UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal quarter ended June 30, 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 August 5, 1996 - 9,181,361 shares
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
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(in thousands)
ASSETS
Cash and cash equivalents $ 3,545 $ 13,764
Receivables 4,067 4,931
Receivables from affiliates 7,702 8,690
Investment in direct finance leases, net 30,720 --
Assets held for sale 952 719
Equity interest in affiliates 30,886 28,208
Equipment held for operating leases 105,043 112,732
Less accumulated depreciation (55,882) (64,892)
----------------------------------------
49,161 47,840
Restricted cash and cash equivalents 15,805 10,621
Other, net 11,487 11,440
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Total assets $ 154,325 $ 126,213
========================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt $ 24,849 $ --
Senior secured debt 35,000 35,000
Other secured debt 1,084 1,353
Subordinated debt 8,625 11,500
Nonrecourse securitization facility 8,185 --
Payables and other liabilities 11,103 13,884
Deferred income taxes 15,697 15,493
----------------------------------------
Total liabilities 104,543 77,230
Minority interest 370 363
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 10,743,761
issued and outstanding at June 30, 1996 and 10,833,161 at December 31,
1995 (excluding 1,852,630 and 1,753,230 shares held
in treasury at June 30, 1996 and
December 31, 1995, respectively) 117 117
Paid-in capital, in excess of par 77,778 77,743
Treasury stock (6,279) (5,931)
----------------------------------------
71,616 71,929
Accumulated deficit (22,204) (23,309)
----------------------------------------
Total shareholders' equity 49,412 48,620
----------------------------------------
Total liabilities, minority interest,
and shareholders' equity $ 154,325 $ 126,213
========================================
See accompanying notes to these consolidated financial
statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
For the three months For the six months
ended June 30, ended June 30,
1996 1995 1996 1995
---------------------------------------------------------------
Revenues:
Operating leases $ 4,111 $ 6,223 $ 9,157 $ 12,631
Management fees 2,893 2,631 5,446 5,322
Partnership interests and other fees 300 1,732 1,292 2,329
Acquisition and lease negotiation fees 1,109 1,790 2,664 2,330
Finance lease income 724 -- 1,046 --
Commissions -- 293 -- 1,322
Aircraft brokerage and services 729 1,295 1,416 2,317
Gain on the sale or disposition of assets, net 993 594 1,793 5,181
Other 697 278 1,143 522
---------------------------------------------------------------
Total revenues 11,556 14,836 23,957 31,954
Costs and expenses:
Operations support 6,308 5,732 11,421 12,552
Depreciation and amortization 2,907 2,166 5,616 4,387
Commissions -- 327 -- 1,468
General and administrative 1,464 2,397 3,559 5,067
---------------------------------------------------------------
Total costs and expenses 10,679 10,622 20,596 23,474
---------------------------------------------------------------
Operating income 877 4,214 3,361 8,480
Interest expense 1,541 1,616 2,983 3,931
Other income (expense), net 416 (27 ) 390 (54 )
Interest income 286 247 523 925
---------------------------------------------------------------
Income before income taxes 38 2,818 1,291 5,420
Provision for (benefit from) income taxes (223 ) 1,210 238 2,325
---------------------------------------------------------------
Net income to common shares $ 261 $ 1,608 1,053 $ 3,095
===============================================================
Earnings per common share outstanding $ 0.02 $ 0.13 0.10 $ 0.26
===============================================================
See accompanying notes to these consolidated financial
statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY For the Year Ended December 31, 1995 and the Six
Months Ended June 30, 1996
(in thousands)
Common Stock
-------------------------------------------
Paid-in Retained
Capital in Earnings Total
At Excess Treasury Accumulated Shareholders'
Par of Par Stock (Deficit) Equity
--------------------------------------------------------------------------
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
Net income 1,053 1,053
Common stock repurchases (348 ) (348 )
Exercise of stock options 35 35
Translation gain 52 52
===========================================================================
Balances, June 30, 1996 $ 117 $ 77,778 $ (6,279 ) (22,204 ) $ 49,412
===========================================================================
See accompanying notes to these consolidated financial
statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the six months
ended June 30,
1996 1995
-------------------------------
Operating activities:
Net income $ 1,053 $ 3,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,616 4,387
Finance lease income (1,046 ) --
Foreign currency translation 52 (7)
Increase in deferred income taxes 222 2,157
Gain on sale or disposition of assets, net (1,793 ) (5,181)
Undistributed residual value interests 294 (112)
Minority interest in net income of subsidiaries 7 1
Decrease in payables and other liabilities (2,723 ) (1,035)
Decrease (increase) in receivables and receivables from affiliates 2,252 (3,750 )
Cash distributions from affiliates in excess of income accrued 1,342 393
Increase in other assets (478 ) (272 )
-------------------------------
Net cash provided by (used in) operating activities 4,798 (324 )
-------------------------------
Investing activities:
Additional investment in affiliates (4,956 ) (4,284 )
Purchase of residual option -- (200 )
Investment in direct finance leases (33,614 ) --
Purchase of equipment (33,287 ) (24,855 )
Proceeds from sale of transportation equipment for lease 6,254 16,506
Proceeds from sale of assets held for sale 1,431 27,241
Proceeds from sale of commercial and industrial equipment to
offshore investment program 18,074 --
Proceeds from the sale of commercial and industrial equipment to
third parties 6,086 --
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 --
Increase in restricted cash and restricted cash equivalents (5,184 ) (5,314 )
-------------------------------
Net cash (used in) provided by investing activities (44,824 ) 15,683
-------------------------------
(Continued)
See accompanying notes to these consolidated financial
statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the six months
ended June 30,
1996 1995
-------------------------------
Financing activities:
Borrowings under bridge facility $ 33,444 $ 9,800
Repayment of bridge facility (8,595 ) (16,204 )
Proceeds from long-term equipment loans -- 85
Principal payments under long-term equipment loans (39 ) (33 )
Borrowings under securitization facility 15,866 --
Repayment of securitization facility (7,681 ) --
Repayment of subordinated debt (2,875 ) --
Payments received from ESOP Trustee -- 928
Repurchase of treasury stock (348 ) (494 )
Proceeds from exercise of stock options 35 2
-------------------------------
Net cash provided by (used in) financing activities 29,807 (5,916 )
-------------------------------
Net (decrease) increase in cash and cash equivalents (10,219 ) 9,443
Cash and cash equivalents at beginning of period 13,764 16,131
===============================
Cash and cash equivalents at end of period 3,545 $ 25,574
===============================
Supplemental information:
Interest paid during the period 2,688 $ 3,380
===============================
Income taxes paid during the period 1,283 $ 378
See accompanying notes to these consolidated financial
statements.
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 1996, the statements of income for the three
and six months ended June 30, 1996 and 1995, the statements of cash flows for
the six months ended June 30, 1996 and 1995, and the statements of changes in
shareholders' equity for the year ended December 31, 1995 and the six months
ended June 30, 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 purchased by AFG which are depreciated over
their estimated useful lives.
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 June 30, 1996, the
Company had 16 railcars and one commuter aircraft held for sale to third parties
with an aggregate net book value of $1.0 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 six months ended June 30,
1996, the Company realized $0.7 million of gains on the sale of 69 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.
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 $35.0 million short-term equipment acquisition loan facility. The Company
amended this facility on May 31, 1996. The amendment extended the availability
of the facility until May 23, 1997 and added the Company's AFG subsidiary as a
borrower.
This facility, which is shared with Equipment Growth Funds (EGFs) III, IV, V,
VI, VII and 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 the lesser of 100% of the present value of the lease stream or 85% of the
original equipment cost on commercial and industrial equipment 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 June 30, 1996, the Company had
borrowed $24.8 million and EGF VI had borrowed $9.0 million. Borrowings by the
EGFs or Fund I are guaranteed by the Company.
The Company entered into a securitization facility on July 1, 1995 which made
available for one year up to $80 million on a nonrecourse basis that is 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 bears interest equivalent to average U.S. treasury rates plus
1%. As of June 30, 1996, there were $8.2 million in borrowings outstanding under
this facility. The Company extended this facility in July 1996 on similar terms
for up to a one year period.
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 99,400 shares under this program for $0.3 million during the six
months ended June 30, 1996. As of June 30, 1996, 834,596 shares were purchased
under this program for $2.6 million.
During the six months ended June 30, 1996, 40,000 options were granted under the
Director's 1995 Non-Qualified Stock Option Plan at $3.50 per share.
During the six months ended June 30, 1996, 99,400 common shares were repurchased
by the Company, and options for 10,000 shares were exercised. Consequently, the
total common shares outstanding decreased to 10,743,761 at June 30, 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 June 30, 1996 and 1995,
were 10,947,381 and 11,751,359, respectively. The weighted average number of
shares and stock options deemed outstanding during the six months ended June 30,
1996 and 1995, were 10,996,981 and 11,806,322, respectively.
7. Syndication Activities
On May 14, 1996, the Company announced the halt of syndication of equipment
leasing programs with the May 13, 1996 close of Professional Lease Management
Income Fund I (Fund I). The Company recognized a one-time $1.4 million charge in
the quarter ended June 30, 1996 mainly related to severance pay associated with
this decision.
Through 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. Existing employees were partially or fully vested based on previous
years of employment when the plan was implemented.
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.
In November 1995, James F. Schultz (Plaintiff), a former employee of PLM
International, filed and served on PLMI, a first amended complaint (the
Complaint) in the 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 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 interference with Plaintiff's rights under
ERISA. Plaintiff seeks monetary damages, rescission of the preferred stock
transactions with the ESOP and/or restitution of ESOP assets, and attorneys'
fees and costs under ERISA. In January 1996, PLMI and other defendants filed a
motion to dismiss the Compliant for lack of subject matter jurisdiction, arguing
the plaintiff lacked standing. The motion was granted and on May 30, 1996, the
Court entered a judgment dismissing the Complaint for lack of subject matter
jurisdiction. Plaintiff has appealed to the U.S. Court of Appeals for the Ninth
Circuit, seeking a reversal of District Court's judgment. The parties are
required to complete briefing on the appeal by November 11, 1996.
11. Purchase Commitments
As of June 30, 1996, the Company, through its AFG subsidiary, had committed to
purchase $70.2 million of equipment for its commercial and industrial equipment
lease portfolio.
12. Note Agreement
On June 28, 1996, the Company completed a floating rate senior secured note
agreement which allows the Company to borrow up to $27.0 million within a one
year period. No borrowings were outstanding at June 30, 1996 under this
facility. The facility bears interest at three-month LIBOR plus 240 basis
points. The Company has pledged substantially all of its management, acquisition
and lease negotiation fees, and certain partnership distributions as collateral
to the facility. The facility provides that management, acquisition and lease
negotiation fees, and the partnership distributions be deposited into a lockbox
account. The Company has access to a certain amount of the cash in this lockbox
account after monthly borrowing base requirements have been met. The facility
requires quarterly interest only payments through August 15, 1997, with
principal plus interest payments beginning November 15, 1997. Principal payments
are payable quarterly in 20 equal amounts through termination of the loan on
August 15, 2002.
13. Subsequent Events
The Company borrowed $18.0 million under the floating rate senior secured note
agreement during July 1996. (Refer to Note 12.)
During July 1996, the Company prepaid in its entirety the $8.6 million balance
of its subordinated debt and incurred prepayment penalties of approximately $0.7
million.
During July 1996, the Company repurchased 1.6 million shares of the Company's
common stock for $6.1 million. The shares were acquired through private
transactions at a price of 3 13/16 per share.
During July and August 1996, the Company, through its AFG subsidiary, funded
$9.0 million of commitments outstanding for its commercial and industrial
equipment lease portfolio at June 30, 1996, and entered into new commitments for
$11.7 million.
During July 1996, the Company sold one commuter aircraft with a net book value
of $0.5 million, for $0.7 million, and 16 railcars with an aggregate net book
value of $0.5 million, for $0.6 million. The aircraft and railcars were included
in assets held for sale as of June 30, 1996.
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, and storage equipment at June 30, 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 has syndicated investment programs from which it earns various fees
and equity interests. The Professional Lease Management Income Fund I (Fund I)
was structured as a limited liability company with a no front-end fee structure.
The previously syndicated limited partnership programs 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 these types of programs 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.
On May 14, 1996, the Company announced the halt of public syndication
of equipment leasing programs with the May 13, 1996 close of Fund I. As a result
of this decision, revenues earned from managed programs which include management
fees, partnership interests and other fees, and acquisition and lease
negotiation fees will be reduced in the future as the older programs begin
liquidation and the managed equipment portfolio becomes permanently reduced.
The Company is 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 predominately 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. Through AFG, the
Company is also engaged in the management of an offshore leasing investment
program for which it originates leases and receives acquisition and management
fees.
For the Three Months Ended June 30, 1996 versus June 30, 1995
The following analysis reviews the operating results of the Company:
Revenue: For the three months
ended June 30,
1996 1995
------------------------------
(in thousands)
Operating leases $ 4,111 $ 6,223
Management fees 2,893 2,631
Partnership interests and other fees 300 1,732
Acquisition and lease negotiation fees 1,109 1,790
Finance lease income 724 --
Commissions -- 293
Aircraft brokerage and services 729 1,295
Gain on the sale or disposition of assets, net 993 594
Other 697 278
------------------------------
Total revenues 11,556 $ 14,836
The fluctuations in revenues for the three months ended June 30, 1996 from the
same period in 1995 are summarized and explained below.
Operating lease revenue:
For the three months
ended June 30,
1996 1995
----------------------------
(in thousands)
By equipment type or subsidiary:
Trailers $ 1,802 $ 2,625
Aircraft 1,139 1,516
Marine vessels -- 535
Marine containers 92 146
Storage equipment 282 243
Railcars 18 421
Commercial and industrial 778 737
-----------------------------
$ 4,111 $ 6,223
As of June 30, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $96.8 million, which
was $25.2 million less than the original cost of equipment owned and held for
operating leases or held for sale at June 30, 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 26% net reduction in
its marine container portfolio, a 30% net reduction in its aircraft portfolio, a
68% net reduction in its railcar portfolio, and a 10% net reduction in its
trailer portfolio, compared to June 30, 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. In
addition, trailer lease revenue decreased due to lower utilization.
The decrease in operating lease revenues as a result of the reduction in
equipment available for lease was offset by $0.1 million in operating lease
revenues generated from higher storage equipment utilization and by commercial
and industrial equipment leases on owned equipment and revenues generated on
leases prior to being sold to third parties.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio grew
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 $0.3 million
increase in management fees during the quarter ended June 30, 1996, compared to
the comparable prior year quarter, resulted from an increase in management fees
related to Fund I, while management fees from other programs remained relatively
constant. With the termination of syndication activities, management fees are
expected to decrease in the future as the older programs begin liquidation and
the managed equipment portfolio becomes permanently reduced. This future
decrease will be offset, in part, by management fees earned from the offshore
leasing investment program managed by the Company's AFG subsidiary.
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 $0.3 million and $1.7 million for the quarters ended
June 30, 1996 and 1995, respectively. In 1996, the revenue included net
decreases of $0.4 million in the Company's recorded residual values related to
equipment owned by the Equipment Growth Fund programs. In 1995, the equity
interest recorded was impacted by net increases of $0.9 million in the Company's
residual values which resulted mainly from residual income recorded for the
equipment purchased for Fund I, which did not occur during the second quarter of
1996. 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 June 30, 1996, a total of $17.4 million of equipment
was purchased on behalf of the equipment growth funds compared to $24.2 million
during the same quarter of the prior year, resulting in a $0.4 million decrease
in acquisition and lease negotiation fees. In addition, acquisition and lease
negotiation fees related to AFG purchases for managed programs decreased $0.3
million in the quarter ended June 30, 1996, as compared to the quarter ended
June 30, 1995. As a result of the Company's decision to halt syndication of
equipment leasing programs with the close of Fund I on May 13, 1996, and because
Fund I had a no front-end fee structure, acquisition and lease negotiation fees
will be reduced in the future.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary. During the quarter ended June 30, 1996, the Company managed direct
finance lease transactions on equipment it purchased for $32.0 million, financed
by both a warehousing credit facility and a securitization facility. These
direct finance lease transactions resulted in $0.7 million in earned income for
the second quarter of 1996, which represented income earned on the lease stream.
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 June 30, 1996, there
was no program equity raised for the equipment growth funds compared to $3.2
million of equity raised during the quarter ended June 30, 1995, resulting in a
$0.3 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 halt syndication of equipment leasing
programs on May 14, 1996, and due to Fund I having a no front-end fee structure,
commission revenue since the close of EGF VII was 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 $0.6 million during the quarter
ended June 30, 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.
Gain on the sale or disposition of assets, net:
During the quarter ended June 30, 1996, the Company recorded $0.6
million in gains which resulted mainly from the sale or disposition of 5
commuter aircraft, 50 marine containers, 2 railcars, 1 storage unit and 138
trailers. In addition, the Company recorded $0.4 million in gains related to AFG
equipment sales. During the quarter ended June 30, 1995, the Company purchased
two commuter aircraft for a total of $1.5 million and sold both aircraft for a
gain of $0.3 million, net of selling costs. Additional net gains on the sales or
dispositions of assets for the quarter ended June 30, 1995 of $0.3 million
resulted mainly from the sales or dispositions of 363 marine containers, 1
commuter aircraft, 2 railcars, 10 storage units, and 225 trailers.
Other:
Other revenues increased $0.4 million during the quarter ended June 30,
1996, compared to the comparable prior year quarter, due to increased revenue
earned for data processing services provided to the Company's affiliated
programs and due to an increase in brokerage fees.
Costs, Expenses, and Other:
For the three months
ended June 30,
1996 1995
----------------------------
(in thousands)
Operations support $ 6,308 $ 5,732
Depreciation and amortization 2,907 2,166
Commissions -- 327
General and administrative 1,464 2,397
Interest expense 1,541 1,616
Other income (expense), net 416 (27)
Interest income 286 247
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 $0.6
million (10%) for the quarter ended June 30, 1996, from the same quarter in
1995. The increase resulted mainly from a one-time $1.4 million charge related
to the termination of syndication activities, offset partially by an $0.8
million decrease in compensation expenses related to headcount reductions during
the fourth quarter of 1995 and the first quarter of 1996.
Depreciation and amortization:
Depreciation and amortization expense increased $0.7 million (34%) for
the quarter ended June 30, 1996, as compared to the quarter ended June 30, 1995.
The increase resulted from amortization of costs associated with the formation
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.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the
quarter ended June 30, 1996, decreased $0.3 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 June 30, 1996, versus $3.2
million in syndicated equity raised for Equipment Growth and Income Fund VII
during the same quarter in 1995. Commission costs related to Fund I were
capitalized as part of the Company's investment in the program. With the
termination of syndication activities, there will be no more commission costs
incurred in the future.
General and administrative:
General and administrative expense decreased $0.9 million (39%) during the
quarter ended June 30, 1996, compared to the same period in 1995, due primarily
to a $0.2 million decrease in compensation related to the reductions in
headcount, a $0.4 million decrease in bonus expenses, and a $0.3 million
decrease in estimated accruals.
Interest expense:
Interest expense decreased $0.1 million (5%) during the quarter ended
June 30, 1996, compared to the same period in 1995, due to the reduction in
subordinated debt levels partially offset by increased borrowings on the
short-term equipment acquisition loan facility and the securitization facility.
Other income (expense), net:
Other income increased $0.4 million during the quarter ended June 30, 1996,
compared to the same quarter in 1995, due to the sale of 32 wind turbines during
the second quarter of 1996 which had previously been written off.
Income taxes:
For the three months ended June 30, 1996, the benefit for income taxes was $0.2
million, which reflected an adjustment for taxes related to the Employee Stock
Ownership Plan. For the same period in 1995, the provision for income taxes was
$1.2 million, which represented an effective rate of 43% and higher income
before tax.
Net income:
As a result of the foregoing, for the three months ended June 30, 1996,
net income was $0.3 million resulting in net income per common share of $0.02.
For the same period in 1995, net income was $1.6 million resulting in net income
per common share of $0.13.
For the Six Months Ended June 30, 1996 versus June 30, 1995
The following analysis reviews the operating results of the Company:
Revenue:
For the six months
ended June 30,
1996 1995
------------------------------
(in thousands)
Operating leases $ 9,157 $ 12,631
Management fees 5,446 5,322
Partnership interests and other fees 1,292 2,329
Acquisition and lease negotiation fees 2,664 2,330
Finance lease income 1,046 --
Commissions -- 1,322
Aircraft brokerage and services 1,416 2,317
Gain on the sale or disposition of assets, net 1,793 5,181
Other 1,143 522
------------------------------
Total revenues $ 23,957 $ 31,954
The fluctuations in revenues for the six months ended June 30, 1996 from the
same period in 1995 are summarized and explained below.
Operating lease revenue:
For the six months
ended June 30,
1996 1995
----------------------------
(in thousands)
By equipment type or subsidiary:
Trailers $ 3,958 $ 5,380
Aircraft 2,565 3,073
Marine vessels -- 1,092
Marine containers 219 300
Storage equipment 544 500
Railcars 73 1,263
Commercial and industrial 1,798 1,023
------------------------------
$ 9,157 $ 12,631
As of June 30, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $96.8 million, which
was $25.2 million less than the original cost of equipment owned and held for
operating leases or held for sale at June 30, 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 26% net reduction in
its marine container portfolio, a 30% net reduction in its aircraft portfolio, a
68% net reduction in its railcar portfolio, and a 10% net reduction in its
trailer portfolio, compared to June 30, 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 comparable
period. In addition, trailer lease revenue decreased due to lower utilization.
The decrease in operating lease revenues as a result of the reduction in
equipment available for lease was offset by a $0.8 million increase in operating
lease revenues generated by higher storage equipment utilization and by
commercial and industrial leases on owned equipment and revenues generated on
leases prior to being sold to third parties.
Management fees:
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.
Management fees increased $0.1 million during the six months ended June 30, 1996
as compared to the same period of the prior year. Although management fees
related to Fund I increased, management fees from the remaining older programs
decreased 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. With the termination of syndication
activities, management fees are expected to decrease in the future as older
programs begin liquidation and the managed equipment portfolio becomes
permanently reduced. This future decrease will be offset, in part, by management
fees earned from the offshore leasing investment program managed by the
Company's AFG subsidiary.
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 $1.3 million and $2.3 million for the six months ended
June 30, 1996 and 1995, respectively. In 1996, the revenue included net
decreases of $0.2 million in the Company's recorded residual values related to
the Equipment Growth Fund programs offset partially by residual income for
equipment purchased for Fund I. In 1995, the equity interest recorded was
impacted by net increases of $0.6 million in the Company's recorded residual
values which resulted mainly from residual income for equipment purchased for
Fund I. 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 six months ended June 30, 1996, a total of $41.2 million of equipment
was purchased on behalf of the equipment growth funds compared to $28.6 million
during the same period of the prior year, resulting in a $0.7 million increase
in acquisition and lease negotiation fees. This increase was partially offset by
a $0.4 million decrease in acquisition and lease negotiation fees related to AFG
purchases for managed programs. As a result of the Company's decision to halt
syndication of equipment leasing programs with the close of Fund I on May 13,
1996, and because Fund I had a no front-end fee structure, acquisition and lease
negotiation fees will be reduced in the future.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary. During the six months ended June 30, 1996, the Company originated
and managed direct finance lease transactions on equipment it purchased for
$32.0 million, financed by both a warehousing credit facility and a
securitization facility. These direct finance lease transactions resulted in
$1.0 million in earned income for the six months ended June 30, 1996, which
represented income earned on the lease stream. 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 six months ended June 30, 1996, there
was no program equity raised for the equipment growth funds compared to $11.4
million of equity raised during the six months ended June 30, 1995, resulting in
a $1.3 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 halt syndication of equipment
leasing programs on May 14, 1996, and because Fund I had a no front-end fee
structure, commission revenue since the close of EGF VII was 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 $0.9 million during the six months
ended June 30, 1996, compared to the comparable prior year period. 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.
Gain on the sale or disposition of assets, net:
During the six months ended June 30, 1996, the Company recorded $1.4
million in gains which resulted mainly from the sale or disposition of 5
commuter aircraft, 124 marine containers, 69 railcars, 6 storage units, and 205
trailers. In addition, the Company recorded $0.4 million in gains related to AFG
equipment sales. The $5.2 million net gain recorded during the same period in
1995 resulted mainly from a net gain of $3.1 million from the sale or
disposition of 1 marine vessel, 510 marine containers, 2 commercial aircraft, 1
commuter aircraft, 1 helicopter, 216 railcars, 10 storage units, and 355
trailers, and from the sale of 3 option contracts, for railcar equipment, for a
net gain of $1.8 million. Additionally during the six months ended June 30,
1995, the Company purchased two commuter aircraft for a total of $1.5 million
and sold both aircraft for a gain of $0.3 million, net of selling costs.
Other:
Other revenues increased $0.6 million during the six months ended June
30, 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 increased underwriting income and brokerage fees.
Costs, Expenses, and Other:
For the six months
ended June 30,
1996 1995
----------------------------
(in thousands)
Operations support $ 11,421 $ 12,552
Depreciation and amortization 5,616 4,387
Commissions -- 1,468
General and administrative 3,559 5,067
Interest expense 2,983 3,931
Other income (expense), net 390 (54)
Interest income 523 925
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 $1.1
million (9%) for the six months ended June 30, 1996, from the same period in
1995. The decrease resulted from a $0.9 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 $1.8 million decrease in
compensation and bonus 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, offset partially
by a one-time $1.4 million charge related to the termination of syndication
activities, and a $0.2 million increase in bad debt expense.
Depreciation and amortization:
Depreciation and amortization expense increased $1.2 million (28%) for
the six months ended June 30, 1996, as compared to the six months ended June 30,
1995. The increase resulted from amortization of costs associated with the
formation 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.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the six
months ended June 30, 1996, decreased $1.5 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 six months ended June 30, 1996, versus $14.6
million in syndicated equity raised for the equipment growth funds during the
same period in 1995. Commission costs related to Fund I were capitalized as part
of the company's investment in the program. With the termination of syndication
activities, there will be no more commission costs incurred in the future.
General and administrative:
General and administrative expense decreased $1.5 million (30%) during the six
months ended June 30, 1996, compared to the same period in 1995, due to a $1.0
million decrease in compensation expenses primarily related to terminated
employees and lower 1996 bonus expense (primarily related to the compensation of
employees during 1995 for lost benefits resulting from the termination of the
401(k) plan), a $0.3 million decrease in estimated accruals, and a $0.2 million
decrease in computer services expenses.
Interest expense:
Interest expense decreased $0.9 million (24%) during the six months
ended June 30, 1996, compared to the same period in 1995 mainly due to the
reduction in subordinated debt levels.
Other income (expense), net:
Other income increased $0.4 million during the six months ended June 30, 1996,
compared to the same period of 1995, due to the sale of 32 wind turbines during
the second quarter of 1996 which had previously been written off.
Interest income:
Interest income decreased $0.4 million (43%) in the six months ended
June 30, 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 six months ended June 30, 1996, the provision for income taxes was $0.2
million, which represented an effective rate of 18% and reflected an adjustment
for taxes related to the Employee Stock Ownership Plan. For the same period in
1995, the provision for income taxes was $2.3 million, which represented an
effective rate of 43% and higher income before taxes.
Net income:
As a result of the foregoing, for the six months ended June 30, 1996,
net income was $1.1 million resulting in net income per common share of $0.10.
For the same period in 1995, net income was $3.1 million resulting in net income
per common share of $0.26.
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, possible additional equipment
sales and the volume of commercial and industrial equipment leasing transactions
for which the Company earns fees and a spread. 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: The Company's senior loan facility with a syndicate of
insurance companies 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 June 30, 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.
On June 28, 1996, the Company closed a floating rate senior secured note
agreement which allows the Company to borrow up to $27.0 million within a one
year period. The facility bears interest at LIBOR plus 240 basis points. During
July 1996, the Company borrowed $18.0 million under this agreement. The Company
has pledged substantially all of its management, acquisition and lease
negotiation fees, and certain partnership distributions as collateral to the
facility. The facility provides that management, acquisition and lease
negotiation fees, and the partnership distributions be deposited into a lockbox
account. The Company has access to a certain amount of the cash in this lockbox
account after monthly borrowing base requirements have been met. The facility
requires quarterly interest only payments through August 15, 1997, with
principal plus interest payments beginning November 15, 1997. Principal payments
are payable quarterly in 20 equal amounts through termination of the loan on
August 15, 2002.
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 $35.0 million short-term equipment acquisition loan facility. The Company
amended this facility on May 31, 1996. The amendment extended the facility until
May 23, 1997, and provides for a $5.0 million letter of credit facility as part
of the $35.0 million facility.
This bridge facility, which is shared with Equipment Growth Funds
(EGFs) 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 the lesser of 100% of the
present value of the lease stream or 85% of the original equipment cost 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 August 2, 1996,
the Company had $22.6 million in outstanding borrowings and EGF VI had $9.0
million in outstanding borrowings.
Subordinated Debt: In February 1996, the Company made its scheduled
$2.9 million debt payment as required by the loan agreement.
In July 1996, the Company prepaid in its entirety the $8.6 million balance of
its subordinated debt and incurred prepayment penalties of approximately $0.7
million.
Securitized Debt: The Company entered into a securitization facility on July 1,
1995, which made available for one year up to $80 million on a nonrecourse basis
that is 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 bears interest equivalent to average
U.S. treasury rates plus 1%. As of June 30, 1996, there were $8.2 million in
borrowings outstanding under this facility. In July 1996, the Company extended
this facility on similar terms for up to a one year period.
Interest Rate Swap Contracts: The Company attempts to minimize its interest rate
exposure through the purchase of fixed rate interest rate swap contracts.
(b) Portfolio Activities:
During the six months ended June 30, 1996, the Company generated proceeds of
$7.7 million from the sales of owned transportation equipment. These net
proceeds were placed in a collateral account as required by the senior loan
facility 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.
(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 then 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. From May 1995 through May 14, 1996, Fund I raised $100 million in
equity investment from the public. The Company recognized a one-time $1.4
million charge in the second quarter of 1996 mainly related to severance pay
associated with this decision to halt syndication activities.
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 July 31, 1996, equal $50.6 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 equipment subject to leases ($25.8 million) is 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.
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
10.1$27,000,000 Floating Rate Senior Secured Notes Agreement, dated as of
June 28, 1996.
10.2 Warehousing Credit Agreement among American Finance Group, Inc. and
First Union National Bank of North Carolina, dated as of May 31, 1996.
(B) Reports on Form 8-K
May 15, 1996 - Announcement regarding PLM International to halt syndication and
expand its trailer leasing business.
June 10, 1996 - Announcement regarding Allen V. Hirsch's termination of
employment and resignation as a member of the Board of Directors of the Company.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
/s/ David J. Davis
----------------------------
David J. Davis
Vice President and Corporate Controller
Date: August 5, 1996