-----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, VHM4GTHOTXLT9n2ZiQvcQ+FHMBXCj4+G07anm1yU/Zv50uf9C7/UzxC8joC2nKIp F3dWzUlfcPGjEYQUN3v/UQ== 0000857645-01-500031.txt : 20020410 0000857645-01-500031.hdr.sgml : 20020410 ACCESSION NUMBER: 0000857645-01-500031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 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: 1781157 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_3qtr2001-egf4.txt 10Q 3Q 2001 PLM 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 September 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) CONDENSED BALANCE SHEETS (IN THOUSANDS OF DOLLARS, EXCEPT UNIT AMOUNTS) (UNAUDITED)
September 30, December 31, 2001 2000 ------------------------------------ ASSETS Equipment held for operating leases, at cost $ 16,496 $ 18,003 Less accumulated depreciation (12,463) (13,436) ------------------------------------ 4,033 4,567 Equipment held for sale -- 1,931 ------------------------------------ Net equipment 4,033 6,498 Cash and cash equivalents 8,030 2,742 Restricted cash 147 272 Accounts receivable, less allowance for doubtful accounts of $19 in 2001 and $5 in 2000 69 171 Investments in unconsolidated special-purpose entity 2,846 3,143 Prepaid expenses and other assets 24 37 ------------------------------------ Total assets $ 15,149 $ 12,863 ==================================== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 375 $ 186 Due to affiliates 165 174 Lessee deposits and reserve for repairs 152 369 ------------------------------------ Total liabilities 692 729 ------------------------------------ Partners' capital: Limited partners (8,628,420 limited partnership units as of September 30, 2001 and December 31, 2000) 14,457 12,134 General Partner -- -- ------------------------------------ Total partners' capital 14,457 12,134 ------------------------------------ Total liabilities and partners' capital $ 15,149 $ 12,863 ====================================
See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS, EXCEPT WEIGHTED-AVERAGE UNIT AMOUNTS) (UNAUDITED)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 2001 2000 2001 2000 ----------------------------------------------------------- REVENUES Lease revenue $ 634 $ 1,110 $ 2,185 $ 3,476 Interest and other income 72 28 251 114 Net gain on disposition of equipment 16 154 3,471 253 ---------------------------------------------------------- Total revenues 722 1,292 5,907 3,843 ---------------------------------------------------------- EXPENSES Depreciation 119 587 547 1,787 Repairs and maintenance 368 243 640 811 Equipment operating expenses -- (3) 28 29 Insurance expense 18 21 109 60 Management fees to affiliate 44 62 142 209 General and administrative expenses to affiliates 35 106 195 322 Other general and administrative expenses 74 196 411 473 Provision for (recovery of) bad debt expense 1 (28) 15 (174) Loss on revaluation of equipment -- 106 -- 106 ---------------------------------------------------------- Total expenses 659 1,290 2,087 3,623 ---------------------------------------------------------- Equity in net income of unconsolidated special- purpose entities 99 83 273 549 ---------------------------------------------------------- Net income $ 162 $ 85 $ 4,093 $ 769 ========================================================== PARTNERS' SHARE OF NET INCOME Limited partners $ 162 $ 41 $ 4,003 $ 408 General Partner -- 44 90 361 ---------------------------------------------------------- Total $ 162 $ 85 $ 4,093 $ 769 ========================================================== Limited partners' net income per weighted- average partnership unit $ 0.02 $ 0.01 $ 0.46 $ 0.05 ========================================================== Cash distribution $ -- $ 885 $ 1,770 $ 2,679 Special cash distribution -- -- -- 4,541 ---------------------------------------------------------- Total distribution $ -- $ 885 $ 1,770 $ 7,220 ========================================================== Per weighted-average partnership unit: Cash distribution $ -- $ 0.10 $ 0.19 $ 0.30 Special cash distribution -- -- -- 0.50 ---------------------------------------------------------- Total distribution per weighted-average partnership unit $ -- $ 0.10 $ 0.19 $ 0.80 ==========================================================
See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIOD FROM DECEMBER 31, 1999 TO SEPTEMBER 30, 2001 (IN THOUSANDS OF DOLLARS) (UNAUDITED)
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 4,003 90 4,093 Cash distribution (1,680) (90) (1,770) ---------------------------------------------------- Partner's capital as of September 30, 2001 $ 14,457 $ -- $ 14,457 ====================================================
See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) (UNAUDITED)
For the Nine Months Ended September 30, 2001 2000 ---------------------------- OPERATING ACTIVITIES Net income $ 4,093 $ 769 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 547 1,787 Net gain on disposition of equipment (3,471) (253) Loss on revaluation of equipment -- 106 Equity in net income of unconsolidated special-purpose entities (273) (549) Changes in operating assets and liabilities: Restricted cash 125 -- Accounts receivable, net 102 263 Prepaid expenses and other assets 13 44 Accounts payable and accrued expenses 189 (151) Due to affiliates (9) (35) Lessee deposits and reserve for repairs (217) (64) ---------------------------- Net cash provided by operating activities 1,099 1,917 ---------------------------- INVESTING ACTIVITIES Payments for capitalized improvements (2) (7) Proceeds from disposition of equipment 5,391 1,767 Distribution from unconsolidated special-purpose entities 570 840 ---------------------------- Net cash provided by investing activities 5,959 2,600 ---------------------------- FINANCING ACTIVITIES Cash distribution paid to limited partners (1,680) (2,545) Cash distribution paid to General Partner (90) (134) 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) (7,220) ---------------------------- Net increase (decrease) in cash and cash equivalents 5,288 (2,703) Cash and cash equivalents at beginning of year 2,742 5,587 ---------------------------- Cash and cash equivalents at end of period $ 8,030 $ 2,884 ============================
See accompanying notes to unaudited condensed financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. OPINION OF MANAGEMENT In the opinion of the management of PLM Financial Services, Inc. (FSI or the General Partner), the accompanying unaudited condensed financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the condensed financial position of PLM Equipment Growth Fund IV (the Partnership) as of September 30, 2001 and December 31, 2000, the condensed statements of income for the three and nine months ended September 30, 2001 and 2000, the condensed statements of changes in partners' capital for the period from December 31, 1999 to September 30, 2001, and the condensed statements of cash flows for the nine months ended September 30, 2001 and 2000. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the accompanying financial statements. For further information, reference should be made to the condensed 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 2002. 3. RECLASSIFICATION Certain amounts on the 2000 financial statements have been reclassified to conform to the 2001 presentation. 4. CASH DISTRIBUTIONS Cash distributions are recorded when paid and may include amounts in excess of net income that are considered to represent a return of capital. For the three months ended September 30, 2001 and 2000, cash distributions totaled $-0- and $0.9 million, respectively. For the nine months ended September 30, 2001 and 2000, cash distributions totaled $1.8 million and $2.7 million, respectively. In addition, during the nine months ended September 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 nine months ended September 30, 2001. None of the cash distributions to the limited partners during the nine months ended September 30, 2001, were deemed to be a return of capital. Cash distributions to the limited partners of $6.4 million for the nine months ended 2000 were deemed to be a return of capital. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 5. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES The balance due to affiliates as of September 30, 2001, includes $19,000 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 to FSI and its affiliate as of September 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 Nine Months Ended September 30, Ended September 30, 2001 2000 2001 2000 ------------------------------------------------------------- Management fees $ 4 $ 4 $ 13 $ 13 Data processing and administrative expenses -- -- -- 5
6. EQUIPMENT Owned equipment held for operating leases is stated at cost. Equipment held for sale is stated at the lower of the equipment's depreciated cost or fair value, less cost to sell, and is subject to a pending contract for sale. The components of owned equipment were as follows (in thousands of dollars):
September 30, December 31, 2001 2000 ----------------------------------- Equipment held for operating leases Railcars $ 13,239 $ 13,336 Marine containers 3,257 4,667 ------------ ----------- 16,496 18,003 Less accumulated depreciation (12,463) (13,436) ------------ ----------- 4,033 4,567 Equipment held for sale -- 1,931 ------------ ----------- Net equipment $ 4,033 $ 6,498 ============ ===========
As of September 30, 2001, all equipment was on lease except for 35 railcars with a net book value of $0.3 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, were 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 nine months ended September 30, 2001, the Partnership sold aircraft, marine containers and railcars with an aggregate net book value of $1.9 million, for proceeds of $5.4 million. The aircraft were reported as equipment held for sale as of December 31, 2000. During the nine months ended September 30, 2000, the Partnership sold all of its trailers, and certain marine containers and railcars with an aggregate net book value of $1.5 million, for proceeds of $1.8 million. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 7. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITY 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 $2.8 million and $3.1 million as of September 30, 2001 and December 31, 2000, respectively. 8. 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 September 30, 2001 Leasing Leasing Leasing Other(1) Total ------------------ ------- ------- ------- ----- ----- REVENUES Lease revenue $ -- $ 635 $ (1) $ -- $ 634 Interest income and other -- -- -- 72 72 Gain (loss) on disposition of (4) -- 20 -- 16 equipment ---------------------------------------------------- Total revenues (4) 635 19 72 722 Costs and expenses Operations support 226 144 -- 16 386 Depreciation (1) 75 45 -- 119 Management fees to affiliates 2 42 -- -- 44 General and administrative expenses 1 26 -- 82 109 Provision for (recovery of) bad -- 5 (4) -- 1 debts ---------------------------------------------------- Total costs and expenses 228 292 41 98 659 ---------------------------------------------------- Equity in net income of USPEs 99 -- -- -- 99 ---------------------------------------------------- Net income (loss) $ (133) $ 343 $ (22) $ (26) $ 162 ==================================================== Total assets as of September 30, 2001 $ 2,993 $ 3,949 $ 153 $ 8,054 $ 15,149 ==================================================== (1) Includes certain assets not identifiable to a particular segment, such as cash and prepaid expenses. Also includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
(This space intentionally left blank) PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 8. OPERATING SEGMENTS (continued)
Marine Marine For the three months ended Aircraft Railcar Container Vessel Trailer September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total ------------------ ------- ------- ------- ------- ------- ----- ----- REVENUES Lease revenue $ 196 $ 701 $ 20 $ -- $ 193 $ -- $ 1,110 Interest income and other -- -- -- -- -- 28 28 Gain (loss) on disposition of -- (3) 28 -- 129 -- 154 equipment ------------------------------------------------------------------------- Total revenues 196 698 48 -- 322 28 1,292 COSTS AND EXPENSES Operations support 23 151 2 -- 79 6 261 Depreciation 336 104 86 -- 61 -- 587 Management fees to affiliates 4 44 1 -- 13 -- 62 General and administrative expenses 39 20 -- -- 99 144 302 Recovery of bad debts -- (27) -- -- (1) -- (28) Loss on revaluation of equipment -- -- -- -- 106 -- 106 ------------------------------------------------------------------------- Total costs and expenses 402 292 89 -- 357 150 1,290 ------------------------------------------------------------------------- Equity in net income (loss) of USPEs 115 -- -- (32) -- -- 83 ------------------------------------------------------------------------- Net income (loss) $ (91) $ 406 $ (41 )$ (32) $ (35) $ (122) $ 85 ========================================================================= Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14) $ 22 $ 2,888 $ 13,484 =========================================================================
Marine Marine For the nine months ended Aircraft Railcar Container Vessel Trailer September 30, 2001 Leasing Leasing Leasing Leasing Leasing Other(1) Total ------------------ ------- ------- ------- ------- ------- ----- ----- REVENUES Lease revenue $ 185 $ 1,971 $ 29 $ -- $ -- $ -- $ 2,185 Interest income and other 39 -- -- -- -- 212 251 Gain (loss) on disposition of 3,355 (15) 128 -- 3 -- 3,471 equipment ------------------------------------------------------------------------- Total revenues 3,579 1,956 157 -- 3 212 5,907 COSTS AND EXPENSES Operations support 247 410 -- 27 -- 93 777 Depreciation 144 246 157 -- -- -- 547 Management fees to affiliates 2 139 1 -- -- -- 142 General and administrative expenses 126 70 -- -- (1) 411 606 Provision for (recovery of) bad -- 16 -- -- (1) -- 15 debts ------------------------------------------------------------------------- Total costs and expenses 519 881 158 27 (2) 504 2,087 ------------------------------------------------------------------------- Equity in net income (loss) of USPEs 307 -- -- (34) -- -- 273 ------------------------------------------------------------------------- Net income (loss) $ 3,367 $ 1,075 $ (1 )$ (61) $ 5 $ (292) $ 4,093 ========================================================================= Total assets as of September 30, 2001 $ 2,993 $ 3,949 $ 153 $ -- $ -- $ 8,054 $ 15,149 ========================================================================= (1) Includes certain assets not identifiable to a particular segment, such as cash and prepaid expenses. Also includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 8. OPERATING SEGMENTS (continued)
Marine Marine For the nine months ended Aircraft Railcar Container Vessel Trailer September 30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total ------------------ ------- ------- ------- ------- ------- ----- ----- REVENUES Lease revenue $ 588 $ 2,191 $ 62 $ -- $ 635 $ -- $ 3,476 Interest income and other 2 -- -- -- -- 112 114 Gain (loss) on disposition of -- (13) 154 -- 112 -- 253 equipment ------------------------------------------------------------------------- Total revenues 590 2,178 216 -- 747 112 3,843 COSTS AND EXPENSES Operations support 126 511 5 -- 207 51 900 Depreciation 1,007 323 271 -- 186 -- 1,787 Management fees to affiliates 12 145 3 -- 49 -- 209 General and administrative expenses 103 82 1 -- 213 396 795 Recovery of bad debts (9) (23) -- -- (142) -- (174) Loss on revaluation of equipment -- -- -- -- 106 -- 106 ------------------------------------------------------------------------- Total costs and expenses 1,239 1,038 280 -- 619 447 3,623 ------------------------------------------------------------------------- Equity in net income of USPEs 426 -- -- 123 -- -- 549 ------------------------------------------------------------------------- Net income (loss) $ (223) $ 1,140 $ (64) $ 123 $ 128 $ (335) $ 769 ========================================================================= Total assets as of September 30, 2000 $ 5,571 $ 4,388 $ 629 $ (14) $ 22 $ 2,888 $ 13,484 ========================================================================= (1) Includes certain assets not identifiable to a particular segment, such as cash and prepaid expenses. Also includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
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 nine months ended September 30, 2001 and 2000 was 8,628,420. 10. 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 PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 10. CONTINGENCIES (continued) of the Funds, and concealing such mismanagement from investors in the Funds. Plaintiffs seek unspecified compensatory damages, as well as punitive damages. 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 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 or, Fund VII, and their assigns and successors in interest. 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 Fund V, Fund VI, and Fund VII's equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the funds of Fund V, Fund VI, and Fund VII 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. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 10. CONTINGENCIES (continued) 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 district court judge adopted the Report and Recommendation, and entered a final judgment approving both settlements. No appeal has been filed and the time for filing an appeal has expired. Therefore, monetary class members who submitted claims will be paid their settlement amount out of the monetary fund by the third-party claims administrator once the final settlement amounts are calculated pursuant to the formula set forth in the settlement agreement and court order. Similarly the equitable settlement will be implemented promptly. 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, 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 counterclaims 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 defend against such counterclaims. The General Partner believes the likelihood of an unfavorable outcome from the counterclaims is remote. During 2001, the General Partner has decided to minimize its collection efforts from the India lessee in order to save the Partnership from additional expenses of trying to collect from a lessee that has limited ability to pay. 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 or results of operations of the Partnership. 11. LIQUIDATION AND SPECIAL DISTRIBUTIONS On January 1, 1999, 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 owned equipment leased under operating leases and the jointly-owned equipment leased under a finance lease will continue to be leased until sold. 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. Upon final liquidation, the Partnership will be dissolved. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 11. LIQUIDATION AND SPECIAL DISTRIBUTIONS (continued) In the nine months ended September 30, 2000, the General Partner paid special distributions of $0.50 per weighted-average limited partnership unit. No special distributions were paid in the nine months ended September 30, 2001. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. The sales and liquidations occur based on 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. (This space intentionally left blank) 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 September 30, 2001 and 2000 (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 third 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 8 to the unaudited condensed 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 September 30, 2001 2000 --------------------------- Railcars $ 491 $ 550 Trailers -- 114 Marine containers (1) 18 Aircraft (226) 173
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.1 million, respectively, for the third quarter of 2001, compared to $0.7 million and $0.2 million, respectively, during the same period in 2000. Railcar contribution decreased $0.1 million compared to the same period of 2000 due to lower lease revenues on railcars whose lease expired during 2001. Trailers: Trailer lease revenues and direct expenses were $-0- for the third 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 third quarter of 2001 was due to the sale of all the Partnership's trailers in 2000. Marine containers: Marine container lease revenues and direct expenses were $(1,000) and $-0-, respectively, for the third quarter of 2001, compared to $20,000 and $2,000, respectively, during the same period of 2000. The decrease in marine container contribution in the third quarter of 2001 compared to the same period of 2000 was due to the sale of marine containers in 2001 and 2000. Aircraft: Aircraft lease revenues and direct expenses were $-0- and $0.2 million, respectively, for the third quarter of 2001, compared to $0.2 million and $23,000, respectively, during the same period of 2000. The decrease in aircraft contribution in the third 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 third quarter of 2001 decreased from $1.0 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 $0.2 million decrease in general and administrative expenses during the three months ended September 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. (iii) Loss on revaluation of equipment decreased $0.1 million during the third quarter of 2001 compared to the same period in 2000. In the third quarter of 2000, the Partnership reduced the carrying value of its trailers to their estimated net realizable value. No revaluation of equipment was required during the same period in 2001. (C) Net Gain on Disposition of Owned Equipment The net gain on disposition of equipment for the third quarter of 2001 totaled $16,000, which resulted from the sale of marine containers and railcars with an aggregate net book value of $15,000, for proceeds of $31,000. For the third quarter of 2000, net gain on disposition of equipment totaled $0.2 million, which resulted from the sale of marine containers, trailers, and railcars with an aggregate net book value of $1.2 million, for proceeds of $1.4 million. (D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs) Net income (loss) generated from the operation of jointly-owned assets accounted for under the equity method is shown in the following table by equipment type (in thousands of dollars):
For the Three Months Ended September 30, 2001 2000 --------------------------- Aircraft $ 99 $ 115 Marine vessel -- (32) --------------------------- Equity in net income of USPEs $ 99 $ 83 ===========================
Aircraft: As of September 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 $16,000, respectively, for the third quarter of 2001, compared to $0.1 million and $17,000, respectively, during the same period in 2000. Marine vessel: As of September 30, 2001, the Partnership had no remaining interests in entities that owned marine vessels. (E) Net Income As a result of the foregoing, the Partnership's net income was $0.2 million for the third quarter of 2001, compared to net income of $0.1 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 September 30, 2001 is not necessarily indicative of future periods. COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance, equipment operating and asset-specific insurance expenses) on owned equipment decreased during the nine months ended September 30, 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 Nine Months Ended September 30, 2001 2000 --------------------------- Railcars $ 1,561 $ 1,680 Marine containers 29 57 Trailers -- 428 Marine vessel (27) -- Aircraft (62) 462
Railcars: Railcar lease revenues and direct expenses were $2.0 million and $0.4 million, respectively, for the nine months ended September 30, 2001, compared to $2.2 million and $0.5 million, respectively, during the same period in 2000. Railcar contribution decreased $0.1 million compared to the same period of 2000 due to lower lease revenues on railcars whose lease expired during 2001. Marine containers: Marine container lease revenues and direct expenses were $29,000 and $-0-, respectively, for the nine months ended September 30, 2001, compared to $62,000 and $5,000, respectively, during the same period of 2000. The decrease in marine container contribution in the nine months ended September 30, 2001 compared to the same period of 2000 was due to the sale of marine containers in 2001 and 2000. Trailers: Trailer lease revenues and direct expenses were $-0- for the nine months ended September 30, 2001, compared to $0.6 million and $0.2 million, respectively, during the same period of 2000. The decrease in trailer contribution in the nine months ended September 30, 2001 was due to the sale of all of the Partnership's trailers in 2000. Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.2 million, respectively, for the nine months ended September 30, 2001, compared to $0.6 million and $0.1 million, respectively, during the same period of 2000. The decrease in aircraft contribution in the nine months ended September 30, 2001 was due to the sale of the Partnership's aircraft in 2001 and 2000. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $1.3 million for the nine months ended September 30, 2001 decreased from $2.7 million for the same period in 2000. Significant variances are explained as follows: (i) A $1.2 million decrease in depreciation expense from 2000 levels resulted from a $1.2 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 decrease of $0.2 million in general and administrative expenses was due to lower costs of $0.1 million resulting from the sale of all the Partnership's trailers during 2000 and lower costs of $0.1 million due to the sale of aircraft during 2001. (iii) Loss on revaluation of equipment decreased $0.1 million during the nine months ended September 30, 2001 compared to the same period in 2000. In the third quarter of 2000, the Partnership reduced the carrying value of its trailers to their estimated net realizable value. No revaluation of equipment was required during the same period in 2001. (iv) A $0.1 million decrease in management fees to affiliate resulted from the lower levels of lease revenues on owned equipment during the nine months ended September 30, 2001, compared to the same period in 2000. (v) The $0.2 million increase in the bad debt expenses was due to the collection of $0.2 million receivable in the nine months ended September 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 nine months ended September 30, 2001 totaled $3.5 million, which resulted from the sale of aircraft, marine containers, and railcars with an aggregate net book value of $1.9 million, for proceeds of $5.4 million. For the nine months ended September 30, 2000, net gain on disposition of totaled $0.3 million, which resulted from the sale of marine containers, railcars, and trailers with a net book value of $1.5 million, for aggregate proceeds of $1.8 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 Nine Months Ended September 30, 2001 2000 --------------------------- Aircraft $ 307 $ 426 Marine vessel (34) 123 --------------------------- Equity in net income of USPEs $ 273 $ 549 ===========================
Aircraft: As of September 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 $0.4 million and $47,000, respectively, for the nine months ended September 30, 2001, compared to $0.4 million and $(19,000), respectively, during the same period in 2000. The decrease in revenues of $0.1 million during the nine months ended September 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 September 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 nine months ended September 30, 2001 compared to $0.1 million and $(5,000), respectively, during the same period in 2000. Revenues decreased $0.1 million during the nine months ended September 30, 2001 due to the sale of the marine vessel entity in which the Partnership owned an interest during the fourth quarter of 2000 and the receipt of $0.1 million for an insurance claim during the nine months ended September 30, 2000. A similar event did not occur during the same period of 2001. Expenses increased $39,000 due to payment of additional marine vessel operating expenses. (E) Net Income As a result of the foregoing, the Partnership's net income was $4.1 million for the nine months ended September 30, 2001, compared to net income of $0.8 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 nine months ended September 30, 2001 is not necessarily indicative of future periods. In the nine months ended September 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 nine months ended September 30, 2001, the Partnership generated $1.7 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 $0.1 million to make distributions (total of $1.8 million in the nine months ended September 30, 2001) to the partners. During the nine months ended September 30, 2001, the Partnership sold aircraft, marine containers and railcars with an aggregate net book value of $1.9 million, for proceeds of $5.4 million. Restricted cash decreased $0.1 million during the nine months ended September 30, 2001 due to the sale of a Partnership aircraft and the reclassification of $0.1 million of restricted cash to equipment sales proceeds during the first quarter of 2001. Accounts receivable decreased $0.1 million during the nine months ended September 30, 2001 due to the timing of cash receipts. Investments in USPEs decreased $0.3 million due to cash distributions of $0.6 million to the Partnership from the USPEs offset, in part, by $0.3 million of income that was recorded by the Partnership from the USPEs during the nine months ended September 30, 2001. Accounts payable increased $0.2 million during the nine months ended September 30, 2001 due to the timing of payments to vendors. Lessee deposits and reserve for repairs decreased $0.2 million during the nine months ended September 30, 2001 due to the decrease of $0.1 million resulting from the sale of a Partnership aircraft and the reclassification of $0.1 million of a lessee deposit to equipment sales proceeds 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 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. 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. 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 2002. Several factors may affect the Partnership's operating performance in 2001 and beyond, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates. Other factors affecting the Partnership's contribution in the year 2001 and beyond 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 nine 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 or railcars are not released. 3. The tragic events of September 11, 2001 have significantly impacted the commercial airline industry and consequently the demand for commercial aircraft. The General Partner expects the Partnership to be affected as a result of the excess supply of off-lease aircraft now available in the market, as well as the weakened financial strength of the Partnership's aircraft lessees. No direct damage occurred to any of the Partnership's aircraft as a result of these events and the General Partner is currently unable to determine the long-term effects, if any, these events may have on the Partnership's aircraft. As of September 30, 2001, substantially all of the Partnership's lease receivables remain current for the Partnership's interest in a trust that owns commercial aircraft. 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. The General Partner believes that due to the current state of the economy, liquidating Partnership equipment at this time is not in the best interest of the partners. The General Partner will continue to monitor the economic conditions to determine the best time to liquidate the Partnership's equipment. (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 nine months of 2001, 68% 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. PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K Report dated September 5, 2001 announcing the engagement of Deloitte & Touche LLP as the Partnership's auditors and the dismissal of KPMG, LLP. 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: November 9, 2001 By: /s/Stephen M. Bess ------------------------------ Stephen M. Bess President and Current Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----