-----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, CzVzVWSFUMn0n1MoD27R+CRX3C6bU/vCXcDeUG//TzsNhpwDYPT+7/Y5GhVmS17n 6rgMCJKLwrs9CqZ1DpcHYA== 0000814677-96-000002.txt : 19960429 0000814677-96-000002.hdr.sgml : 19960429 ACCESSION NUMBER: 0000814677-96-000002 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960426 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09670 FILM NUMBER: 96551335 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-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-K/A Amendment No. 1 [x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1995. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] 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 incorporation or (I.R.S. Employer 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 -------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.01 Par Value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 25, 1996 was $37,019,374. The number of shares outstanding of the issuer's classes of common stock as of March 25, 1996: Common Stock, $.01 Par Value -- 10,805,861 shares DOCUMENTS INCORPORATED BY REFERENCE An index of exhibits filed with this Form 10-K/A is located at pages 34-35. PLM INTERNATIONAL, INC. 1995 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page Part I Item 1 Business 2 Item 2 Properties 9 Item 3 Legal Proceedings 9 Item 4 Submission of Matters to a Vote of Security Holders 9 Part II Item 5 Market for the Company's Common Equity and Related Stockholder Matters 10 Item 6 Selected Financial Data 11 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 8 Financial Statements and Supplemental Data 22 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 22 Part III Item 10 Directors and Executive Officers of the Company 22 Item 11 Executive Compensation 24 Item 12 Security Ownership of Certain Beneficial Owners and Management 31 Item 13 Certain Relationships and Related Transactions 33 Part IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 33 PART I ITEM 1. BUSINESS A. Introduction (i) Background PLM International, Inc. (PLM International or the Company or PLMI), a Delaware corporation, is a transportation equipment leasing company specializing in the management of equipment on operating leases domestically and internationally. The Company is also a leading sponsor of syndicated investment programs organized to invest primarily in transportation equipment. The Company operates and manages approximately $1.3 billion of transportation equipment and related assets for its account and various investment partnerships and third party accounts. An organization chart for PLM International indicating the relationships of significant active legal entities is shown in Table 1: PLM International, Inc., a Delaware corporation, the parent corporation. Subsidiaries of PLM International, Inc.: PLM Financial Services, Inc., a Delaware corporation; PLM Railcar Management Services, Inc., a Delaware corporation; PLM Worldwide Management Services Limited, a Bermuda corporation; Aeromil Holdings, Inc., a California corporation; and American Finance Group, Inc., a Delaware corporation. Subsidiaries of PLM Financial Services, Inc. PLM Investment Management, Inc., a California corporation; PLM Securities Corp., a California corporation; and PLM Transportation Equipment Corporation, a California corporation. A subsidiary of PLM Railcar Management Services, Inc. is PLM Railcar Management Services Canada, Ltd., an Alberta corporation. A subsidiary of PLM Worldwide Management Services Limited is Transportation Equipment Indemnity Company, Ltd., a Bermuda corporation. A subsidiary of American Finance Group, Inc. is AFG Credit Corp., a Delaware corporation. Note: All entities are 100% owned except Aeromil Holdings, Inc., which is 80% owned. (ii) Description of Business PLM International owns or manages a portfolio of transportation equipment consisting of approximately 35,000 individual items with a combined original cost of approximately $1.3 billion (refer to Table 2). The Company syndicates investment programs and manages equipment and related assets for approximately 75,000 investors in various limited partnerships or investment programs. TABLE 2 EQUIPMENT AND RELATED ASSETS December 31, 1995 (original cost in millions)
Professional Lease Management Equipment Other Income Fund 1 Growth Funds Investor PLMI Programs Total ------------------------------------------------------------------------- Aircraft and aircraft engines $ 53 $ 18 $ 327 $ 10 $ 408 Marine vessels -- 12 245 -- 257 Railcars/locomotives 1 13 126 56 196 Trailers/tractors 53 7 84 17 161 Marine containers 5 -- 96 7 108 Mobile offshore drilling units (MODUs) -- -- 87 -- 87 Other 26 7 42 6 81 ---------------------------------------------------------------------- Total $ 138 $ 57 $ 1,007 $ 96 $ 1,298 ======================================================================
(iii) Equipment Owned The Company leases its owned equipment to a variety of lessees. Certain equipment is leased and operated internationally. In general, the equipment leasing industry is an alternative to direct equipment ownership. It is a highly competitive industry offering lease terms ranging from day-to-day to a term equal to the economic life of the equipment (full payout). Generally, leases for a term less than the economic life of the equipment are known as operating leases because the aggregate lease rentals accruing over the initial lease period are less than the cost of the leased equipment. PLM International's focus is on providing equipment under operating leases. This type of lease generally commands a higher lease rate than full payout leases because of the flexibility it affords the lessee. This emphasis on operating leases requires highly experienced management and support staff, as the equipment must be periodically re-leased to continue generating rental income, and thus, to maximize the long-term return on investment in the equipment. In appropriate circumstances, certain equipment, mainly marine containers, is leased to utilization-type pools which include equipment owned by unaffiliated parties. In such instances, revenues received by the Company consist of a specified percentage of the pro-rata share of lease revenues generated by the pool operator from leasing the pooled equipment to its customers, after deducting certain direct operating expenses of the pooled equipment. With respect to trailer leasing activities, the Company markets over-the-road trailers through its subsidiary PLM Rental, Inc. (PLM Rental) on short-term leases through rental yards located in 10 major U.S. cities. These rental facilities provide the Company with a base of operations in selected markets to facilitate its operating lease strategy. The Company also markets intermodal trailers to railroads and shippers on short-term arrangements through a licensing agreement with a short line railroad. In addition, the Company markets on-site storage units protected by a patented security system through both existing facilities and PLM Rental's facilities. Over the past five years, approximately 94.0% of all equipment (owned and managed) on average, was operating under a lease agreement or in PLM trailer rental yards. (iv) Subsidiary Business Activities (a) PLM Financial Services, Inc. PLM Financial Services, Inc. (FSI) along with its primary subsidiaries: PLM Transportation Equipment Corporation (TEC); PLM Securities Corp. (PLM Securities); and PLM Investment Management, Inc. (IMI), focus on the development, syndication, and management of investment programs, including limited liability companies, limited partnerships, and private placement programs, which acquire and lease primarily used transportation and related equipment. Depending on the objectives of the particular program, the programs feature various combinations of current cash flow and income tax benefits through investments in long-lived, low-obsolescence transportation and related equipment. Programs sponsored by FSI are offered nationwide through a network of unaffiliated national and regional broker-dealers and financial planning firms. FSI has completed the offering of 16 public programs which have invested in diversified portfolios of transportation and related equipment. From 1986 through April of 1995, FSI offered the PLM Equipment Growth Fund (EGFs) investment series. During 1995, FSI introduced Professional Lease Management Income Fund I, L.L.C., a Limited Liability Company (Fund I), with a no front-end fee structure. Fund I is currently being syndicated by PLM Securities. Both the EGF and Fund I programs are designed to invest primarily in used transportation equipment for lease in order to generate current operating cash flow for (i) distribution to investors and (ii) reinvestment into additional used transportation equipment. An objective of the programs is to maximize the value of the equipment portfolio and provide cash distributions to investors by acquiring and managing equipment for the benefit of the investors. The cumulative equity raised by PLM International for its affiliated investment programs now stands at $1.7 billion. The Company has raised more syndicated equity for equipment leasing programs than any other syndicator in United States history. Annually, since 1983, PLM International has been one of the top three equipment leasing syndicators in the United States. Annually, from 1990 through 1995, the Company has ranked as the number one or two diversified transportation equipment leasing syndicator in the United States. PLMI's market share for all syndicated equipment leasing programs increased to 22% in 1995 from 17% in 1994. In 1995, the Company was the number two equipment leasing syndicator. EGFs I, II, and III were listed for trading on the American Stock Exchange until April 7, 1996. Under the Internal Revenue Code (the Code) these Partnerships are classified as Publicly Traded Partnerships. The Code treats all Publicly Traded Partnerships as corporations if they remain publicly traded after December 31, 1997. Treating the Partnerships as corporations would mean the Partnerships themselves would become taxable, rather than "flow through" entities. As taxable entities, the income of the Partnerships would be subject to federal taxation at both the partnership level and at the investor level to the extent income is distributed to an investor. In order to avoid taxation of the Partnerships as corporations, the General Partner applied for delisting of the Partnerships' depositary units from the American Stock Exchange. The Partnerships were delisted effective April 7, 1996. Trading of Partnership depositary units on the American Stock Exchange was suspended March 22, 1996, pending approval of the application for delisting. While the Partnerships' depositary units are no longer publicly traded on a national stock exchange, the General Partner will continue to manage the equipment of the Partnerships, prepare and distribute quarterly and annual reports and Forms 10-Q and 10-K in accordance with the Securities and Exchange Commission requirements, and provide pertinent tax reporting forms and information to unitholders. Due to the changes in the federal tax laws causing Publicly Traded Partnerships traded on a national exchange to be taxed as corporations after December 31, 1997, rather than treated as flow through entities, the management of PLM International structured EGFs IV, V, VI, and PLM Equipment Growth and Income Fund VII (EGF VII) so that they will not be publicly traded. Fund I is not and will not be publicly traded. Investment in and Management of the EGFs, Other Limited Partnerships, and Private Placements FSI earns revenues in connection with the organization, marketing, and management of the limited partnerships and private placement programs. During the syndication of each of the EGFs, placement fees and commissions, representing approximately 9% of equity raised were generally earned upon the purchase by investors of partnership units. A significant portion of these placement fees were reallowed to the originating broker-dealer. Equipment acquisition, lease negotiation, and debt placement fees are generally earned through the purchase, initial lease, and financing of equipment, and are generally recognized as revenue when FSI completed substantially all of the services required to earn the fees, generally when binding commitment agreements are signed. Management fees are earned for managing the equipment portfolios and administering investor programs as provided for in various agreements and are recognized as revenue over time as they are earned. As compensation for organizing a partnership investment program, FSI, as general partner, is generally granted an interest (between 1% and 5%) in the earnings and cash distributions of the program. FSI recognizes as partnership interests its equity interest in the earnings of the partnerships after adjusting such earnings to reflect the use of straight-line depreciation and the effect of special allocations of the program's gross income allowed under the respective partnership agreements. FSI also recognizes as income its interest in the estimated net residual value of the assets of the partnerships as they are purchased. The amounts recorded are based on management's estimate of the net proceeds to be distributed upon disposition of the partnership's equipment at the end of the respective partnerships. As assets are purchased by the partnerships, these residual value interests are recorded in other fees at the present value of FSI's share of estimated disposition proceeds. As required by FASB Technical Bulletin 1986-2, the discount on FSI's residual value interests is not accreted over the holding period. FSI reviews the carrying value of its residual interests at least annually in relation to expected future market values for the underlying equipment in which it holds residual interests, for the purpose of assessing recoverability of recorded amounts. When a limited partnership is in the liquidation phase, distributions received by FSI will be treated as recoveries of its equity interest in the partnership until the recorded residual is eliminated. Any additional distributions received will be treated as residual interest income. In accordance with certain investment program and partnership agreements, FSI receives reimbursement for organization and offering costs incurred during the offering period. The reimbursement is generally between 1.5% and 3.0% of equity raised. The investment program reimburses FSI ratably over the offering period of the investment program based on equity raised. In the event organizational and offering costs incurred by FSI as defined by the partnership agreement exceed amounts allowed, the excess costs are capitalized as an additional investment in the related partnership and amortized over the estimated life of the partnership. These additional investments are reflected as equity interest in affiliates in the accompanying consolidated balance sheets. Investment in and Management of Limited Liability Companies During the year ended December 31, 1995, Fund I was formed as a new investor program. FSI serves as the Manager for the new program. This product, 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 for organization of Fund I, raising equity, acquisition of equipment, or negotiation of the initial leases. FSI is funding the cost of organization, syndication, and offering and is treating this as its investment in Fund I. FSI will amortize its investment in Fund I over the life of the program. In return for its investment, FSI is generally entitled to a 15% interest in the cash distributions and earnings of Fund I subject to certain allocation provisions. FSI's interest in the cash distributions and earnings of Fund I will increase to 25% after the investors have received distributions equal to their invested capital. FSI is also entitled to monthly fees for equipment management services and reimbursement for certain accounting and administrative services it provides. As of March 25, 1996, Fund I had raised $81.3 million in equity from third party investors. (b) PLM Transportation Equipment Corporation PLM Transportation Equipment Corporation (TEC) is responsible for the selection, negotiation and purchase, initial lease and re-lease, and sale of equipment. This process includes identification of prospective lessees, analyses of lessees' credit worthiness, negotiation of lease terms, negotiations with equipment owners, manufacturers, or dealers for the purchase, delivery, and inspection of equipment, preparation of debt offering materials, and negotiation of loans. TEC or its wholly-owned subsidiary, TEC AcquiSub, Inc., also purchases transportation equipment for PLM International's own portfolio and on an interim basis, for resale to various affiliated limited partnerships at cost or to third parties. (c) PLM Securities Corp. PLM Securities Corp. (PLM Securities) markets the investment programs through unaffiliated broker-dealers and financial planning firms throughout the United States. Sales of investment programs are not made directly to the public by PLM Securities. During 1995 and 1994, approximately 200 selected broker-dealer firms with over 20,000 agents sold investment units in Fund I and EGF VII. Wheat First Butcher Singer accounted for 15% of equity sales in 1995. Royal Alliance Associates and Wheat First Butcher Singer accounted for approximately 13% and 11.5%, respectively, of 1994 equity sales. No other selected agent has accounted for the sale of more than 10% of the units in these investment programs during these periods. The marketing of the investment programs is supported by PLM Securities representatives who deal directly with account executives of participating broker-dealers. During the marketing of the EGFs, PLM Securities earned a placement fee for the sale of investment units of which a significant portion was reallowed to the originating broker-dealer. Placement fees vary from program to program, but for EGF VII, PLM Securities received a fee of up to 9% of the capital contributions to the partnership, of which commissions of up to 8% were reallowed to the unaffiliated selling broker-dealer, with the difference being retained by PLM Securities. Fund I has a no front-end fee structure. FSI funds all organization costs and placement fees associated with the Fund I program as its investment. Thus, 100% of syndicated equity is invested in equipment. The Company's invested funds will equal approximately 14% of the equity raised in the Fund I program, assuming full subscription of the $100 million registration. The Company raised investor equity totaling approximately $107.4 million for its EGF VII program through April 1995 when the program closed. The Company has raised investor equity totaling approximately $81.3 million for its Fund I program through March 25, 1996. (d) PLM Investment Management, Inc. PLM Investment Management, Inc. (IMI) manages equipment owned by the Company and by investors in the various investment programs. The equipment consists of the following: aircraft (commercial, commuter, and corporate); aircraft engines; aircraft rotables; railcars and locomotives; tractors (highway); trailers (highway and intermodal, refrigerated, and non refrigerated); marine containers (refrigerated and non refrigerated); marine vessels (dry bulk carriers and product tankers); and mobile offshore drilling units (rigs). IMI is obligated to invoice and collect rents, arrange for maintenance and repair of the equipment, pay operating expenses, debt service, and certain taxes, determine that the equipment is used in accordance with all operative contractual arrangements, arrange insurance, correspond with program investors, provide or arrange for clerical and administrative services necessary to the operation of the equipment, prepare quarterly and annual financial statements and tax information materials, and make distributions to investors. IMI also monitors equipment regulatory requirements and compliance with investor program debt covenants. (e) American Finance Group, Inc. In 1995, the Company established a new wholly-owned equipment leasing and management subsidiary, American Finance Group, Inc. (AFG), and entered into an agreement to manage certain operations of Boston-based, privately-held American Finance Group, L.P. (AFG, L.P.). During 1995, the Company provided management services for investor programs of AFG, L.P. for which the Company earned management fees and other revenues. In January 1996, the agreement was modified to exclude management of AFG, L.P.'s investor programs. The modified agreement allowed the Company to assume the lease origination and servicing operations, the rights to manage a significant offshore investment program, and certain furniture, computers, and software of AFG, L.P. Going forward, AFG will originate and manage lease transactions on new equipment that will be financed by a securitization facility for the Company's own account or sold to an offshore investment program or other investors. (f) PLM Railcar Management Services, Inc. PLM Railcar Management Services, Inc. (RMSI) markets and manages railcar fleets. RMSI is also involved in negotiating the purchase and sale of railcars. PLM Railcar Management Services Canada, Limited, a wholly-owned subsidiary of RMSI headquartered in Calgary, Alberta, Canada, provides fleet management services to the owned and managed railcars operating in Canada. (g) Transportation Equipment Indemnity Company, Ltd. Transportation Equipment Indemnity Company, Ltd. (TEI) is a Bermuda-based insurance company licensed to underwrite a full range of insurance products including property and casualty risk. TEI's primary objective is to minimize the long-term cost of insurance coverages for all owned and managed equipment. A substantial portion of the risks underwritten by TEI are reinsured with unaffiliated underwriters. (h) PLM Rental, Inc. PLM Rental markets trailers and storage units owned by the Company and its affiliated investor programs on short-term leases through a network of rental facilities. Presently, facilities are located in Atlanta, Chicago, Dallas, Detroit, Indianapolis, Kansas City, Miami, Newark, Orlando, and Tampa. All of the above subsidiaries are 100% owned directly or indirectly by PLM International. (i) Aeromil Holdings, Inc. Aeromil Holdings, Inc. (Aeromil) is 80% owned by the Company (see Note 2 to the Financial Statements). Aeromil owns several operating companies engaged in brokerage of corporate, commuter, and commercial aircraft and spare parts in local and international markets. (v) Equipment Leasing Markets Within the equipment leasing industry, there are essentially three leasing markets: the full payout lease, short-term rental, and the mid-term operating lease. The full payout lease, in which the combined rental payments are sufficient to cover the lessor's investment and to provide a return on the investment, is the most common form of leasing. This type of lease is sometimes referred to and qualifies as a finance lease under United States generally accepted accounting principles and is accounted for by the lessor as a purchase of the underlying asset. From the lessee's perspective, the election to enter into a full payout lease is usually made on the basis of a lease versus purchase analysis which will take into account the lessee's ability to utilize the depreciation tax benefits of ownership, its liquidity and cost of capital, and financial reporting considerations. Short-term rental lessors direct their services to a user's short-term equipment needs. This business requires a more extensive overhead commitment in the form of marketing and operating personnel by the lessor/owner. There is normally less than full utilization in the lessor's equipment fleet as lessee turnover is frequent. Lessors usually charge a premium for the additional flexibility provided through short-term rentals. To satisfy lessee short-term needs, certain equipment is leased through pooling arrangements or utilization leases. For lessees, these arrangements can work effectively with respect to interchangeable equipment such as marine containers, trailers, and marine vessels. From the lessor's perspective, these arrangements diversify risk. Operating leases for transportation equipment generally run for a period of one to six years. Operating lease rates are usually higher than full payout lease rates, but lower than short-term rental rates. From a lessee's perspective, the advantages of a mid-term operating lease compared to a full payout lease are flexibility in its equipment commitment and the fact that the rental obligation under the lease need not be capitalized on its balance sheet. The advantage from the lessee's perspective of a mid-term operating lease compared to a short-term rental, apart from the lower monthly cost, is greater control over future costs and the ability to balance equipment requirements over a specific period of time. Disadvantages of the mid-term operating lease from the lessee's perspective are that the equipment may be subject to significant changes in lease rates for future periods or will generally be required to be returned to the lessor at the expiration of the initial lease. Disadvantages from the lessor's perspective of the mid-term operating lease (as well as the short-term rental) compared to the full payout lease is that the equipment generally must be re-leased or sold at the expiration of the initial lease term in order for the lessor to recover its investment and that re-lease rates or sale prices are subject to changes in market conditions. PLM International, its subsidiaries, and affiliated investment programs lease their equipment primarily on mid-term operating leases and short-term rentals. Many of its leases are net operating leases. In a net operating lease, expenses such as insurance and maintenance are the responsibility of the lessee. The effect of entering into net operating leases is to reduce lease rates as compared to non-net lease rates for comparable lease terms. However, the overall profitability of net operating leases is more predictable and less risk is assumed over time as the lessees absorb maintenance costs which generally increase as equipment ages. Per diem rental agreements are used mainly on equipment in the Company's trailer, marine container, and storage unit rental operations. Per diem rentals for the most part require the Company to absorb maintenance costs which again tend to increase as the equipment ages. (vi) Management Programs FSI also has sponsored programs in which the equipment is individually owned by the program investors. Management agreements, with initial terms ranging from three to ten years, are typically employed to provide for the management of this equipment. These agreements require that the Company or one of its subsidiaries use its best efforts to lease the equipment and to otherwise perform all managerial functions necessary for the operation of the equipment, including arranging for maintenance and repair, collection of lease revenues, and disbursement of operating expenses. Management agreements also require that the Company correspond with program investors, prepare financial statements and tax information, and make distributions to investors from available cash. Operating revenues and expenses for equipment under management agreements are generally pooled in each program and shared pro rata by the participants. Management fees are generally received by IMI for these services based on a flat fee per month per unit of equipment. (vii) Lessees Lessees of equipment range from Fortune 500 companies to small, privately-held corporations and entities. All (i) equipment acquisitions, (ii) equipment sales, and (iii) lease renewals relating to equipment having an original cost basis in excess of $1.0 million must be approved by a credit committee consisting of senior executives of PLM International. PLM Rental, which leases equipment primarily on short-term rentals, follows guidelines set by the credit committee in determining the credit worthiness of its respective lessees. Deposits, prepaid rents, corporate and personal guarantees, and letters of credit are utilized, when necessary, to provide credit support for lessees which alone do not have a financial condition satisfactory to the credit committee. No single lessee of the Company's equipment accounted for more than 10% of revenues for the year ended December 31, 1995. (viii) Competition In the distribution of investment programs, FSI competes with numerous organizations engaged in limited partnership syndications. While management of the Company does not believe that any one sponsor dominates the offering of similar investment programs, there are other sponsors of such programs which may have greater assets and financial resources, the ability to borrow on more favorable terms, or other significant competitive advantages. The principal competitive factors in the organization and distribution of investment programs are: the ability to reach investors through an experienced marketing force, the performance of prior investment programs, the particular terms of the investment program, and the development of a client base willing to consider periodic investments in such programs. Competition for investors' funds also exists from other financial instruments and intermediaries such as: certificates of deposits, money market funds, stocks, bonds, mutual funds, investment trusts, real estate, brokerage houses, banks, and insurance companies. FSI believes that the structure of its current Fund I program permits it to compete with other equipment leasing programs as well as with oil and gas and real estate programs. FSI's investment programs compete directly with numerous other entities for equipment acquisition and leasing opportunities and for debt financing. In 1995, $77.5 million was invested in the Company's equity programs ranking the Company, on a capital raised basis, as the number two syndicator of transportation equipment leasing programs. In 1994, the $55.2 million invested in EGF VII also ranked the Company as the number two syndicator of transportation equipment leasing programs. The $92.5 million invested in the Company's publicly-sponsored equity programs in 1993 ranked the Company as the number one syndicator of equipment leasing programs that year. In connection with operating leases, the Company encounters considerable competition from lessors offering full payout leases on new equipment. In comparing lease terms for the same equipment, full payout leases provide longer lease periods and lower monthly rent than the Company offers. However, lower lease rates can generally be offered for used equipment under operating leases than can be offered on similar new equipment under a full payout lease. The shorter length of operating leases also provides lessees with flexibility in their equipment and capital commitments. The Company also competes with equipment manufacturers who offer operating leases and full payout leases. Manufacturers may provide ancillary services which the Company cannot offer such as specialized maintenance services (including possible substitution of equipment), warranty services, spare parts, training, and trade-in privileges. The Company competes with many equipment lessors, including ACF Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services Corporation, Greenbrier Leasing Company, Polaris Aircraft Leasing Corp., G.P.A. Group Plc., GATX Corporation, and certain limited partnerships, some of which engage in syndications and lease the same type of equipment. (ix) Government Regulations PLM Securities is registered with the Securities and Exchange Commission (SEC) as a broker-dealer. As such, it is subject to supervision by the SEC and securities authorities in each state. In addition, it is a member of the National Association of Securities Dealers, Inc. and is subject to that entity's rules and regulations. These rules and regulations govern such matters as program structure, sales methods, net capital requirements, record-keeping requirements, trade practices among broker-dealers, and dealings with investors. Sales of investment programs must be made in compliance with various complex federal and state securities laws. Failure to comply with provisions of these laws, even though inadvertent, could result in investors having rights of rescission or claims for damages. The transportation industry, in which the majority of the equipment owned and managed by the Company operates, has been subject to substantial regulation by various federal, state, local, and foreign governmental authorities. For example the Airport Noise and Capacity Act of 1990 generally prohibits the operation of commercial jets which do not comply with stage III noise level restrictions at United States airports after December 1999. Enactments like this could affect the performance of aircraft owned and managed by the Company. It is not possible to predict the positive or negative effect of future regulatory changes in the transportation industry. (x) Employees As of March 25, 1996, the Company and its subsidiaries had 182 employees. None of the Company's employees are subject to collective bargaining arrangements. The Company believes employee relations are good. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY As of the date of this report the directors and executive officers of PLM International (and key executive officers of its subsidiaries) are as follows:
Name Age Position - -------------------------------------- ------ ------------------------------------------------------------------------------ J. Alec Merriam..................... 60 Director, Chairman of the Board, PLM International, Inc.; Director, PLM Financial Services, Inc. Allen V. Hirsch..................... 42 Director, Vice Chairman of the Board, Executive Vice President, PLM International, Inc.; Director and President, PLM Financial Services, Inc.; President, PLM Securities Corp. Walter E. Hoadley................... 79 Director, PLM International, Inc. Robert L. Pagel..................... 59 Director, Chairman of the Executive Committee, PLM International, Inc.; Director, PLM Financial Services, Inc. Harold R. Somerset.................. 61 Director, PLM International, Inc. Robert N. Tidball................... 57 Director, President and Chief Executive Officer, PLM International, Inc. J. Michael Allgood.................. 47 Vice President of Finance and Chief Financial Officer, PLM International, Inc. and PLM Financial Services, Inc. Robin L. Austin..................... 49 Vice President, Human Resources, PLM International, Inc.; Vice President, PLM Financial Services, Inc. Stephen M. Bess..................... 49 President, PLM Investment Management, Inc.; Vice President, PLM Financial Services, Inc. David J. Davis...................... 39 Vice President and Corporate Controller, PLM International, Inc. Douglas P. Goodrich................. 49 Senior Vice President, PLM International, Inc. and PLM Transportation Equipment Corporation Steven O. Layne..................... 41 Vice President and General Manager, Air Group, PLM Transportation Equipment Corporation Stephen Peary....................... 47 Senior Vice President, Secretary and General Counsel, PLM International, Inc., PLM Financial Services, Inc.; Vice President, PLM Investment Management, Inc., PLM Transportation Equipment Corporation and PLM Securities Corp.
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM International in September 1990, having served as a director since February 1988. In October 1988 he became a member of the Executive Committee of the Board of Directors of PLM International. From 1972 to 1988 Mr. Merriam was Executive Vice President and Chief Financial Officer of Crowley Maritime Corporation, a San Francisco area-based company engaged in maritime shipping and transportation services. Previously, he was Chairman of the Board and Treasurer of LOA Corporation of Omaha, Nebraska, and served in various financial positions with Northern Natural Gas Company, also of Omaha. Allen V. Hirsch became Vice Chairman of the Board and a Director of PLM International in April 1989. He is an Executive Vice President of PLM International and President of PLM Securities Corp. Mr. Hirsch became the President of PLM Financial Services, Inc. in January 1986 and President of PLM Investment Management, Inc. and PLM Transportation Equipment Corporation in August 1985, having served as a Vice President of PLM Financial Services, Inc. and Senior Vice President of PLM Transportation Equipment Corporation beginning in August 1984, and as a Vice President of PLM Transportation Equipment Corporation beginning in July 1982 and of PLM Securities Corp. from July 1982 to October 1, 1987. He joined PLM, Inc. in July 1981, as Assistant to the Chairman. Prior to joining PLM, Inc., Mr. Hirsch was a Research Associate at the Harvard Business School. From January 1977 through September 1978, Mr. Hirsch was a consultant with the Booz, Allen and Hamilton Transportation Consulting Division, leaving that employment to obtain his master's degree in business administration. Dr. Walter E. Hoadley joined PLM International's Board of Directors and its Executive Committee in September, 1989. He served as a Director of PLM, Inc. from November 1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988. Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since 1981. He was Executive Vice President and Chief Economist for the Bank of America from 1968 to 1981 and Chairman of the Federal Reserve Bank of Philadelphia from 1962 to 1966. Dr. Hoadley served as a Director of Transcisco Industries, Inc. from February 1988 until August 1995. Robert L. Pagel was appointed Chairman of the Executive Committee of the Board of Directors of PLM International in September 1990, having served as a director since February 1988. In October 1988 he became a member of the Executive Committee of the Board of Directors of PLM International. From June 1990 to April 1991 Mr. Pagel was President and Co-Chief Executive Officer of The Diana Corporation, a holding company traded on the New York Stock Exchange. He is the former President and Chief Executive Officer of FanFair Corporation which specializes in sports fan's gift shops. He previously served as President and Chief Executive Officer of Super Sky International, Inc., a publicly traded company, located in Mequon, Wisconsin, engaged in the manufacture of skylight systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis & Loewi, Inc., a Milwaukee based investment firm. Mr. Pagel retired from Blunt, Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the brokerage and financial industries. Mr. Pagel has also served on the Board of Governors of the Midwest Stock Exchange. Harold R. Somerset was appointed to the Board of Directors of PLM International in July 1994. From February 1988 to December 1993, Mr. Somerset was President and Chief Executive officer of California & Hawaiian Sugar Corporation, a recently acquired subsidiary of Alexander & Baldwin, Inc. ("C&H"). Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating Officer, having served on its Board of Directors since 1978, a position in which he continues to serve. Between 1972 and 1984, Mr. Somerset served in various capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture company headquartered in Honolulu, Hawaii, including Executive Vice President Agriculture and Vice President and General Counsel. Mr. Somerset also serves on the board of directors for various other companies and organizations. Robert N. Tidball was appointed President and Chief Executive Officer of PLM International in March 1989. At the time of his appointment, he was Executive Vice President of PLM International. Mr. Tidball became a director of PLM International in April 1989 and a member of the Executive Committee of the Board of Directors of PLM International in September 1990. Mr. Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith, Inc., he was Vice President & General Manager and Director of North American Car Corporation, and Director of the American Railcar Institute and the Railway Supply Association. J. Michael Allgood was appointed Vice President of Finance and Chief Financial Officer of PLM International in October 1992. Between July 1991 and October 1992, Mr. Allgood was a consultant to various private and public sector companies and institutions specializing in financial operational systems development. In October 1987, Mr. Allgood cofounded Electra Aviation Limited and its holding company, Aviation Holdings Plc of London, where he served as Chief Financial Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served as a First Vice President with American Express Bank, Ltd. In February 1978, Mr. Allgood founded and until June 1981, served as a director of Trade Projects International/Philadelphia Overseas Finance Company, a joint venture with Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served in various capacities with Citibank, N.A. Robin L. Austin is Vice President, Human Resources of PLM International. Ms. Austin became Vice President, Human Resources of PLM Financial Services, Inc. in February 1984, having served in various capacities with PLM Investment Management, Inc., including Director of Operations, since February 1980. From June 1970 to September 1978, Ms. Austin served on active duty in the United States Marine Corps. She is currently a Colonel in the United States Marine Corps Reserves. Ms. Austin serves on the board of directors for two nonprofit organizations, the Marine Memorial Club and the International Diplomacy Council. Stephen M. Bess was appointed President of PLM Investment Management, Inc. in August 1989, having served as Senior Vice President of PLM Investment Management, Inc. beginning in February 1984 and as Corporate Controller of PLM Financial Services, Inc. beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc., beginning in December 1982. Mr. Bess was Vice President-Controller of Trans Ocean Leasing Corporation, a container leasing company, from November 1978 to November 1982, and Group Finance Manager with the Field Operations Group of Memorex Corp., a manufacturer of computer peripheral equipment, from October 1975 to November 1978. David J. Davis was appointed Vice President and Controller of PLM International in January 1994. From March 1993 through January 1994, Mr. Davis was engaged as a consultant for various firms, including PLM International. Prior to that Mr. Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice President and Controller for ITEL Containers International Corporation which was located in San Francisco. Between May 1978 and April 1989, Mr. Davis held various positions with Transamerica Leasing Inc. in New York, including that of Assistant Controller for its rail leasing division. Douglas P. Goodrich was appointed Senior Vice President of PLM International in March 1994. Mr. Goodrich was appointed Vice President, Rail Group, of PLM Transportation Equipment Corporation in July 1989, and President of PLM Railcar Management Services, Inc. in September 1992. Mr. Goodrich was an Executive Vice President of G.I.C. Financial Services Corporation, a subsidiary of Guardian Industries Corp. of Chicago, Illinois from December 1980 to September 1985. Steven O. Layne was appointed Vice President and General Manager, Air Group, PLM Transportation Equipment Corporation in November 1992. Mr. Layne was its Vice President, Commuter and Corporate Aircraft beginning in July 1990. Previously, Mr. Layne was the Director, Commercial Marketing for Bromon Aircraft Corporation, a joint venture of General Electric Corporation and the Government Development Bank of Puerto Rico. Mr. Layne is a Major in the United States Air Force Reserves and Senior Pilot with 13 years of accumulated service. Stephen Peary was appointed Senior Vice President, Secretary and General Counsel of PLM International in March 1994. Mr. Peary served as Vice President, Secretary and General Counsel of PLM International beginning in February 1988. Mr. Peary was Assistant General Counsel of PLM Financial Services, Inc. from August 1987 through January 1988. Previously, Mr. Peary was engaged in the private practice of law in San Francisco. Mr. Peary is a graduate of the University of Illinois, Georgetown University Law Center, and Boston University (Masters of Taxation Program). ITEM 11. EXECUTIVE COMPENSATION The following table sets forth for the fiscal years ended December 31, 1995, 1994, and 1993, a summary of compensation awarded to, earned by or paid to the Company's Chief Executive Officer and each of its four other most highly compensated executive officers (together, the "named executive officers") at December 31, 1995: SUMMARY COMPENSATION TABLE
Name Securities and Underlying Principal Salary Bonus Options/ All Other Position Year ($) ($) SARS (#) Compensation ----------------------------------------------------------------------------------------------------------- Robert N. Tidball 1995 $300,000 $203,054 -- $3,306 ---- President, Chief 1994 268,333 225,000 20,000 105,716 ---- Executive Officer 1993 260,000 100,000 -- 15,237 ---- Allen V. Hirsch 1995 230,000 207,987 -- 1,380 ---- Executive Vice President 1994 228,333 100,000 10,000 90,559 ---- and Director 1993 220,000 100,000 -- 12,956 ---- Douglas P. Goodrich 1995 188,333 239,910 -- 1,779 ---- Senior Vice President 1994 170,833 60,000 10,000 61,211 ---- 1993 125,000 35,000 -- 9,133 ---- Stephen Peary 1995 176,667 103,054 -- 1,779 ---- Senior Vice President 1994 158,333 100,000 10,000 65,129 ---- and Secretary 1993 150,000 50,000 -- 9,532 ---- J. Michael Allgood 1995 162,615 78,054 -- 1,726 ---- Chief Financial Officer 1994 140,231 60,000 10,000 7,041 ---- and Vice President 1993 130,000 20,000 -- 1,008 ---- - -------------------------------- Amounts shown do not include the cost to the Company of personal benefits, the value of which did not exceed 10 percent of the aggregate salary and bonus compensation for each named executive officer. Bonus compensation reflects amount earned in designated year, but paid in the immediate subsequent year; provided, however, the bonus compensation reflects for each named Executive Officer a bonus of $3,054 paid in 1995 to replace Company matching program delayed until 1996 by the termination of the Company's 401(k) plan, effective December 31, 1994. Every employee of the Company employed throughout 1995 received the same $3,054 bonus compensation. Mr. Hirsch, as President of the Company's syndication subsidiary, is no longer a participant in the Company's bonus compensation plan. Mr. Hirsch now participates in a quarterly commission incentive plan based on the amount of syndicated equity raised by the Company. In 1995, Mr. Hirsch received commission compensation equal to $204,933. Mr. Goodrich, as Senior Vice President of the Company's equipment acquisition subsidiary, has had his bonus compensation restructured to add a commission incentive plan based on the amount of equipment transactions closed during a fiscal quarter. In 1995, Mr. Goodrich received commission compensation equal to $206,856. Includes the following compensation: Fair market value of Common Stock Cash balances Company paid allocated to ESOP distributed from premiums for term accounts ESOP accounts life insurance -------------------- ------------------- -------------------- 1994 1993 1995 1994 1995 1994 1993 ---- ---- ---- ---- ---- ---- ---- Robert N. Tidball $78,469 $14,576 $816 $26,700 $2,490 $547 $661 Allen V. Hirsch 67,098 12,285 816 22,914 564 547 661 Douglas P. Goodrich 45,167 8,472 816 15,497 963 547 661 Stephen Peary 48,072 8,871 816 16,510 963 547 661 J. Michael Allgood 4,536 347 763 1,958 963 547 661 Total fair market Total cash value of balances Common Stock allocated distributed from all to all ESOP accounts: $4,847,085 $641,914 ESOP accounts: $43,699 $589,517
Fair market value of shares allocated to ESOP accounts was determined using closing price of the Company's Common Stock on January 18, 1995 ($2.9375), the date all ESOP account balances were distributed to ESOP participants. Amounts reported in this column for 1993 for named individuals in the 1993 proxy statement consisted of the fair market value of ESOP allocations made to individual accounts determined using appraised fair market value of ESOP preferred stock at December 31 of applicable year, plus the value of Company paid premiums for term life insurance. STOCK OPTION GRANTS IN 1995 There were no grants or exercises of options to or by any named executive officer in 1995. The following table sets forth certain information, based on market value of the Company's Common Stock on December 31, 1995, with respect to stock options held by each of the named executive officers as of such date: FISCAL YEAR END OPTION VALUES
- --------------------------------- ------------------------------- ------------------------------ Number of Securities Underlying Value of Unexercised Unexercised In-the-Money Options at Options at December 31, 1995 December 31, 1995 Exercisable/ Exercisable/ Name Unexercisable Unexercisable - --------------------------------- ------------------------------- ------------------------------ Robert N. Tidball 136,666/13,334 $232,083/$9,167 Allen V. Hirsch 118,333/6,667 $203,541/$4,584 Douglas P. Goodrich 23,333/6,667 $37,291/$4,584 Stephen Peary 33,333/6,667 $54,791/$4,584 J. Michael Allgood 23,333/6,667 $37,291/$4,584 - ------------------------------------ Options granted in 1992 have an exercise price of $2.00. Options granted in 1994 have an exercise price of $3.0625. Market value of Common Stock at December 31, 1995 close $3.75 per share.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS The Company has entered into Employment Agreements (the Employment Agreements) with the Chief Executive Officer, each of its four other named executive officers and others (each a Contract Employee). The Employment Agreements are designed to encourage Contract Employees to remain in the employ of the Company and to reinforce their continued attention and dedication to their duties in the event of an unsolicited attempt to take over control of the Company. The Employment Agreements have terms of one, two or three years from the date on which they were entered (the Original Term) and are automatically extended one additional year on each succeeding anniversary thereof unless earlier terminated by the Company or the employee. Each Employment Agreement contains provisions governing salary, bonus and participation in Company benefit plans, and provides in certain events for payments to the Contract Employee upon termination of his or her employment with the Company. In addition, each Employment Agreement includes a covenant not to solicit the Company's customers or otherwise compete against the Company for a period of time after termination of employment. If, after a change in control occurs, the Company terminates a Contract Employee other than for cause or if the employee terminates his or her employment for good reason (including, without limitation, any demonstrable and material diminution of the compensation, duties, responsibilities, authority or powers of the Contract Employee), then the Company is required to pay the Contract Employee the sum of (i) the employee's annual base compensation rate then in effect multiplied by the number of years in the Original Term (up to 2.99 years), (ii) an amount equal to the greater of the amount paid and/or payable to or due the Contract Employee under the Company's bonus or incentive plans (a) for the Company's fiscal year prior to the fiscal year of any change in control or (b) for the immediately preceding fiscal year, multiplied by the number of years in the Original Term (up to 2.99 years) and (iii) all other cash benefits due the Contract Employee. In addition, if following a change in control, the Contract Employee terminates his or her employment for good reason all options to purchase stock of the Company granted to such Contract Employee immediately become fully vested and any restrictions on the exercise of such options lapse. For purposes of the Employment Agreements, a change in control is defined to include, among other things, (i) any Person acquiring Beneficial Ownership (as defined in the Employment Agreements) of 36% or more of the combined voting power of the Company's securities, (ii) any Person who did not have Beneficial Ownership of 5% or more of the voting power of the Company's securities on the date the Employment Agreement was entered into acquiring Beneficial Ownership of more than 15% of such voting power or (iii) a change in the Board of Directors of the Company due to proxy solicitations or other actions to influence voting at a meeting of stockholders of the Company by a Person who has Beneficial Ownership of 5% or more of the voting power of the Company, and which causes the Continuing Directors (as defined below) to cease to be a majority of the Board of Directors, unless such event(s) have been approved by a majority of the Continuing Directors. "Continuing Directors" are (a) those who were directors on the date the Employment Agreement was entered, (b) those who were appointed or recommended for election by a majority of those who were directors on such date, or (c) those who were appointed or recommended by a majority of those directors described in (a) and (b) above. The Employment Agreements are structured so that no excess payments within the meaning of Section 280G of the Code will be made to any Contract Employee pursuant to the Employment Agreements. If a change in control occurred on the date hereof and the employment of the Contract Employees was immediately terminated without cause, based on certain assumptions, the following would be the present value of post-employment compensation benefits provided under the Employment Agreements to the following named executive officers: Mr. Tidball, $1,504,131; Mr. Hirsch, $1,309,578; Mr. Goodrich, $1,280,447; Mr. Peary, $836,366; and Mr. Allgood, $719,600. PENSION BENEFITS The following table sets forth certain information regarding annual benefits payable in specified compensation and years of service classifications under the Company's nonqualified supplemental retirement income plan:
Average Annual Credited Years of Service ------------------------------------------------------------------- Compensation Annual Payout to be Received During Last in Each of Five Years Five Years of Following later of Termination of Employment Employment or Attainment of Age 60 ------------------------------------------------------------------------------------------------------- 5 10 15 - -- -- $ 60,000 $ 15,000 $ 30,000 $ 45,000 100,000 25,000 50,000 75,000 140,000 35,000 70,000 105,000 180,000 45,000 90,000 135,000 220,000 55,000 110,000 165,000 260,000 65,000 130,000 195,000 300,000 75,000 150,000 225,000 400,000 100,000 200,000 300,000 - --------------------------------- The Company's shareholder-approved nonqualified supplemental retirement income plan provides that an executive participating in the plan is generally entitled to receive for a period of 60 months, commencing upon the later of attainment of age 60 or termination of employment, an amount equal to the product of (i) 5%, (ii) number of years of employment with PLM International, its affiliates or predecessors (up to a maximum of 15 years) and (iii) average monthly base compensation during the most recent consecutive months of employment (not to exceed 60) preceding termination of employment. Obligations under the plan are funded by general corporate funds and insurance policies on the lives of the participants. For purposes of computing benefits under the plan, compensation includes only salaries and wages and does not include directors' fees or bonuses. Benefits payable are not subject to any deduction for social security or other offset amounts. The annual base compensation 60-month averages at December 31, 1995 for the named executive officers equaled: Mr. Tidball, $245,667; Mr. Hirsch, $201,833; Mr. Goodrich, $144,475; Mr. Peary, $147,333; and Mr. Allgood, $117,777. Benefits under the plan generally vest over a five-year period. Vesting is accelerated immediately to 100% in the event of a change in control of the Company. The Board of Directors has discretion to accelerate the date for making payments under the plan in the event of a change in control. Years of credited service for named executive officers who participate in the plan are as follows: Years Robert N. Tidball 10 Allen V. Hirsch 14 Douglas P. Goodrich 8 Stephen Peary 8 J. Michael Allgood 3
COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board of Directors (the Committee) is responsible for advising and recommending to the Board of Directors of the Company policies governing employee compensation and the Company's employee benefit plans, including its 1988 Management Stock Compensation Plan, and determining the compensation of the Company's executive officers, subject to review by the disinterested members of the Board of Directors. The Committee evaluates the performance of management and determines compensation polices and levels. The disinterested members of the Board of Directors review the Committee's recommendations regarding the compensation of executive officers. The Company's executive compensation programs are designed to attract and retain executives capable of leading the Company to meet its business objectives and motivate them to enhance long-term shareholder value. Compensation for the Company's executive officers consists of both fixed (base salary) and variable (incentive) compensation elements. Variable compensation consists of annual cash incentives and stock option grants. These elements are designed to operate on an integrated basis and together comprise total compensation value. It is the Compensation Committee's belief that none of the Company's executive officers will be affected by the provisions of Section 162(m) of the Code which limits the deductibility of certain executive compensation during 1995. Therefore, the Committee has not adopted a policy as to compliance with the requirements of Section 162(m) of the Code. Base Salary Base salary levels of the Company's key executives are largely determined through comparison with comparable companies in the San Francisco Bay Area. Salary information about comparable companies is reviewed by reference to public disclosures and published surveys. In addition, the Committee from time to time obtains information about comparable salary levels from outside compensation consultants. The companies included in the salary comparisons are generally not the same as the companies included in the index in the stock performance graph included in this Proxy Statement. The Committee believes that the Company's most direct competitors for executive talent in the San Francisco Bay Area are not necessarily the same companies to which the Company would be compared for stock performance purposes. In 1994, the Company engaged the services of a national compensation consultant to advise on the overall compensation of the CEO and the Company's Executive Vice President (EVP). Findings of the report submitted to the Board of Directors were that the base salaries and level of actual total cash compensation for both the CEO and EVP appear reasonable and do not require adjustment. The consultant did suggest, which suggestion was approved by the Committee as well as the Board of Directors, that after a threshold level is met, the EVP should have an uncapped override or commission on the production of syndication sales for which the EVP is responsible. See "Annual Cash Incentives," below. For fiscal 1994, base salaries of the Company's executive officers (other than the President and Chief Executive Officer (CEO)) were set to approximate the 75th percentile of the survey data. The base salary of the CEO was set to approximate the 50th percentile of the survey data. Annual Cash Incentives The annual cash incentive is designed to provide a short-term (one-year) incentive to executive officers. Generally, the cash incentive is paid from a single bonus pool established by the Compensation Committee at the beginning of each year based on a targeted level of profitability. The Committee retains the right to increase or decrease the size of the bonus pool during the year. Payment of cash incentives is not contingent on the Company's meeting the targeted level of profitability, which level was met during 1995. The material in this report is not "soliciting material," is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. Incentive awards for the Company's key executives participating in the single bonus pool (other than the CEO) are based on the achievement of predetermined individual performance goals. Specific individual goals for each executive are established at the beginning of the year by the CEO and are tied to the functional responsibilities of each executive. Individual goals may include objective and subjective factors, such as improving the performance of assets managed by the executive, successful acquisitions or sales, management of operating expenses, development of leadership skills and personal training and education. No specific weights are assigned to the individual goals. In fiscal 1995, certain of the individual performance targets were met. In 1995, both Mr. Hirsch and Mr. Goodrich were removed from participation in the single bonus pool. Company profitability is directly influenced by the level of syndicated equity raised and the volume of transportation equipment transactions closed for the Company's affiliated investment programs. Mr. Hirsch, as to syndicated equity, and Mr. Goodrich, as to equipment transactions, have direct functional responsibilities for these two areas. Their incentive commission compensation is now measured as a percentage of predetermined individual performance goals in these respective areas of responsibility. The Summary Compensation Table shows, under the caption "Bonus," incentive awards for the named executive officers for 1995. In establishing the annual cash incentive for the CEO, the Committee considers the performance of the Company and the CEO, including his leadership and effectiveness in dealing with major corporation problems and opportunities. While overall corporate performance, including stock price performance, is taken into account, the incentive award for the CEO is primarily determined by a subjective account of his individual performance. The Summary Compensation Table shows, under the caption "Bonus," the incentive award for the CEO in 1995. Stock Options Stock options are designed to provide long-term incentives and rewards tied to the price of the Company's Common Stock. Given the fluctuations of the stock market, stock price performance and financial performance are not always consistent. The Committee believes that stock options, which provide value to participants only when the Company's shareholders benefit from stock price appreciation, are an important component of the Company's annual executive compensation program. There were no grant of options to executive officers during 1995. Options to acquire 10,000 shares of common stock were granted in 1995 to an employee who heads the Company's Canadian railcar operations. All outstanding employee options expire on March 31, 1998. The table "Fiscal Year End Option Values" identifies all options granted to the named executive officers, including the CEO. J. ALEC MERRIAM ROBERT L. PAGEL The Members of the Compensation Committee ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the beneficial ownership of shares of the Company's Common Stock by each stockholder known to be the beneficial owner of more than 5% of the outstanding Common Stock as of the date of this report.
Number of Shares of Percent of Name and Address Common Stock Common of Beneficial Owner Stock ------------------------------------------------------------------------------ HPB Associates, L.P. 960,000 8.9 888 Seventh Avenue New York, NY 10106 - -------------------------- Computed on the basis of 10,805,861 shares of Common Stock outstanding. Schedule 13D filed on October 21, 1994 indicating beneficial ownership of 960,000 shares of Common Stock. Shares acquired in October 1994 from Official Bondholders Committee of Transcisco Industries, Inc. (OBC) in a transaction in which the Company repurchased 922,367 common shares and other institutions and individuals acquired beneficial ownership of 1,485,000 common shares. In December 1995, the Company repurchased 630,700 shares of the 1,485,000 common shares acquired by other institutions.
The following table shows the amount and percent of the Company's outstanding Common Stock beneficially owned by each of its directors and named executive officers (as hereinafter defined), and by all directors and executive officers as a group, as of the date of this report.
Number of Shares of Percent of Common Stock Common Name and Address Stock of Beneficial Owner ---------------------------------------------------------------------- Allen V. Hirsch....................... 192,095 1.7 Walter E. Hoadley..................... 41,000 * J. Alec Merriam....................... 120,696 1.1 Robert L. Pagel....................... 60,000 * Harold R. Somerset.................... 26,000 * Robert N. Tidball..................... 235,438 2.1 J. Michael Allgood.................... 36,643 * Douglas P. Goodrich................... 72,823 * Stephen Peary........................ 89,426 * All directors and executive officers as a group (14 people).................... 988,546 8.7 - ------------------ * Represents less than 1% of the outstanding shares. Computed on the basis of 10,805,861 shares of Common Stock outstanding plus, in the case of any person deemed to own shares of Common Stock as a result of owning options to purchase such securities exercisable within 60 days of the date of this report, the additional shares of Common Stock which would be outstanding upon exercise by such person. Includes 125,000 shares of Common Stock which may be purchased by Mr. Hirsch upon exercise of options. Includes 40,000 shares of Common Stock which may be purchased by Dr. Hoadley upon exercise of options. Includes 40,000 shares of Common Stock which may be purchased by Mr. Merriam upon exercise of options. Represents 40,000 shares of Common Stock which may be purchased by Mr. Pagel upon exercise of options. Includes 20,000 shares of Commons Stock which may be purchased by Mr. Somerset upon exercise of options. Includes 150,000 shares of Common Stock which may be purchased by Mr. Tidball upon exercise of options. Includes 30,000 shares of Common Stock which may be purchased by Mr. Allgood upon exercise of options. Includes 30,000 shares of Common Stock which may be purchased by Mr. Goodrich upon exercise of options. Includes 40,000 shares of Common Stock which may be purchased by Mr. Peary upon exercise of options. Includes 470,000 shares of Common Stock which may be purchased by members of the Board of Directors and executive officers upon exercise of options.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 25, 1996 PLM International, Inc. By: /s/ J. Michael Allgood ------------------------- J. Michael Allgood Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company, in the capacities and on the dates indicated. /s/ J. Michael Allgood Vice President and March 25, 1996 ------------------------ J. Michael Allgood Chief Financial Officer * Director, Executive March 25, 1996 ------------------------ Allen V. Hirsch Vice President * Director March 25, 1996 ------------------------ Walter E. Hoadley * Director March 25, 1996 ------------------------ J. Alec Merriam * Director March 25, 1996 ------------------------ Robert L. Pagel * Director March 25, 1996 ------------------------ Harold R. Somerset * Director, President and March 25, 1996 ------------------------ Robert N. Tidball Chief Executive Officer * Stephen Peary, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Stephen Peary - ------------------------- Stephen Peary Attorney-in-Fact INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders PLM International, Inc. We have audited the consolidated financial statements of PLM International, Inc. and subsidiaries as listed in the accompanying index. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PLM International, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 14 to the financial statements, the Company changed its method of accounting for its Employee Stock Ownership Plan in 1994. /S/ KPMG PEAT MARWICK LLP SAN FRANCISCO, CALIFORNIA MARCH 25, 1996 -----END PRIVACY-ENHANCED MESSAGE-----