UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 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 2-64413
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RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2645847
(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 (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
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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 ______
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
For the Three Months
Ended March 31,
1999 1998
------------------------------------
Revenues collected:
Lease revenue received $ 537,324 $ 612,392
Interest and other income 22,730 19,690
------------------------------------
Total revenues collected 560,054 632,082
Expenses paid:
Management fees paid 74,078 71,494
Repairs and maintenance 73,835 67,270
Property taxes 1,364 1,654
Accounting and legal fees 1,988 3,791
Storage, repositioning, and other 2,157 2,671
------------------------------------
Total expenses paid 153,422 146,880
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Excess of revenues collected
over expenses paid 406,632 485,202
------------------------------------
Other increases (decreases) in cash:
Reimbursement of prepaid mileage,repairs,
and other expenses, net 32,089 40,953
Receipt of proceeds from sold or destroyed cars 29,763 62,820
Receipt of proceeds for transfer of car ownership 26,000 79,000
Payments to investors for sold or destroyed cars -- (32,772 )
Payments to investors for transfer of car ownership (24,960 ) (75,840 )
Commission paid for sale or transfer of car ownership -- (3,160 )
Distributions to investors (485,325 ) (476,086 )
------------------------------------
Net other decreases in cash (422,433 ) (405,085 )
------------------------------------
Net (decrease) increase in cash (15,801 ) 80,117
Cash at beginning of period 1,318,995 1,314,628
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Cash at end of period $ 1,303,194 $ 1,394,745
====================================
See accompanying notes to
financial statements.
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
NOTES TO THE STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
MARCH 31, 1999
1. Basis of Presentation
RMI Covered Hopper Railcar Management Program 79-1 (the Program) is not a legal
entity. The statements of revenues collected and expenses paid and other changes
in cash (the Statements) of the Program are presented on the cash basis of
accounting, used for reporting to investors in the Program in accordance with
the Management Agreement with PLM Investment Management, Inc. (IMI). Under the
cash basis of accounting, revenues are recognized when received, rather than
when earned, and expenses are recognized when paid, rather than when the
obligation is incurred. Accordingly, the Statements are not intended to present
financial position, or results of operations or cash flows in accordance with
generally accepted accounting principles.
2. Operations
At March 31, 1999, 485 cars, which are owned by the investors, were being
managed by IMI under the Program. All of the cars were covered by lease
agreements. During the three months ending March 31, 1999, one car was destroyed
and one car was added to the Program.
3. Equalization reserve
Under the terms of the management agreement, IMI may, at its discretion, cause
the Program to retain a certain amount of cash (the working capital reserve) to
cover future disbursements and provide for a balanced distribution of funds to
the investors each quarter. IMI has determined the working capital reserve at
March 31, 1999, to be $751,716 ($836,155 at December 31, 1998).
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH BALANCES AND RESULTS OF
OPERATIONS
Comparison of the Program's Revenues Collected, Expenses Paid, and Other Changes
in Cash for the Three Months Ended March 31, 1999 and 1998
REVENUES COLLECTED:
(1) Lease receipts decreased to $537,324 in the first quarter of 1999 from
$612,392 in the first quarter of 1998. The decrease is primarily due to the
timing of receipt of revenues and to lower average leases rates for certain
lessees during the comparable periods.
(2) Interest and other income increased to $22,730 in the first quarter of 1999,
from $19,690 in the first quarter of 1998, due to $5,848 exchange rate gain in
the first quarter of 1999 as compared to $53 exchange rate loss in the first
quarter of 1998. The increase caused by the exchange rate fluctuation was
partially offset by decreased interest income resulting from lower interest
rates earned on cash investments during the first quarter of 1999 when compared
to the same period of 1998.
EXPENSES PAID:
(1) Management fees paid increased to $74,078 in the first quarter 1999, from
$71,494 in the first quarter of 1998. The increase is due to more cars in the
Program during the first quarter of 1999 as compared to the same period of 1998.
In addition, an incentive management fees of $18,788 was paid to IMI in the
first quarter of 1999 compared to an incentive management fees of $17,850 was
paid to IMI in the same period of 1998. Incentive management fees are paid to
the Manager quarterly in arrears.
(2) Repairs and maintenance expense increased to $73,835 in the first quarter of
1999, from $67,270 in the first quarter of 1998. The increase is due to the
timing of payments of expenses during comparable periods.
(3) Property taxes decreased to $1,364 in the first quarter of 1999, from $1,654
in the first quarter of 1998. The decrease is due to the timing of payments for
these expenses during the comparable periods.
(4) Accounting and legal fees decreased to $1,988 in the first quarter of 1999,
from $3,791 in the first quarter of 1998 due to the timing of payments for these
expenses during the comparable periods.
(5) Storage, repositioning, and other expenses decreased to $2,157 in the first
quarter of 1999, from $2,671 in the first quarter of 1998. The decrease is
primarily due to the timing of payments of expenses during comparable periods.
OTHER CHANGES IN CASH:
(1) Prepaid mileage, reimbursable repairs and other expenses are composed
primarily of receipts of mileage credits from railroads which are due to
lessees, net of reimbursable repairs due from lessees. The funds increased by
$32,089 in the first quarter of 1999, as compared to an increase of $40,953 in
the first quarter of 1998 as a result of these items. The difference between
comparable periods is due primarily to the timing of net receipts and repayments
of these funds by the Program.
(2) During the three months ended March 31, 1999, one car was destroyed for
which the Program received insurance proceeds of $29,763. These insurance
proceeds were paid to the investor of the destroyed car in April of 1999. During
the three months ended March 31, 1998, the Program received insurance proceeds
of $62,820 from two cars that were destroyed. The Program paid one investor
$32,772 for one of the destroyed cars during the first quarter of 1998 and paid
the remaining $30,048 to the other investor of the destroyed car during the
second quarter of 1998.
(3) During the three months ended March 31, 1999, the Program received proceeds
of $26,000 for one car that was transferred between investors in the Program.
The Program paid $24,960 net of commission to the investor that sold the
railcar. During the three months ended March 31, 1998, the Program received
proceeds of $79,000 for three cars that were transferred between investors in
the Program. The Program paid $75,840 net of commission to investors that sold
the railcars.
(4) Commission of $1,040 will be paid to the Manager during the second quarter
of 1999 for the one car that was transferred between investors during the first
quarter of 1999. Commission of $3,160 was paid during the three months ended
March 31, 1998 for the three cars that were transferred between investors in the
Program.
As a result of the foregoing and other factors, the Program distributed $485,325
to investors in the first quarter 1999 compared to $476,086 in the first quarter
of 1998.
The Program's performance in the first quarter 1999 is not necessarily
indicative of future periods.
Liquidity and Capital Resources
The Program's operating funds are committed to payment of operating expenses,
management fees, and making cash distributions to the investors when available.
The Program intends to finance these activities with funds generated from
operations. The Manager knows of no demands or commitments that might adversely
affect the liquidity of the Program.
Effects of Year 2000
It is possible that the PLM Investment Management, Inc.'s (IMI's or Manager's)
currently installed computer systems, software products and other business
systems, or the Program'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 problem commonly known as the "Year 2000" problem).
Since the Program 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 Program'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 software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Manager (a) is currently integrating 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 either already
been made Year 2000-compliant or Year 2000-compliant upgrades of such systems
are planned to be implemented by the Manager before the end of fiscal 1999.
Although the Manager believes that its Year 2000 compliance program can be
completed by the beginning of 1999, there can be no assurance that the
compliance program will be completed by that date. To date, the costs incurred
and allocated to the Program to become Year 2000 compliant have not been
material. In addition, the Manager believes the future costs allocable to the
Program to become Year 2000 compliant will not be material.
It is possible that certain of the Program's equipment lease portfolio may not
be Year 2000 compliant. The Manager is currently contacting equipment
manufacturers of the Program's leased equipment portfolio to assure Year 2000
compliance or to develop remediation strategies. The Manager does not expect
that non-Year 2000 compliance of its leased equipment portfolio will have an
adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Manager or the Program 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 compliance
readiness of such parties and the extent to which the Program is vulnerable to
any third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Any 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 from the Program. The
Manager will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 non-compliance, and will develop a contingency
plan if the Manager determines, that third-party non-compliance will have a
material adverse effect on the Program's business, financial position, or
results of operation.
The Manager is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Manager anticipates
these plans will be completed by September 30, 1999.
Forward-Looking Information
Except for 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 Program'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 Program's actual results could differ materially from
those discussed here.
(this space intentionally left blank)
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.
RMI COVERED HOPPER RAILCAR
MANAGEMENT PROGRAM 79-1
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
---------------------------------
Stephen M. Bess
President
Date: April 30, 1999 By: /s/ Richard K Brock
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Richard K Brock
Vice President and
Corporate Controller