-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J1IKxh7/EMqW8Q9/E9xg0x4GZKrMPyozzgU8kykI0GsBln2zEIh8wCL7Pthx6OgA pRIofyF/G7mDJOK/SenlCA== /in/edgar/work/0000812072-00-000033/0000812072-00-000033.txt : 20001109 0000812072-00-000033.hdr.sgml : 20001109 ACCESSION NUMBER: 0000812072-00-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM EQUIPMENT GROWTH FUND III CENTRAL INDEX KEY: 0000824210 STANDARD INDUSTRIAL CLASSIFICATION: [4400 ] IRS NUMBER: 680146197 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10813 FILM NUMBER: 755341 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 900 STREET 2: C/O ONE MARKET PLAZA CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 MAIL ADDRESS: STREET 1: ONE MARKET STEUART STREET TWR STREET 2: STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 10-Q 1 0001.txt PLM EQUIPMENT GROWTH FUND III UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ___________________ [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended September 30, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 1-10813 _______________________ PLM EQUIPMENT GROWTH FUND III (Exact name of registrant as specified in its charter) California 68-0146197 (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 III (A Limited Partnership) BALANCE SHEETS (in thousands of dollars, except unit amounts)
September 30, December 31, 2000 1999 ------------------------------------ ASSETS Equipment held for operating lease, at cost $ 61,983 $ 84,191 Less accumulated depreciation (53,906) (69,303) ------------------------------------ Net equipment 8,077 14,888 Cash and cash equivalents 12,276 486 Accounts receivable, net of allowance for doubtful accounts of $1,697 in 2000 and $1,757 in 1999 710 727 Investments in unconsolidated special-purpose entities 191 2,498 Deferred charges, net of accumulated amortization of $309 in 1999 -- 31 Prepaid expenses and other assets 9 60 ------------------------------------ Total assets $ 21,263 $ 18,690 ==================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 479 $ 786 Due to affiliates 101 699 Lessee deposits and reserves for repairs 158 1,419 Note payable -- 7,458 ------------------------------------ Total liabilities 738 10,362 ------------------------------------ Partners' capital: Limited partners (9,871,073 depositary units as of September 30, 2000 and December 31, 1999) 20,525 8,328 General Partner -- -- ------------------------------------ Total partners' capital 20,525 8,328 ------------------------------------ Total liabilities and partners' capital $ 21,263 $ 18,690 ====================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) STATEMENTS OF OPERATIONS (in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 ----------------------------- --------------------------- REVENUES Lease revenue $ 2,962 $ 3,852 $ 9,130 $ 11,664 Interest and other income 67 80 109 194 Net gain on disposition of equipment 9,635 12 9,680 478 ----------------------------- --------------------------- Total revenues 12,664 3,944 18,919 12,336 ----------------------------- --------------------------- EXPENSES Depreciation and amortization 1,175 1,982 3,932 5,969 Repairs and maintenance 552 661 1,713 1,765 Equipment operating expenses 7 255 23 640 Insurance expense 32 74 101 201 Management fees to affiliate 160 194 510 626 Interest expense 39 252 306 813 General and administrative expenses to affiliates 97 129 301 378 Other general and administrative expenses 224 210 720 847 Loss on revaluation of equipment 11 -- 202 -- Provision for (recovery of) bad debts 36 407 (69) 385 ----------------------------- --------------------------- Total expenses 2,333 4,164 7,739 11,624 ----------------------------- --------------------------- Minority interests -- 4 -- 22 Equity in net income of unconsolidated special-purpose entities 1,102 -- 1,017 1,477 ----------------------------- --------------------------- Net income (loss) $ 11,433 $ (216) $ 12,197 2,211 ============================= =========================== PARTNERS' SHARE OF NET INCOME (LOSS) Limited partners $ 11,433 $ (320) $ 12,197 $ 1,899 General Partner -- 104 -- 312 ----------------------------- --------------------------- Total $ 11,433 $ (216) $ 12,197 $ 2,211 ============================= =========================== Limited partners' net income (loss) per weighted- average depositary unit $ 1.16 $ (0.03) $ 1.24 $ 0.19 ============================= =========================== Cash distribution $ -- $ 2,078 $ -- $ 6,235 ============================= =========================== Cash distribution per weighted-average depositary unit $ -- $ 0.20 $ -- $ 0.60 ============================= ===========================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the Period from December 31, 1998 to September 30, 2000 (in thousands of dollars)
Limited General Partners Partner Total ------------------------------------------------ Partners' capital as of December 31, 1998 $ 12,082 $ -- $ 12,082 Net income 3,649 390 4,039 Cash distribution (7,403) (390) (7,793) ------------------------------------------------- Partners' capital as of December 31, 1999 8,328 -- 8,328 Net income 12,197 -- 12,197 ------------------------------------------------- Partners' capital as of September 30, 2000 $ 20,525 $ -- $ 20,525 =================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Nine Months Ended September 30, 2000 1999 ----------------------------- OPERATING ACTIVITIES Net income $ 12,197 $ 2,211 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,932 5,969 Loss on revaluation of equipment 202 -- Net gain on disposition of equipment (9,680) (478) Equity in net income from unconsolidated special-purpose entities (1,017) (1,477) Changes in operating assets and liabilities: Accounts receivable, net 17 250 Prepaid expenses and other assets 51 26 Accounts payable and accrued expenses (307) (652) Due to affiliates 2 4 Lessee deposits and reserves for repairs (1,261) 337 Minority interests -- (224) ----------------------------- Net cash provided by operating activities 4,136 5,966 ----------------------------- INVESTING ACTIVITIES Payments for capitalized improvements (78) (19) Distributions from unconsolidated special-purpose entities 160 20 Distributions from liquidation of unconsolidated special-purpose entities 3,164 3,548 Proceeds from disposition of equipment 12,466 699 ----------------------------- Net cash provided by investing activities 15,712 4,248 ----------------------------- FINANCING ACTIVITIES Principal payments on note payable (7,458) (7,472) Loans from affiliate 4,550 600 Repayments of loans to affiliate (5,150) -- Cash distributions paid to limited partners -- (5,923) Cash distributions paid to General Partner -- (312) ----------------------------- Net cash used in financing activities (8,058) (13,107) ----------------------------- Net increase (decrease) in cash and cash equivalents 11,790 (2,893) Cash and cash equivalents at beginning of period 486 3,429 ----------------------------- Cash and cash equivalents at end of period $ 12,276 $ 536 ============================= Supplemental information Interest paid $ 316 $ 813 =============================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 1. OPINION OF MANAGEMENT In the opinion of the management of PLM Financial Services, Inc. (FSI or the General Partner), the accompanying unaudited financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the financial position of PLM Equipment Growth Fund III (the Partnership) as of September 30, 2000 and December 31, 1999, the statements of operations for the three months and nine months ended September 30, 2000 and 1999, the statements of changes in partners' capital for the period from December 31, 1998 to September 30, 2000, and the statements of cash flows for the nine months ended September 30, 2000 and 1999. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K/A for the year ended December 31, 1999, on file at the Securities and Exchange Commission. 2. SCHEDULE OF PARTNERSHIP PHASES The Partnership, in accordance with its limited partnership agreement entered its liquidation phase on January 1, 2000, and has commenced an orderly liquidation of the Partnership's assets. The General Partner may no longer purchase additional equipment. All future cash flows and surplus funds, if any, are to be used for distributions to partners, except to the extent used to maintain reasonable reserves. During the liquidation phase, the Partnership's assets will continue to be recorded at the lower of the carrying amount or fair value less cost to sell. The General Partner expects to file a certificate of dissolution on behalf of the Partnership with the Secretary of State for the State of California by December 31, 2000, and following completion of the liquidation of the Partnership, to file a certificate of cancellation. 3. 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. There were no cash distributions for the three and nine months ended September 30, 2000. For the nine months ended September 30, 1999, cash distributions totaled $6.2 million. For the three months ended September 30, 1999, cash distributions totaled $2.1 million. Cash distributions to the limited partners of $4.0 million for the nine months ended September 30, 1999, were deemed to be a return of capital. A special distribution of $10.9 million will be paid during November of 2000 from asset sales in the third quarter of 2000. 4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES The balance due to affiliates as of September 30, 2000 included $0.1 million due to FSI and its affiliate for management fees and administrative services. During the nine months ended September 30, 2000, the Partnership borrowed $4.6 million from FSI and repaid FSI of $5.2 million including $0.6 million that was borrowed during 1999. The Partnership was charged market rate interest on the loans from FSI. Interest expense charged by FSI was $82,000 and $96,000 for the three and nine months ended September 30, 2000, respectively. The balance due to affiliates as of December 31, 1999 includes $0.1 million due to FSI and its affiliates for management fees and $0.6 million due to FSI for a loan made to the Partnership. The Partnership's proportional share of unconsolidated special purpose entities (USPE's)-affiliated management fees, of $11,000 and $12,000, were payable as of September 30, 2000 and December 31, 1999, respectively. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED) The Partnership's proportional share of the affiliated expenses incurred by the unconsolidated special-purpose entities during 2000 and 1999 is listed in the following table (in thousands of dollars):
For the Three Months For the Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 -------------------------------------------------------------- Management fees $ 9 $ -- $ 36 $ -- Data processing and administrative expenses 3 -- 9 2
5. EQUIPMENT The components of owned equipment were as follows (in thousands of dollars):
September 30, December 31, 2000 1999 -------------------------------------- Railcars $ 33,217 $ 33,572 Aircraft 21,843 42,000 Marine containers 3,495 4,453 Trailers 3,428 4,166 ------------------------------------- 61,983 84,191 Less accumulated depreciation (53,906) (69,303) ------------------------------------- Net equipment $ 8,077 $ 14,888 =====================================
As of September 30, 2000, all equipment in the Partnership portfolio was on lease, except for 96 railcars, and an aircraft. As of December 31, 1999, all equipment in the Partnership portfolio was either on lease or operating in PLM-affiliated short-term rental facilities, except for 40 railcars and an aircraft. The net book value of the equipment off lease was $0.8 million and $1.2 million as of September 30, 2000 and December 31, 1999, respectively. Capital improvements to the Partnership's equipment of $0.1 million were made during the nine months ended September 30, 2000. Capital improvements to the Partnership's equipment of $19,000 were made during the nine months ended September 30, 1999. During the nine months ended September 30, 2000, the Partnership disposed of marine containers, trailers, railcars, and aircraft with an aggregate net book value of $2.8 million, for aggregate proceeds of $12.5 million. During the nine months ended September 30, 1999, the Partnership disposed of marine containers, trailers, and railcars, with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.7 million. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 6. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES The net investment in USPEs included the following jointly-owned equipment (and related assets and liabilities) (in thousands of dollars):
September 30, December 31, 2000 1999 ---------------------------------- 56% interest in an entity that owned a marine vessel $ 191 $ 2,440 25% interest in a trust that owned four commercial aircraft -- 58 --------------------------------- Net investments $ 191 $ 2,498 =================================
During the nine months ended September 30, 2000, the Partnership's 56% interest in an entity that owned a marine vessel was sold for a gain of $1.1 million. As of December 31, 1999, all jointly-owned equipment in the Partnership's USPE portfolio was on lease. For the nine months ended September 30, 2000, all jointly-owned equipment was accounted for under the equity method of accounting. For the nine months ended September 30, 1999, jointly-owned equipment of which the Partnership had a controlling interest greater than 50%, was accounted for under the consolidation method of accounting. 7. OPERATING SEGMENTS The Partnership operates or operated in five different segments: railcar leasing, aircraft leasing, marine vessel leasing, marine container leasing, and trailer leasing. Each equipment leasing segment engages in short-term and mid-term operating leases to a variety of customers. The following tables present a summary of the operating segments (in thousands of dollars):
Marine Marine Railcar Aircraft Vessel Container Trailer All For the quarter ended September 30, Leasing Leasing Leasing Leasing Leasing Other(1) Total 2000 REVENUES Lease revenue $ 1,584 $ 1,227 $ -- $ 15 $ 136 $ -- $ 2,962 Interest income and other 9 1 -- -- -- 57 67 Net gain on disposition of 68 9,460 -- 23 84 -- 9,635 equipment ------------------------------------------------------------------------ Total revenues 1,661 10,688 -- 38 220 57 12,664 COSTS AND EXPENSES Operations support 498 23 -- 1 60 9 591 Depreciation and amortization 403 696 -- 17 60 (1) 1,175 Interest expense -- -- -- -- -- 39 39 Management fees 105 47 -- -- 8 -- 160 General and administrative expenses 51 58 -- 1 28 183 321 Loss on revaluation of equipment -- -- -- -- 11 -- 11 Provision for bad debts 36 -- -- -- -- -- 36 ------------------------------------------------------------------------ Total costs and expenses 1,093 824 -- 19 167 230 2,333 ------------------------------------------------------------------------ Equity in net income (loss) of USPEs -- -- 1,102 -- -- -- 1,102 ------------------------------------------------------------------------ Net income (loss) $ 568 $ 9,864 $ 1,102 $ 19 $ 53 $ (173) $ 11,433 ======================================================================== Total assets as of September 30, 2000 $ 5,464 $ 2,078 $ 191 $ 191 $ 1,054 $ 12,285 $ 21,263 ========================================================================
(1) Includes revenues and costs not identifiable to a particular segment such as interest expense, certain amortization expenses, certain interest income and other, certain operations support and general and administrative expenses. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Marine Marine Railcar Aircraft Vessel Trailer Container All For the quarter ended September 30, Leasing Leasing Leasing Leasing Leasing Other(1) Total 1999 REVENUES Lease revenue $ 1,691 $ 1,399 $ 547 $ 192 $ 23 $ -- $ 3,852 Interest income and other -- 4 45 -- -- 31 80 Net gain (loss) on disposition of equipment 13 -- -- (1) -- -- 12 -------------------------------------------------------------------------- Total revenues 1,704 1,403 592 191 23 31 3,944 COSTS AND EXPENSES Operations support 506 82 334 57 2 9 990 Depreciation and amortization 441 1,194 215 89 28 15 1,982 Interest expense -- -- -- -- -- 252 252 Management fees 116 37 28 11 2 -- 194 General and administrative expenses 72 56 21 35 (1) 156 339 Provision for bad debts 19 378 -- 10 -- -- 407 -------------------------------------------------------------------------- Total costs and expenses 1,154 1,747 598 202 31 432 4,164 -------------------------------------------------------------------------- Minority interests -- -- 4 -- -- -- 4 -------------------------------------------------------------------------- Net income (loss) $ 550 $ (344) $ (2) $ (11) $ (8) $ (401) $ (216) ========================================================================== Total assets as of September 30, 1999 $ 6,787 $ 9,424 $ 2,529 $ 2,023 $ 419 $ 583 $ 21,765 ==========================================================================
Marine Marine Railcar Aircraft Vessel Container Trailer All For the nine months ended September Leasing Leasing Leasing Leasing Leasing Other(1) Total 30, 2000 Lease revenue $ 4,972 $ 3,654 $ -- $ 68 $ 436 $ -- $ 9,130 Interest income and other 12 3 -- -- -- 94 109 Net gain (loss) on disposition of equipment 106 9,460 -- 36 78 -- 9,680 -------------------------------------------------------------------------- Total revenues 5,090 13,117 -- 104 514 94 18,919 COSTS AND EXPENSES Operations support 1,411 231 -- 2 164 29 1,837 Depreciation and amortization 1,230 2,429 -- 59 184 30 3,932 Interest expense -- -- -- -- -- 306 306 Management fees 345 138 -- 3 24 -- 510 General and administrative expenses 160 151 -- 1 75 634 1,021 Loss on revaluation of equipment -- -- -- -- 202 -- 202 Recovery of bad debts (58) -- -- -- (1) (10) (69) -------------------------------------------------------------------------- Total costs and expenses 3,088 2,949 -- 65 648 989 7,739 -------------------------------------------------------------------------- Equity in net income of USPEs -- 22 995 -- -- -- 1,017 -------------------------------------------------------------------------- Net income (loss) $ 2,002 $ 10,190 $ 995 $ 39 $ (134) $ (895) $ 12,197 ========================================================================== Total assets as of September 30, 2000 $ 5,464 $ 2,078 $ 191 $ 191 $ 1,054 $ 12,069 $ 21,263 ==========================================================================
(1) Includes revenues and costs not identifiable to a particular segment such as interest expense, certain amortization expenses, certain interest income and other, certain operations support and general and administrative expenses. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Marine Marine Railcar Aircraft Vessel Trailer Container All For the nine months ended September Leasing Leasing Leasing Leasing Leasing Other(1) Total 30, 1999 Other1 REVENUES Lease revenue $ 5,160 $ 4,418 $ 1,477 $ 515 $ 94 $ -- $ 11,664 Interest income and other -- 14 45 -- -- 135 194 Net gain (loss) on disposition of equipment 383 2 -- (7) 100 -- 478 -------------------------------------------------------------------------- Total revenues 5,543 4,434 1,522 508 194 135 12,336 COSTS AND EXPENSES Operations support 1,315 292 817 151 2 29 2,606 Depreciation and amortization 1,326 3,599 643 266 90 45 5,969 Interest expense -- -- -- -- -- 813 813 Management fees 356 161 74 30 5 -- 626 General and administrative expenses 195 389 44 91 3 503 1,225 Provision for (recovery of) bad 48 358 -- (21) -- -- 385 debts -------------------------------------------------------------------------- Total costs and expenses 3,240 4,799 1,578 517 100 1,390 11,624 -------------------------------------------------------------------------- Minority interests -- -- 22 -- -- -- 22 Equity in net income of USPEs -- 1,477 -- -- -- -- 1,477 -------------------------------------------------------------------------- Net income (loss) $ 2,303 1,112 (34) (9) 94 (1,255) 2,211 ========================================================================== Total assets as of September 30, 1999 $ 6,787 $ 9,424 $ 2,529 $ 2,023 $ 419 $ 583 $ 21,765 ==========================================================================
(1) Includes revenues and costs not identifiable to a particular segment such as interest expense, certain amortization expenses, certain interest income and other, certain operations support and general and administrative expenses. 8. DEBT During the first nine months of 2000, the Partnership paid off the outstanding note balance of $7.5 million. 9. NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT Net income (loss) per weighted-average Partnership unit was computed by dividing net income (loss) attributable to limited partners by the weighted-average number of Partnership units deemed outstanding during the period. The weighted-average number of Partnership units deemed outstanding during the three and nine months ended September 30, 2000 and 1999 was 9,871,073. 10. CONTINGENCIES 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 counter-claims 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 General Partner believes the likelihood an unfavorable outcome from the counterclaims is remote. 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 Partnership. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 2000 11. LIQUIDATION AND SPECIAL DISTRIBUTIONS On January 1, 2000, the General Partner began the liquidation phase of the Partnership with the intent to commence an orderly liquidation of the Partnership assets. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodically declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. No special distributions were paid in the first nine months of 2000 and 1999. A special distributions of $10.9 million will be paid during November of 2000 from assets sales in the third quarter of 2000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (I) RESULTS OF OPERATIONS COMPARISON OF PLM EQUIPMENT GROWTH FUND III'S (THE PARTNERSHIP'S) OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 In September 1999, the General Partner amended the corporate-by-laws of certain unconsolidated special-purpose entities (USPEs) in which the Partnership, or any affiliated program, owns an interest greater than 50%. The amendment to the corporate-by-laws provided that all decisions regarding the acquisition and disposition of the investment as well as other significant business decisions of that investment would be permitted only upon unanimous consent of the Partnership and all the affiliated programs that have an ownership in the investment (the Amendment). As such, although the Partnership may own a majority interest in a USPE, the Partnership does not control its management and thus the equity method of accounting will be used after adoption of the Amendment. As a result of the Amendment, as of September 30, 1999, all jointly owned equipment in which the Partnership owned a majority interest, which had been consolidated, were reclassified to investments in USPEs. Lease revenues and direct expenses for jointly owned equipment in which the Partnership held a majority interest were reported under the consolidation method of accounting during the three and nine months ended September 30, 1999 and were included with the owned equipment operations. For the three and nine months ended September 30, 2000, lease revenues and direct expenses for these entities are reported under the equity method of accounting and are included with the operations of the USPEs. (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance, equipment operating and asset-specific insurance expenses) on owned equipment decreased during the three months ended September 30, 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 7 to the financial statements), are not included in the owned equipment operation discussion because these expenses are indirect in nature, not a result of operations but the result of owning a portfolio of equipment. The following table presents lease revenues less direct expenses by segment (in thousands of dollars): For the Three Months Ended September 30, 2000 1999 ------------------------------------ Aircraft $ 1,204 $ 1,317 Railcars 1,086 1,185 Trailers 76 135 Marine containers 14 21 Marine vessel -- 213 Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and $23,000, respectively, for the quarter ended September 30, 2000, compared to $1.4 million and $0.1 million, respectively, during the same period of 1999. Lease revenues decreased $0.2 million during the three months ended September 30, 2000 compared to the same period in 1999 primarily due to the sale of an aircraft during the fourth quarter of 1999. Railcars: Railcars lease revenues and direct expenses were $1.6 million and $0.5 million, respectively, for the quarter ended September 30, 2000, compared to $1.7 million and $0.5 million, respectively, during the same period of 1999. The number of railcars owned by the Partnership has been declining due to dispositions. The result of this declining fleet is a decrease in railcar contribution. Trailers: Trailer lease revenues and direct expenses were $0.1 million and $0.1 million, respectively, for the quarter ended September 30, 2000, compared to $0.2 million and $0.1 million, respectively, during the same period of 1999. The number of trailers owned by the Partnership has been declining due to dispositions. The result of this declining fleet is a decrease in trailer contribution. Marine containers: Marine container lease revenues and direct expenses were $15,000 and $1,000 respectively, for the quarter ended September 30, 2000, compared to $23,000 and $2,000, respectively, during the same period of 1999. The number of marine containers owned by the Partnership has been declining due to dispositions. The result of this declining fleet has been a decrease in marine container contribution. Marine vessel: Marine vessel lease revenues and direct expenses were zero for the quarter ended September 30, 2000, compared to 0.5 million and $0.3 million, respectively, for 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 for one marine vessel. As a result of the Amendment, during the three months ended September 30, 2000, lease revenues decreased $0.5 million and direct expenses decreased $0.3 million when compared to the same period of 1999. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $1.7 million for the quarter ended September 30, 2000 decreased from $3.2 million for the same period of 1999. Significant variances are explained as follows: (i) A decrease of $0.8 million in depreciation and amortization expenses from 1999 levels reflects a decrease of $0.6 million due to the disposition of certain Partnership assets during 2000 and 1999. A decrease of $0.2 million is the 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. (ii) A decrease of $0.4 in bad debt expense from 1999 was due to the General Partner's evaluation of the collectability of receivables due from certain lessees. (iii)A decrease of $0.2 million in interest expense was due to lower average debt balances outstanding during the three months ended September 30, 2000, compared to the same period in 1999. (C) Net Gain on Disposition of Owned Equipment The net gain on the disposition of owned equipment for the third quarter of 2000 was $9.6 million, resulting from the disposition of marine containers, railcars, trailers, and aircraft, with an aggregate net book value of $2.6 million, for aggregate proceeds of $12.2 million. The net gain on the disposition of owned equipment for the third quarter of 1999 was $12,000, resulting from the disposition of marine containers, railcars, and trailers, with an aggregate net book value of $21,000, for aggregate proceeds of $33,000. (D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities (USPEs) Net income (loss) generated from the operation of jointly-owned assets accounted for under the equity method is shown in the following table by equipment type (in thousands of dollars): For the Three Months Ended September 30, 2000 1999 ------------------------------------- Marine vessel $ 1,102 $ -- ------------------------------------- Equity in net income of USPEs $ 1,102 $ -- ===================================== Marine vessel: The Partnership's share of revenues and expenses of marine vessels was $1.3 million and $0.2 million, respectively, for the quarter ended September 30, 2000, compared to zero for the same period of 1999. During the nine months ended September 30, 2000, the Partnership's 56% interest in an entity owing a marine vessel was sold for a gain of $1.1 million. The increase in marine vessel revenues of $1.1 million was due to the gain from the sale. The increase in marine vessel lease revenues of $0.2 million and depreciation expense, direct expenses, and administrative expenses of $0.2 million during the three months ended September 30, 2000, was caused by the September 30, 1999 Amendment that changed the accounting method of majority held equipment from the consolidation method of accounting to the equity method of accounting for one marine vessel. The lease revenues and depreciation expense, direct expenses, and administrative expenses for the majority owned marine vessel were reported under the consolidation method of accounting under Owned Equipment Operations during the three months ended September 30, 1999. Aircraft, aircraft engines, and rotables: As of September 30, 2000, the Partnership had no remaining interests in entities that owned aircraft, aircraft engines, or rotables. The Partnership sold these two trusts during the first quarter of 1999. (E) Net Income (loss) As a result of the foregoing, the Partnership had a net income of $11.4 million in the third quarter of 2000 compared to a net loss of $0.2 million in the third quarter of 1999. The Partnership's ability to 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 three months ended September 30, 2000 is not necessarily indicative of future periods. COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance, equipment operating and asset-specific insurance expenses) on owned equipment decreased during the nine months ended September 30, 2000 when compared to the same period of 1999. The following table presents lease revenues less direct expenses by segment (in thousands of dollars): For the Nine Months Ended September 30, 2000 1999 ------------------------------------- Railcars $ 3,561 $ 3,845 Aircraft 3,423 4,126 Trailers 272 364 Marine containers 66 92 Marine vessel -- 660 Railcars: Railcars lease revenues and direct expenses were $5.0 million and $1.4 million, respectively, for the nine months ended September 30, 2000, compared to $5.2 million and $1.3 million, respectively, during the same period of 1999. The decrease in lease revenues resulted from dispositions of railcars during 2000 and 1999. The increase in direct expenses of $0.1 million was a result of more repairs being required on rail equipment in the nine months ended September 30, 2000 than was needed during the nine months ended September 30, 1999. Aircraft: Aircraft lease revenues and direct expenses were $3.7 million and $0.2 million, respectively, for the nine months ended September 30, 2000, compared to $4.4 million and $0.3 million, respectively, during the same period of 1999. Lease revenues decreased $0.7 million during the nine months ended September 30, 2000 compared to the same period in 1999 primarily due to the sale of an aircraft during the fourth quarter of 1999. Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.2 million, respectively, for the nine months ended September 30, 2000, compared to $0.5 million and $0.2 million, respectively, during the same period of 1999. The number of trailers owned by the Partnership has been declining due to dispositions. The result of this declining fleet is a decrease in trailer contribution. Marine containers: Marine container lease revenues and direct expenses were $0.1 million and $2,000, respectively, for the nine months ended September 30, 2000, compared to $0.1 million and $2,000, respectively, during the same period of 1999. The number of marine containers owned by the Partnership has been declining due to dispositions. The result of this declining fleet is a decrease in marine container contribution. Marine vessel: There were no marine vessel lease revenues and direct expenses for the nine months ended September 30, 2000, compared to $1.5 million and $0.8 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 for one marine vessel. As a result of the Amendment, during the nine months ended September 30, 2000, lease revenues decreased $1.5 million and direct expenses decreased $0.8 million when compared to the same period of 1999. (B) Indirect Operating Expenses Related to Owned Equipment Operations Total indirect expenses of $5.9 million for the nine months ended September 30, 2000 decreased from $9.0 million for the same period of 1999. Significant variances are explained as follows: (i) A decrease of $2.0 million in depreciation and amortization expenses from 1999 levels reflects the decrease of $1.4 million due to the disposition of certain Partnership assets during 2000 and 1999. A decrease of $0.6 million was the 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. (ii) A decrease of $0.5 million in interest expense was due to lower average debt balances outstanding during the nine months ended September 30, 2000 when compared to the same period of 1999. (iii)A decrease of $0.5 million in bad debt expense from 1999 was due to the General Partner's evaluation of the collectability of receivables due from certain lessees. (iv) A decrease of $0.2 million in general and administrative expenses from 1999 levels was due to the reduction of the size of the Partnership's equipment portfolio. (v) A decrease of $0.1 million in management fees to affiliate from 1999 levels was due to lower lease revenues during the nine months ended September 30, 2000, compared to the same period of 1999. (C) Net Gain on Disposition of Owned Equipment The net gain on the disposition of equipment was $9.7 million for the nine months ended September 30, 2000, resulting from the disposition of marine containers, trailers, railcars, and aircraft with an aggregate net book value of $2.8 million, for aggregate proceeds of $12.5 million. The net gain on the disposition of equipment was $0.5 million for the nine months ended September 30, 1999, resulting from the disposition of marine containers, trailers, and railcars with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.7 million. (D) Equity in Net Income of Unconsolidated Special-Purpose Entities Net income generated from the operation of jointly-owned assets accounted for under the equity method is shown in the following table by equipment type (in thousands of dollars): For the Nine Months Ended September 30, 2000 1999 ----------------------------------- Marine vessel $ 997 $ -- Aircraft, aircraft engines, and rotables 20 1,477 ----------------------------------- Equity in net income of USPEs $ 1,017 $ 1,477 =================================== Marine vessel: The Partnership's share of revenues and expenses from the marine vessel was $1.8 million and $0.8 million, respectively, for the nine months ended September 30, 2000, compared to zero for the same period of 1999. During the nine months ended September 30, 2000, the Partnership's 56% interest in an entity owing a marine vessel was sold for a gain of $1.1 million. The increase in marine vessel revenues of $1.1 million was due to the gain from the sale. The increase in marine vessel lease revenues of $0.7 million and depreciation expense, direct expenses, and administrative expenses of $0.8 million during the nine months ended September 30, 2000, was caused by the September 30, 1999 Amendment that changed the accounting method of majority held equipment from the consolidation method of accounting to the equity method of accounting for one marine vessel. The lease revenues and depreciation expense, direct expenses, and administrative expenses for the majority owned marine vessel were reported under the consolidation method of accounting under Owned Equipment Operations during the nine months ended September 30, 1999. Aircraft, aircraft engines, and rotables: As of September 30, 2000, the Partnership had no remaining interests in entities that owned aircraft, aircraft engines, or rotables. The Partnership's share of aircraft revenues and expenses was $20,000 and zero, respectively, for the nine months ended September 30, 2000, compared to $1.6 million and $0.1 million, respectively, during the same period of 1999. The $20,000 of aircraft revenues for the nine months ended September 30, 2000 represented interest income earned during the first nine months of 2000 on accounts receivable. The $1.6 million in revenue in 1999 represented the gain from the sale of the equipment in two trusts during the first quarter of 1999. (E) Net Income As a result of the foregoing, the Partnership had net income of $12.2 million for the nine months ended September 30, 2000, compared to a net income of $2.2 million in the same period of 1999. The Partnership's ability to operate, or liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors. Therefore, the Partnership's performance in the nine months ended September 30, 2000 is not necessarily indicative of future periods. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS For the nine months ended September 30, 2000, the Partnership generated operating cash of $4.3 million (net cash provided by operating activities, plus non-liquidating distributions from USPEs) to meet its operating obligations. During the nine months ended September 30, 2000, the Partnership sold wholly-and partially-owned equipment received aggregate proceeds of $15.6 million. During the nine months ended September 30, 2000, accounts payable and accrued expenses decreased $0.5 million. A $0.2 million decrease in trade accounts payable was due to the reduction of the size of the Partnership's equipment portfolio. A $0.3 million decrease in accrued expenses was due to the payment of $0.3 million for repairs to an aircraft in the first nine months of 2000, which was accrued at December 31, 1999. A similar accrual was not required on September 30, 2000. During the nine months ended September 30, 2000, due to affiliates decreased $0.6 million. During the nine months ended September 30, 2000, the Partnership borrowed $4.6 million from FSI and repaid $5.2 million including $0.6 million that was borrowed as of December 31, 1999. During the nine months ended September 30, 2000, lessee deposits and reserves for repairs decreased $1.3 million. A $0.9 million decrease in reserves for repairs resulted from the sale of two aircraft. A $0.4 million decrease in prepaid lease revenue was due to fewer lessees prepaying future lease revenue at September 30, 2000 compared to December 31, 1999. PLM Financial Services, Inc. (the General Partner) has not planned any expenditure, nor is it aware of any contingencies that would cause the Partnership to require any additional capital to that mentioned above. The Partnership is in its active liquidation phase. As a result, the size of the Partnership's remaining equipment portfolio and, in turn, the amount of net cash flows from operations will continue to become progressively smaller as assets are sold. Although distribution levels may be reduced, significant asset sales may result in potential special distributions to the partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio that is actively being marketed for sale by the General Partner continues to be carried at the lower of depreciated cost or fair value less cost of disposal. Although the General Partner estimates that there will be distributions to the partners after final disposal of assets and settlement of liabilities, the amounts cannot be accurately determined prior to actual disposal of the equipment. On April 18, 2000, the General Partner for the Partnership announced that effective immediately, it will not recognize any further transfers involving trading of units in this partnership for the remainder of the 2000 calendar year. PLM Equipment Growth Fund III (hereafter referred to as "the Partnership") is listed on the OTC Bulletin Board under the symbol GFZPZ. In making the announcement, the General Partner cited the Partnership's need to continue to comply with Internal Revenue Service (IRS) Notice 88-75 and IRS Code Section 7704, which contain safe harbor provisions regarding the maximum number of partnership units that can be traded during a calendar year in order for a partnership not to be deemed a publicly traded partnership for income tax purposes. Transfers for the remainder of the year may only be processed, pursuant to IRS Code Section 7704, through a qualified matching service. The General Partner will also continue to recognize transfers specifically excluded from the safe harbor limitations, referred to in the regulations as "transfers not involving trading," which includes transfers at death, transfers between family members, and transfers involving distributions from a qualified retirement plan. (III) OUTLOOK FOR THE FUTURE The Partnership entered its liquidation phase on January 1, 2000. The General Partner is seeking to selectively re-lease or sell assets as the existing leases expire. Sale decisions will cause the operating performance of the Partnership to decline over the remainder of its life. Several factors may affect the Partnership's operating performance in the remainder of 2000, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates. Liquidation of the Partnership's equipment will cause a reduction in the size of the equipment portfolio and may result in a reduction of contribution to the Partnership. Other factors affecting the Partnership's contribution in the year 2000 include: 1. One of the Partnership's aircraft has been off-lease for two years. This Stage II aircraft required extensive repairs and maintenance and the Partnership has had difficulty selling the aircraft. This aircraft will remain off-lease until it is sold. During the nine months ended September 30, 2000, the Partnership received a $0.1 million refundable security deposit from a potential buyer of the Partnership's Boeing 737-200 Stage II commercial aircraft. 2. The cost of new marine containers has been at historic lows for the past several years which has caused downward pressure on per diem lease rates. Recently, the cost of marine containers have started to increase which, if this trend continues, should translate into rising per diem lease rates. 3. According to the Association of American Railroads, railcar loadings for the first nine months of 2000 are 0.7% ahead of the railcar loadings for the same period of 1999. Some commodity groups are behind last year's loading numbers. While our utilization rates remain fairly high, we are experiencing downward pressure on rental rates. This translates into lower contributions to the partnership. 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 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 those equipment markets in which it determines that it cannot operate equipment and achieve acceptable rates of return. The Partnership intends to use cash flow from operations and proceeds from disposition of equipment to satisfy its operating requirements, maintain working capital reserves, and pay cash distributions to the investors. (IV) FORWARD-LOOKING INFORMATION Except for the historical information contained herein, in 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 currency devaluation risk. During the nine months ended September 30, 2000, 81% 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 is intentionally left blank) PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. (this space intentionally left blank) Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM EQUIPMENT GROWTH FUND III By: PLM Financial Services, Inc. General Partner Date: November 7, 2000 By: /s/ Richard K Brock Richard K Brock Vice President and Chief Financial Officer EX-27 2 0002.txt FDS --
5 PLM EQUIPMENT GROWTH FUND III 0000824210 PLM EQUIPMENT GROWTH FUND III 1,000 U.S.DOLLARS 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 12,276 0 2,407 (1,697) 0 0 61,983 (53,906) 21,263 0 0 0 0 0 738 21,263 0 18,919 0 0 7,502 (697) 306 12,197 0 12,197 0 0 0 12,197 1.24 1.24
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