UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[x] Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For Quarterly the fiscal quarter ended June 30, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 1-9670
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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.)
120 Montgomery Street
Suite 1350, San Francisco, CA 94104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 445-3201
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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 8, 2001 -7,554,510 shares.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
---------------------------------------------------------------
REVENUES
Operating lease income $ 117 $ 264 $ 630 $ 309
Management fees 1,451 1,738 2,987 3,549
Partnership interests and other fees 341 (193) 904 24
Acquisition and lease negotiation fees -- 134 185 153
Other 331 192 630 535
--------------------------------------------------------------
Total revenues 2,240 2,135 5,336 4,570
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COSTS AND EXPENSES
Operations support 385 494 639 1,080
Depreciation and amortization 171 239 414 396
General and administrative 1,339 1,389 3,396 2,589
--------------------------------------------------------------
Total costs and expenses 1,895 2,122 4,449 4,065
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Operating income 345 13 887 505
Interest expense (2) (439) (3) (870)
Interest income 140 400 235 603
Other expenses, net (61) (2) (61) (2)
--------------------------------------------------------------
Income (loss) before income taxes 422 (28) 1,058 236
Provision for (benefit from) income taxes 168 (11) 422 89
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Income (loss) from continuing operations 254 (17) 636 147
Income from discontinued operations, net of income tax -- 579 -- 496
--------------------------------------------------------------
Net income to common shares $ 254 $ 562 $ 636 $ 643
==============================================================
,
Basic earnings per weighted-average common share
outstanding
Income (loss) from continuing operations $ 0.03 $ (0.01) $ 0.08 $ 0.02
Income from discontinued operations -- 0.08 -- 0.06
--------------------------------------------------------------
$ 0.03 $ 0.07 $ 0.08 $ 0.08
==============================================================
Diluted earnings per weighted-average common share
outstanding
Income (loss) from continuing operations $ 0.03 $ (0.01) $ 0.08 $ 0.02
Income from discontinued operations -- 0.08 -- 0.06
--------------------------------------------------------------
$ 0.03 $ 0.07 $ 0.08 $ 0.08
==============================================================
`
See accompanying notes to these consolidated financial statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share amounts)
ASSETS
June 30, December 31,
2001 2000
---------------------------------------
Cash and cash equivalents $ 10,363 $ 5,874
Receivables (net of allowance for doubtful accounts of $0.1 million as of
June 30, 2001 and December 31, 2000) 415 1,045
Receivables from affiliates 898 1,207
Equity interest in affiliates 15,446 15,753
Assets held for sale -- 10,250
Restricted cash and cash equivalents 48 2,530
Other assets, net 2,757 3,748
-------------------------------------
Total assets $ 29,927 $ 40,407
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Payables and other liabilities $ 5,875 $ 15,909
Deferred income taxes 8,407 8,885
-------------------------------------
Total liabilities 14,282 24,794
SHAREHOLDERS' EQUITY
Preferred stock ($0.01 par value, 10.0 million shares
authorized, none outstanding as of June 30, 2001 and December 31, 2000) -- --
Common stock ($0.01 par value, 50.0 million shares
authorized and 7,554,510 shares issued and outstanding
as of June 30, 2001 and December 31, 2000) 112 112
Paid-in capital, in excess of par 36,943 37,547
Treasury stock (4,481,245 shares as of June 30, 2001 and
December 31, 2000) (19,875) (19,875)
Accumulated deficit (1,535) (2,171)
-------------------------------------
Total shareholders' equity 15,645 15,613
-------------------------------------
Total liabilities and shareholders' equity $ 29,927 $ 40,407
=====================================
See accompanying notes to these consolidated financial statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
For the Year Ended December 31, 2000 and the
Six Months Ended June 30, 2001
(in thousands of dollars)
Accumulated
Common Stock Deficit &
--------------------------------------------
Paid-in Accumulated
Capital in Other Total
At Excess Treasury Comprehensive Shareholders'
Par of Par Stock Income Equity
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Balances, December 31, 1999 $ 112 $ 75,059 $ (18,324) $ (7,434) $ 49,413
Comprehensive income:
Net income 5,263 5,263
Exercise of stock options (289) 1,037 748
Common stock purchases (2,588) (2,588)
Liquidating distribution (37,223) (37,223)
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Balances, December 31, 2000 112 37,547 (19,875) (2,171) 15,613
Comprehensive income:
Net income 636 636
Redemption of stock options (604) (604)
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Balances, June 30, 2001 $ 112 $ 36,943 $ (19,875) $ (1,535) $ 15,645
=============================================================================
See accompanying notes to these consolidated financial statements.
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Six Months
Ended June 30,
2001 2000
--------------------------------
OPERATING ACTIVITIES
Net income from continuing operations $ 636 $ 147
Adjustments to reconcile net income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 414 396
Deferred income tax (478) 709
Loss on disposition of assets, net 82 --
Equity income from managed programs (1,208) (472)
Decrease in payables and other liabilities (10,034) (3,303)
Decrease (increase) in receivables and receivables from affiliates 939 (4,998)
Amortization of goodwill related to the managed programs 304 448
Decrease in other assets 292 392
---------------------------------
Cash used in operating activities of continuing operations (9,053) (6,681)
Cash provided by operating activities of discontinued operations -- 5,353
---------------------------------
---------------------------------
Net cash used in operating activities (9,053) (1,328)
---------------------------------
INVESTING ACTIVITIES
Cash distribution from managed programs 1,211 2,252
Loans made to affiliates (5,500) --
Repayment of loans made to affiliates 5,500 --
Principal payments received on finance leases -- 279
Purchase of property, plant, and equipment (55) (9)
Purchase of equipment held for sale -- (14,000)
Proceeds from sale of subsidiary, net of transaction costs -- 28,275
Proceeds from sale of equipment for lease 258 --
Proceeds from assets held for sale 10,250 --
Decrease in restricted cash and restricted cash equivalents 2,482 134
Cash used in investing activities of discontinued operations -- (12,871)
---------------------------------
Net cash provided by investing activities 14,146 4,060
---------------------------------
FINANCING ACTIVITIES
Borrowings of short-term warehouse credit facility -- 10,200
Repayment of short-term warehouse credit facility -- (1,300)
Repayment of senior secured notes -- (3,760)
Proceeds from exercise of stock options -- 30
Redemption of stock options (604) --
Purchase of stock -- (2,588)
Cash used in financing activities of discontinued operations -- (4,418)
---------------------------------
Net cash used in financing activities (604) (1,836)
---------------------------------
Net increase in cash and cash equivalents 4,489 896
Cash and cash equivalents at beginning of period 5,874 2,089
---------------------------------
Cash and cash equivalents at end of period $ 10,363 $ 2,985
=================================
SUPPLEMENTAL INFORMATION
Net cash paid for interest from continuing operations $ 3 $ 854
=================================
Net cash paid for interest from discontinued operations $ -- $ 3,694
=================================
=================================
Net cash paid for income taxes $ 6,301 $ 307
=================================
See accompanying notes to these consolidated financial statements.
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary, consisting primarily of normal
recurring accruals, to present fairly PLM International, Inc. and its
wholly-owned subsidiaries (the Company's) financial position as of June 30, 2001
and December 31, 2000, statements of income for the three and six months ended
June 30, 2001 and 2000, statements of changes in shareholders' equity and
comprehensive income for the year ended December 31, 2000 and the six months
ended June 30, 2001, and statements of cash flows for the six months ended June
30, 2001 and 2000. Certain information and note 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, 2000, on file with the Securities
and Exchange Commission.
On December 22, 2000, the Company announced that it had signed an agreement and
plan of merger with MILPI Acquisition Corporation (MILPI). In December 2000,
MILPI tendered for all the outstanding common stock of the Company at $3.46 per
share. In February 2001, PLM International announced that MILPI had completed
its cash tender offer for the outstanding common stock of PLM International.
MILPI acquired 83% of the common shares outstanding of PLM International through
the tender. MILPI intends to complete its acquisition of PLM International by
effecting a merger of PLM International into MILPI. In order to effectuate the
merger, PLM International must hold a special meeting of its shareholders to
approve the merger proposal. MILPI owns sufficient shares to assure approval of
the merger proposal at the special meeting and has agreed to vote all of its
shares in favor of the merger proposal. In February 2001, the Company filed a
preliminary proxy statement for the special meeting. In connection with its
review of the preliminary proxy materials, the Securities and Exchange
Commission (SEC) has informed the four trusts that own MILPI that it believes
the trusts may be unregistered investment companies within the meaning of the
Investment Company Act of 1940. The managing trustee of the trusts is engaged in
discussions with the staff at the SEC regarding this matter. If necessary, each
of the trusts intends to avoid being deemed an investment company by disposing
of or acquiring certain assets that it might not otherwise dispose or acquire.
PLM International does not intend to schedule the special meeting of
stockholders until the issues with the SEC are resolved. Upon completion of the
merger, PLMI will no longer be publicly traded.
Due to the continuing stockholder interest, the Company is using the carryover
basis of accounting as opposed to the push down basis of accounting.
2. RECLASSIFICATIONS
Certain prior-period amounts have been reclassified to conform to the current
period's presentation.
3. DISCONTINUED OPERATIONS
In October 1999, the Company agreed to sell AFG, its commercial and industrial
equipment leasing subsidiary. On February 25, 2000, the shareholders of PLM
International approved the transaction. The sale of AFG was completed on March
1, 2000 for total proceeds of $32.2 million. Taxes and transaction costs related
to the sale were $3.9 million. Net proceeds to the Company from the sale of AFG
were $28.3 million. In addition, AFG distributed to PLMI certain assets with a
net book value of $2.7 million and cash of $0.4 million immediately prior to the
sale.
On May 24, 2000, the Company signed an asset purchase agreement to sell the
refrigerated and dry trailer assets and related liabilities. PLM shareholders
approve the transaction on August 25, 2000. For the sale of the Company's
trailer assets, the Company received $69.2 million for its 4,250 trailers and
the purchaser assumed $49.2 million in debt and other liabilities, including the
operation of most of the PLM Trailer Leasing's trailer yards located throughout
the United States. The Company paid $5.0 million of income tax related to the
trailer sale in the first quarter of 2001.
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
3. DISCONTINUED OPERATIONS (continued)
Accordingly, both the Company's AFG and trailer leasing operations are accounted
for as discontinued operations. Net income (loss) from discontinued operations
for the three and six months ended June 30, 2000 are as follows (in thousands of
dollars):
For the three months ended For the six months ended
June 30, 2000 June 30, 2000
------------------------------------ ------------------------------------
Trailer Trailer
Leasing AFG Total Leasing AFG Total
---------------------------------- ------------------------------------
REVENUES $ 8,115 $ -- $ 8,115 $ 15,587 $ 4,076 $ 19,663
COSTS AND EXPENSES (6,034) (46) (6,080) (12,472) (2,271) (14,743)
------------------------------------ ------------------------------------
Operating income (loss) 2,081 (46) 2,035 3,115 1,805 4,920
Interest expense, net (1,054) (48) (1,102) (2,143) (1,655) (3,798)
------------------------------------ ------------------------------------
Net income (loss) from discontinued
operations
before income taxes 1,027 (94) 933 972 150 1,122
Provision for (benefit from) income tax 390 (36) 354 369 57 426
Net income previously accrued as a
component
of loss of a discontinued operation -- -- -- -- (200) (200)
------------------------------------ ------------------------------------
Net income (loss) from discontinued $ 637 $ (58) $ 579 $ 603 $ (107)$ 496
operations
==================================== ====================================
During the first quarter of 2000, $0.6 million of after-tax loss on disposal of
discontinued operations was recorded against the provision established at
December 31, 1999 and is not included in the above table.
4. ASSETS HELD FOR SALE
As of June 30, 2001, the Company had no assets held for sale. As of December 31,
2000, the Company had $10.3 million in marine containers that were reported as
assets held for sale. During the first six months of 2001, the Company sold
these marine containers to affiliated programs at cost, which approximated their
fair market value.
5. DEBT
In April 2001, the Company entered into a joint $15.0 million credit facility on
behalf of Acquisub LLC (ACQ), a wholly-owned subsidiary of the Company, PLM
Equipment Growth Fund VI (EGF VI), PLM Equipment Growth and Income Fund VII (EGF
VII), and Professional Lease Management Income Fund I (Fund I), each affiliated
investment programs of the Company. The facility provides interim financing of
up to 100% of the aggregate book value of eligible equipment as defined in the
credit facility. The Company, EGF VI, EGF VII, and Fund I, collectively may
borrow up to $15.0 million under this facility. Outstanding borrowings by one
borrower reduce the amount available to each of the other borrowers under the
facility. Individual borrowings may be outstanding for no more than 270 days,
with all advances due no later than April 12, 2002. Interest accrues at either
the prime rate or adjusted LIBOR plus 2.00 %, at the borrower's option, and is
set at the time of an advance of funds. The Company guarantees all borrowings.
As of June 30, 2001, there were no loans outstanding under this facility to any
of the borrowers.
6. SHAREHOLDERS' EQUITY
The total common shares outstanding were 7,554,510 as of June 30, 2001 and
December 31, 2000.
Net income per basic weighted-average common share outstanding was computed by
dividing net income to common shares by the weighted-average number of shares
deemed outstanding during the period. The weighted-average number of shares
deemed outstanding for the basic earnings per share calculation during the three
months ended June 30, 2001 and 2000 was 7,554,510 and 7,638,701, respectively.
The weighted-average number of shares deemed outstanding for the basic earnings
per share calculation during the six months ended June 30, 2001 and 2000 was
7,554,510 and 7,670,843, respectively. The weighted-average number of shares
deemed outstanding, including potentially dilutive
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
6. SHAREHOLDERS' EQUITY (continued)
common shares, for the diluted earnings per weighted-average share calculation
during the three months ended June 30, 2001 and 2000 was 7,554,510 and
7,698,658, respectively. The weighted-average number of shares deemed
outstanding, including potentially dilutive common shares, for the diluted
earnings per weighted-average share calculation during the six months ended June
30, 2001 and 2000 was 7,586,661 and 7,730,116, respectively.
7. LEGAL MATTERS
The Company and various of its wholly owned subsidiaries are defendants in a
class action lawsuit filed in January 1997 and which is pending in the United
States District Court for the Southern District of Alabama, Southern Division
(Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six
individuals who invested in PLM Equipment Growth Fund IV, PLM Equipment Growth
Fund V (Fund V), PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income
Fund VII (the Partnerships), each a California limited partnership for which the
Company's wholly owned subsidiary, PLM Financial Services, Inc. (FSI) acts as
the General Partner.
The complaint asserts causes of action against all defendants for fraud and
deceit, suppression, negligent misrepresentation, negligent and intentional
breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, and
control persons. Based on these duties, plaintiffs assert liability against
defendants for improper sales and marketing practices, mismanagement of the
Partnerships, and concealing such mismanagement from investors in the
Partnerships. Plaintiffs seek unspecified compensatory damages, as well as
punitive damages.
In June 1997, the Company and the affiliates who are also defendants in the Koch
action were named as defendants in another purported class action filed in the
San Francisco Superior Court, San Francisco, California, Case No.987062 (the
Romei action). The plaintiff is an investor in Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in the Partnerships. The complaint alleges the same facts and the same
causes of action as in the Koch action, plus additional causes of action against
all of the defendants, including alleged unfair and deceptive practices and
violations of state securities law. In July 1997, defendants filed a petition
(the petition) in federal district court under the Federal Arbitration Act
seeking to compel arbitration of plaintiff's claims. In October 1997, the
district court denied the Company's petition, but in November 1997, agreed to
hear the Company's motion for reconsideration. Prior to reconsidering its order,
the district court dismissed the petition pending settlement of the Romei
action, as discussed below. The state court action continues to be stayed
pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle the
lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into two
parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to $6.6
million. The final settlement amount will depend on the number of claims filed
by class members, the amount of the administrative costs incurred in connection
with the settlement, and the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy. For
settlement purposes, the monetary settlement class consists of all investors,
limited partners, assignees, or unit holders who purchased or received by way of
transfer or assignment any units in the Partnerships between May 23, 1989 and
August 30, 2000. The monetary settlement, if approved, will go forward
regardless of whether the equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the extension
(until January 1, 2007) of the date by which FSI must complete liquidation of
the Partnerships' equipment, (b) the extension (until
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
7. LEGAL MATTERS (continued)
December 31, 2004) of the period during which FSI can reinvest the Partnerships'
funds in additional equipment, (c) an increase of up to 20% in the amount of
front-end fees (including acquisition and lease negotiation fees) that FSI is
entitled to earn in excess of the compensatory limitations set forth in the
North American Securities Administrator's Association's Statement of Policy; (d)
a one-time repurchase by each of Funds V, VI and VII of up to 10% of that
partnership's outstanding units for 80% of net asset value per unit; and (e) the
deferral of a portion of the management fees paid to an affiliate of FSI until,
if ever, certain performance thresholds have been met by the Partnerships.
Subject to final court approval, these proposed changes would be made as
amendments to each Partnership's limited partnership agreement if less than 50%
of the limited partners of each Partnership vote against such amendments. The
equitable settlement also provides for payment of additional attorneys' fees to
the plaintiffs' attorneys from Partnership funds in the event, if ever, that
certain performance thresholds have been met by the Partnerships. The equitable
settlement class consists of all investors, limited partners, assignees or unit
holders who on August 30, 2000 held any units in Funds V, VI, and VII, and their
assigns and successors in interest.
The court preliminarily approved the monetary and equitable settlements in
August 2000, and information regarding each of the settlements was sent to class
members in September 2000. A final fairness hearing was held on November 29,
2000, and on April 25, 2001, the federal magistrate judge assigned to the case
entered a Report and Recommendation recommending final approval of the monetary
and equitable settlements to the federal district court judge. On July 24, 2001,
the federal district court judge adopted the Report and Recommendation, and
entered a final judgment approving both settlements. Monetary class members who
submitted timely claims will be paid their settlement amount out of the monetary
fund by the third-party claims administrator, calculated pursuant to the formula
set forth in the settlement agreement and court order. These payments to
qualifying class members will occur following the expiration of the time for the
filing of an appeal, assuming that no appeal is filed. Similarly the equitable
settlement will be implemented promptly at the same time and assuming no appeal
is filed. For those equitable class members who submitted timely requests for
the repurchase of their limited partnership units, the respective partnerships
will repurchase such units by December 31, 2001.
The Company continues to believe that the allegations of the Koch and Romei
actions are completely without merit and intends to continue to defend this
matter vigorously if the monetary settlement is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
8. OPERATING SEGMENTS
In the first six months of 2000, the Company operated in three operating
segments: the management of investment programs and other equipment leasing,
trailer leasing, and commercial and industrial equipment leasing and financing.
The management of investment programs and other equipment leasing segment
involves managing the Company's syndicated investment programs, from which it
earns fees and equity interests, and arranging short-term to mid-term operating
leases of other equipment. The Company sold its commercial and industrial
equipment leasing subsidiary, AFG on March 1, 2000 and its trailer leasing
operations on September 30, 2000. Accordingly, these segments are accounted for
as discontinued operations. With the sale of AFG and the trailer leasing
operations, the Company operated in only one segment in the first six months of
2001, which is the management of investment programs and other transportation
equipment leasing. The Company evaluates the performance of each segment based
on profit or loss from operations before allocating general and administrative
expenses, certain operation support costs and income taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT OF INVESTMENT PROGRAMS
The Company syndicated investment programs from which it earns various fees and
equity interests. Professional Lease Management Income Fund I, LLC (Fund I) was
structured as a limited liability company with a no front-end fee structure. The
previously syndicated limited partnership programs allow the Company to receive
fees for the acquisition and initial leasing of the equipment. The Fund I
program does not provide for acquisition and lease negotiation fees. The Company
invested the equity raised through syndication for these programs in
transportation equipment and related assets, which it manages 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 a program.
The limited partnership agreements entitle the Company to receive a 1% or 5%
interest in the cash distributions and earnings of a partnership, subject to
certain allocation provisions. The Fund I agreement entitles the Company to a
15% interest in the cash distributions and 1% of earnings of the program,
subject to certain allocation provisions per the operating agreement. The
Company's interest in the earnings and distributions of Fund I will increase to
25% after the investors have received distributions equal to their original
invested capital.
In 1996, the Company announced the suspension of public syndication of equipment
leasing programs with the 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 liquidate and the managed
equipment portfolio for these programs becomes permanently reduced.
In accordance with certain limited partnerships' agreements, four limited
partnerships have entered their liquidation phases and the Company has commenced
an orderly liquidation of the partnerships' assets. Two of the limited
partnerships, PLM Equipment Growth Fund III and PLM Equipment Growth Fund IV are
expected to be liquidated by the end of 2001. Two of the limited partnerships,
PLM Equipment Growth Fund and PLM Equipment Growth Fund II will terminate on
December 31, 2006, unless terminated earlier upon the sale of all equipment or
by certain other events.
The Company will occasionally own transportation equipment prior to sale to
affiliated programs. During this period, the Company earns lease revenue and may
incur interest expense.
TRAILER LEASING
Prior to 2001, the Company operated 22 trailer rental facilities doing business
as PLM Trailer Leasing that engaged in short-term and mid-term operating leases.
On May 24, 2000, the Company signed an asset purchase agreement to sell its
refrigerated and dry trailer assets and related liabilities. PLM shareholders
approved the transaction on August 25, 2000. The sale was completed on September
30, 2000. The Company received $69.2 million, net of transaction costs, for its
4,250 trailers and the purchaser assumed $49.2 million in debt and other
liabilities, including the operation of most of the PLM Trailer Leasing's
trailer yards located throughout the United States. The Company paid $5.0
million of income tax related to the trailer sale in the first quarter of 2001.
Accordingly, the Company's trailer leasing is accounted for as a discontinued
operation.
COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING AND FINANCING
Prior to 2001, the Company funded and managed long-term direct finance leases,
operating leases, and loans through its American Finance Group, Inc. (AFG)
subsidiary. Master lease agreements were entered into with predominately
investment-grade lessees and served as the basis for marketing efforts. The
underlying assets represented a broad range of commercial and industrial
equipment, such as: point-of-sale, materials handling, computer and peripheral,
manufacturing, general-purpose plant and warehouse, communications, medical, and
construction and mining equipment. Through AFG, the Company was also engaged in
the management of institutional programs for which it originated leases and
received acquisition and management fees. The Company also earned syndication
fees for arranging purchases and sales of equipment to other unaffiliated third
parties.
In October 1999, the Company agreed to sell AFG. On February 25, 2000, the
shareholders of PLM International approved the transaction. The sale of AFG was
completed on March 1, 2000 for total proceeds of $32.2 million. Taxes and
transaction costs related to the sale were $3.9 million. Net proceeds to the
Company from the sale of AFG were $28.3 million. In addition, AFG distributed to
PLMI certain assets with a net book value of $2.7 million and cash of $0.4
million immediately prior to the sale.
Accordingly, the Company's commercial and industrial leasing operations are
accounted for as a discontinued operation.
COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE
30, 2001 AND 2000
The following analysis reviews the operating results of the Company:
REVENUES
For the Three Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Operating lease income $ 117 $ 264
Management fees 1,451 1,738
Partnership interests and other fees 341 (193)
Acquisition and lease negotiation fees -- 134
Other 331 192
-----------------------------------------
Total revenues $ 2,240 $ 2,135
The fluctuations in revenues for the three months ended June 30, 2001, compared
to the three months ended June 30, 2000, are summarized and explained below.
OPERATING LEASE INCOME BY TYPE:
For the Three Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Lease income from assets held for sale $ -- $ 122
Other 117 142
-----------------------------------------
Total operating lease income $ 117 $ 264
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. Operating lease
income decreased $0.1 million during the second quarter of 2001 compared to the
same quarter of 2000.
A $ 0.1 million decrease in operating lease income in the three months ended
June 30, 2001 related to assets held for sale. The Company held no assets for
sale in the three months ended June 30, 2001. For 17 days in the second quarter
of 2000, the Company owned $14.0 million in marine containers from which the
Company earned $0.1 million in operating lease income.
MANAGEMENT FEES:
Management fees are, for the most part, based on the gross revenues generated by
equipment under management. Management fees were $1.5 million and $1.7 million
for the quarters ended June 30, 2001 and 2000, respectively. The decrease in
management fees resulted from a net decrease in managed equipment from the PLM
Equipment Growth Fund programs and Professional Lease Management Income Fund I,
LLC. With the termination of syndication activities in 1996, management fees
from the older programs are decreasing and are expected to continue to decrease
as the programs liquidate their equipment portfolios.
PARTNERSHIP INTERESTS AND OTHER FEES:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The Company's net earnings from the affiliated
programs was $0.3 million for the quarter ended June 30, 2001 compared to the
net losses from the affiliated programs of $0.2 million for the three months
ended June 30, 2000. The increase of $0.5 million in net earnings from the
affiliated entities in the second quarter of 2001 compared to the same quarter
of 2000 is a result of gains from the disposition of equipment in certain of the
EGF programs in the second quarter of 2001.
ACQUISITION AND LEASE NEGOTIATION FEES:
During the quarter ended June 30, 2001, the Company did not purchase any
transportation and other equipment for the EGF programs compared to $2.8 million
of transportation and other equipment being purchased for these programs during
the quarter ended June 30, 2000, resulting in a $0.1 million decrease in
acquisition and lease negotiation fees. Because of the Company's decision to
halt syndication of equipment leasing programs with the close of Fund I in 1996,
because Fund I has a no front-end fee structure, and because the Company has
reached the maximum allowable fees that may be taken in some of the programs,
acquisition and lease negotiation fees in the future will continue to be less
than has been historically earned by the Company.
OTHER REVENUE:
Other revenue increased $0.1 million in the three months ended June 30, 2001
compared to the same period in 2000 due to increased revenue from the affiliated
programs for data processing services.
COSTS AND EXPENSES
For the Three Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Operations support $ 385 $ 494
Depreciation and amortization 171 239
General and administrative 1,339 1,389
-----------------------------------------
Total costs and expenses $ 1,895 $ 2,122
OPERATIONS SUPPORT:
Operations support expense, including salary and office-related expenses for
operational activities, decreased $0.1 million (22%) during the quarter ended
June 30, 2001, compared to the quarter ended June 30, 2000. The decrease in
operations support expense was primarily due to a decrease in compensation and
benefits expense resulting from staff reductions.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization expense decreased $0.1 million (28%) for
the quarter ended June 30, 2001, compared to the quarter ended June 30, 2000.
The decrease resulted primarily from a decrease in the volume of other assets
held for operating lease.
GENERAL AND ADMINISTRATIVE:
General and administrative expenses decreased $0.1 million (4%) during the
quarter ended June 30, 2001, compared to the quarter ended June 30, 2000. The
reduction resulted from lower compensation costs due to staffing reductions
partially offset by one-time severance costs.
OTHER INCOME AND EXPENSES
For the Three Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Interest expense $ (2) $ (439)
Interest income 140 400
Other expenses, net (61) (2)
INTEREST EXPENSE:
Interest expense decreased $0.4 million (100%) during the quarter ended June 30,
2001, compared to the quarter ended June 30, 2000 due to the repayment of the
Company's senior secured notes in 2000.
INTEREST INCOME:
Interest income decreased $0.3 million (65%) during the quarter ended June 30,
2001, compared to the same quarter of 2000 due to lower average cash balances
and lower interest rates during the quarter ended June 30, 2001 compared to the
same quarter of 2000.
OTHER EXPENSES, NET:
Other expenses of $0.1 million in the second quarter of 2001 represented costs
related to the settlement of litigation. A similar event did not occur in the
second quarter of 2000.
PROVISION FOR (BENEFIT FROM) INCOME TAXES:
For the three months ended June 30, 2001, the provision for income tax was $0.2
million, representing an effective rate of 40%. For the three months ended June
30, 2000, the benefit from income taxes was $11,000, representing an effective
rate of 39%.
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
On May 24, 2000, the Company signed an asset purchase agreement to sell its
refrigerated and dry trailer assets and related liabilities. PLM shareholders
approved the transaction on August 25, 2000. The sale was completed on September
30, 2000.
In October 1999, the Company agreed to sell its commercial and industrial
equipment subsidiary, American Finance Group, Inc. On February 25, 2000, the
shareholders of PLM International approved the transaction. The sale was
completed on March 1, 2000.
Accordingly, the Company's trailer leasing and commercial and industrial leasing
operations are accounted for as discontinued operations. Net income (loss) from
discontinued operations for the quarter ended June 30, 2000 is as follows (in
thousands of dollars):
Trailer
Leasing AFG Total
-------------------------------------------
REVENUES
Operating lease income $ 7,808 $ -- $ 7,808
Management fees 185 -- 185
Partnership interests 100 -- 100
Loss on sale or disposition of assets, net (8) -- (8)
Other 30 -- 30
------------------------------
-------------------------------------------
Total revenues 8,115 -- 8,115
-------------------------------------------
COSTS AND EXPENSES
Operations support 3,180 46 3,226
Depreciation and amortization 2,529 -- 2,529
General and administrative expenses 325 325
-------------------------------------------
Total costs and expenses 6,034 46 6,080
-------------------------------------------
Operating income (loss) 2,081 (46) 2,035
Interest expense, net (1,054) (48) (1,102)
-------------------------------------------
Income (loss) before income taxes 1,027 (94) 933
Provision for (benefit from) income taxes 390 (36) 354
-------------------------------------------
Net income (loss) from discontinued operations $ 637 $ (58) $ 579
===========================================
NET INCOME
As a result of the foregoing, for the three months ended June 30, 2001, net
income was $0.3 million, resulting in basic and diluted earnings per
weighted-average common share outstanding of $0.03. For the same period of 2000,
net income was $0.6 million, resulting in basic and diluted earnings per
weighted-average common share outstanding of $0.07.
Comparison of the Company's Operating Results for the Six Months Ended June 30,
2001 and 2000
The following analysis reviews the operating results of the Company:
REVENUES
For the Six Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Operating lease income $ 630 $ 309
Management fees 2,987 3,549
Partnership interests and other fees 904 24
Acquisition and lease negotiation fees 185 153
Other 630 535
-----------------------------------------
Total revenues $ 5,336 $ 4,570
The fluctuations in revenues for the six months ended June 30, 2001, compared to
the six months ended June 30, 2000, are summarized and explained below.
OPERATING LEASE INCOME BY TYPE:
For the Six Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Lease income from assets held for sale $ 347 $ 122
Other 283 187
-----------------------------------------
Total operating lease income $ 630 $ 309
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. Operating lease
income increased $0.3 million during six months ended June 30, 2001, compared to
the six months ended June 30, 2000 due to the following:
1) Lease income from assets held for sale increased $0.2 million
during the six months ended June 30, 2001 compared to the same period
of 2000. During the six months ended June 30, 2001, the Company owned
$10.3 million in marine containers for 78 days during which the
Company earned $0.3 million in operating lease income. During the six
months ended June 30, 2000, the Company owned $14.0 million in marine
containers for 17 days on which the Company earned $0.1 million in
operating lease income.
2) Lease income from other assets increased $0.1 million during the
six months ended June 30, 2001 compared to the same period of 2000 due
to an increase in the amount of other assets held for lease.
MANAGEMENT FEES:
Management fees are, for the most part, based on the gross revenues generated by
equipment under management. Management fees were $3.0 million and $3.5 million
for the six months ended June 30, 2001 and 2000, respectively. The decrease in
management fees resulted from a net decrease in managed equipment from the PLM
Equipment Growth Fund programs and Professional Lease Management Income Fund I,
LLC. With the termination of syndication activities in 1996, management fees
from the older programs are decreasing and are expected to continue to decrease
as the programs liquidate their equipment portfolios.
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 from the affiliated programs
were $0.9 million and $24,000 for the six months ended June 30, 2001 and 2000,
respectively. The increase in net earnings from affiliated programs in 2001,
compared to 2000, resulted from increased gains on disposition of equipment in
the Growth Fund programs.
ACQUISITION AND LEASE NEGOTIATION FEES:
During the six months ended June 30, 2001, the Company, on behalf of the EGF
programs, purchased transportation and other equipment for $8.0 million,
compared to first six months of 2000 during which the Company purchased $5.0
million of transportation and other equipment for these programs. The Company
has reached certain fee limitations in certain of its limited partnership
programs per the partnership agreements. During the six months ended June 30,
2001 and 2000, the Company did not take acquisition and lease negotiation fees
on $5.0 million and $2.2 million, respectively, of this equipment. Because of
the Company's decision to halt syndication of equipment leasing programs with
the close of Fund I in 1996, because Fund I has a no front-end fee structure,
and because the Company has reached the maximum allowable fees that may be taken
in some of the programs, acquisition and lease negotiation fees will continue at
the current levels or be reduced in the future.
COSTS AND EXPENSES
For the Six Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Operations support $ 639 $ 1,080
Depreciation and amortization 414 396
General and administrative 3,396 2,589
-----------------------------------------
Total costs and expenses $ 4,449 $ 4,065
OPERATIONS SUPPORT:
Operations support expense, including salary and office-related expenses for
operational activities, decreased $0.4 million (41%) for the six months ended
June 30, 2001, compared to the six months ended June 30, 2000. The decrease in
operations support expense was primarily due to a decrease in compensation and
benefits expense resulting from staff reductions.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization expense increased $18,000 (5%) for the six months
ended June 30, 2001, compared to the six months ended June 30, 2000. The
increase resulted from an increase in the volume of other assets held for
operating lease.
GENERAL AND ADMINISTRATIVE:
General and administrative expenses increased $0.8 million (31%) during the six
months ended June 30, 2001, compared to the six months ended June 30, 2000. A
$0.3 million increase was due to compensation expense recorded relating to stock
option expenses incurred in the first quarter of 2001. An additional increase of
$0.3 million in 2001 was due to expenses incurred related to the sale of the
Company (as discussed in Note 1 to the consolidated financial statements). There
were no similar expenses in 2000.
OTHER INCOME AND EXPENSES
For the Six Months
Ended June 30,
2001 2000
-----------------------------------------
(in thousands of dollars)
Interest expense $ (3) $ (870)
Interest income 235 603
Other expenses, net (61) (2)
INTEREST EXPENSE:
Interest expense decreased $0.9 million (100%) during the six months ended June
30, 2001, compared to the six months ended June 30, 2000, due to the Company's
repayment of the senior secured notes in 2000.
INTEREST INCOME:
Interest income decreased $0.4 million (61%) during the six months ended June
30, 2001, compared to the same period of 2000 due to lower average cash balances
and lower interest rates during the six months ended June 30, 2001 compared to
the same period of 2000.
OTHER EXPENSES, NET:
Other expenses of $0.1 million in the first six months of 2001 represented costs
related to the settlement of litigation. A similar event did not occur in the
first six months of 2000.
PROVISION FOR INCOME TAXES:
For the six months ended June 30, 2001, the provision for income tax was $0.4
million, representing an effective rate of 40%. For the six months ended June
30, 2000, the provision for income taxes was $0.1 million, representing an
effective rate of 38%.
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
On May 24, 2000, the Company signed an asset purchase agreement to sell its
refrigerated and dry trailer assets and related liabilities. PLM shareholders
approved the transaction on August 25, 2000. The sale was completed on September
30, 2000.
In October 1999, the Company agreed to sell its commercial and industrial
equipment subsidiary, American Finance Group, Inc. On February 25, 2000, the
shareholders of PLM International approved the transaction. The sale was
completed on March 1, 2000.
Accordingly, the Company's trailer leasing and commercial and industrial leasing
operations are accounted for as discontinued operations. Net income (loss) from
discontinued operations for the six months ended June 30, 2000 are as follows
(in thousands of dollars):
2000
----------------------------------------
Trailer
Leasing AFG Total
---------------------------------------
REVENUES
Operating lease income $ 15,053 $ 1,841 $ 16,894
Finance lease income -- 1,650 1,650
Management fees 358 100 458
Partnership interests 164 -- 164
Gain (loss) on disposition of assets, net (21) 40 19
Other 33 445 478
---------------------------------------
Total revenues 15,587 4,076 19,663
---------------------------------------
COSTS AND EXPENSES
Operations support 6,867 766 7,633
Depreciation and amortization 4,894 1,505 6,399
General and administrative expenses 711 -- 711
---------------------------------------
Total costs and expenses 12,472 2,271 14,743
---------------------------------------
Operating income 3,115 1,805 4,920
Interest expense, net (2,143) (1,655) (3,798)
---------------------------------------
Net income from discontinued operations
before income taxes 972 150 1,122
Provision for income tax 369 57 426
Net income previously accrued as a component
of loss on a discontinued operation -- (200) (200)
---------------------------------------
Net income (loss) from discontinued operations $ 603 $ (107) $ 496
=======================================
During the first quarter of 2000, $0.6 million of after-tax loss on disposal of
discontinued operations was recorded against the provision established at
December 31, 1999 and is not included in the above table.
NET INCOME
As a result of the foregoing, for the six months ended June 30, 2001 and 2000,
net income was $0.6 million, resulting in basic and diluted earnings per
weighted-average common share outstanding of $0.08.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and proceeds from the sale of equipment and business
segments.
During the six months ended June 30, 2001, accounts receivable decreased $0.6
million. This decrease was primarily by the collection of lease receivables
outstanding at December 31, 2000.
As of December 31, 2000, the Company had $10.3 million in marine containers that
were reported as assets held for sale. During the first six months of 2001, the
Company sold these marine containers to affiliated programs at cost, which
approximated their fair market value. As of June 30, 2001, the Company had no
assets held for sale.
During the six months ended June 30, 2001, restricted cash decreased $2.5
million. The Company's agreement to be purchased by MILPI Acquisition Corp.
required the Company to place $1.7 million into an escrow account as of December
31, 2000. Concurrent with the conclusion of the tender offer in February 2001,
the $1.7 million in restricted cash held in an escrow account was released to
the Company. Restricted cash as of December 31, 2000 also included $0.8 million
related to the Company's obligations under the deferred compensation agreements.
These deferred compensation obligations were paid during the first six months of
2001 and the cash held as restricted related to these agreements was released.
During the six months ended June 30, 2001, other assets decreased $1.0 million.
A $0.6 million decrease was due to a decrease in net book value of other assets
held for lease due to asset sales and depreciation being recorded on these
assets. A decrease of $0.4 million was due to a reduction in prepaid insurance
and prepaid rent.
During the six months ended June 30, 2001, accounts payable and accrued expenses
decreased $10.0 million. $5.4 million of this decrease was the result of net
federal and state income tax payments made in 2001. A $3.5 million decrease in
accrued expenses was due to the payment of deferred compensation, profit
sharing, and bonuses in 2001 that were accrued at December 31, 2000. Accounts
payable decreased $0.8 million due to the timing of payments and the payment in
2001 of a litigation settlement that had been accrued at December 31, 2000
DEBT FINANCING:
WAREHOUSE CREDIT FACILITY: In April 2001, the Company entered into a joint $15.0
million credit facility on behalf of Acquisub LLC (ACQ), a wholly-owned
subsidiary of the Company, PLM Equipment Growth Fund VI (EGF VI), PLM Equipment
Growth and Income Fund VII (EGF VII), and Professional Lease Management Income
Fund I (Fund I), each affiliated investment programs of the Company. The
facility provides interim financing of up to 100% of the aggregate book value of
eligible equipment as defined in the credit agreement. The Company, EGF VI, EGF
VII, and Fund I, collectively may borrow up to $15.0 million under this
facility. Outstanding borrowings by one borrower reduce the amount available to
each of the other borrowers under the facility. Individual borrowings may be
outstanding for no more than 270 days, with all advances due no later than April
12, 2002. Interest accrues at either the prime rate or adjusted LIBOR plus 2.00
%, at the borrower's option, and is set at the time of an advance of funds. The
Company guarantees all borrowings. As of June 30, 2001 and August 8, 2001 there
were no borrowings outstanding under this facility by any of the borrowers. .
Management believes that, through debt financing and cash flows from operations,
the Company will have sufficient liquidity and capital resources to meet its
projected future operating needs over the next twelve months.
FORWARD-LOOKING INFORMATION:
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that contain risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Company's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
This space intentionally left blank.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 7 to the consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
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/ Stephen M. Bess
---------------------------------------------------
Stephen M. Bess
Chief Executive Officer and
Current Chief Accounting Officer
Date: August 8, 2001