Back to GetFilings.com
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 01-19203
_______________________
PLM EQUIPMENT GROWTH FUND V
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3104548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 V
(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 lease, at cost $ 72,929 $ 73,711
Less accumulated depreciation (63,367) (62,572)
--------- ---------
Net equipment 9,562 11,139
Cash and cash equivalents 9,335 6,312
Restricted cash 81 --
Accounts receivable, less allowance for doubtful
accounts of $2,176 in 2002 and $664 in 2001 855 1,041
Investments in unconsolidated special-purpose entities 4,710 5,703
Deferred charges, net of accumulated amortization of
$39 in 2002 and $33 in 2001 7 14
Prepaid expenses and other assets 54 34
--------- ---------
Total assets $ 24,604 $ 24,243
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 110 $ 410
Due to affiliates 160 194
Lessee deposits and reserve for repairs 3,148 3,149
------- -------
Total liabilities 3,418 3,753
Partners' capital:
Limited partners (8,479,516 limited partnership units in 2002
and 8,533,465 in 2001) 21,186 20,490
General Partner -- --
------- -------
Total partners' capital 21,186 20,490
------- -------
Total liabilities and partners' capital $24,604 $24,243
======= =======
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND V
(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 $2,372 $2,791 $4,983 $5,672
Interest and other income 30 88 64 147
Net gain on disposition of equipment 29 18 71 1,174
------ ------ ------ -------
Total revenues 2,431 2,897 5,118 6,993
EXPENSES
Depreciation and amortization 759 1,621 1,537 3,224
Repairs and maintenance 161 215 348 437
Equipment operating expenses 17 119 24 324
Insurance expense 29 13 58 122
Management fees to affiliate 28 131 104 253
Interest expense -- 42 -- 141
General and administrative expenses
to affiliates 69 101 127 290
Other general and administrative expenses 235 134 388 306
Provision for (recovery of) bad debts 753 (7) 1,512 (3)
------ ------ ------ -------
Total expenses 2,051 2,369 4,098 5,094
Equity in net income (loss) of unconsolidated
special-purpose entities (157) 468 (359) 845
------ ------ ------ -------
Net income $ 223 $ 996 $ 661 $2,744
PARTNERS' SHARE OF NET INCOME:
Limited partners $ 223 $ 996 $ 661 $2,625
General Partner -- -- -- 119
------ ------ ------ -------
Total $ 223 $ 996 $ 661 $2,744
------ ------ ------ -------
Net income per weighted-average
limited partnership unit $ 0.03 $ 0.11 $ 0.08 $ 0.29
------ ------ ------ -------
Cash distribution $ -- $ -- $ -- $1,719
------ ------ ------ -------
Cash distribution per weighted-average
limited partnership unit $ -- $ -- $ -- $ 0.18
====== ======= ======= =======
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND V
( 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 $21,446 $ -- $21,446
Net income 3,149 119 3,268
Purchase of limited partnership units (2,504) -- (2,504)
Cash distribution (1,601) (119) (1,720)
-------- ------ --------
Partners' capital as of December 31, 2001 20,490 -- 20,490
Net income 661 -- 661
Canceled purchase of limited partnership units 35 -- 35
-------- ------ --------
Partners' capital as of June 30, 2002 $21,186 $ -- $21,186
======== ====== ========
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND V
(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 $ 661 $ 2,744
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,537 3,224
Provision for (recovery of) bad debts 1,512 (3)
Net gain on disposition of equipment (71) (1,174)
Equity in net (income) loss from unconsolidated
special-purpose entities 359 (845)
Changes in operating assets and liabilities:
Restricted cash (81) (48)
Accounts receivable (1,308) 655
Prepaid expenses and other assets (20) (8)
Accounts payable and accrued expenses (86) (136)
Due to affiliates (34) (45)
Lessee deposits and reserve for repairs (1) 360
-------- --------
Net cash provided by operating activities 2,468 4,724
INVESTING ACTIVITIES
Payments for capitalized repairs -- (3)
Distributions from unconsolidated special-purpose entities 634 1,352
Proceeds from disposition of equipment 100 2,561
-------- --------
Net cash provided by investing activities 734 3,910
FINANCING ACTIVITIES
Payment for limited partnership units (214) --
Canceled purchase of limited partnership units 35 --
Payments of note payable -- (5,474)
Cash distributions paid to limited partners -- (1,600)
Cash distributions paid to General Partner -- (119)
-------- --------
Net cash used in financing activities (179) (7,193)
Net increase in cash and cash equivalents 3,023 1,441
Cash and cash equivalents at beginning of period 6,312 1,799
-------- --------
Cash and cash equivalents at end of period $ 9,335 $ 3,240
======== ========
SUPPLEMENTAL INFORMATION
Interest paid $ -- $ 224
======== ========
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND V
(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 V (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 is currently in its investment phase during which the
Partnership uses a portion of the cash generated from operations and proceeds
from asset sales to purchase additional equipment. The General Partner believes
these acquisitions may cause the Partnership to generate additional earnings and
cash flow for the Partnership.
The Partnership may reinvest its cash flow, surplus cash and equipment sale
proceeds in additional equipment, consistent with the objectives of the
Partnership, until December 31, 2004. The Partnership will terminate on
December 31, 2010, unless terminated earlier upon sale of all equipment and by
certain other events.
3. Reclassification
----------------
Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentations.
4. 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, 2001, cash distributions totaled $1.7 million. 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. No cash distributions were paid to the
limited partners during the six months ended June 30, 2002.
5. Transactions with General Partner and Affiliates
-----------------------------------------------------
The balance due to affiliates as of June 30, 2002 and December 31, 2001,
included $0.1 million due to FSI and its affiliates for management fees and $0.1
million due to affiliated unconsolidated special-purpose entities (USPEs).
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. Transactions with General Partner and Affiliates (continued)
-----------------------------------------------------
The Partnership's proportional share of the affiliated expenses incurred by
USPEs 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 $ 71 $ 103 $ 116 $ 193
Data processing and administrative
expenses 30 32 53 84
These affiliate expenses reduced the Partnership's proportional share of the
equity interest in the income of USPEs.
6. 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
------- ---------
Aircraft $ 55,172 $ 55,172
Rail equipment 11,154 11,265
Marine containers 4,388 5,059
Trailers 2,215 2,215
------- --------
72,929 73,711
Less accumulated depreciation (63,367) (62,572)
------- --------
Net equipment $ 9,562 $ 11,139
======== =========
As of June 30, 2002, all owned equipment in the Partnership's portfolio was on
lease except for 98 railcars with a net book value of $0.4 million. As of
December 31, 2001, all owned equipment was on lease except for 87 railcars with
a net book value of $0.5 million.
During the six months ended June 30, 2002, the Partnership disposed of marine
containers and railcars with an aggregate net book value of $46,000 for proceeds
of $0.1 million. During the six months ended June 30, 2001, the Partnership
disposed of a marine vessel that was held for sale at December 31, 2000, marine
containers, and a railcar with an aggregate net book value of $1.4 million for
proceeds of $2.6 million.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. Investments in Unconsolidated Special-Purpose Entities
----------------------------------------------------------
The Partnership owns equipment jointly with affiliated programs. These are
single purpose entities that do not have any debt or other financial
encumbrances. The net investments in USPEs include the following jointly-owned
equipment and related assets and liabilities (in thousands of dollars):
June 30, December 31,
2002 2001
========= ==========
48% interest in an entity owning a product tanker $ 3,647 $4,248
25% interest in a trust owning two stage III commercial aircraft
on a direct finance lease 742 855
50% interest in an entity owning a product tanker 321 600
-------- ------
Net investments $ 4,710 $5,703
======== ======
As of June 30, 2002 and December 31, 2001, all jointly-owned equipment in the
Partnership's USPE portfolio was on lease except the Partnership's interest in
an entity owning a product tanker with a net investment of $0.3 million.
8. Operating Segments
-------------------
The Partnership operates in five primary operating segments: aircraft leasing,
marine vessel leasing, railcar leasing, marine container leasing, and trailer
leasing. Each equipment leasing segment engages in short-term to mid-term
operating leases to a variety of customers.
The following tables present a summary of the operating segments (in thousands
of dollars):
Marine Marine
For the three months ended Aircraft Vessel Railcar Container Trailer
June 30, 2002 Leasing Leasing Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ 1,867 $ -- $ 392 $ 49 $ 64 $ -- $ 2,372
Interest income and other -- -- -- -- -- 30 30
Gain (loss) on disposition of equipment -- -- (2) 31 -- -- 29
--------- -------- --------- ---------- -------- -------- --------
Total revenues 1,867 -- 390 80 64 30 2,431
COSTS AND EXPENSES
Operations support 17 -- 131 1 42 16 207
Depreciation and amortization 529 -- 131 64 32 3 759
Management fees to affiliates 14 -- 11 1 2 -- 28
General and administrative expenses 31 -- 32 -- 16 225 304
Provision for bad debts 753 -- -- -- -- -- 753
--------- -------- --------- ---------- -------- -------- --------
Total costs and expenses 1,344 -- 305 66 92 244 2,051
--------- -------- --------- ---------- -------- -------- --------
Equity in net income (loss) of USPEs 20 (177) -- -- -- -- (157)
--------- -------- --------- ---------- -------- -------- --------
Net income (loss) $ 543 $ (177) $ 85 $ 14 $ (28) $ -214 $ 223
========= ========= ========= ========== ========= ======== ========
Total assets as of June 30, 2002 $ 8,470 $ 3,969 $ 1,972 $ 257 $ 512 $ 9,424 $24,604
========= ========= ========= ========== ========= ======== ========
1 Includes certain assets not identifiable to a specific segment such as
cash, certain accounts receivable, deferred charges and prepaid expenses. Also
includes certain interest income and costs not identifiable to a particular
segment, such as certain amortization, general and administrative and operations
support expenses.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
8. Operating Segments (continued)
Marine Marine
For the three months ended Aircraft Vessel Railcar Container Trailer
June 30, 2001 Leasing Leasing Leasing Leasing Leasing Other 2 Total
REVENUES
Lease revenue $ 2,145 $ -- $ 447 $ 107 $ 92 $ -- $2,791
Interest income and other 33 -- -- -- -- 55 88
Gain on disposition of equipment -- -- -- 18 -- -- 18
--------- -------- -------- ---------- -------- -------- -------
Total revenues 2,178 -- 447 125 92 55 2,897
COSTS AND EXPENSES
Operations support 11 71 194 -- 54 17 347
Depreciation and amortization 1,342 -- 148 81 32 18 1,621
Interest expense -- -- -- -- -- 42 42
Management fees to affiliates 89 -- 32 5 5 -- 131
General and administrative expenses 4 4 9 -- 21 197 235
Provision for bad debts 753 -- (7) -- -- -- (7)
--------- -------- -------- ---------- -------- -------- -------
Total costs and expenses 1,446 75 376 86 112 274 2,369
--------- -------- -------- ---------- -------- -------- -------
Equity in net income (loss) of USPEs 74 394 -- -- -- -- 468
--------- -------- -------- ---------- -------- -------- -------
Net income (loss) $ 806 $ 319 $ 71 $ 39 $ (20) $ (219) $ 996
========= ======== ========= ========== ========= ========= =======
Marine Marine
For the six months ended Aircraft Vessel Railcar Container Trailer
June 30, 2002 Leasing Leasing Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ 3,907 $ -- $ 784 $ 122 $ 170 $ -- $4,983
Interest income and other -- -- 4 -- -- 60 64
Gain (loss) on disposition of equipment -- -- (3) 74 -- -- 71
--------- -------- --------- ---------- -------- -------- -------
Total revenues 3,907 -- 785 196 170 60 5,118
COSTS AND EXPENSES
Operations support 26 -- 272 1 99 32 430
Depreciation and amortization 1,072 -- 264 132 63 6 1,537
Management fees to affiliates 47 -- 45 5 7 -- 104
General and administrative expenses 99 -- 54 -- 32 330 515
Provision for bad debts 1,506 -- -- -- 6 -- 1,512
--------- -------- --------- ---------- -------- -------- -------
Total costs and expenses 2,750 -- 635 138 207 368 4,098
--------- -------- --------- ---------- -------- -------- -------
Equity in net income (loss) of USPEs 45 (404) -- -- -- -- (359)
--------- -------- --------- ---------- -------- -------- -------
Net income (loss) $ 1,202 $ (404) $ 150 $ 58 $ (37) $ (308) $ 661
========= ========= ========= ========== ========= ========= =======
1 Includes interest income and costs not identifiable to a particular
segment, such as interest expense and certain amortization, general and
administrative and operations support expenses.
2 Includes interest income and costs not identifiable to a particular
segment, such as interest expense and certain amortization, general and
administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
8. Operating Segments (continued)
-------------------
Marine Marine
For the six months ended Aircraft Vessel Railcar Container Trailer
June 30, 2001 Leasing Leasing Leasing Leasing Leasing Other 1 Total
REVENUES
Lease revenue $ 4,290 $ -- $ 983 $ 216 $ 183 $ -- $5,672
Interest income and other 33 -- -- -- -- 114 147
Gain (loss) on disposition of equipment -- 1,116 (4) 62 -- -- 1,174
--------- -------- --------- ---------- -------- -------- -------
Total revenues 4,323 1,116 979 278 183 114 6,993
COSTS AND EXPENSES
Operations support 29 348 334 -- 94 78 883
Depreciation and amortization 2,684 -- 283 169 64 24 3,224
Interest expense -- -- -- -- -- 141 141
Management fees to affiliates 165 -- 68 10 10 -- 253
General and administrative expenses 18 23 22 -- 31 502 596
Recovery of bad debts -- -- -- -- (3) -- (3)
--------- -------- --------- ---------- -------- -------- -------
Total costs and expenses 2,896 371 707 179 196 745 5,094
--------- -------- --------- ---------- -------- -------- -------
Equity in net income of USPEs 148 697 -- -- -- -- 845
--------- -------- --------- ---------- -------- -------- -------
Net income (loss) $ 1,575 $ 1,442 $ 272 $ 99 $ (13) $ (631) $2,744
========= ======== ========= ========== ========= ========= =======
9. 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, was 8,479,516 and 8,488,756,
respectively. The weighted-average number of limited partnership units deemed
outstanding during the three and six months ended June 30, 2001 was 9,065,911.
(This space intentionally left blank)
1 Includes interest income and costs not identifiable to a particular
segment, such as interest expense and certain amortization, general and
administrative and operations support expenses.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
10. Limited Partnership Units
---------------------------
During 2001, the General Partner agreed to purchase 594,820 limited partnership
units and paid $2.5 million to the purchasing agent for this purchase.
The purchasing agent purchased 53,949 units during the six months ended June 30,
2002 and 532,446 units as of December 31, 2001, which is reflected as a
reduction in Partnership units. Under the terms of the purchase agreement, only
the units held by the owner on the date of the agreement were eligible to be
purchased. The General Partner has not been able to purchase the remaining
8,425 units due to the eligible owners selling the units in the open market.
The General Partner has determined that the remaining units will not be
purchased and has received a $35,000 refund from the purchasing agent.
11. Subsequent Event
-----------------
In July 2002, PLM International, Inc. (PLMI), the parent company of FSI, reached
an agreement with the lenders of the $10.0 million warehouse facility to extend
the expiration date of the facility to June 30, 2003. The warehouse facility is
shared by the Partnership, PLM Equipment Growth Fund VI, PLM Equipment Growth &
Income Fund VII, Professional Lease Management Income Fund I, LLC and Acquisub
LLC, a wholly owned subsidiary of PLMI. The facility provides for financing up
to 100% of the cost of the equipment. Outstanding borrowings by one borrower
reduce the amount available to each of the other borrowers under the facility.
Individual borrowings may be outstanding for no more than 270 days, with all
advances due no later than June 30, 2003. Interest accrues either at the prime
rate or LIBOR plus 2.0% at the borrower's option and is set at the time of an
advance of funds. Borrowings by the Partnership are guaranteed by PLMI. The
Partnership is not liable for the advances made to the other borrowers.
(This space intentionally left blank)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------
RESULTS OF OPERATIONS
-------------------
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund V'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,
equipment operating, and asset-specific insurance 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, interest and other
income, and certain expenses such as management fees to affiliate, depreciation
and amortization and general and administrative expenses relating to the
operating segments (see Note 8 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
====================
Aircraft $1,850 $2,134
Railcars 261 253
Marine containers 48 107
Trailers 22 38
Marine vessel -- (71)
Aircraft: Aircraft lease revenues and direct expenses were $1.9 million and
$17,000, respectively, for the three months ended June 30, 2002, compared to
$2.1 million and $11,000, respectively, during the same period of 2001. The
decrease in aircraft lease revenues of $0.3 million during the second quarter of
2002 was due to the reduction in the lease rate on two of the Partnership's
owned aircraft compared to 2001.
Railcars: Railcar lease revenues and direct expenses were $0.4 million and $0.1
million, respectively, for the three months ended June 30, 2002, compared to
$0.4 million and $0.2 million, respectively, during the same period of 2001.
Railcar lease revenues decreased $39,000 due to the increase in the number of
off-lease railcars during the three months ended June 30, 2002 compared to 2001.
A decrease of $11,000 was due to certain railcars being released at a lower rate
in 2002 than the rate that was in place during 2001. An additional decrease in
lease revenues of $5,000 was due to the disposition of railcars during 2001 and
2002.
Marine containers: Marine container lease revenues and direct expenses were
$49,000 and $1,000, respectively, for the three months ended June 30, 2002,
compared to $0.1 million and $-0-, respectively, during the same period of 2001.
The decrease in marine container contribution was due to the disposal of marine
containers during 2002 and 2001.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$42,000, respectively, for the three months ended June 30, 2002, compared to
$0.1 million and $0.1 million, respectively, during the same period of 2001.
Marine vessel: The Partnership sold the remaining owned marine vessel during
2001. Marine vessel lease revenues and direct expenses were $-0- and $0.1
million, respectively, for the three months ended June 30, 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.8 million for the three months ended June 30, 2002
decreased from $2.0 million for the same period in 2001. Significant variances
are explained as follows:
(i) A $0.9 million decrease in depreciation and amortization expenses
from 2001 levels reflects the decrease of $0.8 million resulting from certain
assets being fully depreciated during 2001 and a decrease of approximately $0.1
million caused by the double-declining balance method of depreciation which
results in greater depreciation in the first years an asset is owned;
(ii) A $0.1 million decrease in management fees was the result of a
decrease of $30,000 due to lower lease revenues earned and a decrease of $28,000
due to higher provision for bad debts during the second quarter of 2002 compared
to 2001;
(iii) A $42,000 decrease in interest expense from 2001 levels was due
to the payoff of all of the Partnership's outstanding debt during the second
quarter of 2001;
(iv) A $0.1 million increase in general and administrative expenses
during the three months ended June 30, 2002 resulted from higher administrative
and professional services; and
(v) A $0.8 million increase in the provision for bad debts was based on
the General Partner's evaluation of the collectability of receivables compared
to 2001. The provision for bad debt expense recorded in the second quarter of
2002 of $0.8 million was primarily related to one aircraft lessee.
(C) Interest and Other Income
Interest and other income decreased $0.1 million during 2002 due to a decrease
in the interest rate earned on available cash balances.
(D) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the second quarter of 2002
totaled $29,000, and resulted from the sale of marine containers and railcars
with an aggregate net book value of $18,000 for proceeds of $47,000. The net
gain on the disposition of equipment for the second quarter of 2001 totaled
$18,000, and resulted from the sale of marine containers with a net book value
of $15,000 for proceeds of $33,000.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Equity in net income (loss) of USPEs represents the Partnership's share of the
net income (loss) generated from the operation of jointly owned assets accounted
for under the equity method of accounting. These entities are single purpose
and have no debt or other financial encumbrances. The following table presents
equity in net income (loss) by equipment type (in thousands of dollars):
For the Three Months
Ended June 30,
2002 2001
===================
Aircraft $ 20 $ 74
Marine vessels (177) 394
------ ----
Equity in net income (loss) of USPEs $(157) $468
====== ====
Aircraft: As of June 30, 2002 and 2001, the Partnership had an interest in a
trust owning two commercial aircraft on a direct finance lease. During the
three months ended June 30, 2002, the contribution from this trust decreased
$0.1 million due to the leases for the aircraft in the trust being renegotiated
at a lower rate.
Marine vessels: As of June 30, 2002 and 2001, the Partnership owned interests
in two entities each owning a marine vessel. During the second quarter of 2002,
lease revenues of $1.3 million were offset by depreciation expense, direct
expenses and administrative expenses of $1.4 million. During the same period of
2001, lease revenues of $2.0 million were offset by depreciation expense, direct
expenses and administrative expenses of $1.6 million.
Lease revenues decreased $0.8 million during the three months ended June 30,
2002 primarily due to a decrease in voyage charter lease rates compared to the
same period of 2001.
Depreciation expense, direct expenses, and administrative expenses decreased
$0.2 million during the three months ended June 30, 2002 compared to the same
period of 2001. The decrease in direct expenses of $0.2 million was due to the
marine vessels incurring lower repairs and maintenance of $0.3 million partially
offset by higher operating costs of $0.1 million.
(F) Net Income
As a result of the foregoing, the Partnership's net income for the three months
ended June 30, 2002 was $0.2 million, compared to net income of $1.0 million
during the same period in 2001. The Partnership's ability to acquire, operate,
and liquidate assets, secure leases, and re-lease those assets whose leases
expire is subject to many factors. Therefore, the Partnership's performance in
the second quarter of 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
====================
Aircraft $3,881 $4,261
Railcars 512 649
Marine containers 121 216
Trailers 71 89
Marine vessel -- (348)
Aircraft: Aircraft lease revenues and direct expenses were $3.9 million and
$26,000, respectively, for the six months ended June 30, 2002, compared to $4.3
million and $29,000, respectively, during the same period of 2001. The decrease
in aircraft lease revenues of $0.4 million during the six months ended June 30,
2002 was due to the reduction in the lease rate on two of the Partnership's
owned aircraft compared to 2001.
Railcars: Railcar lease revenues and direct expenses were $0.8 million and $0.3
million, respectively, for the six months ended June 30, 2002, compared to $1.0
million and $0.3 million, respectively, during the same period of 2001. A
decrease in railcar lease revenues of approximately $0.1 million was due to the
increase in the number of off-lease railcars during the six months ended June
30, 2002 compared to 2001. Additionally, a decrease of approximately $0.1
million was due to certain railcars being released at a lower rate in 2002 than
the rate that was in place during 2001.
Marine containers: Marine container lease revenues and direct expenses were
$0.1 million and $1,000, respectively, for the six months ended June 30, 2002,
compared to $0.2 million and $-0-, respectively, during the same period of 2001.
The decrease in marine container contribution was due to the disposal of marine
containers during 2002 and 2001.
Trailers: Trailer lease revenues and direct expenses were $0.2 million and
$0.1 million, respectively, for the six months ended June 30, 2002 and 2001.
Marine vessel: The Partnership sold the remaining owned marine vessel during
the six months ended June 30, 2001. Marine vessel lease revenues and direct
expenses were $-0- and $0.3 million, respectively, for the six months ended June
30, 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $3.7 million for the six months ended June 30, 2002
decreased from $4.2 million for the same period in 2001. Significant variances
are explained as follows:
(i) A $1.7 million decrease in depreciation and amortization expenses
from 2001 levels was due to certain assets being fully depreciated during 2001;
(ii) A $0.1 million decrease in interest expense from 2001 levels was
due to the payoff of all of the Partnership's outstanding debt during the second
quarter of 2001;
(iii) A $0.1 million decrease in general and administrative expenses
during the six months ended June 30, 2002 resulted from lower allocations by the
General Partner for office services and data processing services;
(iv) A $0.1 million decrease in management fees was the result of a
decrease of $0.1 million due to lower lease revenues earned and a decrease of
$0.1 million due to higher provision for bad debts during the six months ended
June 30, 2002 compared to 2001; and
(v) A $1.5 million increase in the provision for bad debts was based on
the General Partner's evaluation of the collectability of receivables compared
to 2001. The provision for bad debts recorded in the six months ended June 30,
2002 of $1.5 million was primarily related to one aircraft lessee.
(C) Interest and Other Income
Interest and other income decreased $0.1 million during 2002 due to a decrease
in the interest rate earned on available 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 $0.1 million, and resulted from the sale of marine containers
and railcars with an aggregate net book value of $46,000 for proceeds of $0.1
million. The net gain on the disposition of owned equipment for the six months
ended June 30, 2001 totaled $1.2 million, and resulted from the sale of a marine
vessel, marine containers, and a railcar with a net book value of $1.4 million,
for proceeds of $2.6 million.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
Equity in net income (loss) 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 $ 45 $148
Marine vessels (404) 697
------ ----
Equity in net income (loss) of USPEs $(359) $845
====== ====
Aircraft: As of June 30, 2002 and 2001, the Partnership had an interest in a
trust owning two commercial aircraft on a direct finance lease. During the six
months ended June 30, 2002, the contribution from this trust decreased $0.1
million due to the leases for the aircraft in the trust being renegotiated at a
lower rate.
Marine vessels: As of June 30, 2002 and 2001, the Partnership owned interests
in two entities each owning a marine vessel. During the six months ended June
30, 2002, lease revenues of $2.3 million were offset by depreciation expense,
direct expenses and administrative expenses of $2.7 million. During the same
period of 2001, lease revenues of $3.8 million were offset by depreciation
expense, direct expenses and administrative expenses of $3.1 million.
Lease revenues decreased $1.5 million during the six months ended June 30, 2002
primarily due to a decrease in voyage charter lease rates compared to the same
period of 2001.
Depreciation expense, direct expenses, and administrative expenses decreased
$0.4 million during the six months ended June 30, 2002 compared to the same
period of 2001. A decrease in direct expenses of $0.4 million was due to the
marine vessels incurring lower repairs and maintenance of $0.3 million and $0.1
million caused by the double-declining balance method of depreciation which
results in greater depreciation in the first years an asset is owned.
(F) Net Income
As a result of the foregoing, the Partnership's net income for the six months
ended June 30, 2002 was $0.7 million, compared to net income of $2.7 million
during the same period in 2001. The Partnership's ability to acquire, operate,
and liquidate assets, secure leases, and re-lease those assets whose leases
expire is subject to many factors. Therefore, the Partnership's performance in
the six months ended June 30, 2002 is not necessarily indicative of future
periods.
(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, reserves
related to legally mandated equipment repairs and contingencies and litigation.
These estimates are based on the General Partner's historical experience and on
various other assumptions believed to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions or
conditions. The General Partner believes, however, that the estimates,
including those for the above-listed items, are reasonable and that actual
results will not vary significantly from the estimated amounts.
The General Partner believes the following critical accounting policies affect
the more significant judgments and estimates used in the preparation of the
Partnership's financial statements:
Asset lives and depreciation methods: The Partnership's primary business
involves the purchase and subsequent lease of long-lived transportation and
related equipment. The General Partner has chosen asset lives that it believes
correspond to the economic life of the related asset. The General Partner has
chosen a deprecation method that it believes matches the benefit to the
Partnership from the asset with the associated costs. These judgments have been
made based on the General Partner's expertise in each equipment segment that the
Partnership operates. If the asset life and depreciation method chosen does not
reduce the book value of the asset to at least the potential future cash flows
from the asset to the Partnership, the Partnership would be required to record a
loss on revaluation. Likewise, if the net book value of the asset was reduced
by an amount greater than the economic value has deteriorated, the Partnership
may record a gain on sale upon final disposition of the asset.
Impairment of long-lived assets: On a regular basis, the General Partner
reviews the carrying value of its equipment and investments in USPEs to
determine if the carrying value of the assets may not be recoverable due to
current economic conditions. This requires the General Partner to make
estimates related to future cash flows from each asset as well as the
determination if the deterioration is temporary or permanent. If these
estimates or the related assumptions change in the future, the Partnership may
be required to record additional impairment charges.
Allowance for doubtful accounts: The Partnership maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the
lessees to make the lease payments. These estimates are primarily based on the
amount of time that has lapsed since the related payments were due as well as
specific knowledge related to the ability of the lessees to make the required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, additional allowances could be required that would reduce income.
Conversely, if the financial condition of the lessees were to improve or if
legal remedies to collect past due amounts were successful, the allowance for
doubtful accounts may need to be reduced and income would be increased.
Reserves for repairs: The Partnership accrues for legally required repairs to
equipment such as dry docking for marine vessels and engine overhauls to
aircraft engines over the period prior to the required repairs. The amount that
is reserved for is based on the General Partner's expertise in each equipment
segment, the past history of such costs for that specific piece of equipment and
discussions with independent, third party equipment brokers. If the amount
reserved for is not adequate to cover the cost of such repairs or if the repairs
must be performed earlier than the General Partner estimated, the Partnership
would incur additional repair and maintenance or equipment operating expenses.
Contingencies and litigation: The Partnership is subject to legal proceedings
involving ordinary and routine claims related to its business. The ultimate
legal and financial liability with respect to such matters cannot be estimated
with certainty and requires the use of estimates in recording liabilities for
potential litigation settlements. Estimates for losses from litigation are made
after consultation with outside counsel. If estimates of potential losses
increase or the related facts and circumstances change in the future, the
Partnership may be required to record additional litigation expense.
(III) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the six months ended June 30, 2002, the Partnership generated $3.1 million
in operating cash (net cash provided by operations plus non-liquidating
distributions from USPEs) to meet its operating obligations and maintain working
capital reserves.
During the six months ended June 30, 2002, the Partnership disposed of owned
equipment and received aggregate proceeds of $0.1 million.
Restricted cash increased during the six months ended June 30, 2002 due to the
deposit of $0.1 million into an escrow account related to collection efforts
from an aircraft lessee.
Accounts receivable decreased $0.2 million in the six months ended June 30,
2002. This decrease was due to increase in the allowance for bad debts of $1.5
million due to the General Partner's evaluation of the collectibility of
accounts receivable. This decrease was partially offset by an increase of $1.3
million during the six months ended June 30, 2002 due to the timing of cash
receipts.
Investments in USPEs decreased $1.0 million during the six months ended June 30,
2002 due to cash distributions of $0.6 million to the Partnership from the USPEs
and a $0.4 million loss that was recorded by the Partnership for its equity
interests in the USPEs.
Accounts payable decreased $0.3 million during the six months ended June 30,
2002 due to the payment of $0.2 million to the purchasing agent for the purchase
of Partnership units that was accrued at December 31, 2001 and a decrease of
$0.1 million due to the timing of payments to vendors.
In July 2002, PLM International, Inc. (PLMI), the parent company of FSI, reached
an agreement with the lenders of the $10.0 million warehouse facility to extend
the expiration date of the facility to June 30, 2003. The warehouse facility is
shared by the Partnership, PLM Equipment Growth Fund VI, PLM Equipment Growth &
Income Fund VII, Professional Lease Management Income Fund I, LLC and Acquisub
LLC, a wholly owned subsidiary of PLMI. The facility provides for financing up
to 100% of the cost of the equipment. Outstanding borrowings by one borrower
reduce the amount available to each of the other borrowers under the facility.
Individual borrowings may be outstanding for no more than 270 days, with all
advances due no later than June 30, 2003. Interest accrues either at the prime
rate or LIBOR plus 2.0% at the borrower's option and is set at the time of an
advance of funds. Borrowings by the Partnership are guaranteed by PLMI. The
Partnership is not liable for the advances made to the other borrowers.
As of August 13, 2002, the Partnership had no borrowings outstanding under this
facility and there were no other borrowings outstanding under this facility by
any other eligible borrower.
(IV) OUTLOOK FOR THE FUTURE
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.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
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. In addition, some of the Partnership's refrigerated
marine containers have become delaminated. This condition lowers the demand for
these marine containers and has lead to declining lease rates and lower
utilization on containers with this problem;
(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;
(3) Marine vessel freight rates are dependent upon the overall condition of
the international economy. Freight rates earned by the Partnership's marine
vessel began to decrease during the latter half of 2001 and through the first
six months of 2002. This trend is expected to continue through the latter half
of 2002 or until international economies stabilize and begin to improve;
(4) Industry wide utilization of inter-modal trailers decreased 12% during
the six months ended June 30, 2002 compared to 2001. This has led to lower
utilization of the Partnership's trailers as existing leases expire and may lead
to lower utilization during the remainder of 2002; and
(5) 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 leases on its owned aircraft and partially owned aircraft on a
direct finance lease during 2001 that will result in a decrease in revenues
during 2002.
In addition, these events have had a negative impact on the fair market value of
the Partnership's owned and 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.
During 2001, the lessee of three Stage II Boeing 737-200 commercial aircraft,
notified the General Partner of its intention to return these aircraft. The
lessee is located in Brazil, a country currently experiencing economic
difficultly. As of June 30, 2002, the lessee has not remitted ten lease
payments due to the Partnership. The Partnership has a security deposit from
this lessee that could be used to pay a portion of the amount due. During
October 2001, the General Partner sent a notification of default to the lessee.
The lease, with an expiration date of October 2002, has certain return condition
requirements for each aircraft. The General Partner has recorded an allowance
for bad debts for the amount due less the security deposit and is uncertain of
the collectibility of this receivable.
The Partnership also owns two DHC-8-102 commuter aircraft on lease through
February 2003 to Allegheny Airlines, Inc., a wholly owned subsidiary of US
Airways, both of which declared bankruptcy on August 11, 2002. At June 30, 2002,
Allegheny Airlines, Inc. has no outstanding receivables due to the Partnership.
The General Partner is unable to determine the impact this will have on the
Partnership at this time.
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 it cannot operate equipment to achieve
acceptable rates of return. Alternatively, the General Partner may make a
determination to enter equipment markets in which it perceives opportunities to
profit from supply/demand instabilities or other market imperfections
The Partnership may reinvest its cash flow, surplus cash, and equipment sale
proceeds in additional equipment, consistent with the objectives of the
Partnership, until December 31, 2004. The General Partner believes that these
acquisitions may cause the Partnership to generate additional earnings and cash
flow for the Partnership. Surplus funds, if any, less reasonable reserves, may
be distributed to the partners. The Partnership will terminate on December 31,
2010, unless terminated earlier upon sale of all equipment and by certain other
events.
(V) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q 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-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, 89% of the Partnership's total
lease revenues from wholly- and partially-owned equipment came from non-United
States domiciled lessees. Most of the Partnership's 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 payments.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits
--------
10.1 Third amendment to the Warehouse Credit Agreement, dated July 11, 2002.
(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 V
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 V (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 V
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