-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hu7cuZuGokTCZ84SFOfR/IwryCHvZOOlYYxLKRQm1/chvzYR/AVx7LiZ/BFsx9O4 vAaBWp7DnAi/fQHtylrjuw== 0000814677-00-000009.txt : 20000505 0000814677-00-000009.hdr.sgml : 20000505 ACCESSION NUMBER: 0000814677-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000504 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: SEC FILE NUMBER: 001-09670 FILM NUMBER: 618593 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 800 STREET 2: ONE MARKET PLZ CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9670 ------------------------------- PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-3041257 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE MARKET, STEUART STREET TOWER, SUITE 800, SAN FRANCISCO, CA 94105-1301 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (415) 974-1399 ---------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock - $.01 par value; outstanding as of May 2, 2000 - 7,701,409 shares. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share amounts)
For the Three Months Ended March 31, 2000 1999 -------------------------- REVENUES Operating lease income $ 7,290 $ 3,877 Management fees 1,984 2,153 Partnership interests and other fees 281 290 Acquisition and lease negotiation fees 19 461 Loss on the sale or disposition of assets, net (13) (9) Other 346 364 ----------------------------- Total revenues 9,907 7,136 ----------------------------- COSTS AND EXPENSES Operations support 4,273 2,699 Depreciation and amortization 2,522 1,577 General and administrative 1,586 1,484 ----------------------------- Total costs and expenses 8,381 5,760 ----------------------------- Operating income 1,526 1,376 Interest expense (1,520) (1,097) Interest income 203 97 ----------------------------- Income before income taxes 209 376 Provision for income taxes 79 145 ----------------------------- Net income from continuing operations 130 231 Income (loss) from discontinued operations, net of income tax (49) 79 ----------------------------- Net income before cumulative effect of accounting change 81 310 Cumulative effect of accounting change, net of income taxes -- (250) ----------------------------- Net income to common shares $ 81 $ 60 ============================= Basic earnings per weighted-average common share outstanding: Income from continuing operations $ 0.02 $ 0.03 Income (loss) from discontinued operations (0.01) 0.01 Cumulative effect of accounting change -- (0.03) ----------------------------- Net income $ 0.01 $ 0.01 ============================= Diluted earnings per weighted-average common share outstanding: Income from continuing operations $ 0.02 $ 0.03 Income (loss) from discontinued operations (0.01) 0.01 Cumulative effect of accounting change -- (0.03) ----------------------------- Net income $ 0.01 $ 0.0 =============================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share amounts)
ASSETS March 31, December 31, 2000 1999 --------------------------------------- Cash and cash equivalents $ 22,636 $ 2,089 Receivables (net of allowance for doubtful accounts of $1.2 million and $0.8 million as of March 31, 2000 and December 31, 1999, respectively) 10,329 8,437 Receivables from affiliates 4,248 2,962 Net assets of discontinued operations -- 30,990 Equity interest in affiliates 18,165 18,145 Trailers held for operating leases 108,272 103,000 Less accumulated depreciation (23,298) (21,093) ------------------------------------- 84,974 81,907 Restricted cash and cash equivalents 1,477 1,812 Other assets, net 7,815 5,855 ===================================== Total assets $ 149,644 $ 152,197 ===================================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Senior secured notes $ 18,799 $ 20,679 Senior secured loan 7,353 8,824 Other secured debt 50,103 50,697 Payables and other liabilities 8,570 8,445 Deferred income taxes 15,503 14,139 ------------------------------------- Total liabilities 100,328 102,784 Shareholders' equity Preferred stock ($0.01 par value, 10.0 million shares authorized, none outstanding as of March 31, 2000 and December 31, 1999) -- -- Common stock ($0.01 par value, 50.0 million shares authorized, and 7,701,409 and 7,675,410 shares issued and outstanding as of March 31, 2000 and December 31, 1999, respectively) 112 112 Paid-in capital, in excess of par 74,883 75,059 Treasury stock (4,334,346 and 4,360,345 shares as of March 31, 2000 and December 31, 1999, respectively) (18,326) (18,324) Accumulated deficit (7,353) (7,434) ------------------------------------- Total shareholders' equity 49,316 49,413 ===================================== Total liabilities and shareholders' equity $ 149,644 $ 152,197 =====================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME For the Year Ended December 31, 1999 and the Three Months Ended March 31, 2000 (in thousands of dollars)
Common Stock Accumulated ------------------------------------------- Deficit & Paid-in Accumulated Capital in Other Total At Excess Treasury Comprehensive Shareholders' Par of Par Stock Income ------------------------------------------------------------------------------- Balances, December 31, 1998 $ 112 $ 74,947 $ (15,072) $ (9,790) $ 50,197 Comprehensive income: Net income 2,356 2,356 Exercise of stock options 11 591 602 Common stock purchases (3,951) (3,951) Reissuance of treasury stock 101 108 209 --------------------------------------------------------------------------- Balances, December 31, 1999 112 75,059 (18,324) (7,434) 49,413 Comprehensive income: Net income 81 81 Exercise of stock options (176) 336 160 Common stock purchases (338) (338) =========================================================================== Balances, March 31, 2000 $ 112 $ 74,883 $ (18,326) $ (7,353) $ 49,316 ===========================================================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Three Months Ended March 31, 2000 1999 -------------------------------- OPERATING ACTIVITIES Net income from continuing operations $ 130 $ 231 Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: Depreciation and amortization 2,522 1,577 Deferred income tax 1,364 (5,838) Loss on sale or disposition of assets, net 13 9 Equity income in excess of (less than) cash received (244) 82 Increase (decrease) in payables and other liabilities 125 (792) (Increase) decrease in receivables and receivables from affiliates 170 303 Amortization of goodwill related to the investment programs 224 709 Increase in other assets (2,265) (62) -------------------------------- Cash provided by (used in) operating activities of continuing operations 2,039 (3,781) Cash provided by operating activities of discontinued operations -- 6,636 Cumulative effect of accounting change -- 250 -------------------------------- Net cash provided by operating activities 2,039 3,105 -------------------------------- INVESTING ACTIVITIES Principal payments received on finance leases 140 71 Purchase of property, plant, and equipment (2) (409) Purchase of transportation equipment and capital improvements (5,480) (21,907) Proceeds from sale of subsidiary, net of transaction costs 27,723 -- Proceeds from the sale of transportation equipment for lease 45 103 Proceeds from the sale of assets held for sale -- 6,960 Decrease (increase) in restricted cash and restricted cash equivalents 335 (409) Investing activities of discontinued operations -- (574) ------------------------------- Net cash provided by (used in) investing activities 22,761 (16,165) ------------------------------- FINANCING ACTIVITIES Borrowings of short-term warehouse credit facilities 1,200 17,126 Repayment of short-term warehouse credit facilities (1,200) (5,855) Repayment of senior secured notes (1,880) (1,880) Repayment of senior secured loan (1,471) (1,471) Repayment of other secured debt (867) (298) Borrowings of other secured debt 273 -- Proceeds from exercise of stock options 30 18 Purchase of stock (338) (405) Net financing activities of discontinued operations -- 942 -------------------------------- Net cash (used in) provided by financing activities (4,253) 8,177 -------------------------------- Net increase (decrease) in cash and cash equivalents 20,547 (4,883) Cash and cash equivalents at beginning of period 2,089 8,786 ================================ Cash and cash equivalents at end of period $ 22,636 $ 3,903 ================================ SUPPLEMENTAL INFORMATION Net cash paid for interest from continuing operations $ 1,588 $ 2,61 ================================ Net cash paid for interest from discontinued operations $ 1,688 $ 1,125 ================================ Net cash paid for income taxes $ 182 $ 137 ================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 1. GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly PLM International, Inc. and its wholly- and majority-owned subsidiaries (the Company's) financial position as of March 31, 2000 and December 31, 1999, statements of income for the three months ended March 31, 2000 and 1999, statements of changes in shareholders' equity and comprehensive income for the year ended December 31, 1999 and the three months ended March 31, 2000 and statements of cash flows for the three months ended March 31, 2000 and 1999. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying consolidated financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, on file with the Securities and Exchange Commission. 2. RECLASSIFICATIONS Certain prior-period amounts have been reclassified to conform to the current period's presentation. 3. DISCONTINUED OPERATIONS In October 1999, the Company agreed to sell American Finance Group, Inc. (AFG), its commercial and industrial equipment leasing subsidiary for approximately $28.3 million, net of transaction costs and income taxes. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale of AFG was completed on March 1, 2000. On that date, the Company received $29.0 million for AFG. The Company expects to receive additional proceeds of $3.2 million, which are included in receivables on consolidated balance sheet as of March 31, 2000, in the second quarter of 2000 related to the sale of AFG. Taxes and transaction costs related to the sale are estimated to be $3.9 million resulting in estimated net proceeds to the Company of $28.3 million. In addition, AFG distributed to PLMI certain assets with a net book value of $2.7 million and cash of $0.4 million immediately prior to the sale. Accordingly, the Company's commercial and industrial leasing operations are accounted for as a discontinued operation and prior periods have been restated. For business segment reporting purposes, AFG is reported in the segment "Commercial and industrial equipment leasing and financing". Costs and expenses included in discontinued operations includes all direct expenses of AFG and allocated costs from PLMI that will be eliminated as a result of the sale. Net income (loss) from discontinued operations for the quarter ended March 31, 2000 and 1999 are as follows (in thousands of dollars):
2000 1999 ------------------------------- Revenue $ 4,076 $ 6,471 Costs and expenses (2,871) (2,954) ------------------------------- Operating income 1,205 3,517 Interest expense (1,702) (2,588) Interest income and other expenses 95 (802) ------------------------------- Net income (loss) from discontinued operations before income taxes (402) 127 Provision for (benefit from) income tax (153) 48 Net income previously accrued as a component of loss on discontinued operations 200 -- ------------------------------- Net income (loss) from discontinued operations $ (49) $ 79 ================================
During the first quarter of 2000, $0.6 million of after-tax loss on disposal of discontinued operations was recorded against the provision established at December 31, 1999 and is not included in the above table. 4. EQUIPMENT Trailer quipment held for operating lease is depreciated on the straight-line method down to the equipment's estimated salvage value. During the first three months of 2000, the Company purchased trailers for $5.5 million and sold trailers with a net book value of $0.1 million for $45,000. As of March 31, 2000 and December 31, 1999, the Company had no equipment held for sale. 5. DEBT The Company has a $24.5 million facility, which is shared with Equipment Growth Fund VI (EGF VI), Equipment Growth and Income Fund VII (EGF VII), and Professional Lease Management Income Fund I, LLC (Fund I), that allows the Company to purchase equipment prior to its designation to a specific program or prior to obtaining permanent financing. Total borrowings for trailer equipment are limited to $12.0 million. Borrowings under this facility by the other eligible borrowers reduce the amount available to be borrowed by the Company. All borrowings under this facility are guaranteed by the Company. This facility expires on June 30, 2000. As of March 31, 2000, the Company had no borrowings outstanding under this facility and there were no other borrowings outstanding under this facility by any other eligible borrower. The Company believes it will be able to renew this facility on substantially the same terms upon its expiration. During the first quarter of 2000, the Company borrowed $0.3 million under the $15.0 million credit facility used to purchase trailers. This facility's outstanding balance at March 31, 2000 was $15.0 million. During the first quarter of 2000, the Company repaid $1.5 million of the senior secured loan, $1.9 million of the senior secured notes, and $0.9 million of the other secured debt, in accordance with the debt repayment schedules. 6. SHAREHOLDERS' EQUITY During the first quarter of 2000, the Company purchased 54,001 shares of the Company's common stock for $0.3 million, under the $5.0 million common stock repurchase program authorized by the Company's Board of Directors in December 1998. As of March 31, 2000, 784,080 shares had been purchased under this plan, for a total of $4.7 million. During the three months ended March 31, 2000, 80,000 shares were issued from exercise of stock options. Consequently, the total common shares outstanding increased to 7,701,409 as of March 31, 2000 from the 7,675,410 outstanding as of December 31, 1999. Net income per basic weighted-average common share outstanding was computed by dividing net income to common shares by the weighted-average number of shares deemed outstanding during the period. The weighted-average number of shares deemed outstanding for the basic earnings per share calculation during the three months ended March 31, 2000 and 1999 was 7,702,985 and 8,164,672, respectively. The weighted-average number of shares deemed outstanding, including potentially dilutive common shares, for the diluted earnings per weighted-average share calculation during the three months ended March 31, 2000 and 1999 was 7,761,244 and 8,288,189, respectively. 7. LEGAL MATTERS The Company and various of its wholly owned subsidiaries are named as defendants in a lawsuit filed as a purported class action in January 1997 in the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII) (the Partnerships), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial 7. LEGAL MATTERS (CONTINUED) Services, Inc. (FSI), acts as the General Partner. The complaint asserts causes of action against all defendants for fraud and deceit, suppression, negligent misrepresentation, negligent and intentional breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Partnerships, and concealing such mismanagement from investors in the Partnerships. Plaintiffs seek unspecified compensatory damages, as well as punitive damages, and have offered to tender their limited partnership units back to the defendants. In March 1997, the defendants removed the Koch action from the state court to the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court) based on the court's diversity jurisdiction. In December 1997, the court granted defendants motion to compel arbitration of the named plaintiffs' claims, based on an agreement to arbitrate contained in the limited partnership agreement of each Partnership. Plaintiffs appealed this decision, but in June 1998 voluntarily dismissed their appeal pending settlement of the Koch action, as discussed below. In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No. 987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in the Partnerships. The complaint alleges the same facts and the same causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices and violations of state securities law. In July 1997, defendants filed a petition (the petition) in federal district court under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims. In October 1997, the district court denied the Company's petition, but in November 1997, agreed to hear the Company's motion for reconsideration. Prior to reconsidering its order, the district court dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In February 1999 the parties to the Koch and Romei actions agreed to settle the lawsuits, with no admission of liability by any defendant, and filed a Stipulation of Settlement with the court. The settlement is divided into two parts, a monetary settlement and an equitable settlement. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.6 million. The final settlement amount will depend on the number of claims filed by class members, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court to plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. For settlement purposes, the monetary settlement class consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Partnerships between May 23, 1989 and June 29, 1999. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The equitable settlement provides, among other things, for: (a) the extension (until January 1, 2007) of the date by which FSI must complete liquidation of the Partnerships' equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the Partnerships' funds in additional equipment, (c) an increase of up to 20% in the amount of front-end fees (including acquisition and lease negotiation fees) that FSI is entitled to earn in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (d) a one-time repurchase by each of Funds V, VI and VII of up to 10% of that partnership's outstanding units for 80% of net asset value per unit; and (e) the deferral of a portion of the management fees paid to an affiliate of FSI until, if ever, certain performance thresholds have been met by the Partnerships. Subject to final court approval, these proposed changes would be made as amendments to each Partnership's limited partnership agreement if less than 50% of the limited partners of each Partnership vote against such amendments. The limited partners will be provided the opportunity to vote against the amendments by following the 7. LEGAL MATTERS (CONTINUED) instructions contained in solicitation statements that will be mailed to them after being filed with the Securities and Exchange Commission. The equitable settlement also provides for payment of additional attorneys' fees to the plaintiffs' attorneys from Partnership funds in the event, if ever, that certain performance thresholds have been met by the Partnerships. The equitable settlement class consists of all investors, limited partners, assignees or unit holders who on June 29, 1999 held any units in Funds V, VI, and VII, and their assigns and successors in interest. The court preliminarily approved the monetary and equitable settlements in June 1999. The monetary settlement remains subject to certain conditions, including notice to the monetary class and final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including: (a) notice to the equitable class, (b) disapproval of the proposed amendments to the partnership agreements by less than 50% of the limited partners in one or more of Funds V, VI, and VII, and (c) judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. No hearing date is currently scheduled for the final fairness hearing. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Company. 8. PURCHASE COMMITMENTS As of May 2, 2000, the Company had committed to purchase $21.0 million of trailer equipment. 9. OPERATING SEGMENTS The Company operates or operated in three operating segments: trailer leasing, the management of investment programs and other transportation equipment leasing, and commercial and industrial equipment leasing and financing. The trailer leasing segment includes 22 trailer rental facilities that engage in short to mid-term operating leases of refrigerated and dry van trailers to a variety of customers and management of trailers for the investment programs. The management of investment programs and other transportation equipment leasing segment involves managing the Company's syndicated investment programs, from which it earns fees and equity interests, and arranging short-term to mid-term operating leases of other transportation equipment. The Company sold its comercial and industrial equipment leasing subsidiary on March 1, 2000. Accordingly, this segment is accounted for as a discontinued operation. The Company evaluates the performance of each segment based on profit or loss from operations before allocating general and administrative expenses and certain operation support expense and before allocating income taxes. 9. OPERATING SEGMENTS (CONTINUED) The following tables present a summary of the operating segments (in thousands of dollars):
Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment Leasing Financing Leasing Other1 Total For the quarter ended March 31, 2000 - ------------------------------------- ---------------------------------------------------------------------------- REVENUES Lease income $ 7,245 $ -- $ 45 $ -- $ 7,290 Fees earned 173 -- 2,111 -- 2,284 Loss on sale or disposition of assets, net (13) -- -- -- (13) Other 3 -- 343 -- 346 ------------------------------------------------------------------------------ Total revenues 7,408 -- 2,499 -- 9,907 ------------------------------------------------------------------------------ Costs and expenses Operations support 3,640 -- 296 337 4,273 Depreciation and amortization 2,365 -- 157 -- 2,522 General and administrative expenses -- -- -- 1,586 1,586 ------------------------------------------------------------------------------ Total costs and expenses 6,005 -- 453 1,923 8,381 ------------------------------------------------------------------------------ Operating income (loss) 1,403 -- 2,046 (1,923) 1,526 Interest expense, net (1,089) -- (431) 203 (1,317) ------------------------------------------------------------------------------ Income (loss) before income taxes $ 314 $ -- $ 1,615 $ (1,720) $ 209 ============================================================================== Loss from discontinued operations, net of $ -- $ (49) $ $ -- $ (49) income tax -- ============================================================================== Total assets as of March 31, 2000 $ 90,263 $ -- $ 27,764 $ 31,617 $ 149,644 ============================================================================== Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment Leasing Financing Leasing Other1 Total For the quarter ended March 31, 1999 - ------------------------------------- ---------------------------------------------------------------------------- Revenues Lease income $ 3,691 $ -- $ 186 $ -- $ 3,877 Fees earned 205 -- 2,699 -- 2,904 Loss on sale or disposition of assets, net (9) -- -- -- (9) Other -- -- 364 -- 364 ------------------------------------------------------------------------------ Total revenues 3,887 -- 3,249 -- 7,136 ------------------------------------------------------------------------------ Costs and expenses Operations support 1,899 -- 494 306 2,699 Depreciation and amortization 1,459 -- 110 8 1,577 General and administrative expenses -- -- -- 1,484 1,484 ------------------------------------------------------------------------------ Total costs and expenses 3,358 -- 604 1,798 5,760 ------------------------------------------------------------------------------ Operating income (loss) 529 -- 2,645 (1,798) 1,376 Interest expense, net (554) -- (446) -- (1,000) ------------------------------------------------------------------------------ Income (loss) before income taxes $ (25) $ -- $ 2,199 $ (1,798) $ 376 ============================================================================== Income from discontinued operations, net of $ -- $ 79 $ -- $ -- $ 79 income tax ============================================================================== Cumulative effect of accounting change, net of income taxes $ -- $ (250) $ -- $ -- $ (250) ============================================================================== Total assets as of March 31, 1999 $ 57,316 $ 25,505 $ 36,271 $ 9,119 $ 128,211 ============================================================================== - ---------------------------- 1 Includes costs not identifiable to a particular segment such as general and administrative, certain operations support expenses, and interest income.
10. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FROM DISCONTINUED OPERATIONS, NET OF TAX In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which required costs related to start-up activities to be expensed as incurred. The statement required that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment operations which is being accounted for as discontinued operations. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TRAILER LEASING The Company operates 22 trailer rental facilities doing business as PLM Trailer Leasing that engage in short-term and mid-term operating leases. Nineteen of these facilities operate predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities operate only dry van (non-refrigerated) trailers. The Company intends to move virtually all of its dry van trailers to these facilities. During the first three months of 2000, the Company purchased $5.5 million of refrigerated trailer equipment. MANAGEMENT OF INVESTMENT PROGRAMS The Company has syndicated investment programs from which it earns various fees and equity interests. Professional Lease Management Income Fund I, LLC (Fund I) was structured as a limited liability company with a no front-end fee structure. The previously syndicated limited partnership programs allow the Company to receive fees for the acquisition and initial leasing of the equipment. The Fund I program does not provide for acquisition and lease negotiation fees. The Company invested the equity raised through syndication for these programs in transportation equipment and related assets, which it then manages on behalf of the investors. The equipment management activities for these types of programs generate equipment management fees for the Company over the life of a program. The limited partnership agreements entitle the Company to receive a 1% or 5% interest in the cash distributions and earnings of a partnership, subject to certain allocation provisions. The Fund I agreement entitles the Company to a 15% interest in the cash distributions and earnings of the program, subject to certain allocation provisions. The Company's interest in the earnings and distributions of Fund I will increase to 25% after the investors have received distributions equal to their original invested capital. In 1996, the Company announced the suspension of public syndication of equipment leasing programs with the close of Fund I. As a result of this decision, revenues earned from managed programs, which include management fees, partnership interests and other fees, and acquisition and lease negotiation fees, will be reduced in the future as the older programs liquidate and the managed equipment portfolio for these programs becomes permanently reduced. In accordance with certain limited partnership agreements, four limited partnerships have entered their liquidation phases and the Company has commenced an orderly liquidation of the partnerships' assets. Two of the limited partnerships, PLM Equipment Growth Fund III (EGF III) and PLM Equipment Growth Fund IV (EGF IV) are expected to be liquidated by the end of 2000. Two of the limited partnerships, PLM Equipment Growth Fund (EGF I) and PLM Equipment Growth Fund II (EGF II) will terminate on December 31, 2006, unless terminated earlier upon the sale of all equipment or by certain other events. The Company will occasionally own transportation equipment prior to sale to affiliated programs. During this period, the Company earns lease revenue and incurs interest expense. COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING AND FINANCING The Company had a subsidiary, Amercian Finance Group, Inc. (AFG) that specialized in the leasing and management of commercial and industrial equipment. In October 1999, the Company agreed to sell AFG for approximately $28.3 million, net of transaction costs and income taxes. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale of AFG was completed on March 1, 2000, the Company received $29.0 million for AFG. The Company expects to receive additional proceeds of $3.2 million in the second quarter of 2000 related to the sale of AFG. Taxes and transaction costs related to the sale are estimated to be $3.9 million resulting in estimated net proceeds to the Company of $28.3 million. In addition, AFG distributed to PLMI certain assets with a net book value of $2.7 million and cash of $0.4 million immediately prior to the sale. Accordingly, the Company's commercial and industrial leasing operations are accounted for as a discontinued operation and prior periods financial statements have been restated. COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 The following analysis reviews the operating results of the Company:
REVENUES For the Three Months Ended March 31, 2000 1999 ----------------------------------------- (in thousands of dollars) Operating lease income $ 7,290 $ 3,877 Management fees 1,984 2,153 Partnership interests and other fees 281 290 Acquisition and lease negotiation fees 19 461 Loss on the sale or disposition of assets, net (13) (9) Other 346 364 ----------------------------------------- Total revenues $ 9,907 $ 7,136
The fluctuations in revenues for the three months ended March 31, 2000, compared to the same quarter in 1999, are summarized and explained below. Operating lease income by equipment type:
For the Three Months Ended March 31, 2000 1999 ----------------------------------------- (in thousands of dollars) Trailers $ 7,245 $ 3,691 Lease income from assets held for sale -- 179 Other 45 7 ----------------------------------------- Total operating lease income $ 7,290 $ 3,877
Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. Operating lease income increased $3.4 million during the first quarter of 2000, compared to the same quarter of 1999. An increase of $3.6 million in operating lease income generated from trailer equipment. An increase of $2.5 million in trailer lease income was due to an increase in the amount of these types of equipment owned and on operating lease. For the quarter ended March 31, 2000, the average investment in trailer equipment was $105.6 million, compared to $66.7 million for the first quarter of 1999. An increase of $1.1 million in trailer lease income was due to higher lease rates in the first quarter of 2000 compared to the same quarter of 1999. The increase in operating lease income from trailer equipment was partially offset by a $0.2 million decrease in operating lease generated from assets held for sale. During the first quarter of 1999, the Company purchased $13.8 million in marine containers and sold $7.0 million in marine containers to an affiliated program at cost, which approximated their fair market value. The Company earned operating lease income on these marine containers during the first quarter of 1999. There were no assets held for sale by the Company during the first quarter of 2000. MANAGEMENT FEES: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees were $2.0 million and $2.2 million for the quarters ended March 31, 2000 and 1999, respectively. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs and Professional Lease Management Income Fund I (Fund I). With the termination of syndication activities in 1996, management fees from the older programs are decreasing and are expected to continue to decrease as the programs liquidate their equipment portfolios. PARTNERSHIP INTERESTS AND OTHER FEES: The Company records as revenues its equity interest in the earnings of the Company's affiliated programs. The net earnings from the affiliated programs were $0.3 million and $0.4 million for the quarters ended March 31, 2000 and 1999, respectively. In addition, a decrease of $0.1 million in the Company's residual interests in the programs was recorded during the quarter ended March 31, 1999. The decrease in net earnings and distribution levels and residual interests in 2000, compared to 1999, resulted from the disposition of equipment in certain of the EGF programs. ACQUISITION AND LEASE NEGOTIATION FEES: During the quarter ended March 31, 2000, the Company, on behalf of the EGF programs, purchased transportation and other equipment for $2.6 million, compared to the Company purchasing $7.2 million of transportation and other equipment during the quarter ended March 31, 1999, resulting in a $0.4 million decrease in acquisition and lease negotiation fees. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996, and because Fund I has a no front-end fee structure, acquisition and lease negotiation fees will continue at the current levels. LOSS ON THE SALE OR DISPOSITION OF ASSETS, NET: During the quarter ended March 31, 2000, the Company recorded $13,000 in loss on the sale or disposition of trailer equipment. During the quarter ended March 31, 1999, the Company recorded $9,000 loss on the sale or disposition of trailer equipment. COSTS AND EXPENSES For the Three Months Ended March 31, 2000 1999 ----------------------------------------- (in thousands of dollars) Operations support $ 4,273 $ 2,699 Depreciation and amortization 2,522 1,577 General and administrative 1,586 1,484 ----------------------------------------- Total costs and expenses $ 8,381 $ 5,760
OPERATIONS SUPPORT: Operations support expense, including salary and office-related expenses for operational activities, equipment insurance, repair and maintenance costs, equipment remarketing costs, and provision for doubtful accounts, increased $1.6 million (58%) for the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. Operations support expense related to the trailer leasing segment increased $1.7 million due to the expansion of PLM Rental, with the addition of rental yards and additional trailer purchases. This increase was offset by a $0.2 million decrease in operations support expenses related to the management of investment programs and other transportation equipment-leasing segment resulting from the sale of the investment programs' transportation equipment. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expenses increased $0.9 million (60%) for the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. The increase resulted from an increase in refrigerated trailer equipment on operating lease at PLM Trailer Leasing. GENERAL AND ADMINISTRATIVE: General and administrative expenses increased $0.1 million (7%) during the quarter ended March 31, 2000, compared to the same quarter in 1999, primarily due to a $0.1 million decrease in allocations to the managed programs.
OTHER INCOME AND EXPENSES For the Three Months Ended March 31, 2000 1999 ----------------------------------------- (in thousands of dollars) Interest expense $ (1,520) $ (1,097) Interest income 203 97
INTEREST EXPENSE: Interest expense increased $0.4 million (39%) during the quarter ended March 31, 2000, compared to the same quarter in 1999, due to an increase in borrowings of other secured debt to fund trailer purchases. The increase in interest expense caused by these increased borrowings was partially offset by lower interest expense resulting from reductions in the amounts outstanding under the senior secured debt agreements. INTEREST INCOME: Interest income increased $0.1 million (109%) during the quarter ended March 31, 2000, compared to the same quarter of 1999, as a result of higher average cash balances during the quarter ended March 31, 2000, compared to the same quarter of 1999. The increase in cash balances resulted from the proceeds received from the sale of AFG. PROVISION FOR INCOME TAXES: For the three months ended March 31, 2000, the provision for income tax was $0.1 million, representing an effective rate of 38%. For the three months ended March 31, 1999, the provision for income taxes was $0.1 million, representing an effective rate of 39%. The decrease in effective rate of 1% was due to a decrease in tax loss from a foreign subsidiary which was liquidated during the first quarter of 2000. Net Income from Discontinued Operations In October 1999, the Company agreed to sell its commercial and industrial equipment subsidiary American Finance Group, Inc. (AFG) for approximately $28.3 million, net of transaction costs and income taxes. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale was completed on March 1, 2000. Accordingly, the Company's commercial and industrial leasing operations are accounted for as a discontinued operation and prior periods financial statements have been restated. Net income from discontinued operations for the quarter ended March 31, 2000 and 1999 are as follows (in thousands of dollars):
2000 1999 ------------------------------- REVENUES Operating Lease income $ 1,841 $ 2,225 Finance lease income 1,650 3,147 Management fees 100 215 Gain on sale or disposition of assets, net 40 322 Other 445 562 ------------------------------- Total revenues 4,076 6,471 ------------------------------- Costs and expenses Operations support 1,366 1,132 Depreciation and amortization 1,505 1,822 ------------------------------- Total costs and expenses 2,871 2,954 ------------------------------- Operating income 1,205 3,517 Interest expense, net (1,607) (2,442) Other expenses -- (948) ------------------------------- Income (loss) before income taxes (402) 127 Provision for (benefit from) income taxes (153) 48 Net income previously accrued as a component of loss on discontinued operations 200 -- ------------------------------- Net income (loss) from discontinued operations $ (49) $ 79 ===============================
The decrease in all revenues and expense was due to the sale of AFG on March 1, 2000. In addition, other expenses decreased $1.0 million due to the write-off of expenses related to the proposed initial public offering of AFG in 1999. A similar expense was not recorded in 2000. During the first quarter of 2000, $0.6 million of after-tax loss on disposal of discontinued operations was recorded against the provision established at December 31, 1999 and is not included in the above table. CUMULATIVE EFFECT OF ACCOUNTING CHANGE In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment leasing subsidiary which is being accounted for as discontinued operations. NET INCOME As a result of the foregoing, for the three months ended March 31, 2000 and 1999, net income was $0.1 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.01. LIQUIDITY AND CAPITAL RESOURCES Cash requirements have historically been satisfied through cash flow from operations, borrowings, the sale of equipment, and the sale of business segments. Liquidity in the remainder 2000 and beyond will depend, in part, on the continued remarketing of the equipment portfolio at similar lease rates, the management of existing sponsored programs, the effectiveness of cost control programs, the purchase and sale of equipment, the volume of trailer equipment leasing transactions, and additional borrowings. Management believes the Company can accomplish the preceding and that it will have sufficient liquidity and capital resources for the future. Future liquidity is influenced by the factors summarized below. DEBT FINANCING: FSI WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by the Company for sale to affiliated programs or third parties have, from time to time, been partially funded by a $24.5 million warehouse credit facility. This facility is also used to temporarily finance the purchase of trailers prior to permanent financing being obtained. Borrowings under this facility secured by trailers are limited to $12.0 million. This facility expires on June 30, 2000. The Company believes it will be able to renew this facility on substantially the same terms upon its expiration. This facility is shared with Equipment Growth Fund VI (EGF VI), PLM Equipment Growth & Income Fund VII (EGF VII), and Professional Lease Management Income Fund I (Fund I). Borrowings under this facility by the other eligible borrowers reduce the amount available to be borrowed by the Company. All borrowings under this facility are guaranteed by the Company. This facility provides 80% financing for transportation assets. The Company can hold transportation assets under this facility for up to 150 days. Interest accrues at prime or LIBOR plus 162.5 basis points, at the option of the Company. As of December 31, 1999 and May 2, 2000, the Company had no outstanding borrowings under this facility and there were no other borrowings outstanding under this facility by any other eligible borrower. SENIOR SECURED NOTES: The Company's senior secured notes agreement, which had an outstanding balance of $18.8 million as of March 31, 2000 and May 2, 2000, bears interest at LIBOR plus 240 basis points. The Company has pledged substantially all of its future management fees, acquisition and lease negotiation fees, data processing fees, and partnership distributions as collateral to the facility. The facility required quarterly interest-only payments through August 15, 1997, with principal plus interest payments beginning November 15, 1997. Principal payments of $1.9 million are payable quarterly through termination of the loan on August 15, 2002. SENIOR SECURED LOAN: The company's senior loan with a syndicate of insurance companies, which had an outstanding balance of $7.4 million as of March 31, 2000 and May 2, 2000, provides that equipment sale proceeds from pledged equipment or cash deposits be placed into a collateral account or used to purchase additional equipment to the extent required to meet certain debt covenants. Pledged equipment for this loan consists of the storage equipment and virtually all trailer equipment purchased prior to August 1998. As of March 31, 2000, the cash collateral balance for this loan was $43,000 and is included in restricted cash and cash equivalents on the Company's balance sheet. During the first three months of 2000, the Company repaid $1.5 million on this facility. The facility bears interest at 9.78% and required quarterly interest payments through June 30, 1997, with quarterly principal payments of $1.5 million plus interest charges beginning June 30, 1997 and continuing until termination of the loan in June 2001. OTHER SECURED DEBT: As of March 31, 2000, the Company had $35.1 million outstanding under eight debt agreements, bearing interest from 5.35% to 7.05%, each with payments of $0.1 million due monthly in advance. The debt is secured by certain trailer equipment and allows the Company to buy the equipment at a fixed price at the end of the loan. The final payments under these eight debt agreements total $9.1 million due between December 2005 and October 2006. In the second quarter of 1999, the Company entered into a $15.0 million credit facility loan agreement bearing interest at LIBOR plus 1.5%. This facility allows the Company to borrow up to $15.0 million within a one-year period. As of March 31, 2000 and May 2, 2000, the Company had borrowed $15.0 million under this facility. Payments of $0.5 million are due quarterly beginning August 2000, with a final payment of $1.4 million due August 2006. TRAILER LEASING: The Company operates 22 trailer rental facilities that engage in short-term and mid-term operating leases. Nineteen of these facilities operate predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities operate only dry van (non-refrigerated) trailers. The Company intends to move virtually all of its dry van trailers to these facilities. During the three months ended March 31, 2000, the Company purchased $5.5 million of primarily refrigerated trailers and sold refrigerated and dry van trailers with a net book value of $0.1 million for proceeds of $45,000. The net proceeds from the sale of assets that were collateralized as part of the senior loan facility were placed in a collateral account. STOCK REPURCHASE PROGRAM: In December 1998, the Company announced that its Board of Directors had authorized the repurchase of up to $5.0 million of the Company's common stock. As of May 2, 2000, 784,080 shares had been purchased under this plan for a total of $4.7 million. Management believes that, through debt and equity financing, possible sales of equipment, and cash flows from operations, the Company will have sufficient liquidity and capital resources to meet its projected future operating needs over the next twelve months. EFFECTS OF THE YEAR 2000: To date, the Company has not experienced any material Year 2000 issues with either its internally developed software or purchased software. In addition, to date the Company has not been impacted by any Year 2000 problems that may have impacted our customers and suppliers. The amount the Company has spent related to Year 2000 issues has not been material. The Company continues to monitor its systems for any potential Year 2000 issues. FORWARD-LOOKING INFORMATION: Except for historical information contained herein, the discussion in this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Company's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Company's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure is that of interest rate risk. A change in the U.S. prime interest rate, LIBOR rate, or lender's cost of funds based on commercial paper market rates, would affect the rate at which the Company could borrow funds under its various borrowing facilities. Increases in interest rates to the Company, which may cause the Company to raise the rates charged to its customers, could in turn, result in a reduction in demand for the Company's lease financing. The Company's warehouse credit facilities, senior secured notes, and $15.0 million of its other secured debt are variable rate debt. The Company estimates a one percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $0.2 million in the remainder of 2000, $0.1 million in 2001, $36,000 in 2002, and $18,000 in 2003. The Company estimates a two percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $0.4 million in the remainder of 2000, $0.2 million in 2001, $0.1 million in 2002, and $36,000 in 2003. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS See Note 7 to the consolidated financial statements. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 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/ Richard K Brock Richard K Brock Chief Financial Officer Date: May 2, 2000 EX-27 2
5 1,000 3-MOS DEC-31-2000 MAR-31-2000 24,113 0 14,577 0 0 0 108,272 (23,298) 149,644 0 76,255 0 0 56,669 (7,353) 149,644 0 9,907 0 8,381 0 0 1,520 81 0 130 (49) 0 0 81 0.01 0.01
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