<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ______________________
FOR QUARTER ENDED DECEMBER 31, 1994 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, SUITE 1301
SAN FRANCISCO, CA 94108
- - - - ---------------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 477-9700
- - - - -------------------------------
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
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 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
----- -----
INDICATE THE NUMBER OF COMMON SHARES OUTSTANDING, AS OF THE LATEST PRACTICABLE
DATE.
CLASS OUTSTANDING AT JAN. 31, 1995
- - - - ---------------------------- --------------------------------------
COMMON STOCK, $.01 PAR VALUE 5,120,870 (EXCLUDES 478,726 SHARES
HELD IN TREASURY)
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PART I - FINANCIAL STATEMENTS
ITEM 1. TRANSCISCO INDUSTRIES, INC.
Financial Statements CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31 March 31
----------- -----------
1994 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,021 $ 725
Receivables - trade 7,047 5,351
Inventories 3,354 2,401
Other current assets 439 516
------- -------
Total current assets 11,861 8,993
Property and equipment, net
of accumulated depreciation 17,621 17,932
Subordinated note receivable from PLMI -- 2,000
Other 1,502 1,574
------- -------
$30,984 $30,499
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,655 $ 3,639
Accrued compensation and benefits 814 832
Short-term borrowing 1,529 525
Deferred maintenance liability -- 15
Other current liabilities 3,002 2,787
Current portion of long-term debt 1,791 1,185
------- -------
Total current liabilities 10,791 8,983
Other long-term liabilities 497 497
Deferred maintenance liability 987 51
Long-term debt 14,328 17,510
Interest payable 1,131 488
Deferred income tax 321 321
Shareholders' equity:
Common Stock $.01 par value
15,000,000 shares authorized,
issued and outstanding 5,120,870 in
1994 and 5,513,486 in 1993 51 51
Paid-in capital in excess of par 17,017 17,007
Accumulated deficit (11,145) (11,415)
Less cost of Common shares in Treasury;
478,726 in 1994 and 1993 (2,994) (2,994)
------- -------
Total shareholders' equity 2,929 2,649
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$30,984 $30,499
------- -------
------- -------
</TABLE>
See accompanying notes.
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Dec. 31 Three Months Ended Dec. 31
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues (primarily
maintenance and repairs) $26,060 $23,724 $9,185 $7,572
------- ------- ------ ------
Costs and expenses:
Operations and support 21,232 19,638 7,437 6,227
Selling, general and
administrative costs 3,575 3,667 1,181 1,178
Interest income (174) (196) (18) (76)
Interest expense 1,229 298 439 239
Other Income (72) (89) -- (43)
------- ------- ------- -------
25,790 23,318 9,039 7,525
Income from continuing
operations before
reorganization items,
and extraordinary gain 270 406 146 47
Reorganization items:
Bankruptcy administration
costs -- (1,895) -- 1
Adjustment to estimated
allowed claims -- (1,700) -- --
------- ------- ------- -------
-- (3,595) -- 1
Income (loss) from continuing
operations before
extraordinary gain 270 (3,189) 146 48
</TABLE>
(continued on next page)
See accompanying notes.
3
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Dec. 31 Three Months Ended Dec. 31
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Discontinued operations
Loss from discontinued
operations -- (28) -- --
Gain (loss) on close-down
and disposal of
business segment -- 200 -- --
Adjustment to estimated
allowed claims -- (1,500) -- --
------- ------- ------- -------
Loss from discontinued
operations -- (1,328) -- --
------- ------- ------- -------
Gain (loss) before
extraordinary gain 270 (4,517) 146 48
Extraordinary gain -
extinguishment of debt
upon emergence from
bankruptcy -- 13,929 -- --
------- ------- ------- -------
Net income (loss) $ 270 $ 9,412 $ 146 $ 48
------- ------- ------- -------
------- ------- ------- -------
Per share amounts:
Continuing operations $ 0.05 $ (0.67) $ 0.03 $ 0.01
Discontinuing operations -- (0.28) -- --
Extraordinary gain -- 2.92 -- --
------- ------- ------- -------
Net income (loss) $ 0.05 $ 1.97 $ 0.03 $ 0.01
------- ------- ------- -------
------- ------- ------- -------
Shares used in calculations 5,326,697 4,779,053 5,347,880 5,079,290
</TABLE>
See accompanying notes.
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended December 31
-----------------------------------
1994 1993
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income/(Loss) from continuing operations $ 270 $(3,190)
Adjustments to reconcile loss to net cash
used in continuing operations:
Reorganization items not requiring cash -- 1,332
Interest payable 643 --
Depreciation and amortization 886 844
Compensation from common stock issuance 10 67
Changes in operating assets and liabilities:
Accounts receivable (1,696) 1,237
Inventories (953) 832
Other current assets 77 342
Notes receivable 2,000 --
Other assets 72 46
Accounts payable 16 (105)
Accrued compensation and benefits (18) (138)
Deferred maintenance liability 921 (309)
Other current liabilities 215 442
Other long-term liabilities -- (194)
------ ------
Net cash provided by continuing
operations 2,443 1,206
------ ------
Loss from discontinued operations (1,328)
Adjustments to reconcile loss to net cash
used in discontinued operations:
Accrual for loss on disposal of business segment -- (10)
Liabilities subject to compromise -- (8)
Other, net -- (255)
------ ------
Net cash used in discontinued operations -- (1,601)
------ ------
Net cash provided (used) in $ 2,443 $ (395)
operating activities ------ ------
</TABLE>
See accompanying notes.
5
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended December 31
-----------------------------------
1994 1993
------ ------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures, net $ (575) $ (192)
Restricted cash -- 126
Discontinued operations:
Disposal of equipment -- 1,125
------ ------
Net cash provided by investing activities (575) 1,059
------ ------
Cash flows from financing activities:
Payments of long-term debt (2,127) (357)
Decrease in long-term debt (449) --
Short-term borrowing 1,004 --
------ ------
Net cash used in financing activities (1,572) (357)
------ ------
Net increase in cash and cash equivalents 296 307
Cash and cash equivalents at beginning of period 725 796
------ ------
Cash and cash equivalents at end of period $1,021 $1,103
------ ------
------ ------
</TABLE>
See accompanying notes.
6
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TRANSCISCO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1994
1) In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary, consisting only of
normal recurring accruals, to present fairly Transcisco Industries, Inc.'s
(the "Company") financial position as of December 31, 1994 and March 31,
1994, and the results of operations for the nine months and three months
ended December 31, 1994 and 1993.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements in the 1993 Form 10-K.
The results of operations for the nine month periods ended December 31,
1994 are not necessarily indicative of the results to be expected for the
full year.
2) Refer to Item 2, Part I for discussion concerning bank and other debt.
3) Refer to Item 1, Part II for legal proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE NINE MONTHS ENDED DECEMBER
31, 1994 AS COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1993
REVENUES
Transcisco's revenues for the nine month period ending December 31, 1994
increased by approximately 9.8% over the comparable nine month period for 1993.
Railcar maintenance operation's revenues, which comprised 82.6% of total company
revenues, increased by 5.4% to $21.5 million due primarily to increased program
work. Domestic revenues from the leasing operation increased by $1,989,000, an
increased of 78.3%, due primarily to the increase in the size of the rail fleet
under lease. Revenues from international operations increase by $134,000 due to
resumption of production and shipments of Uni-Temp heating systems to
SOVFINAMTRANS ("SFAT").
OPERATIONS AND SUPPORT EXPENSES
Operation and support expenses include the cost of direct and indirect labor,
labor burdens, materials and overhead costs associated with the location and
management costs of the various operating facilities. Operation and support
costs comprised approximately 81.5% of revenues during the nine month period of
1994, which is consistent with the comparable 1993 period.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses include salaries, advertising and promotion, travel and
facility costs for the Company's marketing and sales personnel. General and
administrative expenses include the finance, human resources, legal, purchasing
and administrative operations of the Company. These expenses decreased by
$239,000 from 1993 levels (a decrease of 6%) and reflect the continued
downsizing which has occurred throughout the Company. The Company has completed
the majority of its planned cost reductions and anticipates that selling,
general and administrative expenses incurred during the first three quarters are
indicative of the level of future costs in the next several quarters.
INCOME FROM OPERATIONS BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY GAIN
Income from operations for the nine month period decreased from 1993 levels,
primary as a result of $1,054,000 in additional interest expense on restructured
debt for the nine months ended December 31, 1994, which was partial offset by
reductions in operations support and selling, general and administrative
expenses.
ACCOUNTING FOR INVESTMENT IN SOVFINAMTRANS
The Company has a 20% interest in SOVFINAMTRANS ("SFAT"), which the Company
believes is the only railcar leasing company in the Commonwealth of Independent
States (CIS) formally the Soviet Union. SFAT was founded in mid-1989. Due to
uncertainty in the political and economic arenas within the CIS, management
decided to discontinue recording equity earnings on the investment in
SOVFINAMTRANS effective June 30, 1991. While the joint venture continues to be
profitable and does not appear to be materially affected by the changes in the
CIS, it is management's belief that this policy is prudent and consistent with
the reporting of other U.S. companies with investments in the CIS. Dividends
received from SOVFINAMTRANS amounted to $60,000 annually in 1992, 1993, and
$51,000 in 1994.
DISCONTINUED OPERATIONS
TRANSCISCO TOURS INC. ("TOURS")
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. As a significant
shortfall in ridership coupled with higher than projected capital costs and
costs of operations 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 has been the marketing for
disposition of the remaining assets of Tours, which consist primarily of
passenger cars used on the "Sierra 49er Express."
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All proceeds from the liquidation of Tours were placed in a trust account,
pending distribution, and are not reflected on the financial statements of the
Company. In September 1993, Tours filed a liquidating plan of reorganization.
The Disclosure Statement accompanying the plan was approved by the U.S.
Bankruptcy Court in October 1993, and confirmed in December 1993. Pursuant to
the liquidating plan, the Company received $150,000 in January 1994 as payment
of its claim against Tours.
LIQUIDITY AND CAPITAL RESOURCES
The ratio of current assets to current liabilities was 1.1 to 1.0 at December
31, 1994, compared to 1.00 to 1.00 at March 31, 1994. Working capital increased
by $1,060,000 due primarily to increased trade receivables and inventory.
The Company has a number of claims and loss contingencies which it is actively
contesting and which have not been resolved in its bankruptcy proceeding or by
the Plan and approximate $2.5 million. If all of these claims were resolved
adversely to the Company, the amount required to be paid to discharge the Class
F Claimants under the Plan would be increased and may impair the Company's
ability to meet obligations under the Plan.
The Company's cash requirements were primarily satisfied through cash on hand,
operating earnings and short-term borrowing. Short-term borrowings at December
31, 1994 were $1,529,000. The Company through its subsidiary, Transcisco Rail
Services, has a $2 million line of credit with Congress Financial Corporation
secured by valid first liens on all of the assets of the Company, tangible and
intangible except
machinery and equipment and real estate. Management believes the availability
of working capital from this loan facility combined with the attainment of
projected operating cash flow should be sufficient to meet the Company's working
capital requirements in the near future.
9
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PART II - OTHER INFORMATION
Item 1. 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 35% of PLMI Common Stock. In addition, the Company
contributed the assets of 21 investor-owned public limited partnerships to PLMI
in return for an approximately 64% [ownership interest] in PLMI (the
"Consolidation"). The 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 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 may deem appropriate. 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, and was settled in July, 1993. On September 21, 1990 Shirley B. Daniels
and Barney and Rachel Milione instituted a purported class action in the United
States 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 the
Complaint is substantially similar to that sought in the DANIELS case brought in
the state court discussed above. By order dated January 11, 1991 pursuant to
stipulation of the parties, the federal court action was stayed, with such stay
to remain in effect until 60 days after written notice is given by any party of
intention to proceed in the federal court action, or 30 days after a full and
final adjudication or other resolution of all of the issues raised in the
DANIELS state court action.
Transcisco and the Class Representatives agreed to settle all matters raised in
the State Court Action and Federal Action. The Settlement calls for Transcisco
to pay $750,000 to plaintiffs over ten consecutive quarters, and is subject to
several other conditions. The Settlement has been approved by the Bankruptcy
Court. On November 4, 1993, the Company made its initial payment in the amount
of $187,500 to the Daniels' claimants. Two more installment payments of $62,500
each were made in December 1993 and March 1994, leaving the balance owing of
$437,500. As part of the settlement, the Great American Insurance Company
("Great American") made a payment to the Daniels claimants in the approximate
amount of $2.7 million, with reservation of rights. A Lower Court ruled that
Great American had an obligation to provide coverage, but Great American has
appealed that ruling with the Ninth Circuit Court of Appeals.
10
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In the event that Great American's appeal is successful, Great American may seek
reimbursement from Mr. Hungerford (an individual defendant in the Daniels
action). This may result in Mr. Hungerford's indemnification claim against the
Company being allowed in the amount Mr. Hungerford is compelled to pay Great
American.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The following report on form 8-K was filed for the quarter ended December
31, 1994:
(i) Press Release issued on November 2, 1994 covering a report of the
Company's earnings and revenues for the six month and three month
periods ending September 30, 1994; date of report was November 14,
1994.
(ii) Press Release issued on November 18, 1994 announcing a shareholders'
meeting on January 20, 1995 for shareholders of record as of
December 16, 1994.
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Pursuant to the requirements 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.
TRANSCISCO INDUSTRIES, INC.
January 31, 1995 /s/ Robert W. Laversin
- - - - ---------------- ---------------------------------------------
Date Robert W. Laversin - on behalf of the
Registrant and as Chief Financial Officer
12
