WASHINGTON, D.C. 20549
Amended and Restated
FORM 10-K/A
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 (SECTION229.405 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.
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,
theyhave 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.
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.
In fiscal 1995, TTC earned approximately $1.3 million in
revenues from licensing and servicing its Uni-Temp technology.
Additionally, TTC earned about $50,000 in dividends from SFAT during
the year.
Financial Information Relating to Industry Segments and Classes
of Products or Services
<TABLE>
<CAPTION>
Fiscal Three Month
Year Ended Period Ended Years Ended December 31,
Mar. 31, 1995 Mar. 31, 1994 1993 1992
<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 extra-
ordinary 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 adminis-
tration 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) (8,778)
Extraordinary gain - - - - 13,929 - -
Consolidated net (loss)
income $ 571 $ (341) $ 9,136 $ (8,778)
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
_________________________________
(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.
</TABLE>
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 alter-
natives. 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 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:
Abstentions
Votes Votes or Broker
For Against Non-Votes
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
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Prices for 4th 3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd 1st
Common Stock: Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
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 - - - - - - - - - - - -
_______________________
(*) Class A and B Stock were converted share for share to Common Stock on
August 11, 1993.
</TABLE>
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 treasury shares and 489,976
non-treasury 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 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.
Item 6.Selected Consolidated Financial Data.
[CAPTION]
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands except ratio and per share amounts)
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>
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>
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. Overall, TRS sales volume and prices did not change significantly
in 1994 compared to 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. Material costs increased to $9.4 million
in 1995 from $8.7 million in 1993 as a result of more material-intensive work
arising from the change in business mix (described above) of increased
retrofit and program work and reduced tankcar and cost-per-mile work. This
increase in material costs caused direct costs to increase to $24.9 million
in 1995 compared to $23.9 million in 1993.
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, the Company reduced
warranty reserves which it deemed no longer necessary based on expiration of
warranty terms and absence of warranty claims. As a result, cost of sales
were reduced to a credit balance of $74,000 in 1995 versus a debit balance of
$441,000 in 1993. Consequently, gross margin on sales and net income
improved considerably. Gross margin increased to $1.4 million in 1995 from
$900,000 in 1993. TTC's 1995 net 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. Also, higher
sales caused direct costs to increase to $3.9 million from $2.6 million in
1993. TLC's gross margin increased as well, both in terms of dollars and as
a percentage of sales. Gross margin was $2.5 million in 1995 (38.7% of
sales) versus $600,000 in 1993 (18.5% of sales). Gross margin improved
because of the growth in TLC's fleet and because TLC performed a higher
volume of specialty maintenance services which earn higher margins. Overall,
the sales increase and improvement in margins helped push pre-tax income to
$1,427,000 in 1995 from $44,000 in 1993.
Corporate.
Corporate overhead levels were reduced in fiscal year 1995, by about $286,000
(from $1,546,000 to $1,260,000), 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.
Accounts receivable and inventory at March 31, 1995 were 33% and 43% higher,
respectively, than they were at December 31, 1993 (sales increased 6.4%
during the same period). The increase in accounts receivable was a result of
several factors. First, TRS's cost-per-mile business, in which all of its
revenues were paid in advance on the first day of each month, had transpired
and was replaced by conventional repair and maintenance services (for which
credit terms are generally 30-45 days longer). Second, some customers
delayed payment longer in 1995 compared to 1993 (the company does not expect
this trend to continue). Third, Transcisco Leasing Company's revenues
increased by $3 million during 1995, resulting in higher receivables at the
end of the reporting period. The Company does not expect the increase in
accounts receivable will materially affect its liquidity or cash resources.
The increase in inventory was due primarily to a large repair program which
was terminated by the customer for internal reasons. TRS had obtained a
large portion of this inventory prior to beginning work on the program. TRS
has since been able to return this inventory or use it on other repair work.
The Company does not believe the increase in inventory will materially affect
its liquidity or cash resources.
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.
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.
Name Age Current Position with the Company
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
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 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.
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:
Summary Compensation Table
Long
Term
Compen- All
Name and Annual Compensation sation (1) Other
Principal Salary Bonus Option s Compensation
Position Year ($) ($) # ($)
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 - - - -
________________________________
(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.
(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 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.
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:
Stock Option Grants in Last Fiscal Year
Individual Options
[CAPTION]
<TABLE>
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
[CAPTION]
<TABLE>
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 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:
Name Number of Options
___________________ _________________
William E. Greenwood 6,000
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:
Number of Percent
Name Shares of Total
________ _________ ________
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. 663,521 12.8%
3505 York Road
Oakbrook, Il 60521 (3)
______________________
(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.
(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.
Number of Percent
Name and Address Shares of Shares(1)
________________ _________ ___________
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
____________________________
(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.
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.
*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)
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.
Signature Title Date
/s/ Steven L. Pease President and June 26, 1995
(Steven L. Pease) Chief Executive Officer
/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)
TRANSCISCO INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES
( Item 14 (a) (1) and (2) )
Description Page No.
Report of Independent Auditors. 27
Consolidated Balance Sheets at March 31, 1995
and December 31,1993. 29
Consolidated Statements of Operations for year ended
March 31, 1995, the three month period ended March 31,
1994 , and the years ended December 31, 1993 and 1992. 30
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 period ended March 31,
1994, and the years ended December 31, 1993, and 1992. 32
Notes to Consolidated Financial Statements 34
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.
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
/s/ Ernst & Young LLP
San Francisco, California
May 3, 1995
Report of Independent Auditors of PLM International
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM
International, Inc. and subsidiaries as listed in the
accompanying index to financial statements (Item 14 (a)) for the
years ended December 31, 1992, 1991, and 1990. In connection
with our audits of the consolidated financial statements, we also
have audited the financial statement schedules for the years
ended December 31, 1992, 1991, and 1990, as listed in the
accompanying index. These consolidated financial statements and
financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts 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 financial
position of PLM International, Inc. and subsidiaries as of
December 31, 1992 and 1991, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1992, in conformity with generally
accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick
/s/ KPMG Peat Marwick
San Francisco, California
March 22, 1993
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, 1995 December 31, 1993
______________ _________________
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:
Preferred Stock, no par value, 1,000,000 shares
authorized, none issued -- --
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
See accompanying notes.
<TABLE>
<CAPTION>
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
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.
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)
Total Share-
holders'
Common Stock Retained Equity
and Paid-in Earnings/ (Net
Capital in (Accumulated Treasury Capital
Excess of Par Deficit) Shares Deficiency)
_____________ ____________ ________ ___________
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>
<CAPTION>
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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) 55 448
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)
_________ ___________ _________ ________
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.
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.
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:
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
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.
TRANSCISCO INDUSTRIES, INC.
and
TRANSCISCO TOURS, INC.
COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands)
Year Ended December 31,
1992
_______________________
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)
TRANSCISCO INDUSTRIES, INC. and TRANSCISCO TOURS, INC.
COMBINED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
1992
______________________
Cash flow from operating activities:
Loss from continuing operations $(4,632)
Adjustments to reconcile loss to net
cash used in continuing operations:
Equity earnings of affiliated companies 3,641
Equity in earning of subsidiaries - continuing operations (3,000)
Reorganization costs 750
Depreciation and amortization 94
Decrease in operating assets:
Accounts receivable 248
Other current assets 18
Other long-term assets 428
Increase(decrease) in operating liabilities:
Accounts payable 714
Accrued compensation and benefits (91)
Other current liabilities (95)
Other long-term liabilities (293)
Liabilities subject to compromise (257)
________
Net cash(used in) continuing operations (2,475)
________
Loss from discontinued operations (4,146)
Adjustment to reconcile loss from discontinued
operations to cash used in discontinued operations:
Equity in losses of discontinued subsidiaries 575
Depreciation and amortization 133
Accrual for loss on disposa l3,187
Liabilities subject to compromise (118)
Other, net 268
________
Net cash used by discontinued operations (101)
________
Net cash used in operating activities (2,576)
________
Cash provided by(used in) investing activities:
Restricted cash (600)
Disposal of equipment - discontinued operations 811
________
Net cash provided by investing activities 211
________
Cash provided by financing activities:
Net decrease in investment in and
accounts receivable from wholly owned subsidiaries 344
________
Net cash provided by financing activities 344
________
Net decrease in cash and cash equivalents (2,021)
Cash and cash equivalents at beginning of year 2,137
________
Cash and cash equivalents at end of year$ 116
________
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:
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
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.
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. Management decided effective June 30, 1991 to
discontinue recording equity earnings on the investment in
SovFinAmTrans. The Company has accounted for its investment in
SFAT using the cost method of accounting for the period 1991
through fiscal 1995. This decision is based on the Company's
determination that, during this time period, it could not exert
significant influence over SFAT's operations. This decision was
based upon several factors, including the fact that the two
Russian government ministries held a consolidated interest in
SFAT of 65%. 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. The Company's investment in SFAT was $1.42 million
at March 31, 1995 and December 31, 1993. The investment is
classified under "other assets" in the non-current assets section
of the balance sheet.
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.
Revenue Recognition.
The Company recognizes revenue from repair and maintenance
services in the period in which such services are performed.
Performance of services is deemed to have occurred when a
railcar's repairs have been completed and the railcar has been
shipped. For maintenance fees earned under long term contracts,
revenues are recognized in the period in which services are
performed pursuant to said agreements. For railcar leases, the
Company recognizes revenues over the length of the leases in
amounts reflecting contractual lease payments due from lessees.
Note 3 - PROPERTY AND EQUIPMENT.
Property and equipment at March 31, 1995 and December 31, 1993
were as follows (in thousands):
1995 1993
_____ _____
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
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):
Deferred tax liability: March 31, 1995 December 31, 1993
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
Net deferred tax asset 7,890 2,835
Valuation allowance (7,890) (2,835)
Net deferred tax liability $ -- $ --
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:
Fiscal Year Three Month
Ended Period Ended Year Ended
March 31, 1995 March 31, 1994 December 31, 1993
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 - - - - - -
========== ========= ========
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:
March 31, 1995 December 31, 1993
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
============ ==========
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.
NOTE 6 -BANK BORROWINGS AND LONG-TERM DEBT (IN THOUSANDS).
March 31, 1995 December 31, 1993
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
========= ========
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):
March 31, 1995 December 31, 1993
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
======== =========
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 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).
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:
Shares Under Option Price
Option Per Share
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
=========
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):
YEAR ENDED DECEMBER 31, 1992
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)
=========
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.
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.
INDEX TO EXHIBITS
TRANSCISCO INDUSTRIES, INC.
EXHIBIT NO. PAGE NO.
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.
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
* incorporated by reference
