UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended March 31, 1997. [ ] 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 800, San Francisco, CA 94105-1301 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (415) 974-1399 --------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS March 31, December 31, 1997 1996 ---------------------------------------- Equipment held for operating leases, at cost $ 2,993,030 $ 3,550,990 Less accumulated depreciation (2,953,192 ) (3,427,418 ) --------------------------------------- Net equipment 39,838 123,572 Cash and cash equivalents 404,900 269,628 Accounts receivable, net of allowance for doubtful accounts of $4,975 in 1997 and $5,082 in 1996 118,915 127,105 Prepaid insurance 2,028 2,714 --------------------------------------- Total assets $ 565,681 $ 523,019 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 4,641 $ 4,641 Accounts payable and accrued expenses 28,358 32,221 Lessee deposits and engine reserves 14,000 615 --------------------------------------- Total liabilities 46,999 37,477 Partners' capital (deficit): Limited Partners (22,276 units) 611,545 578,736 General Partner (92,863 ) (93,194 ) --------------------------------------- Total partners' capital 518,682 485,542 --------------------------------------- Total liabilities and partners' capital $ 565,681 $ 523,019 ======================================= See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF OPERATIONS For the three months ended March 31, 1997 1996 -------------------------------- Revenues: Lease revenue $ 98,483 $ 106,074 Interest and other income 3,528 3,453 Gain on disposition of equipment 114,482 19,330 ---------------------------------- Total revenues 216,493 128,857 Expenses: Depreciation 23,510 54,769 Management fees to affiliate 13,922 11,513 (Recovery of) provision for bad debts (106 ) 17,821 Repairs and maintenance 16,249 22,263 Insurance expense 1,057 1,826 General and administrative expenses to affiliates 4,364 26,546 Other general and administrative expenses 27,185 10,516 ---------------------------------- Total expenses 86,181 145,254 Equity in net income of unconsolidated special purpose entity -- 9,331 ---------------------------------- Net income (loss) $ 130,312 $ (7,066 ) ================================== Partners' share of net income (loss): Limited Partners - 99% $ 129,009 $ (6,995 ) General Partner - 1% 1,303 (71 ) ---------------------------------- Total $ 130,312 $ (7,066 ) ================================== Net income (loss) per weighted average Limited Partnership Unit (22,276 units) $ 5.79 $ (0.31 ) ================================== Cash distributions $ 97,172 $ 99,046 ================================== Cash distribution per weighted average Limited Partnership Unit $ 4.32 $ 4.40 ================================== 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, 1995 to March 31, 1997 Limited General Partners Partner Total ------------------------------------------------------------ Partners' capital (deficit) at December 31, 1995 $ 931,401 $ (89,632 ) $ 841,769 Net income 235,702 2,381 238,083 Quarterly cash distributions (390,367 ) (3,943 ) (394,310 ) Special distributions (198,000 ) (2,000 ) (200,000 ) ------------------------------------------------------------- Partners' capital (deficit) at December 31, 1996 578,736 (93,194 ) 485,542 Net income 129,009 1,303 130,312 Quarterly cash distributions (96,200 ) (972 ) (97,172 ) ------------------------------------------------------------- Partners' capital (deficit) at March 31, 1997 $ 611,545 $ (92,863 ) $ 518,682 ============================================================= See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) STATEMENT OF CASH FLOWS For the three months ended March 31, 1997 1996 ------------------------------------- Operating activities: Net income (loss) $ 130,312 $ (7,066 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on disposition of equipment (114,482 ) (19,330 ) Depreciation 23,510 54,769 Equity in net income from unconsolidated special purpose entity -- (9,331 ) Changes in operating assets and liabilities: Accounts receivable, net 8,190 42,674 Prepaid insurance 686 1,028 Accounts payable and accrued expenses (3,863 ) (2,695 ) Lessee deposits and engine reserves 13,385 (260 ) ------------------------------------- Net cash provided by operating activities 57,738 59,789 ------------------------------------- Investing activities: Proceeds from disposition of equipment 174,706 34,213 Distributions from unconsolidated special purpose entity -- 18,398 ------------------------------------- Net cash provided by investing activities 174,706 52,611 ------------------------------------- Financing activities: Cash distributions paid to Limited Partners (96,200 ) (98,056 ) Cash distributions paid to General Partner (972 ) (990 ) ------------------------------------- Net cash used in financing activities (97,172 ) (99,046 ) ------------------------------------- Net increase in cash and cash equivalents 135,272 13,354 Cash and cash equivalents at beginning of period 269,628 293,808 ------------------------------------- Cash and cash equivalents at end of period $ 404,900 $ 307,162 ===================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 1997 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 March 31, 1997 and December 31, 1996, the statements of operations and cash flows for the three months ended March 31, 1997 and 1996, and the statements of changes in partners' capital for the period from December 31, 1995 to March 31, 1997. 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, 1996, on file at the Securities and Exchange Commission. 2. Reclassifications Certain amounts in the 1996 financial statements have been reclassified to conform to the 1997 presentation. 3. Equipment The components of owned equipment are as follows: March 31, December 31, 1997 1996 ---------------------------------------- Equipment held for operating leases: Trailers $ 2,910,211 $ 3,146,140 Marine containers 82,819 86,201 Rail equipment -- 318,649 ---------------------------------------- 2,993,030 3,550,990 Less accumulated depreciation (2,953,192 ) (3,427,418 ) ---------------------------------------- Net equipment $ 39,838 $ 123,572 ======================================== All of the equipment owned by the Partnership was either on lease or operating in PLM-affiliated short-term rental facilities at March 31, 1997 and December 31, 1996. During the three months ended March 31, 1997, the Partnership sold or disposed of railcars, trailers and marine containers with an aggregate net book value of $60,224 for proceeds of $174,706. During the three months ended March 31, 1996, the Partnership sold or disposed of trailers and marine containers with an aggregate net book value of $14,883 for aggregate proceeds of $34,213. 4. 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 is being 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 PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 1997 4. Liquidation and special distributions (continued) 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 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. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) BALANCE SHEETS ASSETS March 31, December 31, 1997 1996 ---------------------------------------- Equipment held for operating leases, at cost $ 3,832,106 $ 4,069,971 Less accumulated depreciation (3,688,771 ) (3,861,489 ) --------------------------------------- Net equipment 143,335 208,482 Cash and cash equivalents 343,774 416,360 Investments in unconsolidated special purpose entity 73,224 99,974 Accounts receivable, net of allowance for doubtful accounts of $612 in 1997 and $633 in 1996 53,046 64,261 Prepaid insurance 2,707 3,713 --------------------------------------- Total assets $ 616,086 $ 792,790 ======================================= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Due to affiliates $ 7,026 $ 7,026 Accounts payable and accrued expenses 10,030 13,040 --------------------------------------- Total liabilities 17,056 20,066 Partners' capital (deficit): Limited Partners (33,727 units) 741,543 913,500 General Partner (142,513 ) (140,776 ) --------------------------------------- Total partners' capital 599,030 772,724 --------------------------------------- Total liabilities and partners' capital $ 616,086 $ 792,790 ======================================= See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF INCOME For the three months ended March 31, 1997 1996 ----------------------------------- Revenues: Lease revenue $ 72,195 $ 109,192 Interest and other income 4,318 6,463 Gain on disposition of equipment 40,958 34,445 ------------------------------- Total revenues 117,471 150,100 Expenses: Depreciation 55,082 66,504 Management fees to affiliate 21,079 15,298 (Recovery of) provision for bad debts (21 ) 406 Repairs and maintenance 14,825 23,711 Insurance expense 1,431 4,058 General and administrative expenses to affiliates 23,305 37,131 Other general and administrative expenses 12,760 15,283 ------------------------------- Total expenses 128,461 162,391 Equity in net income of unconsolidated special purpose entities 12,956 36,977 ------------------------------- Net income $ 1,966 $ 24,686 =============================== Partners' share of net income: Limited Partners - 99% $ 1,946 $ 24,439 General Partner - 1% 20 247 ------------------------------- Total $ 1,966 $ 24,686 =============================== Net income per weighted average Limited Partnership Unit (33,727 units) $ 0.06 $ 0.72 =============================== Cash distributions $ 75,660 $ 160,317 =============================== Cash distribution per weighted average Limited Partnership Unit $ 2.22 $ 4.71 =============================== Special cash distributions $ 100,000 $ 100,000 =============================== Special cash distributions per weighted average Limited Partnership Unit $ 2.94 $ 2.94 =============================== Total cash distributions per Limited Partnership Unit $ 5.16 $ 7.65 =============================== 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, 1995 to March 31, 1997 Limited General Partners Partner Total ---------------------------------------------------------------- Partners' capital (deficit) at December 31, 1995 $ 1,758,377 $ (132,241 ) $ 1,626,136 Net income 594,935 6,009 600,944 Quarterly cash distributions (647,812 ) (6,544 ) (654,356 ) Special distributions (792,000 ) (8,000 ) (800,000 ) ---------------------------------------------------------------- Partners' capital (deficit) at December 31, 1996 913,500 (140,776 ) 772,724 Net income 1,946 20 1,966 Quarterly cash distributions (74,903 ) (757 ) (75,660 ) Special distributions (99,000 ) (1,000 ) (100,000 ) ---------------------------------------------------------------- Partners' capital (deficit) at March 31, 1997 $ 741,543 $ (142,513 ) $ 599,030 ================================================================ See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) STATEMENTS OF CASH FLOWS For the three months ended March 31, 1997 1996 -------------------------------------- Operating activities: Net income $ 1,966 $ 24,686 Adjustment to reconcile net income to net cash provided by operating activities: Gain on disposition of equipment (40,958 ) (34,445 ) Depreciation 55,082 66,504 Equity in net income from unconsolidated special purpose entities (12,956 ) (36,977 ) Changes in operating assets and liabilities Accounts receivable, net 11,215 49,513 Prepaid insurance 1,006 2,042 Accounts payable and accrued expenses (3,010 ) (2,972 ) ------------------------------------- Net cash provided by operating activities 12,345 68,351 ------------------------------------- Investing activities: Proceeds from disposition of equipment 51,023 61,147 Distributions from unconsolidated special purpose entities 39,706 92,536 ------------------------------------- Net cash provided by investing activities 90,729 153,683 ------------------------------------- Financing activities: Cash distributions paid to Limited Partners (173,903 ) (257,714 ) Cash distributions paid to General Partner (1,757 ) (2,603 ) ------------------------------------- Net cash used in financing activities (175,660 ) (260,317 ) ------------------------------------- Net decrease in cash and cash equivalents (72,586 ) (38,283 ) Cash and cash equivalents at beginning of period 416,360 551,094 ------------------------------------- Cash and cash equivalents at end of period $ 343,774 $ 512,811 ===================================== See accompanying notes to financial statements. PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 1997 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 March 31, 1997 and December 31, 1996, the statements of income and cash flows for the three months ended March 31, 1997 and 1996, and the statements of changes in partners' capital for the period from December 31, 1995 to March 31, 1997. 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, 1996, on file at the Securities and Exchange Commission. 2. Reclassifications Certain amounts in the 1996 financial statements have been reclassified to conform to the 1997 presentation. 3. Equipment The components of owned equipment are as follows: March 31, December 31, 1997 1996 ----------------------------------------- Equipment held for operating leases: Trailers $ 3,632,382 $ 3,870,247 Marine containers 199,724 199,724 ---------------------------------------- 3,832,106 4,069,971 Less accumulated depreciation (3,688,771 ) (3,861,489 ) ======================================== Net equipment $ 143,335 $ 208,482 ======================================== All of the equipment owned by the Partnership was either on lease or operating in PLM-affiliated short-term rental facilities at March 31, 1997 and December 31, 1996. During the three months ended March 31, 1997, the Partnership sold or disposed of trailers with a net book value of $10,065 for proceeds of $51,023. During the three months ended March 31, 1996, the Partnership sold or disposed of marine containers and trailers with a net book value of $26,702 for proceeds of $61,147. 4. 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 is being 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 PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 1997 4. Liquidation and special distributions (continued) 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 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 March 31, 1997, and 1996, the General Partner paid special distributions of $2.94 per Limited Partnership Unit out of proceeds from equipment liquidations. During the liquidation phase, 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 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. 5. Investments in Unconsolidated Special Purpose Entites The net investments in unconsolidated special purpose entity includes 80% interests in a commuter aircraft at March 31, 1997. 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 March 31, 1997 and 1996 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 for the quarter ended March 31, 1997 when compared to the same period of 1996. The following table presents lease revenues less direct expenses by owned equipment type: For the three months ended March 31, 1997 1996 --------------------------------- Trailers $ 76,569 $ 70,526 Railcar equipment 3,565 7,455 Marine containers 1,343 5,236 Trailers: Trailer lease revenues and direct expenses were $93,461 and $16,892, respectively, for the quarter ended March 31, 1997, compared to $93,308 and $22,782, respectively, during the same period of 1996. The increase in contribution was due to lower repair and maintenance expense for the three months ended March 31, 1997 when compared to the same period of 1996; Railcar equipment: Railcar lease revenues and direct expenses were $3,661 and $96, respectively, for quarter ended March 31, 1997, compared to $7,500 and $45, respectively, during the same period of 1996. The decrease in railcar contribution resulted from the sale of all railcars during the first quarter of 1997; Marine containers: Marine container lease revenues and direct expenses were $1,361 and $18, respectively, for the quarter ended March 31, 1997, compared to $5,266 and $30, respectively, during the same period of 1996. 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 contribution. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $69,175 for the quarter ended March 31, 1997, decreased from $122,397 for the same period in 1996. The variances are explained as follows: (a) a $31,259 decrease in depreciation expenses reflecting the sale of equipment during the first quarter of 1997 and during 1996; (b) a $17,927 decrease in bad debt expense was due to the General Partner's evaluation of the collectibility of trade receivables; (c) a $5,513 decrease in general and administrative expenses was due to decreased accounting costs and administrative costs associated with the short-term rental facilities. (C) For the quarter ended March 31, 1997, the Partnership realized a gain of $114,482 on the sale or disposition of marine containers, railcars and trailers, compared to the same period in 1996 when the Partnership realized a gain of $19,330 on the sale or disposition of trailers and marine containers. (D) Equity in net income of the unconsolidated special purpose entity Equity in net income of unconsolidated special purpose entity was $9,331 for the quarter ended March 31, 1996, and represents the Partnership's share of income generated from the partnership investment in an entity which owns an aircraft, accounted for under the equity method. This investment was sold in the third quarter of 1996. (E) Net income (loss) The Partnership's net income of $130,312 in the first quarter of 1997 compared to a net loss of $7,066 in the first quarter of 1996. 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 quarter of 1997 is not necessarily indicative of future periods. In the first quarter of 1997, the Partnership distributed $96,200 to the Limited Partners, or $4.32 per weighted average Limited Partnership 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 for the quarter ended March 31, 1997 when compared to the same period of 1996. The following table presents lease revenues less direct expenses by owned equipment type: For the three months ended March 31, 1997 1996 --------------------------------- Trailers $ 55,187 $ 83,140 Marine containers 1,298 1,237 Trailers: Trailer lease revenues and direct expenses were $70,855 and $15,668, respectively, for the quarter ended March 31, 1997, compared to $107,892 and $24,752, respectively during the same period during 1996. The decrease in contribution was due to lower utilization of trailers and the disposition of equipment during the first quarter of 1997 and during 1996; Marine containers: Marine container lease revenues and direct expenses were $1,340 and $42, respectively, for the quarter ended March 31, 1997, compared to $1,300 and $63, respectively during the same period during 1996. (B) Indirect expenses related to owned equipment operations Total indirect expenses of $112,751 for the quarter ended March 31, 1997, decreased from $137,576 for the same period in 1996. The variances are explained as follows: (a) a $16,349 decrease in the general and administrative expenses due to decreased accounting costs and administrative costs associated with the short-term rental facilities due to decreased volume of trailers operating in these facilities; (b) a $11,422 decrease in depreciation expenses reflecting the sale of certain assets during the first quarter of 1997 and during 1996; (c) a $5,781 increase in management fees due to higher 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 quarter ended March 31, 1997, the Partnership realized a gain of $40,958 on the sale or disposition of trailers, compared to the same period in 1996, when the Partnership realized a gain of $34,445 on the sale or disposition of trailers and marine containers. (D) Equity in net income of unconsolidated special purpose entities Equity in net income of unconsolidated special purpose entities of $12,956 and $36,977 for the quarter ended March 31, 1997 and March 31, 1996, respectively, represents the Partnership's share of income generated from the partnership's investment in entities which own aircraft, accounted for under the equity method. The Partnership liquidated its 69% investment in an aircraft as a result of the General Partner's sale of the asset during 1996. As of March 31, 1997, the Partnership's remaining investment in unconsolidated purpose entity was the 80% interest in a commuter aircraft. (E) Net income The Partnership's net income decreased to $1,966 in the first quarter of 1997. from $24,686 in the first quarter of 1996. 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 quarter of 1997 is not necessarily indicative of future periods. In the first quarter of 1997, the Partnership distributed $173,903 to the Limited Partners, or $5.16 per weighted average Limited Partnership Unit which included a special distribution of $2.94 per weighted average Limited Partnership Unit. (II) Asset Sales The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As discussed in note 4, the Partnerships have entered the portfolio liquidation phase as of the third quarter of 1995. During the three months ended March 31, 1997, TEP VIIB sold or disposed of railcars, trailers and marine containers for $174,706, and TEP VIIC sold or disposed of trailers and for $51,023. (III) Market Values As of March 31, 1997, the General Partner estimated the fair market value of each Partnerships' equipment portfolio to be approximately: $0.7 million and $1.6 million for TEP VIIB and TEP VIIC respectively. (IV) 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. 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: May 9, 1997 By: /s/ David J. Davis ------------------ David J. Davis Vice President and Corporate Controller