UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q / A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 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 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
<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,
1999 1998
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease, at cost $ 111,996 $ 122,626
Less accumulated depreciation (47,573) (44,350)
------------------------------------
Net equipment 64,423 78,276
Cash and cash equivalents 4,678 3,720
Restricted cash 420 --
Accounts receivable, less allowance for doubtful accounts
of $67 in 1999 and $43 in 1998 2,119 1,876
Investment in unconsolidated special-purpose entities 15,916 15,224
Deferred charges, less accumulated amortization
of $47 in 1999 and $344 in 1998 129 275
Prepaid expenses and other assets 106 264
------------------------------------
Total assets $ 87,791 $ 99,635
====================================
Liabilities and members' equity
Liabilities:
Accounts payable and accrued expenses $ 915 $ 465
Due to affiliates 641 400
Lessee deposits and reserves for repairs 3,558 3,040
Note payable 25,000 25,000
------------------------------------
Total liabilities 30,114 28,905
------------------------------------
Minority interest -- 5,705
Members' equity:
Class A members (4,975,321 units as of September 30, 1999
and 4,999,581 units as of December 31, 1998) 57,677 64,893
Class B member -- 132
------------------------------------
Total members' equity 57,677 65,025
------------------------------------
Total liabilities and members' equity $ 87,791 $ 99,635
====================================
</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,
1999 1998 1999 1998
-------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 6,943 $ 6,830 $ 20,192 $ 18,121
Interest and other income 35 31 156 320
Net gain on disposition of equipment 9 16 20 2,757
-------------------------------------------------------------
Total revenues 6,987 6,877 20,368 21,198
-------------------------------------------------------------
EXPENSES
Depreciation and amortization 4,018 4,503 11.458 12,308
Repairs and maintenance 704 573 1,957 1,346
Equipment operating expenses 890 420 2,470 1,078
Interest expense 468 469 1,385 1,385
Insurance expense 144 78 311 184
Management fees to affiliate 369 379 1,075 990
General and administrative expenses
to affiliates 218 231 709 680
Other general and administrative expenses 205 71 540 535
-------------------------------------------------------------
Total expenses 7,016 6,724 19,905 18,506
-------------------------------------------------------------
Minority interest (192) (92) (590) (249)
Equity in net income (loss) of unconsolidated
special-purpose entities (393) (1,818) 2,047 3,410
-------------------------------------------------------------
Net income (loss) before cumulative effect of
accounting change (614) (1,757) 1,920 5,853
Cumulative effect of accounting change -- -- (132) --
-------------------------------------------------------------
Net income (loss) $ (614) $ (1,757) $ 1,788 $ 5,853
=============================================================
Members' share of net income (loss)
Class A members $ (1,054) $ (2,172) $ 599 $ 4,608
Class B member 440 415 1,189 1,245
-------------------------------------------------------------
Total $ (614) $ (1,757) $ 1,788 $ 5,853
=============================================================
Net income (loss) per weighted-average
Class A unit $ (0.21) $ (0.43) $ 0.12 $ 0.92
=============================================================
Cash distributions $ 2,928 $ 2,941 $ 8,800 $ 8,823
=============================================================
Cash distributions per weighted-average
Class A units $ 0.50 $ 0.50 $ 1.50 $ 1.50
=============================================================
</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 September 30, 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 599 1,189 1,788
Purchase of Class A units (336) -- (336)
Cash distribution (7,479) (1,321) (8,800)
---------------------------------------------------------
Members' equity as of September 30, 1999 $ 57,677 $ -- $ 57,677
=========================================================
</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,
1999 1998
---------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,788 $ 5,853
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,458 12,308
Cumulative effect of accounting change 132 --
Net gain on disposition of equipment (20) (2,757)
Equity in net income of unconsolidated
special-purpose entities (2,047) (3,410)
Changes in operating assets and liabilities:
Restricted cash (420) --
Accounts receivable, net (243) 107
Prepaid expenses and other assets 158 17
Accounts payable and accrued expenses 454 350
Due to affiliates 260 (13)
Lessee deposits and reserves for repairs 518 487
Minority interest (676) (717)
---------------------------------------
Net cash provided by operating activities 11,362 12,225
---------------------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized
improvements (9,969) (27,470)
Investment in and equipment purchased and placed
in unconsolidated special-purpose entities -- (13,917)
Liquidation distributions from unconsolidated
special-purpose entities 7,095 10,990
Proceeds from disposition of equipment 158 5,507
Distributions from unconsolidated special-purpose
entities 1,448 5,980
--------------------------------------
Net cash used in (provided by) investing activities (1,268) (18,910)
---------------------------------------
FINANCING ACTIVITIES
Payment due to affiliates -- (1,793)
Cash distributions to Class A members (7,479) (7,500)
Cash distributions to Class B Member (1,321) (1,323)
Purchase of Class A units (336) --
---------------------------------------
Net cash used in financing activities (9,136) (10,616)
---------------------------------------
Net increase (decrease) in cash and cash equivalents 958 (17,301)
Cash and cash equivalents at beginning of period 3,720 19,179
---------------------------------------
Cash and cash equivalents at end of period $ 4,678 $ 1,878
=======================================
SUPPLEMENTAL INFORMATION
Interest paid $ 916 $ 916
=======================================
</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, 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 September 30, 1999 and December 31,
1998, the statements of operations for the three and nine months ended
September 30, 1999 and 1998, the statements of changes in members' equity
for the period from December 31, 1997 to September 30, 1999, and the
statements of cash flows for the nine months ended September 30, 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/A 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. Beginning in the eighth year
of operation which commences on January 1, 2004, the Manager intends to
begin an orderly liquidation of the Fund's assets.
3. RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentations.
4. PURCHASE OF CLASS A UNITS
In 1998, the Fund agreed to purchase up to 28,000 Class A units in 1999 for
an aggregate purchase price of $0.4 million. As of September 30, 1999, the
Fund had purchased 24,260 Class A units for $0.3 million. The Manager may
purchase additional units in the future.
5. 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 September 30, 1999 and 1998, cash distributions totaled
$2.9 million. For the nine months ended September 30, 1999 and 1998, cash
distributions totaled $8.8 million. Cash distributions to the Class A
unitholders of $6.9 million and $2.9 million for the nine months ended
September 30, 1999 and 1998, respectively, were deemed to be a return of
capital.
Cash distributions related to the results from the third quarter of 1999,
of $1.3 million, were paid during the fourth quarter of 1999.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
6. TRANSACTIONS WITH MANAGER AND AFFILIATES
The balance due to affiliates as of September 30, 1999 included $0.3
million due to FSI and its affiliates for management fees and $0.4 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.
The Fund's proportional share of USPE-affiliated management fees of $42,000
and $28,000 were payable as of September 30, 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):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 36 $ 55 $ 108 $ 176
Data processing and administrative
expenses 9 16 30 58
Insurance expense -- -- -- (3)
</TABLE>
7. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
September 30, December 31,
1999 1998
---------------------------------------
Marine vessels $ 46,957 $ 46,957
Aircraft 20,605 20,605
Mobile offshore drilling unit -- 20,356
Railcars 19,709 19,920
Trailers 14,783 14,788
Marine containers 9,942 --
--------------------------------------
111,996 122,626
Less accumulated depreciation (47,573) (44,350)
--------------------------------------
Net equipment $ 64,423 $ 78,276
======================================
As of September 30, 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 12 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 September 1999, certain equipment in which the Fund held a majority
ownership, was reclassified to investments in USPE's (see note 8).
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
7. EQUIPMENT (CONTINUED)
During the nine months ended September 30, 1999, the Fund purchased marine
containers at a cost of $9.9 million. During the nine months ended
September 30, 1998, the Fund purchased 39 railcars, two marine vessels (a
deposit of $0.9 million was paid in December 1997 for the purchase of one
of these marine vessels) and a hush kit for an aircraft for a total of
$28.4 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. During the nine months ended September 30, 1998, the Fund
sold an aircraft, trailers and a railcar with a net book value of $2.8
million, net of outstanding receivables, for proceeds of $5.6 million.
8. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
In September 1999, the Manager amended the corporate-by-laws of the Fund
and any affiliated program's investments in USPE's that own an interest
greater than 50%. The amendment to the corporate-by-laws provides 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 regardless of the
percentage of ownership. 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
USPE's. As such, although the Fund may own a majority interest in a USPE,
the Fund does not control its management and thus it is appropriate in the
future that the equity method of accounting be used. Accordingly, as of
September 30, 1999, the balance sheet reflects all investments in USPEs on
an equity basis.
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,
1999 1998
----------------------------------------------
<S> <C> <C>
61% interest in an entity owning a mobile offshore drilling unit $ 7,188 $ --
50% interest in a trust owning an MD-82 stage III commercial
aircraft 5,198 6,441
50% interest in a trust owning an MD-82 stage III commercial
aircraft 2,191 3,342
50% interest in a trust owning a cargo marine vessel 1,177 1,265
25% interest in a trust that owned four Boeing 737-200A stage II
commercial aircraft 90 137
25% interest in a trust that owned four Boeing 737-200A stage II
commercial aircraft 72 110
33% interest in two trusts that owned a total of three Boeing
737-200A stage II commercial aircraft, two stage II
aircraft
engines, and a portfolio of aircraft rotables -- 3,929
----------------------------------------------
Net investments $ 15,916 $ 15,224
==============================================
</TABLE>
As of September 30, 1999 and December 31, 1998, all jointly-owned equipment
in the Fund's USPE portfolio were on lease.
During the nine months ended September 30, 1999, the Manager sold the
Fund's 33% interest in two trusts that owned a total of three Boeing
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.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
9. OPERATING SEGMENTS
The Fund operates in five primary segments: marine vessel leasing, aircraft
leasing, railcar leasing, trailer leasing, and mobile offshore drilling
unit (MODU) 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
For the three months ended Vessel Aircraft Railcar Trailer MODU All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1> Total
------------------ ------- ------- ------- ------- ------- ------ -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease Revenue $ 2,313 $ 1,014 $ 904 $ 1,006 $ 1,196 $ 510 $ 6,943
Interest income and other 3 2 -- -- -- 30 35
Net gain on disposition
of equipment -- -- 9 -- -- -- 9
-------------------------------------------------------------------------
Total revenues 2,316 1,016 913 1,006 1,196 540 6,987
COSTS AND EXPENSES
Operations support 1,285 7 171 236 26 13 1,738
Depreciation and amortization 1,503 643 435 362 582 493 4,018
Interest expense -- -- -- -- -- 468 468
Management fees to affiliate 117 51 58 58 60 25 369
General and administrative expenses 14 10 23 180 45 151 423
-------------------------------------------------------------------------
Total costs and expenses 2,919 711 687 836 713 1,150 7,016
-------------------------------------------------------------------------
Minority interest -- -- -- -- (192) -- (192)
Equity in net income (loss) of USPEs (70) (323) -- -- -- -- (393)
-------------------------------------------------------------------------
Net income (loss) $ (673) $ (18) $ 226 $ 170 $ 291 $ (610) $ (614)
=========================================================================
Total assets as of September 30, 1999 $ 33,089 $ 12,497 $ 11,776 $ 8,455 $ 7,188 $ 14,786 $ 87,791
=========================================================================
Marine
For the three months ended Vessel Aircraft Railcar Trailer MODU All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ------ -----
Revenues
Lease revenue $ 2,709 $ 1,014 $ 1,005 $ 1,090 $ 1,012 $ -- $ 6,830
Interest income and other -- 3 -- -- -- 28 31
Net gain on disposition
of equipment -- -- 16 -- -- -- 16
---------------------------------------------------------------------------
Total revenues 2,709 1,017 1,021 1,090 1,012 28 6,877
Costs and expenses
Operations support 683 11 182 163 20 12 1,071
Depreciation and amortization 1,766 1,071 506 435 699 26 4,503
Interest expense -- -- -- -- -- 469 469
Management fees to affiliate 135 51 68 74 51 -- 379
General and administrative expenses 45 17 (30) 170 11 89 302
---------------------------------------------------------------------------
Total costs and expenses 2,629 1,150 726 842 781 596 6,724
---------------------------------------------------------------------------
Minority interest -- -- -- -- (92) -- (92)
Equity in net income (loss) of USPEs (1,023) (795) -- -- -- -- (1,818)
---------------------------------------------------------------------------
Net income (loss) $ (943) $ (928) $ 295 $ 248 $ 139 $ (568) $ (1,757)
===========================================================================
Total assets as of September 30, 1998 $39,682 $ 23,150 $ 13,608 $ 9,623 $ 14,688 $ 3,117 $103,868
===========================================================================
<FN>
<F1>
-------------------------------------
1 Includes interest income and costs not identifiable to a particular
segment, such as amortization expense, interest expense, certain
operations support, and general and administrative expenses. Also
includes the lease revenue, depreciation expense, and management fee
for containers.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
9. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine
For the nine months ended Vessel Aircraft Railcar Trailer MODU All
September 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 7,118 $ 3,043 $ 2,809 $ 2,780 $ 3,560 $ 882 $ 20,192
Interest income and other 5 7 -- -- 1 143 156
Net gain on disposition
of equipment -- -- 15 5 -- -- 20
-------------------------------------------------------------------------
Total revenues 7,123 3,050 2,824 2,785 3,561 1,025 20,368
COSTS AND EXPENSES
Operations support 3,476 20 502 637 66 37 4,738
Depreciation and amortization 4,509 1,929 1,307 1,085 1,749 879 11,458
Interest expense -- -- -- -- -- 1,385 1,385
Management fees to affiliate 357 152 184 160 178 44 1,075
General and administrative expenses 42 24 48 569 75 491 1,249
-------------------------------------------------------------------------
Total costs and expenses 8,384 2,125 2041 2,451 2,068 2,836 19,905
-------------------------------------------------------------------------
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) 3,086 783 334 903 (1,811) 1,920
Cumulative effect of accounting -- -- -- -- -- (132) (132)
change
-------------------------------------------------------------------------
Net income (loss) $ (1,375) $ 3,086 $ 783 $ 334 $ 903 $ (1,943) $ 1,788
=========================================================================
Total assets as of September 30, 1999 $ 33,089 $ 12,497 $ 11,776 $ 8,455 $ 7,188 $ 14,786 $ 87,791
=========================================================================
Marine
For the nine months ended Vessel Aircraft Railcar Trailer MODU All
September 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------ ------- ------- ------- ------- ------- ------ -----
REVENUES
Lease revenue $ 5,789 $ 3,524 $ 2,989 $ 2,816 $ 3,003 $ -- $ 18,121
Interest income and other 13 10 -- -- -- 297 320
Net gain on disposition
of equipment -- 2,710 38 9 -- -- 2,757
---------------------------------------------------------------------------
Total revenues 5,802 6,244 3,027 2,825 3,003 297 21,198
COSTS AND EXPENSES
Operations support 1,591 34 411 448 89 35 2,608
Depreciation and amortization 3,752 3,559 1,516 1,304 2,098 79 12,308
Interest expense -- -- -- -- -- 1,385 1,385
Management fees to affiliate 289 162 199 190 150 -- 990
General and administrative expenses 124 57 (6) 597 35 408 1,215
---------------------------------------------------------------------------
Total costs and expenses 5,756 3,812 2,120 2,539 2,372 1,907 18,506
---------------------------------------------------------------------------
Minority interest -- -- -- -- (249) -- (249)
Equity in net income (loss) of USPEs (1,241) 4,651 -- -- -- 382 3,410
---------------------------------------------------------------------------
Net income (loss) $ (1,195) $ 7,083 $ 907 $ 286 $ 382 $(1,610) $ 5,853
===========================================================================
Total assets as of September 30, 1998 $ 39,682 $ 23,150 $ 13,608 $ 9,623 $ 14,688 $ 3,117 $103,868
===========================================================================
<FN>
<F1>
-------------------------------------
1 Includes interest income and costs not identifiable to a particular
segment, such as amortization expense, interest expense, certain
operations support, and general and administrative expenses. Also
includes the lease revenue, depreciation expense, and management fee
for containers.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
10. 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 Fund VI had borrowings of $1.0 million and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of PLM International, Inc., had borrowings
of $7.6 million under the Committed Bridge Facility as of September 30,
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.
11. 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 and nine months
ended September 30, 1999 were units 4,975,419 and 4,984,675 units,
respectively. The weighted-average number of Class A units deemed
outstanding during the three and nine months ended September 30, 1998 was
4,999,581 units.
12. 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. 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.
13. RESTATEMENT
The financial statements, with the exception of the balance sheet as of
September 30, 1999, have been restated to reflect the consolidation of the
Fund's majority interests in greater than 50% owned USPE's previously
reported under the equity method of accounting for the three and nine
months ending September 30, 1999 and 1998.
As a result of the consolidation, total assets, total liabilities, and
minority interests changed as of December 31, 1998 as follows:
December 31, 1998
As reported Amended
----------------------------------
Total assets $93,466 $99,635
Total liabilities 28,441 28,905
Minority interests -- 5,705
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
13. RESTATEMENT (CONTINUED)
As a result of the consolidation, total revenues, total expenses, and
equity in net income of USPEs changed for the three and nine months ended
September 30, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
For the three months ended September 30 For the nine months ended September 30,
1999 1998 1999 1998
As reported Amended As reported Amended As reported Amended As reported Amended
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 5,791 $ 6,987 $ 5,865 $ 6,877 $ 16,807 $ 20,368 $ 18,195 $ 21,198
Total expenses 6,303 7,016 5,943 6,724 17,837 19,905 16,134 18,506
Minority -- (192) -- (92) -- (590) -- (249)
interest
Equity in net
income of USPEs (102) (393) (1,679) (1,818) 2,950 2,047 3,792 3,410
Net income $ (614) $ (614) $ (1,757) (1,757) $ 1,788 $ 1,788 $ 5,853 $ 5,853
</TABLE>
The consolidation of the Fund's majority interests in USPE's did not change
members' capital or net income (loss) as of and for the three and nine
months ended September 30, 1999 and 1998.
In September 1999, the Manager amended the corporate-by-laws of the Fund
and any affiliated program's investments in USPE's that own an interest
greater than 50%. The amendment to the corporate-by-laws provides 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 regardless of the
percentage of ownership. 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
USPE's. As such, although the Fund may own a majority interest in a USPE,
the Fund does not control its management and thus it is appropriate in the
future that the equity method of accounting be used. Accordingly, as of
September 30, 1999, the balance sheet reflects all investments in USPEs on
an equity basis.
(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 SEPTEMBER 30, 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
decreased during the third 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 9 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):
For the Three Months
Ended September 30,
1999 1998
----------------------------
MODU $ 1,170 992
Marine vessels 1,028 2,026
Aircraft 1,007 1,003
Trailers 770 927
Railcars 733 823
Marine containers 510 --
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $1.2 million and $26,000, respectively, for the third
quarter of 1999, compared to $1.0 million and $20,000, 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.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.3
million and $1.3 million, respectively, for the third quarter of 1999, compared
to $2.7 million and $0.7 million, respectively, during the same quarter of 1998.
Lease revenue decreased $0.5 million in the third quarter of 1999 compared to
the same period in 1998 due to significantly lower re-lease rates for one of the
Fund's anchor handling supply marine vessels. The decrease in lease revenue from
this marine vessel was offset, in part, by an increase in additional lease
revenue of $0.1 million for another marine vessel during the third quarter of
1999 compared to the same period in 1998 due to higher re-lease rates. Direct
expenses increased $0.6 million in the third quarter of 1999 compared to the
same period in 1998 primarily due to hull cleaning costs, and canal charges
while repositioning the marine vessel for a new charter in 1999. A similar event
did not occur in 1998.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$7,000, respectively, for the third quarter of 1999, compared to $1.0 million
and $11,000, respectively, during the same quarter of 1998. Aircraft
contribution remained approximately the same due to the relative stability of
the aircraft fleet.
Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the third quarter of 1999, compared to $1.1 million
and $0.2 million, respectively, during the same quarter of 1998. Lease revenue
decreased primarily due to the lower utilization lease revenue on the
refrigerated trailers in the third quarter of 1999 compared to the same period
in 1998.
Railcars: Railcar lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, for the third quarter of 1999, compared to $1.0 million
and $0.2 million, respectively, during the same quarter of 1998. Lease revenue
decreased primarily due to lower re-lease rates for a group of railcars in the
third quarter of 1999 compared to the same period in 1998.
Marine containers: Marine container lease revenues were $0.5 million for the
third quarter of 1999. Marine container contribution increased due to the
purchase of marine containers in the second quarter of 1999.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.3 million for the quarter ended September 30, 1999
decreased from $5.7 million for the same period in 1998. Significant variances
are explained as follows:
(1) A $0.5 million decrease in depreciation and amortization expenses from
1998 levels resulted from an approximately $1.0 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, partially offset by an increase
of approximately $0.5 million in depreciation expense from the purchase of
equipment during 1999.
(2) A $0.1 million increase in general and administrative expenses from
1998 levels due to higher office expenses and professional services required by
the Fund.
(C) Net Gain on Disposition of Owned Equipment
The 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. Net gain on disposition of equipment for the
third quarter of 1998 totaled $16,000, and resulted from the sale of a railcar
with a net book value of $21,000, for proceeds of $37,000.
(D) Minority Interest
Minority interest increased $0.1 million due to an increase in revenue during
1999 when compared to 1998.
(E) 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 is shown in the following table by equipment type
(in thousands of dollars).
For the Three Months
Ended September 30,
1999 1998
----------------------------
Marine vessel $ (70) $ (1,023)
Aircraft (323) (795)
---------------------------------
Equity in Net Loss of USPEs $ (393) $ (1,818)
=================================
Marine vessel: As of September 30, 1999 and 1998, the Fund had an interest in an
entity that owns a marine vessel. During the third quarter of 1999, marine
vessel revenues of $0.2 million were offset by depreciation and administrative
expenses of $0.3 million. During the third quarter of 1998, marine vessel
revenues of $0.2 million were offset by depreciation and administrative expenses
of $0.2 million, and a loss on the revaluation of the marine vessel of $1.0
million. Lease revenue decreased $0.1 million in the third quarter of 1999
compared to the same period in 1998, due to lower re-lease rates as a result of
a weak bulk-carrier vessel market. The decrease was offset, in part, by an
increase of $0.1 million in lease revenues due to a marine vessel that the
Company owns an interest in being off-hire for 20 days in the third quarter of
1998 compared to 2 days in the same period in 1999. Expenses increased $0.1
million due to higher operating expenses in the third quarter of 1999 compared
to the same period in 1998. The increase in expenses was offset, in part, by a
decrease of $59,000 due 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. Loss on revaluation of
equipment of $1.0 million during the third quarter of 1998, resulted from the
Company reducing the carrying value of its interest in an entity owning a marine
vessel to its estimated net realizable value. There was no revaluation of the
carrying value of partially owned assets required during the same period of
1999.
Aircraft: As of September 30, 1999, the Fund owned interests in two trusts that
each owns a commercial aircraft. As of September 30, 1998, the Company owned
interests in two trusts that each own a commercial aircraft, and an interest in
two trusts that own a total of three commercial aircraft, two aircraft engines,
and a portfolio of aircraft rotables. During the third quarter of 1999, aircraft
lease revenues were $0.5 million which were offset by expenses of $0.8 million.
During the same period in 1998, aircraft revenues were $0.9 million which were
offset by expenses of $1.7 million. Lease revenues decreased $0.4 million due to
the sale of the Fund's investment in two trusts that owned three Boeing 737-200A
stage II commercial aircraft, two stage II aircraft engines, and a portfolio of
aircraft rotables in the first quarter of 1999. The decrease in expenses of $0.9
million was primarily due to lower depreciation expense resulting from an
approximately $0.3 million decrease due to the sale of the Fund's interest in
two trusts and an approximately $0.6 million decrease due to the double
declining-balance method of depreciation which results in greater depreciation
in the first years an asset is owned.
(F) Net Loss
As a result of the foregoing, the Fund had a net loss of $0.6 million for the
third quarter of 1999, compared to a net loss of $1.8 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 third quarter of 1999 is not
necessarily indicative of future periods. In the third quarter of 1999, the Fund
distributed $2.5 million to Class A members, or $0.50 per weighted-average Class
A unit.
COMPARISON OF THE FUND'S OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 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
decreased during the nine months ended September 30, 1999, compared to the same
period 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 9 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):
For the Nine Months
Ended September 30,
1999 1998
----------------------------
Marine vessels $ 3,642 4,198
MODU 3,494 2,914
Aircraft 3,023 3,490
Railcars 2,307 2,578
Trailers 2,143 2,368
Marine containers 882 --
Marine vessels: Marine vessel lease revenues and direct expenses were $7.1
million and $3.5 million, respectively, for the nine months ended September 30,
1999, compared to $5.8 million and $1.6 million, respectively, during the same
period of 1998. Lease revenue increased $2.1 million in the nine months ended
September 30, 1999 compared to the same period in 1998 due to the purchase of a
marine vessel at the end of the second quarter of 1998. This marine vessel
earned nine months of lease revenue in 1999 compared to only three months in
1998. The increase in lease revenue for this marine vessel was offset, in part,
by a decrease of $0.1 million for another marine vessel being dry-docked for
approximately three weeks during the nine months ended September 30, 1999.
During dry-docking, the marine vessel did not earn any revenues. In addition,
lease revenue decreased an additional $0.7 million for two marine vessels due to
lower re-lease rates earned during the nine months ended September 30, 1999
compared to the same period in 1998. Direct expenses increased $2.2 million in
the nine months ended September 30, 1999 compared to the same period in 1998 due
to the purchase of a marine vessel at the end of the second quarter of 1998. The
increase in direct expenses for this marine vessel was offset, in part, by a
decrease of $0.3 million for another marine vessel being dry-docked for
approximately three weeks during the nine months ended September 30, 1999.
Mobile offshore drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $3.6 million and $0.1 million, respectively, for the nine
months ended September 30, 1999, compared to $3.0 million and $0.1 million,
respectively, during the same period of 1998. The increase in mobile offshore
drilling unit contribution is due to an increase in the lease rate during 1999.
Aircraft: Aircraft lease revenues and direct expenses were $3.0 million and
$20,000, respectively, for the nine months ended September 30, 1999, compared to
$3.5 million and $34,000, respectively, during the same period 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 $2.8 million and $0.5
million, respectively, for the nine months ended September 30, 1999, compared to
$3.0 million and $0.4 million, respectively, during the same period of 1998.
Lease revenue decreased $0.2 million due to lower re-lease rates for a group of
railcars in the nine months ended September 30, 1999 compared to the same period
in 1998. In addition, lease revenue decreased $0.1 million resulting from the
sale or disposition of railcars in 1998 and the nine months ended September 30,
1999. This decrease in lease revenue was offset, in part, by a $40,000 increase
in lease revenue due to the purchase of railcars in the first quarter of 1998.
Direct expenses increased due to higher running repairs required on certain
railcars during the nine months ended September 30, 1999, that were not needed
during the same period in 1998.
Trailers: Trailer lease revenues and direct expenses were $2.8 million and $0.6
million, respectively, for the nine months ended September 30, 1999, compared to
$2.8 million and $0.4 million, respectively, during the same period of 1998.
Direct expenses increased due to repairs required on certain trailers during the
nine months ended September 30, 1999, which were not needed in the same period
in 1998.
Marine containers: Marine container lease revenues were $0.9 million for the
nine months ended September 30, 1999. Marine container contribution increased
due to the purchase of marine containers in the second quarter of 1999.
(B) Interest and Other Income
Interest and other income decreased $0.2 million due to lower average cash
balances in the nine months ended September 30, 1999, compared to the same
period in 1998.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $15.2 million for the nine months ended September 30,
1999 decreased from $15.9 million for the same period in 1998. Significant
variances are explained as follows:
(1) A $0.8 million decrease in depreciation and amortization expenses from
1998 levels resulting from an approximately $0.2 million decrease due to the
sale of certain assets during 1999 and 1998 and an approximately $2.8 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,
partially offset by an approximately $2.2 million increase in depreciation
expense from the purchase of equipment during 1999 and 1998.
(2) A $0.1 million increase in management fees to affiliate reflects the
higher levels of lease revenues on owned equipment in 1999, when compared to
1998.
<PAGE>
(D) Net Gain on Disposition of Owned Equipment
The 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. Net
gain on disposition of equipment for the nine months ended September 30, 1998
totaled $2.8 million, and resulted from the sale of an aircraft, a railcar and
trailers with an aggregate net book value of $2.8 million, net of outstanding
receivables, for proceeds of $5.6 million.
(E) Minority Interest
Minority interest increased $0.3 million due to an increase in revenue of $0.2
million and a decrease in direct and indirect expenses of $0.1 million during
1999 when compared to 1998.
(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,
1999 1998
----------------------------
Aircraft $ 2,161 $ 4,651
Marine vessel (114) (1,241)
-----------------------------
Equity in Net Income of USPEs $ 2,047 $ 3,410
=============================
Aircraft: As of September 30, 1999, the Fund owned interests in two trusts that
each owns a commercial aircraft. As of September 30, 1998, the Company owned
interests in two trusts that each own a commercial aircraft, and an interest in
two trusts that own a total of three commercial aircraft, two aircraft engines,
and a portfolio of aircraft rotables. 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. During the nine months ended
September 30, 1998, aircraft lease revenues were $3.4 million and the gain from
the sale of the Company's interest in two trusts that owned commercial aircraft
of $6.3 million was offset by expenses of $5.0 million. Lease revenues decreased
$2.1 million due to the sale of the Fund's investment in two trusts containing
ten commercial aircraft, and 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. The decrease in lease
revenues caused by these sales was offset, in part, by $0.3 million in
additional lease revenue from the purchase of two additional trusts each owning
a MD-82 commercial aircraft during 1998. The decrease in expenses of $2.3
million was primarily due to lower depreciation expense resulting from an
approximately $1.1 million decrease due to the sale of the Fund's interest in
four trusts and an approximately $1.7 million decrease due to the double
declining-balance method of depreciation which results in greater depreciation
in the first years an asset is owned offset, in part, by an approximately $0.5
million increase in depreciation expense due to the Fund's investment in two
additional trusts during 1998.
Marine vessel: As of September 30, 1999 and 1998, the Fund had an interest in an
entity that owns a marine vessel. During the first nine months of 1999, revenues
of $0.6 million were offset by depreciation and administrative expenses of $0.7
million. During the nine months ended September 30, 1998, marine vessel revenues
were $0.8 million offset by depreciation and administrative expenses of $1.0
million, and a loss on the revaluation of a marine vessel of $1.0 million. Lease
revenue decreased $0.5 million in the nine months ended September 30, 1999
compared to the same period in 1998, due to lower re-lease rates as a result of
a weak bulk-carrier vessel market. The decrease was offset, in part, by an
increase of $0.1 million in lease revenues due to a marine vessel that the Fund
owns an interest in being off-hire for 20 days in the nine months ended
September 30, 1998 compared to 2 days in the same period in 1999. 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. Loss on revaluation of
equipment of $1.0 million for the nine months ended September 30, 1998, resulted
from the Company reducing the carrying value of its interest in an entity owning
a marine vessel to its estimated net realizable value. There was no revaluation
of interest required during the same period of 1999.
(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 nine months ended September 30, 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 $1.8 million for the
nine months ended September 30, 1999, compared to net income of $5.9 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 nine months
ended September 30, 1999 is not necessarily indicative of future periods. In the
nine months ended September 30, 1999, 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, 1999, the Fund generated operating cash
of $12.8 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, 1999 of approximately $8.8 million) to the partners.
During the nine months ended September 30, 1999, the Fund purchased marine
containers at a cost of $9.9 million.
During the nine months ended September 30, 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 $7.3 million.
Lessee deposits and reserve for repairs increased $0.5 million during the nine
months ended September 30, 1999 compared to December 31, 1998. Reserves for
aircraft engine repair increased $0.5 million due to additional lessee deposits,
and security deposits increased $0.4 million due to a security deposit from a
container lessee, offset, in part, by a decrease of $0.4 million in prepaid
lease revenue due to less lessee's prepaying future lease revenue
The Manager has entered into a short-term joint $24.5 million credit facility.
As of November 8, 1999, no eligible borrower had any outstanding borrowings. The
Manager believes it will renew the credit facility upon its expiration with
similar terms to those in the current credit facility.
(III) EFFECTS OF YEAR 2000
It is possible that the Manager's currently installed computer systems, software
products, and other business systems, or those of 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 possibility
commonly known as the "Year 2000" or "Y2K" 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 business systems in order to determine
whether such systems will retain functionality after December 31, 1999. As of
September 30, 1999, the Manager has completed Inventory, Assessment, Remediation
and Testing Stages of its Year 2000 review of its core business information
systems. Specifically, the Manager (a) has integrated 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 been made Year 2000
compliant. In addition, numerous other software systems provided by vendors and
service providers have been replaced with systems represented by the vendor or
service provider to be Year 2000 functional. These systems have been tested and
appear to be compliant.
As of September 30, 1999, the costs incurred and allocated to the Fund to become
Year 2000 compliant have not been material and the Manager does not anticipate
any additional Year 2000-compliant expenditures.
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 readiness of
such parties and the extent to which the Fund is vulnerable to any third-party
Year 2000 issues. As part of this process, vendors and service providers were
ranked in terms of the relative importance of the service or product provided.
All service providers and vendors who were identified as medium to high relative
importance were surveyed to determine Year 2000 status. The Manager has received
satisfactory responses to Year 2000 readiness inquiries from surveyed service
providers and vendors.
It is possible that certain of the Fund's equipment lease portfolio may not be
Year 2000 compliant. The Manager has contacted equipment manufacturers of the
portion of the Fund's leased equipment portfolio identified as date sensitive to
assure Year 2000 compliance or to develop remediation strategies. The Fund does
not expect that non-Year 2000 compliance of its leased equipment portfolio will
have an adverse material impact on its financial statements. The Manager has
surveyed the majority of its lessees and the majority of those surveyed have
responded satisfactorily to Year 2000 readiness inquiries.
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 has made and will continue an ongoing
effort to recognize and evaluate potential exposure relating to third-party Year
2000 noncompliance. The Manager will implement a contingency plan if the Manager
determines that third-party noncompliance would 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 or vendors or service providers due to Year 2000
problems. For the purpose of such contingency planning, reasonably likely worst
case scenarios primarily anticipate a) an inability to access systems and data
on a temporary basis resulting in possible delay in reconciliation of funds
received or payment of monies owed, or b) an inability to continuously employ
equipment assets due to temporary Year 2000 related failure of external
infrastructure necessary to the ongoing operation of the equipment. The Manager
is evaluating whether there are additional scenarios, which have not been
identified. Contingency planning will encompass strategies up to and including
manual processes. The Manager anticipates that these plans will be completed in
the fourth quarter of 1999.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," 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.
FASB Statement No. 137, "Accounting for Derivatives, Instruments, and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
amendment of FASB Statement No. 133," issued in June 1999, defers the effective
date of Statement No. 133. Statement No. 133, as amended, is now effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. As of
September 30, 1999, the Manager is reviewing the effect SFAS No. 133 will have
on the Fund's financial statements.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Fund's operating performance in the remainder of
1999 and beyond, including changes in the markets for the Fund's equipment and
changes in the regulatory environment in which the equipment operates.
Other factors affecting the Fund's contribution in the remainder of 1999 and
beyond include:
1. Depressed economic conditions in Asia have led to declining freight rates
through the early part of 1999 for drybulk vessels. In the absence of new
additional drybulk orders, the market is expected to stabilize and improve over
the next 2-3 years.
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. If the
economic conditions remain the same, a similar trend of lower re-lease rates
will occur for the Fund's remaining anchor handling marine vessel when the
current lease expires in the year 2000.
3. Rates and utilization dropped for oil tanker vessels due to the economic
crisis in Asia. The demand in 1999 has shown some signs of recovery, however,
rate recovery may take two to three years.
4. The demand for covered hopper cars has softened in the market since 1998, and
is expected to continue through the remainder of 1999. The demand for the other
types of railcars has continued to be high, however a softening in the market is
expected in the remainder of 1999, which may lead to lower utilization and lower
contribution to the Fund.
5. The lease for the Fund's 61% interest in an entity owning a mobile offshore
drilling unit will expire in December 1999. This mobile offshore drilling unit
will be sold in the fourth quarter of 1999.
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 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, repurchase of Class A
units, 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/A 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/A should be
read as being applicable to all related forward-looking statements wherever they
appear in this Form 10-Q/A. The Fund's actual results could differ materially
from those discussed here.
<PAGE>
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, 1999, 73% 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 is 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
Dated: January 24, 2000 By: /s/ Richard K Brock
------------------------------
Richard K Brock
Vice President and
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,098
<SECURITIES> 0
<RECEIVABLES> 2,186
<ALLOWANCES> (67)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 111,996
<DEPRECIATION> (47,573)
<TOTAL-ASSETS> 87,791
<CURRENT-LIABILITIES> 0
<BONDS> 25,000
0
0
<COMMON> 0
<OTHER-SE> 57,677
<TOTAL-LIABILITY-AND-EQUITY> 87,791
<SALES> 0
<TOTAL-REVENUES> 20,368
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,385
<INCOME-PRETAX> 1,920
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 132
<NET-INCOME> 1,788
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
