-----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, Gfc+8RdrHByV0UDygw1LRFAv4ST1o9MKPHbvCAuDqKL6ZfLrnTz/ONPeTibtpOMA IBq+g5V+9fNWqxaOEBsmUQ== 0000857645-01-500007.txt : 20010810 0000857645-01-500007.hdr.sgml : 20010810 ACCESSION NUMBER: 0000857645-01-500007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010809 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: 1701964 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 f10q_2q2001-egf2.txt FORM 10Q 2ND QUARTER 2001 EGF2 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, 2001 [-] 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.) 120 Montgomery Street Suite 1350, San Francisco, CA 94104 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (415) 445-3201 ----------------------- 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, except unit amounts)
June 30, December 31, 2001 2000 ----------------------------- ASSETS Equipment held for operating lease, at cost $ 23,879 $ 24,727 Less accumulated depreciation (20,241) (20,483) ----------------------------- Net equipment 3,638 4,244 Cash and cash equivalents 901 2,538 Accounts receivable, less allowance for doubtful accounts of $200 in 2001 and $57 in 2000 486 718 Prepaid expenses and other assets 40 35 ----------------------------- Total assets $ 5,065 $ 7,535 ============================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued expenses $ 230 $ 482 Due to affiliates 33 52 Lessee deposits and reserve for repairs 319 449 ----------------------------- Total liabilities 582 983 ----------------------------- Partners' capital: Limited partners (7,381,165 depositary units as of June 30, 2001 and December 31, 2000) 4,483 6,552 General Partner -- -- ----------------------------- Total partners' capital 4,483 6,552 ----------------------------- Total liabilities and partners' capital $ 5,065 $ 7,535 =============================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) STATEMENTS OF OPERATIONS (in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 --------------------------------------------------------------- REVENUES Lease revenue $ 635 $ 1,361 $ 1,365 $ 2,866 Interest and other income 10 26 40 36 Net gain on disposition of equipment 30 523 191 502 --------------------------------------------------------------- Total revenues 675 1,910 1,596 3,404 --------------------------------------------------------------- EXPENSES Depreciation 283 413 583 845 Repairs and maintenance 351 449 815 859 Equipment operating expenses 49 44 140 89 Management fees to affiliate 31 66 61 143 General and administrative expenses to affiliates 22 52 126 119 Other general and administrative expenses 204 183 434 427 Provision for bad debts 103 19 143 10 --------------------------------------------------------------- Total expenses 1,043 1,226 2,302 2,492 --------------------------------------------------------------- Equity in net income (loss) of an unconsolidated special-purpose entity -- (60 ) -- 1,304 --------------------------------------------------------------- Net income (loss) $ (368) $ 624 $ (706) $ 2,216 =============================================================== PARTNERS' SHARE OF NET INCOME (LOSS): Limited partners $ (379) $ 528 $ (774) $ 2,063 General Partner 11 96 68 153 --------------------------------------------------------------- Total $ (368) $ 624 $ (706) $ 2,216 =============================================================== Limited partners' net income (loss) per weighted-average depositary unit $ (0.05) $ 0.07 $ (0.10) $ 0.28 =============================================================== Cash distributions $ 233 $ 1,136 $ 1,363 $ 2,273 Special cash distributions -- 777 -- 777 --------------------------------------------------------------- Total cash distributions $ 233 $ 1,913 $ 1,363 $ 3,050 =============================================================== Per weighted-average depositary unit: Cash distributions $ 0.03 $ 0.15 $ 0.18 $ 0.29 Special cash distributions -- 0.10 -- 0.10 --------------------------------------------------------------- Total cash distributions $ 0.03 $ 0.25 $ 0.18 $ 0.39 ===============================================================
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, 1999 to June 30, 2001 (in thousands of dollars)
Limited General Partners Partner Total --------------------------------------------------- Partners' capital as of December 31, 1999 $ 7,656 $ -- $ 7,656 Net income 3,942 265 4,207 Cash distribution (4,308) (226) (4,534) Special cash distribution (738) (39) (777) --------------------------------------------------- Partners' capital as of December 31, 2000 6,552 -- 6,552 Net income (loss) (774) 68 (706) Cash distribution (1,295) (68) (1,363) --------------------------------------------------- Partners' capital as of June 30, 2001 $ 4,483 $ -- $ 4,483 ===================================================
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, 2001 2000 ---------------------------------- OPERATING ACTIVITIES Net income (loss) $ (706) $ 2,216 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 583 845 Net gain on disposition of equipment (191) (502) Equity in net income from an unconsolidated special-purpose entity -- (1,304) Changes in operating assets and liabilities: Accounts receivable, net 232 8 Prepaid expenses and other assets (5) 30 Accounts payable and accrued expenses (252) (111) Due to affiliates (19) -- Lessee deposits and reserve for repairs (130) (67) ---------------------------------- Net cash (used in) provided by operating activities (488) 1,115 ---------------------------------- INVESTING ACTIVITIES Proceeds from disposition of equipment 214 977 Liquidation distributions from an unconsolidated special-purpose entity -- 1,824 Additional investments in an unconsolidated special-purpose entity -- (152) ---------------------------------- Net cash provided by investing activities 214 2,649 ---------------------------------- FINANCING ACTIVITIES Cash distribution paid to limited partners (1,295) (2,159) Cash distribution paid to General Partner (68) (114) Special cash distribution paid to limited partners -- (738) Special cash distribution paid to General Partner -- (39) ---------------------------------- Net cash used in financing activities (1,363) (3,050) ---------------------------------- Net increase (decrease) in cash and cash equivalents (1,637) 714 Cash and cash equivalents at beginning of period 2,538 894 ---------------------------------- Cash and cash equivalents at end of period $ 901 $ 1,608 ==================================
See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 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, 2001 and December 31, 2000, the statements of operations for the three and six months ended June 30, 2001 and 2000, the statements of changes in partners' capital for the period from December 31, 1999 to June 30, 2001, and the statements of cash flows for the six months ended June 30, 2001 and 2000. Certain information and note 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, 2000, on file at the Securities and Exchange Commission. 2. SCHEDULE OF PARTNERSHIP PHASES The Partnership, in accordance with its limited partnership agreement, entered its liquidation phase on January 1, 1999, and has commenced an orderly liquidation of the Partnership's assets. The Partnership will terminate on December 31, 2006, unless terminated earlier upon the sale of all equipment or by certain other events. 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. During the liquidation phase, the Partnership's assets will continue to be recorded at the lower of the 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 six months ended June 30, 2001 and 2000, cash distributions totaled $1.4 million and $2.3 million, respectively. For the three months ended June 30, 2001 and 2000, cash distributions totaled $0.2 million and $1.1 million, respectively. In addition, a $0.8 million special distribution was paid to the partners during the six months ended June 30, 2000, from the proceeds realized on the sale of equipment in 2000 and 1999. No special distributions were paid in the three and six months ended June 30, 2001. Cash distributions to the limited partners of $1.3 million and $0.8 million for the six months ended June 30, 2001 and 2000, respectively were deemed to be a return of capital. PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES The balance due to affiliates as of June 30, 2001 and December 31, 2000 totaled $33,000 and $0.1 million respectively, due to FSI and its affiliate for management fees. 5. EQUIPMENT The components of owned equipment were as follows (in thousands of dollars):
June 30, December 31, 2001 2000 -------------------------------------- Railcars $ 12,680 $ 12,712 Trailers 9,495 9,510 Marine containers 1,704 2,505 ------------------------------------- 23,879 24,727 Less accumulated depreciation (20,241 ) (20,483) ------------------------------------- Net equipment $ 3,638 $ 4,244 =====================================
As of June 30, 2001, all equipment was on lease, except for 317 railcars and 2 marine containers with an aggregate net book value of $0.3 million. As of December 31, 2000, all equipment was on lease, except for 203 railcars and 106 marine containers with an aggregate net book value of $0.4 million. During the six months ended June 30, 2001, the Partnership sold or disposed of marine containers, trailers, and railcars, with an aggregate net book value of $23,000, for proceeds of $0.2 million. For the six months ended June 30, 2000, the Partnership sold or disposed of marine containers, trailers, and railcars, with an aggregate net book value of $0.5 million, for proceeds of $1.0 million. 6. OPERATING SEGMENTS The Partnership operates or operated in four different segments: railcar leasing, trailer leasing, marine container leasing and aircraft 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):
Marine Railcar Trailer Container For the quarter ended June 30, 2001 Leasing Leasing Leasing All Other(1) Total ----------------------------------- ------- ------- ------- --------- ----- REVENUES Lease revenue $ 265 $ 370 $ 1 $ (1) $ 635 Interest income and other -- -- -- 10 10 Gain on disposition of equipment -- 2 28 -- 30 ---------------------------------------------------- Total revenues 265 372 29 9 675 COSTS AND EXPENSES Operations support 162 223 -- 15 400 Depreciation 149 132 2 -- 283 Management fees 13 19 (1) -- 31 General and administrative 26 97 -- 103 226 expenses Provision for (recovery of) bad 86 1 17 (1) 103 debts ---------------------------------------------------- Total costs and expenses 436 472 18 117 1,043 ---------------------------------------------------- Net income (loss) $ (171) $ (100) $ 11 $ (108) $ (368) ==================================================== Total assets as of June 30, 2001 $ 794 $ 3,271 $ 59 $ 941 $ 5,065 ==================================================== (1) Includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 6. OPERATING SEGMENTS (continued) ------------------
Marine Railcar Trailer Container Aircraft For the quarter ended June 30, 2000 Leasing Leasing Leasing Leasing All Other(1) Total ----------------------------------- ------- ------- ------- ------- -------- ----- REVENUES Lease revenue $ 887 $ 458 $ 16 $ -- $ -- $ 1,361 Interest income and other -- -- -- -- 26 26 Gain on disposition of equipment 508 2 13 -- -- 523 -------------------------------------------------------------- Total revenues 1,395 460 29 -- 26 1,910 Costs and expenses Operations support 333 150 1 -- 9 493 Depreciation 187 171 55 -- -- 413 Management fees 43 22 1 -- -- 66 General and administrative 89 52 1 1 92 235 expenses Provision for (recovery of) bad 26 (7) -- -- -- 19 debts -------------------------------------------------------------- Total costs and expenses 678 388 58 1 101 1,226 -------------------------------------------------------------- Equity in net loss of USPE -- -- -- (60) -- (60) -------------------------------------------------------------- -------------------------------------------------------------- Net income (loss) $ 717 $ 72 $ (29 )$ (61) $ (75) $ 624 ============================================================== Total assets as of June 30, 2000 $ 1,668 $ 4,031 $ 522 $ -- $ 1,625 $ 7,846 ==============================================================
Marine Railcar Trailer Container Aircraft For the six months ended June 30, Leasing Leasing Leasing Leasing All Other(1) Total ------------------------------------ ------- ------- ------- ------- -------- ----- 2001 REVENUES Lease revenue $ 616 $ 770 $ (20) $ -- $ (1) $ 1,365 Interest income and other -- -- -- -- 40 40 Gain (loss) on disposition of 3 2 196 (10) -- 191 equipment -------------------------------------------------------------- Total revenues 619 772 176 (10) 39 1,596 COSTS AND EXPENSES Operations support 491 388 -- -- 76 955 Depreciation 300 265 18 -- -- 583 Management fees 25 38 (2) -- -- 61 General and administrative 46 148 1 1 364 560 expenses Provision for (recovery of) bad 118 9 17 -- (1) 143 debts -------------------------------------------------------------- Total costs and expenses 980 848 34 1 439 2,302 -------------------------------------------------------------- Net income (loss) $ (361 $ (76) $ 142 $ (11) $ (400) $ (706) ============================================================== Total assets as of June 30, 2001 $ 794 $ 3,271 $ 59 $ -- $ 941 $ 5,065 ============================================================== (1) Includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
PLM EQUIPMENT GROWTH FUND II (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 6. OPERATING SEGMENTS (continued) ---------------------------
Marine Railcar Trailer Container Aircraft For the six months ended June 30, Leasing Leasing Leasing Leasing All Other()1 Total ------------------------------------ ------- ------- ------- ------- --------- ----- 2000 ---- REVENUES Lease revenue $ 1,794 $ 983 $ 89 $ -- $ -- $ 2,866 Interest income and other -- -- -- -- 36 36 Gain (loss) on disposition of 576 21 (95) -- -- 502 equipment ----------------------------------------------------------------- Total revenues 2,370 1,004 (6) -- 36 3,404 COSTS AND EXPENSES Operations support 598 329 2 -- 19 948 Depreciation 379 343 123 -- -- 845 Management fees 88 50 5 -- -- 143 General and administrative 126 141 3 1 275 546 expenses Provision for (recovery of) bad 29 (19) -- -- -- 10 debts ----------------------------------------------------------------- Total costs and expenses 1,220 844 133 1 294 2,492 ----------------------------------------------------------------- Equity in net income of USPE -- -- -- 1,304 -- 1,304 ----------------------------------------------------------------- Net income (loss) $ 1,150 $ 160 $ (139) $ 1,303 $ (258) $ 2,216 ================================================================= Total assets as of June 30, 2000 $ 1,668 $ 4,031 $ 522 $ -- $ 1,625 $ 7,846 ================================================================= ------------------------------------- (1) Includes interest income and costs not identifiable to a particular segment, such as certain operations support and general and administrative expenses.
7. NET INCOME (LOSS) PER WEIGHTED-AVERAGE DEPOSITARY UNIT Net income (loss) per weighted-average depositary unit was computed by dividing net income (loss) attributable to limited partners by the weighted-average number of depositary units deemed outstanding during the period. The weighted-average number of depositary units deemed outstanding during the three and six months ended June 30, 2001 and 2000 was 7,381,165 and 7,381,805, respectively. 8. LIQUIDATION AND SPECIAL DISTRIBUTIONS On January 1, 1999, the General Partner began the liquidation phase of the Partnership with the intent to commence an orderly liquidation of the Partnership assets. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received, the General Partner intends to periodically declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership, the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. The Partnership is no longer permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The Partnership paid a special distribution of $0.8 million in the six months ended June 30, 2000. No special distributions were paid in the six months ended June 30, 2001. The sales and liquidations occur because of certain damaged equipment, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset and, in some cases, the ability of the lessee to exercise purchase options. 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 JUNE 30, 2001 AND 2000 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment decreased during the second quarter of 2001 when compared to the same quarter of 2000. 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 6 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 equipment type (in thousands of dollars):
For the Three Months Ended June 30, 2001 2000 --------------------------- Trailers $ 147 $ 308 Railcars 103 554 Marine containers 1 15
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.2 million, respectively, for the second quarter of 2001, compared to $0.5 million and $0.2 million, respectively, during the same quarter of 2000. The decrease in trailer contribution in the second quarter of 2001 was due to the disposition of trailers in 2000 and 2001. Railcars: Railcar lease revenues and direct expenses were $0.3 million and $0.2 million, respectively, for the second quarter of 2001, compared to $0.9 million and $0.3 million, respectively, during the same quarter of 2000. The decrease in railcar contribution in the second quarter of 2001 was due to the disposition of railcars in 2000 and 2001. Marine containers: Marine container lease revenues were $1,000 and $15,000 during the second quarter of 2001 and 2000, respectively. The decrease in marine container contribution in the second quarter of 2001 was due to the disposition of marine containers in 2000 and 2001. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $0.6 million for the second quarter of 2001 decreased from $0.7 million for the same quarter in 2000. The primary reason for the decrease was a $0.1 million decrease in depreciation expense from 2000 levels due to asset sales in 2001 and 2000. (C) Net Gain on Disposition of Owned Equipment Net gain on disposition of equipment for the second quarter of 2001 totaled $30,000, and resulted from the disposal or sale of marine containers and trailers, with an aggregate net book value of $4,000, for aggregate proceeds of $34,000. For the same quarter in 2000, net gain on disposition of equipment totaled $0.5 million, and resulted from the disposal or sale of marine containers, trailers, and railcars with an aggregate net book value of $0.3 million, for aggregate proceeds of $0.8 million. (D) Equity in Net Loss of an Unconsolidated Special-Purpose Entity (USPE) Equity in the net loss of an unconsolidated special-purpose entity represents the Partnership's share of the net loss generated from the operation of a jointly-owned asset accounted for under the equity method. As of June 30, 2001, the Partnership had no remaining interests in aircraft. Expenses related to USPE's were $0.1 million for the second quarter of 2000. The Partnership's remaining partially-owned aircraft was sold in the first quarter of 2000. (E) Net Income (Loss) As a result of the foregoing, the Partnership's net loss was $0.4 million for the second quarter of 2001, compared to net income of $0.6 million during the second quarter of 2000. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the second quarter of 2001 is not necessarily indicative of future periods. In the second quarter of 2001, the Partnership distributed $0.2 million to the limited partners, or $0.03 per weighted-average limited partnership unit. COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (A) Owned Equipment Operations Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment decreased during the six months ended June 30, 2001 when compared to the same period of 2000. The following table presents lease revenues less direct expenses by equipment type (in thousands of dollars):
For the Six Months Ended June 30, 2001 2000 --------------------------- Trailers $ 382 $ 654 Railcars 125 1,196 Marine containers (20) 87
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.4 million, respectively, for the six months ended June 30, 2001, compared to $1.0 million and $0.3 million, respectively, during the same quarter of 2000. The decrease in trailer contribution was due to the sale of 32% of the Partnership's trailers during 2000. Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.5 million, respectively, for the six months ended June 30, 2001, compared to $1.8 million and $0.6 million, respectively, during the same quarter of 2000. The decrease in railcar contribution during the six months ended June 30, 2001 was due to the sale or disposition of railcars in 2000 and 2001. Marine containers: Marine container lease revenues were ($20,000) and $0.1 million during the six months ended June 30, 2001 and 2000, respectively. The negative revenues in the second quarter of 2001 were caused by actual lease revenues in the first quarter of 2001 being $27,000 less than had been previously reported. Lease revenue decreased $0.1 million in the six months ended June 30, 2001 compared to the same period in 2000. (B) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $1.3 million for the six months ended June 30, 2001 decreased from $1.5 million for the same period in 2000. Significant variances are explained as follows: (i) A $0.3 million decrease in depreciation expense from 2000 levels reflects the effect of asset dispositions in 2001 and 2000. (ii) A $0.1 million increase in bad debt expense from 2000 levels was due to increased accounts receivable of the Partnership being deemed uncollectible. (C) Net Gain on Disposition of Owned Equipment Net gain on disposition of equipment for the six months ended June 30, 2001 totaled $0.2 million, and resulted from the disposal or sale of marine containers, trailers, and railcars, with an aggregate net book value of $23,000, for aggregate proceeds of $0.2 million. For the same period in 2000, net gain on disposition of equipment totaled $0.5 million, and resulted from the disposal or sale of marine containers, trailers, and railcars, with an aggregate net book value of $0.5 million, for aggregate proceeds of $1.0 million. (D) Equity in Net Income of an Unconsolidated Special-Purpose Entity Equity in the net income of an unconsolidated special-purpose entity represents the Partnership's share of the net income generated from the operation of a jointly-owned aircraft accounted for under the equity method. As of June 30, 2001, the Partnership had no remaining interests in entities which owned aircraft. During the six months ended June 30, 2000, the gain from the sale of the Partnership's interest in the USPE of $1.5 million, which was sold in the first quarter of 2000, was offset by depreciation expense, direct expenses, and administrative expenses of $0.2 million. (E) Net Income (Loss) As a result of the foregoing, the Partnership's net loss was $0.7 million for the six months ended June 30, 2001, compared to net income of $2.2 million during the six months ended June 30, 2000. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the six months ended June 30, 2001 is not necessarily indicative of future periods. In the six months ended June 30, 2001, the Partnership distributed $1.3 million to the limited partners, or $0.18 per weighted-average limited partnership unit. (II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY For the six months ended June 30, 2001, the Partnership used $0.5 million of undistributed cash from prior periods and sales proceeds to meet its operating obligations, and used undistributed available cash from prior periods as well as proceeds from equipment sales of approximately $1.4 million to make distributions (total of $1.4 million in the six months ended June 30, 2001) to the partners. During the six months ended June 30, 2001, the Partnership sold or disposed of marine containers and railcars, with an aggregate net book value of $23,000, for proceeds of $0.2 million. Accounts receivable decreased $0.2 million during the six months ended June 30, 2001 due to an increase in the allowance for doubtful accounts and the reduction in lease revenues. Accounts payable and accrued expenses decreased $0.3 million during the six months ended June 30, 2001 due to a decrease in trade accounts payable resulting from the timing of payments of invoices to the vendors. Lessee deposits and reserve for repairs decreased $0.1 million during the six months ended June 30, 2001 due to the decrease in reserves for repairs resulting from the sale of marine containers in 2001. 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. 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 partners after final disposal of assets and settlement of liabilities, the amounts cannot be accurately determined prior to actual disposal of the equipment. (III) OUTLOOK FOR THE FUTURE Since the Partnership is in its active liquidation phase, the General Partner is 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 the remainder of 2001 and beyond, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates. Liquidation of the Partnership's equipment represents a reduction in the size of the equipment portfolio and may result in a reduction of contribution to the Partnership. Other factors affecting the Partnership's contribution in 2001 and beyond includes: 1. The cost of new marine containers have been at historic lows for the past several years which has caused downward pressure on per diem lease rates for this type of equipment. 2. Railcar loadings in North America for the six months ending June 30, 2001 were below those of 2000. This decrease has led to lower utilization and lower contribution to the Partnership as existing leases expire and renewal leases are negotiated. 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 General Partner continually monitors both the equipment markets and the performance of the Partnership's equipment in these markets. The General Partner may decide 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 unpredictability of some of these factors, or the 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 Partnership intends to use cash flow from operations, proceeds from disposition of equipment, and cash currently held to satisfy its operating requirements, maintain working capital reserves, and pay cash distributions to the unitholders. (IV) FORWARD-LOOKING INFORMATION Except for historical information contained herein, the discussion in this Form 10-Q contains forward-looking statements that involve risks and uncertainties, such as statements of the Partnership's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Partnership's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's primary market risk exposure is that of currency devaluation risk. During the six months ended June 30, 2001, 25% of the Partnership's total lease revenues 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. 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 8, 2001 By: /s/ Stephen M.. Bess ---------------------- Stephen M. Bess President and Current Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----