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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 SEPTEMBER 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)
September 30, December 31,
2002 2001
================================
ASSETS
Equipment held for operating leases, at cost. . . . . . $ 11,525 $ 15,811
Less accumulated depreciation . . . . . . . . . . . . . (8,362) (11,918)
--------------- --------------
Net equipment . . . . . . . . . . . . . . . . . . . 3,163 3,893
Cash and cash equivalents . . . . . . . . . . . . . . . 6,677 8,879
Accounts receivable, less allowance for doubtful
accounts of $50 in 2002 and $45 in 2001 . . . . . 140 82
Investment in an unconsolidated special-purpose entity. 968 1,197
Prepaid expenses and other assets . . . . . . . . . . . 41 21
--------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . $ 10,989 $ 14,072
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses . . . . . . . . . $ 65 $ 293
Due to affiliates . . . . . . . . . . . . . . . . . . . 160 168
--------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . 225 461
--------------- --------------
Commitments and contingencies
Partners' capital:
Limited partners (8,628,420 limited partnership units
in 2002 and 2001) . . . . . . . . . . . . . . . . 10,764 13,611
General Partner . . . . . . . . . . . . . . . . . . . . -- --
--------------- --------------
Total partners' capital . . . . . . . . . . . . . . 10,764 13,611
--------------- --------------
Total liabilities and partners' capital. . . . . . $ 10,989 $ 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 Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
===========================================
REVENUES
Lease revenue . . . . . . . . . . . . . . . . . $ 459 $ 634 $ 1,517 $ 2,185
Interest and other income . . . . . . . . . . . 38 72 95 251
Gain on disposition of equipment. . . . . . . . 10 16 659 3,471
------- -------- -------- -------
Total revenues. . . . . . . . . . . . . . . 507 722 2,271 5,907
------- -------- -------- -------
EXPENSES
Depreciation. . . . . . . . . . . . . . . . . . 63 119 216 547
Repairs and maintenance . . . . . . . . . . . . 163 368 427 640
Equipment operating expenses. . . . . . . . . . 20 18 62 137
Management fees to affiliate. . . . . . . . . . 34 44 108 142
General and administrative expenses
to affiliates . . . . . . . . . . . . . . 16 35 79 195
Other general and administrative expenses . . . 162 74 319 411
Provision for (recovery of) bad debts . . . . . (30) 1 4 15
------- -------- -------- -------
Total expenses. . . . . . . . . . . . . . . 428 659 1,215 2,087
------- -------- -------- -------
Equity in net income of unconsolidated special-
purpose entities. . . . . . . . . . . . . 29 99 93 273
------- -------- -------- -------
Net income. . . . . . . . . . . . . . . . . . . $ 108 162 $1,149 $4,093
======= ======== ======== =======
PARTNERS' SHARE OF NET INCOME
Limited partners. . . . . . . . . . . . . . . . $ 108 162 $ 949 $4,003
General Partner . . . . . . . . . . . . . . . . -- -- 200 90
------- -------- -------- -------
Total . . . . . . . . . . . . . . . . . . . . . $ 108 162 $1,149 $4,093
======= ======== ======== =======
Net income per weighted-average
limited partnership unit. . . . . . . . . $ 0.01 0.02 $ 0.11 $ 0.46
======= ======== ======== =======
Cash distribution . . . . . . . . . . . . . . . $ -- -- $3,996 $1,770
======= ======== ======== =======
Cash distribution per weighted-average
limited partnership unit. . . . . . . . . $ -- -- $ 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 SEPTEMBER 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 . . . . . . . . . . . . . . . . . 949 200 1,149
Cash distribution. . . . . . . . . . . . . . (3,796) (200) (3,996)
--------- ---------- --------
Partners' capital as of September 30, 2002 $ 10,764 $ -- $10,764
========== ========= ========
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 Nine Months
Ended September 30,
2002 2001
=====================
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,149 $ 4,093
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 216 547
Gain on disposition of equipment. . . . . . . . . . . . . (659) (3,471)
Equity in net income of unconsolidated special-purpose
entities. . . . . . . . . . . . . . . . . . . . . . . . (93) (273)
Changes in operating assets and liabilities:
Restricted cash . . . . . . . . . . . . . . . . . . . . -- 125
Accounts receivable, net. . . . . . . . . . . . . . . . (60) 102
Prepaid expenses and other assets . . . . . . . . . . . (20) 13
Accounts payable and accrued expenses . . . . . . . . . (228) 189
Due to affiliates . . . . . . . . . . . . . . . . . . . (8) (9)
Lessee deposits and reserve for repairs . . . . . . . . -- (217)
---------- --------
Net cash provided by operating activities . . . . . . 297 1,099
---------- --------
INVESTING ACTIVITIES
Payments for capitalized improvements . . . . . . . . . . . -- (2)
Proceeds from disposition of equipment. . . . . . . . . . . 1,175 5,391
Distribution from unconsolidated special-purpose entities . 322 570
---------- --------
Net cash provided by investing activities . . . . . . 1,497 5,959
---------- --------
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. . . . (2,202) 5,288
Cash and cash equivalents at beginning of period. . . . . . 8,879 2,742
---------- --------
Cash and cash equivalents at end of period. . . . . . . . . $ 6,677 $ 8,030
========== ========
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 September 30, 2002 and December
31, 2001, the unaudited condensed statements of income for the three and nine
months ended September 30, 2002 and 2001, the unaudited condensed statements of
changes in partners' capital for the period from December 31, 2000 to September
30, 2002, and the unaudited condensed statements of cash flows for the nine
months ended September 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 nine months ended
September 30, 2002 and 2001, cash distributions totaled $4.0 million and $1.8
million, respectively. No cash distributions were paid during the three months
ended September 30, 2002 and 2001. Cash distributions of $2.8 million and $-0-
to the limited partners for the nine months ended September 30, 2002 and 2001,
respectively, were deemed to be a return of capital.
4. Transactions with General Partner and Affiliates
-----------------------------------------------------
The balance due to affiliates as of September 30, 2002 and December 31, 2001
includes $13,000 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 Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
==========================================
Management fees. . . . . . . . . . $ 2 $ 4 $ 6 $ 13
Data processing and administrative
expenses. . . . . . . . . . . . -- -- 2 --
These affiliated 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):
September 30, December 31,
2002 2001
===============================
Railcars. . . . . . . . . . . $ 10,982 $ 13,239
Marine containers . . . . . . 543 2,572
--------------- --------------
11,525 15,811
Less accumulated depreciation (8,362) (11,918)
--------------- --------------
Net equipment. . . . . . . $ 3,163 $ 3,893
=============== ==============
As of September 30, 2002, all equipment was on lease except for 121
railcars and 7 marine containers with an aggregate net book value of $1.0
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 nine months ended September 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 nine months ended September 30, 2001,
the Partnership sold aircraft, marine containers and railcars with an aggregate
net book value of $1.9 million, for 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 owns equipment jointly with affiliated programs. This is a
single purpose entity that does not have any debt or other financial
encumbrances.
The table below sets forth 100% of the assets, liabilities, and equity of the
Aero California Trust in which the Partnership has a 35% interest and the
Partnership's proportional share of equity in the entity (in thousands of
dollars):
September 30, December 31,
2002 2001
=========================
Assets
Receivables . . . . . . . . . . . . . . $ 420 420
Finance lease receivable. . . . . . . . 2,763 3,450
Other assets. . . . . . . . . . . . . . 6 9
------- -------
Total assets. . . . . . . . . . . . . $3,189 $3,879
======= =======
Liabilities
Accounts payable. . . . . . . . . . . . $ 1 $ --
Due to affiliates . . . . . . . . . . . 2 39
Lessee deposits and reserve for repairs 420 420
------- -------
Total liabilities . . . . . . . . . . 423 459
------- -------
Equity. . . . . . . . . . . . . . . . . . 2,766 3,420
------- -------
Total liabilities and equity. . . . . $3,189 $3,879
======= =======
Partnership's share of equity . . . . . . $ 968 $1,197
======= =======
The table below sets forth 100% of the revenues, direct and indirect expenses,
and net income (loss) of the Aero California Trust in which the Partnership has
a 35% interest, and an entity that owned a marine vessel in which the
Partnership had an interest, and the Partnership's proportional share of income
(loss) in each entity for the three and nine months ended September 30, 2002 and
2001 (in thousands of dollars):
Aero Aero
California California
Trust Trust
For the three months ended September 30, 2002 2001
- ------------------------------------------------------------------
Revenues . . . . . . . . . . . . . . . $ 119 $ 328
Less: Direct expenses. . . . . . . . . 5 6
Indirect expenses. . . . . . 29 39
----------- -----------
Net income . . . . . . . . . . . . . $ 85 $ 283
=========== ===========
Partnership's share of net income. . . . $ 29 $ 99
=========== ===========
Aero Aero
California California Montgomery
Trust Trust Partnership
For the nine months ended September 30,. 2002 2001 Total
- ------------------------------------------------------------------------------------------
Revenues . . . . . . . . . . . . . . . $ 384 $ 1,011 $ -- $ --
Less: Direct expenses. . . . . . . . . 17 14 68 --
Indirect expenses. . . . . . 101 119 1 --
----------- ----------- ------------- -------
Net income (loss). . . . . . . . . . $ 266 $ 878 $ (69) $ --
=========== =========== ============= =======
Partnership's share of net income (loss) $ 93 $ 307 (34)1 $ 273
=========== =========== ============= =======
1 During 2000, the Partnership sold its 50% interest in the Montgomery
Partnership that owned a bulk carrier. During 2001 the Partnership received
additional expenses related to 2000.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
6. Investment in an Unconsolidated Special-Purpose Entity (continued)
-----------------------------------------------------------
As of September 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
September 30, 2002 Leasing Leasing Leasing Other 1 Total
- -----------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ -- $ 452 $ 7 $ -- $ 459
Interest income and other. . . . . . . . -- -- -- 38 38
Gain (loss) on disposition of equipment. -- (7) 17 -- 10
--------- --------- ---------- --------- --------
Total revenues. . . . . . . . . . . . -- 445 24 38 507
--------- --------- ---------- --------- --------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . -- 168 -- 15 183
Depreciation . . . . . . . . . . . . . . -- 63 -- -- 63
Management fees to affiliates. . . . . . -- 34 -- -- 34
General and administrative expenses. . . -- 30 -- 148 178
Provision for bad debts. . . . . . . . . -- (30) -- -- (30)
--------- --------- ---------- --------- --------
Total costs and expenses . . . . . . -- 265 -- 163 428
--------- --------- ---------- --------- --------
Equity in net income of USPE . . . . . . . 29 -- -- -- 29
--------- --------- ---------- --------- --------
Net income (loss). . . . . . . . . . . . . $ 29 $ 180 $ 24 $ (125) $ 108
========= ========= ========== ========= ========
Total assets as of June 30, 2002 . . . . . $ 968 $ 3,286 $ 17 $ 6,718 $10,989
========= ========= ========== ========= ========
Marine
For the three months ended Aircraft Railcar Container
September 30, 2001 Leasing Leasing Leasing Other 1 Total
- -----------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ -- $ 635 $ (1) $ -- $ 634
Interest income and other. . . . . . . . -- -- -- 72 72
Gain (loss) on disposition of equipment. (4) -- 20 -- 16
---------- --------- --------- ---------- ------
Total revenues. . . . . . . . . . . . (4) 635 19 72 722
---------- --------- --------- ---------- ------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . 226 144 -- 16 386
Depreciation . . . . . . . . . . . . . . (1) 75 45 -- 119
Management fees to affiliates. . . . . . 2 42 -- -- 44
General and administrative expenses. . . 1 26 -- 82 109
Provision for (recovery of) bad debts. . -- 5 (4) -- 1
---------- --------- --------- ---------- ------
Total costs and expenses . . . . . . 228 292 41 98 659
---------- -------- ----------- --------- ------
Equity in net income of USPEs. . . . . . . 99 -- -- -- 99
---------- -------- ----------- --------- ------
Net income (loss). . . . . . . . . . . . . $ (133) $ 343 $ (22) $ (26) $ 162
========== ======== =========== ========= ======
1 Includes certain assets not identifiable to a specific segment such as
cash 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.
2 Includes certain 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 nine months ended Aircraft Railcar Container
September 30, 2002 Leasing Leasing Leasing Other 1 Total
- -----------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . $ -- $ 1,498 $ 19 $ -- $1,517
Interest income and other. . . . . . -- -- -- 95 95
Gain on disposition of equipment . . -- 499 160 -- 659
--------- -------- ---------- --------- ------
Total revenues. . . . . . . . . . -- 1,997 179 95 2,271
--------- -------- ---------- --------- ------
COSTS AND EXPENSES
Operations support . . . . . . . . . -- 442 -- 47 489
Depreciation . . . . . . . . . . . . -- 191 25 -- 216
Management fees to affiliates. . . . -- 107 1 -- 108
General and administrative expenses. -- 92 -- 306 398
Provision for bad debts. . . . . . . -- 3 -- 1 4
--------- -------- ---------- --------- ------
Total costs and expenses . . . . -- 835 26 354 1,215
--------- -------- ---------- --------- ------
Equity in net income of USPE . . . . . 93 -- -- -- 93
--------- -------- ---------- --------- ------
Net income (loss). . . . . . . . . . . $ 93 $ 1,162 $ 153 $ (259) $1,149
========= ======== ========== ========= ======
Marine Marine
For the nine months ended Aircraft Railcar Container Vessel
September 30, 2001 Leasing Leasing Leasing Leasing Other 2 Total
- ----------------------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ 185 $ 1,971 $ 29 $ -- $ -- $2,185
Interest income and other. . . . . . . . 39 -- -- -- 212 251
Gain (loss) on disposition of equipment. 3,355 (15) 128 -- 3 3,471
--------- --------- ----------- --------- --------- ------
Total revenues. . . . . . . . . . . . 3,579 1,956 157 -- 215 5,907
--------- --------- ----------- --------- --------- ------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . 247 410 -- 27 93 777
Depreciation . . . . . . . . . . . . . . 144 246 157 -- -- 547
Management fees to affiliates. . . . . . 2 139 1 -- -- 142
General and administrative expenses. . . 126 70 -- -- 410 606
Provision for (recovery of) bad debts. . -- 16 -- -- (1) 15
--------- --------- ----------- --------- --------- ------
Total costs and expenses . . . . . . 519 881 158 27 502 2,087
--------- --------- ----------- --------- --------- ------
Equity in net income (loss) of USPEs . . . 307 -- -- (34) -- 273
--------- --------- ----------- --------- --------- ------
Net income (loss). . . . . . . . . . . . . $ 3,367 $ 1,075 $ (1) $ (61) $ (287) $4,093
========= ========= =========== ========= ========= ======
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 nine months ended September 30, 2002 and 2001 was 8,628,420.
1 Includes interest income and costs not identifiable to a particular
segment, such as certain general and administrative and operations support
expenses. Also includes the provision for bad debts related to trailers.
2 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.
PLM EQUIPMENT GROWTH FUND IV
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
9. Liquidation
-----------
On January 1, 1999, the General Partner began the liquidation phase of the
Partnership and commenced an orderly liquidation of the Partnership assets.
Given the current economic environment, and offers received for similar types of
equipment owned by the Partnership, the General Partner has determined it would
not be advantageous to sell the remaining Partnership equipment at the current
time. The General Partner will continue to monitor the equipment markets to
determine an optimal time to sell. In the meantime, equipment will continue to
be leased, and re-leased at market rates as existing leases expire. 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.
(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 the PLM Equipment Growth Fund IV's (the Partnership's) Operating
- --------------------------------------------------------------------------------
Results for the Three Months Ended September 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 increased during the three
months ended September 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 September 30,
2002 2001
===================
Railcars. . . . . $ 284 $ 491
Marine containers 7 (1)
Aircraft. . . . . -- (226)
Railcars: Railcar lease revenues and direct expenses were $0.5 million and $0.2
million, respectively, for the third 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 third 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 third
quarter of 2002, compared to $(1,000) during the same period of 2001. Lease
revenues increased $8,000 during the third quarter 2002 compared to the same
period of 2001 due to a reduction of lease revenues during the 2001 resulting
from actual revenues in a previous quarter being less than had been estimated.
A similar event did not occur during 2002.
Aircraft: Aircraft lease revenues and direct expenses were $-0- and $0.2
million, respectively, for the third 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
third 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;
(ii) A $30,000 decrease in the provision for bad debts was due to the
collection of receivables in 2002 that has been previously reserved for as a bad
debt. A similar event did not occur in 2001; and
(iii) A $0.1 million increase in administrative expenses was due to
higher professional service costs.
(C) Interest and Other Income
Interest and other income decreased $34,000 due to a decrease in the interest
rate earned on cash balances.
(D) Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the third quarter in 2002
totaled $10,000, and resulted from the sale of marine containers and railcars
with an aggregate net book value of $10,000, for proceeds of $20,000. The net
gain on disposition of equipment for the third quarter of 2001 totaled $16,000,
which resulted from the sale of marine containers and railcars with an aggregate
net book value of $15,000, for proceeds of $31,000.
(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 September 30, 2002 and 2001, the Partnership had an interest in a trust
that owns two commercial aircraft on direct finance lease. The Partnership's
share of aircraft revenues and expenses were $42,000 and $12,000, respectively,
for the third quarter of 2002, compared to $0.1 million and $16,000,
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 third quarter of 2002, compared to net income of $0.2 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
September 30, 2002 is not necessarily indicative of future periods.
Comparison of the Partnership's Operating Results for the Nine Months Ended
- --------------------------------------------------------------------------------
September 30, 2002 and 2001
- -------------------------------
(A) Owned Equipment Operations
Lease revenues less direct expenses on owned equipment decreased during the nine
months ended September 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 Nine Months
Ended September 30,
2002 2001
====================
Railcars. . . . . $ 1,056 $1,561
Marine containers 19 29
Marine vessel . . -- (27)
Aircraft. . . . . -- (62)
Railcars: Railcar lease revenues and direct expenses were $1.5 million and $0.4
million, respectively, for the nine months ended September 30, 2002, compared to
$2.0 million and $0.4 million, respectively, during the same period of 2001.
Lease revenues decreased $0.5 million during the nine months ended September 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 $19,000 for the nine
months ended September 30, 2002, compared to $29,000 during the same period of
2001. Lease revenues decreased $10,000 due to the disposition of marine
containers during 2002 and 2001.
Marine vessel: Marine vessel reported direct expenses of $(27,000) during the
nine months ended September 30, 2001 and related to actual expenses from a
previous period being higher than had been estimated. The Partnership's last
marine vessel was sold in 1999.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$0.2 million, respectively, for the nine months ended September 30, 2001. The
Partnership's wholly-owned aircraft was sold during 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.8 million for the nine months ended September 30,
2002 decreased from $1.4 million for the same period in 2001. Significant
variances are explained as follows:
(i) A $0.3 million decrease in depreciation expense from 2001 levels
resulted from the disposition of certain assets during 2002 and 2001;
(ii) A $0.2 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 PLM Financial
Services, Inc. (the General Partner) for office services and data processing
services; and
(iii) A decrease of $34,000 in management fees to affiliate was due to
lower lease revenues.
(C) Interest and Other Income
Interest and other income decreased $0.2 million due to a decrease in the
interest rate earned on cash balances.
(D) Gain on Disposition of Owned Equipment
The net gain on the disposition of owned equipment for the nine months ended
September 30, 2002 totaled $0.7 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 nine
months ended September 30, 2001 totaled $3.5 million, which resulted from the
sale of aircraft, marine containers, and railcars with an aggregate net book
value of $1.9 million, for proceeds of $5.4 million.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
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 Nine Months
Ended September 30,
2002 2001
==================
Aircraft. . . . . . . . . . . . . . $ 93 $ 307
Marine vessel . . . . . . . . . . . -- (34)
-------- -------
Equity in net income of USPEs $ 93 $ 273
======== =======
Aircraft: As of September 30, 2002 and 2001, the Partnership had an interest in
a trust that owns two commercial aircraft on direct finance lease. The
Partnership's share of aircraft revenues and expenses were $0.1 million and
$41,000, respectively, for the nine months ended September 30, 2002, compared to
$0.4 million and $47,000, 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 September 30, 2002 and 2001, the Partnership had no
remaining interest in entities that owned marine vessels. During the nine
months ended September 30, 2001, the Partnership's share of 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 $1.1 million for
the nine months ended September 30, 2002, compared to net income of $4.1 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
nine months ended September 30, 2002 is not necessarily indicative of future
periods. During the nine months ended September 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 nine months ended September 30, 2002, the Partnership generated $0.6
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 nine months ended September 30, 2002 of $4.0 million) to the partners, and
used undistributed available cash from prior periods and proceeds from equipment
dispositions of approximately $3.4 million.
During the nine months ended September 30, 2002, the Partnership disposed
of owned equipment for aggregate proceeds of $1.2 million.
Accounts receivable increased $0.1 million during the nine months ended
September 30, 2002 due to the timing of cash receipts.
Investment in an USPE decreased $0.2 million due to cash distributions of $0.3
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 nine months
ended September 30, 2002.
Accounts payable decreased $0.2 million during the nine months ended September
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 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.
(IV) OUTLOOK FOR THE FUTURE
The Partnership is in its liquidation phase. Given the current economic
environment, and offers received for similar types of equipment owned by the
Partnership, the General Partner has determined it would not be advantageous to
sell the remaining Partnership equipment at the current time. The General
Partner will continue to monitor the equipment markets to determine an optimal
time to sell. In the meantime, equipment will continue to be leased, and
re-leased at market rates as existing leases expire. 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.
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 has 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) Railcarfreightloadings in theUnited States and Canada decreased 1% and
3%,respectively,through the first nine months of 2002. There has been, however,
a recent increase for some of the commodities that drive demand for those types
of railcars owned by the Partnership. It will be some time, however, before
this translates into new leasing demand by shippers since most shippers have
idle railcars in their fleets;
(3) The airline industry began to see lower passenger travel during 2001.
The events of September 11, 2001, along with a recession in the United States
have continued to adversely affect the market demand for both new and used
commercial aircraft and to significantly weaken the financial position of most
major domestic airlines. As a result of this, 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. The General
Partner believes that there is a significant oversupply of commercial aircraft
available and that this oversupply will continue for some time. In addition,
these events have had a negative impact on the fair market value of the
Partnership's partially owned aircraft. The General Partner does not expect
these aircraft to return to their September 11, 2001 values; and
(4) The General Partner has seen an increase in its insurance premiums on
its equipment portfolio and is finding it more difficult to find an insurance
carrier with which to place the coverage. Premiums for aircraft have increased
over 50% and for other types of equipment the increases have been over 25%. The
increase in insurance premiums caused by the increased rate will be partially
mitigated by the reduction in the value of the Partnership's equipment portfolio
caused by the events of September 11, 2001 and other economic factors. The
General Partner has also experienced an increase in the deductible required to
obtain coverage. This may have a negative impact on the Partnership in the
event of an insurance claim.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of these factors, or
of their occurrence, makes it difficult for the General Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment. The General Partner continually monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner may 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 nine months ended September 30, 2002, 72% 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.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------
Within the 90-day period prior to the filing of this report, evaluations were
carried out under the supervision and with the participation of the General
Partner's management, including its President and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934). Based upon those evaluations, the President and Chief Financial Officer
concluded that the design and operation of these disclosure controls and
procedures were effective. No significant changes have been made in the
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluations.
(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.
(This space intentionally left blank)
- ------
CONTROL CERTIFICATION
- ----------------------
I, James A Coyne, certify that:
1. I have reviewed this quarterly report on Form 10-Q of PLM Equipment
Growth Fund IV.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others,
particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 By: /s/ James A. Coyne
---------------------
James A. Coyne
President
- ------
CONTROL CERTIFICATION
- ----------------------
I, Richard K Brock, certify that:
1. I have reviewed this quarterly report on Form 10-Q of PLM Equipment
Growth Fund IV.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others,
particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer
(Principal Financial Officer)
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: November 13, 2002 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial 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 September 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: November 13, 2002 By: /s/ James A. Coyne
---------------------
James A. Coyne
President
Date: November 13, 2002 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer