UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal quarter ended September 30, 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) Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (415) 974-1399
_______________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating leases, at cost $ 39,685 $ 45,468
Less accumulated depreciation (32,537) (34,920)
------------------------------------
Net equipment 7,148 10,548
Cash and cash equivalents 2,884 5,587
Restricted cash 147 147
Accounts receivable, less allowance for doubtful
accounts of $2,480 in 2000 and $2,843 in 1999 177 440
Investments in unconsolidated special-purpose entities 3,124 3,415
Prepaid expenses and other assets 4 48
------------------------------------
Total assets $ 13,484 $ 20,185
====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 141 $ 292
Due to affiliates 176 211
Lessee deposits and reserve for repairs 276 340
------------------------------------
Total liabilities 593 843
------------------------------------
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of September 30, 2000 and December 31, 1999) 12,891 19,342
General Partner -- --
------------------------------------
Total partners' capital 12,891 19,342
------------------------------------
Total liabilities and partners' capital $ 13,484 $ 20,185
====================================
</TABLE>
See accompanying notes to financial statements.
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 Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,110 $ 2,019 $ 3,476 $ 6,537
Interest and other income 28 45 114 110
Net gain on disposition of equipment 154 2,444 253 4,451
----------------------------------------------------------
Total revenues 1,292 4,508 3,843 11,098
----------------------------------------------------------
EXPENSES
Depreciation and amortization 587 1,063 1,787 3,415
Repairs and maintenance 243 232 811 2,390
Equipment operating expenses 18 212 89 655
Management fees to affiliate 62 114 209 369
Interest expense -- 203 -- 824
General and administrative expenses
to affiliates 106 116 322 381
Other general and administrative expenses 196 163 473 523
(Recovery of) provision for bad debt expense (28) 16 (174) 40
Loss on revaluation 106 -- 106 --
----------------------------------------------------------
Total expenses 1,290 2,119 3,623 8,597
----------------------------------------------------------
Equity in net income of unconsolidated special-
purpose entities 83 105 549 91
----------------------------------------------------------
Net income $ 85 $ 2,494 $ 769 $ 2,592
==========================================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 41 $ 2,449 $ 408 $ 2,456
General Partner 44 45 361 136
----------------------------------------------------------
Total $ 85 $ 2,494 $ 769 $ 2,592
==========================================================
Limited partners'net income per weighted-average
partnership unit $ 0.01 $ 0.28 $ 0.05 $ 0.28
==========================================================
Cash distribution $ 885 $ 908 $ 2,679 $ 2,725
Special cash distribution -- -- 4,541 --
----------------------------------------------------------
Total distribution $ 885 $ 908 $ 7,220 $ 2,725
==========================================================
Per weighted-average partnership unit:
Cash distribution $ 0.10 $ 0.10 $ 0.30 $ 0.30
Special cash distribution -- -- 0.50 --
----------------------------------------------------------
Total distribution per weighted-average partnership unit $ 0.10 $ 0.10 $ 0.80 $ 0.30
==========================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1998 to September 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1998 $ 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 408 361 769
Cash distribution (2,545) (134) (2,679)
Special cash distribution (4,314) (227) (4,541)
----------------------------------------------------
Partner's capital as of September 30, 2000 $ 12,891 $ -- $ 12,891
====================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 769 $ 2,592
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,787 3,415
Net gain on disposition of equipment (253 ) (4,451 )
Loss on revaluation 106 --
Equity in net income of unconsolidated special-purpose
entities (549 ) (91 )
Changes in operating assets and liabilities:
Accounts receivable, net 263 234
Prepaid expenses and other assets 44 (21)
Accounts payable and accrued expenses (151) (326)
Due to affiliates (35) (37)
Lessee deposits and reserve for repairs (64) (393)
----------------------------
Net cash provided by operating activities 1,917 922
----------------------------
INVESTING ACTIVITIES
Payments for capitalized improvements (7) (5)
Proceeds from disposition of equipment 1,767 10,352
Distribution from unconsolidated special-purpose entities 840 523
----------------------------
Net cash provided by investing activities 2,600 10,870
----------------------------
FINANCING ACTIVITIES
Principal payments of notes payable -- (8,250)
Cash distribution paid to limited partners (2,545) (2,589)
Cash distribution paid to General Partner (134) (136)
Special cash distribution paid to limited partners (4,314) --
Special cash distribution paid to General Partner (227) --
----------------------------
Net cash used in financing activities (7,220) (10,975)
----------------------------
Net (decrease) increase in cash and cash equivalents (2,703) 817
Cash and cash equivalents at beginning of year 5,587 778
----------------------------
Cash and cash equivalents at end of period $ 2,884 $ 1,595
============================
Supplemental information
Interest paid $ -- $ 824
============================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or
the General Partner), the accompanying unaudited financial statements
contain all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund IV (the Partnership) as of September 30, 2000 and December 31, 1999,
the statements of income for the three and nine months ended September 30,
2000 and 1999, the statements of changes in partners' capital for the
period from December 31, 1998 to September 30, 2000, and the statements of
cash flows for the nine months ended September 30, 2000 and 1999. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1999, on file with the Securities and
Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
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 in 2001.
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
nine months ended September 30, 2000 and 1999, cash distributions totaled
$2.7 million. For the three months ended September 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 nine months ended
September 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 nine months ended
September 30, 1999 or the three months ended September 30, 1999 or 2000.
Cash distributions to the limited partners of $6.4 million and $0.1
million, respectively, for the nine months ended September 30, 2000 and
1999, were deemed to be a return of capital.
Cash distributions related to the results from the third quarter of 2000,
of $0.9 million, will be paid during the fourth quarter of 2000.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The balance due to affiliates as of September 30, 2000, includes $29,000
due to FSI 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 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 $5,000 and $25,000 were
payable as of September 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 Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 4 $ 20 $ 13 $ 47
Data processing and administrative
expenses -- 2 5 8
</TABLE>
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
September 30, December 31,
2000 1999
--------------------------------------
Aircraft $ 20,440 $ 20,440
Railcars 13,343 13,454
Marine containers 5,902 8,073
Trailers -- 3,501
--------------------------------------
39,685 45,468
Less accumulated depreciation (32,537 ) (34,920 )
--------------------------------------
Net equipment $ 7,148 $ 10,548
======================================
As of September 30, 2000, all equipment was on lease, except for one
commercial aircraft, 37 railcars, and 163 marine containers, with an
aggregate net book value of $1.4 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 nine months ended September 30, 2000, the Partnership disposed
of all of its trailers and certain marine containers and railcars with an
aggregate net book value of $1.5 million, for aggregate proceeds of $1.8
million.
During the nine months ended September 30, 1999, the Partnership disposed
of aircraft, marine containers, railcars, and trailers with an aggregate
net book value of $5.9 million, for aggregate proceeds of $10.4 million.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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>
September 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 $ 3,138 $ 3,548
50% interest in an entity that sold a bulk-carrier (14) (133)
-------------------------------
Net investments $ 3,124 $ 3,415
================================
</TABLE>
As of September 30, 2000 and December 31, 1999, the remaining jointly-owned
equipment in the Partnership's USPE portfolio was on lease.
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 SEPTEMBER 30, Leasing Leasing Leasing Leasing Leasing Other(1) Total
2000
<S>
REVENUES <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 196 $ 701 $ 20 $ -- $ 193 $ -- $ 1,110
Interest income and other -- -- -- -- -- 28 28
Gain (loss) on disposition of -- (3) 28 -- 129 -- 154
equipment
-------------------------------------------------------------------------
Total revenues 196 698 48 -- 322 28 1,292
COSTS AND EXPENSES
Operations support 23 151 2 -- 79 6 261
Depreciation 336 104 86 -- 61 -- 587
Management fees to affiliates 4 44 1 -- 13 -- 62
General and administrative expenses 39 20 -- -- 99 144 302
Recovery of bad debts -- (27) -- -- (1) -- (28)
Loss on revaluation -- -- -- -- 106 -- 106
-------------------------------------------------------------------------
Total costs and expenses 402 292 89 -- 357 150 1,290
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 115 -- -- (32) -- -- 83
-------------------------------------------------------------------------
Net income (loss) $ (91) $ 406 $ (41) $ (32) $ (35) $ (122) $ 85
=========================================================================
Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14 ) $ 22 $ 2,888 $ 13,484
=========================================================================
</TABLE>
(1) Includes certain interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Railcar Container Vessel Trailer All
FOR THE QUARTER ENDED SEPTEMBER 30, Leasing Leasing Leasing Leasing Leasing Other(1) Total
1999
<S>
REVENUES <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 643 $ 751 $ (18) $ 374 $ 269 $ -- $ 2,019
Interest income and other 2 -- -- -- -- 43 45
Gain (loss) on disposition of 2,427 14 11 -- (8 ) -- 2,444
equipment
-------------------------------------------------------------------------
Total revenues 3,072 765 (7) 374 261 43 4,508
COSTS AND EXPENSES
Operations support 37 120 1 188 89 9 444
Depreciation and amortization 591 155 146 81 80 10 1,063
Interest expense -- -- -- -- -- 203 203
Management fees to affiliates 26 53 (1) 19 17 -- 114
General and administrative expenses 39 28 2 44 52 114 279
Provision for bad debts -- 6 -- -- 10 -- 16
-------------------------------------------------------------------------
Total costs and expenses 693 362 148 332 248 336 2,119
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 132 -- -- (27 ) -- -- 105
-------------------------------------------------------------------------
Net income (loss) $ 2,511 $ 403 $ (155) $ 15 $ 13 $ (293) $ 2,494
=========================================================================
Total assets as of September 30, 1999 $ 8,373 $ 4,910 $ 1,575 $ 3,608 $ 1,804 $ 1,841 $ 22,111
=========================================================================
Marine Marine
Aircraft Railcar Container Vessel Trailer All
FOR THE NINE MONTHS ENDED SEPTEMBER Leasing Leasing Leasing Leasing Leasing Other(2) Total
30, 2000
Revenues
Lease revenue $ 588 $ 2,191 $ 62 $ -- $ 635 $ -- $ 3,476
Interest income and other 2 -- -- -- -- 112 114
Gain (loss) on disposition of -- (13) 154 -- 112 -- 253
equipment
-------------------------------------------------------------------------
Total revenues 590 2,178 216 -- 747 112 3,843
Costs and expenses
Operations support 126 511 5 -- 207 51 900
Depreciation 1,007 323 271 -- 186 -- 1,787
Management fees to affiliates 12 145 3 -- 49 -- 209
General and administrative expenses 103 82 1 -- 213 396 795
Recovery of bad debts (9) (23) -- -- (142) -- (174)
Loss on revaluation -- -- -- -- 106 -- 106
-------------------------------------------------------------------------
Total costs and expenses 1,239 1,038 280 -- 619 447 3,623
-------------------------------------------------------------------------
Equity in net income of USPEs 426 -- -- 123 -- -- 549
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ (223) $ 1,140 $ (64) $ 123 $ 128 $ (335) $ 769
=========================================================================
Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14 ) $ 22 $ 2,888 $ 13,484
=========================================================================
</TABLE>
(1) Includes certain 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 certain interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Railcar Container Vessel Trailer All
FOR THE NINE MONTHS ENDED SEPTEMBER Leasing Leasing Leasing Leasing Leasing Other(1) Total
30, 1999
<S>
REVENUES <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 2,385 $ 2,373 $ 123 $ 834 $ 822 $ -- $ 6,537
Interest income and other 6 -- -- -- -- 104 110
Gain (loss) on disposition of 4,598 (130) 63 -- (80) -- 4,451
equipment
-------------------------------------------------------------------------
Total revenues 6,989 2,243 186 834 742 104 11,098
COSTS AND EXPENSES
Operations support 1,441 497 3 833 245 26 3,045
Depreciation and amortization 1,983 481 449 242 231 29 3,415
Interest expense -- -- -- -- -- 824 824
Management fees to affiliates 102 167 6 42 52 -- 369
General and administrative expenses 201 83 7 55 198 360 904
Provision for bad debts -- 12 -- -- 28 -- 40
-------------------------------------------------------------------------
Total costs and expenses 3,727 1,240 465 1,172 754 1,239 8,597
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 403 -- -- (312) -- -- 91
-------------------------------------------------------------------------
Net income (loss) $ 3,665 $ 1,003 $ (279) $ (650) $ (12) $ (1,135) $ 2,592
=========================================================================
Total assets as of September 30, 1999 $ 8,373 $ 4,910 $ 1,575 $ 3,608 $ 1,804 $ 1,841 $ 22,111
=========================================================================
</TABLE>
(1) Includes certain 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.
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 nine months ended September 30, 2000 and 1999 was 8,628,420.
10. CONTINGENCIES
PLM International (the Company) and various of its wholly owned
subsidiaries are defendants in a class action lawsuit filed in January 1997
and which is pending in the United States District Court for the Southern
District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the
court). The named plaintiffs are six individuals who invested in the
Partnership, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth
Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII)
(the Funds), each a California limited partnership for which the Company's
wholly owned subsidiary, PLM Financial Services, Inc. (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.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
10. CONTINGENCIES (CONTINUED)
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 Funds. 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 Funds between May 23, 1989 and August 30, 2000. 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 Funds' equipment, (b) the extension (until December 31,
2004) of the period during which FSI can reinvest the Funds' 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 Funds. Subject to final court approval, these proposed changes
would be made as amendments to each Fund's limited partnership agreement if
less than 50% of the limited partners of each Partnership vote against such
amendments. The equitable settlement also provides for payment of
additional attorneys' fees to the plaintiffs' attorneys from Partnership
funds in the event, if ever, that certain performance thresholds have been
met by the Funds. The equitable settlement class consists of all investors,
limited partners, assignees or unit holders who on August 30, 2000 held any
units in Funds V, VI, and VII, and their assigns and successors in
interest.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
10. CONTINGENCIES (CONTINUED)
The court preliminarily approved the monetary and equitable settlements in
August 2000, and information regarding each of the settlements was sent to
class members in September 2000. The monetary settlement remains subject to
certain conditions, including final approval by the court following a final
fairness hearing. The equitable settlement remains subject to certain
conditions, including 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, judicial approval of the proposed amendments
and final approval of the equitable settlement by the court following a
final fairness hearing. A final fairness hearing has been scheduled for
November 29, 2000. 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.
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
11. LIQUIDATION AND SPECIAL DISTRIBUTIONS (CONTINUED)
The Partnership is not permitted to reinvest proceeds from sales or
liquidations of equipment. These proceeds, in excess of operational cash
requirements, are periodically paid out to partners in the form of special
distributions. The sales and liquidations occur due to the determination by
the General Partner that it is the appropriate time to maximize the return
on an asset through sale of that asset, and, in some leases, the ability of
the lessee to exercise purchase options. In the nine months ended September
30, 2000, the General Partner paid special distributions of $0.50 per
weighted-average limited partnership unit. No special distibutions were
paid in the nine months ended September 30, 1999.
(This space is intentionally left blank.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
COMPARISON OF THE PLM EQUIPMENT GROWTH FUND IV'S (THE PARTNERSHIP'S) OPERATING
RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 third
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 September 30,
2000 1999
----------------------------
Railcars $ 550 $ 631
Aircraft 173 606
Trailers 114 180
Marine containers 18 (19)
Marine vessel -- 186
Railcars: Railcar lease revenues and direct expenses were $0.8 million and $0.1
million, respectively, for the third quarter of 2000 and 1999. The decrease in
railcar contribution in the third quarter of 2000 was due to the disposition of
railcars in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$23,000, respectively, for the third quarter of 2000, compared to $0.6 million
and $37,000, respectively, during the same period of 1999. The decrease in
aircraft contribution in the third quarter of 2000 was due to the disposition of
aircraft in 1999.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and $0.1
million, respectively, for the third 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 third quarter of 2000 was due to the disposition of
trailers in 1999 and 2000.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.4
million and $0.2 million, respectively, for the third 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 $1.0 million for the third quarter of 2000 decreased
from $1.7 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 $0.3 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 in the first years an asset is owned.
(ii) A $0.2 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 management fees to an affiliate resulted
from the lower levels of lease revenues on owned equipment in the third quarter
of 2000, when compared to the same period in 1999.
(iv) Loss on revaluation of equipment increased $0.1 million during the
third quarter of 2000 compared to the same period in 1999. In the third quarter
of 2000, the Partnership reduced the carrying value of its trailers to their
estimated net realizable value. No revaluation of equipment was required during
the same period in 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the third quarter of 2000 totaled
$0.2, which resulted from the sale or disposal of marine containers, trailers
and railcars with an aggregate net book value of $1.2 million, for proceeds of
$1.4 million. For the third quarter of 1999, net gain on disposition of
equipment totaled $2.4 million, which resulted from the sale or disposal of an
aircraft, trailers, marine containers and railcars with an aggregate net book
value of $2.6 million, for proceeds of $5.0 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended September 30,
2000 1999
----------------------------
Aircraft $ 115 $ 132
Marine vessel (32) (27)
----------------------------
Equity in net income of USPEs $ 83 $ 105
============================
Aircraft: As of September 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 $17,000, respectively, for the third
quarter of 2000, compared to $0.1 million and $14,000, respectively, during the
same period in 1999.
Marine vessel: As of September 30, 2000, the Partnership had no remaining
interests in entities which owned marine vessels. Marine vessel revenues and
expenses were $0.3 million and $0.3 million, respectively, during the third
quarter of 1999. The Partnership's remaining partially-owned marine vessel was
sold in the fourth quarter of 1999.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.1 million for
the third quarter of 2000, compared to net income of $2.5 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 September 30,
2000 is not necessarily indicative of future periods. In the third quarter of
2000, the Partnership distributed $0.8 million to the limited partners, or $0.10
per weighted-average limited partnership unit.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the nine
months ended September 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 Nine Months
Ended September 30,
2000 1999
----------------------------
Railcars $ 1,680 $ 1,876
Aircraft 462 944
Trailers 428 577
Marine containers 57 120
Marine vessel -- 1
Railcars: Railcar lease revenues and direct expenses were $2.2 million and $0.5
million, respectively, for the nine months ended September 30, 2000, compared to
$2.4 million and $0.5 million, respectively, during the same period in 1999. The
decrease in railcar contribution in the nine months ended September 30, 2000 was
due to the disposition of railcars in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $0.6 million and $0.1
million, respectively, for the nine months ended September 30, 2000, compared to
$2.4 million and $1.4 million, respectively, during the same period of 1999. The
decrease in aircraft contribution in the nine months ended September 30, 2000
was due to the disposition of aircraft in 1999.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2
million, respectively for the nine months ended September 30, 2000, compared to
$0.8 million and $0.2 million, respectively, during the same period of 1999. The
decrease in trailer contribution in the nine months ended September 30, 2000 was
due to the disposition of trailers in 1999 and 2000.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $5,000, respectively, for the nine months ended September 30, 2000,
compared to $0.1 million and $3,000, respectively, during the same period of
1999. The decrease in marine container contribution in the nine months ended
September 30, 2000 was due to the disposition of marine containers in 1999 and
2000.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.8
million and $0.8 million, respectively, for the nine months ended September 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 $2.7 million for the nine months ended September 30,
2000 decreased from $5.6 million for the same period in 1999. Significant
variances are explained as follows:
(i) A $1.6 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $1.1 million decrease due to the sale of certain
assets during 2000 and 1999 and a $0.5 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 $0.8 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 expense was due to the
collection of $0.2 million receivable in the nine months ended September 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 $0.2 million decrease in management fee to an affiliate resulted from
the lower levels of lease revenues on owned equipment in the nine months ended
September 30, 2000, when compared to the same period in 1999.
(vi) The Partnership recorded a loss on revaluation of equipment of $0.1
million in the nine months ended September 30, 2000 in order to reduce the
carrying value of its trailers to their estimated net realizable value. No
revaluation of equipment was required during the same period in 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the nine months ended September 30,
2000 totaled $0.3 million, which resulted from the sale or disposal of marine
containers, trailers and railcars with an aggregate net book value of $1.5
million, for aggregate proceeds of $1.8 million. For the nine months ended
September 30, 1999, net gain on disposition of equipment totaled $4.5 million,
which resulted from the sale or disposal of an aircraft, marine containers,
trailers and railcars with an aggregate net book value of $5.9 million, for
aggregate proceeds of $10.4 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Nine Months
Ended September 30,
2000 1999
----------------------------
Aircraft $ 426 $ 403
Marine vessel 123 (312)
----------------------------
Equity in net income of USPEs $ 549 $ 91
============================
Aircraft: As of September 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 $0.4 million and $(19,000), respectively, for the
nine months ended September 30, 2000, compared to $0.4 million and $45,000,
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 previously
written-off as a bad debt. A similar event did not occur during the same period
of 1999.
Marine vessel: As of September 30, 2000, the Partnership had no remaining
interests in entities which owned marine vessels. Marine vessel revenues and
expenses were $0.1 million and $(5,000), respectively, for the nine months ended
September 30, 2000, compared to $0.7 million and $1.0 million, respectively,
during the same period in 1999. Revenues decreased $0.7 million in the nine
months ended September 30, 2000 due to the sale of the Partnership's only
remaining 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
nine months ended September 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 $0.8 million for
the nine months ended September 30, 2000, compared to net income of $2.6 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 nine months
ended September 30, 2000 is not necessarily indicative of future periods. In the
nine months ended September 30, 2000, the Partnership distributed $2.5 million
to the limited partners, or $0.30 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 nine months of 2000.
There were no special distributions in the nine months ended September 30, 1999.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 2000, the Partnership generated $2.8
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 $7.2 million in the nine months ended September
30, 2000, which includes a special distribution of $4.5 million) to the
partners.
During the nine months ended September 30, 2000, the Partnership sold or
disposed of marine containers, trailers, and railcars with an aggregate net book
value of $1.5 million, for aggregate proceeds of $1.8 million.
Accounts receivable decreased $0.3 million during the nine months ended
September 30, 2000 due to the timing of receipt of payments from lessees and the
reduction in lease revenues.
Accounts payable and accrued expenses decreased $0.2 million during the nine
months ended September 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 decreased $0.1 million during the nine
months ended September 30, 2000 due to the decrease in reserves resulting from
the sale of marine containers in 2000.
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 in 2001.
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 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 nine months of 2000, 79% 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.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND IV
By: PLM Financial Services, Inc.
General Partner
Date: November 6, 2000
By: /s/Richard K Brock
Richard K Brock
Chief Financial Officer
