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 QUARTER ENDED MARCH 31, 1999
OR
[ ] 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 0-15436
-----------------------
PLM EQUIPMENT GROWTH FUND
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2998816
(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 ______
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease, at cost $ 25,456 $ 26,113
Less accumulated depreciation (20,638 ) (20,862 )
-------------------------------------
Net equipment 4,818 5,251
Cash and cash equivalents 3,527 3,289
Accounts receivable, less allowance for doubtful accounts
of $56 in 1999 and $161 in 1998 336 305
Investments in unconsolidated special-purpose entities 4,172 4,149
Prepaid expenses and other assets 17 26
-------------------------------------
Total assets $ 12,870 $ 13,020
=====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 139 $ 131
Due to affiliates 577 525
Lessee deposits and reserve for repairs 91 37
-------------------------------------
Total liabilities 807 693
-------------------------------------
Partners' capital:
Limited partners (5,785,350 depositary units
as of March 31, 1999 and December 31, 1998) 12,063 12,327
General Partner -- --
-------------------------------------
Total partners' capital 12,063 12,327
-------------------------------------
Total liabilities and partners' capital $ 12,870 $ 13,020
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
REVENUES 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lease revenue $ 1,672 $ 1,969
Interest and other income 49 67
Net gain on disposition of equipment 89 75
------------------------
Total revenues 1,810 2,111
------------------------
EXPENSES
Depreciation 386 495
Repairs and maintenance 469 569
Insurance expense 9 10
Management fees to affiliate 114 166
General and administrative expenses to affiliates 77 144
Other general and administrative expenses 133 256
Recovery of bad debts (103 ) (116 )
------------------------
Total expenses 1,085 1,524
------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 42 (44 )
------------------------
Net income $ 767 $ 543
========================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 757 $ 486
General Partner 10 57
------------------------
Total $ 767 $ 543
========================
Net income per weighted-average depositary unit $ 0.13 $ 0.08
=================================================================================================================
Cash distribution $ 1,031 $ 1,601
Special distribution -- 3,483
=================================================================================================================
Total distribution $ 1,031 $ 5,084
=================================================================================================================
Per weighted-average depositary unit:
Cash distribution $ 0.18 $ 0.27
Special distribution -- 0.60
=================================================================================================================
Total distributions per weighted-average depositary unit $ 0.18 $ 0.87
=================================================================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM DECEMBER 31,
1997 TO MARCH 31, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1997 $ 18,887 $ (189 ) $ 18,698
Net income 1,536 271 1,807
Cash distribution (4,648 ) (47 ) (4,695 )
Special distribution (3,448 ) (35 ) (3,483 )
--------------------------------------------------------
Partners' capital as of December 31, 1998 12,327 -- 12,327
Net income 757 10 767
Cash distribution (1,021 ) (10 ) (1,031 )
----------------------------------------------------------------------------------------------------------------------
Partners' capital as of March 31, 1999 $ 12,063 $ -- $ 12,063
======================================================================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 767 $ 543
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 386 495
Net gain on disposition of equipment (89 ) (75 )
Equity in net (income) loss from unconsolidated
special-purpose entities (42 ) 44
Changes in operating assets and liabilities:
Accounts receivable, net (31 ) 189
Due from affiliate -- 353
Prepaid expenses and other assets 9 10
Accounts payable and accrued expenses 8 (411 )
Due to affiliates 52 (70 )
Lessee deposits and reserve for repairs 54 59
----------------------------------
Net cash provided by operating activities 1,114 1,137
----------------------------------
INVESTING ACTIVITIES
Payments for capital improvements (11 ) (74 )
Liquidation distributions from unconsolidated
special-purpose entities -- 1,101
Proceeds from disposition of equipment 148 310
Distributions from (additional investments in) unconsolidated
special-purpose entities 18 (166 )
----------------------------------
Net cash provided by investing activities 155 1,171
----------------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (1,021 ) (1,585 )
Cash distribution paid to General Partner (10 ) (16 )
Special distribution paid to limited partners -- (3,448 )
Special distribution paid to General Partner -- (35 )
----------------------------------
Net cash used in financing activities (1,031 ) (5,084 )
----------------------------------
Net increase (decrease) in cash and cash equivalents 238 (2,776 )
Cash and cash equivalents at beginning of period 3,289 4,585
----------------------------------
Cash and cash equivalents at end of period $ 3,527 $ 1,809
==================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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 (the
Partnership) as of March 31, 1999 and 1998, the statements of income for the
three months ended March 31, 1999 and 1998, the statements of changes in
Partners' capital from December 31, 1997 to March 31, 1999, and the statements
of cash flows for the three months ended March 31, 1999 and 1998. 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, 1998, 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, 1998, and has commenced an orderly
liquidation of the Partnership assets. The Partnership will terminate on
December 31, 2006, unless terminated earlier upon the sale of all equiment 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.
3. Cash Distributions
Cash distributions are recorded when paid and may include amounts in excess of
net income. Operating cash distributions were $1.0 million and $1.6 million for
the three months ended March 31, 1999 and 1998, respectively. In addition, a
$3.5 million special distribution was paid to the partners during the three
months ended March 31, 1998. No special distributions were paid during the three
months ended March 31, 1999. Cash distributions to the limited partners in
excess of net income are considered to represent a return of capital. During the
three months ended March 31, 1999 and 1998, cash distributions to unitholders of
$0.3 million and $4.5 million, respectively, were deemed to be a return of
capital.
Operating cash distributions related to the results from the first quarter of
1999 of $1.0 million are to be paid during the second quarter of 1999. A special
cash distribution of $1.75 million was declared on April 27, 1999, and will be
paid during the second quarter of 1999.
4. Transactions with General Partner and Affiliates
The balance due to affiliates as of March 31, 1999, includes $45,000 due to FSI
and its affiliate for management fees and $0.5 million due to affiliated
unconsolidated special-purpose entities (USPEs). The balance due to affiliates
as of December 31, 1998 includes $39,000 due to FSI and its affiliate for
management fees and $0.5 million due to affiliated USPEs.
The Partnership's proportional share of USPE-affiliated management fees of $0
and $3,000 were payable as of March 31, 1999 and 1998, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
4. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the affiliated expenses incurred by the
USPEs during 1999 and 1998 is listed in the following table (in thousands of
dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
---------------------------
<S> <C> <C>
Data processing and administrative
expenses $ 12 $ 14
Management fees 5 48
Insurance expense 5 17
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, and currently in liquidation, will no longer provide certain
marine insurance coverage as had been provided during 1998. These services will
be provided by an unaffiliated third party.
5. Equipment
The components of owned equipment were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Railcars $ 21,440 $ 21,635
Marine containers 2,010 2,039
Trailers 2,006 2,439
- --------------------------------------------------------------------------------------------------------------------
25,456 26,113
Less accumulated depreciation (20,638 ) (20,862 )
==================================
Net equipment $ 4,818 $ 5,251
==================================
</TABLE>
As of March 31, 1999, all equipment in the Partnership's owned equipment
portfolio was on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for 20 marine containers and 5 railcars with an aggregate net
book value of $19,000. As of December 31, 1998, all equipment in the
Partnership's owned equipment portfolio was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 23 marine
containers and 5 railcars with an aggregate net book value of $23,000.
Capital improvements to the Partnership's equipment of $11,000 and $0.1 million
were made during the three months ended March 31, 1999, and March 31, 1998,
respectively.
During the three months ended March 31, 1999, the Partnership sold or disposed
of marine containers, railcars, and trailers, with an aggregate net book value
of $0.1 million, for proceeds of $0.1 million.
During the three months ended March 31, 1998, the Partnership sold or disposed
of marine containers, trailers, and railcars with an aggregate net book value of
$0.3 million, for proceeds of $0.4 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
6. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities included the
following jointly-owned equipment (and related assets and liabilities) (in
thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-----------------------------------------
<S> <C> <C>
12% interest in an entity owning a Boeing 767-200 ER $ 1,973 $ 2,064
50% interest in an entity owning a product tanker 1,831 1,585
50% interest in an entity owning a Boeing 737-200 366 498
18% interest in an entity that owned a Boeing 727-200 2 2
-----------------------------------------
Net investments $ 4,172 $ 4,149
=========================================
</TABLE>
The Boeing 737-200 aircraft was off-lease as of March 31, 1999, and December 31,
1998.
(this space left blank intentionally)
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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):
<TABLE>
<CAPTION>
Marine
Railcar Trailer Container All
For the quarter ended March 31, Leasing Leasing Leasing Other<F1> Total
1999
<S> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,490 $ 134 $ 48 $ -- $ 1,672
Interest income and other -- -- -- 49 49
Net gain on disposition
of equipment 29 59 1 -- 89
--------------------------------------------------------------
Total revenues 1,519 193 49 49 1,810
COST AND EXPENSES
Operations support 441 31 -- 6 478
Depreciation 325 35 26 -- 386
General and administrative 45 35 1 129 210
expenses
Management fees -- -- -- 114 114
Provision for (recovery of) (100 ) 1 -- (4 ) (103 )
bad debts
---------------------------------------------------------------
Total costs and expenses 711 102 27 245 1,085
Equity in net income of USPEs -- -- -- 42 42
---------------------------------------------------------------
Net income (loss) $ 808 $ 91 $ 22 $ (154 ) $ 767
==============================================================
Total assets as of March 31, 1999 $ 3,767 $ 502 $ 2,341 $ 6,260 $ 12,870
==============================================================
<FN>
<F1> Includes revenues and costs not identifiable to a particular segment such
as interest expense, certain amortization expenses, certain interest income
and other, operations support and general and administrative expenses. Also
includes income from an investment in an entity owning a marine vessel and
an interest in an entity owning an aircraft.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Marine
Railcar Trailer Container Aircraft All
For the quarter ended March 31, Leasing Leasing Leasing Leasing Other<F2> Total
1998
<S> <C> <C> <C> <C> <C> <C>
Revenues
Lease revenue $ 1,507 $ 381 $ 81 $ -- $ -- $ 1,969
Interest income and other -- -- 1 -- 66 67
Net gain (loss) on disposition
of equipment 37 85 2 (49 ) -- 75
--------------------------------------------------------------------------
Total revenues 1,544 466 84 (49 ) 66 2,111
Cost and Expenses
Operations support 460 113 1 -- 5 579
Depreciation 331 115 49 -- -- 495
General and administrative 56 106 2 4 232 400
expenses
Management fees -- -- -- -- 166 166
Provision for (recover of) bad (110 ) (5 ) (21 ) -- 20 (116 )
debts
--------------------------------------------------------------------------
Total costs and expenses 737 329 31 4 423 1,524
Equity in net income (loss) of -- -- -- (78 ) 34 (44 )
USPEs
--------------------------------------------------------------------------
Net income (loss) $ 807 $ 137 $ 53 $ (131 ) $ (323 )$ 543
==========================================================================
Total assets as of March 31, 1998 $ 5,162 $ 1,185 $ 1,078 $ 3,472 $ 4,146 $ 15,043
==========================================================================
<FN>
<F2> Includes revenues and costs not identifiable to a particular segment such
as interest expense, certain amortization expenses, certain interest income
and other, operations support and general and administrative expenses. Also
includes income from an investment in an entity owning a marine vessel.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999 and 1998 was 5,785,350.
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 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 vigorously defend
against such counterclaims.
(this space left blank intentionally)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund's (the Partnership's) Operating Results
for the Three Months Ended March 31, 1999 and 1998
(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 quarter ended March 31, 1999, when compared to the same
period of 1998. 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 expenses (see Note 6 to
the financial statement), 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 owned equipment type (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Railcars $ 1,049 $ 1,046
Trailers 103 268
Marine containers 48 80
</TABLE>
Railcars: Railcar lease revenues and direct expenses were $1.5 million and $0.4
million, respectively, for the quarter ended March 31, 1999, compared to $1.5
million and $0.5 million, respectively, for the same period of 1998. Direct
revenues during the first quarter of 1999 remained the same as the same period
in 1998 due to the low number of off-lease railcars in both periods. Direct
expenses on railcars decreased due to repairs required on certain of the
railcars in the fleet during 1998, which were not needed during 1999.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$31,000, respectively, for the quarter ended March 31, 1999, compared to $0.4
million and $0.1 million, respectively, for the same period of 1998. The number
of trailers owned by the Partnership has been declining over the past twelve
months due to sales and dispositions. The result of this declining fleet has
been a decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were
$48,000 and $0, respectively, for the quarter ended March 31, 1999, compared to
$0.1 million and $1,000, respectively, for the same period of 1998. The number
of marine containers owned by the Partnership has been declining over the past
twelve months due to sales and 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 $0.6 million for the quarter ended March 31, 1999,
decreased from $0.9 million for the same period of 1998. The decrease is due
primarily to a $0.2 million decrease in general and administrative expenses due
to a reduction in the size of the Partnership's equipment portfolio, and a $0.1
million decrease in depreciation expense from 1998 levels resulting from the
sale of certain assets during 1999 and 1998.
<PAGE>
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for the first quarter of 1999
totaled $0.1 million, and resulted from the sale of marine containers, railcars,
and trailers, with an aggregate net book value of $0.1 million, for aggregate
proceeds of $0.1 million. For the first quarter of 1998, the net gain on sales
totaled $0.1 million, and resulted from the sale of marine containers, trailers,
and railcars with an aggregate net book value of $0.3 million, for aggregate
proceeds of $0.4 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):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Marine vessel $ 112 $ 34
Aircraft (70 ) (78 )
===================================================================================================
Equity in net income (loss) $ 42 $ (44 )
===================================================================================================
</TABLE>
Marine vessel: As of March 31, 1999 and 1998, the Partnership had an interest in
an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $0.7 million and $0.6 million, respectively, for the
quarters ended March 31, 1999, compared to $0.6 million and $0.6 million for the
same period in 1998. Marine vessel contribution in the first quarter of 1999 was
slightly higher due to higher charter rates when compared to the same period of
1998.
Aircraft: As of March 31, 1999 and 1998, the Partnership had an interest in two
entities that own a total of two commercial aircraft. The Partnership's share of
aircraft revenues and expenses was $0.2 million and $0.2 million, respectively,
for the quarter ended March 31, 1999, compared to $0.1 million and $0.2 million,
respectively, for the same period of 1998. The Partnership's 50% interest in an
entity that owns a commercial aircraft was off lease during the first quarter of
1999 and 1998. Direct expenses in this entity decreased due to decreased repairs
on this aircraft. The Partnership's remaining 12% interest in an entity that
owns a commercial aircraft earned higher lease rates during the first quarter of
1999, when compared to 1998.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $0.8 million for
the first quarter of 1999 increased from net income of $0.5 million during the
same period of 1998. 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 first quarter of 1999
is not necessarily indicative of future periods. In the first quarter of 1999,
the Partnership distributed $1.0 million to the limited partners, or $0.18 per
weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the three months ended March 31, 1999, the Partnership generated $1.1
million in operating cash (net cash provided by operating activities, plus
non-liquidating distributions from unconsolidated special-purpose entities) to
meet its operating obligations and maintain the current level of distributions
(total for the three months ended March 31, 1999, of approximately $1.0 million
to the partners).
During the three months ended March 31, 1999, the General Partner sold equipment
on behalf of the Partnership and realized proceeds of approximately $0.1
million.
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
to that mentioned above.
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
Partnership after final disposal of assets and settlement of liabilities, the
amounts cannot be accurately determined prior to actual disposal of the
equipment.
(III) EFFECTS OF YEAR 2000
It is possible that the General Partner's currently installed computer systems,
software products and other business systems, or the Partnership's vendors,
service providers and customers, working either alone or in conjunction with
other software and systems, may not accept input of, store, manipulate, and
output dates on or after January 1, 2000, without error or interruption (a
problem commonly known as the "Year 2000" problem). As the Partnership relies
substantially on the General Partner's software systems, applications, and
control devices in operating and monitoring significant aspects of its business,
any Year 2000 problem suffered by the General Partner could have a material
adverse effect on the Partnership's business, financial condition and results of
operations.
The General Partner has established a special Year 2000 oversight committee to
review the impact of Year 2000 issues on its software products and other
business systems in order to determine whether such systems will retain
functionality after December 31, 1999. The General Partner (a) is currently
integrating Year 2000-compliant programming code into its existing internally
customized and internally developed transaction processing software systems and
(b) the General Partner's accounting and asset management software systems have
either already been made Year 2000-compliant or Year 2000-compliant upgrades of
such systems are planned to be implemented by the General Partner before the end
of fiscal year 1999. Although the General Partner believes that its Year 2000
compliance program can be completed by the beginning of 1999, there can be no
assurance that the compliance program will be completed by that date. To date,
the costs incurred and allocated to the Partnership to become Year
2000-compliant have not been material. Also, the General Partner believes the
future costs allocable to the Partnership to become Year 2000-compliant will not
be material.
It is possible that certain of the Partnership's equipment lease portfolio may
not be Year 2000 compliant. The General Partner is currently contacting
equipment manufacturers of the Partnership's leased equipment portfolio to
assure Year 2000 compliance or to develop remediation strategies. The General
Partner does not expect that non-Year 2000 compliance of its leased equipment
portfolio will have an adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Partnership or General Partner to control, including the extent to which third
parties can address the Year 2000 problem. The General Partner is communicating
with vendors, services providers and customers in order to assess the Year 2000
compliance readiness of such parties and the extent to which the Partnership is
vulnerable to any third-party Year 2000 issues. There can be no assurance that
the software systems of such parties will be converted or made Year 2000
compliant in a timely manner. Any failure by the General Partner or such other
parties to make their respective systems Year 2000 compliant could have a
material adverse effect on the business, financial position and results of
operations from the Partnership. The General Partner will make an ongoing effort
to recognize and evaluate potential exposure relating to third-party Year 2000
non-compliance and develop a contingency plan if the General Partner determines
that third-party non-compliance will have a material adverse effect on the
Partnership's business, financial position or results of operation.
The General Partner is currently developing a contingency plan to address the
possible failure of any systems due to the Year 2000 problems. The General
Partner anticipates these plans will be completed by September 30, 1999.
<PAGE>
(IV) OUTLOOK FOR THE FUTURE
Since the Partnerhsip 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.
Several factors may affect the Partnership's operating performance in 1999 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
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 unpredicability of these factors, or of
their occurrence, makes it difficult for the General Partner to clearly define
trends or influences that may impact the performance of the Partnership's
equipment. The General Partner continually monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner may decide to reduce the Partnership's exposure to those equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.
The Partnership intends to use excess cash flow, if any, from operations to
satisfy its operating requirements, and to pay cash distributions to the
Partners.
(V) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, 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 that of currency devaluation
risk. During the first quarter of 1999, 88% 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 the United States
(U.S.) 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.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
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
By: PLM Financial Services, Inc.
General Partner
Date: April 28, 1999 By: /s/ Richard K Brock
-----------------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
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