UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended September 30, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-21806
_______________________
PLM EQUIPMENT GROWTH FUND VI
(Exact name of registrant as specified in its charter)
California 94-3135515
(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 VI
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease, at cost $ 92,417 $ 90,755
Less accumulated depreciation (48,935) (43,341)
-----------------------------------
43,482 47,414
Equipment held for sale 6,105 --
-----------------------------------
Net equipment 49,587 47,414
Cash and cash equivalents 926 2,558
Restricted cash 833 1,416
Accounts receivable, less allowance for doubtful accounts
of $1,915 in 1999 and $1,930 in 1998 2,133 2,321
Investments in unconsolidated special-purpose entities 32,819 33,414
Net investment in direct finance lease -- 41
Deferred charges, net of accumulated amortization of
$336 in 1999 and $367 in 1998 361 413
Prepaid expenses and other assets 76 93
Equipment acquisition deposit -- 667
-----------------------------------
Total assets 86,735 $ 88,337
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 609 $ 1,147
Due to affiliates 377 2,946
Lessee deposits and reserve for repairs 1,418 1,290
Short-term note payable 1,000 --
Note payable 30,000 30,000
-----------------------------------
Total liabilities 33,404 35,383
-----------------------------------
Partners' capital:
Limited partners (8,191,718 limited partnership units as of
September 30, 1999 and 8,206,339 as of December 31, 1998) 53,331 52,954
General Partner -- --
-----------------------------------
Total partners' capital 53,331 52,954
-----------------------------------
Total liabilities and partners' capital $ 86,735 $ 88,337
===================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease revenue $ 5,007 $ 4,816 13,884 $ 13,376
Interest and other income 13 181 102 507
Net gain (loss) on disposition of equipment (3) 1,325 (127) 6,246
------------------------------------------------------------
Total revenues 5,017 6,322 13,859 20,129
------------------------------------------------------------
EXPENSES
Depreciation and amortization 3,230 3,755 8,922 10,749
Repairs and maintenance 1,187 906 2,993 2,641
Equipment operating expense 777 414 2,255 1,714
Insurance recovery from affiliate -- -- -- (127)
Other insurance expense 51 42 272 254
Management fees to affiliate 272 274 758 754
Interest expense 512 503 1,588 1,515
General and administrative expenses
to affiliates 160 175 519 619
Other general and administrative expenses 226 186 648 682
Loss on revaluation of equipment -- 4,276 -- 4,276
Provision for bad debts 42 104 78 260
--------------------------
------------------------------------------------------------
Total expenses 6,457 10,635 18,033 23,337
------------------------------------------------------------
Equity in net income (loss) of
unconsolidated special-purpose entities (829) (795) 15,031 6,774
------------------------------------------------------------
Net income (loss) $ (2,269) $ (5,108) 10,857 $ 3,566
============================================================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ (2,442) $ (5,281) 10,338 $ 2,960
General Partner 173 173 519 606
------------------------------------------------------------
Total $ (2,269) $ (5,108) 10,857 $ 3,566
============================================================
Net income (loss) per weighted-average
limited partnership unit $ (0.30) $ (0.64) 1.26 $ 0.36
============================================================
Cash distributions $ 3,450 $ 3,106 10,358 $ 11,771
============================================================
Cash distributions per weighted-average
limited partnership unit $ 0.40 $ 0.36 1.20 $ 1.36
============================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
( A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1997 to September 30, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1997 $ 67,152 $ -- $ 67,152
Net income 666 779 1,445
Purchase of limited partnership units (417) -- (417)
Cash distribution (14,447) (779) (15,226)
-------------------------------------------------------
Partners' capital as of December 31, 1998 52,954 -- 52,954
Net income 10,338 519 10,857
Purchase of limited partnership units (122) -- (122)
Cash distribution (9,839) (519) (10,358)
-------------------------------------------------------
Partners' capital as of September 30, 1999 $ 53,331 $ -- $ 53,331
=======================================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
----------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 10,857 $ 3,566
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 8,922 10,749
Loss on revaluation of equipment -- 4,276
Net (gain) loss on disposition of equipment 127 (6,246)
Equity in net income from unconsolidated special-purpose entities (15,031) (6,774)
Changes in operating assets and liabilities:
Restricted cash -- 82
Accounts receivable, net 153 750
Prepaid expenses and other assets 17 144
Accounts payable and accrued expenses (538) (327)
Due to affiliates 18 21
Lessee deposits and reserve for repairs 128 (177)
---------------------------
Net cash provided by operating activities $ 4,653 $ 6,064
---------------------------
INVESTING ACTIVITIES
Payments for equipment purchases and capitalized improvements (11,644 ) (23,836 )
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (14,297 ) (3,778 )
Distributions from unconsolidated special-purpose entities 4,559 6,158
Distributions from liquidation of unconsolidated special-purpose entities 23,360 16,679
Payments of acquisition fees to affiliate (300 ) (1,132 )
Payments of lease negotiation fees to affiliate (67 ) (251 )
Principal payments on direct finance lease 51 74
Proceeds from disposition of equipment 1,533 10,259
---------------------------
Net cash provided by investing activities 3,195 4,173
---------------------------
FINANCING ACTIVITIES
Proceeds from short-term note payable 4,712 --
Payment of short-term note payable (3,712 ) --
Proceeds from short-term note payable to affiliate 400 --
Payment of short-term note payable to affiliate (400 ) --
Cash distribution paid to limited partners (9,839 ) (11,165 )
Cash distribution paid to General Partner (519 ) (606 )
Purchase of limited partnership units (122 ) (417 )
---------------------------
Net cash used in financing activities (9,480 ) (12,188 )
---------------------------
Net decrease in cash and cash equivalents (1,632) (1,951)
Cash and cash equivalents at beginning of period 2,558 14,204
---------------------------
Cash and cash equivalents at end of period $ 926 $ 12,253
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 1,585 $ 1,515
===========================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly the financial position of PLM Equipment Growth Fund VI (the
Partnership) as of September 30, 1999 and December 31, 1998, the statements of
operations for the three and nine months ended September 30, 1999 and 1998, the
statements of changes in partners' capital for the period from December 31, 1997
to September 30, 1999, and the statements of cash flows for the nine months
ended September 30, 1999 and 1998. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from the
accompanying financial statements. For further information, reference should be
made to the financial statements and notes thereto included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1998, on file at the
Securities and Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
The Partnership is currently operating within the first six years of operation
in which the General Partner intends to reinvest a portion of cash flow and net
disposition proceeds in additional equipment. Beginning in the Partnership's
seventh year of operations, which commences on January 1, 2000, the General
Partner will stop reinvesting excess cash, if any, which, less reasonable
reserves, will be distributed to the Partners. Beginning in the Partnership's
ninth year of operations, which commences on January 1, 2002, the General
Partner intends to begin an orderly liquidation of the Partnership's assets. The
Partnership will terminate on December 31, 2011, unless terminated earlier upon
sale of all equipment or by certain other events.
3. PURCHASE OF LIMITED PARTNERSHIP UNITS
In 1998, the Partnership agreed to purchase up to 23,700 limited partnership
units in 1999 for an aggregate purchase price of up to a maximum of $0.2
million. During the nine months ended September 30, 1999, the Partnership had
purchased 14,621 limited partnership units for $0.1 million. 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 September 30, 1999 and 1998, cash distributions totaled $3.5
million and $3.1 million, respectively. For the nine months ended September 30,
1999 and 1998, cash distributions totaled $10.4 million and $11.8 million,
respectively. None of the cash distributions to the limited partners for the
nine months ended September 30, 1999 were deemed to be a return of capital. Cash
distributions to the limited partners of $8.2 million for the nine months ended
September 30, 1998 were deemed to be a return of capital
Cash distributions related to the results from the third quarter of 1999 of $2.0
million, will be paid during the fourth quarter of 1999.
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of September 30, 1999 included $0.2 million due
to FSI and its affiliates for management fees and $0.2 million due to affiliated
unconsolidated special-purpose entities (USPEs). The balance due to affiliates
as of December 31, 1998 included $0.2 million due to FSI and its affiliates for
management fees and $2.8 million due to an affiliated USPE.
During the nine months ended September 30, 1999, $2.6 million in engine reserves
and security deposits were paid to an affiliated USPE. PLM EQUIPMENT GROWTH FUND
VI (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1999
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 September 30, 1999 and December 31, 1998.
The Partnership's proportional share of the affiliated expenses incurred by
USPEs during 1999 and 1998 is listed in the following table (in thousands of
dollars):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 59 $ 113 $ 270 $ 365
Data processing and administrative
expenses 25 38 93 113
Insurance expense -- 5 -- 6
</TABLE>
The Partnership and USPEs paid FSI $0.5 million and $1.6 million for equipment
acquisition and lease negotiation fees during the nine months ended September
30, 1999 and 1998, respectively.
The Partnership did not pay $0.9 million in acquisition and lease negotiation
fees on $16.6 million of owned equipment and investments in USPE's purchased
during 1999. The Partnership has reached certain fee limitations, per the
partnership agreement, that can be paid to FSI.
During the nine months ended September 30, 1999 the Partnership borrowed $0.4
million from the General Partner for six days. The General Partner charged the
Partnership market interest rates.
6. EQUIPMENT
Owned equipment held for operating leases is stated at cost. Equipment held for
sale is stated at the lower of the equipment's depreciated cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment were as follows (in thousands of dollars):
September 30, December 31,
1999 1998
---------------------------------
Marine vessels $ 26,094 $ 26,094
Aircraft and rotable components 21,630 21,630
Railcars 17,278 18,638
Marine containers 15,615 11,189
Trailers 11,800 13,204
----------- -----------
92,417 90,755
Less accumulated depreciation (48,935) (43,341)
----------- -----------
43,482 47,414
Equipment held for sale 6,105 --
----------- -----------
Net equipment $ 49,587 $ 47,414
=========== ===========
As of September 30, 1999, 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 Boeing 737-200 and 11 railcars. As of December 31,
1998, all owned equipment in the Partnership's portfolio was either on lease or
operating in PLM-affiliated short-term trailer rental facilities, except for 59
marine containers and 15 railcars. The net book value of the off-lease equipment
was $2.0 million and $0.3 million as of September 30, 1999 and December 31,
1998, respectively.
PLM EQUIPMENT GROWTH FUND VI PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
6. EQUIPMENT (CONTINUED)
During the nine months ended September 30, 1999, the Partnership completed the
purchase of a marine vessel for $7.0 million, including acquisition fees of $0.3
million paid to FSI for the purchase of this equipment. The Partnership made a
deposit of $0.7 million toward this purchase in 1998, which is included in the
December 31, 1998 balance sheet as equipment acquisition deposit. During the
nine months ended September 30, 1999, the Partnership also purchased a portfolio
of marine containers for $5.5 million of which no fees were paid to FSI. The
Partnership has reached certain fee limitations, per the partnership agreement,
that can be paid to FSI.
The marine vessel purchased during the nine months ended September 30, 1999 has
been reclassified to equipment held for sale. As of September 30, 1999, the
Partnership had a signed memorandum of agreement for the sale of this marine
vessel for $7.8 million.
During the nine months ended September 30, 1999, the Partnership disposed of or
sold marine containers, trailers, and railcars, with an aggregate net book value
of $1.6 million, for $1.5 million. During the nine months ended September 30,
1998, the Partnership disposed of or sold a Boeing 737-200 commercial aircraft,
an aircraft engine, marine containers, trailers, and railcars, with an aggregate
net book value of $5.4 million, for $11.7 million which includes $1.4 million of
unused engine reserves.
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>
September 30, December 31,
1999 1998
-----------------------------
<S> <C> <C>
62% interest in a trust owning a Boeing 737-300 Stage III
commercial aircraft $ 13,169 $ --
53% interest in an entity owning a product tanker 6,807 7,678
40% interest in a trust owning two DC-9 Stage III commercial
aircraft on direct finance lease 3,984 4,435
30% interest in an entity owning a mobile offshore drilling unit 3,759 4,279
25% interest in an entity owning marine containers 2,200 2,475
50% interest in an entity owning a container feeder vessel 1,331 1,421
20% interest in an entity owning a handymax bulk carrier 1,144 1,311
64% interest in a trust that owned a Boeing 767-200ER Stage III
commercial aircraft 239 11,536
50% interest in a trust that owned four Boeing 737-200A Stage II
commercial aircraft 186 279
----------- -----------
Net investments $ 32,819 $ 33,414
=========== ===========
</TABLE>
As of September 30, 1999, all jointly-owned equipment in the Partnership's USPE
portfolio was on lease except for a Boeing 737-300 commercial aircraft with a
net investment value of $13.2 million. As of December 31, 1998, all
jointly-owned equipment in the Partnership's USPE portfolio was on lease.
During the nine months ended September 30, 1999, the Partnership purchased an
interest in a trust owning a Boeing 737-300 Stage III commercial aircraft for
$14.0 million including acquisition fees of $0.1 million that were paid to FSI
for the purchase of this investment and increased its investment in a trust
owning marine containers by $0.1 million and paid no fees to FSI. The remaining
interest in these trusts were purchased by an affiliated program.
During the nine months ended September 30, 1999, the General Partner sold the
Partnership's 64%
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
7. Investments in Unconsolidated Special-Purpose Entities (continued)
interest in a Boeing 767-200ER Stage III commercial aircraft. The Partnership's
interest in this trust was sold for proceeds of $25.6 million which includes
$1.9 million of unused engine reserves for its net investment of $10.1 million.
In September 1999, the General Partner amended the corporate-by-laws of all the
Partnership's and any affiliated program's investments in USPE's that own an
interest greater than 50%. The amendment to the by-laws provides that all
decisions regarding the acquisition and disposition of the investment as well as
other significant business decisions of that investment would be permitted only
upon unanimous consent of the Partnership and all the affiliated programs that
have an ownership in the investment regardless of the percentage of ownership.
8. Operating Segments
The Partnership operates in five primary operating segments: marine vessel
leasing, aircraft leasing, railcar leasing, trailer leasing, and marine
container leasing. Each equipment leasing segment primarily engages in
short-term to mid-term operating leases to a variety of customers.
The following tables present a summary of the operating segments for the three
and nine months ended September 30, 1999 and 1998 (in thousands of dollars):
<TABLE>
<CAPTION>
Marine Marine
For the Three Months Ended Vessel Aircraft Railcar Trailer Container All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other <F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,843 $ 694 $ 1,112 $ 721 $ 637 $ -- $ 5,007
Interest income and other -- -- -- (2) -- 15 13
Gain (loss) on disposition of -- -- (4) (6) 7 -- (3)
equipment
------------------------------------------------------------------------
Total revenues 1,843 694 1,108 713 644 15 5,017
COSTS AND EXPENSES
Operations support 1,016 602 175 208 1 13 2,015
Depreciation and amortization 919 1,048 361 185 709 8 3,230
Interest expense -- -- -- -- -- 512 512
Management fees to affiliate 91 30 67 52 32 -- 272
General and administrative expenses 14 42 20 125 2 183 386
Provision for (recovery of) bad 29 -- 27 (14) -- -- 42
debts
------------------------------------------------------------------------
Total costs and expenses 2,069 1,722 650 556 744 716 6,457
------------------------------------------------------------------------
Equity in net income (loss) of USPEs (456 ) (513 ) -- -- 2 138 (829)
------------------------------------------------------------------------
========================================================================
Net income (loss) $ (682) $ (1,541) $ 458 $ 157 $ (98) $ (563) $ (2,269)
========================================================================
Total assets as of September 30, 1999 $ 28,516 $ 25,401 $ 9,234 $ 4,356 $ 13,267 $ 5,961 $ 86,735
========================================================================
<FN>
<F1> Includes interest income and costs not identifiable to a particular
segment, such as general and administrative, interest expense, and certain
operations support. Also includes aggregate net income from an investment in an
entity owning a mobile offshore drilling unit.
</FN>
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the Three Months Ended Vessel Aircraft Railcar Trailer Container All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other <F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,807 $ 1,054 $ 1,015 $ 804 $ 136 $ -- $ 4,816
Interest income and other -- -- -- 2 -- 179 181
Gain (loss) on disposition of -- 1,189 2 (8) 142 -- 1,325
equipment
-------------------------------------------------------------------------
Total revenues 1,807 2,243 1,017 798 278 179 6,322
COSTS AND EXPENSES
Operations support 970 19 175 181 2 15 1,362
Depreciation and amortization 927 2,124 318 250 129 7 3,755
Interest expense -- -- -- -- -- 503 503
Management fees to affiliate 90 43 82 52 7 -- 274
General and administrative expenses 20 32 10 124 2 173 361
Loss on revaluation 4,093 -- -- -- 183 -- 4,276
Provision for (recovery of) bad -- 120 -- (2) (14) -- 104
debts
-------------------------------------------------------------------------
Total costs and expenses 6,100 2,338 585 605 309 698 10,635
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (1,183) 344 -- -- (19) 63 (795)
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ (5,476) $ 249 $ 432 $ 193 $ (50) $ (456) $ (5,108)
=========================================================================
Total assets as of September 30, 1998 $ 26,968 $ 28,627 $ 8,205 $ 5,643 $ 5,123 $ 18,590 $ 93,156
=========================================================================
Marine Marine
For the Nine Months Ended Vessel Aircraft Railcar Trailer Container All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other <F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 4,939 $ 2,143 $ 3,410 $ 1,996 $ 1,396 $ -- $ 13,884
Interest income and other 10 -- -- (1) -- 93 102
Gain (loss) on disposition of -- (1) (31) (187) 92 -- (127)
equipment
-------------------------------------------------------------------------
Total revenues 4,949 2,142 3,379 1,808 1,488 93 13,859
COSTS AND EXPENSES
Operations support 3,651 653 616 559 3 38 5,520
Depreciation and amortization 2,759 3,143 1,105 577 1,315 23 8,922
Interest expense -- -- -- -- -- 1,588 1,588
Management fees to affiliate 245 96 232 115 70 -- 758
General and administrative expenses 67 165 50 361 8 516 1,167
Provision for bad debts 29 -- 33 16 -- -- 78
-------------------------------------------------------------------------
Total costs and expenses 6,751 4,057 2,036 1,628 1,396 2,165 18,033
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (538) 15,142 -- -- 2 425 15,031
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ (2,340) $ 13,227 $ 1,343 $ 180 $ 94 $ (1,647) $ 10,857
=========================================================================
Total assets as of September 30, 1999 $ 28,516 $ 25,401 $ 9,234 $ 4,356 $ 13,267 $ 5,961 $ 86,735
=========================================================================
<FN>
<F1>Includes interest income and costs not identifiable to a particular segment,
such as general and administrative, interest expense, and certain operations
support. Also includes aggregate net income from an investment in an entity
owning a mobile offshore drilling unit.
</FN>
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the Nine Months Ended Vessel Aircraft Railcar Trailer Container All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 4,127 $ 3,153 $ 3,079 $ 2,437 $ 580 $ -- $ 13,376
Interest income and other 64 19 -- 9 4 411 507
Gain on disposition of equipment 19 5,603 12 88 524 -- 6,246
-------------------------------------------------------------------------
Total revenues 4,210 8,775 3,091 2,534 1,108 411 20,129
Costs and expenses
Operations support 3,022 253 569 579 11 48 4,482
Depreciation and amortization 2,049 6,465 950 801 459 25 10,749
Interest expense -- -- -- -- -- 1,515 1,515
Management fees to affiliate 206 138 225 161 24 -- 754
General and administrative expenses 95 175 37 431 8 555 1,301
Loss on revaluation 4,093 -- -- -- 183 -- 4,276
Provision for (recovery of) bad -- 182 (18) (8) 104 -- 260
debts
-------------------------------------------------------------------------
Total costs and expenses 9,465 7,213 1,763 1,964 789 2,143 23,337
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (1,565) 8,187 -- -- (19) 171 6,774
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ (6,820) $ 9,749 $ 1,328 $ 570 $ 300 $ (1,561) $ 3,566
=========================================================================
Total assets as of September 30, 1998 $ 26,968 $ 28,627 $ 8,205 $ 5,643 $ 5,123 $ 18,590 $ 93,156
=========================================================================
<FN> <F1> Includes interest income and costs not identifiable to a particular
segment, such as general and administrative, interest expense, and certain
operations support. Also includes aggregate net income from an investment in an
entity owning a mobile offshore drilling unit.
</FN>
</TABLE>
9. DEBT
The General Partner has entered into a short-term, joint $24.5 million credit
facility (the Committed Bridge Facility) on behalf of the Partnership that is
due to expire on December 14, 1999. Among the eligible borrowers, the
Partnership had borrowings of $1.0 million and TEC Acquisub, Inc., an indirect
wholly-owned subsidiary of PLM International, Inc., had borrowings of $7.6
million under the Committed Bridge Facility as of September 30, 1999. No other
eligible borrower had any outstanding borrowings.
The General Partner believes it will renew the credit facility upon its
expiration with similar terms to those in the current credit facility.
10. NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income (loss) per weighted-average Partnership unit was computed by dividing
net income (loss) attributable to limited partners by the weighted-average
number of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the three
and nine months ended September 30, 1999 was 8,191,718 and 8,197,722,
respectively. The weighted-average number of Partnership units deemed
outstanding during the three and nine months ended September 30, 1998 was
8,206,339 and 8,219,887, respectively.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
11. CONTINGENCIES
PLM International Inc., (The Company) and various of its wholly-owned
subsidiaries are named as defendants in a lawsuit filed as a purported class
action in January 1997 in the Circuit Court of Mobile County, Mobile, Alabama,
Case No. CV-97-251 (the Koch action). Plaintiffs, who filed the complaint on
their own and on behalf of all class members similarly situated, are six
individuals who invested in certain California limited partnerships for which
the Company's wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts
as the general partner, including 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). The complaint
asserts eight causes of action against all defendants, as follows: fraud and
deceit, suppression, negligent misrepresentation, intentional breach of
fiduciary duty, negligent breach of fiduciary duty, unjust enrichment,
conversion, and conspiracy. Plaintiffs allege that each defendant owed
plaintiffs and the class certain duties due to their status as fiduciaries,
financial advisors, agents, and control persons. Based on these duties,
plaintiffs assert liability against defendants for improper sales and marketing
practices, mismanagement of the Funds, and concealing such mismanagement from
investors in the Funds. Plaintiffs seek unspecified compensatory and recissory
damages, as well as punitive damages, and have offered to tender their limited
partnership units back to the defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) (the court) based on the court's
diversity jurisdiction, and the court denied plaintiffs' motion to remand, which
denial was upheld on appeal. In December 1997, the court granted defendants
motion to compel arbitration of the named plaintiffs' claims, based on an
agreement to arbitrate contained in the limited partnership agreement of each
Partnership. Plaintiffs appealed this decision, but in June 1998 voluntarily
dismissed their appeal pending settlement of the Koch action, as discussed
below.
In June 1997, the Company and the affiliates who are also defendants in the Koch
action were named as defendants in another purported class action filed in the
San Francisco Superior Court, San Francisco, California, Case No. 987062 (the
Romei action). The plaintiff is an investor in Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in certain California limited partnerships for which FSI acts as the
general partner, including the Funds. The complaint (as amended in August 1997)
alleges the same facts and the same 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 constructive fraud. The plaintiff asserts a
claim for treble damages and violations of the California Securities Law of
1968.
In July 1997, defendants filed with the district court for the Northern District
of California (Case No. C-97-2847 WHO) a petition (the petition) under the
Federal Arbitration Act seeking to compel arbitration of plaintiff's claims and
for an order staying the state court proceedings pending the outcome of the
arbitration. In October 1997, the district court denied the Company's petition
to compel arbitration, but in November 1997, agreed to hear the Company's motion
for reconsideration of this order. The hearing on this motion has been taken off
calendar and the district court has dismissed the petition pending settlement of
the Romei action, as discussed below. The state court action continues to be
stayed pending such resolution.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding related to the settlement of those actions (the monetary
settlement), following which the parties agreed to an additional equitable
settlement (the equitable settlement). The terms of the monetary settlement and
the equitable settlement are contained in a Stipulation of Settlement that was
filed with the court. The monetary settlement provides for a settlement and
release of all claims against defendants in exchange for payment for the benefit
of the class of up to $6.0 million. The final settlement amount will depend on
the number of claims filed by authorized claimants who are members of the class,
the amount of the administrative costs incurred in connection with the
settlement, and the amount of attorneys' fees
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
11. CONTINGENCIES (CONTINUED)
awarded by the court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy. The
equitable settlement provides, among other things: (a) for the extension of the
operating lives of Funds V, VI, and VII by judicial amendment to each of their
partnership agreements, such that FSI, the general partner of each such
partnership, be permitted to reinvest partnership funds in additional equipment
into the year 2004, and will liquidate the Funds' equipment in 2006; (b) that
FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) up to 20% in excess of the compensatory limitations set forth
in the North American Securities Administrator's Association's Statement of
Policy; (c) for a one-time purchase of up to 10% of the outstanding units of
Funds V, VI, and VII by the respective partnership at 80% of such partnership's
net asset value; and (d) for the deferral of a portion of FSI's management fees
until such time as certain performance thresholds have, if ever, been met by the
Funds. The equitable settlement also provides for payment of the equitable class
attorneys' fees from partnership funds in the event, if ever, that distributions
paid to investors in Funds V, VI, and VII during the extension period reach a
certain internal rate of return. Defendants will continue to deny each of the
claims and contentions and admit no liability in connection with the monetary
and equitable settlements.
The court, among other things, preliminarily approved the monetary and equitable
settlements in June 1999, and set a final fairness hearing for November 16,
1999. For settlement purposes, the monetary settlement class (the monetary
class) consists of all investors, limited partners, assignees, or unit holders
who purchased or received by way of transfer or assignment any units in the
Funds between May 23, 1989 and June 29, 1999. The equitable settlement class
(the equitable class) consists of all investors, limited partners, assignees or
unit holders who on June 29, 1999 held any units in Funds V, VI, and VII, and
their assigns and successors in interest.
The monetary settlement remains subject to certain conditions, including but not
limited to notice to the monetary class for purposes of the monetary settlement
and final approval of the monetary settlement by the court following a final
fairness hearing. The equitable settlement remains subject to numerous
conditions, including but not limited to: (a) notice to the equitable class, (b)
review and clearance by the SEC, and dissemination to the members of the
equitable class, of solicitation statements regarding the proposed extensions,
(c) disapproval by less than 50% of the limited partners in Funds V, VI, and VII
of the proposed amendments to the limited partnership agreements, (d) judicial
approval of the proposed amendments to the limited partnership agreements, and
(e) final approval of the equitable settlement by the court following a final
fairness hearing. The monetary settlement, if approved, will go forward
regardless of whether the equitable settlement is approved or not. The Company
continues to believe that the allegations of the Koch and Romei actions are
completely without merit and intends to continue to defend this matter
vigorously if the monetary settlement is not consummated.
The Partnership 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 Partnership.
12. SUBSEQUENT EVENT
During October 1999, the Partnership sold a marine vessel that was held for sale
as of September 30, 1999 with a net book value of $6.1 million for proceeds of
$7.8 million. The Partnership used a portion of the proceeds to purchase marine
containers for $4.6 million and paid no fees to FSI. The Partnership also repaid
its $1.0 million borrowing under the Committed Bridge Facility.
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
COMPARISON OF PLM EQUIPMENT GROWTH FUND VI'S (THE PARTNERSHIP'S) OPERATING
RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the three months ended September 30, 1999, when compared to the
same period of 1998. 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 these expenses are indirect in nature and not a
result of operations, but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Three Months
Ended September 30,
1999 1998
----------------------------
Railcars $ 937 $ 840
Marine vessels 827 837
Marine containers 636 134
Trailers 513 623
Aircraft, aircraft engines, and components 92 1,035
Railcars: Railcar lease revenues and direct expenses were $1.1 million and $0.2
million, respectively, for the three months ended September 30, 1999, compared
to $1.0 million and $0.2 million, respectively, during the same period of 1998.
The increase in railcar lease revenues was due to the purchase of a group of
railcars during the fourth quarter of 1998.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.8
million and $1.0 million, respectively, for the three months ended September 30,
1999 and 1998. Although lease revenues and direct expenses remained relatively
the same, lease revenues declined $0.6 million on two marine vessels due to
lower lease rates that were offset by lease revenues of $0.6 million earned on
the additional marine vessel purchased during 1999. In addition, during the
three months ended September 30, 1999, direct expenses increased $0.2 million
due to the purchase of a marine vessel during 1999 and decreased $0.2 million
for two other marine vessels due to lower required repairs.
Marine containers: Marine container lease revenues and direct expenses were $0.6
million and $1,000, respectively, for the three months ended September 30, 1999,
compared to $0.1 million and $2,000, respectively, during the same quarter of
1998. The increase in lease revenues of $0.5 million during the third quarter of
1999 was due to the purchase of marine containers during the second quarter of
1999 and the fourth quarter of 1998.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the three months ended September 30, 1999, compared
to $0.8 million and $0.2 million, respectively, during the same period of 1998.
The number of trailers owned by the Partnership declined during 1999 and 1998
due to sales and dispositions. The result of this declining fleet has also been
a decrease in trailer contribution.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $0.7 million and $0.6 million, respectively, for the three months
ended September 30, 1999, compared to $1.1 million and $19,000, respectively,
during the same period of 1998. The decrease in aircraft contribution was due to
a Boeing 737-200 that was off-lease during the third quarter of 1999 that was
on-lease during the same period of 1998. Direct expenses increased $0.6 million
due to required repairs to the Boeing 737-200 that is off-lease.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.4 million for the quarter ended September 30, 1999
decreased from $9.3 million for the same period in 1998. Significant variances
are explained as follows:
(i) Loss on revaluation of marine vessels and marine containers decreased
$4.3 million during the three months ended September 30, 1999 when compared to
the same period of 1998. There was no revaluation of equipment required during
the third quarter of 1999.
(ii) A $1.4 million decrease in depreciation and amortization expenses from
1998 levels reflects the sale of certain equipment during 1999 and 1998 and the
double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned offset, in part, by an
increase of $0.9 million from the purchase of certain assets during 1999 and
1998.
(iii) A $0.1 million decrease in the provision for bad debts based on the
General Partner's evaluation of the collectability of receivables.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the third quarter of 1999
totaled $3,000, and resulted from the sale of marine containers, trailers, and a
railcar with an aggregate net book value of $0.1 million, for $0.1 million. The
net gain on the disposition of owned equipment for the third quarter of 1998
totaled $1.3 million and resulted from the sale of an aircraft engine, marine
containers, and trailers, with an aggregate net book value of $0.5 million, for
$1.8 million.
(D) Interest and other income
Interest and other income decreased $0.2 million due to lower average cash
balances available for investment when compared to the same period of 1998.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended September 30,
1999 1998
------------------------------
Mobile offshore drilling unit $ 138 $ 63
Marine containers 2 (19)
Aircraft (513) 344
Marine vessels (456) (1,183)
============ ============
Equity in net loss of USPEs $ (829) $ (795)
============ ============
Mobile offshore drilling unit: As of September 30, 1999 and 1998, the
Partnership owned an interest in an entity owning a mobile offshore drilling
unit. During the third quarter of 1999, revenues of $0.4 million were offset by
depreciation expense, direct expenses, and administrative expenses of $0.2
million. During the same period of 1998, revenues of $0.3 million were offset by
depreciation expense, direct expenses, and administrative expenses of $0.2
million. The increase in mobile offshore drilling unit contribution is primarily
due to an increase in lease revenue of $0.1 million due to increased lease rates
during 1999 and lower direct expenses of $20,000 primarily due to the
double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
Marine containers: As of September 30, 1999, the Partnership owned an interest
in an entity that owns marine containers. During the third quarter of 1999,
revenues of $0.1 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.1 million. During the same period of 1998,
revenues of $17,000 were offset by depreciation expense, direct expenses, and
administrative expenses of $36,000. The Partnership purchased the interest in
this entity during September 1998. The third quarter of 1999 represents a full
quarter of lease revenues offset by a full quarter of depreciation expense,
direct expenses, and administrative expenses when compared to a partial quarter
of lease revenues and depreciation expense, direct expenses, and administrative
expenses during the same period of 1998.
Aircraft: As of September 30, 1999, the Partnership owned an interest in an
entity that owns a Boeing 737-300 Stage III commercial aircraft and an interest
in two commercial aircraft on a direct finance lease. As of September 30, 1998,
the Partnership owned an interest in an entity that owned a Boeing 767-200
commercial aircraft and an interest in two commercial aircraft on a direct
finance lease. During the third quarter of 1999, lease revenues of $0.2 million
and were offset by depreciation expense, direct expenses, and administrative
expenses of $0.7 million. During the same period of 1998, lease revenues of $1.0
million were offset by depreciation expense, direct expenses, and administrative
expenses of $0.7 million. The decrease in lease revenues during the third
quarter of 1999 was due to the sale of the Partnership's interest in a trust
owning a Boeing 767-200. The Partnership's purchase of an interest in a trust
owning a Boeing 737-300 during 1999 did not generate any lease revenues since it
was off-lease. Although depreciation expense, direct expenses, and
administrative expenses remained the same, the decrease in these expenses caused
by the sale of the trust owning a Boeing 767-200 during 1999, was offset by the
Partnership's purchase of an interest in a trust owning a Boeing 737-300 during
1999.
Marine vessels: As of September 30, 1999 and 1998, the Partnership owned an
interest in entities that own three marine vessels. During the third quarter of
1999, revenues of $0.7 million were offset by depreciation expense, direct
expenses, and administrative expenses of $1.2 million. During the same period of
1998, revenues of $1.0 million were offset by depreciation expense, direct
expenses, and administrative expenses of $1.3 million and a loss on the
revaluation of a marine vessel of $1.0 million. The decrease in lease revenues
of $0.3 million was due to one marine vessel going off-lease during the third
quarter of 1999. The decrease in depreciation expense, direct expenses, and
administrative expenses was primarily due to a decrease of $0.1 million in
depreciation expense resulting from the use of the double-declining balance
method of depreciation which results in greater depreciation in the first years
an asset is owned. Additionally, there was no loss on the revaluation of marine
vessels required during the three months ended September 30, 1999.
(F) Net Loss
As a result of the foregoing, the Partnership's net loss for the three months
ended September 30, 1999 was $2.3 million, compared to a net loss of $5.1
million during the same period of 1998. The Partnership's ability to acquire,
operate, and liquidate assets, secure leases, and re-lease those assets whose
leases expire is subject to many factors. Therefore, the Partnership's
performance in the third quarter of 1999 is not necessarily indicative of future
periods. In the three months ended September 30, 1999, the Partnership
distributed $3.3 million to the limited partners, or $0.40 per weighted-average
limited partnership unit.
(This space intentionally left blank)
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30, 1999, when compared to the
same period of 1998. 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 these expenses are indirect in nature and not a
result of operations, but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Nine Months
Ended September 30,
1999 1998
--------------------------
Railcars $ 2,794 $ 2,510
Aircraft, aircraft engines, and components 1,490 2,900
Trailers 1,437 1,858
Marine containers 1,393 569
Marine vessels 1,288 1,105
Railcars: Railcar lease revenues and direct expenses were $3.4 million and $0.6
million, respectively, for the nine months ended September 30, 1999, compared to
$3.1 million and $0.6 million, respectively, for the same period of 1998. The
increase in railcar lease revenues was due to the purchase of a portfolio of
railcars during the fourth quarter of 1998. These railcars were on lease during
the nine months ended September 30, 1999.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $2.1 million and $0.7 million, respectively, for the nine months
ended September 30, 1999, compared to $3.2 million and $0.3 million,
respectively, during the same period of 1998. The decrease in aircraft lease
revenues was due to a Boeing 737-200 being off-lease during the nine months
ended September 30, 1999 that was on-lease during the same period of 1998.
Direct expenses increased $0.4 million due to required repairs to the Boeing
737-200 that is off-lease.
Trailers: Trailer lease revenues and direct expenses were $2.0 million and $0.6
million, respectively, for the nine months ended September 30, 1999, compared to
$2.4 million and $0.6 million, respectively, during the same period of 1998.
During the second quarter of 1999, certain over-the-road dry trailers were in
the process of transitioning to a new PLM-affiliated short-term rental facility
specializing in this type of trailer causing lease revenues for this group of
trailers to decrease $0.1 million during the nine months ended September 30,
1999 when compared to the same period of 1998. In addition, the number of
trailers owned by the Partnership declined during 1999 and 1998 due to sales and
dispositions. The result of this declining fleet has been a decrease of
approximately $0.3 million in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $1.4
million and $3,000, respectively, for the nine months ended September 30, 1999,
compared to $0.6 million and $11,000, respectively, during the same period of
1998. The increase in marine container lease revenues of $0.8 million was
primarily due to the purchase of a portfolio of marine containers during the
fourth quarter of 1998. These marine containers were on lease during the nine
months ended September 30, 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $4.9
million and $3.7 million, respectively, for the nine months ended September 30,
1999, compared to $4.1 million and $3.0 million, respectively, during the same
period of 1998. The purchase of two marine vessels during 1998 and 1999
generated $2.2 million in additional lease revenues while the existing marine
vessels saw lease revenues decrease $1.4 million due to a decline in lease
rates. Direct expenses from the two marine vessels purchased during 1999 and
1998 increased these expenses $1.1 million, while the existing marine vessels
saw a declined of $0.4 million in repairs and maintenance. Direct expenses also
decreased $0.1 million during 1999 as the result of marine vessels sales during
1998.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $12.5 million for the nine months ended September 30,
1999 decreased from $18.9 million for the same period in 1998. Significant
variances are explained as follows:
(i) Loss on revaluation of marine vessels and marine containers decreased
$4.3 million during the nine months ended September 30, 1999 when compared to
the same period of 1998. There was no revaluation of equipment required during
the nine months ended September 30, 1999.
(ii) A $1.8 million decrease in depreciation and amortization expenses from
1998 levels reflects the decrease of $2.9 million caused by the double-declining
balance method of depreciation which results in greater depreciation in the
first years an asset is owned and a decrease of $0.4 million due to the sale of
certain equipment during 1999 and 1998. These decreases were offset in part, by
an increase of $1.4 million in depreciation and amortization expenses resulting
from the purchase of additional equipment during 1999.
(iii) A $0.2 million decrease in the provision for bad debts reflects the
General Partner's evaluation of the collectibility of receivables due from
certain lessees.
(iv) A $0.1 million decrease in administrative expenses was due to lower
costs for professional services needed to collect past due receivables due from
certain nonperforming lessees.
(v) A $0.1 million increase in interest expense was due to a higher average
debt balance on the short-term credit facility when compared to 1998.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the nine months ended
September 30, 1999 totaled $0.1 million, and resulted from the sale of marine
containers, trailers, and railcars, with an aggregate net book value of $1.6
million, for $1.5 million. The net gain on the disposition of owned equipment
for the nine months ended September 30, 1998 totaled $6.2 million, and resulted
from the sale of a commercial aircraft, an aircraft engine, marine containers,
trailers, and railcars, with an aggregate net book value of $5.4 million, for
$11.7 million which included $1.4 million of unused engine reserves.
(D) Interest and other income
Interest and other income decreased $0.4 million due to lower average cash
balances available for investments when compared to the same period of 1998.
(E) Equity in Net Income 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,
1999 1998
-----------------------------
Aircraft $ 15,142 $ 8,187
Mobile offshore drilling unit 425 171
Marine containers 2 (19)
Marine vessels (538 ) (1,565)
============ ===========
Equity in net income of USPEs $ 15,031 $ 6,774
============ ===========
Aircraft: As of September 30, 1999, the Partnership owned an interest in an
entity that owns a Boeing 737-300 Stage III commercial aircraft and an interest
in two commercial aircraft on a direct finance lease. As of September 30, 1998,
the Partnership owned an interest in an entity that owned a Boeing 767-200
commercial aircraft and an interest in two commercial aircraft on a direct
finance lease. During the nine months ended September 30, 1999, lease revenues
of $1.6 million and the gain from the sale of an interest in the trust that held
a Boeing 767-200 commercial aircraft of $15.6 million were offset by
depreciation expense, direct expenses, and administrative expenses of $2.0
million. During the same period of 1998, lease revenues of $3.9 million and the
gain from the sale of an interest in the trust that held four commercial
aircraft of $6.9 million were offset by depreciation expense, direct expenses,
and administrative expenses of $2.6 million. The decrease in lease revenues
during the nine months ended September 30, 1999, was due to the sale of the
Partnership's interest in a trust owning a Boeing 767-200 during 1999 and the
sale of the Partnership's investment in a trust owning four commercial aircraft
during 1998. The Partnership's purchase of an interest in a trust owning a
Boeing 737-300 during 1999 did not generate any lease revenues since it was
off-lease. A decrease of $1.6 million in depreciation expense, direct expenses,
and administrative expenses that was caused by these sales during 1999 and 1998
was offset in part, by the Partnership's purchase of an interest in a trust
owning a Boeing 737-300 during 1999 that generated $1.1 million in additional
depreciation expense, direct expenses, and administrative expenses.
Mobile offshore drilling unit: As of September 30, 1999 and 1998, the
Partnership owned an interest in a mobile offshore drilling unit. During the
nine months ended September 30, 1999, revenues of $1.1 million were offset by
depreciation expense, direct expenses, and administrative expenses of $0.6
million. During the same period of 1998, revenues of $0.9 million were offset by
depreciation expense, direct expenses, and administrative expenses of $0.7
million. The contribution from this equipment increased during 1999, when
compared to the same period of 1998, due to a higher lease rate earned on this
equipment which increased the contribution $0.2 million and lower depreciation
and administrative expenses due to the double-declining balance method of
depreciation which decreased $0.1 million. The double-declining balance method
of depreciation results in greater depreciation in the first years an asset is
owned.
Marine containers: As of September 30, 1999, the Partnership owned an interest
in an entity that owns marine containers. During the nine months ended September
30, 1999, revenues of $0.3 million were offset by depreciation expense, direct
expenses, and administrative expenses of $0.3 million. During the same period of
1998, revenues of $17,000 were offset by depreciation expense, direct expenses,
and administrative expenses of $36,000. The Partnership purchased the interest
in this entity during September 1998. The nine months ended September 30, 1999
represents a full nine months of lease revenues offset by a full nine months of
depreciation expense, direct expenses, and administrative expenses when compared
to one month of revenues and expenses during the same period of 1998.
Marine vessels: As of September 30, 1999 and 1998, the Partnership owned an
interest in entities that own three marine vessels. During the nine months ended
September 30, 1999, revenues of $2.8 million were offset by depreciation
expense, direct expenses, and administrative expenses of $3.3 million. During
the same period of 1998, revenues of $3.4 million were offset by depreciation
expense, direct expenses, and administrative expenses of $4.0 million and a loss
on the revaluation of a marine vessel of $1.0 million. The decrease in lease
revenues of $0.6 million was primarily due to lower lease rates earned on the
marine vessels. The decrease in depreciation expense, direct expenses, and
administrative expenses was primarily due to the decrease of $0.4 million from
the double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned. Repairs and maintenance to
the marine vessels also decreased $0.2 million during the nine months ended
September 30, 1999, due to fewer repairs required when compared to the same
period of 1998. Additionally, there was no loss on the revaluation of marine
vessels required during the nine months ended September 30, 1999.
(F) Net Income
As a result of the foregoing, the Partnership's net income for the nine months
ended September 30, 1999 was $10.9 million, compared to net income of $3.6
million during the same period of 1998. The Partnership's ability to acquire,
operate, and liquidate assets, secure leases, and re-lease those assets whose
leases expire is subject to many factors, and the Partnership's performance in
the nine months ended September 30, 1999 is not necessarily indicative of future
periods. In the nine months ended September 30, 1999, the Partnership
distributed $9.8 million to the limited partners, or $1.20 per weighted-average
limited partnership unit.
II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the nine months ended September 30, 1999, the Partnership generated $9.2
million in operating cash (net cash provided by operating activities, plus
non-liquidating distributions from USPEs) to meet its operating obligations,
maintain working capital reserves, and maintain the current level of
distributions (total for the nine months ended September 30, 1999 of $10.4
million) to the partners, but also used undistributed available cash from prior
periods of $1.1 million.
During the nine months ended September 30, 1999, the Partnership sold or
disposed of owned equipment and investments in USPEs and received aggregate
proceeds of $24.9 million.
During the nine months ended September 30, 1999, the Partnership completed the
purchase of a marine vessel for $6.7 million and paid acquisition and lease
negotiation fees of $0.4 million to PLM Financial Services, Inc. (FSI or the
General Partner), a wholly-owned subsidiary of PLM International, Inc., for the
purchase of this equipment. The Partnership made a deposit of $0.7 million
toward the purchase of the marine vessel in 1998, which is included in the
December 31, 1998 balance sheet as equipment acquisition deposit. The
Partnership also purchased a portfolio of marine containers for $5.5 million and
paid no fees to FSI for this equipment.
The Partnership purchased an investment in a trust owning a Boeing 737 Stage III
commercial aircraft for $14.0 million and paid acquisition fees of $0.1 million
to FSI for this investment The Partnership also increased its investment in a
trust owning marine containers by $0.1 million and paid no fees to FSI.
The Partnership did not pay $0.9 million of acquisition and lease negotiation
fees on $16.6 million of owned equipment and investments in USPE's purchased
during 1999. The Partnership has reached certain fee limitations, per the
partnership agreement, that can be paid to FSI.
During the nine months ended September 30, 1999, due to affiliates decreased
$2.6 million of which $2.5 million was paid to an affiliated USPE. Of the $2.5
million returned to the USPE, $1.9 million was unused engine reserves that were
included in the gain on sale upon the sale of the related USPE aircraft and $0.6
million was security deposits which were applied against outstanding account
receivables.
Lessee deposits and reserve for repairs increased $0.1 million due to an
increase in marine vessel dry-docking during the nine months ended September 30,
1999 when compared to December 31, 1998.
The General Partner entered into a short-term, joint $24.5 million credit
facility. The Partnership borrowed $1.0 million under the short-term joint $24.5
million credit facility during the third quarter of 1999 and repaid its $1.0
million borrowing during October 1999. As of November 3, 1999, TEC Acquisub,
Inc., an indirect wholly-owned subsidiary of PLM International, Inc., had
borrowings of $0.9 million under the short-term joint $24.5 million credit
facility. No other eligible borrower had any outstanding borrowings. The General
Partner believes it will renew the credit facility upon its expiration with
similar terms to those in the current credit facility.
(III) EFFECTS OF YEAR 2000
It is possible that the General Partner's currently installed computer systems,
software products, and other business systems, or those of the Partnership's
vendors, service providers, and customers, working either alone or in
conjunction with other software or systems, may not accept input of, store,
manipulate, and output dates on or after January 1, 2000 without error or
interruption, a possibility commonly known as the "Year 2000" or "Y2K" problem.
As the Partnership relies substantially on the General Partner's software
systems, applications and control devices in operating and monitoring
significant aspects of its business, any Year 2000 problem suffered by the
General Partner could have a material adverse effect on the Partnership's
business, financial condition and results of operations.
The General Partner has established a special Year 2000 oversight committee to
review the impact of Year 2000 issues on its business systems in order to
determine whether such systems will retain functionality after December 31,
1999. As of September 30, 1999, the General Partner has completed inventory,
assessment, remediation and testing stages of its Year 2000 review of its core
business information systems. Specifically, the General Partner (a) has
integrated Year 2000-compliant programming code into its existing internally
customized and internally developed transaction processing software systems and
(b) the General Partner's accounting and asset management software systems have
been made Year 2000 compliant. In addition, numerous other software systems
provided by vendors and service providers have been replaced with systems
represented by the vendor or service provider to be Year 2000 functional. These
systems have been tested and appear to be compliant.
As of September 30, 1999, the costs incurred and allocated to the Partnership to
become Year 2000 compliant have not been material and the General Partner does
not anticipate any additional Year 2000-compliant expenditures.
Some risks associated with the Year 2000 problem are beyond the ability of the
Partnership or General Partner to control, including the extent to which third
parties can address the Year 2000 problem. The General Partner is communicating
with vendors, services providers, and customers in order to assess the Year 2000
readiness of such parties and the extent to which the Partnership is vulnerable
to any third-party Year 2000 issues. As part of this process, vendors and
service providers were ranked in terms of the relative importance of the service
or product provided. All service providers and vendors who were identified as
medium to high relative importance were surveyed to determine Year 2000 status.
The General Partner has received satisfactory responses to Year 2000 readiness
inquiries from surveyed service providers and vendors.
It is possible that certain of the Partnership's equipment lease portfolio may
not be Year 2000 compliant. The General Partner has contacted equipment
manufacturers of the portion of the Partnership's leased equipment portfolio
identified as date sensitive to assure Year 2000 compliance or to develop
remediation strategies. The Partnership does not expect that non-Year 2000
compliance of its leased equipment portfolio will have an adverse material
impact on its financial statements. The General Partner has surveyed the
majority of its lessees and the majority of those surveyed have responded
satisfactorily to Year 2000 readiness inquiries.
There can be no assurance that the software systems of such parties will be
converted or made Year 2000 compliant in a timely manner. Failure by the General
Partner or such other parties to make their respective systems Year 2000
compliant could have a material adverse effect on the business, financial
position, and results of operations of the Partnership. The General Partner has
made and will continue an ongoing effort to recognize and evaluate potential
exposure relating to third party Year 2000 noncompliance. The General Partner
will implement a contingency plan if the General Partner determines that
third-party noncompliance would have a material adverse effect on the
Partnership's business, financial position, or results of operation.
The General Partner is currently developing a contingency plan to address the
possible failure of any systems, vendors, or service providers due to Year 2000
problems. For the purpose of such contingency planning, a reasonably likely
worst case scenarios primarily anticipate a) an inability to access systems and
data on a temporary basis resulting in possible delay in reconciliation of funds
received or payment of monies owed, or b) an inability to continuously employ
equipment assets due to temporary Year 2000 related failure of external
infrastructure necessary to the ongoing operation of the equipment. The General
Partner is evaluating whether there are additional scenarios, which have not
been identified. Contingency planning will encompass strategies up to and
including manual processes. The General Partner anticipates that these plans
will be completed in the fourth quarter of 1999.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued "Accounting for
Derivative Instruments and Hedging Activities", (SFAS No. 133) which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999.
FASB Statement No. 137, "Accounting for Derivatives, Instruments, and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
amendment of FASB Statement No. 133," issued in June 1999, defers the effective
date of Statement No. 133. Statement No. 133, as amended, is now effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. As of
September 30, 1999, the General Partner is reviewing the effect SFAS No. 133
will have on the Partnership's financial statements.
V) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance during the
remainder of 1999 and beyond, including changes in the markets for the
Partnership's equipment and changes in the regulatory environment in which that
equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The General Partner continually monitors
both the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may decide to reduce the Partnership's
exposure to equipment markets in which it determines it cannot operate equipment
to achieve acceptable rates of return. Alternatively, the General Partner may
make a determination to enter equipment markets in which it perceives
opportunities to profit from supply/demand instabilities or other market
imperfections.
Other factors affecting the Partnership's contribution during the remainder of
1999 and beyond include:
1. The Partnership is experiencing difficulty in releasing its older aircraft.
2. A worldwide increase in available marine containers to lease has lead to
declining lease rates for marine containers.
3. Depressed economic conditions in Asia have led to declining freight rates
through the early part of 1999 for dry bulk marine vessels. In the absence of
new additional orders, the market would be expected to stabilize and improve
over the next 2-3 years.
4. The Partnership owns an anchor handling supply marine vessel that has a fixed
lease rate due to expire in the year 2000. If the economic conditions remain the
same, the General Partner would expect to re-lease this marine vessel at a rate
much lower than the rate that is currently in place.
5. Railcar loading in North America have continued to be high, however a
softening in the market is expected during the last quarter of 1999, which may
lead to lower utilization and lower contribution to the Partnership as existing
leases expire and renewal leases are negotiated.
6. The Partnership's over-the-road dry trailers were in transition to new
PLM-affiliated short-term rental facilities specializing in this type of
trailer. The movement of these trailers to a new location caused a temporary
reduction in lease revenues.
The Partnership intends to use excess cash flow, if any, after payment of
operating expenses, principal and interest on debt, redemption of limited
partnership units, and cash distributions to the partners to acquire additional
equipment during the first six years of Partnership operations which concludes
December 31, 1999. The General Partner believes that these acquisitions may
cause the Partnership to generate additional earnings and cash flow for the
Partnership.
(VI) 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 currency devaluation
risk. During the nine months ended September 30, 1999, 65% 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.
(This space intentionally left blank)
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
(This space intentionally left blank)
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.
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 VI
By: PLM Financial Services, Inc.
General Partner
Date: November 3, 1999 By: /s/ Richard K Brock
Richard K Brock
Vice President and
Corporate Controller
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