UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended March 31, 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 1-10813
-----------------------
PLM EQUIPMENT GROWTH FUND III
(Exact name of registrant as specified in its charter)
California 68-0146197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes ____ X ____ No ______
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
March 31, December 31,
2001 2000
-------- --------
Assets
Equipment held for operating lease, at cost $ 39,510 $ 40,028
Less accumulated depreciation (34,277) (34,361)
-------- --------
5,233 5,667
Equipment held for sale -- 1,703
-------- --------
Net equipment 5,233 7,370
Cash and cash equivalents 7,284 1,832
Restricted cash -- 125
Accounts and note receivable, net of allowance for doubtful
accounts of $485 in 2001 and $455 in 2000 1,076 591
Investments in unconsolidated special-purpose entities -- 76
Prepaid expenses and other assets 64 43
-------- --------
Total assets $ 13,657 $ 10,037
======== ========
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 360 $ 462
Due to affiliates 106 72
Lessee deposits and reserves for repairs 2 187
-------- --------
Total liabilities 468 721
-------- --------
Partners' capital:
Limited partners (9,871,073 depositary units as
of March 31, 2001 and December 31, 2000) 13,189 9,316
General Partner -- --
-------- --------
Total partners' capital 13,189 9,316
-------- --------
Total liabilities and partners' capital $ 13,657 $ 10,037
======== ========
<FN>
See accompanying notes to financial statements.
</FN>
1
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
For the Three Months
Ended March 31,
2001 2000
------- -------
Revenues
Lease revenue $ 1,970 $ 3,154
Interest and other income 53 14
Net gain on disposition of equipment 3,842 37
------- -------
Total revenues 5,865 3,205
------- -------
Expenses
Depreciation and amortization 601 1,388
Repairs and maintenance 560 455
Equipment operating expenses 8 8
Insurance expense 71 35
Management fees to affiliate 119 179
Interest expense -- 150
General and administrative expenses to affiliates 164 113
Other general and administrative expenses 429 297
Provision for (recovery of) bad debts 30 (43)
------- -------
Total expenses 1,982 2,582
------- -------
Equity in net loss of unconsolidated
special-purpose entities (10) (72)
------- -------
Net income $ 3,873 $ 551
======= =======
Partners' share of net income
Limited partners $ 3,873 $ 523
General Partner -- 28
------- -------
Total $ 3,873 $ 551
======= =======
Limited partners' net income per weighted-average
depositary unit $ 0.39 $ 0.05
======= =======
See accompanying notes to financial statements.
2
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Period from December 31, 1999 to March 31, 2001
(in thousands of dollars)
Limited General
Partners Partner Total
-------- -------- --------
Partners' capital as of December 31, 1999 $ 8,328 $ -- $ 8,328
Net income 11,353 545 11,898
Cash distribution (10,365) (545) (10,910)
-------- -------- --------
Partners' capital as of December 31, 2000 9,316 -- 9,316
Net income 3,873 -- 3,873
-------- -------- --------
Partners' capital as of March 31, 2001 $ 13,189 $ -- $ 13,189
======== ======== ========
See accompanying notes to financial statements.
3
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Three Months
Ended March 31,
2001 2000
------- -------
Operating activities
Net income $ 3,873 $ 551
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 601 1,388
Net gain on disposition of equipment (3,842) (37)
Equity in net loss from unconsolidated special-purpose entities 10 72
Changes in operating assets and liabilities:
Accounts and note receivables, net (485) (97)
Restricted cash 125 --
Prepaid expenses and other assets (21) 18
Accounts payable and accrued expenses (102) (479)
Due to affiliates 34 17
Lessee deposits and reserves for repairs (185) 63
------- -------
Net cash provided by operating activities 8 1,496
------- -------
Investing activities
Payments for capitalized improvements (44) --
Distributions from unconsolidated special-purpose entities 66 87
Proceeds from disposition of equipment 5,422 173
------- -------
Net cash provided by investing activities 5,444 260
------- -------
Financing activities
Principal payments on note payable -- (3,727)
Payments on short-term loan from affiliate -- (600)
Proceeds from short-term loan from affiliate -- 2,350
------- -------
Net cash used in financing activities -- (1,977)
------- -------
Net increase (decrease) in cash and cash equivalents 5,452 (221)
Cash and cash equivalents at beginning of period 1,832 486
------- -------
Cash and cash equivalents at end of period $ 7,284 $ 265
======= =======
Supplemental information
Interest paid $ -- $ 147
======= =======
<FN>
See accompanying notes to financial statements.
</FN>
4
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 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 III (the Partnership) as of March 31, 2001 and December 31, 2000, the
statements of income for the three months ended March 31, 2001 and 2000,
the statements of changes in partners' capital for the period from December
31, 1999 to March 31, 2001, and the statements of cash flows for the three
months ended March 31, 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 at the Securities and
Exchange Commission.
2. Schedule of Partnership Phases
The Partnership, in accordance with its limited partnership agreement,
entered its liquidation phase on January 1, 2000 and has commenced an
orderly liquidation of the Partnership's assets. During the liquidation
phase, the Partnership's assets will continue to be reported at the lower
of carrying amount or fair value less cost to sell. The General Partner
filed a certificate of dissolution on behalf of the Partnership with the
Secretary of State for the State of California on December 31, 2000, and
following completion of the liquidation of the Partnership which is
anticipated to occur in 2001, will file a certificate of cancellation.
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. There
were no cash distributions for the three months ended March 31, 2001 and
2000.
Cash distributions related to the results from the first quarter of 2001 of
$0.6 million, will be paid during May 2001.
4. Transactions with General Partner and Affiliates
The balance due to affiliates as of March 31, 2001 and December 31, 2000
included $0.1 million due to FSI and its affiliate for management fees and
administrative expenses.
There was no Partnership's proportional share of USPE-affiliated management
fees payable as of March 31, 2001. The Partnership's proportional share of
USPE-affiliated management fees payable as of December 31, 2000 was
$10,000.
The Partnership's proportional share of the expenses incurred by the
unconsolidated special-purpose entities during the first quarters of 2001
and 2000 were $1,000 and $13,000, respectively.
5
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
5. Equipment
The components of owned equipment were as follows (in thousands of
dollars):
March 31, December 31,
2001 2000
-------- --------
Rail equipment $ 33,286 $ 33,370
Trailers 3,240 3,428
Marine containers 2,984 3,230
-------- --------
39,510 40,028
Less accumulated depreciation (34,277) (34,361)
-------- --------
5,233 5,667
Equipment held for sale -- 1,703
-------- --------
Net equipment $ 5,233 $ 7,370
======== ========
As of March 31, 2001, all equipment in the Partnership portfolio was on
lease except for 67 railcars and 20 trailers. As of December 31, 2000, all
owned equipment in the Partnership portfolio was on lease except for 88
railcars, 25 trailers, and an aircraft. The net book value of the equipment
off lease was $0.3 million and $0.6 million as of March 31, 2001 and
December 31, 2000, respectively.
Capital improvements to the Partnership's equipment of $44,000 were made
during the three months ended March 31, 2001. No capital improvements were
made during the three months ended March 31, 2000.
During the three months ended March 31, 2001, the Partnership disposed of
aircraft, marine containers, trailers, and railcars, with an aggregate net
book value of $1.6 million, for aggregate proceeds of $5.4 million. The
aircraft was reported as equipment held for sale as of December 31, 2000.
During the three months ended March 31, 2000, the Partnership disposed of
marine containers, trailers, and railcars, with an aggregate net book value
of $0.1 million, for aggregate proceeds of $0.2 million.
6. Investments in an Unconsolidated Special-Purpose Entity (USPE)
The net investment in an USPE included the following jointly-owned
equipment (and related assets and liabilities) (in thousands of dollars):
March 31, December 31,
2001 2000
---- ----
56% interest in an entity that owned a marine vessel $ -- $76
---- ---
Net investments $ -- $76
==== ===
6
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
7. Operating Segments
The Partnership operates or operated primarily in four different segments:
aircraft leasing, railcar leasing, marine container leasing, and trailer
leasing. Each equipment leasing segment engages in short-term and mid-term
operating leases to a variety of customers. The following tables present a
summary of the operating segments (in thousands of dollars):
Marine
Aircraft Railcar Container Trailer All
For the quarter Ended March 31, 2001 Leasing Leasing Leasing Leasing Other(1) Total
------------------------------------ ------- ------- ------- ------- -------- -----
Revenues
Lease revenue $ 185 $ 1,680 $ 12 $ 93 $ -- $ 1,970
Interest income and other 6 -- -- -- 47 53
Net gain on disposition of equipment 3,699 90 32 21 -- 3,842
-------- -------- -------- -------- -------- --------
Total revenues 3,890 1,770 44 114 47 5,865
Costs and Expenses
Operations support 25 509 -- 45 60 639
Depreciation and amortization 151 395 9 46 -- 601
Management fees 2 111 1 5 -- 119
General and administrative expenses 147 52 -- 20 374 593
Provision of bad debts -- 30 -- -- -- 30
-------- -------- -------- -------- -------- --------
Total costs and expenses 325 1,097 10 116 434 1,982
-------- -------- -------- -------- -------- --------
Equity in net loss of USPEs -- -- -- -- (10) (10)
-------- -------- -------- -------- -------- --------
Net income (loss) $ 3,565 $ 673 $ 34 $ (2) $ (397) $ 3,873
======== ======== ======== ======== ======== ========
Total assets as of March 31, 2001 $ 473 $ 4,830 $ 111 $ 895 $ 7,348 $ 13,657
======== ======== ======== ======== ======== ========
Marine
Aircraft Railcar Container Trailer All
For the quarter Ended March 31, 2001 Leasing Leasing Leasing Leasing Other(1) Total
------------------------------------ ------- ------- ------- ------- -------- -----
Revenues
Lease revenue $ 1,205 $ 1,751 $ 32 $ 166 $ -- $ 3,154
Interest income and other -- -- -- -- 14 14
Net gain (loss) on disposition of
equipment -- 44 7 (14) -- 37
-------- -------- -------- -------- -------- --------
Total revenues 1,205 1,795 39 152 14 3,205
Costs and Expenses
Operations support 49 386 -- 53 10 498
Depreciation and amortization 867 420 23 63 15 1,388
Interest expense -- -- -- -- 150 150
Management fees 46 123 1 9 -- 179
General and administrative expenses 37 56 -- 29 288 410
Recovery of bad debts -- (42) -- (1) -- (43)
-------- -------- -------- -------- -------- --------
Total costs and expenses 999 943 24 153 463 2,582
-------- -------- -------- -------- -------- --------
Equity in net income (loss) of USPEs 22 -- -- -- (94) (72)
-------- -------- -------- -------- -------- --------
Net income (loss) $ 228 $ 852 $ 15 $ (1) $ (543) 551
======== ======== ======== ======== ======== ========
Total assets as of March 31, 2000 $ 6,329 $ 6,039 $ 334 $ 1,547 $ 2,616 $ 16,865
======== ======== ======== ======== ======== ========
<FN>
- --------------------------
(1) Includes certain interest income and costs not identifiable to a particular
segment such as amortization expense and certain operations support and
general and administrative expenses.
(2) Includes certain interest income and costs not identifiable to a particular
segment such as interest and amortization expense and certain operations
support and general and administrative expenses.
</FN>
7
PLM EQUIPMENT GROWTH FUND III
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
8. Net Income Per Weighted-Average Partnership Unit
Net income per weighted-average Partnership unit was computed by dividing
net income attributable to the 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 months ended March 31, 2001 and 2000 was 9,871,073.
9. Contingencies
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
counter-claims 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
vigorously defend against such counterclaims. The General Partner believes
the likelihood of an unfavorable outcome from the counterclaims is remote.
The Partnership is involved as plaintiff or defendant in various other
legal actions incident 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 and commenced an orderly liquidation of the Partnership assets.
The General Partner is actively marketing the remaining equipment portfolio
with the intent of maximizing sale proceeds. 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 to partners.
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.
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. No special distributions were paid in the first
quarter of 2001 and 2000. 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.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund III's (the Partnership's) Operating
Results for the Three Months Ended March 31, 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 three months ended March 31, 2001 when compared to the same
period of 2000. Gains or losses from the sale of equipment, interest and other
income, and certain expenses such as depreciation and amortization and general
and administrative expenses relating to the operating segments (see Note 7 to
the unaudited financial statements), are not included in the owned equipment
operation discussion because these expenses are indirect in nature, not a result
of operations but the result of owning a portfolio of equipment. The following
table presents lease revenues less direct expenses by segment (in thousands of
dollars):
For the Three Months
Ended March 31,
2001 2000
------ ------
Railcars $1,171 $1,365
Aircraft 160 1,156
Trailers 48 113
Marine containers 12 32
Railcars: Railcars lease revenues and direct expenses were $1.7 million and $0.5
million, respectively, for the quarter ended March 31, 2001 compared to $1.8
million and $0.4 million for the quarter ended March 31, 2000. Lease revenues
declined as a result of lower lease rates. The increase in direct expenses of
$0.1 million was a result of more repairs being required on rail equipment in
the first quarter of 2001 than was needed during the first quarter of 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$25,000, respectively, for the quarter ended March 31, 2001, compared to $1.2
million and $49,000, respectively, during the same period of 2000. Lease
revenues decreased $1.0 million during the three months ended March 31, 2001
compared to the same period in 2000 due to the sale of two aircraft during 2001.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$45,000, respectively, for the quarter ended March 31, 2001, compared to $0.2
million and $0.1 million, respectively, during the same period of 2000. The
number of trailers owned by the Partnership has been declining due to
dispositions. The result of this declining fleet has been a decrease in trailer
contribution.
Marine containers: Marine container lease revenues and direct expenses were
$12,000 and zero, respectively, for the quarter ended March 31, 2001, compared
to $32,000 and $1,000, respectively, during the same period of 2000. The number
of marine containers owned by the Partnership has been declining due to
dispositions. The result of this declining fleet has been a decrease in marine
container contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.4 million for the quarter ended March 31, 2001
decreased from $2.1 million for the same period of 2000. Significant variances
are explained as follows:
(i) A decrease of $0.8 million in depreciation and amortization
expenses from 2000 levels reflects the disposition of certain
Partnership assets during 2001 and 2000.
(ii) A decrease of $0.2 million in interest expense was due to the
repayment of the Partnership's debt during 2000.
9
(iii) A $0.2 million increase in general and administrative expenses
was due to an increase of $0.1 million in legal fees related to
aircraft litigation. Allocations by the General Partner also increased
$0.1 million, of which $30,000 was due to severance costs related to
staff reductions.
(iv) A $0.1 million increase in bad debt expense from the first
quarter of 2000. A $0.1 million increase was due to the General
Partner's evaluation of the collectability of receivables due from
certain lessee and a $43,000 increase was due to recovery of bad debt
previously reserved for during the first quarter of 2000. A similar
recovery did not occur in the first quarter of 2001.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the first quarter of 2001
was $3.8 million, resulting from the disposition of aircraft, marine containers,
railcars, and trailers, with an aggregate net book value of $1.6 million, for
aggregate proceeds of $5.4 million. The net gain on the disposition of owned
equipment for the first quarter of 2000 was $37,000, resulting from the
disposition of marine containers, railcars, and trailers, with an aggregate net
book value of $0.1 million, for aggregate proceeds of $0.2 million.
(D) Equity in Net Income (Loss) 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 March 31,
2001 2000
---- ----
Aircraft, aircraft engines, and rotables $-- $ 22
Marine vessel (10) (94)
---- ----
Equity in net income (loss) of USPEs $(10) $(72)
==== ====
Aircraft, aircraft engines, and rotables: As of March 31, 2001, the Partnership
had no remaining interest in entities that owned aircraft, aircraft engines, or
rotables. The Partnership had no revenues or expenses in USPE's that owned
aircraft, aircraft engines, and rotables in the three months ended March 31,
2001. The Partnership's share of aircraft revenues and expenses were $22,000 and
zero, respectively, for the quarter ended March 31, 2000. The $22,000 of
aircraft revenues for the three months ended March 31, 2000 represented interest
income earned during the first quarter of 2000 on accounts receivable.
Marine vessel: As of March 31, 2001, the Partnership had no remaining interest
in entities that owned marine vessels. The Partnership's share of revenues and
expenses of marine vessels was $6,000 and $16,000, respectively, for the quarter
ended March 31, 2001, compared to $0.2 million and $0.3 million, respectively,
for the same period of 2000. The decrease in revenues and expenes of marine
vessels in the first quarter of 2001 compared to the same period of 2000 was due
to the sale of the Partnership's interest in an entity that owned a marine
vessel during the third quarter of 2000.
(E) Net Income
As a result of the foregoing, the Partnership had a net income of $3.9 million
in the first quarter of 2001 compared to net income of $0.6 million in the first
quarter 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. Therefore, the Partnership's performance in the three months ended
March 31, 2001 is not necessarily indicative of future periods. In the first
quarter of 2001, the Partnership did not make any cash distributions.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the three months ended March 31, 2001, the Partnership generated operating
cash of $0.1 million (net cash provided by operating activities, plus
non-liquidating distributions from USPEs) to meet its operating obligations.
10
During the three months ended March 31, 2001, the Partnership sold owned
equipment and received aggregate proceeds of $5.4 million.
During the three months ended March 31, 2001, accounts and note receivables
increased $0.5 million was due to the increase in notes receivable related to an
aircraft sold in the first quarter of 2001.
During the three months ended March 31, 2001, accounts payable and accrued
expenses decreased $0.1 million due to the reduction of the size of the
Partnership's equipment portfolio.
During the three months ended March 31, 2001, lessee deposits and reserves for
repairs decreased $0.2 million. This reflects a decrease of $0.1 million in
lessee deposits due to the return of security deposits to the buyers who
purchased an aircraft during the first quarter of 2001. A decrease of $0.1
million in prepaid aircraft lease revenue was due to the sale of an aircraft.
The General Partner has not planned any expenditure, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. 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 entered its liquidation phase on January 1, 2000. The General
Partner is seeking to selectively re-lease or sell assets as the existing leases
expire. Sale decisions will cause the operating performance of the Partnership
to decline over the remainder of its life. The General Partner filed a
certificate of dissolution on behalf of the Partnership with the Secretary of
State for the State of California in December 2000, and following completion of
the liquidation of the Partnership which is anticipated to occur in 2001, the
General Partner will file a certificate of cancellation.
Several factors may affect the Partnership's operating performance in the
remainder of 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 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 Partnership's fleet of both standard dry and specialized marine
containers is in excess of twelve years of age and is generally no longer
suitable for use in international commerce either due to its specific
physical condition, or lessees preferences for newer equipment. Demand for
the Partnership's marine containers will continue to be weak due to their
age.
2. Railcar loadings in North America for the 1st quarter of 2001 are 1.7%
below those of 2000. This decrease has led to lower utilization and lower
contribution to the Partnership when 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
11
Partner may decide to reduce the Partnership's exposure to those equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.
The Partnership intends to use cash flow from operations and proceeds from
disposition of equipment to satisfy its operating requirements, maintain working
capital reserves, and pay cash distributions to the unitholders.
(IV) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, in this Form 10-Q
contains forward-looking statements that involve risks and uncertainties, such
as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is currency devaluation risk.
During the first quarter of 2001, 71% of the Partnership's total lease revenues
equipment came from non-United States domiciled lessees. Most of the
Partnership's leases require payment in United States currency. If these
lessees' currency devalues against the U.S. dollar, the lessees could
potentially encounter difficulty in making the U.S. dollar denominated lease
payments.
(this space intentionally left blank)
12
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
(this space intentionally left blank)
13
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND III
By: PLM Financial Services, Inc.
General Partner
Date: May 7, 2001 By:
-----------------------------------------
Richard K Brock
Vice President and
Chief Financial Officer
14
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND III
By: PLM Financial Services, Inc.
General Partner
Date: May 7, 2001 By: /s/ Richard K Brock
-----------------------------------------
Richard K Brock
Vice President and
Chief Financial Officer
14