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 JUNE 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 33-83216-01
-----------------------
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3209289
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MARKET, STEUART STREET TOWER
SUITE 800, SAN FRANCISCO, CA 94105-1301
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease, at cost $ 132,395 $ 122,626
Less accumulated depreciation (51,704) (44,350)
------------------------------------
Net equipment 80,691 78,276
Cash and cash equivalents 2,027 3,720
Restricted cash 409 --
Accounts receivable, less allowance for doubtful accounts
of $70 in 1999 and $43 in 1998 2,977 1,876
Investment in unconsolidated special-purpose entities 9,622 15,224
Deferred charges, less accumulated amortization
of $43 in 1999 and $344 in 1998 134 275
Prepaid expenses and other assets 151 264
---------------------------------------------------------------------------------------------------------------
Total assets $ 96,011 $ 99,635
====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 453 $ 465
Due to affiliates 639 400
Lessee deposits and reserves for repairs 3,446 3,040
Note payable 25,000 25,000
------------------------------------
Total liabilities 29,538 28,905
------------------------------------
Minority interest 5,250 5,705
Members' equity:
Class A members (4,975,671 units as of June 30, 1999
and 4,999,581 units as of December 31, 1998) 61,223 64,893
Class B member -- 132
------------------------------------
Total members' equity 61,223 65,025
------------------------------------
Total liabilities and members' equity $ 96,011 $ 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 Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 6,595 $ 6,018 $ 13,249 $ 11,291
Interest and other income 36 92 120 289
Net gain on disposition of equipment 27 2,713 11 2,741
-------------------------------------------------------------
Total revenues 6,658 8,823 13,380 14,321
-------------------------------------------------------------
Expenses
Depreciation and amortization 3,907 4,152 7,440 7,805
Repairs and maintenance 580 508 1,253 773
Equipment operating expenses 640 408 1,580 658
Interest expense 463 458 916 916
Insurance expense to affiliate -- 22 -- 19
Other insurance expense 69 37 167 87
Management fees to affiliate 346 326 706 612
General and administrative expenses
to affiliates 234 243 491 448
Other general and administrative expenses 180 304 336 465
Minority interest 202 64 398 157
-------------------------------------------------------------
Total expenses 6,621 6,522 13,287 11,940
-------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities (305) 2,915 2,441 5,229
-------------------------------------------------------------
Net income (loss) before cumulative effect of
accounting change (268) 5,216 2,534 7,610
Cumulative effect of accounting change -- -- (132) --
-------------------------------------------------------------
Net income (loss) $ (268) $ 5,216 $ 2,402 $ 7,610
=============================================================
Members' share of net income (loss)
Class A members $ (708) $ 4,764 $ 1,653 $ 6,780
Class B member 440 452 749 830
-------------------------------------------------------------
Total $ (268) $ 5,216 $ 2,402 $ 7,610
=============================================================
Net income (loss) per weighted-average
Class A unit $ (0.14) $ 0.95 $ 0.33 $ 1.36
=============================================================
Cash distributions $ 2,933 $ 2,941 $ 5,873 $ 5,882
=============================================================
Cash distributions per weighted-average
Class A units $ 0.50 $ 0.50 $ 1.00 $ 1.00
=============================================================
</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 June 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 1,653 749 2,402
Repurchase of Class A units (331) -- (331)
Cash distribution (4,992) (881) (5,873)
---------------------------------------------------------
Members' equity as of June 30, 1999 $ 61,223 $ -- $ 61,223
=========================================================
</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 Six Months
Ended June 30,
1999 1998
---------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 2,402 $ 7,610
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,440 7,805
Cumulative effect of accounting change 132 --
Net gain on disposition of equipment (11) (2,741)
Equity in net income of unconsolidated
special-purpose entities (2,441) (5,229)
Changes in operating assets and liabilities:
Restricted cash (409) --
Accounts receivable, net (1,101) 415
Prepaid expenses and other assets 113 (38)
Accounts payable and accrued expenses (12) 154
Due to affiliates 239 39
Lessee deposits and reserves for repairs 406 487
Minority interest (455) (448)
---------------------------------------
Net cash provided by operating activities 6,303 8,054
---------------------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized
improvements (9,949) (24,963)
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 114 5,481
Distributions from unconsolidated special-purpose
entities 948 5,185
---------------------------------------
Net cash used in investing activities (1,792) (17,224)
---------------------------------------
FINANCING ACTIVITIES
Payment due to affiliates -- (1,793)
Cash distributions to Class A members (4,992) (5,000)
Cash distributions to Class B Member (881) (882)
Repurchase of Class A units (331) --
---------------------------------------
Net cash used in financing activities (6,204) (7,675)
---------------------------------------
Net decrease in cash and cash equivalents (1,693) (16,845)
Cash and cash equivalents at beginning of period 3,720 19,179
---------------------------------------
Cash and cash equivalents at end of period $ 2,027 $ 2,334
=======================================
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
JUNE 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 June 30, 1999 and December 31, 1998,
the statements of operations for the three and six months ended June 30,
1999 and 1998, the statements of changes in members' equity for the period
from December 31, 1997 to June 30, 1999, and the statements of cash flows
for the six months ended June 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. Between the eighth and tenth
years of operations, the Manager intends to begin an orderly liquidation of
the Fund's assets.
3. REPURCHASE OF CLASS A UNITS
In 1998, the Fund agreed to repurchase up to 28,000 Class A units in 1999
for an aggregate purchase price of $0.4 million. As of June 30, 1999, the
Fund had repurchased 23,910 Class A units for $0.3 million. The Manager may
repurchase additional units in the future.
4. CASH DISTRIBUTIONS
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
six months ended June 30, 1999 and 1998, cash distributions totaled $5.9
million. For the three months ended June 30, 1999 and 1998, cash
distributions totaled $2.9 million. Cash distributions to the Class A
unitholders of $3.3 million and $0 million for the six months ended June
30, 1999 and 1998, respectively, were deemed to be a return of capital.
Cash distributions related to the results from the second quarter of 1999,
of $2.9 million, were paid during the third quarter of 1999.
5. TRANSACTIONS WITH MANAGER AND AFFILIATES
The balance due to affiliates as of June 30, 1999 included $0.3 million due
to FSI and its affiliates for management fees and $0.3 million due to
affiliated unconsolidated special-purpose entities (USPEs). The balance due
to affiliates as of December 31, 1998 included $0.2 million due to FSI and
its affiliates for management fees.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
5. TRANSACTIONS WITH MANAGER AND AFFILIATES (CONTINUED)
The Fund's proportional share of USPE-affiliated management fees of $28,000
was payable as of June 30, 1999 and December 31, 1998.
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 Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 62 $ 64 $ 72 $ 122
Data processing and administrative
expenses 13 19 21 42
Insurance expense -- (1) -- (3)
</TABLE>
Transportation Equipment Indemnity Company, Ltd., an affiliate of the
Manager, provided certain marine insurance coverage for Fund equipment and
other insurance brokerage services during 1998. TEI will not provide the
same insurance coverage during 1999 as had been provided during 1998. These
services were provided by an unaffiliated third party.
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
June 30, December 31,
1999 1998
------------------------------------
Marine vessels $ 46,957 $ 46,957
Aircraft 20,605 20,605
Mobile offshore drilling unit 20,356 20,356
Railcars 19,773 19,920
Trailers 14,762 14,788
Marine containers 9,942 --
------------------------------------
132,395 122,626
Less accumulated depreciation (51,704) (44,350)
------------------------------------
Net equipment $ 80,691 $ 78,276
====================================
As of June 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 a marine vessel and 19 railcars with a carrying
value of $6.2 million. As of December 31, 1998, all owned equipment in the
Fund's portfolio was either on lease or operating in PLM-affiliated
short-term trailer rental facilities, except for three railcars with a
carrying value of $37,000.
During the six months ended June 30, 1999, the Fund purchased marine
containers at a cost of $9.9 million.
During the six months ended June 30, 1998, the Fund purchased 39 rail
equipment, 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 $25.9 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
6. EQUIPMENT (CONTINUED)
During the six months ended June 30, 1999, the Fund sold railcars and
trailers with an aggregate net book value of $0.1 million, for proceeds of
$0.1 million.
During the six months ended June 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 $5.5 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>
June 30, December 31,
1999 1998
---------------------------------------------
<S> <C> <C>
50% interest in a trust owning an MD-82 stage III commercial
aircraft $ 5,613 $ 6,441
50% interest in a trust owning an MD-82 stage III commercial
aircraft 2,612 3,342
50% interest in a trust owning a cargo marine vessel 1,210 1,265
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 106 137
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 81 110
33% interest in two trusts that owned a total of three 737-200A
stage II commercial aircraft, two stage II aircraft
engines,
and a portfolio of aircraft rotables -- 3,929
=============================================
Net investments $ 9,622 $ 15,224
=============================================
</TABLE>
During the six months ended June 30, 1999, the Manager sold the Fund's 33%
interest in two trusts that owned a total of three 737-200A stage II
commercial aircraft, two stage II aircraft engines, and a portfolio of
aircraft rotables. The trusts were sold for proceeds of $7.1 million for
its net investment of $3.8 million.
(This space intentionally left blank.)
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
8. OPERATING SEGMENTS
The Fund operates in five different 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
Vessel Aircraft Railcar Trailer MODU All
For the quarter ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
----------------------------------- ------- ------- ------- ------- ------- ------ -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 2,175 $ 1,014 $ 923 $ 927 $ 1,183 $ 373 $ 6,595
Interest income and other 1 2 -- -- -- 33 36
Net gain on disposition
of equipment -- -- 22 5 -- -- 27
-------------------------------------------------------------------------
Total revenues 2,176 1,016 945 932 1,183 406 6,658
Costs and expenses
Operations support 861 7 185 208 16 12 1,289
Depreciation and amortization 1,503 643 435 362 583 381 3,907
Interest expense -- -- -- -- -- 463 463
Management fees to affiliate 109 51 61 48 59 18 346
General and administrative expenses 13 6 18 214 13 150 414
Minority interest -- -- -- -- 202 -- 202
-------------------------------------------------------------------------
Total costs and expenses 2,486 707 699 832 873 1,024 6,621
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs 12 (317) -- -- -- -- (305)
-------------------------------------------------------------------------
Net income (loss) $ (298) $ (8) $ 246 $ 100 $ 310 $ (618) $ (268)
=========================================================================
Total assets as of June 30, 1999 $ 34,896 $ 14,902 $ 12,176 $ 8,316 $ 12,823 $ 12,898 $ 96,011
=========================================================================
Marine
Vessel Aircraft Railcar Trailer MODU All
For the quarter ended June 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
----------------------------------- ------- ------- ------- ------- ------- ------ -----
Revenues
Lease revenue $ 1,810 $ 1,245 $ 1,031 $ 920 $ 1,012 $ -- $ 6,018
Interest income and other 13 3 -- -- -- 76 92
Net gain on disposition
of equipment -- 2,710 -- 3 -- -- 2,713
-------------------------------------------------------------------------
Total revenues 1,823 3,958 1,031 923 1,012 76 8,823
Costs and expenses
Operations support 597 10 146 154 57 11 975
Depreciation and amortization 1,225 1,233 506 434 728 26 4,152
Interest expense -- -- -- -- -- 458 458
Management fees to affiliate 63 56 64 92 51 -- 326
General and administrative expenses 52 31 40 231 13 180 547
Minority interest -- -- -- -- 64 -- 64
-------------------------------------------------------------------------
Total costs and expenses 1,937 1,330 756 911 913 675 6,522
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (91) 3,006 -- -- -- -- 2,915
-------------------------------------------------------------------------
Net income (loss) $ (205) $ 5,634 $ 275 $ 12 $ 99 $ (599) $ 5,216
=========================================================================
Total assets as of June 30, 1998 $ 39,706 $ 25,917 $ 14,126 $ 10,038 $ 15,387 $ 3,517 $108,691
==========================================================================
<FN>
<F1>
-------------------------------------
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. Also
includes the aggregate net income from an investment in an entity
owning a mobile offshore drilling unit.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine
Vessel Aircraft Railcar Trailer MODU All
For the six months ending June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
- -------------------------------------- ------ -------- ------- ------- ------- ---------- -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 4,805 $ 2,028 $ 1,905 $ 1,774 $ 2,364 $ 373 $ 13,249
Interest income and other 1 5 -- -- -- 114 120
Net gain on disposition
of equipment -- -- 6 5 -- -- 11
-------------------------------------------------------------------------
Total revenues 4,806 2,033 1,911 1,779 2,364 487 13,380
COSTS AND EXPENSES
Operations support 2,191 13 331 401 40 24 3,000
Depreciation and amortization 3,006 1,286 873 724 1,166 385 7,440
Interest expense -- -- -- -- -- 916 916
Management fees to affiliate 240 101 126 102 118 19 706
General and administrative expenses 27 14 25 389 31 341 827
Minority interest -- -- -- -- 398 -- 398
-------------------------------------------------------------------------
Total costs and expenses 5,464 1,414 1,355 1,616 1,753 1,685 13,287
-------------------------------------------------------------------------
Equity in net income (loss) of USPEs (44) 2,485 -- -- -- -- 2,441
-------------------------------------------------------------------------
Net income (loss) before cumulative
effect
of accounting change (702) 3,104 556 163 611 (1,198) 2,534
Cumulative effect of accounting -- -- -- -- -- (132) (132)
change
-------------------------------------------------------------------------
Net income (loss) $ (702) $ 3,104 $ 556 $ 163 $ 611 $ (1,330) $ 2,402
=========================================================================
Total assets as of June 30, 1999 $ 34,896 $ 14,902 $ 12,176 $ 8,316 $ 12,823 $ 12,898 $ 96,011
=========================================================================
Marine
Vessel Aircraft Railcar Trailer MODU All
For the six months ended June 30, 1998 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
- --------------------------------------- ------- -------- ------- ------- -------- --------- -----
REVENUES
Lease revenue $ 3,079 $ 2,510 $ 1,985 $ 1,726 $ 1,991 $ -- $ 11,291
Interest income and other 13 7 -- -- -- 269 289
Net gain on disposition
of equipment -- 2,710 22 9 -- -- 2,741
--------------------------------------------------------------------------
Total revenues 3,092 5,227 2,007 1,735 1,991 269 14,321
COSTS AND EXPENSES
Operations support 908 23 229 285 69 23 1,537
Depreciation and amortization 1,986 2,488 1,010 869 1,399 53 7,805
Interest expense -- -- -- -- -- 916 916
Management fees to affiliate 155 111 131 115 100 -- 612
General and administrative expenses 79 40 27 426 24 317 913
Minority interest -- -- -- -- 157 -- 157
--------------------------------------------------------------------------
Total costs and expenses 3,128 2,662 1,397 1,695 1,749 1,309 11,940
--------------------------------------------------------------------------
Equity in net income (loss) of USPEs (217) 5,446 -- -- -- -- 5,229
--------------------------------------------------------------------------
Net income (loss) $ (253 ) $ 8,011 $ 610 $ 40 $ 242 $ (1,040 ) $ 7,610
==========================================================================
Total assets as of June 30, 1998 $ 39,706 $ 25,917 $ 14,126 $ 10,038 $ 15,387 $ 3,517 $ 108,691
==========================================================================
<FN>
<F1>
-------------------------------------
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. Also
includes the aggregate net income from an investment in an entity
owning a mobile offshore drilling unit.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
9. DEBT
The Manager has entered into a short-term, joint $24.5 million credit
facility (the Committed Bridge Facility) on behalf of the Fund that is due
to expire on December 14, 1999. Among the eligible borrowers, TEC Acquisub,
Inc., an indirect wholly-owned subsidiary of PLM International, Inc., had
borrowings of $10.4 million under the short-term joint, $24.5 million
credit facility as of June 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.
10. NET INCOME PER WEIGHTED-AVERAGE CLASS A UNIT
Net income per weighted-average Class A unit was computed by dividing net
income attributable to Class A members by the weighted-average number of
Class A units deemed outstanding during the period. The weighted-average
number of Class A units deemed outstanding during the three and six months
ended June 30, 1999 were 4,989,303 units and 4,982,528 units, respectively.
The weighted-average number of Class A units deemed outstanding during the
three and six months ended June 30, 1998 was 4,999,581 units.
11. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs related to start-up activities to be
expensed as incurred. The statement requires that initial application be
reported as a cumulative effect of a change in accounting principle. The
Fund adopted this statement during the first quarter of 1999, at which time
it took a $0.1 million charge, related to start-up costs of Fund. This
charge had the effect of reducing net income per weighted-average Class A
unit by $0.03 for the six months ended June 30, 1999.
12. RESTATEMENT
The financial statements 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 six months
ending June 30, 1999 and 1998.
As a result of the consolidation, total assets, total liabilities, and
minority interests changed as of June 30, 1999 and December 31, 1998 as
follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
As reported Amended As reported Amended
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Total assets $90,718 $96,011 $93,466 $99,635
Total liabilities 29,495 29,538 28,441 28,905
Minority interests -- 5,250 -- 5,705
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
12. RESTATEMENT (CONTINUED)
Additionally, as a result of the consolidation, total revenues, total
expenses, and equity in net income of USPEs changed for the three and six
months ended June 30, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 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 $ 5,475 $ 6,658 $ 7,811 $ 8,823 $ 11,016 $ 13,380 $ 12,330 $ 14,321
Total expenses 5,748 6,621 5,609 6,522 11,534 13,287 10,191 11,940
Equity in net
income of USPEs 5 (305) 3,014 2,915 3,052 2,441 5,471 5,229
Net income $ (268) $ (268) $ 5,216 $ 5,216 $ 2,402 $ 2,402 $ 7,610 $ 7,610
</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 six
months ended June 30, 1999 and 1998.
(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 JUNE 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
increased during the first quarter of 1999, compared to the same quarter of
1998. Gains or losses from the sale of equipment, interest and other income and
certain expenses such as depreciation and amortization and general and
administrative expenses relating to the operating segments (see Note 8 to the
financial statements), are not included in the owned equipment operation
discussion because they are indirect in nature and not a result of operations
but the result of owning a portfolio of equipment. The following table presents
lease revenues less direct expenses by segment (in thousands of dollars):
For the Three Months
Ended June 30,
1999 1998
----------------------------
Marine vessels $ 1,314 1,215
MODU 1,166 955
Aircraft 1,007 1,235
Railcars 738 885
Trailers 719 765
Marine containers 373 --
Marine vessels: Marine vessel lease revenues and direct expenses were $2.2
million and $0.9 million, respectively, for the second quarter of 1999, compared
to $1.8 million and $0.6 million, respectively, during the same quarter of 1998.
Due to the purchase of a marine vessel in the second quarter of 1998, lease
revenue increased $0.6 million and direct expenses increased $0.7 million in the
second quarter of 1999 compared to the same period in 1998. This marine vessel
was off lease for 38 days in the second quarter of 1999. Due to one of the
Fund's marine vessel being dry-docked for approximately three weeks in the
second quarter of 1999, lease revenue decreased $0.1 million and direct expenses
decreased $0.4 million. During this period, the marine vessel did not earn any
revenues or incur any expenses. In addition, lease revenue decreased an
additional $0.1 million in the second quarter of 1999 compared to the same
period in 1998 due to lower re-lease rates for this marine vessel.
Mobile offshore drilling unit: As of June 30, 1999 and 1998, the Fund had an
interest in an entity that owns a mobile offshore drilling unit. Mobile offshore
drilling unit revenues and expenses were $1.2 million and $17,000, respectively,
for the second quarter of 1999, compared to $1.0 million and $0.1 million,
respectively, during the same quarter of 1998. The increase in mobile offshore
drilling unit contribution is due to an increase in the lease rate during 1999
and lower depreciation expense as a result of the double declining-balance
method of depreciation which results in greater depreciation in the first years
an asset is owned.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$7,000, respectively, for the second quarter of 1999, compared to $1.2 million
and $10,000, respectively, during the same quarter of 1998. Aircraft
contribution decreased due to the sale of an aircraft in the second quarter of
1998.
Railcars: Railcar lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, for the second quarter of 1999, compared to $1.0 million
and $0.1 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
second quarter of 1999 compared to the same period in 1998. Direct expenses
increased due to higher running repairs required on certain railcars during the
second quarter of 1999, that were not needed during the same period in 1998.
Trailers: Trailer lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, for the second quarter of 1999, compared to $0.9 million
and $0.1 million, respectively, during the same quarter of 1998. Direct expenses
increased due to repairs required on certain trailers during the second quarter
of 1999, which were not needed in the same period in 1998.
Marine containers: Marine container lease revenues were $0.4 million for the
second quarter of 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 $0.1 million due to lower average cash
balances in the second quarter of 1999, compared to the same period in 1998.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $5.3 million for the quarter ended June 30, 1999
decreased from $5.5 million for the same period in 1998. Significant variances
are explained as follows:
(1) A $0.2 million decrease in depreciation and amortization expenses from
1998 levels resulted from a decrease of approximately $1.0 million in
depreciation expense 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 $0.8 million in depreciation
expense due to the purchase of equipment during 1999 and 1998.
(2) A $0.1 million decrease in general and administrative expenses from
1998 levels due to lower office expenses required by the Fund.
(3) A $0.1 million increase in minority interest due to an increase in
revenue during 1999 when compared to 1998.
(D) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the second quarter of 1999 totaled
$27,000 which resulted from the sale of railcars with a net book value of
$28,000, for proceeds of $0.1 million. Net gain on disposition of equipment for
the second quarter of 1998 totaled $2.7 million, and resulted from the sale of
an aircraft and a trailer with an aggregate net book value of $2.8 million, net
of outstanding receivables, for proceeds of $5.5 million.
(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 June 30,
1999 1998
----------------------------
Marine vessel $ 12 $ (91)
Aircraft (317) 3,006
-------------------------------
Equity in Net Income of USPEs $ (305) $ 2,915
===============================
Aircraft: As of June 30, 1999, the Fund owned interests in two trusts that each
own a commercial aircraft. As of June 30, 1998, the Company owned interests in
two trusts that each own a commercial aircraft, and an interest in two trusts
that own three commercial aircraft, two aircraft engines, and a portfolio of
aircraft rotables. During the second 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 $1.1 million and the gain from the sale
of the Fund's interest in a trust that owned four commercial aircraft of $3.6
million was offset by expenses of $1.7 million. Lease revenues decreased $0.7
million due to the sale of the Fund's investment in a trust containing four
commercial aircraft, the sale of the Fund's investment in two trusts that owned
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 $0.1 million in additional lease revenues from the
purchase of a trust owning a MD-82 commercial aircraft during the second quarter
of 1998. The decrease in expenses was primarily due to an approximately $0.5
million decrease in depreciation expense relating to the sale of the Fund's
interest in four trusts and an approximately $0.4 million decrease in
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 offset, in part, by an approximately $0.1 million increase in
depreciation expense as a result of the Fund's investment in two additional
trusts during 1998.
Marine vessel: As of June 30, 1999 and 1998, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.2
million and $0.2 million, respectively, for the second quarter of 1999, compared
to $0.3 million and $0.4 million, respectively, during the same period in 1998.
Lease revenue decreased in the second 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. Expenses decreased due primarily to lower depreciation expense as
a result of the double-declining balance method of depreciation which results in
greater depreciation in the first years an asset is owned.
(F) Net Income (Loss)
As a result of the foregoing, the Fund had net loss of $0.3 million for the
second quarter of 1999, compared to net income of $5.2 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 second quarter of 1999 is not
necessarily indicative of future periods. In the second 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 THE FUND'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 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
increased during the six months ended June 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 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):
For the Six Months
Ended June 30,
1999 1998
----------------------------
Marine vessels $ 2,614 2,172
MODU 2,324 1,922
Aircraft 2,015 2,487
Railcars 1,574 1,755
Trailers 1,373 1,441
Marine containers 373 --
Marine vessels: Marine vessel lease revenues and direct expenses were $4.8
million and $2.2 million, respectively, for the six months ended June 30, 1999,
compared to $3.1 million and $0.9 million, respectively, during the same period
of 1998. Due to the purchase of a marine vessel in the first quarter of 1998 and
another vessel in the second quarter of 1998, lease revenue increased $2.1
million and direct expenses increased $1.6 million in the six months ended June
30, 1999 compared to the same period in 1998. This marine vessel was off lease
for 38 days in the second quarter of 1999. Due to one of the Fund's marine
vessel being dry-docked for approximately three weeks in the six months ended
June 30, 1999, lease revenue decreased $0.1 million and direct expenses
decreased $0.4 million. During this period, the marine vessel did not earn any
revenues or incur any expenses. In addition, lease revenue decreased an
additional $0.3 million in the six months ended June 30, 1999 compared to the
same period in 1998 due to lower re-lease rates for this marine vessel.
Mobile offshore drilling unit: As of June 30, 1999 and 1998, the Fund had an
interest in an entity that owns a mobile offshore drilling unit. Mobile offshore
drilling unit revenues and expenses were $2.4 million and $40,000, respectively,
for the six months ended June 30, 1999, compared to $2.0 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 and lower depreciation expense as a result of the double
declining-balance method of depreciation which results in greater depreciation
in the first years an asset is owned.
Aircraft: Aircraft lease revenues and direct expenses were $2.0 million and
$13,000, respectively, for the six months ended June 30, 1999, compared to $2.5
million and $23,000, 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 $1.9 million and $0.3
million, respectively, for the six months ended June 30, 1999, compared to $2.0
million and $0.2 million, respectively, during the same period of 1998. Lease
revenue decreased $70,000 due to several railcars being off-lease in the six
months ended June 30, 1999 compared to the entire railcar fleet being on-lease
in the same period in 1998. In addition, lease revenue decreased $30,000
resulting from the sale or disposition of railcars in 1998 and the six months
ended June 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 six months ended June 30, 1999, that
were not needed during the same period in 1998.
Trailers: Trailer lease revenues and direct expenses were $1.8 million and $0.4
million, respectively, for the six months ended June 30, 1999, compared to $1.7
million and $0.3 million, respectively, during the same period of 1998. Lease
revenues increased due to higher utilization earned on trailers operating in the
short-term rental facilities in the six months ended June 30, 1999 compared to
the same period in 1998. Direct expenses increased due to repairs required on
certain trailers during the six months ended June 30, 1999, which were not
needed in the same period in 1998.
Marine containers: Marine container lease revenues were $0.4 million for the six
months ended June 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 six months ended June 30, 1999, compared to the same period in
1998.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $10.3 million for the six months ended June 30, 1999
decreased from $10.4 million for the same period in 1998. Significant variances
are explained as follows:
(1) A $0.4 million decrease in depreciation and amortization expenses from
1998 levels resulted from a decrease of approximately $0.3 million due to the
sale of certain assets during 1999 and 1998 and a decrease of approximately $1.8
million 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 $1.7 million in depreciation expense from
the purchase of equipment during 1999 and 1998.
(2) A $0.1 million decrease in general and administrative expenses from
1998 levels due to lower office expenses required by the Fund.
(3) A $0.1 million increase in management fees to affiliate that reflects
the higher levels of lease revenues on owned equipment in 1999, when compared to
1998.
(4) A $0.2 million increase in minority interest due to an increase in
revenue of $0.1 million and a decrease in direct and indirect expenses of $0.1
million during 1999 when compared to 1998.
(D) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 1999
totaled $11,000 which resulted from the sale of railcars and trailers with an
aggregate net book value of $0.1 million, for proceeds of $0.1 million. Net gain
on disposition of equipment for the six months ended June 30, 1998 totaled $2.7
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 $5.5 million.
(E) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars).
For the Six Months
Ended June 30,
1999 1998
----------------------------
Aircraft $ 2,485 $ 5,446
Marine vessel (44) (217)
-----------------------------
Equity in Net Income of USPEs $ 2,441 $ 5,229
=============================
Aircraft: As of June 30, 1999, the Fund owned interests in two trusts that each
own a commercial aircraft. As of June 30, 1998, the Company owned interests in
two trusts that each own a commercial aircraft, and an interest in two trusts
that own three commercial aircraft, two aircraft engines, and a portfolio of
aircraft rotables. During the six months ended June 30, 1999, aircraft lease
revenues were $1.1 million and the gain from the sale of the Fund's interest in
two trusts that owned three commercial aircraft, two aircraft engines, and a
portfolio of aircraft rotables of $3.3 million was offset by expenses of $1.9
million. During the six months ended June 30, 1998, aircraft lease revenues were
$2.5 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 $3.3
million. Lease revenues decreased $1.7 million due to the sale of the Fund's
investment in two trusts containing ten commercial aircraft, the sale of the
Fund's investment in two trusts that owned 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 containing a MD-82 commercial aircraft during 1998. The decrease in
expenses of $1.4 million was primarily due to an approximately $1.0 million
decrease in depreciation expense relating to the sale of the Fund's interest in
four trusts and an approximately $0.9 million decrease as a result of the double
declining-balance method of depreciation which results in greater depreciation
in the first years an asset is owned offset, in part, by an approximately $0.5
million increase due to the Fund's investment in two additional trusts during
1998.
Marine vessel: As of June 30, 1999 and 1998, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.4
million and $0.5 million, respectively, for the six months ended June 30, 1999,
compared to $0.6 million and $0.8 million, respectively, during the same period
in 1998. Lease revenue decreased in the six months ended June 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. Expenses decreased due primarily to lower
depreciation expense as a result of the double-declining balance method of
depreciation which results in greater depreciation in the first years an asset
is owned.
(F) Cumulative effect of accounting change
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. The Fund adopted this statement
during the six months ended June 30, 1999, 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 six
months ended June 30, 1999.
(G) Net Income
As a result of the foregoing, the Fund had net income of $2.4 million for the
six months ended June 30, 1999, compared to net income of $7.6 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 six months ended June
30, 1999 is not necessarily indicative of future periods. In the six months
ended June 30, 1999, the Fund distributed $5.0 million to Class A members, or
$1.00 per weighted-average Class A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 1999, the Fund generated operating cash of
$7.3 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 six months ended June 30, 1999 of
approximately $5.9 million) to the partners.
During the six months ended June 30, 1999, the Fund purchased marine containers
at a cost of $9.9 million.
During the six months ended June 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 $7.2 million.
Lessee deposits and reserve for repairs increased $0.4 million during the six
months ended June 30, 1999 compared to December 31, 1998 due to an increase of
$0.4 million in security deposits and an increase of $0.5 million in reserve for
repairs, offset, in part, by a decrease of $0.5 million in prepaid lease
revenue.
The Manager has entered into a short-term joint $24.5 million credit facility.
As of August 2, 1999, TEC Acquisub, Inc., an indirect wholly-owned subsidiary of
PLM International, Inc., had borrowings of $17.3 million under the short-term
joint $24.5 million credit facility. No other eligible borrower had any
outstanding borrowings.
(III) EFFECTS OF YEAR 2000
It is possible that the Manager's currently installed computer systems, software
products, and other business systems, or 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
June 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 will be fully tested
September by 30, 1999 and are expected to be compliant.
As of June 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 by
September 30, 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
June 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 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 1999 and beyond include:
1. Depressed economic conditions in Asia have led to declining freight rates
through the early part of 1999 for bulk carrier vessels. The market has
stabilized and is expected to improve over the next 2-3 years in the absence of
new additional orders. The demand for anchor handling supply vessels is cyclical
and is expected to recover in the near future. With the increase in the demand
for oil, such recovery may be as soon as the next twelve months. Container
feeder vessel rates have declined gradually since 1997, but the depressed
economic conditions in Asia accelerated the decline. In the early part of 1999,
the market stabilized and if trade grows at the current rate, supply and demand
should return to normal within the next two years. 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.
2. The demand for covered hopper cars has softened in the market since 1998, and
is expected to continue throughout 1999. The demand for the other types of
railcars has continued to be high, however a softening in the market is expected
in the second half of 1999, which may lead to lower utilization and lower
contribution to the Fund.
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 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.
<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 six months ended June 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
Date: January 11, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,436
<SECURITIES> 0
<RECEIVABLES> 3,047
<ALLOWANCES> (707)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 132,395
<DEPRECIATION> (51,704)
<TOTAL-ASSETS> 96,011
<CURRENT-LIABILITIES> 0
<BONDS> 25,000
0
0
<COMMON> 0
<OTHER-SE> 61,223
<TOTAL-LIABILITY-AND-EQUITY> 96,011
<SALES> 0
<TOTAL-REVENUES> 13,380
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 916
<INCOME-PRETAX> 2,402
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (132)
<NET-INCOME> 2,402
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
</TABLE>
