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 JUNE 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 ____
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease $ 83,751 $ 85,318
Less accumulated depreciation (42,732) (39,250)
-----------------------------------
Net equipment 41,019 46,068
Cash and cash equivalents 1,758 2,486
Restricted cash 268 183
Accounts receivable, less allowance for doubtful accounts
of $2,344 in 2000 and $2,416 in 1999 1,570 1,397
Investments in unconsolidated special-purpose entities 24,892 27,736
Deferred charges, net of accumulated amortization of
$415 in 2000 and $355 in 1999 215 276
Prepaid expenses and other assets 24 58
-----------------------------------
Total assets $ 69,746 $ 78,204
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,016 $ 2,106
Due to affiliates 349 342
Lessee deposits and reserve for repairs 773 735
Short-term warehouse facility 600 --
Note payable 30,000 30,000
-----------------------------------
Total liabilities 32,738 33,183
-----------------------------------
Partners' capital:
Limited partners (8,189,465 limited partnership units as of
June 30, 2000 and 8,191,718 as of December 31, 1999) 37,008 45,021
General Partner -- --
-----------------------------------
Total partners' capital 37,008 45,021
-----------------------------------
Total liabilities and partners' capital $ 69,746 $ 78,204
===================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 4,687 $ 6,065 $ 9,387 $ 13,235
Interest and other income 29 41 107 94
Net gain (loss) on disposition of equipment -- 24,482 (72) 24,291
------------------------------------------------------------
Total revenues 4,716 30,588 9,422 37,620
------------------------------------------------------------
EXPENSES
Depreciation and amortization 2,263 4,683 4,664 8,823
Repairs and maintenance 418 1,113 949 2,089
Equipment operating expense 607 1,186 1,245 2,266
Insurance expense 92 43 102 313
Management fees to affiliate 238 334 504 714
Interest expense 509 557 1,011 1,091
General and administrative expenses
to affiliates 155 203 343 445
Other general and administrative expenses 331 232 547 492
Provision for (recovery of) bad debts (101) (7) (81) 36
------------------------------------------------------------
Total expenses 4,512 8,344 9,284 16,269
------------------------------------------------------------
Minority interests -- (8,512) -- (8,699 )
Equity in net income (loss) of unconsol-
idated special-purpose entities (691) 265 (1,236) 474
------------------------------------------------------------
Net income (loss) $ (487) $ 13,997 $ (1,098) $ 13,126
============================================================
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners $ (659) $ 13,824 $ (1,443) $ 12,780
General Partner 172 173 345 346
------------------------------------------------------------
Total $ (487) $ 13,997 $ (1,098) $ 13,126
============================================================
Limited partners' net income (loss) per
weighted-average limited partnership unit $ (0.08) $ 1.69 $ (0.18) $ 1.56
============================================================
Cash distributions $ 3,449 $ 3,452 $ 6,898 $ 6,908
============================================================
Cash distributions per weighted-average
limited partnership unit $ 0.40 $ 0.40 $ 0.80 $ 0.80
============================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
( A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1998 to June 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) (1,443) 345 (1,098)
Purchase of limited partnership units (17) -- (17)
Cash distribution (6,553) (345) (6,898)
-------------------------------------------------------
Partners' capital as of June 30, 2000 $ 37,008 $ -- $ 37,008
=======================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
2000 1999
----------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (1,098) $ 13,126
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,664 8,823
Net (gain) loss on disposition of equipment 72 (24,291)
Equity in net (income) loss from unconsolidated special-purpose
entities 1,236 (474)
Changes in operating assets and liabilities:
Restricted cash (85) 583
Accounts receivable, net (162) 2,065
Prepaid expenses and other assets 34 36
Accounts payable and accrued expenses (163) (121)
Due to affiliates 7 40
Lessee deposits and reserve for repairs 38 (679)
Minority interests -- 1,910
---------------------------
Net cash provided by operating activities 4,543 1,018
---------------------------
INVESTING ACTIVITIES
Payments for equipment purchases and capitalized improvements (932) (34,209)
Investments in and equipment purchased and placed in
unconsolidated special-purpose entities -- (147)
Distributions from unconsolidated special-purpose entities 1,608 1,451
Payments of acquisition fees to affiliate -- (825)
Payments of lease negotiation fees to affiliate -- (67)
Principal payments on direct finance lease -- 49
Proceeds from disposition of equipment 368 37,902
---------------------------
Net cash provided by investing activities 1,044 4,154
---------------------------
FINANCING ACTIVITIES
Proceeds from short-term warehouse facility 600 3,712
Payment of short-term warehouse facility -- (3,712)
Cash distribution paid to limited partners (6,553) (6,562)
Cash distribution paid to General Partner (345) (346)
Purchase of limited partnership units (17) (122)
---------------------------
Net cash used in financing activities (6,315) (7,030)
---------------------------
Net decrease in cash and cash equivalents (728) (1,858)
Cash and cash equivalents at beginning of period 2,486 2,558
-------------------------
Cash and cash equivalents at end of period $ 1,758 $ 700
===========================
SUPPLEMENTAL INFORMATION
Interest paid $ 1,011 $ 1,076
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 2000 and December 31, 1999, the statements of
operations for the three months and six months ended June 30, 2000 and 1999, the
statements of changes in partners' capital for the period from December 31, 1998
to June 30, 2000, and the statements of cash flows for the six months ended June
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 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 six months ended June 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 six months ended June 30, 2000, cash distributions totaled $3.4 million and
$6.9 million, respectively. For the three and six months ended June 30, 1999,
cash distributions totaled $3.5 million and $6.9 million, respectively. Cash
distributions to the limited partners of $6.6 million for the six months ended
June 30, 2000, were deemed to be a return of capital. None of the cash
distributions to the limited partners for the six months ended June 30, 1999,
were deemed to be a return of capital.
Cash distributions related to the results from the second quarter of 2000 of
$2.0 million, will be paid during the second quarter of 2000.
5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of June 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
$38,000 and $0.1 million was payable as of June 30, 2000 and December 31, 1999,
respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 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 Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 52 $ 44 $ 110 $ 86
Data processing and administrative
expenses 12 8 24 17
</TABLE>
The Partnership and USPEs incurred $0.5 million for equipment acquisition and
lease negotiation fees to FSI during the six months ended June 30, 1999. Since
the Partnership had no equipment acquisitions during the six months ended June
30, 2000, neither acquisition nor lease negotiation fees were incurred to FSI.
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of dollars):
June 30, December 31,
2000 1999
---------------------------------
Marine containers $ 23,432 $ 24,691
Aircraft 21,630 21,630
Railcars 17,242 17,284
Trailers 11,447 11,713
Marine vessels 10,000 10,000
----------- -----------
83,751 85,318
Less accumulated depreciation (42,732) (39,250)
----------- -----------
Net equipment $ 41,019 $ 46,068
=========== ===========
As of June 30, 2000, all owned equipment in the Partnership's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for a Boeing 737-200 commercial aircraft, an anchor handling
marine vessel, and 50 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 $5.6
million as of June 30, 2000 and $2.0 million as of December 31, 1999.
During the six months ended June 30, 2000, the Partnership disposed of or sold
marine containers, trailers, and railcars, with an aggregate net book value of
$0.4 million, for $0.4 million. During the six months ended June 30, 1999, the
Partnership disposed of or sold marine containers, trailers, and railcars, with
an aggregate net book value of $1.5 million, for $1.4 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.
On May 24, 2000, FSI, on behalf of the Partnership, entered into an asset
purchase agreement to sell the refrigerated and dry trailer assets of the
Partnership. Closing of the transaction is contingent on numerous conditions. If
the sale is completed, the General Partner estimates that the Partnership's sale
proceeds to be approximately $3.3 million and will result in a gain of
approximately $1.2 million. Since the sale of the trailers is contingent upon
certain conditions being met, the Partnership's refrigerated and dry trailers
are not classified as assets held for sale.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
7. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The net investments in USPEs include the following jointly-owned equipment (and
related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------------------
<S> <C> <C>
62% interest in a trust owning a Boeing 737-300 stage III
commercial aircraft $ 11,396 $ 12,574
53% interest in an entity owning a product tanker 5,710 6,482
40% interest in a trust owning two DC-9 stage III commercial aircraft
on direct finance lease 3,817 4,055
25% interest in an entity owning marine containers 1,972 2,211
50% interest in an entity owning a container feeder vessel 947 1,178
20% interest in an entity owning a handymax dry bulk carrier 940 1,065
50% interest in a trust that owned four stage II commercial aircraft 93 156
64% interest in a trust that owned a stage III commercial aircraft 17 15
---------- -----------
Net investments $ 24,892 $ 27,736
========== ===========
</TABLE>
As of June 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.
For the six months ended June 30, 2000, all jointly-owned equipment was
accounted for under the equity method of accounting. For the six months ended
June 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.
(This space intentionally left blank)
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container
For the quarter ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
2000
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,174 $ 695 $ 1,073 $ 600 $ 1,145 $ -- $ 4,687
Interest income and other -- -- -- -- -- 29 29
Gain (loss) on disposition of -- -- -- (8) 8 -- --
equipment
------------------------------------------------------------------------
Total revenues 1,174 695 1,073 592 1,153 29 4,716
COSTS AND EXPENSES
Operations support 610 96 214 184 3 10 1,117
Depreciation and amortization 395 582 320 162 797 7 2,263
Interest expense -- -- -- -- -- 509 509
Management fees to affiliate 59 32 55 35 57 -- 238
General and administrative expenses 23 72 43 107 3 238 486
Recovery of bad debts -- (9) (78) (14) -- -- (101)
------------------------------------------------------------------------
Total costs and expenses 1,087 773 554 474 860 764 4,512
------------------------------------------------------------------------
Equity in net income (loss) of USPEs (272) (438) -- -- 19 -- (691)
------------------------------------------------------------------------
Net income (loss) $ (185) $ (516) $ 519 $ 118 $ 312 $ (735) $ (487)
========================================================================
Total assets as of June 30, 2000 $ 15,517 $ 20,300 $ 8,247 $ 3,670 $ 19,746 $ 2,266 $ 69,746
========================================================================
Marine Marine
Vessel Aircraft Railcar Trailer Container
For the quarter ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
1999
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 3,132 $ 928 $ 1,107 $ 650 $ 248 $ -- $ 6,065
Interest income and other 5 4 -- -- -- 32 41
Gain (loss) on disposition of -- 24,415 103 (94) 58 -- 24,482
equipment
-------------------------------------------------------------------------
Total revenues 3,137 25,347 1,210 556 306 32 30,588
COSTS AND EXPENSES
Operations support 1,790 65 278 197 1 11 2,342
Depreciation and amortization 1,571 2,164 418 192 331 7 4,683
Interest expense -- 6 -- -- -- 551 557
Management fees to affiliate 156 47 83 36 12 -- 334
General and administrative expenses 40 97 18 115 3 162 435
Provision for (recovery of) bad -- (31) 1 23 -- -- (7)
debts
-------------------------------------------------------------------------
Total costs and expenses 3,557 2,348 798 563 347 731 8,344
-------------------------------------------------------------------------
Minority interests (61) (8,451) -- -- -- -- (8,512)
Equity in net income (loss) of USPEs (40) 160 -- -- (1) 146 265
-------------------------------------------------------------------------
Net income (loss) $ (521) $ 14,708 $ 412 $ (7) $ (42) $ (553) $ 13,997
=========================================================================
Total assets as of June 30, 1999 $ 37,275 $ 35,713 $ 9,492 $ 4,222 $ 14,320 $ 6,929 $ 107,951
=========================================================================
<FN>
<F1>
-------------------------
1 Includes interest income and costs not identifiable to a particular segment,
such as interest expense, certain amortization, general and administrative,
and operations support expenses. Also includes net income (loss) from an
investment in an entity that owned a mobile offshore drilling unit.
</FN>
</TABLE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
For the six months ended Vessel Aircraft Railcar Trailer Container
June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 2,368 $ 1,390 $ 2,195 $ 1,187 $ 2,247 $ -- $ 9,387
Interest income and other -- -- -- -- -- 107 107
Gain (loss) on disposition of -- -- 20 (31) (61) -- (72)
equipment
-------------------------------------------------------------------------
Total revenues 2,368 1,390 2,215 1,156 2,186 107 9,422
COSTS AND EXPENSES
Operations support 1,413 37 456 365 6 19 2,296
Depreciation and amortization 791 1,164 640 326 1,728 15 4,664
Interest expense -- -- -- -- -- 1,011 1,011
Management fees to affiliate 119 63 133 68 121 -- 504
General and administrative expenses 41 105 63 239 7 435 890
Recovery of bad debts -- (9) (63) (9) -- -- (81)
-------------------------------------------------------------------------
Total costs and expenses 2,364 1,360 1,229 989 1,862 1,480 9,284
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (526) (745) -- -- 37 (2) (1,236)
-------------------------------------------------------------------------
Net income (loss) $ (522) $ (715) $ 986 $ 167 $ 361 $ (1,375) $ (1,098)
=========================================================================
Total assets as of June 30, 2000 $ 15,517 $ 20,300 $ 8,247 $ 3,670 $ 19,746 $ 2,266 $ 69,746
=========================================================================
Marine Marine
For the six months ended Vessel Aircraft Railcar Trailer Container
June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
---------------------------------- --------- --------- --------- --------- --------- --------- -----------
REVENUES
Lease revenue $ 5,811 $ 3,092 $ 2,298 $ 1,275 $ 759 $ -- $ 13,235
Interest income and other 11 5 -- 1 -- 77 94
Gain (loss) on disposition of -- 24,414 (27) (181) 85 -- 24,291
equipment
-------------------------------------------------------------------------
Total revenues 5,822 27,511 2,271 1,095 844 77 37,620
COSTS AND EXPENSES
Operations support 3,762 86 441 351 2 26 4,668
Depreciation and amortization 3,143 3,923 744 391 607 15 8,823
Interest expense -- 15 -- -- -- 1,076 1,091
Management fees to affiliate 291 158 164 63 38 -- 714
General and administrative expenses 98 234 29 237 7 332 937
Provision for bad debts -- -- 6 30 -- -- 36
-------------------------------------------------------------------------
Total costs and expenses 7,294 4,416 1,384 1,072 654 1,449 16,269
-------------------------------------------------------------------------
Minority interests (49) (8,650) -- -- -- -- (8,699)
Equity in net income (loss) of USPEs (136) 323 -- -- (1) 288 474
-------------------------------------------------------------------------
Net income (loss) $ (1,657) $ 14,768 $ 887 $ 23 $ 189 $ (1,084) $ 13,126
=========================================================================
Total assets as of June 30, 1999 $ 37,275 $ 35,713 $ 9,492 $ 4,222 $ 14,320 $ 6,929 $ 107,951
=========================================================================
<FN>
<F1>
-------------------
1 Includes interest income and costs not identifiable to a particular segment,
such as interest expense, certain amortization, general and administrative,
and operations support expenses. Also includes net income (loss) from an
investment in an entity that owned a mobile offshore drilling unit.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. DEBT
The Partnership has a warehouse facility, which is 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.
Borrowings under this facility by the other eligible borrowers reduces the
amount available to be borrowed by the Partnership. All borrowings under this
facility are guaranteed by the General Partner. On June 30, 2000, this facility
was extended to September 30, 2000 and the amount available to be borrowed under
the facility was reduced from $24.5 million to $9.5 million. The General Partner
has been notified by the lender that this facility will not be renewed upon its
expiration. The General Partner is currently negotiating with a lender for a
warehouse credit facility of $10.0-$15.0 million with similar terms. The General
Partner believes the facility will be in place by September 30, 2000.
As of June 30, 2000, the Partnership had outstanding borrowings of $0.6 million
and TEC Acquisub, Inc. had borrowings of $8.9 million under the warehouse
facility. No other eligible borrower had any outstanding borrowings under the
warehouse facility.
10. NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income (loss) per weighted-average Partnership unit was computed by dividing
net income (loss) attributable to limited partners by the weighted-average
number of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the three
and six months ended June 30, 2000 was 8,189,465 and 8,190,322, respectively.
The weighted-average number of Partnership units deemed outstanding during the
three and six months ended June 30, 1999 was 8,200,774 and 8,200,178,
respectively.
11. CONTINGENCIES
PLM International (the Company) and various of its wholly-owned subsidiaries are
named as defendants in a lawsuit filed as a purported class action in January
1997 in the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251
(the Koch action). The named plaintiffs are six individuals who invested in PLM
Equipment Growth Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM
Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII
(Fund VII) (the Funds), each a California limited partnership for which the
Company's wholly-owned subsidiary, FSI, acts as the General Partner. The
complaint asserts causes of action against all defendants for fraud and deceit,
suppression, negligent misrepresentation, negligent and intentional breaches of
fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege
that each defendant owed plaintiffs and the class certain duties due to their
status as fiduciaries, financial advisors, agents, and control persons. Based on
these duties, plaintiffs assert liability against defendants for improper sales
and marketing practices, mismanagement of the Funds, and concealing such
mismanagement from investors in the Funds. Plaintiffs seek unspecified
compensatory damages, as well as punitive damages, and have offered to tender
their limited partnership units back to the defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) (the court) based on the court's
diversity jurisdiction. In December 1997, the court granted defendants motion to
compel arbitration of the named plaintiffs' claims, based on an agreement to
arbitrate contained in the limited partnership agreement of each Partnership.
Plaintiffs appealed this decision, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
In June 1997, the Company and the affiliates who are also defendants in the Koch
action were named as defendants in another purported class action filed in the
San Francisco Superior Court, San Francisco, California, Case No. 987062 (the
Romei action). The plaintiff is an investor in Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in the
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
11. CONTINGENCIES (CONTINUED)
Funds. The complaint alleges the same facts and the same causes of action as in
the Koch action, plus additional causes of action against all of the defendants,
including alleged unfair and deceptive practices and violations of state
securities law. In July 1997, defendants filed a petition (the petition) in
federal district court under the Federal Arbitration Act seeking to compel
arbitration of plaintiff's claims. In October 1997, the district court denied
the Company's petition, but in November 1997, agreed to hear the Company's
motion for reconsideration. Prior to reconsidering its order, the district court
dismissed the petition pending settlement of the Romei action, as discussed
below. The state court action continues to be stayed pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle the
lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into two
parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to $6.6
million. The final settlement amount will depend on the number of claims filed
by class members, the amount of the administrative costs incurred in connection
with the settlement, and the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy. For
settlement purposes, the monetary settlement class consists of all investors,
limited partners, assignees, or unit holders who purchased or received by way of
transfer or assignment any units in the Funds between May 23, 1989 and June 29,
1999. The monetary settlement, if approved, will go forward regardless of
whether the equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the extension
(until January 1, 2007) of the date by which FSI must complete liquidation of
the Funds' equipment, (b) the extension (until December 31, 2004) of the period
during which FSI can reinvest the Funds' funds in additional equipment, (c) an
increase of up to 20% in the amount of front-end fees (including acquisition and
lease negotiation fees) that FSI is entitled to earn in excess of the
compensatory limitations set forth in the North American Securities
Administrator's Association's Statement of Policy; (d) a one-time repurchase by
each of Funds V, VI and VII of up to 10% of that partnership's outstanding units
for 80% of net asset value per unit; and (e) the deferral of a portion of the
management fees paid to an affiliate of FSI until, if ever, certain performance
thresholds have been met by the Funds. Subject to final court approval, these
proposed changes would be made as amendments to each Partnership's limited
partnership agreement if less than 50% of the limited partners of each
Partnership vote against such amendments. The limited partners will be provided
the opportunity to vote against the amendments by following the instructions
contained in solicitation statements that will be mailed to them after being
filed with the Securities and Exchange Commission. The equitable settlement also
provides for payment of additional attorneys' fees to the plaintiffs' attorneys
from Partnership funds in the event, if ever, that certain performance
thresholds have been met by the Funds. The equitable settlement class consists
of all investors, limited partners, assignees or unit holders who on June 29,
1999 held any units in Funds V, VI, and VII, and their assigns and successors in
interest.
The court preliminarily approved the monetary and equitable settlements in June
1999. The monetary settlement remains subject to certain conditions, including
notice to the monetary class and final approval by the court following a final
fairness hearing. The equitable settlement remains subject to certain
conditions, including: (a) notice to the equitable class, (b) disapproval of the
proposed amendments to the partnership agreements by less than 50% of the
limited partners in one or more of Funds V, VI, and VII, and (c) judicial
approval of the proposed amendments and final approval of the equitable
settlement by the court following a final fairness hearing. No hearing date is
currently scheduled for the final fairness hearing. The Company continues to
believe that the allegations of the Koch and Romei actions are completely
without merit and intends to continue to defend this matter vigorously if the
monetary settlement is not consummated.
<PAGE>
PLM EQUIPMENT GROWTH FUND VI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
11. CONTINGENCIES (CONTINUED)
The Partnership has initiated litigation in various official forums in India
against the defaulting Indian airline lessees to repossess Partnership property
and to recover damages for failure to pay rent and failure to maintain such
property in accordance with relevant lease contracts. The Partnership has
repossessed its property previously leased to such airline, and the airline has
ceased operations. In response to the Partnership's collection efforts, the
airline filed counter-claims against the Partnership in excess of the
Partnership's claims against the airline. The General Partner believes that the
airlines' counterclaims are completely without merit, and the General Partner
will vigorously defend against such counterclaims. The General Partner believes
the likelihood of an unfavorable outcome from the counterclaims is remote.
The Company is involved as plaintiff or defendant in various other legal actions
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
(This space intentionally left blank)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
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
six months ended June 30, 1999 and were included with the owned equipment
operations. For the three and six and months ended June 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
JUNE 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 three months ended June 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):
For the Three Months
Ended June 30,
2000 1999
----------------------------
Marine containers $ 1,142 $ 247
Railcars 859 829
Aircraft, aircraft engines, and components 599 863
Marine vessels 564 1,342
Trailers 416 453
Marine containers: Marine container lease revenues and direct expenses were $1.1
million and $3,000, respectively, for the three months ended June 30, 2000,
compared to $0.2 million and $1,000, respectively, during the same quarter of
1999. The increase in lease revenues of $0.9 million during the second quarter
of 2000 was due to the purchase of marine containers during the second and
fourth quarters of 1999.
Railcars: Railcar lease revenues and direct expenses were $1.1 million and $0.2
million, respectively, for the three months ended June 30, 2000, compared to
$1.1 million and $0.3 million, respectively, during the same period of 1999. The
increase in railcar contribution was due to fewer repairs on the railcars during
the three months ended June 30, 2000 than during the same period of 1999.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $0.7 million and $0.1 million, respectively, for the three months
ended June 30, 2000, compared to $0.9 million and $0.1 million, respectively,
during the same period of 1999. The decrease in aircraft lease revenues of $0.2
million was due to the sale of a Boeing 767-200ER Stage III commercial aircraft
during 1999. Direct expenses increased $0.1 million during the second quarter of
2000 due to a repairs to the Boeing 737-200 that were not required during the
same period of 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.2
million and $0.6 million, respectively, for the three months ended June 30,
2000, compared to $3.1 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
June 30, 2000, lease revenues decreased $1.4 million and direct expenses
decreased $0.5 million when compared to the same period of 1999.
In addition, a decline in lease revenues of $0.5 million and a decline in direct
expenses of $0.5 million was caused by the sale of one of the Partnership's
wholly-owned marine vessels during 1999. Direct expenses decreased an additional
$0.2 million on the three remaining wholly-owned marine vessels due to a $0.2
million decrease in required repairs.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2
million, respectively, for the three months ended June 30, 2000, compared to
$0.7 million and $0.2 million, respectively, during the same quarter of 1999.
The decrease in lease revenues is due to lower utilization on short-term rental
trailers during the three months ended June 30, 2000 when compared to the same
period of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.4 million for the quarter ended June 30, 2000
decreased from $6.0 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $2.4 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 $0.4 million
due to the sale of certain equipment during 2000 and 1999, and a decrease of
$1.8 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 $0.6 million in depreciation and amortization expenses resulting
from the purchase of additional equipment during 2000 and 1999.
(ii)A $0.1 million decrease in management fees was due to lower lease
revenues earned by the Partnership during the three months ended June 30, 2000
when compared to the same period of 1999.
(iii) A $0.1 million decrease in the provision for bad debts was due to the
collection of past due receivables during the three months ended June 30, 2000
that had been previously reserved for as a bad debt.
A similar collection did not occur in the same quarter of 1999.
(iv)A $48,000 decrease in interest expense was due to a lower average
outstanding short-term borrowings during the second quarter of 2000 when
compared to the same period of 1999
(v) A $0.1 million increase in general and administrative expenses was
caused by higher storage costs associated with the aircraft that is off-lease
during the three months ended June 30, 2000 when compared to the same period of
1999.
(C) Net Gain (loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the second quarter of
2000 totaled $0, and resulted from the sale of marine containers and trailers
with an aggregate net book value of $0.2 million, for $0.2 million. The net gain
on the disposition of owned equipment for the second quarter of 1999 totaled
$24.5 million, and resulted from the sale of marine containers, railcars, and
trailers, with an aggregate net book value of $0.4 million, for $0.5 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 $8.5 million in the second 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):
For the Three Months
Ended June 30,
2000 1999
------------------------------
Marine containers $ 19 $ (1)
Mobile offshore drilling unit -- 146
Marine vessels (272) (40)
Aircraft (438) 160
--------------- ---------------
Equity in net income (loss) of USPEs $ (691) $ 265
=============== ===============
Marine containers: During the three months ended June 30, 2000 and 1999, lease
revenues of $0.1 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.1 million. Marine containers contribution
increased $20,000 in the second quarter of 2000 when compared to the same period
of 1999 due to $7,000 in higher lease revenues caused by the purchase of
additional marine containers during June 1999 and lower depreciation expense of
$13,000 due to the double-declining balance method of depreciation which results
in greater depreciation in the first years an asset is owned.
Mobile offshore drilling unit: The Partnership's interest in an entity that
owned a mobile offshore drilling unit was sold during the fourth quarter of
1999. During the three months ended June 30, 1999, lease revenues of $0.3
million were offset by depreciation expense, direct expenses, and administrative
expenses of $0.2 million.
Marine vessels: During the three months ended June 30, 2000, lease revenues of
$0.8 million were offset by depreciation expense, direct expenses, and
administrative expenses of $1.1 million. During the same period of 1999, lease
revenues of $0.3 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.3 million.
An increase in marine vessel lease revenues of $0.6 million and depreciation
expense, direct expenses, and administrative expenses of $0.7 million during the
three months ended June 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 June 30, 1999.
Marine vessel direct expenses increased an additional $0.1 million due to higher
repair costs and operating costs associated with one marine vessel during the
three months ended June 30, 2000 when compared to the same period of 1999.
Aircraft: As of June 30, 2000, the Partnership owned an interest in two
commercial aircraft on a direct finance lease and a Boeing 737-300 commercial
aircraft. As of June 30, 1999, the Partnership owned an interest in two
commercial aircraft on a direct finance lease. During the second quarter of
2000, revenues of $0.3 million and were offset by depreciation expense, direct
expenses, and administrative expenses of $0.7 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 $0.2 million and depreciation
expense, direct expenses, and administrative expenses of $0.7 million during the
three months ended June 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 June 30, 1999. No lease
revenues were reported due to the off-lease status of this commercial aircraft
during the second quarter of 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 $0.2
million during the three months ended June 30, 2000.
(F) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the three months
ended June 30, 2000 was $0.5 million, compared to a net income of $14.0 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
second quarter of 2000 is not necessarily indicative of future periods. In the
three months ended June 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 SIX MONTHS ENDED JUNE
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 six months ended June 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):
For the Six Months
Ended June 30,
2000 1999
----------------------------
Marine containers $ 2,241 $ 757
Railcars 1,739 1,857
Aircraft, aircraft engines, and components 1,353 3,006
Marine vessels 955 2,049
Trailers 822 924
Marine containers: Marine container lease revenues and direct expenses were $2.2
million and $6,000, respectively, for the six months ended June 30, 2000,
compared to $0.8 million and $2,000, respectively, during the same period of
1999. The increase in lease revenues of $1.5 million during the six months ended
June 30, 2000 was due to the purchase of marine containers during the second and
fourth quarters of 1999.
Railcars: Railcar lease revenues and direct expenses were $2.2 million and $0.5
million, respectively, for the six months ended June 30, 2000, compared to $2.3
million and $0.4 million, respectively, during the same period of 1999. The
decrease in railcar lease revenues of $0.1 million was due to an increase in the
number of railcars that were off-lease during the six months ended June 30, 2000
when compared to the same period of 1999.
Aircraft, aircraft engines, and components: Aircraft lease revenues and direct
expenses were $1.4 million and $37,000, respectively, for the six months ended
June 30, 2000, compared to $3.1 million and $0.1 million, respectively, during
the same period of 1999. A decrease in aircraft lease revenues of $1.6 million
and direct expenses of $45,000 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 six
months ended June 30, 2000 that was on-lease for one month during the same
period of 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.4
million and $1.4 million, respectively, for the six months ended June 30, 2000,
compared to $5.8 million and $3.8 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 six months ended
June 30, 2000, lease revenues decreased $2.7 million and direct expenses
decreased $1.1 million when compared to the same period of 1999.
Lease revenues declined $0.5 million and direct expenses declined $0.7 million
resulting from the sale of one of the Partnership's wholly-owned marine vessels
during 1999.
Lease revenues declined an additional $0.2 million due to lower lease rates
earned of two of the three remaining wholly-owned marine vessels. Direct
expenses also decreased an additional $0.5 million on one of the three remaining
wholly-owned marine vessels due to a decrease in repairs during the six months
ended June 30, 2000 when compared to the same period of 1999.
Trailers: Trailer lease revenues and direct expenses were $1.2 million and $0.4
million, respectively, for the six months ended June 30, 2000, compared to $1.3
million and $0.4 million, respectively, during the same period of 1999. The
decrease in lease revenues was due to a lower utilization on the short-term
rental trailers during the six months ended June 30, 2000 when compared to the
same period of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $7.0 million for the six months ended June 30, 2000
decreased from $11.6 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $4.2 million decrease in depreciation and amortization expenses from
1999 levels reflects the decrease of approximately $1.5 million caused by the
double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned, a decrease of $1.8 million
due to the sale of certain equipment during 2000 and 1999, and a decrease of
$1.9 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 2000 and 1999.
(ii) A $0.2 million decrease in management fees was due to lower lease
revenues earned by the Partnership during the six months ended June 30, 2000
when compared to the same period of 1999.
(iii) A $0.1 million decrease in the provision for bad debts was due to the
collection of past due receivables during the six months ended June 30, 2000
that had been previously reserved for as a bad debt. A similar collection did
not occur in the same period of 1999.
(iv) A $0.1 million decrease in interest expense was due to a lower average
outstanding short-term borrowings during the six months ended June 30, 2000 when
compared to the same period of 1999
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on the disposition of owned equipment for the six months ended June
30, 2000 totaled $0.1 million, and resulted from the sale of marine containers,
trailers, and railcars with an aggregate net book value of $0.4 million, for
$0.4 million. The net gain on the disposition of owned equipment for the six
months ended June 30, 1999 totaled $24.3 million, and resulted from the sale of
marine containers, trailers, and railcars, with an aggregate net book value of
$1.5 million, for $1.4 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 $8.7 million in the six months ended June 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):
For the Six Months
Ended June 30,
2000 1999
------------------------------
Marine containers $ 37 $ (1)
Mobile offshore drilling unit (3) 288
Marine vessels (525) (136)
Aircraft (745) 323
------------- ------------
Equity in net income (loss) of USPEs $ (1,236) $ 474
============== ============
Marine containers: During the six months ended June 30, 2000 and 1999, lease
revenues of $0.2 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.2 million. Marine containers contribution
increased $38,000 in the six months ended June 30, 2000 when compared to the
same period of 1999 due to $16,000 in higher lease revenues caused by the
purchase of additional marine containers during June 1999 and lower depreciation
expense of $23,000 due to the double-declining balance method of depreciation
which results in greater depreciation in the first years an asset is owned.
Mobile offshore drilling unit: The Partnership's interest in an entity that
owned a mobile offshore drilling unit was sold during the fourth quarter of
1999. During the six months ended June 30, 1999, lease revenues of $0.7 million
were offset by depreciation expense, direct expenses, and administrative
expenses of $0.4 million.
Marine vessels: During the six months ended June 30, 2000, lease revenues of
$1.8 million were offset by depreciation expense, direct expenses, and
administrative expenses of $2.3 million. During the same period of 1999, lease
revenues of $0.6 million were offset by depreciation expense, direct expenses,
and administrative expenses of $0.8 million.
An increase in marine vessel lease revenues of $1.2 million and depreciation
expense, direct expenses, and administrative expenses of $1.5 million during the
six months ended June 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 six months ended June 30, 1999.
Aircraft: As of June 30, 2000, the Partnership owned an interest in two
commercial aircraft on a direct finance lease and a Boeing 737-300 commercial
aircraft. As of June 30, 1999, the Partnership owned an interest in two
commercial aircraft on a direct finance lease. During the six months ended June
30, 2000, revenues of $0.5 million and were offset by depreciation expense,
direct expenses, and administrative expenses of $1.2 million. During the same
period of 1999, revenues of $0.4 million were offset by direct expenses and
administrative expenses of $34,000.
An increase in aircraft lease revenues of $0.2 million and depreciation expense,
direct expenses, and administrative expenses of $1.3 million during the six
months ended June 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 six months ended June 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 a receivable that
had 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 six months
ended June 30, 2000 was $1.1 million, compared to a net income of $13.1 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 six
months ended June 30, 2000 is not necessarily indicative of future periods. In
the six months ended June 30, 2000, the Partnership distributed $6.6 million to
the limited partners, or $0.80 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the six months ended June 30, 2000, the Partnership generated $6.2 million
in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations,
maintain working capital reserves, and maintain the current level of
distributions (total for the six months ended June 30, 2000 of $6.9 million) to
the partners, but also used undistributed available cash from prior periods of
approximately $0.7 million.
During the six months ended June 30, 2000, the Partnership sold or disposed of
owned equipment for aggregate proceeds of $0.4 million.
Accounts receivable increased $0.2 million during the six months ended June 30,
2000 due to the timing of cash receipts.
Investments in USPEs decreased $2.8 million due to cash distributions of $1.6
million to the Partnership and a $1.2 million loss that was recorded from
operations from its equity interests in USPEs for the six months ended June 30,
2000.
Accounts payable decreased $1.1 million during the six months ended June 30,
2000 due to the payment of $0.9 million accrual 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.
The Partnership has a warehouse facility, which is 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.
Borrowings under this facility by the other eligible borrowers reduces the
amount available to be borrowed by the Partnership. All borrowings under this
facility are guaranteed by the General Partner. On June 30, 2000, this facility
was extended to September 30, 2000 and the amount available to be borrowed under
the facility was reduced from $24.5 million to $9.5 million. The General Partner
has been notified by the lender that this facility will not be renewed upon its
expiration. The General Partner is currently negotiating with a lender for a
warehouse credit facility of $10.0-$15.0 million with similar terms. The General
Partner believes the facility will be in place by September 30, 2000.
As of August 7, 2000, the Partnership had outstanding borrowings of $0.6 million
and TEC Acquisub, Inc. had borrowings of $8.9 million under the short term
Committed Bridge Facility. No other eligible borrower had any outstanding
borrowings under the short term Committed Bridge Facility.
(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. The Partnership owns an anchor handling supply marine vessel whose lease
expired in June 2000. If the economic conditions remain the same, the General
Partner would expect to re-lease this marine vessel at a rate lower than the
rate that is currently in place.
4. Railcar loading in North America have continued to be high, however a
softening in the market is expected during 2000, which may lead to lower
utilization and lower contribution to the Partnership as existing leases expire
and renewal leases are negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The General Partner continually monitors
both the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may decide to reduce the Partnership's
exposure to equipment markets in which it determines it cannot operate equipment
to achieve acceptable rates of return.
The unpredictability of some of these factors, or of their occurrence, makes it
difficult for the General Partner to clearly define trends or influences that
may impact the performance of the Partnership's equipment.
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 six months ended June 30, 2000, 72% 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.
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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.
(This space intentionally left blank)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND VI
By: PLM Financial Services, Inc.
General Partner
Date: August 7, 2000 By: /s/ Richard K Brock
-----------------------------------
Richard K Brock
Vice President and
Chief Financial Officer
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