-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Wb0cv4QI5P8iI0ebRoh1Q6ftUsb+uvtQfL0ALLeX6AYbVtbi0PMDWAucNtesJ4QY XA9UlAbAS9IvopoJoNjTJA== 0000812072-94-000008.txt : 19941121 0000812072-94-000008.hdr.sgml : 19941121 ACCESSION NUMBER: 0000812072-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM EQUIPMENT GROWTH FUND II CENTRAL INDEX KEY: 0000812072 STANDARD INDUSTRIAL CLASSIFICATION: 7359 IRS NUMBER: 943041013 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10553 FILM NUMBER: 94559176 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 900 STREET 2: C/O ONE MARKET PLAZA CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended September 30, 1994. [ ] 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 jurisiction of (I.R.S. Employer incorporation or organization Identification No.) One Market, Steuart Street Tower Suite 900, San Francisco, CA 94105-1301 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code (415) 974-1399 _______________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of units outstanding of each of the issuer's classes of partnership units, as of the last practicable date: Class Outstanding at November 11, 1994 Limited Partnership Depositary Units 7,492,905 General Partnership Units 1 Limited Partnership Units General Partnership Units PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) BALANCE SHEETS (thousands of dollars)
ASSETS September 30, December 31, 1994 1993 Equipment held for operating leases $ 124,750 $ 149,451 Less accumulated depreciation (72,739) (83,035) Net equipment 52,011 66,416 Cash and cash equivalents 18,257 5,996 Restricted cash 382 8,178 Accounts receivable, less allowance for doubtful accounts of $260 in 1994 and $235 in 1993 2,623 2,807 Deferred charges, net of accumulated amortization of $1,717 in 1994 and $1,855 in 1993 336 489 Prepaid expenses and other assets 110 320 Total assets $ 73,719 $ 84,206 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 1,297 $ 1,773 Due to affiliates 314 355 Notes payable 35,000 35,000 Prepaid deposits and reserve for repairs 3,577 4,216 Total liabilities 40,188 41,344 Partners' capital (deficit): Limited Partners (7,492,905 Depositary Units, including 1,150 Depositary Units held in the Treasury) at September 30, 1994 and December 31, 1993 34,256 43,894 General Partner (725) (1,032) Total partners' capital 33,531 42,862 Total liabilities and partners' capital $ 73,719 $ 84,206
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF OPERATIONS (thousands of dollars except per unit amounts)
For the three months For the nine months ended September 30, ended September 30, 1994 1993 1994 1993 Revenues: Lease revenue $ 5,983$ 7,357 $ 18,263$ 22,787 Interest and other income 175 53 531 198 Net gain on disposition of equipment 125 38 765 6,550 Total revenues 6,283 7,448 19,559 29,535 Expenses: Depreciation and amortization 2,710 3,514 8,231 10,092 Management fees to affiliate 299 365 911 1,148 Interest expense 569 408 1,942 1,296 Insurance expense to affiliate 135 243 239 854 Other insurance expense 158 162 505 662 Repairs and maintenance 770 1,461 3,350 3,956 Marine equipment operating expenses 1,074 1,097 2,929 4,108 General and administrative expenses to affiliates 185 247 522 595 Other general and administrative expenses 194 314 741 889 Bad debt expense 5 -- 55 -- Loss on revaluation of equipment -- -- -- 161 Total expenses 6,099 7,811 19,425 23,761 Net income (loss) $ 184$ (363) $ 134$ 5,774 Partners' share of net income (loss): Limited Partners $ (234)$ (521) $ (646)$ 5,300 General Partner 418 158 780 474 Total $ 184$ (363) $ 134$ 5,774 Net income (loss) per Depositary Unit (7,492,905 Units, including 1,150 Units held in Treasury at September 30, 1994 and 1993;$ (0.03)$ (0.06) $ (0.09)$ 0.70 Cash distributions $ 3,155$ 3,196 $ 9,465$ 9,510 Cash distributions per Depositary Unit $ 0.40$ 0.40 $ 1.20$ 1.20 See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF CASH FLOWS (thousands of dollars)
For the nine months ended September 30, 1994 1993 Operating activities: Net income $ 134 $ 5,774 Adjustments to reconcile net income to net cash provided by operating activities: Net gain on disposition of equipment (765) (6,550) Loss on revaluation of equipment -- 161 Write-off of unamortized loan origination costs 305 -- Depreciation and amortization 8,231 10,092 Changes in operating assets and liabilities Restricted cash (91) (14) Accounts receivable, net 278 (1,491) Due to affiliates (146) 68 Prepaid expenses and other assets 210 354 Insurance reimbursement receivable -- 2,661 Accounts payable and accrued expenses (636) 219 Prepaid deposits and reserve for repairs 1,561 1,822 Cash provided by operating activities 9,081 13,096 Investing activities: Proceeds from disposition of equipment 9,782 12,796 Payments of acquisition-related fees to affiliate (93) (565) Payments for purchase of equipment (3,949) (12,343) Payments for capital improvements (725) -- Payments for lease negotiation fees (21) -- Decrease in restricted cash 7,887 1,524 Cash provided by investing activities 12,881 1,412 Financing activities: Proceeds from note payable 35,000 -- Principal payments on notes payable (35,000) (3,218) Cash distributions paid to partners (9,465) (9,510) Payments of debt issuance costs (236) -- Repurchase of Depositary Units -- (70) Payment for loan fees -- (50) Cash used in financing activities (9,701) (12,848) Cash and cash equivalents: Net increase in cash and cash equivalents 12,261 1,660 Cash and cash equivalents at beginning of period 5,996 2,225 Cash and cash equivalents at end of period $ 18,257 $ 3,885 Supplemental information: Interest paid $ 1,638 $ 1,312
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1994 1. Opinion of Management In the opinion of the management of PLM Financial Services, Inc., the General Partner, the accompanying unaudited financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the financial position of PLM Equipment Growth Fund II (the "Partnership") as of September 30, 1994, the statements of operations for the three and nine months ended September 30, 1994 and 1993, and the statements of cash flows for the nine months ended September 30, 1994 and 1993. 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, 1993, on file at the Securities and Exchange Commission. 2. Reclassification Certain amounts in the 1993 financial statements have been reclassified to conform with the 1994 presentation. Transportation equipment held for operating leases at September 30, 1994, and December 31, 1993, includes equipment previously reported as held for sale. 3. Restricted Cash Under the Partnership's new loan agreement (See Footnote 6 to the Financial Statements), at September 30, 1994, the Partnership is no longer required to deposit proceeds realized on the sale or disposal of equipment into a joint escrow account, to be held for equipment acquisitions or debt paydown only. At December 31, 1993, the Partnership was required to deposit proceeds realized on the sale or disposal of equipment into the joint escrow account, and the proceeds could only be used for the above-mentioned purposes. 4. Cash Distributions Cash distributions are recorded when paid and totaled $9,465,000 and $3,155,000 for the nine and three months ended September 30, 1994, respectively. Cash distributions to unitholders in excess of net income are considered to represent a return of capital. Cash distributions to unitholders of $8,992,000 and $3,734,000 for the nine months ended September 30, 1994, and 1993, respectively, were deemed to be a return of capital. Cash distributions of $2,997,000 ($0.40 per Depositary Unit) were declared on September 14, 1994, and are to be paid on November 15, 1994, to the unitholders of record as of September 30, 1994. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1994 5. Equipment Equipment held for operating leases is stated at cost. As of September 30, 1994, the General Partner reclassified assets shown as held for sale at December 31, 1993, to equipment held for operating lease, unless the particular asset is subject to a pending contract of sale. The components of equipment are as follows (in thousands):
September 30, December 31, 1994 1993 Equipment held for operating leases: Rail equipment $ 19,768 $ 19,800 Marine containers 18,476 17,889 Marine vessels 4,702 29,461 Aircraft 50,644 49,939 Trailers and tractors 14,844 16,049 Mobile offshore drilling unit 16,316 16,313 124,750 149,451 Less accumulated depreciation (72,739) (83,035) Net equipment $ 52,011 $ 66,416
As of September 30, 1994, all equipment in the Partnership portfolio was either on lease or operating in PLM-affiliated short-term trailer rental facilities, except for 337 marine containers. As of December 31, 1993, 73 marine containers and three railcars were off lease. The aggregate carrying value of equipment off lease was $1,520,000 and $172,000 at September 30, 1994, and December 31, 1993, respectively. Between January 1, 1994, and September 30, 1994, the Partnership purchased 1,959 used marine containers and 113 trailers at a cost of $3,949,000 and was obligated to pay acquisition and lease negotiation fees of $217,000 (of which $114,000 has been paid) to PLM Transportation Equipment Corporation ("TEC"), a wholly-owned subsidiary of the General Partner. Between January 1, 1993, and September 30, 1993, the Partnership purchased 26 trailers at a cost of $241,000 and was obligated to pay acquisition and lease negotiation fees of $14,000 to TEC. In addition, the Partnership purchased a 55% interest in a mobile offshore drilling unit for $12,100,000 (the remaining interest in this equipment is owned by an affiliated partnership). In connection with this purchase, the Partnership was obligated to pay acquisition and lease negotiation fees of $666,000 (of which $451,000 has been paid) to TEC. During the nine months ended September 30, 1994, the Partnership sold or disposed of 328 marine containers, two railcars, 266 trailers, and two marine vessels with a net book value of $11.1 million, and unused drydock reserves and closing costs of $2.0 million, for proceeds of $9.8 million. For the nine months ended September 30, 1993, the Partnership sold or disposed of 237 marine containers, 639 railcars, two marine vessels, 23 tractors and 54 trailers with a net book value of $7.0 million, and unused drydock reserves of $0.7 million, for proceeds of $12.8 million. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1994 6. Notes Payable On March 31, 1994, the Partnership completed a refinancing of its $35 million bank loan which was due on September 30, 1995. The new $35 million loan facility is unsecured and non- recourse, limits additional borrowings, and specifies covenants related to collateral coverage, fixed charge coverage, ratios for market value, and composition of the equipment owned by the Partnership. The loan facility bears interest at LIBOR + 1.55% per annum (6.36% at September 30, 1994) and is payable quarterly in arrears. Principal is payable in annual installments of $4 million on March 31, 1996 and 1997, $9 million on March 31, 1998 and 1999, and a final payment of $9 million on March 31, 2000. 7. Subsequent Event During November 1994, the Partnership purchased for $8.0 million, 536 piggyback trailers, which are currently on lease with Kankakee, Beaverville and Southern Railroad Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (A) Sources The Partnership's primary source of liquidity is operating cash flow. The Partnership's level of operating cash flow has declined from 1993 levels due in part to depressed conditions in certain equipment markets (see "Trends" below) that have impacted re-leasing rates, and the sale of certain partnership equipment. The Partnership uses net operating cash flow primarily to pay cash distributions to the Partners and, to the extent available, to add to working capital reserves. Proceeds realized from the sale or disposal of equipment may be used for the purchase of additional equipment or the repayment of outstanding debt. The Partnership's sources of capital include proceeds from its initial public offering of limited partnership units, debt financing, and during the reinvestment phase of the Partnership, excess net cash flow from operations remaining after a certain level of distributions has been made to the Limited Partners. On March 31, 1994, the Partnership completed a refinancing of its $35 million bank loan which was due on September 30, 1995. The new debt comprises notes payable of $35 million, and the corresponding loan agreements require the Partnership to maintain a minimum debt coverage ratio based on the fair market value of equipment, a minimum fixed charge coverage ratio, and limits over-concentration in any one equipment type. The loan facility bears interest at LIBOR + 1.55% per annum (6.36% at September 30, 1994) and is payable quarterly in arrears. Principal is payable in annual installments of $4 million on March 31, 1996 and 1997, $9 million on March 31, 1998 and 1999, and a final payment of $9 million on March 31, 2000. The Partnership is currently in compliance with the debt covenants. (B) Asset Sales and Purchases Equipment sales and dispositions prior to the Partnership's planned liquidation phase can result from a performance-based decision by the General Partner or, in some cases, an election of the lessee provided for in certain lease agreements. Additionally, certain lessees are required to pay stipulated loss values on equipment lost or disposed of during the term of the lease agreement. The General Partner intends to use the proceeds realized either from the selective sale of assets or the incidental disposal of equipment to invest in additional equipment during the reinvestment phase of Partnership operations, and subsequent to that phase, to distribute such proceeds to the Partners or pay down debt. Proceeds from these sales, together with excess net operating cash flow from operations that remains after cash distributions have been made to the Limited Partners, will be used to acquire additional equipment throughout the intended seven year reinvestment phase for the Partnership which ends September 30, 1995. During the nine months ended September 30, 1994, the Partnership purchased 1,959 marine containers and 113 trailers at a cost of $3.9 million, and disposed of 328 marine containers, two railcars, 266 trailers, and two marine vessels for proceeds of $9.8 million. In November, 1994, the Partnership also purchased for $8.0 million, 536 piggyback trailers which are currently on lease with Kankakee, Beaverville and Southern Railroad Company. Except as stated above, the General Partner has no additional planned expenditures but anticipates available cash will be invested in equipment as appropriate opportunities are identified. Additionally, the General Partner is not aware of any contingencies that would require capital resources other than those provided by operating cash flow and sales and liquidation proceeds. (C) Depositary Unit Repurchase Plan On December 28, 1992, the Partnership engaged in a program to repurchase up to 200,000 Depositary Units. As of September 30, 1994, the Partnership had cumulatively repurchased 6,700 Depositary Units at a cost of $70,000. In October, a total of 1,800 units were repurchased at a cost of $21,000. (D) Market Values The General Partner prepares an evaluation of the fair market value and net realizable value of the Partnership's equipment portfolio at least annually, using, among other sources, independent third-party appraisals, values reported in trade publications, and comparative values from arms-length transactions for similar equipment. Concurrently, the General Partner evaluates whether the current fair market value of equipment represents the effects of current market conditions or permanent impairment of value (e.g., technological obsolescence or regulatory changes, etc.). Equipment whose carrying value is determined to be permanently impaired, without possibility of being leased at an acceptable rate, has its book value adjusted to its estimated net realizable value. Uncertain market conditions have caused the General Partner to continuously monitor the changes in market values for Partnership equipment, and on occasion, the General Partner has made adjustments to Partnership equipment values to reflect this volatility. While there has continued to be a general decline in certain market values, the total fair market value of the assets still exceeds the Partnership's carrying value. No adjustments to reflect impairment of equipment carrying values were required in the nine months ended September 30, 1994. Comparison of the Partnership's Operating Results for the Three Months Ended September 30, 1994 and 1993 (A) Revenues Total revenues of $6.3 million for the quarter ended September 30, 1994, declined from $7.4 million for the same period in 1993. This decrease resulted primarily from lower lease revenue. (1) Lease revenues decreased to $6.0 million in the quarter ended September 30, 1994, from $7.4 million in the same period in 1993. The following table lists lease revenues earned by equipment type:
For the three months ended September 30, 1994 1993 Marine vessels $ 1,653 $ 2,942 Rail equipment 1,202 1,183 Aircraft 1,171 1,244 Trailers and tractors 899 895 Mobile offshore drilling units 643 482 Marine containers 415 611 $ 5,983 $ 7,357
Significant revenue component changes from quarter to quarter resulted primarily from: (a) declines of $1.3 million in marine vessel revenues due to the sale of one marine vessel in the fourth quarter 1993, which was on a voyage charter during the third quarter of 1993, and lower re-lease charter rates for two vessels which were sold at the end of the third quarter of 1994; (b) declines of $0.2 million in marine container revenues primarily due to a group of marine containers which were on- lease in the third quarter of 1993, but off-lease in 1994, offset, in part, by revenue earned on the 1,959 containers purchased in 1994; (c) an increase of $0.2 million in mobile offshore drilling unit ("rig") revenue due to a full quarter of revenue received in 1994 compared to a partial quarter in 1993. The acquisition of a 55% interest in the rig occurred during July 1993; (d) declines of $0.1 million in aircraft revenue due to the sale of an aircraft in the fourth quarter of 1993. (2) Net gain on disposition of equipment during the third quarter of 1994 totaled $0.1 million from the sale or disposal of four trailers, 144 marine containers, two railcars, and two marine vessels with a net book value of $9.9 million, and unused drydock reserves and closing costs of $2.0 million, for proceeds of $8.0 million. During the same period in 1993, the net gain on disposition of equipment was $0.04 million from the sale or disposal of 51 railcars, three tractors and trailers, and 91 marine containers with a net book value of $0.25 million, for proceeds of $0.29 million. (B) Expenses Total expenses for the quarter ended September 30, 1994, decreased to $6.1 million from $7.8 million for the same period in 1993. The decrease in 1994 expenses was primarily attributable to decreases in depreciation expense, repairs and maintenance, and overall general and administrative expenses. (1) Direct operating expenses (defined as repairs and maintenance, insurance expenses, and marine operating expenses) decreased to $2.1 million in the third quarter of 1994, from $3.0 million in the same period in 1993. This decrease resulted from: (a) decreases of $0.7 million in repairs and maintenance costs from 1993 levels resulted from the sale of a marine vessel in the fourth quarter of 1993; (b) decreases of $0.1 million in the cost of marine vessel insurance resulted from the sale of three vessels in 1993. (2) Indirect operating expenses (defined as depreciation expense, management fees, interest expense, general and administrative expenses, and bad debt expense) decreased to $4.0 million in the third quarter of 1994 from $4.8 million in the same period in 1993. This decrease resulted from: (a) decreases in depreciation expense of $0.8 million from 1993 levels, reflecting the Partnership's double-declining depreciation method and the effect of asset sales in 1993 and 1994, partially offset by the acquisition of the rig in July 1993; (b) decreases in all general and administrative expenses of $0.2 million from 1993 levels due to reduced professional services required by the Partnership and lower storage expenses incurred by two aircraft which were off-lease in the third quarter of 1993; (c) decreases of $0.1 million in management fees to affiliates, reflecting the lower levels of lease revenues in 1994 as compared to 1993; (d) increases of $0.2 million in interest expense resulting from a higher base rate of interest charged on the Partnership's debt. (C) Net Income (Loss) The Partnership's net income of $0.2 million for the third quarter of 1994 increased from a net loss of $0.4 million in the same period of 1993. The Partnership's ability to acquire, operate, or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors and the Partnership's performance in the third quarter 1994 is not necessarily indicative of future periods. In the third quarter 1994, the Partnership distributed $3.0 million to the Limited Partners, or $0.40 per Depositary Unit. Comparison of the Partnership's Operating Results for the Nine Months Ended September 30, 1994 and 1993 (A) Revenues Total revenues of $19.6 million for the nine months ended September 30, 1994, declined from $29.5 million for the same period in 1993. This decrease resulted primarily from lower gains realized on the disposition of assets and from lower lease revenue. (1) Lease revenues decreased to $18.3 million in the nine months ended September 30, 1994 from $22.8 million in the same quarter of 1993. The following table lists lease revenues earned by equipment type:
For the nine months ended September 30, 1994 1993 Marine vessels $ 5,142 $ 9,496 Aircraft 3,771 3,774 Rail equipment 3,619 4,162 Trailers and tractors 2,590 2,638 Mobile offshore drilling units 1,852 775 Marine containers 1,289 1,942 $ 18,263 $ 22,787
Significant revenue component changes resulted primarily from: (a) declines of $4.4 million in marine vessel revenues due to the sale of three on-lease vessels during the first and fourth quarters of 1993 and lower re-lease charter rates for two vessels which were sold at the end of the third quarter of 1994; (b) declines of $0.5 million in railcar revenues due to the sale of 639 railcars during 1993; (c) declines of $0.7 million in marine container revenues primarily due to a group of marine containers which were on lease in 1993, but off-lease in 1994, offset, in part, by revenue earned on 1,959 marine containers purchased in 1994; (d) although aircraft revenues remained relatively the same, revenues decreased due to the sale of an aircraft in the fourth quarter of 1993. This decrease was offset entirely by the re- lease of an aircraft which was off-lease for most of 1993; (e) increases of $1.1 million in mobile offshore drilling unit ("rig") revenue due to the acquisition of a 55% interest in a rig during July of 1993. (2) Net gain on disposition of equipment during the nine months ended September 30, 1994, totaled $0.8 million from the sale or disposal of 266 trailers, 328 marine containers, two railcars, and two marine vessels with a net book value of $11.1 million, and unused drydock reserves and closing costs of $2.0 million, for proceeds of $9.8 million. During the same period in 1993, the Partnership sold or disposed of two marine vessels, 639 railcars, 77 tractors and trailers, and 237 marine containers with a net book value of $7.0 million and unused drydock reserves of $0.7 million, for proceeds of $12.8 million (See Footnote 5 to the Financial Statements). (B) Expenses Total expenses for the nine months ended September 30, 1994, decreased to $19.4 million from $23.8 million for the same period in 1993. The decrease in 1994 expenses was primarily attributable to decreases in depreciation expense, marine vessel operating expenses, and insurance expense, partially offset by an increase in interest expense. (1) Direct operating expenses (defined as repairs and maintenance, insurance expenses, and marine operating expenses) decreased to $7.0 million for the nine months ended September 30, 1994, from $9.6 million in the same period of 1993. This decrease resulted from: (a) decreases of $0.8 million insurance expense which resulted primarily from the sale of three marine vessels in 1993 and a refund of $0.2 million from an insurance pool which the Partnership's marine vessels participate in, due to lower than estimated insurance claims in the pool; (b) decreases of $1.2 million in marine vessel operating expenses due to the sale of three marine vessels in 1993. This decrease was offset by increased operating costs for three marine vessels which operated under leases (voyage charters and utilization-based pooling arrangements) in which the Partnership paid costs not incurred when the vessels operated under time charters in the similar period one year earlier; (c) decreases of $0.6 million in repairs and maintenance expenses due to the sale of three marine vessels in 1993, offset by increases in trailer expenses resulting from the increased number of trailers coming off term leases which required refurbishment prior to transitioning to short-term rental facilities operated by an affiliate of the General Partner. (2) Indirect operating expenses (defined as depreciation expense, management fees,interest expense, general and administrative expenses, and bad debt expense) decreased to $12.4 million for the nine months ended September 30, 1994, from $14.0 million in the same period of 1993. This decrease resulted primarily from: (a) decreases in depreciation expense of $1.8 million from 1993 levels, reflecting the Partnership's double-declining balance depreciation method and the effect of asset sales in 1993 and 1994, partially offset by the acquisition of the rig in July 1993; (b) decreases of $0.2 million in management fees to affiliates, reflecting the lower levels of lease revenues in 1994 as compared to 1993; (c) decreases in general and administrative expenses of $0.2 million from 1993 levels due to reduced professional services required by the Partnership and lower storage expenses for two aircraft which were off-lease for most of 1993; (d) increases in interest expense of $0.6 million from a $0.3 million write-off of unamortized loan origination costs due to the refinancing of the Partnership's debt and a $0.3 million increase due to a higher base rate of interest charged on the Partnership's debt during 1994, offset by a reduction in the amount of debt outstanding when compared to the same period in 1993. (C) Net Income The Partnership's net income of $0.1 million for the nine months ended September 30, 1994, decreased from a net income of $5.8 million for the same period in 1993. The Partnership's ability to acquire, operate, or liquidate assets, secure leases, and re-lease those assets whose leases expire during the duration of the Partnership is subject to many factors and the Partnership's performance in the nine months of 1994 is not necessarily indicative of future periods. In the nine months of 1994, the Partnership distributed $9.0 million to the Limited Partners, or $1.20 per Depositary Unit. Trends Due in part to continuing recessionary conditions in Europe and Japan over the last year and low oil and gas prices, the markets for certain types of transportation equipment, primarily mobile offshore drilling units, marine containers, and vessels are performing below historic norms. These conditions have resulted in lower lease rates and reduced values for these types of equipment and have significantly impacted the Partnership's cash flow. The General Partner will closely monitor the effects of these factors on the Partnership's financial condition, and as stated previously, take appropriate actions regarding underperforming equipment. The return of lease rates on certain types of equipment to their historical levels may be dependent on a number of factors including improved international economic conditions, the absence of technological obsolescence, new government regulations, increased industry-specific demand, and the increased availability of financing. The Partnership intends to use excess cash flow, if any, after payment of expenses, loan principal, and cash distributions, to acquire additional equipment during the first seven years of Partnership operations which ends September 30, 1995. The General Partner believes these acquisitions, if any, may generate additional earnings and cash flow for the Partnership. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. 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 FUND II By: PLM Financial Services, Inc. General Partner Date: November 11, 1994 By: David J. Davis Vice President and Corporate Controller 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 FUND II By: PLM Financial Services, Inc. General Partner Date: November 11, 1994 By: /s/ David J. Davis David J. Davis Vice President and Corporate Controller EX-27 2
5 This schedule contains summary financial information extracted from the third quarter 10-Q and is qualified in its entirety by reference to such 10-Q. 9-MOS DEC-31-1994 SEP-30-1994 18257 0 2623 260 0 0 124750 72739 73719 0 0 0 0 0 33531 73719 0 19559 0 17483 0 0 1942 134 0 0 0 0 0 134 0 0
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