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 June 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 amount)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------------------------------
Assets:
<S> <C> <C>
Equipment held for operating lease, at cost $ 64,744 $ 82,856
Less accumulated depreciation (49,099 ) (62,114 )
------------------------------------
15,645 20,742
Equipment held for sale 1,047 -
------------------------------------
Net equipment 16,692 20,742
Cash and cash equivalents 3,455 7,962
Restricted cash 295 295
Investment in unconsolidated special-purpose entity 772 1,665
Accounts receivable, net of allowance for doubtful accounts
of $1,098 in 1997 and $882 in 1996 2,618 1,765
Deferred charges, net of accumulated amortization
of $232 in 1997 and $197 in 1996 118 157
Prepaid expenses and other assets 974 1,009
------------------------------------
Total assets $ 24,924 $ 33,595
====================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 432 $ 412
Due to affiliates 130 110
Lessee deposits and reserve for repairs 2,890 2,827
Notes payable 7,500 13,000
------------------------------------
Total liabilities 10,952 16,349
------------------------------------
Partners' capital (deficit):
Limited partners (7,381,805 depositary units, including
1,150 depositary units held in the Treasury
as of June 30, 1997 and December 31, 1996) 14,077 17,434
General Partner (105 ) (188 )
------------------------------------
Total partners' capital 13,972 17,246
------------------------------------
Total liabilities and partners' capital $ 24,924 $ 33,595
====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 2,468 3,200 $ 5,506 $ 6,381
Interest and other income 63 69 144 142
Net gain on disposition of equipment 859 53 1,027 167
--------------------------------------------------------------
Total revenues 3,390 3,322 6,677 6,690
--------------------------------------------------------------
Expenses:
Depreciation and amortization 1,150 1,458 2,373 2,925
Repairs and maintenance 429 573 805 963
Interest expense 193 483 426 971
Insurance expense 43 24 73 65
Management fees to affiliate 128 172 256 321
General and administrative expenses
to affiliates 158 224 372 418
Other general and administrative expenses 240 205 492 495
(Recovery of) provision for bad debt (98 ) 194 228 225
--------------------------------------------------------------
Total expenses 2,243 3,333 5,025 6,383
--------------------------------------------------------------
Equity in net loss of unconsolidated
special-purpose entities (925 ) (22 ) (1,041 ) (424 )
--------------------------------------------------------------
Net income (loss) $ 222 (33 ) $ 611 $ (117 )
==============================================================
Partners' share of net income (loss):
Limited partners $ 79 (166 ) $ 334 $ (435 )
General Partner 143 133 277 318
--------------------------------------------------------------
Total $ 222 (33 ) $ 611 $ (117 )
==============================================================
Net income (loss) per weighted-average
depositary unit (7,381,805 and
7,387,671 units, including 1,150 units
held in the Treasury, as of June
30, 1997 and
1996, respectively) $ 0.01 (0.02 ) $ 0.05 $ (0.06 )
==============================================================
Cash distributions $ 1,942 1,943 $ 3,885 $ 5,070
==============================================================
Cash distributions per weighted-average
depositary unit $ 0.25 0.25 $ 0.50 $ 0.65
==============================================================
</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 June 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1995 $ 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 334 277 611
Cash distributions (3,691 ) (194 ) (3,885 )
---------------------------------------------------
Partners' capital (deficit) as of June 30, 1997 $ 14,077 $ (105 ) $ 13,972
===================================================
</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 Six Months
Ended June 30,
1997 1996
-----------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 611 $ (117 )
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Net gain on disposition of equipment (1,027 ) (167 )
Depreciation and amortization 2,373 2,925
Equity in net loss of unconsolidated special-purpose entities 1,041 424
Changes in operating assets and liabilities:
Restricted cash - 133
Accounts receivable, net (853 ) 342
Prepaid expenses and other assets 35 35
Accounts payable and accrued expenses 6 (26 )
Due to affiliates 20 (152 )
Lessee deposits and reserve for repairs 63 (277 )
-----------------------------------
Net cash provided by operating activities 2,269 3,120
-----------------------------------
Investing activities:
Proceeds from disposition of equipment 2,739 709
(Additional investments in) distributions from unconsolidated special-
purpose entities (148 ) 179
Reimbursements of (payments for) capital improvements 18 (6 )
-----------------------------------
Net cash provided by investing activities 2,609 882
-----------------------------------
Financing activities:
Principal payments on notes payable (5,500 ) -
Cash distributions paid to limited partners (3,691 ) (4,817 )
Cash distributions paid to General Partner (194 ) (253 )
Repurchase of depositary units - (179 )
-----------------------------------
Net cash used in financing activities (9,385 ) (5,249 )
-----------------------------------
Net decrease in cash and cash equivalents (4,507 ) (1,247 )
Cash and cash equivalents at beginning of period 7,962 6,427
-----------------------------------
Cash and cash equivalents at end of period $ 3,455 $ 5,180
===================================
Supplemental information:
Interest paid $ 426 $ 971
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or
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 June 30, 1997 and December 31, 1996, the
statements of operations for the three and six months ended June 30, 1997
and 1996, the statements of changes in partners' capital for the period
from December 31, 1995 to June 30, 1997, and the statements of cash flows
for the six months ended June 30, 1997 and 1996. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1996, on file at the Securities and
Exchange Commission.
2. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Repurchase of Depositary Units
Pursuant to the Partnership repurchase plan as of December 28, 1992, the
Partnership agreed to repurchase up to 200,000 depositary units. As of June
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 $3.9 million and $5.1
million for the six months ended June 30, 1997 and 1996, respectively, and
$1.9 million and $1.9 million for the three months ended June 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 $3.4 million and $4.8 million for the six months
ended June 30, 1997 and 1996, respectively, were deemed to be a return of
capital.
5. Investment in Unconsolidated Special-Purpose Entity
The net investment in an unconsolidated special purpose entity (USPE)
consisted of the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------------------------------------
<S> <C> <C>
50% interest in a trust owning a Boeing
737-200A aircraft $ 772 $ 1,665
=======================================
</TABLE>
This aircraft was off lease as of June 30, 1997 and December 31, 1996.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
6. Transactions with General Partner and Affiliates
Partnership management fees of $0.1 million and $0.1 million were payable
as of June 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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Data processing and administrative
expenses $ 3 $ 45 $ 3 $ 68
Management fees - (3 ) - 22
</TABLE>
7. Equipment
Components of owned equipment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------------------
<S> <C> <C>
Aircraft $ 18,826 $ 32,860
Trailers 18,268 21,173
Rail equipment 18,155 18,183
Marine containers 9,495 10,640
------------------------------------
64,744 82,856
Less accumulated depreciation (49,099 ) (62,114 )
------------------------------------
------------------------------------
15,645 20,742
Equipment held for sale 1,047 -
------------------------------------
Net equipment $ 16,692 $ 20,742
====================================
</TABLE>
Equipment held for sale is stated at the lower of the equipment's
depreciated cost or fair value less costs to sell and is subject to a
pending contract of sale. As of June 30, 1997, an aircraft with a net book
value of $1.0 million is currently on lease and subject to a pending sale.
This aircraft was reclassified to equipment held for sale.
As of June 30, 1997, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 172 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 June 30, 1997 and December 31, 1996, respectively.
During the six months ended June 30, 1997, the Partnership sold or disposed
of an aircraft, marine containers, trailers, and railcars, with an
aggregate net book value of $1.7 million, for proceeds of $2.7 million. For
the six months ended June 30, 1996, the Partnership sold or disposed of
marine containers, trailers, and railcars, with an aggregate net book value
of $0.5 million, for proceeds of $0.7 million.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
8. Notes Payable
In the first six months of 1997, the Partnership prepaid $5.5 million of
the outstanding notes payable, representing a portion of the principal
payment due March 31, 1999.
(This space intentionally left blank.)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Partnership's Operating Results for the Three Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, and
asset-specific insurance expenses) on owned equipment decreased during the
second 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 June 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 875 $ 765
Aircraft 577 601
Trailers 483 899
Marine containers 85 346
</TABLE>
Rail equipment: Railcar lease revenues and direct expenses were $1.1 million and
$0.2 million, respectively, for the second 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 42 railcars at the end of 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.
Aircraft: Aircraft lease revenues and direct expenses were $0.6 million and
$10,000, respectively, for the second quarter of 1997, compared to $0.6 million
and $9,000, respectively, during the same quarter of 1996. Aircraft contribution
decreased slightly in the second quarter of 1997, compared to the same period in
1996, due to the sale of an aircraft, which was partially offset by an increase
in the lease rate for another aircraft.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the second quarter of 1997, compared to $1.0 million
and $0.1 million, respectively, during the same quarter of 1996. The decrease
was primarily due to the sale of 102 trailers in the first quarter of 1997. In
addition, the trailer fleet is experiencing lower utilization in the
PLM-affiliated short-term rental yards.
Marine containers: Marine container lease revenues were $0.1 million and $0.3
million during the second 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 $1.8 million for the second quarter of 1997 decreased
from $2.7 million for the same period in 1996. The variances are explained as
follows:
(1) A $0.3 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 was due to a decrease in
the level of outstanding debt during the second quarter of 1997 when compared to
the same period in 1996. In 1997, the Partnership prepaid $5.5 million of the
outstanding notes payable, representing a portion of the principal payment due
March 31, 1999. In 1996, the Partnership prepaid $14.0 million of the
outstanding notes payable, representing the principal payment due March 31,
1998, and a portion of the principal payment due March 31, 1999.
(3) A $0.3 million decrease 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 second quarter of 1997 totaled $0.9
million, and resulted from the disposal or sale of an aircraft, trailers, marine
containers, and railcars, with an aggregate net book value of $1.3 million, for
aggregate proceeds of $2.2 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 $0.4 million, for proceeds of $0.5 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 June 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ (925 ) $ 49
Mobile offshore drilling unit - (71 )
</TABLE>
Aircraft: As of June 30, 1997 and 1996, the Partnership owned a 50% investment
in an entity that owns a commercial aircraft. Revenues and expenses were $0.0
and $0.9 million, respectively, for the second quarter of 1997, compared to $0.2
million and $0.1 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 second quarter of 1997, compared to its on-lease status for
the second quarter of 1996. The Partnership's share of expenses increased in the
second quarter of 1997 due to the repairs required to meet 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 an aircraft's lessee that
encountered financial difficulties.
Mobile offshore drilling unit: As of June 30, 1996, the Partnership owned a 55%
investment in an entity that owns a mobile offshore drilling unit (rig). The rig
was sold in the third quarter of 1996.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $0.2 million for
the second quarter of 1997, compared to a net loss of $33,000 during the same
period of 1996. The Partnership's ability to operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors, and the Partnership's performance in the second quarter of 1997 is not
necessarily indicative of future periods. In the second quarter of 1997, the
Partnership distributed $1.8 million to the unitholders, or $0.25 per
weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Six Months Ended
June 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, and
asset-specific insurance expenses) on owned equipment decreased during the six
months ended June 30, 1997, compared to the same period of 1996. The following
table presents lease revenues less direct expenses by owned equipment type (in
thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
----------------------------
<S> <C> <C>
Rail equipment $ 1,800 $ 1,707
Trailers 1,277 1,784
Aircraft 1,197 1,191
Marine containers 384 699
</TABLE>
Rail equipment: Railcar lease revenues and direct expenses were $2.3 million and
$0.5 million, respectively, for the six months ended June 30, 1997, compared to
$2.4 million and $0.7 million, respectively, during the same period of 1996.
Lease revenues decreased due to the sale of 42 railcars at the end of 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
as a result of the sale of the 42 cars.
Trailers: Trailer lease revenues and direct expenses were $1.6 million and $0.3
million, respectively, for the six months ended June 30, 1997, compared to $2.1
million and $0.3 million, respectively, during the same period of 1996. The
decrease in net contribution was due to the sale of 102 trailers in the six
months ended June 30, 1997. 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 $1.2 million and
$19,000, respectively, for the six months ended June 30, 1997, compared to $1.2
million and $0.0 million, respectively, during the same period of 1996. Aircraft
contribution increased slightly in the six months ended June 30, 1997, compared
to the same period in 1996, due to an increase in the lease rate for an
aircraft, which was partially offset by the sale of another aircraft in the
second quarter of 1997.
Marine containers: Marine container lease revenues were $0.4 million and $0.7
million for the six months ended June 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 $4.1 million for the six months ended June 30, 1997
decreased from $5.4 million for the same period of 1996. The variances are
explained as follows:
(1) A $0.6 million decrease in depreciation and amortization expense from
1996 levels reflects the effect of asset sales in 1996 and 1997.
(2) A $0.5 million decrease in interest expense was due to a decrease in
the level of outstanding debt during the six months ended June 30, 1997,
compared to the same period in 1996. In 1997, the Partnership prepaid $5.5
million of the outstanding notes payable, representing a portion of the
principal payment due March 31, 1999. In 1996, the Partnership prepaid $14.0
million of the outstanding notes payable, representing the principal payment due
March 31, 1998, and a portion of the principal payment due March 31, 1999.
(3) A $0.1 million decrease in administrative expenses from 1996 levels was
due to reduced office expenses and professional services required by the
Partnership.
(4) A $0.1 million decrease in management fees to affiliates reflects the
lower levels of lease revenues in 1997, compared to 1996.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 1997
totaled $1.0 million, and resulted from the sale or disposal of an aircraft,
marine containers, trailers, and railcars, with an aggregate net book value of
$1.7 million, for aggregate proceeds of $2.7 million. For the six months ended
June 30, 1996, the $0.2 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 $0.5 million, for aggregate proceeds of $0.7
million.
<PAGE>
(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 Six Months
Ended June 30,
1997 1996
------------------------------
<S> <C> <C>
Aircraft $ (1,041 ) $ (312 )
Mobile offshore drilling unit - (112 )
</TABLE>
Aircraft: As of June 30, 1997 and 1996, the Partnership owned a 50% investment
in an entity that owns a commercial aircraft. Revenues and expenses were $0.0
and $1.0 million, respectively, for the six months ended June 30, 1997, compared
to $0.2 million and $0.5 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 six months ended June 30, 1997; this aircraft had been on
lease for the entire six months ended June 30, 1996. The Partnership's share of
expenses increased due to the repairs required in 1997 to meet airworthiness
requirements. This increase was 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 an aircraft's lessee that encountered
financial difficulties.
Mobile offshore drilling unit: As of June 30, 1996, the Partnership owned a 55%
investment in an entity that owns a mobile offshore drilling unit (rig). The rig
was sold in the third quarter of 1996.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net income was $0.6 million for
the six months ended June 30, 1997, compared to a net loss of $0.1 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 second
quarter 1997 is not necessarily indicative of future periods. In the six months
ended June 30, 1997, the Partnership distributed $3.7 million to the
unitholders, or $0.50 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, currently $7.5 million, 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 six months of 1997, the Partnership used $5.5 million in proceeds
from the sale of assets and other cash on hand to prepay the remaining portion
of the fourth annual $9.0 million principal installment of the loan due March
31, 1999 and a portion of the final annual $9.0 million principal installment of
the loan due March 31, 2000. In 1996, the Partnership prepaid the third annual
$9.0 million installment of the loan due March 31, 1998 and a portion of the
fourth annual $9.0 million installment due March 31, 1999.
For the six months ended June 30, 1997, the Partnership generated sufficient
operating cash (net cash provided by operating activities plus distributions
from the unconsolidated special-purpose entity) to meet its operating
obligations, but used undistributed available cash from prior periods of
approximately $1.8 million to maintain the current level of distributions ($3.9
million) to the partners.
The cash distributions to be paid in August 1997 was 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 are now
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 will be reduced, significant asset sales may result in
potential special distributions to unitholders.
(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
Second amendment to the second amended and restated limited
partnership agreement.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
PLM EQUIPMENT GROWTH FUND II
By: PLM Financial Services, Inc.
General Partner
Date: August 8, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,455
<SECURITIES> 0
<RECEIVABLES> 2,618
<ALLOWANCES> 1,098
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<PP&E> 64,744
<DEPRECIATION> 49,099
<TOTAL-ASSETS> 24,924
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0
0
<OTHER-SE> 13,972
<TOTAL-LIABILITY-AND-EQUITY> 24,924
<SALES> 0
<TOTAL-REVENUES> 6,677
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<TOTAL-COSTS> 4,599
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</TABLE>
SECOND AMENDMENT
TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PLM EQUIPMENT GROWTH FUND II
This Second Amendment ("Amendment") to the Amended and Restated Limited
Partnership Agreement ("Agreement") of PLM Equipment Growth Fund II
("Partnership") is executed as of November 21, 1996, by its general partner, PLM
Financial Services, Inc., a Delaware corporation ("General Partner"), pursuant
to Article XVIII of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Agreement.
RECITALS
The Partners entered into a Limited Partnership Agreement as of March
30, 1987, a First Amended and Restated Limited Partnership Agreement as of June
5, 1987 and a Second Amended and Restated Limited Partnership Agreement as of
June 16, 1987.
The General Partner now amends the Agreement, pursuant to Article
XVIII, paragraph two, subsections (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's representations and obligations, to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01, 6.02 and 9.02 of the Agreement. In executing this Amendment the General
Partner represents, warrants and agrees, and will take all action to ensure,
that this Amendment does not, and will not, detrimentally affect the Cash
Distributions of the Limited Partners or assignees or the management of the
Partnership by the General Partner.
Now, therefor, the Agreement is amended as follows:
1. Section 6.02 is amended to read in its entirety as follows:
"The General Partner shall not transfer its interest as General Partner
in the Partnership (which transfer shall be deemed as "withdrawal" of the
General Partner for purposes of Section 9.02) or its interest in the
Partnership's capital, earnings or assets (except in connection with the pledge
of the General Partner's assets or right in connection with loans or other
indebtedness) except (a) upon the approval of a majority in interest of the
Limited Partners, or (b) to an Affiliate upon its merger, consolidation with
another person or its transfer pursuant to a reorganization of all or
substantially all of its assets to another person, and the assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such successor or transferee shall on the date of such transfer, merger,
consolidation or reorganization assume all of the duties and obligations of the
General Partner set forth in this Agreement."
IN WITNESS WHEREOF, the General Partner has duly executed this
Amendment as of November 21, 1996.
PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners
By: /s/ J. Michael Allgood
------------------------
Vice President and Chief Financial Officer
