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 September 30, 1997
[ ] 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 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 II
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except per unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating lease, at cost $ 63,861 $ 82,856
Less accumulated depreciation (49,343 ) (62,114 )
---------------------------------------
Net equipment 14,518 20,742
Cash and cash equivalents 3,272 7,962
Restricted cash 295 295
Investment in unconsolidated special-purpose entity 659 1,665
Accounts receivable, net of allowance for doubtful accounts
of $1,421 in 1997 and $882 in 1996 2,676 1,765
Deferred charges, net of accumulated amortization
of $249 in 1997 and $197 in 1996 101 157
Prepaid expenses and other assets 6 1,009
---------------------------------------
Total assets $ 21,527 $ 33,595
=======================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 496 $ 412
Due to affiliates 176 110
Lessee deposits and reserve for repairs 1,757 2,827
Notes payable 5,783 13,000
---------------------------------------
Total liabilities 8,212 16,349
---------------------------------------
Partners' capital (deficit):
Limited partners (7,381,805 depositary units, including
1,150 depositary units held in the Treasury as of
September 30, 1997 and December 31, 1996, respectively) 13,358 17,434
General Partner (43 ) (188 )
---------------------------------------
Total partners' capital 13,315 17,246
---------------------------------------
Total liabilities and partners' capital $ 21,527 $ 33,595
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 2,606 $ 3,027 $ 8,112 $ 9,408
Interest and other income 51 98 195 240
Net gain on disposition of equipment 336 100 1,363 267
--------------------------------------------------------------
Total revenues 2,993 3,225 9,670 9,915
--------------------------------------------------------------
Expenses:
Depreciation and amortization 1,014 1,433 3,387 4,358
Repairs and maintenance 483 532 1,288 1,495
Interest expense 140 489 566 1,460
Insurance expense 25 32 98 69
Management fees to affiliate 119 130 375 451
General and administrative expenses
to affiliates 157 169 529 587
Other general and administrative expenses 248 179 740 702
Provision for bad debt 310 159 538 384
--------------------------------------------------------------
Total expenses 2,496 3,123 7,521 9,506
--------------------------------------------------------------
Equity in net income (loss) of unconsolidated
special-purpose entities 12 7,023 (1,029 ) 6,599
--------------------------------------------------------------
Net income $ 509 $ 7,125 $ 1,120 $ 7,008
==============================================================
Partners' share of net income:
Limited partners $ 388 $ 7,002 $ 722 $ 6,567
General Partner 121 123 398 441
--------------------------------------------------------------
Total $ 509 $ 7,125 $ 1,120 $ 7,008
==============================================================
Net income per weighted-average depositary
unit (7,381,805 and 7,385,715 units, including
1,150 units held in the Treasury, as of
September 30, 1997 and 1996, respectively) $ 0.05 $ 0.95 $ 0.10 $ 0.89
==============================================================
Cash distributions $ 1,166 $ 1,944 $ 5,051 $ 7,014
==============================================================
Cash distributions per weighted-average
depositary unit $ 0.15 $ 0.25 $ 0.65 $ 0.90
==============================================================
</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, 1995 to September 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1995 $ 18,658 $ (462 ) $ 18,196
Net income 7,464 722 8,186
Cash distributions (8,509 ) (448 ) (8,957 )
Repurchase of depositary units (179 ) - (179 )
---------------------------------------------------
Partners' capital (deficit) as of December 31, 1996 17,434 (188 ) 17,246
Net income 722 398 1,120
Cash distributions (4,798 ) (253 ) (5,051 )
---------------------------------------------------
Partners' capital (deficit) as of September 30, 1997 $ 13,358 $ (43 ) $ 13,315
===================================================
</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 Nine Months
Ended September 30,
1997 1996
-----------------------------------
<S> <C> <C>
Operating activities:
Net income $ 1,120 $ 7,008
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on disposition of equipment (1,363 ) (267 )
Depreciation and amortization 3,387 4,358
Equity in net (income) loss of unconsolidated special-purpose entities 1,029 (6,599 )
Changes in operating assets and liabilities:
Restricted cash - 133
Accounts receivable, net (856 ) 393
Prepaid expenses and other assets 1,003 47
Accounts payable and accrued expenses 84 (161 )
Due to affiliates 66 (199 )
Lessee deposits and reserve for repairs (1,070 ) (983 )
-----------------------------------
Net cash provided by operating activities 3,400 3,730
-----------------------------------
Investing activities:
Proceeds from disposition of equipment 4,185 909
Liquidation distributions from unconsolidated special-purpose entities - 14,272
(Additional investments in) distributions from unconsolidated special-
purpose entities (23 ) 1,003
Payments for capital improvements and other 16 (7 )
-----------------------------------
Net cash provided by investing activities 4,178 16,177
-----------------------------------
Financing activities:
Principal payments on notes payable (7,217 ) (9,000 )
Cash distributions paid to limited partners (4,798 ) (6,663 )
Cash distributions paid to General Partner (253 ) (351 )
Repurchase of depositary units - (179 )
-----------------------------------
Net cash used in financing activities (12,268 ) (16,193 )
-----------------------------------
Net (decrease) increase in cash and cash equivalents (4,690 ) 3,714
Cash and cash equivalents at beginning of period 7,962 6,427
-----------------------------------
Cash and cash equivalents at end of period $ 3,272 $ 10,141
===================================
Supplemental information:
Interest paid $ 508 $ 1,457
===================================
Supplemental disclosure of noncash investing and financing activities:
Sale proceeds included in accounts receivable $ 55 $ 24
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (the
General Partner), the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund II (the Partnership) as of September 30, 1997 and December 31, 1996,
the statements of income for the three and nine months ended September 30,
1997 and 1996, the statements of changes in partners' capital for the
period from December 31, 1995 to September 30, 1997, and the statements of
cash flows for the nine months ended September 30, 1997 and 1996. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, on file at the
Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Repurchase of Depositary Units
In December 28, 1992, the Partnership announced a plan to repurchase up to
200,000 depositary units. As of September 30, 1997, the Partnership had
cumulatively repurchased 117,800 depositary units for $0.8 million.
The General Partner may repurchase the remaining units in the future.
4. Cash Distribution
Cash distributions are recorded when paid and totaled $5.1 million and $7.0
million for the nine months ended September 30, 1997 and 1996,
respectively, and $1.2 million and $1.9 million for the three months ended
September 30, 1997 and 1996, respectively. Cash distributions to limited
partners in excess of net income are considered to represent a return of
capital. Cash distributions to limited partners of $4.1 million and $0.1
million for the nine months ended September 30, 1997 and 1996,
respectively, were deemed to be a return of capital. Cash distributions
related to the results from the third quarter of 1997 of $1.2 million, are
payable during November 1997.
5. Investment in Unconsolidated Special-Purpose Entity
The net investment in an unconsolidated special-purpose entity (USPE)
consisted of a 50% interest in a trust owning a Boeing 737-200A aircraft
(and related assets and liabilities) totaling $0.7 million and $1.7 million
as of September 30, 1997 and December 31, 1996, respectively. This aircraft
was off lease as of September 30, 1997 and December 31, 1996.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
6. Equipment
Components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------------------------------
<S> <C> <C>
Aircraft $ 18,826 $ 32,860
Rail equipment 18,102 18,183
Trailers 17,701 21,173
Marine containers 9,232 10,640
------------------------------------
63,861 82,856
Less accumulated depreciation (49,343 ) (62,114 )
------------------------------------
Net equipment $ 14,518 $ 20,742
====================================
</TABLE>
As of September 30, 1997, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 169 marine
containers and 3 railcars. With the exception of 71 marine containers and 3
railcars, all equipment was either on lease or operating in PLM-affiliated
short-term trailer rental facilities as of December 31, 1996. The aggregate
carrying value of off-lease equipment was $0.4 million and $0.2 million as
of September 30, 1997 and December 31, 1996, respectively.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of aircraft, marine containers, trailers, and railcars, with an
aggregate net book value of $2.9 million, for proceeds of $4.3 million. For
the nine months ended September 30, 1996, the Partnership sold or disposed
of marine containers, trailers, and railcars, with an aggregate net book
value of $0.6 million, for proceeds of $0.9 million.
7. Transactions with General Partner and Affiliates
Partnership management fees of $0.2 million and $0.1 million were payable
as of September 30, 1997 and December 31, 1996, respectively.
The Partnership's proportional share of the affiliated expenses incurred by
the USPE during 1997 and 1996 is listed in the following table (in
thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Data processing and administrative
expenses $ 1 $ 13 $ 5 $ 19
Management fees - 31 - 44
</TABLE>
8. Notes Payable
In the first nine months of 1997, the Partnership prepaid $7.2 million of
the outstanding notes payable, representing a portion of the principal
payment due March 31, 1999 and a portion of the final annual $9.0 million
principal installment of the loan due March 31, 2000.
9. Subsequent Event
In October 1997, the Partnership prepaid $1.3 million of the outstanding
notes payable.
<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
September 30, 1997 and 1996
(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 third
quarter of 1997, compared to the same quarter of 1996. The following table
presents lease revenues less direct expenses by owned equipment type (in
thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 795 $ 753
Trailers 697 826
Aircraft 459 609
Marine containers 154 298
</TABLE>
Rail equipment: Railcar lease revenues and direct expenses were $1.1 million and
$0.3 million, respectively, for the third quarter of 1997, compared to $1.2
million and $0.4 million, respectively, during the same quarter of 1996. Lease
revenue decreased due to the sale of railcars in 1997 and 1996. Railcar expenses
decreased due to running repairs required on certain of the railcars during
1996, which were not needed during 1997, and the smaller fleet in 1997.
Trailers: Trailer lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, for the third quarter of 1997, compared to $1.0 million
and $0.2 million, respectively, during the same quarter of 1996. The decrease
was primarily due to the sale of trailers in 1997 and 1996. In addition, the
trailer fleet is experiencing lower utilization in the PLM-affiliated short-term
rental yards.
Aircraft: Aircraft lease revenues and direct expenses were $0.5 million and
$10,000, respectively, for the third quarter of 1997, compared to $0.6 million
and $1,000, respectively, during the same quarter of 1996. Aircraft contribution
decreased in the third quarter of 1997, compared to the same period in 1996, due
to the sale of two aircraft in the second and third quarters of 1997, which was
partially offset by an increase in the lease rate for another aircraft.
Marine containers: Marine container lease revenues were $0.2 million and $0.3
million during the third quarter of 1997 and 1996, respectively. 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 revenues.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.0 million for the third quarter of 1997 decreased
from $2.6 million for the same period in 1996. The variances are explained as
follows:
(1) A $0.4 million decrease in depreciation and amortization expense from
1996 levels reflects the effect of asset sales in 1996 and 1997.
(2) A $0.3 million decrease in interest expense is due to a decrease in the
level of outstanding debt during the third quarter of 1997 when compared to the
same period in 1996. In 1997, the Partnership prepaid $7.2 million of the
outstanding notes payable. In the third and fourth quarters of 1996, the
Partnership prepaid $14.0 million of the outstanding notes payable.
(3) A $0.1 million increase in bad debt expense reflects the General
Partner's evaluation of the collectibility of receivables due from certain
lessees.
<PAGE>
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the third quarter of 1997 totaled $0.3
million, and resulted from the disposal or sale of an aircraft, trailers, marine
containers, and railcars, with an aggregate net book value of $1.2 million, for
aggregate proceeds of $1.5 million. For the same period in 1996, the $0.1
million net gain on disposition of equipment resulted from the sale or disposal
of the trailers, marine containers, and railcars, with an aggregate net book
value of $0.1 million, for proceeds of $0.2 million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of unconsolidated special-purpose entities (USPEs)
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 12 $ (70 )
Mobile offshore drilling unit - 7,093
</TABLE>
Aircraft: As of September 30, 1997 and 1996, the Partnership owned a 50%
investment in an entity that owns a commercial aircraft. Revenues and expenses
were $0.1 and $0.1 million, respectively, for the third quarter of 1997,
compared to expenses of $0.1 million for the same period in 1996. The
Partnership's share of the net contribution increased due to the sale of its 50%
investment in an entity that owned an aircraft engine in the third quarter of
1997.
Mobile offshore drilling unit: During the third quarter of 1996, the General
Partner sold the Partnership's 55% investment in an entity which owned a mobile
offshore drilling unit, resulting in a $7.1 million net gain.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.5 million for
the third quarter of 1997, compared to a net income of $7.1 million during the
same period of 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the third quarter of 1997 is not
necessarily indicative of future periods. In the third quarter of 1997, the
Partnership distributed $1.1 million to the unitholders, or $0.15 per
weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Nine Months Ended
September 30, 1997 and 1996
(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 nine
months ended September 30, 1997, compared to the same period of 1996. The
following table presents lease revenues less direct expenses by owned equipment
type (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 2,596 $ 2,460
Trailers 1,973 2,612
Aircraft 1,656 1,821
Marine containers 538 997
</TABLE>
Rail equipment: Railcar lease revenues and direct expenses were $3.4 million and
$0.8 million, respectively, for the nine months ended September 30, 1997,
compared to $3.5 million and $1.0 million, respectively, during the same period
of 1996. Lease revenues decreased due to the sale of railcars in 1997 and 1996.
Railcar expenses decreased due to running repairs required on certain of the
railcars during 1996, which were not needed during 1997, and the smaller fleet
in 1997.
Trailers: Trailer lease revenues and direct expenses were $2.5 million and $0.5
million, respectively, for the nine months ended September 30, 1997, compared to
$3.0 million and $0.4 million, respectively, during the same period of 1996. The
decrease in net contribution was due to the sale of trailers in 1997 and 1996.
In addition, the trailer fleet is experiencing lower utilization in the
PLM-affiliated short-term rental yards.
Aircraft: Aircraft lease revenues and direct expenses were $1.7 million and
$30,000, respectively, for the nine months ended September 30, 1997, compared to
$1.8 million and $10,000, respectively, during the same period of 1996. Aircraft
contribution decreased in the nine months ended September 30, 1997, compared to
the same period in 1996, due to the sale of two aircraft in the second and third
quarters of 1997.
Marine containers: Marine container lease revenues were $0.5 million and $1.0
million for the nine months ended September 30, 1997 and 1996, respectively. 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 revenue.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $6.1 million for the nine months ended September 30,
1997 decreased from $7.9 million for the same period of 1996. The variances are
explained as follows:
(1) A $1.0 million decrease in depreciation and amortization expense from
1996 levels reflects the effect of asset sales in 1996 and 1997.
(2) A $0.9 million decrease in interest expense is due to a decrease in the
level of outstanding debt during the nine months ended September 30, 1997,
compared to the same period in 1996. In 1997, the Partnership prepaid $7.2
million of the outstanding notes payable. In the third and fourth quarters of
1996, the Partnership prepaid $14.0 million of the outstanding notes payable.
(3) A $0.1 million decrease in management fees to affiliates reflects the
lower levels of lease revenues in 1997 compared to 1996.
(4) A $0.2 million increase in bad debt expense reflects the General
Partner's evaluation of the collectibility of receivables due from certain
lessees.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the nine months ended September 30,
1997 totaled $1.4 million, and resulted from the sale or disposal of aircraft,
marine containers, trailers, and railcars, with an aggregate net book value of
$2.9 million, for aggregate proceeds of $4.3 million. For the nine months ended
September 30, 1996, the $0.3 million net gain on disposition of equipment
resulted from the sale or disposal of marine containers, trailers, and railcars,
with an aggregate net book value of $0.6 million, for aggregate proceeds of $0.9
million.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Equity in net income (loss) of unconsolidated special-purpose entities
represents net income (loss) generated from the operation of jointly-owned
assets accounted for under the equity method (in thousands).
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
------------------------------
<S> <C> <C>
Aircraft $ (1,029 ) $ (381 )
Mobile offshore drilling unit - 6,980
</TABLE>
Aircraft: As of September 30, 1997 and 1996, the Partnership owned a 50%
investment in an entity that owns a commercial aircraft. Revenues and expenses
were $0.2 million and $1.2 million, respectively, for the nine months ended
September 30, 1997, compared to $0.4 million and $0.8 million, respectively, for
the same period in 1996. The Partnership's share of revenues decreased due to
the off-lease status of this aircraft during the nine months ended September 30,
1997; this aircraft had been on lease for the first six months ended September
30, 1996. The Partnership sold its 50% investment in an entity that owns an
aircraft engine in the third quarter of 1997. The Partnership's share of
expenses increased due to the repairs to this engine to meet 1997 airworthiness
requirements. This increase was partially offset by a decrease in the
Partnership's share of bad debt expenses. In 1996, the General Partner fully
reserved the uncollected outstanding receivables from the aircraft's lessee that
encountered financial difficulties.
Mobile offshore drilling unit: During 1996, the General Partner sold the
Partnership's 55% investment in an entity which owned a mobile offshore drilling
unit, resulting in a $7.1 million net gain, which was offset by a net loss from
operations of $0.1 million.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $1.1 million for
the nine months ended September 30, 1997, compared to a net income of $7.0
million during the same period of 1996. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the nine months
ended September 30, 1997 is not necessarily indicative of future periods. In the
nine months ended September 30, 1997, the Partnership distributed $4.8 million
to the unitholders, or $0.65 per weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
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 of $4.5 million on October 31, 1997 can only be
increased up to a maximum of $35.0 million, subject to specific covenants in the
existing debt agreement. The Partnership relies on operating cash flow to meet
its operating obligations, maintain working capital reserves, and, to the extent
funds are available, make cash distributions to partners.
In the first nine months of 1997, the Partnership used $7.2 million in proceeds
from the sale of assets and other cash on hand to prepay the outstanding debt.
The Partnership may continue to prepay the outstanding notes payable.
For the nine months ended September 30, 1997, the Partnership generated $3.4
million in operating cash (net cash provided by operating activities plus
distributions from unconsolidated special-purpose entities) to meet its
operating obligations and maintain the current level of distributions (total for
the nine months ended September 30, 1997 of $5.1 million) to the partners, but
also used undistributed available cash from prior periods of approximately $1.7
million.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of aircraft, marine containers, trailers, and railcars, with an
aggregate net book value of $2.9 million, for proceeds of $4.3 million.
The cash distributions paid in August 1997 were reduced from an annual rate of
5% to an annual rate of 3% to more closely reflect current and expected net cash
flows from operations. Continued weak market conditions in certain equipment
sectors and equipment sales have reduced overall lease revenues in the
Partnership to the extent that reductions in distribution levels were necessary.
In addition, with the Partnership expected to enter the active liquidation phase
in the near future, 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
have been reduced, significant asset sales may result in potential special
distributions to unitholders.
<PAGE>
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is in its holding or passive liquidation phase, the
General Partner will be seeking to selectively re-lease or sell assets as the
existing leases expire. Sale decisions will cause the operating performance of
the Partnership to decline over the remainder of its life. The General Partner
anticipates the liquidation of Partnership assets will be completed by the
planned termination of the Partnership at the end of the year 2000.
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.
(IV) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
(This space intentionally left blank.)
<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: October 31, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,272
<SECURITIES> 0
<RECEIVABLES> 2,676
<ALLOWANCES> 1,421
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,861
<DEPRECIATION> 49,343
<TOTAL-ASSETS> 21,527
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 13,315
<TOTAL-LIABILITY-AND-EQUITY> 21,527
<SALES> 0
<TOTAL-REVENUES> 9,670
<CGS> 0
<TOTAL-COSTS> 6,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 566
<INCOME-PRETAX> 1,120
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,120
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
