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 0-18789
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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 Indentification 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 IV
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
March 31, December 31,
2001 2000
-------- --------
Assets
Equipment held for operating leases, at cost $ 17,325 $ 18,003
Less accumulated depreciation (12,966) (13,436)
-------- --------
4,359 4,567
Equipment held for sale -- 1,931
-------- --------
Net equipment 4,359 6,498
Cash and cash equivalents 7,056 2,742
Restricted cash 147 272
Accounts and note receivable, less allowance for doubtful
accounts of $35 in 2001 and $5 in 2000 614 171
Investments in unconsolidated special-purpose entity 3,068 3,143
Prepaid expenses and other assets 60 37
-------- --------
Total assets $ 15,304 $ 12,863
======== ========
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 138 $ 186
Due to affiliates 191 174
Lessee deposits and reserve for repairs 191 369
-------- --------
Total liabilities 520 729
-------- --------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of March 31, 2001 and December 31, 2000) 14,784 12,134
General Partner -- --
-------- --------
Total partners' capital 14,784 12,134
-------- --------
Total liabilities and partners' capital $ 15,304 $ 12,863
======== ========
See accompanying notes to financial statements.
-1-
PLM EQUIPMENT GROWTH FUND IV
(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 $ 908 $ 1,192
Interest and other income 66 62
Net gain on disposition of equipment 3,429 59
------- -------
Total revenues 4,403 1,313
Expenses
Depreciation 301 589
Repairs and maintenance 139 249
Equipment operating expenses 96 48
Management fees to affiliate 47 78
General and administrative expenses to affiliates 123 119
Other general and administrative expenses 225 121
Provision for (recovery of) bad debt expense 30 (112
------- -------
Total expenses 961 1,092
Equity in net income of unconsolidated special-
purpose entities 70 297
------- -------
Net income $ 3,512 $ 518
======= =======
Partners' share of net income
Limited partners $ 3,468 $ 246
General Partner 44 272
------- -------
Total $ 3,512 $ 518
======= =======
Limited Partners net income per weighted-average
partnership unit $ 0.40 $ 0.03
======= =======
Cash distribution $ 862 $ 908
Special cash distribution -- 4,541
------- -------
Total distribution $ 862 $ 5,449
======= =======
Per weighted-average limited partnership unit:
Cash distribution $ 0.09 $ 0.10
Special cash distribution -- 0.50
------- -------
Total distribution $ 0.09 $ 0.60
======= =======
See accompanying notes to financial statements.
-2-
PLM EQUIPMENT GROWTH FUND IV
(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 $ 19,342 $ -- $ 19,342
Net income 492 405 897
Cash distribution (3,386) (178) (3,564)
Special distribution (4,314) (227) (4,541)
-------- -------- --------
Partners' capital as of December 31, 2000 12,134 -- 12,134
Net income 3,468 44 3,512
Cash distribution (818) (44) (862)
-------- -------- --------
Partner's capital as of March 31, 2001 $ 14,784 $ -- $ 14,784
======== ======== ========
See accompanying notes to financial statements.
-3-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Three Months
Ended March 31,
2001 2000
------- -------
Operating activities
Net income $ 3,512 $ 518
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 301 589
Net gain on disposition of equipment (3,429) (59)
Equity in net income of unconsolidated special-purpose
entities (70) (297)
Changes in operating assets and liabilities:
Restricted cash 125 --
Accounts and note receivable, net (443) 205
Prepaid expenses and other assets (23) 15
Accounts payable and accrued expenses (48) (92)
Due to affiliates 17 (15)
Lessee deposits and reserve for repairs (178) (18)
------- -------
Net cash (used in) provided by operating activities (236) 846
------- -------
Investing activities
Payments for capitalized improvements -- (3)
Proceeds from disposition of equipment 5,267 266
Distribution from unconsolidated special-purpose entities 145 303
------- -------
Net cash provided by investing activities 5,412 566
------- -------
Financing activities
Cash distribution paid to limited partners (818) (863)
Cash distribution paid to General Partner (44) (45)
Special cash distribution paid to limited partners -- (4,314)
Special cash distribution paid to General Partner -- (227)
------- -------
Net cash used in financing activities (862) (5,449)
------- -------
Net increase (decrease) in cash and cash equivalents 4,314 (4,037)
Cash and cash equivalents at beginning of year 2,742 5,587
------- -------
Cash and cash equivalents at end of period $ 7,056 $ 1,550
======= =======
See accompanying notes to financial statements.
-4-
PLM EQUIPMENT GROWTH FUND IV
(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 IV (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 cash flows for the three months ended March 31, 2001 and
2000, and the statements of changes in partners' capital for the period
from December 31, 1999 to March 31, 2001. 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 months ended March 31, 2001 and 2000, cash distributions totaled $0.9
million. In addition, a $4.5 million special distribution was paid to the
partners during the three months ended March 31, 2000 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 three months ended March 31, 2001. Cash distributions to
the limited partners of $0.0 and $4.9 million, respectively, for the three
months ended March 31, 2001 and 2000, were deemed to be a return of
capital.
Cash distributions related to the results from the first quarter of 2001,
of $0.9 million, will be paid during the second quarter of 2001.
4. Transactions with General Partner and Affiliates
The balance due to affiliates as of March 31, 2001 includes $44,000 due to
FSI and its affiliate for management fees and administrative expenses and
$0.1 million due to affiliated USPEs. 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 affiliated USPEs. The Partnership's
proportional share of management fees with USPE's of $12,000 and $9,000
were payable as of March 31, 2001 and December 31, 2000, respectively.
-5-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
4. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the expenses incurred by the USPEs
during 2001 and 2000 is listed in the following table (in thousands of
dollars):
For the Three Months
Ended March 31,
2001 2000
--------------------------
Management fees $ 4 $ 4
Data processing and administrative
expenses -- 5
5. 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):
March 31, December 31,
2001 2000
---------- ----------
Equipment held for operating leases
Railcars $ 13,336 $ 13,336
Marine containers 3,989 4,667
---------- ----------
17,325 18,003
Less accumulated depreciation (12,966) (13,436)
---------- ----------
4,359 4,567
Equipment held for sale -- 1,931
---------- ----------
Net equipment $ 4,359 $ 6,498
========== ==========
As of March 31, 2001, all equipment was on lease, except for 33 railcars,
and 117 marine containers, with an aggregate 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.
During the three months ended March 31, 2001, the Partnership disposed of
aircraft that were held for sale at December 31, 2000 and marine containers
with an aggregate net book value of $1.8 million, for aggregate proceeds of
$5.3 million.
During the three months ended March 31, 2000, the Partnership disposed of
marine containers, railcars and trailers with an aggregate net book value
of $0.2 million, for aggregate proceeds of $0.3 million.
-6-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
6. Investments in Unconsolidated Special-Purpose Entities
The 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 $3.1 million as of March 31, 2001 and December 31,
2000.
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 Marine
Aircraft Railcar Container Vessel
For the quarter ended March 31, 2001 Leasing Leasing Leasing Leasing All Other 1 Total
------------------------------------ ------- ------- ------- ------- ----------- -----
Revenues
Lease revenue $ 185 $ 711 $ 12 $ -- $ -- $ 908
Interest income and other 6 -- -- -- 60 66
Gain on disposition of equipment 3,360 -- 67 -- 2 3,429
--------------------------------------------------------------
Total revenues 3,551 711 79 -- 62 4,403
Costs and expenses
Operations support 13 135 -- 27 60 235
Depreciation 145 90 66 -- -- 301
Management fees to affiliates 3 44 -- -- -- 47
General and administrative expenses 107 21 -- -- 220 348
Provision for bad debts -- 30 -- -- -- 30
--------------------------------------------------------------
Total costs and expenses 268 320 66 27 280 961
--------------------------------------------------------------
Equity in net income (loss) of USPEs 104 -- -- (34) -- 70
--------------------------------------------------------------
Net income (loss) $ 3,387 $ 391 $ 13 $ (61) $ (218) $ 3,512
==============================================================
Total assets as of March 31, 2001 $ 3,540 $ 4,199 $ 302 $ -- $ 7,263 $ 15,304
==============================================================
<FN>
- -------------
1 Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
</FN>
-7-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
7. Operating Segments (continued)
Marine Marine
Aircraft Railcar Container Vessel Trailer
For the quarter ended March 31, 2000 Leasing Leasing Leasing Leasing Leasing All Other 1 Total
------------------------------------ ------- ------- ------- ------- ------- ----------- -----
Revenues
Lease revenue $ 196 $ 770 $ 15 $ -- $ 211 $ -- $ 1,192
Interest income and other 1 -- -- -- -- 61 62
Gain (loss) on disposition of -- (2) 66 -- (5) -- 59
equipment
-------------------------------------------------------------------------
Total revenues 197 768 81 -- 206 61 1,313
Costs and expenses
Operations support 23 193 2 -- 43 36 297
Depreciation 335 114 77 -- 63 -- 589
Management fees to affiliates 4 53 1 -- 20 -- 78
General and administrative expenses 30 32 -- -- 61 117 240
Provision for (recovery of) bad -- 18 -- -- (130) -- (112)
debts
-------------------------------------------------------------------------
Total costs and expenses 392 410 80 -- 57 153 1,092
-------------------------------------------------------------------------
Equity in net income of USPEs 189 -- -- 108 -- -- 297
-------------------------------------------------------------------------
Net income (loss) $ (6) $ 358 $ 1 $ 108 $ 149 $ (92) $ 518
=========================================================================
Total assets as of March 31, 2000 $ 6,426 $ 4,577 $ 921 $ (38) $ 1,513 $ 1,730 $ 15,129
=========================================================================
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 months ended March 31, 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.
- ---------------
1 Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
-8-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 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. The monetary settlement remains subject to
certain conditions, including final approval by the court following a final
fairness hearing. The equitable settlement remains subject to certain
conditions, including judicial approval of the proposed amendments and
final approval of the equitable settlement by the court following a final
fairness hearing.
-9-
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
9. Contingencies (continued)
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. Any objector to the
settlement may file objections to the Report and Recommendation. The Report
and Recommendation, along with any objections, will be reviewed by the
district court judge, who may approve, reject or modify any of the
magistrate judge's findings or recommendations, and who may also receive
further evidence or recommit the matter to the magistrate judge. The
parties await the district court's ruling on the Report and Recommendation.
The Company continues to believe that the allegations of the Koch and Romei
actions are completely without merit and intends to continue to defend this
matter vigorously if the monetary settlement is not consummated.
The Company 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, 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 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 on a quarterly basis 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 disposition of
equipment. These proceeds, in excess of operational cash requirements, are
periodically paid out to limited partners in the form of special
distributions. In the first quarter of 2000, the General Partner paid
special distributions of $0.50 per weighted-average depositary unit. No
special distibutions were paid in the first quarter of 2001. The sales and
liquidations occur because equipment is damaged, 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.
-10-
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 March 31, 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 first
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 March 31,
2001 2000
----------------------------
Railcars $ 576 $ 577
Aircraft 172 173
Marine containers 12 13
Trailers -- 168
Railcars: Railcar lease revenues and direct expenses were $0.7 million and $0.1
million, respectively, for the first quarter of 2001, compared to $0.8 million
and $0.2 million, respectively, during the same period of 2000. Railcar lease
revenue and direct expenses decreased in the first quarter of 2001, compared to
the same quarter of 2000, due to the disposition of railcars in 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$13,000, respectively, for the first quarter of 2001, compared to $0.2 million
and $23,000, respectively, during the same period of 2000.
Marine containers: Marine container lease revenues and direct expenses were
$12,000 and $0, respectively, for the first quarter of 2001, compared to $15,000
and $2,000, respectively, during the same period of 2000. Lease revenues
increased $0.1 million due to higher utilization than in the first quarter of
2000 for certain marine containers. This increase was offset by a decrease in
lease revenue of $0.1 million due to the sale of marine containers in 2001 and
2000.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and
$43,000, respectively, during the first quarter of 2000. All of the
Partnership's trailers were sold in 2000.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.7 million for the first quarter of 2001 decreased
from $0.8 million for the same period in 2000. Significant variances are
explained as follows:
(1) A $0.3 million decrease in depreciation expenses from 2000 levels
resulted primarily due to the sale of certain assets during 2001 and 2000.
(2) A $0.1 million increase in administrative expenses from 2000 levels
resulted from an increase of $0.2 million due to higher professional costs and
an increase of $22,000 as a result of the allocations by the General Partner of
severance costs related to staff reductions partially offset by lower
administrative expenses of $0.1 million resulting from the sale of the
Partnership's trailers during 2000.
-11-
(3) The $0.1 million increase in the provision of bad debt expenses was
primarily due to the collection from unpaid invoices in the first quarter of
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 first quarter of 2001 totaled
$3.4 million, and resulted from the sale or disposal of aircraft and marine
containers, with an aggregate net book value of $1.8 million, for aggregate
proceeds of $5.3 million. For the same quarter in 2000, net gain on disposition
of equipment totaled $0.1 million, which resulted from the sale or disposal of
marine containers, railcars and trailers with an aggregate net book value of
$0.2 million, for aggregate proceeds of $0.3 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 March 31,
2001 2000
----------------------------
Aircraft $ 104 $ 189
Marine vessel (34) 108
----------------------------
Equity in net income of USPEs $ 70 $ 297
============================
Aircraft: As of March 31, 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 first
quarter of 2001, compared to $0.2 million and $15,000, respectively, during the
same period in 2000. Revenues decreased due to a lower investment in finance
lease in the first quarter of 2001 compared to the same period in 2000.
Marine vessel: As of March 31, 2001, the Partnership had no remaining interests
in entities that owned marine vessels. Marine vessel revenues and expenses were
$0.1 million and $0, respectively, for the first quarter of 2000.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $3.5 million for
the first quarter of 2001, compared to net income of $0.5 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 March 31, 2001
is not necessarily indicative of future periods. In the first quarter of 2001,
the Partnership distributed $0.8 million to the limited partners, or $0.09 per
weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the quarter ended March 31, 2001, the Partnership used $0.2 million of
undistributed cash from prior periods to fund operations. In addition, the
Partnership used $0.9 million of sales proceeds to make its cash distributions.
During the three months ended March 31, 2001, the Partnership disposed of
aircraft and marine containers with an aggregate net book value of $1.8 million,
for aggregate proceeds of $5.3 million.
Restricted cash decreased $0.1 million during the three months ended March 31,
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 and note receivables increased $0.4 million during the three months
ended March 31, 2001 primarily due to the increase in note receivable related to
an aircraft sold in the first quarter of 2001.
-12-
Lessee deposits and reserve for repairs decreased $0.2 million during the three
months ended March 31, 2001 due to the decrease of $0.1 million in lessee
deposits resulting from the return of security deposits to the buyers 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. Although, there was some upward pressure on container
prices during the fourth quarter of 2000, this trend was reversed during the
quarter ended March 31, 2001.
2. Railcar loadings in North America for the first quarter 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 some 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.
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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 quarter of 2001, 74% 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.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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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: May 7, 2001
By:
------------------------------
Richard K Brock
Chief Financial Officer
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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: May 7, 2001
By: /s/ Richard K Brock
------------------------------
Richard K Brock
Chief Financial Officer