-----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, V85FA9el+kpS6uobWXrcxjPiccS1X6tLcR+jMxLVe9w6m7oFpFYujFoLzkIb7T30 2HKWWV8Sy9gg9TqwC71dZQ== 0000812072-02-000013.txt : 20020415 0000812072-02-000013.hdr.sgml : 20020415 ACCESSION NUMBER: 0000812072-02-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 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: 1934 Act SEC FILE NUMBER: 002-64413 FILM NUMBER: 02587805 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 f10k_2001-rmi.txt RMI COVERED HOPPER RAILCAR 79-1 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, 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 ----------------------- 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 ------------------------------------------------------- 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 * - ----------------------------- * Incorporated by reference. See page 10 of this report. -----END PRIVACY-ENHANCED MESSAGE-----