-----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, kOyoBDxQnzTCaI7IJcu8p5OsOYEXgNQRos7z4FxLJxZKGlU8jvvcdmJ7VTz9JECi 6PcjY3i9l/3sjLWRnsMgYQ== 0000814677-94-000038.txt : 19941121 0000814677-94-000038.hdr.sgml : 19941121 ACCESSION NUMBER: 0000814677-94-000038 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19941114 SROS: AMEX 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: 94559152 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. 2) [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 1-9670 _______________________ PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 94-3041257 (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 (1994 amounts as restated, see Note 8)
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 8,548 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 $214,157 $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 18,570 19,386 Total liabilities 161,400 166,587 Minority Interest 362 -- 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 60,663 63,569 Unearned compensation/Loan to ESOP on ESOP shares (39,232) (50,280) 21,431 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 (24,782) (17,691) Total shareholders' equity 52,395 51,133 Total liabilities, minority interest, and shareholders' equity $214,157 $217,720
See accompanying notes to these financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (1994 amounts as restated, see Note 8) (in thousands, except per share data)
For the three months For the six months ended June 30, ended June 30, 1994 1993 1994 1993 Revenues: Operating leases $ 7,975 $ 8,462 $ 15,247 $ 17,802 Management fees and partnership interests 3,980 3,549 7,465 7,158 Commissions and other fees 1,264 5,525 4,466 9,438 (Loss) gain on the disposal of trans- portation equipment, net (348) 391 (465) 1,788 Other 1,610 214 2,735 334 Total revenues 14,481 18,141 29,448 36,520 Costs and expenses: Operations support 5,978 5,126 11,582 10,289 Depreciation and amortization 3,137 3,128 6,305 6,506 Commissions 1,317 2,440 2,873 5,323 General and administrative 2,411 2,914 4,765 5,057 Total costs and expenses 12,843 13,608 25,525 27,175 Operating income 1,638 4,533 3,923 9,345 Interest expense 2,417 3,152 4,708 6,534 Other income (expense), net 118 (140) 270 (435) Interest income 877 1,412 1,680 2,739 Income before income taxes 216 2,653 1,165 5,115 (Benefit) provision for income taxes (366) 949 (478) 1,823 Net income before cumulative effect of accounting change 582 1,704 1,643 3,292 Cumulative effect of accounting change -- -- 5,130 -- Net (loss) income 582 1,704 (3,487) 3,292 Preferred dividend on allocated shares 562 341 1,124 682 Preferred dividend on unallocated shares (net) of $521 and $1,042 income tax benefit for the three and six months ended June 30, 1993 -- 895 -- 1,790 Net (loss) income to common shares $ 20 $ 468 $(4,611) $ 820 (Loss) earnings per common share outstanding $ 0.00 $ 0.04 $ (0.37) $ 0.08
See accompanying notes to these financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (1994 amounts as restated, see Note 8) (in thousands)
For the six months ended June 30, 1994 1993 Cash flows from operating activities: Net (loss) income $ (3,487) $ 3,292 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 6,305 6,506 Cumulative effect of accounting change 5,130 -- Decrease in deferred income taxes (937) (1,548) Compensation expense for ESOP, net 170 -- 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 2,082 (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 2,058 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 (934) (1,034) Payments received from ESOP Trustee 834 -- Proceeds from exercise of stock options 19 -0- Net cash used in financing activities (184) (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 (loss) income per common share was computed by dividing net (loss) income to common shares by the weighted average number of shares of common stock deemed outstanding during the period, which includes the Employee Stock Ownership Plan ("ESOP") convertible preferred shares committed to be released as prescribed under the American Institute of Certified Public Accountants' Statement of Position 93-6 ("SOP 93-6") which the Company has adopted (refer to Footnote 8). 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. The facility provides that equipment sale proceeds or cash deposits be placed into collateral accounts or used to purchase additional equipment to the extent required to meet certain debt covenants. 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 to each ESOP participant (or transfer 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 2,200,000 common shares will be distributed to (or transferred to the accounts of) a total of approximately 315 ESOP participants, including up to 410,000 shares distributed on or before termination of the Plan to Participants who are no longer employees of the Company. 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 2,700,000 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 and marketable securities. 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 which were recently impacted by SOP 93-6. The impact of this change in accounting for allocated shares will be reflected as a reduction to income to common shareholders of approximately $5.1 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 net of the imputed dividend on allocated shares; (ii) interest received on the loan to the ESOP is not recorded as income; (iii) only dividends on allocated shares are reflected as a reduction to income to common shareholders; and (iv) the previously reported loan to Employee Stock Ownership Plan is not recognized under SOP 93-6; instead, an amount representing the unearned compensation related to the unallocated shares is reported as a reduction of Preferred Stock. The Company elected to adopt SOP 93-6 in the third quarter of 1994, which required the previously issued financial statements to be restated to reflect the change in accounting as of January 1, 1994. The adoption of SOP 93-6 resulted in a non-cash charge to earnings of $5.1 million for the impact of the change in accounting principle which was recorded as of the beginning of the year of adoption. Additionally, SOP 93-6 eliminates the recognition of interest income on the Company's loan to the ESOP and records the entire tax benefit of the ESOP as a reduction in income tax expense. 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 all 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 $0.9 million (17%) 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 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 (17%) 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 $0.5 million (38%) 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 from the adoption of SOP 93-6 which eliminates the recognition of interest income on the Company's internal loan to the ESOP. This was partially offset by an increase in interest rates. 4. The benefit for income taxes for the three months ended June 30, 1994, of $0.4 million reflects the entire tax benefit of the ESOP. 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% and included the tax benefit of preferred dividend on only the ESOP shares allocated to ESOP participants. As required by Statement of Financial Accounting Standards No. 109 ("Accounting For Income Taxes") ("SFAS No. 109"), and the Company's previous accounting for the ESOP, the ESOP dividend is presented net of the tax benefit on ESOP shares not allocated to participants. With the adoption of SOP 93-6, the tax benefit for all ESOP shares is reflected as a benefit in the provision for income tax. (D) Net (Loss) Income For the three months ended June 30, 1994, net income was $0.6 million. In addition, $0.6 million is reflected for the imputed preferred dividend on allocated ESOP shares, resulting in essentially no net (loss) income to common shareholders, and essentially no (loss) income per common share. 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 $1.3 million (13%) 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 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 $0.3 million (6%) 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 $1.1 million (39%) 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 the adoption of SOP 93-6, which eliminates the recognition of interest income on the Company's internal loan to the ESOP. This partially offset by an increase in interest rates. 4. The benefit for income taxes for the six months ended June 30, 1994, of $0.5 million reflects the entire tax benefit of the ESOP. 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%, and included the tax benefit of the preferred dividend on only the ESOP shares allocated to ESOP participants. Under Statement of Financial Accounting Standards No. 109 ("Accounting For Income Taxes") ("SFAS No. 109"), and the Company's previous accounting for the ESOP, the ESOP dividend is presented net of the tax benefit on ESOP shares not allocated to participants. With the adoption of SOP 93-6, the tax benefit for al ESOP shares is reflected as a benefit in the provision for income tax. (D) Net (Loss) Income For the six months ended June 30, 1994, net income before the cumulative effect of the accounting change was $1.6 million. In addition, $1.1 million is required for the imputed preferred dividend on allocated ESOP shares, resulting in net income to common shareholders before the cumulative effect of the accounting change of $0.5 million and income per common share of $0.04. 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 or cash deposits 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. 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. The Company elected in the third quarter to adopt Statement of Position 93-6 "Employers Accounting for Employee Stock Ownership Plans" (SOP 93-6), which requires the previously issued financial statements to be restated to reflect the change in accounting as of January 1, 1994. SOP 93-6 requires different accounting treatment for certain items relating to the ESOP than those previously used by the Company. (Refer to Footnote 8) (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 [FN] Harold R. Somerset joined the Board of Directors on July 19, 1994 as a Class III director. [/FN] 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. David J. Davis Vice President and Corporate Controller Date: November 11, 1994 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: November 11, 1994 EX-27 2
5 This schedule contains summary financial information extracted from the second quarter 10-Q/A and is qualified in its entirety by reference to such 10-Q/A. 6-MOS DEC-31-1994 JUN-30-1994 17849 41586 6765 0 0 0 184925 98550 214157 0 0 55746 0 21431 (24782) 214157 0 29448 0 25525 270 0 4708 1165 (478) 1643 0 0 5130 (3487) (0.37) (0.37)
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