UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED
MARCH 31, 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>
March 31, December 31,
2000 1999
------------------------------------
ASSETS
<S> <C> <C>
Equipment held for operating lease $ 109,314 $ 103,709
Less accumulated depreciation (48,079) (45,183)
------------------------------------
Net equipment 61,235 58,526
Cash and cash equivalents 8,108 11,597
Restricted cash 706 453
Accounts receivable, less allowance for doubtful accounts
of $87 in 2000 and $65 in 1999 1,921 2,007
Investment in unconsolidated special-purpose entities 7,063 7,717
Deferred charges, less accumulated amortization
of $57 in 2000 and $52 in 1999 120 125
Prepaid expenses and other assets 81 108
------------------------------------
Total assets $ 79,234 $ 80,533
====================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 1,349 $ 458
Due to affiliates 718 656
Lessee deposits and reserves for repairs 4,179 3,821
Note payable 25,000 25,000
------------------------------------
Total liabilities 31,246 29,935
------------------------------------
Members' equity:
Class A members (4,971,311 units as of March 31, 2000
and 4,975,321 units as of December 31, 1999) 47,988 50,598
Class B member -- --
------------------------------------
Total members' equity 47,988 50,598
------------------------------------
Total liabilities and members' equity $ 79,234 $ 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 INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
--------------------------
REVENUES
<S> <C> <C>
Lease revenue $ 5,789 $ 6,654
Interest and other income 147 84
Net loss on disposition of equipment -- (16)
--------------------------
Total revenues 5,936 6,722
--------------------------
EXPENSES
Depreciation and amortization 2,901 3,533
Repairs and maintenance 627 673
Equipment operating expenses 759 939
Interest expense 463 453
Insurance expense 83 98
Management fees to affiliate 312 360
General and administrative expenses to affiliates 258 257
Other general and administrative expenses 218 156
--------------------------
Total expenses 5,621 6,469
--------------------------
Minority interest -- (196)
Equity in net income (loss) of unconsolidated special-purpose entities (92) 2,745
--------------------------
Net income before cumulative effect of accounting change 223 2,802
Cumulative effect of accounting change -- (132)
--------------------------
Net income $ 223 $ 2,670
==========================
MEMBERS' SHARE OF NET INCOME (LOSS)
Class A members $ (216) $ 2,361
Class B member 439 309
--------------------------
Total $ 223 $ 2,670
==========================
Net income (loss) per weighted-average Class A unit $ (0.04 ) $ 0.47
==========================
Cash distributions $ 2,785 $ 2,940
==========================
Cash distributions per weighted-average Class A units $ 0.47 $ 0.50
==========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD FROM DECEMBER 31, 1998 TO MARCH 31, 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) (216) 439 223
Purchase of Class A units (48) -- (48)
Cash distribution (2,346) (439) (2,785)
---------------------------------------------------------
Members' equity as of March 31, 2000 $ 47,988 $ -- $ 47,988
=========================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
---------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 223 $ 2,670
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,901 3,533
Cumulative effect of accounting change -- 132
Net loss on disposition of equipment -- 16
Equity in net (income) loss of unconsolidated
special-purpose entities 92 (2,745)
Changes in operating assets and liabilities:
Restricted cash (253) --
Accounts receivable, net 86 (1,285)
Prepaid expenses and other assets 27 (50)
Accounts payable and accrued expenses 891 429
Due to affiliates 62 191
Lessee deposits and reserves for repairs 358 (185)
Minority interest -- (219)
---------------------------------------
Net cash provided by operating activities 4,387 2,487
---------------------------------------
Investing activities
Payments for purchase of equipment and capitalized
improvements (5,605) (5)
Liquidation distributions from unconsolidated
special-purpose entities -- 7,092
Proceeds from disposition of equipment -- 60
Distributions from unconsolidated special-purpose
entities 562 409
---------------------------------------
Net cash (used in) provided by investing activities (5,043) 7,556
---------------------------------------
Financing activities
Cash distributions to Class A members (2,346) (2,499)
Cash distributions to Class B Member (439) (441)
Purchase of Class A units (48) (201)
---------------------------------------
Net cash used in financing activities (2,833) (3,141)
---------------------------------------
Net (decrease) increase in cash and cash equivalents (3,489) 6,902
Cash and cash equivalents at beginning of period 11,597 3,720
---------------------------------------
Cash and cash equivalents at end of period $ 8,108 $ 10,622
=======================================
Supplemental information
Interest paid $ -- $ --
=======================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 2000 and December 31,
1999, the statements of income for the three months ended March 31, 2000
and 1999, the statements of changes in members' equity for the period from
December 31, 1998 to March 31, 2000, and the statements of cash flows for
the three months ended March 31, 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
Beginning in the Fund's seventh year of operations, which commences on
January 1, 2003, the Manager will stop purchasing into additional
equipment. Surplus cash, if any, less reasonable reserves, will be
distributed to the partners. Between the eighth and tenth years of
operations, the Manager intends to orderly liquidate the Fund's assets. The
Fund will terminate on December 31, 2010, unless terminated earlier upon
sale of all equipment or by certain other events.
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 March 31, 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
three months ended March 31, 2000 and 1999, cash distributions totaled $2.8
million and $2.9 million, respectively. Cash distributions to the Class A
unitholders of $2.3 million and $0.1 million for the three months ended
March 31, 2000 and 1999, respectively, were deemed to be a return of
capital.
Cash distributions related to the results from the first quarter of 2000,
of $1.9 million, will be paid during the second quarter of 2000.
5. TRANSACTIONS WITH MANAGER AND AFFILIATES
The balance due to affiliates as of March 31, 2000 and December 31, 1999,
included $0.2 million due to FSI and its affiliates for management fees and
$0.5 million due to affiliated unconsolidated special-purpose entities
(USPEs).
The Fund's proportional share of USPE-affiliated management fees of $24,000
and $31,000 were payable as of March 31, 2000 and December 31, 1999,
respectively.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
5. TRANSACTIONS WITH MANAGER AND AFFILIATES (CONTINUED)
The Fund's proportional share of the expenses incurred by the USPEs during
2000 and 1999 is listed in the following table (in thousands of dollars):
For the Three Months
Ended March 31,
2000 1999
--------------------------
Management fees $ 35 $ 34
Data processing and administrative
expenses 12 13
6. EQUIPMENT
The components of owned equipment were as follows (in thousands of
dollars):
March 31, December 31,
2000 1999
---------------------------------------
Marine vessels $ 37,256 $ 37,256
Aircraft 20,605 20,605
Railcars 19,711 19,710
Trailers 16,433 16,196
Marine containers 15,309 9,942
---------------------------------------
109,314 103,709
Less accumulated depreciation (48,079) (45,183)
---------------------------------------
Net equipment $ 61,235 $ 58,526
=======================================
As of March 31, 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 13 railcars with a carrying
value of $4.0 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 three months ended March 31, 2000, the Fund purchased 2,445
marine containers and ten trailers for a total cost of $5.6 million. During
the three months ended March 31, 1999, the Fund did not purchase any owned
equipment.
During the three months ended March 31, 2000, the Fund did not sell or
dispose of any owned equipment. During the three months ended March 31,
1999, the Fund sold railcars with a net book value of $0.1 million, for
proceeds of $0.1 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
7. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES
The net investments in USPEs included the following jointly-owned equipment
(and related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------------------------------------
<S> <C> <C>
50% interest in a trust owning an MD-82 stage III commercial
aircraft $ 4,469 $ 4,784
50% interest in a trust owning an MD-82 stage III commercial
aircraft 1,558 1,773
50% interest in a trust owning a cargo marine vessel 928 1,024
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 60 76
25% interest in a trust that owned four 737-200A stage II
commercial aircraft 48 60
=============================================
Net investments $ 7,063 $ 7,717
=============================================
</TABLE>
As of March 31, 2000 and December 31, 1999, all jointly-owned equipment in
the Fund's USPE portfolio was on lease.
For the three months ended March 31, 1999, certain jointly-owned equipment
of which the Fund had a controlling interest greater than 50%, was
accounted for under the consolidation method of accounting.
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 rig leasing. Each equipment leasing segment engages
in short-term to mid-term operating leases to a variety of customers. The
following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Marine Marine
Vessel Aircraft Railcar Trailer Container All
For the quarter ended March 31, 2000 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ------ -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 2,212 $ 1,014 $ 966 $ 1,030 $ 567 $ -- $ 5,789
Interest income and other 1 2 -- -- -- 144 147
-------------------------------------------------------------------------
Total revenues 2,213 1,016 966 1,030 567 144 5,936
COSTS AND EXPENSES
Operations support 1,118 9 115 215 2 10 1,469
Depreciation and amortization 1,155 579 376 369 417 5 2,901
Interest expense -- -- -- -- -- 463 463
Management fees to affiliate 110 51 63 60 28 -- 312
General and administrative expenses 13 2 26 231 -- 204 476
-------------------------------------------------------------------------
Total costs and expenses 2,396 641 580 875 447 682 5,621
-------------------------------------------------------------------------
Equity in net loss of USPEs (64) (23) -- -- -- (5) (92)
-------------------------------------------------------------------------
Net income (loss) $ (247) $ 352 $ 386 $ 155 $ 120 $ (543) $ 223
=========================================================================
Total assets as of March 31, 2000 $ 26,079 $ 9,771 $ 10,920 $ 9,342 $ 13,611 $ 9,511 $ 79,234
=========================================================================
<FN>
<F1>
-------------------------------------
1 Includes certain interest income and costs not identifiable to a
particular segment, such as amortization expense and interest expense
and certain operations support and general and administrative expenses.
</FN>
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
8. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Marine
Vessel Aircraft Railcar Trailer Rig All
For the quarter ended March 31, 1999 Leasing Leasing Leasing Leasing Leasing Other<F1>1 Total
------------------------------------ ------- ------- ------- ------- ------- ------ -----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C>
Lease revenue $ 2,630 $ 1,014 $ 982 $ 847 $ 1,181 $ -- $ 6,654
Interest income and other -- 3 -- -- -- 81 84
Net loss on disposition
of equipment -- -- (16) -- -- -- (16 )
-------------------------------------------------------------------------
Total revenues 2,630 1,017 966 847 1,181 81 6,722
COSTS AND EXPENSES
Operations support 1,329 6 146 193 23 13 1,710
Depreciation and amortization 1,503 643 437 362 583 5 3,533
Interest expense -- -- -- -- -- 453 453
Management fees to affiliate 132 51 65 53 59 -- 360
General and administrative expenses 15 8 6 175 18 191 413
-------------------------------------------------------------------------
Total costs and expenses 2,979 708 654 783 683 662 6,469
-------------------------------------------------------------------------
Minority interest -- -- -- -- (196) -- (196)
Equity in net income (loss) of USPEs (56) 2,801 -- -- -- -- 2,745
-------------------------------------------------------------------------
Net income (loss) before cumulative
effect
of accounting change (405) 3,110 312 64 302 (581) 2,802
-------------------------------------------------------------------------
Cumulative effect of accounting -- -- -- -- -- (132) (132)
change
=========================================================================
Net income (loss) $ (405) $ 3,110 $ 312 $ 64 $ 302 $ (713) $ 2,670
=========================================================================
Total assets as of March 31, 1999 $ 36,821 $ 16,309 $ 12,706 $ 8,695 $ 13,406 $ 11,443 $ 99,380
=========================================================================
<FN>
<F1>
-------------------------------------
1 Includes certain interest income and costs not identifiable to a
particular segment, such as amortization expense and interest expense
and certain operations support and general and administrative expenses.
</FN>
</TABLE>
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 June 30, 2000. As of March 31, 2000, no eligible borrower had
any outstanding borrowings under the short-term Committed Bridge Facility.
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 (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 months ended March 31, 2000 and 1999 were 4,973,911 units
and 4,996,077 units, respectively.
11. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs related to start-up activities to be
expensed as incurred. The statement requires that initial application be
reported as a cumulative effect of a change in accounting principle. The
Fund adopted this statement during the first quarter of 1999, at which time
it took a $0.1 million charge, related to start-up costs of Fund.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
COMPARISON OF THE PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.'S (THE
FUND'S) OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
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, owns 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 months ended March 31, 1999
and were included with the owned equipment operations.
(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 first 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
unaudited 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 March 31,
2000 1999
----------------------------
Marine vessels $ 1,094 $ 1,301
Aircraft 1,005 1,008
Railcars 851 836
Trailers 815 654
Marine containers 565 --
Mobile offshore drilling unit -- 1,158
Marine vessels: Marine vessel lease revenues and direct expenses were $2.2
million and $1.1 million, respectively, for the first quarter of 2000, compared
to $2.6 million and $1.3 million, respectively, during the same quarter of 1999.
Lease revenue decreased $0.4 million in the first 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. Direct expenses decreased $0.2 million primarily
due to lower operating expenses for one of the Fund's marine vessels in the
first quarter of 2000 compared to the same period in 1999.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and
$9,000, respectively, for the first quarter of 2000, compared to $1.0 million
and $6,000, respectively, during the same quarter of 1999. Aircraft contribution
remained the same due to the relative stability of the aircraft fleet.
Railcars: Railcar lease revenues and direct expenses were $1.0 million and $0.1
million, respectively, for the first quarter of 2000 and 1999. Lease revenue
decreased due to the sale or disposition of railcars in 1999. Expenses decreased
due to running repairs required on certain of the railcars during the first
quarter of 1999, which were not needed during the same period in 2000.
Trailers: Trailer lease revenues and direct expenses were $1.0 million and $0.2
million, respectively, for the first quarter of 2000, compared to $0.8 million
and $0.2 million, respectively, during the same quarter of 1999. Lease revenues
increased in the first quarter of 2000, compared to the same period of 1999 due
to the purchase of trailers in 1999 and the first quarter of 2000.
Marine containers: Marine container lease revenues were $0.6 million for the
first quarter of 2000. Marine container contribution increased due to the
purchase of marine containers in 1999 and the first quarter of 2000.
Mobile offshore drilling unit: Mobile offshore drilling unit revenues and
expenses were $1.2 million and $23,000, respectively, for the first quarter of
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 first quarter of 2000, compared to the same period in 1999.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.2 million for the quarter ended March 31, 2000
decreased from $4.8 million for the same period in 1999. The primary reason for
the decrease was a $0.6 million decrease in depreciation expense from 1999
levels due to a $0.5 million decrease due to the use of the double-declining
balance depreciation method which results in greater depreciation the first
years an asset is owned, and a $0.6 million decrease as a result of the change
in accounting treatment of majority held equipment from the consolidation method
of accounting to the equity method of accounting. These decreases were partially
offset by an increase of $0.5 million in depreciation expense from the purchase
of equipment during 1999 and the first quarter of 2000.
(D) Minority interest
Minority interests 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 Loss on Disposition of Owned Equipment
Net loss on disposition of equipment for the first quarter of 1999 totaled
$16,000 which resulted from the sale of railcars with a net book value of $0.1
million, for proceeds of $0.1 million. There were no sales or dispositions of
equipment in the first quarter of 2000.
(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 Three Months
Ended March 31,
2000 1999
----------------------------
Mobile offshore drilling unit $ (5) $ --
Aircraft (23) 2,801
Marine vessel (64) (56)
--------------------------------
Equity in net income (loss) of USPEs $ (92 ) $ 2,745
================================
Aircraft: As of March 31, 2000 and 1999, the Fund owned interests in two trusts
that each owns a commercial aircraft. During the first quarter of 2000, aircraft
lease revenues were $0.5 million offset by expenses of $0.5 million. During the
first quarter of 1999, aircraft lease revenues were $0.5 million and the gain
from the sale of the Fund's interest in two trusts that owned a total of three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables
of $3.3 million was offset by expenses of $1.0 million. The decrease in expenses
of $0.5 million was primarily due to lower depreciation expense resulting from a
$0.3 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 March 31, 2000 and 1999, 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 first quarter of 2000, compared
to $0.2 million and $0.3 million, respectively, during the same period in 1999.
Expenses decreased due primarily to lower depreciation expense as a result of
the double-declining balance method of depreciation which results in greater
depreciation in the first years an asset is owned.
(G) 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 or
$0.03 per weighted-average Class A unit, related to start-up costs of the Fund.
(H) Net Income
As a result of the foregoing, the Fund had net income of $0.2 million for the
first quarter of 2000, compared to net income of $2.7 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 first quarter of 2000 is not
necessarily indicative of future periods. In the first quarter of 2000, the Fund
distributed $2.3 million to Class A members, or $0.47 per weighted-average Class
A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the three months ended March 31, 2000, the Fund generated operating cash of
$4.9 million (net cash provided by operating activities, plus non-liquidating
distributions from USPEs) to meet its operating obligations and maintain the
current level of distributions (total of $2.8 million for three months ended
March 31, 2000) to the partners.
As of March 31, 2000, restricted cash increased $0.3 million compared to
December 31, 1999 due to the security deposit received from a container lessee
in the first quarter of 2000.
Accounts payable increased $0.9 million during the three months ended March 31,
2000 when compared to December 31, 1999 due to the $0.5 million accrual of
interest expense for the Fund's outstanding note which is paid semi annually,
and the accrual of $0.4 million for the purchase of marine containers.
Lessee deposits and reserve for repairs increased $0.4 million during the three
months ended March 31, 2000. Security deposits increased $0.3 million due to
security deposits from a container lessee, reserves for aircraft engine repairs
increased $0.2 million due to additional lessee deposits, and marine vessel
dry-docking reserves increased $0.1 million due to the accrual for future
repairs. Lessee prepaid deposits decreased $0.2 million due to fewer lessee's
prepaying future lease revenue.
The Fund has a $0.6 million commitment to purchase marine containers of which
$0.4 million was accrued for as of March 31, 2000.
The Manager has entered into a short-term joint $24.5 million credit facility.
As of April 30, 2000, no eligible borrower had any outstanding borrowings. The
Manager believes it will be able to renew the Committed Bridge Facility upon its
June 30, 2000 expiration with similar terms as those in the current Committed
Bridge Facility.
<PAGE>
(III) EFFECTS OF YEAR 2000
To date, the Fund has not experienced any material Year 2000 (Y2K) issues with
either its internally developed software or purchased software. In addition, to
date the Fund has not been impacted by any Y2K problems that may have impacted
our customers and suppliers. The amount allocated to the Fund by the Manager
related to Y2K issues has not been material. The Manager continues to monitor
its systems for any potential Y2K issues.
(IV) 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. Depressed economic conditions in Asia during most of 1999 led to low freight
rates for dry bulk marine vessels. As Asia began its economic recovery later in
1999 freight rates began to increase and, in the absence of new additional
orders, this market would be expected to continue to show improvement and
stabilize over the next one to two years.
2. In 1999, one of the Fund's anchor handling supply marine vessels was
re-leased at a significantly lower rate, due to soft market conditions. The
other anchor handling supply marine vessel is currently off lease. The Manager
is in the process of marketing this marine vessel for re-lease.
3. Rates and utilization dropped for oil tanker vessels due to the economic
crisis in Asia. The demand in 2000 has shown some signs of recovery; however,
rate recovery may take two to three years.
4. The demand for covered hopper cars has softened in the market since 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, which
may 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.
(V) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of the Fund's plans, objectives, expectations,
and intentions. The cautionary statements made in this Form 10-Q should be read
as being applicable to all related forward-looking statements wherever they
appear in this Form 10-Q. The Fund's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Fund's primary market risk exposure is that of currency devaluation risk.
During the three months ended March 31, 2000, 69% of the Fund's total lease
revenues from wholly-and partially-owned equipment came from non-United States
domiciled lessees. Most of the leases require payment in United States (U.S.)
currency. If these lessee's currency devalues against the U.S. dollar, the
lessees could encounter difficulty in making the U.S. dollar denominated lease
payment.
(This space intentionally left blank.)
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROFESSIONAL LEASE MANAGEMENT
INCOME FUND I, L.L.C.
By: PLM Financial Services, Inc.
Manager
Date: May 9, 2000
By: /s/ Richard K Brock
--------------------------
Richard K Brock
Chief Financial Officer
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