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 March 31, 1996.
[ ] 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 0-14598
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(Exact name of registrant as specified in its charter)
California 94-2946245
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 900, San Francisco, CA 94105-1301
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
---------------------------------
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
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------------
<S> <C> <C>
Equipment held for operating leases, at cost $ 3,808,548 $ 3,972,722
Less accumulated depreciation (3,521,610) (3,616,132)
----------------------------------------
Net equipment 286,938 356,590
Cash and cash equivalents 307,162 293,808
Investment in unconsolidated special purpose entity 70,049 79,116
Accounts receivable, net of allowance for doubtful accounts of
$32,026 in 1996 and $19,664 in 1995 92,646 135,320
Prepaid Insurance 2,100 3,128
========================================
Total assets $ 758,895 $ 867,962
========================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 4,641 $ 4,641
Accounts payable 18,597 21,292
Prepaid deposits and engine reserves -- 260
----------------------------------------
Total liabilities 23,238 26,193
Partners capital (deficit):
Limited Partners (22,276 units) 826,350 931,401
General Partner (90,693) (89,632)
----------------------------------------
Total partners' capital 735,657 841,769
----------------------------------------
Total liabilities and partners' capital $ 758,895 $ 867,962
========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
--------------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 106,074 $ 183,663
Interest and other income 3,453 5,326
Gain on disposition of
equipment 19,330 12,830
--------------------------------
Total revenues 128,857 201,819
Expenses:
Depreciation 54,769 71,856
Management fees to affiliate 11,513 13,923
Bad debt expense 17,821 44,639
Repairs and maintenance 22,263 44,164
General and administrative
expenses to affiliates 26,546 37,530
Other general and administrative
expenses 12,342 9,778
--------------------------------
Total expenses 145,254 221,890
Equity in net income of unconsolidated special purpose entity 9,331 --
--------------------------------
Net loss $ (7,066) $ (20,071)
================================
Partners' share of net loss:
Limited Partners - 99% $ (6,995) $ (19,870)
General Partner - 1% (71) (201)
--------------------------------
Total $ (7,066) $ (20,071)
================================
Net loss per Limited
Partnership Unit (22,276 units) $ (0.31) $ (0.89)
================================
Cash distributions $ 99,046 $ 99,046
================================
Cash distribution per
Limited Partnership Unit $ 4.40 $ 4.40
================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1994 to March 31, 1996
<TABLE>
<CAPTION>
Limited General
Partner Partner Total
--------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1994 $ 1,294,613 $ (85,963) $ 1,208,650
Net income 29,013 293 29,306
Cash distributions (392,225) (3,962) (396,187)
--------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 931,401 (89,632) 841,769
Net loss (6,995) (71) (7,066)
Cash distributions (98,056) (990) (99,046)
--------------------------------------------------------------
Partners' capital (deficit)
at March 31, 1996 $ 826,350 (90,693) 735,657
==============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
-------------------------------------
<S> <C> <C>
Operating Activities:
Net loss $ (7,066) $ (20,071)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Gain on disposition of equipment (19,330) (12,830)
Depreciation 54,769 71,856
Cash distributions from unconsolidated special purpose
entity in excess of income accrued 9,067 --
Changes in operating assets and liabilities:
Restricted cash -- (303)
Accounts receivable, net 42,674 31,205
Prepaid insurance 1,028 767
Due to affiliates -- (12,856)
Accounts payable (2,695) (16,265)
Prepaid deposits and engine reserves (260) (1,059)
-------------------------------------
Cash provided by operating activities 78,187 40,444
-------------------------------------
Investing activities:
Proceeds from disposition of equipment 34,213 48,172
-------------------------------------
Cash provided by investing activities 34,213 48,172
-------------------------------------
Cash flows used in financing activities:
Cash distributions paid to partners (99,046) (99,046)
-------------------------------------
Net increase (decrease) in cash and cash equivalents 13,354 (10,430)
Cash and cash equivalents at beginning of period 293,808 358,864
-------------------------------------
Cash and cash equivalents at end of period $ 307,162 $ 348,434
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Opinion of Management
In the opinion of the management of PLM Financial Services Inc., the
General Partner, the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the Partnership's financial position as of
March 31, 1996, the statements of operations and cash flows for the three
months ended March 31, 1996 and 1995, the statements of changes in
partners' capital for the period from December 31, 1994 to March 31, 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying 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, 1995, on file at the
Securities and Exchange Commission.
2. Equipment
The components of owned equipment are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------------
<S> <C> <C>
Equipment held for operating leases:
Trailers $ 3,394,985 $ 3,543,334
Rail equipment 318,649 110,739
Marine containers 94,914 318,649
-----------------------------------------
3,808,548 3,972,722
Less accumulated depreciation (3,521,610) (3,616,132)
-----------------------------------------
Net equipment $ 286,938 $ 356,590
=========================================
</TABLE>
All of the equipment owned by the Partnership was either on lease or
operating in PLM-affiliated short-term rental facilities as of March 31, 1996.
With the exception of one trailer with a carrying value of $6,500, all of the
equipment was on lease as of December 31, 1995.
During the three months ended March 31, 1996, the Partnership sold or
disposed of five trailers and six marine containers with a net book value of
$14,883 for proceeds of $34,213. During the three months ended March 31, 1995,
the Partnership sold or disposed of six trailers and four marine containers with
a net book value of $35,342 for proceeds of $48,172.
3. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodicially declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed on a quarterly basis to partners. The amounts reflected for
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
3. Liquidation and special distributions (continued)
assets and liabilites of Partnership have not been adjusted to reflect
liquidation values. The equipment portfolio continues to be carried at the
lower of depreciated cost or fair value less cost to dispose. Although the
General Partner estimates that there will be distributions after
liquidation of assets and liabilities, the amounts cannot be accurately
determined prior to actual liquidation of the equipment. Any excess
proceeds over expected Partnership obligations will be distributed to the
Partners throughout the liquidation period. Upon final liquidation, the
Partnership will be dissolved.
4. Investment in Unconsolidated Special Purpose Entity
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental equipment as undivided interests,
including its proportionate share of each asset with similar wholly-owned
assets in its financial statements. Under generally accepted accounting
principles, the effects of such activities, if material, should be reported
using the equity method of accounting. Therefore, effective January 1,
1996, the Partnership adopted the equity method to account for its
investment in such jointly-held assets.
The principle differences between the previous accounting method and the
equity method relates to the presentation of activities relating to these
assets in the statement of operations. Whereas, under equity accounting the
Partnership's proportionate share is presented as a single net amount,
"equity in net income (loss) of unconsolidated special purpose entities",
under the previous method, the Partnership's statement of operations
reflected its proportionate share of each individual item of revenue and
expense. Accordingly, the effect of adopting the equity method of
accounting has no cumulative effect on previously reported partner's
capital or on the Partnership's net income (loss) for the period of
adoption. Because the effects on previously issued financial statements of
applying the equity method of accounting to investments in jointly-owned
assets are not considered to be material to such financial statements taken
as a whole, previously issued financial statements have not been restated.
However, certain items have been reclassified in the previously issued
balance sheet to conform to the current period presentation.
The net investment in unconsolidated special purpose entity includes a 31%
interest in a commuter aircraft.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------------
<S> <C> <C>
Equipment held for operating leases, at cost $ 4,778,390 $ 5,059,215
Less accumulated depreciation (4,348,943) (4,536,562)
----------------------------------------
Net equipment 429,447 522,653
Cash and cash equivalents 512,811 551,094
Investments in unconsolidated special purpose entities 370,398 425,957
Accounts receivable, net of allowance for doubtful accounts of
$10,572 in 1996 and $6,649 in 1995 93,712 143,225
Prepaid Insurance 3,393 5,435
========================================
Total assets $ 1,409,761 $ 1,648,364
========================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 7,026 $ 7,026
Accounts Payable 12,230 15,202
----------------------------------------
Total liabilities 19,256 22,228
Partners capital (deficit):
Limited Partners (33,727 units) 1,525,102 1,758,377
General Partner (134,597) (132,241)
----------------------------------------
Total partners' capital 1,390,505 1,626,136
----------------------------------------
Total liabilities and partners' capital $ 1,409,761 $ 1,648,364
========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
-----------------------------------
<S> <C> <C>
Lease revenue $ 109,192 $ 314,676
Interest and other income 6,463 11,274
Gain on disposition of
equipment 34,445 18,691
--------------------------------
Total revenues 150,100 344,641
Expenses:
Depreciation 66,504 130,908
Management fees to affiliate 15,298 24,280
Repairs and maintenance 23,711 42,929
General and administrative
expenses to affiliates 37,131 55,095
Other general and administrative
expenses 19,747 4,647
----------------------------------
Total expenses 162,391 257,859
Equity in net income of unconsolidated special purpose entities 36,977 --
--------------------------------
Net income $ 24,686 $ 86,782
================================
Partners' share of net income:
Limited Partners - 99% $ 24,439 $ 85,914
General Partner - 1% 247 868
================================
Total $ 24,686 $ 86,782
================================
Net income per Limited Partnership
Unit (33,727 units) $ 0.72 $ 2.55
================================
Cash distributions $ 160,317 $ 263,767
================================
Cash distribution per
Limited Partnership Unit $ 4.71 $ 7.74
================================
Special cash distributions $ 100,000 $ 100,000
================================
Special cash distributions per
Limited Partnership Unit $ 2.94 $ 2.94
================================
Total Cash Distributions per
Limited Partnership Units $ 7.65 $ 10.68
================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1994 to March 31, 1996
<TABLE>
<CAPTION>
Limited General
Partner Partner Total
----------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1994 $ 2,622,019 $ (123,518) $ 2,498,501
Net income 173,422 1,752 175,174
Cash distributions (1,037,064) (10,475) (1,047,539)
----------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 1,758,377 (132,241) 1,626,136
Net income 24,439 247 24,686
Quarterly cash distributions (158,714) (1,603) (160,317)
Special distributions (99,000) (1,000) (100,000)
----------------------------------------------------------------
Partners' capital (deficit)
at March 31, 1996 $ 1,525,102 (134,597) 1,390,505
================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
--------------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 24,686 $ 86,782
Adjustment to reconcile net income
to net cash provided by operating activities:
Gain on disposition of equipment (34,445) (18,691)
Depreciation 66,504 130,908
Cash distributions from unconsolidated special purpose
entities in excess of income accrued 55,559 --
Changes in operating assets and liabilities
Restricted cash -- (231)
Accounts receivable, net 49,513 26,856
Prepaid insurance 2,042 1,035
Due to affiliates -- (16,710)
Accounts payable (2,972) (595)
Prepaid deposits and engine reserves -- 232
--------------------------------------
Cash provided by operating activities 160,887 209,586
--------------------------------------
Investing activities:
Proceeds from disposition of equipment 61,147 50,703
--------------------------------------
Cash provided by investing activities 61,147 50,703
--------------------------------------
Cash flows used in financing activities:
Cash distributions paid to partners (260,317) (363,767)
--------------------------------------
Net decrease in cash and cash equivalents (38,283) (103,478)
Cash and cash equivalents at beginning of period 551,094 799,068
--------------------------------------
Cash and cash equivalents at end of period $ 512,811 $ 695,590
======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Opinion of Management
In the opinion of the management of PLM Financial Services Inc., the
General Partner, the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the Partnership's financial position as of
March 31, 1996, the statements of income and cash flows for the three
months ended March 31, 1996 and 1995, the statements of changes in
partners' capital for the period from December 31, 1994 to March 31, 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying 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, 1995, on file at the
Securities and Exchange Commission.
2. Equipment
The components of owned equipment are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-----------------------------------------
<S> <C> <C>
Equipment held for operating leases:
Trailers $ 4,560,847 $ 4,833,449
Marine containers 217,543 225,766
-----------------------------------------
4,778,390 5,059,215
Less accumulated depreciation (4,348,943) (4,536,562)
=========================================
Net equipment $ 429,447 $ 522,653
=========================================
</TABLE>
All of the equipment owned by the Partnership is either on lease or
operating in PLM-affiliated short-term rental facilities as of March 31, 1996,
and at December 31, 1995.
During the three months ended March 31, 1996, the Partnership sold or
disposed of four marine containers and nine trailers with a net book value of
$26,702 for proceeds of $61,147. During the three months ended March 31, 1995,
the Partnership sold or disposed of four marine containers and six trailers with
a net book value of $32,012 for proceeds of $50,703.
3. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodicially declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed on a quarterly basis to partners. The amounts reflected for
assets and liabilities of the Partnership have not been adjusted to reflect
liquidation values. The
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
3. Liquidation and special distributions (continued)
equipment portfolio continues to be carried at the lower of depreciated
cost or fair value less cost to dispose. Although the General Partner
estimates that there will be distributions after liquidation of assets and
liabilities, the amounts cannot be accurately determined prior to actual
liquidation of the equipment. Any excess proceeds over expected Partnership
obligations will be distributed to the Partners throughout the liquidation
period. Upon final liquidation, the Partnership will be dissolved.
During the three months ended March 31, 1996, and 1995, the General Partner
paid special distributions of $2.94 per Limited Partnership Unit for
proceeds from equipment liquidations. The Partnership is not permitted to
reinvest proceeds from sales or liquidations of equipment. These proceeds,
in excess of operational cash requirements, are periodically paid out to
limited partners in the form of special distributions. The sales and
liquidations occur because of equipment destructions, the determination by
the General Partner that it is the appropriate time to maximize the return
on an asset through sale of that asset, and, in some leases, the ability of
the lessee to exercise purchase options.
4. Investments in Unconsolidated Special Purpose Entites
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental equipment as undivided interests,
including its proportionate share of each asset with similar wholly-owned
assets in its financial statements. Under generally accepted accounting
principles, the effects of such activities, if material, should be reported
using the equity method of accounting. Therefore, effective January 1,
1996, the Partnership adopted the equity method to account for its
investment in such jointly-held assets.
The principle differences between the previous accounting method and the
equity method relates to the presentation of activities relating to these
assets in the income statement. Whereas, under equity accounting the
Partnership's proportionate share is presented as a single net amount,
"equity in net income (loss) of unconsolidated special purpose entities",
under the previous method, the Partnership's income statement reflected its
proportionate share of each individual item of revenue and expense.
Accordingly, the effect of adopting the equity method of accounting has no
cumulative effect on previously reported partner's capital or on the
Partnership's net income (loss) for the period of adoption. Because the
effects on previously issued financial statements of applying the equity
method of accounting to investments in jointly-owned assets are not
considered to be material to such financial statements taken as a whole,
previously issued financial statements have not been restated. However,
certain items have been reclassified in the previously issued balance sheet
to conform to the current period presentation.
The net investments in unconsolidated special purpose entities includes 31%
and 80% interests in two separate commuter aircraft.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) Results of Operations
Comparison of the Partnerships' Operating Results for the Three Months Ended
March 31, 1996 and 1995
TEP VIIB:
(A) Revenues
Total revenues of $128,857 for the quarter ended March 31, 1996, decreased from
$201,819 for the same period in 1995 due primarily to lower lease revenues and
lower interest and other income, offset by a higher gain on disposition of
equipment for the first quarter of 1996 when compared to the same period in
1995.
(1) Lease revenue decreased to $106,074 in the first quarter of 1996, from
$183,663 in the first quarter of 1995.
The following table lists lease revenues for owned equipment types:
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------------------
1996 1995
----------------------------------
<S> <C> <C>
Trailers $ 93,308 $ 143,910
Aircraft -- 24,770
Marine containers 5,266 7,903
Rail equipment 7,500 7,080
==================================
$ 106,074 $ 183,663
==================================
</TABLE>
Although, net income was not affected by the change in accounting for investment
in unconsolidated special purpose entity, lease revenues attributable to the
unconsolidated special purpose entity totaled $24,093 in the first quarter of
1996 which represented revenue for jointly-owned assets (refer to the "Equity in
net income of the unconsolidated special purpose entity" section below).
Significant revenue component changes related to owned equipment resulted
primarily from:
(a) Trailer revenues decreased $50,602 due to the sale of two trailers
during the last three quarters of 1995, and five trailers in the first quarter
of 1996, and a decline in utilization in the PLM-affiliated short-term rental
facilities in 1996 compared to 1995 levels;
(b) Marine containers revenues decreased $2,637 due to the disposition or
sale of 11 marine containers in the last three quarters of 1995 and six marine
containers in the first quarter of 1996, and lower utlilization in the first
quarter of 1996 compared to the same period in 1995.
(2) Interest and other income decreased to $3,453 in the first quarter of 1996
from $5,326 in the first quarter of 1995. This increase was primarily due to
lower interest rate earned on cash investments in the first quarter of 1996.
<PAGE>
(3) For the quarter ended March 31, 1996, the Partnership realized a gain of
$19,330 on the sale or disposition of six marine containers and five trailers,
compared to the same period in 1995 where the Partnership realized a gain of
$12,830 on the sale or disposition of six trailers and four marine containers.
(B) Expenses
Total expenses of $145,254 for the quarter ended March 31, 1996 decreased from
$221,890 for the same period in 1995. Although net income was not affected as a
result of the change in accounting for investment in unconsolidated special
purpose entity, expenses attributable to the unconsolidated special purpose
entity totaled $14,762 in the first quarter of 1996, all relating to
jointly-owned assets (refer to the "Equity in net income of the unconsolidated
special purpose entity" section below). The remaining decreases in 1996 expenses
are explained below:
(1) Direct operating expenses (defined as repairs and maintenance expenses)
decreased to $22,263 in the first quarter of 1996, from $44,164 in the same
period in 1995. This decrease is primarily attributable to disposition of
trailers and containers during 1995 and 1996.
(2) Indirect operating expenses (defined as depreciation expense, management
fees to affiliates, bad debt expenses, and general and administrative expenses)
increased to $122,991 in the first quarter of 1996, from $177,726 in the first
quarter of 1995. The change related to owned equipment resulted primarily from:
(a) a decrease of $26,818 in bad debt expense due to the General Partner's
evaluation of collectibility of the current open receivable balances;
(b) a decrease in depreciation expense of $17,087 was due to asset sales or
dispositions during 1995 and 1996;
(c) a decrease of $8,420 in all general and administrative expenses from
1995 levels due to lower accounting costs associated with the Partnership, less
license and registration fee for trailers due to the disposition or sale of
trailers during 1995 and 1996, offset by an increase in audit fee.
(C) Equity in net income of the unconsolidated special purpose entity represents
the net income generated from jointly owned assets now accounted for under the
equity method. The aircraft revene for the quarter ended March 31, 1996, was
$24,093. Expenses totaled $14,762, composed mostly of depreciation expense.
(D) Net loss
The Partnership's net loss of $7,066 in the first quarter of 1996, decreased
from a net loss of $20,071 in the first quarter of 1995. The Partnership's
ability to operate or liquidate assets, secure leases, and re-lease those assets
whose leases expire during the duration of the Partnership is subject to many
factors, and the Partnership's performance in the first quarter of 1996 is not
necessarily indicative of future periods. In the first quarter of 1996, the
Partnership distributed $98,056 to the Limited Partners, or $4.40 per Limited
Partnership Unit.
TEP VIIC:
(A) Total revenues of $150,100 for the quarter ended March 31, 1996, decreased
from $344,641 for the same period in 1995 due primarily to lower lease revenues
and lower interest and other income, offset by a larger gain on the sale of
equipment in the first quarter of 1996, as compared to the same period in 1995.
<PAGE>
(1) Lease revenue decreased to $109,192 in the first quarter of 1996 from
$314,676 for the same period in 1995. The following table lists lease revenues
for owned equipment types.
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------------------
1996 1995
----------------------------------
<S> <C> <C>
Trailers $ 107,892 $ 205,296
Aircraft -- 99,462
Marine containers 1,300 9,918
==================================
$ 109,192 $ 314,676
==================================
</TABLE>
Although, net income was not affected by the change in accounting for
investments in unconsolidated special purpose entities, lease revenues
attributable to unconsolidated special purpose entities totaled $99,462 in the
first quarter of 1996 which represented revenue for jointly-owned assets (refer
to the "Equity in net income of unconsolidated special purpose entity" section
below).
Significant revenue component changes related to owned equipment resulted
primarily from:
(a) Trailer revenue decreased $97,404 due to the sale of eight trailers in
the last three quarters of 1995 and nine trailers in the first quarter of 1996
and a decline in utilization in the PLM-affiliated short-term rental facilities
in 1996 compared to 1995 levels;
(b) Marine containers revenues decreased $8,618 due to disposition of 13
marine containers during the last three quarters of 1995 and four marine
containers in the first quarter of 1996, and a lower utlilization in the first
quarter of 1996 compared to 1995 levels.
(2) For the quarter ended March 31, 1996, the Partnership realized a gain of
$34,445 on the sale or disposition of nine trailers and four marine containers,
compared to the same period in 1995, where the Partnership realized a gain of
$18,691 on the sale or disposition of six trailers and four marine containers.
(B) Expenses
Total expenses of $162,391 for the quarter ended March 31, 1996 decreased
from $257,859 for the same period in 1995. Although net income was not affected
as a result of the change in accounting for investments in unconsolidated
special purpose entities, expenses attributable to unconsolidated special
purpose entities totaled $62,628 in the first quarter of 1996, all relating to
jointly-owned assets (refer to the "Equity in net income of unconsolidated
special purpose entities" section below). The remaining decreases in 1996
expenses are explained below:
(1) Direct operating expenses (defined as repairs and maintenance expenses)
decreased to $23,711 in the first quarter of 1996, from $42,929 in the same
period of 1995 due to decreases in maintenance for trailers in the
PLM-affiliated short-term rental facilities. In the first quarter of 1995,
repairs were made on former term lease trailers prior to transitioning into the
PLM-affiliated short-term rental facilities.
(2) Indirect operating expenses (defined as depreciation expense, management
fees to affiliates, and general and administrative expenses) decreased to
$138,680 in the first quarter of 1996 from $214,930 in the first quarter of
1995. The change related to owned equipment resulted primarily from:
(a) a decrease of $8,844 in depreciation expense from 1995 levels
reflecting asset sales or dispositions during 1995 and 1996;
(b) a decrease in general and administrative expenses of $2,864 resulting
from a decrease in indirect costs associated with the operations of the
PLM-affiliated short-term rental facilities and lower accounting costs, offset
by increase in audit fee.
(C) Equity in net income of unconsolidated special purpose entities represents
the net income generated from jointly owned assets now accounted for under the
equity method. The revene for these two aircraft for the quarter ended March 31,
1996, was $99,605. Expenses totaled $62,628, composed mostly of depreciation
expense.
(D) Net Income
The Partnership's net income decreased to $24,686 in the first quarter of
1996, from $86,782 in the first quarter of 1995. The Partnership's ability to
operate or liquidate assets, secure leases, and re-lease those assets whose
leases expire during the duration of the Partnership is subject to many factors,
and the Partnership's performance in the first quarter of 1996 is not
necessarily indicative of future periods. In the first quarter of 1996, the
Partnership distributed $158,714 to the Limited Partners, or $7.65 per Limited
Partnership Unit.
(II) Asset Sales
The General Partner is actively marketing the remaining equipment portfolio with
the intent of maximizing sale proceeds.
Equipment sales and dispositions prior to the Partnerships' planned liquidation
phase generally result from either the exercise by lessees of fair market value
purchase options provided for in certain leases, or the payment of stipulated
loss values on equipment lost or disposed of during the time it is subject to
lease agreements. Such disposal of equipment is unpredictable and results from
the wear, tear, and general risk of normal operations. As discussed in note 5,
the Partnerships have entered the portfolio liquidation phase as of the third
quarter of 1995. During the three months ended March 31, 1996, TEP VIIB sold or
disposed of five trailers and six marine containers for $34,213, and TEP VIIC
sold or disposed of nine trailers and four marine containers for $61,146. As
discussed in note 3, the General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds.
(III) Market Values
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995,
the effect of which was not material as the method previously employed by the
Partnership was consistent with SFAS 121. In accordance with SFAS 121, the
General Partner reviews the carrying value of its equipment portfolio at least
annually in relation to expected future market conditions for the purpose of
assessing recoverability of the recorded amounts. If projected future lease
revenue plus residual values are less than the carrying value of the equipment,
a loss on revaluation is recorded. No adjustments to reflect impairment of
individual equipment carrying values were required for the three months ended
March 31, 1996.
As of March 31, 1996, the General Partner estimated the fair market value of
each Partnerships' equipment portfolio to be approximately: $1.8 million and
$3.3 million for TEP VIIB and TEP VIIC respectively.
<PAGE>
(IV) Government Regulations
The General Partner operates the Partnerships' equipment in accordance with
current regulations (see Item 1 (D) Government Regulations). However, the
continuing implementation of new or modified regulations by some of the
authorities mentioned previously, or others, may adversely affect the
Partnerships' ability to continue to own or operate equipment in its portfolio.
These on-going changes in the regulatory environment, both in the U.S. and
internationally, cannot be predicted with any certainty and thus preclude the
General Partner from accurately determining the impact of such changes on
Partnership operations, purchases and sales of equipment.
(V) Future outlook
Pursuant to the original operating plan, the Partnerships entered into their
liquidation phase during 1995 and the General Partner is actively pursuing the
sale of all of the Partnerships' equipment with the intention of winding up the
Partnerships and distributing all available cash to the Partners.
(VI) Trends
Inflation and changing prices did not materially impact the Partnerships'
revenues or expenses during the reported periods.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM TRANSPORTATION EQUIPMENT
PARTNERS VIIB 1985 INCOME FUND
By: PLM Financial Services, Inc.
General Partner
Date: May 13, 1996 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 307,162
<SECURITIES> 8,227
<RECEIVABLES> 92,646
<ALLOWANCES> 32,026
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,717,281
<DEPRECIATION> 4,347,990
<TOTAL-ASSETS> 779,426
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 735,657
<TOTAL-LIABILITY-AND-EQUITY> 779,426
<SALES> 0
<TOTAL-REVENUES> 152,950
<CGS> 0
<TOTAL-COSTS> 160,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,066)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,066)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
