UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal quarter ended March 31, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
For the transition period from to
Commission file number 1-9670
-------------------------------
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 900, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
----------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock - $.01
Par Value; Outstanding as of May 14, 1996 - 10,805,861 shares
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------------
(in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,541 $ 13,764
Receivables 5,106 4,931
Investment in direct finance lease receivables, net 15,460 --
Receivables from affiliates 8,241 8,690
Assets held for sale 3,071 719
Equity interest in affiliates 30,112 28,208
Equipment held for operating leases 110,894 112,732
Less accumulated depreciation (61,214) (64,892)
----------------------------------------
49,680 47,840
Restricted cash and cash equivalents 9,624 10,621
Other, net 11,441 11,440
----------------------------------------
Total assets $ 139,276 $ 126,213
========================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt $ 7,706 $ --
Senior secured debt 35,000 35,000
Other secured debt 1,128 1,353
Subordinated debt 8,625 11,500
Nonrecourse securitization facility 8,181 --
Payables and other liabilities 12,999 13,884
Deferred income taxes 15,969 15,493
----------------------------------------
Total liabilities 89,608 77,230
Minority interest 365 363
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 10,805,861
issued and outstanding at March 31, 1996 and 10,833,161 at December 31,
1995 (excluding 1,781,530 and 1,753,230 shares held
in treasury at March 31, 1996 and
December 31, 1995, respectively) 117 117
Paid-in capital, in excess of par 77,747 77,743
Treasury stock (6,030) (5,931)
----------------------------------------
71,834 71,929
Accumulated deficit (22,531) (23,309)
----------------------------------------
Total shareholders' equity 49,303 48,620
----------------------------------------
Total liabilities, minority interest,
and shareholders' equity $ 139,276 $ 126,213
========================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
----------------------------
<S> <C> <C>
Revenues:
Operating leases $ 5,046 $ 6,408
Management fees 2,553 2,691
Partnership interests and other fees 992 597
Acquisition and lease negotiation fees 1,555 540
Finance lease income 322 --
Commissions -- 1,029
Aircraft brokerage and services 687 1,022
Gain on the sale or disposition of assets, net 800 4,587
Other 446 244
----------------------------
Total revenues 12,401 17,118
Costs and expenses:
Operations support 5,113 6,820
Depreciation and amortization 2,709 2,221
Commissions -- 1,141
General and administrative 2,095 2,670
----------------------------
Total costs and expenses 9,917 12,852
----------------------------
Operating income 2,484 4,266
Interest expense 1,442 2,315
Other expense, net 26 27
Interest income 237 678
----------------------------
Income before income taxes 1,253 2,602
Provision for income taxes 461 1,115
----------------------------
Net income to common shares $ 792 $ 1,487
============================
Earnings per common share outstanding $ 0.07 $ 0.13
============================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Year Ended December 31, 1995
and the Three Months Ended March 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Paid-in Retained
Capital in Earnings Total
At Excess Treasury Accumulated Shareholders'
Par of Par Stock (Deficit) Equity
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 $ 117 $ 77,699 $ (2,831) $ (29,290) $ 45,695
Net income 6,048 6,048
Exercise of stock options 44 44
Common stock repurchases (3,100) (3,100)
Translation loss (67) (67)
----------------------------------------------------------------------------
Balances, December 31, 1995 117 77,743 (5,931) (23,309) 48,620
Net income 792 792
Common stock repurchases (99) (99)
Exercise of stock options 4 4
Translation loss (14) (14)
============================================================================
Balances, March 31, 1996 $ 117 $ 77,747 $ (6,030) $ (22,531) $ 49,303
============================================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
---------------------------------
<S> <C> <C>
Operating activities:
Net income $ 792 $ 1,487
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,709 2,221
Finance lease income (322) --
Foreign currency translation (14) (35)
Increase in deferred income taxes 494 1,135
Gain on sale or disposition of assets, net (800) (4,587)
Undistributed residual value interests (91) 450
Minority interest in net income/loss of subsidiaries 2 (27)
Decrease in payables and other liabilities (759) (1,125)
Decrease in receivables and receivables from affiliates 674 1,155
Cash distributions from affiliates in excess of income accrued 621 119
Increase in other assets (584) (83)
---------------------------------
Net cash provided by operating activities 2,722 710
---------------------------------
Investing activities:
Additional investment in affiliates (3,076) (1,354)
Purchase of residual option -- (200)
Investment in direct finance leases (15,491) --
Purchase of equipment (21,905) (17,406)
Proceeds from sale of equipment for lease 381 11,105
Proceeds from sale of assets held for sale 1,431 128
Proceeds from sale of equipment to offshore investment program 14,424 --
Proceeds from the sale of leveraged leased assets -- 4,530
Proceeds from the disposition of residual options -- 2,059
Sale of investment in subsidiary 372 --
Decrease (increase) in restricted cash and restricted cash equivalents 997 (860)
---------------------------------
Net cash used in investing activities (22,867) (1,998)
---------------------------------
Financing activities:
Borrowings under bridge facility 12,550 9,800
Repayment of bridge facility (4,844) (16,204)
Borrowings under securitization facility 15,640 85
Repayment of securitization facility (7,454) --
Repayment of subordinated debt (2,875) --
Payments received from ESOP Trustee -- 928
Repurchase of treasury stock (99) (446)
Proceeds from exercise of stock options 4 --
---------------------------------
Net cash provided by (used in) financing activities 12,922 (5,837)
---------------------------------
Net decrease in cash and cash equivalents (7,223) (7,125)
Cash and cash equivalents at beginning of period 13,764 16,131
=================================
Cash and cash equivalents at end of period $ 6,541 $ 9,006
=================================
Supplemental information:
Interest paid during the period $ 1,178 $ 1,880
=================================
Income taxes paid during the period $ 765 $ 20
=================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. General
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of March 31, 1996, the statements of income for the three
months ended March 31, 1996 and 1995, the statements of cash flows for the three
months ended March 31, 1996 and 1995, and the statements of changes in
shareholders' equity for the year ended December 31, 1995 and the three months
ended March 31, 1996. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
consolidated financial statements. For further information, reference should be
made to the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1995, on file with
the Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
3. Finance Lease Activities
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 leasing investment program and
certain furniture, computers, and software of AFG, L.P. AFG is originating and
managing lease transactions on new commercial and industrial 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. Certain of these leases
will be accounted for as direct finance leases. Periodically, the Company will
use its short-term loan facility to finance the acquisition of the assets
subject to these leases prior to sale or permanent financing by the
securitization facility.
4. Equipment
Equipment held for operating leases includes transportation equipment and
commercial and industrial equipment originated by AFG under operating leases
which are depreciated over their estimated useful life.
The Company classifies assets as held for sale if the particular asset is
subject to a pending contract for sale or is held for sale to an affiliated
partnership. Transportation equipment held for sale is valued at the lower of
depreciated cost or estimated net realizable value. As of March 31, 1996, the
Company had four commuter aircraft subject to pending contracts for sale for a
total of $3.1 million, with an aggregate net book value of $3.1 million. As of
December 31, 1995, the Company had 1 marine container and 69 railcars, subject
to pending contracts for sale for a total of $0.7 million, with an aggregate net
book value of $0.7 million.
Periodically, the Company will purchase groups of assets whose ownership may be
allocated among affiliated partnerships and the Company. Generally in these
cases, only assets that are on-lease will be purchased by the affiliated
partnerships. The Company will generally assume the ownership and remarketing
risks associated with off-lease equipment. Allocation of the purchase price will
be determined by a combination of the Company's knowledge and assessment of the
relevant equipment market, third party industry sources, and recent transactions
or published fair market value references. During the three months ended March
31, 1996, the Company realized $0.7 million of gains on the sale of 64 railcars
purchased by the Company as part of a group of assets in 1995.
These assets were included in assets held for sale at December 31, 1995.
<PAGE>
5. Debt
Assets acquired and held on an interim basis for placement with affiliated
partnerships or purchased with the intent of permanent financing through the
Company's securitization facility 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
availability of the facility until September 30, 1996. This facility, which is
shared with Equipment Growth Funds (EGFs) II, III, IV, V, VI, VII and the
Professional Lease Management Income Fund I, L.L.C. (Fund I), allows the Company
to purchase equipment prior to the designated program or partnership being
identified, or prior to its having raised sufficient capital to purchase the
equipment. This facility provides 80% financing for transportation assets and
80% of the present value of the lease stream on assets purchased for placement
in a securitization facility, 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 bridge 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. The Company retains the net lease revenue earned and
is liable for the interest expense during the interim holding period since its
capital is at risk. As of March 31, 1996, the Company had borrowed $7.7 million,
EGF V had borrowed $5.6 million, and EGF VI had borrowed $11.2 million.
Borrowings by the EGFs or Fund I are guaranteed by the Company.
In February 1996, the Company made its scheduled $2.9 million debt payment as
required by the subordinated loan agreement.
The Company entered into a securitization facility on July 1, 1995 which makes
available for one year up to $80 million on a nonrecourse basis that will be
secured primarily by direct finance 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. treasury rate plus 1%. As of March 31, 1996, there were $8.2 million in
borrowings outstanding under this facility. The Company believes it will be able
to extend the facility prior to its expiration on similar terms.
6. Shareholders' Equity
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 28,300 shares under this program for $0.1 million during the quarter
ended March 31, 1996. As of March 31, 1996, 763,496 shares were purchased under
this program for $2.7 million.
During the three months ended March 31, 1996, 40,000 options were granted under
the Director's 1995 Non-Qualified Stock Option Plan at $3.50 per share.
During the three months ended March 31, 1996, 28,300 common shares were
repurchased by the Company, and options for 1,000 shares were exercised.
Consequently, the total common shares outstanding decreased to 10,805,861 at
March 31, 1996, from the 10,833,161 outstanding at December 31, 1995. Net income
per common share was computed by dividing net income to common shares by common
stock equivalents which included the weighted average number of shares and stock
options deemed outstanding during the period. The weighted average number of
shares and stock options deemed outstanding during the three months ended March
31, 1996 and 1995, were 11,044,269 and 11,867,815, respectively.
<PAGE>
7. Limited Liability Company Interests
In January 1995, the registration statement for Fund I became effective. FSI
serves as the manager for the new program. This program, organized as a limited
liability company with a no front-end fee structure, began syndication in the
first quarter of 1995. There is no compensation paid to FSI, or any of its
subsidiaries, for the organization and syndication of interests in Fund I, the
acquisition of equipment, nor the negotiation of the leases by Fund I. FSI is
funding the cost of organization, syndication, and offering through use of
operating cash and is capitalizing these costs 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, FSI is 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. The Company is also entitled to monthly fees for equipment management
services and reimbursement for certain accounting and administrative services
provided by the Company.
As May 13, 1996, Fund I had raised $100 million in equity and is in the
equipment investment phase of the program.
8. Sale of Subsidiary
In January 1996, the Company sold its 100% ownership interest in Austin Aero FBO
Ltd. to a third party for $923,000. The Company recorded a $2,000 loss on the
sale, net of the tax benefit. During the year ended 1995, revenues and expenses
related to Austin Aero FBO Ltd. were $2.3 million and $2.1 million,
respectively, representing net income of $0.2 million or net income per common
share of $0.01.
9. Profit Sharing and 401(k) Plan
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 Plan is a
contributory plan available to essentially all full-time employees of the
Company. Employees who participate in the Plan can elect to defer and contribute
to the trust established under the 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.
10. Legal Matters
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company. Refer to the
Company's Annual Report on Form 10-K/A for the year ended December 31, 1995, for
a detail discussion of current litigation matters.
11. Subsequent Events
During April 1996, the Company sold three commuter aircraft with an aggregate
net book value of $2.4 million, for a total of $2.5 million. The assets were
included in assets held for sale as of March 31, 1996.
On May 14, 1996, the Company announced the halt of syndication of equipment
leasing programs with the May 13, 1996 close of its current program,
Professional Lease Management Income Fund I. The Company anticipates certain
costs related to this decision will be recognized in the second quarter of 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company owns a diversified portfolio of transportation equipment from which
it earns operating lease revenue and incurs operating expenses. The Company's
transportation equipment held for operating leases, which consists of aircraft,
marine containers, trailers, railcars, and storage equipment at March 31, 1996,
is mainly equipment built prior to 1988. As equipment ages, the Company
continues to monitor the performance of its assets on lease and current market
conditions for leasing equipment in order to seek the best opportunities for
investment. Failure to replace equipment may result in shorter lease terms and
higher costs of maintaining and operating aged equipment and, in certain
instances, limited remarketability.
The Company also syndicates investment programs from which it earns various fees
and equity interests. The Company marketed an investment program structured as a
limited liability company (Fund I) with a no front-end fee structure. The
previously syndicated limited partnership programs have allowed the Company to
receive fees for the acquisition and initial lease of the equipment. The Fund I
program does not provide for acquisition and lease negotiation fees. The Company
invests the equity raised through syndication in transportation equipment which
is then managed on behalf of the investors. The equipment management activities
for this type of program generate equipment management fees for the Company over
the life of the program, typically 10 to 12 years. The limited partnership
agreements generally entitle the Company to receive a 1% or 5% interest in the
cash distributions and earnings of the partnership subject to certain allocation
provisions. The Fund I agreement entitles the Company to a 15% interest in the
cash distributions and earnings of the program subject to certain allocation
provisions which will increase to 25% after the investors have received
distributions equal to their original invested capital.
The Company is also engaged in the funding and management of longer-term direct
finance leases and operating leases through its AFG subsidiary. Master lease
agreements are entered into with investment-grade lessees and serve as the basis
for marketing efforts. The underlying assets represent a broad range of
commercial and industrial equipment, such as, data processing, communications,
materials handling and construction equipment. This is an important new growth
area for the Company as it marks the entry into the very substantial industrial
and commercial equipment fields and yet allows the Company to apply much of the
same equipment leasing and management experience gained from its many years in
the transportation sector.
For the Three Months Ended March 31, 1996 versus March 31, 1995
The following analysis reviews the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
-------------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 5,046 $ 6,408
Management fees 2,553 2,691
Partnership interests and other fees 992 597
Acquisition and lease negotiation fees 1,555 540
Finance lease income 322 --
Commissions -- 1,029
Aircraft brokerage and services 687 1,022
Gain on the sale or disposition of assets, net 800 4,587
Other 446 244
-------------------------------
Total revenues $ 12,401 $ 17,118
</TABLE>
<PAGE>
The fluctuations in revenues for the three months ended March 31, 1996 from the
same period in 1995 are summarized and explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
-----------------------------
(in thousands)
<S> <C> <C>
By equipment type or subsidiary:
Trailers $ 2,157 $ 3,039
Aircraft 1,424 1,557
Marine vessels -- 558
Marine containers 128 154
Storage equipment 262 257
Railcars 55 843
AFG 1,020 --
------------------------------
$ 5,046 $ 6,408
</TABLE>
As of March 31, 1996, the Company owned transportation equipment held for
operating leases with an original cost of $103.7 million, which was $32.7
million less than the original cost of equipment owned and held for operating
leases at March 31, 1995. 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 transportation assets resulting in a 100%
reduction in its marine vessel fleet, a 55% net reduction in its marine
container portfolio, a 19% net reduction in its aircraft portfolio, a 99% net
reduction in its railcar portfolio, and a 9% net reduction in its trailer
portfolio, compared to March 31, 1995. Operating lease revenue includes revenues
generated from assets held for operating leases, assets held for sale that are
on lease, and rents received during short-term holding periods on operating
leased assets. The reduction in transportation equipment available for lease is
the primary reason marine vessel, trailer, railcar, marine container, and
aircraft revenue were all reduced as compared to the prior year.
The decrease in operating lease revenues as a result of the reduction in
equipment available for lease was partially offset by $1.0 million in operating
lease revenues generated by AFG-related leases on $7.2 million of owned
equipment and revenues generated on leases prior to being sold to third parties.
Management fees:
<TABLE>
<CAPTION>
For the three months Year
ended March 31, Liquidation
1996 1995 Phase Begins
------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Management fees by program were:
EGF I $ 203 $ 336 1998
EGF II 173 238 1999
EGF III 269 295 2000
EGF IV 239 285 1999
EGF V 473 448 2000
EGF VI 366 430 2002
EGF VII 287 197 2003
Fund I 175 -- 2002
Other programs 368 462 --
---------------------------
$ 2,553 $ 2,691
</TABLE>
<PAGE>
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio for new
programs grows correspondingly with new syndication activity. Affiliated
partnership and investment program surplus operating cash flows and loan
proceeds invested in additional equipment favorably influence management fees.
The $0.1 million decrease in management fees resulted from a net decrease in
management fees generated by gross revenues from the equipment growth funds
which fell due to a net decrease in managed equipment and a decrease in lease
rates for certain types of equipment in those programs and the elimination of
management of the AFG, L.P. programs, offset partially by an increase in
management fees generated from the Fund I program introduced in May 1995.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $1.0 million and $0.6 million for the quarters ended
March 31, 1996 and 1995, respectively. In 1996, the revenue included net
increases of $0.2 million in the Company's recorded residual values which
resulted mainly from residual income for the equipment purchased for Fund I. A
net decrease in the recorded residual values related to other existing programs
of $0.3 million was recorded for the same period in 1995. Residual income is
recognized on residual interests based upon the general partner's share of the
present value of the estimated disposition proceeds of the equipment portfolio
of the affiliated partnership. Net decreases in the recorded residual values
result when partnership assets are sold and the reinvestment proceeds are less
than the original investment in the sold equipment.
Acquisition and lease negotiation fees:
During the quarter ended March 31, 1996, a total of $23.8 million of equipment
was purchased on behalf of the equipment growth funds compared to $4.4 million
during the same quarter of the prior year, resulting in a $1.0 million increase
in acquisition and lease negotiation fees. 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.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary. During 1996, the Company originated and managed direct finance lease
transactions on equipment it purchased for $15.5 million, financed by both a
warehousing credit facility and a securitization facility. These direct finance
lease transactions resulted in $0.3 million in earned income for the first
quarter of 1996 which represented interest earned on the lease payments
received. There were no similar transactions in the comparable prior year
period.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the quarter ended March 31, 1996, there
was no program equity raised for the equipment growth funds compared to $11.4
million of equity raised during the quarter ended March 31, 1995, resulting in a
$1.0 million decrease in placement commissions. The Company closed PLM Equipment
Growth & Income Fund VII (EGF VII) syndication activities on April 30, 1995. As
a result of the Company's decision to market a new investment program with a no
front-end fee structure which raised $21.9 million in equity during the first
quarter of 1996, commission revenue will be eliminated.
Aircraft brokerage and services:
Aircraft brokerage and services revenue which represents revenue earned
by Aeromil Holdings, Inc. (Aeromil), the Company's aircraft leasing and spare
parts brokerage subsidiary, decreased $0.3 million during the quarter ended
March 31, 1996 compared to the comparable prior year quarter. The decrease was
attributable to the sales of the subsidiary's ownership interests in Aeromech
Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995 and January
1996, respectively.
<PAGE>
Gain on the sale or disposition of assets, net:
During the quarter ended March 31, 1996, the Company recorded $0.8
million in gains which resulted mainly from the sale or disposition of 74 marine
containers, 67 railcars, 5 storage units, and 67 trailers. The $4.6 million net
gain for the same period in 1995 resulted mainly from a net gain of $2.8 million
from the sale or disposition of 1 marine vessel, 147 marine containers, 2
commercial aircraft, 1 helicopter, 214 railcars, and 130 trailers, and from the
sale of 3 option contracts, for railcar equipment, for a net gain of $1.8
million.
Other:
Other revenues increased $0.2 million during the quarter ended March
31, 1996, compared to the comparable prior year period, due to increased revenue
earned for data processing services provided to the Company's affiliated
programs and due to an increase in brokerage fees related to Aeromil activities.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
For the three months
ended March 31,
1996 1995
-----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 5,113 $ 6,820
Depreciation and amortization 2,709 2,221
Commissions -- 1,141
General and administrative 2,095 2,670
Interest expense 1,442 2,315
Other expense, net 26 27
Interest income 237 678
</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) decreased $1.7
million (25%) for the quarter ended March 31, 1996, from the same quarter in
1995. The decrease resulted from a $0.6 million decrease in operating and repair
and maintenance costs due to the sale of the Company's entire owned vessel
portfolio and the sale of other equipment, a $0.2 million decrease in
Aeromil-related expenses due to the sales of the Company's ownership interests
in Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995
and January 1996, respectively, and a $0.9 million decrease in compensation
expense due to headcount reductions and lower accrued compensation expense
primarily to compensate employees for lost benefits resulting from the
termination of the 401(k) plan during 1995. There was no similar accrual for
compensation expense in 1996, as a new 401(k) plan was established.
Depreciation and amortization:
Depreciation and amortization expense increased $0.5 million (22%) for
the quarter ended March 31, 1996, as compared to the quarter ended March 31,
1995. The increase resulted from amortization of costs associated with the
operation of AFG and depreciation of AFG assets held for operating leases and
administrative assets, offset partially by the reduction in depreciable
transportation equipment discussed in the operating lease revenue section.
<PAGE>
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the
quarter ended March 31, 1996, decreased $1.1 million (100%) from the same period
in 1995. The reduction is the result of no syndicated equity raised for the
equipment growth funds during the quarter ended March 31, 1996 versus $11.4
million in syndicated equity raised for the equipment growth funds during the
same quarter in 1995. With the closing of syndication efforts for EGF VII,
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 expense decreased $0.6 million (22%) during the
quarter ended March 31, 1996, compared to the same period in 1995, due to a
decrease in computer services expenses, fees, and accrued compensation expense
primarily to compensate employees for lost benefits resulting from the
termination of the 401(k) plan during 1995. There was no similar accrual for
compensation expense in 1996, as a new 401(k) plan was established.
Interest expense:
Interest expense decreased $0.9 million (38%) during the quarter ended
March 31, 1996, compared to the same period in 1995, due to the reduction in
subordinated debt levels and interest expenses associated with the termination
of the Company's ESOP and the extinguishment of the associated debt.
Interest income:
Interest income decreased $0.4 million (65%) in the quarter ended March
31, 1996, compared to the same quarter in 1995 from a reduction in interest
income earned on the ESOP cash collateral account which related to the
termination of the Company's ESOP and due to a decrease in interest income as a
result of lower cash balances in 1996 compared to 1995.
Income taxes:
For the three months ended March 31, 1996, the provision for income taxes was
$0.5 million, which represented an effective rate of 37%. For the same period in
1995, the provision for income taxes was $1.1 million, which represented an
effective rate of 43%.
Net income:
As a result of the foregoing, for the three months ended March 31,
1996, net income was $0.8 million resulting in net income per common share of
$0.07. For the same period in 1995, net income was $1.5 million resulting in net
income per common share of $0.13.
Liquidity and Capital Resources:
Cash requirements historically have been satisfied through cash flow
from operations, borrowings, or sales of transportation equipment.
Liquidity in 1996 will depend, in part, on continued remarketing of the
equipment portfolio at similar lease rates, management of existing sponsored
programs, effectiveness of cost control programs, and possible additional
equipment sales. Management believes the Company can accomplish the preceding
and will have sufficient liquidity and capital resources for the future.
Specifically, future liquidity is influenced by the following:
<PAGE>
(a) Debt Financing:
Senior Debt: On June 30, 1994, the Company closed a $45.0 million
senior loan facility with a syndicate of insurance companies and repaid the
prior facility. The Company has pledged substantially all of its equipment as
collateral to the loan facility. The facility provides that equipment sale
proceeds, from pledged equipment, or cash deposits be placed into collateral
accounts or used to purchase additional equipment. The facility requires
quarterly interest only payments through March 31, 1997, with quarterly
principal payments of $2.1 million plus interest charges beginning June 30,
1997, through the termination of the loan in June 2001. In December 1994, the
Company repaid $10.0 million of its senior debt through the use of cash
collateral from the sale of pledged equipment.
Bridge Financing: Assets acquired and held on an interim basis for
placement with affiliated partnerships or purchased for placement in the
Company's securitization facility 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
facility as part of the $25.0 million facility.
This facility, which is shared with Equipment Growth Funds (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 for transportation assets and 80% of the present value of the lease
stream on assets purchased for placement in a securitization facility, if the
Company is the borrower and working capital is used for the nonfinanced costs of
these acquisitions. The Company can hold assets under this bridge 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. The Company retains
the difference between the net lease revenue earned and the interest expense
during the interim holding period since its capital is at risk. As of May 14,
1996, the Company had $12.3 million in outstanding borrowings and EGFs V and VI
had $5.6 million and $11.2 million in outstanding borrowings, respectively. The
Company is in negotiations with the lender, and believes it will be able to
extend the facility prior to its expiration on terms similar to the existing
agreement.
Subordinated Debt: In February 1996, the Company made its scheduled
$2.9 million debt payment as required by the loan agreement.
Securitized Debt: The Company entered into a securitization facility on July 1,
1995, which makes available for one year up to $80 million on a nonrecourse
basis that will be secured by direct finance and operating 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. treasury rate plus 1%. As of March 31, 1996,
there were $8.2 million in borrowings outstanding under this facility. The
Company believes it will be able to extend the facility prior to its expiration
on terms similar to the existing agreement.
(b) Portfolio Activities:
During the three months ended March 31, 1996, the Company generated proceeds of
$1.8 million from the sale of equipment. These net proceeds were placed in a
collateral account as required by the senior secured term loan agreement. In
March 1996, the lender consented to the Company's request to release $1.9
million in funds from the cash collateral account relating to asset sales in
1996 and 1995. The request to release funds and the subsequent approval were
based on the appraised fair market value of the equipment portfolio and the
related collateral coverage ratio.
Over the last four years, the Company has downsized the transportation
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.
<PAGE>
(c) Syndication Activities:
On May 14, 1996, the Company's Board of Directors approved a decision
to halt the syndication of transportation equipment leasing programs effective
with the close of its current offering, Professional Lease Management Income
Fund I, on May 13, 1996. The Company will no longer be required to fund the
front-end investment requirement of this no front-end fee structured program.
Since May 1995 through May 14, 1996, Fund I raised $100 million in equity
investment from the public. The Company anticipates certain costs related to
this decision will be recognized in the second quarter of 1996.
The Company earned fees from syndication activities related to EGF VII
during the first four months of 1995. Total equity raised since inception for
this partnership was $107.4 million through April 30, 1995 when the program
closed. There will be no more equity raised for this partnership.
(d) Commercial Equipment Leasing Activities:
The Company earns finance lease or operating lease income for leases originated
and retained by its AFG subsidiary. The funding of leases requires the Company
to retain an equity interest in all leases financed through the securitization
facility. Lease originations funded through May 14, 1996, equal $37.1 million,
on an original equipment cost basis. A portion of these leases has been
financed, on an interim basis, through the Company's bridge financing facility.
Some leases originated ($14.4 million) are sold to an offshore leasing
investment program for which the Company serves as the Manager. Placement fees
and management fees are received for the sale and subsequent management of these
leases. The Company believes this lease origination operation is a growth area
for the future.
Management believes that through debt and equity financing, possible
sales of transportation equipment, and cash flows from operations, the Company
will have sufficient liquidity and capital resources to meet its projected
future operating needs.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 10 of Notes to Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
None
(B) Reports on Form 8-K
None
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
/s/ David J. Davis
-------------------------------
David J. Davis
Vice President and Corporate
Controller
Date: May 14, 1996
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