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 JUNE 30, 2000
[ ] 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 94-3090127
(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>
June 30, December 31,
2000 1999
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating leases, at cost $ 43,435 $ 45,468
Less accumulated depreciation (34,382) (34,920)
------------------------------------
Net equipment 9,053 10,548
Cash and cash equivalents 1,514 5,587
Restricted cash 247 147
Accounts receivable, less allowance for doubtful
accounts of $2,825 in 2000 and $2,843 in 1999 280 440
Investments in unconsolidated special-purpose entities 3,325 3,415
Prepaid expenses and other assets 19 48
------------------------------------
Total assets $ 14,438 $ 20,185
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 143 $ 292
Due to affiliates 187 211
Lessee deposits and reserve for repairs 417 340
------------------------------------
Total liabilities 747 843
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of June 30, 2000 and December 31, 1999) 13,691 19,342
General Partner -- --
------------------------------------
Total partners' capital 13,691 19,342
------------------------------------
Total liabilities and partners' capital $ 14,438 $ 20,185
====================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months Ended
Ended June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 1,174 $ 2,056 $ 2,366 $ 4,518
Interest and other income 24 44 86 65
Net gain on disposition of equipment 40 2,202 99 2,007
----------------------------------------------------------
Total revenues 1,238 4,302 2,551 6,590
----------------------------------------------------------
EXPENSES
Depreciation and amortization 611 1,124 1,200 2,352
Repairs and maintenance 319 1,057 568 2,159
Equipment operating expenses 23 220 71 443
Management fees to affiliate 69 115 147 254
Interest expense -- 311 -- 622
General and administrative expenses
to affiliates 97 122 216 265
Other general and administrative expenses 156 204 277 359
Provision for (recovery of) bad debt expense (34) 26 (146) 24
----------------------------------------------------------
Total expenses 1,241 3,179 2,333 6,478
----------------------------------------------------------
Equity in net income (loss) of unconsolidated special-
purpose entities 169 (34) 466 (14)
----------------------------------------------------------
Net income $ 166 $ 1,089 $ 684 $ 98
==========================================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 121 $ 1,043 $ 367 $ 7
General Partner 45 46 317 91
----------------------------------------------------------
Total $ 166 $ 1,089 $ 684 $ 98
==========================================================
Limited partners' net income per weighted-average
partnership unit $ 0.01 $ 0.12 $ 0.04 $ 0.00
==========================================================
Cash distribution 886 909 1,794 1,817
Special cash distribution -- -- 4,541 --
---------------------------------------------------------
Total distribution $ 886 $ 909 $ 6,335 $ 1,817
==========================================================
Per weighted-average partnership unit:
Cash distribution 0.10 0.10 0.20 0.20
Special cash distribution -- -- 0.50 --
----------------------------------------------------------
Total distribution per weighted-average partnership unit $ 0.10 $ 0.10 $ 0.70 $ 0.20
==========================================================
</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, 1998 TO JUNE 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1998 $ 16,567 $ -- $ 16,567
Net income 6,226 182 6,408
Cash distribution (3,451) (182) (3,633)
--------------------------------------------------
Partners' capital as of December 31, 1999 19,342 -- 19,342
Net income 367 317 684
Cash distribution (1,704) (90) (1,794)
Special cash distribution (4,314) (227) (4,541)
--------------------------------------------------
Partner's capital as of June 30, 2000 $ 13,691 $ -- $ 13,691
==================================================
</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 Six Months
ended June 30,
2000 1999
----------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 684 $ 98
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,200 2,352
Net gain on disposition of equipment (99) (2,007)
Equity in net (income) loss of unconsolidated special-purpose
entities (466) 14
Changes in operating assets and liabilities:
Restricted cash (100) --
Accounts receivable, net 160 308
Prepaid expenses and other assets 29 (113)
Accounts payable and accrued expenses (149) (166)
Due to affiliates (24) (16
Lessee deposits and reserve for repairs 77 (153)
----------------------------
Net cash provided by operating activities 1,312 317
----------------------------
Investing activities
Payments for capitalized improvements (7) --
Proceeds from disposition of equipment 401 5,301
Distribution from unconsolidated special-purpose entities 556 193
----------------------------
Net cash provided by investing activities 950 5,494
----------------------------
Financing activities
Cash distribution paid to limited partners (1,704) (1,726)
Cash distribution paid to General Partner (90) (91)
Special cash distribution paid to limited partners (4,314) --
Special cash distribution paid to General Partner (227) --
----------------------------
Net cash used in financing activities (6,335) (1,817)
----------------------------
Net (decrease) increase in cash and cash equivalents (4,073) 3,994
Cash and cash equivalents at beginning of year 5,587 778
----------------------------
Cash and cash equivalents at end of period $ 1,514 $ 4,772
============================
Supplemental information
Interest paid $ -- $ 622
============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or
the General Partner), the accompanying unaudited financial statements
contain all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund IV (the Partnership) as of June 30, 2000 and December 31, 1999, the
statements of income for the three and six months ended June 30, 2000 and
1999, the statements of changes in partners' capital for the period from
December 31, 1998 to June 30, 2000, and the statements of cash flows for
the six months ended June 30, 2000 and 1999. Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1999, on file 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 purchase additional 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. The General Partner anticipates that
the liquidation of Partnership assets will be completed by the end of the
year 2000. 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 1999 financial statements have been reclassified to
conform to the 2000 presentation.
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
six months ended June 30, 2000 and 1999, cash distributions totaled $1.8
million. For the three months ended June 30, 2000 and 1999, cash
distributions totaled $0.9 million. In addition, a $4.5 million special
distribution was paid to the partners during the six months ended June 30,
2000, from the proceeds realized on the sale of equipment and liquidating
distibutions from unconsolidated special purpose entities (USPEs). No
special distributions were paid in the six months ended June 30, 1999. Cash
distributions to the limited partners of $5.7 million and $1.7 million,
respectively, for the six months ended June 30, 2000 and 1999, were deemed
to be a return of capital.
Cash distributions related to the results from the second quarter of 2000,
of $0.9 million, will be paid during the third quarter of 2000.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The balance due to affiliates as of June 30, 2000, includes $40,000 due to
FSI and its affiliate for management fees and data processing services, and
$0.1 million due to affiliated unconsolidated special-purpose entities. The
balance due to affiliates as of December 31, 1999, includes $0.1 million
due to FSI and its affiliate for management fees and $0.1 million due to
affiliated unconsolidated special-purpose entities. The Partnership's
proportional share of management fees related to USPEs of $9,000 and
$25,000 were payable as of June 30, 2000 and December 31, 1999,
respectively.
The Partnership's proportional share of the affiliated expenses incurred by
the USPEs during 2000 and 1999 is listed in the following table (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 4 $ 11 $ 9 $ 27
Data processing and administrative
expenses -- 1 5 7
</TABLE>
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
June 30, December 31,
2000 1999
----------------------------------------
Aircraft $ 20,440 $ 20,440
Railcars 13,413 13,454
Marine containers 6,140 8,073
Trailers 3,442 3,501
----------------------------------------
43,435 45,468
Less accumulated depreciation (34,382) (34,920)
----------------------------------------
Net equipment $ 9,053 $ 10,548
========================================
As of June 30, 2000, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for one
commercial aircraft, 26 railcars, and 163 marine containers, with an
aggregate net book value of $1.6 million. As of December 31, 1999, all
equipment was either on lease or operating in PLM-affiliated short-term
trailer rental facilities, except for one commercial aircraft, seven
railcars, and 221 marine containers, with an aggregate net book value of
$2.1 million.
During the six months ended June 30, 2000, the Partnership sold or disposed
of marine containers, railcars, and trailers with an aggregate net book
value of $0.3 million, for aggregate proceeds of $0.4 million.
During the six months ended June 30, 1999, the Partnership sold or disposed
of an aircraft, marine containers, railcars, and trailers with an aggregate
net book value of $3.3 million, for aggregate proceeds of $5.3 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
6. EQUIPMENT (CONTINUED)
On May 24, 2000, FSI, on behalf of the Partnership, entered into an asset
purchase agreement to sell the refrigerated and dry trailer assets of the
Partnership. Closing of the transaction is contingent on numerous
conditions. If the sale is completed, the General Partner estimates that
the Partnership's sale proceeds to be approximately $1.4 million and will
result in a gain of approximately $0.2 million. Since the sale of the
trailers is contingent upon certain conditions being met, the Partnership's
refrigerated and dry trailers are not classified as assets held for sale.
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>
June 30, December 31,
2000 1999
------------------------------------
<S> <C> <C>
35% interest in a trust owning two DC-9 stage III commercial
aircraft on direct finance lease $ 3,339 $ 3,548
50% interest in an entity that owned a bulk-carrier (14) (133)
------------------------------------
Net investments $ 3,325 $ 3,415
====================================
</TABLE>
8. OPERATING SEGMENTS
The Partnership operates or operated 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
Aircraft Railcar Container Vessel Trailer All
For the quarter ended June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
----------------------------------- ------- ------- ------- ------- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 196 $ 720 $ 27 $ -- $ 231 $ -- $ 1,174
Interest income and other -- -- -- -- -- 24 24
Gain (loss) on disposition of -- (9) 61 -- (12) -- 40
equipment
-------------------------------------------------------------------------
Total revenues 196 711 88 -- 219 24 1,238
COSTS AND EXPENSES
Operations support 79 165 2 -- 85 11 342
Depreciation 336 105 108 -- 62 -- 611
Management fees to affiliates 4 47 2 -- 16 -- 69
General and administrative expenses 33 29 -- -- 53 138 253
(Recovery of) provision for bad (9) (14) -- -- (11) -- (34)
debts
-------------------------------------------------------------------------
Total costs and expenses 443 332 112 -- 205 149 1,241
-------------------------------------------------------------------------
Equity in net income of USPEs 121 -- -- 48 -- -- 169
-------------------------------------------------------------------------
Net income (loss) $ (126) $ 379 $ (24) $ 48 $ 14 $ (125) $ 166
=========================================================================
Total assets as of June 30, 2000 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438
=========================================================================
<FN>
<F1>
-----------------------
1 Includes interest income and costs not identifiable to a particular segment,
such as certain operations support and general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Railcar Container Vessel Trailer All
For the quarter ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
----------------------------------- ------- ------- ------- ------- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 871 $ 775 $ 36 $ 108 $ 266 $ -- $ 2,056
Interest income and other 2 -- -- -- -- 42 44
Gain (loss) on disposition of 2,171 19 31 -- (19) -- 2,202
equipment
-------------------------------------------------------------------------
Total revenues 3,044 794 67 108 247 42 4,302
COSTS AND EXPENSES
Operations support 741 166 1 281 79 9 1,277
Depreciation and amortization 661 156 149 81 68 9 1,124
Interest expense -- -- -- -- -- 311 311
Management fees to affiliates 38 54 2 5 16 -- 115
General and administrative expenses 96 29 2 5 74 120 326
Provision for bad debts -- 12 -- -- 14 -- 26
-------------------------------------------------------------------------
Total costs and expenses 1,536 417 154 372 251 449 3,179
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 134 -- -- (168) -- -- (34)
------------------------------------------------------------------------
Net income (loss) $ 1,642 $ 377 $ (87) $ (432) $ (4) $ (407) $ 1,089
=========================================================================
Total assets as of June 30, 1999 $ 11,484 $ 5,046 $ 1,872 $ 3,670 $ 1,744 $ 5,380 $ 29,196
=========================================================================
Marine Marine
Aircraft Railcar Container Vessel Trailer All
For the six month ended June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other<F2>2 Total
------------------------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
Lease revenue $ 392 $ 1,490 $ 42 $ -- $ 442 $ -- $ 2,366
Interest income and other 2 -- -- -- -- 84 86
Gain (loss) on disposition of -- (11) 126 -- (16 ) -- 99
equipment -------------------------------------------------------------------------
Total revenues 394 1,479 168 -- 426 84 2,551
COSTS AND EXPENSES
Operations support 103 359 3 -- 128 46 639
Depreciation 671 219 185 -- 125 -- 1,200
Management fees to affiliates 8 101 2 -- 36 -- 147
General and administrative expenses 63 62 1 -- 114 253 493
(Recovery of) provision for bad debts (9) 4 -- -- (141) -- (146)
-------------------------------------------------------------------------
Total costs and expenses 836 745 191 -- 262 299 2,333
-------------------------------------------------------------------------
Equity in net income of USPEs 311 -- -- 155 -- -- 466
-------------------------------------------------------------------------
Net income (loss) $ (131) $ 734 $ (23) $ 155 $ 164 $ (215) $ 684
=========================================================================
Total assets as of June 30, 2000 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438
=========================================================================
<FN>
<F1>
-----------------------
1 Includes interest income and costs not identifiable to a particular segment,
such as interest expense, and amortization expense, and certain operations
support and general and administrative expenses.
2 Includes interest income and costs not identifiable to a particular segment,
such as certain operations support and general administration expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Railcar Container Vessel Trailer All
For the six months ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------- ------- ------- ------- ------- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,742 $ 1,622 $ 141 $ 460 $ 553 $ -- $ 4,518
Interest income and other 4 -- -- -- -- 61 65
Gain (loss) on disposition of 2,171 (144) 52 -- (72) -- 2,007
equipment
-------------------------------------------------------------------------
Total revenues 3,917 1,478 193 460 481 61 6,590
Costs and expenses
Operations support 1,404 377 2 645 156 18 2,602
Depreciation and amortization 1,392 326 303 162 151 18 2,352
Interest expense -- -- -- -- -- 622 622
Management fees to affiliates 75 114 7 23 35 -- 254
General and administrative expenses 162 56 4 11 146 245 624
Provision for bad debts -- 6 -- -- 18 -- 24
-------------------------------------------------------------------------
Total costs and expenses 3,033 879 316 841 506 903 6,478
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 271 -- -- (285) -- -- (14)
-------------------------------------------------------------------------
Net income (loss) $ 1,155 $ 599 $ (123) $ (666) $ (25) $ (842) $ 98
=========================================================================
Total assets as of June 30, 1999 $ 11,484 $ 5,046 $ 1,872 $ 3,670 $ 1,744 $ 5,380 $ 29,196
=========================================================================
<FN>
<F1>
-----------------------
1 Includes interest income and costs not identifiable to a particular segment,
such as interest expense, and amortization expense, and certain operations
support and general and administrative expenses.
</FN>
</TABLE>
9. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income per weighted-average Partnership unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the
three and six months ended June 30, 2000 and 1999 was 8,628,420.
10. CONTINGENCIES
PLM International (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). The named plaintiffs are six
individuals who invested in PLM Equipment Growth Fund IV (Fund IV), 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), each a
California limited partnership for which the Company's wholly-owned
subsidiary, FSI, acts as the general partner. The complaint asserts causes
of action against all defendants for fraud and deceit, suppression,
negligent misrepresentation, negligent and intentional breaches 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 damages, as well as punitive
damages, and have offered to tender their limited partnership units back to
the defendants.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
10. CONTINGENCIES (CONTINUED)
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. 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 the Partnerships. The complaint alleges
the same facts and the same causes of action as in the Koch action, plus
additional causes of action against all of the defendants, including
alleged unfair and deceptive practices and violations of state securities
law. In July 1997, defendants filed a petition (the petition) in federal
district court under the Federal Arbitration Act seeking to compel
arbitration of plaintiff's claims. In October 1997, the district court
denied the Company's petition, but in November 1997, agreed to hear the
Company's motion for reconsideration. Prior to reconsidering its order, the
district court dismissed the petition pending settlement of the Romei
action, as discussed below. The state court action continues to be stayed
pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle
the lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into
two parts, a monetary settlement and an equitable settlement. 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
$6.6 million. The final settlement amount will depend on the number of
claims filed by class members, the amount of the administrative costs
incurred in connection with the settlement, and the amount of attorneys'
fees awarded by the court to plaintiffs' attorneys. The Company will pay up
to $0.3 million of the monetary settlement, with the remainder being funded
by an insurance policy. For settlement purposes, the monetary settlement
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 Partnerships between May 23, 1989 and June 29, 1999. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the
extension (until January 1, 2007) of the date by which FSI must complete
liquidation of the Partnerships' equipment, (b) the extension (until
December 31, 2004) of the period during which FSI can reinvest the
Partnerships' funds in additional equipment, (c) an increase of up to 20%
in the amount of front-end fees (including acquisition and lease
negotiation fees) that FSI is entitled to earn in excess of the
compensatory limitations set forth in the North American Securities
Administrator's Association's Statement of Policy; (d) a one-time
repurchase by each of Funds V, VI and VII of up to 10% of that
partnership's outstanding units for 80% of net asset value per unit; and
(e) the deferral of a portion of the management fees paid to an affiliate
of FSI until, if ever, certain performance thresholds have been met by the
Partnerships. Subject to final court approval, these proposed changes would
be made as amendments to each Partnership's limited partnership agreement
if less than 50% of the limited partners of each Partnership vote against
such amendments. The limited partners will be provided the opportunity to
vote against the amendments by following the instructions contained in
solicitation statements that will be mailed to them after being filed with
the Securities and Exchange Commission. The equitable settlement also
provides for payment of additional attorneys' fees to the
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
10. CONTINGENCIES (CONTINUED)
plaintiffs' attorneys from Partnership funds in the event, if ever, that
certain performance thresholds have been met by the Partnerships. The
equitable settlement 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 court preliminarily approved the monetary and equitable settlements in
June 1999. The monetary settlement remains subject to certain conditions,
including notice to the monetary class and final approval by the court
following a final fairness hearing. The equitable settlement remains
subject to certain conditions, including: (a) notice to the equitable
class, (b) disapproval of the proposed amendments to the partnership
agreements by less than 50% of the limited partners in one or more of Funds
V, VI, and VII, and (c) judicial approval of the proposed amendments and
final approval of the equitable settlement by the court following a final
fairness hearing. No hearing date is currently scheduled for the final
fairness hearing. 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.
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.
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1999, the General Partner began the liquidation phase of the
Partnership with the intent to commence an orderly liquidation of the
Partnership assets. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodically declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed on a quarterly basis to partners. The amounts reflected for
assets and liabilities of the Partnership have not been adjusted to reflect
liquidation values. The equipment portfolio continues to be carried at the
lower of depreciated cost or fair value less cost to dispose. Although the
General Partner estimates that there will be distributions after
liquidation of assets and liabilities, the amounts cannot be accurately
determined prior to actual liquidation of the equipment. Any excess
proceeds over expected Partnership obligations will be distributed to the
Partners throughout the liquidation period. Upon final liquidation, the
Partnership will be dissolved.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS (CONTINUED)
In the six months ended June 30, 2000, the General Partner paid special
distributions of $0.50 per weighted-average limited partnership unit. No
special distibutions were paid in the six months ended June 30, 1999. The
Partnership is not permitted to reinvest proceeds from sales or
liquidations of equipment. These proceeds, in excess of operational cash
requirements, are periodically paid out to limited partners in the form of
special distributions. The sales and liquidations occur because of certain
damaged equipment, the determination by the General Partner that it is the
appropriate time to maximize the return on an asset through sale of that
asset, and, in some leases, the ability of the lessee to exercise purchase
options.
(This space is 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 June 30, 2000 and 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
equipment operating expenses) on owned equipment increased during the second
quarter of 2000 compared to the same period of 1999. 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 June 30,
2000 1999
----------------------------
Railcars $ 555 $ 609
Trailers 146 187
Aircraft 117 130
Marine containers 25 35
Marine vessel -- (173)
Railcars: Railcar lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the second quarter of 2000, compared to $0.8 million
and $0.2 million, respectively, during the same period in 1999. The decrease in
railcar contribution in the second quarter of 2000 was due to the sale or
disposition of railcars in 1999 and 2000.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and $0.1
million, respectively, for the second quarter of 2000, compared to $0.3 million
and $0.1 million, respectively, during the same period of 1999. The decrease in
trailer contribution in the second quarter of 2000 was due to the sale or
disposition of trailers in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.1
million, respectively, for the second quarter of 2000, compared to $0.9 million
and $0.7 million, respectively, during the same period of 1999. The decrease in
aircraft contribution in the second quarter of 2000 was due to the sale of
aircraft in 1999.
Marine containers: Marine container lease revenues and direct expenses were
$27,000 and $2,000, respectively, for the second quarter of 2000, compared to
$36,000 and $1,000, respectively, during the same period of 1999. The decrease
in marine container contribution in the second quarter of 2000 was due to the
disposition of marine containers in 1999 and 2000.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.1
million and $0.3 million, respectively, for the second quarter of 1999. The
Partnership's remaining wholly-owned marine vessel was sold in the fourth
quarter of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.9 million for the second quarter of 2000 decreased
from $1.9 million for the same period in 1999. Significant variances are
explained as follows:
(i) A $0.5 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $0.4 million decrease due to the sale of certain
assets during 2000 and 1999 and a $0.1 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.
(ii) A $0.3 million decrease in interest expense was due to the repayment
of the Partnership's outstanding debt in 1999.
(iii) A $0.1 million decrease in general and administrative expenses from
1999 levels due to the reduced professional services required by the
Partnership, resulting from the reduced equipment portfolio.
(iv)The $0.1 million decrease in the bad debt expenses was due to the
collection of $0.1 million receivable in the second quarter of 2000 that had
previously been reserved for as bad debts. A similar recovery did not occur in
1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the second quarter of 2000 totaled
$40,000, which resulted from the sale or disposal of marine containers, trailers
and railcars with an aggregate net book value of $0.1 million, for proceeds of
$0.1 million. For the second quarter of 1999, net gain on disposition of
equipment totaled $2.2 million, which resulted from the sale or disposal of an
aircraft, trailers, marine containers and railcars with an aggregate net book
value of $2.5 million, for proceeds of $4.7 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended June 30,
2000 1999
----------------------------
Aircraft $ 121 $ 134
Marine vessel 48 (168)
=============================
Equity in net income (loss) of USPEs $ 169 $ (34)
============================
Aircraft: As of June 30, 2000 and 1999, 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
second quarter of 2000, compared to $0.1 million and $15,000, respectively,
during the same period in 1999.
Marine vessel: As of June 30, 2000, the Partnership had no remaining interests
in entities which owned marine vessels. Marine vessel revenues and expenses were
$48,000 and $0, respectively, for the second quarter of 2000, compared to $0.1
million and $0.3 million, respectively, during the same period in 1999. Revenues
decreased $0.1 million in the second quarter of 2000 due to the sale of marine
vessel in the fourth quarter of 1999. This decrease was partially offset by the
receipt of $0.1 million for an insurance claim in the second quarter of 2000.
Expenses decreased as a result of the sale of the marine vessel.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.1 million for
the second quarter of 2000, compared to net income of $1.1 million during the
same period of 1999. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the quarter ended June 30, 2000 is
not necessarily indicative of future periods. In the second quarter of 2000, the
Partnership distributed $0.8 million to the limited partners, or $0.10 per
weighted-average limited partnership unit.
<PAGE>
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE
30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, and
equipment operating expenses) on owned equipment decreased during the six months
ended June 30, 2000 compared to the same period of 1999. The following table
presents lease revenues less direct expenses by segment (in thousands of
dollars):
For the Six Months
Ended June 30,
2000 1999
----------------------------
Railcars $ 1,131 $ 1,245
Trailers 314 397
Aircraft 289 338
Marine containers 39 139
Marine vessel -- (185)
Railcars: Railcar lease revenues and direct expenses were $1.5 million and $0.4
million, respectively, for the six months ended June 30, 2000, compared to $1.6
million and $0.4 million, respectively, during the same period in 1999. The
decrease in railcar contribution in the six months ended June 30, 2000 was due
to the sale or disposition of railcars in 1999 and 2000.
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.1
million, respectively for the six months ended June 30, 2000, compared to $0.6
million and $0.2 million, respectively, during the same period of 1999. The
decrease in trailer contribution in the six months ended June 30, 2000 was due
to the sale or disposition of trailers in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.4 million and $0.1
million, respectively, for the six months ended June 30, 2000, compared to $1.7
million and $1.4 million, respectively, during the same period of 1999. The
decrease in aircraft contribution in the six months ended June 30, 2000 was due
to the sale of aircraft in 1999.
Marine containers: Marine container lease revenues and direct expenses were
$42,000 and $3,000, respectively, for the six months ended June 30, 2000,
compared to $0.1 million and $2,000, respectively, during the same period of
1999. The decrease in marine container contribution in the six months ended June
30, 2000 was due to the disposition of marine containers in 1999 and 2000.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.5
million and $0.6 million, respectively, for the six months ended June 30, 1999.
The Partnership's remaining wholly-owned marine vessel was sold in the fourth
quarter of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.7 million for the six months ended June 30, 2000
decreased from $3.9 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $1.2 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $0.8 million decrease due to the sale of certain
assets during 2000 and 1999 and a $0.4 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.
(ii) A $0.6 million decrease in interest expense was due to the repayment
of the Partnership's outstanding debt in 1999.
(iii) The $0.2 million decrease in the bad debt expenses was due to the
collection of $0.2 million receivable in the six months ended June 30, 2000 that
had previously been reserved for as bad debts. A similar recovery did not occur
in 1999.
(iv) A $0.1 million decrease in administrative expenses from 1999 levels
due to reduced professional services required by the Partnership, resulting
primarily from the reduced equipment portfolio.
(v) A $0.1 million decrease in management fee to an affiliate resulted from
the lower levels of lease revenues on owned equipment in the six months ended
June 30, 2000, when compared to the same period in 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 2000
totaled $0.1 million, which resulted from the sale or disposal of marine
containers, trailers and railcars with an aggregate net book value of $0.3
million, for aggregate proceeds of $0.4 million. For the six months ended June
30, 1999, net gain on disposition of equipment totaled $2.0 million, which
resulted from the sale or disposal of an aircraft, marine containers, trailers
and railcars with an aggregate net book value of $3.3 million, for aggregate
proceeds of $5.3 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 Six Months
Ended June 30,
2000 1999
----------------------------
Aircraft $ 311 $ 271
Marine vessel 155 (285)
============================
Equity in net income (loss) of USPEs $ 466 $ (14)
============================
Aircraft: As of June 30, 2000 and 1999, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.3 million and $(35,000), respectively, for the six
months ended June 30, 2000, compared to $0.3 million and $30,000, respectively,
during the same period in 1999. The decrease in expenses was due to a $0.1
million collection of a receivable that had been written-off as a bad debt. A
similar event did not occur during the same period of 1999.
Marine vessel: As of June 30, 2000, the Partnership had no remaining interests
in entities which owned marine vessels. Marine vessel revenues and expenses were
$0.1 million and $(37,000), respectively, for the six months ended June 30,
2000, compared to $0.4 million and $0.7 million, respectively, during the same
period in 1999. Revenues decreased $0.4 million in the six months ended June 30,
2000 due to the sale of marine vessel in the fourth quarter of 1999. This
decrease was partially offset by the receipt of $0.2 million for an insurance
claim in the six months ended June 30, 2000. Expenses decreased as a result of
the sale of the marine vessel.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.7 million for
the six months ended June 30, 2000, compared to net income of $0.1 million
during the same period of 1999. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the six months
ended June 30, 2000 is not necessarily indicative of future periods. In the six
months ended June 30, 2000, the Partnership distributed $1.7 million to the
limited partners, or $0.20 per weighted-average limited partnership unit. In
addition, a special distribution of $4.3 million or $0.50 per weighted-average
limited partnership unit was made in the six months of 2000. There were no
special distributions in the six months ended June 30, 1999.
<PAGE>
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 2000, the Partnership generated $1.9 million
in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations, but
used undistributed available cash from prior periods and proceeds from equipment
sales and liquidating distibutions from USPEs of approximately $4.4 million to
make the distributions (total of $6.3 million in the six months ended June 30,
2000, which includes a special distribution of $4.5 million) to the partners.
During the six months ended June 30, 2000, the Partnership sold or disposed of
marine containers, railcars, and trailers with an aggregate net book value of
$0.3 million, for aggregate proceeds of $0.4 million.
Accounts receivable decreased $0.2 million during the six months ended June 30,
2000 due to the timing of receipt of payments from lessees.
Accounts payable decreased $0.1 million during the six months ended June 30,
2000 due to a decrease in trade accounts payable resulting from the reduction of
the size of the Partnership's equipment portfolio.
Lessee deposits and reserve for repairs increased $0.1 million during the six
months ended June 30, 2000 due to a security deposit received from a potential
buyer of the Partnership's Boeing 737-200 Stage II commercial 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
to that mentioned above.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in potential special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts cannot
be accurately determined prior to actual disposal of the equipment.
(III) 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 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 and its investment in a USPE will
cause 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 year 2000 include:
1. One of the Partnership's aircraft has been off-lease for approximately three
years. This Stage II aircraft required extensive repairs and maintenance and the
Partnership has had difficulty selling the aircraft. This aircraft will remain
off-lease until it is sold. During the six months ended June 30, 2000 the
Partnership received a $0.1 million refundable security deposit from a potential
buyer of the Partnership's Boeing 737-200 Stage II commercial aircraft.
2. The cost of new marine containers had 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. However,
some of the Partnership's refrigerated marine containers have experienced a roof
delimination problem which has limited their re-lease opportunities. These
marine containers are currently off lease and the General Partner plans to
dispose of these containers.
3. Railcar loadings in North America have continued to be high, however a
softening in the market is expected and will 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 some 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 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, and pay cash distributions to the investors.
(IV) 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 first six months of 2000, 88% of the Partnership's total lease
revenues from wholly- and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in 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: August 4, 2000
By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
