UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1999.
[ ] 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 ______
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
--------------------------------------------------------------------
Revenues collected:
<S> <C> <C> <C> <C>
Lease revenue received $ 612,001 $ 557,141 $ 1,781,455 $ 1,869,108
Interest and other income 13,316 15,782 52,590 53,075
--------------------------------------------------------------------
Total revenues collected 625,317 572,923 1,834,045 1,922,183
--------------------------------------------------------------------
Expenses paid:
Management fees paid 72,776 72,266 219,930 216,113
Repairs and maintenance 111,089 108,465 244,055 230,956
Property taxes 2,264 1,885 7,544 9,157
Accounting and legal fees 733 327 5,632 6,007
Storage, repositioning and other 4,139 1,961 10,122 6,114
--------------------------------------------------------------------
Total expenses paid 191,001 184,904 487,283 468,347
--------------------------------------------------------------------
Excess of revenues collected
over expenses paid 434,316 388,019 1,346,762 1,453,836
--------------------------------------------------------------------
Other increases (decreases) in cash:
Reimbursable prepaid mileage, repairs
and other expenses (103,256) 8,609 (57,787) (49,844)
Receipt of proceeds from sold or destroyed cars 34,673 32,042 97,502 94,862
Receipt of proceeds for transfer of car ownership -- 26,000 99,000 133,000
Payments to investors for sold or destroyed cars (35,136) (32,042) (97,965) (94,862)
Payments to investors for transfer of car
ownership -- (24,960) (96,500) (128,800)
Commission paid for sale or transfer of car
ownership -- (1,040) (2,500) (4,200)
Distributions to investors (485,185) (477,339) (1,456,169) (1,431,479)
--------------------------------- ---------------------------------
--
Net other decreases in cash (588,904) (468,730) (1,514,419) (1,481,323)
--------------------------------------------------------------------
Net decrease in cash (154,588) (80,711) (167,657) (27,487)
Cash at beginning of period 1,305,926 1,367,852 1,318,995 1,314,628
--------------------------------------------------------------------
Cash at end of period $ 1,151,338 $ 1,287,141 $ 1,151,338 $ 1,287,141
====================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
NOTES TO THE STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
SEPTEMBER 30, 1999
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 or Manager).
Under the cash basis of accounting, revenues are recognized when received,
rather than when earned, and expenses are recognized when paid, rather than when
the obligation is incurred. Accordingly, the Statements are not intended to
present the financial position or results of operations or cash flows of the
Program in accordance with generally accepted accounting principles.
2. Operations
As of September 30, 1999, 485 cars, which are owned by the investors, were being
managed by IMI under the Program. As of September 30, 1998, 484 cars, which are
owned by the investors, were being managed by IMI under the Program. All of the
cars were covered by lease agreements. During the nine months ending September
30, 1999, three cars were added to the Program and three cars were destroyed.
During the nine months ending September 30, 1998, 10 cars were added to the
Program and three cars were destroyed.
3. Equalization reserve
Under the terms of the management agreement, IMI may, at its discretion, cause
the Program to retain a certain amount of cash (the working capital reserve) to
cover future disbursements and provide for a balanced distribution of funds to
the investors each quarter. IMI has determined the working capital reserve at
September 30, 1999, to be $722,836 ($836,155 at December 31, 1998).
(this space intentionally left blank)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Three Months Ended September 30, 1999 and 1998
Revenues collected:
(1) Lease receipts increased to $612,001 in the third quarter of 1999, from
$557,141 in the third quarter of 1998. $144,426 increase in lease receipts is
due to the timing of receipt of revenues, $9,349 increase in lease receipts is
due to twelve cars added in the Program during the last quarter of 1998 and the
first three quarters in 1999. The increase in lease receipts is partially offset
by decrease in lease receipts of $98,915 due to lower average leases rates for
certain lessees during the comparable periods.
(2) Interest and other income decreased to $13,316 in the third quarter of 1999,
from $15,782 in the third quarter of 1998 due to a decrease in interest income
of $5,135 resulting from lower interest income earned on lower average cash
balances during the third quarter of 1999 when compared to the same period of
1998 and a decrease in miscellaneous income of $214. The decrease in interest
and other income is partially offset by the exchange rate fluctuation, $353
exchange rate gain in the third quarter of 1999 as compared to $2,530 exchange
rate loss in the third quarter of 1998.
Expenses paid:
(1) Management fees paid increased to $72,776 in the third quarter of 1999, from
$72,266 in the third quarter of 1998. The increase is primarily due to higher
incentive fees paid to PLM Investment Management, Inc. (IMI) in the third
quarter of 1999 compared to same quarter of 1998. In the third quarter of 1999,
$18,188 in incentive fees were paid to IMI, compared to $17,888 in the third
quarter of 1998. The increase is also due to more cars in the Program during the
third quarter of 1999 as compared to the same period of 1998. IMI receives a
monthly management fee on a per car basis at $38 per car.
(2) Repairs and maintenance expense increased to $111,089 in the third quarter
of 1999, from $108,465 in the third quarter of 1998. An increase of $23,105 in
repairs and maintenance resulted from running repairs required on certain
railcars in the fleet during the third quarter of 1999, which were not needed
during the same period of 1998. A $6,919 increase in repairs and maintenance is
due to twelve cars added in the Program during the last quarter of 1998 and the
first three quarters in 1999. The increase in repairs and maintenance expense is
partially offset by the decrease in repairs and maintenance expense of $27,400
due to the timing of payments of expenses during comparable period.
(3) Property taxes increased to $2,264 in the third quarter of 1999, from $1,885
in the third quarter of 1998. The increase is primarily due to the timing of
payments for these expenses during the comparable periods, and the timing of
receiving of invoices from various states, as the tax rates remained relatively
constant.
(4) Accounting and legal fees increased to $733 in the third quarter of 1999,
from $327 in the third quarter of 1998, due to the timing of payments for these
expenses during the comparable periods.
(5) Storage, repositioning and other expenses increased to $4,139 in the third
quarter of 1999, from $1,961 for the comparable period in 1998. The increase is
primarily due to higher repositioning expenses during 1999 when compared to
1998.
Other changes in cash:
(1) Reimbursable prepaid mileage, repairs and other expenses are composed
primarily of receipts of mileage credits from railroads which are due to
lessees, net of reimbursable repairs due from lessees. Net payments were
$103,256 in the third quarter of 1999, as compared to net receipts of $8,609 in
the third quarter of 1998. The difference between comparable periods is due
primarily to the timing of receipts and repayments of these funds by the
Program.
(2) During the third quarter of 1999, one car was destroyed for which the
Program received $34,673 and paid to the investor insurance proceeds of $35,136.
During the third quarter of 1998, one car was destroyed for which the Program
received and paid to the investor insurance proceeds of $32,042.
(3) During the third quarter of 1999, no railcars were transferred from one
investor to another investor in the Program. During the third quarter of 1998,
the Program received proceeds of $26,000 for a railcar that was transferred from
one investor to another investor in the Program. The Program paid $24,960 net of
commission to the investor that sold the car.
(4) No commission was paid for the three months ended September 30, 1999,
compared to $1,040 in the third quarter of 1998. The decrease was due to no cars
being transferred during the third quarter of 1999, when compared to one car
being transferred during the same quarter of 1998.
The Program distributed $485,185 to investors in the three months ended
September 30, 1999 compared to $477,339 in the three months ended September 30,
1998.
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Nine Months Ended September 30, 1999 and 1998
Revenues collected:
(1) Lease receipts decreased to $1,781,455 for the nine months ended September
30, 1999, from $1,869,108 for the comparable period in 1998. $131,805 decrease
in lease receipts is due to lower average leases rates for certain lessees
during the comparable periods. The decrease in lease receipts is partially
offset by increase in lease receipts of $30,895 due to the timing of receipt of
revenues and $13,257 increase in lease receipts due to twelve cars added in the
Program during the last quarter of 1998 and the first three quarters in 1999.
(2) Interest and other income decreased to $52,590 for the nine months ended
September 30, 1999, from $53,075 for the comparable period in 1998, due to a
decrease in interest income of $12,711 resulting from lower interest income
earned on lower average cash balances during the nine months ended September 30,
1999 when compared to the same period of 1998 and a decrease in miscellaneous
income of $30. The decrease in interest and other income is partially offset by
the exchange rate fluctuation, $8,017 exchange rate gain in the nine months
ended September 30, 1999 as compared to $4,239 exchange rate loss in the nine
months ended September 30, 1998.
Expenses paid:
(1) Management fees paid increased to $219,930 for the nine months period ended
September 30, 1999, from $216,113 for the comparable period in 1998. The
increase is due to more cars in the Program during the first three quarters of
1999 as compared to the same period of 1998. IMI receives a monthly management
fee on a per car basis at $38 per car. The increase is also due to higher
incentive fees in the first nine months of 1999 compared to same period of 1998.
For the nine months ended September 30, 1999, $54,816 in incentive fees were
paid to IMI, compared to $53,663 paid for the nine months ended September 30,
1998.
(2) Repairs and maintenance expense increased to $244,055 for the nine months
ended September 30, 1999, from $230,956 for the comparable period in 1998. An
increase of $9,473 in repairs and maintenance expense is due to twelve cars
added in the Program during the last quarter of 1998 and the first
three-quarters in 1999. An increase of $9,030 in repairs and maintenance expense
resulted from running repairs required on certain railcars in the fleet during
the nine months ended September 30, 1998, which were not needed during the same
period of 1999. The increase is partially offset by the decrease in repairs and
maintenance expense of $5,404 due to the timing of payments of expenses during
comparable periods
(3) Property taxes decreased to $7,544 for the nine months ended September 30,
1999, from $9,157 for the comparable period in 1998. The decrease is primarily
due to the timing of payments for these expenses during the comparable periods,
and the timing of receiving of invoices from various states, as the tax rates
remained relatively constant.
(4) Accounting and legal fees decreased to $5,632 for the nine months ended
September 30, 1999, from $6,007 for the comparable period in 1998, due to the
timing of payments for these expenses during the comparable periods.
(5) Storage, repositioning and other expenses increased to $10,122 for the nine
months ended September 30, 1999, from $6,114 for the comparable period in 1998.
The increase is primarily due to higher repositioning expenses in 1999 when
compared to 1998.
Other changes in cash:
(1) Reimbursable prepaid mileage, repairs and other expenses are composed
primarily of receipts of mileage credits from railroads which are due to
lessees, net of reimbursable repairs due from lessees. Net payments were $57,787
for the nine months ended September 30, 1999, as compared to net payments of
$49,844 for the comparable period in 1998. The difference between comparable
periods is due primarily to the timing of receipts and repayments of these funds
by the Program.
(2) During the nine months ended September 30, 1999, three cars were destroyed
for which the Program received insurance proceeds of $97,502 and paid to
investors insurance proceeds of $97,965. During the nine months ended September
30, 1998, three cars were destroyed for which the Program received and paid to
investors insurance proceeds of $94,862.
(3) During the nine months ended September 30, 1999, the Program received
proceeds of $99,000 for four railcars that were transferred between investors in
the Program. The Program paid $96,500 net of commission to investors that sold
the cars. During the nine months ended September 30, 1998, the Program received
proceeds of $133,000 for five railcars that were transferred between investors
in the Program. The Program paid $128,800 net of commission to investors that
sold the cars.
(4) Commission paid decreased to $2,500 for the nine months ended September 30,
1999, from $4,200 in the same period of 1998. The decrease was due to fewer cars
being transferred in the nine months ended September 30, 1999, as compared to
the same period of 1998.
The Program distributed $1,456,169 to investors in the nine months ended
September 30, 1999 compared to $1,431,479 in the nine months ended September 30,
1998.
The Program's performance in the nine months ended September 30, 1999 is not
necessarily indicative of future periods.
(II) EFFECTS OF YEAR 2000
It is possible that the Manager's currently installed computer systems, software
products, and other business systems, or those of 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 possibility
commonly known as the "Year 2000" or "Y2K" problem. As the Program relies
substantially on the Manager's software systems, applications and control
devices in operating and monitoring significant aspects of its business, any
Year 2000 problem suffered by the Manager could have a material adverse effect
on the Program's business, financial condition and results of operations.
The Manager has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its business systems in order to determine
whether such systems will retain functionality after December 31, 1999. As of
September 30, 1999, the Manager has completed inventory, assessment, remediation
and testing stages of its Year 2000 review of its core business information
systems. Specifically, the Manager (a) has integrated 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 been made Year 2000
compliant. In addition, numerous other software systems provided by vendors and
service providers have been replaced with systems represented by the vendor or
service provider to be Year 2000 functional. These systems will be fully tested
and appear to be compliant.
As of September 30, 1999, the costs incurred and allocated to the Fund to become
Year 2000 compliant have not been material and does not anticipate any
additional Year 2000-compliant expenditures.
Some risks associated with the Year 2000 problem are beyond the ability of the
Program or Manager 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 readiness of
such parties and the extent to which the Program is vulnerable to any
third-party Year 2000 issues. As part of this process, vendors and service
providers were ranked in terms of the relative importance of the service or
product provided. All service providers and vendors who were identified as
medium to high relative importance were surveyed to determine Year 2000 status.
The Manager has received satisfactory responses to Year 2000 readiness inquiries
from surveyed service providers and vendors.
It is possible that certain of the Program's equipment lease portfolio may not
be Year 2000 compliant. The Manager has contacted equipment manufacturers of the
portion of the Program's leased equipment portfolio identified as date sensitive
to assure Year 2000 compliance or to develop remediation strategies. The Program
does not expect that non-Year 2000 compliance of its leased equipment portfolio
will have an adverse material impact on its financial statements. The Manager
has surveyed the majority of its lessees and the majority of those surveyed have
responded satisfactorily to Year 2000 readiness inquiries.
There can be no assurance that the software systems of such parties will be
converted or made Year 2000 compliant in a timely manner. Failure by the Manager
or such other parties to make their respective systems Year 2000 compliant could
have a material adverse effect on the business, financial position, and results
of operations of the Program. The Manager has made and will continue an ongoing
effort to recognize and evaluate potential exposure relating to third party Year
2000 noncompliance. The Manager will implement a contingency plan if the Manager
determines that third-party noncompliance would 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 or vendors or service providers due to Year 2000
problems. For the purpose of such contingency planning, a reasonably likely
worst case scenarios primarily anticipate a) an inability to access systems and
data on a temporary basis resulting in possible delay in reconciliation of funds
received or payment of monies owed, or b) an inability to continuously employ
equipment assets due to temporary Year 2000 related failure of external
infrastructure necessary to the ongoing operation of the equipment. The Manager
is evaluating whether there are additional scenarios, which have not been
identified. Contingency planning will encompass strategies up to and including
manual processes. The Manager anticipates that these plans will be completed by
the fourth quarter of 1999.
(III) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of the Program's plans, objectives,
expectations, and intentions. The cautionary statements made in this Form 10-Q
should be read as being applicable to all related forward-looking statements
wherever they appear in this Form 10-Q. The Program's actual results could
differ materially from those discussed here.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RMI COVERED HOPPER RAILCAR
MANAGEMENT PROGRAM 79-1
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
-----------------------------------
Stephen M. Bess
President
Date: November 9, 1999 By: /s/ Richard K Brock
--------------------------------
Richard K Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,151,338
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 1,834,045
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 487,283
<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-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
