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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2001.
[x] 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 01-19203
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PLM EQUIPMENT GROWTH FUND V
(Exact name of registrant as specified in its charter)
California 94-3104548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Montgomery Street
Suite 1350, San Francisco, CA 94104
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 445-3201
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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
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An index of exhibits filed with this Form 10-K is located on page 24.
Total number of pages in this report: 72.
PART I
ITEM 1. BUSINESS
(A) Background
In November 1989, PLM Financial Services, Inc. (FSI or the General Partner), a
wholly owned subsidiary of PLM International, Inc. (PLM International or PLMI),
filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission with respect to a proposed offering of 10,000,000 limited partnership
units (the units) including 2,500,000 optional units, in PLM Equipment Growth
Fund V, a California limited partnership (the Partnership, the Registrant, or
EGF V). The Registration Statement also proposed offering an additional
1,250,000 Class B units through a reinvestment plan. The General Partner has
determined that it will not adopt this reinvestment plan for the Partnership.
The Partnership's offering became effective on April 11, 1990. 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 was formed to engage in the business of owning and managing a
diversified pool of used and new transportation-related equipment and certain
other items of equipment.
The Partnership's primary objectives are:
(1) to maintain a diversified portfolio of low-obsolescence equipment with
long lives and high residual values which were purchased with the net proceeds
of the initial Partnership offering, supplemented by debt financing, and surplus
operating cash during the investment phase of the Partnership. All transactions
over $1.0 million must be approved by the PLMI Credit Review Committee (the
Committee) which is made up of members of PLMI's senior management. In
determining a lessee's creditworthiness, the Committee will consider, among
other factors, the lessee's 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 expected future benefits from continued ownership of a particular
asset. 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 repay the
Partnership's outstanding indebtedness and for distributions to the partners;
and
(4) to preserve and protect the value of the portfolio through quality
management, maintaining diversity, and constantly monitoring equipment markets.
The offering of units of the Partnership closed on December 23, 1991. As of
December 31, 2001, there were 8,533,465 units outstanding. The General Partner
contributed $100 for its 5% general partner interest in the Partnership.
As a result of the amendment to the Partnership's Limited Partnership Agreement
made pursuant to a court approved class action settlement, the Partnership may
reinvest its cash flow, surplus cash, and equipment sale proceeds in additional
equipment, consistent with the objectives of the Partnership, until December 31,
2004. The Partnership will terminate on December 31, 2010.
Table 1, below, lists the equipment and the original cost of equipment in the
Partnership's portfolio and the Partnership's proportional share of equipment
owned by unconsolidated special-purpose entities as of December 31, 2001 (in
thousands of dollars):
TABLE 1
Units Type Manufacturer Cost
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Owned equipment held for operating leases:
3 737-200 Stage II commercial aircraft Boeing $ 16,049
2 737-200A Stage III commercial aircraft Boeing 12,920
1 DC-9-32 Stage III commercial aircraft McDonnell Douglas 12,827
2 DHC-8-102 commuter aircraft DeHavilland 7,628
1 DHC-8-300 commuter aircraft DeHavilland 5,748
153 Pressurized tank railcars ACF/RTC 4,080
109 Non-pressurized tank railcars GATX 3,170
118 Covered hopper railcars Various 2,796
43 Mill gondola railcars Bethlehem Steel 1,219
396 Various marine containers Various 3,648
74 Refrigerated marine containers Various 1,411
145 Piggyback refrigerated trailers Oshkosh 2,215
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Total owned equipment held for operating leases $ 73,711 (1)
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Equipment owned by unconsolidated special-purpose entities:
0.48 Product tanker Boelwerf-Temse $ 9,492 (2)
0.50 Product tanker Kaldnes M/V 8,249 (2)
0.25 Equipment on direct finance lease:
Two DC-9 Stage III commercial aircraft McDonnell Douglas 3,005 (3)
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Total investments in unconsolidated special-purpose entities $ 20,746 (1)
==========
(1). Includes equipment and investments purchased with the proceeds from capital
contributions, undistributed cash flow from operations, and Partnership
borrowings. Includes costs capitalized, subsequent to the date of
acquisition, and equipment acquisition fees paid to PLM Transportation
Equipment Corporation (TEC), a wholly owned subsidiary of FSI, or PLM
Worldwide Management Services (WMS), a wholly owned subsidiary of PLM
International. All equipment was used equipment at the time of purchase,
except 150 piggyback refrigerated trailers.
(2) Jointly owned: EGF V and an affiliated program.
(3) Jointly owned: EGF V and two affiliated programs.
Equipment is generally leased under operating leases for a term of one to six
years except for marine vessels operating on voyage charter or time charter
which are usually leased for less than one year. 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. Lease revenues for intermodal
trailers are based on a per-diem lease in the free running interchange with the
railroads. Rents for all other equipment are based on fixed rates.
The lessees of the equipment include but are not limited to: Aero California
Airline, Air Canada, Coastal Chemical, Inc., Husky Energy Marketing, Inc., and
Potash Corp., Trans Ocean LTD, and Varig Aerea Rio-Grandense.
(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 or invested in by 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 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 service (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), GATX Corp., General Electric
Railcar Services Corporation, General Electric Capital Aviation Services
Corporation, Xtra Corporation, and other investment programs that lease the same
types of equipment.
(D) Demand
The Partnership currently operates in the following operating segments: aircraft
leasing, railcar leasing, marine container leasing, product tanker leasing, and
intermodal trailer leasing. Each equipment leasing segment engages in short-term
to mid-term operating leases to a variety of customers. The Partnership's
equipment and investments are primarily used to transport materials and
commodities, except for aircraft leased to passenger air carriers.
The following section describes the international and national markets in which
the Partnership's capital equipment operates:
(1) Aircraft
(a) Commercial Aircraft
Prior to September 11, 2001, Boeing and Airbus Industries predicted that the
rate of growth in the demand for air transportation services would be relatively
robust for the next 20 years. Boeing's prediction was that the demand for
passenger services would grow at an average rate of about 5% per year and the
demand for cargo traffic would grow at about 6% per year during such period.
Airbus' numbers were largely the same at 5% and 6%, respectively. Neither
manufacturer has released new long-term predictions; however, both have
confirmed lower production rates as well as substantial reductions in their work
forces. Both manufacturers experienced significant reductions in the numbers of
new orders for the year 2001 (through the end of November), with Boeing
reporting 294 (as compared to 611 the previous year) and Airbus reporting 352
(as compared to 520 for the previous year).
Current Market: It is to be noted that even prior to the events on September 11,
2001 the worldwide airline industry experienced negative traffic growth, which
in itself is unprecedented in peace time (it also happened during and after the
Gulf War). The tragic events of September 11, 2001 have resulted in an
unprecedented market situation for used commercial aircraft. The major carriers
in the United States (US) have grounded (or are in the process of grounding)
approximately 20% of their fleets, causing the imbalance between supply and
demand for aircraft seats to be exacerbated. In short, the market for used
commercial aircraft is more negatively impacted than ever and is in un-chartered
territory. The Partnership's portfolio of aircraft has been severely impacted.
The Partnership owns 100% of six commercial aircraft of which all are currently
on lease. The lease for these aircraft expires on October 30, 2002. The lessee
of these aircraft is four months in arrears with its lease payments and has
notified the General Partner that it wants to return the aircraft. The market
for Boeing 737-200 aircraft is very soft and the credit quality of the airlines
interested in this type of aircraft is, generally speaking, poor. The
Partnership also owns 25% of two commercial aircraft that are on a direct
finance lease. This lease has been renegotiated and the resulting incoming cash
flow will be severely reduced.
(b) Commuter Aircraft
Regional jets continue to be well received in the commuter market and as a
result the demand for turboprops continues to diminish. Post September 11, 2001,
the market for turboprops has been largely unaffected, as the market was already
soft and the availability of turboprops was already at high levels. The market
is beginning to show some positive sentiment as the majority of North American
operators are seeking to retain most their turboprops as the smaller capacity
and lower operating costs are proving advantageous since passenger numbers have
fallen. However, most old vintage turboprops are being returned due to their
higher maintenance costs and higher downtime ratios.
The Partnership leases three commuter turboprops containing 37 to 50 seats each
(two DHC8-100 aircraft and one DHC8-300 aircraft.) The Partnership's aircraft
possess unique performance capabilities, compared to most other turboprops,
which allow them to readily operate at maximum payloads from unimproved
surfaces, hot-and-high runways and short runways. These aircraft operate in
North America, which continues to be a healthy growth market for commuter
aircraft.
The Partnership's turboprops remained on lease throughout 2001 and their lease
rates were unaffected by market conditions. The current operator will return the
two DHC8-100 aircraft, in accordance with the lease, at the end of February,
2002 and no replacement lessee has yet been identified. The Partnership's one
DHC-300 aircraft will remain on lease through 2004.
(2) Product Tankers
The Partnership has investments in two product tankers, one built in 1975 and
the other in 1985, which operate in international markets carrying a variety of
commodity-type cargoes. Demand for commodity-based shipping is closely tied to
worldwide economic growth patterns, which can affect demand by causing changes
in volume on trade routes. The General Partner operates the Partnership's
product tankers in the spot chartering markets, carrying mostly fuel oil and
similar petroleum distillates, an approach that provides the flexibility to
adapt to changes in market conditions.
The market for product tankers improved throughout most of 2001, with dramatic
improvements experienced in the first and second quarters. The market has
recently softened and the Partnership's older vessel, because of it's advanced
age, which affects the vessel's ability to operate in all markets, has seen not
only lower rates but also periods of idle time. The Partnership's newer product
tanker, built in 1985, has continued to operate with very little idle time
between charters, but at lower rates than experienced earlier in the year.
(3) Railcars
(a) Pressurized Tank Railcars
Pressurized tank cars are used to transport liquefied petroleum gas (natural
gas) and anhydrous ammonia (fertilizer). The US markets for natural gas are
industrial applications, residential use, electrical generation, commercial
applications, and transportation. 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, status of
government farm subsidy programs, amount of farming acreage and mix of crops
planted, weather patterns, farming practices, and the value of the US 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 decreased over 5% compared to 2000. Even
with this decrease in industry-wide demand, the utilization of this type of
railcar within the Partnership continued to be in the 98% range through 2001.
(b) General Purpose (Nonpressurized) Tank Railcars
These railcars 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. The overall
health of the market for these types of commodities is closely tied to both the
US 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, 2001 carloadings of the commodity
group that includes chemicals and petroleum products fell over 5% from 2000
levels. Utilization of the Partnership's nonpressurized tank cars decreased from
90% at the beginning of 2001 to 85% at year-end.
(c) Covered Hopper (Grain) Railcars
Demand for covered hopper railcars, which are specifically designed to service
the grain industry, continued to experience weakness during 2001; carloadings
were down 2% when compared to 2000 volumes. The US agribusiness industry serves
a domestic market that is relatively mature, the future growth of which is
expected to be consistent but modest. Most domestic grain rail traffic moves to
food processors, poultry breeders, and feedlots. The more volatile export
business, which accounts for approximately 30% of total grain shipments, serves
emerging and developing nations. In these countries, demand for protein-rich
foods is growing more rapidly than in the US, due to higher population growth, a
rapid pace of industrialization, and rising disposable income. Utilization of
the Partnership's covered hopper railcars decreased from 100% at the beginning
of 2001 to 96% at year-end.
(d) Mill Gondola Railcars
Mill gondola railcars are typically used to transport scrap steel for recycling
from steel processors to small steel mills called mini-mills. Demand for steel
is cyclical and moves in tandem with the growth or contraction of the overall
economy. Within the US, carloadings for the commodity group that includes scrap
steel decreased over 12% in 2001, when compared to 2000 volumes. Utilization of
the Partnership's Mill gondola railcars decreased from 100% at the beginning of
2001 to 2% at year-end.
(4) Marine Containers
The Partnership's fleet of both standard dry and specialized containers is in
excess of 12 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 softened somewhat in the last year
primarily due to the worldwide recession. In addition to this overall softness
in residual values, the Partnership has continued to experience reduced residual
values on the sale of refrigerated containers, due primarily to technological
obsolescence associated with this equipment's refrigeration machinery.
(5) Intermodal (Piggyback) Trailers
Intermodal trailers are used to transport a variety of dry goods by rail on
flatcars, usually for distances of over 400 miles. Over the past five years,
intermodal trailers have continued to be rapidly displaced by domestic
containers as the preferred method of transport for such goods. This
displacement occurs because railroads offer approximately 20% lower freight
rates on domestic containers compared to trailer rates. During 2001, demand for
intermodal trailers was much more volatile than historic norms. Unusually low
demand occurred over the second half of the year due to a rapidly slowing
economy and low rail freight rates for competing 53-foot domestic containers.
Due to the decline in demand, which occurred over the latter half of 2001,
shipments for the year, within the intermodal trailer market, declined
approximately 10%, compared to the prior year. Average utilization of the entire
US intermodal fleet rose from 73% in 1998 to 77% in 1999, and then declined to
75% in 2000 and further declined to a record low of 63% in 2001.
The General Partner continued its aggressive marketing program in a bid to
attract new customers for the Partnership's intermodal trailers during 2001.
Even with these efforts, average utilization of the Partnership's intermodal
trailers for the year 2001 dropped 8% to approximately 73%, still 10% above the
national average.
The trend towards using domestic containers instead of intermodal trailers is
expected to accelerate in the future. Overall, intermodal trailer shipments are
forecast to decline by 10% to 15% in 2002, compared to 2001, due to the
anticipated continued weakness of the overall economy. As such, the nationwide
supply of intermodal trailers is expected to have approximately 25,000 units in
surplus for 2002. For the Partnership's intermodal fleet, the General Partner
will continue to seek to expand its customer base while minimizing trailer
downtime at repair shops and terminals. Significant efforts will continue to be
undertaken to reduce maintenance costs and cartage costs.
(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 governmental 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:
(1) the US Oil Pollution Act of 1990, which established liability for
operators and owners of marine vessels that create environmental pollution.
This regulation has resulted in higher oil pollution liability insurance.
The lessee of the equipment typically reimburses the Partnership for these
additional costs;
(2) the US 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 US Federal Aviation Regulations, after
December 31, 1999, no person may operate an aircraft to or from any airport
in the contiguous United States unless that aircraft has been shown to
comply with Stage III noise levels. The Partnership has Stage II aircraft
that do not meet Stage III requirements. These Stage II aircraft are
scheduled to be sold or re-leased in countries that do not require this
regulation;
(3) the Montreal Protocol on Substances that Deplete the Ozone Layer and
the U.S. 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 which are used extensively as refrigerants in refrigerated marine
cargo; and
(4) the US Department of Transportation's Hazardous Materials Regulations
regulates the classification and packaging requirements of hazardous
materials that apply particularly to 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 the tank railcar for service. The average cost
of this inspection is $3,600 for jacketed tank railcars and $1,800 for
non-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 146 jacketed tank railcars
and 116 non-jacketed tank railcars that will need re-qualification. To
date, a total of 17 tank railcars have been inspected with no significant
defects.
As of December 31, 2001, the Partnership was in compliance with the above
governmental 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, 2001, the Partnership owned a portfolio of
transportation and related equipment and investments in equipment owned by
unconsolidated special-purpose entities (USPEs) as described in Item 1, Table 1.
The Partnership acquired equipment with the proceeds of the Partnership offering
of $184.3 million through the first quarter of 1992, proceeds from the debt
financing of $38.0 million, and by reinvesting a portion of its operating cash
flow in additional equipment.
The Partnership maintains its principal office at 120 Montgomery Street, Suite
1350, San Francisco, California 94104. All office facilities are provided by FSI
without reimbursement by the Partnership.
ITEM 3. LEGAL PROCEEDINGS
Two class action lawsuits which were filed against PLM International and various
of its wholly owned subsidiaries in January 1997 in the United States District
Court for the Southern District of Alabama, Southern Division (the court), Civil
Action No. 97-0177-BH-C (the Koch action), and June 1997 in the San Francisco
Superior Court, San Francisco, California, Case No. 987062 (the Romei action),
were fully resolved during the fourth quarter of 2001.
The named plaintiffs were individuals who invested in PLM Equipment Growth Fund
IV (Fund IV), the Partnership (Fund V), PLM Equipment Growth Fund VI (Fund VI),
and PLM Equipment Growth & Income Fund VII (Fund VII and collectively, the
Funds), each a California limited partnership for which PLMI's wholly owned
subsidiary, FSI, acts as the General Partner. The complaints asserted causes of
action against all defendants for fraud and deceit, suppression, negligent
misrepresentation, negligent and intentional breaches of fiduciary duty, unjust
enrichment, conversion, conspiracy, unfair and deceptive practices and
violations of state securities law. Plaintiffs alleged 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 asserted liability against defendants for improper sales and
marketing practices, mismanagement of the Funds, and concealing such
mismanagement from investors in the Funds. Plaintiffs sought unspecified
compensatory damages, as well as punitive damages.
In February 1999, the parties to the Koch and Romei actions agreed to monetary
and equitable settlements of the lawsuits, with no admission of liability by any
defendant, and filed a Stipulation of Settlement with the court. The court
preliminarily approved the settlement in August 2000, and information regarding
the settlement was sent to class members in September 2000. A final fairness
hearing was held on November 29, 2000, and on April 25, 2001, the federal
magistrate judge assigned to the case entered a Report and Recommendation
recommending final approval of the monetary and equitable settlements to the
federal district court judge. On July 24, 2001, the federal district court judge
adopted the Report and Recommendation, and entered a final judgment approving
the settlements. No appeal has been filed and the time for filing an appeal has
expired.
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, consisting of $0.3 million deposited by PLMI and the remainder
funded by an insurance policy. The final settlement amount of $4.9 million (of
which PLMI's share was approximately $0.3 million) was accrued in 1999, paid out
in the fourth quarter of 2001 and was determined based upon the number of claims
filed by class members, the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys, and the amount of the administrative costs incurred in
connection with the settlement.
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, except for Fund IV; (b) the extension (until December 31,
2004) of the period during which FSI can reinvest the Funds' funds in additional
equipment, except for Fund IV; (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;
except for Fund IV; (d) a one-time purchase by each of Funds V, VI, and VII of
up to 10% of that partnership's outstanding units for 80% of net asset value per
unit as of September 30, 2000; and (e) the deferral of a portion of the
management fees paid, except for Fund IV, to an affiliate of FSI until, if ever,
certain performance thresholds have been met by the Funds. 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. Following a vote of limited
partners resulting in less than 50% of the limited partners of each of Funds V,
VI, and VII voting against such amendments and after final approval of the
settlement, each of the Funds' limited partnership agreement was amended to
reflect these changes. During the fourth quarter of 2001, the respective Funds
purchased limited partnership units from those equitable class members who
submitted timely requests for purchase. Fund V agreed to purchase 594,820 of its
limited partnership units at a total cost of $2.5 million.
The Partnership is involved as plaintiff or defendant in various other legal
actions incidental to its business. Management does not believe that any of
these actions will be material to the financial condition or results of
operations of the Partnership.
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, 2001.
(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
entitled to 5% of the cash distributions of the Partnership. The General Partner
is the sole holder of such interests. Net income is allocated to the General
Partner to the extent necessary to cause the General Partner's capital account
to equal zero. The remaining interests in the profits, losses, and cash
distributions of the Partnership are allocated to the limited partners. As of
December 31, 2001, there were 8,922 limited partners holding units in the
Partnership.
There are several secondary markets in which limited partnership units trade.
Secondary markets are characterized as having few buyers for limited partnership
interests and, therefore, are generally viewed as inefficient vehicles for the
sale of limited partnership units. Presently, there is no public market for the
limited partnership 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 limited partnership units will not be transferable
without the consent of the General Partner, which may be withheld in its
absolute discretion. The General Partner intends to monitor transfers of limited
Partnership 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 a US
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
Individual Retirement Accounts to exceed the allowable limit.
As a result of the equitable settlement related to the Koch and Romei actions
(see Note 10 to the audited financial statements), a one-time purchase by the
Partnership of up to 10% of the outstanding limited Partnership units for 80% of
net asset value per unit has been approved. During the fourth quarter 2001, the
General Partner, on behalf of the Partnership, agreed to purchase 594,820
limited partnership units for $2.5 million. The cash for this purchase came from
available cash.
(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)
2001 2000 1999 1996 1997
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Operating results:
Total revenues $ 12,517 $ 22,473 $ 20,768 $ 24,047 $ 41,123
Net gain on disposition
of equipment 1,246 1,351 253 732 10,990
Loss on revaluation of equipment -- -- 2,899 -- --
Equity in net income (loss) of uncon-
solidated special-purpose entities 186 406 2,108 294 (264)
Net income 3,268 3,994 1,302 2,370 7,921
At year-end:
Total assets $ 24,243 $ 30,152 $ 46,083 $ 61,376 $ 82,681
Note payable -- 5,474 15,484 23,588 32,000
Total liabilities 3,753 8,706 19,077 26,970 35,958
Cash distribution $ 1,720 $ 9,544 $ 8,617 $ 12,008 $ 15,346
Cash distribution representing
a return of capital to the limited
partners $ -- $ 5,550 $ 7,315 $ 9,638 $ 7,425
Per weighted-average limited partnership unit:
Net income $ 0.35(1) $ 0.39(1) $ 0.09(1) $ 0.20(1) $ 0.79 (1)
Cash distribution $ 0.18 $ 1.00 $ 0.90 $ 1.26 $ 1.60
Cash distribution representing
a return of capital $ -- $ 0.61 $ 0.81 $ 1.06 $ 0.81
(1) After an increase of income necessary to cause the General Partner's
capital account to equal zero of $44,000 ($0.00 per weighted-average
limited partnership unit) in 2001 and after reduction of income necessary
to cause the General Partner's capital account to equal zero of $0.3
million ($0.03 per weighted-average limited partnership unit) in 2000, $0.4
million ($0.05 per weighted-average limited partnership unit) in 1999, $0.5
million ($0.05 per weighted-average limited partnership unit) in 1998, and
$0.4 million ($0.04 per weighted-average limited partnership unit) in 1997.
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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 V
(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 Partnership 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 2001 for its trailer, marine
vessels, railcar, aircraft, and marine container portfolios.
(a) Trailers: The Partnership's trailer portfolio operates with short-line
railroad systems. The relatively short duration of most leases in these
operations exposes the trailers to considerable re-leasing activity.
(b) Marine vessels: The Partnership's investment in entities owning marine
vessels operated in the short-term leasing market. As a result of this, the
Partnership's partially owned marine vessels were remarketed during 2001
exposing it to re-leasing and repricing risk.
(c) Railcars: This equipment experienced significant re-leasing activity.
Lease rates in this market are showing signs of weakness and this has led to
lower utilization and lower contribution to the Partnership as existing leases
expire and renewal leases are negotiated.
(d) Aircraft: The Partnership's investment in a trust owning two aircraft
on a direct finance lease was renegotiated in 2001 at a much lower rate.
(e) Marine containers: All of the Partnership's marine containers are
leased to operators of utilization-type leasing pools and, as such, are highly
exposed to repricing activity. Market conditions were relatively constant during
2001.
(2) Equipment Liquidations
Liquidation of Partnership owned equipment and of investments in unconsolidated
special-purpose entities (USPEs) represents a reduction in the size of the
equipment portfolio and may result in reductions of contributions to the
Partnership. During the year, the Partnership disposed of owned equipment that
included a marine vessel, marine containers, trailers, and a railcar for total
proceeds of $2.7 million.
(3) Nonperforming Lessees
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 contribution, but also may require the
Partnership to assume additional costs to protect its interests under the
leases, such as repossession or legal fees.
During 2001, a Brazilian lessee of three Stage II Boeing 737-200 commercial
aircraft, notified the General Partner of its intention to return these
aircraft. The lessee has not remitted four lease payments due to the
Partnership. The Partnership has a security deposit from this lessee that could
be used to pay a portion of the amount due. During October 2001, the General
Partner sent a notification of default to the lessee. The lease, with an
expiration date of October 2002, has certain return condition requirements for
each of the remaining aircraft. The General Partner has recorded an allowance
for bad debts for the amount of receivables due less the security deposit.
(4) Reinvestment Risk
Reinvestment risk occurs when the Partnership cannot generate sufficient surplus
cash after fulfillment of operating obligations and distributions to reinvest in
additional equipment during the reinvestment phase of the Partnership; equipment
is disposed of for less than threshold amounts; proceeds from the dispositions,
or surplus cash available for reinvestment cannot be reinvested at the threshold
lease rates; or proceeds from sales or surplus cash available for reinvestment
cannot be deployed in a timely manner.
Pursuant to the equitable settlement related to the Koch and Romei actions (see
Note 10 to the audited financial statements), the Partnership intends to
increase its equipment portfolio by investing surplus cash in additional
equipment, after fulfilling operating requirements until December 31, 2004.
Additionally, the Partnership paid PLM Financial Services, Inc. (FSI or the
General Partner) $0.1 million in acquisition and lease negotiation fees related
to equipment purchased during 1999.
Other non-operating funds for reinvestment are generated from the sale of
equipment prior to the Partnership's planned liquidation phase, the receipt of
funds realized from the payment of stipulated loss values on equipment lost or
disposed of while it was subject to lease agreements, or from the exercise of
purchase options in certain lease agreements. Equipment sales generally result
from evaluations by the General Partner that continued ownership of certain
equipment is either inadequate to meet Partnership performance goals, or that
market conditions, market values, and other considerations indicate it is the
appropriate time to sell certain equipment.
(5) Equipment Valuation
In accordance with Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.
121), the General Partner reviews the carrying values of the Partnership's
equipment portfolio at least quarterly and whenever circumstances indicate that
the carrying value of an asset may not be recoverable due to expected future
market conditions. If the projected undiscounted cash flows and the fair market
value of the equipment are less than the carrying value of the equipment, a loss
on revaluation is recorded. During 2001, a USPE trust owning two Stage III
commercial aircraft on a direct finance lease reduced its net investment in the
finance lease receivable due to a series of lease amendments. The Partnership's
proportionate share of this writedown, which is included in equity in net income
(loss) of the USPE in the accompanying statement of income, was $1.0 million.
Reductions of $2.9 million to the carrying value of owned marine vessels were
required during 1999. No reductions were required to the carrying value of the
owned equipment during 2001 and 2000 or partially owned equipment in 2000 and
1999.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144), which replaces SFAS No. 121. SFAS
No. 144 provides updated guidance concerning the recognition and measurement of
an impairment loss for certain types of long-lived assets, expands the scope of
a discontinued operation to include a component of an entity and eliminates the
current exemption to consolidation when control over a subsidiary is likely to
be temporary. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001.
The Partnership will apply the new rules on accounting for the impairment or
disposal of long-lived assets beginning in the first quarter of 2002, and they
are not anticipated to have an impact on the Partnership's earnings or financial
position.
(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 of $184.3 million and permanent
debt financing of $38.0 million. No further capital contributions from limited
partners are permitted under the terms of the Partnership's limited partnership
agreement. The Partnership relies on operating cash flow to meet its operating
obligations and make cash distributions to limited partners.
For the year ended December 31, 2001, the Partnership generated $11.4 million in
operating cash (net cash provided by operating activities plus non-liquidating
cash distributions from USPEs) to meet its operating obligations, make principal
debt payments, purchase limited Partnership units for $2.3 million, and pay
distributions of $1.7 million to the partners.
Pursuant to the equitable settlement related to the Koch and Romei actions (see
Note 10 to the audited financial statements), during 2001 the Partnership paid
FSI $0.1 million in acquisition and lease negotiation fees related to equipment
purchased during 1999.
During 2001, the Partnership disposed of owned equipment for aggregate proceeds
of $2.7 million.
Accounts receivable decreased $0.5 million during 2001 due to an increase in the
allowance for doubtful accounts of $0.6 million offset, in part, by $0.1 million
due to the timing of cash receipts.
Investments in USPEs decreased $2.5 million due to cash distributions of $2.7
million to the Partnership from the USPEs offset, in part, by income of $0.2
million that was recorded by the Partnership's from the USPEs during the year
ended December 31, 2001.
Accounts payable and accrued expenses decreased $49,000 during 2001 due to the
timing of payments to vendors.
Lessee deposits and reserve for repairs increased $0.4 million during 2001
resulting from increases in lessee's security deposits of $0.1 million and
lessee prepaid deposits of $0.3 million.
The Partnership made principal payments of $5.3 million and quarterly interest
payments at a rate of LIBOR plus 1.2% per annum to the lender of the senior loan
during 2001. The Partnership also paid the lender of the senior loan an
additional $0.2 million from equipment sale proceeds, as required by the loan
agreement.
As a result of the settlement in the Koch and Romei actions (see Note 10 to the
audited financial statements), the Partnership's redemption plan has been
terminated and the Partnership was required to purchase up to 10% of the
Partnership's limited partnership units for 80% of the net asset valued per
unit. During the fourth quarter 2001, the General Partner, on behalf of the
Partnership, agreed to purchase 594,820 limited partnership units for $2.5
million. The cash for this purchase came from available cash.
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) Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the General Partner
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On a regular basis, the General Partner reviews
these estimates including those related to asset lives and depreciation methods,
impairment of long-lived assets including intangibles, allowance for doubtful
accounts, reserves related to legally mandated equipment repairs and
contingencies and litigation. These estimates are based on the General Partner's
historical experience and on various other assumptions believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. The General Partner believes, however, that
the estimates, including those for the above-listed items, are reasonable and
that actual results will not vary significantly from the estimated amounts.
The General Partner believes the following critical accounting policies affect
the more significant judgments and estimates used in the preparation of the
Partnership's financial statements:
Asset lives and depreciation methods: The Partnership's primary business
involves the purchase and subsequent lease of long-lived transportation and
related equipment. The General Partner has chosen asset lives that it believes
correspond to the economic life of the related asset. The General Partner has
chosen a deprecation method that it believes matches the benefit to the
Partnership from the asset with the associated costs. These judgments have been
made based on the General Partner's expertise in each equipment segment that the
Partnership operates. If the asset life and depreciation method chosen does not
reduce the book value of the asset to at least the potential future cash flows
from the asset to the Partnership, the Partnership would be required to record a
loss on revaluation. Likewise, if the net book value of the asset was reduced by
an amount greater than the economic value has deteriorated, the Partnership may
record a gain on sale upon final disposition of the asset.
Impairment of long-lived assets: On a regular basis, the General Partner reviews
the carrying value of its equipment, investments in USPEs, and intangible assets
to determine if the carrying value of the asset may not be recoverable in
consideration of current economic conditions. This requires the General Partner
to make estimates related to future cash flows from each asset as well as the
determination if the deterioration is temporary or permanent. If these estimates
or the related assumptions change in the future, the Partnership may be required
to record additional impairment charges.
Allowance for doubtful accounts: The Partnership maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the
lessees to make the lease payments. These estimates are primarily based on the
amount of time that has lapsed since the related payments were due as well as
specific knowledge related to the ability of the lessees to make the required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, additional allowances could be required that would reduce income.
Conversely, if the financial condition of the lessees were to improve or if
legal remedies to collect past due amounts were successful, the allowance for
doubtful accounts may need to be reduced and income would be increased.
Reserves for repairs: The Partnership accrues for legally required repairs to
equipment such as dry docking for marine vessels and engine overhauls to
aircraft engines over the period prior to the required repairs. The amount that
is reserved for is based on the General Partner's expertise in each equipment
segment, the past history of such costs for that specific piece of equipment and
discussions with independent, third party equipment brokers. If the amount
reserved for is not adequate to cover the cost of such repairs or if the repairs
must be performed earlier than the General Partner estimated, the Partnership
would incur additional repair and maintenance or equipment operating expenses.
Contingencies and litigation: The Partnership is subject to legal proceedings
involving ordinary and routine claims related to its business. The ultimate
legal and financial liability with respect to such matters cannot be estimated
with certainty and requires the use of estimates in recording liabilities for
potential litigation settlements. Estimates for losses from litigation are made
after consultation with outside counsel. If estimates of potential losses
increase or the related facts and circumstances change in the future, the
Partnership may be required to record additional litigation expense.
(This space intentionally left blank)
(E) Results of Operations - Year-to-Year Detailed Comparison
(1) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 2001 and 2000
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the year ended December 31, 2001, compared to 2000. Gains or
losses from the sale of equipment, interest and other income, and certain
expenses such as depreciation and amortization and general and administrative
expenses relating to the operating segments (see Note 5 to the audited financial
statements), are not included in the owned equipment operation discussion
because they are indirect in nature and not a result of operations, but the
result of owning a portfolio of equipment. The following table presents lease
revenues less direct expenses by segment (in thousands of dollars):
For the Years
Ended December 30,
2001 2000
---------------------------
Aircraft $ 8,351 $ 7,782
Railcars 991 1,811
Marine containers 311 405
Trailers 163 1,213
Marine vessels (265) 2,774
Aircraft: Aircraft lease revenues and direct expenses were $8.5 million and $0.1
million, respectively, during 2001, compared to $8.1 million and $0.3 million,
respectively, during 2000. The increase in aircraft lease revenues of $0.4
million was due to one aircraft being on-lease for the entire year ended
December 31, 2001 that was off-lease for four months during 2000. Direct
expenses decreased $0.1 million during the first nine months of 2001 due to
repairs to one of the Partnership's aircraft during 2000 that wasn't required
during 2001.
Railcars: Railcar lease revenues and direct expenses were $1.8 million and $0.8
million, respectively, during 2001, compared to $2.4 million and $0.6 million,
respectively, during 2000. Lease revenues decreased $0.1 million due to lower
re-lease rates earned on railcars whose leases expired during 2001 and decreased
$0.4 million due to the increase in the number of railcars off-lease during 2001
compared to 2000. An increase in direct expenses of $0.2 million was due to
higher repairs during 2001 compared to 2000.
Marine containers: Marine container lease revenues and direct expenses were $0.3
million and $1,000, respectively, during 2001, compared to $0.4 million and
$7,000, respectively, during 2000. The decrease in marine container contribution
was due to the disposal of marine containers during 2001 and 2000.
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.2
million, respectively, during 2001, compared to $1.9 million and $0.7 million,
respectively, during 2000. The decrease in trailer contribution was due to the
sale of 76% of the Partnership`s trailers during 2000.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.1
million and $0.3 million, respectively, during 2001, compared to $8.1 million
and $5.3 million, respectively, during 2000. The decrease in marine vessel
contribution was caused by the sale of all the Partnership's wholly owned marine
vessels during 2001 and 2000.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $7.8 million for the year ended December 31, 2001
decreased from $11.9 million for the same period in 2000. Significant variances
are explained as follows:
(i) Depreciation and amortization expenses decreased $2.5 million during
2001 compared to 2000. A decrease of $1.3 million was caused by the sale of two
of the Partnership's wholly owned marine vessels during 2001 and 2000 and a
decrease of $0.3 million resulted from the sale of 76% of the Partnership`s
trailers during 2000. Additionally, a decrease of $0.9 million was caused by the
double-declining balance method of depreciation that results in greater
depreciation during the first years an asset is owned.
(ii) A $0.9 million decrease in interest expense was due to a lower average
outstanding debt balance during 2001 compared to 2000.
(iii) A $0.7 million decrease in general and administrative expenses during
2001 was due to a decrease of $0.4 million in costs resulting from the sale of
76% of the Partnership's trailers, a decrease of $0.1 million due to lower
professional services, and $0.1 million decrease in inspection costs on owned
equipment.
(iv) A $0.6 million decrease in management fees was due to lower lease
revenues of $10.0 million earned during 2001 compared to 2000 and an increase of
$0.6 million in provision for bad debts.
(v) A $0.6 million increase in the provision for bad debts was due to the
General Partners evaluation of the collectability of receivables due from
certain lessees.
(c) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the year ended December 31,
2001 totaled $1.2 million, which resulted from the sale of a marine vessel,
marine containers, trailers, and a railcar with a net book value of $1.4
million, for $2.7 million. The net gain on the disposition of owned equipment
for the year ended December 31, 2000 totaled $1.4 million, which resulted from
the sale of a marine vessel, marine containers, railcars, and trailers with a
net book value of $6.0 million, for proceeds of $7.2 million. Included in the
2000 net gain on disposition of assets is the unused portion of marine vessel
dry docking of $0.1 million.
(d) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)
Equity in net income (loss) of USPEs represent the Partnership's share of the
net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method of accounting. These entities are single purpose and
have no debt or other financial encumbrances. The following table presents
equity in net income (loss) by equipment type (in thousands of dollars):
For the Years
Ended December 31,
2001 2000
---------------------------
Marine vessels $ 911 $ 22
Aircraft (725) 384
---------------------------
Equity in net income of USPEs $ 186 $ 406
===========================
Marine vessels: As of December 31, 2001 and 2000, the Partnership owned
interests in two entities owning a total of two marine vessels. During the year
ended December 31, 2001, lease revenues of $6.6 million were offset by
depreciation expense, direct expenses, and administrative expenses of $5.7
million. During 2000, lease revenues of $6.3 million were offset by depreciation
expense, direct expenses, and administrative expenses of 6.2 million.
Lease revenues increased $0.4 million during 2001 compared to 2000. The increase
in lease revenues was due to the following:
(i) One marine vessel was on voyage charter the entire year of 2001,
compared to being on voyage charter and fixed rate lease during 2000. During
2001, this marine vessel earned $2.4 million in higher lease revenues due to
higher lease rates earned while on voyage charter compared to 2000. Under a
voyage charter lease, the marine vessel earns a higher lease rate, however,
certain direct expenses that were paid by the lessee are now paid by the owner.
(ii) This increase was partially offset by the other marine vessel earning
lower lease revenues of $2.0 million compared to 2000. During 2001, lease
revenues for this marine vessel decreased $0.5 million resulting from being
off-lease for approximately two months while completing its dry docking. Lease
revenues also decreased $0.4 million due to lower release rates while on voyage
charter, and decreased $0.8 million due to being off-lease for an additional
three months. Lease revenues for this marine vessel then decreased $0.2 million
due to being on a fixed rate lease for over one month before returning to voyage
charter when compared to the same month of 2000. During 2000, this marine vessel
was on voyage charter the entire year.
Depreciation expense, direct expenses, and administrative expenses decreased
$0.5 million during 2001 compared to 2000. A decrease of $0.3 million was caused
by lower repairs and maintenance during 2001 compared to 2000, a decrease of
$0.2 million in marine vessel operating expenses was the result of fewer voyage
charters during 2001 compared to 2000, and lower depreciation expense of $0.2
million caused by the double-declining balance method of depreciation that
results in greater depreciation during the first years an asset is owned. These
decreases were partially offset by higher administrative expenses of $0.1
million during 2001 compared to 2000.
Aircraft: As of December 31, 2001 and 2000, the Partnership had an interest in a
trust owning two commercial aircraft on a direct finance lease. During the year
ended December 31, 2001, revenues of $0.3 million were offset by depreciation
expense, direct expenses, and administrative expenses of $1.1 million. During
the year ended December 31, 2000, revenues of $0.4 million were offset by
depreciation expense, direct expenses, and administrative expenses of $(2,000).
Revenues for the year ended December 31, 2001, decreased $48,000 due to a lower
outstanding principal balance on the finance lease compared to 2000.
Direct expenses increased $1.1 million. During 2001, the Partnership's reduced
its interest in a trust owning two Stage III commercial aircraft on a direct
finance lease $1.0 million due to a reduction in its net investment in the
finance lease receivable caused by a series of lease amendments. There were no
revaluations to the trust required during 2000. Additionally, direct expenses
increased $46,000 due to the recovery of accounts receivable in 2000 that had
previously been reserved as a bad debt. A similar recovery did not occur in
2001.
(e) Net Income
As a result of the foregoing, the Partnership's net income for the year ended
December 31, 2001 was $3.3 million, compared to net income of $4.0 million
during 2000. The Partnership's ability to acquire, 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, 2001 is not necessarily indicative of future periods. In the year ended
December 31, 2001, the Partnership distributed $1.6 million to the limited
partners, or $0.18 per weighted-average limited partnership unit.
(2) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 2000 and 1999
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the year ended December 31, 2000, when compared to 1999. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Years
Ended December 31,
2000 1999
---------------------------
Aircraft $ 7,782 $ 8,000
Marine vessels 2,774 2,332
Railcars 1,811 1,989
Trailers 1,213 1,857
Marine containers 405 694
Aircraft: Aircraft lease revenues and direct expenses were $8.1 million and $0.3
million, respectively, for 2000, compared to $8.2 million and $0.2 million,
respectively, during 1999. Aircraft lease revenues decreased $0.3 million due to
a commercial aircraft being off-lease for four months during 2000 that was
on-lease for the entire year during 1999. This decrease in lease revenues was
partially offset by an increase of $0.2 million cause by the re-lease of a
commercial aircraft at a higher rate in 2000 than the lease that was in place
during 1999. Direct expenses increased $0.1 million during the year ended
December 31, 2000 due to required repairs to the off-lease commercial aircraft.
A similar expense was not required during 1999.
Marine vessels: Marine vessel lease revenues and direct expenses were $8.1
million and $5.3 million, respectively, for 2000, compared to $6.2 million and
$3.9 million, respectively, during 1999.
The increase in marine vessel lease revenues of $1.9 million during 2000 was due
to one marine vessel that earned $3.8 million in additional voyage lease
revenues due to an increase in voyage lease rates compared to 1999, offset in
part, by a decrease of $1.9 million caused by another marine vessel that was
off-lease for nine months during 2000, compared to 1999, when it was on-lease
the entire year.
As a result of the additional voyages, direct expenses increased $1.4 million
during 2000 when compared to 1999.
Railcars: Railcar lease revenues and direct expenses were $2.4 million and $0.6
million, respectively, for 2000, compared to $2.5 million and $0.5 million,
respectively, during 1999. The decrease in railcar contribution was due to a
decrease in railcar lease revenues of $0.1 million primarily due to lower
re-lease rates earned on railcars whose leases expired during 2000 and to an
increase of $0.1 million in repairs to certain railcars in 2000 that were not
needed during 1999.
Trailers: Trailer lease revenues and direct expenses were $1.9 million and $0.7
million, respectively, for 2000, compared to $2.7 million and $0.9 million,
respectively, during 1999. Trailer contribution decreased $0.6 million during
the year ended December 31, 2000 due to the sale of 76% of the Partnership `s
trailers during 2000.
Marine containers: Marine container lease revenues and direct expenses were $0.4
million and $7,000, respectively, for 2000, compared to $0.7 million and $5,000,
respectively, during 1999. The number of marine containers owned by the
Partnership has been declining due to dispositions during 2000 and 1999
resulting in a decrease to marine container contribution.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $11.9 million for 2000 decreased from $16.1 million
for 1999. Significant variances are explained as follows:
(i) A loss on revaluation of $2.9 million was required during 1999 to
reduce the carrying value of a marine vessel to its estimated fair market value.
No revaluation of equipment was required during 2000.
(ii) A $1.1 million decrease in depreciation and amortization expenses from
1999 levels was caused by the double-declining balance method of depreciation
that results in greater depreciation in the first years an asset is owned.
(iii) A $0.3 million decrease in interest expense was due to a lower
average outstanding debt balance during 2000 compared to 1999.
(iv) A $0.1 million increase in general and administrative expenses was
primarily due to additional costs associated with the re-lease of a commercial
aircraft during 2000 and administrative costs compared to 1999.
(c) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for 2000 totaled $1.4
million, which resulted from the sale of a marine vessel, marine containers,
railcars, and trailers with a net book value of $6.0 million, for proceeds of
$7.2 million. Included in the 2000 net gain on disposition of assets is the
unused portion of marine vessel dry docking of $0.1 million. The net gain on the
disposition of owned equipment for 1999 totaled $0.3 million, which resulted
from the sale of marine containers, railcars, and trailers with an aggregate net
book value of $0.6 million, for proceeds of $0.9 million.
(d) Equity in Net Income (loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Equity in net income (loss) of USPEs represent the Partnership's share of the
net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method of accounting. These entities are single purpose and
have no debt or other financial encumbrances. The following table presents
equity in net income (loss) by equipment type (in thousands of dollars):
For the Years
Ended December 31,
2000 1999
---------------------------
Aircraft, rotable components, and aircraft engines $ 384 $ 1,811
Marine vessels 22 297
---------------------------
Equity in net income of USPEs $ 406 $ 2,108
===========================
Aircraft, rotable components, and aircraft engines: As of December 31, 2000 and
1999, the Partnership had an interest in an entity owning two commercial
aircraft on a direct finance lease. During 2000, revenues of $0.4 million were
offset by direct expenses and administrative expenses of ($2,000). During 1999,
revenues of $0.4 million and the gain from the sale of the Partnership's
interest in two trusts that owned a total of three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables of $1.6 million were
offset by depreciation expense, direct expenses, and administrative expenses of
$0.2 million. Direct expenses and administrative expenses decreased $0.2 million
during 2000 due to the sale of the Partnership's interest in two trusts and the
recovery of a $48,000 accounts receivable in 2000 that had previously been
reserved as a bad debt. A similar recovery did not occur during 1999.
Marine vessels: As of December 31, 2000 and 1999, the Partnership owned an
interest in two entities owning a total of two marine vessels. During 2000,
lease revenues of $6.3 million were offset by depreciation expense, direct
expenses, and administrative expenses of $6.2 million. During 1999, lease
revenues of $5.2 million and the gain of $1.9 million from the sale of the
Partnership's interest in an entity owning a marine vessel were offset by
depreciation expense, direct expenses, and administrative expenses of $6.8
million.
Lease revenues increased $1.0 million during 2000 compared to 1999. The increase
in lease revenues is due to the following:
(i) One marine vessel that was on voyage charter during the year ended
December 31, 2000 and 1999, earned $2.0 million more in lease revenues due to an
increase in voyage lease rates when compared to 1999.
(ii) The other marine vessel, while on time charter during the year ended
December 31, 2000 and 1999, earned higher lease revenues of $0.1 million during
the year ended December 31, 2000. The increase of $0.1 million is due to this
marine vessel being on rent for a full 12 months during 2000. During 1999, this
marine vessel was in dry dock for over one month not earning any revenues.
(iii) The sale of the Partnership's interest in a marine vessel during the
fourth quarter of 1999 caused lease revenues to also decrease $1.1 million
during the year ended December 31, 2000 compared to 1999.
Depreciation expense, direct expenses, and administrative expenses decreased
$0.6 million during 2000 compared to 1999. The sale of the Partnership's
interest in a marine vessel during the fourth quarter of 1999 caused
depreciation expense, direct expenses, and administrative expenses to decrease
$1.2 million during 2000. This decrease was offset, in part, by an increase of
$0.6 million in certain direct expenses due to increased usage of a marine
vessel during 2000 when compared to 1999.
(e) Net Income
As a result of the foregoing, the Partnership's net income for the year ended
December 31, 2000 was $4.0 million, compared to net income of $1.3 million
during 1999. The Partnership's ability to operate assets, 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 $9.1 million to the limited partners, or $1.00
per weighted-average limited partnership unit.
(F) 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 US dollars. Political risks are minimized
by avoiding 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 US 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 lease 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 change significantly 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.
The Partnership's equipment on lease to US domiciled lessees consisted of
trailers, railcars, and aircraft. During 2001, US lease revenues accounted for
13% of the total lease revenues of wholly- and jointly-owned equipment while
this region reported net income of $0.5 million.
The Partnership's owned equipment on lease to Canadian-domiciled lessees
consisted of railcars and aircraft. During 2001, Canadian lease revenues
accounted for 24% of the total lease revenues of wholly- and jointly-owned
equipment and recorded net income of $2.5 million.
The Partnership's owned equipment on lease to a South American-domiciled lessee
consisted of an aircraft during 2001 and accounted for 17% of the total lease
revenues of wholly- and jointly-owned equipment, and recorded a net income of
$0.7 million.
The Partnership's owned equipment and its ownership share in USPEs on lease to a
Mexican-domiciled lessee consisted of aircraft and accounted for 7% of the total
lease revenues of wholly- and jointly-owned equipment consisted of a commercial
aircraft and two aircraft on a direct finance lease, and recorded a net loss of
$1.3 million.
The Partnership's owned equipment and its ownership share in USPEs on lease to
lessees in the rest of the world consisted of marine vessels and marine
containers. During 2001, lease revenues for these lessees accounted for 39% of
the total lease revenues of wholly- and jointly-owned equipment and recorded a
net income of $1.8 million.
(G) Inflation
Inflation had no significant impact on the Partnership's operations during 2001,
2000, or 1999.
(H) 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.
(I) Outlook for the Future
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of these factors makes
it difficult for the General Partner to clearly define trends or influences that
may impact the performance of the Partnership's equipment. The General Partner
continuously 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 those equipment markets in
which it determines that it cannot operate equipment and achieve acceptable
rates of return. Alternatively, the General Partner may make a determination to
enter those markets in which it perceives opportunities to profit from supply
and demand instabilities, or other market imperfections.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements, acquire additional equipment until December 31, 2004,
and pay cash distributions to the partners.
Factors affecting the Partnership's contribution during the year 2002 and beyond
include:
1. The cost of new marine containers has been at historic lows for the past
several years which has caused downward pressure on per diem lease rates.
Recently, the cost of marine containers has started to increase which, if this
trend continues, should translate into rising per diem lease rates. However,
some of the Partnership's refrigerated marine containers have become
delaminated. This condition lowers the demand for these marine containers which
has lead to declining lease rates and lower utilization on containers with this
problem.
2. Railcar loadings in North America have weakened over the past year. During
2001, utilization and lease rates decreased. Railcar contribution may decrease
in 2002 as existing leases expire and renewal leases are negotiated.
3. Marine vessel freight rates are dependent upon the overall condition of the
international economy. Freight rates earned by the Partnership's investments in
entities that own marine vessels began to decrease during the later half of
2001. This trend is expected to continue during the first half of 2002 until
freight rates begin to show signs of stabilization.
4. The airline industry began to see lower passenger travel during 2001. The
tragic events on September 11, 2001 worsened the situation. No direct damage
occurred to any of the Partnership's aircraft as a result of these events and
the General Partner is currently unable to determine the long-term effects, if
any, these events may have on the Partnership's aircraft. Three of the
Partnership's owned commercial aircraft leases expire during 2002; however, the
lessee has stopped paying on the aircraft leases in September 2001 and notified
the General Partner that they would like to return these aircraft before the
lease expiration date.. In addition to this and the general uncertainty in the
airline industry, the Partnership has had to renegotiate leases on its owned
aircraft and partially owned aircraft on a direct finance lease during 2001 that
will result in a decrease in revenues during 2002.
Several other factors may affect the Partnership's operating performance in the
year 2002 and beyond, 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 portions of the Partnership's railcar, marine container, marine vessel,
and trailer portfolios will be remarketed in 2002 as existing leases expire,
exposing the Partnership to considerable repricing risk/opportunity.
Additionally, the General Partner may elect to sell certain underperforming
equipment or equipment whose continued operation may become prohibitively
expensive. In either case, the General Partner intends to re-lease or 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 accuracy, and preclude the General Partner from determining the impact of
such changes on Partnership operations or sale of equipment. Under US Federal
Aviation Regulations, after December 31, 1999, no person may operate an aircraft
to or from any airport in the contiguous United States unless that aircraft has
been shown to comply with Stage III noise levels. The Partnership's Stage II
aircraft are scheduled to be sold or re-leased in countries that do not require
this regulation.
The US Department of Transportation's Hazardous Materials Regulations regulates
the classification and packaging requirements of hazardous materials that apply
particularly to 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 the tank railcar for service.
The average cost of this inspection is $3,600 for jacketed tank railcars and
$1,800 for non-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 174 jacketed tank railcars and
88 non-jacketed tank railcars that will need re-qualification. To date, a total
of 17 tank railcars have been inspected with no significant defects.
(3) Distributions
Pursuant to the amended limited partnership agreement, the Partnership will
cease to reinvest surplus cash in additional equipment beginning on January 1,
2005. Prior to that date, the General Partner intends to continue its strategy
of selectively redeploying equipment to achieve competitive returns, or selling
equipment that is underperforming or whose operation becomes prohibitively
expensive. During this time, the Partnership will use operating cash flow,
proceeds from the sale of equipment, and additional debt to meet its operating
obligations, make distributions to the partners, and acquire additional
equipment. In the long term, changing market conditions and used-equipment
values may preclude the General Partner from accurately determining the impact
of future re-leasing activity and equipment sales on Partnership performance and
liquidity. Consequently, the General Partner cannot establish future
distribution levels with any certainty at this time.
The General Partner believes that sufficient cash flow will be available in the
future to meet Partnership operating cash flow requirements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of interest rate and
currency risk.
During 2001, 87% of the Partnership's total lease revenues from wholly- and
jointly-owned equipment came from non-United States-domiciled lessees. Most of
the Partnership's leases require payment in US currency. If these lessees
currency devalues against the US dollar, the lessees could potentially encounter
difficulty in making the US dollar-denominated lease payments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Partnership are listed on 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
(A) Disagreements with Accountants on Accounting and Financial Disclosures
None
(B) Changes in Accountants
In September 2001, the General Partner announced that the Partnership
had engaged Deloitte & Touche LLP as the Partnership's auditors and
had dismissed KPMG LLP. KPMG LLP issued unqualified opinions on the
1999 and 2000 financial statements. During 1999, 2000 and the
subsequent interim period preceding such dismissal, there were no
disagreements with KPMG LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure.
(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
- ---------------------------------------- ------- ------------------------------------------------------------------
Gary D. Engle 52 Director, PLM Financial Services, Inc., PLM Investment
Management Inc., and PLM Transportation Equipment Corp.
James A. Coyne 41 Director and Secretary, PLM Financial Services Inc., PLM
Investment Management, Inc., and PLM Transportation Equipment
Corp.
Stephen M. Bess 55 President and Director, PLM Financial Services, Inc., PLM
Investment Management Inc., and PLM Transportation Equipment
Corp.
Gary D. Engle was appointed a Director of PLM Financial Services, Inc. in
January 2002. He was appointed a director of PLM International, Inc. in February
2001. He is a director and President of MILPI. Since November 1997, Mr. Engle
has been Chairman and Chief Executive Officer of Semele Group Inc. ("Semele"), a
publicly traded company. Mr. Engle is President and Chief Executive Officer of
Equis Financial Group (EFG), which he joined in 1990 as Executive Vice
President. Mr. Engle purchased a controlling interest in EFG in December 1994.
He is also President of AFG Realty, Inc.
James A. Coyne was appointed a Director and Secretary of PLM Financial Services
Inc. in April 2001. He was appointed a director of PLM International, Inc in
February 2001. He is a director, Vice President and Secretary of MILPI. Mr.
Coyne has been a director, President and Chief Operating Officer of Semele since
1997. Mr. Coyne is Executive Vice President of Equis Corporation, the general
partner of EFG. Mr. Coyne joined EFG in 1989, remained until 1993, and rejoined
in November 1994.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess was appointed President of PLM Financial Services, Inc. in
October 2000. He was appointed President and Chief Executive Officer of PLM
International, Inc. in October 2000. Mr. Bess was appointed President of PLM
Investment Management, Inc. in August 1989, having served as Senior Vice
President of PLM Investment Management, Inc. beginning in February 1984 and as
Corporate Controller of PLM Financial Services, Inc. beginning in October 1983.
He served as Corporate Controller of PLM, Inc. beginning in December 1982. Mr.
Bess was Vice President-Controller of Trans Ocean Leasing Corporation, a
container leasing company, from November 1978 to November 1982, and Group
Finance Manager with the Field Operations Group of Memorex Corporation, a
manufacturer of computer peripheral equipment, from October 1975 to November
1978.
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 had no
pension, profit sharing, retirement, or similar benefit plan in effect as of
December 31, 2001.
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 (subject to certain allocations of income), cash
available for distributions, and net disposition proceeds of the
Partnership. As of December 31, 2001, no investor was known by the
General Partner to beneficially own more than 5% of the limited
partnership units of the Partnership.
(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, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Management and Others
During 2001, the Partnership paid or accrued the following fees to FSI
or its affiliates: management fees, $0.5 million and administrative
and data processing services performed on behalf of the Partnership,
$0.4 million.
During 2001, the Partnership's proportional share of ownership in
USPEs paid or accrued the following fees to FSI or its affiliates:
management fees, $0.3 million; and administrative and data processing
services, $0.2 million.
(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. Montgomery Partnership
b. TAP Trust
(B) Financial Statement Schedules
Schedule II Valuation and Qualifying 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 Partnership. Incorporated by
reference to the Partnership's Registration Statement on Form S-1
(Reg. No. 33-32258), which became effective with the Securities
and Exchange Commission on April 11, 1990.
4.1 First Amendment to the Amended and Restated Limited Partnership
Agreement dated August 24, 2001.
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. 33-32258), which
became effective with the Securities and Exchange Commission on
April 11, 1990.
10.2 Loan Agreement, amended and restated as of September 26, 1996
regarding Senior Notes due November 8, 1999. Incorporated by
reference to the Partnership's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 18, 1997.
10.3 Amendment No. 1 to the Amended and Restated $38,000,000 Loan
Agreement, dated as of December 29, 1997. Incorporated by
reference to the Partnership's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1998.
10.4 Amendment No. 2 to the Amended and Restated $38,000,000 Loan
Agreement, dated as of August 2, 2000. Incorporated by reference
to the Partnership's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 10, 2000.
Financial Statements required under Regulation S-X Rule 3-09:
99.1 Montgomery Partnership.
99.2 TAP Trust.
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.
Dated: March 26, 2002 PLM EQUIPMENT GROWTH FUND V
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ Stephen M. Bess
-----------------------------------
Stephen M. Bess
President and Current Chief Accounting
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
/s/ Gary D. Engle
- --------------------------------
Gary D. Engle Director, FSI March 26, 2002
/s/ James A. Coyne
- --------------------------------
James A. Coyne Director, FSI March 26, 2002
/s/ Stephen M. Bess
- --------------------------------
Stephen M. Bess Director, FSI March 26, 2002
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Independent auditors' reports 27-28
Balance sheets as of December 31, 2001 and 2000 29
Statements of income for the years ended
December 31, 2001, 2000, and 1999 30
Statements of changes in partners' capital for the
years ended December 31, 2001, 2000, and 1999 31
Statements of cash flows for the years ended
December 31, 2001, 2000, and 1999 32
Notes to financial statements 33-44
Independent auditors' reports on financial statement schedule
Schedule II Valuation and Qualifying Accounts
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund V:
We have audited the accompanying balance sheet of PLM Equipment Growth Fund V
(the "Partnership"), as of December 31, 2001, and the related statements of
income, changes in partners' capital, and cash flows for the year then ended.
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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 2001, and
the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
March 8, 2002
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund V:
We have audited the accompanying balance sheet of PLM Equipment Growth Fund V
("the Partnership") as of December 31, 2000 and the related statements of
income, changes in partners' capital and cash flows for each of the years in the
two-year period ended December 31, 2000. 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 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund V as
of December 31, 2000 and the results of its operations and its cash flows for
each of the years in the two-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 12, 2001
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
BALANCE SHEETS
December 31,
(in thousands of dollars, except unit amounts)
2001 2000
-----------------------------------
ASSETS
Equipment held for operating leases, at cost $ 73,711 $ 74,849
Less accumulated depreciation (62,572) (58,086)
-----------------------------------
11,139 16,763
Equipment held for sale -- 1,309
-----------------------------------
Net equipment 11,139 18,072
Cash and cash equivalents 6,312 1,799
Restricted cash -- 445
Accounts receivable, less allowance for doubtful accounts of
$664 in 2001 and $34 in 2000 1,041 1,578
Investments in unconsolidated special-purpose entities 5,703 8,189
Lease negotiation fees to affiliate, less accumulated
amortization of $33 in 2001 and $17 in 2000 14 7
Debt issuance costs, less accumulated amortization
of $110 in 2000 -- 23
Prepaid expenses and other assets 34 39
-----------------------------------
Total assets $ 24,243 $ 30,152
===================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 410 $ 245
Due to affiliates 194 259
Lessee deposits and reserve for repairs 3,149 2,728
Note payable -- 5,474
-----------------------------------
Total liabilities 3,753 8,706
-----------------------------------
Commitments and contingencies
Partners' capital
Limited partners (limited partnership units of 8,533,465 and
9,065,911 as of December 31, 2001 and 2000, respectively) 20,490 21,446
General Partner -- --
-----------------------------------
Total partners' capital 20,490 21,446
-----------------------------------
Total liabilities and partners' capital $ 24,243 $ 30,152
===================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF INCOME
For the Years Ended December 31,
(in thousands of dollars, except weighted-average unit amounts)
2001 2000 1999
-------------------------------------------
REVENUES
Lease revenue $ 11,029 $ 20,918 $ 20,276
Interest and other income 242 204 239
Net gain on disposition of equipment 1,246 1,351 253
-------------------------------------------
Total revenues 12,517 22,473 20,768
-------------------------------------------
EXPENSES
Depreciation and amortization 5,652 8,178 9,322
Repairs and maintenance 1,074 1,781 1,535
Equipment operating expenses 317 4,984 3,275
Insurance expenses 196 206 642
Management fees to affiliate 454 1,013 1,027
Interest expense 141 1,013 1,288
General and administrative expenses to affiliates 443 776 914
Other general and administrative expenses 527 879 659
Loss on revaluation of equipment -- -- 2,899
Provision for bad debts 631 55 13
-------------------------------------------
Total expenses 9,435 18,885 21,574
-------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 186 406 2,108
-------------------------------------------
Net income $ 3,268 $ 3,994 $ 1,302
===========================================
Partners' share of net income
Limited partners $ 3,149 $ 3,517 $ 824
General Partner 119 477 478
-------------------------------------------
Total $ 3,268 $ 3,994 $ 1,302
===========================================
Limited partners' net income per
weighted-average limited partnership unit $ 0.35 $ 0.39 $ 0.09
===========================================
Cash distribution $ 1,720 $ 9,544 $ 8,617
===========================================
Cash distribution per weighted-average limited
partnership unit $ 0.18 $ 1.00 $ 0.90
===========================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands of dollars)
Limited General
Partners Partner Total
----------------------------------------------------
Partners' capital as of December 31, 1998 $ 34,406 $ -- $ 34,406
Net income 824 478 1,302
Purchase of limited partnership units (85) -- (85)
Cash distribution (8,139) (478) (8,617)
---------------------------------------------------
Partners' capital as of December 31, 1999 27,006 -- 27,006
Net income 3,517 477 3,994
Purchase of limited partnership units (10) -- (10)
Cash distribution (9,067) (477) (9,544)
---------------------------------------------------
Partners' capital as of December 31, 2000 21,446 -- 21,446
Net income 3,149 119 3,268
Purchase of limited partnership units (2,504) -- (2,504)
Cash distribution (1,601) (119) (1,720)
---------------------------------------------------
Partners' capital as of December 31, 2001 $ 20,490 $ -- $ 20,490
===================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(in thousands of dollars)
2001 2000 1999
----------------------------------------------
OPERATING ACTIVITIES
Net income $ 3,268 $ 3,994 $ 1,302
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,652 8,178 9,322
Provision for bad debts 631 55 13
Loss on revaluation of equipment -- -- 2,899
Net gain on disposition of equipment (1,246) (1,351) (253)
Equity in net income of unconsolidated
special-purpose entities (186) (406) (2,108)
Changes in operating assets and liabilities:
Restricted cash 445 (4) (333)
Accounts receivable, net (103) 554 986
Prepaid expenses and other assets 5 15 27
Accounts payable and accrued expenses (49) (256) (92)
Due to affiliates (65) (45) (35)
Lessee deposits and reserve for repairs 421 87 338
---------------------------------------------
Net cash provided by operating activities 8,773 10,821 12,066
---------------------------------------------
INVESTING ACTIVITIES
Proceeds from disposition of equipment 2,679 7,183 860
Payments for purchase of equipment and capitalized repairs (4) (2,679) (1,256)
Distribution from liquidation of unconsolidated
special-purpose entity -- -- 7,354
Distribution from unconsolidated special-purpose entities 2,673 1,850 265
Payments of acquisition fees to affiliate (101) -- (56)
Payments of lease negotiation fees to affiliate (23) -- (13)
---------------------------------------------
Net cash provided by investing activities 5,224 6,354 7,154
---------------------------------------------
FINANCING ACTIVITIES
Payments of note payable (5,474) (10,010) (8,104)
Proceeds from short-term loan from affiliate -- 4,500 3,200
Payment of short-term loan to affiliate -- (4,500) (3,200)
Cash distribution paid to General Partner (119) (477) (48)
Cash distribution paid to limited partners (1,601) (9,067) (8,139)
Purchase of limited partnership units (2,290) (10) (85)
---------------------------------------------
Net cash used in financing activities (9,484) (19,564) (16,806)
---------------------------------------------
Net increase (decrease) in cash and cash equivalents 4,513 (2,389) 2,414
Cash and cash equivalents at beginning of year 1,799 4,188 1,774
---------------------------------------------
Cash and cash equivalents at end of year $ 6,312 $ 1,799 $ 4,188
=============================================
SUPPLEMENTAL INFORMATION
Interest paid $ 224 $ 1,083 $ 1,348
=============================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ORGANIZATION
PLM Equipment Growth Fund V, a California limited partnership (the Partnership),
was formed on November 14, 1989 to engage in the business of owning, leasing, or
otherwise investing in predominately used transportation and related equipment.
PLM Financial Services, Inc. (FSI) is the General Partner of the Partnership.
FSI is a wholly owned subsidiary of PLM International, Inc. (PLM International).
FSI manages the affairs of the Partnership. Cash distributions of the
Partnership are generally allocated 95% to the limited partners and 5% to the
General Partner. 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 entitled to subordinated incentive fees equal to 5% of cash
available for distribution and 5% of net disposition proceeds (as defined in the
partnership agreement), which are distributed by the Partnership after the
limited partners have received a certain minimum rate of return.
Pursuant to the equitable settlement related to the Koch and Romei actions (see
Note 10), the Partnership phases have been amended. The amendment extends the
period in which the Partnership will be able to reinvest its cash flow, surplus
cash, and equipment sale proceeds in additional equipment until December 31,
2004. During that time, the General Partner may purchase additional equipment,
consistent with the objectives of the Partnership, and the amount of front-end
fees that FSI may earn has been increased 20% (including acquisition and lease
negotiation fees). The Partnership will be terminated on December 31, 2010,
unless terminated earlier upon the sale of all equipment or by certain other
events. As a result of the equitable settlement, the Partnership's redemption
plan has been terminated and the General Partner has agreed to purchase 594,820
units and, as of December 31, 2001, has paid or accrued $2.5 million to the
purchasing agent for this purchase.
As of December 31, 2001, the purchasing agent purchased 532,446 units, which is
reflected as a reduction in Partnership units. The purchasing agent also
purchased an additional 55,449 during January 2002. The General Partner expects
the remaining 6,925 units to be purchased during the remainder of 2002.
Under the former redemption plan, for the years ended December 31, 2000 and
1999, the Partnership had purchased 2,000 and 13,117 limited partnership units
for $10,000 and $0.1 million, respectively.
ESTIMATES
These financial statements have been prepared on the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States
of America. 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 as earned in accordance with Statement
of
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION (continued)
ACCOUNTING FOR LEASES (continued)
Financial Accounting Standards (SFAS) No. 13, "Accounting for Leases" (SFAS No.
13). Lease origination costs are capitalized and amortized over the term of the
lease. Periodically, the Partnership leases equipment with lease terms that
qualify for direct finance lease classification, as required by SFAS No. 13.
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 all other 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
and certain other acquisition costs have been capitalized as part of the cost of
the equipment. Lease negotiation fees are amortized over the initial equipment
lease term. Debt issuance costs are amortized over the term of the related loan
using the straight-line method that approximates the effective interest method
(see Note 7). Major expenditures that are expected to extend the useful lives or
reduce future operating expenses of equipment are capitalized and amortized over
the remaining life of the equipment.
Pursuant to the equitable settlement (see Note 10), during 2001 the Partnership
paid additional acquisition and lease negotiation fees of $0.1 million to FSI on
equipment purchased in 1999. Depreciation and amortization of $22,000, which
represents the cumulative effect of depreciation and amortization that should
have been recorded from the purchase of equipment in 1999 until the equitable
settlement, was recorded during 2001.
TRANSPORTATION EQUIPMENT
Equipment held for operating leases is stated at cost less any reductions to the
carrying value as required by SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121).
Equipment held for sale is stated at the lower of the equipment's depreciated
cost or fair value, less cost to sell, and is subject to a pending contract for
sale.
In accordance with SFAS No. 121, the General Partner reviews the carrying values
of the Partnership's equipment portfolio at least quarterly and whenever
circumstances indicate that the carrying value of an asset may not be
recoverable due to expected future market conditions. If the projected
undiscounted cash flows and the fair market value of the equipment were less
than the carrying value of the equipment, a loss on revaluation was recorded.
During 2001, a unconsolidated special-purpose entity (USPE) trust owning two
Stage III commercial aircraft on a direct finance lease reduced its net
investment in the finance lease receivable due to a series of lease amendments.
The Partnership's proportionate share of this writedown, which is included in
equity in net income (loss) of the USPE in the accompanying statement of income,
was $1.0 million. Reductions of $2.9 million to the carrying value of a owned
marine vessel were required during 1999. No reductions to the carrying value of
owned equipment were required during 2001 and 2000 or partially owned equipment
during 2000 and 1999.
In October 2001, Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144),
which replaces SFAS No. 121. SFAS No. 144 provides updated guidance concerning
the recognition and measurement of an impairment loss for certain types of
long-lived assets, expands the scope of a discontinued operation to include a
component of an entity, and eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION (continued)
TRANSPORTATION EQUIPMENT (continued)
The Partnership will apply the new rules on accounting for the impairment or
disposal of long-lived assets beginning in the first quarter of 2002, and they
are not anticipated to have an impact on the Partnership's earnings or financial
position.
INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The Partnership has interests in USPEs that own transportation equipment. These
are single purpose entities that do not have any debt or other financial
encumbrances and 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)
and PLM Worldwide Management Services (WMS). TEC is a wholly owned subsidiary of
FSI and WMS is a wholly owned subsidiary of PLM International. The Partnership's
interest in USPEs are managed by IMI. The Partnership's equity interest in the
net income (loss) 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 and WMS.
REPAIRS AND MAINTENANCE
Repairs and maintenance costs related to marine vessels, railcars, and trailers
are usually the obligation of the Partnership and are charged against operations
as incurred. Certain costs associated with marine vessel dry-docking are
estimated and accrued ratably over the period prior to such dry-docking. If a
marine vessel is sold and there is a balance in the dry-docking reserve account
for that marine vessel, the balance in the reserve account is included as
additional gain on disposition. Maintenance costs of aircraft and marine
containers are the obligation of the lessee. To meet the maintenance
requirements of certain aircraft airframes and engines, reserve accounts are
prefunded by the lessee over the period of the lease based on the number of
hours this equipment is used times the estimated rate to repair this equipment.
If repairs exceed the amount prefunded by the lessee, the Partnership may have
the obligation to fund and accrue the difference. In certain instances, if the
aircraft is sold and there is a balance in the reserve account for repairs to
that aircraft, the balance in the reserve account is reclassified as additional
gain on disposition. The aircraft reserve accounts and marine vessel dry-docking
reserve accounts are included in the accompanying balance sheets as lessee
deposits and reserve for repairs.
NET INCOME AND DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT
Special allocations of income are made to the General Partner to the extent
necessary to cause the capital account balance of the General Partner to be zero
as of the close of such year. The limited partners' net income 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 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.
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.
Cash distributions to investors in excess of net income are considered a return
of capital. Cash distributions to the limited partners of $5.5 million, and $7.3
million in 2000, and 1999, respectively, were
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION (continued)
NET INCOME AND DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT (continued)
deemed to be a return of capital. None of the cash distributions to the limited
partners during 2001 were deemed to be a return of capital.
Cash distributions related to the fourth quarter of $1.6 million in 2000, and
$1.7 million in 1999, were paid during the first quarter of 2001, and 2000,
respectively. There were no cash distributions related to the fourth quarter
2001 paid during the first quarter of 2002.
NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT
Net income per weighted-average Partnership unit was computed by dividing net
income attributable to limited partners by the weighted-average number of
Partnership units deemed outstanding during the year. The weighted-average
number of Partnership units deemed outstanding during the years ended December
31, 2001, 2000, and 1999, was 9,061,535, 9,066,391, and 9,071,929, respectively.
CASH AND CASH EQUIVALENTS
The Partnership considers highly liquid investments that are readily convertible
to known amounts of cash with original maturities of one year or less as cash
equivalents. The carrying amount of cash equivalents approximates fair market
value due to the short-term nature of the investments.
COMPREHENSIVE INCOME
The Partnership's comprehensive income is equal to net income for the years
ended December 31, 2001, 2000, and 1999.
RESTRICTED CASH
As of December 31, 2000, restricted cash represented lessee security deposits
held by the Partnership.
NEW ACCOUNTING STANDARDS
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS No.
142), was approved by the FASB. SFAS No. 142 changes the accounting for goodwill
and other intangible assets determined to have an indefinite useful life from an
amortization method to an impairment-only approach. Amortization of applicable
intangible assets will cease upon adoption of this statement. The Partnership is
required to implement SFAS No. 142 on January 1, 2002 and it has not yet
determined the impact, if any, this statement will have on its financial
position or results of operations.
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES
An officer of FSI contributed $100 of the Partnership's initial capital. Under
the equipment management agreement, IMI, subject to certain reductions, receives
a monthly management fee attributable either to owned equipment or interests in
equipment owned by the USPEs equal to the lesser of (i) the fees that would be
charged by an independent third party for similar services for similar equipment
or (ii) the sum of (a) 5% of the gross lease revenues attributable to equipment
that is subject to operating leases, (b) 2% of the gross lease revenues, as
defined in the agreement, that is subject to full payout net leases, or (c) 7%
of the gross lease revenues attributable to equipment, if any, that is subject
to per diem leasing arrangements and thus is operated by the Partnership. The
Partnership's management fee in 2001 was less than an independent third party
management fee charged for similar services for similar equipment. The
Partnership reimbursed FSI for data processing and administrative expenses
directly attributable to the Partnership in the amount of $0.4 million, $0.8
million, and $0.9 million during 2001, 2000, and 1999, respectively.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES (continued)
The Partnership's proportional share of USPEs management fees to affiliate were
$0.3 million during 2001, 2000 and 1999, and the Partnership's proportional
share of administrative and data processing expenses to affiliate $0.2 million
during 2001 and $0.1 million during 2000, and 1999. Both of these affiliate
expenses reduced the Partnership's proportional share of the equity interest in
income in USPEs.
The Partnership and the USPEs paid or accrued equipment acquisition and lease
negotiation fees of $0.1 million, $-0-, and $0.1 million to TEC in 2001, 2000,
and 1999, respectively.
The Partnership owned certain equipment in conjunction with affiliated programs
during 2001, 2000, and 1999 (see Note 4).
The Partnership borrowed a total $4.5 million and $3.2 million from the General
Partner for a period of time during 2000 and 1999, respectively. The General
Partner charged the Partnership market interest rates for the time the loan was
outstanding. Total interest paid to the General Partner was $0.1 million, and
$15,000 during 2000, and 1999, respectively. There were no similar borrowings
during 2001.
The balance due to affiliates as of December 31, 2001 includes $0.1 million due
to FSI and its affiliates for management fees and $0.1 million due to affiliated
USPEs. The balance due to affiliates as of December 31, 2000 includes $0.2
million 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 were as follows (in
thousands of dollars):
Equipment Held for Operating Leases 2001 2000
- ------------------------------------------------------ -----------------------------------
Aircraft $ 55,172 $ 55,071
Rail equipment 11,265 11,288
Marine containers 5,059 6,245
Trailers 2,215 2,245
-----------------------------------
73,711 74,849
Less accumulated depreciation (62,572) (58,086)
-----------------------------------
11,139 16,763
Equipment held for sale -- 1,309
-----------------------------------
Net equipment $ 11,139 $ 18,072
===================================
Revenues are earned under operating leases. In most cases, lessees are invoiced
for equipment leases on a monthly basis. All equipment invoiced monthly are
based on a fixed rate. 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 pooled
equipment to sublessees, after deducting certain direct operating expenses of
the pooled equipment. Rental revenues for trailers are based on a per-diem lease
in the free running interchange with the railroads.
As of December 31, 2001, all owned equipment was on lease except for 87 railcars
with a net book value of $0.5 million. As of December 31, 2000, all owned
equipment was on lease except for 6 railcars with a net book value of $26,000.
Equipment held for operating leases is stated at cost less any reductions to the
carrying value as required by SFAS 121. Reductions of $2.9 million to the
carrying value of a owned marine vessel was required during 1999. No reductions
to the carrying value were required during 2001 and 2000.
As of December 31, 2000, the Partnership held a marine vessel with a net book
value of $1.3 million as equipment held for sale. During February 2001, this
marine vessel was sold.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
3. EQUIPMENT (continued)
During 2000, the Partnership purchased a hush-kit for one of the Partnership's
McDonnell Douglas DC-9 commercial aircraft for $2.7 million. The Partnership was
required to install this hush-kit per the lease agreement for this equipment.
During 2001, the Partnership disposed of a marine vessel that was held for sale
at December 31, 2000, marine containers, trailers, and a railcar with an
aggregate net book value of $1.4 million, for $2.7 million. During 2000, the
Partnership disposed of a marine vessel, marine containers, trailers, and
railcars with an aggregate net book value of $6.0 million, for $7.2 million.
Included in the 2000 net gain on disposition of assets is the unused portion of
marine vessel drydocking of $0.1 million.
All wholly- and jointly-owned equipment on lease is accounted for as operating
leases, except for two jointly owned commercial aircraft on a direct finance
lease. Future minimum rentals under noncancelable operating leases, as of
December 31, 2001, for wholly- and jointly-owned equipment during each of the
next five years are approximately $8.7 million in 2002; $5.1 million in 2003;
$4.0 million in 2004; $2.0 million in 2005; $1.5 million in 2006; and $0.7
million thereafter. Per diem and short-term rentals consisting of utilization
rate lease payments included in lease revenues amounted to approximately $7.3
million, $13.9 million, and $9.2 million in 2001, 2000, and 1999, respectively.
4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The Partnership owns equipment jointly with affiliated programs. These are
single purpose entities that do not have any debt or other financial
encumbrances.
The net investments in USPEs include the following jointly owned equipment (and
related assets and liabilities) as of December 31 (in thousands of dollars):
2001 2000
------------------------------
48% interest in an entity owning a product tanker $ 4,248 $ 4,961
25% interest in a trust owning two commercial stage III aircraft
on a direct finance lease 855 2,245
50% interest in an entity owning a product tanker 600 983
---------- -----------
Net investments $ 5,703 $ 8,189
========== ===========
As of December 31, 2001 and 2000, all jointly-owned equipment in the
Partnership's USPE portfolio was on lease.
During 2001, the USPE trust owning two commercial stage III aircraft on a direct
finance lease reduced its net investment in the finance lease receivable due to
a series of lease amendments. The Partnership's proportionate share of this
writedown, which is included in equity in net income (loss) of the USPE in the
accompanying statement of income, was $1.0 million.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIEs (continued)
The following summarizes the financial information for the USPEs and the
Partnership's interest therein as of and for the years ended December 31 (in
thousands of dollars):
2001 2000 1999
-------------------------- -------------------------- --------------------------
Net Interest Net Interest Net Interest
Total of Total of Total of
USPEs Partnership USPEs Partnership USPEs Partnership
-------------------------- -------------------------- --------------------------
Net Investments $ 13,591 $ 5,703 $ 21,434 $ 8,189 $ 25,000 $ 9,633
Lease revenues 13,613 6,568 12,433 6,107 10,347 5,068
Net income (loss) (860) 186 1,682 406 11,039 2,108
5. OPERATING SEGMENTS
The Partnership operates primarily in five 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 interest expense, general and
administrative expenses, 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 Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, Leasing Leasing Leasing Leasing Leasing Other(1) Total
2001
------------------------------------ --------- --------- -------- --------- --------- --------- ----------
REVENUES
Lease revenue $ 8,486 $ 312 $ 66 $ 366 $ 1,799 $ -- $ 11,029
Interest and other income 34 -- 1 -- 6 201 242
Gain (loss) on disposition of (1) 130 1,116 5 (4) -- 1,246
equipment
------------------------------------------------------------------------
Total revenues 8,519 442 1,183 371 1,801 201 12,517
------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 135 1 331 203 808 109 1,587
Depreciation and amortization 4,619 320 -- 127 551 35 5,652
Interest expense -- -- -- -- -- 141 141
Management fees to affiliate 290 15 3 19 127 -- 454
General and administrative expenses 38 -- 24 64 61 783 970
Provision for bad debts 654 -- -- (10) (13) -- 631
------------------------------------------------------------------------
Total costs and expenses 5,736 336 358 403 1,534 1,068 9,435
------------------------------------------------------------------------
Equity in net income (loss) of USPEs (725) -- 911 -- -- -- 186
------------------------------------------------------------------------
Net income (loss) $ 2,058 $ 106 $ 1,736 $ (32) $ 267 $ (867) $ 3,268
========================================================================
Total assets as of December 31, $ 9,662 $ 408 $ 4,914 $ 582 $ 2,317 $ 6,360 $ 24,243
2001
========================================================================
(1) Includes certain assets not identifiable to a specific segment such as cash
and prepaid expenses. Also includes certain interest income and costs not
identifiable to a particular segment, such as interest expense and certain
amortization, general and administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
5. OPERATING SEGMENTS (continued)
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, Leasing Leasing Leasing Leasing Leasing Other(1) Total
2000
------------------------------------ --------- --------- -------- --------- --------- --------- ----------
REVENUES
Lease revenue $ 8,063 $ 412 $ 8,123 $ 1,944 $ 2,376 $ -- $ 20,918
Interest income and other 9 -- 15 -- -- 180 204
Gain on disposition of equipment -- 189 79 1,054 29 -- 1,351
------------------------------------------------------------------------
Total revenues 8,072 601 8,217 2,998 2,405 180 22,473
------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 281 7 5,349 731 565 38 6,971
Depreciation and amortization 5,377 451 1,283 464 542 61 8,178
Interest expense -- -- -- -- -- 1,013 1,013
Management fees to affiliate 279 20 406 117 191 -- 1,013
General and administrative expenses 165 -- 48 452 70 920 1,655
Provision for bad debts -- -- -- 51 4 -- 55
------------------------------------------------------------------------
Total costs and expenses 6,102 478 7,086 1,815 1,372 2,032 18,885
------------------------------------------------------------------------
Equity in net income (loss) of USPEs 384 -- 22 -- -- -- 406
------------------------------------------------------------------------
Net income (loss) $ 2,354 $ 123 $ 1,153 $ 1,183 $ 1,033 $ (1,852) $ 3,994
========================================================================
Total assets as of December 31, $ 15,860 $ 946 $ 7,852 $ 742 $ 2,891 $ 1,861 $ 30,152
2000
========================================================================
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, Leasing Leasing Leasing Leasing Leasing Other(1) Total
1999
------------------------------------ --------- --------- -------- --------- --------- --------- ----------
REVENUES
Lease revenue $ 8,162 $ 699 $ 6,214 $ 2,727 $ 2,474 $ -- $ 20,276
Interest income and other 59 13 6 -- 28 133 239
Gain (loss) on disposition of -- 249 -- (16) 20 -- 253
equipment
------------------------------------------------------------------------
Total revenues 8,221 961 6,220 2,711 2,522 133 20,768
------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 162 5 3,882 870 485 48 5,452
Depreciation and amortization 5,264 590 2,063 666 600 139 9,322
Interest expense -- -- -- -- -- 1,288 1,288
Management fees to affiliate 334 35 311 171 176 -- 1,027
General and administrative expenses 67 -- 35 628 52 791 1,573
Loss on revaluation -- -- 2,899 -- -- -- 2,899
Provision for (recovery of) bad -- (4 ) -- 29 (12 ) -- 13
debts
------------------------------------------------------------------------
Total costs and expenses 5,827 626 9,190 2,364 1,301 2,266 21,574
------------------------------------------------------------------------
Equity in net income of USPEs 1,811 -- 297 -- -- -- 2,108
------------------------------------------------------------------------
Net income (loss) $ 4,205 $ 335 $ (2,673 )$ 347 $ 1,221 $ (2,133 ) $ 1,302
========================================================================
(1) Includes certain assets not identifiable to a specific segment such as cash
and prepaid expenses. Also includes certain interest income and costs not
identifiable to a particular segment, such as interest expense and certain
amortization, general and administrative and operations support expenses.
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, mobile offshore
drilling unit, and trailers to lessees domiciled in six geographic regions:
United States, Canada, South America, Caribbean, Europe, and Mexico. Marine
vessels and marine containers are leased to multiple lessees in different
regions that operate worldwide.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
6. GEOGRAPHIC INFORMATION (continued)
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):
Owned Equipment Investments in USPEs
------------------------------------- -----------------------------------
Region 2001 2000 1999 2001 2000 1999
----------------------------- ------------------------------------- -----------------------------------
United States $ 2,201 $ 4,390 $ 6,271 $ -- $ -- $ --
Canada 4,272 4,223 4,081 -- -- --
South America 3,011 3,011 3,011 -- -- --
Caribbean -- 444 -- -- -- --
Mexico 1,167 315 -- -- -- --
Rest of the world 378 8,535 6,913 6,568 6,107 5,068
------------------------------------- -------------------------------------
Lease revenues $ 11,029 $ 20,918 $ 20,276 $ 6,568 $ 6,107 $ 5,068
===================================== =====================================
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):
Owned Equipment Investments in USPEs
------------------------------------- -----------------------------------
Region 2001 2000 1999 2001 2000 1999
-------------------------- ------------------------------------- -----------------------------------
United States $ 466 $ 2,089 $ 1,594 $ -- $ -- $ (2)
Canada 2,457 2,504 1,599 -- -- --
South America 651 639 858 -- -- --
Caribbean -- (606) -- -- -- --
Mexico (555) (439) -- (725) 384 336
Europe -- -- -- -- -- 1,477
Rest of the world 930 1,255 (2,635) 911 22 297
------------------------------------- -------------------------------------
Regional income (loss) 3,949 5,442 1,416 186 406 2,108
Administrative and other (867) (1,854) (2,222) -- -- --
------------------------------------- -------------------------------------
Net income (loss) $ 3,082 $ 3,588 $ (806) $ 186 $ 406 $ 2,108
===================================== =====================================
The net book value of these assets as of December 31 are as follows (in
thousands of dollars):
Owned Equipment Investments in USPEs
------------------------- ----------------------
Region 2001 2000 2001 2000
-------------------------- ------------------------- -------------------------
United States $ 3,613 $ 4,579 $ -- $ --
Canada 4,929 6,047 -- --
South America 1,546 3,089 -- --
Mexico 760 2,334 855 2,245
Rest of the world 291 2,023 4,848 5,944
------------------------- -------------------------
Net book value $ 11,139 $ 18,072 $ 5,703 $ 8,189
========================= =========================
7. DEBT
In November 1991, the Partnership borrowed $38.0 million under a nonrecourse
loan agreement. The loan was secured by certain marine containers, a marine
vessel, and five aircraft owned by the Partnership and was scheduled to mature
on December 31, 2001.
During August 2000, the existing senior loan agreement was amended and restated
to change the quarterly principal payment date from the 45th day of each quarter
to the last business day of each quarter. The note was scheduled to be repaid in
four principal payments of $1.4 million during 2001.
The Partnership made the regularly scheduled principal payments of $5.3 million
and $7.5 million to the lender of the senior loan during 2001 and 2000,
respectively, and quarterly interest payments at a rate of LIBOR plus 1.2% per
annum (8.0% at December 31, 2000). The Partnership also paid the lender of the
senior loan an additional $0.2 million and $2.5 million from equipment sale
proceeds, as required by the loan agreement during 2001 and 2000, respectively.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
8. CONCENTRATIONS OF CREDIT RISK
For the years ended December 31, 2001, 2000, and 1999, the Partnership's
customers that accounted for 10% or more of the total consolidated revenues for
the owned equipment and jointly owned equipment was Varig South America
("Varig")(14% in 2001, 10% in 2000 and 1999). During 2001, Varig notified the
General Partner of its intention to return the aircraft under lease. Varig has
not remitted four lease payments due to the Partnership. The Partnership has a
security deposit from Varig that could be used to pay a portion of the amount
due. During October 2001, the General Partner sent a notification of default to
Varig. The lease, with an expiration date of October 2002, has certain return
condition requirements for each of the remaining aircraft. The General Partner
has recorded an allowance for bad debts for the amount of receivables due less
the security deposit.
As of December 31, 2001, 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.
9. 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, 2001, the financial statement carrying amount of assets and
liabilities was approximately $37.7 million lower than the federal income tax
basis of such assets and liabilities, primarily due to differences in
depreciation methods, equipment reserves, provisions for bad debts, lessees'
prepaid deposits, and the tax treatment of underwriting commissions and
syndication costs.
10. CONTINGENCIES
Two class action lawsuits which were filed against PLM International and various
of its wholly owned subsidiaries in January 1997 in the United States District
Court for the Southern District of Alabama, Southern Division (the court), Civil
Action No. 97-0177-BH-C (the Koch action), and June 1997 in the San Francisco
Superior Court, San Francisco, California, Case No. 987062 (the Romei action),
were fully resolved during the fourth quarter of 2001.
The named plaintiffs were individuals who invested in PLM Equipment Growth Fund
IV (Fund IV), the Partnership (Fund V), PLM Equipment Growth Fund VI (Fund VI),
and PLM Equipment Growth & Income Fund VII (Fund VII and collectively, the
Funds), each a California limited partnership for which PLMI's wholly owned
subsidiary, FSI, acts as the General Partner. The complaints asserted causes of
action against all defendants for fraud and deceit, suppression, negligent
misrepresentation, negligent and intentional breaches of fiduciary duty, unjust
enrichment, conversion, conspiracy, unfair and deceptive practices and
violations of state securities law. Plaintiffs alleged 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 asserted liability against defendants for improper sales and
marketing practices, mismanagement of the Funds, and concealing such
mismanagement from investors in the Funds. Plaintiffs sought unspecified
compensatory damages, as well as punitive damages.
In February 1999 the parties to the Koch and Romei actions agreed to monetary
and equitable settlements of the lawsuits, with no admission of liability by any
defendant, and filed a Stipulation of Settlement with the court. The court
preliminarily approved the settlement in August 2000, and information regarding
the settlement was sent to class members in September 2000. A final fairness
hearing was held on November 29, 2000, and on April 25, 2001, the federal
magistrate judge assigned to the case entered a Report and Recommendation
recommending final approval of the monetary and equitable settlements to the
federal district court judge. On July 24, 2001, the federal district court judge
adopted the Report and Recommendation, and entered a final judgment approving
the settlements. No appeal has been filed and the time for filing an appeal has
expired.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
10. CONTINGENCIES (continued)
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, consisting of $0.3 million deposited by PLMI and the remainder
funded by an insurance policy. The final settlement amount of $4.9 million (of
which PLMI's share was approximately $0.3 million) was accrued in 1999, paid out
in the fourth quarter of 2001 and was determined based upon the number of claims
filed by class members, the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys, and the amount of the administrative costs incurred in
connection with the settlement.
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, except for Fund IV; (b) the extension (until December 31,
2004) of the period during which FSI can reinvest the Funds' funds in additional
equipment, except for Fund IV; (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;
except for Fund IV; (d) a one-time purchase by each of Funds V, VI, and VII of
up to 10% of that partnership's outstanding units for 80% of net asset value per
unit as of September 30, 2000; and (e) the deferral of a portion of the
management fees paid, except for Fund IV, to an affiliate of FSI until, if ever,
certain performance thresholds have been met by the Funds. 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. Following a vote of limited
partners resulting in less than 50% of the limited partners of each of Funds V,
VI, and VII voting against such amendments and after final approval of the
settlement, each of the Funds' limited partnership agreements was amended to
reflect these changes. During the fourth quarter of 2001 the respective Funds
purchased limited partnership units from those equitable class members who
submitted timely requests for purchase. Fund V agreed to purchased 594,820 of
its limited partnership units at a total cost of $2.5 million.
The Partnership is involved as plaintiff or defendant in various other legal
actions incidental to its business. Management does not believe that any of
these actions will be material to the financial condition or results of
operations of the Partnership.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
11. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the year
ended December 31, 2001 (in thousands of dollars, except weighted-average unit
amounts):
March June September December
31, 30, 30, 31, Total
------------------------------------------------------------------------------------------
Operating results:
Total revenues $ 4,096 $ 2,897 $ 2,796 $ 2,728 $ 12,517
Net income (loss) 1,748 996 655 (131) 3,268
Per weighted-average limited
partnership unit:
Net income (loss) $ 0.18 $ 0.11 $ 0.07 $ (0.01) $ 0.35
The following is a list of the major events that affected the Partnership's
performance during 2001:
(i) In the first quarter of 2001, the Partnership sold a marine vessel,
marine containers, and a railcar for a gain of $1.2 million;
(ii)In the second quarter of 2001, operating expenses decreased $0.2
million due to the sale of a marine vessel during the first quarter;
(iii) In the third quarter of 2001, the Partnership's investment in USPEs
generated a loss resulting from lower lease revenues of $0.2 million and higher
repair expenses of $0.1 million; and
(iv)In the fourth quarter of 2001, the Partnership's investment in a USPE
trust that owned two commercial aircraft on a direct finance lease, recorded a
$1.0 million loss on revaluation.
The following is a summary of the quarterly results of operations for the year
ended December 31, 2000 (in thousands of dollars, except weighted-average unit
amounts):
March June September December
31, 30, 30, 31, Total
------------------------------------------------------------------------------------------
Operating results:
Total revenues $ 5,770 $ 6,012 $ 6,394 $ 4,297 $ 22,473
Net income 667 1,526 1,592 209 3,994
Per weighted-average limited partnership unit:
Net income $ 0.06 $ 0.16 $ 0.17 $ 0.00 $ 0.39
The following is a list of the major events that affected the Partnership's
performance during 2000:
(i) In the first quarter of 2000, operating expenses increased $0.2 million
due to repairs to the Partnership's aircraft;
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
11. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
(ii) In the second quarter of 2000, lease revenues increased $0.3 million
due to a marine vessel earning a higher lease rate and the Partnership's
investment in USPEs generated an increase in income of $0.4 million also due to
higher lease rates earned by the entities that owned marine vessels;
(iii) In the third quarter of 2000, the Partnership sold marine containers,
trailers, and a railcar for a gain of $1.1 million; and
(iv)In the fourth quarter of 2000, lease revenues decreased $0.9 million
and expenses decreased $0.8 million due to equipment sales.
(This space intentionally left blank)
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund V:
We have audited the financial statements of PLM Equipment Growth Fund V (the
"Partnership") as of December 31, 2001, and for the year then ended, and have
issued our report thereon dated March 8, 2002; such report is included elsewhere
in this Form 10-K. Our audit also included the financial statement schedule of
PLM Equipment Growth Fund V, listed in Item 14. This financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion based on our audit. 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/ Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
March 8, 2002
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
Valuation and Qualifying Accounts
Years Ended December 31, 2001, 2000, and 1999
(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, 2001
Allowance for Doubtful Accounts $ 34 $ 631 $ 1 $ 664
======================================================================
Year Ended December 31, 2000
Allowance for Doubtful Accounts $ 47 $ 55 $ 68 $ 34
======================================================================
Year Ended December 31, 1999
Allowance for Doubtful Accounts $ 77 $ 13 $ 43 $ 47
======================================================================
PLM EQUIPMENT GROWTH FUND V
INDEX OF EXHIBITS
Exhibit Page
4. Limited Partnership Agreement of Partnership. *
4.1 First Amendment to the Amended and Restated Limited
Partnership Agreement 52-55
10.1 Management Agreement between the Partnership and *
PLM Investment Management, Inc.
10.2 Amended and Restated $38,000,000 Loan Agreement,
dated as of September 26, 1996. *
10.3 Amendment No. 1 to the Amended and Restated $38,000,000
Loan Agreement, dated as of December 29, 1997. *
10.4 Amendment No. 2 to the Amended and Restated $38,000,000
Loan Agreement, dated as of August 2, 2000. *
Financial Statements required under Regulation S-X Rule 3-09:
99.1 Montgomery Partnership. 56-64
99.2 TAP Trust. 65-72
* Incorporated by reference. See page 24 of this report.