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, 1998
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,
1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 30,215 $ 33,019
Less accumulated depreciation (23,632) (24,885)
---------------------------------------------
Net equipment 6,583 8,134
Cash and cash equivalents 2,804 4,585
Accounts receivable, net of allowance for doubtful accounts
of $69 in 1998 and $212 in 1997 810 920
Due from affiliate -- 353
Investments in unconsolidated special-purpose entities 4,626 5,983
Prepaid expenses and other assets 11 31
---------------------------------------------
Total assets $ 14,834 $ 20,006
=============================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 481 $ 735
Due to affiliates 497 529
Lessee deposits and reserve for repairs 34 44
------------------------------------------
Total liabilities 1,012 1,308
------------------------------------------
Partners' capital (deficit):
Limited partners (5,785,350 depositary units
as of June 30, 1998 and December 31, 1997) 13,978 18,887
General Partner (156) (189)
------------------------------------------
Total partners' capital 13,822 18,698
------------------------------------------
Total liabilities and partners' capital $ 14,834 $ 20,006
==========================================
</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,
1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Lease revenue $ 1,839 $ 2,243 $ 3,808 $ 4,433
Interest and other income 23 30 90 89
Net gain on disposition of equipment 145 248 220 324
------------------------------------------------------------------
Total revenues 2,007 2,521 4,118 4,846
------------------------------------------------------------------
Expenses
Depreciation and amortization 477 584 972 1,180
Management fees to affiliate 108 126 274 264
Repairs and maintenance 636 519 1,204 873
Insurance expense to affiliate (38) -- (38 ) --
Other insurance expense 10 13 21 27
General and administrative expenses to affiliates 146 117 290 272
Other general and administrative expenses 143 123 398 259
Provision for (recovery of) bad debt expense 7 21 (109 ) 174
------------------------------------------------------------------
Total expenses 1,489 1,503 3,012 3,049
------------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 180 (818) 135 (844)
------------------------------------------------------------------
Net income $ 698 $ 200 $ 1,241 $ 953
==================================================================
Partners' share of net income
Limited partners $ 661 $ 176 $ 1,147 $ 921
General Partner 37 24 94 32
------------------------------------------------------------------
Total $ 698 $ 200 $ 1,241 $ 953
==================================================================
Net income per weighted-average depositary unit
(5,785,350 units as of June 30, 1998 and 1997) $ 0.11 $ 0.03 $ 0.20 $ 0.16
==================================================================
Cash distributions $ 1,033 $ 1,601 $ 2,634 $ 3,202
Special distributions -- -- 3,483 --
-----------------------------------------------------------------------------------------------
Total distributions $ 1,033 $ 1,601 $ 6,117 $ 3,202
===============================================================================================
Per weighted-average depositary unit:
Cash distributions $ 0.18 $ 0.27 $ 0.45 $ 0.55
Special distributions -- -- 0.60 --
-----------------------------------------------------------------------------------------------
Total distributions $ 0.18 $ 0.27 $ 1.05 $ 0.55
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
From the Period From December 31, 1996 to June 30,
1998
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1996 $ 19,641 (223) 19,418
Net income 5,587 98 5,685
Cash distributions (6,341) (64) (6,405)
Partners' capital (deficit) as of December 31, 1997 18,887 (189) 18,698
Net income 1,147 94 1,241
Cash distributions (2,608) (26) (2,634)
Special distributions (3,448) (35) (3,483)
-------------------------------------------------------------
Partners' capital (deficit) as of June 30, 1998 $ 13,978 $ (156) $ 13,822
=============================================================
</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,
1998 1997
---------------------------------
<S> <C> <C>
Operating activities
Net income $ 1,241 $ 953
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 972 1,180
Net gain on disposition of equipment (220) (324 )
Equity in net (income) loss from unconsolidated
special-purpose entities (135) 844
Changes in operating assets and liabilities:
Accounts receivable, net 127 (85 )
Due from affiliate 353 --
Prepaid expenses and other assets 20 21
Accounts payable and accrued expenses (254) (165 )
Due to affiliates (32) (81 )
Lessee deposits and reserve for repairs (10) 2
-------------------------------------
Net cash provided by operating activities 2,062 2,345
-------------------------------------
Investing activities
Payments for capital improvements (102) (25 )
Liquidation distributions from unconsolidated
special-purpose entity 1,101 --
Distributions from unconsolidated special-purpose entities 391 698
Proceeds from disposition of equipment 884 728
-------------------------------------
Net cash provided by investing activities 2,274 1,401
-------------------------------------
Financing activities
Cash distributions paid to limited partners (2,608) (3,170 )
Cash distributions paid to General Partner (26) (32 )
Special distributions paid to limited partners (3,448) --
Special distributions paid to General Partner (35) --
-------------------------------------
Net cash used in financing activities (6,117) (3,202 )
-------------------------------------
Net increase (decrease) in cash and cash equivalents (1,781) 544
Cash and cash equivalents at beginning of period 4,585 1,864
-------------------------------------
Cash and cash equivalents at end of period $ 2,804 $ 2,408
=====================================
Supplemental information
Sale proceeds in accounts receivable $ 20 --
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
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, 1998 and December 31, 1997, the statements of income for
the three and six months ended June 30, 1998 and 1997, the statements of changes
in Partners' capital from December 31, 1996 to June 30, 1998, and the statements
of cash flows for the six months ended June 30, 1998 and 1997. 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, 1997, on file at the Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
3. Cash Distributions
Distributions are recorded when paid. Operating cash distributions were $2.6
million and $3.2 million for the six months ended June 30, 1998 and 1997,
respectively, and $1.0 million and $1.6 million for the three months ended June
30, 1998 and 1997, respectively. In addition, a $3.5 million special
distribution was paid during the six months ended June 30, 1998. During the six
months ended June 30, 1998 and 1997, cash distributions to unitholders of $4.9
million and $2.2 million, respectively, were deemed to be a return of capital.
Cash distributions of $1.0 million relating to the results from the second
quarter of 1998 were paid during the third quarter of 1998.
4. Transactions with General Partner and Affiliates
The Partnership's proportional share of the affiliated expenses incurred by the
USPEs during 1998 and 1997 is listed in the following table (in thousands of
dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 18 $ 30 $ 66 $ 138
Data processing and administrative
expenses 13 12 27 20
Insurance expense 1 37 (7) 99
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, provides marine insurance coverage for the Partnership's
investment in USPEs and other insurance brokerage services. TEI did not provide
the same insurance coverage during 1998 as had been provided during 1997. These
services were provided by an unaffiliated third party.
The balance due to affiliates as of June 30, 1998 includes $38,000 due to FSI
and its affiliate for management fees and $0.5 million due to affiliated USPEs.
The balance due to affiliates as of December 31, 1997 includes $0.1 million due
to FSI and its affiliate for management fees and $0.4 million due to affiliated
USPEs.
<PAGE>
PLM EQUIPMENT GROWTH FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
5. Equipment
Owned equipment held for operating leases is stated at cost. The components of
owned equipment are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------------------
<S> <C> <C>
Railcar equipment $ 22,000 $ 21,948
Trailers 5,509 7,628
Marine containers 2,706 3,443
-----------------------------------------------------------------------------
30,215 33,019
Less accumulated depreciation (23,632) (24,885)
------------------------------------
Net equipment $ 6,583 $ 8,134
====================================
</TABLE>
As of June 30, 1998, all equipment in the Partnership's owned equipment
portfolio was on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for 23 marine containers and 4 railcars with an aggregate net
book value of $23,000. As of December 31, 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 24 marine
containers and 3 railcars with an aggregate net book value of $20,000.
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, 1998 and 1997. Capital improvements
to the Partnership's equipment of $0.1 million and $25,000 were made during the
six months ended June 30, 1998 and June 30, 1997, respectively.
During the six months ended June 30, 1998, the Partnership sold or disposed of
marine containers, railcars, and trailers, with an aggregate net book value of
$0.7 million, for proceeds of $0.9 million. 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 proceeds of $0.7 million.
6. 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 of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------------
<S> <C> <C>
12% interest in an entity owning a Boeing 767-200 ER $ 2,091 $ 2,303
50% interest in an entity owning a Product Tanker 1,858 1,247
50% interest in an entity owning a Boeing 737-200 675 1,241
18% interest in an entity owning a Boeing 727-200 2 1,192
Net investments $ 4,626 $ 5,983
===========================================
</TABLE>
The Boeing 737-200 aircraft was off lease as of June 30, 1998 and December 31,
1997. During the first quarter of 1998, the General Partner sold the aircraft in
which the Partnership had an 18% interest for its approximate net book value.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund's (the Partnership's) Operating Results
for the Three Months Ended June 30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance and
asset-specific insurance expenses) on owned equipment decreased during the
quarter ended June 30, 1998, compared to the same period of 1997. The following
table presents lease revenues less direct expenses by owned equipment type (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
---------------------------
<S> <C> <C>
Railcar equipment $ 939 $ 1,125
Trailers 238 270
Marine containers 22 213
Aircraft -- 108
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $1.5
million and $0.6 million, respectively, for the quarter ended June 30, 1998,
compared to $1.5 million and $0.4 million, respectively, for the same period of
1997. Direct expenses on railcars increased due to increased repairs required on
certain of the railcars in the fleet during 1998, which were not needed during
1997.
Trailers: Trailer lease revenues and direct expenses were $0.3 million and $0.1
million, respectively, for the quarter ended June 30, 1998, compared to $0.4
million and $0.1 million, respectively, for the same period of 1997. The number
of trailers owned by the Partnership has been declining over the past twelve
months due to sales and dispositions. The result of this declining fleet has
been a decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were
$23,000 and $1,000, respectively, for the quarter ended June 30, 1998, compared
to $0.2 million and $1,000, respectively, for the same period of 1997. The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and dispositions. The result of this declining
fleet has been a decrease in marine container contribution.
Aircraft: The Partnership had zero revenues and direct expenses from aircraft
for the quarter ended June 30, 1998, compared to $0.1 million and a $2,000,
respectively, for the same period of 1997. Aircraft contribution decreased in
the second quarter of 1998 due to the disposition of the last aircraft in the
Partnership in the third quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.8 million for the quarter ended June 30, 1998
decreased from $1.0 million for the same period of 1997. The decrease is due
primarily to a $0.1 million decrease in depreciation expenses from 1997 levels
resulting from the sale of certain assets during 1998 and 1997.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of owned equipment for the second quarter of 1998
totaled $0.1 million, and resulted from the sale of marine containers, railcars,
and trailers, with an aggregate net book value of $0.4 million, for aggregate
proceeds of $0.5 million. For the second quarter of 1997, gain on sales 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.
<PAGE>
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
------------------------------
<S> <C> <C>
Marine vessel $ 314 $ 95
Aircraft (134 ) (913)
Equity in net income (loss) $ 180 $ (818)
=================================================================
</TABLE>
Marine vessel: As of June 30, 1998 and 1997, the Partnership had an interest in
an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $0.7 million and $0.4 million, respectively, for the
quarter ended June 30, 1998, compared to $0.6 million and $0.5 million,
respectively, for the same period of 1997. The increase in contribution in the
second quarter of 1998 resulted from higher lease rates earned during the second
quarter of 1998, compared to the same period of 1997.
Aircraft: As of June 30, 1998 and 1997, the Partnership had an interest in two
entities that own a total of two commercial aircraft. The Partnership's share of
aircraft revenues and expenses was $0.1 million and $0.2 million, respectively,
for the quarter ended June 30, 1998, compared to $0.1 million and $1.1 million,
respectively, for the same period of 1997. The Partnership liquidated its 18%
interest in an entity that owned an aircraft during the first quarter of 1998.
The Partnership's 50% interest in an entity that owns a commercial aircraft was
off lease during the second quarter of 1998. Direct expenses in this entity
decreased due to decreased repairs on this aircraft. The Partnership's remaining
12% interest in an entity that owns a commercial aircraft operated at
essentially break-even during the second quarter of 1998.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $0.7 million for
the second quarter of 1998 increased from net income of $0.2 million during the
same period of 1997. 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 1998 is not
necessarily indicative of future periods. In the second quarter of 1998, the
Partnership distributed $1.0 million to the unitholders, or $0.18 per
weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Six Months Ended June
30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance and
asset-specific insurance expenses) on owned equipment decreased during the six
months ended June 30, 1998, compared to the same period of 1997. The following
table presents lease revenues less direct expenses by owned equipment type (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
------------------------------
<S> <C> <C>
Rail equipment $ 1,986 $ 2,362
Trailers 506 577
Marine containers 102 389
Aircraft -- 215
</TABLE>
<PAGE>
Rail equipment: Rail equipment lease revenues and direct expenses were $3.0
million and $1.0 million, respectively, for the six months ended June 30, 1998,
compared to $3.0 million and $0.7 million, respectively, during the same period
of 1997. The decrease in railcar contribution resulted from increased repairs
required on certain of the railcars in the fleet during 1998, which were not
needed in 1997.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the six months ended June 30, 1998, compared to $0.8
million and $0.2 million, respectively, during the same period of 1997. The
number of trailers owned by the Partnership has been declining over the past
twelve months due to sales and dispositions. The result of this declining fleet
has been a decrease in trailer contribution.
Marine containers: Marine container lease revenues and direct expenses were $0.1
million and $2,000, respectively, for the six months ended June 30, 1998,
compared to $0.4 million and $3,000, respectively, during the same period of
1997. The number of marine containers owned by the Partnership has been
declining over the past twelve months due to sales and dispositions. The result
of this declining fleet has been a decrease in marine container contribution.
Aircraft: The Partnership had zero revenues and direct expenses from aircraft
for the six months ended June 30, 1998, compared to $0.2 million and $4,000,
respectively, during the same period of 1997. Aircraft contribution decreased
due to the disposition of an aircraft during the third quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.8 million for the six months ended June 30, 1998
decreased from $2.2 million for the same period in 1997. Significant variances
are explained as follows:
(1) A $0.3 million decrease in bad debt expense due to a $0.2 million decrease
in reserve for a certain lessee resulting from the application of security
deposits against uncollected outstanding receivable, and the collection of $0.1
million in outstanding receivables from certain lessees that were previously
reserved for as bad debts.
(2) A $0.2 million decrease in depreciation expenses from 1997 levels reflecting
the sale of certain assets during the first six months of 1998 and during 1997.
A $0.2 million increase in general and administrative expenes due to railcars
consulting expenses which were not required in 1997.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 1998
totaled $0.2 million, and resulted from the sale of marine containers, railcars,
and trailers with a net book value of $0.7 million, for proceeds of $0.9
million. For the six months ended June 30, 1997, the gain on sales 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.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Marine vessel $ 348 $ 184
Aircraft (213 ) (1,028)
Equity in net income (loss) $ 135 $ (844)
======================================================================
</TABLE>
<PAGE>
Marine vessel: As of June 30, 1998 and 1997, the Partnership had an interest in
an entity that owns a marine vessel. The Partnership's share of marine vessel
revenues and expenses was $1.3 million and $1.0 million, respectively, for the
six months ended June 30, 1998, compared to $1.2 million and $1.0 million,
respectively, during the same period of 1997. The increase in revenue resulted
from higher lease rates during the six months ended June 30, 1998, compared to
the same period of 1997.
Aircraft: As of June 30, 1998 and 1997, the Partnership had an interest in two
entities that own a total of two commercial aircraft. The Partnership's share of
aircraft revenues and expenses was $0.3 million and $0.5 million, respectively,
for the six months ended June 30, 1998, compared to $0.3 million and $1.3
million, respectively, during the same period of 1997. The Partnership
liquidated its 18% interest in an entity that owned an aircraft during the first
quarter of 1998. The Partnership s 50% interest in an entity that owns a
commercial aircraft was off lease during the first six months of 1998. Direct
expenses in this entity decreased due to decreased repairs on this aircraft. The
Partnership's remaining 12% interest in an entity that owns a commercial
aircraft operated at essentially break-even during the first six months of 1998.
(E) Net Income
As a result of the foregoing, the Partnership's net income of $1.2 million for
the six months ended June 30, 1998 increased from net income of $1.0 million
during the same period in 1997. 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 1998 is not necessarily indicative of future periods. During the six
months ended June 30, 1998, the Partnership distributed $6.1 million to the
unitholders, or $1.05 per weighted-average depositary unit, including a special
distribution of $0.60 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the six months ended June 30, 1998, the Partnership generated $2.5 million
in operating cash (net cash provided by operating activities, plus
non-liquidating 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, 1998 of approximately $6.1 million) to the
partners, but used undistributed available cash from prior periods of
approximately $3.6 million.
During the six months ended June 30, 1998, the General Partner sold equipment on
behalf of the Partnership and realized proceeds of approximately $0.9 million. A
special distribution of $3.5 million ($0.60 per weighted-average depositary
unit) was paid on February 13, 1998.
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.
Equipment sales have and will continue to reduce overall lease revenues in the
Partnership to the extent that further reductions in distribution levels may
become necessary. In addition, with the Partnership in active liquidation phase,
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 distribution levels may be reduced,
significant asset sales may result in potential special distributions to the
partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the
Partnership after final disposal of assets and settlement of liabilities, the
amounts cannot be accurately determined prior to actual disposal of the
equipment.
(III) YEAR 2000 COMPLIANCE
The General Partner is currently addressing the year 2000 computer software
issue and is creating a timetable for carrying out any program modifications
that may be required. The General Partner does not anticipate that the cost of
those modifications allocable to the Partnership will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998. The effect of adoption of these statements will be limited to the form
and content of the Partnership's disclosures and will not impact the
Partnership's results of operations, cash flow, or financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General Partner is reviewing the effect this standard will have on the
Partnership's consolidated financial statements.
(V) OUTLOOK FOR THE FUTURE
Since the Partnership entered its orderly liquidation phase in the beginning in
1998, the General Partner has been 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.
Throughout the remaining life of the Partnership, the Partnership may
periodically make special distributions to the partners as asset sales are
completed.
Several factors may affect the Partnership's operating performance in 1998 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.
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 make an evaluation to reduce the Partnership's
exposure to equipment markets in which it determines that it cannot operate
equipment and achieve acceptable rates of return.
(VI) 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
None.
(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 3, 1998 By: /s/ Richard K Brock
--------------------------------
Richard K Brock
Vice President and
Corporate Controller
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