<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7543
GREYHOUND FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-1278569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
DIAL CORPORATE CENTER, PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602/207-6900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, (or such shorter period that the
Registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 5, 1994, 25,000 shares of Common Stock ($1.00 par value) were
outstanding. All the Common Stock of Greyhound Financial corporation is owned
by GFC Financial Corporation.
<PAGE> 2
GREYHOUND FINANCIAL CORPORATION
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION.
<TABLE>
Page No.
--------
<S> <C>
Item 1. Financial Statements.
Consolidated Financial Information:
Consolidated Balance Sheet - June 30, 1994 and
December 31, 1993 1 - 2
Consolidated Income Statement - Quarter and Six Months
Ended June 30, 1994 and 1993 3
Consolidated Statement of Stockholder's Equity - Six Months
Ended June 30, 1994 and 1993 4
Consolidated Statement of Cash Flows - Six Months Ended
June 30, 1994 and 1993 5
Notes to Interim Consolidated Financial Information 6 - 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17 - 20
</TABLE>
Part II OTHER INFORMATION.
<TABLE>
<S> <C>
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - - -----------------------------
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
-------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
ASSETS
------
(Dollars in Thousands)
June 30, December 31,
1994 1993
------------ -----------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 26,446 $ 2,859
INVESTMENT IN FINANCING TRANSACTIONS:
Loans and other financing contracts, less unearned
income of $241,030 and $72,747, respectively 3,629,612 2,343,755
Direct financing leases 693,447 71,812
Operating leases 351,683 147,222
Leveraged leases 286,225 283,782
Factored receivables 152,838
---------- ----------
5,113,805 2,846,571
Less reserve for possible credit losses (115,469) (64,280)
---------- ----------
Investment in financing transactions - net 4,998,336 2,782,291
OTHER ASSETS AND DEFERRED CHARGES 196,037 49,747
---------- ----------
$5,220,819 $2,834,897
========== ==========
</TABLE>
See notes to interim consolidated financial information.
1
<PAGE> 4
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
-------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
(Dollars in Thousands)
June 30, December 31,
1994 1993
--------------- -----------------
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 153,433 $ 30,158
Due to Parent 130,760
Customer deposits 2,687 3,064
Due to factored clients 115,624
Interest payable 28,452 23,633
Short-term debt 501 510
Senior debt 3,963,223 1,991,986
Subordinated debt 86,790
Deferred income taxes 210,254 197,705
---------- ----------
4,474,174 2,464,606
---------- ----------
REDEEMABLE PREFERRED STOCK 25,000
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value, 100,000 shares
authorized, 25,000 shares outstanding 25 25
Additional capital 677,948 298,665
Retained income 74,275 54,374
Cumulative translation adjustments (5,603) (7,773)
---------- ----------
746,645 345,291
---------- ----------
$5,220,819 $2,834,897
========== ==========
</TABLE>
See notes to interim consolidated financial information.
2
<PAGE> 5
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
-------------------------------
CONSOLIDATED INCOME STATEMENT
-----------------------------
(Dollars in Thousands)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------- -------------------------------
1994 1993 1994 1993
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Interest and other income $ 91,929 $ 55,394 $ 157,531 $ 106,796
Financing lease income 15,863 4,302 19,592 8,901
Operating lease income 14,099 4,252 18,729 7,765
-------- -------- --------- ---------
Interest earned from financing
transactions 121,891 63,948 195,852 123,462
Interest expense 53,648 31,423 87,510 61,991
Operating lease expense 8,324 1,592 10,281 2,844
-------- -------- --------- ---------
Interest margins earned 59,919 30,933 98,061 58,627
Provision for possible losses 4,888 827 8,138 3,528
-------- -------- --------- ---------
Net interest margins earned 55,031 30,106 89,923 55,099
Gains on securitization and
sale of assets 4,500 179 4,503 2,240
-------- -------- --------- ---------
59,531 30,285 94,426 57,339
Selling, administrative and other
operating expenses 28,964 14,195 45,205 27,833
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 30,567 16,090 49,221 29,506
Income taxes 13,050 5,767 20,108 10,638
-------- -------- --------- ---------
NET INCOME $ 17,517 $ 10,323 $ 29,113 $ 18,868
======== ======== ========= =========
</TABLE>
See notes to interim consolidated financial information.
3
<PAGE> 6
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
-------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
----------------------------------------------
(Dollars in Thousands)
Six Months Ended
June 30,
-------------------------------
1994 1993
---------- ----------
<S> <C> <C>
COMMON STOCK:
Balance, beginning and end of period $ 25 $ 25
--------- ---------
ADDITIONAL CAPITAL:
Balance, beginning of period 298,665 298,665
Contributions from GFC Financial Corporation 379,283
--------- ---------
Balance, end of period 677,948 298,665
--------- ---------
RETAINED INCOME:
Balance, beginning of period 54,374 33,783
Net income 29,113 18,868
Dividends on common and preferred stock (9,212) (7,525)
--------- ---------
Balance, end of period 74,275 45,126
--------- ---------
CUMULATIVE TRANSLATION ADJUSTMENTS:
Balance, beginning of period (7,773) (6,685)
Unrealized translation gain 2,170 53
--------- ----------
Balance, end of period (5,603) (6,632)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY $ 746,645 $ 337,184
========= =========
</TABLE>
See notes to interim consolidated financial information.
4
<PAGE> 7
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
-------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Dollars in Thousands)
Six Months Ended
June 30,
---------------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 29,113 $ 18,868
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Provision for possible credit losses 8,138 3,528
Operating lease depreciation 10,281 2,844
Other depreciation and amortization 3,174 1,270
Gain on securitization of assets (3,959)
Gains on sale of assets (544) (2,240)
Deferred income taxes 12,549 2,965
Change in assets and liabilities, net of effects from
subsidiaries purchased:
Increase in other assets (14,624) (13,141)
Decrease in accounts payable and accrued expenses (59,041) (326)
Decrease in customer deposits (398) (1,966)
Increase (decrease) in interest payable 4,819 (6,266)
Other 2,170 53
---------- ----------
Net cash (used) provided by operating activities (8,322) 5,589
---------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of assets 3,100 2,482
Proceeds from assets securitized 115,507
Principal collections on financing transactions 426,449 279,954
Expenditures for financing transactions (611,146) (351,656)
Net change in short-term financing transactions (87,512)
Purchase of Asset Based Finance (69,808)
Purchase of Ambassador Factors (246,285)
Purchase of TriCon (344,212)
Net related party advances 21,204
Other 672 24
---------- ----------
Net cash used by investing activities (743,427) (117,800)
---------- ----------
FINANCING ACTIVITIES:
Long-term borrowings 827,550 298,648
Net borrowings under commercial paper 456,184 85,633
Repayment of long-term borrowings (743,443) (268,628)
Net advances and contributions from Parent 228,980
Dividends (9,212) (7,525)
Net change in due to factored clients 15,277
---------- ----------
Net cash provided by financing activities 775,336 108,128
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,587 (4,083)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,859 19,120
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,446 $ 15,037
========== ==========
</TABLE>
See notes to interim consolidated financial information.
5
<PAGE> 8
GREYHOUND FINANCIAL CORPORATION
-------------------------------
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
---------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
-----------------------------------------------
NOTE A SIGNIFICANT ACCOUNTING POLICIES
- - - ----------------------------------------
The consolidated financial statements present the financial position,
results of operations and cash flows of Greyhound Financial Corporation ("GFC"
or the "Company") and subsidiaries, including the European Financial Group,
Ambassador Factors Corporation (formerly known as Fleet Factors Corp.)
("Ambassador") acquired on February 14, 1994 and TriCon Capital ("TriCon")
acquired on April 30, 1994. GFC is a wholly-owned subsidiary of GFC Financial
Corporation ("GFC Financial" or "GFCFC").
This information should be read in connection with the financial
statements set forth in the GFC Annual report for the year ended December 31,
1993 heretofore filed with the Commission as Annex "A" to the Registrant's
Annual Report on Form 10-K. The accounting policies utilized in the
preparation of the financial information herein are the same as set forth in
such Annual Report, as modified for interim accounting policies which are
within the guidelines set forth in Accounting Principles Board Opinion No. 28.
The Financial Accounting Standards Board ("FASB") has issued a new
accounting standard, Statement of Financial Accounting Standards ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"). This
standard requires that impaired loans that are within the scope of this
statement generally be measured based on the present value of expected cash
flows discounted at the loan's effective interest rate or the fair value of the
collateral, if the loan is collateral dependent. Under SFAS 114, a loan is
considered impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due. Presently,
the reserve for possible credit losses represents management's estimate of the
amount necessary to cover potential losses in the portfolio considering
delinquencies, loss experience and collateral. The impact of the new standard,
which is effective for fiscal years beginning after December 15, 1994, has not
yet been determined.
Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". Analogous to SFAS No. 106
for postretirement benefits, this standard requires companies to accrue for
estimated future postemployment benefits during the periods when employees are
working. Postemployment benefits are any benefits other than retirement
benefits that are provided after employment is discontinued. The adoption of
the new standard did not have a material impact on the Company's financial
position or results of operations.
The interim consolidated financial information is unaudited. In the
opinion of management all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the financial position as of June 30,
1994, the results of operations for the six months ended June 30, 1994 and 1993
and cash flows for the six months ended June 30, 1994 and 1993, have been
included. Interim results of operations are not necessarily indicative of the
results of operations for the full year.
6
<PAGE> 9
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
During the six months ended June 30, 1994, GFC Financial contributed
$127,716,000 of intercompany loans and other assets and $25,000,000 of
preferred stock to GFC as additional paid in capital.
NOTE B PORTFOLIO QUALITY
- - - --------------------------
The following table presents a breakdown (by line of business) of the
Company's investment in financing transactions before the reserve for possible
credit losses at the dates indicated.
7
<PAGE> 10
<TABLE>
<CAPTION>
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
JUNE 30, 1994
(Dollars in Thousands)
Revenue Accruing Nonaccruing
---------------------------------------------------- ---------------------------------
Repos- 90 Days Repos-
Original Rewritten Operating sessed Delin- sessed
Rate Contracts Leases Assets(3) quent Assets Other
----------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial Real Estate Finance $ 611,586 $ 5,907 $ $ 28,586 $ 1,004 $27,976 $
Transportation Finance (1) 458,508 14,127 169,940
Resort Finance 582,259 4,231 538 12,662 20,110 143
Communications Finance 565,251 6,188 8,976 7,264 28,348
Corporate Finance 220,932 26,291 6,882 3,881 3,002 310
Asset Based Finance 228,504
Consumer Rediscounting 40,390
European Finance (2) 87,600 2,099 4,533 22,248 10
Ambassador Factors 331,490 10,734 1 ,964
Medical Finance 306,798 151,586 2,623
Franchise Finance 272,211 4,239 13,229
Commercial Equipment Finance 239,772 975 25,086 9,688
Vendor Services 216,618 23,009
Commercial Credit Services 208,933 836
Government Finance 71,858 451
Capital Services 11,206 10,213
----------- -------- -------- --------- -------- ------- -----
TOTAL (4) $4,453,916 $ 64,057 $351,683 $ 57,106 $105,180 $81,410 $ 453
=========== ======== ======== ========= ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Total
Carrying
Amount %
------------ -----
<S> <C> <C>
Commercial Real Estate Finance $ 675,059 13.2
Transportation Finance (1) 642,575 12.6
Resort Finance 619,943 12.1
Communications Finance 616,027 12.0
Corporate Finance 261,298 5.1
Asset Based Finance 228,504 4.5
Consumer Rediscounting 40,390 0.8
European Finance (2) 116,490 2.3
Ambassador Factors 344,188 6.7
Medical Finance 461,007 9.0
Franchise Finance 289,679 5.7
Commercial Equipment Finance 275,521 5.4
Vendor Services 239,627 4.7
Commercial Credit Services 209,769 4.1
Government Finance 72,309 1.4
Capital Services 21,419 0.4
---------- -----
TOTAL(4) $5,113,805 100.0
========== =====
</TABLE>
NOTES:
(1) Domestic Transportation Finance includes $46.4 million of new aircraft
finance business booked through the London office. In addition,
operating leases include certain aircraft and engines having a carrying
amount of $52.2 million that were combined as one transaction pursuant
to a participation agreement with an engine and hushkitting company.
(2) European Finance includes $42.5 million of Consumer Finance assets, of
which $8.2 million are nonaccruing. Consumer Finance accounts are
generally considered nonaccruing after being 180 days delinquent.
(3) The Company earned income totaling $1.8 million on repossessed assets
during 1994, including $0.9 million in Commercial Real Estate Finance,
$0.4 million in Communications Finance, $0.4 million in Resort Finance
and $0.1 million in Corporate Finance.
(4) Excludes $345.8 million of assets securitized which the Company manages.
8
<PAGE> 11
<TABLE>
<CAPTION>
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 1993
(Dollars in Thousands)
Revenue Accruing Nonaccruing
-------------------------------------------------- ---------------------------
Repos- 90 Days Repos-
Original Rewritten Operating sessed Delin- sessed
Rate Contracts Leases Assets(4) quent Assets Other
-------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial Real Estate Finance (1) $ 500,598 $ 1,574 $ $27,844 $ 1,055 $25,542 $
Transportation Finance (1) (2) 457,741 146,675 841
Resort Finance 530,070 4,869 547 12,163 19,001 440
Communications Finance 487,890 7,989 8,949 8,264 25,030
Corporate Finance (1) 221,711 27,921 2,277 7,428 386
Asset Based Finance 176,068
Consumer Rediscounting 19,439
European Finance (3) 107,486 4,430 12,320 23
---------- ------- -------- ------- ------- ------- ----
TOTAL $2,501,003 $46,783 $147,222 $48,956 $24,757 $77,024 $826
========== ======= ======== ======= ======= ======= ====
</TABLE>
<TABLE>
<CAPTION>
Total
Carrying
Amount %
---------------------
<S> <C> <C>
Commercial Real Estate Finance (1) $ 556,613 19.6
Transportation Finance (1) (2) 605,257 21.2
Resort Finance 567,090 19.9
Communications Finance 538,122 18.9
Corporate Finance (1) 259,723 9.1
Asset Based Finance 176,068 6.2
Consumer Rediscounting 19,439 0.7
European Finance (3) 124,259 4.4
---------- -----
TOTAL $2,846,571 100.0
========== =====
</TABLE>
NOTES:
(1) Reclassifications (effective January 1, 1993): Approximately $169
million of accruing assets were reclassified from Corporate Finance
with $163 million going to Transportation Finance because they
primarily represented aircraft financing and $6 million to Commercial
Real Estate Finance. Additionally, $6.5 million of nonaccruing assets
($5.1 million classified as repossessed assets and $1.4 million
classified as 90 days delinquent) were reclassified from Corporate
Finance to Commercial Real Estate Finance.
(2) Domestic Transportation Finance includes $31.9 million of new aircraft
finance business booked through the London office. In addition,
operating leases include certain aircraft and engines having a
carrying amount of $53.0 million that were combined as one transaction
pursuant to a participation agreement with an engine and hushkitting
company.
(3) European Finance includes $45.3 million of Consumer Finance assets, of
which $9.6 million are nonaccruing. Consumer Finance accounts are
generally considered nonaccruing after being 180 days delinquent.
(4) The Company earned income totaling $2.7 million on repossessed
accruing assets during 1993, including $1.5 million in Commercial Real
Estate Finance, $0.6 million in Communications Finance and $0.6
million in Resort Finance.
9
<PAGE> 12
REWRITTEN CONTRACTS:
In the normal course of business, the Company has renegotiated certain
contracts and has modified them with respect to rates and other terms. At June
30, 1994 and December 31, 1993, the Company had approximately $64.1 million and
$46.8 million, respectively, of these rewritten contracts requiring disclosure
under the provisions of SFAS No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructurings". These contracts are all current under the
revised terms and yield on a weighted average basis a return of approximately
10.3%.
NONACCRUING ASSETS:
Income recognition on an account is suspended and the account generally
is classified as nonaccruing at the earlier of the date when an account is 90
days or more past due (180 days for Consumer Finance contracts in the United
Kingdom) or when, in the opinion of management, a full recovery of income and
principal becomes doubtful. Payments (full or partial) are currently being
received on some of these accounts; however, income generally is not recognized
until performance is demonstrated to be resumed.
Total nonaccruals increased to $187.0 million at June 30, 1994 from
$102.6 million at December 31, 1993. This increase primarily is due to the
inclusion of nonaccruing assets of TriCon ($60 million) and Ambassador ($14.7
million). The total at June 30, 1994 represented 3.4% of funds employed and
assets securitized ("managed assets") compared to 3.6% of funds employed at
December 31, 1993.
RESERVE AND ACCRUED LIABILITIES FOR POSSIBLE CREDIT LOSSES:
The reserve and accrued liabilities for possible credit losses of
$134.2 million at June 30, 1994 represents 2.5% of the aggregate carrying
amount of managed assets before deducting such reserve. Accrued liabilities of
$18.7 million represent an allowance for estimated losses under certain
recourse provisions on $345.8 million of assets securitized. Changes in the
reserve for possible credit losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1994 1993
--------------------------------
(Dollars in Thousands)
<S> <C> <C>
Balance, beginning of period $ 64,280 $ 69,291
Provision for possible credit losses 8,138 3,528
Write-offs (12,021) (6,672)
Recoveries 668 104
Other (including TriCon and Ambassador) 54,404 1,261
--------- --------
Balance, end of period $ 115,469 $ 67,512
========= ========
</TABLE>
The Company believes that collateral values significantly reduce its
loss exposure and that the reserve for possible credit losses is adequate.
10
<PAGE> 13
NOTE C RECEIVABLE TRANSFER AGREEMENTS (SECURITIZATIONS)
- - - ---------------------------------------------------------
During the six months ended June 30, 1994, the Company transferred its
interests in approximately $125.4 million of its direct finance lease portfolio
for $135.0 million. These transfers provide limited recourse for credit losses
to the Company and certain of its assets. As of June 30, 1994, $60.5 million
of finance lease receivables are the sole collateral for certain limited
recourse provisions. In addition to such finance lease receivables, the
Company has recourse exposure limited to $95.9 million. An outstanding
allowance for estimated losses under these recourse provisions of $18.7 million
is included in accounts payable and accrued expenses. The Company will service
these lease contracts for the transferee and has deferred a portion of the
proceeds to be recognized as service fee income over the term of the
agreements.
NOTE D BORROWINGS
- - - -------------------
At June 30, 1994 and December 31, 1993, commercial paper and
short-term bank borrowings totaling $972 million and $516 million,
respectively, have been presented as long-term debt because they are supported
by available unused revolving credit lines which if not renewed are convertible
to long-term debt at GFC's option.
Senior and subordinated debt was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
--------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Senior debt:
Commercial paper and short-term bank loans
supported by unused long-term bank revolving credit
agreements, less unamortized discount $ 972,061 $ 515,876
Medium-term notes due to 2003, 4.6% to 12.5% 1,303,686 751,500
Term loans payable to banks due to 1996, 4.2% 129,665 150,000
Loan payable to Bell Atlantic due December 31, 1994 307,071
Senior notes due to 2002, 8.3% to 16.0%, less
unamortized discount 1,232,651 555,666
Nonrecourse installment notes due to 2002, 10.6%
(assets of $25,189 and $25,613, respectively,
pledged as collateral) 18,089 18,944
----------- -----------
Total senior debt 3,963,223 1,991,986
----------- -----------
Subordinated debt repaid in 1994, 14.1% 86,790
----------- -----------
TOTAL $ 3,963,223 $ 2,078,776
=========== ===========
</TABLE>
11
<PAGE> 14
NOTE E INCOME TAXES
- - - ---------------------
The federal statutory income tax rate is reconciled to the effective
income tax rate as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1994 1993
------ ------
<S> <C> <C>
Federal statutory income tax rate 35.0% 34.0%
State income tax 5.0% 3.6%
Foreign tax effects 1.5% (0.9)%
Other (0.6)% (0.6)%
------ ------
Provision for income taxes 40.9% 36.1%
====== ======
</TABLE>
NOTE F RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK
- - - ----------------------------------------------------------------------
DIVIDENDS
---------
The following are the ratios of income to combined fixed charges and
preferred stock dividends for the six months ended June 30, 1994 and 1993 and
the years ended December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------- ---------------------------
1994 1993 1993 1992 1991
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Ratio of income to combined fixed charges
and preferred stock dividends 1.55 1.44 1.47 1.35 --
==== ==== ==== ===== =======
</TABLE>
Note: Preferred stock dividends are included in periods subsequent
to March 1992 through March 31, 1994.
Variations in interest rates generally do not have a substantial impact
on the ratio because fixed-rate and floating-rate assets are generally matched
with liabilities of similar rate and term.
Income available for fixed charges, for purposes of the computation of
the ratio of income to combined fixed charges and preferred stock dividends,
consists of the sum of income before income taxes (adjusted for the effect of
reduced tax rates on income from leveraged leases) and fixed charges. Combined
fixed charges include interest and related debt expense and a portion of rental
expense determined to be representative of interest and preferred stock
dividends grossed up to a pre-tax basis.
For the year ended December 31, 1991, earnings were inadequate to cover
combined fixed charges by $35.3 million. The decline in the ratio in 1991 was
due to restructuring and other charges and transaction costs recorded in the
fourth quarter of 1991. Those charges and costs were recorded in connection
with the spin-off of the Company from The Dial Corp in March 1992.
12
<PAGE> 15
NOTE G PURCHASES OF AMBASSADOR FACTORS AND TRICON CAPITAL CORPORATION
- - - -----------------------------------------------------------------------
On February 14, 1994, GFC acquired Ambassador from Fleet Financial
Group, Inc. ("Fleet"). The cash purchase price of the acquisition was
$246,285,000 and represented Ambassador's stockholder's equity, including a
premium ($76,285,000), and repayment of the intercompany balance due from
Ambassador to Fleet ($170,000,000). In addition, GFC assumed $100,348,000 due
to factored clients, $928,000 of accrued liabilities and $8,800,000 of
additional liabilities and transaction costs. The acquisition has been
accounted for as a purchase and created approximately $30,400,000 of goodwill,
which will be amortized on a straight line basis over 20 years.
The acquisition was financed with proceeds received from the sale of
GFC Financial's discontinued mortgage insurance subsidiary and cash generated
from operations. GFC Financial, simultaneous with the acquisition, increased
its investment in GFC by contributing $40,000,000 of intercompany loans as
additional paid in capital of GFC.
On April 30, 1994, GFC acquired all of the stock of TriCon from Bell
Atlantic Corporation ("Bell Atlantic"), in an all-cash transaction. The cash
purchase price of the acquisition was $344,212,000. In addition, GFC assumed
outstanding indebtedness and liabilities of TriCon totaling $1,500,650,000 and
incurred additional liabilities and acquisition costs of $7,500,000. The
acquisition has been accounted for as a purchase and created approximately
$69,817,000 of goodwill, which will be amortized on a straight line basis over
20 years.
The cash purchase price was financed initially with the proceeds from
the issuance of $300,000,000 of debt securities of GFC and the remainder with
internally generated funds. A portion of the interim debt was replaced with
the net proceeds from a public offering in May 1994 of 8,050,000 shares of GFC
Financial's common stock (the "Offering"), which, together with cash, the
outstanding preferred stock of GFC held by GFC Financial and the remaining
intercompany loans from GFC Financial to GFC were contributed as additional
paid in capital of GFC (the "Contributions").
The following Pro Forma Statements of Consolidated Income for the six
months ended June 30, 1994 and 1993 have been prepared to reflect net income as
adjusted to reflect the acquisitions of Ambassador and TriCon as if such
acquisitions had occurred on January 1, 1994 and 1993, respectively and give
effect to the Offering and Contributions as of such dates. The Pro Forma
Statements of Consolidated Income are unaudited and are not necessarily
indicative of the results that would have occurred if such acquisitions had
been consummated as of January 1, 1994 or January 1, 1993, nor are they
necessarily indicative of the results of future operations.
13
<PAGE> 16
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1994
(Dollars in Thousands)
Historical
-----------------------------------------------------------------------
Company Ambassador TriCon TriCon
Excluding Feb thru May and Ambassador Jan thru
Ambassador June June Company Jan 1994 April
& TriCon (1) 1994 (1) 1994 (1) (1) (1) 1994 (1)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned from
financing transactions $143,620 $16,309 $35,923 $195,852 $3,072 $75,566
Interest expense and
depreciation 76,166 2,868 18,757 97,791 563 37,711
-------- ------- ------- -------- ------ -------
Interest margins earned 67,454 13,441 17,166 98,061 2,509 37,855
Provision for possible
credit losses 2,941 2,500 2,697 8,138 500 7,749
-------- ------- ------- -------- ------ -------
Net interest margins
earned 64,513 10,941 14,469 89,923 2,009 30,106
Gains on sale of assets 4 4,499 4,503
-------- ------- ------- -------- ------ -------
64,517 10,941 18,968 94,426 2,009 30,106
Selling, administrative
and other operating
expenses 30,132 3,706 11,367 45,205 634 18,198
-------- ------- ------- -------- ------ -------
34,385 7,235 7,601 49,221 1,375 11,908
Income taxes 14,399 2,861 2,848 20,108 649 4,059
-------- ------- ------- -------- ------ -------
NET INCOME $ 19,986 $ 4,374 $ 4,753 $ 29,113 $ 726 $ 7,849
======== ======= ======= ======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------
Ambassador TriCon Pro
(1) (1) Forma
----------------------------------- -----------
<S> <C> <C> <C>
Interest earned from
financing transactions $ $ (3,158)(7) $ 271,832
500 (8)
Interest expense and
depreciation 131 (2) 940 (9) 137,136
------ -------- ----------
Interest margins earned (131) (3,598) 134,696
Provision for possible
credit losses 16,387
------ --------- ----------
Net interest margins
earned (131) (3,598) 118,309
Gains on sale of assets 4,503
------ --------- ----------
(131) (3,598) 122,812
Selling, administrative
and other operating expenses 206 (3) 1,164 (10) 65,743
83 (4) 253 (8)
------ --------- ----------
(420) (5,015) 57,069
Income taxes (168) (5) (2,006) (11) 22,543
(99) (6)
------ --------- ----------
NET INCOME $(153) $(3,009) $ 34,526
====== ========= ==========
</TABLE>
<PAGE> 17
GREYHOUND FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical
----------------------------------------------
Company Ambassador TriCon
----------------------------------------------
<S> <C> <C> <C>
Interest earned from
financing transactions $ 123,462 $ 19,075 $ 115,887
Interest expense and
depreciation 64,835 3,280 62,069
--------- --------- ----------
Interest margins earned 58,627 15,795 53,818
Provision for possible credit
losses 3,528 3,400 14,990
--------- --------- ----------
Net interest margins earned 55,099 12,395 38,828
Gains on sale of assets 2,240
--------- --------- ----------
57,339 12,395 38,828
Selling, administrative and other
operating expenses 27,833 4,145 24,105
--------- --------- ----------
29,506 8,250 14,723
Income taxes 10,638 3,922 5,303
--------- --------- ----------
Income from continuing operations 18,868 4,328 9,420
Cumulative effect of changes in
accounting principles 480 5,763
---------- ---------- ----------
NET INCOME $ 18,868 $ 4,808 $ 15,183
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
GREYHOUND FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1993
(Dollars in Thousands)
Pro Forma Adjustments
--------------------------------------------------
Pro
Ambassador TriCon Forma
-------------------------------------------------- -----------------
Interest earned from <C> <C> <C> <C> <C>
financing transactions $ $ (2,325) (7) $ 256,849
750 (8)
Interst expense and 2,113 (2) 2,294 (9) 134,591
depreciation --------------- ------------ --------------
Interest margins earned (2,113) (3,869) 122,258
Provision for possible credit
losses 21,918
--------------- ------------ --------------
Net interest margins earned (2,113) (3,869) 100,340
Gains on sale of asset 2,240
--------------- ------------ --------------
(2,113) (3,869) 102,580
Selling, administrative and other
operating expenses 1,235 (3) 1,746 (10) 59,943
500 (4) 379 (8)
--------------- ------------ --------------
(3,848) (5,994) 42,637
Income taxes (1,539) (5) (2,398) (11) 15,434
(492) (6)
--------------- ------------ --------------
Income from continuing operations (1,817) (3,596) 27,203
Cumulative effect of changes in
accounting principles 6,243
--------------- ------------ --------------
NET INCOME $ (1,817) $ (3,596) $ 33,446
=============== ============ ==============
</TABLE>
<PAGE> 18
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) The Pro Forma Statement of Consolidated Income for the six months
ended June 30, 1994 has been expanded to separately identify the
operations of Ambassador and TriCon subsequent to their acquisition by
the Company. Pro forma adjustments included in the Pro Forma
Statement of Consolidated Income for the six months ended June 30,
1994 related to the acquisitions of Ambassador and TriCon represent
the effect of the one month and four months, respectively, not
included in the Company's historical financial statements.
ACQUISITION OF AMBASSADOR
(2) To record the estimated interest expense ($131,000 - 1994; $2,113,000
- 1993) arising from the debt incurred to fund the acquisition and the
repayment of the intercompany payable due to Fleet. The 1994
adjustment is partially offset by interest saved as a result of the
$40,000,000 of intercompany loans from GFC Financial to GFC
contributed as additional paid in capital of GFC in connection with
the acquisition of Ambassador.
(3) To record amortization of goodwill ($206,000 - 1994; $1,235,000 -
1993) based on an amortization period of twenty years and amortization
of the covenant not to compete over one year (see Note (12)).
(4) To record administrative expenses for additional employees and general
overhead ($83,000 - 1994; $500,000 - 1993).
(5) To record the income tax effect ($168,000 - 1994; $1,539,000 - 1993)
of Notes (2), (3), and (4) at the Company's effective incremental
income tax rate of 40%.
(6) To adjust income taxes for the lower state income tax rate applicable
to the Company ($99,000 - 1994; $492,000 - 1993).
ACQUISITION OF TRICON
(7) To reduce interest earned from financing transactions for the income
recorded on assets not purchased by the Company in 1994 and 1993
($3,158,000 - 1994; $2,325,000 - 1993).
(8) To reflect base fees ($500,000 - 1994; $750,000 - 1993) and
incremental costs ($253,000 - 1994; $379,000 - 1993) related to an
agreement to manage leveraged leases for Bell Atlantic by TriCon.
(9) To record interest expense ($940,000 - 1994; $2,294,000 - 1993)
resulting from the additional debt issued to purchase TriCon and
certain debt to Bell Atlantic incurred to fund the deferred tax
payment and dividends reduced by the interest savings applicable to
the debt not transferred in the TriCon acquisition and interest
savings as a result of the equity contribution of the intercompany
loans.
(10) To record amortization of goodwill ($1,164,000 - 1994; $1,746,000 -
1993) based on an amortization period of twenty years (see Note (12)).
(11) To record the income tax effect ($2,006,000 - 1994; $2,398,000 - 1993)
of Notes (7) through (10) at the Company's effective incremental
income tax rate of 40%.
(12) Goodwill may be adjusted as the final allocation of the values of the
purchased assets and liabilities is established.
16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1994
TO THE SIX MONTHS ENDED JUNE 30, 1993
The following discussion relates to Greyhound Financial Corporation
("GFC" or the "Company") and subsidiaries, including the European Financial
Group ("GEFG"), Ambassador Factors ("Ambassador") acquired on February 14, 1994
and TriCon Capital ("TriCon") acquired on April 30, 1994. GFC is a wholly
owned subsidiary of GFC Financial Corporation.
RESULTS OF OPERATIONS
Net income for the 1994 period rose to $29.1 million from $18.9
million in 1993, an increase of 54%. The 1994 results include five months of
income from Ambassador and two months of income from TriCon.
INTEREST MARGINS EARNED. Interest margins earned, which represent the
difference between interest earned from financing transactions, interest
expense and operating lease depreciation, increased to $98.1 million for the
six months of 1994 from $58.6 million from the comparable period in 1993, an
increase of 67%.
This increase was driven by the portfolio growth of the core finance
operations, as well as the acquisitions of TriCon and Ambassador in 1994. The
source of the growth of the core finance operations was the new business volume
of $699 million for the six months of 1994 compared to $352 million for the
1993 period (an increase of 99%).
Interest margins earned, measured as a percent of average earning
assets, were strong at 5.9%. This measurement compares to 5.3% for the 1993
period and reflects the contributions of the acquisitions made in 1994 as well
as the continuing strong returns of the core finance operations.
The improvement in interest margins more than offset the higher
provisions for possible credit losses and the higher selling, administrative
and other operating expenses (collectively "operating expenses").
NON-INTEREST EXPENSE. Loss provisions, which increase the reserve for
possible credit losses ("reserve"), were higher by $4.6 million during the
first six months of 1994 compared to the same period in 1993. The higher loss
provisions are consistent with the requirements of a larger portfolio and the
risk characteristics of some of the businesses acquired. Higher interest
margins generated by Ambassador and certain TriCon businesses are used to cover
the higher risk profile associated with those businesses. Management believes
that reserve coverage (reserve and accrued liabilities/nonaccruing assets)
remains adequate at 71.7% of nonaccruing assets and at 2.5% of funds employed
and securitizations.
Selling, administrative and other operating expenses were up by
approximately $17.4 million in the 1994 period primarily attributable to the
acquisitions of TriCon and Ambassador in 1994. The running rate of these
expenses (measured as a percent of interest margins earned) declined to 46.1
(for the combined entities) in 1994 from 47.5% for GFC (which excluded TriCon
and Ambassador) in 1993. On July 18, 1994, the Company announced the
reorganization and integration of its operations with newly- acquired TriCon
and an estimated 10% reduction in personnel over the next several months.
These cost saving initiatives are expected to reduce this running rate for
expenses even further in the
17
<PAGE> 20
future.
GAINS ON SECURITIZATIONS AND SALE OF ASSETS. Gains on securitizations
and sale of assets were $2.3 million higher in 1994 compared to the same period
in 1993. The increase principally is the result of a $4.0 million ($2.4
million after-tax) gain from the securitization of assets by TriCon recorded in
the second quarter of 1994.
INCOME TAXES. Income taxes for the six months of 1994 increased to
$20.1 million from $10.6 million in 1993. This increase is attributable to:
(a) higher income before income taxes; (b) higher income tax rates in 1994
(both federal and state), and (c) increased foreign income taxes. The overall
effective income tax rate for the Company, including both federal and state
income taxes, approximates 40%.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Funds employed increased by $2.3 billion to $5.1 billion at June 30,
1994 from $2.8 billion at December 31, 1993. This increase is attributable to
the acquisition of TriCon ($1,802 million) and Ambassador ($329 million) in
1994 and new business generated ($699 million) by the core finance operations
in 1994.
The reserve and accrued liabilities increased by $69.9 million in 1994
to $134.2 million. The increase in the reserve and accrued liabilities during
the six months consisted of increases due to loss provisions of $8.1 million
which were applicable to portfolio growth, $62.6 million of reserves and
accrued liabilities acquired with TriCon and $10.4 million of reserves acquired
with Ambassador, partially offset by decreases due to write-offs of $12.0
million.
The Company had total debt of approximately $3,966 million or 5.3
times its equity base of $747 million at June 30, 1994. The Company also had
deferred income taxes of $210 million at that date as part of its capital base
to help finance its lending activities.
Growth in funds employed is typically financed by internally generated
cash flow and additional borrowings. During the first six months of 1994, GFC
issued $827.6 million of new senior debt, which, together with general
corporate funds, was used to finance new business and redeem or retire $743.4
million of maturing debt.
GFC satisfies a significant portion of its cash requirements from a
diversified group of worldwide funding sources and is not dependent upon any
one lender. Additionally, GFC relies on the issuance of commercial paper as a
major funding source. During the first six months of 1994, GFC issued $3.8
billion of commercial paper (with an average of $593 million outstanding during
this period) and raised $827.6 million, as noted above, through new long-term
financing facilities of one to seven year durations. GFC recently filed a
shelf-registration statement with the Securities and Exchange Commission that
would allow for the issuance of up to $1.0 billion of senior debt securities.
GFC currently maintains a three-year revolving credit facility with numerous
lenders, in the aggregate principal amount of $950 million. Separately, GFC
also has a 364 day revolving credit facility with the same lenders in the
aggregate principal amount of $950 million. Both of these facilities support
GFC's outstanding commercial paper and short- term borrowings.
Maturities of long-term debt outstanding at June 30, 1994 due through
June 2003 (excluding the amount supported by the revolving credit agreements
expected to be renewed) will approximate $445,875,000 (for the last six months
of 1994), $563,202,000 (1995), $399,221,000 (1996), $358,625,000 (1997),
$349,305,000 (1998) and $874,934,000 (thereafter).
18
<PAGE> 21
The Company utilizes derivative instruments to manage exposure to
fluctuations in interest rates arising from normal business operations.
Typically, these agreements are entered into when the Company issues new debt
to match the interest rate characteristics of its assets and liabilities. The
Company continually monitors its position relative to derivatives and does not
utilize speculative derivative instruments. The agreements have been entered
into with major financial institutions which are expected to fully perform
under the terms of the agreements, thereby mitigating the credit risk from the
transactions.
GFC had outstanding 43 interest rate conversion agreements with
notional principal amounts totaling $1.8 billion. Seventeen agreements with
notional principal amounts of $573 million were arranged to effectively convert
certain floating interest rate obligations into fixed interest rate obligations
and require interest payments on the stated principal amount at rates ranging
from 4.1% to 9.3% (remaining terms of one to five years) in return for receipts
calculated on the same notional amounts at floating interest rates. In
addition, 26 agreements with notional principal amounts of $1.19 billion were
arranged to effectively convert certain fixed interest rate obligations into
floating interest rate obligations and require interest payments on the stated
principal amount at the three month or six month LIBOR (remaining terms of one
to nine years) in return for receipts calculated on the same notional amounts
at fixed interest rates of 4.9% to 7.6%. In the third quarter of 1993, GFC
entered into four three year interest rate hedge agreements on $750 million of
floating-rate borrowings to effectively guarantee a spread of approximately
2.3% between its borrowing rate (the London Interbank Offered Rate ("LIBOR"))
and the Prime interest rate. The Company has also entered into three basis
swaps with notional principal amounts of $178 million and remaining terms of
four months to four years.
GFC's aggregate cost of funds has declined to 6.0% for the six months
of 1994 from 6.3% for the six months of 1993. GFC's cost of and access to
capital resources is significantly influenced by its debt ratings.
The agreements pertaining to long-term debt of GFC include various
restrictive covenants and require the maintenance of certain defined financial
ratios with which GFC has complied. Under one of these covenants, dividend
payments are limited to 50 percent of the sum of accumulated earnings and the
proceeds from equity issued, excluding the Offering, after December 31, 1991.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS
Following the spin-off from The Dial Corp in March 1992, the Company
decided to focus its resources and capital on its core domestic commercial
finance activities. The Company embarked on a program of selling or winding
down those businesses included in the spin-off that were not associated with
the Company's core domestic commercial finance activities. The Company has
concentrated on redeploying the capital previously invested in such businesses
and has raised additional capital to support internal portfolio growth and to
make selected acquisitions which complement the Company's core operations.
This strategy has resulted in (i) the managed liquidation and sale of the
Greyhound European Financial Group and Latin America loan portfolios, (ii) an
increase (excluding acquisitions) in GFC's domestic loan portfolio from March
31, 1992, (iii) the acquisition of the Asset Based Finance group from U.S.
Bancorp, (iv) the sale of the discontinued mortgage insurance subsidiary, (v)
the acquisition of Ambassador, and (vi) the acquisition of TriCon. In 1994,
GFC Financial raised $226.6 million of equity through the sale of 8,050,000
shares in a secondary offering, which, together with cash, the outstanding
preferred stock of GFC held by GFC Financial and the remaining intercompany
loans from GFC Financial were contributed as additional paid in capital of GFC.
In addition, GFC has expanded its debt sources through a $1 billion shelf
registration with the SEC and has increased its revolving credit lines to $1.9
billion. As a result of the execution of its business strategy, management
believes that the Company now ranks among the largest independent commercial
finance companies, based on assets, in the United States, and can direct its
energies primarily to its core business
19
<PAGE> 22
operations in the United States, rather than on terminating discontinued
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Document
---------- --------
<S> <C> <C>
12 Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends (interim period).
</TABLE>
(b) Reports on Form 8-K:
A Report on Form 8-K dated April 14, 1994 was filed by
Registrant, which reported under Items 5 and 7 the
revenues, net income and selected financial data and
ratios for the three months ended March 31, 1994
(unaudited).
A Report on Form 8-K dated May 2, 1994 was filed by
Registrant, which reported under Item 5 the consummation
of the TriCon acquisition.
A Report on Form 8-K dated May 23, 1994 was filed by
Registrant, which reported under Item 5 the completion
of the sale of 8,050,000 shares of common stock to the
public and the expanded credit facilities with various
lenders to $1.9 billion, divided between a three-year
and one-year facility for $950 million each and under
Item 7 the Sixth Amendment and Restatement to the Credit
Agreement dated as of May 31, 1976 and the Credit
Agreement (Short-term Facility) dated as of May 16,
1994.
A Report on Form 8-K dated July 19, 1994 was filed by
Registrant, which reported under Items 5 and 7 the
revenues, net income and selected financial data and
ratios for the three months and six months ended June
30, 1994 (unaudited).
20
<PAGE> 23
GREYHOUND FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREYHOUND FINANCIAL CORPORATION
(Registrant)
Dated: August 5, 1994 By: /s/ Bruno A. Marszowski
--------------------------------------------------
Bruno A. Marszowski, Vice President - Controller
Principal Accounting Officer/Authorized Officer
21
<PAGE> 24
GREYHOUND FINANCIAL CORPORATION
COMMISSION FILE NUMBER 1-7543
EXHIBIT INDEX
JUNE 30, 1994 FORM 10-Q
<TABLE>
<CAPTION>
Page No. in
Sequentially
Numbered Form 10-Q
No. Title Report
----- ------------------------------------------------------------------- --------------------
<S> <C> <C>
(12) Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends. 23
</TABLE>
22
<PAGE> 1
EXHIBIT 12
GREYHOUND FINANCIAL CORPORATION
Computation of Ratio of Income to Combined Fixed Charges
and Preferred Stock Dividends
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- -------------------------------
1994 1993 1993 1992 1991
---------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) before
income taxes $ 49,221 $29,506 $ 64,123 $ 50,593 $ (37,014)
Add leveraged lease
adjustment 425 707 1,505 1,059 1,758
Add fixed charges:
Interest expense 87,510 61,991 126,152 136,107 157,560
One-third of rentals 933 700 1,387 1,498 1,148
-------- ------- -------- -------- ---------
Total fixed charges 88,443 62,691 127,539 137,605 158,708
-------- ------- -------- -------- ---------
Net income as adjusted 138,089 92,904 193,167 189,257 123,452
-------- ------- ------- -------- ---------
Ratio of income to fixed
charges 1.56 1.48 1.51 1.38 ---
======== ======= ======== ======== =========
Preferred stock dividends on
a pre-tax basis 930 1,815 3,682 2,826
Total combined fixed
charges and preferred
stock dividends 89,373 64,506 131,221 140,431 158,708
-------- ------- -------- -------- ---------
Ratio of income to combined
fixed charges and preferred
stock dividends 1.55 1.44 1.47 1.35 ---
======== ======= ======== ======== =========
</TABLE>
23
