UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 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
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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 12.
Total number of pages in this report: 20
<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 the management program 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 and are
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,
322 cars have been sold or destroyed and 35 cars have been added to the fleet.
As of December 31, 1999, 490 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 1999 was $374.
All 490 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.
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 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 the 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
The downward pressure on covered hopper cars specifically designed to service
the agricultural industry continued through 1999. During 1999, car loadings of
agricultural products in the United States (U.S.) increased by 4.3% compared to
1998. Car loadings in Canada decreased by 3.3% (Overall North American increase
of 2.9%). Total North American shipments for 1998 were down 7.7% compared to
1997. Thus, while increasing somewhat from 1998, current year shipments remain
below 1997 levels. Another contributing factor to the softness in rental rates
is the large number of covered hopper cars built in the last few years. Total
railcars built during 1999 are estimated to be approximately 58,000 with covered
hoppers representing approximately 20,000 or 34% of the total new builds.
The continued lack of strong demand for covered hopper cars resulted in many
cars being renewed during 1999 at monthly full service rates considerably below
the rate they had been earning.
The U.S. agribusiness industry serves a domestic market that is relatively
mature, with consistent but modest growth likely in the future. Most grain rail
traffic moves to domestic food processors, poultry breeders, and feed lots. The
more volatile export business accounts for about 30% of total grain shipments.
In emerging and developing companies, demand for protein-rich foods is growing
more rapidly than in the U.S. because of higher population growth, rapid
industrialization, and rising disposable income.
ITEM 2. PROPERTIES
At December 31, 1999, the Program had no properties except for the 490 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, 1999.
PART II
ITEM 5. MARKET FOR THE PROGRAM'S EQUITY AND RELATED EQUITY MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
Table 1, below, lists selected financial data for the five years ended December
31, 1999, 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 (the
weighted-average available car per day was 485.32 for 1999):
<TABLE>
<CAPTION>
TABLE 1
For the years ended December 31,
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------
Total program
<S> <C> <C> <C> <C> <C>
Total revenues collected $ 2,314,123 $ 2,621,980 $ 2,444,571 $ 2,538,209 $ 2,559,935
Expenses paid (697,664) (656,156) (598,904) (645,807) (718,385)
---------------------------------------------------------------------------------
Excess of revenues collected
over expenses paid $ 1,616,459 $ 1,965,824 $ 1,845,667 $ 1,892,402 $ 1,841,550
=================================================================================
Distributions to or on
behalf of investors $ 1,941,463 $ 1,909,390 $ 1,864,121 $ 1,809,722 $ 1,731,469
=================================================================================
Per car available (computed
on a weighted-average car
per day basis)
Total revenues collected $ 4,768 $ 5,453 $ 5,158 $ 5,310 $ 5,177
Expenses paid (1,438) (1,365) (1,264) (1,351) (1,453)
--------------------------------------------------------------------------------
Excess of revenues collected
over expenses paid $ 3,330 $ 4,088 $ 3,894 $ 3,959 $ 3,724
================================================================================
</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 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 earned 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.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified in order to conform to the
current year's presentation.
Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes
in Cash for the Years Ended December 31, 1999 and 1998
Revenues collected:
1. Lease receipts decreased to $2,245,736 for the year ended December 31,
1999, from $2,551,476 for the comparable period in 1998. A $279,998
decrease in lease receipts due to lower average leases rates for certain
lessees during the comparable periods, and a $30,163 decrease in lease
receipts is due to the timing of receipt of revenues during the comparable
periods. The decrease was partially offset by the increase of $4,421 due
to eight cars being added to the Program during 1999.
2. Interest and other income decreased to $68,387 for the year ended December
31, 1999, from $70,504 for the comparable period in 1998. A decrease in
interest income of $15,342 resulted from lower interest income earned due
to lower average cash balances during 1999 compared to 1998. The decrease
in interest and other income is partially offset by an increase in other
income of $13,225.
Expenses paid:
1. Management fees increased to $293,408 for the year ended December 31,
1999, from $288,839 for the comparable period in 1998. The increase in
management fees is due to more cars in the Program during 1999 as compared
to 1998. IMI receives a monthly management fee on a per car basis at $38
per car. This increase is also due to an incentive management fee of
$73,004 paid to IMI in 1999 compared to an incentive management fee of
$71,213 paid to IMI in 1998.
2. Repairs and maintenance expense increased to $344,705 for the year ended
December 31, 1999, from $320,437 for the comparable period in 1998. An
increase of $48,920 in repairs and maintenance resulted from repairs
required on certain railcars in the fleet during 1999, which were not
needed during 1998. An increase of $886 in repairs and maintenance is due
to the net addition of five cars to the Program during 1999. The increase
in repairs and maintenance expense is partially offset by the decrease in
repairs and maintenance expense of $25,538 due to the timing of payments
of expenses during comparable period.
3. Insurance expense increased to $15,549 for the year ended December 31,
1999, from $11,183 for the comparable period in 1998. The increase is
primarily due to the timing of payments for the annual premium for
liability and physical damage insurance.
4. Storage, repositioning and other expenses increased to $23,726 for the
year ended 1999, from $10,098 for the comparable period in 1998. The
increase is primarily due to more cars transferred between lessess
resulting in higher repositioning expenses during 1999 when compared to
1998.
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. Funds decreased by
$37,375 during the year ended December 31, 1999, as compared to a decrease
of $52,067 for the comparable period in 1998. The decrease between
comparable periods is primarily due to the timing of net receipts and
repayments of these funds by the Program.
2. During 1999, three cars were destroyed for which the Program received and
paid to investors insurance proceeds of $97,502. During 1998, three cars
were destroyed for which the Program received and paid to the investor
insurance proceeds of $94,862.
3. During 1999, the Program received proceeds of $131,000 for six railcars
that were transferred between investors in the Program. The Program paid
$127,220 net of commission to investors that sold the cars. During 1998,
the Program received $269,000 in proceeds for ten railcars that were
transferred between investors in the Program. The Program paid $260,340
net of commission to the investors that sold the railcars.
4. Commission paid decreased to $3,780 for 1999, from $8,660 in 1998. The
decrease was due to fewer cars being transferred in 1999, as compared to
1998.
As a result of the foregoing and other factors, the Program distributed
$1,941,463 to investors in the year ended December 31, 1999 compared to
$1,909,390 paid in 1998.
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 of
$122,880 is due to the timing of rental receipts between the comparable
periods. An increase of $32,275 is due to higher average lease rates in
1998 when compared to 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.
The exchange rate loss was $4,363 in 1998 compared to $18,716 in 1997. In
addition, interest income increased of $7,901 as cash investments earned a
higher interest rate in 1998 when compared to 1997.
<PAGE>
Expenses paid:
1. 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.
2. 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.
3. Insurance expense decreased to $11,183 for the year ended December 31,
1998, from $14,068 for the comparable period in 1997. The decrease of
$13,962 is due to the timing of payments for the annual premium for
liability and physical damage insurance. The decrease is partially offset
by a refund of a prior year's premium for business interruption insurance
of $11,077 was received during 1997. No similar refund was received in
1998.
4. 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.
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
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. 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.
3. 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.
4. 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.
Certain of the Program's railcars operate in Canada. Although these operations
expose the Program to certain currency, political, credit, and economic risks,
the Manager believes that these risks are minimal or has implemented strategies
to control the risks. Currency risks are at a minimum because all invoicing,
with the exception of a small number of railcars, is conducted in United States
(US) dollars. Political risks are minimized by avoiding operations in countries
that do not have a stable judicial system and established commercial business
laws. Although these credit support mechanisms allow the Program to maintain its
lease yield, there are risks associated with slow-to-respond judicial systems
when legal remedies are required to secure payment or repossess equipment.
Economic risks are inherent in all international markets and the Manager strives
to minimize this risk with market analysis prior to committing equipment to a
particular geographic area. Canadian lease receipts accounted for 14% of total
lease receipts of the Program in 1990.
EFFECTS OF YEAR 2000
To date, PLM Investment Management, Inc. (IMI or Manager) has not experienced
any material Year 2000 issues with either its internally developed software or
purchased software. In addition, to date, IMI has not been impacted by any Year
2000 problems that may have impacted our customers and suppliers. The amount IMI
has spent related to Year 2000 issues has not been material. IMI continues to
monitor its systems for any potential Year 2000 issues.
INFLATION
Inflation did not significantly impact the Program's operations in 1999, 1998,
or 1997.
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.
OUTLOOK FOR THE FUTURE
The ability of the Program to realize acceptable lease rates on its railcars is
contingent on many factors, such as specific market conditions and economic
activity, technological obsolescence, and government or other regulations. The
unpredictability of these factors, or of their occurrence, makes it difficult
for the Manager to clearly define trends or influences that may impact the
performance of the Program's equipment. The Program intends to use excess cash
after payment of operating expenses and maintenance of reasonable reserves to
make cash distributions to the investors.
Factors that may effect the Program's operating performance in 2000 and beyond
include the following:
(1) Repricing Risk
Certain of the Program's railcars will be remarketed as existing leases expire,
exposing the Program to repricing risk/opportunity. The Manager intends to
re-lease railcars at prevailing market rates; however, the Manager cannot
predict these future rates with any certainty at this time, and cannot
accurately assess the effect of such activity on the future performance of the
Program. Demand for covered hopper cars similar to those in the Program are
expected to remain strong.
(2) Impact of Government Regulations on Future Operations
The Manager believes the Program will have sufficient liquidity in the future.
<PAGE>
(3) Distributions
The Program intends to rely on operating cash flow to meet its operating
obligations and make cash distributions. The Manager will continue to evaluate
the level of distributions the Program can sustain over extended periods of
time, and may adjust the level of distributions accordingly. In the long term,
the difficulty in predicting market conditions precludes the Manager from
accurately determining the impact of changing market conditions on liquidity or
distribution level.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Program's primary market risk exposure is that of currency devaluation risk.
During 1999, 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, 1999, 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 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 61 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 52 Director, PLM International, Inc.
Douglas P. Goodrich 53 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 34 Director, PLM International, Inc.
Howard M. Lorber 51 Director, PLM International, Inc.
Harold R. Somerset 64 Director, PLM International, Inc.
Robert L. Witt 59 Director, PLM International, Inc.
Robin L. Austin 53 Vice President, Human Resources, PLM International, Inc. and PLM
Financial Services, Inc.
Stephen M. Bess 53 President, PLM Investment Management, Inc.; Vice President and
Director, PLM Financial Services, Inc.
Richard K Brock 37 Vice President and Chief Financial Officer, PLM International,
Inc. and PLM Financial Services, Inc.
Susan C. Santo 37 Vice President, Secretary, and General Counsel, PLM
International, Inc. and PLM Financial 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 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.
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 Chief Financial Officer of PLM
International and PLM Financial Services, Inc. in January 2000, after having
served as Acting CFO since June 1999. Mr. Brock served as Corporate Controller
of PLM International and PLM Financial Services, Inc. beginning in June 1997, as
Director of Planning and General Accounting beginning in February 1994, and as
an accounting manager beginning in September 1991. Mr. Brock was a division
controller of Learning Tree International, a technical education company, from
February 1988 through July 1991.
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.
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, 1999.
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 1999, $293,408 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 dated December 31,
1989 filed with the Securities and Exchange Commission on
April 2, 1990.
10.2 Form of Amendment to Management Agreement.
10.3 Form of Second Amendment to Management Agreement.
24. 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 17, 2000 Registrant
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
Stephen M. Bess
President
By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
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 17, 2000
*
Douglas P. Goodrich Director March 17, 2000
*
Susan C. Santo Director March 17, 2000
* 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 15
Statements of revenues collected and expenses paid and
other changes in cash for the years ended December 31,
1999, 1998, and 1997 16
Notes to the statements of revenues collected and expenses
paid and other changes in cash 17-19
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>
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, 1999, on the cash basis of
accounting described in Note 1.
San Francisco, California
March 17, 2000
<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>
1999 1998 1997
-------------------------------------------------------
Revenues collected:
<S> <C> <C> <C>
Lease receipts $ 2,245,736 $ 2,551,476 $ 2,396,321
Interest and other income 68,387 70,504 48,250
-------------------------------------------------------
Total revenues collected 2,314,123 2,621,980 2,444,571
Expenses paid (reimbursed):
Management fees 293,408 288,839 282,810
Repairs and maintenance 344,705 320,437 282,612
Insurance 15,549 11,183 14,068
Property taxes 13,858 18,382 (12,793)
Accounting and legal fees 6,418 7,217 14,787
Storage, repositioning, and other 23,726 10,098 17,420
-------------------------------------------------------
Total expenses paid 697,664 656,156 598,904
-------------------------------------------------------
Excess of revenues collected over
expenses paid 1,616,459 1,965,824 1,845,667
-----------------------------------------------------
Other increases (decreases) in cash:
Prepaid mileage, reimbursable repairs,
and other expenses (37,375) (52,067) (10,818)
Receipt of proceeds from sold or destroyed cars 97,502 94,862 31,713
Receipt of proceeds for transfer of car ownership 131,000 269,000 243,500
Payments to investors for sold or destroyed cars (97,502) (94,862) (31,713)
Payments to investors for transfer of car ownership (127,220) (260,340) (238,080)
Distributions to investors (1,941,463) (1,909,390) (1,864,121)
Commission paid (3,780) (8,660) (6,500)
-------------------------------------------------------
Net other decreases in cash (1,978,838) (1,961,457) (1,876,019)
-------------------------------------------------------
Net (decrease) increase in cash (362,379) 4,367 (30,352)
Cash at beginning of year 1,318,995 1,314,628 1,344,980
-------------------------------------------------------
Cash at end of year $ 956,616 1,318,995 $ 1,314,628
=======================================================
</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, 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). 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, 1999, 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, 1999, 1998, and 1997, 490 cars, 485 cars, and 477 cars,
respectively which were owned by the investors, were being managed by IMI
under the Program. As of December 31, 1999, all of the 490 cars owned by
investors were covered by lease arrangements. During 1999, eight cars were
added to the Program, three cars were destroyed, and six cars were
transferred between investors within the Program and IMI received a
commission fee of $3,780 to handle the 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, 1999, all 490 cars were
leased on a fixed rate basis.
The weighted-average monthly rental rate per car in 1999 was $374. The
weighted-average monthly rental rate per car in 1998 was $436. The
weighted-average available car per day was 485.32, 480.83, and 473.94 for
1999, 1998, and 1997, respectively.
The lessees accounting for 10% or more of total revenues collected during
1999, 1998, and 1997 were Louis Dreyfus Corp. (13% in 1999, 13% in 1998,
and 15% in 1997), Canadian Pacific Railroad (13% in 1999, 13% in 1998, and
16% in 1997), San Luis Central Railroad Co. (17% in 1999, 16% in 1998, and
16% in 1997), Union Pacific Railroad (12% in 1999, 19% in 1998, and 20% in
1997), KBSR Railroad (10% in 1998 and 1997), and General Chemical Co. (14%
in 1999, 13% in 1998, and 10% in 1997).
<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, 1999
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, 1999, 1998, and 1997 to be
$603,179, $836,155, and $781,906, respectively.
5. GEOGRAPHIC INFORMATION
Certain of the Program's railcars operate in Canada.
A limited number of transactions are denominated in foreign currency.
Increases and decreases resulting from foreign currency transactions are
included in the Statements of Revenues Collected and Expenses Paid and
Other Changes in Cash and are not material. Canadian lease receipts
accounted for 14% of total lease receipts of the Program in 1999.
(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, incorporated by
reference to the Program's Annual Report on
Form 10-K dated December 31, 1989 filed with
the Securities and Exchange Commission on April 2, 1990. *
10.2 Form of Amendment to Management Agreement
10.3 Form of Second Amendment to Management Agreement
24. Power of Attorney 20
- -----------------------------
* Incorporated by reference. See page 12 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 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,
2000 and shall apply only to the annual reports and any amendments thereto filed
with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Stephen M. Bess
--------------------------------------
Stephen M. Bess
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 956,616
<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> 2,314,123
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 697,664
<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>
AMENDMENT TO MANAGEMENT AGREEMENT
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
This Amendment to Management Agreement is made as of the date set forth
below opposite the signature of "Owner".
The undersigned signatory identified as "Owner" is party to a
Management Agreement with PLM Investment Management, Inc. ("IMI"), formerly "PLM
Railcar Management, Inc.", covering the management of Owner's covered hopper
railcar(s) identified therein.
In consideration of the continuing appointment of IMI as Manager by
Owner, and for other good and valuable consideration, Owner and IMI do hereby
amend the Management Agreement as follows:
1. The Management Agreement shall be extended for a fixed term not to
exceed five years, ending October 1, 1994. If investor has not given written
notice to the Manager, provided herein below, this Agreement shall, at the
option of Manager, be renewed for an additional term of five years. If investor
elects to terminate this Agreement at the expiration date, investor shall so
notify Manager no fewer than 60 days prior to the expiration date.
2. IMI shall receive a minimum monthly management fee of $38 per car.
Said minimum monthly management fee shall be prorated on a daily basis for any
period less than a full month. In addition, IMI shall receive an incentive
management fee of 15% of net income over $750 per car per quarter.
3. Any notice to IMI shall be addressed as follows:
PLM Investment Management, Inc.
655 Montgomery Street, Suite 1200
San Francisco, CA 94111
Attn: Investor Services
or to such other address as may be designated by IMI in writing.
Except as modified by this Amendment, all other terms and conditions of
the Management Agreement shall remain the same for the extended term of the
Management Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Management Agreement as of the date set forth below opposite the signature of
Owner.
PLM INVESTMENT MANAGEMENT, INC.
By: /s/Stephen M. Bess
Title: Senior Vice President
OWNER
By: /s/William Armbrustor
SECOND AMENDMENT TO MANAGEMENT AGREEMENT
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
This Second Amendment to Management Agreement is made as of the date
set forth below opposite the signature of "Owner".
The undersigned signatory identified as ("Owner") is party to a
Management Agreement with PLM Investment Management, Inc. ("IMI" or "Manager"),
covering the management of the covered hopper railcars identified therein. All
references to "RMI" in the Management Agreement shall be deemed to refer to IMI.
In consideration of the continuing appointment of IMI as Manager by
Owner, and for other good and valuable consideration, Owner and IMI do hereby
amend the Management Agreement as follows:
1. The Management Agreement shall be extended for a fixed term of
five years, beginning October 1, 1999 and expiring September 30,
2004.
2. IMI shall receive a minimum monthly management fee of $38 per
car. Said minimum monthly management fee shall be prorated on a
daily basis for any period less than a full month. In addition,
IMI shall receive an incentive management fee of 15% of net
income over $750 per car per quarter.
Except as modified by this Amendment, all other terms and conditions of
the Management Agreement shall remain the same for the extended term of the
Management Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Management Agreement as of the date set forth below opposite the signature of
Owner.
PLM INVESTMENT MANAGEMENT, INC. OWNER'S SIGNATURE
By: /s/Stephen M. Bess By:
Title: Senior Vice President
Date:
