UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28376
-----------------------
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3209289
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MARKET, STEUART STREET TOWER
SUITE 800, SAN FRANCISCO, CA 94105-1301
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (415) 974-1399
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<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,
2000 1999
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease $ 116,142 $ 103,709
Less accumulated depreciation (51,457) (45,183)
------------------------------------
Net equipment 64,685 58,526
Cash and cash equivalents 1,966 11,597
Restricted cash 739 453
Accounts receivable, less allowance for doubtful accounts
of $89 in 2000 and $65 in 1999 2,198 2,007
Investment in unconsolidated special-purpose entities 6,381 7,717
Deferred charges, less accumulated amortization
of $61 in 2000 and $52 in 1999 116 125
Prepaid expenses and other assets 30 108
------------------------------------
Total assets $ 76,115 $ 80,533
====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 332 $ 458
Due to affiliates 838 656
Lessee deposits and reserves for repairs 4,720 3,821
Note payable 25,000 25,000
------------------------------------
Total liabilities 30,890 29,935
------------------------------------
Members' equity:
Class A members (4,971,311 units as of June 30, 2000
and 4,975,321 units as of December 31, 1999) 45,225 50,598
Class B member -- --
------------------------------------
Total members' equity 45,225 50,598
------------------------------------
Total liabilities and members' equity $ 76,115 $ 80,533
====================================
</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,
2000 1999 2000 1999
-------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Lease revenue $ 5,787 $ 6,595 $ 11,576 $ 13,249
Interest and other income 113 36 260 120
Net gain on disposition of equipment 6 27 6 11
-------------------------------------------------------------
Total revenues 5,906 6,658 11,842 13,380
-------------------------------------------------------------
EXPENSES
Depreciation and amortization 3,396 3,907 6,297 7,440
Repairs and maintenance 464 580 1,091 1,253
Equipment operating expenses 238 640 997 1,580
Interest expense 453 463 916 916
Insurance expense 109 69 192 167
Management fees to affiliate 310 346 622 706
General and administrative expenses
to affiliates 217 234 475 491
Other general and administrative expenses 263 180 481 336
-------------------------------------------------------------
Total expenses 5,450 6,419 11,071 12,889
-------------------------------------------------------------
Minority interest -- (202) -- (398)
Equity in net income (loss) of unconsolidated
special-purpose entities (152) (305) (244) 2,441
-------------------------------------------------------------
Net income (loss) before cumulative effect of
accounting change 304 (268) 527 2,534
Cumulative effect of accounting change -- -- -- (132)
-------------------------------------------------------------
Net income (loss) $ 304 $ (268) $ 527 $ 2,402
=============================================================
MEMBERS' SHARE OF NET INCOME (LOSS)
Class A members $ (135) $ (708) $ (351) $ 1,653
Class B member 439 440 878 749
-------------------------------------------------------------
Total $ 304 $ (268) $ 527 $ 2,402
=============================================================
Class A members' net income (loss) per
weighted-average Class A unit $ (0.03) $ (0.14) $ (0.07) $ 0.33
=============================================================
Cash distribution $ 3,066 $ 2,933 $ 5,852 $ 5,873
=============================================================
Cash distribution per weighted-average
Class A units $ 0.53 $ 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, 1998 to June 30, 2000
(in thousands of dollars)
<TABLE>
<CAPTION>
Class A Class B Total
---------------------------------------------------------
<S> <C> <C> <C>
Members' equity as of December 31, 1998 $ 64,893 $ 132 $ 65,025
Net income (loss) (4,029) 1,628 (2,401)
Purchase of Class A units (336) -- (336)
Cash distribution (9,930) (1,760) (11,690)
---------------------------------------------------------
Members' equity as of December 31, 1999 50,598 -- 50,598
Net income (loss) (351) 878 527
Purchase of Class A units (48) -- (48)
Cash distribution (4,974) (878) (5,852)
---------------------------------------------------------
Members' equity as of June 30, 2000 $ 45,225 $ -- $ 45,225
=========================================================
</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,
2000 1999
---------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 527 $ 2,402
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,297 7,440
Cumulative effect of accounting change -- 132
Net gain on disposition of equipment (6) (11)
Equity in net (income) loss of unconsolidated
special-purpose entities 244 (2,441)
Changes in operating assets and liabilities:
Restricted cash (286) (409)
Accounts receivable, net (191) (1,101)
Prepaid expenses and other assets 78 113
Accounts payable and accrued expenses (126) (12)
Due to affiliates 182 239
Lessee deposits and reserves for repairs 899 406
Minority interest -- (455)
---------------------------------------
Net cash provided by operating activities 7,618 6,303
---------------------------------------
INVESTING ACTIVITIES
Payments for purchase of equipment and capitalized
improvements (12,462) (9,949)
Liquidation distributions from unconsolidated
special-purpose entities -- 7,095
Proceeds from disposition of equipment 21 114
Distributions from unconsolidated special-purpose
entities 1,092 948
---------------------------------------
Net cash used in investing activities (11,349) (1,792)
---------------------------------------
FINANCING ACTIVITIES
Cash distribution to Class A members (4,974) (4,992)
Cash distribution to Class B Member (878) (881)
Purchase of Class A units (48) (331)
---------------------------------------
Net cash used in financing activities (5,900) (6,204)
---------------------------------------
Net decrease in cash and cash equivalents (9,631) (1,693)
Cash and cash equivalents at beginning of period 11,597 3,720
---------------------------------------
Cash and cash equivalents at end of period $ 1,966 $ 2,027
=======================================
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, 2000
1. OPINION OF MANAGEMENT
In the opinion of the management of PLM Financial Services, Inc. (FSI or
the Manager), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals,
to present fairly the financial position of Professional Lease Management
Income Fund I, L.L.C. (the Fund) as of June 30, 2000 and December 31, 1999,
the statements of operations for the three and six months ended June 30,
2000 and 1999, the statements of changes in members' equity for the period
from December 31, 1998 to June 30, 2000, and the statements of cash flows
for the six months ended June 30, 2000 and 1999. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying financial statements. For
further information, reference should be made to the financial statements
and notes thereto included in the Fund's Annual Report on Form 10-K for the
year ended December 31, 1999, on file at the Securities and Exchange
Commission.
2. SCHEDULE OF FUND PHASES
The Fund will terminate on December 31, 2010, unless terminated earlier
upon sale of all equipment and certain other events. Beginning in the
Fund's seventh year of operations, which commences on January 1, 2003, the
Manager will stop purchasing additional equipment. Surplus cash, if any,
less reasonable reserves, will be distributed to the members. Between the
eighth and tenth years of operations, the Manager intends to begin an
orderly liquidation of the Fund's assets.
3. PURCHASE OF CLASS A UNITS
In 1999, the Fund agreed to purchase up to 4,010 Class A units in 2000 for
an aggregate purchase price of $49,000. As of June 30, 2000, the Fund had
purchased 4,010 Class A units for $48,000.
4. CASH DISTRIBUTIONS
Cash distributions are recorded when paid and may include amounts in excess
of net income that are considered to represent a return of capital. For the
six months ended June 30, 2000 and 1999, cash distributions totaled $5.9
million. For the three months ended June 30, 2000 and 1999, cash
distributions totaled $3.1 million and $2.9 million, respectively. Cash
distributions to the Class A unitholders of $5.0 million and $3.3 million
for the six months ended June 30, 2000 and 1999, respectively, were deemed
to be a return of capital.
Cash distributions related to the results from the second quarter of 2000,
of $1.7 million, will be paid during the third quarter of 2000.
5. TRANSACTIONS WITH MANAGER AND AFFILIATES
The balance due to affiliates as of June 30, 2000, included $0.2 million
due to FSI and its affiliates for management fees and data processing
services, and $0.6 million due to affiliated unconsolidated special-purpose
entities (USPEs). The balance due to affiliates as of December 31, 1999,
included $0.2 million due to FSI and its affiliates for management fees and
$0.5 million due to affiliated USPEs.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
5. TRANSACTIONS WITH MANAGER AND AFFILIATES (CONTINUED)
The Fund's proportional share of USPE-affiliated management fees of $21,000
and $31,000, respectively, were payable as of June 30, 2000 and December
31, 1999.
The Fund's proportional share of the affiliated expenses incurred by the
USPEs during 2000 and 1999 is listed in the following table (in thousands
of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 32 $ 62 $ 67 $ 72
Data processing and administrative
expenses 8 13 20 21
</TABLE>
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
June 30, December 31,
2000 1999
---------------------------------------
Marine vessels $ 37,256 $ 37,256
Aircraft 20,605 20,605
Railcars 19,717 19,710
Trailers 16,404 16,196
Marine containers 22,160 9,942
---------------------------------------
116,142 103,709
Less accumulated depreciation (51,457) (45,183)
---------------------------------------
Net equipment $ 64,685 $ 58,526
=======================================
As of June 30, 2000, 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 ten railcars with a carrying
value of $3.7 million. As of December 31, 1999, all owned equipment in the
Fund portfolio was either on lease or operating in PLM-affiliate short-term
trailer rental yards except for six railcars with a carrying value of $0.1
million.
During the six months ended June 30, 2000, the Fund purchased 5,945 marine
containers and ten trailers for $12.5 million. During the six months ended
June 30, 1999, the Fund purchased 4,430 marine containers for $9.9 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
6. EQUIPMENT (CONTINUED)
During the six months ended June 30, 2000, the Fund sold a trailer with a
net book value of $15,000, for proceeds of $21,000. 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.
On May 24, 2000, FSI, on behalf of the Fund, entered into an asset purchase
agreement to sell the refrigerated and dry trailer assets of the Fund.
Closing of the transaction is contingent on numerous conditions. If the
sale is completed, the Manager estimates that the Fund's sale proceeds to
be approximately $7.1 million and will result in a gain of approximately
$2.2 million. Since the sale of the trailers is contingent upon certain
conditions being met, the Fund's refrigerated and dry trailers are not
classified as assets held for sale.
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,
2000 1999
---------------------------------------------
<S> <C> <C>
50% interest in a trust owning an MD-82 stage III commercial
aircraft $ 4,159 $ 4,784
50% interest in a trust owning an MD-82 stage III commercial
aircraft 1,347 1,773
50% interest in a trust owning a cargo marine vessel 794 1,024
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 45 76
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 36 60
=============================================
Net investments $ 6,381 $ 7,717
=============================================
</TABLE>
As of June 30, 2000 and December 31, 1999, all jointly-owned equipment in
the Fund's USPE portfolio was on lease.
(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, 2000
8. OPERATING SEGMENTS
The Fund operates or operated in six different segments: marine vessel
leasing, aircraft leasing, railcar leasing, trailer leasing, marine
container leasing, and mobile offshore drilling unit (MODU) leasing. Each
equipment leasing segment engages in short to mid-term operating leases to
a variety of customers. The following tables present a summary of the
operating segments (in thousands of dollars):
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container
For the quarter ended June 30, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
----------------------------------- ------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 1,760 $ 1,014 $ 897 $ 1,052 $ 1,064 $ -- $ 5,787
Interest income and other -- 1 -- -- -- 112 113
Net gain on disposition
of equipment -- -- -- 6 -- -- 6
-------------------------------------------------------------------------
Total revenues 1,760 1,015 897 1,058 1,064 112 5,906
COSTS AND EXPENSES
Operations support 366 9 164 262 1 9 811
Depreciation and amortization 1,155 579 376 369 913 4 3,396
Interest expense -- -- -- -- -- 453 453
Management fees to affiliate 101 51 55 69 34 -- 310
General and administrative expenses 38 2 35 185 1 219 480
-------------------------------------------------------------------------
Total costs and expenses 1,660 641 630 885 949 685 5,450
-------------------------------------------------------------------------
Equity in net loss of USPEs (128) (24) -- -- -- -- (152)
-------------------------------------------------------------------------
Net income (loss) $ (28) $ 350 $ 267 $ 173 $ 115 $ (573) $ 304
=========================================================================
Total assets as of June 30, 2000 $ 25,018 $ 8,602 $ 10,514 $ 8,945 $ 19,944 $ 3,092 $ 76,115
=========================================================================
Marine
Vessel Aircraft Railcar Trailer MODU
For the quarter ended June 30, 1999 Leasing Leasing Leasing Leasing Leasing Other<F2>2 Total
----------------------------------- ------- ------- ------- ------- ------- ------ -----
REVENUES
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
-------------------------------------------------------------------------
Total costs and expenses 2,486 707 699 832 671 1,024 6,419
-------------------------------------------------------------------------
Minority interest -- -- -- -- (202) -- (202)
Equity in net income (loss) of 12 (317) -- -- -- -- (305)
USPEs
-------------------------------------------------------------------------
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
=========================================================================
<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.
<F2>
2 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
lease revenues and expenses from marine containers.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container
For the six months ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
2000
------------------------------------ ------- -------- ------- -------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Lease revenue $ 3,972 $ 2,029 $ 1,862 $ 2,083 $ 1,630 $ -- $ 11,576
Interest income and other 1 2 -- -- -- 257 260
Net gain on disposition
of equipment -- -- -- 6 -- -- 6
-------------------------------------------------------------------------
Total revenues 3,973 2,031 1,862 2,089 1,630 257 11,842
COSTS AND EXPENSES
Operations support 1,484 18 279 477 3 19 2,280
Depreciation and amortization 2,310 1,157 752 738 1,331 9 6,297
Interest expense -- -- -- -- -- 916 916
Management fees to affiliate 212 101 118 129 62 -- 622
General and administrative expenses 52 4 61 416 1 422 956
-------------------------------------------------------------------------
Total costs and expenses 4,058 1,280 1,210 1,760 1,397 1,366 11,071
-------------------------------------------------------------------------
Equity in net loss of USPEs (198) (46) -- -- -- -- (244)
-------------------------------------------------------------------------
Net income (loss) $ (283) $ 705 $ 652 $ 329 $ 233 $ (1,109) $ 527
=========================================================================
Total assets as of June 30, 2000 $ 25,018 $ 8,602 $ 10,514 $ 8,945 $ 19,944 $ 3,092 $ 76,115
=========================================================================
Marine
Vessel Aircraft Railcar Trailer MODU
For the six months ended June 30, Leasing Leasing Leasing Leasing Leasing Other<F2>2 Total
1999
------------------------------------ ------- -------- -------- -------- ------- ---------- ------
Revenues
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
-------------------------------------------------------------------------
Total costs and expenses 5,464 1,414 1,355 1,616 1,355 1,685 12,889
-------------------------------------------------------------------------
Minority interest -- -- -- -- (398) -- (398)
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 change -- -- -- -- -- (132) (132)
=========================================================================
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
=========================================================================
<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.
<F2>
2 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 lease revenues and expenses from marine containers.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. DEBT
The Fund has a warehouse facility, which is shared with PLM Equipment
Growth Fund VI, PLM Equipment Growth & Income Fund VII, and TEC Acquisub,
Inc., an indirect wholly-owned subsidiary of the Manager. Borrowings under
this facility by the other eligible borrowers reduces the amount available
to be borrowed by the Fund. All borrowings under this facility are
guaranteed by the Manager. On June 30, 2000, this facility was extended to
September 30, 2000 and the amount available to be borrowed under the
facility was reduced from $24.5 million to $9.5 million. The Manager has
been notified by the lender that this facility will not be renewed upon its
expiration. The Manager is currently negotiating with a lender for a
warehouse credit facility of $10.0-$15.0 million with similar terms. The
Manager believes the facility will be in place by September 30, 2000.
As of June 30, 2000, PLM Equipment Growth Fund VI had outstanding
borrowings of $0.6 million and TEC Acquisub, Inc. had borrowings of $8.9
million under the warehouse facility. No other eligible borrower had any
outstanding borrowings under the warehouse facility.
10. NET INCOME (LOSS) PER WEIGHTED-AVERAGE CLASS A UNIT
Net income (loss) per weighted-average Class A unit was computed by
dividing net income (loss) attributable to Class A members by the
weighted-average number of Class A units deemed outstanding during the
period. The weighted-average number of Class A units deemed outstanding
during the three and six months ended June 30, 2000 were 4,971,311 units
and 4,972,611 units, respectively. The weighted-average number of Class A
units deemed outstanding during the three and six months ended June 30,
1999 were 4,982,528 units and 4,989,303 units, respectively.
11. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which required costs related to start-up activities to be
expensed as incurred. The statement required that initial application be
reported as a cumulative effect of a change in accounting principle. The
Fund adopted this statement during the six months ended June 30, 1999, at
which time it took a $0.1 million charge, related to start-up costs of
Fund.
(This space is intentionally left blank.)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(I) RESULTS OF OPERATIONS
In September 1999, the Manager amended the corporate-by-laws of certain
unconsolidated special purpose entities (USPEs) in which the Fund, or any
affiliated program, owned an interest greater than 50%. The amendment to the
corporate-by-laws provided that all decisions regarding the acquisition and
disposition of the investment as well as other significant business decisions of
that investment would be permitted only upon unanimous consent of the Fund and
all the affiliated programs that have an ownership in the investment (the
Amendment). As such, although the Fund may own a majority interest in a USPE,
the Fund does not control its management and thus the equity method of
accounting will be used after adoption of the Amendment. As a result of the
Amendment, as of September 30, 1999, all jointly owned equipment in which the
Fund owned a majority interest, which had been consolidated, were reclassified
to investments in USPEs. Lease revenues and direct expenses for jointly owned
equipment in which the Fund held a majority interest were reported under the
consolidation method of accounting during the three and six months ended June
30, 1999 and were included with the owned equipment operations.
COMPARISON OF THE PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.'S (THE
FUND'S) OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the second quarter of 2000, compared to the same quarter of
1999. Gains or losses from the sale of equipment, interest and other income and
certain expenses such as depreciation and amortization and general and
administrative expenses relating to the operating segments (see Note 8 to the
financial statements), are not included in the owned equipment operation
discussion because they are indirect in nature and not a result of operations
but the result of owning a portfolio of equipment. The following table presents
lease revenues less direct expenses by segment (in thousands of dollars):
(A) Owned Equipment Operations
For the Three Months
Ended June 30,
2000 1999
----------------------------
Marine vessels $ 1,394 $ 1,314
Marine containers 1,063 373
Aircraft 1,005 1,007
Trailers 790 719
Railcars 733 738
Mobile offshore drilling unit -- 1,166
Marine vessels: Marine vessel lease revenues and direct expenses were $1.8
million and $0.4 million, respectively, for the second quarter of 2000, compared
to $2.2 million and $0.9 million, respectively, during the same quarter of 1999.
Lease revenue decreased $0.4 million in the second quarter of 2000 compared to
the same period in 1999 due to lower re-lease rates for one of the Fund's anchor
handling supply marine vessels. In addition, lease revenue decreased $0.6
million due to another anchor handling supply marine vessel being off-lease in
the second quarter of 2000 compared to the same period in 1999 where the marine
vessel was on lease for the entire quarter. The decreases in lease revenue from
these marine vessels were offset, in part, by an increase in lease revenue of
$0.1 million due to another marine vessel being on lease for the entire second
quarter of 2000 compared to the same period in 1999 where the marine vessel was
off-lease for 39 days. In addition, lease revenue increased $0.5 million during
the second quarter of 2000 compared to the same period in 1999 due to higher
re-lease rates for the Fund's bulk carrier marine vessel. Direct expenses
decreased $0.5 million primarily due to lower operating expenses for one of the
Fund's marine vessels in the second quarter of 2000 compared to the same period
in 1999.
Marine containers: Marine container lease revenues were $1.1 million and $0.4
million, respectively, for the second quarter of 2000 and 1999. Marine container
contribution increased in the second quarter of 2000, compared to the same
period in 1999 due to the purchase of marine containers in 1999 and 2000.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$9,000, respectively, for the second quarter of 2000, compared to $1.0 million
and $7,000, respectively, during the same quarter of 1999. Aircraft contribution
remained the same due to the stability of the aircraft fleet.
Trailers: Trailer lease revenues and direct expenses were $1.1 million and $0.3
million, respectively, for the second quarter of 2000, compared to $0.9 million
and $0.2 million, respectively, during the same quarter of 1999. Trailer
contribution increased in the second quarter of 2000, compared to the same
period of 1999 due to the purchase of trailers in 1999 and 2000.
Railcars: Railcar lease revenues and direct expenses were $0.9 million and $0.2
million, respectively, during the second quarter of 2000 and 1999.
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. The Fund's interest in an entity owning a mobile offshore drilling unit
was sold in the fourth quarter of 1999.
(B) Interest and Other Income
Interest and other income increased $0.1 million due to higher average cash
balances in the second quarter of 2000, compared to the same period in 1999.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.6 million for the quarter ended June 30, 2000
decreased from $5.1 million for the same period in 1999. The primary reason for
the decrease of $0.5 million in depreciation and amortization expenses from 1999
levels was a $0.6 million decrease resulting from the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned, and a $0.6 million decrease as a
result of the Amendment which changed the accounting method used for majority
held equipment from the consolidation method of accounting to the equity method
of accounting. These decreases were partially offset by an increase of $0.7
million in depreciation expense from the purchase of equipment during 1999 and
2000.
(D) Minority Interest
Minority interest expense decreased $0.2 million due to the September 30, 1999
Amendment that changed the accounting method of majority held equipment from the
consolidation method of accounting to the equity method of accounting.
(E) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the second quarter of 2000 totaled
$6,000 which resulted from the sale of a trailer with a net book value of
$15,000, for proceeds of $21,000. 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.
<PAGE>
(F) 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,
2000 1999
----------------------------
Aircraft, aircraft engines, and aircraft rotables $ (24) $ (317)
Marine vessel (128) 12
------------------------------
Equity in Net Income (Loss) of USPEs $ (152) (305)
==============================
Aircraft: As of June 30, 2000 and 1999, the Fund owned interests in two trusts
that each owns a commercial aircraft. During the second quarter of 2000,
aircraft lease revenues were $0.5 million which were offset by expenses of $0.6
million. During the same period in 1999, aircraft lease revenues were $0.5
million which were offset by expenses of $0.8 million. The decrease in expenses
of $0.2 million was primarily due to lower depreciation expense resulting from
the double declining-balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
Marine vessel: As of June 30, 2000 and 1999, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.1
million and $0.2 million, respectively, for the second quarter of 2000, compared
to $0.2 million and $0.2 million, respectively, during the same period in 1999.
Lease revenue decreased $0.1 million as a result of the marine vessel being off
lease for 19 days in the second quarter of 2000 compared to the same period in
1999 where the marine vessel was on lease for the entire quarter.
(G) Net Income (Loss)
As a result of the foregoing, the Fund had net income of $0.3 million for the
second quarter of 2000, compared to net loss of $0.3 million during the same
period of 1999. The Fund's ability to acquire, operate and liquidate assets,
secure leases, and re-lease those assets whose leases expire is subject to many
factors. Therefore, the Fund's performance in the second quarter of 2000 is not
necessarily indicative of future periods. In the second quarter of 2000, the
Fund distributed $2.6 million to Class A members, or $0.53 per weighted-average
Class A unit.
COMPARISON OF THE THE FUND'S OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30,
2000 ANd 1999
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset-specific insurance expenses) on owned equipment
decreased during the six months ended June 30, 2000, when compared to the same
period of 1999. The following table presents lease revenues less direct expenses
by segment (in thousands of dollars):
For the Six Months
Ended June 30,
2000 1999
----------------------------
Marine vessels $ 2,488 $ 2,614
Aircraft 2,011 2,015
Marine containers 1,627 373
Trailers 1,606 1,373
Railcars 1,583 1,574
Mobile offshore drilling unit -- 2,324
Marine vessels: Marine vessel lease revenues and direct expenses were $4.0
million and $1.5 million, respectively, for the six months ended June 30, 2000,
compared to $4.8 million and $2.2 million, respectively, during the same period
of 1999. Lease revenue decreased $0.8 million in the six months ended June 30,
2000 compared to the same period in 1999 due to lower re-lease rates for one of
the Fund's anchor handling supply marine vessels. In addition, lease revenue
decreased $0.6 million due to another anchor handling supply marine vessel being
off-lease in the second quarter of 2000 compared to the same period in 1999
where the marine vessel was on lease for the entire period. The decreases in
lease revenue from these marine vessels were offset, in part, by an increase in
lease revenue of $0.1 million due to another marine vessel being off lease for
39 days in six months ended June 30, 1999 compared to the same period in 2000
where the marine vessel was on lease for the entire period. In addition, lease
revenue increased $0.5 million during the six months ended June 30, 2000
compared to the same period in 1999 due to higher re-lease rates for the Fund's
bulk carrier marine vessel. Direct expenses decreased $0.7 million primarily due
to lower operating expenses for one of the Fund's marine vessels in the six
months ended June 30, 2000 compared to the same period in 1999.
Aircraft: Aircraft lease revenues and direct expenses were $2.0 million and
$18,000, respectively, for the six months ended June 30, 2000, compared to $2.0
million and $13,000, respectively, during the same period of 1999. Aircraft
contribution remained the same due to the stability of the aircraft fleet.
Marine containers: Marine container lease revenues were $1.6 million and $0.4
million, respectively, for the six months ended June 30, 2000 and 1999. Marine
container contribution increased in the six months ended June 30, 2000, compared
to the same period of 1999 due to the purchase of marine containers in 1999 and
2000.
Trailers: Trailer lease revenues and direct expenses were $2.1 million and $0.5
million, respectively, for the six months ended June 30, 2000, compared to $1.8
million and $0.4 million, respectively, during the same period of 1999. Trailer
contribution increased in the six months ended June 30, 2000, compared to the
same period of 1999 due to the purchase of trailers in 1999 and 2000.
Railcars: Railcar lease revenues and direct expenses were $1.9 million and $0.3
million, respectively, for the six months ended June 30, 2000 and 1999.
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. This mobile offshore drilling unit was sold in the fourth quarter
of 1999.
(B) Interest and Other Income
Interest and other income increased $0.1 million due to higher average cash
balances in the six months ended June 30, 2000, compared to the same period in
1999.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $8.8 million for the six months ended June 30, 2000
decreased from $9.9 million for the same period in 1999. Significant variances
are explained as follows:
(1) A $1.1 million decrease in depreciation and amortization expenses from
1999 levels resulted from a $1.2 million decrease due to the use of the
double-declining balance depreciation method which results in greater
depreciation the first years an asset is owned, and a $1.1 million decrease as a
result of the Amendment which changed the accounting method used for majority
held equipment from the consolidation method of accounting to the equity method
of accounting. These decreases were partially offset by an increase of $1.2
million in depreciation expense from the purchase of equipment during 1999 and
2000.
(2) A $0.1 million decrease in management fees to affiliate that reflects
the lower levels of lease revenues on owned equipment in 2000, when compared to
1999.
(3) A $0.1 million increase in general and administrative expenses from
1999 levels due to higher data processing services and professional services
required by the Fund.
<PAGE>
(D) Minority Interest
Minority interest expense decreased $0.4 million due to the September 30, 1999
Amendment that changed the accounting method of majority held equipment from the
consolidation method of accounting to the equity method of accounting.
(E) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 2000
totaled $6,000 which resulted from the sale of a trailer with a net book value
of $15,000, for proceeds of $21,000. 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.
(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 Six Months
Ended June 30,
2000 1999
--------------------------
Aircraft, aircraft engines, and aircraft rotables $ (46) $ 2,485
Marine vessel (198) (44)
---------------------------
Equity in Net Income of USPEs $ (244) $ 2,441
===========================
Aircraft: As of June 30, 2000 and 1999, the Fund owned interests in two trusts
that each owns a commercial aircraft. During the six months ended June 30, 2000,
aircraft lease revenues were $1.1 million offset by expenses of $1.1 million.
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 a total of three commercial aircraft, two aircraft engines, and a
portfolio of aircraft rotables of $3.3 million was offset by expenses of $1.9
million. The decrease in expenses of $0.8 million was primarily due to lower
depreciation expense resulting from a $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 and a $0.2 million decrease due to the sale
of the Fund's interest in the two trusts.
Marine vessel: As of June 30, 2000 and 1999, the Fund had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.3
million and $0.5 million, respectively, for the six months ended June 30, 2000,
compared to $0.4 million and $0.5 million, respectively, during the same period
in 1999. Lease revenue decreased $0.1 million as a result of the marine vessel
being off lease for 19 days in the six months ended June 30, 2000 compared to
the same period in 1999 where the marine vessel was on lease for the entire
period.
(G) Cumulative Effect of Accounting Change
In April 1999, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which required costs related to start-up activities to be expensed as incurred.
The statement required that initial application be reported as a cumulative
effect of a change in accounting principle. The Fund adopted this statement
during the six months ended June 30, 2000, at which time it took a $0.1 million
charge, related to start-up costs of the Fund. This charge had the effect of
reducing net income per weighted-average Class A unit by $0.03 for the six
months ended June 30, 2000.
(H) Net Income
As a result of the foregoing, the Fund had net income of $0.5 million for the
six months ended June 30, 2000, compared to net income of $2.4 million during
the same period of 1999. The Fund's ability to acquire, operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors. Therefore, the Fund's performance in the six months ended June
30, 2000 is not necessarily indicative of future periods. In the six months
ended June 30, 2000, 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, 2000, the Fund generated operating cash of
$8.7 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, 2000 of $5.9
million) to the partners.
During the six months ended June 30, 2000, the Fund purchased marine containers
and trailers for $12.5 million.
Restricted cash increased $0.3 million during the six months ended June 30, 2000
due to security deposits received from a marine container lessee in 2000.
Accounts receivable increased $0.2 million during the six months ended June 30,
2000 due to the timing of cash receipts.
Investments in USPEs decreased $1.3 million due to cash distributions of $1.1
million to the Fund from USPEs and a $0.2 million loss that was recorded from
its equity interests in USPEs for the six months ended June 30, 2000.
Accounts payable decreased $0.1 million during the six months ended June 30,
2000 due to a decrease in trade accounts payable.
Due to affiliates increased $0.2 million during the six months ended June 30,
2000 due to the receipt an additional deposit of $0.1 million that is due to an
affiliated USPE for engine reserves and an increase of $37,000 due to PLM
Investment Management Inc., an affiliate of the Manager, for management fees.
Lessee deposits and reserve for repairs increased $0.9 million during the six
months ended June 30, 2000. Security deposits increased $0.3 million due to
security deposits received from a marine container lessee, reserves for aircraft
engine repairs increased $0.3 million due to additional lessee deposits, and
marine vessel dry-docking reserves increased $0.2 million due to the accrual for
future repairs. Lessee prepaid deposits increased $0.1 million due to more
lessee's prepaying future lease revenue.
The Fund has a warehouse facility, which is shared with PLM Equipment Growth
Fund VI, PLM Equipment Growth & Income Fund VII, and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of the Manager. Borrowings under this facility
by the other eligible borrowers reduces the amount available to be borrowed by
the Fund. All borrowings under this facility are guaranteed by the Manager. On
June 30, 2000, this facility was extended to September 30, 2000 and the amount
available to be borrowed under the facility was reduced from $24.5 million to
$9.5 million. The Manager has been notified by the lender that this facility
will not be renewed upon its expiration. The Manager is currently negotiating
with a lender for a warehouse credit facility of $10.0-$15.0 million with
similar terms. The Manager believes the facility will be in place by September
30, 2000.
As of August 9, 2000, PLM Equipment Growth Fund VI had outstanding borrowings of
$0.6 million and TEC Acquisub, Inc. had borrowings of $8.9 million under the
short term Committed Bridge Facility. No other eligible borrower had any
outstanding borrowings under the short term Committed Bridge Facility.
<PAGE>
(III) OUTLOOK FOR THE FUTURE
Several factors may affect the Fund's operating performance in the remainder of
2000 and beyond, including changes in the markets for the Fund's equipment and
changes in the regulatory environment in which the equipment operates.
The Fund's operation of a diversified equipment portfolio in a broad base of
markets is intended to reduce its exposure to volatility in individual equipment
sectors.
Other factors affecting the Fund's contribution in the remainder of 2000 and
beyond include:
1. Improved market conditions for the Fund's dry bulk marine vessels has led to
higher re-lease rates in 2000.
2. In 1999, one of the Fund's anchor handling supply marine vessels was
re-leased at a significantly lower rate, due to soft market conditions. The
other anchor handling supply marine vessel is currently off lease. If the
economic conditions remain the same, the Manager would expect to re-lease this
marine vessel at a rate lower than the rate that was in the previous lease.
3. Rates and utilization dropped for oil tanker vessels in 1999 due to the
economic situation in Asia. The demand in 2000 has shown some signs of recovery
and may lead to higher utilization and lease rates. With the improvement of
market conditions, the Fund's oil tanker could expect higher re-lease rates when
the current lease expires.
4. The demand for covered hopper cars has softened in the market since 1999, and
is expected to continue through 2000. The demand for the other types of railcars
has continued to be high, however a softening in the market is expected, and
will lead to lower utilization and lower contribution to the Fund.
The ability of the Fund to realize acceptable lease rates on its equipment in
the different equipment markets is contingent on many factors, such as specific
market conditions and economic activity, technological obsolescence, and
government or other regulations. The unpredictability of some of these factors,
or of their occurrence, makes it difficult for the Manager to clearly define
trends or influences that may impact the performance of the Fund's equipment.
The Manager continually monitors both the equipment markets and the performance
of the Fund's equipment in these markets. The Manager may decide to reduce the
Fund's exposure to equipment markets if it determines that it cannot operate
equipment to achieve acceptable rates of return. Alternatively, the Manager may
make a determination to enter equipment markets in which it perceives
opportunities to profit from supply/demand instabilities or other market
imperfections.
The Fund intends to use excess cash flow, if any, after payment of operating
expenses, the maintenance of working capital reserves, and cash distributions to
the members, to acquire additional equipment during the first six years of the
Fund's operations which ends on December 31, 2002. The Manager believes these
acquisitions may cause the Fund to generate additional earning and cash flow for
the Fund.
The Fund will terminate on December 31, 2010, unless terminated earlier upon
sale of all equipment and certain other events. Beginning in the Fund's seventh
year of operations, which commences on January 1, 2003, the Manager will stop
purchasing additional equipment. Surplus cash, if any, less reasonable reserves,
will be distributed to the members. Between the eighth and tenth years of
operations, the Manager intends to begin an orderly liquidation of the Fund's
assets.
(IV) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of the Fund's plans, objectives, expectations,
and intentions. The cautionary statements made in this Form 10-Q should be read
as being applicable to all related forward-looking statements wherever they
appear in this Form 10-Q. The Fund's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Fund's primary market risk exposure is that of currency devaluation risk.
During the six months ended June 30, 2000, 80% of the Fund's total lease
revenues from wholly-and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in United States (U.S.)
currency. If these lessee's currency devalues against the U.S. dollar, the
lessees could encounter difficulty in making the U.S.
dollar denominated lease payment.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<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: August 8, 2000 By: /s/ Richard K Brock
----------------------
Richard K Brock
Chief Financial Officer
