-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OQGmiBdUehE1NRS3fc8+ZkNA9YtTHMwullFkddlJxHH7CLxW+qGYNVP80LdJV4fK vAGvwEE/Masfy/lBeuXkSw== 0000812072-96-000005.txt : 19960813 0000812072-96-000005.hdr.sgml : 19960813 ACCESSION NUMBER: 0000812072-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM EQUIPMENT GROWTH FUND II CENTRAL INDEX KEY: 0000812072 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [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: 96608574 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 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, 1996. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 33-32258 ----------------------- PLM EQUIPMENT GROWTH FUND II (Exact name of registrant as specified in its charter) California 94-3041013 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower Suite 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 ______ PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) BALANCE SHEETS (in thousands of dollars) ASSETS
June 30, December 31, 1996 1995 ------------------------------------ Equipment held for operating leases $ 91,631 $ 93,980 Less accumulated depreciation (66,072 ) (65,000 ) ------------------------------------ Net equipment 25,559 28,980 Cash and cash equivalents 5,180 6,427 Restricted cash 415 548 Investment in unconsolidated special purpose entities 9,912 10,515 Accounts receivable, less allowance for doubtful accounts of $450 in 1996 and $19 in 1995 1,856 2,198 Deferred charges, net of accumulated amortization of $1,414 in 1996 and $1,374 in 1995 197 237 Prepaid expenses and other assets 17 52 ------------------------------------ Total assets $ 43,136 $ 48,957 ==================================== LIABILITIES Liabilities: Accounts payable and accrued expenses $ 383 $ 409 Due to affiliates 246 398 Note payable 27,000 27,000 Prepaid deposits and reserve for repairs 2,677 2,954 ------------------------------------ Total liabilities 30,306 30,761 Partners' capital (deficit): Limited Partners (7,385,605 and 7,426,305 Depositary Units, including 1,150 Depositary Units held in the Treasury at June 30, 1996 and December 31, 1995) 13,227 18,658 General Partner (397 ) (462 ) ------------------------------------ Total partners' capital 12,830 18,196 ------------------------------------ Total liabilities and partners' capital $ 43,136 $ 48,957 ====================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF OPERATIONS (In thousands of dollars except per unit amounts)
For the three months For the six months ended June 30, ended June 30, 1996 1995 1996 1995 ---------------------------------------------------------------- Revenues: Lease revenue $ 3,200 $ 4,407 $ 6,381 $ 8,938 Interest and other income 69 104 142 249 Net gain on disposition of equipment 53 804 167 854 ---------------------------------------------------------------- Total revenues 3,322 5,315 6,690 10,041 Expenses: Depreciation and amortization 1,458 1,985 2,925 4,330 Management fees to affiliate 172 196 321 434 Interest expense 483 555 971 1,267 Insurance expense to affiliate -- -- -- 87 Other insurance expense 16 78 37 95 Repairs and maintenance 573 848 963 1,401 Marine equipment operating expenses -- 179 -- 145 General and administrative expenses to affiliates 15 231 209 462 Other general and administrative expenses 422 327 732 638 Bad debt expense 194 233 225 251 ---------------------------------------------------------------- Total expenses 3,333 4,632 6,383 9,110 ---------------------------------------------------------------- Equity in net loss of unconsolidated special purpose entities (22 ) -- (424 ) -- ---------------------------------------------------------------- Net income (loss) $ (33 ) $ 683 $ (117 ) $ 931 ================================================================ Partners' share of net income (loss): Limited Partners $ (166 ) $ 614 $ (435 ) $ 679 General Partner 133 69 318 252 ---------------------------------------------------------------- Total $ (33 ) $ 683 $ (117 ) $ 931 ================================================================ Net income (loss) per Depositary Unit (7,385,605 and 7,439,005 Units, including 1,150 Units held in Treasury respectively, at June 30, 1996 and 1995) $ (0.02 ) $ 0.08 $ (0.06 ) $ 0.09 ================================================================ Cash distributions $ 1,943 $ 3,138 $ 5,070 $ 6,284 ================================================================ Cash distributions per Depositary Unit $ 0.25 $ 0.40 $ 0.65 $ 0.80 ================================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1994 to June 30, 1996 (in thousands of dollars)
Limited General Partners Partner Total --------------------------------------------------- Partners' capital (deficit) at December 31, 1994 $ 30,850 $ (697 ) $ 30,153 Net income (loss) 75 862 937 Cash distributions (11,922 ) (627 ) (12,549 ) Repurchase of Depositary Units (345 ) -- (345 ) --------------------------------------------------- Partners' capital (deficit) at December 31, 1995 18,658 (462 ) 18,196 Net income (loss) (435 ) 318 (117 ) Cash distributions (4,817 ) (253 ) (5,070 ) Repurchase of Depositary Units (179 ) -- (179 ) --------------------------------------------------- Partners' capital (deficit) at June 30, 1996 $ 13,227 $ (397 ) $ 12,830 ===================================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the six months ended June 30, 1996 1995 ----------------------------------- Operating activities: Net income (loss) $ (117 ) $ 931 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Net gain on disposition of equipment (167 ) (854 ) Depreciation and amortization 2,925 4,330 Loss from unconsolidated special purpose entities in excess of cash received 603 -- Changes in operating assets and liabilities: Restricted cash 133 -- Accounts receivable, net 342 2 Due to affiliate (152 ) 128 Prepaid expenses and other assets 35 66 Accounts payable and accrued expenses (26 ) 165 Accrued drydock expenses -- 271 Prepaid deposits and reserve for repairs (277 ) (717 ) ----------------------------------- Cash provided by operating activities 3,299 4,322 ----------------------------------- Investing activities: Proceeds from disposition of equipment 709 4,070 Payments for capital improvements (6 ) (11 ) ----------------------------------- Cash provided by investing activities 703 4,059 Financing activities: Principal payments on notes payable -- (7,000 ) Cash distributions paid to Limited Partners (4,817 ) (5,970 ) Cash distributions paid to General Partner (253 ) (314 ) Repurchase of Depositary Units (179 ) (266 ) ----------------------------------- Cash used in financing activities (5,249 ) (13,550 ) ----------------------------------- Cash and cash equivalents: Net (decrease) increase in cash and cash equivalents (1,247 ) (5,169 ) Cash and cash equivalents at beginning of period 6,427 12,348 ----------------------------------- Cash and cash equivalents at end of period $ 5,180 $ 7,179 =================================== Supplemental information: Interest paid $ 971 $ 1,261 ===================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 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, 1996, the statements of operations for the three and six months ended June 30, 1996 and 1995, the statements of changes in partners' capital and the statements of cash flows for the six months ended June 30, 1996 and 1995. 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, 1995, on file at the Securities and Exchange Commission. 2. Investment in Unconsolidated Special Purpose Entities Prior to 1996, the Partnership accounted for operating activities associated with joint ownership of transporation equipment as undivided interests, including its proportionate share of each asset with similar wholly-owned assets in its financial statements. Under generally accepted accounting principles, the effects of such activities, if material, should be reported using the equity method of accounting. Therefore, effective January 1, 1996, the Partnership adopted the equity method to account for its investment in such jointly-held assets. The principle differences between the previous accounting method and the equity method relate to the presentation of activities relating to these assets in the statement of operations. Whereas, under equity accounting the Partnership's proportionate share is presented as a single net amount, equity in net income (loss) of unconsolidated special purpose entities, under the previous method, the Partnership's income statement reflected its proportionate share of each individual item of revenue and expense. Accordingly, the effect of adopting the equity method of accounting has no cumulative effect on previously reported partner's capital or on the Partnership's net income (loss) for the period of adoption. Because the effects on previously issued financial statements of applying the equity method of accounting to investments in jointly-owned assets are not considered to be material to such financial statements taken as a whole, previously issued financial statements have not been restated. However, certain items have been reclassified in the previously issued balance sheet to conform to the current period presentation. The net investment in unconsolidated special purpose entities includes the following jointly-owned equipment (and related assets and liabilities) (in thousands):
June 30, December 31, 1996 1995 --------------------------------- 50% interest in a Boeing 737-200A aircraft $ 1,969 $ 2,365 55% interest in a mobile offshore drilling unit 7,943 8,150 -------------------------------- Investment in unconsolidated special purpose entities $ 9,912 $ 10,515 ================================
During the six months ended June 30, 1995, the Partnership sold it's investments in a 50% owned DC-9 aircraft and a 50% owned marine vessel, included in "Investment in Unconsolidated Special Purpose Entities," with an aggregate net book value of $3.2 million and unused drydock reserves of $0.3 million, for proceeds of $3.5 million. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 3. Cash Distribution Cash distributions are recorded when paid and totaled $5,070,000 and $6,284,000 for the six months ended June 30, 1996 and 1995, respectively, and $1,943,000 and $3,138,000 for the three months ended June 30, 1996 and 1995, respectively. Cash distributions to Limited Partners in excess of net income are considered to represent a return of capital. Cash distributions to Limited Partners of $4,817,000 and $5,291,000 for the six months ended June 30, 1996, and 1995, respectively, were deemed to be a return of capital. Cash distributions of $1,943,000 ($0.25 per Depositary Unit) were declared on July 14, 1996, and are to be paid on August 15, 1996, to the unitholders of record as of June 30, 1996. 4. Repurchase of Depositary Units On December 28, 1992, the Partnership engaged in a program to repurchase up to 200,000 Depositary Units. In the six months ended June 30, 1996, the Partnership had purchased and canceled 42,100 Depositary Units at a cost of $0.2 million. As of June 30, 1996, the Partnership had cumulatively repurchased 102,700 Depositary Units at a cost of $0.8 million. 5. Delisting of Partnership Units The General Partner delisted the Partnership's depositary units from the American Stock Exchange (AMEX) under the symbol GFY on April 8, 1996. The last day for trading on the AMEX was March 22, 1996. Under the Internal Revenue Code (the Code), the Partnership was classified as a Publicly Traded Partnership. The Code treats all Publicly Traded Partnerships as corporations if they remain publicly traded after December 31, 1997. Treating the Partnership as a corporation would mean the Partnership itself would become a taxable, rather than a "flow through" entity. As a taxable entity, the income of the Partnership would have become subject to federal taxation at both the partnership level and at the investor level to the extent that income would have become distributed to an investor. In addition, the General Partner believed that the trading price of the Depositary Units would have been distorted when the Partnership began the final liquidation of the underlying equipment portfolio. In order to avoid taxation of the Partnership as a corporation and to prevent unfairness to Unitholders, the General Partner delisted the Partnership's Depositary Units from the AMEX. While the Partnership's Depositary Units are no longer publicly traded on a national stock exchange, the General Partner continues to manage the equipment of the Partnership and prepare and distribute quarterly and annual reports and Forms 10-Q and 10-K in accordance with the Securities and Exchange Commission requirements. In addition, the General Partner continues to provide pertinent tax reporting forms and information to Unitholders. The General Partner anticipates an informal market for the Partnership's units may develop in the secondary marketplace similar to that which currently exists for non-publicly traded partnerships. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 1996 6. Equipment Owned equipment held for operating leases is stated at cost. The components of equipment are as follows (in thousands): June 30, December 31, 1996 1995 -------------------------------- Equipment held for operating leases: Rail equipment $ 19,708 $ 19,747 Marine containers 12,408 13,399 Aircraft 37,901 37,902 Trailers and tractors 21,614 22,932 ------------------------------- 91,631 93,980 Less accumulated depreciation (66,072 ) (65,000 ) ------------------------------- =============================== Net equipment $ 25,559 $ 28,980 =============================== Revenues are earned by placing the equipment under operating leases which are generally billed monthly or quarterly. The Partnership's marine vessel and certain of its marine containers are leased to operators of utilization-type leasing pools which include equipment owned by unaffiliated parties. In such instances revenues received by the Partnership consist of a specified percentage of revenues generated by leasing the equipment to sublessees, after deducting certain direct operating expenses of the pooled equipment. Rents for railcars are based on mileage traveled or a fixed rate; rents for all other equipment are based on fixed rates. As of June 30, 1996, all equipment in the Partnership's portfolio was either on lease or operating in PLM-affiliated short-term trailer rental facilities, except for an aircraft, 334 marine containers and 23 railcars. With the exception of 266 marine containers and one tractor, all equipment in the Partnership portfolio was either on lease or operating in PLM-affiliate short-term trailer rental facilities at December 31, 1995. The aggregate carrying value of equipment off-lease was $2,831,000 and $1,136,000 at June 30, 1996 and December 31, 1995, respectively. During the six months ended June 30, 1996, the Partnership sold or disposed of 143 marine containers, 106 trailers and three railcars with an aggregate net book value of $0.5 million, for proceeds of $0.7 million. For the six months ended June 30, 1995, the Partnership sold or disposed of 140 marine containers, eight trailers, one tractor and one railcar, with an aggregate net book value of $0.3 million, for proceeds of $0.6 million. 7. Notes Payable In 1995, the Partnership prepaid $8 million of the outstanding note payable of $35 million. This payment was applied to the principal payments due March 31, 1996 and 1997. In June 1996, the General Partner revised the "Committed Bridge Facility" and PLM Equipment Growth Fund II is no longer included as a borrower. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (I) RESULTS OF OPERATIONS Comparison of the Partnership's Operating Results for the Three Months Ended June 30, 1996 and 1995 (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance, marine equipment operating, and asset specific insurance expenses) on owned equipment decreased during the second quarter of 1996 when compared to the same quarter of 1995. The following table presents lease revenues less direct expenses by owned equipment type (in thousands):
For the three months ended June 30, 1996 1995 ---------------------------- Aircraft $ 601 $ 192 Trailers 899 1,155 Rail equipment 765 1,048 Marine containers 346 443
Aircraft: Aircraft lease revenues and direct expenses were $0.6 million and $9,000, respectively, for the second quarter of 1996, compared to $0.8 million and $0.6 million, respectively, during the same quarter of 1995. Lease revenues decreased due to the off-lease status of an aircraft in 1996. Direct expenses decreased due to the costs incurred in the second quarter of 1995 to refurbish another aircraft prior to being re-leased; Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.1 million, respectively, for the second quarter of 1996, compared to $1.3 million and $0.1 million, respectively, during the same quarter of 1995. The decrease was due to the sale of 102 trailers in the second quarter of 1996. In addition, the trailer fleet is experiencing lower utilization in the PLM affiliated short-term rental yards; Rail equipment: Railcar lease revenues and direct expenses were $1.2 million and $0.4 million, respectively, for the second quarter of 1996, compared to $1.2 million and $0.2 million, respectively, during the same quarter of 1995. Although the railcar fleet remained relatively the same size for both quarters, the decrease in railcar contribution resulted from running repairs required on certain of the railcars during 1996 which were not needed during 1995; Marine containers: Marine container lease revenues were $0.3 million and $0.4 million during the second quarter of 1996 and 1995, respectively. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container revenue. (B) Indirect expenses related to owned equipment operations Total indirect expenses remained constant from the second quarter ended June 30, 1995 to the same period in 1996. Although indirect expenses remained relatively the same, depreciation and amortization expenses increased slightly offset by decreases in interest and administrative expenses. (C) Net gain on disposition of owned equipment Net gain on disposition of equipment for the second quarter of 1996 totaled $0.1 million which resulted from the disposal or sale of 102 trailers, 73 marine containers and two railcars with an aggregate net book value of $0.4 million, for aggregate proceeds of $0.5 million. For the same period in 1995, the $0.2 million net gain on disposition of equipment resulted from the sale or disposal of the eight trailers, one tractor, 79 marine containers, and one railcar, with an aggregate net book value of $0.2 million, for proceeds of $0.4 million. (D) 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 2 to the financial statements).
For the three months ended June 30, 1996 1995 ---------------------------- Aircraft $ 49 $ 95 Mobile offshore drilling unit (71 ) (93 ) Marine vessel -- 376
Aircraft: As of June 30, 1996 and 1995, the Partnership owned a 50%-interest in a commercial aircraft. Aircraft lease revenues and expenses remained relatively the same from the second quarter of 1996 compared to the same period in 1995. During 1995, the Partnership also had a 50% investment in a DC-9 aircraft which was sold during the second quarter. The sale generated a gain of $0.1 million. Mobile offshore drilling unit: As of June 30, 1996 and 1995, the Partnership owned a 55% interest in a mobile offshore drilling unit (rig). The Partnership's share of revenue decreased $0.1 million from the second quarter of 1996 compared to the same period in 1995 due to the rig being off-lease for a month in 1996. Expenses remained relatively the same for both periods. Marine vessel: In the second quarter of 1995, the Partnership sold it's 50% interest in a marine vessel. (E) Net Income (loss) As a result of the foregoing, the Partnership's net loss of $33,000 for the second quarter of 1996, decreased from net income of $0.7 million during the same period in 1995. The Partnership's ability to operate and 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 second quarter of 1996 is not necessarily indicative of future periods. In the second quarter of 1996, the Partnership distributed $1.8 million to the Unitholders, or $0.25 per Depositary Unit. Comparison of the Partnership's Operating Results for the Six Months Ended June 30, 1996 and 1995 (A) Owned equipment operations Lease revenues less direct expenses (defined as repairs and maintenance, marine equipment operating, and asset specific insurance expenses) on owned equipment decreased during the six months ended June 30, 1996 when compared to the same period of 1995. The following table presents lease revenues less direct expenses by owned equipment type (in thousands):
For the six months ended June 30, 1996 1995 ---------------------------- Aircraft $ 1,191 $ 778 Trailers 1,784 2,409 Rail equipment 1,707 1,873 Marine containers 699 897
Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and $0.0, respectively, for the six months ended June 30, 1996, compared to $1.4 million and $0.6 million, respectively, during the same period of 1995. Lease revenues decreased due to the off-lease status of an aircraft in 1996. Direct expenses decreased due to the costs incurred in the six months ended June 30, 1995 to refurbish another aircraft prior to being re-leased in 1995; Trailers: Trailer lease revenues and direct expenses were $2.1 million and $0.3 million, respectively, for the six months ended June 30, 1996, compared to $2.7 million and $0.3 million, respectively, during the same period of 1995. The decrease in net contribution was due to the sale of 102 trailers in 1996. In addition, the trailer fleet is experiencing lower utilization in the PLM affiliated short-term rental yards; Rail equipment: Railcar lease revenues and direct expenses were $2.4 million and $0.7 million, respectively, for the six months ended June 30, 1996, compared to $2.4 million and $0.5 million, respectively during the same period of 1995. Although the railcar fleet remained relatively the same size for both periods, the decrease in railcar contribution resulted from running repairs required on certain of the railcars during 1996 which were not needed during 1995; Marine containers: Marine container lease revenues were $0.7 million and $0.9 million for the six months ended June 30, 1996 and 1995, respectively. The number of marine containers owned by the Partnership has been declining over the past twelve months due to sales and dispositions. The result of this declining fleet has been a decrease in marine container revenue. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $5.4 million for the six months ended June 30, 1996, decreased from $5.9 million for the same period in 1995. The variances are explained as follows: (a) A $0.1 million decrease in depreciation and amortization expense from 1995 levels, reflecting the effect of asset sales in 1995 and 1996; (b) A $0.3 million decrease in interest expense due to a lower base rate of interest charged on the Partnership's floating rate debt during the six months ended June 30, 1996 as compared to the same period in 1995. In 1995, the Partnership prepaid $8.0 million of the outstanding note payable representing the principal payments due March 31, 1996 and 1997; (c) A $0.1 million decrease in administrative expenses from 1995 levels due to reduced professional services required by the Partnership. (C) Net gain on disposition of owned equipment Net gain on disposition of equipment for the six months ended June 30, 1996 totaled $0.2 million which resulted from the sale or disposal of 143 marine containers, 106 trailers, and three railcars, with an aggregate net book value of $0.5 million for aggregate proceeds of $0.7 million. For the six months ended June 30, 1995, the $0.3 million net gain on disposition of equipment resulted from the sale or disposal of 140 marine containers, eight trailers, one tractor, and one railcar with an aggregate net book value of $0.3 million, for aggregate proceeds of $0.6 million. (D) Interest and other income Interest and other income decreased $0.1 million during the six months ended June 30, 1996 due primarily to lower cash balances available for investments when compared to the same period of 1995. (E) 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 2 to the financial statements).
For the six months ended June 30, 1996 1995 ---------------------------- Aircraft $ (312 ) $ 158 Mobile offshore drilling unit (112 ) (143 ) Marine vessel -- 355
Aircraft: As of June 30, 1996 and 1995, the Partnership owned a 50% interest in a commercial aircraft. Aircraft lease revenue remained relatively the same from the six months ended June 30, 1996 compared to the same period in 1995. The Partnership's share of expenses increased $0.4 million due to the increase in bad debt expense to reflect the General Partner's evaluation of the collectibility of receivables due from the aicraft's lessee that encountered financial difficulties. During 1995, the Partnership also had a 50% investment in a DC-9 aircraft which was sold during the second quarter. The sale generated a gain of $0.1 million. Mobile offshore drilling unit: As of June 30, 1996, the Partnership owned a 55%-interest in a mobile offshore drilling unit (rig). Revenue decreased $0.1 million from the six months ended June 30, 1996, compared to the same period in 1995, due to the rig being off-lease for a month in 1996. Expenses remained relatively the same for both periods. Marine vessel: In the second quarter of 1995, the Partnership sold it's 50% interest in a marine vessel. (E) Net Income (loss) As a result of the foregoing, the Partnership's net loss of $0.1 million for the six months ended June 30, 1996, decreased from net income of $0.9 million during the same period in 1995. The Partnership's ability to operate and 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 first quarter 1996 is not necessarily indicative of future periods. In the six months ended June 30, 1996, the Partnership distributed $4.8 million to the Unitholders, or $0.65 per Depositary Unit. (II) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS The General Partner purchased the Partnership's initial equipment portfolio with capital raised from its initial equity offering and permanent debt financing. No further capital contributions from original partners are permitted under the terms of the Partnership's Limited Partnership Agreement. The Partnership's total outstanding indebtedness, currently $27.0 million, can only be increased up to a maximum of $35 million subject to specific covenants in the existing debt agreement. The Partnership relies on operating cash flow to meet its operating obligations, make cash distributions to partners, and increase the Partnership's equipment portfolio with any remaining surplus cash available. Pursuant to the Limited Partnership Agreement, the Partnership ceased to reinvest in additional equipment effective December 31, 1995. During the reinvestment phase of the Partnership, the General Partner assembled an equipment portfolio capable of achieving a level of operating cash flow for the remaining life of the Partnership sufficient to meet its obligations and sustain a predictable level of distributions to the partners. Equipment sales now result in partial liquidation of the Partnership's portfolio, with proceeds being used for payment of debt or distributions to partners. In 1995, the Partnership used $8.0 million in proceeds from the sale of equipment and other cash on hand to prepay the first annual $4 million principal installment of the loan due March 31, 1996, and to prepay the second annual $4 million installment due March 31, 1997. In June 1996, the Committed Bridge Facility was revised and PLM Equipment Growth Fund II is no longer included as a borrower. For the six months ended June 30, 1996, the Partnership generated sufficient operating revenues to meet its operating obligations, but used undistributed available cash from prior periods of approximately $1.6 million to maintain the current level of distributions (total 1996 of $5.1 million) to the partners. (III) DELISTING OF PARTNERSHIP UNITS The General Partner delisted the Partnership's depositary units from the American Stock Exchange (AMEX) under the symbol GFY on April 8, 1996. The last day for trading on the AMEX was March 22, 1996. Under the Internal Revenue Code (the Code), the Partnership was classified as a Publicly Traded Partnership. On December 28, 1992, the Partnership engaged in a program to repurchase up to 200,000 Depositary Units. In the six months ended June 30, 1996, the Partnership had purchased and canceled 42,100 Depositary Units at a cost of $0.2 million. As of June 30, 1996, the Partnership had cumulatively repurchased 102,700 Depositary Units at a cost of $0.8 million. (IV) TRENDS 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. Throughout 1995 and the first part of 1996, market conditions, supply and demand equilibrium, and other factors varied in several markets. In the container and refrigerated over-the-road trailer markets, oversupply conditions, industry consolidations, and other factors resulted in falling rates and lower returns. In the dry over-the-road trailer markets, strong demand and a backlog of new equipment deliveries produced high utilization and returns. The marine vessel, rail, and mobile offshore drilling unit markets could be generally categorized by increasing rates as the demand for equipment is increasing faster than new additions net of retirements. Finally, demand for narrowbody stage II aircraft, such as those owned by the Partnership, has increased as expected savings from newer narrowbody aircraft have not materialized and deliveries of the newer aircraft have slowed down. These trends are expected to continue for the near term. These different markets have had individual effects on the performance of Partnership equipment in some cases resulting in declining performance, and in others, in improved performance. 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, governmental or other regulations, and others. 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. Alternatively, the General Partner may make a determination to enter equipment markets in which it perceives opportunities to profit from supply-demand instabilities or other market imperfections. The Partnership intends to use cash flow from operations to satisfy its operating requirements, pay loan principal on debt, and pay cash distributions to the investors. 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 GROWTH FUND II By: PLM Financial Services, Inc. General Partner Date: August 9, 1996 By: /s/ David J. Davis ------------------ David J. Davis Vice President and Corporate Controller EX-27 2
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 5,180 0 1,856 450 0 0 91,631 66,072 43,136 0 0 0 0 0 12,830 43,136 6,381 6,690 0 5,412 0 0 971 (117) 0 (117) 0 0 0 (117) 0 0
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