-----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, KAKeZAGQ3Roim3QjAyTtvtnROJNhVal0Fyes2fouagJEYZQlCb3TKgTVH5J5Yypf xuj4/bWHnty4DEOMv3MO6w== /in/edgar/work/20000807/0000824210-00-000010/0000824210-00-000010.txt : 20000921 0000824210-00-000010.hdr.sgml : 20000921 ACCESSION NUMBER: 0000824210-00-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000807 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: 687071 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 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 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)
June 30, December 31, 2000 1999 ------------------------------------ ASSETS Equipment held for operating lease, at cost $ 83,108 $ 84,191 Less accumulated depreciation (71,319) (69,303) ------------------------------------ Net equipment 11,789 14,888 Cash and cash equivalents 844 486 Accounts receivable, net of allowance for doubtful accounts of $1,662 in 2000 and $1,757 in 1999 663 727 Investments in unconsolidated special-purpose entities 2,235 2,498 Deferred charges, net of accumulated amortization of $309 in 1999 -- 31 Prepaid expenses and other assets 26 60 ------------------------------------ Total assets $ 15,557 $ 18,690 ==================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 133 $ 786 Due to affiliates 4,663 699 Lessee deposits and reserves for repairs 1,669 1,419 Note payable -- 7,458 ------------------------------------ Total liabilities 6,465 10,362 ------------------------------------ Partners' capital: Limited partners (9,871,073 depositary units as of June 30, 2000 and December 31, 1999) 9,092 8,328 General Partner -- -- ------------------------------------ Total partners' capital 9,092 8,328 ------------------------------------ Total liabilities and partners' capital $ 15,557 $ 18,690 ====================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A Limited Partnership) STATEMENTS OF INCOME (in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months Ended June 30, Ended June 30, 2000 1999 2000 1999 --------------------------- --------------------------- REVENUES Lease revenue $ 3,014 $ 3,908 $ 6,168 $ 7,812 Interest and other income 28 46 42 114 Net gain on disposition of equipment 8 453 45 466 ----------------------------- --------------------------- Total revenues 3,050 4,407 6,255 8,392 ----------------------------- --------------------------- EXPENSES Depreciation and amortization 1,369 1,990 2,757 3,987 Repairs and maintenance 706 608 1,161 1,090 Equipment operating expenses 8 203 16 399 Insurance expense 34 48 69 128 Management fees to affiliate 171 214 350 432 Interest expense 117 245 267 561 General and administrative expenses to affiliates 91 116 204 249 Other general and administrative expenses 199 271 496 637 Loss on revaluation of equipment 191 -- 191 -- Recovery of bad debts (62) (13) (105) (22) ------------------------------ --------------------------- Total expenses 2,824 3,682 5,406 7,461 ----------------------------- --------------------------- Minority interests -- (2) -- 19 Equity in net income (loss) of unconsolidated special-purpose entities (13) 4 (85) 1,477 ------------------------------ --------------------------- Net income $ 213 $ 727 $ 764 2,427 ============================== =========================== PARTNERS' SHARE OF NET INCOME Limited partners $ 213 $ 623 $ 764 $ 2,219 General Partner -- 104 -- 208 ----------------------------- --------------------------- Total $ 213 $ 727 $ 764 $ 2,427 =============================== ========================== Limited partners net income per weighted-average depositary unit $ 0.02 $ 0.06 $ 0.08 $ 0.22 ============================== =========================== Cash distribution $ -- $ 2,079 $ -- $ 4,157 =============================== =========================== Cash distribution per weighted-average depositary unit $ -- $ 0.20 $ -- $ 0.40 ============================== ===========================
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 June 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 764 -- 764 ------------------------------------------------- Partners' capital as of June 30, 2000 $ 9,092 $ -- $ 9,092 =================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Six Months Ended June 30, 2000 1999 ----------------------------- OPERATING ACTIVITIES Net income $ 764 $ 2,427 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,757 3,987 Loss on revaluation of equipment 191 -- Net gain on disposition of equipment (45) (466) Equity in net loss (income) from unconsolidated special-purpose entities 85 (1,477) Changes in operating assets and liabilities: Accounts receivable, net 96 (687) Prepaid expenses and other assets 34 12 Accounts payable and accrued expenses (653) (573) Due to affiliates 14 30 Lessee deposits and reserves for repairs 250 340 Minority interests -- (89) ---------------------------- Net cash provided by operating activities 3,493 3,504 ---------------------------- INVESTING ACTIVITIES Payments for capitalized improvements (11) (2) Distributions from unconsolidated special-purpose entities 178 8 Distributions from liquidation of unconsolidated special-purpose entity -- 3,548 Proceeds from disposition of equipment 206 634 --------------------------- Net cash provided by investing activities 373 4,188 ---------------------------- FINANCING ACTIVITIES Principal payments on note payable (7,458) (3,584) Due from affiliates 3,950 -- Cash distributions paid to limited partners -- (3,949) Cash distributions paid to General Partner -- (208) ---------------------------- Net cash used in financing activities (3,508) (7,741) ---------------------------- Net increase (decrease) in cash and cash equivalents 358 (49) Cash and cash equivalents at beginning of period 486 3,429 ---------------------------- Cash and cash equivalents at end of period 844 $ 3,380 ============================ SUPPLEMENTAL INFORMATION Interest paid $ 220 $ 561 =================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND III (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 III (the Partnership) as of June 30, 2000 and December 31, 1999, the statements of income 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 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 Partnership will terminate on December 31, 2000, unless terminated earlier upon the sale of all equipment and by certain other events. 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 anticipates that the liquidation of Partnership assets will be completed by the end of the year 2000. 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 six months ended June 30, 2000. For the six months ended June 30, 1999, cash distributions totaled $4.2 million. For the three months ended June 30, 1999, cash distributions totaled $2.1 million. Cash distributions to the limited partners of $1.7 million for the six months ended June 30, 1999, were deemed to be a return of capital. 4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES The balance due to affiliates as of June 30, 2000 included $0.1 million due to FSI and its affiliate for management fees, and $4.6 million due to FSI for a loan made to the Partnership. The Partnership is charged market rate interest on the loans from FSI. Interest expense charged by FSI was $14,000 and $43,000 for the three and six months ended June 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 $17,000 and $12,000, were payable as of June 30, 2000 and December 31, 1999, respectively. PLM EQUIPMENT GROWTH FUND III (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 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 Six Months Ended June 30, Ended June 30, 2000 1999 2000 1999 -------------------------------------------------------------- Management fees $ 16 $ -- $ 27 $ -- Data processing and administrative expenses 2 -- 6 2
5. EQUIPMENT The components of owned equipment were as follows (in thousands of dollars):
June 30, December 31, 2000 1999 -------------------------------------- Aircraft $ 42,000 $ 42,000 Railcars 33,244 33,572 Marine containers 3,939 4,453 Trailers 3,925 4,166 --------------------------------------- 83,108 84,191 Less accumulated depreciation (71,319) (69,303) ------------------------------------- Net equipment $ 11,789 $ 14,888 =====================================
As of June 30, 2000, all equipment in the Partnership portfolio was either on lease or operating in PLM-affiliated short-term trailer rental facilities, except for 69 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 $0.9 million and $1.2 million as of June 30, 2000 and December 31, 1999, respectively. Capital improvements to the Partnership's equipment of $11,000 were made during the six months ended June 30, 2000. Capital improvements to the Partnership's equipment of $2,000 were made during the six months ended June 30, 1999. During the six months ended June 30, 2000, the Partnership sold or disposed of marine containers, trailers, and railcars, with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.2 million. During the six months ended June 30, 1999, the Partnership sold or disposed of marine containers, trailers, and railcars, with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.6 million. 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 $0.2 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. PLM EQUIPMENT GROWTH FUND III (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 5. EQUIPMENT (CONTINUED) During the six months ended June 30, 2000, the Partnership reduced the carrying value of these trailers by $0.2 million to the equipment's estimated realizable value. 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):
June 30, December 31, 2000 1999 ---------------------------------- 56% interest in an entity owning a marine vessel $ 2,199 $ 2,440 25% interest in a trust that owned four commercial aircraft 36 58 --------------------------------- Net investments $ 2,235 $ 2,498 =================================
As of June 30, 2000 and December 31, 1999, all jointly-owned equipment in the Partnership's USPE portfolio was on lease. 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. 7. OPERATING SEGMENTS The Partnership operates in five different segments: aircraft leasing, railcar 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 Aircraft Railcar Vessel Container Trailer All For the quarter ended June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other1 Total ----------------------------------- ------- ------- ------- ------- ------- --------- ----- REVENUES Lease revenue $ 1,222 $ 1,637 $ -- $ 21 $ 134 $ -- $ 3,014 Interest income and other 2 3 -- -- -- 23 28 Net gain (loss) on disposition of equipment -- (6) -- 6 8 -- 8 ------------------------------------------------------------------------ Total revenues 1,224 1,634 -- 27 142 23 3,050 Costs and Expenses Operations support 159 527 -- 1 51 10 748 Depreciation and amortization 866 407 -- 19 61 16 1,369 Interest expense -- -- -- -- -- 117 117 Management fees 45 117 -- 2 7 -- 171 General and administrative expenses 56 53 -- -- 18 163 290 Recovery of bad debts -- (52) -- -- -- (10) (62) ------------------------------------------------------------------------ Total costs and expenses 1,126 1,052 -- 22 137 296 2,633 ------------------------------------------------------------------------ Equity in net loss of USPEs -- -- (13) -- -- -- (13) ------------------------------------------------------------------------ Net income (loss) $ 98 $ 582 $ (13) $ 5 $ 5 $ (273) $ 404 ======================================================================== Total assets as of June 30, 2000 $ 5,419 $ 5,522 $ 2,199 $ 269 $ 1,437 $ 902 $ 15,748 ======================================================================== - -------------------------- 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 JUNE 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Marine Aircraft Railcar Vessel Trailer Container All For the quarter ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other1 Total ----------------------------------- ------- ------- ------- ------- ------- ---------- ----- REVENUES Lease revenue $ 1,509 $ 1,712 $ 471 $ 182 $ 34 $ -- $ 3,908 Interest income and other 5 -- -- -- -- 41 46 Net gain on disposition of Equipment -- 353 -- 1 99 -- 453 --------------------------------------------------------------------------- Total revenues 1,514 2,065 471 183 133 41 4,407 COSTS AND EXPENSES Operations support 115 459 226 48 1 10 859 Depreciation and amortization 1,202 442 214 88 29 15 1,990 Interest expense -- -- -- -- -- 245 245 Management fees 61 118 23 10 2 -- 214 General and administrative expenses 142 57 8 30 1 149 387 (Recovery of) provision for bad -- (16) -- 3 -- -- (13) debts --------------------------------------------------------------------------- Total costs and expenses 1,520 1,060 471 179 33 419 3,682 --------------------------------------------------------------------------- Minority interests -- -- (2) -- -- -- (2) Equity in net income (loss) of USPEs 4 -- -- -- -- -- 4 --------------------------------------------------------------------------- Net income (loss) $ (2) $ 1,005 $ (2) $ 4 $ 100 $ (378) $ 727 =========================================================================== Total assets as of June 30, 1999 $ 11,214 $ 7,230 $ 5,154 $ 2,058 $ 481 $ 3,769 $ 29,906 =========================================================================== Marine Marine Aircraft Railcar Vessel Container Trailer All For the six months ended June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other1 Total -------------------------------------- -------- ------- ------- --------- ------- --------- ------ REVENUES Lease revenue $ 2,427 $ 3,388 $ -- $ 53 $ 300 $ -- $ 6,168 Interest income and other 2 3 -- -- -- 37 42 Net gain (loss) on disposition of equipment -- 38 -- 13 (6) -- 45 ---------------------------------------------------------------------------- Total revenues 2,429 3,429 -- 66 294 37 6,255 COSTS AND EXPENSES Operations support 208 913 -- 1 104 20 1,246 Depreciation and amortization 1,733 827 -- 42 124 31 2,757 Interest expense -- -- -- -- -- 267 267 Management fees 91 240 -- 3 16 -- 350 General and administrative expenses 93 109 -- -- 47 451 700 Recovery of bad debts -- (94) -- -- (1) (10) (105) -------------------------------------------------------------------------- Total costs and expenses 2,125 1,995 -- 46 290 759 5,215 -------------------------------------------------------------------------- Equity in net income (loss) of USPEs 22 -- (107) -- -- -- (85) --------------------------------------------------------------------------- Net income (loss) $ 326 $ 1,434 $ (107) $ 20 $ 4 $ (722) $ 955 ========================================================================== Total assets as of June 30, 2000 $ 5,419 $ 5,522 $ 2,199 $ 269 $ 1,437 $ 902 $ 15,748 ========================================================================== -------------------------- 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 JUNE 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Marine Marine Aircraft Railcar Vessel Trailer Container All For the six months ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other1 Total -------------------------------------- -------- ------- -------- ------- --------- ---------- ----- REVENUES Lease revenue $ 3,019 $ 3,469 $ 930 $ 323 $ 71 $ -- $ 7,812 Interest income and other 10 -- -- -- -- 104 114 Net gain (loss) on disposition of equipment 2 370 -- (6) 100 -- 466 -------------------------------------------------------------------------- Total revenues 3,031 3,839 930 317 171 104 8,392 Costs and Expenses Operations support 209 809 484 94 1 20 1,617 Depreciation and amortization 2,405 885 428 177 62 30 3,987 Interest expense -- -- -- -- -- 561 561 Management fees 124 240 46 19 3 -- 432 General and administrative expenses 333 123 23 56 4 347 886 (Recovery of) provision for bad (20) 29 -- (31) -- -- (22) debts -------------------------------------------------------------------------- Total costs and expenses 3,051 2,086 981 315 70 958 7,461 -------------------------------------------------------------------------- Minority interests -- -- 19 -- -- -- 19 Equity in net income (loss) of USPEs 1,477 -- -- -- -- -- 1,477 -------------------------------------------------------------------------- ====== Net income (loss) $ 1,457 $ 1,753 $ (32) $ 2 $ 101 $ (854) $ 2,427 ========================================================================== Total assets as of June 30, 1999 $ 11,214 $ 7,230 $ 5,154 $ 2,058 $ 481 $ 3,769 $29,906 ========================================================================== - -------------------------- 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 six months of 2000, the Partnership paid off the outstanding note balance of $7.5 million. 9. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT Net income per weighted-average Partnership unit was computed by dividing net income 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 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 JUNE 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. No special distributions were paid in the first six months of 2000 and 1999. 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 certain damaged equipment, 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. 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 JUNE 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 six months ended June 30, 1999 and were included with the owned equipment operations. For the three and six 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. (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 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 June 30, 2000 1999 ------------------------------------ Railcars $ 1,110 $ 1,253 Aircraft 1,063 1,394 Trailers 83 134 Marine containers 20 33 Marine vessel -- 245 Railcars: Railcars lease revenues and direct expenses were $1.6 million and $0.5 million, respectively, for the quarter ended June 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 sales and dispositions. The result of this declining fleet is a decrease in railcar contribution. Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and $0.2 million, respectively, for the quarter ended June 30, 2000, compared to $1.5 million and $0.1 million, respectively, during the same period of 1999. Lease revenues decreased $0.3 million during the three months ended June 30, 2000 when compared to the same period in 1999 due to the sale of an aircraft during the fourth quarter of 1999. Trailers: Trailer lease revenues and direct expenses were $0.1 million and $0.1 million, respectively, for the quarter ended June 30, 2000, compared to $0.2 million and $48,000, respectively, during the same period of 1999. The number of trailers owned by the Partnership has been declining due to sales and dispositions. The result of this declining fleet is a decrease in trailer contribution. Marine containers: Marine container lease revenues and direct expenses were $21,000 and $1,000 respectively, for the quarter ended June 30, 2000, compared to $34,000 and $1,000, respectively, during the same period of 1999. The number of marine containers owned by the Partnership has been declining due to sales and 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 June 30, 2000, compared to 0.5 million and $0.2 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 of one marine vessel. As a result of the Amendment, during the three months ended June 30, 2000, lease revenues decreased $0.5 million and direct expenses decreased $0.2 million when compared to the same period of 1999. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $1.9 million for the quarter ended June 30, 2000 decreased from $2.8 million for the same period of 1999. Significant variances are explained as follows: (i) A decrease of $0.6 million in depreciation and amortization expenses from 1999 levels reflects a decrease of $0.4 million due to the sale or 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) Loss on revaluation of equipment increased $0.2 million during the three months ended June 30, 2000 and resulted from the Partnership reducing the carrying value of trailers to their estimated net realizable value. There was no revaluation of equipment required during the same period of 1999. (iii)A decrease of $0.1 million in interest expense was due to lower average debt balances outstanding during the three months ended June 30, 2000, compared to the same period in 1999. (iv) A $0.1 million decrease in administrative expenses was due to the reduction of the size of the Partnership's equipment portfolio. (v) A decrease of $49,000 in bad debt expense from 1999 was due to the collection of $0.1 million during the second quarter of 2000 from past due receivables that had previously been reserved for as a bad debt. (C) Net Gain on Disposition of Owned Equipment The net gain on the disposition of owned equipment for the second quarter of 2000 was $8,000, resulting from the disposition of marine containers, railcars, and trailers, with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.1 million. The net gain on the disposition of owned equipment for the second quarter of 1999 was $0.5 million, resulting from the disposition of marine containers, railcars, and trailers, with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.6 million. (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 June 30, 2000 1999 -------------------------------- Marine vessel $ (13 ) $ -- Aircraft, aircraft engines, and rotables -- 4 -------------------------------- Equity in net income (loss) of USPEs $ (13 ) $ 4 ================================= Marine vessel: The Partnership's share of revenues and expenses of marine vessels was $0.3 million and $0.3 million, respectively, for the quarter ended June 30, 2000, compared to zero for the same period of 1999. The increase in marine vessel lease revenues of $0.3 million and depreciation expense, direct expenses, and administrative expenses of $0.3 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. Aircraft, aircraft engines, and rotables: As of June 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 for the quarter ended June 30, 2000 were zero, compared to $1,000 and a credit of $3,000 respectively, during the same period of 1999. (E) Net Income As a result of the foregoing, the Partnership had a net income of $0.4 million in the second quarter of 2000 compared to net income of $0.7 million in the second 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 June 30, 2000 is not necessarily indicative of future periods. 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. 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 Six Months Ended June 30, 2000 1999 ------------------------------------ Railcars $ 2,475 $ 2,660 Aircraft 2,219 2,810 Trailers 196 229 Marine containers 52 70 Marine vessel -- 446 Railcars: Railcars lease revenues and direct expenses were $3.4 million and $0.9 million, respectively, for the six months ended June 30, 2000, compared to $3.5 million and $0.8 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 six months ended June 30, 2000 than was needed during the six months ended June 30, 1999. Aircraft: Aircraft lease revenues and direct expenses were $2.4 million and $0.2 million, respectively, for the six months ended June 30, 2000, compared to $3.0 million and $0.2 million, respectively, during the same period of 1999. Lease revenues decreased $0.6 million during the six months ended June 30, 2000 when compared to the same period in 1999 due to the sale of an aircraft during the fourth quarter of 1999. Trailers: Trailer lease revenues and direct expenses were $0.3 million and $0.1 million, respectively, for the six months ended June 30, 2000, compared to $0.3 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 sales and 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 $1,000, respectively, for the six months ended June 30, 2000, compared to $0.1 million and $1,000, respectively, during the same period of 1999. The number of marine containers owned by the Partnership has been declining due to sales and 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 six months ended June 30, 2000, compared to $0.9 million and $0.5 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 $0.9 million and direct expenses decreased $0.5 million when compared to the same period of 1999. (B) Indirect Operating Expenses Related to Owned Equipment Operations Total indirect expenses of $4.0 million for the six months ended June 30, 2000 decreased from $5.8 million for the same period of 1999. Significant variances are explained as follows: (i) A decrease of $1.2 million in depreciation and amortization expenses from 1999 levels reflects the decrease of $0.8 million due to the sale or disposition of certain Partnership assets during 2000 and 1999. A decrease of $0.4 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)Loss on revaluation of equipment increased $0.2 million during the six months ended June 30, 2000 and resulted from the Partnership reducing the carrying value of trailers to their estimated net realizable value. There was no revaluation of equipment required during the same period of 1999. (iii) A decrease of $0.3 million in interest expense was due to lower average debt balances outstanding during the six months ended June 30, 2000 when compared to the same period of 1999. (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 bad debt expense from 1999 was due to the collection of $0.1 million during the six months ended June 30, 2000 from past due receivables that had previously been reserved for as a bad debt. The decrease was also due to the General Partner's evaluation of the collectability of receivables due from certain lessees. (vi)A decrease of $0.1 million in management fees to affiliate from 1999 levels was due to lower lease revenues during the six months ended June 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 $45,000 for the six months ended June 30, 2000, resulting from the disposition of marine containers, trailers, and railcars with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.2 million. The net gain on the disposition of equipment was $0.5 million for the six months ended June 30, 1999, resulting from the disposition of marine containers, trailers, and railcars with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.6 million. (D) 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 is shown in the following table by equipment type (in thousands of dollars): For the Six Months Ended June 30, 2000 1999 --------------------------------- Aircraft, aircraft engines, and rotables $ 22 $ 1,477 Marine vessel (107 ) -- ================================= Equity in net income (loss) of USPEs $ (85 ) $ 1,477 ================================= Aircraft, aircraft engines, and rotables: As of June 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 $22,000 and zero, respectively, for the six months ended June 30, 2000, compared to $1.6 million and $0.1 million, respectively, during the same period of 1999. The $22,000 of aircraft revenues for the six months ended June 30, 2000 represented interest income earned during the first six 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. Marine vessel: The Partnership's share of revenues and expenses from the marine vessel was $0.5 million and $0.6 million, respectively, for the six months ended June 30, 2000, compared to zero for the same period of 1999. The increase in marine vessel lease revenues of $0.5 million and depreciation expense, direct expenses, and administrative expenses of $0.6 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. (E) Net Income As a result of the foregoing, the Partnership had net income of $1.0 million for the six months ended June 30, 2000, compared to a net income of $2.4 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 six months ended June 30, 2000 is not necessarily indicative of future periods. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS For the six months ended June 30, 2000, the Partnership generated operating cash of $3.7 million (net cash provided by operating activities, plus non-liquidating distributions from USPEs) to meet its operating obligations. During the six months ended June 30, 2000, the Partnership sold owned equipment received aggregate proceeds of $0.2 million. During the six months ended June 30, 2000, accounts payable and accrued expenses decreased $0.7 million. A $0.4 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 in the first six months of 2000 for repairs to an aircraft, which was accrued at December 31, 1999. A similar accrual was not required on June 30, 2000. During the six months ended June 30, 2000, due to affiliates increased $4.0 million due to increased Partnership borrowings from the General Partner. During the six months ended June 30, 2000, lessee deposits and reserves for repairs increased $0.3 million due to an increase in reserves for repairs for two aircraft. PLM Financial Services, Inc. (FSI or 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. The General Partner anticipates that the liquidation of Partnership assets will be completed by the scheduled termination of the Partnership at the end of the year 2000. 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 and its investment in a USPE 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 approximately 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 six months ended June 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. Depressed economic conditions in Asia have led to declining freight rates through 2000 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. 4. Railcar loading in North America have continued to be high, however a softening in the market is expected during 2000, which leads 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 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 six months ended June 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. 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: August 4, 2000 By: /s/ Richard K Brock ------------------------------------------- Richard K Brock Vice President and Chief Financial Officer EX-27 2 0002.txt
5 1,000 6-MOS DEC-31-2000 JUN-30-2000 844 0 2,325 (1,662) 0 0 83,108 (71,319) 15,557 0 0 0 0 0 9,092 15,557 0 6,255 0 0 5,244 (105) 267 764 0 764 0 0 0 764 0.08 0.08
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