-----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, AqdWlDNuA8eLNAs0rq2i8LJRYn076Fa41Y6GkgVL5ZsXHBdtnUAL7wAwQPT7cwZh GL51IGnJ8qymx5G7L9WZ/w== /in/edgar/work/0000812072-00-000037/0000812072-00-000037.txt : 20001114 0000812072-00-000037.hdr.sgml : 20001114 ACCESSION NUMBER: 0000812072-00-000037 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM INTERNATIONAL INC CENTRAL INDEX KEY: 0000814677 STANDARD INDUSTRIAL CLASSIFICATION: [7359 ] IRS NUMBER: 943041257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09670 FILM NUMBER: 759365 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 800 STREET 2: ONE MARKET PLZ CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 10-Q 1 0001.txt PLM INTERNATIONAL, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________ FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended September 30, 2000 or [ ] 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 1-9670 _____________________ PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 94-3041257 (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 executive offices) (Zip Code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock - $.01 par value; outstanding as of November 9, 2000 - 7,448,510 shares. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share amounts)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 ------------------------------------------------------------ REVENUES Operating lease income $ 792 $ 275 $ 1,101 $ 888 Management fees 1,656 1,739 5,205 5,570 Partnership interests and other fees 1,500 263 1,688 579 Acquisition and lease negotiation fees 385 -- 538 1,079 Other 130 337 665 1,025 ------------------------------------------------------------ Total revenues 4,463 2,614 9,197 9,141 ------------------------------------------------------------ COSTS AND EXPENSES Operations support 679 756 1,850 2,189 Depreciation and amortization 247 119 643 359 General and administrative 1,967 780 4,391 3,224 ------------------------------------------------------------ Total costs and expenses 2,893 1,655 6,884 5,772 ------------------------------------------------------------ Operating income 1,570 959 2,313 3,369 Interest expense (554) (521) (1,424) (1,772) Interest income 266 59 869 252 Other income (expenses), net (175) 701 (177) 577 ------------------------------------------------------------ Income before income taxes 1,107 1,198 1,581 2,426 Provision for income taxes 419 468 595 959 ------------------------------------------------------------ Income from continuing operations, net of income tax 688 730 986 1,467 Income (loss) from discontinued operations, net of income tax (509) 647 (164) 941 Gain on disposition of discontinued operations, net of income tax 4,785 -- 4,785 -- ------------------------------------------------------------ Net income before cumulative effect of accounting change 4,964 1,377 5,607 2,408 Cumulative effect of accounting change, net of income taxes -- -- -- (250) ------------------------------------------------------------ Net income to common shares $ 4,964 $ 1,377 $ 5,607 $ 2,158 ============================================================ Basic earnings per weighted-average common share outstanding Income from continuing operations $ 0.09 $ 0.09 $ 0.13 $ 0.18 Income (loss) from discontinued operations (0.06) 0.08 (0.02) 0.12 Gain on disposition of discontinued operations 0.64 -- 0.63 -- Cumulative effect of accounting change -- -- -- (0.03) ------------------------------------------------------------ Net income to common shares $ 0.67 $ 0.17 $ 0.74 $ 0.27 ============================================================ Diluted earnings per weighted-average common share outstanding Income from continuing operations $ 0.09 $ 0.09 $ 0.13 $ 0.18 Income (loss) from discontinued operations (0.07) 0.08 (0.02) 0.11 Gain on disposition of discontinued operations 0.64 -- 0.63 -- Cumulative effect of accounting change -- -- -- (0.03) ------------------------------------------------------------ Net income to common shares $ 0.66 $ 0.17 $ 0.74 $ 0.26 ============================================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share amounts)
ASSETS September 30, December 31, 2000 1999 -------------------------------------- Cash and cash equivalents $ 68,356 $ 2,089 Receivables (net of allowance for doubtful accounts of $0.3 million as of September 30, 2000 and December 31, 1999) 2,228 2,504 Receivables from affiliates 1,603 2,962 Net assets of discontinued operations -- 51,984 Equity interest in affiliates 17,355 18,145 Restricted cash and cash equivalents 2,957 1,766 Other assets, net 4,479 5,275 ------------------------------------- Total assets $ 96,978 $ 84,725 ===================================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Senior secured notes $ 15,039 $ 20,679 Payables and other liabilities 22,527 6,007 Deferred income taxes 6,661 8,626 ------------------------------------- Total liabilities 44,227 35,312 Shareholders' equity Preferred stock ($0.01 par value, 10.0 million shares authorized, none outstanding as of September 30, 2000 and December 31, 1999) -- -- Common stock ($0.01 par value, 50.0 million shares authorized, and 7,448,510 and 7,675,410 shares issued and outstanding as of September 30, 2000 and December 31, 1999, respectively) 112 112 Paid-in capital, in excess of par 74,812 75,059 Treasury stock (4,587,245 and 4,360,345 shares as of September 30, 2000 and December 31, 1999, respectively) (20,346) (18,324) Accumulated deficit (1,827) (7,434) ------------------------------------- Total shareholders' equity 52,751 49,413 ------------------------------------- Total liabilities and shareholders' equity $ 96,978 $ 84,725 =====================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME For the Year Ended December 31, 1999 and the Nine Months Ended September 30, 2000 (in thousands of dollars)
Accumulated Common Stock Deficit & ------------------------------------------- Paid-in Accumulated Capital in Other Total At Excess Treasury Comprehensive Shareholders' Par of Par Stock Income Equity ----------------------------------------------------------------------------------- Balances, December 31, 1998 $ 112 $ 74,947 $ (15,072) $ (9,790) $ 50,197 Comprehensive income: Net income 2,356 2,356 Exercise of stock options 11 591 602 Common stock purchases (3,951) (3,951) Reissuance of treasury stock 101 108 209 --------------------------------------------------------------------------- Balances, December 31, 1999 112 75,059 (18,324) (7,434) 49,413 Comprehensive income: Net income 5,607 5,607 Exercise of stock options (247 ) 566 319 Common stock purchases (2,588) (2,588) --------------------------------------------------------------------------- Balances, September 30, 2000 $ 112 $ 74,812 $ (20,346) $ (1,827) $ 52,751 ===========================================================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Nine Months Ended September 30, 2000 1999 -------------------------------- OPERATING ACTIVITIES Net income from continuing operations $ 986 $ 2,849 Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: Depreciation and amortization 643 359 Deferred income tax (3,441) (5,470) Gain on disposition of discontinued operations, net of income tax (4,785) -- Increase (decrease) in payables and other liabilities 16,679 (1,046) Decrease (increase) in receivables and receivables from affiliates 2,619 (59) Amortization of goodwill related to the investment programs 672 2,119 Decrease (increase) in other assets 2,230 (524) ----------------------------------- Cash provided by (used in) operating activities of continuing operations 15,603 (1,772) Cash provided by operating activities of discontinued operations 14,247 17,349 Cumulative effect of accounting change -- 250 ----------------------------------- Net cash provided by operating activities 29,850 15,827 ----------------------------------- INVESTING ACTIVITIES Cash received from affiliated entities in excess of equity income 118 726 Principal payments received on finance leases 279 211 Purchase of equipment held for sale (14,000) (21,805) Proceeds from sale of subsidiary, net of transaction costs 98,117 -- Proceeds from the sale of assets held for sale 14,000 13,801 Increase (decrease) in restricted cash and restricted cash equivalents (1,191) 602 Investing activities of discontinued operations 6,813 (23,883) ----------------------------------- Net cash provided by (used in) investing activities 104,136 (30,348) ----------------------------------- FINANCING ACTIVITIES Borrowings of short-term warehouse credit facility 10,200 -- Repayment of short-term warehouse credit facility (10,200) -- Repayment of senior secured notes (5,640) (5,640) Repayment of senior secured loan -- (625) Reissuance of treasury stock, net -- 42 Proceeds from exercise of stock options 30 579 Purchase of stock (2,588) (2,149) Net financing activities of discontinued operations (59,521) 15,843 ----------------------------------- Net cash used in financing activities (67,719) 8,050 ----------------------------------- Net increase (decrease) in cash and cash equivalents 66,267 (6,471) Cash and cash equivalents at beginning of period 2,089 8,786 ----------------------------------- Cash and cash equivalents at end of period $ 68,356 $ 2,315 =================================== Supplemental information Net cash paid for interest from continuing operations $ 1,456 $ 3,840 =================================== Net cash paid for interest from discontinued operations $ 4,879 $ 7,937 =================================== =================================== Net cash paid for income taxes $ 351 $ 212 ===================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 1. GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly PLM International, Inc. and its wholly-owned subsidiaries (the Company's) financial position as of September 30, 2000 and December 31, 1999, statements of income for the three and nine months ended September 30, 2000 and 1999, statements of changes in shareholders' equity and comprehensive income for the year ended December 31, 1999 and the nine months ended September 30, 2000, and statements of cash flows for the nine months ended September 30, 2000 and 1999. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying consolidated financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, on file with the Securities and Exchange Commission. The Company has retained an investment banking firm to find a buyer for the Company and is actively pursuing this goal. 2. RECLASSIFICATIONS Certain prior-period amounts have been reclassified to conform to the current period's presentation. 3. DISCONTINUED OPERATIONS Net income (loss) from discontinued operations of trailer leasing and American Finance Group (AFG) for the three and nine months ended September 30, 2000 and 1999 are as follows (in thousands of dollars):
For the three months ended For the three months ended September 30, 2000 September 30, 1999 ------------------------------------ ------------------------------------ Trailer Trailer Leasing AFG Total Leasing AFG Total ---------------------------------- ------------------------------------ Revenues $ 9,446 $ -- $ 9,446 $ 7,277 $ 6,253 $ 13,530 Costs and expenses (9,265) -- (9,265) (5,960) (3,444) (9,404) ------------------------------------ ------------------------------------ Operating income 181 -- 181 1,317 2,809 4,126 Interest expense (1,005) -- (1,005) (902) (2,319) (3,221) Interest and other income (expense) (4) -- (4) -- 144 144 ------------------------------------ ------------------------------------ Net income (loss) from discontinued operations before income taxes (828) -- (828) 415 634 1,049 (Benefit from) provision for income tax (319) -- (319) 162 240 402 ------------------------------------ ------------------------------------ Net income (loss) from discontinued $ (509) $ -- $ (509) $ 253 $ 394 $ 647 operations ==================================== ==================================== Gain on disposition of discontinued operations, net of income tax $ 4,785 $ -- $ 4,785 $ -- $ -- $ -- ==================================== ==================================== For the nine months ended For the nine months ended September 30, 2000 September 30, 1999 ------------------------------------ ------------------------------------ Trailer Trailer Leasing AFG Total Leasing AFG Total ---------------------------------- ------------------------------------ Revenues $ 24,869 $ 4,076 $ 28,945 $ 16,343 $ 19,672 $ 36,015 Costs and expenses (21,811) (2,917) (24,728) (14,673) (9,807) (24,480) ------------------------------------ ------------------------------------ Operating income 3,058 1,159 4,217 1,670 9,865 11,535 Interest expense (3,148) (1,750) (4,898) (2,090) (7,387) (9,477) Interest and other income (expense) (4) 95 91 -- (547) (547) ------------------------------------ ------------------------------------ Net income (loss) from discontinued operations before income taxes (94) (496) (590) (420) 1,931 1,511 (Benefit from) provision for income tax (37) (189) (226) (163) 733 570 Net income previously accrued as a component of loss on a discontinued operation -- 200 200 -- -- -- ------------------------------------ ------------------------------------ Net income (loss) from discontinued $ (57) $ (107) $ (164) $ (257) $ 1,198 $ 941 operations ==================================== ==================================== Gain on disposition of discontinued operations, net of income tax $ 4,785 $ -- $ 4,785 $ -- $ -- $ -- ==================================== ====================================
PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 3. DISCONTINUED OPERATIONS (CONTINUED) During the first quarter of 2000, $0.6 million of after-tax loss on disposal of a discontinued operation was recorded against the provision established at December 31, 1999 and is not included in the above table. TRAILER LEASING: On May 24, 2000, PLM International, Inc. and Marubeni America Corporation signed an asset purchase agreement to sell the refrigerated and dry trailer assets and related liabilities of PLM International, Inc. to Marubeni America Corporation. PLM shareholders approved the transaction on August 25, 2000. At the closing of the sale on September 30, 2000, Marubeni America Corporation paid $67.5 million in cash to PLM International for its 4,250 trailers and assumed $49.2 million in debt and other liabilities, including the operation of most of the PLM Trailer Leasing's trailer yards located throughout the United States. In addition, $1.5 million was placed into an escrow account. This cash will be released to the Company after it receives certain tax clearance certificates. This is expected to occur in the fourth quarter of 2000. This $1.5 million is included in restricted cash on the September 30, 2000 consolidated balance sheet. The Company expects to receive an additional $0.2 million from Marubeni America Corporation in the fourth quarter of 2000 related to the sale of the trailer assets. This amount is included in receivables on the September 30, 2000 consolidated balance sheet. The Company will pay $4.8 million of income tax related to the trailer sale in the fourth quarter of 2000 and the first quarter of 2001. EQUIPMENT: Trailer equipment held for operating lease prior to the sale was depreciated on the straight-line method down to the equipment's estimated salvage value. During the nine months ended September 30, 2000, prior to the sale, the Company purchased trailers for $25.6 million and sold trailers with a net book value of $0.4 million for $0.4 million. The Company sold all the trailer assets owned as of September 30, 2000 to Marubeni America Corporation. DEBT: SENIOR SECURED LOAN: The Company had a senior loan with a syndicate of insurance companies that had an outstanding balance of $5.9 million prior to the trailer sale. This facility was repaid by the Company on September 30, 2000 concurrent with the sale of the trailer assets of the Company. The Company incurred a $0.1 million penalty to have this facility repaid which has been expensed. OTHER SECURED DEBT: The Company had eight debt agreements and a $15.0 million credit loan agreement that had outstanding balances of $33.3 million and $14.5 million, respectively, prior to the trailer sale. These agreements were assumed by Marubeni America Corporation on September 30, 2000 concurrent with the sale of the trailer assets of the Company. AMERICAN FINANCE GROUP, INC.: In October 1999, the Company agreed to sell AFG, its commercial and industrial equipment leasing subsidiary for approximately $28.3 million, net of transaction costs and income taxes. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale of AFG was completed on March 1, 2000. On that date, the Company received $29.0 million for AFG. In July 2000, the Company received additional sales proceeds of $2.3 million for the sale of AFG. The Company received additional proceeds of $0.9 million in the fourth quarter of 2000 which was included in receivables on the consolidated balance sheet on September 30, 2000 related to the sale of AFG. The amount was disputed by the purchaser of AFG and was submitted to arbitration. The Company prevailed in arbitration. Taxes and transaction costs related to the sale are estimated to be $3.9 million resulting in PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 3. DISCONTINUED OPERATIONS (CONTINUED) estimated net proceeds to the Company of $28.3 million. In addition, AFG distributed to PLMI certain assets with a net book value of $2.7 million and cash of $0.4 million immediately prior to the sale. Accordingly, the Company's trailer leasing and commercial and industrial leasing operations are accounted for as discontinued operations and prior periods have been restated. For business segment reporting purposes, trailer leasing is reported in the segment "Trailer Leasing" and AFG is reported in the segment "Commercial and industrial equipment leasing and financing". Costs and expenses included in discontinued operations includes all direct expenses of trailer leasing and AFG, and allocated costs from PLMI that will be eliminated as a result of the sale. 4. DEBT The Company had a $9.5 million warehouse facility, which was shared with PLM Equipment Growth Fund VI (Fund VI), PLM Equipment Growth & Income Fund VII, and Professional Lease Management Income Fund I, LLC, that allowed the Company to purchase equipment prior to its designation to a specific program or prior to obtaining permanent financing. Borrowings under this facility by the other eligible borrowers reduced the amount available to be borrowed by the Company. All borrowings under this facility were guaranteed by the Company. This facility expired on September 30, 2000. The Company is currently negotiating with a new lender for a $15.0 million warehouse facility with similar terms. The Company believes this facility will be completed in the fourth quarter of 2000. During the first nine months of 2000, the Company repaid $5.6 million of the senior secured notes in accordance with the debt repayment schedules. 5. SHAREHOLDERS' EQUITY During the nine months ended September 30, 2000, the Company purchased 98,246 shares of the Company's common stock for $0.7 million, which completed the $5.0 million common stock repurchase program authorized by the Company's Board of Directors in December 1998. The Company purchased 828,325 shares under this plan for a total of $5.0 million. In May 2000, the Company's Board of Directors' authorized the purchase of up to $10.0 million of the Company's common stock. During the nine months ended September 30, 2000, the Company purchased 261,654 shares of the Company's common stock for $1.9 million, under the $10.0 million common stock repurchase program. During the nine months ended September 30, 2000, 133,000 shares were issued for the exercise of stock options. As a result of the stock repurchases and exercise of stock options, the total common shares outstanding decreased to 7,448,510 as of September 30, 2000 from the 7,675,410 outstanding as of December 31, 1999. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 5. SHAREHOLDERS' EQUITY (CONTINUED) Net income per basic weighted-average common share outstanding was computed by dividing net income to common shares by the weighted-average number of shares deemed outstanding during the period. The weighted-average number of shares deemed outstanding for the basic earnings per share calculation during the three months ended September 30, 2000 and 1999 was 7,429,271 and 8,061,551, respectively. The weighted-average number of shares deemed outstanding for the basic earnings per share calculation during the nine months ended September 30, 2000 and 1999 was 7,592,002 and 8,097,489, respectively. The weighted-average number of shares deemed outstanding, including potentially dilutive common shares, for the diluted earnings per weighted-average share calculation during the three months ended September 30, 2000 and 1999 was 7,473,131 and 8,137,547, respectively. The weighted-average number of shares deemed outstanding, including potentially dilutive common shares, for the diluted earnings per weighted-average share calculation during the nine months ended September 30, 2000 and 1999 was 7,647,567 and 8,204,268, respectively. On September 29, 2000, the Company announced that its Board of Director's had approved a plan of partial liquidation and authorized a $5.00 per share distribution to shareholders from the proceeds of the trailer sale. This payment was made on November 3, 2000 to shareholders of record as of October 22, 2000. 6. LEGAL MATTERS The Company and various of its wholly owned subsidiaries are defendants in a class action lawsuit filed in January 1997 and which is pending in the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund VII (the Partnerships), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial Services, Inc. (FSI). FSI, acts as the General Partner. The complaint asserts causes of action against all defendants for fraud and deceit, suppression, negligent misrepresentation, negligent and intentional breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Partnerships, and concealing such mismanagement from investors in the Partnerships. Plaintiffs seek unspecified compensatory damages, as well as punitive damages. In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No.987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in the Partnerships. The complaint alleges the same facts and the same causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices and violations of state securities law. In July 1997, defendants filed a petition (the petition) in federal district court under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims. In October 1997, the district court denied the Company's petition, but in November 1997, agreed to hear the Company's motion for reconsideration. Prior to reconsidering its order, the district court dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 6. LEGAL MATTERS (CONTINUED) In February 1999 the parties to the Koch and Romei actions agreed to settle the lawsuits, with no admission of liability by any defendant, and filed a Stipulation of Settlement with the court. The settlement is divided into two parts, a monetary settlement and an equitable settlement. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.6 million. The final settlement amount will depend on the number of claims filed by class members, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court to plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. For settlement purposes, the monetary settlement class consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Partnerships between May 23, 1989 and August 30, 2000. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The equitable settlement provides, among other things, for: (a) the extension (until January 1, 2007) of the date by which FSI must complete liquidation of the Partnerships' equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the Partnerships' funds in additional equipment, (c) an increase of up to 20% in the amount of front-end fees (including acquisition and lease negotiation fees) that FSI is entitled to earn in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (d) a one-time repurchase by each of Funds V, VI and VII of up to 10% of that partnership's outstanding units for 80% of net asset value per unit; and (e) the deferral of a portion of the management fees paid to an affiliate of FSI until, if ever, certain performance thresholds have been met by the Partnerships. Subject to final court approval, these proposed changes would be made as amendments to each Partnership's limited partnership agreement if less than 50% of the limited partners of each Partnership vote against such amendments. The equitable settlement also provides for payment of additional attorneys' fees to the plaintiffs' attorneys from Partnership funds in the event, if ever, that certain performance thresholds have been met by the Partnerships. The equitable settlement class consists of all investors, limited partners, assignees or unit holders who on August 30, 2000 held any units in Funds V, VI, and VII, and their assigns and successors in interest. The court preliminarily approved the monetary and equitable settlements in August 2000, and information regarding each of the settlements was sent to class members in September 2000. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including disapproval of the proposed amendments to the partnership agreements by less than 50% of the limited partners in one or more of Funds V, VI, and VII, judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. A final fairness hearing has been scheduled for November 29, 2000. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Company. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 7. OPERATING SEGMENTS The Company operates or operated in three operating segments: the management of investment programs and other equipment leasing, trailer leasing, and commercial and industrial equipment leasing and financing. The management of investment programs and other equipment leasing segment involves managing the Company's syndicated investment programs, from which it earns fees and equity interests, and arranging short-term to mid-term operating leases of other transportation equipment. The Company sold its trailer assets on September 30, 2000, and sold its commercial and industrial equipment leasing subsidiary on March 1, 2000. Accordingly, these segments are accounted for as discontinued operations. The Company evaluates the performance of each segment based on profit or loss from operations before allocating income taxes. The following tables present a summary of the operating segments (in thousands of dollars):
Management of Investment Programs and Other Transporatation Trailer Equipment For the three months ended September 30, 2000 Leasing Leasing Other(1) Total ------------------------------------------------------------- REVENUES Lease income $ -- $ 792 $ -- $ 792 Fees earned -- 3,541 -- 3,541 Other -- 130 -- 130 ------------------------------------------------------------- Total revenues -- 4,463 -- 4,463 ------------------------------------------------------------- COSTS AND EXPENSES Operations support -- 378 301 679 Depreciation and amortization -- 247 -- 247 General and administrative expenses -- -- 1,967 1,967 ------------------------------------------------------------- Total costs and expenses -- 625 2,268 2,893 ------------------------------------------------------------- Operating income (loss) -- 3,838 (2,268) 1,570 Interest income (expense), net -- (591) 303 (288) Other income (expense), net -- (27) (148) (175) ------------------------------------------------------------- Income (loss) before income taxes $ -- $ 3,220 $ (2,113) $ 1,107 ============================================================= Loss from discontinued operations, net of $ (509) $ $ -- $ (509) income tax -- ============================================================= Gain on disposition of discontinued operations, net of income tax $ 4,785 $ -- $ -- $ -- ============================================================= Total assets as of September 30, 2000 $ -- $ 22,422 $ 74,556 $ 96,978 ============================================================= ________________________ (1) Includes certain other revenue, interest income, and costs not identifiable to a particular segment such as general and administrative, certain operations support expenses, and certain other income.
PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the three months ended September 30, 1999 Leasing Financing Leasing Other(1) Total ------------------------------------------------------------------------------ REVENUES Lease income $ -- $ -- $ 275 $ -- $ 275 Fees earned -- -- 2,002 -- 2,002 Other -- -- 333 4 337 ------------------------------------------------------------------------------ Total revenues -- -- 2,610 4 2,614 ------------------------------------------------------------------------------ COSTS AND EXPENSES Operations support -- -- 691 65 756 Depreciation and amortization -- -- 119 -- 119 General and administrative expenses -- -- -- 780 780 ------------------------------------------------------------------------------ Total costs and expenses -- -- 810 845 1,655 ------------------------------------------------------------------------------ Operating income (loss) -- -- 1,800 (841) 959 Interest expense, net -- -- (463) 1 (462) Other income (expenses), net -- -- 700 1 701 ------------------------------------------------------------------------------ Income (loss) before income taxes $ -- $ -- $ 2,037 $ (839) $ 1,198 ============================================================================== Income from discontinued operations, net of $ 253 $ 394 $ -- $ -- $ 647 income tax ============================================================================== Total assets as of September 30, 1999 $ 16,372 $ 25,140 $ 35,084 $ 6,812 $ 83,408 ============================================================================== Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the nine months ended September 30, 2000 Leasing Financing Leasing Other(1) Total ------------------------------------------------------------------------------ REVENUES Lease income $ -- $ -- $ 1,101 $ -- $ 1,101 Fees earned -- -- 7,431 -- 7,431 Other -- -- 665 -- 665 ------------------------------------------------------------------------------ Total revenues -- -- 9,197 -- 9,197 ------------------------------------------------------------------------------ COSTS AND EXPENSES Operations support -- -- 806 1,044 1,850 Depreciation and amortization -- -- 643 -- 643 General and administrative expenses -- -- -- 4,391 4,391 ------------------------------------------------------------------------------ Total costs and expenses -- -- 1,449 5,435 6,884 ------------------------------------------------------------------------------ Operating income (loss) -- -- 7,748 (5,435) 2,313 Interest income (expense), net -- -- (1,424) 869 (555) Other income (expense), net -- -- (29) (148) (177) ------------------------------------------------------------------------------ Income (loss) before income taxes $ -- $ -- $ 6,295 $ (4,714) $ 1,581 ============================================================================== Income (loss) from discontinued operations, net of income tax $ (57) $ (107) $ $ -- $ (164) -- ============================================================================== Gain on disposition of discontinued operations, net of Income tax $ 4,785 $ -- $ -- $ -- $ -- ============================================================================== Total assets as of September 30, 2000 $ -- $ -- $ 22,422 $ 74,556 $ 96,978 ============================================================================== ____________________________ (1) Includes certain other revenue, interest income, and costs not identifiable to a particular segment such as general and administrative, certain operations support expenses, and certain other income.
PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 7. OPERATING SEGMENTS (CONTINUED)
Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the nine months ended September 30, 1999 Leasing Financing Leasing Other(1) Total ------------------------------------------------------------------------------ REVENUES Lease income $ -- $ -- $ 888 $ -- $ 888 Fees earned -- -- 7,228 -- 7,228 Other -- -- 1,021 4 1,025 ------------------------------------------------------------------------------ Total revenues -- -- 9,137 4 9,141 ------------------------------------------------------------------------------ Costs and expenses Operations support -- -- 1,579 610 2,189 Depreciation and amortization -- -- 359 -- 359 General and administrative expenses -- -- -- 3,224 3,224 ------------------------------------------------------------------------------ Total costs and expenses -- -- 1,938 3,834 5,772 ------------------------------------------------------------------------------ Operating income (loss) -- -- 7,199 (3,830) 3,369 Interest expense, net -- -- (1,520) -- (1,520) Other income (expenses), net -- -- 700 (123) 577 ------------------------------------------------------------------------------ Income (loss) before income taxes $ -- $ -- $ 6,379 $ (3,953) $ 2,426 ============================================================================== Income (loss) from discontinued operations, net of income taxes $ (257) $ 1,198 $ -- $ -- $ 941 ============================================================================== Cumulative effect of accounting change, net of income taxes $ -- $ (250) $ -- $ -- $ (250) ============================================================================== Total assets as of September 30, 1999 $ 16,372 $ 25,140 $ 35,084 $ 6,812 $ 83,408 ============================================================================== (1) Includes certain other revenue, interest income, and costs not identifiable to a particular segment such as general and administrative, certain operations support expenses, and certain other income.
8. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FROM DISCONTINUED OPERATIONS, NET OF TAX In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which required costs related to start-up activities to be expensed as incurred. The statement required that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment operations which is being accounted for as discontinued operations. 9. SUBSEQUENT EVENTS The Company's senior lender agreed to waive certain debt covenants if the Company placed securities with maturity values equal to 66% of future principal payments under the senior secured notes in an escrow account. Accordingly, in October 2000, the Company purchased U.S. Government Securities with a face value of $9.5 million. During October 2000, the Company purchased $10.0 million in marine containers which are held for sale to the affiliated programs. The Company had paid for $8.6 million of these containers as of November 9, 2000. On October 31, 2000, the Company received $1.0 million from the buyer of AFG. This amount represented the $0.9 million receivables on the consolidated balance sheet on September 30, 2000 plus interest on this amount. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MANAGEMENT OF INVESTMENT PROGRAMS The Company has syndicated investment programs from which it earns various fees and equity interests. Professional Lease Management Income Fund I, LLC (Fund I) was structured as a limited liability company with a no front-end fee structure. The previously syndicated limited partnership programs allow the Company to receive fees for the acquisition and initial leasing of the equipment. The Fund I program does not provide for acquisition and lease negotiation fees. The Company invested the equity raised through syndication for these programs in transportation equipment and related assets, which it then manages on behalf of the investors. The equipment management activities for these types of programs generate equipment management fees for the Company over the life of a program. The limited partnership agreements entitle the Company to receive a 1% or 5% interest in the cash distributions and earnings of a partnership, subject to certain allocation provisions. The Fund I agreement entitles the Company to a 15% interest in the cash distributions and earnings of the program, subject to certain allocation provisions. The Company's interest in the earnings and distributions of Fund I will increase to 25% after the investors have received distributions equal to their original invested capital. In 1996, the Company announced the suspension of public syndication of equipment leasing programs with the close of Fund I. As a result of this decision, revenues earned from managed programs, which include management fees, partnership interests and other fees, and acquisition and lease negotiation fees, will be reduced in the future as the older programs liquidate and the managed equipment portfolio for these programs becomes permanently reduced. In accordance with certain limited partnership agreements, four limited partnerships have entered their liquidation phases and the Company has commenced an orderly liquidation of the partnerships' assets. Two of the limited partnerships, PLM Equipment Growth Fund III and PLM Equipment Growth Fund IV are expected to be liquidated by the end of 2001. Two of the limited partnerships, PLM Equipment Growth Fund and PLM Equipment Growth Fund II will terminate on December 31, 2006, unless terminated earlier upon the sale of all equipment or by certain other events. The Company will occasionally own transportation equipment prior to sale to affiliated programs or third parties. During this period, the Company earns lease revenue and incurs interest and operating expenses. TRAILER LEASING The Company operated 22 trailer rental facilities doing business as PLM Trailer Leasing that engaged in short-term and mid-term operating leases. Nineteen of these facilities leased predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities leased only dry van (non-refrigerated) trailers. On May 24, 2000, PLM International, Inc. and Marubeni America Corporation signed an asset purchase agreement to sell the refrigerated and dry trailer assets and related liabilities of PLM International, Inc. to Marubeni America Corporation. PLM shareholders approved the transaction on August 25, 2000. At the closing of the sale on September 30, 2000, Marubeni America Corporation paid $67.5 million in cash to PLM International for its 4,250 trailers and assumed $49.2 million in debt and other liabilities, including the operation of most of the PLM Trailer Leasing's trailer yards located throughout the United States. In addition, $1.5 million was placed into an escrow account. This cash will be released to the Company after it receives certain tax clearance certificates. This is expected to occur in the fourth quarter of 2000. This $1.5 million is included in restricted cash on the September 30, 2000 consolidated balance sheet. The Company expects to receive an additional $0.2 million from Marubeni America Corporation in the fourth quarter of 2000 related to the sale of the trailer assets. This amount is included in receivables on the September 30, 2000 consolidated balance sheet. The Company will pay $4.8 million of income tax related to the trailer sale in the fourth quarter of 2000 and the first quarter of 2001. Accordingly, the Company's trailer leasing is accounted for as a discontinued operation and prior periods have been restated. Commercial and Industrial Equipment Leasing and Financing The Company had a subsidiary, Amercian Finance Group, Inc. (AFG) that specialized in the leasing and management of commercial and industrial equipment. In October 1999, the Company agreed to sell American Finance Group, Inc. (AFG), its commercial and industrial equipment leasing subsidiary for approximately $28.3 million, net of transaction costs and income taxes. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale of AFG was completed on March 1, 2000. On that date, the Company received $29.0 million for AFG. In July 2000, the Company received additional sales proceeds of $2.3 million for the sale of AFG. The Company received additional proceeds of $0.9 million in the fourth quarter of 2000 which was included in the receivables on the consolidated balance sheet on September 30, 2000 related to the sale of AFG. The amount was disputed by the purchaser of AFG and was submitted to arbitration. The Company prevailed in arbitration. Taxes and transaction costs related to the sale are estimated to be $3.9 million resulting in estimated net proceeds to the Company of $28.3 million. In addition, AFG distributed to PLMI certain assets with a net book value of $2.7 million and cash of $0.4 million immediately prior to the sale. Accordingly, the Company's commercial and industrial leasing operations are accounted for as a discontinued operation and prior periods have been restated. COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 The following analysis reviews the operating results of the Company: REVENUES
For the Three Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Operating lease income $ 792 $ 275 Management fees 1,656 1,739 Partnership interests and other fees 1,500 263 Acquisition and lease negotiation fees 385 -- Other 130 337 ----------------------------------------- Total revenues $ 4,463 $ 2,614
The fluctuations in revenues for the three months ended September 30, 2000, compared to the three month ended September 30, 1999, are summarized and explained below. OPERATING LEASE INCOME: Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. Operating lease income increased $0.5 million during the third quarter of 2000, compared to the same quarter of 1999. Lease income from assets held for sale were $0.6 million and $0.3 million for the quarters ended September 30, 2000 and 1999, respectively. During the third quarter of 2000, the Company owned $14.0 million in marine containers that were sold on September 30, 2000 to affiliated programs at cost, which approximated their fair market value. The Company earned $0.6 million in operating lease income on these marine containers during the third quarter of 2000. During the third quarter of 1999, the Company owned $6.8 million in marine containers that were sold during the three months ended September 30, 1999 to affiliated programs at cost, which approximated their fair market value. The Company earned $0.3 million in operating lease income on these marine containers during the third quarter of 1999. Other operating lease income was $0.2 million and $12,000 for the quarters ended September 30, 2000 and 1999, respectively. The increase in other operating lease income was due to the increase in volume of other assets on operating lease. MANAGEMENT FEES: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees were $1.7 million for the quarters ended September 30, 2000 and 1999. The decrease in management fees of $0.1 million resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs and Professional Lease Management Income Fund I, LLC (Fund I). With the termination of syndication activities in 1996, management fees from the older programs are decreasing and are expected to continue to decrease as the programs liquidate their equipment portfolios. PARTNERSHIP INTERESTS AND OTHER FEES: The Company records as revenues its equity interest in the earnings of the Company's affiliated programs. The net earnings from the affiliated programs were $1.3 million and $0.3 million for the quarter ended September 30, 2000 and 1999, respectively. The increase of $1.0 million in net earnings from the affiliated entities compared to 1999, resulted from increased gains from disposal of equipment in the affiliated programs. In addition, a decrease of $0.1 million in the Company's residual interests in the programs was recorded during the quarter ended September 30, 1999. A similar reduction was not required in the three months ended September 30, 2000. An increase of $0.2 million in other fees was due to increased sales commissions in the three months ended September 30, 2000, compared to the same period of 1999. ACQUISITION AND LEASE NEGOTIATION FEES: During the quarter ended September 30, 2000, the Company, on behalf of the EGF programs, purchased transportation equipment for $7.0 million and $0.4 million in acquisition and lease negotiation fees were earned on these purchases. The Company did not purchase any equipment for the EGF programs during the quarter ended September 30, 1999. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996, because Fund I has a no front-end fee structure, and because the Company has reached the maximum allowable fees that may be taken in some of the programs, acquisition and lease negotiation fees will continue at the current levels or be reduced in the future. OTHER: Other revenues were $0.1 million and $0.3 million for the quarters ended September 30, 2000 and 1999, respectively. A decrease in other revenues of $0.1 million was due to loss from disposal of other assets during the quarter ended September 30, 2000. No similar loss occurred during the same period of 1999. A decrease of $0.1 million in other revenues was due to lower data processing fees earned from the affiliated programs in the three months ended September 30, 2000 compared to the same period of 1999. COSTS AND EXPENSES
For the Three Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Operations support $ 679 $ 756 Depreciation and amortization 247 119 General and administrative 1,967 780 ----------------------------------------- Total costs and expenses $ 2,893 $ 1,655
OPERATIONS SUPPORT: Operations support expense, including salary and office-related expenses for operational activities and provision for doubtful accounts, decreased $0.1 million (10%) for the quarter ended September 30, 2000, compared to the quarter ended September 30, 1999. A $0.3 million decrease in operations support expenses related to the management of investment programs was due to a reduction in the size of the managed equipment portfolio. This decrease in operations support expenses was partially offset by a $0.2 million increase in operations support expenses related to other activities due to the increase in compensation and benefits expense. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense increased $0.1 million (108%) for the quarter ended September 30, 2000, compared to the quarter ended September 30, 1999. The increase resulted from an increase in the volume of other assets held for operating lease. GENERAL AND ADMINISTRATIVE: General and administrative expenses increased $1.2 million (152%) during the quarter ended September 30, 2000, compared to the quarter ended September 30, 1999. An increase of $1.6 million was due to severance costs incurred in 2000 related to staffing reductions. A similar event did not occur in 1999. The increase was partially offset by a $0.4 million decrease of in compensation and benefits expense as a result of a decrease in staffing requirements. OTHER INCOME AND EXPENSES
For the Three Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Interest expense $ (554) $ (521) Interest income 266 59 Other income (expense), net (175) 701
INTEREST INCOME: Interest income increased $0.2 million (351%) during the quarter ended September 30, 2000, compared to the same quarter of 1999. The increase was primarily due to increased loans outstanding to the affiliated programs in the three months ended September 30, 2000, compared to the same period of 1999. OTHER INCOME (EXPENSES), NET: Other expenses of $0.2 million during the quarter ended September 30, 2000, compared to $0.7 million of other income during the same quarter of 1999. Other expenses of $0.2 million for the quarter of 2000 primarily related to the litigation cost. No similar expenses were incurred during the same quarter of 1999. Other income of $0.7 million for the quarter ended September 30, 1999 represented mileage income received from the railroads. No similar income was received during the same quarter of 2000. PROVISION FOR INCOME TAXES: For the three months ended September 30, 2000, the provision for income tax was $0.4 million, representing an effective rate of 38%. For the three months ended September 30, 1999, the provision for income taxes was $0.5 million, representing an effective rate of 39%. The decrease in the effective rate of 1% was due to the change in the effect of permanent difference between tax and book income. NET INCOME FROM DISCONTINUED OPERATIONS On May 24, 2000, PLM International, Inc. and Marubeni America Corporation signed an asset purchase agreement to sell the refrigerated and dry trailer assets and related liabilities of PLM International, Inc. to Marubeni America Corporation. PLM shareholders approved the transaction on August 25, 2000. The sale was completed on September 30, 2000. In October 1999, the Company agreed to sell its commercial and industrial equipment subsidiary American Finance Group, Inc. (AFG). On February 25, 2000, the shareholders of PLM International approved the transaction. The sale was completed on March 1, 2000. Accordingly, the Company's trailer leasing and commercial and industrial leasing operations are accounted for as discontinued operations and prior periods have been restated. Net income (loss) from discontinued operations for the quarter ended September 30, 2000 and 1999 are as follows (in thousands of dollars):
For the Three Months Ended For the Three Months Ended September 30, 2000 September 30, 1999 -------------------------------------- ---------------------------------- Trailer Trailer Leasing AFG Total Leasing AFG Total -------------------------------------- ------------------------------------ REVENUES Operating lease income $ 9,259 $ -- $ 9,259 $ 7,069 $ 2,439 $ 9,508 Finance lease income -- -- -- -- 2,696 2,696 Management fees 192 -- 192 227 171 398 Gain (loss) on sale or disposition of (18) -- (18) (29) 458 429 assets, net Other 13 -- 13 10 489 499 -------------------------------------- ------------------------------------ Total revenues 9,446 -- 9,446 7,277 6,253 13,530 -------------------------------------- ------------------------------------ COSTS AND EXPENSES Operations support 5,220 -- 5,220 3,365 1,295 4,660 Depreciation and amortization 2,728 -- 2,728 2,053 2,149 4,202 General and administrative expenses 1,317 -- 1,317 542 -- 542 -------------------------------------- ------------------------------------ Total costs and expenses 9,265 -- 9,265 5,960 3,444 9,404 -------------------------------------- ------------------------------------ Operating income (loss) 181 -- 181 1,317 2,809 4,126 Interest expense, net (1,005) -- (1,005) (902) (2,174) (3,076) Other expense (4) -- (4) -- (1) (1) -------------------------------------- ------------------------------------ Net income (loss) from discontinued operations before income taxes (828) -- (828) 415 634 1,049 (Benefit from) provision for income tax (319) -- (319) 162 240 402 -------------------------------------- ------------------------------------ Net income (loss) from discontinued $ (509) $ -- $ (509) $ 253 $ 394 $ 647 operations ====================================== ==================================== Gain on disposition of discontinued opertions, net of income tax $ 4,785 $ -- $ 4,785 $ -- $ -- $ -- ====================================== ====================================
TRAILER LEASING: Operating lease income increased to $9.3 million for the three months ended September 30, 2000, compared to $7.1 million for the same period of 1999 which resulted from an increase in the trailers owned and on operating lease. Operation support increased to $5.2 million for the three months ended September 30, 2000, compared to $3.4 million for the same period of 1999 was due to the expansion of PLM Trailer Leasing, with the opening of additional rental yards in 1999 and trailer purchases in 1999 and 2000. Depreciation and amortization increased to $2.7 million for the three months September 30, 2000, compared to $2.1 million for the same period of 1999 due to an increase in the amount of refrigerated trailer equipment on operating lease at PLM Trailer Leasing. General and administrative expenses increased to $1.3 million for the three months ended September 30, 2000, compared to $0.5 million for the same period of 1999. The increase of $0.8 million was due to the growth of the trailer business. Interest expenses increased to $1.0 million for the three months ended September 30, 2000, compared to $0.9 million for the same period of 1999 due to increased borrowings to fund trailer purchases. A $4.8 million after-tax gain on disposition of discontinued operations was recorded for the three months ended September 30, 2000 related to the trailer assets of the Company. AFG: The decrease in all revenues and expenses of AFG for the three months ended September 30, 2000 compared to the same period of 1999 was due to the sale of AFG on March 1, 2000. NET INCOME As a result of the foregoing, for the three months ended September 30, 2000, net income was $5.0 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.67 and $0.66, respectively. For the same period of 1999, net income was $1.4 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.17. COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 The following analysis reviews the operating results of the Company: REVENUES
For the Nine Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Operating lease income $ 1,101 $ 888 Management fees 5,205 5,570 Partnership interests and other fees 1,688 579 Acquisition and lease negotiation fees 538 1,079 Other 665 1,025 ----------------------------------------- Total revenues $ 9,197 $ 9,141
The fluctuations in revenues for the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999, are summarized and explained below. OPERATING LEASE INCOME: Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. Operating lease income increased $0.2 million during nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. Lease income from assets held for sale were $0.7 million and $0.9 million for the nine months ended September 30, 2000 and 1999, respectively. During the nine months ended September 30, 2000, the Company owned $14.0 million in marine containers which were sold to affiliated programs at cost, which approximated their fair market value. The Company earned $0.7 million in operating lease income from these marine containers during the nine months ended September 30, 2000. During the nine months ended September 30, 1999, the Company purchased $21.8 million in marine containers that were sold during the nine months ended September 30, 1999 to affiliated programs at cost, which approximated their fair market value. The Company earned $0.9 million in operating lease income on these marine containers during the nine months ended September 30, 1999. Other operating lease income was $0.4 million and $38,000 for the nine months ended September 30, 2000 and 1999, respectively. The increase in other operating lease income was due to the increase in the volume of other assets on operating lease. MANAGEMENT FEES: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees were $5.2 million and $5.6 million for the nine months ended September 30, 2000 and 1999, respectively. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund programs and Professional Lease Management Income Fund I, LLC. With the termination of syndication activities in 1996, management fees from the older programs are decreasing and are expected to continue to decrease as the programs liquidate their equipment portfolios. PARTNERSHIP INTERESTS AND OTHER FEES: The Company records as revenues its equity interest in the earnings of the Company's affiliated programs. The net earnings from the affiliated programs were $1.5 million and $1.1 million for the nine months ended September 30, 2000 and 1999, respectively. The increase in net earnings of $0.4 million from the affiliated entities resulted from increased gains from disposal of equipment in the affiliated programs in the nine months ended September 30, 2000, compared to the same period of 1999. In addition, a decrease of $0.6 million in the Company's residual interests in the programs was recorded during the nine months ended September 30, 1999. A similar reduction was not required in the nine months ended September 30, 2000. An increase of $0.2 million in other fees was due to increased sales commissions in the nine months ended September 30, 2000, compared to the same period of 1999. ACQUISITION AND LEASE NEGOTIATION FEES: During the nine months ended September 30, 2000, the Company, on behalf of the EGF programs, purchased transportation and other equipment for $12.0 million, compared to $37.1 million of transportation and other equipment during the nine months ended September 30, 1999, resulting in a $0.5 million decrease in acquisition and lease negotiation fees. During the nine months ended September 30, 2000, the Company did not take acquisition and lease negotiation fees on $2.2 million of the hushkit purchased for the equipment of an affiliated program due to the investment phase of this affiliated program was closed. In addition, the Company has reached certain fee limitations for another affiliated program per the partnership agreement. During the nine months ended September 30, 1999, the Company did not take acquisition and lease negotiation fees on $16.6 million of this equipment purchased for this program. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996, because Fund I has a no front-end fee structure, and because the Company has reached the maximum allowable fees that may be taken in some of the programs, acquisition and lease negotiation fees will continue at the current levels or be reduced in the future. OTHER: Other revenues were $0.7 million and $1.0 million for the nine months ended September 30, 2000 and 1999, respectively. The decrease in other revenues was due to loss from disposal of other assets during the nine months ended September 30, 2000. A similar loss did not occur in 1999. COSTS AND EXPENSES
For the Nine Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Operations support $ 1,850 $ 2,189 Depreciation and amortization 643 359 General and administrative 4,391 3,224 ----------------------------------------- Total costs and expenses $ 6,884 $ 5,772
OPERATIONS SUPPORT: Operations support expense, including salary and office-related expenses for operational activities and provision for doubtful accounts, decreased $0.3 million (15%) for the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. A $0.7 million decrease in operations support expenses related to the management of investment programs due to a reduction in the size of the managed equipment portfolio. This decrease in operations support was partially offset by a $0.4 increase in operations support expense related to other activities due to the increase in compensation and benefits expense. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense increased $0.3 million (79%) for the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. The increase resulted from an increase in the volume of other assets held for operating lease. GENERAL AND ADMINISTRATIVE: General and administrative expenses increased $1.2 million (36%) during the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. The increase was due to severance costs incurred in 2000 related to staff reductions. A similar event did not occur in 1999. OTHER INCOME AND EXPENSES
For the Nine Months Ended September 30, 2000 1999 ----------------------------------------- (in thousands of dollars) Interest expense $ (1,424) $ (1,772) Interest income 869 252 Other income (expense), net (177) 577
INTEREST EXPENSE: Interest expense decreased $0.3 million (20%) during the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999, due to reductions in the amounts outstanding under the senior secured notes in the nine months ended September 30, 2000, compared to the same period of 1999. INTEREST INCOME: Interest income increased $0.6 million (245%) during the nine months ended September 30, 2000, compared to the same period of 1999. An increase in interest income of $0.4 million resulted from higher cash balances that resulted from the proceeds received from the sale of AFG. An increase of $0.2 million resulted from increased loans made to the affiliated programs in the nine months ended September 30, 2000, compared to the same period of 1999. OTHER INCOME (EXPENSES), NET: Other expenses of $0.2 million during the nine months ended September 30, 2000, compared to $0.6 million of other income during the same period of 1999. Other expenses of $0.2 million for the nine months ended September 30, 2000 primarily related to the litigation cost. No similar expenses were incurred during the same period of 1999. Other income of $0.6 million for the nine months ended September 30, 1999 represents $0.7 million of mileage income received from the railroads, partially offset by $0.1 million in expenses related to the settlement of a lawsuit. No similar income was received during the nine months ended September 30, 2000. PROVISION FOR INCOME TAXES: For the nine months ended September 30, 2000, the provision for income tax was $0.6 million, representing an effective rate of 38%. For the nine months ended September 30, 1999, the provision for income taxes was $1.0 million, representing an effective rate of 40%. The decrease in the effective rate of 2% was due to the change in the effect of permanent difference between tax and book income. NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS Net income (loss) from discontinued operations for the nine months ended September 30, 2000 and 1999 are as follows (in thousands of dollars):
For the Nine Months Ended For the Nine Months Ended September 30, 2000 September 30, 1999 -------------------------------------- ---------------------------------- Trailer Trailer Leasing AFG Total Leasing AFG Total ------------------------------------ ------------------------------------ REVENUES Operating lease income $ 24,312 $ 1,841 $ 26,153 $ 15,746 $ 6,819 $ 22,565 Finance lease income -- 1,650 1,650 -- 8,573 8,573 Management fees 550 100 650 628 578 1,206 Gain (loss) on sale or disposition of (39) 40 1 (41) 2,100 2,059 assets, net Other 46 445 491 10 1,602 1,612 ------------------------------------ ------------------------------------ Total revenues 24,869 4,076 28,945 16,343 19,672 36,015 ------------------------------------ ------------------------------------ COSTS AND EXPENSES Operations support 11,996 1,412 13,408 7,754 4,075 11,829 Depreciation and amortization 7,622 1,505 9,127 5,292 5,732 11,024 General and administrative expenses 2,193 -- 2,193 1,627 -- 1,627 ------------------------------------ ------------------------------------ Total costs and expenses 21,811 2,917 24,728 14,673 9,807 24,480 ------------------------------------ ------------------------------------ Operating income 3,058 1,159 4,217 1,670 9,865 11,535 Interest expense, net (3,148) (1,655) (4,803) (2,090) (6,959) (9,049) Other expense (4) -- (4) -- (975) (975) ------------------------------------ ------------------------------------ Net income (loss) from discontinued operations before income taxes (94) (496) (590) (420) 1,931 1,511 (Benefit from) provision for income tax (37) (189) (226) (163) 733 570 ------------------------------------ ------------------------------------ Net income previously accrued as a component of loss on a discontinued operation -- 200 200 -- -- -- ------------------------------------ ------------------------------------ Net income (loss) from discontinued $ (57) $ (107) $ (164) $ (257) $ 1,198 $ 941 operations ==================================== ==================================== Gain on disposition of discontinued operations, net of income tax $ 4,785 $ -- $ 4,785 $ -- $ -- $ -- ==================================== ====================================
TRAILER LEASING: Operating lease income increased to $24.3 million for the nine months ended September 30, 2000, compared to $15.7 million for the same period of 1999 which resulted from an increase in the trailers owned and on operating lease. Operation support increased to $12.0 million for the nine months ended September 30, 2000, compared to $7.8 million for the same period of 1999 due to the expansion of PLM Trailer Leasing, with the opening of additional rental yards in 1999 and trailer purchases in 1999 and 2000. Depreciation and amortization increased to $7.6 million for the nine months September 30, 2000, compared to $5.3 million for the same period of 1999 was due to an increase in the amount of refrigerated trailer equipment on operating lease at PLM Trailer Leasing. General and administrative expenses increased to $2.2 million for the nine months ended September 30, 2000, compared to $1.6 million for the same period of 1999. The increase of $0.6 million was due to the growth of the trailer business. Interest expenses increased to $3.1 million for the nine months ended September 30, 2000, compared to $2.1 million for the same period of 1999 due to increased borrowings to fund trailer purchases. A $4.8 million after-tax gain on disposition of discontinued operations was recorded for the nine months ended September 30, 2000 related to the trailer assets of the Company. AFG: The decrease in all revenues and expenses of AFG for the nine months ended September 30, 2000 was due to the sale of AFG on March 1, 2000. In addition, other expenses decreased $1.0 million due to the write-off of expenses related to the proposed initial public offering of AFG in 1999. A similar expense was not recorded in 2000. During the first quarter of 2000, $0.6 million of after-tax loss on disposal of discontinued operations was recorded against the provision established at December 31, 1999 and is not included in the above table. CUMULATIVE EFFECT OF ACCOUNTING CHANGE In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the second quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment leasing subsidiary which is being accounted for as discontinued operations. NET INCOME As a result of the foregoing, for the nine months ended September 30, 2000, net income was $5.6 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.74 and 0.73, respectively. For the same period of 1999, net income was $2.2 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.27, and $0.26, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash requirements have historically been satisfied through cash flow from operations, borrowings, the sale of equipment, and the sale of business segments. Liquidity in the remainder of 2000 and beyond will depend, in part, the management of existing sponsored programs and the effectiveness of cost control programs. Management believes the Company can accomplish the preceding and that it will have sufficient liquidity and capital resources for the future. Future liquidity is influenced by the factors summarized below. DEBT FINANCING: WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by the Company for sale to affiliated programs or third parties have, from time to time, been partially funded by a warehouse credit facility. This facility was shared with PLM Equipment Growth Fund VI , PLM Equipment Growth & Income Fund VII, and Professional Lease Management Income Fund I, LLC. Borrowings under this facility by the other eligible borrowers reduced the amount available to be borrowed by the Company. All borrowings under this facility were guaranteed by the Company. This facility provided 80% financing for transportation assets. The Company could hold transportation assets under this facility for up to 150 days. Interest accrued at prime or LIBOR plus 162.5 basis points, at the option of the Company. The warehouse facility expired on September 30, 2000. The Company is currently negotiating with a new lender on a $15.0 million warehouse facility with similar terms. The Company expects this facility to be completed in the fourth quarter of 2000. Senior Secured Notes: The Company's senior secured notes agreement, which had an outstanding balance of $15.0 million as of September 30, 2000 and November 9, 2000, bears interest at LIBOR plus 240 basis points. The Company has pledged substantially all of its future management fees, acquisition and lease negotiation fees, data processing fees, and partnership distributions as collateral to the facility. The facility required quarterly interest-only payments through August 15, 1997, with principal plus interest payments beginning November 15, 1997. Principal payments of $1.9 million are payable quarterly through termination of the loan on August 15, 2002. The Company's senior lender agreed to waive certain debt covenants if the Company placed securities with maturity values equal to 66% of future principal payments under the senior secured notes in an escrow account. Accordingly, in October 2000, the Company purchased U.S. Government Securities with a face value of $9.5 million. STOCK REPURCHASE PROGRAM: In May 2000, the Company announced that its Board of Directors had authorized the repurchase of up to $10.0 million of the Company's common stock. As of November 9. 2000, 261,654 shares had been purchased under this plan for $1.9 million. Future purchases of stock will be contingent upon, among other factors, the Company's cash position and compliance with certain debt covenants. LIQUIDATING DISTRIBUTIONS: On November 3, 2000, the Company paid a $5.00 per share liquidating distribution to shareholders of record as of October 22, 2000. Future liquidating distributions from the proceeds of the sale of trailer leasing will be contingent upon, among other factors; the Company's cash position and compliance of certain debt covenants. * * * * * * * * * * Management believes that, through debt financing and cash flows from operations, the Company will have sufficient liquidity and capital resources to meet its projected future operating needs over the next twelve months. FORWARD-LOOKING INFORMATION: Except for historical information contained herein, the discussion in this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Company's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Company's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure is that of interest rate risk. A change in the U.S. prime interest rate, LIBOR rate, or lender's cost of funds based on commercial paper market rates, would affect the rate at which the Company could borrow funds under its senior notes. The Company estimates a one percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $33,000 in the remainder of 2000, $75,000 in 2001, and $12,000 in 2002. The Company estimates a two percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $66,000 in the remainder of 2000, $0.2 million in 2001, and $23,000 in 2002. PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 6 to the consolidated financial statements. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 10.1 Amendment No.1 to Asset Purchase Agreement among Marubeni America Corporation and PLM International, Inc. dated September 29, 2000 incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on October 11, 2000. 10.2 License Agreement between PLM International, Inc. and Marubeni America Corporation Trailer Leasing, L.L.C. dated September 30, 2000. 10.3 Non-competition Agreement among PLM International, Inc., PLM Rental, Inc., PLM Transportation Equipment Corporation, TEC AcquiSub, Inc., PLM Financial Services, Inc., Professional Lease Management Income Fund I, L.L.C., PLM Equipment Growth Fund I thru VI, PLM Equipment Growth and Income Fund VII, and Marubeni America Corporation dated September 30, 2000. (B) Reports on Form 8-K Report dated October 9, 2000 (filed on October 11, 2000) incorporated by reference to exhibit 2.2 to registrant's Form 8-K filed with the Securities and Exchange Commission on October 11, 2000 - Announcement of the completion of the sale of PLM International Inc.'s trailer leasing operations, the resignation of Mr. Robert N. Tidball, President and Chief Executive Officer, the appointment of Mr. Stephen M. Bess as President, and as Chief Executive Officer, and his election to Board of Directors of PLM International, Inc., and the authorization of a partial liquidating distribution of $5 per share to shareholders of PLM International, Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM INTERNATIONAL, INC. /s/ Richard K Brock Richard K Brock Chief Financial Officer Date: November 9, 2000 EX-10 2 0002.txt EX-10.2 LICENSING AGREEMENT LICENSE AGREEMENT BETWEEN PLM INTERNATIONAL, INC. AND MAC TRAILER LEASING, L.L.C. This License Agreement (the "Agreement") is made effective as of this 30th day of September, 2000 ("Effective Date"), between PLM International, Inc., a Delaware corporation, having its place of business at One Market, Steuart Street Tower, Suite 800, San Francisco, California 94105 ("Licensor"), and MAC Trailer Leasing, L.L.C., a Delaware limited liability company, having its place of business at 1 Maynard Drive, Park Ridge, New Jersey 07656 ("Licensee"). RECITALS: WHEREAS, Licensor is the owner of certain trademarks and service marks and registrations, including the service marks PLM TRAILER LEASING, PLM PLM TRAILER LEASING and design, PLM PLM TRAILER LEASING REFRIGERATED SOLUTIONS FOR THE FOODSERVICE INDUSTRY and design, REFRIGERATED SOLUTIONS FOR THE FOODSERVICE INDUSTRY, and PLM RENTAL, relating to the truck trailer equipment rental and leasing services ("Service Marks"); WHEREAS, Licensor owns federal service mark registrations for PLM TRAILER LEASING, Registration No. 2,248,568, PLM PLM TRAILER LEASING and design, Registration No. 2,248,567, PLM PLM TRAILER LEASING REFRIGERATED SOLUTIONS FOR THE FOODSERVICE INDUSTRY and design, Registration No. 2,247,007, REFRIGERATED SOLUTIONS FOR THE FOODSERVICE INDUSTRY, Registration No. 2,142,572, and PLM RENTAL, Registration No. 1,651,728; WHEREAS, pursuant to an Asset Purchase Agreement dated May 24, 2000 (the "Purchase Agreement") between Marubeni America Corporation, a New York corporation ("MAC"), Licensor, and the other sellers party thereto, Licensor is selling all of its interest in certain Acquired Assets and Assumed Liabilities of the Business to MAC (as such terms are defined in the Purchase Agreement); WHEREAS, as permitted by the Purchase Agreement, MAC and Licensor, among others, have agreed that MAC may assign its rights thereunder to Licensee; WHEREAS, Licensee wishes to use the Service Marks in connection with trailer equipment rental and leasing services (the "Trailer Leasing Services") for a transitional period of five years from the Effective Date; and WHEREAS, Licensor is willing to permit such transitional use of the Service Marks by Licensee in accordance with the terms and conditions of this Agreement; NOW, THEREFORE, pursuant to the purchase of Acquired Assets and Assumed Liabilities of the Business, the parties hereto agree as follows: 1. Licensor hereby grants Licensee an irrevocable, royalty-free, exclusive license to use the Service Marks solely in connection with Trailer Leasing Services (the "License") for a period of five years from the Effective Date, subject to the terms and conditions set forth in this Agreement. 2. The License granted applies solely to the Service Marks as set forth on the attached exhibits for use solely with Trailer Leasing Services and for no other purpose; Licensee shall have no right to use the name "PLM" or the "PLM" logo apart from the words "Rental" or "Trailer Leasing." Licensee may use the Service Marks whether alone or in conjunction with other marks of Licensee or third parties. 3. Licensor has not received notice of any claim that the use of the Service Marks does or may infringe the rights of any third party. 4. Licensee acknowledges Licensor's ownership of the Service Marks and the validity of any registrations therefor. Except as otherwise provided in this Agreement, Licensee shall not apply to register or register the Service Marks. Licensee agrees to assist Licensor as necessary in maintaining its rights in the Service Marks, including assisting Licensor upon request in contesting any third-party infringement. 5. Licensor acknowledges that Licensee shall have the sole and exclusive right throughout the world to use the Service Marks. Licensor shall not, and shall not authorize any other third party to, use the Service Marks in any manner whatsoever. Licensor shall not anywhere in the world challenge the Licensee's use of the Service Marks, provided that such use is consistent with the requirements of this Agreement. Licensor will not take or, at Licensee's expense, omit to take, or authorize the taking or omission of, any action that could dilute or adversely affect any of the Service Marks or Licensee's license thereof. Licensor shall not adopt or use, or license others to use, in connection with any goods or services any other trademark or service mark that is a variation of or phonetically similar to any Service Mark or suggestive of Trailer Leasing Services. 6. Notwithstanding anything to the contrary in this Agreement, Licensor may continue to use the name "PLM" and the "PLM" logo during the term of this Agreement and thereafter, whether alone or in conjunction with other marks or words, other than in connection with Trailer Leasing Services or in a manner that is suggestive of Trailer Leasing Services. 7. Licensor shall take all necessary steps, including in any proceeding before the United States Patent and Trademark Office, to maintain, to the extent permitted by law, any registration of each Service Mark, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings, and the payment of fees and taxes. Licensee shall pay all costs and expenses that Licensor reasonably incurs pursuant to this paragraph 7. 8. Licensor shall not knowingly permit any registration relating to any Service Mark to become abandoned or dedicated to the public or placed in the public domain or to become invalid or unenforceable, and shall notify Licensee immediately if it knows, or has reason to know, that any such actions may occur or of any final or otherwise material adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court) regarding the ownership or validity of any Service Mark, its right to register the same, or to keep, maintain, and enforce the same. If Licensor is required to take any affirmative actions to comply with this paragraph, Licensee shall pay all costs and expenses that Licensor reasonably incurs. 9. Licensor shall not take or omit to take, or authorize the taking or omission of, any action with respect to the Service Marks that would in any way diminish the goodwill associated with the Service Marks. 10. Licensor shall comply with all the terms and conditions of the Non-Competition Agreement dated as of the Effective Date between, inter alia, Licensor and Licensee and shall require any assignee or successor to any of the Collateral (as defined in paragraph 19) to comply therewith. 11. Upon receiving notice from Licensee of activities by a third party that may be infringing or otherwise impairing the strength of the Service Marks, Licensor agrees to act promptly and diligently to enforce and otherwise defend its and Licensee's rights in the Service Marks. Licensee shall pay all costs and expenses that Licensor reasonably incurs pursuant to this paragraph 11. 12. Licensor may assign, sell or otherwise divest all or a portion of its interest in the Services Marks, the goodwill associated therewith and the business in connection with which the Licensor's PLM word mark and PLM logo ("PLM Marks") are used, provided that (i) Licensor assigns, sells or otherwise divests all or a portion of its interest in the Services Marks and the goodwill associated therewith only in connection with the PLM Marks; (ii) the party acquiring such interest agrees in writing to be bound by the terms and conditions of this Agreement, including assuming all rights, obligations and liabilities associated herewith, and acquiring the Collateral subject to the lien of Licensee's security interest hereunder, (iii) Licensee continues to have a perfected security interest in the Collateral, and (iv) on or before the date of such assignment, sale or other divestiture, the acquiring party shall have filed and recorded such instruments and documents with the appropriate governmental authorities and executed and delivered to Licensee such other instruments and documents and taken such other action as necessary or as Licensee shall reasonably request in order to maintain the perfection and priority of the Collateral. Except as set forth in the preceding sentence, Licensor will not sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Service Marks, any associated goodwill or any other Collateral, or create or suffer to exist any lien or other charge or encumbrance upon or with respect to any of the Service Marks, any associated goodwill or any other Collateral, except for the license and security interest created by this Agreement. 13. Licensee may assign this Agreement and the security interests granted hereunder to an affiliated company that is either a direct or indirect subsidiary, that is at least 80% directly or indirectly owned by Marubeni Corporation. If, after an assignment permitted under this paragraph, the assignee ceases to be at least 80% directly or indirectly owned by Marubeni Corporation, the assignee shall assign this Agreement and the security interests granted herein to Marubeni Corporation or a direct or indirect subsidiary, that is at least 80% directly or indirectly owned by Marubeni Corporation, within thirty days after the date on which the assignee ceases to be at least 80% directly or indirectly owned by Marubeni Corporation. If the assignee fails to comply with the foregoing sentence, this Agreement shall terminate. Licensee may assign this Agreement and the security interests granted hereunder to a third party subject to Licensor's consent, which consent Licensor shall not unreasonably withhold, except that Licensee may not assign this Agreement to a competitor of Licensor or to a third party whose affiliation with Licensor is reasonably believed by Licensor to damage materially Licensor's reputation. 14. Licensor shall cause a copy of this Agreement to be filed with the Securities Exchange Commission as a material contract as party of the exhibits to Licensor's next periodic report after the Effective Date under the Securities and Exchange Act of 1934. 15. During the term hereof, Licensor agrees that, in the event that Licensor or an assignee of Licensor, as applicable, ceases to conduct business in the ordinary course, Licensor shall assign to Licensee the Service Marks and any goodwill associated with the Service Marks. In the event of an assignment under this paragraph 15: (i) this Agreement shall terminate and (ii) no later than five years after the Effective Date, Licensee shall operate its Trailer Leasing Services under a name that does not include or resemble the word "PLM" or any word confusingly similar thereto, promptly destroy all stationery, business cards, forms and other business materials containing the word mark "PLM," and file an express abandonment with the United States Patent and Trademark Office. 16. Upon the expiration or termination of the License, Licensee shall operate its Trailer Leasing Services under a name that does not include or resemble the word "PLM" or any word confusingly similar thereto, and Licensee shall promptly destroy all stationery, business cards, forms and other business materials containing the word mark "PLM". 17. Upon the expiration or termination of the License, Licensor agrees that it shall not license the use of the Service Marks or any mark confusingly similar thereto to any person or entity, nor shall it use, or allow any person or entity to use, the Service Marks or any mark confusingly similar thereto. 18. A material part of the consideration for Licensor's licensing the Service Marks to Licensee is the confidence Licensor has in Licensee's excellent record of past business conduct and favorable reputation for integrity and high quality of services. Licensee agrees that the services rendered under the Service Marks will continue to be of the same high quality as previously provided by Licensor, and that Licensee will not engage in any activity which would impugn Licensor's reputation or that of the Service Marks. 19. As security for the prompt and complete performance of all of the obligations of the Licensor, now existing or hereafter incurred, arising out of, relating to or connected with this Agreement, Licensor hereby pledges and grants to Licensee a continuing security interest in all of Licensor's right, title, and interest in and to the following, whether now or hereafter existing or acquired (the "Collateral"): (i) each Service Mark and all registrations and recordings thereof; (ii) all extensions or renewals of any of the items described in clause (i); (iii) all of the goodwill of the business of Licensor connected with the use of, and represented and symbolized by the items described in clause (i); and (iv) all proceeds of, and rights associated with, the foregoing, including any claim by Licensor against third parties for past, present, or future infringement or dilution of any Service Mark or for any injury to the goodwill associated with the use of any such Service Mark. a) Licensor covenants and agrees that: (i) contemporaneously with the execution and delivery of this Agreement, it will execute and deliver to Licensee the Trademark Security Agreement in the form attached hereto as Exhibit A (the "Trademark Security Agreement") and a UCC-1 financing statement describing the Collateral for filing with the office of the California Secretary of State and, from time to time at Licensee's expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that Licensee may reasonably request as necessary or desirable in order to perfect, preserve, and protect any security interest granted or purported to be granted hereby or to enable Licensee to exercise and enforce its rights and remedies hereunder with respect to any Collateral; (ii) it will give Licensee at least thirty (30) days' prior written notice of any change in its name, identity or corporate structure or the location of its chief place of business and simultaneously with such change, at Licensee's expense, will take all action necessary or reasonably requested by the Licensee in order to perfect, preserve, and protect the security interest granted or purported to be granted herein. b) Licensor will be deemed in default under this Agreement upon the occurrence of the following (each an "Event of Default"): (i) a material breach by Licensor of this Agreement where such breach materially, adversely affects Licensee's rights under the License or if such breach is of such a nature that it cannot reasonably be cured; or (ii) any other material breach by Licensor of this Agreement, where such breach remains uncured for a period of twenty days after Licensor receives written notice thereof. Upon an Event of Default, Licensee may exercise all rights and remedies of a secured party on default under the Uniform Commercial Code, including, without limitation, foreclose or otherwise enforce Licensee's security interest in the Collateral in any manner permitted by law, and any and all other rights and remedies available to Licensee under applicable law. 20. Licensor hereby irrevocably appoints Licensee as Licensor's attorney-in-fact, with full authority in the place and stead of Licensor and in the name of Licensor or otherwise, from time to time in Licensee's discretion, to take any action and to execute any instrument that Licensee may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to maintain the Service Marks and the registration, validity and enforceability thereof and to maintain the perfection and priority of the security interest granted hereunder; provided that Licensee agrees not to exercise its rights under this paragraph unless there is an Event of Default. Licensee agrees that it shall provide Licensor with written notice reasonably promptly after it exercises its rights hereunder. Licensor acknowledges, consents and agrees that the power of attorney granted hereunder is irrevocable and coupled with an interest. 21. This Agreement does not constitute and shall not be construed as constituting a partnership, joint venture or agency relationship between the parties. Neither party shall have the right to obligate or bind the other party in any manner whatsoever, and nothing herein contained shall give or is intended to give any rights of any kind to any third persons. 22. In the event any paragraph or provision of this Agreement is held to be void or unenforceable, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same force and effect as though the void and unenforceable parts had been severed or deleted. 23. The waiver of any term or provision of this Agreement shall not be construed as a waiver of any other term or provision. No failure to exercise and no delay in exercising, on the part of Licensee, any right, remedy, power, or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof, or the exercise of any other right, remedy, power or privilege. 24. This Agreement shall be binding upon and shall inure to the benefit of the parties and their present and past agents, servants, officers, directors, partners, predecessors, employees, franchisees, trustees, representatives, shareholders, successors and assigns; provided, however, that Licensee shall not have the right to sublicense or assign this Agreement, by operation of law or otherwise, except as otherwise set forth in paragraph 13. 25. This Agreement shall be governed by and construed under the laws of the United States and the local laws of the State of California, as applied to agreements entered into and to be performed entirely within California and by California residents, without regard to choice of laws provisions. 26. Any dispute arising out of this Agreement, or its performance or breach, shall be resolved by binding arbitration at San Francisco, California, under the Commercial Arbitration Rules (the "AAA Rules") of the American Arbitration Association (the "AAA"). This arbitration provision is expressly made pursuant to and shall be governed by the Federal Arbitration Act, 9 U.S.C. sections 1-14. The Parties agree that pursuant to section 9 of the Federal Arbitration Act, a judgment of a United States District Court of competent jurisdiction shall be entered upon the award made pursuant to the arbitration. A single arbitrator, who shall have the authority to allocate the costs of any arbitration initiated under this paragraph, shall be selected according to the AAA Rules within ten (10) days of the submission to the AAA of the response to the statement of claim or the date on which any such response is due, whichever is earlier. The arbitrator shall be required to furnish to the parties to the arbitration a preliminary statement of the arbitrator's decision that includes the legal rationale for the arbitrator's conclusion and the calculations pertinent to any damage award being made by the arbitrator. The arbitrator shall then furnish each of the parties to the arbitration the opportunity to comment upon and/or contest the arbitrator's preliminary statement of decision either, in the discretion of the arbitrator, through briefs or at a hearing. The arbitrator shall render a final decision following any such briefing or hearing. The arbitrator shall conduct the arbitration in accordance with the Federal Rules of Evidence. The arbitrator shall decide the amount and extent of pre-hearing discovery which is appropriate. The arbitrator shall have the power to enter any award of monetary and/or injunctive relief (including the power to issue permanent injunctive relief and also the power to reconsider any prior request for immediate injunctive relief by any party and any order as to immediate injunctive relief previously granted or denied by a court in response to a request therefor by any party), including the power to render an award as provided in Rule 43 of the AAA Rules; provided, however, that the arbitrator shall not have the power to award consequential, indirect, punitive or exemplary damages under any circumstances (whether styled as loss of profit, loss of expected economic advantage, punitive, exemplary or treble damages, or any penalty or punitive type of damages) regardless of whether such damages may be available under any applicable law, the parties are hereby waiving their rights, if any, to recover any such damages, whether in arbitration or litigation. The arbitrator shall have the power to award the prevailing party its costs and reasonable attorneys' fees; provided, however, that the arbitrator shall not award attorneys' fees to a prevailing party if the prevailing party received a settlement offer unless the arbitrator's award to the prevailing party is greater than such settlement offer without taking into account attorneys' fees in the case of the settlement offer or the arbitrator's award. Any arbitration shall be held in San Francisco, California, for any claim brought by the parties. In addition to the above courts, the arbitration award may be enforced in any court having jurisdiction over the parties and the subject matter of the arbitration. 27. This Agreement contains the complete and entire understanding and agreement between the parties and supersedes any previous communications, representations, or agreements, verbal or written, related to the subject matter of this Agreement. This Agreement may only be amended by a writing signed by the party to be charged or its successor(s) in interest. 28. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed given on the date delivered if delivered personally (including by courier), on the date transmitted if sent by confirmed telecopy or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address as may be specified by like notice): If to Licensor: PLM International, Inc. One Market Steuart Street Tower, Suite 800 San Francisco, California 94105 Attention: General Counsel Telephone: (415) 974-1399 Telecopier: (415) 882-0860 If to Licensee: MAC Trailer Leasing, L.L.C. 1 Maynard Drive Park Ridge, NJ 07656 Attention: Daniel P. DeBlasio Telephone: (201) 949-2008 Telecopier: (201) 391-0356 With a copy to: Marubeni America Corporation 450 Lexington Avenue New York, New York 10017 Attention: David Appel - Counsel Telephone: (212) 250-0132 Telecopier: (212) 450-0706 29. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties hereto and delivered to the other party. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. LICENSOR LICENSEE PLM INTERNATIONAL, INC. MAC TRAILER LEASING, L.L.C. Signature \s\ Susan Santo Signature /s/ Toru Nishimi Printed Name: Susan Santo Printed Name: Toru Nishimi Title: V.P. Title: Chairman EX-10 3 0003.txt EX-10.3 NON-COMPETITION AGREEMENT NON-COMPETITION AGREEMENT This Non-Competition Agreement ("Agreement") is being entered into this 30th day of September, 2000 by and among PLM International, Inc., a Delaware corporation, PLM Rental, Inc, a Delaware corporation, PLM Transportation Equipment Corp., a California corporation, TEC AcquiSub, Inc., a California corporation, and PLM Financial Services, Inc., a Delaware corporation, as the manager of and on behalf of Professional Lease Management Income Fund I, L.L.C., a California limited liability company ("LLC"), and as general partner for and on behalf of PLM Equipment Growth Fund, PLM Equipment Growth Fund II, PLM Equipment Growth Fund III, PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth and Income Fund VII, each a California limited partnership (collectively, "Seller"), and Marubeni America Corporation, a New York corporation ("Buyer"), and is made with reference to the following facts: A. Pursuant to that certain Asset Purchase Agreement (the "Purchase Agreement"), dated as of May 24, 2000, between PLM, PLM Rental, PLM TEC, TEC and Buyer, as well as the Partnerships Asset Purchase Agreement, between the Partnerships and Buyer, Buyer has agreed to purchase from Seller and Partnerships certain assets and goodwill as described in Section 3.18 of the Purchase Agreement (the "Acquisition"), and Buyer seeks to protect such assets and goodwill; and B. Seller has had access to business secrets and confidential information of the Business, which are proprietary to the Business. The use of such business secrets and confidential information of the Business by any of the Business's competitors would be irreparably damaging to the Business. It would be extremely difficult for Seller to become affiliated with those entities engaged in the activities described in Section 1 below without making unlawful use of such business secrets and confidential information, since the business secrets and confidential information would be immediately applicable to and of great value to the businesses of those entities. Any such use of the business secrets and confidential information of the business would materially and adversely impact the value of the Business purchased by Buyer through the Acquisition. C. As an inducement to Buyer to acquire the Business via the Acquisition, each Seller has agreed to preserve and protect the goodwill, business secrets and confidential information of the Business by agreeing to the covenants set forth below. D. Each Seller acknowledges and agrees that the Business presently carries on business in all cities, counties and countries identified in the Specified Region (as defined in Schedule A). In view of the foregoing and for good and valuable consideration, receipt of which is hereby acknowledged, each Seller covenants and agrees with Buyer as follows: 1. ACTIVITIES SUBJECT TO AGREEMENT. For the Covenant Period (as defined in Section 2), each Seller will refrain, within the Specified Region, from (a) engaging in any competitive activity with any refrigerated and dry van over-the-road trailer leasing operations (excluding intermodal trailers), (b) soliciting for employment, or recommending for employment (other than by Buyer) any New Hire, or (c) diverting or attempting to divert from Buyer or any affiliate of Buyer any business of any kind in which the Business is engaged, including, without limitation, the solicitation of or interference with any suppliers, contractors or customers. Notwithstanding the foregoing, it shall not be a breach of this Agreement for Seller to own, as a passive investment, not more than five percent (5%) of the outstanding stock of any corporation having securities listed on the New York Stock Exchange, the American Stock Exchange, or traded on NASDAQ, that carries on activities prohibited to Seller hereunder and the foregoing provisions shall (x) with respect to the Partnerships and PLM FSI, not restrict any such Seller from owning Equipment which is leased to or managed by a third party who is not an Affiliate of any such Seller or PLM FSI, so long as such Seller or PLM FSI are not involved in the day to day use, operation, rental or maintenance of such Equipment, and (y) with respect to each Seller, not restrict Seller from being acquired by any other person or entity that prior to the date of such acquisition is already engaged in an activity that is competitive with the trailer leasing operations that are the subject of the Purchase Agreement and the Partnerships Asset Purchase Agreement, and which after the date of such acquisition without use of any name including the word PLM may engage in an activity that is competitive with any trailer leasing operations that are the subject of the Purchase Agreement and the Partnerships Asset Purchase Agreement. 2. COVENANT PERIOD. The Covenant Period shall automatically terminate if neither Buyer nor any division, subsidiary or affiliate of Buyer nor any successor or assignee of Buyer nor any other person deriving title to the goodwill of the Business, carries on the business formerly conducted by the Business or any trailer leasing operations in the Specified Region. Subject to the foregoing sentence, the Covenant Period shall extend for a period not longer than five (5) years from the Closing Date. Buyer and Seller agree that the Covenant Period as described above is reasonable and is necessary to protect the value of the Business that Buyer is purchasing via the Acquisition. In the event that, contrary to the intent of the parties, a court should determine that the covenants of Seller herein may not be enforced throughout the full length of the Covenant Period, the parties agree that the Covenant Period shall be deemed amended to the longest period (not exceeding that set forth in this Section 2) that is permissible. 3. SPECIFIED REGION. Carrying on a business within the Specified Region shall include, without limitation, any of the following: maintaining office, manufacturing, assembly, distribution, research, design, sales or other facilities within the Specified Region, soliciting sales within or into the Specified Region, or obtaining supplies, materials or services within or from the Specified Region. Each Seller acknowledges that the Business has been carried on throughout the Specified Region. 4. ASSIGNMENT BY BUYER. In the future, Buyer may choose to assign all or substantially all of the assets of the Business to some other affiliate of Buyer. It is the parties' intention that those covenants of Seller shall inure to the benefit of the Buyer, any affiliate of Buyer, or any other person or entity that may succeed to the Business (acquired by Buyer under the Purchase Agreement and the Partnerships Asset Purchase Agreement) with the same force and effect as if these covenants were made directly with such successor. The parties agree that the covenants of Seller contained herein may be assigned by Buyer to any person or entity to whom may be transferred the Business of the Buyer by sale of stock, sale of assets, merger, consolidation or otherwise. 5. REMEDY FOR BREACH. The parties agree that, in the event of breach or threatened breach of Seller's covenants herein, the damage or imminent damage to the value and the goodwill of the Business will be irreparable and extremely difficult to estimate, making any remedy at law, in equity or in damages inadequate. Accordingly, the parties agree that Buyer and its affiliates shall be entitled to injunctive relief against Seller in the event of any breach or threatened breach of any of such covenants by Seller, in addition to any other relief (including money damages) available to the Buyer under this Agreement, under law or in equity. Seller agrees that the remedy at law or in equity for any breach by Seller of this Agreement will be inadequate and that Buyer and its affiliates shall be entitled to injunctive relief. 6. SEVERABILITY. It is the understanding of the parties that the scope of the covenants contained herein, including as to time, geographic area and activities covered, are necessary to protect the reasonable expectations of Buyer in connection with its acquisition of the Business and the goodwill that is a part of the Business acquired pursuant to the Purchase Agreement and the Partnerships Asset Purchase Agreement. It is the parties' intention that these covenants be enforced to the greatest extent in time, area, and activities covered as is permitted by the law or in equity. The parties intend that the unenforceability or invalidity of any term or provision of this Agreement shall not render any other term or provision contained herein unenforceable or invalid. If the business activities, period of time or geographical area covered by this Agreement shall be deemed too extensive, then the parties intend that this Agreement be construed to cover the maximum scope of business activities, period of time and geographical area (not exceeding those specifically set forth herein) as may be permissible under applicable law or in equity. 7. SEVERAL LIABILITY AND JOINT AND SEVERAL LIABILITY. Each Seller is severally liable for its obligations under this Agreement. In addition, each of PLM, PLM Rental, PLM TEC and TEC (the "Corporate Sellers") are jointly and severally liable for its obligations as well as the obligations of each of the other Corporate Seller's obligations under this Agreement. PLM is jointly and severally liable for its obligations as well as the obligations of each of the other Seller's obligations under this Agreement; provided, however, that, with respect to the Partnerships, PLM's liability for the obligations of any given Partnership shall cease as of the day on which such Partnership ceases to have PLM or any of PLM's direct or indirect subsidiaries as a general partner of the Partnership or, in the case of LLC, as the manager. 8. DEFINITION. Capitalized terms used and not otherwise defined in this Agreement (including the schedules hereto) shall have the respective meanings assigned to such terms in the Purchase Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. MARUBENI AMERICA CORPORATION By: /s/ Toru Nishimi Name: Toru Nishimi Title: SVP PLM INTERNATIONAL, INC. By: /s/ Susan Santo Name: Susan Santo Title: VP PLM RENTAL, INC. d/b/a PLM TRAILER LEASING By: /s/ Susan Santo Name: Susan Santo Title: VP PLM TRANSPORTATION EQUIPMENT CORP. By: /s/ Susan Santo Name: Susan Santo Title: VP TEC ACQUISUB, INC. By /s/ Susan Santo Name: Susan Santo Title: VP PLM FINANCIAL SERVICES, INC. By: /s/ Susan Santo Name: Susan Santo Title: VP PROFESSIONAL LEASE MANAGEMENT INCOME FUND, LLC By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its Sole Manager PLM EQUIPMENT GROWTH FUND By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH FUND II By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH FUND III By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH FUND IV By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH FUND V By: PLM Financial Services, Inc. By: /s/ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH FUND VI By: PLM Financial Services, Inc. By: \s\ Susan Santo Name: Susan Santo Title: Its General Partner PLM EQUIPMENT GROWTH AND INCOME FUND VII By: PLM Financial Services, Inc. By: \s/ Susan Santo Name: Susan Santo Title: Its General Partner SCHEDULE A SPECIFIED REGION Anywhere in the world that the Business presently carries on or has carried on its operations. Without prejudice to the foregoing, it is hereby expressly acknowledged and agreed by Seller that the Business presently carries on or has carried on its operations in each of the 58 counties of the State of California and all of the other 49 states and the District of Columbia of the U.S.A.. EX-27 4 0004.txt FDS --
5 PLM International Inc. 10Q, Third Quarter, 2000 0000814677 PLM INTERNATIONAL, INC. 1,000 U.S DOLLARS 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 71,313 0 3,831 0 0 0 0 0 96,978 0 15,039 0 0 54,578 (1,827) 96,978 0 9,197 0 6,884 177 0 1,424 1,581 0 986 (164) 4,785 0 5,607 0.74 0.74
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