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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 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)
September 30, December 31,
2002 2001
===============================
ASSETS
Equipment held for operating lease, at cost. . . . . . . . . . $ 72,507 $ 73,711
Less accumulated depreciation. . . . . . . . . . . . . . . . . (63,708) (62,572)
--------------- --------------
Net equipment. . . . . . . . . . . . . . . . . . . . . . . . 8,799 11,139
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . 9,408 6,312
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . 701 --
Accounts receivable, less allowance for doubtful
accounts of $2,939 in 2002 and $664 in 2001. . . . . . . . 1,167 1,041
Investments in unconsolidated special-purpose entities . . . . 4,377 5,703
Deferred charges, net of accumulated amortization of
$43 in 2002 and $33 in 2001. . . . . . . . . . . . . . . . 4 14
Prepaid expenses and other assets. . . . . . . . . . . . . . . 112 34
--------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 24,568 $ 24,243
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . $ 171 $ 410
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . 163 194
Lessee deposits and reserve for repairs. . . . . . . . . . . . 3,140 3,149
--------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 3,474 3,753
--------------- --------------
Commitments and contingencies
Partners' capital:
Limited partners (8,479,516 limited partnership units in 2002
and 8,533,465 in 2001) . . . . . . . . . . . . . . . . . . 21,094 20,490
General Partner. . . . . . . . . . . . . . . . . . . . . . . . -- --
--------------- --------------
Total partners' capital. . . . . . . . . . . . . . . . . . 21,094 20,490
--------------- --------------
Total liabilities and partners' capital. . . . . . . . . $ 24,568 $ 24,243
=============== ==============
See accompanying notes to unaudited condensed financial statements.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
CONDENSED STATEMENTS OF OPERATIONS
(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. . . . . . . . . . . . . . . . . $ 2,352 $ 2,719 $ 7,335 $ 8,392
Interest and other income. . . . . . . . . . . 35 48 99 194
Gain on disposition of equipment . . . . . . . 109 29 180 1,203
----------- ---------- --------- --------
Total revenues . . . . . . . . . . . . . . 2,496 2,796 7,614 9,789
----------- ---------- --------- --------
EXPENSES
Depreciation and amortization. . . . . . . . . 735 1,454 2,272 4,678
Repairs and maintenance. . . . . . . . . . . . 216 201 564 638
Equipment operating expenses . . . . . . . . . 8 (20) 32 304
Insurance expense. . . . . . . . . . . . . . . 28 41 86 163
Management fees to affiliate . . . . . . . . . 44 120 148 373
Interest expense . . . . . . . . . . . . . . . -- -- -- 141
General and administrative expenses
to affiliates. . . . . . . . . . . . . . 18 64 145 354
Other general and administrative expenses. . . 235 122 623 428
Provision for bad debts. . . . . . . . . . . . 770 16 2,282 13
----------- ---------- --------- --------
Total expenses . . . . . . . . . . . . . . 2,054 1,998 6,152 7,092
----------- ---------- --------- --------
Equity in net income (loss) of unconsolidated
special-purpose entities . . . . . . . . (534) (143) (893) 702
----------- ---------- --------- --------
Net income (loss). . . . . . . . . . . . . . . $ (92) $ 655 $ 569 $ 3,399
=========== ========== ========= ========
PARTNERS' SHARE OF NET INCOME (LOSS):
Limited partners . . . . . . . . . . . . . . . $ (92) $ 655 $ 569 $ 3,280
General Partner. . . . . . . . . . . . . . . . -- -- -- 119
----------- ---------- --------- --------
Total. . . . . . . . . . . . . . . . . . . . . $ (92) $ 655 $ 569 $ 3,399
=========== ========== ========= ========
Net income (loss) per weighted-average
limited partnership unit . . . . . . . . . $ (0.01) $ 0.07 $ 0.07 $ 0.36
=========== ========== ========= ========
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 SEPTEMBER 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 . . . . . . . . . . . . . . . . . . 569 -- 569
Canceled purchase of limited partnership units 35 -- 35
---------- --------- --------
Partners' capital as of September 30, 2002 . $ 21,094 $ -- $21,094
========== ========= ========
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 Nine Months
Ended September 30,
2002 2001
======================
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 569 $ 3,399
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . 2,272 4,678
Provision for bad debts . . . . . . . . . . . . . . . . . 2,282 13
Gain on disposition of equipment. . . . . . . . . . . . . (180) (1,203)
Equity in net (income) loss of unconsolidated
special-purpose entities. . . . . . . . . . . . . . . 893 (702)
Changes in operating assets and liabilities:
Restricted cash . . . . . . . . . . . . . . . . . . . . (701) (65)
Accounts receivable . . . . . . . . . . . . . . . . . . (2,391) 489
Prepaid expenses and other assets . . . . . . . . . . . (78) 11
Accounts payable and accrued expenses . . . . . . . . . (25) (97)
Due to affiliates . . . . . . . . . . . . . . . . . . . (31) (81)
Lessee deposits and reserve for repairs . . . . . . . . (9) 410
--------- ---------
Net cash provided by operating activities . . . . . . 2,601 6,852
--------- ---------
INVESTING ACTIVITIES
Payments for capitalized improvements . . . . . . . . . . . -- (4)
Distributions from unconsolidated special-purpose entities. 433 1,779
Payments of acquisition fees to affiliate . . . . . . . . . -- (101)
Payments of lease negotiation fees to affiliate . . . . . . -- (22)
Proceeds from disposition of equipment. . . . . . . . . . . 241 2,613
--------- ---------
Net cash provided by investing activities . . . . . . 674 4,265
--------- ---------
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 . . . . . . . . . 3,096 3,924
Cash and cash equivalents at beginning of period. . . . . . 6,312 1,799
--------- ---------
Cash and cash equivalents at end of period. . . . . . . . . $ 9,408 $ 5,723
========= =========
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 September 30, 2002 and December
31, 2001, the unaudited condensed statements of operations 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 is currently in its investment phase during which the
Partnership uses cash generated from operations and proceeds from asset
dispositions 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
disposition 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.
No cash distributions were paid to the limited partners during the three and
nine months ended September 30, 2002. For the three and nine months ended
September 30, 2001, cash distributions totaled $-0- and $1.7 million,
respectively.
5. Transactions with General Partner and Affiliates
-----------------------------------------------------
The balance due to affiliates as of September 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 Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
==============================================
Management fees. . . . . . . . . . $ (4) $ 65 $ 112 $ 257
Data processing and administrative
expenses. . . . . . . . . . . . 3 26 57 124
These affiliate expenses reduced the Partnership's proportional share of the
equity interest in the income of USPEs.
The Partnership paid FSI $-0- and $0.1 million for equipment acquisition and
lease negotiation fees during the nine months ended September 30, 2002 and 2001,
respectively.
6. Equipment
---------
Owned equipment held for operating leases is stated at cost. The components of
September 30, December 31,
2002 2001
===============================
Aircraft. . . . . . . . . . . $ 55,172 $ 55,172
Rail equipment. . . . . . . . 11,047 11,265
Marine containers . . . . . . 4,089 5,059
Trailers. . . . . . . . . . . 2,199 2,215
--------------- --------------
72,507 73,711
Less accumulated depreciation (63,708) (62,572)
--------------- --------------
Net equipment . . . . . . $ 8,799 $ 11,139
=============== ==============
owned equipment were as follows (in thousands of dollars):
As of September 30, 2002, all owned equipment in the Partnership's portfolio was
on lease except for 84 railcars with a net book value of $0.3 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 nine months ended September 30, 2002, the Partnership disposed of
marine containers, railcars, and a trailer with an aggregate net book value of
$0.1 million for proceeds of $0.3 million. During the nine months ended
September 30, 2001, the Partnership disposed of a marine vessel, marine
containers, and a railcar with an aggregate net book value of $1.4 million for
proceeds of $2.6 million.
(This space intentionally left blank)
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. Ownership interest is based on the Partnership's contribution
towards the cost of the equipment in the USPEs. The Partnership's proportional
share of equity and income (loss) in each entity is not necessarily the same as
its ownership interest. The primary reason for this difference has to do with
certain fees such as management and acquisition and lease negotiation fees
varying among the owners of the USPEs.
The tables below set forth 100% of the assets, liabilities, and equity of the
entities in which the Partnership has an interest and the Partnership's
proportional share of equity in each entity as of September 30, 2002 and
December 31, 2001 (in thousands of dollars):
. Aero
Clement California Lion
As of September 30, 2002 Partnership1 Trust2 Partnership3 Total
=========================================
Assets
- -----------------------------------------
Equipment less accumulated depreciation $ 672 $ -- $ 7,724
Receivables . . . . . . . . . . . . . . 16 420 110
Finance lease receivable. . . . . . . . -- 2,763 --
Other assets. . . . . . . . . . . . . -- 6 --
------- ------- -------
Total assets. . . . . . . . . . . . . $ 688 $ 3,189 $ 7,834
======= ======= =======
Liabilities
Accounts payable. . . . . . . . . . . . $ 198 $ 1 $ 320
Due to affiliates . . . . . . . . . . -- 2 31
Lessee deposits and reserve for repairs -- 420 224
------- ------- -------
Total liabilities . . . . . . . . . 198 423 575
------- ------- -------
Equity. . . . . . . . . . . . . . . . . 490 2,766 7,259
------- ------- -------
Total liabilities and equity. . . . $ 688 $ 3,189 $ 7,834
======= ======= =======
Partnership's share of equity . . . . . $ 230 $ 691 $ 3,456 $ 4,377
======= ======= ======= =======
. Aero
Clement California Lion
As of December 31, 2001 Partnership1 Trust2 Partnership3 Total
=========================================
Assets
- -----------------------------------------
Equipment less accumulated depreciation $ 1,239 $ -- $ 8,827
Receivables . . . . . . . . . . . . . . 302 420 776
Finance lease receivable. . . . . . . . -- 3,449 --
Other assets. . . . . . . . . . . . . . -- 10 --
------- ------- -------
Total assets. . . . . . . . . . . . . $ 1,541 $ 3,879 $ 9,603
======= ======= =======
Liabilities
Accounts payable. . . . . . . . . . . $ 248 $ -- $ 111
Due to affiliates . . . . . . . . . . . 48 39 51
Lessee deposits and reserve for repairs -- 420 514
------- ------- -------
Total liabilities . . . . . . . . . . 296 459 676
------- ------- -------
Equity. . . . . . . . . . . . . . . . . . 1,245 3,420 8,927
------- ------- -------
Total liabilities and equity. . . . $ 1,541 $ 3,879 $ 9,603
======= ======= =======
Partnership's share of equity . . . . . . $ 600 $ 855 $ 4,248 $ 5,703
======= ======= ======= =======
1 The Partnership owns a 50% interest of the Clement Partnership that owns a
product tanker.
2 The Partnership owns a 25% interest in the Aero California Trust that owns
two stage III commercial aircraft on a direct finance lease.
3 The Partnership owns a 48% interest in the Lion Partnership that owns a
product tanker.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. Investments in Unconsolidated Special-Purpose Entities (continued)
----------------------------------------------------------
The tables below set forth 100% of the revenues, direct and indirect expenses
and net income (loss) of the entities in which the Partnership has 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
For the three months ended Clement California Lion
September 30, 2002 Partnership1 Trust2 Partnership3 Total
=========================================
Revenues . . . . . . . . . . . . . . . $ 191 $ 119 $ 1,013
Less: Direct expenses. . . . . . . . . 762 5 977
Indirect expenses. . . . . 173 29 427
-------- -------- --------
Net income (loss). . . . . . . . . $ (744) $ 85 $ (391)
======== ======== ========
Partnership's share of net income (loss) $ (381) $ 22 $ (175) $ (534)
======== ======== ======== =======
. Aero
For the three months ended Clement California Lion
September 30, 2001 Partnership1 Trust2 Partnership3 Total
=========================================
Revenues . . . . . . . . . . . . . . $ 570 $ 328 $ 2,097
Less: Direct expenses. . . . . . . . 1,075 6 1,151
Indirect expenses. . . . . 222 39 600
------- ------ -------
Net income (loss). . . . . . . . . $ (727) $ 283 $ 346
======= ====== =======
Partnership's share of net income (loss) $ (378) $ 71 $ 164 $ (143)
======= ====== ======= =======
. Aero
For the nine months ended Clement California Lion
September 30, 2002 Partnership1 Trust2 Partnership3 Total
=========================================
Revenues . . . . . . . . . . . . . . $ 1,876 $ 384 $ 4,009
Less: Direct expenses. . . . . . . . 2,601 17 3,101
Indirect expenses. . . . . 654 101 1,429
-------- ------ --------
Net income (loss). . . . . . . . . $(1,379) $ 266 $ (521)
======== ====== ========
Partnership's share of net income (loss) $ (723) $ 67 $ (237) $ (893)
======== ====== ======== =======
Aero
For the nine months ended Clement California Lion Montgomery
September 30, 2001 Partnership1 Trust2 Partnership3 Partnership4 Total
======================================================
Revenues . . . . . . . . . .$ 2,913 $ 1,011 $ 7,613 $ --
Less: Direct expenses. . . . 3,056 14 3,591 67
Indirect expenses 773 119 1,892 1
------- ------- ------- -------
Net income (loss). . . .. $ (916) $ 878 $ 2,130 $ (68)
======= ======= ======= =======
Partnership's share of net $ (495) $ 219 $ 1,012 $ (34) $ 702
income (loss) ======= ======= ======= ======= =====
As of September 30, 2002 and December 31, 2001, all jointly-owned equipment in
the Partnership's USPE portfolio was on lease.
1 The Partnership owns a 50% interest in the Clement Partnership that owns a
product tanker.
2 The Partnership owns a 25% interest in the Aero California Trust that owns
two stage III commercial aircraft on a direct finance lease.
3 The Partnership owns a 48% interest in the Lion Partnership that owns a
product tanker.
4 The Partnership owned a 50% interest in the Montgomery Partnership that
owned a bulk carrier.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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
September 30, 2002 Leasing Leasing Leasing Leasing Leasing Other 1 Total
- ----------------------------------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ 1,865 $ -- $ 386 $ 23 $ 78 $ -- $ 2,352
Interest income and other. . . . . . . . -- -- -- -- -- 35 35
Gain (loss) on disposition of equipment. -- -- 74 30 5 -- 109
---------- --------- --------- ---------- --------- --------- --------
Total revenues. . . . . . . . . . . . 1,865 -- 460 53 83 35 2,496
---------- --------- --------- ---------- --------- --------- --------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . 10 -- 161 -- 66 15 252
Depreciation and amortization. . . . . . 529 -- 131 41 31 3 735
Management fees to affiliates. . . . . . 24 -- 17 -- 3 -- 44
General and administrative expenses. . . (34) -- 30 -- 16 241 253
Provision for bad debts. . . . . . . . . 779 -- (10) -- 1 -- 770
---------- --------- --------- ---------- --------- --------- --------
Total costs and expenses . . . . . . 1,308 -- 329 41 117 259 2,054
---------- --------- --------- ---------- --------- --------- --------
Equity in net income (loss) of USPEs . . . 22 (556) -- -- -- -- (534)
---------- --------- --------- ---------- --------- --------- --------
Net income (loss). . . . . . . . . . . . . $ 579 $ (556) $ 131 $ 12 $ (34) $ (224) $ (92)
========== ========= ========= ========== ========= ========= ========
Total assets as of September 30, 2002. . . $ 8,715 $ 3,685 $ 1,995 $ 168 $ 481 $ 9,524 $24,568
========== ========= ========= ========== ========= ========= ========
. Marine . Marine
For the three months ended Aircraft Vessel Railcar Container Trailer
September 30, 2001 Leasing Leasing Leasing Leasing Leasing Other 2 Total
- -----------------------------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . $ 2,145 $ -- $ 448 $ 32 $ 94 $ -- $2,719
Interest income and other. . . . . . 1 -- -- -- -- 47 48
Gain on disposition of equipment . . -- -- -- 29 -- -- 29
--------- --------- -------- ----------- --------- --------- -------
Total revenues. . . . . . . . . . 2,146 -- 448 61 94 47 2,796
--------- --------- -------- ----------- --------- --------- -------
COSTS AND EXPENSES
Operations support . . . . . . . . . 40 (14) 126 -- 55 15 222
Depreciation and amortization. . . . 1,203 -- 135 77 31 8 1,454
Management fees to affiliates. . . . 82 -- 31 3 4 -- 120
General and administrative expenses. 2 1 19 -- 19 145 186
Provision for bad debts. . . . . . . -- -- 16 -- -- -- 16
--------- --------- -------- ----------- --------- --------- -------
Total costs and expenses . . . . 1,327 (13) 327 80 109 168 1,998
--------- --------- -------- ----------- --------- --------- -------
Equity in net income (loss) of USPEs . 71 (214) -- -- -- -- (143)
--------- --------- -------- ----------- --------- --------- -------
Net income (loss). . . . . . . . . . . $ 890 $ (201) $ 121 $ (19) $ (15) $ (121) $ 655
========= ========= ======== =========== ========= ========= =======
1 Includes certain assets not identifiable to a specific segment such as
cash, deferred charges, and prepaid expenses. Also includes interest income and
costs not identifiable to a particular segment, such as certain amortization,
general and administrative and operations support expenses.
2 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 nine months ended Aircraft Vessel Railcar Container Trailer
September 30, 2002 Leasing Leasing Leasing Leasing Leasing Other 1 Total
- ---------------------------------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ 5,772 $ -- $ 1,170 $ 145 $ 248 $ -- $7,335
Interest income and other. . . . . . . . -- -- 4 -- -- 95 99
Gain (loss) on disposition of equipment. -- -- 71 104 5 -- 180
--------- --------- --------- ---------- --------- --------- -------
Total revenues. . . . . . . . . . . . 5,772 -- 1,245 249 253 95 7,614
--------- --------- --------- ---------- --------- --------- -------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . 36 -- 433 1 165 47 682
Depreciation and amortization. . . . . . 1,601 -- 395 173 94 9 2,272
Management fees to affiliates. . . . . . 71 -- 62 5 10 -- 148
General and administrative expenses. . . 65 -- 84 -- 48 571 768
Provision for bad debts. . . . . . . . . 2,285 -- (10) -- 7 -- 2,282
--------- --------- --------- ---------- --------- --------- -------
Total costs and expenses . . . . . . 4,058 -- 964 179 324 627 6,152
--------- --------- --------- ---------- --------- --------- -------
Equity in net income (loss) of USPEs . . . 67 (960) -- -- -- -- (893)
--------- --------- --------- ---------- --------- --------- -------
Net income (loss). . . . . . . . . . . . . $ 1,781 $ (960) $ 281 $ 70 $ (71) $ (532) $ 569
========= ========= ========= ========== ========= ========= =======
Marine Marine
For the nine months ended Aircraft Vessel Railcar Container Trailer
September 30, 2001 Leasing Leasing Leasing Leasing Leasing Other 1 Total
- -------------------------------------------------------------------------------------------------------------------
REVENUES
Lease revenue. . . . . . . . . . . . . . $ 6,435 $ -- $ 1,431 $ 249 $ 277 $ -- $8,392
Interest income and other. . . . . . . . 34 -- -- -- -- 160 194
Gain (loss) on disposition of equipment. -- 1,116 (4) 91 -- -- 1,203
--------- -------- --------- ---------- --------- --------- ------
Total revenues. . . . . . . . . . . . 6,469 1,116 1,427 340 277 160 9,789
--------- -------- --------- ---------- --------- --------- ------
COSTS AND EXPENSES
Operations support . . . . . . . . . . . 69 334 460 -- 149 93 1,105
Depreciation and amortization. . . . . . 3,887 -- 418 246 95 32 4,678
Interest expense . . . . . . . . . . . . -- -- -- -- -- 141 141
Management fees to affiliates. . . . . . 247 -- 99 13 14 -- 373
General and administrative expenses. . . 20 24 41 -- 50 647 782
Recovery of bad debts. . . . . . . . . . -- -- 16 -- (3) -- 13
--------- -------- --------- ---------- --------- --------- ------
Total costs and expenses . . . . . . 4,223 358 1,034 259 305 913 7,092
--------- -------- --------- ---------- --------- --------- ------
Equity in net income of USPEs. . . . . . . 219 483 -- -- -- -- 702
--------- -------- --------- ---------- --------- --------- ------
Net income (loss). . . . . . . . . . . . . $ 2,465 $ 1,241 $ 393 $ 81 $ (28) $ (753) $3,399
========= ======== ========= ========== ========= ========= ======
1 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)
9. Net Income (Loss) Per Weighted-Average Limited Partnership Unit
----------------------------------------------------------------------
Net income (loss) per weighted-average limited partnership unit was computed by
dividing net income (loss) 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, was
8,479,516 and 8,485,642, respectively. The weighted-average number of limited
partnership units deemed outstanding during the three and nine months ended
September 30, 2001 was 9,065,911.
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 532,446 units as of December 31, 2001 and an
additional 53,949 units during the nine months ended September 30, 2002, 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. Debt
----
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 September 30, 2002, there were no outstanding borrowings on this facility
by any of the eligible borrowers.
12. Commitments and Contingencies
-------------------------------
In October 2002, PLM Transportation Equipment Corp. Inc. (TEC), a wholly owned
subsidiary of FSI, arranged for the lease or purchase of a total of 1,050
pressurized tank railcars by (i) partnerships and managed programs in which FSI
serves as the general partner or manager and holds an ownership interest
(Program Affiliates) or (ii) partnerships or managed programs in which FSI
provides management services but does not hold an ownership interest or third
parties (Non-Program Affiliates). These railcars will be delivered over the
next three years. A leasing company affiliated with the manufacturer will
acquire approximately 70% of the railcars and lease them to a Non-Program
Affiliate. The remaining approximately 30% will either be purchased by other
third parties to be managed by PLMI, or by the Program Affiliates. An affiliate
of TEC will manage the leased and purchased railcars. Neither TEC nor its
affiliate will be liable for these railcars. TEC estimates that the total value
of purchased railcars will not exceed $26.0 million with one third of the
railcars being purchased in each of 2002, 2003, and 2004. Although the General
Partner has neither determined which Program Affiliates will purchase the
railcars nor the timing of any purchases, it is possible the Partnership may
purchase some of the railcars.
PLM EQUIPMENT GROWTH FUND V
(A LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
13. Accounting Pronouncements
--------------------------
In April 2002, the Financial Accounting Standards Board (FASB) adopted Statement
of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections" ("SFAS
No. 145"). The provisions of SFAS No. 145 are effective for fiscal years
beginning after May 15, 2002. As permitted by the pronouncement, the
Partnership has elected early adoption of SFAS No. 145 and, accordingly, if the
Partnership has a loss on extinguishment of long-term debt, it will be reported
as a loss in "Other general and administrative expenses".
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued an exposure draft of a proposed
statement of position ("SOP") entitled "Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment". The Partnership has
historically accrued legally mandated maintenance such as marine vessel
dry-docking and aircraft engine maintenance over the periods prior to the
required maintenance date. If the SOP is adopted as proposed, the Partnership
and USPEs would reverse all previously accrued maintenance reserves. If this
proposed change were in effect at September 30, 2002, the Partnership and USPEs
would have been required to reverse maintenance reserves of approximately $2.4
million. Maintenance reserves will change in 2002 as maintenance is performed
and past maintenance reserves are depleted and additional reserves are recorded.
If adopted in its present form, charges related to this proposed change would be
taken in the first quarter of 2003 and would be reported as a cumulative effect
of an accounting change, in the statements of operations.
(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 September 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 September 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, general and administrative expenses, and provision for bad
debts 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 September 30,
2002 2001
====================
Aircraft. . . . . $ 1,855 $ 2,105
Railcars. . . . . 225 322
Marine containers 23 32
Trailers. . . . . 12 39
Marine vessel . . -- 14
Aircraft: Aircraft lease revenues and direct expenses were $1.9 million and
$10,000, respectively, for the three months ended September 30, 2002, compared
to $2.1 million and $40,000, respectively, during the same period of 2001. The
decrease in aircraft lease revenues of $0.3 million during the third quarter of
2002 was due to the reduction in the lease rate on three of the Partnership's
owned aircraft compared to 2001.
Railcars: Railcar lease revenues and direct expenses were $0.4 million and $0.2
million, respectively, for the three months ended September 30, 2002, compared
to $0.4 million and $0.1 million, respectively, during the same period of 2001.
Railcar lease revenues decreased $39,000 due to certain railcars being re-leased
at a lower rate in 2002 than the rate that was in place during 2001. A decrease
of $13,000 was due to the increase in the number of off-lease railcars during
the three months ended September 30, 2002 compared to 2001. An additional
decrease in lease revenues of $9,000 was due to the disposition of railcars
during 2001 and 2002. An increase in railcar direct expenses of $35,000 in the
third quarter of 2002 was due to an increase in the repairs and maintenance of
railcars compared to the same period of 2001
Marine containers: Marine container lease revenues were $23,000 and $32,000
for the three months ended September 30, 2002 and 2001, respectively. The
decrease in marine container lease revenues was due to the disposal of marine
containers during 2002 and 2001.
Trailers: Trailer lease revenues and direct expenses were $0.1 million and
$0.1 million, respectively, for the three months ended September 30, 2002 and
2001, respectively. The decrease in trailer contribution of $27,000 during the
third quarter 2002 was due to a decrease in lease revenues of $16,000 caused by
lower lease rates earned on the Partnership's trailers and an increase of
$11,000 in repairs and maintenance compared to 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 $(14,000),
respectively, for the three months ended September 30, 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses remained relatively the same at $1.8 million for the
three months ended September 30, 2002 and 2001. Significant variances are
explained as follows:
(i) A $0.7 million decrease in depreciation and amortization expenses
from 2001 levels was caused by certain assets being fully depreciated during
2001;
(ii) A $0.1 million decrease in management fees was the result of a
decrease of $37,000 due to lower lease revenues earned in the third quarter of
2002 compared to the same period of 2001 and a decrease of $39,000 due to higher
provision for bad debts during the third quarter of 2002 compared to the same
period of 2001;
(iii) A $0.1 million increase in general and administrative expenses
during the three months ended September 30, 2002 resulted from higher
professional service costs; and
(v) A $0.8 million increase in the provision for bad debts was based on
PLM Financial Services, Inc.'s (FSI or the General Partner's) evaluation of the
collectability of receivables compared to 2001. The provision for bad debts
recorded in the third quarter of 2002 was primarily related to two aircraft
lessees.
(C) Gain on Disposition of Owned Equipment
The gain on the disposition of equipment for the third quarter of 2002 totaled
$0.1 million, and resulted from the sale of marine containers, railcars, and a
trailer with an aggregate net book value of $31,000 for proceeds of $0.1
million. The gain on the disposition of equipment for the third quarter of 2001
totaled $29,000, and resulted from the sale of marine containers with a net book
value of $24,000, for $0.1 million.
(D) 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 Three Months
Ended September 30,
2002 2001
===================
Aircraft. . . . . . . . . . . . $ 22 $ 71
Marine vessels. . . . . . . . . (556) (214)
------- --------
Equity in net loss of USPEs $ (534) $(143)
======= ========
Aircraft: As of September 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 September 30, 2002, the Partnership's share of the
contribution from this trust decreased $49,000 due to the leases for the
aircraft in the trust being renegotiated at a lower rate during the first
quarter of 2002.
Marine vessels: As of September 30, 2002 and 2001, the Partnership owned
interests in two entities each owning a marine vessel. During the third quarter
of 2002, the Partnership's share of lease revenues of $0.6 million were offset
by the Partnership's share of depreciation expense, direct expenses and
administrative expenses of $1.1 million. During the same period of 2001, the
Partnership's share of lease revenues of $1.3 million were offset by the
Partnership's share of depreciation expense, direct expenses, and administrative
expenses of $1.5 million.
Marine vessels lease revenues decreased $0.7 million during the three months
ended September 30, 2002 due to:
(i) One marine vessel's lease revenues decreased $0.2 million due to the
increase in the number days it was off-lease during the third quarter ended
September 30, 2002 compared to 2001; and
(ii) Lease revenues for another marine vessel decreased $0.3 million due to
a decrease in voyage charter lease rates compared to the same period of 2001.
Additionally, lease revenues decreased $0.2 million due to this marine vessel
being in dry-dock and off-lease for three weeks of the third quarter 2002. A
similar event did not take place during the same period of 2001.
Marine vessels depreciation expense, direct expenses, and administrative
expenses decreased $0.4 million during the three months ended September 30, 2002
compared to the same period of 2001. The decrease in direct expenses of $0.4
million was due to the marine vessels incurring lower repairs and maintenance of
$0.1 million, lower operating costs of $0.1 million, and lower management fees
of $0.1 million.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss for the three months
ended September 30, 2002 was $0.1 million, compared to net income of $0.7
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 third quarter of 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
===================
Aircraft. . . . . $ 5,736 $ 6,366
Railcars. . . . . 737 971
Marine containers 144 249
Trailers. . . . . 83 128
Marine vessel . . -- (334)
Aircraft: Aircraft lease revenues and direct expenses were $5.8 million and
$36,000, respectively, for the nine months ended September 30, 2002, compared to
$6.4 million and $0.1 million, respectively, during the same period of 2001.
The decrease in aircraft lease revenues of $0.7 million during the nine months
ended September 30, 2002 was due to the reduction in the lease rate on three of
the Partnership's owned aircraft compared to 2001.
Railcars: Railcar lease revenues and direct expenses were $1.2 million and $0.4
million, respectively, for the nine months ended September 30, 2002, compared to
$1.4 million and $0.5 million, respectively, during the same period of 2001.
Railcars lease revenues decreased $0.3 million during the nine months ended
September 30, 2002 compared to the same period of 2001. A decrease in railcar
lease revenues of $0.2 million was due to certain railcars being re-leased at a
lower rate in 2002 than the rate that was in place during 2001. Additionally, a
decrease of $0.1 million was due to the increase in the number of off-lease
railcars during the nine months ended September 30, 2002 compared to 2001.
Marine containers: Marine container lease revenues and direct expenses were
$0.1 million and $1,000, respectively, for the nine months ended September 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
$0.2 million, respectively, for the nine months ended September 30, 2002
compared to $0.3 million and $0.1 million, respectively, during the same period
of 2001. The decrease in trailer contribution of $45,000 during the nine months
ended September 30, 2002 was due to a decrease in lease revenues of $29,000
caused by lower lease rates earned on the Partnership's trailers and an increase
of $16,000 in repairs and maintenance compared to the same period of 2001.
Marine vessel: The Partnership sold the remaining owned marine vessel during
the nine months ended September 30, 2001. Marine vessel lease revenues and
direct expenses were $-0- and $0.3 million, respectively, for the nine months
ended September 30, 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.5 million for the nine months ended September 30,
2002 decreased from $6.1 million for the same period in 2001. Significant
variances are explained as follows:
(i) A $2.4 million decrease in depreciation and amortization expenses
from 2001 levels reflects a decrease of $2.3 million due to certain assets being
fully depreciated during 2001 and a decrease of $0.1 million due to the sale of
certain equipment during 2002 and 2001;
(ii) A $0.2 million decrease in management fees was the result of a
decrease of $0.1 million due to lower lease revenues earned in the nine months
ended September 30, 2002 compared to the same period of 2001, a decrease of $0.1
million resulting from the decrease in the management fee rate paid by the
Partnership, and a decrease of $0.1 million due to a higher provision for bad
debts during the nine months ended September 30, 2002 compared to 2001;
(iii) 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 third
quarter of 2001; and
(iv) A $2.3 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 nine months ended
September 30, 2002 was primarily related to two aircraft lessees.
(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 average cash balances.
(D) Gain on Disposition of Owned Equipment
The gain on the disposition of owned equipment for the nine months ended
September 30, 2002 totaled $0.2 million, and resulted from the sale of marine
containers, railcars and a trailer with an aggregate net book value of $0.1
million for proceeds of $0.3 million. The gain on the disposition of equipment
for the nine months ending September 30, 2001 totaled $1.2 million, which
resulted from the sale of a marine vessel, marine containers, and a railcar with
a net book value of $1.4 million, for $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 Nine Months
Ended September 30,
2002 2001
===================
Aircraft . . . . . . . . . . . . . . . . $ 67 $ 219
Marine vessels . . . . . . . . . . . . (960) 483
------- --------
Equity in net income (loss) of USPEs $ (893) $ 702
======= ========
Aircraft: As of September 30, 2002 and 2001, the Partnership had an interest in
a trust owning two commercial aircraft on a direct finance lease. During the
nine months ended September 30, 2002, the Partnership's share of the
contribution from this trust decreased $0.2 million due to the leases for the
aircraft in the trust being renegotiated at a lower rate.
Marine vessels: As of September 30, 2002 and 2001, the Partnership owned
interests in two entities each owning a marine vessel. During the nine months
ended September 30, 2002, the Partnership's share of lease revenues of $2.8
million were offset by the Partnership's share of depreciation expense, direct
expenses and administrative expenses of $3.8 million. During the same period of
2001, the Partnership's share of lease revenues of $5.1 million were offset by
the Partnership's share of depreciation expense, direct expenses, and
administrative expenses of $4.6 million.
Marine vessels lease revenues decreased $1.7 million during the nine months
ended September 30, 2002 due to a decrease in voyage charter lease rates
compared to the same period of 2001 and decreased $0.5 million due to the
increase in the number days one marine vessel was off-lease during the nine
months ended September 30, 2002 compared to 2001.
Marine vessels depreciation expense, direct expenses, and administrative
expenses decreased $0.8 million during the nine months ended September 30, 2002
compared to the same period of 2001. A decrease in direct expenses of $0.8
million was due to the marine vessels incurring lower repairs and maintenance of
$0.4 million, lower management fees of $0.1 million due to lower lease revenues,
lower administrative expenses of $0.1 million, and a decrease if $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 nine months
ended September 30, 2002 was $0.6 million, compared to net income of $3.4
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 nine months ended September 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 nine months ended September 30, 2002, the Partnership generated $3.0
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 nine months ended September 30, 2002, the Partnership disposed of
owned equipment and received aggregate proceeds of $0.2 million.
Restricted cash increased during the nine months ended September 30, 2002 due to
the deposit of $0.7 million into an escrow account related to collection efforts
for an aircraft lessee.
Accounts receivable increased $0.1 million in the nine months ended September
30, 2002. This increase was due to an increase of $2.4 million during the nine
months ended September 30, 2002 due to the timing of cash receipts. This
increase was partially offset by an increase in the allowance for bad debts of
$2.3 million due to the General Partner's evaluation of the collectibility of
accounts receivable.
Investments in USPEs decreased $1.3 million during the nine months ended
September 30, 2002 due to cash distributions of $0.4 million to the Partnership
from the USPEs and a $0.9 million loss that was recorded by the Partnership for
its equity interests in the USPEs.
Accounts payable decreased $0.2 million during the nine months ended September
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.
In July 2002, PLM International, Inc. (PLMI) 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 November 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.
In October 2002, PLM Transportation Equipment Corp. Inc. (TEC), a wholly owned
subsidiary of FSI, arranged for the lease or purchase of a total of 1,050
pressurized tank railcars by (i) partnerships and managed programs in which FSI
serves as the general partner or manager and holds an ownership interest
(Program Affiliates) or (ii) partnerships or managed programs in which FSI
provides management services but does not hold an ownership interest or third
parties (Non-Program Affiliates). These railcars will be delivered over the
next three years. A leasing company affiliated with the manufacturer will
acquire approximately 70% of the railcars and lease them to a Non-Program
Affiliate. The remaining approximately 30% will either be purchased by other
third parties to be managed by PLMI, or by the Program Affiliates. An affiliate
of TEC will manage the leased and purchased railcars. Neither TEC nor its
affiliate will be liable for these railcars. TEC estimates that the total value
of purchased railcars will not exceed $26.0 million with one third of the
railcars being purchased in each of 2002, 2003, and 2004. Although the General
Partner has neither determined which Program Affiliates will purchase the
railcars nor the timing of any purchases, it is possible the Partnership may
purchase some of the railcars.
(IV) ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board (FASB) adopted Statement
of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections" ("SFAS
No. 145"). The provisions of SFAS No. 145 are effective for fiscal years
beginning after May 15, 2002. As permitted by the pronouncement, the
Partnership has elected early adoption of SFAS No. 145 and, accordingly, if the
Partnership has a loss on extinguishment of long-term debt, it will be reported
as a loss in "Other general and administrative expenses".
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued an exposure draft of a proposed
statement of position ("SOP") entitled "Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment". The Partnership has
historically accrued legally mandated maintenance such as marine vessel
dry-docking and aircraft engine maintenance over the periods prior to the
required maintenance date. If the SOP is adopted as proposed, the Partnership
and USPEs would reverse all previously accrued maintenance reserves. If this
proposed change were in effect at September 30, 2002, the Partnership and USPEs
would have been required to reverse maintenance reserves of approximately $2.4
million. Maintenance reserves will change in 2002 as maintenance is performed
and past maintenance reserves are depleted and additional reserves are recorded.
If adopted in its present form, charges related to this proposed change would be
taken in the first quarter of 2003 and would be reported as a cumulative effect
of an accounting change, in the statements of operations.
(V) 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 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. A significant number of the Partnership's marine
containers are in excess of twelve years of age and are no longer suitable for
use in international commerce either due to its specific physical condition or
lessees preference for newer equipment. Demand for these marine containers will
continue to be weak due to their age. In addition, some of the Partnership's
refrigerated marine containers have become delaminated. This condition lowers
the demand for these marine containers and has led to declining lease rates and
lower utilization on containers with this problem;
(2) Railcar freight loadings in the United 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) Marine vessel freight rates are dependent upon the overall condition of
the international economy. Freight rates earned by the Partnership's partially
owned marine vessels began to decrease during the latter half of 2001 and
through the first nine months of 2002. This trend is expected to continue
through the remainder 2002. In addition, one of the marine vessels in which the
Partnership own an interest was manufactured in 1976 and is nearing the end of
its economic life. This marine vessel is also single hulled which restricts the
ports which it may enter. These conditions severely limit the marine vessel's
marketability;
(4) Utilization of intermodal trailers owned by the Partnership decreased
15% in the nine months ended September 30, 2002 compared to the nine months
ended September 30, 2001. This decline was similar to the decline in industry
wide utilization. As the Partnership's trailers are smaller than many shippers
prefer, the General Partner expects continued declines in utilization over the
next few years. Additionally, one of the major shippers that leased the
Partnership's trailers has entered bankruptcy. While the Partnership did not
have any outstanding receivables from the company, its bankruptcy may cause a
further decline in performance of the trailer fleet in the future; and
(5) 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 leases on its owned aircraft and partially owned aircraft 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.
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 to return to their September 11, 2001 values.
During 2001, the lessee of three Stage II Boeing 737-200 commercial aircraft
notified the General Partner of its intention to return this aircraft. The
lessee is located in Brazil, a country experiencing severe economic difficultly.
As of September 30, 2002, the lessee was thirteen lease payments in arrears 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 the aircraft. The General Partner recorded an allowance for bad debts for
the amount due less the security deposit. During October 2002, the General
Partner reached an agreement with the lessee of this aircraft for the past due
lease payments and agreed to re-lease two of these aircraft to this lessee until
March 2003 at a lower lease rate. In order to give the lessee an incentive to
make timely payments in accordance with the agreement, the General Partner gave
the lessee a discount on the total amount due. If the lessee fails to comply
with the payment schedule in the agreement, the discount provision will be
waived and the full amount again becomes payable. The lessee made an initial
payment during October 2002, to be followed by 23 equal monthly installments
beginning in November 2002. Unpaid outstanding amounts will accrue interest at
a rate of 5%. Due to the uncertainty of ultimate collection, the General
Partner will continue to fully reserve the unpaid outstanding balance from this
lessee.
The Partnership owns two DHC-8-102 commuter aircraft that were on a lease
through February 2003 to Allegheny Airlines, Inc., a wholly owned subsidiary of
US Airways Inc., both of which declared bankruptcy on August 11, 2002. At
September 30, 2002, Allegheny Airlines, Inc. was three lease payments in arrears
to the Partnership. On October 9, 2002, the General Partner received
notification that the leases for the two aircraft had been rejected and the
aircraft would be returned. The aircraft are currently in storage and are being
remarketed for lease or sale. Given the current oversupply of aircraft, these
aircraft may remain off-lease for the foreseeable future. The General Partner
recorded an allowance for bad debts for the amount due.
(6) 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 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.
(VI) 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 nine months ended September 30, 2002, 88% 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.
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
--------
1. November 2002 purchase agreement between PLM Transportation Equipment
Corp., Inc. and Trinity Tank Car, Inc.
2. Settlement Agreement between PLM Worldwide Leasing Corp. and Varig S.A.
dated October 11, 2002.
(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 V.
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 V.
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 V
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 V (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 V
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