UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 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 executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
--------------------
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 25, 1996 was $37,019,374.
The number of shares outstanding of the issuer's classes of common
stock as of March 25, 1996: Common Stock, $.01 Par Value -- 10,805,861 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders are incorporated by reference in Part III.
<PAGE>
PLM INTERNATIONAL, INC.
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1 Business 2
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8 Financial Statements and Supplemental Data 22
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
Part III
Item 10 Directors and Executive Officers of the Company 22
Item 11 Executive Compensation 22
Item 12 Security Ownership of Certain Beneficial Owners
and Management 22
Item 13 Certain Relationships and Related Transactions 22
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 22
<PAGE>
PART I
ITEM 1. BUSINESS
A. Introduction
(i) Background
PLM International, Inc. (PLM International or the Company or PLMI), a Delaware
corporation, is a transportation equipment leasing company specializing in the
management of equipment on operating leases domestically and internationally.
The Company is also a leading sponsor of syndicated investment programs
organized to invest primarily in transportation equipment. The Company operates
and manages approximately $1.3 billion of transportation equipment and related
assets for its account and various investment partnerships and third party
accounts. An organization chart for PLM International indicating the
relationships of significant active legal entities is shown in Table 1:
PLM International, Inc., a Delaware corporation, the parent corporation.
Subsidiaries of PLM International, Inc.:
PLM Financial Services, Inc., a Delaware corporation; PLM Railcar Management
Services, Inc., a Delaware corporation; PLM Worldwide Management Services
Limited, a Bermuda corporation; Aeromil Holdings, Inc., a California
corporation; and American Finance Group, Inc., a Delaware corporation.
Subsidiaries of PLM Financial Services, Inc.
PLM Investment Management, Inc., a California corporation; PLM Securities Corp.,
a California corporation; and PLM Transportation Equipment Corporation, a
California corporation.
A subsidiary of PLM Railcar Management Services, Inc. is PLM Railcar Management
Services Canada, Ltd., an Alberta corporation.
A subsidiary of PLM Worldwide Management Services Limited is Transportation
Equipment Indemnity Company, Ltd., a Bermuda corporation.
A subsidiary of American Finance Group, Inc. is AFG Credit Corp., a Delaware
corporation.
Note: All entities are 100% owned except Aeromil Holdings, Inc., which is 80%
owned.
<PAGE>
(ii) Description of Business
PLM International owns or manages a portfolio of transportation equipment
consisting of approximately 35,000 individual items with a combined original
cost of approximately $1.3 billion (refer to Table 2). The Company syndicates
investment programs and manages equipment and related assets for approximately
75,000 investors in various limited partnerships or investment programs.
<TABLE>
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1995
(original cost in millions)
<CAPTION>
Professional
Lease Management Equipment Other
Income Fund 1 Growth Funds Investor
PLMI Programs Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aircraft and aircraft engines $ 53 $ 18 $ 327 $ 10 $ 408
Marine vessels -- 12 245 -- 257
Railcars/locomotives 1 13 126 56 196
Trailers/tractors 53 7 84 17 161
Marine containers 5 -- 96 7 108
Mobile offshore drilling units (MODUs) -- -- 87 -- 87
Other 26 7 42 6 81
----------------------------------------------------------------------
Total $ 138 $ 57 $ 1,007 $ 96 $ 1,298
======================================================================
</TABLE>
(iii) Equipment Owned
The Company leases its owned equipment to a wide variety of lessees. Certain
equipment is leased and operated internationally. In general, the equipment
leasing industry is an alternative to direct equipment ownership. It is a highly
competitive industry offering lease terms ranging from day-to-day to a term
equal to the economic life of the equipment (full payout). Generally, leases for
a term less than the economic life of the equipment are known as operating
leases because the aggregate lease rentals accruing over the initial lease
period are less than the cost of the leased equipment. PLM International's focus
is on providing equipment under operating leases. This type of lease generally
commands a higher lease rate than full payout leases because of the flexibility
it affords the lessee. This emphasis on operating leases requires highly
experienced management and support staff, as the equipment must be periodically
re-leased to continue generating rental income, and thus, to maximize the
long-term return on investment in the equipment. In appropriate circumstances,
certain equipment, mainly marine containers, is leased to utilization-type pools
which include equipment owned by unaffiliated parties. In such instances,
revenues received by the Company consist of a specified percentage of the
pro-rata share of lease revenues generated by the pool operator from leasing the
pooled equipment to its customers, after deducting certain direct operating
expenses of the pooled equipment.
With respect to trailer leasing activities, the Company markets
over-the-road trailers through its subsidiary PLM Rental, Inc. (PLM Rental) on
short-term leases through rental yards located in 10 major U.S. cities. These
rental facilities provide the Company with a base of operations in selected
markets to facilitate its operating lease strategy. The Company also markets
intermodal trailers to railroads and shippers on short-term arrangements through
a licensing agreement with a short line railroad. In addition, the Company
markets on-site storage units protected by a patented security system through
both existing facilities and PLM Rental's facilities.
Over the past five years, approximately 94.0% of all equipment (owned
and managed) on average, was operating under a lease agreement or in PLM trailer
rental yards.
<PAGE>
(iv) Subsidiary Business Activities
(a) PLM Financial Services, Inc.
PLM Financial Services, Inc. (FSI) along with its primary subsidiaries: PLM
Transportation Equipment Corporation (TEC); PLM Securities Corp. (PLM
Securities); and PLM Investment Management, Inc. (IMI), focus on the
development, syndication, and management of investment programs, including
limited liability companies, limited partnerships, and private placement
programs, which acquire and lease primarily used transportation and related
equipment. Depending on the objectives of the particular program, the programs
feature various combinations of current cash flow and income tax benefits
through investments in long-lived, low-obsolescence transportation and related
equipment. Programs sponsored by FSI are offered nationwide through a network of
unaffiliated national and regional broker-dealers and financial planning firms.
FSI has completed the offering of 16 public programs which have invested
in diversified portfolios of transportation and related equipment. From 1986
through April of 1995, FSI offered the PLM Equipment Growth Fund (EGFs)
investment series. During 1995, FSI introduced Professional Lease Management
Income Fund I, L.L.C., a Limited Liability Company (Fund I), with a no front-end
fee structure. Fund I is currently being syndicated by PLM Securities. Both the
EGF and Fund I programs are designed to invest primarily in used transportation
equipment for lease in order to generate current operating cash flow for (i)
distribution to investors and (ii) reinvestment into additional used
transportation equipment. An objective of the programs is to maximize the value
of the equipment portfolio and provide cash distributions to investors by
acquiring and managing equipment for the benefit of the investors. The
cumulative equity raised by PLM International for its affiliated investment
programs now stands at $1.7 billion. The Company has raised more syndicated
equity for equipment leasing programs than any other syndicator in United States
history. Annually, since 1983, PLM International has been one of the top three
equipment leasing syndicators in the United States. Annually, from 1990 through
1995, the Company has ranked as the number one or two diversified transportation
equipment leasing syndicator in the United States. PLMI's market share for all
syndicated equipment leasing programs increased to 22% in 1995 from 17% in 1994.
In 1995, the Company was the number two equipment leasing syndicator.
EGFs I, II, and III are listed for trading on the American Stock
Exchange. Under the Internal Revenue Code (the Code) these Partnerships are
classified as Publicly Traded Partnerships. The Code treats all Publicly Traded
Partnerships as corporations if they remain publicly traded after December 31,
1997. Treating the Partnerships as corporations will mean the Partnerships
themselves will become taxable, rather than "flow through" entities. As taxable
entities, the income of the Partnerships will be subject to federal taxation at
both the partnership level and at the investor level to the extent income is
distributed to an investor. In order to avoid taxation of the Partnerships as
corporations, the General Partner has applied for delisting of the Partnerships'
depositary units from the American Stock Exchange and anticipates receiving
approval no later than April 15, 1996. While the Partnerships' depositary units
will no longer be publicly traded on a national stock exchange, the General
Partner will continue to manage the equipment of the Partnerships, prepare and
distribute quarterly and annual reports and Forms 10-Q and 10-K in accordance
with the Securities and Exchange Commission requirements, and continue to
provide pertinent tax reporting forms and information to unitholders.
Due to the changes in the federal tax laws causing Publicly Traded
Partnerships traded on a national exchange to be taxed as corporations after
December 31, 1997, rather than treated as flow through entities, the management
of PLM International structured EGFs IV, V, VI, and PLM Equipment Growth and
Income Fund VII (EGF VII) so that they will not be publicly traded. Fund I is
not and will not be publicly traded.
Investment in and Management of the EGFs, Other Limited Partnerships, and
Private Placements
FSI earns revenues in connection with the organization, marketing, and
management of the limited partnerships and private placement programs. During
the syndication of each of the EGFs, placement fees and commissions,
representing approximately 9% of equity raised were generally earned upon the
purchase by investors of partnership units. A significant portion of these
placement fees were reallowed to the originating broker-dealer. Equipment
acquisition, lease negotiation, and debt placement fees are generally earned
through the purchase, initial lease, and financing of equipment, and are
generally recognized as revenue when FSI completed substantially all of the
services required to earn the fees, generally when binding commitment agreements
are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in various agreements and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, FSI,
as general partner, is generally granted an interest (between 1% and 5%) in the
earnings and cash distributions of the program. FSI recognizes as partnership
interests its equity interest in the earnings of the partnerships after
adjusting such earnings to reflect the use of straight-line depreciation and the
effect of special allocations of the program's gross income allowed under the
respective partnership agreements.
FSI also recognizes as income its interest in the estimated net
residual value of the assets of the partnerships as they are purchased. The
amounts recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnership's equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in other fees at the present value of
FSI's share of estimated disposition proceeds. As required by FASB Technical
Bulletin 1986-2, the discount on FSI's residual value interests is not accreted
over the holding period. FSI reviews the carrying value of its residual
interests at least annually in relation to expected future market values for the
underlying equipment in which it holds residual interests, for the purpose of
assessing recoverability of recorded amounts. When a limited partnership is in
the liquidation phase, distributions received by FSI will be treated as
recoveries of its equity interest in the partnership until the recorded residual
is eliminated. Any additional distributions received will be treated as residual
interest income.
In accordance with certain investment program and partnership
agreements, FSI receives reimbursement for organization and offering costs
incurred during the offering period. The reimbursement is generally between 1.5%
and 3.0% of equity raised. The investment program reimburses FSI ratably over
the offering period of the investment program based on equity raised. In the
event organizational and offering costs incurred by FSI as defined by the
partnership agreement exceed amounts allowed, the excess costs are capitalized
as an additional investment in the related partnership and amortized over the
estimated life of the partnership. These additional investments are reflected as
equity interest in affiliates in the accompanying consolidated balance sheets.
Investment in and Management of Limited Liability Companies
During the year ended December 31, 1995, Fund I was formed as a new investor
program. FSI serves as the Manager for the new program. This product, 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 for organization of
Fund I, raising equity, acquisition of equipment, or negotiation of the initial
leases. FSI is funding the cost of organization, syndication, and offering and
is treating this as its investment in Fund I. FSI will amortize its investment
in Fund I over the life of the program. In return for its investment, FSI is
generally entitled to a 15% interest in the cash distributions and earnings of
Fund I subject to certain allocation provisions. FSI's interest in the cash
distributions and earnings of Fund I will increase to 25% after the investors
have received distributions equal to their invested capital. FSI is also
entitled to monthly fees for equipment management services and reimbursement for
certain accounting and administrative services it provides.
As of March 25, 1996, Fund I had raised $81.3 million in equity from
third party investors.
(b) PLM Transportation Equipment Corporation
PLM Transportation Equipment Corporation (TEC) is responsible for the selection,
negotiation and purchase, initial lease and re-lease, and sale of equipment.
This process includes identification of prospective lessees, analyses of
lessees' credit worthiness, negotiation of lease terms, negotiations with
equipment owners, manufacturers, or dealers for the purchase, delivery, and
inspection of equipment, preparation of debt offering materials, and negotiation
of loans. TEC or its wholly-owned subsidiary, TEC AcquiSub, Inc., also purchases
transportation equipment for PLM International's own portfolio and on an interim
basis, for resale to various affiliated limited partnerships at cost or to third
parties.
<PAGE>
(c) PLM Securities Corp.
PLM Securities Corp. (PLM Securities) markets the investment programs through
unaffiliated broker-dealers and financial planning firms throughout the United
States. Sales of investment programs are not made directly to the public by PLM
Securities. During 1995 and 1994, approximately 200 selected broker-dealer firms
with over 20,000 agents sold investment units in Fund I and EGF VII. Wheat First
Butcher Singer accounted for 15% of equity sales in 1995. Royal Alliance
Associates and Wheat First Butcher Singer accounted for approximately 13% and
11.5%, respectively, of 1994 equity sales. No other selected agent has accounted
for the sale of more than 10% of the units in these investment programs during
these periods. The marketing of the investment programs is supported by PLM
Securities representatives who deal directly with account executives of
participating broker-dealers.
During the marketing of the EGFs, PLM Securities earned a placement fee
for the sale of investment units of which a significant portion was reallowed to
the originating broker-dealer. Placement fees vary from program to program, but
for EGF VII, PLM Securities received a fee of up to 9% of the capital
contributions to the partnership, of which commissions of up to 8% were
reallowed to the unaffiliated selling broker-dealer, with the difference being
retained by PLM Securities. Fund I has a no front-end fee structure. FSI funds
all organization costs and placement fees associated with the Fund I program as
its investment. Thus, 100% of syndicated equity is invested in equipment. The
Company's invested funds will equal approximately 14% of the equity raised in
the Fund I program, assuming full subscription of the $100 million registration.
The Company raised investor equity totaling approximately $107.4 million
for its EGF VII program through April 1995 when the program closed. The Company
has raised investor equity totaling approximately $81.3 million for its Fund I
program through March 25, 1996.
(d) PLM Investment Management, Inc.
PLM Investment Management, Inc. (IMI) manages equipment owned by the Company and
by investors in the various investment programs. The equipment consists of the
following: aircraft (commercial, commuter, and corporate); aircraft engines;
aircraft rotables; railcars and locomotives; tractors (highway); trailers
(highway and intermodal, refrigerated, and non refrigerated); marine containers
(refrigerated and non refrigerated); marine vessels (dry bulk carriers and
product tankers); and mobile offshore drilling units (rigs). IMI is obligated to
invoice and collect rents, arrange for maintenance and repair of the equipment,
pay operating expenses, debt service, and certain taxes, determine that the
equipment is used in accordance with all operative contractual arrangements,
arrange insurance, correspond with program investors, provide or arrange for
clerical and administrative services necessary to the operation of the
equipment, prepare quarterly and annual financial statements and tax information
materials, and make distributions to investors. IMI also monitors equipment
regulatory requirements and compliance with investor program debt covenants.
(e) American Finance Group, Inc.
In 1995, the Company established a new wholly-owned equipment leasing and
management subsidiary, American Finance Group, Inc. (AFG), and entered into an
agreement to manage certain operations of Boston-based, privately-held American
Finance Group, L.P. (AFG, L.P.). During 1995, the Company provided management
services for investor programs of AFG, L.P. for which the Company earned
management fees and other revenues. In January 1996, the agreement was modified
to exclude management of AFG, L.P.'s investor programs. The modified agreement
allowed the Company to assume the lease origination and servicing operations,
the rights to manage a significant offshore investment program, and certain
furniture, computers, and software of AFG, L.P. Going forward, AFG will
originate and manage lease transactions on new equipment that will be financed
by a securitization facility for the Company's own account or sold to an
offshore investment program or other investors.
(f) PLM Railcar Management Services, Inc.
PLM Railcar Management Services, Inc. (RMSI) markets and manages railcar fleets.
RMSI is also involved in negotiating the purchase and sale of railcars. PLM
Railcar Management Services Canada, Limited, a wholly-owned subsidiary of RMSI
headquartered in Calgary, Alberta, Canada, provides fleet management services to
the owned and managed railcars operating in Canada.
<PAGE>
(g) Transportation Equipment Indemnity Company, Ltd.
Transportation Equipment Indemnity Company, Ltd. (TEI) is a Bermuda-based
insurance company licensed to underwrite a full range of insurance products
including property and casualty risk. TEI's primary objective is to minimize the
long-term cost of insurance coverages for all owned and managed equipment. A
substantial portion of the risks underwritten by TEI are reinsured with
unaffiliated underwriters.
(h) PLM Rental, Inc.
PLM Rental markets trailers and storage units owned by the Company and its
affiliated investor programs on short-term leases through a network of rental
facilities. Presently, facilities are located in Atlanta, Chicago, Dallas,
Detroit, Indianapolis, Kansas City, Miami, Newark, Orlando, and Tampa.
All of the above subsidiaries are 100% owned directly or indirectly by
PLM International.
(i) Aeromil Holdings, Inc.
Aeromil Holdings, Inc. (Aeromil) is 80% owned by the Company (see Note 2 to the
Financial Statements). Aeromil owns several operating companies engaged in
brokerage of corporate, commuter, and commercial aircraft and spare parts in
local and international markets.
(v) Equipment Leasing Markets
Within the equipment leasing industry, there are essentially three leasing
markets: the full payout lease, short-term rental, and the mid-term operating
lease. The full payout lease, in which the combined rental payments are
sufficient to cover the lessor's investment and to provide a return on the
investment, is the most common form of leasing. This type of lease is sometimes
referred to and qualifies as a finance lease under United States generally
accepted accounting principles and is accounted for by the lessor as a purchase
of the underlying asset. From the lessee's perspective, the election to enter
into a full payout lease is usually made on the basis of a lease versus purchase
analysis which will take into account the lessee's ability to utilize the
depreciation tax benefits of ownership, its liquidity and cost of capital, and
financial reporting considerations.
Short-term rental lessors direct their services to a user's short-term
equipment needs. This business requires a more extensive overhead commitment in
the form of marketing and operating personnel by the lessor/owner. There is
normally less than full utilization in the lessor's equipment fleet as lessee
turnover is frequent. Lessors usually charge a premium for the additional
flexibility provided through short-term rentals. To satisfy lessee short-term
needs, certain equipment is leased through pooling arrangements or utilization
leases. For lessees, these arrangements can work effectively with respect to
interchangeable equipment such as marine containers, trailers, and marine
vessels. From the lessor's perspective, these arrangements diversify risk.
Operating leases for transportation equipment generally run for a period
of one to six years. Operating lease rates are usually higher than full payout
lease rates, but lower than short-term rental rates. From a lessee's
perspective, the advantages of a mid-term operating lease compared to a full
payout lease are flexibility in its equipment commitment and the fact that the
rental obligation under the lease need not be capitalized on its balance sheet.
The advantage from the lessee's perspective of a mid-term operating lease
compared to a short-term rental, apart from the lower monthly cost, is greater
control over future costs and the ability to balance equipment requirements over
a specific period of time. Disadvantages of the mid-term operating lease from
the lessee's perspective are that the equipment may be subject to significant
changes in lease rates for future periods or will generally be required to be
returned to the lessor at the expiration of the initial lease. Disadvantages
from the lessor's perspective of the mid-term operating lease (as well as the
short-term rental) compared to the full payout lease is that the equipment
generally must be re-leased at the expiration of the initial lease term in order
for the lessor to recover its investment and that re-lease rates are subject to
changes in current market conditions.
PLM International, its subsidiaries, and affiliated investment programs
lease their equipment primarily on mid-term operating leases and short-term
rentals. Many of its leases are net operating leases. In a net operating lease,
expenses such as insurance and maintenance are the responsibility of the lessee.
The effect of entering into net operating leases is to reduce lease rates as
compared to non-net lease rates for comparable lease terms. However, the overall
profitability of net operating leases is more predictable and less risk is
assumed over time as the lessees absorb maintenance costs which generally
increase as equipment ages. Per diem rental agreements are used mainly on
equipment in the Company's trailer, marine container, and storage unit rental
operations. Per diem rentals for the most part require the Company to absorb
maintenance costs which again tend to increase as the equipment ages.
(vi) Management Programs
FSI also has sponsored programs in which the equipment is individually owned by
the program investors. Management agreements, with initial terms ranging from
three to ten years, are typically employed to provide for the management of this
equipment. These agreements require that the Company or one of its subsidiaries
use its best efforts to lease the equipment and to otherwise perform all
managerial functions necessary for the operation of the equipment, including
arranging for maintenance and repair, collection of lease revenues, and
disbursement of operating expenses. Management agreements also require that the
Company correspond with program investors, prepare financial statements and tax
information, and make distributions to investors from available cash. Operating
revenues and expenses for equipment under management agreements are generally
pooled in each program and shared pro rata by the participants. Management fees
are generally received by IMI for these services based on a flat fee per month
per unit of equipment.
(vii) Lessees
Lessees of equipment range from Fortune 500 companies to small, privately-held
corporations and entities. All (i) equipment acquisitions, (ii) equipment sales,
and (iii) lease renewals relating to equipment having an original cost basis in
excess of $1.0 million must be approved by a credit committee consisting of
senior executives of PLM International. PLM Rental, which leases equipment
primarily on short-term rentals, follows guidelines set by the credit committee
in determining the credit worthiness of its respective lessees. Deposits,
prepaid rents, corporate and personal guarantees, and letters of credit are
utilized, when necessary, to provide credit support for lessees which alone do
not have a financial condition satisfactory to the credit committee. No single
lessee of the Company's equipment accounted for more than 10% of revenues for
the year ended December 31, 1995.
(viii) Competition
In the distribution of investment programs, FSI competes with numerous
organizations engaged in limited partnership syndications. While management of
the Company does not believe that any one sponsor dominates the offering of
similar investment programs, there are other sponsors of such programs which may
have greater assets and financial resources, the ability to borrow on more
favorable terms, or other significant competitive advantages. The principal
competitive factors in the organization and distribution of investment programs
are: the ability to reach investors through an experienced marketing force, the
performance of prior investment programs, the particular terms of the investment
program, and the development of a client base willing to consider periodic
investments in such programs. Competition for investors' funds also exists from
other financial instruments and intermediaries such as: certificates of
deposits, money market funds, stocks, bonds, mutual funds, investment trusts,
real estate, brokerage houses, banks, and insurance companies. FSI believes that
the structure of its current Fund I program permits it to compete with other
equipment leasing programs as well as with oil and gas and real estate programs.
FSI's investment programs compete directly with numerous other entities for
equipment acquisition and leasing opportunities and for debt financing. In 1995,
$77.5 million was invested in the Company's equity programs ranking the Company,
on a capital raised basis, as the number two syndicator of transportation
equipment leasing programs. In 1994, the $55.2 million invested in EGF VII also
ranked the Company as the number two syndicator of transportation equipment
leasing programs. The $92.5 million invested in the Company's publicly-sponsored
equity programs in 1993 ranked the Company as the number one syndicator of
equipment leasing programs that year.
In connection with operating leases, the Company encounters
considerable competition from lessors offering full payout leases on new
equipment. In comparing lease terms for the same equipment, full payout leases
provide longer lease periods and lower monthly rent than the Company offers.
However, lower lease rates can generally be offered for used equipment under
operating leases than can be offered on similar new equipment under a full
payout lease. The shorter length of operating leases also provides lessees with
flexibility in their equipment and capital commitments.
The Company also competes with equipment manufacturers who offer
operating leases and full payout leases. Manufacturers may provide ancillary
services which the Company cannot offer such as specialized maintenance services
(including possible substitution of equipment), warranty services, spare parts,
training, and trade-in privileges.
The Company competes with many equipment lessors, including ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, Greenbrier Leasing Company, Polaris Aircraft Leasing Corp., G.P.A.
Group Plc., GATX Corporation, and certain limited partnerships, some of which
engage in syndications and lease the same type of equipment.
(ix) Government Regulations
PLM Securities is registered with the Securities and Exchange Commission (SEC)
as a broker-dealer. As such, it is subject to supervision by the SEC and
securities authorities in each state. In addition, it is a member of the
National Association of Securities Dealers, Inc. and is subject to that entity's
rules and regulations. These rules and regulations govern such matters as
program structure, sales methods, net capital requirements, record-keeping
requirements, trade practices among broker-dealers, and dealings with investors.
Sales of investment programs must be made in compliance with various
complex federal and state securities laws. Failure to comply with provisions of
these laws, even though inadvertent, could result in investors having rights of
rescission or claims for damages.
The transportation industry, in which the majority of the equipment
owned and managed by the Company operates, has been subject to substantial
regulation by various federal, state, local, and foreign governmental
authorities. For example the Airport Noise and Capacity Act of 1990 generally
prohibits the operation of commercial jets which do not comply with stage III
noise level restrictions at United States airports after December 1999.
Enactments like this could affect the performance of aircraft owned and managed
by the Company. It is not possible to predict the positive or negative effect of
future regulatory changes in the transportation industry.
(x) Employees
As of March 25, 1996, the Company and its subsidiaries had 182 employees. None
of the Company's employees are subject to collective bargaining arrangements.
The Company believes employee relations are good.
ITEM 2. PROPERTIES
At December 31, 1995, the Company owned transportation equipment and related
assets originally costing approximately $120.5 million. The Company leases
approximately 46,000 square feet as its principal office at One Market, Steuart
Street Tower, San Francisco, California. The Company leases business offices in
Boston, Massachusetts; Chicago, Illinois; and Calgary, Alberta, Canada. In
addition, the Company leases trailer rental yard facilities in Atlanta, Georgia;
Chicago, Illinois; Dallas, Texas; Detroit, Michigan; Indianapolis, Indiana;
Kansas City, Kansas; Miami, Florida; Newark, New Jersey; Orlando, Florida; and
Tampa, Florida.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
On November 22, 1995, James F. Schultz (Plaintiff), a former employee of
PLM International, filed a first amended complaint (the Complaint) in United
States District Court for the Northern District of California (Case No.
C-95-2957 MMC) against the Company, the PLM International, Inc. Employee Stock
Ownership Plan (the ESOP), the ESOP's trustee, and certain individual employees,
officers, and/or directors of PLM International. The Complaint, which was served
on PLMI on November 27, 1995, contains claims for relief alleging breaches of
fiduciary duties and various violations of the Employee Retirement Income
Security Act of 1974 (ERISA) arising principally from purported defects in the
structure, financing, and termination of the ESOP and for rescission of the
preferred stock transactions with the ESOP and/or restitution of ESOP assets,
and attorneys' fees and costs under ERISA. The original complaint, which was
filed in August 1995 by Plaintiff, was never served on the Company. PLMI and the
other defendants have filed a motion to dismiss the Complaint, which is
scheduled to be heard on April 19, 1996. The Company does not believe the claims
have any merit and plans to defend this matter vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades (under the ticker symbol "PLM") on the
American Stock Exchange (AMEX). As of the date of this annual report, there are
10,805,861 common shares outstanding and approximately 9,226 shareholders of
record.
Table 3, below, sets forth the high and low prices of the Company's
common stock for 1995 and 1994 as reported by the AMEX:
<TABLE>
TABLE 3
<CAPTION>
Calendar Period High Low
------------------- --------- ---------
<S> <C> <C>
1995
1st Quarter $ 3.687 $ 2.563
2nd Quarter $ 3.563 $ 2.750
3rd Quarter $ 4.125 $ 2.875
4th Quarter $ 4.000 $ 2.875
1994
1st Quarter $ 3.875 $ 2.125
2nd Quarter $ 3.688 $ 2.500
3rd Quarter $ 3.563 $ 2.875
4th Quarter $ 3.813 $ 2.375
</TABLE>
In 1989, Transcisco Industries, Inc., the Company's largest shareholder
at that time, indicated its intention to dispose of its entire holdings in the
Company. In October 1994, Transcisco transferred, to its Official Bondholders'
Committee (OBC), its beneficial ownership in the 3,367,367 shares of the
Company's common stock. On October 13, 1994, the Company announced the purchase
of the 3,367,367 shares held by the OBC. Under the terms of the purchase, a
total of 2,445,000 common shares were sold to independent investors and the
remaining 922,367 shares were repurchased by the Company, all for cash at $3.25
per share. The Company also retired the $5.0 million 14.75% subordinated note
which was jointly owned by Transcisco and the OBC, at a $0.5 million discount.
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 either 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 purchased 146,977 shares under this program for $0.5
million in 1995.
In November 1995, the Company authorized the repurchase of up to $5.0
million of the Company's common stock and, pursuant to such authorization, the
Company repurchased 735,196 shares in private transactions for $2.6 million.
Additional future repurchases may be made in the open market or through private
transactions. The timing and amount of these transactions are to be funded
through working capital and existing cash reserves and will depend upon market
conditions and corporate requirements. Shares may be used for corporate
purposes, including option plans, or they may be retired.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SUMMARY OF SELECTED FINANCIAL DATA
Years Ended December 31,
(in thousands except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenue $ 61,251 $ 57,962 $ 69,652 $ 75,035 $ 72,767
Income (loss) before taxes $ 7,868 $ (5,579) $ 7,737 $ (33,918) $ 10,228
Net income (loss) before cumulative
effect of accounting change $ 6,048 $ (1,511) $ 6,282 $ (18,231) $ 10,103
Cumulative effect of accounting change $ -- $ (5,130) $ -- $ -- $ --
Net income (loss) to common shares $ 6,048 $ (9,071) $ 1,432 $ (25,271) $ 3,063
Per common share:
Net income (loss) $ 0.51 $ (0.73) $ 0.14 $ (2.41) $ 0.30
Financial position:
Total assets $ 126,213 $ 140,372 $ 217,720 $ 255,404 $ 319,074
Long-term debt $ 47,853 $ 60,119 $ 129,119 $ 171,470 $ 194,390
Shareholders' equity $ 48,620 $ 45,695 $ 51,133 $ 44,719 $ 65,964
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of the Company's Operating Results for the Years Ended December 31,
1995 and 1994
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 the equipment ages, the Company is generally
not replacing it with newer equipment. However, the Company at times will
selectively add equipment to its fleet when the purchase price and lease
opportunity are advantageous and exceed the returns on alternative 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 following analysis reviews the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 23,919 $ 28,748
Management fees 11,197 11,189
Partnership interests and other fees 4,978 3,101
Acquisition and lease negotiation fees 6,659 4,223
Commissions 1,322 4,939
Aircraft brokerage and services 5,022 4,624
Gain (loss) on the sale or disposition of assets, net 6,090 (164)
Other 2,064 1,302
----------------------------
Total revenues $ 61,251 $ 57,962
</TABLE>
Each component is explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
By equipment type or subsidiary:
Trailers $ 10,582 $ 14,268
Aircraft 6,465 9,319
Marine vessels 1,304 3,211
Marine containers 635 941
Storage equipment 1,056 749
Railcars 1,584 260
AFG 2,293 --
---------------------------
$ 23,919 $ 28,748
</TABLE>
As of December 31, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $119.6 million, $22.2 million less
than the original cost of equipment owned and held for operating leases at
December 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 54% net reduction in its marine container portfolio, a 9%
net reduction in its aircraft portfolio, a 13% net reduction in its trailer
portfolio, a 6% net reduction in its storage equipment portfolio, and a 100%
reduction in its railcar portfolio compared to 1994. Operating lease revenue was
also impacted by the level of assets held for sale and AFG, L.P. lease
originations which earned lease revenue for short-term periods before sale in
1995.
The reduction in equipment available for lease is the primary reason marine
vessel, trailer, marine container, and aircraft revenues 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 $2.3
million increase in operating lease revenues generated by AFG, L.P.-related
leases, a $1.3 million increase in railcar lease revenues, and a $0.3 million
increase in storage equipment revenues. The increase in railcar revenue of $1.3
million for the year ended 1995 is comprised primarily of revenues on railcars
acquired by the Company of which the majority have been sold to both affiliated
programs and third parties as of December 31, 1995. Storage equipment revenue
increased $0.3 million for the year ended December 31, 1995, compared to 1994,
due to additions of $0.6 million in new storage equipment during the fourth
quarter of 1994.
Management fees:
<TABLE>
<CAPTION>
Year
Liquidation
1995 1994 Phase Begins
---------------------------------------------
(in thousands)
Management fees by program were:
<S> <C> <C> <C>
EGF I $ 1,318 $ 1,482 1998
EGF II 818 1,153 1999
EGF III 1,137 1,788 2000
EGF IV 1,064 1,183 1999
EGF V 1,767 2,097 2000
EGF VI 1,775 1,760 2002
EGF VII 971 500 2003
Fund I 343 -- 2002
AFG programs 1,483 -- --
Other programs 521 1,226 --
---------------------------
$ 11,197 $ 11,189
</TABLE>
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, L.P.
programs, amounted to $1.11 billion and $1.07 billion at December 31, 1995 and
1994, respectively. Management fees were $11.2 million in both 1995 and 1994.
Although management fees generated by gross revenues from the equipment growth
funds and other programs decreased $1.8 million in 1995 from 1994 due to net
decreases in managed equipment and a decrease in lease rates for certain types
of equipment, these decreases were offset by a $1.5 million increase from the
January 1995 agreement with AFG, L.P. to provide management services to their
existing investor programs and from a $0.3 million increase in management fees
generated by the new Fund I program.
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 $5.0 million and $3.1 million for the
years ended December 31, 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 $1.7 million in the
Company's recorded residual values which included $2.2 million in residual
income recorded for Fund I equipment purchases, and $0.9 million in residual
income from the AFG, L.P. programs, offset partially by a decrease in residual
income related to other existing programs. A $0.7 million net decrease in
residual values 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 year ended
December 31, 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:
During the year ended December 31, 1995, a total of $100.0 million of equipment
was purchased on behalf of the Equipment Growth Funds compared to $78.2 million
during 1994, resulting in a $1.2 million increase in acquisition and lease
negotiation fees. In addition, $1.2 million in acquisition and lease negotiation
fees were generated by AFG, L.P.-related purchases during the year ended
December 31, 1995. There were no AFG, L.P.-related transactions during 1994. As
a result of the Company's decision to market a new investment program with a no
front-end fee structure, acquisition and lease negotiation fees will be
significantly reduced in the future.
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 1995, program equity raised for the
equipment growth funds totaled $14.6 million compared to $55.2 million during
1994, resulting in a $3.6 million decrease in placement commissions. 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 (Fund I) with a no
front-end fee structure, which raised $62.9 million in equity during 1995,
commission revenue will be eliminated.
Aircraft brokerage and services revenue:
Aircraft brokerage and services revenue increased $0.4 million during
1995, compared to 1994. The increase represents revenue earned by Aeromil, the
Company's aircraft leasing and spare parts brokerage subsidiary.
Gain (loss) on the sale or disposition of assets, net:
The $5.6 million net gain recorded during the year ended December 31,
1995 included gains from the sale of three option contracts for railcar
equipment and the disposition of 1 marine vessel, 645 marine containers, 2
commercial aircraft, 2 commuter aircraft, 4 helicopters, 318 railcars, 37
storage equipment units, and 525 trailers. Additionally, during 1995, the
Company purchased and sold three off-lease commuter aircraft for an aggregate
gain of $0.5 million, net of selling costs. The $0.2 million net loss for the
same period in 1994 resulted from the sale or disposition of trailers and marine
containers, partially offset by net gains on the sale of 11 aircraft and 1
marine vessel.
Other:
Other revenues increased $0.8 million in the year ended December 31,
1995, from 1994, due to an increase in revenue earned for data processing
services provided to the Company's affiliated programs.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 26,001 $ 23,510
Depreciation and amortization 8,616 12,135
Commissions 1,416 5,192
General and administrative 10,539 10,366
Reduction in carrying value of certain assets 1,178 4,247
Interest expense 7,110 9,777
Interest income 1,973 3,744
Other expense, net 496 2,058
</TABLE>
<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 $2.5 million (11%) for the year ended 1995, from 1994. The increase
resulted from $5.5 million in costs associated with the operation of AFG, a $1.1
million increase in Aeromil expenses due to higher operational expenses in the
current year, a $0.4 million increase in accrued compensation expense primarily
to compensate employees for lost benefits resulting from the termination of the
Company's 401(k) plan, and a $0.2 million increase in accrued severances due to
terminated employees of the Company, offset partially by a $2.5 million decrease
in operating costs and repair and maintenance expenses due to the sale of the
entire owned marine vessel portfolio and other equipment, a $0.6 million
decrease in expenses absorbed by the Company for rental yard operations due to
the sale of trailers in 1994 and 1995, a $0.7 million decrease in the provision
for bad debts, and a $0.9 million decrease in compensation expenses booked in
1994 related to the adoption of Statement of Position 93-6 "Employers'
Accounting for Employee Stock Ownership Plans" (SOP 93-6).
Depreciation and amortization:
Depreciation and amortization expense decreased $3.5 million (29%) for
the year ended 1995, as compared to 1994. The decrease resulted from the
reduction in depreciable equipment discussed in the operating lease revenue
section.
Commissions:
Commission expenses are incurred by the Company primarily 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. Historically, commission costs
related to the equipment growth funds have been expensed as incurred. Since
syndication efforts related to EGF VII have ended, commission expense for the
year ended December 31, 1995 decreased $3.8 million (73%) from 1994. Commission
costs related to Fund I will be capitalized as part of the Company's investment
in the Fund I program as equity is raised for Fund I and commissions are paid.
General and administrative:
General and administrative expenses increased $0.2 million (2%) during
the year ended 1995, compared to 1994. The increase resulted from a $0.4 million
increase in accrued compensation expense primarily to compensate employees for
lost benefits resulting from the termination of the Company's 401(k) plan and
for severance pay to terminated employees of the Company, offset partially by a
decrease in amortized fees booked in the prior year related to the Employee
Stock Ownership Plan (ESOP).
Reduction in carrying value of certain assets:
As a result of the Company's continuing analysis of its transportation equipment
portfolio, adjustments totaling $1.2 million were made to the estimated net
realizable value of certain aircraft in 1995. In 1994, adjustments totaling $4.2
million were made to the estimated net realizable value of certain equipment,
consisting of adjustments to certain aircraft ($2.1 million), trailers ($1.1
million), storage vaults ($0.2 million), containers ($0.1 million), and one
marine vessel ($0.7 million).
Interest expense:
Interest expense decreased $2.7 million (27%) during the year ended
1995, compared to 1994, due to the reduction in senior and subordinated debt
levels in 1995 from 1994, partially offset by increased interest rates.
Interest income:
Interest income decreased $1.8 million (47%) in the year ended December
31, 1995, compared to 1994 from a reduction in interest income earned on the
ESOP cash collateral account which existed prior to the ESOP's termination at
the end of 1994.
During 1994, the Company elected to adopt SOP 93-6 which had a significant
impact on the Company's presentation of interest income, income taxes, and
preferred dividends. SOP 93-6 required the change in accounting principle to be
reflected as of January 1, 1994 (refer to Note 14 to the Financial Statements).
<PAGE>
Other expense, net:
Other expense, net was $0.5 million in the year ended December 31, 1995
due mainly to loan fees of $1.1 million related to the early retirement of $11.5
million of the Company's subordinated debt, offset partially by collection of an
account receivable from a previously bankrupt debtor. For 1994, other expense,
net of $2.1 million, was due to the write-off of unamortized loan fees related
to the termination of the Company's ESOP and a reduction in the carrying value
of certain marketable securities.
Income taxes:
For the year ended December 31, 1995, the provision for income taxes was $1.8
million, which represented an effective rate of 23%. For 1994, the $4.1 million
tax benefit reflected the benefit for the Company's losses and the tax benefit
on the ESOP dividend.
Cumulative effect of accounting change:
The adoption of SOP 93-6 in 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, year ended 1995 net income was $6.0
million resulting in net income per common share of $0.51. For the year ended
1994, net loss was $6.6 million. In addition, $2.4 million was required in 1994
for the imputed preferred dividend allocated to ESOP shares, resulting in a $9.1
million net loss to common shareholders, or a $0.73 loss per common share
outstanding.
Comparison of the Company's Operating Results for the Years Ended December 31,
1994 and 1993
The following analysis reviews the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
1994 1993
----------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 28,748 $ 34,054
Management fees 11,189 10,822
Partnership interests and other fees 3,101 3,838
Acquisition and lease negotiation fees 4,223 9,697
Commissions 4,939 8,178
Aircraft brokerage and services 4,624 --
Gain (loss) on the sale or disposition of assets, net (164) 2,350
Other 1,302 713
----------------------------
Total revenues $ 57,962 $ 69,652
</TABLE>
Total revenues of $58.0 million for the year ended December 31, 1994, decreased
from $69.7 million in 1993. Each component is explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
1994 1993
----------------------------
(in thousands)
<S> <C> <C>
By equipment type:
Trailers $ 14,268 $ 15,778
Aircraft 9,319 10,155
Marine vessels 3,211 5,028
Marine containers 941 1,375
Storage vaults 749 726
Railcars 260 992
----------------------------
$ 28,748 $ 34,054
</TABLE>
<PAGE>
As of December 31, 1994, the Company owned $177.7 million of transportation
equipment, which was $28.1 million less than the original cost of equipment
owned at December 31, 1993. The reduction in equipment is a consequence of the
Company's strategic decision to dispose of certain assets resulting in a 51% net
reduction in its marine vessel fleet, a 21% net reduction in its marine
container portfolio, an 11% net reduction in its aircraft portfolio, and a 5%
net reduction in its trailer portfolio, compared to 1993.
The reduction in equipment available for lease and lower utilization rates
are the primary reasons marine vessel, trailer, marine container, aircraft, and
railcar revenue were all reduced as compared to the prior year.
Management fees:
<TABLE>
<CAPTION>
Year
Liquidation
1994 1993 Phase Begins
------------------------------------------------
(in thousands)
Management fees by fund were:
<S> <C> <C> <C>
EGF I $ 1,482 $ 1,670 1998
EGF II 1,153 1,503 1999
EGF III 1,788 2,013 2000
EGF IV 1,183 1,380 1999
EGF V 2,097 1,953 2000
EGF VI 1,760 967 2002
EGF VII 500 34 2003
Other programs 1,226 1,302 --
--------------------------
$ 11,189 $ 10,822
</TABLE>
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. Equipment under
management (measured at original cost) amounted to $1.07 billion and $1.14
billion at December 31, 1994 and 1993, respectively. The increase in management
fees of $0.4 million resulted from an increase in utilization rates for
equipment. In addition, the partnership agreements allow higher management fees
on full service railcar leases than the Company has previously recognized.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated partnerships. These revenues decreased $0.1 million during
1994 as compared to 1993 as a result of reduced net earnings and distribution
levels in the affiliated partnerships. Residual interest income decreased $0.6
million in 1994 from 1993 as a result of decreased equipment acquisitions for
the affiliated partnerships.
Acquisition and lease negotiation fees:
On behalf of the various investor programs and partnerships, a total of $78.2
million of equipment was purchased during the year ended 1994, compared to
$186.6 million purchased during 1993, resulting in a $5.5 million decrease in
acquisition and lease negotiation fees.
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 1994, program equity raised totaled $55.2 million compared
to $92.5 million in 1993, resulting in a decrease in placement commissions of
$3.2 million.
Aircraft brokerage and services:
Aircraft brokerage and services revenue represents revenue earned by Aeromil,
the Company's aircraft leasing and spare parts brokerage subsidiary.
<PAGE>
Gain (loss) on the sale or disposition of assets, net:
The $0.2 million loss on the disposal of transportation equipment in 1994
resulted primarily from net losses on the sale or disposition of trailers and
marine containers, partially offset by net gains on the sale of 11 aircraft and
1 marine vessel. The $2.4 million net gain in 1993 was primarily the result of
the Company's decision to sell substantially all of its railcar fleet, at a
gain, and from the sale or disposition of trailers.
Other:
Other revenues increased $0.6 million to $1.3 million in 1994 from $0.7 million
in 1993, due to an increase in data processing revenues earned from services
provided to the Company's affiliated partnerships.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
1994 1993
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 23,510 $ 20,074
Depreciation and amortization 12,135 12,236
Commissions 5,192 8,849
General and administrative 10,366 10,867
Reduction in carrying value of certain assets 4,247 2,221
Interest expense 9,777 12,573
Interest income 3,744 5,231
Other expense, net 2,058 326
</TABLE>
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 $3.4
million (17%) for the year ended December 31, 1994 from 1993. The increase
resulted from $4.2 million in costs associated with the operation of Aeromil and
a $0.5 million increase in the provision for bad debts. This was offset by lower
equipment operation costs resulting from the reduction in the equipment
portfolio and lower professional service costs.
Depreciation and amortization:
Depreciation and amortization expense decreased $0.1 million (1%) for the year
ended December 31, 1994, as compared to the year ended December 31, 1993. The
decrease resulted from the reduction in depreciable equipment offset partially
by the increase in depreciation expense on one marine vessel and certain
aircraft to reflect estimated net realizable values.
Commissions:
Commission expenses are incurred by the Company primarily 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 costs related to the equipment growth funds are
expensed as incurred. Commission expenses for 1994 decreased $3.7 million (41%)
from 1993. The reduction is the result of a decrease in syndicated equity raised
for the equipment growth funds in 1994 versus 1993.
General and administrative:
General and administrative expenses decreased $0.5 million (5%) during 1994,
compared to 1993. The decrease resulted principally from a decrease in
professional service costs.
<PAGE>
Reduction in carrying value of certain assets:
In 1994, as part of the Company's analysis of asset performance, the Company
recorded adjustments to the estimated net realizable values of certain equipment
totaling $4.2 million, consisting of adjustments to certain aircraft ($2.1
million), trailers ($1.1 million), storage vaults ($0.2 million), marine
containers ($0.1 million), and one marine vessel ($0.7 million). In 1993, the
Company adjusted the value of certain equipment to its estimated net realizable
value by $2.2 million, including adjustments to marine containers ($0.9
million), trailers ($0.7 million), railcars ($0.4 million), and aircraft ($0.2
million).
Interest expense:
Interest expense decreased $2.8 million (22%) during the year ended December 31,
1994, compared with 1993, as a result of reduced debt levels, partially offset
by increased interest rates.
Interest income:
During 1994, the Company elected to adopt SOP 93-6 which had a significant
impact on the Company's presentation of interest income, income taxes, and
preferred dividends. SOP 93-6 required the change in accounting principle to be
reflected as of January 1, 1994 (refer to Note 14 to the Financial Statements).
Interest income decreased $1.5 million (28%) in 1994, compared to 1993. The
reduced interest income resulted from the adoption of SOP 93-6 which eliminated
the recognition of interest income on the Company's internal loan to the ESOP.
Other expense, net:
The increased expense in 1994 resulted from a $2.3 million write-off of
unamortized loan fees related to the termination of the Company's ESOP. Included
in the 1993 expense was a $0.7 million charge from accelerating certain expenses
related to the Company's interest rate swap agreement, required by the decision
to repay the existing senior loan.
Income taxes:
The $4.1 million benefit for income taxes in 1994 reflects the impact of the
Company's loss before income taxes and the entire tax benefit of the ESOP
dividend. Under Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS No. 109), and the Company's previous method of
accounting for the ESOP, the ESOP tax benefit was allocated between the tax
provision (benefit for dividend on allocated shares) and the ESOP dividend
(benefit for dividend on unallocated shares). With the Company's adoption of SOP
93-6, the tax benefit for the dividend on all ESOP shares is reflected as a
benefit in the provision for income tax. The corresponding effective rate for
the 1994 income tax benefit is 73%. For 1993, the Company's provision for income
taxes was $1.5 million, which represented an effective rate of 19%, and included
only the tax benefit of the preferred dividend imputed on unallocated ESOP
shares.
Cumulative effect of accounting change:
The adoption of SOP 93-6 also 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 (loss) income:
As a result of the foregoing, the 1994 net loss was $6.6 million. In addition,
$2.4 million was required for the imputed preferred dividend on allocated ESOP
shares, resulting in a net loss to common shares of $9.1 million, with a per
share net loss to common shareholders of $0.73. In comparison, for 1993, net
income was $6.3 million and net income available to common shareholders was $1.4
million, or $0.14 per common share.
<PAGE>
Liquidity and Capital Resources
Cash requirements historically have been satisfied through cash flow from
operations, borrowings, or sales of transportation equipment.
Liquidity beyond 1995 will depend, in part, on cash flow provided by
continued remarketing of the equipment portfolio at similar lease rates,
effectiveness of cost control programs, additional equipment sales, and
originating and placing equipment leases with institutional investors. Uses of
cash in the short term will be funding the costs of offering of Fund I and
originating equipment leases for the Company's account that will be financed
through a securitization facility. 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 bank
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 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.
Subordinated Debt: In December 1995, the Company used existing cash to prepay
$11.5 million of its subordinated debt and incurred prepayment penalties of
approximately $1.1 million. Although the Company's liquidity has been negatively
impacted in the short term, subsequent cash flow increases will result due to
reduced interest costs of approximately $2.2 million from now until the end of
the subordinated debt term in February 1999. In July and October 1994, the
Company repaid $3.0 million and $5.0 million of its subordinated debt,
respectively, at a discount of $0.7 million in the aggregate.
Bridge Financing: Assets acquired and held on an interim basis for placement
with affiliated partnerships or sale to third parties 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 September 27, 1995. The amendment
extended the facility until September 30, 1996, and provides for a $5.0 million
letter of credit as part of the $25.0 million facility.
This facility, which is shared with EGFs II, III, IV, V, VI, VII, and Fund
I, 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 if the Company is
the borrower and working capital is used 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 March 25, 1996, the Company had $10.5 million of
outstanding borrowings while the EGFs and Fund I had no borrowings outstanding
under this facility.
Securitization Facility: The Company entered into a securitization facility on
July 1, 1995, which makes available for one year up to $80 million on a
non-recourse basis to be secured primarily by finance type leases with terms of
generally four to five years. Repayment of the facility matches the terms of the
underlying leases. The securitized debt is expected to bear interest equivalent
to average U.S. treasuries plus 1%. As of December 31, 1995, there were no
borrowings on this facility.
(b) Employee Stock Ownership Plan:
The Company terminated its ESOP effective December 31, 1994, and the ESOP debt
was repaid in full by offsetting the debt with the restricted cash equivalents
and restricted marketable securities that served as collateral for the loan
($43.3 million). The Company has eliminated annual interest expense of
approximately $2.0 million and preferred dividends of $7.0 million.
<PAGE>
(c) Equipment Leasing Activities:
Over the last two years, the Company has downsized its owned equipment
portfolio, through the sale or disposal of underperforming and nonperforming
assets, in an effort to strengthen the future performance of the portfolio. The
Company will continue to identify underperforming and nonperforming assets for
sale or disposal as necessary.
During 1995, the Company generated proceeds of $12.0 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 from the cash collateral account
$10.8 million in funds relating primarily to 1994 asset sales. 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.
The Company, through its AFG subsidiary, originates leases it will either
sell to institutional investors and earn certain fees or retain using financing
from the securitization facility. The retained leases will require cash to
complete the purchase of the leased equipment placed in the securitization
facility. This will negatively impact liquidity over the next several years.
(d) Syndication Activities:
The Company earned fees from syndication activities related to EGF VII through
April of 1995. Total equity raised for this partnership was $107.4 million from
inception through April 30, 1995 when the program closed. There will be no
additional 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 (Fund I) was
developed to capture a larger share of the syndication market. The no front-end
fee structure of Fund I requires the Company to pay offering and organizational
costs, including broker-dealer commissions, as syndicated equity is raised. In
previous investor programs sponsored by the Company, most offering and
organizational expenses were reimbursed to the Company. Since May 1995 through
December 31, 1995, Fund I raised $62.9 million in equity investment from the
public. This is 118% higher than the equity raised for EGF VII during the same
period of 1994. Though the Company receives a higher share of Fund I
distributions versus its share of equipment growth fund program distributions,
the front-end investments required by the Company in the form of expense
payments on behalf of Fund I will negatively impact the Company's liquidity
during the investment phase of the program.
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.
Inflation
There was no significant impact on the Company's operations as a result of
inflation during 1995, 1994, or 1993.
New Accounting Pronouncements
For discussion of the impact of new accounting pronouncements refer to Note 1 to
the Financial Statements.
Trends
The Company continues to seek opportunities for new businesses, markets, and
acquisitions. During 1995, the Company entered into an agreement with American
Finance Group, L.P. (AFG L.P.) to form a new subsidiary of the Company, American
Finance Group (AFG), to assume the lease origination and servicing operations,
the rights to manage a significant offshore investment program, and certain
furniture, computers, and software of AFG, L.P. In the future, the Company
intends for AFG to originate and manage primarily finance-type lease
transactions on new equipment under a securitization facility for the Company's
own account or sold to unaffiliated investment program investors.
As part of the Company's strategic decision to reduce the size of its owned
equipment portfolio, the Company sold $57.1 million (of which $34.9 million was
included in assets held for sale as of December 31, 1994), based on original
cost, of its owned equipment in 1995, and the Company expects to continue to
sell equipment in 1996 and beyond. As a result of the reduction in owned
equipment, the Company's operating lease revenues are expected to continue to
decrease as well as the associated depreciation, operating, and repair and
maintenance costs. However, the Company has used the proceeds from equipment
sales and cash from operations to significantly reduce senior and subordinated
outstanding indebtedness by $31.0 million over the last two years, resulting in
reduced interest costs. The impact of the $11.5 million reduction in
subordinated debt levels that occurred in the fourth quarter of 1995, is
expected to result in reduced interest costs of $2.2 million from now until the
end of the subordinated debt term in March 1999. Additionally, the Company has
conducted a review of existing operations to identify areas for productivity
improvements, process streamlining, and other cost savings currently being
implemented with the intent of reducing operations support and general and
administrative expenses in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted as a separate section of this report. See
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A definitive Company proxy statement will be filed not later than 120 days after
the end of the fiscal year with the Securities and Exchange Commission. The
information set forth under "Identification of Directors and Officers,"
"Compensation of Executive Officers," and "Security Ownership of Certain
Beneficial Owners and Management" in such proxy statement is incorporated herein
by reference for Items 10, 11 and 12, above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying
index to financial statements are filed as part of this Annual
Report on Form 10-K.
(2) Exhibits are listed at item (c), below.
(b) Reports on Form 8-K Filed in Last Quarter of 1995
December 19, 1995 - Announcement regarding the Company's retirement of $11.5
million of subordinated debt and the commencement of a $5.0 million stock
repurchase program.
(c) Exhibits
3.1 Certificate of Incorporation, incorporated by reference to
the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 2, 1990.
3.2 Bylaws, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on April 2, 1990.
10.1 $45,000,000 Senior Secured Note Agreement, dated as of June
30, 1994, as amended, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 15, 1995.
10.2 $23,000,000 Subordinated Note Agreement, dated as of January
15, 1989, as amended, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 2, 1990.
10.3 Amended and Restated Warehousing Credit Agreement, dated as
of September 27, 1995, incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 1, 1995.
10.4 Form of Employment contracts for executive officers,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.5 Rights Agreement, as amended, filed with Forms 8-K, on March
12, 1989, August 12, 1991, and January 23, 1993, and
incorporated herein by reference.
10.6 Directors' 1992 Non-qualified Stock Option Plan, incorporated
by reference to the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March
31, 1993.
10.7 Form of Company Non-qualified Stock Option Agreement,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.8 Directors' 1995 Non-qualified Stock Option Plan, incorporated
by reference to the Company's Annual Report on Form 10-K
filed with the Securities Exchange Commission on March 15,
1995.
10.9 Form of Executive Deferred Compensation Agreement,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.10 Asset Purchase Agreement, dated as of July 1, 1995,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q filed with the Securities and Exchange
Commission on November 1, 1995.
10.11 Pooling and Servicing Agreement and Indenture of Trust, dated
as of July 1, 1995, incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 1, 1995.
10.12 Office Lease for premises at One Market, San Francisco,
California, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1991.
10.13 Ninth Amendment to Subordinated Note Agreement, dated as of
November 15, 1995
10.14 Tenth Amendment to Subordinated Note Agreement, dated as of
February 10, 1996.
10.15 Fourth Amendment to Senior Secured Note Agreement, dated as
of February 10, 1996.
11. Statement regarding computation of per share earnings.
21. Subsidiaries of the Company.
23. Consents of Independent Auditors.
24. Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: March 25, 1996 PLM International, Inc.
By: /s/ J. Michael Allgood
J. Michael Allgood
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company, in the
capacities and on the dates indicated.
/s/ J. Michael Allgood Vice President and March 25, 1996
-----------------------
J. Michael Allgood Chief Financial Officer
* Director, Executive March 25, 1996
------------------------
Allen V. Hirsch Vice President
* Director March 25, 1996
------------------------
Walter E. Hoadley
* Director March 25, 1996
-----------------------
J. Alec Merriam
* Director March 25, 1996
------------------------
Robert L. Pagel
* Director March 25, 1996
------------------------
Harold R. Somerset
* Director, President and March 25, 1996
------------------------
Robert N. Tidball Chief Executive Officer
* Stephen Peary, by signing his name hereto, does sign this document on
behalf of the persons indicated above pursuant to powers of attorney
duly executed by such persons and filed with the Securities and
Exchange Commission.
/s/ Stephen Peary
-------------------
Stephen Peary
Attorney-in-Fact
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1)(2))
Description Page
Independent Auditors' Report 26
Consolidated Statements of Operations for Years Ended
December 31, 1995, 1994, and 1993 27
Consolidated Balance Sheets as of December 31, 1995 and 1994 28
Consolidated Statements of Changes in Shareholders' Equity
for Years Ended December 31, 1995, 1994, and 1993 29
Consolidated Statements of Cash Flows for Years
Ended December 31, 1995, 1994, and 1993 30-31
Notes to Consolidated Financial Statements 32-46
All schedules are omitted since the required information is not pertinent or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc.
and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PLM
International, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 14 to the financial statements, the Company changed
its method of accounting for its Employee Stock Ownership Plan in 1994.
/S/ KPMG PEAT MARWICK
SAN FRANCISCO, CALIFORNIA
MARCH 25, 1996
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Revenues:
Operating leases (Notes 1 and 6) $ 23,919 $ 28,748 $ 34,054
Management fees (Notes 1 and 5) 11,197 11,189 10,822
Partnership interests and other fees (Notes 1 and 5) 4,978 3,101 3,838
Acquisition and lease negotiation fees (Notes 1 and 5) 6,659 4,223 9,697
Commissions (Notes 1 and 5) 1,322 4,939 8,178
Aircraft brokerage and services 5,022 4,624 --
Gain (loss) on the sale or disposition of assets, net 6,090 (164) 2,350
Other 2,064 1,302 713
------------------------------------------
Total revenues 61,251 57,962 69,652
Costs and expenses:
Operations support (Note 15) 26,001 23,510 20,074
Depreciation and amortization (Note 1) 8,616 12,135 12,236
Commissions 1,416 5,192 8,849
General and administrative (Note 13) 10,539 10,366 10,867
Reduction in carrying value of certain assets (Note 1) 1,178 4,247 2,221
------------------------------------------
Total costs and expenses 47,750 55,450 54,247
------------------------------------------
Operating income 13,501 2,512 15,405
Interest expense 7,110 9,777 12,573
Interest income 1,973 3,744 5,231
Other expense, net 496 2,058 326
------------------------------------------
Income (loss) before income taxes 7,868 (5,579) 7,737
Provision for (benefit from) income taxes (Notes 1 and 12) 1,820 (4,068) 1,455
------------------------------------------
Net income (loss) before cumulative effect of
accounting change 6,048 (1,511) 6,282
Cumulative effect of accounting change (Note 14) -- (5,130) --
------------------------------------------
Net income (loss) 6,048 (6,641) 6,282
Preferred dividend imputed on allocated shares -- 2,430 1,364
Preferred dividend imputed on unallocated shares
(net of $2,182 income tax benefit for 1993) -- -- 3,486
------------------------------------------
Net income (loss) to common shares $ 6,048 $ (9,071) $ 1,432
==========================================
Earnings (loss) per common share outstanding (Note 1) $ 0.51 $ (0.73) $ 0.14
==========================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands)
<TABLE>
<CAPTION>
ASSETS
1995 1994
-----------------------------
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 13,764 $ 16,131
Receivables 4,931 5,747
Receivables from affiliates (Notes 1 and 5) 8,690 7,001
Assets held for sale (Note 4) 719 17,644
Equity interest in affiliates (Notes 1 and 5) 28,208 18,374
Transportation equipment held for operating lease (Notes 1 and 6) 119,608 141,836
Less accumulated depreciation (Note 1) (68,290) (77,744)
-----------------------------
51,318 64,092
Restricted cash (Notes 1 and 7) 10,621 1,409
Other 7,962 9,974
=============================
Total assets $ 126,213 $ 140,372
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt (Note 8) $ -- $ 6,404
Senior secured debt (Note 9) 35,000 35,000
Other secured debt (Note 9) 1,353 2,119
Subordinated debt (Note 10) 11,500 23,000
Payables and other liabilities 13,884 11,589
Deferred income taxes (Note 12) 15,493 16,165
-----------------------------
Total liabilities 77,230 94,277
Commitments and contingencies (Note 13)
Minority interest (Note 2) 363 400
Shareholders' Equity:
Common stock, $0.01 par value, 50,000,000 shares authorized, 10,833,161
shares issued and outstanding at December 31, 1995, and 11,699,673 shares
issued and outstanding at December 31, 1994 (excluding 1,753,230 and
871,057 held in treasury
at December 31, 1995 and 1994, respectively) (Note 14) 117 117
Paid-in capital, in excess of par (Note 14) 77,743 77,699
Treasury stock (Note 14) (5,931) (2,831)
-----------------------------
71,929 74,985
Accumulated deficit (23,309) (29,290)
-----------------------------
Total shareholders' equity 48,620 45,695
=============================
Total liabilities and shareholders' equity $ 126,213 $ 140,372
=============================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, and 1993
(in thousands)
<CAPTION>
Loan to
Employee Common Stock
---------------------------------
Preferred Stock Paid-in Retained
Stock at Ownership Capital in Earnings Total
Paid-in Plan At Excess Treasury Accumulated Shareholders'
Amount (ESOP) Par of Par Stock Deficit Equity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 $ 63,644 $(55,393) $ 109 $ 55,482 $ -- $(19,123) $ 44,719
Net income 6,282 6,282
Dividend paid on ESOP convertible
preferred shares (net of tax effect) (4,850) (4,850)
Conversion of preferred stock (75) 75 --
Principal payments of ESOP loan 5,113 5,113
Purchase of treasury shares (131) (131)
---------------------------------------------------------------------------------
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 repurchase (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 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 6,048 6,048
Common stock repurchases (3,100) (3,100)
Exercise of stock options 44 44
Translation loss (67) (67)
==================================================================================
Balances, December 31, 1995 $ -- $ -- $ 117 $ 77,743 $ (5,931) $(23,309) $ 48,620
==================================================================================
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ 6,048 $ (6,641) $ 6,282
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 8,616 12,135 12,236
Cumulative effect of accounting change -- 5,130 --
Restructuring adjustments and revaluation of assets 1,178 4,247 2,221
Foreign currency translations (67) 37 --
Decrease in deferred income taxes (672) (3,342) (2,700)
Compensation expense for ESOP, net -- (477) --
(Gain) loss on the sale or disposition of assets, net (6,090) 164 (2,928)
Undistributed residual value interests (343) 728 286
Minority interest in net income (loss) of subsidiaries (37) 64 --
Increase (decrease) in payables and other liabilities 2,839 (6,760) 3,135
(Increase) decrease in receivables and receivables
from affiliates (1,825) 4,132 (2,177)
Cash distributions from affiliates in excess of
income accrued 985 675 373
(Increase) decrease in other assets (1,807) 1,844 1,165
Purchase of equipment for lease (7,896) (3,083) (1,535)
Proceeds from the sale of equipment for lease 11,998 14,609 26,912
Purchase of assets held for sale (38,034) (28,261) (18,105)
Proceeds from sale of assets held for sale 55,362 19,886 18,105
Financing of assets held for sale to affiliates 18,620 9,357 14,404
Repayment of financing for assets held for sale
to affiliates (25,024) (2,953) (14,404)
--------------------------------------------
Net cash provided by operating activities 23,851 21,491 43,270
Investing activities:
Investment in affiliates (10,477) (311) (541)
Proceeds from the disposition of residual options and
other investments 2,059 90 365
Proceeds from the sale of leveraged leased assets 4,530 -- --
Purchase of residual option (200) -- --
(Increase) decrease in restricted cash and
cash equivalents (9,212) (17,106) 9,541
Purchase of restricted marketable securities -- (19,552) (84,299)
Proceeds from the maturity and sale of restricted
marketable securities -- 43,485 86,343
Acquisition of subsidiary net of cash acquired -- (1,013) --
--------------------------------------------
Net cash (used in) provided by investing activities (13,300) 5,593 11,409
</TABLE>
(continued)
See accompanying notes to these consolidated
financial statements.
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)
<CAPTION>
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Financing activities:
Proceeds from long-term equipment loans 779 45,138 --
Principal payments under loans (11,569) (71,515) (42,351)
Principal payments under leveraged ESOP loan -- -- 5,113
Cash dividends paid on preferred stock -- (9,436) (7,032)
Payments received from ESOP trustee 928 8,097 --
Repurchase of treasury stock (3,100) (2,997) (131)
Proceeds from exercise of stock options 44 75 --
--------------------------------------------
Net cash used in financing activities (12,918) (30,638) (44,401)
--------------------------------------------
Net (decrease) increase in cash and cash equivalents (2,367) (3,554) 10,278
Cash and cash equivalents at beginning of year 16,131 19,685 9,407
============================================
Cash and cash equivalents at end of year $ 13,764 $ 16,131 $ 19,685
============================================
Supplementary schedule - net cash paid for:
Interest $ 6,371 $ 10,231 $ 10,852
============================================
Income taxes $ 603 $ 4,009 $ 626
============================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements present the results of
operations, financial position, changes in shareholders' equity, and cash flows
of PLM International, Inc. and its wholly and majority-owned subsidiaries (PLM
International or the Company). PLM International and its consolidated group
began operations on February 1, 1988. All intercompany transactions among the
consolidated group have been eliminated.
PLM International is a diversified equipment leasing and management company
providing services to transportation, industrial, and commercial companies. The
Company specializes in creating equipment leasing solutions for domestic and
international customers. PLM Financial Services, Inc., a wholly-owned
subsidiary, is the leading sponsor of diversified equipment leasing programs for
investors.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles. This
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Lease Operations
PLM International's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is recorded at
cost and depreciated over its estimated useful life. Rental payments are
recorded as revenue over the lease term. Lease origination costs are capitalized
and amortized over the term of the lease.
The Company's operations are predominately U.S. based with the exception of
the aircraft brokerage and services operations in Australia (Aeromil) (refer to
Note 2). The Australian operations account for less than 10% of total revenues
and income of the Company. Most of the Company's equipment lessees are U.S.
companies, and with the exception of Aeromil lessees, its operating lease
revenues are paid in U.S. dollars.
Transportation Equipment
Transportation equipment held for operating leases is stated at the lower of
depreciated cost or estimated net realizable value. Depreciation is computed on
the straight-line method down to its estimated salvage value utilizing the
following estimated useful lives (in years): aircraft 8-20; trailers 8-18;
marine containers 10-15; railcars 15-18; and storage vaults 15. Salvage value is
15% of original equipment cost.
In accordance with Financial Accounting Standards Board (FASB) Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121), the Company reviews the carrying value of
its equipment at least annually in relation to expected future market conditions
for the purpose of assessing recoverability of the recorded amounts. If
projected future lease revenues plus residual values are lower than the carrying
value of the equipment, a loss on revaluation is recorded ($1.2 million in 1995,
$4.2 million in 1994, and $2.2 million in 1993). 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 an affiliated partnership, or is being marketed for
sale by the Company's aircraft leasing and spare parts brokerage subsidiary.
Transportation equipment held for sale is valued at the lower of depreciated
cost or estimated net realizable value.
Except for trailers and storage vaults at the Company's per-diem rental
yards, maintenance costs are usually the obligation of the lessee. If not
covered by the lessee, they are charged against operations as incurred. To meet
the maintenance obligations of certain aircraft engines and frames, escrow
accounts are prefunded by the lessees. The escrow accounts are included in the
consolidated balance sheet as restricted cash and other liabilities. Repairs and
maintenance expense was $3.5 million, $4.2 million, and $4.4 million for 1995,
1994, and 1993, respectively.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Equipment Growth Funds, Other Limited
Partnerships, and Private Placements
The Company earns revenues in connection with the organization, marketing, and
management of limited partnerships and private placement programs. Placement
fees and commissions, representing approximately 9% of equity raised for the
equipment growth funds, were generally earned upon the purchase by investors of
partnership units. Equipment acquisition, lease negotiation, and debt placement
fees were generally earned through the purchase, initial lease, and financing of
equipment, and were generally recognized as revenue when the Company completed
substantially all of the services required to earn the fees, generally when
binding commitment agreements were signed.
Management fees are earned for managing the equipment portfolio and
administering investor programs as provided for in various agreements and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership, the Company is generally
granted an interest (between 1% and 5%) in the earnings and cash distributions
of the program for which PLM Financial Services, Inc. (FSI) is the general
partner. The Company recognizes as partnership interests its equity interest in
the earnings of the partnerships after adjusting such earnings to reflect the
use of straight-line depreciation and the effect of special allocations of the
program's gross income allowed under the respective partnership agreements.
The Company also recognizes as income its interest in the estimated net
residual value of the assets of the partnerships as they are purchased. The
amounts recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnership's equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in other fees at the present value of the
Company's share of estimated disposition proceeds. As required by FASB Technical
Bulletin 1986-2, the discount on the Company's residual value interests is not
accreted over the holding period. The Company reviews the carrying value of its
residual interests at least annually in relation to expected future market
values for the underlying equipment in which it holds residual interests for the
purpose of assessing recoverability of recorded amounts. When a limited
partnership is in the liquidation phase, all distributions received by the
Company will be treated as recoveries of its equity interest in the partnership.
In accordance with certain investment program and partnership agreements,
the Company receives reimbursement for organization and offering costs incurred
during the offering period. The reimbursement is generally between 1.5% and 3.0%
of equity raised. The investment program reimburses the Company ratably over the
offering period of the investment program based on equity raised. In the event
organizational and offering costs incurred by the Company, as defined by the
partnership agreement, exceed amounts allowed, the excess costs are capitalized
as an additional investment in the related partnership and amortized over the
estimated life of the partnership. These additional investments are reflected as
equity interest in affiliates in the accompanying consolidated balance sheets.
Investment in and Management of Limited Liability Companies
During the year ended December 31, 1995, Professional Lease Management Income
Fund I, L.L.C. (Fund I) was formed as a new investor program. FSI serves as the
Manager for the new program. This product, 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 the Company for organization of Fund I, raising
equity, acquisition of equipment, or negotiation of initial leases. The Company
is funding the cost of organization, syndication, and offering and is treating
this as its investment in Fund I. The Company will amortize its investment in
Fund I over the life of the program. In return for its investment, the Company
is generally entitled to a 15% interest in the cash distributions and earnings
of Fund I subject to certain allocation provisions. The Company's interest in
the cash distributions and earnings of Fund I will increase to 25% after the
investors have received distributions equal to their invested capital. The
Company is entitled to monthly fees for equipment management services and
reimbursement for certain accounting and administrative services it provides.
The Company also recognizes as income its interest in the estimated net residual
value of the assets of Fund I as they are purchased. The amounts recorded are
based on management's estimate of the net proceeds to be distributed upon
disposition of Fund I's equipment portfolio.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings (Loss) Per Common Share
The total common shares outstanding at December 31, 1995, were 10,833,161, a
decrease from 11,699,673 outstanding at December 31, 1994. Primary earnings
(loss) per common share is 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 years
ended 1995, 1994, and 1993 were 11,795,116, 12,373,616, and 10,589,032,
respectively.
Fully diluted earnings (loss) per common share is anti-dilutive or
substantially the same as primary earnings (loss) per common share for each
period reported on and, therefore, is not reported separately.
Income Taxes
As of January 1, 1993, the Company has adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (SFAS No. 109). SFAS No. 109
continues to require the same liability method of accounting for income taxes as
under SFAS No. 96. No additional tax assets were recorded and no valuation
allowances or additional liability was required upon adoption of SFAS No. 109.
As permitted under adoption of SFAS 109, the Company has elected not to restate
prior years' financial statements. The consolidated statement of operations for
1993 reflects the changes required in the presentation of the tax benefit from
the preferred dividend imputed on unallocated shares for the adoption of
Statement of Position 93-6 "Employers' Accounting for Employee Stock Ownership
Plans" (SOP 93-6) (refer to Note 14).
Under the liability method, deferred income taxes are recognized for the
tax consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Deferred income taxes arise primarily because of differences in the timing
of reporting transportation equipment depreciation, partnership income, and
certain reserves for financial statement and income tax reporting purposes.
Intangibles
Intangibles are included in other assets on the balance sheet and consist
primarily of goodwill related to acquisitions. Goodwill is being amortized over
10 to 15 years from the acquisition date. The Company annually reviews the
valuation of goodwill based on projected future cash flows.
Cash and Cash Equivalents
The Company considers highly liquid investments readily convertible into known
amounts of cash with original maturities of 90 days or less to be cash
equivalents.
Reclassifications
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
New Accounting Pronouncement
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This standard defines a fair-value-based method of
accounting for stock-based compensation plans. However, the standard also allows
measurement of compensation cost using the intrinsic-value-based method of
accounting prescribed in Accounting Principles Board Opinion No. 25 (APB 25).
Companies that choose to retain APB 25 for measurement will be required to
provide pro forma footnote disclosures effective for 1996 financial statements.
The Company expects to continue recording stock-based compensation costs based
on APB 25 and to provide the pro forma disclosures required under SFAS 123
beginning in 1996.
<PAGE>
2. ACQUISITION
In February 1994, the Company created a new subsidiary, Aeromil Holdings, Inc.,
to complete the purchase of Aeromil Australia Pty. Ltd., Yoder Holdings Pty.
Ltd., Austin Aero FBO Ltd., TNPL, Inc., and a 50% interest in Aeromech Pty. Ltd.
(Aeromil). Aeromil Holdings, Inc. purchased an 80% interest in Aeromil for
$1,237,000 in cash. Aeromil is one of Australia's largest aircraft dealers
specializing in local and international marketing and brokerage of corporate,
commuter, and commercial aircraft and aircraft spare parts. The acquisition was
accounted for by the purchase method of accounting and accordingly, the purchase
price was allocated to assets and liabilities based on the estimated fair value
at the date of acquisition. The excess of the consideration paid over the
estimated fair value of the net assets acquired in the Aeromil transaction, in
the amount of $0.6 million, has been recorded as goodwill to be amortized on a
straight-line basis over ten years. The portion of Aeromil not owned by PLM
International is shown as minority interest on the balance sheet (refer to Note
18).
In October 1995, the Company entered into an agreement with the 50%
partners in Aeromech, Pty. Ltd. to sell the Company's 50% interest to the
partners. A small gain on sale was recorded in relation to this transaction.
3. MANAGEMENT AGREEMENT
In 1995, the Company established a new wholly-owned equipment leasing and
management subsidiary, American Finance Group, Inc. (AFG), and entered into an
agreement to manage certain operations of Boston-based, privately-held American
Finance Group, L.P. (AFG, L.P.). During 1995, the Company provided management
services for investor programs of AFG, L.P. for which the Company earned
management fees and other revenues. In January 1996, the agreement was modified
to exclude management of AFG, L.P.'s investor programs. The modified agreement
allowed the Company to assume the lease origination and servicing operations,
the rights to manage a significant offshore investment program and certain
furniture, computers, and software of AFG, L.P. In the future, AFG will
originate and manage lease transactions on new equipment that will be financed
by a securitization facility for the Company's own account or sold to the
offshore investment program or other investors.
4. ASSETS HELD FOR SALE
At December 31, 1995, assets held for sale included 1 marine container and 69
railcars, subject to pending contracts for sale, with an aggregate net book
value of $0.7 million. At December 31, 1994, assets held for sale included 2
commercial aircraft, 1 helicopter, 11 railcars, and 1 marine vessel, all subject
to pending contracts for sale with an aggregate net book value of $9.2 million,
$8.0 million in railcars held for sale to one or more affiliated partnerships,
and $0.4 million in aircraft inventory held for sale to third parties by the
Company's aircraft brokerage and services subsidiary.
5. EQUITY INTEREST IN AFFILIATES
FSI, a wholly-owned subsidiary of the Company, is the general partner in 23
limited partnerships and generally holds an equity interest in each ranging from
1% to 5%. Net earnings and distributions of the partnerships are generally
allocated 99% to the limited partners and 1% to the general partner, except for
PLM Equipment Growth Funds (EGFs) II, III, IV, V, VI, and PLM Equipment Growth
and Income Fund VII (EGF VII), which are allocated 95% to the limited partners
and 5% to the general partner.
FSI is the manager of Fund I and is entitled to a 15% interest in the cash
distributions and earnings of Fund I, subject to certain allocation provisions.
The Company's interest in the cash distributions and earnings of Fund I will
increase to 25% after the investors have received distributions equal to their
invested capital.
<PAGE>
5. EQUITY INTEREST IN AFFILIATES (continued)
Summarized combined financial data for these affiliates, reflecting
straight-line depreciation, is as follows (in thousands and unaudited):
<TABLE>
<CAPTION>
Financial position at December 31,: 1995 1994
-----------------------------
<S> <C> <C>
Cash and other assets $ 88,619 $ 85,686
Transportation equipment and other assets,
net of accumulated depreciation of $250,715
in 1995 and $271,666 in 1994 843,297 822,798
-----------------------------
Total assets 931,916 908,484
Less liabilities, primarily long-term financings 265,356 244,547
=============================
Partners' equity $ 666,560 $ 663,937
=============================
PLM International's share thereof, which amounts are recorded as equity
interest in affiliates:
Equity interest $ 15,887 $ 6,760
Estimated residual value interests in equipment 12,321 11,614
=============================
Equity interest in affiliates $ 28,208 $ 18,374
=============================
</TABLE>
<TABLE>
<CAPTION>
Operating results for the years ended December 31,: 1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Revenue from equipment leases and other $ 201,401 $ 200,415 $ 194,335
Equipment depreciation (100,652) (87,959) (71,378)
Other costs and expenses (88,944) (83,460) (82,977)
Reduction in carrying value of certain assets (1,084) (3,213) (8,215)
----------------------------------------------
Net income (before provision for (benefit from)
income taxes) $ 10,721 $ 25,783 $ 31,765
==============================================
PLM International's share of partnership income,
residual interests, and other fees $ 4,978 $ 3,101 $ 3,838
==============================================
Distributions received and applied against
PLM International's equity interest in affiliates $ 4,590 $ 4,110 $ 4,089
==============================================
</TABLE>
Most of the limited partnership agreements contain provisions for special
allocations of the partnerships' gross income. These special allocation
provisions, in effect, allow the Company to record partnership income which
reflects the cash distributions received from the partnerships.
While none of the partners, including the general partner, are liable for
partnership borrowings and while the general partner maintains insurance against
liability for bodily injury, death, and property damage for which a partnership
may be liable, the general partner may be contingently liable for non-debt
claims against the partnership which exceed asset values.
<PAGE>
6. TRANSPORTATION EQUIPMENT HELD FOR OPERATING LEASE
Transportation equipment, at cost, held for operating lease at December 31,
1995, is represented by the following types (in thousands):
Aircraft $ 53,122 44%
Trailers 53,283 45%
Marine containers 4,528 4%
Other 8,675 7%
During the last three years, the Company has significantly downsized its
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 ultimate
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
year ended December 31, 1995, the Company realized $1.3 million of gains on
sales of railcars and aircraft purchased by the Company as part of a group of
assets.
Future minimum rentals receivable under noncancelable leases at December
31, 1995 are approximately $5,092,000 in 1996; $2,435,000 in 1997; $1,748,000 in
1998; $1,324,000 in 1999; and $92,000 in 2000. In addition, per diem and
contingent rentals consisting of utilization rate lease payments included in
revenue amounted to approximately $13.0 million in 1995, $17.0 million in 1994,
and $16.0 million in 1993. At December 31, 1995, the Company had committed
approximately 89.7% of its trailer equipment to rental yard and per diem
operations. Certain equipment owned by the Company is leased and operated
internationally.
7. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
subject to withdrawal restrictions as per lease or loan agreements. Certain
lease agreements, primarily for aircraft, require prepayments to the Company for
periodic engine and air frame maintenance. The Company's senior debt agreement
requires proceeds from the sale of pledged assets to be deposited into a
collateral bank account and the funds used to purchase additional equipment to
the extent required to meet certain debt requirements or to reduce the
outstanding loan balance (refer to Note 9).
8. SHORT-TERM SECURED DEBT
The Company maintains a warehousing line of credit to be used to acquire assets
on an interim basis for placement with affiliated partnerships.
In September 1995, the Company amended its warehousing line of credit
facility. The amendment extended the facility until September 30, 1996 and
provides for a $5.0 million letter of credit facility as part of the $25.0
million facility. This facility, which is shared by EGFs II, III, IV, V, VI,
VII, and Fund I, allows the Company to purchase equipment prior to a designated
program or partnership being identified, or prior to having raised sufficient
capital to purchase the equipment. This facility provides 80% financing if the
Company is the borrower and working capital is used for the nonfinanced costs of
these acquisitions. The Company can hold purchased assets under this facility
for up to 150 days. Interest accrues at prime or LIBOR plus 2.5%, at the option
of the borrower at the time of the advance under the facility. As provided for
in the program offering documents, the Company retains the difference between
the net lease revenue earned and the carrying costs incurred during the interim
holding period as the Company's capital is at risk. As of December 31, 1995,
there were no borrowings on this facility by the Company, the EGFs, or Fund I.
At December 31, 1994, the Company had borrowed $6.4 million and the EGFs and
Fund I had no borrowings under the facility.
<PAGE>
9. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
------------------------------
<S> <C> <C>
Senior Secured Debt:
Institutional debt, $25.0 million bearing interest at 9.78% and $10.0 million
bearing interest at LIBOR plus 2.75% per annum (8.69% and 8.3% at December
31, 1995 and 1994, respectively), interest due quarterly, principal payments
due quarterly beginning June 30, 1997 through June 2001, secured by
substantially all of the Company's transportation-related equipment assets
and associated leases
except those assets used as collateral for other secured debt $ 35,000 $ 35,000
Other Secured Debt:
Notes payable, bearing interest from 8.25% to 11.25% due in varying monthly
principal and interest installments through 2000, secured by equipment with
a net book value
of approximately $1.1 million at December 31, 1995 1,353 2,119
------------------------------
Total Secured Debt $ 36,353 $ 37,119
==============================
</TABLE>
In June 1994, the Company closed a $45.0 million senior loan facility with
a syndicate of insurance companies and repaid its then existing senior
indebtedness. The facility provides that equipment sales proceeds or cash
deposits be placed into cash collateral accounts or used to purchase additional
equipment to the extent required to meet certain debt covenants. In December
1994, the Company utilized the balance in the cash collateral account to prepay
$10.0 million of the fixed rate loan.
The current institutional debt agreement contains financial covenants
related to tangible net worth, ratios for leverage, interest coverage ratios,
and collateral coverage, all of which were met at December 31, 1995. In
addition, there are restrictions on payment of dividends, purchase of stock, and
certain investments based on computations of tangible net worth, financial
ratios, and cash flows, as defined.
Scheduled principal payments on long-term secured debt are approximately
(in thousands):
1996 - $ 284
1997 - 6,560
1998 - 8,788
1999 - 8,777
2000 - 8,444
thereafter - 3,500
===========
Total - $ 36,353
===========
The Company estimates, based on recent transactions, that the fair value of
the $25.0 million fixed-rate portion of the 9.78% long-term senior debt is $26.3
million, and the fair value of the variable-rate portion of the long-term senior
debt approximates its carrying value of $10.0 million.
<PAGE>
10. SUBORDINATED DEBT
The Company has outstanding certain senior unsecured subordinated notes, bearing
interest at 11.55% payable monthly. At December 31, 1995, these notes totaled
$11.5 million. The senior subordinated debt agreement contains certain financial
covenants and other provisions, including an acceleration provision in the event
that, under certain circumstances, a person or group obtains certain percentages
of the voting stock of the Company or seeks to influence the voting on certain
matters at a meeting of shareholders. In addition, extensions to the senior
secured debt may cause payment of this debt to be delayed. Absent the
aforementioned, principal payments due on subordinated debt in the next four
years are $2,875,000 in 1996, $2,875,000 in 1997, $2,875,000 in 1998, and
$2,875,000 in 1999.
The Company estimates, based on recent transactions, that the fair value of
the $11.5 million fixed-rate subordinated debt is $11.9 million.
11. SECURITIZATION FACILITY
The Company entered into a securitization facility on July 1, 1995 which makes
available for one year up to $80 million on a non-recourse basis that will be
secured primarily by finance-type leases which generally have terms of four to
five years. Repayment of the facility matches the terms of the underlying
leases. The securitized debt is expected to bear interest equivalent to average
U.S. treasuries plus 1%. As of December 31, 1995, there were no borrowings under
this facility.
12. INCOME TAXES
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------------------------- ----------------------------------------
Federal State Total Federal State Total
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current $ 2,432 $ 60 $ 2,492 $ (734) $ 42 $ (692)
Deferred (941) 269 (672) (2,664) (712) (3,376)
======================================== ========================================
$ 1,491 $ 329 $ 1,820 $ (3,398) $ (670) $ (4,068)
======================================== ========================================
</TABLE>
<TABLE>
<CAPTION>
1993
----------------------------------------
Federal State Total
----------------------------------------
<S> <C> <C> <C>
Current $ 5,766 $ 30 $ 5,796
Deferred (4,023) (318) (4,341)
========================================
$ 1,743 $ (288) $ 1,455
========================================
</TABLE>
Amounts for the current year are based upon estimates and assumptions as of
the date of this report and could vary significantly from amounts shown on the
tax returns ultimately filed. Accordingly, the variances, if any, in
classification from the amounts previously reported for prior years are
primarily the result of adjustments to conform to the tax returns as filed.
The difference between the effective rate and the expected Federal
statutory rate is reconciled below:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense (benefit) rate 34% (34)% 34%
State income tax (benefit) 3 (8) (2)
Federal tax credits -- -- (9)
Benefit from preferred dividend to ESOP -- (32) (6)
Other (4) 1 2
Tax adjustment related to ESOP termination (10) -- --
------------------------------------------
Effective tax expense (benefit) rate 23% (73)% 19%
==========================================
</TABLE>
<PAGE>
12. INCOME TAXES (continued)
Net operating loss carryforwards for federal income tax purposes amounted
to $8,904,000 and $21,691,000 at December 31, 1995 and 1994, respectively. These
net operating losses have a 15-year carryforward period. The net operating
losses at December 31, 1995, will expire as follows: $158,000 in 2005;
$7,169,000 in 2006; $770,000 in 2007; and $807,000 in 2009. Alternative minimum
tax credit carryforwards at December 31, 1995 are $8,027,000.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities at December 31, are presented below (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------------------------------
<S> <C> <C>
Deferred Tax Assets
Tax credit carryforwards $ 9,018 $ 6,583
Net operating loss carryforwards 3,451 7,048
Federal benefit of state taxes 975 1,082
Other 75 --
------------------------------
Total deferred tax assets 13,519 14,713
------------------------------
Deferred Tax Liabilities
Transportation equipment, principally differences in depreciation 19,581 22,415
Partnership interests 6,327 8,085
Other 3,104 378
------------------------------
Total deferred tax liabilities 29,012 30,878
------------------------------
Net deferred tax liabilities $ 15,493 $ 16,165
==============================
</TABLE>
Management has reviewed all established tax interpretations of items
reflected in its consolidated tax returns and believes these interpretations do
not require valuation allowances as described in SFAS No. 109. Deferred tax
liabilities have not been provided on approximately $1.4 million in 1995 of
undistributed earnings of foreign subsidiaries because assets representing those
earnings are permanently invested.
13. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved as plaintiff or defendant in various legal actions
incidental to its business. Management does not believe any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
On November 22, 1995, James F. Schultz (Plaintiff), a former employee of
PLM International, filed a first amended complaint (the Complaint) in United
States District Court for the Northern District of California (Case No.
C-95-2957 MMC) against the Company, the PLM International, Inc. Employee Stock
Ownership Plan (the ESOP), the ESOP's trustee, and certain individual employees,
officers and/or directors of PLM International. The Complaint, which was served
on PLMI on November 27, 1995, contains claims for relief alleging breaches of
fiduciary duties and various violations of the Employee Retirement Income
Security Act of 1974 (ERISA) arising principally from purported defects in the
structure, financing and termination of the ESOP and for rescission of the
preferred stock transactions with the ESOP and/or restitution of ESOP assets,
and attorneys' fees and costs under ERISA. The original complaint, which was
filed in August 1995 by Plaintiff, was never served on the Company. PLMI and the
other defendants have filed a motion to dismiss the Complaint, which is
scheduled to be heard on April 19, 1996. The Company does not believe the claims
have any merit and plans to defend this matter vigorously.
<PAGE>
13. COMMITMENTS AND CONTINGENCIES (continued)
Lease Agreements
The Company has entered into operating leases for office space and rental yard
operations. The Company's total net rent expense was $2.5 million, $2.1 million,
and $2.4 million in 1995, 1994, and 1993, respectively. The portion of rent
expense related to its principal office was $2.3 million in 1995, 1994, and
1993. The remaining rent expense was related to other office space and rental
yard operations.
Annual lease rental commitments for all of the Company's locations total
$2,080,000, $1,919,000, $1,777,000, $1,738,000, $1,685,000, and $656,000 for
years 1996 through 2000, and thereafter respectively.
Letter of Credit
At December 31, 1995, the Company had a $327,000 open letter of credit to cover
its guarantee of the payment of the outstanding debt of a Canadian railcar
repair facility, in which the Company has a 10% equity interest. This letter of
credit must be extended or replaced under the terms of the guarantee.
Other
The Company provides employment contracts to certain officers which provide for
certain payments in the event of a change of control and termination of
employment.
The Company has agreed to provide supplemental retirement benefits to 11
current or former members of management. The benefits accrue over a maximum of
15 years and will result in payments over 5 years based on the average base rate
of pay during the 60-month period prior to retirement as adjusted for length of
participation in the plan. Expenses for the plan were $316,000 for 1995,
$249,000 for 1994, and $429,000 for 1993. As of December 1995, the total
estimated future obligation relating to the current participants is $9,392,000
including vested benefits of $2,965,000. In connection with this plan, whole
life insurance contracts were purchased on the participants. Insurance premiums
of $247,000 and $203,000 were paid during 1995 and 1994, respectively.
Additionally, the Company has capitalized $540,000 to reflect the cash surrender
value of these contracts as of December 31, 1995.
14. SHAREHOLDERS' EQUITY
Common Stock
PLM International has authorized 50,000,000 shares of common stock at $0.01 par
value of which 780,000 shares have been reserved for stock options. In 1994,
Transcisco Industries Inc. emerged from Chapter 11 bankruptcy proceedings and as
part of its plan of reorganization, transferred its shares of PLM International
common stock to its Official Bondholders' Committee (OBC) during 1994. In
October 1994, 2,445,000 of these shares were sold to independent investors and
the remaining 922,367 shares were repurchased by the Company as treasury stock.
In February 1995, the Company announced that its Board of Directors had
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 purchased 146,977 shares under this program
for $0.5 million in 1995.
In November 1995, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
The shares may be purchased in the open market or through private transactions,
with working capital and existing cash reserves. Shares may be used for
corporate purposes, including option plans, or they may be retired. The Company
purchased 735,196 shares under this program for $2.6 million in 1995.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Common Stock
The following table summarizes changes in common stock during 1994 and
1995:
<TABLE>
<CAPTION>
Issued Outstanding
Common Treasury Common
Shares Shares Shares
-----------------------------------------------------
<S> <C> <C> <C>
Shares at December 31, 1993 10,897,324 432,018 10,465,306
Conversion of preferred stock -- (14,809) 14,809
Stock options exercised 23,331 -- 23,331
Stock repurchase -- 922,367 (922,367)
ESOP termination 1,650,075 (468,519) 2,118,594
--------------------------------------------------------
Shares at December 31, 1994 12,570,730 871,057 11,699,673
Stock options exercised 15,661 -- 15,661
Stock repurchase -- 882,173 (882,173)
========================================================
Shares at December 31, 1995 12,586,391 1,753,230 10,833,161
========================================================
</TABLE>
Preferred Stock
PLM International has authorized 10,000,000 shares of preferred stock at $0.01
par value, none of which are outstanding at December 31, 1995.
Stock Options
The granting of non-qualified stock options to key employees and directors is
provided for in plans that reserve up to 780,000 shares of the Company's common
stock. The price of the shares issued under an option must be at least 85% of
the fair market value of the common stock at the date of grant. All options
currently outstanding are exercisable at prices equal to the market value of the
shares at the date of grant. Vesting of options granted generally occurs in
three equal installments of 33 1/3% per year, initiating from the date of grant.
Stock option transactions during 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
Average
Number of Option Price
Shares Per Shares
------------------------------------
<S> <C> <C>
Balance, December 31, 1993 645,197 $ 2.00
Granted 102,500 3.06
Canceled (77,069) 2.00
Exercised (23,331) 2.00
------------------------------------
Balance, December 31, 1994 647,297 $ 2.17
Granted 50,000 2.78
Canceled (37,834) 2.00
Exercised (15,661) 2.00
====================================
Balance, December 31, 1995 643,802 $ 2.23
====================================
</TABLE>
At December 31, 1995, 484,547 of these options were exercisable.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Shareholder Rights
On March 12, 1989, the Company adopted a Shareholder Right Plan (Plan) under
which one common stock purchase right (a Right) was distributed as a dividend on
each outstanding share of common stock. The Plan, which was amended on August
12, 1991 and on January 18, 1993, is designed to protect against unsolicited and
coercive attempts to acquire control of PLM International and other abusive
tactics. The Plan is not intended to preclude an acquisition of PLM
International which is determined to be fair to, and in the best interests of,
its shareholders.
Upon the occurrence of certain events which may be characterized as
unsolicited or abusive attempts to acquire control of the Company, each Right
will entitle its holder (other than holders and their affiliates participating
in such attempts), to purchase, for the exercise price, shares of the Company's
common stock (or in certain circumstances, other securities, cash, or
properties) having a fair market value equal to twice the exercise price. In
addition, in certain other events involving the sale of the Company or a
significant portion of its assets, each Right not owned by the acquiring entity
and its affiliates will entitle the holder to purchase, at the Right's exercise
price, equity securities of such acquiring entity having a market value equal to
twice the exercise price.
Previously, the Plan did not provide for the issuance of rights to the
holder of preferred stock except upon conversion of the preferred stock into
common stock. On January 18, 1993, the Plan was amended to distribute additional
rights as a dividend on each outstanding share of the Company's Series A
Cumulative Preferred Stock held at the close of business on February 1, 1993.
PLM International generally will be entitled to redeem the Rights in whole
at a price of one cent per Right at any time prior to the Rights becoming
exercisable. As of December 31, 1995, there were 10,833,161 Rights outstanding
which will expire on March 31, 1999, and carry no voting privileges.
Employee Stock Ownership Plan (ESOP)
Termination
On August 17, 1989, the Company established a leveraged ESOP, effective August
21, 1989. PLM International issued 4,923,077 shares of Series A Cumulative
Convertible Preferred Stock to the ESOP for $13.00 per share, for an aggregate
purchase price of $64,000,001. The sale was 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 was secured, in part, by the shares of
preferred stock, while the Bank Loan was secured with cash equivalents and
marketable securities. Preferred dividends were payable semiannually on February
21 and August 21, which corresponded to the ESOP Debt payment dates. Bank loan
debt service was covered through release of the restricted cash and marketable
securities. While the annual ESOP dividend was fixed at $1.43 per share, the
interest rate on the ESOP debt varied, resulting in uneven debt service
requirements.
Termination of the ESOP resulted in the distribution to each ESOP
participant of shares of preferred stock allocated to such participant's account
which shares immediately converted into common stock. During the life of the
ESOP, 2,118,594 common shares were distributed to approximately 315 ESOP
participants, including 1,650,075 shares distributed to then ESOP participants
upon termination of the ESOP. Shares in the amount of 468,519 were distributed
on or about November 18, 1994, to participants who, at that time, were no longer
employees of the Company. All such distributed shares are freely tradable common
shares listed on the American Stock Exchange.
Shares of preferred stock held by the ESOP which were not allocated to
participants' accounts at the date of termination (2,804,483 shares) were
returned to the Company. In addition, the bank indebtedness of the Company
($43.3 million) related to the ESOP was repaid using restricted cash and
marketable securities collateral. In 1994, the Company charged approximately
$0.5 million to earnings to reflect an adjustment to current market value of
this collateral.
Termination of the ESOP and the related ESOP loan has eliminated payment by
the Company of the annual dividend on the preferred stock held by the ESOP. For
the years ended December 31, 1994 and 1993, the aggregate pretax amount of this
dividend was $7.3 million and $7.0 million, respectively. The Company also
charged to earnings approximately $2.7 million of previously paid, unamortized
ESOP loan fees and other costs in 1994.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Change in Accounting
On November 22, 1993, the American Institute of Certified Public Accountants
issued SOP 93-6 which changes the way companies report transactions with
leveraged employee stock ownership plans 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 ESOP loan 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 for the change in accounting as of January
1, 1994. The adoption of SOP 93-6 resulted in a noncash charge to earnings, of
$5.1 million for the impact of the change in accounting principle which was
primarily the result of an increase in unearned compensation of $7.1 million and
the recording of a previously unaccrued dividend of $2.5 million. 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.
15. TRANSACTIONS WITH AFFILIATES
In addition to various fees payable to the Company or its subsidiaries (refer to
Notes 1 and 5), the affiliated partnerships reimburse the Company for certain
expenses as allowed in the partnership agreements. Reimbursed expenses totaling
approximately $6.9 million , $7.0 million, and $10 million in 1995, 1994, and
1993, respectively, have been recorded as reductions of operations support
expense. Outstanding amounts are paid within normal business terms or treated as
a capital contribution if excess organization and offering costs exceed the
partnership agreement reimbursement limitations. The Company amortizes such
capital contributions over the estimated life of the partnership.
16. OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
Concentrations of Credit Risk: Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of temporary
cash investments, lease receivables, and receivables from affiliated entities.
The Company places its temporary cash investments with financial
institutions and other creditworthy issuers and limits the amount of credit
exposure to any one party. Concentrations of credit risk with respect to lease
receivables are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different businesses and
geographic areas. The Company's involvement with management of the receivables
from affiliated entities limits the amount of credit exposure from affiliated
entities.
As of December 31, 1995 and 1994, management believes the Company had no
significant concentrations of credit risk.
<PAGE>
17. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1995 and 1994 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Net Income Earnings (Loss)
Income (Loss) Per Common
(Loss) to Common Shares
Revenue Before Taxes Shares Outstanding
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 Quarters
First $ 17,118 $ 2,602 $ 1,487 $ 0.13
Second 14,836 2,818 1,608 0.13
Third 14,750 3,616 2,057 0.18
Fourth 14,547 (1,168) 896 0.07
======================================================================
Total $ 61,251 $ 7,868 $ 6,048 $ 0.51
======================================================================
1994 Quarters
First $ 14,967 $ 949 $ (4,631) $ (0.37)
Second 14,481 216 20 0.00
Third 13,323 (8,727) (5,804) (0.46)
Fourth 15,191 1,983 1,344 0.10
======================================================================
Total $ 57,962 $ (5,579) $ (9,071) $ (0.73)
======================================================================
</TABLE>
In the fourth quarter of 1995, the Company recorded a $1.2 million
reduction in the carrying value of certain aircraft equipment, $1.1 million in
loan fees related to early retirement of the Company's senior subordinated debt,
and higher operations support expense of $1.3 million which resulted mainly from
AFG-related expenses and severance accruals for terminated employees.
In the fourth quarter of 1995, the Company recorded a $2.1 million tax
benefit resulting in a 23% effective rate on its annual income.
The adoption of SOP 93-6 resulted in a noncash charge to earnings of $5.1
million for the impact of the change in accounting principle which was recorded
in the first quarter of 1994.
In the third quarter of 1994, the Company reduced the carrying value of
certain equipment by $4.2 million and recognized other expense of $2.5 million
related to the planned termination of the Company's ESOP.
18. SUBSEQUENT EVENTS
In February 1996, the Company sold 64 railcars to a third party for $1.4
million. The Company recognized a gain of $0.7 million on this sale. The assets
were included in assets held for sale at December 31, 1995.
From January 1, 1996 through March 25, 1996, the Company engaged in
transactions that resulted in a $5.5 million balance under the securitization
trust using leases originated by AFG. Certain of these leases were acquired from
AFG, L.P. under the modified agreement (refer to Notes 3 and 11).
In January 1996, the Company sold its 100% ownership interest in the common
stock of Austin Aero FBO Ltd. to a third party at essentially break even.
In February 1996, the Company adopted the PLM International, Inc. Profit
Sharing and 401(k) Plan (the Plan). The Plan provides for deferred compensation
as described in Section 401(k) of the Internal Revenue Code. The 401(k) Plan is
a contributory plan available to essentially all full-time employees of the
Company. Employees who participate in the 401(k) Plan can elect to defer and
contribute to the trust established under the 401(k) Plan up to 9% or $9,500 of
pre-tax salary or wages in 1996. The Company will match up to a maximum of
$4,000 of employee contributions per annum to vest in four equal installments
over a four-year period.
<PAGE>
18. SUBSEQUENT EVENTS (continued)
In February 1996, the Company made its scheduled $2.9 million subordinated
debt payment as required by the loan agreement.
The Company repurchased 28,300 shares of its common stock for $0.1 million
during the period from January 1, 1996 through March 25, 1996.
As March 25, 1996, the Company had $10.5 million of outstanding borrowings
under its short-term warehousing line of credit facility.
<PAGE>
<TABLE>
EXHIBIT XI
PLM INTERNATIONAL, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE<F1>
Years Ended December 31,
1995 1994 1993
-------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Primary
Earnings:
Net income (loss) $ 6,048 $ (6,641) $ 6,282
Preferred dividend required -- (2,430) (4,850)
=================================================
Net income (loss) to common shares: $ 6,048 $ (9,071) 1,432
=================================================
Shares:
Weighted average number of common shares outstanding 11,795 12,374 10,589
=================================================
Primary earnings (loss) per common share $ 0.51 $ (0.73) $ 0.14
=================================================
Assuming Full Dilution<F2>
Earnings:
Net income (loss) $ 6,048 $ (6,641) $ 6,282
Replacement contribution required upon conversion
of ESOP convertible preferred shares -- -- (4,542)
Non-discretionary adjustments to incentive
compensation plans based on ESOP's replacement
contribution effect on pretax earnings -- -- 850
Change in income tax due to conversion of
ESOP convertible preferred shares -- -- (191)
=================================================
Net income (loss) to common as adjusted $ 6,048 $ (6,641) $ 2,399
=================================================
Shares:
Weighted average number of common shares
outstanding and common stock equivalents 11,760 12,374 10,605
Assumed conversion of preferred shares<F3> -- 3,082 4,917
-------------------------------------------------
Weighted average number of common shares
outstanding as adjusted 11,760 15,456 15,522
=================================================
Earnings (loss) per common share assuming full dilution $ 0.51 $ (0.43) $ 0.16
=================================================
<FN>
<F1> See accompanying notes to December 31, 1995, 1994, and 1993 Financial
Statements.
<F2> This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because the results are antidilutive.
<F3> Refer to accompanying Note 14 to the December 31, 1994, Financial
Statements for the explanation related to the ESOP termination.
</FN>
</TABLE>
AMENDMENT NO. 4 TO NOTE AGREEMENT
This Amendment No. 4 to Note Agreement (this "Amendment"), dated as of
February 10, 1996, is by and among PLM International, Inc., a Delaware
corporation (the "Company"), and each of the purchasers named on the execution
page hereto (the "Purchasers").
The Company and the Purchasers have entered into the Note Agreement
dated as of June 30, 1994, as amended by Amendment No. 1, dated as of June 30,
1994, Amendment No. 2, dated as of December 27, 1994, and Amendment No. 3, dated
as of November 1, 1995 (the "Note Agreement"), and the Company and each
Purchaser have entered into the Note Purchase Agreement between the Company and
such Purchaser dated as of June 30, 1994, relating to the issuance and sale by
the Company of its 9.78% Series A Senior Secured Notes and its Floating Rate
Series B Senior Secured Notes. The Company and the Purchasers have agreed that
Section 6.7(b) of the Note Agreement requires amending in order to more
accurately reflect the composition of the Company's Equipment constituting
Collateral. The Company and the Purchasers now wish to amend Section 6.7(b) of
the Note Agreement, as more fully set forth herein.
The Company and the Purchasers agree as follows:
1. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Note Agreement.
2. Section 6.7(b) of the Note Agreement is hereby amended to read
in its entirety as follows:
The Company shall cause no more than 60% of the
Equipment constituting Collateral (determined on the basis of
Appraised Value from time to time) to be in any one
transportation sector (e.g., aircraft, marine vessels, marine
containers, storage containers, railcars, or trailers).
Without limiting the foregoing, the Company shall ensure that
each category of Equipment constituting Collateral listed
below shall not exceed the percentages set forth opposite its
category (determined on the basis of Appraised Value) of the
aggregate Equipment constituting Collateral:
Type of Equipment Maximum Percentage of Collateral
Any one item of Equipment 15%
Marine Containers 10%
3. This Amendment shall become effective when it is executed by
the Company and all the Purchasers.
<PAGE>
4. Except as amended by this Amendment, the Note Agreement
remains in full force and effect as originally written.
5. This Amendment may be executed and delivered in any number of
counterparts, each of such counterparts constituting an
original but all together only one agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
COMPANY: PLM INTERNATIONAL, INC.
By: /s/ Stephen Peary
------------------------------------
Stephen Peary, Senior Vice President
PURCHASERS: SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ Sam Tillinghast
------------------------------------
Sam Tillinghast, Authorized Agent
ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA
By:
William Lang,
REPUBLIC WESTERN INSURANCE
COMPANY
/s/ Bradley P. Newman
----------------------
Bradley P. Newman
Title: Vice President/Treasurer
<PAGE>
AMENDMENT NO. 10 TO NOTE AGREEMENT
This Amendment No. 10 to Note Agreement (the "Amendment") is made as of
February 10, 1996 by and between PLM International, Inc. ("Company") and
Principal Mutual Life Insurance Company ("Purchaser"), and amends that certain
Note Agreement dated as of January 15, 1989, as amended by Amendment No. 1 to
Note Agreement dated as of May ___, 1989, by Amendment No. 2 to Note Agreement
dated as of June 1, 1989, by Amendment No. 3 to Note Agreement dated as of
August 6, 1990, by Amendment 4 to Note Agreement dated as of June 21, 1991, by
Amendment No. 5 to Note Agreement dated as of December 16, 1991, by Amendment
No. 6 to Note Agreement dated October 30, 1992, by Amendment No. 7 to Note
Agreement dated July 22, 1994, by Amendment No. 8 to Note Agreement dated
December 12, 1994, and by Amendment No. 9 to Note Agreement, dated as of
November 15, 1995, by and between the Company and the Purchaser (as so amended,
the "Note Agreement").
RECITALS
A. The Company and the Purchaser have entered into the Note
Agreement and the Company has issued and delivered to
Purchaser the Notes (as defined in the Note Agreement).
B. The Company and the Purchaser wish to amend Section 5.5 of the
Note Agreement to more accurately reflect the composition of
the Company's Equipment.
C. The Company and Purchaser now desire to amend the Note
Agreement and the Notes.
D. As of the date hereof, the Purchaser is the holder of 100% in
aggregate principal amount of the Notes.
E. Subject to the terms and conditions hereinafter set forth, the
Company and Purchaser are willing to amend the Note Agreement
and the Notes.
NOW THEREFORE, the Company and Purchaser hereby agree as follows:
1. Section 5.5. Section 5.5 is hereby amended to read in its
entirety as follows:
"5.5 Nature of Business. The Company, its Restricted
Subsidiaries and Special Subsidiaries will engage only in (i)
the business of or a business relating to (a) the ownership,
operation, maintenance or leasing of transportation equipment,
(b) the financing of transportation equipment and (c) the
management of transportation equipment portfolios and (ii) any
other business provided that, as a result of engaging in such
business, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by the
Company, its Restricted Subsidiaries and Special Subsidiaries
would not be substantially changed from the general nature of
the business engaged in by the Company, its Restricted
Subsidiaries and Special Subsidiaries on the date of this
Agreement. The Company shall cause no more than 60% of its
Equipment (as defined in Section 5.14) determined on the basis
of market value to be in any one transportation sector (e.g.,
aircraft, marine vessels, marine containers, storage
containers, railcars or trailers). Without limiting the
foregoing, the Company shall ensure that each category of
Equipment listed below shall not exceed the percentages set
forth opposite its category (determined on the basis of market
value) of the aggregate Equipment of the Company:
Type of Equipment Maximum Percentage
Any one item of Equipment 15%
Marine Containers 10%"
2. Effectiveness. This Amendment and each of its terms shall be
effective as of February 10, 1996, and will apply to all
periods from and after February 10, 1996.
3. Express Amendment. Except as specifically provided herein, the
Note Agreement shall continue in full force and effect. No
provision of this Amendment shall be construed to limit any
obligation of the Company under the Note Agreement or any
right of the Purchaser under the Note Agreement.
4. Counterparts. This Amendment may be signed in any number of
counterparts with the same effect as if the signatures to each
such counterpart were upon a single instrument. All
counterparts shall be deemed an original of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
COMPANY: PURCHASER:
PLM INTERNATIONAL, INC. PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By: /s/ J. Michael Allgood By: /s/ Annette Masterson
---------------------- ---------------------
J. Michael Allgood Annette Masterson
Its: VP & Chief Financial Officer Its: Director
AMENDMENT NO. 9 TO NOTE AGREEMENT
This Amendment No. 9 to Note Agreement (the "Amendment") is made as of
November 15, 1995 by and between PLM International, Inc. ("Company") and
Principal Mutual Life Insurance Company ("Purchaser"), and amends that certain
Note Agreement dated as of January 15, 1989, as amended by Amendment No. 1 to
Note Agreement dated as of May ___, 1989, by Amendment No. 2 to Note Agreement
dated as of June 1, 1989, by Amendment No. 3 to Note Agreement dated as of
August 6, 1990, by Amendment 4 to Note Agreement dated as of June 21, 1991, by
Amendment No. 5 to Note Agreement dated as of December 16, 1991, by Amendment
No. 6 to Note Agreement dated October 30, 1992, by Amendment No. 7 to Note
Agreement dated July 22, 1994 and by Amendment No. 8 to Note Agreement dated
December 12, 1994, by and between the Company and the Purchaser (as so amended,
the "Note Agreement").
RECITALS
A. The Company and the Purchaser have entered into the Note Agreement
and the Company has issued and delivered to Purchaser the Notes (as defined in
the Note Agreement).
B. The Company wishes to prepay approximately $11,500,000 in
outstanding principal pursuant to Section 2.2 of the Note Agreement. Purchaser
is desirous for the Company to prepay such amount and is therefore willing to
agree to certain changes in the covenants of the Company provided in the Note
Agreement.
C. The Company and Purchaser now desire to amend the Note Agreement and
the Notes.
D. As of the date hereof, the Purchaser is the holder of 100% in
aggregate principal amount of the Notes.
E. Subject to the terms and conditions hereinafter set forth, the
Company and Purchaser are willing to amend the Note Agreement and the Notes.
NOW THEREFORE, the Company and Purchaser hereby agree as follows:
1. Section 5.8(b). Section 5.8(b) is hereby amended to read in its
entirety as follows:
"(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of capital stock of any
class or any warrants, rights or options to purchase or
acquire any shares of its capital stock (except purchases,
redemptions or retirement of (i) up to $8,500,000 in the
aggregate of common shares of the Company."
2. Section 5.10(e). Section 5.10(e) is hereby amended to read in its
entirety as follows:
"(e) As used in this Sec. 5.10, a sale, lease or other
disposition of assets shall be deemed to be "substantial part"
of assets only if the book value of such assets when added to
the book value of all other assets sold, leased or otherwise
disposed of by the Company, its Restricted Subsidiaries and
Special Subsidiaries (other than (i) in the ordinary course of
business and (ii) the disposition of Eligible Securitization
Assets by a Securitization Subsidiary) during the twelve month
period ending with the date of such sale, lease or other
disposition, exceeds 10% of the Consolidated Net Tangible
Assets of the Company and its Restricted Subsidiaries
determined as of the end of the immediately preceding fiscal
year (the amount of such excess being herein referred to as
"Excess Proceeds"). For the purpose of making any
determination of "substantial part" (i) sales of assets from
which the Excess Proceeds are deposited with a financial
institution and held in an account which is (x) segregated
from all other accounts and funds of the Company and (y)
identified as holding such proceeds and used within 120 days
after the sale to purchase other fixed or capital assets
useful and intended to be used in the business of the Company,
a Restricted Subsidiary or Special Subsidiary shall be
excluded, and (ii) sales of assets shall also be excluded if
the Company applies the Excess Proceeds to the payment or
prepayment of Funded Debt; provided however that the use of
proceeds under clause (y) above to purchase such fixed or
capital assets to be used in the business of a Special
Subsidiary shall be subject to Sec. 5.18(j) hereof."
3. Section 8.1. Section 8.1 is amended by replacing or adding the
following definitions in the appropriate alphabetical order:
"Borrowing Base" shall mean as of the date of any
determination thereof, the sum of (i) Adjusted Net Worth as at
the end of the Company's fiscal quarter then most recently
ended and (ii) the unpaid principal amount of all Subordinated
Debt outstanding as at such date of determination, minus the
Consolidated Tangible Net Worth of any Restricted Subsidiary
which has incurred obligations for borrowed money in
connection with the acquisition of Eligible Securitization
Assets.
"Eligible Securitization Asset" shall mean (i) any lease or
installment purchase contract entered into or owned by the
Company which shall have been selected for disposition in
accordance with the Company's past practices and substantially
in accordance with standard industry practice; (ii) the
Company's interest in any equipment or other assets which are
the subject of the lease or installment purchase contract
described in the foregoing clause (i); (iii) all monies due or
to become due with respect to any of the foregoing clauses (i)
or (ii); (iv) all rights and interest in the insurance
policies with respect to any of the foregoing; and (v) cash in
an amount up to the aggregate reserve requirements, if any,
which the Company is obligated to fund under the documents
governing an asset securitization for a Securitization
Subsidiary.
"Fixed Charges" for any period shall mean on a consolidated
basis the sum of (i) all Rentals on Capitalized Leases to the
extent of the imputed interest component payable during such
period by the Company and its Restricted Subsidiaries, (ii)
all Interest Charges on all Indebtedness (other than (a)
imputed interest on Capitalized Leases and (b) Interest
Charges on any obligations for borrowed money incurred in
connection with the acquisition of Eligible Securitization
Assets) of the Company and its Restricted Subsidiaries and
(iii) all Rentals on leases other than Capitalized Leases.
"Funded Debt" of any Person shall mean without duplication (i)
all Indebtedness for Borrowed Money of such Person having a
final maturity of more than one year from the date of origin
thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from
the date of origin), including (a) all payments in respect
thereof that are required to be made, within one year from the
date of any determination of Funded Debt and (b) obligations
for borrowed money incurred in connection with the acquisition
of Eligible Securitization Assets), (ii) all Capitalized
Rentals of such Person, and (iii) all Guaranties of such
Person of Funded Debt of others.
"Securitization Subsidiary" shall mean any Subsidiary of which
all of the issued and outstanding shares of stock shall be
owned by the Company and/or one or more of its Wholly-owned
Restricted Subsidiaries and which engages exclusively in
financing Eligible Securitization Assets and activities
related to such financing activities.
4. Effectiveness. This Amendment and each of its terms shall be
effective upon the prepayment of at least $11,500,000 of principal outstanding
on the Notes pursuant to Section 2.2 of the Note Agreement.
5. Express Amendment. Except as specifically provided herein, the Note
Agreement shall continue in full force and effect. No provision of this
Amendment shall be construed to limit any obligation of the Company under the
Note Agreement or any right of the Purchaser under the Note Agreement.
6. Counterparts. This Amendment may be signed in any number of
counterparts with the same effect as if the signatures to each such counterpart
were upon a single instrument. All counterparts shall be deemed an original of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
COMPANY: PURCHASER:
PLM INTERNATIONAL, INC. PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By: /s/ J. Michael Allgood By: /s/ John Heiny
---------------------- -----------------------
Its: Vice President & CFO Its: Counsel
By: /s/ Donald Brattebo
-----------------------
Its: Second Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996.
/s/ Allen V. Hirsch
---------------------------
Allen V. Hirsch
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendements thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996.
/s/ Robert L. Pagel
---------------------------
Robert L. Pagel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996.
/s/ Robert N. Tidball
----------------------------
Robert N. Tidball
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996
/s/ Walter E. Hoadley
--------------------------------
Walter E. Hoadley
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996
/s/ J. Alec Merriam
-------------------------------
J. Alec Merriam
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1996 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1995.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of February, 1996
/s/ Harold R. Somerset
--------------------------------
Harold R. Somerset
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,764
<SECURITIES> 0
<RECEIVABLES> 4,931
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 119,608
<DEPRECIATION> 68,290
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0
0
<OTHER-SE> (23,309)
<TOTAL-LIABILITY-AND-EQUITY> 126,213
<SALES> 0
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<TOTAL-COSTS> 46,572
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