UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarter ended September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-15436
_______________________
PLM EQUIPMENT GROWTH FUND
(Exact name of registrant as specified in its charter)
California 94-2998816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (415) 974-1399
_______________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999
-------------------------------------
Assets
Equipment held for operating lease, at cost $ 22,114 $ 24,580
Less accumulated depreciation (20,135) (20,967)
-------------------------------------
Net equipment 1,979 3,613
Cash and cash equivalents 2,166 1,446
Accounts receivable, less allowance for doubtful accounts
of $14 in 2000 and $36 in 1999 435 365
Investments in unconsolidated special-purpose entities 1,666 1,755
Prepaid expenses and other assets 1 38
-------------------------------------
Total assets $ 6,247 $ 7,217
=====================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 96 $ 337
Due to affiliates 18 63
Lessee deposits 10 63
-------------------------------------
Total liabilities 124 463
-------------------------------------
Partners' capital:
Limited partners (5,785,350 depositary units
as of September 30, 2000 and December 31, 1999) 6,123 6,754
General Partner -- --
-------------------------------------
Total partners' capital 6,123 6,754
-------------------------------------
Total liabilities and partners' capital $ 6,247 $ 7,217
=====================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease revenue $ 1,460 $ 1,465 $ 4,588 $ 4,703
Interest and other income 21 38 69 134
Net gain on disposition of equipment 452 8 460 148
------------------------------------------------------------
Total revenues 1,933 1,511 5,117 4,985
------------------------------------------------------------
EXPENSES
Depreciation 355 372 1,076 1,132
Repairs and maintenance 432 391 1,274 1,456
Insurance expense 14 9 37 26
Management fees to affiliate 69 79 234 279
General and administrative expenses to affiliates 55 71 183 215
Other general and administrative expenses 114 101 368 353
(Recovery of) provision for bad debt expense (42) (4) 6 (125)
------------------------------------------------------------
Total expenses 997 1,019 3,178 3,336
------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 138 (327) 1,795 2,369
------------------------------------------------------------
Net income $ 1,074 $ 165 $ 3,734 $ 4,018
============================================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 1,064 $ 114 $ 3,690 $ 3,929
General Partner 10 51 44 89
------------------------------------------------------------
Total $ 1,074 $ 165 $ 3,734 $ 4,018
============================================================
Limited partners net income per weighted-average
depositary unit $ 0.18 $ 0.02 $ 0.64 $ 0.68
============================================================
Cash distribution $ 958 $ 1,014 $ 2,905 $ 2,877
Special distribution -- 4,091 1,460 6,044
-----------------------------------------------------------------------------------------------------------------------
Total distributions $ 958 $ 5,105 $ 4,365 $ 8,921
=======================================================================================================================
Per weighted-average depositary unit:
Cash distribution $ 0.16 $ 0.17 $ 0.50 $ 0.49
Special distribution -- 0.70 0.25 1.03
-----------------------------------------------------------------------------------------------------------------------
Total distributions $ 0.16 $ 0.87 $ 0.75 $ 1.52
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1998 to September 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1998 $ 12,327 $ -- $ 12,327
Net income 4,222 99 4,321
Cash distribution (3,811) (39) (3,850)
Special distribution (5,984) (60) (6,044)
---------------------------------------------------------
Partners' capital as of December 31, 1999 6,754 -- 6,754
Net income 3,690 44 3,734
Cash distribution (2,875) (30) (2,905)
Special distribution (1,446) (14) (1,460)
---------------------------------------------------------
Partners' capital as of September 30, 2000 $ 6,123 $ -- $ 6,123
=========================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,734 $ 4,018
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 1,076 1,132
Net gain on disposition of equipment (460) (148)
Equity in net income of unconsolidated
special-purpose entities (1,795) (2,369)
Changes in operating assets and liabilities:
Accounts receivable, net (70) (93)
Prepaid expenses and other assets 37 26
Accounts payable and accrued expenses (241) (5)
Due to affiliates (44) 37
Lessee deposits (53) 16
----------------------------------
Net cash provided by operating activities 2,184 2,614
----------------------------------
Investing activities
Payments for capital improvements -- (25)
Liquidation distributions from unconsolidated
special-purpose entities 1,910 4,262
Proceeds from disposition of equipment 1,018 271
Additional investments in unconsolidated special-purpose entities (26) (251)
----------------------------------
Net cash provided by investing activities 2,902 4,257
----------------------------------
Financing activities
Cash distribution paid to limited partners (2,875) (2,848)
Cash distribution paid to General Partner (30) (29)
Special distribution paid to limited partners (1,446) (5,984)
Special distribution paid to General Partner (14) (60)
----------------------------------
----------------------------------
Net cash used in financing activities (4,365) (8,921)
----------------------------------
Net increase (decrease) in cash and cash equivalents 721 (2,050)
Cash and cash equivalents at beginning of period 1,446 3,289
----------------------------------
Cash and cash equivalents at end of period $ 2,167 $ 1,239
==================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly the financial position of PLM Equipment Growth Fund (the
Partnership) as of September 30, 2000 and 1999, the statements of income for the
three and nine months ended September 30, 2000 and 1999, the statements of
changes in Partners' capital from December 31, 1998 to September 30, 2000, and
the statements of cash flows for the nine months ended September 30, 2000 and
1999. Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements and
notes thereto included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1999, on file at the Securities and Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
The Partnership, in accordance with its limited partnership agreement, entered
its liquidation phase on January 1, 1998, and has commenced an orderly
liquidation of the Partnership assets. The Partnership will terminate on
December 31, 2006, unless terminated earlier upon the sale of all equipment or
by certain other events. The General Partner may no longer reinvest cash flows
and surplus funds in equipment. All future cash flows and surplus funds, if any,
are to be used for distributions to partners, except to the extent used to
maintain reasonable reserves. During the liquidation phase, the Partnership's
assets will continue to be recorded at the lower of the carrying amount or fair
value less cost to sell.
3. CASH DISTRIBUTIONS
Cash distributions are recorded when paid and may include amounts in excess of
net income that are considered to represent a return on capital. For the nine
months ended September 30, 2000 and 1999, cash distributions totaled $2.9
million. For the three months ended September 30, 2000 and 1999 cash
distributions totaled $1.0 million. In addition, $1.4 and $6.0 million in
special distributions were paid during the three and nine months ended September
30, 2000 and 1999. Special distributions of $0 and $4.1 million were paid during
the three months ended September 30, 2000 and 1999. During the nine months ended
September 30, 2000 and 1999, cash and special distributions to unitholders of
$0.6 million and $4.9 million, respectively, were deemed to be a return of
capital.
Operating cash distributions related to the results from the third quarter of
2000 of $0.9 million are to be paid during the fourth quarter of 2000.
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of September 30, 2000, includes $19,000 due to
FSI and its affiliate for management fees and data processing services. The
balance due to affiliates as of December 31, 1999 includes $0.1 million due to
FSI and its affiliate for management fees.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The Partnerships proportional share of the affiliated expenses incurred by the
Unconsolidated Special Purpose Entities (USPEs) during 2000 and 1999 is listed
in the following table (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 5 $ (25) $ 51 $ 21
Data processing and administrative
expenses 14 5 30 35
</TABLE>
5. EQUIPMENT
The components of owned equipment were as follows (in thousands of dollars):
September 30 December 31,
2000 1999
--------------------------------------------------------------------------------
Railcars $ 21,340 $ 21,392
Marine containers 774 1,571
Trailers -- 1,617
--------------------------------------------------------------------------------
22,114 24,580
Less accumulated depreciation (20,135) (20,967)
-------------------------------------
Net equipment $ 1,979 $ 3,613
=====================================
As of September 30, 2000, all equipment in the Partnership's owned equipment
portfolio was on lease, except for five marine containers and eight railcars
with an aggregate net book value of $23,000. As of December 31, 1999, all
equipment in the Partnership's owned equipment portfolio was on lease or
operating in PLM-affiliated short-term trailer rental facilities, except for 11
railcars with an aggregate net book value of $43,000.
Capital improvements to the Partnership's equipment of $0 and $25,000 were made
during the nine months ended September 30, 2000 and 1999, respectively.
During the nine months ended September 30, 2000, the Partnership disposed of
marine containers, railcars, and trailers, with an aggregate net book value of
$0.6 million, for proceeds of $1.0 million. During the nine months ended
September 30, 1999, the Partnership disposed of marine containers, trailers, and
railcars with an aggregate net book value of $0.1 million, for proceeds of $0.3
million.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
6. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The net investments in unconsolidated special-purpose entities included the
following jointly-owned equipment (and related assets and liabilities) (in
thousands of dollars):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-----------------------------------------
<S> <C> <C>
50% interest in an entity owning a product tanker $ 1,664 $ 1,397
18% interest in an entity that owned a Boeing 727-200 2 2
50% interest in an entity that owned a Boeing 737-200A -- 371
12% interest in an entity that owned a Boeing 767-200 ER -- (15)
-----------------------------------------
Net investments $ 1,666 $ 1,755
=========================================
</TABLE>
The Partnership's 50% interest in a product tanker was on lease as of September
30, 2000 and December 31, 1999. During the first quarter of 2000, the General
Partner sold the Partnership's 50% interest in a Boeing 737-200A in which the
Partnership had an investment of $0.4 million for proceeds of $1.9 million. This
aircraft was off-lease as of December 31, 1999.
7. OPERATING SEGMENTS
The Partnership operates or operated primarily in five different segments,
railcar leasing, trailer leasing, marine container leasing, aircraft leasing,
and marine vessel leasing. Each equipment leasing segment engages in short-term
and mid-term operating leases to a variety of customers. The following tables
present a summary of the operating segments (in thousands of dollars):
<TABLE>
<CAPTION>
Marine Marine
For the three months ended Railcar Trailer Container Vessel All
September 30, 2000 Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,355 $ 93 $ 12 $ -- $ -- $ 1,460
Interest income and other -- -- -- -- 21 21
Net gain (loss) on disposition
of equipment 3 462 (13) -- -- 452
--------------------------------------------------------------------------
1,358 555 (1) -- 21 1,933
COST AND EXPENSES
Operations support 403 34 -- -- 9 446
Depreciation 323 20 12 -- -- 355
General and administrative 22 34 -- -- 113 169
expenses
Management fees -- -- -- -- 69 69
Recovery of bad debts (38) (4) -- -- -- (42)
---------------------------------------------------------------------------
Total costs and expenses 710 84 12 -- 191 997
Equity in net income of USPEs -- -- -- 138 -- 138
----------------------------------------------------------------------------
Net income (loss) $ 648 $ 471 $ (13) $ 138 $ (170) $ 1,074
===========================================================================
Total assets as of September 30, $ 2,180 $ -- $ 234 $ 1,664 $ 2,173 $ 6,251
2000
===========================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as management fees and certain operations support and general and
administrative expenses . 1 Includes interest income and costs not identifiable
to a particular segment such as management fees and certain operations support
and general and administrative expenses .
</TABLE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
7. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the three months ended Railcar Trailer Container Aircraft Vessel All
September 30,1999 Leasing Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,338 $ 107 $ 20 $ -- $ -- $ -- $ 1,465
Interest income and other -- -- -- -- 38 38
Net gain (loss) on disposition --
of equipment -- 3 (1) 6 -- -- 8
---------------------------------------------------------------------------------------
Total revenues 1,338 110 19 6 -- 38 1,511
COST AND EXPENSES
Operations support 355 40 -- -- -- 5 400
Depreciation 325 23 24 -- -- -- 372
General and administrative
expenses 60 19 -- -- 4 89 172
Management fees -- -- -- -- -- 79 79
(Recovery of) provision for bad (11) 7 -- -- -- -- (4)
debts
---------------------------------------------------------------------------------------
Total costs and expenses 729 89 24 -- 4 173 1,019
Equity in net loss of USPEs -- -- -- (98) (229) -- (327)
---------------------------------------------------------------------------------------
Net income (loss) $ 609 $ 21 $ (5) $ (92) $ (233) $ (135) $ 165
=======================================================================================
Total assets as of September 30, $ 3,314 $ 523 $ 451 $ 557 $ 1,684 $ 1,104 $ 7,633
1999
=======================================================================================
Marine Marine
For the nine months ended Railcar Trailer Container Aircraft Vessel All
September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
REVENUES
Lease revenue $ 4,231 $ 273 $ 84 $ -- $ -- $ -- $ 4,588
Interest income and other -- -- -- -- 69 69
Net gain (loss) on disposition --
Of equipment 21 480 (41) -- -- -- 460
---------------------------------------------------------------------------------------
Total revenues 4,252 753 43 -- -- 69 5,117
COST AND EXPENSES
Operations support 1,201 82 -- -- -- 28 1,311
Depreciation 969 61 46 -- -- -- 1,076
General and administrative
expenses 68 88 -- 4 2 389 551
Management fees -- -- -- -- -- 234 234
(Recovery of) provision for bad (8) 14 -- -- -- -- 6
debts
---------------------------------------------------------------------------------------
Total costs and expenses 2,230 245 46 4 2 651 3,178
Equity in net loss of USPEs -- -- -- 1,308 487 -- 1,795
---------------------------------------------------------------------------------------
Net income (loss) $ 2,022 $ 508 $ (3) $ 1,304 $ 485 $ (582) $ 3,734
=======================================================================================
Total assets as of September 30, $ 2,180 $ -- $ 234 $ 2 $ 1,664 $ 2,171 $ 6,251
1999
=======================================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as management fees and certain operations support and general and
administrative expenses . 1 Includes interest income and costs not identifiable
to a particular segment such as management fees and certain operations support
and general and administrative expenses .
</TABLE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
7. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the nine months ended Railcar Trailer Container Aircraft Vessel All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 4,235 $ 360 $ 108 $ -- $ -- $ -- $ 4,703
Interest income and other -- -- 5 -- -- 129 134
Net gain (loss) on disposition --
of equipment 52 88 (4) 12 -- -- 148
--------------------------------------------------------------------------------------
Total revenues 4,287 448 109 12 -- 129 4,985
COST AND EXPENSES
Operations support 1,363 104 1 -- -- 14 1,482
Depreciation 975 83 74 -- -- -- 1,132
General and administrative -- --
expenses 156 85 2 2 6 317 568
Management fees -- -- -- -- -- 279 279
(Recovery of) provision for bad (136) 14 -- -- -- (3) (125)
debts
--------------------------------------------------------------------------------------
Total costs and expenses 2,358 286 77 2 6 607 3,336
Equity in net loss of USPEs -- -- -- 2,605 (236) -- 2,369
--------------------------------------------------------------------------------------
Net income (loss) $ 1,929 $ 162 $ 32 $ 2,615 $ (242) $ (478) $ 4,018
======================================================================================
Total assets as of September 30, $ 3,314 $ 523 $ 451 $ 557 $ 1,684 $ 1,104 $ 7,633
======================================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as management fees and certain operations support and general and
administrative expenses . 1 Includes interest income and costs not identifiable
to a particular segment such as management fees and certain operations support
and general and administrative expenses .
</TABLE>
8. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income per weighted-average Partnership unit was computed by dividing net
income attributable to limited partners by the weighted-average number of
Partnership units deemed outstanding during the period. The weighted-average
number of Partnership units deemed outstanding during the three and nine months
ended September 30, 2000 and 1999 was 5,785,350.
9. CONTINGENCIES
The Partnership, together with affiliates, has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership property and to recover damages for failure to pay rent and failure
to maintain such property in accordance with relevant lease contracts. The
Partnership has repossessed all of its property previously leased to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline filed counterclaims against the Partnership in
excess of the Partnership's claims against the airline. The General Partner
believes that the airline's counterclaims are completely without merit, and the
General Partner will vigorously defend against such counterclaims. The General
Partner believes the likelihood of an unfavorable outcome from the counterclaims
is remote.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
10. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1998, the General Partner began the liquidation phase of the
Partnership with the intent to commence an orderly liquidation of the
Partnership assets. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing lease revenues and sale
proceeds. As sale proceeds are received the General Partner intends to
periodically declare special distributions to distribute the sale proceeds to
the partners. During the liquidation phase of the Partnership the equipment will
continue to be leased under operating leases until sold. Operating cash flows,
to the extent they exceed Partnership expenses, will continue to be distributed
on a quarterly basis to partners. The amounts reflected for assets and
liabilities of the Partnership have not been adjusted to reflect liquidation
values. The equipment portfolio continues to be carried at the lower of
depreciated cost or fair value less cost to dispose. Although the General
Partner estimates that there will be distributions after liquidation of assets
and liabilities, the amounts cannot be accurately determined prior to actual
liquidation of the equipment. Any excess proceeds over expected Partnership
obligations will be distributed to the Partners throughout the liquidation
period. Upon final liquidation, the Partnership will be dissolved.
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 partners in the form of special distributions. The
sales and liquidations occur due to 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. In the nine months ended September 30, 2000 and 1999, the
General Partner paid special distributions of $0.25 and $1.03 per
weighted-average depositary unit.
(this space left blank intentionally)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund's (the Partnership's) Operating Results
for the Three Months Ended September 30, 2000 and 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
asset-specific insurance expenses) on owned equipment decreased during the
quarter ended September 30, 2000, when compared to the same period of 1999.
Gains or losses from the sale of equipment interest, and other income, and
certain expenses such as depreciation and general and administrative expenses
relating to the operating segments (see Note 7 to the unaudited financial
statements), are not included in the owned equipment operation discussion
because these expenses are indirect in nature, not a result of operations but
the result of owning a portfolio of equipment. The following table presents
lease revenues less direct expenses by equipment type (in thousands of dollars):
For the Three Months
Ended September 30,
2000 1999
----------------------------
Railcars $ 952 $ 983
Trailers 59 67
Marine containers 12 20
Railcars: Railcar lease revenues and direct expenses were $1.4 million and $0.4
million, respectively, for the quarter ended September 30, 2000, compared to
$1.3 million and $0.4 million, respectively, for the same period of 1999. Direct
revenues and expenses during the third quarter of 2000 remained stable when
comparted to the same period in 1999 due to the low number of off-lease railcars
in both periods.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$34,000 respectively, for the quarter ended September 30, 2000, compared to $0.1
million and $40,000, respectively, for the same period of 1999. The number of
trailers owned by the Partnership has been declining over the past twelve months
due to sales and dispositions. The result of this declining fleet has been a
decrease in trailer contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses were $0.6 million and $0.6 million for the quarters
ended September 30, 2000 and 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for the third quarter of 2000
totaled $0.5 million , and resulted from the sale of marine containers,
railcars, and trailers, with an aggregate net book value of $0.4 million, for
aggregate proceeds of $0.8 million. For the third quarter of 1999, the net gain
on sales totaled $8,000, and resulted from the sale of marine containers and
trailers with an aggregate net book value of $26,000, for aggregate proceeds of
$34,000.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended September 30,
2000 1999
----------------------------
Marine vessel $ 138 $ (228)
Aircraft -- (99)
----------------------------
Equity in net income (loss) of USPEs $ 138 $ (327)
============================
Marine vessel: As of September 30, 2000 and 1999, the Partnership had an
interest in an entity that owns a marine vessel. The Partnership's share of
marine vessel revenues and expenses was $0.8 million and $0.7 million,
respectively, for the quarter ended September 30, 2000, compared to $0.5 million
and $0.7 million for the same period in 1999. Marine vessel revenue increased
$0.3 million in the third quarter of 2000 due to higher charter rates being
earned while on a voyage charter when compared to the same period of 1999.
Vessel expenses remained the same for the third quarter of 2000 and 1999.
Aircraft: The Partnership's remaining interest in an entity which owned an
aircraft was sold in the first quarter of 2000. During the third quarter of
1999, this aircraft was off lease.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $1.1 million for
the third quarter of 2000 increased from net income of $0.2 million during the
same period of 1999. The Partnership's ability to operate and liquidate assets,
secure leases and re-lease those assets whose leases expire is subject to many
factors. Therefore, the Partnership's performance in the third quarter of 2000
is not necessarily indicative of future periods. In the third quarter of 2000,
the Partnership distributed $0.9 million to the limited partners, or $0.16 per
weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Nine Months Ended
September 30, 2000 and 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
asset-specific insurance expenses) on owned equipment increased during the nine
months ended September 30, 2000, when compared to the same period of 1999. The
following table presents lease revenues less direct expenses by owned equipment
type (in thousands of dollars):
For the Nine Months
Ended September 30,
2000 1999
----------------------------
Railcars $ 3,030 $ 2,872
Trailers 191 256
Marine containers 84 107
Railcars: Railcar lease revenues and direct expenses were $4.2 million and $1.2
million, respectively, for the nine months ended September 30, 2000, compared to
$4.2 million and $1.4 million, respectively, during the same period of 1999.
Direct expenses decreased by $0.2 million due to repairs required in 1999 which
were not necessary during the nine months ended September 30, 2000.
Trailers: Trailer lease revenues and direct expenses were $0.3 million and $0.1
respectively, for the nine months ended September 30, 2000, compared to $0.4
million and $0.1 million, respectively, during the same period of 1999. The
number of trailers owned by the Partnership has been declining over the past
twelve months due to sales and dispositions. The result of this declining fleet
has been a decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $0 respectively, for the nine months ended September 30, 2000,
compared to $0.1 million and $1,000, respectively, during the same period of
1999. The number of marine containers owned by the Partnership has been
declining over the past twelve months due to sales and dispositions. The result
of this declining fleet has been a decrease in marine container contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.9 million for the nine months ended September 30,
2000 and 1999. Significant variances are explained as follows:
(1) A $0.1 million increase in bad debt expense that resulted from the
collection of an accounts receivable in 1999 that had been previously
reserved for as a bad debt. A similar event did not occur in 2000.
(2) A $0.1 million decrease in depreciation expense from 1999 levels reflecting
the sale of assets during 2000 and during 1999.
(3) A $45,000 decrease in management fee expense due to reduced cash flows from
operations in 2000, compared to the same period in 1999.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the nine months ended September 30,
2000 totaled $0.5 million, and resulted from the sale of marine containers,
railcars, and trailers with a net book value of $0.6 million, for proceeds of
$1.0 million. For the nine months ended September 30, 1999, the net gain on sale
totaled $0.1 million, and resulted from the sale of marine containers, railcars,
and trailers, with a net book value of $0.1 million, for proceeds of $0.3
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 Nine Months
Ended September 30,
2000 1999
----------------------------
Aircraft $ 1,308 $ 2,605
Marine vessel 487 (236)
-------------------------------
Equity in net income of USPEs $ 1,795 $ 2,369
===============================
Aircraft: As of September 30, 2000, the Partnership had no remaining interests
in entities which owned aircraft. During the nine months ended September 30,
2000, the gain from the sale of the Partnership's interest in the USPE of $1.5
million, which was sold in the first quarter of 2000, was offset by depreciation
expense, direct expenses, and administrative expenses of $0.2 million. As of
September 30, 1999, expenses for this aircraft were $0.4 million. The
Partnership's other interest in an entity which owned an aircraft was sold in
the second quarter of 1999, for a gain of $3.0 million. During the nine months
ended September 30, 1999, this aircraft had revenue and expenses of $0.2
million.
Marine vessel: As of September 30, 2000 and 1999, the Partnership had an
interest in an entity that owns a marine vessel. The Partnership's share of
marine vessel revenues and expenses was $2.8 million and $2.3 million,
respectively, for the nine months ended September 30, 2000, compared to $1.6
million and $1.9 million, respectively, during the same period of 1999. The
increase in contribution for the nine months ended September 30, 2000 resulted
from the vessel earning higher voyage charter rates, which were partially offset
by higher voyage expenses when compared to the same period in 1999.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $3.7 million for
the nine months ended September 30, 2000 compared to net income of $ 4.0 million
during the same period in 1999. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the first nine
months of 2000 is not necessarily indicative of future periods. During the nine
months ended September 30, 2000, the Partnership distributed $4.3 million to the
unitholders, or $0.75 per weighted-average depositary unit, including a special
distribution of $0.25 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the nine months ended September 30, 2000, the Partnership generated $2.2
million in operating cash (net cash provided by operating activities less
investments in a USPE to fund its operations) to meet its operating obligations
and fund distributions (total of $4.4 million for the nine months ended
September 30, 2000, which includes a special distribution of $1.5 million), but
used undistributed available cash from prior periods, proceeds from equipment
sales, and liquidating distributions from the USPE's of approximately $2.2
million.
During the nine months ended September 30, 2000, the General Partner sold
equipment on behalf of the Partnership and realized proceeds of approximately
$1.0 million. The Partnership also received liquidating proceeds of $1.9 million
from the sale of its interest in an entity owning an aircraft.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts if any
cannot be accurately determined prior to actual disposal of the equipment.
On April 20, 2000, the General Partner for the Partnership announced that
effective immediately, it will not recognize any further transfers involving
trading of units in this partnership for the remainder of the 2000 calendar
year. PLM Equipment Growth Fund (hereafter referred to as "the Partnership") is
listed on the OTC Bulletin Board under the symbol GFXPZ.
In making the announcement, the General Partner cited the Partnership's need to
continue to comply with Internal Revenue Service (IRS) Notice 88-75 and IRS Code
Section 7704, which contain safe harbor provisions regarding the maximum number
of partnership units that can be traded during a calendar year in order for a
partnership not to be deemed a publicly traded partnership for income tax
purposes. Transfers for the remainder of the year may only be processed,
pursuant to IRS Code Section 7704, through a qualified matching service. The
General Partner will also continue to recognize transfers specifically excluded
from the safe harbor limitations, referred to in the regulations as "transfers
not involving trading," which includes transfers at death, transfers between
family members, and transfers involving distributions from a qualified
retirement plan.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is in its active liquidation phase, the General Partner is
seeking to selectively re-lease or sell assets as the existing leases expire.
Sale decisions may cause the operating performance of the Partnership to decline
over the remainder of its life.
Several factors may affect the Partnership's operating performance in the
remainder of 2000 and beyond, including changes in the markets for the
Partnership's equipment and changes in the regulatory environment in which that
equipment operates.
Liquidation of the Partnership's equipment represents a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership. Other factors affecting the Partnership's contribution in 2000 and
beyond include:
The cost of new marine containers have been at historic lows for the past
several years which has caused downward pressure on per diem lease rates.
Recently, the cost of marine containers have started to increase which, if this
trend continues, should translate into rising per diem lease rates
Railcar loadings in North America have continued to be high, however a softening
in the market is expected during 2000, which may lead to lower utilization and
lower contribution to the Partnership as existing leases expire and renewal
leases are negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of these factors, or
of their occurrence, makes it difficult for the General Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment. The General Partner continually monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner may decide to reduce the Partnership's exposure to those equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.
The Partnership intends to use excess cash flow, if any, from operations to
satisfy its operating requirements, and to pay cash distributions to the
unitholders.
(IV) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, this Form 10-Q contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Partnership's plans, objectives, expectations, and intentions.
The cautionary statements made in this Form 10-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During the nine months ended September 30, 2000, 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 payments.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND
By: PLM Financial Services, Inc.
General Partner
Date: November 6, 2000 By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
