UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 2001.
[ ] 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.)
120 Montgomery Street
Suite 1350, San Francisco, CA 94104
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 445-3201
-----------------------
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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 10.
Total number of pages in this report: 18
PART I
ITEM 1. BUSINESS
(A) Background
In 1979, PLM Investment Management, Inc. (IMI or Manager), a wholly owned
subsidiary of PLM Financial Services, Inc. (FSI), sponsored the public offering
of the management program RMI Covered Hopper Railcar Management Program 79-1
(the Registrant or the Program). The Program was registered with the Securities
and Exchange Commission under the Securities Act of 1933. The Program offered to
investors, meeting certain suitability standards, the opportunity to purchase
from PLM Transportation Equipment Corporation (TEC), a wholly-owned subsidiary
of FSI, one or more 100-ton triple covered hopper, 4,700 or 4,750 cubic foot,
railroad cars with center pockets, gravity discharge, and trough hatches (car or
cars).
The purchase price for one unit, consisting of one car plus a Management
Agreement (Unit), was the sum of (i) the manufacturer's invoice price of a car,
(ii) a commencement fee paid to an affiliate of the Manager, equal to 10% prior
to August 15, 1980, and 13% thereafter, of the manufacturer's invoice price and
(iii) initial storage and transit costs.
The Program is organized to provide investors with an efficient and convenient
method of acquiring, leasing, maintaining, and managing individually owned
railroad cars. With certain exceptions, operating revenues and expenses from all
cars managed under the Program are pooled. Net income or net loss is allocated
to each participant and excess cash flow is distributed to each participant on a
pro-rata basis after maintaining reasonable reserves.
IMI manages 6 private railcar management programs and two public railcar
programs. Each of the programs involves a distinct group of railcars and is
managed separately, with all funds from each management program administered
separately. The railcars owned by investors in each pool are subject to separate
leases.
(B) Sale and Availability of Cars
Program investors originally purchased a total of 777 cars for a price per car
ranging from $48,000 to $50,000, which included commencement fees and other
fees. The Program closed April 30, 1981. Subsequent to the close of the Program,
327 cars have been sold or destroyed and 37 cars have been added to the fleet.
As of December 31, 2001, 487 cars were in the Program, all of which were on
lease except for 195 cars that came off lease on December 31, 2001. During 2001,
two cars were added to the Program and three cars were destroyed.
(C) Management
The investors were offered the option of entering into a 10-year management
agreement (Management Agreement) with IMI, pursuant to which IMI has acted as
the investors' agent for the purpose of managing and leasing the investors' car
or cars. Pursuant to the original Management Agreement and extensions thereof,
IMI receives a management fee on a per car basis at a fixed rate each month,
plus an incentive management fee equal to 15% of "Net Earnings" (as defined in
the Management Agreement) over $750 per car per quarter. The weighted-average
monthly rental rate per car in 2001 was $165.
All 292 cars under lease in the Program are operating under fixed payment, full
service lease agreements. Additional mileage revenue above the fixed lease
payments may also be earned for certain cars.
IMI has agreed to perform all services necessary to manage the railcars on
behalf of the Program and to perform or contract for the performance of all
obligations of the lessor under the Program's leases. When cars need repair,
rent will generally abate during the period they are out of service. Lessees are
usually obligated to pay all operating expenses of the cars. Lessees are
normally responsible for the loss, damage, or destruction of the cars, except in
the case of negligence, recklessness, or willful misconduct on the part of the
Manager. Regulatory changes may occasionally require cars to be altered or
retrofitted. Typically, such alterations or retrofits are the responsibility of
the investor. The leases usually provide for an increase in the monthly rental
rate calculated as a percentage of the cost of any such alterations. In such
cases, rent will abate for the period of time while the alterations are being
made.
Monthly management fees of $38 per car and quarterly incentive management fees
are charged directly to the individual investors pursuant to the three five-year
extensions made to the original Management Agreements which had an original term
of ten years. Prior to the five-year extensions, management fees were being
charged at the rate of $55 per car.
(D) Competition
Full service lease rental rates are highly competitive and are not subject to
regulation by the Interstate Commerce Commission. Lease rental rates are
principally affected by the demand for and the supply of cars between different
owner-lessors. Secondarily, lease rental rates are influenced by a number of
factors, including the cost of new and used cars, interest rates, maintenance
and operating costs, property taxes, other direct operating costs, and the level
of railroad mileage allowances.
The major leasing competitors of the Program who are also involved in leasing
privately-owned covered hopper cars are: ACF Industries, Inc. (Shippers Car Line
Division), First Union Rail Services, Inc., General Electric Railcar Services
Corporation, Chicago Freight Car, Inc., and Canadian Wheat Board.
(E) Demand
Demand for covered hopper railcars, which are specifically designed to service
the grain industry, continued to experience weakness during 2001; carloadings
were down 2% compared to 2000 volumes. The United States agribusiness industry
serves a domestic market that is relatively mature, the future growth of which
is expected to be consistent but modest. Most domestic grain rail traffic moves
to food processors, poultry breeders, and feedlots. The more volatile export
business, which accounts for approximately 30% of total grain shipments, serves
emerging and developing nations. In these countries, demand for protein-rich
foods is growing more rapidly than in the United States, due to higher
population growth, a rapid pace of industrialization, and rising disposable
income. Other factors contributing to the softness in demand for covered hopper
cars are the large number of new cars built during the last few years and the
improved utilization of covered hoppers by the railroads.
ITEM 2. PROPERTIES
At December 31, 2001, the Program had no properties except for the 487 cars
being managed under the Program, as described in Item 1(c). The Manager of the
Program maintains its principal office at 120 Montgomery Street, Suite 1350, San
Francisco, California 94104. All office facilities are provided by FSI without
reimbursement by the Program.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Program's owners during the last
quarter of its fiscal year ended December 31, 2001.
PART II
ITEM 5. MARKET FOR THE PROGRAM'S EQUITY AND RELATED EQUITY MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
Table 1, below, lists selected financial data for the five years ended December
31, 2001, prepared on a cash basis, for the Program, as a whole and on a per car
basis, computed on a weighted-average available car per day basis (the
weighted-average available cars per day was 488 for 2001):
TABLE 1
For the years ended December 31,
2001 2000 1999 1998 1997
----------------------------------------------------------------------------------
TOTAL PROGRAM
Total revenues collected $ 970,582 $ 1,631,724 $ 2,314,123 $ 2,621,980 $ 2,444,571
Expenses paid (532,133) $ (698,889) (697,664) (656,156) (598,904)
---------------------------------------------------------------------------------
Excess of revenues collected
over expenses paid $ 438,449 $ 932,835 $ 1,616,459 $ 1,965,824 $ 1,845,667
=================================================================================
Distributions to investors $ 437,489 $ 1,319,610 $ 1,941,463 $ 1,909,390 $ 1,864,121
=================================================================================
PER CAR AVAILABLE (COMPUTED
ON A WEIGHTED-AVERAGE CAR
PER DAY BASIS)
Total revenues collected $ 1,990 $ 3,334 $ 4,768 $ 5,453 $ 5,158
Expenses paid (1,091) (1,428) (1,438) (1,365) (1,264)
---------------------------------------------------------------------------------
Excess of revenues collected
over expenses paid $ 899 $ 1,906 $ 3,330 $ 4,088 $ 3,894
=================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Program's operating funds are committed to payment of operating expenses and
making cash distributions to the car owners when available. The Program intends
to finance these activities with funds generated from operations. The Manager of
the Program does not know of any demands or commitments that might adversely
affect the liquidity of the Program.
Funds from operations are primarily generated by lease payments and interest
income earned on invested cash.
RESULTS OF OPERATIONS
The statements of revenues collected and expenses paid and other changes in cash
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
IMI. Under the cash basis, revenues are recognized when received, rather than
when earned, and expenses are recognized when paid, rather than when the
obligation is incurred.
COMPARISON OF THE PROGRAM'S REVENUES COLLECTED, EXPENSES PAID AND OTHER CHANGES
IN CASH FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Revenues collected:
1. Lease receipts decreased to $946,568 for the year ended December 31, 2001,
from $1,586,688 for the comparable period in 2000. A $504,101 decrease in
lease receipts was due to lower average lease rates during the comparable
periods, a $131,742 decrease in lease receipts was due to the off lease
cars during the comparable periods, and a $4,277 decrease was due to a net
decrease of one car in the Program in 2001.
2. Interest and other income decreased to $24,014 for the year ended December
31, 2001, from $45,036 for the comparable period in 2000. The decrease was
due to lower interest income earned as a result of lower average cash
balances and lower interest rates during 2001 compared to 2000.
Expenses paid:
1. Management fees decreased to $222,908 for the year ended December 31, 2001,
from $230,284 for the comparable period in 2000. The decrease was primarily
due to lower incentive fees paid to IMI resulting from reduced cash flows
to the Program for 2001 compared to 2000. In 2001, no incentive fees were
paid to IMI, compared to $7,110 in 2000.
2. Repairs and maintenance expense decreased to $250,189 for the year ended
December 31, 2001, from $409,963 for the comparable period in 2000. A
decrease of $160,380 in repairs and maintenance resulted from major repairs
in 2000, which were not needed in 2001. A decrease in payments of $447 was
due to the timing of payments of expenses during comparable period. These
decreases were partially offset by an increase of $1,053 which was due to
three cars being destroyed during 2001.
3. Property taxes decreased to $8,000 for the year ended December 31, 2001,
from $11,488 for the comparable period in 2000. The decrease was primarily
due to the timing of payments for these expenses during the comparable
periods, as the tax rates and number of cars owned by the Program remained
relatively constant.
4. Accounting and legal fees increased to $10,128 for the year ended December
31, 2001, from $8,461 for the comparable period in 2000. The increase was
primarily due to higher professional service costs in 2001 compared to
2000.
5. Storage, repositioning and other expenses increased to $33,061 for the year
ended 2001, from $31,290 in 2000. The increase was due to a $7,726 of
higher repositioning expenses resulting from more cars being transferred to
new lessees during 2001 compared to 2000 and an increase of $110 of other
expenses. These increases were offset by a decrease of $2,690 related to
bank service charges and a $3,375 decrease in data process expenses.
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 from lessees. Funds increased to
$16,551 due to these activities during the year ended December 31, 2001,
compared to payments of $27,928 in 2000. The decrease between comparable
periods is primarily due to the timing of net receipts and repayments of
these funds by the Program.
2. During 2001, three cars were destroyed for which the Program received and
paid to the investors insurance proceeds of $73,718.
As a result of the foregoing, the Program distributed $437,489 to investors in
the year ended December 31, 2001 compared to $1,319,610 distributed in 2000.
COMPARISON OF THE PROGRAM'S REVENUES COLLECTED, EXPENSES PAID AND OTHER CHANGES
IN CASH FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Revenues collected:
1. Lease receipts decreased to $1,586,688 for the year ended December 31,
2000, from $2,245,736 for the comparable period in 1999. A $607,881
decrease in lease receipts due to lower average leases rates during the
comparable periods, a $45,676 decrease in lease receipts was due to the
timing of receipt of revenues during the comparable periods, and a $5,491
decrease was due to two cars being destroyed during 2000.
2. Interest and other income decreased to $45,036 for the year ended December
31, 2000, from $68,387 for the comparable period in 1999. The decrease was
primarily due to lower interest income earned as a result of lower average
cash balances during 2000 compared to 1999.
Expenses paid:
1. Management fees decreased to $230,284 for the year ended December 31, 2000,
from $293,408 for the comparable period in 1999. The decrease was primarily
due to lower incentive fees paid to IMI resulting from reduced cash flows
to the Program for 2000 compared to 1999. In 2000, $7,110 in incentive fees
were paid to IMI, compared to $73,004 in 1999.
2. Repairs and maintenance expense increased to $409,963 for the year ended
December 31, 2000, from $344,705 for the comparable period in 1999. The
increase in repairs and maintenance expense was primarily due to the timing
of payments of expenses during comparable period.
3. Insurance expense decreased to $7,403 for the year ended December 31, 2000,
from $15,549 in 1999. The decrease is primarily due to the timing of
payments for the annual premium for liability and physical damage
insurance.
4. Property taxes decreased to $11,488 for the year ended December 31, 2000,
from $13,858 for the comparable period in 1999. The decrease was primarily
due to the timing of payments for these expenses during the comparable
periods, as the tax rates and number of cars owned by the Program remained
relatively constant.
5. Accounting and legal fees increased to $8,461 for the year ended December
31, 2000, from $6,418 for the comparable period in 1999. The increase was
primarily due to higher professional service costs in 2000 compared to
1999.
6. Storage, repositioning and other expenses increased to $31,290 for the year
ended 2000, from $23,726 in 1999. The increases are due to: $4,510
increases in data processing expenses; $2,494 of higher repositioning
expenses resulting from more cars being transferred to new lessees during
2000 compared to 1999; and a $1,173 of higher bank service charge. These
increases were partially offset by a decrease of $613 of other expenses.
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 from lessees. Funds decreased by
$27,928 due to these activities during the year ended December 31, 2000,
compared to a decrease of $37,375 in 1999. The decrease between comparable
periods is primarily due to the timing of net receipts and repayments of
these funds by the Program.
2. During 2000, two cars were destroyed for which the Program received and
paid to the investors insurance proceeds of $54,748. In addition, during
2000, proceeds of $1,994 were received and paid to an investor for a car
that was destroyed in 1999. During 1999, three cars were destroyed for
which the Program received and paid to investors insurance proceeds of
$97,502.
3. During 2000, no railcars were transferred between investors in the Program.
During 1999, the Program received proceeds of $131,000 for six railcars
that were transferred between investors in the Program. The Program paid
$127,220 net of commission to investors that sold the cars.
4. No commissions were paid during 2000. Commissions of $3,780 were paid to
the Manager during 1999 for cars that were transferred between investors
during 1999.
As a result of the foregoing, the Program distributed $1,319,610 to investors in
the year ended December 31, 2000 compared to $1,941,463 distributed in 1999.
Certain of the Program's railcars operate in Canada. Although these operations
expose the Program to certain currency, political, credit, and economic risks,
the Manager believes that these risks are minimal or has implemented strategies
to control the risks. Currency risks are at a minimum because all invoicing,
with the exception of a small number of railcars, is conducted in United States
(US) dollars. Political risks are minimized by avoiding operations in countries
that do not have a stable judicial system and established commercial business
laws. Credit support strategies for lessees range from letters of credit
supported by US banks to cash deposits. Although these credit support mechanisms
allow the Program to maintain its lease yield, there are risks associated with
slow-to-respond judicial systems when legal remedies are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets and the Manager strives to minimize this risk with market analysis prior
to committing equipment to a particular geographic area. Canadian lease receipts
accounted for 3% of total lease receipts of the Program in 2001.
Inflation
Inflation did not significantly impact the Program's operations in 2001, 2000,
or 1999.
Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K 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-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Program's actual results could differ materially from
those discussed here.
Outlook for the Future
The cars in the Program are lower capacity than those built in the last six to
seven years. Better equipment utilization by the railroads, combined with little
or no growth in the number of grain car loading in recent years, has led to an
imbalance in the supply/demand equation (i.e., supply of cars exceeding relative
demand). Consequently, many of the lower capacity cars, as well as the newer
higher capacity cars, are now in storage. The Program has avoided placing
additional cars into storage by reducing the rental rates on the cars
significantly. Lease rates are expected to continue to decrease in 2002.
Factors that may effect the Program's operating performance in 2002 and beyond
include the following:
(1) Repricing Risk
Certain of the Program's railcars will be remarketed as existing leases expire,
exposing the Program to repricing risk/opportunity. The Manager intends to
re-lease railcars at prevailing market rates; however, the Manager cannot
predict these future rates with any certainty at this time, and cannot
accurately assess the effect of such activity on the future performance of the
Program. Demand for covered hopper cars, which are specifically designed to
service the agricultural industry, experienced weakness during 2001 and this is
expected to continue during 2002.
(2) Impact of Government Regulations on Future Operations
The federal government and the railroad industry itself regulate the use and
maintenance of railcars. The Federal Railroad Association issues regulations
regarding the repair and maintenance of the railcars. The American Association
of Railroads, a self regulating industry organization, also sets standards and
facilitates the collection and payments within the industry regarding use of and
repairs to the railcars. Such regulations and standards may impose restrictions
and financial burdens on the Program's ability to operate the equipment
profitably. All railcars are subject to substantial safety and operating
regulations. From time to time, these regulations may require extensive and
expensive modifications of the railcars. In some instances, a regulation may
necessitate the removal of certain railcars from service.
(3) Distributions
The Program intends to rely on operating cash flow to meet its operating
obligations and make cash distributions. The Manager will continue to evaluate
the level of distributions the Program can sustain over extended periods of
time, and may adjust the level of distributions accordingly. In the long term,
the difficulty in predicting market conditions precludes the Manager from
accurately determining the impact of changing market conditions on liquidity or
distribution level.
The Manager believes the Program will have sufficient liquidity in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Program's primary market risk exposure is that of currency devaluation risk.
During 2001, 3% of the Program's total lease revenues came from non-United
States domiciled lessees. Most of the leases require payment in US currency. If
these lessees currency devalues against the US dollar, the lessees could
potentially encounter difficulty in making the U.S. dollar denominated lease
payments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Statements of Revenues Collected and Expenses Paid and Other Changes in Cash for
the three years ended December 31, 2001, are included on the Index to Financial
Statements as part of Item 14(a) of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) Disagreements with Accountants on Accounting and Financial Disclosures
None
(b) Changes in Accountants
In September 2001, the General Partner announced that the Partnership
had engaged Deloitte & Touche LLP as the Partnership's auditors and
had dismissed KPMG LLP. KPMG LLP issued unqualified opinions on the
1999 and 2000 financial statements. During 1999, 2000 and the
subsequent interim period preceding such dismissal, there were no
disagreements with KPMG LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure.
(This space intentionally left blank.)
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC.
As of the date of this annual report, the directors and executive officers of
PLM Financial Services, Inc. (and key executive officers of its subsidiaries)
are as follows:
Name Age Position
- ---------------------------------------- ------- ------------------------------------------------------------------
Gary D. Engle 52 Director, PLM Financial Services, Inc., PLM Investment
Management Inc., and PLM Transportation Equipment Corp.
James A. Coyne 41 Director and Secretary, PLM Financial Services Inc., PLM
Investment Management, Inc., and PLM Transportation Equipment
Corp.
Stephen M. Bess 55 President and Director, PLM Financial Services, Inc., PLM
Investment Management Inc., and PLM Transportation Equipment
Corp.
Gary D. Engle was appointed a Director of PLM Financial Services, Inc. in
January 2002. He was appointed a director of PLM International, Inc. in February
2001. He is a director and President of MILPI. Since November 1997, Mr. Engle
has been Chairman and Chief Executive Officer of Semele Group Inc. ("Semele"), a
publicly traded company. Mr. Engle is President and Chief Executive Officer of
Equis Financial Group ("EFG"), which he joined in 1990 as Executive Vice
President. Mr. Engle purchased a controlling interest in EFG in December 1994.
He is also President of AFG Realty, Inc.
James A. Coyne was appointed a Director and Secretary of PLM Financial Services
Inc. in April 2001. He was appointed a director of PLM International, Inc in
February 2001. He is a director, Vice President and Secretary of MILPI. Mr.
Coyne has been a director, President and Chief Operating Officer of Semele since
1997. Mr. Coyne is Executive Vice President of Equis Corporation, the general
partner of EFG. Mr. Coyne joined EFG in 1989, remained until 1993, and rejoined
in November 1994.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997. Mr. Bess was appointed President of PLM Financial Services, Inc. in
October 2000. He was appointed President and Chief Executive Officer of PLM
International, Inc. in October 2000. Mr. Bess was appointed President of PLM
Investment Management, Inc. in August 1989, having served as Senior Vice
President of PLM Investment Management, Inc. beginning in February 1984 and as
Corporate Controller of PLM Financial Services, Inc. beginning in October 1983.
He served as Corporate Controller of PLM, Inc. beginning in December 1982. Mr.
Bess was Vice President-Controller of Trans Ocean Leasing Corporation, a
container leasing company, from November 1978 to November 1982, and Group
Finance Manager with the Field Operations Group of Memorex Corporation, a
manufacturer of computer peripheral equipment, from October 1975 to November
1978.
The directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified. No family relationships exist
between any director and executive officer of PLM Financial Services, Inc., PLM
Transportation Equipment Corp., or PLM Investment Management, Inc.
ITEM 11. EXECUTIVE COMPENSATION
The Program has no directors, officers, or employees. The Program has no
pension, profit-sharing, retirement, or similar benefit plan in effect as of
December 31, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Program is not a legal entity. The Program itself does not have any
securities. The Program has neither directors nor executive officers. The cars
sold to investors who have entered into Management Agreements are managed by
IMI. Neither the Manager, its affiliates, nor any officer or director of the
Manager or its affiliates own any cars.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 2001, $222,908 in management fees were paid to the Manager by
participants in the Program.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The statements listed in the accompanying Index to Financial
Statements are filed as part of this Annual Report.
2. FINANCIAL STATEMENT SCHEDULES
None.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
10.1 Form of Management Agreement, incorporated by reference to the
Program's Annual Report on Form 10-K dated December 31, 1989
filed with the Securities and Exchange Commission on April 2,
1990.
10.2 Form of Amendment to Management Agreement incorporated by
reference to the Program's Annual Report on Form 10-K dated
December 31, 1999 filed with the Securities and Exchange
Commission on March 22, 2000.
10.3 Form of Second Amendment to Management Agreement incorporated by
reference to the Program's Annual Report on Form 10-K dated
December 31, 1999 filed with the Securities and Exchange
Commission on March 22, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
The Registrant is not a legal entity. PLM Investment Management, Inc., the
Manager, has signed on behalf of the Registrant by its duly authorized officers.
RMI COVERED HOPPER RAILCAR
MANAGEMENT PROGRAM 79-1
Date: March 27, 2002 Registrant
By: PLM Investment Management, Inc.
Manager
By: /s/ Stephen M. Bess
-----------------------------------
Stephen M. Bess
President and
Current Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of IMI on the dates indicated.
Name Capacity Date
/s/ Gary D. Engle
- ----------------------------
Gary D. Engle Director, FSI March 27, 2002
/s/ James A. Coyne
- -----------------------------
James A. Coyne Director, FSI March 27, 2002
/s/ Stephen M. Bess
- -----------------------------
Stephen M. Bess Director, FSI March 27, 2002
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
PAGE
Independent Auditors' Reports 13-14
Statements of revenues collected and expenses paid and
other changes in cash for the years ended December 31,
2001, 2000, and 1999 15
Notes to the statements of revenues collected and expenses
paid and other changes in cash 16-17
INDEPENDENT AUDITORS' REPORT
The Equipment Owners in
RMI Covered Hopper Railcar Management Program 79-1:
We have audited the statement of revenues collected and expenses paid and other
changes in cash of RMI Covered Hopper Railcar Management Program 79-1 (the
"Program") for the year ended December 31, 2001. This financial statement is the
responsibility of the Program's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We have conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement was prepared to present the revenues
collected and expenses paid and other changes in cash of RMI Covered Hopper
Railcar Management Program 79-1 pursuant to the management agreement described
in Note 1 and are not intended to be a complete presentation of the Program's
financial position, results of operations, and cash flows in conformity with
accounting principles generally accepted in the United States of America.
In our opinion, such financial statement presents fairly, in all material
respects, the revenues collected and expenses paid and other changes in cash of
the Program for the year ended December 31, 2001, on the cash basis of
accounting described in Note 1.
/s/ Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
March 8, 2002
INDEPENDENT AUDITORS' REPORT
The Equipment Owners in
RMI Covered Hopper Railcar Management Program 79-1:
We have audited the statements of revenues collected and expenses paid and other
changes in cash of RMI Covered Hopper Railcar Management Program 79-1 ("the
Program") for each of the years in the two-year period ended December 31, 2000.
These financial statements are the responsibility of the Program's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether these financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying financial statements were prepared to present the revenues
collected and expenses paid and other changes in cash of RMI Covered Hopper
Railcar Management Program 79-1 pursuant to the management agreement described
in Note 1 and are not intended to be a complete presentation of the Program's
financial position, results of operations, and cash flows in conformity with
accounting principles generally accepted in the United States of America.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenues collected and expenses paid and other
changes in cash of RMI Covered Hopper Railcar Management Program 79-1 for each
of the years in the two-year period ended December 31, 2000, on the cash basis
of accounting described in Note 1.
/s/ KPMG LLP
SAN FRANCISCO, CALIFORNIA
March 12, 2001
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
STATEMENTS OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
For the Years Ended December 31,
2001 2000 1999
-------------------------------------------------------
Revenues collected:
Lease receipts $ 946,568 $ 1,586,688 $ 2,245,736
Interest and other income 24,014 45,036 68,387
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Total revenues collected 970,582 1,631,724 2,314,123
-------------------------------------------------------
Expenses paid:
Management fees 222,908 230,284 293,408
Repairs and maintenance 250,189 409,963 344,705
Insurance 7,847 7,403 15,549
Property taxes 8,000 11,488 13,858
Accounting and legal fees 10,128 8,461 6,418
Storage, repositioning, and other 33,061 31,290 23,726
-------------------------------------------------------
Total expenses paid 532,133 698,889 697,664
-------------------------------------------------------
Excess of revenues collected over
expenses paid 438,449 932,835 1,616,459
-----------------------------------------------------
Other increases (decreases) in cash:
Prepaid mileage, reimbursable repairs,
and other expenses 16,551 (27,928) (37,375)
Receipt of proceeds from sold or destroyed cars 73,718 56,742 97,502
Receipt of proceeds for transfer of car ownership -- -- 131,000
Payments to investors for sold or destroyed cars (73,718) (56,742) (97,502)
Payments to investors for transfer of car ownership -- -- (127,220)
Distributions to investors (437,489) (1,319,610) (1,941,463)
Commission paid -- -- (3,780)
-------------------------------------------------------
Net other decreases in cash (420,938) (1,347,538) (1,978,838)
-------------------------------------------------------
Net increase (decrease) in cash 17,511 (414,703) (362,379)
Cash at beginning of year 541,913 956,616 1,318,995
-------------------------------------------------------
Cash at end of year $ 559,424 $ 541,913 $ 956,616
=======================================================
See accompanying notes to the 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
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 the financial position, results of
operations, or cash flows in accordance with accounting principles
generally accepted in the United States of America.
2. OPERATIONS
The Program is managed by IMI, a wholly owned subsidiary of PLM Financial
Services, Inc. (FSI). FSI, in conjunction with its subsidiaries, sells
transportation equipment to investor programs and third parties, manages
pools of transportation equipment under management agreements with the
investor programs, and is also a general partner of several limited
partnerships. The investors are liable for the obligations and liabilities
of the Program.
As of December 31, 2001, monthly management fees of $38 per car are charged
directly to the individual investors with respect to cars being managed
pursuant to five-year extensions made to the original management agreements
that had an original term of ten years. In addition, IMI earns an incentive
management fee equal to 15% of Net Earnings (as defined in the original
Management Agreement) over earnings of $750 per car per quarter.
At December 31, 2001, 2000, and 1999, 487 cars, 488 cars, and 490 cars,
respectively, which were owned by the investors, were being managed by IMI
under the Program. As of December 31, 2001, all cars except for 195 cars
owned by investors were covered by lease arrangements. During 2001, two
cars were added to the Program and three cars were destroyed.
3. REVENUES AND EXPENSES
Operating revenues and expenses of the Program are pooled and allocated to
participants based on available car-days as defined in the Management
Agreement. Revenues are earned by placing the railcars under leases, and
are generally billed monthly. As of December 31, 2001, all cars except for
195 cars were leased on a fixed rate basis.
The weighted-average monthly rental rate per car in 2001 was $165. The
weighted-average monthly rental rate per car in 2000 was $267. The
weighted-average available car per day was 488, 489, 485, for 2001, 2000,
and 1999, respectively.
The lessees accounting for 10% or more of total revenues collected during
2001, 2000, and 1999 were Louis Dreyfus Corp. (22% in 2000 and 13% in
1999), Canadian Pacific Railroad (13% in 1999), San Luis Central Railroad
Co. (40% in 2001, 24% in 2000, and 17% in 1999), General Chemical Co. (13%
in 2000, and 14% in 1999), Burlington Northern Railroad Co. (14% in 2001
and 10% in 2000), and Con Agra Inc. (22% in 2001 and 12% in 2000).
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
NOTES TO THE STATEMENT OF REVENUES COLLECTED AND EXPENSES PAID
AND OTHER CHANGES IN CASH
4. 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 to provide for a balanced
distribution of funds to the investors each quarter. IMI has determined the
working capital reserve at December 31, 2001, 2000, and 1999 to be
$481,905, $419,882, and $603,179, respectively.
5. GEOGRAPHIC INFORMATION
Certain of the Program's railcars operate in Canada.
A limited number of transactions are denominated in foreign currency.
Increases and decreases resulting from foreign currency transactions are
included in the Statements of Revenues Collected and Expenses Paid and
Other Changes in Cash and are not material. Canadian lease receipts
accounted for 3% of total lease receipts of the Program in 2001.
(This space is intentionally left blank)
RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1
INDEX OF EXHIBITS
EXHIBIT PAGE
10.1 Form of Management Agreement *
10.2 Form of Amendment to Management Agreement *
10.3 Form of Second Amendment to Management Agreement *
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* Incorporated by reference. See page 10 of this report.