SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q/A
(Amendment No. 2)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended June 30, 1994.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9670
_______________________
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisiction of (I.R.S. Employer
incorporation or organization Identification No.)
One Market, Steuart Street Tower
Suite 900, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
_______________________
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (ro
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable date:
Common Stock - $.01 Par Value; Outstanding as of August 12, 1994 -
10,495,114 shares
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(1994 amounts as restated, see Note 8)
<CAPTION>
June 30, December 31,
1994 1993
(in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 17,849 $ 19,685
Receivables 6,765 6,037
Receivables from affiliates 8,548 10,981
Assets held for sale 9,836 -0-
Equity interest in affiliates 17,287 17,707
Transportation equipment held for
operating leases 184,925 205,810
Less accumulated depreciation (98,550) (105,122)
86,375 100,688
Restricted cash and cash equivalents 12,673 7,055
Restricted marketable securities 41,586 44,469
Other 13,238 11,098
Total assets $214,157 $217,720
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Senior secured debt $ 45,000 $ 45,000
Bank debt related to ESOP 50,280 50,280
Other secured debt 3,401 2,839
Subordinated debt 31,000 31,000
Payables and other liabilities 13,149 18,082
Deferred income taxes 18,570 19,386
Total liabilities 161,400 166,587
Minority Interest 362 --
Shareholders' Equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized, 4,901,474 at June 30,
1994, and 4,916,301 at December 31, 1993,
series A Convertible shares issued and
outstanding, aggregate $63,719,162 at
June 30, 1994, and $63,911,913 at
December 31, 1993, ($13 per share)
liquidation preference at paid-in amount 60,663 63,569
Unearned compensation/Loan to ESOP on
ESOP shares (39,232) (50,280)
21,431 13,289
Common stock, $.01 par value, 50,000,000
shares authorized, 10,495,114 shares issued
and outstanding at June 30, 1994,
(excluding 417,209 shares held in treasury)
and 10,465,306 at December 31, 1993, 109 109
(excluding 432,018 shares held in treasury)
Paid in capital, in excess of par 55,737 55,557
Treasury stock (100) (131)
55,746 55,535
Accumulated deficit (24,782) (17,691)
Total shareholders' equity 52,395 51,133
Total liabilities, minority interest,
and shareholders' equity $214,157 $217,720
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(1994 amounts as restated, see Note 8)
(in thousands, except per share data)
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Operating leases $ 7,975 $ 8,462 $ 15,247 $ 17,802
Management fees and partnership
interests 3,980 3,549 7,465 7,158
Commissions and other fees 1,264 5,525 4,466 9,438
(Loss) gain on the disposal of trans-
portation equipment, net (348) 391 (465) 1,788
Other 1,610 214 2,735 334
Total revenues 14,481 18,141 29,448 36,520
Costs and expenses:
Operations support 5,978 5,126 11,582 10,289
Depreciation and amortization 3,137 3,128 6,305 6,506
Commissions 1,317 2,440 2,873 5,323
General and administrative 2,411 2,914 4,765 5,057
Total costs and expenses 12,843 13,608 25,525 27,175
Operating income 1,638 4,533 3,923 9,345
Interest expense 2,417 3,152 4,708 6,534
Other income (expense), net 118 (140) 270 (435)
Interest income 877 1,412 1,680 2,739
Income before income taxes 216 2,653 1,165 5,115
(Benefit) provision for income taxes (366) 949 (478) 1,823
Net income before cumulative effect of
accounting change 582 1,704 1,643 3,292
Cumulative effect of accounting change -- -- 5,130 --
Net (loss) income 582 1,704 (3,487) 3,292
Preferred dividend on allocated shares 562 341 1,124 682
Preferred dividend on unallocated shares (net)
of $521 and $1,042 income tax benefit for the
three and six months ended June 30, 1993 -- 895 -- 1,790
Net (loss) income to common shares $ 20 $ 468 $(4,611) $ 820
(Loss) earnings per common
share outstanding $ 0.00 $ 0.04 $ (0.37) $ 0.08
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(1994 amounts as restated, see Note 8)
(in thousands)
<CAPTION>
For the six months ended
June 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (3,487) $ 3,292
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 6,305 6,506
Cumulative effect of accounting change 5,130 --
Decrease in deferred income taxes (937) (1,548)
Compensation expense for ESOP, net 170 --
Loss (gain) on disposal of assets 465 (1,832)
Undistributed residual value interests 216 (336)
Minority interest in net income of subsidiaries 26 -0-
(Decrease) increase in payables and
other liabilities (6,028) 1,781
Decrease (increase) in receivables and
receivables from affiliates 2,082 (4,554)
Cash distributions from affiliates in excess of
(less than) income accrued 255 (130)
(Increase) decrease in other assets (391) 998
Purchase of equipment for lease (842) (618)
Proceeds from sale of equipment for lease 2,763 438
Purchase of assets held for sale to affiliates (7,364) (5,007)
Proceeds from sale of assets held for sale to
affiliates 3,695 20,659
Financing of assets held for sale to affiliates 2,953 -0-
Repayment of financing for assets held for sale
to affiliates (2,953) -0-
Net cash provided by operating activities 2,058 19,649
Cash flows from investing activities:
Additional investment in affiliates (51) (420)
Proceeds from the sale of investments 89 -0-
Proceeds from the maturity and sale of restricted
marketable securities 17,516 39,059
Purchase of restricted marketable securities (14,633) (42,736)
(Increase) decrease in restricted cash and cash
equivalents (5,618) 7,376
Acquisition of subsidiaries (1,013) -0-
Net cash (used in) provided by investing activities (3,710) 3,279
Cash flows from financing activities:
Proceeds from long-term equipment loans 45,079 -0-
Principal payments under equipment loans (45,182) (23,292)
Cash dividends paid on Preferred Stock (934) (1,034)
Payments received from ESOP Trustee 834 --
Proceeds from exercise of stock options 19 -0-
Net cash used in financing activities (184) (24,326)
Net decrease in cash and cash equivalents (1,836) (1,398)
Cash and cash equivalents at beginning of period 19,685 9,407
Cash and cash equivalents at end of period $ 17,849 $ 8,009
Supplemental information:
Interest paid during the period $ 4,521 $ 5,719
Income taxes paid during the period $ 4,007 $ 610
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
1. In the opinion of management, the accompanying
unaudited consolidated financial statements contain
all adjustments necessary to present fairly the
Company's financial position as of June 30, 1994, and
the statements of operations for the three and six
months ended June 30, 1994, and 1993 and the
statements of cash flows for the six months ended
June 30, 1994, and 1993. Certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally
accepted accounting principles have been condensed or
omitted from the accompanying consolidated financial
statements. For further information, reference
should be made to the financial statements and notes
thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, on
file at the Securities and Exchange Commission.
2. In the first six months of 1994, 14,999 common shares
were issued for the exercise of stock options. In
addition, in exchange for an equal number of
preferred shares 14,809 common shares were taken out
of treasury stock and issued to former participants
in the Company's Employee Stock Ownership Plan.
Consequently, the total common shares outstanding
increased to 10,495,114 at June 30, 1994, from the
10,465,306 outstanding at December 31, 1993. Net
(loss) income per common share was computed by
dividing net (loss) income to common shares by the
weighted average number of shares of common stock
deemed outstanding during the period, which includes
the Employee Stock Ownership Plan ("ESOP")
convertible preferred shares committed to be released
as prescribed under the American Institute of
Certified Public Accountants' Statement of Position
93-6 ("SOP 93-6") which the Company has adopted
(refer to Footnote 8). Dilution that could result
from the issuance of stock options is not material.
3. Certain amounts in the 1993 financial statements have
been reclassified to conform to the 1994
presentation.
4. The Company classifies assets as held for sale if the
particular asset is subject to a pending contract for
sale or is held for sale to an affiliated
partnership. Transportation equipment held for
operating leases at December 31, 1993, includes
equipment classified as held for sale in previous
reports. At June 30, 1994, $3.7 million in trailers
was held for sale to one or more affiliated
Partnerships.
5. As of January 1, 1994, the Company has adopted
Statement of Financial Accounting Standards No. 115
("Accounting For Certain Investments in Debt and
Equity Securities") ("SFAS No. 115"). At January 1,
1994, the Company classified most of its marketable
securities as held-to-maturity securities based on
management intent and ability to hold. All
securities that were considered available-for-sale at
January 1, 1994, were sold during the first quarter,
with the corresponding gain or loss included in
income. As of June 30, 1994, the Company has
classified all of its marketable securities as held-
to-maturity securities. Thus, all marketable
securities are reported on the balance sheet at
amortized cost, and any unrealized gains and losses
have not been recorded.
6. In February 1994, the Company completed the purchase
of a majority interest in Aeromil Australia Pty Ltd
("Aeromil"). Aeromil is an aircraft dealer
specializing in local and international marketing of
business, commuter, and commercial aircraft. The
acquisition was accounted for by the purchase method
of accounting and accordingly, the purchase price is
allocated to assets and liabilities based on the
estimated fair value at the date of acquisition and
goodwill will be amortized over ten years. The
portion of Aeromil not owned by the Company is shown
as minority interest on the balance sheet. Minority
interest in net income of subsidiaries is included in
other expense for the three and six months ended June
30, 1994.
7. In June 1994, the Company closed a new $45.0 million
senior loan facility, with a syndicate of insurance
companies, and repaid the existing senior loan. The
new facility has a seven year term with quarterly
interest-only payments through March 31, 1997.
Quarterly principal payments of $2.6 million, plus
interest charges begin on June 30, 1997, through the
termination of the loan in June 2001. Interest on
$35.0 million of the debt is fixed at 9.78% per annum
and the remaining $10.0 million floats based on LIBOR
plus 2.75% per annum and adjusts quarterly. The
facility is secured by all of the Company's
transportation-related equipment assets and
associated leases. The facility provides that
equipment sale proceeds or cash deposits be placed
into collateral accounts or used to purchase
additional equipment to the extent required to meet
certain debt covenants.
8. The Company's Board of Directors has announced its
intention to terminate the Company's ESOP. The
termination is contingent on, among other things, the
receipt of a favorable IRS determination letter as to
the qualified status of the ESOP as of the date of
termination under the rules and regulations of the
Internal Revenue Code (the "Code"). Upon termination
of the ESOP, each share of Series A Preferred Stock
held by the ESOP (the "Preferred Stock") which has
been allocated to ESOP participants will
automatically convert to one share of Common Stock.
In addition, it is presently expected that an
amendment to the Company's Certificate of Designation
of Series A Preferred Stock (the "Certificate of
Designations") will be submitted to the PLM
shareholders for approval prior to termination of the
ESOP. Under the proposed amendment, the allocated
shares of Preferred Stock would also automatically
convert to common shares in the event those shares
are transferred to the trustee of the Company's
profit sharing plan.
Termination of the ESOP will result in the
distribution to each ESOP participant (or transfer to
the participant's account in the Company's profit
sharing plan) of shares of PLM Common Stock, and the
Preferred Stock which has been allocated to such
participant's account as of the date of termination
will be canceled. Assuming termination on or about
December 31, 1994, it is estimated that approximately
2,200,000 common shares will be distributed to (or
transferred to the accounts of) a total of
approximately 315 ESOP participants, including up to
410,000 shares distributed on or before termination
of the Plan to Participants who are no longer
employees of the Company. All such shares would be
freely tradeable and listed on the AMEX.
Shares of Preferred Stock held by the ESOP which have
not been allocated to participants' accounts at the
date of termination (i.e. approximately 2,700,000
shares assuming termination on or about December 31,
1994) will cease to be outstanding upon termination,
and concurrent with the termination, all indebtedness
of the ESOP then owing to the Company will either be
repaid or rendered uncollectible. In addition, the
corresponding bank indebtedness of the Company
related to the ESOP will be repaid using restricted
cash and marketable securities collateral. As of
June 30, 1994, the principal amount of this
indebtedness was $50.3 million and it was fully
secured by restricted cash collateral and marketable
securities. Depending on prevailing interest rates
at the time of termination, gain or loss may be
recognized on the liquidation of the collateral to be
used to repay this indebtedness.
Termination of the ESOP and the related ESOP loan
will eliminate payment by the Company of the annual
dividend on the Preferred Stock now held by the ESOP.
For the year ended December 31, 1993, the aggregate
pretax amount of this dividend was $7,030,000.
Termination of the ESOP will also result in a 10%
excise tax imposed by the Code on the "amount
realized" by the ESOP from the disposition of the
unallocated shares held by the ESOP on the date of
termination. Although the amount of this one-time
tax is not presently known, based on the Company's
assessment of the valuation of the unallocated
shares, the tax is currently estimated at less than
$1,000,000. This excise tax is payable seven months
after the close of the calendar year of termination
and will be charged to earnings in the year of
termination. The Company also anticipates that
approximately $2,700,000 of previously paid,
unamortized ESOP loan fees and other costs will be
charged to earnings in the year of termination, which
together with the estimated amount of the 10% excise
tax and income tax benefits, will result in a
reduction in shareholders' equity of approximately
$2,800,000.
As a result of the termination, the cost recorded for
previously allocated ESOP shares will be adjusted as
required by current accounting principles which were
recently impacted by SOP 93-6. The impact of this
change in accounting for allocated shares will be
reflected as a reduction to income to common
shareholders of approximately $5.1 million and will
result in a corresponding increase to additional paid
in capital. The Company's total stockholders' equity
will not be impacted by this accounting charge for
the allocated shares.
On November 22, 1993, the American Institute of
Certified Public Accountants issued Statement of
Position 93-6 "Employers' Accounting for Employee
Stock Ownership Plans" (SOP 93-6) which changes the
way companies report transactions with leveraged
employee stock ownership plans ("ESOPs") for
financial statement purposes, including the
following: (i) compensation expense is to be
recognized based on the fair value of shares
committed to be released to employees net of the
imputed dividend on allocated shares; (ii) interest
received on the loan to the ESOP is not recorded as
income; (iii) only dividends on allocated shares are
reflected as a reduction to income to common
shareholders; and (iv) the previously reported loan
to Employee Stock Ownership Plan is not recognized
under SOP 93-6; instead, an amount representing the
unearned compensation related to the unallocated
shares is reported as a reduction of Preferred Stock.
The Company elected to adopt SOP 93-6 in the third
quarter of 1994, which required the previously issued
financial statements to be restated to reflect the
change in accounting as of January 1, 1994. The
adoption of SOP 93-6 resulted in a non-cash charge to
earnings of $5.1 million for the impact of the change
in accounting principle which was recorded as of the
beginning of the year of adoption. Additionally, SOP
93-6 eliminates the recognition of interest income on
the Company's loan to the ESOP and records the entire
tax benefit of the ESOP as a reduction in income tax
expense.
9. In June 1994, the Company amended its Warehousing
Line of Credit facility. The amendment extended the
facility until June 30, 1995, and provides for a $5.0
million letter of credit facility as part of the
$25.0 million facility.
10. The Company is involved as plaintiff or defendant in
various legal actions incident to its business.
Management does not believe that any of these actions
will be material to the financial condition of the
Company.
Subsequent Events:
11. In July 1994, the Company completed the sale of one
of its marine vessels, which was in assets held for
sale, for $6.2 million which approximated its
carrying value.
12. In July 1994, the Company repaid $3.0 million of its
subordinated debt.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company owns a diversified portfolio of transportation
equipment from which it earns operating lease revenue and incurs
operating expenses. The Company also raises investor equity
through syndicated partnerships and invests the equity raised in
transportation equipment which it manages on behalf of its
investors. The Company earns various fees and equity interests
from syndication and investor equipment management activities.
The Company's transportation equipment held for operating leases
is mainly equipment built prior to 1988. As trailer equipment
ages, the Company is generally replacing it with newer
equipment. However, aged equipment for other equipment types
may not be replaced. Rather, proceeds from the liquidation of
other equipment types may be invested in trailers or in other
Company investment opportunities. Failure to replace equipment
may result in shorter lease terms and higher costs of
maintaining and operating aged equipment and, in certain
instances, limited remarketability.
For the Three Months Ended June 30, 1994, vs. June 30, 1993
(A) Revenues
The Company's total revenues for the quarters ended
June 30, 1994, and 1993 were $14.5 million and $18.1
million, respectively. The decrease in 1994
revenues is principally composed of a 6% decrease in
operating lease revenue, a 77% decrease in
commission and other fees, and a loss on the
disposal of transportation equipment, partially
offset by a 12% increase in management fees and
partnership interests, and a $1.4 million increase
in other revenue.
1. Operating Lease Revenues - $8.0 million vs.
$8.5 million
For the three months ended June 30, 1994, the
Company had an average $198.9 million of equipment
in its operating lease portfolio, which is
approximately $37.3 million less than the original
cost of equipment held during the second quarter
of 1993. The reduction in equipment is a
consequence of the Company's strategic decision to
dispose of certain assets resulting in a 17%
reduction in its aircraft fleet, and a net
reduction of 25% and 12% in its trailer and marine
container portfolios, respectively, compared to
the second quarter of 1993.
The reduction in equipment available for lease is
the primary reason trailer and aircraft lease
revenue decreased by $0.3 million and $0.1
million, respectively.
2. Management Fees and Partnership Interests -
$4.0 million vs. $3.5 million
Management fees increased approximately $0.4
million for the quarter ended June 30, 1994, as
compared to the second quarter of 1993. These
fees are, for the most part, based on the revenues
generated by equipment under management. The
managed equipment portfolio grows correspondingly
with new syndication activity. Affiliated
partnership and investment program surplus
operating cash flows and loan proceeds invested in
additional equipment increase management fees.
Equipment managed at June 30, 1994, and 1993
(measured at original cost) amounted to $1.13
billion and $1.05 billion, respectively. The
increase in management fees generated by
additional assets under management was partially
offset by reduced lease rates for equipment which
negatively impacted affiliated partnership
revenues. Agreements for these partnerships and
investment programs provide for higher management
fees on full service railcar leases than the
Company has previously recognized. The Company
recognized additional fees of $0.2 million in the
second quarter of 1994, for these past services.
The Company also records as revenues its equity
interest in the earnings of the Company's
affiliated partnerships, which revenues were
approximately the same as the second quarter of
1993.
3. Commissions and Other Fees - $1.3 million vs.
$5.5 million
Commission revenue and other fees are derived from
raising syndicated equity and acquiring and
leasing equipment for Company-sponsored investment
programs. Commission revenue consists of
placement fees which are earned on the amount of
equity raised. Acquisition and lease negotiation
fees are earned on the amount of equipment
purchased and leased on behalf of syndicated
investment programs. Debt placement fees are
earned for debt placed in the investment programs.
These fees are governed by applicable program
agreements and securities regulations. The
Company also receives a residual interest in the
net equipment purchased by the affiliated
partnerships. Income is recognized on residual
interests based upon the general partner's share
of the present value of the estimated disposition
proceeds of the equipment portfolios of
affiliated partnerships.
During the three months ended June 30, 1994,
program equity raised totaled $13.6 million,
compared to $25.6 million in the same period of
1993, resulting in a decrease in placement
commissions of $1.0 million. Syndication equity
raising efforts are influenced by many factors,
including general economic conditions, performance
of comparable investments, and the number of firms
that undertake to sell Company-sponsored programs.
There can be no assurances that future syndication
sales will perform as well as or better than prior
periods. During the second quarter of 1994, there
were no equipment purchases on behalf of various
investor programs and partnerships compared to
$58.8 million in the same period of 1993,
resulting in a $2.9 million decrease in
acquisition and lease negotiation fees.
Residual interest income decreased $0.4 million as
a result of no equipment acquisitions for the
affiliated partnerships in the second quarter of
1994.
4. (Loss) Gain on the Disposal of Transportation
Equipment - ($0.3) million vs. $0.4 million
The loss on the disposal of transportation
equipment in 1994 resulted primarily from the net
loss on the disposition of trailers and marine
containers in the normal course of business. The
net gain in 1993 was primarily the result of the
Company's decision to sell substantially all of
its railcar fleet.
5. Other - $1.6 million vs $0.2 million
Other revenues are principally revenue earned by
Aeromil ($1.3 million), the Company's aircraft
leasing and spare parts brokerage subsidiary
acquired in February of 1994, and insurance
premiums earned by Transportation Equipment
Indemnity Company Ltd., a captive insurance
company.
(B) Costs and Expenses
1. Operations support expense (including salary
and office-related expenses for operational
activities, provision for doubtful accounts,
equipment insurance, repair and maintenance
costs, and equipment remarketing costs)
increased $0.9 million (17%) for the three
months ended June 30, 1994, from the same
period in 1993. The increase resulted from
$1.2 million in costs associated with the
operation of Aeromil. This was offset by lower
equipment operation costs resulting from the
reduction in the equipment portfolio.
2. Depreciation and amortization expense was $3.1
million for the quarters ended June 30, 1994,
and 1993. The decrease resulting from the
reduction in depreciable equipment was offset
by accelerating depreciation on certain assets.
3. Commission expenses are primarily incurred by
the Company in connection with the syndication
of investment partnerships. Commissions are
also paid for certain leasing activities.
Commission expenses for the three months ended
June 30, 1994, decreased $1.1 million (46%)
from a similar period in 1993. The reduction
is the result of lower equity syndication
levels.
4. General and administrative expenses decreased
$0.5 million (17%) during the quarter ended
June 30, 1994, compared to a similar period in
1993. The decrease is a result of lower
compensation expense, due to staff reductions,
and lower professional service costs.
(C) Other Items
1. Interest expense decreased $0.7 million (23%)
during the quarter ended June 30, 1994,
compared to the similar period in 1993 as a
result of reduced debt levels, partially offset
by increased interest rates.
2. Other income (expense) was income of $0.1
million in the second quarter of 1994, compared
to an expense of $0.1 million in the second
quarter of 1993. The change is a result of a
reduction in the previously accrued cost of
terminating the Company's interest rate SWAP
agreement, which resulted from increased
interest rates during the second quarter.
3. Interest income decreased $0.5 million (38%)
during the quarter ended June 30, 1994,
compared to the similar period in 1993. The
reduced interest income resulted from reduced
marketable securities and cash balances, and
from the adoption of SOP 93-6 which eliminates
the recognition of interest income on the
Company's internal loan to the ESOP. This was
partially offset by an increase in interest
rates.
4. The benefit for income taxes for the three
months ended June 30, 1994, of $0.4 million
reflects the entire tax benefit of the ESOP.
For the quarter ended June 30, 1993, the
Company's provision for income taxes was $0.9
million, which represented an effective rate of
36% and included the tax benefit of preferred
dividend on only the ESOP shares allocated to
ESOP participants. As required by Statement of
Financial Accounting Standards No. 109
("Accounting For Income Taxes") ("SFAS No.
109"), and the Company's previous accounting
for the ESOP, the ESOP dividend is presented
net of the tax benefit on ESOP shares not
allocated to participants. With the adoption
of SOP 93-6, the tax benefit for all ESOP
shares is reflected as a benefit in the
provision for income tax.
(D) Net (Loss) Income
For the three months ended June 30, 1994, net income
was $0.6 million. In addition, $0.6 million is
reflected for the imputed preferred dividend on
allocated ESOP shares, resulting in essentially no
net (loss) income to common shareholders, and
essentially no (loss) income per common share. In
comparison, for the same period in 1993, net income
was $1.7 million and the net income available to
common shareholders was $0.5 million, with income
per common share of $0.04.
For the Six Months Ended June 30, 1994, vs. June 30, 1993
(A) Revenues
The Company's total revenues for the six months
ended June 30, 1994, and 1993 were $29.4 million and
$36.5 million, respectively. The decrease in 1994
revenues is principally composed of a 14% decrease
in operating lease revenue, a 53% decrease in
commission and other fees, and a loss on the
disposal of transportation equipment, partially
offset by a 4% increase in management fees and
partnership interests, and a $2.4 million increase
in other revenue.
1. Operating Lease Revenues - $15.2 million vs.
$17.8 million
For the six months ended June 30, 1994, the
Company had an average $201.2 million of equipment
in its operating lease portfolio, which is $40.3
million less than the original cost of equipment
held during the first six months of 1993. The
reduction in equipment is a consequence of the
Company's strategic decision to dispose of certain
assets resulting in the sale of almost its entire
railcar portfolio, a 17% reduction in its aircraft
fleet , and a net reduction of 25% and 12% in its
trailer and marine container portfolios,
respectively, compared to 1993.
The reduction in equipment available for lease is
the primary reason trailer, rail, aircraft, and
marine container revenue were reduced by $1.1
million, $0.6 million, $0.6 million, and $0.3
million, respectively.
2. Management Fees and Partnership Interests -
$7.5 million vs. $7.2 million
Management fees increased $0.3 million for the six
months ended June 30, 1994, as compared to the
first six months of 1993. Equipment managed at
June 30, 1994, and 1993 (measured at original
costs) amounted to $1.13 billion and $1.05
billion, respectively. The increase in management
fees generated by additional assets under
management was partially offset by reduced lease
rates for equipment which negatively impacted
affiliated partnership revenues. The partnership
agreements allow higher management fees on full
service railcar leases than the Company has
previously recognized. The Company recognized
additional fees of $0.2 million in the second
quarter of 1994, for these past services. The
Company also records as revenues its equity
interest in the earnings of the Company's
affiliated partnerships which revenues were
approximately the same as in the first six months
of 1993.
3. Commissions and Other Fees - $4.5 million vs.
$9.4 million
During the six months ended June 30, 1994, program
equity raised totaled $30.6 million, compared to
$56.7 million in the same period of 1993,
resulting in a decrease in placement commissions
of $2.2 million. On behalf of various investor
programs and partnerships, a total of $31.4
million of equipment was purchased during the six
months ended June 30, 1994, compared to $76.8
million in the same period of 1993, resulting in
a $2.1 million decrease in acquisition and lease
negotiation fees.
Residual interest income decreased $0.5 million as
a result of decreased equipment acquisitions for
the affiliated partnerships.
4. (Loss) Gain on the Disposal of Transportation
Equipment - ($0.5) million vs. $1.8 million
The loss on the disposal of transportation
equipment in 1994 resulted primarily from the net
loss on the disposition of trailers and marine
containers in the normal course of business. The
net gain in 1993 was primarily the result of the
Company's decision to sell substantially all of
its railcar fleet.
5. Other - $2.7 million vs $0.3 million
Other revenues are principally revenue earned by
Aeromil ($2.1 million), the Company's aircraft
leasing and spare parts brokerage subsidiary
acquired in February of 1994, and insurance
premiums earned by Transportation Equipment
Indemnity Company Ltd., a captive insurance
company.
(B) Costs and Expenses
1. Operations support expense (including salary
and office-related expenses for operational
activities, provision for doubtful accounts,
equipment insurance, repair and maintenance
costs, and equipment remarketing costs)
increased $1.3 million (13%) for the six months
ended June 30, 1994, from the same period in
1993. The increase resulted from $1.9 million
in costs associated with the operation of
Aeromil. This was offset by lower equipment
operation costs resulting from the reduction in
the equipment portfolio.
2. Depreciation and amortization expense decreased
$0.2 million (3%) for the six months ended June
30, 1994, as compared to the similar period in
1993. The decrease resulted from the reduction
in depreciable equipment, which was partially
offset by accelerating depreciation on certain
assets.
3. Commission expenses are primarily incurred by
the Company in connection with the syndication
of investment partnerships. Commissions are
also paid for certain leasing activities.
Commission expenses for the six months ended
June 30, 1994, decreased $2.5 million (46%)
from the similar period in 1993. The reduction
is the result of lower equity syndication
levels.
4. General and administrative expenses decreased
$0.3 million (6%) during the six months ended
June 30, 1994, compared to the similar period
in 1993. The decrease is a result of lower
compensation expense, due to of staff
reductions, and lower professional service
costs.
(C) Other Items
1. Interest expense decreased $1.8 million (28%)
during the six months ended June 30, 1994,
compared with the same period in 1993 as a
result of reduced debt levels, partially offset
by increased interest rates.
2. Other income (expense) was income of $0.3
million in the first six months of 1994,
compared to an expense of $0.4 million in the
first six months of 1993. The change is a
result of a reduction in the previously accrued
cost of terminating the Company's interest rate
SWAP agreement, which resulted from increased
interest rates during 1994.
3. Interest income decreased $1.1 million (39%) in
the six months ended June 30, 1994, compared
the same period in 1993. The reduced interest
income resulted from reduced marketable
securities and cash balances, and the adoption
of SOP 93-6, which eliminates the recognition
of interest income on the Company's internal
loan to the ESOP. This partially offset by an
increase in interest rates.
4. The benefit for income taxes for the six months
ended June 30, 1994, of $0.5 million reflects
the entire tax benefit of the ESOP. For the
six months ended June 30, 1993, the Company's
provision for income taxes was $1.8 million,
which represented an effective rate of 36%, and
included the tax benefit of the preferred
dividend on only the ESOP shares allocated to
ESOP participants. Under Statement of
Financial Accounting Standards No. 109
("Accounting For Income Taxes") ("SFAS No.
109"), and the Company's previous accounting
for the ESOP, the ESOP dividend is presented
net of the tax benefit on ESOP shares not
allocated to participants. With the adoption
of SOP 93-6, the tax benefit for al ESOP shares
is reflected as a benefit in the provision for
income tax.
(D) Net (Loss) Income
For the six months ended June 30, 1994, net income
before the cumulative effect of the accounting
change was $1.6 million. In addition, $1.1 million
is required for the imputed preferred dividend on
allocated ESOP shares, resulting in net income to
common shareholders before the cumulative effect of
the accounting change of $0.5 million and income per
common share of $0.04. In comparison, for the same
period in 1993, net income was $3.3 million and the
net income available to common shareholders was $0.8
million, with income per common share of $0.08.
<PAGE>
Liquidity and Capital Resources
Cash requirements have been historically satisfied through cash
flow from operations, borrowings, or sales of transportation
equipment.
Liquidity throughout 1994 and beyond will depend, in part, on
continued remarketing of the equipment portfolio at similar
lease rates, continued success in raising syndicated equity for
the sponsored programs, effectiveness of cost control programs,
and possible additional equipment sales. Management believes
the Company can accomplish the preceding and will have
sufficient liquidity and capital resources for the future.
Specifically, future liquidity is influenced by the following:
(A) Debt Financing:
Senior Debt: On June 30, 1994, the Company closed
a new $45.0 million senior loan facility with a
syndicate of insurance companies and repaid the
prior facility. The facility provides that
equipment sale proceeds or cash deposits be placed
into collateral accounts or used to purchase
additional equipment to the extent required to meet
certain debt covenants. The facility requires
quarterly interest only payments through March 31,
1997 with quarterly principal payments of $2.6
million plus interest charges beginning June 30,
1997, through the termination of the loan in June
2001.
Subordinated Debt: In July 1994, the Company repaid
$3.0 million of its subordinated debt.
Bridge Financing: Assets held on an interim basis
for placement with affiliated partnerships have,
from time to time, been partially funded by a $25.0
million short-term equipment acquisition loan
facility. The Company amended this facility on June
28, 1994. The amendment extended the facility until
June 30, 1995, and provides for a $5.0 million
letter of credit facility as part of the $25.0
million facility.
This facility, which is shared with PLM Equipment
Growth and Income Fund VII ("EGF VII"), allows the
Company to purchase equipment prior to the
designated program or partnership being identified,
or prior to having raised sufficient capital to
purchase the equipment. This facility provides 80
percent financing, and the Company or EGF VII uses
working capital for the non-financed costs of these
transactions. The Company usually enjoys a spread
between the net lease revenue earned and the
interest expense during the interim holding period.
As of August 12, 1994, the Company had no
outstanding borrowings and EGF VII had borrowed $8.5
million under this facility.
(B) Equity Financing:
On August 21, 1989, the Company established a
leveraged employee stock ownership plan ("ESOP").
PLM International issued 4,923,077 shares of
Preferred Stock to the ESOP for $13.00 per share,
for an aggregate purchase price of $64,000,001. The
sale was originally financed, in part, with the
proceeds of a loan (the "Bank Loan") from a
commercial bank (the "Bank") which proceeds were
lent to the ESOP ("ESOP Debt") on terms
substantially the same as those in the Bank Loan
agreement. The ESOP Debt is secured, in part, by
the shares of Preferred Stock, while the Bank Loan
is secured with cash equivalents and marketable
securities. Preferred dividends are payable semi-
annually on February 21 and August 21, which
corresponds to the ESOP Debt payment dates. Bank
Loan debt service is covered through release of the
restricted cash and marketable securities. While
the annual ESOP dividend is fixed at $1.43 per
share, the interest rate on the ESOP debt varies,
resulting in uneven debt service requirements.
The Company's Board of Directors has announced its
intention to terminate the ESOP. (See Note 8 to the
Financial Statements.) The Board's decision was
based on several factors. First, the Company
anticipated that the cash collateral of the ESOP
financing could ultimately be fully accessed for use
in the Company's business. Instead, however, the
banks required that all such amounts be held in a
collateral account which could only be invested in
certificates of deposit and similar low yielding
investments. The ESOP financing arrangement has for
that reason continuously reduced corporate earnings
and growth. Second, employees have generally been
dissatisfied with the ESOP as a vehicle for
retirement planning. An employee stock ownership
plan like the ESOP generally provides an
undiversified investment, and the annual allocation
of an increased number of shares to participants has
unfortunately been matched by a decline in the value
of the Company's outstanding Common Stock. The
Company's Board of Directors determined to terminate
the ESOP because it was satisfying neither the
Company's nor the participants' expectations and
could not be expected to do so in the foreseeable
future.
The Company elected in the third quarter to adopt
Statement of Position 93-6 "Employers Accounting for
Employee Stock Ownership Plans" (SOP 93-6), which
requires the previously issued financial statements
to be restated to reflect the change in accounting
as of January 1, 1994. SOP 93-6 requires different
accounting treatment for certain items relating to
the ESOP than those previously used by the Company.
(Refer to Footnote 8)
(C) Portfolio Activities:
In the first six months of 1994, the Company
generated proceeds of $2.8 million from the sale of
equipment. The net proceeds from these and other
equipment sales were placed in collateral accounts
as required by the senior secured term loan
agreement and used for debt payments. The new
senior loan agreement requires that sales proceeds
be put into a cash collateral account or reinvested
into additional equipment to the extent required to
meet certain financial convenents.
Over the last two years, the Company has downsized
the equipment portfolio, through the sale or
disposal of under-performing and non-performing
assets, in an effort to strengthen the future
performance of the portfolio. This downsizing
exercise is now complete. The Company will continue
to identify under-performing and non-performing
assets for sale or disposal as necessary, but the
Company intends to maintain approximately the same
size portfolio for the near future.
The Company has committed to purchase $11.5 million
in marine containers. The Company intends to place
them in affiliated partnerships. As of June 30,
1994, $0.5 million of the containers had been
purchased by an affiliated partnership.
(D) Syndication Activities:
The Company earns fees generated from syndication
activities. In May 1993, EGF VII became effective
and selling activities commenced. As of the date of
this report, $72.6 million had been raised for this
partnership. Based on current syndication levels
the Company intends to offer units in EGF VII
through June 30, 1995.
The Company is in the process of seeking approval of
a registration statement for a no-load program. The
Company intends to begin syndication activity for
this program in the fourth quarter of 1994 or the
first quarter of 1995.
Although the Company has increased its market share
over the last year, the overall limited partnership
syndications market has been contracting. The
Company's management is concerned with the continued
contraction of the syndications market and its
effect on the volume of partnership equity that can
be raised. Management does not expect the Company
to syndicate the same volume of partnership equity
as it did last year.
Management believes through debt and equity
financing, possible sales of transportation
equipment and cash flows from operations, the
Company will have sufficient liquidity and capital
resources to meet its projected future operating
needs.
<PAGE>
Item 1. Legal Proceedings
See Note 10 of Notes to Consolidated Financial Statements.
(A) Exhibits
10.1 $45,000,000 Note Agreement dated as of June 30,
1994.
10.2 Amendment No. 2 to Warehousing Credit Agreement,
date as of June 28, 1994, as amended.
10.3 Amendment No. 7 to Note Agreement dated as of July
22, 1994, by and between PLM International, Inc. and
Principal Mutual Life Insurance Company, as amended.
10.4 Amendment dated as of April 20, 1994, to PLM
International, Inc. Employee Stock Ownership Plan.
10.5 Amendment to the PLM International, Inc. Employee
Stock Ownership Plan dated as of June 17, 1994.
(B) Reports on Form 8-K
June 17, 1994 - Announcement regarding the
Company's conditional intent to terminate the
ESOP.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 26, 1994 one
proposal was submitted to a vote of the Company's security
holders. Robert N. Tidball and Walter E. Hoadley were re-
elected to the Board of Directors of the Company. The votes cast
in the election were as follows<F1>:
Votes
Nominee For Withheld
Robert N. Tidball 8,842,440 4,592,087
Walter E. Hoadley 9,028,748 4,405,779
Norman J. Wechsler 3,383,307 10,047,160
Directors whose terms continued after the Annual Meeting of
Stockholders held on May 26, 1994 are as follows<F1>:
CLASS II (TERMS EXPIRE IN 1995)
J. Alec Merriam
Robert L. Pagel
CLASS III (TERM EXPIRES IN 1996)
Allen V. Hirsch
CLASS I (TERMS EXPIRE IN 1997)
Walter E. Hoadley
Robert N. Tidball
[FN]
<F1> Harold R. Somerset joined the Board of Directors on
July 19, 1994 as a Class III director.
[/FN]
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
David J. Davis
Vice President and Corporate
Controller
Date: November 11, 1994
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
/s/ David J. Davis
David J. Davis
Vice President and Corporate
Controller
Date: November 11, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the second
quarter 10-Q/A and is qualified in its entirety by reference to such 10-Q/A.
</LEGEND>
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