================================================================================
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 QUARTERLY PERIOD ENDED FEBRUARY 28, 2001
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____to____.
Commission File Number: 0-25878
ILM I LEASE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 04-3248637
- ------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1750 Tysons Boulevard, Suite 1200, Tysons Corner, VA 22102
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (888) 257-3550
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class Which Registered
- ------------------- ---------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock $.01 Par Value
-------------------------------------
(Title of Class)
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
------ --------
Shares of common stock outstanding as of February 28, 2001: 7,519,430.
================================================================================
Page 1 of 19
ILM I LEASE CORPORATION
INDEX
Part I. Financial Information PAGE
----
Item 1. Financial Statements
Statements of Net Assets in Liquidation
February 28, 2001 (Unaudited) and August 31, 2000....................................... 4
Statement of Changes in Net Assets in Liquidation
For the six months ended February 28, 2001 (Unaudited)................................. 5
Statements of Operations
For the six and three months ended February 28, 2001
and February 29, 2000 (Unaudited).................................................. 6
Statements of Changes in Shareholders' Equity
For the six months ended February 28, 2001 and February 29, 2000 (Unaudited)........... 7
Statements of Cash Flows
For the six months ended February 28, 2001 and February 29, 2000 (Unaudited)........... 8
Notes to Financial Statements (Unaudited)............................................... 9-13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 14-17
Part II. Other Information............................................................................... 18
Item 6. Exhibits and Reports on Form 8-K........................................................ 18
Signatures................................................................................................ 19
-2-
ILM I LEASE CORPORATION
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
(see next page)
-3-
ILM I LEASE CORPORATION
STATEMENTS OF NET ASSETS IN LIQUIDATION
February 28, 2001 (Unaudited) and August 31, 2000
(LIQUIDATION BASIS)
(Dollars in thousands, except per share data)
FEBRUARY 28, 2001 AUGUST 31, 2000
----------------- ---------------
Cash and cash equivalents $ 526 $ 644
Prepaid expenses and other assets - 12
--------- --------
Total current assets 526 656
Furniture, fixtures and equipment 1,629 1,629
Less: accumulated depreciation (1,629) (1,629)
--------- --------
- -
Deferred tax asset, net - 8
--------- --------
526 664
Accounts payable and accrued expenses 31 118
Accounts payable - Capital Senior Living Corporation 305 659
Accounts payable - related party __ 8 8
--------- --------
Total current liabilities 344 785
--------- --------
Commitments and contingencies
Net assets (liabilities) in liquidation $ 182 $ (121)
========= ========
See accompanying notes.
-4-
ILM I LEASE CORPORATION
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS)
For the six months ended February 28, 2001 (Unaudited)
(Dollars in thousands, except per share data)
February 28
2001
----
Net Liabilities in Liquidation at August 31, 2000 $ (121)
Net income 303
-------
Net Assets in Liquidation at February 28, 2001 $ 182
=======
See accompanying notes.
-4-
ILM I LEASE CORPORATION
STATEMENTS OF OPERATIONS
For the six and three months ended February 28, 2001 and February 29, 2000
(Unaudited)
(Dollars in thousands, except per share data)
Six Months Ended Three Months Ended
---------------- ------------------
February 28 February 29 February 28 February 29
----------- ----------- ----------- -----------
2001 2000 2001 2000
---- ---- ---- ----
(Going
(Liquidation Concern (Liquidation (Going
Basis) Basis) Basis) Concern
Basis)
REVENUES
Rental and other income $ - $10,037 $ - $5,033
Interest income 8 7 4 3
------ ------- ----- --------
8 10,044 4 5,036
EXPENSES
Facilities lease rent expense (354) 3,786 (354) 1,901
Dietary and food service salaries, wages and expenses - 1,869 - 945
Administrative salaries, wages and expenses - 767 - 382
Marketing salaries, wages and expenses - 482 - 253
Utilities - 414 - 213
Repairs and maintenance - 334 - 171
Real estate taxes - 422 - 214
Property management fees - 547 - 271
Other property operating expenses - 760 - 379
General and administrative 29 186 26 99
Directors' compensation 14 31 - 16
Professional fees 8 194 - 137
Depreciation expense - 482 - 223
------ ------- ----- --------
(303) 10,274 (328) 5,204
------ ------- ----- --------
Income (loss) before taxes 311 (230) 332 (168)
Income tax expense:
Current - - - -
Deferred 8 - - -
------ ------- ----- --------
8 - - -
------ ------- ----- --------
NET INCOME (LOSS) $ 303 $ (230) $ 332 $ (168)
====== ======= ===== ========
Basic income (loss) per share of common stock $ 0.04 $ (0.03) $0.04 $ (0.02)
====== ======= ===== ========
The above loss per share of common stock is based upon the 7,519,430 shares
outstanding for each period.
See accompanying notes.
-6-
ILM I LEASE CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended February 28, 2001 and February 29, 2000
(Unaudited)
(Dollars in thousands, except per share data)
Common Stock
$.01 Par Value Additional
-------------- Paid-in (Accumulated
Shares Amount Capital Deficit) Total
------ ------ ------- -------- -----
Balance at August 31, 1999 7,519,430 $ 75 $625 $(187) $513
Net loss - - (230) (230)
--------- ---- ---- ----- ----
Balance at February 29, 2000 7,519,430 $ 75 $625 $(417) $283
========= ==== ==== ===== ====
Balance at August 31, 2000 7,519,430 $ 75 $625 $(821) $(121)
Net income - - - 303 303
--------- ---- ---- ----- ----
Balance (Net Asset) at February 28,
2001 7,519,430 $ 75 $625 $(518) $182
========= ==== ==== ===== ====
See accompanying notes.
-7-
ILM I LEASE CORPORATION
STATEMENTS OF CASH FLOWS
For the six months ended February 28, 2001 and February 29, 2000
(Unaudited)
(Dollars in thousands)
SIX MONTHS ENDED
----------------
FEBRUARY 28 FEBRUARY 29
----------- -----------
2001 2000
---- ----
(Liquidation (Going
Basis) Concern Basis)
-------------------------------
Cash flows from operating activities:
Net income (loss) $ 303 $ (230)
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Depreciation expense - 482
Deferred tax expense, net 8 -
Changes in assets and liabilities:
Accounts receivable, net - (173)
Tax refund receivable - -
Prepaid expenses and other assets 12 (51)
Accounts payable and accrued expenses (87) 193
Accounts payable - Capital Senior Living Corporation (354) -
Accounts payable - related party - 21
Real estate taxes payable - 90
Deferred rent payable - (12)
Security deposits - 1
------ ------
Net cash (used in) provided by operating activities (118) 321
------ ------
Cash flows from investing activity:
Additions to operating investment properties - (152)
------ ------
Net cash used in investing activity - (152)
------ ------
Net (decrease) increase in cash and cash equivalents (118) 169
Cash and cash equivalents, beginning of period 644 1,066
------ ------
Cash and cash equivalents, end of period $ 526 $1,235
====== ======
Supplemental Disclosure:
- -----------------------
Cash paid during the period for state income taxes $ 2 $ 1
====== ======
See accompanying notes.
-8-
ILM I LEASE CORPORATION
Notes to Financial Statements (Unaudited)
1. GENERAL
The accompanying financial statements, footnotes and discussions should
be read in conjunction with the financial statements and footnotes
contained in ILM I Lease Corporation's (the "Company") Annual Report on
Form 10-K for the year ended August 31, 2000. In the opinion of management,
the accompanying interim financial statements, which have not been audited,
reflect all adjustments necessary to present fairly the results for the
interim periods. All of the accounting adjustments reflected in the
accompanying interim financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with U.S. generally accepted accounting
principles for interim financial information, which requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities as of
February 28, 2001, and revenues and expenses for each of the six- and
three-month periods ended February 28, 2001 and February 29, 2000. Actual
results may differ from the estimates and assumptions used. The results of
operations for the six- and three-month periods ended February 28, 2001,
are not necessarily indicative of the results to be expected for the year
ending August 31, 2001.
The Company was incorporated on September 12, 1994 under the laws of
the State of Virginia by ILM Senior Living, Inc., a Virginia finite-life
corporation ("ILM I"), formerly PaineWebber Independent Living Mortgage
Fund, Inc., to operate eight rental housing projects that provide
independent-living and assisted-living services for independent senior
citizens ("the Senior Housing Facilities") under a facilities lease
agreement dated September 1, 1995 (the "Facilities Lease Agreement"),
between the Company, as lessee, and ILM Holding, Inc. ("ILM Holding"), as
lessor, and a direct subsidiary of ILM I.
The Company's sole business, prior to entering into a plan of
liquidation as discussed below, was the operation of the Senior Housing
Facilities. The Company leased the Senior Housing Facilities from ILM
Holding, a subsidiary of ILM I that held title to the Senior Housing
Facilities, pursuant to a Facilities Lease Agreement. The lease agreement
was accounted for as an operating lease in the Company's financial
statements until August 15, 2000.
ILM I made mortgage loans to Angeles Housing Concepts, Inc. ("AHC")
secured by the Senior Housing Facilities between June 1989 and July 1992.
In March 1993, AHC defaulted under the terms of such mortgage loans and in
connection with the settlement of such default, title to the Senior Housing
Facilities was transferred, effective April 1, 1994, to certain indirect
subsidiaries of ILM I, subject to the mortgage loans. Subsequently, these
property-owning subsidiaries were merged into ILM Holding. As part of the
fiscal 1994 settlement agreement with AHC, AHC was retained as the property
manager for all of the Senior Housing Facilities pursuant to the terms of a
management agreement, which was assigned to the Company as of September 1,
1995 and subsequently terminated in July 1996.
In July 1996, following termination of the property management
agreement with AHC, the Company entered into a property management
agreement (the "Management Agreement") with Capital Senior Management 2,
Inc. ("Capital") to handle the day-to-day operations of the Senior Housing
Facilities. Lawrence A. Cohen, who served through July 28, 1998 as a
Director of the Company and President, Chief Executive Officer and Director
of ILM I, has also served in various management capacities at Capital
Senior Living Corporation ("CSLC"), an affiliate of Capital, since 1996.
Mr. Cohen currently serves as Chief Executive Officer of Capital Senior
Living Corporation. As a result, the Management Agreement with Capital was
considered a related party transaction (see Note 3) through July 28, 1998.
-9-
ILM I LEASE CORPORATION
Notes to Financial Statements (Unaudited)
(continued)
1. GENERAL (CONTINUED)
On August 15, 2000, ILM I completed the merger with CSLC and caused ILM
Holding to cancel and terminate the Facilities Lease Agreement effective
August 15, 2000. The Company also terminated the Management Agreement
effective August 15, 2000. Since the Company does not have any current plans
to operate or own any other facilities or engage in any other business
outside of its previous relationship with ILM I, on November 8, 2000, the
Company's Board of Directors voted to pursue a plan of liquidation.
Thereafter, the Company changed its basis of accounting as of August 31,
2000, from the going concern basis to the liquidation basis. It is currently
expected that the Company will have nominal value after payment of its
expenses. No specific charges were taken as a result of the Company's
changing its basis of accounting.
2. THE FACILITIES LEASE AGREEMENT
ILM Holding (the "Lessor") leased the Senior Housing Facilities to the
Company (the "Lessee") pursuant to a Facilities Lease Agreement. Such lease
was extended on a month-to-month basis on November 16, 1999, beyond its
original expiration date of December 31, 1999. On August 15, 2000, ILM I
completed its merger with CSLC and caused ILM Holding to cancel and
terminate the Facilities Lease Agreement effective August 15, 2000. The
lease was accounted for as an operating lease in the Company's financial
statements.
-10-
ILM I LEASE CORPORATION
Notes to Financial Statements (Unaudited)
(continued)
2. THE FACILITIES LEASE AGREEMENT (CONTINUED)
Descriptions of the properties covered by the Facilities Lease Agreement
between the Company and ILM Holding prior to the Facilities Lease
Agreement's termination on August 15, 2000, are summarized as follows:
Year Rentable Resident
Name Location Facility Units (2) Capacities (2)
---- -------- Built --------- --------------
-----
Independence Village of East Lansing East Lansing, MI 1989 161 162
Independence Village of Winston-Salem Winston-Salem, NC 1989 159 161
Independence Village of Raleigh Raleigh, NC 1991 164 205
Independence Village of Peoria Peoria, IL 1990 166 183
Crown Point Apartments Omaha, NE 1984 135 163
Sedgwick Plaza Apartments Wichita, KS 1984 150 170
West Shores Hot Springs, AR 1986 136 166
Villa Santa Barbara (1) Santa Barbara, CA 1979 125 125
(1) Until August 15, 2000, the Company operated Villa Santa Barbara
under a co-tenancy arrangement with an affiliated company, ILM II
Lease Corporation ("Lease II"). The Company has entered into an
agreement with Lease II regarding such joint tenancy. ILM II
Senior Living, Inc. ("ILM II") sold its interest in Villa Santa
Barbara on August 15, 2000, to CSLC. Accordingly, ILM II's
interest in Villa Santa Barbara was transferred to CSLC on August
15, 2000.
(2) Rentable units represent the number of apartment units and is a
measure commonly used in the real estate industry. Resident
capacity equals the number of bedrooms contained within the
apartment units and corresponds to measures commonly used in the
healthcare industry.
Prior to its termination on August 15, 2000, pursuant to the Facilities Lease
Agreement, the Company paid annual base rent for the use of the Senior Housing
Facilities in the aggregate amount of $6,364,800. The facilities lease was a
"triple-net" lease whereby the Lessee paid all operating expenses, governmental
taxes and assessments, utility charges and insurance premiums, as well as the
costs of all required maintenance, personal property and non-structural repairs
in connection with the operation of the Senior Housing Facilities. ILM Holding,
as Lessor, was responsible for all major capital improvements and structural
repairs to the Senior Housing Facilities. Also, any fixed assets of the Company
at a Senior Housing Facility remained with the Senior Housing Facility at the
termination of the lease. The Company also paid variable rent, on a quarterly
basis, for each Senior Housing Facility in an amount equal to 40% of the excess
of aggregate total revenues for the Senior Housing Facilities, on an annualized
basis, over $16,996,000. Variable rent was $0 and $0 for the six- and
three-month periods ended February 28, 2001, compared to $615,000 and $313,000
for the six- and three-month periods ended February 29, 2000. On February 28,
2001, an adjustment was made to reduce facilities lease rent expense by $354,000
for property level payables (principally base and variable rent) pursuant to a
settlement reached with CSLC.
The Company's use of the properties was limited to use as Senior Housing
Facilities. The Company had responsibility to obtain and maintain all licenses,
certificates and consents needed to use and operate each Senior Housing
Facility, and to use and maintain each Senior Housing Facility in compliance
with all local board of health and other applicable governmental and insurance
regulations. The Senior Housing Facilities that were located in Arkansas,
California and Kansas were licensed by such states to provide assisted living
services. In addition, various health and safety regulations and standards,
which are enforced by state and local authorities, applied to the operation of
the Senior Housing Facilities. Violations of such health and safety standards
could result in fines, penalties, or other sanctions.
-11-
ILM I LEASE CORPORATION
Notes to Financial Statements (Unaudited)
(continued)
3. RELATED PARTY TRANSACTIONS
The Company retained Capital to be the property manager of the Senior
Housing Facilities pursuant to the Management Agreement which commenced on
July 29, 1996. Lawrence A. Cohen, who served through July 28, 1998 as a
Director of the Company and President, Chief Executive Officer and Director
of ILM I, has also served in various management capacities at CSLC, an
affiliate of Capital, since 1996. Mr. Cohen currently serves as Chief
Executive Officer of CSLC. Under the Management Agreement, Capital
generally was required to perform all operational functions necessary to
operate the Senior Housing Facilities other than certain administrative
functions. The functions performed by Capital included periodic reporting
to and coordination with the Company, leasing the individual units in the
Senior Housing Facilities, maintaining bank accounts, maintaining books and
records, advertising and marketing the Senior Housing Facilities, hiring
and supervising on-site personnel, and performing maintenance. Under the
terms of the Management Agreement, Capital earned a base management fee
equal to 4% of the gross operating revenues of the Senior Housing
Facilities, as defined. Capital also earned an incentive management fee
equal to 25% of the amount by which the net cash flow of the Senior Housing
Facilities, as defined, exceeded a specified base amount. Each August 31,
beginning on August 31, 1997, the base amount was increased based on the
percentage increase in the Consumer Price Index as well as 15% of Senior
Housing Facility expansion costs. ILM I guaranteed the payment of all fees
due to Capital under the terms of the Management Agreement. For the six-
and three-month periods ended February 28, 2001, Capital earned no property
management fees from the Company compared to the six- and three-month
periods ended February 29, 2000, when Capital earned property management
fees from the Company of $547,000 and $271,000, respectively.
On September 18, 1997, the Company entered into an agreement with
Capital Senior Development, Inc., an affiliate of Capital, to manage the
development process for the potential expansions of several of the Senior
Housing Facilities. Capital Senior Development, Inc. received a fee equal
to 7% of the total development costs of these expansions if they are
pursued. ILM Holding reimbursed the Company for all costs related to these
potential expansions including fees to Capital Senior Development, Inc. For
the six- and three-month periods ended February 28, 2001 and February 29,
2000, Capital Senior Development, Inc. earned no fees from the Company for
managing pre-construction development activities for potential expansions
of the Senior Housing Facilities.
Jeffry R. Dwyer, Secretary and Director of the Company, is a
shareholder of Greenberg Traurig, Counsel to the Company and its affiliates
since 1997. For the six- and three-month periods ended February 28, 2001,
Greenberg Traurig earned fees from the Company of $8,000 and $0,
respectively, compared to fees of $20,000 and $6,000, respectively, earned
by Greenberg Traurig for the six- and three-month periods ended February
29, 2000.
Accounts payable - Capital Senior Living Corporation at February 28,
2001, and August 31, 2000, includes approximately $140,000 payable to CSLC
as part of the final settlement of property-level payables and receivables
at lease termination as well as base rent of $265,000 and variable rent of
$254,000 payable to ILM Holding, Inc. (and its successors). As more fully
described in Note 4 to the financial statements, "Subsequent Events," CSLC
agreed to accept $305,000 in full and final satisfaction of all amounts
owed to CSLC, and the Company paid CSLC this amount subsequent to the
balance sheet date, on April 4, 2001. Accordingly, the payable to CSLC
reflected on the balance sheet at February 28, 2001, has been reduced by
$354,000 to reflect the actual amount due of $305,000 with an equal
adjustment to reduce facilities lease rent expense by the same amount.
Accounts payable - related party at February 28, 2001 and August 31,
2000, includes $8,000 for accrued legal fees due to Greenberg Traurig,
Counsel to the Company and a related party.
-12-
ILM I LEASE CORPORATION
Notes to Financial Statements (Unaudited) (continued)
4. SUBSEQUENT EVENTS
On March 20, 2001, the Company's Board of Directors approved a
final settlement agreement with CSLC (as successor to Holding I) regarding
the discharge of approximately $659,000 of property-level payables, base
rents and variable rents, as reflected on the accompanying balance sheet at
February 28, 2001, in full satisfaction of the payment of $305,000.
Subsequent to the balance sheet date, on April 4, 2001, the Company paid
CSLC $305,000, which payment is in full and final satisfaction of all
amounts owed to CSLC, providing that the Company is judicially dissolved
not later than March 31, 2002.
On April 11, 2001, because of the Company's condition and the
relative high cost of soliciting the applicable Shareholder's approval,
the Company filed a petition for judicial dissolution within the Circuit
Court of Fairfax County seeking permission to liquidate the Company
without Shareholder approval. There can be no assurance that such
permission will be granted or, if granted, the timing thereof.
-13-
ILM I LEASE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Prior to its termination on August 15, 2000, the Facilities Lease Agreement
was a "triple-net" lease whereby the Lessee paid all operating expenses,
governmental taxes and assessments, utility charges and insurance premiums, as
well as the costs of all required maintenance, personal property and
non-structural repairs in connection with the operation of the Senior Housing
Facilities. Pursuant to the Facilities Lease Agreement, the Company paid annual
base rent for the use of all the Senior Housing Facilities in the aggregate
amount of $6,364,800. The Company also paid variable rent, on a quarterly basis,
for each Senior Housing Facility in an amount equal to 40% of the excess, if
any, of the aggregate total revenues for the Senior Housing Facilities, on an
annualized basis, over $16,996,000. Variable rent was $0 and $0 for the six- and
three-month periods ended February 28, 2001, respectively, compared to $615,000
and $313,000 for the six- and three-month periods ended February 29, 2000,
respectively. On February 28, 2001, an adjustment was made to reduce facilities
lease rent expense by $354,000 for property level payables (principally base and
variable rent) pursuant to a settlement reached with CSLC.
On August 15, 2000, ILM I completed the merger with CSLC and caused ILM
Holding to cancel and terminate the Facilities Lease Agreement effective August
15, 2000. The Company also terminated the Management Agreement effective August
15, 2000. Since the Company does not have any current plans to operate or own
any other facilities or engage in any other business outside of its previous
relationship with ILM I, on November 8, 2000, the Company's Board of Directors
voted to pursue a plan of liquidation. Thereafter, the Company changed its basis
of accounting as of August 31, 2000, from the going concern basis to the
liquidation basis. It is currently expected that the Company will have nominal
value after payment of its expenses. No specific charges were taken as a result
of the Company's changing its basis of accounting.
On April 11, 2001, because of the Company's condition and the relative high
cost of soliciting the applicable Shareholder's approval, the Company filed a
petition for judicial dissolution within the Circuit Court of Fairfax County
seeking permission to liquidate the Company without Shareholder approval. There
can be no assurance that such permission will be granted or, if granted, as to
the timing thereof.
LIQUIDITY AND CAPITAL RESOURCES
Occupancy levels for the eight properties in which the Company had invested
averaged 90% and 95% for the six- and three-month periods ended February 29,
2000; the properties were not owned after August 15, 2000. Base rent payments of
$6,364,800 were in effect throughout the term of the lease until August 15,
2000. As noted above, the Facilities Lease Agreement provided for the payment of
variable rent.
At February 28, 2001, the Company had cash and cash equivalents of $526,000
compared to $644,000 at August 31, 2000. The decrease of $118,000 is primarily
attributable to the payment of remaining liabilities. Remaining amounts of cash
will be used for the Company's working capital requirements. The Company does
not currently anticipate the need to engage in any borrowing activities. The
Company did not pay cash dividends during the past fiscal years 2000 and 1999.
Because the Company is pursuing a plan of liquidation, it is not anticipated
that cash dividends will be paid in the future.
-14-
ILM I LEASE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 2001 VERSUS SIX MONTHS ENDED FEBRUARY 29, 2000
REVENUES
Total revenues were $8,000 for the six-month period ended February 28, 2001
compared to $10,044,000 for the same period of the prior year, representing a
decrease of $10,036,000, or 99.9%. This decrease is the result of a $10,037,000
or 100.0% decrease in rental income in the six months ended February 28, 2001,
due to termination of the Facilities Lease Agreement and the transfer of the
properties to CSLC at completion of ILM I's merger on August 15, 2000. Interest
income increased $1,000 or 14.3%.
EXPENSES
Total expenses were $(303,000) for the six-month period ended February 28,
2001, compared to $10,274,000 for the same period in the prior year,
representing a decrease of $10,577,000, or 102.9%. This overall decrease in
expenses was due to termination of the Facilities Lease Agreement and transfer
of the properties to CSLC at completion of ILM I's merger on August 15, 2000,
coupled with a $354,000 adjustment to decrease facilities rent expense. This
adjustment reflects the agreement reached with CSLC to reduce property-level
payables (principally base and variable rent) by $354,000. As reflected on the
accompanying Statements of Operations, at February 28, 2001, operating expenses
individually decreased to $0 or 100.0% when compared to the previous year due to
cessation of operations with the following exceptions: general and
administrative costs decreased $157,000 or 84.4% due chiefly to a $55,000
decrease in insurance expense and a 100.0% decrease in all other general and
administrative costs; and professional fees decreased $186,000 or 95.9% due to
decreased legal and financial service requirements. Depreciation expense
decreased $482,000 or 100.0% as all fixed assets were fully depreciated by the
lease termination date.
INCOME TAX EXPENSE
Income tax expense increased $8,000 or 100% due to the combination of income
before taxes of $311,000 and the utilization of an $8,000 net deferred tax asset
resulting in a $541,000 or 174.0% increase in income before taxes.
NET INCOME
Primarily as a result of the factors noted above, net income increased
$533,000 or 231.7%, from net loss of $230,000 for the six months ended February
29, 2000, to net income of $303,000 for the six months ended February 28, 2001.
-15-
ILM I LEASE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED FEBRUARY 28, 2001 VERSUS THREE MONTHS ENDED FEBRUARY 29, 2000
REVENUES
Total revenues were $4,000 for the three-month period ended February 28,
2001 compared to $5,036,000 for the same period of the prior year, representing
a decrease of $5,032,000, or 99.9%. This decrease is the result of a $5,033,000
or 100.0% decrease in rental income in the three months ended February 28, 2001,
due to termination of the Facilities Lease Agreement and the transfer of the
properties to CSLC at completion of ILM I's merger on August 15, 2000. Interest
income increased $1,000 or 33.3%.
EXPENSES
Total expenses were $(328,000) for the three-month period ended February
28, 2001, compared to $5,204,000 for the same period in the prior year,
representing a decrease of $5,532,000, or 106.3%. This overall decrease in
expenses was due to termination of the Facilities Lease Agreement and transfer
of the properties to CSLC at completion of ILM I's merger on August 15, 2000,
coupled with a $354,000 adjustment to decrease facilities rent expense. This
adjustment reflects the agreement reached with CSLC to reduce property-level
payables (principally base and variable rent) by $354,000. As reflected on the
accompanying Statements of Operations, at February 28, 2001, operating expenses
individually decreased to $0 or 100.0% when compared to the previous year due to
cessation of operations with the following exceptions: general and
administrative costs decreased $73,000 or 73.7% due chiefly to a $24,000
decrease in insurance expense and a 100.0% decrease in all other general and
administrative costs; and professional fees decreased $137,000 or 100.0% due to
decreased legal and financial service requirements. Depreciation expense
decreased $223,000 or 100.0% as all fixed assets were fully depreciated by the
lease termination date.
INCOME TAX EXPENSE
Income tax expense was unchanged from the previous three-month period due to
income before taxes of $332,000 resulting in a $500,000 or 297.6% decrease in
loss before taxes.
NET INCOME
Primarily as a result of the factors noted above, net loss decreased
$500,000 or 297.6%, from net loss of $168,000 for the three months ended
February 29, 2000, to net income of $332,000 for the three months ended February
28, 2001.
-16-
ILM I LEASE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
CERTAIN STATEMENTS INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q
("QUARTERLY REPORT") CONSTITUTE "FORWARD-LOOKING STATEMENTS" INTENDED TO QUALIFY
FOR THE SAFE HARBORS FROM LIABILITY ESTABLISHED BY SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THESE FORWARD-LOOKING
STATEMENTS GENERALLY CAN BE IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE
STATEMENT WILL INCLUDE WORDS SUCH AS "BELIEVES," "COULD," "MAY," "SHOULD,"
"ENABLE," "LIKELY," "PROSPECTS," "SEEK," "PREDICTS," "POSSIBLE," "FORECASTS,"
"PROJECTS," "ANTICIPATES," "EXPECTS" AND WORDS OF ANALOGOUS IMPORT AND
CORRELATIVE EXPRESSIONS THEREOF, AS WELL AS STATEMENTS PRECEDED OR OTHERWISE
QUALIFIED BY: "THERE CAN BE NO ASSURANCE" OR "NO ASSURANCE CAN BE GIVEN."
SIMILARLY, STATEMENTS THAT DESCRIBE THE COMPANY'S FUTURE PLANS, OBJECTIVES,
STRATEGIES OR GOALS ALSO ARE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS MAY
ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING, AMONG OTHER THINGS, THE
COMPANY'S CASH FLOWS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION; THE
CONSUMMATION OF ACQUISITION AND FINANCING TRANSACTIONS AND THE EFFECT THEREOF ON
THE COMPANY'S BUSINESS, ANTICIPATED CAPITAL EXPENDITURES, PROPOSED OPERATING
BUDGETS AND ACCOUNTING RESERVES; LITIGATION; PROPERTY EXPANSION AND DEVELOPMENT
PROGRAMS OR PLANS; REGULATORY MATTERS; AND THE COMPANY'S PLANS, GOALS,
STRATEGIES AND OBJECTIVES FOR FUTURE OPERATIONS AND PERFORMANCE. ANY SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
IN SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO A NUMBER OF ASSUMPTIONS REGARDING, AMONG OTHER THINGS, GENERAL ECONOMIC,
COMPETITIVE AND MARKET CONDITIONS. SUCH ASSUMPTIONS NECESSARILY ARE BASED ON
FACTS AND CONDITIONS AS THEY EXIST AT THE TIME SUCH STATEMENTS ARE MADE, THE
PREDICTION OR ASSESSMENT OF WHICH MAY BE DIFFICULT OR IMPOSSIBLE AND, IN ANY
CASE, BEYOND THE COMPANY'S CONTROL. FURTHER, THE COMPANY'S BUSINESS IS SUBJECT
TO A NUMBER OF RISKS THAT MAY AFFECT ANY SUCH FORWARD-LOOKING STATEMENTS AND
ALSO COULD CAUSE ACTUAL RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE
PROJECTED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS PARAGRAPH. MOREOVER, THE COMPANY
DOES NOT INTEND TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT
ANY CHANGES IN GENERAL ECONOMIC, COMPETITIVE OR MARKET CONDITIONS AND
DEVELOPMENTS BEYOND ITS CONTROL.
READERS OF THIS QUARTERLY REPORT ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON ANY OF THE FORWARD-LOOKING STATEMENTS SET FORTH HEREIN AND THAT ACTUAL FUTURE
RESULTS MAY DIFFER.
-17-
ILM I LEASE CORPORATION
PART II-OTHER INFORMATION
Item 1. through 5. NONE
- -------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
-18-
ILM I LEASE CORPORATION
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.
BY: ILM I LEASE CORPORATION
By: /s/ Jeffry R. Dwyer
------------------------------
Jeffry R. Dwyer
President
Dated: April 12, 2001
-19-