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, 1998
[ ] 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 1-10553
-----------------------
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>
June 30, December 31,
1998 1997
-------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 38,955 $ 50,707
Less accumulated depreciation (28,664) (38,170)
-------------------------------
10,291 12,537
Equipment held for sale -- 788
Net equipment 10,291 13,325
Cash and cash equivalents 2,744 556
Restricted cash -- 395
Accounts receivable, less allowance for doubtful
accounts of $83 in 1998 and $1,146 in 1997 1,129 1,626
Investments in unconsolidated special-purpose entities 670 2,680
Prepaid expenses and other assets 18 49
Total assets $ 14,852 $ 18,631
===============================
Liabilities and partners' capital
Liabilities
Accounts payable and accrued expenses $ 542 $ 365
Due to affiliates 82 195
Lessee deposits and reserve for repairs 787 1,846
Notes payable -- 2,500
-------------------------------
Total liabilities 1,411 4,906
-------------------------------
Partners' capital:
Limited partners (7,381,805 depositary units as of
June 30, 1998 and December 31, 1997) 13,441 13,725
General Partner -- --
-------------------------------
Total partners' capital 13,441 13,725
-------------------------------
Total liabilities and partners' capital $ 14,852 $ 18,631
===============================
</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 Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 1,821 $ 2,468 $ 3,697 $ 5,506
Interest and other income 54 63 126 144
Net gain on disposition of equipment 1,363 859 5,608 1,027
-------------------------------------------------------------------
Total revenues 3,238 3,390 9,431 6,677
-------------------------------------------------------------------
Expenses:
Depreciation and amortization 612 1,150 1,326 2,373
Repairs and maintenance 551 429 996 805
Interest expense -- 193 47 426
Insurance expense to affiliate 24 -- 24 --
Other insurance expense 18 43 40 73
Management fees to affiliate 90 128 188 256
General and administrative expenses
to affiliates 121 158 244 372
Other general and administrative expenses 196 240 454 492
Provision for (recovery of) bad debt 15 (98 ) (73) 228
-------------------------------------------------------------------
Total expenses 1,627 2,243 3,246 5,025
-------------------------------------------------------------------
Equity in net loss of unconsolidated
special-purpose entities (141) (925 ) (253) (1,041)
-------------------------------------------------------------------
Net income $ 1,470 $ 222 $ 5,932 $ 611
===================================================================
Partners' share of net income:
Limited partners $ 1,217 $ 79 $ 5,621 $ 334
General Partner 253 143 311 277
-------------------------------------------------------------------
Total $ 1,470 $ 222 $ 5,932 $ 611
===================================================================
Net income per weighted-average depositary unit
(7,381,805 units, including
1,150 units held in the Treasury, as of
June 30, 1998 and 1997, respectively) $ 0.16 $ 0.01 $ 0.76 $ 0.05
===================================================================
Cash distributions $ 1,166 $ 1,942 $ 2,331 $ 3,885
===================================================================
Cash distributions per weighted-average
depositary unit $ 0.15 $ 0.25 $ 0.30 $ 0.50
===================================================================
Special cash distributions $ 3,885 $ -- $ 3,885 $ --
===================================================================
Special cash distributions per weighted-
average depositary unit $ 0.50 $ -- $ 0.50 $ --
===================================================================
Total cash distributions per weighted-average
depositary unit $ 0.65 $ 0.25 $ 0.80 $ 0.50
===================================================================
</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, 1996
to June 30, 1998 (in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit) as of December 31, 1996 $ 17,434 $ (188 ) $ 17,246
Net income 2,196 499 2,695
Cash distributions (5,905 ) (311 ) (6,216)
Partners' capital as of December 31, 1997 13,725 -- 13,725
Net income 5,621 311 5,932
Cash distributions (2,214 ) (117 ) (2,331)
Special cash distributions (3,691 ) (194 ) (3,885)
Partners' capital as of June 30, 1998 $ 13,441 $ -- $ 13,441
========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
A Limited Partnership
STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, (in thousands of
dollars)
<TABLE>
<CAPTION>
1998 1997
---------------------------------------
<S> <C> <C>
Operating activities
Net income $ 5,932 $ 611
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on disposition of equipment (5,608 ) (1,027 )
Depreciation and amortization 1,326 2,373
Equity in net loss from unconsolidated special-purpose entities 253 1,041
Changes in operating assets and liabilities:
Restricted cash 395 --
Accounts receivable, net 577 (853 )
Prepaid expenses and other assets 31 35
Accounts payable and accrued expenses 177 6
Due to affiliates (113 ) 20
Lessee deposits and reserve for repairs (1,059 ) 63
---------------------------------------
Net cash provided by operating activities 1,911 2,269
---------------------------------------
Investing activities
Proceeds from disposition of equipment 7,236 2,739
Liquidation distributions from unconsolidated special-purpose entities 1,425 --
Reimbursements of capital improvements -- 18
Distributions from (additional investments in) unconsolidated
special-purpose entities 332 (148 )
---------------------------------------
Net cash provided by investing activities 8,993 2,609
---------------------------------------
Financing activities
Principal payments on notes payable (2,500 ) (5,500 )
Cash distribution paid to limited partners (5,905 ) (3,691 )
Cash distribution paid to General Partner (311 ) (194 )
---------------------------------------
Net cash used in financing activities (8,716 ) (9,385 )
---------------------------------------
Net increase (decrease) in cash and cash equivalents 2,188 (4,507 )
Cash and cash equivalents at beginning of period 556 7,962
---------------------------------------
Cash and cash equivalents at end of period $ 2,744 $ 3,455
=======================================
Supplemental information
Interest paid $ 47 $ 426
=======================================
Sale proceeds included in accounts receivable $ 80 $ --
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (the
General Partner), the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund II (the Partnership) as of June 30, 1998 and December 31, 1997, the
statements of income for the three and six months ended June 30, 1998 and
1997, the statements of changes in partners' capital for the period from
December 31, 1996 to June 30, 1998, and the statements of cash flows for
the six months ended June 30, 1998 and 1997. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 1 K
for the year ended December 31, 1997, on file at the Securities and
Exchange Commission.
2. Cash Distributions
Cash distributions are recorded when paid and totaled $6.2 million and $3.9
million for the six months ended June 30, 1998 and 1997, respectively and
$5.1 million and $1.9 million for the three months ended June 30, 1998 and
1997, respectively. In addition, a $3.9 million special distribution was
paid to the partners during the six months ended June 30, 1998, from the
proceeds realized on the sale of equipment in 1998 and 1997. Cash
distributions to limited partners in excess of net income are considered to
represent a return of capital. Cash distributions to limited partners of
$0.3 million and $3.4 million for the six months ended June 30, 1998 and
1997, respectively, were deemed to be a return of capital. Cash
distributions related to the results from the second quarter of 1998 of
$1.1 million, are payable during August 1998.
3. Transactions with General Partner and Affiliates
Partnership management fees of $0.1 million and $0.2 million were payable
as of June 30, 1998 and December 31, 1997, respectively.
The Partnership's proportional share of the data processing and
administrative expenses incurred by the unconsolidated special-purpose entities
(USPEs) was $4,000 and $3,000 for the six months ended June 30, 1998 and 1997,
respectively and $9,000 and $3,000 for the three months ended June 30, 1998 and
1997, respectively.
4. Equipment
Owned equipment held for operating lease is stated at cost. The components
of owned equipment held for operating lease are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Rail equipment $ 17,345 $ 17,401
Trailers 14,197 17,144
Marine containers 7,413 8,308
Aircraft -- 7,854
----------------------------------------
38,955 50,707
Less accumulated depreciation (28,664) (38,170)
10,291 12,537
Equipment held for sale -- 788
Net equipment $ 10,291 $ 13,325
========================================
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND II
A Limited Partnership
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
4. Equipment (continued)
As of June 30, 1998, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 129 marine
containers and a rail equipment with an aggregate net book value of $0.2
million. As of December 31, 1997, all equipment was either on lease or operating
in PLM-affiliated short-term trailer rental facilities, except for 168 marine
containers and 3 rail equipment with an aggregate net book value of $0.4
million.
During the six months ended June 30, 1998, the Partnership sold or disposed
an aircraft, marine containers, trailers, and rail equipment, with an aggregate
net book value of $1.7 million, for proceeds of $7.3 million. For the six months
ended June 30, 1997, the Partnership sold or disposed of an aircraft, marine
containers, trailers, and rail equipment, with an aggregate net book value of
$1.7 million, for proceeds of $2.7 million.
5. Investments in Unconsolidated Special-Purpose Entities
The net investments in USPEs included the following jointly-owned equipment
(and related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------------------------------
<S> <C> <C>
50% interest in a Boeing 727-200 aircraft $ 670 $ 1,235
23% interest in a Boeing 727-200 aircraft -- 1,445
Net investments $ 670 $ 2,680
=======================================
</TABLE>
During the six months ended June 30, 1998, the General Partner sold a
Boeing 727-200 aircraft in which the Partnership owned a 23% interest, at
approximately its net book value. The Partnership received liquidating
distributions of $1.4 million from this USPE during the first quarter of 1998.
The Partnership's 50% investment in a commercial aircraft was off-lease at June
30, 1998 and December 31, 1997.
6. Notes Payable
During the six months ended June 30, 1998, the Partnership prepaid the $2.5
million remaining 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 PLM Equipment Growth Fund II's (the Partnership) Operating
Results for the Three Months Ended June 30, 1998 and 1997
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance and
asset-specific insurance expenses) on owned equipment decreased during the
second quarter of 1998 when compared to the same quarter of 1997. The following
table presents lease revenues less direct expenses by owned equipment type (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Rail equipment $ 688 $ 875
Trailers 502 483
Aircraft 34 577
Marine containers 33 85
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $1.0
million and $0.3 million, respectively, for the second quarter of 1998, compared
to $1.1 million and $0.2 million, respectively, during the same quarter of 1997.
Rail equipment contribution decreased in the second quarter of 1998, compared to
the same quarter of 1997, due to the sale of rail equipment in 1998 and 1997.
Rail equipment expenses increased due to running repairs required on certain of
the rail equipment during the second quarter of 1998, which were not needed
during 1997.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the second quarter of 1998 and 1997. The number of
trailers owned by the Partnership has been declining over the past twelve months
due to sales and dispositions. Although the number of trailers has been
declining, the Partnership had an increase in the trailer contribution due to
higher utilization for the remaining fleet when compared to the same period in
1997.
Aircraft: Aircraft lease revenues and direct expenses were $50,000 and $16,000,
respectively, for the second quarter of 1998, compared to $0.6 million and
$10,000, respectively, during the same quarter of 1997. Aircraft contribution
decreased in the second quarter of 1998, compared to the same quarter of 1997,
due to the sale of the remaining aircraft fleet in 1998 and 1997.
Marine containers: Marine containers lease revenues were $35,000 and $0.1
million during the second quarter of 1998 and 1997, 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 $1.1 million for the second quarter of 1998 decreased
from $1.8 million for the same quarter in 1997. The variances are explained as
follows:
(i) A $0.5 million decrease in depreciation and amortization expense from 1997
levels reflects the effect of asset sales in 1998 and 1997.
(ii) A $0.2 million decrease in interest expense is due to the repayment of the
Partnership's outstanding debt.
(iii) A $0.1 million decrease in administrative expenses from 1997 levels due to
reduced office expenses and professional services required by the Partnership
resulting primarily from asset sales.
(iv) The $0.1 million increase in bad debt expense in 1998 is due to the
collection of $0.1 million in 1997 for outstanding receivables from certain
lessees that were previously reserved for as bad debts, a similar collection was
not received in 1998.
(c) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the second quarter of 1998 totaled $1.4
million, and resulted from the disposal or sale of an aircraft, trailers, and
marine containers, with an aggregate net book value of $0.6 million, for
aggregate proceeds of $2.0 million. For the same quarter in 1997, the $0.9
million net gain on disposition of equipment resulted from the sale or disposal
of an aircraft, trailers, marine containers, and rail equipment, with an
aggregate net book value of $1.3 million, for aggregate proceeds of $2.2
million.
(d) Equity in Net Loss of Unconsolidated Special-Purpose Entities (USPEs)
Equity in net loss of unconsolidated special-purpose entities (USPEs) represents
net loss generated from the operation of jointly-owned assets accounted for
under the equity method (see Note 5 to the financial statements).
As of June 30, 1998 and 1997, the Partnership owned a 50% interest in an entity
which owns a commercial aircraft that was off lease during the second quarter of
1998 and 1997. Expenses were $0.1 million and $0.9 million, respectively, for
the second quarter of 1998 and 1997. The Partnership's share of expenses
decreased in the second quarter of 1998 due to repairs required in the second
quarter of 1997 that were not needed in the second quarter of 1998.
(e) Net Income
As a result of the foregoing, the Partnership's net income was $1.5 million for
the second quarter of 1998, compared to net income of $0.2 million during the
second quarter of 1997. The Partnership's ability to operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors, and the Partnership's performance in the second quarter of 1998
is not necessarily indicative of future periods. In the second quarter of 1998,
the Partnership distributed regular cash distributions of $1.1 million to the
limited partners, or $0.15 per weighted-average depositary unit. In addition,
the Partnership distributed a special distribution of $3.7 million to the
limited partners, or $0.50 per weighted-average depositary unit.
Comparison of the Partnership's Operating Results for the Six Months Ended June
30, 1998 and 1997
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, and
asset-specific insurance expenses) on owned equipment decreased during the six
months ended June 30, 1998, compared to the same period of 1997. The following
table presents lease revenues less direct expenses by owned equipment type (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Rail equipment $ 1,461 $ 1,800
Trailers 1,034 1,277
Marine containers 130 384
Aircraft 49 1,197
</TABLE>
Rail equipment: Rail equipment lease revenues and direct expenses were $2.1
million and $0.6 million, respectively, for the six months ended June 30, 1998,
compared to $2.3 million and $0.5 million, respectively, during the same period
of 1997. Lease revenues decreased due to the sale of rail equipment in 1998 and
1997. Rail equipment expenses increased due to running repairs required on
certain of the rail equipment during the six months ended June 30, 1998, which
were not needed during 1997.
Trailers: Trailer lease revenues and direct expenses were $1.4 million and $0.4
million, respectively, for the six months ended June 30, 1998, compared to $1.6
million and $0.3 million, respectively, during the same period of 1997. The
decrease in net contribution was primarily due to the sale of trailers in 1998
and 1997. Trailer expenses increased due to repairs required on certain of the
trailers during the six months ended June 30, 1998, which were not needed during
1997.
Marine containers: Marine container lease revenues were $0.1 million and $0.4
million for the six months ended June 30, 1998 and 1997, 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.
Aircraft: Aircraft lease revenues and direct expenses were $0.1 million and
$35,000, respectively, for the six months ended June 30, 1998, compared to $1.2
million and $19,000, respectively, during the same period of 1997. Aircraft
contribution decreased in the six months ended June 30, 1998, compared to the
same period in 1997, due to the sale of the remaining aircraft fleet in 1998 and
1997.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.2 million for the six months ended June 30, 1998
decreased from $4.1 million for the same period of 1997. The variances are
explained as follows:
(i) A $1.0 million decrease in depreciation and amortization expense from 1997
levels reflects the effect of asset sales in 1998 and 1997.
(ii) A $0.4 million decrease in interest expense is due to the repayment of the
Partnership's outstanding debt.
(iii) A $0.2 million decrease in administrative expenses from 1997 levels was
due to reduced office expenses and professional services required by the
Partnership resulting primarily from asset sales.
(iv) A $0.3 million decrease in bad debt expense due to a $0.1 million decrease
in reserve for a certain lessee resulting from the application of security
deposits against uncollected outstanding receivable, and the collection of $0.2
million in 1998 of outstanding receivables from certain lessees that were
previously reserved for as bad debts in 1997.
(v) A $0.1 million decrease in management fees to affiliates reflects the lower
levels of lease revenues in the six months ended June 30, 1998, compared to the
same period in 1997.
(c) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 1998
totaled $5.6 million, and resulted from the sale or disposal of an aircraft,
marine containers, trailers, and rail equipment, with an aggregate net book
value of $1.7 million, for aggregate proceeds of $7.3 million. For the six
months ended June 30, 1997, the $1.0 million net gain on disposition of
equipment resulted from the sale or disposal of an aircraft, marine containers,
trailers, and rail equipment, with an aggregate net book value of $1.7 million,
for aggregate proceeds of $2.7 million.
(d) Equity in Net Loss of Unconsolidated Special-Purpose Entities
Equity in net loss of unconsolidated special-purpose entities represents net
loss generated from the operation of jointly-owned assets accounted for under
the equity method.
As of June 30, 1998 and 1997, the Partnership owned a 50% interest in an entity
which owns a commercial aircraft that was off lease during the six months ended
June 30, 1998 and 1997. Expenses were $0.2 million and $1.0 million,
respectively, for the six months ended June 30, 1998 and 1997. The Partnership's
share of expenses decreased in the six months ended June 30, 1998, due to
repairs required during 1997, which were not required for the same period in
1998. During the first quarter of 1998, the General Partner sold for
approximately its book value the Partnership's 23% investment in an entity that
owned an aircraft.
<PAGE>
(e) Net Income
As a result of the foregoing, the Partnership's net income was $5.9 million for
the six months ended June 30, 1998, compared to net income of $0.6 million
during the same period of 1997. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the six months
ended June 30, 1998 is not necessarily indicative of future periods. In the six
months ended June 30, 1998, the Partnership distributed regular cash
distributions of $2.2 million to the unitholders, or $0.30 per weighted-average
depositary unit. In addition, the Partnership distributed a special distribution
of $3.7 million to the limited partners, 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 limited partnership agreement. As of June 30, 1998, the Partnership
has no outstanding indebtedness. The Partnership relies on operating cash flow
to meet its operating obligations and make cash distributions to the limited
partners.
In the six months ended June 30, 1998, the Partnership used $2.5 million in
proceeds from the sale of assets to prepay the outstanding debt.
For the six months ended June 30, 1998, the Partnership generated $2.2 million
in operating cash (net cash provided by operating activities plus distributions
from unconsolidated special-purpose entities) to meet its operating obligations,
but used undistributed available cash from prior periods of approximately $0.1
million to maintain the level of regular cash distributions (total of $2.3
million in the six months ended June 30, 1998) to the partners. During the six
months ended June 30, 1998, the General Partner sold owned equipment on behalf
of the Partnership and realized proceeds of approximately $7.3 million of which
the Partnership received $7.2 million. A special distribution of $3.9 million
($0.50 per weighted-average depositary unit) was paid on May 21, 1998.
During the six months ended June 30, 1998, the Partnership sold or disposed of
aircraft, marine containers, trailers, and rail equipment, with an aggregate net
book value of $1.7 million, for proceeds of $7.3 million.
(III) YEAR 2000 COMPLIANCE
The General Partner is currently addressing the Year 2000 computer software
issue. The General Partner is creating a timetable for carrying out any program
modifications that may be required. The General Partner does not anticipate that
the cost of these modifications allocable to the Partnership will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998, with earlier application permitted. The effect of adoption of these
statements will be limited to the form and content of the Partnership's
disclosures and will not impact the Partnership's results of operations, cash
flow, or financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General Partner is reviewing the effect this standard will have on the
Partnership's consolidated financial statements.
<PAGE>
(V) OUTLOOK FOR THE FUTURE
Since the Partnership is in its orderly 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 scheduled termination
of the Partnership at the end of the year 2000.
Several factors may affect the Partnership's operating performance in 1998 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is intended to reduce its exposure to volatility in individual
equipment sectors.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The unpredictability of some of these
factors, or of their occurrence, makes it difficult for the General Partner to
clearly define trends or influences that may impact the performance of the
Partnership's equipment. The General Partner 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.
The Partnership intends to use cash flow from operations to satisfy its
operating requirements and pay cash distributions to the investors.
(VI) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
-11-
<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 3, 1998 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,744
<SECURITIES> 0
<RECEIVABLES> 1,212
<ALLOWANCES> 83
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38,955
<DEPRECIATION> 28,664
<TOTAL-ASSETS> 14,852
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0
0
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</TABLE>
