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, 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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 22.
Total number of pages in this report: 23
<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.), a wholly-owned
subsidiary 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.
TEC is the General Partner for other railcars investment programs.
(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,
319 cars have been sold or destroyed and 27 cars have been added to the fleet.
As of December 31, 1998, 485 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 1998 was $436.
All 485 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, 1998, the Program had leases with the following lessees which
accounted for greater than 10% or more of the total revenues collected in the
Program:
<TABLE>
<CAPTION>
Percent of total
Lessee revenues collected
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Union Pacific 19%
Louis Dreyfus Corp. 13%
San Luis Central Railroad 16%
Canadian Pacific Railroad 13%
General Chemical Corp. 13%
KBSR Railroad 10%
</TABLE>
IMI has agreed to perform all services necessary to manage the railcars on
behalf of the Program and to perform or contract for the performance of all
obligations of the lessor under the Program's leases. 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 three 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
Covered hopper railcars are used to transport grain to domestic food processors,
poultry breeders, cattle feed lots, and for export. Demand for covered hopper
cars softened in 1998, as total North American grain shipments declined 8%,
compared to 1997, with grain shipments within Canada contributing to most of
this decrease. This has put downward pressure on lease rates, which has been
exacerbated by a significant increase in the number of covered hopper cars built
in the last few years. Since 1988, there has been a nearly 20% increase in rail
transportation capacity assigned to agricultural service. In 1996, just over
one-half of all new railcars built were covered hopper cars; in 1997, this
percentage dropped somewhat, to 38% of all cars built.
<PAGE>
The Program's covered hopper cars were not impacted by the decrease in lease
rates during 1998, as all of the cars continued to operate on long-term leases.
The Program is anticipating, however, a significant negative impact in lease
revenue in 1999 due to the decrease in demand discussed above.
ITEM 2. PROPERTIES
At December 31, 1998, the Program had no properties except for the 485 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, 1998.
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, 1998, 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>
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total program
Total revenues collected $ 2,621,980 $ 2,444,571 $ 2,538,209 $ 2,559,935 $ 2,441,627
Expenses paid (367,317 ) (316,094 ) (374,274 ) (455,927 ) (491,486 )
Excess of revenues collected
---------------------------------------------------------------------------------------------------------------------
over expenses paid 2,254,663 2,128,477 2,163,935 2,104,008 1,950,141
Management fees paid (288,839 ) (282,810 ) (271,533 ) (262,458 ) (244,940 )
---------------------------------------------------------------------------------------------------------------------
Total revenues collected less
total expenses and
management fees paid $ 1,965,824 $ 1,845,667 $ 1,892,402 $ 1,841,550 $ 1,705,201
=====================================================================================================================
Distributions to or on
behalf of investors
after management fees $ 1,909,390 $ 1,864,121 $ 1,809,722 $ 1,731,469 $ 1,630,674
=====================================================================================================================
Per car available (computed
on a weighted-average car
per day basis)
Total revenues collected $ 5,453 $ 5,158 $ 5,310 $ 5,177 $ 4,849
Expenses paid (764 ) (667 ) (783 ) (922 ) (976 )
---------------------------------------------------------------------------------------------------------------------
Excess of revenues collected
over expenses paid 4,689 4,491 4,527 4,255 3,873
Management fees paid (601 ) (597 ) (568 ) (531 ) (486 )
---------------------------------------------------------------------------------------------------------------------
Total revenues collected less
total expenses and
management fees paid $ 4,088 $ 3,894 $ 3,959 $ 3,724 $ 3,387
=====================================================================================================================
</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 Manager of the Program does not know of any 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, 1998 and 1997
Revenues collected:
1. Lease receipts increased to $2,551,476 for the year ended December 31,
1998, from $2,396,321 for the comparable period in 1997. The increase is
due to higher average lease rates in 1998 when compared to 1997, the
addition of 11 cars in 1998, and the timing of rental receipts between the
comparable periods. These increases were partially offset by the
disposition of 31 cars in 1997.
2. Interest and other income increased to $70,504 for the year ended December
31, 1998, from $48,250 for the comparable period in 1997. The increase is
primarily due to a lower exchange rate loss in 1998 when compared to 1997.
In addition, interest income increased as cash investments earned a higher
interest rate in 1998 when compared to 1997.
Expenses paid:
1. Repairs and maintenance expense increased to $320,437 for the year ended
December 31, 1998, from $282,612 for the comparable period in 1997. The
increase is primarily due to the timing of payments for these expenses
during the comparable periods.
2. Insurance expense decreased to $11,183 for the year ended December 31,
1998, from $14,068 for the comparable period in 1997. The decrease is
primarily due to the timing of payments for the annual premium for
liability and physical damage insurance. In 1997, a refund of a prior
year's premium for business interruption insurance was received. No
similar refund was received in 1998.
3. Property taxes increased to $18,382 for the year ended December 31, 1998,
from a credit of $12,793 for the comparable period in 1997. The increase
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. No similar refund or settlement was received during
1998.
4. Accounting and legal fees decreased to $7,217 for the year ended December
31, 1998, from $14,787 for the comparable period in 1997. The decrease is
due to a decrease in costs of these professional services and the timing
of payments for these expenses during the comparable periods.
5. Storage, repositioning and other expenses decreased to $10,098 for the
year ended 1998, from $17,420 for the comparable period in 1997. The
decrease is primarily due to lower repositioning expenses during 1998, 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
$52,067 during the year ended December 31, 1998, as compared to a decrease
of $10,818 for the comparable period in 1997. The increase 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 $288,839 for the year ended December 31,
1998, from $282,810 for the comparable period in 1997. This increase is
due to an incentive management fee of $71,213 paid to IMI in 1998 compared
to an incentive management fee of $67,172 paid to IMI in 1997. The
management fees increase is also due to eleven cars were added in the
Program during 1998.
3. During 1998, three cars were destroyed for which the Program received and
paid to investors insurance proceeds of $94,862. During 1997, one car was
destroyed for which the Program received and paid to the investor
insurance proceeds of $31,713.
4. During 1998, the Program received proceeds of $269,000 for ten railcars
that were transferred between investors in the Program. The Program paid
$260,340 net of commission to investors that sold the cars. During 1997,
the Program received $243,500 in proceeds for nine railcars that were
transferred between investors in the Program. The Program paid $238,080
net of commission to the investors that sold the railcars.
5. Commission paid increased to $8,660 for 1998, from $6,500 in 1997. The
increase was due to more cars being transferred in 1998, as compared to
1997.
As a result of the foregoing and other factors, the Program distributed
$1,909,390 to investors for the year ended December 31, 1998 compared to
$1,864,121 paid in 1997.
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 addition 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.
<PAGE>
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 is
primarily 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.
3. During 1997, one car was destroyed for which the Program received and paid
to investor insurance proceeds of $31,713. During 1996, 31 cars were sold
- for which the Program received - proceeds of $960,000 and paid $921,600
net of commission to investors. The Program also paid working capital
reserve of $44,940 to investors for cars that were sold in 1996.
4. During 1997, the Program received proceeds of $243,500 for nine railcars
that were transferred between investors in the Program. The Program paid
$238,080 net of commission to investors that sold the cars. During 1996,
the Program received $384,000 in proceeds for 14 railcars that were
transferred between investors in the Program. The Program paid $368,640
net of commission to the investors that sold the railcars.
5. Commission paid decreased to $6,500 for 1997, from $51,960 in 1996. The
decrease was due to fewer cars being transferred in 1997, as compared to
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.
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).
Since 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.
It is possible that certain of the Program's equipment lease portfolio may not
be Year 2000 compliant. The Manager is currently contacting equipment
manufacturers of the Program's leased equipment portfolio to assure Year 2000
compliance or to develop remediation strategies. The Manager does not expect
that non-Year 2000 compliance of its leased equipment portfolio will have an
adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Manager or the Program to control, including the extent to which third parties
can address the Year 2000 problem. The Manager is communicating 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 from 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, that third-party non-compliance will have a
material adverse effect on the Program's business, financial position, or
results of operation.
The Manager is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Manager anticipates
these plans will be completed by September 30, 1999.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Program's primary market risk exposure is that of currency devaluation risk.
During 1998, 14% of the Program'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 lessees currency devalues against the U.S. dollar, the
lessees could potentially encounter difficulty in making the U.S. dollar
denominated lease payments.
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, 1998, are included on the Index to Financial
Statements as part of Item 14(a) of this Annual Report.
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 (PLM) and of PLM Financial Services, Inc. (and key executive
officers of its subsidiaries) are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------------- ------------------ -------------------------------------------------------
<S> <C> <C>
Robert N. Tidball 60 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 51 Director, PLM International, Inc.
Douglas P. Goodrich 52 Director and Senior Vice President, PLM
International, Inc.; Director and President, PLM
Financial Services, Inc.; President, PLM
Transportation Equipment Corporation; President, PLM
Railcar Management Services, Inc.
Warren G. Lichtenstein 33 Director, PLM International, Inc.
Howard M. Lorber 50 Director, PLM International, Inc.
Harold R. Somerset 63 Director, PLM International, Inc.
Robert L. Witt 58 Director, PLM International, Inc.
J. Michael Allgood 50 Vice President and Chief Financial Officer, PLM
International, Inc. and PLM Financial Services, Inc.
Robin L. Austin 52 Vice President, Human Resources, PLM International,
Inc. and PLM Financial Services, Inc.
Stephen M. Bess 52 President, PLM Investment Management, Inc.; Vice
President and Director, PLM Financial Services, Inc.
Richard K Brock 36 Vice President and Corporate Controller, PLM
International, Inc. and PLM Financial Services, Inc.
James C. Chandler 50 Vice President, Planning and Development, PLM
International, Inc. and PLM Financial Services, Inc.
Susan C. Santo 36 Vice President, Secretary, and General Counsel, PLM
International, Inc. and PLM Financial Services, Inc.
Janet M. Turner 42 Vice President, Investor Relations and Corporate
Communications, PLM International, Inc. and PLM
Investment Management, 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 as President and Chief Executive Officer, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April 1989. Mr. Tidball was appointed a 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. Prior to founding
Dunsford Hill Capital Partners, Mr. Caudill held senior investment banking
positions at Prudential Securities, Morgan Grenfell Inc., and The First Boston
Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics,
Inc., VaxGen, Inc., SBE, Inc., and RamGen, 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 of Chicago, Illinois, a subsidiary of Guardian Industries
Corporation, from December 1980 to September 1985.
Warren G. Lichtenstein was elected to the Board of Directors in December 1998.
Mr. Lichtenstein is the Chief Executive Officer of Steel Partners II, L.P.,
which is PLM International's largest shareholder, currently owning 16% of the
Company's common stock. Additionally, Mr. Lichtenstein is Chairman of the Board
of Aydin Corporation, a NYSE-listed defense electronics concern, as well as a
director of Gateway Industries, Rose's Holdings, Inc., and Saratoga Beverage
Group, Inc. Mr. Lichtenstein is a graduate of the University of Pennsylvania,
where he received a Bachelor of Arts degree in economics.
Howard M. Lorber was elected to the Board of Directors in January 1999. Mr.
Lorber is President and Chief Operating Officer of New Valley Corporation, an
investment banking and real estate concern. He is also Chairman of the Board and
Chief Executive Officer of Nathan's Famous, Inc., a fast food company.
Additionally, Mr. Lorber is a director of United Capital Corporation and Prime
Hospitality Corporation and serves on the boards of several community service
organizations. He is a graduate of Long Island University, where he received a
Bachelor of Arts degree and a Masters degree in taxation. Mr. Lorber also
received charter life underwriter and chartered financial consultant degrees
from the American College in Bryn Mawr, Pennsylvania. He is a trustee of Long
Island University and a member of the Corporation of Babson College.
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 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. 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 and General Counsel. Mr. Somerset
holds a law degree from Harvard Law School as well as a degree in civil
engineering from the Rensselaer Polytechnic Institute and a degree 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.
Robin L. Austin became Vice President, Human Resources of PLM Financial
Services, Inc. in 1984, having served in various capacities with PLM Investment
Management, Inc., including Director of Operations, from February 1980 to March
1984. From June 1970 to September 1978, Ms. Austin served on active duty in the
United States Marine Corps and served in the United States Marine Corp Reserves
from 1978 to 1998. She retired as a Colonel of the United States Marine Corps
Reserves in 1998. Ms. Austin has served on the Board of Directors of the
Marines' Memorial Club and is currently on the Board of Directors of the
International Diplomacy Council.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess was appointed 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.
James C. Chandler became Vice President, Planning and Development of PLM
International in April 1996. From 1994 to 1996 Mr. Chandler worked as a
consultant to public companies, including PLM, in the formulation of business
growth strategies. Mr. Chandler was Director of Business Development at Itel
Corporation from 1987 to 1994, serving with both the Itel Transportation Group
and Itel Rail.
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.
Janet M. Turner became Vice President of Investor Services of PLM International
in 1994, having previously served as Vice President of PLM Investment
Management, Inc. since 1990. Before 1990, Ms. Turner held the positions of
manager of systems development and manager of investor relations at the Company.
Prior to joining PLM in 1984, she was a financial analyst with The
Toronto-Dominion Bank in Toronto, Canada.
The directors of PLM International, Inc. are elected for a three-year term and
the directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director or executive officer of PLM International Inc. or PLM
Financial Services, Inc., PLM Transportation Equipment Corp., or PLM Investment
Management, Inc.
(This space is intentionally left blank)
<PAGE>
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, 1998.
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 1998, $288,839 in management fees were paid to the
Manager by participants in the Program.
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.
24. Power of Attorney
(This space is intentionally left blank)
<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, 1999 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, 1999
*_______________
Douglas P. Goodrich Director March 30, 1999
*_______________
Susan C. Santo Director March 30, 1999
* 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
Independent Auditors' Report 18
Statements of revenues collected and expenses paid and other changes
in cash for the years ended December 31,
1998, 1997, and 1996 19
Notes to the statements of revenues collected and expenses
paid and other changes in cash 20-21
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>
INDEPENDENT AUDITORS' REPORT
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, 1998, on the cash basis of
accounting described in Note 1.
/S/ KPMG LLP
- -----------------------------------
San Francisco, California
March 24, 1999
<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>
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Revenues collected:
Lease revenue received $ 2,551,476 $ 2,396,321 $ 2,458,027
Interest and other income 70,504 48,250 80,182
-------------------------------------------------------
Total revenues collected 2,621,980 2,444,571 2,538,209
Expenses paid (reimbursed):
Repairs and maintenance 320,437 282,612 295,383
Insurance 11,183 14,068 26,065
Property taxes 18,382 (12,793 ) 30,894
Accounting and legal fees 7,217 14,787 8,849
Storage, repositioning, and other 10,098 17,420 13,083
-------------------------------------------------------
Total expenses paid 367,317 316,094 374,274
-------------------------------------------------------
Excess of revenues collected over
expenses paid 2,254,663 2,128,477 2,163,935
-----------------------------------------------------
Other increases (decreases) in cash:
Prepaid mileage, reimbursable repairs,
and other expenses (52,067 ) (10,818 ) (275,672 )
Management fees paid (288,839 ) (282,810 ) (271,533 )
Receipt of proceeds from sold or destroyed cars 94,862 31,713 960,000
Receipt of proceeds for transfer of car ownership 269,000 243,500 384,000
Payments to investors for sold or destroyed cars (94,862 ) (31,713 ) (966,540 )
Payments to investors for transfer of car ownership (260,340 ) (238,080 ) (368,640 )
Distributions to investors (1,909,390 ) (1,864,121 ) (1,809,722 )
Commission paid (8,660 ) (6,500 ) (51,960 )
-------------------------------------------------------
Net other decreases in cash (2,250,296 ) (2,158,829 ) (2,400,067 )
-------------------------------------------------------
Net increase (decrease) in cash 4,367 (30,352 ) (236,132 )
Cash at beginning of year 1,314,628 1,344,980 1,581,112
-------------------------------------------------------
Cash at end of year $ 1,318,995 $ 1,314,628 $ 1,344,980
=======================================================
</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, 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, 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, 1998, 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. 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, 1998, 1997, and 1996, 485 cars, 477 cars, and 469 cars,
respectively which were owned by the investors, were being managed by IMI
under the Program. As of December 31, 1998, all of the 485 cars owned by
investors were covered by lease arrangements. During 1998, 11 cars were
added to the Program, three cars were destroyed, and ten cars were
transferred between investors within the Program and IMI received a
commission fee of $8,660 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, 1998, all 485 cars were
leased on a fixed rate basis.
The lessees accounting for 10% or more of total revenues collected during
1998, 1997, and 1996 were Louis Dreyfus Corp. (13% in 1998, 15% in 1997,
and 14% in 1996), Canadian Pacific Railroad (13% in 1998, 16% in 1997, and
16% in 1996), San Luis Central Railroad Co. (16% in 1998, 16% in 1997, and
13% in 1996), Union Pacific Railroad (19% in 1998, 20% in 1997, and 20% in
1996), KBSR Railroad (10% in 1998, 10% in 1997, and 10% in 1996), and
General Chemical Co. (13% in 1998, 10% in 1997, and 11% in 1996).
<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, 1998
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, 1998, 1997, and 1996 to be
$836,155, $781,906, and $910,989, respectively.
(This space is intentionally left blank)
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
INDEX OF EXHIBITS
Exhibit Page
10.1 Form of Management Agreement *
24. Power of Attorney 23
- -----------------------------
* Incorporated by reference. See page 14 of this report.
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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/s/ Stephen M. Bess
-------------------------
Stephen M. Bess
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,318,995
<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> 2,621,980
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<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>
