ITEM 1. BUSINESS
(A) Background
PLM International, Inc. (PLM International, the Company, or PLMI), a Delaware corporation, is a management company that specializes in transportation equipment leasing. Through May 1996, the Company syndicated investment programs organized to invest primarily in transportation and related equipment. The Company continues to manage these syndicated investment programs. As of December 31, 2000, the Company operated and managed transportation equipment and related assets for various investment programs and third-party investors with an approximate original cost of $0.7 billion. An organizational chart for PLM International indicating the relationships of significant active legal entities as of December 31, 2000 is shown in Table 1:
TABLE 1
ORGANIZATIONAL CHART
[chart omitted]
(B) Description of Business
PLM International, a Delaware corporation formed on May 20, 1987, manages a portfolio of transportation equipment and related assets with a combined original cost of approximately $0.7 billion (refer to Table 2). In 2000, the Company operated in three operating segments: refrigerated and dry van (non-refrigerated) trailer leasing, commercial and industrial equipment leasing and financing, and the management of investment programs and other transportation equipment leasing.
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 MILPI through the tender. MILPI will complete its acquisition of PLM International by effecting a merger of PLM International into MILPI under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Upon completion of the merger, PLMI will no longer be publicly traded.
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.
In October 1999, the Company agreed to sell American Finance Group, Inc. (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. The Company received $32.2 million for AFG. Taxes and transaction costs related to the sale were $3.9 million resulting in net proceeds to the Company of $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 trailer leasing and commercial and industrial leasing operations are accounted for as discontinued operations and prior periods have been restated. For business segment reporting purposes, trailer leasing is reported in the segment "Trailer Leasing" and AFG is reported in the segment "Commercial and Industrial Equipment Leasing and Financing". Costs and expenses included in discontinued operations are comprised of all direct expenses of trailer leasing and AFG, and allocated costs from PLMI that will be eliminated as a result of the sale.
(C) Management of Investment Programs and Other Transportation Equipment Leasing
Management of Investment Programs
PLM Financial Services, Inc. (FSI), a wholly owned subsidiary of PLMI, along with its primary subsidiary, PLM Investment Management, Inc. (IMI), focus on the management of investment programs, including a limited liability company, limited partnerships, and private placement programs, which acquire and lease primarily used transportation and related equipment. The Company has entered into management agreements with these programs.
FSI completed the offering of 17 public programs that have invested in diversified portfolios of transportation and related equipment. From 1986 through April 1995, FSI offered the PLM Equipment Growth Fund (EGF) investment series. From 1995 through May 1996, FSI offered Professional Lease Management Income Fund I, a limited liability company (Fund I) with a no front-end fee structure. In May 1996, the Company announced that it no longer planned to offer publicly syndicated programs that invest in transportation equipment. The Company plans to continue to manage the existing programs. Each of the EGF and Fund I programs is designed to invest primarily in used transportation and related equipment for lease in order to generate current operating cash flow for distribution to investors and for reinvestment into additional used transportation and related equipment. An objective of the programs is to maximize the value of the equipment portfolio and provide cash distributions to investors by acquiring and managing equipment for the benefit of the investors. Cumulative equity raised by PLM International for it's affiliated investment programs is $1.7 billion.
IMI manages equipment owned by investors in the various investment programs. The equipment consists of: aircraft (commercial and commuter), aircraft engines and rotables, railcars, intermodal trailers, marine containers (refrigerated and nonrefrigerated), marine vessels (dry bulk carriers, marine feeder vessels, and product tankers). IMI is obligated to invoice and collect rents; arrange for the maintenance and repair of equipment; arrange for the payment of operating expenses, debt service, and certain taxes; determine that the equipment is used in accordance with all operative contractual arrangements; arrange insurance as appropriate; provide or arrange for clerical and administrative services necessary to the operation of the equipment; correspond with program investors; prepare quarterly and annual financial statements and tax information materials; and make distributions to investors. IMI also monitors equipment regulatory requirements, compliance with investor program debt covenants and terms of the various investment program agreements. PLM Railcar Management Services, Inc. (RMSI) markets and manages the investment programs' railcar fleets. RMSI is also involved in negotiating the purchase and sale of railcars on behalf of IMI and PLM Transportation Equipment Corporation (TEC).
PLM Worldwide Management Services Limited (WMS), a wholly owned subsidiary of PLMI, is a Bermuda-based company that serves as the parent of PLMI's foreign operating entity and generates revenue from certain equipment brokerage activities.
PLM Railcar Management Services Canada, Limited, a wholly owned subsidiary of WMS headquartered in Calgary, Alberta, Canada, provides fleet management services on behalf of IMI to the managed railcars operating in Canada.
Investment in and Management of the EGFs, Other Limited Partnerships, and Private Placements: FSI earns revenues in connection with its management of the limited partnerships and private placement programs. Equipment acquisition, lease negotiation, and debt placement fees are earned through the purchase, initial lease, and financing of equipment. These fees are recognized as revenue when FSI has completed all of the services required to earn them, typically when binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and administering investor programs as provided for in the various agreements, and are recognized as revenue as they are earned. FSI is also entitled to reimbursement for providing certain administrative services.
With the termination of syndication activities in 1996, management fees, acquisition fees, lease negotiation fees, and debt placement fees from the older programs have decreased and are expected to continue to decrease as the programs liquidate their equipment portfolios.
As compensation for organizing a partnership investment program, the Company was granted an interest (between 1% and 5%) in the earnings and cash distributions of the program, in which PLM Financial Services, Inc. (FSI) is the General Partner. The Company recognizes as partnership interests its equity interest in the earnings of the partnerships, after adjusting such earnings to reflect the effect of special allocations of the programs' gross income allowed under the respective partnership agreements. Capital contributions in excess of the equity interest are considered goodwill and are amortized through the life of the program.
Investment in and Management of Limited Liability Company: From 1995 through May 1996, Fund I, a limited liability company with a no front-end fee structure, was offered as an investor program. FSI serves as the manager for the program. No compensation was paid to FSI or any of its subsidiaries for the organization and syndication of interests, the acquisition of equipment, the negotiation of leases, or the placement of debt in Fund I. FSI funded the cost of organization, syndication, and offering through the use of operating cash, and has capitalized these costs as its investment in Fund I, which is reflected as equity interest in affiliates in the accompanying consolidated balance sheets. Capital contributions in excess of the Company's equity interest are considered goodwill. FSI is amortizing its goodwill in Fund I through the projected end of the Program. In return for its investment, FSI is entitled to a 15% interest in the cash distributions and earnings of Fund I, subject to certain allocation provisions. FSI's interest in the cash distributions and earnings of Fund I will increase to 25% after the investors have received distributions equal to their invested capital. Management fees are earned for managing the equipment portfolios in Fund I, and are recognized as revenue as they are earned. FSI is also entitled to reimbursement for providing certain administrative services.
Leasing Markets: FSI, on behalf of its affiliated investment programs, leases its transportation equipment primarily on mid-term operating leases and short-term rentals. Leases of aircraft are net operating leases. In net operating leases, expenses such as insurance, taxes, and maintenance are the responsibility of the lessees. The effect of entering into net operating leases is to reduce lease rates, compared to full-service lease rates for comparable lease terms. Railcar leases are full-services leases. Marine vessel leases may be either net operating leases or full-service leases. In a full-service lease and a per diem rental, the lessor absorbs the maintenance costs. This allows the Company to insure proper maintenance of the equipment.
Lessees: Lessees of the investment programs' equipment range from Fortune 1000 companies to small privately held corporations and entities. All equipment acquisitions, equipment sales, and lease renewals relating to equipment having an original cost basis in excess of $1.0 million must be approved by a credit committee. The credit committee performs an in-depth review of each transaction and considers many factors, including anticipated residual values from the eventual sale of the equipment. These residuals may be affected by several factors during the time the equipment is held, including changes in regulatory environments in which the equipment is operated, the onset of technological obsolescence, changes in equipment markets, and perceived values for equipment at the time of sale. Because the impact of any of these factors is difficult to forecast with accuracy over extended time horizons, the Company cannot predict with certainty that the anticipated residual values for equipment selected for acquisition will actually be realized when the equipment is sold. Deposits, prepaid rents, corporate and personal guarantees, and letters of credit are utilized, when necessary, to provide credit support for lessees who do not satisfy the credit committee's financial requirements.
Competition: When marketing operating leases for transportation assets owned by the managed investment programs, the Company encounters considerable competition from lessors offering full payout leases on new equipment. In comparing lease terms for the same equipment, full payout leases provide longer lease periods and lower monthly rents than the Company offers. In comparison, the shorter length of operating leases provides lessees with flexibility in their equipment and capital commitments.
The Company competes with transportation equipment manufacturers who offer operating leases and full payout leases. Manufacturers may provide ancillary services that the Company cannot offer; such as specialized maintenance services (including possible substitution of equipment), warranty services, spare parts, training, and trade-in privileges.
The Company competes with many transportation equipment lessors, including GE Capital Railcar Services, Inc., GATX, GE Capital Aviation Services, Inc., International Lease Finance Corporation, Union Tank Car Company, international banks, and certain limited partnerships.
Government Regulations: The transportation industry, in which the majority of the equipment managed by the Company operates, is subject to substantial regulation by various federal, state, local, and foreign government authorities. For example, in July 2000, the Federal Railroad Administration implemented Regulation HM-201 for all rail tank cars. This regulation is the requalification of the tank vessel which consists of checking metal thickness & critical welds in certain high stress areas the tank shell. This regulation takes the place of a hydrostatic tank test & will result in more costly inspections of tank cars in the future. Enactments like these could affect the performance of equipment managed by the Company. It is not possible to predict the positive or negative effects of future regulatory changes in the transportation industry.
Transportation Equipment Leasing and Other
The Company owns forklifts that are on operating leases with a net book value of $1.0 million as of December 31, 2000.
The Company owned portable on-site storage units. In January 1997, the Company entered into an agreement to lease all of its storage equipment assets to a lessee for a five-year period, with a purchase option when the lease terminated. During 2000, the Company sold all the portable on-site storage units.
The Company had an 80% interest in a company owning 100% of a company located in Australia that was involved in aircraft brokerage and aircraft spare parts sales. This company was sold during August 1998.
(D) Employees
As of March 28, 2001, the Company and its subsidiaries had 43 employees. None of the Company's employees are subject to collective bargaining arrangements. The Company believes that employee relations are good.
ITEM 2.
ITEM 2. PROPERTIES
The Company's principal offices are located in leased office space at One Market, Steuart Street Tower, Suite 800, San Francisco, California. The Company also has office spaces at Chicago, and Calgary.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
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 unitholders 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 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. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing.
A final fairness hearing was held on November 29, 2000 and the parties await the court's decision. 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.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades under the ticker symbol PLM on the American Stock Exchange (AMEX). As of the date of this annual report, the Company had 7,554,510 common shares outstanding and approximately 2,003 shareholders of record.
Table 3, below, sets forth the quarterly high and low prices of the Company's common stock for 2000 and 1999, as reported by the AMEX:
TABLE 3
Calendar Period High Low ------------------- ---------- ---------- 1st Quarter $ 7.13 $ 5.75 2nd Quarter 7.44 6.25 3rd Quarter 6.88 6.38 4th Quarter 6.88 2.06
1st Quarter $ 6.250 $ 5.310 2nd Quarter 6.750 5.500 3rd Quarter 5.940 4.500 4th Quarter 6.130 4.440
In December 1998, the Company announced that its Board of Directors had authorized the repurchase of up to $5.0 million of the Company's common stock. During 1998, 1999, and 2000, the Company purchased a total of 828,325 shares under this plan for a total of $5.0 million.
In May 2000, the Company's Board of Directors' authorized the purchase of up to $10.0 million of the Company's common stock. During 2000, the Company purchased 261,654 shares of the Company's common stock for $1.9 million, under the $10.0 million common stock repurchase program. The Company does not anticipate any future repurchases under this program.
On September 29, 2000, the Company announced that its Board of Director's had approved a plan of partial liquidation and authorized a $5.00 per share distribution to shareholders from the proceeds of the trailer sale. This payment was made on November 3, 2000 to shareholders of record as of October 22, 2000.
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 will complete its acquisition of PLM International by effecting a merger of PLM International into MILPI under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Upon completion of the merger, PLMI will no longer be publicly traded.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. 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 earnings of the program, subject to certain allocation provisions. 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 (EGF III) and PLM Equipment Growth Fund IV (EGF IV) are expected to be liquidated by the end of 2001. Two of the limited partnerships, PLM Equipment Growth Fund (EGF I) and PLM Equipment Growth Fund II (EGF 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
The Company operated 22 trailer rental facilities doing business as PLM Trailer Leasing that engaged in short-term and mid-term operating leases. Nineteen of these facilities leased predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities leased only dry van (non-refrigerated) trailers.
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 and prior periods have been restated.
Commercial and Industrial Equipment Leasing and Financing
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. The Company received $32.2 million for AFG. Taxes and transaction costs related to the sale were $3.9 million resulting in net proceeds to the Company of $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 and prior periods financial statements have been restated.
Comparison of the Company's Operating Results for the Years Ended December 31, 2000 and 1999
The following analysis reviews the operating results of the Company:
Revenues
2000 1999 ------------------------------------- (in thousands of dollars) Operating lease income $ 1,810 $ 1,194 Management fees 7,043 7,332 Partnership interests and other fees 1,037 346 Acquisition and lease negotiation fees 624 1,354 Loss on disposition of assets, net (416) -- Other 1,453 1,358 ------------------------------------- Total revenues $ 11,551 $ 11,584
The fluctuations in revenues between 2000 and 1999 are summarized and explained below.
Operating lease income:
2000 1999 ------------------------------------ (in thousands of dollars) Lease income from assets held for sale $ 1,247 $ 1,155 Other 563 39 ------------------------------------ Total operating lease income $ 1,810 $ 1,194
Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. A $0.6 million increase in operating lease income during 2000 compared to 1999 was due to the following:
Lease income from assets held for sale was $1.2 million for 2000 and 1999. During 2000, the Company purchased $24.3 million and sold $14.0 million in marine containers to affiliated programs at cost, which approximated their fair market value. The Company earned $1.2 million in operating lease income on these marine containers during 2000. During 1999, the Company purchased and sold $21.8 million in marine containers to affiliated programs at cost, which approximated their fair market value. The Company earned $1.2 million in operating lease income on these marine containers during 1999 prior to their sale to the affiliated programs.
Other operating lease income was $0.6 million and $39,000 for 2000 and 1999, respectively. The increase in other operating lease income was due to the increase in volume of other assets on operating lease.
Management fees:
Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees decreased $0.3 million during 2000, compared to 1999. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs and other managed programs. 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 partnership interests and other fees of 2000 included the net earnings from the affiliated programs of $0.8 million and $0.2 million in other fees. The partnership interests and other fees in 1999 included the net earnings from the affiliated programs of $1.1 million, partially offset by a $0.8 million reduction in the Company's residual interests in the programs. The decrease of $0.3 million in net earnings from the affiliated entities in 2000 compared to 1999, resulted from the disposition of equipment in certain of the EGF programs. A decrease of $0.8 million in the Company's residual interests in the programs was recorded during 1999. A similar reduction was not required in 2000. An increase of $0.2 million in other fees in 2000 compared to 1999 was due to increased sales commissions.
Acquisition and lease negotiation fees:
During 2000, the Company, on behalf of the EGF programs, purchased transportation and other equipment for $12.0 million compared to $51.7 million of transportation and other equipment during 1999, resulting in a $0.8 million decrease in acquisition and lease negotiation fees. The decrease was partially offset by an increase of $0.1 million in lease negotiation fees due to -$0.1 million of lease negotiation fees were recorded in 2000 for an aircraft that was purchased in 1999. The lease of this aircraft started in June 2000. During 2000, the Company did not take acquisition and lease negotiation fees for a $2.2 million hushkit purchased for an affiliated program as the investment phase of this affiliated program is closed. In addition, the Company has reached certain fee limitations for another affiliated program per the partnership agreement. During 2000, the Company did not take lease negotiation fees for $14.0 million of the aircraft that was purchased in 1999. During 1999, the Company did not take acquisition and negotiation fees for $26.1 million of the equipment purchased for this program. 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.
Loss on disposition of assets, net:
During 2000, the Company had a loss of $0.4 million from disposal of other assets held for operating lease. No similar loss occurred during 1999.
Other:
Other revenues increased $0.1 million during 2000 compared to 1999. A $0.2 million increase in other income was offset by a $0.1 million decrease in other revenue resulting from lower data processing fees earned from the affiliated programs.
Costs and Expenses
2000 1999 ------------------------------------- (in thousands of dollars) Operations support $ 2,136 $ 2,474 Depreciation and amortization 885 385 General and administrative 6,851 5,224 ------------------------------------- Total costs and expenses $ 9,872 $ 8,083
Operations support:
Operations support expense, including salary and office-related expenses for operational activities and provision for doubtful accounts, decreased $0.3 million (14%) for 2000 compared to 1999. A $0.7 million decrease in operations support expenses related to the management of investment programs due to a reduction in the size of the managed equipment portfolio. This decrease in operations support expenses was partially offset by a $0.4 million increase in operations support expenses related to other activities due to an increase in compensation and benefits expense.
Depreciation and amortization:
Depreciation and amortization expenses increased $0.5 million (130%) for 2000 compared to 1999. The increase resulted from an increase in the volume of other assets held for operating lease.
General and administrative:
General and administrative expenses increased $1.6 million (31%) during 2000 compared to 1999. The increase was primarily due to severance costs incurred in 2000 related to staffing reductions. A similar event did not occur in 1999.
Other Income and Expenses
2000 1999 --------------------------- (in thousands of dollars) Interest expense $ (1,756) $ (2,261) Interest income 1,512 343 Other income (expense), net (1,333) 721
Interest expense:
Interest expense decreased $0.5 million (22%) during 2000 compared to 1999. The decrease was primarily due to a lower average outstanding balance on the senior secured notes in 2000 compared to 1999.
Interest income:
Interest income increased $1.2 million (341%) during 2000, compared to 1999. An increase in interest income of $1.0 million resulted from higher cash balances that resulted from the proceeds received from the sale of AFG and the trailer operations. In addition, an increase of $0.2 million resulted from increased loans made to the affiliated programs in 2000 compared to the same period of 1999.
Other income (expense), net:
Other income (expense), net of $1.3 million for the year ended December 31, 2000, increased from $0.7 million in 1999. The significant variances are explained as follows:
(i) $0.6 million of legal fees related to litigation in 2000 compared to $0.1 million of litigation settlement in 1999.
(ii) Other expenses of $0.4 million in 2000 related to the Company paying the obligations of railcar repair facility in which the Company has a 10% ownership interest. No similar payments were required in 1999.
(iii) A $0.3 million reduction in the carrying value of the repair facility in which the Company has a 10% ownership interest. No similar reduction was required in 1999.
(iv) A $0.2 million loss on revaluation on other assets in 2000. No similar loss was incurred in 1999.
(v) A $0.2 million of prepayment penalty and write off loan fee related to prepayment of the senior secured notes in 2000. The Company prepaid the senior secured notes in December of 2000.
(vi) A $0.3 million of mileage credit income received from the railroads in 2000 compared to $0.8 million in credit income received from the railroads in 1999.
Provision for Income Taxes
For 2000, the provision for income taxes was $39,000, representing an effective rate from continuing operations of 38%. For 1999, the provision for income taxes was $0.9 million, representing an effective rate from continuing operations of 39%. The decrease in the effective rate of 1% was due to the net effect of a decrease in the effect of permanent differences between tax and book income, a decrease in the effect of foreign operations, a change in the state apportionment factors, and an increase in the federal tax rate.
Net Income 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.
Trailer Leasing:
Operating lease income decreased to $24.3 million for 2000 compared to $24.6 million for 1999. Operating lease income decreased $8.9 million due to the sale of all the trailers on September 30, 2000. This decrease was partially offset by the increase of operating lease income of $8.6 million resulting from an increase in the trailers owned and on operating lease in 2000 compared to 1999 prior to the sale.
Partnership interests increased to $0.6 million for 2000 compared to $0.3 million for 1999. The increase of $0.3 million due to the gain from the sale of all the trailers on September 30, 2000.
Operations support increased to $12.2 million for 2000 compared to $11.7 million for 1999. Operations support increased $4.2 million due to the expansion of PLM Trailer Leasing, with the opening of additional rental yards in 1999 and trailer purchases in 1999 and 2000. This increase was partially offset by the decrease in operations support of $3.7 million due to the sale of all the trailers on September 30, 2000.
General and administrative expenses increased to $2.0 million for 2000 compared to $1.6 million for the same period of 1999. General and administrative expenses increased $0.6 million due to the growth of the trailer business. The increase was partially offset by the decrease in general and administrative expenses of $0.2 million due to the sale of all the trailers on September 30, 2000.
Interest expenses decreased to $3.1 million for 2000 compared to $3.2 million for 1999 due to sale of the trailer operations.
AFG:
The decrease in all revenues and expenses of AFG for 2000 compared to 1999 was due to the sale of AFG on March 1, 2000.
Gain (Loss) on Disposition of Discontinued Operations
The Company recorded a $5.0 million gain after tax of $3.0 million on disposition of discontinued operations in 2000 related to sale of the trailer assets of the Company.
The Company recorded a $0.6 million after-tax loss on disposition of discontinued operations during 1999 related to the sale of AFG.
Cumulative Effect of Accounting Change
In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment leasing subsidiary which is being accounted for as discontinued operations.
Net Income
As a result of the foregoing, 2000 net income was $5.3 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.70 and $0.69, respectively. For 1999, net income was $2.4 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.29.
Comparison of the Company's Operating Results for the Years Ended December 31, 1999 and 1998
The following analysis reviews the operating results of the Company:
Revenues
1999 1998 -------------------------------- (in thousands of dollars) Operating lease income $ 1,194 $ 2,269 Management fees 7,332 8,363 Partnership interests and other fees 346 459 Acquisition and lease negotiation fees 1,354 3,253 Gain on disposition of assets, net -- 1,432 Other 1,358 3,023 -------------------------------- Total revenues $ 11,584 $ 18,799
The fluctuations in revenues between 1999 and 1998 are summarized and explained below.
Operating lease income:
1999 1998 -------------------------------- (in thousands of dollars) Lease income from assets held for sale $ 1,155 $ 412 Intermodal trailers -- 1,706 Other 39 151 -------------------------------- Total operating lease income $ 1,194 $ 2,269
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 $1.1 million during 1999 compared to 1998. A $1.7 million decrease in intermodal trailer and other operating lease income was due to the Company's strategic decision to dispose of certain transportation assets and exit certain equipment markets. This decrease in operating lease income was partially offset by a $0.7 million increase in operating lease income generated from assets held for sale. During 1999, the Company purchased and sold $21.8 million in marine containers to affiliated programs at cost, which approximated their fair market value. The Company earned $1.2 million in operating lease income on these marine containers during 1999 prior to their sale to the affiliated programs. During 1998, the Company owned an interest in an entity owning a marine vessel that generated $0.4 million in operating lease income. The Company sold its interest in the entity that owned the marine vessel at cost, which approximated fair market value, to an affiliated program during 1998.
Management fees:
Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees decreased $1.0 million during 1999 compared to 1998. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs and other managed programs. 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 and distribution levels from the affiliated programs were $1.1 million and $1.3 million for 1999 and 1998, respectively. In addition, a decrease of $0.8 million in the Company's residual interests in the programs was recorded during 1999 and 1998.
Acquisition and lease negotiation fees:
During 1999, the Company, on behalf of the EGF programs, purchased transportation and other equipment, along with beneficial interests in entities that own marine containers and a commercial aircraft, for $51.7 million. In 1998, $60.4 million in transportation and other equipment and a beneficial interest in entities that own marine containers and a commercial aircraft were purchased on behalf of the EGFs. In 1999, the Company did not take acquisition and lease negotiation fees on $26.1 million of transportation and other equipment, as the Company has reached certain fee limitations for one of its limited partnership programs per the partnership agreement. This resulted in a $1.9 million decrease in acquisition and lease negotiation fees in 1999 compared to 1998. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996, and because Fund I has a no front-end fee structure, acquisition and lease negotiation fees will be substantially reduced in the future.
Gain on disposition of assets, net:
No gain or loss on sale of assets was recorded during 1999. During 1998, the Company recorded $1.4 million in net gains on the disposition of assets. Of this gain, $1.0 million resulted from disposition of an aircraft engine, a 20% interest in a commuter aircraft, and intermodal trailers, which the company had previously leased. Also during 1998, the Company purchased and subsequently sold railcars to an unaffiliated third party for a net gain of $0.5 million.
Other:
Other revenues decreased $1.7 million during 1999, compared to 1998. A $1.1 million decrease in aircraft brokerage and services revenue during 1999 compared to 1998 was due to the sale of this subsidiary in August 1998. A $0.3 million decrease in other revenue was due to lower data processing fees earned from the affiliated programs. A $0.2 million decrease in underwriting income from Transportation Equipment Indemnity Company, Ltd. (TEI), a wholly-owned subsidiary of PLMI, was due to TEI providing less insurance coverage to the investment programs than in previous years. TEI was liquidated during the first quarter of 2000. A $0.1 million decrease in miscellaneous income from Aeromil Holdings, Inc. was due to the sale of this subsidiary in 1998.
Costs and Expenses
1999 1998 ------------------------------------- (in thousands of dollars) Operations support $ 2,474 $ 7,014 Depreciation and amortization 385 1,056 General and administrative 5,224 6,082 ------------------------------------- Total costs and expenses $ 8,083 $ 14,152
Operations support:
Operations support expense, including salary and office-related expenses for operational activities and provision for doubtful accounts, decreased $4.5 million (65%) in 1999 compared to 1998. A $3.0 million decrease in operations support expenses related to the management of investment programs was due to a reduction in the size of the managed equipment portfolio. A $1.5 million decrease in other transportation equipment leasing segment was mainly due to the sale of the Company's aircraft leasing and spare parts brokerage subsidiary in August 1998 and the sale of other transportation equipment including intermodal trailers.
Depreciation and amortization:
Depreciation and amortization expenses decreased $0.7 million (64%) in 1999, compared to 1998. The decrease in depreciation expense was caused by the disposition of intermodal trailers and other equipment.
General and administrative:
General and administrative expenses decreased $0.9 million (14%) during 1999, compared to 1998 due to a $0.5 million decrease in rent and office related expenses, a $0.3 million decrease in compensation and benefits expense, and a $0.1 million decrease in insurance expense. These decreases were due to a decrease in staffing and office space requirements.
Other Income and Expenses
1999 1998 ------------------------------------- (in thousands of dollars) Interest expense $ (2,261) $ (2,072) Interest income 343 941 Other income, net 721 473
Interest expense:
Interest expense increased $0.2 million (9%) during 1999 compared to 1998. Interest expense increased $0.3 million due to an increase in borrowings to finance equipment held for sale. The increase caused by these borrowings was partially offset by lower interest expense of $0.1 million resulting from lower average borrowings outstanding under the Company's senior secured notes and loan in 1999 compared to 1998.
Interest income:
Interest income decreased $0.6 million (64%) during 1999, compared to 1998. A decrease of $0.3 million was due to lower cash balances in 1999 compared to 1998. In addition, in 1998 interest income of $0.3 million was recorded for a tax refund receivable that had not previously been recognized. No similar interest income was recorded in 1999.
Other income, net:
Other income in 1999 was $0.7 million, compared to $0.5 million in 1998. Other income of $0.7 million in 1999 represents $0.8 million of mileage credit income received from the railroads partially offset by a litigation settlement of $0.1 million. During 1998, the Company recorded income of $0.7 million related to the settlement of a lawsuit and recorded an expense of $0.3 million related to a legal settlement for the Koch and Romei actions.
Provision for Income Taxes
For 1999, the provision for income taxes was $0.9 million, representing an effective rate of 39%. For 1998, the provision for income taxes was $1.6 million, representing an effective rate of 40%. The decrease in the effective rate of 1% was due the change in the effect of permanent differences between tax and book income.
Net Income (Loss) from Discontinued Operations
Trailer Leasing:
Operating lease income increased to $24.6 million in 1999 compared to $9.7 million in 1998 as a result of an increase in the trailers owned and on operating lease.
Partnership interests decreased to $0.3 million for 1999 from $0.5 million in 1998 due to the affiliated programs' dry van trailers transitioning to the three dry van trailer rental facilities during which period they were off-lease.
Management fees decreased to $0.8 million in 1999 compared to $1.0 million in 1998. Management fees decreased due to a reduction in lease revenue earned by dry and refrigerated trailers owned by the investment programs.
A $49,000 net loss on the sale of trailers during 1999 compared to a gain of $0.1 million from the sale of trailers during 1998.
Operations support increased to $11.7 million for 1999 compared to $5.4 million for 1998 due to the expansion of PLM Trailer Leasing, with the opening of additional rental yards and trailer purchases in 1999 and 1998.
Depreciation and amortization increased to $7.7 million for 1999 compared to $3.8 million for the same period of 1998 due to an increase in the amount of refrigerated trailer equipment on operating lease at PLM Trailer Leasing.
General and administrative expenses increased to $1.6 million for 1999 compared to $1.5 million for the same period of 1998 due to the growth of the trailer business.
Interest expense, net increased to $3.2 million for 1999 compared to $1.8 million for 1998 due to increased borrowings to fund trailer purchases.
AFG:
Operating lease income increased to $10.7 million in 1999, compared to $7.9 million in 1998 due to an increase in the amount of commercial and industrial equipment owned and on operating leases. Finance lease income decreased to $10.5 million for 1999 compared to $12.5 million for 1998 due to a decrease in commercial and industrial assets that were on finance leases.
Acquisition and lease negotiation fees decreased $0.7 million in 1999 compared to 1998 because no equipment was purchased by AFG for the institutional investment programs during 1999, compared to $26.0 million in 1998, for which the Company earned $0.7 million of acquisition and lease negotiation fees.
During 1999 and 1998, AFG recorded $2.2 million and $3.2 million in gains on the disposition of commercial and industrial equipment, respectively. The decrease in the gain on the sale was due to less equipment being disposed of in 1999 compared to 1998. The original cost of equipment disposed of during 1999 was $59.3 million compared to $98.6 million during 1998.
Operations support increased to $5.2 million for 1999 compared to $4.7 million for 1998 primarily due to an increase in compensation expense resulting from a new bonus program initiated in 1999 to retain AFG employees during AFG's sale.
Depreciation and amortization expenses increased to $9.5 million for 1999, compared to $7.0 million for 1998 due to an increase in commercial and industrial equipment on operating leases.
Interest expense decreased to $9.3 million for 1999 compared to $10.3 million for 1998 due to lower average debt outstanding during 1999, compared to 1998.
Other expenses of $1.0 million in 1999 represent the expense related to the proposed initial public offering of AFG. During the first quarter of 1999, the Company's Board of Directors determined that it was in the Company's best interest to sell AFG rather than proceed with a stock offering, and therefore wrote off all associated offering costs.
Loss on Disposition of Discontinued Operations
The Company recorded a $0.6 million loss on disposition of discontinued operations during 1999 related to the sale of AFG. No similar loss was recorded during 1998.
Net Income
As a result of the foregoing, 1999 net income was $2.4 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.29. For 1998, net income was $4.9 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.58 and $0.57, respectively.
Liquidity and Capital Resources
Cash requirements have historically been satisfied through cash flow from operations, borrowings, and the sale of equipment and business segments. Liquidity in 2001 and beyond will depend, in part, on the management of existing sponsored programs and the effectiveness of cost control programs. Management believes the Company can accomplish the preceding and that it will have sufficient liquidity and capital resources for the future. Future liquidity is influenced by the factors summarized below.
Debt financing
Warehouse Credit Facility: The Company had a $9.5 million warehouse facility, which was shared with PLM Equipment Growth Fund VI, PLM Equipment Growth & Income Fund VII, and Professional Lease Management Income Fund I, LLC, that allowed the Company to purchase equipment prior to its designation to a specific program. Borrowings under this facility by the other eligible borrowers reduced the amount available to be borrowed by the Company. All borrowings under this facility were guaranteed by the Company. This facility expired on September 30, 2000. The Company is currently negotiating with a new lender for a $15.0 million warehouse facility with similar terms. The Company believes this facility will be completed in the first half of 2001.
Stock Repurchase Programs
In December 1998, the Company announced that its Board of Directors had authorized the repurchase of up to $5.0 million of the Company's common stock. During 2000, the Company purchased 98,246 shares of the Company's common stock for $0.7 million, which completed the $5.0 million common stock repurchase program. In May 2000, the Company announced that its Board of Directors had authorized the repurchase of up to $10.0 million of the Company's common stock. As of March 28 2001, 261,654 shares had been purchased under this plan for $1.9 million. The Company does not anticipate any future repurchases under this program.
Liquidating Distribution
In November 2000, the Company paid a $5.00 per share partial-liquidating distribution to shareholders of record as of October 22, 2000.
Cost Control Program
The Company is currently reviewing all expenses. As part of this review, the Company is in the process of determining if certain functions can be completed more economically by third-party service providers. Total Company headcount is expected to be reduced significantly by the end of the second quarter of 2001.
Internal Revenue Service Audit
In March 2001, the Internal Revenue Service notified the Company that it would conduct an audit regarding the Company's tax withholding of -payments to foreign entities. The audit is scheduled to begin in June 2001 and relates to two partnerships in which the Company formerly held interests as the 100% direct and indirect owner. One audit relates to the years between 1997 and 1999, while the other audit relates to the years 1998 and 1999. Management believes that the positions taken on the withholding tax returns will be upheld by the Internal Revenue Service upon audit. If the Company's position is not upheld by the Internal Revenue Service, the foreign entities are legally obligated to indemnify the Company for any losses. If the Internal Revenue Service does not uphold the Company's position and the foreign entities do not honor the indemnification, the Company's financial condition, results of operations, and liquidity would be materially impacted.
Inflation
There was no material impact on the Company's operations as a result of inflation during 2000, 1999, or 1998.
Geographic Information
For geographic information, refer to Note 16 to the consolidated financial statements.
Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. After evaluation of SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, which is effective for all quarters of fiscal years beginning after June 15, 2000, the Company has concluded that there is no impact material to the financial statements as of December 31, 2000.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements as amended by SAB 101A, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosures related to revenue recognition policies. In June 2000, the SEC issued SAB 101B which deferred the effective date of SAB 101 until the last quarter of fiscal years beginning after December 15, 1999. The Company has adopted SAB 101 and determined that there is no material effect on its consolidated financial position or results of operations.
Forward-Looking Information
Except for historical information contained herein, the discussion in this Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-K should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-K. The Company's actual results could differ materially from those discussed here.
Trends
In 1996, the Company announced that it would no longer syndicate equipment leasing programs. 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 programs liquidate and the managed equipment portfolio becomes permanently reduced.
In 2000, the Company sold its commercial and industrial and trailer leasing segments.
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 will complete its acquisition of PLM International by effecting a merger of PLM International into MILPI under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Upon completion of the merger, PLMI will no longer be publicly traded.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted as a separate section of this report. See Item 14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A definitive Company proxy statement or an amended 10-K will be filed not later than 120 days after the end of the fiscal year with the Securities and Exchange Commission. The information set forth under "Identification of Directors and Officers," "Compensation of Executive Officers," and "Security Ownership of Certain Beneficial Owners of Management," and "Certain Relationships and Related Transaction" in such amended 10-K or proxy statement is incorporated herein by reference for Items 10, 11, 12, and 13 above.
None.
(this space intentionally left blank)
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying index to financial statements are filed as part of this Annual Report on Form 10-K.
(2) Exhibits are listed at Item (c), below.
(3) Financial Statement Schedules
- Schedule II Valuation and qualifying accounts All other schedules are omitted, since the required information is not pertinent or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
(b) Reports on Form 8-K Filed in the Last Quarter of 2000
Form 8-K filed with the Securities and Exchange Commission on October 11, 2000 - Announcement of the completion of the sale of PLM International Inc.'s trailer leasing operations, the resignation of Mr. Robert N. Tidball, President and Chief Executive Officer, the appointment of Mr. Stephen M. Bess as President and as Chief Executive Officer, and his election to the Board of Directors of PLM International, Inc., and the authorization of a partial liquidating distribution of $5.00 per share to shareholders of PLM International, Inc.
Form 8-K filed with the Securities and Exchange Commission on December 28, 2000 - Announcement that on December 22, 2000 the Company and MILPI Acquisition Corp. had entered into an Agreement and Plan of Merger providing for the commencement of a tender offer to acquire all outstanding shares of the Company's common stock for $3.46 per share in cash by MILPI, and further providing for MILPI to be merged with and into the Company after the satisfaction or waiver of certain conditions. The Company also reported that it had entered into two other agreements: an Amended and Restated Voting and Tender Agreement, also dated December 22, 2000, with MILPI and certain of the Company's shareholders, pursuant to which the shareholders would tender their shares after commencement of the tender offer and vote their PLM shares in favor of the Merger; and an Escrow Agreement with MILPI and the Bank of San Francisco, as escrow agent, in connection with the Merger Agreement and tender offer.
(c) Exhibits
3.1 Certificate of Incorporation, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 1990.
3.2 Bylaws, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 1990.
10.1 Form of Employment contracts for Executive Officers, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1993.
10.2 Directors' 1995 Nonqualified Stock Option Plan, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 1995.
10.3 PLM International, Inc. Mandatory Management Stock Bonus Plan, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 1997.
10.4 Form of Executive Deferred Compensation Agreement, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1993.
10.5 Office Lease for Premises at One Market, San Francisco, California, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1991.
10.6 1998 Management Stock Compensation Plan, dated May 12, 1998, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on July 22, 1998.
10.7 Severance Agreement dated December 2, 1996 between PLM Financial Services, Inc. and Stephen M. Bess, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.8 Employment Agreement dated May 12, 1998 between PLM International, Inc. and Richard K Brock, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.9 Amendment to Employment Agreement dated November 18, 1998 between PLM International, Inc. and Richard K Brock, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.10 Employment Agreement dated November 19, 1997 between PLM International, Inc. and Susan C. Santo, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.11 Amendment to Employment Agreement dated November 17, 1998 between PLM International, Inc. and Susan C. Santo, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.12 Executive Deferred Compensation Agreement dated December 18, 1992 between PLM International, Inc. and Robert N. Tidball, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.13 Executive Deferred Compensation Agreement dated December 18, 1992 between PLM International, Inc. and Stephen M. Bess, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.14 Executive Deferred Compensation Agreement dated January 18, 1999 between PLM International, Inc. and Richard K Brock, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.15 Executive Deferred Compensation Agreement dated January 18, 1999 between PLM International, Inc. and Susan C. Santo, incorporated by reference to the Company's Form 10-K/A filed with the Securities and Exchange Commission on January 19, 2000.
10.16 Amendment to PLM International, Inc. Directors' 1995 Nonqualified Stock Option Plan, dated April 28, 1999, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on May 4, 1999.
10.17 Amendment to PLM International, Inc. 1998 Management Stock Compensation Plan, dated April 28, 1999, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on May 4, 1999.
10.18 Amended Form of Nonqualified Stock Option Agreement, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on May 4, 1999.
10.19 Second Amendment to PLM International, Inc. 1998 Management Stock Compensation Plan, dated May 29, 1999, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on July 26, 1999.
10.20 Form of severance Agreement among PLM International, Inc. and certain employees dated August 1999, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on October 28, 1999.
10.21 Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank dated October 26, 1999, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on October 28, 1999.
10.22 Amendment #2 dated March 1, 2000 to Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank, incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on March 9, 2000.
10.23 Amendment #1 dated January 24, 2000 to Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank, incorporated by reference to the Company's Form 10-K filed with the Securities and Exchange Commission on March 17, 2000.
10.24 Severance Agreement dated December 17, 1999 between PLM International, Inc. and Richard K Brock, incorporated by reference to the Company's Form 10-K filed with the Securities and Exchange Commission on March 17, 2000.
10.25 Severance Agreement dated December 17, 1999 between PLM International, Inc. and Susan C. Santo, incorporated by reference to the Company's Form 10-K filed with the Securities and Exchange Commission on March 17, 2000.
10.26 Directors 2000 Nonqualified Stock Option Plan, incorporated by reference to the Company's Form 10-K filed with the Securities and Exchange Commission on March 17, 2000.
10.27 Third Amendment to Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank dated July 5, 2000, incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on August 1, 2000.
10.28 Asset Purchase Agreement among Marubeni America Corporation and PLM International, Inc. dated May 24, 2000 incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on August 1, 2000.
10.29 Termination of Severance Agreement dated July 7, 2000 between PLM Financial Services, Inc. and Stephen M. Bess incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on August 1, 2000.
10.30 Severance Agreement dated July 7, 2000 between PLM International, Inc. and Stephen M. Bess incorporated by reference to the Company's Form 10-Q filed with the Securities and Exchange Commission on August 1, 2000.
10.31 Fourth Amendment to Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank dated July 31, 2000. Amendment No.1 to Asset Purchase Agreement among Marubeni America Corporation and PLM International, Inc. dated September 29, 2000 incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on October 11, 2000.
10.32 License Agreement between PLM International, Inc. and Marubeni America Corporation Trailer Leasing, L.L.C. dated September 30, 2000, incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 8, 2000.
10.33 Non-competition Agreement among PLM International, Inc., PLM Rental, Inc., PLM Transportation Equipment Corporation, TEC AcquiSub, Inc., PLM Financial Services, Inc., Professional Lease Management Income Fund I, L.L.C., PLM Equipment Growth Fund I through VI, PLM Equipment Growth and Income Fund VII, and Marubeni America Corporation dated September 30, 2000, incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 8, 2000.
10.34 Transition Services and Employment Agreement dated January 5, 2001 between PLM International, Inc. and Stephen M. Bess, incorporated by reference to Schedule 14D-9/A filed with the Securities and Exchange Commission on February 6, 2001.
10.35 Transition Services and Employment Agreement dated January 5, 2001 between PLM International, Inc. and Richard K Brock, incorporated by reference to Schedule 14D-9/A filed with the Securities and Exchange Commission on February 6, 2001.
10.36 Transition Services, Employment and Consulting Agreement dated January 5, 2001 between PLM International, Inc. and Susan C. Santo, incorporated by reference to Schedule 14D-9/A filed with the Securities and Exchange Commission on February 6, 2001.
23.2 Independent Auditors' Report on Financial Statement Schedule and Consent
24.1 Powers of Attorney.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 29, 2001 PLM International, Inc.
By: /s/ Stephen M. Bess ------------------------------------- Stephen M. Bess President, and Chief Executive Officer
By: /s/ Richard K Brock ------------------------------------- Richard K Brock Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company, in the capacities and on the dates indicated.
* Director March 29, 2001 - --------------------------- Robert N. Tidball
* Director March 29, 2001 - --------------------------- Gary D. Engle
* Director March 29, 2001 - --------------------------- James A. Coyne
*Susan C. Santo, by signing her name hereto, does sign this document on behalf of the persons indicated above, pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission.
/s/ Susan C. Santo ------------------------------------ Susan C. Santo Attorney-in-Fact
(Item 14(a)(1)(2))
Description Page
Independent Auditors' Report 29
Consolidated Statements of Income for Years Ended December 31, 2000, 1999, and 1998 30
Consolidated Balance Sheets as of December 31, 2000 and 1999 31
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for Years Ended December 31, 2000, 1999, and 1998 32
Consolidated Statements of Cash Flows for Years Ended December 31, 2000, 1999, and 1998 33-34
Notes to Consolidated Financial Statements 35-53
Schedule II Valuation and Qualifying Accounts 54
Independent Auditors' Report on Financial Statement Schedule and Consent 55
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc. and subsidiaries (the Company), as listed in the accompanying index. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in Note 20 to the financial statements, MILPI Acquisition Corp. completed its cash tender offer for the outstanding common stock of the Company on February 7, 2001.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PLM International, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
SAN FRANCISCO, CALIFORNIA MARCH 12, 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements contain all necessary adjustments, consisting primarily of normal recurring accruals, to present fairly the results of operations, financial position, changes in shareholders' equity and comprehensive income, and cash flows of PLM International, Inc. and its wholly and majority owned subsidiaries (PLM International, the Company, or PLMI). All significant intercompany transactions among the consolidated group have been eliminated.
PLM International is an equipment management company specializing in the leasing of transportation equipment. The Company specializes in creating equipment leasing solutions for domestic and international customers.
On December 22, 2000, the Company announced that it had signed an agreement and plan of merger with MILPI Acquisition Corporation for MILPI Acquisition Corporation to commence an offer to purchase all outstanding common stock for a price of $3.46 per share. On February 7, 2001, the Company announced that MILPI Acquisition Corp. completed its cash tender offer for the outstanding common stock of the Company at $3.46 per share. MILPI acquired 83% of the common shares outstanding of PLM International through the tender. MILPI will complete its acquisition of PLM International by effecting a merger of MILPI into PLM International under Delaware law. The merger is expected to be completed when MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to occur in the first half of 2001.
These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Investment in and Management of Equipment Growth Funds, Other Limited Partnerships, and Private Placement Programs
The Company earns revenues in connection with the management of limited partnerships and private placement programs. Equipment acquisition and lease negotiation fees are earned through the purchase and initial lease of equipment, and are recognized as revenue when the Company completes all of the services required to earn the fees, typically when binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and administering investor programs as provided for in various agreements, and are recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, the Company was granted an interest (between 1% and 5%) in the earnings and cash distributions of the program, in which PLM Financial Services, Inc. (FSI) is the General Partner. The Company recognizes as partnership interests its equity interest in the earnings of the partnerships, after adjusting such earnings to reflect the effect of special allocations of the programs' gross income allowed under the respective partnership agreements. Capital contributions in excess of the equity interest are considered goodwill and are amortized through the life of the program.
The Company is entitled to reimbursement from the investment programs for providing certain administrative services.
Investment in and Management of Limited Liability Company
From May 1995 through May 1996, Professional Lease Management Income Fund I, LLC (Fund I), a limited liability company with a no front-end fee structure, was offered as an investor program. FSI serves as the manager for the program. No compensation was paid to the Company for the organization and syndication of interests, the acquisition of equipment, the negotiation of leases for equipment, or the placement of debt. The Company funded the costs of organization, syndication, and offering through the use of operating cash and has capitalized these costs as its investment in Fund I. The Company has equity interest of 15% for its contribution to the fund. Costs funded in excess of 15% interest are considered goodwill and are amortized through the end of the program.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Limited Liability Company (continued)
In return for its investment, the Company is entitled to a 15% interest in the cash distributions and earnings of Fund I, subject to certain allocation provisions. The Company's interest in the cash distributions and earnings of Fund I will increase to 25% after the investors have received distributions equal to their invested capital. The Company is entitled to monthly fees for equipment management services and reimbursement for providing certain administrative services.
Leasing Operations
PLM International's owned transportation leasing assets consisted primarily of trailers on operating leases. The Company's commercial and industrial subsidiary leasing operations consisted of operating and direct finance leases on a variety of equipment including point-of-sale, computer, communications, manufacturing, and materials-handling equipment. Equipment held for operating lease was depreciated over its estimated useful life. Rental payments were recorded as revenue over the lease term as earned.
Under the direct finance lease method of accounting, the leased asset is recorded as an investment in direct finance leases and represents the minimum net lease payments receivable, includes third-party guaranteed residuals, plus the unguaranteed residual value of the equipment, less unearned income. Rental payments consist of principal and interest on the lease, principal payments reduce the investment in the finance lease, and the interest is recorded as revenue over the lease term.
Equipment
Trailer and commercial and industrial equipment held for operating lease were stated at cost. Depreciation was computed on the straight-line method down to the equipment's estimated salvage value, utilizing the following estimated useful lives in years: trailers, 10 to 12; and commercial and industrial equipment, 1 to 7. Salvage values for trailer equipment were 20% of original equipment cost. Salvage values for commercial and industrial equipment varied according to the type of equipment.
In accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company reviews the carrying value of its equipment at least quarterly and whenever circumstances indicate that the carrying value of an asset may not be recoverable. If projected undiscounted future cash flows are lower than the carrying value of the equipment, a loss on revaluation is recorded for operating leases or as a reduction to finance lease income if the assets were on finance lease. Total reductions to the carrying value of equipment were $0.2 million in 2000. No reductions to the carrying value of equipment were required during 1999 and 1998.
The Company classifies assets as held for sale when management has committed to a plan to dispose of the asset, whether by sale or abandonment. Equipment held for sale is valued at the lower of depreciated cost or estimated fair value less cost to sell.
Repairs and maintenance costs are usually the obligation of the Company. Repair and maintenance expenses were $44,000, $0, and $1.0 million for 2000, 1999, and 1998, respectively.
Institutional Programs
The Company earned revenues in connection with lease originations and servicing equipment leases for institutional programs, which were managed by American Finance Group, Inc. (AFG), the Company's commercial and industrial equipment leasing subsidiary. Acquisition fees were earned through the purchase and initial lease of equipment, and were recognized as revenue when the Company completed substantially all of the services required in earning the fees, typically when binding commitment agreements were signed. Management fees were earned for servicing the equipment portfolios and leases as provided for in various agreements, and were recognized as revenue over time as they were earned. AFG was sold on March 1, 2000.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Weighted-Average Common Share
Income Taxes
The Company recognizes income tax expense using the asset and liability method. Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred income taxes arise primarily because of differences in the timing of reporting equipment depreciation, partnership income, and certain accruals for financial statement and income tax reporting purposes.
Intangibles
Intangibles consist primarily of goodwill related to the investment programs, loan fees, and lease origination costs. They are reported at the lower of net amortized cost or fair value and are generally included on the balance sheet in other assets, net. Lease origination costs related to finance leases are reported as investment in finance leases. Goodwill related to the investment programs is amortized over the life of the related program. The Company annually reviews the valuation of goodwill based on projected undiscounted future cash
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangibles (continued)
flows. Loan fees are amortized over the life of the related loan. Software is amortized over three to five years from the acquisition date. Lease origination costs are amortized over the life of the related lease.
Cash and Cash Equivalents
The Company considers highly liquid investments readily convertible into known amounts of cash, with original maturities of 90 days or less as cash equivalents.
Comprehensive Income
The Company discloses its foreign currency translation gain as a component of comprehensive income on a gross basis, because it relates to a foreign investment permanently invested outside of the United States.
Reclassifications
Certain prior-year amounts have been reclassified in order to conform to the current year's presentation.
Discontinued Operations
The Company's commercial and industrial equipment subsidiary (AFG) and trailer leasing operations are accounted for as a discontinued operations and prior periods have been restated. AFG was sold on March 1, 2000 and trailer leasing was sold on September 30, 2000.
2. 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. The Company received $32.2 million for AFG. Taxes and transaction costs related to the sale were $3.9 million resulting in net proceeds to the Company of $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 approved 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.
2. DISCONTINUED OPERATIONS (continued)
Net assets of discontinued operations on the balance sheet as of December 31, 1999 are as follow (in thousands of dollars) :
--------------------------------------- Trailer Leasing AFG Total ---------------------------------------
Cash and cash equivalents $ -- $ 382 $ 382 Restricted cash 46 7,380 7,426 Receivables 5,933 2,330 8,263 Investment in direct finance leases -- 123,632 123,632 Loan receivables -- 28,115 28,115 Equipment held for leases, net 81,907 23,464 105,371 Other assets, net 797 1,895 2,692 Warehouse credit facility -- (38,240) (38,240) Senior debt (8,824) -- (8,824) Other secured debt (50,697) -- (50,697) Nonrecourse securitized debt -- (106,485) (106,485) Payables and other liabilities (2,438) (5,382) (7,820) Deferred income taxes (5,513) (6,101) (11,614) ---------------------------------------- Net assets of discontinued operations $ 21,211 $ 30,990 $ 52,201 ========================================
3. EQUITY INTEREST IN AFFILIATES
FSI, a wholly owned subsidiary of the Company, is the General Partner or manager in 11 investment programs. Distributions of the programs are allocated as follows: 99% to the limited partners and 1% to the General Partner in PLM Equipment Growth Fund (EGF I), PLM Passive Income Investors 1988, and PLM Passive Income Investors 1988-II; 95% to the limited partners and 5% to the General Partner in EGFs II, III, IV, V, VI, PLM Equipment Growth & Income Fund VII (EGF VII); 85% to the members and 15% to the manager in Professional Lease Management Income Fund I (Fund I). Net income is allocated to the General Partner subject to certain allocation provisions. FSI also receives a management fee on a per car basis at a fixed rate each month, plus an incentive management fee equal to 15% of "Net Earnings" over $750 per car per quarter from Covered Hopper Program 1979-1. The Company's interest in the cash distributions of Fund I will increase to 25% after the investors have received distributions equal to their invested capital.
3. EQUITY INTEREST IN AFFILIATES (continued)
The summarized combined financial data for FSI's affiliates as of and for the years ended December 31, are as follows (in thousands of dollars):
2000 1999 -------- -------- Financial position: Cash and receivables $ 46,126 $ 40,129 Transportation equipment and other assets, net of accumulated depreciation of $265,473 in 2000 and $350,501 in 1999 212,669 327,527 -------- -------- Total assets 258,795 367,656
Less liabilities, primarily long-term financings 91,365 118,409 -------- -------- Partners' equity $167,430 $249,247 ======== ========
Equity interest in affiliates: PLM International's share $ 12,512 $ 14,008 Goodwill, net of accumulated amortization 3,241 4,137 -------- -------- Equity interest in affiliates $ 15,753 $ 18,145 ======== ========
Most of the investment program agreements contain provisions for special allocations of the programs gross income.
While none of the partners or members, including the General Partner and manager, are liable for programs borrowings, and while the General Partner or manager maintains insurance against liability for bodily injury, death, and property damage for which an investment program may be liable, the General Partner or manager may be contingently liable for nondebt claims against the program that exceed asset values.
4. ASSETS HELD FOR SALE
As of December 31, 2000, the Company had $10.3 million in marine containers that were assets held for sale. As of December 31, 1999, the Company had no assets held for sale.
During 2000, the Company purchased $24.3 million of marine containers and subsequently sold $14.0 million of these marine containers to affiliated programs at cost, which approximated their fair market value. During 1999, the Company purchased and sold $21.8 million in marine containers to affiliated programs at cost, which approximated their fair market value.
5. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are primarily subject to withdrawal restrictions per loan and other legally binding agreements. The Company's senior notes required virtually all management fees, acquisition and lease negotiation fees, data processing fees, and partnership distributions to be deposited into a collateral bank account, to the extent required to meet certain debt requirements or to reduce the outstanding note balance (refer to Note 8). All of the cash was released quarterly when the principal and interest payments were made. 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. Restricted cash as of December 31, 2000 includes $0.8 million provided for the Company's obligations under the deferred compensation agreements (see Note 10).
6. OTHER ASSETS, NET
7. WAREHOUSE CREDIT FACILITY
The Company had a $9.5 million warehouse facility, which was shared with PLM Equipment Growth Fund VI (Fund VI), PLM Equipment Growth & Income Fund VII, and Professional Lease Management Income Fund I, LLC, that allowed the Company to purchase equipment prior to its designation to a specific program. Borrowings under this facility by the other eligible borrowers reduced the amount available to be borrowed by the Company. All borrowings under this facility were guaranteed by the Company. This facility expired on September 30, 2000. The Company is currently negotiating with a new lender for a $15.0 million warehouse facility with similar terms. The Company believes this facility will be completed in the first half of 2001.
8. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following as of December 31 (in thousands of dollars):
During 2000, the Company made four regular principal payments totaling $7.5 million. In the fourth quarter of 2000, the Company made a repayment of $13.2 million to prepay the senior secured notes and the Company incurred a prepayment penalty of $0.1 million related to this prepayment.
9. INCOME TAXES
Amounts for the current year are based upon estimates and assumptions as of the date of this report and could vary significantly from amounts shown on the tax returns ultimately filed.
The difference between the effective rate and the expected federal statutory rate is reconciled below:
2000 1999 1998 ---------- ----------- ---------- Federal statutory tax expense rate 35% 34% 34% State income tax rate 4 3 3 Effect of foreign operations -- 1 1 Reversal of excess accrual -- -- -- Abandonment of identifiable intangibles -- -- -- Other (1) 1 2 ---------- ----------- ---------- Effective tax expense (benefit) rate 38% 39% 40% ========== =========== ==========
There are no net operating loss carryforwards for federal income tax purposes as of December 31, 2000. Net operating loss carryforwards for federal income tax purposes amounted to $22.6 million as of December 31, 1999 for both continuing an discontinued operations. Alternative minimum tax credit carryforwards are $0.7 million for continuing operations and $5.5 million for both continuing and discontinued operations as of December 31, 2000 and 1999, respectively.
9. INCOME TAXES (continued)
Management has reviewed all established interpretations of items reflected in its consolidated tax returns and believes that these interpretations require valuation allowances as described in SFAS No. 109, "Accounting for Income Taxes". The valuation allowance contained in the 2000 deferred tax asset account includes $0.7 million for tax credit carryforwards and $0.3 million for other deferred tax assets. There was no valuation allowance in 1999. As of December 31, 2000, the deferred taxes not provided on cumulative earnings of consolidated foreign subsidiaries that are designated as permanently invested were approximately $2.1 million. (See discussion in note 20 to the financial statements relative to future Internal Revenue Service examination.)
10. COMMITMENTS AND CONTINGENCIES
Litigation
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
10. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
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 unitholders 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 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. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing.
A final fairness hearing was held on November 29, 2000 and the parties await the court's decision. 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.
Lease Agreements
The Company and its subsidiaries have entered into operating leases for office space. The Company's total net rent expense was $0.4 million, $0.4 million, and $0.6 million in 2000, 1999, and 1998, respectively. The portion of rent expense related to its principal office, net of sublease income of $1.0 million, $1.0 million, and $0.8 million, in 2000, 1999, and 1998, respectively, was $0.3 million, $0.3 million, and $0.5 million, in 2000, 1999, and 1998, respectively. The remaining rent expense was related to other office space and rental yard operations. The future rent expense related to discontinued operations is not material.
Annual lease commitments for all of the Company's locations total $0.8 million in 2001 and $0.1 million in 2002, 2003, 2004, and 2005.
10. COMMITMENTS AND CONTINGENCIES (continued)
Corporate Guarantee
As of December 31, 2000, the Company had guaranteed certain obligations up to $0.4 million of a Canadian railcar repair facility, in which the Company has a 10% ownership interest.
Employment Agreements
As of December 31, 2000, the Company has entered into employment agreements with 10 individuals that require the Company to pay a severance to these individuals ranging from six months to two years of their base salaries if their employment is terminated after a change in control as defined in the employee agreement. The Company's sale of its trailer assets was considered a change in control in these agreements. In addition, the Company would be required to pay for certain benefits of the employee for a similar period. As of December 31, 2000, the total future contingent liability for these payments was $2.2 million.
Other
The Company agreed to provide supplemental retirement benefits to seven current or former members of management. The benefits accrue over a maximum of 15 years and result in payments over 5 years based on the average base rate of pay during the 60-month period prior to retirement, as adjusted for length of participation in the program. All benefits under this program vested concurrent with the sale of the Company's trailer assets. After a change in control as defined in various agreements, this benefit becomes payable immediately at the request of the employee. Expenses for these arrangements were $0.3 million for 2000, 1999, and 1998. As of December 2000, the total estimated gross future obligation relating to the current participants is $2.7 million. The present value of such benefits is $2.4 million and is included in accrued liabilities.
The Company has life insurance policies on certain employees which had a $2.0 million cash surrender value as of December 31, 2000 and are included in other assets. These policies were held in a trust collateralizing the obligations under the supplemental retirement benefits.
11. SHAREHOLDERS' EQUITY
Common Stock
In December 1998, the Company announced that its Board of Directors had authorized the repurchase of up to $5.0 million of the Company's common stock. During 1998, 63,360 shares were repurchased under this plan for a total of $0.4 million. During 1999, the Company purchased 666,779 shares under this program for a total of $4.0 million. During 2000, the Company purchased 98,246 shares of the Company's common stock for $0.7 million, which completed the $5.0 million common stock repurchase program. The Company purchased 828,325 shares under this plan for a total of $5.0 million.
In May 2000, the Company's Board of Directors' authorized the purchase of up to $10.0 million of the Company's common stock. During 2000, the Company purchased 261,654 shares of the Company's common stock for $1.9 million, under the $10.0 million common stock repurchase program. The Company does not anticipate any future repurchases under this program in the future.
The following table summarizes changes in common stock during 1999 and 2000:
Issued Outstanding Common Treasury Common Shares Shares Shares ---------- --------- --------- Shares as of December 31, 1998 12,035,755 3,875,836 8,159,919 Reissuance of treasury stock, net -- (197,869) 197,869 Stock canceled -- 15,599 (15,599) Stock repurchased -- 666,779 (666,779) ---------- --------- --------- Shares as of December 31, 1999 12,035,755 4,360,345 7,675,410 Reissuance of treasury stock, net -- (239,000) 239,000 Stock repurchased -- 359,900 (359,900) ---------- --------- --------- Shares as of December 31, 2000 12,035,755 4,481,245 7,554,510 ========== ========= =========
11. SHAREHOLDERS' EQUITY (continued)
Preferred Stock
PLM International has authorized 10.0 million shares of preferred stock at $0.01 par value, none of which were outstanding as of December 31, 2000 or December 31, 1999.
Liquidating Distribution
In November of 2000, the Company paid a $5.00 partial-liquidating distribution to the shareholders of record on October 22, 2000 from the proceeds of the sale of the trailer assets.
Stock Option Plans
Prior to 1998, the Company had two nonqualified stock options plans that reserved up to 780,000 shares of the Company's common stock for key employees and directors. Under these plans, the price of the shares issued under an option must be at least 85% of the fair market value of the common stock at the date of granting. All options currently outstanding under these plans are exercisable at prices equal to the fair market value of the shares at the date of granting. Vesting of options granted occurs in three equal installments of 33.3% per year, initiating from the date of the grant. As of December 31, 2000, grants could no longer be made under either the employee or director's plan.
In May 1998, the Company's Board of Directors adopted the 1998 Management Stock Compensation Plan, which reserved 800,000 shares (in addition to the 780,000 shares above) of the Company's common stock for issuance to certain management and key employees of the Company upon the exercise of stock options. During 1998, 500,000 nonqualified options were granted under this plan at $6.81 per share, which equaled 110% of the average daily closing price of such shares on the American Stock Exchange for the 10 trading days immediately preceding the grant (as required by the plan). In 2000, 50,000 shares were issued under this plan at $7.26 a share which equaled 110% of the average daily closing price of such shares on the American Stock Exchange for the 10 trading days immediately preceding the grant (as required by the plan). Vesting of options granted occurs in three equal installments of 33.3% per year, initiating from the date of the grant. The sale of the trailer assets of the Company was deemed a change in control in accordance with the terms of the 1998 Management Stock Compensation Plan and various employment agreements. Concurrent with this change in control, the shares granted in 1998 immediately vested.
In February 2000, the Company's Board of Directors adopted the 2000 Management Stock Compensation Plan, which reserved 70,000 shares with respect to which options may be granted under the 2000 Directors' Plan. In February 2000, each non-employee director of the Company was granted an option to purchase 8,000 shares of common stock under this Plan.
Concurrent with the $5.00 per share liquidating distribution, the exercise price of all outstanding stock options was reduced by $5.00 and compensation expense of $0.8 million was recognized. All remaining outstanding options will be accounted for under variable accounting method. Stock option transactions during 1998, 1999, and 2000 are summarized as follows:
Number of Average Options/ Option Price Shares Per Share ------- -------- Balance, December 31, 1997 475,556 $ 2.62 Granted 530,000 6.72 Canceled (19,556) 3.25 Exercised (56,500) 3.06 ------- -------- Balance, December 31, 1998 929,500 $ 4.92 Granted 50,000 5.88 Canceled (69,166) 5.98 Exercised (143,000) 2.31 ------- -------- Balance, December 31, 1999 767,334 $ 5.37 Granted 100,000 6.72 Canceled (239,000) 2.77 Exercised (133,334) 6.63 ------- -------- Balance, December 31, 2000 495,000 $ 1.28 ======= ========
11. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
As of December 31, 2000, 1999, and 1998, respectively, 351,666, 398,445, and 337,500, of these options were exercisable.
The following table summarizes information about fixed stock options outstanding as of December 31, 2000:
Options outstanding: Range of exercise prices $0.25-$2.26 Number outstanding, December 31, 2000 495,000 Weighted-average exercise price $1.28
Options exercisable: Range of exercise prices $0.25-$1.81 Number exercisable, December 31, 2000 351,666 Weighted-average exercise price $0.98
The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. The fair value of each option grant is estimated on the date of the grant using an option-pricing model that computes the value of employee stock options consistent with FASB SFAS No.123. The following weighted-average assumptions were used for grants in 2000, 1999, and 1998, no dividend yield; expected lives of three years for the management plan and eight years for the director plan options; shorter-term adjustment of six years; expected volatility of 47% for all years; and risk-free interest rates of 5.46%, 6.48%, and 5.16%, respectively. The weighted-average fair market value per share of options granted during 2000, 1999, and 1998 was $0.74, $2.54, and $1.86, respectively.
12. PROFIT SHARING AND 401(k) PLAN
The Company adopted the PLM International, Inc. Profit Sharing and 401(k) Plan (the Plan) effective as of February 1996. 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 in the United States. In 2000, employees who participated in the Plan could elect to defer and contribute to the trust established under the Plan up to 9% of pretax salary or wages up to $10,500. The Company matched up to a maximum of $4,000 of employees' 401(k) contributions in 2000, 1999, and 1998 to vest in four equal installments over a four-year period. The Company's total 401(k) contributions, net of forfeitures, were $0.3 million for 2000, 1999, and 1998, respectively.
During 2000, 1999, and 1998, the Company accrued discretionary profit-sharing contributions. Profit-sharing contributions are allocated equally among the number of eligible Plan participants. The Company's total profit-sharing expense was $0.1 million for 2000, 1999, and 1998.
13. TRANSACTIONS WITH AFFILIATES
In addition to various fees payable to the Company or its subsidiaries (refer to Note 1), the affiliated programs reimburse the Company for certain expenses, as allowed in the program agreements. Reimbursed expenses totaling $2.6 million, $2.3 million, and $3.1 million in 2000, 1999, and 1998, respectively, have been recorded as reductions of operations support or general and administrative expenses. Outstanding amounts are paid under normal business terms.
14. RISK MANAGEMENT
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and receivables from affiliated entities.
The Company places its temporary cash investments with financial institutions and other creditworthy issuers and limits the amount of credit exposure to any one party. The Company's involvement with the management of the receivables from affiliated entities limits the credit exposure from affiliated entities.
No single customer of the Company accounted for more than 10% of revenues for the years ended December 31, 2000, 1999, or 1998. As of December 31, 2000 and 1999, management believes the Company had no significant concentrations of credit risk that could have a material adverse effect on the Company's business, financial condition, or results of operations.
15. OPERATING SEGMENTS
16. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations follow:
Revenues from continuing operations for the years ended December 31, 2000, 1999, and 1998 are as follows (in thousands of dollars):
2000 1999 1998 ------- ------- -------
Domestic $11,551 $11,584 $16,846 International -- -- 1,953 ------- ------- ------- Total revenues $11,551 $11,584 $18,799 ======= ======= =======
Long-lived assets from continuing operations as of December 31, 2000, 1999, and 1998 are as follows (in thousands of dollars):
2000 1999 1998 ------- ------- -------
Domestic $18,897 $22,483 $26,515 International 73 535 814 ------- ------- ------- Total long-lived assets $18,970 $23,018 $27,329 ======= ======= =======
International operations are comprised primarily of international leasing, brokerage, and other activities conducted primarily through the Company's subsidiaries operated in Bermuda, Canada, and Australia (Australian operations were sold in August 1998).
17. ESTIMATED FAIR VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS
The Company estimates the fair value of it's financial instruments based on recent similar transactions the Company has entered into. The estimated fair values of the Company's financial instruments are as follows as of December 31 (in thousands of dollars):
2000 1999 ------------------ ------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------- ------- ------- ------- Financial assets: Restricted cash (Note 5) $ 2,530 $ 2,530 $ 1,766 $ 1,766 Financial liabilities: Senior secured notes (Note 8) -- -- 20,679 20,679
18. QUARTERLY RESULTS OF OPERATIONS (unaudited)
18. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
During 2000, the Company recorded a gain of $5.0 million from disposition of discontinued operations.
19. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.3 million charge, net of tax of $0.1 million, related to start-up costs of its commercial and industrial equipment operations which is being accounted for as discontinued operations.
20. SUBSEQUENT EVENTS
On February 7, 2001, PLM International, announced that MILPI Acquisition Corp. (MILPI) 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 will complete its acquisition of PLM International by effecting a merger of MILPI into PLM International under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Concurrent with the conclusion of the tender offer, the $1.7 million in restricted cash held in an escrow account was released to the Company.
20. SUBSEQUENT EVENTS (continued)
During the first quarter of 2001, the Company sold marine containers of $10.3 million that were classified as assets held for sale as of December 31, 2000 to affiliated programs at cost, which approximated their fair market value.
In March 2001, the Internal Revenue Service notified the Company that it would conduct an audit regarding the Company's tax withholding of payments to foreign entities. The audit is scheduled to begin in June 2001 and relates to two partnerships in which the Company formerly held interests as the 100% direct and indirect owner. One audit relates to the years between 1997 and 1999, while the other audit relates to the years 1998 and 1999. Management believes that the positions taken on the withholding tax returns will be upheld by the Internal Revenue Service upon audit. If the Company's position is not upheld by the Internal Revenue Service, the foreign entities are legally obligated to indemnify the Company for any losses. If the Internal Revenue Service does not uphold the Company's position and the foreign entities do not honor the indemnification, the Company's financial condition, results of operations, and liquidity would be materially impacted.
SCHEDULE II
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors and Shareholders PLM International, Inc.
Under date of March 12, 2001, we reported on the consolidated balance sheets of PLM International, Inc. and subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2000, which are included in Form 10-K. Such report notes that on February 7, 2001 MILPI Acquisition Corp. completed its cash tender offer for the outstanding common stock of the Company. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule, Valuation and Qualifying Accounts, in Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement (No. 33-379145) on Form S-8 of PLM International, Inc. of our reports dated March 12, 2001 and March 28, 2001, relating to the consolidated balance sheets of PLM International, Inc. as of December 31, 2000, and 1999, and the related consolidated statements of income, changes in stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2000, and related schedule, which report appears in the December 31, 2000, annual report on Form 10-K of PLM International, Inc.
San Francisco, California March 28, 2001 /s/ KPMG LLP
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Stephen M. Bess, Richard K Brock and Susan Santo, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM International, Inc. to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM International, Inc., including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 2001 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 2000.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 5th day of March, 2001.
/s/ Robert N. Tidball --------------------------- Robert N. Tidball
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Stephen M. Bess, Richard K Brock and Susan Santo, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM International, Inc. to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM International, Inc., including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 2001 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 2000.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 5th day of March, 2001.
/s/ James A. Coyne --------------------------- James A. Coyne
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Stephen M. Bess, Richard K Brock and Susan Santo, jointly and severally, his true and lawful attorneys-in-fact, each with power of substitution, for him in any and all capacities, to do any and all acts and things and to execute any and all instruments which said attorneys, or any of them, may deem necessary or advisable to enable PLM International, Inc. to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and regulations thereunder, in connection with the preparation and filing with the Securities and Exchange Commission of annual reports on Form 10-K on behalf of PLM International, Inc., including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in any and all capacities, to such annual reports, to any and all amendments thereto, and to any and all documents or instruments filed as a part of or in connection therewith; and the undersigned hereby ratifies and confirms all that each of the said attorneys, or his substitute or substitutes, shall do or cause to be done by virtue hereof. This Power of Attorney is limited in duration until May 1, 2001 and shall apply only to the annual reports and any amendments thereto filed with respect to the fiscal year ended December 31, 2000.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 5th day of March, 2001.
/s/ Gary Engle --------------------------- Gary Engle