SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section
13 or 15(d) of the Securities
Exchange Act of 1934 For the
fiscal year ended September 30,
2000
or
[ ] Transition Report Pursuant to Section 13 of
15(d) of the Securities Exchange Act of 1934
For the transition period from
___________________ to ________________
Commission file number 1-7725
COMDISCO, INC.
(a Delaware Corporation)
6111 North River Road
Rosemont, Illinois 60018
Telephone (847) 698-3000
I.R.S. Employer Identification Number 36-2687938
Securities registered pursuant to Section
12(b) of the Act:
Name of each exchange
Titles of each class on which registered
-------------------- -------------------
Comdisco stock New York Stock Exchange
$.10 par value Chicago Stock Exchange, Inc.
Common Stock Purchase Rights-- New York Stock Exchange
Series C Junior Participating Preferred Chicago Stock Exchange, Inc.
Comdisco Ventures stock N/A
$.10 par value
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. .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Comdisco stock held by nonaffiliates of the
Registrant as of December 1, 2000 was approximately $1,323,000,000. For purposes
of the foregoing calculation only, all directors and executive officers of the
registrant have been deemed affiliates. As of September 30, 2000, there were
152,569,367 shares of the Registrant's Comdisco stock, $.10 par value,
outstanding. No other series of common stock of the Registrant has been issued.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Annual Report to Stockholders for the fiscal year
ended September 30, 2000 are incorporated by reference into
Parts I and II.
2. Portions of Comdisco, Inc.'s definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on February 1, 2001 filed
within 120 days of fiscal year end are incorporated by reference
into Part III.
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Comdisco, Inc. and Subsidiaries
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TABLE OF CONTENTS PAGE
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PART I.
Item 1. Business:
Overview............................................................................. 3
Investment Considerations............................................................ 5
Leasing and Services ................................................................ 9
Comdisco Ventures group .......................................................... 13
Item 2. Properties ............................................................................. 18
Item 3. Legal Proceedings ...................................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders..................................... 19
PART II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............... 20
Item 6. Selected Financial Data................................................................. 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .. 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............................. 21
Item 8. Financial Statements and Supplementary Data............................................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 22
PART III.
Item 10. Directors and Executive Officers of Registrant.......................................... 23
Item 11. Executive Compensation ................................................................. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management...................... 23
Item 13. Certain Relationships and Related Transactions.......................................... 23
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K......................... 24
SIGNATURES............................................................................................ 25
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE........................................ 26
INDEX TO EXHIBITS..................................................................................... 29
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Special Note: At a special meeting of stockholders on April 20, 2000,
stockholders approved the Company's tracking stock proposal, which
authorized the Company to amend and restate its certificate of
incorporation as of May 4, 2000 to: increase the total authorized shares of
common stock from 750,000,000 to 1,800,000,000; authorized the board of
directors to issue common stock in multiple series, with the initial two
series of common stock being Comdisco group stock and Comdisco Ventures
group stock; and reclassified each outstanding share of then existing
common stock as one share of Comdisco group stock. Unless the context
clearly indicates otherwise, references to "common stock" as of a date
prior to May 4, 2000 relate to the Company's then existing common stock,
$0.10 per share, and all references to "common stock" as of a date on and
after May 4, 2000, relate to the Company's Comdisco group stock. No
Comdisco Ventures group stock has been issued to date.
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PART I.
Item 1. Business
A. GENERAL DEVELOPMENT OF BUSINESS
OVERVIEW
Comdisco, Inc. (with its subsidiaries, the "Company" or "Comdisco") provides
global technology services to help its customers maximize technology
functionality, predictability and availability. The Company provides equipment
leasing, continuity, managed network services, and desktop management solutions.
These services are designed to provide integrated, long-term, cost effective
asset and technological planning as well as data and voice availability and
recovery to users of high technology equipment. Through its Ventures group,
Comdisco provides venture leases, venture debt and direct equity financing to
venture capital-backed companies. Additional information about each of the
business groups is included later in this section.
The executive offices of the Company are located in the Chicago area, at 6111
North River Road, Rosemont, Illinois, 60018, and its telephone number is (847)
698-3000.
GENERAL DEVELOPMENT OF BUSINESS
The Company was founded in 1969 and incorporated in Delaware in 1971. Since its
incorporation, the Company's business, its markets and the services it offers
and the way it conducts its business have changed significantly and are expected
to continue to change and evolve. These changes are primarily the result of
rapid changes in technology (including declining prices, manufacturer
consolidations and the rise of new industries such as telecommunications), the
rise of new dominant technologies (such as the Internet) and their related
impact on customers' needs and requirements. Initially, Comdisco was engaged
primarily in the procurement and placement of new and used computer equipment,
principally mainframe and related peripherals. Comdisco developed disaster
recovery and contingency planning services (collectively "continuity services")
in 1980. In the mid-1980's the company expanded its operations to include the
leasing of non-computer equipment (office equipment, PBX, point-of-sale, and
other high-technology equipment), eventually adding healthcare, communications,
semiconductor manufacturing and other industry specific equipment leasing,
remarketing and other services. In 1987, Comdisco formed Comdisco Ventures
group. Comdisco Ventures group has grown significantly in the last three fiscal
years and has become a significant and material contributor to the Company's
earnings. Since its inception in 1980, the company's continuity services have
evolved into two general categories; a) traditional disaster recovery, with
services delivered at the date of disaster; and 2) high availability services,
with continuous services (data protection, availability and management) in a
production environment.
On March 24, 1999, the Company announced a major shift in corporate strategy,
including its intent to focus on high-margin service businesses and shed
low-margin businesses, such as its mainframe leasing portfolio and medical
refurbishing business. In conjunction with its repositioning, the Company
recorded a one-time pre-tax charge of $150 million, $96 million after tax, or
approximately $0.59 per share, in the quarter ended March 31, 1999. The
components of this pretax charge include $100 million associated with the
Company's plans to exit the mainframe residual leasing business, $20 million to
exit the medical refurbishing business and $30 million associated with a
realignment of the service businesses. The Company completed the sale of its
mainframe computer leasing portfolio and the sale of the medical refurbishing
business in the fiscal quarter ended June 30, 1999. In addition to these sales,
the Company completed the sale of substantially its entire vendor lease
portfolio on September 30, 1999.
In fiscal 2000, the Company continued its focus on services, adding high
availability Web hosting solutions for e-business companies and expanded network
solutions for the connection of remote offices, teleworkers and mobile users and
services to manage bandwidth.
The Company acquired Prism Communication Services, Inc. ("Prism"), a provider of
dedicated high-speed connectivity, in February 1999, for a cash purchase price
of approximately $53 million. From the date of acquisition through September 30,
2000, the Company provided Prism with cash totaling $478 million for the
expansion of its network and for its operating costs. On October 1, 2000, the
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Company's Board of Directors voted to cease funding ongoing operations of Prism.
On October 1, 2000, the Prism Board of Directors voted to cease operations and
pursue the immediate sale of Prism's assets.
The industry in which the Company operates is in a state of constant change,
and, as part of this environment, the Company's business is becoming more
service oriented, with the business driven by the Company's service
capabilities. Accordingly, Comdisco is aligned to focus on technology services,
Comdisco Ventures group and on global leasing businesses in historically
high-margin areas such as electronics, communications, medical, laboratory and
scientific.
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INVESTMENT CONSIDERATIONS
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
The Company believes that certain statements herein and in the future filings by
the Company with the Securities and Exchange Commission and in the Company's
written and oral statements made by or with the approval of an authorized
executive officer constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. The words and phrases
"looking ahead," "is confident," "should be," "will," "predicted," "believe,"
"plan," "intend," "estimates," "likely," "expect" and "anticipate" and similar
expressions identify forward-looking statements.
These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, but are subject to many
uncertainties and factors relating to the Company's operations and business
environment which may affect the accuracy of forward-looking statements and
cause the actual results of the Company to be materially different from any
future results expressed or implied by such forward-looking statements.
The Company's actual revenues and results of operations could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the "Risk Factors." As a result of
these and other factors, in some future quarter the Company's operating results
may fall below the expectations of securities analysts and investors. In such an
event, the trading price of the Company's common stock would likely be
materially and adversely affected. Many of the factors that will determine
results of operations are beyond the Company's ability to control or predict.
RISK FACTORS
OPERATING RESULTS ARE SUBJECT TO QUARTERLY FLUCTUATIONS
The Company's operating results are subject to quarterly fluctuations resulting
from a variety of factors, including earnings contributions from Comdisco
Ventures group, remarketing activities and services, the timing and ability of
Comdisco Ventures group to sell equity positions (see "Comdisco Ventures group"
below), product announcements by manufacturers, economic conditions and
variations in the financial mix of leases written. The financial mix of leases
written 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 and pricing
policies of equipment manufacturers, and price competition from other lessors
and finance companies.
THE COMPANY'S GROWTH STRATEGY DEPENDS ON PRODUCT AND MARKET DEVELOPMENT
The markets for the Company's principal products are characterized by rapidly
changing technology, evolving industry standards, and declining prices. The
Company's operating results will depend to a significant extent on its ability
to continue to introduce new services and to control and/or reduce costs on
existing services. The success of these and other new offerings is dependent on
several factors, including proper identification of customer needs, cost, timely
completion and introduction, differentiation from offerings of the Company's
competitors and market acceptance.
THE COMPANY'S SUCCESS DEPENDS IN PART ON ANTICIPATING AND ADAPTING TO NEW
TECHNOLOGICAL DEVELOPMENTS AND CHANGING MARKET CONDITIONS.
The market for leasing and services is characterized by rapid technological
developments, evolving customer demands and frequent new product announcements
and enhancements. Failure to anticipate or adapt to new technological
developments or to recognize changing market conditions could adversely affect
the Company's business, including its lease volume, leasing revenue and earnings
contributions from leasing.
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REMARKETING IS AN IMPORTANT CONTRIBUTOR TO ANNUAL AND QUARTERLY EARNINGS
Remarketing is an important factor in determining quarterly earnings. To meet
earnings goals for fiscal 2001, remarketing contributions, primarily for the
Company's global equipment leasing businesses, must be at the level achieved in
fiscal 2000. Quarterly operating results depend substantially upon the
remarketing transactions within the quarter, which are difficult to forecast
accurately. While the Company is devoting resources to its remarketing
activities, there can be no assurance that the Company will achieve the
appropriate level of activity necessary to meet or match the Company's prior and
desired operating results.
THE COMPANY'S GROWTH STRATEGY DEPENDS IN PART ON THE COMMUNICATIONS INDUSTRY. IF
THAT INDUSTRY DOES POORLY, THE COMPANY'S BUSINESS AND FINANCIAL RESULTS MAY
SUFFER
The emergence of the communications market--facilities-based broadband
communications companies, Internet Service Providers and other
telecommunications carriers--and the growth of broadband networks, provide the
Company with an industry in which leasing is an attractive alternative to
ownership. The Company's communications equipment customers are generally
companies with accumulated net deficits and extensive liquidity requirements. To
the extent that these companies are unable to meet their business plans, or
unable to obtain funding or funding at reasonable rates to complete their
business plans, there could be an increase in the Company's credit losses above
historical levels.
THE COMPANY'S SUCCESS IS HIGHLY DEPENDENT ON DEVELOPING AND EXPANDING ITS
SERVICES BUSINESS. THE SERVICES BUSINESS MAY BE LESS PREDICTABLE AND THE REVENUE
LESS RECURRING THAN CONTRACTUAL LEASE AND CONTINUITY SERVICES REVENUE.
COMPETITION IN SERVICES MAY NEGATIVELY IMPACT THE COMPANY'S BUSINESS STRATEGY.
REVENUE RECOGNITION CAN BE NEGATIVELY AFFECTED BY LONGER SALES CYCLES
As a result of the evolving nature of its services business, particularly the
emerging desktop management and managed network services, the Company has
limited meaningful historical data on which to base its planned operating
expenses. Accordingly, a significant portion of the Company's expense levels
(investment in continuity facilities and hardware, consultants, experts and back
office personnel) is based in part on its expectations as to future services
revenues, and is, to a large extent, fixed. Conversely, the Company's revenue
base has become more diverse with the growth of other technology services
revenue.
To attain its services earnings contribution goals for fiscal 2001, the Company
must: meet its obligations under the agreements underlying transactions in
process at September 30, 2000 (also referred to by the Company as its "sales
backlog"); expand its contract subscription base (through new contract signings
and contract renewals); increase its revenues from other technology services,
develop, promote and sell additional service products, such as IT CAP Solutions,
advanced recovery services, availability options, remote computing services and
web hosting; and contain costs. The Company must also successfully compete with
organizations offering similar services.
The Company's ability to obtain new business and realize revenue on its sales
backlog depends on its ability to anticipate technological changes, develop
services to meet customer requirements and achieve delivery of services that
meet customer requirements. In addition, there can be no assurance that the
Company will be able to maintain and/or increase its margins on technology
services in fiscal 2001.
The Company's business is becoming more service oriented, with the business
driven by the Company's service offerings. These transactions, which generally
include a combination of services and leasing, are more complex than the
Company's traditional leasing business. In addition, because these service
offerings represent new services, the company has to spend more time explaining
the value of these services to the customer. Accordingly, one of the impacts of
the Company's changing business model is the lengthening of the sales cycle--the
length of time between initial sales contact and final delivery of contracts--as
compared to its traditional leasing business. This increase in sales cycle
results in an increase in negotiations in progress which ultimately impacts the
timing of revenue, earnings and volume recognition.
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COMDISCO VENTURES GROUP CUSTOMERS ARE IN AN EARLY STAGE OF DEVELOPMENT AND MAY
BE UNABLE TO COMPLETE THEIR BUSINESS PLANS. EQUITY INSTRUMENTS HELD BY COMDISCO
VENTURES GROUP ARE RISKY INVESTMENTS AND THE PUBLIC MARKET FOR THESE COMPANIES
IS EXTREMELY VOLATILE. TO THE EXTENT THESE COMPANIES DO NOT MEET THEIR PLANS OR
THE COMPANY IS UNABLE TO DISPOSE OF ITS EQUITY SECURITIES, THE COMPANY'S
BUSINESS AND FINANCIAL RESULTS MAY SUFFER.
The Company has made loans to and equity investments in various privately held
companies. These companies typically are in an early stage of development with
limited operating histories, and limited or no revenues and may be expected to
incur substantial losses. Accordingly, investments in these companies may not
result in any return and the Company may lose its entire investment and/or
principal balance.
Equity instruments held by the Company are subject to lockup agreements
restricting its ability to sell until several months after an initial public
offering. The public market for high technology and other emerging growth
companies is extremely volatile. Such volatility may adversely affect the
ability of the Company to dispose of the equity securities and the value of
those securities on the date of sale. To the extent these companies do not meet
their plans or the Company is unable to dispose of its equity securities, the
Company's business and financial results may suffer.
The Company has established working relationships with successful venture
capital organizations. There can be no assurance that these relationships can be
maintained or sustained. To the extent that the Company is unable to maintain
these relationships, its ability to identify potential customers may be
substantially impaired.
Comdisco Ventures group policy with respect to disposition of its equity
holdings is not intended to, and does not, assure that Comdisco Ventures group
will maximize its return on any particular holding. Furthermore, because the
creation of a public market or an acquisition/merger is beyond Comdisco Ventures
group's control and is difficult, if not impossible, to predict, its operating
results are subject to significant and material quarterly fluctuations.
Fluctuations in future quarters may be greater than those experienced in past
quarters as a result of the growth in the number of direct equity financings
made by the Company, market volatility for emerging growth companies and the
Company's focus on Internet-related, communications and other high-technology
companies. For those securities without a public trading market, the realizable
value of Comdisco Ventures group interests may prove to be lower than the
carrying value currently reflected in the consolidated and the separate Comdisco
Ventures group's financial statements.
In the past Comdisco Ventures group financed its operations with inter-group
loans from Comdisco. Comdisco Ventures group may need to obtain funding from
outside sources in order to meet its business plan for fiscal 2001 and may be
unable to obtain funding from outside sources. Furthermore, even if funding is
available, such financing may not be on terms as favorable as those obtained
from Comdisco.
Comdisco Ventures group depends on certain important employees and the loss of
those employees could harm and disrupt Comdisco Ventures group's business.
THE COMPANY MAY BE UNABLE TO REFLECT CHANGES IN INTEREST RATES IN THE RATES ON
NEWLY LEASED ASSETS OR IN THE FEES FOR TECHNOLOGY SERVICES
Historically, a changing interest rate environment did not impact the company's
margins since the effects of higher or lower borrowing costs would be reflected
in the rates on newly leased assets or in the fees for technology services. If
the Company's borrowing costs increase in fiscal 2001, there can be no assurance
that the Company will be able to reflect such increases in its lease rates or
service fees. Factors which may impact the Company's ability to adjust its rates
or otherwise mitigate the impact of increasing cost of funds in fiscal 2001 are
the market for secured nonrecourse debt, interest rate spreads on Company
borrowings compared to similarly rated companies and organizations, changes, if
any, in the Company's terms and conditions under its lines of credit and other
market concerns, including the company's commitments to Comdisco Ventures group.
Many, if not all, of these factors are beyond the control of the Company.
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THE COMPANY MAYBE UNABLE TO INCREASE EARNINGS CONTRIBUTIONS FROM LEASING OR
SERVICES
The Company borrowed significant amounts to invest in the infrastructure of its
discontinued operations. After the wind down date, interest costs associated
with these borrowings will be included in interest expense until such borrowing
is paid off by cash flow from operations. Accordingly, the Company expects
interest expense to increase significantly in fiscal 2001. In order to meet
earnings goals for fiscal 2001, the Company must increase (compared to fiscal
2001) its earnings contributions from leasing, including from remarketing
activities, margins on services and cash flow from operating activities. In
additions, the Company must dispose of its equity securities, manage its capital
expenditures and control costs and expenses.
THE COMPANY LIQUIDITY IS DEPENDENT ON A NUMBER OF FACTORS
The Company's liquidity depends on cash provided by operating activities and on
its access to capital markets, specifically medium-term and senior notes,
commercial paper, and on its lines of credit and the willingness of banks to
renew or extend these lines as they come due. The Company's cash flow from
operating activities is dependent on a number of variables, including, but not
limited to, the ability of the Company to implement its strategic plan and
respond to external market conditions, the ability of the Company to dispose of
the securities held by Comdisco Ventures group, timely payment by its customers,
global economic conditions and control of operating costs and expenses. If the
Company is not able to refinance its indebtedness or obtain new financing
(either through the issuance of senior notes, commercial paper, or secured
nonrecourse debt), the Company would have to consider other options, including:
sales of some assets; sales of equity; negotiations with lenders to restructure
applicable indebtedness; or other options available to the Company under
applicable law.
ECONOMIC CONDITIONS AND OTHER FACTORS MAY NEGATIVELY IMPACT THE COMPANY'S
OPERATIONS
The current economic environment has been sustained over a number of years and
is currently the longest continuous period of economic growth in the last thirty
years. This environment has encouraged entrepreneurs to conceive, develop and
bring to market new products and services. The Company targets these early-stage
companies for its services and products. A slow down in economic growth could
materially affect the market in which the Company operates. Furthermore, a slow
down would impact Comdisco Ventures group's liquidity and access to funds from
third party investors.
Many of the companies to which the Company provides financing are dependent on
third parties for liquidity. Any significant change in the availability of
funds, would have a material impact on the Company's customer base, and,
potentially, its loan collectability, as well as, the fair market value of its
equity instruments.
In the present economic climate, Comdisco Ventures group's customers may not be
able to complete securities offerings and Comdisco Ventures group may not be
able to generate gains or receive proceeds from the sale of equity holdings.
A slow down in economic growth may result in companies either reducing their
capital budgets, or delaying equipment upgrades and enhancements.
Other uncertainties include continued business conditions, trend of movement to
client/server environment, competition, including competition from other
technology service providers, reductions in technology budgets and related
spending plans and price competition from other technology service providers
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See Note 18 of Notes to Consolidated Financial Statements on page 56 of the
Annual Report to Stockholders for the year ended September 30, 2000 for
financial information about the Company's segments.
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C. NARRATIVE DESCRIPTION OF BUSINESS
Principal Services:
The Company's operations are organized into three reportable groups of
businesses. These groups are Leasing, Services and Comdisco Ventures group.
The following is a narrative description of the Leasing and Services businesses.
Leasing:
General: Leasing and remarketing services for distributed computing systems
(servers, workstations, PCs, local area networks and other high technology
equipment), acquisition management and expenditure tracking and other services
that facilitate equipment procurement and expense tracking. The rental rate and
all other transaction terms are individually negotiated with customers. The
leased equipment is owned by Comdisco which purchased the equipment from a
variety of manufacturers.
Substantially all equipment leases that Comdisco originates have specified
non-cancelable initial terms ranging from two to five years. The general terms
and conditions of all of its leases are substantially similar and are embodied
in a master lease agreement. For each lessee, the lease term, rent interval,
lease rate factor and other specific terms for each piece of leased equipment
are set forth on equipment schedules, which also incorporate the terms and
conditions of its master lease agreement.
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The Company buys, sells and leases and remarkets PCs and workstations made by
most of the leading manufacturers. The Company's lease transactions also include
high-end servers, printers and other desktop related equipment. The Company's
strategy for the distributed systems market is to provide financing,
professional services and software tools (see "Services") to its existing and
prospective customers.
Industry Specific: Leasing and remarketing, asset management and reconditioning
services for industry specific equipment, including semiconductor manufacturers,
telecommunication and pharmaceutical companies.
Electronics Group: The Company leases new and used electronic manufacturing,
testing and monitoring equipment, including semiconductor production equipment,
automated test equipment and assembly equipment. Additionally, the Company
maintains a dedicated refurbishing and sales facility in the Silicon Valley
area. The semiconductor manufacturing industry is characterized by rapidly
advancing technology, high capital outlays, increased competition, and a growing
concern over the total cost of ownership in high technology equipment. The
Company assists its customers in developing an effective strategy for acquiring
and managing its high-tech assets.
Healthcare Group: Through its healthcare subsidiaries, the Company leases
medical and other high technology equipment to healthcare providers, including
used, reconditioned medical equipment. The Company's portfolio includes
angiography, MRI systems, CT Scanners, nuclear imaging devices, test equipment
such as oscilloscopes, analyzers and testers and laboratory equipment such as
microscopes and centrifuges.
Laboratory and Scientific Group: The Company's laboratory and scientific group
assists organizations in the pharmaceutical, chemical, research, healthcare and
biotechnology industries through the implementation of an equipment life-cycle
management strategy. Its marketing strategy includes financing, technology risk
management and remarketing.
Services:
Continuity Services: The Company provides multi-vendor, multi-platform
continuous availability and global continuity solutions. These services include
continuity services for mission critical data, business function availability
and network recovery.
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These services also include consulting services in continuity planning, recovery
program management, network services and data protection, and other related data
processing services throughout the United States, Canada and Europe. Comdisco's
services are designed to help customers avoid and minimize the impact of a
significant interruption to critical business functions as a result of the
inaccessibility to the customer's data processing facility, communications
network(s) or workstations.
The Company provides high availability infrastructure for use by customers
whenever they are unable to operate or communicate with their computer
facilities. These high availability services, which include rapid recovery,
electronic vaulting, disk mirroring, remote journaling and database shadowing,
are provided through fully equipped and operational computer sites known as
"hot-sites" where customers restore critical applications using Comdisco's
installed equipment. For long-term recoveries, the Company offers complete
mobile recovery functions.
Comdisco provides business continuity services to users of, among others,
Digital Equipment Corporation, Hitachi Data Systems, IBM (and compatible), EMC
Storage Systems, Hewlett Packard, Sequent, Stratus, Sun Micro Systems, Tandem
and Unisys equipment. Capabilities also include client/server platforms and
midrange systems.
Comdisco's solutions for network recovery are facilitated by CCSNET, a private
high-speed network. Through CCSNET, the company provides recovery of voice, data
and image communications via redundant communications links and streamlined
access between a customers' site and the company's Technology Service Centers.
The Company also operates recovery centers throughout North America to provide
business function availability (also referred to as "work-group recovery
services" and enhance remote operations capabilities.
These centers are located in the United States and Canada and are linked
together by CCSNET with the Company's Technology Service Centers and, in many
cases, the customer. Most Technology Service Centers also include workstation
and/or desktop recovery, voice, and network capabilities.
Of the Company's approximately thirty-six continuity locations, nine serve as
data center recovery environments providing hot site and/or shell site services.
These nine regional recovery centers serve major commercial centers, including
New York, Chicago, Northern and Southern California, Texas, Georgia,
Pennsylvania and a center located in Toronto, Canada. Each recovery center has
at least one hot site or CCC and includes telecommunications capabilities,
conference rooms, office space, support areas, and appropriate on-site technical
personnel. Comdisco believes it operates one of the largest communications
networks in North America.
Managed Network Services: Comdisco Network Services offers network assessment,
design, implementation, help desk and professional management services designed
to reduce the total cost of network technology. The Company's customer base is
primarily North American-based enterprises as its monitoring and on-site support
capabilities are predominantly within the United States.
Web-Availability Solutions: The Company provides web hosting, including
production hosting for both primary and alternate sites. The Company's solutions
include multi-site protection of a customers data, servers, network and
applications. The Company offers continuous web-availability to ensure a
continuous web presence. The Company also addresses the challenges of managing
through peak demand periods via a shared infrastructure service.
IT CAP: The Company provides strategic solutions for desktop management services
to its customers to assist them in managing their information technology assets
with the objective of increasing productivity and reducing technology cost and
risk. These technology service solutions are built around the collection,
integration, and management of information on enterprise assets through the
implementation of an integrated database of asset information. These solutions
may also include improving, supporting, and managing distributed systems and
critical business processes through a single point of contact. The services,
which are designed to complement the Company's leasing activities, include
transitional strategies, integration planning and implementation, financing
(hardware and software), and continuity planning. The Company's integrated
desktop management software tools let customers order, track and manage their
inventory of distributed systems equipment.
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The Company's operations are conducted through its principal office in the
Chicago area and approximately one hundred offices in the United States, Canada,
Europe and the Pacific Rim. Subsidiaries in Europe and Canada offer services
similar to those offered in the United States.
The Company's services are provided through separate business units. Each
business is directed by its own management team and has its own sales,
marketing, product development, operations and customer support personnel.
Overall corporate control and coordination are achieved through centralized
budgeting, financial and legal reporting, cash management, additional customer
support and strategic planning.
The Company may, from time-to time, enter into marketing relationships with high
technology equipment manufacturers and value-added resellers in order to expand
its customer base and name recognition. In its marketing operations, the Company
attempts to cross-sell services where and when appropriate.
Customers and Raw Materials
Comdisco's business is diversified by customer, customer type, equipment
segments, geographic location of its customers and maturity of its lease and
notes receivables. The Company's customers include "Fortune 1000" corporations
or companies of a similar size as well as smaller organizations, including
privately-held corporations. The Company's businesses are not dependent on any
single customer or on any single source for the purchasing, selling or leasing
of equipment, or in connection with its continuity services.
Competition
The Company competes as a lessor and as a dealer of new and used computer and
selected other high technology equipment. The Company competes with different
firms in each of its activities. The Company's competition includes equipment
manufacturers such as IBM, Hewlett Packard ("HP"), Amdahl, Hitachi Data Systems,
AT&T, Rolm, Hitachi Medical Systems, Siemens Medical Systems and General
Electric, other equipment dealers, brokers and leasing companies (including
captive or related leasing companies of IBM, HP and General Electric and others)
as well as financial institutions, including commercial banks and investment
banking firms. While its competitive methodologies will differ, in general, the
Company competes mainly on the basis of its expertise in remarketing equipment,
terms offered in its transactions, its reliability in meeting its commitments,
its independence from the manufacturer and its ability to develop and offer
alternative solutions and options to high technology equipment users.
Primarily as a result of technological changes, competition has increased in the
leasing industry and the number of companies offering competitive services, such
as desktop management and other high technology equipment leasing, has
increased. Competitive alliances have also impacted the leasing industry.
In PCs, workstations, electronics, healthcare and telecommunications, the
Company believes it competes with the manufacturers and their captive leasing
companies and approximately three significant leasing companies, as well as
banks and other lessors and financial and lending institutions throughout the
United States and Canada. In Web-hosting, the Company believes that its major
domestic competitors are IBM and Exodus. In its other services, the Company
competes with manufacturers and other national and regional consulting and
services organizations.
In continuity services, the Company believes that its major domestic competitors
are IBM and SunGard Data Systems, Inc. Additionally, it competes with regional
firms in the domestic, Canadian and European marketplace, which provide contract
continuity services, and that it is the largest international provider of such
services.
In managed network services, the Company competes with telecommunications firms,
such as AT&T and MCI Communications, consulting organizations, such as Andersen
Consulting and EDS, and other local and regional providers.
In desktop management, the Company believes it competes with a number of large
general contractors such as AT&T, GE Capital ITS, Hewlett-Packard and IBM, all
companies with significant resources and with experience in leasing and
financing. In addition, other companies, such as Amdahl and Unisys--companies
that have traditionally focused on equipment break/fix and maintenance
services--have begun offering more comprehensive asset management strategies.
-11-
<PAGE>
The Company's continued ability to compete is also affected by its ability to
attract and retain well qualified personnel and the availability of financing.
Other
The Company does not own any patents, licenses, or franchises which it considers
to be material to the Company's businesses.
The Company's businesses are not seasonal, however, quarter-to-quarter results
from operations can vary significantly.
The Company currently believes that the amount of backlog orders is not material
to an understanding of the Company's business.
Because of the nature of the Company's business, the Company is not required to
carry significant amounts of inventory either for delivery requirements or to
assure continuous availability of goods from suppliers.
At September 30, 2000, the Company had approximately 3,500 full-time employees.
-12-
<PAGE>
Comdisco Ventures group:
The following is a narrative description of the Comdisco Ventures group
business:
Overview
Comdisco Ventures group provides venture leases, venture debt and direct equity
financing to venture capital-backed companies. Venture leases are leases with
warrants that compensate Comdisco Ventures group for providing equipment leases
with terms having lower periodic cash costs than leases or loans without
warrants. Similarly, venture debt is a high-risk loan with warrants or a
conversion-to-equity feature with more flexible terms, having lower periodic
cash costs and security conditions, than more traditional debt financing. Direct
equity financings involve Comdisco Ventures group's purchase of convertible
preferred stock and common stock from its customers. Comdisco Ventures group
also provides other ancillary financings, including convertible debt, bridge
loans, expansion loans, acquisition financings and landlord guarantees.
Comdisco Ventures group's relationships with established venture capital firms
help it identify what it believes are the best positioned companies in the most
attractive high-growth industries. Comdisco Ventures group offers companies a
broad range of equity-linked financing products, which complement equity from
venture capital firms and debt from venture-oriented banks and asset-based
lenders.
Comdisco Ventures group was formed in 1987, and since that time, Comdisco
Ventures group has invested more than $3.0 billion in venture debt, venture
leasing and equity financing to over nine hundred venture-backed companies. Of
the companies Comdisco Ventures group has helped finance, over one hundred fifty
have gone public and over two hundred have been acquired. During the last three
years, some of Comdisco Ventures group's notable customers include Ariba
Technologies, Ask Jeeves, Avici Systems, Copper Mountain Networks, Corvis,
Critical Path, e-Loan, e.Piphany, Extreme Networks, Gadzoox, Handspring,
Inktomi, Next Card, Northpoint Communications, Siara Systems, and StratumOne.
Venture debt and venture leasing can be utilized at various stages of a
company's development and for various purposes including the following:
o early stage capital to supplement the initial venture capital raised and
support growth requirements;
o expansion capital between venture capital rounds to enable an emerging
company to reach milestones and increase the prospect of raising future
capital at higher valuations;
o Late stage capital to provide financial flexibility to deal with the
uncertainty of a liquidity event such as an initial public offering or the
sale of the company; and
As a result of the specialized nature of venture leases and venture debt,
Comdisco Ventures group must have expertise in technology-related industry
sectors, access to capital, the ability to assess risk, relationships with
venture capital firms, access to deal flow, and the ability to structure
transactions appropriately.
Markets
Comdisco Ventures group focuses its activities on what it believes are the most
attractive emerging industries. Within these industries, Comdisco Ventures group
leverages its industry knowledge and strong relationships to provide financing
to the most promising emerging companies. Comdisco Ventures group identified the
following common characteristics of potential customers, which help to guide
financing decisions:
Growth. Comdisco Ventures group seeks to fund customers that have or
are projected to have significant and sustainable growth in their
business operations and industry sectors.
Foreseeable Liquidity Event. Prior to entering into a commitment with
a customer, Comdisco Ventures group reviews the likelihood of a
liquidity event in a time frame acceptable to us and estimate the fair
market value, which could be realized from such a liquidity event.
Typical liquidity events include an initial public offering or a sale
of the company. Liquidity events historically have enhanced the value
of Comdisco Ventures group's equity-linked and equity interests in
many cases.
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<PAGE>
Comdisco Ventures group currently offers a broad range of financing alternatives
to venture capital-backed companies. The success of Comdisco Ventures group has
been fueled, in part, by its ability to understand the capital needs of its
customers and to develop and customize attractive financings to meet those
needs. Its initial venture lease products have evolved and expanded over time.
Comdisco Ventures group generally receives warrants to purchase equity
securities or the right to convert some of the debt into equity securities of
the customer in connection with the lease and debt financings. Warrants
typically represent less than 10% of the customer's ownership at the date of
origination. The terms of the warrants or equity conversion, including the
expiration date, exercise price and terms of the equity security for which the
warrant may be exercised, will be negotiated individually with each customer,
and will likely be affected by the price and terms of securities issued by the
customer to its venture capitalists and other holders. Based upon its past
experience, it is anticipated that most warrants will be exercisable for a term
of three to ten years. The equity securities for which the warrant will be
exercised generally will be convertible preferred stock or common stock (of
which there may be one or more classes).
Venture Leasing
Comdisco Ventures group's equipment-based lease and loan activities consist
primarily of the direct origination of non-cancelable, full-payout leases. These
leases cover a variety of equipment including computers, servers and other
information technology equipment, laboratory and scientific equipment, testing
equipment, production equipment and software. The rental rate and all other
transaction terms are individually negotiated with Comdisco Ventures group's
customers. The leased equipment is owned by Comdisco Ventures group through
Comdisco, which in turn purchased the equipment from a variety of manufacturers.
Substantially all equipment leases that Comdisco Ventures group originates have
specified non-cancelable initial terms ranging from two to five years. The
general terms and conditions of all of its leases are substantially similar and
are embodied in a master lease agreement. For each lessee, the lease term, rent
interval, lease rate factor and other specific terms for each piece of leased
equipment are set forth on equipment schedules, which also incorporate the terms
and conditions of its master lease agreement.
During fiscal 2000 and 1999, Comdisco Ventures group originated leases through
approximately 340 and 230 separate transactions, respectively, representing
total commitments of approximately $738 million and $332 million, respectively.
Venture Debt
Comdisco Ventures group's venture debt activities consist primarily of the
direct origination of debt financings to customers pursuant to subordinated,
secured loan agreements. These loans bear fixed interest rates over the prime
rate and are usually repaid in thirty-six monthly installments. Typically, the
customer makes several months of interest-only payments, the balance
representing installments of principal and interest. In addition, fees may be
paid at closing.
These subordinated loans typically have been secured by a lien on all of the
borrower's assets, which, in most cases, is subordinated to the lien of the
borrower's senior lenders. Loan documents usually contain cross-default
provisions linked to any defaults by the customer on any debt outstanding and
may have specific provisions governing future financing or pledging of assets.
During fiscal 2000 and 1999, Comdisco Ventures group originated subordinated
loans through approximately one hundred seventy and one hundred forty-five
separate transactions, respectively, representing total commitments of
approximately $638 million and $367 million, respectively.
Direct Equity Investments
Comdisco Ventures group provides equity financing to customers by directly
purchasing common or preferred convertible stock. Comdisco Ventures group
generally purchases equity at a valuation based on the most recent financing
-14-
<PAGE>
round to venture capitalists or, as applicable, a current or contemplated
financing round.
During fiscal 2000 and 1999, Comdisco Ventures group made direct equity
investments with approximately two hundred and ninety customers, representing
$145 million and $40 million, respectively.
The following table shows total new lease, debt and equity commitments for
Comdisco Ventures group in the last five years.
Total New Commitments By Year-Last 5 Years
(Dollars in Millions)
------------------------------------------------
1996 1997 1998 1999 2000
------ ----- ------ ------ --------
Leases ........... $103.5 $144.3 $220.6 $332.1 $ 773.7
Debt ............. 7.5 19.5 67.7 367.1 637.7
Equity ........... 3.1 3.7 7.4 39.0 139.3
------ ------ ------ ------ --------
Total ............ $114.1 $167.5 $295.7 $738.2 $1,550.7
====== ====== ====== ====== ========
--------------------------------------------------------------------------------
The following table shows the 15 largest original commitments for Comdisco
Ventures group at September 30, 2000
15 Largest Commitments
----------------------
Company Industry Sector
------- ---------------
Avici Systems, Inc. Communications & Networking
Blue Nile, Inc. Internet
Cereva Networks, Inc. Computer Hardware & Semiconductors
Chorum Technologies, Inc. Communications & Networking
Corio, Inc. Software & Computer Services
eConvergent, Inc. Software & Computer Services
HomeGrocer.com Internet
living.com, Inc. Internet
New Edge Networks, Inc. Communications & Networking
Oresis Communications, Inc. Communications & Networking
OurHouse.com Internet
Silicon Access Technology, Inc. Computer Hardware & Semiconductors
Telegis Networks, Inc. Communications & Networking
Telocity, Inc. Communications & Networking
Urban Media, Inc. Communications & Networking
Comdisco Ventures group tries to avoid concentrating its financing risk in a few
customers. Comdisco Ventures group's commitment of approximately $25 million to
living.com, Inc. is the largest commitment Comdisco Ventures group has made to
any single customer. On August 29, 2000, living.com filed for Chapter 11
reorganization under the federal bankruptcy laws. In addition, other
business-to-consumer companies such as HomeGrocer.com have experienced reduced
access to capital markets which has put pressure on their liquidity. In
determining its allowance for credit losses, Comdisco Ventures group takes into
account these industry issues. At September 30, 2000 no commitment to any single
customer represents more than 2% of Comdisco Ventures group's total assets.
As of September 30, 2000, Comdisco Ventures group current public equity holdings
had a market value of $845 million and represented ownership in 70 companies.
The 10 largest equity holdings represented 80% of the total of these holdings
-15-
<PAGE>
and was composed of the following companies:
Largest Public Equity Stakes held by Comdisco
Ventures group as of September 30, 2000
based on Fair Market Value
---------------------------------------------
Company Industry Sector
------- ---------------
Avici Systems, Inc. Communications & Networking
Ciena Corporation 1 Software & Computer Services
Corvis Corporation Communications & Networking
Equinix, Inc. Communications & Networking
Handspring, Inc. Computer Hardware & Semiconductors
Niku Corporation Software & Computer Services
ONI Systems Corp (formerly Optical Communications & Networking
Networks, Inc.)
Quantum Effect Devices, Inc. Computer Hardware & Semiconductors
Redback Networks, Inc. 2 Communications & Networking
Turnstone Systems, Inc. Communications & Networking
----------
1 Comdisco Ventures group received shares in Ciena
Corporation, as a result of that company's purchase of
Lightera Networks, Inc.
2 Comdisco Ventures group received shares in Redback Networks,
Inc. as a result of that company's purchase of Siara Systems,
Inc.
In addition to its public equity holdings at September 30, 2000, Comdisco
Ventures group held warrants and other equity positions in approximately 475
private companies.
Competition
Comdisco Ventures group's primary competitors include financial institutions,
equipment lessors and manufacturers, venture capital firms and non-traditional
lenders that provide debt and/or equity financing to emerging, high technology
companies. Comdisco Ventures group believes that it competes effectively with
these competitors based on creative and innovative deal structuring,
flexibility, reputation, quality of service, timely credit analysis and timely
decision-making.
Employees
As of September 30, 2000, Comdisco Ventures group employed 51 people on a full
time basis-- 16 personnel were involved in marketing and sales, 32 were in
processing, servicing and administrative support and 3 were executive employees.
No employees are represented by a labor union.
Legal Proceedings
Comdisco Ventures group is not currently a party to any material litigation.
Additional Information
FOR INFORMATIONAL PURPOSES ONLY, Comdisco Ventures group financial statements
are attached to this Form 10-K as Exhibit 99.01. These statements are not
incorporated by reference in this or any other filing with the Securities and
Exchange Commission. THESE STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
COMDISCO, INC. CONSOLIDATED FINANCIAL STATEMENTS AND THIS INFORMATION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
-16-
<PAGE>
D. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
See Note 18 of Notes to Consolidated Financial Statements for information about
foreign and domestic operations.
-17-
<PAGE>
Item 2. Properties
The Company owns its principal executive office building in Rosemont, Illinois
that has approximately 269,000 square feet. The Company leases office space for
sales offices in various domestic and international locations. The Company's
technical services division utilizes a 250,000 square foot building owned by the
Company in Schaumburg, Illinois. This space is used primarily for refurbishing,
maintenance and equipment storage.
The Company's continuity services group presently occupies eight recovery
centers owned by the Company, including 151,000 square feet in Illinois, 34,000
square feet in Texas, 140,000 square feet in Georgia (opened in fiscal 2000),
56,000 square feet in Toronto, Canada, two recovery centers each in New Jersey
of 81,000 and 72,000 square feet (see construction in progress, below), and
California of 52,000 and 38,000 square feet. The Company's continuity services
group also leases 255,000, 14,000 and 10,000 square feet in New Jersey,
Missouri, and Canada, respectively. In addition, the continuity services group
leases space throughout North America for work area recovery. Existing
Company-owned facilities can be enlarged and expanded to support additional
growth. The Company's continuity services division also owns and leases
facilities in several European countries.
Construction in progress: The Company is currently building a new facility in
Freemont, California for its Web-hosting services. This facility is scheduled to
become operational in the first half of calendar 2001. It will be approximately
96,000 square feet of leased spaced. The Company is also building a new 302, 000
square feet leased facility in New Jersey to replace its existing New Jersey
facilities.
Comdisco Ventures group principal executive offices are located and its venture
leasing and venture debt activities are conducted at 3000 Sand Hill Road, Menlo
Park, California. Comdisco Ventures group leases office space at the following
locations:
Location Square Footage Leased
-------- ---------------------
Menlo Park, CA 3,685
Palo Alto, CA 4,518
Waltham, MA 2,393
Rosemont, IL 2,066
Comdisco Ventures group believes its current facilities are adequate for its
existing needs and that additional, suitable space will be available as
required.
The Company's electronics group leases approximately 68,000 square feet in San
Jose, California, to be used primarily for equipment demonstration, maintenance
and storage.
-18-
<PAGE>
Item 3. Legal Proceedings
No material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the three
months ended September 30, 2000.
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<PAGE>
PART II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
COMDISCO VENTURES GROUP STOCK AND COMDISCO GROUP STOCK
At a special meeting of stockholders on April 20, 2000, the Company's
stockholders approved the Company's tracking stock proposal, which authorized
the Company to amend and restate its current certificate of incorporation as of
May 4, 2000 to: increase the total authorized shares of common stock from
750,000,000 to 1,800,000,000; authorized the board of directors to issue common
stock in multiple series, with the initial series of common stock being Comdisco
stock and Comdisco Ventures stock; and reclassified each outstanding share of
existing common stock as one share of Comdisco stock. No Comdisco Ventures stock
has been issued to date.
STOCK SPLIT
On April 22, 1998, the Board of Directors authorized a two-for-one split of the
Company's common stock to be distributed on June 15, 1998, to holders of record
on May 22, 1998. Accordingly, all references in the Company's Annual Report to
Stockholders for the year ended September 30, 2000 and the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 to common share data
have been adjusted to reflect the split.
PRICE RANGE OF COMMON STOCK
Price Range of Common Stock on page 64 of the Annual Report to Stockholders for
the year ended September 30, 2000 is incorporated herein by reference.
SHARED INVESTMENT PLAN
On February 2, 1998, the Company announced that 106 senior managers of the
Company exercised options to purchase over six million shares of the Company's
common stock for approximately $109 million (the "Proceeds"). Under the
voluntary program, the senior managers took out full recourse, personal loans to
fund their purchase of the shares. The Company has guaranteed repayment of the
loans in the event of default. The purchased shares represented over 4% of the
then current total shares outstanding. Most of the Proceeds were used by the
Company to purchase its common stock under the Company's existing repurchase
program.
COMMON STOCK REPURCHASE PROGRAM
The Company has an on-going common stock repurchase program. During fiscal 2000
and 1999, the Company purchased four million shares at an aggregate cost of $91
million and five million shares at an aggregate cost of $82 million,
respectively.
SHAREHOLDER RIGHTS PLAN
The Company has issued and will issue preferred stock purchase rights to all
holders of its common stock under a rights agreement amended and restated as of
May 4, 2000, between Comdisco and ChaseMellon Shareholder Services L.L.C., as
rights agent. The restated rights agreement provides that:
o each right in effect at the date of restatement be redesignated as a Comdisco
group stock right, which will continue to allow holders of outstanding
Comdisco group stock to purchase shares of the Company's Series C junior
participating preferred stock if a distribution date (as defined in the
rights agreement) occurs;
o for each share of Comdisco group stock issued between the date of the
restated rights agreement and the expiration date of the rights, the Company
will issue one Comdisco group stock right which will allow holders to
purchase shares of the Company's Series C junior participating preferred
stock if a distribution date occurs; and
-20-
<PAGE>
o for each share of Comdisco Ventures group stock issued between the date of
the restated rights agreement and the expiration date of the rights, the
Company will issue one Comdisco Ventures group stock right which will allow
holders to purchase share of the Company's Series D junior participating
preferred stock if a distribution date occurs.
The rights expire on November 17, 2007.
The amended and restated rights agreement and related forms of the rights
certificates was filed as Exhibit 4.1 with the Company's Current Report on Form
8-K, filed on June 13, 2000, File No. 1-7725. The foregoing description of the
shareholder rights plan does not purport to be complete and is qualified in its
entirety by reference to such exhibit.
DIVIDENDS
The Company has paid cash dividends quarterly since February 1979. Cash
dividends paid on common stock were $16 million and $15 million in fiscal 2000
and fiscal 1999, respectively. The most recently declared quarterly common stock
cash dividend, $.025 per share, was paid on December 11, 2000 to stockholders of
record on November 10, 2000. There are no contractual restrictions on the
Company's present or future ability to pay common dividends, except its
agreement to maintain a debt to net worth ratio pursuant to, and certain other
limitations contained in, the Company's multi-option and global revolving credit
agreements, none of which have any current application.
The Company is permitted to pay dividends on Comdisco group stock out of assets
of Comdisco legally available for the payment of dividends, but the total
amounts paid as dividends on Comdisco group stock cannot exceed the available
dividend amount for Comdisco group as described in the Company's charter.
The Company expects to continue its policy of paying regular cash dividends on
its Comdisco group stock, although there is no assurance as to future dividends
because they are dependent upon the Company's profit levels and capital
requirements as well as financial and other conditions existing at the time.
Common stock cash dividends paid were $.10 per share in fiscal 2000 and fiscal
1999. The Company does not expect to pay dividends on Comdisco Ventures stock.
Item 6. Selected Financial Data
Six Year Summary on pages 22 and 23 of the Annual Report to Stockholders for the
fiscal year ended September 30, 2000 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 24 through 34 of the Annual Report to Stockholders for the
fiscal year ended September 30, 2000 is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Qualitative Information About Market Risk on pages 33 and 34 of the Annual
Report to Stockholders for the fiscal year ended September 30, 2000 is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements and the accompanying Notes to Consolidated
Financial Statements on pages 35 through 60 of the Annual Report to Stockholders
for the fiscal year ended September 30, 2000 is incorporated herein by
reference. Quarterly Financial Data on page 55 of the Annual Report to
Stockholders for the fiscal year ended September 30, 2000 is incorporated herein
by reference.
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<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-22-
<PAGE>
PART III.
Item 10. Directors and Executive Officers of Registrant
The information relating to Directors and Executive Officers of Registrant
contained in the Company's definitive Proxy Statement filed within one hundred
twenty days of the last day of the year ended September 30, 2000 is incorporated
herein by reference.
Item 11. Executive Compensation
The information relating to Executive Compensation contained in the Company's
definitive Proxy Statement filed within one hundred twenty days of the last day
of the year ended September 30, 2000 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information relating to Security Ownership of Certain Beneficial Owners and
Management contained in the Company's definitive Proxy Statement filed within
one hundred twenty days of the last day of the year ended September 30, 2000 is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information relating to Certain Relationships and Related Transactions
contained in the Company's definitive Proxy Statement filed within one hundred
twenty days of the last day of the year ended September 30, 2000 is incorporated
herein by reference.
-23-
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a)(1) and (a)(2) Certain Documents Filed as Part of the Form 10-K:
The financial statements, including the supporting
schedule, listed in the Index to Financial Statements
and Financial Statement Schedule are filed as part of
this Form 10-K on page 26.
(a)(3) Exhibits:
See Index to Exhibits filed as part of this Form 10-K
on pages 29 through 32.
Items identified as Exhibits 10.01 through 10.15 of
that index are management contracts or compensation
arrangements required to be filed as exhibits to this
Form 10-K.
(b) Exhibits:
Included in Item (a)(3) above.
(c) Financial Statement Schedule Required by Regulation S-X:
Included in Item (a)(1) and (a)(2) above.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
COMDISCO, INC.
DATE: December 20, 2000 By: /S/ DAVID J. KEENAN
-----------------------
David J. Keenan
Senior Vice President and
Corporate Controller
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ NICHOLAS K. PONTIKES
Nicholas K. Pontikes
CHIEF EXECUTIVE OFFICER /S/ PHILIP A. HEWES
(Principal Executive Officer), Philip A. Hewes
President and Director Director
/S/ JOHN J. VOSICKY /S/ JAMES VOELKER
John J. Vosicky James Voelker
Chief Financial Officer (Principal Director
Financial Officer) and Director
/S/ DAVID J. KEENAN /S/ WILLIAM N. PONTIKES
David J. Keenan William N. Pontikes
Senior Vice President Director
(Principal Accounting Officer)
and Corporate Controller
/S/ ROBERT A. BARDAGY /S/ THOMAS H. PATRICK
Robert A. Bardagy Thomas H. Patrick
Director Director
/S/ HARRY M. JANSEN KRAEMER, JR. /S/ RICK KASH
Harry M. Jansen Kraemer, Jr. Rick Kash
Director Director
/S/ C. KEITH HARTLEY /S/ CAROLYN L. MURPHY
C. Keith Hartley Carolyn L. Murphy
Director Director
Each of the above signatures is
affixed as of December 20, 2000
-25-
<PAGE>
Comdisco, Inc. and Subsidiaries
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements and notes to consolidated
financial statements of Comdisco, Inc. and Subsidiaries and related Independent
Auditors' Report, included in the Registrant's Annual Report to Stockholders for
the fiscal year ended September 30, 2000, are incorporated by reference in Item
8:
Annual Report
Page Number
-------------
Consolidated Statements of Earnings --
Years Ended September 30, 2000, 1999 and 1998 ....................... 35
Consolidated Balance Sheets -- September 30, 2000 and 1999 ............ 36
Consolidated Statements of Stockholders' Equity --
Years Ended September 30, 2000, 1999 and 1998 ....................... 37
Consolidated Statements of Cash Flows --
Years Ended September 30, 2000, 1999 and 1998 ....................... 38-39
Notes to Consolidated Financial Statements ............................ 40-60
Independent Auditors' Report .......................................... 61
The following consolidated financial statement schedule of Comdisco, Inc. and
Subsidiaries is included in Item 14(d):
Form 10-K
Page Number
-----------
Schedule II -- Valuation and Qualifying Accounts .................... 38
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
-26-
<PAGE>
[KPMG LLP Letterhead]
Independent Auditors' Report
The Board of Directors and Stockholders
Comdisco, Inc.:
Under date of November 7, 2000, we reported on the consolidated balance sheets
of Comdisco, Inc. and subsidiaries as of September 30, 2000 and 1999, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 2000,
as contained in the 2000 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended September 30, 2000. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related consolidated financial statement schedule as listed in
the accompanying index. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Chicago, Illinois
November 7, 2000
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<PAGE>
Comdisco, Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended September 30, 2000
(in millions)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end
Description of period expenses Other of period
------------------- --------- -------- ----- ---------
Year ended September 30, 1998:
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts $22 $12 $(10)<F1> $24
=== === ===== ===
Year ended September 30, 1999:
Allowance for
doubtful accounts $24 $41 $ (22)<F1> $43
=== === ====== ===
Year ended September 30, 2000:
Allowance for
doubtful accounts $43 $156 $(75)<F1> $124
=== ==== ===== ====
<FN>
<F1> Write off of receivables net of recoveries.
</FN>
</TABLE>
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<PAGE>
Comdisco, Inc. and Subsidiaries
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
3.01 Amended and Restated Certificate of Incorporation of
Registrant filed with the Secretary of State of Delaware
on May 4, 2000
Incorporated by reference to Exhibit 3.1 filed
with the Company's Quarterly Report on Form 10-Q
for the Quarterly Period ended March 31, 2000, as
filed with the Commission May 14, 2000, File No.
1-7725.
3.02 By-Laws of Registrant dated November 4, 2000
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 Agreement 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 company's Form 8 dated February 21,
1991, File No. 1-7725, the copy of Indenture
dated as of April 1, 1988, between Registrant and
Manufacturers Hanover Trust Company (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).
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<PAGE>
Exhibit No. Description of Exhibit
4.04 Amended and Restated Rights Agreement, dated as of
May 4,2000, between the Registrant and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, which
includes Designations, Preferences and Rights of Series C
Junior Participating Preferred Stock and Series D
Junior Participating Preferred Stock and the Form of
Rights Certificates
Incorporated by reference to Exhibit 4.1 filed
with the company's Current Report on Form 8-K
dated May 4, 2000, as filed with the
Commission June 14, 2000 File No. 1-7725.
4.05 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 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 and The Fuji Bank and Trust
Company, as Trustee (said Indenture defines
certain rights of security holders).
4.06 Indenture Agreement between Registrant and Yasuda
Bank and Trust Company (U.S.A.), as Trustee, dated
as of December 1, 1995
Incorporated by reference to Exhibit 4.1 filed
with the company's Current Report on Form 8-K
dated January 12, 1996, as filed with the
Commission on January 17, 1996, File No. 1-7725,
the copy of the Indenture dated as of December 1,
1995 between the Registrant and Yasuda Bank and
Trust Company (U.S.A), as Trustee (said Indenture
defines certain rights of security holders).
4.07 Indenture Agreement between Registrant and The Fuji
Bank and Trust Company, as Trustee, dated as of
December 15, 1998
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K
dated January 19, 1999, as filed with the
Commission on January 20, 1999, File No. 1-7725,
the copy of the Indenture dated as of December
15, 1998 between the Registrant and The Fuji Bank
and Trust Company, as Trustee (said Indenture
defines certain rights of security holders).
4.08 Indenture Agreement between Registrant and SunTrust Bank,
as Trustee, dated as of September 15, 1999
Incorporated by reference to Exhibit 4.1
filed with the company's Form 8-K dated
February 29, 2000, the copy of the Indenture
dated as of September 15, 1999 between the
Registrant and SunTrust Bank, as Trustee
(said Indenture defines certain rights of
security holders).
4.09 Description of the Rights of Holders of Comdisco stock
and Comdisco Ventures group stock.
Incorporated by reference to pages 12 through 20
and pages 46 through 62 of the Company's Proxy
Statement on Schedule 14A, dated March 20, 2000,
as filed with the Commission March 20, 2000,
File No. 1-7725.
10.01 1981 Stock Option Plan of the Registrant
Incorporated by reference to Exhibit 10.4 filed
with the Company's Annual Report for the year
ended September 30, 1982 on Form 10-K, File No.
1-7725.
10.02 Amendment to 1979 and 1981 Stock Option Plans of the
Registrant dated December 15, 1986
Incorporated by reference to Exhibit 10.6 filed
with the Company's Annual Report for the year
ended September 30, 1987 on Form 10-K, File No.
1-7725.
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<PAGE>
Exhibit No. Description of Exhibit
10.03 1987 Stock Option Plan of the Registrant
Incorporated by reference to Exhibit 10.7 filed
with the Company's Annual Report for the year
ended September 30, 1988 on Form 10-K, File No.
1-7725.
10.04 Amendment to 1981 and 1987 Stock Option Plans of the
Registrant dated November 4, 1987
Incorporated by reference to Exhibit 10.9 filed
with the Company's Annual Report for the year
ended September 30, 1987 on Form 10-K, File No.
1-7725.
10.05 1989 Non-Employee Director Stock Option Plan
Incorporated by reference to Exhibit 10.11 filed
with the Company's Annual Report for the year
ended September 30, 1990 on Form 10-K, File No.
1-7725.
10.06 1996 Non-Employee Director Stock Option Plan
Incorporated by reference to Exhibit 10.10 filed
with the Company's Annual Report for the year
ended September 30, 1996 on Form 10-K, File No.
1-7725.
10.07 1991 Stock Option Plan
Incorporated by reference to Exhibit 10.08 filed
with the Company's Annual Report for the year
ended September 30, 1992 on Form 10-K, File No.
1-7725.
10.08 1992 Long-Term Stock Ownership Incentive Plan
Incorporated by reference to Exhibit 10.09 filed
with the Company's Annual Report for the year
ended September 30, 1992 on Form 10-K, File No.
1-7725
10.09 1995 Long-Term Stock Ownership Incentive Plan
Incorporated by reference to Exhibit 10.13 filed
with the Company's Annual Report for the year
ended September 30, 1996 on Form 10-K, File No.
1-7725.
10.10 Amended and Restated 1998 Employee Stock Purchase Plan
Incorporated by reference to Exhibit 10.01 to the
Company's Proxy Statement on Schedule 14A dated
March 20, 2000
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<PAGE>
Exhibit No. Description of Exhibit
10.11 Amended and Restated International Employee Stock
Purchase Plan
Incorporated by reference to Exhibit 10.02 to the
Company's Quarterly Report for the quarter ended
March 31, 1998 on Form 10-Q, File No. 1-7725.
10.12 Amended and Restated Long-Term Stock Ownership Incentive
Plan
Incorporated by reference to Annex IV to the
Company's Proxy Statement on Schedule 14A dated
March 20, 2000
10.13 Amendment to the 1995 Long-Term Stock Ownership Incentive
Plan; 1992 Long-Term Stock Ownership Incentive Plan; 1991
Stock Option Plan; 1987 Stock Option Plan; 1981 Stock
Option Plan; 1996 Non-Employee Director Stock Option
Plan; and 1989 Non-Employee Director Stock Option Plan,
each dated November 3, 1999.
Incorporated by reference to Exhibit 10.13
filed with the Company's Annual Report for the
year ended September 30, 1999 on Form 10-K, File
No. 1-7725
10.14 Amended and Restated 1999 Non-Employee Directors Stock
Option Plan
Incorporated by reference to Annex V to the
Company's Proxy Statement on Schedule 14A, dated
March 20, 2000, as filed with the Commission on
March 20, 2000, File No. 1-7725
10.15 Management Compensation Arrangements and Plans
11.00 Computation of Earnings Per Share
12.00 Ratio of Earnings to Fixed Charges
13.00 Annual Report to Security Holders
Six Year Summary, Management's Discussion and
Analysis of Financial Condition and Results of
Operations, and the Consolidated Financial
Statements on pages 24 through 53 and the
Quarterly Financial Data on page 52 and the
Independent Auditors' Report on page 54 of the
Annual Report to security holders for the fiscal
year ended September 30, 2000 have been
incorporated by reference as part of this Form
10-K.
21.00 Subsidiaries of Registrant
23.01 Consent of KPMG LLP dated December 20, 2000
27.0 Financial Data Schedule
99.01 Financial Statements of Comdisco Ventures group
These financial statements are filed with this
Annual Report on Form 10-K for informational
purposes only and are not incorporated by
reference in this or any other filing with the
Securities and Exchange Commission.
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