UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
____________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ended March 31, 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 1-7725
I.R.S. Employer Identification Number 36-2687938
COMDISCO, INC.
(a Delaware Corporation)
6111 North River Road
Rosemont, Illinois 60018
Telephone: (708) 698-3000
Name of each Number of shares
Title of exchange on outstanding as of
each class which registered March 31, 1994
Common stock, New York Stock Exchange 38,024,538
$.10 par value Midwest Stock Exchange
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. YesXX No .
<PAGE>
Comdisco, Inc. and Subsidiaries
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings and Retained Earnings --
Three and Six Months Ended March 31, 1994 and 1993....................3
Consolidated Balance Sheets --
March 31, 1994 and September 30, 1993.................................4
Consolidated Statements of Cash Flows --
Six Months Ended March 31, 1994 and 1993..............................5
Notes to Consolidated Financial Statements..............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 13
SIGNATURES................................................................ 15
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (UNAUDITED)
(in millions except per share data)
For the Three and Six Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months Six Months Ended
Ended March 31 Ended March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenue
Leasing
Operating $ 251 $ 275 $ 516 $ 563
Direct financing 47 48 93 97
Sales-type 100 60 181 142
Total leasing 398 383 790 802
Sales 65 83 143 172
Disaster recovery 60 54 118 106
Other 6 10 14 21
Total revenue 529 530 1,065 1,101
Costs and expenses
Leasing
Operating 187 207 383 422
Sales-type 80 42 143 110
Total leasing 267 249 526 532
Sales 52 72 118 153
Disaster recovery 56 51 111 100
Selling, general and administrative 49 50 97 97
Interest 65 73 134 150
Total costs and expenses 489 495 986 1,032
Earnings from continuing operations before income taxes
before income taxes 40 35 79 69
Income taxes 16 14 32 28
Earnings from continuing operations before
cumulative effect of change in accounting principle 24 21 47 41
Cumulative effect of change in accounting principle - - - 20
Net earnings before preferred dividends 24 21 47 61
Preferred dividends (2) (2) (4) (3)
Net earnings to common
stockholders $ 22 $ 19 $ 43 $ 58
Retained earnings at beginning of period $ 668 $ 618 $ 650 $ 582
Net earnings to common stockholders 22 19 43 58
Cash dividends paid on common stock (4) (3) (7) (6)
Retained earnings at end of period $ 686 $ 634 $ 686 $ 634
Net earnings per common and common
equivalent share:
Earnings from continuing operations $ .55 $ .48 $1.09 $ .94
Cumulative effect of change - - - .49
in accounting principle
Net earnings to common stockholders $ .55 $ .48 $1.09 $ 1.43
Cash dividends paid per common share $ .09 $ .07 $ .17 $ .14
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions except number of shares)
<CAPTION>
March 31 September 30
1994 1993
(unaudited) (audited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 75 $ 70
Cash - legally restricted 47 48
Receivables, net 124 158
Inventory of equipment 158 164
Leased assets:
Direct financing and sales-type 2,115 2,073
Operating (net of accumulated depreciation) 1,716 1,834
Net leased assets 3,831 3,907
Buildings, furniture and other, net 173 175
Other assets 426 438
$4,834 $4,960
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 523 $ 655
Term notes payable 205 206
Senior notes 1,153 1,119
Accounts payable 62 100
Income taxes 211 202
Other liabilities 256 269
Discounted lease rentals 1,665 1,670
4,075 4,221
Stockholders' equity:
Preferred stock $.10 par value.
Authorized 100,000,000 shares:
8.75% Cumulative Preferred Stock, Series A and Series B.
$25 stated value and liquidation preference.
4,000,000 shares issued 100 100
Common stock $.10 par value
Authorized 200,000,000 shares; issued 47,288,671 shares
(47,219,823 at September 30, 1993) 5 5
Additional paid-in capital 139 138
Deferred compensation (ESOP) (11) (12)
Deferred translation adjustment (12) (7)
Retained earnings 686 650
907 874
Common stock held in treasury, at cost; 9,264,133 shares
(8,608,502 shares at September 30, 1993) (148) (135)
Total stockholders' equity 759 739
4,834 $4,960
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
For the Six Months Ended March 31, 1994 and 1993
Increase (decrease) in cash and cash equivalents:
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Operating lease and other leasing receipts $579 $621
Direct financing and sales-type leasing receipts 440 468
Sale of direct financing and sales-type lease receivables - 181
Leasing costs, primarily rentals paid (23) (43)
Sales 160 171
Sales costs (75) (103)
Disaster recovery receipts 115 99
Disaster recovery costs (102) (93)
Other revenue 14 21
Selling, general and administrative expenses (99) (113)
Interest (133) (147)
Income taxes (20) (20)
Net cash provided by operating activities 856 1,042
Cash flows from investing activities:
Equipment purchased for leasing (707) (781)
Investment in disaster recovery facilities (6) (5)
Other (11) (7)
Net cash used in investing activities (724) (793)
Cash flows from financing activities:
Discounted lease proceeds 434 493
Net decrease in notes and term notes payable (133) (312)
Net increase in senior notes 34 57
Principal payments on secured debt (441) (489)
Common stock repurchased and placed in treasury (13) (4)
Dividends paid on common stock (7) (6)
Dividends paid on preferred stock (4) (3)
Other 3 5
Net cash used by financing activities (127) (259)
Net increase (decrease) in cash and cash equivalents 5 (10)
Cash and cash equivalents at beginning of period 70 74
Cash and cash equivalents at end of period $ 75 $ 64
</TABLE>
<PAGE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- CONTINUED
(in millions)
Six Months Ended March 31, 1994 and 1993
<CAPTION>
1994 1993
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 47 $ 58
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Leasing costs, primarily
depreciation and amortization 503 489
Leasing revenue, primarily principal portion of
direct financing and sales-type lease rentals 229 287
Sale of direct financing and sales-type
lease receivables - 181
Cost of sales 43 50
Interest 1 3
Income taxes 12 8
Cumulative effect of change in accounting for
income taxes - (20)
Other - net 21 (14)
Net cash provided by operating activities $ 856 $1,042
Supplemental schedule of noncash financing activities:
Assumption of discounted lease rentals in lease
portfolio acquisition $ 2 $ 7
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Comdisco, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1994 and 1993
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all the of the information and
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation
have been included. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended September 30, 1993.
The balance sheet at September 30, 1993 has been derived from the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended September 30, 1993.
Legally restricted cash represents cash and cash equivalents that are restricted
solely for use as collateral in secured borrowings and are not available to
other creditors.
2. Change in Method of Accounting for Income Taxes
Effective October 1, 1992, the Company adopted FASB Statement No. 109
("FAS 109"), "Accounting for Income Taxes." The adoption of FAS 109 changed
the Company's method of accounting for income taxes from the deferred method
(APB No. 11) to an asset and liability approach. Previously the Company
provided deferred income taxes for income and expenses that were recognized in
different periods for income tax purposes than for financial reporting purposes,
measured at the tax rate in effect in the year the difference originated.
Under the asset and liability method of FAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences betweeen the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under FAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
<PAGE>
As permitted by FAS 109, the Company elected not to restate the financial
statements of any prior years. The effect of the change on income tax expense
for the three months ended December 31, 1992 was not material; however, the
cumulative effect of the change increased net earnings to common stockholders
by $20 million, or $.49 per share. The cumulative effect primarily
represents the impact of adjusting deferred taxes to reflect the current
Federal tax rate of 34% as opposed to the higher tax rates that were in effect
when the deferred taxes originated.
Income taxes are provided on earnings at the appropriate statutory rates
applicable to such earnings. The Company estimates that the annual effective
tax rate will be approximately 40% for fiscal 1994, which is the same as the
estimated rate used in the six months ended March 31, 1993.
As disclosed in Note 12 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended September 30, 1993, in
February, 1992, the Internal Revenue Service commenced an income tax audit for
fiscal years 1989 and 1990. The Company recently received the Revenue Agent's
Report. The Company believes that all issues raised in the report will be
resolved with no material impact on the Company's financial condition.
3. Interest-Bearing Liabilities
The average daily borrowings outstanding during the six months ended
March 31, 1994 were approximately $3.6 billion, with a related weighted average
interest rate of 7.16%. This compares to average daily borrowings during the
first six months of fiscal 1993 of approximately $4.1 billion, with a related
weighted average interest rate of 8.20%.
At March 31, 1994, the Company had $1 billion of available domestic
and international borrowing capacity under various lines of credit from
commercial banks and commercial paper facilities, of which approximately
$475 million was unused.
4. Senior Notes
In June, 1992, the Company filed a Registration Statement on Form S-3 with
the Securities and Exchange Commission for a shelf offering (the "Shelf
Offering") of up to $500 million of senior debt securities with terms to be
set at the time of sale. At March 31, 1994, $232 million of debt securities
remain available for issuance under the Shelf Offering.
5. Common Stock
On April 20, 1994, the Board of Directors declared a quarterly cash
dividend of $.09 per common share to be paid on June 20, 1994 to common
stockholders of record as of May 27, 1994.
During the six months ended March 31, 1994, the Company purchased
655,631 shares of its common stock at an aggregate cost of approximately
$13 million. At March 31, 1994, the Company had a remaining authorization
of $12 million to purchase common stock. An additional 322,200 shares were
purchased between March 31, 1994 and May 10, 1994 at a cost of $6 million.
<PAGE>
6. Earnings Per Common Share
Average common and common equivalent shares outstanding for the three
months ended March 31, 1994 and 1993 were 39,023,601 and 40,620,290,
respectively. Average common and common equivalent shares outstanding for the
six months ended March 31, 1994 and 1993 were 39,091,959 and 40,741,953,
respectively.
Earnings per common and common equivalent share reflects the assumed
exercise of stock options that would have a dilutive effect on earnings per
common share if exercised.
7. Contingent Liabilities
Refer to Note 16 of Notes to Consolidated Financial Statements in
the Company's Annual Report to Stockholders for the year ended
September 30, 1993, for information on the Company's contingent liabilities.
Management believes such information adequately reflects the current status
of such contingencies.
<PAGE>
Comdisco, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Earnings
Net earnings available to common stockholders (hereinafter referred to as
"net earnings") for the three months ended March 31, 1994 were $22 million, or
$.55 per share, as compared to $19 million, or $.48 per share, for the three
months ended March 31, 1993. Net earnings for the six months ended
March 31, 1994 were $43 million, or $1.09 per share, as compared to $58 million,
or $1.43 per share, for the year earlier period. The first quarter of fiscal
1993 includes the cumulative effect of the adoption of FAS 109 (see Note 2 of
Notes to Consolidated Financial Statements) which increased net earnings by
$20 million, or $.49 per share (the "Cumulative Effect"). Excluding the
Cumulative Effect, the increase in net earnings in the three and six months
ended March 31, 1994 compared to the year earlier periods is due to an increase
in earnings contributions from remarketing coupled with a decrease in interest
expense, offset by a decrease in the earnings contributions from operating
leases. Direct financing revenue declined compared to the prior years periods,
reflecting both a decline in interest rates and the impact of a reduction in the
net investment in direct financing leases resulting from the Company's offering
of lease-backed certificates.
The Company's operating results are subject to quarterly fluctuations
resulting from a variety of factors, including variations in the mix of leases
written and changes in interest rates. The mix of leases written in a quarter
is also a result of a combination of factors, including, but not limited to,
changes in customer demands and/or requirements, new product announcements,
price changes, changes in delivery dates, changes in maintenance policies and
the pricing policies of equipment manufacturers, and price competition from
other lessors.
Leasing
Leasing volume in the three and six months ended March 31, 1994 decreased
as compared to the year earlier periods. However, remarketing activity
remained strong, and overall margins on remarketing activities increased. The
decline in leasing volume is due to a number of factors, including, but not
limited to, the slow growth in worldwide economies, changes in the traditional
mainframe business, including the repositioning of the traditional mainframe
as a powerful "file server" running networks of PCs and newer, transitional
mainframe products leading toward system integration, delays in equipment
acquistion decisions pending definitive product strategy announcements from
the leading high technology equipment manufacturers, cost pressures and the
related impact on capital budgets, and, with respect to the medical industry,
uncertainty surrounding federal proposals on healthcare. Conversely, cost
pressures have stregthened the Company's remarketing activities as high
technology equipment users opt for remarketed equipment as a cost effective
alternative to new equipment.
During the six months ended March 31, 1994, equipment purchased for
leasing totaled $707 million compared to $781 million of equipment purchased
for leasing during the six months ended March 31, 1993. During the quarter
ended March 31, 1994, equipment purchased for leasing totaled $293 million
compared to $375 million and $414 million of equipment purchased for leasing
during the quarters ended March 31,
<PAGE>
1993 and December 31, 1993, respectively.
The decline in the overall lease portfolio may have an impact on the Company's
future remarketing activities as the Company has less equipment to remarket.
Three months ended March 31, 1994
Total revenue for the three months ended March 31, 1994 was $529 million
compared to $530 million in the prior year quarter. The decline in operating
lease revenue as compared to the year earlier period reflects reduced leasing
volume in the latter part of fiscal 1993 and the first half of fiscal 1994
as compared to the prior year periods, the aging IBM 3090 lease portfolio and
the lack of growth in the overall mainframe market (primarily high-end IBM
ES/9000 and comparable models) during the last twenty four months. The
increase in sales-type revenue as compared to the prior year quarter reflects
the Company's strong remarketing activities. Operating lease revenue minus
operating lease cost (the "Lease Margin") was $64 million, or 25.5% of
operating lease revenue, and $68 million, or 24.7% of operating lease revenue,
in the three months ended March 31, 1994 and 1993, respectively. Total leasing
revenue of $398 million for the quarter ended March 31, 1994 represented an
increase of 4% compared to the year earlier period. Total leasing revenue was
$383 million in the second quarter of fiscal 1993.
Total costs and expenses of $489 million for the quarter ended March 31, 1994
represented a decrease of 1% compared to the prior year period. The decrease
was primarily due to reduced operating lease and sales volume and reduced
interest expense, offset by higher sales-type costs associated with the
Company's increased remarketing activity compared to the prior year.
Cost of sales for the three months ended March 31, 1994 and 1993 were
$52 million and $72 million, respectively, a 28% decrease. Margins on sales
were 20% and 13% in the quarters ended March 31, 1994 and 1993, respectively.
The increased margin in fiscal 1994 compared to the prior year was due to
improved margins on remarketing.
Interest expense for the three months ended March 31, 1994 totaled $65 million
in comparison to $73 million in the quarter ended March 31, 1993 and $69 million
in the quarter ended December 31, 1993. The decrease in interest expense
primarily reflects declining interest rates and reduced average daily
borrowings.
Six Months Ended March 31, 1994
Total revenue was $1.1 billion for the six months ended March 31, 1994 and 1993.
Leasing revenue of $790 million for the six months ended March 31, 1994,
represented a decrease of 1% compared to the year earlier period. The decrease
relates primarily to a decline in operating lease revenue, offset by higher
sales-type revenue.
The Lease Margin was $133 million, or 25.8% of operating lease revenue, and
$141 million, or 25.0% of operating lease revenue, in the six months ended
March 31, 1994 and 1993, respectively. The increase in margin reflects higher
margins on increased remarketing activity.
Sales revenue of $143 million for the six months ended March 31, 1994,
represented a decrease of 17% compared to the year earlier period. The decrease
in sales revenue as compared to the year earlier period is primarily due to
reduced mainframe sales and
<PAGE>
lower sales revenue per unit on mainframes as a result of reductions in the fair
market value.
Total costs and expenses of $986 million for the six months ended
March 31, 1994, represented a decrease of 4% over the comparative period of the
prior year.
Cost of sales for the six months ended March 31, 1994 and 1993 were $118 million
and $153 million, respectively, a decrease of 23%. This decrease relates
directly to the decrease in sales volume.
Interest expense was $134 million for the six months ended March 31, 1994 as
compared to $150 million for the year earlier period. The decrease in interest
expense is primarily due to declining interest rates on borrowings combined
with reduced average daily borrowings. The reduction in average daily
borrowings (see Note 3 of Notes to Consolidated Financial Statements on page 8)
is due to the cash flow generated from the lease portfolio coupled with reduced
new equipment leasing volume resulting in lower equipment purchases.
Financial Condition
The Company's current financial resources and estimated cash flows from
operations are considered adequate to fund anticipated future growth and
operating requirements. The Company utilizes a variety of financial
instruments to fund its short and long-term needs.
Capital expenditures for equipment are generally financed by cash provided
by operating activities, recourse debt, or by assigning the noncancellable
lease rentals to various financial institutions at fixed interest rates on a
nonrecourse basis. Cash provided by operating activities for the six months
ended March 31, 1994 was $856 million, compared to $1.0 billion for the year
earlier period. Cash provided by operations has been used to finance
equipment purchases and, accordingly, had a positive impact on the level of
borrowing required to support the Company's investment in its lease portfolio.
The Company expects this trend to continue, with cash flow from leasing and
remarketing reinvested in the equipment portfolio.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit No. Description of Exhibit
4.01 Indenture Agreement between Registrant and Citibank, N.A., as Trustee
dated as of June 15, 1992
Incorporated by reference to Exhibit 4.1 filed with the Company's Current
Report on Form 8-K dated September 1, 1992, as filed with the Commission
on September 2, 1992, File No. 1-7725, the copy of Indenture, dated as of
June 15, 1992 between Registrant and Citibank, N.A., as Trustee, (said
Indenture defines certain rights of security holders).
4.02 Indenture between Registrant and Chemical Bank, N.A., as Trustee dated
as of April 1, 1988
Incorporated by reference to Exhibit 4.5 filed with the Form 8 Amendment
to the Company's Annual Report on Form 10-K for the year ended
September 30, 1990, filed February 21, 1991, File No. 1-7725, the copy of
Indenture dated as of April 1, 1988, between Registrant and Manufacturers
Hanover Trust Company, as Trustee, (said Indenture defines certain rights
of security holders).
4.03 First Supplemental Indenture between Registrant and Chemical Bank, N.A.,
as Trustee dated as of January 1, 1990
Incorporated by reference to Exhibit 4.8 filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1990,
File No. 1-7725, the copy of the First Supplemental Indenture dated as of
January 1, 1990, between Registrant and Manufufacturers Hanover Trust
Company, as Trustee (said Indenture defines certain rights of security
holders).
4.04 Shareholder Rights Agreement dated November 18, 1987
Incorporated by reference to Exhibit 4.4 filed with the Company's Annual
Report for the year ended September 30, 1987 on Form 10-K,
File No. 1-7725.
4.05 Shareholder Rights Agreement
Incorporated by reference to Pages 7 - 10 of the Company's Form 10-K for
the fiscal year ended September 30, 1987, File No. 1-7725.
4.06 Certificate of Designations with respect to the Company's 8 3/4%
Cumulative Preferred Stock, Series A, as filed with the Secretary of
State of Delaware on September 18, 1992.
Incorporated by reference to Exhibit 4.1 filed with the Company's Current
Report on Form 8-K dated September 17, 1992, as filed with the Commission
October 9, 1992, File No. 1-7725.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit No. Description of Exhibit
4.07 Certificate of Designations with respect to the Company's 8 3/4%
Cumulative Preferred Stock, Series B, as filed with the Secretary
of the State of Delaware on July 2, 1993.
Incorporated by reference to Exhibit 4.1 filed with the Company's Current
Report on Form 8-K dated June 30, 1993, as filed with the Commission
July 21, 1993, File No. 1-7725.
11 Computation of Earnings Per Common Share
12 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
b) Reports on Form 8-K:
None.
<PAGE>
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.
COMDISCO, INC.
Registrant
Date: May 16, 1994 /s/ John J. Vosicky
John J. Vosicky
Senior Vice President and
Chief Financial Officer
By: /S/
<TABLE>
Comdisco, Inc. and Subsidiaries Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(in millions except per share data)
Average shares used in computing net earnings per common and common equivalent
share were as follows:
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Average shares outstanding 39 41 39 41
Effect of dilutive options - - - -
Total 39 41 39 41
Net earnings to
common stockholders $ 22 $ 19 $ 43 $ 58
Net earnings per common and
common equivalent share $ .55 $ .48 $1.09 $1.43
</TABLE>
<TABLE>
Comdisco, Inc. and Subsidiaries Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(dollars in millions)
<CAPTION>
Six Months
Ended March 31 For the Years Ended September 30
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest expense <F1> $135 $152 $295 $355 $371 $343 $290
Approximate portion of rental expense
representative of an interest factor 7 11 22 29 37 39 35
Fixed charges 142 163 317 384 408 382 325
Preferred stock dividends <F2> 2 7 5 11 - - -
Combined fixed charges and
preferred stock dividends 149 168 328 384 408 382 325
Earnings from continuing operations
before income taxes and extraordinary item,
net of preferred stock dividends 75 66 137 34 136 134 167
Earnings from continuing operations before
income taxes, extraordinary item, combined
fixed charges and preferred stock dividend $224 $234 $465 $418 $544 $516 $492
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.50 1.39 1.42 1.09 1.33 1.35 1.51
Rental expense:
Equipment subleases $ 17 $ 30 $ 57 $ 77 $103 $109 $ 99
Office space, furniture, etc. 4 4 8 10 9 8 7
Total $ 21 $ 34 $ 65 $ 87 $112 $117 $106
1/3 of rental expense $ 7 $ 11 $ 22 $ 29 $ 37 $ 39 $ 35
<FN>
<F1> Includes interest expense incurred by disaster recovery services and
included in disaster recovery services expenses on the statements of
earnings.
<F2> There were no preferred stock dividend requirements prior to fiscal year
1993.
</TABLE>
