UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal quarter ended September 30, 1998.
[ ] 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 2-64413
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RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM
79-1 (Exact name of registrant as specified in its
charter)
California 94-2645847
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ______
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues collected:
Lease revenue received $ 557,141 $ 553,046 $ 1,869,108 $ 1,763,486
Interest and other income 15,782 17,421 53,075 49,735
------------------------------------------------------------------------
Total revenues collected 572,923 570,467 1,922,183 1,813,221
------------------------------------------------------------------------
Expenses paid (refunded):
Repairs and maintenance 108,465 110,222 230,956 218,920
Insurance -- 4,269 -- (5,912)
Property taxes 1,885 (12,270 ) 9,157 (15,402)
Accounting and legal fees 327 -- 6,007 8,936
Storage, repositioning and other 1,961 9,749 6,114 15,316
----------------------------------- ------------------------------------
---
Total expenses paid 112,638 111,970 252,234 221,858
------------------------------------------------------------------------
Excess of revenues collected
over expenses paid 460,285 458,497 1,669,949 1,591,363
------------------------------------------------------------------------
Other increases (decreases) in cash:
Mileage, reimbursable repairs
and other expenses 8,609 8,510 (49,844) 15,340
Management fees paid (72,266) (71,912 ) (216,113) (210,741)
Receipt of proceeds from sold or destroyed cars 32,042 -- 94,862 31,713
Receipt of proceeds for transfer of car ownership 26,000 -- 133,000 27,500
Payments to investors for sold or destroyed cars (32,042) -- (94,862) (31,713)
Payments to investors for transfer of car
Ownership (24,960) -- (128,800) (26,400)
Commission paid for sale or transfer of car
Ownership (1,040) -- (4,200) (2,180)
Distributions to investors (477,339) (472,439 ) (1,431,479) (1,387,252)
----------------------------------- ------------------------------------
---
Net other decreases in cash (540,996) (535,841 ) (1,697,436) (1,583,733)
------------------------------------------------------------------------
Net increase (decrease) in cash (80,711) (77,344 ) (27,487) 7,630
Cash at beginning of period 1,367,852 1,429,954 1,314,628 1,344,980
------------------------------------------------------------------------
Cash at end of period $ 1,287,141 $ 1,352,610 $ 1,287,141 $ 1,352,610
========================================================================
</TABLE>
See accompanying notes to
financial statements.
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
NOTES TO THE STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
September 30, 1998
1. Basis of Presentation
RMI Covered Hopper Railcar Management Program 79-1 (the Program) is not a legal
entity. The statements of revenues collected and expenses paid and other changes
in cash (the Statements) of the Program are presented on the cash basis of
accounting, used for reporting to investors in the Program in accordance with
the Management Agreement with PLM Investment Management, Inc. (IMI). Under the
cash basis of accounting, revenues are recognized when received, rather than
when earned, and expenses are recognized when paid, rather than when the
obligation is incurred. Accordingly, the Statements are not intended to present
the financial position or results of operations or cash flows of the Program in
accordance with generally accepted accounting principles.
2. Operations
At September 30, 1998, 484 cars, which are owned by the investors, were being
managed by IMI under the Program. All of the cars were covered by lease
agreements. During the nine months ending September 30, 1998, 10 cars were added
to the Program and three cars were destroyed.
3. Equalization reserve
Under the terms of the management agreement, IMI may, at its discretion, cause
the Program to retain a certain amount of cash (the working capital reserve) to
cover future disbursements and provide for a balanced distribution of funds to
the investors each quarter. IMI has determined the working capital reserve at
September 30, 1998, to be $803,458 ($782,000 at December 31, 1997).
(this space intentionally left blank)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Three Months Ended September 30, 1998 and 1997
Revenues collected:
(1) Lease receipts increased to $557,141 in the third quarter of 1998, from
$553,046 in the third quarter of 1997. The increase is primarily due to the
timing of receipt of revenues during the comparable periods.
(2) Interest and other income decreased to $15,782 in the third quarter of
1998, from $17,421 in the third quarter of 1997 due to an exchange rate
loss of $2,500, partially offset by higher interest income resulting from
higher average cash balances maintained by the Program during the third
quarter of 1998 when compared to the same period of 1997.
Expenses paid:
(1) Repairs and maintenance expense decreased to $108,465 in the third quarter
of 1998, from $110,222 in the third quarter of 1997. The decrease is due to
the timing of payments of expenses during comparable periods.
(2) Insurance decreased to zero in the third quarter of 1998, from $4,269 in
the third quarter of 1997. The decrease is due to the timing of payments of
expenses during comparable periods.
(3) Property taxes increased to $1,885 in the third quarter of 1998, from a
credit of $12,270 in the third quarter of 1997. The increase is due to
$12,700 refund for overpaid taxes from prior years recorded in the third
quarter of 1997 and to the timing of payments for these taxes during the
comparable periods, as the tax rates remained relatively constant.
(4) Accounting and legal fees increased to $327 in the third quarter of 1998,
from zero in the third quarter of 1997, due to the timing of payments for
these expenses during the comparable periods.
(5) Storage, repositioning and other expenses decreased to $1,961 in the third
quarter of 1998, from $9,749 for the comparable period in 1997. The
decrease is primarily due to lower repositioning expenses during 1998, and
the timing of payments of expenses during comparable periods.
Other changes in cash:
(1) Mileage, reimbursable repairs and other expenses are composed primarily of
receipts of mileage credits from railroads which are due to lessees, net of
reimbursable repairs due from lessees. Net receipts were $8,609 in the
third quarter of 1998, as compared to net receipts of $8,510 in the third
quarter of 1997. The difference between comparable periods is due primarily
to the timing of receipts and repayments of these funds by the Program.
(2) Management fees paid increased to $72,266 in the third quarter of 1998,
from $71,912 in the third quarter of 1997. The increase is due to higher
incentive fees paid to PLM Investment Management, Inc. (IMI) in the third
quarter of 1998 compared to same quarter of 1997. In the third quarter of
1998, $17,888 in incentive fees were paid to IMI, compared to $17,664 in
the third quarter of 1997.
(3) During the third quarter of 1998, one car was destroyed for which the
Program received and paid to the investor insurance proceeds of $32,042.
During the third quarter of 1997, no cars were destroyed.
(4) During the third quarter of 1998, the Program received proceeds of $26,000
for a railcar that was transferred from one investor to another investor in
the Program. The Program paid $24,960 net of commission to the investor
that sold the car. During the third quarter of 1997, no railcars were
transferred from one investor to another investor.
(5) Commission paid increased to $1,040 for the three months ended September
30, 1998, from zero in the third quarter of 1997. The increase was due to
one car being transferred during the third quarter of 1998, compared to
zero in the same quarter of 1997.
The Program distributed $477,339 to investors in the three months ended
September 30, 1998 compared to $472,439 in the three months ended September 30,
1997.
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Nine Months Ended September 30, 1998 and 1997
Revenues collected:
(1) Lease receipts increased to $1,869,108 for the nine months ended September
30, 1998, from $1,763,486 for the comparable period in 1997. The increase
is primarily due to the timing of receipt of revenues during the comparable
periods.
(2) Interest and other income increased to $53,075 for the nine months ended
September 30, 1998, from $49,735 for the comparable period in 1997, due to
higher interest income resulting from higher average cash balances
maintained by the Program for the nine months ended September 30, 1998 when
compared to the same period of 1997. The increase is partially offset by an
exchange rate loss of $4,200 incurred in 1998.
Expenses paid:
(1) Repairs and maintenance expense increased to $230,956 for the nine months
ended September 30, 1998, from $218,920 for the comparable period in 1997.
The increase is due to the timing of payments of expenses during comparable
periods.
(2) Insurance expense was zero for the nine months ended September 30, 1998,
compared to a credit of $5,912 for the comparable period of 1997. The
increase is due to a refund of a 1994 annual premium for business
interruption insurance received in the second quarter of 1997. No similar
refund was received in 1998.
(3) Property taxes increased to $9,157 for the nine months ended September 30,
1998, from a credit of $15,402 for the comparable period in 1997. The
increase is due to a $21,000 refund for overpaid taxes from prior years
recorded in the nine months ended September 30, 1997, and the timing of
payments for these expenses during the comparable periods, as the tax rates
remained relatively constant.
(4) Accounting and legal fees decreased to $6,007 for the nine months ended
September 30, 1998, from $8,936 for the comparable period in 1997, due to
the timing of payments for these expenses during the comparable periods.
(5) Storage, repositioning and other expenses decreased to $6,114 for the nine
months ended September 30, 1998, from $15,316 for the comparable period in
1997. The decrease is primarily due to lower repositioning expenses in 1998
and the timing of payments of expenses during comparable periods.
Other changes in cash:
(1) Mileage, reimbursable repairs and other expenses are composed primarily of
receipts of mileage credits from railroads which are due to lessees, net of
reimbursable repairs due from lessees. Net payments were $49,844 for the
nine months ended September 30, 1998, as compared to net receipts of
$15,340 for the comparable period in 1997. The difference between
comparable periods is due primarily to the timing of receipts and
repayments of these funds by the Program.
(2) Management fees paid increased to $216,113 for the nine months period ended
September 30, 1998, from $210,741 for the comparable period in 1997. The
increase is due to higher incentive fees in the first nine months of 1998
compared to same period of 1997. For the nine months ended September 30,
1998, $53,663 in incentive fees were paid to IMI, compared to $49,322 paid
for the nine months ended September 30, 1997.
(3) During the nine months ended September 30, 1998, three cars were destroyed
for which the Program received and paid to investors insurance proceeds of
$94,862. During the nine months ended September 30, 1997, one car was
destroyed for which the Program received and paid to investors insurance
proceeds of $31,713.
(4) During the nine months ended September 30, 1998, the Program received
proceeds of $133,000 for five railcars that were transferred between
investors in the Program. The Program paid $128,800 net of commission to
investors that sold the cars. During the nine months ended September 30,
1997, the Program received $27,500 in proceeds for a railcar that was
transferred from one investor to another investor in the Program. The
Program paid $26,400 net of commission to the investor that sold the
railcar.
(5) Commission paid increased to $4,200 for the nine months ended September 30,
1998, from $2,180 in the same period of 1997. The increase was due to more
cars being transferred in the nine months ended September 30, 1998, as
compared to same period of 1997.
The Program distributed $1,431,479 to investors in the nine months ended
September 30, 1998 compared to $1,387,252 in the nine months ended September 30,
1997.
The Program's performance in the nine months ended September 30, 1998 is not
necessarily indicative of future periods.
(II) EFFECTS OF YEAR 2000
It is possible that the PLM Investment Management, Inc.'s (IMI's or Manager's)
currently installed computer systems, software products and other business
systems, or the Program's vendors, service providers and customers, working
either alone or in conjunction with other software or systems, may not accept
input of, store, manipulate and output dates on or after January 1, 2000 without
error or interruption (a problem commonly known as the "Year 2000" problem). As
the Program relies substantially on the Manager's software systems, applications
and control devices in operating and monitoring significant aspects of its
business, any Year 2000 problem suffered by the Manager could have a material
adverse effect on the Program's business, financial condition and results of
operations.
The Manager has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Manager (a) is currently integrating Year 2000
compliant programming code into its existing internally customized and
internally developed transaction processing software systems and (b) the
Manager's accounting and asset management software systems have either already
been made Year 2000 compliant or Year 2000 compliant upgrades of such systems
are planned to be implemented by the Manager before the end of fiscal 1999.
Although the Manager believes that its Year 2000 compliance program can be
completed by the beginning of 1999, there can be no assurance that the
compliance program will be completed by that date. To date, the costs incurred
and allocated to the Program to become Year 2000 compliant have not been
material. In addition, the Manager believes the future costs allocable to the
Program to become Year 2000 compliant will not be material.
Some risks associated with the Year 2000 problem are beyond the ability of the
Program to control, including the extent to which third parties can address the
Year 2000 problem. The Manager has begun to communicate with vendors, services
providers and customers in order to assess the Year 2000 compliance readiness of
such parties and the extent to which the Program is vulnerable to any
third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Any failure by the Manager or such other parties to make their
respective systems Year 2000 compliant could have a material adverse effect on
the business, financial position and results of operations of the Program. The
Manager will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 non-compliance and will develop a contingency
plan if the Manager determines, or is unable to determine, that third-party
non-compliance would have a material adverse effect on the Program's business,
financial position or results of operation.
<PAGE>
(III) FORWARD-LOOKING INFORMATION
Except for the 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 Program'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 Program's actual results could
differ materially from those discussed here.
(this space intentionally left blank)
<PAGE>
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 thereunto duly authorized.
RMI COVERED HOPPER RAILCAR
MANAGEMENT PROGRAM 79-1
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
--------------------------------
Stephen M. Bess
President
Date: November 10, 1998 By: /s/ Richard K Brock
-------------------
Richard K Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,287,141
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 1,922,183
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 252,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
