-----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, VWv8YO57r5Mcvr46AGZwJzLjdyf90DIJn2oeNKu4r0gY0rMnmv5STZZ1OVyupSzH koKzlbnD1SnwCortlJIrug== 0000950005-01-500071.txt : 20010510 0000950005-01-500071.hdr.sgml : 20010510 ACCESSION NUMBER: 0000950005-01-500071 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010509 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: SEC FILE NUMBER: 000-18789 FILM NUMBER: 1626590 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 p13636-10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended March 31, 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 Indentification No.) One Market, Steuart Street Tower, Suite 800, San Francisco, CA 94105-1301 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (415) 974-1399 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) BALANCE SHEETS (in thousands of dollars, except unit amounts) March 31, December 31, 2001 2000 -------- -------- Assets Equipment held for operating leases, at cost $ 17,325 $ 18,003 Less accumulated depreciation (12,966) (13,436) -------- -------- 4,359 4,567 Equipment held for sale -- 1,931 -------- -------- Net equipment 4,359 6,498 Cash and cash equivalents 7,056 2,742 Restricted cash 147 272 Accounts and note receivable, less allowance for doubtful accounts of $35 in 2001 and $5 in 2000 614 171 Investments in unconsolidated special-purpose entity 3,068 3,143 Prepaid expenses and other assets 60 37 -------- -------- Total assets $ 15,304 $ 12,863 ======== ======== Liabilities and partners' capital Liabilities: Accounts payable and accrued expenses $ 138 $ 186 Due to affiliates 191 174 Lessee deposits and reserve for repairs 191 369 -------- -------- Total liabilities 520 729 -------- -------- Partners' capital: Limited partners (8,628,420 limited partnership units as of March 31, 2001 and December 31, 2000) 14,784 12,134 General Partner -- -- -------- -------- Total partners' capital 14,784 12,134 -------- -------- Total liabilities and partners' capital $ 15,304 $ 12,863 ======== ======== See accompanying notes to financial statements. -1- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF INCOME (in thousands of dollars, except weighted-average unit amounts) For the Three Months Ended March 31, 2001 2000 ---------------------- Revenues Lease revenue $ 908 $ 1,192 Interest and other income 66 62 Net gain on disposition of equipment 3,429 59 ------- ------- Total revenues 4,403 1,313 Expenses Depreciation 301 589 Repairs and maintenance 139 249 Equipment operating expenses 96 48 Management fees to affiliate 47 78 General and administrative expenses to affiliates 123 119 Other general and administrative expenses 225 121 Provision for (recovery of) bad debt expense 30 (112 ------- ------- Total expenses 961 1,092 Equity in net income of unconsolidated special- purpose entities 70 297 ------- ------- Net income $ 3,512 $ 518 ======= ======= Partners' share of net income Limited partners $ 3,468 $ 246 General Partner 44 272 ------- ------- Total $ 3,512 $ 518 ======= ======= Limited Partners net income per weighted-average partnership unit $ 0.40 $ 0.03 ======= ======= Cash distribution $ 862 $ 908 Special cash distribution -- 4,541 ------- ------- Total distribution $ 862 $ 5,449 ======= ======= Per weighted-average limited partnership unit: Cash distribution $ 0.09 $ 0.10 Special cash distribution -- 0.50 ------- ------- Total distribution $ 0.09 $ 0.60 ======= ======= See accompanying notes to financial statements. -2- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1999 to March 31, 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 distribution (4,314) (227) (4,541) -------- -------- -------- Partners' capital as of December 31, 2000 12,134 -- 12,134 Net income 3,468 44 3,512 Cash distribution (818) (44) (862) -------- -------- -------- Partner's capital as of March 31, 2001 $ 14,784 $ -- $ 14,784 ======== ======== ======== See accompanying notes to financial statements. -3- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) STATEMENTS OF CASH FLOWS (in thousands of dollars) For the Three Months Ended March 31, 2001 2000 ------- ------- Operating activities Net income $ 3,512 $ 518 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 301 589 Net gain on disposition of equipment (3,429) (59) Equity in net income of unconsolidated special-purpose entities (70) (297) Changes in operating assets and liabilities: Restricted cash 125 -- Accounts and note receivable, net (443) 205 Prepaid expenses and other assets (23) 15 Accounts payable and accrued expenses (48) (92) Due to affiliates 17 (15) Lessee deposits and reserve for repairs (178) (18) ------- ------- Net cash (used in) provided by operating activities (236) 846 ------- ------- Investing activities Payments for capitalized improvements -- (3) Proceeds from disposition of equipment 5,267 266 Distribution from unconsolidated special-purpose entities 145 303 ------- ------- Net cash provided by investing activities 5,412 566 ------- ------- Financing activities Cash distribution paid to limited partners (818) (863) Cash distribution paid to General Partner (44) (45) Special cash distribution paid to limited partners -- (4,314) Special cash distribution paid to General Partner -- (227) ------- ------- Net cash used in financing activities (862) (5,449) ------- ------- Net increase (decrease) in cash and cash equivalents 4,314 (4,037) Cash and cash equivalents at beginning of year 2,742 5,587 ------- ------- Cash and cash equivalents at end of period $ 7,056 $ 1,550 ======= ======= See accompanying notes to financial statements. -4- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 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 March 31, 2001 and December 31, 2000, the statements of income for the three months ended March 31, 2001 and 2000, the statements of cash flows for the three months ended March 31, 2001 and 2000, and the statements of changes in partners' capital for the period from December 31, 1999 to March 31, 2001. 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 months ended March 31, 2001 and 2000, cash distributions totaled $0.9 million. In addition, a $4.5 million special distribution was paid to the partners during the three months ended March 31, 2000 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 three months ended March 31, 2001. Cash distributions to the limited partners of $0.0 and $4.9 million, respectively, for the three months ended March 31, 2001 and 2000, were deemed to be a return of capital. Cash distributions related to the results from the first quarter of 2001, of $0.9 million, will be paid during the second quarter of 2001. 4. Transactions with General Partner and Affiliates The balance due to affiliates as of March 31, 2001 includes $44,000 due to FSI and its affiliate for management fees and administrative expenses and $0.1 million due to affiliated USPEs. 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 affiliated USPEs. The Partnership's proportional share of management fees with USPE's of $12,000 and $9,000 were payable as of March 31, 2001 and December 31, 2000, respectively. -5- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 4. Transactions with General Partner and Affiliates (continued) The Partnership's proportional share of the expenses incurred by the USPEs during 2001 and 2000 is listed in the following table (in thousands of dollars): For the Three Months Ended March 31, 2001 2000 -------------------------- Management fees $ 4 $ 4 Data processing and administrative expenses -- 5 5. 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): March 31, December 31, 2001 2000 ---------- ---------- Equipment held for operating leases Railcars $ 13,336 $ 13,336 Marine containers 3,989 4,667 ---------- ---------- 17,325 18,003 Less accumulated depreciation (12,966) (13,436) ---------- ---------- 4,359 4,567 Equipment held for sale -- 1,931 ---------- ---------- Net equipment $ 4,359 $ 6,498 ========== ========== As of March 31, 2001, all equipment was on lease, except for 33 railcars, and 117 marine containers, with an aggregate 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. During the three months ended March 31, 2001, the Partnership disposed of aircraft that were held for sale at December 31, 2000 and marine containers with an aggregate net book value of $1.8 million, for aggregate proceeds of $5.3 million. During the three months ended March 31, 2000, the Partnership disposed of marine containers, railcars and trailers with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.3 million. -6- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 6. Investments in Unconsolidated Special-Purpose Entities The 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 $3.1 million as of March 31, 2001 and December 31, 2000. 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 Marine Aircraft Railcar Container Vessel For the quarter ended March 31, 2001 Leasing Leasing Leasing Leasing All Other 1 Total ------------------------------------ ------- ------- ------- ------- ----------- ----- Revenues Lease revenue $ 185 $ 711 $ 12 $ -- $ -- $ 908 Interest income and other 6 -- -- -- 60 66 Gain on disposition of equipment 3,360 -- 67 -- 2 3,429 -------------------------------------------------------------- Total revenues 3,551 711 79 -- 62 4,403 Costs and expenses Operations support 13 135 -- 27 60 235 Depreciation 145 90 66 -- -- 301 Management fees to affiliates 3 44 -- -- -- 47 General and administrative expenses 107 21 -- -- 220 348 Provision for bad debts -- 30 -- -- -- 30 -------------------------------------------------------------- Total costs and expenses 268 320 66 27 280 961 -------------------------------------------------------------- Equity in net income (loss) of USPEs 104 -- -- (34) -- 70 -------------------------------------------------------------- Net income (loss) $ 3,387 $ 391 $ 13 $ (61) $ (218) $ 3,512 ============================================================== Total assets as of March 31, 2001 $ 3,540 $ 4,199 $ 302 $ -- $ 7,263 $ 15,304 ============================================================== - ------------- 1 Includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
-7- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 7. Operating Segments (continued)
Marine Marine Aircraft Railcar Container Vessel Trailer For the quarter ended March 31, 2000 Leasing Leasing Leasing Leasing Leasing All Other 1 Total ------------------------------------ ------- ------- ------- ------- ------- ----------- ----- Revenues Lease revenue $ 196 $ 770 $ 15 $ -- $ 211 $ -- $ 1,192 Interest income and other 1 -- -- -- -- 61 62 Gain (loss) on disposition of -- (2) 66 -- (5) -- 59 equipment ------------------------------------------------------------------------- Total revenues 197 768 81 -- 206 61 1,313 Costs and expenses Operations support 23 193 2 -- 43 36 297 Depreciation 335 114 77 -- 63 -- 589 Management fees to affiliates 4 53 1 -- 20 -- 78 General and administrative expenses 30 32 -- -- 61 117 240 Provision for (recovery of) bad -- 18 -- -- (130) -- (112) debts ------------------------------------------------------------------------- Total costs and expenses 392 410 80 -- 57 153 1,092 ------------------------------------------------------------------------- Equity in net income of USPEs 189 -- -- 108 -- -- 297 ------------------------------------------------------------------------- Net income (loss) $ (6) $ 358 $ 1 $ 108 $ 149 $ (92) $ 518 ========================================================================= Total assets as of March 31, 2000 $ 6,426 $ 4,577 $ 921 $ (38) $ 1,513 $ 1,730 $ 15,129 =========================================================================
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 months ended March 31, 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. - --------------- 1 Includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses. -8- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 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. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. -9- PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 9. Contingencies (continued) 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. Any objector to the settlement may file objections to the Report and Recommendation. The Report and Recommendation, along with any objections, will be reviewed by the district court judge, who may approve, reject or modify any of the magistrate judge's findings or recommendations, and who may also receive further evidence or recommit the matter to the magistrate judge. The parties await the district court's ruling on the Report and Recommendation. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Partnership. 10. 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 equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed on a quarterly basis to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. The Partnership is not permitted to reinvest proceeds from disposition of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. In the first quarter of 2000, the General Partner paid special distributions of $0.50 per weighted-average depositary unit. No special distibutions were paid in the first quarter of 2001. The sales and liquidations occur because equipment is damaged, 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. -10- 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 March 31, 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 first 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 March 31, 2001 2000 ---------------------------- Railcars $ 576 $ 577 Aircraft 172 173 Marine containers 12 13 Trailers -- 168 Railcars: Railcar lease revenues and direct expenses were $0.7 million and $0.1 million, respectively, for the first quarter of 2001, compared to $0.8 million and $0.2 million, respectively, during the same period of 2000. Railcar lease revenue and direct expenses decreased in the first quarter of 2001, compared to the same quarter of 2000, due to the disposition of railcars in 2000. Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $13,000, respectively, for the first quarter of 2001, compared to $0.2 million and $23,000, respectively, during the same period of 2000. Marine containers: Marine container lease revenues and direct expenses were $12,000 and $0, respectively, for the first quarter of 2001, compared to $15,000 and $2,000, respectively, during the same period of 2000. Lease revenues increased $0.1 million due to higher utilization than in the first quarter of 2000 for certain marine containers. This increase was offset by a decrease in lease revenue of $0.1 million due to the sale of marine containers in 2001 and 2000. Trailers: Trailer lease revenues and direct expenses were $0.2 million and $43,000, respectively, during the first quarter of 2000. All of the Partnership's trailers were sold in 2000. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $0.7 million for the first quarter of 2001 decreased from $0.8 million for the same period in 2000. Significant variances are explained as follows: (1) A $0.3 million decrease in depreciation expenses from 2000 levels resulted primarily due to the sale of certain assets during 2001 and 2000. (2) A $0.1 million increase in administrative expenses from 2000 levels resulted from an increase of $0.2 million due to higher professional costs and an increase of $22,000 as a result of the allocations by the General Partner of severance costs related to staff reductions partially offset by lower administrative expenses of $0.1 million resulting from the sale of the Partnership's trailers during 2000. -11- (3) The $0.1 million increase in the provision of bad debt expenses was primarily due to the collection from unpaid invoices in the first quarter of 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 first quarter of 2001 totaled $3.4 million, and resulted from the sale or disposal of aircraft and marine containers, with an aggregate net book value of $1.8 million, for aggregate proceeds of $5.3 million. For the same quarter in 2000, net gain on disposition of equipment totaled $0.1 million, which resulted from the sale or disposal of marine containers, railcars and trailers with an aggregate net book value of $0.2 million, for aggregate proceeds of $0.3 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 March 31, 2001 2000 ---------------------------- Aircraft $ 104 $ 189 Marine vessel (34) 108 ---------------------------- Equity in net income of USPEs $ 70 $ 297 ============================ Aircraft: As of March 31, 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 first quarter of 2001, compared to $0.2 million and $15,000, respectively, during the same period in 2000. Revenues decreased due to a lower investment in finance lease in the first quarter of 2001 compared to the same period in 2000. Marine vessel: As of March 31, 2001, the Partnership had no remaining interests in entities that owned marine vessels. Marine vessel revenues and expenses were $0.1 million and $0, respectively, for the first quarter of 2000. (E) Net Income As a result of the foregoing, the Partnership's net income was $3.5 million for the first quarter of 2001, compared to net income of $0.5 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 March 31, 2001 is not necessarily indicative of future periods. In the first quarter of 2001, the Partnership distributed $0.8 million to the limited partners, or $0.09 per weighted-average limited partnership unit. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY For the quarter ended March 31, 2001, the Partnership used $0.2 million of undistributed cash from prior periods to fund operations. In addition, the Partnership used $0.9 million of sales proceeds to make its cash distributions. During the three months ended March 31, 2001, the Partnership disposed of aircraft and marine containers with an aggregate net book value of $1.8 million, for aggregate proceeds of $5.3 million. Restricted cash decreased $0.1 million during the three months ended March 31, 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 and note receivables increased $0.4 million during the three months ended March 31, 2001 primarily due to the increase in note receivable related to an aircraft sold in the first quarter of 2001. -12- Lessee deposits and reserve for repairs decreased $0.2 million during the three months ended March 31, 2001 due to the decrease of $0.1 million in lessee deposits resulting from the return of security deposits to the buyers 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. Although, there was some upward pressure on container prices during the fourth quarter of 2000, this trend was reversed during the quarter ended March 31, 2001. 2. Railcar loadings in North America for the first quarter 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 some of these factors, or of their occurrence, makes it difficult for the General Partner to clearly define trends or influences that may impact the performance of the Partnership's equipment. 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. -13- 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 quarter of 2001, 74% 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. -14- PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. -15- 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: May 7, 2001 By: ------------------------------ Richard K Brock Chief Financial Officer -16- 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: May 7, 2001 By: /s/ Richard K Brock ------------------------------ Richard K Brock Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----