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 DECEMBER 31, 1994
[ ] 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 December 31, 1994
Common stock, New York Stock Exchange 36,349,626
$.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 .
Comdisco, Inc. and Subsidiaries
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings and Retained Earnings --
Three Months Ended December 31, 1994 and 1993 3
Consolidated Balance Sheets --
December 31, 1994 and September 30, 1994 4
Consolidated Statements of Cash Flows --
Three Months Ended December 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 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 13
<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 Months Ended December 31, 1994 and 1993
<CAPTION>
Three Months Ended
December 31
<S> <C> <C>
Revenue 1994 1993
Leasing
Operating $ 249 $ 265
Direct financing 47 46
Sales-type 64 81
Total leasing 360 392
Sales 90 78
Disaster recovery 64 58
Other 10 8
Total revenue 524 536
Costs and expenses
Leasing
Operating 181 196
Sales-type 46 63
Total leasing 227 259
Sales 74 66
Disaster recovery 58 55
Selling, general and administrative 56 48
Interest 68 69
Total costs and expenses 483 497
Earnings before income taxes 41 39
Income taxes 16 16
Net earnings before preferred dividends 25 23
Preferred dividends (2) (2)
Net earnings available to common
stockholders $ 23 $ 21
Retained earnings at beginning of period $ 681 $ 650
Net earnings available to common stockholders 23 21
Cash dividends paid on common stock (3) (3)
Retained earnings at end of period $ 701 $ 668
Net earnings per common and
common equivalent share:
Net earnings available to common stockholders $0.62 $ .54
Common and common equivalent shares outstanding 37 39
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions except number of shares)
<CAPTION>
December 31 September 30
1994 1994
(unaudited) (audited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 65 $51
Cash - legally restricted 35 37
Receivables, net 195 169
Inventory of equipment 171 145
Leased assets:
Direct financing and sales-type 2,155 2,144
Operating (net of accumulated depreciation) 1,799 1,696
Net leased assets 3,954 3,840
Buildings, furniture and other, net 164 168
Other assets 411 397
$4,995 $4,807
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 525 $ 593
Term notes payable 543 291
Senior and subordinated debt 1,039 1,073
Accounts payable 132 84
Income taxes 239 229
Other liabilities 299 248
Discounted lease rentals 1,473 1,548
4,250 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.
3,800,000 shares issued (4,000,000 at September, 1994) 95 100
Common stock $.10 par value.
Authorized 200,00,000 shares issued 47,306,211 shares
(47,300,054 at September 30, 1994) 5 5
Additional paid-in capital 139 139
Deferred compensation (ESOP) ( 9) (10)
Deferred translation adjustment (5) -
Retained earnings 701 681
926 915
Common stock held in treasury, at cost (181) (174)
Total stockholders' equity 745 741
$4,995 $4,807
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Three Months Ended December 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 $322 $300
Direct financing and sales-type leasing receipts 236 211
Leasing costs, primarily rentals paid (10) (14)
Sales 77 89
Sales costs (44) (41)
Disaster recovery receipts 66 58
Disaster recovery costs (53) (52)
Other revenue 10 8
Selling, general and administrative expenses (63) (55)
Interest (64) (73)
Income taxes 13 (4)
Net cash provided by operating activities 490 427
Cash flows from investing activities:
Equipment purchased for leasing (513) (414)
Investment in disaster recovery facilities (3) (4)
Other (22) (2)
Net cash used in investing activities (538) (420)
Cash flows from financing activities:
Discounted lease proceeds 115 258
Net decrease in notes payable (68) (88)
Issuance of term notes and senior notes 261 34
Maturities and repurchases of term notes and senior notes (43) -
Principal payments on secured debt (190) (225)
Decrease (increase) in legally restricted cash 2 (5)
Preferred stock repurchased (5) -
Common stock repurchased and placed in treasury (7) (6)
Dividends paid on common stock (3) (3)
Dividends paid on preferred stock (2) (2)
Other 2 -
Net cash provided (used) by financing activities 62 (37)
Net increase (decrease) in cash and cash equivalents 14 (30)
Cash and cash equivalents at beginning of period 51 70
Cash and cash equivalents at end of period $ 65 $ 40
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- CONTINUED
(in millions)
Three Months Ended December 31, 1994 and 1993
Reconciliation of net earnings to net cash
provided by operating activities:
<CAPTION>
1994 1993
<S> <C> <C>
Net earnings $25 $ 23
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Leasing costs, primarily
depreciation and amortization 217 245
Leasing revenue, primarily principal portion of
direct financing and sales-type lease rentals 198 119
Cost of sales 30 25
Interest 4 (4)
Income taxes 29 12
Other - net (13) 7
Net cash provided by operating activities $ 490 $427
Supplemental schedule of noncash financing activities:
Assumption of discounted lease rentals
in lease portfolio acquisition $ - $ 2
See accompanying notes to consolidated financial statements.
</TABLE>
Comdisco, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 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 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 December 31, 1994, 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 $625 million was
unused.
The average daily borrowings outstanding during the three months ended
December 31, 1994 were approximately $3.6 billion, with a related weighted
average interest rate of 7.22%. This compares to average daily borrowings
during the first three months of fiscal 1994 of approximately $3.6 billion,
with a related weighted average interest rate of 7.20%.
3. Senior Notes
In June, 1992, the Company filed a Registration Statement on Form S-3 with the
Securities and Exchange Commission for the shelf offering (the "Shelf
Offering") of up to $500 million of senior debt securities with terms to be
set at the time of the sale. At December 31, 1994, $73 million of debt
securities remain available for issuance under the Shelf Offering.
4. Common Stock
On January 24, 1995, the Board of Directors declared a quarterly cash dividend
of $.09 per share to be paid on March 13, 1995 to stockholders of record as of
February 10, 1995.
During the quarter ended December 31, 1994, the Company purchased 352,300
shares of its common stock at an aggregate cost of approximately $7 million.
An additional 1,345,872 shares were purchased between December 31, 1994 and
February 10, 1995 at a cost of $32 million.
5. Earnings Per Share
Average common and common equivalent shares outstanding for the three months
ended December 31, 1994 and 1993 were 37,185,845 and 39,145,796, respectively.
Earnings per common and common equivalent share reflects the assumed exercise
of stock options that would have a dilutive effect on earnings per share if
exercised.
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 December 31, 1994 were $23 million, or
$.62 per share, as compared to $21 million, or $.54 per share, for the three
months ended December 31, 1993. The increase in net earnings in the current
quarter compared to the year earlier period is due to an increase in earnings
contributions from sales and disaster recovery activities, offset by increases
in selling general and administrative expense. A decrease in the estimated
effective tax rate from the 40% utilized in the first quarter of fiscal 1994
compared to 38% in the current quarter also positively impacted net earnings.
Earnings per share in the current quarter benefited from the Company's stock
repurchase program, which has reduced the average common and 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, such as IBM Credit Corporation.
Three Months Ended December 31, 1994
Leasing volume in the first quarter of fiscal 1995 increased as compared to
the year earlier quarter and was at the highest level since the year ago
quarter. Cost of equipment placed on lease was $502 million during the
quarter ended December 31, 1994. This compares to cost of equipment placed on
lease of $462 million and $405 million during the quarters ended December 31,
1993 and September 30, 1994 respectively. Among other factors, the
acquisition of Promodata S. A. in June 1994, had a favorable impact on volume
in the current quarter. Remarketing activity declined compared to the fourth
quarter of fiscal 1994, however, overall remarketing activity remained strong
and margins on remarketing remained stable. Remarketing activity in the
fourth quarter of fiscal 1994 was unusually high.
Total revenue for the three months ended December 31, 1994 was $524 million
compared to $536 million in the prior year quarter. Total leasing revenue of
$360 million for the quarter ended December 31, 1994 represented a decrease of
8% compared to the year earlier period. Total leasing revenue was $384
million in the fourth quarter of fiscal 1994. The decline in total leasing
revenue in the current quarter compared to the fourth quarter is due to
reduced operating lease revenue. The decline in operating lease revenue as
compared to the prior year's quarter reflects the aging 3090 lease portfolio
and the gradual transition to the IBM ES/9000 series. The Company expects
operating lease revenue to increase in the second quarter as compared to the
first quarter of fiscal 1995, primarily due to the increase in operating
leased assets since September 30, 1994. Operating lease revenue in the first
quarter of fiscal 1995 increased compared to the fourth quarter of fiscal
1994, representing the first quarter-to-quarter increase in operating lease
revenue since the fourth quarter of fiscal 1991. The decline in total leasing
revenue in the current quarter compared to the fourth quarter of fiscal 1994
reflects reduced remarketing activities.
Operating lease revenue minus operating lease cost (the "Lease Margin") was
$68 million, or 27.3% of operating lease revenue, and $69 million, or 26.0% of
operating lease revenue, in the three months ended December 31, 1994 and 1993,
respectively. The Company expects the Lease Margin to remain at or slightly
above current levels throughout the remainder of fiscal 1995.
Revenue from disaster recovery activities for the three months ended December
31, 1994 and 1993 was $64 million and $58 million, respectively, a 10%
increase. Cost of disaster recovery activities for the three months ended
December 31, 1994 and 1993 was $58 million and $55 million, respectively, a 6%
increase.
Total costs and expenses of $483 million for the quarter ended December 31,
1994 represented a decrease of 3% compared to the prior year period. The
decrease was primarily due to reduced remarketing activities as compared to
the prior year period.
Cost of sales for the three months ended December 31, 1994 and 1993 were $74
million and $66 million, respectively, a 12% increase. Margins on sales were
18% and 15% in the quarters ended December 31, 1994 and 1993, respectively.
Selling, general and administrative expenses totaled $56 million in the
quarter ended December 31, 1994 compared to $48 million in the quarter ended
December 31, 1993. The increase is primarily due to the June 1994 acquisition
of the leasing business of Promodata S. A., which increased selling, general
and administrative expenses by approximately $5 million in the current
quarter.
Interest expense for the three months ended December 31, 1994 totaled $68
million in comparison to $69 million in the quarter ended December 31, 1993
and $65 million in the quarter ended September 30, 1994. The increase in
interest expense in the current quarter compared to the fourth quarter of
fiscal 1994 primarily reflects increasing interest rates on domestic
short-term borrowings and an increase in average daily borrowings (see Note 3
of Notes to Consolidated Financial Statements). The Company expects a
similar increase in the second quarter of fiscal 1995.
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 financed by cash flows from operations,
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 three months ended December 31, 1994
was $490 million, compared to $427 million 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.
<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 Manufacturers
Hanover Trust Company, as Trustee (said Indenture defines certain
rights of security holders).
4.04 Shareholder Rights Agreement dated November 18, 1987, 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.
4.05 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.
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.
10.05 Purchase Agreement dated January 27, 1995 by and among Computer
Discount Corporation, Nicholas K. Pontikes, as executor of the
Estate of Kenneth N. Pontikes, and Nicholas K. Pontikes as trustee
of the Pontikes Trust
Incorporated by reference to Exhibit 2 to Amendment No. 2 to
Schedule D filed by Nicholas K. Pontikes, the Pontikes Trust and
the Ponchil Limited Partnership, dated as of January 27, 1995 and
filed with the Commission on February 2, 1995, 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 January 31, 1995, the Company filed a current report on Form 8-K, dated
January 27, 1995, reporting Item 5. Other Events. The filing was for the
1,100,000 shares of common stock repurchased by the Company from the estate of
Mr. Kenneth N. Pontikes and related trusts.
<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: February 14, 1995 /s/ David J. Keenan
David J. Keenan
Vice President and
Corporate Controller
<PAGE>
<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
December 31
1994 1993
<S> <C> <C>
Average shares outstanding 36 39
Effect of dilutive options 1 -
Total 37 39
Net earnings available
to common stockholders $ 23 $ 21
Net earnings per common and
common equivalent share $.62 $.54
</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>
Three Months Ended
December 31 For the Years Ended September 30,
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1994 1993 1992 1991 1990
Fixed charges
Interest expense <F1> $ 69 69 266 295 355 371 343
Approximate portion of
rental expense representative
of an interest factor 3 4 13 22 29 37 39
Fixed charges 72 73 279 317 384 408 382
Preferred stock dividends<F2> 3 4 15 11 - - -
Combined fixed charges and
preferred stock dividends 75 77 294 328 384 408 382
Earnings from continuing operations
before income taxes and
extraordinary item, and cumulative
effect of change in accounting principle,
Net of preferred stock dividends 39 37 80 137 34 136 134
Earnings from continuing operations
before income taxes, extraordinary
item, cumulative effect of change
in accounting principle, net of
preferred stock dividend 114 114 374 465 418 544 516
Ratio of earnings to combined
fixed charges and preferred
stock dividends 1.52 1.48 1.27 1.42 1.09 1.33 1.35
Rental expense:
Equipment subleases $ 6 $ 10 $ 30 $ 57 $ 77 $103 $109
Office space, furniture, etc. 2 2 8 8 10 9 8
Total $ 8 $ 12 $ 38 $ 65 $ 87 $112 $117
1/3 of rental expense $ 3 $ 4 $ 13 $ 22 $ 29 $ 37 $ 39
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.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> DEC-31-1994
<CASH> 65
<SECURITIES> 0
<RECEIVABLES> 208
<ALLOWANCES> (13)
<INVENTORY> 171
<CURRENT-ASSETS> 431
<PP&E> 3,537
<DEPRECIATION> (1,574)
<TOTAL-ASSETS> 4,995
<CURRENT-LIABILITIES> 657
<BONDS> 1,039
<COMMON> 5
0
95
<OTHER-SE> 645
<TOTAL-LIABILITY-AND-EQUITY> 4,995
<SALES> 360
<TOTAL-REVENUES> 524
<CGS> 227
<TOTAL-COSTS> 227
<OTHER-EXPENSES> 188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 41
<INCOME-TAX> 16
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
