UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended June 30, 2001
[-] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 1-10553
-----------------------
PLM EQUIPMENT GROWTH FUND II
(Exact name of registrant as specified in its charter)
California 94-3041013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Montgomery Street
Suite 1350, San Francisco, CA 94104
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (415) 445-3201
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
June 30, December 31,
2001 2000
-----------------------------
ASSETS
Equipment held for operating lease, at cost $ 23,879 $ 24,727
Less accumulated depreciation (20,241) (20,483)
-----------------------------
Net equipment 3,638 4,244
Cash and cash equivalents 901 2,538
Accounts receivable, less allowance for doubtful
accounts of $200 in 2001 and $57 in 2000 486 718
Prepaid expenses and other assets 40 35
-----------------------------
Total assets $ 5,065 $ 7,535
=============================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 230 $ 482
Due to affiliates 33 52
Lessee deposits and reserve for repairs 319 449
-----------------------------
Total liabilities 582 983
-----------------------------
Partners' capital:
Limited partners (7,381,165 depositary units as of
June 30, 2001 and December 31, 2000) 4,483 6,552
General Partner -- --
-----------------------------
Total partners' capital 4,483 6,552
-----------------------------
Total liabilities and partners' capital $ 5,065 $ 7,535
=============================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
---------------------------------------------------------------
REVENUES
Lease revenue $ 635 $ 1,361 $ 1,365 $ 2,866
Interest and other income 10 26 40 36
Net gain on disposition of equipment 30 523 191 502
---------------------------------------------------------------
Total revenues 675 1,910 1,596 3,404
---------------------------------------------------------------
EXPENSES
Depreciation 283 413 583 845
Repairs and maintenance 351 449 815 859
Equipment operating expenses 49 44 140 89
Management fees to affiliate 31 66 61 143
General and administrative expenses
to affiliates 22 52 126 119
Other general and administrative expenses 204 183 434 427
Provision for bad debts 103 19 143 10
---------------------------------------------------------------
Total expenses 1,043 1,226 2,302 2,492
---------------------------------------------------------------
Equity in net income (loss) of an
unconsolidated special-purpose entity -- (60 ) -- 1,304
---------------------------------------------------------------
Net income (loss) $ (368) $ 624 $ (706) $ 2,216
===============================================================
PARTNERS' SHARE OF NET INCOME (LOSS):
Limited partners $ (379) $ 528 $ (774) $ 2,063
General Partner 11 96 68 153
---------------------------------------------------------------
Total $ (368) $ 624 $ (706) $ 2,216
===============================================================
Limited partners' net income (loss) per
weighted-average depositary unit $ (0.05) $ 0.07 $ (0.10) $ 0.28
===============================================================
Cash distributions $ 233 $ 1,136 $ 1,363 $ 2,273
Special cash distributions -- 777 -- 777
---------------------------------------------------------------
Total cash distributions $ 233 $ 1,913 $ 1,363 $ 3,050
===============================================================
Per weighted-average depositary unit:
Cash distributions $ 0.03 $ 0.15 $ 0.18 $ 0.29
Special cash distributions -- 0.10 -- 0.10
---------------------------------------------------------------
Total cash distributions $ 0.03 $ 0.25 $ 0.18 $ 0.39
===============================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
the period from December 31, 1999 to June 30, 2001
(in thousands of dollars)
Limited General
Partners Partner Total
---------------------------------------------------
Partners' capital as of December 31, 1999 $ 7,656 $ -- $ 7,656
Net income 3,942 265 4,207
Cash distribution (4,308) (226) (4,534)
Special cash distribution (738) (39) (777)
---------------------------------------------------
Partners' capital as of December 31, 2000 6,552 -- 6,552
Net income (loss) (774) 68 (706)
Cash distribution (1,295) (68) (1,363)
---------------------------------------------------
Partners' capital as of June 30, 2001 $ 4,483 $ -- $ 4,483
===================================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Six Months
Ended June 30,
2001 2000
----------------------------------
OPERATING ACTIVITIES
Net income (loss) $ (706) $ 2,216
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation 583 845
Net gain on disposition of equipment (191) (502)
Equity in net income from an unconsolidated special-purpose
entity -- (1,304)
Changes in operating assets and liabilities:
Accounts receivable, net 232 8
Prepaid expenses and other assets (5) 30
Accounts payable and accrued expenses (252) (111)
Due to affiliates (19) --
Lessee deposits and reserve for repairs (130) (67)
----------------------------------
Net cash (used in) provided by operating activities (488) 1,115
----------------------------------
INVESTING ACTIVITIES
Proceeds from disposition of equipment 214 977
Liquidation distributions from an unconsolidated special-purpose entity -- 1,824
Additional investments in an unconsolidated special-purpose entity -- (152)
----------------------------------
Net cash provided by investing activities 214 2,649
----------------------------------
FINANCING ACTIVITIES
Cash distribution paid to limited partners (1,295) (2,159)
Cash distribution paid to General Partner (68) (114)
Special cash distribution paid to limited partners -- (738)
Special cash distribution paid to General Partner -- (39)
----------------------------------
Net cash used in financing activities (1,363) (3,050)
----------------------------------
Net increase (decrease) in cash and cash equivalents (1,637) 714
Cash and cash equivalents at beginning of period 2,538 894
----------------------------------
Cash and cash equivalents at end of period $ 901 $ 1,608
==================================
See accompanying notes to financial statements.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (the
General Partner), the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of PLM Equipment Growth
Fund II (the Partnership) as of June 30, 2001 and December 31, 2000, the
statements of operations for the three and six months ended June 30, 2001
and 2000, the statements of changes in partners' capital for the period
from December 31, 1999 to June 30, 2001, and the statements of cash flows
for the six months ended June 30, 2001 and 2000. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2000, on file at the Securities and
Exchange Commission.
2. SCHEDULE OF PARTNERSHIP PHASES
The Partnership, in accordance with its limited partnership agreement,
entered its liquidation phase on January 1, 1999, and has commenced an
orderly liquidation of the Partnership's assets. The Partnership will
terminate on December 31, 2006, unless terminated earlier upon the sale of
all equipment or by certain other events. The General Partner may no longer
reinvest cash flows and surplus funds in equipment. All future cash flows
and surplus funds, if any, are to be used for distributions to partners,
except to the extent used to maintain reasonable reserves. During the
liquidation phase, the Partnership's assets will continue to be recorded at
the lower of the carrying amount or fair value less cost to sell.
3. CASH DISTRIBUTION
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
six months ended June 30, 2001 and 2000, cash distributions totaled $1.4
million and $2.3 million, respectively. For the three months ended June 30,
2001 and 2000, cash distributions totaled $0.2 million and $1.1 million,
respectively. In addition, a $0.8 million special distribution was paid to
the partners during the six months ended June 30, 2000, from the proceeds
realized on the sale of equipment in 2000 and 1999. No special
distributions were paid in the three and six months ended June 30, 2001.
Cash distributions to the limited partners of $1.3 million and $0.8 million
for the six months ended June 30, 2001 and 2000, respectively were deemed
to be a return of capital.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
The balance due to affiliates as of June 30, 2001 and December 31, 2000
totaled $33,000 and $0.1 million respectively, due to FSI and its affiliate
for management fees.
5. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
June 30, December 31,
2001 2000
--------------------------------------
Railcars $ 12,680 $ 12,712
Trailers 9,495 9,510
Marine containers 1,704 2,505
-------------------------------------
23,879 24,727
Less accumulated depreciation (20,241 ) (20,483)
-------------------------------------
Net equipment $ 3,638 $ 4,244
=====================================
As of June 30, 2001, all equipment was on lease, except for 317 railcars
and 2 marine containers with an aggregate net book value of $0.3 million.
As of December 31, 2000, all equipment was on lease, except for 203
railcars and 106 marine containers with an aggregate net book value of $0.4
million.
During the six months ended June 30, 2001, the Partnership sold or disposed
of marine containers, trailers, and railcars, with an aggregate net book
value of $23,000, for proceeds of $0.2 million. For the six months ended
June 30, 2000, the Partnership sold or disposed of marine containers,
trailers, and railcars, with an aggregate net book value of $0.5 million,
for proceeds of $1.0 million.
6. OPERATING SEGMENTS
The Partnership operates or operated in four different segments: railcar
leasing, trailer leasing, marine container leasing and aircraft leasing.
Each equipment leasing segment engages in short-term to mid-term operating
leases to a variety of customers. The following tables present a summary of
the operating segments (in thousands of dollars):
Marine
Railcar Trailer Container
For the quarter ended June 30, 2001 Leasing Leasing Leasing All Other(1) Total
----------------------------------- ------- ------- ------- --------- -----
REVENUES
Lease revenue $ 265 $ 370 $ 1 $ (1) $ 635
Interest income and other -- -- -- 10 10
Gain on disposition of equipment -- 2 28 -- 30
----------------------------------------------------
Total revenues 265 372 29 9 675
COSTS AND EXPENSES
Operations support 162 223 -- 15 400
Depreciation 149 132 2 -- 283
Management fees 13 19 (1) -- 31
General and administrative 26 97 -- 103 226
expenses
Provision for (recovery of) bad 86 1 17 (1) 103
debts
----------------------------------------------------
Total costs and expenses 436 472 18 117 1,043
----------------------------------------------------
Net income (loss) $ (171) $ (100) $ 11 $ (108) $ (368)
====================================================
Total assets as of June 30, 2001 $ 794 $ 3,271 $ 59 $ 941 $ 5,065
====================================================
(1) Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
6. OPERATING SEGMENTS (continued)
------------------
Marine
Railcar Trailer Container Aircraft
For the quarter ended June 30, 2000 Leasing Leasing Leasing Leasing All Other(1) Total
----------------------------------- ------- ------- ------- ------- -------- -----
REVENUES
Lease revenue $ 887 $ 458 $ 16 $ -- $ -- $ 1,361
Interest income and other -- -- -- -- 26 26
Gain on disposition of equipment 508 2 13 -- -- 523
--------------------------------------------------------------
Total revenues 1,395 460 29 -- 26 1,910
Costs and expenses
Operations support 333 150 1 -- 9 493
Depreciation 187 171 55 -- -- 413
Management fees 43 22 1 -- -- 66
General and administrative 89 52 1 1 92 235
expenses
Provision for (recovery of) bad 26 (7) -- -- -- 19
debts
--------------------------------------------------------------
Total costs and expenses 678 388 58 1 101 1,226
--------------------------------------------------------------
Equity in net loss of USPE -- -- -- (60) -- (60)
--------------------------------------------------------------
--------------------------------------------------------------
Net income (loss) $ 717 $ 72 $ (29 )$ (61) $ (75) $ 624
==============================================================
Total assets as of June 30, 2000 $ 1,668 $ 4,031 $ 522 $ -- $ 1,625 $ 7,846
==============================================================
Marine
Railcar Trailer Container Aircraft
For the six months ended June 30, Leasing Leasing Leasing Leasing All Other(1) Total
------------------------------------ ------- ------- ------- ------- -------- -----
2001
REVENUES
Lease revenue $ 616 $ 770 $ (20) $ -- $ (1) $ 1,365
Interest income and other -- -- -- -- 40 40
Gain (loss) on disposition of 3 2 196 (10) -- 191
equipment
--------------------------------------------------------------
Total revenues 619 772 176 (10) 39 1,596
COSTS AND EXPENSES
Operations support 491 388 -- -- 76 955
Depreciation 300 265 18 -- -- 583
Management fees 25 38 (2) -- -- 61
General and administrative 46 148 1 1 364 560
expenses
Provision for (recovery of) bad 118 9 17 -- (1) 143
debts
--------------------------------------------------------------
Total costs and expenses 980 848 34 1 439 2,302
--------------------------------------------------------------
Net income (loss) $ (361 $ (76) $ 142 $ (11) $ (400) $ (706)
==============================================================
Total assets as of June 30, 2001 $ 794 $ 3,271 $ 59 $ -- $ 941 $ 5,065
==============================================================
(1) Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
PLM EQUIPMENT GROWTH FUND II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
6. OPERATING SEGMENTS (continued)
---------------------------
Marine
Railcar Trailer Container Aircraft
For the six months ended June 30, Leasing Leasing Leasing Leasing All Other()1 Total
------------------------------------ ------- ------- ------- ------- --------- -----
2000
----
REVENUES
Lease revenue $ 1,794 $ 983 $ 89 $ -- $ -- $ 2,866
Interest income and other -- -- -- -- 36 36
Gain (loss) on disposition of 576 21 (95) -- -- 502
equipment
-----------------------------------------------------------------
Total revenues 2,370 1,004 (6) -- 36 3,404
COSTS AND EXPENSES
Operations support 598 329 2 -- 19 948
Depreciation 379 343 123 -- -- 845
Management fees 88 50 5 -- -- 143
General and administrative 126 141 3 1 275 546
expenses
Provision for (recovery of) bad 29 (19) -- -- -- 10
debts
-----------------------------------------------------------------
Total costs and expenses 1,220 844 133 1 294 2,492
-----------------------------------------------------------------
Equity in net income of USPE -- -- -- 1,304 -- 1,304
-----------------------------------------------------------------
Net income (loss) $ 1,150 $ 160 $ (139) $ 1,303 $ (258) $ 2,216
=================================================================
Total assets as of June 30, 2000 $ 1,668 $ 4,031 $ 522 $ -- $ 1,625 $ 7,846
=================================================================
-------------------------------------
(1) Includes interest income and costs not identifiable to a particular
segment, such as certain operations support and general and administrative
expenses.
7. NET INCOME (LOSS) PER WEIGHTED-AVERAGE DEPOSITARY UNIT
Net income (loss) per weighted-average depositary unit was computed by
dividing net income (loss) attributable to limited partners by the
weighted-average number of depositary units deemed outstanding during the
period. The weighted-average number of depositary units deemed outstanding
during the three and six months ended June 30, 2001 and 2000 was 7,381,165
and 7,381,805, respectively.
8. LIQUIDATION AND SPECIAL DISTRIBUTIONS
On January 1, 1999, the General Partner began the liquidation phase of the
Partnership with the intent to commence an orderly liquidation of the
Partnership assets. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received, the General Partner intends to periodically declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership, the equipment will
continue to be leased under operating leases until sold. Operating cash
flows, to the extent they exceed Partnership expenses, will continue to be
distributed. The amounts reflected for assets and liabilities of the
Partnership have not been adjusted to reflect liquidation values. The
equipment portfolio continues to be carried at the lower of depreciated
cost or fair value less cost to dispose. Although the General Partner
estimates that there will be distributions after liquidation of assets and
liabilities, the amounts cannot be accurately determined prior to actual
liquidation of the equipment. Any excess proceeds over expected Partnership
obligations will be distributed to the Partners throughout the liquidation
period. Upon final liquidation, the Partnership will be dissolved.
The Partnership is no longer permitted to reinvest proceeds from sales or
liquidations of equipment. These proceeds, in excess of operational cash
requirements, are periodically paid out to limited partners in the form of
special distributions. The Partnership paid a special distribution of $0.8
million in the six months ended June 30, 2000. No special distributions
were paid in the six months ended June 30, 2001. The sales and liquidations
occur because of certain damaged equipment, the determination by the
General Partner that it is the appropriate time to maximize the return on
an asset through sale of that asset and, in some cases, the ability of the
lessee to exercise purchase options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
COMPARISON OF THE PLM EQUIPMENT GROWTH FUND II'S (THE PARTNERSHIP'S) OPERATING
RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the second
quarter of 2001 when compared to the same quarter of 2000. Gains or losses from
the sale of equipment, interest and other income and certain expenses such as
depreciation and general and administrative expenses relating to the operating
segments (see Note 6 to the financial statements), are not included in the owned
equipment operation discussion because they are indirect in nature and not a
result of operations, but the result of owning a portfolio of equipment. The
following table presents lease revenues less direct expenses by equipment type
(in thousands of dollars):
For the Three Months
Ended June 30,
2001 2000
---------------------------
Trailers $ 147 $ 308
Railcars 103 554
Marine containers 1 15
Trailers: Trailer lease revenues and direct expenses were $0.4 million and $0.2
million, respectively, for the second quarter of 2001, compared to $0.5 million
and $0.2 million, respectively, during the same quarter of 2000. The decrease in
trailer contribution in the second quarter of 2001 was due to the disposition of
trailers in 2000 and 2001.
Railcars: Railcar lease revenues and direct expenses were $0.3 million and $0.2
million, respectively, for the second quarter of 2001, compared to $0.9 million
and $0.3 million, respectively, during the same quarter of 2000. The decrease in
railcar contribution in the second quarter of 2001 was due to the disposition of
railcars in 2000 and 2001.
Marine containers: Marine container lease revenues were $1,000 and $15,000
during the second quarter of 2001 and 2000, respectively. The decrease in marine
container contribution in the second quarter of 2001 was due to the disposition
of marine containers in 2000 and 2001.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $0.6 million for the second quarter of 2001 decreased
from $0.7 million for the same quarter in 2000. The primary reason for the
decrease was a $0.1 million decrease in depreciation expense from 2000 levels
due to asset sales in 2001 and 2000.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the second quarter of 2001 totaled
$30,000, and resulted from the disposal or sale of marine containers and
trailers, with an aggregate net book value of $4,000, for aggregate proceeds of
$34,000. For the same quarter in 2000, net gain on disposition of equipment
totaled $0.5 million, and resulted from the disposal or sale of marine
containers, trailers, and railcars with an aggregate net book value of $0.3
million, for aggregate proceeds of $0.8 million.
(D) Equity in Net Loss of an Unconsolidated Special-Purpose Entity (USPE)
Equity in the net loss of an unconsolidated special-purpose entity represents
the Partnership's share of the net loss generated from the operation of a
jointly-owned asset accounted for under the equity method.
As of June 30, 2001, the Partnership had no remaining interests in aircraft.
Expenses related to USPE's were $0.1 million for the second quarter of 2000. The
Partnership's remaining partially-owned aircraft was sold in the first quarter
of 2000.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss was $0.4 million for
the second quarter of 2001, compared to net income of $0.6 million during the
second quarter of 2000. The Partnership's ability to operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors, and the Partnership's performance in the second quarter of 2001
is not necessarily indicative of future periods. In the second quarter of 2001,
the Partnership distributed $0.2 million to the limited partners, or $0.03 per
weighted-average limited partnership unit.
COMPARISON OF THE PARTNERSHIP'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE
30, 2001 AND 2000
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance and
equipment operating expenses) on owned equipment decreased during the six months
ended June 30, 2001 when compared to the same period of 2000. The following
table presents lease revenues less direct expenses by equipment type (in
thousands of dollars):
For the Six Months
Ended June 30,
2001 2000
---------------------------
Trailers $ 382 $ 654
Railcars 125 1,196
Marine containers (20) 87
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.4
million, respectively, for the six months ended June 30, 2001, compared to $1.0
million and $0.3 million, respectively, during the same quarter of 2000. The
decrease in trailer contribution was due to the sale of 32% of the Partnership's
trailers during 2000.
Railcars: Railcar lease revenues and direct expenses were $0.6 million and $0.5
million, respectively, for the six months ended June 30, 2001, compared to $1.8
million and $0.6 million, respectively, during the same quarter of 2000. The
decrease in railcar contribution during the six months ended June 30, 2001 was
due to the sale or disposition of railcars in 2000 and 2001.
Marine containers: Marine container lease revenues were ($20,000) and $0.1
million during the six months ended June 30, 2001 and 2000, respectively. The
negative revenues in the second quarter of 2001 were caused by actual lease
revenues in the first quarter of 2001 being $27,000 less than had been
previously reported. Lease revenue decreased $0.1 million in the six months
ended June 30, 2001 compared to the same period in 2000.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $1.3 million for the six months ended June 30, 2001
decreased from $1.5 million for the same period in 2000. Significant variances
are explained as follows:
(i) A $0.3 million decrease in depreciation expense from 2000 levels
reflects the effect of asset dispositions in 2001 and 2000.
(ii) A $0.1 million increase in bad debt expense from 2000 levels was due
to increased accounts receivable of the Partnership being deemed uncollectible.
(C) Net Gain on Disposition of Owned Equipment
Net gain on disposition of equipment for the six months ended June 30, 2001
totaled $0.2 million, and resulted from the disposal or sale of marine
containers, trailers, and railcars, with an aggregate net book value of $23,000,
for aggregate proceeds of $0.2 million. For the same period in 2000, net gain on
disposition of equipment totaled $0.5 million, and resulted from the disposal or
sale of marine containers, trailers, and railcars, with an aggregate net book
value of $0.5 million, for aggregate proceeds of $1.0 million.
(D) Equity in Net Income of an Unconsolidated Special-Purpose Entity
Equity in the net income of an unconsolidated special-purpose entity represents
the Partnership's share of the net income generated from the operation of a
jointly-owned aircraft accounted for under the equity method.
As of June 30, 2001, the Partnership had no remaining interests in entities
which owned aircraft. During the six months ended June 30, 2000, the gain from
the sale of the Partnership's interest in the USPE of $1.5 million, which was
sold in the first quarter of 2000, was offset by depreciation expense, direct
expenses, and administrative expenses of $0.2 million.
(E) Net Income (Loss)
As a result of the foregoing, the Partnership's net loss was $0.7 million for
the six months ended June 30, 2001, compared to net income of $2.2 million
during the six months ended June 30, 2000. The Partnership's ability to operate
and liquidate assets, secure leases, and re-lease those assets whose leases
expire is subject to many factors, and the Partnership's performance in the six
months ended June 30, 2001 is not necessarily indicative of future periods. In
the six months ended June 30, 2001, the Partnership distributed $1.3 million to
the limited partners, or $0.18 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 2001, the Partnership used $0.5 million of
undistributed cash from prior periods and sales proceeds to meet its operating
obligations, and used undistributed available cash from prior periods as well as
proceeds from equipment sales of approximately $1.4 million to make
distributions (total of $1.4 million in the six months ended June 30, 2001) to
the partners.
During the six months ended June 30, 2001, the Partnership sold or disposed of
marine containers and railcars, with an aggregate net book value of $23,000, for
proceeds of $0.2 million.
Accounts receivable decreased $0.2 million during the six months ended June 30,
2001 due to an increase in the allowance for doubtful accounts and the reduction
in lease revenues.
Accounts payable and accrued expenses decreased $0.3 million during the six
months ended June 30, 2001 due to a decrease in trade accounts payable resulting
from the timing of payments of invoices to the vendors.
Lessee deposits and reserve for repairs decreased $0.1 million during the six
months ended June 30, 2001 due to the decrease in reserves for repairs resulting
from the sale of marine containers in 2001.
The General Partner has not planned any expenditures, nor is it aware of any
contingencies that would cause the Partnership to require any additional
capital.
The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from operations will continue to become progressively smaller as assets
are sold. Although distribution levels may be reduced, significant asset sales
may result in potential special distributions to the partners.
The amounts reflected for assets and liabilities of the Partnership have not
been adjusted to reflect liquidation values. The equipment portfolio that is
actively being marketed for sale by the General Partner continues to be carried
at the lower of depreciated cost or fair value less cost of disposal. Although
the General Partner estimates that there will be distributions to the partners
after final disposal of assets and settlement of liabilities, the amounts cannot
be accurately determined prior to actual disposal of the equipment.
(III) OUTLOOK FOR THE FUTURE
Since the Partnership is in its active liquidation phase, the General Partner is
seeking to selectively re-lease or sell assets as the existing leases expire.
Sale decisions will cause the operating performance of the Partnership to
decline over the remainder of its life.
Several factors may affect the Partnership's operating performance in the
remainder of 2001 and beyond, including changes in the markets for the
Partnership's equipment and changes in the regulatory environment in which that
equipment operates.
Liquidation of the Partnership's equipment represents a reduction in the size of
the equipment portfolio and may result in a reduction of contribution to the
Partnership.
Other factors affecting the Partnership's contribution in 2001 and beyond
includes:
1. The cost of new marine containers have been at historic lows for the past
several years which has caused downward pressure on per diem lease rates for
this type of equipment.
2. Railcar loadings in North America for the six months ending June 30, 2001
were below those of 2000. This decrease has led to lower utilization and lower
contribution to the Partnership as existing leases expire and renewal leases are
negotiated.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations. The General Partner continually monitors
both the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may decide to reduce the Partnership's
exposure to equipment markets in which it determines that it cannot operate
equipment and achieve acceptable rates of return.
The unpredictability of some of these factors, or the occurrence, makes it
difficult for the General Partner to clearly define trends or influences that
may impact the performance of the Partnership's equipment.
The Partnership intends to use cash flow from operations, proceeds from
disposition of equipment, and cash currently held to satisfy its operating
requirements, maintain working capital reserves, and pay cash distributions to
the unitholders.
(IV) FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is that of currency devaluation
risk. During the six months ended June 30, 2001, 25% of the Partnership's total
lease revenues came from non-United States domiciled lessees. Most of the leases
require payment in United States (U.S.) currency. If these lessee's currency
devalues against the U.S. dollar, the lessees could encounter difficulty in
making the U.S. dollar denominated lease payments.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
PLM EQUIPMENT GROWTH FUND II
By: PLM Financial Services, Inc.
General Partner
Date: August 8, 2001 By: /s/ Stephen M.. Bess
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Stephen M. Bess
President and
Current Chief Accounting Officer