UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10553
_______________________
PLM EQUIPMENT GROWTH FUND II
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3041013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
235 3RD STREET SOUTH, SUITE 200
ST. PETERSBURG, FL 33701
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (727) 803-1800
_______________________
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 ______
----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Aggregate market value of voting stock: N/A
Indicate the number of units outstanding of each of the issuer's classes of
depositary units, as of the latest practicable date:
Class Outstanding at March 26, 2003
- ----- ---------------------------------
Limited partnership depositary units: 7,381,265
General Partnership units: 1
An index of exhibits filed with this Form 10-K is located at page 40
Total number of pages in this report: 49
PART I
ITEM 1. BUSINESS
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(A) Background
On April 2, 1987, PLM Financial Services, Inc. (FSI or the General Partner), a
wholly-owned subsidiary of PLM International, Inc. (PLM International or PLMI),
filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission with respect to a proposed offering of 7,500,000 depositary units
(the units) in PLM Equipment Growth Fund II, a California limited partnership
(the Partnership, the Registrant, or EGF II). The Partnership's offering became
effective on June 5, 1987. FSI, as General Partner, owns a 5% interest in the
Partnership. The Partnership engages in the business of investing in a
diversified equipment portfolio consisting primarily of used, long-lived,
low-obsolescence capital equipment that is easily transportable by and among
prospective users.
The Partnership's primary objectives are:
(1) to maintain a diversified portfolio of long-lived,
low-obsolescence, high residual-value equipment which was purchased with the net
proceeds of the initial partnership offering, supplemented by debt financing,
and surplus operating cash during the investment phase of the Partnership;
(2) to generate sufficient net operating cash flow from lease
operations to meet liquidity requirements and to generate cash distributions to
the limited partners until such time as the General Partner commences the
orderly liquidation of the Partnership assets or, unless the Partnership is
terminated earlier, upon sale of all Partnership property or by certain other
events;
(3) to selectively sell equipment when the General Partner believes
that, due to market conditions, market prices for equipment exceed inherent
equipment values or that expected future benefits from continued ownership of a
particular asset will have an adverse effect on the Partnership. As the
Partnership is in the liquidation phase, proceeds from these sales, together
with excess net operating cash flow from operations, less reasonable reserves
are used to pay distributions to the partners;
(4) to preserve and protect the value of the portfolio through quality
management, maintaining the portfolio's diversity and constantly monitoring
equipment markets;
The offering of the Units of the Partnership closed on March 18, 1988. The
General Partner contributed $100 for its 5% general partner interest in the
Partnership. On November 20, 1990, the units of the Partnership began trading
on the American Stock Exchange (AMEX). Thereupon each unitholder received a
depositary receipt representing ownership of the number of units owned by such
unitholder. The General Partner delisted the Partnership's units from the AMEX
on April 8, 1996. The last day for trading on the AMEX was March 22, 1996.
As of December 31, 2002, there were 7,381,265 depositary units outstanding.
On January 1, 1999, the Partnership entered its liquidation phase and in
accordance with the limited partnership agreement, the General Partner has
commenced an orderly liquidation of the Partnership's assets. The liquidation
phase will end on December 31, 2006, unless the Partnership is terminated
earlier upon sale of all of the equipment or by certain other events.
Table 1, below, lists the equipment and the cost of equipment in the
Partnership's portfolio, as of December 31, 2002 (in thousands of dollars):
TABLE 1
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Units Type Manufacturer Cost
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Owned equipment held for operating leases:
612. . . . . Intermodal trailers Various $ 9,404
118. . .. . . Mill gondola railcars Various 3,340
111. . . . . Pressurized tank railcars Various 3,131
26 . . . . . Covered hopper railcars ACF Industries 408
10 . . . . . Nonpressurized tank railcars Various 218
Total owned equipment held for operating lease $16,501 (1)
Lease revenues for dry piggyback trailers are based on a per-diem lease in the
free running interchange with the railroads. Railcars are leased under operating
leases with terms of six months to six years.
(B) Management of Partnership Equipment
The Partnership has entered into an equipment management agreement with PLM
Investment Management, Inc. (IMI), a wholly owned subsidiary of FSI, for the
management of the Partnership's equipment. The Partnership's management
agreement with IMI is to co-terminate with the dissolution of the Partnership,
unless the limited partners vote to terminate the agreement prior to that date
or at the discretion of the General Partner. IMI has agreed to perform all
services necessary to manage the equipment on behalf of the Partnership and to
perform or contract for the performance of all obligations of the lessor under
the Partnership's leases. In consideration for its services and pursuant to the
partnership agreement, IMI is entitled to a monthly management fee (see Notes 1
and 2 to the financial statements).
(C) Competition
(1) Operating Leases versus Full Payout Leases
The equipment owned by the Partnership is leased out on an operating lease basis
wherein the rents received during the initial noncancelable term of the lease
are insufficient to recover the Partnership's purchase price of the equipment.
The short- to mid-term nature of operating leases generally commands a higher
rental rate than longer-term, full payout leases and offers lessees relative
flexibility in their equipment commitment. In addition, the rental obligation
under an operating lease need not be capitalized on the lessee's balance sheet.
The Partnership encounters considerable competition from lessors that utilize
full payout leases on new equipment, i.e. leases that have terms equal to the
expected economic life of the equipment. While some lessees prefer the
flexibility offered by a shorter-term operating lease, other lessees prefer the
rate advantages possible with a full payout lease. Competitors may write full
payout leases at considerably lower rates and for longer terms than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates, which may put the Partnership at a competitive
disadvantage.
1 Includes equipment purchased with the proceeds from capital contributions,
undistributed cash flow from operations, and Partnership borrowings. Includes
costs capitalized subsequent to the date of acquisition and equipment
acquisition fees paid to PLM Transportation Equipment Corporation (TEC), a
wholly ownedsubsidiary of FSI. All equipment was used equipment at the time of
purchase.
(2) Manufacturers and Equipment Lessors
The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases. Manufacturers may provide ancillary services that the
Partnership cannot offer, such as specialized maintenance services (including
possible substitution of equipment), training, warranty services, and trade-in
privileges.
The Partnership also competes with many equipment lessors, including ACF
Industries, Inc. (Shippers Car Line Division), GATX, General Electric Railcar
Services Corporation, and other investment programs that lease the same types of
equipment.
(D) Demand
The Partnership currently operates in two operating segments: railcar leasing
and trailer leasing. Each equipment-leasing segment engages in short-term to
mid-term operating leases to a variety of customers. The Partnership equipment
is used to transport materials and commodities rather than people.
The following section describes the international and national markets in which
the Partnership's capital equipment operates:
(1) Intermodal Trailers
Intermodal trailers are used to transport a variety of dry goods by rail on
flatcars, usually for distances of over 400 miles. Over the past seven years,
intermodal trailers have continued to be rapidly displaced by domestic
containers as the preferred method of transport for such goods. This
displacement occurs because railroads offer approximately 20% lower wholesale
freight rates on domestic containers compared to intermodal trailers. During
2002, demand for intermodal trailers was much more depressed than historic
norms. Unusually low demand occurred over the first half of the year due to a
rapidly slowing economy and low rail freight rates for 53-foot domestic
containers. Due to the decline in demand, shipments for the year within the
intermodal pool trailer market declined approximately 10% compared to the prior
year. Average utilization of the entire US intermodal trailer pool fleet
declined from 77% in 1999 to 75% in 2000 to 63% in 2001 and further declined to
a record low of 50% in 2002.
The General Partner continued its aggressive marketing program in a bid to
attract new customers for the Partnership's intermodal trailers during 2002. The
largest Partnership trailer customer, Consolidated Freightways, abruptly shut
down their operations and declared bankruptcy during 2002. This situation was
largely offset by extensive efforts with other carriers to increase market
share. Even with these efforts, average utilization of the Partnership's
intermodal trailers for the year 2002 dropped 12% from 2001 to approximately
61%, still 11% above the national average.
The trend towards using domestic containers instead of intermodal trailers is
expected to accelerate in the future. Due to the anticipated continued weakness
in the overall economy intermodal trailer shipments are forecast to decline by
10% to 15% in 2003, compared to 2002. As such, the nationwide supply of
intermodal trailers is expected to have approximately 27,000 units in surplus
for 2003. The maintenance costs have increased approximately 12% from 2001 due
to improper repair methods performed by the railroads' vendors and billed to
owners.
The General will continue to seek to expand its customer base and undertake
significant efforts to reduce cartage and maintenance costs, such as minimizing
trailer downtime at repair shops and terminals.
(2) Railcars
(a) Mill Gondola Railcars
Mill gondola railcars are typically used to transport scrap steel for recycling
from steel processors to small steel mills called minimills. Demand for steel is
cyclical and moves in tandem with the growth or contraction of the overall
economy. Within the United States, carloadings for the commodity group that
includes scrap steel decreased over 12% in 2001, and while there has been a
small recovery this last year, it has not been sufficient to buoy car demand.
These cars remain in storage.
(b) Pressurized Tank Railcars
Pressurized tank railcars are used to transport liquefied petroleum gas (LPG)
and anhydrous ammonia (fertilizer). The North American markets for LPG include
industrial applications, residential use, electrical generation, commercial
applications, and transportation. LPG consumption is expected to grow over the
next few years as most new electricity generation capacity is expected to be gas
fired. Within any given year, consumption is particularly influenced by the
severity of winter temperatures.
Within the fertilizer industry, demand is a function of several factors,
including the level of grain prices, status of government farm subsidy programs,
amount of farming acreage and mix of crops planted, weather patterns, farming
practices, and the value of the US dollar. Population growth and dietary trends
also play an indirect role.
On an industry-wide basis, North American carloadings of the commodity group
that includes petroleum and chemicals decreased over 2% in 2002 after a 5%
decline in 2001. Even with this further decrease in industry-wide demand, the
utilization of pressurized tank railcars across the Partnership was in the 85%
range during the year. The availability of cars to lease was affected by the
advancing age of this fleet and related corrosion issues on foam insulated cars.
(c) Covered Hopper (Grain) Railcars
Demand for covered hopper railcars, which are specifically designed to service
the grain industry, continued to experience weakness during 2002; carloadings
were down 3% when compared to 2001 volumes. There has been a consistent pattern
of decline in the number of carloadings over the last several years.
The US agribusiness industry serves a domestic market that is relatively mature,
the future growth of which is expected to be consistent but modest. Most
domestic grain rail traffic moves to food processors, poultry breeders, and
feedlots. The more volatile export business, which accounts for approximately
30% of total grain shipments, serves emerging and developing nations. In these
countries, demand for protein-rich foods is growing more rapidly than in the US,
due to higher population growth, a rapid industrialization pace, and rising
disposable income.
Other factors contributing to the softness in demand for covered hopper railcars
are the large number of new railcars built in the late 1990s and the more
efficient utilization of covered hoppers by the railroads. As in prior years,
any covered hopper railcars that were leased were done so at considerably lower
rental rates.
Many of the Partnership's cars are smaller and thus less desirable than those
currently being built. Because of this factor, the lack of any prospect for
improvement in car demand, and the large number of idle cars throughout the
industry, the Partnership has sold a number of these cars. As a result,
utilization rose to 70% at the end of 2002.
(d) General Purpose (Nonpressurized) Tank Railcars
General purpose tank railcars are used to transport bulk liquid commodities and
chemicals not requiring pressurization, such as certain petroleum products,
liquefied asphalt, lubricating oils, molten sulfur, vegetable oils, and corn
syrup. The overall health of the market for these types of commodities is
closely tied to both the US and global economies, as reflected in movements in
the Gross Domestic Product, personal consumption expenditures, retail sales, and
currency exchange rates. The manufacturing, automobile, and housing sectors are
the largest consumers of chemicals. Within North America, 2002 carloadings of
the commodity group that includes chemicals and petroleum products reversed
previous declines and rose 4% after a fall of 5% during 2001. Utilization of
the Partnership's nonpressurized tank railcars has been increasing reflecting
this market condition and presently stands at about 75%.
(E) Government Regulations
The use, maintenance, and ownership of equipment are regulated by federal,
state, local, or foreign government authorities. Such regulations may impose
restrictions and financial burdens on the Partnership's ownership and operation
of equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Partnership's equipment portfolio are
either registered or operated internationally. Such equipment may be subject to
adverse political, government, or legal actions, including the risk of
expropriation or loss arising from hostilities. Certain of the Partnership's
equipment is subject to extensive safety and operating regulations, which may
require its removal from service or extensive modifications of such equipment to
meet these regulations, at considerable cost to the Partnership. Such
regulations include but are not limited to:
The U.S. Department of Transportation's Hazardous Materials Regulations
regulates the classification and packaging requirements of hazardous materials
which apply particularly to the Partnership's tank railcars. The Federal
Railroad Administration has mandated that effective July 1, 2000 all tank
railcars must be re-qualified every ten years from the last test date stenciled
on each railcar to insure tank shell integrity. Tank shell thickness, weld
seams and weld attachments must be inspected and repaired if necessary to
re-qualify the tank railcar for service. The average cost of this inspection is
$3,600 for jacketed tank railcars and $1,800 for non-jacketed tank railcars.
This does not include any necessary repairs. This inspection is to be performed
at the next scheduled tank test and every ten years thereafter. The Partnership
currently owns 109 jacketed tank railcars and 10 non-jacketed tank railcars.
There are 7 jacketed tank railcars and 5 non-jacketed tank railcars that will
need re-qualification in 2003 or 2004.
During the fourth quarter of 2002, the Partnership recalled three owned tank
railcars to due a general recall for a manufacturing defect allowing extensive
corrosion of the railcars' internal lining. The fair value and net book value
per railcar was $2,000 and $-0-, respectively. Accordingly, the Partnership did
not record an impairment loss. Repairs of the railcars were determined to be
cost prohibitive. The fair value of railcars with this defect was determined by
using industry expertise. These railcars were off lease.
As of December 31, 2002, the Partnership was in compliance with the above
government regulations. Typically, costs related to extensive equipment
modifications to meet government regulations are passed on to the lessee of that
equipment.
ITEM 2. PROPERTIES
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The Partnership neither owns nor leases any properties other than the equipment
it has purchased. As of December 31, 2002, the Partnership owned a portfolio of
transportation and related equipment as described in Item I, Table 1. The
Partnership acquired equipment with the proceeds of the Partnership offering of
$150.0 million, proceeds from debt financing of $35.0 million and by reinvesting
a portion of its operating cash flow in additional equipment.
The Partnership maintains its principal office at 235 3rd Street South, Suite
200, St. Petersburg, FL 33701.
ITEM 3. LEGAL PROCEEDINGS
------------------
The Partnership, together with affiliates, initiated litigation in various
official forums in 2000 and 2001 in India against a defaulting Indian airline
lessee to repossess Partnership property and to recover damages for failure to
pay rent and failure to maintain such property in accordance with relevant lease
contracts. The Partnership has repossessed all of its property previously leased
to such airline, and the airline has ceased operations. In response to the
Partnership's collection efforts, the airline filed counter-claims against the
Partnership in excess of the Partnership's claims against the airline. The
General Partner believes that the airline's counterclaims are completely without
merit, and the General Partner will vigorously defend against such
counterclaims.
During 2001, the General Partner decided to minimize its collection efforts from
the Indian lessee in order to save the Partnership from incurring additional
expenses associated with trying to collect from a lessee that has no apparent
ability to pay.
The Partnership is involved as plaintiff or defendant in various other legal
actions incidental to its business. Management does not believe that any of
these actions will be material to the financial condition or results of
operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 2002.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED DEPOSITARY UNIT
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MATTERS
---
Pursuant to the terms of the partnership agreement, the General Partner is
entitled to a 5% interest in the profits, losses and distributions of the
Partnership. The General Partner is the sole holder of such interest. Special
allocations of income are made to the General Partner equal to the deficit
balance, if any, in the capital account of the General Partner. The General
Partner's annual allocation of net income will generally be equal to the General
Partner's cash distributions paid during the current year. The remaining
interests in the profits, losses and distributions of the Partnership are owned,
as of December 31, 2002, by the 6,016 unit holders of units in the Partnership.
There are several secondary markets that will facilitate sales and purchases of
depositary units. Secondary markets are characterized as having few buyers for
depository units and, therefore, are generally viewed as inefficient vehicles
for the sale of depositary units. Presently, there is no public market for the
units and none is likely to develop.
The Partnership is listed on the OTC Bulletin Board under the symbol GFYPZ.
To prevent the units from being considered publicly traded and thereby to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal Revenue Code, the limited partnership units will not be transferable
without the consent of the General Partner, which may be withheld in its
absolute discretion. The General Partner intends to monitor transfers of
limited partnership units in an effort to ensure that they do not exceed the
percentage or number permitted by certain safe harbors promulgated by the
Internal Revenue Service. A transfer may be prohibited if the intended
transferee is not a United States citizen or if the transfer would cause any
portion of the units of a "Qualified Plan" as defined by the Employee Retirement
Income Security Act of 1974 and Individual Retirement Accounts to exceed the
allowable limit.
ITEM 6. SELECTED FINANCIAL DATA
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Table 2, below, lists selected financial data for the Partnership:
TABLE 2
-------
For the Years Ended December 31,
(In thousands of dollars, except weighted-average depositary unit amounts)
2002 2001 2000 1999 1998
---------------------------------------
Operating results:
Total revenues. . . . . . . . . . . . . . . . . . . $3,841 $3,823 $7,878 $6,367 $13,567
Gain on disposition of equipment. . .. . . . . . . . 1,233 929 2,448 328 5,990
Equity in net income (loss) of
unconsolidated special-purpose
entities. . . . . . . . . . . . . . . . . . . . -- -- 1,304 (448) (1,484)
Net income. . . . . . . . . . . . . . . . . . . . . 921 42 4,207 934 6,031
At year-end:
Total assets. . . . . . . . . . . . . . . . . . . . $6,492 $5,533 $7,535 $8,858 $ 12,474
Total liabilities . . . . . . . . . . . . . . . . . 340 302 983 1,202 1,207
Cash distribution . . . . . . . . . . . . . . . . . . $ -- $1,363 $4,534 $4,545 $ 4,604
Special distribution. . . . . . . . . . . . . . . . . $ -- $ -- $ 777 $ -- $ 3,885
Total cash distribution . .. . . . . . . . . . . . . . $ -- $1,363 $5,311 $4,545 $ 8,489
Cash distribution representing a
return of capital to the limited
partners. . . . . . . . . . . . .. . . . . . . . . $ -- $1,295 $1,104 $3,611 $ 2,458
Per weighted-average depositary unit:
Net income (loss) $ 0.12 1 $(0.00) 1 $0.53 1 $0.10 1 $0.76 1
Cash distribution . . . . . . . . .. . . . . . . . . . $ -- $ 0.18 $ 0.58 $ 0.58 $ 0.59
Special distribution. . . . . . . . . . . . . . . . . $ -- $ -- $ 0.10 $ -- $ 0.50
Total cash distribution . . . . . . . . . . . . . . . $ -- $ 0.18 $ 0.68 $ 0.58 $ 1.09
Cash distribution representing a
return of capital to the limited
partners. . . . . . .. . . . . . . . . . . . . . . $ -- $ 0.18 $ 0.15 $ 0.49 $ 0.33
1 After an increase of income of $46,000 ($0.01 per weighted-average depositary
unit) in 2002, representing special allocations from the General Partner. After
a reduction of income of $0.1 million ($0.01 per weighted-average depositary
unit) in 2001 and 2000, representing special allocations to the General Partner.
After a reduction of income of $0.2 million ($0.02 per weighted-average
depositary unit) in 1999, representing special allocations to the General
Partner. After reductions in net income of $0.1 million ($0.02 per weighted-
Average depositary unit) in 1998, representing special allocations to the
General Partner. (See Note 1 to the financial statements)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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(A) Introduction
Management's discussion and analysis of financial condition and results of
operations relates to the financial statements of PLM Equipment Growth Fund II
(the Partnership). The following discussion and analysis of operations focuses
on the performance of the Partnership's equipment in the various segments in
which it operates and its effect on the Partnership's overall financial
condition.
(B) Results of Operations -- Factors Affecting Performance
(1) Re-leasing Activity and Repricing Exposure to Current Economic
Conditions
The exposure of the Partnership's equipment portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for the Partnership's equipment include supply and demand for similar or
comparable types of transport capacity, desirability of the equipment in the
leasing market, market conditions for the particular industry segment in which
the equipment is to be leased, overall economic conditions, and various
regulations concerning the use of the equipment. Equipment that is idle or out
of service between the expiration of one lease and the assumption of a
subsequent lease can result in a reduction of contribution to the Partnership.
The Partnership experienced re-leasing or repricing activity in 2002 across its
railcar and trailer portfolio.
(a) Railcars: The relatively short duration of most leases exposes the
railcars to considerable re-leasing activity. As of December 31, 2002, the
Partnership had 64 railcars off-lease. Additional railcar leases will expire in
2003. The Partnership's railcar lease revenue declined approximately $0.1
million from 2001 to 2002 due to the sale and disposition of railcars during
2001 and 2002.
(b) Trailers: The Partnership's trailer portfolio operates with
short-line railroad systems. The relatively short duration of most leases in
these operations exposes the trailers to considerable re-leasing activity. The
Partnership's lease revenue decreased approximately $0.1 million from 2001 to
2002 primarily due lower utilization on the trailer fleet in 2002 compared to
2001.
(2) Equipment Liquidations
Liquidation of Partnership equipment represents a reduction in the size of the
equipment portfolio and may result in a reduction of contribution to the
Partnership. During the year ended December 31, 2002, the Partnership sold or
disposed of marine containers and railcars, with an aggregate net book value of
$0.1 million, for proceeds of $1.4 million.
(3) Equipment Valuation
In accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of " (SFAS No. 121), the
General Partner reviewed the carrying value of the Partnership's equipment
portfolio at least quarterly and whenever circumstances indicated that the
carrying value of an asset may not be recoverable due to expected future market
conditions. If the projected undiscounted cash flows and the fair value of the
equipment were less than the carrying value of the equipment, an impairment loss
was recorded.
In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144),
which replaced SFAS No. 121. In accordance with SFAS No. 144, the Company
evaluates long-lived assets for impairment whenever events or circumstances
indicate that the carrying values of such assets may not be recoverable. Losses
for impairment are recognized when the undiscounted cash flows estimated to be
realized from a long-lived asset are determined to be less than the carrying
value of the asset and the carrying amount of long-lived assets exceed its fair
value. The determination of fair value for a given investment requires several
considerations, including but not limited to, income expected to be earned from
the asset, estimated sales proceeds, and holding costs excluding interest. The
Partnership applied the new rules on accounting for the impairment or disposal
of long-lived assets beginning January 1, 2002.
No reductions to the equipment carrying values were required for the years ended
December 31, 2002, 2001, or 2000.
(C) Financial Condition -- Capital Resources and Liquidity
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing.
No further capital contributions from the original partners are permitted under
the terms of the limited partnership agreement. As of December 31, 2002, the
Partnership had no outstanding indebtedness. The Partnership relies on
operating cash flow to meet its operating obligations and make cash
distributions to the limited partners.
For the year ended December 31, 2002, the Partnership generated $0.7 million in
cash from its operating activities.
During the year ended December 31, 2002, the Partnership disposed of marine
containers and railcars, with an aggregate net book value of $0.1 million, for
proceeds of $1.4 million.
Accounts receivable decreased $0.2 million during the year ended December 31,
2002 due to the decrease in lease revenue caused by the reduction in the size of
the equipment portfolio.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause it to require any additional capital to that
mentioned above.
The Partnership is in its active liquidation phase. As a result, the size of
the Partnership's remaining equipment portfolio and, in turn, the amount of net
cash flows from operations will continue to become progressively smaller as
assets are sold. Significant asset sales may result in special distributions to
the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the
Partnership after final disposal of assets and settlement of liabilities, the
amounts cannot be accurately determined prior to actual disposal of the
equipment.
(D) Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the General Partner
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On a regular basis, the General Partner reviews
these estimates including those related to asset lives and depreciation methods,
impairment of long-lived assets, allowance for doubtful accounts, and
contingencies and litigation. These estimates are based on the General
Partner's historical experience and on various other assumptions believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The General Partner
believes, however, that the estimates, including those for the above-listed
items, are reasonable and that actual results will not vary significantly from
the estimated amounts.
The General Partner believes the following critical accounting policies affect
the more significant judgments and estimates used in the preparation of the
Partnership's financial statements:
Asset lives and depreciation methods: The Partnership's primary business
involves the purchase and subsequent lease of long-lived transportation and
related equipment. The General Partner has chosen asset lives that it believes
correspond to the economic life of the related asset. The General Partner has
chosen a deprecation method that it believes matches the benefit to the
Partnership from the asset with the associated costs. These judgments have been
made based on the General Partner's expertise in each equipment segment that the
Partnership operates. If the asset life and depreciation method chosen does not
reduce the book value of the asset to at least the potential undiscounted future
cash flows from the asset to the Partnership, the Partnership would be required
to record an impairment. Likewise, if the net book value of the asset was
reduced by an amount greater than the economic value has deteriorated, the
Partnership may record a gain on sale upon final disposition of the asset.
Impairment of long-lived assets: Whenever there is an indicator that an
impairment may exist, the General Partner reviews the carrying value of
equipment to determine if the carrying value of the asset may not be recoverable
in consideration of current economic conditions. This requires the General
Partner to make estimates related to future undiscounted cash flows from each
asset as well as the determination if the deterioration is temporary or
permanent. If these estimates or the related assumptions change in the future,
the Partnership may be required to record an impairment loss.
Allowance for doubtful accounts: The Partnership maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the
lessees to make the lease payments. These estimates are primarily based on the
amount of time that has lapsed since the related payments were due as well as
specific knowledge related to the ability of the lessees to make the required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, additional allowances could be required that would reduce income.
Conversely, if the financial condition of the lessees were to improve or if
legal remedies to collect past due amounts were successful, the allowance for
doubtful accounts may need to be reduced and income would be increased.
Contingencies and litigation: The Partnership is subject to legal proceedings
involving ordinary and routine claims related to its business. The ultimate
legal and financial liability with respect to such matters cannot be estimated
with certainty and requires the use of estimates in recording liabilities for
potential litigation settlements. Estimates for losses from litigation are
disclosed if considered possible and accrued if considered probable after
consultation with counsel. If estimates of potential losses increase or the
related facts and circumstances change in the future, the Partnership may be
required to record additional litigation expense.
(E) Recent Accounting Pronouncements
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (SFAS No. 146), which is based on the general
principle that a liability for a cost associated with an exit or disposal
activity should be recorded when it is incurred and initially measured at fair
value. SFAS No. 146 applies to costs associated with (1) an exit activity that
does not involve an entity newly acquired in a business combination, or (2) a
disposal activity within the scope of SFAS No. 146. These costs include certain
termination benefits, costs to terminate a contract that is not a capital lease,
and other associated costs to consolidate facilities or relocate employees.
Because the provisions of this statement are to be applied prospectively to exit
or disposal activities initiated after December 31, 2002, the effect of adopting
this statement cannot be determined.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). This interpretation requires the guarantor to
recognize a liability for the fair value of the obligation at the inception of
the guarantee. The provisions of FIN 45 will be applied on a prospective basis
to guarantees issued after December 31, 2002.
(F) Results of Operations -- Year-to-Year Detailed Comparison
(1) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 2002 and
2001.
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the year ended December 31, 2002 compared to 2001. Gains or
losses from the sale of equipment, interest and other income and certain
expenses such as depreciation and general and administrative expenses relating
to the operating segments (see Note 5 to the financial statements), are not
included in the owned equipment operation discussion because they are indirect
in nature and not a result of operations, but the result of owning a portfolio
of equipment. The following table presents lease revenues less direct expenses
by equipment type (in thousands of dollars):
For the Years
Ended December 31,
2002 2001
-------------------
Railcars. . . . . $ 790 $ 401
Trailers. . . . . 583 785
Marine containers 2 (25)
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the year ended December 31, 2002, compared to $1.1
million and $0.7 million, respectively, during 2001. Lease revenue decreased
$0.1 million due to the disposition of railcars in 2001 and 2002. Direct
expenses decreased $0.5 million in the year ended December 31, 2002 compared to
2001 due to fewer repairs being required for the railcar portfolio in 2002.
Trailers: Trailer lease revenues and direct expenses were $1.5 million and $0.9
million, respectively, for the year ended December 31, 2002, compared to $1.6
million and $0.8 million, respectively, during the same period of 2001. Trailer
lease revenues decreased $0.1 million in the year ended December 31, 2002
compared to 2001 due to lower utilization on the Partnership's trailer fleet.
Trailer direct expenses increased $0.1 million in the year ended December 31,
2002 compared to 2001 due to increased repair and maintenance costs in 2002.
Marine containers: Marine container lease revenues were $3,000 and $(24,000) in
the year ended December 31, 2002 and 2001, respectively. The negative $24,000
of lease revenues in the year ended December 31, 2001 resulted from actual lease
revenue in previous periods being lower than was previously accrued. As of
December 31, 2002, the Partnership had disposed of its entire marine container
portfolio.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.7 million for the year ended December 31, 2002
decreased from $2.2 million for the same period in 2001. Significant variances
are explained as follows:
(i) A $0.3 million decrease in depreciation expense from 2001 levels
reflects the effect of asset dispositions in 2002 and 2001.
(ii) A $0.2 million decrease in general and administrative expenses
during the year ended December 31, 2002 resulted from the reduction in the size
of the Partnership's equipment portfolio over the last twelve months.
(c) Gain on Disposition of Owned Equipment
Gain on disposition of equipment in the year ended December 31, 2002 totaled
$1.2 million, and resulted from the disposition of marine containers and
railcars with an aggregate net book value of $0.1 million for aggregate proceeds
of $1.4 million. Gain on disposition of equipment for the year ended December
31, 2001 totaled $0.9 million, and resulted from the sale of marine containers,
trailers, and railcars, with an aggregate net book value of $0.1 million for
proceeds of $0.7 million. Included in the gain on sale are unused repair
reserves of $0.3 million.
(d) Net Income
As a result of the foregoing, the Partnership's net income was $0.9 million for
the year ended December 31, 2002, compared to net income of $42,000 during the
year ended December 31, 2001. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the year ended
December 31, 2002 is not necessarily indicative of future periods.
(2) Comparison of the Partnership's Operating Results for the Years Ended
December 31, 2001 and
2000.
(a) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operating expense and asset-specific insurance expenses) on owned
equipment decreased during the year ended December 31, 2001, when compared to
2000. The following table presents lease revenues less direct expenses by
segment (in thousands of dollars):
For the Years
Ended December 31,
2001 2000
-------------------
Trailers. . . . . $ 785 $ 1,217
Railcars. . . . . 401 1,983
Marine containers (25) 75
Trailers: Trailer lease revenues and direct expenses were $1.6 million and $0.8
million, respectively, for the year ended December 31, 2001, compared to $1.9
million and $0.7 million, respectively, during the same period of 2000. The
decrease in trailer contribution was due to the sale of 32% of the Partnership's
trailers during 2000.
Railcars: Railcar lease revenues and direct expenses were $1.1 million and $0.7
million, respectively, for the year ended December 31, 2001, compared to $3.3
million and $1.3 million, respectively, during the same period of 2000. The
decrease in railcar contribution during the year ended December 31, 2001 was due
to the disposition of railcars during 2000 and 2001.
Marine containers: Marine container lease revenues were ($24,000) and $0.1
million during the years ended December 31, 2001 and 2000, respectively. The
decrease in marine container contribution in the year ended December 31, 2001
was due to the disposition of marine containers in 2000 and 2001. The negative
lease revenues during the year ended December 31, 2001 was caused by actual
lease revenues in 2000 being less than had been previously reported. The
Partnership receives its actual amount of marine container lease revenues
managed in equipment pools approximately 90 days following the end of each
quarter. Estimates are made for each quarter's lease revenues that are trued up
to the actual results in the following quarter.
(b) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $2.2 million for the year ended December 31, 2001
decreased from $2.9 million for the same period in 2000. Significant variances
are explained as follows:
(i) A $0.5 million decrease in depreciation expense from 2000 levels
reflects the effect of equipment dispositions during 2001 and 2000.
(ii) A $0.2 million decrease in general and administrative expenses was due
to the reduction in the size of the Partnership's equipment portfolio.
(iii) A $0.1 million decrease in management fees was due to lower lease
revenues earned during the year ended December 31, 2001 compared to the same
period of 2000.
(iv) A $0.1 million increase in the provision for bad debts was based on
the General Partner's evaluation of the collectability of receivables compared
to the same period of 2000.
(c) Gain on Disposition of Owned Equipment
Gain on disposition of equipment for the year ended December 31, 2001 totaled
$0.9 million, and resulted from the sale of marine containers, trailers, and
railcars, with an aggregate net book value of $0.1 million for proceeds of $0.7
million. Included in the gain on sale are unused repair reserves of $0.3
million. Net gain on disposition of equipment for the year ended December 31,
2000 totaled $2.4 million, which resulted from the disposal of marine
containers, trailers, and railcars, with an aggregate net book value of $0.8
million, for proceeds of $3.3 million.
(d) Equity in Net Income of an Unconsolidated Special-Purpose Entity (USPE)
Equity in net income of an unconsolidated special-purpose entity represents the
Partnership's share of the net income generated from the operation of jointly
owned assets accounted for under the equity method (see Note 4 to the financial
statements). This entity was a single purpose entity that did not have any
debt.
As of December 31, 2001 and 2000, the Partnership had no interests in USPEs.
During the year ended December 31, 2000, net income of $1.3 million resulted
from the gain on sale of the Partnership's interest in the USPE of $1.4 million,
partially offset by depreciation expense, direct expenses, and administrative
expenses of $0.1 million.
(e) Net Income
As a result of the foregoing, the Partnership's net income was $42,000 for the
year ended December 31, 2001, compared to net income of $4.2 million during
2000. The Partnership's ability to operate and liquidate assets, secure leases,
and re-lease those assets whose leases expire is subject to many factors, and
the Partnership's performance in the year ended December 31, 2001 is not
necessarily indicative of future periods. In the year ended December 31, 2001,
the Partnership distributed $1.3 million to the limited partners, or $0.18 per
weighted-average limited partnership unit.
(G) Geographic Information
Certain of the Partnership's equipment operates in international markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes these risks are minimal
or has implemented strategies to control the risks. Currency risks are at a
minimum because all invoicing, with the exception of a small number of railcars
operating in Canada, is conducted in US dollars. Political risks are minimized
generally through the avoidance of operations in countries that do not have a
stable judicial system and established commercial business laws. Credit support
strategies for lessees range from letters of credit supported by US banks to
cash deposits. Although these credit support mechanisms generally allow the
Partnership to maintain its lease yield, there are risks associated with
slow-to-respond judicial systems when legal remedies are required to secure
payment or repossess equipment. Economic risks are inherent in all
international markets and the General Partner strives to minimize this risk with
market analysis prior to committing equipment to a particular geographic area.
Refer to Note 6 to the financial statements for information on the revenues, net
income, and net book value of equipment in various geographic regions.
Revenues and net operating income (loss) by geographic region are impacted by
the time period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges, which are greatest in the early years of
ownership due to the use of the double-declining balance method of depreciation.
The relationships of geographic revenues, net income (loss), and net book value
of equipment are expected to significantly change in the future as assets come
off lease and decisions are made to either redeploy the assets in the most
advantageous geographic location, or sell the assets.
The Partnership's owned equipment on lease to US-domiciled lessees consists of
trailers and railcars. During 2002, lease revenues generated by owned equipment
in the United States accounted for 82% of the lease revenues, while generating
net operating income of $0.5 million.
The Partnership's equipment leased to Canadian-domiciled lessees consists of
railcars. During 2002, lease revenues generated by owned equipment in Canada
accounted for 18% of the lease revenues, while generating a net income of $0.7
million
(H) Inflation
Inflation had no significant impact on the Partnership's operations during 2002,
2001, or 2000.
(I) Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K 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-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially
from those discussed here.
(J) Outlook for the Future
The Partnership is in its liquidation phase. Given the current economic
environment and offers received for similar types of equipment owned by the
Partnership, the General Partner has determined it would not be advantageous to
sell the remaining Partnership equipment at the current time. The General
Partner will continue to monitor the equipment markets to determine an optimal
time to sell. In the meantime, equipment will continue to be leased, and
re-leased at market rates as existing leases expire. Although the General
Partner estimates that there will be distributions to the partners after final
disposal of assets and settlement of liabilities, the amounts cannot be
accurately determined prior to actual disposal of the equipment.
Sale decisions may cause the operating performance of the Partnership to decline
over the remainder of its life. The liquidation phase will end on December 31,
2006, unless the Partnership is terminated earlier upon sale of all of the
equipment or by certain other events.
Several factors may affect the Partnership's operating performance in 2003 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
Liquidation of the Partnership's equipment represents a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership. Other factors affecting the Partnership's contribution in 2003 and
beyond include:
1. Through 2002, U.S. and Canadian freight carloads decreased 1% and 3%,
respectively, compared to 2001. There has been, however, a recent increase in
some of the commodities that drive demand for those types of railcars most
prevalent in the Partnership's fleet. It will be some time, however, before
this translates into new leasing demand by shippers since most shippers have
idle cars in their fleets.
2. Utilization of intermodal trailers owned by the Partnership decreased 12%
during 2002 compared to 2001. This decline was similar to the decline in
industry-wide utilization. As the Partnership's trailers are smaller than many
shippers prefer, the General Partner expects continued declines in utilization
over the next few years. Additionally, one of the major shippers that leased
the Partnership's trailers has entered bankruptcy. While the Partnership did
not have any outstanding receivables from the company, its bankruptcy may cause
a further decline in performance of the trailer fleet in the future.
3. The General Partner has seen an increase in insurance premiums on its
equipment portfolio and is finding it more difficult to place the coverage.
Premiums for the equipment types owned by the Partnership have increased over
25%. The increase in premiums caused by the increase in rate will be partially
mitigated by the reduction in the value of the Partnership equipment portfolio
caused by the events of September 11, 2001 and other economic factors. The
General Partner has also experienced an increase in the deductible required to
obtain coverage. This may have a negative impact on the Partnership in the
event of an insurance claim.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The General Partner continually monitors
both the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may make an evaluation to reduce the
Partnership's exposure to equipment markets in which it determines that it
cannot operate equipment and achieve acceptable rates of return.
Several other factors may affect the Partnership's operating performance in 2003
and beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
The other factors affecting the Partnership's contribution in 2003 and beyond
include:
(1) Repricing Risk
Certain of the Partnership's trailers and railcars will be remarketed in 2003 as
existing leases expire, exposing the Partnership to repricing risk/opportunity.
Additionally, the Partnership entered its liquidation phase on January 1, 1999,
and has commenced an orderly liquidation of the Partnership's assets. The
General Partner intends to re-lease or sell equipment at prevailing market
rates; however, the General Partner cannot predict these future rates with any
certainty at this time, and cannot accurately assess the effect of such activity
on future Partnership performance.
(2) Impact of Government Regulations on Future Operations
The General Partner operates the Partnership's equipment in accordance with
current applicable regulations (see Item 1, Section E, Government Regulations).
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Partnership's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Partnership of meeting regulatory compliance for the
same equipment operated between countries. Ongoing changes in the regulatory
environment, both in the US and internationally, cannot be predicted with any
accuracy and preclude the General Partner from determining the impact of such
changes on Partnership operations, or sale of equipment.
The U.S. Department of Transportation's Hazardous Materials Regulations
regulates the classification and packaging requirements of hazardous materials
which apply particularly to Partnership's tank railcars. The Federal Railroad
Administration has mandated that effective July 1, 2000 all tank railcars must
be re-qualified every ten years from the last test date stenciled on each
railcar to insure tank shell integrity. Tank shell thickness, weld seams and
weld attachments must be inspected and repaired if necessary to re-qualify the
tank railcar for service. The average cost of this inspection is $3,600 for
jacketed tank railcars and $1,800 for non-jacketed tank railcars. This does not
include any necessary repairs. This inspection is to be performed at the next
scheduled tank test and every ten years thereafter. The Partnership currently
owns 109 jacketed tank railcars and 10 non-jacketed tank railcars. There are 7
jacketed tank railcars and 5 non-jacketed tank railcars that will need
re-qualification in 2003 or 2004.
During the fourth quarter of 2002, the Partnership recalled three owned tank
railcars to due a general recall for a manufacturing defect allowing extensive
corrosion of the railcars' internal lining. The fair value and net book value
per railcar was $2,000 and $-0-, respectively. Accordingly, the Partnership did
not record an impairment loss. Repairs of the railcars were determined to be
cost prohibitive. The fair value of railcars with this defect was determined by
using industry expertise. These railcars were off lease.
(3) Distributions
During the active liquidation phase, the Partnership will use operating cash
flow and proceeds from the sale of equipment to meet its operating obligations
and, to the extent available, make distributions to the partners. In the long
term, changing market conditions and used equipment values preclude the General
Partner from accurately determining the impact of future re-leasing activity and
equipment sales on Partnership performance and liquidity.
(4) Liquidation
Liquidation of the Partnership's equipment represents a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership.
Since the Partnership is in its active liquidation phase, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Significant asset sales may result in special distributions to
unitholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------------
The Partnership's primary market risk exposure is that of currency devaluation
risk. During 2002, 12% of the Partnership's total lease revenues came from
non-United States domiciled lessees. Most of the leases require payment in
United States (US) currency. If these lessees' currency devalues against the US
dollar, the lessees could potentially encounter difficulty in making the US
dollar denominated lease payments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------
The financial statements for the Partnership are listed in the Index to
Financial Statements included in Item 15(a) of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------------------------------------------------------------------
FINANCIAL DISCLOSURES
------------------
(A) Disagreements with Accountants on Accounting and Financial Disclosures
None
(B) Changes in Accountants
In September 2001, the General Partner announced that the Partnership had
engaged Deloitte & Touche LLP as the Partnership's auditors and had dismissed
KPMG LLP. KPMG LLP issued an unqualified opinion on the 2000 financial
statements. During 2000 and the subsequent interim period preceding such
dismissal, there were no disagreements with KPMG LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC.
------------------------------------------------------------------
As of the date of this annual report, the directors and executive officers of
PLM Financial Services, Inc. (and key executive officers of its subsidiaries)
are as follows:
Name Age Position
Gary D. Engle . 53 Director, PLM Financial Services, Inc., PLM Investment
Management, Inc., and PLM Transportation Equipment Corp.
James A. Coyne 42 Director, Secretary and President, PLM Financial
Services, Inc. and PLM Investment Management, Inc.,
Director and Secretary, PLM Transportation Equipment Corp.
Richard K Brock 40 Director and Chief Financial Officer, PLM Financial
Services, Inc., PLM Investment Management, Inc. and PLM
Transportation Equipment Corp.
Gary D. Engle was appointed a Director of PLM Financial Services, Inc. in
January 2002. He was appointed a director of PLM International, Inc. in
February 2001. He is a director and President of MILPI Holdings, LLC
('"MILPI"). Since November 1997, Mr. Engle has been Chairman and Chief
Executive Officer of Semele Group Inc. ("Semele"), a publicly traded company.
Mr. Engle is President and Chief Executive Officer of Equis Financial Group
("EFG"), which he joined in 1990 as Executive Vice President. Mr. Engle
purchased a controlling interest in EFG in December 1994. He is also President
of AFG Realty, Inc.
James A. Coyne was appointed President of PLM Financial Services, Inc. in August
2002. He was appointed a Director and Secretary of PLM Financial Services, Inc.
in April 2001. He was appointed a director of PLM International, Inc. in
February 2001. He is a director, Vice President and Secretary of MILPI. Mr.
Coyne has been a director, President and Chief Operating Officer of Semele since
1997. Mr. Coyne is Executive Vice President of Equis Corporation, the general
partner of EFG. Mr. Coyne joined EFG in 1989, remained until 1993, and rejoined
in November 1994.
Richard K Brock was appointed a Director and Chief Financial Officer of PLM
Financial Services, Inc. in August 2002. From June 2001 through August 2002,
Mr. Brock was a consultant to various leasing companies including PLM Financial
Services, Inc. From October 2000 through June 2001, Mr. Brock was a Director of
PLM Financial Services, Inc. Mr. Brock was appointed Vice President and Chief
Financial Officer of PLM International, Inc. and PLM Financial Services, Inc. in
January 2000, having served as Acting Chief Financial Officer since June 1999
and as Vice President and Corporate Controller of PLM International, Inc. and
PLM Financial Services, Inc. since June 1997. Prior to June 1997, Mr. Brock
served as an accounting manager at the PLM Financial Services, Inc. beginning in
September 1991 and as Director of Planning and General Accounting beginning in
February 1994.
The directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director or executive officer of PLM Financial Services, Inc., PLM
Transportation Equipment Corp., or PLM Investment Management, Inc.
ITEM 11. EXECUTIVE COMPENSATION
-----------------------
The Partnership has no directors, officers, or employees. The Partnership has
no pension, profit sharing, retirement, or similar benefit plan in effect as of
December 31, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------
(A) Security Ownership of Certain Beneficial Owners
The General Partner is entitled to a 5% interest in the profits and losses
(subject to certain allocations of income) and distributions of the Partnership.
As of December 31, 2002, no investor was known by the General Partner to
beneficially own more than 5% of the depositary units of the Partnership.
(B) Security Ownership of Management
Neither the General Partner and its affiliates nor any executive officer or
director of the General Partner and its affiliates own any depositary units of
the Partnership as of December 31, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------
Transactions with Management and Others
During 2002, management fees to IMI were $0.1 million. During 2002, the
Partnership reimbursed FSI and its affiliates $0.1 million for administrative
services and data processing expenses performed on behalf of the Partnership.
The balance due to affiliates as of December 31, 2002 and 2001 includes $33,000
and $42,000, respectively, due to FSI and its affiliates for management fees.
ITEM 14. CONTROLS AND PROCEDURES
-------------------------
Based on their evaluation as of a date within 90 days of the filing of this Form
10-K, the Partnership's principal Executive Officer and Chief Financial Officer
have concluded that the Partnership's disclosure controls and procedures are
effective to ensure that information required to be disclosed in the reports
that the Partnership files or submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. There
have been no significant changes in the Partnership's internal controls or in
other factors that could significantly affect those controls subsequent to the
date of their evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
------------------------------------------------------------------
(A) 1. Financial Statements
The financial statements listed in the accompanying Index to Financial
Statements are filed as part of this Annual Report on Form 10-K.
2. Financial Statements required under Regulation S-X Rule 3-09.
The following financial statements are filed as an exhibit of the Annual Report
on Form 10-K.
a. East West 925
(B) Reports on Form 8-K
None.
(C) Exhibits
4. Limited Partnership Agreement of Registrant, incorporated by reference to
the Partnership's Registration Statement on Form S-1 (Reg. No. 33-13113), which
became effective with the Securities and Exchange Commission on June 5, 1987.
4.1 Amendment, dated November 18, 1991, to Limited Partnership Agreement of
the Partnership, incorporated by reference to the Partnership's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 30, 1993.
10.1 Management Agreement between Registrant and PLM Investment Management,
Inc., incorporated by reference to the Partnership's Registration Statement on
Form S-1 (Reg. No. 33-13113), which became effective with the Securities and
Exchange Commission on June 5, 1987.
Financial Statements required under Regulation S-X Rule 3-09.
99.1 East West 925
CONTROL CERTIFICATION
I, James A. Coyne, certify that:
1. I have reviewed this annual report on Form 10-K of PLM Equipment Growth
Fund II.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others,
particularly during the period in which this annual report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 By: /s/ James A. Coyne
---------------------
James A. Coyne
President
(Principal Executive Officer)
CONTROL CERTIFICATION
- ----------------------
I, Richard K Brock, certify that:
1. I have reviewed this annual report on Form 10-K of PLM Equipment Growth
Fund II.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others,
particularly during the period in which this annual report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and board of Managers:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer
(Principal Financial Officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has signed on
behalf of the Partnership by duly authorized officers.
Dated: March 26, 2003 PLM EQUIPMENT GROWTH FUND II
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ James A. Coyne
---------------------
James A. Coyne
President
By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer
CERTIFICATION
The undersigned hereby certifies, in their capacity as an officer of the General
Partner of PLM Equipment Growth Fund II (the Partnership), that the Annual
Report of the Partnership on Form 10-K for the year ended December 31, 2002,
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that the information contained in such report fairly presents,
in all material respects, the financial condition of the Partnership at the end
of such period and the results of operations of the Partnership for such period.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following directors of the Partnership's General
Partner on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Gary D. Engle_________
- -----------------------------
Gary D. Engle Director, FSI March 26, 2003
/s/ James A. Coyne_______
- ----------------------------
James A. Coyne Director, FSI March 26, 2003
/s/ Richard K Brock______
- ----------------------
Richard K Brock Director, FSI March 26, 2003
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
INDEX TO FINANCIAL STATEMENTS
(ITEM 15(A))
Page
----
Independent auditors' reports 24-25
Balance sheets as of December 31, 2002 and 2001 26
Statements of income for the years ended
December 31, 2002, 2001, and 2000 27
Statements of changes in partners' capital for the years
ended December 31, 2002, 2001, and 2000 28
Statements of cash flows for the years ended
December 31, 2002, 2001, and 2000 29
Notes to financial statements 30-39
All financial statement schedules have been omitted, as the required information
is not pertinent to the registrant or is not material, or because the
information required is included in the financial statements and notes thereto.
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund II:
We have audited the accompanying balance sheets of PLM Equipment Growth Fund II
(the "Partnership"), as of December 31, 2002 and 2001, and the related
statements of income, changes in partners' capital, and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 2002 and
2001, and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
As described in Note 1 to the financial statements, the Partnership, in
accordance with the limited partnership agreement, entered its liquidation phase
on January 1, 1999 and has commenced an orderly liquidation of the Partnership
assets. The Partnership will terminate on December 31, 2006, unless terminated
earlier upon the sale of all equipment or by certain other events.
/s/ Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
March 7, 2003
INDEPENDENT AUDITORS' REPORT
The Partners
PLM Equipment Growth Fund II:
We have audited the accompanying statements of income, changes in partners'
capital and cash flows of PLM Equipment Growth Fund II ("the Partnership") for
the year ended December 31, 2000. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, PLM Equipment Growth Fund
II, in accordance with the limited partnership agreement, entered its
liquidation phase on January 1, 1999 and has commenced an orderly liquidation of
the Partnership assets. The Partnership will terminate on December 31, 2006,
unless terminated earlier upon sale of all equipment or by certain other events.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of PLM Equipment
Growth Fund II for the year ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
SAN FRANCISCO, CALIFORNIA
March 2, 2001
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31,
(in thousands of dollars, except unit amounts)
2002 2001
--------- ---------
ASSETS
Equipment held for operating lease, at cost . . . . . . . . $ 16,501 $ 21,119
Less accumulated depreciation . . . . . . . . . . . . . . . (14,500) (18,146)
--------- ---------
Net equipment . . . . . . . . . . . . . . . . . . . . . 2,001 2,973
Cash and cash equivalents . . . . . . . . . . . . . . . . . 4,025 1,958
Accounts receivable, less allowance for doubtful
accounts of $47 in 2002 and $89 in 2001 . . . . . . . . 412 584
Prepaid expenses and other assets . . . . . . . . . . . . . 54 18
--------- ---------
Total assets. . . . . . . . . . . . . . . . . . . . . $ 6,492 $ 5,533
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses . . . . . . . . . . . $ 307 $ 260
Due to affiliates . . . . . . . . . . . . . . . . . . . . . 33 42
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . 340 302
--------- ---------
Commitments and contingencies
Partners' capital
Limited partners (7,381,265 depositary units as of
December 31, 2002 and 7,381,165 as of December 31, 2001) 6,152 5,231
General Partner . . . . . . . . . . . . . . . . . . . . . . -- --
--------- ---------
Total partners' capital . . . . . . . . . . . . . . . . 6,152 5,231
--------- ---------
Total liabilities and partners' capital . . . . . . . $ 6,492 $ 5,533
========= =========
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars, except weighted-average unit amounts)
2002 2001 2000
------- ------- -------
REVENUES
Lease revenue . . . . . . . . . . . . . . . . . . . . . . $2,554 $2,673 $5,338
Interest and other income . . . . . . . . . . . . . . . . 54 221 92
Gain on disposition of equipment. . . . . . . . . . . . . 1,233 929 2,448
------- ------- -------
Total revenues . . . . . . . . . . . . . . . . . . . . 3,841 3,823 7,878
------- ------- -------
EXPENSES
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 857 1,127 1,581
Repairs and maintenance . . . . . . . . . . . . . . . . . 1,053 1,377 1,915
Equipment operating expenses. . . . . . . . . . . . . . . 111 121 119
Insurance expense . . . . . . . . . . . . . . . . . . . . 78 123 67
Management fees to affiliate. . . . . . . . . . . . . . . 129 132 269
General and administrative expenses to affiliate. . . . . 67 171 234
Other general and administrative expenses . . . . . . . . 642 699 848
(Recovery of) provision for bad debts . . . . . . . . . . (17) 31 (58)
------- ------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . 2,920 3,781 4,975
------- ------- -------
Equity in net income of unconsolidated
special-purpose entity. . . . . . . . . . . . . . . . -- -- 1,304
------- ------- -------
Net income. . . . . . . . . . . . . . . . . . . . . $ 921 $ 42 $4,207
======= ======= =======
PARTNERS' SHARE OF NET INCOME (LOSS)
Limited partners. . . . . . . . . . . . . . . . . . . . . $ 921 $ (26) $3,942
General Partner . . . . . . . . . . . . . . . . . . . . . -- 68 265
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 921 $ 42 $4,207
======= ======= =======
Limited Partner's net income (loss) per weighted-average
depositary unit . . . . . . . . . . . . . . . . . . . $ 0.12 $(0.00) $ 0.53
======= ======= =======
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
(in thousands of dollars)
Limited General
Partners Partner Total
-------------------------------
Partners' capital as of December 31, 1999 $ 7,656 $ -- $ 7,656
Net income. . . . . . . . . . . . . . . . . 3,942 265 4,207
Cash distribution . . . . . . . . . . . . . (4,308) (226) (4,534)
Special distribution. . . . . . . . . . . . (738) (39) (777)
---------- --------- --------
Partners' capital as of December 31, 2000 6,552 -- 6,552
Net (loss) income . . . . . . . . . . . . . (26) 68 42
Cash distribution . . . . . . . . . . . . . (1,295) (68) (1,363)
---------- --------- --------
Partners' capital as of December 31, 2001 5,231 -- 5,231
Net income. . . . . . . . . . . . . . . . . 921 -- 921
---------- --------- --------
Partners' capital as of December 31, 2002 $ 6,152 $ -- $ 6,152
========== ========= ========
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars)
OPERATING ACTIVITIES 2002 2001 2000
-------- -------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 921 $ 42 $ 4,207
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 857 1,127 1,581
Gain on disposition of equipment. . . . . . . . . . . . . . . (1,233) (929) (2,448)
Equity in net income of an unconsolidated special-
purpose entity. . . . . . . . . . . . . . . . . . . . . . -- -- (1,304)
Changes in operating assets and liabilities:
Accounts receivable, net. . . . . . . . . . . . . . . . . . 162 144 158
Prepaid expenses and other assets . . . . . . . . . . . . . (36) 17 12
Accounts payable and accrued expenses . . . . . . . . . . . 47 (98) 130
Due to affiliates . . . . . . . . . . . . . . . . . . . . . (9) (11) (15)
Lessee deposits and reserve for repairs . . . . . . . . . . -- (162) (334)
-------- -------- --------
Net cash provided by operating activities . . . . . . . . 709 130 1,987
-------- -------- --------
INVESTING ACTIVITIES
Proceeds from disposition of equipment. . . . . . . . . . . . . 1,358 653 3,297
Distribution from liquidation of an unconsolidated
special-purpose entity. . . . . . . . . . . . . . . . . . . -- -- 1,827
Additional investments in unconsolidated special-purpose entity -- -- (156)
-------- -------- --------
Net cash provided by investing activities . . . . . . . . 1,358 653 4,968
-------- -------- --------
FINANCING ACTIVITIES
Cash distribution paid to limited partners. . . . . . . . . . . -- (1,295) (4,308)
Cash distribution paid to General Partner . . . . . . . . . . . -- (68) (226)
Special distribution paid to limited partners . . . . . . . . . -- -- (738)
Special distribution paid to General Partner. . . . . . . . . . -- -- (39)
-------- -------- --------
Net cash used in financing activities . . . . . . . . . . -- (1,363) (5,311)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents. . . . . . 2,067 (580) 1,644
Cash and cash equivalents at beginning of year. . . . . . . . . 1,958 2,538 894
-------- -------- --------
Cash and cash equivalents at end of year. . . . . . . . . . . . $ 4,025 $ 1,958 $ 2,538
======== ======== ========
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
-----------------------
Organization
- ------------
PLM Equipment Growth Fund II, a California limited partnership (the
Partnership), was formed on March 30, 1987. The Partnership engages primarily
in the business of owning, leasing, or otherwise investing in predominately used
transportation and related equipment. The Partnership commenced significant
operations in June 1987. PLM Financial Services, Inc. (FSI) is the General
Partner of the Partnership. FSI is a wholly owned subsidiary of PLM
International, Inc. (PLM International).
The Partnership, in accordance with its limited partnership agreement, entered
its liquidation phase on January 1, 1999, and has commenced an orderly
liquidation of the Partnership's assets (see Note 10). The Partnership will
terminate on December 31, 2006, unless terminated earlier upon the sale of all
equipment or by certain other events. The General Partner may no longer
reinvest cash flows and surplus funds in equipment. All future cash flows and
surplus funds after payment of operating expenses, if any, are to be used for
distributions to partners, except to the extent used to maintain reasonable
reserves. During the liquidation phase, the Partnership's assets will continue
to be recorded at the lower of the carrying amount or fair value less cost to
sell.
FSI manages the affairs of the Partnership. The cash distributions of the
Partnership are generally allocated 95% to the limited partners and 5% to the
General Partner (see Net Income and Distributions per Depositary Unit, below).
Net income is allocated to the General Partner to the extent necessary to cause
the General Partner's capital account to equal zero. Such allocation of income
may not cumulatively exceed five ninety-fifths of the aggregate of the capital
contributions made by the limited partners and the reinvestment cash available
for distribution. The General Partner is also entitled to a subordinated
incentive fee equal to 7.5% of surplus distributions, as defined in the limited
partnership agreement, remaining after the limited partners have received a
certain minimum rate of return. The General Partner does not anticipate that
this fee will be earned.
Estimates
- ---------
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America. This requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Operations
- ----------
The equipment of the Partnership is managed under a continuing management
agreement by PLM Investment Management, Inc. (IMI), a wholly owned subsidiary of
FSI. IMI receives a monthly management fee from the Partnership for managing
the equipment (see Note 2). FSI, in conjunction with its subsidiaries, sells
equipment to investor programs and third parties, manages pools of equipment
under agreements with the investor programs, and is a general partner of other
programs.
Accounting for Leases
- -----------------------
The Partnership's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the lessor records the leased
asset at cost and depreciates the leased asset over its estimated useful life.
Rental payments are recorded as revenue over the lease term as earned in
accordance with Statement of Financial Accounting Standards (SFAS) No. 13,
"Accounting for Leases" (SFAS No.13). Lease origination costs are capitalized
and amortized over the term of the lease.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation (continued)
-----------------------
Depreciation
- ------------
Depreciation of transportation equipment held for operating leases is computed
on the double-declining balance method, taking a full month's depreciation in
the month of acquisition, based upon estimated useful lives of 15 years for
railcars and 12 years for other types of equipment. The depreciation method
changes to straight-line when annual depreciation expense using the
straight-line method exceeds that calculated by the double-declining balance
method. Acquisition fees have been capitalized as part of the cost of the
equipment. Major expenditures that are expected to extend the useful lives or
reduce future operating expenses of equipment are capitalized and amortized over
the estimated remaining life of the equipment.
Transportation Equipment
- -------------------------
Equipment held for operating leases is stated at cost.
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of" (SFAS No. 121), the General
Partner reviewed the carrying value of the Partnership's equipment portfolio at
least quarterly and whenever circumstances indicated that the carrying value of
an asset may not be recoverable due to expected future market conditions. If
the projected undiscounted cash flows and the fair value of the equipment were
less than the carrying value of the equipment, an impairment loss was recorded.
In October 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No.
144), which replaced SFAS No. 121. In accordance with SFAS No. 144, the Company
evaluates long-lived assets for impairment whenever events or circumstances
indicate that the carrying values of such assets may not be recoverable. Losses
for impairment are recognized when the undiscounted cash flows estimated to be
realized from a long-lived asset are determined to be less than the carrying
value of the asset and the carrying amount of long-lived assets exceed its fair
value. The determination of fair value for a given investment requires several
considerations, including but not limited to, income expected to be earned from
the asset, estimated sales proceeds, and holding costs excluding interest. The
Partnership applied the new rules on accounting for the impairment or disposal
of long-lived assets beginning January 1, 2002.
No reductions were required to the carrying value of the equipment during 2002,
2001, or 2000.
Investment in Unconsolidated Special-Purpose Entity
- -------------------------------------------------------
The Partnership had an interest in an unconsolidated special-purpose entity
(USPE) that owned an aircraft. This was a single purpose entity that did not
have any debt. This interest was accounted for using the equity method. This
aircraft was sold in the first quarter of 2000.
The Partnership's investment in the USPE included acquisition and lease
negotiation fees paid by the Partnership to PLM Transportation Equipment
Corporation (TEC), a wholly owned subsidiary of FSI. The Partnership's interest
in the USPE was managed by IMI. The Partnership's equity interest in the net
income of the USPE is reflected net of management fees paid or payable to IMI
and the amortization of acquisition and lease negotiation fees paid to TEC.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation (continued)
-----------------------
Repairs and Maintenance
- -------------------------
Repair and maintenance costs to railcars and trailers are usually the obligation
of the Partnership. Maintenance costs for the marine containers were the
obligation of the lessee. To meet the repair requirements of certain marine
containers, reserve accounts were prefunded by the lessee. If an asset is sold
and there is a balance in the reserve account for repairs to that asset, the
balance in the reserve account is reclassified as additional sales proceeds.
During 2001, the General Partner determined that there would be no future
repairs made to certain marine containers and reclassified the remaining balance
of $0.2 million in marine container repair reserves to interest and other income
on the accompanying statement of income.
Net Income and Distributions per Depositary Unit
- ------------------------------------------------------
Cash distributions are allocated 95% to the limited partners and 5% to the
General Partner and may include amounts in excess of net income. The limited
partners' net income is allocated among the limited partners based on the number
of limited partnership units owned by each limited partner and on the number of
days of the year each limited partner is in the Partnership. During 2002, the
General Partner received a special loss allocation of $46,000 to bring its
capital account to zero. During 2001 and 2000, the General Partner received a
special allocation of income of $0.1 million and $0.1 million, respectively in
excess of its pro-rata ownership share.
Cash distributions are recorded when declared. Cash distributions are generally
paid in the same quarter they are declared. For the years ended December 31,
2001 and 2000, cash distributions totaled $1.4 million and $4.5 million,
respectively, or $0.18 and $0.58 per weighted-average depositary unit,
respectively. There were no cash distributions in 2002.
The Partnership declared and paid a special distribution of $0.8 million to the
partners during 2000, or $0.10 per weighted-average depositary unit. No special
distributions were declared during 2002 or 2001.
Cash distributions relating to the fourth quarter of 2000 of $1.1 million or
$0.15 per weighted-average depositary unit were declared and paid during the
first quarter of 2001. There were no distributions declared or paid relating to
the fourth quarter of 2001 or 2002 in the first quarter of 2002 or 2003.
Cash distributions to investors in excess of net income are considered a return
of capital. Cash distributions to the limited partners of $1.3 million and $1.1
million in 2001 and 2000, respectively, were deemed to be a return of capital.
Net Income (Loss) Per Weighted-Average Depositary Unit
- ------------------------------------------------------------
Net income (loss) per weighted-average depositary unit was computed by dividing
net income (loss) attributable to limited partners by the weighted-average
number of depositary units deemed outstanding during the period. The
weighted-average number of depositary units deemed outstanding during the year
ended December 31, 2002 were 7,381,265, and during the years ended December 31,
2001, and 2000 were 7,381,165.
Cash and Cash Equivalents
- ----------------------------
The Partnership considers highly liquid investments that are readily convertible
to known amounts of cash with original maturities of three months or less as
cash equivalents. The carrying amount of cash equivalents approximates fair
value due to the short-term nature of the investments.
Comprehensive Income
- ---------------------
The Partnership's net income was equal to comprehensive income for the years
ended December 31, 2002, 2001, and 2000.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation (continued)
-----------------------
New Accounting Standards
- --------------------------
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (SFAS No. 146) which is based on the general
principle that a liability for a cost associated with an exit or disposal
activity should be recorded when it is incurred and initially measured at fair
value. SFAS No. 146 applies to costs associated with (1) an exit activity that
does not involve an entity newly acquired in a business combination, or (2) a
disposal activity within the scope of SFAS No. 146. These costs include certain
termination benefits, costs to terminate a contract that is not a capital lease,
and other associated costs to consolidate facilities or relocate employees.
Because the provisions of this statement are to be applied prospectively to exit
or disposal activities initiated after December 31, 2002, the effect of adopting
this statement cannot be determined.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). This interpretation requires the guarantor to
recognize a liability for the fair value of the obligation at the inception of
the guarantee. The provisions of FIN 45 will be applied on a prospective basis
to guarantees issued after December 31, 2002.
2. Transactions with General Partner and Affiliates
-----------------------------------------------------
An officer of FSI contributed $100 of the Partnership's initial capital. Under
the equipment management agreement, IMI receives a monthly management fee
attributable to either owned equipment or interests in equipment owned by the
USPE equal to the greater of (i) 5% of Gross Revenues (as defined in the
agreement) or (ii) 1/12 of 1/2% of the net book value of the equipment portfolio
subject to certain adjustments. The Partnership management fee in 2002, 2001
and 2000 was based on lease revenue and was $0.1 million, $0.1 million, and $0.3
million, respectively. Partnership management fees of $33,000 and $42,000,
respectively, were payable as of December 31, 2002 and 2001. The Partnership
reimbursed FSI and its affiliates $0.1 million, $0.2 million and $0.2 million in
2002, 2001, and 2000, respectively, for data processing expenses and
administrative services performed on behalf of the Partnership. The
Partnership's proportional share of the USPE's administrative and data
processing expenses reimbursed to FSI were $-0-, $-0- and $2,000 during 2002,
2001 and 2000, respectively. These affiliated expenses reduced the
Partnership's share of income in the USPE.
3. Equipment
---------
Owned equipment held for operating leases is stated at cost. The components of
owned equipment as of December 31 were as follows (in thousands of dollars):
Equipment held for operating leases 2002 2001
- --------------------------------------------------------
Trailers. . . . . . . . . . . . . . $ 9,404 $ 9,404
Railcars. . . . . . . . . . . . . . 7,097 10,705
Marine containers . . . . . . . . . -- 1,010
--------- ---------
16,501 21,119
Less accumulated depreciation . . . (14,500) (18,146)
--------- ---------
Net equipment . . . . . . . . . $ 2,001 $ 2,973
========= =========
Revenues are earned by placing equipment under operating leases. The
Partnership's marine containers were leased to operators of utilization-type
leasing pools that included equipment owned by unaffiliated parties. In such
instances, revenues received by the Partnership consisted of a specified
percentage of revenues generated by leasing the equipment to sublessees, after
deducting certain direct operating expenses of the pooled equipment. Rental
revenues for trailers are based on a per-diem lease in the free running
interchange with the railroads. Rents for railcars are based on fixed rates.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
3. Equipment (continued)
----------------------
As of December 31, 2002, all owned equipment in the Partnership's portfolio was
on lease, except for 64 railcars with an aggregate net book value of $0. As of
December 31, 2001, all owned equipment in the Partnership's portfolio was on
lease except for 223 railcars and 7 marine containers with an aggregate net book
value of $0.2 million.
During 2002, the General Partner disposed of marine containers and railcars
owned by the Partnership, with an aggregate net book value of $0.1 million, for
proceeds of $1.4 million. During 2001, the General Partner disposed of marine
containers, trailers, and railcars owned by the Partnership, with an aggregate
net book value of $0.1 million, for proceeds of $0.7 million. Included in the
2001 gain on sale are unused repair reserves of $0.3 million.
There were no reductions to the carrying values of equipment in 2002, 2001, or
2000.
All owned equipment on lease is being accounted for as operating leases. Future
minimum rents under noncancelable operating leases as of December 31, 2002
during each of the next five years are $0.4 million in 2003, $0.3 million in
2004, $0.2 million in 2005, $23,000 in 2006, and $0 thereafter. Per diem and
short-term rentals consisting of utilization rate lease payments included in
revenue amounted to $1.9 million, $1.8 million, and $2.0 million in 2002, 2001,
and 2000, respectively.
4. Investment in an Unconsolidated Special-Purpose Entity
-----------------------------------------------------------
The Partnership had an interest in an USPE that consisted of a 50% interest in a
tenancy in common (TIC) owning a Boeing 737-200A aircraft (and related assets
and liabilities). This was a single purpose entity that did not have any debt.
This aircraft was sold in the first quarter of 2000 and the Partnership received
liquidating proceeds from the sale of $1.8 million for its net investment of
$0.3 million.
The tables below set forth 100% of the gain on disposition of equipment, direct
and indirect expenses, and net income of the entity in which the Partnership had
an interest, and the Partnership's proportional share of income in this entity
for the year ended December 31, 2000 (in thousands of dollars):
East West
For the year ended . . . . . . . 925
December 31, 2000. . . . TIC
- --------------------------------------------
Gain on disposition of equipment $ 2,862
Less: Direct expenses. . . . . . 74
Indirect expenses . . 183
----------
Net income. . . . . . . . . . $ 2,605
==========
Partnership's share of net
income. . . . . . . . . . . . $ 1,304
==========
5. Operating Segments
-------------------
The Partnership operates or operated in four primary operating segments:
aircraft leasing, marine container leasing, trailer leasing, and railcar
leasing. Each equipment-leasing segment engages in short-term to mid-term
operating leases to a variety of customers.
The General Partner evaluates the performance of each segment based on profit or
loss from operations before allocation of general and administrative expenses
and certain other expenses. The segments are managed separately due to
different business strategies for each operation. The accounting policies of
the Partnership's operating segments are the same as described in Note 1, Basis
of Presentation. There were no intersegment revenues for the years ended
December 31, 2002, 2001 and 2000.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
5. Operating Segments (continued)
--------------------------------
The following tables present a summary of the operating segments (in thousands
of dollars):
Marine
Container Trailer Railcar
For the Year Ended December 31, 2002 Leasing Leasing Leasing Other 1 Total
- -------------------------------------------------------------------------------------
REVENUES
Lease revenue $ 3 $ 1,515 $ 1,036 $ -- $ 2,554
Interest income and other -- -- 3 51 54
Gain on disposition of equipment 4 10 1,219 -- 1,233
-------- -------- -------- ------ -------
Total revenues 7 1,525 2,258 51 3,841
-------- -------- -------- ------ -------
EXPENSES
Operations support 1 932 246 63 1,242
Depreciation 3 526 328 -- 857
Management fees to affiliates -- 75 54 -- 129
General and administrative expenses -- 280 106 323 709
Provision for (recovery of) bad debts -- 26 (43) -- (17)
-------- -------- -------- ------ -------
Total expenses 4 1,839 691 386 2,920
-------- -------- -------- ------ -------
Net income (loss) $ 3 $ (314) $ 1,567 $ (335) $ 921
======== ======== ======== ====== =======
Total assets as of December 31, 2002 $ 5 $ 2,360 $ 48 $ 4,079 $6,492
======== ======== ======== ====== =======
Marine
Container Trailer Railcar
For the Year Ended December 31, 2001 Leasing Leasing Leasing Other 1 Total
- ----------------------------------------------------------------------------------------
REVENUES
Lease revenue $ (24) $ 1,596 $ 1,101 $ -- $ 2,673
Interest income and other 159 -- 3 59 221
Gain (loss) on disposition of equipment 391 22 526 (10) 929
--------- ------- -------- ------- ------
Total revenues 526 1,618 1,630 49 3,823
--------- ------- -------- ------- ------
EXPENSES
Operations support 1 811 700 109 1,621
Depreciation 20 530 577 -- 1,127
Management fees to affiliates (1) 38 95 -- 132
General and administrative expenses 1 284 94 491 870
Provision for bad debts 1 21 9 -- 31
--------- ------- -------- ------- ------
Total expenses 22 1,684 1,475 600 3,781
--------- ------- -------- ------- ------
Net income (loss) $ 504 $ (66) $ 1 55 $ (551) $ 42
========= ======= ======= ======== ======
Total assets as of December 31, 2001 $ 27 $ 2,953 $ 577 $1,976 $5,533
========= ======= ======= ======== ======
___________________________
1 Includes certain assets not identifiable to a specific segment, such as
cash and prepaid expenses. Also includes interest income and costs not
identifiable to a particular segment, such as certain operations support and
general and administrative expenses.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
5. Operating Segments (continued)
------------------------------------
Marine
Aircraft Container Trailer Railcar
For the Year Ended December 31, 2000 Leasing Leasing Leasing Leasing Other 1 Total
- ----------------------------------------------------------------------------------------------
REVENUES
Lease revenue $ -- $ 81 $ 1,945 $ 3,312 $ -- $5,338
Interest income and other -- -- -- 6 86 92
Net gain on disposition of equipment -- 182 301 1,965 -- 2,448
-------- -------- -------- -------- ------ ------
Total revenues -- 263 2,246 5,283 86 7,878
-------- -------- -------- -------- ------ ------
EXPENSES
Operations support -- 6 728 1,329 38 2,101
Depreciation -- 206 648 727 -- 1,581
Management fees to affiliates -- 4 98 167 -- 269
General and administrative expenses 4 6 332 205 535 1,082
Recovery of bad debts -- -- (21) (27) (10) (58)
-------- -------- -------- -------- ------ ------
Total expenses 4 222 1,785 2,401 563 4,975
-------- -------- -------- -------- ------ ------
Equity in net income of USPE 1,304 -- -- -- -- 1,304
-------- -------- -------- -------- ------ ------
Net income (loss) $ 1,300 $ 41 $ 461 $ 2,882 $(477) $4,207
======== ======== ======== ======== ====== ======
6. Geographic Information
-----------------------
The Partnership owns certain equipment that is leased and operated
internationally. A limited number of the Partnership's transactions are
denominated in a foreign currency. Gains or losses resulting from foreign
currency transactions are included in the results of operations and are not
material.
The Partnership leases or leased its aircraft, railcars, and trailers to lessees
domiciled in three geographic regions: the United States, Canada, and South
Asia. Marine containers were leased to multiple lessees in different regions
that operated worldwide.
The table below sets forth lease revenues by geographic region for the
Partnership's owned equipment, grouped by domicile of the lessee as of and for
the years ended December 31 (in thousands of dollars):
Owned Equipment
================
Region. . . . . . 2002 2001 2000
United States . . $ 2,088 $ 2,046 $ 3,956
Canada. . . . . . 463 651 1,301
Rest of the world 3 (24) 81
------- ------- -------
Lease revenues $ 2,554 $ 2,673 $ 5,338
======= ======= =======
The following table sets forth net income (loss) information by region for the
Partnership's owned equipment and investments in an USPE, grouped by domicile of
the lessee as of and for the years ended December 31 (in thousands of dollars):
______________________________
1 Includes interest income and costs not identifiable to a particular segment,
such as certain operations support and general and administrative
expenses.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
6. Geographic Information (continued)
-----------------------
Owned Equipment Investments in an USPE
------------------------- --------------------------
Region. . . . . . 2002 2001 2000 2002 2001 2000
========================= ===========================
United States . . $ 516 $ (429) $ 2,661 $ -- $ -- $ --
Canada. . . . . . 736 518 679 -- -- --
South Asia. . . . -- -- -- -- -- 1,304
Rest of the world 4 504 42 -- -- --
------- -------- ------- -------- -------- -------
Regional income . 1,256 593 3,382 -- -- 1,304
Administrative
and other. . . (335) (551) (479) -- -- --
------- -------- ------- -------- -------- -------
Net income . $ 921 $ 42 $ 2,903 $ -- $ -- $ 1,304
======= ======== ======= ======== ======== =======
The net book value of these assets as of December 31 are as follows (in
thousands of dollars):
Owned Equipment
---------------
Region. . . . . . 2002 2001 2000
=======================
United States . . $ 1,996 $ 2,692 $ 3,743
Canada. . . . . . 5 255 432
Rest of the world -- 26 69
------- ------- -------
Net book value $ 2,001 $ 2,973 $ 4,244
======= ======= =======
7. Concentrations of Credit Risk
--------------------------------
No single lessee accounted for more than 10% of the total revenues for the years
ended December 31, 2002, 2001 and 2000. In 2002, however, the Partnership sold
railcars to Greenbrier and the gain from this sale accounted for 27% of the
Partnership's revenues in 2002. In 2000, the Partnership sold its remaining
investment in an USPE in which it had a 50% interest in an aircraft to Aegro
Capital. The gain from this sale accounted for 14% of the Partnership's
revenues from wholly owned equipment in 2000.
As of December 31, 2002 and 2001, the General Partner believes the Partnership
had no significant concentrations of credit risk that could have a material
adverse effect on the Partnership.
8. Income Taxes
-------------
The Partnership is not subject to income taxes, as any income or loss is
included in the tax returns of the individual partners. Accordingly, no
provision for income taxes has been made in the financial statements of the
Partnership.
As of December 31, 2002, the federal income tax basis was higher than the
financial statement carrying values of certain assets and liabilities by $15.1
million, primarily due to differences in depreciation methods and the tax
treatment of underwriting commissions and syndication costs.
9. Contingencies
-------------
The Partnership, together with affiliates, has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership property and to recover damages for failure to pay rent and failure
to maintain such property in accordance with relevant lease contracts. The
Partnership has repossessed all of its property previously leased to such
airline, and the airline has ceased operations. In response to the
Partnership's collection efforts, the airline filed counter-claims against the
Partnership in excess of the Partnership's claims against the airline. The
General Partner believes that the airline's counterclaims are completely without
merit, and the General Partner will vigorously defend against such
counterclaims.
PLM EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
9. Contingencies (continued)
--------------------------
During 2001, the General Partner decided to minimize its collection efforts from
the Indian lessee in order to save the Partnership from incurring additional
expenses associated with trying to collect from a lessee that has no apparent
ability to pay.
The Partnership is involved as plaintiff or defendant in various other legal
actions incidental to its business. Management does not believe that any of
these actions will be material to the financial condition or results of
operations of the Partnership.
10. Liquidation and Special Distributions
----------------------------------------
On January 1, 1999, the General Partner began the liquidation phase of the
Partnership and commenced an orderly liquidation of the Partnership's assets.
Given the current economic environment, and offers received for similar types of
equipment owned by the Partnership, the General Partner has determined it would
not be advantageous to sell the remaining Partnership equipment at the current
time. The General Partner will continue to monitor the equipment markets to
determine an optimal time to sell. In the meantime, equipment will continue to
be leased, and re-leased at market rates as existing leases expire. 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. Upon final liquidation, the Partnership
will be dissolved.
A special distribution of $0.8 million ($0.10 per weighted-average depositary
unit) was paid in 2000. No special distributions were paid in 2002 and 2001.
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 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.
EQUIPMENT GROWTH FUND II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
11. Quarterly Results of Operations (unaudited)
----------------------------------
The following is a summary of the quarterly results of operations for the year
ended December 31, 2002 (in thousands of dollars, except per share amounts):
March June September December
31, 30, 30, 31, Total
================================================
Operating results:
Total revenues . . . . . . . . . . . $1,875 $ 568 $ 700 $ 698 $3,841
Net income (loss). . . . . . . . . . 1,200 (169) (143) 33 921
Per weighted-average depositary unit:
Limited partners'
net income (loss). . . . . . . . . . $ 0.16 $(0.02) $ (0.02) $ 0.00 $ 0.12
In the first quarter of 2002, the Partnership disposed of railcars and recorded
a gain on disposition of $1.2 million.
The following is a summary of the quarterly results of operations for the year
ended December 31, 2001 (in thousands of dollars, except per share amounts):
March June September December
31, 30, 30, 31, Total
===============================================
Operating results:
Total revenues . . . . . . . . . . . $ 921 $ 675 $ 818 $ 1,409 $3,823
Net income (loss). . . . . . . . . . (338) (368) 20 728 42
Per weighted-average depositary unit:
Limited partners'
net income (loss). . . . . . . . . . $(0.05) $(0.05) $ 0.00 $ 0.10 $(0.00)
In the fourth quarter of 2001, the Partnership sold trailers, marine containers,
and railcars for a gain of $0.6 million.
PLM EQUIPMENT GROWTH FUND II
INDEX OF EXHIBITS
Exhibit Page
- ------- ----
4.. . . Limited Partnership Agreement of Partnership *
4.1 Amendment to Limited Partnership Agreement of Registrant *
10.1 Management Agreement between Partnership and PLM Investment *
Management, Inc.
99.1 East West 925. 41-48
__________________________
*Incorporated by reference. See page 19 of this report.