SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999.
[ ] 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
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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 executive offices) (Zip code)
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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Aggregate market value of the voting stock: N/A.
Indicate the number of units outstanding of each of the issuer's classes of
depositary units as of the latest practicable date:
Class Outstanding at March 17, 2000
Limited partnership depositary units: 5,785,350
General Partnership Units: 1
An index of exhibits filed with this Form 10-K is located on page 39.
Total number of pages in this report: 42.
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
On January 28, 1986, PLM Financial Services, Inc. (FSI or the General Partner),
a wholly-owned subsidiary of PLM International, Inc. (PLM International or
PLMI), filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission with respect to a proposed offering of 6,000,000 depositary
units in PLM Equipment Growth Fund, a California limited partnership (the
Partnership, the Registrant, or EGF). The Partnership's offering became
effective on May 20, 1986. FSI, as General Partner, owns a 1% interest in the
Partnership. The Partnership engages in the business of investing in a
diversified equipment portfolio consisting primarily of used, long-lived,
low-obsolescence capital equipment that is easily transportable by and among
prospective users.
The Partnership's primary objectives are:
(1) to maintain a diversified portfolio of long-lived, low-obsolescence
high residual-value equipment which were purchased with the net proceeds of the
initial partnership offering, supplemented by debt financing, and surplus
operating cash during the investment phase of the Partnership. All transactions
of over $1.0 million must be approved by the PLM International Credit Review
Committee (the Committee), which is made up of members of PLM International
Senior Management. In determining a lessee's creditworthiness, the Committee
will consider, among other factors, the lessee's financial statements, internal
and external credit ratings, and letters of credit;
(2) to generate sufficient net operating cash flows from lease operations
to meet liquidity requirements and to generate cash distributions to the limited
partners until such time as the General Partner commences the orderly
liquidation of the Partnership assets or unless the Partnership is terminated
earlier upon sale of all Partnership property or by certain other events;
(3) to selectively sell equipment when the General Partner believes that,
due to market conditions, market prices for equipment exceed inherent equipment
values or that expected future benefits from continued ownership of a particular
asset will have an adverse affect on the Partnership. As the Partnership is in
the liquidations phase, proceeds from these sales, together with excess net
operating cash flow from operations (net cash provided by operating activities
plus distributions from unconsolidated special-purpose entities (USPEs)), less
reasonable reserves to pay distributions to the partners;
(4) to preserve and protect the value of the portfolio through quality
management, maintaining diversity, and constantly monitoring equipment markets.
The offering of the units of the Partnership closed on May 19, 1987. On November
20, 1990, the units of the Partnership began trading on the American Stock
Exchange (AMEX). Thereupon each unitholder received a depositary receipt
representing ownership of the number of units owned by such unitholder. The
General Partner contributed $100 for its 1% general partner interest in the
Partnership. The General Partner delisted the Partnership's depositary units
from the American Stock Exchange (AMEX) on April 8, 1996. The last day for
trading on the AMEX was March 22, 1996.
Sine the third quarter of 1994, the Partnership agreement has prohibited the
General Partner from reinvesting cash flows and surplus funds in equipment. All
future cash flows and surplus funds, if any, are to be used for distributions to
the limited partners, except to the extent used to maintain reasonable reserves.
As of December 31, 1999, there were 5,785,350 depositary units outstanding.
On January 1, 1998, the Partnership entered its liquidation phase. All future
cash flows and surplus funds, if any, are to be used for distributions to the
limited partners, except to the extent used to maintain reasonable reserves. The
liquidation phase will end on December 31, 2006, unless the Partnership is
terminated earlier upon sale of all of the equipment or by certain other events.
<PAGE>
Table 1, below, lists the equipment and the cost of the equipment in the
Partnership's portfolio, and the cost of investments in unconsolidated
special-purpose entities, as of December 31, 1999 (in thousands of dollars):
<TABLE>
<CAPTION>
TABLE 1
Units Type Manufacturer Cost
- -------------------------------------------------------------------------------------------------------
Owned equipment held for operating leases:
<S> <C> <C> <C>
851 Tank railcars Various $ 21,392
147 Dry trailers Various 1,357
9 Refrigerated trailers Various 248
2 Dry storage trailers Various 12
118 Refrigerated marine containers Various 1,571
---------------
Total owned equipment held for operating leases $ 24,580<F2>2
===============
Investments in unconsolidated special-purpose entities:
0.50 737-200 Stage II commercial aircraft Boeing $ 8,084<F1>1
0.50 Product tanker Kaldnes M/V 8,277<F1>1
--------------
Total investments in unconsolidated special-purpose entities $ 16,361<F2>2
===============
<FN>
- --------------------
<F1> 1 Jointly owned: EGF (50%) and one affiliated program.
<F2> 2 Includes equipment and investment purchased with the capital
contributions, undistributed cash flow from operations, operations and Partner-
ship borrowings. Includes costs capitalized, subsequent to the date of
acquisition, and equipment acquisition fees paid to PLM Transportation Equipment
Corporation, a wholly owned subsidiary of FSI. All equipment was used equipment
at the time of purchase.
</FN>
</TABLE>
The equipment is leased under operating leases with terms of one to six years.
The Partnership's marine containers are leased to operators of utilization-type
leasing pools, that include equipment owned by unaffiliated parties. In such
instances, revenues received by the Partnership consist of a specified
percentage of revenues generated by leasing the pooled equipment to sublessees,
after deducting certain direct operating expenses of the pooled equipment. Rents
for all other equipment are based on fixed rates.
As of December 31, 1999, all of the Partnership's trailer equipment was operated
in rental yards owned and maintained by PLM Rental, Inc., the short-term trailer
rental subsidiary of PLM International doing business as PLM Trailer Leasing.
Rents are reported as revenue in accordance with Financial Accounting Standards
Board Statement No.13 "Accounting For Leases". Direct expenses associated with
the equipment are charged directly to the Partnership. An allocation of indirect
expenses of the rental yard operations is charged to the Partnership monthly.
The lessees of the equipment include but are not limited to: Cronos Containers,
Petro Canada, TOSCO, Terra Nitrogen and Allied Signal.
<PAGE>
(B) Management of Partnership Equipment
The Partnership has entered into an equipment management agreement with PLM
Investment Management, Inc. (IMI), a wholly owned subsidiary of FSI, for the
management of the Partnership's equipment. The Partnership's management
agreement with IMI is to co-terminate with the dissolution of the Partnership,
unless the limited partners vote to terminate the agreement prior to that date
or at the discretion of the General Partner. IMI has agreed to perform all
services necessary to manage the equipment on behalf of the Partnership and to
perform or contract for the performance of all obligations of the lessor under
the Partnership's leases. In consideration for its services and pursuant to the
partnership agreement, IMI is entitled to a monthly management fee (see Notes 1
and 2 to the financial statements).
(C) Competition
(1) Operating Leases versus Full Payout Leases
The equipment owned or invested in by the Partnership is leased out on an
operating lease basis wherein the rents received during the initial
noncancelable term of the lease are insufficient to recover the Partnership's
purchase price of equipment. The short to mid-term nature of operating leases
commands a higher rental rate than the longer-term, full payout leases, and
offers lessees relative flexibility in their equipment commitment. In addition,
the rental obligation under an operating lease need not be capitalized on a
lessee's balance sheet.
The Partnership encounters considerable competition from lessors that utilize
full payout leases on new equipment, i.e., leases that have terms equal to the
expected economic life of the equipment. While some lessees prefer the
flexibility offered by a shorter-term operating lease, other lessees prefer the
rate advantages possible with a full payout lease. Competitors may write full
payout leases at considerably lower rates and for longer terms than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates, which may put the Partnership at a competitive
disadvantage.
(2) Manufacturers and Equipment Lessors
The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases. Manufacturers may provide ancillary services that the
Partnership cannot offer, such as specialized maintenance services (including
possible substitution of equipment), training, warranty services, and trade-in
privileges.
The Partnership also competes with many equipment lessors, including ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, General Electric Capital Aviation Services Corporation, and other
investment programs that lease the same types of equipment.
(D) Demand for Equipment
The Partnership operates in the following operating segments: aircraft leasing,
marine vessel leasing, marine container leasing, railcar leasing, and trailer
leasing. Each equipment leasing segment engages in short-term to mid-term
operating leases to a variety of customers. Except for the aircraft that was
leased to passenger air carriers, the Partnership's equipment and investments
are used to transport materials and commodities, rather than people.
The following section describes the international and national markets in which
the Partnership's capital equipment operates:
(1) Commercial Aircraft
After experiencing relatively robust growth over the prior four years, demand
for commercial aircraft softened somewhat in 1999. Boeing and Airbus, the two
primary manufacturers of new commercial aircraft, saw a decrease in their volume
of orders, which totaled 368 and 417 during 1999, compared to 656 and 556 in
1998. The slowdown in aircraft orders can be partially attributed to the full
implementation of US Stage III environmental restrictions, which became fully
effective on December 31, 1999. Since these restrictions effectively prohibit
the operation of noncompliant aircraft in the United States after 1999, carriers
operating within or into the United States either replaced or modified all of
their noncompliant aircraft before the end of the year. The continued weakness
of the Asian economy has also served to slow the volume of new aircraft orders.
However, with the Asian economy now showing signs of recovery, air carriers in
this region are beginning to resume their fleet building efforts.
Demand for, and values of, used commercial aircraft have been adversely affected
by the Stage III environmental restrictions and an oversupply of older aircraft
as manufacturers delivered more new aircraft that the overall market required.
Boeing predicts that the worldwide fleet of jet-powered commercial aircraft will
increase from approximately 12,600 airplanes as of the end of 1998 to about
13,700 aircraft by the end of 2003, an average increase of 220 units per year.
However, actual deliveries for the first two years of this period, 1998 and
1999, already averaged 839 units annually. Although some of the resultant
surplus used aircraft have been retired, the net effect has been an overall
increase in the number of used aircraft available. This has resulted in a
decrease in both market prices and lease rates for used aircraft. The weakness
in the used commercial aircraft market may be mitigated in the future as
manufacturers bring their new production more in line with demand and given the
anticipated continued growth in air traffic. Worldwide, demand for air passenger
services is expected to increase at about 5% annually and freight services at
about 6% per year, for the foreseeable future.
This Partnership owns a 50% interest in a Stage II aircraft, which has been
impacted by the soft market conditions described above.
(2) Marine Product Tanker
The Partnership has an investment with an affiliated program in a product tanker
that operates in international markets carrying a variety of commodity-type
cargoes. Demand for commodity-based shipping is closely tied to worldwide
economic growth patterns, which can affect demand by causing changes in volume
on trade routes. The General Partner operates the Partnership's vessel through a
combination of spot and period charters, an approach that provides the
flexibility to adapt to changes in market conditions.
During 1999, product tanker markets experienced declines in charter rates and
vessel values brought about by volatile oil and oil product prices, relatively
low growth in trade volumes, and high rates of new product tanker deliveries.
Daily charter rates for standard-size product tankers averaged $8,106 in 1999,
21% lower than in 1998 and 39% lower than in 1997. This decline was primarily
due to a deterioration in oil products trade in European markets.
Since crude oil is the source feedstock for oil products, the products trade is
closely tied to crude oil prices. Although 1999 was a year of rising oil prices,
volatility in trading appeared to depress actual shipping volumes, particularly
in Europe. Although product imports to the United States and Japan increased
such that the entire worldwide market grew by 2.7% during 1999, due to the
lingering effects of the Asian recession, shipping volumes ended the year below
the levels of 1996-1997.
Measured by deadweight tons, the product tanker fleet grew by only 3.2% during
1999, as overall supply was significantly moderated by a 150% increase in
scrapping levels as compared to 1998. For 2000, the product tanker fleet is
expected to expand by a 6.5% rise in new deliveries. This increase is due to the
continuing effects of high order levels in the mid-1990s, which was driven by
growth in Asian trade and the anticipated effects of the US Oil Pollution Act of
1990. Under this Act, tankers over 25 years old are restricted from trading to
the United States if they do not have double bottoms and/or double hulls
(similar, though somewhat less stringent restrictions are in place within
developing nations). These regulations have the effect of inducing the
retirement of older vessels that would otherwise continue trading.
The combined effects of regulatory restrictions and low charter rates are
expected to keep scrappings at relatively high levels throughout 2000. However,
an anticipated high rate of new tanker deliveries will prevent much improvement
in rates and ship values during 2000. Should high scrapping levels continue
beyond then, this could offset increases in new deliveries and prevent further
significant declines in freight rates and ship values.
(3) Marine Containers
The marine container leasing market started 1999 with industry-wide utilization
rates in the mid 70% range, down somewhat from the beginning of 1998. The market
strengthened throughout the year such that most container leasing companies
reported utilization of 80% by the end of 1999. Offsetting this favorable trend
was a continuation of historically low acquisition prices for new containers
acquired in the Far East, predominantly China. These low prices put pressure on
fleetwide per diem leasing rates.
Industry consolidation continued in 1999 as the parent of one of the world's top
ten container lessors finalized the outsourcing of the management of its
container fleet to a competitor. However, the General Partner believes that such
consolidation is a positive trend for the overall container leasing industry,
and ultimately will lead to higher industrywide utilization and increased per
diem rates. Since this Partnership is in the liquidation phase, containers
remain off lease while waiting to be sold and thus utilization on the
Partnerships containers decreased in 1999.
(4) Railcars
(a) Pressurized Tank Cars
Pressurized tank cars are used to transport primarily liquefied petroleum gas
(natural gas) and anhydrous ammonia (fertilizer). The major US markets for
natural gas are industrial applications (40% of estimated demand in 1998),
residential use (21%), electrical generation (15%), and commercial applications
(14%). Within the fertilizer industry, demand is a function of several factors,
including the level of grain prices, the status of government farm subsidy
programs, amount of farming acreage and mix of crops planted, weather patterns,
farming practices, and the value of the US dollar. Population growth and dietary
trends also play an indirect role.
On an industrywide basis, North American carloadings of the commodity group that
includes petroleum and chemicals increased 2.5% in 1999, compared to 1998.
Correspondingly, demand for pressurized tank cars remained solid during 1999,
with utilization of this type of railcar within the Partnership remaining above
98%. While renewals of existing leases continue at similar rates, some cars have
been renewed for "winter only" terms of approximately six months. As a result,
it is anticipated that there will be more pressurized tank cars than usual
coming up for renewal in the spring.
(b) Nonpressurized, General Purpose Tank Cars
These cars, which are used to transport bulk liquid commodities and chemicals
not requiring pressurization, such as certain petroleum products, liquefied
asphalt, lubricating and vegetable oils, molten sulfur, and corn syrup,
continued to be in high demand during 1999. The overall health of the market for
these types of commodities in closely tied to both the US and global economies,
as reflected in movements in the Gross Domestic Product, personal consumption
expenditures, retail sales, and currency exchange rates. The manufacturing,
automobile, and housing sectors are the largest consumers of chemicals. Within
North America, 1999 carloadings of the commodity group that includes chemicals
and petroleum products rose 2.5% over 1998 levels. Utilization of the
Partnership's nonpressurized tank cars was above 98% again during 1999.
(5) Trailers
(a) Nonrefrigerated Trailers
The U.S. nonrefrigerated (dry) trailer market continued to recover in 1999, as
the strong domestic economy resulted in heavy freight volumes. With unemployment
low, consumer confidence high, and industrial production sound, the outlook for
leasing this type of trailer remains positive, particularly as the equipment
surpluses of recent years are being absorbed by the buoyant market. In addition
of high freight volumes, improvements in inventory turnover and tighter
turnaround times have lead to a stronger overall trucking industry and increased
equipment demand.
(b) Refrigerated Trailers
After a very strong year in 1998, the temperature-controlled trailer market
leveled off somewhat in 1999, as equipment users began to absorb the expanded
equipment supply created over the prior two years. Refrigerated trailer users
have been actively retiring their older units and consolidating their fleets in
response to improved refrigerated trailer technology. Concurrently, there is a
backlog of six to nine months on orders for new equipment. As a result of these
changes in the refrigerated trailer market, it is anticipated that trucking
companies and shippers will utilize short-term trailer leases more frequently to
supplement their existing fleets. Such a trend should benefit the Fund, whose
trailers are typically leased on a short-term basis.
<PAGE>
(E) Government Regulations
The use, maintenance, and ownership of equipment are regulated by federal,
state, local, or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Partnership's ownership and operation
of equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Partnership's equipment portfolio are
either registered or operated internationally. Such equipment may be subject to
adverse political, government, or legal actions, including the risk of
expropriation or loss arising from hostilities. Certain of the Partnership's
equipment is subject to extensive safety and operating regulations, which may
require its removal from service or extensive modification of such equipment to
meet these regulations at considerable cost to the Partnership. Such regulations
include but are not limited to:
(1) the US Oil Pollution Act of 1990, which established liability for
operators and owners of vessels and mobile offshore drilling units that create
environmental pollution. This regulation has resulted in higher oil pollution
liability insurance. The lessee of the equipment typically reimburses the
Partnership for these additional costs;
(2) the US Department of Transportation's Aircraft Capacity Act of 1990,
which limits or eliminates the operation of commercial aircraft in the U.S. that
do not meet certain noise, aging, and corrosion criteria. In addition, under US
Federal Aviation Regulations, after December 31, 1999, no person may operate an
aircraft to or from any airport in the contiguous United States unless that
aircraft has been shown to comply with Stage III noise levels. The Partnership
has one Stage II aircraft that does not meet Stage III requirements. As of
December 31, 1999, the aircraft is located overseas where it is intended to be
sold in 2000.
(3) the Montreal Protocol on Substances that Deplete the Ozone Layer and
the US Clean Air Act Amendments of 1990, which call for the control and eventual
replacement of substances that have been found to cause or contribute
significantly to harmful effects on the stratospheric ozone layer and which are
used extensively as refrigerants in refrigerated marine cargo containers and
over-the-road refrigerated trailers;
(4) the US Department of Transportation's Hazardous Materials Regulations
which regulate the classification of and packaging requirements for hazardous
materials and which apply particularly to the Partnership's tank railcars.
As of December 31, 1999, the Partnership is in compliance with the above
government regulations. Typically, costs related to extensive modifications
required to meet government regulations are passed on to the lessee of that
equipment.
ITEM 2. PROPERTIES
The Partnership neither owns nor leases any properties other than the equipment
it has purchased and its interest in entities that own equipment for leasing
purposes. As of December 31, 1999, the Partnership owned a portfolio of
transportation and related equipment and investments in equipment owned by
unconsolidated special-purpose entities (USPEs), as described in Item 1, Table
1. The Partnership acquired equipment with the proceeds of the Partnership
offering of $100.0 million, proceeds from debt financing of $23.0 million, and
by reinvesting a portion of its operating cash flow in additional equipment.
The Partnership maintains its principal office at One Market, Steuart Street
Tower, Suite 800, San Francisco, California 94105-1301. All office facilities
are provided by FSI without reimbursement by the Partnership.
ITEM 3. LEGAL PROCEEDINGS
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 an unfavorable outcome from the counterclaims is remote.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED DEPOSITARY UNIT
MATTERS
As of March 1, 2000, there were 5,785,350 depositary units outstanding. There
are 5,077 depositary unitholders of record as of the date of this report.
There are several secondary markets that will facilitate sales and purchases of
depositary units. Secondary markets are characterized as having few buyers for
limited partnership interests and therefore are viewed as inefficient vehicles
for the sale of depositary units. Presently, there is no public market for the
units and none is likely to develop.
To prevent the units from being considered publicly traded and thereby to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal Revenue Code, the limited partnership units will not be transferable
without the consent of the General Partner, which may be withheld in its
absolute discretion. The General Partner intends to monitor transfers of limited
partnership units in an effort to ensure that they do not exceed the percentage
or number permitted by certain safe harbors promulgated by the Internal Revenue
Service. A transfer may be prohibited if the intended transferee is not a US
citizen or if the transfer would cause any portion of a "Qualified Plan" as
defined by the Employee Retirement Income Security Act of 1974 and Individual
Retirement Accounts to exceed the allowable limit.
On January 10, 2000, the General Partner for the Partnership announced that it
has begun recognizing transfers involving trading of units in the Partnership
for the 2000 calendar year. The Partnership is listed on the OTC Bulletin Board
under the symbol GFXPZ.
In making the announcement, the General Partner noted that, as in previous
years, it will continue to monitor the volume of such trades to ensure that the
Partnership remains in compliance with IRS Notice 88-75 and IRS Code Section
7704. These IRS regulations contain safe harbor provisions stipulating 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.
Should the Partnership approach the annual safe harbor limitation later on in
2000, the General Partner will, at that time, cease to recognize any further
transfers involving trading of Partnership units. Transfers specifically
excluded from the safe harbor limitations, referred to in the regulations as
"transfers not involving trading," which include transfers at death, transfers
between family members, and transfers involving distributions from a qualified
retirement plan, will continue to be recognized by the General Partner
throughout the year.
Pursuant to the terms of the partnership agreement, the General Partner is
entitled to a 1% interest in the profits, losses and cash distributions of the
Partnership. The General Partner is the sole holder of such interests. Special
allocations of income are made to the General Partner equal to the deficit
balance, if any, in the capital account of the General Partner. The General
Partner's annual allocation of net income will be equal to the General Partner's
cash distributions paid during the current year. The remaining interests in the
profits, losses and cash distributions of the Partnership are allocated to the
limited partners. As of December 31, 1999, there were 5,077 limited partners
holding units in the Partnership.
The Partnership engaged in a plan to repurchase up to 250,000 depositary units.
There were no repurchases of depositary units in 1997, 1998, or 1999. As of
December 31, 1999, the Partnership had purchased a cumulative total of 199,650
depositary units at a cost of $2.6 million. The General Partner does not plan
any future repurchases of depositary units on behalf of the Partnership.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Table 2, below, lists selected financial data for the Partnership:
<TABLE>
<CAPTION>
TABLE 2
For the years ended December 31,
(In thousands of dollars, except per weighted-average depositary unit amounts)
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------
Operating results:
<S> <C> <C> <C> <C> <C>
Total revenues $ 6,816 $ 8,366 $ 12,462 $ 23,859 $ 23,575
Net gain on disposition
of equipment 156 733 3,265 13,304 2,195
Equity in net income (loss) of
Unconsolidated special-
purpose entities 2,047 (895) (483) 8,728 --
Net income 4,321 1,807 5,685 23,847 4,234
At year-end:
Total assets $ 7,217 $ 13,020 $ 20,006 $ 20,749 $ 39,061
Total liabilities 463 693 1,308 1,331 24,727
Notes payable -- -- - -- 23,000
Cash distribution $ 3,850 $ 4,695 $ 6,405 $ 8,358 $ 13,549
Special distribution $ 6,044 $ 3,483 $ -- $ 10,242 $ --
Cash and special distribution
Representing a return of capital
to the limited partners $ 5,415 $ 6,397 $ 754 $ -- $ 9,351
Per weighted-average Depositary unit:
Net income $ 0.73 1 $ 0.29 1 $ 0.97 1 $ 4.08 1 $ 0.70<F1>1
Cash distribution $ 0.66 $ 0.81 $ 1.10 $ 1.43 $ 2.30
Special distribution $ 1.03 $ 0.60 $ -- $ 1.75 $ --
Cash and special distribution
Representing a return of capital
to the limited partners $ 0.93 $ 1.12 $ 0.13 $ -- $ 1.60
<FN>
- ----------------------------------
<F1>
1 After reduction of income of $0.1 million ($0.01 per weighted-average
depositary unit) in 1999, $0.3 million ($0.01 per weighted-average depositary
unit) in 1998, $41,000 ($0.01 per weighted-average depositary unit) in 1997,
$0.1 million ($0.02 per weighted-average depositary unit) in 1996, and $0.1
million ($0.02 per weighted-average depositary unit) in 1995, representing
allocations to the General Partner resulting from an amendment to the
partnership agreement (see Note 1 to the financial statements).
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(A) Introduction
Management's discussion and analysis of financial condition and results of
operations relates to the financial statements of PLM Equipment Growth Fund (the
Partnership). The following discussion and analysis of operations focuses on the
performance of the Partnership's equipment in the various segments in which it
operates and its effect on the Partnership's overall financial condition.
(B) Results of Operations -- Factors Affecting Performance
(1) Re-leasing Activity and Repricing Exposure to Current Economic Conditions
The exposure of the Partnership's equipment portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for the Partnership's equipment include, but are not limited to, supply and
demand for similar or comparable types of transport capacity, desirability of
the equipment in the leasing market, market conditions for the particular
industry segment in which the equipment is to be leased, overall economic
conditions, and various regulations concerning the use of the equipment.
Equipment that is idle or out of service between the expiration of a lease and
the assumption of a subsequent lease can result in a reduction of contribution
to the Partnership. The Partnership experienced re-leasing activity or repricing
exposure in 1999 primarily in its aircraft, trailer, container, and railcar
portfolios.
(a) Aircraft: Aircraft contribution decreased from 1998 to 1999 on an
aircraft in which the Partnership owns a 50% interest. This aircraft was off
lease for all of 1998 and 1999. We have been unsuccessfully trying to sell this
aircraft. In addition, one aircraft was sold during the second quarter of 1999
(b) Trailers: The Partnership's trailer portfolio operates in short-term
rental facilities. The relatively short duration of most leases in these
operations exposes the trailers to considerable re-leasing activity.
Contributions from the Partnership's trailers that operated in short-term rental
facilities decreased in 1999 compared to 1998 due to the sale of trailers.
(c) Railcars: The majority of the Partnership's railcar equipment remained
on lease throughout the year. During the fourth quarter of 1999, a group of 19
tank cars came off lease. While renewals of existing leases continue at similar
rates, some cars have been renewed for "winter only" terms of approximately six
months. As a result, it is anticipated that there will be more pressurized tank
cars than usual coming up for renewal in the spring.
(d) Marine containers: All of the Partnership's marine container portfolio
is operated in utilization-based leasing pools and, as such, is highly exposed
to repricing activity. The Partnership saw lower re-lease rates and lower
utilization on the remaining marine containers fleet during 1999. Since this
Partnership is in the liquidation phase, containers remain off lease while
waiting to be sold and thus utilization on the Partnership's containers
decreased in 1999.
(2) Equipment Liquidations and Nonperforming Lessees
Liquidation of Partnership equipment and investment in unconsolidated
special-purpose entities (USPEs) represents a reduction in the size of the
equipment portfolio and may result in reduction of contributions to the
Partnership. Lessees not performing under the terms of their leases, either by
not paying rent, not maintaining or operating the equipment in accordance with
the conditions of the leases, or other possible departures from lease terms can
result not only in reductions in contribution, but also may require the
Partnership to assume additional costs to protect its interests under the
leases, such as repossession or legal fees. The Partnership experienced the
following in 1999:
(a) Liquidations: During 1999, the Partnership disposed of owned equipment
and its interest in a USPE for proceeds of $5.1 million.
<PAGE>
(b) Nonperforming Lessees: In 1996, the General Partner repossessed an
aircraft owned by a trust in which the Partnership has a 50% interest, due to
the lessee's inability to pay outstanding receivables. This aircraft remained
off lease throughout 1997, 1998 and 1999.
(3) Equipment Valuation
In accordance with Financial Accounting Standards Board (FASB) Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of", the General Partner reviews the carrying value of the
Partnership's portfolio at least quarterly and whenever circumstances indicate
that the carrying value of an asset may not be recoverable in relation to
expected future market conditions for the purpose of assessing the
recoverability of the recorded amounts. If the projected undiscounted future
lease revenue plus residual values and fair values are less than the carrying
values of the equipment, a loss on revaluation is recorded. No reductions to the
carrying value of equipment were required in 1999, 1998 or 1997.
As of December 31, 1999, the General Partner estimated the current fair market
value of the Partnership's equipment portfolio, including the Partnership's
interest in USPEs owned by the Partnership, to be $21.4 million. This estimate
is based on recent market transactions for equipment similar to the
Partnership's equipment portfolio and the Partnership's interest in equipment
owned by USPEs. Ultimate realization of fair market value by the Partnership may
differ substantially from the estimate due to specific market conditions,
technological obsolescence, and government regulations, among other factors that
the General Partner cannot accurately predict.
(C) Financial Condition -- Capital Resources and Liquidity
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from the limited partners are permitted under the
terms of the limited partnership agreement. The Partnership currently has no
debt obligations. As the Partnership entered its liquidation phase in 1998, it
is prohibited from incurring new debt. The Partnership relies on operating cash
flows to meet its operating obligations and to make cash distributions to the
limited partners.
For the year ended December 31, 1999, the Partnership generated $3.0 million in
operating cash (net cash provided by operating activities, plus non-liquidating
cash distributions from USPEs, less additional investments in USPE's to fund
operating activities) to meet its operating obligations, but used undistributed
available cash from prior periods of $6.9 million to maintain the current level
of distributions and to make a special distribution to the partners.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause it 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 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.
(D) Results of Operations Year-to-Year Detailed Comparison
(1) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1999 and 1998
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating expenses, and asset-specific insurance expenses) on owned
equipment decreased during the year ended December 31, 1999, compared to the
same period of 1998. Certain expenses such as depreciation and amortization and
general and administrative expenses relating to the operating segments (see Note
5 to the audited financial statements), are not included in the owned equipment
operations discussion because these expenses are more indirect in nature, not a
result of operations but more 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 Years Ended
December 31,
1999 1998
----------------------------
Rail equipment $ 3,972 4,064
Trailers 330 866
Marine containers 140 231
Rail equipment: Rail equipment lease revenues and direct expenses were $5.7
million and $1.8 million, respectively, for the year ended December 31, 1999,
compared to $6.0 million and $1.9 million, respectively, for the same period of
1998. Direct revenues and expenses decreased due to the sale of railcars during
1998 and 1999.
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the year ended December 31, 1999, compared to $1.2
million and $0.3 million, respectively, for the same period of 1998. The number
of trailers owned by the Partnership has declined due to sales and dispositions
of the trailers during 1999 and 1998. The result of this declining fleet is a
decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $1,000 respectively, for the year ended December 31, 1999, compared
to $0.2 million and $3,000, respectively, for the same period of 1998. Revenues
decreased by $61,000 due to lower lease rates in 1999, and by $32,000 due to
sales and dispositions in 1999.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.6 million for the year ended December 31, 1999,
decreased from $3.5 million for the same period of 1998. The decrease is due
primarily to a $0.3 million decrease in general and administrative expenses due
to lower professional services costs resulting from the decrease in the size of
the Partnership's equipment portfolio, a $0.3 million decrease in depreciation
expense from 1998 levels resulting from the sale of certain assets during 1999
and 1998, a $0.1 million decrease in bad debt expense related to certain
receivables thought to be uncollectible being collected, previously reserved for
as bad debts being collected in 1999 and a $0.1 million decrease in management
fees due to lower cash flows.
(c) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for 1999 totaled $0.2 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 $0.3
million. For 1998, gain on sales totaled $0.7 million, and resulted from the
sale of marine containers, trailers, railcars, and an aircraft with an aggregate
net book value of $1.2 million, for aggregate proceeds of $1.9 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 Years
Ended December 31,
1999 1998
---------------------------
Aircraft 2,531 (1,323)
Marine vessel $ (484) $ 4288
-----------------------------
Equity in net income (loss) of USPEs $ 2,047 $ (895)
=============================
Aircraft: As of December 31, 1999, the Partnership had an interest in one entity
that owns a commercial aircraft. As of December 31, 1998, the Partnership had an
interest in an entity that owned a total of two aircraft. During 1999, the
Partnership sold the aircraft in which it had a 12% interest for a gain of $3.0
million. The Partnership's share of aircraft revenues and expenses were $0.2
million and $0.8 million, respectively, for the year ended December 31, 1999,
compared to $0.6 million and $1.9 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 1999, 1998 and 1997. In October 1999, a deposit
for $0.2 million was received for the sale of this aircraft. The buyer failed to
perform under the terms of the agreement and the deposit was recorded as income.
Direct expenses in this entity decreased due to required repairs on this
aircraft in 1998 which were not required in 1999. The Partnership's remaining
12% interest in an entity that owns a commercial aircraft had a decrease in
contribution primarily due to the sale of this aircraft in June of 1999.
Marine vessel: As of December 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 $2.0 million and $2.7 million for 1999, compared to
$2.6 million and $2.2 million, respectively, for 1998. Marine vessel
contribution decreased due to lower charter rates during 1999, the vessel being
off lease for scheduled maintenance, and higher operating costs associated with
being on a voyage charter.
(e) Net Income
As a result of the foregoing, the Partnership's net income of $4.3 million for
the year ended December 31, 1999, increased from net income of $1.8 million
during the same period of 1998. The Partnership's ability to operate and
liquidate assets and re-lease those assets whose leases expire is subject to
many factors, and the Partnership's performance in the year ended December 31,
1999 is not necessarily indicative of future periods. In 1999, the Partnership
distributed $9.8 million to the limited partners, or $1.69 per weighted-average
depositary unit.
(2) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1998 and 1997
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating expenses, and asset-specific insurance expenses) on owned
equipment decreased during the year ended December 31, 1998, compared to the
same period of 1997. Certain expenses such as depreciation and amortization and
general and administrative expenses relating to the operating segments (see Note
5 to the audited financial statements), are not included in the owned equipment
operation discussion because these expenses are more indirect in nature, not a
result of operations but more 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 Years Ended
December 31,
1998 1997
----------------------------
Rail equipment $ 4,064 4,497
Trailers 866 1,222
Marine containers 231 791
Aircraft and aircraft engines -- 249
Rail equipment: Rail equipment lease revenues and direct expenses were $6.0
million and $1.9 million, respectively, for the year ended December 31, 1998,
compared to $6.2 million and $1.7 million, respectively, for the same period of
1997. Direct revenues decreased due to the sale of railcars during the preceding
twelve months. Direct expenses on railcars increased due to increased repairs
required on certain of the railcars in the fleet during 1998, which were not
needed during 1997.
Trailers: Trailer lease revenues and direct expenses were $1.2 million and $0.3
million, respectively, for the year ended December 31, 1998, compared to $1.7
million and $0.5 million, respectively, for the same period of 1997. Although,
revenues for the trailer industry increased by 10% in 1999, the Partnership sold
32% of it's fleet during the year. The result of this declining fleet is a
decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $0.2
million and $3,000, respectively, for the year ended December 31, 1998, compared
to $0.8 million and $5,000, respectively, for the same period of 1997. Lower
utilization rates in 1999 coupled with sales and dispositions of containers
during 1999, 1998 and 1997, resulted in the decrease in marine container
contribution.
Aircraft: The Partnership had zero revenues and direct expenses from aircraft
for the year ended December 31, 1998, compared to $0.3 million and $6,000,
respectively, for the same period of 1997. There was no aircraft contribution in
1998 due to the disposition of the last aircraft in the Partnership in the third
quarter of 1997.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.5 million for the year ended December 31, 1998,
decreased from $4.1 million for the same period of 1997. The decrease is due
primarily to a $0.5 million decrease in depreciation expense from 1997 levels
resulting from the sale of certain assets during 1998 and 1997, and a $0.1
million decrease in bad debt expense due to bad debt expense recorded in 1997
related to a former aircraft lessee.
(c) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for 1998 totaled $0.7 million,
and resulted from the sale of marine containers, railcars, aircraft, and
trailers, with an aggregate net book value of $1.2 million, for aggregate
proceeds of $1.9 million. For 1997, gain on sales totaled $3.3 million, and
resulted from the sale of marine containers, trailers, railcars, and an aircraft
with an aggregate net book value of $0.9 million, for aggregate proceeds of $4.2
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 Year
Ended December 31,
1998 1997
--------------------------
Marine vessel $ 428 $ 12
Aircraft (1,323) (495)
---------------------------
Equity in net loss of USPEs $ (895) $ (483)
===========================
Marine vessel: As of December 31, 1998 and 1997, the Partnership had an interest
in an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $2.6 million and $2.2 million for 1998, compared to
$2.5 million and $2.5 million, respectively, for 1997. Marine vessel
contribution increased due to a refund received during 1998 from Transportation
Equipment Company, Ltd. and an affiliate of the General Partner, related to
lower claims from the insured Partnership and other insured affiliated
partnerships.
Aircraft: As of December 31, 1998 and 1997, 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 $0.6 million and $1.9 million,
respectively, for the year ended December 31, 1998, compared to $0.7 million and
$1.2 million, respectively, for the same period of 1997. The Partnership's 50%
interest in an entity that owns a commercial aircraft was off lease during 1998
and 1997. Direct expenses in this entity increased due to required repairs on
this aircraft. The Partnership's remaining 12% interest in an entity that owns a
commercial aircraft had an increase in contribution primarily due to lower
depreciation expense.
(e) Net Income
As a result of the foregoing, the Partnership's net income of $1.8 million for
the year ended December 31, 1998, decreased from net income of $5.7 million
during the same period of 1997. The Partnership's ability to operate and
liquidate assets and re-lease those assets whose leases expire is subject to
many factors, and the Partnership's performance in the year ended December 31,
1998 is not necessarily indicative of future periods. In 1998, the Partnership
distributed $8.1 million to the limited partners, or $1.41 per weighted-average
depositary unit.
(E) Geographic Information
Certain of the Partnership's equipment operates in international markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes that these risks are
minimal or has implemented strategies to control the risks. Currency risks are
at a minimum because all invoicing, with the exception of a small number of
railcars operating in Canada, is conducted in US dollars. Political risks are
minimized by avoiding operations in countries that do not have a stable judicial
system and established commercial business laws. Credit support strategies for
lessees range from letters of credit supported by US banks to cash deposits.
Although these credit support mechanisms allow the Partnership to maintain its
lease yield, there are risks associated with slow-to-respond judicial systems
when legal remedies are required to secure payment or repossess equipment.
Economic risks are inherent in all international markets and the General Partner
strives to minimize this risk with market analysis prior to committing equipment
to a particular geographic area. Refer to Note 6 to the financial statements for
information on the revenues, income (loss), and net book value of equipment in
various geographic regions.
Revenues and net operating income by geographic region are impacted by the time
period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges, which are greatest in the early years of
ownership due to the use of the double-declining balance method of depreciation.
The relationships of geographic revenues, net income (loss), and net book value
of equipment are expected to change significantly in the future, as equipment is
sold in various equipment markets and geographic areas. An explanation of the
current relationships is presented below.
During 1999, the Partnership's equipment on lease to US domiciled lessees
accounted for 16% of the lease revenues generated by wholly and partially-owned
equipment. This equipment generated a net loss of $0.2 million.
The Partnership's equipment leased to Canadian-domiciled lessees consists of
railcars. During 1999, lease revenues in Canada accounted for 56% of total lease
revenues of wholly and partially owned equipment, while the net income from
Canadian operations accounted for $3.2 million for the Partnership's total net
income of $4.3 million.
The Partnership's 50% investment in a marine vessel and various marine
containers, which were leased in various regions throughout 1999, accounted for
25% of the lease revenues generated by wholly and partially owned equipment. The
Partnership's 50% investment in a marine vessel earned lease revenues of $2.0
million in 1999 and generated $0.5 million in net loss. The Partnership's marine
containers earned $0.1 million in lease revenues and generated $38,000 in net
income. Marine container lease revenue is expected to decline in the future, as
the Partnership continues to sell marine containers.
The Partnership had a 12% investment in a commercial aircraft that operates in
South America, which accounted for 2% of the lease revenues generated by wholly
and partially owned equipment, while this investment had a net income of $3.0
million, the Partnership's total net income was $4.3 million. This aircraft was
sold in June of 1999 for a gain of $3.0 million.
(F) Effects of Year 2000
As of March 1, 2000, the Partnership has not experienced any material Year 2000
(Y2K) issues with either its internally developed software or purchased
software. In addition, to date the Partnership has not been impacted by any Y2K
problems that may have impacted our customers and suppliers. The amount
allocated to the Partnership by the General Partner related to Y2K issues has
not been material. The General Partner continues to monitor its systems for any
potential Y2K issues.
(G) Inflation
Inflation had no significant impact on the Partnership's operations during 1999,
1998, or 1997.
(H) Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K 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-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
(I) Outlook for the Future
Since the Partnership entered its orderly liquidation phase in the first quarter
of 1998, 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 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 equipment and investments in USPE represents a
reduction in the size of the portfolio and may result in a reduction of
contribution to the Partnership. Other factors effecting the Partnership in 2000
and beyond include:
1. The Partnership's remaining aircraft that it jointly owns with an affiliated
Partnership, has been off lease for over two years. This aircraft required
extensive repairs and maintenance and has had difficulty being re-leased or
sold. This aircraft will remain off-lease until it is sold. We have been
unsuccessful in our efforts to sell this aircraft.
2. Railcar loadings in North America have continued to be high, however a
softening in the market is expected in 2000, which may lead to lower utilization
and lower contribution to the Partnership.
3. The purchase price of new containers continues to be at very low historical
levels. These lower prices have put downward pressure on per diem lease rates
that customers are willing to pay for the rental of marine containers. Demand
for the Partnership's marine containers has been weak, as they are older
containers.
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 from operations to satisfy its
operating requirements, and to pay cash distributions to the investors.
(1) Repricing Risk
Certain of the Partnership's aircraft, marine vessels, railcars, marine
containers and trailers will be remarketed in 2000 as existing leases expire,
exposing the Partnership to some repricing risk/opportunity. Additionally, the
General Partner may elect to sell certain underperforming equipment or equipment
whose continued operation may become prohibitively expensive. In either case,
the General Partner intends to re-lease or sell equipment at prevailing market
rates; however, the General Partner cannot predict these future rates with any
certainty at this time, and cannot accurately assess the effect of such activity
on future Partnership performance. The proceeds from the sold or liquidated
equipment will be distributed to the limited partners, or held for operating
reserves.
(2) Impact of Government Regulations on Future Operations
The General Partner operates the Partnership's equipment in accordance with
current applicable regulations (see Item 1, Section E, Government Regulations).
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Partnership's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Partnership of meeting regulatory compliance for the
same equipment operated between countries. Currently, the General Partner has
observed rising insurance costs to operate certain vessels into US ports
resulting from implementation of the US Oil Pollution Act of 1990. Ongoing
changes in the regulatory environment, both in the United States and
internationally, cannot be predicted with accuracy, and preclude the General
Partner from determining the impact of such changes on Partnership operations,
or sale of equipment. Under US Federal Aviation Regulations, after December 31,
1999, no person may operate an aircraft to or from any airport in the contiguous
United States unless that aircraft has been shown to comply with Stage III noise
levels.
(3) Distributions
Pursuant to the limited partnership agreement, the Partnership has ceased
reinvesting in additional equipment. The General Partner will pursue a strategy
of selectively re-leasing equipment to achieve competitive returns or selling
equipment that is underperforming or whose operation becomes prohibitively
expensive during the liquidation phase of the Partnership. During this time, the
Partnership will use operating cash flow and proceeds from the sale of equipment
to meet its operating obligations and make distributions to the partners.
Although the General Partner intends to maintain a sustainable level of
distributions prior to final liquidation of the Partnership, actual Partnership
performance and other considerations may require adjustments to then-existing
distribution levels. In the long term, changing market conditions and used
equipment values preclude the General Partner from accurately determining the
impact of future re-leasing activity and equipment sales on partnership
performance and liquidity. Since the Partnership has entered the active
liquidation phase 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 unitholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During 1999, 84% 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 payment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Partnership are listed in the Index to
Financial Statements included in Item 14 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM INTERNATIONAL
AND PLM FINANCIAL SERVICES, INC.
As of the date of this annual report, the directors and executive officers of
PLM International and of PLM Financial Services, Inc. (and key executive
officers of its subsidiaries) are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------- --------------- -----------------------------------------------------------------
<S> <C> <C>
Robert N. Tidball 61 Chairman of the Board, Director, President, and
Chief Executive Officer, PLM International, Inc.;
Director, PLM Financial Services, Inc.;
Vice President, PLM Railcar Management Services, Inc.;
President, PLM Worldwide Management Services Ltd.
Randall L.-W. Caudill 52 Director, PLM International, Inc.
Douglas P. Goodrich 53 Director and Senior Vice President, PLM International, Inc.;
Director and President, PLM Financial Services, Inc.;
President, PLM Transportation Equipment Corporation; President,
PLM Railcar Management Services, Inc.
Warren G. Lichtenstein 34 Director, PLM International, Inc.
Howard M. Lorber 51 Director, PLM International, Inc.
Harold R. Somerset 64 Director, PLM International, Inc.
Robert L. Witt 59 Director, PLM International, Inc.
Robin L. Austin 53 Vice President, Human Resources, PLM International, Inc. and
PLM Financial Services, Inc.
Stephen M. Bess 53 President, PLM Investment Management, Inc.; Vice President and
Director, PLM Financial Services, Inc.
Richard K Brock 37 Vice President and Chief Financial Officer, PLM International,
Inc. and PLM Financial Services, Inc.
Susan C. Santo 37 Vice President, Secretary, and General Counsel, PLM
International, Inc. and PLM Financial Services, Inc.
</TABLE>
Robert N. Tidball was appointed Chairman of the Board in August 1997 and
President and Chief Executive Officer of PLM International in March 1989. At the
time of his appointment as President and Chief Executive Officer, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April 1989. Mr. Tidball was appointed a Director of PLM
Financial Services, Inc. in July 1997 and was elected President of PLM Worldwide
Management Services Limited in February 1998. He has served as an officer of PLM
Railcar Management Services, Inc. since June 1987. Mr. Tidball was Executive
Vice President of Hunter Keith, Inc., a Minneapolis-based investment banking
firm, from March 1984 to January 1986. Prior to Hunter Keith, he was Vice
President, General Manager, and Director of North American Car Corporation and a
director of the American Railcar Institute and the Railway Supply Association.
Randall L.-W. Caudill was elected to the Board of Directors in September 1997.
He is President of Dunsford Hill Capital Partners, a San Francisco-based
financial consulting firm serving emerging growth companies. Prior to founding
Dunsford Hill Capital Partners, Mr. Caudill held senior investment banking
positions at Prudential Securities, Morgan Grenfell Inc., and The First Boston
Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics,
Inc., VaxGen, Inc., SBE, Inc., and RamGen, Inc.
Douglas P. Goodrich was elected to the Board of Directors in July 1996,
appointed Senior Vice President of PLM International in March 1994, and
appointed Director and President of PLM Financial Services, Inc. in June 1996.
Mr. Goodrich has also served as Senior Vice President of PLM Transportation
Equipment Corporation since July 1989 and as President of PLM Railcar Management
Services, Inc. since September 1992, having been a Senior Vice President since
June 1987. Mr. Goodrich was an executive vice president of G.I.C. Financial
Services Corporation of Chicago, Illinois, a subsidiary of Guardian Industries
Corporation, from December 1980 to September 1985.
Warren G. Lichtenstein was elected to the Board of Directors in December 1998.
Mr. Lichtenstein is the Chief Executive Officer of Steel Partners II, L.P.,
which is PLM International's largest shareholder, currently owning 16% of the
Company's common stock. Additionally, Mr. Lichtenstein is Chairman of the Board
of Aydin Corporation, a NYSE-listed defense electronics concern, as well as a
director of Gateway Industries, Rose's Holdings, Inc., and Saratoga Beverage
Group, Inc. Mr. Lichtenstein is a graduate of the University of Pennsylvania,
where he received a Bachelor of Arts degree in economics.
Howard M. Lorber was elected to the Board of Directors in January 1999. Mr.
Lorber is President and Chief Operating Officer of New Valley Corporation, an
investment banking and real estate concern. He is also Chairman of the Board and
Chief Executive Officer of Nathan's Famous, Inc., a fast food company.
Additionally, Mr. Lorber is a director of United Capital Corporation and Prime
Hospitality Corporation and serves on the boards of several community service
organizations. He is a graduate of Long Island University, where he received a
Bachelor of Arts degree and a Masters degree in taxation. Mr. Lorber also
received charter life underwriter and chartered financial consultant degrees
from the American College in Bryn Mawr, Pennsylvania. He is a trustee of Long
Island University and a member of the Corporation of Babson College.
Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994. From February 1988 to December 1993, Mr. Somerset was President and
Chief Executive Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a subsidiary of Alexander & Baldwin, Inc. Mr. Somerset joined C&H Sugar in 1984
as Executive Vice President and Chief Operating Officer, having served on its
Board of Directors since 1978. Between 1972 and 1984, Mr. Somerset served in
various capacities with Alexander & Baldwin, Inc., a publicly held land and
agriculture company headquartered in Honolulu, Hawaii, including Executive Vice
President of Agriculture and Vice President and General Counsel. Mr. Somerset
holds a law degree from Harvard Law School as well as a degree in civil
engineering from the Rensselaer Polytechnic Institute and a degree in marine
engineering from the U.S. Naval Academy. Mr. Somerset also serves on the boards
of directors for various other companies and organizations, including Longs Drug
Stores, Inc., a publicly held company.
Robert L. Witt was elected to the Board of Directors in June 1997. Since 1993,
Mr. Witt has been a principal with WWS Associates, a consulting and investment
group specializing in start-up situations and private organizations about to go
public. Prior to that, he was Chief Executive Officer and Chairman of the Board
of Hexcel Corporation, an international advanced materials company with sales
primarily in the aerospace, transportation, and general industrial markets. Mr.
Witt also serves on the boards of directors for various other companies and
organizations.
Robin L. Austin became Vice President, Human Resources of PLM Financial
Services, Inc. in 1984, having served in various capacities with PLM Investment
Management, Inc., including Director of Operations, from February 1980 to March
1984. From June 1970 to September 1978, Ms. Austin served on active duty in the
United States Marine Corps and served in the United States Marine Corp Reserves
from 1978 to 1998. She retired as a Colonel of the United States Marine Corps
Reserves in 1998. Ms. Austin has served on the Board of Directors of the
Marines' Memorial Club and is currently on the Board of Directors of the
International Diplomacy Council.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess was appointed President of PLM Investment Management, Inc. in
August 1989, having served as Senior Vice President of PLM Investment
Management, Inc. beginning in February 1984 and as Corporate Controller of PLM
Financial Services, Inc. beginning in October 1983. Mr. Bess served as Corporate
Controller of PLM, Inc. beginning in December 1982. Mr. Bess was Vice
President-Controller of Trans Ocean Leasing Corporation, a container leasing
company, from November 1978 to November 1982, and Group Finance Manager with the
Field Operations Group of Memorex Corporation, a manufacturer of computer
peripheral equipment, from October 1975 to November 1978.
Richard K Brock was appointed Vice President and Chief Financial Officer of PLM
International and PLM Financial Services, Inc. in January 2000, after having
served as Acting CFO since June 1999. Mr. Brock served as an accounting manager
beginning in September 1991 and as Director of Planning and General Accounting
beginning in February 1994. Mr. Brock was a division controller of Learning Tree
International, a technical education company, from February 1988 through July
1991.
Susan C. Santo became Vice President, Secretary, and General Counsel of PLM
International and PLM Financial Services, Inc. in November 1997. She has worked
as an attorney for PLM International since 1990 and served as its Senior
Attorney since 1994. Previously, Ms. Santo was engaged in the private practice
of law in San Francisco. Ms. Santo received her J.D. from the University of
California, Hastings College of the Law.
The directors of PLM International, Inc. are elected for a three-year term and
the directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director or executive officer of PLM International Inc. or PLM
Financial Services, Inc., PLM Transportation Equipment Corp., or PLM Investment
Management, Inc.
(This space intentionally left blank.)
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors, officers, or employees. The Partnership had no
pension, profit sharing, retirement, or similar benefit plan in effect as of
December 31, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) Security Ownership of Certain Beneficial Owners
The General Partner is entitled to a 1% interest in the profits and losses
and distributions of the Partnership subject to certain allocations of
income. In addition to its General Partner interest, FSI owned 1,500 units
in the Partnership at December 31, 1999. As of December 31, 1999, no
investor was known by the General Partner to beneficially own more than 5%
of the depositary units of the Partnership.
(B) Security Ownership of Management
Table 3, below, sets forth, as of the date of this report, the amount and
percentage of the Partnership's outstanding depositary units beneficially
owned by each of the directors and executive officers and all directors and
executive officers as a group of the General Partner and its affiliates:
TABLE 3
Name Depositary Units Percentage of Units
Robert N. Tidball 400 *
All directors and officers
As a group (1 person) 400 *
* Less than 1%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Management and Others
During 1999, management fees paid or accrued to IMI were $0.4 million.
During 1999, the Partnership reimbursed FSI or its affiliates $0.3 million
for administrative services and data processing expenses performed on
behalf of the Partnership.
During 1999, the Partnership's proportional share of ownership of the
USPEs, paid or accrued the following fees to FSI or its affiliates:
administrative and data processing services, $39,000. No management fees
were paid by the USPES in 1999 due to the lower cash flows on the marine
vessel and aircraft.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report on
Form 10-K.
(B) Reports on Form 8-K
None.
(C) Exhibits
4. Limited Partnership Agreement of Partnership, incorporated by
reference to the Partnership's Registration Statement on Form S-1
(Reg. No. 33-2834), which became effective with the Securities
and Exchange Commission on May 20, 1986.
4.1 Amendment, dated November 18, 1991, to Limited Partnership
Agreement of Partnership, incorporated by reference to the
Partnership Form 10-K dated December 31, 1992, filed with the
Securities and Exchange Commission on March 30,1993.
10.1 Management Agreement between the Partnership and PLM Investment
Management, Inc., incorporated by reference to the Partnership's
Registration Statement on Form S-1 (Reg. No. 33-2834), which
became effective with the Securities and Exchange Commission on
May 20, 1986.
24. Powers of Attorney.
(This space intentionally left blank.)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has signed on
behalf of the Partnership by duly authorized officers.
Dated: March 17, 2000 PLM EQUIPMENT GROWTH FUND
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ Douglas P. Goodrich
Douglas P. Goodrich
President and Director
By: /s/ Richard K Brock
Richard K Brock
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following directors of the Partnership's General
Partner on the dates indicated.
Name Capacity Date
*_______________________
Robert N. Tidball Director, FSI March 17, 2000
*_______________________
Douglas P. Goodrich Director, FSI March 17, 2000
*_______________________
Stephen M. Bess Director, FSI March 17, 2000
* Susan C. Santo, by signing her name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.
/s/ Susan C. Santo
Susan C. Santo
Attorney-in-Fact
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Independent auditors' report 25
Balance sheets as of December 31, 1999 and 1998 26
Statements of income for the years ended
December 31, 1999, 1998, and 1997 27
Statements of changes in partners' capital for the years
ended December 31, 1999, 1998, and 1997 28
Statements of cash flows for the years ended
December 31, 1999, 1998, and 1997 29
Notes to financial statements 30-38
All financial statement schedules have been omitted, because the required
information is not pertinent to the registrant or is not material, or because
the information required is included in the financial statements and notes
thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund:
We have audited the accompanying financial statements of PLM Equipment Growth
Fund (the Partnership) listed in the accompanying index to financial statements.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, PLM Equipment Growth Fund,
in accordance with the 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 sale of all equipment or by certain other events.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999 in
conformity with generally accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
March 17, 2000
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31,
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
1999 1998
----------------------------------
Assets
<S> <C> <C>
Equipment held for operating leases, at cost $ 24,580 $ 26,113
Less accumulated depreciation (20,967) (20,862)
----------------------------------
Net equipment 3,613 5,251
Cash and cash equivalents 1,446 3,289
Accounts receivable, less allowance for doubtful accounts
of $36 in 1999 and $161 in 1998 365 305
Investments in unconsolidated special-purpose entities 1,755 4,149
Prepaid expenses and other assets 38 26
---------------------------------
Total assets $ 7,217 $ 13,020
=================================
Liabilities:
Accounts payable and accrued expenses $ 337 $ 131
Due to affiliates 63 525
Lessee deposits 63 37
---------------------------------
Total liabilities 463 693
---------------------------------
Partners' capital:
Limited partners (5,785,350 depositary units as of
December 31, 1999 and 1998) 6,754 12,327
General Partner -- --
---------------------------------
Total partners' capital 6,754 12,327
---------------------------------
Total liabilities and partners' capital $ 7,217 $ 13,020
=================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------
Revenues
<S> <C> <C> <C>
Lease revenue $ 6,339 $ 7,393 $ 8,956
Interest and other income 321 240 241
Net gain on disposition of equipment 156 733 3,265
-------------------------------------------
Total revenues 6,816 8,366 12,462
-------------------------------------------
Expenses
Depreciation and amortization 1,505 1,820 2,276
Repairs and maintenance 1,876 2,213 2,164
Insurance expense to affiliate -- (45) --
Other insurance expenses 44 40 61
Management fees to affiliate 415 505 535
General and administrative expenses to affiliate 303 422 641
Other general and administrative expenses 516 704 527
(Recovery of) provision for bad debts (117) 5 90
-------------------------------------------
Total expenses 4,542 5,664 6,294
-------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 2,047 (895) (483)
-------------------------------------------
Net income $ 4,321 $ 1,807 $ 5,685
===========================================
Partners' share of net income
Limited partners $ 4,222 $ 1,536 $ 5,587
General Partner 99 271 98
-------------------------------------------
Total $ 4,321 $ 1,807 $ 5,685
===========================================
Net income per weighted-average depositary unit $ 0.73 $ 0.29 $ 0.97
===========================================
Cash distribution $ 3,850 $ 4,695 $ 6,405
Special distribution 6,044 3,483 --
------------------------------------------
Total distribution $ 9,894 $ 8,178 $ 6,405
===========================================
Per weighted-average depositary unit:
Cash distribution $ 0.66 0.81 $ 1.10
Special distribution 1.03 0.60 --
-------------------------------------------
Total distribution $ 1.69 1.41 $ 1.10
===========================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1996 $ 19,641 $ (223) $ 19,418
Net income 5,587 98 5,685
Cash distribution (6,341) (64) (6,405)
----------------------------------------------
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 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
================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------
Operating activities
<S> <C> <C> <C>
Net income $ 4,321 $ 1,807 $ 5,685
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 1,505 1,820 2,276
Net gain on disposition of equipment (156) (733) (3,265)
Equity in net (income) loss from unconsolidated special-
Purpose entities (2,047) 895 483
Changes in operating assets and liabilities:
Restricted cash -- -- 60
Accounts receivable, net (60) 613 (219)
Due from affiliate -- 353 (353)
Prepaid expenses and other assets (12) 5 3
Accounts payable and accrued expenses 206 (604) 278
Due to affiliates (462) (4) 408
Lessee deposits and reserve for repairs 26 (7) (649)
-------------------------------------------------
Net cash provided by operating activities 3,321 4,145 4,707
-------------------------------------------------
Investing activities
Payments for capital improvements (31) (108) (116)
Additional investment in unconsolidated special-purpose
entities to fund operations (835) (721) (831)
Liquidation of investment in equipment placed in
Unconsolidated special-purpose entities 4,794 1,101 150
Distribution from unconsolidated special-purpose entities 482 557 1,049
Proceeds from disposition of equipment 320 1,908 4,167
-------------------------------------------------
Net cash provided by investing activities 4,730 2,737 4,419
-------------------------------------------------
Financing activities
Cash distribution paid to limited partners (3,811) (4,648) (6,341)
Cash distribution paid to General Partner (39) (47) (64)
Special distribution paid to limited partners (5,984) (3,448) -
Special distribution paid to General Partner (60) (35) -
------------------------------------------------
Net cash used in financing activities (9,894) (8,178) (6,405)
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,843) (1,296) 2,721
Cash and cash equivalents at beginning of year 3,289 4,585 1,864
-------------------------------------------------
Cash and cash equivalents at end of year $ 1,446 $ 3,289 $ 4,585
=================================================
Supplemental information
Receipt of interest in unconsolidated special-purpose entity in
settlement of receivables $ -- $ -- $ 281
=================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Basis of Presentation
Organization
PLM Equipment Growth Fund, a California limited partnership (the
Partnership) was formed on January 28, 1986. The Partnership engages
primarily in the business of owning, leasing, or otherwise investing in
predominantly used transportation and related equipment. The Partnership
commenced significant operations in August 1986. PLM Financial Services,
Inc. (FSI) is the General Partner of the Partnership. FSI is a wholly
owned subsidiary of PLM International, Inc. (PLM International).
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.
FSI manages the affairs of the Partnership. The cash distributions of the
Partnership are allocated 99% to the limited partners and 1% to the
General Partner (see Net Income (Loss) and Distributions Per Depositary
Unit, below). Net income is allocated to the General Partner to the extent
necessary to cause the General Partner's capital account to equal zero.
The General Partner is entitled to a subordinated incentive fee equal to
15% of surplus distributions, as defined in the limited partnership
agreement, remaining after the limited partners have received a certain
minimum rate of return.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. This requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Operations
The equipment of the Partnership is managed, under a continuing management
agreement, by PLM Investment Management, Inc. (IMI), a wholly owned
subsidiary of FSI. IMI receives a monthly management fee from the
Partnership for managing the equipment (see Note 2). FSI, in conjunction
with its subsidiaries, sells equipment to investor programs and third
parties, manages pools of transportation equipment under agreements with
the investor programs, and is a general partner of other programs.
Accounting for Leases
The Partnership's leasing operations consist of operating leases. Under
the operating lease method of accounting, the leased asset is recorded at
cost and depreciated over its estimated useful life. Rental payments are
recorded as revenue over the lease term.
Depreciation
Depreciation of transportation equipment held for operating leases is
computed on the double-declining balance or declining balance method,
based upon estimated useful lives of 15 years for railcars and 12 years
for marine containers, trailers, aircraft, and the marine vessel. The
depreciation method converts to straight line when annual depreciation
expense using the straight-line method exceeds that calculated by the
accelerated method.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Basis of Presentation (continued)
Transportation Equipment
In accordance with the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (SFAS 121). The General
Partner reviews the carrying value of the Partnership's equipment at
least quarterly and whenever circumstances indicate the carrying value of
an asset may not be recoverable in relation to expected future market
conditions for the purpose of assessing recoverability of the recorded
amounts. If projected undiscounted future cash flows and the fair value
are lower than the carrying value of the equipment, the loss on
revaluation is recorded. No reductions to the carrying value of equipment
were required during 1999, 1998 or 1997.
Investments in Unconsolidated Special-Purpose Entities
The Partnership has interests in unconsolidated special-purpose entities
that own transportation equipment. These interests are accounted for using
the equity method.
The Partnership's investment in unconsolidated special-purpose entities
includes acquisition and lease negotiation fees paid by the Partnership to
TEC, a wholly owned subsidiary of FSI. The Partnership's interest in
USPE's is managed by IMI. The Partnership's equity interest in net income
(loss) of unconsolidated special-purpose entities is reflected net of
management fees paid or payable to IMI and the amortization of acquisition
and lease negotiation fees paid to TEC.
Repairs and Maintenance
Repair and maintenance costs related to railcars and the trailer equipment
operated in rental yards owned and maintained by PLM Rental, Inc., the
short-term trailer rental subsidiary of PLM International doing business
as PLM Trailer Leasing, are usually the obligation of the Partnership.
Maintenance costs of most of the other equipment are the obligation of the
lessee. If they are not covered by the lessee, they are charged against
operations as incurred.
Net Income (Loss) and Distributions Per Depositary Unit
Cash distributions of the Partnership are allocated 99% to the limited
partners and 1% to the General Partner and may include amounts in excess
of net income. Net income is allocated to the General Partner through
allocation to the extent necessary to cause the General Partner's capital
account to equal zero. The General Partner received an allocation of
income in the amount of $0.1 million in 1999, $0.1 million in 1998, and
41,000 in 1997. In 1998, the General Partner received an additional
allocation of income of $0.2 million to adjust its capital account to zero
in accordance with the Partnership agreements. The limited partners' net
income (loss) is allocated among the limited partners based on the number
of limited partnership units owned by each limited partner and on the
number of days of the year each limited partner is in the Partnership.
Cash distributions are recorded when paid and may include amounts in
excess of net income. An operating cash distribution of $1.0 million
($0.172 per depositary unit) was declared on January 28, 2000 and paid on
February 15, 2000 to the unitholders of record as of December 31, 1999.
Special distributions were $6.0 million in 1999 and $3.5 million in 1998.
Special distributions are typically made from the proceeds of the sale of
equipment. No special distributions were paid to partners in 1997. Cash
distributions to investors in excess of net income are considered a return
of capital. Cash distributions to limited partners of $5.4 million in 1999
were deemed to be a return of capital. Cash distribution of limited
partners of $6.4 million in 1998 were deemed to be a return of capital.
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Basis of Presentation (continued)
Cash distributions of $0.8 million in 1997 were deemed to be a return of
capital.
Net Income Per Weighted-Average Depositary Unit
Net income per weighted-average depositary unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of depositary units deemed outstanding during the period. The
weighted-average number of depositary units deemed outstanding during the
years ended December 31, 1999, 1998, and 1997 were 5,785,350.
Cash and Cash Equivalents
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents. The carrying amount of cash
equivalents approximates fair market value due to the short-term nature of
the investments.
Comprehensive Income
The Partnership's net income is equal to comprehensive income for the
years ended December 31, 1999, 1998, and 1997.
2. General Partner and Transactions with Affiliates
An officer of FSI contributed $100 of the Partnership's initial capital.
Under the equipment management agreement, IMI receives a monthly
management fee attributable to either owned equipment or interests in
equipment owned by the USPEs equal to the greater of (a) 10% of cash flows
or (b) 1/12 of 1/2% of the book value of the equipment portfolio, subject
to a reduction in certain events, as described in the limited partnership
agreement. Partnership management fees of $0.1 million and $39,000 were
payable to IMI as of December 31, 1999 and 1998. The Partnership's
proportional share of USPE management fees of $0 and $3,000 was payable as
of December 31, 1999 and 1998, respectively. The Partnership's
proportional share of USPE management fee expense during 1999, 1998 and
1997 was $0, $0.1 million and $0.2 million, respectively. Additionally,
the Partnership reimbursed FSI and its affiliates $0.3 million, $0.4
million, and $0.6 million for administrative services and data processing
expenses performed on behalf of the Partnership in 1999, 1998, and 1997,
respectively. The Partnership's proportional share of USPE administrative
and data processing expenses was $56,000, $26,000 and $49,000 during 1999,
1998, and 1997, respectively.
The Partnership's proportional share of USPE marine insurance coverage
paid to TEI was $0 in 1999 and 1998, and $0.2 million during 1997. A
substantial portion of these amounts was paid to third-party reinsurance
underwriters or placed in risk pools managed by TEI on behalf of
affiliated partnerships and PLM International, which provide threshold
coverages on marine vessel loss of hire and hull and machinery damage. All
pooling arrangement funds are either paid out to cover applicable losses
or refunded pro rata by TEI. TEI was liquidated by PLMI in the first
quarter of 2000.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
3. Equipment
The components of owned equipment as of December 31, 1999 and 1998 are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
Equipment held for operating leases 1999 1998
--------------------------------
<S> <C> <C>
Rail equipment $ 21,392 $ 21,635
Trailers 1,617 2,439
Marine containers 1,571 2,039
---------------------------------
24,580 26,113
Less accumulated depreciation (20,967) (20,862)
---------------------------------
Net equipment $ 3,613 $ 5,251
=================================
</TABLE>
Revenues are earned under operating leases that are billed monthly or
quarterly. All of the Partnership's marine containers are leased to
operators of utilization-type leasing pools, which include equipment owned
by unaffiliated parties. In such instances, revenues received by the
Partnership consist of a specified percentage of revenues generated by
leasing the equipment to sublessees, after deducting certain direct
operating expenses of the pooled equipment. Rents for railcars are based
on mileage traveled or a fixed rate; rents for all other equipment are
based on fixed rates.
As of December 31, 1999, all of the Partnership's trailer equipment was in
rental facilities operated by PLM Rental, Inc., an affiliate of the
General Partner doing business as PLM Trailer Leasing. Rents are reported
as revenue in accordance with Financial Accounting Standards Board
Statement No.13 "Accounting For Leases". Direct expenses associated with
the equipment are charged directly to the Partnership. An allocation of
indirect expenses of the rental yard operations is charged to the
Partnership monthly.
As of December 31, 1999, all owned equipment in the Partnership's
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. As of December 31, 1998, the Partnership had 23 marine
containers and 5 railcars off lease with an aggregate net book value of
$23,000.
The General Partner, on behalf of the Partnership, incurred approximately
$0.1 million in 1999, 1998, and 1997 in capital improvements, but did not
purchase any additional equipment, in accordance with the limited
partnership agreement.
During 1999, the Partnership sold marine containers, trailers and railcars
with a net book value of $0.2 million, for $0.3 million. During 1998, the
Partnership sold or disposed of marine containers, trailers, railcars, and
an aircraft, with a net book value of $1.2 million, for $1.9 million.
All leases for owned and partially owned equipment are being accounted for
as operating leases. Future minimum rentals under noncancelable leases for
owned and partially-owned equipment as of December 31, 1999, and during
each of the next five years and thereafter, are approximately $4.0 million
in 2000, $1.9 million in 2001, $1.0 in 2002, $0.4 in 2003, and $0.2
thereafter. Per diem and short-term rentals consisting of untilization
rate lease payments included in revenue amounted to approximately $0.6
million, $1.4 million, and $2.5 million in 1999, 1998, and 1997,
respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
4. Investments in Unconsolidated Special-Purpose Entities
The following summarizes the financial information for the unconsolidated
special-purpose entities and the Partnership's interest therein as of and
for the years ended December 31, 1999, 1998 and 1997 (in thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
Net Interest Net Interest Net
Total of Total Of Total Interest of
USPEs Partnership USPEs Partnership USPEs Partnership
-------------------------------- ---------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investments $ 3,704 $ 1,755 $ 22,096 $ 4,149 $ 31,664 $ 5,983
Revenues 5,742 2,246 10,300 3,200 9,610 2,935
Net income (loss) 22,304 2,047 (934) (895) (666) (483)
</TABLE>
An aircraft lessee encountered financial difficulties in 1996. The General
Partner established reserves against these receivables due to the
determination that ultimate collection of these rents was uncertain. As
payment for these past due receivables, the Partnership was given an 18%
interest in an entity that owns a Boeing 727 aircraft. In 1997, the
Partnership contributed $0.8 million to this entity. These funds were used
to make capital repairs to prepare the aircraft for sale. This aircraft was
sold at its approximate net book value in the first quarter of 1998. The
fair market value of the Partnership's interest in this aircraft
approximated the outstanding receivable from this lessee.
During 1997, the Partnership liquidated an aircraft engine from its 50%
investment in an entity that owned a commercial aircraft and an aircraft
engine, for a gain of $0.2 million.
The Partnership's 50% investment in a commercial aircraft, included in the
investments in unconsolidated special-purpose entities, was off lease as of
December 31, 1999 and 1998. In October 1999, this entity received a deposit
for $0.2 million for the sale of the aircraft. The buyer failed to perfom
under the terms of the agreement and this deposit was recorded as income.
5. Operating Segments
The Partnership currently operates in five primary operating segments:
trailer leasing, railcar leasing, aircraft leasing, marine vessel leasing,
and marine container leasing. Each equipment leasing segment engage in
short-term to mid-term operating leases to a variety of customers.
The General Partner evaluates the performance of each segment based on
profit or loss from operations before allocation of general and
administrative expenses, interest expense and certain other expenses. The
segments are managed separately due to the utilization of different
business strategies for each operation.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
5. Operating Segments (continued)
The following tables present a summary of the operating segments (in
thousands of dollars):
<TABLE>
<CAPTION>
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ---------- -----
Revenues
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ -- $ 141 $ -- $ 468 $ 5,730 $ -- $ 6,339
Interest income and other -- 5 -- -- 157 159 321
Gain (loss) on disposition of 12 (9) -- 101 52 -- 156
equipment
-------------------------------------------------------------------------
Total revenues 12 137 -- 569 5,939 159 6,816
Costs and expenses
Operations support -- 1 -- 138 1,758 23 1,920
Depreciation and amortization -- 95 -- 108 1,302 -- 1,505
Management fees to affiliate -- -- -- -- -- 415 415
General and administrative expenses 3 3 9 122 219 463 819
Provision for (recovery of) bad -- -- -- 19 (133) (3) (117)
debts
-------------------------------------------------------------------------
Total costs and expenses 3 99 9 387 3,146 898 4,542
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 2,531 -- (484) -- -- -- 2,047
-------------------------------------------------------------------------
Net income (loss) $ 2,540 $ 38 $ (493) $ 182 $ 2,793 $ (739) $ 4,321
=========================================================================
As of December 31, 1999
Total assets $ 457 $ 445 $ 1,398 $ 505 $ 2,937 $ 1,475 $ 7,217
=========================================================================
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ---- -----
Revenues
Lease revenue $ -- $ 234 $ -- $ 1,203 $ 5,956 $ -- $ 7,393
Interest income and other -- -- -- -- 62 178 240
Gain (loss) on disposition of (57) (1) -- 630 161 -- 733
equipment
-------------------------------------------------------------------------
Total revenues (losses) (57) 233 -- 1,833 6,179 178 8,366
Costs and expenses
Operations support -- 4 (45) 337 1,892 20 2,208
Depreciation and amortization -- 166 -- 317 1,337 -- 1,820
Interest expense -- -- -- -- -- 1,110 1,110
General and administrative expenses 17 4 5 289 206 -- 521
Provision for bad debts -- -- -- 20 (15) -- 5
-------------------------------------------------------------------------
Total costs and expenses 17 174 (40) 963 3,420 1,130 5,664
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (1,323) -- 428 -- -- -- (895)
-------------------------------------------------------------------------
Net income (loss) $ (1,397) $ 59 $ 468 $ 870 $ 2,759 $ (952) $ 1,807
=========================================================================
As of December 31, 1998
Total assets $ 2,564 $ 574 $ 1,585 $ 561 $ 4,116 $ 3,620 $ 13,020
=========================================================================
<FN>
<F1>
- -------------------
1 Includes interest income and costs not identifiable to a particular
segment such as interest expense, and certain general and administrative
and operations support expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
5. Operating Segments (continued)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, 1997 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ---- -----
Revenues
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 255 $ 796 $ -- $ 1,745 $ 6,160 $ -- $ 8,956
Interest income and other -- 17 -- 19 94 111 241
Gain (loss) on disposition of 1,589 1,548 -- 97 31 -- 3,265
equipment
-------------------------------------------------------------------------
Total revenues 1,844 2,361 -- 1,861 6,285 111 12,462
Costs and expenses
Operations support 6 5 -- 523 1,663 29 2,226
Depreciation and amortization -- 380 -- 601 1,296 -- 2,277
General and administrative expenses 20 3 18 367 189 1,105 1,702
Provision for bad debts (83) 1 6 12 153 -- 89
-------------------------------------------------------------------------
Total costs and expenses (57) 389 24 1,503 3,301 1,134 6,294
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (495) -- 12 -- -- -- (483)
-------------------------------------------------------------------------
Net income (loss) $ 1,406 $ 1,972 $ (12) $ 358 $ 2,984 $ (1,023) $ 5,685
=========================================================================
As of December 31, 1997
Total assets $ 4,736 $ 1,190 $ 1,246 $ 1,516 $ 5,428 $ 5,890 $ 20,006
=========================================================================
<FN>
<F1>
- -------------------------
1 Includes interest income and costs not identifiable to a particular
segment such as general and administrative, interest expense, and certain
operations support expenses. Also includes income from an investment in an
entity owning a mobile offshore drilling unit.
</FN>
</TABLE>
6. Geographic Information
The Partnership owns certain equipment that is leased and operated
internationally. A limited number of the Partnership's transactions are
denominated in a foreign currency. Gains or losses resulting from foreign
currency transactions are included in the results of operations and are
not material.
The Partnership leases or leased its aircraft, railcars, mobile offshore
drilling unit, and trailers to lessees domiciled in five geographic
regions: Canada, the United States, South America, Europe, and Asia.
Marine equipment is leased to multiple lessees in different regions who
operate the marine equipment worldwide.
The following table sets forth lease revenue information by region for the
years ended December 31, as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Owned Equipment Investments in USPEs
----------------------------------------- ---------------------------------------
Region 1999 1998 1997 1999 1998 1997
--------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
United States $ 1,369 2,173 $ 7,283 $ -- $ -- $ --
South America -- -- -- 197 616 --
Canada 4,829 4,986 877 -- -- --
Europe -- -- -- -- -- 590
Rest of the world 141 234 796 2,049 2,584 2,345
======================================================================================
Lease Revenues $ 6,339 7,393 $ 8,956 $ 2,246 $ 3,200 $ 2,935
======================================================================================
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
6. Geographic Location (continued)
The following table sets forth income (loss) information by region for the
years ended December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
Owned Equipment Investments in USPEs
---------------------------------------------------------------------------------------
Region 1999 1998 1997 1999 1998 1997
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States $ (184) $ 145 $ 1,468 $ -- -- $ --
South America -- -- -- 2980 158 25
Canada 3,168 3,409 3,774 -- -- --
Asia -- -- -- (449) (1,481 ) (520)
Rest of the world 38 100 1,949 (484) 428 12
---------------------------------------------------------------------------------------
Regional
Income (loss) 3,022 3,654 7,191 2,047 (895) (483)
Administrative
and other (748) (952) (1,023) -- -- --
---------------------------------------------------------------------------------------
Net income (loss) $ 2,274 $ 2,702 $ 6,168 $ 2,047 (895) $ (483)
=======================================================================================
The net book value of these assets at December 31, are as follows (in
thousands of dollars):
Owned Equipment Investments in USPEs
------------------------------------------ ------------------------------------------
Region 1999 1998 1997 1999 1998 1997
---------------------------------------------------------------------------------------------------------------
United States $ 933 $ 1,233 $ 2,234 $ -- $ -- $ --
South America -- -- -- -- 2,064 3,495
Canada 2,294 3,445 4,710 -- -- --
Asia -- -- -- 357 498 1,241
Europe -- -- -- -- -- --
Rest of the world 386 573 1,190 1,398 1,587 1,247
-------------------------------------------------------------------------------------------
Net book value $ 3,613 $ 5,251 $ 8,134 $ 1,755 $ 4,149 $ 5,983
===========================================================================================
</TABLE>
7. Concentrations of Credit Risk
The Partnership did not have any customer that accounted for 10% or more
of the total revenue for the year ended December 31, 1999. The
Partnership's only customer that accounted for 10% or more of the total
consolidated revenues for the owned equipment and partially owned
equipment during 1998 and 1997 was Texaco (14% in 1998 and 20% in 1997).
As of December 31, 1999 and 1998, the General Partner believes the
Partnership had no other significant concentrations of credit risk that
could have a material adverse effect on the Partnership.
8. Income Taxes
The Partnership is not subject to income taxes, as any income or loss is
included in the tax returns of the individual partners. Accordingly, no
provision for income taxes has been made in the financial statements of
the Partnership.
<PAGE>
PLM EQUIPMENT GROWTH FUND
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
8. Income Taxes (continued)
As of December 31, 1999, the financial statement carrying values of
certain assets and liabilities were approximately $16 million lower than
the federal income tax bases of such assets and liabilities, primarily due
to differences in depreciation methods and equipment reserves and the tax
treatment of underwriting commissions and syndication costs.
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 an unfavorable outcome from the counterclaims is
remote.
11. 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 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.
In 1999 and 1998, the General Partner paid special distributions of $1.03
and $0.60 per weighted-average depositary unit. 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.
<PAGE>
PLM EQUIPMENT GROWTH FUND
INDEX OF EXHIBITS
Exhibit Page
4. Limited Partnership Agreement of Registrant *
4.1 Amendment to Limited Partnership Agreement of Registrant *
10.1 Management Agreement between Registrant and PLM Investment *
Management, Inc.
24. Powers of Attorney 40-42
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM Financial Services, Inc., as General Partner of PLM
Equipment Growth Fund, to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules and regulations thereunder, in connection
with the preparation and filing with the Securities and Exchange Commission of
annual reports on Form 10-K on behalf of PLM Equipment Growth Fund, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned, in any and all capacities, to
such annual reports, to any and all amendments thereto, and to any and all
documents or instruments filed as a part of or in connection therewith; and the
undersigned hereby ratifies and confirms all that each of the said attorneys, or
his substitute or substitutes, shall do or cause to be done by virtue hereof.
This Power of Attorney is limited in duration until May 1, 1999 and shall apply
only to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Douglas P. Goodrich
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM Financial Services, Inc., as General Partner of PLM
Equipment Growth Fund, to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules and regulations thereunder, in connection
with the preparation and filing with the Securities and Exchange Commission of
annual reports on Form 10-K on behalf of PLM Equpment Growth Fund, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned, in any and all capacities, to
such annual reports, to any and all amendments thereto, and to any and all
documents or instruments filed as a part of or in connection therewith; and the
undersigned hereby ratifies and confirms all that each of the said attorneys, or
his substitute or substitutes, shall do or cause to be done by virtue hereof.
This Power of Attorney is limited in duration until May 1, 2000 and shall apply
only to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Robert N. Tidball
Robert N. Tidball
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM Financial Services, Inc., as General Partner of PLM
Equipment Growth Fund, to comply with the Securities Exchange Act of 1934, as
amended (the "Act"), and any rules and regulations thereunder, in connection
with the preparation and filing with the Securities and Exchange Commission of
annual reports on Form 10-K on behalf of PLM Equipment Growth Fund, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned, in any and all capacities, to
such annual reports, to any and all amendments thereto, and to any and all
documents or instruments filed as a part of or in connection therewith; and the
undersigned hereby ratifies and confirms all that each of the said attorneys, or
his substitute or substitutes, shall do or cause to be done by virtue hereof.
This Power of Attorney is limited in duration until May 1, 2000 and shall apply
only to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Stephen M. Bess
Stephen M. Bess
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,446
<SECURITIES> 0
<RECEIVABLES> 401
<ALLOWANCES> 36
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,580
<DEPRECIATION> 20,967
<TOTAL-ASSETS> 7,217
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,754
<TOTAL-LIABILITY-AND-EQUITY> 7,217
<SALES> 0
<TOTAL-REVENUES> 6,816
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,659
<LOSS-PROVISION> (117)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,321
<EPS-BASIC> 0.73
<EPS-DILUTED> 0.73
</TABLE>
