UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 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 0-18789
-----------------------
PLM EQUIPMENT GROWTH FUND IV
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3041013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
ONE MARKET, STEUART STREET TOWER,
SUITE 800, SAN FRANCISCO, CA 94105-1301
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating leases, at cost $ 47,260 $ 82,278
Less accumulated depreciation (35,670) (58,674)
------------------------------------
11,590 23,604
Equipment held for sale 2,707 --
------------------------------------
Net equipment 14,297 23,604
Cash and cash equivalents 1,595 778
Restricted cash 147 147
Accounts receivable, less allowance for doubtful
accounts of $3,164 in 1999 and $3,126 in 1998 664 874
Investments in unconsolidated special-purpose entities 5,307 5,739
Deferred charges, less accumulated amortization
of $349 in 1999 and $321 in 1998 30 58
Prepaid expenses and other assets 71 50
------------------------------------
Total assets $ 22,111 $ 31,250
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 237 $ 563
Due to affiliates 207 244
Lessee deposits and reserve for repairs 733 1,126
Notes payable 4,500 12,750
------------------------------------
Total liabilities 5,677 14,683
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of September 30, 1999 and December 31, 1998) 16,434 16,567
General Partner -- --
------------------------------------
Total partners' capital 16,434 16,567
------------------------------------
Total liabilities and partners' capital $ 22,111 $ 31,250
====================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(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,
1999 1998 1999 1998
-----------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 2,019 $ 2,662 $ 6,537 $ 8,380
Interest and other income 45 17 110 204
Net gain (loss) on disposition of equipment 2,444 (13) 4,451 (495)
----------------------------------------------------------
Total revenues 4,508 2,666 11,098 8,089
----------------------------------------------------------
EXPENSES
Depreciation and amortization 1,063 1,430 3,415 4,396
Equipment operating expenses 169 155 503 600
Repairs and maintenance 232 284 2,390 1,133
Interest expense 203 311 824 1,335
Insurance expense 43 58 152 167
Management fees to affiliate 114 151 369 466
General and administrative expenses
to affiliates 116 118 381 421
Other general and administrative expenses 163 182 523 417
Provision for (recovery of) bad debt expense 16 (30 ) 40 154
----------------------------------------------------------
Total expenses 2,119 2,659 8,597 9,089
----------------------------------------------------------
Equity in net income of unconsolidated special-
purpose entities 105 46 91 338
----------------------------------------------------------
Net income (loss) $ 2,494 $ 53 $ 2,592 $ (662)
==========================================================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ 2,449 $ 8 $ 2,456 $ (798)
General Partner 45 45 136 136
----------------------------------------------------------
Total $ 2,494 $ 53 $ 2,592 $ (662)
==========================================================
Net income (loss) per weighted-average limited
partnership unit $ 0.28 $ 0.00 $ 0.28 $ (0.09)
==========================================================
Cash distributions $ 908 $ 808 $ 2,725 $ 2,624
==========================================================
Cash distributions per weighted-average limited
partnership unit $ 0.10 $ 0.09 $ 0.30 $ 0.29
==========================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM DECEMBER 31, 1997 TO SEPTEMBER 30, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1997 $ 21,227 $ -- $ 21,227
Net income (loss) (1,309) 182 (1,127)
Cash distribution (3,351) (182) (3,533)
--------------------------------------------------
Partners' capital as of December 31, 1998 16,567 -- 16,567
Net income 2,456 136 2,592
Cash distribution (2,589) (136) (2,725)
--------------------------------------------------
Partner's capital as of September 30, 1999 $ 16,434 $ -- $ 16,434
==================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
----------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 2,592 $ (662)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 3,415 4,396
Net (gain) loss on disposition of equipment (4,451) 495
Equity in net income of unconsolidated special-purpose
entities (91) (338)
Changes in operating assets and liabilities:
Accounts receivable, net 234 83
Prepaid expenses and other assets (21) 46
Accounts payable and accrued expenses (326) (779)
Due to affiliates (37) (17)
Lessee deposits and reserve for repairs (393) (388)
----------------------------
Net cash provided by operating activities 922 2,836
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (5) (7)
Proceeds from disposition of equipment 10,352 1,324
Distribution from liquidation of unconsolidated special-
purpose entities -- 3,470
Distribution from unconsolidated special-purpose entities 523 745
----------------------------
Net cash provided by investing activities 10,870 5,532
----------------------------
Financing activities
Principal payments of notes payable (8,250) (8,250)
Cash distribution paid to limited partners (2,589) (2,488)
Cash distribution paid to General Partner (136) (136)
----------------------------
Net cash used in financing activities (10,975) (10,874)
----------------------------
Net increase (decrease) in cash and cash equivalents 817 (2,506)
Cash and cash equivalents at beginning of year 778 3,650
----------------------------
Cash and cash equivalents at end of period $ 1,595 $ 1,144
============================
SUPPLEMENTAL INFORMATION
Interest paid $ 824 $ 1,335
============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or
the General Partner), the accompanying unaudited financial statements
contain all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund IV (the Partnership) as of September 30, 1999 and December 31, 1998,
the statements of operations for the three and nine months ended September
30, 1999 and 1998, the statements of changes in partners' capital for the
period from December 31, 1997 to September 30, 1999, and the statements of
cash flows for the nine months ended September 30, 1999 and 1998. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1998, on file with the Securities and
Exchange Commission.
2. Schedule of Partnership Phases
In accordance with the limited partnership agreement, the Partnership
entered its passive phase on January 1, 1997 and as a result, the
Partnership is not permitted to reinvest in equipment. On January 1, 1999,
the Partnership entered its liquidation phase and has commenced an orderly
liquidation of the Partnership assets. The Partnership will terminate on
December 31, 2009, unless terminated earlier upon sale of all equipment or
by certain other events. During the liquidation phase, the Partnership's
assets will continue to be recorded at the lower of carrying amount or fair
value less costs to sell.
3. Reclassification
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentations.
4. Cash Distributions
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
three months ended September 30, 1999 and 1998, cash distributions totaled
$0.9 million and $0.8 million, respectively. For the nine months ended
September 30, 1999 and 1998, cash distributions totaled $2.7 million and
$2.6 million, respectively. Cash distributions to the limited partners of
$0.1 million and $2.5 million for the nine months ended September 30, 1999
and 1998, respectively, were deemed to be a return of capital.
Cash distributions related to the results from the third quarter of 1999,
of $0.9 million, will be paid during the fourth quarter of 1999.
5. Transactions with General Partner and Affiliates
The balance due to affiliates as of September 30, 1999 and December 31,
1998, includes $0.1 million due to FSI and its affiliate for management
fees and $0.1 million due to affiliated unconsolidated special-purpose
entities (USPEs). The Partnership's proportional share of management fees
with USPE's of $23,000 and $9,000 were payable as of September 30, 1999 and
December 31, 1998, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
5. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of the affiliated expenses incurred by
the USPEs during 1999 and 1998 is listed in the following table (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 20 $ 18 $ 47 $ 61
Data processing and administrative
expenses 2 4 7 15
Insurance expense -- 2 1 9
</TABLE>
Transportation Equipment Indemnity Company, Ltd., an affiliate of the
General Partner and currently in liquidation, will no longer provide
certain marine insurance coverage as had been provided during 1998.
These services will be provided by unaffiliated third parties.
6. Equipment
Owned equipment held for operating lease is stated at cost. Equipment held
for sale is stated at the lower of the equipment's depreciated cost or fair
value, less cost to sell, and is subject to a pending contract for sale.
The components of equipment were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------------------------------
<S> <C> <C>
Aircraft $ 20,441 $ 42,734
Railcars 13,450 14,752
Marine containers 9,666 11,012
Trailers 3,703 4,061
Marine vessel -- 9,719
---------------------------------------------------------------------------------------------
47,260 82,278
Less accumulated depreciation (35,670) (58,674)
----------------------------------------
11,590 23,604
Equipment held for sale 2,707 --
-----------------------------------------------------========================================
Net equipment $ 14,297 $ 23,604
========================================
</TABLE>
As of September 30, 1999, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for one
commercial aircraft, four railcars, and 245 marine containers, with an
aggregate net book value of $2.5 million. As of December 31, 1998, all
equipment was either on lease or operating in PLM-affiliated short-term
trailer rental facilities, except for two commercial aircraft, five
railcars, and 46 marine containers, with an aggregate net book value of
$4.6 million.
During the nine months ended September 30, 1999, the Partnership sold or
disposed of aircraft, marine containers, railcars, and trailers with an
aggregate net book value of $5.9 million, for aggregate proceeds of $10.4
million. During the nine months ended September 30, 1998, the Partnership
sold or disposed of marine containers, railcars, and trailers with an
aggregate net book value of $1.9 million, for aggregate proceeds of $1.4
million. As of September 30, 1999, the remaining wholly owned marine vessel
and a DC 9 aircraft are held for sale.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
7. Investments in Unconsolidated Special-Purpose Entities
The net investments in USPEs included the following jointly-owned equipment
(and related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------------------------
<S> <C> <C>
35% interest in two Stage II commercial aircraft on a direct
finance lease $ 3,486 $ 3,880
50% interest in an entity owning a bulk-carrier 1,821 1,859
--------------------------------------------------------------------------------------------------------
Net investments $ 5,307 $ 5,739
====================================
</TABLE>
As of September 30, 1999 and December 31, 1998, all jointly-owned equipment
in the Partnership's USPE portfolio was on lease.
8. Operating Segments
The Partnership operates in five different segments: aircraft leasing,
railcar leasing, marine container leasing, marine vessel leasing, and
trailer leasing. Each equipment leasing segment engages in short-term to
mid-term operating leases to a variety of customers. The following tables
present a summary of the operating segments (in thousands of dollars):
<TABLE>
<CAPTION>
Marine Marine
For the three months ended Aircraft Railcar Container Vessel Trailer All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 643 $ 751 $ (18) $ 374 $ 269 $ -- $ 2,019
Interest income and other 2 -- -- -- -- 43 45
Gain (loss) on disposition of 2,427 14 11 -- (8) -- 2,444
equipment
-------------------------------------------------------------------------
Total revenues 3,072 765 (7) 374 261 43 4,508
Costs and expenses
Operations support 37 120 1 188 89 9 444
Depreciation and amortization 591 155 146 81 80 10 1,063
Interest expense -- -- -- -- -- 203 203
Management fees to affiliates 26 53 (1) 19 17 -- 114
General and administrative expenses 39 28 2 44 52 114 279
Provision for bad debts -- 6 -- -- 10 -- 16
-------------------------------------------------------------------------
Total costs and expenses 693 362 148 332 248 336 2,119
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 132 -- -- (27) -- -- 105
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ 2,511 $ 403 $ (155) $ 15 $ 13 $ (293) $ 2,494
=========================================================================
Total assets as of September 30, 1999 $ 8,373 $ 4,910 $ 1,575 $ 3,608 $ 1,804 $ 1,841 $ 22,111
=========================================================================
<FN>
-----------------------------------
<F1> 1 Includes interest income and costs not identifiable to a particular
segment, such as amortization expense and interest expense and certain
operations support and general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
8. Operating Segments (continued)
<TABLE>
<CAPTION>
Marine Marine
For the three months ended Aircraft Railcar Container Vessel Trailer All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ------- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 871 $ 884 $ 145 $ 377 $ 385 $ -- $ 2,662
Interest income and other 3 -- -- -- -- 14 17
Gain (loss) on disposition of (3) -- 7 -- (17) -- (13)
equipment
-------------------------------------------------------------------------
Total revenues 871 884 152 377 368 14 2,666
COSTS AND EXPENSES
Operations support 20 171 2 209 85 10 497
Depreciation and amortization 828 206 172 96 114 14 1,430
Interest expense -- -- -- -- -- 311 311
Management fees to affiliates 38 63 7 19 24 -- 151
General and administrative expenses 23 25 3 9 112 128 300
(Recovery of) provision for bad -- (13) 2 -- (19) -- (30)
debts
-------------------------------------------------------------------------
Total costs and expenses 909 452 186 333 316 463 2,659
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 142 -- -- (96) -- -- 46
-------------------------------------------------------------------------
Net income (loss) $ 104 $ 432 $ (34) $ (52) $ 52 $ (449) $ 53
=========================================================================
Total assets as of September 30, 1998 $16,364 $ 6,199 $ 2,606 $ 4,242 $ 2,290 $ 1,668 $ 33,369
=========================================================================
Marine Marine
For the nine months ended Aircraft Railcar Container Vessel Trailer All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
Lease revenue $ 2,385 $ 2,373 $ 123 $ 834 $ 822 $ -- $ 6,537
Interest income and other 6 -- -- -- -- 104 110
Gain (loss) on disposition of 4,598 (130) 63 -- (80) -- 4,451
equipment
-------------------------------------------------------------------------
Total revenues 6,989 2,243 186 834 742 104 11,098
COSTS AND EXPENSES
Operations support 1,441 497 3 833 245 26 3,045
Depreciation and amortization 1,983 481 449 242 231 29 3,415
Interest expense -- -- -- -- -- 824 824
Management fees to affiliates 102 167 6 42 52 -- 369
General and administrative expenses 201 83 7 55 198 360 904
Provision for bad debts -- 12 -- -- 28 -- 40
-------------------------------------------------------------------------
Total costs and expenses 3,727 1,240 465 1,172 754 1,239 8,597
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 403 -- -- (312) -- -- 91
------------------------------------------------------------------------
Net income (loss) $ 3,665 $ 1,003 $ (279) $ (650) $ (12) $ (1,135) $ 2,592
=========================================================================
Total assets as of September 30, 1999 $ 8,373 $ 4,910 $ 1,575 $ 3,608 $ 1,804 $ 1,841 $ 22,111
=========================================================================
<FN>
-----------------------------------
<F1> 1 Includes interest income and costs not identifiable to a particular
segment, such as amortization expense and interest expense and certain
operations support and general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
8. Operating Segments (continued)
<TABLE>
<CAPTION>
Marine Marine
For the nine months ended Aircraft Railcar Container Vessel Trailer All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 2,613 $ 2,669 $ 621 $ 1,245 $ 1,232 $ -- $ 8,380
Interest income and other 12 -- -- -- -- 192 204
Gain (loss) on disposition of (5) (9) 39 -- (520) -- (495)
equipment
-------------------------------------------------------------------------
Total revenues 2,620 2,660 660 1,245 712 192 8,089
Costs and expenses
Operations support 56 689 6 783 339 27 1,900
Depreciation and amortization 2,486 641 536 287 398 48 4,396
Interest expense -- -- -- -- -- 1,335 1,335
Management fees to affiliates 113 190 28 62 73 -- 466
General and administrative expenses 159 93 16 20 276 274 838
(Recovery of) provision for bad -- (53) 66 -- 141 -- 154
debts
-------------------------------------------------------------------------
Total costs and expenses 2,814 1,560 652 1,152 1,227 1,684 9,089
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 514 -- -- (17) -- -- 338
-------------------------------------------------------------------------
Net income (loss) $ 320 $ 1,100 $ 8 $ (83) $ (515) $ (1,492) $ (662)
=========================================================================
Total assets as of September 30, 1998 $ 16,364 $ 6,199 $ 2,606 $ 4,242 $ 2,290 $ 1,668 $ 33,369
=========================================================================
<FN>
-----------------------------------
<F1> 1 Includes interest income and costs not identifiable to a particular
segment, such as amortization expense and interest expense and certain
operations support and general and administrative expenses.
</FN>
</TABLE>
9. Net Income (Loss) Per Weighted-Average Partnership Unit
Net income (loss) per weighted-average Partnership unit was computed by
dividing net income (loss) 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, 1999 and 1998 was
8,628,420.
10. Debt
The Partnership had a scheduled loan payment of $8.3 million due on July 1,
1999. On this date, the Partnership paid $4.0 million of the $8.3 million
scheduled principal payment. The Partnership amended the Note Agreement to
delay the date of the remaining $4.3 million principal payment on its notes
payable from July 1, 1999 to August 1, 1999. The amendment increased the
interest rate on the deferred principal payment of $4.3 million from 9.75%
per annum to 11.75% per annum. On July 30, 1999, the Partnership further
amended the note agreement to delay the scheduled remaining principal
payment of $4.3 million from August 1, 1999 to September 1, 1999. The
Partnership paid $1.0 million of the remaining $4.3 million principal
payment in August of 1999, and paid the remaining balance of $3.3 million
in September of 1999. The Partnership plans to use sale proceeds to pay the
remaining principal payment of $4.5 million due July 1, 2000.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
11. Contingencies
PLM International Inc., (The Company) and various of its wholly-owned
subsidiaries are named as defendants in a lawsuit filed as a purported
class action in January 1997 in the Circuit Court of Mobile County, Mobile,
Alabama, Case No. CV-97-251 (the Koch action). Plaintiffs, who filed the
complaint on their own and on behalf of all class members similarly
situated, are six individuals who invested in certain California limited
partnerships for which the Company's wholly-owned subsidiary, PLM Financial
Services, Inc. (FSI), acts as the general partner, including the
Partnership, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth
Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII)
(the Funds). The complaint asserts eight causes of action against all
defendants, as follows: fraud and deceit, suppression, negligent
misrepresentation and suppression, intentional breach of fiduciary duty,
negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the
class certain duties due to their status as fiduciaries, financial
advisors, agents, and control persons. Based on these duties, plaintiffs
assert liability against defendants for improper sales and marketing
practices, mismanagement of the Funds, and concealing such mismanagement
from investors in the Funds. Plaintiffs seek unspecified compensatory and
recissory damages, as well as punitive damages, and have offered to tender
their limited partnership units back to the defendants.
In March 1997, the defendants removed the Koch action from the state court
to the United States District Court for the Southern District of Alabama,
Southern Division (Civil Action No. 97-0177-BH-C) (the court) based on the
court's diversity jurisdiction, and the court denied plaintiffs' motion to
remand, which denial was upheld on appeal. In December 1997, the court
granted defendants motion to compel arbitration of the named plaintiffs'
claims, based on an agreement to arbitrate contained in the limited
partnership agreement of each Partnership. Plaintiffs appealed this
decision, but in June 1998 voluntarily dismissed their appeal pending
settlement of the Koch action, as discussed below.
In June 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action
filed in the San Francisco Superior Court, San Francisco, California, Case
No. 987062 (the Romei action). The plaintiff is an investor in Fund V, and
filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships
for which FSI acts as the general partner, including the Funds. The
complaint (as amended in August 1997) alleges the same facts and the same
nine causes of action as in the Koch action, plus additional causes of
action against all of the defendants, including alleged unfair and
deceptive practices, constructive fraud, unjust enrichment, a claim for
treble damages and violations of the California Securities Law of 1968.
In July 1997, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition)
under the Federal Arbitration Act seeking to compel arbitration of
plaintiff's claims and for an order staying the state court proceedings
pending the outcome of the arbitration. In October 1997, the district court
denied the Company's petition to compel arbitration, but in November 1997,
agreed to hear the Company's motion for reconsideration of this order. The
hearing on this motion has been taken off calendar and the district court
has dismissed the petition pending settlement of the Romei action, as
discussed below. The state court action continues to be stayed pending such
resolution.
In May 1998, all parties to the Koch and Romei actions entered into a
memorandum of understanding related to the settlement of those actions (the
monetary settlement), following which the parties agreed to an additional
equitable settlement (the equitable settlement). The terms of the monetary
settlement and the equitable settlement are contained in a Stipulation of
Settlement that was filed with
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
11. Contingencies (continued)
the court. The monetary settlement provides for a settlement and release of
all claims against defendants in exchange for payment for the benefit of
the class of up to $6.0 million. The final settlement amount will depend on
the number of claims filed by authorized claimants who are members of the
class, the amount of the administrative costs incurred in connection with
the settlement, and the amount of attorneys' fees awarded by the court. The
Company will pay up to $0.3 million of the monetary settlement, with the
remainder being funded by an insurance policy. The equitable settlement
provides, among other things: (a) for the extension of the operating lives
of Funds V, VI, and VII by judicial amendment to each of their partnership
agreements, such that FSI, the general partner of each such partnership, be
permitted to reinvest partnership funds in additional equipment into the
year 2004, and will liquidate the Funds' equipment in 2006; (b) that FSI is
entitled to earn front-end fees (including acquisition and lease
negotiation fees) up to 20% in excess of the compensatory limitations set
forth in the North American Securities Administrator's Association's
Statement of Policy; (c) for a one-time repurchase of up to 10% of the
outstanding units of Funds V, VI, and VII by the respective partnership at
80% of such partnership's net asset value; and (d) for the deferral of a
portion of FSI's management fees until such time as certain performance
thresholds have, if ever, been met by the Funds. The equitable settlement
also provides for payment of the equitable class attorneys' fees from
partnership funds in the event, if ever, that distributions paid to
investors in Funds V, VI, and VII during the extension period reach a
certain internal rate of return. Defendants will continue to deny each of
the claims and contentions and admit no liability in connection with the
monetary and equitable settlements.
The court, among other things, preliminarily approved the monetary and
equitable settlements in June 1999, and set a final fairness hearing for
November 16, 1999. For settlement purposes, the monetary settlement class
(the monetary class) consists of all investors, limited partners,
assignees, or unit holders who purchased or received by way of transfer or
assignment any units in the Funds between May 23, 1989 and June 29, 1999.
The equitable settlement class (the equitable class) consists of all
investors, limited partners, assignees or unit holders who on June 29, 1999
held any units in Funds V, VI, and VII, and their assigns and successors in
interest.
The monetary settlement remains subject to certain conditions, including
but not limited to notice to the monetary class for purposes of the
monetary settlement and final approval of the monetary settlement by the
court following a final fairness hearing. The equitable settlement remains
subject to numerous conditions, including but not limited to: (a) notice to
the equitable class, (b) review and clearance by the SEC, and dissemination
to the members of the equitable class, of solicitation statements regarding
the proposed extensions, (c) disapproval by less than 50% of the limited
partners in Funds V, VI, and VII of the proposed amendments to the limited
partnership agreements, (d) judicial approval of the proposed amendments to
the limited partnership agreements, and (e) final approval of the equitable
settlement by the court following a final fairness hearing. The monetary
settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not. The Company continues to believe
that the allegations of the Koch and Romei actions are completely without
merit and intends to continue to defend this matter vigorously if the
monetary settlement is not consummated.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
11. Contingencies (continued)
The Partnership, together with affiliates, has initiated litigation in
various official forums in India against each of two defaulting Indian
airline lessees 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 airlines, and the airlines have ceased
operations. In response to the Partnership's collection efforts, the two
airlines each filed counter-claims against the Partnership in excess of the
Partnership's claims against the airlines. The General Partner believes
that the airlines' 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.
The Partnership is involved as plaintiff or defendant in various other
legal actions incident to its business. Management does not believe that
any of these actions will be material to the financial condition of the
Company.
(this space intentionally left blank.)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the PLM Equipment Growth Fund IV's (the Partnership's) Operating
Results for the Three Months Ended September 30, 1999 and 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the third quarter of 1999 compared to the same period of 1998.
Gains or losses from the sale of equipment, and interest and other income and
certain expenses such as depreciation and amortization and general and
administrative expenses relating to the operating segments (see Note 8 to the
financial statements), are not included in the owned equipment operation
discussion because they are indirect in nature and not a result of operations
but the result of owning a portfolio of equipment. The following table presents
lease revenues less direct expenses by segment (in thousands of dollars):
For the Three Months
Ended September 30,
1999 1998
----------------------------
Railcars $ 631 713
Aircraft 606 851
Marine vessel 186 168
Trailers 180 300
Marine containers (19) 142
Railcars: Railcar lease revenues and direct expenses were $0.8 million and $0.1
million, respectively, for the third quarter of 1999, compared to $0.9 million
and $0.2 million, respectively, during the same period in 1998. The decrease in
railcar contribution in the third quarter of 1999 compared to the same period of
1998 was due to the sale or disposition of railcars in 1998 and 1999.
Aircraft: Aircraft lease revenues and direct expenses were $0.6 million and
$37,000, respectively, for the third quarter of 1999, compared to $0.9 million
and $20,000, respectively, during the same period of 1998. Lease revenue
decreased in the third quarter of 1999 compared to the same period of 1998 due
to the sale of aircraft in 1999.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.4
million and $0.2 million, respectively, for the third quarter of 1999 and 1998,
respectively. Marine vessel contribution remained approximately the same due to
the relative stability of the vessel fleet.
Trailers: Trailer lease revenues and direct expenses were $0.3 million and $0.1
million, respectively for the third quarter of 1999, compared to $0.4 million
and $0.1 million, respectively, during the same period of 1998. The decrease in
trailer contribution in the third quarter of 1999 was due to the sale or
disposition of trailers in 1999 and 1998.
Marine containers: Marine container lease revenues and direct expenses were
$(18,000) and $1,000, respectively, for the third quarter of 1999, compared to
$0.1 million and $2,000, respectively, during the same period of 1998. Marine
container contributions decreased in the third quarter of 1999, compared to same
quarter of 1998 primarily due to marine containers being off-lease in 1999.
<PAGE>
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.7 million for the third quarter of 1999 decreased
from $2.2 million for the same period in 1998. Significant variances are
explained as follows:
(1) A $0.4 million decrease in depreciation and amortization expenses from
1998 levels resulted from an approximately $0.1 million decrease due to the sale
of certain assets during 1999 and 1998 and an approximately $0.3 million
decrease resulting from the use of the double-declining balance depreciation
method which results in greater depreciation the first years an asset is owned.
(2) A $0.1 million decrease in interest expense was due to lower average
borrowings outstanding during the quarter ended September 30, 1999, compared to
the same period in 1998.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net gain on disposition of equipment for the third quarter of 1999 totaled
$2.4 million, which resulted from the sale or disposal of an aircraft, marine
containers, trailers and railcars with an aggregate net book value of $2.6
million, for proceeds of $5.0 million. For the third quarter of 1998, net loss
on disposition of equipment totaled $13,000, which resulted from the sale or
disposal of trailers and marine containers with an aggregate net book value of
$0.6 million, for proceeds of $0.6 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended September 30,
1999 1998
---------------------------
Aircraft $ 132 142
Marine vessel (27) (96)
===========================
Equity in net income of USPEs $ 105
===========================
Aircraft: As of September 30, 1999 and 1998, the Partnership had an interest in
a trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.1 million and $14,000, respectively, for the third
quarter of 1999, compared to $0.1 million and $0, respectively, during the same
period in 1998.
Marine vessel: As of September 30, 1999 and 1998, the Partnership had an
interest in an entity owning a marine vessel. Marine vessel revenues and
expenses were $0.3 million and $0.3 million, respectively, for the third quarter
of 1999, compared to $0.3 million and $0.4 million, respectively, during the
same period in 1998. Expenses decreased for the third quarter of 1999 compared
to the same period in 1998, due to lower depreciation expense as a result of the
double declining-balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $2.5 million for
the third quarter of 1999, compared to net income of $0.1 million during the
same period of 1998. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the quarter ended September 30,
1999 is not necessarily indicative of future periods. In the third quarter of
1999, the Partnership distributed $0.9 million to the limited partners, or $0.10
per weighted-average limited partnership unit.
<PAGE>
Comparison of the Partnership's Operating Results for the Nine Months Ended
September 30, 1999 and 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30,1999 compared to the same
period of 1998. Gains or losses from the sale of equipment, and interest and
other income and certain expenses such as depreciation and amortization and
general and administrative expenses relating to the operating segments (see Note
8 to the financial statements), are not included in the owned equipment
operation discussion because they are indirect in nature and not a result of
operations but the result of owning a portfolio of equipment. The following
table presents lease revenues less direct expenses by segment (in thousands of
dollars):
For the Nine Months
Ended September 30,
1999 1998
----------------------------
Railcars $ 1,876 1,980
Aircraft 944 2,557
Trailers 577 893
Marine containers 120 615
Marine vessel 1 462
Railcars: Railcar lease revenues and direct expenses were $2.4 million and $0.5
million, respectively, for the nine months ended September 30, 1999, compared to
$2.7 million and $0.7 million, respectively, during the same period in 1998. The
decrease in railcar contribution in the nine months ended September 30, 1999 was
due to the sale or disposition of railcars in 1998 and 1999.
Aircraft: Aircraft lease revenues and direct expenses were $2.4 million and $1.4
million, respectively, for the nine months ended September 30, 1999, compared to
$2.6 million and $0.1 million, respectively, during the same period of 1998.
Lease revenue decreased in the nine months ended September 30, 1999, compared to
the same period in 1998 due to the sale of aircraft in 1999. Direct expenses
increased due to higher costs incurred for repairs on an off-lease aircraft in
the nine months ended September 30, 1999, when compared to the same period in
1998.
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.2
million, respectively for the nine months ended September 30, 1999, compared to
$1.2 million and $0.3 million, respectively, during the same period of 1998. The
decrease in trailer contribution in the nine months ended September 30, 1999
compared to the same period of 1998 was due to the sale or disposition of
trailers in 1999 and 1998.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $3,000, respectively, for the nine months ended September 30, 1999,
compared to $0.6 million and $6,000, respectively, during the same period of
1998. Marine container contributions decreased $0.4 million due to the
disposition of containers in 1998 and 1999. In addition, marine container
contributions decreased $0.1 million due to a group of containers being off
lease in 1999.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.8
million and $0.8 million, respectively, for the nine months ended September 30,
1999, compared to $1.2 million and $0.8 million, respectively, during the same
period of 1998. Lease revenue decreased $0.2 million in the nine months ended
September 30, 1999, compared to the same period in 1998, due to the marine
vessel being in drydock for approximately six weeks. During this period, the
marine vessel did not earn any revenues. In addition, lease revenue decreased
$0.2 million due to lower re-lease rates in the first six months of 1999,
compared to the same period in 1998. In the third quarter of 1999, lease revenue
remained relatively the same when compared to the same period in 1998, due to
higher re-lease rates than in the early part of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.6 million for the nine months ended September 30,
1999 decreased from $7.2 million for the same period in 1998. Significant
variances are explained as follows:
(1) A $1.0 million decrease in depreciation and amortization expenses from
1998 levels resulted from an approximately $0.2 million decrease due to the sale
of certain assets during 1999 and 1998 and an approximately $0.8 million
decrease resulting from the use of the double-declining balance depreciation
method which results in greater depreciation the first years an asset is owned.
(2) A $0.5 million decrease in interest expense was due to lower average
borrowings outstanding during the nine months ended September 30, 1999, compared
to the same period in 1998.
(3) A $0.1 million decrease in bad debt expenses was due to the General
Partner's evaluation of the collectibility of receivables due from certain
lessees.
(4) A $0.1 million decrease in management fees to affiliate that reflects
the lower levels of lease revenues on owned equipment in 1999, when compared to
1998.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net gain on disposition of equipment for the nine months ended September 30,
1999 totaled $4.5 million, which resulted from the sale or disposal of aircraft,
marine containers, trailers and railcars with an aggregate net book value of
$5.9 million, for aggregate proceeds of $10.4 million. For the nine months ended
September 30, 1998, net loss on disposition of equipment totaled $0.5 million,
which resulted from the sale of trailers with a net book value of $1.4 million,
for proceeds of $0.9 million. In addition, the Partnership sold or disposed of
marine containers, and railcars with an aggregate net book value of $0.5
million, for aggregate proceeds of $0.5 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Nine Months
Ended September 30,
1999 1998
----------------------------
Aircraft $ 403
Marine vessel (312) (176)
============================
Equity in net income of USPEs $ 91 338
Aircraft: As of September 30, 1999 and 1998, the Partnership had an interest in
a trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.4 million and $45,000, respectively, for the nine
months ended September 30, 1999, compared to $0.5 million and $0, respectively,
during the same period in 1998. Revenues decreased due to lower investment in
finance lease received in the nine months ended September 30, 1999 when compared
to the same period in 1998.
Marine vessel: As of September 30, 1999 and 1998, the Partnership had an
interest in an entity owning a marine vessel. Marine vessel revenues and
expenses were $0.7 million and $1.0 million, respectively, for the nine months
ended September 30, 1999, compared to $0.9 million and $1.1 million,
respectively, during the same period in 1998. Lease revenue decreased $0.3
million due to lower re-lease rates in the first six months of 1999, compared to
the same period in 1998. In the third quarter of 1999, lease revenue increased
$0.1 million when compared to the same period in 1998, due to slightly higher
re-lease rates than in the early part of 1999. Expenses decreased for the nine
months ended September 30, 1999 compared to the same period in 1998, due to
lower depreciation expense as a result of the double declining-balance method of
depreciation which results in greater depreciation in the first years an asset
is owned.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $2.6 million for
the nine months ended September 30, 1999, compared to net loss of $0.7 million
during the same period of 1998. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the nine months
ended September 30, 1999 is not necessarily indicative of future periods. In the
nine months ended September 30, 1999, the Partnership distributed $2.6 million
to the limited partners, or $0.30 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 1999, the Partnership generated $1.4
million in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations and
maintain the current level of distributions (total for the nine months ended
September 30, 1999 of approximately $2.7 million) to the partners, but also used
undistributed available cash from prior periods and proceeds from the sale of
equipment of approximately $1.3 million.
During the nine months ended September 30, 1999, the Partnership sold or
disposed of aircraft, marine containers, railcars, and trailers with an
aggregate net book value of $5.9 million, for aggregate proceeds of $10.4
million.
During the nine months ended September 30, 1999 the Partnership paid the third
annual principal payment of $8.3 million of the outstanding notes payable. The
Partnership plans to use sale proceeds to pay the remaining principal payment of
$4.5 million.
Lessee deposits and reserve for repairs decreased $0.4 million during the nine
months ended September 30, 1999 compared to December 31, 1998, due to the $0.2
million drydocking payment and the $0.1 million aircraft engine repairs payment
during the nine months ended September 30, 1999. Lessee prepaid deposits
decreased $0.1 million due to fewer lessee's prepaying future lease revenue.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in potential special distributions to the partners.
(III) EFFECTS OF YEAR 2000
It is possible that the General Partner's currently installed computer systems,
software products, and other business systems, or those of the Partnership's
vendors, service providers, and customers, working either alone or in
conjunction with other software or systems, may not accept input of, store,
manipulate, and output dates on or after January 1, 2000 without error or
interruption, a possibility commonly known as the "Year 2000" or "Y2K" problem.
As the Partnership relies substantially on the General Partner's software
systems, applications and control devices in operating and monitoring
significant aspects of its business, any Year 2000 problem suffered by the
General Partner could have a material adverse effect on the Partnership's
business, financial condition and results of operations.
The General Partner has established a special Year 2000 oversight committee to
review the impact of Year 2000 issues on its business systems in order to
determine whether such systems will retain functionality after December 31,
1999. As of September 30, 1999, the General Partner has completed inventory,
assessment, remediation and testing stages of its Year 2000 review of its core
business information systems. Specifically, the General Partner (a) has
integrated Year 2000-compliant programming code into its existing internally
customized and internally developed transaction processing software systems and
(b) the General Partner's accounting and asset management software systems have
been made Year 2000 compliant. In addition, numerous other software systems
provided by vendors and service providers have been replaced with systems
represented by the vendor or service provider to be Year 2000 functional. These
systems have been tested and appear to be compliant.
As of September 30, 1999, the costs incurred and allocated to the Fund to become
Year 2000 compliant have not been material and does not anticipate any
additional Year 2000-compliant expenditures.
Some risks associated with the Year 2000 problem are beyond the ability of the
Partnership or General Partner to control, including the extent to which third
parties can address the Year 2000 problem. The General Partner is communicating
with vendors, services providers, and customers in order to assess the Year 2000
readiness of such parties and the extent to which the Partnership is vulnerable
to any third-party Year 2000 issues. As part of this process, vendors and
service providers were ranked in terms of the relative importance of the service
or product provided. All service providers and vendors who were identified as
medium to high relative importance were surveyed to determine Year 2000 status.
The General Partner has received satisfactory responses to Year 2000 readiness
inquiries from surveyed service providers and vendors.
It is possible that certain of the Partnership's equipment lease portfolio may
not be Year 2000 compliant. The General Partner has contacted equipment
manufacturers of the portion of the Partnership's leased equipment portfolio
identified as date sensitive to assure Year 2000 compliance or to develop
remediation strategies. The Partnership does not expect that non-Year 2000
compliance of its leased equipment portfolio will have an adverse material
impact on its financial statements. The General Partner has surveyed the
majority of its lessees and the majority of those surveyed have responded
satisfactorily to Year 2000 readiness inquiries.
There can be no assurance that the software systems of such parties will be
converted or made Year 2000 compliant in a timely manner. Failure by the General
Partner or such other parties to make their respective systems Year 2000
compliant could have a material adverse effect on the business, financial
position, and results of operations of the Partnership. The General Partner has
made and will continue an ongoing effort to recognize and evaluate potential
exposure relating to third party Year 2000 noncompliance. The General Partner
will implement a contingency plan if the General Partner determines that
third-party noncompliance would have a material adverse effect on the
Partnership's business, financial position, or results of operation.
The General Partner is currently developing a contingency plan to address the
possible failure of any systems or vendors or service providers due to Year 2000
problems. For the purpose of such contingency planning, a reasonably likely
worst case scenarios primarily anticipate a) an inability to access systems and
data on a temporary basis resulting in possible delay in reconciliation of funds
received or payment of monies owed, or b) an inability to continuously employ
equipment assets due to temporary Year 2000 related failure of external
infrastructure necessary to the ongoing operation of the equipment. The General
Partner is evaluating whether there are additional scenarios, which have not
been identified. Contingency planning will encompass strategies up to and
including manual processes. The General Partner anticipates that these plans
will be completed in the fourth quarter of 1999.
<PAGE>
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value.
FASB Statement No. 137, "Accounting for Derivatives, Instruments, and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
amendment of FASB Statement No. 133," issued in June 1999, defers the effective
date of Statement No. 133. Statement No. 133, as amended, is now effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. As of
September 30, 1999, the General Partner is reviewing the effect SFAS No. 133
will have on the Partnership's financial statements.
(V) OUTLOOK FOR THE FUTURE
The Partnership is in its active liquidation phase. The General Partner is
seeking to selectively re-lease or sell assets as the existing leases expire.
Sale decisions will cause the operating performance of the Partnership to
decline over the remainder of its life. The General Partner anticipates that the
liquidation of Partnership assets will be completed by the end of the year 2000.
Several factors may affect the Partnership's operating performance in the
remainder of 1999 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 and investment in USPE 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 the remainder of 1999 and beyond include:
1. One of the Partnership's aircraft has been off-lease for approximately three
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.
2. 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 containers. Additionally, a
large group of the Partnership's containers have experienced a roof delimination
problem which has limited their re-lease opportunities.
3. The Partnership's wholly owned and partially owned drybulk marine vessels
have signed memoradum of agreements to be sold. These sales are expected to be
completed in the fourth quarter of 1999.
4. Railcar loading in North America have continued to be high, however a
softening in the market is expected in the last quarter of 1999, which may lead
to lower utilization and lower contribution to the Partnership as existing
leases expire and renewal leases are negotiated.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
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 General Partner continually monitors
both the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may make an evaluation to reduce the
Partnership's exposure to equipment markets in which it determines that it
cannot operate equipment and achieve acceptable rates of return.
The Partnership intends to use cash flow from operations and proceeds from
disposition of equipment to satisfy its operating requirements, maintain working
capital reserves, pay loan principal and interest on debt, and pay cash
distributions to the investors.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that contain risks and
uncertainties, such as statements of the Partnership's plans, objectives,
expectations, and intentions. The cautionary statements made in this Form 10-Q
should be read as being applicable to all related forward-looking statements
wherever they appear in this Form 10-Q. The Partnership's actual results could
differ materially from those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During the nine months of 1999, 62% of the Partnership's total lease
revenues from wholly- and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in United States (U.S.)
currency. If these lessees currency devalues against the U.S. dollar, the
lessees could encounter difficulty in making the U.S. dollar denominated lease
payments.
(This space intentionally left blank.)
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND IV
By: PLM Financial Services, Inc.
General Partner
Date: November 2, 1999
By: /s/ Richard K Brock
----------------------------
Richard K Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,742
<SECURITIES> 0
<RECEIVABLES> 3,828
<ALLOWANCES> (3,164)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 57,301
<DEPRECIATION> (44,630)
<TOTAL-ASSETS> 22,111
<CURRENT-LIABILITIES> 0
<BONDS> 4,500
0
0
<COMMON> 0
<OTHER-SE> 16,434
<TOTAL-LIABILITY-AND-EQUITY> 22,111
<SALES> 0
<TOTAL-REVENUES> 11,098
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,733
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 824
<INCOME-PRETAX> 2,592
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,592
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.28
</TABLE>
