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 quarterly period ended June 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 1-7725
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 June 30, 1995
-------------- ----------------------- -----------------
Common stock, New York Stock Exchange 34,992,936
$.10 par value Chicago 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. Yes XX No .
<PAGE>
Comdisco, Inc. and Subsidiaries
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings and Retained Earnings --
Three and Nine Months Ended June 30, 1995 and 1994.................... 3
Consolidated Balance Sheets --
June 30, 1995 and September 30, 1994.................................. 4
Consolidated Statements of Cash Flows --
Nine Months Ended June 30, 1995 and 1994.............................. 5
Notes to Consolidated Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 13
SIGNATURES.................................................................. 15
<PAGE>
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 Nine Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
------------------ -----------------
1995 1994 1995 1994
----- ---- ----- ----
<S> <C> <C> <C> <C>
Revenue
Leasing
Operating ..................................... $ 291 $ 244 $ 812 $ 760
Direct financing .............................. 44 46 137 139
Sales-type .................................... 53 74 210 255
-------- -------- -------- --------
Total leasing .............................. 388 364 1,159 1,154
Sales ........................................... 74 64 269 207
Disaster recovery ............................... 68 60 197 178
Other ........................................... 9 26 31 40
-------- -------- -------- --------
Total revenue ................................. 539 514 1,656 1,579
-------- -------- -------- --------
Costs and expenses
Leasing
Operating ..................................... 214 181 597 564
Sales-type .................................... 35 51 156 194
-------- -------- -------- --------
Total leasing .............................. 249 232 753 758
Sales ........................................... 62 53 225 171
Disaster recovery ............................... 60 55 176 166
Selling, general and administrative ............. 58 60 172 157
Litigation charge ............................... -- 10 -- 10
Interest ........................................ 68 64 206 198
-------- -------- -------- --------
Total costs and expenses ...................... 497 474 1,532 1,460
-------- -------- -------- --------
Earnings before income taxes ....................... 42 40 124 119
Income taxes ....................................... 16 16 47 48
-------- -------- -------- --------
Net earnings before preferred dividends ........... 26 24 77 71
Preferred dividends ................................ (2) (2) (6) (6)
-------- -------- -------- --------
Net earnings to common stockholders ............... $ 24 $ 22 $ 71 $ 65
======== ======== ======== ========
Retained earnings at beginning of period ........... $ 721 $ 686 $ 681 $ 650
Net earnings to common stockholders ............... 24 22 71 65
Cash dividends paid on common stock ................ (3) (3) (10) (10)
-------- -------- -------- --------
Retained earnings at end of period ................. $ 742 $ 705 $ 742 $ 705
======== ======== ======== ========
Net earnings per common and common equivalent share:
Net earnings to common stockholders ......... $ .66 $ .57 $ 1.92 $ 1.66
======== ======== ======== ========
Cash dividends paid per common share ............... $ .09 $ .09 $ .27 $ .26
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions except number of shares)
<TABLE>
<CAPTION>
June 30 September 30
1995 1994
----------- ------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................. $ 54 $ 51
Cash - legally restricted ................................. 21 37
Receivables, net .......................................... 159 169
Inventory of equipment .................................... 154 145
Leased assets:
Direct financing and sales-type ......................... 2,028 2,144
Operating (net of accumulated depreciation) ............. 2,034 1,696
--------- ---------
Net leased assets ..................................... 4,062 3,840
Buildings, furniture and other, net ....................... 166 168
Other assets .............................................. 401 397
--------- ---------
$ 5,017 $ 4,807
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable ............................................. $ 790 $ 593
Term notes payable ........................................ 207 291
Senior notes .............................................. 1,328 1,073
Accounts payable .......................................... 99 84
Income taxes .............................................. 242 229
Other liabilities ......................................... 334 248
Discounted lease rentals .................................. 1,254 1,548
--------- ---------
4,254 4,066
--------- ---------
Stockholders' equity:
Preferred stock $.10 par value.
Authorized 100,000,000 shares:
8.75% Cumulative Preferred Stock, Series A and B.
$25 stated value and liquidation preference.
3,758,800 shares issued
(4,000,000 at September 30, 1994) ................... 94 100
Common stock $.10 par value.
Authorized 200,000,000 shares issued 47,833,401 shares
(47,300,054 at September 30, 1994) .................... 5 5
Additional paid-in capital .............................. 151 139
Deferred compensation (ESOP) ............................ (8) (10)
Deferred translation adjustment ......................... 15 --
Retained earnings ....................................... 742 681
--------- ---------
999 915
Common stock held in treasury, at cost; 12,840,465 shares
(10,604,146 shares at September 30, 1994) .............. (236) (174)
--------- ---------
Total stockholders' equity .......................... 763 741
--------- ---------
$ 5,017 $ 4,807
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Nine Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Operating lease and other leasing receipts .............. $ 934 $ 860
Direct financing and sales-type leasing receipts ........ 718 659
Leasing costs, primarily rentals paid ................... (28) (36)
Sales ................................................... 258 216
Sales costs ............................................. (135) (98)
Disaster recovery receipts .............................. 208 175
Disaster recovery costs ................................. (159) (149)
Other revenue ........................................... 31 20
Selling, general and administrative expenses ............ (176) (141)
Interest ................................................ (200) (200)
Income taxes ............................................ (7) (34)
--------- ---------
Net cash provided by operating activities ............. 1,444 1,272
--------- ---------
Cash flows from investing activities:
Equipment purchased for leasing .......................... (1,438) (1,068)
Investment in disaster recovery facilities ............... (6) (36)
Other .................................................... (14) (12)
--------- ---------
Net cash used in investing activities ................. (1,458) (1,116)
--------- ---------
Cash flows from financing activities:
Discounted lease proceeds ............................... 236 520
Net increase in notes and term notes payable ............ 197 127
Issuance of term notes and senior notes ................. 954 232
Maturities and repurchases of term notes and senior notes (765) (384)
Principal payments on nonrecourse debt .................. (530) (639)
Common stock repurchased and placed in treasury ......... (80) (27)
Preferred stock repurchased ............................. (6) --
Decrease in legally restricted cash .................... 16 1
Dividends paid on common stock .......................... (10) (10)
Dividends paid on preferred stock ....................... (6) (6)
Other ................................................... 11 6
--------- ---------
Net cash provided by (used) in financing activities ... 17 (180)
--------- ---------
Net increase (decrease) in cash and cash equivalents ....... 3 (24)
Cash and cash equivalents at beginning of period ........... 51 70
--------- ---------
Cash and cash equivalents at end of period ................. $ 54 $ 46
========= =========
</TABLE>
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- CONTINUED
(in millions)
Nine Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------ -----
<S>
<C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings ................................................................... $ 77 $ 71
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Leasing costs, primarily
depreciation and amortization ............................................ 725 722
Leasing revenue, primarily principal portion of
direct financing and sales-type lease rentals ............................ 493 365
Cost of sales .............................................................. 90 73
Interest ................................................................... 6 (2)
Litigation charge .......................................................... -- 10
Income taxes ............................................................... 40 14
Other - net .................................................................... 13 19
------- -------
Net cash provided by operating activities .................... $ 1,444 $ 1,272
======= =======
Supplemental schedule of noncash financing activities:
Assumption of discounted lease rentals in lease
portfolio acquisition ................................................... $ -- $ 2
======= =======
Common stock issued upon conversion of 6% convertible
subordinated promissory note ............................................ $ 20 --
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Comdisco, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995 and 1994
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
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, 1994.
The balance sheet at September 30, 1994 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, 1994.
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. Interest-Bearing Liabilities
At June 30, 1995, the Company had $1.2 billion of available domestic
and international borrowing capacity under various lines of credit from
commercial banks and commercial paper facilities, of which
approximately $410 million was unused.
The average daily borrowings outstanding during the nine months ended
June 30, 1995 were approximately $3.7 billion, with a related weighted
average interest rate of 7.25%. This compares to average daily
borrowings during the first nine months of fiscal 1994 of approximately
$3.6 billion, with a related weighted average interest rate of 7.17%.
3. Senior Notes
On February 13, 1995, the Company filed a registration statement on
Form S-3 with the Securities and Exchange Commission for a shelf
offering of up to $500 million of Senior Debt Securities (the "1995
Shelf") on terms to be set at the time of each sale.
Pursuant to the 1995 Shelf, the Company, on April 13, 1995 (the
"Funding Date"), issued $200 million of 7.25% Notes Due April 15, 1998
(the "7.25% Notes"). Between the Funding Date and the maturity of the
Company's outstanding 8.95% Senior Notes due May 15, 1995, which
aggregated $150 million in principal amount (the "8.95% Senior Notes"),
the Company used the net proceeds from the sale of the 7.25% Notes to
reduce outstanding notes payable (short-term debt), which in turn made
short-term debt available to redeem the 8.95% Senior Notes.
The Company originally designated $250 million in Debt Securities as
"Medium Term Notes, Series D" under the 1995 Shelf, $50 million of
which Medium Term Notes have been issued. On June 6, 1995, the Company
redesignated $150 million of the remaining $200 million of Medium Term
Notes, together with $50 million in Debt Securities previously
undesignated under the 1995 Shelf as its "6.50% Notes Due June 15,
2000" (the "6.50% Notes"), and the Company issued the aggregate $200
million of the 6.50% Notes on June 15, 1995. The net proceeds of the
sale of the 6.50% Notes have been used for general corporate purposes.
An aggregate of $50 million of Medium-Term Notes remain available for
issuance under the 1995 Shelf.
<PAGE>
4. Common Stock
On July 25, 1995, the Board of Directors declared a quarterly cash
dividend of $.09 per common share to be paid on September 4, 1995 to
common stockholders of record as of August 4, 1995.
During the quarter ended June 30, 1995, the Company purchased 456,330
shares of its common stock at an aggregate cost of approximately $13
million. At June 30, 1995, the Company had a remaining authorization of
approximately $2 million to purchase common stock. On July 25, 1995,
the Board of Directors authorized an additional $25 million for the
Company's repurchase plan.
On March 1, 1995, the Company issued 1 million shares from Treasury
upon the conversion of a $20 million convertible subordinated
promissory note. These shares were repurchased on the same day at a
price of $25 per share.
5. Earnings Per Common Share
Average common and common equivalent shares outstanding for the three
months ended June 30, 1995 and 1994 were 36,574,534 and 38,331,698,
respectively. Average common and common equivalent shares outstanding
for the nine months ended June 30, 1995 and 1994 were 36,875,038 and
38,835,317, 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.
<PAGE>
Comdisco, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Earnings
------------
Net earnings to common stockholders (hereinafter referred to as "net
earnings") for the three months ended June 30, 1995 were $24 million,
or $.66 per share, as compared to $22 million, or $.57 per share, for
the three months ended June 30, 1994. Net earnings for the nine months
ended June 30, 1995, were $71 million, or $1.92 per share, as compared
to $65 million, or $1.66 per share, for the year earlier period. The
increase in net earnings in the three and nine months ended June 30,
1995 compared to the year earlier periods is due to increases in
earnings contributions from operating leases, sales and disaster
recovery activities and, offset by increases in selling, general and
administrative expense (see below under "Three months ended June 30,
1995" and "Nine months ended June 30, 1995" for the definition of, and
information on, the Proceeds and the Contribution and their impact on
the period to period comparisons of the "other revenue" and "selling,
general and administrative expense" income statement line items). A
decrease in the estimated effective tax rate from the 40% utilized in
the three and nine months ended June 30, 1994 compared to 38% in the
current year periods also positively impacted net earnings. Overall
remarketing activity remained strong, although such activity slowed
somewhat in the current quarter compared to the first two quarters of
fiscal 1995, and margins on remarketing remained stable. Earnings per
share in the current year periods benefited from the Company's stock
repurchase program, which has reduced the average common equivalent
shares outstanding.
The Company's operating results are subject to quarterly fluctuations
resulting from a variety of factors, including product announcements by
manufacturers, economic conditions, interest rate fluctuations and
variations in the mix of leases written. The mix of leases written in a
quarter is 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 nine months ended June 30, 1995
increased as compared to the year earlier periods. In general,
improving worldwide economies coupled with continued demand for high
technology equipment, including mainframes, have had a favorable impact
on volume in the current fiscal year. Other factors having a positive
impact on volume include the acquisition of Promodata S.A. in June 1994
(the "Acquisition"), the growth of the Company's semiconductor
manufacturing equipment leasing activities, and improving markets in
Europe. This growth in volume results in an increased amount of
equipment available for remarketing in future periods.
Cost of equipment placed on lease was $518 million during the quarter
ended June 30, 1995. This compares to cost of equipment placed on lease
of $425 million and $536 million during the quarters ended June 30,1994
and March 31, 1995, respectively. During the nine months ended June 30,
1995, cost of equipment placed on lease totaled $1.6 billion compared
to $1.2 billion during the nine months ended June 30, 1994.
During the last eighteen months, the mainframe market has remained
strong. Recent announcements by the major manufacturers indicate a
backlog in orders. Additionally, Hitachi Data Systems has announced the
"Skylark" family of processors that are expected to begin shipment in
late 1995. In addition to mainframes there are technological advances
in both direct access storage devices and tape drives. The Company
remains an active participant in the mainframe and related peripheral
markets.
<PAGE>
Under the terms of the Acquisition, the Company assumed management
responsibility for the Promodata lease portfolio through initial lease
termination and ownership of the equipment thereafter. The Company
earns a fee for managing the Promodata lease portfolio. The Acquisition
has had a favorable impact on the Company's operating lease portfolio
and related operating lease revenue resulting from the remarketing of
the Promodata lease portfolio. Management fees are included in other
revenue. The Acquisition also increased selling, general and
administrative expenses, primarily personnel related costs, as
Promodata personnel necessary for the on-going management of the
portfolio transferred to the Company.
Disaster Recovery Services
--------------------------
The Company's disaster recover activities have remained strong
throughout the current fiscal year. New recovery services and expanded
platform support coupled with enhancements to existing services has
enabled the Company to expand its revenue base with existing customers,
while attracting new customers. This growth, in conjunction with strong
cost containment efforts and tight capital budgeting has resulted in
higher profit contributions and improved margins from these activities.
The Company will continue to invest in markets with growth
opportunities, while maintaining its technological capabilities in
existing and developing markets.
Systems Integration
-------------------
The emerging markets for client/server and distributed processing
represent opportunities for hardware, disaster recovery and consulting
services. The Company is developing services to assist customers in the
planning, design and implementation of distributed applications and
data, integrating multiple departmental networks within the corporate
network, and tracking and controlling all technology assets in the
enterprise. While these activities generated revenue in both the second
and third quarters of fiscal 1995, the Company does not anticipate
earnings contributions from such activities until late fiscal 1996.
Three months ended June 30, 1995
--------------------------------
Total revenue for the three months ended June 30, 1995 was $539 million
compared to $514 million in the prior year quarter. Total leasing
revenue of $388 million for the quarter ended June 30, 1995 represented
an increase of 7% compared to the year earlier period. Total leasing
revenue was $411 million in the second quarter of fiscal 1995. The
increase in total leasing revenue in the current quarter compared to
the prior year quarter is due to increased operating lease revenue.
Operating lease revenue in the current quarter increased compared to
the second quarter of fiscal 1995, representing the third consecutive
quarter-to-quarter increase in operating lease revenue. The Company
expects operating lease revenue to increase in the fourth quarter as
compared to the third quarter of fiscal 1995, primarily due to the
increase in operating leased assets since September 30, 1994. The
decrease in total leasing revenue in the current quarter compared to
the second quarter of fiscal 1995 is due to a decrease in remarketing
activities, which resulted in lower sales-type lease revenue.
Operating lease revenue minus operating lease cost was $77 million, or
26.5% of operating lease revenue (the "Lease Margin"), and $63 million,
or 25.8% of operating lease revenue, in the three months ended June 30,
1995 and 1994, respectively. The Company expects the Lease Margin to
remain at or slightly below current levels throughout the remainder of
fiscal 1995.
Revenue from disaster recovery activities for the three months ended
June 30, 1995 and 1994 was $68 million and $60 million, respectively, a
12% increase. Cost of disaster recovery activities for the three months
ended June 30, 1995 was $60 million and $55 million, respectively, an
8% increase.
Other revenue for the three months ended June 30, 1995 and 1994 was $9
million and $26 million, respectively. Fiscal 1994 other revenue
includes the receipt of key-man life insurance proceeds of $20 million
(the "Proceeds") as a result of the death on June 24, 1994 of Mr.
Kenneth N. Pontikes, Founder, Chairman of the Board and President of
Comdisco, Inc. Excluding the Proceeds, the increase in the current
period compared to the prior year period is primarily due to revenue
from managing the Promodata S.A. lease portfolio. Revenue from the sale
of warrants and ownership positions generated in conjunction with the
Company's lease financing transactions with early-stage high technology
companies was $3 million for the three months ended June 30, 1995 and
1994.
<PAGE>
Total costs and expenses of $497 million for the quarter ended June 30,
1995 represented a 5% increase compared to the prior year period. The
increase is primarily due to increased leasing costs and cost of sales
related to increasing operating lease revenue and sales revenue,
respectively. Other factors contributing to the increase include higher
selling, general and administrative costs (excluding the Contribution)
and an increase in interest expense.
Cost of sales for the three months ended June 30, 1995 and 1994 were
$62 million and $53 million, respectively. Margins on sales were 16%
and 17% in the quarters ended June 30, 1995 and 1994, respectively.
In the third quarter of fiscal 1994, the Company increased by $10
million the litigation reserve, originally established in fiscal 1992,
to cover the then current estimate of the continuing costs associated
with the Company's litigation with International Business Machines
Corporation ("IBM"), IBM Credit Corporation and certain IBM-related
limited partnerships. This litigation was settled in August 1994. (See
Notes 8 and 9 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended September 30,
1994 (the "1994 Consolidated Financial Statements") for a discussion of
the litigation reserve and the IBM litigation settlement).
Selling, general and administrative expenses were $58 and $60 million
for the three months ended June 30, 1995 and 1994, respectively.
Selling, general and administrative expenses were $58 million in the
second quarter of fiscal 1995. During the quarter ended June 30,1994,
the Company recorded a contribution of $10 million (the "Contribution")
to establish and fund the Comdisco Foundation (the "Foundation"). The
Foundation is intended to fulfill the Company's social and
philanthropic responsibilities to the communities in which it operates.
Excluding the effect of the Contribution, the increase in selling,
general and administrative expenses is primarily due to the
Acquisition, which increased selling, general and administrative
expenses by approximately $5 million in the current quarter compared to
the prior year quarter. Other factors contributing to the increase
include the development of the Company's system integration activities,
offset by reduced expenditures resulting from improved operating
efficiencies in the Company's leasing operations.
Interest expense for the three months ended June 30, 1995 totaled $68
million in comparison to $64 million in the quarter ended June 30, 1994
and $70 million in the quarter ended March 31, 1995. The increase in
interest expense in the current period compared to the year earlier
period primarily reflects rising interest rates on domestic short-term
borrowings and an increase in average daily borrowings (see Note 2 of
Notes to Consolidated Financial Statements). The increase in average
daily borrowings in the current quarter as compared to the year ago
period reflects the increase in leasing volume and the impact of the
Company's stock repurchase program. The decrease in interest expense in
the three months ended June 30, 1995 compared to the three months ended
March 31, 1995 is due to reduced average daily borrowings resulting
from higher net cash provided by operating activities.
Nine Months Ended June 30, 1995
-------------------------------
Total revenue was $1.7 billion and $1.6 billion for the nine months
ended June 30, 1995 and 1994, respectively. Leasing revenue was $1.2
billion for the nine months ended June 30, 1995 and 1994. Increases in
operating lease revenue were offset by decreases in sale-type lease
revenue. Revenue from the sale of warrants and ownership positions
generated in conjunction with the Company's lease financing
transactions with early-stage high technology companies was $7 million
for the nine months ended June 30, 1995 and 1994.Other revenue in the
current year period includes $3 million of gains generated from the
sale of stock originally received by the Company in fiscal 1993 in
connection with the sale of its formerly wholly-owned subsidiary,
Comdisco Systems, Inc. Other revenue in the prior year quarter includes
the Proceeds.
Total costs and expenses of $1.5 billion for the nine months ended June
30, 1995, represented an increase of 5% over the comparative period of
the prior year. The increase is primarily due to higher operating lease
costs and costs of sales resulting from increased operating lease
revenue and sales, respectively, offset by lower sale-type costs.
<PAGE>
The Lease Margin was $215 million, or 26.5% of operating lease revenue,
and $196 million, or 25.8% of operating lease revenue, in the nine
months ended June 30, 1995 and 1994, respectively.
Selling, general and administrative expenses totaled $172 million and
$157 million for the nine months ended June 30, 1995 and 1994,
respectively. The increase is primarily due to the Acquisition, which
increased selling, general and administrative expense by $15 million in
the current period. Selling, general and administrative expenses for
the nine months ended June 30, 1994 include the Contribution.
Interest expense was $206 million for the nine months ended June 30,
1995 as compared to $198 million for the year earlier period. The
increase in interest expense is primarily due to rising interest rates
and higher average daily borrowings.
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
noncancelable lease rentals to various financial institutions at fixed
interest rates on a nonrecourse basis. Cash provided by operating
activities for the nine months ended June 30, 1995 was $1.4 billion,
compared to $1.3 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 The Fuji Bank and
Trust Company, as Trustee, dated as of February 1, 1995
Incorporated by reference to Exhibit 4.1 filed with the
Company's with the Company's Current Report on Form 8-K dated
May 15, 1995, as filed with the Commission on May 15, 1995,
File No. 1-7725, the copy of the Indenture dated as of February
1, 1995 between the Registrant an The Fuji Bank and Trust
Company, as Trustee (said Indenture defines certain rights of
security holders).
4.02 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).
4.03 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).
4.04 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 Manufacturers Hanover Trust Company, as Trustee
(said Indenture defines certain rights of security holders).
4.05 Shareholder Rights Agreement, as amended and restated as of
November 7, 1994, between Comdisco, Inc. and Chemical Bank, as
Rights Agent, which includes as Exhibit A thereto the Form of
Rights Certificate
Incorporated by reference to Exhibit 4.1 filed with the
Company's Current Report on Form 8-K, filed on December 6,1994,
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
<PAGE>
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.
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
27 Financial Data Schedule
b) Reports on Form 8-K:
On May 15, 1995, the Company filed a Current Report on Form 8-K, dated
May 15, 1995, and on May 16, 1995, a related Form 8-K/A (the
"Reports"), reporting Item 7. Financial Statements and Exhibits. The
exhibit in the Reports was the form of executed Indenture dated
February 1, 1995 between the Registrant and The Fuji Bank and Trust
Company, as Trustee.
On June 23, 1995, the Company filed a Current Report on Form 8-K, dated
June 23, 1995 reporting Item 7. Financial Statements and Exhibits. The
exhibits included in the report related to the Company's $200 million
6.50% Senior Notes due June 15, 2000.
<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: July 31, 1995 /s/ John J. Vosicky
-------------------
John J. Vosicky
Executive Vice President and
Chief Financial Officer
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:
<TABLE>
Three Months Nine Months
ended ended
June 30 June 30
------------ -------------
1995 1994 1995 1994
---- ---- ----- -----
<S> <C> <C> <C> <C>
Average shares outstanding ........... 35 38 36 39
Effect of dilutive options ........... 2 -- 1 --
---- ---- ----- -----
Total ............................. 37 38 37 39
==== ==== ===== =====
Net earnings to
common stockholders .............. $ 24 $ 22 $ 71 $ 65
==== ==== ===== =====
Net earnings per common and
common equivalent share.......... $.66 $.57 $1.92 $1.66
==== ==== ===== =====
</TABLE>
Comdisco, Inc. and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(dollars in millions)
<TABLE>
<CAPTION>
Nine Months
Ended
June 30, For the Years Ended September 30,
----------- --------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest expense <F1> ........................................................... $209 $203 $266 $295 $355 $371 $343
Approximate portion of rental expense
representative of an interest factor .......................................... 9 10 13 22 29 37 39
---- ---- ---- ---- ---- ---- ----
Fixed charges ................................................................... 218 213 279 317 384 408 382
Preferred stock dividends <F2>................................................... 10 11 15 11 -- -- --
---- ---- ---- ---- ---- ---- ----
Combined fixed charges and
preferred stock dividends ..................................................... 228 224 294 328 384 408 382
Earnings from continuing operations
before income taxes and extraordinary item,
net of preferred stock dividends ................................................ 118 113 80 137 34 136 134
---- ---- ---- ---- ---- ---- ----
Earnings from continuing operations before
income taxes, extraordinary item, combined
fixed charges and preferred stock dividend ...................................... $346 $337 $374 $465 $418 $544 $516
==== ==== ==== ==== ==== ==== ====
Ratio of earnings to combined fixed charges
and preferred stock dividends ................................................... 1.52 1.50 1.27 1.42 1.09 1.33 1.35
==== ==== ==== ==== ==== ==== ====
Rental expense:
Equipment subleases ............................................................. $ 20 $ 24 $ 30 $ 57 $ 77 $103 $109
Office space, furniture, etc .................................................... 6 6 8 8 10 9 8
---- ---- ---- ---- ---- ---- ----
Total ........................................................................ $ 26 $ 30 $ 38 $ 65 $ 87 $112 $117
==== ==== ==== ==== ==== ==== ====
1/3 of rental expense ........................................................ $ 9 $ 10 $ 13 $ 22 $ 29 $ 37 $ 39
==== ==== ==== ==== ==== ==== ====
<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 for fiscal years 1990
through 1992.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information
extracted from the Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000722487
<NAME> Comdisco, Inc.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> Oct-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 54
<SECURITIES> 0
<RECEIVABLES> 173
<ALLOWANCES> (14)
<INVENTORY> 154
<CURRENT-ASSETS> 367
<PP&E> 4,062
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,017
<CURRENT-LIABILITIES> 889
<BONDS> 1,328
<COMMON> 5
0
94
<OTHER-SE> 664
<TOTAL-LIABILITY-AND-EQUITY> 5,017
<SALES> 1,159
<TOTAL-REVENUES> 1,656
<CGS> 753
<TOTAL-COSTS> 1,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206
<INCOME-PRETAX> 124
<INCOME-TAX> 47
<INCOME-CONTINUING> 77
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71
<EPS-PRIMARY> 1.920
<EPS-DILUTED> 1.920
</TABLE>
