UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Initial
--------------------
FORM 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal year ended
December 31, 1995.
[ ] 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 33-83216-01
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PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 94-3209289
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 900, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 34.
Total number of pages in this report: 37.
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
Professional Lease Management Income Fund I, L.L.C., a Delaware Limited
Liability Company (Fund I or the Company) was formed on August 22, 1994, to
purchase, lease, charter, or otherwise invest in, a diversified portfolio of
long-lived, low obsolescence capital equipment that is transportable by and
among prospective users (the Equipment). The securities represent limited
liability company interests (the Class A Units) which are offered to the public.
The Company's offering became effective on January 23, 1996. PLM Financial
Services, Inc. (FSI) is the Manager of the Company and is the initial Class B
Member. The purchase price of the Class A Units is $20.00 per Class A Unit. A
minimum of 75,000 Class A Units and an anticipated maximum of 5,000,000 Class A
Units will be offered.
The primary objectives of the Company are:
(i)Investment in and leasing of capital equipment: to invest in a
diversified leasing portfolio of low obsolescence Equipment having long lives
and high residual values, at prices that the Manager believes to be below
inherent values and to place the Equipment on lease or under other contractual
arrangements with creditworthy lessees and operators of Equipment;
(ii) Safety through diversification: to create a significant degree of
safety relative to other equipment leasing investments through the purchase of a
diversified Equipment portfolio. This diversification may reduce the exposure to
market fluctuations in any one sector. The purchase of used long-lived, low
obsolescence Equipment typically at prices which are substantially below the
cost of new equipment should also reduce the impact of economic depreciation and
may create the opportunity for appreciation in certain market situations, where
supply and demand return to balance from oversupply conditions;
while providing:
(iii) Cash distributions: to generate cash distributions, which may be
substantially tax-deferred (i.e., distributions which are not subject to current
taxation) during the early years of the Company, to investors beginning in the
month after the minimum number of Class A Units are sold in such Company, a
portion of which may represent a return of an investor's investment; and
(iv)Growth potential through reinvestment: to increase the Company's
revenue base by reinvesting a portion of its operating cash flow in additional
Equipment in order to grow the size of its portfolio. Since net income and
distributions are affected by a variety of factors, including purchase prices,
lease rates and costs and expenses, growth in the size of the Company's
portfolio does not mean that in all cases the Company's aggregate net income and
distributions will increase upon the reinvestment of operating cash flow.
At December 31, 1995, the Company had received $62,887,260 (3,144,363
units) in Class A subscriptions. As of December 31, 1995, the Fund admitted
$56,627,760 (2,831,388) Class A Units. As of March 6, 1996, the Fund had
received a total of $76,659,540 (3,832,977) Class A Units, and had admitted
$76,588,640 (3,829,432) Class A Units. As of April 13, 1995, the Company had
accepted subscription agreements for 79,408 Class A Units ($1,588,160) thereby
meeting the minimum subscriptions of 75,000 Class A Units, exclusive of
subscriptions from Pennsylvania residents, needed for release of funds from
escrow.
Between the eighth and tenth years of operations of the Company, the
Manager intends to begin the dissolution and liquidation of the Company in an
orderly fashion, unless the Company is terminated earlier upon sale of all of
the equipment or by certain other events. However, under certain circumstances,
the term of the Company may be extended. In no event will the Company extend
beyond December 31, 2010.
<PAGE>
Table 1, below, lists cumulative offering proceeds, the cost of equipment
in the Company's portfolio, and the cost of investments in unconsolidated
special purpose entities, at December 31, 1995:
<TABLE>
TABLE 1
Use of proceeds (through December 31, 1995)
Total gross offering proceeds: $ 56,627,760
Equipment purchases:
<CAPTION>
Units Type Manufacturer Cost
- ----------------------------------------------------------------------------------------------------------------------
Equipment held for operating leases:
<S> <C> <C> <C>
1 Bulk carrier marine vessel Hitachi Shipbuilding & Engineering Co. $ 12,256,532
1 737 Commercial aircraft Boeing 4,000,000
245 Boxcars Various 4,951,450
314 Tank cars Various 8,160,940
450 Piggyback Trailers Various 6,771,028
-------------------
Total equipment $ 36,139,950<F2>
===================
Investments in unconsolidated special purpose entities:
.33 Two trusts consisting of: Boeing
Three 737-200A Stage II
commercial aircraft Boeing 9,003,825<F1>
Two aircraft engines Pratt Whitney 373,296<F1>
Portfolio of rotable components Various 621,879<F1>
.14 Trust consisting of seven 737-200A
Stage II commercial aircraft Boeing 4,300,000
-------------------
Total investments $ 14,299,000
===================
<FN>
<F1> Jointly owned by Fund I and affiliated partnerships.
<F2> Includes costs capitalized, subsequent to the date of purchase.
</FN>
</TABLE>
The equipment is generally leased under operating leases for a term of one
to six years.
The lessees of the equipment include, but are not limited to: Canadian
Airlines, Transportation Airline Portugal, and Norfolk Southern. As of December
31, 1995, all of the equipment was on lease.
(B) Management of Company Equipment
The Company has entered into an equipment management agreement with PLM
Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI, for the
management of equipment. IMI agreed to perform all services necessary to manage
the transportation equipment on behalf of the Company and to perform or contract
for the performance of all obligations of the lessor under the Company's leases.
In consideration for its services and pursuant to the Operating Agreement, IMI
will be entitled to a monthly management fee. (See Financial Statements, Notes 1
and 2).
(C) Competition
(1) Operating Leases vs. Full Payout Leases
Generally, the equipment owned by the Company is leased out on an operating
lease basis wherein rents owed during the initial noncancelable term of the
lease are insufficient to recover the purchase price of the equipment. The short
to mid-term nature of operating leases generally command a higher rental rate
than longer term, full payout leases and offers lessees relative flexibility in
their equipment commitment. In addition, the rental obligation under an
operating lease need not be capitalized on the lessee's balance sheet.
The Company encounters considerable competition from lessors utilizing full
payout leases on new equipment, i.e., leases which have terms equal to the
expected economic life of the equipment. Full payout leases are written for
longer terms and for lower monthly rates than the Company offers. While some
lessees prefer the flexibility offered by a shorter term operating lease, other
lessees prefer the rate advantages possible with a full payout lease.
Competitors of the Company may write full payout leases at considerably lower
rates, or larger competitors with a lower cost of capital may offer operating
leases at lower rates, and as a result, the Company may be at a competitive
disadvantage.
(2) Manufacturers and Equipment Lessors
The Company also competes with equipment manufacturers who offer operating
leases and full payout leases. Manufacturers may provide ancillary services
which the Company cannot offer, such as specialized maintenance service
(including possible substitution of equipment), training, warranty services, and
trade-in privileges.
The Company competes with many equipment lessors, including ACF Industries,
Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, Greenbrier Leasing Company, Polaris Aircraft Leasing Corp., GPA
Group Plc, and other limited partnerships which lease the same types of
equipment.
(D) Demand
The Company invests in transportation-related capital equipment.
The following describe the markets for the Company's equipment:
(1) Commercial Aircraft
International airlines are expected to post an aggregate $5.7 billion profit for
1995, an indication that the world air transport industry made a dramatic
turnaround during the year.(3) While U.S. air traffic growth slowed during 1995,
capacity levels decreased, resulting in higher load factors, lower unit costs,
and improved yields. Worldwide, airlines took delivery of 517 commercial jets,
the lowest number since 1988. A continuing decrease in 1996 deliveries is
expected to improve the supply-demand balance.(4)
Several factors have favorably impacted the market for "second generation"
commercial jets, the type owned by the Company, including Boeing 737-200s. In
addition to fewer deliveries, the new generation of narrowbody aircraft has as
yet failed to produce any significant savings in carriers' direct operating
costs, and there are clear indications of further carrier consolidation within
the U.S. and European markets. These trends, expected to continue through 1996,
have led to increases in demand, rental rates, and market values for "second
generation" commercial aircraft.
The Company owns predominantly aircraft that are affected by the FAA
regulatory requirements. However, this equipment is on leases in foreign markets
and has been commanding lease rates higher than those available in the U.S.
(2) Aircraft Engines
Most airlines maintain an inventory of spare engines in order to minimize
aircraft downtime due to engine maintenance and overhaul requirements.
Although Stage II engines do not meet future U.S. and European noise
regulations, those owned by the Company are the most advanced Stage II engines
produced, compatible with all models of Boeing 727, 737-200, and McDonnell
Douglas DC-9-30 series aircraft. The resurgence in demand for narrowbody
aircraft in the U.S. and Europe has favorably impacted lease rates and values
for these Stage II engines.
(3) Source: January 1996 issue, Air Transport World
(4) Source: February 1996 issue, Air Transport World
<PAGE>
(3) Aircraft Rotables
Aircraft rotables are a predetermined quantity of replacement spare parts held
by airlines as inventory. They can be removed from an aircraft or engine,
overhauled, and then recertified and refitted to the aircraft in "as-new"
condition. Rotables carry specific identification numbers and can thus be
individually tracked. They include landing gear, certain engine components,
avionics, auxiliary power units, replacement doors, control surfaces, pumps,
valves, and other similar equipment. The useful life of a rotable is usually
measured in terms of either time in service or number of takeoffs and landings
(cycles). While specific guidelines apply to rotables for the length of time or
number of cycles between overhauls, there is no preset limit to the number of
times a rotable can be overhauled and recertified. In practice, a component will
be overhauled until the cost to do so exceeds its replacement cost. Airlines are
expected to continue utilizing off-balance sheet financing such as
sale-leasebacks and inventory pooling arrangements to finance spare parts
inventories.
(4) Railcars
Nearly all the major railroads reported substantial revenue increases during
1995. As additional industry consolidation is expected in 1996, these mergers
should produce further operating efficiencies leading to continued increases in
revenues and profits.(5) Car loadings rose approximately 3% during 1995 with
chemicals, metals, and grain experiencing the largest gains.(6) Car demand for
liquefied petroleum gas and liquid fertilizer service was also strong throughout
the year.
The Company's fleet experienced almost 100% utilization during 1995. The
few cars out of service were undergoing scheduled maintenance or repair. The
Manager believes rates are at the top of the cycle for all types of cars owned
by the Company. With demand continuing high, rental rates for most types of cars
owned by the Company are expected to remain relatively strong during 1996.
On the supply side, industry experts predict 60,853 new car builds and
34,353 retirements for a net gain of about 2.2% in the total U.S. fleet during
1996. While car builders are still busy, orders are not coming in as rapidly as
in the last two years, so it is likely additions will not significantly outpace
retirements this year.(7)
(5) Marine Vessel
The Company's vessel operates primarily in pooled vessel operations. In contrast
to longer-term, fixed-rate time charter or bareboat charters, this operating
approach provides greater flexibility in response to changes in demand and, the
Manager believes, has the potential to achieve a higher average return over the
period the vessel is owned.
Over the first half of 1995, freight rates for small to medium-sized dry
bulk vessels, the type owned by the Company, continued the improvement begun in
late 1994. The Baltic Freight Index (an industry standard index for dry freight
rates) hit an all-time high in May 1995. Although this index later declined, it
ended 1995 at a level slightly higher than the year before. In 1996, freight
rates are expected to hold at current levels, with some improvement possible
over the latter half of the year. On the supply side, newbuilding orders for the
classes of vessels owned by the Company are at nearly the same levels as in
1995. On a long-term basis, the level of scrappings and retirements will be
influenced by market freight rates which are not expected to grow at more than a
moderate level. Another factor which affects the volume of newbuilding is
government subsidy policies, particularly in those countries which are members
of the Organization for Economic Co-Operation and Development (OECD). While the
OECD nations did not come to a firm agreement regarding ship building subsidies
in 1995, it appears that in 1996 and beyond, subsidies should decline, reducing
newbuilding levels.
(5) Source: Railway Age -- December 1995.
(6) Source: The Journal of Commerce -- November 7, 1995.
(7) Source: Progressive Railroading -- April 1996 and Railway Progress
Institute -- Annual Report & Membership Directory
<PAGE>
(6) Intermodal Trailers
After three robust years, growth in the intermodal trailer market was flat in
1995. This lack of growth resulted from several factors including a lackluster
domestic economy, environmental issues, the peso devaluation, a new teamsters
agreement allowing more aggressive pricing, and consolidation among U.S.
railroads. Industry experts believe these factors may lead to an improved
balance in supply and demand and encourage suppliers to retire older, obsolete
equipment in 1996. The Company's piggyback trailer fleet, with an average age of
one year compared to the industry norm of 10 years, experienced better
utilization than that of its competitors, averaging near 80% during 1995.
Expansion and utilization levels in the intermodal market are anticipated to
improve in 1996 and trailer loadings are expected to increase 3-4% per year
throughout the rest of the decade.
(E) Government Regulations
The use, maintenance, and ownership of equipment is regulated by federal, state,
local and/or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Company's ownership and operation of
equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Company's equipment portfolio are either
registered or operated internationally. Such equipment may be subject to adverse
political, government, or legal actions, including the risk of expropriation or
loss arising from hostilities. Certain of the Company's equipment is subject to
extensive safety and operating regulations which may require the removal from
service or extensive modification of such equipment to meet these regulations at
considerable cost to the Company. Such regulations include (but are not limited
to):
(1) the U.S. Oil Pollution Act of 1990 (which established liability for
operators and owners of vessels, mobile offshore drilling units, etc.
that create environmental pollution);
(2) the U.S. Department of Transportation's Aircraft Capacity Act of 1990
(which limits or eliminates the operation of commercial aircraft in the
U.S. that do not meet certain noise, aging, and corrosion criteria);
(3) the Montreal Protocol on Substances that Deplete the Ozone layer and
the U.S. Clean Air Act Amendments of 1990 (which call for the control
and eventual replacement of substances that have been found to cause or
contribute significantly to harmful effects on the stratospheric ozone
layer and which are used extensively as refrigerants in refrigerated
marine cargo containers, over-the-road trailers, etc.);
(4) the U.S. Department of Transportation's Hazardous Materials Regulations
(which regulate the classification of and packaging requirements for
hazardous materials and which could apply particularly to the Company's
tank cars).
ITEM 2. PROPERTIES
The Company neither owns nor leases any properties other than the equipment
it has purchased for leasing purposes. At December 31, 1995, the Company owned a
portfolio of transportation equipment as described in Part I, Table 1. The
Company intends to acquire additional equipment in 1996 with the proceeds of the
Company offering.
The Company maintains its principal office at One Market, Steuart Street
Tower, Suite 900, San Francisco, California 94105-1301. All office facilities
are provided by FSI without reimbursement by the Company.
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 Company's limited partners
during the fourth quarter of its fiscal year ended December 31, 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S EQUITY AND RELATED UNITHOLDER MATTERS
Pursuant to the terms of the Operating Agreement, the Manager is generally
entitled to a 1% interest in the profits and losses and 15% of Cash Available
for Distributions of the Company. After the investors receive cash distributions
equal to their original Capital Contributions the Manager's interest will
increase to 25%. The Manager is the sole holder of such interests. Gross income
in each year of the Company will be specially allocated to the Manager in the
amount equal to the lesser of (i) the deficit balance, if any, in the Manager's
capital account calculated under generally accepted accounting principles using
the straight-line method of depreciation, and (ii) the deficit balance, if any,
in the Manager's capital account calculated under Federal income tax
regulations. The remaining interests in the profits and losses and distributions
of the Company are owned as of December 31, 1995, by approximately 3,094 holders
of Units in the Company.
There are several secondary markets in which limited Company units trade.
Secondary markets are characterized as having few buyers for limited Company
interests and, therefore, generally are viewed as inefficient vehicles for the
sale of Company units. There is presently no public market for the Units and
none is likely to develop. To prevent the Units from being considered "publicly
traded" and, thereby, to avoid taxation of the Company as an association treated
as a corporation under the Internal Revenue Code, the Units will not be
transferable without the consent of the Manager, which may be withheld in its
absolute discretion. The Manager intends to monitor transfers of Units in an
effort to ensure that they do not exceed the number permitted by certain safe
harbor rules promulgated by the Internal Revenue Service.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Table 2, below, lists selected financial data for the Company:
TABLE 2
For the year ended December 31, 1995, and for
the period from inception (August 22, 1994)
to December 31, 1994
<TABLE>
<CAPTION>
1995 1994
-----------------------------
<S> <C> <C>
Operating results:
Total revenues $ 4,149,484 $ --
Net gain (loss) on disposition of
equipment 24,593 --
Net loss (617,991) --
At year-end:
Total assets $ 62,719,980 $ 100
Total liabilities 1,318,256 --
Cash distributions $ 1,302,566 $ --
Cash distribution which represent
a return of capital $ 1,179,332 $
Per Class A unit:
Net loss Various, N/A
Cash distributions according to N/A
interim
Cash distributions which represent closings
a return of capital N/A
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
Management's Discussion and Analysis of Financial Condition and Results of
Operations relates to the Financial Statements of Professional Lease Management
Income Fund I, L.L.C. (the Company). The following discussion and analysis of
operations focuses on the performance of the Company's equipment in various
sectors of the transportation industry, and its effect on the Company's overall
financial condition.
The analysis is organized in the following manner:
- Results of Operations - Year Over Year Summary and Factors Affecting
Performance
- Financial Condition - Capital Resources, Liquidity, and Distributions
- Outlook for the Future
(A) Results of Operations
(1) Year over Year Summary
The Company is in the initial equity-raising stage. The Company commenced
significant operations in May 1995. As of December 31, 1995, the Company had
purchased and placed into service $50.4 million of equipment (see Financial
Statements Note 3). Of the acquisitions, $14.3 million represents partial
interests in aircraft, engines and rotables purchased by the Company which have
been placed in special purpose entities for ownership purposes. All of these
purchases were completed with a combination of unrestricted cash, interim
financing, and an advance from an affiliate of the Manager. The nine day advance
from the Manager was repaid (including interest at commercial loan rates) in
July of 1995. Revenues of $4.1 million were generated during 1995. Expenses of
$4.8 million for 1995 consisted primarily of depreciation expense, using the
double-declining balance method, and normal operating costs incurred as
equipment is being purchased and placed in service.
The Company's performance during 1995 is not necessarily indicative of
future periods.
The Manager continues to offer Units in the Company. All equipment
purchased by the Company was on lease at December 31, 1995.
(2) Factors Affecting Performance
(a) Re-leasing Activity and Repricing Exposure to Current Economic Conditions.
The exposure of the Company's equipment portfolio to re-pricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for transportation equipment include supply and demand for similar or comparable
types or kinds of transport capacity, desirability of the equipment in the lease
market, market conditions for the particular industry segment in which the
equipment is to be leased, overall economic conditions both domestically and
worldwide, various regulations concerning the use of the equipment, and others.
The equipment portfolio owned by the Company at December 31, 1995 has a weighted
average lease term of greater than 36 months, and experienced no re-pricing
exposure for the year ended December 31, 1995.
(b) Investment Risk During Offering Phase
Investment risk during the offering phase of Company operations occurs when the
Company cannot deploy available equity for purchases in a timely manner either
due to the lack of availability of equipment that meets the criteria of the
Manager's Credit Review Committee, or to the lack of equity or financing sources
available to fund the purchase of such equipment.
During 1995, the Company acquired one marine vessel for $12.3 million , one
commercial aircraft for $4.0 million, 450 piggyback trailers for $6.8 million,
314 tank cars for $8.2 million (which includes $0.1 million in capital
improvements), 245 boxcars for $5.0 million, a 14% beneficial interest in a
trust which own seven Boeing 737-200A aircraft for $4.3 million, and a one-third
beneficial interest (33.33%) in two trusts (the Trusts) which own three 1983
Boeing 737-200A aircraft, equipped with Pratt & Whitney JT8D-17A engines, two
spare Pratt & Whitney JT8D-17A engines and a rotables package for $10.0 million.
The remaining partial interests are owned by affiliated partnerships. These
purchases were completed with a combination of interim financing, available
unrestricted cash and an advance from an affiliate of the Manager. The nine day
advance from the Manager was repaid (including interest at commercial loan
rates) in July of 1995.
The Company has approximately $11 million in equity available for purchases
that has not been specified for the acquisition of any particular equipment.
(c) Equipment Valuation
In March 1995, the Financial Accounting Standards Board (FASB) issued statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Company adopted SFAS 121 during 1995, the
effect of which was not material as the method previously employed by the
Company was consistent with SFAS 121. In accordance with SFAS 121, the Company
reviews the carrying value of its equipment at least annually in relation to
expected future market conditions for the purpose of assessing the
recoverability of the recorded amounts. If projected undiscounted cash flows
(future lease revenue plus residual values) are less than the carrying value of
the equipment, the equipment is written down to the estimated fair value. No
adjustments to reflect impairment of individual equipment carrying values were
required for the year ended December 31, 1995.
As of December 31, 1995, the Manager estimates the current fair market
value of the Company's equipment portfolio to be approximately $50.7 million.
(B) Financial Condition - Capital Resources, Liquidity, and Distributions
The Manager has entered into a joint $25 million credit facility (the Committed
Bridge Facility) on behalf of the Company, PLM Equipment Growth Fund II, PLM
Equipment Growth Fund III, PLM Equipment Growth Fund IV, PLM Equipment Growth
Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund
VII, all affiliated Partnerships, and TEC Acquisub, Inc. (TECAI), an indirect
wholly-owned subsidiary of the Manager, which may be used to provide interim
financing of up to (i) 70% of the aggregate book value or 50% of the aggregate
net fair market value of eligible equipment owned by an affiliate plus (ii) 50%
of unrestricted cash held by the borrower. The Committed Bridge Facility became
available to the above mentioned Partnerships on December 20, 1993, and became
available to the Company on May 8, 1995 and was amended and restated on
September 27, 1995 to expire on September 30, 1996. The Committed Bridge
Facility also provides for a $5 million Letter of Credit Facility for the
eligible borrowers. Outstanding borrowings by the Company, TECAI or PLM
Equipment Growth Funds II through VII reduce the amount available to each other
under the Committed Bridge Facility. Individual borrowings may be outstanding
for no more than 179 days, with all advances due no later than September 30,
1996. The Committed Bridge Facility prohibits the Company from incurring any
additional indebtedness. Interest accrues at either the prime rate or adjusted
LIBOR plus 2.5% at the borrower's option and is set at the time of an advance of
funds. To the extent the Company is unable to raise sufficient capital through
the sale of interests to repay its portion of the Committed Bridge Facility, the
Company will continue to be obligated under the Committed Bridge Facility until
the Company generates proceeds from operations or the sale of Equipment
sufficient for repayment. Borrowings by the Company are guaranteed by the
Manager. As of December 31, 1995, neither the Company, Partnerships, nor TECAI
had any outstanding borrowings under the Committed Bridge Facility.
As of December 31, 1995, the Company had entered into a commitment to
purchase a 50% ownership in a marine vessel for $3.8 million (the remaining
interest of this marine vessel will be owned by an affiliated partnership). The
Company has signed a Memorandum of Agreement to purchase the vessel and lodged a
deposit of $0.4 million with the current owners. The total amount of the deposit
is included in this balance sheet as equipment acquisition deposits. The Company
received delivery of this equipment during March 1996. Subsequent to year-end,
the Company purchased 50 new refrigerated trailers for $1,850,000, and a Boeing
737-200A aircraft equipped with Pratt & Whitney JT8D-17A jet engines from
Canadian Airlines for a purchase price of $5,610,000. The Company used existing
cash for the purchase of these assets. The Company relies on operating cash flow
to meet its operating obligations, make cash distributions to Class A and B
Unitholders, and grow the Company's equipment portfolio through reinvestment of
any remaining surplus cash available in additional equipment.
For the year ended December 31, 1995, the Company generated sufficient
operating income to meet its operating obligations and pay distributions to
those Class A and B Unitholders who have become members of the Company.
On a short term basis the existing portfolio of equipment is capable of
generating sufficient cash flow to meet operating obligations and pay
distributions.
In the long term, equity raised will be used to increase the equipment
portfolio which will continue to generate sufficient cash flow to meet operating
obligations and pay distributions.
(C) Outlook for the Future
Several factors may affect the Company's operating performance in 1996 and
beyond, including changes in the markets for the Company's equipment and changes
in the regulatory environment in which the equipment operates.
(1) Investment Risk
The Company is in its offering phase, and by December 31, 1995, has sold
approximately 63% of the maximum of 5,000,000 Class A Units offered in the
Offering Prospectus dated January 24, 1995 (the Prospectus). The size of the
Company's initial equipment portfolio is subject to total equity raised, and any
borrowings obtained by the Manager on behalf of the Company for the acquisition
of equipment. (Permanent borrowings obtained by the Manager are anticipated to
be limited to approximately 20% of the aggregate cost of the equipment at the
time any such borrowings are originated). While the Company has already achieved
its minimum offering size, it cannot predict with certainty that it will sell
all Class A Units offered in the Prospectus. Should the Company not be
successful in selling all the Class A Units, the initial equipment portfolio may
be smaller than originally anticipated.
The Manager had identified approximately $15 million of equipment for
acquisition by the Company in the Prospectus, which was purchased with equity
raised from the sale of Class A Units. Subsequently, the company has purchased
an additional $35 million in equipment with equity raised from further sales of
Class A Units. The availability of suitable equipment for purchase with
subsequent sales of Class A Units cannot be known with certainty at this time,
and the Manager cannot predict with accuracy the impact of such acquisitions on
Company operations.
(2) Repricing and Reinvestment Risk
The equipment portfolio owned by the Company at December 31, 1995, has a
weighted average lease term of greater than 36 months. The Manager of the
Company does not believe sufficient information is now available to predict with
any degree of certainty the impact of re-leasing activity or re-pricing exposure
on the Company's current equipment portfolio when, on average, its equipment
leases begin to expire.
The Manager intends to grow the Company's equipment portfolio through
reinvestment of any remaining surplus cash available after meeting its operating
obligations and making cash distributions in additional equipment. Pursuant to
the Fifth Amended and Restated Operating Agreement of Professional Lease
Management Income Fund I, L.L.C. (the Agreement), the Company will reinvest
surplus cash available for a period of six years after the Closing Date of the
Company's offering period. As the Company is still in its offering phase, the
Manager can neither predict with any certainty whether the Company will be able
to achieve a level of operations sufficient to generate cash available for
reinvestment in equipment, nor the impact such a reinvestment strategy, if
successful, would have on Company operations.
(3) Residual Risk
A portion of the total return on the Class A and B Unitholders' investment in
the Company is expected to be realized on the sale or liquidation of the
Company's equipment portfolio, the majority of which is anticipated during the
liquidation phase of Company's operations. The Manager's Credit Review Committee
of the Company selects equipment for acquisition based on many factors,
including anticipated residual values from the eventual sale of that equipment.
These residuals may be affected by several factors during the time the equipment
is held , including changes in regulatory environments in which the equipment is
operated, the onset of technological obsolescence, changes in the equipment
markets , perceived values for equipment at the time of sale, and others. As the
impact of any of these factors becomes difficult to forecast with accuracy over
extended time horizons, the Manager cannot predict with certainty that the
anticipated residual values for equipment selected for acquisition will actually
have realized when the equipment is sold.
Prior to the liquidation phase of Company's operations, the Manager may
decide to selectively sell equipment either when it has determined that
opportunities exist to realize significant gains on the sales; when continuing
ownership of the equipment becomes prohibitively expensive; or when the Manager
determines that continuing ownership of the equipment may result in the
realization of unsatisfactory residual values. At this time, the Manager cannot
predict when such occasions may occur, and thus cannot predict with any
certainty the impact of such events on Company operations.
(4) Impact of Government Regulations on Future Operations
The Manager operates the Company's equipment in accordance with current
applicable regulations (see Item 1, Section E "Government Regulations").
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Company's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Company of meeting regulatory compliance for the same
equipment operated between countries. Currently, the Manager has observed rising
insurance costs to operate certain vessels into U.S. ports resulting from
implementation of the U.S. Oil Pollution Act of 1990. Ongoing changes in the
regulatory environment, both in the U.S. and internationally, cannot be
predicted with any accuracy and preclude the Manager from determining the impact
of such changes on Company operations, purchases, or sale of equipment.
(5) Additional Capital Resources and Distribution Levels
The Company is still in the initial equity offering stage. As of December 31,
1995, the Company had raised approximately $62.9 million in equity. The Manager
intends to use the Company's initial equity and borrowings, if deemed
appropriate, to purchase the Company's initial equipment portfolio. The Company
intends to rely on operating cash flow to meet its operating obligations, make
cash distributions to Class A Unitholders, and grow the Company's equipment
portfolio through reinvestment of any remaining surplus cash available in
additional equipment.
Pursuant to the Fifth Amended and Restated Operating Agreement of
Professional Lease Management Income Fund I, L.L.C. (the Agreement), the Company
will cease to reinvest surplus cash in additional equipment beginning in its
seventh year of operations. The Manager intends to pursue a strategy of
selectively redeploying equipment to achieve competitive returns. By the end of
the reinvestment period, the Manager intends to have assembled an equipment
portfolio capable of achieving a level of operating cash flow for the remaining
life of the Company sufficient to meet its obligations and sustain a predictable
level of distributions to the Class A Unitholders.
Geographic Information
The Company operates its equipment in international markets. Although these
operations expose the Company to certain currency, political, credit and
economic risks, the Manager believes these risks are minimal or has implemented
strategies to control the risks as follows: Currency risks are at a minimum
because all invoicing, with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally through the avoidance of operations in countries that do not have a
stable judicial system and established commercial business laws. Credit support
strategies for lessees range from letters of credit supported by U.S. banks to
cash deposits. Although these credit support mechanisms generally allow the
Company 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. Refer to the Financial
Statements, Note 3 for information on the revenues, income, and assets in
various geographic regions.
Revenues and net operating income by geographic region are impacted by the time
period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges which are greatest in the early years due to
the Manager's decision to use the 200% declining balance method of depreciation.
The relationships of geographic revenues, net income (loss) and net book value
are expected to significantly change in the future as additional equity is
raised and invested in equipment in various equipment markets and geographic
areas. An explanation of the current relationships is presented below:
The Company's equipment on lease to US domiciled lessees accounted for 40% of
the revenues generated by owned and partially owned equipment while net
operating income accounted for $197,000 in profits versus $178,500 in loss for
the entire Company. The primary reason for this relationship is the fact that
the Company depreciates its rail equipment over a fifteen year period versus
eight years for other equipment types owned and leased in other geographic
regions. Since railcars make up 63% of the equipment, on an original cost basis,
and 64% of the revenues generated in the United States, it is expected that this
relationship of revenue to net operating income will continue into the near
future for this geographic region, as long as additional equipment types are not
added to the equipment mix. The trailers leased to US domiciled lessees are
expected to become profitable in the near future, as the revenue from the
trailers exceeds the operating costs, and the depreciation recorded by the
Company declines in future periods .
The Company's equipment leased to Canadian domiciled lessees consists of
railcars, an aircraft and a partial interest in another aircraft. Revenues in
Canada accounted for 10% of total revenues while these operations accounted for
$43,800 of the $178,500 of the net operating loss for the entire Company. The
net operating loss generated in Canada was created by the shorter depreciable
life on the partially owned aircraft leased in Canada. While the aircraft in
Canada generated losses for the period, this loss was partially offset by net
operating income from the railcar operations. As the depreciation recorded by
the Company declines in future periods the aircraft is expected to generate net
operating income for the Company.
One marine vessel, which was leased in various regions throughout the period,
accounted for 28% of the revenues and 248% of the net operating loss for the
period. The vessel, representing 23% of the net book value of the Company's
assets and investments, generated a significant depreciation charge for the
period that exceeded the revenues less direct operating costs of the vessel. As
depreciation charges in the future decline, the vessel is expected to generate
net income for the Company.
European operations consist of partial interests in aircraft and aircraft
rotables that are generating revenues that accounted for 21% of combined, owned
and partially owned equipment revenues. The net income generated by this
equipment accounted for $93,700 in profits for the period because lease revenues
exceeded depreciation charges. While this equipment is expected to remain
profitable during the lease term expiring in January 1998 the Company may not be
able to remarket this equipment at comparable rates in the future.
Inflation
There was no significant impact on the Company's operations as a result of
inflation during 1995.
Trends
The Company's operation of a diversified equipment portfolio in a broad base of
markets is intended to reduce its exposure to volatility in individual equipment
sectors. In 1995, market conditions, supply and demand equilibrium, and other
factors varied in several markets. The marine vessel, and rail markets could be
generally categorized by increasing rates as the demand for equipment is
increasing faster than new additions net of retirements. Demand for narrowbody
Stage II aircraft, such as those owned by the Company, has increased as expected
savings from newer narrowbody aircraft have not materialized while deliveries of
the newer aircraft have slowed down. These different markets have had individual
effects on the performance of Company equipment - both declining and improving
performance.
The ability of the Company to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
governmental or other regulations, and others. The unpredictability of some 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
Company's equipment. The Manager continuously monitors both the equipment
markets and the performance of the Company's equipment in these markets. The
Manager may make an evaluation to reduce the Company's exposure to equipment
markets in which it determines that it cannot successfully operate equipment and
achieve acceptable rates of return. Alternatively, the Manager may make a
determination to enter equipment markets in which it perceives opportunities to
profit from supply-demand instabilities or other market imperfections.
The Company intends to use any excess cash flow, after payment of expenses,
loan principal, and cash distributions to acquire additional equipment during
the first seven years of Company's operations. The Manager believes these
acquisitions may generate additional earnings and cash flow for the Company.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Company are listed on the Index to
Financial Statements included in 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 THE COMPANY.
As of the date of this Annual Report, the directors and executive
officers of PLM International (and key executive officers of its subsidiaries)
are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------- ------------------- -------------------------------------------------------
<S> <C> <C>
J. Alec Merriam 60 Director, Chairman of the Board, PLM International,
Inc.; Director, PLM Financial Services, Inc.
Allen V. Hirsch 42 Director, Vice Chairman of the Board, Executive Vice
President of PLM International, Inc.; Director and
President, PLM Financial Services, Inc.; President,
PLM Securities Corp., and PLM Transportation
Equipment Corporation.
Walter E. Hoadley 79 Director, PLM International, Inc.
Robert L. Pagel 59 Director, Chairman of the Executive Committee, PLM
International, Inc.; Director, PLM Financial
Services, Inc.
Harold R. Somerset 61 Director, PLM International, Inc.
Robert N. Tidball 57 Director, President and Chief Executive Officer, PLM
International, Inc.
J. Michael Allgood 47 Vice President and Chief Financial Officer, PLM
International, Inc. and PLM Financial Services, Inc.
Stephen M. Bess 49 President, PLM Investment Management, Inc.; Vice
President, PLM Financial Services, Inc.
David J. Davis 39 Vice President and Corporate Controller, PLM
International and PLM Financial Services, Inc.
Frank Diodati 41 President, PLM Railcar Management Services Canada
Limited.
Douglas P. Goodrich 49 Senior Vice President, PLM International; Senior Vice
President PLM Transportation Equipment Corporation;
President PLM Railcar Management Services, Inc.
Steven O. Layne 41 Vice President, PLM Transportation Equipment
Corporation.
Stephen Peary 47 Senior Vice President, General Counsel and Secretary,
PLM International, Inc.; Vice President, General
Counsel and Secretary, PLM Financial Services, Inc.,
PLM Investment Management, Inc., PLM Transportation
Equipment Corporation; Vice President, PLM
Securities, Corp.
Thomas L. Wilmore 53 Vice President, PLM Transportation Equipment
Corporation; Vice President, PLM Railcar Management
Services, Inc.
</TABLE>
<PAGE>
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM
International in September 1990, having served as a director since February
1988. In October 1988 he became a member of the Executive Committee of the Board
of Directors of PLM International. From 1972 to 1988 Mr. Merriam was Executive
Vice President and Chief Financial Officer of Crowley Maritime Corporation, a
San Francisco area-based company engaged in maritime shipping and transportation
services. Previously, he was Chairman of the Board and Treasurer of LOA
Corporation of Omaha, Nebraska and served in various financial positions with
Northern Natural Gas Company, also of Omaha.
Allen V. Hirsch became Vice Chairman of the Board and a Director of PLM
International in April 1989. He is an Executive Vice President of PLM
International and President of PLM Securities Corp. Mr. Hirsch became the
President of PLM Financial Services, Inc. in January 1986 and President of PLM
Investment Management, Inc. and PLM Transportation Equipment Corporation in
August 1985, having served as a Vice President of PLM Financial Services, Inc.
and Senior Vice President of PLM Transportation Equipment Corporation beginning
in August 1984, and as a Vice President of PLM Transportation Equipment
Corporation beginning in July 1982 and of PLM Securities Corp. from July 1982 to
October 1, 1987. He joined PLM, Inc. in July 1981, as Assistant to the Chairman.
Prior to joining PLM, Inc., Mr. Hirsch was a Research Associate at the Harvard
Business School. From January 1977 through September 1978, Mr. Hirsch was a
consultant with the Booz, Allen and Hamilton Transportation Consulting Division,
leaving that employment to obtain his master's degree in business
administration.
Dr. Hoadley joined PLM International's Board of Directors and its Executive
Committee in September, 1989. He served as a Director of PLM, Inc. from November
1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988.
Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since
1981. He was Executive Vice President and Chief Economist for the Bank of
America from 1968 to 1981 and Chairman of the Federal Reserve Bank of
Philadelphia from 1962 to 1966. Dr. Hoadley had served as a Director of
Transcisco Industries, Inc. from February 1988 through August 1995.
Robert L. Pagel was appointed Chairman of the Executive Committee of the
Board of Directors of PLM International in September 1990, having served as a
director since February 1988. In October 1988 he became a member of the
Executive Committee of the Board of Directors of PLM International. From June
1990 to April 1991 Mr. Pagel was President and Co-Chief Executive Officer of The
Diana Corporation, a holding company traded on the New York Stock Exchange. He
is the former President and Chief Executive Officer of FanFair Corporation which
specializes in sports fans' gift shops. He previously served as President and
Chief Executive Officer of Super Sky International, Inc., a publicly traded
company, located in Mequon, Wisconsin, engaged in the manufacture of skylight
systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis &
Loewi, Inc., a Milwaukee-based investment firm. Mr. Pagel retired from Blunt,
Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the
brokerage and financial industries. Mr. Pagel has also served on the Board of
Governors of the Midwest Stock Exchange.
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), a recently-acquired subsidiary of Alexander & Baldwin, Inc.
Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating
Officer, having served on its Board of Directors since 1978, a position in which
he continues to serve. Between 1972 and 1984, Mr. Somerset served in various
capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture
company headquartered in Honolulu, Hawaii, including Executive Vice President -
Agricultures, Vice President, General Counsel and Secretary. In addition to a
law degree from Harvard Law School, Mr. Somerset also holds degrees in civil
engineering from the Rensselaer Polytechnic Institute and in marine engineering
from the U.S. Naval Academy. Mr. Somerset also serves on the Boards of Directors
for various other companies and organizations, including Longs Drug Stores,
Inc., a publicly-held company headquartered in Maryland.
Robert N. Tidball was appointed President and Chief Executive Officer of
PLM International in March 1989. At the time of his appointment, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April 1989 and a member of the Executive Committee of the
Board of Directors of PLM International in September 1990. Mr. Tidball was
elected President of PLM Railcar Management Services, Inc. in January 1986. 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,
Inc., he was Vice President, a General Manager and a Director of North American
Car Corporation, and a Director of the American Railcar Institute and the
Railway Supply Association.
J. Michael Allgood was appointed Vice President and Chief Financial Officer
of PLM International in October 1992. Between July 1991 and October 1992, Mr.
Allgood was a consultant to various private and public sector companies and
institutions specializing in financial operational systems development. In
October 1987, Mr. Allgood co-founded Electra Aviation Limited and its holding
company, Aviation Holdings Plc of London where he served as Chief Financial
Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served
as a First Vice President with American Express Bank, Ltd. In February 1978, Mr.
Allgood founded and until June 1981, served as a director of Trade Projects
International/Philadelphia Overseas Finance Company, a joint venture with
Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served
in various capacities with Citibank, N.A.
Stephen M. Bess was appointed 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 Corp., a manufacturer of computer peripheral
equipment, from October 1975 to November 1978.
David J. Davis was appointed Vice President and Controller of PLM
International in January 1994. From March 1993 through January 1994, Mr. Davis
was engaged as a consultant for various firms, including PLM. Prior to that Mr.
Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from
July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice
President and Controller for ITEL Containers International Corporation which was
located in San Francisco. Between May 1978 and April 1989, Mr. Davis held
various positions with Transamerica Leasing Inc., in New York, including that of
Assistant Controller for their rail leasing division.
Frank Diodati was appointed President of PLM Railcar Management Services
Canada Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and
Sales for G.E. Railcar Services Canada Limited.
Douglas P. Goodrich was appointed Senior Vice President of PLM
International in March 1994. Mr. Goodrich has also serve as Senior Vice
President of PLM Transportation Equipment Corporation since July 1989, and as
President of PLM Railcar Management Services, Inc. since September 1992, having
been a Senior Vice President since June 1987. Mr. Goodrich was an Executive Vice
President of G.I.C. Financial Services Corporation, a subsidiary of Guardian
Industries Corp. of Chicago, Illinois from December 1980 to September 1985.
Steven O. Layne was appointed Vice President, PLM Transportation Equipment
Corporation's Air Group in November 1992. Mr. Layne was its Vice President,
Commuter and Corporate Aircraft beginning in July 1990. Prior to joining PLM,
Mr. Layne was the Director, Commercial Marketing for Bromon Aircraft
Corporation, a joint venture of General Electric Corporation and the Government
Development Bank of Puerto Rico. Mr. Layne is a major in the United States Air
Force Reserves and senior pilot with 13 years of accumulated service.
Stephen Peary became Vice President, Secretary, and General Counsel of PLM
International in February 1988 and Senior Vice President in March 1994. Mr.
Peary was Assistant General Counsel of PLM Financial Services, Inc. from August
1987 through January 1988. Previously, Mr. Peary was engaged in the private
practice of law in San Francisco. Mr. Peary is a graduate of the University of
Illinois, Georgetown University Law Center, and Boston University (Masters of
Taxation Program).
Thomas L. Wilmore was appointed Vice President - Rail, PLM Transportation
Equipment Corporation, in March 1994 and has served as Vice President, Marketing
for PLM Railcar Management Services, Inc. since May 1988. Prior to joining PLM,
Mr. Wilmore was Assistant Vice President Regional Manager for MNC Leasing Corp.
in Towson, Maryland from February 1987 to April 1988. From July 1985 to February
1987, he was President and Co-Owner of Guardian Industries Corp., Chicago,
Illinois and between December 1980 and July 1985, Mr. Wilmore was an Executive
Vice President for its subsidiary, G.I.C. Financial Services Corporation. Mr.
Wilmore also served as Vice President of Sales for Gould Financial Services
located in Rolling Meadows, Illinois from June 1978 to December 1980.
The directors of the Manager are elected for a one-year term or until their
successors are elected and qualified. There are no family relationships between
any director or any executive officer of the Manager.
ITEM 11. EXECUTIVE COMPENSATION
The Company has no directors, officers or employees. The Company has no
pension, profit sharing, retirement or similar benefit plan in effect as of
December 31, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The Manager is generally entitled to a 15% interest in the Company's
cash distributions and earnings subject to certain allocation
provisions. After the investors receive cash at December 31, 1995, no
investor was known by the Manager to beneficially own more than 5% of
the Units of the Company.
(b) Security Ownership of Management
Neither the Manager and its affiliates nor any executive officer or
director of the Manager and its affiliates own any Units of the Company
as of December 31, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
During 1995, the Company paid or accrued the following fees to FSI or
its affiliates: management fees - $343,208. The Company reimbursed FSI
and/or its affiliates $118,114 for administrative and data processing
services performed on behalf of the Company during 1995. The Company
paid Transportation Equipment Indemnity Company Ltd. (TEI), a wholly
owned, Bermuda-based subsidiary of PLM International, $46,416 for
insurance coverages during 1995 substantially all of which was paid to
third party reinsurance underwriters or placed in risk pools managed by
TEI on behalf of affiliated partnerships and PLM International which
provide threshold coverages on marine vessel loss of hire and hull and
machinery damage. All pooling arrangement funds are either paid out to
cover applicable losses or refunded pro rata by TEI.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions With Promoters
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
4. Limited Partnership Agreement of Partnership. Incorporated by
reference to the Partnership's Registration Statement on Form S-1
(Reg. No. 33-55796) which became effective with the Securities and
Exchange Commission on May 25, 1993.
10.1 Management Agreement between Partnership and PLM Investment
Management, Inc. Incorporated by reference to the Partnership's
Registration Statement on Form S-1 (Reg. No. 33-55796) which became
effective with the Securities and Exchange Commission on May 25,
1993.
10.2 Amended and restated Warehousing Credit Agreement, dated as of
September 27, 1995 with First Union National Bank of North
Carolina. Incorporated by reference to the Partnership quarterly
report on Form 10Q filed with the Securities and Exchange
Commission November 10, 1995.
25. Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
The Company has no directors or officers. The Manager has signed on behalf
of the Company by duly authorized officers.
PROFESSIONAL LEASE MANAGEMENT INCOME
Date: March 19, 1996 FUND I
By: PLM Financial Services, Inc.
Manager
By: *_________________________
Allen V. Hirsch
President
By: /s/ J. Michael Allgood
J. Michael Allgood
Vice President and Chief
Financial Officer
* Stephen Peary, by signing his 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/ Stephen Peary
Stephen Peary
Attorney-in-Fact
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of the Company's Manager on the
dates indicated.
Name Capacity Date
*_________________________
Allen V. Hirsch Director - FSI March 19, 1996
*_________________________
J. Alec Merriam Director - FSI March 19, 1996
*_________________________
Robert L. Pagel Director - FSI March 19, 1996
* Stephen Peary, by signing his 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/ Stephen Peary
Stephen Peary
Attorney-in-Fact
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Report of Independent Auditors 22
Balance sheets as of December 31, 1995 and 1994 23
Statement of operations for the year ended
December 31, 1995 24
Statement of changes in members' equity for the years ended
December 31, 1995
and the period from inception (August 22, 1994)
through December 31, 1994 25
Statements of cash flows for the year ended December 31, 1995 and the
period from inception (August 22, 1994) through December 31,
1994 26
Notes to financial statements 27-32
All other 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 financial statements and notes
thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Members
Professional Lease Management Income Fund I, L.L.C.:
We have audited the financial statements of Professional Lease Management Income
Fund I, L.L.C. as listed in the accompanying index. These financial statements
are the responsibility of the Company'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 the 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Professional Lease Management
Income Fund I, L.L.C. as of December 31, 1995 and 1994, and the results of its
operations for the year ended December 31, 1995 and its cash flows for the year
ended December 31, 1995 and the period from inception (August 22, 1994) through
December 31, 1994, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLC
SAN FRANCISCO, CALIFORNIA
March 15, 1996
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
BALANCE SHEETS
December 31,
<TABLE>
ASSETS
<CAPTION>
1995 1994
-------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating leases $ 36,139,950 $ --
Less accumulated depreciation (2,869,535) --
-------------------------------------
Net equipment 33,270,415 --
Cash and cash equivalents 6,803,946 100
Restricted cash 6,315,548 --
Investment in unconsolidated special purpose entities 14,218,219 --
Accounts receivable, net of allowance for doubtful accounts
of $7,835 in 1995 869,097 --
Prepaid expenses 416,515 --
Equipment acquisition deposits 377,987 --
Organization and offering costs, net of accumulated amortization 389,289 --
-------------------------------------
Total assets $ 62,661,016 $ 100
=====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 664,686 $ --
Due to affiliates 387,197 --
Prepaid deposits and reserves for repairs 207,409 --
-------------------------------------
Total liabilities 1,259,292 --
Subscriptions in escrow 6,259,500 --
Members' equity:
Class A Members (2,831,388 Units at December 31, 1995 and 54,836,617
5 Units held by an officer of the Manager at December 31, 1994) 100
Class B Member 305,607 --
-------------------------------------
Total Members' Equity 55,142,224 100
-------------------------------------
Total liabilities and members' equity $ 62,661,016 $ 100
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Lease revenue $ 3,991,638
Interest and other income 133,253
Gain on disposition of equipment 24,593
-----------------
Total revenues 4,149,484
Expenses:
Depreciation and amortization 2,916,682
Management fees to affiliate 284,376
Repairs and maintenance 586,426
Marine equipment operating expenses 479,486
Insurance expense to affiliate 3,860
Other insurance expense 46,416
Interest expense 229,660
General and administrative expenses to affiliates 118,114
Other general and administrative expenses 172,074
-----------------
Total expenses 4,837,094
Equity in net income of unconsolidated special purpose entities 69,619
-----------------
Net loss $ (617,991)
=================
Members' share of net loss:
Class A Members
Class B Member $ (611,811)
Total (6,180)
-----------------
$ (617,991)
=================
Net loss per Unit
(2,831,388 Units at December 31, 1995) $ (0.22)
=================
Cash distributions $ 1,302,566
=================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF CHANGES IN MEMBERS' EQUITY
For the year ended December 31, 1995 and for the
period from inception (August 22, 1994)
through December 31, 1994
<TABLE>
<CAPTION>
Class A Class B Total
---------------------------------------------------------
<S> <C> <C> <C>
Member's capital contributions $ 100 $ -- $ 100
---------------------------------------------------------
Member's equity at December 31, 1994 100 -- 100
Members' capital contributions 56,627,660 9,536,106 66,163,766
Syndication costs -- (9,101,085) (9,101,085)
Net loss (611,811) (6,180) (617,991)
Distributions (1,179,332) (123,234) (1,302,566)
---------------------------------------------------------
Members' equity at December 31, 1995 $ 54,836,617 $ 305,607 $ 55,142,224
=========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF CASH FLOWS
For the year ended December 31, 1995 and for the
period from inception (August 22, 1994)
through December 31, 1994
<TABLE>
<CAPTION>
Cash flows from operating activities: 1995 1994
------------------------------
<S> <C> <C>
Net loss $ (617,991) $ --
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,916,682
Gain on sale of equipment (24,593)
Changes in operating assets and liabilities:
Accounts receivable, net (869,097)
Prepaid expenses (416,515)
Accounts payable and accrued expenses 664,686
Due to affiliates 387,197
Prepaid deposits and reserves for repairs 207,409
------------------------------
Net cash provided by operating activities 2,247,778 --
------------------------------
Investing activities:
Payments to affiliates for purchase of equipment (29,707,311)
Payments for purchase of equipment (6,464,489)
Payments for equipment acquisition deposits (377,987)
Investment in and equipment purchased and placed
in unconsolidated special purpose entities (14,299,000)
Cash distributions from affiliates in excess of income
accrued 80,781
Proceeds from disposition of equipment 55,028
------------------------------
Net cash used in investing activities (50,712,978) --
------------------------------
Financing activities:
Proceeds from note payable 1,057,221
Proceeds from note payable - affiliates 3,956,300
Principal payments on notes payable (1,057,221)
Principal payments on notes payable - affiliates (3,956,300)
Cash distributions to Class A Members (1,179,332)
Cash distributions to Class B Member (123,234)
Class A members capital contribution 56,627,660 100
Increase in subscriptions in escrow 6,259,500
Increase in restricted cash from subscriptions in escrow, net (6,315,548)
------------------------------
Cash provided by financing activities 55,269,046 100
------------------------------
Cash and cash equivalents:
Net increase in cash and cash equivalents 6,803,846 100
Cash and cash equivalents at beginning of period 100 --
------------------------------
Cash and cash equivalents at end of period $ 6,803,946 $ 100
==============================
Supplemental information:
Cash items:
Interest paid ($8,902 paid to affiliate) $ 229,660 $ --
==============================
Non cash items:
Syndication and offering costs paid by Class B Member $ 9,536,106 $ --
==============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. Basis of Presentation
Organization
Professional Lease Management Income Fund I, L.L.C., a Delaware Limited
Liability Company (Fund I or the Company) was formed on August 22, 1994, to
purchase, lease, charter, or otherwise invest in, a diversified portfolio
of long-lived, low obsolescence capital equipment that is transportable by
and among prospective users (the Equipment). The securities represent
limited liability company interests (the Class A Units) which are offered
to the public. The Company's offering became effective on January 23, 1995.
PLM Financial Services, Inc. (FSI) is the Manager of the Company and is the
initial Class B Member. The purchase price of the Class A Units is $20.00
per Class A Unit. A minimum of 75,000 Class A Units and an anticipated
maximum of 5,000,000 Class A Units will be offered.
At December 31, 1995, the Company had received $62,887,260 (3,144,363
units) in Class A subscriptions. As of December 31, 1995, the Fund had
admitted $56,627,760 (2,831,388) Class A Units. As of March 6, 1996, the
Fund had received a total of $76,659,540 (3,832,977) Class A Units, and had
admitted $76,588,640 (3,829,432) Class A Units. As of April 13, 1995, the
Company had accepted subscription agreements for 79,408 Class A Units
($1,588,160) thereby meeting the minimum subscriptions of 75,000 Class A
Units, exclusive of subscriptions from Pennsylvania residents, needed for
release of funds from escrow.
At December 31, 1995, the Class B Member had capital contributions of
$9,536,106 representing the cash payments for organization and syndication
costs. Syndication costs of $9,101,085 are recorded as a reduction to Class
B Member's equity.
The Manager controls and manages the affairs of the Company. The
Manager will pay out of its own corporate funds (as a capital contribution
to the Company) all organization and syndication expenses incurred in
connection with the offering; therefore, 100% of the cash proceeds received
by the Company from the sale of Class A Units are initially being used to
purchase Equipment and establish any required cash reserves. For its
contribution, the Manager is generally entitled to a 15% interest in the
Company's cash distributions and earnings subject to certain allocation
provisions. After the investors receive cash distributions equal to their
original capital contributions the Manager's interest will increase to 25%.
Between the eighth and tenth years of operations of the Company, the
Manager intends to begin the dissolution and liquidation of the Company in
an orderly fashion, unless the Company is terminated earlier upon sale of
all of the equipment or by certain other events. However, under certain
circumstances, the term of the Company may be extended. In no event will
the Company extend beyond December 31, 2010.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Operations
The equipment of the Company is being managed, under a management
agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned
subsidiary of the Manager. IMI receives a monthly management fee from the
Company for managing the equipment (See Note 2). The Manager is also the
General Partner in a series of limited partnerships which own and lease
transportation equipment. The Manager, in conjunction with its
subsidiaries, also sells transportation
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. Basis of Presentation (continued)
Operations (continued)
equipment to these partnerships and manages transportation equipment under
management agreements with the partnerships.
Accounting for Leases
The Company's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is
recorded at cost and depreciated over its estimated useful life. Rental
payments are recorded as revenue over the lease term. Lease origination
costs are capitalized and amortized over the term of the lease.
Translation of Foreign Currency Transactions
The Company is a domestic entity, however, a limited number of the
Company's transactions are denominated in a foreign currency. The Company's
asset and liability accounts denominated in a foreign currency were
translated into U.S. dollars at the rates in effect at the balance sheet
dates, and revenue and expense items were translated at average rates
during the period. Gains or losses resulting from foreign currency
transactions are included in the results of operations and are not
material.
Depreciation and Amortization
Depreciation of equipment held for operating leases is computed on the 200%
declining balance method taking a full month's depreciation in the month of
acquisition, based upon estimated useful lives of 8 years for aircraft,
trailers, and marine vessels, and 15 years for railcars. The depreciation
method is changed to straight line when annual depreciation expense using
the straight line method exceeds that calculated by the 200% declining
balance method. Organization costs will be amortized over a 60 month
period. Major expenditures which are expected to extend the useful lives or
reduce future operating expenses of equipment are capitalized.
Transportation Equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued
statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is
effective for years beginning after December 15, 1995. The Company adopted
SFAS 121 during 1995, the effect of which was not material as the method
previously employed by the Company was consistent with SFAS 121. In
accordance with SFAS 121, the Company reviews the carrying value of its
equipment at least annually in relation to expected future market
conditions for the purpose of assessing the recoverability of the recorded
amounts. If projected undiscounted cash flows (future lease revenue plus
residual values) are less than the carrying value of the equipment, the
equipment is written down to the estimated fair value.
Equipment held for operating leases is stated at cost.
Investments in Unconsolidated Special Purpose Entities
The Company purchased interests in aircraft, engines and rotables ranging
from 14% to 33% which have been placed in unconsolidated special purpose
entities for ownership purposes. These interests are accounted for using
the equity method.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. Basis of Presentation (continued)
Repairs and Maintenance
Maintenance costs are usually the obligation of the lessee. If they are not
covered by the lessee, they are charged against operations as incurred. To
meet the maintenance obligations of certain aircraft airframes and engines,
reserve accounts are prefunded by the lessee. Marine vessel drydocking is a
periodic required maintenance process that generally occurs every five
years. The drydock maintenance process generally lasts from 10 to 21 days.
Estimated costs associated with marine vessel drydockings are accrued and
charged to repair and maintenance expense ratably over the period prior to
such drydocking because wear and tear occurs over the same revenue
generating period. The reserve accounts are included in the balance sheet
as prepaid deposits and reserve for repairs.
Net Income (Loss) and Distributions per Depositary Unit
After giving effect to the special allocations set forth in Sections
3.08(b) and 3.17 of the Company's Operating Agreement, Net Profits and Net
Loss shall be allocated 1% to the Class B Members and 99% to the Class A
Members.
Cash Distributions
Cash distributions are recorded when paid and totaled $1,302,566 for 1995.
Cash distributions to Class A Unitholders in excess of net income are
considered to represent a return of capital using the generally accepted
accounting principle basis. Cash distributions to Class A Unitholders of
$1,179,332 in 1995, were deemed to be a return of capital.
Cash distributions related to the fourth quarter results of $300,181
were paid or are payable during January, 1996, to the Class A Unitholders
of record as of December 31, 1995, for unitholders who elected for monthly
distributions. Quarterly cash distributions of approximately $331,974 were
declared on January 25, 1996 and are to be paid on February 15, 1996 to
Class A and Class B Unitholders.
Cash and Cash Equivalents
The Company considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents.
Restricted Cash
Subscription deposits for Units in escrow are considered restricted cash
until the members are admitted, usually the next day of the following
month, upon which the funds are no longer considered restricted cash.
2. Other Transactions with Affiliates
An officer of PLM Securities Corp. (PLMS) contributed $100 of the Company's
initial capital. Under the equipment management agreement, IMI, subject to
certain reductions, the monthly management fee is equal to the lesser of
(i) the fees which would be charged by an independent party for similar
services for similar equipment or (ii) the sum of (A) for that Equipment
for which IMI provides only Basic Equipment Management Services (a) 2% of
the Gross Lease Revenues attributable to Equipment which is subject to Full
Payout Net Leases, (b) 5% of the Gross Lease Revenues attributable to
Equipment which is subject to Operating Leases, and (B) for that Equipment
for which IMI provides supplemental Equipment Management Services, 7% of
the Gross Lease Revenues attributable to such Equipment. Management fees of
$218,500 were payable at December 31, 1995. The Company reimbursed FSI
$118,114 for data processing expenses and administrative services
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
2. Other Transactions with Affiliates (continued)
performed on behalf of the Company during 1995. Transportation Equipment
Corporation (TEC) will also be entitled to receive an equipment liquidation
fee equal to the lesser of (i) 3% of the sales price of equipment sold on
behalf of the Company, or (ii) 50% of the "Competitive Equipment Sale
Commission," as defined, if certain conditions are met. PLMS and TEC are
wholly-owned subsidiaries of the Manager. In certain circumstances, the
Manager will be entitled to a monthly re-lease fee for re-leasing services
following expiration of the initial lease, charter or other contract for
certain Equipment equal to the lesser of (a) the fees which would be
charged by an independent third party for comparable services for
comparable equipment or (b) 2% of Gross Lease Revenues derived from such
re-lease. No re-lease fee, however, shall be payable if such fee would
cause the combination of the equipment management fee paid to IMI (see Note
1) or the re-lease fees to exceed 7% Gross Lease Revenues.
The Company paid $3,860 in 1995 to Transportation Equipment Indemnity
Company Ltd. (TEI) which provides insurance coverage for Company equipment
and other insurance brokerage services to the Company. TEI is an affiliate
of the Manager. A substantial portion of these amounts was paid to third
party reinsurance underwriters or placed in risk pools managed by TEI on
behalf of affiliated partnerships and PLM International which provide
threshold coverages on marine vessel loss of hire and hull and machinery
damage. All pooling arrangement funds are either paid out to cover
applicable losses or refunded pro rata by TEI.
The Company owns certain equipment in conjunction with affiliated
partnerships. In 1995, this equipment included three Stage II commercial
aircraft, two aircraft engines, and aircraft rotables.
3. Equipment
The components of equipment are as follows (in thousands):
1995
-----------------
Rail equipment $ 13,112,390
Aircraft 4,000,000
Marine vessel 12,256,532
Trailers 6,771,028
-----------------
36,139,950
Less accumulated depreciation (2,869,535)
-----------------
Net equipment $ 33,270,415
=================
Revenues are earned by placing the equipment under operating leases
which are generally billed monthly or quarterly. The Company's marine
vessel is leased to an operator of utilization-type leasing pools which
include equipment owned by unaffiliated parties. In such instances,
revenues received by the Company consist of a specified percentage of
revenues generated by leasing the equipment to sublessees, after deducting
certain direct operating expenses of the pooled equipment. Rents for
railcars are based on mileage traveled or a fixed rate; rents for all other
equipment are based on fixed rates.
During 1995, the Company acquired one marine vessel for $12.3 million,
one commercial aircraft for $4.0 million, 450 piggyback trailers for $6.8
million, 314 tank cars for $8.2 million (which includes $0.1 million in
capital improvements), and 245 boxcars for $5.0 million. These purchases
were completed with interim financing, available unrestricted cash and an
advance from an affiliate of the Manager. The nine day advance from the
Manager was repaid (including interest at commercial loan rates) in July of
1995.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
3. Equipment (continued)
As of December 31, 1995, all equipment in the Company portfolio was on
lease.
All leases are being accounted for as operating leases. Future minimum
rent under noncancelable leases at December 31, 1995 during each of the
next five years are approximately $12,543,000 - 1996; $9,041,000 - 1997;
$2,701,000 - 1998; $2,464,000 - 1999; and $2,455,000 - 2000.
The Company owns certain equipment which is leased and operated
internationally. All leases relating to this equipment were denominated in
U.S. dollars.
The Company leases its aircraft, railcars and trailers to lessees
domiciled in four geographic regions: United States, Canada, Europe, and
Asia. The vessel is leased to multiple lessees in different regions who
operate the vessel worldwide. The tables below set forth geographic
information about the Company's equipment and the Company's proportional
interest in equipment owned by special purpose entities. The Company
accounts for proportional interest in equipment using the equity method.
The geographic information is grouped by domicile of the lessee as of and
for the year ended December 31, 1995:
<TABLE>
<CAPTION>
Investment in
Unconsolidated
Special Purpose
Owned Entities
------------------------------------------
<S> <C> <C>
Revenues:
Various $ 1,491,972 $ --
United States 2,082,312 --
Canada 417,354 78,400
Europe -- 1,131,458
Asia -- 45,176
==========================================
Total revenues $ 3,991,638 $ 1,255,034
==========================================
</TABLE>
The following table sets forth Identifiable income (loss) information
by region :
<TABLE>
<CAPTION>
Investment in
Unconsolidated
Special Purpose
Owned Entities
-------------------------------------------
<S> <C> <C>
Income (loss):
Various $ (442,731) $ --
United States 197,288 --
Canada (2,724) (41,045)
Europe -- 93,671
Asia -- 16,993
-------------------------------------------
Total identifiable Income (loss) (248,167) 69,619
Administrative and other (439,443) --
===========================================
Total loss $ (687,610) $ 69,619
===========================================
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
3. Equipment (continued)
The net book value of owned assets and the net investment in the
unconsolidated special purpose entities at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Investment in
Unconsolidated
Special Purpose
Owned Entities
--------------------------------------------
<S> <C> <C>
Various $ 11,064,923 $ --
United States 16,365,304 --
Canada 5,840,188 4,108,555
Europe -- 9,719,375
Asia -- 390,289
==============================================
Net equipment $ 33,270,415 $ 14,218,219
==============================================
</TABLE>
For the period from January 31, 1995 through December 31, 1995, one lessee,
Transportes Aeroes Portugueses, accounted for more than 10% of the
Company's revenues. The total amount of revenue accounted for by this
lessee is $1.2 million or 22% of total revenues. The Company accounts for
its interest in the special purpose entities owning the aircraft, engines
and rotables that are leased using the equity method. Thus, the lease
revenues are not reported in Lease Revenue in the Statement of Operations,
but, rather are reported net in Equity in net income of unconsolidated
special purpose entities. Such concentration of revenues are not unusual,
given the early stage of the equity raising period and are expected to
decrease in the future to the extent additional equipment is acquired using
proceeds from the Company's sale of limited liability company interests.
4. Investments in Unconsolidated Affiliates
During 1995, the Company acquired a 14% beneficial interest in a trust
which owns seven Boeing 737-200A aircraft for $4.3 million, and a one-third
beneficial interest (33.33%) in two trusts (the Trusts) which own three
1983 Boeing 737-200A aircraft, equipped with Pratt & Whitney JT8D-17A
engines, two spare Pratt & Whitney JT8D-17A engines and a rotables package
for $10.0 million. The remaining interests are owned by affiliated
partnerships.
The following summarizes the financial information for the special purpose
entities and the Company's interests therein as of and for the year ended
December 31, 1995:
Net Interest of
Total Numbers Company
------------------ ------------------
Net Assets $59,388,644 $14,218,219
Revenues 4,777,472 1,255,034
Net Income (1,021,162) 69,619
As of December 31, 1995, the Company had entered into a commitment to
purchase a 50% ownership in a marine vessel for $3.8 million (the remaining
interest of this marine vessel will be owned by an affiliated partnership).
The Company has signed a Memorandum of Agreement to purchase the vessel and
lodged a deposit of $0.4 million with the current owners. The total amount
of the deposit is included in this balance sheet as equipment acquisition
deposits. The Company received delivery of this equipment in March 1996.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
5. Debt
The Manager has entered into a joint $25 million credit facility (the
Committed Bridge Facility) on behalf of the Company, PLM Equipment Growth
Fund II, PLM Equipment Growth Fund III, PLM Equipment Growth Fund IV, PLM
Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment
Growth & Income Fund VII, all affiliated investment programs, and TEC
Acquisub, Inc. (TECAI), an indirect wholly-owned subsidiary of the Manager,
which may be used to provide interim financing of up to (i) 70% of the
aggregate book value or 50% of the aggregate net fair market value of
eligible equipment owned by an affiliate plus (ii) 50% of unrestricted cash
held by the borrower. The Committed Bridge Facility became available to the
above mentioned Partnerships on December 20, 1993, and became available to
the Company on May 8, 1995, and was amended and restated on September 27,
1995 to expire on September 30, 1996. The Committed Bridge Facility also
provides for a $5 million Letter of Credit Facility for the eligible
borrowers. Outstanding borrowings by the Company, TECAI or PLM Equipment
Growth Funds II through VII reduce the amount available to each other under
the Committed Bridge Facility. Individual borrowings may be outstanding for
no more than 179 days, with all advances due no later than September 30,
1996. The Committed Bridge Facility prohibits the Company from incurring
any additional indebtedness. Interest accrues at either the prime rate or
adjusted LIBOR plus 2.5% at the borrower's option and is set at the time of
an advance of funds. To the extent the Company is unable to raise
sufficient capital through the sale of interests to repay its portion of
the Committed Bridge Facility, the Company will continue to be obligated
under the Committed Bridge Facility until the Company generates proceeds
from operations or the sale of Equipment sufficient for repayment.
Borrowings by the Company are guaranteed by the Manager. As of December 31,
1995, neither the Company, the Partnerships, nor TECAI had any outstanding
borrowings under the Committed Bridge Facility.
6. Income Taxes
The Company is not subject to income taxes as any income or loss is
included in the tax returns of the individual members. Accordingly, no
provision for income taxes has been made in the financial statements of the
Company.
As of December 31, 1995, there were temporary differences of
approximately $1,108,000 between the financial statement carrying values of
certain assets and liabilities and the income tax basis of such assets and
liabilities, primarily due to differences in depreciation methods and
equipment reserves.
7. Subsequent Events
Subsequent to year-end, the Company purchased 50 new refrigerated trailers
for $1,850,000.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
INDEX OF EXHIBITS
Exhibit Page
4. Limited Partnership Agreement of Partnership. *
10.1 Management Agreement between Partnership and *
PLM Investment Management, Inc.
10.2 Amended and restated Warehousing Credit Agreement, dated as of
September 27, * 1995 with First Union National Bank of North
Carolina. Incorporated by reference to the Partnership quarterly
report on Form 10Q filed with the Securities and Exchange Commission
November 10, 1995.
25. Powers of Attorney. 35-37
* Incorporated by reference. See page 18 of this report.
