UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the fiscal quarter ended June 30, 1995.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
and 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 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 executive offices) (Zip Code)
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 (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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock - $.01
Par Value; Outstanding as of August 2, 1995 - 11,553,357 shares
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
(in thousands)
ASSETS
Cash and cash equivalents $ 25,574 $ 16,131
Receivables 5,434 5,747
Receivables from affiliates 10,111 7,001
Assets held for sale 1,949 17,644
Equity interest in affiliates 22,377 18,374
Transportation equipment held for operating leases 126,255 141,469
Less accumulated depreciation (69,292) (77,744)
56,963 63,725
Restricted cash and cash equivalents 6,723 1,409
Other 6,638 10,341
Total assets $ 135,769 $ 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 695 2,119
Subordinated debt 23,000 23,000
Payables and other liabilities 10,060 11,589
Deferred income taxes 18,322 16,165
Total liabilities 87,077 94,277
Minority interest 401 400
Shareholders' Equity:
Common stock, $.01 par value,
50,000,000 shares authorized, 11,553,357
issued and outstanding at June 30,
1995 and 11,699,673 at December 31,
1994 (excluding 1,018,034 and
871,057 shares held
in treasury at June 30, 1995 and
December 31, 1994, respectively) 117 117
Paid in capital, in excess of par 77,701 77,699
Treasury stock (3,325) (2,831)
74,493 74,985
Accumulated deficit (26,202) (29,290)
Total shareholders' equity 48,291 45,695
Total liabilities, minority interest,
and shareholders' equity $ 135,769 $ 140,372
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Operating leases $ 6,223 $ 7,975 $ 12,631 $ 15,247
Management fees 2,631 3,042 5,322 5,585
Partnership interests and other fees 1,732 940 2,329 1,841
Acquisition and lease negotiation fees 1,790 -- 2,330 1,726
Commissions 293 1,224 1,322 2,741
Aircraft brokerage and services 1,295 1,343 2,317 2,147
Gain (loss) on the sale or disposition
of assets, net 594 (348) 5,181 (465)
Other 278 305 522 626
Total revenues 14,836 14,481 31,954 29,448
Costs and expenses:
Operations support 5,732 5,978 12,552 11,582
Depreciation and amortization 2,166 3,137 4,387 6,305
Commissions 327 1,317 1,468 2,873
General and administrative 2,397 2,411 5,067 4,765
Total costs and expenses 10,622 12,843 23,474 25,525
Operating income 4,214 1,638 8,480 3,923
Interest expense 1,616 2,417 3,931 4,708
Other (expense) income, net (27) 118 (54) 270
Interest income 247 877 925 1,680
Income before income taxes 2,818 216 5,420 1,165
Provision for (benefit from) income taxes 1,210 (366) 2,325 (478)
Net income before cumulative effect
of accounting change 1,608 582 3,095 1,643
Cumulative effect of accounting change -- -- -- 5,130
Net income (loss) 1,608 582 3,095 (3,487)
Preferred dividend imputed on allocated shares -- 562 -- 1,124
Net income (loss) to common shares $ 1,608 $ 20 $ 3,095 $ (4,611)
Earnings (loss) per common share outstanding $ 0.13 $ 0.00 $ 0.26 $ (0.37)
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (in thousands)
<TABLE>
<CAPTION>
Loan to Common Stock
Employee ---------------------------------
Preferred Stock Paid-in Retained Total
Stock at Ownership Capital in Earnings Share-
Paid-in Plan At Excess Treasury Accumulated holders'
Amount (ESOP) Par of Par Stock (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $ 63,569 $(50,280) $ 109 $ 55,557 $ (131) $(17,691) $ 51,133
Net loss (6,641) (6,641)
Cumulative effect of
change in accounting on unearned
compensation 7,130 7,130
Common stock repurchases (2,997) (2,997)
Conversion of preferred stock (192) 161 31 --
Allocation of shares (4,091) 6,044 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 (59,286) 37,106 8 21,906 266 --
Exercise of stock options 75 75
Translation gain 37 37
Balances, December 31, 1994 -- -- 117 77,699 (2,831) (29,290) 45,695
Net income 3,095 3,095
Common stock repurchases (494) (494)
Exercise of stock options 2 2
Translation loss (7) (7)
Balances, June 30, 1995 -- -- $ 117 $ 77,701 $ (3,325) $(26,202) $ 48,291
</TABLE>
See accompanying notes to
these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
1995 1994
<S> <C> <C>
Operating activities:
Net income (loss) $ 3,095 $ (3,487)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,387 6,305
Foreign currency translations (7) --
Cumulative effect of accounting change -- 5,130
Increase (decrease) in deferred income taxes 2,157 (937)
Compensation expense for ESOP -- 170
(Gain) loss on sale or disposition of assets, net (5,181) 465
Undistributed residual value interests (112) 216
Minority interest in net income of subsidiaries 1 26
Decrease in payables and other liabilities (1,035) (6,028)
(Increase) decrease in receivables and receivables from affiliates (3,750) 2,082
Cash distributions from affiliates in excess of income accrued 393 255
Increase in other assets (272) (391)
Purchase of equipment for lease (3,721) (842)
Proceeds from sale of equipment for lease 16,506 2,763
Purchase of assets held for sale (21,134) (7,364)
Proceeds from sale of assets held for sale 27,241 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 provided by operating activities 12,164 2,058
Investing activities:
Additional investment in affiliates (4,284) (51)
Purchase of residual option (200) --
Proceeds from the disposition of residual options 2,059 89
Proceeds from the sale of leveraged leased assets 4,530 --
Proceeds from the maturity and sale of restricted
marketable securities -- 17,516
Purchase of restricted marketable securities -- (14,633)
Increase in restricted cash and restricted cash equivalents (5,314) (5,618)
Acquisition of subsidiaries net of cash acquired -- (1,013)
Net cash used in investing activities (3,209) (3,710)
Financing activities:
Proceeds from long-term equipment loans 85 45,079
Principal payments under loans (33) (45,182)
Cash dividends paid on Preferred Stock -- (934)
Payments received from ESOP Trustee 928 834
Repurchase of treasury stock (494) --
Proceeds from exercise of stock options 2 19
Net cash provided by (used in) financing activities 488 (184)
Net increase (decrease) in cash and cash equivalents 9,443 (1,836)
Cash and cash equivalents at beginning of period 16,131 19,685
Cash and cash equivalents at end of period $ 25,574 $ 17,849
Supplemental information:
Interest paid during the period $ 3,380 $ 4,521
Income taxes paid during the period $ 378 $ 4,007
</TABLE>
See accompanying notes to
these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 1995, the statements of operations for the
three and six months ended June 30, 1995 and 1994, and the statements of cash
flows for the six months ended June 30, 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, or is held for sale to one or more
affiliated parties or third parties. At June 30, 1995, $1.9 million in
transportation equipment was held for sale to one or more affiliated parties or
third parties.
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 six months ended June 30, 1995, the Company sold 56 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 $0.3 million. The Company also purchased two
commuter aircraft which were part of a group purchase for a total of $1.5
million, and sold both aircraft for a gain of $0.3 million.
3. Debt
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 30, 1995. The amendment extended the facility until September
30, 1995. The Company is currently negotiating with the lender to further extend
this agreement and believes this will be completed prior to the September 30,
1995 expiration date. The Company had no borrowings on this facility at June 30,
1995.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
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 nonemployees 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 six months ended June
30, 1995, 40,000 options were granted under this plan at $2.63 per share.
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
could be purchased in the open market or through private transactions with
working capital and existing cash reserves. Shares repurchased could be used for
corporate purposes, including option plans, or they could be retired. The
Company had purchased 146,977 shares under this program for $0.5 million as of
June 30, 1995.
During the six months ended June 30, 1995, 146,977 common shares were
repurchased by the Company, and options for 661 shares were exercised.
Consequently, the total common shares outstanding decreased to 11,553,357 at
June 30, 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 during the three
months ended June 30, 1995 and 1994, were 11,751,359 and 12,533,347,
respectively. The weighted average number of shares and stock options deemed
outstanding during the six months ended June 30, 1995 and 1994, were 11,806,322
and 12,440,755, 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 after June 30, 1995.
Affiliates of AFG, which will change its name, will continue to be the general
partners of the existing AFG programs. AFG currently manages a portfolio of
approximately $868 million of capital equipment (at original cost), subject to
primarily full payout leases, for its own account and approximately 50,000
investors.
The Company has entered into a securitization facility to borrow up to $80
million on a nonrecourse basis for a one year period that will be securitized by
primarily finance type leases which will generally have terms of four to five
years. The securitized debt will bear interest at treasuries plus 1% and will
become effective August, 1995.
In January 1995, the registration statement for the Professional Lease
Management Income Fund I, L.L.C. (LLC) became effective. FSI serves as the
manager for the new program. This program, organized as a limited liability
company with a no front-end fee structure, began syndication in the first
quarter of 1995. There is no compensation paid to FSI, or any of its
subsidiaries, for the organization and syndication of interests in the LLC, the
acquisition of equipment, nor the negotiation of the leases by the LLC. FSI is
funding the cost of organization, syndication and offering through use of
operating cash and is capitalizing these costs 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 is 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 is also entitled to monthly fees for equipment management
services and reimbursement for certain accounting and administrative services
provided by the Company.
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
5. Recent Developments (continued)
As of the date of this report, the LLC had raised $23.9 million in equity and
had met the legal requirements for breaking impound and entering the equipment
investment phase of the program.
6. Subsequent Event
In July 1995, the Company purchased one commuter aircraft for resale to a third
party at a cost of $725,000.
<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 June 30, 1995, is
mainly equipment built prior to 1988. As equipment ages, the Company continues
to monitor the performance of its assets on lease and market conditions for
leasing equipment in general in order to seek the best opportunities for
investment. 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 (LLC) with a no front-end fee
structure. The previously syndicated limited partnership programs have allowed
the Company to receive fees for the acquisition and initial lease of the
equipment. The LLC program does not provide for acquisition and lease
negotiation fees. 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 to 12
years. The limited partnership agreements generally entitle the Company to
receive a 1% or 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 June 30, 1995 versus June 30, 1994
The following analysis reviews the operating results of the Company:
Revenue: For the three months
ended June 30,
1995 1994
(in thousands)
Operating leases $ 6,223 $ 7,975
Management fees 2,631 3,042
Partnership interests and other fees 1,732 940
Acquisition and lease negotiation fees 1,790 --
Commissions 293 1,224
Aircraft brokerage and services 1,295 1,343
Gain (loss) on the sale or disposition of assets, net 594 (348)
Other 278 305
Total revenues $ 14,836 $ 14,481
<PAGE>
The fluctuations in revenues for the three months ended June 30, 1995 from the
same period in 1994 are summarized and explained below.
Operating lease revenue: For the three months
ended June 30,
1995 1994
(in thousands)
By equipment type:
Trailers $2,625 $3,763
Aircraft 1,516 2,537
Marine vessels 535 1,153
Marine containers 146 256
Storage vaults 243 191
Railcars 421 75
AFG 737 --
------ ------
$6,223 $7,975
As of June 30, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $126.3 million, which was $58.7
million less than the original cost of equipment owned and held for operating
leases at June 30, 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 54% net reduction in its marine container portfolio, a
35% net reduction in its aircraft portfolio, a 17% net reduction in its trailer
portfolio, and a 21% net reduction in its railcar portfolio compared to June 30,
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. The decrease in operating lease revenues as a result
of the reduction in equipment available for lease was partially offset by $0.7
million in operating lease revenues generated by AFG-related leases prior to
being sold to third parties, a $0.3 million increase in railcar lease revenues,
and a $0.1 million increase in storage vault revenues. Although the net cost of
railcar equipment in the railcar portfolio decreased 21% from the comparable
1994 period, railcar revenue increased $0.3 million due to the purchase of 227
railcars in December of 1994 generating higher revenue than the 11 doublestack
railcars did, which were owned in the prior year and had a higher net cost.
Storage vault revenue increased $0.1 million for the quarter ended June 30,
1995, compared to the same quarter of the prior year, 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 June 30, Liquidation
1995 1994 Phase Begins
(in thousands)
Management fees by fund were:
EGF I $ 347 $ 293 1998
EGF II 196 312 1999
EGF III 269 544 2000
EGF IV 234 410 1999
EGF V 438 618 2000
EGF VI 432 451 2002
EGF VII 207 110 2003
AFG programs 179 -- --
Other programs 329 304 --
------ ------
$2,631 $3,042
<PAGE>
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio for new
programs 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 $1.06 billion
and $1.13 billion at June 30, 1995 and 1994, respectively. The decrease in
management fees of $0.4 million resulted from 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, partially offset by a $0.2 million increase from the January
1995 agreement with AFG to provide management services to their existing
investor programs.
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 $1.7 million and $0.9 million for the
quarters ended June 30, 1995 and 1994, respectively. In 1995, the equity
interest recorded was impacted by net increases of $0.9 million in the Company's
recorded residual values which included $1.1 million in residual income recorded
for the equipment purchased for the LLC, and $0.3 million in residual income for
the AFG programs, partially offset by a decrease in residual income related to
other existing programs. Residual 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 portfolio of the affiliated partnership.
Net decreases in the recorded residual values result when partnership assets are
sold and the reinvestment proceeds are less than the original investment in the
sold equipment. There were no adjustments to the residual values recorded in the
same period of 1994.
Acquisition and lease negotiation fees:
On behalf of the equipment growth funds, a total of $24.2 million of
equipment was purchased during the quarter ended June 30, 1995, generating $1.3
million in acquisition and lease negotiation fees. In addition, $0.5 million in
acquisition and lease negotiation fees were generated by AFG-related purchases
during the quarter ended June 30, 1995. No purchases of equipment or AFG-related
transactions were made during the same quarter of 1994, resulting in a $1.8
million increase in acquisition and lease negotiation fees in the quarter ended
June 30, 1995 from the prior year comparable period.
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 June 30, 1995, program
equity raised for the equipment growth funds totaled $3.2 million compared to
$13.6 million during the same quarter during 1994, resulting in a decrease in
placement commissions of $0.9 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 was $1.3 million during both
the quarters ended June 30, 1995 and 1994 and represents revenue earned by
Aeromil, the Company's aircraft leasing, spare parts brokerage, and related
services subsidiary, acquired in February 1994.
Gain (loss) on the sale or disposition of assets, net:
During the quarter ended June 30, 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. Additional net gains on the sales or
dispositions of assets for the quarter ended June 30, 1995 of $0.3 million
resulted mainly from the sales or dispositions of 363 marine containers, one
commuter aircraft, two railcars, 10 storage vaults, and 225 trailers. The $0.3
million net loss for the same period in 1994 resulted from the sale or
disposition of trailers and marine containers.
<PAGE>
Costs, Expenses and Other:
For the three months
ended June 30,
1995 1994
(in thousands)
Operations support $ 5,732 $ 5,978
Depreciation and amortization 2,166 3,137
Commissions 327 1,317
General and administrative 2,397 2,411
Interest expense 1,616 2,417
Other (expense) income, net (27) 118
Interest income 247 877
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)
decreased $0.2 million (4%) for the quarter ended June 30, 1995, from the same
quarter in 1994. The decrease resulted from decreases in Aeromil-related
operational expenses and a decrease in marine charter expenses due to the sale
of the Company's marine vessel, offset partially by $1.2 million in costs
associated with the operation of AFG which was not a part of operations in 1994.
Depreciation and amortization:
Depreciation and amortization expense decreased $1.0 million (31%) for
the quarter ended June 30, 1995, as compared to the quarter ended June 30, 1994.
The decrease resulted from the reduction in depreciable equipment discussed in
the operating lease revenue section.
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 June 30, 1995, decreased $1.0 million (75%) from the same period
in 1994. The reduction is the result of a decrease in syndicated equity raised
for the equipment growth funds during the quarter ended June 30, 1995 versus the
same quarter in 1994. With the closing of syndication efforts for EGF VII,
commission costs related to the LLC will be capitalized as part of the Company's
investment in the LLC program.
Interest expense:
Interest expense decreased $0.8 million (33%) during the quarter ended
June 30, 1995, compared to the same period in 1994, due to the reduction in debt
levels in 1995 from the second quarter of 1994, partially offset by increased
interest rates.
Other (expense) income:
Other (expense) income decreased $0.1 million in the quarter ended June
30, 1995, from the same quarter of 1994, due to fluctuations in items comprising
other income (expense).
Interest income:
Interest income decreased $0.6 million (72%) in the quarter ended June
30, 1995, compared to the same quarter in 1994 from a reduction in interest
income earned on the ESOP cash collateral account which existed prior to the
termination of the Company's ESOP at the end of 1994.
Income taxes:
For the three months ended June 30, 1995, the provision for income
taxes was $1.2 million, which represented an effective rate of 43%. For the same
period in 1994, the $0.4 million tax benefit reflected the provision for the
Company's income net of the tax benefit on the ESOP dividend.
Net income:
As a result of the foregoing, the three months ended June 30, 1995 net
income was $1.6 million resulting in net income to common shares of $0.13. For
the same period in 1994, net income was $0.6 million. In addition, $0.6 million
was required in 1994 for the imputed preferred dividend allocated on ESOP shares
resulting in essentially no income to common shareholders, and essentially no
income per common share.
For the Six Months Ended June 30, 1995 versus June 30, 1994
The following analysis reviews the operating results of the Company:
Revenue: For the six months
ended June 30,
1995 1994
(in thousands)
Operating leases $ 12,631 $ 15,247
Management fees 5,322 5,585
Partnership interests and other fees 2,329 1,841
Acquisition and lease negotiation fees 2,330 1,726
Commissions 1,322 2,741
Aircraft brokerage and services 2,317 2,147
Gain (loss) on the sale or disposition of assets, net 5,181 (465)
Other 522 626
Total revenues $ 31,954 $ 29,448
The fluctuations in revenues for the six months ended June 30, 1995 from the
same period in 1994 are summarized and explained below.
Operating lease revenue: For the six months
ended June 30,
1995 1994
(in thousands)
By equipment type:
Trailers $ 5,380 $ 7,096
Aircraft 3,073 4,733
Marine vessels 1,092 2,388
Marine containers 300 496
Storage vaults 500 364
Railcars 1,263 170
AFG 1,023 --
------- -------
$12,631 $15,247
As of June 30, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $126.3 million, which was $58.7
million less than the original cost of equipment owned and held for operating
leases at June 30, 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 54% net reduction in its marine container portfolio, a
35% net reduction in its aircraft portfolio, a 17% net reduction in its trailer
portfolio, and a 21% 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. The decrease in operating lease revenues as a result
of the reduction in equipment available for lease was partially offset by a $1.0
million increase in operating lease revenues generated by AFG-related leases, a
$1.1 million increase in railcar lease revenues, and a $0.1 million increase in
storage vault revenues. Although the net cost of railcar equipment in the
railcar portfolio decreased 21% from the comparable 1994 period, railcar revenue
increased $1.1 million due to the purchase of 227 railcars in December of 1994
generating higher revenue than the 11 doublestack railcars did which were sold
in March 1995, and had a higher net cost. Storage vault revenue increased $0.1
million for the six months ended June 30, 1995, compared to the same period in
the prior year, due to additions of $0.6 million in new storage vaults made
during the fourth quarter of 1994.
Management fees: For the six months Year
ended June 30, Liquidation
1995 1994 Phase Begins
(in thousands)
Management fees by fund were:
EGF I $ 683 $ 656 1998
EGF II 434 611 1999
EGF III 564 936 2000
EGF IV 519 672 1999
EGF V 886 1,056 2000
EGF VI 862 873 2002
EGF VII 404 174 2003
AFG programs 359 -- --
Other programs 611 607 --
------ ------
$5,322 $5,585
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 $1.06 billion and $1.13
billion at June 30, 1995 and 1994, respectively. The decrease in management fees
of $0.3 million resulted from 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,
partially offset by $0.4 million increase from the January 1995 agreement with
AFG to provide management services to their existing investor programs.
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 $2.3 million and $1.8 million for the
periods ended June 30, 1995 and 1994, respectively, which were impacted by net
increases/decreases in the Company's recorded residual values. In 1995, the
equity interest recorded was impacted by net increases of $0.6 million in the
Company's recorded residual values which included $1.1 million in residual
income recorded for the equipment purchased for the LLC, and $0.4 million in
residual income for the AFG programs, offset partially by a decrease in residual
income related to other existing programs. A net decrease in the recorded
residual values of $0.2 million was recorded 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. Net decreases in the
recorded residual values result when partnership assets are sold and the
reinvestment proceeds are less than the original investment in the sold
equipment. During the quarter ended June 30, 1994, the Company also recorded
$0.2 million in debt financing fees earned for debt placed in affiliated
partnerships.
<PAGE>
Acquisition and lease negotiation fees:
Acquisition and lease negotiation fees increased $0.6 million during
the six months ended June 30, 1995 as compared to the same period in the prior
year, due to $0.8 million in acquisition and lease negotiation fees generated
from AFG-related equipment purchases, partially offset by a $0.2 million
decrease in fees due to a decrease of $3.3 million in equipment purchases by the
equipment growth funds as compared to the prior year.
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 six months ended June 30, 1995,
program equity raised for the equipment growth funds totaled $14.6 million
compared to $30.6 million during the same period during 1994, resulting in a
decrease in placement commissions of $1.4 million. The Company closed 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 increased $0.2 million during
the six months ended June 30, 1995, compared to the same period of 1994, and
represents revenue earned by Aeromil, the Company's aircraft leasing, spare
parts brokerage, and related services subsidiary, acquired in February 1994.
Gain (loss) on the sale or disposition of assets, net:
The $5.2 million net gain recorded during the six months ended June 30,
1995 included a gain of $1.8 million for the sale of three option contracts for
railcar equipment, and gains of $3.1 million from the sale or disposition of one
marine vessel, 510 marine containers, two commercial aircraft, one commuter
aircraft, one helicopter, 216 railcars, 10 storage vaults and 355 trailers.
Additionally, during the six months ended June 30, 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. The $0.5 million net loss for the
same period in 1994 resulted from the sale or disposition of trailers and marine
containers.
Other:
Other revenues decreased $0.1 million in the six months ended June 30,
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 six months
ended June 30,
1995 1994
(in thousands)
Operations support $ 12,552 $ 11,582
Depreciation and amortization 4,387 6,305
Commissions 1,468 2,873
General and administrative 5,067 4,765
Interest expense 3,931 4,708
Other (expense) income, net (54) 270
Interest income 925 1,680
<PAGE>
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 $1.0 million (8%) for the six months ended June 30, 1995, from the
same period in 1994. The increase resulted from $2.2 million in costs associated
with the operation of AFG, and a $0.3 million increase in accrued compensation
expense primarily to compensate employees for lost benefits resulting from the
termination of the Company's 401(k) plan, offset partially by a decrease in
marine charter expenses due to the sale of the entire owned marine vessel
portfolio, and a decrease in Aeromil expenses due to lower operational expenses
in the current year.
Depreciation and amortization:
Depreciation and amortization expense decreased $1.9 million (30%) for
the six months ended June 30, 1995, as compared to the six months ended June 30,
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 six
months ended June 30, 1995, decreased $1.4 million (49%) from the same period in
1994. The reduction is the result of a $16.0 million decrease in syndicated
equity raised for the equipment growth funds in the six months ended June 30,
1995 versus the same period in 1994. With the closing of syndication efforts for
EGF VII, commission costs related to the LLC will be capitalized as part of the
Company's investment in the LLC program.
General and administrative:
General and administrative expenses increased $0.3 million (6%) during
the period ended June 30, 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 401(k) plan.
Interest expense:
Interest expense decreased $0.8 million (17%) during the six months
ended June 30, 1995, compared to the same period in 1994 due to the reduction in
debt levels in 1995 from the same period in 1994, partially offset by increased
interest rates.
Other (expense) income:
Other (expense) income decreased $0.3 million in the six months ended
June 30, 1995, from the same period of 1994, due to fluctuations in items
comprising other income (expense).
Interest income:
Interest income decreased $0.8 million (45%) in the six months ended
June 30, 1995, compared to the same period in 1994 from a reduction in interest
income earned on the ESOP cash collateral account which existed prior to the
termination of the Company's ESOP at the end of 1994.
Income taxes:
For the six months ended June 30, 1995, the provision for income taxes
was $2.3 million, which represented an effective rate of 43%. For the same
period in 1994, the $0.5 million tax benefit reflected the provision for the
Company's income net of the tax benefit on the ESOP dividend.
<PAGE>
Cumulative effect of accounting change:
The adoption of SOP 93-6 in the six months ended June 30, 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 Statements of Operations.
Net income (loss):
As a result of the foregoing, the six months ended June 30, 1995 net
income was $3.1 million resulting in net income per common share of $0.26. For
the same period in 1994, net loss was $3.5 million. In addition, $1.1 million
was required in 1994 for the imputed preferred dividend allocated on ESOP shares
resulting in a net loss to common shareholders of $4.6 million, or $0.37 per
common share outstanding.
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.
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.
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 30, 1995. 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. The Company is currently
negotiating with the lender to further extend this agreement and believes this
will be completed prior to the September 30, 1995 expiration date.
This facility, which is shared with EGF VII and the LLC, 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 all three parties. The
Company, EGF VII or the LLC uses working capital for the nonfinanced 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 August 2, 1995, the Company and EGF VII had no
borrowings under this facility, and the LLC had $10.1 million in borrowings
under this facility.
Securitized Debt: The Company has entered into a securitization
facility to borrow up to $80 million on a non-recourse basis for a one year
period that will be securitized by primarily finance type leases which will
generally have terms of four to five years. The securitized debt will bear
interest at treasuries plus 1% and will become effective August, 1995.
<PAGE>
(b) Portfolio Activities:
During the six months ended June 30, 1995, the Company generated
proceeds of $16.5 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 earned fees from syndication activities related to EGF VII
during the six months ended June 30, 1995. Total equity raised since inception
for this partnership was $107.4 million through April 30, 1995 when the program
closed. 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>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 1 of Notes to Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held May 18, 1995, three proposals were
submitted to a vote of the Company's security holders.
1. J. Alec Merriam and Robert L. Pagel were re-elected to the Board of
Directors of the Company. The votes cast in the election were as follows:
Nominee For Votes Withheld
J. Alec Merriam 5,341,518 4,192,689
Robert L. Pagel 5,343,635 4,190,572
Directors whose terms continued after the Annual Meeting of Stockholders held on
May 18, 1995 are as follows:
Class III (Terms expire in 1996)
Allen V. Hirsch
Harold R. Somerset
Class I (Terms expire in 1997)
Walter E. Hoadley
Robert N. Tidball
2. The proposed 1995 Management Stock Compensation Plan was not approved.
Votes
-----
Broker
For Against Abstentions Non Votes
2,921,438 4,499,609 191,067 1,922,093
3. The proposal by one shareholder for the Company to embrace as a corporate
policy the concept of preserving natural resources to the extent feasible and to
take no actions, unless absolutely necessary for corporate survival, that would
greatly harm natural resources and the creatures that exist herein, was not
approved.
Votes
-----
Broker
For Against Abstentions Non Votes
696,453 5,621,324 1,189,276 2,027,154
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
None.
(B) Reports on Form 8-K
None.
<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: August 2, 1995
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 25,574
<SECURITIES> 0
<RECEIVABLES> 5,434
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 126,255
<DEPRECIATION> 69,292
<TOTAL-ASSETS> 135,769
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<BONDS> 0
<COMMON> 74,493
0
0
<OTHER-SE> (26,202)
<TOTAL-LIABILITY-AND-EQUITY> 135,769
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<TOTAL-REVENUES> 31,954
<CGS> 0
<TOTAL-COSTS> 23,474
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<INCOME-PRETAX> 5,420
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