UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 1999
[ ] 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 unit amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-----------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease, at cost $ 34,219 $ 36,212
Less accumulated depreciation (26,021 ) (27,223 )
-----------------------------
Net equipment 8,198 8,989
Cash and cash equivalents 2,216 1,986
Accounts receivable, less allowance for doubtful
accounts of $88 in 1999 and $91 in 1998 723 975
Investment in an unconsolidated special-purpose entity 363 494
Prepaid expenses and other assets 20 30
-------------------------------------------------------------------------------------------------------------
Total assets $ 11,520 $ 12,474
=============================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 304 $ 352
Due to affiliates 73 83
Lessee deposits and reserve for repairs 790 772
-----------------------------
Total liabilities 1,167 1,207
-----------------------------
Partners' capital:
Limited partners (7,381,805 depositary units as of
March 31, 1999 and December 31, 1998) 10,353 11,267
General Partner -- --
-----------------------------
Total partners' capital 10,353 11,267
-----------------------------
Total liabilities and partners' capital $ 11,520 $ 12,474
=============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands of dollars, except weighted-average unit
amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
REVENUES
<S> <C> <C>
Lease revenue $ 1,457 $ 1,876
Interest and other income 24 72
Net gain on disposition of equipment 152 4,245
----------------------------
Total revenues 1,633 6,193
EXPENSES
Depreciation 514 714
Repairs and maintenance 395 445
Equipment operating expenses 20 --
Interest expense -- 47
Insurance expense 9 22
Management fees to affiliate 79 98
General and administrative expenses to affiliates 83 123
Other general and administrative expenses 181 258
Recovery of bad debt (3 ) (88 )
----------------------------
Total expenses 1,278 1,619
Equity in net loss of unconsolidated special-
purpose entities (133 ) (112 )
----------------------------
Net income $ 222 $ 4,462
============================
PARTNERS' SHARE OF NET INCOME
Limited partners $ 166 $ 4,404
General Partner 56 58
----------------------------
Total $ 222 $ 4,462
============================
Net income per weighted-average depositary unit $ 0.02 $ 0.60
============================
Cash distribution $ 1,136 $ 1,165
============================
Cash distribution per weighted-average depositary unit $ 0.15 $ 0.15
============================
</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, 1997 TO MARCH 31, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
---------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1997 $ 13,725 $ -- $ 13,725
Net income 5,606 425 6,031
Cash distribution (4,373 ) (231 ) (4,604 )
Special cash distribution (3,691 ) (194 ) (3,885 )
---------------------------------------------------
Partners' capital as of December 31, 1998 11,267 -- 11,267
Net income 166 56 222
Cash distribution (1,080 ) (56 ) (1,136 )
---------------------------------------------------
Partners' capital as of March 31, 1999 $ 10,353 $ -- $ 10,353
===================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
-----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 222 $ 4,462
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 514 714
Net gain on disposition of equipment (152 ) (4,245 )
Equity in net loss from unconsolidated special-purpose entities 133 112
Changes in operating assets and liabilities:
Restricted cash -- 395
Accounts receivable, net 252 396
Prepaid expenses and other assets 10 15
Accounts payable and accrued expenses (48 ) 17
Due to affiliates (10 ) (87 )
Lessee deposits and reserve for repairs 18 (702 )
-----------------------------------
Net cash provided by operating activities 939 1,077
-----------------------------------
INVESTING ACTIVITIES
Proceeds from disposition of equipment 429 5,349
Liquidation distributions from unconsolidated special-purpose entities -- 1,425
Additional investments in unconsolidated special-purpose entities (2 ) (50 )
-----------------------------------
Net cash provided by investing activities 427 6,724
-----------------------------------
FINANCING ACTIVITIES
Principal payments on notes payable -- (2,500 )
Cash distribution paid to limited partners (1,080 ) (1,107 )
Cash distribution paid to General Partner (56 ) (58 )
-----------------------------------
Net cash used in financing activities (1,136 ) (3,665 )
-----------------------------------
Net increase in cash and cash equivalents 230 4,136
Cash and cash equivalents at beginning of period 1,986 556
-----------------------------------
Cash and cash equivalents at end of period $ 2,216 $ 4,692
===================================
SUPPLEMENTAL INFORMATION
Interest paid $ -- $ 47
===================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (the
General Partner), the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund II (the Partnership) as of March 31, 1999 and December 31, 1998, the
statements of income for the three months ended March 31, 1999 and 1998,
the statements of cash flows for the three months ended March 31, 1999 and
1998, and the statements of changes in partners' capital for the period
from December 31, 1997 to March 31, 1999. 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, 1998, on file at the Securities and
Exchange Commission.
2. Schedule of Partnership Phases
In accordance with the limited partnership agreement, the Partnership
entered its passive phase on January 1, 1996 and as a result, the
Partnership is not permitted to reinvest in equipment. On January 1, 1999,
the Partnership entered its liquidation phase and has commenced an orderly
liquidation of the Partnership assets. The Partnership will terminate on
December 31, 2006, unless terminated earlier upon sale of all equipment or
by certain other events.
Since the end of 1995, in accordance with the Partnership Agreement, the
General Partner may no longer reinvest cash flows and surplus funds in
equipment. All future cash flows and surplus funds if any, are to be used
for distributions to partners, except to the extent used to maintain
reasonable reserves. Beginning January 1, 1999, the General Partner will
begin the liquidation phase of the Partnership with the intent to commence
an orderly liquidation of the Partnership assets. During the liquidation
phase, the Partnership's assets will continue to be recorded at the lower
of carrying amount or fair value less cost to sell.
3. Cash Distribution
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
three months ended March 31, 1999 and 1998, cash distributions totaled $1.1
million and $1.2 million, respectively. Cash distributions to the limited
partners of $0.9 million and $0 million for the three months ended March
31, 1999 and 1998, respectively, were deemed to be a return of capital.
Cash distributions related to the results from the first quarter of 1999 of
$1.1 million, will be paid during May 1999.
4. Transactions with General Partner and Affiliates
Partnership management fees of $0.1 million were payable as of March 31,
1999 and December 31, 1998.
The Partnership's proportional share of the data processing and
administrative expenses incurred by the unconsolidated special purpose
entities (USPEs) was $0 and $5,000 for the three months ended March 31,
1999 and 1998, respectively.
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
5. Equipment
The components of owned equipment were as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------------------
<S> <C> <C>
Railcars $ 16,311 $ 17,320
Trailers 11,628 11,884
Marine containers 6,280 7,008
------------------------------------
34,219 36,212
Less accumulated depreciation (26,021 ) (27,223 )
---------------------------------------------------------------------------------
Net equipment $ 8,198 $ 8,989
====================================
</TABLE>
As of March 31, 1999, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 71 marine
containers and 4 railcars with an aggregate net book value of $0.1 million.
As of December 31, 1998, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 6 railcars
and 115 marine containers with an aggregate net book value of $0.2 million.
During the three months ended March 31, 1999, the Partnership sold or
disposed of marine containers, trailers, and railcars, with an aggregate
net book value of $0.3 million, for proceeds of $0.4 million.
For the three months ended March 31, 1998, the Partnership sold or disposed
an aircraft, marine containers, trailers, and railcars, with an aggregate
net book value of $1.1 million, for proceeds of $5.3 million.
6. Investments in Unconsolidated Special-Purpose Entity
The net investment in an USPE consisted of a 50% interest in a trust owning
a Boeing 737-200A aircraft (and related assets and liabilities) totaling
$0.4 million and $0.5 million as of March 31, 1999 and December 31, 1998,
respectively. This aircraft was off lease as of March 31, 1999 and December
31, 1998.
(This space intentionally left blank.)
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
7. Operating Segments
The Partnership operates in four different segments: aircraft leasing,
marine container leasing, trailer leasing and railcar leasing. Each
equipment leasing segment engages in short-term to mid-term operating
leases to a variety of customers. The following tables present a summary of
the operating segments (in thousands of dollars):
<TABLE>
<CAPTION>
Marine
Aircraft Container Trailer Railcar All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Other<F1> Total
------------------------------------ ------- ------- ------- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ -- $ 41 $ 464 $ 952 $ -- $ 1,457
Interest income and other -- -- -- -- 24 24
Gain (loss) on disposition of -- (83 ) 43 192 -- 152
equipment
--------------------------------------------------------------
Total revenues -- (42 ) 507 1,144 24 1,633
COSTS AND EXPENSES
Operations support -- 1 124 295 4 424
Depreciation -- 88 225 201 -- 514
Management fees -- 3 29 48 -- 80
General and administrative 1 2 73 46 141 263
expenses
Provision for (recovery of) bad -- -- 3 (6 ) -- (3 )
debts
--------------------------------------------------------------
Total costs and expenses 1 94 454 584 145 1,278
--------------------------------------------------------------
Equity in net loss of USPE (133 ) -- -- -- -- (133 )
--------------------------------------------------------------
==============================================================
Net income (loss) $ (134 ) $ (136 ) $ 53 $ 560 $ (121 )$ 222
==============================================================
Total assets as of March 31, 1999 $ 363 $ 993 $ 4,437 $ 2,768 $ 2,959 $ 11,520
==============================================================
<FN>
<F1> Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Marine
Aircraft Container Trailer Railcar All
For the quarter ended March 31, 1998 Leasing Leasing Leasing Leasing Other<F2> Total
------------------------------------ ------- ------- ------- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 33 $ 98 $ 692 $ 1,053 $ -- $ 1,876
Interest income and other -- -- -- -- 72 72
Gain (loss) on disposition of 3,673 (36 ) 211 397 -- 4,245
equipment
--------------------------------------------------------------
Total revenues 3,706 62 903 1,450 72 6,193
COSTS AND EXPENSES
Operations support 18 1 160 281 7 467
Depreciation 74 103 332 205 -- 714
Interest expense -- -- -- -- 47 47
Management fees 5 5 38 50 -- 98
General and administrative 4 6 144 39 188 381
expenses
(Recovery of) provision for bad (72 ) -- (17 ) 1 -- (88 )
debts
--------------------------------------------------------------
Total costs and expenses 29 115 657 576 242 1,619
--------------------------------------------------------------
Equity in net loss of USPEs (112 ) -- -- -- -- (112 )
--------------------------------------------------------------
==============================================================
Net income (loss) $ 3,565 $ (53 ) $ 246 $ 874 $ (170 )$ 4,462
==============================================================
Total assets as of March 31, 1998 $ 1,556 $ 1,544 $ 5,811 $ 3,763 $ 5,982 $ 18,656
==============================================================
<FN>
<F2> Includes interest income and costs not identifiable to a particular
segment, such as interest expense, and certain operations support and
general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
8. Net Income Per Weighted-Average Partnership Unit
Net income per weighted-average Partnership unit was computed by dividing
net income attributable to limited partners by the weighted-average number
of Partnership units deemed outstanding during the period. The
weighted-average number of Partnership units deemed outstanding during the
three months ended March 31, 1999 and 1998 was 7,381,805.
9. Contingencies
The Partnership, together with affiliates, has initiated litigation in
various official forums in India against a defaulting Indian airline lessee
to repossess Partnership property and to recover damages for failure to pay
rent and failure to maintain such property in accordance with relevant
lease contracts. The Partnership has repossessed all of its property
previously leased to such airline, and the airline has ceased operations.
In response to the Partnership's collection efforts, the airline filed
counter-claims against the Partnership in excess of the Partnership's
claims against the airline. The General Partner believes that the airline's
counterclaims are completely without merit, and the General Partner will
vigorously defend against such counterclaims.
(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 PLM Equipment Growth Fund II's (the Partnership's) Operating
Results for the Three Months Ended March 31, 1999 and 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset-specific insurance expenses) on owned equipment decreased during the first
quarter of 1999 when compared to the same quarter of 1998. Gains or losses from
the sale of equipment, interest and other income and certain expenses such as
depreciation and general and administrative expenses relating to the operating
segments (see Note 7 to the financial statements), are not included in the owned
equipment operation discussion because they are indirect in nature and not a
result of operations but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by segment (in
thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Railcars $ 657 $ 772
Trailers 340 532
Marine containers 40 97
Aircraft -- 15
</TABLE>
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.3
million, respectively, for the first quarter of 1999, compared to $1.1 million
and $0.3 million, respectively, during the same quarter of 1998. Railcar
contribution decreased in the first quarter of 1999, compared to the same
quarter of 1998, due to the sale of railcars in 1999 and 1998.
Trailers: Trailer lease revenues and direct expenses were $0.5 million and $0.1
million, respectively, for the first quarter of 1999, compared to $0.7 million
and $0.2 million, respectively, during the same quarter of 1998. The decrease in
trailer contribution was primarily due to the sale of trailers in 1999 and 1998.
Marine containers: Marine container lease revenues were $40,000 and $0.1 million
during the first quarter of 1999 and 1998, 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.
Aircraft: Aircraft lease revenues and direct expenses were $33,000 and $18,000,
respectively, for the first quarter of 1998. The Partnership's remaining
aircraft was sold in 1998.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.9 million for the first quarter of 1999 decreased
from $1.2 million for the same quarter in 1998. Significant variances are
explained as follows:
(i) A $0.2 million decrease in depreciation expense from 1998 levels
reflects the effect of asset sales in 1999 and 1998.
(ii) A $0.1 million decrease in general and administrative expenses from
1998 levels due to reduced office expenses and professional services required by
the Partnership, resulting from the reduced equipment portfolio.
(iii) A $47,000 decrease in interest expense was due to the repayment of
the Partnership's outstanding debt in the first quarter of 1998.
(iv)The $0.1 million decrease in recovery of bad debt was due to the
application, in the first quarter of 1998 of security deposits against
uncollected outstanding receivable for a certain lessee. A similar recovery did
not occur in 1999.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the first quarter of 1999 totaled $0.2
million, and resulted from the disposal or sale of trailers, marine containers,
and railcars, with an aggregate net book value of $0.3 million, for aggregate
proceeds of $0.4 million. For the same quarter in 1998, net gain on disposition
of equipment totaled $4.2 million, and resulted from the disposal or sale of an
aircraft, trailers, marine containers, and railcars, with an aggregate net book
value of $1.1 million, for aggregate proceeds of $5.3 million.
(D) Equity in Net Loss of Unconsolidated Special-Purpose Entities (USPEs)
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 (see Note 5 to the financial statements).
As of March 31, 1999 and 1998, the Partnership owned a 50% interest in an entity
which owns a commercial aircraft that was off lease during the first quarter of
1999 and 1998. The Partnership's share of expenses for this entity were $0.1
million for the first quarter of 1999 and 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.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $0.2 million for
the first quarter of 1999, compared to net income of $4.5 million during the
first quarter of 1998. 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 first quarter of 1999
is not necessarily indicative of future periods. In the first quarter of 1999,
the Partnership distributed $1.1 million to the limited partners, or $0.15 per
weighted-average depositary unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the quarter ended March 31, 1999, the Partnership generated $0.9 million in
operating cash (net cash provided by operating activities plus non-liquidating
distributions from unconsolidated special-purpose entities) to meet its
operating obligations, but used undistributed available cash from prior periods
of approximately $0.2 to maintain the level of distributions (total of $1.1
million in the first quarter of 1999) to the partners.
During the quarter ended March 31, 1999, the Partnership sold or disposed of
marine containers, trailers, and railcars, with an aggregate net book value of
$0.3 million, for proceeds of $0.4 million.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional capital
to that mentioned above.
The Partnership is in its active liquidation phase. As a result, 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 may be reduced, significant asset sales
may result in potential special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the
Partnership after final disposal of assets and settlement of liabilities, the
amounts cannot be accurately determined prior to actual disposal of the
equipment.
<PAGE>
(III) EFFECTS OF YEAR 2000
It is possible that the General Partner's currently installed computer systems,
software products, and other business systems, or the Partnership's vendors,
service providers, and customers, working either alone or in conjunction with
other software or systems, may not accept input of, store, manipulate, and
output dates on or after January 1, 2000 without error or interruption (a
problem commonly known as the "Year 2000" problem). Since the Partnership relies
substantially on the General Partner's software systems, applications, and
control devices in operating and monitoring significant aspects of its business,
any Year 2000 problem suffered by the General Partner could have a material
adverse effect on the Partnership's business, financial condition, and results
of operations.
The General Partner has established a special Year 2000 oversight committee to
review the impact of Year 2000 issues on its software products and other
business systems in order to determine whether such systems will retain
functionality after December 31, 1999. The General Partner (a) is currently
integrating Year 2000-compliant programming code into its existing internally
customized and internally developed transaction processing software systems and
(b) the General Partner's accounting and asset management software systems have
either already been made Year 2000-compliant or Year 2000-compliant upgrades of
such systems are planned to be implemented by the General Partner before the end
of fiscal 1999. Although the General Partner believes that its Year 2000
compliance program can be completed by the beginning of 1999, there can be no
assurance that the compliance program will be completed by that date. To date,
the costs incurred and allocated to the Partnership to become Year 2000
compliant have not been material. Also, the General Partner believes the future
cost allocable to the Partnership to become Year 2000 compliant will not be
material.
It is possible that certain of the Partnership's equipment lease portfolio may
not be Year 2000 compliant. The General Partner is currently contacting
equipment manufacturers of the Partnership's leased equipment portfolio to
assure Year 2000 compliance or to develop remediation strategies. The General
Partner does not expect that non-Year 2000 compliance of the Partnership's
leased equipment portfolio will have an adverse material impact on its financial
statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
General Partner or Partnership to control, including the extent to which third
parties can address the Year 2000 problem. The General Partner is communicating
with vendors, services providers, and customers in order to assess the Year 2000
compliance readiness of such parties and the extent to which the Partnership is
vulnerable to any third-party Year 2000 issues. There can be no assurance that
the software systems of such parties will be converted or made Year 2000
compliant in a timely manner. Any failure by the General Partner or such other
parties to make their respective systems Year 2000 compliant could have a
material adverse effect on the business, financial position, and results of
operations from the Partnership. The General Partner will make an ongoing effort
to recognize and evaluate potential exposure relating to third-party Year 2000
non-compliance, and will develop a contingency plan if the General Partner
determines that third-party non-compliance will have a material adverse effect
on the Partnership's business, financial position, or results of operation.
The General Partner is currently developing a contingency plan to address the
possible failure of any systems due to the Year 2000 problems. The General
Partner anticipates these plans will be completed by September 30, 1999.
(IV) OUTLOOK FOR THE FUTURE
Since the Partnership is in its active 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.
Several factors may affect the Partnership's operating performance in 1999 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
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 continually 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 partners.
(V) 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During the first quarter of 1999, 27% of the Partnership's total lease
revenues from wholly- and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in United States (U.S.)
currency. If these lessee's currency devalues against the U.S. dollar, the
lessees could encounter difficulty in making the U.S. dollar denominated lease
payments.
<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: April 28, 1999 By: /s/ Richard K Brock
--------------------------
Richard K Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,216
<SECURITIES> 0
<RECEIVABLES> 811
<ALLOWANCES> 88
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 34,219
<DEPRECIATION> 26,021
<TOTAL-ASSETS> 11,520
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,353
<TOTAL-LIABILITY-AND-EQUITY> 11,520
<SALES> 0
<TOTAL-REVENUES> 1,633
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,281
<LOSS-PROVISION> (3)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 222
<INCOME-TAX> 0
<INCOME-CONTINUING> 222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
