106
-------------------------------------------------------------------------
Total costs and expenses 402 292 89 -- 357 150 1,290
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 115 -- -- (32) -- -- 83
-------------------------------------------------------------------------
Net income (loss) $ (91) $ 406 $ (41 )$ (32) $ (35) $ (122) $ 85
=========================================================================
Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14) $ 22 $ 2,888 $ 13,484
=========================================================================
Marine Marine
For the nine months ended Aircraft Railcar Container Vessel Trailer
September 30, 2001 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------ ------- ------- ------- ------- ------- ----- -----
REVENUES
Lease revenue $ 185 $ 1,971 $ 29 $ -- $ -- $ -- $ 2,185
Interest income and other 39 -- -- -- -- 212 251
Gain (loss) on disposition of 3,355 (15) 128 -- 3 -- 3,471
equipment
-------------------------------------------------------------------------
Total revenues 3,579 1,956 157 -- 3 212 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 -- -- (1) 411 606
Provision for (recovery of) bad -- 16 -- -- (1) -- 15
debts
-------------------------------------------------------------------------
Total costs and expenses 519 881 158 27 (2) 504 2,087
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 307 -- -- (34) -- -- 273
-------------------------------------------------------------------------
Net income (loss) $ 3,367 $ 1,075 $ (1 )$ (61) $ 5 $ (292) $ 4,093
=========================================================================
Total assets as of September 30, 2001 $ 2,993 $ 3,949 $ 153 $ -- $ -- $ 8,054 $ 15,149
=========================================================================
(1) Includes certain assets not identifiable to a particular segment, such as
cash and prepaid expenses. Also includes interest income and costs not
identifiable to a particular segment, such as certain operations support
and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
8. OPERATING SEGMENTS (continued)
Marine Marine
For the nine months ended Aircraft Railcar Container Vessel Trailer
September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------ ------- ------- ------- ------- ------- ----- -----
REVENUES
Lease revenue $ 588 $ 2,191 $ 62 $ -- $ 635 $ -- $ 3,476
Interest income and other 2 -- -- -- -- 112 114
Gain (loss) on disposition of -- (13) 154 -- 112 -- 253
equipment
-------------------------------------------------------------------------
Total revenues 590 2,178 216 -- 747 112 3,843
COSTS AND EXPENSES
Operations support 126 511 5 -- 207 51 900
Depreciation 1,007 323 271 -- 186 -- 1,787
Management fees to affiliates 12 145 3 -- 49 -- 209
General and administrative expenses 103 82 1 -- 213 396 795
Recovery of bad debts (9) (23) -- -- (142) -- (174)
Loss on revaluation of equipment -- -- -- -- 106 -- 106
-------------------------------------------------------------------------
Total costs and expenses 1,239 1,038 280 -- 619 447 3,623
-------------------------------------------------------------------------
Equity in net income of USPEs 426 -- -- 123 -- -- 549
-------------------------------------------------------------------------
Net income (loss) $ (223) $ 1,140 $ (64) $ 123 $ 128 $ (335) $ 769
=========================================================================
Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14) $ 22 $ 2,888 $ 13,484
=========================================================================
(1) Includes certain assets not identifiable to a particular segment, such as
cash and prepaid expenses. Also includes interest income and costs not
identifiable to a particular segment, such as certain operations support
and general and administrative expenses.
9. 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 nine months
ended September 30, 2001 and 2000 was 8,628,420.
10. 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
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
10. CONTINGENCIES (continued)
of the Funds, and concealing such mismanagement from investors in the Funds.
Plaintiffs seek unspecified compensatory damages, as well as punitive damages.
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 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 or, Fund VII, and their assigns and successors in interest. 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 Fund V,
Fund VI, and Fund VII's equipment, (b) the extension (until December 31, 2004)
of the period during which FSI can reinvest the funds of Fund V, Fund VI, and
Fund VII 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.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
10. CONTINGENCIES (continued)
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 district court judge adopted the Report and Recommendation, and
entered a final judgment approving both settlements. No appeal has been filed
and the time for filing an appeal has expired. Therefore, monetary class members
who submitted claims will be paid their settlement amount out of the monetary
fund by the third-party claims administrator once the final settlement amounts
are calculated pursuant to the formula set forth in the settlement agreement and
court order. Similarly the equitable settlement will be implemented promptly.
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, together with affiliates, has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership property and to recover damages for failure to pay rent and failure
to maintain such property in accordance with relevant lease contracts. The
Partnership has repossessed all of its property previously leased to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline filed counterclaims against the Partnership in
excess of the Partnership's claims against the airline. The General Partner
believes that the airline's counterclaims are completely without merit, and the
General Partner will defend against such counterclaims. The General Partner
believes the likelihood of an unfavorable outcome from the counterclaims is
remote.
During 2001, the General Partner has decided to minimize its collection efforts
from the India lessee in order to save the Partnership from additional expenses
of trying to collect from a lessee that has limited ability to pay.
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 or results of
operations of the Partnership.
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1999, 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 owned equipment leased under
operating leases and the jointly-owned equipment leased under a finance lease
will continue to be leased until sold. The amounts reflected for assets and
liabilities of the Partnership have not been adjusted to reflect liquidation
values. The equipment portfolio continues to be carried at the lower of
depreciated cost or fair value less cost to dispose. Although the General
Partner estimates that there will be distributions after liquidation of assets
and liabilities, the amounts cannot be accurately determined prior to actual
liquidation of the equipment. Any excess proceeds over expected Partnership
obligations will be distributed to the Partners. Upon final liquidation, the
Partnership will be dissolved.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS (continued)
In the nine months ended September 30, 2000, the General Partner paid special
distributions of $0.50 per weighted-average limited partnership unit. No special
distributions were paid in the nine months ended September 30, 2001. The
Partnership is not permitted to reinvest proceeds from sales or liquidations of
equipment. The sales and liquidations occur based on 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.
(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, 2001 and 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating and asset-specific insurance expenses) on owned equipment
decreased during the third 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 8 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,
2001 2000
---------------------------
Railcars $ 491 $ 550
Trailers -- 114
Marine containers (1) 18
Aircraft (226) 173
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.1
million, respectively, for the third quarter of 2001, compared to $0.7 million
and $0.2 million, respectively, during the same period in 2000. Railcar
contribution decreased $0.1 million compared to the same period of 2000 due to
lower lease revenues on railcars whose lease expired during 2001.
Trailers: Trailer lease revenues and direct expenses were $-0- for the third
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 third
quarter of 2001 was due to the sale of all the Partnership's trailers in 2000.
Marine containers: Marine container lease revenues and direct expenses were
$(1,000) and $-0-, respectively, for the third quarter of 2001, compared to
$20,000 and $2,000, respectively, during the same period of 2000. The decrease
in marine container contribution in the third quarter of 2001 compared to the
same period of 2000 was due to the sale of marine containers in 2001 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $-0- and $0.2
million, respectively, for the third quarter of 2001, compared to $0.2 million
and $23,000, respectively, during the same period of 2000. The decrease in
aircraft contribution in the third 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 third quarter of 2001 decreased
from $1.0 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 $0.2 million decrease in general and administrative expenses during
the three months ended September 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.
(iii) Loss on revaluation of equipment decreased $0.1 million during the
third quarter of 2001 compared to the same period in 2000. In the third quarter
of 2000, the Partnership reduced the carrying value of its trailers to their
estimated net realizable value. No revaluation of equipment was required during
the same period in 2001.
(C) Net Gain on Disposition of Owned Equipment
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. For the third
quarter of 2000, net gain on disposition of equipment totaled $0.2 million,
which resulted from the sale of marine containers, trailers, and railcars with
an aggregate net book value of $1.2 million, for proceeds of $1.4 million.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)
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 Three Months
Ended September 30,
2001 2000
---------------------------
Aircraft $ 99 $ 115
Marine vessel -- (32)
---------------------------
Equity in net income of USPEs $ 99 $ 83
===========================
Aircraft: As of September 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 $16,000, respectively, for the third
quarter of 2001, compared to $0.1 million and $17,000, respectively, during the
same period in 2000.
Marine vessel: As of September 30, 2001, the Partnership had no remaining
interests in entities that owned marine vessels.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.2 million for
the third quarter of 2001, compared to net income of $0.1 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 September 30,
2001 is not necessarily indicative of future periods.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 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 Nine Months
Ended September 30,
2001 2000
---------------------------
Railcars $ 1,561 $ 1,680
Marine containers 29 57
Trailers -- 428
Marine vessel (27) --
Aircraft (62) 462
Railcars: Railcar lease revenues and direct expenses were $2.0 million and $0.4
million, respectively, for the nine months ended September 30, 2001, compared to
$2.2 million and $0.5 million, respectively, during the same period in 2000.
Railcar contribution decreased $0.1 million compared to the same period of 2000
due to lower lease revenues on railcars whose lease expired during 2001.
Marine containers: Marine container lease revenues and direct expenses were
$29,000 and $-0-, respectively, for the nine months ended September 30, 2001,
compared to $62,000 and $5,000, respectively, during the same period of 2000.
The decrease in marine container contribution in the nine months ended September
30, 2001 compared to the same period of 2000 was due to the sale of marine
containers in 2001 and 2000.
Trailers: Trailer lease revenues and direct expenses were $-0- for the nine
months ended September 30, 2001, compared to $0.6 million and $0.2 million,
respectively, during the same period of 2000. The decrease in trailer
contribution in the nine months ended September 30, 2001 was due to the sale of
all of the Partnership's trailers in 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.2
million, respectively, for the nine months ended September 30, 2001, compared to
$0.6 million and $0.1 million, respectively, during the same period of 2000. The
decrease in aircraft contribution in the nine months ended September 30, 2001
was due to the sale of the Partnership's aircraft in 2001 and 2000.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.3 million for the nine months ended September 30,
2001 decreased from $2.7 million for the same period in 2000. Significant
variances are explained as follows:
(i) A $1.2 million decrease in depreciation expense from 2000 levels
resulted from a $1.2 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 decrease of $0.2 million in general and administrative expenses was
due to lower costs of $0.1 million resulting from the sale of all the
Partnership's trailers during 2000 and lower costs of $0.1 million due to the
sale of aircraft during 2001.
(iii) Loss on revaluation of equipment decreased $0.1 million during the
nine months ended September 30, 2001 compared to the same period in 2000. In the
third quarter of 2000, the Partnership reduced the carrying value of its
trailers to their estimated net realizable value. No revaluation of equipment
was required during the same period in 2001.
(iv) A $0.1 million decrease in management fees to affiliate resulted from
the lower levels of lease revenues on owned equipment during the nine months
ended September 30, 2001, compared to the same period in 2000.
(v) The $0.2 million increase in the bad debt expenses was due to the
collection of $0.2 million receivable in the nine months ended September 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 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. For the nine months ended September 30, 2000, net gain
on disposition of totaled $0.3 million, which resulted from the sale of marine
containers, railcars, and trailers with a net book value of $1.5 million, for
aggregate proceeds of $1.8 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 Nine Months
Ended September 30,
2001 2000
---------------------------
Aircraft $ 307 $ 426
Marine vessel (34) 123
---------------------------
Equity in net income of USPEs $ 273 $ 549
===========================
Aircraft: As of September 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 $0.4 million and $47,000, respectively, for the nine
months ended September 30, 2001, compared to $0.4 million and $(19,000),
respectively, during the same period in 2000. The decrease in revenues of $0.1
million during the nine months ended September 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 September 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 nine months ended
September 30, 2001 compared to $0.1 million and $(5,000), respectively, during
the same period in 2000. Revenues decreased $0.1 million during the nine months
ended September 30, 2001 due to the sale of the marine vessel entity in which
the Partnership owned an interest during the fourth quarter of 2000 and the
receipt of $0.1 million for an insurance claim during the nine months ended
September 30, 2000. A similar event did not occur during the same period of
2001. Expenses increased $39,000 due to payment of additional marine vessel
operating expenses.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $4.1 million for
the nine months ended September 30, 2001, compared to net income of $0.8 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 nine months
ended September 30, 2001 is not necessarily indicative of future periods. In the
nine months ended September 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 nine months ended September 30, 2001, the Partnership generated $1.7
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 $0.1 million to make distributions (total of $1.8 million
in the nine months ended September 30, 2001) to the partners.
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.
Restricted cash decreased $0.1 million during the nine months ended September
30, 2001 due to the sale of a Partnership aircraft and the reclassification of
$0.1 million of restricted cash to equipment sales proceeds during the first
quarter of 2001.
Accounts receivable decreased $0.1 million during the nine months ended
September 30, 2001 due to the timing of cash receipts.
Investments in USPEs decreased $0.3 million due to cash distributions of $0.6
million to the Partnership from the USPEs offset, in part, by $0.3 million of
income that was recorded by the Partnership from the USPEs during the nine
months ended September 30, 2001.
Accounts payable increased $0.2 million during the nine months ended September
30, 2001 due to the timing of payments to vendors.
Lessee deposits and reserve for repairs decreased $0.2 million during the nine
months ended September 30, 2001 due to the decrease of $0.1 million resulting
from the sale of a Partnership aircraft and the reclassification of $0.1 million
of a lessee deposit to equipment sales proceeds 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 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.
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. 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 2002.
Several factors may affect the Partnership's operating performance in 2001 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
Other factors affecting the Partnership's contribution in the year 2001 and
beyond 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 nine 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 or railcars are not released.
3. The tragic events of September 11, 2001 have significantly impacted the
commercial airline industry and consequently the demand for commercial aircraft.
The General Partner expects the Partnership to be affected as a result of the
excess supply of off-lease aircraft now available in the market, as well as the
weakened financial strength of the Partnership's aircraft lessees. No direct
damage occurred to any of the Partnership's aircraft as a result of these events
and the General Partner is currently unable to determine the long-term effects,
if any, these events may have on the Partnership's aircraft. As of September 30,
2001, substantially all of the Partnership's lease receivables remain current
for the Partnership's interest in a trust that owns commercial aircraft.
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.
The General Partner believes that due to the current state of the economy,
liquidating Partnership equipment at this time is not in the best interest of
the partners. The General Partner will continue to monitor the economic
conditions to determine the best time to liquidate the Partnership's equipment.
(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 nine months of 2001, 68% 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.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
Report dated September 5, 2001 announcing the engagement of
Deloitte & Touche LLP as the Partnership's auditors and the
dismissal of KPMG, LLP.
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 9, 2001
By: /s/Stephen M. Bess
------------------------------
Stephen M. Bess
President and
Current Chief Accounting Officer