<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 SEPTEMBER 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 1-3521
ARISTAR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4128205
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8900 Grand Oak Circle, Tampa, FL 33637-1050
(Address of principal executive offices) (Zip Code)
(813) 632-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of October 31, 1994, there were 1,000 shares of Common Stock
outstanding.
Registrant meets the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form
with the reduced disclosure format.
<PAGE> 2
ARISTAR, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
September 30, 1994, December 31, 1993, and
September 30, 1993. . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations and Retained
Earnings - Three Months and Nine Months Ended
September 30, 1994 and 1993. . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows - Three
Months and Nine Months Ended September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . 6 - 7
Item 2. Management's Analysis of the
Results of Operations for the Nine Months
Ended September 30, 1994 . . . . . . . . . . . . . . . . . 8
Part II. Other Information:
Item 5. Other Information. . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . 10 - 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
<PAGE> 3
Item 1. Financial Statements
ARISTAR, INC. and Subsidiaries
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
(Dollars in thousands) 1994 1993 1993
<S> <C> <C> <C>
ASSETS
Finance receivables, net $ 1,461,634 $ 1,453,138 $ 1,362,996
Investment securities 103,135 92,614 77,447
Cash and cash equivalents 8,927 14,224 21,742
Property and equipment, less
accumulated depreciation and
amortization: 1994, $20,772;
1993, $19,205 and $18,213 13,747 12,936 11,580
Deferred charges 11,471 14,135 15,670
Excess of cost over equity of
companies acquired, less
accumulated amortization: 1994,
$36,269; 1993, $31,014 and
$29,262 70,742 75,997 77,748
Other assets 14,774 8,327 24,481
TOTAL ASSETS $ 1,684,43 $ 1,671,371 $ 1,591,664
LIABILITIES AND STOCKHOLDER'S
EQUITY
Liabilities
Short-term debt $ 195,128 $ 279,607 $ 208,304
Long-term debt 992,761 892,683 892,631
Total debt 1,187,889 1,172,290 1,100,935
Accounts payable and other
liabilities 48,637 72,241 63,769
Federal and state income taxes 3,167 5,901 16,170
Insurance claims and benefits
reserves 7,604 7,877 7,572
Unearned insurance premiums and
commissions 52,665 50,653 49,588
Total liabilities 1,299,962 1,308,962 1,238,034
Stockholder's equity
Common stock: $1.00 par value;
10,000 shares authorized; 1,000
shares issued and outstanding 1 1 1
Paid-in capital 44,894 44,894 44,894
Retained earnings 341,610 317,069 308,735
Net unrealized holding gain (loss)
on investment securities (2,037) 445
Total stockholder's equity 384,468 362,409 353,630
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,684,430 $1,671,371 $1,591,664
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
ARISTAR, INC. and Subsidiaries
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
For the Three MonthsFor the Nine Months
Ended September 30,Ended September 30,
(Dollars in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Loan interest and fee income $ 74,519 $ 73,745 $223,651 $220,173
Investment securities income 1,710 1,242 4,321 4,687
Total interest income 76,229 74,987 227,972 224,860
Interest and debt expense 22,584 22,111 64,515 65,922
Net interest income before
provision for credit losses 53,645 52,876 163,457 158,938
Provision for credit losses 9,513 8,335 25,686 25,578
Net interest income 44,132 44,541 137,771 133,360
Other operating income
Net insurance operations
and other income 7,171 6,979 20,522 18,084
Other expenses
Personnel costs 15,380 16,935 47,106 48,208
Occupancy expense 2,186 2,415 6,369 6,748
Advertising expense 1,290 1,350 3,504 3,157
Amortization of excess cost
over equity of companies
acquired 1,752 1,752 5,255 5,255
Other operating expenses 8,661 9,499 28,747 29,837
29,269 31,951 90,981 93,205
Income before income taxes 22,034 19,569 67,312 58,239
Provision for federal and
state income taxes 7,695 5,311 24,021 21,700
Net income 14,339 14,258 43,291 36,539
Retained Earnings
Beginning of period 333,521 300,727 317,069 286,446
Dividends paid (6,250) (6.250) (18,750) (14,250)
End of period $341,610 $308,735 $341,610 $308,735
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
ARISTAR, INC. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
(Dollars in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income $ 14,339 $ 14,258 $ 43,291 $ 36,539
Adjustments to reconcile
net income to net cash
provided by operating
activities
Provision for credit
losses 9,513 8,335 25,686 25,578
Depreciation and
amortization 3,732 3,842 11,422 10,576
Increase in other assets (3,693) (12,993) (6,447) (6,968)
Increase (decrease) in
Accounts payable and other
liabilities (8,008) (10,111) (24,917) (17,671)
Unearned insurance premiums
and commissions and
insurance claims and
benefits reserves 825 759 1,739 1,642
Net cash provided by
operating activities 16,708 4,090 50,774 49,696
Cash flows from investing
activities
Investment securities
purchased (5,776) (17,638) (31,156) (24,438)
Investment securities
matured 1,148 19,623 16,677 38,003
Finance receivables
originated or purchased (268,763)(243,585) (817,441)(703,670)
Finance receivables
repaid or sold 257,640 226,183 783,612 691,170
Net change in property
and equipment (82) (1,654) (3,458) (3,667)
Net cash provided by
(used in) investing
activities (15,833) (17,071) (51,766) (2,602)
Cash flows from financing
activities
Net change in short-term
debt (92,665) 40,404 (84,479) 5,212
Proceeds from issuance
of long-term debt 149,902 149,769 149,902 149,769
Repayments of long-term
debt (50,000)(165,000) (50,000)(175,000)
Dividends paid (6,250) (6,250) (18,750) (14,250)
Other, net (918) (1,095) (978) (1,095)
Net cash used in financing
activities 69 17,828 (4,305) (35,364)
Net increase (decrease) in
cash and cash equivalents 944 4,847 (5,297) 11,730
Cash and cash equivalents
Beginning of period 7,983 16,895 14,224 10,012
End of period $ 8,927 $ 21,742 $ 8,927 $ 21,742
Supplemental disclosures
of cash flow information
Interest paid $31,381 $ 34,744 $ 73,440 $ 78,962
Intercompany payment in
lieu of federal and state
income taxes 10,668 14,861 31,530 36,343
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
ARISTAR, INC. and Subsidiaries Notes to Consolidated Financial
Statements
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements of
Aristar, Inc. and subsidiaries (the "Company") have been prepared
in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. These statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
Certain amounts in prior periods have been reclassified to
conform to the current period's presentation.
Note 2 Ownership
As a result of a corporate realignment consummated on June 30,
1993, the Company is no longer a subsidiary, directly or
indirectly, of Great Western Bank, a Federal Savings Bank
("GWB").
After giving effect to the realignment which was consummated as a
dividend from GWB to Great Western Financial Corporation ("GWFC")
of the stock of an intermediate holding company (which holds all
of the stock of the Company), the Company continues to be a
wholly owned indirect subsidiary of GWFC. The realignment is not
expected to have a significant effect on the operations of the
Company.
Note 3 Accounting Change
As of December 31, 1993, investments classified as available for
sale are accounted for according to Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("FAS 115"). This statement
requires that debt and equity securities classified as available
for sale be reported at fair value, with unrealized gains and
losses excluded from earnings and reported, net of taxes, as a
separate component of stockholder's equity. The Company recorded
a net unrealized holding gain (loss) of $445,000 and ($2,037,000)
as a separate component of stockholder's equity, and a deferred
tax liability (asset) of $324,000 and ($1,097,000), as of
December 31, 1993 and September 30, 1994, respectively.
Beginning December 31, 1992, until the adoption of FAS 115,
investment securities that may have been sold in response to or
in anticipation of changes in interest rates and prepayment risk,
liquidity considerations, and other factors were carried at the
lower of aggregate amortized cost or market value. As of
December 31, 1992, all investment securities were deemed to be
available for sale. Prior to December 31, 1992, generally all
securities were recorded at cost and adjusted for amortization of
premium and accretion of discount. Gains and losses on
investment securities were recorded when realized on a specific
identity basis.
<PAGE> 7
ARISTAR, INC. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Note 4 Finance Receivables
Finance receivables consist of the following:
<TABLE>
<CAPTION>
September 30,December 31,September 30,
(Dollars in thousands) 1994 1993 1993
<S> <C> <C> <C>
Consumer finance receivables
Real estate secured loans $ 515,108 $ 510,229 $ 513,929
Other instalment loans 954,186 971,532 872,676
Retail instalment contracts 336,470 328,042 307,761
Gross finance receivables 1,805,764 1,809,803 1,694,366
Less: Unearned finance
charges and deferred loan
fees (304,292) (317,571) (292,714)
Allowance for credit losses (39,838) (39,094) (38,656)
Finance receivables, net $1,461,634 $1,453,138 $1,362,996
</TABLE>
Activity in the Company's allowance for credit losses is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Balance, beginning of
period $ 39,737 $ 38,204 $ 39,094 $ 36,046
Provision for credit losses 9,513 8,335 25,686 25,578
Amounts charged off (13,366) (12,246) (37,165) (35,582)
Recoveries 3,689 3,896 11,500 11,408
Allowances on notes
purchased 265 467 723 1,206
Balance, end of period $ 39,838 $ 38,656 $ 39,838 $ 38,656
</TABLE>
Note 5 Long-term Debt
Long-term debt at September 30, 1994 was comprised of:
(Dollars in thousands)
Senior Notes and Debentures $793,471
Senior Subordinated Notes
and Debentures 199,290
$992,761
<PAGE> 8
Item 2. MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Loan interest and fee income increased $3.5 million, or 1.6%, in
the nine months ended September 30, 1994, as compared to the nine
months ended September 30, 1993, primarily as a result of an
increase in average net finance receivables. Income from
investment securities decreased $366 thousand, due to reduced
interest rates. As a result, total interest income increased by
$3.1 million. During 1993, the Company reduced its long-term
debt outstanding by issuing commercial paper at substantially
lower interest rates, resulting in a decrease in interest and
debt expense of $1.4 million, or 2.1%, for the nine months ended
September 30, 1994, as compared to the same 1993 period. These
changes caused an increase in net interest income before
provision for credit losses of $4.5 million, or 2.8%.
In July, 1994, the Company issued $150 million of 7.75% senior
notes maturing in 2001. The proceeds were used primarily to
reduce outstanding commercial paper. On September 1, 1994, the
Company retired $50 million of 14.75% senior debentures at
maturity.
The provision for credit losses for the nine months ended
September 30, 1994 was 2.30% as an annualized percentage of
average net finance receivables for that period, as compared to
2.45% for the comparable 1993 period. The decrease in provision
rate reflects management's assessment of the quality of the
Company's receivables portfolio at this time.
The Company began relocating its headquarters from Memphis,
Tennessee to Tampa, Florida in the third quarter of 1993 and
completed this move in the first quarter of 1994. In connection
with this relocation, the Company has constructed a 71,000 square
foot headquarters building on 6 acres of land at a total cost of
approximately $7 million.
Productivity in the first nine months of 1994 improved as
compared to the first nine months of 1993, with operating and
administrative expenses as a percent of average outstanding
finance receivables of 7.6% in 1994 and 8.3% in 1993.
As of December 31, 1993, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115), which
requires that debt and equity securities classified as available
for sale be reported at fair value, with unrealized gains and
losses excluded from earnings and reported, net of taxes, as a
separate component of stockholder's equity. See Note 3 to the
accompanying Consolidated Financial Statements for additional
information.
<PAGE> 9
PART II. OTHER INFORMATION
Item 5. Other Information
The calculation of the Company's ratio of earnings to fixed
charges as of the dates indicated is shown below:
<TABLE>
<CAPTION>
Nine Months Year Nine Months
Ended Ended Ended
September 30, December 31, September 30,
1994 1993 1993
<S> <C> <C> <C>
Income before income
taxes $ 67,312 $ 79,683 $ 58,239
Fixed charges:
Interest and debt
expense on all
indebtedness 64,515 86,385 65,922
Appropriate portion of
rentals (33%) 1,917 2,825 2,088
Total fixed charges 66,432 89,210 68,010
Earnings available for
fixed charges $ 133,744 $168,893 $ 126,249
Ratio of earnings
to fixed charges 2.01 1.89 1.86
</TABLE>
<PAGE> 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) (a) Indenture dated as of July 15, 1984,
between Aristar, Inc. and Bank of
Montreal Trust Company, as trustee.
(1)
(b) First supplemental indenture to
Exhibit (4) (a) dated as of June 1,
1987. (1)
(c) Indenture dated as of August 15,
1988, between Aristar, Inc. and Bank
of Montreal Trust Company, as
trustee. (2)
(d) Indenture dated as of May 1, 1991
between Aristar, Inc. and Security
Pacific National Bank, as trustee.
(3)
(e) Indenture dated as of May 1, 1991
between Aristar, Inc. and The First
National Bank of Boston, as trustee.
(3)
(f) Indenture dated as of July 1, 1992
between Aristar, Inc. and The Chase
Manhattan Bank, N.A., as trustee.
(4)
(g) Indenture dated as of July 1, 1992
between Aristar, Inc. and Citibank,
N.A., as trustee. (4)
(h) The registrant hereby agrees to
furnish the Securities and Exchange
Commission upon request with copies
of all instruments defining rights
of holders of long-term debt of
Aristar, Inc. and its consolidated
subsidiaries.
(10)(a) Great Western Financial Corporation
Tax Allocation Policy. (5)
(b) Amendment Number 1 to Great Western
Financial Corporation Income Tax
Allocation Policy. (5)
(c) Amendment Number 2 to Great Western
Financial Corporation Income Tax
Allocation Policy. (6)
(27) Financial Data Schedule
(1) Incorporated by reference to
Registrant's Quarterly Report on
Form 10-Q for the quarter ended
March 31, 1993, Commission file
number 1-3521.
(2) Incorporated by reference to
Registrant's Quarterly Report on
Form 10-Q for the quarter ended
September 30, 1988, Commission file
number 1-3521.
(3) Incorporated by reference to
Registrant's Current Report on Form
8-K dated May 29, 1991, Commission
file number 1-3521.
(4) Incorporated by reference to
Registrant's Current Report on Form
8-K dated June 24, 1992, Commission
file number 1-3521.
(5) Incorporated by reference to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1992, Commission file number 1-3521.
<PAGE> 11
(6) Incorporated by reference to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1993, Commission file number 1-
3521.
(b) Reports on Form 8-K
On July 1, 1994, the Company filed a Current Report on Form 8-
K, dated June 29, 1994, disclosing that the Company has been
named as a defendant in several recently filed class action
suits in Alabama in which various industry-wide practices
arising from routine business activities are being challenged
and various damages are being sought. The Company believes
that its practices are permissible under state and federal
laws and will defend these suits accordingly. At this time,
the Company is unable to determine whether any of the classes
will be certified, the possibility of any adverse outcome, or
the effect, if any, of such an outcome on the Company.
On July 7, 1994, the Company filed a Current Report on Form 8-
K dated June 29, 1994, disclosing the terms of the issuance of
$150,000,000 7.75% senior notes maturing June 15, 2001.
<PAGE> 12
SIGNATURE
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.
ARISTAR, INC.
Date: November 4, 1994 By: /s/ James A. Bare
James A. Bare
Senior Vice President and
Chief Financial Officer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's financial statements filed as part of its Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 8,927
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 103,135
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,501,472
<ALLOWANCE> (39,838)
<TOTAL-ASSETS> 1,684,430
<DEPOSITS> 0
<SHORT-TERM> 195,128
<LIABILITIES-OTHER> 48,637
<LONG-TERM> 992,761
<COMMON> 1
0
0
<OTHER-SE> 339,573
<TOTAL-LIABILITIES-AND-EQUITY> 1,684,430
<INTEREST-LOAN> 223,651<F1><F2><F3>
<INTEREST-INVEST> 4,321
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 227,972
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 64,515
<INTEREST-INCOME-NET> 163,457
<LOAN-LOSSES> 25,686
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 90,981
<INCOME-PRETAX> 67,312
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,291
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 11.52
<LOANS-NON> 27,164
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 39,094
<CHARGE-OFFS> (37,165)
<RECOVERIES> 11,500
<ALLOWANCE-CLOSE> 39,838
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 39,838
<FN>
<F1>Aristar, Inc. is technically a Commercial and Industrial Company subject to
Article 5 of Regulation S-X.
<F2>However, as its primary business is consumer finance, the Company,
although not a bank holding company, is engaged in similar lending activities.
<F3>Therefore, in accordance with Staff Accounting Bulletin Topic 11-K,
"Application of Article 9 and Guide 3", the Company has prepared its Financial
Data Schedule for the nine months ended September 30, 1994 using the Article 9
format.
</FN>
</TABLE>
