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
MARCH 31, 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>
March 31, December 31,
2000 1999
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating leases, at cost $ 44,040 $ 45,468
Less accumulated depreciation (34,285) (34,920)
------------------------------------
Net equipment 9,755 10,548
Cash and cash equivalents 1,550 5,587
Restricted cash 147 147
Accounts receivable, less allowance for doubtful
accounts of $2,856 in 2000 and $2,843 in 1999 235 440
Investments in unconsolidated special-purpose entities 3,409 3,415
Prepaid expenses and other assets 33 48
------------------------------------
Total assets $ 15,129 $ 20,185
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 200 $ 292
Due to affiliates 196 211
Lessee deposits and reserve for repairs 322 340
------------------------------------
Total liabilities 718 843
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of March 31, 2000 and December 31, 1999) 14,411 19,342
General Partner -- --
------------------------------------
Total partners' capital 14,411 19,342
------------------------------------
Total liabilities and partners' capital $ 15,129 $ 20,185
====================================
</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
Ended March 31,
2000 1999
----------------------------
REVENUES
<S> <C> <C>
Lease revenue $ 1,192 $ 2,462
Interest and other income 62 21
Net gain (loss) on disposition of equipment 59 (195)
----------------------------
Total revenues 1,313 2,288
EXPENSES
Depreciation and amortization 589 1,228
Repairs and maintenance 249 1,102
Equipment operating expenses 48 223
Management fees to affiliate 78 139
Interest expense -- 311
General and administrative expenses
to affiliates 119 143
Other general and administrative expenses 121 155
Recovery of bad debt expense (112) (2)
----------------------------
Total expenses 1,092 3,299
Equity in net income of unconsolidated special-
purpose entities 297 20
----------------------------
Net income (loss) $ 518 $ (991)
============================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ 246 $ (1,036)
General Partner 272 45
----------------------------
Total $ 518 $ (991)
============================
Net income (loss) per weighted-average limited partnership unit $ 0.03 $ (0.12)
============================
Cash distribution $ 908 $ 908
Special cash distribution 4,541 --
---------------------------
Total distribution $ 5,449 908
============================
Per weighted-average depositary unit:
Cash distribution $ 0.10 $ 0.10
Special cash distribution 0.50 --
----------------------------
Total distribution $ 0.60 $ 0.10
============================
</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 MARCH 31,2000
(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 246 272 518
Cash distribution (863) (45) (908)
Special cash distribution (4,314) (227) (4,541)
--------------------------------------------------
Partner's capital as of March 31, 2000 $ 14,411 $ - $ 14,411
==================================================
</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 Three Months
Ended March 31,
2000 1999
----------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 518 $ (991)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 589 1,228
Net (gain) loss on disposition of equipment (59) 195
Equity in net income of unconsolidated special-purpose
entities (297) (20)
Changes in operating assets and liabilities:
Accounts receivable, net 205 92
Prepaid expenses and other assets 15 (49)
Accounts payable and accrued expenses (92) (268)
Due to affiliates (15) (7)
Lessee deposits and reserve for repairs (18) 16
---------------------------
Net cash provided by operating activities 846 196
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (3) --
Proceeds from disposition of equipment 266 637
Distribution from unconsolidated special-purpose entities 303 110
----------------------------
Net cash provided by investing activities 566 747
----------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (863) (863)
Cash distribution paid to General Partner (45) (45)
Special cash distribution paid to limited partners (4,314) --
Special cash distribution paid to General Partner (227) --
----------------------------
Net cash used in financing activities (5,449) (908)
----------------------------
Net (decrease) increase in cash and cash equivalents (4,037) 35
Cash and cash equivalents at beginning of year 5,587 778
----------------------------
Cash and cash equivalents at end of period $ 1,550 $ 813
============================
SUPPLEMENTAL INFORMATION
Interest paid $ -- $ 311
============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 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 March 31, 2000 and December 31, 1999, the
statements of operations for the three months ended March 31, 2000 and
1999, the statements of cash flows for the three months ended March 31,
2000 and 1999, and the statements of changes in partners' capital for the
period from December 31, 1998 to March 31, 2000. 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
The Partnership, in accordance with its limited partnership agreement,
entered its liquidation phase on January 1, 1999, and has commenced an
orderly liquidation of the Partnership's assets. The Partnership will
terminate on December 31, 2009, unless terminated earlier upon the sale of
all equipment or by certain other events. The General Partner may no longer
reinvest cash flows and surplus funds in equipment. All future cash flows
and surplus funds, if any, are to be used for distributions to partners,
except to the extent used to maintain reasonable reserves. During the
liquidation phase, the Partnership's assets will continue to be recorded at
the lower of the carrying amount or fair value less cost to sell. The
General Partner anticipates that the liquidation of Partnership assets will
be completed by the end of the year 2000.
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
three months ended March 31, 2000 and 1999, cash distributions totaled $0.9
million. In addition, a $4.5 million special distribution was paid to the
partners during the three months ended March 31, 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 three months ended March 31, 1999. Cash distributions to
the limited partners of $4.9 million and $0.9 million, respectively, for
the three months ended March 31, 2000 and 1999, were deemed to be a return
of capital.
Cash distributions related to the results from the first quarter of 2000,
of $0.9 million, will be paid during the second quarter of 2000.
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of March 31, 2000 includes $49,000 due to
FSI and its affiliate for management fees and $0.1 million due to
affiliated USPEs. 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 USPEs. The Partnership's proportional share
of management fees with
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
USPE's of $26,000 and $25,000 were payable as of March 31, 2000 and
December 31, 1999, respectively.
The Partnership's proportional share of the expenses incurred by the USPEs
during 2000 and 1999 is listed in the following table (in thousands of
dollars):
For the Three Months
Ended March 31,
2000 1999
--------------------------
Management fees $ 4 $ 16
Data processing and administrative
expenses 5 3
Insurance expense -- 3
Transportation Equipment Indemnity Company, Ltd., an affiliate of the
General Partner was liquidated in the first quarter of 2000, and will no
longer provide certain marine insurance coverage. These services are
provided by an unaffiliated third party.
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------------------------------
<S> <C> <C>
Aircraft $ 20,440 $ 20,440
Railcars 13,436 13,454
Marine containers 6,698 8,073
Trailers 3,466 3,501
---------------------------------------
44,040 45,468
Less accumulated depreciation (34,285) (34,920)
----------------------------------------
Net equipment $ 9,755 $ 10,548
========================================
</TABLE>
As of March 31, 2000, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for one
commercial aircraft, eight railcars, and 186 marine containers, with an
aggregate net book value of $1.7 million. As of December 31, 1999, all
owned equipment in the Partnership portfolio was either on lease or
operating in PLM-affiliated short-term trailer rental facilities, except
for one commercial aircraft, 221 marine containers, and seven railcars with
a net book value of $2.1 million.
During the three months ended March 31, 2000, the Partnership sold or
disposed of marine containers, railcars and trailers with an aggregate net
book value of $0.2 million, for aggregate proceeds of $0.3 million.
During the three months ended March 31, 1999, the Partnership sold or
disposed of marine containers, railcars, and trailers with an aggregate net
book value of $0.9 million, for aggregate proceeds of $0.7 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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>
March 31, December 31,
2000 1999
------------------------------------
<S> <C> <C>
35% interest in two Stage II commercial aircraft on a direct
finance lease $ 3,447 $ 3,548
50% interest in an entity that owned a bulk-carrier (38) (133)
---------------------------------
Net investments $ 3,409 $ 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 March 31, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 196 $ 770 $ 15 $ -- $ 211 $ -- $ 1,192
Interest income and other 1 -- -- -- -- 61 62
Gain (loss) on disposition of -- (2) 66 -- (5) -- 59
equipment
-------------------------------------------------------------------------
Total revenues 197 768 81 -- 206 61 1,313
COSTS AND EXPENSES
Operations support 23 193 2 -- 43 36 297
Depreciation 335 114 77 -- 63 -- 589
Management fees to affiliates 4 53 1 -- 20 -- 78
General and administrative expenses 30 32 -- -- 61 117 240
Provision for (recovery of) bad -- 18 -- -- (130) -- (112)
debts
-------------------------------------------------------------------------
Total costs and expenses 392 410 80 -- 57 153 1,092
-------------------------------------------------------------------------
Equity in net income of USPEs 189 -- -- 108 -- -- 297
-------------------------------------------------------------------------
Net income (loss) $ (6) $ 358 $ 1 $ 108 $ 149 $ (92) $ 518
=========================================================================
Total assets as of March 31, 2000 $ 6,426 $ 4,577 $ 921 $ (38) $ 1,513 $ 1,730 $ 15,129
=========================================================================
<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
MARCH 31, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Railcar Container Vessel Trailer All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ---- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 871 $ 847 $ 105 $ 352 $ 287 $ -- $ 2,462
Interest income and other 2 -- -- -- -- 19 21
Gain (loss) on disposition of -- (163) 21 -- (53) -- (195)
equipment
-------------------------------------------------------------------------
Total revenues 873 684 126 352 234 19 2,288
Costs and expenses
Operations support 663 211 1 364 77 9 1,325
Depreciation and amortization 731 171 154 81 82 9 1,228
Interest expense -- -- -- -- -- 311 311
Management fees to affiliates 38 60 5 17 19 -- 139
General and administrative expenses 65 26 2 6 72 127 298
(Recovery of) provision for bad -- (6) -- -- 4 -- (2)
debts
-------------------------------------------------------------------------
Total costs and expenses 1,497 462 162 468 254 456 3,299
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 137 -- -- (117) -- -- 20
-------------------------------------------------------------------------
Net income (loss) $ (487) $ 222 $ (36) $ (233) $ (20) $ (437) $ (991)
=========================================================================
Total assets as of March 31, 1999 $ 14,705 $ 5,159 $ 2,104 $ 3,976 $ 1,849 $ 1,299 $ 29,092
=========================================================================
<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>
9. NET LOSS PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net loss per weighted-average Partnership unit was computed by dividing net
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 months ended March 31, 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
MARCH 31, 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
MARCH 31, 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
MARCH 31, 2000
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS (CONTINUED)
In the first quarter of 2000, the General Partner paid special
distributions of $0.50 per weighted-average depositary unit. No special
distibutions were paid in the first quarter of 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 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 MARCH 31, 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 first
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 March 31,
2000 1999
----------------------------
Railcars $ 577 $ 636
Aircraft 173 208
Trailers 168 210
Marine containers 13 104
Marine vessel -- (12)
Railcars: Railcar lease revenues and direct expenses were $0.8 million and $0.2
million, respectively, for the first quarter of 2000 and 1999. The decrease in
railcar contribution in the first quarter of 2000 was due to the sale or
disposition of railcars in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$23,000, respectively, for the first quarter of 2000, compared to $0.9 million
and $0.7 million, respectively, during the same period of 1999. Lease revenue
decreased in the first quarter of 2000, compared to the same period in 1999 due
to the sale of aircraft in 1999. Direct expenses decreased due to costs incurred
for repairs on the off-lease aircraft in 1999, which were not required in the
first quarter of 2000.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and
$43,000, respectively for the first 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 first quarter of 2000 was due to the sale or
disposition of trailers in 2000 and 1999.
Marine containers: Marine container lease revenues and direct expenses were
$15,000 and $2,000, respectively, for the first quarter of 2000, compared to
$0.1 million and $1,000, respectively, during the same period of 1999. Marine
container contributions decreased due to the disposition of containers in 2000
and 1999.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.4
million and $0.4 million, respectively, for the first quarter of 1999. The
Partnership's remaining wholly-owned marine vessel was sold in the fourth
quarter of 1999.
<PAGE>
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.8 million for the first quarter of 2000 decreased
from $2.0 million for the same period in 1999. Significant variances are
explained as follows:
(1) A $0.6 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 $0.2 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 $0.3 million decrease in interest expense was due to the repayment of
the Partnership's outstanding debt in 1999.
(3) A $0.1 million decrease in management fees to an affiliate resulted
from the lower levels of lease revenues on owned equipment in the first quarter
of 2000, when compared to the same period in 1999.
(4) A $0.1 million decrease in administrative expenses from 1999 levels due
to reduced office expenses and professional services required by the
Partnership, resulting primarily from the reduced equipment portfolio.
(5) The $0.1 million increase in the recovery of bad debt expenses was due
to the collection of $0.1 million from unpaid invoices in the first quarter of
2000 that had previously been reserved for as bad debts. A similar recovery did
not occur in 1999.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net gain on disposition of equipment for the first quarter of 2000 totaled
$0.1 million, which resulted from the sale or disposal of marine containers,
railcars and trailers in the first quarter of 2000 with an aggregate net book
value of $0.2 million, for aggregate proceeds of $0.3 million. For the same
quarter in 1999, net loss on disposition of equipment totaled $0.2 million,
which resulted from the sale of railcars with a net book value of $0.7 million,
for proceeds of $0.5 million. In addition, the Partnership sold or disposed of
marine containers and trailers in the first quarter of 1999 with an aggregate
net book value of $0.2 million, for aggregate proceeds of $0.2 million.
(D) Equity in Net Income 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 March 31,
2000 1999
----------------------------
Aircraft $ 189 $ 137
Marine vessel 108 (117)
===========================
Equity in net income of USPEs $ 297 $ 20
===========================
Aircraft: As of March 31, 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 $(0.1) million, respectively, for
the first quarter of 2000, compared to $0.2 million and $15,000, respectively,
during the same period in 1999. Revenues decreased due to lower investment in
finance lease received in the first quarter of 2000 when compared to the same
period in 1999. Expenses decreased due to the collection of $0.1 million from
unpaid invoices in the first quarter of 2000 that had previously been reserved
for as bad debts. A similar recovery did not occur in 1999.
Marine vessel: As of March 31, 1999, the Partnership owned an interest in an
entity which owned a marine vessel. Marine vessel revenues and expenses were
$0.1 million and $0, respectively, for the first quarter of 2000, compared to
$0.2 million and $0.3 million, respectively, during the same period in 1999.
Revenues decreased $0.2 million in the first quarter of 2000 due to the sale of
marine vessel in the fourth quarter of 1999. This decrease was offset by an
increase in revenue due to the receipt of $0.1 million for an insurance claim in
the first quarter of 2000. Expenses decreased as a result of the sale of the
marine vessel.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $0.5 million for
the first quarter of 2000, compared to net loss of $1.0 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 March 31, 2000
is not necessarily indicative of future periods. In the first quarter of 2000,
the Partnership distributed $5.4 million to the limited partners, or $0.60 per
weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the quarter ended March 31, 2000, the Partnership generated $1.1 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 $4.3 million to
make the distributions (total of $5.4 million in the first quarter of 2000) to
the partners.
During the three months ended March 31, 2000, the Partnership sold or disposed
of marine containers, railcars and trailers with an aggregate net book value of
$0.2 million, for aggregate proceeds of $0.3 million.
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) EFFECTS OF YEAR 2000
To date, the Partnership has not experienced any material Year 2000 (Y2K) issues
with either its internally developed software or purchased software. In
addition, to date the Partnership has not been impacted by any Y2K problems that
may have impacted our customers and suppliers. The General Partner continues to
monitor its systems for any potential Y2K issues.
(IV) 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 scheduled termination
of the Partnership at 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.
2. The cost of new marine containers has 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 which may lead to lower utilization and
lower contribution to the Partnership as existing leases expire and renewal
leases are negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of 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.
(V) 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 quarter of 2000, 64% 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.
<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: May 8, 2000 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer
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<PERIOD-END> MAR-31-2000
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<OTHER-SE> 14,411
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