UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 33-40093
_______________________
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>
March 31, December 31,
1999 1998
----------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease, at cost $ 157,748 $ 153,206
Less accumulated depreciation (76,463) (73,704)
-----------------------------------
Net equipment 81,285 79,502
Cash and cash equivalents 498 2,558
Restricted cash 1,550 1,416
Accounts receivable, less allowance for doubtful accounts
of $1,893 in 1999 and $1,930 in 1998 5,609 5,186
Investments in unconsolidated special-purpose entities 13,717 14,200
Net investment in direct finance lease 12 41
Deferred charges, net of accumulated amortization of
$361 in 1999 and $452 in 1998 527 519
Prepaid expenses and other assets 138 181
Equipment acquisition deposit -- 667
-----------------------------------
Total assets $ 103,336 $ 104,270
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,408 $ 1,302
Due to affiliates 509 444
Lessee deposits and reserve for repairs 6,427 6,276
Short-term note payable 3,712 --
Note payable 30,000 30,000
-----------------------------------
Total liabilities 42,056 38,022
-----------------------------------
Minority interests 12,670 13,294
Partners' capital:
Limited partners (8,204,581 limited partnership units as of
March 31, 1999 and 8,206,339 as of December 31, 1998) 48,610 52,954
General Partner -- --
-----------------------------------
Total partners' capital 48,610 52,954
-----------------------------------
Total liabilities and partners' capital $ 103,336 $ 104,270
===================================
</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
Ended March 31,
1999 1998
--------------------------------
<S> <C> <C>
REVENUES
Lease revenue $ 7,169 $ 7,044
Interest and other income 53 94
Net gain (loss) on disposition of equipment (191) 62
--------------------------------
Total revenues 7,031 7,200
--------------------------------
EXPENSES
Depreciation and amortization 4,140 5,133
Repairs and maintenance 976 1,104
Equipment operating expenses 1,080 1,085
Insurance expense to affiliate -- (13)
Other insurance expenses 270 170
Management fees to affiliate 380 385
Interest expense 534 520
General and administrative expenses to affiliates 241 258
Other general and administrative expenses 260 246
Provision for bad debts 43 127
--------------------------------
Total expenses 7,924 9,015
--------------------------------
Minority interests (188) (48)
Equity in net income of unconsolidated special-purpose entities 210 3,667
--------------------------------
Net income (loss) $ (871) $ 1,804
================================
Partners' share of net income (loss)
Limited partners $ (1,044) $ 1,587
General Partner 173 217
--------------------------------
Total $ (871) $ 1,804
================================
Net income (loss) per weighted-average limited partnership unit $ (0.13) $ 0.19
================================
Cash distribution $ 3,456 $ 4,339
================================
Cash distribution per weighted-average limited partnership unit $ 0.40 $ 0.50
================================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
( A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1997 to March 31, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1997 $ 67,152 $ -- $ 67,152
Net income 666 779 1,445
Repurchase of limited partnership units (417) -- (417)
Cash distribution (14,447) (779) (15,226)
-------------------------------------------------------
Partners' capital as of December 31, 1998 52,954 -- 52,954
Net income (loss) (1,044) 173 (871)
Repurchase of limited partnership units (17) -- (17)
Cash distribution (3,283) (173) (3,456)
-------------------------------------------------------
Partners' capital as of March 31, 1999 $ 48,610 $ -- $ 48,610
=======================================================
</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 Three Months
Ended March 31,
1999 1998
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (871) $ 1,804
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,140 5,133
Net (gain) loss on disposition of equipment 191 (62)
Equity in net income from unconsolidated special-purpose entities (210) (3,667)
Changes in operating assets and liabilities:
Restricted cash (134) 94
Accounts receivable, net (460) 230
Prepaid expenses and other assets 43 86
Accounts payable and accrued expenses 106 (193)
Due to affiliates 65 (20)
Lessee deposits and reserve for repairs 151 241
Minority interests (624) (840)
----------------------------
Net cash provided by operating activities 2,397 2,806
---------------------------
INVESTING ACTIVITIES
Payments for equipment purchases and capitalized improvements (6,010) (14,190)
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities -- (1,265)
Distributions from unconsolidated special-purpose entities 692 1,351
Distributions from liquidation of unconsolidated special-purpose entities -- 9,547
Payments of acquisition fees to affiliate (300) (699)
Payments of lease negotiation fees to affiliate (67) (155)
Principal payments on direct finance lease 39 27
Proceeds from disposition of equipment 950 1,003
---------------------------
Net cash used in investing activities (4,696) (4,381)
---------------------------
FINANCING ACTIVITIES
Proceeds from short-term note payable 3,712 --
Cash distribution paid to limited partners (3,283) (4,122)
Cash distribution paid to General Partner (173) (217)
Repurchase of limited partnership units (17) (279)
---------------------------
Net cash provided by (used in) financing activities 239 (4,618)
---------------------------
Net decrease in cash and cash equivalents (2,060) (6,193)
Cash and cash equivalents at beginning of period 2,558 14,204
---------------------------
Cash and cash equivalents at end of period $ 498 $ 8,011
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 525 $ 510
===========================
</TABLE>
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly the financial position of PLM Equipment Growth Fund VI (the
Partnership) as of March 31, 1999 and December 31, 1998, the statements of
operations for the three months ended March 31, 1999 and 1998, the statements of
changes in partners' capital for the period from December 31, 1997 to March 31,
1999, and the statements of cash flows for the three months ended March 31, 1999
and 1998. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K/A for the year ended December 31, 1998, on file at the Securities and
Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
Beginning in the Partnership's seventh year of operations, which commences on
January 1, 2000, the General Partner will stop reinvesting excess cash, if any,
which, less reasonable reserves, will be distributed to the Partners. Beginning
in the Partnership's ninth year of operations, which commences on January 1,
2002, the General Partner intends to begin an orderly liquidation of the
Partnership's assets. The Partnership will terminate on December 31, 2011,
unless terminated earlier upon sale of all equipment or by certain other events.
3. REPURCHASE OF LIMITED PARTNERSHIP UNITS
In 1998, the Partnership agreed to repurchase up to 23,700 limited partnership
units in 1999 for an aggregate purchase price of up to a maximum of $0.2
million. During the three months ended March 31, 1999, the Partnership had
repurchased 1,758 limited partnership units for $17,000. The General Partner may
repurchase 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, 1999 and 1998, cash distributions totaled $3.5 million
and $4.3 million, respectively. Cash distributions to the limited partners of
$3.3 million and $2.6 million for the three months ended March 31, 1999 and
1998, respectively, were deemed to be a return of capital.
Cash distributions related to the results from the first quarter of 1999 of $2.0
million, will be paid during the second quarter of 1999.
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of March 31, 1999 included $0.3 million due to
FSI and its affiliates for management fees and $0.2 million due to affiliated
unconsolidated special-purpose entities (USPEs). The balance due to affiliates
as of December 31, 1998 included $0.2 million due to FSI and its affiliates for
management fees and $0.2 million due to an affiliated USPE.
The Partnership's proportional share of USPE-affiliated management fees of
$48,000 and $27,000 was payable as of March 31, 1999 and December 31, 1998,
respectively.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
The Partnership's proportional share of the affiliated expenses incurred by
USPEs during 1999 and 1998 is listed in the following table (in thousands of
dollars):
For the Three Months
Ended March 31,
1999 1998
---------------------------
Management fees $ 42 $ 52
Data processing and administrative
expenses 9 19
Insurance expense -- 1
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.
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of dollars):
March 31, December 31,
1999 1998
---------------------------------
Marine vessels $ 53,039 $ 46,062
Aircraft and rotable components 64,113 64,113
Railcars 17,224 18,638
Trailers 12,513 13,204
Marine containers 10,859 11,189
----------- -----------
157,748 153,206
Less accumulated depreciation (76,463) (73,704)
----------- -----------
Net equipment $ 81,285 $ 79,502
=========== ===========
As of March 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, 52 marine containers, and 9 railcars.
As of December 31, 1998, all owned equipment in the Partnership's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for 59 marine containers and 15 railcars. The net book value
of the off-lease equipment was $2.2 million and $0.3 million as of March 31,
1999 and December 31, 1998, respectively.
During the three months ended March 31, 1999, the Partnership completed the
purchase of a marine vessel for $7.0 million, including acquisition fees of $0.3
million paid to FSI for the purchase of this equipment. The Partnership made a
deposit of $0.7 million toward this purchase in 1998, which is included in the
December 31, 1998 balance sheet as equipment acquisition deposit.
During the 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.
During the three months ended March 31, 1998, the Partnership disposed of or
sold marine containers, trailers, and a railcar with an aggregate net book value
of $1.0 million for $1.0 million.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 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>
March 31, December 31,
1999 1998
-----------------------------
<S> <C> <C>
40% interest in a trust owning two Stage II commercial aircraft
on direct finance lease $ 4,344 $ 4,435
30% interest in an entity owning a mobile offshore drilling unit 4,110 4,279
25% interest in an entity owning marine containers 2,370 2,475
50% interest in an entity owning a container feeder vessel 1,354 1,421
20% interest in an entity owning a handymax bulk carrier 1,291 1,311
50% interest in a trust that owned four 737-200A Stage II
commercial aircraft 248 279
---------- -----------
Net investments $ 13,717 $ 14,200
========== ===========
</TABLE>
8. OPERATING SEGMENTS
The Partnership operates in five primary operating segments: marine vessel
leasing, aircraft leasing, railcar leasing, trailer leasing, and marine
container leasing. Each equipment leasing segment primarily engages in
short-term to mid-term operating leases to a variety of customers.
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
------------------------------------ --------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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 bad debts -- 31 5 7 -- -- 43
------------------------------------------------------------------------
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> Includes interest income and costs not identifiable to a particular
segment, such as general and administrative, interest expense, and certain
operations support. Also includes aggregate net income (loss) from an investment
in an entity owning a mobile offshore drilling unit.
</FN>
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container All
For the quarter ended March 31, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 2,688 $ 2,243 $ 1,031 $ 849 $ 233 $ -- $ 7,044
Interest income and other -- 19 -- 4 4 67 94
Gain (loss) on disposition of -- (5) (6) 7 66 -- 62
equipment
-------------------------------------------------------------------------
Total revenues 2,688 2,257 1,025 860 303 67 7,200
COSTS AND EXPENSES
Operations support 1,821 142 166 199 2 16 2,346
Depreciation and amortization 1,249 3,070 315 291 176 32 5,133
Interest expense -- 10 -- -- -- 510 520
Management fees to affiliate 135 111 70 57 12 -- 385
General and administrative expenses 78 35 10 160 4 217 504
Provision for (recovery of) bad -- 122 33 (28) -- -- 127
debts
-------------------------------------------------------------------------
Total costs and expenses 3,283 3,490 594 679 194 775 9,015
-------------------------------------------------------------------------
Minority interests 48 (96) -- -- -- -- (48)
Equity in net income (loss) of USPEs (148) 3,750 -- -- -- 65 3,667
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ (695) $ 2,421 $ 431 $ 181 $ 109 $ (643) $ 1,804
=========================================================================
Total assets As of March 31, 1998 $ 33,799 $ 49,325 $ 8,812 $ 6,667 $ 4,464 $ 14,575 $ 117,642
=========================================================================
<FN>
<F1> Includes interest income and costs not identifiable to a particular
segment, such as general and administrative, interest expense, and certain
operations support. Also includes aggregate net income (loss) from an investment
in an entity owning a mobile offshore drilling unit.
</FN>
</TABLE>
9. DEBT
The General Partner has entered into a short-term, joint $24.5 million credit
facility (the Committed Bridge Facility) on behalf of the Partnership that is
due to expire on December 14, 1999. Among the other eligible borrowers, the
Partnership had borrowing of $3.7 million and TEC Acquisub, Inc., an indirect
wholly-owned subsidiary of PLM International, Inc., had borrowings of $11.3
million under the short-term joint, $24.5 million credit facility as of March
31, 1999. The Partnership plans to repay the short-term note payable with the
proceeds from planned asset dispositions. No other eligible borrower had any
outstanding borrowings.
The General Partner believes it will renew the credit facility upon its
expiration with similar terms to those in the current credit facility.
10. NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income (loss) per weighted-average Partnership unit was computed by dividing
net income (loss) attributable to limited partners by the weighted-average
number of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the three
months ended March 31, 1999 and 1998 was 8,205,780 and 8,239,561, respectively.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
11. CONTINGENCIES
PLM International (the Company) and various of its affiliates are named as
defendants in a lawsuit filed as a purported class action on January 22, 1997 in
the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the
Koch action). Plaintiffs, who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who invested in
certain California limited partnerships (the Funds) for which the Company's
wholly-owned subsidiary, FSI, acts as the general partner, including the
Partnership, PLM Equipment Growth Funds IV and V, and PLM Equipment Growth &
Income Fund VII. The state court ex parte certified the action as a class action
(i.e., solely upon plaintiffs' request and without the Company being given the
opportunity to file an opposition). The complaint asserts eight causes of action
against all defendants, as follows: fraud and deceit, suppression, negligent
misrepresentation and suppression, intentional breach of fiduciary duty,
negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action against PLM
Securities Corp. for breach of third party beneficiary contracts in violation of
the National Association of Securities Dealers rules of fair practice.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, and
control persons. Based on these duties, plaintiffs assert liability against
defendants for improper sales and marketing practices, mismanagement of the
Funds, and concealing such mismanagement from investors in the Funds. Plaintiffs
seek unspecified compensatory and recissory damages, as well as punitive
damages, and have offered to tender their limited partnership units back to the
defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 1997,
defendants filed a motion to compel arbitration of plaintiffs' claims, based on
an agreement to arbitrate contained in the limited partnership agreement of each
partnership, and to stay further proceedings pending the outcome of such
arbitration. Notwithstanding plaintiffs' opposition, the district court granted
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
On June 5, 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 PLM Equipment Growth Fund V,
and filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships for
which FSI acts as the general partner, including the Funds. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
plus five additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
11. CONTINGENCIES (CONTINUED)
On July 31, 1997, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings pending the outcome of the
arbitration. In connection with this motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, plaintiff filed an amended
complaint with the state court in August 1997, alleging two new causes of action
for violations of the California Securities Law of 1968 (California Corporations
Code Sections 25400 and 25500) and for violation of California Civil Code
Sections 1709 and 1710. Plaintiff also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will depend on the number of claims filed by authorized claimants who are
members of the class, the amount of the administrative costs incurred in
connection with the settlement, and the amount of attorneys' fees awarded by the
Alabama district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed to an equitable
settlement (the equitable settlement) which provides, among other things: (a)
for the extension of the operating lives of the Partnership and Funds V and VII
by judicial amendment to each of their partnership agreements, such that FSI,
the general partner of each such partnership, will be permitted to reinvest cash
flow, surplus partnership funds or retained proceeds in additional equipment
into the year 2004, and will liquidate the partnerships' equipment in 2006; (b)
that FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) in excess of the compensatory limitations set forth in the
North American Securities Administrators Association, Inc. Statement of Policy
by judicial amendment to the partnership agreements for the Partnership and
Funds V and VII; (c) for a one-time redemption of up to 10% of the outstanding
units of the Partnership and Funds V and VII at 80% of such partnership's net
asset value; and (d) for the deferral of a portion of FSI's management fees. The
equitable settlement also provides for payment of the equitable class attorneys'
fees from partnership funds in the event that distributions paid to investors in
the Partnership and Funds V and VII during the extension period reach a certain
internal rate of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The parties completed the
documentation of the monetary and equitable settlements in April 1999. The
monetary settlement remains subject to numerous conditions, including but not
limited to, notice to and certification of the monetary class for purposes of
the monetary settlement, and preliminary and final approval of the monetary
settlement by the Alabama district court. The equitable settlement remains
subject to numerous conditions, including but not limited to: (a) notice to the
current unitholders in the Partnership and Funds V and VII (the equitable class)
and certification of the equitable class for purposes of the equitable
settlement, (b) preparation, review by the Securities and Exchange Commission
(SEC), and dissemination to the members of the equitable class of solicitation
statements regarding the proposed extensions, (c) disapproval by less than 50%
of the limited partners in the Partnership and Funds V and VII of the proposed
amendments to the limited partnership agreements, (d) judicial approval of the
proposed amendments to the limited partnership agreements, and (e) preliminary
and final approval of the equitable settlement by the Alabama district court. If
the district
PLM EQUIPMENT GROWTH FUND VI
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
11. CONTINGENCIES (CONTINUED)
court grants preliminary approval, notices to the monetary class and equitable
class will be sent following review by the SEC of the solicitation statements to
be prepared in connection with the equitable settlement. The monetary
settlement, if approved, will go forward regardless of whether the equitable
settlement is approved or not. The Company continues to believe that the
allegations of the Koch and Romei actions are completely without merit and
intends to continue to defend this matter vigorously if the monetary settlement
is not consummated.
The Partnership, together with affiliates, has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership property and to recover damages for failure to pay rent and failure
to maintain such property in accordance with relevant lease contracts. The
Partnership has repossessed all of its property previously leased to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline filed a counter-claim against the Partnership in
excess of the Partnership's claims against the airline. The General Partner
believes that the airline's counterclaims are completely without merit, and the
General Partner will vigorously defend against such counterclaims.
The Partnership is involved as plaintiff or defendant in various other legal
actions incident to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
12. RESTATEMENT
The financial statements have been restated to reflect the consolidation of the
Partnership's majority interests in greater than 50% owned USPE's previously
reported under the equity method of accounting for the period ending March 31,
1999.
As a result of the consolidation, total assets, total liabilities, and minority
interests changed as of March 31, 1999 and December 31, 1998 as follows:
1999 1998
As reported Amended As Reported Amended
------------------------- --------------------------
Total assets $87,759 $103,336 $88,337 $104,270
Total liabilities 39,149 42,056 35,383 38,022
Minority interests -- 12,670 -- 13,294
Additionally, as a result of the consolidation, total revenues, total expenses,
minority interests, and equity in net income of USPEs changed for the three
months ended March 31, 1999 and 1998 as follows:
1999 1998
As reported Amended As reported Amended
----------------------- ---------------------------
Total revenues $ 4,270 $ 7,031 $ 4,620 $ 7,200
Total expenses 5,695 7,924 6,599 9,015
Minority interests -- (188 ) -- (48)
Equity in net income
of USPEs 554 210 3,783 3,667
Net income (loss) $ (871 ) $ (871 ) $ 1,804 $ 1,804
The consolidation of the Partnership's majority interests in USPE's did not
change partners' capital or net income (loss).
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, 1999 and 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
remained relatively the same during the three months ended March 31, 1999, when
compared to the same period of 1998. Gains or losses from the sale of equipment,
interest and other income, and certain expenses such as depreciation and
amortization and general and administrative expenses relating to the operating
segments (see Note 8 to the financial statements), are not included in the owned
equipment operation discussion because they are indirect in nature and not a
result of operations, but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Three Months
Ended March 31,
1999 1998
-------------------------
Aircraft, aircraft engines, and components $ 2,141 $ 2,101
Railcars 1,029 865
Marine vessels 703 867
Marine containers 510 231
Trailers 472 650
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $2.2 million and $23,000, respectively, for the three months ended
March 31, 1999, compared to $2.2 million and $0.1 million, respectively, during
the same period of 1998. The increase in aircraft contribution was due to lower
required repairs during the three months ended March 31, 1999 when compared to
the same period of 1998.
Railcars: Railcar lease revenues and direct expenses were $1.2 million and $0.2
million, respectively, for the three months ended March 31, 1999, compared to
$1.0 million and $0.2 million, respectively, during the same period of 1998. The
increase in railcar lease revenues was due to the purchase of a group of
railcars during the fourth quarter of 1998.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.7
million and $2.0 million, respectively, for the three months ended March 31,
1999, compared to $2.7 million and $1.8 million, respectively, during the same
period of 1998. The decrease in marine vessel contribution was due to higher
repairs to the marine vessels during the first quarter of 1999 when compared to
the same period of 1998.
Marine containers: Marine container lease revenues and direct expenses were $0.5
million and $1,000, respectively, for the three months ended March 31, 1999,
compared to $0.2 million and $2,000, respectively, during the same quarter of
1998. The increase in lease revenues of $0.3 million during the first quarter of
1999, when compared to the same period of 1998, was due to the purchase of a
portfolio of containers during the fourth quarter of 1998.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2
million, respectively, for the three months ended March 31, 1999, compared to
$0.8 million and $0.2 million, respectively, during the same period of 1998. The
number of trailers owned by the Partnership declined during 1999 and 1998 due to
sales and dispositions. The result of this declining fleet has been a decrease
in trailer contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.6 million for the quarter ended March 31, 1999
decreased from $6.7 million for the same period in 1998. Significant variances
are explained as follows:
(i) A $1.0 million decrease in depreciation and amortization expenses from
1998 levels primarily reflects the double-declining balance method of
depreciation which results in greater depreciation in the first years an asset
is owned.
(ii) A $0.1 million decrease in the provision for bad debts reflects the
General Partner's evaluation of the collectibility of receivables due from
certain lessees.
(C) Net Gain (Loss) on Disposition of Owned Equipment
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, railcars,
and trailers, with an aggregate net book value of $1.1 million, for $0.9
million. The net gain on the disposition of owned equipment for the first
quarter of 1998 totaled $0.1 million, and resulted from the sale of marine
containers, trailers and a railcar with an aggregate net book value of $1.0
million, for $1.0 million.
(D) Minority interests
Minority interests increased $0.1 million due to an increase in lease revenues
of $0.2 million and a decrease in direct and indirect expenses of $0.2 million
during 1999 when compared to the same period of 1998, as it relates to the
minority's percentage of ownership in these interests.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Three Months
Ended March 31,
1999 1998
----------------------------
Aircraft $ 164 $ 3,750
Mobile offshore drilling unit 142 65
Marine containers 0 0
Marine vessels (96) (148)
============ =========
Equity in net income of USPEs $ 210 $ 3,667
=========== ==========
Aircraft: As of March 31, 1999, the Partnership owned an interest in two
commercial aircraft on a direct finance lease. As of March 31, 1998, the
Partnership owned an interest in two commercial aircraft on a direct finance
lease and an interest in a trust that holds two commercial aircraft. During the
first quarter of 1999, revenues of $0.2 million were offset by depreciation
expense, direct expenses, and administrative expenses of $17,000. During the
same period of 1998, revenues of $0.9 million and the gain from the sale of an
interest in the trust that held four commercial aircraft of $3.3 million were
offset by depreciation expense, direct expenses, and administrative expenses of
$0.5 million. The decrease in revenues during the first quarter of 1999 was due
to the sale of the Partnership's interest in a trust owning four commercial
aircraft during 1998. The decrease in depreciation expense, direct expenses, and
administrative expenses was also due to the sale during 1998.
Mobile offshore drilling unit: As of March 31, 1999 and 1998, the Partnership
owned an interest in an entity owning a mobile offshore drilling unit. During
the first quarter of 1999, revenues of $0.3 million were offset by depreciation
expense, direct expenses, and administrative expenses of $0.2 million. During
the same period of 1998, revenues of $0.3 million were offset by depreciation
expense, direct expenses, and administrative expenses of $0.2 million. The
increase in mobile offshore drilling unit contribution was primarily due to the
double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
Marine containers: As of March 31, 1999, the Partnership owned an interest in an
entity that owns marine containers. During the first quarter of 1999, revenues
of $0.1 million were offset by depreciation expense, direct expenses, and
administrative expenses of $0.1 million. The Partnership purchased the interest
in this entity during September 1998.
Marine vessels: As of March 31, 1999 and 1998, the Partnership owned an interest
in entities that own two marine vessels. During the first quarter of 1999,
revenues of $0.3 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.4 million. During the same period of 1998,
revenues of $0.4 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.6 million. The decrease in lease revenues was
due to lower lease rates earned on the marine vessels during the three months
ended March 31, 1999 when compared to the same period of 1998. The decrease in
depreciation expense, direct expenses, and administrative expenses was primarily
due to the double-declining balance method of depreciation which results in
greater depreciation in the first years an asset is owned.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the three months
ended March 31, 1999 was $0.9 million, compared to a net income of $1.8 million
during the same period of 1998. The Partnership's ability to acquire, operate,
and liquidate assets, secure leases, and re-lease those assets whose leases
expire is subject to many factors. Therefore, the Partnership's performance in
the first quarter of 1999 is not necessarily indicative of future periods. In
the first quarter of 1999, 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, 1999, the Partnership generated $3.1
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, 1999 of $3.5 million)
to the partners, but also used undistributed available cash from prior periods
of approximately $0.4 million.
During the three months ended March 31, 1999, the Partnership sold owned
equipment for proceeds of $0.9 million.
The General Partner entered into a short-term, joint $24.5 million credit
facility. As of April 30, 1999, the Partnership had borrowings of $3.7 million
and TEC Acquisub, Inc., an indirect wholly-owned subsidiary of PLM
International, Inc., had borrowings of $14.8 million under the short-term joint
$24.5 million credit facility. No other eligible borrower had any outstanding
borrowings. The General Partner believes it will renew the credit facility upon
its expiration with similar terms to those in the current credit facility.
(III) EFFECTS OF YEAR 2000
It is possible that the General Partner's currently installed computer systems,
software products, and other business systems, or the Partnership's vendors,
service providers, and customers, working either alone or in conjunction with
other software or systems, may not accept input of, store, manipulate, and
output dates on or after January 1, 2000 without error or interruption (a
problem commonly known as the "Year 2000" or "Y2K" problem). Since the
Partnership relies substantially on the General Partner's software systems,
applications, and control devices in operating and monitoring significant
aspects of its business, any Year 2000 problem suffered by the General Partner
could have a material adverse effect on the Partnership's business, financial
condition, and results of operations.
The General Partner has established a special Year 2000 oversight committee to
review the impact of Year 2000 issues on its software products and other
business systems in order to determine whether such systems will retain
functionality after December 31, 1999. The General Partner (a) is currently
integrating Year 2000-compliant programming code into its existing internally
customized and internally developed transaction processing software systems and
(b) the General Partner's accounting and asset management software systems have
either already been made Year 2000-compliant or Year 2000-compliant upgrades of
such systems are planned to be implemented by the General Partner before the end
of fiscal 1999. Although the General Partner believes that its Year 2000
compliance program can be completed by the end of 1999, there can be no
assurance that the compliance program will be completed by that date. To date,
the costs incurred and allocated to the Partnership to become Year 2000
compliant have not been material. Also, the General Partner believes the future
cost allocable to the Partnership to become Year 2000 compliant will not be
material.
It is possible that certain of the Partnership's equipment lease portfolio may
not be Year 2000 compliant. The General Partner is currently contacting
equipment manufacturers of the Partnership's leased equipment portfolio to
assure Year 2000 compliance or to develop remediation strategies. The General
Partner does not expect that non-Year 2000 compliance of its leased equipment
portfolio will have an adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Partnership or the General Partner to control, including the extent to which
third parties can address the Year 2000 problem. The General Partner is
communicating with vendors, services providers, and customers in order to assess
the Year 2000 compliance readiness of such parties and the extent to which the
Partnership is vulnerable to any third-party Year 2000 issues. There can be no
assurance that the software systems of such parties will be converted or made
Year 2000 compliant in a timely manner. Any failure by the General Partner or
such other parties to make their respective systems Year 2000 compliant could
have a material adverse effect on the business, financial position, and results
of operations from the Partnership. The General Partner will make an ongoing
effort to recognize and evaluate potential exposure relating to third-party Year
2000 noncompliance, and will develop a contingency plan if the General Partner
determines that third-party noncompliance will have a material adverse effect on
the Partnership's business, financial position, or results of operation.
The General Partner is currently developing a contingency plan to address the
possible failure of any systems due to the Year 2000 problems. The General
Partner anticipates these plans will be completed by September 30, 1999.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued "Accounting for
Derivative Instruments and Hedging Activities", (SFAS No. 133) which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of March 31, 1999,
the General Partner is reviewing the effect this standard will have on the
Partnership's financial statements.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance in 1999 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of some of these
factors, or of their occurrence, makes it difficult for the General Partner to
clearly define trends or influences that may impact the performance of the
Partnership's equipment. The General Partner continually monitors both the
equipment markets and the performance of the Partnership's equipment in these
markets. The General Partner may decide to reduce the Partnership's exposure to
equipment markets in which it determines it cannot operate equipment to achieve
acceptable rates of return. Alternatively, the General Partner may make a
determination to enter equipment markets in which it perceives opportunities to
profit from supply/demand instabilities or other market imperfections.
The Partnership intends to use excess cash flow, if any, after payment of
operating expenses, principal and interest on debt, and cash distributions to
the partners to acquire additional equipment during the first six years of
Partnership operations which concludes December 31, 1999. The General Partner
believes that these acquisitions may cause the Partnership to generate
additional earnings and cash flow for the Partnership.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q/A
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/A should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q/A. 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, 1999, 65% of the Partnership's
total lease revenues from wholly- and partially-owned equipment came from
non-United States domiciled lessees. Most of the Partnership's leases require
payment in United States (U.S.) currency. If these lessees currency devalues
against the U.S. dollar, the lessees could potentially encounter difficulty in
making the U.S. dollar denominated lease payments.
(this space intentionally left blank)
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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: January 25, 2000 By: /s/ Richard K Brock
Richard K Brock
Vice President and
Corporate Controller
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