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, 1995
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, 1995, 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>
<CAPTION>
Part I. Financial Information:
Item 1. Financial Statements
<S> <C>
Consolidated Statements of Financial Condition -
September 30, 1995, December 31, 1994 and
September 30, 1994. . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations and Retained Earnings -
Three Months and Nine Months Ended September 30, 1995 and 1994. . . 4
Consolidated Statements of Cash Flows -
Three Months and Nine Months Ended September 30, 1995 and 1994. . . 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, 1995. . . . . . . . . . . . . . . . . . . . . . . 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) 1995 1994 1994
<S> <C> <C> <C>
ASSETS
Finance receivables, net $ 1,531,187 $ 1,539,914 $1,461,634
Investment securities 116,125 106,600 103,135
Cash and cash equivalents 10,790 9,668 8,927
Property and equipment, less
accumulated depreciation and
amortization: 1995, $18,707;
1994, $21,684 and $20,772 11,556 13,327 13,747
Deferred charges 12,868 12,605 11,471
Excess of cost over equity of
companies acquired, less
accumulated amortization: 1995,
$43,276; 1994, $38,021 and $36,269 63,735 68,990 70,742
Other assets 11,506 19,832 14,774
TOTAL ASSETS $ 1,757,767 $ 1,770,936 $1,684,430
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Short-term debt $ 212,695 $ 179,085 $ 195,128
Long-term debt 1,016,715 1,092,545 992,761
Total debt 1,229,410 1,271,630 1,187,889
Accounts payable and other
liabilities 38,320 45,636 48,637
Federal and state income taxes 13,020 421 3,167
Insurance claims and benefits
reserves 7,858 7,792 7,604
Unearned insurance premiums and
commissions 54,899 53,890 52,665
Total liabilities 1,343,507 1,379,369 1,299,962
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 369,553 350,266 341,610
Net unrealized holding gain (loss)
on investment securities (188) (3,594) (2,037)
Total stockholder's equity 414,260 391,567 384,468
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,757,767 $ 1,770,936 $1,684,430
</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 Months For the Nine Months
Ended September 30, Ended September 30,
(Dollars in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Loan interest and fee income $ 77,814 $ 74,519 $231,867 $223,651
Investment securities income 1,857 1,710 5,637 4,321
Total interest income 79,671 76,229 237,504 227,972
Interest and debt expense 22,430 22,584 68,800 64,515
Net interest income before
provision for credit losses 57,241 53,645 168,704 163,457
Provision for credit losses 10,805 9,513 30,635 25,686
Net interest income 46,436 44,132 138,069 137,771
Other operating income
Net insurance operations
and other income 7,048 7,171 21,078 20,522
Other expenses
Personnel costs 15,072 15,380 46,943 47,106
Occupancy expense 2,305 2,186 6,848 6,369
Advertising expense 1,252 1,290 3,535 3,504
Amortization of excess cost over
equity of companies acquired 1,752 1,752 5,255 5,255
Other operating expenses 8,567 8,661 27,435 28,747
28,948 29,269 90,016 90,981
Income before income taxes 24,536 22,034 69,131 67,312
Provision for federal and state
income taxes 9,686 7,695 27,344 24,021
Net income 14,850 14,339 41,787 43,291
Retained Earnings
Beginning of period 362,203 333,521 350,266 317,069
Dividends paid (7,500) (6,250) (22,500) (18,750)
End of period $ 369,553 $ 341,610 $369,553 $341,610
</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) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 14,850 $ 14,339 $ 41,787 $ 43,291
Adjustments to reconcile net income
to net cash provided by operating
activities
Provision for credit losses 10,805 9,513 30,635 25,686
Depreciation and amortization 3,024 3,732 9,622 11,422
Deferred income taxes (45) 3 (1,813) 1,421
Increase (decrease) in
Accounts payable and other
liabilities (13,680) (9,058) (7,316) (23,604)
Unearned insurance premiums and
commissions and insurance claims
and benefits reserves 808 825 1,075 1,739
Currently payable income taxes 11,526 1,047 12,599 (2,734)
(Increase) decrease in other assets (1,608) (3,693) 8,325 (6,447)
Net cash provided by operating
activities 25,680 16,708 94,914 50,774
Cash flows from investing activities
Investment securities purchased (15,358) (5,776) (30,961) (31,156)
Investment securities matured 11,168 1,148 26,714 16,677
Finance receivables originated or
purchased (278,232) (268,763) (813,674) (817,441)
Finance receivables repaid or sold 258,329 257,640 790,253 783,612
Net change in property and equipment (94) (82) (212) (3,458)
Net cash used in investing activities(24,187) (15,833) (27,880) (51,766)
Cash flows from financing activities
Net change in short-term debt (72,591) (92,665) 33,610 (84,479)
Proceeds from issuance of long-term
debt 99,909 149,902 99,909 149,902
Repayments of long-term debt (21,000) (50,000) (176,000) (50,000)
Dividends paid (7,500) (6,250) (22,500) (18,750)
Other, net (585) (918) (931) (978)
Net cash provided by (used in)
financing activities (1,767) 69 (65,912) (4,305)
Net increase (decrease) in cash and
cash equivalents (274) 944 1,122 (5,297)
Cash and cash equivalents
Beginning of period 11,064 7,983 9,668 14,224
End of period $ 10,790 $ 8,927 $ 10,790 $ 8,927
Supplemental disclosures of cash flow
information
Interest paid $ 28,661 $ 31,381 $ 76,472 $ 73,440
Intercompany payment in lieu of
federal and state income taxes 970 10,668 15,119 31,530
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
ARISTAR, INC. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
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, 1994.
Certain amounts in prior periods have been reclassified to conform to the
current period's presentation.
Note 2 Ownership
The Company is an indirect, wholly-owned subsidiary of Great Western Financial
Corporation.
<PAGE> 7
ARISTAR, INC. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Note 3 Finance Receivables
Finance receivables consist of the following:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
(Dollars in thousands) 1995 1994 1994
<S> <C> <C> <C>
Consumer finance receivables
Real estate secured loans $ 546,529 $ 518,757 $ 515,108
Other instalment loans 1,019,905 1,055,723 954,186
Retail instalment contracts 314,070 331,424 336,470
Gross finance receivables 1,880,504 1,905,904 1,805,764
Less: Unearned finance charges and
deferred loan fees (308,034) (324,679) (304,292)
Allowance for credit losses (41,283) (41,311) (39,838)
Finance receivables, net $1,531,187 $1,539,914 $1,461,634
</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) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Balance, beginning of period $ 41,744 $ 39,737 $ 41,311 $ 39,094
Provision for credit losses 10,805 9,513 30,635 25,686
Amounts charged off (15,212) (13,366) (42,928) (37,165)
Recoveries 3,796 3,689 11,775 11,500
Allowances on notes purchased 150 265 490 723
Balance, end of period $ 41,283 $ 39,838 $ 41,283 $ 39,838
</TABLE>
Note 4 Long-term Debt
Long-term debt at September 30, 1995 was comprised of:
(Dollars in thousands)
Senior Notes and Debentures $ 817,291
Senior Subordinated Notes
and Debentures 199,424
$1,016,715
<PAGE> 8
Item 2. MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
The Company's average net finance receivables outstanding were $70.2 million
or 4.7% greater in the nine months ended September 30, 1995, than the same
period of 1994, while, as a reflection of lower interest rates and competitive
pressures, the overall portfolio yield decreased .20%. As a result, loan
interest and fee income increased $8.2 million, or 3.7%, for the nine months
ended September 30, 1995, over the nine months ended September 30, 1994.
Income from investment securities for the nine months ended September 30, 1995
increased $1.3 million or 30.5%, with both the total invested balances and the
yield thereon increasing over the first nine months of 1994. As a result, total
interest income for the 1995 period increased by $9.5 million or 4.2% over the
1994 period. On the other hand, average debt outstanding increased $61 million,
or 5.2%, and the weighted average interest rate grew by 10 basis points,
resulting in an increase in interest and debt expense of $4.3 million, or 6.7%,
for the nine months ended September 30, 1995, as compared to the same 1994
period. These factors resulted in an increase in net interest income before
provision for credit losses of $5.2 million, or 3.2%.
In July, 1995, the Company issued $100 million of 6.30% senior notes maturing
in 2000. The proceeds were used to reduce outstanding commercial paper.
The provision for credit losses for the nine months ended September 30, 1995
was 2.62% as an annualized percentage of average net finance receivables for
that period, as compared to 2.30% for the same 1994 period. The increase in
provision rate reflects management's assessment of the quality of the
Company's receivables portfolio at this time.
Personnel expenses were $163 thousand, or .4%, lower in the nine month period
ended September 30, 1995 as compared to the same 1994 period because, while
1995 includes normal compensation increases, 1994 reflected various one-time
charges related to the relocation of the Company s headquarters.
Productivity, defined as the ratio of operating and administrative expenses
(before deferral of direct loan costs) to average outstanding finance
receivables, improved to 8.2% in the first nine months ended September 30,
1995 as compared to 8.7% in the first nine months of 1994. Contributing to
this improvement is the fact that the first nine months of 1994 included $1.4
million in amortization of the cost of the Company s proprietary computer
software, which became fully amortized in the third quarter of 1994.
<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,
1995 1994 1994
<S> <C> <C> <C>
Income before income taxes $ 69,130 $ 91,592 $ 67,312
Fixed charges:
Interest and debt expense on
all indebtedness 68,800 87,074 64,515
Appropriate portion of
rentals (33%) 2,141 2,537 1,917
Total fixed charges 70,941 89,611 66,432
Earnings available for
fixed charges $ 140,071 $ 181,203 $ 133,744
Ratio of earnings
to fixed charges 1.97 2.02 2.01
</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) Indenture dated as of July 1, 1995
between Aristar, Inc. and The Bank of
New York, as trustee. (5)
(i) 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. (6)
(b) Amendment Number 1 to Great Western
Financial Corporation Income Tax Allocation
Policy. (6)
(c) Amendment Number 2 to Great Western
Financial Corporation Income Tax Allocation
Policy. (7)
(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 Quarterly
Report on Form 10-Q for the quarter ended June 30,
1995, 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,
1992, Commission file number 1-3521.
(7) 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 14, 1995, the Company filed a Current Report on Form 8-K,
dated July 11, 1995, disclosing, under item (7), thereof the terms of
the issuance of $100,000,000 aggregate principle of its amount 6.30%
senior notes maturing July 15, 2000.
<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 3, 1995 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 Report on Form 10-Q for the
nine months ended September 30, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,790
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 116,125
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,572,470<F1>
<ALLOWANCE> (41,283)
<TOTAL-ASSETS> 1,757,767
<DEPOSITS> 0
<SHORT-TERM> 212,695
<LIABILITIES-OTHER> 38,320
<LONG-TERM> 1,016,715
<COMMON> 1
0
0
<OTHER-SE> 414,259
<TOTAL-LIABILITIES-AND-EQUITY> 1,757,767
<INTEREST-LOAN> 231,867
<INTEREST-INVEST> 5,637
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 237,504
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 68,800
<INTEREST-INCOME-NET> 168,704
<LOAN-LOSSES> 30,635
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 90,016
<INCOME-PRETAX> 69,131
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,787
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 10.97
<LOANS-NON> 20,613
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 41,311
<CHARGE-OFFS> (42,928)
<RECOVERIES> 11,775
<ALLOWANCE-CLOSE> 41,283
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 41,283
<FN>
<F1>Aristar, Inc. is technically a Commercial and Industrial Company subject to
Article 5 of Regulation S-X. However, as its primary business is consumer
finance, the Company, although not a bank holding company, is engaged in
similar lending activities. 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,
1995 using the Article 9 format.
</FN>
</TABLE>
