UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended September 30, 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 800, 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 unit amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating leases, at cost $ 79,123 $ 70,333
Less accumulated depreciation (22,952 ) (12,189 )
------------------------------------
56,171 58,144
Equipment held for sale 9,479 -
------------------------------------
Net equipment 65,650 58,144
Cash and cash equivalents 7,114 1,692
Restricted cash - 223
Investment in unconsolidated special-purpose entities 25,839 25,349
Accounts receivable, net of allowance for doubtful accounts
of $25 in 1997 and $36 in 1996 2,071 1,534
Prepaid expenses 311 505
Deferred charges, net of accumulated amortization
of $212 in 1997 and $134 in 1996 407 308
------------------------------------
Total assets $ 101,392 $ 87,755
====================================
Liabilities and members' equity:
Liabilities:
Accounts payable and accrued expenses $ 968 $ 430
Due to affiliates 198 163
Lessee deposits and reserves for repairs 1,255 873
Notes payable 25,000 -
------------------------------------
Total liabilities 27,421 1,466
------------------------------------
Members' equity:
Class A members (4,999,581 units as of September 30, 1997
and December 31, 1996) 73,819 86,024
Class B member 152 265
------------------------------------
Total members' equity 73,971 86,289
------------------------------------
Total liabilities and members' equity $ 101,392 $ 87,755
====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue $ 4,687 $ 2,194 $ 12,312 $ 6,468
Interest and other income 88 487 303 1,188
Net gain on disposition of equipment 1 -- 5 --
-----------------------------------------------------------
Total revenues 4,776 2,681 12,620 7,656
-----------------------------------------------------------
Expenses:
Depreciation and amortization 4,268 2,363 11,870 5,420
Marine equipment operating expenses 242 139 717 616
Repairs and maintenance 362 322 921 845
Interest expense 458 -- 963 9
Insurance expense to affiliate 1 2 10 6
Other insurance expense 61 86 205 218
Management fees to affiliate 259 127 691 384
General and administrative expenses
to affiliates 235 6 743 219
Other general and administrative expenses 158 211 486 365
-----------------------------------------------------------
Total expenses 6,044 3,256 16,606 8,082
-----------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 275 104 490 38
-----------------------------------------------------------
Net loss $ (993 ) $ (471 ) $ (3,496 ) $ (388 )
===========================================================
Members' share of net income (loss):
Class A members $(1,398 ) $ (887 ) $ (4,706 ) $ (995 )
Class B member 405 416 1,210 607
-----------------------------------------------------------
Total $ (993 ) $ (471 ) $ (3,496 ) $ (388 )
===========================================================
Net loss per weighted-average
Class A unit (4,999,581 units as of
September 30, 1997 and 1996) $ (0.28 ) $ (0.18 ) $ (0.94 ) $ (0.20 )
===========================================================
Cash distributions $ 2,940 $ 2,885 $ 8,822 $ 6,884
===========================================================
Cash distributions per weighted-average
Class A units $ 0.50 $ N/A $ 1.50 $ N/A
===========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS' EQUITY For
the period from December 31, 1995 to September 30, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Class A Class B Total
--------------------------------------------------------
<S> <C> <C> <C>
Members' equity as of 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 as of December 31, 1996 86,024 265 86,289
Net income (loss) (4,706 ) 1,210 (3,496 )
Distributions (7,499 ) (1,323 ) (8,822 )
--------------------------------------------------------
Members' equity as of September 30, 1997 $ 73,819 $ 152 $ 73,971
========================================================
</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
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
---------------------------------------
<S> <C> <C>
Operating activities:
Net loss $ (3,496 ) $ (388 )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 11,870 5,420
Gain on disposition of equipment (5 ) -
Equity in net income of unconsolidated
special-purpose entities (490 ) (38 )
Changes in operating assets and liabilities:
Restricted cash 223 -
Accounts receivable, net (537 ) (709 )
Prepaid expenses 194 68
Accounts payable and accrued expenses 538 (537 )
Due to affiliates 35 (328 )
Lessee deposits and reserves for repairs 382 460
---------------------------------------
Net cash provided by operating activities 8,714 3,948
---------------------------------------
Investing activities:
Payments for purchase of equipment and capital
improvements (19,320 ) (27,880 )
Investment in and equipment purchased and placed
in unconsolidated special-purpose entities (5,100 ) (9,068 )
Proceeds from disposition of equipment 27 -
Distributions from unconsolidated special-purpose
entities 5,100 4,153
---------------------------------------
---------------------------------------
Net cash used in investing activities (19,293 ) (32,795 )
---------------------------------------
Financing activities:
Proceeds from notes payable 25,000 -
Cash distributions to Class A members (7,499 ) (5,965 )
Cash distributions to Class B Member (1,323 ) (920 )
Payments of debt placement fees (177 ) -
Class A members' capital contribution - 43,364
Increase in subscriptions in escrow - (6,260 )
Increase in restricted cash from subscriptions
in escrow, net - 6,316
---------------------------------------
Net cash provided by financing activities 16,001 36,535
---------------------------------------
Net increase in cash and cash equivalents 5,422 7,688
Cash and cash equivalents at beginning of period 1,692 6,804
---------------------------------------
Cash and cash equivalents at end of period $ 7,114 $ 14,492
=======================================
Supplemental information:
Cash items:
Interest paid $ 505 $ 9
=======================================
Noncash items:
Syndication and offering costs paid by Class B member $ - $ 5,062
=======================================
</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
September 30, 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 September 30, 1997 and
December 31, 1996, the statements of operations for the three and nine
months ended September 30, 1997 and 1996, the statements of changes in
members' equity for the period from December 31, 1995 to September 30,
1997, and the statements of cash flows for the nine months ended September
30, 1997 and 1996. 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. Reclassifications
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 member and 99% to the Class A
members. During the nine months ended September 30, 1997, the Manager
received a special allocation of income of $1,257,000.
Cash distributions are recorded when paid and totaled $2.9 million and $2.9
million for the three months ended September 30, 1997 and 1996,
respectively, and $8.8 million and $6.9 million for the nine months ended
September 30, 1997 and 1996. Cash distributions to Class A unitholders in
excess of net income are considered to represent a return of capital. Cash
distributions to Class A unitholders of $7.5 million and $6.0 million for
the nine months ended September 30, 1997 and 1996, respectively, were
deemed to be a return of capital. Cash distributions related to the results
from the third quarter of 1997, of $1.7 million, were paid or are payable
during October and November 1997, depending on whether the individual Class
A unitholders elected to receive a monthly or quarterly distribution check.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
4. Investments in Unconsolidated Special-Purpose Entities
The net investments in unconsolidated special-purpose entities (USPEs)
included the following jointly-owned equipment (and related assets and
liabilities) (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
% Ownership Equipment 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
61% Mobile offshore drilling unit $ 9,959 $ 6,906
33% Two trusts consisting of:
Three 737-200A Stage II
commercial aircraft
Two aircraft engines
Portfolio of rotable components 7,361 8,767
25% Trust consisting of four 737-200A
Stage II commercial aircraft 3,456 3,981
50% Cargo marine vessel 2,751 3,011
17% Trust consisting of six 737-200A
Stage II commercial aircraft 2,312 2,684
==============================================
Total investments $ 25,839 $ 25,349
==============================================
</TABLE>
During the nine months ended September 30, 1997, the Company purchased an
additional 26% interest in a mobile offshore drilling unit for $5.1
million, bringing its initial investment from 35% up to 61%.
5. Equipment
Components of equipment are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------------------------------------
<S> <C> <C>
Aircraft $ 24,605 $ 24,605
Marine vessel 20,757 12,257
Rail equipment 18,944 18,876
Trailers 14,817 14,595
---------------------------------------
79,123 70,333
Less accumulated depreciation (22,952 ) (12,189 )
---------------------------------------
56,171 58,144
Equipment held for sale 9,479 -
---------------------------------------
Net equipment $ 65,650 $ 58,144
=======================================
</TABLE>
Equipment held for sale is stated at the lower of the equipment's
depreciated cost or fair value less cost to sell. As of September 30, 1997,
one mobile offshore drilling unit, which is currently on lease and subject
to a pending sale for $11.0 million, was held for sale.
During the nine months ended September 30, 1997, the Company purchased 24
trailers, a mobile offshore drilling unit, and a marine vessel for a total
of $19.3 million. During the nine months ended September 30, 1996, the
Company purchased four 737-200A Stage II commercial aircraft, 178
refrigerated trailers, and one box car for $28.3 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
5. Equipment (continued)
During the nine months ended September 30, 1997, the Company sold trailers
with a net book value of $22,000, for proceeds of $27,000. There were no
sales or disposals of equipment in the nine months ended September 30,
1996.
As of September 30, 1997, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for 10 railcars
with a carrying value of $0.2 million. As of December 31, 1996, all
equipment 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.
6. Transactions with Manager and Affiliates
Company management fees of $0.2 million and $0.2 million were payable as of
September 30, 1997 and December 31, 1996, respectively. The Company's
proportional share of USPE management fees of $0.1 million and $23,000 were
payable as of September 30, 1997 and December 31, 1996, respectively.
The Company's proportional share of the affiliated expenses incurred by the
USPEs during 1997 and 1996 is listed in the following table (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 97 $ 98 $ 281 $ 166
Data processing and administrative
expenses 25 20 69 62
Insurance expense 1 - 6 -
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine
insurance coverage for Company equipment and other insurance brokerage
services. TEI is an affiliate of the Manager.
7. Debt
During the first nine months of 1997, the Company borrowed $25.0 million
under the long-term senior note agreement entered into in December 1996. A
total of $19.3 million of the proceeds was used to fund additional
equipment acquisitions during the nine months ended September 30, 1997. The
Company also used debt proceeds of $5.1 million to increase its investment
in unconsolidated special-purpose entities with the purchase of the
additional interest in an entity that owns a mobile offshore drilling unit
(the remaining interest in this mobile offshore drilling unit belongs to
affiliated partnerships). The Company anticipates utilizing the remaining
debt proceeds to purchase equipment during the fourth quarter of 1997.
During the nine months ended September 30, 1997, a $0.2 million placement
fee was paid to the lender in connection with this loan agreement which is
being amortized over the life of the loan.
The Manager entered into a short-term, joint $50.0 million credit facility.
As of September 30, 1997, PLM Equipment Growth Fund V had $9.1 million in
outstanding borrowings with the short-term $50.0 million joint credit
facility, and PLM Equipment Growth Fund VI had $10.0 million in outstanding
borrowings under the short-term committed bridge facility. Neither the
Company nor any of the other eligible borrowers 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 $10.0 million or 50% of the outstanding senior note balance.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
8. Subsequent Event
During October 1997, the short-term credit facility was amended and restated
to decrease the available borrowings for American Finance Group, Inc. (AFG),
a subsidiary of PLM International, Inc., to $35.0 million and to extend the
termination date of the credit facility to December 2, 1997. The Manager
believes it will be able to extend the credit facility prior to its
expiration on similar terms and increase the amount of available borrowings
for AFG to $50.0 million.
(This space intentionally left blank.)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Company's Operating Results for the Three Months Ended
September 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the third quarter of 1997, 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 September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 1,249 $ 273
Trailers 842 530
Marine vessels 806 219
Rail equipment 628 624
Mobile offshore drilling unit 502 -
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and
$11,000, respectively, for the third quarter of 1997, compared to $0.3 million
and $2,000, respectively, during the same quarter of 1996. Aircraft contribution
increased due to the purchase of four 737-200A Stage II commercial aircraft in
the third quarter of 1996. These aircraft were on lease for the entire third
quarter of 1997.
Trailers: Trailer revenues and direct expenses were $0.9 million and $0.1
million, respectively, for the third quarter of 1997, compared to $0.6 million
and $40,000, respectively, during the same quarter of 1996. Trailer contribution
increased due to the purchase of additional trailers throughout 1996 and 1997.
These trailers were operating in the short-term rental facilities for the entire
third quarter of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.2
million and $0.4 million, respectively, for the third quarter of 1997, compared
to $0.5 million and $0.3 million, respectively, during the same quarter of 1996.
Marine vessel contribution increased due to the purchase of a marine vessel at
the end of the second quarter of 1997.
Rail equipment: Railcar lease revenues and direct expenses were $0.8 million and
$0.2 million, respectively, for the third quarter of 1997 and 1996. Railcar
contribution remained relatively stable in the third quarter of 1997, compared
to the same period in 1996.
Mobile offshore drilling unit (rig): Revenues and direct expenses were $0.5
million and $4,000, respectively, in the third quarter of 1997. This rig was
purchased in the first quarter of 1997 and earned a full quarter of revenue in
the third quarter of 1997. No rigs were owned by the Company in the third
quarter of 1996.
(B) Interest and Other Income
Interest and other income decreased $0.4 million due to lower cash balances
available for investment in the third quarter of 1997, compared to the same
period in 1996.
<PAGE>
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.4 million for the quarter ended September 30, 1997
increased from $2.7 million for the same period in 1996. The variances are
explained as follows:
(1) A $1.9 million increase in depreciation and amortization expenses from
1996 levels reflects the purchase of assets during 1997 and 1996.
(2) A $0.5 million increase in interest expense was due to the Company's
incurrence of debt in 1997 for the purchase of equipment. The Company did not
have any debt outstanding in the third quarter of 1996.
(3) A $0.2 million increase in administrative expenses from 1996 levels
resulted from increased administrative costs associated with the short-term
trailer rental facilities due to additional trailers operating in the facilities
in the third quarter of 1997, compared to the same period in 1996.
(4) A $0.1 million increase in management fees to affiliate reflects the
higher levels of lease revenues in 1997, compared to 1996, due to the purchase
of equipment throughout 1996 and the beginning of 1997.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)
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 September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 405 $ 75
Mobile offshore drilling unit 6 --
Marine vessel (136 ) 29
</TABLE>
Aircraft: As of September 30, 1997 and 1996, the Company owned an interest in a
trust that owns six commercial aircraft, an interest in another trust that owns
four commercial aircraft, and an interest in two trusts that own three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
Aircraft revenues and expenses were $1.4 million and $1.0 million, respectively,
for the third quarter of 1997, compared to $1.5 million and $1.4 million,
respectively, during the same quarter in 1996. Lease revenue decreased due to
lower lease rates for a trust in the third quarter of 1997 compared to the same
period in 1996. Expenses decreased due to the use of the double-declining
balance depreciation method, which results in greater depreciation in the first
years an asset is owned.
Mobile offshore drilling unit: As of September 30, 1997, the Company had an
interest in an entity that owns a mobile offshore drilling unit (rig) purchased
during the fourth quarter of 1996. The Company's interest in this investment
increased in the first quarter of 1997 from 35% to 61%. During the third quarter
of 1997, revenues of $0.6 million were offset by depreciation and administrative
expenses of $0.6 million. The Company did not own any rigs during the third
quarter of 1996.
Marine vessel: As of September 30, 1997 and 1996, the Company had an interest in
an entity that owns a marine vessel. Marine vessel revenues and expenses were
$0.3 million and $0.4 million, respectively, for the third quarter of 1997,
compared to $0.3 million and $0.3 million, respectively, during the same period
in 1996. Expenses increased due to repairs needed on this marine vessel in the
third quarter of 1997, compared to the same period in 1996.
(E) Net Loss
As a result of the foregoing, the Company had a net loss of $1.0 million for the
third quarter of 1997, compared to a net loss of $0.5 million during the same
period of 1996. The Company's ability to operate and liquidate assets, secure
leases, and re-lease those assets whose leases expire is subject to many
factors, and the Company's performance in the third quarter of 1997 is not
necessarily indicative of future periods. In the third quarter of 1997, the
Company distributed $2.5 million to Class A members, or $0.50 per
weighted-average Class A unit.
Comparison of the Company's Operating Results for the Nine Months Ended
September 30, 1997 and 1996
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance, marine
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the nine months ended September 30, 1997, compared to the same
period of 1996. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 3,748 $ 744
Trailers 2,334 1,234
Rail equipment 2,025 1,915
Marine vessels 1,323 909
Mobile offshore drilling unit 1,056 -
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $3.8 million and
$29,000, respectively, during the nine months ended September 30, 1997, compared
to $0.7 million and $12,000, respectively, during the same period of 1996.
Aircraft contribution increased due to the purchase of four 737-200A Stage II
commercial aircraft in the third quarter of 1996. These aircraft were on lease
for the entire nine months of 1997.
Trailers: Trailer revenues and direct expenses were $2.6 million and $0.3
million, respectively, for the nine months of 1997, compared to $1.3 million and
$0.1 million, respectively, during the same period in 1996. Trailer contribution
increased due to the purchase of additional trailers throughout 1996 and 1997.
These trailers were operating in the short-term rental facilities for the entire
nine months of 1997.
Rail equipment: Railcar lease revenues and direct expenses were $2.4 million and
$0.4 million, respectively, for the nine months ended September 30, 1997,
compared to $2.4 million and $0.5 million, respectively, during the same period
of 1996. Lease revenues remained relatively stable in the nine months of 1997,
compared to the same period of 1996. Expenses decreased due to lower running
repairs in the nine months ended September 30, 1997, compared to the same period
of 1996. Although the Company purchased additional railcars in the last two
months of 1996, these railcars were off lease in the first eight months of 1997
and did not impact the contribution for the first eight months of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.4
million and $1.1 million, respectively, for the nine months ended September 30,
1997, compared to $2.0 million and $1.1 million, respectively, during the same
period of 1996. Marine vessel contribution increased due to the purchase of a
marine vessel at the end of the second quarter of 1997; this increase was offset
slightly by a decrease in lease revenue due to lower re-lease rates for another
marine vessel as a result of a softer bulk carrier vessel market.
Mobile offshore drilling unit (rig): Rig lease revenues and direct expenses were
$1.1 million and $22,000, respectively, for the nine months ended September 30,
1997. This rig was purchased near the end of the first quarter of 1997. The
Company did not own any rigs in the nine months ended September 30, 1996.
(B) Interest and Other Income
Interest and other income decreased $0.9 million due to lower cash balances
available for investment in the nine months ended September 30, 1997, compared
to the same period of 1996.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $14.8 million for the nine months ended September 30,
1997 increased from $6.4 million for the same period of 1996. The variances are
explained as follows:
(1) A $6.5 million increase in depreciation and amortization expenses from
1996 levels reflects the purchase of assets during 1997 and 1996.
(2) A $1.0 million increase in interest expense was due to the Company's
incurrence of the long-term senior note agreement in 1997 to purchase equipment.
(3) A $0.6 million increase in administrative expenses from 1996 levels
resulted primarily from increased administrative costs associated with the
short-term trailer rental facilities due to additional trailers operating in the
facilities in the first nine months of 1997, compared to the same period of
1996.
(4) A $0.3 million increase in management fees to affiliate reflects the
higher levels of lease revenues in 1997, compared to 1996, due to the purchase
of equipment throughout 1996 and 1997.
(D) Net Gain on Disposition of Owned Equipment
Net gain on the disposition of equipment for the nine months ended September 30,
1997 totaled $5,000, and resulted from the sale of trailers with a net book
value of $22,000, for proceeds of $27,000. There were no sales or disposals of
equipment in the first nine months of 1996.
(E) 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 Nine Months
Ended September 30,
1997 1996
----------------------------
<S> <C> <C>
Aircraft $ 1,297 $ 194
Marine vessel (340 ) (156 )
Mobile offshore drilling unit (467 ) -
</TABLE>
Aircraft: As of September 30, 1997 and 1996, the Company owned an interest in a
trust that owns six commercial aircraft, an interest in another trust that owns
four commercial aircraft, and an interest in two trusts that own three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
Aircraft revenues and expenses were $4.4 million and $3.1 million, respectively,
for the nine months ended September 30, 1997, compared to $4.1 million and $3.9
million, respectively, during the same period in 1996. The increase in revenues
was because of the purchase of an interest in a trust that owns commercial
aircraft at the end of the first quarter of 1996. This investment was on lease
for the entire nine months of 1997, compared to only six months in the same
period in 1996. This increase was partially offset by a decrease in lease
revenues due to lower lease rates for a trust for the nine months ended
September 30, 1997 compared to the same period in 1996. Expenses decreased due
to the use of the double-declining balance depreciation method, which results in
greater depreciation in the first years an asset is owned.
Marine vessel: As of September 30, 1997 and 1996, the Company had an interest in
an entity that owns a marine vessel. Marine vessel revenues and expenses were
$0.9 million and $1.2 million, respectively, for the nine months ended September
30, 1997, compared to $0.6 million and $0.8 million, respectively, during the
same period in 1996. Revenues and expenses during 1997 represent a full nine
months, when compared to 1996, in which revenues and expenses were for only
seven months, due to the purchase of a 50% interest in a marine vessel during
the later half of the first quarter of 1996. In addition, expenses increased due
to required repairs needed on this marine vessel in the nine months ended
September 30, 1997.
Mobile offshore drilling unit: As of September 30, 1997, the Company had an
interest in an entity that owns a mobile offshore drilling unit (rig) purchased
during the fourth quarter of 1996. The Company's interest in this investment
increased in the first quarter of 1997 from 35% to 61%. During the nine months
ended September 30, 1997, revenues of $1.4 million were offset by depreciation
and administrative expenses of $1.9 million.
(F) Net Loss
As a result of the foregoing, the Company had a net loss of $3.5 million for the
nine months of 1997, compared to a net loss of $0.4 million during the same
period of 1996. The Company's ability to operate and liquidate assets, secure
leases, and re-lease those assets whose leases expire is subject to many
factors, and the Company's performance in the nine months ended September 30,
1997 is not necessarily indicative of future periods. In the nine months ended
September 30, 1997, the Company distributed $7.5 million to the Class A members,
or $1.50 per weighted-average Class A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
The Company's initial contributed capital was composed of the proceeds from its
initial offering, and was supplemented by permanent debt in the amount of $25.0
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 and Class B unitholders, and grow the Company's
equipment portfolio through reinvestment of any remaining surplus cash
available.
For the nine months ended September 30, 1997, the Company generated sufficient
operating cash (net cash provided by operating activities plus distributions
from the unconsolidated special-purpose entities) to meet its operating
obligations and pay distributions to Class A and Class B unitholders.
During the nine months ended September 30, 1997, the Company purchased 24
trailers, a mobile offshore drilling unit and a marine vessel for a total of
$19.3 million.
During the nine months ended September 30, 1997, the Company sold trailers with
a net book value of $22,000, for proceeds of $27,000.
The Manager has entered into a short-term joint $50.0 million credit facility.
As of November 10, 1997, the PLM Equipment Growth Fund V had $3.6 million in
outstanding borrowings and PLM Equipment Growth Fund VI had $2.0 million in
outstanding borrowings. Neither the Company, PLM Equipment Growth Fund IV, PLM
Equipment Growth & Income Fund VII, American Finance Group, Inc. (AFG), a
wholly-owned subsidiary of PLM International, Inc., nor TEC Aquisub, Inc., an
indirect wholly-owned subsidiary of FSI, 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 $10.0 million or 50% of
the outstanding senior note balance.
During October 1997, the short-term credit facility was amended and restated to
decrease the available borrowings for AFG to $35.0 million and to extend the
termination date of the credit facility to December 2, 1997. The Manager
believes it will be able to extend the credit facility prior to its expiration
on similar terms and increase the amount of available borrowings for AFG to
$50.0 million.
In October of 1997, the Company received notice from a lessee of its election to
exercise its option to purchase the rig which it is currently leasing. The rig
is anticipated to be sold in the fourth quarter of 1997 for approximately $11.0
million resulting in a gain of $1.5 million to the Company.
<PAGE>
(III) 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
earning as 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.
(IV) FORWARD LOOKING INFORMATION
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that involve risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Company's actual results could differ materially from
those discussed here.
(This space intentionally left blank.)
<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: November 10, 1997
By: /s/ Richard Brock
------------------------
Richard Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,114
<SECURITIES> 0
<RECEIVABLES> 2,071
<ALLOWANCES> (25)
<INVENTORY> 0
<CURRENT-ASSETS> 9,185
<PP&E> 79,123
<DEPRECIATION> 22,952
<TOTAL-ASSETS> 101,392
<CURRENT-LIABILITIES> 1,166
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 73,971
<TOTAL-LIABILITY-AND-EQUITY> 101,392
<SALES> 0
<TOTAL-REVENUES> 12,620
<CGS> 0
<TOTAL-COSTS> 16,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 963
<INCOME-PRETAX> (3,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,496)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
