SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994 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 (415) 974-1399
area code
Indicate by check mark whether the registrant has (1) 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
Number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding May 13, 1994
Common Stock, $.01 par value 10,495,114 shares
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1994 1993
(in thousands)
Cash and cash equivalents $ 12,203 $ 19,685
Receivables 6,036 6,037
Receivables from affiliates 9,059 10,981
Equity interest in affiliates 17,432 17,707
Transportation equipment held for
operating leases 203,470 205,810
Less accumulated depreciation (105,498) (105,122)
97,972 100,688
Restricted cash and cash equivalents 13,312 7,055
Restricted marketable securities 38,149 44,469
Other 11,997 11,098
Total assets $206,160 $217,720
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
March 31, December 31,
1994 1993
(in thousands)
Liabilities:
Senior secured debt $ 36,747 $ 45,000
Bank debt related to ESOP 50,280 50,280
Other secured debt 3,288 2,839
Subordinated debt 31,000 31,000
Payables and other liabilities 13,608 18,082
Deferred income taxes 19,328 19,386
Total liabilities 154,251 166,587
Minority Interest 352 -0-
Shareholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
4,901,474 at March 31, 1994,
and 4,916,301 at
December 31, 1993, series A
Convertible shares issued and
outstanding, aggregate
$63,719,162 at March 31, 1994,
and $63,911,913 at
December 31, 1993,
($13 per share) liquidation
preference at paid-in amount 63,377 63,569
Loan to Employee Stock
Ownership Plan (50,280) (50,280)
13,097 13,289
Common stock, $.01 par value,
50,000,000 shares authorized,
10,486,782 shares issued and
outstanding at March 31, 1994,
(excluding 417,209 shares
held in treasury) and
10,465,306 at December 31,
1993, (excluding 432,018 shares
held in treasury) 109 109
Paid in capital, in excess of
par 55,737 55,557
Treasury stock (100) (131)
55,746 55,535
Accumulated deficit (17,286) (17,691)
Total shareholders' equity 51,557 51,133
Total liabilities, minority
interest, and shareholders'
equity $206,160 $217,720
See accompanying notes to these financial statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the three months ended
March 31,
1994 1993
Revenues:
Operating leases $ 7,272 $ 9,340
Management fees and
partnership interests 3,485 3,609
Commissions and other fees 3,202 3,913
(Loss) gain on the disposal
of transportation equipment, net (117) 1,397
Other 1,125 120
Total revenues 14,967 18,379
Costs and expenses:
Operations support 5,556 5,163
Depreciation and amortization 3,168 3,378
Commissions 1,556 2,883
General and administrative 2,317 2,143
Total costs and expenses 12,597 13,567
Operating income 2,370 4,812
Interest expense 2,291 3,382
Other income (expense), net 152 (295)
Interest income 1,204 1,327
Income before income taxes 1,435 2,462
Provision for income taxes 391 874
Net income 1,044 1,588
Preferred dividend (net of $466
and $521 income tax
benefit for the three months ended
March 31, 1994, and 1993) 1,271 1,236
Net (loss) income to common shares $ (227) $ 352
(Loss) earnings per
common share outstanding $ (0.02) $ 0.03
See accompanying notes to financial statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the three months ended
March 31,
1994 1993
Cash flows from operating activities:
Net income $ 1,044 $ 1,588
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 3,168 3,378
Decrease in deferred income taxes (291) (2,947)
Tax benefit of preferred dividend paid 291 321
Loss (gain) on disposal of assets 117 (1,380)
Undistributed residual value interests 217 69
Minority interest in
net income of subsidiaries 20 -0-
(Decrease) increase in
payables and other liabilities (5,666) 1,921
Decrease in receivables and
receivables from affiliates 2,743 232
Cash distributions from affiliates
in excess of income accrued 109 70
Decrease in other assets 248 766
Purchase of equipment for lease (365) (312)
Proceeds from sale of equipment
for lease 1,182 109
Purchase of assets held for sale
to affiliates (3,695) -0-
Proceeds from sale of assets
held for sale to affiliates 3,695 17,534
Net cash provided by
operating activities 2,817 21,349
Cash flows from investing activities:
Additional investment in affiliates (51) -0-
Proceeds from the sale of investments 89 -0-
Proceeds from the maturity
and sale of restricted
marketable securities 15,792 23,539
Purchase of restricted
marketable securities (9,472) (23,963)
Increase in restricted cash
and cash equivalents (6,257) (4,615)
Acquisition of subsidiaries (1,139) -0-
Net cash used in investing activities (1,038) (5,039)
Cash flows from financing activities:
Principal payments under
equipment loans (8,350) (11,955)
Cash dividends paid on Preferred Stock (930) (1,034)
Proceeds from exercise of
stock options 19 -0-
Financing of assets held for sale
to affiliates 2,953 -0-
Repayment of financing for assets
held for sale to affiliates (2,953) -0-
Net cash used in financing activities (9,261) (12,989)
Net (decrease) increase in cash
and cash equivalents (7,482) 3,321
Cash and cash equivalents at
beginning of period 19,685 9,407
Cash and cash equivalents at
end of period $ 12,203 $ 12,728
Supplemental information:
Interest paid during the period $ 2,535 $ 3,069
Income taxes paid during the period $ 3,875 $ 263
See accompanying notes to financial statements.
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly the Company's financial position as
of March 31, 1994, and the statements of operations and cash
flows for the three months ended March 31, 1994, and 1993.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
from the accompanying consolidated financial statements. For
further information, reference should be made to the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, on
file at the Securities and Exchange Commission.
2. In February 1994, 6,667 common shares were issued for the
exercise of stock options. In addition, 14,809 common shares
were taken out of treasury stock and issued to former
participants in the Company's Employee Stock Ownership Plan.
Consequently, the total common shares outstanding increased to
10,486,782 at March 31, 1994, from the 10,465,306 outstanding
at December 31, 1993. Net income (loss) per common share was
computed by dividing net income (loss) to common shares by the
weighted average number of shares of common stock deemed
outstanding during the period. Dilution that could result from
the issuance of stock options is not material.
3. Certain amounts in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.
4. As of March 31, 1994, the Company has reclassified assets held
for sale to equipment held for operating lease, unless the
particular asset is subject to a pending contract for sale or
held for sale to an affiliated partnership. Transportation
equipment held for operating leases at March 31, 1994, and
December 31, 1993, includes equipment previously reported as
held for sale.
5. As of January 1, 1994, the Company has adopted Statement of
Financial Accounting Standards No. 115 ("Accounting For Certain
Investments in Debt and Equity Securities") ("SFAS No. 115").
At January 1, 1994, the Company classified most of its
marketable securities as held-to-maturity securities based on
management intent and ability to hold. All securities that were
considered available-for-sale at January 1, 1994, were sold
during the first quarter, with the corresponding gain or loss
included in income. As of March 31, 1994, the Company has
classified all of its marketable securities as held-to-maturity
securities. Thus, all marketable securities are reported on the
balance sheet at amortized cost, and any unrealized gains and
losses have not been recorded.
6. In February 1994, the Company completed the purchase of a
majority interest in Aeromil Australia Pty Ltd ("Aeromil").
Aeromil is one of Australia's largest aircraft dealers
specializing in local and international marketing of business,
commuter, and commercial aircraft. The acquisition was
accounted for by the purchase method of accounting and
accordingly the purchase price will be allocated to assets and
liabilities based on the estimated fair value at the date of
acquisition an no goodwill is expected to be recorded. The
portion of Aeromil not owned by PLM is shown as minority
interest on the balance sheet.
7. The Company's senior secured financing expires on June 30, 1994.
The Company is presently in due diligence and documentation
with a lender group to replace the senior secured debt.
Management of the Company believes this replacement financing
will be completed prior to maturity of the senior secured debt.
8. Subsequent Event
On May 11, 1994, the Company signed a memorandum of agreement
to sell one marine vessel for $6.3 million which approximates
its carrying value. The sale is expected to be completed in the
second or third quarter of 1994.
9. 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 actions will be material to the
financial condition of the Company.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company owns a diversified portfolio of transportation
equipment from which it earns operating lease revenue and incurs
operating expenses. The Company also raises investor equity
through syndicated partnerships and invests the equity raised in
transportation equipment which it manages on behalf of its
investors. The Company earns various fees and equity interests
from syndication and investor equipment management activities.
The Company's transportation equipment held for operating leases is
mainly equipment built prior to 1988. As trailer equipment ages,
the Company is generally replacing it with newer equipment.
However, aged equipment for other equipment types may not be
replaced. Rather, proceeds from the liquidation of other equipment
types may be invested in trailers or in other Company investment
opportunities. Failure to replace equipment may result in shorter
lease terms and higher costs of maintaining and operating aged
equipment and, in certain instances, limited remarketability.
For the Three Months Ended March 31, 1994, vs. March 31, 1993
(A) Revenues
The Company's total revenues for the quarters ended March 31,
1994, and 1993 were $15.0 million and $18.4 million,
respectively. The decrease in 1994 revenues is principally
composed of a 22% decrease in operating lease revenue, a 3%
decrease in management fees and partnership interests, an 18%
decrease in commission and other fees, and a loss on the
disposal of transportation equipment, partially offset by a
$1.0 million increase in other revenue.
1. Operating Lease Revenues - $7.3 million vs. $9.3 million
For the three months ended March 31, 1994, the Company had
an average $204.6 million of equipment in its operating
lease portfolio, which is approximately $21.2 million less
than the original cost of equipment held during the first
quarter of 1993. The reduction in equipment is a
consequence of the Company's strategic decision to dispose
of certain assets resulting in the sale of almost its entire
railcar portfolio, a 23% reduction in its aircraft fleet ,
and a net reduction of 5% and 16% in its marine container
and trailer portfolios, respectively, compared to the first
quarter of 1993.
The reduction in equipment is the primary reason trailer,
rail, aircraft, and marine container revenue, were reduced
by $0.8 million, $0.6 million, $0.5 million, and $0.2
million, respectively. Also contributing to the decline in
marine container revenue was lower utilization.
2. Management Fees and Partnership Interests - $3.5 million
vs. $3.6 million
Management fees decreased approximately $0.2 million for the
quarter ended March 31, 1994, as compared to the first
quarter of 1993. These fees are, for the most part, based
on the revenues generated by equipment under management.
The managed equipment portfolio grows correspondingly with
new syndication activity. Affiliated partnership and
investment program surplus operating cash flows and loan
proceeds invested in additional equipment increase
management fees. While equipment under management increased
from 1993 to 1994, lease rates for affiliated partnerships
and investment programs fell so that gross revenues, which
give rise to the management fees, decreased. Equipment
managed at March 31, 1994, and 1993 (measured at original
cost) amounted to $1.14 billion and $ 1.07 billion,
respectively. The Company also records as revenues its
equity interest in the earnings of the Company's affiliated
partnerships which revenues increased approximately $0.1
million from the first quarter of 1993.
3. Commissions and Other Fees - $3.2 million vs. $3.9 million
Commission revenue and other fees are derived from raising
syndicated equity and acquiring and leasing equipment for
Company-sponsored investment programs. Commission revenue
consists of placement fees which are earned on the amount of
equity raised. Acquisition and lease negotiation fees are
earned on the amount of equipment purchased and leased on
behalf of syndicated investment programs. Debt placement
fees are earned for debt placed in the investment programs.
These fees are governed by applicable program agreements and
securities regulations. The Company also receives a
residual interest in additional equipment acquired by
affiliated partnerships. Income is recognized on residual
interests based upon the general partner's share of the
present value of the estimated disposition proceeds of the
equipment portfolios of affiliated partnerships.
During the three months ended March 31, 1994, program equity
raised totaled $17.0 million, compared to $31.1 million in
the same period of 1993, resulting in a decrease in
placement commissions of approximately $1.2 million.
Syndication equity raising efforts are influenced by many
factors, including general economic conditions, performance
of comparable investments, and the number of firms that
undertake to sell Company-sponsored programs. There can be
no assurances that future syndication sales will perform as
well as or better than prior periods.
On behalf of various investor programs and partnerships, a
total of $31.4 million of equipment was purchased during the
three months ended March 31, 1994, compared to $18.0 million
in the same period of 1993, resulting in a $0.8 million
increase in acquisition and lease negotiation fees.
Residual interest income decreased $0.1 million as a result
of ad- justments resulting from the sale of program
equipment for which the Company had previously recorded
residual interest income.
4. (Loss) Gain on the Disposal of Transportation Equipment -
($0.1) million vs. $1.4 million
The loss on the disposal of transportation equipment in
1994 resulted from the net loss on the disposition of
trailers. The gain in 1993 was the result of the sale of
railcars.
5. Other - $1.1 million vs $0.1 million
Other revenues are principally revenue earned by Aeromil
($0.8 million), the Company's aircraft leasing and spare
parts brokerage subsidiary acquired in February of 1994, and
insurance premiums earned by Transportation Equipment
Indemnity Company Ltd., a captive insurance company.
(B) Costs and Expenses
1. Operations support expense (including salary and office-
related expenses for non-administrative activities,
provision for doubtful accounts, equipment insurance,
repair and maintenance costs, and equipment remarketing
costs) increased $0.4 million (8%) for the three months
ended March 31, 1994, from the same period in 1993. The
increase resulted from $0.7 million in costs associated
with the operation of Aeromil. This was partially offset
by lower equipment operation costs resulting from the
reduction in the equipment portfolio.
2. Depreciation and amortization expense decreased $0.2
million (6%) for the quarter ended March 31, 1994 as
compared to the similar period in 1993. The decrease
resulted from the decrease in depreciable equipment.
3. Commission expenses are primarily incurred by the Company
in connection with the syndication of investment
partnerships. Commissions are also paid for certain
leasing activities. Commission expenses for the three
months ended March 31, 1994, decreased $1.3 million (46%)
from a similar period in 1993. The reduction is the
result of lower equity syndication levels and lower
equipment commissions.
4. General and administrative expenses increased $0.2 million
(8%) during the quarter ended March 31, 1994, compared to
a similar period in 1993. The increase is a result of
higher professional service costs.
(C) Other Items
1. Interest expense decreased to $2.3 million compared with
$3.4 million for the same period in 1993 as a result of
reduced debt levels.
2. Other income (expense) was income of $0.2 million in the
first quarter of 1994, compared to an expense of $0.3
million in the first quarter of 1993. The change is a
result of a reduction in the estimated cost related to the
Company's interest rate SWAP agreement caused by an
increase in interest rates.
3. Interest income decreased to $1.2 million in the three
months ended March 31, 1994, compared to $1.3 million for
the same period in 1993, primarily due to reduced
marketable securities and cash balances and lower interest
rates paid on investments.
4. The provision for income taxes for the three months ended
March 31, 1994, of $0.4 million represents an effective
tax rate of 27%. The provision reflects the tax benefit
of the preferred dividend on the ESOP shares allocated to
ESOP participants. For the quarter ended March 31, 1993,
the Company's provision for income taxes was $0.9 million,
which represented an effective rate of 36%. As required
by Statement of Financial Accounting Standards No. 109
("Accounting For Income Taxes") ("SFAS No. 109") the ESOP
dividend is presented net of the tax benefit on ESOP
shares not allocated to participants.
(D) Net (Loss) Income
For the three months ended March 31, 1994, net income was $1.0
million. In addition, $1.3 million is required for payment of
preferred dividends (net of a tax benefit of $0.5 million),
resulting in a net loss to common shareholders of $0.2 million
and a loss per common share of $0.02. In comparison, for the
same period in 1993, net income was $1.6 million and the net
income available to common shareholders was $0.4 million, with
income per common share of $0.03.
Liquidity and Capital Resources
Cash requirements have been historically satisfied through cash
flow from operations, borrowings, or sales of transportation
equipment.
Liquidity throughout 1994 and beyond will depend, in part, on
continued remarketing of the equipment portfolio at similar lease
rates, continued success in raising syndicated equity for the
sponsored programs, effectiveness of cost control programs, ability
of the Company to secure new financing, and possible additional
equipment sales. Management believes the Company can accomplish
the preceding and will have sufficient liquidity and capital
resources for the future. Specifically, future liquidity is
influenced by the following:
(A) Debt Financing:
Senior and Subordinated Debt: On October 28, 1992, the
Company's senior secured term loan agreement was amended to
provide an accelerated principal amortization schedule. The
amended agreement provides for the net proceeds from the sale
of transportation equipment to be placed into collateral
accounts to be used for principal reductions. No further
principal payments are required before maturity. Final
maturity of the senior secured indebtedness is June 30, 1994.
The Company is presently in due diligence and documentation
with a lender group to replace the senior secured debt.
Management of the Company believes this replacement financing
will be completed prior to maturity of the senior secured debt
facility.
Bridge Financing: Assets held on an interim basis for
placement with affiliated partnerships have, from time to time,
been partially funded by a $25.0 million short-term equipment
acquisition loan facility. This facility, made available to
the Company effective June 30, 1993, provides 80 percent
financing, and the Company uses working capital for the non-
financed costs of these transactions. The commitment for this
facility expires on July 13, 1994. The Company expects to
renew the facility at that time.
This facility, which is shared with PLM Equipment Growth and
Income Fund VII, ("EGF VII") allows the Company to purchase
equipment prior to the designated program or partnership being
identified, or prior to having raised sufficient resources to
purchase the equipment. The Company usually enjoys a spread
between the net lease revenue earned and the interest expense
during the interim holding period. As of May 13, 1994, the
Company had no outstanding borrowings and EGF VII had borrowed
$3.0 million under this facility.
(B) Equity Financing:
On August 21, 1989, the Company established a leveraged
employee stock ownership plan ("ESOP"). PLM International
issued 4,923,077 shares of Preferred Stock to the ESOP for
$13.00 per share, for an aggregate purchase price of
$64,000,001. The sale was originally financed, in part, with
the proceeds of a loan (the "Bank Loan") from a commercial bank
(the "Bank") which proceeds were lent to the ESOP ("ESOP Debt")
on terms substantially the same as those in the Bank Loan
agreement. The ESOP Debt is secured, in part, by the shares
of Preferred Stock, while the Bank Loan is secured with cash
equivalents and marketable securities. Preferred dividends are
payable semi-annually on February 21 and August 21, which
corresponds to the ESOP Debt payment dates. Bank Loan debt
service is covered through release of the restricted cash and
marketable securities. While the annual ESOP dividend is fixed
at $1.43 per share, the interest rate on the ESOP debt varies
resulting in uneven debt service requirements. If interest
rates continue at current levels, it is expected that ESOP
dividends during 1994 will exceed the required ESOP Debt
service, with the excess being used for additional principal
payments. Management, as part of its overall strategic
planning process, is evaluating the effectiveness of the ESOP
and the Company's other qualified benefit plan.
A preferred stock dividend of $0.19 per share was paid on
February 21, 1994. This dividend was approximately equivalent
to the interest due from the ESOP on the ESOP Debt for the six
months ended February 21, 1994. The ESOP dividend was charged
to retained earnings net of the appropriate tax benefit, in
accordance with the provisions of SFAS No. 109.
(C) Portfolio Activities:
In the first quarter of 1994, the Company generated proceeds
of $1.2 million from the sale of equipment. The net proceeds
from these and other equipment sales were placed in collateral
accounts as required by the amended senior secured term loan
agreement and used for debt payments. If the funds held in
these collateral accounts exceed certain levels specified by
the amended senior loan agreement, the excess of these funds
are available for reinvestment in transportation equipment or
for other purposes.
Over the last two years the Company has downsized the equipment
portfolio, through the sale or disposal of under-performing and
non-performing assets, in an effort to strengthen the future
performance of the portfolio. This downsizing exercise is now
complete. The Company will continue to identify under-
performing and non-performing assets for sale or disposal as
necessary, but the Company intends on maintaining approximately
the same size portfolio for the near future.
(D) Syndication Activities:
The Company earns fees generated from syndication activities.
In May 1993, EGF VII became effective and selling activities
commenced. As of the date of this report, $59.4 million had
been raised for this partnership. The Company will likely
continue to offer units in EGF VII through the end of 1994.
Although the Company has increased its market share over the
last year, the overall Limited Partnership syndications market
has been contracting. The Company's management is concerned
about the continued contraction of the syndications market and
its effect on the volume of partnership equity that can be
raised. Management does not expect the Company to syndicate
the same volume of partnership equity as it did last year.
Item 1. Legal Proceedings
See Note 9 of Notes to Consolidated Financial Statements.
(A) Exhibits
None
(B) Reports on Form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
______________________________
David J. Davis
Vice President and Corporate
Controller
Date: May 13, 1994
Item 1. Legal Proceedings
See Note 9 of Notes to Consolidated Financial Statements.
(A) Exhibits
None
(B) Reports on Form 8-K
None
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 13, 1994