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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18789
_______________________
PLM EQUIPMENT GROWTH FUND IV
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3090127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
450 CARILLON PARKWAY, SUITE 200
ST. PETERSBURG, FL 33716
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (727) 803-8200
_______________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
CONDENSED BALANCE SHEETS
(in thousands of dollars, except unit amounts)
(unaudited)
June 30, December 31,
2002 2001
--------- -------------
ASSETS
Equipment held for operating leases, at cost $11,806 $ 15,811
Less accumulated depreciation (8,570) (11,918)
-------- ---------
Net equipment 3,236 3,893
Cash and cash equivalents 6,534 8,879
Accounts receivable, less allowance for doubtful
accounts of $79 in 2002 and $45 in 2001 11 82
Investment in an unconsolidated special-purpose entity 1,038 1,197
Prepaid expenses and other assets 43 21
-------- ---------
Total assets $10,862 $ 14,072
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 47 $ 293
Due to affiliates 159 168
-------- ---------
Total liabilities 206 461
Partners' capital:
Limited partners (8,628,420 limited partnership units
as of June 30, 2002 and December 31, 2001) 10,656 13,611
General Partner -- --
-------- ---------
Total partners' capital 10,656 13,611
Total liabilities and partners' capital $10,862 $ 14,072
======== =========
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
CONDENSED STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
==================== ======================
REVENUES
Lease revenue $ 440 $ 643 $ 1,058 $ 1,551
Interest and other income 25 112 57 178
Net gain on disposition of equipment 58 26 649 3,455
------ ----- ------- -------
Total revenues 523 781 1,764 5,184
EXPENSES
Depreciation 71 126 153 428
Repairs and maintenance 134 133 264 272
Equipment operating expenses 21 23 42 118
Management fees to affiliate 30 51 74 98
General and administrative expenses
to affiliates 31 38 63 161
Other general and administrative expenses 110 112 157 336
Provision for (recovery of) bad debts 32 (16) 34 14
------ ----- ------- -------
Total expenses 429 467 787 1,427
Equity in net income of unconsolidated special-
purpose entities 29 104 64 174
------ ----- ------- -------
Net income $ 123 $ 418 $ 1,041 $ 3,931
PARTNERS' SHARE OF NET INCOME
Limited partners $ 123 $ 373 $ 841 $ 3,841
General Partner -- 45 200 90
------ ----- ------- -------
Total $ 123 $ 418 $ 1,041 $ 3,931
Net income per weighted-average
limited partnership unit $0.01 $0.04 $ 0.10 $ 0.45
Cash distribution $ -- $ 908 $ 3,996 $ 1,770
------ ----- ------- -------
Cash distribution per weighted-average
limited partnership unit $ -- $0.10 $ 0.44 $ 0.19
====== ====== ======== =======
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM DECEMBER 31, 2000 TO JUNE 30, 2002
(in thousands of dollars)
(unaudited)
Limited General
Partners Partner Total
Partners' capital as of December 31, 2000 $12,134 $ -- $12,134
Net income 3,157 90 3,247
Cash distribution (1,680) (90) (1,770)
-------- ------ --------
Partners' capital as of December 31, 2001 13,611 -- 13,611
Net income 841 200 1,041
Cash distribution (3,796) (200) (3,996)
-------- ------ --------
Partners' capital as of June 30, 2002 $10,656 $ -- $10,656
======== ====== ========
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
For the Six Months
Ended June 30,
2002 2001
==================
OPERATING ACTIVITIES
Net income $ 1,041 $ 3,931
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation 153 428
Net gain on disposition of equipment (649) (3,455)
Equity in net income of unconsolidated special-purpose
entities (64) (174)
Changes in operating assets and liabilities:
Restricted cash -- 125
Accounts receivable, net 69 65
Prepaid expenses and other assets (22) (6)
Accounts payable and accrued expenses (246) (50)
Due to affiliates (9) (9)
Lessee deposits and reserve for repairs -- (207)
-------- -------
Net cash provided by operating activities 273 648
INVESTING ACTIVITIES
Payments for capitalized improvements -- (2)
Proceeds from disposition of equipment 1,155 5,361
Distribution from unconsolidated special-purpose entities 223 357
-------- -------
Net cash provided by investing activities 1,378 5,716
FINANCING ACTIVITIES
Cash distribution paid to limited partners (3,796) (1,680)
Cash distribution paid to General Partner (200) (90)
-------- -------
Net cash used in financing activities (3,996) (1,770)
Net (decrease) increase in cash and cash equivalents (2,345) 4,594
Cash and cash equivalents at beginning of period 8,879 2,742
-------- -------
Cash and cash equivalents at end of period $ 6,534 $ 7,336
======= =======
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Opinion of Management
-----------------------
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited condensed financial statements
contain all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the unaudited condensed financial position of PLM
Equipment Growth Fund IV (the Partnership) as of June 30, 2002 and December 31,
2001, the unaudited condensed statements of income for the three and six months
ended June 30, 2002 and 2001, the unaudited condensed statements of changes in
partners' capital for the period from December 31, 2000 to June 30, 2002, and
the unaudited condensed statements of cash flows for the six months ended June
30, 2002 and 2001. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted from the accompanying condensed financial statements. For further
information, reference should be made to the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2001, on file at the Securities and Exchange Commission.
2. Schedule of Partnership Phases
---------------------------------
The Partnership, in accordance with its limited partnership agreement, entered
its liquidation phase on January 1, 1999, and has commenced an orderly
liquidation of the Partnership's assets. The Partnership will terminate on
December 31, 2009, unless terminated earlier upon sale of all equipment or by
certain other events. During the liquidation phase, the Partnership may not
reinvest cash flows and proceeds from asset dispositions into additional
equipment. All future cash flows and surplus funds after payment of operating
expenses, if any, are to be used for cash distributions to the partners, except
to the extent used to maintain reasonable working reserves. During the
liquidation phase, the Partnership's assets will continue to be recorded at the
lower of carrying amount or fair value less cost to sell.
3. Cash Distributions
-------------------
Cash distributions are recorded when paid and may include amounts in excess of
net income that are considered a return of capital. For the six months ended
June 30, 2002 and 2001, cash distributions totaled $4.0 million and $1.8
million, respectively. Cash distributions of $3.0 million to the limited
partners for the six months ended June 30, 2002 were deemed to be a return of
capital. None of the cash distributions to the limited partners for the six
months ended June 30, 2001 were deemed to be a return of capital.
4. Transactions with General Partner and Affiliates
-----------------------------------------------------
The balance due to affiliates as of June 30, 2002 and December 31, 2001 includes
$12,000 and $21,000, respectively, due to FSI and its affiliates for management
fees and $0.1 million due to an affiliated unconsolidated special-purpose entity
(USPE).
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
4. Transactions with General Partner and Affiliates (continued)
-----------------------------------------------------
The Partnership's proportional share of the expenses incurred by the USPE during
2002 and 2001 is listed in the following table (in thousands of dollars):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
------ ------ ------ -----
Management fees $ 2 $ 4 $ 4 $ 9
Data processing and administrative
expenses 1 2 2 4
These affiliate expenses reduced the Partnership's proportional share of the
equity interest in income of the USPE.
5. Equipment
---------
Owned equipment held for operating leases is stated at cost. The components of
owned equipment were as follows (in thousands of dollars):
June 30, December 31,
2002 2001
-------- ---------
Railcars $11,022 $ 13,239
Marine containers 784 2,572
-------- ---------
11,806 15,811
Less accumulated depreciation (8,570) (11,918)
-------- ---------
Net equipment $ 3,236 $ 3,893
======== =========
As of June 30, 2002, all equipment was on lease except for 88 railcars and
7 marine containers with an aggregate net book value of $0.7 million. As of
December 31, 2001, all equipment was on lease except for 47 railcars with a net
book value of $0.3 million.
During the six months ended June 30, 2002, the Partnership disposed of marine
containers and railcars with an aggregate net book value of $0.5 million, for
proceeds of $1.2 million. During the six months ended June 30, 2001, the
Partnership sold a commercial aircraft, a commuter aircraft, marine containers
and railcars with an aggregate net book value of $1.9 million, for aggregate
proceeds of $5.4 million.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
6. Investment in an Unconsolidated Special-Purpose Entity
-----------------------------------------------------------
The Partnership's net investment in an USPE consisted of a 35% interest in a
trust owning two stage III commercial aircraft on a direct finance lease and
related assets and liabilities; such investment totaled $1.0 million and $1.2
million as of June 30, 2002 and December 31, 2001, respectively. This is a
single purpose entity that does not have any debt or other financial
encumbrances.
As of June 30, 2002 and December 31, 2001, the jointly owned equipment in the
Partnership's USPE portfolio was on lease.
7. Operating Segments
-------------------
The Partnership operates or operated in four different segments: aircraft
leasing, railcar leasing, marine container leasing, and marine vessel leasing.
Each equipment leasing segment engages in short-term to mid-term operating
leases to a variety of customers. The following tables present a summary of the
operating segments (in thousands of dollars):
Marine
For the three months ended Aircraft Railcar Container
June 30, 2002 Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ -- $ 433 $ 7 $ -- $ 440
Interest income and other -- -- -- 25 25
Gain (loss) on disposition of equipment -- (3) 61 -- 58
--------- -------- ---------- -------- -------
Total revenues -- 430 68 25 523
COSTS AND EXPENSES
Operations support -- 139 -- 16 155
Depreciation -- 64 7 -- 71
Management fees to affiliates -- 29 1 -- 30
General and administrative expenses -- 27 -- 114 141
Provision for bad debts -- 30 -- 2 32
--------- -------- ---------- -------- -------
Total costs and expenses -- 289 8 132 429
--------- -------- ---------- -------- -------
Equity in net income of USPE 29 -- -- -- 29
--------- --------- ---------- --------- -------
Net income (loss) $ 29 $ 141 $ 60 $ (107) $ 123
========= ========= ========== ========= =======
Total assets as of June 30, 2002 $ 1,038 $ 3,224 $ 17 $ 6,583 $10,862
========= ========= ========== ========= =======
1 Includes certain assets not identifiable to a specific segment such as
cash, certain accounts receivable, and prepaid expenses. Also includes interest
income and costs not identifiable to a particular segment, such as certain
general and administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. Operating Segments (continued)
-------------------
Marine
For the three months ended Aircraft Railcar Container
June 30, 2001 Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ -- $ 625 $ 18 $ -- $ 643
Interest income and other 32 -- -- 80 112
Gain (loss) on disposition of equipment (1) (15) 42 -- 26
--------- -------- ---------- -------- -------
Total revenues 31 610 60 80 781
COSTS AND EXPENSES
Operations support 8 131 -- 17 156
Depreciation -- 81 45 -- 126
Management fees to affiliates (3) 53 1 -- 51
General and administrative expenses 18 24 -- 108 150
Provision for (recovery of) bad debts -- (18) 3 (1) (16)
--------- -------- ---------- -------- -------
Total costs and expenses 23 271 49 124 467
--------- -------- ---------- -------- -------
Equity in net income of USPEs 104 -- -- -- 104
---------- --------- ---------- --------- -------
Net income (loss) $ 112 $ 339 $ 11 $ (44) $ 418
========== ========= ========== ========= =======
Marine
For the six months ended Aircraft Railcar Container
June 30, 2002 Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ -- $ 1,046 $ 12 $ -- $1,058
Interest income and other -- -- -- 57 57
Gain on disposition of equipment -- 506 143 -- 649
--------- -------- ---------- -------- ------
Total revenues -- 1,552 155 57 1,764
COSTS AND EXPENSES
Operations support -- 274 -- 32 306
Depreciation -- 128 25 -- 153
Management fees to affiliates -- 73 1 -- 74
General and administrative expenses -- 62 -- 158 220
Provision for bad debts -- 33 -- 1 34
--------- -------- ---------- -------- ------
Total costs and expenses -- 570 26 191 787
--------- -------- ---------- -------- ------
Equity in net income of USPE 64 -- -- -- 64
--------- -------- ---------- --------- ------
Net income (loss) $ 64 $ 982 $ 129 $ (134) $1,041
========= ======== ========== ========= ======
1 Includes interest income and costs not identifiable to a particular
segment, such as certain general and administrative and operations support
expenses.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. Operating Segments (continued)
-------------------
For the six months ended Aircraft Railcar Container Vessel
June 30, 2001 Leasing Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ 185 $ 1,336 $ 30 $ -- $ -- $1,551
Interest income and other 38 -- -- -- 140 178
Gain (loss) on disposition of equipment 3,359 (15) 108 -- 3 3,455
--------- -------- ---------- -------- -------- ------
Total revenues 3,582 1,321 138 -- 143 5,184
COSTS AND EXPENSES
Operations support 21 266 -- 27 76 390
Depreciation 145 171 112 -- -- 428
Management fees to affiliates -- 97 1 -- -- 98
General and administrative expenses 125 44 -- -- 328 497
Provision for (recovery of) bad debts -- 11 4 -- (1) 14
--------- -------- ---------- -------- -------- ------
Total costs and expenses 291 589 117 27 403 1,427
--------- -------- ---------- -------- -------- ------
Equity in net income (loss) of USPEs 208 -- -- (34) -- 174
--------- --------- ---------- --------- --------- ------
Net income (loss) $ 3,499 $ 732 $ 21 $ (61) $ (260) $3,931
========= ========= ========== ========= ========= ======
8. Net Income Per Weighted-Average Limited Partnership Unit
--------------------------------------------------------------
Net income per weighted-average limited partnership unit was computed by
dividing net income attributable to limited partners by the weighted-average
number of limited partnership units deemed outstanding during the period. The
weighted-average number of limited partnership units deemed outstanding during
the three and six months ended June 30, 2002 and 2001 was 8,628,420.
9. Liquidation and Special Distributions
----------------------------------------
On January 1, 1999, the General Partner began the liquidation phase of the
Partnership and commenced an orderly liquidation of the Partnership assets. The
General Partner is actively marketing the remaining equipment portfolio with the
intent of maximizing sale proceeds. During the liquidation phase of the
Partnership the equipment will continue to be leased under operating and finance
leases until sold. The amounts reflected for assets and liabilities of the
Partnership have not been adjusted to reflect liquidation values. The equipment
portfolio continues to be carried at the lower of depreciated cost or fair value
less cost to dispose. Although the General Partner estimates that there will be
distributions after liquidation of assets and liabilities, the amounts cannot be
accurately determined prior to actual liquidation of the equipment. Upon final
liquidation, the Partnership will be dissolved.
The Partnership is not permitted to reinvest proceeds from disposition of
equipment. These proceeds, in excess of operational cash requirements, are
periodically paid out to limited partners in the form of special distributions.
No special distributions were paid during the six months ended June 30, 2002 or
2001. The sales and liquidations occur because equipment is damaged, the
determination by the General Partner that it is the appropriate time to maximize
the return on an asset through sale of that asset, and, in some leases, the
ability of the lessee to exercise purchase options.
1 Includes certain interest income and costs not identifiable to a
particular segment, such as certain general and administrative and operations
support expenses. Also includes the gain from the sale of a trailer and the
recovery of trailer bad debts.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
-----------------
(I) RESULTS OF OPERATIONS
Comparison of the PLM Equipment Growth Fund IV's (the Partnership's) Operating
- --------------------------------------------------------------------------------
Results for the Three Months Ended June 30, 2002 and 2001
- -------------------------------------------------------------------
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the three
months ended June 30, 2002 compared to the same period of 2001. Gains or losses
from the sale of equipment, and interest and other income and certain expenses
such as management fees to affiliate, depreciation and general and
administrative expenses relating to the operating segments (see Note 7 to the
unaudited condensed financial statements), are not included in the owned
equipment operation discussion because they are indirect in nature and not a
result of operations but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
For the Three Months
Ended June 30,
2002 2001
==================
Railcars $294 $494
Marine containers 7 18
Aircraft -- (8)
Railcars: Railcar lease revenues and direct expenses were $0.4 million and $0.1
million, respectively, for the second quarter of 2002, compared to $0.6 million
and $0.1 million, respectively, during the same period of 2001. Railcar lease
revenue decreased in the second quarter of 2002 compared to the same quarter of
2001 due to the disposition of railcars during 2002 and 2001.
Marine containers: Marine container lease revenues were $7,000 for the second
quarter of 2002, compared to $18,000 during the same period of 2001. Lease
revenues decreased $11,000 due to the disposition of marine containers during
2002 and 2001.
Aircraft: Aircraft lease revenues and direct expenses were $-0- and $8,000,
respectively, for the second quarter of 2001. The Partnership's wholly-owned
aircraft was sold during 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.3 million remained relatively the same for the
second quarter of 2002 and 2001. Significant variances are explained as
follows:
(i) A $0.1 million decrease in depreciation expenses from 2001 levels
resulted from to the disposition of certain assets during 2002 and 2001; and
(ii) A $48,000 increase in the provision for bad debts was based on PLM
Financial Services, Inc. (the General Partner's) evaluation of the
collectability of receivables compared to 2001.
(C) Interest and Other Income
Interest and other income decreased $0.1 million due to a decrease in the
interest rate earned on cash balances.
(D) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the second quarter in
2002 totaled $0.1 million, and resulted from the sale of marine containers and a
railcar with an aggregate net book value of $11,000, for proceeds of $0.1
million. The net gain on disposition of equipment for the second quarter of
2001 totaled $26,000, which resulted from the sale of marine containers and
railcars with an aggregate net book value of $0.1 million, for proceeds of $0.1
million.
(E) Equity in Net Income of an Unconsolidated Special-Purpose Entity (USPE)
Equity in net income of an USPE represents the Partnership's share of the net
income generated from the operation of a jointly owned asset accounted for under
the equity method of accounting. This entity is single purpose and has no debt
or other financial encumbrances.
As of June 30, 2002 and 2001, the Partnership had an interest in a trust that
owns two commercial aircraft on direct finance lease. Aircraft revenues and
expenses were $44,000 and $15,000, respectively, for the second quarter of 2002,
compared to $0.1 million and $15,000, respectively, during the same period of
2001. Revenues decreased due to the leases for the aircraft in the trust being
renegotiated at a lower rate.
(F) Net Income
As a result of the foregoing, the Partnership's net income was $0.1 million for
the second quarter of 2002, compared to net income of $0.4 million during the
same period of 2001. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors. Therefore, the Partnership's performance in the quarter ended June 30,
2002 is not necessarily indicative of future periods.
Comparison of the Partnership's Operating Results for the Six Months Ended June
- --------------------------------------------------------------------------------
30, 2002 and 2001
- --------------------
(A) Owned Equipment Operations
Lease revenues less direct expenses on owned equipment decreased during the six
months ended June 30, 2002 compared to the same period of 2001. The following
table presents lease revenues less direct expenses by segment (in thousands of
dollars):
For the Six Months
Ended June 30,
2002 2001
===================
Railcars $772 $1,070
Marine containers 12 30
Aircraft -- 164
Marine vessel -- (27)
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.3
million, respectively, for the six months ended June 30, 2002, compared to $1.3
million and $0.3 million, respectively, during the same period of 2001. Lease
revenues decreased $0.3 million during the six months ended June 30, 2002
compared to the same period of 2001 due to the disposition of railcars during
2002 and 2001.
Marine containers: Marine container lease revenues were $12,000 for the six
months ended June 30, 2002, compared to $30,000 during the same period of 2001.
Lease revenues decreased $18,000 due to the disposition of marine containers
during 2002 and 2001.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$21,000, respectively, for the six months ended June 30, 2001. Aircraft
contribution decreased $0.2 million during the six months ended June 30, 2002
due to the sale of the Partnership's wholly-owned aircraft during 2001.
Marine vessel: Marine vessel reported direct expenses of $27,000 during the six
months ended June 30, 2001 due to actual operating expenses in 2000 being higher
than previously reported.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.5 million for the six months ended June 30, 2002
decreased from $1.0 million for the same period in 2001. Significant variances
are explained as follows:
(i) A $0.3 million decrease in administrative expenses from 2001 levels
resulted from a decrease of $0.1 million due to lower professional costs and a
decrease of $0.1 million resulting from lower allocations by the General Partner
for office services and data processing services; and
(ii) A $0.3 million decrease in depreciation expense from 2001 levels
resulted from the disposition of certain assets during 2002 and 2001.
(C) Interest and Other Income
Interest and other income decreased $0.1 million due to a decrease in the
interest rate earned on cash balances.
(D) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the six months ended June
30, 2002 totaled $0.6 million, and resulted from the sale of marine containers
and railcars with an aggregate net book value of $0.5 million, for proceeds of
$1.2 million. The net gain on disposition of equipment for the six months ended
June 30, 2001 totaled $3.5 million, which resulted from the sale of a commercial
aircraft, a commuter aircraft, marine containers, and railcars with an aggregate
net book value of $1.9 million, for aggregate proceeds of $5.4 million.
(E) Equity in Net Income of Unconsolidated Special-Purpose Entities
Equity in net income of USPEs represents the Partnership's share of the net
income or loss generated from the operation of jointly owned assets accounted
for under the equity method of accounting. These entities are single purpose
and have no debt or other financial encumbrances. The following table presents
equity in net income (loss) by equipment type (in thousands of dollars):
For the Six Months
Ended June 30,
2002 2001
==================
Aircraft $64 $208
Marine vessel -- (34)
----- -----
Equity in net income of USPEs $64 $174
===== =====
Aircraft: As of June 30, 2002 and 2001, the Partnership had an interest in a
trust that owns two commercial aircraft on direct finance lease. Aircraft
revenues and expenses were $0.1 million and $29,000, respectively, for the six
months ended June 30, 2002, compared to $0.2 million and $31,000, respectively,
during the same period in 2001. Revenues decreased due to the leases for the
aircraft in the trust being renegotiated at a lower rate.
Marine vessel: As of June 30, 2002 and 2001, the Partnership had no remaining
interest in an entity that owned a marine vessel. During the six months ended
June 30, 2001, the entity that owned a marine vessel reported $34,000 in
operating expenses due to actual operating expenses in 2000 being higher than
previously reported.
(F) Net Income
As a result of the foregoing, the Partnership's net income was $1.0 million for
the six months ended June 30, 2002, compared to net income of $3.9 million
during the same period of 2001. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors. Therefore, the Partnership's performance during the
six months ended June 30, 2002 is not necessarily indicative of future periods.
During the six months ended June 30, 2002, the Partnership distributed $3.8
million to the limited partners, or $0.44 per weighted-average limited
partnership unit.
(II) CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the General Partner
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On a regular basis, the General Partner reviews
these estimates including those related to asset lives and depreciation methods,
impairment of long-lived assets, allowance for doubtful accounts, and
contingencies and litigation. These estimates are based on the General
Partner's historical experience and on various other assumptions believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The General Partner
believes, however, that the estimates, including those for the above-listed
items, are reasonable and that actual results will not vary significantly from
the estimated amounts.
The General Partner believes the following critical accounting policies affect
the more significant judgments and estimates used in the preparation of the
Partnership's financial statements:
Asset lives and depreciation methods: The Partnership's primary business
involves the purchase and subsequent lease of long-lived transportation and
related equipment. The General Partner has chosen asset lives that it believes
correspond to the economic life of the related asset. The General Partner has
chosen a deprecation method that it believes matches the benefit to the
Partnership from the asset with the associated costs. These judgments have been
made based on the General Partner's expertise in each equipment segment that the
Partnership operates. If the asset life and depreciation method chosen does not
reduce the book value of the asset to at least the potential future cash flows
from the asset to the Partnership, the Partnership would be required to record a
loss on revaluation. Likewise, if the net book value of the asset was reduced
by an amount greater than the economic value has deteriorated, the Partnership
may record a gain on sale upon final disposition of the asset.
Impairment of long-lived assets: On a regular basis, the General Partner
reviews the carrying value of its equipment and investment in an USPE to
determine if the carrying value of the assets may not be recoverable in
consideration of the current economic conditions. This requires the General
Partner to make estimates related to future cash flows from each asset as well
as the determination if the deterioration is temporary or permanent. If these
estimates or the related assumptions change in the future, the Partnership may
be required to record additional impairment charges.
Allowance for doubtful accounts: The Partnership maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the
lessees to make the lease payments. These estimates are primarily based on the
amount of time that has lapsed since the related payments were due as well as
specific knowledge related to the ability of the lessees to make the required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, additional allowances could be required that would reduce income.
Conversely, if the financial condition of the lessees were to improve or if
legal remedies to collect past due amounts were successful, the allowance for
doubtful accounts may need to be reduced and income would be increased.
Contingencies and litigation: The Partnership is subject to legal proceedings
involving ordinary and routine claims related to its business. The ultimate
legal and financial liability with respect to such matters cannot be estimated
with certainty and requires the use of estimates in recording liabilities for
potential litigation settlements. Estimates for losses from litigation are made
after consultation with outside counsel. If estimates of potential losses
increase or the related facts and circumstances change in the future, the
Partnership may be required to record additional litigation expense.
(III) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 2002, the Partnership generated $0.5 million
in operating cash (net cash provided by operating activities plus
non-liquidating cash distributions from an USPE) to meet its operating
obligations, maintain working capital reserves and make distributions (total for
the six months ended June 30, 2002 of $4.0 million) to the partners, and used
undistributed available cash from prior periods and proceeds from equipment
dispositions of approximately $3.5 million.
During the six months ended June 30, 2002, the Partnership disposed of
owned equipment for aggregate proceeds of $1.2 million.
Accounts receivable decreased $0.1 million during the six months ended June 30,
2002 due to the timing of cash receipts.
Investment in an USPE decreased $0.2 million due to cash distributions of $0.2
million to the Partnership from the USPE offset in part, by $0.1 million of
income that was recorded by the Partnership from the USPE during the six months
ended June 30, 2002.
Accounts payable decreased $0.2 million during the six months ended June 30,
2002 due to the payment of an aircraft repair that had been accrued as of
December 31, 2001.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of
the Partnership's remaining equipment portfolio and, in turn, the amount of net
cash flows from operations will continue to become progressively smaller as
assets are sold. Significant asset sales may result in distributions to the
partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts cannot
be accurately determined prior to actual disposal of the equipment.
(IV) OUTLOOK FOR THE FUTURE
The Partnership is in its active liquidation phase. The General Partner is
actively pursuing the sale of all of the Partnership's equipment with the
intention of winding up the Partnership and distributing all available cash to
the Partners. Sale decisions may cause the operating performance of the
Partnership to decline over the remainder of its life. The liquidation phase
will end on December 31, 2009, unless the Partnership is terminated earlier upon
sale of all of the equipment or by certain other events.
Several factors may affect the Partnership's operating performance during the
remainder of 2002 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's equipment and its investment in an USPE will
cause a reduction in the size of the equipment portfolio and may result in a
reduction of contribution to the Partnership. Other factors affecting the
Partnership's contribution during the remainder of 2002 and beyond include:
(1) The cost of new marine containers have been at historic lows for the
past several years which has caused downward pressure on per diem lease rates
for this type of equipment. The Partnership's fleet of marine containers is in
excess of twelve years of age and is generally no longer suitable for use in
international commerce either due to its specific physical condition, or
lessees' preferences for newer equipment;
(2) Railcar loadings in North America for the six months ended June 30, 2002
were below those of 2001. This decrease has led to lower utilization and lower
contribution to the Partnership as existing leases expire and renewal leases are
negotiated; and
(3) The airline industry began to see lower passenger travel during 2001. The
tragic events on September 11, 2001 worsened the situation. As a result of this
and the general turmoil in the airline industry, the Partnership has had to
renegotiate the lease on its partially owned aircraft on a direct finance lease
during 2001 that will result in a decrease in revenues during 2002. In addition,
these events have had a negative impact on the fair market value of the
Partnership's partially owned aircraft. Although no revaluations were required
during 2002 to these aircraft, the General Partner does not expect these
aircraft values to return to their previous value in the foreseeable future.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of some of these
factors, or of their occurrence, makes it difficult for the General Partner to
clearly define trends or influences that may impact the performance of the
Partnership's equipment. The General Partner continually monitors both the
equipment markets and the performance of the Partnership's equipment in these
markets. The General Partner may decide to reduce the Partnership's exposure to
equipment markets in which it determines that it cannot operate equipment and
achieve acceptable rates of return.
The Partnership intends to use cash flow from operations and proceeds from
disposition of equipment to satisfy its operating requirements, maintain working
capital reserves, and pay cash distributions to the partners.
(V) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q contains
forward-looking statements that contain risks and uncertainties, such as
statements of the Partnership's plans, objectives, expectations, and intentions.
The cautionary statements made in this Form 10-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------------
The Partnership's primary market risk exposure is that of currency devaluation
risk. During the six months ended June 30, 2002, 74% of the Partnership's total
lease revenues from wholly- and partially-owned equipment came from non-United
States domiciled lessees. Most of the leases require payment in United States
(U.S.) currency. If these lessees' currency devalues against the U.S. dollar,
the lessees could encounter difficulty in making the US dollar denominated lease
payments.
(This space intentionally left blank)
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND IV
By: PLM Financial Services, Inc.
General Partner
Date: August 13, 2002 By: /s/ Stephen M. Bess
----------------------
Stephen M. Bess
President and
Current Chief Accounting Officer
CERTIFICATION
The undersigned hereby certifies, in their capacity as an officer of the General
Partner of PLM Equipment Growth Fund IV (the Partnership), that the Quarterly
Report of the Partnership on Form 10-Q for the period ended June 30, 2002, fully
complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that the information contained in such report fairly presents, in
all material respects, the financial condition of the Partnership at the end of
such period and the results of operations of the Partnership for such period.
PLM EQUIPMENT GROWTH FUND IV
By: PLM Financial Services, Inc.
General Partner
Date: August 13, 2002 By: /s/ Stephen M. Bess
----------------------
Stephen M. Bess
President and
Current Chief Accounting Officer
Date: August 13, 2002 By: /s/ James A. Coyne
---------------------
James A. Coyne
Chief Financial Officer