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, 2000
[ ] 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 0-28376
_______________________
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
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,
2000 1999
------------------------------------
<S> <C> <C>
ASSETS
Equipment held for operating lease $ 109,310 $ 103,709
Less accumulated depreciation (49,701) (45,183)
------------------------------------
59,609 58,526
Equipment held for sale 3,400 --
------------------------------------
Net equipment 63,009 58,526
Cash and cash equivalents 4,299 11,597
Restricted cash 771 453
Accounts receivable, less allowance for doubtful accounts
of $36 in 2000 and $65 in 1999 1,795 2,007
Investment in unconsolidated special-purpose entities 5,762 7,717
Deferred charges, less accumulated amortization
of $65 in 2000 and $52 in 1999 112 125
Prepaid expenses and other assets 5 108
------------------------------------
Total assets $ 75,753 $ 80,533
====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 825 $ 458
Due to affiliates 896 656
Lessee deposits and reserves for repairs 5,015 3,821
Note payable 25,000 25,000
------------------------------------
Total liabilities 31,736 29,935
------------------------------------
Members' equity:
Class A members (4,971,311 units as of September 30, 2000
and 4,975,321 units as of December 31, 1999) 44,017 50,598
Class B member -- --
------------------------------------
Total members' equity 44,017 50,598
------------------------------------
Total liabilities and members' equity $ 75,753 $ 80,533
====================================
</TABLE>
See accompanying notes to financial statements.
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,
2000 1999 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease revenue $ 5,820 $ 6,943 $ 17,396 $ 20,192
Interest and other income 44 35 304 156
Net gain on disposition of equipment 2,112 9 2,118 20
-------------------------------------------------------------
Total revenues 7,976 6,987 19,818 20,368
-------------------------------------------------------------
EXPENSES
Depreciation and amortization 3,434 4,018 9,731 11,458
Repairs and maintenance 731 704 1,822 1,957
Equipment operating expenses 605 890 1,602 2,470
Interest expense 463 468 1,379 1,385
Insurance expense 125 144 317 311
Management fees to affiliate 317 369 939 1,075
General and administrative expenses
to affiliates 252 218 727 709
Other general and administrative expenses 232 205 713 540
-------------------------------------------------------------
Total expenses 6,159 7,016 17,230 19,905
-------------------------------------------------------------
Minority interest -- (192) -- (590)
Equity in net income (loss) of unconsolidated
special-purpose entities (101) (393) (345) 2,047
-------------------------------------------------------------
Net income (loss) before cumulative effect of
accounting change 1,716 (614) 2,243 1,920
Cumulative effect of accounting change -- -- -- (132)
-------------------------------------------------------------
Net income (loss) $ 1,716 $ (614) $ 2,243 $ 1,788
=============================================================
MEMBERS' SHARE OF NET INCOME (LOSS)
Class A members $ 1,540 $ (1,054) $ 927 $ 599
Class B member 176 440 1,316 1,189
-------------------------------------------------------------
Total $ 1,716 $ (614) $ 2,243 $ 1,788
=============================================================
Class A member's net income (loss) per
weighted-average Class A unit $ 0.31 $ (0.21) $ 0.19 $ 0.12
=============================================================
Cash distribution $ 2,925 $ 2,928 $ 8,776 $ 8,800
=============================================================
Cash distribution per weighted-average
Class A units $ 0.50 $ 0.50 $ 1.50 $ 1.50
=============================================================
</TABLE>
See accompanying notes to financial statements.
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, 1998 to September 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Class A Class B Total
---------------------------------------------------------
<S> <C> <C> <C>
Members' equity as of December 31, 1998 $ 64,893 $ 132 $ 65,025
Net income (loss) (4,029) 1,628 (2,401)
Purchase of Class A units (336) -- (336)
Cash distribution (9,930) (1,760) (11,690)
---------------------------------------------------------
Members' equity as of December 31, 1999 50,598 -- 50,598
Net income 927 1,316 2,243
Purchase of Class A units (48) -- (48)
Cash distribution (7,460) (1,316) (8,776)
---------------------------------------------------------
Members' equity as of September 30, 2000 $ 44,017 $ -- $ 44,017
=========================================================
</TABLE>
See accompanying notes to financial statements.
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,
2000 1999
---------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,243 $ 1,788
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,731 11,458
Cumulative effect of accounting change -- 132
Net gain on disposition of equipment (2,118) (20)
Equity in net (income) loss of unconsolidated
special-purpose entities 345 (2,047)
Changes in operating assets and liabilities:
Restricted cash (318) (420)
Accounts receivable, net 210 (243)
Prepaid expenses and other assets 103 158
Accounts payable and accrued expenses 367 454
Due to affiliates 240 260
Lessee deposits and reserves for repairs 1,194 518
Minority interest -- (676)
---------------------------------------
Net cash provided by operating activities 11,997 11,362
---------------------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized
improvements (19,478) (9,969)
Liquidating distributions from unconsolidated
special-purpose entities -- 7,095
Proceeds from disposition of equipment 7,397 158
Distributions from unconsolidated special-purpose
entities 1,610 1,448
---------------------------------------
Net cash used in investing activities (10,471) (1,268)
---------------------------------------
FINANCING ACTIVITIES
Cash distribution to Class A members (7,460) (7,479)
Cash distribution to Class B Member (1,316) (1,321)
Purchase of Class A units (48) (336)
---------------------------------------
Net cash used in financing activities (8,824) (9,136)
---------------------------------------
Net (decrease) increase in cash and cash equivalents (7,298) 958
Cash and cash equivalents at beginning of period 11,597 3,720
---------------------------------------
Cash and cash equivalents at end of period $ 4,299 $ 4,678
=======================================
Supplemental information
Interest paid $ 916 $ 916
=======================================
</TABLE>
See accompanying notes to financial statements.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
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 September 30, 2000 and December 31,
1999, the statements of operations for the three and nine months ended
September 30, 2000 and 1999, the statements of changes in members' equity
for the period from December 31, 1998 to September 30, 2000, and the
statements of cash flows for the nine months ended September 30, 2000 and
1999. 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/A for the year ended December 31, 1999, 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 and certain other events. Beginning in the
Fund's seventh year of operations, which commences on January 1, 2003, the
Manager will stop purchasing additional equipment. Surplus cash, if any,
less reasonable reserves, will be distributed to the members. Between the
eighth and tenth years of operations, the Manager intends to orderly
liquidate the Fund's assets.
3. PURCHASE OF CLASS A UNITS
In 1999, the Fund agreed to purchase up to 4,010 Class A units in 2000 for
an aggregate purchase price of $49,000. During the nine months ended
September 30, 2000, the Fund purchased 4,010 Class A units for $48,000.
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
nine months ended September 30, 2000 and 1999, cash distributions totaled
$8.8 million. For the three months ended September 30, 2000 and 1999, cash
distributions totaled $2.9 million. Cash distributions to the Class A
unitholders of $6.4 million and $6.9 million for the nine months ended
September 30, 2000 and 1999, respectively, were deemed to be a return of
capital.
Cash distributions related to the results from the third quarter of 2000,
of $1.7 million, will be paid during the fourth quarter of 2000.
5. TRANSACTIONS WITH MANAGER AND AFFILIATES
The balance due to affiliates as of September 30, 2000, included $0.2
million due to FSI and its affiliates for management fees and data
processing services, and $0.7 million due to affiliated unconsolidated
special-purpose entities (USPEs). The balance due to affiliates as of
December 31, 1999, included $0.2 million due to FSI and its affiliates for
management fees and $0.5 million due to affiliated USPEs.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
5. TRANSACTIONS WITH MANAGER AND AFFILIATES (CONTINUED)
The Fund's proportional share of USPE-affiliated management fees of $21,000
and $31,000, respectively, were payable as of September 30, 2000 and
December 31, 1999.
The Fund's proportional share of the affiliated expenses incurred by the
USPEs during 2000 and 1999 is listed in the following table (in thousands
of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 33 $ 36 $ 100 $ 108
Data processing and administrative
expenses 7 9 27 30
</TABLE>
6. EQUIPMENT
Owned equipment held for operating leases is stated at cost. Equipment held
for sale is stated at the lower of the equipment's depreciated cost or fair
value, less cost to sell, and is subject to a pending contract for sale.
The components of owned equipment were as follows (in thousands of
dollars):
September 30, December 31,
2000 1999
----------------------------------------
Equipment held for operating lease:
Marine vessels $ 33,256 $ 37,256
Marine containers 29,160 9,942
Aircraft 20,605 20,605
Railcars 19,623 19,710
Trailers 6,666 16,196
----------------------------------------
109,310 103,709
Less accumulated depreciation (49,701) (45,183)
----------------------------------------
59,609 58,526
Equipment held for sale 3,400 --
----------------------------------------
Net equipment $ 63,009 $ 58,526
========================================
As of September 30, 2000, all owned equipment in the Fund's portfolio was
on lease, except for a marine vessel and 14 railcars with a carrying value
of $3.6 million. As of December 31, 1999, all owned equipment in the Fund
portfolio was either on lease or operating in PLM-affiliate short-term
trailer rental yards except for six railcars with a carrying value of $0.1
million.
As of September 30, 2000, equipment held for sale included a marine vessel
with a net book value of $3.4. No equipment was held for sale as of
December 31, 1999.
During the nine months ended September 30, 2000, the Fund purchased 9,239
marine containers and ten trailers for $19.5 million. During the nine
months ended September 30, 1999, the Fund purchased 4,430 marine containers
for $9.9 million.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
6. EQUIPMENT (CONTINUED)
During the nine months ended September 30, 2000, the Fund sold trailers and
railcars with an aggregate net book value of $5.3 million, for aggregate
proceeds of $7.4 million. During the nine months ended September 30, 1999,
the Fund sold railcars and trailers with an aggregate net book value of
$0.1 million, for proceeds of $0.2 million.
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>
September 30, December 31,
2000 1999
----------------------------------------------
<S> <C> <C>
50% interest in a trust owning an MD-82 stage III commercial
aircraft $ 3,846 $ 4,784
50% interest in a trust owning an MD-82 stage III commercial
aircraft 1,133 1,773
50% interest in a trust owning a cargo marine vessel 783 1,024
25% interest in a trust that owned four 737-200A stage II
commercial aircraft -- 76
25% interest in a trust that owned four 737-200A stage II
commercial aircraft -- 60
----------------------------------------------
Net investments $ 5,762 $ 7,717
==============================================
</TABLE>
As of September 30, 2000 and December 31, 1999, all jointly-owned equipment
in the Fund's USPE portfolio was on lease.
(This space intentionally left blank.)
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS
The Fund operates or operated in six different segments: marine vessel
leasing, aircraft leasing, railcar leasing, trailer leasing, marine
container leasing, and mobile offshore drilling unit (MODU) leasing. Each
equipment leasing segment engages in short 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 Marine
Vessel Aircraft Railcar Trailer Container
For the quarter ended September 30, Leasing Leasing Leasing Leasing Leasing Other(1) Total
2000
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,758 $ 1,014 $ 921 $ 1,086 $ 1,041 $ -- $ 5,820
Interest income and other -- -- -- -- -- 44 44
Net gain on disposition
of equipment -- -- 49 2,063 -- -- 2,112
-------------------------------------------------------------------------
Total revenues 1,758 1,014 970 3,149 1,041 44 7,976
COSTS AND EXPENSES
Operations support 969 8 157 315 2 10 1,461
Depreciation and amortization 1,155 579 375 368 952 5 3,434
Interest expense -- -- -- -- -- 463 463
Management fees to affiliate 75 50 66 54 72 -- 317
General and administrative expenses 17 3 4 276 -- 184 484
-------------------------------------------------------------------------
Total costs and expenses 2,216 640 602 1,013 1,026 662 6,159
-------------------------------------------------------------------------
Equity in net loss of USPEs (77) (24) -- -- -- -- (101)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ (535) $ 350 $ 368 $ 2,136 $ 15 $ (618) $ 1,716
=========================================================================
Total assets as of September 30, 2000 $ 23,781 $ 7,490 $ 10,229 $ 2,987 $ 26,850 $ 4,416 $ 75,753
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Marine Marine
For the quarter ended Vessel Aircraft Railcar Trailer Container MODU
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 2,313 $ 1,014 $ 904 $ 1,006 $ 510 $ 1,196 $ -- $ 6,943
Interest income and 3 2 -- -- -- -- 30 35
other
Net gain on disposition
of equipment -- -- 9 -- -- -- -- 9
------------------------------------------------------------------------------------
Total revenues 2,316 1,016 913 1,006 510 1,196 30 6,987
COSTS AND EXPENSES
Operations support 1,285 7 171 236 -- 26 13 1,738
Depreciation and 1,503 643 435 362 493 582 -- 4,018
amortization
Interest expense -- -- -- -- -- -- 468 468
Management fees to 117 51 58 58 25 60 -- 369
affiliate
General and
administrative
expenses 14 10 23 180 -- 45 151 423
------------------------------------------------------------------------------------
Total costs and 2,919 711 687 836 518 713 632 7,016
expenses
------------------------------------------------------------------------------------
Minority interest -- -- -- -- -- (192) -- (192)
Equity in net loss of (70) (323) -- -- -- -- -- (393)
USPEs
------------------------------------------------------------------------------------
Net income (loss) $ (673) $ (18) $ 226 $ 170 $ (8) $ 291 $ (602) $ (614)
====================================================================================
Total assets as of
September 30, 1999 $ 33,089 $ 12,497 $11,776 $ 8,455 $ 9,453 $ 7,188 $ 5,333 $ 87,791
====================================================================================
_____________________________________
(1) 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.
</TABLE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
FOR THE NINE MONTHS ENDED SEPTEMBER Vessel Aircraft Railcar Trailer Container
30, 2000 Leasing Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 5,730 $ 3,043 $ 2,783 $ 3,169 $ 2,671 $ -- $ 17,396
Interest income and other 1 2 -- -- -- 301 304
Net gain on disposition
of equipment -- -- 49 2,069 -- -- 2,118
-------------------------------------------------------------------------
Total revenues 5,731 3,045 2,832 5,238 2,671 301 19,818
COSTS AND EXPENSES
Operations support 2,453 26 436 792 5 29 3,741
Depreciation and amortization 3,466 1,736 1,128 1,106 2,282 13 9,731
Interest expense -- -- -- -- -- 1,379 1,379
Management fees to affiliate 286 152 184 183 134 -- 939
General and administrative expenses 68 7 65 692 1 607 1,440
-------------------------------------------------------------------------
Total costs and expenses 6,273 1,921 1,813 2,773 2,422 2,028 17,230
-------------------------------------------------------------------------
Equity in net loss of USPEs (275) (70) -- -- -- -- (345)
-------------------------------------------------------------------------
Net income (loss) $ (817) $ 1,054 $ 1,019 $ 2,465 $ 249 $ (1,727) $ 2,243
=========================================================================
Total assets as of September 30, 2000 $ 23,781 $ 7,490 $ 10,229 $ 2,987 $ 26,850 $ 4,416 $ 75,753
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Marine Marine
FOR THE NINE MONTHS ENDED Vessel Aircraft Railcar Trailer Container MODU
SEPTEMBER 30, 1999 Leasing Leasing Leasing Leasing Leasing Leasing Other(1) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 7,118 $ 3,043 $ 2,809 $ 2,780 $ 882 $ 3,560 $ -- $ 20,192
Interest income and 5 7 -- -- -- 1 143 156
other
Net gain on disposition
of equipment -- -- 15 5 -- -- -- 20
-----------------------------------------------------------------------------------
Total revenues 7,123 3,050 2,824 2,785 882 3,561 143 20,368
COSTS AND EXPENSES
Operations support 3,476 20 502 637 -- 66 37 4,738
Depreciation and 4,509 1,929 1,307 1,085 866 1,749 13 11,458
amortization
Interest expense -- -- -- -- -- -- 1,385 1,385
Management fees to 357 152 184 160 44 178 -- 1,075
affiliate
General and
administrative
expenses 42 24 48 569 -- 75 491 1,249
-----------------------------------------------------------------------------------
Total costs and 8,384 2,125 2041 2,451 910 2,068 1,926 19,905
expenses
-----------------------------------------------------------------------------------
Minority interest -- -- -- -- -- (590) -- (590)
Equity in net income
(loss) of USPEs (114) 2,161 -- -- -- -- -- 2,047
-----------------------------------------------------------------------------------
Net income (loss) before
cumulative effect of
accounting change (1,375) 3,086 783 334 (28) 903 (1,783) 1,920
Cumulative effect of
Accounting change -- -- -- -- -- -- (132) (132)
-----------------------------------------------------------------------------------
Net income (loss) $ (1,375) $ 3,086 $ 783 $ 334 $ (28) $ 903 $ (1,915) $ 1,788
===================================================================================
Total assets as of
September 30, 1999 $ 33,089 $ 12,497 $ 11,776 $ 8,455 $ 9,453 $ 7,188 $ 5,333 $ 87,791
===================================================================================
</TABLE>
_____________________________________
(1) 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.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
9. DEBT
The Fund's warehouse facility, which was shared with PLM Equipment Growth
Fund VI, PLM Equipment Growth & Income Fund VII, and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of the Manager, expired on September 30,
2000. The Manager is currently negotiating with a new lender for a $15.0
million warehouse credit facility with similar terms as the facility that
expired. The Manager believes the facility will be completed during the
fourth quarter of 2000.
10. NET INCOME (LOSS) PER WEIGHTED-AVERAGE CLASS A UNIT
Net income (loss) per weighted-average Class A unit was computed by
dividing net income (loss) 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 and nine months ended September 30, 2000 were 4,971,311
units and 4,972,178 units, respectively. The weighted-average number of
Class A units deemed outstanding during the three and nine months ended
September 30, 1999 were 4,975,419 units and 4,984,675 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 required costs related to start-up activities to be
expensed as incurred. The statement required that initial application be
reported as a cumulative effect of a change in accounting principle. The
Fund adopted this statement during the nine months ended September 30,
1999, at which time it took a $0.1 million charge, related to start-up
costs of Fund. This charge had the effect of reducing net income per
weighted-average Class A unit by $0.03 for the nine months ended September
30, 1999.
12. SUBSEQUENT EVENT
In October of 2000, the Fund sold a marine vessel with a net book value of
$3.4 million for $3.4 million.
In October of 2000, the Fund received $0.2 million in additional proceeds
from the sale of one of the Fund's USPEs that owned an interest in a mobile
offshore drilling unit. No additional proceeds will be received.
(This space is intentionally left blank.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
In September 1999, the Manager amended the corporate-by-laws of certain
unconsolidated special purpose entities (USPEs) in which the Fund, or any
affiliated program, owned an interest greater than 50%. The amendment to the
corporate-by-laws provided that all decisions regarding the acquisition and
disposition of the investment as well as other significant business decisions of
that investment would be permitted only upon unanimous consent of the Fund and
all the affiliated programs that have an ownership in the investment (the
Amendment). As such, although the Fund may own a majority interest in a USPE,
the Fund does not control its management and thus the equity method of
accounting will be used after adoption of the Amendment. As a result of the
Amendment, as of September 30, 1999, all jointly owned equipment in which the
Fund owned a majority interest, which had been consolidated, were reclassified
to investments in USPEs. Lease revenues and direct expenses for jointly owned
equipment in which the Fund held a majority interest were reported under the
consolidation method of accounting during the three and nine months ended
September 30, 1999 and were included with the owned equipment operations.
Comparison of the Professional Lease Management Income Fund I, L.L.C.'s (the
Fund's) Operating Results for the Three Months Ended September 30, 2000 and 1999
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the third quarter of 2000, compared to the same quarter of
1999. 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):
(A) Owned Equipment Operations
For the Three Months
Ended September 30,
2000 1999
---------------------------
Marine containers $ 1,039 $ 510
Aircraft 1,006 1,007
Trailers 771 770
Marine vessels 789 1,028
Railcars 764 733
Mobile offshore drilling unit -- 1,170
Marine containers: Marine container lease revenues were $1.0 million and $0.5
million, respectively, for the third quarter of 2000 and 1999. Marine container
contribution increased in the third quarter of 2000, compared to the same period
in 1999 due to the purchase of marine containers in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$8,000, respectively, for the third quarter of 2000, compared to $1.0 million
and $7,000, respectively, during the same period in 1999. Aircraft contribution
remained the same due to the stability of the aircraft fleet.
Trailers: Trailer lease revenues and direct expenses were $1.1 million and $0.3
million, respectively, for the third quarter of 2000, compared to $1.0 million
and $0.2 million, respectively, during the same period in 1999. Trailer
contribution increased in the third quarter of 2000, compared to the same period
of 1999 due to the purchase of trailers in 1999 and 2000.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.8
million and $1.0 million, respectively, for the third quarter of 2000, compared
to $2.3 million and $1.3 million, respectively, during the same period in 1999.
Lease revenue decreased $0.5 million in the third quarter of 2000 compared to
the same period in 1999 due to one of the Fund's anchor handling supply marine
vessels being off-lease in the third quarter of 2000 compared to the same period
in 1999 where the marine vessel was on lease for the entire quarter. Direct
expenses decreased $0.3 million primarily due to hull cleaning costs and canal
charges incurred in the third quarter of 1999 while repositioning one of the
Fund's marine vessels for a new charter in the third quarter of 1999. A similar
event did not occur in the same period in 2000.
Railcars: Railcar lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, during the third quarter of 2000 and 1999.
Mobile offshore drilling unit: Mobile offshore drilling unit revenues and
expenses were $1.2 million and $26,000, respectively, for the third quarter of
1999. The September 30, 1999 Amendment that changed the accounting method of
majority held equipment from the consolidation method of accounting to the
equity method of accounting impacted the reporting of lease revenes and direct
expenses of the mobile offshore drilling unit. In addition, the Fund's interest
in an entity owning a mobile offshore drilling unit was sold in the fourth
quarter of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.7 million for the quarter ended September 30, 2000
decreased from $5.3 million for the same period in 1999. Significant variances
are explained as follows:
(i) A $0.6 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $0.6 million decrease due to the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned, and a $0.6 million decrease as a
result of the Amendment which changed the accounting method used for majority
held equipment from the consolidation method of accounting to the equity method
of accounting. These decreases were partially offset by an increase of $0.6
million in depreciation expense from the purchase of equipment during 1999 and
2000.
(ii) A $0.1 million decrease in management fees to affiliate due to lower
levels of lease revenues on owned equipment in 2000, when compared to 1999.
(iii) A $0.1 million increase in general and administrative expenses was
due to higher costs associated with the transition of trailers into and the
operations of three new PLM short-term trailer rental facilities during the
third quarter of 2000 when compared to the same period in 1999.
(C) Minority Interest
Minority interest expense decreased $0.2 million due to the September 30, 1999
Amendment that changed the accounting method of majority held equipment from the
consolidation method of accounting to the equity method of accounting.
(D) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the third quarter of 2000 totaled
$2.1 million which resulted from the sale of trailers and railcars with an
aggregate net book value of $5.3 million, for aggregate proceeds of $7.4
million. Net gain on disposition of equipment for the third quarter of 1999
totaled $9,000 which resulted from the sale of railcars with a net book value of
$34,000, for proceeds of $43,000.
(E) Equity in Net Loss of Unconsolidated Special-Purpose Entities
Net 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).
For the Three Months
Ended September 30,
2000 1999
----------------------------
Aircraft $ (24) $ (323)
Marine vessel (77) (70)
----------------------------
Equity in Net Loss of USPEs $ (101) $ (393)
============================
Aircraft: As of September 30, 2000 and 1999, the Fund owned interests in two
trusts that each own a commercial aircraft. During the third quarter of 2000,
aircraft lease revenues were $0.5 million which were offset by expenses of $0.5
million. During the same period in 1999, aircraft lease revenues were $0.5
million which were offset by expenses of $0.8 million. The decrease in expenses
of $0.3 million was primarily due to lower depreciation expense resulting from
the use of double declining-balance method of depreciation which results in
greater depreciation in the first years an asset is owned.
Marine vessel: As of September 30, 2000 and 1999, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.1
million and $0.2 million, respectively, for the third quarter of 2000, compared
to $0.2 million and $0.3 million, respectively, during the same period in 1999.
Lease revenue decreased $0.1 million as a result of the marine vessel being off
lease for 11 days in the third quarter of 2000 compared to the same period in
1999 where the marine vessel was on lease for the entire quarter. Direct
expenses decreased $0.1 million due to lower operating expenses in the third
quarter of 2000 compared to the same period in 1999.
(F) Net Income (Loss)
As a result of the foregoing, the Fund had net income of $1.7 million for the
third quarter of 2000, compared to net loss of $0.6 million during the same
period of 1999. 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 third quarter of 2000 is not
necessarily indicative of future periods. In the third quarter of 2000, the Fund
distributed $2.5 million to Class A members, or $0.50 per weighted-average Class
A unit.
COMPARISON OF THE THE FUND'S OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the nine months ended September 30, 2000, when compared to the
same period of 1999. The following table presents lease revenues less direct
expenses by segment (in thousands of dollars):
For the Nine Months
Ended September 30,
2000 1999
---------------------------
Marine vessels $ 3,277 $ 3,642
Aircraft 3,017 3,023
Marine containers 2,666 882
Trailers 2,377 2,143
Railcars 2,347 2,307
Mobile offshore drilling unit -- 3,494
Marine vessels: Marine vessel lease revenues and direct expenses were $5.7
million and $2.5 million, respectively, for the nine months ended September 30,
2000, compared to $7.1 million and $3.5 million, respectively, during the same
period of 1999. Lease revenue decreased $0.7 million in the nine months ended
September 30, 2000 compared to the same period in 1999 due to lower re-lease
rates for one of the Fund's anchor handling supply marine vessels. In addition,
lease revenue decreased $1.2 million due to another anchor handling supply
marine vessel being off-lease in the second and third quarters of 2000 compared
to the nine months ended September 30, 1999 when the marine vessel was on lease
for the entire period. The decreases in lease revenue from these marine vessels
were offset, in part, by an increase in lease revenue of $0.5 million during the
nine months ended September 30, 2000 compared to the same period in 1999 due to
higher re-lease rates for the Fund's bulk carrier marine vessel. Direct expenses
decreased $1.0 million primarily due to lower operating expenses for one of the
Fund's marine vessels in the nine months ended September 30, 2000 compared to
the same period in 1999.
Aircraft: Aircraft lease revenues and direct expenses were $3.0 million and
$26,000, respectively, for the nine months ended September 30, 2000, compared to
$3.0 million and $20,000, respectively, during the same period of 1999. Aircraft
contribution remained approximately the same due to the stability of the
aircraft fleet.
Marine containers: Marine container lease revenues were $2.7 million and $0.9
million, respectively, for the nine months ended September 30, 2000 and 1999.
Marine container contribution increased in the nine months ended September 30,
2000, compared to the same period of 1999 due to the purchase of marine
containers in 1999 and 2000.
Trailers: Trailer lease revenues and direct expenses were $3.2 million and $0.8
million, respectively, for the nine months ended September 30, 2000, compared to
$2.8 million and $0.6 million, respectively, during the same period of 1999.
Trailer contribution increased in the nine months ended September 30, 2000,
compared to the same period of 1999 due to the purchase of trailers in 1999 and
2000.
Railcars: Railcar lease revenues and direct expenses were $2.8 million and $0.4
million, respectively, for the nine months ended September 30, 2000, compared to
$2.8 million and $0.5 million, respectively, during the same period of 1999.
Direct expenses decreased due to lower running repairs required on certain
railcars during the nine months ended September 30, 1999, that were not needed
during the same period in 2000.
Mobile offshore drilling unit: Mobile offshore drilling unit revenues and
expenses were $3.6 million and $0.1 million, respectively, for the nine months
ended September 30, 1999. The September 30, 1999 Amendment that changed the
accounting method of majority held equipment from the consolidation method of
accounting to the equity method of accounting impacted the reporting of lease
revenes and direct expenses of the mobile offshore drilling unit. In addition,
this mobile offshore drilling unit was sold in the fourth quarter of 1999.
(B) Interest and Other Income
Interest and other income increased $0.1 million due to higher average cash
balances in the nine months ended September 30, 2000, compared to the same
period in 1999.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $13.5 million for the nine months ended September 30,
2000 decreased from $15.2 million for the same period in 1999. Significant
variances are explained as follows:
(i) A $1.7 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $1.8 million decrease due to the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned, and a $1.7 million decrease as a
result of the Amendment which changed the accounting method used for majority
held equipment from the consolidation method of accounting to the equity method
of accounting. These decreases were partially offset by an increase of $1.8
million in depreciation expense from the purchase of equipment during 1999 and
2000.
(ii) A $0.1 million decrease in management fees to affiliate was due to
lower levels of lease revenues on owned equipment in 2000, when compared to
1999.
(iii) A $0.2 million increase in general and administrative expenses was
due to a $0.1 million increase in costs associated with the transition of
trailers into and the operations of three new PLM short-term trailer rental
facilities and an increase of $0.1 million in the costs associated with
professional services during the nine months ended September 30, 2000 when
compared to the same period in 1999.
(D) Minority Interest
Minority interest expense decreased $0.6 million due to the September 30, 1999
Amendment that changed the accounting method of majority held equipment from the
consolidation method of accounting to the equity method of accounting.
(E) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the nine months ended September 30,
2000 totaled $2.1 million which resulted from the sale of trailers and railcars
with an aggregate net book value of $5.3 million, for aggregate proceeds of $7.4
million. Net gain on disposition of equipment for the nine months ended
September 30, 1999 totaled $20,000 which resulted from the sale of railcars and
trailers with an aggregate net book value of $0.1 million, for proceeds of $0.2
million.
(F) 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).
For the Nine Months
Ended September 30,
2000 1999
----------------------------
Aircraft $ (70) $ 2,161
Marine vessel (275) (114)
----------------------------
Equity in Net Income (Loss) of USPEs $ (345) $ 2,047
============================
Aircraft: As of September 30, 2000 and 1999, the Fund owned interests in two
trusts that each own a commercial aircraft. During the nine months ended
September 30, 2000, aircraft lease revenues were $1.6 million offset by expenses
of $1.7 million. During the nine months ended September 30, 1999, aircraft lease
revenues were $1.6 million and the gain from the sale of the Fund's interest in
two trusts that owned a total of three commercial aircraft, two aircraft
engines, and a portfolio of aircraft rotables of $3.3 million was offset by
expenses of $2.7 million. The decrease in expenses of $1.0 million was primarily
due to lower depreciation expense resulting from a $0.9 million decrease due to
the use of double declining-balance method of depreciation which results in
greater depreciation in the first years an asset is owned and a $0.1 million
decrease due to the sale of the Fund's interest in the two trusts.
Marine vessel: As of September 30, 2000 and 1999, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.4
million and $0.7 million, respectively, for the nine months ended September 30,
2000, compared to $0.6 million and $0.7 million, respectively, during the same
period in 1999. Lease revenue decreased $0.2 million as a result of the marine
vessel being off lease for 30 days in the nine months ended September 30, 2000
compared to the same period in 1999 where the marine vessel was on lease for the
entire period.
(G) Cumulative Effect of Accounting Change
In April 1999, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which required costs related to start-up activities to be expensed as incurred.
The statement required that initial application be reported as a cumulative
effect of a change in accounting principle. The Fund adopted this statement
during the nine months ended September 30, 2000, at which time it took a $0.1
million charge, related to start-up costs of the Fund. This charge had the
effect of reducing net income per weighted-average Class A unit by $0.03 for the
nine months ended September 30, 1999.
(H) Net Income
As a result of the foregoing, the Fund had net income of $2.2 million for the
nine months ended September 30, 2000, compared to net income of $1.8 million
during the same period of 1999. 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 nine months
ended September 30, 2000 is not necessarily indicative of future periods. In the
nine months ended September 30, 2000, the Fund distributed $7.5 million to Class
A members, or $1.50 per weighted-average Class A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 2000, the Fund generated operating cash
of $13.6 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 nine months ended
September 30, 2000 of $8.8 million) to the partners.
During the nine months ended September 30, 2000, the Fund purchased marine
containers and trailers for $19.5 million.
During the nine months ended September 30, 2000, the Fund sold trailers and
railcars with an aggregate net book value of $5.3 million, for aggregate
proceeds of $7.4 million.
Restricted cash increased $0.3 million during the nine months ended September
30, 2000 due to security deposits received from a marine container lessee in
2000.
Accounts receivable decreased $0.2 million during the nine months ended
September 30, 2000 due to the timing of cash receipts and the reduction in lease
revenues.
Investments in USPEs decreased $2.0 million due to cash distributions of $1.6
million to the Fund from USPEs and a $0.3 million loss that was recorded from
the programs equity interests in USPEs for the nine months ended September 30,
2000.
Accounts payable increased $0.4 million during the nine months ended September
30, 2000 due to the accrual of interest expense for the Fund's outstanding note
which is paid semi annually.
Due to affiliates increased $0.2 million during the nine months ended September
30, 2000 due to the receipt of an additional deposit that is due to an
affiliated USPE for engine reserves.
Lessee deposits and reserve for repairs increased $1.2 million during the nine
months ended September 30, 2000. Security deposits increased $0.3 million due to
security deposits received from a marine container lessee and an aircraft
lessee, reserves for aircraft engine repairs increased $0.4 million due to
additional lessee deposits, and marine vessel dry-docking reserves increased
$0.3 million. Lessee prepaid deposits increased $0.2 million due to more
lessee's prepaying future lease revenue.
The Fund's warehouse facility, which was shared with PLM Equipment Growth Fund
VI, PLM Equipment Growth & Income Fund VII, LLC, and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of the Manager, expired on September 30, 2000.
Borrowings under this facility by the other eligible borrowers reduced the
amount available to be borrowed by the Fund. All borrowings under this facility
were guaranteed by the Manager. The Manager is currently negotiating with a new
lender for a $15.0 million warehouse credit facility with similar terms as the
facility that expired. The Manager believes the facility will be completed
during the fourth quarter of 2000.
(III) OUTLOOK FOR THE FUTURE
Several factors may affect the Fund's operating performance in the remainder of
2000 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.
Other factors affecting the Fund's contribution in the remainder of 2000 and
beyond include:
1. Improved market conditions for the Fund's dry bulk marine vessels has led to
higher re-lease rates in 2000.
2. In 1999, one of the Fund's anchor handling supply marine vessels was
re-leased at a significantly lower rate, due to soft market conditions. The
other anchor handling supply marine vessel was off lease as of September 30,
2000 and was sold in the fourth quarter of 2000.
3. Rates and utilization dropped for oil tanker vessels in 1999 due to the
economic situation in Asia. The demand in 2000 has shown significant signs of
recovery due to the world's energy situation and has lead to higher utilization
and lease rates. With the improvement of market conditions, the Fund's oil
tanker could expect higher re-lease rates when the current lease expires.
4. The demand for covered hopper cars has softened in the market since 1999, and
is expected to continue through 2000. The demand for the other types of railcars
has continued to be high, however a softening in the market is expected, and
will lead to lower utilization and lower contribution to the Fund.
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 which ends on December 31, 2002. The Manager believes these
acquisitions may cause the Fund to generate additional earning and cash flow for
the Fund.
The Fund will terminate on December 31, 2010, unless terminated earlier upon
sale of all equipment and certain other events. Beginning in the Fund's seventh
year of operations, which commences on January 1, 2003, the Manager will stop
purchasing additional equipment. Surplus cash, if any, less reasonable reserves,
will be distributed to the members. Between the eighth and tenth years of
operations, the Manager intends to liquidate the Fund's assets.
(IV) 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 nine months ended September 30, 2000, 78% 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.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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, 2000 By: /s/ Richard K Brock
Richard K Brock
Chief Financial Officer
