-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GTB3/xy3px5/f3yf7PRc3p7cI8tZqUp74oG5ex/v1yHt6wECdla3yVzYsKsUVPms jAP/IBRsm/x5qAAvWiWq+w== 0000814677-94-000022.txt : 19940930 0000814677-94-000022.hdr.sgml : 19940930 ACCESSION NUMBER: 0000814677-94-000022 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940929 SROS: NONE 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09670 FILM NUMBER: 94550875 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 900 STREET 2: ONE MARKET PLZ CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-Q/A (Amendment No.1) [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended June 30, 1994. [ ] 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 0-22212 _______________________ PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 41-1682038 (State or other jurisiction of (I.R.S. Employer incorporation or organization Identification No.) One Market, Steuart Street Tower Suite 900, San Francisco, CA 94105-1301 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code (415) 974-1399 _______________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (ro 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 last practicable date: Common Stock - $.01 Par Value; Outstanding as of August 12, 1994 - 10,495,114 shares PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1994 1993 (in thousands) ASSETS Cash and cash equivalents $ 17,849 $ 19,685 Receivables 6,765 6,037 Receivables from affiliates 9,071 10,981 Assets held for sale 9,836 -0- Equity interest in affiliates 17,287 17,707 Transportation equipment held for operating leases 184,925 205,810 Less accumulated depreciation (98,550) (105,122) 86,375 100,688 Restricted cash and cash equivalents 12,673 7,055 Restricted marketable securities 41,586 44,469 Other 13,238 11,098 Total assets $214,680 $217,720 LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY Liabilities: Senior secured debt $ 45,000 $ 45,000 Bank debt related to ESOP 50,280 50,280 Other secured debt 3,401 2,839 Subordinated debt 31,000 31,000 Payables and other liabilities 13,149 18,082 Deferred income taxes 19,285 19,386 Total liabilities 162,115 166,587 Minority Interest 362 -0- Shareholders' Equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, 4,901,474 at June 30, 1994, and 4,916,301 at December 31, 1993, series A Convertible shares issued and outstanding, aggregate $63,719,162 at June 30, 1994, and $63,911,913 at December 31, 1993, ($13 per share) liquidation preference at paid-in amount 63,377 63,569 Loan to Employee Stock Ownership Plan (50,280) (50,280) 13,097 13,289 Common stock, $.01 par value, 50,000,000 shares authorized, 10,495,114 shares issued and outstanding at June 30, 1994, (excluding 417,209 shares held in treasury) and 10,465,306 at December 31, 1993, 109 109 (excluding 432,018 shares held in treasury) Paid in capital, in excess of par 55,737 55,557 Treasury stock (100) (131) 55,746 55,535 Accumulated deficit (16,640) (17,691) Total shareholders' equity 52,203 51,133 Total liabilities, minority interest, and shareholders' equity $214,680 $217,720
See accompanying notes to these financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
For the three months ended June 30, 1994 1993 Revenues: Operating leases $ 7,975 $ 8,462 Management fees and partnership interests 3,980 3,549 Commissions and other fees 1,264 5,525 (Loss) gain on the disposal of transportation equipment, net (348) 391 Other 1,610 214 Total revenues 14,481 18,141 Costs and expenses: Operations support 5,930 5,126 Depreciation and amortization 3,137 3,128 Commissions 1,317 2,440 General and administrative 2,374 2,914 Total costs and expenses 12,758 13,608 Operating income 1,723 4,533 Interest expense 2,417 3,152 Other income (expense), net 118 (140) Interest income 1,358 1,412 Income before income taxes 782 2,653 Provision for income taxes 137 949 Net income 645 1,704 Preferred dividend (net of $466 and $522 income tax benefit for the three months ended June 30, 1994, and 1993, respectively, and $932 and $1,044 for the six months ended June 30, 1994, and 1993, respectively) 1,271 1,236 Net (loss) income to common shares $ (626) $ 468 (Loss) earnings per common share outstanding $ (0.06) $ 0.04 For the six months ended June 30, 1994 1993 Revenues: Operating leases $ 15,247 $ 17,802 Management fees and partnership interests 7,465 7,158 Commissions and other fees 4,466 9,438 (Loss) gain on the disposal of transportation equipment, net (465) 1,788 Other 2,735 334 Total revenues 29,448 36,520 Costs and expenses: Operations support 11,486 10,289 Depreciation and amortization 6,305 6,506 Commissions 2,873 5,323 General and administrative 4,691 5,057 Total costs and expenses 25,355 27,175 Operating income 4,093 9,345 Interest expense 4,708 6,534 Other income (expense), net 270 (435) Interest income 2,562 2,739 Income before income taxes 2,217 5,115 Provision for income taxes 528 1,823 Net income 1,689 3,292 Preferred dividend (net of $466 and $522 income tax benefit for the three months ended June 30, 1994, and 1993, respectively, and $932 and $1,044 for the six months ended June 30, 1994, and 1993, respectively) 2,542 2,472 Net (loss) income to common shares $ (853) $ 820 (Loss) earnings per common share outstanding $ (0.08) $ 0.08
See accompanying notes to these financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the six months ended June 30, 1994 1993 Cash flows from operating activities: Net income $ 1,689 $ 3,292 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,305 6,506 Decrease in deferred income taxes (222) (1,869) Tax benefit of preferred dividend paid 292 321 Loss (gain) on disposal of assets 465 (1,832) Undistributed residual value interests 216 (336) Minority interest in net income of subsidiaries 26 -0- (Decrease) increase in payables and other liabilities (6,028) 1,781 Decrease (increase) in receivables and receivables from affiliates 2,029 (4,554) Cash distributions from affiliates in excess of (less than) income accrued 255 (130) (Increase) decrease in other assets (391) 998 Purchase of equipment for lease (842) (618) Proceeds from sale of equipment for lease 2,763 438 Purchase of assets held for sale to affiliates (7,364) (5,007) Proceeds from sale of assets held for sale to affiliates 3,695 20,659 Financing of assets held for sale to affiliates 2,953 -0- Repayment of financing for assets held for sale to affiliates (2,953) -0- Net cash provided by operating activities 2,888 19,649 Cash flows from investing activities: Additional investment in affiliates (51) (420) Proceeds from the sale of investments 89 -0- Proceeds from the maturity and sale of restricted marketable securities 17,516 39,059 Purchase of restricted marketable securities (14,633) (42,736) (Increase) decrease in restricted cash and cash equivalents (5,618) 7,376 Acquisition of subsidiaries (1,013) -0- Net cash (used in) provided by investing activities (3,710) 3,279 Cash flows from financing activities: Proceeds from long-term equipment loans 45,079 -0- Principal payments under equipment loans (45,182) (23,292) Cash dividends paid on Preferred Stock (930) (1,034) Proceeds from exercise of stock options 19 -0- Net cash used in financing activities (1,014) (24,326) Net decrease in cash and cash equivalents (1,836) (1,398) Cash and cash equivalents at beginning of period 19,685 9,407 Cash and cash equivalents at end of period $ 17,849 $ 8,009 Supplemental information: Interest paid during the period $ 4,521 $ 5,719 Income taxes paid during the period $ 4,007 $ 610
See accompanying notes to financial statements. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1994 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position as of June 30, 1994, and the statements of operations for the three and six months ended June 30, 1994, and 1993 and the statements of cash flows for the six months ended June 30, 1994, and 1993. Certain information and footnote 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, 1993, on file at the Securities and Exchange Commission. 2. In the first six months of 1994, 14,999 common shares were issued for the exercise of stock options. In addition, in exchange for an equal number of preferred shares 14,809 common shares were taken out of treasury stock and issued to former participants in the Company's Employee Stock Ownership Plan. Consequently, the total common shares outstanding increased to 10,495,114 at June 30, 1994, from the 10,465,306 outstanding at December 31, 1993. Net income (loss) per common share was computed by dividing net income (loss) to common shares by the weighted average number of shares of common stock deemed outstanding during the period. Dilution that could result from the issuance of stock options is not material. 3. Certain amounts in the 1993 financial statements have been reclassified to conform to the 1994 presentation. 4. The Company classifies assets as held for sale if the particular asset is subject to a pending contract for sale or is held for sale to an affiliated partnership. Transportation equipment held for operating leases at December 31, 1993, includes equipment classified as held for sale in previous reports. At June 30, 1994, $3.7 million in trailers was held for sale to one or more affiliated Partnerships. 5. As of January 1, 1994, the Company has adopted Statement of Financial Accounting Standards No. 115 ("Accounting For Certain Investments in Debt and Equity Securities") ("SFAS No. 115"). At January 1, 1994, the Company classified most of its marketable securities as held-to-maturity securities based on management intent and ability to hold. All securities that were considered available-for-sale at January 1, 1994, were sold during the first quarter, with the corresponding gain or loss included in income. As of June 30, 1994, the Company has classified all of its marketable securities as held-to-maturity securities. Thus, all marketable securities are reported on the balance sheet at amortized cost, and any unrealized gains and losses have not been recorded. 6. In February 1994, the Company completed the purchase of a majority interest in Aeromil Australia Pty Ltd ("Aeromil"). Aeromil is an aircraft dealer specializing in local and international marketing of business, commuter, and commercial aircraft. The acquisition was accounted for by the purchase method of accounting and accordingly, the purchase price is allocated to assets and liabilities based on the estimated fair value at the date of acquisition and goodwill will be amortized over ten years. The portion of Aeromil not owned by the Company is shown as minority interest on the balance sheet. Minority interest in net income of subsidiaries is included in other expense for the three and six months ended June 30, 1994. 7. In June 1994, the Company closed a new $45.0 million senior loan facility, with a syndicate of insurance companies, and repaid the existing senior loan. The new facility has a seven year term with quarterly interest-only payments through March 31, 1997. Quarterly principal payments of $2.6 million, plus interest charges begin on June 30, 1997, through the termination of the loan in June 2001. Interest on $35.0 million of the debt is fixed at 9.78% per annum and the remaining $10.0 million floats based on LIBOR plus 2.75% per annum and adjusts quarterly. The facility is secured by all of the Company's transportation-related equipment assets and associated leases. 8. The Company's Board of Directors has announced its intention to terminate the Company's ESOP. The termination is contingent on, among other things, the receipt of a favorable IRS determination letter as to the qualified status of the ESOP as of the date of termination under the rules and regulations of the Internal Revenue Code (the "Code"). Upon termination of the ESOP, each share of Series A Preferred Stock held by the ESOP (the "Preferred Stock") which has been allocated to ESOP participants will automatically convert to one share of Common Stock. In addition, it is presently expected that an amendment to the Company's Certificate of Designation of Series A Preferred Stock (the "Certificate of Designations") will be submitted to the PLM shareholders for approval prior to termination of the ESOP. Under the proposed amendment, the allocated shares of Preferred Stock would also automatically convert to common shares in the event those shares are transferred to the trustee of the Company's profit sharing plan. Termination of the ESOP will result in the distribution of each ESOP participant (or to the participant's account in the Company's profit sharing plan) of shares of PLM Common Stock, and the Preferred Stock which has been allocated to such participant's account as of the date of termination will be canceled. Assuming termination on or about December 31, 1994, it is estimated that approximately 2,000,000 common shares will be distributed to (or to the accounts of) a total of approximately 315 ESOP participants. All such shares would be freely tradeable and listed on the AMEX. Shares of Preferred Stock held by the ESOP which have not been allocated to participants' accounts at the date of termination (i.e. approximately 2,900,000 shares assuming termination on or about December 31, 1994) will cease to be outstanding upon termination, and concurrent with the termination, all indebtedness of the ESOP then owing to the Company will either be repaid or rendered uncollectible. In addition, the corresponding bank indebtedness of the Company related to the ESOP will be repaid using restricted cash and marketable securities collateral. As of June 30, 1994, the principal amount of this indebtedness was $50.3 million and it was fully secured by restricted cash collateral. Depending on prevailing interest rates at the time of termination, gain or loss may be recognized on the liquidation of the collateral to be used to repay this indebtedness. Termination of the ESOP and the related ESOP loan will eliminate payment by the Company of the annual dividend on the Preferred Stock now held by the ESOP. For the year ended December 31, 1993, the aggregate pretax amount of this dividend was $7,030,000. Termination of the ESOP will also result in a 10% excise tax imposed by the Code on the "amount realized" by the ESOP from the disposition of the unallocated shares held by the ESOP on the date of termination. Although the amount of this one-time tax is not presently known, based on the Company's assessment of the valuation of the unallocated shares, the tax is currently estimated at less than $1,000,000. This excise tax is payable seven months after the close of the calendar year of termination and will be charged to earnings in the year of termination. The Company also anticipates that approximately $2,700,000 of previously paid, unamortized ESOP loan fees and other costs will be charged to earnings in the year of termination, which together with the estimated amount of the 10% excise tax and income tax benefits, will result in a reduction in shareholders' equity of approximately $2,800,000. As a result of the termination, the cost recorded for previously allocated ESOP shares will be adjusted as required by current accounting principles. The impact of this change in accounting for allocated shares will be reflected as a reduction to income to common shareholders of approximately $5.5 million and will result in a corresponding increase to additional paid in capital. The Company's total stockholders' equity will not be impacted by this accounting charge for the allocated shares. On November 22, 1993, the American Institute of Certified Public Accountants issued Statement of Position 93-6 "Employers' Accounting for Employee Stock Ownership Plans" (SOP 93-6) which changes the way companies report transactions with leveraged employee stock ownership plans ("ESOPs") for financial statement purposes, including the following: (i) compensation expense is to be recognized based on the fair value of shares committed to be released to employees; (ii) interest received on loans to ESOPs is not recorded as income; and (iii) only dividends on allocated shares are reflected as a reduction to income to common shareholders. The Company is not required to adopt SOP 93-6 because the shares held by its ESOP were purchased prior to December 31, 1992; however, management is considering voluntary adoption of SOP 93-6. If the Company elects to adopt SOP 93-6, a non-cash charge to earnings for the impact of the change in accounting principle will be recorded as of the beginning of the year of adoption and all previously issued financial statements for that year will be restated. The estimated impact on earnings per share as a result of the accounting change is a reduction of $0.35 per share in the first quarter of 1994 (including $0.43 per share attributable to the cumulative effect of the change in the accounting of $5.5 million) and an increase of $0.08 per share in the second quarter of 1994. 9. In June 1994, the Company amended its Warehousing Line of Credit facility. The amendment extended the facility until June 30, 1995, and provides for a $5.0 million letter of credit facility as part of the $25.0 million facility. 10. The Company is involved as plaintiff or defendant in various legal actions incident to its business. Management does not believe that any of these actions will be material to the financial condition of the Company. Subsequent Events: 11. In July 1994, the Company completed the sale of one of its marine vessels, which was in assets held for sale, for $6.2 million which approximated its carrying value. 12. In July 1994, the Company repaid $3.0 million of its subordinated debt. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company owns a diversified portfolio of transportation equipment from which it earns operating lease revenue and incurs operating expenses. The Company also raises investor equity through syndicated partnerships and invests the equity raised in transportation equipment which it manages on behalf of its investors. The Company earns various fees and equity interests from syndication and investor equipment management activities. The Company's transportation equipment held for operating leases is mainly equipment built prior to 1988. As trailer equipment ages, the Company is generally replacing it with newer equipment. However, aged equipment for other equipment types may not be replaced. Rather, proceeds from the liquidation of other equipment types may be invested in trailers or in other Company investment opportunities. Failure to replace equipment may result in shorter lease terms and higher costs of maintaining and operating aged equipment and, in certain instances, limited remarketability. For the Three Months Ended June 30, 1994, vs. June 30, 1993 (A) Revenues The Company's total revenues for the quarters ended June 30, 1994, and 1993 were $14.5 million and $18.1 million, respectively. The decrease in 1994 revenues is principally composed of a 6% decrease in operating lease revenue, a 77% decrease in commission and other fees, and a loss on the disposal of transportation equipment, partially offset by a 12% increase in management fees and partnership interests, and a $1.4 million increase in other revenue. 1. Operating Lease Revenues - $8.0 million vs. $8.5 million For the three months ended June 30, 1994, the Company had an average $198.9 million of equipment in its operating lease portfolio, which is approximately $37.3 million less than the original cost of equipment held during the second quarter of 1993. The reduction in equipment is a consequence of the Company's strategic decision to dispose of certain assets resulting in a 17% reduction in its aircraft fleet, and a net reduction of 25% and 12% in its trailer and marine container portfolios, respectively, compared to the second quarter of 1993. The reduction in equipment available for lease is the primary reason trailer and aircraft lease revenue decreased by $0.3 million and $0.1 million, respectively. 2. Management Fees and Partnership Interests - $4.0 million vs. $3.5 million Management fees increased approximately $0.4 million for the quarter ended June 30, 1994, as compared to the second quarter of 1993. These fees are, for the most part, based on the revenues generated by equipment under management. The managed equipment portfolio grows correspondingly with new syndication activity. Affiliated partnership and investment program surplus operating cash flows and loan proceeds invested in additional equipment increase management fees. Equipment managed at June 30, 1994, and 1993 (measured at original cost) amounted to $1.13 billion and $1.05 billion, respectively. The increase in management fees generated by additional assets under management was partially offset by reduced lease rates for equipment which negatively impacted affiliated partnership revenues. Agreements for these partnerships and investment programs provide for higher management fees on full service railcar leases than the Company has previously recognized. The Company recognized additional fees of $0.2 million in the second quarter of 1994, for these past services. The Company also records as revenues its equity interest in the earnings of the Company's affiliated partnerships, which revenues were approximately the same as the second quarter of 1993. 3. Commissions and Other Fees - $1.3 million vs. $5.5 million Commission revenue and other fees are derived from raising syndicated equity and acquiring and leasing equipment for Company-sponsored investment programs. Commission revenue consists of placement fees which are earned on the amount of equity raised. Acquisition and lease negotiation fees are earned on the amount of equipment purchased and leased on behalf of syndicated investment programs. Debt placement fees are earned for debt placed in the investment programs. These fees are governed by applicable program agreements and securities regulations. The Company also receives a residual interest in the net equipment purchased by the affiliated partnerships. Income is recognized on residual interests based upon the general partner's share of the present value of the estimated disposition proceeds of the equipment portfolios of affiliated partnerships. During the three months ended June 30, 1994, program equity raised totaled $13.6 million, compared to $25.6 million in the same period of 1993, resulting in a decrease in placement commissions of $1.0 million. Syndication equity raising efforts are influenced by many factors, including general economic conditions, performance of comparable investments, and the number of firms that undertake to sell Company-sponsored programs. There can be no assurances that future syndication sales will perform as well as or better than prior periods. During the second quarter of 1994, there were no equipment purchases on behalf of various investor programs and partnerships compared to $58.8 million in the same period of 1993, resulting in a $2.9 million decrease in acquisition and lease negotiation fees. Residual interest income decreased $0.4 million as a result of no equipment acquisitions for the affiliated partnerships in the second quarter of 1994. 4. (Loss) Gain on the Disposal of Transportation Equipment - ($0.3) million vs. $0.4 million The loss on the disposal of transportation equipment in 1994 resulted primarily from the net loss on the disposition of trailers and marine containers in the normal course of business. The net gain in 1993 was primarily the result of the Company's decision to sell substantially al of its railcar fleet. 5. Other - $1.6 million vs $0.2 million Other revenues are principally revenue earned by Aeromil ($1.3 million), the Company's aircraft leasing and spare parts brokerage subsidiary acquired in February of 1994, and insurance premiums earned by Transportation Equipment Indemnity Company Ltd., a captive insurance company. (B) Costs and Expenses 1. Operations support expense (including salary and office- related expenses for operational activities, provision for doubtful accounts, equipment insurance, repair and maintenance costs, and equipment remarketing costs) increased $0.8 million (16%) for the three months ended June 30, 1994, from the same period in 1993. The increase resulted from $1.2 million in costs associated with the operation of Aeromil. This was partially offset by lower equipment operation costs resulting from the reduction in the equipment portfolio. 2. Depreciation and amortization expense was $3.1 million for the quarters ended June 30, 1994, and 1993. The decrease resulting from the reduction in depreciable equipment was offset by accelerating depreciation on certain assets. 3. Commission expenses are primarily incurred by the Company in connection with the syndication of investment partnerships. Commissions are also paid for certain leasing activities. Commission expenses for the three months ended June 30, 1994, decreased $1.1 million (46%) from a similar period in 1993. The reduction is the result of lower equity syndication levels. 4. General and administrative expenses decreased $0.5 million (19%) during the quarter ended June 30, 1994, compared to a similar period in 1993. The decrease is a result of lower compensation expense, due to staff reductions, and lower professional service costs. (C) Other Items 1. Interest expense decreased $0.7 million (23%) during the quarter ended June 30, 1994, compared to the similar period in 1993 as a result of reduced debt levels, partially offset by increased interest rates. 2. Other income (expense) was income of $0.1 million in the second quarter of 1994, compared to an expense of $0.1 million in the second quarter of 1993. The change is a result of a reduction in the previously accrued cost of terminating the Company's interest rate SWAP agreement, which resulted from increased interest rates during the second quarter. 3. Interest income decreased $0.1 million (4%) during the quarter ended June 30, 1994, compared to the similar period in 1993. The reduced interest income resulted from reduced marketable securities and cash balances, and was partially offset by an increase in interest rates. 4. The provision for income taxes for the three months ended June 30, 1994, of $0.1 million represents an effective tax rate of 18%. The provision reflects the tax benefit of the preferred dividend on the ESOP shares allocated to ESOP participants which has increased since the comparable period in 1993. For the quarter ended June 30, 1993, the Company's provision for income taxes was $0.9 million, which represented an effective rate of 36%. As required by Statement of Financial Accounting Standards No. 109 ("Accounting For Income Taxes") ("SFAS No. 109") the ESOP dividend is presented net of the tax benefit on ESOP shares not allocated to participants. (D) Net (Loss) Income For the three months ended June 30, 1994, net income was $0.6 million. In addition, $1.3 million is required for payment of preferred dividends (net of a tax benefit of $0.5 million), resulting in a net loss to common shareholders of $0.6 million and a loss per common share of $0.06. In comparison, for the same period in 1993, net income was $1.7 million and the net income available to common shareholders was $0.5 million, with income per common share of $0.04. For the Six Months Ended June 30, 1994, vs. June 30, 1993 (A) Revenues The Company's total revenues for the six months ended June 30, 1994, and 1993 were $29.4 million and $36.5 million, respectively. The decrease in 1994 revenues is principally composed of a 14% decrease in operating lease revenue, a 53% decrease in commission and other fees, and a loss on the disposal of transportation equipment, partially offset by a 4% increase in management fees and partnership interests, and a $2.4 million increase in other revenue. 1. Operating Lease Revenues - $15.2 million vs. $17.8 million For the six months ended June 30, 1994, the Company had an average $201.2 million of equipment in its operating lease portfolio, which is $40.3 million less than the original cost of equipment held during the first six months of 1993. The reduction in equipment is a consequence of the Company's strategic decision to dispose of certain assets resulting in the sale of almost its entire railcar portfolio, a 17% reduction in its aircraft fleet , and a net reduction of 25% and 12% in its trailer and marine container portfolios, respectively, compared to 1993. The reduction in equipment available for lease is the primary reason trailer, rail, aircraft, and marine container revenue were reduced by $1.1 million, $0.6 million, $0.6 million, and $0.3 million, respectively. 2. Management Fees and Partnership Interests - $7.5 million vs. $7.2 million Management fees increased $0.3 million for the six months ended June 30, 1994, as compared to the first six months of 1993. Equipment managed at June 30, 1994, and 1993 (measured at original costs) amounted to $1.13 billion and $1.05 billion, respectively. The increase in management fees generated by additional assets under management was partially offset by reduced lease rates for equipment which negatively impacted affiliated partnership revenues. The partnership agreements allow higher management fees on full service railcar leases than the Company has previously recognized. The Company recognized additional fees of $0.2 million in the second quarter of 1994, for these past services. The Company also records as revenues its equity interest in the earnings of the Company's affiliated partnerships which revenues were approximately the same as in the first six months of 1993. 3. Commissions and Other Fees - $4.5 million vs. $9.4 million During the six months ended June 30, 1994, program equity raised totaled $30.6 million, compared to $56.7 million in the same period of 1993, resulting in a decrease in placement commissions of $2.2 million. On behalf of various investor programs and partnerships, a total of $31.4 million of equipment was purchased during the six months ended June 30, 1994, compared to $76.8 million in the same period of 1993, resulting in a $2.1 million decrease in acquisition and lease negotiation fees. Residual interest income decreased $0.5 million as a result of decreased equipment acquisitions for the affiliated partnerships. 4. (Loss) Gain on the Disposal of Transportation Equipment - ($0.5) million vs. $1.8 million The loss on the disposal of transportation equipment in 1994 resulted primarily from the net loss on the disposition of trailers and marine containers in the normal course of business. The net gain in 1993 was primarily the result of the Company's decision to sell substantially all of its railcar fleet. 5. Other - $2.7 million vs $0.3 million Other revenues are principally revenue earned by Aeromil ($2.1 million), the Company's aircraft leasing and spare parts brokerage subsidiary acquired in February of 1994, and insurance premiums earned by Transportation Equipment Indemnity Company Ltd., a captive insurance company. (B) Costs and Expenses 1. Operations support expense (including salary and office- related expenses for operational activities, provision for doubtful accounts, equipment insurance, repair and maintenance costs, and equipment remarketing costs) increased $1.2 million (12%) for the six months ended June 30, 1994, from the same period in 1993. The increase resulted from $1.9 million in costs associated with the operation of Aeromil. This was partially offset by lower equipment operation costs resulting from the reduction in the equipment portfolio. 2. Depreciation and amortization expense decreased $0.2 million (3%) for the six months ended June 30, 1994, as compared to the similar period in 1993. The decrease resulted from the reduction in depreciable equipment, which was partially offset by accelerating depreciation on certain assets. 3. Commission expenses are primarily incurred by the Company in connection with the syndication of investment partnerships. Commissions are also paid for certain leasing activities. Commission expenses for the six months ended June 30, 1994, decreased $2.5 million (46%) from the similar period in 1993. The reduction is the result of lower equity syndication levels. 4. General and administrative expenses decreased $0.4 million (7%) during the six months ended June 30, 1994, compared to the similar period in 1993. The decrease is a result of lower compensation expense, due to of staff reductions, and lower professional service costs. (C) Other Items 1. Interest expense decreased $1.8 million (28%) during the six months ended June 30, 1994, compared with the same period in 1993 as a result of reduced debt levels, partially offset by increased interest rates. 2. Other income (expense) was income of $0.3 million in the first six months of 1994, compared to an expense of $0.4 million in the first six months of 1993. The change is a result of a reduction in the previously accrued cost of terminating the Company's interest rate SWAP agreement, which resulted from increased interest rates during 1994. 3. Interest income decreased $0.2 million (6%) in the six months ended June 30, 1994, compared the same period in 1993. The reduced interest income resulted from reduced marketable securities and cash balances, and was partially offset by an increase in interest rates. 4. The provision for income taxes for the six months ended June 30, 1994, of $0.5 million represents an effective tax rate of 24%. The provision reflects the tax benefit of the preferred dividend on the ESOP shares allocated to ESOP participants. For the six months ended June 30, 1993, the Company's provision for income taxes was $1.8 million, which represented an effective rate of 36%. As required by Statement of Financial Accounting Standards No. 109 ("Accounting For Income Taxes") ("SFAS No. 109"), the ESOP dividend is presented net of the tax benefit on ESOP shares not allocated to participants. (D) Net (Loss) Income For the six months ended June 30, 1994, net income was $1.7 million. In addition, $2.5 million is required for payment of preferred dividends (net of a tax benefit of $0.9 million), resulting in a net loss to common shareholders of $0.9 million and a loss per common share of $0.08. In comparison, for the same period in 1993, net income was $3.3 million and the net income available to common shareholders was $0.8 million, with income per common share of $0.08. Liquidity and Capital Resources Cash requirements have been historically satisfied through cash flow from operations, borrowings, or sales of transportation equipment. Liquidity throughout 1994 and beyond will depend, in part, on continued remarketing of the equipment portfolio at similar lease rates, continued success in raising syndicated equity for the sponsored programs, effectiveness of cost control programs, and possible additional equipment sales. Management believes the Company can accomplish the preceding and will have sufficient liquidity and capital resources for the future. Specifically, future liquidity is influenced by the following: (A) Debt Financing: Senior Debt: On June 30, 1994, the Company closed a new $45.0 million senior loan facility with a syndicate of insurance companies and repaid the prior facility. The facility provides that equipment sale proceeds be placed into collateral accounts or used to purchase additional equipment to the extent required to meet certain debt covenants. The facility requires quarterly interest only payments through March 31, 1997 with quarterly principal payments of $2.6 million plus interest charges beginning June 30, 1997, through the termination of the loan in June 2001. Subordinated Debt: In July 1994, the Company repaid $3.0 million of its subordinated debt. Bridge Financing: Assets held on an interim basis for placement with affiliated partnerships have, from time to time, been partially funded by a $25.0 million short-term equipment acquisition loan facility. The Company amended this facility on June 28, 1994. The amendment extended the facility until June 30, 1995, and provides for a $5.0 million letter of credit facility as part of the $25.0 million facility. This facility, which is shared with PLM Equipment Growth and Income Fund VII ("EGF VII"), allows the Company to purchase equipment prior to the designated program or partnership being identified, or prior to having raised sufficient capital to purchase the equipment. This facility provides 80 percent financing, and the Company or EGF VII uses working capital for the non-financed costs of these transactions. The Company usually enjoys a spread between the net lease revenue earned and the interest expense during the interim holding period. As of August 12, 1994, the Company had no outstanding borrowings and EGF VII had borrowed $8.5 million under this facility. (B) Equity Financing: On August 21, 1989, the Company established a leveraged employee stock ownership plan ("ESOP"). PLM International issued 4,923,077 shares of Preferred Stock to the ESOP for $13.00 per share, for an aggregate purchase price of $64,000,001. The sale was originally financed, in part, with the proceeds of a loan (the "Bank Loan") from a commercial bank (the "Bank") which proceeds were lent to the ESOP ("ESOP Debt") on terms substantially the same as those in the Bank Loan agreement. The ESOP Debt is secured, in part, by the shares of Preferred Stock, while the Bank Loan is secured with cash equivalents and marketable securities. Preferred dividends are payable semi-annually on February 21 and August 21, which corresponds to the ESOP Debt payment dates. Bank Loan debt service is covered through release of the restricted cash and marketable securities. While the annual ESOP dividend is fixed at $1.43 per share, the interest rate on the ESOP debt varies, resulting in uneven debt service requirements. If interest rates continue at current levels, it is expected that ESOP dividends during 1994 will exceed the required ESOP Debt service, with the excess being used for additional principal payments. The Company's Board of Directors has announced its intention to terminate the ESOP. (See Note 8 to the Financial Statements.) The Board's decision was based on several factors. First, the Company anticipated that the cash collateral of the ESOP financing could ultimately be fully accessed for use in the Company's business. Instead, however, the banks required that all such amounts be held in a collateral account which could only be invested in certificates of deposit and similar low yielding investments. The ESOP financing arrangement has for that reason continuously reduced corporate earnings and growth. Second, employees have generally been dissatisfied with the ESOP as a vehicle for retirement planning. An employee stock ownership plan like the ESOP generally provides an undiversified investment, and the annual allocation of an increased number of shares to participants has unfortunately been matched by a decline in the value of the Company's outstanding Common Stock. The Company's Board of Directors determined to terminate the ESOP because it was satisfying neither the Company's nor the participants' expectations and could not be expected to do so in the foreseeable future. A preferred stock dividend of $0.19 per share was paid on February 21, 1994. This dividend was approximately equivalent to the interest due from the ESOP on the ESOP Debt for the six months ended February 21, 1994. The ESOP dividend was charged to retained earnings net of the appropriate tax benefit, in accordance with the provisions of SFAS No. 109. (C) Portfolio Activities: In the first six months of 1994, the Company generated proceeds of $2.8 million from the sale of equipment. The net proceeds from these and other equipment sales were placed in collateral accounts as required by the senior secured term loan agreement and used for debt payments. The new senior loan agreement requires that sales proceeds be put into a cash collateral account or reinvested into additional equipment to the extent required to meet certain financial convenents. Over the last two years, the Company has downsized the equipment portfolio, through the sale or disposal of under- performing and non-performing assets, in an effort to strengthen the future performance of the portfolio. This downsizing exercise is now complete. The Company will continue to identify under-performing and non-performing assets for sale or disposal as necessary, but the Company intends to maintain approximately the same size portfolio for the near future. The Company has committed to purchase $11.5 million in marine containers. The Company intends to place them in affiliated partnerships. As of June 30, 1994, $0.5 million of the containers had been purchased by an affiliated partnership. (D) Syndication Activities: The Company earns fees generated from syndication activities. In May 1993, EGF VII became effective and selling activities commenced. As of the date of this report, $72.6 million had been raised for this partnership. Based on current syndication levels the Company intends to offer units in EGF VII through June 30, 1995. The Company is in the process of seeking approval of a registration statement for a no-load program. The Company intends to begin syndication activity for this program in the fourth quarter of 1994 or the first quarter of 1995. Although the Company has increased its market share over the last year, the overall limited partnership syndications market has been contracting. The Company's management is concerned with the continued contraction of the syndications market and its effect on the volume of partnership equity that can be raised. Management does not expect the Company to syndicate the same volume of partnership equity as it did last year. Management believes through debt and equity financing, possible sales of transportation equipment and cash flows from operations, the Company will have sufficient liquidity and capital resources to meet its projected future operating needs. Item 1. Legal Proceedings See Note 10 of Notes to Consolidated Financial Statements. (A) Exhibits 10.1 $45,000,000 Note Agreement dated as of June 30, 1994. 10.2 Amendment No. 2 to Warehousing Credit Agreement, date as of June 28, 1994, as amended. 10.3 Amendment No. 7 to Note Agreement dated as of July 22, 1994, by and between PLM International, Inc. and Principal Mutual Life Insurance Company, as amended. 10.4 Amendment dated as of April 20, 1994, to PLM International, Inc. Employee Stock Ownership Plan. 10.5 Amendment to the PLM International, Inc. Employee Stock Ownership Plan dated as of June 17, 1994. (B) Reports on Form 8-K June 17, 1994 - Announcement regarding the Company's conditional intent to terminate the ESOP. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders held on May 26, 1994 one proposal was submitted to a vote of the Company's security holders. Robert N. Tidball and Walter E. Hoadley were re-elected to the Board of Directors of the Company. The votes cast in the election were as follows: Votes Nominee For Withheld Robert N. Tidball 8,842,440 4,592,087 Walter E. Hoadley 9,028,748 4,405,779 Norman J. Wechsler 3,383,307 10,047,160 Directors whose terms continued after the Annual Meeting of Stockholders held on May 26, 1994 are as follows: CLASS II (TERMS EXPIRE IN 1995) J. Alec Merriam Robert L. Pagel CLASS III (TERM EXPIRES IN 1996) Allen V. Hirsch CLASS I (TERMS EXPIRE IN 1997) Walter E. Hoadley Robert N. Tidball Harold J. Somerset joined the Board of Directors on July 19, 1994 as a Class III director 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/ David J. Davis David J. Davis Vice President and Corporate Controller Date: August 12, 1994 EX-10 2 Exhibit 10.4 AMENDMENT NO. 3 TO THE PLM INTERNATIONAL, INC. EMPLOYEE STOCK OWNERSHIP PLAN Section 14(b) of the Plan is hereby amended to read in its entirety as follows: "(b) The Trustee shall exercise its independent discretion in determining whether to vote the aggregate of all unallocated shares of Stock (including, without limitation, all unallocated Financed Stock held in the Loan Suspense Account) held in the Trust on each issue to be voted upon in the same proportions as the shares of Stock allocated to the Members' Accounts are voted pursuant to the Members' instructions as provided in Section 14.4(a)." EX-10 3 Exhibit 10.5 AMENDMENT NO. 4 TO THE PLM INTERNATIONAL, INC. EMPLOYEE STOCK OWNERSHIP PLAN The definition of "Plan Year" in Article II of the Plan shall be amended to read as follows: "'Plan Year' shall mean the twelve-month period beginning on January 1 and ending on December 31, provided, however, that the initial Plan Year shall be a short Plan Year commencing on the Effective Date and the final Plan Year shall be a short Plan Year ending on the effective date of termination of the Plan." The definition of "Compensation" in Article II of the Plan shall be amended, as conformed to Amendment No. 2, to read as follows: "'Compensation' shall mean, for each Plan Year, the compensation (within the meaning of such term under Section 415(c)(3) of the Code) paid to an Employee for the performance of Service during such Plan Year, including (except for purposes of Article X) amounts otherwise excludable from such individual's gross income under Section 125, 402(e)(3) or 402(h) of the Code. Notwithstanding the foregoing, the maximum amount of Compensation taken into account for an individual in any Plan Year beginning before January 1, 1994, shall not exceed $200,000, as such amount is adjusted for increases in the cost-of-living in accordance with Section 401(a)(17) of the Code, and the maximum amount of Compensation that may be taken into account in any Plan Year beginning on or after January 1, 1994 shall not exceed $150,000, as such amount is adjusted for increases in the cost-of-living in accordance with Code section 401(a)(17). The cost-of- living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the limit set forth in this paragraph shall be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12." A new section 9.8 of the Plan shall be added to read as follows: "9.8 Direct Rollovers. This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX or a distribution on Plan termination under Article XVII, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (a) For purposes of this section, the following terms shall be defined as follows: (i) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). An eligible rollover distribution also does not include distribution of Code section 404(k) dividends, and any additional items designated by the Commissioner in revenue rulings, notices, and other guidance. (ii) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (iii) Distributee: A distributee includes an employee or former Employee. In addition, the Employee's or former Employee's Surviving Spouse and the Employee's or former Employee's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the Spouse or former Spouse. (iv) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. (b) The Committee may prescribe reasonable procedures for the election of direct rollovers under this section, including, but not limited to: (i) Requirements that the distributee provide the Committee with adequate information, including, but not limited to, the name of the eligible retirement plan to which the rollover is to be made, a representation that the recipient plan is an individual retirement plan, a qualified plan, or a 403(a) annuity, as appropriate, acknowledgement from the recipient plan that it will accept the direct rollover, and any other information necessary to make the direct rollover; (ii) Requirements that direct rollover elections be made within 30 days of receipt of the notice required under section 402(f) of the Code and procedures for default which either provide that a failure to make an affirmative election within this time period will constitute an election to make a direct rollover or provide that failure to make an affirmative election within this time period shall constitute an election to receive the distribution; (iii) Requirements prohibiting the division of an eligible rollover distribution into separate distributions to be paid to more than one plan; (iv) Requirements prohibiting a direct rollover if the total distributions for the year to the distributee are reasonably expected to total less than $200; (v) Requirements prohibiting division of an eligible rollover distribution into a portion to be paid in a direct rollover and a portion to be paid to the distributee, unless the amount to be paid in the direct rollover is equal to or greater than $500." Section 9.1 of the Plan is amended by adding ", Section 9.9, and Section 9.10" after the reference to "Section 9.6" in the first line of text. Section 9.2(a) of the Plan is amended by adding ", Section 9.9 and Section 9.10" after the reference to "Section 9.6" in the first line of text. A new section 9.9 of the Plan shall be added to read as follows: "9.9 Distribution of Vested Interest Less than or Equal to $3,500. Notwithstanding any provision of this Plan to the contrary, if the value of the Vested Interest of a Member is less than or equal to $3,500 (and has never exceeded $3,500 at the time of any prior distribution), then it shall be distributed in a lump sum as soon as practicable on or after the later of June 17, 1994 or the day the Member terminates Service. For the purpose of determining the value of the Vested Interest of a Member who has terminated Service under this Section 9.9, Stock held in the Member's Account shall be valued based on the fair market value of the shares of common stock of PLM into which any Series A Convertible Preferred Stock would be converted upon distribution. For the purpose of this Section 9.9, fair market value shall mean the closing price for the common stock of PLM on the date immediately prior to the date of distribution as reported on the America Stock Exchange by the Wall Street Journal on such date, or if no such common stock was traded on the relevant date, on the next preceding day on which such common stock was so traded. Any distribution made pursuant to this Section 9.9 shall be made in kind, in whole shares of Stock, consisting of shares of common stock of PLM into which any Series A Convertible Preferred Stock shall have been converted, together with any cash credited to the Member either awaiting investment in Stock or representing a fractional share of Stock." A new section 9.10 of the Plan shall be added to read as follows: "9.10 Elective Distributions on Termination of Service. Notwithstanding any provision of this Plan to the contrary, a Member who has terminated Service may elect, in such form and manner specified by the Committee or its delegates, to receive the Vested Interest of the Member in the Member's Account as soon as practicable on or after the later of June 17, 1994 or the date of the Member's termination of Service. Any distribution made pursuant to the Section 9.10 shall be made in kind, in whole shares of Stock, consisting of shares of common stock of PLM into which any Series A Convertible Preferred Stock shall have been converted, together with any cash credited to the Member either awaiting investment in Stock or representing a fractional share of Stock." Section 17.1 of the Plan shall be amended to read as follows: "17.1 Amendment, Suspension or Termination of the Plan. (a) Subject to the provisions of Section 17.1(b), the Board of Directors reserves the right at any time to amend, suspend or terminate the Plan, any Company Contributions thereunder, or the Trust in whole or in part and for any reason and without the consent of any Participating Company, Member, Beneficiary or other interested party. Any action taken pursuant to this Subsection shall be formally adopted by resolution, unanimous written consent, or any other method authorized under the by-laws of PLM and shall be effective on the date of its adoption or such other date as may be specified in the resolution or other Board of Directors' action." Section 17.4 of the Plan shall be amended to read as follows: "17.4 Termination of the Plan. Upon termination of the Plan, the Company shall not make any further Company Contributions under the Plan and no amount shall thereafter be payable under the Plan to or in respect of any Member except as provided in this Article XVII. Any Financed Stock credited to the Loan Suspense Account shall be used first to satisfy any obligations under the ESOP Loan. Any Financed Stock remaining after satisfaction of all liabilities under the ESOP Loan shall be credited to the Accounts of Members who are Employees on the date of termination of the Plan in the proportion that each such member's Covered Compensation for the Plan Year bears to the aggregate Covered Compensation of all such Member for such Plan Year. To the maximum extent permitted by ERISA, transfers, distributions or other dispositions of the assets of the Plan as provided in this Article XVII shall constitute a complete discharge of all liabilities under the Plan. The Committee shall remain in existence and all of the provisions of the Plan which in the opinion of the Committee are necessary for the execution of the Plan and the administration and distribution, transfer or other disposition of the assets of the Plan in accordance with this Section 17.4 shall remain in force. After (i) payment of or provision for all expenses and charges referred to in Section 6.3 and Section 6.4 and (ii) adjustment for earnings, profits and losses of the Trust to such termination date in the manner described in Section 6.1, the interest of each Member in Service as of the date of such termination in the amount, if any, credited to his or her Account after the foregoing adjustments, shall be nonforfeitable as of such date. As of the date of termination, the shares and cash, if any, credited to the Account of each Member or former Member shall be paid in kind in a lump sum as soon as practicable from the Trust to each Member and former Member (or, in the event of the death of a Member or former Member, the Beneficiary thereof), if the Company and every other entity within the same controlled group as the Company does not maintain another defined contribution plan. Otherwise, such lump sum shall be transferred to another defined contribution plan of the Company or an entity within the same control group as the Company. Such a lump sum shall include whole shares of Stock, consisting of shares of common stock of PLM into which Series A Cumulative Convertible Preferred stock shall have been converted, together with any cash credited to the Member or former Member's Account either awaiting investment in Stock or representing a fractional share of Stock. Any amounts remaining unallocated in a suspense account created in accordance with Section 415 of the Code shall, after application to the extent necessary to satisfy the outstanding balance on any ESOP Loan, be returned to the Company specified by PLM. All determinations, approvals and notifications referred to above shall be in form and substance and from a source satisfactory to the Committee." -----END PRIVACY-ENHANCED MESSAGE-----