-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SxkpmZSR2gf1EA/drfMx/xniFG8vk+PPJJjVu+IR1TpUSR4edcab2LXnb913OZSh mOExRvoeSk8sXO8PS529UA== 0000311250-00-000002.txt : 20000320 0000311250-00-000002.hdr.sgml : 20000320 ACCESSION NUMBER: 0000311250-00-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1 CENTRAL INDEX KEY: 0000311250 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 942645847 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-64413 FILM NUMBER: 573137 BUSINESS ADDRESS: STREET 1: ONE MARKET PLZ STREET 2: STEUART STREET TOWER STE 900 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1301 BUSINESS PHONE: 4159741399 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- 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, 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 ----------------------- 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 ----------------------- 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 12. Total number of pages in this report: 20 PART I ITEM 1. BUSINESS (A) Background In 1979, PLM Investment Management, Inc. (IMI or Manager) (formerly PLM Railcar Management, Inc.), 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) (formerly National Equipco, Inc.), 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 7 private railcar management programs and two public railcar programs. Each of the programs involves a distinct group of railcars and are 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, 322 cars have been sold or destroyed and 35 cars have been added to the fleet. As of December 31, 1999, 490 cars were in the Program, all of which were on lease. (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 1999 was $374. All 490 cars 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 The downward pressure on covered hopper cars specifically designed to service the agricultural industry continued through 1999. During 1999, car loadings of agricultural products in the United States (U.S.) increased by 4.3% compared to 1998. Car loadings in Canada decreased by 3.3% (Overall North American increase of 2.9%). Total North American shipments for 1998 were down 7.7% compared to 1997. Thus, while increasing somewhat from 1998, current year shipments remain below 1997 levels. Another contributing factor to the softness in rental rates is the large number of covered hopper cars built in the last few years. Total railcars built during 1999 are estimated to be approximately 58,000 with covered hoppers representing approximately 20,000 or 34% of the total new builds. The continued lack of strong demand for covered hopper cars resulted in many cars being renewed during 1999 at monthly full service rates considerably below the rate they had been earning. The U.S. agribusiness industry serves a domestic market that is relatively mature, with consistent but modest growth likely in the future. Most grain rail traffic moves to domestic food processors, poultry breeders, and feed lots. The more volatile export business accounts for about 30% of total grain shipments. In emerging and developing companies, demand for protein-rich foods is growing more rapidly than in the U.S. because of higher population growth, rapid industrialization, and rising disposable income. ITEM 2. PROPERTIES At December 31, 1999, the Program had no properties except for the 490 cars being managed under the Program, as described in Item 1(c). The Manager of the Program maintains its principal office at One Market, Steuart Street Tower, Suite 800, San Francisco, California 94105-1301. 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, 1999. 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, 1999, 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 car per day was 485.32 for 1999):
TABLE 1 For the years ended December 31, 1999 1998 1997 1996 1995 ---------------------------------------------------------------------------------- Total program Total revenues collected $ 2,314,123 $ 2,621,980 $ 2,444,571 $ 2,538,209 $ 2,559,935 Expenses paid (697,664) (656,156) (598,904) (645,807) (718,385) --------------------------------------------------------------------------------- Excess of revenues collected over expenses paid $ 1,616,459 $ 1,965,824 $ 1,845,667 $ 1,892,402 $ 1,841,550 ================================================================================= Distributions to or on behalf of investors $ 1,941,463 $ 1,909,390 $ 1,864,121 $ 1,809,722 $ 1,731,469 ================================================================================= Per car available (computed on a weighted-average car per day basis) Total revenues collected $ 4,768 $ 5,453 $ 5,158 $ 5,310 $ 5,177 Expenses paid (1,438) (1,365) (1,264) (1,351) (1,453) -------------------------------------------------------------------------------- Excess of revenues collected over expenses paid $ 3,330 $ 4,088 $ 3,894 $ 3,959 $ 3,724 ================================================================================
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. RECLASSIFICATIONS Certain prior-year amounts have been reclassified in order to conform to the current year's presentation. Comparison of the Program's Revenues Collected, Expenses Paid and Other Changes in Cash for the Years Ended December 31, 1999 and 1998 Revenues collected: 1. Lease receipts decreased to $2,245,736 for the year ended December 31, 1999, from $2,551,476 for the comparable period in 1998. A $279,998 decrease in lease receipts due to lower average leases rates for certain lessees during the comparable periods, and a $30,163 decrease in lease receipts is due to the timing of receipt of revenues during the comparable periods. The decrease was partially offset by the increase of $4,421 due to eight cars being added to the Program during 1999. 2. Interest and other income decreased to $68,387 for the year ended December 31, 1999, from $70,504 for the comparable period in 1998. A decrease in interest income of $15,342 resulted from lower interest income earned due to lower average cash balances during 1999 compared to 1998. The decrease in interest and other income is partially offset by an increase in other income of $13,225. Expenses paid: 1. Management fees increased to $293,408 for the year ended December 31, 1999, from $288,839 for the comparable period in 1998. The increase in management fees is due to more cars in the Program during 1999 as compared to 1998. IMI receives a monthly management fee on a per car basis at $38 per car. This increase is also due to an incentive management fee of $73,004 paid to IMI in 1999 compared to an incentive management fee of $71,213 paid to IMI in 1998. 2. Repairs and maintenance expense increased to $344,705 for the year ended December 31, 1999, from $320,437 for the comparable period in 1998. An increase of $48,920 in repairs and maintenance resulted from repairs required on certain railcars in the fleet during 1999, which were not needed during 1998. An increase of $886 in repairs and maintenance is due to the net addition of five cars to the Program during 1999. The increase in repairs and maintenance expense is partially offset by the decrease in repairs and maintenance expense of $25,538 due to the timing of payments of expenses during comparable period. 3. Insurance expense increased to $15,549 for the year ended December 31, 1999, from $11,183 for the comparable period in 1998. The increase is primarily due to the timing of payments for the annual premium for liability and physical damage insurance. 4. Storage, repositioning and other expenses increased to $23,726 for the year ended 1999, from $10,098 for the comparable period in 1998. The increase is primarily due to more cars transferred between lessess resulting in higher repositioning expenses during 1999 when compared to 1998. 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 $37,375 during the year ended December 31, 1999, as compared to a decrease of $52,067 for the comparable period in 1998. The decrease between comparable periods is primarily due to the timing of net receipts and repayments of these funds by the Program. 2. During 1999, three cars were destroyed for which the Program received and paid to investors insurance proceeds of $97,502. During 1998, three cars were destroyed for which the Program received and paid to the investor insurance proceeds of $94,862. 3. 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. During 1998, the Program received $269,000 in proceeds for ten railcars that were transferred between investors in the Program. The Program paid $260,340 net of commission to the investors that sold the railcars. 4. Commission paid decreased to $3,780 for 1999, from $8,660 in 1998. The decrease was due to fewer cars being transferred in 1999, as compared to 1998. As a result of the foregoing and other factors, the Program distributed $1,941,463 to investors in the year ended December 31, 1999 compared to $1,909,390 paid in 1998. COMPARISON OF THE PROGRAM'S REVENUES COLLECTED, EXPENSES PAID AND OTHER CHANGES IN CASH FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 Revenues collected: 1. Lease receipts increased to $2,551,476 for the year ended December 31, 1998, from $2,396,321 for the comparable period in 1997. The increase of $122,880 is due to the timing of rental receipts between the comparable periods. An increase of $32,275 is due to higher average lease rates in 1998 when compared to 1997. 2. Interest and other income increased to $70,504 for the year ended December 31, 1998, from $48,250 for the comparable period in 1997. The increase is primarily due to a lower exchange rate loss in 1998 when compared to 1997. The exchange rate loss was $4,363 in 1998 compared to $18,716 in 1997. In addition, interest income increased of $7,901 as cash investments earned a higher interest rate in 1998 when compared to 1997. Expenses paid: 1. Management fees increased to $288,839 for the year ended December 31, 1998, from $282,810 for the comparable period in 1997. This increase is due to an incentive management fee of $71,213 paid to IMI in 1998 compared to an incentive management fee of $67,172 paid to IMI in 1997. The management fees increase is also due to eleven cars were added in the Program during 1998. 2. Repairs and maintenance expense increased to $320,437 for the year ended December 31, 1998, from $282,612 for the comparable period in 1997. The increase is primarily due to the timing of payments for these expenses during the comparable periods. 3. Insurance expense decreased to $11,183 for the year ended December 31, 1998, from $14,068 for the comparable period in 1997. The decrease of $13,962 is due to the timing of payments for the annual premium for liability and physical damage insurance. The decrease is partially offset by a refund of a prior year's premium for business interruption insurance of $11,077 was received during 1997. No similar refund was received in 1998. 4. Property taxes increased to $18,382 for the year ended December 31, 1998, from a credit of $12,793 for the comparable period in 1997. The increase is primarily due to a $22,000 credit for overpaid taxes from prior years and $8,110 of litigation settlement proceeds, which were received, in the third quarter of 1997. No similar refund or settlement was received during 1998. 5. Storage, repositioning and other expenses decreased to $10,098 for the year ended 1998, from $17,420 for the comparable period in 1997. The decrease is primarily due to lower repositioning 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 from lessees. The funds decreased by $52,067 during the year ended December 31, 1998, as compared to a decrease of $10,818 for the comparable period in 1997. The increase between comparable periods is primarily due to the timing of net receipts and repayments of these funds by the Program. 2. During 1998, three cars were destroyed for which the Program received and paid to investors insurance proceeds of $94,862. During 1997, one car was destroyed for which the Program received and paid to the investor insurance proceeds of $31,713. 3. During 1998, the Program received proceeds of $269,000 for ten railcars that were transferred between investors in the Program. The Program paid $260,340 net of commission to investors that sold the cars. During 1997, the Program received $243,500 in proceeds for nine railcars that were transferred between investors in the Program. The Program paid $238,080 net of commission to the investors that sold the railcars. 4. Commission paid increased to $8,660 for 1998, from $6,500 in 1997. The increase was due to more cars being transferred in 1998, as compared to 1997. As a result of the foregoing and other factors, the Program distributed $1,909,390 to investors for the year ended December 31, 1998 compared to $1,864,121 paid in 1997. 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. 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 14% of total lease receipts of the Program in 1990. EFFECTS OF YEAR 2000 To date, PLM Investment Management, Inc. (IMI or Manager) has not experienced any material Year 2000 issues with either its internally developed software or purchased software. In addition, to date, IMI has not been impacted by any Year 2000 problems that may have impacted our customers and suppliers. The amount IMI has spent related to Year 2000 issues has not been material. IMI continues to monitor its systems for any potential Year 2000 issues. INFLATION Inflation did not significantly impact the Program's operations in 1999, 1998, or 1997. 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 ability of the Program to realize acceptable lease rates on its railcars is contingent on many factors, such as specific market conditions and economic activity, technological obsolescence, and government or other regulations. The unpredictability 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 Program's equipment. The Program intends to use excess cash after payment of operating expenses and maintenance of reasonable reserves to make cash distributions to the investors. Factors that may effect the Program's operating performance in 2000 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 similar to those in the Program are expected to remain strong. (2) Impact of Government Regulations on Future Operations The Manager believes the Program will have sufficient liquidity in the future. (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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Program's primary market risk exposure is that of currency devaluation risk. During 1999, 14% of the Program's total lease revenues came from non-United States domiciled lessees. Most of the leases require payment in United States (U.S.) currency. If these lessees currency devalues against the U.S. 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, 1999, 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 None. (This space intentionally left blank.) PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM INTERNATIONAL AND PLM FINANCIAL SERVICES, INC. As of the date of this annual report, the directors and executive officers of PLM International and of PLM Financial Services, Inc. (and key executive officers of its subsidiaries) are as follows:
Name Age Position - ---------------------------------------- ------- ------------------------------------------------------------------ Robert N. Tidball 61 Chairman of the Board, Director, President, and Chief Executive Officer, PLM International, Inc.; Director, PLM Financial Services, Inc.; Vice President, PLM Railcar Management Services, Inc.; President, PLM Worldwide Management Services Ltd. Randall L.-W. Caudill 52 Director, PLM International, Inc. Douglas P. Goodrich 53 Director and Senior Vice President, PLM International, Inc.; Director and President, PLM Financial Services, Inc.; President, PLM Transportation Equipment Corporation; President, PLM Railcar Management Services, Inc. Warren G. Lichtenstein 34 Director, PLM International, Inc. Howard M. Lorber 51 Director, PLM International, Inc. Harold R. Somerset 64 Director, PLM International, Inc. Robert L. Witt 59 Director, PLM International, Inc. Robin L. Austin 53 Vice President, Human Resources, PLM International, Inc. and PLM Financial Services, Inc. Stephen M. Bess 53 President, PLM Investment Management, Inc.; Vice President and Director, PLM Financial Services, Inc. Richard K Brock 37 Vice President and Chief Financial Officer, PLM International, Inc. and PLM Financial Services, Inc. Susan C. Santo 37 Vice President, Secretary, and General Counsel, PLM International, Inc. and PLM Financial Services, Inc.
Robert N. Tidball was appointed Chairman of the Board in August 1997 and President and Chief Executive Officer of PLM International in March 1989. At the time of his appointment as President and Chief Executive Officer, he was Executive Vice President of PLM International. Mr. Tidball became a director of PLM International in April 1989. Mr. Tidball was appointed a Director of PLM Financial Services, Inc. in July 1997 and was elected President of PLM Worldwide Management Services Limited in February 1998. He has served as an officer of PLM Railcar Management Services, Inc. since June 1987. Mr. Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith, he was Vice President, General Manager, and Director of North American Car Corporation and a director of the American Railcar Institute and the Railway Supply Association. Randall L.-W. Caudill was elected to the Board of Directors in September 1997. He is President of Dunsford Hill Capital Partners, a San Francisco-based financial consulting firm serving emerging growth companies. Prior to founding Dunsford Hill Capital Partners, Mr. Caudill held senior investment banking positions at Prudential Securities, Morgan Grenfell Inc., and The First Boston Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics, Inc., VaxGen, Inc., SBE, Inc., and RamGen, Inc. Douglas P. Goodrich was elected to the Board of Directors in July 1996, appointed Senior Vice President of PLM International in March 1994, and appointed Director and President of PLM Financial Services, Inc. in June 1996. Mr. Goodrich has also served as Senior Vice President of PLM Transportation Equipment Corporation since July 1989 and as President of PLM Railcar Management Services, Inc. since September 1992, having been a Senior Vice President since June 1987. Mr. Goodrich was an executive vice president of G.I.C. Financial Services Corporation of Chicago, Illinois, a subsidiary of Guardian Industries Corporation, from December 1980 to September 1985. Warren G. Lichtenstein was elected to the Board of Directors in December 1998. Mr. Lichtenstein is the Chief Executive Officer of Steel Partners II, L.P., which is PLM International's largest shareholder, currently owning 16% of the Company's common stock. Additionally, Mr. Lichtenstein is Chairman of the Board of Aydin Corporation, a NYSE-listed defense electronics concern, as well as a director of Gateway Industries, Rose's Holdings, Inc., and Saratoga Beverage Group, Inc. Mr. Lichtenstein is a graduate of the University of Pennsylvania, where he received a Bachelor of Arts degree in economics. Howard M. Lorber was elected to the Board of Directors in January 1999. Mr. Lorber is President and Chief Operating Officer of New Valley Corporation, an investment banking and real estate concern. He is also Chairman of the Board and Chief Executive Officer of Nathan's Famous, Inc., a fast food company. Additionally, Mr. Lorber is a director of United Capital Corporation and Prime Hospitality Corporation and serves on the boards of several community service organizations. He is a graduate of Long Island University, where he received a Bachelor of Arts degree and a Masters degree in taxation. Mr. Lorber also received charter life underwriter and chartered financial consultant degrees from the American College in Bryn Mawr, Pennsylvania. He is a trustee of Long Island University and a member of the Corporation of Babson College. Harold R. Somerset was elected to the Board of Directors of PLM International in July 1994. From February 1988 to December 1993, Mr. Somerset was President and Chief Executive Officer of California & Hawaiian Sugar Corporation (C&H Sugar), a subsidiary of Alexander & Baldwin, Inc. Mr. Somerset joined C&H Sugar in 1984 as Executive Vice President and Chief Operating Officer, having served on its Board of Directors since 1978. Between 1972 and 1984, Mr. Somerset served in various capacities with Alexander & Baldwin, Inc., a publicly held land and agriculture company headquartered in Honolulu, Hawaii, including Executive Vice President of Agriculture and Vice President and General Counsel. Mr. Somerset holds a law degree from Harvard Law School as well as a degree in civil engineering from the Rensselaer Polytechnic Institute and a degree in marine engineering from the U.S. Naval Academy. Mr. Somerset also serves on the boards of directors for various other companies and organizations, including Longs Drug Stores, Inc., a publicly held company. Robert L. Witt was elected to the Board of Directors in June 1997. Since 1993, Mr. Witt has been a principal with WWS Associates, a consulting and investment group specializing in start-up situations and private organizations about to go public. Prior to that, he was Chief Executive Officer and Chairman of the Board of Hexcel Corporation, an international advanced materials company with sales primarily in the aerospace, transportation, and general industrial markets. Mr. Witt also serves on the boards of directors for various other companies and organizations. Robin L. Austin became Vice President, Human Resources of PLM Financial Services, Inc. in 1984, having served in various capacities with PLM Investment Management, Inc., including Director of Operations, from February 1980 to March 1984. From June 1970 to September 1978, Ms. Austin served on active duty in the United States Marine Corps and served in the United States Marine Corp Reserves from 1978 to 1998. She retired as a Colonel of the United States Marine Corps Reserves in 1998. Ms. Austin has served on the Board of Directors of the Marines' Memorial Club and is currently on the Board of Directors of the International Diplomacy Council. Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July 1997. 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. Mr. Bess 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. Richard K Brock was appointed Vice President and Chief Financial Officer of PLM International and PLM Financial Services, Inc. in January 2000, after having served as Acting CFO since June 1999. Mr. Brock served as Corporate Controller of PLM International and PLM Financial Services, Inc. beginning in June 1997, as Director of Planning and General Accounting beginning in February 1994, and as an accounting manager beginning in September 1991. Mr. Brock was a division controller of Learning Tree International, a technical education company, from February 1988 through July 1991. Susan C. Santo became Vice President, Secretary, and General Counsel of PLM International and PLM Financial Services, Inc. in November 1997. She has worked as an attorney for PLM International since 1990 and served as its Senior Attorney since 1994. Previously, Ms. Santo was engaged in the private practice of law in San Francisco. Ms. Santo received her J.D. from the University of California, Hastings College of the Law. The directors of PLM International, Inc. are elected for a three-year term and 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 or executive officer of PLM International Inc. or PLM Financial Services, Inc., PLM Transportation Equipment Corp., or PLM Investment Management, Inc. (This space is intentionally left blank) 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, 1999. 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 1999, $293,408 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. 10.3 Form of Second Amendment to Management Agreement. 24. Power of Attorney 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 17, 2000 Registrant By: PLM Investment Management, Inc. Manager By: /s/ Stephen M. Bess Stephen M. Bess President By: /s/ Richard K Brock Richard K Brock Chief Financial 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 * Stephen M. Bess Director March 17, 2000 * Douglas P. Goodrich Director March 17, 2000 * Susan C. Santo Director March 17, 2000 * Susan C. Santo, by signing her name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Susan C. Santo Susan C. Santo Attorney-in-Fact RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1 INDEX TO FINANCIAL STATEMENTS (Item 14(a)) Page Independent Auditors' Report 15 Statements of revenues collected and expenses paid and other changes in cash for the years ended December 31, 1999, 1998, and 1997 16 Notes to the statements of revenues collected and expenses paid and other changes in cash 17-19 All financial statement schedules have been omitted as the required information is not pertinent to the Registrant or is not material, or because the information required is included in the statements and notes thereto. INDEPENDENT AUDITORS' REPORT The Equipment Owners in RMI Covered Hopper Railcar Management Program 79-1: We have audited the accompanying financial statements of RMI Covered Hopper Railcar Management Program 79-1 (the Program) as listed in the accompanying index. 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 generally accepted auditing standards. 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 generally accepted accounting principles. In our opinion, the accompanying financial statements 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 three-year period ended December 31, 1999, on the cash basis of accounting described in Note 1. San Francisco, California March 17, 2000 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,
1999 1998 1997 ------------------------------------------------------- Revenues collected: Lease receipts $ 2,245,736 $ 2,551,476 $ 2,396,321 Interest and other income 68,387 70,504 48,250 ------------------------------------------------------- Total revenues collected 2,314,123 2,621,980 2,444,571 Expenses paid (reimbursed): Management fees 293,408 288,839 282,810 Repairs and maintenance 344,705 320,437 282,612 Insurance 15,549 11,183 14,068 Property taxes 13,858 18,382 (12,793) Accounting and legal fees 6,418 7,217 14,787 Storage, repositioning, and other 23,726 10,098 17,420 ------------------------------------------------------- Total expenses paid 697,664 656,156 598,904 ------------------------------------------------------- Excess of revenues collected over expenses paid 1,616,459 1,965,824 1,845,667 ----------------------------------------------------- Other increases (decreases) in cash: Prepaid mileage, reimbursable repairs, and other expenses (37,375) (52,067) (10,818) Receipt of proceeds from sold or destroyed cars 97,502 94,862 31,713 Receipt of proceeds for transfer of car ownership 131,000 269,000 243,500 Payments to investors for sold or destroyed cars (97,502) (94,862) (31,713) Payments to investors for transfer of car ownership (127,220) (260,340) (238,080) Distributions to investors (1,941,463) (1,909,390) (1,864,121) Commission paid (3,780) (8,660) (6,500) ------------------------------------------------------- Net other decreases in cash (1,978,838) (1,961,457) (1,876,019) ------------------------------------------------------- Net (decrease) increase in cash (362,379) 4,367 (30,352) Cash at beginning of year 1,318,995 1,314,628 1,344,980 ------------------------------------------------------- Cash at end of year $ 956,616 1,318,995 $ 1,314,628 =======================================================
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 DECEMBER 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 the financial position, results of operations, or cash flows in accordance with generally accepted accounting principles. 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, 1999, 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 which 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, 1999, 1998, and 1997, 490 cars, 485 cars, and 477 cars, respectively which were owned by the investors, were being managed by IMI under the Program. As of December 31, 1999, all of the 490 cars owned by investors were covered by lease arrangements. During 1999, eight cars were added to the Program, three cars were destroyed, and six cars were transferred between investors within the Program and IMI received a commission fee of $3,780 to handle the transfers. 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, 1999, all 490 cars were leased on a fixed rate basis. The weighted-average monthly rental rate per car in 1999 was $374. The weighted-average monthly rental rate per car in 1998 was $436. The weighted-average available car per day was 485.32, 480.83, and 473.94 for 1999, 1998, and 1997, respectively. The lessees accounting for 10% or more of total revenues collected during 1999, 1998, and 1997 were Louis Dreyfus Corp. (13% in 1999, 13% in 1998, and 15% in 1997), Canadian Pacific Railroad (13% in 1999, 13% in 1998, and 16% in 1997), San Luis Central Railroad Co. (17% in 1999, 16% in 1998, and 16% in 1997), Union Pacific Railroad (12% in 1999, 19% in 1998, and 20% in 1997), KBSR Railroad (10% in 1998 and 1997), and General Chemical Co. (14% in 1999, 13% in 1998, and 10% in 1997). RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1 NOTES TO THE STATEMENT OF REVENUES COLLECTED AND EXPENSES PAID AND OTHER CHANGES IN CASH DECEMBER 31, 1999 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, 1999, 1998, and 1997 to be $603,179, $836,155, and $781,906, 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 14% of total lease receipts of the Program in 1999. (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, 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 10.3 Form of Second Amendment to Management Agreement 24. Power of Attorney 20 - ----------------------------- * Incorporated by reference. See page 12 of this report. EX-24 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby constitute and appoint Robert N. Tidball, Susan Santo and Richard Brock, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM Investment Management, Inc., as Manager of RMI Covered Hopper Railcar Management Program 79-1, to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM Investment Management, Inc., as Manager of RMI Covered Hopper Railcar Management Program 79-1, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 2000 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 1999. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 3rd day of March, 2000. /s/ Stephen M. Bess -------------------------------------- Stephen M. Bess EX-27 3
5 1 12-MOS DEC-31-1999 DEC-31-1999 956,616 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,314,123 0 0 697,664 0 0 0 0 0 0 0 0 0 0 0
EX-10 4 AMENDMENT TO MANAGEMENT AGREEMENT RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1 This Amendment to Management Agreement is made as of the date set forth below opposite the signature of "Owner". The undersigned signatory identified as "Owner" is party to a Management Agreement with PLM Investment Management, Inc. ("IMI"), formerly "PLM Railcar Management, Inc.", covering the management of Owner's covered hopper railcar(s) identified therein. In consideration of the continuing appointment of IMI as Manager by Owner, and for other good and valuable consideration, Owner and IMI do hereby amend the Management Agreement as follows: 1. The Management Agreement shall be extended for a fixed term not to exceed five years, ending October 1, 1994. If investor has not given written notice to the Manager, provided herein below, this Agreement shall, at the option of Manager, be renewed for an additional term of five years. If investor elects to terminate this Agreement at the expiration date, investor shall so notify Manager no fewer than 60 days prior to the expiration date. 2. IMI shall receive a minimum monthly management fee of $38 per car. Said minimum monthly management fee shall be prorated on a daily basis for any period less than a full month. In addition, IMI shall receive an incentive management fee of 15% of net income over $750 per car per quarter. 3. Any notice to IMI shall be addressed as follows: PLM Investment Management, Inc. 655 Montgomery Street, Suite 1200 San Francisco, CA 94111 Attn: Investor Services or to such other address as may be designated by IMI in writing. Except as modified by this Amendment, all other terms and conditions of the Management Agreement shall remain the same for the extended term of the Management Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment to Management Agreement as of the date set forth below opposite the signature of Owner. PLM INVESTMENT MANAGEMENT, INC. By: /s/Stephen M. Bess Title: Senior Vice President OWNER By: /s/William Armbrustor EX-10 5 SECOND AMENDMENT TO MANAGEMENT AGREEMENT RMI COVERED HOPPER RAILCAR MANAGEMENT PROGRAM 79-1 This Second Amendment to Management Agreement is made as of the date set forth below opposite the signature of "Owner". The undersigned signatory identified as ("Owner") is party to a Management Agreement with PLM Investment Management, Inc. ("IMI" or "Manager"), covering the management of the covered hopper railcars identified therein. All references to "RMI" in the Management Agreement shall be deemed to refer to IMI. In consideration of the continuing appointment of IMI as Manager by Owner, and for other good and valuable consideration, Owner and IMI do hereby amend the Management Agreement as follows: 1. The Management Agreement shall be extended for a fixed term of five years, beginning October 1, 1999 and expiring September 30, 2004. 2. IMI shall receive a minimum monthly management fee of $38 per car. Said minimum monthly management fee shall be prorated on a daily basis for any period less than a full month. In addition, IMI shall receive an incentive management fee of 15% of net income over $750 per car per quarter. Except as modified by this Amendment, all other terms and conditions of the Management Agreement shall remain the same for the extended term of the Management Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment to Management Agreement as of the date set forth below opposite the signature of Owner. PLM INVESTMENT MANAGEMENT, INC. OWNER'S SIGNATURE By: /s/Stephen M. Bess By: Title: Senior Vice President Date: -----END PRIVACY-ENHANCED MESSAGE-----