SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] For the fiscal
quarter ended March 31, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 1-9670
-----------------------
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 900, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name on each exchange on which registered
Common Stock, $.01 Par Value American Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-Q or any amendment to this Form 10-Q. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 11, 1995 was $42,426,214.
The number of shares outstanding of the issuer's classes of common
stock as of May 11, 1995: Common Stock, $.01 Par Value -- 12,570,730 shares
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
(in thousands)
ASSETS
Cash and cash equivalents $ 9,006 $ 16,131
Receivables 5,206 5,747
Receivables from affiliates 5,459 7,001
Assets held for sale 25,396 17,644
Equity interest in affiliates 19,159 18,374
Transportation equipment held for
operating leases 136,442 141,836
Less accumulated depreciation (76,102) (77,744)
---------- ----------
60,340 64,092
Restricted cash and cash equivalents 2,269 1,409
Other 6,525 9,974
---------- ----------
Total assets $ 133,360 $ 140,372
========== ==========
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt -- $ 6,404
Senior secured debt 35,000 35,000
Other secured debt 728 2,119
Subordinated debt 23,000 23,000
Payables and other liabilities 10,258 11,589
Deferred income taxes 17,300 16,165
------- -------
Total liabilities 86,286 94,277
Minority Interest 373 400
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 11,570,273 shares
issued and outstanding at March 31, 1995, and 11,699,673 at December 31, 1994
(excluding 1,000,457 and 871,057 shares held in treasury at March 31, 1995
and December 31,
1994, respectively) 117 117
Paid in capital, in excess of par 77,699 77,699
Treasury stock (3,277) (2,831)
--------- ---------
74,539 74,985
Accumulated deficit (27,838) (29,290)
--------- ---------
Total shareholders' equity 46,701 45,695
--------- ---------
Total liabilities, minority interest,
and shareholders' equity $ 133,360 $ 140,372
========= =========
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
For the three months
ended March 31,
1995 1994
-------- --------
Revenues:
Operating leases $ 6,408 $ 7,272
Management fees 2,691 2,543
Partnership interests and other fees 597 901
Acquisition and lease negotiation fees 540 1,726
Commissions 1,029 1,517
Aircraft brokerage and services 1,022 804
Gain (loss) on the sale or disposition of
transportation equipment, net 4,587 (117)
Other 244 321
--------- ---------
Total revenues 17,118 14,967
Costs and expenses:
Operations support 6,820 5,604
Depreciation and amortization 2,221 3,168
Commissions 1,141 1,556
General and administrative 2,670 2,354
--------- ---------
Total costs and expenses 12,852 12,682
Operating income 4,266 2,285
Interest expense 2,315 2,291
Other (expense) income, net (27) 152
Interest income 678 803
--------- ---------
Income before income taxes 2,602 949
Provision (benefit) for income taxes 1,115 (112)
--------- ---------
Net income before cumulative effect
of accounting change 1,487 1,061
Cumulative effect of accounting change -- 5,130
--------- ---------
Net income (loss) 1,487 (4,069)
Preferred dividend imputed on allocated shares -- 562
--------- ---------
Net income (loss) to common shares $ 1,487 $ (4,631)
========= =========
Earnings (loss) per common share outstanding $ 0.13 $ (0.37)
========= =========
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Periods Ended December 31, 1993 through March 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Preferred Loan to
Stock at Employee Stock
Paid-in Ownership At
Amount Plan (ESOP) par
--------- ----------- ----
<S> <C> <C> <C>
Balances, December 31, 1993 $ 63,569 $ (50,280) $ 109
Net loss
Cumulative effect of change in
accounting on unearned compensation 7,130
Common stock repurchase
Conversion of preferred stock (192)
Allocation of shares (4,091) 6,044
Current year imputed dividend on
allocated ESOP shares
Prior year preferred dividend not charged
to equity until paid
Cancellation of preferred stock and
issuance of common stock upon
termination of the ESOP (59,286) 37,106 8
Exercise of stock options
Translation gain/loss
--------- --------- ---------
Balances, December 31, 1994 -- -- 117
Net income
Common stock repurchase
Translation gain/loss
--------- --------- ---------
Balances, March 31, 1995 -- -- $ 117
========= ========= =========
<CAPTION>
Common Stock
------------------------- Retained
Paid-in Earnings Total
Capital in Treasury Accumulated Shareholders'
Excess of par Stock (Deficit) Equity
------------- ----- --------- --------
<S> <C> <C> <C> <C>
Balances, December 31, 1993 $55,557 $(131) $(17,691) $51,133
Net loss (6,641) (6,641)
Cumulative effect of change in
accounting on unearned compensation 7,130
Common stock repurchase (2,997) (2,997)
Conversion of preferred stock 161 31 --
Allocation of shares 1,953
Current year imputed dividend on
allocated ESOP shares (2,430) (2,430)
Prior year preferred dividend not charged
to equity until paid (2,565) (2,565)
Cancellation of preferred stock and
issuance of common stock upon
termination of the ESOP 21,906 266 --
Exercise of stock options 75 75
Translation gain/loss 37 37
------- ------- -------- --------
Balances, December 31, 1994 77,699 (2,831) (29,290) 45,695
Net income 1,487 1,487
Common stock repurchase (446) (446)
Translation gain/loss (35) (35)
------- ------- -------- --------
Balances, March 31, 1995 $77,699 $(3,277) $(27,838) $ 46,701
======= ======= ========= ========
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1995 1994
-------- -------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,487 $(4,069)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 2,221 3,168
Foreign currency translations (35) --
Cumulative effect of accounting change -- 5,130
Increase (decrease) in deferred income taxes 1,135 (503)
Compensation expense for ESOP -- 85
(Gain) loss on sale or disposition of assets, net (4,587) 117
Reduction in residual value interests 450 217
Minority interest in net (loss) income of subsidiaries (27) 20
Decrease in payables and other liabilities (1,125) (5,666)
Increase in receivables and receivables from
affiliates 1,155 2,314
Cash distributions from affiliates in excess of
income accrued 119 109
(Increase) decrease in other assets (83) 248
Purchase of equipment for lease (254) (365)
Proceeds from sale of equipment for lease 11,105 1,182
Purchase of assets held for sale (17,152) (3,695)
Proceeds from sale of assets held for sale 128 3,695
Financing of assets held for sale to affiliates 9,800 2,953
Repayment of financing of assets held for sale
to affiliates (16,204) (2,953)
-------- --------
Net cash (used in) provided by operating activities (11,867) 1,987
-------- --------
Investing activities:
Additional investment in affiliates (1,354) (51)
Purchase of residual option (200) --
Proceeds from the disposition of residual options 2,059 89
Proceeds from the sale of leveraged leases 4,530 --
Proceeds from the maturity and sale of restricted
marketable securities -- 15,792
Purchase of restricted marketable securities -- (9,472)
Increase in restricted cash and cash equivalents (860) (6,257)
Acquisition of subsidiaries net of cash acquired -- (1,139)
-------- --------
Net cash provided by (used in) investing activities 4,175 (1,038)
-------- --------
Financing activities:
Proceeds from long-term equipment loans 85 --
Principal payments under loans -- (8,350)
Cash dividends paid on Preferred Stock -- (934)
Payments received from ESOP Trustee 928 834
Repurchase of treasury stock (446) --
Proceeds from exercise of stock options -- 19
-------- --------
Net cash provided by (used in) financing activities 567 (8,431)
-------- --------
Net decrease in cash and cash equivalents (7,125) (7,482)
Cash and cash equivalents at beginning of period 16,131 19,685
-------- --------
Cash and cash equivalents at end of period $ 9,006 $ 12,203
======== ========
Supplemental information:
Interest paid during the period $ 1,880 $ 2,535
======== ========
Income taxes paid during the period $ 20 $ 3,875
======== ========
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
1. General
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 March 31, 1995, and the statements
of operations and cash flows for the three months ended March 31, 1995,
and 1994. 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,
1994, on file at the Securities and Exchange Commission.
Certain amounts in the 1994 financial statements have been reclassified to
conform to the 1995 presentation.
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.
2. Equipment
The Company classifies assets as held for sale if the particular asset is
subject to a pending contract for sale, is held for sale to one or more
affiliated parties or third parties, or is being marketed for sale by the
Company's aircraft brokerage and services subsidiary("Aeromil"). At March
31, 1995, $25.1 million in transportation equipment was held for sale to
one or more affiliated parties or third parties and $0.3 million in
aircraft inventory was held for sale to third parties by Aeromil.
During the last three years, the Company has significantly downsized the
equipment portfolio, through the sale or disposal of underperforming and
nonperforming assets. The Company will continue to identify
underperforming and nonperforming assets for sale or disposal as
necessary.
Periodically, the Company will purchase groups of assets whose ownership
may be allocated among affiliated partnerships and the Company. Generally
in these cases, only assets that are on-lease will be purchased by the
affiliated partnerships. The Company will generally assume the ownership
and remarketing risks associated with off-lease equipment. Allocation of
the purchase price will be determined by a combination of the Company's
knowledge and assessment of the relevant equipment market, third party
industry sources, and recent transactions or published fair market value
references.
During the quarter ended March 31, 1995, the Company sold 40 railcars that
were a part of a group purchase in December 1994. These cars were
off-lease when purchased and remarketing efforts resulted in a sale in
which the Company realized a gain of approximately $0.2 million.
3. Debt
On March 28, 1995, the Company used surplus cash on hand to repay the
entire $16.2 million that was outstanding on its short-term equipment
acquisition loan facility on that date.
4. Shareholders' Equity
Effective February 1995, the Company adopted the Directors' 1995
Non-qualified Stock Option Plan which reserves 120,000 shares of the
Company's common stock for issuance to directors who are non-employees of
the Company. All options outstanding are exercisable at prices equal to
the closing price as of the date of grant. Vesting of options occurs in
three equal installments of 33 1/3% per year, initiating from the date of
the grant. During the three months ended March 31, 1995, 80,000 options
were granted under this plan at $2.63 per share.
<PAGE>
In February 1995, the Company announced that its Board of Directors
authorized the repurchase of up to $0.5 million of the Company's common
stock. The shares may be purchased in the open market or through private
transactions. The timing and amount of repurchases, which will be funded
through working capital and existing cash reserves, will depend on market
conditions and corporate requirements. Shares repurchased may be used for
corporate purposes, including option plans, or they may be retired. The
Company had repurchased the entire $0.5 million or 151,477 shares under
this program as of May 11, 1995.
During the first quarter of 1995, 129,400 common shares were repurchased
by the Company. Consequently, the total common shares outstanding
decreased to 11,570,273 at March 31, 1995, from the 11,699,673 outstanding
at December 31, 1994. Net income (loss) per common share was computed by
dividing net income (loss) to common shares by common stock equivalents
which included the weighted average number of shares and stock options
deemed outstanding during the period. The weighted average number of
shares and stock options deemed outstanding as of March 31, 1995 and 1994,
were 11,867,815 and 12,348,162, respectively.
5. Recent Developments
In January 1995, the Company entered into an agreement, through a new
equipment leasing and management subsidiary, to manage the operations of
Boston-based, privately-held American Finance Group ("AFG"). The new
entity, as a wholly-owned subsidiary of PLM Financial Services, Inc.
("FSI"), will acquire AFG's proprietary software and provide equipment
management and investor relations services to AFG's existing investor
programs. The Company has the right to terminate the contract subject to
certain terms and conditions any time on or after June 30, 1995.
Affiliates of AFG, which will change its name, will continue to be the
general partners of the existing programs. AFG currently manages a
portfolio of approximately $807 million of capital equipment (at original
cost), subject to primarily full payout leases, for its own account and
approximately 50,000 investors.
In January 1995, the registration statement for the Professional Lease
Management Income Fund I, L.L.C. ("LLC") became effective. FSI will serve
as the Manager for the new program. This product, organized as a Limited
Liability Company with a no front-end fee structure, began syndication in
the first quarter of 1995. There will be no compensation paid to FSI, or
any of its subsidiaries, for the organization of the LLC, the acquisition
of equipment, nor the negotiation of the leases. FSI will fund the cost of
organization, syndication and offering through use of operating cash and
will treat this as its investment in the LLC. The Company will amortize
its investment in the LLC over the life of the program. In return for its
investment, FSI will be entitled to a 15% interest in the cash
distributions and earnings of the LLC subject to certain allocation
provisions. FSI's interest in the cash distributions and earnings of the
LLC will increase to 25% after the investors have received distributions
equal to their invested capital. The Company will also be entitled to
monthly fees for equipment management services and reimbursement for
certain accounting and administrative services provided by the Company.
As of the date of this report, the LLC had raised $4.1 million in equity
and had met the legal requirements for breaking impound and entering the
equipment investment phase of the program.
<PAGE>
6. Subsequent Events
On April 27, 1995, the Company sold 82 railcars to the LLC at their
original cost plus capitalized repairs of $1.6 million. On May 9, 1995,
the Company sold an additional 232 railcars to the LLC at their original
cost plus capitalized repairs of $6.6 million. All 314 railcars were
included in assets held for sale at March 31, 1995.
On April 18, 1995, the Company purchased two commuter aircraft for a total
of $1.5 million and sold both aircraft for a gain of $0.3 million, net of
selling costs. On March 9, 1995, the Company purchased one commuter
aircraft for $0.6 million.
<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's
transportation equipment held for operating leases, which consists of aircraft,
marine containers, trailers, railcars and storage vaults at March 31, 1995, is
mainly equipment built prior to 1988. As the 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.
The Company also syndicates investment programs from which it earns
various fees and equity interests. The Company is currently marketing an
investment program structured as a limited liability company with a no front-end
fee structure. The Company invests the equity raised through syndication in
transportation equipment which is then managed on behalf of the investors. The
equipment management activities for this type of program generate equipment
management fees for the Company over the life of the program, typically 10-12
years.
The limited partnership agreements have allowed the Company to receive
fees for the acquisition and initial lease of the equipment. The LLC agreement
does not provide for acquisition and lease negotiation fees.
The limited partnership agreements generally entitle the Company to
receive between a 1% and 5% interest in the cash distributions and earnings of
the partnership subject to certain allocation provisions. The LLC agreement
entitles the Company to a 15% interest in the cash distributions and earnings of
the program subject to certain allocation provisions which will increase to 25%
after the investors have received distributions equal to their invested capital.
For the Three Months Ended March 31, 1995 vs. March 31, 1994
The following analysis reviews the operating results of the Company:
Revenue: For the three months
ended March 31,
1995 1994
(in thousands)
Operating leases $ 6,408 $ 7,272
Management fees 2,691 2,543
Partnership interests and
other fees 597 901
Acquisition and lease
negotiation fees 540 1,726
Commissions 1,029 1,517
Aircraft brokerage and services 1,022 804
Gain (loss) on the sale or
disposition of transportation
equipment, net 4,587 (117)
Other 244 321
-------- --------
Total revenues $ 17,118 $ 14,967
<PAGE>
The fluctuations in revenues for the three months ended March 31, 1995 from the
same period in 1994 are summarized and explained below.
Operating lease revenue: For the three months
ended March 31,
----------------------
1995 1994
---- ----
(in thousands)
By equipment type:
Trailers $ 3,039 $ 3,333
Aircraft 1,557 2,196
Marine vessels 558 1,235
Marine containers 154 240
Storage vaults 257 173
Railcars 843 95
------- -------
$ 6,408 $ 7,272
As of March 31, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $136.4 million, which was $67.0
million less than the original cost of equipment owned and held for operating
leases at March 31, 1994. The reduction in equipment, on an original cost basis,
is a consequence of the Company's strategic decision to dispose of certain
underperforming and nonperforming assets resulting in a 100% reduction in its
marine vessel fleet, a 26% net reduction in its marine container portfolio, a
35% net reduction in its aircraft portfolio, a 19% net reduction in its trailer
portfolio, and a 20% net reduction in its railcar portfolio compared to 1994.
Operating lease revenue will be impacted on an ongoing basis by the level of
assets held for operating lease and held for sale, which can earn lease revenue
for the Company.
The reduction in equipment available for lease is the primary reason
marine vessel, trailer, marine container, and aircraft revenue were all reduced
as compared to the prior year. Although the net cost of equipment in the railcar
portfolio decreased 20% from the 1994 period, railcar revenue increased $0.7
million in 1995 due to the purchase of 227 railcars in December of 1994, and 11
doublestack railcars which were not sold until March of 1995. Storage vault
revenue increased $0.1 million for the period ended March 31, 1995, compared to
the same period in 1994, due to additions of $0.6 million in new storage vaults
made during the fourth quarter of 1994.
Management fees:
For the three months Year
ended March 31, Liquidation
1995 1994 Phase Begins
---- ---- ----------
(in thousands)
Management fees by fund were:
EGF I $ 336 $ 363 1998
EGF II 238 299 1999
EGF III 295 392 2000
EGF IV 285 262 1999
EGF V 448 438 2000
EGF VI 430 422 2002
EGF VII 197 64 2003
AFG programs 180 -- --
Other programs 282 303 --
------- ------
$ 2,691 $2,543
Management fees are, for the most part, based on the gross 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 favorably influence management fees. The original cost of
the equipment under management, excluding equipment managed under the AFG
programs, (measured at original cost) amounted to $1.05 billion and $1.14
billion at March 31, 1995 and 1994, respectively. The increase in management
fees of $0.1 million resulted from a $0.2 million increase from the new January
1995 agreement with AFG to provide management services to their existing
investor programs, partially offset by a decrease in management fees generated
by gross revenues of the equipment growth funds which fell due to a net decrease
in managed equipment and a decrease in lease rates for certain types of
equipment.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of
the Company's affiliated partnerships. The net earnings and distribution levels
from the affiliated partnerships were $0.9 million for the periods ended March
31, 1995 and 1994, which were impacted by net reductions in the Company's
recorded residual values when partnership assets were sold and the reinvestment
proceeds were significantly less than the original investment in the sold
equipment. The net reductions were $0.3 million in 1995 and $0.2 million for the
same period in 1994. Residual income is recognized on residual interests based
upon the general partners' share of the present value of the estimated
disposition proceeds of the equipment portfolios of the affiliated partnerships.
During the quarter ended March 31, 1994, the Company also recorded $0.2 million
in debt financing fees earned for debt placed in affiliated partnerships.
No equipment was purchased by the LLC in the first quarter of
1995. Consequently, no residual interests were recorded related to the LLC.
Acquisition and lease negotiation fees:
On behalf of the various investor programs and partnerships, a total of
$4.4 million of equipment was purchased during the quarter ended March 31, 1995,
compared to $31.9 million purchased during the same quarter of 1994, resulting
in a $1.5 million decrease in acquisition and lease negotiation fees. This was
partially offset by a $0.3 million increase in acquisition fees related to AFG
related transactions.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the quarter ended March 31, 1995, program
equity raised for the equipment growth funds totaled $11.4 million compared to
$17.0 million during the same quarter during 1994, resulting in a decrease in
placement commissions of $0.5 million. The Company closed PLM Equipment Growth &
Income Fund VII ("EGF VII") syndication activities on April 30, 1995. As a
result of the Company's decision to market a new investment program with a no
front-end fee structure, commission revenue will be eliminated unless a new
program with a front-end fee is brought to market.
Aircraft brokerage and services:
Aircraft brokerage and services revenue represents revenue earned by
Aeromil, the Company's aircraft leasing, spare parts brokerage, and related
services subsidiary, acquired in February 1994. For the quarter ended March 31,
1995, Aeromil produced three months of revenue compared to two months during the
same quarter of 1994 resulting in a $0.2 million increase in Aeromil revenues.
Gain (loss) on the sale or disposition of transportation equipment,
net:
The $4.6 million gain on the sale or disposition of transportation
equipment for the quarter ended March 31, 1995 resulted mainly from a net gain
of $2.8 million from the sale or disposition of one marine vessel, 147 marine
containers, two commercial aircraft, one helicopter, 214 railcars, and 130
trailers, and from the sale of three option contracts, for railcar equipment,
for gains of $1.8 million. The $0.1 million net loss for the same period in 1994
resulted from the sale or disposition of approximately 142 trailers.
<PAGE>
Other:
Other revenues decreased $0.1 million in the quarter ended March 31,
1995, from the same period in 1994, due to a decrease in insurance underwriting
revenue earned from services provided to the Company's affiliated partnerships.
Costs, Expenses and Other:
For the three months
ended March 31,
1995 1994
(in thousands)
Operations support $ 6,820 $ 5,604
Depreciation and amortization 2,221 3,168
Commissions 1,141 1,556
General and administrative 2,670 2,354
Interest expense 2,315 2,291
Other (expense) income, net (27) 152
Interest income 678 803
Operations support:
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 $1.2 million (22%) for the quarter ended March 31, 1995, from the same
quarter in 1994. The increase resulted from $1.0 million in costs associated
with the operation of AFG, and a $0.4 million increase in accrued compensation
expense primarily to compensate employees for lost benefits resulting from the
termination of the Company's 401K plan, offset partially by a decrease in marine
charter expenses due to the sale of the entire owned marine vessel portfolio.
Depreciation and amortization:
Depreciation and amortization expense decreased $0.9 million (30%) for
the quarter ended March 31, 1995, as compared to the quarter ended March 31,
1994. The decrease resulted from the reduction in depreciable equipment.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the
quarter ended March 31, 1995, decreased $0.4 million (27%) from the same period
in 1994. The reduction is the result of a decrease in syndicated equity raised
in 1995 versus 1994.
General and administrative:
General and administrative expenses increased $0.3 million (13%) during
the quarter ended March 31, 1995, compared to the same period in 1994. The
increase resulted from an increase in accrued compensation expense primarily to
compensate employees for lost benefits resulting from the termination of the
Company's 401K plan.
Interest expense:
Interest expense was $2.3 million during the quarters ended March 31,
1995 and 1994. The reduction in debt levels in 1995 from the first quarter of
1994 was offset by increased interest rates.
<PAGE>
Other (expense) income:
Other (expense) income decreased $0.2 million in the quarter ended
March 31, 1995 from the same quarter of 1994 due to a reduction in the estimated
cost related to the Company's interest rate SWAP agreement caused by an increase
in interest rates in 1994.
Interest income:
Interest income decreased $0.1 million (16%) in the quarter ended March
31, 1995, compared to the same quarter in 1994. The reduced interest income
resulted from a $0.3 million reduction in interest income earned on the ESOP
cash collateral account due to the termination of the Company's ESOP in 1994,
and due to a $0.1 million reduction in interest from finance leases, offset
partially by a $0.3 million increase in interest income from short-term
investments which increased due to deposited proceeds from equipment sales.
Income taxes:
For the three months ended March 31, 1995, the provision for income
taxes was $1.1 million, which represented an effective rate of 43%. For the same
period in 1994, the $0.1 million tax benefit reflected the provision for the
Company's income net of the entire tax benefit on the ESOP dividend. The
corresponding effective rate for the 1994 period income tax benefit was 12%.
Cumulative effect of accounting change:
The adoption of SOP 93-6 in the quarter ended March 31, 1994, resulted
in a noncash charge to earnings of $5.1 million for the impact of the change in
accounting principle and is reflected as the "Cumulative effect of accounting
change" in the Consolidated Statement of Operations.
Net income (loss):
As a result of the foregoing, the three months ended March 31, 1995,
net income was $1.5 million resulting in net income to common shares of $0.13.
For the same period in 1994, net loss was $4.0 million. In addition, $0.6
million was required in 1994 for the imputed preferred dividend allocated on
ESOP shares resulting in a net loss to common shares of $4.6 million, with a per
share net loss to common shareholders of $0.37.
Liquidity and Capital Resources
Cash requirements historically have been satisfied through cash flow
from operations, borrowings, or sales of transportation equipment.
Liquidity in 1995 will depend, in part, on continued remarketing of the
equipment portfolio at similar lease rates, management of existing and newly
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 $45.0 million
senior loan facility with a syndicate of insurance companies and repaid the
prior facility. The Company has pledged substantially all of its equipment as
collateral to the loan facility. The facility provides that equipment sale
proceeds, from pledged equipment, or cash deposits will be placed into
collateral accounts or used to purchase additional equipment. The facility
requires quarterly interest only payments through March 31, 1997, with quarterly
principal payments of $2.1 million plus interest charges beginning June 30,
1997, through the termination of the loan in June 2001.
<PAGE>
In December 1994, the Company repaid $10.0 million of its
senior debt through the use of cash collateral from the sale of pledged
equipment.
At this time, the Company has no intention of paying down
additional senior debt if additional equipment is sold.
Bridge Financing: Assets acquired and 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 September 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 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% financing to the Company. The Company or
EGF VII uses working capital for the non-financed costs of these acquisitions.
The Company retains the difference between the net lease revenue earned and the
interest expense during the interim holding period since its capital is at risk.
As of May 11, 1995, the Company and EGF VII had no borrowings under this
facility.
The Company is working on having this facility extend to the
LLC. This is anticipated to occur in the second quarter of 1995.
On March 28, 1995, the Company used surplus cash on hand to
repay the entire $16.2 million that was outstanding on the facility on that
date.
(b) Portfolio Activities:
During the first quarter 1995, the Company generated proceeds of $11.1
million from the sale of equipment for lease. These net proceeds were placed in
a collateral account as required by the senior secured term loan agreement. In
March 1995, the lender consented to the Company's request to release $10.8
million in funds from the cash collateral account. The request to release funds
and the subsequent approval were based on the appraised fair market value of the
equipment portfolio and the related collateral coverage ratio.
Over the last three years, the Company has downsized the
equipment portfolio, through the sale or disposal of underperforming and
nonperforming assets. The Company will continue to identify underperforming and
nonperforming assets for sale or disposal as necessary.
(c) 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, $107.4 million had been raised for this partnership. EGF VII
closed April 30, 1995; hence, there will be no more equity raised for this
partnership.
The overall limited partnership syndication market has been
contracting. The Company's management is concerned with the continued
contraction of the equipment leasing syndication market and its effect on the
volume of partnership equity that can be raised. The Company's newly registered
and currently marketed no front-end fee syndication product was developed to
capture a larger share of the syndication market.
Management believes that 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 1 of Notes to Consolidated Financial Statements.
(A) Exhibits
None
(B) Reports on Form 8-K
January 11, 1995 - Announcement regarding the Company's
agreement with AFG to form a new equipment leasing and management company.
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: May 11, 1995
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