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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 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 PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease, at cost $ 102,144 $ 102,270
Less accumulated depreciation (40,873 ) (37,983 )
------------------------------------
Net equipment 61,271 64,287
Cash and cash equivalents 10,622 3,720
Accounts receivable, less allowance for doubtful accounts
of $41 in 1999 and $43 in 1998 3,161 1,473
Investment in unconsolidated special-purpose entities 18,357 23,447
Deferred charges, less accumulated amortization
of $38 in 1999 and $344 in 1998 138 275
Prepaid expenses and other assets 314 264
---------------------------------------------------------------------------------------------------------------
Total assets $ 93,863 $ 93,466
====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 890 $ 461
Due to affiliates 571 381
Lessee deposits and reserves for repairs 2,848 2,599
Note payable 25,000 25,000
------------------------------------
Total liabilities 29,309 28,441
------------------------------------
Members' equity:
Class A members (4,985,383 units as of March 31, 1999
and 4,999,581 units as of December 31, 1998) 64,554 64,893
Class B member -- 132
------------------------------------
Total members' equity 64,554 65,025
------------------------------------
Total liabilities and members' equity $ 93,863 $ 93,466
====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS, EXCEPT WEIGHTED-AVERAGE UNIT AMOUNTS)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
--------------------------
<S> <C> <C>
REVENUES
Lease revenue $ 5,473 $ 4,294
Interest and other income 84 197
Net gain (loss) on disposition of equipment (16 ) 28
--------------------------
Total revenues 5,541 4,519
--------------------------
EXPENSES
Depreciation and amortization 2,950 2,982
Repairs and maintenance 673 265
Equipment operating expenses 916 238
Interest expense 453 458
Insurance expense to affiliate -- (3 )
Other insurance expense 98 50
Management fees to affiliate 301 237
General and administrative expenses to affiliates 244 194
Other general and administrative expenses 151 161
--------------------------
Total expenses 5,786 4,582
--------------------------
Equity in net income of unconsolidated special-purpose entities 3,047 2,457
--------------------------
Net income before cumulative effect of accounting change 2,802 2,394
Cumulative effect of accounting change 132 --
--------------------------
Net income $ 2,670 $ 2,394
==========================
MEMBERS' SHARE OF NET INCOME
Class A members $ 2,361 $ 2,016
Class B member 309 378
--------------------------
Total $ 2,670 $ 2,394
==========================
Net income per weighted-average Class A unit $ 0.47 $ 0.40
==========================
Cash distributions $ 2,940 $ 2,941
==========================
Cash distributions per weighted-average Class A units $ 0.50 $ 0.50
==========================
</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, 1997 TO MARCH 31, 1999
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Class A Class B Total
---------------------------------------------------------
<S> <C> <C> <C>
Members' equity as of December 31, 1997 $ 72,298 $ 176 $ 72,474
Net income 2,595 1,721 4,316
Cash distribution (10,000 ) (1,765 ) (11,765 )
---------------------------------------------------------
Members' equity as of December 31, 1998 64,893 132 65,025
Net income 2,361 309 2,670
Repurchase of Class A units (201 ) -- (201 )
Cash distribution (2,499 ) (441 ) (2,940 )
---------------------------------------------------------
Members' equity as of March 31, 1999 $ 64,554 $ -- $ 64,554
=========================================================
</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 Three Months
Ended March 31,
1999 1998
---------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,670 $ 2,394
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,950 2,982
Cumulative effect of accounting change 132 --
Net (gain) loss on disposition of equipment 16 (28 )
Equity in net income of unconsolidated
special-purpose entities (3,047 ) (2,457 )
Changes in operating assets and liabilities:
Accounts receivable, net (1,688 ) 421
Prepaid expenses and other assets (50 ) 45
Accounts payable and accrued expenses 429 331
Due to affiliates 190 (28 )
Lessee deposits and reserves for repairs 249 282
---------------------------------------
Net cash provided by operating activities 1,851 3,942
---------------------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized
improvements (5 ) (10,442 )
Investment in and equipment purchased and placed
in unconsolidated special-purpose entities -- (6,143 )
Liquidation distributions from unconsolidated
special-purpose entities 7,092 4,707
Proceeds from disposition of equipment 60 --
Distributions from unconsolidated special-purpose
entities 1,045 4,316
---------------------------------------
---------------------------------------
Net cash used in investing activities 8,192 (7,562 )
---------------------------------------
FINANCING ACTIVITIES
Payment due to affiliates -- (1,793 )
Cash distributions to Class A members (2,499 ) (2,500 )
Cash distributions to Class B Member (441 ) (441 )
Repurchase of Class A units (201 ) --
---------------------------------------
Net cash used in financing activities (3,141 ) (4,734 )
---------------------------------------
Net increase (decrease) in cash and cash equivalents 6,902 (8,354 )
Cash and cash equivalents at beginning of period 3,720 19,179
---------------------------------------
Cash and cash equivalents at end of period $ 10,622 $ 10,825
=======================================
SUPPLEMENTAL INFORMATION
Interest paid $ -- $ --
=======================================
</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, 1999
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or
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. (the Fund) as of March 31, 1999 and December 31,
1998, the statements of income for the three months ended March 31, 1999
and 1998, the statements of changes in members' equity for the period from
December 31, 1997 to March 31, 1999, and the statements of cash flows for
the three months ended March 31, 1999 and 1998. Certain information and
note 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 Fund's Annual Report on Form 10-K for the
year ended December 31, 1998, on file at the Securities and Exchange
Commission.
2. Schedule of Fund Phases
The Fund will terminate on December 31, 2010, unless terminated earlier
upon sale of all equipment or by certain other events. Beginning in the
Fund's seventh year of operations, which commences on January 1, 2003, the
Manager will stop reinvesting excess cash, if any, which less reasonable
reserves, will be distributed to the members. Between the eighth and tenth
years of operations, the Manager intends to begin an orderly liquidation of
the Fund's assets.
3. Repurchase of Class A Units
In 1998, the Fund agreed to repurchase up to 28,000 Class A units in 1999
for an aggregate purchase price of $0.4 million. As of March 31, 1999, the
Fund had repurchased 14,198 Class A units for $0.2 million. The Manager may
repurchase additional units in the future.
4. Cash Distributions
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
three months ended March 31, 1999 and 1998, cash distributions totaled $2.9
million. Cash distributions to the Class A unitholders of $0.1 million and
$0.5 million for the three months ended March 31, 1999 and 1998,
respectively, were deemed to be a return of capital.
Cash distributions related to the results from the first quarter of 1999,
of $1.7 million, were paid during the second quarter of 1999.
5. Transactions with Manager and Affiliates
The balance due to affiliates as of March 31, 1999 included $0.3 million
due to FSI and its affiliates for management fees and $0.3 million due to
affiliated unconsolidated special-purpose entities (USPEs). The balance due
to affiliates as of December 31, 1998 included $0.2 million due to FSI and
its affiliates for management fees.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
5. Transactions with Manager and Affiliates (continued)
The Fund's proportional share of USPE-affiliated management fees of $37,000
and $40,000 were payable as of March 31, 1999 and December 31, 1998,
respectively.
The Fund's proportional share of the affiliated expenses incurred by the
USPEs during 1999 and 1998 is listed in the following table (in thousands
of dollars):
For the Three Months
Ended March 31,
1999 1998
--------------------------
Management fees $ 70 $ 87
Data processing and administrative
expenses 21 31
Insurance expense -- 1
Transportation Equipment Indemnity Company, Ltd., an affiliate of the
Manager, provided certain marine insurance coverage for Fund equipment and
other insurance brokerage services during 1998. TEI will not provide the
same insurance coverage during 1999 as had been provided during 1998. These
services were provided by an unaffiliated third party.
6. Equipment
The components of owned equipment were as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------------------------------
<S> <C> <C>
Marine vessels $ 46,957 $ 46,957
Aircraft 20,605 20,605
Railcars 19,794 19,920
Trailers 14,788 14,788
---------------------------------------
102,144 102,270
Less accumulated depreciation (40,873 ) (37,983 )
---------------------------------------
Net equipment $ 61,271 $ 64,287
=======================================
</TABLE>
As of March 31, 1999, all owned equipment in the Fund's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for ten railcars with a carrying value of $0.2 million.
As of December 31, 1998, all owned equipment in the Fund's portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for three railcars with a carrying value of $37,000.
During the three months ended March 31, 1999, the Fund did not purchase any
owned equipment. It spent $5,000 on capitalized improvements.
During the three months ended March 31, 1999, the Fund sold railcars with a
net book value of $0.1 million, for proceeds of $0.1 million.
During the three months ended March 31, 1998, the Fund sold a trailer and a
railcar with a net book value of $24,000, for proceeds of $0.1 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
7. Investments in Unconsolidated Special-Purpose Entities
The net investments in USPEs included the following jointly-owned equipment
(and related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------------------------------------
<S> <C> <C>
61% interest in an entity owning a mobile offshore drilling unit $ 7,889 $ 8,223
50% interest in a trust owning an MD-82 stage III commercial
aircraft 6,027 6,441
50% interest in a trust owning an MD-82 stage III commercial
aircraft 3,024 3,342
50% interest in a trust owning a cargo marine vessel 1,200 1,265
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 121 137
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 96 110
33% interest in two trusts that owned a total of three 737-200A
stage II commercial aircraft, two stage II aircraft
engines,
and a portfolio of aircraft rotables -- 3,929
=============================================
Net investments $ 18,357 $ 23,447
=============================================
</TABLE>
During the three months ended March 31, 1999, the Manager sold the Fund's
33% interest in two trusts that owned a total of three 737-200A stage II
commercial aircraft, two stage II aircraft engines, and a portfolio of
aircraft rotables. The trusts were sold for proceeds of $7.1 million for
its net investment of $3.8 million.
(This space intentionally left
blank.)
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
8. Operating Segments
The Fund operates in five different segments: marine vessel leasing,
aircraft leasing, railcar leasing, trailer leasing and rig leasing. Each
equipment leasing segment engages in short-term to mid-term operating
leases to a variety of customers. The following tables present a summary of
the operating segments (in thousands of dollars):
<TABLE>
<CAPTION>
Marine
Vessel Aircraft Railcar Trailer Rig All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
------------------------------------ ------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 2,630 $ 1,014 $ 982 $ 847 $ -- $ -- $ 5,473
Interest income and other -- 3 -- -- -- 81 84
Net loss on disposition
of equipment -- -- (16 ) -- -- -- (16 )
-------------------------------------------------------------------------
Total revenues 2,630 1,017 966 847 -- 81 5,541
COSTS AND EXPENSES
Operations support 1,329 6 146 193 -- 13 1,687
Depreciation and amortization 1,503 643 437 362 -- 5 2,950
Interest expense -- -- -- -- -- 453 453
Management fees to affiliate 132 51 65 53 -- -- 301
General and administrative expenses 15 8 6 175 -- 191 395
-------------------------------------------------------------------------
Total costs and expenses 2,979 708 654 783 -- 662 5,786
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (56 ) 2,801 -- -- 302 -- 3,047
-------------------------------------------------------------------------
Net income (loss) before cumulative
effect
of accounting change (405 ) 3,110 312 64 302 (581 ) 2,802
-------------------------------------------------------------------------
Cumulative effect of accounting -- -- -- -- -- 132 132
change
=========================================================================
Net income $ (405 ) $ 3,110 $ 312 $ 64 $ 302 $ (713 ) $ 2,670
=========================================================================
Total assets as of March 31, 1999 $ 36,821 $ 16,309 $ 12,706 $ 8,695 $ 7,889 $ 11,443 $ 93,863
=========================================================================
<FN>
<F1> Includes interest income and costs not identifiable to a particular
segment, such as amortization expense and interest expense and certain
operations support, and general and administrative expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Marine
Vessel Aircraft Railcar Trailer Rig All
For the quarter ended March 31, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
------------------------------------ ------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,269 $ 1,265 $ 954 $ 806 $ -- $ -- $ 4,294
Interest income and other -- 4 -- -- -- 193 197
Net gain on disposition
of equipment -- -- 22 6 -- -- 28
-------------------------------------------------------------------------
Total revenues 1,269 1,269 976 812 -- 193 4,519
COSTS AND EXPENSES
Operations support 312 13 83 131 -- 11 550
Depreciation and amortization 761 1,255 505 435 -- 26 2,982
Interest expense -- -- -- -- -- 458 458
Management fees to affiliate 63 56 65 53 -- -- 237
General and administrative expenses 27 9 (18 ) 196 -- 141 355
-------------------------------------------------------------------------
Total costs and expenses 1,163 1,333 635 815 -- 636 4,582
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (126 ) 2,440 -- -- 143 -- 2,457
-------------------------------------------------------------------------
=========================================================================
Net income (loss) $ (20 ) $ 2,376 $ 341 $ (3 ) $ 143 $ (443 ) $ 2,394
=========================================================================
Total assets as of March 31, 1998 $ 26,672 $ 26,585 $ 14,605 $ 10,453 $ 9,528 $ 11,884 $ 99,727
=========================================================================
<FN>
<F1> Includes interest income and costs not identifiable to a particular
segment, such as amortization expense and interest expense and certain
operations support, and general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
9. Debt
The Manager has entered into a short-term, joint $24.5 million credit
facility (the Committed Bridge Facility) on behalf of the Fund that is due
to expire on December 14, 1999. Among the eligible borrowers, PLM Equipment
Growth VI had borrowings of $3.7 million and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of PLM International, Inc., had borrowings
of $11.3 million under the short-term joint, $24.5 million credit facility
as of March 31, 1999. No other eligible borrower had any outstanding
borrowings. The Manager believes it will be able to renew the Committed
Bridge Facility upon its expiration with similar terms as those in the
current Committed Bridge Facility.
10. Net Income Per Weighted-Average Class A Unit
Net income per weighted-average Class A unit was computed by dividing net
income attributable to Class A members by the weighted-average number of
Class A units deemed outstanding during the period. The weighted-average
number of Class A units deemed outstanding during the three months ended
March 31, 1999 and 1998 were 4,996,077 units and 4,999,581 units,
respectively.
11. Cumulative Effect of Accounting Change
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs related to start-up activities to be
expensed as incurred. The statement requires that initial application be
reported as a cumulative effect of a change in accounting principle. The
Fund adopted this statement during the first quarter of 1999, at which time
it took a $0.1 million charge, related to start-up costs of Fund.
12. Subsequent Event
On April 1, 1999, the Fund purchased a group of marine containers for $8.6
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 Professional Lease Management Income Fund I, L.L.C.'s (the
Fund's) Operating Results for the Three Months Ended March 31, 1999 and 1998
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
increased during the first quarter of 1999, compared to the same quarter of
1998. Gains or losses from the sale of equipment, interest and other income and
certain expenses such as depreciation and amortization and general and
administrative expenses relating to the operating segments (see Note 8 to the
financial statements), are not included in the owned equipment operation
discussion because they are indirect in nature and not a result of operations
but the result of owning a portfolio of equipment. The following table presents
lease revenues less direct expenses by segment (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Marine vessels $ 1,301 $ 973
Aircraft 1,008 1,252
Railcars 836 871
Trailers 654 676
</TABLE>
Marine vessels: Marine vessel lease revenues and direct expenses were $2.6
million and $1.3 million, respectively, for the first quarter of 1999, compared
to $1.3 million and $0.3 million, respectively, during the same quarter of 1998.
Marine vessel contribution increased due to the purchase of a marine vessel in
the first quarter of 1998 and another vessel in the second quarter of 1998. This
increase in contribution caused by these purchases was offset, in part, by lower
re-lease rates for another marine vessel.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$6,000, respectively, for the first quarter of 1999, compared to $1.3 million
and $13,000, respectively, during the same quarter of 1998. Aircraft
contribution decreased due to the sale of an aircraft in the second quarter of
1998.
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.1
million, respectively, for the first quarter of 1999 and 1998. Railcar
contribution decreased slightly due to a decrease in lease revenue resulting
from the sale or disposition of railcars in 1998 and the first quarter of 1999,
offset, in part, by the increase in lease revenue due to the purchase of
railcars in the first quarter of 1998.
Trailers: Trailer lease revenues and direct expenses were $0.8 million and $0.2
million, respectively, for the first quarter of 1999, compared to $0.8 million
and $0.1 million, respectively, during the same quarter of 1998. Expenses
increased due to repairs required on certain trailers during the first quarter
of 1999, which were not needed in the same period in 1998.
(B) Interest and Other Income
Interest and other income decreased $0.1 million due to lower average cash
balances in the first quarter of 1999, compared to the same period in 1998.
<PAGE>
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.1 million for the quarter ended March 31, 1999
increased from $4.0 million for the same period in 1998. The primary reason for
the increase was due to a $0.1 million increase in management fees to affiliate
that reflects the higher levels of lease revenues on owned equipment in 1999,
when compared to 1998.
(D) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on disposition of equipment for the first quarter of 1999 totaled
$16,000 which resulted from the sale of railcars with a net book value of $0.1
million, for proceeds of $0.1 million. Net gain on disposition of equipment for
the first quarter of 1998 totaled $28,000 which resulted from the sale of a
railcar and a trailer with a net book value of $24,000, for proceeds of $0.1
million.
(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 is shown in the following table by equipment type
(in thousands of dollars).
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Aircraft $ 2,801 $ 2,440
Mobile offshore drilling unit 302 143
Marine vessel (56 ) (126 )
===================================================================================================
Equity in Net Income of USPEs $ 3,047 $ 2,457
===================================================================================================
</TABLE>
Aircraft: As of March 31, 1999, the Fund owned interests in two trusts that each
own a commercial aircraft. As of March 31, 1998, the Fund owned an interest in a
trust that owns two commercial aircraft, an interest in a trust that owns a
commercial aircraft, and an interest in two trusts that owned a total of three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
During the first quarter of 1999, aircraft lease revenues were $0.5 million and
the gain from the sale of the Fund's interest in two trusts that owned three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables
of $3.3 million was offset by expenses of $1.0 million. During the same period
in 1998, aircraft revenues were $1.3 million and the gain from the sale of the
Fund's interest in a trust that owned four commercial aircraft of $2.7 million
was offset by expenses of $1.6 million. Lease revenues decreased $0.8 million
due to the sale of the Fund's investment in two trusts containing ten commercial
aircraft, the sale of the Fund's investment in two trusts that owned a total of
three 737-200A Stage II commercial aircraft, two stage II aircraft engines, and
a portfolio of aircraft rotables, and a lower lease rate earned on certain
equipment. The decrease in lease revenues caused by these sales was offset, in
part, by the purchase of two additional trusts each containing a MD-82
commercial aircraft during 1998. The decrease in expenses of $0.6 million was
primarily due to lower depreciation expense relating to the sale of the Fund's
interest in four trusts and the result of the double declining-balance method of
depreciation which results in greater depreciation in the first years an asset
is owned offset, in part, by the Fund's investment in two additional trusts
during 1998.
Mobile offshore drilling unit: As of March 31, 1999 and 1998, the Fund had an
interest in an entity that owns a mobile offshore drilling unit. Mobile offshore
drilling unit revenues and expenses were $0.7 million and $0.4 million,
respectively, for the first quarter of 1999, compared to $0.6 million and $0.4
million, respectively, during the same quarter of 1998. The increase in mobile
offshore drilling unit contribution is due to an increase in the lease rate
during 1999 and lower depreciation expense as a result of the double
declining-balance method of depreciation which results in greater depreciation
in the first years an asset is owned.
Marine vessel: As of March 31, 1999 and 1998, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.2
million and $0.3 million, respectively, for the first quarter of 1999, compared
to $0.3 million and $0.4 million, respectively, during the same period in 1998.
Lease revenue decreased in the quarter ended March 31, 1999 compared to the same
period in 1998, due to lower re-lease rates as a result of a weak bulk-carrier
vessel market. Expenses decreased due primarily to lower depreciation expense as
a result of the double-declining balance method of depreciation which results in
greater depreciation in the first years an asset is owned.
(F) Cumulative effect of accounting change
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. The Fund adopted this statement
during the first quarter of 1999, at which time it took a $0.1 million charge,
related to start-up costs of the Fund.
(G) Net Income
As a result of the foregoing, the Fund had net income of $2.7 million for the
first quarter of 1999, compared to net income of $2.4 million during the same
period of 1998. The Fund's ability to acquire, operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors. Therefore, the Fund's performance in the first quarter of 1999 is not
necessarily indicative of future periods. In the first quarter of 1999, the Fund
distributed $2.5 million to Class A members, or $0.50 per weighted-average Class
A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the three months ended March 31, 1999, the Fund generated operating cash of
$2.9 million (net cash provided by operating activities, plus non-liquidating
distributions from USPEs) to meet its operating obligations and maintain the
current level of distributions (total for three months ended March 31, 1999 of
approximately $2.9 million) to the partners.
During the three months ended March 31, 1999, PLM Financial Services, Inc. (FSI
or the Manager), a wholly-owned subsidiary of PLM International, Inc., sold or
disposed of Fund owned equipment and investments in USPEs and received aggregate
proceeds of $7.2 million.
On April 1, 1999, the Fund purchased a group of marine containers for $8.6
million.
The Manager has entered into a short-term joint $24.5 million credit facility.
As of April 30, 1999, TEC Acquisub, Inc., an indirect wholly-owned subsidiary of
PLM International, Inc., had borrowings of $14.8 million and PLM Equipment
Growth Fund VI had borrowings of $3.7 million under the short-term joint $24.5
million credit facility. No other eligible borrower had any outstanding
borrowings.
(III) EFFECTS OF YEAR 2000
It is possible that the Manager's currently installed computer systems, software
products, and other business systems, or the Fund's vendors, service providers
and customers, working either alone or in conjunction with other software or
systems, may not accept input of, store, manipulate, and output dates on or
after January 1, 2000 without error or interruption (a problem commonly known as
the "Year 2000" problem). As the Fund relies substantially on the Manager's
software systems, applications and control devices in operating and monitoring
significant aspects of its business, any Year 2000 problem suffered by the
Manager could have a material adverse effect on the Fund's business, financial
condition and results of operations.
The Manager has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Manager (a) is currently integrating Year 2000
compliant programming code into its existing internally customized and
internally developed transaction processing software systems and (b) the
Manager's accounting and asset management software systems have either already
been made Year 2000 compliant or Year 2000 compliant upgrades of such systems
are planned to be implemented by the Manager before the end of fiscal 1999.
Although the Manager believes that its Year 2000 compliance program can be
completed by the beginning of 1999, there can be no assurance that the
compliance program will be completed by that date. To date, the costs incurred
and allocated to the Fund to become Year 2000 compliant have not been material.
To date, the cost incurred, the Manager believes the future costs allocable to
the Fund to become Year 2000 compliant will not be material.
It is possible that certain of the Fund's equipment lease portfolio may not be
Year 2000 compliant. The Manager is currently contacting equipment manufacturers
of the Fund's leased equipment portfolio to assure Year 2000 compliance or to
develop remediation strategies. The Manager does not expect that non-Year 2000
compliance of the Fund's leased equipment portfolio will have an adverse
material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Fund or Manager to control, including the extent to which third parties can
address the Year 2000 problem. The Manager is communicating with vendors,
services providers and customers in order to assess the Year 2000 compliance
readiness of such parties and the extent to which the Fund is vulnerable to any
third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Failure by the Manager or such other parties to make their
respective systems Year 2000 compliant could have a material adverse effect on
the business, financial position and results of operations of the Fund. The
Manager will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 non-compliance and will develop a contingency
plan if the Manager determines that third-party non-compliance will have a
material adverse effect on the Fund's business, financial position or results of
operation.
The Manager is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Manager anticipates
these plans will be completed by September 30, 1999.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued "Accounting for
Derivative Instruments and Hedging Activities," (SFAS No. 133) which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of March 31, 1999,
the Manager is reviewing the effect this standard will have on the Fund's
consolidated financial statements.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Fund's operating performance in 1999 and beyond,
including changes in the markets for the Fund's equipment and changes in the
regulatory environment in which the equipment operates.
The Fund'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.
The ability of the Fund 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, and
government or other regulations. 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 Fund's equipment.
The Manager continually monitors both the equipment markets and the performance
of the Fund's equipment in these markets. The Manager may decide to reduce the
Fund's exposure to equipment markets if it determines that it cannot operate
equipment to 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 Fund intends to use excess cash flow, if any, after payment of operating
expenses, the maintenance of working capital reserves, and cash distributions to
the members, to acquire additional equipment during the first six years of the
Fund's operations. The Manager believes these acquisitions may cause the Fund to
generate additional earning and cash flow for the Fund.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of the Fund'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 Fund's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Fund's primary market risk exposure is that of currency devaluation risk.
During the three months ended March 31, 1999, 79% of the Fund's total lease
revenues from wholly-and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in United States (U.S.)
currency. If these lessee's currency devalues against the U.S. dollar, the
lessees could encounter difficulty in making the U.S. dollar denominated lease
payment.
(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: April 30, 1999
By: /s/ Richard K Brock
----------------------------
Richard K Brock
Vice President and
Corporate Controller
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