-----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, aH900jUeijaDF+Y0XBiUUSFXrLLJuvInjLdCyQ1azpOf216yEorfWzYogYPWNcAb bC+uYnjpOtrhVONPQ9Nxbw== 0000814677-95-000013.txt : 19950804 0000814677-95-000013.hdr.sgml : 19950804 ACCESSION NUMBER: 0000814677-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950803 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM INTERNATIONAL INC CENTRAL INDEX KEY: 0000814677 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943041257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09670 FILM NUMBER: 95558630 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 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------------- FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the fiscal quarter ended June 30, 1995. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the transition period from to Commission file number 1-9670 ------------------------------- PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 94-3041257 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower, Suite 900, San Francisco, CA 94105-1301 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (415) 974-1399 ---------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock - $.01 Par Value; Outstanding as of August 2, 1995 - 11,553,357 shares PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS June 30, December 31, 1995 1994 (in thousands) ASSETS Cash and cash equivalents $ 25,574 $ 16,131 Receivables 5,434 5,747 Receivables from affiliates 10,111 7,001 Assets held for sale 1,949 17,644 Equity interest in affiliates 22,377 18,374 Transportation equipment held for operating leases 126,255 141,469 Less accumulated depreciation (69,292) (77,744) 56,963 63,725 Restricted cash and cash equivalents 6,723 1,409 Other 6,638 10,341 Total assets $ 135,769 $ 140,372 LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY Liabilities: Short-term secured debt -- $ 6,404 Senior secured debt 35,000 35,000 Other secured debt 695 2,119 Subordinated debt 23,000 23,000 Payables and other liabilities 10,060 11,589 Deferred income taxes 18,322 16,165 Total liabilities 87,077 94,277 Minority interest 401 400 Shareholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 11,553,357 issued and outstanding at June 30, 1995 and 11,699,673 at December 31, 1994 (excluding 1,018,034 and 871,057 shares held in treasury at June 30, 1995 and December 31, 1994, respectively) 117 117 Paid in capital, in excess of par 77,701 77,699 Treasury stock (3,325) (2,831) 74,493 74,985 Accumulated deficit (26,202) (29,290) Total shareholders' equity 48,291 45,695 Total liabilities, minority interest, and shareholders' equity $ 135,769 $ 140,372 See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
For the three months For the six months ended June 30, ended June 30, 1995 1994 1995 1994 Revenues: Operating leases $ 6,223 $ 7,975 $ 12,631 $ 15,247 Management fees 2,631 3,042 5,322 5,585 Partnership interests and other fees 1,732 940 2,329 1,841 Acquisition and lease negotiation fees 1,790 -- 2,330 1,726 Commissions 293 1,224 1,322 2,741 Aircraft brokerage and services 1,295 1,343 2,317 2,147 Gain (loss) on the sale or disposition of assets, net 594 (348) 5,181 (465) Other 278 305 522 626 Total revenues 14,836 14,481 31,954 29,448 Costs and expenses: Operations support 5,732 5,978 12,552 11,582 Depreciation and amortization 2,166 3,137 4,387 6,305 Commissions 327 1,317 1,468 2,873 General and administrative 2,397 2,411 5,067 4,765 Total costs and expenses 10,622 12,843 23,474 25,525 Operating income 4,214 1,638 8,480 3,923 Interest expense 1,616 2,417 3,931 4,708 Other (expense) income, net (27) 118 (54) 270 Interest income 247 877 925 1,680 Income before income taxes 2,818 216 5,420 1,165 Provision for (benefit from) income taxes 1,210 (366) 2,325 (478) Net income before cumulative effect of accounting change 1,608 582 3,095 1,643 Cumulative effect of accounting change -- -- -- 5,130 Net income (loss) 1,608 582 3,095 (3,487) Preferred dividend imputed on allocated shares -- 562 -- 1,124 Net income (loss) to common shares $ 1,608 $ 20 $ 3,095 $ (4,611) Earnings (loss) per common share outstanding $ 0.13 $ 0.00 $ 0.26 $ (0.37)
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Year Ended December 31, 1994 and the Six Months Ended June 30, 1995 (in thousands)
Loan to Common Stock Employee --------------------------------- Preferred Stock Paid-in Retained Total Stock at Ownership Capital in Earnings Share- Paid-in Plan At Excess Treasury Accumulated holders' Amount (ESOP) Par of Par Stock (Deficit) Equity Balances, December 31, 1993 $ 63,569 $(50,280) $ 109 $ 55,557 $ (131) $(17,691) $ 51,133 Net loss (6,641) (6,641) Cumulative effect of change in accounting on unearned compensation 7,130 7,130 Common stock repurchases (2,997) (2,997) Conversion of preferred stock (192) 161 31 -- Allocation of shares (4,091) 6,044 1,953 Current year imputed dividend on allocated ESOP shares (2,430) (2,430) Prior year preferred dividend not charged to equity until paid (2,565) (2,565) Cancellation of preferred stock and issuance of common stock upon termination of the ESOP (59,286) 37,106 8 21,906 266 -- Exercise of stock options 75 75 Translation gain 37 37 Balances, December 31, 1994 -- -- 117 77,699 (2,831) (29,290) 45,695 Net income 3,095 3,095 Common stock repurchases (494) (494) Exercise of stock options 2 2 Translation loss (7) (7) Balances, June 30, 1995 -- -- $ 117 $ 77,701 $ (3,325) $(26,202) $ 48,291
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the six months ended June 30, 1995 1994 Operating activities: Net income (loss) $ 3,095 $ (3,487) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,387 6,305 Foreign currency translations (7) -- Cumulative effect of accounting change -- 5,130 Increase (decrease) in deferred income taxes 2,157 (937) Compensation expense for ESOP -- 170 (Gain) loss on sale or disposition of assets, net (5,181) 465 Undistributed residual value interests (112) 216 Minority interest in net income of subsidiaries 1 26 Decrease in payables and other liabilities (1,035) (6,028) (Increase) decrease in receivables and receivables from affiliates (3,750) 2,082 Cash distributions from affiliates in excess of income accrued 393 255 Increase in other assets (272) (391) Purchase of equipment for lease (3,721) (842) Proceeds from sale of equipment for lease 16,506 2,763 Purchase of assets held for sale (21,134) (7,364) Proceeds from sale of assets held for sale 27,241 3,695 Financing of assets held for sale to affiliates 9,800 2,953 Repayment of financing of assets held for sale to affiliates (16,204) (2,953) Net cash provided by operating activities 12,164 2,058 Investing activities: Additional investment in affiliates (4,284) (51) Purchase of residual option (200) -- Proceeds from the disposition of residual options 2,059 89 Proceeds from the sale of leveraged leased assets 4,530 -- Proceeds from the maturity and sale of restricted marketable securities -- 17,516 Purchase of restricted marketable securities -- (14,633) Increase in restricted cash and restricted cash equivalents (5,314) (5,618) Acquisition of subsidiaries net of cash acquired -- (1,013) Net cash used in investing activities (3,209) (3,710) Financing activities: Proceeds from long-term equipment loans 85 45,079 Principal payments under loans (33) (45,182) Cash dividends paid on Preferred Stock -- (934) Payments received from ESOP Trustee 928 834 Repurchase of treasury stock (494) -- Proceeds from exercise of stock options 2 19 Net cash provided by (used in) financing activities 488 (184) Net increase (decrease) in cash and cash equivalents 9,443 (1,836) Cash and cash equivalents at beginning of period 16,131 19,685 Cash and cash equivalents at end of period $ 25,574 $ 17,849 Supplemental information: Interest paid during the period $ 3,380 $ 4,521 Income taxes paid during the period $ 378 $ 4,007
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995 1. General 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, 1995, the statements of operations for the three and six months ended June 30, 1995 and 1994, and the statements of cash flows for the six months ended June 30, 1995 and 1994. 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, 1994, on file at the Securities and Exchange Commission. Certain amounts in the 1994 financial statements have been reclassified to conform to the 1995 presentation. 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. 2. Equipment 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 one or more affiliated parties or third parties. At June 30, 1995, $1.9 million in transportation equipment was held for sale to one or more affiliated parties or third parties. During the last three years, the Company has significantly downsized the equipment portfolio through the sale or disposal of underperforming and nonperforming assets. The Company will continue to identify underperforming and nonperforming assets for sale or disposal as necessary. Periodically, the Company will purchase groups of assets whose ownership may be allocated among affiliated partnerships and the Company. Generally in these cases, only assets that are on-lease will be purchased by the affiliated partnerships. The Company will generally assume the ownership and remarketing risks associated with off-lease equipment. Allocation of the purchase price will be determined by a combination of the Company's knowledge and assessment of the relevant equipment market, third party industry sources, and recent transactions or published fair market value references. During the six months ended June 30, 1995, the Company sold 56 railcars that were a part of a group purchase in December 1994. These cars were off-lease when purchased and remarketing efforts resulted in a sale in which the Company realized a gain of approximately $0.3 million. The Company also purchased two commuter aircraft which were part of a group purchase for a total of $1.5 million, and sold both aircraft for a gain of $0.3 million. 3. Debt Assets acquired and 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 30, 1995. The amendment extended the facility until September 30, 1995. The Company is currently negotiating with the lender to further extend this agreement and believes this will be completed prior to the September 30, 1995 expiration date. The Company had no borrowings on this facility at June 30, 1995. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995 4. Shareholders' Equity Effective February 1995, the Company adopted the Directors' 1995 Non-qualified Stock Option Plan which reserves 120,000 shares of the Company's common stock for issuance to directors who are nonemployees of the Company. All options outstanding are exercisable at prices equal to the closing price as of the date of grant. Vesting of options occurs in three equal installments of 33 1/3% per year, initiating from the date of the grant. During the six months ended June 30, 1995, 40,000 options were granted under this plan at $2.63 per share. In February 1995, the Company announced that its Board of Directors authorized the repurchase of up to $0.5 million of the Company's common stock. The shares could be purchased in the open market or through private transactions with working capital and existing cash reserves. Shares repurchased could be used for corporate purposes, including option plans, or they could be retired. The Company had purchased 146,977 shares under this program for $0.5 million as of June 30, 1995. During the six months ended June 30, 1995, 146,977 common shares were repurchased by the Company, and options for 661 shares were exercised. Consequently, the total common shares outstanding decreased to 11,553,357 at June 30, 1995, from the 11,699,673 outstanding at December 31, 1994. Net income (loss) per common share was computed by dividing net income (loss) to common shares by common stock equivalents which included the weighted average number of shares and stock options deemed outstanding during the period. The weighted average number of shares and stock options deemed outstanding during the three months ended June 30, 1995 and 1994, were 11,751,359 and 12,533,347, respectively. The weighted average number of shares and stock options deemed outstanding during the six months ended June 30, 1995 and 1994, were 11,806,322 and 12,440,755, respectively. 5. Recent Developments In January 1995, the Company entered into an agreement, through a new equipment leasing and management subsidiary, to manage the operations of Boston-based, privately-held American Finance Group (AFG). The new entity, as a wholly-owned subsidiary of PLM Financial Services, Inc. (FSI), will acquire AFG's proprietary software and provide equipment management and investor relations services to AFG's existing investor programs. The Company has the right to terminate the contract subject to certain terms and conditions any time after June 30, 1995. Affiliates of AFG, which will change its name, will continue to be the general partners of the existing AFG programs. AFG currently manages a portfolio of approximately $868 million of capital equipment (at original cost), subject to primarily full payout leases, for its own account and approximately 50,000 investors. The Company has entered into a securitization facility to borrow up to $80 million on a nonrecourse basis for a one year period that will be securitized by primarily finance type leases which will generally have terms of four to five years. The securitized debt will bear interest at treasuries plus 1% and will become effective August, 1995. In January 1995, the registration statement for the Professional Lease Management Income Fund I, L.L.C. (LLC) became effective. FSI serves as the manager for the new program. This program, organized as a limited liability company with a no front-end fee structure, began syndication in the first quarter of 1995. There is no compensation paid to FSI, or any of its subsidiaries, for the organization and syndication of interests in the LLC, the acquisition of equipment, nor the negotiation of the leases by the LLC. FSI is funding the cost of organization, syndication and offering through use of operating cash and is capitalizing these costs as its investment in the LLC. The Company will amortize its investment in the LLC over the life of the program. In return for its investment, FSI is entitled to a 15% interest in the cash distributions and earnings of the LLC subject to certain allocation provisions. FSI's interest in the cash distributions and earnings of the LLC will increase to 25% after the investors have received distributions equal to their invested capital. The Company is also entitled to monthly fees for equipment management services and reimbursement for certain accounting and administrative services provided by the Company. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995 5. Recent Developments (continued) As of the date of this report, the LLC had raised $23.9 million in equity and had met the legal requirements for breaking impound and entering the equipment investment phase of the program. 6. Subsequent Event In July 1995, the Company purchased one commuter aircraft for resale to a third party at a cost of $725,000. 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's transportation equipment held for operating leases, which consists of aircraft, marine containers, trailers, railcars and storage vaults at June 30, 1995, is mainly equipment built prior to 1988. As equipment ages, the Company continues to monitor the performance of its assets on lease and market conditions for leasing equipment in general in order to seek the best opportunities for investment. 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. The Company also syndicates investment programs from which it earns various fees and equity interests. The Company is currently marketing an investment program structured as a limited liability company (LLC) with a no front-end fee structure. The previously syndicated limited partnership programs have allowed the Company to receive fees for the acquisition and initial lease of the equipment. The LLC program does not provide for acquisition and lease negotiation fees. The Company invests the equity raised through syndication in transportation equipment which is then managed on behalf of the investors. The equipment management activities for this type of program generate equipment management fees for the Company over the life of the program, typically 10 to 12 years. The limited partnership agreements generally entitle the Company to receive a 1% or 5% interest in the cash distributions and earnings of the partnership subject to certain allocation provisions. The LLC agreement entitles the Company to a 15% interest in the cash distributions and earnings of the program subject to certain allocation provisions which will increase to 25% after the investors have received distributions equal to their invested capital. For the Three Months Ended June 30, 1995 versus June 30, 1994 The following analysis reviews the operating results of the Company: Revenue: For the three months ended June 30, 1995 1994 (in thousands) Operating leases $ 6,223 $ 7,975 Management fees 2,631 3,042 Partnership interests and other fees 1,732 940 Acquisition and lease negotiation fees 1,790 -- Commissions 293 1,224 Aircraft brokerage and services 1,295 1,343 Gain (loss) on the sale or disposition of assets, net 594 (348) Other 278 305 Total revenues $ 14,836 $ 14,481 The fluctuations in revenues for the three months ended June 30, 1995 from the same period in 1994 are summarized and explained below. Operating lease revenue: For the three months ended June 30, 1995 1994 (in thousands) By equipment type: Trailers $2,625 $3,763 Aircraft 1,516 2,537 Marine vessels 535 1,153 Marine containers 146 256 Storage vaults 243 191 Railcars 421 75 AFG 737 -- ------ ------ $6,223 $7,975 As of June 30, 1995, the Company owned transportation equipment held for operating leases with an original cost of $126.3 million, which was $58.7 million less than the original cost of equipment owned and held for operating leases at June 30, 1994. The reduction in equipment, on an original cost basis, is a consequence of the Company's strategic decision to dispose of certain underperforming and nonperforming assets resulting in a 100% reduction in its marine vessel fleet, a 54% net reduction in its marine container portfolio, a 35% net reduction in its aircraft portfolio, a 17% net reduction in its trailer portfolio, and a 21% net reduction in its railcar portfolio compared to June 30, 1994. Operating lease revenue will be impacted on an ongoing basis by the level of assets held for operating lease and held for sale, which can earn lease revenue for the Company. The reduction in equipment available for lease is the primary reason marine vessel, trailer, marine container, and aircraft revenue were all reduced as compared to the prior year. The decrease in operating lease revenues as a result of the reduction in equipment available for lease was partially offset by $0.7 million in operating lease revenues generated by AFG-related leases prior to being sold to third parties, a $0.3 million increase in railcar lease revenues, and a $0.1 million increase in storage vault revenues. Although the net cost of railcar equipment in the railcar portfolio decreased 21% from the comparable 1994 period, railcar revenue increased $0.3 million due to the purchase of 227 railcars in December of 1994 generating higher revenue than the 11 doublestack railcars did, which were owned in the prior year and had a higher net cost. Storage vault revenue increased $0.1 million for the quarter ended June 30, 1995, compared to the same quarter of the prior year, due to additions of $0.6 million in new storage vaults made during the fourth quarter of 1994. Management fees: For the three months Year ended June 30, Liquidation 1995 1994 Phase Begins (in thousands) Management fees by fund were: EGF I $ 347 $ 293 1998 EGF II 196 312 1999 EGF III 269 544 2000 EGF IV 234 410 1999 EGF V 438 618 2000 EGF VI 432 451 2002 EGF VII 207 110 2003 AFG programs 179 -- -- Other programs 329 304 -- ------ ------ $2,631 $3,042 Management fees are, for the most part, based on the gross revenues generated by equipment under management. The managed equipment portfolio for new programs grows correspondingly with new syndication activity. Affiliated partnership and investment program surplus operating cash flows and loan proceeds invested in additional equipment favorably influence management fees. The original cost of the equipment under management, excluding equipment managed under the AFG programs, (measured at original cost) amounted to $1.06 billion and $1.13 billion at June 30, 1995 and 1994, respectively. The decrease in management fees of $0.4 million resulted from a decrease in management fees generated by gross revenues of the equipment growth funds, which fell due to a net decrease in managed equipment and a decrease in lease rates for certain types of equipment, partially offset by a $0.2 million increase from the January 1995 agreement with AFG to provide management services to their existing investor programs. Partnership interests and other fees: The Company records as revenues its equity interest in the earnings of the Company's affiliated partnerships. The net earnings and distribution levels from the affiliated partnerships were $1.7 million and $0.9 million for the quarters ended June 30, 1995 and 1994, respectively. In 1995, the equity interest recorded was impacted by net increases of $0.9 million in the Company's recorded residual values which included $1.1 million in residual income recorded for the equipment purchased for the LLC, and $0.3 million in residual income for the AFG programs, partially offset by a decrease in residual income related to other existing programs. Residual 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 portfolio of the affiliated partnership. Net decreases in the recorded residual values result when partnership assets are sold and the reinvestment proceeds are less than the original investment in the sold equipment. There were no adjustments to the residual values recorded in the same period of 1994. Acquisition and lease negotiation fees: On behalf of the equipment growth funds, a total of $24.2 million of equipment was purchased during the quarter ended June 30, 1995, generating $1.3 million in acquisition and lease negotiation fees. In addition, $0.5 million in acquisition and lease negotiation fees were generated by AFG-related purchases during the quarter ended June 30, 1995. No purchases of equipment or AFG-related transactions were made during the same quarter of 1994, resulting in a $1.8 million increase in acquisition and lease negotiation fees in the quarter ended June 30, 1995 from the prior year comparable period. Commissions: Commission revenue represents syndication placement fees, generally 9% of equity raised for the equipment growth funds, earned upon the sale of partnership units to investors. During the quarter ended June 30, 1995, program equity raised for the equipment growth funds totaled $3.2 million compared to $13.6 million during the same quarter during 1994, resulting in a decrease in placement commissions of $0.9 million. The Company closed PLM Equipment Growth & Income Fund VII (EGF VII) syndication activities on April 30, 1995. As a result of the Company's decision to market a new investment program with a no front-end fee structure, commission revenue will be eliminated unless a new program with a front-end fee is brought to market. Aircraft brokerage and services: Aircraft brokerage and services revenue was $1.3 million during both the quarters ended June 30, 1995 and 1994 and represents revenue earned by Aeromil, the Company's aircraft leasing, spare parts brokerage, and related services subsidiary, acquired in February 1994. Gain (loss) on the sale or disposition of assets, net: During the quarter ended June 30, 1995, the Company purchased two commuter aircraft for a total of $1.5 million and sold both aircraft for a gain of $0.3 million, net of selling costs. Additional net gains on the sales or dispositions of assets for the quarter ended June 30, 1995 of $0.3 million resulted mainly from the sales or dispositions of 363 marine containers, one commuter aircraft, two railcars, 10 storage vaults, and 225 trailers. The $0.3 million net loss for the same period in 1994 resulted from the sale or disposition of trailers and marine containers. Costs, Expenses and Other: For the three months ended June 30, 1995 1994 (in thousands) Operations support $ 5,732 $ 5,978 Depreciation and amortization 2,166 3,137 Commissions 327 1,317 General and administrative 2,397 2,411 Interest expense 1,616 2,417 Other (expense) income, net (27) 118 Interest income 247 877 Operations support: 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) decreased $0.2 million (4%) for the quarter ended June 30, 1995, from the same quarter in 1994. The decrease resulted from decreases in Aeromil-related operational expenses and a decrease in marine charter expenses due to the sale of the Company's marine vessel, offset partially by $1.2 million in costs associated with the operation of AFG which was not a part of operations in 1994. Depreciation and amortization: Depreciation and amortization expense decreased $1.0 million (31%) for the quarter ended June 30, 1995, as compared to the quarter ended June 30, 1994. The decrease resulted from the reduction in depreciable equipment discussed in the operating lease revenue section. Commissions: Commission expenses are primarily incurred by the Company in connection with the syndication of investment partnerships and represent payments to brokers and financial planners for sales of investment program units. Commissions are also paid to certain of the Company's employees directly involved in syndication and leasing activities. Commission expenses for the quarter ended June 30, 1995, decreased $1.0 million (75%) from the same period in 1994. The reduction is the result of a decrease in syndicated equity raised for the equipment growth funds during the quarter ended June 30, 1995 versus the same quarter in 1994. With the closing of syndication efforts for EGF VII, commission costs related to the LLC will be capitalized as part of the Company's investment in the LLC program. Interest expense: Interest expense decreased $0.8 million (33%) during the quarter ended June 30, 1995, compared to the same period in 1994, due to the reduction in debt levels in 1995 from the second quarter of 1994, partially offset by increased interest rates. Other (expense) income: Other (expense) income decreased $0.1 million in the quarter ended June 30, 1995, from the same quarter of 1994, due to fluctuations in items comprising other income (expense). Interest income: Interest income decreased $0.6 million (72%) in the quarter ended June 30, 1995, compared to the same quarter in 1994 from a reduction in interest income earned on the ESOP cash collateral account which existed prior to the termination of the Company's ESOP at the end of 1994. Income taxes: For the three months ended June 30, 1995, the provision for income taxes was $1.2 million, which represented an effective rate of 43%. For the same period in 1994, the $0.4 million tax benefit reflected the provision for the Company's income net of the tax benefit on the ESOP dividend. Net income: As a result of the foregoing, the three months ended June 30, 1995 net income was $1.6 million resulting in net income to common shares of $0.13. For the same period in 1994, net income was $0.6 million. In addition, $0.6 million was required in 1994 for the imputed preferred dividend allocated on ESOP shares resulting in essentially no income to common shareholders, and essentially no income per common share. For the Six Months Ended June 30, 1995 versus June 30, 1994 The following analysis reviews the operating results of the Company: Revenue: For the six months ended June 30, 1995 1994 (in thousands) Operating leases $ 12,631 $ 15,247 Management fees 5,322 5,585 Partnership interests and other fees 2,329 1,841 Acquisition and lease negotiation fees 2,330 1,726 Commissions 1,322 2,741 Aircraft brokerage and services 2,317 2,147 Gain (loss) on the sale or disposition of assets, net 5,181 (465) Other 522 626 Total revenues $ 31,954 $ 29,448 The fluctuations in revenues for the six months ended June 30, 1995 from the same period in 1994 are summarized and explained below. Operating lease revenue: For the six months ended June 30, 1995 1994 (in thousands) By equipment type: Trailers $ 5,380 $ 7,096 Aircraft 3,073 4,733 Marine vessels 1,092 2,388 Marine containers 300 496 Storage vaults 500 364 Railcars 1,263 170 AFG 1,023 -- ------- ------- $12,631 $15,247 As of June 30, 1995, the Company owned transportation equipment held for operating leases with an original cost of $126.3 million, which was $58.7 million less than the original cost of equipment owned and held for operating leases at June 30, 1994. The reduction in equipment, on an original cost basis, is a consequence of the Company's strategic decision to dispose of certain underperforming and nonperforming assets resulting in a 100% reduction in its marine vessel fleet, a 54% net reduction in its marine container portfolio, a 35% net reduction in its aircraft portfolio, a 17% net reduction in its trailer portfolio, and a 21% net reduction in its railcar portfolio compared to 1994. Operating lease revenue will be impacted on an ongoing basis by the level of assets held for operating lease and held for sale, which can earn lease revenue for the Company. The reduction in equipment available for lease is the primary reason marine vessel, trailer, marine container, and aircraft revenue were all reduced as compared to the prior year. The decrease in operating lease revenues as a result of the reduction in equipment available for lease was partially offset by a $1.0 million increase in operating lease revenues generated by AFG-related leases, a $1.1 million increase in railcar lease revenues, and a $0.1 million increase in storage vault revenues. Although the net cost of railcar equipment in the railcar portfolio decreased 21% from the comparable 1994 period, railcar revenue increased $1.1 million due to the purchase of 227 railcars in December of 1994 generating higher revenue than the 11 doublestack railcars did which were sold in March 1995, and had a higher net cost. Storage vault revenue increased $0.1 million for the six months ended June 30, 1995, compared to the same period in the prior year, due to additions of $0.6 million in new storage vaults made during the fourth quarter of 1994. Management fees: For the six months Year ended June 30, Liquidation 1995 1994 Phase Begins (in thousands) Management fees by fund were: EGF I $ 683 $ 656 1998 EGF II 434 611 1999 EGF III 564 936 2000 EGF IV 519 672 1999 EGF V 886 1,056 2000 EGF VI 862 873 2002 EGF VII 404 174 2003 AFG programs 359 -- -- Other programs 611 607 -- ------ ------ $5,322 $5,585 Management fees are, for the most part, based on the gross 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 favorably influence management fees. The original cost of the equipment under management, excluding equipment managed under the AFG programs, (measured at original cost) amounted to $1.06 billion and $1.13 billion at June 30, 1995 and 1994, respectively. The decrease in management fees of $0.3 million resulted from a decrease in management fees generated by gross revenues of the equipment growth funds, which fell due to a net decrease in managed equipment and a decrease in lease rates for certain types of equipment, partially offset by $0.4 million increase from the January 1995 agreement with AFG to provide management services to their existing investor programs. Partnership interests and other fees: The Company records as revenues its equity interest in the earnings of the Company's affiliated partnerships. The net earnings and distribution levels from the affiliated partnerships were $2.3 million and $1.8 million for the periods ended June 30, 1995 and 1994, respectively, which were impacted by net increases/decreases in the Company's recorded residual values. In 1995, the equity interest recorded was impacted by net increases of $0.6 million in the Company's recorded residual values which included $1.1 million in residual income recorded for the equipment purchased for the LLC, and $0.4 million in residual income for the AFG programs, offset partially by a decrease in residual income related to other existing programs. A net decrease in the recorded residual values of $0.2 million was recorded for the same period in 1994. Residual income is recognized on residual interests based upon the general partners' share of the present value of the estimated disposition proceeds of the equipment portfolios of the affiliated partnerships. Net decreases in the recorded residual values result when partnership assets are sold and the reinvestment proceeds are less than the original investment in the sold equipment. During the quarter ended June 30, 1994, the Company also recorded $0.2 million in debt financing fees earned for debt placed in affiliated partnerships. Acquisition and lease negotiation fees: Acquisition and lease negotiation fees increased $0.6 million during the six months ended June 30, 1995 as compared to the same period in the prior year, due to $0.8 million in acquisition and lease negotiation fees generated from AFG-related equipment purchases, partially offset by a $0.2 million decrease in fees due to a decrease of $3.3 million in equipment purchases by the equipment growth funds as compared to the prior year. Commissions: Commission revenue represents syndication placement fees, generally 9% of equity raised for the equipment growth funds, earned upon the sale of partnership units to investors. During the six months ended June 30, 1995, program equity raised for the equipment growth funds totaled $14.6 million compared to $30.6 million during the same period during 1994, resulting in a decrease in placement commissions of $1.4 million. The Company closed EGF VII syndication activities on April 30, 1995. As a result of the Company's decision to market a new investment program with a no front-end fee structure, commission revenue will be eliminated unless a new program with a front-end fee is brought to market. Aircraft brokerage and services: Aircraft brokerage and services revenue increased $0.2 million during the six months ended June 30, 1995, compared to the same period of 1994, and represents revenue earned by Aeromil, the Company's aircraft leasing, spare parts brokerage, and related services subsidiary, acquired in February 1994. Gain (loss) on the sale or disposition of assets, net: The $5.2 million net gain recorded during the six months ended June 30, 1995 included a gain of $1.8 million for the sale of three option contracts for railcar equipment, and gains of $3.1 million from the sale or disposition of one marine vessel, 510 marine containers, two commercial aircraft, one commuter aircraft, one helicopter, 216 railcars, 10 storage vaults and 355 trailers. Additionally, during the six months ended June 30, 1995, the Company purchased two commuter aircraft for a total of $1.5 million and sold both aircraft for a gain of $0.3 million, net of selling costs. The $0.5 million net loss for the same period in 1994 resulted from the sale or disposition of trailers and marine containers. Other: Other revenues decreased $0.1 million in the six months ended June 30, 1995, from the same period in 1994, due to a decrease in insurance underwriting revenue earned from services provided to the Company's affiliated partnerships. Costs, Expenses and Other: For the six months ended June 30, 1995 1994 (in thousands) Operations support $ 12,552 $ 11,582 Depreciation and amortization 4,387 6,305 Commissions 1,468 2,873 General and administrative 5,067 4,765 Interest expense 3,931 4,708 Other (expense) income, net (54) 270 Interest income 925 1,680 Operations support: 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 $1.0 million (8%) for the six months ended June 30, 1995, from the same period in 1994. The increase resulted from $2.2 million in costs associated with the operation of AFG, and a $0.3 million increase in accrued compensation expense primarily to compensate employees for lost benefits resulting from the termination of the Company's 401(k) plan, offset partially by a decrease in marine charter expenses due to the sale of the entire owned marine vessel portfolio, and a decrease in Aeromil expenses due to lower operational expenses in the current year. Depreciation and amortization: Depreciation and amortization expense decreased $1.9 million (30%) for the six months ended June 30, 1995, as compared to the six months ended June 30, 1994. The decrease resulted from the reduction in depreciable equipment. Commissions: Commission expenses are primarily incurred by the Company in connection with the syndication of investment partnerships and represent payments to brokers and financial planners for sales of investment program units. Commissions are also paid to certain of the Company's employees directly involved in syndication and leasing activities. Commission expenses for the six months ended June 30, 1995, decreased $1.4 million (49%) from the same period in 1994. The reduction is the result of a $16.0 million decrease in syndicated equity raised for the equipment growth funds in the six months ended June 30, 1995 versus the same period in 1994. With the closing of syndication efforts for EGF VII, commission costs related to the LLC will be capitalized as part of the Company's investment in the LLC program. General and administrative: General and administrative expenses increased $0.3 million (6%) during the period ended June 30, 1995, compared to the same period in 1994. The increase resulted from an increase in accrued compensation expense primarily to compensate employees for lost benefits resulting from the termination of the Company's 401(k) plan. Interest expense: Interest expense decreased $0.8 million (17%) during the six months ended June 30, 1995, compared to the same period in 1994 due to the reduction in debt levels in 1995 from the same period in 1994, partially offset by increased interest rates. Other (expense) income: Other (expense) income decreased $0.3 million in the six months ended June 30, 1995, from the same period of 1994, due to fluctuations in items comprising other income (expense). Interest income: Interest income decreased $0.8 million (45%) in the six months ended June 30, 1995, compared to the same period in 1994 from a reduction in interest income earned on the ESOP cash collateral account which existed prior to the termination of the Company's ESOP at the end of 1994. Income taxes: For the six months ended June 30, 1995, the provision for income taxes was $2.3 million, which represented an effective rate of 43%. For the same period in 1994, the $0.5 million tax benefit reflected the provision for the Company's income net of the tax benefit on the ESOP dividend. Cumulative effect of accounting change: The adoption of SOP 93-6 in the six months ended June 30, 1994, resulted in a noncash charge to earnings of $5.1 million for the impact of the change in accounting principle and is reflected as the "Cumulative effect of accounting change" in the Consolidated Statements of Operations. Net income (loss): As a result of the foregoing, the six months ended June 30, 1995 net income was $3.1 million resulting in net income per common share of $0.26. For the same period in 1994, net loss was $3.5 million. In addition, $1.1 million was required in 1994 for the imputed preferred dividend allocated on ESOP shares resulting in a net loss to common shareholders of $4.6 million, or $0.37 per common share outstanding. Liquidity and Capital Resources: Cash requirements historically have been satisfied through cash flow from operations, borrowings, or sales of transportation equipment. Liquidity in 1995 will depend, in part, on continued remarketing of the equipment portfolio at similar lease rates, management of existing and newly 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 $45.0 million senior loan facility with a syndicate of insurance companies and repaid the prior facility. The Company has pledged substantially all of its equipment as collateral to the loan facility. The facility provides that equipment sale proceeds, from pledged equipment, or cash deposits will be placed into collateral accounts or used to purchase additional equipment. The facility requires quarterly interest only payments through March 31, 1997, with quarterly principal payments of $2.1 million plus interest charges beginning June 30, 1997, through the termination of the loan in June 2001. In December 1994, the Company repaid $10.0 million of its senior debt through the use of cash collateral from the sale of pledged equipment. Bridge Financing: Assets acquired and 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 30, 1995. The amendment extended the facility until September 30, 1995, and provides for a $5.0 million letter of credit facility as part of the $25.0 million facility. The Company is currently negotiating with the lender to further extend this agreement and believes this will be completed prior to the September 30, 1995 expiration date. This facility, which is shared with EGF VII and the LLC, 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% financing to all three parties. The Company, EGF VII or the LLC uses working capital for the nonfinanced costs of these acquisitions. The Company retains the difference between the net lease revenue earned and the interest expense during the interim holding period since its capital is at risk. As of August 2, 1995, the Company and EGF VII had no borrowings under this facility, and the LLC had $10.1 million in borrowings under this facility. Securitized Debt: The Company has entered into a securitization facility to borrow up to $80 million on a non-recourse basis for a one year period that will be securitized by primarily finance type leases which will generally have terms of four to five years. The securitized debt will bear interest at treasuries plus 1% and will become effective August, 1995. (b) Portfolio Activities: During the six months ended June 30, 1995, the Company generated proceeds of $16.5 million from the sale of equipment for lease. These net proceeds were placed in a collateral account as required by the senior secured term loan agreement. In March 1995, the lender consented to the Company's request to release $10.8 million in funds from the cash collateral account. The request to release funds and the subsequent approval were based on the appraised fair market value of the equipment portfolio and the related collateral coverage ratio. Over the last three years, the Company has downsized the equipment portfolio through the sale or disposal of underperforming and nonperforming assets. The Company will continue to identify underperforming and nonperforming assets for sale or disposal as necessary. (c) Syndication Activities: The Company earned fees from syndication activities related to EGF VII during the six months ended June 30, 1995. Total equity raised since inception for this partnership was $107.4 million through April 30, 1995 when the program closed. There will be no more equity raised for this partnership. The overall limited partnership syndication market has been contracting. The Company's management is concerned with the continued contraction of the equipment leasing syndication market and its effect on the volume of partnership equity that can be raised. The Company's newly registered and currently marketed no front-end fee syndication product was developed to capture a larger share of the syndication market. Management believes that 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 1 of Notes to Consolidated Financial Statements. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders held May 18, 1995, three proposals were submitted to a vote of the Company's security holders. 1. J. Alec Merriam and Robert L. Pagel were re-elected to the Board of Directors of the Company. The votes cast in the election were as follows: Nominee For Votes Withheld J. Alec Merriam 5,341,518 4,192,689 Robert L. Pagel 5,343,635 4,190,572 Directors whose terms continued after the Annual Meeting of Stockholders held on May 18, 1995 are as follows: Class III (Terms expire in 1996) Allen V. Hirsch Harold R. Somerset Class I (Terms expire in 1997) Walter E. Hoadley Robert N. Tidball 2. The proposed 1995 Management Stock Compensation Plan was not approved. Votes ----- Broker For Against Abstentions Non Votes 2,921,438 4,499,609 191,067 1,922,093 3. The proposal by one shareholder for the Company to embrace as a corporate policy the concept of preserving natural resources to the extent feasible and to take no actions, unless absolutely necessary for corporate survival, that would greatly harm natural resources and the creatures that exist herein, was not approved. Votes ----- Broker For Against Abstentions Non Votes 696,453 5,621,324 1,189,276 2,027,154 Item 6. Exhibits and Reports on Form 8-K (A) Exhibits None. (B) Reports on Form 8-K None. 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 2, 1995 EX-27 2
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 25,574 0 5,434 0 0 0 126,255 69,292 135,769 0 0 74,493 0 0 (26,202) 135,769 0 31,954 0 23,474 54 0 3,931 5,420 2,325 3,095 0 0 0 3,095 0.26 0.26
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