UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal quarter ended
March 31, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 33-83216-01
-----------------------
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
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
BALANCE SHEETS
(in thousands of dollars except per unit amounts)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating leases $ 80,833 $ 70,333
Less accumulated depreciation (15,736 ) (12,189 )
--------------------------------------
Net equipment 65,097 58,144
Cash and cash equivalents 13,847 1,692
Restricted cash 223 223
Investment in unconsolidated special purpose entities 27,326 25,349
Accounts receivable, net of allowance for doubtful accounts
of $247 in 1997 and $36 in 1996 1,826 1,534
Prepaid expenses 377 505
Organization and offering costs, net of accumulated amortization
of $156 in 1997 and $134 in 1996 463 308
--------------------------------------
Total assets $ 109,159 $ 87,755
======================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 626 $ 430
Due to affiliates 223 163
Note payable 25,000 --
Lessee deposits and reserves for repairs 1,158 873
--------------------------------------
Total liabilities 27,007 1,466
Members' equity:
Class A members (4,999,581 units at March 31, 1997 and
at December 31, 1996) 81,925 86,024
Class B Member 227 265
--------------------------------------
Total Members' Equity 82,152 86,289
--------------------------------------
Total liabilities and members' equity $ 109,159 $ 87,755
======================================
</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 Three Months Ended March 31,
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 3,517 $ 2,157
Interest and other income 48 255
Gain on disposition of equipment 4 --
-------------------------------------------
Total revenues 3,569 2,412
Expenses:
Depreciation and amortization 3,577 1,506
Management fees to affiliate 233 114
Repairs and maintenance 269 280
Marine equipment operating expenses 242 257
Insurance expense to affiliate 7 2
Other insurance expense 53 88
Interest expense 46 9
General and administrative expenses to affiliates 353 52
Other general and administrative expenses 122 81
-------------------------------------------
Total expenses 4,902 2,389
Equity in net income (loss) of unconsolidated special purpose
entities 137 (47 )
-------------------------------------------
Net loss $ (1,196 ) $ (24 )
===========================================
Members' share of net loss:
Class A members $ (1,599 ) $ (24 )
Class B Member 403 --
===========================================
Total $ (1,196 ) $ (24 )
===========================================
Net loss per weighted average Class A unit (4,999,581 units
and 3,829,012 at March 31, 1997 and 1996, respectively) $ (0.32 ) $ (0.01 )
===========================================
Cash distributions $ 2,941 $ 1,624
===========================================
Cash distributions per weighted average Class A units $ 0.50 $ N/A
===========================================
</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 period from December 31, 1995 to March 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Class A Class B Total
--------------------------------------------------------
<S> <C> <C> <C>
Members' equity at December 31, 1995 $ 54,836 $ 306 $ 55,142
Members' capital contributions 43,364 5,069 48,433
Syndication costs -- (5,062 ) (5,062 )
Net income (loss) (3,705 ) 1,313 (2,392 )
Distributions (8,471 ) (1,361 ) (9,832 )
--------------------------------------------------------
Members' equity at December 31, 1996 86,024 265 86,289
Net income (loss) (1,599 ) 403 (1,196 )
Distributions (2,500 ) (441 ) (2,941 )
--------------------------------------------------------
Members' equity at March 31, 1997 $ 81,925 $ 227 $ 82,152
========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF CASH FLOWS
For the three months ended March 31,
(thousands of dollars)
<TABLE>
<CAPTION>
Cash flows from operating activities: 1997 1996
---------------------------------------
<S> <C> <C>
Net loss $ (1,196 ) $ (24 )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,577 1,506
Gain on sale of equipment (4 ) --
Equity in net (income) loss unconsolidated special
purpose entities (137 ) 47
Changes in operating assets and liabilities:
Accounts receivable, net (292 ) (279 )
Prepaid expenses 128 32
Accounts payable and accrued expenses 196 (512 )
Due to affiliates 60 (310 )
Lessee deposits and reserves for repairs 285 12
---------------------------------------
Net cash provided by operating activities 2,617 472
---------------------------------------
Investing activities:
Payments for purchase of equipment (10,530 ) (1,950 )
Investment in and equipment purchased and placed
in unconsolidated special purpose entities (5,100 ) (9,006 )
Proceeds from disposition of equipment 26 --
Distributions from unconsolidated special purpose
entities 3,260 2,863
---------------------------------------
---------------------------------------
Net cash used in investing activities (12,344 ) (8,093 )
---------------------------------------
Financing activities:
Proceeds from note payable 25,000 --
Cash distributions to Class A members (2,500 ) (1,427 )
Cash distributions to Class B Member (441 ) (197 )
Payments of placement fees (177 )
Class A members capital contribution -- 19,931
Increase in subscriptions in escrow -- 1,998
Increase in restricted cash from subscriptions in
escrow, net -- (2,016 )
---------------------------------------
Cash provided by financing activities 21,882 18,289
---------------------------------------
Cash and cash equivalents:
Net increase in cash and cash equivalents 12,155 10,668
Cash and cash equivalents at beginning of period 1,692 6,804
---------------------------------------
Cash and cash equivalents at end of period $ 13,847 $ 17,472
=======================================
Supplemental information:
Cash items:
Interest paid ($9 paid to affiliate) $ -- $ 9
=======================================
Non cash items:
Syndication and offering costs paid by Class B Member $ -- $ 2,987
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc., the
Manager, the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals,
to present fairly the financial position of Professional Lease Management
Income Fund I, L.L.C. (Fund I or the Company) as of March 31, 1997 and
December 31, 1996, the statements of operations and cash flows for the
three months ended March 31, 1997 and 1996, and the statements of changes
in partners' capital for the period December 31, 1995 to March 31, 1997.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, on file at the
Securities and Exchange Commission.
2. Reclassification
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
3. Net Income (Loss) and Cash Distributions
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. During the quarter ended March 31, 1997, the Manager received a
special allocation of income of $419,000.
Cash distributions are recorded when paid and totaled $2.9 million and
$1.6 million for the three months ended March 31, 1997 and 1996,
respectively. 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 $2.5 million and $1.4 million for the three months ended
March 31, 1997 and 1996, respectively, were deemed to be a return of
capital.
Cash distributions related to the first quarter results of $0.6 million
were paid or are payable during April, 1997, to the Class A Unitholders of
record as of March 31, 1997, for unitholders who elected for monthly
distributions. Quarterly cash distributions of approximately $1.1 million
were declared on April 24, 1997 and are to be paid on May 15, 1997 to Class
A and Class B Unitholders.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
4. Investments in Unconsolidated Special Purpose Entities
The net investments in unconsolidated special purpose entities (USPE)
include the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
% Ownership Equipment 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
33% Two trusts consisting of:
Three 737-200A Stage II
commercial aircraft
Two aircraft engines
Portfolio of rotable components $ 6,494 $ 8,767
17% Trust consisting of six 737-200A
Stage II commercial aircraft 2,523 2,684
25% Trust consisting of four 737-200A
Stage II commercial aircraft 3,734 3,981
35% Mobile offshore drilling unit -- 6,906
61% Mobile offshore drilling unit 11,491 --
50% Cargo marine vessel 3,084 3,011
----------------------------------------------
Total investments $ 27,326 $ 25,349
==============================================
</TABLE>
During the first quarter ended March 31, 1997, the Company purchased an
additional 26% interest in a mobile offshore drilling unit for $5.1 million
bringing its initial investment of 35% up to 61%.
5. Other Transactions with Affiliates
Company management fees of $0.2 million and $0.2 million were payable at
March 31, 1997 and December 31, 1996. The Company's proportional share of
the USPE management fees of $48,000 and $23,000 were payable as of March
31, 1997 and December 31, 1996, respectively. The Company's proportional
share of the USPE management fees expense for the quarters ended March 31,
1997 and 1996 was $85,000 and $61,000, respectively. The Company reimbursed
FSI $114,000 and $52,000 for data processing expenses and administrative
services performed on behalf of the Company expense for the quarters ended
March 31, 1997 and 1996, respectively. The Company's proportional share of
the USPE administrative and data processing expenses were $19,000 and
$22,000 for the quarters ended March 31, 1997 and 1996, respectively
The Company paid $7,000 and $2,000 for the quarters ended March 31,
1997 and 1996, respectively to Transportation Equipment Indemnity Company
Ltd. (TEI) which provides marine insurance coverage and other insurance
brokerage services to the Company. The Company's proportional share of USPE
marine insurance coverage paid to TEI were $4,000 and $0 at March 31, 1997
and 1996, respectively. 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.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
6. Equipment
Equipment held for operating leases is stated at cost. The components of
equipment are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------------------------------
<S> <C> <C>
Rail equipment $ 18,906 $ 18,876
Aircraft 24,605 24,605
Marine vessel 12,257 12,257
Trailers 14,565 14,595
Mobile offshore drilling unit 10,500 --
------------------------------------
80,833 70,333
Less accumulated depreciation (15,736 ) (12,189 )
------------------------------------
Net equipment $ 65,097 $ 58,144
====================================
</TABLE>
During the quarter ended March 31, 1997, the Company purchased a mobile
offshore drilling unit for $10.5 million. During the quarter ended March
31, 1996, the Company purchased 50 new refrigerated trailers and one box
car for $1.9 million.
As of March 31, 1997, all equipment in the Company portfolio was either
on lease or operating in PLM-affiliated short-term trailer rental
facilities except for 105 railcars with a carrying value of $5.2 million.
At December 31, 1996, all equipment in the Company portfolio was either on
lease or operating in PLM-affiliated short-term trailer rental facilities
except for 14 railcars with a carrying value of $0.3 million.
7. Debt
As of March 31, 1997, the Company had completed two draw downs totaling $25
million by issuing two notes related to the long term senior note agreement
entered into in December. A total of $15.6 million of the proceeds were
used to fund additional equipment acquisitions during the first quarter of
1997. The Company anticipates utilizing the remaining debt proceeds to
purchase equipment during the second quarter of 1997. During the first
quarter of 1997, a $0.2 million placement fee was paid to the lender in
connection with this loan agreement.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of the Company's Operating Results for the Three Months Ended
March 31, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance, marine
equipment operating, and asset specific insurance expenses) on owned equipment
decreased during the first quarter of 1997 when compared to the same quarter of
1996. The following table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 1,252 $ 309
Marine vessel 215 281
Trailers 713 279
Rail equipment 700 670
Mobile offshore drilling unit 71 --
</TABLE>
Aircraft: Aircraft lease revenues were $1.3 million and $0.3 million,
respectively, during the first quarter of 1997 and 1996. There were no expenses
incurred in either the first quarter of 1997 or 1996. The increase in lease
revenue was due to the purchase of four 737-200A Stage II commercial aircraft at
the end of the third quarter of 1996. These aircraft were on lease for the
entire first quarter in 1997.
Marine vessel: Marine vessel lease revenues and direct expenses were $0.6
million and $0.4 million respectively, for the first quarter of 1997, compared
to $0.8 million and $0.5 million, respectively, during the same quarter of 1996.
Marine vessel contribution decreased due to lower re-lease rates as a result of
a softer bulk carrier vessel market. The decrease in direct expenses were due to
the lower marine operating expenses in the first quarter of 1997 compared to the
same period in 1996.
Trailers: Trailer revenues and direct expenses were $0.8 million and $0.1
million, respectively, for the first quarter of 1997, compared to $0.3 million
and $0.0 million, respectively, during the same quarter of 1996. Trailer
contribution increased due to the purchase of additional trailers throughout
1996. These trailers were on lease for the entire first quarter of 1997.
Rail equipment: Railcar lease revenues and direct expenses were $0.8 million and
$0.1 million, respectively, for the first quarter of 1997 and 1996. Railcar
contribution remained relatively stable in the first quarter of 1997 compared to
the same period in 1996. Although the Company purchased additional railcars in
the last two months of 1996, these railcars were off lease in the first quarter
of 1997 and did not impact the contribution for the first quarter of 1997.
Mobile offshore drilling unit (rig): Revenues were $0.1 million, in the first
quarter of 1997. This rig earned 13 days of revenue in the first quarter of 1997
due to its purchase near the end of the quarter.
(B) Interest and Other Income
Interest and other income decreased $0.2 million due to lower cash balances
available for investments in the first quarter of 1997 compared to the same
period in 1996.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.3 million for the quarter ended March 31, 1997,
decreased from $1.8 million for the same period in 1996. The variances are
explained as follows:
(a) A $2.1 million increase in depreciation and amortization expenses from
1996 levels reflecting the purchase of assets during 1997 and 1996, and the
application of the double declining balance depreciation method.
(b) A $0.4 million increase in administrative expenses from 1996 levels
resulting from increased administrative costs associated with the short-term
rental facilities due to additional trailers operating in the facilities in the
first quarter of 1997 as compared to the same period in 1996.
(c) A $0.1 million increase in management fees to affiliates, reflecting
the higher levels of lease revenues in 1997 as compared to 1996 due to the
additional purchase of equipment throughout 1996 and the beginning of 1997.
(C) Net Gain on Disposition of Owned Equipment
Net loss on disposition of equipment for the first quarter of 1997 totaled
$4,000 which resulted from the sale of trailers with a net book value of
$22,000, for proceeds of $26,000. There were no sales or disposals of equipment
in the first quarter of 1996.
(D) Equity in Net Income (Loss) of Unconsolidated Special Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method are presented as follows (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 448 $ (31 )
Marine vessel (47 ) (16 )
Mobile offshore drilling unit (264 ) --
</TABLE>
Aircraft: As of March 31, 1997 and 1996, the Company owned an interest in a
trust which owns a commercial aircraft and an interest in two trusts which own 3
commercial aircraft, 2 aircraft engines and a portfolio of aircraft rotables.
Aircraft revenues and expenses were $1.5 million and $1.1 million, respectively,
for the first quarter of 1997, compared to $1.1 million and $1.1 million,
respectively, during the same quarter in 1996. The primary reason revenues
increased was due to the purchase of an interest in a trust which owns
commercial aircraft at the end of the first quarter of 1996. This investment was
on lease for the entire first quarter of 1997 compared to only a few days in the
same period in 1996. Although expenses remained relatively the same, expenses
are significantly impacted by the depreciation charges which are greatest in the
early years due to the use of the 200% declining balance method of depreciation.
The investment that was purchased at the end of the first quarter of 1996,
incurred a full quarter of depreciation in 1997 compared to only a partial
quarter in 1996.
Marine vessel: As of March 31, 1997 and 1996, the Company had an interest in an
entity which owns a marine vessel. Marine vessel revenues and expenses were $0.3
million and $0.3 million, respectively, for the first quarter of 1997, compared
to $47,000 and $62,000, respectively, during the same quarter in 1996. The
primary reason revenues increased was due to the purchase of a 50% interest in a
marine vessel during the later half of the first quarter of 1996. Revenues and
expenses during 1997 represent a full quarter when compared to 1996 where
revenues and expenses are for only a partial quarter.
Mobile offshore drilling unit: As of March 31, 1997, the Company had an interest
in which it owns an entity in a mobile offshore drilling unit (rig) which was
purchased during the fourth quarter of 1996. The Company's interest in this
investment was increased in the first quarter of 1997 from 35% to 61%. During
the first quarter of 1997, revenues of $0.3 million were offset by depreciation
and administrative expenses of $0.3 million.
(E) Net Income (Loss)
As a result of the foregoing, the Company's net loss of $1.2 million for the
first quarter of 1997, increased from net loss of $24,000 during the same period
in 1996. The Company's ability to operate and liquidate assets, secure leases,
and re-lease those assets whose leases expire during the duration of the Company
is subject to many factors and the Company's performance in the first quarter of
1997 is not necessarily indicative of future periods. In the first quarter of
1997, the Company distributed $2.5 million to the Class A Members, or $0.50 per
weighted average Class A Unit.
Financial Condition - Capital Resources and Liquidity
The Company's initial contributed capital was composed of the proceeds from its
initial offering, and supplemented by permanent debt in the amount of $25
million. The Company intends to rely on operating cash flow to meet its
operating obligations, maintain working capital reserves, 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.
As of March 31, 1997, the Company did not have any borrowings with the
short-term $50 million joint credit facility, PLM Equipment Growth Fund V had
$1.1 million in outstanding borrowings under the short-term Committed Bridge
Facility and American Finance Group, Inc. had $22.5 million. None of the other
programs had any outstanding borrowings. The Company's Senior Note Agreement
limits the borrowings available to the Company under this short-term credit
facility to the lesser of $10 million or 50% of the outstanding senior note
balance.
For the quarter ended March 31, 1997, the Company generated sufficient
operating income to meet its operating obligations and pay distributions to
those Class A and B Unitholders.
Outlook for the Future
Several factors may affect the Company's operating performance in 1997 and
beyond, including changes in the markets for the Company's equipment and changes
in the regulatory environment in which the equipment operates.
The Company intends to use excess cash flow, after payment of expenses, the
maintenance of working capital reserves and cash distributions to acquire
additional equipment during the first six years of the Company's operations. The
Manager believes these acquisitions may cause the Company to generate additional
earnings and cash flow for the Company.
The Company relies on operating cash flow to meet its operating
obligations, maintain working capital reserves, 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.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROFESSIONAL LEASE MANAGEMENT
INCOME FUND I, L.L.C.
By: PLM Financial Services, Inc.
Manager
Date: May 13, 1997
By: /s/ David J. Davis
--------------------------
David J. Davis
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,847
<SECURITIES> 0
<RECEIVABLES> 1,826
<ALLOWANCES> 247
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 80,833
<DEPRECIATION> 15,736
<TOTAL-ASSETS> 109,159
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 82,152
<TOTAL-LIABILITY-AND-EQUITY> 109,159
<SALES> 0
<TOTAL-REVENUES> 3,569
<CGS> 0
<TOTAL-COSTS> 4,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (1,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,196)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
