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 01-19203
-----------------------
PLM EQUIPMENT GROWTH FUND V
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3104548
(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 V
(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 lease, at cost $ 103,950 $ 102,326
Less accumulated depreciation (74,163) (72,847)
-----------------------------------
Net equipment 29,787 29,479
Cash and cash equivalents 1,405 4,188
Restricted cash 465 441
Accounts receivable, net of allowance for doubtful
accounts of $64 in 2000 and $47 in 1999 1,878 2,187
Investments in unconsolidated special-purpose entities 9,285 9,633
Deferred charges, net of accumulated amortization of
$165 in 2000 and $148 in 1999 85 101
Prepaid expenses and other assets 47 54
-----------------------------------
Total assets $ 42,952 $ 46,083
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 649 $ 501
Due to affiliates 825 304
Lessee deposits and reserve for repairs 3,000 2,788
Note payable 13,200 15,484
-----------------------------------
Total liabilities 17,674 19,077
-----------------------------------
Partners' capital:
Limited partners (9,066,161 limited partnership units as of
March 31, 2000 and 9,067,911 as of December 31, 1999) 25,278 27,006
General Partner -- --
-----------------------------------
Total partners' capital 25,278 27,006
-----------------------------------
Total liabilities and partners' capital $ 42,952 $ 46,083
===================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
(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 $ 5,689 $ 4,833
Interest and other income 39 46
Net gain on disposition of equipment 42 60
--------------------------------
Total revenues 5,770 4,939
--------------------------------
EXPENSES
Depreciation and amortization 2,043 2,262
Repairs and maintenance 675 475
Equipment operating expenses 1,311 519
Insurance expenses 49 123
Management fees to affiliate 278 241
Interest expense 269 365
General and administrative expenses to affiliates 223 249
Other general and administrative expenses 205 125
Provision for (recovery of) bad debts 27 (8)
--------------------------------
Total expenses 5,080 4,351
--------------------------------
Equity in net income (loss) of unconsolidated special-purpose entities (23) 1,507
--------------------------------
Net income $ 667 $ 2,095
================================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 548 $ 1,976
General Partner 119 119
--------------------------------
Total $ 667 $ 2,095
================================
Net income per weighted-average limited partnership unit $ 0.06 $ 0.22
================================
Cash distribution $ 2,386 $ 1,656
================================
Cash distribution per weighted-average limited partnership unit $ 0.25 $ 0.17
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
( 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 $ 34,406 $ -- $ 34,406
Net income 824 478 1,302
Purchase of limited partnership units (85) -- (85)
Cash distribution (8,139) (478) (8,617)
-------------------------------------------------------
Partners' capital as of December 31, 1999 27,006 -- 27,006
Net income 548 119 667
Purchase of limited partnership units (9) -- (9)
Cash distribution (2,267) (119) (2,386)
-------------------------------------------------------
Partners' capital as of March 31, 2000 $ 25,278 $ -- $ 25,278
=======================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(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 $ 667 $ 2,095
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,043 2,262
Net gain on disposition of equipment (42) (60)
Equity in net (income) loss from unconsolidated
special-purpose entities 23 (1,507)
Changes in operating assets and liabilities, net:
Restricted cash (24) --
Accounts receivable, net 300 (240)
Prepaid expenses and other assets 7 39
Accounts payable and accrued expenses 148 161
Due to affiliates 21 4
Lessee deposits and reserve for repairs 212 (125)
---------------------------
Net cash provided by operating activities 3,355 2,629
---------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized improvements (2,463) --
Distribution from liquidation of unconsolidated special-purpose entity -- 3,553
Distributions from unconsolidated special-purpose entities 325 271
Proceeds from disposition of equipment 179 225
---------------------------
Net cash (used in) provided by investing activities (1,959) 4,049
---------------------------
FINANCING ACTIVITIES
Payments of note payable (2,284) (1,966)
Proceeds of short-term loan from affiliate 1,900 --
Payments of short-term loan from affiliate (1,400) --
Cash distributions paid to limited partners (2,267) (1,537)
Cash distributions paid to General Partner (119) (119)
Purchase of limited partnership units (9) (32)
---------------------------
Net cash used in financing activities (4,179) (3,654)
---------------------------
Net (decrease) increase in cash and cash equivalents (2,783) 3,024
Cash and cash equivalents at beginning of period 4,188 1,774
---------------------------
Cash and cash equivalents at end of period 1,405 $ 4,798
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 300 $ 398
===========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(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 V (the
Partnership) as of March 31, 2000 and December 31, 1999, the statements of
income for the three months ended March 31, 2000 and 1999, the statements of
changes in partners' capital for the period from December 31, 1998 to March 31,
2000, and the statements of cash flows for the three months ended March 31, 2000
and 1999. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1999, on file at the Securities and
Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
Beginning in the Partnership's seventh year of operations, which commenced on
January 1, 1999, the General Partner stopped purchasing additional equipment.
Surplus cash, less reasonable reserves, will be distributed to the partners.
Beginning in the Partnership's ninth year of operations, the General Partner
intends to begin an orderly liquidation of the Partnership's assets. The
Partnership will be terminated by December 31, 2010, unless terminated earlier
upon sale of all equipment and by certain other events.
3. PURCHASE OF LIMITED PARTNERSHIP UNITS
In 1999, the Partnership agreed to purchase approximately 2,300 limited
partnership units in 2000 for an aggregate purchase price of up to $12,500.
During the three months ended March 31, 2000, the Partnership purchased 1,750
limited partnership units for $9,000. The General Partner may purchase the
additional units in the future.
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 $2.4 million
and $1.7 million, respectively. Cash distributions of $1.7 million to the
limited partners during the three months ended March 31, 2000 were deemed to be
a return of capital None of the cash distributions to the limited partners for
the three months ended March 31, 1999, were deemed to be a return of capital.
Cash distributions related to the results from the first quarter of 2000 of $1.7
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, included $0.5 million due to
FSI for a short-term loan, $0.2 million due to IMI for management fees, and $0.1
million due to affiliated unconsolidated special-purpose entities (USPEs). The
balance due to affiliates as of December 31, 1999, included $0.2 million due to
FSI and its affiliates for management fees and $0.1 million due to affiliated
USPEs.
During the three months ended March 31, 2000, the Partnership borrowed $1.9
million from the General Partner for a short-term loan and repaid $1.4 million
to the General Partner. The General Partner charged the Partnership $6,000 in
interest using market interest rates. The Partnership will pay the General
Partner market interest rates on the remaining balance of the short-term loan
until the loan is fully paid.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The Partnership's proportional share of USPE-affiliated management fees of $0.1
million was payable as of March 31, 2000 and December 31, 1999.
The Partnership's proportional share of the affiliated expenses incurred by
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 $ 73 $ 84
Data processing and administrative
expenses 16 22
6. Equipment
The components of owned equipment were as follows (in thousands of dollars):
March 31, December 31,
2000 1999
---------------------------------
Aircraft $ 54,861 $ 52,402
Marine vessels 20,276 20,276
Railcars 11,329 11,328
Trailers 9,235 9,245
Marine containers 8,249 9,075
----------- -----------
103,950 102,326
Less accumulated depreciation (74,163) (72,847)
----------- -----------
Net equipment $ 29,787 $ 29,479
=========== ===========
As of March 31, 2000, all owned equipment in the Partnership's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities except for a marine vessel with a net book value of $3.8 million. As
of December 31, 1999, all owned equipment in the Partnership's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities.
During the three months ended March 31, 2000, the Partnership purchased a
hush-kit for one of the Partnership's McDonnell Douglas DC-9 commercial aircraft
for $2.5 million. The Partnership was required to install the hush-kit per the
Partnership's lease agreement.
During the three months ended March 31, 2000, the Partnership disposed of marine
containers and a trailer with an aggregate net book value of $0.1 million, for
$0.2 million. During the three months ended March 31, 1999, the Partnership
disposed of marine containers with a net book value of $0.2 million, for $0.2
million.
(This space intentionally left blank)
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
7. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The net investments in USPEs include 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>
48% interest in an entity owning a product tanker $ 5,520 $ 5,885
25% interest in a trust owning two commercial aircraft on direct
finance lease 2,462 2,535
50% interest in an entity owning a product tanker 1,328 1,333
50% interest in an entity that owned a bulk carrier (25) (120)
------------ ------------
Net investments $ 9,285 $ 9,633
============ ============
</TABLE>
As of March 31, 2000 and December 31, 1999, all jointly-owned equipment in the
Partnership's USPE portfolio was on lease.
8. OPERATING SEGMENTS
The Partnership operates in five primary operating segments: aircraft leasing,
marine vessel leasing, railcar leasing, marine container 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 Vessel Railcar Container Trailer All
For the quarter ended March 31, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 1,853 $ 2,571 $ 614 $ 85 $ 566 $ -- $ 5,689
Interest income and other 5 3 -- -- -- 31 39
Gain (loss) on disposition of -- -- -- 45 (3 ) -- 42
equipment
------------------------------------------------------------------------
Total revenues 1,858 2,574 614 130 563 31 5,770
COSTS AND EXPENSES
Operations support 218 1,467 155 2 184 9 2,035
Depreciation and amortization 1,246 371 141 127 144 14 2,043
Interest expense -- -- -- -- -- 269 269
Management fees to affiliate 62 129 49 4 34 -- 278
General and administrative expenses 55 8 11 -- 141 213 428
Provision for bad debts -- -- 4 -- 23 -- 27
------------------------------------------------------------------------
Total costs and expenses 1,581 1,975 360 133 526 505 5,080
------------------------------------------------------------------------
Equity in net income (loss) of USPEs 135 (158) -- -- -- -- (23)
------------------------------------------------------------------------
Net income (loss) $ 412 $ 441 $ 254 $ (3) $ 37 $ (474) $ 667
========================================================================
Total assets as of March 31, 2000 $ 19,726 $ 12,730 $ 3,274 $ 1,686 $ 3,535 $ 2,001 $ 42,952
========================================================================
<FN>
-----------------------------
<F1> 1 Includes certain interest income and costs not identifiable to a
particular segment, such as interest expense, certain amortization, general
and administrative and operations support expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Aircraft Vessel Railcar Container 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 $ 2,192 $ 1,140 $ 602 $ 260 $ 639 $ -- $ 4,833
Interest income and other 9 -- -- -- -- 37 46
Gain (loss) on disposition of -- -- -- 61 (1 ) -- 60
equipment
------------------------------------------------------------------------
Total revenues 2,201 1,140 602 321 638 37 4,939
COSTS AND EXPENSES
Operations support 15 791 117 1 180 13 1,117
Depreciation and amortization 1,281 466 154 164 167 30 2,262
Interest expense -- -- -- -- -- 365 365
Management fees to affiliate 96 57 31 13 44 -- 241
General and administrative expenses 7 8 10 -- 152 197 374
Provision for (recovery of) bad -- -- 3 (4) (7) -- (8)
debts
------------------------------------------------------------------------
Total costs and expenses 1,399 1,322 315 174 536 605 4,351
------------------------------------------------------------------------
Equity in net income (loss) of USPEs 1,571 (64) -- -- -- -- 1,507
------------------------------------------------------------------------
Net income (loss) $ 2,373 $ (246) $ 287 $ 147 $ 102 $ (568) $ 2,095
========================================================================
Total assets as of March 31, 1999 $ 22,236 $ 21,272 $ 3,906 $ 2,814 $ 3,897 $ 5,762 $ 59,887
========================================================================
<FN>
<F1>
- -------------------------
1 Includes certain interest income and costs not identifiable to a particular
segment, such as interest expense, certain amortization, general and
administrative and operations support expenses.
</FN>
</TABLE>
9. DEBT
The Partnership made the regularly scheduled installment payment of $1.9 million
to the lender of the note payable during the three months ended March 31, 2000,
and accrued or paid the quarterly interest payment at a rate of LIBOR plus 1.2%
per annum (7.3% at March 31, 2000 and December 31, 1999). The Partnership also
paid the lender of the senior note an additional $0.4 million from equipment
sales proceeds, as required by the loan agreement.
10. 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 months ended
March 31, 2000 and 1999, was 9,067,727 and 9,080,730, respectively.
11. 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
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
11. CONTINGENCIES (CONTINUED)
Funds. Plaintiffs seek unspecified compensatory damages, as well as punitive
damages, and have offered to tender their limited partnership units back to the
defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) (the court) based on the court's
diversity jurisdiction. 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 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 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 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 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
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
11. CONTINGENCIES (CONTINUED)
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 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 has initiated litigation in various official forums in India
against the 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 its property previously leased to such airline, and the airline has
ceased operations. In response to the Partnership's collection efforts, the
airline filed counter-claims against the Partnership in excess of the
Partnership's claims against the airline. 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
the likelihood of an unfavorable outcome from the counterclaims is remote.
The Company is involved as plaintiff or defendant in various other legal actions
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
(This space intentionally left blank)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund V'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,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the three months ended March 31, 2000, when compared to the
same period of 1999. Gains or losses from the sale of equipment, interest and
other income, and certain expenses such as depreciation and 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
----------------------------
Aircraft $ 1,635 $ 2,177
Marine vessels 1,104 349
Railcars 459 485
Trailers 382 459
Marine containers 83 259
Aircraft: Aircraft lease revenues and direct expenses were $1.9 million and $0.2
million, respectively, for the three months ended March 31, 2000, compared to
$2.2 million and $15,000, respectively, during the same period of 1999. A
decrease in aircraft lease revenues of $0.1 million was due to the release of
two aircraft at a lower lease rate than had been in place during 1999.
Additionally, a commercial aircraft that went off-lease during the first quarter
of 2000, required repairs of $0.2 million before it could start a new lease. As
a result of the required repairs to this commercial aircraft, it did not earn
any lease revenues during the period it was undergoing repairs in 2000, when
compared to the same period of 1999, this commercial aircraft earned $0.3
million in lease revenues.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.6
million and $1.5 million, respectively, for the three months ended March 31,
2000, compared to $1.1 million and $0.8 million, respectively, during the same
period of 1999. The increase in marine vessel lease revenues of $1.4 million was
due to one marine vessel that earned three months lease revenues when compared
to the same period of 1999, this marine vessel was in dry-dock for approximately
six weeks not earning lease revenues. Accordingly, direct expenses for this same
marine vessel also increased $0.7 million in 2000 when compared to the same
period of 1999 for the same reason.
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.2
million, respectively, for the three months ended March 31, 2000, compared to
$0.6 million and $0.1 million, respectively, during the same period of 1999. The
decrease in railcar contribution was due to additional required repairs to
certain railcars in 2000 that were not needed during the same period of 1999.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2
million, respectively, for the three months ended March 31, 2000 and 1999.
Trailer contribution decreased $0.1 million during the first quarter of 2000 due
to lower lease revenues resulting from trailer dispositions during 2000 and
1999.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $2,000, respectively, for the three months ended March 31, 2000,
compared to $0.3 million and $1,000, respectively, during the same period of
1999. The number of marine containers owned by the Partnership has been
declining due to sales and dispositions during 2000 and 1999 resulting in a
decrease to marine container contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.0 million for the quarter ended March 31, 2000
decreased from $3.2 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $0.2 million decrease in depreciation and amortization expenses from
1999 levels was caused primarily by the double-declining balance method of
depreciation which results in greater depreciation in the first years an asset
is owned.
(ii) A $0.1 million decrease in interest expense was due to a lower average
outstanding debt balance in the first quarter of 2000 when compared to the same
period of 1999.
(iii) A $0.1 million increase in general and administrative expenses was
due primarily to additional cost associated with the re-lease of a commercial
aircraft during 2000 when compared to the same period of 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the first quarter of 2000
totaled $42,000, which resulted from the sale of marine containers and a trailer
with a net book value of $0.1 million, for proceeds of $0.2 million. The net
gain on the disposition of equipment for the first quarter of 1999 totaled $0.1
million, which resulted from the sale of marine containers with a net book value
of $0.2 million, for proceeds of $0.2 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 of accounting is shown in the following table by
equipment type (in thousands of dollars):
For the Three Months
Ended March 31,
2000 1999
-------------------------
Aircraft, rotable components, and aircraft engines $ 135 $ 1,571
Marine vessels (158) (64)
------------------------
Equity in net income (loss) of USPEs $ (23) $ 1,507
========================
Aircraft, rotable components, and aircraft engines: As of March 31, 2000 and
1999, the Partnership had an interest in an entity owning two commercial
aircraft on a direct finance lease. During the three months ended March 31,
2000, revenues of $0.1 were supplemented by direct expenses and administrative
expenses of $(35,000). During the same period of 1999, revenues of $0.1 million
and the gain from the sale of the Partnership's interest in two trusts that
owned a total of three commercial aircraft, two aircraft engines, and a
portfolio of aircraft rotables of $1.6 million were offset by depreciation
expense, direct expenses, and administrative expenses of $0.1 million. Direct
expenses and administrative expenses decreased $0.1 million during the three
months ended March 31, 2000 due to the sale of the Partnership's interest in two
trusts and the recovery of a $47,000 accounts receivable in 2000 that had
previously been reserved as a bad debt.
Marine vessels: As of March 31, 2000, the Partnership owned an interest in two
entities owning a total of two marine vessels. As of March 31, 1999, the
Partnership owned an interest in three entities owning a total of three marine
vessels. During the first quarter of 2000, lease revenues of $1.5 million were
offset by depreciation expense, direct expenses, and administrative expenses of
$1.6 million. During the same period of 1999, lease revenues of $1.6 million
were offset by depreciation expense, direct expenses, and administrative
expenses of $1.7 million. The sale of a marine vessel during the fourth quarter
of 1999 caused lease revenues to decrease $0.2 million and depreciation expense,
direct expenses, and administrative expenses to decrease $0.4 million during the
three months ended March 31, 2000. The decrease in depreciation expense, direct
expenses, and administrative expenses caused by the sale of one marine vessel of
$0.4 million was offset in part, by higher operating expenses of $0.3 million on
the two remaining marine vessels.
<PAGE>
(E) Net Income
As a result of the foregoing, the Partnership's net income for the three months
ended March 31, 2000 was $0.7 million, compared to net income of $2.1 million
during the same period in 1999. The Partnership's ability to operate assets,
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the first
quarter of 2000 is not necessarily indicative of future periods. In the first
quarter of 2000, the Partnership distributed $2.3 million to the limited
partners, or $0.25 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the three months ended March 31, 2000, the Partnership generated $3.7
million in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations and
maintain the current level of distributions (total for the three months ended
March 31, 2000 of $2.4 million) to the partners.
During the three months ended March 31, 2000, the Partnership sold owned
equipment and received aggregate proceeds of $0.2 million.
During the three months ended March 31, 2000, the Partnership borrowed $1.9
million from the General Partner for a short-term loan and repaid $1.4 million
to the General Partner. The General Partner charged the Partnership $6,000 in
interest using market interest rates.
Lessee deposits and reserve for repairs increased $0.2 million during the three
months ended March 31, 2000. Lessee deposits increased $0.1 million due to the
receipt of a payment of an accounts receivable invoice that was due in April
2000. Reserve for repairs increased $0.1 million due to monthly accruals for
aircraft engine repairs and marine vessel dry-docking.
The Partnership is scheduled to make quarterly installments of $1.9 million
under its notes payable through the year 2001 and, in some instances, a
percentage of equipment sale proceeds. During the three months ended March 31,
2000, the Partnership made the regularly scheduled installment payment of $1.9
million to the lender of the note payable. The Partnership also paid the senior
lender an additional $0.4 million from the proceeds of equipment sales.
(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 amount allocated to the
Partnership by the General Partner related to Y2K issues has not been material.
The General Partner continues to monitor its systems for any potential Y2K
issues.
(IV) OUTLOOK FOR THE FUTURE
Since the Partnership is in its holding or passive liquidation phase, the
General Partner will be 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.
Several factors may affect the Partnership's operating performance during the
remainder of 2000 and beyond, including changes in the markets for the
Partnership's equipment and changes in the regulatory environment in which that
equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
Factors affecting the Partnership's contribution during the remainder of 2000
and beyond include:
1. 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 become
delaminated. This condition lowers the demand for these marine containers which
has lead to declining lease rates and lower utilization.
2. Depressed economic conditions in Asia during most of 1999 has led to
declining freight rates for dry bulk marine vessels. As Asia begins its economic
recovery and in the absence of new additional orders, this market would be
expected to stabilize and improve over the next one to two years.
3. The Partnership owns an anchor handling supply marine vessel that has a fixed
lease rate that expired in the first quarter of 2000 and is now off-lease. If
the economic conditions remain the same, the General Partner would expect to
re-lease this marine vessel at a rate lower than the rate that was in the
previous lease.
4. Railcar loading in North America has continued to be high, however a
softening in the market in the last quarter of 1999, 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 decide to reduce the Partnership's exposure to
equipment markets in which it determines it cannot operate equipment to achieve
acceptable rates of return.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements, pay loan principal and interest on debt, and pay cash
distributions to the partners.
(V) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Partnership's plans, objectives, expectations, and intentions.
The cautionary statements made in this Form 10-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of interest rate and
currency risk. The Partnership's note payable is a variable rate debt. The
Partnership estimates a one percent increase or decrease in the Partnership's
variable rate debt would result in an increase or decrease, respectively, in
interest expense of $0.1 million for the remaining nine months of 2000 and
$37,000 in 2001. The Partnership estimates a two percent increase or decrease in
the Partnership's variable rate debt would result in an increase or decrease,
respectively, in interest expense of $0.2 million for the remaining nine months
of 2000 and $0.1 million in 2001.
During the three months ended March 31, 2000, 84% of the Partnership's total
lease revenues from wholly- and partially-owned equipment came from non-United
States domiciled lessees. Most of the Partnership's leases require payment in
United States (U.S.) currency. If these lessees currency devalues against the
U.S. dollar, the lessees could potentially encounter difficulty in making the
U.S. dollar denominated lease payments.
<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>
<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 V
By: PLM Financial Services, Inc.
General Partner
Date: May 4, 2000 By: /s/ Richard K Brock
------------------------
Richard K Brock
Vice President and
Chief Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,870
<SECURITIES> 0
<RECEIVABLES> 1,942
<ALLOWANCES> (64)
<INVENTORY> 0
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<PP&E> 103,950
<DEPRECIATION> (74,163)
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0
0
<COMMON> 0
<OTHER-SE> 25,278
<TOTAL-LIABILITY-AND-EQUITY> 42,952
<SALES> 0
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<CGS> 0
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