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 quarter ended June 30, 1997
or
[ ] 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 0-15436
-----------------------
PLM EQUIPMENT GROWTH FUND
(Exact name of registrant as specified in its charter)
California 94-2998816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 800, 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 EQUIPMENT GROWTH FUND
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,,
1997 1996
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 37,187 $ 45,118
Less accumulated depreciation (27,547 ) (33,919 )
Net equipment 9,640 11,199
Cash and cash equivalents 2,408 1,864
Restricted cash 60 60
Investments in unconsolidated special-purpose entities 5,011 6,553
Accounts receivable, net of allowance for doubtful accounts
of $319 in 1997 and $139 in 1996 1,124 1,039
Prepaid expenses and other assets 13 34
Total assets $ 18,256 $ 20,749
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 292 $ 457
Due to affiliates 40 121
Lessee deposits and reserve for repairs 755 753
Total liabilities 1,087 1,331
Partners' capital (deficit):
Limited partners (5,785,350 depositary units
as of June 30, 1997 and December 31, 1996) 17,392 19,641
General Partner (223 ) (223 )
Total partners' capital 17,169 19,418
Total liabilities and partners' capital $ 18,256 $ 20,749
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 2,243 $ 2,541 $ 4,433 $ 5,383
Interest and other income 30 21 89 90
Net gain on disposition of equipment 248 1,555 324 12,893
Total revenues 2,521 4,117 4,846 18,366
Expenses:
Depreciation and amortization 584 887 1,180 1,850
Repairs and maintenance 519 621 873 1,058
Interest expense - 262 - 663
Insurance expense 13 21 27 43
Management fees to affiliate 126 377 264 517
General and administrative expenses to affiliates 117 191 272 407
Other general and administrative expenses 144 150 433 257
Total expenses 1,503 2,509 3,049 4,795
Equity in net (loss) income of unconsolidated
special-purpose entities (818 ) 435 (844 ) (150 )
Net income $ 200 $ 2,043 $ 953 $ 13,421
Partners' share of net income:
Limited partners $ 176 $ 2,023 $ 921 $ 13,287
General Partner 24 20 32 134
Total $ 200 $ 2,043 $ 953 $ 13,421
Net income per weighted-average depositary unit
(5,785,350 units as of June 30, 1997 and 1996) $ 0.03 $ 0.35 $ 0.16 $ 2.30
Cash distributions $ 1,601 $ 1,688 $ 3,202 $ 5,063
Cash distributions per weighted-average
depositary unit $ 0.27 $ 0.29 $ 0.55 $ 0.87
Special distributions $ - $ - $ - $ 4,398
Special distributions per weighted-average
depositary unit $ - $ - $ - $ 0.75
Total distributions per weighted-average
depositary unit $ 0.27 $ 0.29 $ 0.55 $ 1.62
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
From the period ended December 31, 1995 to June 30,
1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1995 $ 14,609 $ (275 ) $ 14,334
Net income 23,609 238 23,847
Repurchase of depositary units (163 ) - (163 )
Cash distributions (8,274 ) (84 ) (8,358 )
Special distributions (10,140 ) (102 ) (10,242 )
Partners' capital (deficit) as of December 31, 1996 19,641 (223 ) 19,418
Net income 921 32 953
Cash distributions (3,170 ) (32 ) (3,202 )
Partners' capital (deficit) as of June 30, 1997 $ 17,392 $ (223 ) $ 17,169
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Operating activities:
Net income $ 953 $ 13,421
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on disposition of equipment (324 ) (12,893 )
Depreciation and amortization 1,180 1,850
Equity in net loss from unconsolidated special-purpose entities 844 150
Changes in operating assets and liabilities:
Restricted cash - 58
Accounts receivable, net (85 ) 297
Prepaid expenses and other assets 21 (31 )
Accounts payable and accrued expenses (165 ) (245 )
Due to affiliates (81 ) 10
Lessee deposits and reserve for repairs 2 46
Net cash provided by operating activities 2,345 2,663
Investing activities:
Payments for capital improvements (25 ) (59 )
Distributions from unconsolidated special-purpose entities 698 1,127
Proceeds from disposition of equipment 728 17,256
Net cash provided by investing activities 1,401 18,324
Financing activities:
Principal repayment under note payable - (9,000 )
Increase in restricted cash - (779 )
Cash distributions paid to limited partners (3,170 ) (5,012 )
Cash distributions paid to General Partner (32 ) (51 )
Special distributions paid to limited partners - (4,354 )
Special distributions paid to General Partner - (44 )
Repurchase of depositary units - (163 )
Net cash used in financing activities (3,202 ) (19,403 )
Net increase in cash and cash equivalents 544 1,584
Cash and cash equivalents at beginning of period 1,864 1,474
Cash and cash equivalents at end of period $ 2,408 $ 3,058
Supplemental information:
Interest paid $ - $ 669
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 PLM Equipment Growth Fund's (the
Partnership's) financial position as of June 30, 1997 and December 31,
1996, the statements of income for the three and six months ended June 30,
1997 and 1996, the statements of changes in Partners' capital from the
period ended December 31, 1995 to June 30, 1997, and the statements of cash
flows for the six months ended June 30, 1997 and 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, 1996, on file at the Securities and
Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Cash Distributions
Distributions are recorded when paid. Operating cash distributions were
$3.2 million and $5.1 million for the six months ended June 30, 1997 and
1996, respectively. In addition, a $4.4 million special distribution was
paid to the partners during the six months ended June 30, 1996 from the
proceeds of seven offshore supply vessels sold in January 1996,
representing approximately 8% of the Partnership's portfolio on an original
cost basis. No special distribution was paid during the six months ended
June 30, 1997. During the six months ended June 30, 1997, cash
distributions to unitholders of $2.2 million were deemed to be a return of
capital.
4. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities (USPEs)
include the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
% Ownership Equipment 1997 1996
<S> <C> <C> <C>
12% Boeing 767-200 ER $ 2,494 $ 2,774
50% Product Tanker 1,722 2,090
50% Boeing 737-200 795 1,689
Net investments $ 5,011 $ 6,553
</TABLE>
The Boeing 737-200 aircraft was off lease as of June 30, 1997 and December
31, 1996.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
5. Transactions with General Partner and Affiliates
Partnership management fees payable to an affiliate of the General Partner
were $22,000 and $103,000 as of June 30, 1997 and December 31, 1996,
respectively. The Partnership's proportional share of USPE-affiliated
management fees, of $6,000 and $36,000, were payable as of June 30, 1997
and December 31, 1996, respectively.
The Partnership's proportional share of the affiliated expenses incurred by
the USPEs during 1997 and 1996 is listed in the following table (in
thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Insurance expense $ 37 $ 43 $ 99 $ 82
Management fees 30 24 138 86
Data processing and administrative
expenses 12 28 20 28
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine
insurance coverage for Partnership equipment and other insurance brokerage
services. TEI is an affiliate of the General Partner.
6. Equipment
The components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Railcar equipment $ 21,909 $ 21,909
Trailers 8,984 9,445
Marine containers 6,294 7,465
Aircraft and aircraft engines - 6,299
37,187 45,118
Less accumulated depreciation (27,547 ) (33,919 )
Net equipment $ 9,640 $ 11,199
</TABLE>
As of June 30, 1997, one aircraft with a zero net book value was
reclassified to equipment held for sale.
Revenues are earned by placing the equipment under operating leases, which
are generally billed monthly or quarterly. All of the Partnership's marine
containers are leased to operators of utilization-type leasing pools, which
include equipment owned by unaffiliated parties. In such instances,
revenues received by the Partnership consist of a specified percentage of
revenues generated by leasing the equipment to sublessees, after deducting
certain direct operating expenses of the pooled equipment. Rents for
railcars are based either on mileage traveled or on fixed rates; rents for
all other equipment are based on fixed rates.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
6. Equipment (continued)
As of June 30, 1997, all equipment in the Partnership's owned equipment
portfolio was on lease or operating in PLM-affiliated short-term trailer
rental facilities, except for 25 marine containers and 8 railcars with
carrying values of $54,000.
In the third quarter of 1994, the Partnership ended its reinvestment phase
in accordance with the Limited Partnership Agreement; therefore, no
equipment was purchased during the quarters ended June 30, 1997 and 1996.
Capital improvements to the Partnership's equipment of $25,000 and $59,000
were made during the six months ended June 30, 1997 and June 30, 1996,
respectively.
During the six months ended June 30, 1997, the Partnership sold or disposed
of marine containers and trailers with an aggregate net book value of $0.4
million for $0.7 million. During the six months ended June 30, 1996, the
Partnership sold or disposed of offshore supply vessels, marine containers,
trailers, railcars, and an aircraft engine, with an aggregate net book
value of $4.4 million, for $17.3 million.
(this space intentionally left blank)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Partnership's Operating Results for the Three Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the quarter ended June 30, 1997, compared to the same period of
1996. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
Railcar equipment $ 1,125 $ 1,264
Trailers 270 271
Marine containers 213 305
Aircraft and aircraft engines 108 59
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $1.5
million and $0.4 million, respectively, for the quarter ended June 30, 1997,
compared to $1.7 million and $0.4 million, respectively, for the same period of
1996. During 1996, the Partnership sold 15 railcars and 20 locomotives,
resulting in lower revenues and expenses in the second quarter of 1997, compared
to the same period of 1996.
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.1
million, respectively, for the quarter ended June 30, 1997, compared to $0.4
million and $0.1 million, respectively, for the same period of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.2
million and $1,000, respectively, for the quarter ended June 30, 1997, compared
to $0.3 million and $2,000, respectively, for the same period of 1996. The
number of marine containers owned by the Partnership declined over the past
twelve months due to sales and dispositions. In addition, the marine container
fleet experienced lower utilization, resulting in a decrease in marine container
contribution.
Aircraft: Aircraft lease revenues and direct expenses were $0.1 million and
$2,000, respectively, for the quarter ended June 30, 1997, compared to $0.2
million and a $0.1 million, respectively, for the same period of 1996. Aircraft
contribution increased in the second quarter of 1997 due to lower repair and
maintenance expenses for the quarter ended June 30, 1997, compared to the same
period of 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.0 million for the quarter ended June 30, 1997
decreased from $1.9 million for the same period of 1996. The variances are
explained as follows:
(1) A $0.3 million decrease in depreciation and amortization expenses from 1996
levels reflected the sale of certain assets during 1997 and 1996.
(2) A $0.3 million decrease in interest expense was due to repayment of the
Partnership's entire outstanding debt balance during 1996.
(3) A $0.3 million decrease in management fees to affiliate was due to a
decrease in the Partnership's operating cash flows. Management fees are based on
the greater of (i) 10% of cash flows or (ii) 1/12 of 1/2% of the net book value
of the equipment portfolio, subject to reduction in certain events, as described
in the Limited Partnership Agreement.
<PAGE>
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for the second quarter of 1997
totaled $0.2 million, and resulted from the sale of marine containers and
trailers with an aggregate net book value of $0.4 million, for aggregate
proceeds of $0.6 million. For the second quarter of 1996, gain on sales totaled
$1.6 million, which resulted mainly from the sale or disposition of railcars,
trailers, marine containers, and an aircraft engine, with an aggregate net book
value of $1.9 million, for aggregate proceeds of $3.5 million.
(D) Equity in Net (Loss) Income of Unconsolidated Special-Purpose Entities
Equity in net (loss) income of unconsolidated special-purpose entities
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft and aircraft engines $ (913 ) $ 405
Marine vessels 95 13
Mobile offshore drilling unit - 17
</TABLE>
Aircraft and aircraft engines: The Partnership's share of aircraft revenues and
expenses was $0.1 million and $1.1 million, respectively, for the quarter ended
June 30, 1997, compared to $0.7 million and $0.3 million, respectively, for the
same period of 1996. As of June 30, 1997, the Partnership owned a 50% investment
in a commercial aircraft and a 12% interest in another commercial aircraft. The
Partnership liquidated its 70% and 50% investments in commuter aircraft and its
50% investment in an aircraft engine during 1996 as a result of the General
Partner's sale of the assets. The loss of $0.9 million for the quarter ended
June 30, 1997 related to the Partnership's 50% investment in a commercial
aircraft. This aircraft was off lease during the second quarter of 1997. The
commercial aircraft in which the Partnership has a 12% investment operated at
essentially break-even during the first quarter of 1997.
Marine vessel: The Partnership's share of marine vessel revenues and expenses
was $0.6 million and $0.5 million, respectively, for the quarter ended June 30,
1997, compared to $0.5 million and $0.5 million, respectively, for the same
period of 1996. As of June 30, 1997 and 1996, the Partnership owned a 50%
investment in a marine vessel. The increase in contribution in the second
quarter of 1997 resulted from higher lease rates earned during the second
quarter of 1997, compared to the same period of 1996.
Mobile offshore drilling unit: There were no mobile offshore drilling unit lease
revenues or direct expenses for the second quarter of 1997, compared to $0.4
million and $0.4 million, respectively, for the second quarter of 1996. The
Partnership liquidated its 55% investment in a mobile offshore drilling unit
during July 1996 as a result of the General Partner's sale of the asset.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $0.2 million for
the second quarter of 1997 decreased from net income of $2.0 million during the
same period of 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the second quarter of 1997 is not
necessarily indicative of future periods. In the second quarter of 1997, the
Partnership distributed $1.6 million to the unitholders, or $0.27 per
weighted-average depositary unit.
<PAGE>
Comparison of the Partnership's Operating Results for the Six Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the six months ended June 30, 1997, compared to the same period
of 1996. The following table presents lease revenues less direct expenses by
owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Rail equipment $ 2,362 $ 2,571
Trailers 577 651
Marine containers 389 687
Aircraft and aircraft engines 215 229
Marine vessels - 144
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $3.0
million and $0.7 million, respectively, for the six months ended June 30, 1997,
compared to $3.4 million and $0.7 million, respectively, during the same period
of 1996. Although the railcar fleet remained relatively the same size for both
periods, the decrease in railcar contribution resulted from lower revenue due to
lower lease rates for the six months ended June 30, 1997, compared to the same
period of 1996.
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.2
million, respectively, for the six months ended June 30, 1997, compared to $0.9
million and $0.3 million, respectively, during the same period of 1996.
Marine containers: Marine container lease revenues and direct expenses were $0.4
million and $3,000, respectively, for the six months ended June 30, 1997,
compared to $0.7 million and $5,000, respectively, during the same period of
1996. The number of marine containers owned by the Partnership declined over the
past twelve months due to sales and dispositions. In addition, the marine
container fleet experienced lower utilization, resulting in a decrease in marine
container contribution.
Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and
$4,000, respectively, for the six months ended June 30, 1997, compared to $0.2
million and $15,000, respectively, during the same period of 1996.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.1
million and a credit of $18,000, respectively, for the six months ended June 30,
1996. The decrease was due to the sale of all offshore supply vessels during
1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.2 million for the six months ended June 30,
1997 decreased from $3.7 million forthe same period in 1996. The variances
are explained as follows:
(1) A $0.7 million decrease in depreciation and amortization expenses from 1996
levels reflected the sale of certain assets during 1997 and 1996.
(2) A $0.7 million decrease in interest expense was due to repayment of the
Partnership's entire outstanding debt balance during 1996.
(3) A $0.3 million decrease in management fees to affiliate was due to a
decrease in the Partnership's operating cash flows. Management fees are based on
the greater of (i) 10% of cash flows or (ii) 1/12 of 1/2% of the net book value
of the equipment portfolio, subject to reductions in certain events, as
described in the Limited Partnership Agreement.
(4) A 0.2 million increase in bad debt expense primarily reflected the
Partnership's evaluation of collectibility of certain receivable balances.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 1997
totaled $0.3 million, and resulted from the sale of marine containers and
trailers with a net book value of $0.4 million, for proceeds of $0.7 million.
For the six months ended June 30, 1996, the gain on sales totaled $12.9 million,
which resulted mainly from the sale of offshore supply vessels with a net book
value of $2.3 million, for proceeds of $13.4 million, and the sale or disposal
of marine containers, trailers, railcars, and an aircraft engine with an
aggregate net book value of $2.1 million, for aggregate proceeds of $3.9
million.
(D) Equity in Net (Loss) Income of Unconsolidated Special-Purpose Entities
Equity in net (loss) income of unconsolidated special-purpose entities
represents net (loss) income generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
Aircraft and aircraft engines $ (1,028 ) $ (41 )
Marine vessels 184 (117 )
Mobile offshore drilling unit - 8
</TABLE>
Aircraft and aircraft engines: The Partnership's share of aircraft revenues and
expenses was $0.3 million and $1.3 million, respectively, for the six months
ended June 30, 1997, compared to $1.1 million and $1.1 million, respectively,
during the same period of 1996. As of June 30, 1997, the Partnership owned a 50%
investment in a commercial aircraft and a 12% interest in another commercial
aircraft. The Partnership liquidated its 70% and 50% investments in commuter
aircraft and its 50% investment in an aircraft engine during 1996 as a result of
the General Partner's sale of the assets. The loss of $1.0 million for the six
months ended June 30, 1997 related to the Partnership's 50% investment in a
commercial aircraft. This aircraft was off lease during the first six months of
1997. The commercial aircraft in which the Partnership has a 12% investment
operated at essentially break-even during the first six months of 1997.
Marine vessel: The Partnership's share of marine vessel revenues and expenses
was $1.2 million and $1.0 million, respectively, for the six months ended June
30, 1997, compared to $1.0 million and $1.1 million, respectively, during the
same period of 1996. During 1997 and 1996, the Partnership owned a 50%
investment in a marine vessel that earned higher lease rates during the six
months ended June 30, 1997, compared to the same period of 1996.
Mobile offshore drilling unit: There were no mobile offshore drilling unit lease
revenues or direct expenses during the six months ended June 30, 1997, compared
to $0.7 million and $0.7 million, respectively, during the same period of 1996,
since the Partnership liquidated its 55% investment in the mobile offshore
drilling unit during July 1996 as a result of the General Partner's sale of the
asset.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $1.0 million for
the six months ended June 30, 1997 decreased from net income of $13.4 million
during the same period in 1996. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the first six
months of 1997 is not necessarily indicative of future periods. During the six
months ended June 30, 1997, the Partnership distributed $3.2 million to the
unitholders, or $0.55 per weighted-average depositary unit.
<PAGE>
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from original partners are permitted under the
terms of the Limited Partnership Agreement. The Partnership currently has no
debt obligations. The Partnership relies on operating cash flows to meet its
operating obligations, maintain working capital reserves, and make cash
distributions to the limited partners.
For the six months ended June 30, 1997, the Partnership generated $3.0 million
in operating cash (net cash provided by operating activities, plus distributions
from unconsolidated special-purpose entities) to meet its operating obligations
and maintain the current level of distributions (total for six months ended June
30, 1997 of approximately $3.2 million) to the partners, but used undistributed
available cash from prior periods of approximately $0.2 million. During the six
months ended June 30, 1997, the General Partner sold equipment on behalf of the
Partnership and realized proceeds of approximately $0.7 million.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional capital
to that mentioned above.
During the first quarter of 1996, the cash distribution rate was reduced to more
closely reflect current and expected net cash flows from operations. Continued
weak market conditions in certain equipment sectors and equipment sales have
reduced overall lease revenues in the Partnership. In addition, with the onset
of the equipment liquidation phase of the Partnership in 1997, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations, will continue to become progressively smaller as assets
are sold. Although operating distribution levels will be reduced, significant
asset sales may result in potential special distributions to unitholders.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is approaching its orderly liquidation phase (beginning in
1998), the General Partner will be seeking to selectively re-lease or sell
assets as the existing leases expire. Sale decisions will cause the operating
performance of the Partnership to decline over the remainder of its life. The
General Partner anticipates that the liquidation of Partnership assets will be
completed by the scheduled termination of the Partnership at the end of 1999.
Throughout the remaining life of the Partnership, the Partnership may
periodically be making special distributions to the partners as asset sales are
completed.
(IV) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the discussion in 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.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Second amendment to the second amended and restated Limited
Partnership Agreement.
(b) Reports on Form 8-K
None.
<PAGE>
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
By: PLM Financial Services, Inc.
General Partner
Date: August 7, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
SECOND AMENDMENT
TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PLM EQUIPMENT GROWTH FUND
This Second Amendment ("Amendment") to the Amended and Restated Limited
Partnership Agreement ("Agreement") of PLM Equipment Growth Fund ("Partnership")
is executed as of November 21, 1996, by its general partner, PLM Financial
Services, Inc., a Delaware corporation ("General Partner"), pursuant to Article
XVIII of the Agreement. All capitalized terms not otherwise defined herein shall
have the meanings set forth in the Agreement.
RECITALS
The Partners entered into a Limited Partnership Agreement as of January
24, 1986, a First Amended and Restated Limited Partnership Agreement as of March
17, 1986 and a Second Amended and Restated Limited Partnership Agreement as of
May 6, 1986.
The General Partner now amends the Agreement, pursuant to Article
XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's representations and obligations, to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General
Partner represents, warrants and agrees, and will take all action to ensure,
that this Amendment does not, and will not, detrimentally affect the Cash
Distributions of the Limited Partners or assignees or the management of the
Partnership by the General Partner.
Now, therefor, the Agreement is amended as follows:
1. Section 6.02 is amended to read in its entirety as follows:
"The General Partner shall not transfer its interest as General Partner
in the Partnership (which transfer shall be deemed as "withdrawal" of the
General Partner for purposes of Section 9.02) or its interest in the
Partnership's capital, earnings or assets (except in connection with the pledge
of the General Partner's assets or right in connection with loans or other
indebtedness) except (a) upon the approval of a majority in interest of the
Limited Partners, or (b) to an Affiliate upon its merger, consolidation with
another person or its transfer pursuant to a reorganization of all or
substantially all of its assets to another person, and the assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such successor or transferee shall on the date of such transfer, merger,
consolidation or reorganization assume all of the duties and obligations of the
General Partner set forth in this Agreement."
IN WITNESS WHEREOF, the General Partner has duly executed this
Amendment as of November 21, 1996.
PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners
By: /s/ J. Michael Allgood
------------------------
Vice President and Chief Financial Officer
