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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, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-15436
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PLM EQUIPMENT GROWTH FUND
(Exact name of registrant as specified in its charter)
California 94-2998816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 800, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (415) 974-1399
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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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Aggregate market value of the voting stock: N/A.
Indicate the number of units outstanding of each of the issuer's classes of
depositary units as of the latest practicable date:
Class Outstanding at March 14, 2001
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Limited partnership depositary units: 5,785,725
General Partnership Units: 1
An index of exhibits filed with this Form 10-K is located on page 39.
Total number of pages in this report: 52.
PART I
ITEM 1. BUSINESS
(A) Background
On January 28, 1986, 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 6,000,000 depositary
units in PLM Equipment Growth Fund, a California limited partnership (the
Partnership, the Registrant, or EGF). The Partnership's offering became
effective on May 20, 1986. FSI, as General Partner, owns a 1% interest in the
Partnership. The Partnership engages in the business of investing in a
diversified equipment portfolio consisting primarily of used, long-lived,
low-obsolescence capital equipment that is easily transportable by and among
prospective users.
The Partnership's primary objectives are:
(1) to maintain a diversified portfolio of long-lived, low-obsolescence
high residual-value equipment 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
of over $1.0 million must be approved by the PLM International Credit Review
Committee (the Committee), which is made up of members of PLM International
Senior Management. In determining a lessee's creditworthiness, the Committee
will consider, among other factors, the lessee's financial statements, internal
and external credit ratings, and letters of credit;
(2) to generate sufficient net operating cash flows from lease operations
to meet liquidity requirements and to generate cash distributions to the limited
partners until such time as the General Partner commences the orderly
liquidation of the Partnership assets or unless the Partnership is terminated
earlier upon sale of all Partnership property or by certain other events;
(3) to selectively sell equipment when the General Partner believes that,
due to market conditions, market prices for equipment exceed inherent equipment
values or that expected future benefits from continued ownership of a particular
asset will have an adverse affect on the Partnership. As the Partnership is in
the liquidations phase, proceeds from these sales, together with excess net
operating cash flow from operations (net cash provided by operating activities
plus distributions from unconsolidated special-purpose entities (USPEs)), less
reasonable reserves will be used to pay distributions to the partners;
(4) to preserve and protect the value of the portfolio through quality
management, maintaining diversity, and constantly monitoring equipment markets.
The offering of the units of the Partnership closed on May 19, 1987. On November
20, 1990, the units of the Partnership began trading on the American Stock
Exchange (AMEX). Thereupon each unitholder received a depositary receipt
representing ownership of the number of units owned by such unitholder. The
General Partner contributed $100 for its 1% general partner interest in the
Partnership. The General Partner delisted the Partnership's depositary units
from the American Stock Exchange (AMEX) on April 8, 1996. The last day for
trading on the AMEX was March 22, 1996.
Since the third quarter of 1994, the Partnership agreement has prohibited the
General Partner from reinvesting cash flows and surplus funds in equipment.
On January 1, 1998, the Partnership entered its liquidation phase. All future
cash flows and surplus funds, if any, are to be used for distributions to the
limited partners, except to the extent used to maintain reasonable reserves. The
liquidation phase will end on December 31, 2006, unless the Partnership is
terminated earlier upon sale of all of the equipment or by certain other events.
As of December 31, 2000, there were 5,785,725 depositary units outstanding.
Table 1, below, lists the equipment and the cost of the equipment in the
Partnership's portfolio, and the cost of the investment in an unconsolidated
special-purpose entity, as of December 31, 2000 (in thousands of dollars):
TABLE 1
Units Type Manufacturer Cost
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Owned equipment held for operating leases:
847 Tank railcars Various $ 21,340
54 Refrigerated marine containers Various 706
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Total owned equipment held for operating leases $ 22,046(1)
=================
Investment in unconsolidated special-purpose entity:
0.50 Product tanker Kaldnes M/V $ 8,277(1,2)
=================
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1 Includes equipment and investments purchased with capital contributions,
undistributed cash flow from operations, operations and Partnership borrowings.
Includes costs capitalized, subsequent to the date of acquisition, and equipment
acquisition fees paid to PLM Transportation Equipment Corporation, a wholly
owned subsidiary of FSI. All equipment was used equipment at the time of
purchase.
2 Jointly owned: EGF (50%) and one affiliated program
Railcars are leased under operating leases with terms of one to six years. 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. The
marine vessel operates in the short term spot charter market.
The lessees of the equipment include but are not limited to: Cronos Containers,
Elbow River Resources, Amoco Canada, ICG Propane, and Chevron USA Products Co.
(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
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 equipment. The short to mid-term nature of operating leases
commands a higher rental rate than the longer-term, full payout leases, and
offers lessees relative flexibility in their equipment commitment. In addition,
the rental obligation under an operating lease need not be capitalized on a
lessee's balance sheet.
The Partnership encounters considerable competition from lessors that utilize
full payout leases on new equipment, i.e., leases that have terms equal to the
expected economic life of the equipment. While some lessees prefer the
flexibility offered by a shorter-term operating lease, other lessees prefer the
rate advantages possible with a full payout lease. Competitors may write full
payout leases at considerably lower rates and for longer terms than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates, which may put the Partnership at a competitive
disadvantage.
(2) Manufacturers and Equipment Lessors
The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases. Manufacturers may provide ancillary services that the
Partnership cannot offer, such as specialized maintenance services (including
possible substitution of equipment), training, warranty services, and trade-in
privileges.
The Partnership also competes with many equipment lessors, including ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, and other investment programs that lease the same types of
equipment.
(D) Demand for Equipment
The Partnership currently operates in the following operating segments: marine
vessel leasing, marine container leasing, and tank railcar leasing. Each
equipment leasing segment engages in short-term to mid-term operating leases to
a variety of customers. The Partnership's current portfolio of equipment and
investments are used to transport materials and commodities, rather than people.
The following section describes the international and national markets in which
the Partnership's capital equipment operates:
(1) Marine Product Tanker
The market for tankers improved throughout 2000, with dramatic improvements
experienced in the fourth quarter; that are expected to continue strong
throughout 2001. The strength in the charter market for tankers is generally
tied to overall economic activity, and in particular, the upturn in activity
being seen in the Far East. The Partnership owns a 50% interest in a 1975-built
50,000 dwt. tanker (an affiliated Partnership owns the other 50% interest in
this vessel), which has been operating on a spot- or trip-charter basis,
carrying mostly fuel oil and similar petroleum distillates, throughout this time
period.
(2) Marine Containers
The Partnership's fleet of both standard dry and specialized containers is in
excess of twelve years of age, and is generally no longer suitable for use in
international commerce, either due to its specific physical condition, or the
lessees' preferences for newer equipment. As individual containers are returned
from their specific lessees, they are being marketed for sale on an "as is,
where is" basis. The market for such sales, although highly dependent upon the
specific location and type of container, has continued to be strong over the
last several years, as it relates to standard dry containers. The Partnership
has in the last year experienced reduced residual values on the sale of
refrigerated containers, due primarily to technological obsolescence associated
with this equipment's refrigeration machinery.
(3) Railcars
(a) Pressurized Tank Cars
Pressurized tank cars are used to transport liquefied petroleum gas (natural
gas) and anhydrous ammonia (fertilizer). The U.S. markets for natural gas are
industrial applications (46% of estimated demand in 2000), residential use
(21%), electrical generation (15%), commercial applications (15%), and
transportation (3%). Natural gas consumption is expected to grow over the next
few years as most new electricity generation capacity planned for is expected to
be natural gas fired. Within the fertilizer industry, demand is a function of
several factors, including the level of grain prices, the status of government
farm subsidy programs, amount of farming acreage and mix of crops planted,
weather patterns, farming practices, and the value of the U.S. dollar.
Population growth and dietary trends also play an indirect role.
On an industry wide basis, North American carloadings of the commodity group
that includes petroleum and chemicals increased 1% in 2000, compared to 1999.
Consequently, demand for pressurized tank cars remained relatively constant
during 2000, with utilization of this type of railcar within the Partnership
remaining above 98%. While renewals of existing leases continue at similar
rates, some cars continue to be renewed for "winter only" terms of approximately
six months. As a result, there are many pressurized tank cars up for renewal in
the spring of 2001.
(b) Nonpressurized, General Purpose Tank Cars
These cars are used to transport bulk liquid commodities and chemicals not
requiring pressurization, such as certain petroleum products, liquefied asphalt,
lubricating oils, molten sulfur, vegetable oils and corn syrup. This car type
continued to be in high demand during 2000. The overall health of the market for
these types of commodities is closely tied to both the U.S. and global
economies, as reflected in movements in the Gross Domestic Product, personal
consumption expenditures, retail sales, and currency exchange rates. The
manufacturing, automobile, and housing sectors are the largest consumers of
chemicals. Within North America, 2000 carloadings of the commodity group that
includes chemicals and petroleum products rose 1% over 1999 levels. Utilization
of the Partnership's nonpressurized tank cars remained above 98% during 2000.
(E) Government Regulations
The use, maintenance, and ownership of equipment are regulated by federal,
state, local, or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Partnership's ownership and operation
of equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Partnership's equipment portfolio are
either registered or operated internationally. Such equipment may be subject to
adverse political, government, or legal actions, including the risk of
expropriation or loss arising from hostilities. Certain of the Partnership's
equipment is subject to extensive safety and operating regulations, which may
require its removal from service or extensive modification of such equipment to
meet these regulations at considerable cost to the Partnership. Such regulations
include but are not limited to:
(1) the U.S. Oil Pollution Act of 1990, which established liability for
operators and owners of vessels and mobile offshore drilling units 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 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 containers.
(3) the U.S. Department of Transportation's Hazardous Materials Regulations
which regulate the classification of and packaging requirements for
hazardous materials and which apply particularly to the Partnership's tank
railcars.
(4) the U.S. Department of Transportation's Hazardous Materials Regulations
regulates the classification and packaging requirements of hazardous
materials which apply particularly to the Partnership's tank railcars. The
Federal Railroad Administration has mandated that effective July 1, 2000,
all tank railcars must be re-qualified every ten years from the last test
date stenciled on each railcar to insure tank shell integrity. Tank shell
thickness, weld seams, and weld attachments must be inspected and repaired
if necessary to re-qualify a tank railcar for service. The average cost of
this inspection is $1,800 for non-jacketed tank railcars and $3,600 for
jacketed tank railcars, not including any necessary repairs. This
inspection is to be performed at the next scheduled tank test and every ten
years thereafter. The Partnership owns 847 of these type of railcars. As of
December 31, 2000, 75 have been inspected and no defects have been found.
As of December 31, 2000, the Partnership is in compliance with the above
government regulations. Typically, costs related to extensive modifications
required 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 interest in an entity that own equipment for leasing
purposes. As of December 31, 2000, the Partnership owned a portfolio of
transportation and related equipment and an investment in equipment owned by an
unconsolidated special-purpose entity (USPE), as described in Item 1, Table 1.
The Partnership acquired equipment with the proceeds of the Partnership offering
of $100.0 million, proceeds from debt financing of $23.0 million, and by
reinvesting a portion of its operating cash flow in additional equipment.
The Partnership maintains its principal office at One Market, Steuart Street
Tower, Suite 800, San Francisco, California 94105-1301. All office facilities
are provided by FSI without reimbursement by the Partnership.
ITEM 3. LEGAL PROCEEDINGS
The Partnership, together with affiliates, has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership property and to recover damages for failure to pay rent and failure
to maintain such property in accordance with relevant lease contracts. The
Partnership has repossessed all of its property previously leased to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline filed counterclaims against the Partnership in
excess of the Partnership's claims against the airline. The General Partner
believes that the airline's counterclaims are completely without merit, and the
General Partner will vigorously defend against such counterclaims. The General
Partner believes an unfavorable outcome from the counterclaims is remote.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 2000.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED DEPOSITARY UNIT
----------------------------------------------------------------
MATTERS
As of March 12, 2001, there were 5,785,725 depositary units outstanding. There
are 4,967 depositary unitholders of record as of the date of this report.
There are several secondary markets that will facilitate sales and purchases of
depositary units. Secondary markets are characterized as having few buyers for
limited partnership interests and therefore are viewed as inefficient vehicles
for the sale of depositary units. Presently, there is no public market for the
units and none is likely to develop.
To prevent the units from being considered publicly traded and thereby to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal Revenue Code, the 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 a "Qualified Plan" as
defined by the Employee Retirement Income Security Act of 1974 and Individual
Retirement Accounts to exceed the allowable limit.
On January 4, 2001, the General Partner for the Partnership announced that it
has begun recognizing transfers involving trading of units in the Partnership
for the 2001 calendar year. The Partnership is listed on the OTC Bulletin Board
under the symbol GFXPZ.
In making the announcement, the General Partner noted that, as in previous
years, it will continue to monitor the volume of such trades to ensure that the
Partnership remains in compliance with IRS Notice 88-75 and IRS Code Section
7704. These IRS regulations contain safe harbor provisions stipulating the
maximum number of partnership units that can be traded during a calendar year in
order for a partnership not to be deemed a publicly traded partnership for
income tax purposes.
Should the Partnership approach the annual safe harbor limitation later on in
2001, the General Partner will, at that time, cease to recognize any further
transfers involving trading of Partnership units. Transfers specifically
excluded from the safe harbor limitations, referred to in the regulations as
"transfers not involving trading," which include transfers at death, transfers
between family members, and transfers involving distributions from a qualified
retirement plan, will continue to be recognized by the General Partner
throughout the year.
Pursuant to the terms of the partnership agreement, the General Partner is
entitled to a 1% interest in the profits, losses and cash distributions of the
Partnership. The General Partner is the sole holder of such interests. Special
allocations of income are made to the General Partner equal to the deficit
balance, if any, in the capital account of the General Partner. The General
Partner's annual allocation of net income will be equal to the General Partner's
cash distributions paid during the current year. The remaining interests in the
profits, losses and cash distributions of the Partnership are allocated to the
limited partners. As of December 31, 2000, there were 4,967 limited partners
holding units in the Partnership.
The Partnership engaged in a plan to repurchase up to 250,000 depositary units.
There were no repurchases of depositary units in 1998, 1999, or 2000. As of
December 31, 2000, the Partnership had purchased a cumulative total of 199,650
depositary units at a cost of $2.6 million. The General Partner does not plan
any future repurchases of depositary units on behalf of the Partnership.
(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 per weighted-average depositary unit amounts)
2000 1999 1998 1997 1996
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Operating results:
Total revenues $ 6,669 $ 6,816 $ 8,366 $ 12,462 $ 23,859
Net gain on disposition
of equipment 486 156 733 3,265 13,304
Equity in net income (loss) of
unconsolidated special-
purpose entities 1,606 2,047 (895) (483) 8,728
Net income 3,804 4,321 1,807 5,685 23,847
At year-end:
Total assets $ 5,497 $ 7,217 $ 13,020 $ 20,006 $ 20,749
Total liabilities 257 463 693 1,308 1,331
Cash distribution $ 3,858 $ 3,850 $ 4,695 $ 6,405 $ 8,358
Special distribution $ 1,460 $ 6,044 $ 3,483 $ -- $ 10,242
Cash and special distribution
representing a return of capital
to the limited partners $ 1,514 $ 5,573 $ 6,560 $ 754 $ --
Per weighted-average depositary unit:
Net income $ 0.66 1 $ 0.75 1 $ 0.31 1 $ 0.97 1 $ 4.08(1)
Cash distribution $ 0.66 $ 0.66 $ 0.81 $ 1.10 $ 1.43
Special distribution $ 0.25 $ 1.04 $ 0.60 $ -- $ 1.75
Cash and special distribution
representing a return of capital
to the limited partners $ 0.26 $ 0.96 $ 1.13 $ 0.13 $ --
- ----------------------------------
1 After reduction of income of $14,000 ($0.00 per weighted-average depositary
unit) in 2000, $0.1 million ($0.01 per weighted-average depositary unit) in
1999, $0.3 million ($0.04 per weighted-average depositary unit) in 1998, $41,000
($0.01 per weighted-average depositary unit) in 1997, and $0.1 million ($0.02
per weighted-average depositary unit) in 1996, representing allocations to the
General Partner resulting from an amendment to the partnership agreement (see
Note 1 to the audited financial statements).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(A) Introduction
Management's discussion and analysis of financial condition and results of
operations relates to the financial statements of PLM Equipment Growth Fund (the
Partnership). The following discussion and analysis of operations focuses on the
performance of the Partnership's equipment in the various segments in which it
operates and its effect on the Partnership's overall financial condition.
(B) Results of Operations -- Factors Affecting Performance
(1) Re-leasing Activity and Repricing Exposure to Current Economic Conditions
The exposure of the Partnership's equipment portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for the Partnership's equipment include, but are not limited to, 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 a lease and
the assumption of a subsequent lease can result in a reduction of contribution
to the Partnership. The Partnership experienced re-leasing activity or repricing
exposure in 2000 primarily in its, trailer, container, and railcar portfolios.
(a) Trailers: The Partnership's trailer portfolio operated in short-term
rental facilities. The relatively short duration of most leases in these
operations exposed the trailers to considerable re-leasing activity.
Contributions from the Partnership's trailers that operated in short-term
rental facilities decreased in 2000 compared to 1999 due to the sale of all
the trailers in the short term rental facilities.
(b) Railcars: The majority of the Partnership's railcar equipment remained
on lease throughout the year. While renewals of existing leases continue at
similar or slightly lower rates, some tank cars have been renewed for
"winter only" terms of approximately six months. As a result, it is
anticipated that there will be more pressurized tank cars than usual coming
up for renewal in the spring.
(c) Marine containers: The Partnership's marine container portfolio is
operated in utilization-based leasing pools and, as such, is highly exposed
to repricing activity. The Partnership saw lower re-lease rates and lower
utilization on the remaining marine containers fleet during 2000. Since this
Partnership is in the liquidation phase, containers remain off lease while
waiting to be sold and thus utilization on the Partnership's containers
decreased in 2000.
(2) Equipment Liquidations
Liquidation of Partnership equipment and investment in unconsolidated
special-purpose entities (USPEs) represents a reduction in the size of the
equipment portfolio and may result in reduction of contributions to the
Partnership. During 2000, the Partnership disposed of railcars, trailers, and
marine containers and its interest in an USPE owning an aircraft with an
aggregate net book value of $0.9 million for proceeds net of commissions of $2.8
million.
(3) Equipment Valuation
In accordance with Financial Accounting Standards Board (FASB) Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of", the General Partner reviews the carrying value of the
Partnership's portfolio at least quarterly and whenever circumstances indicate
that the carrying value of an asset may not be recoverable in relation to
expected future market conditions for the purpose of assessing the
recoverability of the recorded amounts. If the projected undiscounted future
lease revenue plus residual values and fair values are less than the carrying
values of the equipment, a loss on revaluation is recorded. No reductions to the
carrying value of equipment were required in 2000, 1999 or 1998.
(C) Financial Condition -- Capital Resources and Liquidity
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from the limited partners are permitted under the
terms of the limited partnership agreement. The Partnership currently has no
debt obligations. As the Partnership entered its liquidation phase in 1998, it
is prohibited from incurring new debt. The Partnership relies on operating cash
flows to meet its operating obligations and to make cash distributions to the
limited partners.
For the year ended December 31, 2000, the Partnership generated $3.6 million in
operating cash (net cash provided by operating activities, plus non-liquidating
cash distributions from USPEs), to meet its operating obligations, but used
undistributed available cash from prior periods and proceeds from asset sales
and liquidating distributions from USPEs of $1.8 million to maintain the current
level of distributions and to make a special distribution to the partners.
The Partnership's investment in USPEs declined $0.8 million in 2000 due to
distributions received from the USPE's of $2.3 million partially offset by the
Partnership's share of income from these entities of $1.6 million.
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.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the
Partnership after final disposal of assets and settlement of liabilities, the
amounts cannot be accurately determined prior to actual disposal of the
equipment.
(D) Results of Operations Year-to-Year Detailed Comparison
(1) 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 and
asset-specific insurance expenses) on owned equipment decreased during the year
ended December 31, 2000, compared to the same period of 1999. 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 operations discussion
because these expenses are more indirect in nature, not a result of operations
but more the result of owning a portfolio of equipment.
The following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Years Ended
December 31,
2000 1999
--------------------------
Rail equipment $ 3,949 $ 3,972
Trailers 192 330
Marine containers 98 140
Rail equipment: Rail equipment lease revenues and direct expenses were $5.6
million and $1.7 million, respectively, for the year ended December 31, 2000,
compared to $5.7 million and $1.8 million, respectively, for the same period of
1999. Direct revenues and expenses were slightly lower due to a group of
railcars being off lease at the end of 2000.
Trailers: Trailer lease revenues and direct expenses were $0.3 million and $0.1
million, respectively, for the year ended December 31, 2000, compared to $0.5
million and $0.1 million, respectively, for the same period of 1999. The
decrease in trailer contribution resulted from the sale of the Partnership's
remaining trailers in 2000.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $1,000 respectively, for the years ended December 31, 2000 and 1999.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses were $2.6 million for the years ended December 31, 2000
and 1999. While there was no change in the total indirect expenses from 1999 to
2000, some components of these expenses had material fluctuations. Significant
fluctuations are as follows:
i) a $0.1 million decrease in depreciation expense due to equipment
dispositions.
ii) a $0.1 million decrease in management fee reflects reduced cash flow.
iii) a $0.2 million increase in bad debt expense related to the receipt of
an accounts receivable in 1999 that had been previously reserved for
as bad debt. A similar event did not occur in 2000.
(c) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for 2000 totaled $0.5 million,
and resulted from the sale of marine containers, railcars, and trailers, with an
aggregate net book value of $0.6 million, for aggregate proceeds of $1.1
million. In 1999, the net gain on disposition of owned equipment totaled $0.2
million, and resulted from the sale of marine containers, trailers and railcars,
with an aggregate net book value of $0.1 million, for aggregate proceeds of $0.3
million.
(d) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Years
Ended December 31,
2000 1999
-----------------------------
Aircraft $ 1,308 $ 2,531
Marine vessel 298 (484 )
-----------------------------
Equity in net income (loss) of USPEs $ 1,606 $ 2,047
=============================
Aircraft: The Partnership's remaining interest in an entity which owned an
aircraft was sold in the first quarter of 2000 for a gain of $1.4 million. This
aircraft was off lease during 2000 and 1999. In 1999, the Partnership sold it's
interest in an entity owning a commercial aircraft for gain of $3.0 million. The
aircraft had revenues and expenses of $0.2 million and $0.2 million
respectively, prior to its sale.
Marine vessel: As of December 31, 2000 and 1999, the Partnership had an interest
in an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $4.0 million and $3.7 million for 2000, compared to
$2.0 million and $2.5 million, respectively, for 1999. Marine vessel
contribution increased due to higher charter rates during 2000. Higher voyage
charter rates in 2000 were due to the increased demand for petroleum products in
Europe and Asia. Expenses increased in 2000 due to additional voyages made in
2000 compared to 1999.
(e) Net Income
As a result of the foregoing, the Partnership's net income of $3.8 million for
the year ended December 31, 2000, decreased from net income of $4.3 million
during the same period of 1999. The Partnership's ability to operate and
liquidate assets 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 2000 the Partnership
distributed $5.3 million to the limited partners, or $0.91 per weighted-average
depositary unit.
(2) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1999 and 1998
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating expenses, and asset-specific insurance expenses) on owned
equipment decreased during the year ended December 31, 1999, compared to the
same period of 1998. The following table presents lease revenues less direct
expenses by segment (in thousands of dollars):
For the Years Ended
December 31,
1999 1998
--------------------------
Rail equipment $ 3,972 $ 4,064
Trailers 330 866
Marine containers 140 231
Rail equipment: Rail equipment lease revenues and direct expenses were $5.7
million and $1.8 million, respectively, for the year ended December 31, 1999,
compared to $6.0 million and $1.9 million, respectively, for the same period of
1998. Direct revenues and expenses decreased due to the sale of railcars during
1998 and 1999.
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the year ended December 31, 1999, compared to $1.2
million and $0.3 million, respectively, for the same period of 1998. The number
of trailers owned by the Partnership has declined due to sales and dispositions
of the trailers during 1999 and 1998. The result of this declining fleet is a
decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $1,000 respectively, for the year ended December 31, 1999, compared
to $0.2 million and $3,000, respectively, for the same period of 1998. Revenues
decreased by $61,000 due to lower lease rates in 1999, and by $32,000 due to
sales and dispositions in 1999.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.6 million for the year ended December 31, 1999,
decreased from $3.5 million for the same period of 1998. The decrease is due
primarily to a $0.3 million decrease in general and administrative expenses due
to lower professional services costs resulting from the decrease in the size of
the Partnership's equipment portfolio, a $0.3 million decrease in depreciation
expense from 1998 levels resulting from the sale of certain assets during 1999
and 1998, a $0.1 million decrease in bad debt expense related to certain
receivables thought to be uncollectible being collected, previously reserved for
as bad debts being collected in 1999 and a $0.1 million decrease in management
fees due to lower cash flows.
(c) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for 1999 totaled $0.2 million,
and resulted from the sale of marine containers, railcars, and trailers, with an
aggregate net book value of $0.1 million, for aggregate proceeds of $0.3
million. For 1998, gain on sales totaled $0.7 million, and resulted from the
sale of marine containers, trailers, railcars, and an aircraft with an aggregate
net book value of $1.2 million, for aggregate proceeds of $1.9 million.
(d) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
For the Years
Ended December 31,
1999 1998
-----------------------------
Aircraft 2,531 (1,323)
Marine vessel $ (484) $ 428
-----------------------------
Equity in net income (loss) of USPEs $ 2,047 $ (895)
=============================
Aircraft: As of December 31, 1999, the Partnership had an interest in one entity
that owns a commercial aircraft. As of December 31, 1998, the Partnership had an
interest in an entity that owned a total of two aircraft. During 1999, the
Partnership sold the aircraft in which it had a 12% interest for a gain of $3.0
million. The Partnership's share of aircraft revenues and expenses were $0.2
million and $0.8 million, respectively, for the year ended December 31, 1999,
compared to $0.6 million and $1.9 million, respectively, for the same period of
1998. The Partnership's 50% interest in an entity that owns a commercial
aircraft was off lease during 1999, 1998 and 1997. In October 1999, a deposit
for $0.2 million was received for the sale of this aircraft. The buyer failed to
perform under the terms of the agreement and the deposit was recorded as income.
Direct expenses in this entity decreased due to required repairs on this
aircraft in 1998 which were not required in 1999. The Partnership's remaining
12% interest in an entity that owns a commercial aircraft had a decrease in
contribution primarily due to the sale of this aircraft in June of 1999.
Marine vessel: As of December 31, 1999 and 1998, the Partnership had an interest
in an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $2.0 million and $2.5 million for 1999, compared to
$2.6 million and $2.2 million, respectively, for 1998. Marine vessel
contribution decreased due to lower charter rates during 1999, the vessel being
off lease for scheduled maintenance, and higher operating costs associated with
being on a voyage charter.
(e) Net Income
As a result of the foregoing, the Partnership's net income of $4.3 million for
the year ended December 31, 1999, increased from net income of $1.8 million
during the same period of 1998. The Partnership's ability to operate and
liquidate assets and re-lease those assets whose leases expire is subject to
many factors, and the Partnership's performance in the year ended December 31,
1999 is not necessarily indicative of future periods. In 1999, the Partnership
distributed $9.8 million to the limited partners, or $1.69 per weighted-average
depositary unit.
(E) Geographic Information
Certain of the Partnership's equipment operates in international markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes that these risks are
minimal or has implemented strategies to control the risks. Currency risks are
at a minimum because all invoicing, with the exception of a small number of
railcars operating in Canada, is conducted in U.S. dollars. Political risks are
minimized 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 U.S. banks to cash deposits.
Although these credit support mechanisms 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 financial statements for
information on the revenues, 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 equipment is
sold in various equipment markets and geographic areas. An explanation of the
current relationships is presented below.
During 2000, the Partnership's equipment on lease to U.S. domiciled lessees
consisted of railcars and trailers. During 2000, lease revenues in the U.S.
accounted for 20% of the lease revenues generated by wholly and partially-owned
equipment. This equipment generated net income of $0.5 million.
The Partnership's equipment leased to Canadian-domiciled lessees consists of
railcars. During 2000, lease revenues in Canada accounted for 38% of total lease
revenues of wholly and partially owned equipment. This equipment generated net
income of $2.4 million.
The Partnership's 50% investment in a marine vessel and marine containers, which
were operated worldwide in 2000, and accounted for 41% of the lease revenues
generated by wholly and partially owned equipment. This equipment generated net
income of $0.3 million in 2000.
(F) Inflation
Inflation had no significant impact on the Partnership's operations during 2000,
1999, or 1998.
(G) Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
(H) Outlook for the Future
Since the Partnership entered its orderly liquidation phase in the first quarter
of 1998, the General Partner is seeking to selectively re-lease or sell assets
as the existing leases expire. Sale decisions will cause the operating
performance of the Partnership to decline over the remainder of its life.
Several factors may affect the Partnership's operating performance in 2001 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
Liquidation of the Partnership equipment and investment in the USPE represents a
reduction in the size of the portfolio and may result in a reduction of
contribution to the Partnership.
Additionally, while railcar loadings in North America have continued to be high,
a softening in the market is expected to put downward pressure on lease rates as
cars come up for renewal. Lease rates in this market are showing signs of
weakness and this has lead to lower contribution to the Partnership as existing
leases expire and renewal leases are negotiated.
Liquidation of the Partnership's equipment represents a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership. Other factors affecting the Partnership's contribution in 2001 and
beyond includes:
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of these factors, or
of their occurrence, makes it difficult for the General Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment. The General Partner continually monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner may make an evaluation to reduce the Partnership's exposure to equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements and pay cash distributions to the partners.
Several other factors may affect the Partnership's operating performance in the
year 2001 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 of the Partnership's marine vessel, railcars and marine containers will
be remarketed in 2001 as existing leases expire, exposing the Partnership to
some 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. The proceeds from the sold or liquidated equipment will be
distributed to the limited partners, or held for operating reserves.
(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. Currently, the General Partner has
observed rising insurance costs to operate certain vessels into US ports
resulting from implementation of the U.S. Oil Pollution Act of 1990. 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. The U.S. Department of Transportation's Hazardous
Materials Regulations regulates the classification and packaging requirements of
hazardous materials which apply particularly to the Partnership's tank railcars.
The Federal Railroad Administration has mandated that effective July 1, 2000,
all tank railcars must be re-qualified every ten years from the last test date
stenciled on each railcar to insure tank shell integrity. Tank shell thickness,
weld seams, and weld attachments must be inspected and repaired if necessary to
re-qualify a tank railcar for service. The average cost of this inspection is
$1,800 for non-jacketed tank railcars and $3,600 for jacketed tank railcars, not
including any necessary repairs. This inspection is to be performed at the next
scheduled tank test and every ten years thereafter. The Partnership owns 847 of
these type of railcars. As of December 31, 2000, 75 have been inspected and no
defects have been found.
(3) Distributions
Pursuant to the limited partnership agreement, the Partnership has ceased
reinvesting in additional equipment. The General Partner will pursue a strategy
of selectively re-leasing equipment to achieve competitive returns or selling
equipment that is underperforming or whose operation becomes prohibitively
expensive during the liquidation phase of the Partnership. During this time, the
Partnership will use operating cash flow and proceeds from the sale of equipment
to meet its operating obligations and make distributions to the partners.
Although the General Partner intends to maintain a sustainable level of
distributions prior to final liquidation of the Partnership, actual partnership
performance and other considerations may require adjustments to then-existing
distribution levels. In the long term, changing market conditions and used
equipment values preclude the General Partner from accurately determining the
impact of future re-leasing activity and equipment sales on partnership
performance and liquidity.
Since the Partnership has entered the active liquidation phase the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations, will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in potential special distributions to unitholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During 2000, 80% of the Partnership's total lease revenues from wholly-
and partially-owned equipment came from non-United States domiciled lessees.
Most of the leases require payment in United States (U.S.) currency. If these
lessees currency devalues against the U.S. dollar, the lessees could potentially
encounter difficulty in making the U.S. dollar denominated lease payment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Partnership are listed in the Index to
Financial Statements included in Item 14 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC
---------------------------------------------------------------
As of the filing date of this report, the directors and executive officers of
PLM Financial Services, Inc. (and key executive officers of its subsidiaries)
are as follows:
Name Age Position
- ----------------- ---- ---------------------------------------------------------
Stephen M. Bess 55 President, PLM Financial Services, Inc.,
PLM Investment Management, Inc. and
PLM Transportation Equipment Corporation,
Director of PLM Financial Services, Inc.
Richard K Brock 38 Vice President and Chief Financial Officer,
PLM Financial Services, Inc.,
PLM Investment Management, Inc. and
PLM Transportation Equipment Corporation,
Director of PLM Financial Services, Inc.
Susan C. Santo 38 Vice President, Secretary, and General Counsel,
PLM Financial Services, Inc.,
Director of PLM Financial Services, Inc.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess President of Financial Services, Inc. has served as President of
PLM Investment Management, Inc., an indirect wholly-owned subsidiary of PLM
International, since August 1989, and as an executive officer of certain other
of PLM International's subsidiaries or affiliates since 1982.
Richard K Brock was appointed a Director of PLM Financial Services, Inc. in
October 1, 2000. Mr. Brock was appointed as Vice President and Chief Financial
Officer of PLM International and PLM Financial Services, Inc. in January 2000,
having served as Acting Chief Financial Officer since June 1999 and as Vice
President and Corporate Controller of PLM International and PLM Financial
Services, Inc. since June 1997. Prior to June 1997, Mr. Brock served as an
accounting manager beginning in September 1991 and as Director of Planning and
General Accounting beginning in February 1994.
Susan C. Santo was appointed a Director of PLM Financial Services, Inc., a
subsidiary of PLM International, in October 1, 2000. Miss Santo was appointed as
Vice President, Secretary, and General Counsel of PLM International and PLM
Financial Services, Inc. in November 1997. She has worked as an attorney for PLM
International and PLM Financial Services, Inc. since 1990 and served as its
Senior Attorney from 1994 until her appointment as General Counsel.
The directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director or executive officer of PLM Financial Services, Inc., PLM
Transportation Equipment Corp., or PLM Investment Management, Inc.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors, officers, or employees. The Partnership had no
pension, profit sharing, retirement, or similar benefit plan in effect as of
December 31,2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(A) Security Ownership of Certain Beneficial Owners
The General Partner is entitled to a 1% interest in the profits and losses
and distributions of the Partnership subject to certain allocations of
income. In addition to its General Partner interest, FSI owned 1,500 units
in the Partnership at December 31, 2000. As of December 31, 2000, no
investor was known by the General Partner to beneficially own more than 5%
of the depositary units of the Partnership.
(B) Security Ownership of Management
Table 3, below, sets forth, as of the date of this report, the amount and
percentage of the Partnership's outstanding depositary units beneficially
owned by each of the directors and executive officers and all directors and
executive officers as a group of the General Partner and its affiliates:
TABLE 3
Name Depositary Units Percentage of Units
- ---- ---------------- -------------------
Robert N. Tidball 400 *
All directors and officers
as a group (1 person) 400 *
* Less than 1%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Management and Others
During 2000, management fees paid or accrued to IMI were $0.4 million.
During 2000, the Partnership reimbursed FSI or its affiliates $0.2 million
for administrative services and data processing expenses performed on
behalf of the Partnership.
During 2000, the Partnership's proportional share of ownership of the
USPEs, paid or accrued the following fees to FSI or its affiliates:
administrative and data processing services, $37,000. Management fees of
$0.1 million paid by the USPEs in 2000 on the marine vessel.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, 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 the
Annual Report on Form 10-K:
a. Boeing 767
(B) Schedule II Valuation Accounts
All other financial statement schedules have been omitted, because
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. 33-2834), which became effective with the Securities
and Exchange Commission on May 20, 1986.
4.1 Amendment, dated November 18, 1991, to Limited Partnership
Agreement of Partnership, incorporated by reference to the
Partnership Form 10-K dated December 31, 1992, filed with the
Securities and Exchange Commission on March 30,1993.
10.1 Management Agreement between the Partnership and PLM Investment
Management, Inc., incorporated by reference to the Partnership's
Registration Statement on Form S-1 (Reg. No. 33-2834), which
became effective with the Securities and Exchange Commission on
May 20, 1986.
24. Powers of Attorney.
Financial Statements required under Regulation S-X Rule 3-09:
99.1. Boeing 767
(This space intentionally left blank.)
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 14, 2001 PLM EQUIPMENT GROWTH FUND
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ Stephen M. Bess
-----------------------------------
Stephen M. Bess
President and Director
By: /s/ Richard K Brock
-----------------------------------
Richard K Brock
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following directors of the Partnership's General
Partner on the dates indicated.
Name Capacity Date
- ---- -------- ----
*_______________________
Stephen M. Bess Director, FSI March 14, 2001
*_______________________
Richard K Brock Director, FSI March 14, 2001
*_______________________
Susan C. Santo Director, FSI March 14, 2001
* Susan C. Santo, by signing her name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.
/s/ Susan C. Santo
- ------------------------
Susan C. Santo
Attorney-in-Fact
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Independent auditors' report 22
Balance sheets as of December 31, 2000 and 1999 23
Statements of income for the years ended
December 31, 2000, 1999, and 1998 24
Statements of changes in partners' capital for the years
ended December 31, 2000, 1999, and 1998 25
Statements of cash flows for the years ended
December 31, 2000, 1999, and 1998 26
Notes to financial statements 27-36
Independent auditor report on financial statement schedule 37
Schedule II Valuation Accounts 38
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund:
We have audited the accompanying financial statements of PLM Equipment Growth
Fund (the Partnership) listed in the accompanying index to financial statements.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We have conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, PLM Equipment Growth Fund,
in accordance with the limited partnership agreement, entered its liquidation
phase on January 1, 1998 and has commenced an orderly liquidation of the
Partnership assets. The Partnership will terminate on December 31, 2006, unless
terminated earlier upon sale of all equipment or by certain other events.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
SAN FRANCISCO, CALIFORNIA
March 13, 2001
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
December 31,
(in thousands of dollars, except unit amounts)
2000 1999
----------------------------------
ASSETS
Equipment held for operating leases, at cost $ 22,046 $ 24,580
Less accumulated depreciation (20,414) (20,967)
---------------------------------
Net equipment 1,632 3,613
Cash and cash equivalents 2,596 1,446
Accounts receivable, less allowance for doubtful accounts
of $103 in 2000 and $36 in 1999 203 365
Investments in unconsolidated special-purpose entities 1,028 1,755
Prepaid expenses and other assets 38 38
---------------------------------
Total assets $ 5,497 $ 7,217
=================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 219 $ 337
Due to affiliates 36 63
Lessee deposits 2 63
---------------------------------
Total liabilities 257 463
---------------------------------
Partners' capital:
Limited partners (5,785,725 depositary units as of
December 31, 2000 and 1999) 5,240 6,754
General Partner -- --
---------------------------------
Total partners' capital 5,240 6,754
---------------------------------
Total liabilities and partners' capital $ 5,497 $ 7,217
=================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the Years Ended December 31,
(in thousands of dollars, except weighted-average unit amounts)
2000 1999 1998
--------------------------------------------
REVENUES
Lease revenue $ 6,019 $ 6,339 $ 7,393
Interest and other income 164 321 240
Net gain on disposition of equipment 486 156 733
-------------------------------------------
Total revenues 6,669 6,816 8,366
-------------------------------------------
EXPENSES
Depreciation 1,408 1,505 1,820
Repairs and maintenance 1,764 1,876 2,213
Insurance expense to affiliate -- -- (45)
Other insurance expenses 54 44 40
Management fees to affiliate 357 415 505
General and administrative expenses to affiliate 218 303 422
Other general and administrative expenses 572 516 704
Provision for (recovery of) bad debts 98 (117) 5
-------------------------------------------
Total expenses 4,471 4,542 5,664
-------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 1,606 2,047 (895)
-------------------------------------------
Net income $ 3,804 $ 4,321 $ 1,807
===========================================
Partners' share of net income
Limited partners $ 3,751 $ 4,222 $ 1,536
General Partner 53 99 271
-------------------------------------------
Total $ 3,804 $ 4,321 $ 1,807
===========================================
Limited Partners net income per weighted-average depositary unit $ 0.65 $ 0.73 $ 0.29
===========================================
Cash distribution $ 3,858 $ 3,850 $ 4,695
Special distribution 1,460 6,044 3,483
-------------------------------------------
Total distribution $ 5,318 $ 9,894 $ 8,178
===========================================
Per weighted-average depositary unit:
Cash distribution $ 0.66 $ 0.66 $ 0.81
Special distribution 0.25 1.04 0.60
-------------------------------------------
Total distribution $ 0.91 $ 1.70 $ 1.41
===========================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 2000, 1999, and 1998
(in thousands of dollars)
Limited General
Partners Partner Total
--------------------------------------------
Partners' capital (deficit) as of December 31, 1997 $ 18,887 $ (189) $ 18,698
Net income 1,536 271 1,807
Cash distribution (4,648) (47) (4,695)
Special distribution (3,448) (35) (3,483)
---------------------------------------------
Partners' capital as of December 31, 1998 12,327 -- 12,327
Net income 4,222 99 4,321
Cash distribution (3,811) (39) (3,850)
Special distribution (5,984) (60) (6,044)
-----------------------------------------------
Partners' capital as of December 31, 1999 6,754 -- 6,754
Net income 3,751 53 3,804
Cash distribution (3,819) (39) (3,858)
Special distribution (1,446) (14) (1,460)
-----------------------------------------------
Partners' capital as of December 31, 2000 $ 5,240 $ -- $ 5,240
===============================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(in thousands of dollars)
2000 1999 1998
----------------------------------------------
OPERATING ACTIVITIES
Net income $ 3,804 $ 4,321 $ 1,807
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 1,408 1,505 1,820
Net gain on disposition of equipment (486) (156) (733)
Equity in net (income) loss from unconsolidated special-
purpose entities (1,606) (2,047) 895
Changes in operating assets and liabilities:
Accounts receivable, net 162 (60) 613
Due from affiliate -- -- 353
Prepaid expenses and other assets -- (12) 5
Accounts payable and accrued expenses (118) 206 (604)
Due to affiliates (27) (462) (4)
Lessee deposits and reserve for repairs (61) 26 (7)
-------------------------------------------------
Net cash provided by operating activities 3,076 3,321 4,145
-------------------------------------------------
INVESTING ACTIVITIES
Payments for capital improvements -- (31) (108)
Additional investment in unconsolidated special-purpose
entities to fund operations -- (835) (721)
Liquidation of investment in equipment placed in
unconsolidated special-purpose entities 1,769 4,794 1,101
Distribution from unconsolidated special-purpose entities 564 482 557
Proceeds from disposition of equipment 1,059 320 1,908
-------------------------------------------------
Net cash provided by investing activities 3,392 4,730 2,737
-------------------------------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (3,819) (3,811) (4,648)
Cash distribution paid to General Partner (39) (39) (47)
Special distribution paid to limited partners (1,446) (5,984) (3,448)
Special distribution paid to General Partner (14) (60) (35)
------------------------------------------------
Net cash used in financing activities (5,318 ) (9,894 ) (8,178 )
------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,150 (1,843) (1,296)
Cash and cash equivalents at beginning of year 1,446 3,289 4,585
------------------------------------------------
Cash and cash equivalents at end of year $ 2,596 $ 1,446 $ 3,289
================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. BASIS OF PRESENTATION
ORGANIZATION
PLM Equipment Growth Fund, a California limited partnership (the
Partnership) was formed on January 28, 1986. The Partnership engages
primarily in the business of owning, leasing, or otherwise investing in
predominantly used transportation and related equipment. The Partnership
commenced significant operations in August 1986. PLM Financial Services,
Inc. (FSI) is the General Partner of the Partnership. FSI is a wholly
owned subsidiary of PLM International, Inc. (PLM International).
The Partnership, in accordance with its limited partnership agreement,
entered its liquidation phase on January 1, 1998, and has commenced an
orderly liquidation of the Partnership assets. The Partnership will
terminate on December 31, 2006, unless terminated earlier upon the sale of
all equipment or by certain other events. The General Partner may no
longer reinvest cash flows and surplus funds in equipment. All future cash
flows and surplus funds, if any, are to be used for distributions to
partners, except to the extent used to maintain reasonable reserves.
During the liquidation phase, the Partnership's assets will continue to be
recorded at the lower of the carrying amount or fair value less cost to
sell.
FSI manages the affairs of the Partnership. The cash distributions of the
Partnership are allocated 99% to the limited partners and 1% to the
General Partner (see Net Income (Loss) and Distributions Per Depositary
Unit, below). Net income is allocated to the General Partner to the extent
necessary to cause the General Partner's capital account to equal zero.
The General Partner is entitled to a subordinated incentive fee equal to
15% of surplus distributions, as defined in the limited partnership
agreement, remaining after the limited partners have received a certain
minimum rate of return.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. This requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
OPERATIONS
The equipment of the Partnership is managed, under a continuing management
agreement, by PLM Investment Management, Inc. (IMI), a wholly owned
subsidiary of FSI. IMI receives a monthly management fee from the
Partnership for managing the equipment (see Note 2). FSI, in conjunction
with its subsidiaries, sells equipment to investor programs and third
parties, manages pools of transportation equipment under agreements with
the investor programs, and is a general partner of other programs.
ACCOUNTING FOR LEASES
The Partnership's leasing operations 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.
DEPRECIATION
Depreciation of transportation equipment held for operating leases is
computed on the double-declining balance method, based upon estimated
useful lives of 15 years for railcars and 12 years for other equipment
types. The depreciation method converts to straight line when annual
depreciation expense using the straight-line method exceeds that
calculated by the accelerated method.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. BASIS OF PRESENTATION (CONTINUED)
TRANSPORTATION EQUIPMENT
In accordance with the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (SFAS 121). The General
Partner reviews the carrying value of the Partnership's equipment at
least quarterly and whenever circumstances indicate the carrying value of
an asset may not be recoverable in relation to expected future market
conditions for the purpose of assessing recoverability of the recorded
amounts. If projected undiscounted future cash flows and the fair value
are lower than the carrying value of the equipment, a loss on revaluation
is recorded. No reductions to the carrying value of equipment were
required during 2000, 1999 or 1998.
INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The Partnership has interests in unconsolidated special-purpose entities
that own transportation equipment. These interests are accounted for using
the equity method.
The Partnership's investment in unconsolidated special-purpose entities
includes acquisition and lease negotiation fees paid by the Partnership to
TEC, a wholly owned subsidiary of FSI. The Partnership's interest in
USPE's is managed by IMI. The Partnership's equity interest in net income
(loss) of unconsolidated special-purpose entities is reflected net of
management fees paid or payable to IMI and the amortization of acquisition
and lease negotiation fees paid to TEC.
REPAIRS AND MAINTENANCE
Repair and maintenance costs related to railcars, marine vessels, and
trailers are usually the obligation of the Partnership. Maintenance costs
of the marine containers are the obligation of the lessee. If they are not
covered by the lessee, they are charged against operations as incurred.
NET INCOME AND DISTRIBUTIONS PER DEPOSITARY UNIT
Cash distributions of the Partnership are allocated 99% to the limited
partners and 1% to the General Partner and may include amounts in excess
of net income. 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 received an allocation of income in the amount
of $0.1 million in 2000, $0.1 million in 1999, and $41,000 in 1998. In
1998, the General Partner received an additional allocation of income of
$0.2 million to adjust its capital account to zero in accordance with the
Partnership agreements. 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 are recorded when paid and may include amounts in
excess of net income. An operating cash distribution of $1.0 million
($0.164 per depositary unit) was declared on January 24, 2001 and paid on
February 15, 2001 to the unitholders of record as of December 31, 2000.
Special distributions of $1.5 million, $6.0 million, and $3.5 million were
paid in 2000, 1999, and 1998 respectively. Cash distributions to investors
in excess of net income are considered a return of capital. Cash
distributions to limited partners of $1.5 million in 2000, $5.6 million in
1999 and $6.6 million in 1998 were deemed to be a return of capital.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. BASIS OF PRESENTATION (CONTINUED)
NET INCOME PER WEIGHTED-AVERAGE DEPOSITARY UNIT
Net income per weighted-average depositary unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of depositary units deemed outstanding during the period. The
weighted-average number of depositary units deemed outstanding during the
years ended December 31, 2000, 1999, and 1998 were 5,785,725.
CASH AND CASH EQUIVALENTS
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents. The carrying amount of cash
equivalents approximates fair market value due to the short-term nature of
the investments.
COMPREHENSIVE INCOME
The Partnership's net income is equal to comprehensive income for the
years ended December 31, 2000, 1999, and 1998.
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 receives a monthly
management fee attributable to either owned equipment or interests in
equipment owned by the USPEs equal to the greater of (a) 10% of cash flows
or (b) 1/12 of 1/2% of the book value of the equipment portfolio, subject
to a reduction in certain events, as described in the limited partnership
agreement. Partnership management fees of $36,000 and $0.1 million were
payable to IMI as of December 31, 2000 and 1999. The Partnership's
proportional share of USPE management fees of $26,000 and $0 was payable
as of December 31, 2000 and 1999, respectively. The Partnership's
proportional share of USPE management fee expense during 2000, 1999 and
1998 was $0.1 million , $0 and $0.1 million, respectively. Additionally,
the Partnership reimbursed FSI and its affiliates $0.2 million, $0.3
million, and $0.4 million for administrative services and data processing
expenses performed on behalf of the Partnership in 2000, 1999, and 1998,
respectively. The Partnership's proportional share of USPE administrative
and data processing expenses was $37,000, $56,000 and $26,000 during 2000,
1999, and 1998, respectively.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
3. Equipment
The components of owned equipment as of December 31, 2000 and 1999 are as
follows (in thousands of dollars):
Equipment held for operating leases 2000 1999
------------------------------------------ ----------------------------------
Rail equipment $ 21,340 $ 21,392
Marine containers 706 1,571
Trailers -- 1,617
---------------------------------
22,046 24,580
Less accumulated depreciation (20,414) (20,967)
---------------------------------
Net equipment $ 1,632 $ 3,613
=================================
Revenues are earned under operating leases that are billed monthly or
quarterly. 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 equipment to sublessees, after deducting certain direct
operating expenses of the pooled equipment. Rents for railcars are based
on a fixed rate.
As of September 30, 2000, all the Partnership's trailers were sold. As of
December 31, 1999, all of the Partnership's trailer equipment was in
rental facilities operated by PLM Rental, Inc., an affiliate of the
General Partner doing business as PLM Trailer Leasing. Rents are reported
as revenue in accordance with Financial Accounting Standards Board
Statement No.13 "Accounting For Leases". Direct expenses associated with
the equipment are charged directly to the Partnership. An allocation of
indirect expenses of the rental yard operations was charged to the
Partnership monthly.
As of December 31, 2000, all owned equipment in the Partnership's
portfolio was on lease except for 14 railcars with an aggregate net book
value of $20,000. As of December 31, 1999, all owned equipment was on
lease or operating in PLM-affiliated short term trailer facilities, except
for 11 railcars with an aggregate net book value of $43,000.
The General Partner, on behalf of the Partnership, incurred approximately
$0 in 2000,and $0.1 million in 1999, and 1998, in capital improvements,
but did not purchase any additional equipment, in accordance with the
limited partnership agreement.
During 2000, the Partnership sold marine containers, trailers and railcars
with a net book value of $0.6 million, for $1.1 million. During 1999, the
Partnership sold or disposed of marine containers, trailers and railcars
with a net book value of $0.2 million, for $0.3 million.
All leases for owned and partially owned equipment are being accounted for
as operating leases. Future minimum rentals under noncancelable leases for
owned and partially-owned equipment as of December 31, 2000, and during
each of the next five years and thereafter, are approximately $3.0 million
in 2001, $1.8 million in 2002, $1.2 million in 2003, $0.8 million in 2004,
and $0.1 million thereafter. Per diem and short-term rentals consisting of
utilization rate lease payments included in revenue amounted to
approximately $0.4 million, $0.6 million and $1.4 million in 2000, 1999
and 1998, respectively.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The following summarizes the financial information for the unconsolidated
special-purpose entities and the Partnership's interest therein as of and
for the years ended December 31: (in thousands of dollars):
2000 1999 1998
------ ------ ------
Net Net Net Interest
Total Interest Total Interest Total of
USPEs of USPEs Of USPEs Partnership
Partnership Partnership
------------------------------ --------------------------- ---------------------------------
Net investments $ 2,025 $ 1,028 $ 3,704 $ 1,755 $ 22,096 $ 4,149
Revenues 10,935 5,466 5,742 2,246 10,300 3,200
Net income (loss) 3,155 1,606 22,304 2,047 (934) (895)
The Partnership 50% investment in a marine vessel included a reserve for
repairs of $0.4 million for required repairs on the vessel. The repairs are
scheduled to be completed by March 31, 2001. Similar reserves were not
established in 1999.
The Partnership's 50% investment in a commercial aircraft, included in the
investments in unconsolidated special-purpose entities, was off lease as of
December 31, 1999 and 1998. In October 1999, this entity received a deposit
for $0.2 million for the sale of the aircraft. The buyer failed to perform
under the terms of the agreement and this deposit was recorded as income.
This aircraft was sold in the first quarter of 2000 for a gain of $1.4
million.
5. Operating Segments
The Partnership operates or operated in five primary operating segments:,
aircraft leasing, marine container leasing, marine vessel leasing, trailer
leasing, and railcar leasing. Each equipment leasing segment engage 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 general and
administrative expenses, interest expense and certain other expenses. The
segments are managed separately due to the utilization of different
business strategies for each operation.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
5. OPERATING SEGMENTS (CONTINUED)
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, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------------------------ ------- ------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ -- $ 99 $ -- $ 273 $ 5,647 $ -- $ 6,019
Interest income and other -- -- -- -- -- 164 164
Gain (loss) on disposition of 35 (43) -- 473 21 -- 486
equipment
-------------------------------------------------------------------------
Total revenues 35 56 -- 746 5,668 164 6,669
COSTS AND EXPENSES
Operations support -- 1 -- 81 1,698 38 1,818
Depreciation -- 55 -- 61 1,292 -- 1,408
Management fees to affiliate -- -- -- -- -- 357 357
General and administrative expenses 5 1 2 91 154 537 790
Provision for (recovery of) bad -- -- -- 16 84 (2) 98
debts
-------------------------------------------------------------------------
Total costs and expenses 5 57 2 249 3,228 930 4,471
-------------------------------------------------------------------------
Equity in net income of USPEs 1,308 -- 298 -- -- -- 1,606
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ 1,338 $ (1) $ 296 $ 497 $ 2,440 $ (766) $ 3,804
=========================================================================
As of December 31, 2000
Total assets $ 2 $ 174 $ 1,028 $ -- $ 1,661 $ 2,632 $ 5,497
=========================================================================
(1) Includes interest income and costs not identifiable to a particular segment
such as management fees to affiliate and certain general and administrative and
operations support expenses.
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, 1999 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------------------------ ------- ------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ -- $ 141 $ -- $ 468 $ 5,730 $ -- $ 6,339
Interest income and other -- 5 -- -- 157 159 321
Gain (loss) on disposition of 12 (9 ) -- 101 52 -- 156
equipment
-------------------------------------------------------------------------
Total revenues 12 137 -- 569 5,939 159 6,816
COSTS AND EXPENSES
Operations support -- 1 -- 138 1,758 23 1,920
Depreciation -- 95 -- 108 1,302 -- 1,505
Management fees to affiliate -- -- -- -- -- 415 415
General and administrative expenses 3 3 9 122 219 463 819
Provision for (recovery of) bad -- -- -- 19 (133) (3) (117)
debts
-------------------------------------------------------------------------
Total costs and expenses 3 99 (9) 387 3,146 898 4,542
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 2,531 -- (484) -- -- -- 2,047
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ 2,540 $ 38 $ (493) $ 182 $ 2,793 $ (739) $ 4,321
=========================================================================
As of December 31, 1999
Total assets $ 457 $ 445 $ 1,398 $ 505 $ 2,937 $ 1,475 $ 7,217
=========================================================================
- ----------
(1) Includes interest income and costs not identifiable to a particular segment
such as management fees to affiliate and certain general and administrative and
operations support expenses.
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
5. OPERATING SEGMENTS (CONTINUED)
Marine Marine
Aircraft Container Vessel Trailer Railcar All
For the Year Ended December 31, 1998 Leasing Leasing Leasing Leasing Leasing Other(1) Total
------------------------------------ ------- ------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ -- $ 234 $ -- $ 1,203 $ 5,956 $ -- $ 7,393
Interest income and other -- -- -- -- 62 178 240
Gain (loss) on disposition of (57) (1) -- 630 161 -- 733
equipment
-------------------------------------------------------------------------
Total revenues (losses) (57) 233 -- 1,833 6,179 178 8,366
COSTS AND EXPENSES
Operations support -- 4 (45) 337 1,892 20 2,208
Depreciation and amortization -- 166 -- 317 1,337 -- 1,820
Management fees to affiliate 505 505
General and administrative expenses 17 4 5 289 206 605 1,126
Provision for (recovery of)bad -- -- -- 20 (15) -- 5
debts
-------------------------------------------------------------------------
Total costs and expenses 17 174 (40) 963 3,420 1,130 5,664
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (1,323) -- 428 -- -- -- (895)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ (1,397) $ 59 $ 468 $ 870 $ 2,759 $ (952) $ 1,807
=========================================================================
As of December 31, 1998
Total assets $ 2,564 $ 574 $ 1,585 $ 561 $ 4,116 $ 3,620 $ 13,020
=========================================================================
- ----------
(1) Includes interest income and costs not identifiable to a particular segment
such as interest expense, management fees to affiliate and certain general and
administrative 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, and trailers to
lessees domiciled in five geographic regions: Canada, the United States,
South America, Europe, and Asia. Marine equipment is leased to multiple
lessees in different regions who operate the marine equipment worldwide.
The following table sets forth lease revenue information by region for the
years ended December 31, as follows (in thousands of dollars):
Owned Equipment Investments in USPEs
----------------------------------------- ---------------------------------------
Region 2000 1999 1998 2000 1999 1998
- ---------------------------------------------------------------- ---------------------------------------
United States $ 2,055 $ 1,369 $ 2,173 -- $ -- $ --
South America -- -- -- 197 616
Canada 3,865 4,829 4,986 -- -- --
Rest of the world 99 141 234 4,029 2,049 2,584
--------------------------------------------------------------------------------------
Lease Revenues $ 6,019 $ 6,339 $ 7,393 $ 4,029 $ 2,246 $ 3,200
======================================================================================
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
6. GEOGRAPHIC LOCATION (CONTINUED)
The following table sets forth income (loss) information by region for the
years ended December 31 (in thousands of dollars):
Owned Equipment Investments in USPEs
--------------------------------------------------------------------------------------
Region 2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
United States $ 491 $ (184) $ 145 -- $ -- $ --
South America -- -- -- 1,308 2,980 158
Canada 2,447 3,168 3,409 -- -- --
Asia -- -- -- -- (449) (1,481)
Rest of the world (1) 38 100 298 (484) 428
--------------------------------------------------------------------------------------
Regional
income (loss) 2,937 3,022 3,654 1,606 2,047 (895)
Administrative
and other (739) (748) (952) -- -- --
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Net income (loss) $ 2,198 $ 2,274 $ 2,702 1,606 $ 2,047 $ (895)
======================================================================================
The net book value of these assets at December 31, are as follows (in thousands
of dollars):
Owned Equipment Investments in USPEs
------------------------------------------ ------------------------------------------
Region 2000 1999 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
United States $ 302 $ 933 $ 1,233 -- $ -- $ --
South America -- -- -- -- -- 2,064
Canada 1,203 2,294 3,445 -- -- --
Asia -- -- -- -- 357 498
Rest of the world 127 386 573 1,028 1,398 1,587
----------------------------------------------------------------------------------------
Net book value $ 1,632 $ 3,613 $ 5,251 1,028 $ 1,755 $ 4,149
========================================================================================
7. CONCENTRATIONS OF CREDIT RISK
The Partnership did not have any customers that accounted for 10% or more
of the total revenue for the year ended December 31, 2000 and 1999. The
Partnership's only customer that accounted for 10% or more of the total
consolidated revenues for the owned equipment and partially owned
equipment during 1998 was Texaco (14%).
As of December 31, 2000 and 1999, the General Partner believes the
Partnership had no other significant concentrations of credit risk that
could have a material adverse effect on the Partnership.
8. INCOME TAXES
The Partnership is not subject to income taxes, as any income or loss is
included in the tax returns of the individual partners. Accordingly, no
provision for income taxes has been made in the financial statements of
the Partnership.
PLM EQUIPMENT GROWTH FUND
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
8. INCOME TAXES (CONTINUED)
As of December 31, 2000, the financial statement carrying values of
certain assets and liabilities were approximately $17.0 million lower than
the federal income tax bases of such assets and liabilities, primarily due
to differences in depreciation methods and equipment reserves and the tax
treatment of underwriting commissions and syndication costs.
9. CONTINGENCIES
The Partnership, together with affiliates, has initiated litigation in
various official forums in India against a defaulting Indian airline
lessee to repossess Partnership property and to recover damages for
failure to pay rent and failure to maintain such property in accordance
with relevant lease contracts. The Partnership has repossessed all of its
property previously leased to such airline, and the airline has ceased
operations. In response to the Partnership's collection efforts, the
airline filed counterclaims against the Partnership in excess of the
Partnership's claims against the airline. The General Partner believes
that the airline's counterclaims are completely without merit, and the
General Partner will vigorously defend against such counterclaims. The
General Partner believes an unfavorable outcome from the counterclaims is
remote.
10. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1998, the General Partner began the liquidation phase of the
Partnership with the intent to commence an orderly liquidation of the
Partnership assets. The General Partner is actively marketing the
remaining equipment portfolio with the intent of maximizing sale proceeds.
As sale proceeds are received the General Partner intends to periodically
declare special distributions to distribute the sale proceeds to the
partners. During the liquidation phase of the Partnership the equipment
will continue to be leased under operating leases until sold. Operating
cash flows, to the extent they exceed Partnership expenses, will continue
to be distributed on a quarterly basis to partners. The amounts reflected
for assets and liabilities of the Partnership have not been adjusted to
reflect liquidation values. The equipment portfolio continues to be
carried at the lower of depreciated cost or fair value less cost to
dispose. Although the General Partner estimates that there will be
distributions after liquidation of assets and liabilities, the amounts
cannot be accurately determined prior to actual liquidation of the
equipment. Any excess proceeds over expected Partnership obligations will
be distributed to the Partners throughout the liquidation period. Upon
final liquidation, the Partnership will be dissolved.
In 2000 and 1999, the General Partner paid special distributions of $0.25
and $1.04 per weighted-average depositary unit. The Partnership is not
permitted to reinvest proceeds from sales or liquidations of equipment.
These proceeds, in excess of operational cash requirements, are
periodically paid out to limited partners in the form of special
distributions. The sales and liquidations occur because of certain damaged
equipment, the determination by the General Partner that it is the
appropriate time to maximize the return on an asset through sale of that
asset, and, in some leases, the ability of the lessee to exercise purchase
options.
11. Quarterly Results of Operations (unaudited) (continued)
The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 (in thousands of dollars, except per share
amounts):
March June September December
31, 30, 30, 31, Total
------------------------------------------------------------------------------
Operating results:
Total revenues $ 1,675 $ 1,509 $ 1,933 $ 1,552 $ 6,669
Net income 1,838 822 1,074 70 3,804
Per weighted-average depositary unit:
Limited partners'
net income $ 0.32 $ 0.14 $ 0.18 $ 0.01 $ 0.65
The following is a summary of the quarterly results of operations for the
years ended December 31, 1999 (in thousands of dollars, except per share
amounts):
March June September December
31, 30, 30, 31, Total
------------------------------------------------------------------------------
Operating results:
Total revenues $ 1,810 $ 1,664 $ 1,511 $ 1,831 $ 6,816
Net income 767 3,086 165 303 4,321
Per weighted-average depositary unit:
Limited partners'
net income $ 0.13 $ 0.53 $ 0.02 $ 0.05 $ 0.73
12. SUBSEQUENT EVENT
On January 04, 2001, the General Partner for the Partnership announced
that it has begun recognizing transfers involving trading of units in the
partnership for the 2001 calendar year. The Partnership is listed on the
OTC Bulletin Board under the symbols GFXPZ.
In February 2001, PLM International, the parent of the Partnership,
announced that MILPI Acquisition Corp. (MILPI) completed its cash tender
offer for the outstanding common stock of PLM International. To date,
MILPI has acquired 83% of the common shares outstanding. MILPI will
complete its acquisition of PLM International by effecting a merger of PLM
International into MILPI under Delaware law. The merger is expected to be
completed after MILPI obtains approval of the merger by PLM
International's shareholders pursuant to a special shareholders' meeting
which is expected to be held during the first half of 2001.
Independent Auditors' Report
The Partners
PLM Equipment Growth Fund :
Under date of March 12, 2001, we reported on the balance sheets of PLM Equipment
Growth Fund as of December 31, 2000 and 1999, and the related statements of
income, changes in partners' capital, and cash flows for each of the years in
the three-year period ended December 31, 2000, as contained in the 2000 annual
report to stockholders. These financial statements and our report thereon are
included on Form 10-K for the year 2000. In connection with our audits of the
aforementioned financial statements, we also audited the related financial
statement schedule as listed in the accompanying index. This financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
San Francisco, CA
March 14, 2001
SCHEDULE II
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
Valuation and Qualifying Accounts
Year Ended December 31, 2000, 1999, and 1998
(in thousands of dollars)
Additions
Balance at Charged to Balance at
Beginning of Cost and Close of
Year Expense Deductions Year
---------------- ---------------- -------------- -------------
Year Ended December 31, 2000
Allowance for Doubtful Accounts $ 36 $ 104 $ (37) $ 103
======================================================================
Year Ended December 31, 1999
Allowance for Doubtful Accounts $ 161 $ (114) $ (11) $ 36
======================================================================
Year Ended December 31, 1998
Allowance for Doubtful Accounts $ 212 $ 5 $ (56) $ 161
======================================================================
PLM EQUIPMENT GROWTH FUND
INDEX OF EXHIBITS
EXHIBIT PAGE
4. Limited Partnership Agreement of Registrant *
4.1 Amendment to Limited Partnership Agreement of Registrant *
10.1 Management Agreement between Registrant and PLM Investment *
Management, Inc.
24. Powers of Attorney 40-42
99.1 Boeing 767 43
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[FN]
* Incorporated by reference. See page 19 of this report.