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 September 30, 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 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
September 30, December 31,
1997 1996
----------------------------------------
Assets:
Equipment held for operating lease, at cost $ 676,601 $ 3,550,990
Less accumulated depreciation (673,377 ) (3,427,418 )
---------------------------------------
Net equipment 3,224 123,572
Cash and cash equivalents 220,487 269,628
Accounts receivable, net of allowance for doubtful accounts of
$3,676 in 1997 and $5,082 in 1996 263,138 127,105
Prepaid insurance 140 2,714
---------------------------------------
Total assets $ 486,989 $ 523,019
=======================================
Liabilities and partners' capital:
Liabilities:
Accounts payable and accrued expenses $ 30,297 $ 32,221
Due to affiliate 4,641 4,641
Lessee deposits and engine reserves -- 615
---------------------------------------
Total liabilities 34,938 37,477
---------------------------------------
Partners' capital (deficit):
Limited partners (22,276 units) 545,580 578,736
General Partner (93,529 ) (93,194 )
---------------------------------------
Total partners' capital 452,051 485,542
---------------------------------------
Total liabilities and partners' capital $ 486,989 $ 523,019
=======================================
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 Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
----------------------------------------------------------------
Revenues:
Lease revenue $ 58,365 $ 94,091 $ 241,370 $ 289,005
Interest income 2,915 2,408 10,544 8,496
Net gain on disposition of equipment 292,684 3,040 518,392 32,674
----------------------------------------------------------------
Total revenues 353,964 99,539 770,306 330,175
----------------------------------------------------------------
Expenses:
Depreciation 8,312 52,357 46,373 160,238
Repairs and maintenance 14,305 25,782 59,294 70,983
Management fees to affiliate 13,922 16,331 41,767 41,767
General and administrative
expenses to affiliates 8,615 14,067 43,995 62,503
Other general and administrative expenses 12,594 13,948 49,118 40,931
Provision for bad debt 9,831 19,502 16,060 12,646
----------------------------------------------------------------
Total expenses 67,579 141,987 256,607 389,068
----------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entity -- 245,732 -- 265,108
----------------------------------------------------------------
Net income $ 286,385 $ 203,284 $ 513,699 $ 206,215
================================================================
Partners' share of net income:
Limited partners - 99% $ 283,521 $ 201,251 $ 508,562 $ 204,153
General Partner - 1% 2,864 2,033 5,137 2,062
----------------------------------------------------------------
Total $ 286,385 $ 203,284 $ 513,699 $ 206,215
================================================================
Net income per weighted-average limited
partnership unit (22,276 units) $ 12.73 $ 9.03 $ 22.83 $ 9.16
================================================================
Cash distributions $ -- $ 99,047 $ 97,172 $ 297,138
================================================================
Cash distribution per weighted-average
limited partnership unit $ -- $ 4.40 $ 4.32 $ 13.21
================================================================
Special cash distributions $ 225,010 $ -- $ 450,018 $ 100,000
================================================================
Special cash distributions per weighted-average
limited partnership unit $ 10.00 $ -- $ 20.00 $ 4.44
================================================================
Total cash distributions per weighted-average
limited partnership unit $ 10.00 $ 4.40 $ 24.32 $ 17.65
================================================================
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 September
30, 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
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 508,562 5,137 513,699
Cash distributions (96,200 ) (972 ) (97,172 )
Special distributions (445,518 ) (4,500 ) (450,018 )
--------------------------------------------------------------
Partners' capital (deficit) at September 30, 1997 $ 545,580 $ (93,529 ) $ 452,051
==============================================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the Nine Months
ended September 30,
1997 1996
-------------------------------------
Operating activities:
Net income $ 513,699 $ 206,215
Adjustments to reconcile net income
to net cash provided by operating activities:
Net gain on disposition of equipment (518,392 ) (32,674 )
Depreciation 46,373 160,238
Equity in net income from unconsolidated special-purpose
entity -- (265,108 )
Changes in operating assets and liabilities:
Accounts receivable, net 47,748 56,609
Prepaid insurance 2,574 2,864
Accounts payable and accrued expenses (1,924 ) (4,773 )
Lessee deposits and engine reserves (615 ) (252 )
-------------------------------------
Net cash provided by operating activities 89,463 123,119
-------------------------------------
Investing activities:
Liquidation proceeds from unconsolidated special-purpose entity -- 344,224
Proceeds from disposition of equipment 408,586 52,805
-------------------------------------
Net cash provided by investing activities 408,586 397,029
-------------------------------------
Financing activities:
Cash distributions paid to Limited Partners (541,718 ) (393,167 )
Cash distributions paid to General Partner (5,472 ) (3,971 )
-------------------------------------
Net cash used in financing activities (547,190 ) (397,138 )
-------------------------------------
Net (decrease) increase in cash and cash equivalents (49,141 ) 123,010
Cash and cash equivalents at beginning of period 269,628 293,808
-------------------------------------
Cash and cash equivalents at end of period $ 220,487 $ 416,818
=====================================
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 183,781 $ --
=====================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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 financial position of PLM Transportation
Equipment Partners VIIB 1985 Income Fund (the Partnership) as of September
30, 1997 and December 31, 1996, the statements of income for the three and
nine months ended September 30, 1997 and 1996, the statements of changes in
partners' capital for the period from December 31, 1995 to September 30,
1997, and the statements of cash flows for the nine months ended September
30, 1997 and 1996. 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:
September 30, December 31,
1997 1996
---------------------------------------
Equipment held for operating lease:
Trailers $ 614,072 $ 3,146,140
Marine containers 62,529 86,201
Rail equipment -- 318,649
---------------------------------------
676,601 3,550,990
Less accumulated depreciation (673,377 ) (3,427,418 )
---------------------------------------
Net equipment $ 3,224 $ 123,572
=======================================
All of the equipment owned by the Partnership was either on lease or operating
in PLM-affiliated short-term rental facilities at September 30, 1997 and
December 31, 1996.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of railcars, trailers and marine containers with an aggregate net
book value of $73,975 for proceeds of $592,367. During the nine months
ended September 30, 1996, the Partnership sold or disposed of trailers and
marine containers with an aggregate net book value of $20,131 for aggregate
proceeds of $52,805.
4. Liquidation and Special Distributions
The Partnership is in its liquidation phase. 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
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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 the partners. The
amounts reflected for assets and liabilities 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.
During the nine months ended September 30, 1997 and 1996, the General
Partner paid special distributions of $20.00 and $4.44, respectively, per
weighted-average limited partnership unit which were the result of proceeds
from the sale of equipment. 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 the sale of that asset, and, in
some leases, the ability of the lessee to exercise purchase options.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
September 30, December 31,
1997 1996
----------------------------------------
Assets:
Equipment held for operating lease, at cost $ 1,787,489 $ 4,069,971
Less accumulated depreciation (1,769,176 ) (3,861,489 )
----------------------------------------
Net equipment 18,313 208,482
Cash and cash equivalents 272,467 416,360
Investments in unconsolidated special-purpose entity 17,630 99,974
Accounts receivable, net of allowance for doubtful accounts of
$3,227 in 1997 and $633 in 1996 38,166 64,261
Prepaid insurance 111 3,713
----------------------------------------
Total assets $ 346,687 $ 792,790
========================================
Liabilities and Partners' Capital:
Liabilities:
Accounts payable and accrued expenses $ 12,087 $ 13,040
Due to affiliate 7,026 7,026
----------------------------------------
Total liabilities 19,113 20,066
----------------------------------------
Partners' capital (deficit):
Limited partners (33,727 units) 472,802 913,500
General Partner (145,228 ) (140,776 )
----------------------------------------
Total partners' capital 327,574 772,724
----------------------------------------
Total liabilities and partners' capital $ 346,687 $ 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 For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
-------------------------------------------------------------
Revenues:
Lease revenue $ 53,535 $ 96,968 $ 180,399 $ 316,717
Interest income 5,052 3,768 14,216 14,590
Net gain on disposition of equipment 82,320 14,895 334,727 69,529
-------------------------------------------------------------
Total revenues 140,907 115,631 529,342 400,836
-------------------------------------------------------------
Expenses:
Depreciation 26,571 60,477 117,647 189,848
Repairs and maintenance 18,105 21,703 47,091 68,639
Management fees to affiliate 21,079 32,944 63,238 70,767
General and administrative
expenses to affiliates 16,331 22,579 54,380 89,661
Other general and administrative expenses 9,534 11,981 37,712 44,846
Provision for (recovery of) bad debt 1,390 (79 ) 5,702 3,872
-------------------------------------------------------------
Total expenses 93,010 149,605 325,770 467,633
-------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 12,843 569,504 37,953 640,348
-------------------------------------------------------------
Net income $ 60,740 $ 535,530 $ 241,525 $ 573,551
=============================================================
Partners' share of net income:
Limited partners - 99% $ 60,133 $ 530,175 $ 239,110 $ 567,815
General Partner - 1% 607 5,355 2,415 5,736
---
============================= =============================
Total $ 60,740 $ 535,530 $ 241,525 $ 573,551
=============================================================
Net income per weighted-average limited
partnership unit (33,727 units) $ 1.78 $ 15.72 $ 7.09 $ 16.84
=============================================================
Cash distributions $ -- $ 156,815 $ 75,660 $ 576,447
=============================================================
Cash distribution per weighted-average
limited partnership unit $ -- $ 4.60 $ 2.22 $ 16.92
=============================================================
Special cash distributions $ 340,677 $ 100,000 $ 611,015 $ 350,000
=============================================================
Special cash distributions per weighted-average
limited partnership unit $ 10.00 $ 2.94 $ 17.94 $ 10.27
=============================================================
Total cash distributions per weighted-average
limited partnership units $ 10.00 $ 7.54 $ 20.16 $ 27.19
=============================================================
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 September
30, 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
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 239,110 2,415 241,525
Cash distributions (74,903 ) (757 ) (75,660 )
Special distributions (604,905 ) (6,110 ) (611,015 )
----------------------------------------------------------------
Partners' capital (deficit) at September 30, 1997 $ 472,802 $ (145,228 ) $ 327,524
================================================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
1997 1996
-----------------------------------------
Operating activities:
Net income $ 241,525 $ 573,551
Adjustments to reconcile net income
to net cash provided by operating activities:
Net gain on disposition of equipment (334,727 ) (69,529 )
Depreciation 117,647 189,848
Equity in net income from unconsolidated special-purpose
entities (37,953 ) (640,348 )
Changes in operating assets and liabilities:
Accounts receivable, net 29,095 70,381
Prepaid insurance 3,602 5,198
Accounts payable and accrued expenses (953 ) (3,786 )
---------------------------------------
Net cash provided by operating activities 18,236 125,315
---------------------------------------
Investing activities:
Payment for capitalized repairs (1,435 ) --
Distributions from unconsolidated special-purpose entities 120,297 939,728
Proceeds from disposition of equipment 405,684 121,454
---------------------------------------
Net cash provided by investing activities 524,546 1,061,182
---------------------------------------
Financing activities:
Cash distributions paid to limited partners (679,808 ) (917,183 )
Cash distributions paid to General Partner (6,867 ) (9,264 )
---------------------------------------
Net cash used in financing activities (686,675 ) (926,447 )
---------------------------------------
Net (decrease) increase in cash and cash equivalents (143,893 ) 260,050
Cash and cash equivalents at beginning of period 416,360 551,094
---------------------------------------
Cash and cash equivalents at end of period $ 272,467 $ 811,144
=======================================
Supplemental disclosure of noncash investing and financing activities:
Sales proceeds included in accounts receivable $ 3,000 $ --
=======================================
See accompanying notes to financial
statements.
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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 financial position of PLM Transportation
Equipment Partners VIIC 1985 Income Fund (the Partnership) as of September
30, 1997 and December 31, 1996, the statements of income for the three and
nine months ended September 30, 1997 and 1996, the statements of changes in
partners' capital for the period from December 31, 1995 to September 30,
1997, and the statements of cash flows for the nine months ended September
30, 1997 and 1996. 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:
September 30, December 31,
1997 1996
----------------------------------------
Equipment held for operating lease:
Trailers $ 1,636,254 $ 3,870,247
Marine containers 151,235 199,724
----------------------------------------
1,787,489 4,069,971
Less accumulated depreciation (1,769,176 ) (3,861,489 )
========================================
Net equipment $ 18,313 $ 208,482
========================================
All of the equipment owned by the Partnership was either on lease or operating
in PLM-affiliated short-term rental facilities at September 30, 1997 and
December 31, 1996.
During the nine months ended September 30, 1997, the Partnership sold or
disposed of marine containers and trailers with a net book value of $73,957
for proceeds of $408,684. During the nine months ended September 30, 1996,
the Partnership sold or disposed of marine containers and trailers with a
net book value of $51,925 for proceeds of $121,454.
4. Liquidation and Special Distributions
The Partnership is in its liquidation phase. 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
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 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 the 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 nine months ended September 30, 1997, and 1996, the General
Partner paid special distributions of $17.94 and $10.27, respectively, per
weighted-average limited partnership unit which were the result of proceeds
from the sale of equipment. 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 Entity
The net investment in an unconsolidated special-purpose entity included a
80% interest in a commuter aircraft as of September 30, 1997 and December
31, 1996.
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
September 30, 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 September 30, 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 September 30,
1997 1996
---------------------------------
Trailers $ 40,852 $ 60,225
Marine containers 2,610 36
Railcar equipment (57 ) 7,455
Trailers: Trailer lease revenues and direct expenses were $55,740 and $14,888,
respectively, for the quarter ended September 30, 1997, compared to $86,526 and
$26,301, respectively, during the same period of 1996. The decrease in
contribution was due to the disposition of trailers over the preceding twelve
months.
Marine containers: Marine container lease revenues and direct expenses were
$2,625 and $15, respectively, for the quarter ended September 30, 1997, compared
to $66 and $30, respectively, during the same period of 1996.
Railcar equipment: Railcar lease revenues and direct expenses were zero and $57,
respectively, for the quarter ended September 30, 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 the Partnership's railcars during the
first quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $52,620 for the quarter ended September 30, 1997,
decreased from $115,611 for the same period in 1996. The variances are explained
as follows:
(1) a $44,045 decrease in depreciation expense reflecting the sale of equipment
during 1997 and 1996.
(2) a $9,671 decrease in bad debt expense was due to the General Partner's
evaluation of the collectibility of trade receivables.
(3) a $6,866 decrease in general and administrative expenses was due to
decreased administrative costs associated with the short-term rental facilities.
(C) Net Gain on Disposition of Owned Equipment
For the quarter ended September 30, 1997, the Partnership realized a gain of
$292,684 on the sale or disposition of marine containers and trailers, compared
to the same period in 1996 when the Partnership realized a gain of $3,040 on the
sale or disposition of a trailer and a marine container.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entity
Equity in the net income of the unconsolidated special-purpose entity was
$245,732 for the quarter ended September 30, 1996, and represents the
Partnership's share of income generated from the partnership's investment in an
entity which owned an aircraft, accounted for under the equity method. This
investment was sold in the third quarter of 1996.
(E) Net Income
The Partnership's net income of $286,385 in the third quarter of 1997 increased
from $203,284 in the third 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 third quarter of 1997 is not necessarily
indicative of future periods. In the third quarter of 1997, no regular
distributions were made but the Partnership made a special distribution of
$222,760 to the limited partners, or $10.00 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 September 30, 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 September 30,
1997 1996
---------------------------------
Trailers $ 32,062 $ 74,056
Marine containers 2,588 420
Trailers: Trailer lease revenues and direct expenses were $50,911 and $18,849,
respectively, for the quarter ended September 30, 1997, compared to $96,503 and
$22,447, respectively, during the same period during 1996. The decrease in
contribution was due to lower utilization of trailers in 1997, and the
disposition of equipment during 1997 and 1996.
Marine containers: Marine container lease revenues and direct expenses were
$2,624 and $36, respectively, for the quarter ended September 30, 1997, compared
to $465 and $45, respectively, during the same period during 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $74,125 for the quarter ended September 30, 1997,
decreased from $127,113 for the same period in 1996. The variances are explained
as follows:
(1) a $33,906 decrease in depreciation expenses reflecting the sale of equipment
during 1997 and 1996.
(2) a $11,865 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.
(3) a $8,686 decrease in the general and administrative expenses due to
decreased administrative costs associated with the short-term rental facilities
due to sale of equipment.
(C) Net Gain on Disposition of Owned Equipment
For the quarter ended September 30, 1997, the Partnership realized a gain of
$82,320 on the sale or disposition of trailers, compared to the same period in
1996, when the Partnership realized a gain of $14,895 on the sale or disposition
of marine containers and trailers.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities
Equity in net income of unconsolidated special-purpose entities of $12,843 and
$569,504 for the quarter ended September 30, 1997 and September 30, 1996,
respectively, represents the Partnership's share of income generated from the
partnership investment in entities which own aircraft, accounted for under the
equity method. The decrease is due to the Partnership liquidating its 69%
investment in an enitity which owned an aircraft as a result of the General
Partner's sale of the asset during 1996.
(E) Net Income
The Partnership's net income decreased to $60,740 in the third quarter of 1997,
from $535,530 in the third 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 third quarter of 1997 is not necessarily
indicative of future periods. In the third quarter of 1997, no regular
distributions were made but the Partnership made a special distribution of
$337,270 to the limited partners, or $10.00 per weighted-average limited
partnership unit.
Comparison of the Partnerships' Operating Results for the Nine Months Ended
September 30, 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 during the first
nine months of 1997 when compared to the same period of 1996. The following
table presents lease revenues less direct expenses by owned equipment type:
For the nine months
ended September 30,
1997 1996
---------------------------------
Trailers $ 170,119 $ 186,338
Marine containers 6,325 7,811
Railcar equipment 3,538 22,091
Trailers: Trailer lease revenues and direct expenses were $231,246 and $61,127,
respectively, for the nine months ended September 30, 1997, compared to $258,604
and $72,266, respectively, during the same period of 1996. The decrease of net
contribution was due to the disposition of trailers and lower utilization in the
first nine months of 1997 when compared to the same period of 1996.
Marine containers: Marine container lease revenues and direct expenses were
$6,374 and $49, respectively, for the nine months ended 1997, compared to $7,901
and $90, respectively, during the same period of 1996. The decrease in marine
containers contribution was due to the number of marine containers owned by the
Partnership declined over the past twelve months due to sales and dispositions.
In addition, the marine container fleet experienced lower utilization, resulting
in a decrease in marine container contribution.
Railcar equipment: Railcar lease revenues and direct expenses were $3,750 and
$212, respectively, for the nine months ended September 30, 1997, compared to
$22,500 and $409, respectively, during the same period of 1996. The decrease in
railcar contribution resulted from the sale of all the Partnership's railcars
during the first quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $195,219 for the nine months ended September 30,
1997, decreased from $316,303 for the same period in 1996. The variances are
explained as follows:
(1) a $113,865 decrease in depreciation expense from 1996 levels reflecting the
sale of equipment during 1997 and 1996.
(2) a decrease of general and administrative expenses of $10,633 from 1996
levels was due to decreased administrative costs associated with the short-term
rental facilities, partially offset by increased license fee due to renewal of
trailers licenses.
(3) an increase of bad debt expense of $3,414 was due to the General Partner's
evaluation of the collectibility of trade receivables.
(C) Net Gain on Disposition of Owned Equipment
For the nine months ended September 30, 1997, the Partnership realized a gain of
$518,392 on the sale or disposition of railcars, marine containers, and
trailers, compared to the same period in 1996 where the Partnership realized a
gain of $32,674 on the sale or disposition of marine containers and trailers.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entity
Equity in the net income of the unconsolidated special-purpose entity was
$265,108 for the nine months ended September 30, 1996, and represents the
Partnership's share of income generated from the partnership's investment in an
entity which owned an aircraft, accounted for under the equity method. This
investment was sold in the third quarter of 1996.
(E) Net Income
The Partnership's net income of $513,699 in the nine months ended September 30,
1997, increased from $206,215 in the first nine months 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 nine
months of 1997 is not necessarily indicative of future periods. For the nine
months ended September 30, 1997, the Partnership distributed $541,718 to the
limited partners, or $24.32 per weighted-average limited partnership unit which
included a special distribution of $20.00 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 during the first
nine months of 1997 when compared to the same period of 1996. The following
table presents lease revenues less direct expenses by owned equipment type:
For the nine months
ended September 30,
1997 1996
---------------------------------
Trailers $ 124,437 $ 241,758
Marine containers 6,396 3,533
Trailers: Trailer lease revenues and direct expenses were $173,888 and $49,451,
respectively, for the nine months ended 1997, compared to $313,025 and $71,267,
respectively during the same quarter of 1996. The decrease in net contribution
was due to lower utilization of trailers in the short-term rental facilities in
the first nine months of 1997 when compared to the same period of 1996, and the
disposition of trailers.
Marine containers: Marine container lease revenues and direct expenses were
$6,511 and $115, respectively, for the nine months ended 1997, compared to
$3,692 and $159, respectively during the same period of 1996.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $276,204 for the nine months ended September 30,
1997, decreased from $396,207 for the same period in 1996. The variances are
explained as follows:
(1) a $72,201 decrease in depreciation expenses from 1996 levels reflecting the
sale of equipment during 1997 and 1996.
(2) a $42,103 decrease in the general and administrative expenses from 1996
levels was due to decreased administrative costs associated with the short-term
rental facilities.
(3) a $7,529 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) Net Gain on Disposition of Owned Equipment
For the nine months ended September 30, 1997, the Partnership realized a gain of
$334,727 on the sale or disposition of trailers and marine containers, compared
to the same period in 1996, where the Partnership realized a gain of $69,529 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 $37,953 and
$640,348 for the nine months ended September 30, 1997 and 1996, respectively,
represents the Partnership's share of income generated from the partnership
investment in entities which own an aircraft, accounted for under the equity
method. The decrease is due to the Partnership liquidating its 69% investment in
an entity which owned an aircraft as a result of the General Partner's sale of
the asset during 1996.
(E) Net Income
The Partnership's net income decreased to $241,525 for the nine months ended
September 30, 1997, from $573,551 in the same period in 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 nine months ended September
30, 1997, is not necessarily indicative of future periods. For the nine months
ended September 30, 1997, the Partnership distributed $679,808 to the limited
partners, or $20.16 per weighted-average limited partnership unit which included
a special distribution of $17.94 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
entered the liquidation phase in 1995. During the nine months ended September
30, 1997, TEP VIIB sold or disposed of railcars, trailers and marine containers
for $592,367, and TEP VIIC sold or disposed of trailers and marine containers
for $408,684.
(III) MARKET VALUES
As of September 30, 1997, the General Partner estimated the fair market value of
each Partnerships' equipment portfolio to be approximately: $0.2 million and
$1.1 million for TEP VIIB and TEP VIIC respectively.
(IV) OUTLOOK FOR THE FUTURE
Pursuant to the original operating plan, the Partnerships entered into their
liquidation phase in 1995. 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.
(V) 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.
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: November 11, 1997 By: /s/ Richard Brock
-----------------
Richard Brock
Vice President and
Corporate Controller