UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal quarter ended
March 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 33-32258
-----------------------
PLM EQUIPMENT GROWTH FUND II
(Exact name of registrant as specified in its charter)
California 94-3041013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 900, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-----------------------------------------
<S> <C> <C>
Equipment held for operating leases $ 93,416 $ 93,980
Less accumulated depreciation (66,018) (65,000)
-----------------------------------------
Net equipment 27,398 28,980
Cash and cash equivalents 4,534 6,427
Restricted cash 547 548
Investment in unconsolidated special purpose entities 10,133 10,515
Accounts receivable, less allowance for
doubtful accounts of $260 in 1996 and $19 in 1995 1,794 2,198
Deferred charges, net of accumulated amortization of
$1,394 in 1996 and $1,374 in 1995 217 237
Prepaid expenses and other assets 32 52
-----------------------------------------
Total assets $ 44,655 $ 48,957
=========================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 342 $ 409
Due to affiliates 216 398
Note payable 27,000 27,000
Prepaid deposits and reserve for repairs 2,291 2,954
-----------------------------------------
Total liabilities 29,849 30,761
-----------------------------------------
Partners' capital (deficit):
Limited Partners (7,385,605 and 7,426,305 Depositary Units,
including 1,150 Depositary Units held in the
Treasury at March 31, 1996 and December 31, 1995) 15,239 18,658
General Partner (433) (462)
-----------------------------------------
Total partners' capital 14,806 18,196
-----------------------------------------
Total liabilities and partners' capital $ 44,655 $ 48,957
=========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(In thousands of dollars except per unit amounts)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
----------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 3,181 $ 4,531
Interest and other income 73 145
Net gain on disposition of equipment 114 50
----------------------------
Total revenues 3,368 4,726
Expenses:
Depreciation and amortization 1,467 2,345
Management fees to affiliate 149 238
Interest expense 488 712
Insurance expense to affiliate -- 87
Other insurance expense 43 17
Repairs and maintenance 389 554
Marine equipment operating expenses 6 (34)
General and administrative
expenses to affiliates 194 231
Other general and administrative expenses 283 328
Provision for bad debt 31 --
----------------------------
Total expenses 3,050 4,478
Equity in net loss of unconsolidated special purpose entities (402) --
----------------------------
Net income (loss) $ (84) $ 248
============================
Partners' share of net income (loss):
Limited Partners $ (269) $ 65
General Partner 185 183
----------------------------
Total $ (84) $ 248
============================
Net income (loss) per Depositary Unit (7,385,605 and 7,452,505 Units, including
1,150 Units held in Treasury respectively,
at March 31, 1996 and 1995) $ (0.04) $ 0.01
============================
Cash distributions $ 3,127 $ 3,146
============================
Cash distributions per Depositary Unit $ 0.40 $ 0.40
============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1994 to March 31, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-----------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) at December 31, 1994 $ 30,850 $ (697) $ 30,153
Net income (loss) 75 862 937
Cash distributions (11,922) (627) (12,549)
Repurchase of Depositary Units (345) -- (345)
-----------------------------------------------------
Partners' capital (deficit) at December 31, 1995 18,658 (462) 18,196
Net income (loss) (269) 185 (84)
Cash distributions (2,971) (156) (3,127)
Repurchase of Depositary Units (179) -- (179)
-----------------------------------------------------
Partners' capital (deficit) at March 31, 1996 $ 15,239 $ (433) $ 14,806
=====================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
-----------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (84) $ 248
Adjustments to reconcile net income to net
cash provided by operating activities:
Net gain on disposition of equipment (114) (50)
Depreciation and amortization 1,467 2,345
Loss from unconsolidated special purpose entities in excess of
cash received 382 --
Changes in operating assets and liabilities:
Restricted cash 1 88
Accounts receivable, net 404 (277)
Due to affiliate (182) (36)
Prepaid expenses and other assets 20 39
Accounts payable and accrued expenses (67) 40
Prepaid deposits and reserve for repairs (663) (508)
-----------------------------------
Cash provided by operating activities 1,164 1,889
-----------------------------------
Investing activities:
Proceeds from disposition of equipment 254 125
Payments for capital improvements (5) (8)
-----------------------------------
Cash provided by investing activities 249 117
-----------------------------------
Financing activities:
Principal payments on notes payable -- (7,000)
Cash distributions paid to Limited Partners (2,971) (2,989)
Cash distributions paid to General Partner (156) (157)
Repurchase of Depositary Units (179) (184)
-----------------------------------
Cash used in financing activities (3,306) (10,330)
-----------------------------------
Cash and cash equivalents:
Net decrease in cash and cash equivalents (1,893) (8,324)
Cash and cash equivalents at beginning of period 6,427 12,348
-----------------------------------
Cash and cash equivalents at end of period $ 4,534 $ 4,024
===================================
Supplemental information:
Interest paid $ 488 $ 704
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc., the
General Partner, the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund II (the "Partnership") as of March 31, 1996, the statements of
operations and cash flows for the three months ended March 31, 1996 and
1995, and the statements of changes in partners' capital for the period
December 31, 1994 to March 31, 1996. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1995, on file at the Securities and
Exchange Commission.
2. Investment in Unconsolidated Special Purpose Entities
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental equipment as undivided interests,
including its proportionate share of each asset with similar wholly-owned
assets in its financial statements. Under generally accepted accounting
principles, the effects of such activities, if material, should be reported
using the equity method of accounting. Therefore, effective January 1,
1996, the Partnership adopted the equity method to account for its
investment in such jointly-held assets.
The principle differences between the previous accounting method and the
equity method relate to the presentation of activities relating to these
assets in the statement of operations. Whereas, under equity accounting the
Partnership's proportionate share is presented as a single net amount,
equity in net income (loss) of unconsolidated special purpose entities,
under the previous method, the Partnership's income statement reflected its
proportionate share of each individual item of revenue and expense.
Accordingly, the effect of adopting the equity method of accounting has no
cumulative effect on previously reported partner's capital or on the
Partnership's net income (loss) for the period of adoption. Because the
effects on previously issued financial statements of applying the equity
method of accounting to investments in jointly-owned assets are not
considered to be material to such financial statements taken as a whole,
previously issued financial statements have not been restated. However,
certain items have been reclassified in the previously issued balance sheet
to conform to the current period presentation.
The net investment in unconsolidated special purpose entities includes the
following jointly-owned equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------------------------
<S> <C> <C>
50% interest in a Boeing 737-200A aircraft $ 2,024 $ 2,365
55% interest in a MODU 8,109 8,150
---------------------------------
Investment in unconsolidated special purpose
entities $ 10,133 $ 10,515
=================================
</TABLE>
3. Cash Distribution
Cash distributions are recorded when paid and totaled $3,127,000 and
$3,146,000 for the three months ended March 31, 1996 and 1995,
respectively. Cash distributions to unitholders in excess of net income are
considered to represent a return of capital. Cash distributions to
unitholders of $2,971,000 and $2,924,000 for the three months ended March
31, 1996, and 1995, respectively, were deemed to be a return of capital.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
3. Cash Distribution (continued)
Cash distributions of $1,846,000 ($0.25 per Depositary Unit) were declared
on March 11, 1996, and are to be paid on May 15, 1996, to the unitholders
of record as of March 31, 1996.
4. Repurchase of Depositary Units
On December 28, 1992, the Partnership engaged in a program to repurchase up
to 200,000 Depositary Units. In the three months ended March 31, 1996, the
Partnership had purchased and canceled 42,100 Depositary Units at a cost of
$0.2 million. As of March 31, 1996, the Partnership had cumulatively
repurchased 102,700 Depositary Units at a cost of $0.8 million.
5. Delisting of Partnership Units
The General Partner delisted the Partnership's depositary units from the
American Stock Exchange (AMEX) under the symbol GFY on April 8, 1996. The
last day for trading on the AMEX was March 22, 1996. Under the Internal
Revenue Code (the Code), the Partnership was classified as a Publicly
Traded Partnership. The Code treats all Publicly Traded Partnerships as
corporations if they remain publicly traded after December 31, 1997.
Treating the Partnership as a corporation would mean the Partnership itself
would become a taxable, rather than a "flow through" entity. As a taxable
entity, the income of the Partnership would have become subject to federal
taxation at both the partnership level and at the investor level to the
extent that income would have become distributed to an investor. In
addition, the General Partner believed that the trading price of the
Depositary Units would have been distorted when the Partnership began the
final liquidation of the underlying equipment portfolio. In order to avoid
taxation of the Partnership as a corporation and to prevent unfairness to
Unitholders, the General Partner delisted the Partnership's Depositary
Units from the AMEX. While the Partnership's Depositary Units are no longer
publicly traded on a national stock exchange, the General Partner continues
to manage the equipment of the Partnership and prepare and distribute
quarterly and annual reports and Forms 10-Q and 10-K in accordance with the
Securities and Exchange Commission requirements. In addition, the General
Partner continues to provide pertinent tax reporting forms and information
to Unitholders. The General Partner anticipates an informal market for the
Partnership's units may develop in the secondary marketplace similar to
that which currently exists for non-publicly traded partnerships.
6. Equipment
Owned equipment held for operating leases is stated at cost. The components
of equipment are as follows (in thousands):
March 31, December 31,
1996 1995
--------------------------------
Equipment held for operating leases:
Rail equipment $ 19,736 $ 19,747
Marine containers 12,961 13,399
Aircraft 37,902 37,902
Trailers and tractors 22,817 22,932
--------------------------------
93,416 93,980
Less accumulated depreciation (66,018) (65,000)
--------------------------------
================================
Net equipment $ 27,398 $ 28,980
================================
Revenues are earned by placing the equipment under operating leases which
are generally billed monthly or quarterly. Certain 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
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
6. Equipment (continued)
of the pooled equipment. Rents for railcars are based on mileage traveled
or a fixed rate; rents for all other equipment are based on fixed rates.
As of March 31, 1996, all equipment in the Partnership's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities, with the exception of an aircraft, 23 railcars, and 132 marine
containers. At December 31, 1995, all equipment in the Partnership
portfolio was either on lease or operating in short-term rental facilities,
with the exception of an aircraft, an railcar and 115 marine containers.
The aggregate carrying value of equipment off lease was $2.5 million and
$2.0 million at March 31, 1996 and December 31, 1995, respectively.
During the three months ended March 31, 1996, the Partnership sold or
disposed of 70 marine containers, four trailers, and one railcar, with an
aggregate net book value of $140,000, for proceeds of $254,000. For the
three months ended March 31, 1995, the Partnership disposed of 61 marine
containers with a net book value of $75,000 for proceeds of $125,000.
7. Notes Payable
In 1995, the Partnership prepaid $8 million of the outstanding note payable
of $35 million. This payment was applied to the principal payments due
March 31, 1996 and 1997.
The General Partner has entered into a joint $25 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, PLM
Equipment Growth Fund III, PLM Equipment Growth Fund IV, PLM Equipment
Growth Fund V, PLM Equipment Growth Fund VI, PLM Equipment Growth & Income
Fund VII and Professional Lease Management Income Fund I ("Fund I"), all
affiliated investment programs, and TEC Acquisub, Inc. ("TECAI"), an
indirect wholly-owned subsidiary of the General Partner, which may be used
to provide interim financing of up to (i) 70% of the aggregate book value
or 50% of the aggregate net fair market value of eligible equipment owned
by the Partnership, Fund I(II) 50% of unrestricted cash held by the
borrower. The Committed Bridge Facility became available to EGF VII and
TECAI on December 20, 1993, and was amended and restated to include the
above mentioned Partnership on September 27, 1995 and to expire on
September 30, 1996. The Committed Bridge Facility also provides for a $5
million Letter of Credit Facility for the eligible borrowers. Outstanding
borrowings by Fund I, TECAI or PLM Equipment Growth Funds II through VII
reduce the amount available to each other under the Committed Bridge
Facility. Individual borrowings may be outstanding for no more than 179
days, with all advances due no later than September 30, 1996. The Committed
Bridge Facility prohibits the Partnership from incurring any additional
indebtedness. Interest accrues at either the prime rate or adjusted LIBOR
plus 2.5% at the borrowers option and is set at the time of an advance of
funds. Borrowings by the Partnerships are guaranteed by the General
Partner. As of March 31, 1996, PLM Equipment Growth Fund V had $5,610,000
in outstanding borrowings under the Committed Bridge Facility, PLM
Equipment Growth Fund VI had $11,220,000, and TECAI had $7,706,000. Neither
the Partnership, Fund 1 nor the other programs had any outstanding
borrowings. Due to the loan covenants of the senior debt, the Partnership
cannot access this line of credit at this time. The General Partner is in
negotiations to renew the facility. The General Partner believes it will
successfully negotiate an extension of the facility prior to expiration on
terms at least as favorable as those in the current facility.
<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
March 31, 1996 and 1995
(A) Revenues
Total revenues of $3.4 million for the quarter ended March 31, 1996, declined
from $4.7 million for the same period in 1995. This decrease resulted primarily
from lower lease revenue due to the sale or disposal of equipment in 1995 and in
the first quarter of 1996.
(1) Lease revenues decreased to $3.2 million in the quarter ended March 31,
1996, from $4.5 million in the same period in 1995. The following table lists
lease revenues earned by equipment type (in thousands):
For the three months
ended March 31,
1996 1995
--------------------------
Trailers and tractors $ 1,031 $ 1,403
Rail equipment 1,186 1,142
Aircraft 610 875
Marine containers 354 473
Mobile offshore drilling units -- 382
Marine vessels -- 256
--------------------------
$ 3,181 $ 4,531
==========================
Although net loss was not affected by the change in accounting for investments
in unconsolidated special purpose entities, lease revenues decreased $0.5
million in the first quarter of 1996 which included $0.2 million, and $0.3
million in decreases for aircraft, and mobile offshore drilling unit revenue,
respectively, which represented revenue for jointly-owned assets (refer to the
"Equity in net loss of unconsolidated special purpose entities" section below).
The remaining decreases in 1996 lease revenues are explained below:
(a) a decrease of $0.4 million in trailer revenue due to the decline in
utilization and lease rates for trailers operating in the short-term rental
facilities in the first quarter of 1996, compared to the same period in 1995;
(b) a decrease of $0.3 million in marine vessel revenues due to the sale of
a 50% interest in a marine vessel in the second quarter of 1995, which was in a
utilization-based pooling arrangement during the first three months of 1995;
(c) a decrease of $0.1 million in aircraft revenue due to the sale of the
Partnership's 50% interest in a DC-9 aircraft during the second quarter of 1995,
and another aircraft which has been off-lease since the end of 1995;
(d) a decrease of $0.1 million in marine container revenue due to lower
utilization in the first quarter of 1996, compared to the same period in 1995.
(2) Net gain on disposition of equipment during the first quarter of 1996
totaled $114,000 from the sale or disposal of four trailers, one railcar, and 70
marine containers with an aggregate net book value of $140,000 for proceeds of
$254,000. During the same period in 1995, the net gain on disposition of
equipment was $50,000 from the disposal of 61 marine containers with a net book
value of $75,000 for proceeds of $125,000.
(B) Expenses
Total expenses for the quarter ended March 31, 1996, decreased to $3.0 million
from $4.5 million for the same period in 1995. The decrease in 1996 expenses was
primarily attributable to decreases in depreciation expense, interest expense,
and repairs and maintenance, offset by an increase in bad debt expense. Although
net loss was not affected as a result of the change in accounting for
unconsolidated special purpose entities, expenses decreased $0.9 million in the
first quarter of 1996, which included $0.5 million, and $0.4 million decreases
in depreciation and bad debt, respectively, all relating to jointly-owned assets
(refer to the "Equity in net loss of unconsolidated special purpose entities"
section below). The remaining decreases in 1996 expenses are explained below:
(1) Direct operating expenses (defined as repairs and maintenance, insurance
expenses, and marine operating expenses) decreased to $0.4 million in the first
quarter of 1996, from $0.6 million in the same period in 1995. This decrease
resulted primarily from decreases in repairs and maintenance costs from 1995
levels due to the sale of a 50% interest in a marine vessel in the second
quarter of 1995.
(2) Indirect operating expenses (defined as depreciation expense, management
fees, interest expense, general and administrative expenses, and bad debt
expense) decreased to $2.6 million in the first quarter of 1996 from $3.9
million in the same period in 1995. This decrease resulted from:
(a) decreases of $0.4 million in depreciation and amortization expense from
1995 levels, reflecting the effect of asset sales in 1995 and 1996;
(b) decreases of $0.1 million in management fees to affiliates, reflecting
the lower levels of lease revenues in 1996 as compared to 1995. Management fees
are calculated as a monthly fee equal to the lesser of (i) the fees which would
be charged by an independent third party for similar services for similar
equipment or (ii) the sum of (A) 5% of the Gross Lease Revenues attributable to
equipment which is subject to Operating Leases, and (B) 2% of the Gross Lease
Revenues attributable to Equipment which is subject to Full Payout Net leases,
and (C) 7% of the Gross Lease Revenues attributable to Equipment, if any, which
was subject to per diem leasing arrangements and thus is operated by the
Partnership;
(c) decreases of $0.2 million in interest expense due to a lower base rate
of interest charged on the Partnership's floating rate debt during the first
quarter of 1996 as compared to the same period in 1995. In 1995, the Partnership
prepaid $8.0 million of the outstanding note payable representing the principal
payments due March 31, 1996 and 1997.
(C) Equity in loss income of unconsolidated special purpose entities
Equity in net loss of unconsolidated special purpose entities represents net
loss generated from jointly owned assets accounted for under the equity method.
As of March 31, 1996, the Partnership owned a 50% interest in a Boeing 737-200A
aircraft, and a 55% interest in a Mobile Offshore Drilling Unit. During the
quarter ended March 31, 1996, these assets generated revenues of $0.5 million
and expenses of $0.9 million. Expenses incurred for these assets were for bad
debt expense from a jointly held Boeing 737 aircraft which reflected the General
Partner's evaluation of the collectibility of receivables due from an aircraft
lessee that encountered financial difficulties.
(D) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss of $84,000 for the
first quarter of 1996, decreased from a net income of $248,000 in the same
period of 1995. 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 first quarter of 1996 is not necessarily indicative of future
periods. In the first quarter of 1996, the Partnership distributed $3.0 million
to the Limited Partners, or $0.40 per Depositary Unit.
(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 Partnership's Limited Partnership Agreement. The Partnership's
total outstanding indebtedness, currently $27.0 million, can only be increased
up to a maximum of $35 million subject to specific covenants in the existing
debt agreement. The Partnership relies on operating cash flow to meet its
operating obligations, make cash distributions to partners, and increase the
Partnership's equipment portfolio with any remaining surplus cash available.
Pursuant to the Limited Partnership Agreement, the Partnership ceased to
reinvest in additional equipment effective December 31, 1995. During the
reinvestment phase of the Partnership, the General Partner assembled an
equipment portfolio capable of achieving a level of operating cash flow for the
remaining life of the Partnership sufficient to meet its obligations and sustain
a predictable level of distributions to the partners. Equipment sales now result
in partial liquidation of the Partnership's portfolio, with proceeds being used
for payment of debt or distributions to partners.
In 1995, the Partnership used $8.0 million in proceeds from the sale of
equipment and other cash on hand to prepay the first annual $4 million principal
installment of the loan due March 31, 1996, and to prepay the second annual $4
million installment due March 31, 1997.
The General Partner has entered into a joint $25 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, PLM Equipment
Growth Fund III, PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, PLM
Equipment Growth Fund VI, PLM Equipment Growth & Income Fund VII and
Professional Lease Management Income Fund I ("Fund I"), all affiliated
investment programs, and TEC Acquisub, Inc. ("TECAI"), an indirect wholly-owned
subsidiary of the General Partner, which may be used to provide interim
financing of up to (i) 70% of the aggregate book value or 50% of the aggregate
net fair market value of eligible equipment owned by the Partnership, Fund I,
plus (ii) 50% of unrestricted cash held by the borrower. The Committed Bridge
Facility became available to EGF VII and TECAI on December 20, 1993, and was
amended and restated to include the above mentioned Partnership on September 27,
1995 and to expire on September 30, 1996. The Committed Bridge Facility also
provides for a $5 million Letter of Credit Facility for the eligible borrowers.
Outstanding borrowings by Fund I, TECAI or PLM Equipment Growth Funds II through
VII reduce the amount available to each other under the Committed Bridge
Facility. Individual borrowings may be outstanding for no more than 179 days,
with all advances due no later than September 30, 1996. The Committed Bridge
Facility prohibits the Partnership from incurring any additional indebtedness.
Interest accrues at either the prime rate or adjusted LIBOR plus 2.5% at the
borrowers option and is set at the time of an advance of funds. Borrowings by
the Partnerships are guaranteed by the General Partner. As of March 31, 1996,
PLM Equipment Growth Fund V had $5,610,000 in outstanding borrowings under the
Committed Bridge Facility, PLM Equipment Growth Fund VI had $11,220,000 and
TECAI had $7,706,000. Neither the Partnership, Fund 1 nor the other programs had
any outstanding borrowings. Due to the loan covenants of the senior debt, the
Partnership cannot access this line of credit at this time. The General Partner
is in negotiations to renew the facility. The General Partner believes it will
successfully negotiate an extension of the facility prior to expiration on terms
at least as favorable as those in the current facility.
For the three months ended March 31, 1996, the Partnership generated
sufficient operating revenues to meet its operating obligations, but used
undistributed available cash from prior periods of approximately $1.6 million to
maintain the current level of distributions (total 1996 of $3.1 million) to the
partners.
(III) DELISTING OF PARTNERSHIP UNITS
The General Partner delisted the Partnership's depositary units from the
American Stock Exchange (AMEX) under the symbol GFY on April 8, 1996. The last
day for trading on the AMEX was March 22, 1996. Under the Internal Revenue Code
(the Code), the Partnership was classified as a Publicly Traded Partnership. On
December 28, 1992, the Partnership engaged in a program to repurchase up to
200,000 Depositary Units. In the three months ended March 31, 1996, the
Partnership had purchased and canceled 42,100 Depositary Units at a cost of $0.2
million. As of March 31, 1996, the Partnership had cumulatively repurchased
102,700 Depositary Units at a cost of $0.8 million.
(IV) TRENDS
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. Throughout 1995 and the first part of 1996, market
conditions, supply and demand equilibrium, and other factors varied in several
markets. In the container and refrigerated over-the-road trailer markets,
oversupply conditions, industry consolidations, and other factors resulted in
falling rates and lower returns. In the dry over-the-road trailer markets,
strong demand and a backlog of new equipment deliveries produced high
utilization and returns. The marine vessel, rail, and mobile offshore drilling
unit markets could be generally categorized by increasing rates as the demand
for equipment is increasing faster than new additions net of retirements.
Finally, demand for narrowbody stage II aircraft, such as those owned by the
Partnership, has increased as expected savings from newer narrowbody aircraft
have not materialized and deliveries of the newer aircraft have slowed down.
These trends are expected to continue for the near term. These different markets
have had individual effects on the performance of Partnership equipment in some
cases resulting in declining performance, and in others, in improved
performance.
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,
governmental or other regulations, and others. 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 continuously 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. Alternatively,
the General Partner may make a determination to enter equipment markets in which
it perceives opportunities to profit from supply-demand instabilities or other
market imperfections.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements, pay loan principal on debt, and pay cash distributions
to the investors.
<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 GROWTH FUND II
By: PLM Financial Services, Inc.
General Partner
Date: May 13, 1996 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,534
<SECURITIES> 0
<RECEIVABLES> 1,794
<ALLOWANCES> 260
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 27,398
<DEPRECIATION> 66,018
<TOTAL-ASSETS> 44,655
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 14,806
<TOTAL-LIABILITY-AND-EQUITY> 44,655
<SALES> 0
<TOTAL-REVENUES> 3,368
<CGS> 0
<TOTAL-COSTS> 3,050
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 488
<INCOME-PRETAX> (84)
<INCOME-TAX> 0
<INCOME-CONTINUING> (84)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
