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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 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.)
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 ______
Aggregate market value of voting stock: N/A
An index of exhibits filed with this Form 10-K is located on page 22.
Total number of pages in this report: 48.
PART I
ITEM 1. BUSINESS
(A) Background
In March 1989, PLM Financial Services, Inc. (FSI or the General Partner), a
wholly-owned subsidiary of PLM International, Inc. (PLM International or PLM),
filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission with respect to a proposed offering of 8,750,000 limited partnership
units (including 1,250,000 option units) (the units) in PLM Equipment Growth
Fund IV, a California limited partnership (the Partnership, the Registrant, or
EGF IV). The Partnership's offering became effective on May 23, 1989. FSI, as
General Partner, owns a 5% interest in the Partnership. The Partnership engages
in the business of investing in a diversified equipment portfolio consisting
primarily of used, long-lived, low-obsolescence capital equipment that is easily
transportable by and among prospective users.
The Partnership's primary objectives are:
(1) to maintain a diversified portfolio of long-lived, low-obsolescence,
high residual-value equipment with the net proceeds of the initial partnership
offering, supplemented by debt financing and reinvestment of cash generated by
operations. All transactions of over $1.0 million must be approved by the PLM
International Credit Review Committee (the Committee), which is made up of
members of PLM International Senior Management. In determining a lessee's
creditworthiness, the Committee will consider, among other factors, its
financial statements, internal and external credit ratings, and letters of
credit.
(2) to generate sufficient net operating cash flow from lease operations to
meet liquidity requirements and to generate cash distributions to the limited
partners until such time as the General Partner commences the orderly
liquidation of the Partnership assets or unless the Partnership is terminated
earlier upon sale of all Partnership property or by certain other events.
(3) to selectively sell equipment when the General Partner believes that,
due to market conditions, market prices for equipment exceed inherent equipment
values or that expected future benefits from continued ownership of a particular
asset will have an adverse affect on the Partnership. As the Partnership is in
the liquidation phase, proceeds from these sales, together with excess net
operating cash flows from operations (net cash provided by operating activities
plus distributions from unconsolidated special-purpose entities (USPEs)), are
used to pay distributions to the partners.
(4) to preserve and protect the value of the portfolio through quality
management, maintaining the portfolio's diversity, and constantly monitoring
equipment markets.
The offering of the units of the Partnership closed on March 28, 1990. As of
December 31, 2000, there were 8,628,420 limited partnership units outstanding.
The General Partner contributed $100 for its 5% general partner interest in the
Partnership.
The Partnership has entered its liquidation phase and the General Partner is
actively pursuing the sale of all of the Partnership's equipment with the
intention of winding up the Partnership and distributing all available cash to
the Partners. The liquidation phase will end on December 31, 2009, unless the
Partnership is terminated earlier upon sale of all of the equipment or by
certain other events. The General Partner anticipates that the liquidation of
Partnership assets will be completed by the end of the year 2001.
Table 1, below, lists the equipment and the cost of equipment in the
Partnership's portfolio, and the cost of an investment in an unconsolidated
special-purpose entity, as of December 31, 2000 (in thousands of dollars):
TABLE 1
Units Type Manufacturer Cost
- ---------------------------------------------------------------------------------------------------------------------
Owned equipment held for operating leases:
277 Pressurized tank railcars Various $ 8,340
98 Woodchip gondola railcars General Electric 2,341
110 Bulkhead flat railcars Marine Industries Ltd. 2,153
24 Nonpressurized tank railcars Various 502
153 Refrigerated marine containers Various 4,115
161 Various marine containers Various 552
-----------
Total owned equipment held for operating leases $ 18,003
===========
Owned equipment held for sale:
1 737-200 stage II commercial aircraft Boeing $ 14,692
1 Dash 8-300 commuter aircraft Dehavilland 5,748
-----------
Total owned equipment held for sale $ 20,440
===========
Total owned equipment $ 38,443 1
===========
Investment in an unconsolidated special-purpose entity:
0.35 Equipment on direct finance lease:
Two DC-9 stage III commercial aircraft McDonnell-Douglas $ 3,901 1,2
===========
1 Includes equipment and investments purchased with the proceeds from capital
contributions, undistributed cashflow from operations, and Partnership
borrowings. Includes costs capitalized subsequent to the date of
acquisition and equipment acquisition fees paid to PLM Transportation
Equipment Corporation, a wholly-owned subsidiary of FSI. All equipment was
used equipment at the time of purchase.
2 Jointly Owned: EGF IV and two affiliated programs.
The Partnership's aircraft is generally leased under operating leases with terms
of eight years. The Partnership's marine containers are leased to operators of
utilization-type leasing pools, which include equipment owned by unaffiliated
parties. In such instances, revenues received by the Partnership consist of a
specified percentage of revenues generated by leasing the pooled equipment to
sublessees, after deducting certain direct operating expenses of the pooled
equipment. Rents for railcars are based on fixed rate with terms of one to six
years. Lease revenues for trailers that operated in rental yards owned by PLM
Rental, Inc. were based on a fixed rate for a specific period of time.
Rental income related to trailers was reported as revenue in accordance with
Financial Accounting Standards Board Statement No. 13 "Accounting for Leases".
Direct expenses associated with the equipment were charged directly to the
Partnership. An allocation of other indirect expenses of the rental yard
operations was charged to the Partnership monthly.
The lessees of the equipment include, but are not limited to: Aero California,
Transamerica Leasing, and Canadian Pacific Railways.
(B) Management of Partnership Equipment
The Partnership has entered into an equipment management agreement with PLM
Investment Management, Inc.(IMI), a wholly-owned subsidiary of FSI, for the
management of the Partnership's equipment. The Partnership's management
agreement with IMI is to co-terminate with the dissolution of the Partnership,
unless the limited partners vote to terminate the agreement prior to that date
or at the discretion of the General Partner. IMI has agreed to perform all
services necessary to manage the equipment on behalf of the Partnership and to
perform or contract for the performance of all obligations of the lessor under
the Partnership's leases. In consideration for its services and pursuant to the
partnership agreement, IMI is entitled to a monthly management fee (see Notes 1
and 2 to the audited financial statements).
(C) Competition
(1) Operating Leases versus Full Payout Leases
Generally the equipment owned by or invested in the Partnership is leased out on
an operating lease basis wherein the rents received during the initial
noncancelable term of the lease are insufficient to recover the Partnership's
purchase price of the equipment. The short- to mid-term nature of operating
leases generally commands a higher rental rate than the longer-term, full payout
leases and offers lessees relative flexibility in their equipment commitment. In
addition, the rental obligation under an operating lease need not be capitalized
on the lessee's balance sheet.
The Partnership encounters considerable competition from lessors that utilize
full payout leases on new equipment, i.e. leases that have terms equal to the
expected economic life of the equipment. While some lessees prefer the
flexibility offered by a shorter-term operating lease, other lessees prefer the
rate advantages possible with a full payout lease. Competitors may write full
payout leases at considerably lower rates and for longer terms than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates, which may put the Partnership at a competitive
disadvantage.
(2) Manufacturers and Equipment Lessors
The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases. Manufacturers may provide ancillary services that the
Partnership cannot offer, such as specialized maintenance services (including
possible substitution of equipment), training, warranty services, and trade-in
privileges.
The Partnership also competes with many equipment lessors, including ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, General Electric Capital Aviation Services Corporation, and other
investments programs that lease the same types of equipment.
(D) Demand
The Partnership currently operates in three primary operating segments: aircraft
leasing, marine container leasing, and railcar leasing. Each equipment leasing
segment engages in short-term to mid-term operating leases to a variety of
customers. Except for those aircraft leased to passenger air carriers, the
Partnership's equipment and investments are used to transport materials and
commodities, rather than people.
The following section describes the international and national markets in which
the Partnership's capital equipment operates:
(1) Aircraft
(a) Commercial aircraft
Both Boeing and Airbus Industries have predicted that the rate of growth in the
demand for air transportation services will be relatively robust for the next 20
years. Boeing has predicted that the demand for passenger services will grow at
an average rate of about 4.8% per year and the demand for cargo traffic will
grow at about 6.4% per year during that period. Such growth will require a
substantial increase in the numbers of commercial aircraft. According to Boeing,
as of the end of 1999, the world fleet of jet powered commercial aircraft
included a total of about 13,670 airplanes. That total included 11,994 passenger
aircraft with 50 seats or more and 1,676 freighter aircraft. Boeing predicts
that by the end of 2019 that fleet will grow to about 31,755 aircraft including
28,558 passenger aircraft with 50 seats or more and 3,197 freighter aircraft. To
support this growth, Boeing received 502 new aircraft orders in the first ten
months of 2000 and Airbus received 427.
Airline economics will also require aircraft to be retained in active commercial
service for longer periods than previously expected. Consequently, the market
for environmentally acceptable and economically viable aircraft will continue to
be robust and such aircraft will command relatively high residual values. In
general, aircraft values have tended to grow at about 3% per year. Lease rates
should also grow at similar rates. However, such rates are subject to variation
depending on the state of the world economy and the resultant demand for air
transportation services.
(b) Commuter aircraft
Regional jets have been well received in the commuter market. This has resulted
in an increase in demand for regional jets at the expense of turboprops.
Turboprop manufacturers are cutting back on production due to this reduced
demand. The uncertainty of the future market for turboprops has an adverse
effect on turboprop lease rates and residual values.
The Partnership leases one commuter turboprop containing 50 seats. This aircraft
flies in North America, which continues to be the fastest-growing market for
commuter aircraft in the world. The Partnership's aircraft possess unique
performance capabilities, compared to other turboprops, which allow them to
readily operate at maximum payloads from unimproved surfaces, hot and high
runways, and short runways.
The Partnership's turboprop remained on lease throughout 2000 and its lease rate
was constant. However as this aircraft was reclassed as an asset held for sale
by the end of 2000 the sale price will be affected due to the decrease in
residual value for all turboprops.
(2) Railcars
(a) Pressurized Tank Railcars
Pressurized tank cars are used to transport liquefied petroleum gas (natural
gas) and anhydrous ammonia (fertilizer). The United States (U.S.) markets for
natural gas are industrial applications (46% of estimated demand in 2000),
residential use (21%), electrical generation (15%), commercial applications
(15%), and transportation (3%). Natural gas consumption is expected to grow over
the next few years as most new electricity generation capacity planned for is
expected to be natural gas fired. Within the fertilizer industry, demand is a
function of several factors, including the level of grain prices, the status of
government farm subsidy programs, amount of farming acreage and mix of crops
planted, weather patterns, farming practices, and the value of the U.S. dollar.
Population growth and dietary trends also play an indirect role.
On an industry wide basis, North American carloadings of the commodity group
that includes petroleum and chemicals increased 1% in 2000, compared to 1999.
Consequently, demand for pressurized tank cars remained relatively constant
during 2000, with utilization of this type of railcar within the Partnership
remaining above 98%. While renewals of existing leases continue at similar
rates, some cars continue to be renewed for "winter only" terms of approximately
six months. As a result, there are many pressurized tank cars up for renewal in
the spring of 2001.
(b) Woodchip Gondolas Railcars
These railcars are used to transport woodchips from sawmills to pulp mills,
where the woodchips are converted into pulp. Thus, demand for woodchip cars is
directly related to demand for paper, paper products, particleboard, and
plywood. In Canada, where the Partnership's woodchip railcars operate, 2000
carloadings of forest products increased 2% over 1999 levels.
Over the 2001-04 forecast period, U.S. market pulp suppliers should experience
increased global demand and a corresponding increase in domestic sales as
product shipments increase about 2% annually over these years.
(c) Bulkhead Flat Railcars
Bulkhead flatcars are used to transport pulpwood from sawmills to pulp mills.
High-grade pulpwood is used to make paper, while low-grade pulpwood is used to
make particleboard and plywood. In Canada, where the Partnership's bulkhead
flatcars operate for the year, 2000 carloadings of forest products increased 2%
over 1999 levels.
Over the 2001-04 forecast period, U.S. market pulp suppliers should experience
increased global demand and a corresponding increase in domestic sales as
product shipments increase about 2% annually over these years.
(d) Nonpressurized, General Purpose Tank Railcars
These cars are used to transport bulk liquid commodities and chemicals not
requiring pressurization, such as certain petroleum products, liquefied asphalt,
lubricating oils, molten sulfur, vegetable oils and corn syrup. This car type
continued to be in high demand during 2000. The overall health of the market for
these types of commodities is closely tied to both the U.S. and global
economies, as reflected in movements in the Gross Domestic Product, personal
consumption expenditures, retail sales, and currency exchange rates. The
manufacturing, automobile, and housing sectors are the largest consumers of
chemicals. Within North America, 2000 carloadings of the commodity group that
includes chemicals and petroleum products rose 1% over 1999 levels. Utilization
of the Partnership's nonpressurized tank cars remained above 98% during 2000.
(3) Marine Containers
The Partnership's fleet of both standard dry and specialized containers is in
excess of twelve years of age, and is generally no longer suitable for use in
international commerce, either due to its specific physical condition, or the
lessees' preferences for newer equipment. As individual containers are returned
from their specific lessees, they are being marketed for sale on an 'as is,
where is' basis. The market for such sales, although highly dependent upon the
specific location and type of container, has continued to be strong over the
last several years, as it relates to standard dry containers. The Partnership
has in the last year experienced reduced residual values on the sale of
refrigerated containers, due primarily to technological obsolesence associated
with this equipment's refrigeration machinery.
(E) Government Regulations
The use, maintenance, and ownership of equipment are regulated by federal,
state, local, or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Partnership's ownership and operation
of equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Partnership's equipment portfolio are
either registered or operated internationally. Such equipment may be subject to
adverse political, government, or legal actions, including the risk of
expropriation or loss arising from hostilities. Certain of the Partnership's
equipment is subject to extensive safety and operating regulations, which may
require its removal from service or extensive modification of such equipment to
meet these regulations, at considerable cost to the Partnership. Such
regulations include but are not limited to:
(1) the U.S. Department of Transportation's Aircraft Capacity Act of 1990,
which limits or eliminates the operation of commercial aircraft in the
United States that do not meet certain noise, aging, and corrosion
criteria. In addition, under U.S. Federal Aviation Regulations, after
December 31, 1999, no person shall operate an aircraft to or from any
airport in the contiguous United States unless that airplane has been shown
to comply with Stage III noise levels. The Partnership has one Stage II
aircraft that does not meet Stage III requirements. As of December 31,
2000, this aircraft was reclassed as asset held for sale. The cost to
install a hushkit to meet quieter Stage III requirements is approximately
$2.0 million, depending on the type of aircraft.
(2) the Montreal Protocol on Substances that Deplete the Ozone Layer and
the United States Clean Air Act Amendments of 1990, which call for the
control and eventual replacement of substances that have been found to
cause or contribute significantly to harmful effects on the stratospheric
ozone layer and that are used extensively as refrigerants in refrigerated
marine cargo containers.
(3) the U.S. Department of Transportation's Hazardous Materials Regulations
regulates the classification and packaging requirements of hazardous
materials which apply particularly to the Partnership's tank railcars. The
Federal Railroad Administration has mandated that effective July 1, 2000,
all tank railcars must be re-qualified every ten years from the last test
date stenciled on each railcar to insure tank shell integrity. Tank shell
thickness, weld seams, and weld attachments must be inspected and repaired
if necessary to re-qualify a tank railcar for service. The average cost of
this inspection is $1,800 for non-jacketed tank railcars and $3,600 for
jacketed tank railcars, not including any necessary repairs. This
inspection is to be performed at the next scheduled tank test and every ten
years thereafter. The Partnership currently owns 214 non-jacketed tank
railcars and 87 jacketed tank railcars of which a total of 10 tank railcars
have been inspected with no reportable defects.
As of December 31, 2000, the Partnership was in compliance with the above
government regulations. Typically, costs related to extensive equipment
modifications to meet government regulations are passed on to the lessee of that
equipment.
ITEM 2. PROPERTIES
The Partnership neither owns nor leases any properties other than the equipment
it has purchased and its interests in entities that own equipment for leasing
purposes. As of December 31, 2000, the Partnership owned a portfolio of
transportation and related equipment and an investment in equipment owned by an
unconsolidated special-purpose entity (USPE) as described in Item I, Table 1.
The Partnership acquired equipment with the proceeds of the Partnership offering
of $174.8 million through the first half of 1990, proceeds from the debt
financing of $33.0 million and by reinvesting a portion of its operating cash
flow in additional equipment.
The Partnership maintains its principal office at One Market, Steuart Street
Tower, Suite 800, San Francisco, California 94105-1301. All office facilities
are provided by FSI without reimbursement by the Partnership.
ITEM 3. LEGAL PROCEEDINGS
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, 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.
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.
A final fairness hearing was held on November 29, 2000 and the parties await the
court's decision. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 2000.
(this space intentionally left blank)
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP's EQUITY AND RELATED UNITHOLDER MATTERS
Pursuant to the terms of the partnership agreement, the General Partner is
generally entitled to a 5% interest in the profits, losses and distributions of
the Partnership. The General Partner is the sole holder of such interest.
Special allocations of income are made to the General Partner equal to the
deficit balance, if any, in the capital account of the General Partner. The
General Partner's annual allocation of net income will generally be equal to the
General Partner's cash distributions paid during the current year. The remaining
interests in the profits, losses and distributions of the Partnership are owned,
as of December 31, 2000, by the 9,220 holders of units in the Partnership.
There are several secondary markets that will facilitate sales and purchases of
units. Secondary markets are characterized as having few buyers for limited
partnership interests and, therefore, are generally viewed as inefficient
vehicles for the sale of units. Presently, there is no public market for the
units and none is likely to develop. To prevent the units from being considered
publicly traded and thereby to avoid taxation of the Partnership as an
association treated as a corporation under the Internal Revenue Code, the units
will not be transferable without the consent of the General Partner, which may
be withheld at its absolute discretion. The General Partner intends to monitor
transfers of units in an effort to ensure that they do not exceed the percentage
or number permitted by certain safe harbors promulgated by the Internal Revenue
Service. A transfer may be prohibited if the intended transferee is not an U.S.
citizen or if the transfer would cause any portion of the units of a "Qualified
Plan" as defined by the Employee Retirement Income Security Act of 1974 and
Independent Retirement Accounts to exceed the limit allowable. The Partnership
may redeem a certain number of units each year. As of December 31, 2000, the
Partnership had repurchased a cumulative total of 121,580 units at a cost of
$1.6 million. The General Partner does not intend to repurchase any additional
units on behalf of the Partnership in the future.
(this space intentionally left blank)
ITEM 6. SELECTED FINANCIAL DATA
Table 2, below, lists selected financial data for the Partnership:
TABLE 2
For the Years Ended December 31,
(In thousands of dollars, except weighted-average unit amounts)
2000 1999 1998 1997 1996
--------------------------------------------------------------------------
Operating results:
Total revenues $ 4,847 $ 14,651 $ 10,768 $ 16,378 $ 22,120
Net gain (loss) on disposition of
equipment 303 6,357 (464) 2,830 3,179
Loss on revaluation of equipment 106 -- -- -- --
Equity in net income (loss) of uncon-
solidated special-purpose entities 673 2,224 348 2,952 (331)
Net income (loss) 897 6,408 (1,127) 2,098 (4,119)
At year-end:
Total assets $ 12,863 $ 20,185 $ 31,250 $ 46,089 $ 59,009
Total liabilities 729 843 14,683 24,862 34,100
Notes payable -- -- 12,750 21,000 29,250
Cash distribution $ 3,564 $ 3,633 $ 3,533 $ 5,780 $ 7,271
Special cash distribution 4,541 -- -- -- --
Total cash distribution $ 8,105 $ 3,633 $ 3,533 $ 5,780 $ 7,271
Total cash distribution representing a
return of capital to the limited
partners $ 7,208 $ 0 $ 3,351 $ 3,682 $ 6,908
Per weighted-average limited
partnership unit:
Net income (loss) $ 0.06 1 $ 0.72 1 $ (0.15)1 $ 0.21 1 $ (0.52)1
Cash distribution $ 0.39 $ 0.40 $ 0.39 $ 0.64 $ 0.80
Special cash distribution 0.50 -- -- -- --
Total cash distribution $ 0.89 $ 0.40 $ 0.39 $ 0.64 $ 0.80
Total cash distribution representing a
return of capital to the limited
partners $ 0.84 $ N/A $ 0.39 $ 0.43 $ 0.80
1 After reduction of income of $359 ($0.04 per weighted-average depositary
unit) in 2000, $138 ($0.02 per weighted-average depositary unit) in 1999,
$238 ($0.03 per weighted-average depositary unit) in 1998, $190 ($0.02 per
weighted-average depositary unit) in 1997, and $569 ($0.07 per
weighted-average depositary unit) in 1996, representing allocations to the
General Partner (see Note 1 to the financial statements).
ITEM 7 MANAGEMENT's DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(A) Introduction
Management's discussion and analysis of financial condition and results of
operations relates to the financial statements of PLM Equipment Growth Fund IV
(the Partnership). The following discussion and analysis of operations focuses
on the performance of the Partnership's equipment in the various segments in
which it operates and its effect on the Partnership's overall financial
condition.
(B) Results of Operations - Factors Affecting Performance
(1) Re-leasing Activity and Repricing Exposure to Current Economic Conditions
The exposure of the Partnership's equipment portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for the Partnership's equipment include supply and demand for similar or
comparable types of transport capacity, desirability of the equipment in the
leasing market, market conditions for the particular industry segment in which
the equipment is to be leased, overall economic conditions, and various
regulations concerning the use of the equipment. Equipment that is idle or out
of service between the expiration of one lease and the assumption of a
subsequent lease can result in a reduction of contribution to the Partnership.
The Partnership experienced re-leasing or repricing activity in 2000 primarily
in its aircraft, marine container, and railcars portfolios.
(a) Aircraft: The Partnership owns a Boeing 737-200 Stage II aircraft that
has been off-lease throughout 2000 and 1999. This aircraft was reclassed as
asset held for sale as of December 31, 2000.
(b) The Partnership's remaining marine container portfolio operates in
utilization-based leasing pools and, as such, is exposed to considerable
repricing activity. The Partnership's marine container contributions declined
from 1999 to 2000 due to equipment sales during 1999 and 2000.
(c) Railcars: The Partnership's railcar contributions declined from 1999 to
2000, due to equipment sales during 1999 and 2000.
(2) Equipment Liquidations and Nonperforming Lessees
Liquidation of Partnership equipment and investments in unconsolidated
special-purpose entities (USPEs) represents a reduction in the size of the
equipment portfolio, and will result in reduction of contributions to the
Partnership. Lessees not performing under the terms of their leases, either by
not paying rent, not maintaining or operating the equipment in accordance with
the conditions of the leases, or other possible departures from the lease terms,
can result not only in reductions in net contribution, but also may require the
Partnership to assume additional costs to protect its interests under the
leases, such as repossession or legal fees. The Partnership experienced the
following in 2000:
(a) Liquidations: During 2000, the Partnership disposed of marine
containers, railcars, and trailers, for proceeds of $1.9 million.
(b) Nonperforming lessees: In 1997, the Partnership repossessed one
aircraft from a lessee that did not comply with the terms of the lease
agreement. The Partnership incurred legal fees, repossession costs, and repair
costs associated with this aircraft. In addition, the Partnership wrote off all
outstanding receivables from this lessee. This aircraft remained off lease
throughout 1999 and 2000 and was reclassed as assets held for sale as of
December 31, 2000.
(3) Equipment Valuation
In accordance with Financial Accounting Standards Board statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the General Partner reviews the carrying value of the
Partnership's equipment portfolio at least quarterly, and whenever circumstances
indicate that the carrying value of an asset may not be recoverable in relation
to expected future market conditions, for the purpose of assessing the
recoverability of the recorded amounts. If projected undiscounted future cash
flows and fair value are lower than the carrying value of the equipment, a loss
on revaluation is recorded. A $0.1 million loss on revaluation was recorded
during 2000. No reductions to the equipment carrying values were required for
the years ended December 31, 1999 or 1998.
(C) Financial Condition -- Capital Resources, Liquidity, and Unit Redemption
Plan
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from the limited partners are permitted under the
terms of the Partnership's limited partnership agreement. As of December 31,
2000, the Partnership had no outstanding indebtedness. The Partnership relies on
operating cash flow and proceeds from sale of equipment to meet its operating
obligations and make cash distributions to the limited partners.
For the year ended December 31, 2000, the Partnership generated $3.3 million in
operating cash (net cash provided by operating activities plus non-liquidating
distributions from USPEs) to meet its operating obligations and make
distributions (total of $8.1 million in 2000) to the partners, but also used
undistributed available cash from prior periods including proceeds from the sale
of equipment of approximately $4.8 million.
During the year ended December 31, 2000, the Partnership sold or disposed of
marine containers, railcars, and trailers for aggregate proceeds of $1.9
million.
Accounts payable and accrued expenses decreased $0.1 million due to the
reduction of the equipment portfolio.
Investment in unconsolidated special-purpose entities (USPE) decreased $0.3
million. The decrease was due to a $0.9 million distribution to the Partnership,
partially offset by net income from the USPE of $0.7 million during 2000.
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.
Pursuant to the terms of the limited partnership agreement, beginning January 1,
1993, if the number of units made available for purchase by limited partners in
any calendar year exceeds the number that can be purchased with reinvestment
plan proceeds during any calendar year, then the Partnership may redeem up to 2%
of the outstanding units each year, subject to certain terms and conditions. The
purchase price to be offered for such units is to be equal to 110% of the
unrecovered principal attributed to the units. Unrecovered principal is defined
as the excess of the capital contribution attributable to a unit over the
distributions from any source paid with respect to that unit. The Partnership
does not intend to repurchase any units in the future.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause it to require any additional capital to that
mentioned above.
(D) Results of Operations - Year-to-Year Detailed Comparison
(1) Comparison of Partnership's Operating Results for the Years Ended December
31, 2000 and 1999
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the year ended December 31, 2000, compared to the same period
of 1999. Gains or losses from the sale of equipment and certain expenses such as
depreciation and amortization and general and administrative expenses relating
to the operating segments (see Note 5 to the audited financial statements), are
not included in the owned equipment operation discussion because they are more
indirect in nature, not a result of operations but more 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 Years Ended
December 31,
2000 1999
---------------------------
Railcars $ 2,202 $ 2,448
Aircraft 648 1,061
Trailers 428 786
Marine containers 72 138
Marine vessel -- (81)
Railcars: Railcar lease revenues and direct expenses were $2.9 million and $0.7
million, respectively, in 2000, compared to $3.1 million and $0.7 million,
respectively, during 1999. The decrease in railcar contribution in 2000 was due
to the sale of railcars in 2000 and 1999.
Aircraft: Aircraft lease revenues and direct expenses were $0.8 million and $0.1
million, respectively, for the year ended December 31, 2000, compared to $2.6
million and $1.5 million, respectively, during the same period of 1999. The
decrease in aircraft contribution in 2000 was due to the disposition of aircraft
in 1999.
Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2
million, respectively, for the year ended December 31, 2000, compared to $1.1
million and $0.3 million, respectively, during the same period of 1999. The
decrease in trailer contribution in 2000 was due to the disposition of trailers
in 1999 and 2000. All of the Partnership's trailers were sold during 2000.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $6,000, respectively, in 2000, compared to $0.1 million and $5,000,
respectively, during 1999. The decrease in marine containers contribution in
2000 was due to the disposition of marine containers in 1999 and 2000.
Marine vessel: Marine vessel lease revenues and direct expenses were zero in
2000, compared to $1.1 million and $1.1 million, respectively, in 1999. The
decrease in lease revenues and direct expenses in 2000, compared to 1999, was
due to the sale of the remaining marine vessel in the fourth quarter of 1999.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.5 million for the year ended December 31, 2000,
decreased from $6.7 million for the same period in 1999. The significant
variances are explained as follows:
(i) A $2.0 million decrease in depreciation and amortization expenses from
1999 levels resulted from the sale of certain assets during 2000 and 1999.
(ii)A $1.0 million decrease in interest expense was due to the repayment of
the Partnership's debt in 1999.
(iii) A $0.2 million decrease in general and administrative expenses from
1999 levels was due to the reduction of the size of the Partnership's equipment
portfolio.
(iv)A $0.2 million decrease in management fees to an affiliate reflects the
lower levels of lease revenues on owned equipment in 2000, compared to 1999.
(v) A $0.1 million increase in bad debt expenses in 2000 compared to 1999
was due to fewer recoveries of doubtful accounts in 2000 compared to 1999. $0.2
million was collected from unpaid invoices that had previously been reserved for
as bad debts during 2000 compared to the collection of $0.3 million in 1999.
(vi)An increase of $0.1 million in revaluation of equipment was due to the
loss on revaluation of trailer equipment in 2000. A similar loss did not occur
in 1999.
(c) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment in 2000 totaled $0.3 million, which
resulted from the sale of railcars, trailers and marine containers with an
aggregate net book value of $1.6 million, for aggregate proceeds of $1.9
million. The net gain on disposition of equipment in 1999 totaled $6.4 million
that resulted from the sale of a marine vessel, aircraft, railcars, trailers and
marine containers with an aggregate net book value of $8.8 million, for
aggregate proceeds of $15.2 million
(d) Equity in Net Income of Unconsolidated Special Purpose Entities
Net income generated from the operation of jointly-owned assets accounted for
under the equity method is shown in the following table by equipment type (in
thousands of dollars):
For the Years Ended
December 31,
2000 1999
---------------------------
Aircraft $ 538 $ 470
Marine vessels 135 1,754
---------------------------
Equity in Net Income of USPEs $ 673 $ 2,224
===========================
Aircraft: As of December 31, 2000 and 1999, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.5 million and a credit of $3,000, respectively,
for the year ended December 31, 2000, compared to $0.6 million and $0.1 million,
respectively, during the same period in 1999. The aircraft revenues decreased
$0.1 million due to decreasing finance lease receivable based on lease payments
schedules. The Partnership's share of expenses decreased $0.1 million due to the
increase in bad debt expense to reflect the General Partner's evaluation of the
collectibility of receivables due from the aircraft's lessee.
Marine vessel: As of December 31, 2000, the Partnership had no remaining
interests in entities that owned marine vessels. During the year ended December
31, 2000, marine vessel revenues of $0.1 million resulted from an insurance
settlement. During the year ended December 31, 1999, lease revenues of $1.1
million and the gain of $1.9 million from the sale of the Partnership's interest
in an entity that owned a marine vessel were offset by depreciation, direct and
administrative expenses of $1.2 million. The decrease in income from an entity
that owned marine vessels was due to the sale of the Partnership's interest in
an entity that owned a marine vessel in 1999.
(e) Net Income
As a result of the foregoing, the Partnership's net income was $0.9 million for
the year ended December 31, 2000, compared to $6.4 million during the same
period of 1999. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the year ended December 31, 2000
is not necessarily indicative of future periods. In the year ended December 31,
2000, the Partnership distributed $7.7 million to the limited partners, or $0.89
per weighted-average limited partnership unit.
(2) Comparison of Partnership's Operating Results for the Years Ended December
31, 1999 and 1998
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the year ended December 31, 1999, compared to the same period
of 1998. The following table presents lease revenues less direct expenses by
segment (in thousands of dollars):
For the Years Ended
December 31,
1999 1998
----------------------------
Railcars $ 2,448 $ 2,607
Aircraft 1,061 3,038
Trailers 786 1,132
Marine containers 138 712
Marine vessel (81) 623
Railcars: Railcar lease revenues and direct expenses were $3.1 million and $0.7
million, respectively, in 1999, compared to $3.5 million and $0.9 million,
respectively, during 1998. The decrease in railcar contribution in 1999 was due
to the sale or disposition of railcars in 1998 and 1999.
Aircraft: Aircraft lease revenues and direct expenses were $2.6 million and $1.5
million, respectively, for the year ended December 31, 1999, compared to $3.5
million and $0.4 million, respectively, during the same period of 1998. Lease
revenue decreased in 1999, compared to the same period in 1998 due to the sale
of aircraft in 1999. Direct expenses increased due to higher costs incurred for
repairs on an off-lease aircraft in 1999, when compared to the same period in
1998.
Trailers: Trailer lease revenues and direct expenses were $1.1 million and $0.3
million, respectively, for the year ended December 31, 1999, compared to $1.6
million and $0.4 million, respectively, during the same period of 1998. During
the year ended December 31, 1999, certain dry trailers were in the process of
transitioning to a new PLM-affiliated short-term rental facility specializing in
this type of trailer causing lease revenues for this group of trailers to
decrease $0.1 million when compared to the same period of 1998. In addition,
lease revenue decreased $0.4 million due to sales and dispositions of trailers
during 1999 and 1998. Trailer repairs and maintenance decreased $0.1 million
primarily due to required repairs during 1998 that were not needed during the
same period of 1999.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $5,000, respectively, in 1999, compared to $0.7 million and $8,000,
respectively, during 1998. Marine container contributions decreased $0.2 million
due to the disposition of containers in 1998 and 1999. In addition, marine
container contributions decreased $0.4 million due to a group of containers
being off lease during 1999 which were on-lease for all of 1998.
Marine vessel: Marine vessel lease revenues and direct expenses were $1.1
million and $1.1 million, respectively, in 1999, compared to $1.7 million and
$1.0 million, respectively, in 1998. Marine vessel contribution decreased in
1999, compared to 1998, due to the sale of the remaining marine vessel in the
fourth quarter of 1999. Direct expenses increased in 1999 due to higher
operating expenses compared to the same period in 1998.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $6.7 million for the year ended December 31, 1999,
decreased from $9.3 million for the same period in 1998. The significant
variances are explained as follows:
(i) A $1.5 million decrease in depreciation and amortization expenses from
1998 levels resulted from an approximately $0.6 million decrease due to the sale
of certain assets during 1999 and 1998 and an approximately $0.9 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 $0.6 million decrease in interest expense was due to a decrease of
$0.7 million resulting from lower average borrowings outstanding during 1999,
compared to 1998. This decrease was offset by an increase in interest expense of
$0.1 million as a result of the prepayment penalty. In the third quarter of
1999, the Partnership paid the regularly scheduled annual principal payment of
$8.3 million of the outstanding debt. In addition, in December 1999 the
Partnership prepaid the remaining principal balance of $4.5 million.
(iii) A $0.3 million decrease in bad debt expenses in 1999 compared to 1998
was primarily due to the collection of $0.3 million from unpaid invoices in 1999
that had previously been reserved for as bad debts.
(iv)A $0.1 million decrease in management fees to an affiliate that
reflects the lower levels of lease revenues on owned equipment in 1999, when
compared to 1998.
(c) Net Gain (Loss) on Disposition of Owned Equipment
The net gain on disposition of equipment in 1999 totaled $6.4 million, which
resulted from the sale of a marine vessel, aircraft, railcars, trailers and
marine containers with an aggregate net book value of $8.8 million, for
aggregate proceeds of $15.2 million. In 1998, the loss on disposition of
equipment totaled $0.5 million, which resulted from the sale of trailers with a
net book value of $1.4 million, for proceeds of $0.9 million. In addition, the
Partnership sold or disposed of marine containers and railcars with an aggregate
net book value of $0.6 million, for aggregate proceeds of $0.6 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 Years Ended
December 31,
1999 1998
----------------------------
Marine vessels $ 1,754 $ (306)
Aircraft 470 654
----------------------------
Equity in Net Income of USPEs $ 2,224 $ 348
============================
Marine vessel: During the year ended December 31, 1999, lease revenues of $1.1
million and the gain from the sale of the Partnership's interest in an entity
owning a marine vessel of $1.9 million sold in the fourth quarter of 1999 were
offset by depreciation, direct and administrative expenses of $1.2 million.
During the year ended December 31, 1998, revenues of $1.2 million were offset by
depreciation, direct and administrative expenses of $1.5 million. Direct
expenses decreased $0.1 million due to lower required scheduled drydock expenses
in 1999 compared to 1998. In addition, direct expenses decreased $0.1 million
due to certain repairs required in 1998 that were not necessary in 1999. Also,
expenses decreased $0.1 million for the year ended December 31, 1999 compared to
the same period in 1998, due to lower depreciation expense as a result of the
double declining-balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
Aircraft: As of December 31, 1999 and 1998, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.6 million and $0.1, respectively, for the year
ended December 31, 1999, compared to $0.6 million and $0, respectively, during
the same period in 1998. The Partnership's share of expenses increased $0.1
million due to the increase in bad debt expense to reflect the General Partner's
evaluation of the collectibility of receivables due from the aircraft's lessee.
(e) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $6.4 million for
the year ended December 31, 1999, compared to a net loss of $1.1 million during
the same period of 1998. 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 year ended December
31, 1999 is not necessarily indicative of future periods. In the year ended
December 31, 1999, the Partnership distributed $3.5 million to the limited
partners, or $0.40 per weighted-average limited partnership unit.
(E) Geographic Information
Certain of the Partnership's equipment operates in international markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes these risks are minimal
or has implemented strategies to control the risks. Currency risks are at a
minimum because all invoicing, with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally through the avoidance of operations in countries that do not have a
stable judicial system and established commercial business laws. Credit support
strategies for lessees range from letters of credit supported by U.S. banks to
cash deposits. Although these credit support mechanisms generally allow the
Partnership to maintain its lease yield, there are risks associated with
slow-to-respond judicial systems when legal remedies are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets, and the General Partner strives to minimize this risk with market
analysis prior to committing equipment to a particular geographic area. Refer to
Note 6 to the audited financial statements for information on the revenues, net
income (loss), and net book value of equipment in various geographic regions.
Revenues and net operating income by geographic region are impacted by the time
period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges, which are greatest in the early years of
ownership due to the use of the double-declining balance method of depreciation.
The relationships of geographic revenues, net income (loss), and net book value
of equipment are expected to significantly change in the future as assets come
off lease and decisions are made to either redeploy the assets in the most
advantageous geographic location, or sell the assets. An explanation of the
current relationships is presented below.
The Partnership's owned equipment on lease to United States (U.S.)-domiciled
lessees consists of trailers and railcars. During 2000, U.S. lease revenues
accounted for 21% of the total lease revenues from wholly and partially owned
equipment. U.S. operations resulted in a net loss of $0.5 million.
The Partnership's owned equipment on lease to Canadian-domiciled lessees
consists of railcars and aircraft. During 2000, Canadian lease revenues
accounted for 77% of the total lease revenues from wholly and partially owned
equipment. Canadian operations generated a net income of $1.3 million.
The Partnership's owned equipment on lease to lessees in the rest of the world
consisted of marine containers. During 2000, lease revenues for these lessees
accounted for 2% of the total lease revenues from wholly and partially owned
equipment. Net loss from this region was $0.1 million.
(F) Inflation
Inflation had no significant impact on the Partnership's operations during 2000,
1999, or 1998.
(G) Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
(H) 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 end of the year 2001.
Several factors may affect the Partnership's operating performance in the year
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. One of the Partnership's aircraft has been off-lease for approximately three
years. This Stage II aircraft required extensive repairs and maintenance and the
Partnership has had difficulty selling its aircraft. This aircraft was reclassed
to an asset held for sale as of December 31, 2000.
2. The Partnership's fleet of both standard dry and specialized marine
containers is in excess of twelve years of age and is generally no longer
suitable for use in international commerce either due to its specific physical
condition, or lessees preferences for newer equipment. Demand for the
Partnership's marine containers will continue to be weak due to the age of the
fleet.
3. The softening in the railcars market has 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 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.
Several other factors may affect the Partnership's operating performance in the
year 2001, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
(1) Repricing Risk
Certain of the Partnership's marine containers and railcars will be remarketed
in 2001 as existing leases expire, exposing the Partnership to some repricing
risk/opportunity. Additionally, the Partnership entered its liquidation phase on
January 1, 1999 and has commenced an orderly liquidation of the Partnership's
assets. In either case, the General Partner intends to sell equipment at
prevailing market rates; however, the General Partner cannot predict these
future rates with any certainty at this time, and cannot accurately assess the
effect of such activity on future Partnership performance.
(2) Impact of Government Regulations on Future Operations
The General Partner operates the Partnership's equipment in accordance with
current applicable regulations (see Item 1, Section E, Government Regulations).
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Partnership's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Partnership of meeting regulatory compliance for the
same equipment operated between countries. Ongoing changes in the regulatory
environment, both in the United States and internationally, cannot be predicted
with any accuracy and preclude the General Partner from determining the impact
of such changes on Partnership operations, or sale of equipment. Under U.S.
Federal Aviation Regulations, after December 31, 1999, no person shall operate
an aircraft to or from any airport in the contiguous United States unless that
airplane has been shown to comply with Stage III noise levels. The Partnership
has Stage II aircraft that does not meet Stage III requirements. As of December
31, 2000, this aircraft was reclassed to an asset held for sale. Furthermore,
the Federal Railroad Administration has mandated that effective July 1, 2000,
all tank railcars must be re-qualified every ten years from the last test date
stenciled on each railcar to insure tank shell integrity. Tank shell thickness,
weld seams, and weld attachments must be inspected and repaired if necessary to
re-qualify a tank railcar for service. The average cost of this inspection is
$1,800 for non-jacketed tank railcars and $3,600 for jacketed tank railcars, not
including any necessary repairs. This inspection is to be performed at the next
scheduled tank test and every ten years thereafter. The Partnership currently
owns 214 non-jacketed tank railcars and 87 jacketed tank railcars of which a
total of 10 tank railcars have been inspected with no reportable defects.
(3) Distributions
During the active liquidation phase, the Partnership will use operating cash
flow and proceeds from the sale of equipment to meet its operating obligations,
and make distributions to the partners. Although the General Partner intends to
maintain a sustainable level of distributions prior to final liquidation of the
Partnership, actual Partnership performance and other considerations may require
adjustments to then-existing distribution levels. In the long term, changing
market conditions and used equipment values preclude the General Partner from
accurately determining the impact of future re-leasing activity and equipment
sales on Partnership performance and liquidity.
Since the Partnership has entered the active liquidation phase, 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 unitholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During 2000, 79% 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 potentially
encounter difficulty in making the U.S. dollar denominated lease payment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Partnership are listed in the Index to
Financial Statements included in Item 14(a) of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
(This space intentionally left blank.)
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC.
As of the date of this annual report, the directors and executive officers of
PLM Financial Services, Inc. (and key executive officers of its subsidiaries)
are as follows:
Name Age Position
- ------------------------ ------------ ------------------------------------------------------------------
Stephen M. Bess 55 President, PLM Financial Services, Inc., PLM Investment
Management, Inc. and PLM Transportation Equipment Corporation,
Director of PLM Financial Services, Inc.
Richard K Brock 38 Vice President and Chief Financial Officer, PLM Financial
Services, Inc., PLM Investment Management, Inc. and PLM
Transportation Equipment Corporation, Director of PLM Financial
Services, Inc.
Susan C. Santo 38 Vice President, Secretary, and General Counsel, PLM Financial
Services, Inc., Director of PLM Financial Services, Inc.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess has served as President of PLM Investment Management, Inc., an
indirect wholly-owned subsidiary of PLM International, since August 1989, and as
an executive officer of certain other of PLM International's subsidiaries or
affiliates since 1982.
Richard K Brock was appointed a Director of PLM Financial Services, Inc. in
October 1, 2000. Mr. Brock was appointed as Vice President and Chief Financial
Officer of PLM International and PLM Financial Services, Inc. in January 2000,
having served as Acting Chief Financial Officer since June 1999 and as Vice
President and Corporate Controller of PLM International and PLM Financial
Services, Inc. since June 1997. Prior to June 1997, Mr. Brock served as an
accounting manager beginning in September 1991 and as Director of Planning and
General Accounting beginning in February 1994.
Susan C. Santo was appointed a Director of PLM Financial Services, Inc., a
subsidiary of PLM International, in October 1, 2000. Miss Santo was appointed as
Vice President, Secretary, and General Counsel of PLM International and PLM
Financial Services, Inc. in November 1997. She has worked as an attorney for PLM
International and PLM Financial Services, Inc. since 1990 and served as its
Senior Attorney from 1994 until her appointment as General Counsel.
The directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director or executive officer of PLM Financial Services, Inc., PLM
Transportation Equipment Corp., or PLM Investment Management, Inc.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors, officers, or employees. The Partnership has
no pension, profit sharing, retirement, or similar benefit plan in effect as of
December 31, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) Security Ownership of Certain Beneficial Owners
The General Partner is generally entitled to a 5% interest in the
profits and losses and distributions of the Partnership subject to
certain allocations of income. As of December 31, 2000, no investor
was known by the General Partner to beneficially own more than 5% of
the limited partnership units.
(B) Security Ownership of Management
Neither the General Partner and its affiliates nor any executive
officer or director of the General Partner and its affiliates own any
limited partnership units of the Partnership as of December 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
During 2000, management fees to PLM Investment Management, Inc. (IMI)
were $0.3 million. The Partnership reimbursed PLM Financial Services,
Inc. (FSI) and its affiliates $0.4 million for administrative and data
processing services performed on behalf of the Partnership in 2000.
During 2000, the USPEs paid or accrued the following fees to FSI or
its affiliates (based on the Partnership's proportional share of
ownership): management fees, $17,000, and administrative and data
processing services, $5,000.
(this space intentionally left blank)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
The financial statements listed in the accompanying Index to Financial
Statements are filed as part of this Annual Report on Form 10-K.
2. Financial Statements required under Regulation S-X Rule 3-09
The following financial statements are filed as Exhibits of this
Annual Report on Form 10K:
a. Aero California Trust
b. Canadian Air Trust #2
c. Montgomery Partnership
(B) Financial Statement Schedules
Schedule II Valuation Accounts
All other financial statement schedules have been omitted, as the
required information is not pertinent to the registrant or is not
material, or because the information required is included in the
financial statements and notes thereto.
(C) Reports on Form 8-K
None.
(D) Exhibits
4. Limited Partnership Agreement of Registrant, incorporated by
reference to the Partnership's Registration Statement on Form S-1
(Reg. No. 33-27746), which became effective with the Securities
and Exchange Commission on May 23, 1989.
10.1 Management Agreement between Partnership and PLM Investment
Management, Inc., incorporated by reference to the Partnership's
Registration Statement on Form S-1 (Reg. No. 33-27746), which
became effective with the Securities and Exchange Commission on
May 23, 1989.
24. Powers of Attorney.
Financial Statements required under Regulation S-X Rule 3-09:
99.1 Aero California Trust.
99.2 Canadian Air Trust #2.
99.3 Montgomery Partnership.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has signed on
behalf of the Partnership by duly authorized officers.
Date: March 12, 2001 PLM EQUIPMENT GROWTH FUND IV
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ Stephen M. Bess
Stephen M. Bess
President and Chief Executive Officer
By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following directors of the Partnership's General
Partner on the dates indicated.
Name Capacity Date
*
Stephen M. Bess Director, FSI March 12, 2001
*
Richard K Brock Director, FSI March 12, 2001
*
Susan C. Santo Director, FSI March 12, 2001
*Susan Santo, by signing her name hereto, does sign this document on behalf of
the persons indicated above pursuant to powers of attorney duly executed by such
persons and filed with the Securities and Exchange Commission.
/s/ Susan C. Santo
Susan C. Santo
Attorney-in-Fact
PLM EQUIPMENT GROWTH FUND IV
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Independent auditors' report 25
Balance sheets as of December 31, 2000 and 1999 26
Statements of operations for the years ended
December 31, 2000, 1999, and 1998 27
Statements of changes in partners' capital for the years
ended December 31, 2000, 1999, and 1998 28
Statements of cash flows for the years ended
December 31, 2000, 1999, and 1998 29
Notes to financial statements 30-41
Independent auditor report on financial statement schedule 42
Schedule II Valuation Accounts 43
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund IV:
We have audited the accompanying financial statements of PLM Equipment Growth
Fund IV (the Partnership) as listed in the accompanying index to the financial
statements. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We have conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, PLM Equipment Growth Fund
IV, in accordance with the limited partnership agreement, entered its
liquidation phase on January 1, 1999 and has commenced an orderly liquidation of
the Partnership assets. The Partnership will terminate on December 31, 2009,
unless terminated earlier upon sale of all equipment or by certain other events.
The General Partner anticipates that the liquidation of Partnership assets will
be completed by the end of the year 2001.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund IV as
of December 31, 2000 and 1999 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
SAN FRANCISCO, CALIFORNIA
March 2, 2001
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31,
(IN THOUSANDS OF DOLLARS, EXCEPT UNIT AMOUNTS)
2000 1999
---------------------------------
Assets
Equipment held for operating leases, at cost $ 18,003 $ 45,468
Less accumulated depreciation (13,436 ) (34,920)
---------------------------------
4,567 10,548
Equipment held for sale 1,931 --
--------------------------------------------------------------------------------------------------------
Net equipment 6,498 10,548
Cash and cash equivalents 2,742 5,587
Restricted cash 272 147
Accounts receivable, less allowance for doubtful
accounts of $5 in 2000 and $2,843 in 1999 171 440
Investments in unconsolidated special-purpose entities 3,143 3,415
Prepaid expenses and other assets 37 48
---------------------------------
Total assets $ 12,863 $ 20,185
=================================
Liabilities and partners' capital
Liabilities
Accounts payable and accrued expenses $ 186 $ 292
Due to affiliates 174 211
Lessee deposits and reserve for repairs 369 340
---------------------------------
Total liabilities 729 843
Partners' capital
Limited partners (8,628,420 limited partnership units
as of December 31, 2000 and 1999) 12,134 19,342
General Partner -- --
---------------------------------
Total partners' capital 12,134 19,342
---------------------------------
Total liabilities and partners' capital $ 12,863 $ 20,185
=================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS EXCEPT WEIGHTED-AVERAGE UNIT AMOUNTS)
2000 1999 1998
-------------------------------------------
Revenues
Lease revenue $ 4,385 $ 8,054 $ 10,981
Interest and other income 159 240 251
Net gain (loss) on disposition of equipment 303 6,357 (464)
-------------------------------------------
Total revenues 4,847 14,651 10,768
Expenses
Depreciation and amortization 2,320 4,291 5,802
Repairs and maintenance 982 2,838 1,905
Equipment operating expenses 34 797 805
Insurance expense to affiliate -- -- (88)
Other insurance expenses 85 102 285
Management fees to affiliate 274 475 622
Interest expense -- 1,016 1,652
General and administrative expenses to affiliates 395 530 584
Other general and administrative expenses 609 691 667
(Recovery of) provision for bad debts (182) (273) 9
Loss on revaluation of equipment 106 -- --
-------------------------------------------
Total expenses 4,623 10,467 12,243
Equity in net income of unconsolidated
special-purpose entities 673 2,224 348
-------------------------------------------
Net income (loss) $ 897 $ 6,408 $ (1,127)
===========================================
Partners' share of net income (loss)
Limited partners $ 492 $ 6,226 $ (1,309)
General Partner 405 182 182
-------------------------------------------
Total $ 897 $ 6,408 $ (1,127)
===========================================
Limited partners' net income (loss) per weighted-average
partnership unit $ 0.06 $ 0.72 $ (0.15)
===========================================
Cash distribution $ 3,564 $ 3,633 $ 3,533
Special cash distribution 4,541 -- --
-------------------------------------------
Total distribution $ 8,105 $ 3,633 $ 3,533
===========================================
Per weighted-average partnership unit:
Cash distribution $ 0.39 $ 0.40 $ 0.39
Special cash distribution 0.50 -- --
-------------------------------------------
Total distribution per weighted-average partnership unit $ 0.89 $ 0.40 $ 0.39
===========================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS OF DOLLARS)
Limited General
Partners Partner Total
-------------------------------------------------
Partners' capital as of December 31, 1997 $ 21,227 $ -- $ 21,227
Net income (loss) (1,309) 182 (1,127)
Cash distribution (3,351) (182) (3,533)
-------------------------------------------------
Partners' capital as of December 31, 1998 16,567 -- 16,567
Net income (loss) 6,226 182 6,408
Cash distribution (3,451) (182) (3,633)
-------------------------------------------------
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
=================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
2000 1999 1998
--------------------------------------------
Operating activities
Net income (loss) $ 897 $ 6,408 $ (1,127)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,320 4,291 5,802
Net (gain) loss on disposition of equipment (303) (6,357) 464
Loss on revaluation of equipment 106 -- --
Equity in net income of unconsolidated special-
purpose entities (673) (2,224) (348)
Changes in operating assets and liabilities:
Restricted cash (125) -- 100
Accounts receivable, net 269 458 127
Prepaid expenses and other assets 11 2 8
Accounts payable and accrued expenses (106) (271) (534)
Due to affiliates (37) (33) (12)
Lessee deposits and reserve for repairs 29 (786) (1,383)
--------------------------------------------
Net cash provided by operating activities 2,388 1,488 3,097
--------------------------------------------
Investing activities
Purchase of equipment and capital repairs (7) (9) --
Proceeds from disposition of equipment 1,934 15,165 1,449
Distribution from liquidation of unconsolidated
special-purpose entities -- 3,807 3,470
Distribution from unconsolidated special-purpose entities 945 741 895
--------------------------------------------
Net cash provided by investing activities 2,872 19,704 5,814
--------------------------------------------
Financing activities
Repayment of notes payable -- (12,750) (8,250)
Cash distribution paid to limited partners (7,700) (3,451) (3,351)
Cash distribution paid to General Partner (405) (182) (182)
--------------------------------------------
Net cash used in financing activities (8,105) (16,383) (11,783)
--------------------------------------------
Net (decrease) increase in cash and cash equivalents (2,845) 4,809 (2,872)
Cash and cash equivalents at beginning of year 5,587 778 3,650
--------------------------------------------
Cash and cash equivalents at end of year $ 2,742 $ 5,587 $ 778
============================================
Supplemental information
Interest paid $ -- $ 1,016 $ 1,652
============================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. BASIS OF PRESENTATION
ORGANIZATION
PLM Equipment Growth Fund IV, a California limited partnership (the
Partnership), was formed on March 25, 1989. The Partnership engages
primarily in the business of owning, leasing or otherwise investing in
predominately used transportation and related equipment. The Partnership
commenced significant operations in September 1989. PLM Financial Services,
Inc. (FSI) is the General Partner of the Partnership. FSI is a
wholly-owned subsidiary of PLM International, Inc. (PLM International).
The Partnership will terminate on December 31, 2009, unless terminated
earlier upon sale of all equipment or by certain other events. 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. During the liquidation phase, the Partnership's assets will
continue to be recorded at the lower of 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.
FSI manages the affairs of the Partnership. The cash distributions of the
Partnership are generally allocated 95% to the limited partners and 5% to
the General Partner (see Net Income (Loss) and Distribution per Limited
Partnership Unit, below). Net income is allocated to the General Partner
to the extent necessary to cause the General Partner's capital account to
equal zero. The General Partner is also entitled to a subordinated
incentive fee equal to 7.5% of surplus distributions, as defined in the
limited partnership agreement, remaining after the limited partners have
received a certain minimum rate of return on, and a return of, their
invested capital.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. This requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
OPERATIONS
The equipment of the Partnership is managed, under a continuing management
agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned
subsidiary of FSI. IMI receives a monthly management fee from the
Partnership for managing the equipment (see Note 2). FSI, in conjunction
with its subsidiaries, sells equipment to investor programs and third
parties, manages pools of equipment under agreements with the investor
programs, and is a general partner of other programs.
ACCOUNTING FOR LEASES
The Partnership's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is
recorded at cost and depreciated over its estimated useful life. Rental
payments are recorded as revenue over the lease term. Lease origination
costs were capitalized and amortized over the term of the lease.
DEPRECIATION AND AMORTIZATION
Depreciation of transportation equipment held for operating leases is
computed on the double-declining balance method, taking a full month's
depreciation in the month of acquisition, based upon estimated useful lives
of 15 years for railcars and 12 years for most other types of equipment.
The depreciation method changes to straight-line when annual depreciation
expense using the straight-line method exceeds that calculated by the
double-declining balance method. Acquisition fees have been capitalized as
part of the cost of the equipment. Major expenditures that are expected to
extend the useful lives or reduce future operating expenses of equipment
are capitalized and amortized over the estimated remaining life of the
equipment. Lease negotiation fees were
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. BASIS OF PRESENTATION (continued)
DEPRECIATION AND AMORTIZATION (continued)
amortized over the initial equipment lease term. Debt placement fees and
issuance costs were amortized over the term of the related loan.
TRANSPORTATION EQUIPMENT
In accordance with the Financial Accounting Standards Board's Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", the General Partner reviews the carrying value
of the Partnership's equipment at least quarterly, and whenever
circumstances indicate the carrying value of an asset may not be
recoverable in relation to expected future market conditions for the
purpose of assessing recoverability of the recorded amounts. If projected
undiscounted future cash flows and fair value are less than the carrying
value of the equipment, a loss on revaluation is recorded. A $0.1 million
loss on revaluation was recorded during 2000. No reductions to the
equipment carrying values were required for the years ended December 31,
1999 or 1998.
Equipment held for operating leases is stated at cost.
INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The Partnership has interests in unconsolidated special-purpose entities
(USPEs) that own transportation equipment. These interests are accounted
for using the equity method.
The Partnership's investment in USPEs includes acquisition and lease
negotiation fees paid by the Partnership to PLM Transportation Equipment
Corporation (TEC), a wholly-owned subsidiary of FSI, and PLM Worldwide
Management Services (WMS), a wholly-owned subsidiary of PLM International.
The Partnership's interests in USPEs are managed by IMI. The Partnership's
equity interest in the net income of USPEs is reflected net of management
fees paid or payable to IMI and the amortization of acquisition and lease
negotiation fees paid to TEC or WMS.
REPAIRS AND MAINTENANCE
Repair and maintenance costs related to railcars and trailers are usually
the obligation of the Partnership. The reserve accounts for these repairs
are included in the balance sheet as lessee deposits and reserve for
repairs.
Net Income (Loss) and Distribution per Limited Partnership Unit
Cash distributions are allocated 95% to the limited partners and 5% to the
General Partner. Special allocations of income are made to the General
Partner equal to the deficit balance, if any, in the capital account of the
General Partner. Cash distributions of the Partnership are generally
allocated 95% to the limited partners and 5% to the General Partner and may
include amounts in excess of net income. The limited partners' net income
(loss) is allocated among the limited partners based on the number of
limited partnership units owned by each limited partner and on the number
of days of the year each limited partner is in the Partnership.
Cash distributions are recorded when paid. Monthly unitholders receive a
distribution check 15 days after the close of the previous month's business
and quarterly unitholders receive a distribution check 45 days after the
close of the quarter.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. BASIS OF PRESENTATION (continued)
NET INCOME (LOSS) AND DISTRIBUTION PER LIMITED PARTNERSHIP UNIT (continued)
Cash distributions to investors in excess of net income are considered a
return of capital. Cash distributions to the limited partners of $7.2
million, $0, and $3.4 million, in 2000, 1999, and 1998, respectively, were
deemed to be a return of capital.
Cash distributions of $0.9 million for 2000, 1999, and 1998, relating to
the fourth quarter of that year, were paid during the first quarter of
2001, 2000, and 1999.
The Partnership made a special distribution of $4.3 million to the limited
partners during 2000. No special distributions were made during 1999 or
1998.
NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income (loss) per weighted-average Partnership unit was computed by
dividing net income (loss) attributable to limited partners by the
weighted-average number of Partnership units deemed outstanding during the
period. The weighted-average number of Partnership units deemed outstanding
during the years ended December 31, 2000, 1999, and 1998 was 8,628,420.
CASH AND CASH EQUIVALENTS
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents. The carrying amount of cash and cash
equivalents approximates fair market value due to the short-term nature of
the investments.
COMPREHENSIVE INCOME
The Partnership's net income (loss) is equal to comprehensive income for
the years ended December 31, 2000, 1999, and 1998.
RESTRICTED CASH
As of December 31, 2000 and 1999, restricted cash represented lessee
security deposits held by the Partnership.
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES
An officer of PLM Securities Corp., a wholly-owned subsidiary of the
General Partner, contributed $100 of the Partnership's initial capital.
Under the equipment management agreement, IMI, subject to certain
reductions, receives a monthly management fee attributable to either owned
equipment or interests in equipment owned by the USPEs equal to the lesser
of (a) the fees that would be charged by an independent third party for
similar services for similar equipment or (b) the sum of (i) 5% of the
gross lease revenues attributable to equipment that is subject to operating
leases, (ii) 2% of the gross lease revenues attributable to equipment that
is subject to full payout net leases, and (iii) 7% of the gross lease
revenues attributable to equipment for which IMI provides both management
and additional services relating to the continued and active operation of
program equipment, such as on-going marketing and re-leasing of equipment,
hiring or arranging for the hiring of crew or operating personnel for
equipment, and similar services. Partnership management fees of $27,000 and
$0.1 million were payable as of December 31, 2000 and 1999, respectively.
The Partnership's proportional share of the USPE management fees of $9,000
and $25,000 were payable as of December 31, 2000 and 1999, respectively.
The Partnership's proportional share of USPE management fees were $17,000,
$0.1 million, and $0.1 million during 2000, 1999, and 1998,
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES (continued)
respectively. The Partnership reimbursed FSI and its affiliates $0.4
million, $0.5 million, and $0.6 million during 2000, 1999, and 1998,
respectively, for data processing expenses and administrative services
performed on behalf of the Partnership. The Partnership's proportional
share of USPE administrative and data processing expenses was $5,000,
$11,000, and $18,000 during 2000, 1999, and 1998, respectively.
The Partnership paid $2,000 in 1998 to Transportation Equipment Indemnity
Company Ltd. (TEI), an affiliate of the General Partner, which provided
marine insurance coverage and other insurance brokerage services. The
Partnership's proportional share of USPE marine insurance coverage paid to
TEI was $17,000 during 1998. A substantial portion of this amount was paid
to third-party reinsurance underwriters or placed in risk pools managed by
TEI on behalf of affiliated programs and PLM International, which provide
threshold coverages on marine vessel loss of hire and hull and machinery
damage. All pooling arrangement funds are either paid out to cover
applicable losses or refunded pro rata by TEI. Also, during 1998, the
Partnership and the USPEs received a $0.1 million loss-of-hire insurance
refund from TEI due to lower claims from the insured Partnership and other
insured affiliated programs. In 2000 and 1999, TEI did not provide
insurance coverage to the Partnership. These services were provided by an
unaffiliated third party. PLM International liquidated TEI in the first
quarter of 2000.
The Partnership had an interest in certain equipment in conjunction with
affiliated programs during 2000, 1999, and 1998 (see Note 4).
The balance due to affiliates as of December 31, 2000 and 1999 includes
$27,000 and $0.1 million, respectively, due to FSI and its affiliates for
management fees and $0.1 million due to affiliated USPEs.
3. EQUIPMENT
The components of owned equipment as of December 31, are as follows (in
thousands of dollars):
2000 1999
----------------------------------
Equipment held for operating leases
Railcars $ 13,336 $ 13,454
Marine containers 4,667 8,073
Aircraft -- 20,440
Trailers -- 3,501
----------------------------------
18,003 45,468
Less accumulated depreciation (13,436) (34,920)
----------------------------------
4,567 10,548
Equipment held for sale 1,931 --
----------------------------------
Net equipment $ 6,498 $ 10,548
==================================
Revenues are earned under operating leases. The Partnership's marine
containers are leased to operators of utilization-type leasing pools that
include equipment owned by unaffiliated parties. In such instances,
revenues received by the Partnership consist of a specified percentage of
revenues generated by leasing the equipment to sublessees, after deducting
certain direct operating expenses of the pooled equipment. Rents for
railcars are based on a fixed rate. Lease revenues for trailers that
operated in rental yards owned by PLM Rental, Inc. were based on a fixed
rate for a specific period of time.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
3. EQUIPMENT (continued)
As of December 31, 2000, all owned equipment in the Partnership portfolio
was on lease except for an aircraft and 34 railcars with a net book value
of $0.7 million. During the first nine months of 2000, trailer equipment
was either on lease or operating in PLM-affiliated short-term trailer
rental facilities, all the Partnership's trailers were sold on September
30, 2000. As of December 31, 1999, all owned equipment in the Partnership
portfolio was either on lease or operating in PLM-affiliated short-term
trailer rental facilities, except for an aircraft, 221 marine containers,
and seven railcars with a net book value of $2.1 million.
During 2000, the Partnership sold or disposed of marine containers,
railcars, and trailers, with an aggregate net book value of $1.6 million,
for proceeds of $1.9 million. During 1999, the Partnership sold or disposed
of a marine vessel, marine containers, railcars, aircraft and trailers,
with an aggregate net book value of $8.8 million, for proceeds of $15.2
million.
During 2000, the Partnership entered into contracts to sell the
Partnership's 737-200 stage II and Dash 8-300 aircraft. Consequently, these
two aircraft were reclassed as asset held for sale. There were no assets
held for sale as of December 31, 1999.
All owned equipment on lease is being accounted for as operating leases.
Future minimum rentals receivable under noncancelable operating leases, as
of December 31, 2000, for owned equipment during each of the next five
years, are approximately $2.0 million in 2001, $1.3 million in 2002, $0.4
million in 2003, $0.1 million in 2004, $36,000 in 2005, and $6,000
thereafter. Per diem and short-term rentals consisting of utilization rate
lease payments included in revenue amounted to approximately $0.7 million,
$1.2 million, and $2.2 million in 2000, 1999, and 1998, respectively.
4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The net investments in USPEs include the following jointly-owned equipment
(and related assets and liabilities) as of December 31, (in thousands of
dollars):
2000 1999
-------------------------
35% interest in two Stage II commercial aircraft on a direct
finance lease $ 3,143 $ 3,548
50% interest in an entity that owned a bulk carrier -- (133)
-------------------------
Net investments $ 3,143 $ 3,415
=========================
As of December 31, 2000 and 1999, all jointly-owned equipment in the
Partnership's USPE portfolio was on lease.
During 1999, the General Partner sold the Partnership's 50% interest in an
entity owning a marine vessel. The Partnership's interest in this entity
was sold for proceeds of $3.8 million for its net investment of $1.9
million.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES (continued)
The following summarizes the financial information for the special-purpose
entities and the Partnership's interests therein as of and for the years
ended December 31, (in thousands of dollars):
2000 1999 1998
--------- ---------- ----------
Net Net Net
Total Interest of Total Interest of Total Interest of
USPEs Partnership USPEs Partnership USPEs Partnership
------------------------- -------------------------------------------------------
Net investments $ 8,981 $ 3,143 $ 9,489 $ 3,415 $ 14,339 $ 5,739
Lease revenues (3) -- 2,106 1,053 4,066 1,233
Net income 1,838 673 4,881 2,224 9,921 348
5. OPERATING SEGMENTS
The Partnership operates or operated in five primary operating segments:
aircraft leasing, marine container leasing, marine vessel leasing, trailer
leasing, and railcar leasing. Each equipment leasing segment engages in
short-term to mid-term operating leases to a variety of customers.
The General Partner evaluates the performance of each segment based on
profit or loss from operations before allocation of certain general and
administrative expenses, interest expense and certain other expenses. The
segments are managed separately due to different business strategies for
each operation.
The following tables present a summary of the operating segments (in
thousands of dollars):
Marine
Aircraft Container Trailer Railcar
For the Year Ended December 31, 2000 Leasing Leasing Leasing Leasing All 1 Total
Other
Revenues
Lease revenue $ 784 $ 78 $ 635 $ 2,888 $ -- $ 4,385
Interest income and other 3 -- -- -- 156 159
Gain (loss) on disposition of -- 229 87 (13) -- 303
equipment
--------------------------------------------------------------
Total revenues 787 307 722 2,875 156 4,847
Costs and expenses
Operations support 136 6 207 686 66 1,101
Depreciation and amortization 1,343 364 186 427 -- 2,320
Management fee 16 4 49 205 -- 274
General and administrative expenses 138 1 165 133 567 1,004
Recovery of bad debts (9) -- (143) (30) -- (182)
Loss on revaluation of equipment -- -- 106 -- -- 106
--------------------------------------------------------------
Total costs and expenses 1,624 375 570 1,421 633 4,623
--------------------------------------------------------------
Equity in net income of USPEs 538 -- -- -- 135 673
--------------------------------------------------------------
--------------------------------------------------------------
Net income (loss) $ (299) $ (68) $ 152 $ 1,454 $ (342) $ 897
==============================================================
As of December 31, 2000
Total assets $ 5,356 $ 421 $ -- $ 4,302 $ 2,784 $ 12,863
==============================================================
1 Includes certain interest income and costs not identifiable to a particular
segment such as interest and amortization expense and certain operations
support and general and administrative expenses
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
5. OPERATING SEGMENTS (continued)
Marine Marine
Aircraft Container Vessel Trailer Railcar
For the Year Ended December 31, 1999 Leasing Leasing Leasing Leasing Leasing All 1 Total
Other
Revenues
Lease revenue $ 2,590 $ 143 $ 1,067 $ 1,122 $ 3,132 $ -- $ 8,054
Interest income and other 37 -- -- -- 26 177 240
Gain (loss) on disposition of 6,312 167 167 (159) (130) -- 6,357
equipment
-------------------------------------------------------------------------
Total revenues 8,939 310 1,234 963 3,028 177 14,651
Costs and expenses
Operations support 1,529 5 1,148 336 684 35 3,737
Depreciation and amortization 2,409 565 296 326 636 59 4,291
Interest expense -- -- -- -- -- 1,016 1,016
Management fee 104 7 53 89 222 -- 475
General and administrative expenses 253 7 88 282 113 478 1,221
(Recovery of) provision for bad (278) -- -- 1 4 -- (273)
debts
-------------------------------------------------------------------------
Total costs and expenses 4,017 584 1,585 1,034 1,659 1,588 10,467
-------------------------------------------------------------------------
Equity in net income of USPEs 470 -- 1,754 -- -- -- 2,224
-------------------------------------------------------------------------
Net income (loss) $ 5,392 $ (274) $ 1,403 $ (71) $ 1,369 $ (1,411) $ 6,408
=========================================================================
As of December 31, 1999
Total assets (liabilities) $ 6,873 $ 1,202 $ (133) $ 1,682 $ 4,781 $ 5,780 $ 20,185
=========================================================================
Marine Marine
Aircraft Container Vessel Trailer Railcar
For the Year Ended December 31, 1998 Leasing Leasing Leasing Leasing Leasing All 1 Total
Other
Revenues
Lease revenue $ 3,484 $ 720 $ 1,666 $ 1,578 $ 3,533 $ -- $ 10,981
Interest income and other 15 -- -- -- 21 215 251
Gain (loss) on disposition of (2) 77 -- (530) (9) -- (464)
equipment
-------------------------------------------------------------------------
Total revenues 3,497 797 1,666 1,048 3,545 215 10,768
Costs and expenses
Operations support 446 8 1,043 446 926 38 2,907
Depreciation and amortization 3,314 699 383 498 846 62 5,802
Interest expense 6 -- -- -- -- 1,646 1,652
Management fee 156 36 83 96 251 -- 622
General and administrative expenses 336 20 26 368 139 362 1,251
(Recovery of) provision for bad (95) -- -- 154 (50) -- 9
debts
-------------------------------------------------------------------------
Total costs and expenses 4,163 763 1,535 1,562 2,112 2,108 12,243
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 654 -- (306) -- -- -- 348
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ (12) $ 34 $ (175) $ (514) $ 1,433 $ (1,893) $ (1,127)
=========================================================================
As of December 31, 1998
Total assets $ 15,434 $ 2,169 $ 3,727 $ 2,035 $ 5,978 $ 1,907 $ 31,250
=========================================================================
1 Includes certain interest income and costs not identifiable to a particular
segment such as interest and amortization expense and certain operations
support and general and administrative expenses
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
6. GEOGRAPHIC INFORMATION
The Partnership owns certain equipment that is leased and operated
internationally. A limited number of the Partnership's transactions are
denominated in a foreign currency. Gains or losses resulting from foreign
currency transactions are included in the results of operations and are not
material.
The Partnership leases or leased its aircraft, railcars, and trailers to
lessees domiciled in five geographic regions: the United States, Canada,
South Asia, South America, and Mexico. Marine vessels and marine containers
are leased to multiple lessees in different regions that operate the marine
vessels and marine containers worldwide.
The table below sets forth lease revenues by geographic region for the
Partnership's owned equipment and investments in USPEs, grouped by domicile
of the lessee as of and for the years ended December 31 (in thousands of
dollars):
Region Owned Equipment Investments in USPEs
------------------------- --------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
--------------------------------------- -------------------------------------
Canada $ 3,394 $ 2,298 $ 2,698 $ -- $ -- $ --
United States 913 3,683 4,516 -- -- --
South Asia -- -- -- -- -- --
South America -- 863 1,380 -- -- --
Rest of the world 78 1,210 2,387 -- 1,053 1,233
--------------------------------------- -------------------------------------
Lease revenues $ 4,385 $ 8,054 $ 10,981 $ -- $ 1,053 $ 1,233
======================================= =====================================
The following table sets forth net income (loss) information by region for
the owned equipment and investments in USPEs for the years ended December
31 (in thousands of dollars):
Region Owned Equipment Investments in USPEs
--------------------------------- -------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
-------------------------------------- -------------------------------------
Canada $ 1,267 $ 1,129 $ 622 $ -- $ -- $ 84
United States (498) 2,584 847 -- -- --
South Asia -- (502) (2,021) -- -- --
South America -- 3,009 805 -- -- --
Mexico -- -- -- 538 470 570
Rest of the world (68) (625) 164 135 1,754 (306)
------------------------------------ -------------------------------------
Regional net income 701 5,595 417 673 2,224 $ 348
Administrative and other (477 ) (1,411) (1,892) -- -- --
-------------------------------------- -------------------------------------
Net income (loss) $ 224 $ 4,184 $ (1,475) $ 673 $ 2,224 $ 348
====================================== =====================================
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
6. GEOGRAPHIC INFORMATION (continued)
The net book value of these assets as of December 31, are as follows (in
thousands of dollars):
Region Owned Equipment Investments in USPEs
--------------------------- --------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
--------------------------------- --------------------------------
Canada $ 4,176 $ 4,799 $ 5,728 $ -- $ -- $ --
United States 1,555 3,401 6,550 -- -- --
South Asia 378 1,202 4,519 -- -- --
South America -- -- 2,770 -- -- --
Mexico -- -- -- 3,143 3,548 3,880
Rest of the world 389 1,146 4,037 -- (133) 1,859
--------------------------------- ---------------------------------
Total net book value $ 6,498 $ 10,548 $ 23,604 $ 3,143 $ 3,415 $ 5,739
================================= =================================
7. CONCENTRATIONS OF CREDIT RISK
Time Air, Inc. accounted for 14% of the consolidated revenues for the year
ended December 31, 2000. No other lessee accounted for more than 10% of
consolidated lease revenues in 2000. No single lessee accounted for more
than 10% of the consolidated revenues for the years ended December 31, 1999
and 1998. In 1999, however, the Partnership sold three aircraft and a
marine vessel that the Partnership owned an interest in. The following is a
list of the buyers and the percentage of the gain from the sale of the
total consolidated revenues: Aircraft Lease Finance IV, Inc. (14%), Fuerza
Aerea Del Peru (11%), Triton Aviation Services (10%) and Lisa Navigation
Company LLC (10%).
As of December 31, 2000 and 1999, the General Partner believes the
Partnership had no other significant concentrations of credit risk that
could have a material adverse effect on the Partnership.
8. INCOME TAXES
The Partnership is not subject to income taxes, as any income or loss is
included in the tax returns of the individual Partners. Accordingly, no
provision for income taxes has been made in the financial statements of the
Partnership.
As of December 31, 2000, the federal income tax basis was higher than the
financial statement carrying values of certain assets and liabilities by
$20.0 million, primarily due to differences in depreciation methods and
equipment reserves and the tax treatment of underwriting commissions and
syndication costs.
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, 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
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
9. CONTINGENCIES (continued)
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.
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,
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
9. CONTINGENCIES (continued)
including judicial approval of the proposed amendments and final approval
of the equitable settlement by the court following a final fairness
hearing.
A final fairness hearing was held on November 29, 2000 and the parties
await the court's decision. 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 from time to time 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.
Special distributions totaling $4.5 million were paid in 2000. No special
distibutions were paid in 1999 or 1998. The Partnership is not permitted to
reinvest proceeds from sales or liquidations of equipment. These proceeds,
in excess of operational cash requirements, are periodically paid out to
limited partners in the form of special distributions. The sales and
liquidations occur because of certain damaged equipment, the determination
by the General Partner that it is the appropriate time to maximize the
return on an asset through sale of that asset, and, in some leases, the
ability of the lessee to exercise purchase options.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
11. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 (in thousands of dollars, except per share
amounts):
March June September December
31, 30, 30, 31, Total
----------------------------------------------------------------------------
Operating results:
Total revenues $ 1,313 $ 1,238 $ 1,292 $ 1,004 $ 4,847
Net income 518 166 85 128 897
Per weighted-average
limited partners unit:
Limited partners'
net income $ 0.03 $ 0.01 $ 0.01 $ 0.01 $ 0.06
The following is a summary of the quarterly results of operations for the
years ended December 31, 1999 (in thousands of dollars, except per share
amounts):
March June September December
31, 30, 30, 31, Total
----------------------------------------------------------------------------
Operating results:
Total revenues $ 2,288 $ 4,302 $ 4,508 $ 3,553 $ 14,651
Net income (loss) (991) 1,089 2,494 3,816 6,408
Per weighted-average
limited partners unit:
Limited partners'
net income (loss) $ (0.12) $ 0.12 $ 0.28 $ 0.44 $ 0.72
12. SUBSEQUENT EVENT
During February 2001, the Partnership sold a Boeing 737-200 commercial
aircraft with a net book value of $0.4 million which was an asset held for
sale as of December 31, 2000.
In February 2001, PLM International, the parent of the Partnership,
announced that MILPI Acquisition Corp. (MILPI) completed its cash tender
offer for the outstanding common stock of PLM International. To date, MILPI
has acquired 83% of the common shares outstanding. MILPI will complete its
acquisition of PLM International by effecting a merger of MILPI into PLM
International under Delaware law. The merger is expected to be completed
after MILPI obtains approval of the merger by PLM International's
shareholders pursuant to a special shareholders' meeting which is expected
to be held during the first half of 2001.
Independent Auditors' Report
The Partners
PLM Equipment Growth Fund IV:
Under date of March 2, 2001, we reported on the balance sheets of PLM Equipment
Growth Fund IV as of December 31, 2000 and 1999, and the related statements of
income, changes in partners' capital, and cash flows for each of the years in
the three-year period ended December 31, 2000, as contained in the 2000 annual
report to stockholders. These financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 2000.
In connection with our audits of the aforementioned financial statements, we
also audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG LLP
San Francisco, CA
March 2, 2001
SCHEDULE II
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS OF DOLLARS)
Additions
Balance at Charged to Balance at
Beginning of Cost and Close of
Year Expense Deductions Year
---------------- ---------------- -------------- -------------
Year Ended December 31, 2000
Allowance for Doubtful Accounts $ 2,843 $ -- $ (2,838 ) $ 5
======================================================================
Year Ended December 31, 1999
Allowance for Doubtful Accounts $ 3,126 $ 5 $ (288 ) $ 2,843
======================================================================
Year Ended December 31, 1998
Allowance for Doubtful Accounts $ 3,332 $ 9 $ (215 ) $ 3,126
======================================================================
PLM EQUIPMENT GROWTH FUND IV
INDEX OF EXHIBITS
EXHIBIT Page
4. Limited Partnership Agreement of Registrant *
10.1 Management Agreement between Registrant and *
PLM Investment Management, Inc.
24. Powers of Attorney 45 - 47
Financial Statements required under Regulation S-X Rule 3-09:
99.1 Aero California Trust.
99.2 Canadian Air Trust #2.
99.3 Montgomery Partnership.
* Incorporated by reference. See page 22 of this report.