<PAGE> 1
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 1995 Commission file number 1-9051
Transcisco Industries, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2989345
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification No.)
601 California Street, San Francisco, CA 94108
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number (415) 477-9700
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on which registered
Common Stock American Stock Exchange
------------ -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
----------------
(Title of Class)
Indicate by check mark whether the registrant has (1) 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 5S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the 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/
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
---- ----
Aggregate market value of voting stock held by non-affiliates of the registrant
as of June 16, 1995: $7,513,781
Number of common shares, $.01 par value, outstanding at
March 31, 1995: 5,609,961, including 478,726 Treasury Shares.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
OVERVIEW
Transcisco Industries, Inc. ("the Registrant " or "the Company")
was incorporated in California in 1972 under the name PLM Group. It was
reincorporated in Delaware in 1985, as PLM Companies, Inc., and in 1988, its
name was changed to Transcisco Industries, Inc. The Company is a holding Company
whose primary lines of business include: (1) nationwide railcar maintenance
through TRANSCISCO RAIL SERVICES COMPANY, which operates 12 railcar repair and
maintenance facilities from Georgia to Montana; (2) specialty railcar leasing
management and maintenance services through TRANSCISCO LEASING COMPANY which
provides innovative railcar services for large utilities, Class I railroads and
others; and, (3) international rail transportation services through TRANSCISCO
TRADING COMPANY, the 20% shareholder of SovFinAmTrans (SFAT), Russia's leading
privately held rail transportation firm; SFAT's 5,400 tankcar fleet is used to
transport petroleum and petrochemicals for export.
On April 14, 1994, the Board of Directors of Transcisco
Industries, Inc. voted to change the Company's fiscal year to March 31. The
Company previously reported results of operations on a calendar year basis. A
Form 8-K was filed with the Securities and Exchange Commission on April 15,
1994, to reflect the change in fiscal years.
TRANSCISCO RAIL SERVICES COMPANY.
Transcisco Rail Services Company ("TRS") is one of the largest
railcar maintenance organizations in the United States, with more than 15,000
privately owned railcars under maintenance contracts. TRS operates a
full-service network of six major maintenance facilities capable of repairing
all types of railcars at: Alliance, Nebraska; Miles City, Montana; Waycross,
Georgia; Sioux City, Iowa; Bill, Wyoming; and Rock Springs, Wyoming. In
addition, TRS operates six "mobile" or "mini" shops, which perform repairs and
maintenance, generally at customers' plant sites. TRS's marketing offices are in
Chicago and its administrative offices are in San Francisco.
TRANSCISCO LEASING COMPANY.
Transcisco Leasing Company ("TLC"), formed in August 1990, acts
as an intermediary in the railcar leasing, management and maintenance market,
drawing on Transcisco's established leadership position in coal and other
railcar maintenance. TLC manages groups of railcars on a full-service basis,
including fleet administration, lease financing, and maintenance.
Prompted by the Clean Air Act Amendments of 1990, coal-burning
utilities in the midwestern and eastern U.S. increasingly burn low-sulphur coal.
The Powder River Basin in Wyoming is a primary source of this low-sulfur coal
and the TRS maintenance shops surrounding the basin are well-positioned to
service coal carrying unit-trains. Because aluminum cars weigh less and carry
more coal, they have become the railcar of choice for utilities hauling coal
from the Powder River Basin. Increasingly, utilities have replaced their steel
cars with aluminum cars.
TLC's objective is to capitalize on these trends and others by
managing railcar fleets for railroads, utilities and others hauling coal and
other commodities. At March 31, 1995, TLC had 5,314 cars covered by contracts
for maintenance, management and leasing services. Since March, this number has
grown to approximately 8,000 cars. The terms of TLC's contracts range from 1 to
20 years.
TRANSCISCO TRADING COMPANY.
Transcisco Trading Company ("TTC") was formed in 1989 to help
organize and serve as a shareholder in SovFinAmTrans (SFAT). Initially Russia's
first railcar leasing company, SFAT has become a full service transportation
management company which owns and manages more than 5,400 railroad tankcars used
to export petroleum and petrochemicals.
2
<PAGE> 3
SFAT's original shareholders included the Russian Ministry of
Rails (40%), the Russian Ministry of Petrochemicals (25%), TTC (20%) and HAKA OY
- -- a major Finnish construction company (15%). In April 1994, Haka declared
bankruptcy and SFAT bought back its shares.
Since its creation in 1989, SFAT's hard currency profits have
increased each year. For the fiscal year ended 1994, SFAT reported unaudited
revenues of approximately $28 million and operating earnings before nonrecurring
charges of approximately $13 million.
SFAT's customer base includes major Russian oil refineries and
petrochemical companies as well as some western petroleum and petrochemical
trading companies. SFAT's full service transportation services include freight
forwarding, computerized tracking, railcar maintenance and assembly. SFAT has
subsidiaries in Finland, Estonia, Russia, Cyprus and Gibraltar.
Approximately 1,500 of SFAT's 5,400 car fleet have been fitted
with Transcisco's proprietary Uni-Temp heating system, a patented technology
which enhances the performance of rail tank cars by expediting the unloading
process. The licensing of the Uni-Temp heating system is covered through several
agreements, all of which expire in approximately seven years. Pursuant to an
agreement with the inventor of Uni-Temp, TTC is the exclusive worldwide licensee
for the Uni-Temp technology. TTC, in turn, has entered into a sub-licensing
agreement with Finnish American Rail Services OY (FARS), a Finnish firm created
by several former Haka employees (this agreement replaces a similar agreement
between Haka and Transcisco terminated because of Haka's bankruptcy). FARS and
TTC have jointly entered into an April 1994 Uni-Temp sub-licensing agreement
with SFAT.
Transcisco earns approximately $1.5 million in annual revenues
from licensing the Uni-Temp technology. Additionally, TTC earns about $50,000
per year in dividends from SFAT.
3
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FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND
CLASSES OF PRODUCTS OR SERVICES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD YEARS ENDED DECEMBER 31,
MAR. 31, 1995 ENDED MAR. 31, 1994 1993 1992
------------- -------------------- ---- ----
Number in thousands
<S> <C> <C> <C> <C>
Revenues:
Transcisco Rail Services Company:
Maintenance and Repairs $ 23,170 $ 6,115 $ 23,211 $ 19,101
Fixed Fee -- 74 1,520 3,557
Retrofit and Program 4,844 82 3,288 5,073
Transcisco Trading Company 1,282 150 1,259 1,566
Transcisco Leasing Company 6,388 1,170 3,235 2,536
Intercompany eliminations (1,105) (370) -- --
-------- -------- -------- --------
Consolidated revenues $ 34,579 $ 7,221 $ 32,513 $ 31,833
======== ======== ======== ========
Income (loss) from continuing operations
before reorganization items and
extraordinary gain: (1)
Transcisco Rail Services Company 452 40 1,616 1,896
Transcisco Trading Company 1,234 54 507 410
Transcisco Leasing Company 1,427 86 44 718
Corporate Administration (1,260) (245) (1,546) (2,153)
Interest expense, net (2) (1,282) (276) 53 751
-------- -------- -------- --------
571 (341) 674 1,622
Reorganization items:
Bankruptcy administration costs -- -- (2,386) (2,613)
Adjustment to estimated allowed claims -- -- (1,700) --
Equity earnings (loss) from affiliated
companies, net of taxes -- -- -- (3,641)
-------- -------- -------- --------
Consolidated Income (loss) from
continuing operations 571 (341) (3,412) (4,632)
Loss from discontinued operations -- -- (23) --
Gain (loss) on close-down and disposal
of segment of business -- -- 142 (4,146)
Adjustment to estimated allowed claims -- -- (1,500) --
-------- -------- -------- --------
Gain (loss) before extraordinary gain 571 (341) (4,793)
Extraordinary gain -- -- 13,929 --
-------- -------- -------- --------
Consolidated net (loss) income $ 571 $ (341) $ 9,136 $ (8,778)
======== ======== ======== ========
</TABLE>
(1) Net of intercompany eliminations.
(2) Does not include approximately $3.1 and $3.2 million in
contractual interest not accrued during 1993 and 1992,
respectively, due to Chapter 11 proceedings.
4
<PAGE> 5
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND
CLASSES OF PRODUCTS OR SERVICES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD YEARS ENDED DECEMBER 31,
MAR. 31, 1995 ENDED MAR. 31, 1994 1993 1992
------------- -------------------- ---- ----
Numbers in thousands
<S> <C> <C> <C> <C>
Identifiable assets:
Transcisco Rail Services Company $ 25,618 $ 24,709 $ 24,667 $ 26,974
Transcisco Trading Company 1,925 1,758 2,144 2,700
Transcisco Leasing Company 2,812 1,573 1,174 1,906
Administration 22,385 23,562 24,613 14,137
Discontinued Operations -- -- -- 2,333
Eliminations (22,212) (21,103) (22,034) (2,357)
--------- --------- --------- ---------
$ 30,528 $ 30,499 $ 30,564 $ 45,693
========= ========= ========= =========
Depreciation and amortization:
Transcisco Rail Services Company $ 1,122 $ 266 $ 1,039 $ 972
Transcisco Trading Company 1 1 1 1
Transcisco Leasing Company 26 6 24 23
Administration 37 14 63 95
Discontinued Operations -- -- -- 133
--------- --------- --------- ---------
$ 1,186 $ 287 $ 1,127 $ 1,224
========= ========= ========= =========
Capital expenditures, net:
Transcisco Rail Services Company $ 789 $ 115 $ 346 $ 385
Transcisco Trading Company -- -- -- 1
Transcisco Leasing Company 16 2 -- --
Administration 10 3 (7) --
Discontinued Operations -- -- -- 879
--------- --------- --------- ---------
$ 815 $ 120 $ 339 $ 1,265
========= ========= ========= =========
</TABLE>
5
<PAGE> 6
MARKETING, CUSTOMERS AND COMPETITION.
TRS's maintenance services are provided for all types of
railcars. The majority of this business is with long-standing customers,
primarily Fortune 500 companies and utilities. Competition within the railcar
maintenance industry varies by region and by type of railcar. About 250 repair
and maintenance facilities are owned by about 130 companies. Location, price,
quality, turnaround time, and service levels are primary competitive factors.
TRS believes it is one of the largest independent companies offering
maintenance, repair, and cleaning services for privately-owned railcars.
TLC's services include fleet administration, railcar marketing,
lease financing, and maintenance. TLC sells primarily to utilities, major
railroads, other shippers, and financial institutions. Currently, TLC has
management contracts and leases with approximately 15 companies, covering
approximately 8,000 railcars. Although various other companies offer elements of
TLC's line of services, the Company believes TLC's combination of services and
expertise is unique within the railroad industry. Fleet management expertise and
price are important factors in the development and continuing profitability of
TLC's business.
TTC's proprietary Uni-Temp technology is a system of heat panels
installed in tank cars to expedite unloading. The Company believes that this
technology has substantial operating advantages over competing alternatives.
Among its principal applications is in tankcars hauling petroleum and
petrochemicals in Russia. SFAT, a company 20% owned by TTC, utilizes the
technology to enable customers faster delivery of petroleum products.
FORMER INTEREST IN PLMI.
Prior to November 1993, in addition to its operating businesses,
the Company owned approximately 32% of the outstanding stock of PLM
International, Inc. ("PLMI"), and a $5 million PLMI note.
As a result of Transcisco's emergence from bankruptcy on November
3, 1993, the Company exchanged all of the PLMI stock and 60% of the PLMI note
for the extinguishment of $16.3 million of Transcisco's subordinated debt.
Later, in October 1994, PLMI redeemed the remaining 40% interest in the
promissory note for 90% of its face value. In accordance with the Chapter 11
reorganization plan, ("Plan of Reorganization" or "Plan") that $1.8 million of
note redemption proceeds was paid directly to Transcisco's Class F Creditors
(the unsecured creditors in the Company's Chapter 11 case).
EMPLOYEES.
At March 31, 1995, the Company had 304 full-time and part-time
employees. None of the employees are subject to collective bargaining
arrangements. The Company believes employee relations are good and it has never
experienced a work stoppage.
ITEM 2. PROPERTY.
The Company's executive offices are located in leased premises
at 601 California Street in San Francisco, California. The Company operates
railcar repair facilities throughout the United States as described in Item 1,
and believes its facilities are adequate for its present level of business.
ITEM 3. LEGAL PROCEEDINGS.
DANIELS ET AL V. PLM INTERNATIONAL, INC., ET AL. On November 23,
1987, Shirley B. Daniels and Barney and Rachel Milione instituted a purported
class action, known as the "Daniels" case, in the Superior Court of California,
County of San Francisco, against PLM International, Inc., Transcisco Industries,
Inc., and various corporate and individual defendants. The action purported to
arise out of the February 1988 Consolidation wherein the Company exchanged three
of its subsidiaries in return for cash, a note receivable from PLM
International, Inc. ("PLMI") and approximately 32% of PLMI's Common Stock. The
Daniels' plaintiffs claimed that certain aspects of the Consolidation
constituted a breach of alleged fiduciary duties owed by the defendants to the
limited partners of the various limited partnerships which were a party to the
transaction. The plaintiffs sought damages in an unspecified amount and
attorneys' fees, costs of the suit, rescinding and invalidating the
Consolidation, imposing a constructive trust on the shares of PLMI common stock
received by the Company in connection with the Consolidation and such other
relief as the court might have deemed appropriate. On September 21, 1990 Shirley
B. Daniels and Barney and Rachel Milione instituted a
6
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second purported class action suit in the U.S. District Court for the Northern
District of California, against PLMI, the Company and various corporate and
individual defendants. The plaintiffs claimed damages arising from alleged
violations of the federal securities laws, namely Section 10(b) of the
Securities Exchange Act of 1934 ("Exchange Act") and Rule 10(b)-5 thereunder as
to all defendants; and Section 2(a) of the Exchange Act, as to the Company and
all individual defendants. The relief sought in this second Complaint was
substantially similar to that sought in the first Daniels case brought in the
state court and discussed above. The plaintiffs filed a motion for class
certification, and by order dated October 9, 1990, the court granted the
plaintiff's motion to certify the class. The action was originally set for trial
on July 29, 1991; however, the trial date was continued a number of times,
before the disputes were finally settled in July, 1993.
Transcisco and the plaintiff's representatives agreed to settle
all matters with Transcisco paying $750,000 to the plaintiffs over ten
consecutive quarters. The Settlement was approved by the Bankruptcy Court and on
November 4, 1993, the Company made its initial payment of $187,500 to the
Daniels' claimants. From December 31, 1993 to March 31, 1995, the Company has
paid an additional $375,000 to the Daniels' claimants leaving $187,500 to pay
off the entire balance.
As part of the Daniels' settlement, the Great American Insurance
Company ("Great American") made a $2,650,000 payment to the Daniels' plaintiffs
on behalf of Mark Hungerford (Transcisco's Chief Executive Officer at the time
of the formation of PLMI). At the same time, Great American reserved its rights
to sue Hungerford who was, in turn, indemnified by Transcisco. A Federal
District Court had earlier ruled that Great American had the obligation to
provide the coverage, but Great American appealed that ruling to the Ninth
Circuit Court of Appeals which, in April 1995, ruled that federal courts have no
jurisdiction in this matter. In the event that Great American later files suit
in State Court and prevails, Great American may seek reimbursement from Mr.
Hungerford (as an individual defendant in the Daniels' action). This in turn,
could result in Mr. Hungerford making an indemnification claim against the
Company (as a Class F Claimant) in whatever amount Mr. Hungerford is compelled
to pay Great American.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
At the Annual Meeting of Shareholders of the Company held on
January 20, 1995, the shareholders of the Company elected George A. Tedesco and
William E. Greenwood to serve as Class III directors. 6,427,136 votes were cast
for the nominees and 900,952 votes were withheld. Following the meeting, the
Board of Directors were comprised of George A. Tedesco, William E. Greenwood,
Ottokarl F. Finsterwalder, Walter E. Hoadley, Eugene M. Armstrong, and Steven
L. Pease.
In addition, at the Annual Meeting the shareholders of the
Company voted on the following matters:
<TABLE>
<CAPTION>
ABSTENTIONS
VOTES VOTES OR BROKER
FOR AGAINST NON-VOTES
--- ------- ---------
<S> <C> <C> <C>
1. To ratify the appointment of Ernst & Young
LLP as independent auditors of the Company. 3,678,600 595,249 70,709
2. To adopt the Amended and Restated Stock
Option and Stock Grant Plan. 1,902,502 960,782 1,481,274
3. To adopt the Amended and Restated Directors'
Stock Option Plan. 1,957,893 914,770 1,471,895
</TABLE>
7
<PAGE> 8
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is currently traded on the American
Stock Exchange ("AMEX") under the symbol TNI. The following table sets forth
the high and low closing bid prices per share of the Common Stock as reported
on the AMEX for the periods indicated. No dividends were paid during 1995,
1994, 1993, or 1992. The closing of the Company's Common Stock, on May 4,
1995, as reported in the Wall Street Journal was $1.75 per share.
<TABLE>
<CAPTION>
THREE MONTHS
QUARTER OF FISCAL YEAR ENDED MARCH 31, QUARTER OF CALENDAR YEAR QUARTER OF CALENDAR YEAR
1995 1994 1993 1992
------------------------------- --------------- ----------------------------- --------------------------
Market Prices for 4th 3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd 1st
Common Stock: Qtr. Qtr. Qtr. Qtr. Qtr. Qrt. Qrt. Qrt. Qtr. Qtr. Qtr. Qtr.
------------------------------- ----------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A(*)
High - - - - - - - - - - - - 15/16 1 1/4 1 1/4 3/8 3/8 1/2
Low - - - - - - - - - - - - 9/16 3/8 1/8 1/16 3/16 3/16 1/4
Class B (*)
High - - - - - - - - - - - - 15/16 1 3/8 1 5/16 3/8 9/16 9/16
Low - - - - - - - - - - - - 13/16 1/2 1/8 1/8 1/4 1/4 1/4
Common Stock
High 1 3/4 1 1/2 1 1/2 2 1/4 2 1/4 1 3/8 1 3/8 - - - - - - - - - - - -
Low 1 1/16 1 15/16 1 1/16 1 1/8 7/8 3/4 - - - - - - - - - - - -
</TABLE>
_________________________
(*) Class A and B Stock were converted share for share to Common Stock on
August 11,1993.
On August 11, 1993, the Company filed an Amended and Restated
Certificate of Incorporation with the Secretary of State of Delaware, which was
effective at 4:01 p.m. Eastern Time the same day. The Amended and Restated
Certificate of Incorporation was filed by order of the Bankruptcy Court
pursuant to the Company's Joint Plan of Reorganization (the "Reorganization
Plan" or "Plan"). On the effectiveness date of the Amended and Restated
Certificate of Incorporation, the then outstanding 3,188,369 shares of Class A
Common Stock and 1,358,960 shares of Class B Common Stock were reclassified
into the one form of stock designated Common Stock.
The provisions of the Amended and Restated Certificate of
Incorporation modified the rights of the former holders of the Company's Class
A Common Stock and Class B Common Stock (the new Common Stock holders). A
description of the rights of holders of the new class of Common Stock is
incorporated herein by reference to Item 1 "Description of Company's Securities
to be Registered" in the Company's Form 8-A filed under the Securities Exchange
Act of 1934, as amended on August 12, 1993.
The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, $.01 par value and 1,000,000 shares of
Preferred Stock, $.01 par value, (none of the preferred stock is currently
outstanding as of March 31, 1995). A total of 5,609,961 shares of the Common
Stock are currently issued and outstanding, which includes 478,726 shares
issued into Escrow for the Class F Claimants. 750,000 shares of Common Stock
are reserved for issuance under the Company' s Amended and Restated (1994)
Employee Stock Option Plan (described in Item 11, Part F below). An additional
100,000 shares of Common Stock are reserved for issuance under the Company's
Amended and Restated Directors' Stock Option Plan (described in Item 11, Part
G, below). On March 30, 1995, the Board of Directors adopted a Stock Purchase
Plan pursuant to which the Company may grant rights to purchase shares of
Common Stock of the Company to officers, consultants or employees of the
Company. The
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<PAGE> 9
Stock Purchase Plan is administered by the Compensation Committee of the Board
of Directors, which determines the terms of each grant of Stock Purchase
Rights.
Subject to the rights of holders of Preferred Stock, the Holders
of outstanding shares of Common Stock are entitled to share ratably in
dividends declared out of assets legally available therefore at such time and
in such amounts as the Board of Directors may from time to time lawfully
determine. Until December 31, 2000, or such earlier date as the Class F
Claimants are paid in full as provided in the Plan of Reorganization (such date
is defined as the "Release Date"), no dividends shall be paid on the Common
Stock. Each holder of Common Stock is entitled to one vote for each share
held. The Common Stock is not entitled to conversion or preemptive rights and
is not subject to redemption or assessment. Subject to the rights of holders
of any outstanding Preferred Stock, upon liquidation, dissolution or winding up
of the Company, any assets legally available for distribution to stockholders
are to be distributed ratably to the holders of the Common Stock outstanding at
that time. The Common Stock is fully paid and nonassessable.
As provided in the Certificate of Incorporation, until the
Release Date, no person may acquire Common Stock of the Company if after the
acquisition the person beneficially owns 5% or more of the Company's
outstanding Common Stock unless the Company's Board of Directors approves the
acquisition. This restriction is to prevent a loss or limitation to the
Company's net operating loss carryforward under Section 382 of the Internal
Revenue Code of 1986, as amended, or the impairment of the Company's ability
to perform its obligations under the Plan of Reorganization. Any purported
transferee of shares acquired in violation of this restriction will be deemed
to have acted as agent on behalf of the Company in acquiring the shares and
will be deemed to hold the shares in trust and on behalf and for the benefit
of the Company and the transferee's purported interest in the shares will be
void ab initio. The transferee has no right to receive dividends or other
distributions with respect to the shares, and no right to vote the shares (and
for purposes of the determination of any quorum at any meeting of stockholders,
the shares are not entitled to vote on any matter). The transferee's sole
right with respect to the shares is to receive, at the Company's sole and
absolute discretion, consideration for the shares upon the resale of the shares
as directed by the Company, as reduced by all expenses of the Company in
connection with the sale plus any remaining amount of such proceeds that
exceeds the amount paid by the transferee for the shares. Until the Release
Date, no stockholder who at any time on or after June 18, 1993, has
beneficially owned 5% or more of the Company's voting securities, nor any
associate, affiliate, officer, director, or employee of such stockholder, may
serve as an officer, employee, or consultant of the Company.
An application for listing of the new Common Stock of the Company
on the American Stock Exchange was filed with the American Stock Exchange, Inc.
on August 9, 1993. As of March 31, 1995, the Company believes there were 1,200
shareholders of record.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands except ratio and per share amounts)
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTH PERIOD
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1994 CALENDAR YEARS ENDED DECEMBER 31
-------------- ------------------ ------------------------------------------------
1993 1992 1991 1990
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
Revenues $ 34,579 $ 7,221 $ 32,513 $ 31,833 $ 29,715 $ 29,298
Income (loss) from
continuing operations
before reorganization items,
income tax, equity earnings
of affiliated companies,
and extraordinary gain 571 (341) 674 1,622 (3,975) (5,867)
(Loss) income from
continuing operations 571 (341) (3,412) (4,632) (6,301) (106)
Discontinued operations,
net of income tax -- -- (1,381) (4,146) (16,518) (1,943)
Net gain (loss) before
extraordinary gain 571 (341) (4,793) (8,778) (22,819) (2,049)
Extraordinary gain -- -- 13,929 -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) 571 (341) 9,136 (8,778) (22,819) (2,049)
Per common share:
Primary
Net (loss) income -
continuing operations $ 0.11 $ (0.06) $ (0.73) $ (1.05) $ (1.43) $ (0.02)
Net loss -
discontinued operations -- -- (0.29) (0.94) (3.75) (0.44)
Extraordinary gain -- -- 2.97 -- -- --
-------- -------- -------- -------- -------- --------
Primary-net (loss) income $ 0.11 $ (0.06) $ 1.95 $ (1.99) $ (5.18) $ (0.46)
======== ======== ======== ======== ======== =========
Fully diluted-net (loss)
income $ 0.11 $ (0.06) $ 1.95 $ (1.99) $ (5.18) $ (0.46)
======== ======== ======== ======== ======== ========
Dividends - Class A -- -- -- -- -- .30
- Class B -- -- -- -- -- .10
- Common -- -- -- -- -- --
Financial Position:
Current assets $ 11,471 $ 8,993 $ 8,919 $ 14,319 $ 18,002 $ 17,938
Total assets 30,528 30,499 30,564 45,693 54,170 72,266
Long-term debt 15,210 17,998 18,683 36 72 124
Shareholders' equity (deficit) 3,235 2,649 2,916 (6,810) 1,968 24,788
Ratio of current assets
to current liabilities 1.18 1.00 1.05 1.5 2.2 .4
Debt to equity ratio 5.27 7.24 6.71 -- 18.1 1.34
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
On April 14, 1994, the Board of Directors voted to change the
Company's fiscal year end from December 31, to March 31. The Company
previously reported results of operations on a calendar year basis. In the
following discussion, "1995" refers to the Company's fiscal 1995 year, (the
twelve months ending March 31, 1995); "1993" refers to the fiscal (and
calendar year) ending December 31, 1993; "1992" refers to the fiscal (and
calendar year) ending December 31, 1992; and, "1991" refers to the fiscal (and
calendar year) ending December 31, 1991. For the three month period, January 1
to March 31, 1994, results of operations are presented where appropriate. For
a discussion and comparison of this three-month period in relation to the same
period of 1993, the reader is referred to the Company's Form 10-Q for the
quarterly period ended March 31, 1994.
RECENT TRENDS.
Since 1992, the Company's Income from Continuing Operations before
Reorganization Items, Equity and (Losses) of Affiliated Companies and
Extraordinary Gain has declined as a result of higher interest expense.
Interest expense increased because 1995 was the first full year (since entering
bankruptcy) in which the Company began accruing interest expense on its
restructured debts.
In general, the Company's Income from Continuing Operations has
shown improvement since 1991. This improvement has been due to increases in
revenues and operating profits of Transcisco Leasing and Transcisco Trading,
and reductions in corporate reorganization and overhead expenses associated
with the Company's cost cutting programs. In 1995, Income from Continuing
Operations was $571,000, compared with a loss of ($3,412,000) in 1993, a loss
of ($4,632,000) in 1992, and a loss of ($6,301,000) in 1991.
In the years 1991 through 1993, significant factors affected Net
Income other than Income from Continuing Operations. These included: Losses
from Discontinued Operations, Losses from Close-down of a Business Segment, and
an Extraordinary Gain from Extinguishment of Debt. None of these items
influenced Net Income in 1995, so that Income from Continuing Operations was
equal to Net Income, in contrast to the prior fiscal years.
TRANSCISCO RAIL SERVICES (TRS).
In 1995, TRS's revenues were $28,014,000, compared to revenues of
$28,019,000 in 1993. Although 1995 revenues from general maintenance and
repair were flat compared to 1993, revenues from retrofit and program work,
which is performed on special groups of cars under pre-determined terms,
increased 47% in 1995. At the same time, the volume of tankcar work declined
in 1995 as a result of shippers' high demands for these cars. In 1995, TRS
also earned no revenue from cost-per-mile customers since all cost-per-mile
contracts expired in 1993 (cost-per-mile contracts allow customers to pay a
flat fee for maintenance services based on mileage traveled by railcars covered
by the contract).
TRS net income was $452,000 in 1995, compared to $1,552,000 in
1993. The large decline in net income was caused primarily by high material
costs, interest and overhead expenses. The material cost increase arose from
the mix change (described above) of increased retrofit and program work and
reduced tankcar and cost-per-mile work; this caused higher material costs and
lower margins.
TRANSCISCO TRADING COMPANY (TTC).
Revenues from licensing and sales were $1,282,000 in 1995,
compared with revenues of $1,259,000 in 1993. In fiscal 1995, as a result,
the gross margin on sales and net income improved considerably. TTC's 1995
pre-tax income was $1,234,000 compared with $460,000 in 1993.
TRANSCISCO LEASING COMPANY (TLC).
In 1995, TLC's revenue was $6,388,000 compared with $3,235,000 in
1993. Revenues increased because of the significant growth in the size of the
rail fleet under management in fiscal year 1995 compared with 1993. This
increase, combined with improved gross margins, increased pre-tax income to
$1,427,000 compared with $44,000 in 1993.
11
<PAGE> 12
CORPORATE.
Corporate overhead levels were reduced in fiscal year 1995, by
about $101,000, (from $1,398,000 to $1,297,000), primarily due to lower
staffing levels. Net interest expense was $1,282,000 in 1995, compared with
net interest income of $53,000 in 1993. Two factors caused this large
difference in interest expense between 1995 and 1993. First, because of the
bankruptcy proceedings, no interest expense was accrued on the unsecured debt
of Transcisco Industries from January 1 through November 2, 1993. In contrast,
for 1995 interest was accrued for the entire year on the Class F and Tax
Claims. In addition, the PLMI note (in Item 1 above) was redeemed in October
1994, removing a significant source of interest income.
In 1993, the Company's Loss from Continuing Operations includes
$2,386,000 in reorganization costs and $1,700,000 in adjustments to estimated
allowed claims associated with the Chapter 11 filing. These costs relate
primarily to professional fees incurred on behalf of the various committees
formed in relation to the Chapter 11 filing. In addition to its operating
businesses, the Company had a substantial investment in PLMI in the form of
3,767,367 shares of Common Stock (approximately 32% stock ownership) and a $5
million note. The Company did not recognize any earnings or losses from its
PLMI investment in 1993.
LIQUIDITY AND CAPITAL RESOURCES.
Working capital increased from December 31, 1993 to March 31,
1995, mainly due to improved profitability and business growth. The ratio of
current assets to current liabilities was 1.18 to 1.0 at March 31, 1995,
compared to 1.05 to 1.0 at December 31, 1993. Working capital was $1,742,000
at March 31, 1995, compared to $440,000 at December 31, 1993.
In 1995, the Company's scheduled principal payments to the Class F
Creditors will increase to an annual rate of $1,300,000 (versus $52,000 in the
preceding year). Pursuant to the terms of the Plan of Reorganization (see
below), scheduled principal payments will increase in each of the next four
years. The Company believes that cash flows from operations will be
sufficient to cover principal and interest payments on the Class F debt for the
foreseeable future.
In 1995, the Company's cash requirements were primarily satisfied
through cash on hand, operating earnings and short-term borrowings. Though
its subsidiary, TRS, the Company has a line of credit with Congress Financial
Corporation for up to $2,000,000, secured by first liens on all of the
Company's tangible and intangible assets, except machinery and equipment and
real estate. Management believes the availability of working capital from this
loan facility together with projected operating cash flow should be sufficient
to meet the Company's future working capital requirements.
Under the Chapter 11 cases, substantially all liabilities,
litigation and claims against the Company and Tours in existence at the Filing
Date were stayed. The liabilities restructured and compromised are classified
long-term at December 31, 1993, and March 31, 1995, consistent with the terms
the Plan of Reorganization.
Transcisco's Joint Plan of Reorganization and the Order Confirming
the Joint Plan of Reorganization became effective on November 3, 1993. A plan`
to liquidate Tours was filed in September, 1993, and confirmed in December
1993. The accompanying financial statements thus do not include the accounts
of Transcisco Tours. The Plan generally provides that:
A. Tax claims estimated at approximately $1,300,000 (applied against the
previously established deferred tax liability) are to be paid in full
over a six-year period including 7% interest.
B. The Company transferred 3,367,367 shares of PLM International ("PLMI")
Common Stock and 60% of a $5,000,000 subordinated PLMI promissory note
receivable to a court-appointed representative of the holders of the
Company's senior subordinated notes ("Bondholders") in full satisfaction
of their claims in the Chapter 11 case. The Company retained a 40%
interest in the principal and interest paid by PLMI with respect to the
foregoing note and the Bondholders were obligated to liquidate the
Company's interest in the note by November 1998. (This 40% interest was
subsequently retired and paid to the Class F Creditors in October 1994).
C. In connection with the Plan, the Company had previously settled
litigation brought by Shirley B. Daniels against the Company, PLMI and
other defendants. Pursuant to the settlement incorporated in the Plan,
the Company is paying a total of $750,000 in full satisfaction of this
claim over a ten quarter period ending November 3, 1995. As of March
31, 1995, $187,500 remained owning on the obligation.
12
<PAGE> 13
D. In August 1993, in accordance with the Plan, the Company paid $1.5
million to National Railroad Passenger Corporation, aka AMTRAK, in full
satisfaction of AMTRAK's claim of $10,205,739.93. AMTRAK's claim was
based upon the Company's alleged breach of a five-year operating and
management agreement for AMTRAK to operate the Tours' cruise train.
E. Eighty percent (80%) of the claims of most remaining unsecured creditors
(Class F in the Plan) plus monthly interest at prime plus 1 1/2%, are
being paid over a seven-year period. The aggregate amount of unsecured
claims remaining -- after the 20% reduction -- was $18,275,570. As part
of the Plan of Reorganization, this indebtedness was, and is secured by
all of the assets of the Company. The majority of the payments to the
unsecured creditors are due in 1996-1999.
In addition, on November 4, 1993, the Company issued 489,976 shares
of its Common Stock to a Collateral Agent on behalf of the unsecured
creditors (Class F) to be distributed to the members of the Class F over
a three-year period. In the event the Company prepays its debt to these
unsecured creditors during the three-year period, the Company will
receive back a percentage of these shares depending on the period of
repayment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this item is submitted as separate sections of
this report. See Item 14 for financial statement information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
As of the date of this report, the current directors and
executive officers of the Company, including its key subsidiaries, are as
follows. This information has been furnished to the Company by the respective
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Eugene M. Armstrong 76 Chairman of the Board
Steven L. Pease 51 President and Chief Executive Officer, Director
William F. Bryant 56 President, Transcisco Leasing Company
Brian J. Comstock 33 Vice President, Sales & Marketing, TRS
Ottokarl F. Finsterwalder 59 Director
William E. Greenwood 57 Director
Paul G. Hayes 57 Vice President, Engineering, TRS
Walter E. Hoadley 78 Director
Robert A. Jahnke 51 President, Transcisco Rail Services Company
George A. Tedesco 72 President, Transcisco Trading Company
</TABLE>
Eugene M. Armstrong was elected to the Board of Directors in
February 1985, and was appointed President and Chief Executive Officer of the
Company in July 1991. Mr. Armstrong resigned as President and became Chairman
of the Board in January 1993. From 1969 to his retirement in August 1983, Mr.
Armstrong held a number of executive positions with Morrison-Knudsen, Inc., a
construction company, including President, Chairman of the Board, and director
of H.K. Ferguson Co., director and Executive Vice President of Industrial,
Mining and Manufacturing Operations and Manager of the Missile and Space
Division of Morrison-Knudsen.
Steven L. Pease, Chairman, Chief Executive Officer and President
of Deucalion Securities, Inc., became President and Chief Executive Officer of
Transcisco Industries, Inc. for the third time in his career in January of
1995. Mr. Pease had earlier rejoined the Board of Directors in December 1992.
Mr. Pease brings with him considerable expertise in railcar maintenance having
served as the former President and Chief Executive Officer of PLM Companies,
Inc. (the predecessor company of Transcisco
13
<PAGE> 14
Industries and PLM International) from 1981 through 1987, and having served on
the Board of Directors from 1981 through 1989. Mr. Pease was also a member
of the PLM International Inc., Board of Directors from 1988 through 1989. Mr.
Pease served as Chief Executive Officer of Transcisco Industries from January
1993 to March 1994, in the process leading the Company from its Chapter 11
bankruptcy.
William F. Bryant was appointed to President of Transcisco Leasing
Company in August, 1990. Since 1974, Mr. Bryant has held senior marketing
positions with U.S. Leasing International, Brae Corporation, and PLM, Inc.
Brian J. Comstock became Vice President of Sales and Marketing of
Transcisco Rail Services Company, a subsidiary of the Company in February 1995.
From 1986 through 1995, Mr. Comstock served as Regional Director of Sales
overseeing Central and Northwestern U.S. markets. Previously, Mr. Comstock
held management positions in Transcisco's operations. Mr. Comstock is a member
of the Association of American Railroads and the Car Department Officers
Association.
Ottokarl F. Finsterwalder was elected to the Board of Directors in
September 1990. Since 1985, Dr. Finsterwalder has served as a Managing
Director of Creditanstalt-Bankverein, Vienna, Austria, and from 1974 to 1985,
served as Creditanstalt-Bankverein's Senior Officer in charge of international
operations. Dr. Finsterwalder is also a member of the board's directors of the
following companies: ALWA in Vienna, AWT Internationale Handels-und
Finanziorunge Aktiengesellschaft in Vienna, EBIC European Banks' International
in Brussels, European American Banking Corp. in New York, Leykam-Murztaler
Papier-und Zellstoff Aktiengesellschaft in Gratkorn and Wirtschafts-und
Privatbank in Zurich.
William E. Greenwood joined the Transcisco Board of Directors in
January 1995. For the past thirty years, Mr. Greenwood has served in various
capacities at Burlington Northern Railroad (BN), one of the largest railroads
in the United States. Mr. Greenwood's most recent position was Chief Operating
Officer for the BN (1990-1994). He resigned from this position in June 1994.
Prior to this position, he served as Executive Vice President of Marketing and
Sales for BN (1985-1990), and Vice President of Intermodal Transportation
(1981-1984). Previously, he served in numerous executive positions with BN.
Paul G. Hayes became Vice President- Engineering of Transcisco
Rail Services Company, a subsidiary of the Company, in November 1987. Mr.
Hayes has spent the past 28 years in the rail industry after 5 years in
aerospace engineering. Previous positions include Director of Engineering,
Director Research and Development, Director of Quality Control while at
Richmond Tank Car Company, and Chief Product Engineer at ACF Industries.
Walter E. Hoadley was elected to the Board of Directors in
November 1982. Mr. Hoadley has served as a Senior Research Fellow at the
Hoover Institute since 1981. Mr. Hoadley served as 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. Mr. Hoadley is
also a director of the Selected Funds and PLM International.
Robert A. Jahnke became President of Transcisco Rail Services
Company, a subsidiary of Company in April 1995. Mr. Jahnke was previously
Senior Vice President, Operations of Chicago and Northwestern Transportation
Company, where his entire career of 29 years resulted in major contributions in
areas of operations, equipment management, and finance.
George A. Tedesco was appointed President of Transcisco Trading
Company in 1992. Prior to that, since January 1987, Mr. Tedesco was the Senior
Vice President of Marketing and Sales of the Company. Mr. Tedesco played a
key role in creating the Company's successful joint venture, SovFinAmTrans, and
he has extensive experience doing business in Russia. Mr. Tedesco was elected
to the Board of Directors in January 1995. Previously, Mr. Tedesco has been
employed in various executive positions since he joined a predecessor of the
Company in 1975 as Vice President of Marketing for PLM Railcar Maintenance
Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission and the American Stock Exchange, initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
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<PAGE> 15
To the Company's knowledge, based solely on a review of the copies
of the reports furnished to the Company and representations given that no other
reports were required, during the fiscal year ended March 31, 1995, all Section
16(a) filing requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with.
ITEM 11. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS.
(A) EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by
the Company for the fiscal year ended March 31, 1995 to the most highly
compensated executive officers and persons who served as Chief Executive
Officer during 1995 of the Company as a group:
(NEXT PAGE)
15
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG
TERM
ANNUAL COMPENSATION COMPEN- ALL
NAME AND ---------------------- SATION (1) OTHER
PRINCIPAL SALARY BONUS OPTIONS COMPENSATION
POSITION YEAR ($) ($) # ($)
---- ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
STEVEN L. PEASE (2) 1995 75,521 -- 300,000 --
President & Chief 1993 172,082 85,313 (4) -- --
Executive Officer 1992 -- -- -- --
Transcisco Industries, Inc.
WILLIAM F. BRYANT 1995 172,307 115,000 -- --
President 1993 175,000 -- 60,000 --
Transcisco Leasing Company 1992 175,000 82,307 -- --
GEORGE A. TEDESCO 1995 148,260 -- -- --
President 1993 150,577 -- 60,000 (3)
Transcisco Trading Company 1992 146,014 -- -- --
BRIAN J. COMSTOCK 1995 87,235 -- -- --
Vice President, Sales & Marketing 1993 83,827 25,000 -- --
Transcisco Rail Services Company 1992 68,858 18,000 -- --
PHILIP C. KANTZ 1995 240,000 -- -- --
Former President and
Chief Executive Officer
Transcisco Industries, Inc.
PAUL G. HAYES 1995 102,896 -- -- --
Vice President, Engineering 1993 104,220 13,116 -- --
Transcisco Rail Services Company 1992 98,325 5,000 -- --
</TABLE>
_________________________
(1) The Company issued no Restrictive Stock and made no Long-Term Incentive
Plan payouts during any of the years indicated in the table.
(2) Amounts paid to Deucalion Securities, an affiliate of Mr. Pease. Mr.
Pease rejoined the Company on January 3, 1995.
(3) Mr. Tedesco is a Class F Claimant related to a deferred compensation plan
terminated in the Company's Chapter 11 proceedings.
(4) Approximate market value of shares, at time of issue, granted by the Board
of Directors in acknowledgment of Mr. Pease's work during the Company's
Chapter 11.
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<PAGE> 17
(B) COMPENSATION OF DIRECTORS
Directors who are not employees of the Company were paid directors'
fees of $2,000 per month during 1995. Pursuant to the Amended and Restated
(1994) Directors' Stock Option Plan, (as more fully set forth herein) every
non-employee director is eligible to receive a grant of stock options equal to
the product of 2,000 shares times the number of years for which the director was
elected to the Board.
(C) EMPLOYMENT AGREEMENTS
1. Mr. Tedesco, President of Transcisco Trading Company ("TTC"),
entered into an employment agreement with the Company
originally dated as of July 1, 1989. Initially, the term of
Mr. Tedesco's services under the contract was through July 31,
1992. Pursuant to amendments to the contract, the term has
been extended on a month to month basis thereafter. Mr.
Tedesco receives compensation at a fixed rate of $14,583 per
month ($175,000 annualized). In addition, Transcisco's Board
has an agreement with Mr. Tedesco to pay him his deferred
vacation pay of up to one year's salary.
2. Mr. Bryant, President of Transcisco Leasing Company ("TLC"),
and the Company entered into an employment agreement on May 11,
1995. This agreement supersedes an agreement entered in to in
1993, which, in turn. superseded the original employment
agreement with Mr. Bryant dated July 9, 1990. The term of the
employment agreement is five years ending June 30, 2000.
Pursuant to the employment agreement, Mr. Bryant's employment
may be terminated for cause only. Mr. Bryant's base salary is
set at $175,000 per annum and the Board of Directors of TLC may
increase the base salary if it determines an adjustment is
equitable and in the best interest of the Company. The
employment agreement includes incentive compensation, allowing
Mr. Bryant and the management employees of TLC to share in 10%
of the pre-tax earnings (the "Bonus Pool") of Transcisco
Leasing Company. The allocation of the Bonus Pool is as
follows: for pre-tax profits up to $1,000,000 per fiscal year,
Mr. Bryant receives 100% of the Bonus Pool ("Bonus Share
Percentage"). In the event pre-tax profits exceed $1,000,000
in a given fiscal year, Mr. Bryant's Bonus Share Percentage
declines to 6.5%. The employment agreement also includes
customary healthcare and other benefits. In the event of a
merger, acquisition, or change of control of TLC, the
employment agreement is binding on the successor entity or the
controlling person.
3. The Company contracted with Deucalion Securities, Inc. on
January 3, 1995, to make Mr. Pease available to the Company to
serve as its Chief Executive Officer and President at an
initial annual compensation level of $200,000. The contract is
in effect until January 3, 1998.
4. Mr. Jahnke, President of Transcisco Rail Services ("TRS"), has
an employment agreement with TRS dated April 13, 1995,
providing for a base salary of $175,000, and an annual bonus
based on performance parameters to be defined. Mr. Jahnke also
received a grant of stock options which vest over three years
and he purchased 250,000 shares of Transcisco stock. In the
event of a change of control of the Company that adversely
affects location, terms of employment, status, or compensation,
Mr. Jahnke is entitled to receive one year's salary and
immediate vesting of all stock options.
5. On February 23, 1994, the Company entered into an employment
agreement with Philip C. Kantz that entitled him to receive
severance pay equal to his base salary in effect at the time of
the termination for a period of one year after such
termination. Mr. Kantz resigned in January 1995, and a
$240,000 accrual for severance pay was made in the fourth
quarter of fiscal 1995.
COMPENSATION PURSUANT TO PLANS
(D) NON-QUALIFIED DEFERRED COMPENSATION PLAN
The Company adopted a Non-Qualified Deferred Compensation Plan in
February 1987. This Plan was terminated as part of the Chapter 11 proceedings.
Under that Plan, certain senior executives of the Company and its subsidiaries
were generally entitled to receive from the Company for 60 consecutive months,
commencing with the attainment of age 60 or the termination of
17
<PAGE> 18
employment, an amount equal to 5% times his or her number of years of employment
with the Company times his or her average monthly compensation from the Company
during his or her consecutive months of employment (not to exceed 60 months)
immediately preceding termination of employment. The obligations under the Plan
represented unfunded liabilities of the Company, and senior executive
participants' rights to payment were no greater than those of unsecured
creditors.
In its Chapter 11 schedules, the Company scheduled claims of Mark C.
Hungerford and George A. Tedesco in the respective amounts of $216,014.40 and
$460,370.00 for liabilities resulting from the termination of the Non-Qualified
Deferred Compensation Plan. During the course of the Chapter 11 case, Mr.
Hungerford and Mr. Tedesco filed Proofs of Claim, which claims were allowed as
Class F claims by the Company. These claims, in the amount of $172,811.52 and
$368,296.00, respectively, are being paid as Class F Claim's in accordance with
the Plan (see subsection E of this Form 10K for additional information).
(E) PROFIT SHARING AND TAX-ADVANTAGED SAVINGS PLAN
The Company's Profit Sharing and Tax-Advantaged Savings Plan was
adopted by the Board effective February 1, 1988. The Plan is intended to be a
qualified Profit Sharing Plan under Sections 401(a) and (k) of the Internal
Revenue Code and is subject to the provisions of ERISA. The Plan has two
sources of funding (i) salary reduction contributions made at the election of
participating employees; and (ii) Company contributions that the Board, in its
complete discretion, may decide to make for any plan year, and which would be
allocated to participants' accounts proportionate to compensation. For 1995,
the match rate is $1.00 on the dollar up to $500 in salary deferrals, and $.50
on the dollar for the next $1,000 in salary deferral for a maximum contribution
of $1,000 for each participant.
Each participant may elect to contribute to the Plan a percentage of
his or her salary subject to various maximum percentage and dollar limits
determined by the tax laws. These limits are as follows: first, no participant
can elect to defer in any calendar year more than $9,240 (the 1995 IRS imposed
limit) plus a cost of living adjustment; and second, the Company will not
contribute in any year, as either amounts elected to be deferred by
participants, matching contributions, or discretionary Company contributions,
more than 15% of the aggregate compensation paid to all of the plan's
participants. Salary reduction contributions for employees deemed "highly
compensated" under the Internal Revenue Code may be limited by nondiscrimination
rules applicable to the Plan.
Amounts contributed to the Plan (including employees' own salary
reduction contributions) are not included in the income of a participant for
federal income tax purposes. The Company is entitled to an income tax deduction
for all contributions to the Plan (whether in the form of employees' salary
reduction contributions, matching contributions, or discretionary employer
contributions) in the year for which the contributions are made.
Generally, all regular employees of the Company and its affiliates
may participate in the Plan after completing 1,000 hours of service. Effective
April 1, 1992, new employees will be eligible to participate after completing
"One Year of Service" defined as 1,000 hours worked during the first 365 days
(or 366 days in a leap year) after hire or 1,000 hours worked during the first
whole Plan Year commencing on or after the employee's hire date. If the worker
has not qualified during either of these two time periods, then the worker will
become eligible to participate upon completing 1,000 hours in any succeeding
Plan Year. Certain hourly employees of the Company's affiliates were not
eligible to participate in the Plan in 1991 in accordance with the provisions of
the Plan as adopted by said affiliates. Because the Company's matching
contributions are based on employees' salary deferral contributions, and because
of the voluntary nature of participants' deferral contributions and the
discretionary nature of any discretionary contributions by the Company, it is
impossible for the Company to estimate the amount of contributions to the Plan
that will be made by the Company. The Company estimates that approximately 250
employees will be eligible to participate in the Plan in 1995.
All salary reduction contributions and the earnings thereon are 100%
vested at all times. Company discretionary contributions, if any, vest over a
seven-year period beginning with the first Plan Year for which the employee is a
participant. Generally, if a participant terminates employment before being
fully vested in his or her matching contributions and Company discretionary
contribution accounts, he or she will forfeit the non-vested portion of these
accounts, and the forfeited amounts will be allocated to the accounts of the
remaining participants in proportion to compensation.
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<PAGE> 19
Each employee's interest in the trust fund under the Plan will be
held by the fund's trustees until the participant is entitled to receive a
distribution from the Plan. Distributions of amounts attributable to Company
contributions may only be made in the event of a participant's retirement,
disability, death, or termination of employment with the Company. However, in
the case of financial hardship, a participant may withdraw his or her salary
reduction contributions to the Plan, subject to certain additional limitations
imposed by law and described in the Plan.
(F) EMPLOYEE STOCK OPTION PLAN
The Company's Amended and Restated (1994) Employee Stock Option Plan
was adopted in its original form in 1983, subsequently amended in 1989, and
amended and approved again by stockholders at the January 1995 Annual Meeting
(see "Submission of Matters to Vote of Shareholders"). Any officer, consultant,
or other employee of the Company or a subsidiary of the Company is eligible to
participate in the Restated Plan. About 35 employees currently participate in
the Restated Plan. Awards may be granted under the Restated Plan through
December 31, 2004, unless terminated earlier by the Board. Over the life of
the Restated Plan, 750,000 shares of Common Stock are issuable.
The Restated Plan allows for the grant of incentive and
non-statutory options. The Board generally has the discretion to determine the
exercise prices of options, except that Incentive Stock Options may not be less
than 100% of the fair market value of the Common Stock on the date of grant.
Options are exercisable in installments, as the Board provides for in each Stock
Option Agreement. The exercisability of options may be accelerated in the event
of a change of control of the Company. Generally, options which are exercisable
upon termination of an optionee's employment with the Company or its
subsidiaries expires thirty days following such termination. However, options
may be exercised up until the expiration one year after termination of
employment due to an optionee's death, disability, or retirement.
The Restated Plan is administered by the Compensation Committee of
the Board (the "Committee") consisting of at least three non-employee directors,
appointed from time to time by the Board. The Committee has the absolute
discretion to determine which employees should be granted awards under the
Restated Plan, the number of shares subject to such awards, and the terms and
conditions of such awards. In the event that there is any change in the number
of outstanding shares of Common Stock or of the capital structure of the
Company, the number of shares available under the plan shall be increased or
decreased proportionately, as the case may be, and the number of shares of
Common Stock deliverable in connection with any option granted shall be
increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price.
No options for common stock were exercised in fiscal years 1992,
1993, or 1995 by any of the Company's current executive officers or directors.
The following table sets forth for the fiscal year ended December
31, 1995 certain information with respect to stock options granted to the
persons serving as the Company's Chief Executive Officer during the fiscal year
ended March 31, 1995, and each of its four other most highly compensated
executive officers during the fiscal year ended March 31, 1995, including
hypothetical gains based on assumed rates of annual compound stock price
appreciation:
(NEXT PAGE)
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<PAGE> 20
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> INDIVIDUAL OPTIONS
---------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES EXERCISE PRICE APPRECIATION FOR
GRANTED (1) IN FISCAL PRICE EXPIRATION OPTION TERM(2)
NAME (#) YEAR ($/SHARE) DATE(2) 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Philip C. Kantz 300,000 100% $ 1.1875 February 23, 2004 223,725 567,863
Steven L. Pease 300,000 100% $ 1.4375 February 20, 2005 270,825 687,413
</TABLE>
- ------------------
(1) Granted effective February 23, 1994 pursuant to the Company's
stockholder-approved 1983 Management Non-Qualified Stock Option Plan. Such
options vest over a 36-month period beginning on the effective date of
grant.
(2) Subject to earlier termination in certain events related to termination of
employment. Mr. Kantz resigned from the Company on January 3, 1995, and
216,667 option were canceled.
(3) Represents assumed rates of stock price appreciation in accordance with SEC
rules. Actual gains, if any, on stock options exercises are dependent on
the future market price of the Company's Common Stock. Computation based on
actual option term and annual compounding, computed as the product of: (a)
the difference between: (i) the product of the per share market price at
the effective date of grant and the sum of 1 plus the adjusted stock price
appreciation rate (5% - 62.8%, 10% - 159.4%) and (ii) the per share
exercise price of the option and (b) the number of securities underlying
the grant at fiscal year end.
TEN YEAR OPTION REPRICING TABLE
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Un- Price of Exercise Option Term
derlying Options Stock at Price at New Remaining at
Repriced or Time of Time of Exercise Date of
Name Date Amended(#) Repricing($) Repricing($) Price($) Repricing
---- ---- ---------------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
William F. Bryant Mar-93 30,000 .50 3.00 .50 1.75 yrs.
</TABLE>
(G) DIRECTORS' STOCK OPTION PLAN
The Directors' 1989 Stock Option Plan was approved by the Company's
stockholders at the May 1989 Annual Meeting. In 1993, the Board canceled all
outstanding stock options under this Plan. At the January 1995 Annual Meeting,
the stockholders approved the adoption of the Amended and Restated Directors'
Stock Option Plan (the "Plan"). The Plan provides for grants of stock options
to purchase shares of Common Stock. The Plan is designed to attract and retain
qualified members of the Board of Directors. The aggregate number of shares
issuable under the Plan is 100,000 shares of Common Stock, subject to certain
adjustments. Only directors are eligible to receive options under the Plan,
including directors who are also employees.
On the date of the annual meeting coincident with or first
succeeding a director's election to the Board of Directors (other than a
re-election for a successive term), each director in office at the time of such
meeting will receive a grant of options equal to the product of 2,000 times the
number of years for which the director was elected to the Board, each option
representing the right to purchase one share of Common Stock. At each
subsequent annual meeting at which a director is re-elected, the director shall
be granted an additional 2,000 options times the number of years for which the
director was re-elected. Each option shall
20
<PAGE> 21
become exercisable six months from the date of grant. Each option shall have an
exercise price equal to the fair market value of the Common Stock on the date of
grant as determined by the average closing price of the Common Stock on the
American Stock Exchange for sixty days preceding the date of grant.
The following table sets forth the number of options on the
Company's Common Stock granted under the Amended and Restated Directors' Stock
Option Plan since inception in January 1995:
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
---- -----------------
<S> <C>
William E. Greenwood 6,000
</TABLE>
None of the options granted in 1995 under the Director's Stock
Option Plan have been exercised.
(H) STOCK PURCHASE PLAN
The Board of Directors adopted a Stock Purchase Plan on March 30,
1995 pursuant to which the Company may grant rights to purchase shares of Common
Stock of the Company to officers, consultants or employees of the Company. The
Stock Purchase Plan is administered by the Compensation Committee of the Board
of Directors, which determines the terms of each grant of Stock Purchase Rights.
ITEM 12. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 31, 1995, the only persons known to be the beneficial
owners of more than five (5%) of any class of the Company's outstanding capital
stock are as follows:
<TABLE>
<CAPTION>
Number of Percent
Name Shares of Total
---- --------- --------
<S> <C> <C>
Mark C. Hungerford....................... 752,452 14.6%
49 Ivy Drive
Ross, CA 94957(1)
Bank of Bermuda.......................... 298,154 5.8%
Republic of Bermuda(2)
Mr. Riccardo Nunziati, et. al.(3)....... 663,521 12.8%
3505 York Road
Oakbrook, Il 60521
</TABLE>
- ------------------
(1) Shares listed exclude 298,154 shares held in trust for benefit of
Mr. Hungerford's family member and 27,974 shares held by M.
Hungerford's spouse, to which, in each case, Mr. Hungerford
disclaims beneficial ownership. Share figures were taken from Form
4 filed by Mr. Hungerford on January 30, 1995. The Company's
records indicate Mr. Hungerford could be the beneficial owner of
fewer than 200,000 shares. The Company is attempting to reconcile
share ownership figures with Mr. Hungerford.
(2) Beneficial ownership of these shares is held by family members of
Mr. Hungerford.
(3) Includes shares owned by RII Corporation, Mr. Nunziati individually,
his spouse, Mrs. Bianca Nunziati, Mr. Ken Hathi and his spouse, Mrs.
Sharda Hathi, and Robert Lamantia. Altogether, the aforementioned,
individuals comprise a group within the meaning of the Securities
Exchange Act of 1934.
21
<PAGE> 22
(B) SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth as of the end of the fiscal year ending
March 31, 1995, the amount and percent of the Company's outstanding capital
stock beneficially owned by each one of all of its current directors, and by all
current directors and officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER PERCENT
---------------- OF SHARES OF SHARES(1)
--------- ---------
<S> <C> <C>
Eugene M. Armstrong 80,500 1.6
William F. Bryant 350 (2)
Brian J. Comstock 0 (2)
Ottokarl F. Finsterwalder 15,000 (2)
Paul G. Hayes 10,000 (2)
Walter E. Hoadley 29,852 (2)
Steven L. Pease 157,868 2.7
George Tedesco 35,834 (2)
All directors and officers
as a group (10 persons)(3) 755,604 14.73
</TABLE>
(1) Percent of shares outstanding at March 31, 1995 excluding
Treasury shares. The number of Shares outstanding net of
Treasury Shares was 5,131,235 at March 31, 1995.
(2) Less than 1%.
(3) Includes 456,000 shares of Common Stock which may be purchased
by certain directors and officers of the Company upon exercise
of options.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
22
<PAGE> 23
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FROM 8-K.
(a) The following documents are filed as a part of this Report:
(1) (i) Transcisco Industries, Inc. Consolidated Financial
Statements and Report of Independent Auditors: see the Index on
page 46 of this Report.
(2) Exhibits:
3.1 Joint Plan of Reorganization, incorporated by reference to Form
8-A filed by the Company on August 12, 1993.
3.2 Restated Certificate of Incorporation, as Amended, incorporated
by reference to Form 8-A by the Company on August 12, 1993.
3.3 By-Laws, as Amended, incorporated by reference to Form 8-A filed
by the Company on August 12, 1993.
4.1 Indenture dated as of May 15, 1986 between the Company and Bank
of America National Trust and Savings Association, Trustee.
Incorporated by reference to the Company's Amended Registration
Statement filing on Form S-1 (Reg. No. 33-4971) dated May 22,
1986, filed with the Securities Exchange Commission.
4.2 Supplemental Indenture dated February 1, 1988 between the Company
and Bank of America National Trust and Savings Association,
Trustee. Incorporated herein by reference to Company's filing of
Form 10-K for December 31, 1987, filed with the Securities
Exchange Commission, incorporated by reference to Form 10-K for
December 31, 1991, filed with the Securities Exchange Commission.
4.3 Tripartite Agreement, and Instrument of Resignation, Appointment
and Acceptance dated as of July 26, 1991, by and among the
Company, Yasuda Bank and Trust Company (U.S.A.) and First
Interstate Bank of California, incorporated by reference to Form
10-K for December 31, 1993.
10.1 Lease agreement for 601 California Street. Incorporated herein
by reference to Company's filing of Form 10-K for December 31,
1988, filed with the Securities and Exchange Commission.
10.2 Transcisco Industries, Inc., Amended and Restated (1994) Stock
Option Plan (including implementing agreement: Transcisco
Industries, Inc., Stock Option Agreement. Incorporated herein
by reference to Form S-8 filed April 13, 1995 with the Securities
Exchange Commission.
10.3 Plan and Agreement of Reorganization. Incorporated by reference
to the Company's Registration Statement on Form S-4 (Reg. No.
33-2236) dated December 23, 1985, filed with the Securities
Exchange Commission.
* 10.4 Employment Agreement between the Company and George A. Tedesco,
incorporated by reference to the Company's 10-K for the fiscal
year ended December 31, 1993.
* 10.5 Form of Non-Qualified Deferred Executive Compensation Plan.
Incorporated by reference to Company's filing of Form 10-K for
December 31, 1989, filed with the Securities Exchange Commission.
* 10.6 Profit Sharing and Tax Advantaged Savings Plan dated February 1,
1987, incorporated by reference to the Company's Form 10-K for
the fiscal year ended December 31, 1988.
* 10.7 Employment Agreement between TRS and Mr. Jahnke, dated April 13,
1995.
23
<PAGE> 24
* 10.8 Transcisco Industries, Inc. Directors' (1994) Stock Option Plan,
incorporated by reference to the Company's Form S-8 filed April
8, 1995 with the Securities Exchange Commission.
* 10.9 Employment Agreement as amended, dated May 1, 1995 between Mr.
William F. Bryant and Transcisco Leasing Company, a Subsidiary of
Company.
* 10.10 Agreement between Deucalion Securities, Inc., and Steven L. Pease
and the Company dated January 3, 1995, incorporated herein by
reference to the Company's Form 10-K for the fiscal year ended
December 31, 1993.
* 10.11 Employment Agreement between the Company and Philip C. Kantz,
dated as of February 23, 1994, incorporated herein by reference
to the Company's Form 10-K for the fiscal year ended December
31, 1993.
21.1 List of Subsidiaries of the Company, incorporated herein by
reference to the Company's Form 10-K for the fiscal year ended
December 31, 1993.
23.1 Consent of Independent Auditors.
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of this report.
(b) REPORT ON FORM 8-K FOR LAST QUARTER OF 1995
The following reports were filed on Form 8-K:
January 11, 1995, 8-K stating resignation of H.W. Jesse & Company
as investment advisors; resignation of Philip C. Kantz as
President and Chief Executive Officer; and appointment of Steven
L. Pease as successor to Mr. Kantz.
(NEXT PAGE)
24
<PAGE> 25
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: June 26, 1995 Transcisco Industries, Inc.
By: /s/ Steven L. Pease
------------------------------
Steven L. Pease, President and
Chief Executive Officer
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Steven L. Pease, and each of them, his
attorney-in-fact, with full power of substitution, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities Exchange Commission, hereby satisfying and confirming all that such
attorneys-in-fact may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report had been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven L. Pease President and June 26, 1995
------------------------------------- Chief Executive Officer
(Steven L. Pease)
/s/ Eugene M. Armstrong Chairman of the Board June 26, 1995
-------------------------------------
(Eugene M. Armstrong)
/s/ Walter E. Hoadley Director June 26, 1995
-------------------------------------
(Walter E. Hoadley)
/s/ Dr. Ottokarl F. Finsterwalder Director June 26, 1995
-------------------------------------
(Dr. Ottokarl F. Finsterwalder)
/s/ George A. Tedesco Director June 26, 1995
-------------------------------------
(George A. Tedesco)
/s/ William E. Greenwood Director June 26, 1995
-------------------------------------
(William E. Greenwood)
</TABLE>
25
<PAGE> 26
TRANSCISCO INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(ITEM 14 (A) (1) AND (2))
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
Report of Independent Auditors. 28
Consolidated Balance Sheets at March 31, 1995 and December 31, 1993.
Consolidated Statements of Operations for year ended 30
March 31, 1995, the three month period ended March 31, 1994, and the years ended
December 31, 1993 and 1992.
Consolidated Statements of Shareholders' Equity for year ended March 31, 1995, the
three month period ended March 31, 1994, and the years ended December 31, 1993 and 1992. 31
Consolidated Statements of Cash Flow for year ended March 31, 1995, the three month 32
period ended March 31, 1994, and the years ended December 31, 1993, and 1992.
Notes to Consolidated Financial Statements 34
</TABLE>
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
26
<PAGE> 27
Report of Independent Auditors
The Board of Directors and Shareholders
Transcisco Industries, Inc.
We have audited the accompanying consolidated balance sheets of Transcisco
Industries, Inc. (the "Company") as of March 31, 1995, December 31, 1993, and
1992, and the related consolidated statements of operations, shareholders'
equity (net capital deficiency), and cash flows for the year ended March 31,
1995, the three month period ended March 31, 1994, and for each of the two years
in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements of PLM International, Inc. (a corporation in which the
Company had a 32% interest) for the year ended December 31, 1992 were audited by
other auditors whose report has been furnished to us. Our opinion, insofar as it
relates to data included for PLM International, Inc. is based solely on the
report of the other auditors.
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 an disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well 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 consolidated financial position of
Transcisco Industries, Inc. at March 31, 1995 and December 31, 1993, and the
consolidated results of its operations and its cash flows for the year ended
March 31, 1995, the three month period ended March 31, 1994 and for each of the
two years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As more fully described in Note 8, the Company is subject to significant
litigation and other claims. The ultimate outcome of these matters cannot
presently be determined. Accordingly, a provision for any additional liability
that may result has not been made in the consolidated financial statements.
ERNST & YOUNG LLP
San Francisco, California
May 3, 1995
27
<PAGE> 28
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
--------------- -----------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 1,371 $ 1,103
Restricted cash -- 124
Receivables 6,221 4,671
Inventories 3,460 2,423
Other current assets 419 598
---------- ---------
Total current assets 11,471 8,919
Property and equipment, net 17,561 18,099
Subordinated note receivable from PLMI
International, Inc. -- 2,000
Other 1,496 1,546
---------- ---------
$ 30,528 $ 30,564
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 2,744 $ 4,443
Accrued compensation and benefits 1,202 971
Deferred maintenance liability -- 15
Other current liabilities 2,191 2,171
Borrowings under bank line of credit 1,722 --
Current portion of long-term debt 1,870 879
---------- ----------
Total current liabilities 9,729 8,479
Long-term debt 15,210 18,683
Other long-term liabilities 1,246 418
Deferred maintenance liability 1,108 68
Commitments and contingencies
Shareholders' Equity:
Common Stock $.01 par value 15,000,000 shares authorized,
issued and outstanding, 5,609,961 shares in 1995, and
5,513,486 shares in 1993 51 50
Paid-in capital in excess of par 17,022 16,934
Accumulated deficit (10,844) (11,074)
Less cost of Common shares in
Treasury; 478,726 in 1995 and 1993 (2,994) (2,994)
---------- ----------
Total Shareholders' Equity 3,235 2,916
---------- ----------
$ 30,528 $ 30,564
========== ==========
</TABLE>
See accompanying notes.
28
<PAGE> 29
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD YEARS ENDED DECEMBER 31,
MAR. 31, 1995 ENDED MAR. 31, 1994 1993 1992
----------------- ------------------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues (primarily maintenance and
retrofits) $ 34,579 $ 7,221 $ 32,513 $ 31,833
Costs and expenses:
Operations and support 27,717 6,087 26,989 25,590
General and administrative 4,792 1,153 4,903 5,531
Interest income (189) (78) (383) (970)
Interest expense (contractual interest
- $2,537 and $2,597 in 1993 and 1992) 1,688 400 330 60
---------- ---------- --------- ---------
Total costs and expenses 34,008 7,562 31,839 30,211
Income (loss) from continuing operations, before
reorganization items, equity in (losses)
of affiliated companies and extraordinary gain 571 (341) 674 1,622
Reorganization items:
Bankruptcy administrative costs -- -- 2,386 2,613
Adjustment to estimated allowed claims -- -- 1,700 --
---------- ---------- --------- ---------
571 (341) (3,412) (991)
Equity in (losses) of affiliated
companies, net of income taxes -- -- -- (3,641)
---------- ---------- --------- ---------
Income (loss) from continuing operations 571 (341) (3,412) (4,632)
Discontinued operations:
Loss from discontinued operations -- -- (23) --
Gain (loss) on close-down and disposal
of business segment -- -- 142 (4,146)
Adjustment to estimated allowed claims -- -- (1,500) --
---------- ---------- --------- ----------
Loss from discontinued operations -- -- (1,381) (4,146)
---------- ---------- --------- ----------
Income (loss) before extraordinary gain 571 (341) (4,793) (8,778)
Extraordinary gain - extinguishment of debt -- -- 13,929 --
---------- ---------- --------- ----------
Net income (loss) $ 571 $ (341) $ 9,136 $ (8,778)
========== ========== ========= ==========
Per share amounts:
Continuing operations $ 0.11 $ (0.06) $ (0.73) $ (1.05)
Discontinued operations -- -- (0.29) (0.94)
Extraordinary gain -- -- 2.97 --
--------- --------- ---------- ----------
$ 0.11 $ (0.06) $ 1.95 $ (1.99)
========== ========== ========== ==========
Weighted average number of shares 5,283,926 5,422,935 4,689,530 4,410,181
</TABLE>
See accompanying notes.
29
<PAGE> 30
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Fiscal Year Ended March 31, 1995, Three Month Period Ended March 31, 1994
and Years Ended December 31, 1993, and 1992
(in thousands)
<TABLE>
<CAPTION>
TOTAL SHARE-
HOLDERS'
COMMON STOCK RETAINED EQUITY
AND PAID-IN EARNINGS/ (NET
CAPITAL IN (ACCUMULATED TREASURY CAPITAL
EXCESS OF PAR DEFICIT) SHARES DEFICIENCY)
------------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ 16,394 $ (11,432) $ (2,994) $ 1,968
Net loss -- (8,778) -- (8,778)
-------- --------- -------- --------
Balance at December 31, 1992 16,394 (20,210) (2,994) (6,810)
Net income -- 9,136 -- 9,136
Issuance of common stock 590 -- -- 590
--------- --------- -------- --------
Balance at December 31, 1993 16,984 (11,074) (2,994) 2,916
Net loss -- (341) -- (341)
Issuance of common stock 74 -- -- 74
-------- --------- -------- --------
Balance at March 31, 1994 17,058 (11,415) (2,994) 2,649
Net income -- 571 -- 571
Issuance of common stock 15 -- -- 15
-------- --------- -------- --------
Balance at March 31, 1995 $ 17,073 $ (10,844) $ (2,994) $ 3,235
======== ========= ======== ========
</TABLE>
See accompanying notes.
30
<PAGE> 31
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD YEARS ENDED DECEMBER 31,
MAR. 31, 1995 ENDED MAR. 31, 1994 1993 1992
--------------- ------------------- -------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations
before extraordinary gain $ 571 $ (341) $ (3,412) $ (4,632)
Adjustments to reconcile loss to net cash
(used in ) provided by continuing operations:
Equity in losses (earnings) of affiliated
companies -- -- -- 3,641
Reorganization items not requiring cash -- 130 1,332 750
Depreciation and amortization 1,186 287 1,127 1,091
Compensation from common stock issuance 15 74 67 --
Changes in operating assets and liabilities:
Accounts receivable (870) (680) 1,909 (2,099)
Inventories (1,059) 22 414 (354)
Other current assets 97 82 409 (267)
Other assets 78 (28) 554 48
Accounts payable (895) (804) 546 1,298
Accrued compensation and benefits 370 (139) (348) (27)
Deferred maintenance liability 1,042 (17) (520) (482)
Other current liabilities (596) 616 (434) 170
Other long-term liabilities 428 -- (299) (383)
Liabilities subject to compromise -- -- -- (257)
-------- ------- -------- --------
Net cash (used in) provided by
continuing operations $ 367 $ (798) $ 846 $ (1,103)
-------- ------- -------- --------
Loss from discontinued operations -- -- (1,381) (4,146)
Adjustments to reconcile loss to
net cash used in discontinued operations:
Depreciation and amortization -- -- -- 133
Accrual for loss on disposal of
business segment -- -- (150) 3,455
Liabilities subject to compromise -- -- (658) (118)
Other, net -- -- (586) 309
-------- ------- -------- --------
Net cash used in discontinued operations -- -- (2,775) (367)
-------- ------- -------- --------
Net cash used in operating activities -- -- (1,929) (1,470)
-------- ------- -------- --------
Cash flows from investing activities:
Capital expenditures, net (815) (120) (339) (386)
Restricted cash -- 124 123 (247)
Discontinued operations:
Capital expenditures, net -- -- -- --
Disposal of equipment -- -- 1,580 857
Restricted cash -- -- 600 (600)
-------- ------- -------- --------
Net cash provided by (used in)
investing activities $ (815) $ 4 $ 1,964 $ (376)
-------- ------- -------- --------
</TABLE>
- Continued -
31
<PAGE> 32
- Continued from previous page -
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD YEARS ENDED DECEMBER 31,
MAR. 31, 1995 ENDED MAR. 31, 1994 1993 1992
----------------- -------------------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Payments of long-term debt $ (2,452) $ (109) $ (386) $ (118)
Redemption of note receivable 2,000 -- -- --
Increase in long-term debts 341 -- -- --
Short-term borrowings 1,205 525 -- --
---------- ------------ ---------- ----------
Net cash (used in) provided by
financing activities 1,094 416 (386) (118)
---------- ------------ ---------- ----------
Net increase (decrease) in cash and cash equivalents 646 (378) (351) (1,964)
---------- ------------ ---------- ----------
Cash and cash equivalents at beginning of year 725 1,103 1,454 3,418
---------- ------------ ---------- ----------
Cash and cash equivalents at end of year $ 1,371 $ 725 $ 1,103 $ 1,454
========== ============ ========== ==========
</TABLE>
See accompanying notes.
32
<PAGE> 33
TRANSCISCO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CHAPTER 11 REORGANIZATION PROCEEDINGS.
On July 1, 1991, certain holders of Transcisco Industries, Inc.'s
(the "Company's") 9% Convertible Senior Subordinated Notes due May 15, 1996,
filed an Involuntary Petition for Relief Under Chapter 7 of the United States
Bankruptcy Code against the Company in the United States Bankruptcy Court. The
petition was in response to the Company's previous announcement that it was
delaying the May 15, 1991 interest payment on these Notes. On July 30, 1991,
the Company filed a motion (which was granted) to convert the case to voluntary
Chapter 11 of the United States Bankruptcy Code, and, in addition, one of its
subsidiaries, Transcisco Tours, Inc., filed a voluntary petition with the United
States Bankruptcy Court seeking protection under Chapter 11. The Chapter 11
proceedings did not include any of the Company's other operating subsidiaries:
Transcisco Rail Services Company (TRS), Transcisco Leasing Company, Transcisco
Trading Company or Transcisco Texan Railway, Inc., (whose operations were
subsequently discontinued). The Chapter 11 cases were administered by the
Bankruptcy Court, with Transcisco Industries, Inc. and Transcisco Tours Inc.
(the Debtor Companies) managing their businesses as debtors-in-possession
subject to the control and supervision of the Bankruptcy Court.
The primary cause of the Chapter 11 filings was the outlay required
and significant losses incurred in the construction and operation of a luxury
"cruise train" operating from the San Francisco Bay Area to Lake Tahoe/Reno,
Nevada by Transcisco Tours, Inc. The "cruise train" operated from December 7,
1990 to April 29, 1991. During 1991, the Company incurred: losses from
operations; reductions in the value of special purpose assets; costs of closing
down the "cruise train" operation; and costs of restructuring Transcisco Tours
Inc., totaling approximately $13,839,000. An additional $3.5 million write-down
of these special purpose assets was recorded in the fourth quarter of 1992. As
a result of these substantial losses, Union Bank terminated the Company's line
of credit, and the Company was unable to satisfy its then current cash flow
requirements, all of which prompted the two Chapter 11 cases.
Following a hearing on September 3, 1993, the Bankruptcy Court
announced its intention to confirm the Joint Plan of Reorganization ("Plan")
propounded by the Company, its Official Unsecured Creditors' Committee and its
Official Bondholders' Committee. The Findings of Fact and Conclusions of Law
Regarding the Joint Plan of Reorganization and the Order Confirming the Joint
Plan of Reorganization were entered by the Bankruptcy Court on October 21, 1993
and the Plan became effective on November 3, 1993. In September 1993,
Transcisco Tours filed a liquidating Plan of Reorganization. The Disclosure
Statement accompanying that Plan was approved by the Bankruptcy Court in October
1993 and confirmed in December 1993. Accordingly, other than liabilities
guaranteed by the Company as part of the Plan, the accompanying financial
statements do not include the accounts of Transcisco Tours after September 1993
The Plan generally provides that:
1. Tax claims of approximately $1,300,000 (applied against the previously
established deferred tax liability) are payable in full over a six-year
period including 7% interest.
2. The Company transferred 3,367,367 shares of PLM International ("PLMI")
Common Stock and 60% of a $5,000,000 subordinated PLMI promissory note
receivable to a court-appointed representative of the holders of the
Company's senior subordinated notes ("Bondholders") in full satisfaction
of the Bondholders' claims in the Chapter 11 case. The Company retained
a 40% interest in the principal and interest paid by PLMI with respect
to the foregoing $5 million note. That 40% interest was redeemed by
PLMI in October 1994, and the proceeds were paid to the Class F
Creditors.
3. In connection with the Plan, the Company had previously settled
litigation brought by Shirley B. Daniels against the Company, PLMI and
other defendants. Pursuant to the settlement in the Plan, the Company
is paying $750,000 in full satisfaction over a ten quarter period ending
December 31, 1995.
4. In August 1993, in accordance with the Plan, the Company paid $1.5
million in cash to AMTRAK in full satisfaction of its claim of
$10,206,000. AMTRAK's claim was based upon the Company's alleged
breach of a five-year operating and management agreement with AMTRAK to
operate the Transcisco Tours' cruise train.
33
<PAGE> 34
5. Eighty percent (80%) of the claims of most remaining unsecured creditors
(Class F in the Plan) plus monthly interest at prime plus 1 1/2%, will
be paid over a seven year period ending in December 31, 1999. The
aggregate amount of unsecured claims allowed, after the 20% reduction,
is approximately $18,270,570 since reduced, as of March 31, 1995, to
$13,802,562 (excluding accrued but unpaid interest). As part of the
Plan of Reorganization, this indebtedness is secured by all of the
assets the Company. The majority of the payments to the unsecured
creditors is due in 1996-1999.
In addition, on November 4, 1993, the Company issued 489,976 shares of
its common stock (representing 10% of the Company's then outstanding
Common Stock) to a Collateral Agent acting on behalf of the unsecured
creditors. These shares will be distributed over a three year period.
In the event the Company prepays all of its debt to the unsecured
creditors during the three year period, the Company will redeem a
percentage of the shares depending on the date of the repayment.
6. Upon the filing of the amended Certificate of Incorporation on August
11, 1993, each share of the Class A Common Stock (par value $0.01 per
share), of the Company and each share of the Class B Common Stock, (par
value $0.01 per share), of the Company, then issued and outstanding
immediately prior thereto was canceled and changed into one share of the
Common Stock, (par value $0.01 per share), of the Company.
In connection with the Company's emergence from bankruptcy, the
Company recognized a $13,929,000 extraordinary gain in the third quarter of
1993. The gain on early extinguishment of debt is summarized as follows:
<TABLE>
<S> <C>
Extinguished of subordinated debentures $ 7,391,000
20% reduction unsecured creditor claims,
less value of 10% of the Company's Common
Stock issued ($523,000) 2,232,000
Transcisco Tours unsecured debt 4,306,000
-----------
$13,929,000
===========
</TABLE>
During 1993, the Company also recognized $1,700,000 and $1,500,000
in increases in estimated allowed claims related to continuing and discontinued
operations, respectively.
The consolidated financial statements for the year ended December
31, 1992 and during 1993 through the date of the Company's emergence from
bankruptcy reflect the financial reporting guidance for entities in
reorganization as prescribed by the American Institute of Certified Public
Accountants' Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." The Consolidated Statements of
Operations separately disclose reorganization expenses related to the Chapter 11
proceedings.
Interest expense related to pre-petition indebtedness of
approximately $3.1 and $3.2 has not been accrued in the financial statements
for 1993 and 1992, respectively. Such interest will not be paid nor be a
secured claim since the Company was operating under Chapter 11 during these
years. Of the unaccrued interest, approximately $604,000 and $665,000 for 1993
and 1992, respectively, relates to discontinued operations. Since November 3,
1993, interest has been accrued on the $18 million of Class F and Tax Claims, in
accordance with generally accepted accounting principles.
The following condensed financial statements of Transcisco
Industries, Inc. and Transcisco Tours have been prepared using the equity method
of accounting for reporting the results of subsidiaries which were not part of
the bankruptcy proceedings at December 31, 1992.
34
<PAGE> 35
TRANSCISCO INDUSTRIES, INC
AND
TRANSCISCO TOURS, INC.
COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992
-----------------------
<S> <C>
General and administrative expenses $ 2,253
Interest expense (contractual interest - $3,202) 7
Interest income (782)
Other income (100)
--------
Loss from continuing operations before reorganization
costs, income taxes and equity earnings (1,378)
Reorganization costs 2,613
--------
(3,991)
Income tax benefits --
--------
(3,991)
Equity earnings of affiliated companies, net of tax (3,641)
Loss on write-down of investment in
affiliated companies, net of income tax benefit --
Equity in earnings of subsidiaries - continuing operations 3,000
--------
Loss from continuing operations (4,632)
Discontinued operations:
Loss from discontinued operations --
Loss from close-down and disposal of business segment (3,571)
Equity in losses of discontinued subsidiary (575)
--------
Loss from discontinued operations (4,146)
--------
Net loss $ (8,778)
========
</TABLE>
35
<PAGE> 36
TRANSCISCO INDUSTRIES, INC. AND TRANSCISCO TOURS, INC.
COMBINED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992
-----------------------
<S> <C>
Cash flow from operating activities:
Loss from continuing operations $ (4,632)
Adjustments to reconcile loss to net
cash used in continuing operations:
Equity earnings of affiliated companies 3,641
Equity in earning of subsidiaries - continuing operations (3,000)
Reorganization costs 750
Depreciation and amortization 94
Decrease in operating assets:
Accounts receivable 248
Other current assets 18
Other long-term assets 428
Increase (decrease) in operating liabilities:
Accounts payable 714
Accrued compensation and benefits (91)
Other current liabilities (95)
Other long-term liabilities (293)
Liabilities subject to compromise (257)
---------
Net cash (used in) continuing operations (2,475)
---------
Loss from discontinued operations (4,146)
Adjustment to reconcile loss from discontinued
operations to cash used in discontinued operations:
Equity in losses of discontinued subsidiaries 575
Depreciation and amortization 133
Accrual for loss on disposal 3,187
Liabilities subject to compromise (118)
Other, net 268
---------
Net cash used by discontinued operations (101)
---------
Net cash used in operating activities (2,576)
---------
Cash provided by (used in) investing activities:
Restricted cash (600)
Disposal of equipment - discontinued operations 811
---------
Net cash provided by investing activities 211
---------
Cash provided by financing activities:
Net decrease in investment in and
accounts receivable from wholly owned subsidiaries 344
---------
Net cash provided by financing activities 344
---------
Net decrease in cash and cash equivalents (2,021)
Cash and cash equivalents at beginning of year 2,137
---------
Cash and cash equivalents at end of year $ 116
=========
</TABLE>
36
<PAGE> 37
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION.
As more fully described above, the Company emerged from Chapter 11
Bankruptcy in November 1993. The Plan of Reorganization requires payments to
the Class F Creditors over a seven year period. It is management's opinion
that cash flow from operations and its existing credit facilities is sufficient
to meet the cash flow requirements of the Company during fiscal 1996.
PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The accounts
of Transcisco Tours, other than amounts guaranteed by the Company, are not
included in the March 31,1995 or December 31, 1993 consolidated balance sheets,
or in the consolidated statements of operations since September 1993 because
Transcisco Tours has been liquidated.
RESTRICTED CASH.
The Company's cash balance at December 31, 1993 included balances
related to the sale of certain fully secured assets of the Debtor Companies and
a deposit to secure performance under a certain contract. These restricted
balances consisted solely of proceeds from the sale of equipment related to
Tours. All of the proceeds from these sales have been distributed in
accordance with the contract. As of March 31, 1995, the Company had no
restricted cash balances.
CONCENTRATION OF CREDIT RISK.
The Company markets its services throughout the United States. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential credit
losses and such losses have been within management's expectations. Reserves
for doubtful accounts were approximately $48,000 at March 31, 1995 and $50,000
at December 31, 1993.
INVENTORIES.
Inventories, consisting of rail parts, supplies and work in process,
are stated at the lower of cost or market. Cost is determined by the last-in,
first out (LIFO) method for substantially all inventories.
PROPERTY AND EQUIPMENT.
Property and equipment are stated at cost. Depreciation of property
and equipment is computed primarily using the straight-line method based on the
estimated useful lives of the assets. Estimated useful lives used in computing
depreciation provisions are as follows:
<TABLE>
<S> <C>
Buildings and improvements 17 to 40 years
Equipment and track 3 to 40 years
Rolling stock 15 to 20 years
Other 3 to 10 years
</TABLE>
Where properties are retired, or otherwise disposed of, the asset
cost and accumulated depreciation are removed from the accounts, and the
resulting gain or loss is credited or charged to operations.
Normal recurring maintenance and repair costs are expensed as
incurred. Major repairs or betterments are capitalized and depreciated over
the remaining useful lives of the related assets.
37
<PAGE> 38
PER SHARE DATA.
Net income per share data is computed using the weighted average
number of shares of outstanding common stock and diluted common stock
equivalents from the assumed exercise of stock options. Net loss per share data
is computed using the weighted average number of shares of outstanding common
stock and excludes common stock equivalent as their effect would be anti
dilutive.
STATEMENTS OF CASH FLOWS.
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. For the year ended March 31, 1995; the
three month ended March 31, 1994; and the years ended December 31, 1993 and
1992, interest of $906,000, $ 106,000, $135,000, and $61,000 was paid. During
fiscal 1995, the three month period ended March 31, 1994, and calendar years
1993 and 1992, the Company paid $51,000, $17,000, $36,000, and $71,000 in
income taxes related to various state filings.
INCOME TAXES.
Prior to 1993, income taxes were provided on earnings at the
appropriate statutory rates applicable to such earnings. Deferred income taxes
were provided for certain items which were recognized in different periods for
financial reporting purposes than for income tax reporting purposes.
During February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 (SFAS No. 109), - Accounting
for Income Taxes. This statement requires that deferred income taxes be
determined using the asset and liability method rather than the deferred method
previously in effect. Implementation of SFAS No. 109 effective January 1, 1993
did not have an effect on the Company's financial position or results of
operations.
EQUITY EARNINGS OF AFFILIATED COMPANIES.
Equity earnings of affiliated companies represents the Company's share
of earnings in less than 50% owned investees.
Prior to the Company's emergence from Chapter 11 in 1993, the Company
owned 3,367,367 shares of PLMI Common Stock (approximately 32% of PLMI's
outstanding Common Stock). PLMI is an equipment leasing company engaged in the
leasing and management of transportation equipment and in the syndication of
capital equipment leasing investments. Equity in (losses) earnings from the
Company's investment in PLMI represent the Company's share of PLMI's net income
or loss plus amortization of the difference between the carrying value and
stated value of PLMI's equity. The Company's equity in losses, net of
applicable income taxes, from its investment in PLMI was $(3,641,000) in 1992,
and $0 thereafter as a result of provisions in the Plan of Reorganization.
The Company has a 20% interest in SovFinAmTrans ("SFAT"), which the
Company believes is the largest privately owned railcar transportation company
in Russia. SFAT was founded in mid-1989. Due to uncertainty in the
political and economic arenas within Russia, management decided effective June
30, 1991, to discontinue recording equity earnings on the investment in
SovFinAmTrans. While the joint venture continues to be profitable and does not
appear to be materially affected by any adverse changes in Russia, management
believes this policy is prudent and consistent with the reporting of other U.S.
companies with investments in Russia. Dividends received from SFAT in fiscal
1995, the three month period ended March 31, 1994, and calendar years 1993 and
1992 were $51,000, $0, $51,000, and $43,000, respectively.
DISCONTINUED OPERATIONS.
Losses from discontinued operations and provisions for disposal of
segments of the Company's business reflect management's decision to close-down
and dispose of its luxury "cruise train" and dinner train enterprises effective
April 29, 1991, and December 31, 1991, respectively. See Note 12 for further
discussion of discontinued operations.
38
<PAGE> 39
NOTE 3 - PROPERTY AND EQUIPMENT.
Property and equipment at March 31, 1995 and December 31, 1993 were
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1993
------ ------
<S> <C> <C>
Land $ 1,078 $ 1,071
Building and improvements 8,852 8,818
Rolling stock 682 641
Equipment and track 13,863 13,156
Other 1,044 1,078
--------- ---------
$ 25,519 $ 24,764
Less: Accumulated depreciation (7,958) (6,665)
--------- ---------
$ 17,561 $ 18,099
========= =========
</TABLE>
NOTE 4 - SUBORDINATED NOTE RECEIVABLE FROM PLMI AND OTHER PLMI RELATED
TRANSACTIONS. (see Note 9)
Until the Company's emergence from bankruptcy, the Company had a $5
million subordinated note from PLMI. The note bore interest at 14.75% with
interest payable semi-annually. Interest income of approximately $160,000,
$73,000, $371,000 and $738,000 was recorded in fiscal 1995; the three month
period ended March 31, 1994, and the years ended December 31,1993, and 1992,
respectively. In October 1994, PLMI redeemed the note for 90% of its face
value. In accordance with the Plan of Reorganization, the $1.8 million in
redemption proceeds due Transcisco was paid to its Class F Creditors.
NOTE 5 - INCOME TAXES.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
<S> <C> <C>
Deferred tax liability:
Non-current:
Book basis of fixed assets in excess of tax basis $ (5,162) $ (1,739)
Other - net -- (562)
-------- --------
Total deferred tax liability (5,162) (2,301)
Deferred tax asset:
Current
Difference in reporting bad debt expense and
other current assets and liabilities for tax
purposes 624 1,026
Non-current:
Net operating losses carryforwards 11,190 3,828
Accrued interest 556 244
Other -net 682 38
-------- --------
Total deferred tax asset 13,052 5,136
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
<S> <C> <C>
Net deferred tax asset 7,890 2,835
Valuation allowance (7,890) (2,835)
-------- --------
Net deferred tax liability $ -- $ --
======== ========
</TABLE>
The net change in the valuation allowance for the year ended March
31, 1995 was an increase of $5,055,000 due largely to the increase in net
operating losses as well as other changes in the components of the deferred tax
asset and liability.
The presentation of the deferred tax asset related to accrued
interest and the valuation allowance for the year ended December 31, 1993 have
been reclassified to conform to the current year's presentation.
There was no current or deferred provision for income taxes for the
years ended March 31, 1995, or December 31, 1993 due to tax net operating loss
carryforwards.
A reconciliation between income tax provisions computed at the U.S.
federal statutory rate and the effective rate is reflected in the statement
operations:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTH PERIOD ENDED YEAR ENDED
MARCH 31, 1995 MARCH 31, 1994 DECEMBER 31, 1993
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
State rate, net of federal benefit 7 7 7
Benefit from carryforward of net operating losses (41) (41) (41)
------- ------- -------
Effective income tax rates -- -- --
======= ======= =======
</TABLE>
Though there is no provision for taxes, the balance sheets at the
years ended December 31, 1993 and March 31, 1995 reflect liabilities for tax
claims. The tax claims are the result of unresolved tax authority audits
pertaining to the years 1985 through 1989. The potential liability for the tax
claims was approximately $660,000 at both December 31, 1993 and March 31,
1995.
Tax Account Balances Related to Tax Claims:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
<S> <C> <C>
Long term debt $ 1,914,000 $ 1,911,000
Other long term liabilities 321,000 321,000
-------------- --------------
Total liability related to tax claims $ 2,235,000 $ 2,232,000
============ ============
</TABLE>
At March 31, 1995 and December 31, 1993, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$30,000,000 and $8,000,000, respectively. These net operating loss
carryforwards expire from 2004 through 2008. The Company's ability to utilize
the net operating loss carryforwards may be limited in the event of a 50% or
more ownership change within any three year period.
40
<PAGE> 41
NOTE 6 - BANK BORROWINGS AND LONG-TERM DEBT (IN THOUSANDS).
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
------------------ ---------------------
<S> <C> <C>
Secured revolving credit agreement $ 1,722 $ --
Other long-term debt at rates from 7.8%
to 11.5% payable monthly, quarterly
or semi-annually, unsecured and
secured by certain property and
equipment, due 1994 to 2000. 458 466
Restructured Debt 16,622 19,096
-------- --------
17,080 19,562
Less current portion (1,870) (879)
-------- --------
$ 15,210 $ 18,683
======== ========
</TABLE>
The Company through its subsidiary, TRS, currently has a secured
line of credit of up to the lesser of $2,000,000 or 80% of eligible accounts
receivable ($3,850,000 at March 31, 1995), secured by valid first liens on all
of the tangible and intangible assets of the subsidiary, except machinery and
equipment and real estate. The interest rate is three percent (3%) per annum
above the prime rate (9% at March 31, 1995), payable monthly. The line expires
in November 1996, and requires the maintenance of certain financial covenant
ratios. Under the terms of the agreement, the subsidiary's accounts receivable
are collected on behalf of the lender and the subsidiary is limited as to the
amount of cash that can be transferred to the Company. Borrowings under this
line of credit were $1,722,000 at March 31, 1995, and none at December 31,
1993.
Principal payments on long-term debts are approximately (in
thousands) $1,870 in 1996; $2,323 in 1997; $2,664 in 1998; $4,365 in 1999, and
$5,858 thereafter.
After the emergence from Chapter 11, the claims by creditors which
now comprise Restructured Debt, are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1993
------------------ ---------------------
<S> <C> <C>
Daniels class claims $ 188 $ 500
Class F claims 14,520 17,296
Estimated tax claims 1,914 1,300
-------- --------
16,622 19,096
Less current portion (1,758) (413)
-------- --------
$ 14,864 $ 18,683
======== ========
</TABLE>
NOTE 7 - LONG-TERM MAINTENANCE, MANAGEMENT AND SUB-LEASE CONTRACTS.
The Company has long-term maintenance contracts, including certain
cost-per-mile maintenance contracts, with several major customers requiring
the Company to provide maintenance services on unit train coal cars, primarily
over one to fifteen year periods. Fees are based on a fixed price per
railcar-mile traveled, with provisions for adjustments based on a projected
frequency of repair and changes in costs of materials and industry labor rates.
The Company estimates the cost of providing maintenance under these contracts
and accrues these estimates as a Deferred Maintenance Liability and a current
period expense. The actual amount
41
<PAGE> 42
of future maintenance costs will vary depending on the actual lives of the
maintenance components, the proportion of repairs performed by outside railroad
maintenance shops, inflation and other factors. Actual costs are deducted from
the Deferred Maintenance Liability as incurred. Overhead costs are recognized
as incurred.
NOTE 8 - COMMITMENTS AND CONTINGENCIES.
LEASING ARRANGEMENTS
Various production and office facilities and equipment are leased
under operating leases ranging from one to ten years, with options to renew at
various times. In addition, certain rolling stock is leased on a long-term
basis. Rental expenses for operating leases with non-cancelable terms in excess
of one year are: $2,632,000 in 1996; $2,549,000 in 1997; $2,364,000 in 1998;
$2,173,000 in 1999, and $1,769,000 in 2000 and beyond.
The Company has certain long-term non-cancelable management and
sub-lease agreements related to railcar leasing transactions between 1995 and
2006. Amounts receivable under the terms of these non-cancelable agreements
with terms in excess of one year are $2,769,000 in 1996; $2,527,000 in 1997;
$2,383,000 in 1998; $2,316,000 in 1999, and $1,746,000 in 2000 and beyond.
Rent expense during 1993 and 1992 was $1,998,000 and $1,993,000,
respectively, for fiscal 1995 and the three month period ended March 31, 1994,
rent expense was $ 1,699,000 and $492,000, respectively.
LITIGATION
On November 23, 1987, Shirley B. Daniels and Barney and Rachel
Milione instituted a purported class action in the Superior Court of
California, County of San Francisco, against PLM International, Inc.,
Transcisco Industries, Inc., and various corporate and individual defendants.
The action purported to arise out of the "Consolidation" transaction which
occurred in February 1988. The plaintiffs claimed that the Consolidation
constituted a breach of certain fiduciary duties owed by the defendants to the
limited partners of the various limited partnerships which were party to the
transaction. The plaintiffs sought damages in an unspecified amount and
attorneys' fees, costs of the suit, rescinding and invalidating the
Consolidation, imposing a constructive trust on the shares of PLMI's common
stock received by the Company in connection with the transaction and such other
relief as the court might have deemed appropriate. All the defendants filed
answers denying the substantive allegations and asserting affirmative defenses.
The plaintiffs filed a motion for class certification. By order dated October
9, 1990, the court granted the plaintiff's motion to certify the class. A
trial date of September 3, 1991 was set. However, as a consequence of the
involuntary Chapter 7 bankruptcy filing against the Company, an "automatic
stay" became effective July 1, 1991. Later, Transcisco and the Class
Representatives agreed to settle all matters raised in the State Court Action
and in a separate Federal Action. The Settlement was approved by the
Bankruptcy Court. On November 4, 1993, the Company made its initial payment to
the Daniels' Claimants in the amount of $187,500. Since then it has made
payments totaling $375,000 and has $187,500 in remaining payments to satisfy
the entire obligation.
As part of the Daniels' settlement, the Great American Insurance
Company ("Great American") made a payment to the Daniels claimants in the
approximate amount of $2.65 million, with a reservation of rights to be
reimbursed by Mark C. Hungerford, (Transcisco's Chief Executive Officer at the
time of the Daniels' lawsuit). A federal court had earlier ruled that Great
American had the obligation to provide coverage to Hungerford, but Great
American appealed that ruling to the Ninth Circuit Court of Appeals, who
subsequently decided that the matter is not for the federal courts to decide.
Great American has not responded to the Ninth Circuit Court of Appeals'
decision. In the event that Great American files an action in the State Courts
and is successful in a lawsuit, against Mr. Hungerford, it may seek
reimbursement from Mr. Hungerford (an individual defendant in the Daniels'
action). This may result in an indemnification claim against the Company by
Mr. Hungerford (as a Class F Claim - payable at 80% of the amount paid by Mr.
Hungerford to Great American).
42
<PAGE> 43
NOTE 9 - SHAREHOLDERS' EQUITY.
COMMON STOCK
The Company had two classes of Common Stock -- Class A and Class B
- -- which were traded on the American Stock Exchange. During 1992 and 1991,
10,300 and 99,426 shares of the Company's Class B Common Stock were converted
into Class A Common Stock, respectively. On August 11, 1993, the Company filed
an Amended and Restated Certificate of Incorporation with the Secretary of
State of Delaware. Upon the effectiveness of the Amended and Restated
Certificate of Incorporation the then outstanding 3,188,369 shares of Class A
Common Stock and 1,358,960 shares of Class B Common Stock were converted into
one form of stock designated Common Stock. The Amended and Restated
Certificate of Incorporation was filed by order of the Bankruptcy Court
pursuant to the Plan.
During calendar years 1994 and 1993, the Company granted 60,000 and
165,000 shares of common stock valued at approximately $75,000 and $67,000 to
members of the Board of Directors as compensation for their services. The
Company also issued 489,976 shares valued at $523,000 to a Collateral Agent on
behalf of the unsecured creditors in connection with the Plan.
STOCK OPTIONS
In January 1995, the Company's Board of Directors approved an
Amended and Restated (1994) Employee Stock Option Plan. The prior Plan was
adopted in its original form and amended in 1989. The 1994 Plan reserves
750,000 shares of Common Stock. Common Shares available for grant were 70,267
and 217,000 at March 31, 1995 and December 31, 1993, respectively.
In January 1995, the Company's Board of Directors also approved an
Amended and Restated Directors Stock Option Plan which reserves 100,000 shares
of Common Stock. Common shares available for grant were 94,000 and 100,000 at
March 31, 1995 and at December 31, 1993, respectively.
Activity under these stock option plans for the year ended March 31,
1995, the three month period ended March 31, 1994, and the year ended December
31, 1993 was as follows:
<TABLE>
<CAPTION>
SHARES UNDER OPTION PRICE
OPTION PER SHARE
------------------ ----------------------
<S> <C> <C>
Outstanding, December 31, 1992 194,150 $ 3.00 to $3.75
Granted 399,650 $ 0.50 to $0.81
Cancellations (200,800) $ 0.50 to $3.75
--------
Outstanding, December 31, 1993 393,000
Granted 310,000 $ 1.1875
Exercised (6,600) $0.50
Cancellations (21,500) $ 0.50 to $0.81
--------
Outstanding March 31, 1994 674,900
Granted 353,500 $ 1.1875 to $1.50
Exercised (29,875) $ .50 to $1.1875
Cancellations (318,792) $ .50 to $ 1.1875
--------
Outstanding, March 31, 1995 679,733
========
</TABLE>
43
<PAGE> 44
NOTE 10 - REORGANIZATION EXPENSES.
Reorganization Expenses included in the Consolidated Statement of
Operations consist of professional fees of $2,386,000 and $1,863,000 and
litigation of $0 and $750,000, respectively, for the years ended December 31,
1993 and 1992.
NOTE 11 - INVESTMENT IN PLM INTERNATIONAL, INC.
Summary financial information from the audited financial
statements of PLMI is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1992
---------------------------
<S> <C>
Total revenues $ 71,108
Total costs, expenses and taxes (89,339)
Preferred dividends (7,040)
----------
Net loss attributable to common shareholders $ (25,271)
==========
Transcisco Industries, Inc. equity earnings
in PLMI, net of income taxes $ (3,641)
==========
</TABLE>
NOTE 12 - DISCONTINUED OPERATIONS.
Transcisco Tours Inc. operated the "Sierra 49er Express," a luxury
"cruise train" which carried passengers from the San Francisco Bay Area to Lake
Tahoe/Reno, Nevada. 1990 was primarily a start-up period for operations with
the first run to Nevada occurring on December 7, 1990. A significant
shortfall in ridership coupled with higher than projected capital and operating
costs led to the close-down of the "cruise train" operation on April 29, 1991.
Subsequently, Tours filed a voluntary petition for protection under Chapter 11
of the U.S.. Bankruptcy Code. The primary activity at Tours subsequent to the
April 29, 1991 close-down involved the sale of Tours' assets which consisted
primarily of passenger cars used on the "Sierra 49er Express." All proceeds
from the liquidation of Tours were placed in a trust account, pending
distribution, and were reflected on the financial statements of the Company.
In September 1993, Tours filed a liquidation plan of reorganization. The
Disclosure Statement accompanying the Plan was approved by the Bankruptcy Court
in October 1993, and the Plan was confirmed in December 1993. Pursuant to the
Liquidating Plan, the Company recognized income of $150,000 in January 1994 as
payment of its claim against Tours.
Transcisco Texas Railway, Inc., operated a dining train out of San
Antonio, Texas. Due to losses incurred in the operation of the dining train,
requirements of the Company in reorganization and management's desire to divest
its passenger train segment, the dining train operation was closed down
effective December 31, 1991. Losses totaling approximately $575,000, relating
primarily to the write-down of special purpose assets and costs incurred in the
marketing of the Texan assets/operations were incurred in 1992. During
February 1993, the remaining assets of the Texan were sold and the proceeds
were paid to the Texan creditors. Due to market conditions in the passenger
railcar market and the Chapter 11 proceedings, which had an adverse effect on
marketing these assets, the Company recorded estimated losses on the close-down
and disposal of the discontinued operations/assets totaling $4,146,000 during
1992.
Revenues applicable to the discontinued operations were $153,000
in 1992.
44
<PAGE> 45
NOTE 13 - BENEFIT PLANS.
RETIREMENT PLAN
Substantially all employees are eligible to participate in the
Company's Profit Sharing and Tax Advantage Savings Plan. The Company makes
discretionary contributions to the Plan up to a maximum matching contribution
of $1,000 for each participant. Contributions charged to operations were
$101,000 in fiscal 1995, $22,000 in the three month period ended March 31,
1994, $75,000 in 1993, and $103,000 in 1992.
DEFERRED COMPENSATION PLAN
Prior to the bankruptcy, the Company had a Non-Qualified Deferred
Compensation Plan to benefit certain senior executives. Participants were
entitled to receive an amount equal to 5% times the number of years of
employment times the average monthly compensation immediately preceding
termination of employment (not to exceed 60 months) for 60 consecutive months,
commencing with the later of attainment of age 60 or the termination of
employment, Benefits generally vested only upon completion of five years of
employment. The Non-Qualified Deferred Compensation Plan was terminated during
the Chapter 11 case and the liabilities of Mr. Hungerford and Mr. Tedesco in
the respective amounts of $216,014 and $460,370 were allowed as unsecured
claims against the Company. These claims are being paid as Class F Claims in
accordance with the terms of the Company's Plan. (See Note 1). No charges
to operations related to the Deferred Compensation Plan were made in 1993,
($42,000 for 1992). Deferred Compensation Expense accrued through the
Bankruptcy filing date relating to employees of the Debtor Companies was
included as part of long-term debt in 1993.
45
<PAGE> 46
INDEX TO EXHIBITS
TRANSCISCO INDUSTRIES, INC.
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C>
Transcisco Consolidated Financial Statements and Report of Independent
Auditors
3.1 Joint Plan of Reorganization. *
3.2 Restated Certificate of Incorporation, as Amended *
3.3 By-Laws, as Amended. *
4.1 Indenture dated as of May 15, 1986 between the Company and
Bank of America National Trust and Savings Association, Trustee. *
4.2 Supplemental Indenture dated February 1, 1988 between the Company
and Bank of America National Trust and Savings Association, Trustee. *
4.3 Tripartite Agreement, and Instrument of Resignation, Appointment and
Acceptance dated as of July 26, 1991, by and among the Company,
Yasuda Bank and Trust Company (U.S.A.) and First Interstate Bank of California. *
10.1 Lease agreement for 601 California Street. *
10.2 Transcisco Industries, Inc., Amended and Restated (1994) Stock Option Plan
(including implementing agreement: Transcisco Industries, Inc.,
Stock Option Agreement). *
10.3 Plan and Agreement of Reorganization. *
10.4 Employment Agreement between the Company and George A. Tedesco. *
10.5 Form of Non-Qualified Deferred Executive Compensation Plan. I. *
10.6 Profit Sharing and Tax Advantaged Savings Plan dated February 1, 1987. *
10.7 Employment Agreement between TRS and Mr. Jahnke, dated April 13, 1995.
10.8 Transcisco Industries, Inc. Directors' (1994) Stock Option Plan. *
10.9 Employment Agreement as amended, dated May 1, 1995 between
Mr. William F. Bryant and Transcisco Leasing Company, a Subsidiary of Company.
10.10 Agreement between Deucalion Securities, Inc., and Steven L. Pease and
the Company dated January 3, 1995.
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C>
10.11 Employment Agreement between the Company and Philip C. Kantz, *
dated as of February 23, 1994.
21.1 List of Subsidiaries of the Company. *
23.1 Consent of Independent Auditors.
27 Financial Data Schedule
</TABLE>
* = incorporated by reference
47
<PAGE> 1
EXHIBIT 10.7
FEDERAL EXPRESS
April 13, 1995
PERSONAL AND CONFIDENTIAL
Mr. Robert A. Jahnke
4411 Downgate Lane
Rolling Meadows, IL 60008
Dear Bob:
As I hope you know from our conversations, I am delighted by your decision to
join us as President of Transcisco Rail Services, Inc. (TRS). With you on our
team, I believe we have outstanding and exciting prospects for building a
growing, highly successful business.
This letter, summarizes our conversation regarding the arrangements under which
you will join us.
SALARY
First, your base salary, commencing on the day you join us (April 15, 1995)
will be $175,000 payable. Your performance and that base compensation level
will be reviewed annually.
BONUS
You will be eligible for a cash bonus payable after the end of each fiscal year
- - typically after completion of the audit - in an amount of 0% to 100% of your
base salary. We have agreed not to lay out the parameters for this bonus
compensation until you have been with us for 60 to 120 days, at which time, you
and I will work together to define terms which we will take to the Transcisco
Board of Directors Compensation Committee for its approval. In general, we
agree that the 100% maximum is not intended to be "an impossible target", but
instead can be achieved for genuinely important accomplishments that
significantly benefit Transcisco and its shareholders. As but one example, we
discussed the notion of TRS beating its financial objectives while also putting
in place an arrangement for taking over selected shops and maintenance from the
BN, the UP or both. In such an arrangement TRS might acquire designated
railroad maintenance facilities for nominal consideration while assuming agreed
to compensation responsibilities for former railroad employees (a liability
<PAGE> 2
Robert A. Jahnke
April 13, 1995
Page 2
- -----------------
which would be recourse only to the facilities acquired.) The arrangement
would also involve a satisfactory multi-year maintenance agreement covering
cars owned by the railroad(s). In short, such an excellent low risk
arrangement could substantially alter our size, profitability and growth
prospects.
STOCK OPTIONS
The Board of Directors has approved an option grant on 60,000 shares of
Transcisco stock, priced at $1.4375. Those shares will vest over three
years (the same as my own) with 1/3rd of the shares vesting on your first
anniversary and the balance vesting in equal monthly installments thereafter.
STOCK PURCHASE
In addition to and distinct from the above option, the Board has approved your
right to purchase 250,000 shares of Transcisco stock from the company under
our Stock Purchase Plan at a price of $1.00 per share (which is
approximately $.375 cents per share below the price of the stock as of the
writing of this letter). You understand that this may create an element of
taxable ordinary income when you purchase the stock.
BENEFITS
You will be covered by the standard TRS group medical and insurance programs
and will be entitled to other standard benefits such as vacation. (As I told
you, I do not regard vacation as a benefit to be measured rigidly in terms of
time off. If the job is being done well, I do not keep score. If it is being
done poorly, vacation may be an inappropriate use of time.)
CLUB
We will pay (or reimburse) dues for one club to which you currently belong.
The present level of dues for that club are $375 per month. If they increase,
we will pay the higher amount.
CHANGE OF CONTROL
Although you will be an employee at will, the Board has agreed that, in the
event of a "change of control" of the Board and/or the Company that adversely
affects location, terms
<PAGE> 3
Robert A. Jahnke
April 13, 1995
Page 3
- -----------------
of employment, your status, job, or compensation, Transcisco will pay you one
year's compensation and all of your options will immediately vest.
LOCATION AND RESPONSIBILITIES
You will be officed in Chicago with our sales staff and will likely spend a day
or two per week in San Francisco during the early months of your employment so
you can become more familiar with the Company. We will communicate frequently
in the early months and will probably be in touch once or twice daily. You
will have full profit and loss responsibility. The plants, the sales and
marketing staff, our industrial engineer and the estimator will report to you
immediately. Later, you may also assume responsibility for accounting, EDP and
human resources activities of TRS as we make progress in improving the
performance of the company.
Finally, we have agreed that in the event of any later dispute regarding the
agreement, we will resolve the matter by expedited binding baseball arbitration
under the auspices of other American Arbitrations Associations (or the Judicial
Arbitration and Mediation Service if we both agree to use JAMS).
Bob, I believe that covers everything. Please sign and return one copy
indicating your understanding and agreement to the foregoing.
I look forward to working closely with you over the coming years as we build a
great Transcisco together.
Sincerely yours, ACKNOWLEDGED AND AGREED
/s/ Steven L. Pease /s/ Robert A. Jahnke
- ---------------------- -----------------------
Steven L. Pease Robert A. Jahnke
President and CEO
<PAGE> 1
EXHIBIT 10.9
May 11, 1995
Mr. William F. Bryant
5211 Big Ranch Road
Napa, CA 94558
Dear Bill:
Following up on our recent conversations, this letter is intended to replace
the employment agreement described in my letter to you of June 3, 1993. As
such, this letter completely replaces and updates our agreement with respect to
your employment.
Under this new agreement, you will continue to be President and Chief Executive
Officer of Transcisco Leasing Company ("Leasing"). You will report to the
Chief Executive Officer of Transcisco Industries, Inc. ("Industries") who will
serve as Chairman of the Leasing Board, which for the term of this agreement
will include you, the CEO of Industries' (as Chairman) and one other
representative of Industries selected by the Chairman.
Term
The term of this agreement will be approximately five years running
from the above date to June 30, 2000, and will be automatically
extended for an additional one-year period on each anniversary of the
date hereof (unless Leasing elects not to extend (the
"Non-Extension")). In any case, this agreement shall not be extended
beyond June 30, 2011. As in the past, it is expressly agreed that
your services will be subject to termination only for cause which
shall include dishonesty, moral turpitude, gross incompetence, gross
impropriety, frequent improper behavior, illegal and any other acts
which would cause Leasing to be held in disrepute in the investment or
business communities. In the event that this agreement is terminated
for cause, Leasing shall pay your Base Compensation for 30 days
following the date of termination, and, solely at its discretion, a
portion of the Incentive Compensation.
<PAGE> 2
William F. Bryant
May 11, 1995
Page 2
The confidentiality agreement you signed in 1990 will remain in force
for the term of this agreement.
In the event of a change in the beneficial ownership or effective
control of Leasing or Industries, Leasing and/or Industries will
ensure that the obligations covered by this letter are assigned to and
become binding upon any new owner or other successor in interest.
Moreover, should such an event materially interfere with your ability
to perform or substantially modify your authority or level of
responsibility, you may terminate this contract and receive one year's
Base Compensation and your Incentive Compensation (as defined below)
for the remaining five-year term of this agreement.
In the event of termination without cause, you will be entitled to one
year's Base Compensation and your Incentive Compensation (as defined
below) for the remaining five-year term of this agreement.
In the event of this agreement expiring as a result of a Non-Extension
occurring prior to June 30, 2006, you will be entitled, following the
expiry of the agreement, to one year's Base Compensation and your
Incentive Compensation (as defined below) for the following five
years.
For the purpose of computing Incentive Compensation after the
termination of this agreement for the reasons described above, the
pretax profit shall be calculated and paid as described in the
Incentive Compensation section below, except that (i) it shall be
based solely on the revenues derived from arrangements entered into
when you were employed by Leasing or within three months thereafter
(or within six months thereafter in the event you were involved as an
employee of Leasing at the beginning of such arrangement(s)), and (ii)
the overhead costs of Leasing shall not exceed for any fiscal year
those incurred in the last year of your employment.
Base Compensation
Your base compensation will continue at the rate of $175,000 per year
paid semi-monthly. The Board of Leasing, at its discretion, may
<PAGE> 3
William F. Bryant
May 11, 1995
Page 3
increase that base salary if it determines an adjustment is equitable
and in the best interest of the company
Stock Option
As you know, in 1993 Industries modified its stock option agreements
covering all the key executives. Your original 30,000 options were
repriced to reflect the current value of Transcisco stock and you were
granted 30,000 new options to be vested over the ensuing four years.
Benefits
You will continue to be eligible for fringe benefits and insurance
coverages generally available to comparable corporate officers of
Industries or Leasing. You are eligible to continue to participate in
any 401(K) or other deferred compensation plan on the same basis
available to other senior executives of Industries or Leasing. I
believe you have all plan descriptions for the programs and we agree
that if there are any changes in any of the plans, you will be treated
the same as your counterpart executives.
Your parking will be paid for by Leasing and your car allowance will
continue at the rate of $400 per month which will escalate annually
based upon cost of living adjustments in the San Francisco Bay Area.
You will be entitled to up to four week's vacation per year.
In the event of your death while in Leasing's employment, your estate
will receive, in addition to the death benefits available to senior
executives of Industries, Incentive Compensation for the remaining
five-year term of this agreement calculated as described in the last
paragraph under Term above, provided that such payments shall be
reduced dollar for dollar by any proceeds paid to your estate or
beneficiary from additional term/key man life insurance obtained by
Leasing to cover this obligation.
Incentive Compensation
We have agreed that for the term of this agreement you will receive
10% of Leasing's annual pre-tax profits for the first $1 million of
profit as defined below, and 6.5% of all such profit thereafter to be
paid in May after completion of the March 31 fiscal year audit for
Leasing and Industries.
<PAGE> 4
William F. Bryant
May 11, 1995
Page 4
You will recommend the payment of specific awards to your management
team, but the decision will be made by Leasing's Board.
For purposes of this agreement, we have both agreed that profit means
pre-tax earnings after all direct costs of Leasing's operations as
well as reasonable allocations of shared costs for such things as
space, accounting, insurance and similar costs. Profits are not
expected to be reduced, however, by arbitrary allocation of
Industries' corporate overhead where no clear benefit accrues to
Leasing.
As in the past, it is expressly understood and agreed that, other than
as provided herein, no incentive payment provided for in this letter
will be paid unless you are employed by the company at the time the
incentive payment is payable, nor will any option stock or bonus to be
paid or be found to be accruing, in the event that your employment
terminates prior to the date specified for the vesting of such option
stock or bonus (e.g. voluntary termination).
Arbitration
As in the past, any dispute arising between Leasing or Industries and
you concerning your employment, its termination, or any term or
condition of your employment (other than in connection with the
calculation of Incentive Compensation which will be arbitrated by
Arthur, Andersen & Co. or another CPA firm agreed by the parties) will
be submitted to final and binding arbitration by a single arbitrator
who shall have not less than five years experience as a railroad
industry executive (such person to be agreed upon by you and Leasing,
or, failing such agreement, by the presiding judge of the Superior
Court from a list of persons provided by you and Leasing, such list to
contain not more than three names by each party). The only dispute
not subject to arbitration would be breach or potential breach of the
Confidentiality Agreement.
We have also agreed that arbitration will make an award of legal
and/or accounting fees to the prevailing party and our mutual intent
is that any arbitration be Binding Expedited Baseball Arbitration
carried out as speedily as is reasonably possible under such
circumstances (it being our intent to avoid a lengthy and expensive
process that begins to approach the cost, complexity, and duration of
litigation).
Indemnification
In the course of your employment, you will be indemnified by Leasing
on the same basis as available to the officers and Directors of
Industries for any acts taken by you in good faith on behalf of
Leasing.
I believe this covers everything we have discussed and I do expect that we will
enjoy an outstanding business relationship as you continue making your
important contribution to the success of Transcisco.
<PAGE> 5
William F. Bryant
May 11, 1995
Page 5
Please sign where noted below to evidence your acknowledgment of and agreement
to this agreement with Transcisco Leasing Company.
Sincerely,
/s/ Steven L. Pease
- -------------------------------------
Steven L. Pease
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED TO:
/s/ William F. Bryant Date: May 11, 1995
- ------------------------------------- --------------------
William F. Bryant
<PAGE> 1
EXHIBIT 10.10
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") entered into as of
the 3rd day of January 1995, between Transcisco Industries, Inc., a Delaware
corporation (the "Company"), and Deucalion Securities, Inc., (Deucalion),
W I T N E S S E T H:
WHEREAS, Deucalion has agreed to provide the services of
Steven L. Pease to be employed as President and Chief Executive Officer of the
Company; and
WHEREAS, the Company and Deucalion would now like to formalize
the terms and conditions of such employment;
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT AS PRESIDENT. The Company agrees to employ
Deucalion, and through Deucalion, retain Mr. Pease as its President and Chief
Executive Officer. Deucalion/Mr. Pease agrees to be so employed on the terms
and conditions set forth herein. Deucalion/Mr. Pease will serve in such
capacity at the direction of, to the reasonable satisfaction of, and under the
control of the Board of Directors of the Company (the "Board of Directors"),
and shall at all times faithfully, industriously, and to the best of his
ability, experience and talents perform such duties as shall be assigned to him
consistent with such office. Deucalion/Mr. Pease's duties shall include, but
not be limited to, the carrying out of the Company's Joint Plan of
Reorganization, dated June 21, 1993, Bankruptcy No. 91-32674-TC, as amended
(the "Bankruptcy Plan").
2. APPOINTMENT TO BOARD OF DIRECTORS. Mr. Pease is presently
a member of the Board of Directors. During the term of his employment
hereunder, Mr. Pease shall be renominated to the Board of Directors upon
expiration of his term as a director.
3. TERM. The term of this Agreement shall commence on
January 3, 1995, and thereafter shall continue in effect until January 3, 1998.
4. FEE. Deucalion's fee for providing Pease to serve as
President and Chief Executive officer of the Company and as a member of the
Board of Directors shall initially be $200,000 per annum, and shall be
increased to at least $240,000 per annum upon the closing of a satisfactory
refinancing of the Company's Class F Debt or on the transfer of control. Any
increase will not be retroactive. The fee will be payable monthly at
mid-month. The fee shall be reviewed annually by the Board of Directors and
shall be adjusted upwards, if appropriate, based upon the Board of Directors'
assessment of Deucalion/Mr. Pease's accomplishments and
<PAGE> 2
contributions to the Company. Such fee as is in effect from time to time is
herein referred to as the "consulting fee" or "fee".
5. REIMBURSEMENT OF EXPENSES. During the term of Deucalion's
services, the Company shall pay all reasonable expenses incurred by Deucalion
in connection with the performance of Mr. Pease's duties in furtherance of the
business of the Company; provided that each such expense qualifies as a proper
deduction for federal and state income tax purposes (without regard to the
limitations on deductibility on meals and entertainment expenses) and that
Deucalion furnishes the Company with adequate receipts or other records
substantiating each such expense. At each of its meetings, the Board of
Directors will be provided with a summary of such expenses for its review.
6. INCENTIVE COMPENSATION. The Company shall pay to
Deucalion a cash incentive compensation award (the "Bonus"), based upon the
performance of Deucalion/Mr. Pease during each fiscal year in which this
Agreement is in effect, determined by the Board of Directors as follows:
(A) TIMING OF AWARD. Any Bonus awarded to
Deucalion shall be paid annually within 30 days after the completion of the
audit for the fiscal year for which the Bonus has been awarded. In the event
of a change in the last day in the Company's fiscal year, the Bonus payable for
that fiscal year shall be prorated according to the number of months included
in said fiscal year.
(B) DETERMINATION OF AWARD. Unless the Board of
Directors shall have determined to replace the Bonus program as provided in
subsection (c), the amount of the Bonus shall be determined as follows:
(1) Deucalion shall be paid a bonus
equal to the sum of (i) 0.5% of its fee for each 1% that net income exceeds the
net income projected in formulating the Bankruptcy Plan, plus (ii) 0.5% of its
fee for each 1% that cash flow exceeds the cash flow projected in formulating
the Bankruptcy Plan, up to a maximum bonus equal to 200% of the fee.
(2) The Bonus award may be increased
above the amount determined in Section 6(b)(1) if, during the fiscal year for
which the Bonus is awarded, the Board of Directors is of the opinion that the
Company's performance is significantly better than expected.
(C) CHANGE IN BONUS STRUCTURE. The Board of
Directors may, in its sole discretion, replace the provisions included in this
Section 6 with a comparable bonus plan.
2
<PAGE> 3
7. EMPLOYMENT BENEFITS. The Company shall provide Deucalion
with an employee benefits package (including group medical insurance, parking,
vacations, and holidays) comparable to the employee benefits package enjoyed
by other senior executives of the Company.
8. STOCK OPTIONS. The Company shall grant Mr. Pease options
to purchase shares of the Common Stock of the Company (the "Options"). The
number of shares of the Company's Common Stock to be subject to such Options
and the price at which such shares may be purchased thereunder shall be
determined as follows (subject to equitable adjustment for stock splits, stock
dividends and similar transactions):
(A) NUMBER OF OPTIONS. Mr. Pease has been
granted Options to purchase 300,000 shares of Common Stock effective January
20, 1995.
(B) EXERCISE PRICE. The exercise price for each
Option is $ 1.4375 per share.
(C) TERM AND VESTING OF OPTIONS; TERMINATION.
The term of the Options shall be ten (10) years from the date of commencement
of employment as set forth in Section 3 hereof. Provided no notice of
termination has been given pursuant to Section 9, the Options shall vest in
thirty-six (36) equal monthly installments. The price and vesting schedule of
any Options granted in excess of 300,000 shall be determined by the Board of
Directors when such Options are granted. Upon the giving of notice of
termination pursuant to Section 9, any unvested Options shall be canceled
immediately and shall be of no further force and effect, and Mr. Pease shall
have 90 days following such notice to exercise any Options which are vested as
of the date of such notice.
(D) S-8 REGISTRATION. The Company will maintain
an S-8 registration (or its equivalent) for the 300,000 option shares granted
to Mr. Pease.
9. TERMINATION. This Agreement may be terminated as
follows:
(A) TERMINATION BY THE COMPANY. The Company
shall be entitled to terminate this Agreement for any reason, including but not
limited to dissatisfaction with Deucalion/ Mr. Pease's performance, in the sole
discretion of the Board of Directors.
(1) TERMINATION. If the Company elects
to terminate this Agreement, the Company shall continue to pay Deucalion an
amount equal to the fee in effect at the time of the notice of termination for
a period of ninety (90) days. Deucalion shall have the right to elect to
continue the group medical insurance in accordance with Section 4980B(f) of the
Internal Revenue Code, or such other comparable provision as is in effect at
the time of
3
<PAGE> 4
the termination. In addition, the Company, at the discretion of the Board of
Directors, may award a Bonus to Deucalion, prorated according to the number of
months Deucalion provided services to the Company during the fiscal year in
which Deucalion was terminated.
(B) TERMINATION FOR CAUSE. The Company may
terminate Deucalion at any time (without prior notice) for cause, which shall
include dishonesty, disloyalty, moral turpitude, gross incompetence, willful
misconduct, gross impropriety, illegal acts by Mr. Pease and any other acts
which would cause the Company to be held in disrepute in the investment or
business communities. In the event that this Agreement is terminated in
accordance with this Section 9(b), the Board of Directors shall pay Deucalion's
fee for 30 days following the date of termination and, solely at its
discretion, award a Bonus to Deucalion.
(C) DEATH OR DISABILITY. Deucalion's services
hereunder shall automatically terminate on the date of Mr. Pease's death or
mental or physical disability. For purposes of this Agreement, Mr. Pease shall
be deemed to have become disabled if because of ill health, physical or mental
disability or for other cause beyond his control he shall have been, in the
good faith opinion of the Company, unable or unwilling or shall have failed to
perform his duties hereunder for a continuous period of ninety (90) days.
(D) TERMINATION BY DEUCALION FOR CAUSE.
Deucalion may terminate this agreement on 120 days written notice or by notice
thereof to the Company at any time within 60 days after the occurrence of (1) a
material breach of this Agreement by the Company or (2) any decision by the
Board of Directors to materially modify Deucalion/Mr. Pease's titles, duties or
responsibilities in a way that substantially diminishes his authority or level
of responsibility.
In the event this Agreement is terminated pursuant to this
Section 9(d), Deucalion shall be entitled to the same fee continuation and
other benefits as would be due and owing to him if he were terminated by the
Company without cause, under the provisions of paragraph 9(a) above.
10. CHANGE IN CONTROL. In the event of a Change in Control
(as hereinafter defined), Deucalion shall be entitled to one (1) year's fee
continuation, and all of the Options granted under Section 8 shall immediately
vest and Mr. Pease shall have 365 days in which to exercise such Options. A
"Change in Control" shall occur if (a) any person is or becomes the beneficial
owner, directly or indirectly, of 50% or more of the combined voting power of
the Company's outstanding securities, except by reason of a repurchase by the
Company of its securities; (b) there is a change in the composition of the
Company's Board of Directors such that a majority of the Directors cease to be
Independent Directors as defined in the Company's By-Laws; or (c) the Company's
shareholders approve a merger or consolidation of the Company with any other
company (unless the voting stock of the Company outstanding
4
<PAGE> 5
immediately prior to such merger or consolidation continues to represent a
majority of the voting power of the surviving entity after such merger or
consolidation, or unless at least 50% of the Directors of the surviving entity
immediately after the merger or consolidation were Directors of the Company
prior thereto).
11. RELOCATION. The parties presently contemplate that the
services to be provided by Deucalion under this Agreement will not require that
he relocate its permanent residence to a location outside the San Francisco Bay
Area.
12. ARBITRATION. Any dispute between Deucalion/Mr. Pease and
the Company shall be resolved as follows:
(A) APPLICABLE RULES. All disputes shall be
resolved using expedited arbitration under the rules of the American
Arbitration Association ("AAA"), unless the parties mutually agree to abide by
the rules of the Judicial Arbitration and Mediation Service ("JAMS"). The
arbitrator shall be selected pursuant to the rules of the appropriate
organization.
(B) ARBITRATION METHOD. If the dispute
substantially involves only monetary damages, each party shall be required to
submit a proposed resolution of the dispute (the "Proposals") to the chosen
arbitrator. The arbitrator shall be required to choose one of the Proposals as
the final resolution of the dispute.
(C) OTHER. The arbitration shall be final,
conclusive and binding upon the parties. All expenses of said arbitration
shall be divided equally between Deucalion and the Company.
13. REPRESENTATIONS. The Company represents to Deucalion
that this Agreement has been approved by its Board of Directors. Deucalion
represents to the Company that the services of Mr. Pease will not conflict with
and will not be constrained by any prior employment or consulting agreement or
relationship. The Company acknowledges that Mr. Pease has, and will continue
to be involved in other, Non-Transcisco business activities, including his
responsibilities as General Partner of Deucalion Venture Partners.
14. CONFIDENTIAL INFORMATION. Deucalion/Mr. Pease agrees to
maintain in confidence all of the trade secrets and confidential information of
the Company and not to divulge the same to any other person except as
authorized by the Board of Directors.
15. ENTIRE AGREEMENT. This agreement contains the entire
agreement of the parties with respect to the terms of Deucalion's service and
all other agreements, whether
5
<PAGE> 6
written or oral, with respect to the subject matter hereof are hereby
superseded, replaced and discharged.
16. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of California.
17. ASSIGNMENT. This Agreement and the rights,
privileges and benefits inuring to Deucalion by virtue hereof shall not be and
are not capable of assignment by Deucalion either voluntarily or involuntarily.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first set forth above.
TRANSCISCO INDUSTRIES, INC.
By:/s/ Eugene M. Armstrong
-----------------------------
Eugene M. Armstrong, Chairman
By:/s/ Steven L. Pease
-----------------------------
DEUCALION SECURITIES, INC.
BY: Steven L. Pease, President
6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Transcisco Industries, Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-72518 and Form S-8 No. 33-58389) of Transcisco Industries, Inc.
and in the related Prospectuses of our report dated May 3, 1995, with respect to
the consolidated financial statements of Transcisco Industries, Inc. included in
this Annual Report (Form 10-K for the year ended March 31, 1995.
ERNST & YOUNG LLP
San Francisco, California
June 26, 1995
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