SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal quarter ended September 30, 1994.
[ ] 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 33-32258
_______________________
PLM EQUIPMENT GROWTH FUND II
(Exact name of registrant as specified in its charter)
California 94-3041013
(State or other jurisiction 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 [ ]
Indicate the number of units outstanding of each of the issuer's classes of
partnership units, as of the last practicable date:
Class Outstanding at November 11, 1994
Limited Partnership Depositary Units 7,492,905
General Partnership Units 1
Limited Partnership Units
General Partnership Units
<PAGE>
<TABLE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
BALANCE SHEETS
(thousands of dollars)
<CAPTION>
ASSETS
September 30, December 31,
1994 1993
<S> <C> <C>
Equipment held for operating leases $ 124,750 $ 149,451
Less accumulated depreciation (72,739) (83,035)
Net equipment 52,011 66,416
Cash and cash equivalents 18,257 5,996
Restricted cash 382 8,178
Accounts receivable, less allowance
for doubtful accounts of $260 in 1994
and $235 in 1993 2,623 2,807
Deferred charges, net of accumulated
amortization of $1,717 in 1994
and $1,855 in 1993 336 489
Prepaid expenses and other assets 110 320
Total assets $ 73,719 $ 84,206
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,297 $ 1,773
Due to affiliates 314 355
Notes payable 35,000 35,000
Prepaid deposits and reserve for repairs 3,577 4,216
Total liabilities 40,188 41,344
Partners' capital (deficit):
Limited Partners (7,492,905 Depositary Units,
including 1,150 Depositary Units held in the
Treasury) at September 30, 1994
and December 31, 1993 34,256 43,894
General Partner (725) (1,032)
Total partners' capital 33,531 42,862
Total liabilities and partners'
capital $ 73,719 $ 84,206
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(thousands of dollars except per unit amounts)
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 5,983$ 7,357 $ 18,263$ 22,787
Interest and other income 175 53 531 198
Net gain on disposition of
equipment 125 38 765 6,550
Total revenues 6,283 7,448 19,559 29,535
Expenses:
Depreciation and amortization 2,710 3,514 8,231 10,092
Management fees to affiliate 299 365 911 1,148
Interest expense 569 408 1,942 1,296
Insurance expense to affiliate 135 243 239 854
Other insurance expense 158 162 505 662
Repairs and maintenance 770 1,461 3,350 3,956
Marine equipment operating
expenses 1,074 1,097 2,929 4,108
General and administrative
expenses to affiliates 185 247 522 595
Other general and administrative
expenses 194 314 741 889
Bad debt expense 5 -- 55 --
Loss on revaluation of
equipment -- -- -- 161
Total expenses 6,099 7,811 19,425 23,761
Net income (loss) $ 184$ (363) $ 134$ 5,774
Partners' share of net income (loss):
Limited Partners $ (234)$ (521) $ (646)$ 5,300
General Partner 418 158 780 474
Total $ 184$ (363) $ 134$ 5,774
Net income (loss) per Depositary
Unit (7,492,905 Units, including
1,150 Units held in Treasury
at September 30, 1994 and 1993;$ (0.03)$ (0.06) $ (0.09)$ 0.70
Cash distributions $ 3,155$ 3,196 $ 9,465$ 9,510
Cash distributions per
Depositary Unit $ 0.40$ 0.40 $ 1.20$ 1.20
See accompanying notes to financial statements.
<PAGE>
</TABLE>
<TABLE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(thousands of dollars)
<CAPTION>
For the nine months ended
September 30,
1994 1993
<S> <C> <C>
Operating activities:
Net income $ 134 $ 5,774
Adjustments to reconcile net income to
net cash provided by operating activities:
Net gain on disposition of equipment (765) (6,550)
Loss on revaluation of equipment -- 161
Write-off of unamortized loan origination costs 305 --
Depreciation and amortization 8,231 10,092
Changes in operating assets and liabilities
Restricted cash (91) (14)
Accounts receivable, net 278 (1,491)
Due to affiliates (146) 68
Prepaid expenses and other assets 210 354
Insurance reimbursement receivable -- 2,661
Accounts payable and accrued expenses (636) 219
Prepaid deposits and reserve for repairs 1,561 1,822
Cash provided by operating activities 9,081 13,096
Investing activities:
Proceeds from disposition of equipment 9,782 12,796
Payments of acquisition-related fees to affiliate (93) (565)
Payments for purchase of equipment (3,949) (12,343)
Payments for capital improvements (725) --
Payments for lease negotiation fees (21) --
Decrease in restricted cash 7,887 1,524
Cash provided by investing activities 12,881 1,412
Financing activities:
Proceeds from note payable 35,000 --
Principal payments on notes payable (35,000) (3,218)
Cash distributions paid to partners (9,465) (9,510)
Payments of debt issuance costs (236) --
Repurchase of Depositary Units -- (70)
Payment for loan fees -- (50)
Cash used in financing activities (9,701) (12,848)
Cash and cash equivalents:
Net increase in cash and cash equivalents 12,261 1,660
Cash and cash equivalents at beginning of period 5,996 2,225
Cash and cash equivalents at end of period $ 18,257 $ 3,885
Supplemental information:
Interest paid $ 1,638 $ 1,312
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1994
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 financial position of PLM
Equipment Growth Fund II (the "Partnership") as of
September 30, 1994, the statements of operations for the
three and nine months ended September 30, 1994 and 1993,
and the statements of cash flows for the nine months
ended September 30, 1994 and 1993. 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, 1993, on file at the Securities and
Exchange Commission.
2. Reclassification
Certain amounts in the 1993 financial statements have
been reclassified to conform with the 1994 presentation.
Transportation equipment held for operating leases at
September 30, 1994, and December 31, 1993, includes
equipment previously reported as held for sale.
3. Restricted Cash
Under the Partnership's new loan agreement (See Footnote
6 to the Financial Statements), at September 30, 1994,
the Partnership is no longer required to deposit proceeds
realized on the sale or disposal of equipment into a
joint escrow account, to be held for equipment
acquisitions or debt paydown only. At December 31, 1993,
the Partnership was required to deposit proceeds realized
on the sale or disposal of equipment into the joint
escrow account, and the proceeds could only be used for
the above-mentioned purposes.
4. Cash Distributions
Cash distributions are recorded when paid and totaled
$9,465,000 and $3,155,000 for the nine and three months
ended September 30, 1994, respectively. Cash
distributions to unitholders in excess of net income are
considered to represent a return of capital. Cash
distributions to unitholders of $8,992,000 and $3,734,000
for the nine months ended September 30, 1994, and 1993,
respectively, were deemed to be a return of capital.
Cash distributions of $2,997,000 ($0.40 per Depositary
Unit) were declared on September 14, 1994, and are to be
paid on November 15, 1994, to the unitholders of record
as of September 30, 1994.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1994
5. Equipment
Equipment held for operating leases is stated at cost.
As of September 30, 1994, the General Partner
reclassified assets shown as held for sale at December
31, 1993, to equipment held for operating lease, unless
the particular asset is subject to a pending contract of
sale.
The components of equipment are as follows (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
<S>
Equipment held for operating leases:
<S> <C> <C>
Rail equipment $ 19,768 $ 19,800
Marine containers 18,476 17,889
Marine vessels 4,702 29,461
Aircraft 50,644 49,939
Trailers and tractors 14,844 16,049
Mobile offshore drilling unit 16,316 16,313
124,750 149,451
Less accumulated depreciation (72,739) (83,035)
Net equipment $ 52,011 $ 66,416
</TABLE>
As of September 30, 1994, all equipment in the Partnership
portfolio was either on lease or operating in PLM-affiliated
short-term trailer rental facilities, except for 337 marine
containers. As of December 31, 1993, 73 marine containers and
three railcars were off lease. The aggregate carrying value
of equipment off lease was $1,520,000 and $172,000 at
September 30, 1994, and December 31, 1993, respectively.
Between January 1, 1994, and September 30, 1994, the
Partnership purchased 1,959 used marine containers and 113
trailers at a cost of $3,949,000 and was obligated to pay
acquisition and lease negotiation fees of $217,000 (of which
$114,000 has been paid) to PLM Transportation Equipment
Corporation ("TEC"), a wholly-owned subsidiary of the General
Partner. Between January 1, 1993, and September 30, 1993, the
Partnership purchased 26 trailers at a cost of $241,000 and
was obligated to pay acquisition and lease negotiation fees of
$14,000 to TEC. In addition, the Partnership purchased a 55%
interest in a mobile offshore drilling unit for $12,100,000
(the remaining interest in this equipment is owned by an
affiliated partnership). In connection with this purchase,
the Partnership was obligated to pay acquisition and lease
negotiation fees of $666,000 (of which $451,000 has been paid)
to TEC.
During the nine months ended September 30, 1994, the
Partnership sold or disposed of 328 marine containers, two
railcars, 266 trailers, and two marine vessels with a net book
value of $11.1 million, and unused drydock reserves and
closing costs of $2.0 million, for proceeds of $9.8 million.
For the nine months ended September 30, 1993, the Partnership
sold or disposed of 237 marine containers, 639 railcars, two
marine vessels, 23 tractors and 54 trailers with a net book
value of $7.0 million, and unused drydock reserves of $0.7
million, for proceeds of $12.8 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1994
6. Notes Payable
On March 31, 1994, the Partnership completed a refinancing of
its $35 million bank loan which was due on September 30, 1995.
The new $35 million loan facility is unsecured and non-
recourse, limits additional borrowings, and specifies
covenants related to collateral coverage, fixed charge
coverage, ratios for market value, and composition of the
equipment owned by the Partnership. The loan facility bears
interest at LIBOR + 1.55% per annum (6.36% at September 30,
1994) and is payable quarterly in arrears. Principal is
payable in annual installments of $4 million on March 31, 1996
and 1997, $9 million on March 31, 1998 and 1999, and a final
payment of $9 million on March 31, 2000.
7. Subsequent Event
During November 1994, the Partnership purchased for $8.0
million, 536 piggyback trailers, which are currently on lease
with Kankakee, Beaverville and Southern Railroad Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
(A) Sources
The Partnership's primary source of liquidity is operating
cash flow. The Partnership's level of operating cash flow has
declined from 1993 levels due in part to depressed conditions in
certain equipment markets (see "Trends" below) that have
impacted re-leasing rates, and the sale of certain partnership
equipment.
The Partnership uses net operating cash flow primarily to pay
cash distributions to the Partners and, to the extent available,
to add to working capital reserves. Proceeds realized from the
sale or disposal of equipment may be used for the purchase of
additional equipment or the repayment of outstanding debt. The
Partnership's sources of capital include proceeds from its
initial public offering of limited partnership units, debt
financing, and during the reinvestment phase of the Partnership,
excess net cash flow from operations remaining after a certain
level of distributions has been made to the Limited Partners.
On March 31, 1994, the Partnership completed a refinancing of
its $35 million bank loan which was due on September 30,
1995. The new debt comprises notes payable of $35 million,
and the corresponding loan agreements require the Partnership to
maintain a minimum debt coverage ratio based on the fair market
value of equipment, a minimum fixed charge coverage ratio, and
limits over-concentration in any one equipment type. The loan
facility bears interest at LIBOR + 1.55% per annum (6.36% at
September 30, 1994) and is payable quarterly in arrears.
Principal is payable in annual installments of $4 million on
March 31, 1996 and 1997, $9 million on March 31, 1998 and 1999,
and a final payment of $9 million on March 31, 2000. The
Partnership is currently in compliance with the debt covenants.
(B) Asset Sales and Purchases
Equipment sales and dispositions prior to the Partnership's
planned liquidation phase can result from a performance-based
decision by the General Partner or, in some cases, an election
of the lessee provided for in certain lease agreements.
Additionally, certain lessees are required to pay stipulated
loss values on equipment lost or disposed of during the term of
the lease agreement. The General Partner intends to use the
proceeds realized either from the selective sale of assets or
the incidental disposal of equipment to invest in additional
equipment during the reinvestment phase of Partnership
operations, and subsequent to that phase, to distribute such
proceeds to the Partners or pay down debt.
Proceeds from these sales, together with excess net operating
cash flow from operations that remains after cash distributions
have been made to the Limited Partners, will be used to acquire
additional equipment throughout the intended seven year
reinvestment phase for the Partnership which ends September 30,
1995.
During the nine months ended September 30, 1994, the
Partnership purchased 1,959 marine containers and 113 trailers
at a cost of $3.9 million, and disposed of 328 marine
containers, two railcars, 266 trailers, and two marine vessels
for proceeds of $9.8 million.
In November, 1994, the Partnership also purchased for $8.0
million, 536 piggyback trailers which are currently on lease
with Kankakee, Beaverville and Southern Railroad Company.
Except as stated above, the General Partner has no additional
planned expenditures but anticipates available cash will be
invested in equipment as appropriate opportunities are
identified. Additionally, the General Partner is not aware of
any contingencies that would require capital resources other
than those provided by operating cash flow and sales and
liquidation proceeds.
(C) Depositary Unit Repurchase Plan
On December 28, 1992, the Partnership engaged in a program to
repurchase up to 200,000 Depositary Units. As of September 30,
1994, the Partnership had cumulatively repurchased 6,700
Depositary Units at a cost of $70,000. In October, a total of
1,800 units were repurchased at a cost of $21,000.
(D) Market Values
The General Partner prepares an evaluation of the fair market
value and net realizable value of the Partnership's equipment
portfolio at least annually, using, among other sources,
independent third-party appraisals, values reported in trade
publications, and comparative values from arms-length
transactions for similar equipment. Concurrently, the General
Partner evaluates whether the current fair market value of
equipment represents the effects of current market conditions or
permanent impairment of value (e.g., technological obsolescence
or regulatory changes, etc.). Equipment whose carrying value is
determined to be permanently impaired, without possibility of
being leased at an acceptable rate, has its book value adjusted
to its estimated net realizable value. Uncertain market
conditions have caused the General Partner to continuously
monitor the changes in market values for Partnership equipment,
and on occasion, the General Partner has made adjustments to
Partnership equipment values to reflect this volatility. While
there has continued to be a general decline in certain market
values, the total fair market value of the assets still exceeds
the Partnership's carrying value. No adjustments to reflect
impairment of equipment carrying values were required in the
nine months ended September 30, 1994.
Comparison of the Partnership's Operating Results for the Three
Months Ended September 30, 1994 and 1993
(A) Revenues
Total revenues of $6.3 million for the quarter ended September
30, 1994, declined from $7.4 million for the same period in
1993. This decrease resulted primarily from lower lease revenue.
(1) Lease revenues decreased to $6.0 million in the quarter
ended September 30, 1994, from
$7.4 million in the same period in 1993. The following table
lists lease revenues earned by equipment type:
<TABLE>
<CAPTION>
For the three months ended
September 30,
1994 1993
<S> <C> <C>
Marine vessels $ 1,653 $ 2,942
Rail equipment 1,202 1,183
Aircraft 1,171 1,244
Trailers and tractors 899 895
Mobile offshore drilling units 643 482
Marine containers 415 611
$ 5,983 $ 7,357
</TABLE>
Significant revenue component changes from quarter to quarter
resulted primarily from:
(a) declines of $1.3 million in marine vessel revenues due
to the sale of one marine vessel in the fourth quarter 1993,
which was on a voyage charter during the third quarter of 1993,
and lower re-lease charter rates for two vessels which were sold
at the end of the third quarter of 1994;
(b) declines of $0.2 million in marine container revenues
primarily due to a group of marine containers which were on-
lease in the third quarter of 1993, but off-lease in 1994,
offset, in part, by revenue earned on the 1,959 containers
purchased in 1994;
(c) an increase of $0.2 million in mobile offshore drilling
unit ("rig") revenue due to a full quarter of revenue received
in 1994 compared to a partial quarter in 1993. The acquisition
of a 55% interest in the rig occurred during July 1993;
(d) declines of $0.1 million in aircraft revenue due to the
sale of an aircraft in the fourth quarter of 1993.
(2) Net gain on disposition of equipment during the third
quarter of 1994 totaled $0.1 million from the sale or disposal
of four trailers, 144 marine containers, two railcars, and two
marine vessels with a net book value of $9.9 million, and unused
drydock reserves and closing costs of $2.0 million, for proceeds
of $8.0 million. During the same period in 1993, the net gain
on disposition of equipment was $0.04 million from the sale or
disposal of 51 railcars, three tractors and trailers, and 91
marine containers with a net book value of $0.25 million, for
proceeds of $0.29 million.
(B) Expenses
Total expenses for the quarter ended September 30, 1994,
decreased to $6.1 million from $7.8 million for the same period
in 1993. The decrease in 1994 expenses was primarily
attributable to decreases in depreciation expense, repairs and
maintenance, and overall general and administrative expenses.
(1) Direct operating expenses (defined as repairs and
maintenance, insurance expenses, and marine operating expenses)
decreased to $2.1 million in the third quarter of 1994, from
$3.0 million in the same period in 1993. This decrease resulted
from:
(a) decreases of $0.7 million in repairs and maintenance
costs from 1993 levels resulted from the sale of a marine vessel
in the fourth quarter of 1993;
(b) decreases of $0.1 million in the cost of marine vessel
insurance resulted from the sale of three vessels in 1993.
(2) Indirect operating expenses (defined as depreciation
expense, management fees, interest expense, general and
administrative expenses, and bad debt expense) decreased to
$4.0 million in the third quarter of 1994 from $4.8 million in
the same period in 1993. This decrease resulted from:
(a) decreases in depreciation expense of $0.8 million from
1993 levels, reflecting the Partnership's double-declining
depreciation method and the effect of asset sales in 1993 and
1994, partially offset by the acquisition of the rig in July
1993;
(b) decreases in all general and administrative expenses of
$0.2 million from 1993 levels due to reduced professional
services required by the Partnership and lower storage expenses
incurred by two aircraft which were off-lease in the third
quarter of 1993;
(c) decreases of $0.1 million in management fees to
affiliates, reflecting the lower levels of lease revenues in
1994 as compared to 1993;
(d) increases of $0.2 million in interest expense resulting
from a higher base rate of interest charged on the Partnership's
debt.
(C) Net Income (Loss)
The Partnership's net income of $0.2 million for the third
quarter of 1994 increased from a net loss of $0.4 million in the
same period of 1993. The Partnership's ability to acquire,
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 third quarter 1994 is not necessarily
indicative of future periods. In the third quarter 1994, the
Partnership distributed $3.0 million to the Limited Partners, or
$0.40 per Depositary Unit.
Comparison of the Partnership's Operating Results for the Nine
Months Ended September 30, 1994 and 1993
(A) Revenues
Total revenues of $19.6 million for the nine months ended
September 30, 1994, declined from $29.5 million for the same
period in 1993. This decrease resulted primarily from lower
gains realized on the disposition of assets and from lower lease
revenue.
(1) Lease revenues decreased to $18.3 million in the nine
months ended September 30, 1994 from $22.8 million in the same
quarter of 1993. The following table lists lease revenues
earned by equipment type:
<TABLE>
<CAPTION>
For the nine months ended
September 30,
1994 1993
<S> <C> <C>
Marine vessels $ 5,142 $ 9,496
Aircraft 3,771 3,774
Rail equipment 3,619 4,162
Trailers and tractors 2,590 2,638
Mobile offshore drilling units 1,852 775
Marine containers 1,289 1,942
$ 18,263 $ 22,787
</TABLE>
Significant revenue component changes resulted primarily from:
(a) declines of $4.4 million in marine vessel revenues due to
the sale of three on-lease vessels during the first and fourth
quarters of 1993 and lower re-lease charter rates for two
vessels which were sold at the end of the third quarter of 1994;
(b) declines of $0.5 million in railcar revenues due to the
sale of 639 railcars during 1993;
(c) declines of $0.7 million in marine container revenues
primarily due to a group of marine containers which were on
lease in 1993, but off-lease in 1994, offset, in part, by
revenue earned on 1,959 marine containers purchased in 1994;
(d) although aircraft revenues remained relatively the same,
revenues decreased due to the sale of an aircraft in the fourth
quarter of 1993. This decrease was offset entirely by the re-
lease of an aircraft which was off-lease for most of 1993;
(e) increases of $1.1 million in mobile offshore drilling unit
("rig") revenue due to the acquisition of a 55% interest in a
rig during July of 1993.
(2) Net gain on disposition of equipment during the nine
months ended September 30, 1994, totaled $0.8 million from the
sale or disposal of 266 trailers, 328 marine containers, two
railcars, and two marine vessels with a net book value of $11.1
million, and unused drydock reserves and closing costs of $2.0
million, for proceeds of $9.8 million. During the same period
in 1993, the Partnership sold or disposed of two marine vessels,
639 railcars, 77 tractors and trailers, and 237 marine
containers with a net book value of $7.0 million and unused
drydock reserves of $0.7 million, for proceeds of $12.8 million
(See Footnote 5 to the Financial Statements).
(B) Expenses
Total expenses for the nine months ended September 30, 1994,
decreased to $19.4 million from $23.8 million for the same
period in 1993. The decrease in 1994 expenses was primarily
attributable to decreases in depreciation expense, marine vessel
operating expenses, and insurance expense, partially offset by
an increase in interest expense.
(1) Direct operating expenses (defined as repairs and
maintenance, insurance expenses, and marine operating expenses)
decreased to $7.0 million for the nine months ended September
30, 1994, from $9.6 million in the same period of 1993. This
decrease resulted from:
(a) decreases of $0.8 million insurance expense which
resulted primarily from the sale of three marine vessels in 1993
and a refund of $0.2 million from an insurance pool which the
Partnership's marine vessels participate in, due to lower than
estimated insurance claims in the pool;
(b) decreases of $1.2 million in marine vessel operating
expenses due to the sale of three marine vessels in 1993. This
decrease was offset by increased operating costs for three
marine vessels which operated under leases (voyage charters and
utilization-based pooling arrangements) in which the Partnership
paid costs not incurred when the vessels operated under time
charters in the similar period one year earlier;
(c) decreases of $0.6 million in repairs and maintenance
expenses due to the sale of three marine vessels in 1993, offset
by increases in trailer expenses resulting from the increased
number of trailers coming off term leases which required
refurbishment prior to transitioning to short-term rental
facilities operated by an affiliate of the General Partner.
(2) Indirect operating expenses (defined as depreciation
expense, management fees,interest expense, general and
administrative expenses, and bad debt expense) decreased to
$12.4 million for the nine months ended September 30, 1994, from
$14.0 million in the same period of 1993. This decrease
resulted primarily from:
(a) decreases in depreciation expense of $1.8 million from
1993 levels, reflecting the Partnership's double-declining
balance depreciation method and the effect of asset sales in
1993 and 1994, partially offset by the acquisition of the rig in
July 1993;
(b) decreases of $0.2 million in management fees to
affiliates, reflecting the lower levels of lease revenues in
1994 as compared to 1993;
(c) decreases in general and administrative expenses of $0.2
million from 1993 levels due to reduced professional services
required by the Partnership and lower storage expenses for two
aircraft which were off-lease for most of 1993;
(d) increases in interest expense of $0.6 million from a $0.3
million write-off of unamortized loan origination costs due to
the refinancing of the Partnership's debt and a $0.3 million
increase due to a higher base rate of interest charged on the
Partnership's debt during 1994, offset by a reduction in the
amount of debt outstanding when compared to the same period in
1993.
(C) Net Income
The Partnership's net income of $0.1 million for the nine
months ended September 30, 1994, decreased from a net income of
$5.8 million for the same period in 1993. The Partnership's
ability to acquire, 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 nine months of 1994 is not
necessarily indicative of future periods. In the nine months of
1994, the Partnership distributed $9.0 million to the Limited
Partners, or $1.20 per Depositary Unit.
Trends
Due in part to continuing recessionary conditions in Europe
and Japan over the last year and low oil and gas prices, the
markets for certain types of transportation equipment, primarily
mobile offshore drilling units, marine containers, and vessels
are performing below historic norms. These conditions have
resulted in lower lease rates and reduced values for these types
of equipment and have significantly impacted the Partnership's
cash flow. The General Partner will closely monitor the effects
of these factors on the Partnership's financial condition, and
as stated previously, take appropriate actions regarding
underperforming equipment.
The return of lease rates on certain types of equipment to
their historical levels may be dependent on a number of factors
including improved international economic conditions, the
absence of technological obsolescence, new government
regulations, increased industry-specific demand, and the
increased availability of financing.
The Partnership intends to use excess cash flow, if any, after
payment of expenses, loan principal, and cash distributions, to
acquire additional equipment during the first seven years of
Partnership operations which ends September 30, 1995. The
General Partner believes these acquisitions, if any, may
generate additional earnings and cash flow for the Partnership.
<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 there unto duly authorized.
PLM EQUIPMENT FUND II
By: PLM Financial Services,
Inc.
General Partner
Date: November 11, 1994 By:
David J. Davis
Vice President and
Corporate Controller
<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 there unto duly authorized.
PLM EQUIPMENT FUND II
By: PLM Financial Services,
Inc. General Partner
Date: November 11, 1994 By: /s/ David J. Davis
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the third
quarter 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 18257
<SECURITIES> 0
<RECEIVABLES> 2623
<ALLOWANCES> 260
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 124750
<DEPRECIATION> 72739
<TOTAL-ASSETS> 73719
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 33531
<TOTAL-LIABILITY-AND-EQUITY> 73719
<SALES> 0
<TOTAL-REVENUES> 19559
<CGS> 0
<TOTAL-COSTS> 17483
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1942
<INCOME-PRETAX> 134
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
