10-Q 1 p13641-10q.txt FORM 10-Q 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, 2001 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 7, 2001 - 7,554,510 shares. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share amounts)
For the Three Months Ended March 31, 2001 2000 ------- ------- Revenues Operating lease income $ 513 $ 45 Management fees 1,536 1,811 Partnership interests and other fees 563 217 Acquisition and lease negotiation fees 185 19 Other 299 343 ------- ------- Total revenues 3,096 2,435 ------- ------- Costs and expenses Operations support 254 586 Depreciation and amortization 243 157 General and administrative 2,057 1,200 ------- ------- Total costs and expenses 2,554 1,943 ------- ------- Operating income 542 492 Interest expense (1) (431) Interest income 95 203 ------- ------- Income before income taxes 636 264 Provision for income taxes 254 100 ------- ------- Net income from continuing operations 382 164 Loss from discontinued operations, net of income tax -- (83 ------- ------- Net income to common shares $ 382 $ 81 ======= ======= Basic earnings per weighted-average common share outstanding: Income from continuing operations $ 0.05 $ 0.02 Loss from discontinued operations -- (0.01) ------- ------- $ 0.05 $ 0.01 ======= ======= Diluted earnings per weighted-average common share outstanding: Income from continuing operations $ 0.05 $ 0.02 Loss from discontinued operations -- (0.01) ------- ------- $ 0.05 $ 0.01 ======= ======= See accompanying notes to these consolidated financial statements.
-1- PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share amounts)
ASSETS March 31, December 31, 2001 2000 -------- -------- Cash and cash equivalents $ 5,008 $ 5,874 Receivables (net of allowance for doubtful accounts of $0.1 million as of March 31, 2001 and December 31, 2000) 851 1,045 Receivables from affiliates 6,943 1,207 Equity interest in affiliates 15,421 15,753 Assets held for sale -- 10,250 Restricted cash and cash equivalents 48 2,530 Other assets, net 3,084 3,748 -------- -------- Total assets $ 31,355 $ 40,407 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Payables and other liabilities $ 7,555 $ 15,909 Deferred income taxes 8,409 8,885 -------- -------- Total liabilities 15,964 24,794 Shareholders' equity Preferred stock ($0.01 par value, 10.0 million shares authorized, none outstanding as of March 31, 2001 and December 31, 2000) -- -- Common stock ($0.01 par value, 50.0 million shares authorized and 7,554,510 shares issued and outstanding as of March 31, 2001 and December 31, 2000) 112 112 Paid-in capital, in excess of par 36,943 37,547 Treasury stock (4,481,245 shares as of March 31, 2001 and December 31, 2000) (19,875) (19,875) Accumulated deficit (1,789) (2,171) -------- -------- Total shareholders' equity 15,391 15,613 -------- -------- Total liabilities and shareholders' equity $ 31,355 $ 40,407 ======== ======== See accompanying notes to these consolidated financial statements.
-2- PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME For the Year Ended December 31, 2000 and the Three Months Ended March 31, 2001 (in thousands of dollars)
Common Stock Accumulated -------------------------------------------- Deficit & Paid-in Accumulated Capital in Other Total At Excess Treasury Comprehensice Shareholders' Par of Par Stock Income Equity ---------------------------------------------------------------------------------- Balances, December 31, 1999 $ 112 $ 75,059 $ (18,324) $ (7,434) $ 49,413 Comprehensive income: Net income 5,263 5,263 Exercise of stock options (289) 1,037 748 Common stock purchases (2,588) (2,588) Liquidating distribution (37,223) (37,223) ---------------------------------------------------------------------------------- Balances, December 31, 2000 112 37,547 (19,875) (2,171) 15,613 Comprehensive income: Net income 382 382 Redemption of stock options (604) (604) ---------------------------------------------------------------------------------- Balances, March 31, 2001 $ 112 $ 36,943 $ (19,875) $ (1,789) $ 15,391 ================================================================================== See accompanying notes to these consolidated financial statements.
-3- PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Three Months Ended March 31, 2001 2000 -------- -------- Operating activities Net income from continuing operations $ 382 $ 164 Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: Depreciation and amortization 243 157 Deferred income tax (476) 252 Gain on disposition of assets, net (16) -- Equity income of managed programs (715) (441) (Decrease) increase in payables and other liabilities (8,354) 1,206 Increase in receivables and receivables from affiliates (42) (2,016) Amortization of organization and offering costs 152 224 Decrease (increase) in other assets 338 2 -------- -------- Cash used in operating activities of continuing operations (8,488) (452) Cash provided by operating activities of discontinued operations -- 723 -------- -------- Net cash (used in) provided by operating activities (8,488) 271 -------- -------- Investing activities Cash distribution from managed programs 895 1,216 Note receivable from affiliate (5,500) -- Principal payments received on finance leases -- 140 Purchase of property, plant, and equipment -- (2) Proceeds from sale of subsidiary, net of transaction costs -- 28,275 Proceeds from the sale of equipment for lease 99 -- Proceeds from the sale of assets held for sale 10,250 -- Decrease in restricted cash and restricted cash equivalents 2,482 332 Cash used in investing activities of discontinued operations -- (5,432) -------- -------- Net cash provided by investing activities 8,226 24,529 -------- -------- Financing activities Borrowings of short-term warehouse credit facilities -- 1,200 Repayment of short-term warehouse credit facilities -- (1,200) Repayment of senior secured notes -- (1,880) Proceeds from exercise of stock options -- 30 Redemption of stock options (604) -- Purchase of stock -- (338) Cash used in financing activities of discontinued operations -- (2,065) -------- -------- Net cash used in financing activities (604) (4,253) -------- -------- Net (decrease) increase in cash and cash equivalents (866) 20,547 Cash and cash equivalents at beginning of period 5,874 2,089 -------- -------- Cash and cash equivalents at end of period $ 5,008 $ 22,636 ======== ======== Supplemental information Net cash paid for interest from continuing operations $ 1 $ 431 ======== ======== Net cash paid for interest from discontinued operations $ -- $ 2,845 ======== ======== Net cash paid for income taxes $ 5,828 $ 182 ======== ======== See accompanying notes to these consolidated financial statements.
-4- PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 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-owned subsidiaries (the Company's) financial position as of March 31, 2001 and December 31, 2000, statements of income for the three months ended March 31, 2001 and 2000, statements of changes in shareholders' equity and comprehensive income for the year ended December 31, 2000 and the three months ended March 31, 2001 and statements of cash flows for the three months ended March 31, 2001 and 2000. 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/A for the year ended December 31, 2000, on file with the Securities and Exchange Commission. On December 22, 2000, the Company announced that it had signed an agreement and plan of merger with MILPI Acquisition Corporation (MILPI). In December 2000 MILPI tendered for all the outstanding common stock of the Company at $3.46 per share. In February 2001, PLM International announced that MILPI had completed its cash tender offer for the outstanding common stock of PLM International. MILPI acquired 83% of the common shares outstanding of PLM International MILPI through the tender. MILPI will complete its acquisition of PLM International by effecting a merger of PLM International into MILPI under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Upon completion of the merger, PLMI will no longer be publicly traded. 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 AFG, its commercial and industrial equipment leasing subsidiary. 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 received additional proceeds of $3.2 million, which were 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 were $3.9 million of which $0.7 million was paid in the first quarter of 2000. Net proceeds to the Company from the sale of AFG was $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. On May 24, 2000, the Company signed an asset purchase agreement to sell the refrigerated and dry trailer assets and related liabilities. PLM shareholders approved the transaction on August 25, 2000. For the sale of the Company's trailer assets, the Company received $69.2 million for its 4,250 trailers and the purchaser assumed $49.2 million in debt and other liabilities, including the operation of most of the PLM Trailer Leasing's trailer yards located throughout the United States. The Company paid $5.0 million of income tax related to the trailer sale in the first quarter of 2001. -5- Accordingly, both the Company's AFG and trailer leasing operations are accounted for as discontinued operations. Net loss from discontinued operations for the quarter ended March 31, 2000 are as follows (in thousands of dollars):
Trailer Leasing AFG Total ------------------------------------------- Revenues $ 7,472 $ 4,076 $ 11,548 Costs and expenses (6,438) (2,225) (8,663) ------------------------------------------- Operating income 1,034 1,851 2,885 Interest expense, net (1,089) (1,607) (2,696) ------------------------------------------- Net income (loss) from discontinued operations before income taxes (55) 244 189 Provision for (benefit from) income tax (21) 93 72 Net income previously accrued as a component of loss on a discontinued operation -- (200) (200) ------------------------------------------- Net loss from discontinued operations $ (34) $ (49) $ (83) ===========================================
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. Assets Held For Sale As of March 31, 2001, the Company had no assets held for sale. As of December 31, 2000, the Company had $10.3 million in marine containers that were reported as assets held for sale. During the first quarter of 2001, the Company sold these marine containers to affiliated programs at cost, which approximated their fair market value. 5. Shareholders' Equity The total common shares outstanding were 7,554,510 as of March 31, 2001 and December 31, 2000. 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, 2001 and 2000 was 7,554,510 and 7,702,985, 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, 2001 and 2000 was 7,570,940 and 7,761,244, respectively. 6. Legal Matters The Company and various of its wholly owned subsidiaries are defendants in a class action lawsuit filed in January 1997 and which is pending in the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund VII (the Partnerships), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial 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. -6- PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 6. Legal Matters (continued) 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 unitholders who purchased or received by way of transfer or assignment any units in the Partnerships between May 23, 1989 and August 30, 2000. 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 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 August 30, 2000 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 August 2000, and information regarding each of the settlements was sent to class members in September 2000. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. -7- PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 6. Legal Matters (continued) A final fairness hearing was held on November 29, 2000, and on April 25, 2001, the federal magistrate judge assigned to the case entered a Report and Recommendation recommending final approval of the monetary and equitable settlements to the federal district court judge. Any objector to the settlement may file objections to the Report and Recommendation. The Report and Recommendation, along with any objections, will be reviewed by the district court judge, who may approve, reject or modify any of the magistrate judge's findings or recommendations, and who may also receive further evidence or recommit the matter to the magistrate judge. The parties await the district court's ruling on the Report and Recommendation. 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. 7. Operating Segments In the first quarter of 2000, the Company operated in three operating segments: the management of investment programs and other equipment leasing, trailer leasing, and commercial and industrial equipment leasing and financing. The management of investment programs and other 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 equipment. The Company sold its commercial and industrial equipment leasing subsidiary, AFG, on March 1, 2000 and its trailer leasing operations on September 30, 2000. Accordingly, these segments are accounted for as discontinued operations. With the sale of AFG and the trailer leasing operations, the Company operated in only one segment in the first quarter of 2001, which is the management of investment programs and other transportation equipment leasing. The Company evaluates the performance of each segment based on profit or loss from operations before allocating general and administrative expenses, certain operation support costs and income taxes. 8. Subsequent Events In April 2001, the Company entered into a joint $15.0 million credit facility on behalf of Acquisub LLC (ACQ), a wholly-owned subsidiary of the Company, PLM Equipment Growth Fund VI (EGF VI), PLM Equipment Growth and Income Fund VII (EGF VII), and Professional Lease Management Income Fund I (Fund I), each affiliated investment programs of the Company. The facility provides interim financing of up to 100% of the aggregate book value of eligible equipment as defined in the credit agreement. The Company, EGF VI, EGF VII, and Fund I, collectively may borrow up to $15.0 million under this facility. Outstanding borrowings by one borrower reduce the amount available to each of the other borrowers under the facility. Individual borrowings may be outstanding for no more than 270 days, with all advances due no later than April 12, 2002. Interest accrues at either the prime rate or adjusted LIBOR plus 2.00 %, at the borrower's option, and is set at the time of an advance of funds. All borrowings are guaranteed by the Company. On April 10, 2001, the Company entered into an office lease agreement with 120 Montgomery Associates, LLC. for use as its principal office space. Annual lease commitments for this office total $0.1 million for the remainder of 2001, $0.2 million in 2002, $0.2 million in 2003, and $0.1 million in 2004. -8- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management of Investment Programs The Company syndicated investment programs from which it earns various fees and equity interests. Professional Lease Management Income Fund I, LLC 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 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 1% of earnings of the program, subject to certain allocation provisions per the operating agreement. 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 partnerships' 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 and PLM Equipment Growth Fund IV are expected to be liquidated by the end of 2001. Two of the limited partnerships, PLM Equipment Growth Fund and PLM Equipment Growth Fund 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 may incur interest expense. Trailer Leasing The Company operated 22 trailer rental facilities doing business as PLM Trailer Leasing that engaged in short-term and mid-term operating leases. Nineteen of these facilities leased predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities leased only dry van (non-refrigerated) trailers. On May 24, 2000, the Company signed an asset purchase agreement to sell its refrigerated and dry trailer assets and related liabilities. PLM shareholders approved the transaction on August 25, 2000. The sale was completed on September 30, 2000. The Company received $69.2 million, net of transaction costs, for its 4,250 trailers and the purchaser assumed $49.2 million in debt and other liabilities, including the operation of most of the PLM Trailer Leasing's trailer yards located throughout the United States. The Company paid $5.0 million of income tax related to the trailer sale in the first quarter of 2001. Accordingly, the Company's trailer leasing is accounted for as a discontinued operation. -9- Commercial and Industrial Equipment Leasing and Financing The Company funded and managed long-term direct finance leases, operating leases, and loans through its American Finance Group, Inc. (AFG) subsidiary. Master lease agreements were entered into with predominately investment-grade lessees and served as the basis for marketing efforts. The underlying assets represented a broad range of commercial and industrial equipment, such as: point-of-sale, materials handling, computer and peripheral, manufacturing, general purpose plant and warehouse, communications, medical, and construction and mining equipment. Through AFG, the Company was also engaged in the management of institutional programs for which it originated leases and received acquisition and management fees. The Company also earned syndication fees for arranging purchases and sales of equipment to other unaffiliated third parties. In October 1999, the Company agreed to sell AFG, its commercial and industrial equipment leasing subsidiary. 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 received additional proceeds of $3.2 million, which were 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 were $3.9 million of which $0.7 million was paid in the first quarter of 2000. Net proceeds to the Company from the sale of AFG was $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. Comparison of the Company's Operating Results for the Three Months Ended March 31, 2001 and 2000 The following analysis reviews the operating results of the Company: Revenues For the Three Months Ended March 31, 2001 2000 ----------------------------------- (in thousands of dollars) Operating lease income $ 513 $ 45 Management fees 1,536 1,811 Partnership interests and other fees 563 217 Acquisition and lease negotiation fees 185 19 Other 299 343 ----------------------------------- Total revenues $ 3,096 $ 2,435 The fluctuations in revenues for the three months ended March 31, 2001, compared to the same quarter in 2000, are summarized and explained below. Operating lease income by equipment type: For the Three Months Ended March 31, 2001 2000 ----------------------------------- (in thousands of dollars) Lease income from assets held for sale $ 347 $ -- Other 166 45 ----------------------------------- Total operating lease income $ 513 $ 45 -10- 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 $0.5 million during the first quarter of 2001 compared to the same quarter of 2000. Lease income from assets held for sale increased $0.3 million during the first quarter of 2001 compared to the same quarter of 2000. The Company earned $0.3 million in operating lease income from the $10.3 million in marine containers that were held for sale for 78 days in the first quarter of 2001. These marine containers were sold to the affiliated programs at cost, which approximated their fair market value. There were no assets held for sale by the Company during the first quarter of 2000. Other operating lease income increased $0.1 million during the first quarter of 2001 compared to the same quarter of 2000 due to the increase in volume of other assets on operating lease. Management fees: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees decreased $0.3 million during the first quarter of 2001 compared to the same quarter of 2000. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs and other managed programs. 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 partnership interests and other fees in the first quarters of 2001 and 2000 were $0.6 million and $0.2 million, respectively. The increase of $0.4 million in net earnings from the affiliated entities in the first quarter of 2001 compared to the same quarter of 2000, is a result of gains from the disposition of equipment in certain of the EGF programs. Acquisition and lease negotiation fees: During the quarter ended March 31, 2001, the Company on behalf of the EGF programs, purchased transportation and other equipment for $8.0 million compared to $2.6 million of transportation and other equipment during the quarter ended March 31, 2000, resulting in a $0.2 million increase in acquisition and lease negotiation fees. The Company has reached certain fee limitations for certain affiliated programs per the partnerships' agreements. During the first quarter of 2001, the Company did not take acquisition and lease negotiation fees for $5.0 million of the equipment purchased for one of these programs. In addition, during the first quarter of 2000, the Company did not take acquisition and lease negotiation fees for a $2.2 million hushkit purchased for an affiliated program as the investment phase of this affiliated program is closed. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996, because Fund I has a no front-end fee structure, and because the Company has reached the maximum allowable fees that may be taken in some of the programs, acquisition and lease negotiation fees will continue at the current levels or be reduced in the future. Costs and Expenses For the Three Months Ended March 31, 2001 2000 ------------------------------------- (in thousands of dollars) Operations support $ 254 $ 586 Depreciation and amortization 243 157 General and administrative 2,057 1,200 ------------------------------------- Total costs and expenses $ 2,554 $ 1,943 -11- Operations support: Operations support expense, including salary and office-related expenses for operational activities and provision for doubtful accounts, decreased $0.3 million (57%) for the quarter ended March 31, 2001, compared to the quarter ended March 31, 2000. The decrease in operations support expense was primarily due to a decrease in compensation and benefits expense resulting from staff reductions. Depreciation and amortization: Depreciation and amortization expenses increased $0.1 million (55%) for the quarter ended March 31, 2001, compared to the quarter ended March 31, 2000. The increase resulted from an increase in the volume of other assets held for operating lease. General and administrative: General and administrative expenses increased $0.9 million (71%) during the quarter ended March 31, 2001, compared to the same quarter in 2000. A $0.5 million increase, net of allocations to the investment programs, was due to severance costs incurred in the first quarter of 2001 related to staffing reductions. A $0.3 million increase was due to stock option expenses incurred in the first quarter of 2001. Similar expenses were not incurred in the first quarter of 2000. Other Income and Expenses For the Three Months Ended March 31, 2001 2000 ------------------------------ (in thousands of dollars) Interest expense $ (1) $ (431) Interest income 95 203 Interest expense: Interest expense decreased $0.4 million (100%) during the quarter ended March 31, 2001 compared to the same quarter in 2000, due to the Company's repayment of the senior secured notes in 2000. Interest income: Interest income decreased $0.1 million (53%) during the quarter ended March 31, 2001 compared to the same quarter of 2000, as a result of lower average cash balances during the quarter ended March 31, 2001 compared to the same quarter of 2000. Provision for income taxes: For the three months ended March 31, 2001, the provision for income tax was $0.3 million, representing an effective rate of 40%. For the three months ended March 31, 2000, the provision for income taxes was $0.1 million, representing an effective rate of 38%. The increase in effective rate of 2% was due to a change in state apportionment factors that increased the effective state tax rate. Net Loss from Discontinued Operations On May 24, 2000, the Company signed an asset purchase agreement to sell its refrigerated and dry trailer assets and related liabilities. PLM shareholders approved the transaction on August 25, 2000. The sale was completed on September 30, 2000. In October 1999, the Company agreed to sell its commercial and industrial equipment subsidiary, American Finance Group, Inc. On February 25, 2000, the shareholders of PLM International approved the transaction. The sale was completed on March 1, 2000. -12- Accordingly, the Company's trailer leasing and commercial and industrial leasing operations are accounted for as discontinued operations. Net loss from discontinued operations for 2000 are as follows (in thousands of dollars):
2000 --------------------------------- Trailer Leasing AFG Total -------- -------- -------- Revenues Operating lease income $ 7,245 $ 1,841 $ 9,086 Finance lease income -- 1,650 1,650 Management fees 173 100 273 Partnership interests 64 -- 64 Gain (loss) on disposition of assets, net (13) 40 27 Other 3 445 448 -------- -------- -------- Total revenues 7,472 4,076 11,548 -------- -------- -------- Costs and expenses Operations support 3,687 720 4,407 Depreciation and amortization 2,365 1,505 3,870 General and administrative expenses 386 -- 386 -------- -------- -------- Total costs and expenses 6,438 2,225 8,663 -------- -------- -------- Operating income 1,034 1,851 2,885 Interest expense, net (1,089) (1,607) (2,696) -------- -------- -------- Net income (loss) from discontinued operations before income taxes (55) 244 189 (Benefit from) provision for income tax (21) 93 72 Net income previously accrued as a component of loss on a discontinued operation -- (200) (200) -------- -------- -------- Net loss from discontinued operations $ (34) $ (49) $ (83) ======== ======== ========
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, 2000 and is not included in the above table. Net Income As a result of the foregoing, for the three months ended March 31, 2001, net income was $0.4 million resulting in basic and diluted earnings per weighted-average common share outstanding of $0.05. For the three months ended March 31, 2000, 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. During the three months ended March 31, 2001, accounts receivable decreased $0.2 million. A $0.1 million decrease in receivables resulted from the payment of receivables from the insurance company in the Koch matter. A $0.1 million decrease in accounts receivable resulting from the payment of receivables from lease revenues earned from containers held for sale. As of December 31, 2000, the Company had $10.3 million in marine containers that were reported as assets held for sale. During the first quarter of 2001, the Company sold these marine containers to affiliated programs at cost, which approximated their fair market value. As of March 31, 2001, the Company had no assets held for sale. -13- During the three months ended March 31, 2001, restricted cash decreased $2.5 million. The Company's agreement to be purchased by MILPI Acquisition Corp. required the Company to place $1.7 million into an escrow account as of December 31, 2000. Concurrent with the conclusion of the tender offer, the $1.7 million in restricted cash held in an escrow account was released to the Company in the first quarter of 2001. Restricted cash as of December 31, 2000 also included $0.8 million provided for the Company's obligations under the deferred compensation agreements. These deferred compensation obligations were paid during the first quarter of 2001. During the three months ended March 31, 2001, other assets decreased $0.7 million. A $0.3 million decrease was due to a reduction of prepaid insurance and prepaid rent. A $0.3 million decrease was due to a decrease in net book value of other assets. During the three months ended March 31, 2001, accounts payable and accrued expenses decreased $8.4 million. A $5.0 million of this decrease was the result of federal and state income tax payments made in the first quarter of 2001. A $3.4 million decrease in accrued compensation was due to the payment of all amounts outstanding under the Company's deferred compensation plan and the reduction in staff. Liquidity for the remainder of 2001 and beyond will depend, in part, on the management of existing sponsored programs, the effectiveness of cost control programs, and the purchase and sale of equipment. 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: Warehouse Credit Facility: In April 2001, the Company entered into a joint $15.0 million credit facility on behalf of Acquisub LLC (ACQ), a wholly-owned subsidiary of the Company, PLM Equipment Growth Fund VI (EGF VI), PLM Equipment Growth and Income Fund VII (EGF VII), and Professional Lease Management Income Fund I (Fund I), each affiliated investment programs of the Company. The facility provides interim financing of up to 100% of the aggregate book value of eligible equipment as defined in the credit agreement. The Company, EGF VI, EGF VII, and Fund I, collectively may borrow up to $15.0 million under this facility. Outstanding borrowings by one borrower reduce the amount available to each of the other borrowers under the facility. Individual borrowings may be outstanding for no more than 270 days, with all advances due no later than April 12, 2002. Interest accrues at either the prime rate or adjusted LIBOR plus 2.00 %, at the borrower's option, and is set at the time of an advance of funds. All borrowings are guaranteed by the Company. Cost Control Program The Company is currently reviewing all expenses. As part of this review, the Company has determined certain functions can be completed more economically by third-party service providers. Total Company headcount is expected to be reduced from 47 as of March 31, 2001 to 20 by June 30, 2001. In the first quarter of 2001, the Company took a charge of $0.5 million related to these staff reductions. 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 None. -14- PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 6 to the consolidated financial statements. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 10.1 Warehousing Credit Agreement among PLM International, Inc., PLM Equipment Growth Fund VI, PLM Equipment Growth and Income Fund VII, Professional Lease Management Income Fund I, LLC., and Imperial Bank and PFF Bank and Trust dated April 13, 2001. 10.2 Office Lease Agreement between 120 Montgomery Associates, LLC and PLM Financial Services Inc. dated April 10, 2001. -15- 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. ----------------------- Richard K Brock Chief Financial Officer Date: May 7, 2001 -16- 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 7, 2001 -17-