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 0-14598
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(Exact name of registrant as specified in its charter)
California 94-2946245
(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 TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
---------------------------------------
Equipment held for operating leases, at cost $ 3,751,988 $ 3,972,722
Less accumulated depreciation (3,522,222 ) (3,616,132 )
---------------------------------------
Net equipment 229,766 356,590
Cash and cash equivalents 185,417 293,808
Investment in unconsolidated special purpose entity 46,953 79,116
Accounts receivable, net of allowance for doubtful accounts of
$14,107 in 1996 and $19,664 in 1995 106,519 135,320
Prepaid Insurance 1,118 3,128
=======================================
Total assets $ 569,773 $ 867,962
=======================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 4,641 $ 4,641
Accounts payable and accrued expenses 18,524 21,292
Prepaid deposits and engine reserves -- 260
---------------------------------------
Total liabilities 23,165 26,193
Partners capital (deficit):
Limited Partners (22,276 units) 639,192 931,401
General Partner (92,584 ) (89,632 )
---------------------------------------
Total partners' capital 546,608 841,769
---------------------------------------
Total liabilities and partners' capital $ 569,773 $ 867,962
=======================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the three months For the six months
ended June 30, ended June 30,
1996 1995 1996 1995
---------------------------------------------------------------------
Revenues:
Lease revenue $ 88,840 $ 162,569 $ 194,914 $ 346,232
Interest and other income 2,635 17,853 6,088 23,179
Gain on disposition of
equipment 10,304 10,000 29,634 22,830
-------------------------------- -----------------------------
Total revenues 101,779 190,422 230,636 392,241
Expenses:
Depreciation 53,112 69,438 107,881 141,294
Management fees to affiliate 13,922 13,922 25,436 27,845
Bad debt expense (24,677 ) (31,882 ) (6,856 ) 12,757
Repairs and maintenance 22,939 29,607 45,201 74,029
General and administrative
expenses to affiliates 21,889 31,518 48,436 67,357
Other general and administrative
expenses 14,641 15,325 26,983 26,536
-------------------------------- -----------------------------
Total expenses 101,826 127,928 247,081 349,818
Equity in net income of unconsolidated
special purpose entity 10,045 -- 19,376 --
-------------------------------- -----------------------------
Net income $ 9,998 $ 62,494 $ 2,931 $ 42,423
================================ =============================
Partners' share of net income:
Limited Partners - 99% $ 9,898 $ 61,869 $ 2,902 $ 41,999
General Partner - 1% 100 625 29 424
-------------------------------- -----------------------------
Total 9,998 $ 62,494 $ 2,931 $ 42,423
================================ =============================
Net income per Limited
Partnership Unit (22,276 units) $ 0.44 $ 2.78 $ 0.13 $ 1.88
================================ =============================
Cash distributions $ 99,046 $ 99,047 $ 198,092 $ 198,093
================================ =============================
Cash distribution per
Limited Partnership Unit $ 4.40 $ 4.40 $ 8.80 $ 8.80
================================ =============================
Special cash distributions $ 100,000 $ -- $ 100,000 $ --
================================ =============================
Special cash distributions per
Limited Partnership Unit $ 4.44 -- $ 4.44 $ --
================================ =============================
Total cash distributions per
Limited Partnership Unit $ 8.84 $ 4.40 $ 13.24 $ 8.80$
================================ =============================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1994 to June 30,
1996
Limited General
Partner Partner Total
------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1994 $ 1,294,613 $ (85,963 ) $ 1,208,650
Net income 29,013 293 29,306
Cash distributions (392,225 ) (3,962 ) (396,187 )
-------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 931,401 (89,632 ) 841,769
Net income 2,902 29 2,931
Quarterly cash distributions (196,111 ) (1,981 ) (198,092 )
Special distributions (99,000 ) (1,000 ) (100,000 )
-------------------------------------------------------------
Partners' capital (deficit)
at June 30, 1996 639,192 (92,584 ) 546,608
=============================================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the six months ended
June 30,
1996 1995
------------------------------------
Operating Activities:
Net income $ 2,931 $ 42,423
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on disposition of equipment (29,634 ) (22,830 )
Depreciation 107,881 141,294
Cash distributions from unconsolidated special purpose
entity in excess of income accrued 32,163 --
Changes in operating assets and liabilities:
Restricted cash -- (497 )
Accounts receivable, net 28,801 7,091
Prepaid insurance 2,010 1,961
Due to affiliates -- (14,123 )
Accounts payable (2,768 ) (13,544 )
Prepaid deposits and engine reserves (260 ) (807 )
------------------------------------
Cash provided by operating activities 141,124 140,968
------------------------------------
Investing activities:
Proceeds from disposition of equipment 48,577 63,919
------------------------------------
Cash provided by investing activities 48,577 63,919
------------------------------------
Cash flows used in financing activities:
Cash distributions paid to General Partner (2,981 ) (1,981 )
Cash distributions paid to Limited Partners (295,111 ) (196,112 )
------------------------------------
Cash used in financing activities (298,092 ) (198,093 )
Net (decrease) increase in cash and cash equivalents (108,391 ) 6,794
Cash and cash equivalents at beginning of period 293,808 358,864
------------------------------------
Cash and cash equivalents at end of period $ 185,417 365,658
====================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(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 Partnership's financial position as of June
30, 1996, the statements of income for the three months ended June 30, 1996
and 1995, the statements of changes in partners' capital for the period
from December 31, 1994 to June 30, 1996 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. Equipment
The components of owned equipment are as follows:
June 30, December 31,
1996 1995
--------------------------------------
Equipment held for operating leases:
Trailers $ 3,340,319 $ 3,543,334
Marine containers 93,020 110,739
Rail equipment 318,649 318,649
--------------------------------------
3,751,988 3,972,722
Less accumulated depreciation (3,522,222 ) (3,616,132 )
--------------------------------------
Net equipment $ 229,766 $ 356,590
======================================
All of the equipment owned by the Partnership was either on lease or operating
in PLM-affiliated short-term rental facilities as of June 30, 1996. With
the exception of one trailer with a carrying value of $6,500, all of the
equipment was on lease as of December 31, 1995.
During the six months ended June 30, 1996, the Partnership sold or disposed of
eight trailers and seven marine containers with an aggregate net book value
of $18,943 for proceeds of $48,577. During the six months ended June 30,
1995, the Partnership sold or disposed of seven trailers and six marine
containers with an aggregate net book value of $41,089 for proceeds of
$63,919.
3. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. 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 periodicially 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 on a quarterly basis to partners. The amounts reflected for
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
3. Liquidation and special distributions (continued)
assets and liabilites of 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.
4. Investment in Unconsolidated Special Purpose Entity
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental 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 relates 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 statement of operations
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 "Investment in unconsolidated special purpose entity" includes a 31%
interest in a commuter aircraft.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
---------------------------------------
Equipment held for operating leases, at cost $ 4,535,450 $ 5,059,215
Less accumulated depreciation (4,188,772 ) (4,536,562 )
---------------------------------------
Net equipment 346,678 522,653
Cash and cash equivalents 262,459 551,094
Investments in unconsolidated special purpose entities 312,261 425,957
Accounts receivable, net of allowance for doubtful accounts of
$12,918 in 1996 and $6,649 in 1995 87,741 143,225
Prepaid Insurance 1,510 5,435
=======================================
Total assets $ 1,010,649 $ 1,648,364
=======================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 7,026 $ 7,026
Accounts payable and accrued expenses 9,097 15,202
---------------------------------------
Total liabilities 16,123 22,228
Partners capital (deficit):
Limited Partners (33,727 units) 1,133,083 1,758,377
General Partner (138,557 ) (132,241 )
---------------------------------------
Total partners' capital 994,526 1,626,136
---------------------------------------
Total liabilities and partners' capital $ 1,010,649 $ 1,648,364
=======================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the three months For the six months
ended June 30, ended June 30,
1996 1995 1996 1995
---------------------------------------------------------------
Revenues:
Lease revenue $ 110,557 $ 268,097 $ 219,749 $ 582,773
Interest and other income 4,359 8,958 10,822 20,232
Gain on disposition of
equipment 20,189 27,968 54,634 46,659
----------------------------- -----------------------------
Total revenues 135,105 305,023 285,205 649,664
Expenses:
Depreciation 62,867 128,130 129,371 259,038
Management fees to affiliate 22,525 21,529 37,823 45,809
Repairs and maintenance 23,225 59,813 46,936 102,742
General and administrative
expenses to affiliates 29,951 46,213 67,082 101,308
Other general and administrative
expenses 17,069 18,124 36,816 22,771
----------------------------- -----------------------------
Total expenses 155,637 273,809 318,028 531,668
Equity in net income of unconsolidated
special purpose entities 33,867 -- 70,844 --
----------------------------- -----------------------------
Net income $ 13,335 $ 31,214 $ 38,021 $ 117,996
============================= =============================
Partners' share of net income:
Limited Partners - 99% $ 13,202 $ 30,902 $ 37,641 $ 116,816
General Partner - 1% 133 312 380 1,180
============================= =============================
Total $ 13,335 $ 31,214 $ 38,021 $ 117,996
============================= =============================
Net income per Limited Partnership
Unit (33,727 units) $ 0.39 $ 0.92 $ 1.12 $ 3.46
============================= =============================
Cash distributions $ 159,314 $ 262,139 $ 319,631 $ 525,096
============================= =============================
Cash distribution per
Limited Partnership Unit $ 4.68 $ 7.69 $ 9.38 $ 15.44
============================= =============================
Special cash distributions $ 250,000 $ -- $ 350,000 $ 100,000
============================= =============================
Special cash distributions per
Limited Partnership Unit $ 7.34 $ -- $ 10.27 $ 2.94
============================= =============================
Total Cash Distributions per
Limited Partnership Units $ 12.02 $ 7.69 $ 19.65 $ 18.38
============================= =============================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1994 to June 30,
1996
Limited General
Partner Partner Total
---------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1994 $ 2,622,019 $ (123,518 ) $ 2,498,501
Net income 173,422 1,752 175,174
Cash distributions (1,037,064 ) (10,475 ) (1,047,539 )
---------------------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 1,758,377 (132,241 ) 1,626,136
Net income 37,641 380 38,021
Quarterly cash distributions (316,435 ) (3,196 ) (319,631 )
Special distributions (346,500 ) (3,500 ) (350,000 )
---------------------------------------------------------------
Partners' capital (deficit)
at June 30, 1996 1,133,083 (138,557 ) 994,526
===============================================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the six months
ended June 30,
1996 1995
-------------------------------------
Operating Activities:
Net income $ 38,021 $ 117,996
Adjustment to reconcile net income
to net cash provided by operating activities:
Gain on disposition of equipment (54,634 ) (46,659 )
Depreciation 129,371 259,038
Cash distributions from unconsolidated special purpose
entities in excess of income accrued 113,696 --
Changes in operating assets and liabilities
Restricted cash -- (385 )
Accounts receivable, net 55,484 42,146
Prepaid insurance 3,925 4,501
Due to affiliates -- (17,391 )
Accounts payable (6,105 ) 5,437
Prepaid deposits and engine reserves -- 386
-------------------------------------
Cash provided by operating activities 279,758 365,069
-------------------------------------
Investing activities:
Proceeds from disposition of equipment 101,238 93,117
-------------------------------------
Cash provided by investing activities 101,238 93,117
-------------------------------------
Cash flows used in financing activities:
Cash distributions paid to General Partner (6,696 ) (6,259 )
Cash distributions paid to Limited Partners (662,935 ) (619,647 )
-------------------------------------
Cash used in financing activities (669,631 ) (625,906 )
Net decrease in cash and cash equivalents (288,635 ) (167,720 )
Cash and cash equivalents at beginning of period 551,094 799,068
-------------------------------------
Cash and cash equivalents at end of period $ 262,459 $ 631,348
=====================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(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 Partnership's financial position as of June
30, 1996, the statements of income for the three months ended June 30, 1996
and 1995, the statements of changes in partners' capital for the period
from December 31, 1994 to June 30, 1996, 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. Equipment
The components of owned equipment are as follows:
June 30, December 31,
1996 1995
----------------------------------------
Equipment held for operating leases:
Trailers $ 4,317,907 $ 4,833,449
Marine containers 217,543 225,766
----------------------------------------
4,535,450 5,059,215
Less accumulated depreciation (4,188,772 ) (4,536,562 )
========================================
Net equipment $ 346,678 $ 522,653
========================================
All of the equipment owned by the Partnership is either on lease or operating
in PLM-affiliated short-term rental facilities as of June 30, 1996, and at
December 31, 1995.
During the six months ended June 30, 1996, the Partnership sold or disposed of
four marine containers and 16 trailers with an aggregate net book value of
$46,604 for proceeds of $101,238. During the six months ended June 30,
1995, the Partnership sold or disposed of four marine containers and six
trailers with an aggregate net book value of $46,458 for proceeds of
$93,117.
3. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. 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 periodicially 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 on a quarterly basis to partners. The amounts reflected for
assets and liabilities of the Partnership have not been adjusted to reflect
liquidation values. The
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
3. Liquidation and special distributions (continued)
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.
During the three months ended June 30, 1996, and 1995, the General Partner
paid special distributions of $2.94 per Limited Partnership Unit for
proceeds from equipment liquidations. The Partnership is not 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 sales and
liquidations occur because of equipment destructions, 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 leases, the ability of
the lessee to exercise purchase options.
4. Investments in Unconsolidated Special Purpose Entites
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental 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 relates to the presentation of activities relating to these
assets in the income statement. 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 "Investments in unconsolidated special purpose entities" includes 31%
and 80% interests in two separate commuter aircraft.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) Results of Operations
Comparison of the Partnerships' Operating Results for the Three Months Ended
June 30, 1996 and 1995
TEP VIIB:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during the
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:
For the three months
ended June 30,
1996 1995
------------------------------
Trailers $ 55,587 $ 90,915
Railcar equipment 7,181 8,553
Marine containers 2,540 5,254
Trailers: Trailer lease revenues and direct expenses were $78,770 and $23,183,
respectively, for the three months ended June 30, 1996, compared to $125,092 and
34,177, respectively during the same quarter of 1995. The decrease of net
contribution was due to lower utlilization of trailers in the short-term rental
facilities in the second quarter of 1996 when compared to the same quarter of
1995, and the disposition of trailers;
Railcar equipment: Railcar lease revenues and direct expenses were $7,500 and
$319, respectively, for the three months ended June 30, 1996, compared to $8,110
and a credit of $443, 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 as a result of running repairs
required on certain railcars in the fleet during 1995 which were not needed
during 1996;
Marine containers: Marine container lease revenues and direct expenses were
$2,570 and $30, respectively, for the three months ended June 30, 1996, compared
to $5,320 and $66, respectively, during the same quarter of 1995. 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 net contribution.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $78,294 for the quarter ended June 30, 1996,
decreased from $81,599 for the same quarter in 1995. The variances are explained
as follows:
(a) a $7,205 increase in bad debt expense due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees;
(b) a decrease of $6,537 in general and administrative expenses due to lower
indirect costs associated with the short-term rental facilites due to decreased
volume of trailers operating in the facilites in the second quarter of 1996 as
compared to the second quarter of 1995, and lower accounting costs;
(c) A $3,973 decrease in depreciation and amortization expenses from 1995 levels
reflecting the sale of certain assets during 1996 and 1995.
(C) Net gain on disposition of equipment was $10,304 in the second quarter of
1996, from the disposition of one marine trailer and three trailers compared to
a gain of $10,000 in the second quarter of 1995, from the disposition of two
marine containers and one trailer.
(D) Interest and other income
Interest and other income decreased $15,218 during the second quarter of 1996
due primarily to income earned from an early lease termination penalty on four
railcars in the second quarter of 1995, and lower interest income due to lower
cash balances available for investments when compared to the same period of
1995.
(E) Equity in net incomeof unconsolidated special purpose entity
Equity in net income of unconsolidated special purpose entity represents the net
income generated from jointly owned asset accounted for under the equity method
(see Note 4 to financial statements).
For the three months
ended June 30,
1996 1995
------------------------------
Aircraft $ 10,045 $ 11,518
Aircraft: The decrease of net contribution was due to higher management fees in
the second quarter compared to the same period in 1995. Monthly management fees
are calculated as the greater of 10% of the Partnership's Operating Cash Flow,
or 1/12 of 1/2% of the Partnership's Capital Contributions as defined in the
Limited Partnership Agreement.
(F) Net income
The Partnership's net income of $9,998 in the second quarter of 1996, decreased
from a net income of $62,494 in the second quarter of 1995. The Partnership's
ability to 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 second quarter of 1996 is not
necessarily indicative of future periods. In the second quarter of 1996, the
Partnership distributed $197,056 to the Limited Partners, or $8.84 per Limited
Partnership Unit which included a special distribution of $4.44 per unit.
TEP VIIC:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during the
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:
For the three months
ended June 30,
1996 1995
--------------------------------
Trailers $ 84,541 $ 100,740
Marine containers 1,876 5,824
Trailers: Trailer lease revenues and direct expenses were $108,630 and $24,089,
respectively, for the three months ended June 30, 1996, compared to $163,018 and
$62,278, respectively during the same quarter of 1995. The decrease in net
contribution was due to lower utlilization of trailers in the short-term rental
facilities in the second quarter of 1996 when compared to the same quarter of
1995, and the disposition of trailers;
Marine containers: Marine container lease revenues and direct expenses were
$1,927 and $51, respectively, for the three months ended June 30, 1996, compared
to $5,962 and $138, respectively during the same quarter of 1995. 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 resulted in a decrease in marine container net contribution.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $131,497 for the quarter ended June 30, 1996,
decreased from $167,584 for the same period in 1995. The variances are explained
as follows:
(a) a $15,298 decrease in bad debt expense due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees;
(b) a decrease in the general and administrative expenses of $12,081 from 1995
levels was due to decreased administrative costs associated with the short-term
rental facilities;
(c) a $9,704 decrease in depreciation and amortization expenses from 1995 levels
reflecting the sale of certain assets during 1996 and 1995.
(C) Net gain on disposition of equipment was $20,189 in the second quarter of
1996, from the disposition of seven trailers, compared to a gain of $27,968 in
the second quarter of 1995, from the disposition of seven marine containers and
one trailer.
(D) Interest and other income decreased to $4,359 in the second quarter of 1996
from $8,958 in the second quarter of 1995. This decrease was primarily due to
lower interest rate earned on cash investments in the second quarter of 1996.
(E) Equity in net income of unconsolidated special purpose entities
Equity in net income of unconsolidated special purpose entities represents the
net income generated from jointly owned assets accounted for under the equity
method (see Note 4 to financial statements).
For the three months
ended June 30,
1996 1995
------------------------------
Aircraft $ 33,867 $ 55,308
Aircraft: The decrease of net contribution was due to lower bad debt expense in
the second quarter of 1996 when compared to the same period of 1995.
(F) Net Income
The Partnership's net income decreased to $13,335 in the second quarter of 1996,
from $31,214 in the second quarter of 1995. The Partnership's ability to 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 second quarter of 1996 is not necessarily
indicative of future periods. In the second quarter of 1996, the Partnership
distributed $405,221 to the Limited Partners, or $12.02 per Limited Partnership
Unit which included a special distribution of $7.34 per unit.
Comparison of the Partnerships' Operating Results for the Six Months Ended
June 30, 1996 and 1995
TEP VIIB:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during the first
six months of 1996 when compared to the same period of 1995. The following table
presents lease revenues less direct expenses by owned equipment type:
For the six months
ended June 30,
1996 1995
---------------------------------
Trailers $ 126,112 $ 192,596
Railcar equipment 14,636 12,959
Marine containers 7,777 12,268
Trailers: Trailer lease revenues and direct expenses were $172,077 and $45,965,
respectively, for the six months ended June 30, 1996, compared to $269,003 and
$76,407, respectively, during the same period of 1995. The decrease of net
contribution was due to lower utlilization of trailers in the short-term rental
facilities in the first six months of 1996 when compared to the same period of
1995, and the disposition of trailers;
Railcar equipment: Railcar lease revenues and direct expenses were $15,000 and
$364, respectively, for the six months ended June 30, 1996, compared to $16,012
and $3,053, respectively, during the same period of 1995. Although the railcar
fleet remained relatively the same size for both quarters, the decrease in
railcar contribution resulted as a result of running repairs required on certain
railcars in the fleet during 1995 which were not needed during 1996;
Marine containers: Marine container lease revenues and direct expenses were
$7,837 and $60, respectively, for the six months ended 1996, compared to $12,401
and $133, respectively, during the same period of 1995. 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
resulted in a decrease in marine container net contribution.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $200,692 for the six months ended June 30, 1996,
decreased from $244,938 for the same period in 1995. The variances are explained
as follows:
(a) a decrease of bad debt expense of $19,613 was due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees;
(b) a decrease of general and administrative expenses of $13,517 from 1995
levels was due to decreased administrative costs associated with the short-term
rental facilities;
(c) a $8,707 decrease in depreciation and amortization expenses from 1995 levels
reflecting the sale of certain assets during 1996 and 1995;
(d) a $2,409 decrease in management fee due to lower levels of operating cash
flow during the comparable periods. Monthly management fees are calculated as
the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of
the Partnership's Capital Contributions as defined in the Limited Partnership
Agreement.
(C) For the six months ended June 30, 1996, the Partnership realized a gain of
$29,634 on the sale or disposition of seven marine containers and eight
trailers, compared to the same period in 1995 where the Partnership realized a
gain of $22,830 on the sale or disposition of seven trailers and six marine
containers.
(D) Interest and other income decreased to $6,088 for the six months ended June
30, 1996 from $23,179 compared to the same period of 1995. This decrease was
primarily due to income earned from an early lease termination penalty on four
railcars in the second quarter of 1995, and a lower interest income earned due
to lower cash balances available for investments when compared to the same
period of 1995.
(E) Equity in net income of the unconsolidated special purpose entity
Equity in net income of unconsolidated special purpose entity represents the net
income generated from jointly owned asset accounted for under the equity method
(see Note 4 to financial statements).
For the six months
ended June 30,
1996 1995
------------------------------
Aircraft $ 19,376 $ 23,529
Aircraft: The decrease of net contribution was due to higher management fees in
the six months ended June 30, 1996, when compared to the same period of 1995.
Monthly management fees are calculated as the greater of 10% of the
Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Capital
Contributions as defined in the Limited Partnership Agreement.
(F) Net income
The Partnership's net income of $2,931 in the six months ended June 30, 1996,
decreased from $42,423 in the first six months of 1995. The Partnership's
ability to 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 first six months of 1996 is
not necessarily indicative of future periods. For the six months ended June 30,
1996, the Partnership distributed $295,111 to the Limited Partners, or $13.24
per Limited Partnership Unit which included a special distribution of $4.44 per
unit.
TEP VIIC:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during the first
six months of 1996 when compared to the same period of 1995. The following table
presents lease revenues less direct expenses by owned equipment type:
For the six months
ended June 30,
1996 1995
---------------------------------
Trailers $ 167,681 $ 261,558
Marine containers 3,114 15,600
Trailers: Trailer lease revenues and direct expenses were $216,522 and $48,841,
respectively, for the six months ended 1996, compared to $368,314 and $106,756,
respectively during the same quarter of 1995. The decrease in net contribution
was due to lower utlilzation of trailers in the short-term rental facilities in
the first six months of 1996 when compared to the same period of 1995, and the
disposition of trailers;
Marine containers: Marine container lease revenues and direct expenses were
$3,227 and $114, respectively, for the six months ended 1996, compared to
$15,879 and $279, respectively during the same quarter of 1995. 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 resulted in a decrease in marine container net contribution.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $269,073 for the six months ended June 30, 1996,
decreased from $323,363 for the same period in 1995. The variances are explained
as follows:
(a) a decrease in the general and administrative expenses of $22,439 from 1995
levels was due to decreased administrative costs associated with the short-term
rental facilities due to decreased volume of trailers operating in these
facilities;
(b) a $18,548 decrease in depreciation and amortization expenses from 1995
levels reflecting the sale of certain assets during 1996 and 1995;
(c) a $7,986 decrease in managment fee due to lower levels of operating cash
flow during the comparable periods. Monthly management fees are calculated as
the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of
the Partnership's Capital Contributions as defined in the Limited Partnership
Agreement;
(d) a $5,317 decrease in bad debt expense due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees.
(C) For the six months ended June 30, 1996, the Partnership realized a gain of
$54,634 on the sale or disposition of 16 trailers and four marine containers,
compared to the same period in 1995, where the Partnership realized a gain of
$46,659 on the sale or disposition of seven trailers and 11 marine containers.
(D) Equity in net income of unconsolidated special purpose entities
Equity in net income of unconsolidated special purpose entities represents the
net income generated from jointly owned assets accounted for under the equity
method (see Note 4 to financial statements).
For the six months
ended June 30,
1996 1995
------------------------------
Aircraft $ 70,844 $ 97,310
Aircraft: The decrease of net contribution was due to lower management fees in
the six months ended June 30, 1996, when compared to the same period in 1995.
Monthly management fees are calculated as the greater of 10% of the
Partnership's Operating Cash Flow, or 1/12 of 1/2% of the Partnership's Capital
Contributions as defined in the Limited Partnership Agreement.
(E) Interest and other income decreased to $10,822 for the six months ended June
30, 1996 from $5,326 compared to the same period of 1995. This decrease was
primarily due to lower interest rate earned on cash investments in the first six
months of 1996.
(F) Net Income
The Partnership's net income decreased to $38,021 for the six months ended June
30, 1996, from $117,996 in the same period in 1995. The Partnership's ability to
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 second six months of 1996 is not
necessarily indicative of future periods. In the second six months of 1996, the
Partnership distributed $662,935 to the Limited Partners, or $19.65 per Limited
Partnership Unit which included a special distribution of $10.27 per unit.
(II) Asset Sales
The General Partner is actively marketing the remaining equipment portfolio with
the intent of maximizing sale proceeds.
Equipment sales and dispositions prior to the Partnerships' planned liquidation
phase generally result from either the exercise by lessees of fair market value
purchase options provided for in certain leases, or the payment of stipulated
loss values on equipment lost or disposed of during the time it is subject to
lease agreements. Such disposal of equipment is unpredictable and results from
the wear, tear, and general risk of normal operations. As discussed in note 3,
the Partnerships have entered the portfolio liquidation phase as of the third
quarter of 1995. During the six months ended June 30, 1996, TEP VIIB sold or
disposed of eight trailers and seven marine containers for $48,577, and TEP VIIC
sold or disposed of 16 trailers and four marine containers for $101,238. As
discussed in note 3, the General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds.
(III) Market Values
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995,
the effect of which was not material as the method previously employed by the
Partnership was consistent with SFAS 121. In accordance with SFAS 121, the
General Partner reviews the carrying value of its equipment portfolio at least
annually in relation to expected future market conditions for the purpose of
assessing recoverability of the recorded amounts. If projected future lease
revenue plus residual values are less than the carrying value of the equipment,
a loss on revaluation is recorded. No adjustments to reflect impairment of
individual equipment carrying values were required for the three months ended
June 30, 1996.
As of June 30, 1996, the General Partner estimated the fair market value of each
Partnerships' equipment portfolio to be approximately: $1.7 million and $3.0
million for TEP VIIB and TEP VIIC respectively.
(IV) Government Regulations
The General Partner operates the Partnerships' equipment in accordance with
current regulations (see Item 1 (D) Government Regulations). However, the
continuing implementation of new or modified regulations by some of the
authorities mentioned previously, or others, may adversely affect the
Partnerships' ability to continue to own or operate equipment in its portfolio.
These on-going changes in the regulatory environment, both in the U.S. and
internationally, cannot be predicted with any certainty and thus preclude the
General Partner from accurately determining the impact of such changes on
Partnership operations, purchases and sales of equipment.
(V) Future outlook
Pursuant to the original operating plan, the Partnerships entered into their
liquidation phase during 1995 and the General Partner is actively pursuing the
sale of all of the Partnerships' equipment with the intention of winding up the
Partnerships and distributing all available cash to the Partners.
(VI) Trends
Inflation and changing prices did not materially impact the Partnerships'
revenues or expenses during the reported periods.
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 and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM TRANSPORTATION EQUIPMENT
PARTNERS VIIB 1985 INCOME FUND
By: PLM Financial Services, Inc.
General Partner
Date: August 9, 1996 By: /s/ David J. Davis
------------------
David J. Davis
Vice President and
Corporate Controller