-----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, QBe8KOnUhNwP7LiiahtHgXRGfagqP4JCgn5oEDL6yH98rR5N6ABn9bLgDqicdNfF LpS6rtnRl2TQ+rD2EaeE0w== 0000857645-01-500021.txt : 20010814 0000857645-01-500021.hdr.sgml : 20010814 ACCESSION NUMBER: 0000857645-01-500021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM EQUIPMENT GROWTH FUND IV CENTRAL INDEX KEY: 0000847517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943090127 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18789 FILM NUMBER: 1706406 BUSINESS ADDRESS: STREET 1: STEUART STREET TOWER STE 900 STREET 2: C/O ONE MARKET PLAZA CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1399 BUSINESS PHONE: 4159741399 MAIL ADDRESS: STREET 1: ONE MARKET STREET 2: STEUART STREET TOWER STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1301 10-Q 1 f10q_2q2001-egf4.txt 2QTR 2001 EQUIPMENT GROWTH FUND 4 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, 2001 [-] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-18789 ----------------------- PLM EQUIPMENT GROWTH FUND IV (Exact name of registrant as specified in its charter) California 94-3090127 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 120 Montgomery Street, Suite 1350 San Francisco, CA 94104 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (415) 445-3201 ----------------------- 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 IV (A Limited Partnership) BALANCE SHEETS (in thousands of dollars, except unit amounts)
June 30, December 31, 2001 2000 ------------------------------------ ASSETS Equipment held for operating leases, at cost $ 16,738 $ 18,003 Less accumulated depreciation (12,572) (13,436) ------------------------------------ 4,166 4,567 Equipment held for sale -- 1,931 ------------------------------------ Net equipment 4,166 6,498 Cash and cash equivalents 7,336 2,742 Restricted cash 147 272 Accounts receivable, less allowance for doubtful accounts of $18 in 2001 and $5 in 2000 106 171 Investments in unconsolidated special-purpose entity 2,960 3,143 Prepaid expenses and other assets 43 37 ------------------------------------ Total assets $ 14,758 $ 12,863 ==================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 136 $ 186 Due to affiliates 165 174 Lessee deposits and reserve for repairs 162 369 ------------------------------------ Total liabilities 463 729 ------------------------------------ Partners' capital: Limited partners (8,628,420 limited partnership units as of June 30, 2001 and December 31, 2000) 14,295 12,134 General Partner -- -- ------------------------------------ Total partners' capital 14,295 12,134 ------------------------------------ Total liabilities and partners' capital $ 14,758 $ 12,863 ====================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENT0S OF INCOME (in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months Ended Ended June 30, June 30, 2001 2000 2001 2000 ----------------------------------------------------------- REVENUES Lease revenue $ 643 $ 1,174 $ 1,551 $ 2,366 Interest and other income 112 24 178 86 Net gain on disposition of equipment 26 40 3,455 99 ---------------------------------------------------------- Total revenues 781 1,238 5,184 2,551 ---------------------------------------------------------- EXPENSES Depreciation 126 611 428 1,200 Repairs and maintenance 133 319 272 568 Equipment operating expenses 23 23 118 71 Management fees to affiliate 51 69 98 147 General and administrative expenses to affiliates 38 97 161 216 Other general and administrative expenses 112 156 336 277 Provision for (recovery of) bad debt expense (16) (34) 14 (146) ---------------------------------------------------------- Total expenses 467 1,241 1,427 2,333 ---------------------------------------------------------- Equity in net income of unconsolidated special- purpose entities 104 169 174 466 ---------------------------------------------------------- Net income $ 418 $ 166 $ 3,931 $ 684 ========================================================== Partners' share of net income Limited partners $ 373 $ 121 $ 3,841 $ 367 General Partner 45 45 90 317 ---------------------------------------------------------- Total $ 418 $ 166 $ 3,931 $ 684 ========================================================== Limited partners' net income per weighted-average partnership unit $ 0.04 $ 0.01 $ 0.45 $ 0.04 ========================================================== Cash distribution 908 886 1,770 1,794 Special cash distribution -- -- -- 4,541 ---------------------------------------------------------- Total distribution $ 908 $ 886 $ 1,770 $ 6,335 ========================================================== Per weighted-average partnership unit: Cash distribution $ 0.10 $ 0.10 $ 0.19 $ 0.20 Special cash distribution -- -- -- 0.50 ---------------------------------------------------------- Total distribution per weighted-average partnership unit $ 0.10 $ 0.10 $ 0.19 $ 0.70 ==========================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1999 to June 30, 2001 (in thousands of dollars)
Limited General Partners Partner Total --------------------------------------------------- Partners' capital as of December 31, 1999 $ 19,342 $ -- $ 19,342 Net income 492 405 897 Cash distribution (3,386) (178) (3,564) Special cash distribution (4,314) (227) (4,541) ------------------------------------------------- Partners' capital as of December 31, 2000 12,134 -- 12,134 Net income 3,841 90 3,931 Cash distribution (1,680) (90) (1,770) ---------------------------------------------------- Partner's capital as of June 30, 2001 $ 14,295 $ -- $ 14,295 ====================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Six Months ended June 30, 2001 2000 ---------------------------- OPERATING ACTIVITIES Net income $ 3,931 $ 684 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 428 1,200 Net gain on disposition of equipment (3,455) (99) Equity in net income of unconsolidated special-purpose entities (174) (466) Changes in operating assets and liabilities: Restricted cash 125 (100) Accounts receivable, net 65 160 Prepaid expenses and other assets (6) 29 Accounts payable and accrued expenses (50) (149) Due to affiliates (9) (24) Lessee deposits and reserve for repairs (207) 77 --------------------------- Net cash provided by operating activities 648 1,312 ---------------------------- INVESTING ACTIVITIES Payments for capitalized improvements (2) (7) Proceeds from disposition of equipment 5,361 401 Distribution from unconsolidated special-purpose entities 357 556 ---------------------------- Net cash provided by investing activities 5,716 950 ---------------------------- FINANCING ACTIVITIES Cash distribution paid to limited partners (1,680) (1,704) Cash distribution paid to General Partner (90) (90) Special cash distribution paid to limited partners -- (4,314) Special cash distribution paid to General Partner -- (227) ---------------------------- Net cash used in financing activities (1,770) (6,335) ---------------------------- Net increase (decrease) in cash and cash equivalents 4,594 (4,073) Cash and cash equivalents at beginning of year 2,742 5,587 ---------------------------- Cash and cash equivalents at end of period $ 7,336 $ 1,514 ============================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 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 IV (the Partnership) as of June 30, 2001 and December 31, 2000, the statements of income for the three and six months ended June 30, 2001 and 2000, the statements of changes in partners' capital for the period from December 31, 1999 to June 30, 2001, and the statements of cash flows for the six months ended June 30, 2001 and 2000. 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, 2000, on file with 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, 1999, and has commenced an orderly liquidation of the Partnership's assets. The Partnership will terminate on December 31, 2009, unless terminated earlier upon the sale of all equipment or by certain other events. The General Partner may no longer reinvest cash flows and surplus funds in 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 2001. 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. For the three and six months ended June 30, 2001 and 2000, cash distributions totaled $0.9 million and $1.8 million, respectively. In addition, during the six months ended June 30, 2000, a $4.5 million special distribution was paid to the partners from the proceeds realized on the sale of equipment and liquidating distributions from unconsolidated special purpose entities (USPEs). No special distributions were paid in the six months ended June 30, 2001. None of the cash distributions to the limited partners during the six months ended June 30, 2001, were deemed to be a return of capital. Cash distributions to the limited partners of $5.7 million for the six months ended 2000 were deemed to be a return of capital. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (continued) The balance due to affiliates as of June 30, 2001, includes $18,000 due to FSI and its affiliate for management fees and $0.1 million due to an affiliated USPE. The balance due to affiliates as of December 31, 2000 includes $27,000 due to FSI and its affiliate for management fees and $0.1 million due to an affiliated USPE. The Partnership's proportional share of management fees related to USPEs of $12,000 and $9,000 were payable as of June 30, 2001 and December 31, 2000, respectively. The Partnership's proportional share of the affiliated expenses incurred by the USPEs during 2001 and 2000 is listed in the following table (in thousands of dollars):
For the Three Months For the Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 ---------------------------------------------------------------- Management fees $ 4 $ 4 $ 9 $ 9 Data processing and administrative expenses 2 -- 4 5
5. EQUIPMENT The components of owned equipment were as follows (in thousands of dollars):
June 30, December 31, 2001 2000 ---------------------------------------- Equipment held for operating leases Railcars $ 13,238 $ 13,336 Marine containers 3,500 4,667 ---------------------------------------- 16,738 18,003 Less accumulated depreciation (12,572) (13,436) ---------------------------------------- 4,166 4,567 Equipment held for sale -- 1,931 ---------------------------------------- Net equipment $ 4,166 $ 6,498 ========================================
As of June 30, 2001, all equipment was on lease except for 51 railcars with a net book value of $0.5 million. As of December 31, 2000, all equipment was on lease, except for an aircraft and 34 railcars with a net book value of $0.7 million. A Boeing 737-200 stage II commercial aircraft and Dash 8-300 commuter aircraft, subject to pending contract for sale, was held for sale as of December 31, 2000 at the lower of the equipment's depreciated cost or fair value, less cost to sell. During the six months ended June 30, 2001, the Partnership sold a commercial aircraft, a commuter aircraft, marine containers and railcars with an aggregate net book value of $1.9 million, for aggregate proceeds of $5.4 million. During the six months ended June 30, 2000, the Partnership sold marine containers, railcars, and trailers with an aggregate net book value of $0.3 million, for aggregate proceeds of $0.4 million. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 6. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES The Partnership's net investment in a USPE consisted of a 35% interest in two Stage II commercial aircraft on a direct finance lease (and related assets and liabilities) totaling $3.0 million and $3.1 million as of June 30, 2001 and December 31, 2000, respectively. 7. OPERATING SEGMENTS The Partnership operates or operated in five different segments: aircraft leasing, railcar leasing, marine container leasing, marine vessel leasing, and trailer leasing. Each equipment leasing segment engages in short-term to mid-term operating leases to a variety of customers. The following tables present a summary of the operating segments (in thousands of dollars):
Marine For the three months ended Aircraft Railcar Container June 30, 2001 Leasing Leasing Leasing All Other(1) Total ------------- ------- ------- ------- -------- ----- REVENUES Lease revenue $ -- $ 625 $ 18 $ -- $ 643 Interest income and other 32 -- -- 80 112 Gain (loss) on disposition of (1) (15) 42 -- 26 equipment ---------------------------------------------------- Total revenues 31 610 60 80 781 COSTS AND EXPENSES Operations support 8 131 -- 17 156 Depreciation -- 81 45 -- 126 Management fees to affiliates (3) 53 1 -- 51 General and administrative expenses 18 24 -- 108 150 (Recovery of) provision for bad -- (18) 3 (1) (16) debts ---------------------------------------------------- Total costs and expenses 23 271 49 124 467 ---------------------------------------------------- Equity in net income of USPEs 104 -- -- -- 104 ---------------------------------------------------- ---------------------------------------------------- Net income (loss) $ 112 $ 339 $ 11 $ (44) $ 418 ==================================================== Total assets as of June 30, 2001 $ 3,107 $ 4,008 $ 264 $ 7,379 $ 14,758 ==================================================== (1) Includes interest income and costs not identifiable to a particular segment such as certain operation support and general and administrative expenses.
(This space intentionally left blank) PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 7. OPERATING SEGMENTS (continued)
Marine Marine For the three months ended Aircraft Railcar Container Vessel Trailer June 30, 2000 Leasing Leasing Leasing Leasing Leasing All Other(1) Total ------------- ------- ------- ------- ------- ------- -------- ----- REVENUES Lease revenue $ 196 $ 720 $ 27 $ -- $ 231 $ -- $ 1,174 Interest income and other -- -- -- -- -- 24 24 Gain (loss) on disposition of -- (9) 61 -- (12) -- 40 equipment ------------------------------------------------------------------------- Total revenues 196 711 88 -- 219 24 1,238 COSTS AND EXPENSES Operations support 79 165 2 -- 85 11 342 Depreciation 336 105 108 -- 62 -- 611 Management fees to affiliates 4 47 2 -- 16 -- 69 General and administrative expenses 33 29 -- -- 53 138 253 (Recovery of) provision for bad (9) (14) -- -- (11) -- (34) debts ------------------------------------------------------------------------- Total costs and expenses 443 332 112 -- 205 149 1,241 ------------------------------------------------------------------------- Equity in net income of USPEs 121 -- -- 48 -- -- 169 ------------------------------------------------------------------------- Net income (loss) $ (126) $ 379 $ (24 )$ 48 $ 14 $ (125) $ 166 ========================================================================= Total assets as of June 30, 2001 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438 =========================================================================
Marine Marine For the six months ended Aircraft Railcar Container Vessel Trailer June 30, 2001 Leasing Leasing Leasing Leasing Leasing All Other(1) Total ------------- ------- ------- ------- ------- ------- --------- ----- REVENUES Lease revenue $ 185 $ 1,336 $ 30 $ -- $ -- $ -- $ 1,551 Interest income and other 38 -- -- -- -- 140 178 Gain (loss) on disposition of 3,359 (15) 108 -- 3 -- 3,455 equipment ------------------------------------------------------------------------- Total revenues 3,582 1,321 138 -- 3 140 5,184 Costs and expenses Operations support 21 266 -- 27 -- 76 390 Depreciation 145 171 112 -- -- -- 428 Management fees to affiliates -- 97 1 -- -- -- 98 General and administrative expenses 125 44 -- -- -- 328 497 Provision for (recovery of) bad -- 11 4 -- (1) -- 14 debts ------------------------------------------------------------------------- Total costs and expenses 291 589 117 27 (1) 404 1,427 ------------------------------------------------------------------------- Equity in net income (loss) of USPEs 208 -- -- (34) -- -- 174 ------------------------------------------------------------------------- Net income (loss) $ 3,499 $ 732 $ 21 $ (61) $ 4 $ (264) $ 3,931 ========================================================================= Total assets as of June 30, 2001 $ 3,107 $ 4,008 $ 264 $ -- $ -- $ 7,379 $ 14,758 ========================================================================= (1) Includes interest income and costs not identifiable to a particular segment such as certain operation support and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 7. OPERATING SEGMENTS (continued)
Marine Marine For the six months ended Aircraft Railcar Container Vessel Trailer June 30, 2000 Leasing Leasing Leasing Leasing Leasing All Other(1) Total ------------- ------- ------- ------- ------- ------- --------- ----- REVENUES Lease revenue $ 392 $ 1,490 $ 42 $ -- $ 442 $ -- $ 2,366 Interest income and other 2 -- -- -- -- 84 86 Gain (loss) on disposition of -- (11) 126 -- (16) -- 99 equipment ------------------------------------------------------------------------- Total revenues 394 1,479 168 -- 426 84 2,551 COSTS AND EXPENSES Operations support 103 359 3 -- 128 46 639 Depreciation 671 219 185 -- 125 -- 1,200 Management fees to affiliates 8 101 2 -- 36 -- 147 General and administrative expenses 63 62 1 -- 114 253 493 (Recovery of) provision for bad (9) 4 -- -- (141) -- (146) debts ------------------------------------------------------------------------- Total costs and expenses 836 745 191 -- 262 299 2,333 ------------------------------------------------------------------------- Equity in net income of USPEs 311 -- -- 155 -- -- 466 ------------------------------------------------------------------------- Net income (loss) $ (131) $ 734 $ (23) $ 155 $ 164 $ (215) $ 684 ========================================================================= Total assets as of June 30, 2000 $ 5,972 $ 4,482 $ 749 $ (14) $ 1,469 $ 1,780 $ 14,438 ========================================================================= (1) Includes interest income and costs not identifiable to a particular segment such as certain operation support and general and administrative expenses.
8. 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, 2001 and 2000 was 8,628,420. 9. CONTINGENCIES PLM International, (the Company) and various of its wholly owned subsidiaries are defendants in a class action lawsuit filed in January 1997 and which is pending in the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII), collectively (the Funds), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the General Partner. The complaint asserts causes of action against all defendants for fraud and deceit, suppression, negligent misrepresentation, negligent and intentional breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Funds, and concealing such mismanagement from investors in the Funds. Plaintiffs seek unspecified compensatory damages, as well as punitive damages. PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 9. CONTINGENCIES (continued) In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No.987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in the Funds. The complaint alleges the same facts and the same causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices and violations of state securities law. In July 1997, defendants filed a petition (the petition) in federal district court under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims. In October 1997, the district court denied the Company' s petition, but in November 1997, agreed to hear the Company's motion for reconsideration. Prior to reconsidering its order, the district court dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In February 1999 the parties to the Koch and Romei actions agreed to settle the lawsuits, with no admission of liability by any defendant, and filed a Stipulation of Settlement with the court. The settlement is divided into two parts, a monetary settlement and an equitable settlement. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.6 million. The final settlement amount will depend on the number of claims filed by class members, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court to plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. For settlement purposes, the monetary settlement class consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Funds between May 23, 1989 and August 30, 2000. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The equitable settlement provides, among other things, for: (a) the extension (until January 1, 2007) of the date by which FSI must complete liquidation of the Funds' equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the Funds' funds in additional equipment, (c) an increase of up to 20% in the amount of front-end fees (including acquisition and lease negotiation fees) that FSI is entitled to earn in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (d) a one-time repurchase by each of Fund V, Fund VI and Fund VII of up to 10% of that partnership's outstanding units for 80% of net asset value per unit; and (e) the deferral of a portion of the management fees paid to an affiliate of FSI until, if ever, certain performance thresholds have been met by the Funds. Subject to final court approval, these proposed changes would be made as amendments to each Fund's limited partnership agreement if less than 50% of the limited partners of each Fund vote against such amendments. The equitable settlement also provides for payment of additional attorneys' fees to the plaintiffs' attorneys from Fund funds in the event, if ever, that certain performance thresholds have been met by the Funds. The equitable settlement class consists of all investors, limited partners, assignees or unit holders who on August 30, 2000 held any units in Fund V, Fund VI, and Fund VII, and their assigns and successors in interest. The court preliminarily approved the monetary and equitable settlements in August 2000, and information regarding each of the settlements was sent to class members in September 2000. A final fairness hearing was held on November 29, 2000, and on April 25, 2001 the federal magistrate judge assigned to the case entered a Report and Recommendation recommending final approval of the monetary and equitable settlements to the federal district court judge. On July 24, 2001, the federal PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 9. CONTINGENCIES (continued) district court judge adopted the Report and Recommendation, and entered a final judgment approving both settlements. Monetary class members who submitted timely claims will be paid their settlement amount out of the monetary fund by the third-party claims administrator, calculated pursuant to the formula set forth in the settlement agreement and court order. These payments to qualifying class members will occur following the expiration of the time for the filing of an appeal, assuming that no appeal is filed. Similarly the equitable settlement will be implemented promptly at the same time and assuming no appeal is filed. For those equitable class members who submitted timely requests for the repurchase of their limited partnership units, the respective partnerships will repurchase such units by December 31, 2001. The Partnership is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Partnership. 10. 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. 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. In the six months ended June 30, 2000, the General Partner paid special distributions of $0.50 per weighted-average limited partnership unit. No special distributions were paid in the six months ended June 30, 2001. 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 the PLM Equipment Growth Fund IV's (the Partnership's) Operating Results for the Three Months Ended June 30, 2001 and 2000 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment decreased during the second quarter of 2001 compared to the same period of 2000. Gains or losses from the sale of equipment, and interest and other income and certain expenses such as depreciation 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 they are indirect in nature and not a result of operations but the result of owning a portfolio of equipment. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):
For the Three Months Ended June 30, 2001 2000 --------------------------- Railcars $ 494 $ 555 Marine containers 18 25 Trailers -- 146 Aircraft (8) 117
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.1 million, respectively, for the second quarter of 2001, compared to $0.7 million and $0.2 million, respectively, during the same period in 2000. The decrease in railcar contribution in the second quarter of 2001 was due to the sale of railcars in 2001 and 2000. Marine containers: Marine container lease revenues and direct expenses were $18,000 and $-0-, respectively, for the second quarter of 2001, compared to $27,000 and $2,000, respectively, during the same period of 2000. The decrease in marine container contribution in the second quarter of 2001 was due to the sale of marine containers in 2001 and 2000. Trailers: Trailer lease revenues and direct expenses were $-0- for the second quarter of 2001, compared to $0.2 million and $0.1 million, respectively, during the same period of 2000. The decrease in trailer contribution in the second quarter of 2001 was due to the sale of all the Partnership's trailers in 2000. Aircraft: Aircraft lease revenues and direct expenses were $-0- and $8,000, respectively, for the second quarter of 2001, compared to $0.2 million and $0.1 million, respectively, during the same period of 2000. The decrease in aircraft contribution in the second quarter of 2001 was due to the sale of aircraft in 2001 and 2000. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $0.3 million for the second quarter of 2001 decreased from $0.9 million for the same period in 2000. Significant variances are explained as follows: (i) A $0.5 million decrease in depreciation expense from 2000 levels resulted from a $0.4 million decrease due to the sale of certain assets during 2001 and 2000 and a $0.1 million decrease resulting from the use of the double-declining balance depreciation method which results in greater depreciation the first years an asset is owned. (ii) A $0.1 million decrease in general and administrative expenses during the three months ended June 30, 2001 compared to the same period of 2000 is due to lower costs resulting from the sale of all the Partnership's trailers during 2000. (C) Net Gain on Disposition of Owned Equipment The net gain on disposition of equipment for the second quarter of 2001 totaled $26,000, which resulted from the sale of marine containers and railcars with an aggregate net book value of $0.1 million, for proceeds of $0.1 million. For the second quarter of 2000, net gain on disposition of equipment totaled $40,000, which resulted from the sale of marine containers, trailers and railcars with an aggregate net book value of $0.1 million, for proceeds of $0.1 million. (D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs) 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 Three Months Ended June 30, 2001 2000 --------------------------- Aircraft $ 104 $ 121 Marine vessel -- 48 --------------------------- Equity in net income of USPEs $ 104 $ 169 ===========================
Aircraft: As of June 30, 2001 and 2000, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. Aircraft revenues and expenses were $0.1 million and $15,000, respectively, for the second quarter of 2001, compared to $0.1 million and $14,000, respectively, during the same period in 2000. Marine vessel: As of June 30, 2001, the Partnership had no remaining interests in entities that owned marine vessels. Marine vessel revenues and expenses were $48,000 and $-0-, respectively, for the second quarter of 2000. Revenues decreased $48,000 in the second quarter of 2001 due to the sale of the marine vessel entity in which the Partnership owned an interest during the fourth quarter of 2000. (E) Net Income As a result of the foregoing, the Partnership's net income was $0.4 million for the second quarter of 2001, compared to net income of $0.2 million during the same period of 2000. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the quarter ended June 30, 2001 is not necessarily indicative of future periods. In the second quarter of 2001, the Partnership distributed $0.9 million to the limited partners, or $0.10 per weighted-average limited partnership unit. COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment decreased during the six months ended June 30, 2001 compared to the same period of 2000. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):
For the Six Months Ended June 30, 2001 2000 --------------------------- Railcars $ 1,070 $ 1,131 Aircraft 164 289 Marine containers 30 39 Trailers -- 314 Marine vessels (27) --
Railcars: Railcar lease revenues and direct expenses were $1.3 million and $0.3 million, respectively, for the six months ended June 30, 2001, compared to $1.5 million and $0.4 million, respectively, during the same period in 2000. The decrease in railcar contribution in the six months ended June 30, 2001 was due to the sale of railcars in 2001 and 2000. Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $21,000, respectively, for the six months ended June 30, 2001, compared to $0.4 million and $0.1 million, respectively, during the same period of 2000. The decrease in aircraft contribution in the six months ended June 30, 2001 was due to the sale of aircraft in 2001 and 2000. Marine containers: Marine container lease revenues and direct expenses were $30,000 and $-0-, respectively, for the six months ended June 30, 2001, compared to $42,000 and $3,000, respectively, during the same period of 2000. The decrease in marine container contribution in the six months ended June 30, 2001 was due to the sale of marine containers in 2001 and 2000. Trailers: Trailer lease revenues and direct expenses were $-0- for the six months ended June 30, 2001, compared to $0.4 million and $0.1 million, respectively, during the same period of 2000. The decrease in trailer contribution in the six months ended June 30, 2001 was due to the sale of all of the Partnership's trailers in 2000. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $1.0 million for the six months ended June 30, 2001 decreased from $1.7 million for the same period in 2000. Significant variances are explained as follows: (i) A $0.8 million decrease in depreciation expense from 2000 levels resulted from a $0.7 million decrease due to the sale of certain assets during 2001 and 2000 and a $0.1 million decrease resulting from the use of the double-declining balance depreciation method which results in greater depreciation the first years an asset is owned. (ii) A $49,000 decrease in management fees to affiliate resulted from the lower levels of lease revenues on owned equipment during the six months ended June 30, 2001, compared to the same period in 2000. (iii) The $0.2 million increase in the bad debt expenses was due to the collection of $0.2 million receivable in the six months ended June 30, 2000 that had previously been reserved for as bad debts. A similar recovery did not occur in 2001. (C) Net Gain on Disposition of Owned Equipment The net gain on disposition of equipment for the six months ended June 30, 2001 totaled $3.5 million, which resulted from the sale of a commercial aircraft, a commuter aircraft, marine containers, and railcars with an aggregate net book value of $1.9 million, for aggregate proceeds of $5.4 million. For the six months ended June 30, 2000, net gain on disposition of totaled $0.1 million, which resulted from the sale of marine containers, railcars, and trailers with an aggregate net book value of $0.3 million, for aggregate proceeds of $0.4 million. (D) Equity in Net Income 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, 2001 2000 --------------------------- Aircraft $ 208 $ 311 Marine vessel (34) 155 --------------------------- Equity in net income of USPEs $ 174 $ 466 ===========================
Aircraft: As of June 30, 2001 and 2000, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. Aircraft revenues and expenses were $0.2 million and $31,000, respectively, for the six months ended June 30, 2001, compared to $0.3 million and $(35,000), respectively, during the same period in 2000. The decrease in revenues of $36,000 during the six months ended June 30, 2001 was due to a lower outstanding principal balance on the finance lease compared to the same period of 2000. The increase in expenses of $0.1 million was due to the collection of a receivable that had been written-off as a bad debt during 2000. A similar event did not occur during the same period of 2001. Marine vessel: As of June 30, 2001, the Partnership had no remaining interests in entities that owned marine vessels. Marine vessel revenues and expenses were $-0- and $34,000, respectively, for the six months ended June 30, 2001 compared to $0.1 million and $(37,000), respectively, during the same period in 2000. Revenues decreased $0.1 million during the six months ended June 30, 2001 due to the sale of the marine vessel entity in which the Partnership owned an interest during the fourth quarter of 2000. Expenses increased $0.1 million due to the receipt of $0.2 million for an insurance claim during the six months ended June 30, 2000. A similar event did not occur during the same period of 2001. (E) Net Income As a result of the foregoing, the Partnership's net income was $3.9 million for the six months ended June 30, 2001, compared to net income of $0.7 million during the same period of 2000. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the six months ended June 30, 2001 is not necessarily indicative of future periods. In the six months ended June 30, 2001, the Partnership distributed $1.7 million to the limited partners, or $0.19 per weighted-average limited partnership unit. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY For the six months ended June 30, 2001, the Partnership generated $1.0 million in operating cash (net cash provided by operating activities plus non-liquidating distributions from USPEs) to meet its operating obligations, but used undistributed available cash from prior periods and proceeds from equipment sales of approximately $0.8 million to make distributions (total of $1.8 million in the six months ended June 30, 2001) to the partners. During the six months ended June 30, 2001, the Partnership sold a commercial aircraft, a commuter aircraft, marine containers and railcars with an aggregate net book value of $1.9 million, for aggregate proceeds of $5.4 million. Restricted cash decreased $0.1 million during the six months ended June 30, 2001 due to the decrease in lessee deposits resulting from the return of security deposits to the buyers who purchased an aircraft during the first quarter of 2001. Accounts receivables decreased $0.1 million during the six months ended June 30, 2001 due to the timing of cash receipts. Investments in USPEs decreased $0.2 million due to cash distributions of $0.4 million to the Partnership from the USPEs offset, in part, by $0.2 million of income that was recorded by the Partnership's from the USPEs during the six months ended June 30, 2001. Accounts payable decreased $0.1 million during the six months ended June 30, 2001 due to the timing of payments to vendors. Lessee deposits and reserve for repairs decreased $0.2 million during the six months ended June 30, 2001 due to the decrease of $0.1 million in lessee deposits resulting from the return of a security deposit to the buyer who purchased an aircraft during the first quarter of 2001, and a decrease of $0.1 million in prepaid aircraft lease revenue due to the sale of an aircraft. The General Partner has not planned any expenditures, nor is it aware of any contingencies that would cause the Partnership to require any additional capital. 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. (III) OUTLOOK FOR THE FUTURE The Partnership is in its active liquidation phase. 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 2001. Several factors may affect the Partnership's operating performance in 2001, 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 2001 include: 1. The cost of new marine containers have been at historic lows for the past several years which has caused downward pressure on per diem lease rates for this type of equipment. 2. Railcar loadings in North America for the first six months of 2001 were below those of 2000. This decrease will lead to lower utilization and lower contribution to the Partnership as existing leases expire and renewal leases are negotiated. The ability of the Partnership to realize acceptable lease rates on its equipment in the different equipment markets is contingent on many factors, such as specific market conditions and economic activity, technological obsolescence, and government or other regulations. The 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 make an evaluation to reduce the Partnership's exposure to 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, the discussion in this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Partnership's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Partnership's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's primary market risk exposure is that of currency devaluation risk. During the first six months of 2001, 72% of the Partnership's total lease revenues from wholly- and partially-owned equipment came from non-United States domiciled lessees. Most of the leases require payment in United States (U.S.) currency. If these lessees currency devalues against the U.S. dollar, the lessees could encounter difficulty in making the U.S. dollar denominated lease payments. (This space intentionally left blank.) PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM EQUIPMENT GROWTH FUND IV By: PLM Financial Services, Inc. General Partner Date: August 13, 2001 By: /s/ Stephen M. Bess ------------------------- Stephen M. Bess President and Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----