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, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 2-64413
-----------------------
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 ______
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 20.
Total number of pages in this report: 21
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
In 1979, PLM Investment Management, Inc. (IMI or Manager) (formerly PLM Railcar
Management, Inc.), a wholly owned subsidiary of PLM Financial Services, Inc.
(FSI), sponsored the public offering of a management program entitled RMI
Covered Hopper Railcar Management Program 79-1 (the Registrant or the Program).
The Program was registered with the Securities and Exchange Commission under the
Securities Act of 1933. The Program offered to investors, meeting certain
suitability standards, the opportunity to purchase from PLM Transportation
Equipment Corporation (TEC) (formerly National Equipco, Inc.), an affiliate of
FSI, one or more 100-ton triple covered hopper, 4,700 or 4,750 cubic foot,
railroad cars with center pockets, gravity discharge, and trough hatches (car or
cars).
The purchase price for one unit, consisting of one car plus a Management
Agreement (Unit), was the sum of (i) the manufacturer's invoice price of a car,
(ii) a commencement fee paid to an affiliate of the Manager, equal to 10% prior
to August 15, 1980, and 13% thereafter, of the manufacturer's invoice price and
(iii) initial storage and transit costs.
The Program is organized to provide investors with an efficient and convenient
method of acquiring, leasing, maintaining, and managing individually owned
railroad cars. With certain exceptions, operating revenues and expenses from all
cars managed under the Program are pooled. Net income or net loss is allocated
to each participant and excess cash flow is distributed to each participant on a
pro-rata basis after maintaining reasonable reserves.
IMI manages 7 private railcar management programs and two public railcar
programs. Each of the programs involves a distinct group of railcars available
for a specified time and managed separately, with all funds from each management
program administered separately. The railcars owned by investors in each pool
are subject to separate leases.
(B) Sale and Availability of Cars
Program investors originally purchased a total of 777 cars for a price per car
ranging from $48,000 to $50,000, which included commencement fees and other
fees. The Program closed April 30, 1981. Subsequent to the close of the Program,
316 cars have been sold or destroyed and 16 cars have been added to the fleet.
As of December 31, 1997, 477 cars were in the Program, all of which were on
lease.
(C) Management
The investors were offered the option of entering into a 10-year management
agreement (Management Agreement) with IMI, pursuant to which IMI has acted as
the investors' agent for the purpose of managing and leasing the investors' car
or cars. Pursuant to the original Management Agreement and extensions thereof,
IMI receives a management fee on a per car basis at a fixed rate each month,
plus an incentive management fee equal to 15% of "Net Earnings" (as defined in
the Management Agreement) over $750 per car per quarter. The weighted-average
monthly rental rate per car in 1997 was $425.
All 477 cars in the Program are operating under fixed payment, full service
lease agreements. Additional mileage revenue above the fixed lease payments may
also be earned for certain cars.
<PAGE>
At December 31, 1997, the Program had leases with the following lessees which
accounted for greater than 10% of the total number of cars in the Program:
<TABLE>
<CAPTION>
Lessee Number of Cars % of Remaining
Total Fleet Lease Term
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Union Pacific 92 19 17 months
Louis Dreyfus Corp. 70 15 8-28 months
San Luis Central Railroad 70 15 36 months
Canadian Pacific Railroad 70 15 20 months
General Chemical Corp. 57 12 32 months
</TABLE>
Under most of the Program's leases, the lessor is obligated to pay property
taxes and to maintain the cars in good running condition. When cars need repair,
rent will generally abate during the period they are out of service. Lessees are
usually obligated to pay all other operating expenses of the cars. Lessees are
normally responsible for the loss, damage, or destruction of the cars, except in
the case of negligence, recklessness, or willful misconduct on the part of the
Manager. Regulatory changes may occasionally require cars to be altered or
retrofitted. Typically, such alterations or retrofits are the responsibility of
the investor. The leases usually provide for an increase in the monthly rental
rate calculated as a percentage of the cost of any such alterations. In such
cases, rent will abate for the period of time while the alterations are being
made.
Monthly management fees of $38 per car and quarterly incentive management fees
are charged directly to the individual investors pursuant to two five-year
extensions made to the original Management Agreements which had an original term
of ten years. Prior to the five-year extensions, management fees were being
charged at the rate of $55 per car.
(D) Competition
Full service lease rental rates are highly competitive and are not subject to
regulation by the Interstate Commerce Commission. Lease rental rates are
principally affected by the demand for and the supply of cars between different
owner-lessors. Secondarily, lease rental rates are influenced by a number of
factors, including the cost of new and used cars, interest rates, maintenance
and operating costs, property taxes, other direct operating costs, and the level
of railroad mileage allowances.
The major leasing competitors of the Program who are also involved in leasing
privately-owned covered hopper cars are: ACF Industries, Inc. (Shippers Car Line
Division), First Union Rail Services, Inc., General Electric Railcar Services
Corporation, Chicago Freight Car, Inc., and Canadian Wheat Board.
(E) Demand
For the full year of 1997, grain car loadings in North America were 1,651,113
cars versus 1,660,773 cars in 1996, a decrease of approximately 1%.
Industry-wide, the covered hopper is one car type that has increased in number
over the last ten years, going from a total of 299,172 cars in 1985 to 325,882
cars in 1995. As far as new car deliveries are concerned, covered hopper cars
have been the biggest growth area, accounting for 30 percent of new deliveries
in 1995 and 50% of new car deliveries in 1996. The Program has been experiencing
some downward pressure on covered hopper car rental rates as demand throughout
1997 was weaker than during 1996.
<PAGE>
ITEM 2. PROPERTIES
At December 31, 1997, the Program had no properties except for the 477 cars
being managed under the Program, as described in Item 1(c). The Manager of the
Program maintains its principal office at One Market, Steuart Street Tower,
Suite 800, San Francisco, California 94105-1301. All office facilities are
provided by FSI without reimbursement by the Program.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Program's owners during the last
quarter of its fiscal year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR THE PROGRAM'S EQUITY AND RELATED EQUITY MATTERS
None.
(This space intentionally left blank)
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Table 1, below, lists selected financial data for the five years ended December
31, 1997, prepared on a cash basis, for the Program, as a whole and on a per car
basis, computed on a weighted-average available car per day basis:
TABLE 1
For the years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total program
Total revenues collected $ 2,444,571 $ 2,538,209 $ 2,559,935 $ 2,441,627 $ 2,509,506
Expenses paid (316,094) (374,274) (455,927 ) (491,486) (576,012)
Excess of revenues collected
over expenses paid 2,128,477 2,163,935 2,104,008 1,950,141 1,933,494
Management fees paid (282,810) (271,533) (262,458 ) (244,940) (247,539)
Total revenues collected less
total expenses and
management fees paid $ 1,845,667 $ 1,892,402 $ 1,841,550 $ 1,705,201 $ 1,685,955
Distributions to or on
behalf of investors
after management fees $ 1,864,121 $ 1,809,722 $ 1,731,469 $ 1,630,674 $ 1,540,593
Per car available (computed
on a weighted-average car
per day basis
Total revenues collected $ 5,158 $ 5,310 $ 5,177 $ 4,849 $ 4,826
Expenses paid (667) (783) (922 ) (976) (1,108)
Excess of revenue collected
over expenses paid 4,491 4,527 4,255 3,873 3,718
Management fees paid (597) (568) (531 ) (486) (476)
Total revenues collected less
total expenses and
management fees paid $ 3,894 $ 3,959 $ 3,724 $ 3,387 $ 3,242
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Program's operating funds are committed to payment of operating expenses,
management fees, and making cash distributions to the car owners when available.
The Program intends to finance these activities with funds generated from
operations. The Program has experienced no known demands or commitments that
might adversely affect the liquidity of the Program.
Funds from operations are primarily generated by lease payments and interest
income on invested cash.
Results of Operations
The statements of revenues collected and expenses paid and other changes in cash
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
IMI. Under the cash basis, revenues are recognized when received, rather than
when earned, and expenses are recognized when paid, rather than when the
obligation is incurred.
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Years Ended December 31, 1997 and 1996
Revenues collected:
1. Lease receipts decreased to $2,396,321 for the year ended December 31, 1997,
from $2,458,027 for the comparable period in 1996. The decrease is primarily due
to the disposition of 31 cars in 1996, a decrease in average lease rates, and
the timing of rental receipts between the comparable periods. These decreases
were partially offset by the purchase of nine cars in 1997.
2. Interest and other income decreased to $48,250 for the year ended December
31, 1997, from $80,182 for the comparable period in 1996. The decrease is
primarily due to a $19,000 exchange rate loss in 1997. No similar loss was
recorded in 1996. In addition, lower interest income resulted from lower average
cash balances.
Expenses paid:
1. Repairs and maintenance expense decreased to $282,612 for the year ended
December 31, 1997, from $295,383 for the comparable period in 1996. The decrease
is primarily due to the disposition of 31 cars and the timing of payments for
these expenses during the comparable periods.
2. Insurance expense decreased to $14,068 for the year ended December 31, 1997,
from $26,065 for the comparable period in 1996. The decrease is primarily due to
a refund of the 1994 annual premium for business interruption insurance received
in the second quarter of 1997 and the timing of payments for the annual premium
for liability and physical damage insurance.
3. Property taxes decreased to a credit of $12,793 for the year ended December
31, 1997, from $30,894 paid for the comparable period in 1996. The decrease is
primarily due to a $22,000 credit for overpaid taxes from prior years and $8,110
of litigation settlement proceeds which were received in the third quarter of
1997. In addition, the decrease is due to the disposition of 31 cars in 1996,
and the timing of receipt of invoices from various states, and to the timing of
payments for these expenses during the comparable periods.
4. Accounting and legal fees increased to $14,787 for the year ended December
31, 1997, from $8,849 for the comparable period in 1996. The increase is due to
increase in costs of these professional services and the timing of payments for
these expenses during the comparable periods.
5. Storage, repositioning and other expenses increased to $17,420 for the year
ended 1997, from $13,083 for the comparable period in 1996. The increase is
primarily due to higher repositioning expenses during 1997, and the timing of
payments of these expenses during comparable periods.
Other changes in cash:
1. Prepaid 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 from lessees. The funds decreased by
$10,818 during the year ended December 31, 1997, as compared to a decrease of
$275,672 for the comparable period in 1996. The decrease between comparable
periods is primarily due to the timing of net receipts and repayments of these
funds by the Program.
2. Management fees increased to $282,810 for the year ended December 31, 1997,
from $271,533 for the comparable period in 1996. This increase was due to an
incentive management fee of $67,172 paid to IMI in 1997 compared to an incentive
management fee of $54,380 paid in 1996.
As a result of the foregoing and other factors, the Program distributed
$1,864,121 to investors for the year ended December 31, 1997, a 3% increase from
the $1,809,722 paid in 1996.
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Years Ended December 31, 1996 and 1995
Revenues collected:
1. Lease receipts decreased to $2,458,027 for the year ended December 31, 1996,
from $2,475,106 for the comparable period in 1995. The decrease is primarily due
to the disposition of 31 cars in 1996 and the timing of rental receipts between
the comparable periods.
2. Interest and other income decreased to $80,182 for the year ended December
31, 1996, from $84,829 for the comparable period in 1995. The decrease is
primarily due to lower interest income resulting from lower cash balances and a
lower rate of interest paid.
Expenses paid:
1. Repairs and maintenance expense decreased to $295,383 for the year ended
December 31, 1996, from $363,776 for the comparable period in 1995. The decrease
is primarily due to the disposition of 31 cars and the timing of payments for
these expenses during the comparable periods.
2. Insurance expense increased to $26,065 for the year ended December 31, 1996,
from $23,890 for the comparable period in 1995. The increase is primarily due to
the timing of payments for the annual premium for liability and physical damage
insurance.
3. Property taxes decreased to $30,894 for the year ended December 31, 1996,
from $53,685 for the comparable period in 1995. The decrease is due to the
disposition of 31 cars in 1996 and the timing of receipt of invoices from
various states, and to the timing of payments for these expenses during the
comparable periods, as the tax rates remained constant.
4. Accounting and legal fees increased to $8,849 for the year ended December 31,
1996, from $6,597 for the comparable period in 1995. The increase is due the
timing of payments for these expenses during the comparable periods, as the
service level remains the same.
5. Storage, repositioning and other expenses increased to $13,083 for the year
ended 1996, from $7,979 for the comparable period in 1995. The increase is
primarily due to the timing of payments of these expenses during comparable
periods.
Other changes in cash:
1. Prepaid 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 from lessees. The funds decreased by
$275,672 during the year ended December 31, 1996, as compared to an increase of
$119,933 for the comparable period in 1995. The decrease between comparable
periods is primarily due to the timing of net receipts and repayments of these
funds by the Program.
2. Management fees increased to $271,533 for the year ended December 31, 1996,
from $262,458 for the comparable period in 1995. This increase was due to an
incentive management fee of $54,380 paid to IMI in 1996 compared to an incentive
management fee of $37,080 paid in 1995, offset by the decrease in the number of
cars.
As a result of the foregoing and other factors, the Program distributed
$1,809,722 to investors for the year ended December 31, 1996, a 5% increase from
the $1,731,469 paid in 1995.
Year 2000 Compliance
IMI is currently addressing the Year 2000 computer software issue and is
creating a timetable for carrying out any program modifications that may be
required. IMI does not anticipate that the cost of these modifications allocable
to the Program will be material.
Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public Program's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Program's fiscal year ended December 31,
1998, with earlier application permitted. The effect of adoption of these
statements will be limited to the form and content of the Program's disclosures
and will not impact the Program's results of operations, cash flow, or financial
position.
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 Program'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 Program's actual results could differ materially from
those discussed here.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Statements of Revenues Collected and Expenses Paid and Other Changes in Cash for
the three years ended December 31, 1997, are included on the Index to Financial
Statements as part of Item 14(a) of this Annual Report.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
(This space intentionally left blank.)
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM INTERNATIONAL
AND PLM FINANCIAL SERVICES, INC.
As of the date of this annual report, the directors and executive officers of
PLM International (and key executive officers of its subsidiaries) and of PLM
Financial Services, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert N. Tidball 59 Chairman of the Board, Director, President, and
Chief Executive Officer, PLM International, Inc.;
Director, PLM Financial Services, Inc.;
Vice President, PLM Railcar Management Services, Inc.;
President, PLM Worldwide Management Services Ltd.
Randall L.-W. Caudill 50 Director, PLM International, Inc.
Douglas P. Goodrich 51 Director and Senior Vice President, PLM International;
Director and President, PLM Financial Services, Inc.;
President, PLM Transportation Equipment Corporation;
President, PLM Railcar Management Services, Inc.
Harold R. Somerset 63 Director, PLM International, Inc.
Robert L. Witt 57 Director, PLM International, Inc.
J. Michael Allgood 49 Vice President and Chief Financial Officer,
PLM International, Inc. and PLM Financial Services, Inc.
Stephen M. Bess 51 President, PLM Investment Management, Inc. and
PLM Securities Corp.; Vice President and Director,
PLM Financial Services, Inc.
Richard K Brock 35 Vice President and Corporate Controller,
PLM International, Inc. and PLM Financial Services, Inc.
Frank Diodati 43 President, PLM Railcar Management Services Canada Limited
Steven O. Layne 43 Vice President, PLM Transportation Equipment Corporation;
Vice President, PLM Worldwide Management Services Ltd.
Susan C. Santo 35 Vice President, Secretary, and General Counsel,
PLM International, Inc. and PLM Financial Services, Inc.
Thomas L. Wilmore 55 Vice President, PLM Transportation Equipment Corporation;
Vice President, PLM Railcar Management Services, Inc.
</TABLE>
Robert N. Tidball was appointed Chairman of the Board in August 1997 and
President and Chief Executive Officer of PLM International in March 1989. At the
time of his appointment, he was Executive Vice President of PLM International.
Mr. Tidball became a director of PLM International in April 1989. Mr. Tidball
was appointed Director of PLM Financial Services, Inc. in July 1997 and was
elected President of PLM Worldwide Management Services Limited in February 1998.
He has served as an officer of PLM Railcar Management Services, Inc. since June
1987. Mr. Tidball was Executive Vice President of Hunter Keith, Inc., a
Minneapolis-based investment banking firm, from March 1984 to January 1986.
Prior to Hunter Keith, he was Vice President, General Manager, and Director of
North American Car Corporation and a director of the American Railcar Institute
and the Railway Supply Association.
Randall L.-W. Caudill was elected to the Board of Directors in September 1997.
He is President of Dunsford Hill Capital Partners, a San Francisco-based
financial consulting firm serving emerging growth companies in the United States
and abroad, as well as a senior advisor to the investment banking firm of
Prudential Securities, where he has been employed since 1987. Mr. Caudill also
serves as a director of VaxGen, Inc. and SBE, Inc.
Douglas P. Goodrich was elected to the Board of Directors in July 1996,
appointed Senior Vice President of PLM International in March 1994, and
appointed Director and President of PLM Financial Services, Inc. in June 1996.
Mr. Goodrich has also served as Senior Vice President of PLM Transportation
Equipment Corporation since July 1989 and as President of PLM Railcar Management
Services, Inc. since September 1992, having been a senior vice president since
June 1987. Mr. Goodrich was an executive vice president of G.I.C. Financial
Services Corporation, a subsidiary of Guardian Industries Corporation of
Chicago, Illinois, from December 1980 to September 1985.
Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994. From February 1988 to December 1993, Mr. Somerset was President and
Chief Executive Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a recently acquired subsidiary of Alexander & Baldwin, Inc. Mr. Somerset joined
C&H Sugar in 1984 as Executive Vice President and Chief Operating Officer,
having served on its Board of Directors since 1978, a position in which he
continues to serve. Between 1972 and 1984, Mr. Somerset served in various
capacities with Alexander & Baldwin, Inc., a publicly held land and agriculture
company headquartered in Honolulu, Hawaii, including Executive Vice President of
Agriculture and Vice President, General Counsel, and Secretary. In addition to a
law degree from Harvard Law School, Mr. Somerset also holds degrees in civil
engineering from the Rensselaer Polytechnic Institute and in marine engineering
from the U.S. Naval Academy. Mr. Somerset also serves on the boards of directors
for various other companies and organizations, including Longs Drug Stores,
Inc., a publicly held company.
Robert L. Witt was elected to the Board of Directors in June 1997. Since 1993,
Mr. Witt has been a principal with WWS Associates, a consulting and investment
group specializing in start-up situations and private organizations about to go
public. Prior to that, he was Chief Executive Officer and Chairman of the Board
of Hexcel Corporation, an international advanced materials company with sales
primarily in the aerospace, transportation, and general industrial markets. Mr.
Witt also serves on the boards of directors for various other companies and
organizations.
J. Michael Allgood was appointed Vice President and Chief Financial Officer of
PLM International in October 1992 and Vice President and Chief Financial Officer
of PLM Financial Services, Inc. in December 1992. Between July 1991 and October
1992, Mr. Allgood was a consultant to various private and public-sector
companies and institutions specializing in financial operations systems
development. In October 1987, Mr. Allgood co-founded Electra Aviation Limited
and its holding company, Aviation Holdings Plc of London, where he served as
Chief Financial Officer until July 1991. Between June 1981 and October 1987, Mr.
Allgood served as a first vice president with American Express Bank Ltd. In
February 1978, Mr. Allgood founded and until June 1981 served as a director of
Trade Projects International/Philadelphia Overseas Finance Company, a joint
venture with Philadelphia National Bank. From March 1975 to February 1978, Mr.
Allgood served in various capacities with Citibank, N.A.
Stephen M. Bess was appointed Director of PLM Financial Services, Inc. in July
1997. Mr. Bess was appointed President of PLM Securities Corporation in June
1996 and President of PLM Investment Management, Inc. in August 1989, having
served as Senior Vice President of PLM Investment Management, Inc. beginning in
February 1984 and as Corporate Controller of PLM Financial Services, Inc.
beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc.
beginning in December 1982. Mr. Bess was Vice President-Controller of Trans
Ocean Leasing Corporation, a container leasing company, from November 1978 to
November 1982, and Group Finance Manager with the Field Operations Group of
Memorex Corporation, a manufacturer of computer peripheral equipment, from
October 1975 to November 1978.
Richard K Brock was appointed Vice President and Corporate Controller of PLM
International and PLM Financial Services, Inc. in June 1997, having served as an
accounting manager beginning in September 1991 and as Director of Planning and
General Accounting beginning in February 1994. Mr. Brock was a division
controller of Learning Tree International, a technical education company, from
February 1988 through July 1991.
Frank Diodati was appointed President of PLM Railcar Management Services Canada
Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and Sales for
G.E. Railcar Services Canada Limited.
Steven O. Layne was appointed Vice President of PLM Transportation Equipment
Corporation's Air Group in November 1992, and was appointed Vice President and
Director of PLM Worldwide Management Services Limited in September 1995. Mr.
Layne was its Vice President, Commuter and Corporate Aircraft beginning in July
1990. Prior to joining PLM, Mr. Layne was Director of Commercial Marketing for
Bromon Aircraft Corporation, a joint venture of General Electric Corporation and
the Government Development Bank of Puerto Rico. Mr. Layne is a major in the
United States Air Force Reserves and a senior pilot with 13 years of accumulated
service.
Susan C. Santo became Vice President, Secretary, and General Counsel of PLM
International and PLM Financial Services, Inc. in November 1997. She has worked
as an attorney for PLM International since 1990 and served as its Senior
Attorney since 1994. Previously, Ms. Santo was engaged in the private practice
of law in San Francisco. Ms. Santo received her J.D. from the University of
California, Hastings College of the Law.
Thomas L. Wilmore was appointed Vice President, Rail of PLM Transportation
Equipment Corporation in March 1994, and has served as Vice President of
Marketing for PLM Railcar Management Services, Inc. since May 1988. Prior to
joining PLM, Mr. Wilmore was Assistant Vice President and Regional Manager for
MNC Leasing Corporation in Towson, Maryland from February 1987 to April 1988.
From July 1985 to February 1987, he was President and co-owner of Guardian
Industries Corporation, Chicago, and between December 1980 and July 1985, Mr.
Wilmore was an executive vice president for its subsidiary, G.I.C. Financial
Services Corporation. Mr. Wilmore also served as Vice President of Sales for
Gould Financial Services, located in Rolling Meadows, Illinois, from June 1978
to December 1980.
The directors of PLM International and 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
International, Inc., or PLM Financial Services, Inc..
ITEM 11. EXECUTIVE COMPENSATION
The Program has no directors, officers, or employees. The Program has no
pension, profit-sharing, retirement, or similar benefit plan in effect as of
December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Program is not a legal entity. The Program itself does not have any
securities. The Program has neither directors nor executive officers. The cars
sold to investors who have entered into Management Agreements are managed by
IMI. Neither the Manager, its affiliates, nor any officer or director of the
Manager or its affiliates own any cars.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
During 1997, $282,810 in management fees was paid to the
Manager by participants in the Program.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions with Promoters
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. Financial statements
The statements listed in the accompanying Index to Financial
Statements are filed as part of this Annual Report.
2. Financial Statement Schedules
None.
(b) Reports on Form 8-K
None.
(c) Exhibits
10.1 Form of Management Agreement, incorporated by
reference to the Program's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on
April 2, 1990.
25. Power of Attorney
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
The Registrant is not a legal entity. PLM Investment Management, Inc., the
Manager, has signed on behalf of the Registrant by its duly authorized officers.
RMI COVERED HOPPER RAILCAR
MANAGEMENT PROGRAM 79-1
Date: March 30, 1998 Registrant
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
-------------------------------
Stephen M. Bess
President
By: /s/ Richard K Brock
-------------------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of IMI on the dates indicated.
Name Capacity Date
*____________________
Stephen M. Bess Director March 30, 1998
*____________________
Douglas P. Goodrich Director March 30, 1998
*___________________
Susan C. Santo Director March 30, 1998
* Susan C. Santo, by signing her name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.
/s/ Susan C. Santo
- -----------------------
Susan C. Santo
Attorney-in-Fact
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Report of Independent Auditors 16
Statements of revenues collected and expenses paid and
other changes in cash for the years ended December 31,
1997, 1996, and 1995 17
Notes to the statements of revenues collected and expenses
paid and other changes in cash 18-19
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 statements and notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Equipment Owners in
RMI Covered Hopper Railcar Management Program 79-1
We have audited the accompanying financial statements of RMI Covered Hopper
Railcar Management Program 79-1 (the Program) as listed in the accompanying
index. These financial statements are the responsibility of the Program's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether these 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.
The accompanying financial statements were prepared to present the revenues
collected and expenses paid and other changes in cash of RMI Covered Hopper
Railcar Management Program 79-1 pursuant to the management agreement described
in Note 1 and are not intended to be a complete presentation of the Program's
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the revenues collected and expenses paid and other changes in
cash of RMI Covered Hopper Railcar Management Program 79-1 for each of the years
in the three-year period ended December 31, 1997, on the cash basis of
accounting described in Note 1.
/S/ KPMG PEAT MARWICK LLP
- ------------------------------
San Francisco, California
March 24, 1998
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
For the Years Ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Revenues collected:
Lease revenue received $ 2,396,321 $ 2,458,027 $ 2,475,106
Interest and other income 48,250 80,182 84,829
-----------------------------------------------------------
Total revenues collected 2,444,571 2,538,209 2,559,935
Expenses paid (reimbursed):
Repairs and maintenance 282,612 295,383 363,776
Insurance 14,068 26,065 23,890
Property taxes (12,793) 30,894 53,685
Accounting and legal fees 14,787 8,849 6,597
Storage, repositioning, and other 17,420 13,083 7,979
-----------------------------------------------------------
Total expenses paid 316,094 374,274 455,927
-----------------------------------------------------------
Excess of revenues collected over
expenses paid 2,128,477 2,163,935 2,104,008
---------------------------------------------------------
Other increases (decreases) in cash:
Prepaid mileage, reimbursable repairs,
and other expenses (10,818) (275,672) 119,213
Management fees paid (282,810) (271,533) (262,458)
Receipt of proceeds from sold or destroyed cars 31,713 960,000 46,742
Receipt of proceeds for transfer of car ownership 243,500 384,000 250,000
Payments to investors for sold or destroyed cars (31,713) (966,540) (72,250)
Payments to investors for transfer of car ownership (238,080) (368,640) (240,000)
Distributions to investors (1,864,121) (1,809,722) (1,731,469)
Commission paid (6,500) (51,960) (10,000)
-----------------------------------------------------------
Net other decreases in cash (2,158,829) (2,400,067) (1,900,222)
-----------------------------------------------------------
Net (decrease) increase in cash (30,352) (236,132) 203,786
Cash at beginning of year 1,344,980 1,581,112 1,377,326
-----------------------------------------------------------
Cash at end of year $ 1,314,628 $ 1,344,980 $ 1,581,112
===========================================================
</TABLE>
See accompanying notes to the 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
December 31, 1997
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, results of operations, or cash flows in accordance with
generally accepted accounting principles.
2. Operations
The Program is managed by IMI, a wholly owned subsidiary of PLM Financial
Services, Inc. (FSI). FSI, in conjunction with its subsidiaries, sells
transportation equipment to investor programs and third parties, manages
pools of transportation equipment under management agreements with the
investor programs, and is also a general partner of several limited
partnerships. The investors are liable for the obligations and liabilities
of the Program.
As of December 31, 1997, monthly management fees of $38 per car are
charged directly to the individual investors with respect to cars being
managed pursuant to five-year extensions made to the original management
agreements which had an original term of ten years. Prior to the first
five-year extension made to the original management agreement, management
fees were being charged at the rate of $55 per car. In addition, IMI earns
an incentive management fee equal to 15% of Net Earnings (as defined in
the original Management Agreement) over earnings of $750 per car per
quarter.
At December 31, 1997, 1996, and 1995, 477 cars, 469 cars, and 495 cars,
respectively which were owned by the investors, were being managed by IMI
under the Program, all of which were covered by lease arrangements at
December 31, 1997. During 1997, nine cars were added to the Program, one
car was destroyed, and nine cars were transferred between investors within
the Program and IMI received a commission fee of $6,500 to handle these
sales and transfers.
3. Revenues and Expenses
Operating revenues and expenses of the Program are pooled and allocated to
participants based on available car-days as defined in the Management
Agreement. Revenues are earned by placing the railcars under leases, and
are generally billed monthly. As of December 31, 1997, all 477 cars were
leased on a fixed rate basis.
The lessees accounting for 10% or more of lease revenues collected during
1997, 1996, and 1995 were Louis Dreyfus Corp. (15% in 1997, 14% in 1996,
and 14% in 1995), Canadian Pacific Railroad (16% in 1997, 17% in 1996, and
16% in 1995), San Luis Central Railroad Co. (16% in 1997, 15% in 1996, and
13% in 1995), Union Pacific Railroad (21% in 1997, 21% in 1996, and 24% in
1995), KBSR Railroad (11% in 1997), and General Chemical Co. (10% in 1997,
12% in 1996, and 14% in 1995).
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
NOTES TO THE STATEMENT OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
December 31, 1997
4. 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 to provide for a balanced
distribution of funds to the investors each quarter. IMI has determined the
working capital reserve at December 31, 1997, 1996, and 1995 to be $781,906,
$910,989, and $873,359, respectively.
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
INDEX OF EXHIBITS
Exhibit Page
10.1 Form of Management Agreement *
25. Power of Attorney 21
* Incorporated by reference. See page 12 of this report.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Investment Management, Inc.,
as Manager of RMI Covered Hopper Railcar Management Program 79-1, to comply with
the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and
regulations thereunder, in connection with the preparation and filing with the
Securities and Exchange Commission of annual reports on Form 10-K on behalf of
PLM Investment Management, Inc., as Manager of RMI Covered Hopper Railcar
Management Program 79-1, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
13th day of February, 1998.
/s/ Stephen M. Bess
- ---------------------------------
Stephen M. Bess
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,314,628
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 2,444,571
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 316,094
<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>
