UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended September 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 0-21806
_______________________
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,
2000 1999
----------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease $ 75,871 $ 85,318
Less accumulated depreciation (40,535) (39,250)
-----------------------------------
35,336 46,068
Equipment held for sale 3,400 --
-----------------------------------
Net equipment 38,736 46,068
Cash and cash equivalents 4,426 2,486
Restricted cash 168 183
Accounts receivable, less allowance for doubtful accounts
of $2,327 in 2000 and $2,416 in 1999 1,338 1,397
Investments in unconsolidated special-purpose entities 21,672 27,736
Deferred charges, net of accumulated amortization of
$445 in 2000 and $355 in 1999 185 276
Prepaid expenses and other assets 5 58
-----------------------------------
Total assets $ 66,530 $ 78,204
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,018 $ 2,106
Due to affiliates 348 342
Lessee deposits and reserve for repairs 725 735
Note payable 30,000 30,000
-----------------------------------
Total liabilities 32,091 33,183
-----------------------------------
Partners' capital:
Limited partners (8,189,465 limited partnership units as of
September 30, 2000 and 8,191,718 as of December 31, 1999) 34,439 45,021
General Partner -- --
-----------------------------------
Total partners' capital 34,439 45,021
-----------------------------------
Total liabilities and partners' capital $ 66,530 $ 78,204
===================================
</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,
2000 1999 2000 1999
------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease revenue $ 4,192 $ 5,804 $ 13,578 $ 19,039
Interest and other income 30 14 138 108
Net gain (loss) on disposition of equipment 1,848 (3) 1,776 24,288
------------------------------------------------------------
Total revenues 6,070 5,815 15,492 43,435
------------------------------------------------------------
EXPENSES
Depreciation and amortization 2,292 4,847 6,956 13,670
Repairs and maintenance 572 1,442 1,521 3,532
Equipment operating expense 464 1,345 1,709 3,611
Insurance expense 113 109 215 422
Management fees to affiliate 244 302 748 1,016
Interest expense 514 512 1,526 1,603
General and administrative expenses
to affiliates 201 188 544 633
Other general and administrative expenses 281 248 828 739
Loss on revaluation 373 -- 373 --
Provision for (recovery of) bad debts -- 42 (81) 78
------------------------------------------------------------
Total expenses 5,054 9,035 14,339 25,304
------------------------------------------------------------
Minority interests -- 751 -- (7,948)
Equity in net income (loss) of unconsol-
idated special-purpose entities (136) 200 (1,372) 674
------------------------------------------------------------
Net income (loss) $ 880 $ (2,269) $ (219) $ 10,857
============================================================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ 708 $ (2,442) $ (736) $ 10,338
General Partner 172 173 517 519
------------------------------------------------------------
Total $ 880 $ (2,269) $ (219) $ 10,857
============================================================
Limited partner' net income (loss) per
weighted-average limited partnership unit $ 0.09 $ (0.30) $ (0.09) $ 1.26
============================================================
Cash distributions $ 3,449 $ 3,450 $ 10,346 $ 10,358
============================================================
Cash distributions per weighted-average
limited partnership unit $ 0.40 $ 0.40 $ 1.20 $ 1.20
============================================================
</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, 1998 to September 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1998 $ 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) (736) 517 (219)
Purchase of limited partnership units (17) -- (17)
Cash distribution (9,829) (517) (10,346)
-------------------------------------------------------
Partners' capital as of September 30, 2000 $ 34,439 $ -- $ 34,439
=======================================================
</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,
2000 1999
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (219) $ 10,857
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,956 13,670
Revaluation of equipment 373 --
Net gain on disposition of equipment (1,776) (24,288)
Equity in net (income) loss from unconsolidated special-purpose
entities 1,372 (674)
Changes in operating assets and liabilities:
Restricted cash 15 583
Accounts receivable, net 57 2,513
Prepaid expenses and other assets 53 (97)
Accounts payable and accrued expenses (160) (486)
Due to affiliates 6 (35)
Lessee deposits and reserve for repairs (10) (680)
Minority interests -- 1,268
---------------------------
Net cash provided by operating activities 6,667 2,631
---------------------------
INVESTING ACTIVITIES
Payments for equipment purchases and capitalized improvements (946) (34,244)
Investments in and equipment purchased and placed in
unconsolidated special-purpose entities -- (147)
Distributions from unconsolidated special-purpose entities 2,814 2,418
Payments of acquisition fees to affiliate -- (825)
Payments of lease negotiation fees to affiliate -- (67)
Principal payments on direct finance lease -- 51
Proceeds from disposition of equipment 3,768 38,031
---------------------------
Net cash provided by investing activities 5,636 5,217
---------------------------
FINANCING ACTIVITIES
Proceeds from short-term warehouse facility 600 4,712
Payment of short-term warehouse facility (600) (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 (9,829) (9,839)
Cash distribution paid to General Partner (517) (519)
Purchase of limited partnership units (17) (122)
---------------------------
Net cash used in financing activities (10,363) (9,480)
---------------------------
Net increase (decrease) in cash and cash equivalents 1,940 (1,632)
Cash and cash equivalents at beginning of period 2,486 2,558
---------------------------
Cash and cash equivalents at end of period $ 4,426 $ 926
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 1,526 $ 1,585
===========================
Noncash transfer of equipment at net book value from
unconsolidated special-purpose entities $ 1,878 --
===========================
See accompanying notes to financial statements.
</TABLE>
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly the financial position of PLM Equipment Growth Fund VI (the
Partnership) as of September 30, 2000 and December 31, 1999, the statements of
operations for the three months and nine months ended September 30, 2000 and
1999, the statements of changes in partners' capital for the period from
December 31, 1998 to September 30, 2000, and the statements of cash flows for
the nine months ended September 30, 2000 and 1999. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from the accompanying financial statements. For further information, reference
should be made to the financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K/A 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 nine months ended September 30, 2000, the Partnership 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
and nine months ended September 30, 2000, cash distributions totaled $3.4
million and $10.3 million, respectively. For the three and nine months ended
September 30, 1999, cash distributions totaled $3.5 million and $10.4 million,
respectively. All cash distributions to the limited partners for the nine months
ended September 30, 2000, were deemed to be a return of capital. 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 related to the results from the third quarter of 2000 of $2.0
million, will be paid during the fourth quarter of 2000.
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of September 30, 2000 and December 31, 1999
included $0.2 million due to FSI and its affiliates for management fees and data
processing services, and $0.2 million due to affiliated unconsolidated
special-purpose entities (USPEs).
The Partnership's proportional share of USPE-affiliated management fees of
$28,000 and $0.1 million was payable as of September 30, 2000 and December 31,
1999, respectively.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 44 $ 44 $ 155 $ 130
Data processing and administrative
expenses 9 9 34 26
</TABLE>
The Partnership and USPEs paid $0.5 million for equipment acquisition and lease
negotiation fees to FSI during the nine months ended September 30, 1999. Since
the Partnership had no equipment acquisitions during the nine months ended
September 30, 2000, neither acquisition nor lease negotiation fees were paid to
FSI during that period.
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. The Partnership had no borrowings from the
General Partner during the nine months ended September 30, 2000.
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,
2000 1999
---------------------------------
Marine containers $ 25,748 $ 24,691
Aircraft 21,630 21,630
Railcars 17,235 17,284
Trailers 5,258 11,713
Marine vessels 6,000 10,000
----------- -----------
75,871
Less accumulated depreciation (40,535) (39,250)
-----------
-----------
35,336 46,068
Equipment held for sale 3,400 --
-----------
-----------
Net equipment $ 38,736 $ 46,068
=========== ===========
As of September 30, 2000, all owned equipment in the Partnership's portfolio was
on lease except for a Boeing 737-200 commercial aircraft, an anchor handling
marine vessel that was held for sale, and 42 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 $4.9 million as of September 30, 2000 and $2.0 million
as of December 31, 1999.
During the nine months ended September 30, 2000, the General Partner transferred
marine containers with an original equipment cost of $2.6 million from the
Partnership's USPE portfolio to owned equipment.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
6. EQUIPMENT (CONTINUED)
During the nine months ended September 30, 2000, the Partnership disposed of
marine containers, trailers, and railcars, with an aggregate net book value of
$2.0 million, for $3.8 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. The
Partnership also sold a Boeing 767-200ER Stage III commercial aircraft with a
net book value of $15.6 million for proceeds of $40.1 million which includes
$3.6 million of unused engine reserves.
During the nine months ended September 30, 2000, the General Partner reduced the
carrying value of the off-lease Boeing 737-200 commercial aircraft by $0.4
million to the equipment's estimated realizable value. No similar reductions
were required during the nine months ended September 30, 1999.
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,
2000 1999
------------------------------
<S> <C> <C>
62% interest in a trust owning a Boeing 737-300 stage III
commercial aircraft $ 10,785 $ 12,574
53% interest in an entity owning a product tanker 5,449 6,482
40% interest in a trust owning two DC-9 stage III commercial aircraft
on direct finance lease 3,586 4,055
50% interest in an entity owning a container feeder vessel 938 1,178
20% interest in an entity owning a handymax dry bulk carrier 914 1,065
25% interest in an entity that owned marine containers -- 2,211
50% interest in a trust that owned four stage II commercial aircraft -- 156
64% interest in a trust that owned a stage III commercial aircraft -- 15
---------- -----------
Net investments $ 21,672 $ 27,736
========== ===========
</TABLE>
As of September 30, 2000, all jointly-owned equipment in the Partnership's USPE
portfolio was on lease. As of 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 $12.6 million.
During the nine months ended September 30, 2000, the General Partner transferred
the Partnership's interest in an entity that owned marine containers to owned
equipment.
For the nine months ended September 30, 2000, all jointly-owned equipment was
accounted for under the equity method of accounting. For the nine months ended
September 30, 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.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Marine Marine
For the quarter ended Vessel Aircraft Railcar Trailer Container
September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 567 $ 694 $ 1,042 $ 702 $ 1,187 $ -- $ 4,192
Interest income and other -- -- -- -- -- 30 30
Gain on disposition of equipment -- -- 3 1,841 4 -- 1,848
------------------------------------------------------------------------
Total revenues 567 694 1,045 2,543 1,191 30 6,070
COSTS AND EXPENSES
Operations support 659 9 223 245 3 10 1,149
Depreciation and amortization 400 582 320 164 819 7 2,292
Interest expense -- -- -- -- -- 514 514
Management fees to affiliate 28 30 87 40 59 -- 244
General and administrative expenses 15 73 21 166 3 204 482
Loss on revaluation -- 373 -- -- -- -- 373
Provision for (recovery of) bad -- -- 5 (5) -- -- --
debts
------------------------------------------------------------------------
Total costs and expenses 1,102 1,067 656 610 884 735 5,054
------------------------------------------------------------------------
Equity in net income (loss) of USPEs (167) 24 -- -- 7 -- (136)
------------------------------------------------------------------------
Net income (loss) $ (702) $ (349) $ 389 $ 1,933 $ 314 $ (705) $ 880
========================================================================
Total assets as of September 30, 2000 $ 14,715 $ 18,592 $ 7,929 $ 1,820 $ 18,858 $ 4,616 $ 66,530
========================================================================
Marine Marine
For the quarter ended Vessel Aircraft Railcar Trailer Container
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other(1) Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 2,640 $ 694 $ 1,112 $ 721 $ 637 $ -- $ 5,804
Interest income and other 1 -- -- (2) -- 15 14
Gain (loss) on disposition of -- -- (4) (6) 7 -- (3)
equipment
-------------------------------------------------------------------------
Total revenues 2,641 694 1,108 713 644 15 5,815
COSTS AND EXPENSES
Operations support 1,798 701 175 208 1 13 2,896
Depreciation and amortization 1,570 2,014 361 185 709 8 4,847
Interest expense -- -- -- -- -- 512 512
Management fees to affiliate 121 30 67 52 32 -- 302
General and administrative expenses 35 71 20 125 2 183 436
Provision for (recovery of) bad 29 -- 27 (14) -- -- 42
debts
-------------------------------------------------------------------------
Total costs and expenses 3,553 2,816 650 556 744 716 9,035
-------------------------------------------------------------------------
Minority interests 326 425 -- -- -- -- 751
Equity in net income (loss) of USPEs (96) 156 -- -- 2 138 200
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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
=========================================================================
(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
from an investment in an entity that owned a mobile offshore drilling unit.
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the nine months ended Vessel Aircraft Railcar Trailer Container
September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 2,935 $ 2,083 $ 3,237 $ 1,889 $ 3,434 $ -- $ 13,578
Interest income and other -- -- -- -- -- 138 138
Gain (loss) on disposition of -- -- 23 1,810 (57) -- 1,776
equipment
-------------------------------------------------------------------------
Total revenues 2,935 2,083 3,260 3,699 3,377 138 15,492
COSTS AND EXPENSES
Operations support 2,072 46 679 610 9 29 3,445
Depreciation and amortization 1,191 1,746 960 490 2,547 22 6,956
Interest expense -- -- -- -- -- 1,526 1,526
Management fees to affiliate 147 93 220 108 180 -- 748
General and administrative expenses 56 178 84 405 10 639 1,372
Loss on revaluation -- 373 -- -- -- -- 373
Recovery of bad debts -- (9) (58) (14) -- -- (81)
-------------------------------------------------------------------------
Total costs and expenses 3,466 2,427 1,885 1,599 2,746 2,216 14,339
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (692) (721) -- -- 44 (3) (1,372)
-------------------------------------------------------------------------
Net income (loss) $ (1,223) $ (1,065) $ 1,375 $ 2,100 $ 675 $ (2,081) $ (219)
=========================================================================
Total assets as of September 30, 2000 $ 14,715 $ 18,592 $ 7,929 $ 1,820 $ 18,858 $ 4,616 $ 66,530
=========================================================================
Marine Marine
For the nine months ended Vessel Aircraft Railcar Trailer Container
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other(1) Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 8,451 $ 3,786 $ 3,410 $ 1,996 $ 1,396 $ -- $ 19,039
Interest income and other 12 4 -- (1) -- 93 108
Gain (loss) on disposition of -- 24,414 (31) (187) 92 -- 24,288
equipment
-------------------------------------------------------------------------
Total revenues 8,463 28,204 3,379 1,808 1,488 93 43,435
COSTS AND EXPENSES
Operations support 5,561 788 616 559 3 38 7,565
Depreciation and amortization 4,713 5,937 1,105 577 1,315 23 13,670
Interest expense -- 15 -- -- -- 1,588 1,603
Management fees to affiliate 410 189 232 115 70 -- 1,016
General and administrative expenses 133 304 50 361 8 516 1,372
Provision for bad debts 29 -- 33 16 -- -- 78
-------------------------------------------------------------------------
Total costs and expenses 10,846 7,233 2,036 1,628 1,396 2,165 25,304
-------------------------------------------------------------------------
Minority interests 276 (8,224) -- -- -- -- (7,948)
Equity in net income (loss) of USPEs (233) 480 -- -- 2 425 674
-------------------------------------------------------------------------
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
=========================================================================
(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.
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
9. DEBT
The Partnership's warehouse facility, which was shared with PLM Equipment Growth
& Income Fund VII, Professional Lease Management Income Fund I, LLC, and TEC
Acquisub, Inc., an indirect wholly-owned subsidiary of the General Partner,
expired on September 30, 2000. The General Partner is currently negotiating with
a new lender for a $15.0 million warehouse credit facility with similar terms as
the facility that expired. The General Partner believes the facility will be
completed during the fourth quarter of 2000.
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, 2000 was 8,189,465 and 8,190,034,
respectively. 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.
11. CONTINGENCIES
PLM International (the Company) and various of its wholly owned subsidiaries are
defendants in a class action lawsuit filed in January 1997 and which is pending
in the United States District Court for the Southern District of Alabama,
Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named
plaintiffs are six individuals who invested in 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.
In June 1997, the Company and the affiliates who are also defendants in the Koch
action were named as defendants in another purported class action filed in the
San Francisco Superior Court, San Francisco, California, Case No.987062 (the
Romei action). The plaintiff is an investor in Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in the Funds. The complaint alleges the same facts and the same causes
of action as in the Koch action, plus additional causes of action against all of
the defendants, including alleged unfair and deceptive practices and violations
of state securities law. In July 1997, defendants filed a petition (the
petition) in federal district court under the Federal Arbitration Act seeking to
compel arbitration of plaintiff's claims. In October 1997, the district court
denied the Company's petition, but in November 1997, agreed to hear the
Company's motion for reconsideration. Prior to reconsidering its order, the
district court dismissed the petition pending settlement of the Romei action, as
discussed below. The state court action continues to be stayed pending such
resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle the
lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into two
parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to $6.6
million. The final settlement amount will depend on the number of claims filed
by class members, the amount of the administrative costs incurred in connection
with the settlement, and the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys. The
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
11. CONTINGENCIES (CONTINUED)
Company will pay up to $0.3 million of the monetary settlement, with the
remainder being funded by an insurance policy. For settlement purposes, the
monetary settlement class consists of all investors, limited partners,
assignees, or unit holders who purchased or received by way of transfer or
assignment any units in the Funds between May 23, 1989 and August 30, 2000. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the extension
(until January 1, 2007) of the date by which FSI must complete liquidation of
the Funds' equipment, (b) the extension (until December 31, 2004) of the period
during which FSI can reinvest the Funds' funds in additional equipment, (c) an
increase of up to 20% in the amount of front-end fees (including acquisition and
lease negotiation fees) that FSI is entitled to earn in excess of the
compensatory limitations set forth in the North American Securities
Administrator's Association's Statement of Policy; (d) a one-time repurchase by
each of Funds V, VI and VII of up to 10% of that fund's outstanding units for
80% of net asset value per unit; and (e) the deferral of a portion of the
management fees paid to an affiliate of FSI until, if ever, certain performance
thresholds have been met by the Funds. Subject to final court approval, these
proposed changes would be made as amendments to each Fund's limited partnership
agreement if less than 50% of the limited partners of each Fund vote against
such amendments. The equitable settlement also provides for payment of
additional attorneys' fees to the plaintiffs' attorneys from the Funds funds in
the event, if ever, that certain performance thresholds have been met by the
Funds. The equitable settlement class consists of all investors, limited
partners, assignees or unit holders who on August 30, 2000 held any units in
Funds V, VI, and VII, and their assigns and successors in interest.
The court preliminarily approved the monetary and equitable settlements in
August 2000, and information regarding each of the settlements was sent to class
members in September 2000. The monetary settlement remains subject to certain
conditions, including final approval by the court following a final fairness
hearing. The equitable settlement remains subject to certain conditions,
including disapproval of the proposed amendments to the fund partnership
agreements by less than 50% of the limited partners in one or more of Funds V,
VI, and VII, judicial approval of the proposed amendments and final approval of
the equitable settlement by the court following a final fairness hearing. A
final fairness hearing has been scheduled for November 29, 2000. The Company
continues to believe that the allegations of the Koch and Romei actions are
completely without merit and intends to continue to defend this matter
vigorously if the monetary settlement is not consummated.
The 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.
12. SUBSEQUENT EVENT
During October 2000, the Partnership received proceeds of $3.4 million from the
disposition of a marine vessel that was held for sale at September 30, 2000. The
proceeds approximated the marine vessel's net book value.
(This space intentionally left blank)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
In September 1999, PLM Financial Services, Inc. (FSI or the General Partner),
amended the corporate-by-laws of certain unconsolidated special-purpose entities
(USPEs) in which PLM Equipment Growth Fund VI (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 and
nine months ended September 30, 1999 and were included with the owned equipment
operations. For the three and nine and months ended September 30, 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.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the three months ended September 30, 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):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
2000 1999
----------------------------
<S> <C> <C>
Marine containers $ 1,184 $ 636
Railcars 819 937
Aircraft, aircraft engines, and components 685 (7)
Trailers 457 513
Marine vessels (92) 842
</TABLE>
Marine containers: Marine container lease revenues and direct expenses were $1.2
million and $3,000, respectively, for the three months ended September 30, 2000,
compared to $0.6 million and $1,000, respectively, during the same quarter of
1999. The increase in lease revenues of $0.5 million during the third quarter of
2000 was due to the purchase of marine containers during the fourth quarter of
1999 when compared to the same period of 1999. In addition, lease revenues
increased $0.1 million during the third quarter 2000 due to the transfer of the
Partnership's investment in an entity that owned marine containers from a USPE
to owned equipment.
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the three months ended September 30, 2000, compared
to $1.1 million and $0.2 million, respectively, during the same period of 1999.
A decrease in railcar lease revenues of $21,000 was due to lower re-lease rates
earned on railcars whose leases expired during 2000 and a decrease of $47,000
was due to an increase in the number of off-lease railcars during the three
months ended September 30, 2000 when compared to the same period of 1999.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $0.7 million and $9,000, respectively, for the three months ended
September 30, 2000, compared to $0.7 million and $0.7 million, respectively,
during the same period of 1999. The decrease in direct expenses of $0.7 million
during the third quarter of 2000 was due to repairs required to the Boeing
737-200 during the third quarter of 1999 that were not required during the same
period of 2000.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the three months ended September 30, 2000 and 1999.
The decrease in trailer contribution was due to lower lease revenues of $19,000
resulting from lower utilization on short-term rental trailers and higher
repairs of $37,000 during the three months ended September 30, 2000 when
compared to the same period of 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.6
million and $0.7 million, respectively, for the three months ended September 30,
2000, compared to $2.6 million and $1.8 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
September 30, 2000, lease revenues decreased $0.8 million and direct expenses
decreased $0.8 million when compared to the same period of 1999.
In addition, during the three months ended September 30, 2000, lease revenues
decreased $0.5 million due to the sale of one of the Partnership's wholly-owned
marine vessels during 1999, lease revenues decreased $0.7 million due to the
off-lease status of one marine vessel during the third quarter 2000 which was
on-lease the entire third quarter of 1999, and lease revenues decreased $0.1
million due to a lower lease rate earned on one marine vessel when compared to
the same period of 1999.
Direct expenses also decreased $0.3 million resulting from the sale of one of
the Partnership's wholly-owned marine vessels during 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.9 million for the quarter ended September 30, 2000
decreased from $6.1 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $2.6 million decrease in depreciation and amortization expenses from
1999 levels reflects the decrease of approximately $0.8 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 $0.3 million
due to the sale of certain equipment during 2000 and 1999, and a decrease of
$1.6 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 $0.1 million in depreciation and amortization expenses resulting
from the purchase of additional equipment during 1999 and an increase of $0.1
million from the transfer of the Partnership's interest in an entity that owned
marine containers from a USPE portfolio to owned equipment during 2000.
(ii)A $0.1 million decrease in management fees was due to lower lease
revenues earned by the Partnership during the three months ended September 30,
2000 when compared to the same period of 1999.
(iii) Loss on revaluation increased $0.4 million during the three months
ended September 30, 2000 and resulted from the reduction of the carrying value
of a Boeing 737-200 commercial aircraft to its estimated net realizable value.
There was no revaluation of equipment required during the same period of 1999.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the third quarter of 2000
totaled $1.8 million, and resulted from the sale of marine containers, trailers
and a railcar with an aggregate net book value of $1.5 million, for $3.4
million. 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.
(D) Minority Interests
Minority interests decreased $0.8 million in the third 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
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):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
2000 1999
------------------------------
<S> <C> <C>
Aircraft $ 24 $ 156
Marine containers 7 2
Mobile offshore drilling unit -- 138
Marine vessels (167) (96)
------------ ------------
Equity in net income (loss) of USPEs $ (136) $ 200
============ ============
</TABLE>
Aircraft: As of September 30, 2000 and 1999, the Partnership owned an interest
in two commercial aircraft on a direct finance lease and an interest in a Boeing
737-300 commercial aircraft. During the third quarter of 2000, revenues of $0.6
million and were offset by depreciation expense, direct expenses, and
administrative expenses of $0.6 million. During the same period of 1999,
revenues of $0.2 million were offset by direct expenses and administrative
expenses of $17,000.
The increase in aircraft lease revenues of $0.4 million and depreciation
expense, direct expenses, and administrative expenses of $0.5 million during the
three months ended September 30, 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
commercial aircraft. The depreciation expense, direct expenses, and
administrative expenses for the majority owned Boeing 737-300 commercial
aircraft were reported under the consolidation method of accounting under Owned
Equipment Operations during the three months ended September 30, 1999.
The Partnership's investment in a trust owning a Boeing 737-300 went on-lease
during the second quarter of 2000 generating additional lease revenues of $0.4
million during the three months ended September 30, 2000.
Marine containers: As of September 30, 1999, the Partnership owned an interest
in an entity that owned marine containers. As of September 30, 2000, the
Partnership's interest in an entity that owned marine containers had been
transferred to the Partnership's owned equipment. During the three months ended
September 30, 2000, lease revenues of $40,000 were offset by depreciation
expense, direct expenses, and administrative expenses of $30,000. During the
same period of 1999, lease revenues of $0.1 million were offset by depreciation
expense, direct expenses, and administrative expenses of $0.1 million. Marine
containers lease revenues and depreciation expense, direct expenses, and
administrative expenses decreased during the third quarter of 2000 due to the
transfer of this equipment from a USPE to owned equipment.
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 September 30, 1999, lease revenues of $0.4
million were offset by depreciation expense, direct expenses, and administrative
expenses of $0.2 million.
Marine vessels: During the three months ended September 30, 2000, lease revenues
of $0.8 million were offset by depreciation expense, direct expenses, and
administrative expenses of $0.9 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.
An increase in marine vessel lease revenues of $0.5 million and depreciation
expense, direct expenses, and administrative expenses of $0.6 million during the
three months ended September 30, 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 September 30, 1999.
Marine vessel lease revenues decreased $0.1 million during the three months
ended September 30, 2000 due to one marine vessel earning lower lease revenues
due to a four week repositioning voyage during which the marine vessel did not
earn any lease revenues. In addition, as a result of the repositioning, direct
expenses also decreased an $0.1 million due to lower operating costs during the
three months ended September 30, 2000 when compared to the same period of 1999.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net income for the three months
ended September 30, 2000 was $0.9 million, compared to a net loss of $2.3
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 third quarter of 2000 is not necessarily indicative of future periods. In
the three months ended September 30, 2000, the Partnership distributed $3.3
million to the limited partners, or $0.40 per weighted-average limited
partnership unit.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30, 2000, when compared to the
same period of 1999. The following table presents lease revenues less direct
expenses by segment (in thousands of dollars):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
----------------------------
<S> <C> <C>
Marine containers $ 3,425 $ 1,393
Railcars 2,558 2,794
Aircraft, aircraft engines, and components 2,037 2,998
Trailers 1,279 1,437
Marine vessels 863 2,890
</TABLE>
Marine containers: Marine container lease revenues and direct expenses were $3.4
million and $9,000, respectively, for the nine months ended September 30, 2000,
compared to $1.4 million and $3,000, respectively, during the same period of
1999. An increase in lease revenues of $1.9 million during the nine months ended
September 30, 2000 was due to the purchase of marine containers during the
second and fourth quarters of 1999. In addition, lease revenues increased $0.1
million due to the transfer of the Partnership's investment in an entity that
owned marine containers from a USPE to owned equipment during the third quarter
2000.
Railcars: Railcar lease revenues and direct expenses were $3.2 million and $0.7
million, respectively, for the nine months ended September 30, 2000, compared to
$3.4 million and $0.6 million, respectively, during the same period of 1999. The
decrease in railcar lease revenues of $0.2 million was primarily due to the
increase in the number of off-lease railcars during the nine months ended
September 30, 2000 when compared to the same period of 1999. The increase in
direct expenses of $0.1 million during the nine months ended September 30, 2000
was due to higher repair costs when compared to the same period of 1999
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $2.1 million and $46,000, respectively, for the nine months ended
September 30, 2000, compared to $3.8 million and $0.8 million, respectively,
during the same period of 1999. A decrease in aircraft lease revenues of $1.6
million and direct expenses of $0.1 million was due to the sale of a Boeing
767-200ER Stage III commercial aircraft during 1999. An additional decrease of
$0.1 million in lease revenues was due to a Boeing 737-200 that was off-lease
during the nine months ended September 30, 2000 that was on-lease for one month
during the same period of 1999.
A decrease in direct expenses of $0.7 million during the nine months ended
September 30, 2000, was due to repairs to the Boeing 737-200 during 1999 that
were not required during the same period of 2000.
Trailers: Trailer lease revenues and direct expenses were $1.9 million and $0.6
million, respectively, for the nine months ended September 30, 2000, compared to
$2.0 million and $0.6 million, respectively, during the same period of 1999. The
decrease in lease revenues of $0.1 million was due to a lower utilization on the
short-term rental trailers during the nine months ended September 30, 2000 when
compared to the same period of 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.9
million and $2.1 million, respectively, for the nine months ended September 30,
2000, compared to $8.5 million and $5.6 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 nine months ended
September 30, 2000, lease revenues decreased $3.5 million and direct expenses
decreased $1.9 million when compared to the same period of 1999.
In addition, lease revenues declined $1.1 million and direct expenses declined
$1.0 million as a result of the sale of one of the Partnership's wholly-owned
marine vessels during 1999.
Lease revenues declined an additional $0.3 million due to lower lease rates
earned on two wholly-owned marine vessels and declined $0.7 million due to the
off-lease status of one marine vessel during the third quarter 2000 which was
on-lease the entire year of 1999. Direct expenses also decreased an additional
$0.6 million on one of the three remaining wholly-owned marine vessels due to a
decrease in repairs required during the nine months ended September 30, 2000
when compared to the same period of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $10.9 million for the nine months ended September 30,
2000 decreased from $17.7 million for the same period in 1999. Significant
variances are explained as follows:
(i) A $6.7 million decrease in depreciation and amortization expenses from
1999 levels reflects the decrease of approximately $2.3 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 $0.9 million
due to the sale of certain equipment during 2000 and 1999, and a decrease of
$4.7 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 $1.1 million in depreciation and amortization expenses resulting
from the purchase of additional equipment during 1999 and an increase of $0.1
million from the transfer of the Partnership's interest in an entity that owned
marine containers from a USPE portfolio to owned equipment during 2000.
(ii)A $0.3 million decrease in management fees was due to lower lease
revenues earned by the Partnership during the nine months ended September 30,
2000 when compared to the same period of 1999.
(iii) A $0.2 million decrease in the provision for bad debts was based on
the General Partner's evaluation of the collectability of past due accounts
receivables being lower by $0.1 million during the nine months ended September
30, 2000 when compared to the same period of 1999 and the collection of $0.1
million from a former lessee whose past due receivable had been previously
reserved for as a bad debt. A similar collection did not occur during the same
period of 1999.
(iv)A $0.1 million decrease in interest expense was due to a lower average
short-term borrowings outstanding during the nine months ended September 30,
2000 when compared to the same period of 1999.
(v) Loss on revaluation increased $0.4 million during the nine months ended
September 30, 2000 and resulted from the reduction of the carrying value of a
Boeing 737-200 commercial aircraft to its estimated net realizable value. There
was no revaluation of equipment required during the same period of 1999.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the nine months ended
September 30, 2000 totaled $1.8 million, and resulted from the sale of marine
containers, trailers, and railcars with an aggregate net book value of $2.0
million, for $3.8 million. The net gain on the disposition of owned equipment
for the nine months ended September 30, 1999 totaled $24.3 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 and a Boeing 767-200ER Stage
III commercial aircraft with a net book value of $15.6 million for $40.1 million
which includes $3.6 million of unused engine reserves.
(D) Minority Interests
Minority interests decreased $8.0 million in the nine months ended September 30,
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
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):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
------------------------------
<S> <C> <C>
Marine containers $ 44 $ 2
Mobile offshore drilling unit (3) 425
Marine vessels (692) (233)
Aircraft (721) 480
------------ ------------
Equity in net income (loss) of USPEs $ (1,372) $ 674
============ ============
</TABLE>
Marine containers: As of September 30, 1999, the Partnership owned an interest
in an entity that owned marine containers. As of September 30, 2000, the
Partnership's interest in an entity that owned marine containers had been
transferred to the Partnership's owned equipment. During the nine months ended
September 30, 2000 and 1999, lease revenues of $0.3 million were offset by
depreciation expense, direct expenses, and administrative expenses of $0.3
million. Marine containers contribution increased $42,000 in the nine months
ended September 30, 2000 when compared to the same period of 1999 due to $0.1
million in lower depreciation expense resulting from the double-declining
balance method of depreciation which results in greater depreciation in the
first years an asset is owned offset in part, by lower lease revenues of $0.1
million caused by the transfer of this equipment to owned equipment.
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 nine months ended September 30, 1999, lease revenues of $1.1
million were offset by depreciation expense, direct expenses, and administrative
expenses of $0.6 million.
Marine vessels: During the nine months ended September 30, 2000, lease revenues
of $2.5 million were offset by depreciation expense, direct expenses, and
administrative expenses of $3.2 million. During the same period of 1999, lease
revenues of $1.0 million were offset by depreciation expense, direct expenses,
and administrative expenses of $1.2 million.
An increase in marine vessel lease revenues of $1.7 million and depreciation
expense, direct expenses, and administrative expenses of $2.1 million during the
nine months ended September 30, 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 nine months ended September 30, 1999.
Marine vessel lease revenues decreased $0.1 million during the nine months ended
September 30, 2000 due to one marine vessel earning lower lease revenues due to
a four week repositioning voyage during which the marine vessel did not earn any
lease revenues. In addition, as a result of the repositioning, direct expenses
also decreased an $0.1 million due to lower operating costs during the nine
months ended September 30, 2000 when compared to the same period of 1999.
Aircraft: As of September 30, 2000 and 1999, the Partnership owned an interest
in two commercial aircraft on a direct finance lease and a Boeing 737-300
commercial aircraft. During the nine months ended September 30, 2000, revenues
of $1.1 million and were offset by depreciation expense, direct expenses, and
administrative expenses of $1.8 million. During the same period of 1999,
revenues of $0.5 million were offset by direct expenses and administrative
expenses of $0.1 million.
An increase in aircraft lease revenues of $0.6 million and depreciation expense,
direct expenses, and administrative expenses of $1.8 million during the nine
months ended September 30, 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 a
Boeing 737-300 commercial aircraft. The depreciation expense, direct expenses,
and administrative expenses for the majority owned Boeing 737-300 commercial
aircraft were reported under the consolidation method of accounting under Owned
Equipment Operations during the nine months ended September 30, 1999.
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 an accounts
receivable that had previously been written-off as a bad debt. A similar event
did not occur during the same period of 1999.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the nine months
ended September 30, 2000 was $0.2 million, compared to a net income of $10.9
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 nine months ended September 30, 2000 is not necessarily indicative of future
periods. In the nine months ended September 30, 2000, 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, 2000, the Partnership generated $9.5
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, 2000 of $10.3
million) to the partners, but also used undistributed available cash from prior
periods of approximately $0.9 million.
During the nine months ended September 30, 2000, the Partnership disposed of
owned equipment for aggregate proceeds of $3.8 million.
During the nine months ended September 30, 2000, the General Partner transferred
the Partnership's investment in an entity that owned marine containers to the
Partnership's owned equipment. The original equipment cost of the marine
containers transferred to owned equipment was $2.6 million.
Accounts receivable decreased $59,000 during the nine months ended September 30,
2000 due to the timing of cash receipts.
Investments in USPEs decreased $6.1 million during the nine months ended
September 30, 2000 due to the transfer of the Partnership's interest in an
entity that owned marine containers with a net book value of $1.9 million to
owned equipment, cash distributions of $2.8 million to the Partnership from the
USPEs, and a $1.4 million loss that was recorded from operations from its equity
interests in USPEs for the nine months ended September 30, 2000.
Accounts payable decreased $1.1 million during the nine months ended September
30, 2000 due to the payment of $0.9 million for marine containers that were
purchased in 1999 and included as a payable at December 31, 1999 and $0.2
million reduction of trade payables due to the timing of cash payments.
The Partnership's warehouse facility, which was shared with PLM Equipment Growth
& Income Fund VII, Professional Lease Management Income Fund I, LLC, and TEC
Acquisub, Inc., an indirect wholly-owned subsidiary of the General Partner,
expired on September 30, 2000. Borrowings under this facility by the other
eligible borrowers reduced the amount available to be borrowed by the
Partnership. All borrowings under this facility were guaranteed by the General
Partner. The General Partner is currently negotiating with a new lender for a
$15.0 million warehouse credit facility with similar terms as the facility that
expired. The General Partner believes the facility will be completed during the
fourth quarter of 2000.
(III) 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 had been at historic lows for the past
several years which has caused downward pressure on per diem lease rates.
Recently, the cost of marine containers have started to increase which, if this
trend continues, should translate into rising per diem lease rates.
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. Railcar loading in North America have continued to be high, however a
softening in the market is expected during 2000, which has lead to lower lease
rates 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.
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.
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.
(IV) 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, 2000, 66% 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 (US) currency. If these lessees currency devalues
against the US dollar, the lessees could potentially encounter difficulty in
making the US dollar denominated lease payments.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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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 10, 2000 By: /s/ Richard K Brock
Richard K Brock
Vice President and
Chief Financial Officer
