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 June 30, 2000
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 ______
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease, at cost $ 23,820 $ 24,580
Less accumulated depreciation (21,067) (20,967)
-------------------------------------
Net equipment 2,753 3,613
Cash and cash equivalents 1,474 1,446
Accounts receivable, less allowance for doubtful accounts
of $83 in 2000 and $36 in 1999 338 365
Investments in unconsolidated special-purpose entities 1,562 1,755
Prepaid expenses and other assets 15 38
-------------------------------------
Total assets $ 6,142 $ 7,217
=====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 77 $ 337
Due to affiliates 36 63
Lessee deposits 22 63
-------------------------------------
Total liabilities 135 463
-------------------------------------
Partners' capital:
Limited partners (5,785,350 depositary units
as of June 30, 2000 and December 31, 1999) 6,007 6,754
General Partner -- --
-------------------------------------
Total partners' capital 6,007 6,754
-------------------------------------
Total liabilities and partners' capital $ 6,142 $ 7,217
=====================================
</TABLE>
See accompanying notes to financial statements.
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 For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,491 $ 1,566 $ 3,128 $ 3,238
Interest and other income 29 47 48 96
Net (loss) gain on disposition of equipment (11) 51 8 140
-----------------------------------------------------------
Total revenues 1,509 1,664 3,184 3,474
-----------------------------------------------------------
EXPENSES
Depreciation 358 374 721 760
Repairs and maintenance 462 596 842 1,065
Insurance expense 14 8 23 17
Management fees to affiliate 78 86 165 200
General and administrative expenses to affiliates 60 67 128 144
Other general and administrative expenses 86 119 254 252
(Recovery of) provision for bad debt expense -- (18) 48 (121)
-----------------------------------------------------------
Total expenses 1,058 1,232 2,181 2,317
-----------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 371 2,654 1,657 2,696
-----------------------------------------------------------
Net income $ 822 $ 3,086 $ 2,660 $ 3,853
===========================================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 798 $ 3,058 $ 2,626 $ 3,815
General Partner 24 28 34 38
-----------------------------------------------------------
Total $ 822 $ 3,086 $ 2,660 $ 3,853
===========================================================
Limted partners net income per weighted-average
depositary unit $ 0.14 $ 0.53 $ 0.45 $ 0.66
===========================================================
Cash distribution $ 974 $ 1,032 $ 1,947 $ 2,063
Special distribution 1,460 1,753 1,460 1,753
=======================================================================================================================
Total distributions $ 2,434 $ 2,785 $ 3,407 $ 3,816
=======================================================================================================================
Per weighted-average depositary unit:
Cash distribution $ 0.17 $ 0.17 $ 0.34 $ 0.35
Special distribution 0.25 0.30 0.25 0.30
=======================================================================================================================
Total distributions $ 0.42 $ 0.47 $ 0.59 $ 0.65
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1998 to June 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1998 $ 12,327 $ -- $ 12,327
Net income 4,222 99 4,321
Cash distribution (3,811) (39) (3,850)
Special distribution (5,984) (60) (6,044)
----------------------------------------------------------------------------------------------------------------------
Partners' capital as of December 31, 1999 6,754 -- 6,754
Net income 2,626 34 2,660
Cash distribution (1,927) (20) (1,947)
Special distribution (1,446) (14) (1,460)
----------------------------------------------------------------------------------------------------------------------
Partners' capital as of June 30, 2000 $ 6,007 $ -- $ 6,007
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
2000 1999
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,660 $ 3,853
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 721 760
Net gain on disposition of equipment (8) (140)
Equity in net income of unconsolidated
special-purpose entities (1,657) (2,696)
Changes in operating assets and liabilities:
Accounts receivable, net 27 (43)
Prepaid expenses and other assets 23 17
Accounts payable and accrued expenses (260) 44
Due to affiliates (27) (486)
Lessee deposits (41) (2)
----------------------------------
Net cash provided by operating activities 1,438 1,307
----------------------------------
INVESTING ACTIVITIES
Payments for capital improvements -- (17)
Liquidation distributions from unconsolidated
special-purpose entities 1,910 4,794
Proceeds from disposition of equipment 147 236
Distributions from (additional investments in) unconsolidated
special-purpose entities (60) 37
----------------------------------
Net cash provided by investing activities 1,997 5,050
----------------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (1,927) (2,042)
Cash distribution paid to General Partner (20) (21)
Special distribution paid to limited partners (1,446) (1,736)
Special distribution paid to General Partner (14) (17)
----------------------------------
----------------------------------
Net cash used in financing activities (3,407) (3,816)
----------------------------------
Net increase in cash and cash equivalents 28 2,541
Cash and cash equivalents at beginning of period 1,446 3,289
----------------------------------
Cash and cash equivalents at end of period $ 1,474 $ 5,830
==================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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 June 30, 2000 and 1999, the statements of income for the
three and six months ended June 30, 2000 and 1999, the statements of changes in
Partners' capital from December 31, 1998 to June 30, 2000, and the statements of
cash flows for the six months ended June 30, 2000 and 1999. 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,
1999, 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 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.
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 on capital. For the six
months ended June 30, 2000 and 1999, cash distributions totaled $1.9 and $2.1
million, respectively. For both the three months ended June 30, 2000 and 1999
cash distributions totaled $1.0 million. In addition, $1.5 and $1.8 million in
special distributions were paid during the three and six months ended June 30,
2000 and 1999. During the six months ended June 30, 2000, cash and special
distributions to unitholders of $0.7 million, was deemed to be a return of
capital.
Operating cash distributions related to the results from the second quarter of
2000 of $1.0 million are to be paid during the third quarter of 2000.
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of June 30, 2000, includes $36,000 due to FSI
and its affiliate for management fees and data processing services. The balance
due to affiliates as of December 31, 1999 includes $0.1 million due to FSI and
its affiliate for management fees.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The Partnership's proportional share of the affiliated expenses incurred by the
USPEs during 2000 and 1999 is listed in the following table (in thousands of
dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 25 $ 41 $ 46 $ 46
Data processing and administrative
expenses 9 13 16 25
Insurance expense -- -- -- 5
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, will no longer provide certain marine insurance coverage as had
been provided in prior years. These services will be provided by an unaffiliated
third party. TEI was liquidated in the first quarter of 2000.
5. EQUIPMENT
The components of owned equipment were as follows (in thousands of dollars):
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
Railcars $ 21,366 $ 21,392
Trailers 1,427 1,617
Marine containers 1,027 1,571
--------------------------------------------------------------------------------
23,820 24,580
Less accumulated depreciation (21,067) (20,967)
===============================
Net equipment $ 2,753 $ 3,613
===============================
As of June 30, 2000, all equipment in the Partnership's owned equipment
portfolio was on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for five marine containers and six railcars with an aggregate
net book value of $26,000. As of December 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 11 railcars with
an aggregate net book value of $43,000.
Capital improvements to the Partnership's equipment of $0 and $17,000 were made
during the six months ended June 30, 2000 and 1999, respectively.
During the six months ended June 30, 2000, 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 six months ended June 30,
1999, the Partnership sold or disposed of marine containers, trailers, and
railcars with an aggregate net book value of $0.1 million, for proceeds of $0.2
million.
On May 24, 2000, FSI, on behalf of the Partnership, entered into an asset
purchase agreement to sell the refrigerated and dry trailer assets of the
Partnership. Closing of the transaction is contingent on numerous conditions. If
the sale is completed, the General Partner estimates the Partnership's sale
proceeds to be approximately $0.8 million and will result in a gain of
approximately $0.5 million. Since the sale of the trailers is contingent upon
certain conditions being met, the Partnership's trailers are not classified as
assets held for sale.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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>
June 30, December 31,
2000 1999
----------------------------------------
<S> <C> <C>
50% interest in an entity owning a product tanker $ 1,575 $ 1,397
18% interest in an entity that owned a Boeing 727-200 2 2
50% interest in an entity that owned a Boeing 737-200A -- 371
12% interest in an entity that owned a Boeing 767-200 ER (15) (15)
=========================================
Net investments $ 1,562 $ 1,755
=========================================
</TABLE>
During the first quarter of 2000, the General Partner sold the Partnership's 50%
interest in a Boeing 737-200A in which the Partnership had an investment of $0.4
million for proceeds of $1.9 million.
7. OPERATING SEGMENTS
The Partnership operates or operated primarily in five different segments,
railcar leasing, trailer leasing, marine container leasing, aircraft leasing,
and marine vessel 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 Marine
Railcar Trailer Container Aircraft Vessel All
For the quarter ended June 30, Leasing Leasing Leasing Leasing Leasing Other <F1> Total
2000
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,369 $ 99 $ 23 $ $ $ -- $ 1,491
Interest income and other -- -- -- 29 29
Net gain (loss) on disposition
of equipment -- 4 (15) -- (11)
-----------------------------------------------------------------------------------
1,369 103 8 -- 29 1,509
COST AND EXPENSES
Operations support 443 24 -- 9 476
Depreciation 323 20 15 -- 358
General and administrative 16 27 -- 1 102 146
expenses
Management fees -- -- -- 78 78
(Recovery of) provision for bad (10) 10 -- -- --
debts
-----------------------------------------------------------------------------------
Total costs and expenses 772 81 15 1 -- 189 1,058
Equity in net income (loss) of USPEs -- -- -- (61) 432 -- 371
-----------------------------------------------------------------------------------
Net income (loss) $ 597 $ 22 $ (7) $ (62) $ 432 $ (160) $ 822
===================================================================================
Total assets as of June 30, 2000 $ 2,252 $ 384 $ 323 $ -- $ 1,576 $1,607 $ 6,142
===================================================================================
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
7. OPERATING SEGMENTS (CONTINUED)
Marine Marine
Railcar Trailer Container Aircraft Vessel All
For the quarter ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F1> Total
1999
REVENUES
Lease revenue $ 1,407 $ 120 $ 39 $ -- $ -- $ -- $ 1,566
Interest income and other -- -- 5 -- -- 42 47
Net gain (loss) on disposition --
of equipment 23 25 (3) -- -- 6 51
-------------------------------------------------------------------------------
Total revenues 1,430 145 41 -- -- 48 1,664
COST AND EXPENSES
Operations support 567 33 -- -- -- 4 604
Depreciation 324 25 25 -- -- -- 374
General and administrative -- --
Expenses 51 31 -- -- -- 104 186
Management fees -- -- -- -- -- 86 86
(Recovery of) provision for bad (23) 5 -- -- -- (18)
debts
--------------------------------------------------------------------------------
Total costs and expenses 919 94 25 -- -- 194 1,232
Equity in net income (loss) of USPEs -- -- -- 2,773 (119) -- 2,654
================================================================================
Net income (loss) $ 511 $ 51 $ 16 $ 2,773 (119) $ (146) $ 3,086
================================================================================
Total assets as of June 30, 1999 $ 3,439 $ 475 $ 498 $ 711 1,362 $ 6,128 $ 12,613
================================================================================
Marine Marine
Railcar Trailer Container Aircraft Vessel All
For the six months ended June Leasing Leasing Leasing Leasing Leasing Other<F1> Total
30, 2000
REVENUES
Lease revenue $ 2,876 $ 180 $ 72 $ -- $ -- $ -- $ 3,128
Interest income and other -- -- -- -- -- 48 48
Net gain (loss) on disposition --
of equipment 18 18 (28) -- -- -- 8
--------------------------------------------------------------------------------
Total revenues 2,894 198 44 -- -- 48 3,184
COST AND EXPENSES
Operations support 797 49 -- -- -- 19 865
Depreciation 646 41 34 -- -- -- 721
General and administrative -- --
expenses 47 52 1 4 2 276 382
Management fees -- -- -- -- -- 165 165
Provision for bad debts 29 19 -- -- -- 48
--------------------------------------------------------------------------------
Total costs and expenses 1,519 161 35 4 2 460 2,181
Equity in net income of USPEs -- -- -- 1,308 349 -- 1,657
--------------------------------------------------------------------------------
Net income (loss) $ 1,375 37 $ 9 $ 1,304 $ 347 $ (412) $ 2,660
================================================================================
Total assets as of June 30, 2000 $ 2,252 $ 384 $ 323 $ -- $ 1,576 $ 1,607 $ 6,142
================================================================================
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
7. OPERATING SEGMENTS (CONTINUED)
Marine Marine
Railcar Trailer Container Aircraft Vessel All
For the six months ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F1> Total
1999
REVENUES
Lease revenue $ 2,897 $ 253 $ 88 $ -- $ -- $ -- $ 3,238
Interest income and other -- -- 5 -- -- 91 96
Net gain (loss) on disposition --
of equipment 52 84 (2) -- -- 6 140
--------------------------------------------------------------------------------
Total revenues 2,949 337 91 -- -- 97 3,474
COST AND EXPENSES
Operations support 1,008 64 1 -- -- 9 1,082
Depreciation 650 60 50 -- -- -- 760
General and administrative -- --
expenses 96 65 1 1 2 231 396
Management fees -- -- -- -- -- 200 200
(Recovery of) provision for bad (124 ) 6 -- -- (3) (121)
debts
--------------------------------------------------------------------------------
Total costs and expenses 1,630 195 52 1 2 437 2,317
Equity in net income (loss) of USPEs -- -- -- 2,704 (8) -- 2,696
---------- --------------------------------------------------------------------
Net income (loss) $ 1,319 $ 142 $ 39 $ 2,703 (10) $ (340) $ 3,853
================================================================================
Total assets as of June 30, 1999 $ 3,439 $ 475 $ 498 $ 711 1,362 $ 6,128 $ 12,613
================================================================================
<FN>
<F1>Includes interest income and costs not identifiable to a particular segment
such as management fees and certain operations support and general and
administrative expenses.
</FN>
</TABLE>
8. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income per weighted-average Partnership unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the
three and six months ended June 30, 2000 and 1999 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. The General Partner believes
the likelihood of an unfavorable outcome from the counterclaims is remote.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
10. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1998, 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 lease revenues and 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.
Special distributions were $1.5 million for the six months ended June 30,
2000. During the six months ended June 30, 1999, special distributions of
$1.8 million were paid. The Partnership is not permitted to reinvest
proceeds from sales or liquidations of equipment. These proceeds, in excess
of operational cash requirements, are periodically paid out to limited
partners in the form of special distributions. The sales and liquidations
occur because of certain damaged equipment, the determination by the
General Partner that it is the appropriate time to maximize the return on
an asset through sale of that asset, and, in some leases, the ability of
the lessee to exercise purchase options.
(this space left blank intentionally)
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 June 30, 2000 and 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
asset-specific insurance expenses) on owned equipment increased during the
quarter ended June 30, 2000, when compared to the same period of 1999. Gains or
losses from the sale of equipment 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 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 equipment type (in thousands of dollars):
For the Three Months
Ended June 30,
2000 1999
----------------------------
Railcars $ 926 $ 840
Trailers 75 87
Marine containers 23 39
Railcars: Railcar lease revenues and direct expenses were $1.4 million and $0.4
million, respectively, for the quarter ended June 30, 2000, compared to $1.4
million and $0.6 million, respectively, for the same period of 1999. Direct
revenues during the second quarter of 2000 remained approximately the same as
the same period in 1999 due to the low number of off-lease railcars in both
periods. Direct expenses decreased by $0.2 million due to repairs required in
the second quarter of 1999 which were not necessary in the second quarter of
2000.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$24,000 respectively, for the quarter ended June 30, 2000, compared to $0.1
million and $33,000, respectively, for the same period of 1999. 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.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses were $0.6 million for the quarters ended June 30, 2000
and 1999.
(C) Net Gain on Disposition of Owned Equipment
The net loss on disposition of owned equipment for the second quarter of 2000
totaled $11,000, and resulted from the sale of marine containers, railcars, and
trailers, with an aggregate net book value of $39,000, for aggregate proceeds of
$28,000. For the second quarter of 1999, 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 $31,000, for aggregate proceeds of $0.1
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 June 30,
2000 1999
---------------------------
Marine vessel $ 432 $ (119)
Aircraft (61) 2,773
---------------------------
Equity in net income of USPEs $ 371 $ 2,654
===========================
Marine vessel: As of June 30, 2000 and 1999, the Partnership had an interest in
an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $1.1 million and $0.7 million, respectively, for the
quarter ended June 30, 2000, compared to $0.4 million and $0.5 million for the
same period in 1999. Marine vessel revenue increased $0.7 million in the second
quarter of 2000 due to higher charter rates being earned while on a voyage
charter when compared to the same period of 1999. Vessel expenses increased in
the second quarter of 2000 due to higher voyage costs when compared to the same
period in 1999.
Aircraft: The Partnership's remaining interest in an entity which owned an
aircraft was sold in the first quarter of 2000. Additional expenses related to
this sale were $0.1 million in the second quarter of 2000. During the second
quarter of 1999, this aircraft was off lease. The Partnership's other interest
in an entity which owned an aircraft was sold in the second quarter of 1999, for
a gain of $3.0 million.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $0.8 million for
the second quarter of 2000 decreased from net income of $3.1 million during the
same period of 1999. 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 second quarter of 2000
is not necessarily indicative of future periods. In the second quarter of 2000,
the Partnership distributed $2.4 million to the limited partners, or $0.42 per
weighted-average depositary unit.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE
30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
asset-specific insurance expenses) on owned equipment increased during the six
months ended June 30, 2000, when compared to the same period of 1999. The
following table presents lease revenues less direct expenses by owned equipment
type (in thousands of dollars):
For the Six Months
Ended June 30,
2000 1999
---------------------------
Railcars $ 2,079 $ 1,889
Trailers 131 189
Marine containers 72 87
Railcars: Railcar lease revenues and direct expenses were $2.9 million and $0.8
million, respectively, for the six months ended June 30, 2000, compared to $2.9
million and $1.0 million, respectively, during the same period of 1999. Railcar
revenues remained the same. Direct expenses decreased by $0.2 million due to
repairs required in the second quarter of 1999 which were not necessary in the
second quarter of 2000.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and
$49,000, respectively, for the six months ended June 30, 2000, compared to $0.3
million and $0.1 million, respectively, during the same period of 1999. 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 $0.1
million and $0 respectively, for the six months ended June 30, 2000, compared to
$0.1 million and $1,000, respectively, during the same period of 1999. 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 $1.3 million for the six months ended June 30, 2000
increased from $1.2 million for the same period in 1999. Significant variances
are explained as follows:
(1) A $0.2 million increase in bad debt expense related to the receipt of an
accounts receivable in 1999 that had been previously reserved for as a bad
debt. A similar event did not occur in 2000.
(2) A $39,000 decrease in depreciation expenses from 1999 levels reflecting the
sale of assets during 2000 and during 1999.
(3) A $35,000 decrease in management fee expense due to reduced cash flows from
operations in 2000, compared to the same period in 1999.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 2000
totaled $8,000, and resulted from the sale of marine containers, railcars, and
trailers with a net book value of $0.1 million, for proceeds of $0.1 million.
For the six months ended June 30, 1999, the net gain on sale totaled $0.1
million, and resulted from the sale of marine containers, railcars, and
trailers, with a net book value of $0.1 million, for proceeds of $0.2 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Six Months
Ended June 30,
2000 1999
-----------------------------
Aircraft $ 1,308 $ 2,704
Marine vessel 349 (8)
-------------------------------
Equity in net income of USPEs $ 1,657 $ 2,696
===============================
Aircraft: As of June 30, 2000, the Partnership had no remaining interests in
entities which owned aircraft. During the six months ended June 30, 2000, the
gain from the sale of the Partnership's interest in the USPE of $1.5 million,
which was sold in the first quarter of 2000, was offset by depreciation expense,
direct expenses, and administrative expenses of $0.2 million. The Partnership's
other interest in an entity which owned an aircraft was sold in the second
quarter of 1999, for a gain of $3.0 million.
Marine vessel: As of June 30, and 1999, the Partnership had an interest in an
entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $2.0 million and $1.7 million, respectively, for the
six months ended June 30, 2000, compared to $1.1 million and $1.1 million,
respectively, during the same period of 1999. The increase in contribution for
the six months ended June 30, 2000 resulted from the vessel earning higher
voyage charter rates, which were partially offset by higher voyage expenses when
compared to the same period in 1999.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $2.7 million for
the six months ended June 30, 2000 compared to net income of $3.9 million during
the same period in 1999. 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 first six months of
2000 is not necessarily indicative of future periods. During the six months
ended June 30, 2000, the Partnership distributed $3.4 million to the
unitholders, or $0.59 per weighted-average depositary unit, including a special
distribution of $0.25 per weighted-average depositary unit.
(II) Financial Condition -- Capital Resources, Liquidity, and Distributions
For the six months ended June 30, 2000, the Partnership generated $1.4 million
in operating cash (net cash provided by operating activities less investments in
a USPE to fund its operations) to meet its operating obligations and fund
distributions (total of $3.4 million for the six months ended June 30, 2000,
which includes a special distribution of $1.5 million), but used undistributed
available cash from prior periods, proceeds from equipment sales, and
liquidating distributions from the USPE's of approximately $2.0 million.
During the six months ended June 30, 2000, the General Partner sold equipment on
behalf of the Partnership and realized proceeds of approximately $0.1 million.
The Partnership also received liquidating proceeds of $1.9 million from the sale
of its interest in an entity owning an aircraft.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts if any
cannot be accurately determined prior to actual disposal of the equipment.
On April 20, 2000, the General Partner for the Partnership announced that
effective immediately, it will not recognize any further transfers involving
trading of units in this partnership for the remainder of the 2000 calendar
year. PLM Equipment Growth Fund (hereafter referred to as "the Partnership") is
listed on the OTC Bulletin Board under the symbol GFXPZ.
In making the announcement, the General Partner cited the Partnership's need to
continue to comply with Internal Revenue Service (IRS) Notice 88-75 and IRS Code
Section 7704, which contain safe harbor provisions regarding the maximum number
of partnership units that can be traded during a calendar year in order for a
partnership not to be deemed a publicly traded partnership for income tax
purposes. Transfers for the remainder of the year may only be processed,
pursuant to IRS Code Section 7704, through a qualified matching service. The
General Partner will also continue to recognize transfers specifically excluded
from the safe harbor limitations, referred to in the regulations as "transfers
not involving trading," which includes transfers at death, transfers between
family members, and transfers involving distributions from a qualified
retirement plan.
(III) OUTLOOK FOR THE FUTURE
Since 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 may 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 the
remainder of 2000 and beyond, 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 represents 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 2000 and
beyond include:
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.
Recently, the cost of marine containers have started to increase which, if this
trend continues, should translate into rising per diem lease rates
Railcar loadings in North America have continued to be high, however a softening
in the market is expected during 2000, which may lead to lower utilization and
lower contribution to the Partnership as existing leases expire and renewal
leases are negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of these factors, or
of their occurrence, makes it difficult for the General Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment. The General Partner continually monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner may 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
unitholders.
(IV) 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 six months ended June 30, 2000, 86% 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 potentially encounter difficulty in making the U.S. dollar
denominated lease payments.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND
By: PLM Financial Services, Inc.
General Partner
Date: August 4, 2000 By: /s/ Richard K Brock
---------------------------------
Richard K Brock
Chief Financial Officer
