UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-21806
-----------------------
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 ____
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 $ 84,274 $ 85,318
Less accumulated depreciation (40,868) (39,250)
-----------------------------------
Net equipment 43,406 46,068
Cash and cash equivalents 1,663 2,486
Restricted cash 183 183
Accounts receivable, less allowance for doubtful accounts
of $2,431 in 2000 and $2,416 in 1999 1,507 1,397
Investments in unconsolidated special-purpose entities 26,326 27,736
Deferred charges, net of accumulated amortization of
$385 in 2000 and $355 in 1999 245 276
Prepaid expenses and other assets 49 58
-----------------------------------
Total assets $ 73,379 $ 78,204
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,159 $ 2,106
Due to affiliates 359 342
Lessee deposits and reserve for repairs 918 735
Note payable 30,000 30,000
-----------------------------------
Total liabilities 32,436 33,183
-----------------------------------
Partners' capital:
Limited partners (8,189,465 limited partnership units as of
March 31, 2000 and 8,191,718 as of December 31, 1999) 40,943 45,021
General Partner -- --
-----------------------------------
Total partners' capital 40,943 45,021
-----------------------------------
Total liabilities and partners' capital $ 73,379 $ 78,204
===================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
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
Ended March 31,
2000 1999
--------------------------------
REVENUES
<S> <C> <C>
Lease revenue $ 4,700 $ 7,169
Interest and other income 78 53
Net loss on disposition of equipment (72) (191)
--------------------------------
Total revenues 4,706 7,031
--------------------------------
EXPENSES
Depreciation and amortization 2,401 4,140
Repairs and maintenance 531 976
Equipment operating expenses 638 1,080
Insurance expenses 10 270
Management fees to affiliate 266 380
Interest expense 503 534
General and administrative expenses to affiliates 187 241
Other general and administrative expenses 216 260
Provision for bad debts 20 43
-------------------------------
Total expenses 4,772 7,924
--------------------------------
Minority interests -- (188)
Equity in net income (loss) of unconsolidated special-purpose entities (546) 210
-------------------------------
Net loss $ (612) $ (871)
================================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ (784) $ (1,044)
General Partner 172 173
--------------------------------
Total $ (612) $ (871)
================================
Net loss per weighted-average limited partnership unit $ (0.10) $ (0.13)
================================
Cash distribution $ 3,449 $ 3,456
================================
Cash distribution per weighted-average limited partnership unit $ 0.40 $ 0.40
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
( 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 $ 52,954 $ -- $ 52,954
Net income 5,305 691 5,996
Purchase of limited partnership units (123) -- (123)
Cash distribution (13,115) (691) (13,806)
-------------------------------------------------------
Partners' capital as of December 31, 1999 45,021 -- 45,021
Net income (loss) (784) 172 (612)
Purchase of limited partnership units (17) -- (17)
Cash distribution (3,277) (172) (3,449)
-------------------------------------------------------
Partners' capital as of March 31, 2000 $ 40,943 $ -- $ 40,943
=======================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 loss $ (612) $ (871)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,401 4,140
Net loss on disposition of equipment 72 191
Equity in net (income) loss from unconsolidated special-purpose
entities 546 (210)
Changes in operating assets and liabilities:
Restricted cash -- (134)
Accounts receivable, net (102) (460)
Prepaid expenses and other assets 9 43
Accounts payable and accrued expenses (20) 106
Due to affiliates 17 65
Lessee deposits and reserve for repairs 183 151
Minority interests -- (624)
--------------------------
Net cash provided by operating activities 2,494 2,397
---------------------------
INVESTING ACTIVITIES
Payments for equipment purchases and capitalized improvements (928) (6,010)
Distributions from unconsolidated special-purpose entities 864 692
Payments of acquisition fees to affiliate -- (300)
Payments of lease negotiation fees to affiliate -- (67)
Principal payments on direct finance lease -- 39
Proceeds from disposition of equipment 213 950
---------------------------
Net cash provided by (used in) investing activities 149 (4,696)
---------------------------
FINANCING ACTIVITIES
Proceeds from short-term note payable -- 3,712
Cash distribution paid to limited partners (3,277) (3,283)
Cash distribution paid to General Partner (172) (173)
Repurchase of limited partnership units (17) (17)
---------------------------
Net cash (used in) provided by financing activities (3,466) 239
---------------------------
Net decrease in cash and cash equivalents (823) (2,060)
Cash and cash equivalents at beginning of period 2,486 2,558
---------------------------
Cash and cash equivalents at end of period $ 1,663 $ 498
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 503 $ 525
===========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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 VI (the
Partnership) as of March 31, 2000 and December 31, 1999, the statements of
operations for the three months ended March 31, 2000 and 1999, the statements of
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, 2000, the General Partner stopped reinvesting excess cash. Surplus
funds, if any, 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 and by certain other
events.
3. PURCHASE OF LIMITED PARTNERSHIP UNITS
In 1999, the Partnership agreed to purchase up to 4,000 limited partnership
units in 2000 for an aggregate purchase price of up to a maximum of $30,400.
During the three months ended March 31, 2000, the Partnership had purchased
2,253 limited partnership units for $17,000. 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 $3.4 million
and $3.5 million, respectively. Cash distributions to the limited partners of
$3.3 million for the three months ended March 31, 2000 and 1999, were deemed to
be a return of capital.
Cash distributions related to the results from the first quarter of 2000 of
$2.0 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 and December 31, 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 Partnership's proportional share of USPE-affiliated management fees of $0.1
million was payable as of March 31, 2000 and December 31, 1999.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
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 $ 58 $ 42
Data processing and administrative
expenses 12 9
During the three months ended March 31, 1999, the Partnership purchased a marine
vessel for $6.7 million and paid FSI $0.4 million for acquisition and lease
negotiation fees. Neither acquisition nor lease negotiation fees were paid to
FSI during the three months ended March 31, 2000.
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of dollars):
March 31, December 31,
2000 1999
---------------------------------
Marine containers $ 23,824 $ 24,691
Aircraft 21,630 21,630
Railcars 17,239 17,284
Trailers 11,581 11,713
Marine vessels 10,000 10,000
----------- -----------
84,274 85,318
Less accumulated depreciation (40,868) (39,250)
----------- -----------
Net equipment $ 43,406 $ 46,068
=========== ===========
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 Boeing 737-200 commercial aircraft and 24 railcars. 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, except for a Boeing 737-200 commercial aircraft and 20 railcars. The
net book value of the off-lease equipment was $1.9 million and $2.0 million as
of March 31, 2000 and December 31, 1999, respectively.
During the three months ended March 31, 2000, the Partnership disposed of or
sold marine containers, trailers, and railcars, with an aggregate net book value
of $0.3 million, for $0.2 million. During the three months ended March 31, 1999,
the Partnership disposed of or sold marine containers, trailers, and railcars,
with an aggregate net book value of $1.1 million, for $0.9 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(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>
62% interest in a trust owning a Boeing 737-300 stage III
commercial aircraft $ 12,019 $ 12,574
53% interest in an entity owning a product tanker 6,079 6,482
40% interest in a trust owning two DC-9 stage III commercial aircraft
on direct finance lease 3,940 4,055
25% interest in an entity owning marine containers 2,061 2,211
50% interest in an entity owning a container feeder vessel 1,082 1,178
20% interest in an entity owning a handymax dry bulk carrier 1,003 1,065
50% interest in a trust that owned four stage II commercial aircraft 125 156
64% interest in a trust that owned a stage III commercial aircraft 17 15
---------- -----------
Net investments $ 26,326 $ 27,736
========== ===========
</TABLE>
As of March 31, 2000 and December 31, 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 $12.0 million and $12.6 million,
respectively.
For the three months ended March 31, 2000, all jointly-owned equipment was
accounted for under the equity method of accounting. For the three months ended
March 31, 1999, certain jointly-owned equipment of which the Partnership had a
controlling interest greater than 50% was accounted for under the consolidation
method of accounting.
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.
(This space intentionally left blank)
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
8. Operating Segments (continued)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container All
For the quarter ended March 31,2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
- -------------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 1,194 $ 695 $ 1,122 $ 587 $ 1,102 $ -- $ 4,700
Interest income and other -- -- -- -- -- 78 78
Gain (loss) on disposition of -- -- 20 (23) (69) -- (72)
equipment
------------------------------------------------------------------------
Total revenues 1,194 695 1,142 564 1,033 78 4,706
COSTS AND EXPENSES
Operations support 803 (59) 242 181 3 9 1,179
Depreciation and amortization 396 582 320 164 931 8 2,401
Interest expense -- -- -- -- -- 503 503
Management fees to affiliate 60 31 78 33 64 -- 266
General and administrative expenses 18 33 20 132 4 196 403
Provision for bad debts -- -- 15 5 -- -- 20
------------------------------------------------------------------------
Total costs and expenses 1,277 587 675 515 1,002 716 4,772
------------------------------------------------------------------------
Equity in net income (loss) of USPEs (254) (307) -- -- 18 (3) (546)
------------------------------------------------------------------------
Net income (loss) $ (337) $ (199) $ 467 $ 49 $ 49 $ (641) $ (612)
========================================================================
Total assets as of March 31, 2000 $ 16,405 $ 21,660 $ 8,465 $ 3,879 $ 20,809 $ 2,161 $ 73,379
========================================================================
Marine Marine
Vessel Aircraft Railcar Trailer Container All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 2,678 $ 2,164 $ 1,191 $ 625 $ 511 $ -- $ 7,169
Interest income and other 5 1 -- 1 -- 46 53
Gain (loss) on disposition of -- (2) (130) (87) 28 -- (191)
equipment
-------------------------------------------------------------------------
Total revenues 2,683 2,163 1,061 539 539 46 7,031
COSTS AND EXPENSES
Operations support 1,975 23 162 153 1 12 2,326
Depreciation and amortization 1,574 1,759 325 200 275 7 4,140
Interest expense -- 9 -- -- -- 525 534
Management fees to affiliate 134 111 82 27 26 -- 380
General and administrative expenses 56 138 12 121 3 171 501
Provision for (recovery of) bad -- 31 5 7 -- -- 43
debts
-------------------------------------------------------------------------
Total costs and expenses 3,739 2,071 586 508 305 715 7,924
-------------------------------------------------------------------------
Minority interests 12 (200) -- -- -- -- (188)
Equity in net income (loss) of USPEs (96) 164 -- -- -- 142 210
-------------------------------------------------------------------------
Net income (loss) $ (1,140) $ 56 $ 475 $ 31 $ 234 $ (527) $ (871)
=========================================================================
Total assets as of March 31, 1999 $ 38,544 $ 33,460 $ 10,044 $ 4,636 $ 9,031 $ 7,621 $ 103,336
=========================================================================
<FN>
<F1>
- ------------------------------
1 Includes interest income and costs not identifiable to a particular
segment, such as interest expense, certain amortization, general and
administrative, and operations support expenses. Also includes net income
(loss) from an investment in an entity that owned a mobile offshore
drilling unit.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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 June 30, 2000. As of March 31, 2000, no eligible borrower had
any outstanding borrowings under the short term Committed Bridge Facility.
The General Partner believes it will be able to 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
months ended March 31, 2000 and 1999 was 8,191,180 and 8,205,780, 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 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.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
11. CONTINGENCIES (CONTINUED)
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 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.
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
11. CONTINGENCIES (CONTINUED)
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 VI's (the Partnership's) Operating
Results for the Three Months Ended March 31, 2000 and 1999
In September 1999, the General Partner amended the corporate-by-laws of certain
unconsolidated special-purpose entities (USPEs) in which the Partnership, or any
affiliated program, owns an interest greater than 50%. The amendment to the
corporate-by-laws provided 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 (the Amendment). As such, although the Partnership may own a majority
interest in a USPE, the Partnership does not control its management and thus the
equity method of accounting will be used after adoption of the Amendment. As a
result of the Amendment, as of September 30, 1999, all jointly owned equipment
in which the Partnership owned a majority interest, which had been consolidated,
were reclassified to investments in USPEs. Lease revenues and direct expenses
for jointly owned equipment in which the Partnership held a majority interest
were reported under the consolidation method of accounting during the three
months ended March 31, 1999 and were included with the owned equipment
operations. For the three months ended March 31, 2000, lease revenues and direct
expenses for these entities are reported under the equity method of accounting
and are included with the operations of the USPEs.
(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 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 March 31,
2000 1999
----------------------------
Marine containers $ 1,099 $ 510
Railcars 880 1,029
Aircraft, aircraft engines, and components 754 2,141
Trailers 406 472
Marine vessels 391 703
Marine containers: Marine container lease revenues and direct expenses were $1.1
million and $3,000, respectively, for the three months ended March 31, 2000,
compared to $0.5 million and $1,000, respectively, during the same quarter of
1999. The increase in lease revenues of $0.6 million during the first quarter of
2000 was due to the purchase of marine containers during the second and fourth
quarters of 1999.
Railcars: Railcar lease revenues and direct expenses were $1.1 million and $0.2
million, respectively, for the three months ended March 31, 2000, compared to
$1.2 million and $0.2 million, respectively, during the same period of 1999. The
decrease in railcar lease revenues of $0.1 million was due to the sale of
railcars during 2000 and 1999.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $0.7 million and ($0.1) million, respectively, for the three
months ended March 31, 2000, compared to $2.2 million and $23,000, respectively,
during the same period of 1999. The decrease in aircraft contribution of $1.4
million was due to the sale of the Partnership's majority interest in a Boeing
767-200ER Stage III commercial aircraft during 1999 and the decrease of $0.1
million was due to a Boeing 737-200 that was off-lease during the first quarter
of 2000 that was on-lease for one month during the same period of 1999. Direct
expenses decreased $0.1 million during the first quarter of 2000 due to a refund
from repairs to the Boeing 737-200 that were not required when compared to the
same period of 1999. A similar event did not occur during 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. The
number of trailers owned by the Partnership declined during 2000 and 1999 due to
sales and dispositions. The result of this declining fleet has been a decrease
in trailer contribution.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.2
million and $0.8 million, respectively, for the three months ended March 31,
2000, compared to $2.7 million and $2.0 million, respectively, during the same
period of 1999.
The September 30, 1999 Amendment that changed the accounting method of majority
held equipment from the consolidation method of accounting to the equity method
of accounting impacted the reporting of lease revenues and direct expenses of
one marine vessel. As a result of the Amendment, during the three months ended
March 31, 2000, lease revenues decreased $1.4 million and direct expenses
decreased $0.6 million when compared to the same period of 1999.
In addition, a decline in lease revenues of $0.1 million and a decline in direct
expenses of $0.2 million was caused by the sale of one of the Partnership's
wholly-owned marine vessels during 1999. Direct expenses decreased an additional
$0.3 million on the three remaining wholly-owned marine vessels due to a $0.2
million decrease in required repairs and $0.1 million decrease in insurance
expense.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.6 million for the quarter ended March 31,
2000 decreased from $5.6 million for the same period in 1999. Significant
variances are explained as follows:
(i) A $1.7 million decrease in depreciation and amortization expenses from
1999 levels reflects the decrease of approximately $0.2 million caused by the
double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned, a decrease of $1.5 million
due to the sale of certain equipment during 2000 and 1999, and a decrease of
$0.7 million as a result of the Amendment which changed the accounting method
used for majority held equipment from the consolidation method of accounting to
the equity method of accounting. These decreases were offset, in part, by an
increase of $0.7 million in depreciation and amortization expenses resulting
from the purchase of additional equipment during 2000 and 1999.
(ii)A $0.1 million decrease in management fees was due to lower lease
revenues earned by the Partnership during the three months ended March 31, 2000
when compared to the same period of 1999.
(iii) A $0.1 million decrease in general and administrative expenses was
caused by the sale of the Partnership's majority interest in a Boeing 767-200ER
Stage III commercial aircraft during 1999 and to lower costs associated with the
relocation of certain aircraft during the three months ended March 31, 1999 that
were not made during the same period of 2000.
(C) Net Loss on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the first quarter of 2000
totaled $0.1 million, and resulted from the sale of marine containers, trailers,
and railcars with an aggregate net book value of $0.3 million, for $0.2 million.
The net loss on the disposition of owned equipment for the first quarter of 1999
totaled $0.2 million, and resulted from the sale of marine containers, trailers,
and railcars with an aggregate net book value of $1.1 million, for $0.9 million.
<PAGE>
(D) Minority interests
Minority interests decreased $0.2 million in the first quarter of 2000 when
compared to the same period of 1999 due to the September 30, 1999 Amendment that
changed the accounting method of majority held equipment from the consolidation
method of accounting to the equity method of accounting.
(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 of accounting is shown in the following table by
equipment type (in thousands of dollars):
For the Three Months
Ended March 31,
2000 1999
------------------------------
Marine containers $ 18 $ --
Mobile offshore drilling unit (3) 142
Marine vessels (254) (96)
Aircraft (307) 164
=========== ============
Equity in net income (loss) of USPEs $ (546) $ 210
=========== ============
Marine containers: During the three months ended March 31, 2000 and 1999, lease
revenues of $0.1 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.1 million. Marine containers contribution
increased $18,000 in the first quarter of 2000 when compared to the same period
of 1999 due to $8,000 in higher lease revenues caused by the purchase of
additional marine containers during June 1999 and lower depreciation expense of
$11,000 due to the double-declining balance method of depreciation which results
in greater depreciation in the first years an asset is owned.
Mobile offshore drilling unit: The Partnership's interest in an entity that
owned a mobile offshore drilling unit was sold during the fourth quarter of
1999. During the three months ended March 31, 1999, lease revenues of $0.3
million were offset by depreciation expense, direct expenses, and administrative
expenses of $0.2 million.
Marine vessels: During the three months ended March 31, 2000, lease revenues of
$0.9 million were offset by depreciation expense, direct expenses, and
administrative expenses of $1.2 million. During the same period of 1999, lease
revenues of $0.3 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.4 million.
The increase in marine vessel lease revenues of $0.6 million and depreciation
expense, direct expenses, and administrative expenses of $0.8 million during the
three months ended March 31, 2000, was caused by the September 30, 1999
Amendment that changed the accounting method of majority held equipment from the
consolidation method of accounting to the equity method of accounting for one
marine vessel. The lease revenues and depreciation expense, direct expenses, and
administrative expenses for the majority owned marine vessel were reported under
the consolidation method of accounting under Owned Equipment Operations during
the three months ended March 31, 1999.
Aircraft: As of March 31, 2000, the Partnership owned an interest in two
commercial aircraft on a direct finance lease and a Boeing 737-300 commercial
aircraft. As of March 31, 1999, the Partnership owned an interest in two
commercial aircraft on a direct finance lease. During the first quarter of 2000,
revenues of $0.2 million and were offset by depreciation expense, direct
expenses, and administrative expenses of $0.5 million. During the same period of
1999, revenues of $0.2 million were offset by direct expenses and administrative
expenses of $17,000. The Partnership's investment in a trust owning a Boeing
737-300 did not generate any lease revenues during the three months ended March
31, 2000 and caused depreciation expense, direct expenses, and administrative
expenses to increase $0.6 million. The increase in expenses caused by the
investment in a trust owning a Boeing 737-300 was partially offset by a $0.1
million collection of a receivable that had been written-off as a bad debt. A
similar event did not occur during the same period of 1999.
<PAGE>
(F) Net Loss
As a result of the foregoing, the Partnership's net loss for the three months
ended March 31, 2000 was $0.6 million, compared to a net loss of $0.9 million
during the same period of 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. Therefore, the Partnership's performance in the
first quarter of 2000 is not necessarily indicative of future periods. In the
three months ended March 31, 2000, the Partnership distributed $3.3 million to
the limited partners, or $0.40 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 $3.4
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 three months ended March 31, 2000 of $3.4 million)
to the partners.
During the three months ended March 31, 2000, the Partnership sold or disposed
of owned equipment for aggregate proceeds of $0.2 million.
Accounts payable decreased $1.0 million during the first quarter of 2000 due to
the payment of $0.9 million for marine containers that were purchased in 1999.
Lessee deposits and reserve for repairs increased $0.2 during the three months
ended March 31, 2000 when compared to December 31, 1999. Lessee deposits
increased $0.1 million due to the prepayment of an account receivable invoice
that was scheduled to be paid during April 2000. Additionally, marine vessel
dry-docking reserves increased $0.2 million due to the accrual for future
repairs.
The General Partner entered the Partnership into a short-term, joint $24.5
million credit facility. As of May 5, 2000, no eligible borrower had any
outstanding borrowings. The General Partner believes it will renew the credit
facility upon its June 30, 2000 expiration with similar terms to those in the
current credit facility.
(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
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.
Other 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.
2. Depressed economic conditions in Asia have led to declining freight rates
through 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.
3. 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.
4. Railcar loading in North America have continued to be high, however a
softening in the market is expected during 2000, which may lead to lower
utilization and lower contribution to the Partnership as existing leases expire
and renewal leases are negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The 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 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 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 currency devaluation
risk. During the three months ended March 31, 2000, 69% 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)
<PAGE>
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)
<PAGE>
- -18-
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: May 5, 2000 By: /s/ Richard K Brock
--------------------------------
Richard K Brock
Vice President and
Chief Financial Officer
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