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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______ Commission file
number 0-15167
TRANS LEASING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2747735
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 DUNDEE ROAD, NORTHBROOK, ILLINOIS 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 272-1000
Securities registered pursuant to Sections 12(b) or 12(g) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.01 par value per share NASDAQ Stock Market
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
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 registrant's best knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this
Form 10-K or any amendment to this Form 10-K. [ ]
The number of shares of Common Stock, Par Value $.01 Per Share, of
the Registrant outstanding as of September 27, 1995 was 4,168,275.
Excluding shares beneficially owned by directors and officers of the
Registrant, the aggregate market value of such outstanding shares on
September 27, 1995 was $6,909,895 based upon the average of the
closing bid and asked prices for the Common Stock on the NASDAQ Stock
Market on such date.
Documents Incorporated by Reference
None
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Total number of pages: 75
Exhibit index appears on page 50.
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FORM 10-K
TRANS LEASING INTERNATIONAL, INC.
PART I
Item 1. BUSINESS
GENERAL
Trans Leasing International, Inc. (hereafter "the Company" or
"Trans Leasing") leases medical, scientific and other equipment to
physicians, osteopaths, dentists and other health care providers. The
Company also leases general office equipment and automobiles to health
care providers and the general commercial market. The Company
believes that health care providers and other professionals lease
equipment from Trans Leasing for a variety of reasons, including the
speed and convenience of acquiring such equipment from Trans Leasing,
and the tax benefits and reduced initial cash outlays inherent in
leasing.
At June 30, 1995, the Company's net investment in direct finance
leases was approximately $193.1 million, consisting of approximately
27,000 active leases. Lease terms generally range from one to five
years, with an average initial term of approximately 38 months. The
average cost of total equipment purchased per lease originated during
fiscal 1995 was approximately $11,000. The original cost of each item
of leased equipment generally does not exceed $100,000, although the
Company may in the future lease more equipment with a cost in excess
of $100,000 than it has in the past. The Company's primary market is
the continental United States.
The Company believes the following factors have been critical to
its success in the past and will remain critical to its success in the
future:
BUSINESS STRATEGY
Trans Leasing provides fast and convenient financing to
creditworthy applicants.
The Company leases equipment primarily through its LeaseCard[R]
program, supported by the Company's Instant Access[sm] program.
Over 38,000 medical professionals and 15,000 commercial accounts
nationwide have utilized LeaseCards to date.
Through its 45 member sales, marketing and customer service staff
located at the Company's headquarters and in its five regional
sales offices, the Company has developed strong relationships
with equipment manufacturers and dealers. During fiscal 1995,
the Company paid commissions to approximately 800 salespeople
representing various equipment manufacturers and dealers.
The Company distributes LeaseCards to doctors because it believes
doctors with LeaseCards are more likely to choose Trans Leasing
over its competitors, even when dealing with manufacturers and
dealers not associated with Trans Leasing.
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There are approximately 600,000 licensed physicians in the United
States and approximately 150,000 other health care providers.
Physicians and other health care providers historically have
financed their equipment purchases through banks, lease and
finance companies and other financial institutions. Management
believes that the time required by such financial institutions to
process applications for credit has created a significant market
for quick financing for less expensive equipment.
CREDIT RISK MANAGEMENT
The Company believes its bad debt experience compares favorably
with other "small-ticket" lessors primarily because of its strict
credit evaluation procedures, the repeat business it receives
from current lessees with known payment histories and the fact
that much of the equipment the Company leases is a source of
income generation for the lessees.
Though the LeaseCard represents an approved line of credit, it is
not a typical consumer credit card in that credit review and
approval is required for every transaction.
FULL PAY-OUT LEASES
Substantially all of the Company's leases are full pay-out
leases, where the minimum lease payments in the aggregate cover
the full cost of the equipment plus an interest factor.
Full pay-out leases reduce the Company's exposure to obsolescence
of leased equipment.
The Company also leases automobiles, primarily to existing lessees,
and functions as an insurance agent, selling a limited amount of
property and casualty insurance to its lessees. From time to time,
the Company also purchases lease receivables originated by a third
party after Trans Leasing independently verifies that such receivables
meet its credit standards. At June 30, 1995, the Company's lease
financing receivables were approximately $5.0 million.
LEASED EQUIPMENT
The Company leases all types of moderately priced medical,
scientific and commercial equipment currently in demand. The Company
believes that it has benefited and will continue to benefit from
technological advances which stimulate the demand for such equipment.
Additionally, the Company believes that the diversified nature of the
equipment it leases reduces the potential impact of technological
obsolescence which could adversely affect the Company's ability to
collect lease receivables and residual values.
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The following table sets forth certain information about the types
of equipment leased by the Company as of June 30, 1995.
ORIGINAL
EQUIPMENT COST NUMBER
CATEGORY OF EQUIPMENT ($ in 000's) of Leases
MEDICAL EQUIPMENT, including automated
laboratory systems, endoscopy systems,
ambulatory monitors and EKGs,
diagnostic imaging systems, surgical
equipment and diagnostic equipment,
physical therapy equipment, medical
exam tables, dental chairs, microscopes
and optical equipment $154,786 50.3% 12,538 46.6%
COMPUTER EQUIPMENT, including personal
computers and laptops, network systems,
desktop publishing and document imaging
systems 87,056 28.3% 8,459 31.4%
OFFICE EQUIPMENT AND FURNITURE,
including photocopiers, facsimile
machines, desks and cabinetry and
mail equipment 13,562 4.4% 1,833 6.8%
TELECOMMUNICATIONS EQUIPMENT,
including telephone systems and
voice mail systems 10,631 3.4% 1,145 4.3%
AUTOMOBILES 10,928 3.6% 464 1.7%
OTHER, including industrial machine
tools, graphic arts equipment,
printing equipment and restaurant
equipment 30,806 10.0% 2,472 9.2%
Total Equipment Cost $307,769 100.0% 26,911 100.0%
The percentages of each equipment category relative to the total
portfolio vary from time to time with marketing initiatives of
equipment suppliers and introductions of new or improved products.
The Company believes that no single type of equipment currently
accounts for more than 10 percent of the lease portfolio.
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LESSEES
The Company's lessees are primarily health care providers and other
professionals. The following table provides the approximate lessee
composition of Trans Leasing's portfolio as of June 30, 1995.
ORIGINAL EQUIPMENT
COST
LESSEE DESCRIPTION ($ IN 000'S) PERCENTAGE
Medical
General Practice. . . . . . . . . . . . . . . . $ 17,898 5.8%
Family Practice . . . . . . . . . . . . . . . . 17,390 5.7%
Internal Medicine . . . . . . . . . . . . . . . 19,348 6.3%
OB/GYN. . . . . . . . . . . . . . . . . . . . . 10,232 3.3%
Other MDs . . . . . . . . . . . . . . . . . . . 46,320 15.1%
Total Doctors (MDs) . . . . . . . . . . . . . 111,188 36.2%
Chiropractors . . . . . . . . . . . . . . . . . 21,956 7.1%
Veterinarians . . . . . . . . . . . . . . . . . 12,120 3.9%
Dentists. . . . . . . . . . . . . . . . . . . . 48,078 15.6%
Osteopaths. . . . . . . . . . . . . . . . . . . 8,478 2.8%
Other Non-MDs . . . . . . . . . . . . . . . . . 7,215 2.3%
Total Doctors (Non-MDs) . . . . . . . . . . . 97,847 31.7%
Total Doctors (MDs and Non-MDs) . . . . . . . 209,035 67.9%
Medical Institutions. . . . . . . . . . . . . . 16,728 5.4%
Total Medical . . . . . . . . . . . . . . . . 225,763 73.3%
Total Non-Medical. . . . . . . . . . . . . . . . . 82,006 26.7%
Total for All Lessees. . . . . . . . . . . . . . . $307,769 100.0%
The Company's lessees are located throughout the United States, the
largest concentrations of which are in heavily populated states such
as California, Florida, Texas, Illinois and New York. As of June 30,
1995, no single lessee (or group of affiliated lessees) accounted for
more than 1% of the Company's lease portfolio.
MARKETING
The Company markets its leasing services through LeaseCard, which
it introduced in 1982 and which it believes was the first business-
to-business finance card widely used in the United States for purposes
other than travel or entertainment. The LeaseCard is offered to
physicians and other potential lessees by salespeople representing the
various equipment suppliers with which the Company does business, as
well as by the Company's own sales force. During fiscal 1995, the
Company paid commissions to approximately 800 salespeople representing
various equipment manufacturers and dealers.
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The Company issues LeaseCards to medical professionals and
commercial accounts which meet its credit standards. LeaseCards are
issued for one-year periods and are automatically renewed for
additional one-year periods so long as holders continue to maintain
their credit standing with the Company. LeaseCard holders who are
medical professionals are entitled to lease up to $100,000 of
equipment, and commercial accounts are entitled to lease up to $50,000
of equipment, with a minimum of paperwork and delay. Larger credit
limits are available to those meeting additional credit criteria.
LeaseCard provides the holder with convenience and pre-arranged
credit, and enables equipment manufacturers and dealers to concentrate
their efforts on marketing equipment rather than arranging financing.
To date, over 38,000 medical professionals and 15,000 commercial
accounts have used LeaseCard to lease equipment from the Company. A
LeaseCard is issued to every lessee with whom the Company has a lease.
The Company also actively solicits physicians and other medical
professionals who do not currently hold LeaseCards through regular
advertisements in medical and commercial trade publications, a
nationwide direct mail program and personal contacts at trade
conventions. The Company markets the LeaseCard to equipment suppliers
through direct mail solicitation, trade journal advertisements,
participation in trade shows and telephone solicitation.
Another important part of the Company's marketing program is
Instant Access. Holders of active LeaseCards can obtain approval for
a new lease quickly by calling the Company's toll free Instant Access
line (800-YES-1000). Using the Company's on-line balance and credit
information, the Company's credit analysts can typically approve a
transaction within five minutes for existing customers requesting
transactions within their pre-approved credit limits. Non-holders can
call Instant Access and typically obtain preliminary approval within
twenty minutes if all credit information is readily available.
Telephone inquiries to Trans Leasing are normally initiated by
potential lessees or equipment salespeople on sales calls in
customers' offices.
The Company also utilizes its own sales, marketing and customer
service staff of 45 people located at the Company's headquarters and
in its five regional sales offices to market its leasing services.
The sales staff calls on equipment manufacturers and dealers, lessees
and prospective lessees, educates equipment suppliers and their
representatives regarding the merits of the Company and of leasing in
general and frequently conducts seminars at the suppliers' places of
business. The Company participates in trade shows and medical
conventions around the country and is frequently the only equipment
leasing company represented at these events.
As a result of its marketing efforts, the Company has been selected
as the preferred leasing company of sixteen major equipment suppliers
and has entered into informal arrangements with approximately 400
other equipment manufacturers and dealers that provide for use of the
LeaseCard program.
The Company has also developed joint advertising and marketing
programs with a number of major medical and commercial equipment
manufacturers and dealers. In a typical joint advertising program,
the Company and the suppliers prepare printed materials advertising
the supplier's equipment which contain prominent references to
LeaseCard and Trans Leasing.
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TERMS OF LEASE AGREEMENTS
Substantially all of the Company's leases are full pay-out,
non-cancelable leases, where the minimum lease payments during the lease
term cover the full cost of the equipment plus an interest factor.
The Company utilizes a standard, non-cancelable lease agreement for
substantially all of its leases. The Company's leases generally
provide for fixed lease payments, though a small number provide for
graduated lease payments (i.e., payments which increase over the term
of the lease according to a formula specified in the lease). Lease
payments are due and payable monthly over the lease term.
Under the terms of the Company's standard lease, the lessee is
obligated to service the leased equipment and maintain it in good
working condition, to procure and maintain insurance on the leased
equipment for the benefit of the Company, and to pay all property,
sales and other taxes on the leased equipment. In the event of a
default by the lessee, the lease agreement typically provides that the
lessor and its assignees have all the rights afforded creditors under
the law to protect their interest in the leased equipment, including
the right to repossess the leased equipment, and, in the case of legal
proceedings resulting from a default, to recover certain additional
damages.
While the lessee has the full benefit of the equipment
manufacturers' warranties with respect to the leased equipment, the
Company's leases expressly disclaim all warranties of the Company as
to the leased equipment. Additionally, the lease obligates the lessee
to continue making lease payments regardless of any defects in the
equipment. Under the terms of the standard lease, the Company retains
title to the leased equipment and has the right to assign the lease
without the consent of the lessee. The lease terms do not provide the
lessees with the option to prepay though Trans Leasing does allow
prepayments on a case by case basis. Management estimates the number
of early payments of the entire lease balances to be approximately 5%
of the total number of leases. When prepayments are permitted, the
lessee is required to pay the sum of future minimum lease payments
minus 80% of the remaining unearned income on the lease.
At the end of each Lease, in accordance with arrangements typically
made at the time the lease is originated, the lessee will have the
option (I) to renew the lease on the same or renegotiated terms, (ii)
to return the equipment or (iii) to purchase the equipment at either
(A) a fixed price determined at the time the lease is originated
(which may be $1 or a fixed percentage of the original cost of the
equipment or, in the case of leased vehicles, an amount determined to
be the value of the leased vehicle at the end of the lease) or (B) the
then fair market value of the equipment. In any case, if the lessee
fails to return or purchase the equipment or renew the lease, the
lessee will be required to make payments equal to the prior rent
payments until the equipment is returned or purchased or the lease is
renewed. Historically, substantially all of the Company's lessees
have elected to exercise their option to purchase the leased
equipment. Equipment which is not acquired or re-leased by the
original lessee can be sold, re-leased or otherwise disposed of by the
Company or one of its wholly-owned subsidiaries. The Company
maintains its own warehouse and a staff to re-market previously leased
equipment.
As of August 18, 1995, approximately 90% of the lessees whose
leases expired in fiscal 1995 purchased the equipment covered by the
expired leases, approximately 8% returned such equipment to the
Company and approximately 2% of the lessees had not yet either
purchased, re-leased or returned the equipment.
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CREDIT REVIEW AND LOSS EXPERIENCE
Although comparative information from competitors is generally not
available, the Company believes its bad debt experience compares
favorably with other "small-ticket" lessors because (a) the Company
utilizes a comprehensive proprietary on-line credit evaluation
procedure to screen lease applications, (b) approximately 38% of new
leases are with existing lessees who have a credit history with the
Company, a substantial portion of equipment leased is income-producing
or necessary for the operations of the lessee's practice or
business, (d) a majority of the Company's lessees are health care
providers and other professionals with high incomes and (e)
substantially all leases are personally guaranteed by individual
lessees or business owners.
The Company's credit department consists of seven credit analysts
and one credit support person. For each application the Company
receives, the credit department performs a thorough credit review of
the applicant, which includes obtaining retail credit reports from the
major credit bureaus servicing the area in which the applicant is
located. In addition, with respect to transactions over $5,000
($15,000 if the lessee is in the medical or another healthcare field),
the Company obtains bank verification of account activity in deposit
accounts and loan activity, including the length of time accounts have
been opened, the average balance maintained, the high dollar amount of
credit extended and the payment terms.
On medical accounts, the Company also obtains an American Medical
Association report or its equivalent if the lessee is a dentist or
osteopath. These reports indicate the year the individual was
licensed, the college attended and year of graduation, the
individual's medical specialty, and whether or not Board Certification
has been obtained. For commercial accounts, retail credit reports are
normally obtained on the owners of the lessee, bank information is
verified with respect to applications involving more than $5,000 of
equipment, and in most cases the Company obtains a Dun & Bradstreet
report. All of the information is stored electronically on the
Company's computer systems and is reviewed by one or more persons
depending upon the dollar amount involved. The Company also performs
a similar credit check on each equipment supplier and obtains other
information to verify that the equipment supplier is reputable.
If a LeaseCard holder who has available credit as a result of an
update and review by the Company applies for a new lease, the Company
also conducts a computer check of the cardholder's payment history and
status. If the lessee holds a LeaseCard, but desires to lease
equipment with a value in excess of the amount of the lessee's
available credit, or if it is a new applicant and the Company's credit
department has determined there is not enough information available
through the credit bureau, bank reports, American Medical Association
reports and Dun & Bradstreet reports, the Company conducts additional
credit checks which usually include a review of the lessee's current
financial statements and most recent tax return. Management estimates
that 25% of applications are turned down for credit reasons, 25% are
terminated by the applicant, and 50% of the applications are
ultimately consummated.
The Company places an order to purchase equipment only after it has
completed the credit examination and received an executed lease from a
lessee. Upon obtaining the signed lease, a deposit check, an
acceptance notice, an invoice, and any additional documentation which
may be required, such as a personal guarantee, corporate resolution or
evidence of insurance, the Company's sales coordinators verify
directly with the lessee that all the items covered by the lease have
been delivered and installed and are working to the lessee's
satisfaction. The Company then pays the vendor for the equipment.
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The Company utilizes its own 16 person in-house staff to solicit
late payments from lessees and handle accounts that are in litigation.
When an account is 7 days past due the Company assesses a late fee
equal to 10 percent of the late payment and begins collection
procedures. For fiscal years 1995 and 1994, income from such late
charges was $1,877,000 and $1,488,000, respectively. When any payment
is 20 days past due (13 days if the lease balance is greater than
$20,000), the account is automatically inserted into a collectors
follow-up system. An account is considered delinquent if a payment
has not been received for 30 days beyond its due date. The following
table illustrates Trans Leasing's historical delinquency rates.
DELINQUENCY RATES
($ IN 000'S)
REMAINING
RECEIVABLE BALANCE ON
DELINQUENT ACCOUNTS
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Receivable % of
Balance Amount Total
June 30, 1993 . . . . . . . . . . . . $179,606 $ 5,708 3.2%
June 30, 1994 . . . . . . . . . . . . 192,780 5,010 2.6
June 30, 1995 . . . . . . . . . . . . 224,846 6,115 2.7
Accounts are normally written off if no payment has been received
within 150 to 180 days. Accounts can be written off earlier if it is
evident that no further payment will be received. The following table
illustrates Trans Leasing's historical lease charge-off experience.
Fiscal Year Ended June 30
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
($ in 000's)
Allowance for Uncollectible Accounts:
Beginning balance $ 4,047 $ 2,709 $ 2,181 $ 1,735 $ 1,469
Additions 5,328 6,489 3,690 3,017 2,240
Net charge-offs (2,893) (5,151) (3,162) (2,571) (1,974)
-------- -------- -------- -------- --------
Ending Balance $ 6,482 $ 4,047 $ 2,709 $ 2,181 $ 1,735
Investment in leases
(before allowance) $199,576 $170,864 $150,590 $127,666 $102,079
Net charge-offs divided
by investment in leases 1.4% 3.0% 2.1% 2.0% 1.9%
Ending allowance divided
by investment in leases 3.2% 2.4% 1.8% 1.7% 1.7%
Net charge-offs in fiscal year 1995 were somewhat favorable
relative to historical norms, which resulted in an increased allowance
as a percentage of investment in leases at the end of the fiscal year.
The increase in net charge-offs during fiscal year 1994 was primarily
due to the write-off of one account at December 31, 1993 in the amount
of $1,696,000 which reduced net earnings by $.24 per share. This
write-off was expensed in 1994. The Company is continuing to work
with this account to maximize the ultimate recovery.
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REALIZATION OF RESIDUAL VALUE
Historically, the vast majority of the Company's lessees have
elected to exercise their options to purchase the leased equipment.
Equipment which is not acquired or re-leased by the original lessee is
sold, re-leased or otherwise disposed of by the Company. The Company
maintains its own warehouse and staff to re-market previously leased
equipment. From time to time the Company utilizes various equipment
dealers and vendors, for which it pays a commission based upon the
amount received by the Company.
The growth in the Company's lease portfolio in recent years has
resulted in increases in the aggregate amount of recorded residual
values. Substantially all of the residual values on the Company's
balance sheet as of June 30, 1995 are attributable to leases which
will expire before June 30, 1999. Realization of such values depends
on factors not within the Company's control, such as the condition of
the equipment, the cost of comparable new equipment and the
technological or economic obsolescence of the equipment. Although the
Company has received over 100% of recorded residual values for leases
which expired during the last three years, there can be no assurance
this realization rate will be maintained.
MANAGEMENT INFORMATION SYSTEMS
The Company has developed automated information systems and
telecommunications capabilities tailored to support all areas within
the organization. Systems support is provided for accounting, tax,
credit, collections, operations, sales, sales support and marketing.
The Company has made significant investments in computer hardware and
proprietary software. The Company's computerized systems provide
management with accurate up-to-date data which strengthens its
management controls and assists in forecasting.
The Company employs ten management information system professionals
and has developed a substantial amount of proprietary software.
Terminals in the Company's Northbrook, Illinois headquarters and
branch offices are linked 24 hours a day by dedicated telephone lines
to the Company's central computer system located in Northbrook.
The Company's centralized data processing system provides instant
support for the marketing and service efforts of salespeople from the
Company and equipment manufacturers and dealers. The system permits
the Company to generate collection histories, vendor analyses, lessee
reports and credit histories and other data useful in servicing the
lessees and equipment suppliers.
The Company has recently upgraded its data processing system and
spent approximately $498,000 for new hardware and approximately
$20,000 for software in fiscal 1995, and $90,000 for new hardware and
approximately $200,000 for software in fiscal 1994. The Company
completed the upgrade in fiscal 1995.
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COMPETITION
Leasing is only one of many financing alternatives available to
physicians and other users of medical and other equipment. The
leasing business is highly competitive. Concerns engaged in the
leasing business include: (a) finance divisions, affiliates and
subsidiaries of equipment manufacturers, including some which sell
products leased by the Company, (b) banks and their affiliates or
subsidiaries, some of which loan funds to the Company, other leasing
and finance companies, and (d) independently formed partnerships or
corporations operated for the specific purpose of leasing equipment.
Many of these organizations have substantially greater financial and
other resources than the Company. As a consequence they may be able
to obtain funds on terms more favorable than those available to the
Company and may provide financing which is less expensive than leasing
from the Company. However, the Company believes its financing
services are more convenient than those available from many
alternative sources. The Company's ability to compete effectively for
profitable leasing business will continue to depend upon its ability
to procure financing on attractive terms, to develop and maintain good
relations with new and existing equipment suppliers, to attract
additional lessees by means of its LeaseCard and other marketing
programs and to maintain a very high level of service to its lessees
and vendors. There can be no assurance that the Company can continue
to do so. See "Marketing".
Historically, the Company has concentrated on leasing moderately
priced medical and office equipment. The Company may in the future
lease a greater number of more expensive items of equipment than it
has in the past. As it does so, the Company's competition can be
expected to increase. Rising costs, changes in government regulations
and increased competition among health care providers have led to the
development of alternative health care delivery systems, including
health maintenance and preferred provider organizations and managed
care programs. In addition, recent surveys have indicated a
continuing trend toward the formation of group medical practices,
which affect the nature and size of the Company's market. While the
Company does not believe that these developments have had a material
impact on its business to date, their long-term impact, including the
possibility of increased competition in the medical equipment leasing
industry, cannot be predicted.
HEALTH CARE TRENDS
The increasing cost of medical care has brought about federal and
state regulatory changes designed to limit government reimbursement of
certain health care providers. These changes include the enactment of
fixed-price reimbursement systems which involve determining rates of
payment to hospitals, out-patient clinics, and private individual and
group practices for specific illnesses in advance of treatment. While
the Company does not believe that these regulations have had a
material impact on its business to date, their long-term effect, as
well as that of future changes in legislative or administrative
policies, cannot be predicted.
One result of these regulatory changes is increased limitations on
in-patient hospital stays. The Company believes this trend has
resulted in greater outpatient services, where a large majority of the
lessees in the Company's market practice. The Company believes these
regulatory changes, if sustained, could result in greater need for
medical equipment for outpatient procedures and supporting office
equipment. However, no assurance of actual results from such
regulatory changes can be made by the Company.
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<PAGE>
Rising health care costs may also cause non-governmental medical
insurers, such as Blue Cross and Blue Shield Plans and the growing
number of self-insured employers, to revise their reimbursement
systems and regulations governing the purchasing and leasing of
medical equipment. Alternative health care delivery systems, such as
health maintenance organizations, preferred provider organizations and
managed care programs, have adopted similar cost containment measures.
Although these developments have not materially affected the Company's
business to date, future changes in the health care industry and the
effect of such changes on the Company's business cannot be predicted.
EMPLOYEES
At June 30, 1995, the Company had 121 full-time employees, none of
whom were represented by a labor union. Approximately 34 of the
Company's employees are engaged in the credit, collections and lease
documentation areas, approximately 45 are in the sales, marketing and
customer service areas and 42 are engaged in the general
administration area. Management believes that the Company's employee
relations are good.
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Item 2. PROPERTIES
The Company leases its executive offices in Northbrook, Illinois
under leases which run through May 31, 2002. The executive offices
are approximately 17,200 square feet in area. The Company also leases
sales offices in Orange County and Sacramento, California, Boca Raton,
Florida, and King of Prussia, Pennsylvania. A warehouse in Grayslake,
Illinois is also leased for the Company's auto leasing activities and
for sales of equipment returned when leases expire or terminate.
Item 3. LEGAL PROCEEDINGS
While the Company is from time to time subject to actions or claims
for damages in the ordinary course of its business, it is not now a
party to any material legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year ended June 30, 1995.
-13-
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market
and reported on the NASDAQ Stock Market under the ticker symbol
"TLII." The common stock has been trading on NASDAQ-NMS since April,
1986, the time when the Company's initial public offering took place.
The approximate number of beneficial holders of record of the
Company's common stock on September 27, 1995, was 83.
Common Stock Information
For the Fiscal 1995 Fiscal 1994
quarter ended High Low High Low
September 30 3 1/2 3 1/8 6 3 5/8
December 31 3 5/8 3 5 3/4 4
March 31 3 3/4 3 5/16 5 3/4 3 1/2
June 30 3 15/16 3 3/16 3 7/8 3 1/8
The holders of Common Stock are entitled to receive dividends when
and as declared by the Board of Directors. On May 11, 1995 the Board
of Directors approved the first payment of a quarterly cash dividend,
in the amount of $.03 per share, since the Company became publicly
traded in 1986. The declaration of dividends in the future will be
reviewed by the Board of Directors in light of the Company's earnings,
financial condition, and capital requirements, and future dividends may
be declared, reduced, or eliminated at the discretion of the Board of
Directors on the basis of these or other considerations. The
Company's credit facility restricts the payment of dividends on the
Company's common stock unless certain financial tests are met. Under
the most restrictive limitations, the Company shall not purchase its
common stock, pay cash dividends or redeem subordinated debt prior to
maturity which, in aggregate, exceed the sum of $2 million plus 50
percent of consolidated net income computed on a cumulative basis plus
net proceeds to the Company from the issue or sale after December 31,
1992 of shares of capital stock of the Company or warrants, rights or
options to purchase or acquire any shares of its capital stock. On
August 10, 1995, the Board of Directors approved the payment of a
quarterly cash dividend in the amount of $.03 per share on August 31,
1995 to holders of record as of August 21, 1995. See "Management's
Discussion and Analysis -- Liquidity and Capital Resources" for a
discussion of certain restrictions on dividend payments pursuant to
the Company's debt agreements.
-14-
<PAGE>
Item 6. Selected Financial Data
(In thousands, except share and per share amounts)
Operations Statement Data
Fiscal Year Ended June 30,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Revenues
Lease income $29,555 $26,924 $24,588 $21,008 $18,235
Other 974 565 407 300 247
Total revenues 30,529 27,489 24,995 21,308 18,482
Expenses
Interest 13,338 11,738 10,601 8,492 8,071
General &
administrative 10,220 9,113 8,148 7,511 6,803
Provision for
uncollectible
accounts 4,431 5,673 2,949 2,263 1,730
Total expenses 27,989 26,524 21,698 18,266 16,604
Earnings before
income taxes
and cumulative
effect of a
change in
accounting 2,540 965 3,297 3,042 1,878
Income taxes 973 369 1,263 1,165 719
Earnings before
cumulative
effect of a
change in
accounting 1,567 596 2,034 1,877 1,159
Cumulative effect
of a change in
accounting for
income taxes 155
Net earnings $ 1,567 $ 441 $ 2,034 $ 1,877 $ 1,159
Earnings per common share:
Earnings before
cumulative
effect of a
change in
accounting $ .37 $ .13 $ .52 $ .64 $ .39
Cumulative effect
of a change in
accounting for
income taxes ( .03)
Net earnings $ .37 $ .10 $ .52 $ .64 $ .39
Weighted average
shares
outstanding 4,291,200 4,371,900 3,888,500 2,934,400 2,934,400
-15-
<PAGE>
Balance Sheet Data
June 30,
------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- -------- -------- --------
Net investment
in direct finance
leases 193,094 $166,817 $147,881 $125,485 $100,344
Total assets 226,383 193,735 170,075 139,466 109,641
Senior debt and
lease-backed
obligations
168,963 138,841 115,897 99,726 80,456
Subordinated debt 21,840 23,000 23,000 15,556 7,778
Stockholders' equity 25,670 24,779 24,342 17,250 15,373
Book value per share 6.09 5.67 5.57 5.88 5.24
Dividends declared
per share .03
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's operations are comprised almost exclusively of lease
financing. The Company realizes net earnings to the extent that lease
income and related fees exceed interest expense, general and
administrative expense and a provision for uncollectible accounts.
Interest expense is the single largest expense of the Company and is a
function of the amounts borrowed by the Company to finance its lease
portfolio and the interest rates associated with those borrowings.
The difference between the lease income and the cost of funds to
finance the leases is generally referred to as the "spread" in the
portfolio.
Substantially all of the Company's lease receivables are written at
a fixed rate of interest for a fixed term. The Company's borrowings
on the other hand are at both fixed and variable rates of interest.
The Company borrows under a revolving credit facility at a variable
interest rate (see "Liquidity and Capital Resources") and from time to
time periodically refinances that debt on a fixed-rate loan option in
the revolving credit agreement, securitization of lease receivables or
the sale of debt in the public market. To the extent the Company
refinances with fixed-rate debt, the Company locks in the spread in
its portfolio.
The Company has experienced growth in the total dollar amount of
new lease receivables added to its portfolio during each of the last
five fiscal years. In analyzing the Company's financial statements,
it is important to understand the impact of lease receivable growth
during an accounting period on lease income and net earnings.
For financial reporting purposes, substantially all of the
Company's leases are classified as direct finance leases and are
accounted for in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 13, "Accounting for Leases." The Company
accounts for its investment in direct finance leases by recording on
the balance sheet the total future minimum lease payments receivable
plus the estimated unguaranteed residual value of leased equipment
less the unearned lease income. Unearned lease income represents the
excess of the total future minimum lease payments plus the estimated
unguaranteed residual value expected to be realized at the end of the
lease term over the cost of the related equipment. Unearned lease
income is recognized as revenue over the term of the lease by the
effective interest method, i.e., application of a constant periodic
rate of return to the declining net investment in each lease. As a
result, during a period in which the Company realizes growth in new
lease receivables, lease income should also increase, but, at a lesser
rate.
-16-
<PAGE>
Initial direct costs incurred in consummating a lease, principally
commissions, are capitalized as part of the net investment in direct
finance leases and amortized over the lease term as a reduction in the
yield. An allowance for doubtful accounts is provided over the terms
of the underlying leases as the leases are determined to be
uncollectible. See "Results of Operations" below for further
discussion.
RESULTS OF OPERATIONS
Lease income increased by $2,631,000 (9.8%) in fiscal 1995 and
$2,336,000 (9.5%) in fiscal 1994 due primarily to increases of 15.8%
and 12.8%, respectively, in the net investment in direct finance
leases. The increase in the net investment in direct finance leases
was due to increases in lease receivables originated of 20.2% and
13.1%, respectively, in fiscal 1995 and fiscal 1994. In addition, the
increase in lease income is attributable to increases in lease-related
fees of $459,000 (18.6%) and $449,000 (22.2%), respectively, in fiscal
1995 and fiscal 1994.
The growth in the Company's lease portfolio is the result of an
increase in the number of leases originated in each fiscal year. The
Company believes that the number of leases originated has increased
primarily as a result of its increased marketing and selling
activities, greater name recognition of LeaseCard in the marketplace
and the introduction of new products by equipment manufacturers.
Lease-related fees, primarily delinquency charges, have increased as a
result of the growth in the size of the Company's lease portfolio and
increases in the amounts charged by the Company. Delinquency charges
in fiscal 1995 increased to $1,877,000 from $1,488,000 in fiscal 1994
and $1,210,000 in fiscal 1993. Delinquency rates increased slightly
to 2.7% at June 30, 1995 from 2.6% at June 30, 1994 and decreased from
3.2% at June 30, 1993. See "Business -- Credit Review and Loss
Experience."
Interest expense increased $1,600,000 (13.6%) in fiscal 1995 and
$1,137,000 (10.7%) in fiscal 1994. Interest expense as a percent of
lease income increased to 45.1% in fiscal 1995 from 43.6% in fiscal
1994 and 43.1% in fiscal 1993. These increases resulted from
increases in the amounts borrowed to finance the growth in the lease
portfolio and the increase in the general level of market interest
rates. Interest expense is reported net of the impact of interest
rate swaps used to fix the rate on floating rate financings, the
effect of which was to increase interest expense by $30,000 in fiscal
1995, $736,000 in fiscal 1994, and $745,000 in fiscal 1993.
General and administrative expense increased by $1,107,000 (12.1%)
in fiscal 1995 and $965,000 (11.8%) in fiscal 1994 primarily as a
result of increases in salaries and benefits expense and sales-related
expenses. The average number of personnel increased to 117 for fiscal
1995 from 112 for fiscal 1994 and 110 for fiscal 1993. General and
administrative expenses as a percent of lease income were 34.6% in
fiscal 1995, 33.8% in fiscal 1994 and 33.1% in fiscal 1993.
The provision for uncollectible accounts decreased by $1,242,000
(21.9%) in fiscal 1995 and increased by $2,724,000 (92.4%) in fiscal
1994. The provision for uncollectible accounts as a percent of lease
income was 15.0% in fiscal 1995, 21.1% in fiscal 1994 and 12.0% in
fiscal 1993. The decrease in the provision in fiscal year 1995 is the
result of an increase in the provision for uncollectible accounts in
fiscal 1994 of $1,696,000 primarily due to the write-off of one large
lessee account which represented approximately one percent of the
Company's portfolio. The write-off in fiscal 1994 of this one account
does not reflect a deterioration in the performance of the remainder
of the portfolio which continues to perform consistent with historical
norms.
-17-
<PAGE>
Earnings before income taxes and the cumulative effect of the
change in accounting increased by $1,575,000 (163.2%) in fiscal 1995
and decreased by $2,332,000 (70.7%) in fiscal 1994. Earnings before
the cumulative effect of the change in accounting increased by
$971,000 (162.9%) in fiscal 1995 and decreased by $1,438,000 (70.7%)
in fiscal 1994 as compared to the respective prior fiscal years.
The Company adopted Statement of Financial Accounting Standards
(SFAS) 109, "Accounting for Income Taxes", during the first quarter of
fiscal 1994, the cumulative effect of which was to reduce net earnings
for fiscal 1994 by $155,000, or $.03 per share. The Company's
effective tax rate was 38.3% in fiscal years 1993 through 1995.
Net earnings increased by $1,126,000 (255.3%) in fiscal 1995 and
decreased by $1,593,000 (78.3%) in fiscal 1994. The increase for
fiscal 1995 was primarily due to the decrease in the provision for
uncollectible accounts, as discussed above, and the adoption of SFAS
No. 109 in fiscal 1994. The decrease for fiscal 1994 was primarily
due to the increase in interest expense as a percent of lease income,
the adoption of SFAS 109, and the write-off of one large lessee
account, as discussed above.
Liquidity and Capital Resources
The Company has principally financed its operations, including the
growth of its lease portfolio, through borrowings under its revolving
credit agreements, issuance of debt and lease-backed obligations in
both the institutional private placement and public markets, principal
collections on leases and cash provided from operations.
Net cash used in investing activities, which was $37.1 million in
fiscal 1995, $27.3 million in fiscal 1994, and $31.6 in fiscal 1993,
generally represents the excess of equipment purchased for leasing
over principal collections on leases. Net cash provided by financing
activities (the excess of borrowings under the revolving credit
agreement and issuances of debt and lease-backed obligations over
repayments of these debt instruments) was $28.3 million in fiscal
1995, $22.9 million in fiscal 1994 and $28.7 million in fiscal 1993.
The remaining funds used in investing activities were provided by
operating cash flows. As of June 30, 1995, the Company had
outstanding commitments to purchase equipment, which it intended to
lease, with an aggregate purchase price of $5.3 million.
The following paragraphs summarize certain terms of the Company's
existing debt agreements and instruments. The Company believes these
terms may be material to investors, but these summaries, which do not
purport to be complete, are subject to the detailed provisions of
those documents, and are qualified in their entirety by reference to
the agreements and instruments filed as exhibits or incorporated by
reference to this Form 10-K.
-18-
<PAGE>
Revolving Credit Agreement
The Company borrows under its unsecured revolving credit agreement
from time to time to fund its operations. As the Company has
approached full utilization under this agreement, it has sold long-term
debt and lease-backed obligations in both the institutional
private placement and public markets and used the proceeds to reduce
its revolving credit borrowings. The Company intends to continue to
issue long-term debt and lease-backed obligations in both the
institutional private placement and public markets to reduce its
exposure to floating rates associated with revolving credit
borrowings.
As of September 27, 1995 the maximum borrowing allowed under the Company's
current revolving credit agreement was increased from $15 million to
$30 million, permitting the Company to borrow up to $30 million on an
unsecured basis with interest paid quarterly. Upon the earlier to occur
of October 13, 1995 or the issuance of leased-backed notes by a special
purpose subsidiary of the Company expected to close on October 6, 1995,
the maximum borrowing under this facility will be reduced to $15 million from
$30 million. The Company, at its option, pays interest
equal to the prime rate or LIBOR plus .75 percent. The Company has
the option at the end of every quarter to convert its revolving loans
into a fixed-rate loan, in which case the principal amount is payable
in 18 equal quarterly installments with interest at 2 percent over a
calculated rate based on LIBOR. If the revolving credit agreement is
not extended, all revolving loans will be due on March 31, 1996, and
on such date the Company may convert the outstanding balance into a
four-year term loan bearing interest at the prime rate plus 1/4
percent or LIBOR plus 1 percent. As of September 27, 1995, the outstanding
loans under this facility were $12 million and the unused borrowing
capacity was $18 million.
The revolving credit agreement contains numerous covenants which
include: a limitation on leverage, a minimum net worth requirement, a
minimum interest coverage requirement, dividend and other stock and
debt repurchase limitations, a maximum average original equipment cost
of leased assets and a minimum equity ownership by the Company's
principal shareholder and Chief Executive Officer. At June 30, 1995,
the Company was in compliance with all covenants contained in the
revolving credit agreement.
Issuances of Senior and Subordinated Debt and Lease-Backed
Obligations
The Company has outstanding debt under unsecured senior and
subordinated note placements, unsecured subordinated debentures, and
senior and subordinated lease-backed obligations, all of which were
completed since December, 1987 and are summarized in the following
table:
-19-
<PAGE>
PRINCIPAL AMOUNT
--------------------
BALANCE AT
ISSUANCE PURCHASER(S) OR INTEREST JUNE 30,
DATE SECURITY THEIR AGENT (S) RATE ORIGINAL 1995 (1)
- -------- -------------- ----------------- -------- ---------- ----------
March Lease-backed CIGNA 7.10% 25,000,000 2,638,637
1992 certificate Investments, Inc.
June Unsecured Massachusetts 13.40% 10,000,000 8,890,000
1992 subordinated Mutual Life
notes Insurance Co.
October Lease-backed Asset/Liability variable 40,400,000 10,541,619
1992 notes Funding Corp. (2)
October Unsecured American Nat'l 10.50% 13,000,000 12,950,000
1992 subordinated Bank & Trust
debentures Co., Trustee
February Subordinated First Union 8.20% 4,000,000 3,100,000
1993 lease-backed Nat'l Bank of
note North Carolina
June Unsecured Principal 5.83% 38,000,000 27,200,000
1993 senior notes Mutual Life
Insurance Co.,
Massachusetts
Mutual Life
Insurance Co.,
Phoenix Home
Life Mutual
Insurance Co. and
TMG Life
Insurance Co.
June Unsecured Phoenix Home 6.82% 4,000,000 4,000,000
1993 senior notes Life Mutual
Insurance Co.
-20-
<PAGE>
PRINCIPAL AMOUNT
--------------------
BALANCE AT
ISSUANCE PURCHASER(S) OR INTEREST JUNE 30,
DATE SECURITY THEIR AGENT (S) RATE ORIGINAL 1995 (1)
- -------- -------------- ----------------- -------- ---------- ----------
June Unsecured Core States 6.31% 10,000,000 7,800,000
1993 senior notes Bank, N.A.
August Lease-backed Public 6.65% 43,416,000 30,402,413
1994 notes
August Subordinate First Union 7.65% 6,054,168 4,757,664
1994 lease-backed Nat'l Bank of
note North Carolina
August Secured term First Union variable 1,000,000 1,000,000
1994 notes Nat'l Bank of (3)
North Carolina
April Lease-backed First Union variable 75,929,000 67,348,162
1995 revolving Nat'l Bank of (4) (5)
credit North Carolina
facility
Total $180,628,495
(1) The aggregate scheduled maturities of the securities are $114.8
million for fiscal 1996, $34.5 million for fiscal 1997, $25.1
million for fiscal 1998 and $16.4 million thereafter.
(2) The Company has entered into an interest rate swap agreement
with Merrill Lynch Capital Services, Inc. to effectively fix the
interest rate on these notes at 5.75% for their full term.
(3) In addition to prepaid interest in the amount of $14,025.21 paid
at inception, interest payments include all investment earnings
on the account.
(4) The interest rate is .75 percent per annum above LIBOR.
(5) Effective June 19, 1995 the credit limit on this securitized
revolver was increased from $60 million to $80 million. Effective
September 27, 1995 the credit limit on this securitized revolver
was reduced from $80 million to $75 million. Upon the earlier to
occur of October 13, 1995 or the issuance of leased-backed notes by
a special purpose subsidiary of the Company expected to close on
October 6, 1995, the maximum borrowing allowed under this facility
will be reduced to $35 million from $75 million.
-21-
<PAGE>
The unsecured senior and subordinated private placement indentures
contain numerous financial and other covenants, which include:
limitations on total leverage and on the ratio of subordinated debt to
equity, a minimum net worth requirement, a minimum fixed charge
coverage requirement, dividend and other stock and debt repurchase
limitations, a minimum unencumbered asset requirement and a minimum
equity ownership by the Company's principal shareholder and Chief
Executive Officer. At June 30, 1995, the Company was in compliance
with all covenants contained in the senior and subordinated loan
agreements.
The publicly issued subordinated debentures and the related
indenture contain financial and other covenants which include
limitations on: dividends and stock redemptions, the incurrence of
additional senior and/or subordinated debt, issuance of preferred
stock and on transfers of assets by the Company to special-purpose
subsidiaries formed for the purpose of financing such assets. As of
June 30, 1995 the Company was in compliance with all requirements of
these agreements.
On April 18, 1995, the Company, through a newly-created special-
purpose subsidiary, TL Lease Funding Corp. IV ("TLFC IV"), established
a securitized revolving credit and term loan facility (the "TLFC IV
Revolving Credit Facility") with a national banking institution. The
subsidiary may borrow up to $75 million (upon the earlier to occur of
October 13, 1995 or the issuance of leased-backed notes expected to
close on October 6, 1995, the maximum borrowing allowed under this facility
will be reduced to $35 million from $75 million) on a revolving basis
through March 31, 1996, with the option to convert to a term facility at
any time prior to March 31, 1996. The subsidiary pays interest at a rate
equal to LIBOR plus 75 basis points on these borrowings. On April 18,
1995, the Company sold leases with a net book value of approximately
$60 million to the TLFC IV for approximately $60 million in cash
borrowed under this facility. On May 31, 1995, the Company sold
additional leases with a net book value of approximately $18.1 million to
the TLFC IV, and repurchased leases with a net book value of approximately
$3.4 million form TLFC IV. The Company continues to service leases sold to
TLFC IV, and used the net proceeds from the sales of leases to reduce
revolving credit borrowings under its other revolving credit facility.
The Company believes that the revolving credit facilities,
increasing principal payments on leases and
continued placement of debt in either the public or private markets
will provide adequate capital resources and liquidity for the Company
to fund its operations and debt maturities, but there can be no
assurances that this will continue to be the case.
On November 16, 1994, the Board of Directors authorized the
repurchase by the Company of up to 1,000,000 shares of its common
stock. The Board determined that this stock repurchase program is in
the best interests of the Company and its shareholders given the
significant discount to book value at which the Company's common stock
is currently trading. As of June 30, 1995, 159,925 shares have been
repurchased at a total cost of $550,000 under this program.
-22-
<PAGE>
On May 11, 1995 the Board of Directors approved the first payment
of a quarterly cash dividend, in the amount of $.03 per share, since
the Company became publicly traded in 1986. The declaration of dividends
in the future will be reviewed by the Board of Directors in light of the
Company's earnings, financial condition, and capital requirements, and
future dividends may be declared, reduced, or eliminated at the
discretion of the Board of Directors on the basis of these or other
considerations. The Company's credit facility restricts the payment
of dividends on the Company's common stock unless certain financial
tests are met. Under the most restrictive limitations, the Company
shall not purchase its common stock, pay cash dividends or redeem
subordinated debt prior to maturity which, in aggregate, exceed the
sum of $2 million plus 50 percent of consolidated net income computed
on a cumulative basis plus net proceeds to the Company from the issue
or sale after December 31, 1992 of shares of capital stock of the
Company or warrants, rights or options to purchase or acquire any
shares of its capital stock. On August 10, 1995, the Board of
Directors approved the payment of a quarterly cash dividend in the
amount of $.03 per share on August 31, 1995 to holders of record as of
August 21, 1995.
-23-
<PAGE>
Item 8. Financial Statements and Supplementary Data
Page
Consolidated Financial Statements
Independent Auditors' Report 25
Consolidated Balance Sheets at June 30, 1995 and 1994 26
Consolidated Statements of Operations for the years ended
June 30, 1995, 1994, and 1993 27
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1995, 1994, and 1993 28
Consolidated Statements of Cash Flows for the years ended
June 30, 1995, 1994, and 1993 29
Notes to Consolidated Financial Statements 30
-24-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Trans Leasing International, Inc.
Northbrook, Illinois
We have audited the accompanying consolidated balance sheets of Trans
Leasing International, Inc. as of June 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended June 30,
1995. These financial statements are the responsibility of the
management of Trans Leasing International, Inc. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Trans Leasing
International, Inc. at June 30, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note G to the financial statements, in 1994 the Company
changed its method of accounting for income taxes.
DELOITTE & TOUCHE LLP
Chicago, Illinois
September 1, 1995
-25-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION> June 30
--------------------------------
1995 1994
-------------- --------------
ASSETS
<S> <C> <C>
CASH $3,758,000 $3,297,000
RESTRICTED CASH (Note A) 12,988,000 8,984,000
NET INVESTMENT IN DIRECT FINANCE LEASES (Notes B and E):
Future minimum lease payments 219,718,000 186,287,000
Estimated unguaranteed residual value 19,823,000 18,201,000
-------------- --------------
239,541,000 204,488,000
Less: Unearned lease income (39,965,000) (33,624,000)
Allowance for uncollectible accounts (6,482,000) (4,047,000)
-------------- --------------
193,094,000 166,817,000
-------------- --------------
LEASE FINANCING RECEIVABLES, less allowance for
uncollectible accounts of $151,000 and $141,000, respectively 4,977,000 6,352,000
PROPERTY AND EQUIPMENT, net of accumulated depreciation (Note C) 5,423,000 2,019,000
INCOME TAXES RECOVERABLE 1,464,000 1,951,000
OTHER ASSETS (Note D) 4,679,000 4,315,000
-------------- --------------
TOTAL ASSETS $226,383,000 $193,735,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $7,067,000 $5,288,000
NOTES PAYABLE TO FINANCIAL INSTITUTIONS (Note E) 49,175,000 60,657,000
LEASE-BACKED OBLIGATIONS (Note E) 119,788,000 78,184,000
SUBORDINATED OBLIGATIONS (Note E) 21,840,000 23,000,000
DEFERRED INCOME TAXES (Note G) 2,843,000 1,827,000
COMMITMENTS AND CONTINGENT LIABILITIES (Note F) 0 0
-------------- --------------
TOTAL LIABILITIES $200,713,000 $168,956,000
-------------- --------------
STOCKHOLDERS' EQUITY (Note I):
Preferred stock, par value $1.00;
authorized 2,500,000 shares; none issued
Common stock, par value $.01; authorized 10,000,000 shares;
issued 4,798,500 shares, outstanding 4,211,975 and
4,371,900 shares, respectively 48,000 48,000
Additional paid-in capital 9,879,000 9,879,000
Retained earnings 17,471,000 16,030,000
Less 586,525 and 426,600 shares respectively,
held in treasury, at cost (1,728,000) (1,178,000)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 25,670,000 24,779,000
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $226,383,000 $193,735,000
============== ==============
See notes to consolidated financial statements.
</TABLE>
-26-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Year ended June 30
-----------------------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Lease income $29,555,000 $26,924,000 $24,588,000
Other 974,000 565,000 407,000
-------------- -------------- --------------
Total Revenues 30,529,000 27,489,000 24,995,000
EXPENSES:
Interest 13,338,000 11,738,000 10,601,000
General and administrative 10,220,000 9,113,000 8,148,000
Provision for uncollectible accounts 4,431,000 5,673,000 2,949,000
-------------- -------------- --------------
Total Expenses 27,989,000 26,524,000 21,698,000
-------------- -------------- --------------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING 2,540,000 965,000 3,297,000
INCOME TAXES (Note G) 973,000 369,000 1,263,000
-------------- -------------- --------------
EARNINGS BEFORE CUMULATIVE
EFFECT OF A CHANGE
IN ACCOUNTING 1,567,000 596,000 2,034,000
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING FOR INCOME TAXES (Note G) 155,000
-------------- -------------- --------------
NET EARNINGS $1,567,000 $441,000 $2,034,000
============== ============== ==============
EARNINGS PER COMMON SHARE (Notes A and I)
EARNINGS BEFORE CUMULATIVE
EFFECT OF A CHANGE
IN ACCOUNTING $0.37 $0.13 $0.52
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING FOR INCOME TAXES (0.03)
-------------- -------------- --------------
NET EARNINGS $0.37 $0.10 $0.52
============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note A) 4,291,200 4,371,900 3,888,500
See notes to consolidated financial statements.
</TABLE>
-27-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock Additional
------------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock
------------ ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1992 2,934,400 $34,000 $4,835,000 $13,559,000 ($1,178,000)
Issuance of common stock 1,437,500 14,000 5,044,000
Net earnings 2,034,000
------------ ----------- -------------- -------------- --------------
BALANCE, June 30, 1993 4,371,900 48,000 9,879,000 15,593,000 (1,178,000)
Other (4,000)
Net earnings 441,000
------------ ----------- -------------- -------------- --------------
BALANCE, June 30, 1994 4,371,900 48,000 9,879,000 16,030,000 (1,178,000)
Treasury stock purchased (159,925) (550,000)
Dividends declared and paid (126,000)
Net earnings 1,567,000
------------ ----------- -------------- -------------- --------------
BALANCE, June 30, 1995 4,211,975 48,000 9,879,000 17,471,000 (1,728,000)
============ =========== ============== ============== ==============
See notes to condensed consolidated financial statements.
</TABLE>
-28-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended June 30
------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,567,000 $441,000 $2,034,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Leasing costs, primarily provision
for uncollectible accounts and
amortization of initial direct costs 6,521,000 7,626,000 4,730,000
Depreciation and amortization 830,000 461,000 395,000
Initial direct costs incurred (2,397,000) (1,956,000) (1,830,000)
Changes in:
Deferred income taxes (1,016,000) 612,000 963,000
Accounts payable and accrued expenses 1,779,000 681,000 115,000
Income taxes recoverable 487,000 (1,014,000) (264,000)
Other assets (457,000) (1,565,000) (2,736,000)
Other (22,000) 62,000 8,000
-------------- -------------- --------------
Net cash provided by operating activities 9,324,000 5,348,000 3,415,000
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on leases 75,627,000 65,001,000 48,965,000
Equipment purchased for leasing (106,826,000) (89,338,000) (77,390,000)
Purchase of lease financing receivables (1,788,000) (2,468,000) (3,018,000)
Purchase of property and equipment (4,581,000) (608,000) (500,000)
Disposal of property and equipment 419,000 149,000 337,000
-------------- -------------- --------------
Net cash used in investing activities (37,149,000) (27,264,000) (31,606,000)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable to financial institutions 126,225,000 61,600,000 91,000,000
Repayment of notes payable to financial institutions (137,707,000) (62,288,000) (111,472,000)
Issuance of lease-backed obligations 126,382,000 42,966,000 43,996,000
Repayment of lease-backed obligations (84,778,000) (19,334,000) (12,902,000)
Issuance of subordinated obligations 13,000,000
Repayment of subordinated obligations (1,160,000)
Issuance of common stock 5,058,000
Payment of dividends on common stock (126,000)
Purchase of treasury stock (550,000)
-------------- -------------- --------------
Net cash provided by financing activities 28,286,000 22,944,000 28,680,000
-------------- -------------- --------------
NET INCREASE IN CASH 461,000 1,028,000 489,000
CASH, beginning of period 3,297,000 2,269,000 1,780,000
-------------- -------------- --------------
CASH, end of period $3,758,000 $3,297,000 $2,269,000
============== ============== ==============
See notes to condensed consolidated financial statements.
</TABLE>
-29-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies:
Business:
Trans Leasing International, Inc., (the "Company") leases a
variety of medical and general office equipment to the medical and
commercial equipment markets.
Principles of Consolidation:
The financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Trans Leasing Insurance
Services, Inc., T.L.I. Auto Leasing Group, Inc., Nuvotron, Inc.,
Trans Leasing Finance Corp., TL Lease Funding Corp. II, TL Lease
Funding Corp. III, and TL Lease Funding Corp. IV. Intercompany
accounts and transactions have been eliminated.
Lease Accounting:
Completed lease contracts, which qualify as direct finance
leases as defined by Statement of Financial Accounting Standards
No. 13, "Accounting for Leases," are accounted for by recording
on the balance sheet the total future minimum lease payments
receivable plus the estimated unguaranteed residual value of leased
equipment less the unearned lease income. Unearned lease income
represents the excess of the total future minimum lease payments
plus the estimated unguaranteed residual value expected to be
realized at the end of the lease term over the cost of the related
equipment. Unearned lease income is recognized as revenue over the
term of the lease by the effective interest method. Initial direct
costs incurred in consummating a lease are capitalized as part of
the investment in direct finance leases and amortized over the
lease term as a reduction in the yield. An allowance for doubtful
accounts is provided over the terms of the underlying leases as the
leases are determined to be uncollectible. Accounts are normally
written off if no payment has been received within 150 to 180 days
of its due date. Accounts can be written off earlier if it is
evident that no further payment will be received.
Restricted Cash:
Restricted cash represents cash received related to
securitized leases which is held in segregated cash accounts pending
distribution to the lease-backed certificate holders.
Property and Equipment:
Property and equipment are carried at cost and are depreciated
using the straight-line method over their estimated useful lives.
-30-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Income Taxes:
In 1994 and 1995, the provision for income taxes includes
deferred taxes resulting from temporary differences between the
financial statement and tax bases of assets and liabilities, using
the liability method required by Statement of Financial Accounting
Standards 109, "Accounting for Income Taxes."
In 1993, the provision for income taxes included deferred
taxes based upon the principles of Accounting Principles Board
Opinion 11, "Account for Income Taxes."
Interest Rate Swaps:
Interest rate swaps involve the exchange of interest payments
without the exchange of the underlying notional principal amounts.
The Company accrues a net payable or receivable relating to
interest to be paid or received as an adjustment to interest
expense.
Earnings Per Share:
Earnings per common share are computed on the basis of the
weighted average number of shares outstanding plus common stock
equivalents, if dilutive, applicable to warrants and options.
Reclassifications:
Certain reclassifications have been made to prior years to
conform with the presentation used in 1995.
B. Net Investment in Direct Finance Leases:
The Company leases equipment with lease terms generally
ranging from one to five years. Minimum payments to be received on
lease contracts for each of the succeeding five fiscal years ending
June 30 are:
1996 $90,606,000
1997 63,257,000
1998 38,798,000
1999 20,485,000
2000 6,505,000
Thereafter 67,000
Initial direct costs are capitalized as part of the investment
in direct finance leases and are amortized over the lease term as a
reduction in yield. Initial direct costs incurred are as follows:
Year ended June 30
----------------------------------------
1995 1994 1993
------------ ------------ ------------
Initial direct costs: $2,397,000 $1,956,000 $1,830,000
-31-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
An analysis of the changes in the allowance for uncollectible
accounts is as follows:
Year ended June 30
-------------------------------------
1995 1994 1993
----------- ---------- -----------
Balance, beginning of year $4,047,000 $2,709,000 $2,181,000
Additions 5,328,000 6,489,000 3,690,000
Uncollected lease receivables
written off, net of
recoveries ( 2,893,000) ( 5,151,000) ( 3,162,000)
Balance, end of year $6,482,000 $4,047,000 $2,709,000
C. Property and Equipment:
The major classes of property and equipment are as follows:
June 30
-------------------------
1995 1994
---------- ----------
Equipment under operating leases $4,414,000 $1,246,000
Data processing equipment 1,305,000 1,037,000
Furniture and fixtures 549,000 806,000
Personal computer and
communication equipment 331,000 0
Vehicles 66,000 46,000
Leasehold improvements 50,000 46,000
6,715,000 3,181,000
Less accumulated depreciation ( 1,292,000) ( 1,162,000)
$5,423,000 $2,019,000
-32-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
D. Other Assets:
Other assets consist of:
June 30
-----------------------
1995 1994
----------- ----------
Cash surrender value of life
insurance policies, net of
policy loans of $61,000
in 1995 and 1994 $1,796,000 $1,563,000
Deferred debt issuance costs 1,705,000 1,819,000
Due from lessees 789,000 435,000
Supplies 95,000 98,000
Deposits 91,000 25,000
Other 203,000 375,000
----------- ----------
$4,679,000 $4,315,000
=========== ==========
E. Debt:
June 30
---------------------------------
1995 1994
------------- ------------
Revolving term credit agreement:
Unsecured, floating rate
(9% at June 30, 1995),
twelve-month revolving $10,175,000 $ 5,642,000
Other notes payable to financial
institutions:
Unsecured, interest rate of 5.83%,
due in installments through
March 31, 1998 27,200,000 34,400,000
Unsecured, interest rate of 6.31%,
due in installments through
September 30, 1998 7,800,000 10,000,000
Unsecured, interest rate of 6.82%,
due in installments through
June 1, 1998 4,000,000 4,000,000
Unsecured, interest rate of 9.39%,
due in installments through
March 31, 1995 3,000,000
Unsecured, interest rate of 9.8%,
due in installments through
December 1, 1994 2,500,000
Unsecured, interest rate of 13%,
due in installments through
December 1, 1994 1,111,000
Leases discounted with financial
institutions:
Nonrecourse, average interest
rate of 11.3%, due on various
dates through 1994 4,000
----------- ------------
$49,175,000 $60,657,000
=========== ============
-33-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
June 30
--------------------------
1995 1994
------------- ------------
Lease-backed obligations:
Variable interest rate
(6.875% as of June 30, 1995),
due September 9, 1995 $67,348,000
Variable interest rate
(5.95% as of June 30, 1995),
due March 25, 1998 1,000,000
Variable interest rate
(6.875% as of June 30, 1995),
due June 20, 1995 42,653,000
Interest rate of 6.65%,
due in installments through
March 25, 1998 30,402,000
Interest rate of 5.75%,
due in installments through
May 20, 1997 10,541,000 22,160,000
Interest rate of 7.65%,
due in installments through
March 25, 1998 4,758,000
Interest rate of 7.1%,
due in installments through
January 15, 1996 2,639,000 9,851,000
Interest rate of 8.2%,
due in installments through
May 20, 1997 3,100,000 3,520,000
------------- ------------
$119,788,000 $78,184,000
============= ============
Subordinated obligations:
Unsecured, interest rate of 10.5%,
due October 15, 2002 $12,950,000 $13,000,000
Unsecured, interest rate of 13.4%,
due June 30, 1999 8,890,000 10,000,000
------------ ------------
$21,840,000 $23,000,000
============ ============
As of September 27, 1995 the maximum borrowing allowed under the Company's
current revolving credit agreement was increased from $15 million to
$30 million, permitting the Company to borrow up to $30 million on an
unsecured basis with interest paid quarterly. Upon the earlier to occur
of October 13, 1995 or the issuance of leased-backed notes by a special
purpose subsidiary of the Company expected to close on October 6, 1995,
the maximum borrowing under this facility will be reduced to $15 million from
$30 million. The Company, at its option, pays interest
equal to the prime rate or LIBOR plus .75 percent. The Company has
the option at the end of every quarter to convert its revolving loans
into a fixed-rate loan, in which case the principal amount is payable
in 18 equal quarterly installments with interest at 2 percent over a
calculated rate based on LIBOR. If the revolving credit agreement is
not extended, all revolving loans will be due on March 31, 1996, and
on such date the Company may convert the outstanding balance into a
four-year term loan bearing interest at the prime rate plus 1/4
percent or LIBOR plus 1 percent. As of September 27, 1995, the outstanding
loans under this facility were $12 million and the unused borrowing
capacity was $18 million.
-34-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The Company has an amortizing interest rate collar agreement which
effectively fixes the interest rate on its floating-rate lease-backed
notes issued October 1992 at 5.75 percent. The notional amount of the
collar declines over time to match the scheduled amortization of the
related note and, as of June 30, 1995, is $10,588,889.
Interest received from or paid to the counterparty under this
agreement is netted against or added to interest expense on the
Company's income statement. There is no market risk associated with
this agreement as it is used to hedge floating-rate debt. The Company
is exposed to potential non-performance by the counterparty to the
interest rate collar agreement, though the Company does not anticipate
non-performance due to the strong financial position of the
counterparty.
The Company's loan agreements contain certain restrictive
covenants. The more significant of these covenants require the
Company to maintain a ratio of earnings before taxes and interest
expense to interest expense of 1.15 to 1.0 for each fiscal quarter;
require the Company to maintain a ratio of debt, (excluding
subordinated debt due in more than one year), to equity, (including
subordinated debt due in more than one year), not to exceed 4.0 to
1.0; prohibit consolidated tangible net worth, plus aggregate net
assets of securitization subsidiaries, plus the aggregate amount paid
by the Company on or after December 31, 1992 to redeem its stock from
being less than $17 million plus 50 percent of the Company's
consolidated cumulative net income from January 1, 1993; provide that
the Company shall not purchase its common stock, pay cash dividends or
redeem subordinated debt prior to maturity which, in aggregate, exceed
the sum of $2 million plus 50 percent of consolidated net income
computed on a cumulative basis plus net proceeds to the Company from
the issue or sale after December 31, 1992 of shares of capital stock
of the Company or warrants, rights or options to purchase or acquire
any shares of its capital stock; and prohibit the Company's activities
in mergers and acquisitions without the consent of the lender. In
addition, repayment in full would be required in the event the
principal shareholder and Chief Executive Officer ceases to own at
least 35 percent of the Company's outstanding common stock.
At June 30, 1995, the Company was in compliance with all covenants.
-35-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
On April 18, 1995, the Company, through a newly-created special-
purpose subsidiary, TL Lease Funding Corp. IV ("TLFC IV"), established
a securitized revolving credit and term loan facility (the "TLFC IV
Revolving Credit Facility") with a national banking institution. The
subsidiary may borrow up to $75 million (upon the earlier to occur of
October 13, 1995 or the issuance of leased-backed notes expected to
close on October 6, 1995, the maximum borrowing allowed under this facility
will be reduced to $35 million from $75 million) on a revolving basis
through March 31, 1996, with the option to convert to a term facility at
any time prior to March 31, 1996. The subsidiary pays interest at a rate
equal to LIBOR plus 75 basis points on these borrowings. On April 18,
1995, the Company sold leases with a net book value of approximately
$60 million to the TLFC IV for approximately $60 million in cash
borrowed under this facility. On May 31, 1995, the Company sold
additional leases with a net book value of approximately $18.1 million to
the TLFC IV, and repurchased leases with a net book value of approximately
$3.4 million form TLFC IV. The Company continues to service leases sold to
TLFC IV, and used the net proceeds from the sales of leases to reduce
revolving credit borrowings under its other revolving credit facility.
Maturities of debt (notes payable to financial institutions,
subordinated obligations, lease-backed obligations and leases
discounted with financial institutions) during each of the succeeding
five years ending June 30 and thereafter are as follows:
1996 $114,769,000
1997 34,551,000
1998 25,103,000
1999 3,430,000
2000 0
Thereafter 12,950,000
F. Commitments:
The Company leases its office facilities and certain office
equipment. Future minimum rental commitments as of June 30, 1995
and thereafter are as follows:
1996 $276,000
1997 238,000
1998 235,000
Thereafter 919,000
The Company leases its executive offices in Northbrook,
Illinois under leases which run through May 31, 2002.
Total rent expense for the years ended June 30, 1995, 1994,
and 1993 was $353,000, $376,000, and $337,000, respectively.
-36-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
As of June 30, 1995, the Company had outstanding commitments
to purchase equipment, which it intended to lease, with an aggregate
purchase price of $5.3 million.
G. Income Taxes:
The Company adopted Statement of Financial Accounting
Standards (SFAS) 109, "Accounting for Income Taxes," effective
July 1, 1993. This statement supersedes the provisions of
Accounting Principle Board Opinion No. 11, "Accounting for Income
Taxes," under which the Company had previously been recognizing
income tax expense. The cumulative effect of adopting SFAS No.
109 on the Company's financial statements was to decrease net
earnings by $155,000 ($.03 per share) for fiscal 1994.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of the assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (b) operating loss and tax
credit carryforwards. The tax effects of significant items
comprising the Company's net deferred tax liability as of June
30, 1995 and 1994 are as follows:
1995 1994
------------ -------------
Deferred Tax Liabilities:
Differences between book
and tax investment in
equipment leased $12,785,000 $11,823,000
Deferred Tax Assets:
Operating loss carryforwards 2,134,000 2,079,000
Tax credit carryforwards:
Investment tax credits 2,443,000 2,410,000
Alternative minimum tax
credits 5,365,000 5,507,000
------------ -------------
9,942,000 9,996,000
------------ -------------
Net deferred tax liability $ 2,843,000 $ 1,827,000
============ =============
No valuation allowances as of June 30, 1995 and 1994 are
considered necessary.
At June 30, 1995, the Company has $2,800,000 of net operating
loss carryforwards available for federal income tax purposes.
The net operating loss carryforwards expire as follows:
Year of
Net Operating Loss Expiration
------------------ ----------
$ 919,000 2006
1,881,000 2009
-37-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
At June 30, 1995, the Company's investment tax credit carryforwards
expire as follows:
Investment Year of
Tax Credit Expiration
---------- ----------
$ 82,000 1997
631,000 1998
784,000 1999
699,000 2000
247,000 2001
At June 30, 1995 the Company has $5,365,000 of alternative minimum
tax credit carryover, which is available to offset future regular
federal income taxes.
The provision for income taxes is as follows:
Year ended June 30
---------------------------------------
1995 1994 1993
---------- ------------ -------------
Federal:
Current $ 130,000 $1,926,000
Deferred 810,000 191,000 ( 878,000)
---------- ------------ -------------
810,000 321,000 1,048,000
State:
Current 50,000 300,000
Deferred 113,000 48,000 ( 85,000)
---------- ------------ -------------
163,000 48,000 215,000
---------- ------------ -------------
$ 973,000 $ 369,000 $1,263,000
========== ============ =============
The differences between the statutory and effective tax rates are
as follows:
Year ended June 30
--------------------------
1995 1994 1993
------ ------- -------
U.S. statutory income tax rate 34.0% 34.0% 34.0%
State income taxes less
federal benefit 4.3 4.3 4.3
------ ------- -------
Effective income tax rate 38.3% 38.3% 38.3%
====== ======= =======
-38-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
H. Profit Sharing Plan:
The Company has established a profit sharing 401(k) plan for
its employees. The Company matches 30 percent of participants'
contributions up to a maximum contribution of 6 percent of
participants' compensation. Contributions charged to earnings
for the years ended June 30, 1995, 1994 and 1993 were $49,000,
$52,000, and $49,000, respectively.
I. Stockholders' Equity:
The Company has granted to its current directors, other than
the President of the Company, immediately exercisable warrants to
purchase an aggregate of 205,000 shares of common stock, of
which warrants to purchase 30,000 shares are exercisable at
$4.25, expiring in September, 1996, 75,000 at $3.25, expiring in
October, 1996, 50,000 at $5.25, expiring in June, 1997, and
50,000 at $6.00, expiring July, 1998.
The Company has adopted an Employee Stock Option and
Performance Unit Plan (the "1986 Plan"). Under the 1986 Plan, a
committee of the Board of Directors may grant to employees of the
Company stock options, appreciation rights or performance units.
The maximum number of shares of common stock available for grants
under the 1986 Plan and reserved for issuance by the Company is
210,000. Options to purchase 91,950 shares of common stock were
granted in May, 1986, at an option price of $9.25 per share. In
August, 1987, all outstanding options were forfeited by the
employees and the Company granted options for the same number of
shares to the same employees at an option price of $4.25 per
share. These options were exercisable at any time within five
years from date of grant. In August, 1993, the expiration date
on these options was extended to August, 1996. At June 30, 1995,
none of these options had been exercised and 29,000 options
remained outstanding. Since the original grant in May, 1986,
options to purchase 93,500 shares of common stock were granted at
an average option price of $4.95. At June 30, 1995, none of
these options had been exercised and 60,500 options remained
outstanding.
On November 17, 1992, the Company's stockholders approved an
Executive Management Group Stock Option Plan (the "1992 Plan").
Under the provisions of the 1992 Plan, certain officers of the
Company were granted options to purchase a total of 45,000 shares
of common stock at $6.00 per share. On August 11, 1994, under
the 1992 Plan, the Company granted options to Brian Cascarano,
and Joseph Rabito entitling each of them to purchase 499 shares
of the Company's common stock at $3.50 per share and 657 shares
of the Company's common stock at $5.25 per share. At June 30,
1995, none of these options had been exercised and 37,312 options
remained outstanding.
-39-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
All options granted to the President of the Company under the
1992 Plan are exercisable for five years after the date of grant,
and options granted to all other officers under the 1992 Plan are
exercisable for three years after the date of grant.
J. Supplementary Statement of Earnings Information:
Advertising expenses for the years ended June 30, 1995, 1994
and 1993 were $535,000, $322,000, and $258,000, respectively.
K. Estimated Fair Value of Financial Instruments:
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements
of SFAS No. 107, "Disclosures about Fair Values of Financial
Instruments". The estimated fair value amounts have been
determined by the Company using available market information and
appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
the Company could realize in a current market exchange. The use
of different market assumptions and/or estimation methodologies
may have a material effect on the estimated fair value amounts.
SFAS No. 107 also excludes certain items from its disclosure
requirements such as the Company's investments in leased assets.
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which
it is practicable to estimate that value.
Long-term debt: Fair value of the Company's long-term debt is
determined utilizing current market rates based upon the market
rate of debt with similar terms and conditions. The fair value
of the Company's long-term debt is approximately $191,180,000 as
of June 30, 1995; the carrying value is $190,803,000. As of June
30, 1994, the fair value and carrying value of the
Company's long-term debt were $157,135,000 and $161,841,000,
respectively.
-40-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Other Financial Investments: The carrying value in the
balance sheet as of June 30, 1995 for cash, receivables (other
than lease receivables), accrued liabilities and revolving line
of credit and variable rate notes payable approximate fair value
because of the short maturity of the investments or bear interest
rates that approximate current market rates.
Interest Rate Collar: The fair value of the Company's
interest rate collar agreement is the estimated amount that the
Company would pay or receive from termination of the agreement.
At June 30, 1995 the fair value of the agreement was a net asset
of $80,000.
L. Supplementary Information to Statement of Cash Flows:
Cash paid (received) during the year for:
Year ended June 30
---------------------------------------
1995 1994 1993
------------ ----------- -----------
Interest $12,416,000 $10,598,000 $9,986,000
Income Taxes (529,000) 3,708,000 513,000
M. Dividends Declared:
On May 11, 1995 the Board of Directors approved the first
payment of a quarterly cash dividend, in the amount of $.03 per
share, since the Company became publicly traded in 1986. The
declaration of dividends in the future will be reviewed by the Board of
Directors in light of the Company's earnings, financial
condition, and capital requirements, and future dividends may be
declared, reduced, or eliminated at the discretion of the Board
of Directors on the basis of these or other considerations. The
Company's credit facility restricts the payment of dividends on
the Company's common stock unless certain financial tests are
met. Under the most restrictive limitations, the Company shall
not purchase its common stock, pay cash dividends or redeem
subordinated debt prior to maturity which, in aggregate, exceed
the sum of $2 million plus 50 percent of consolidated net income
computed on a cumulative basis plus net proceeds to the Company
from the issue or sale after December 31, 1992 of shares of
capital stock of the Company or warrants, rights or options to
purchase or acquire any shares of its capital stock. On August
10, 1995, the Board of Directors approved the payment of a
quarterly cash dividend in the amount of $.03 per share on August
31, 1995 to holders of record as of August 21, 1995.
-41-
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
No Form 8-K under the Securities Exchange Act of 1934 reporting
a change of accountants has been filed within the 24 months ended June
30, 1995.
-42-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information regarding the
Company's directors and executive officers.
Name Age Position
Richard Grossman 43 President, Chief Executive
Officer and Chairman of the
Board of Directors
Norman Smagley 36 Vice President, Finance and
Chief Financial Officer
Joseph Rabito 37 Vice President, Operations
Brian F. Cascarano (3) 40 Vice President, Sales and
Marketing
Clifford V. Brokaw, III (1) 67 Director
Larry S. Grossman (1) 46 Director
Michael J. Heyman (1) (2) 42 Director
Mark C. Matthews (2) 43 Director
John W. Stodder (2) 72 Director
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Effective August 31, 1995, Mr. Cascarano ceased to be employed by
the Company.
Directors are elected by stockholders at each annual meeting (or,
in the case of vacancy, are appointed by the directors then in office)
to serve until the next annual meeting or until their successors are
elected and qualified. Officers serve at the pleasure of the Board of
Directors.
Richard Grossman, a co-founder of the Company, has been a
director of the Company since 1972 and the President, Chief Executive
Officer, Chairman and principal shareholder of the Company since 1982.
From 1981 to 1982, Mr. Grossman was Executive Vice President and from
1972-1981 Vice President of the Company, with primary responsibility
for developing and maintaining the Company's sources of financing.
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<PAGE>
Norman Smagley joined the Company in March 1994 as Vice
President, Finance and Chief Financial Officer. From 1991 to 1993,
Mr. Smagley was Vice President and Treasurer of Genderm Corporation,
an international pharmaceutical company. Mr. Smagley was Vice
President, Acquisition Finance, from 1988 to 1990, Vice President,
Treasury, from 1987 to 1988, and Assistant Treasurer, from 1985 to
1987, at Heller Financial, Inc., an international commercial financial
services company. Prior to 1985, Mr. Smagley held various financial
analyst positions with Amoco Corporation, an international energy and
chemical company.
Joseph Rabito has been Vice President of Operations since 1985.
Since joining the Company in 1981, Mr. Rabito has held various
positions in the Company's credit department.
Clifford V. Brokaw, III became a director and member of the audit
committee in June 1992. Since 1977, Mr. Brokaw has been President and
Chief Executive Officer of Invail Energy, Inc., a Oklahoma based oil
and gas production company. Prior to that time, he was a general
partner of Eastman Dillon, Union Securities & Co., an investment
banking firm based in New York City.
Larry S. Grossman, a co-founder of the Company, has been a
director of the Company since August 1991. From 1972 to 1982, Mr.
Grossman was a director and served first as a Vice-President and then
as President and Chief Executive Officer of the Company. Since 1989,
and from 1982 to 1986, Mr. Grossman has been Chief Executive Officer
and Chairman of FluoroScan Imaging Systems, Inc., the manufacturer of
the FluoroScan Imaging System, a fluoroscopic device. From 1986 to
1989, Mr. Grossman was Chief Operating Officer and Director of Pain
Prevention Labs, Inc., a manufacturer of an electronic dental
anesthesia device. Larry S. Grossman is the brother of Richard
Grossman.
Michael J. Heyman has been a director and Chairman of the Audit
Committee since August, 1991. Since 1994, Mr. Heyman has been
President of MOKSHA Worldwide, Inc., an international marketing and
merchandising concern in the apparel industry. From 1982 to 1994, Mr.
Heyman was Senior Vice President of Heyman Corporation, an
international marketing and merchandising concern in the apparel
industry.
Mark C. Matthews has been director and Chairman of the
Compensation Committee since August, 1991. Since 1985, Mr. Matthews
has been a partner with the Argent Group, a developer of commercial
and residential real estate.
John W. Stodder was a director from 1986 until August, 1991 and
rejoined the Board in June, 1992. Since 1987, Mr. Stodder has been an
independent corporate finance and acquisition consultant. He
currently serves as a director and vice-chairman of Jostens, Inc., a
manufacturer of educational, recognition and technical products and
services for schools and businesses, and a director of Talley
Industries, Inc., a manufacturer of industrial and defense products
and developer of real estate, and Stevens Graphics Corp., a
manufacturer of high volume packaging and printing machinery and
equipment.
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<PAGE>
Each director who is not an officer of the Company receives fees
of $12,000 per year and is reimbursed for out-of-pocket expenditures
of attending Board and committee meetings. The Company's directors
have also been granted warrants to purchase shares of common stock.
See "Stock Option Plans and Directors' Warrants."
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who
beneficially own more than ten percent of a registered class of the
Company's equity securities to file reports of securities ownership
and changes in such ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than ten-
percent beneficial owners also are required by rules promulgated by
the SEC to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely upon a review of the copies of such forms furnished
to the Company, or written representations that no Form 5 filings were
required, the Company believes that during the period from June 30,
1994 through June 30, 1995 all of its officers, directors and greater
than ten-percent beneficial owners complied with Section 16(a) filing
requirements applicable to them.
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<PAGE>
Item 11. Executive Compensation
The following table sets forth the total annual compensation paid
or accrued by the Company during the fiscal years 1993, 1994 and 1995
to the Company's Chief Executive Officer and to each of the Company's
three most highly compensated executive officers other than the Chief
Executive Officer.
Summary Compensation Table
--------------------------
Long term
Annual compensation compensation
---------------------- ------------
Other Awards- All other
Name & principal Year Salary Bonus annual Options/ compen-
position ($) ($) compen- SARs (#) sation ($)
sation
- -------------------- ------- -------- -------- -------- -------- ----------
Richard Grossman, 1995 $272,000 $34,000 $35,000 - -
President, Chief 1994 259,000 - 20,000 - 23,000
Executive Officer, 1993 247,000 - 24,000 25,000 24,000
& Chairman of the
Board of Directors
Norman Smagley, 1995 116,000 14,000 - - 2,000
Vice President, 1994(1) 30,000 - - 10,000 -
Finance & Chief
Financial Officer
Joseph Rabito, 1995 116,000 14,000 2,000 1,156 -
Vice President, 1994 110,000 - 2,000 10,000 2,000
Operations 1993 105,000 - - 5,000 2,000
Brian F. Cascarano, 1995(2) 116,000 14,000 2,000 1,156 -
Vice President, 1994 110,000 - 2,000 10,000 -
Sales & Marketing 1993 105,000 - - 5,000 -
(1) Norman Smagley became Vice President, Finance and Chief Financial
Officer in March, 1994. His annualized salary for fiscal 1994
was $110,000.
(2) Effective August 31, 1995, Mr. Cascarano ceased to be employed by
the Company. All outstanding options were forfeited effective
August 31, 1995.
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<PAGE>
The persons included above received certain non-cash compensation
during fiscal 1995. Except in the case of Richard Grossman, such
compensation did not exceed, in the case of any named individual, 10
percent of the cash compensation of such individual or, in the case of
the group, 10 percent of the cash compensation for the group. The
Company provides Richard Grossman with the use of an automobile and
pays the premiums on split dollar life insurance policies with a face
value of $5,474,000 for Richard Grossman, $500,000 for his former
wife, and $100,000 for each of this three children. The premiums paid
on these policies in fiscal 1995 did not exceed $125,000. These
policies provide that in the event of the death of the insured, the
Company will receive from the death benefits payable under the policy
the amount of the premiums previously paid by the Company. The cash
surrender value of these policies, up to the cumulative amount of
premiums paid by the Company, is assigned to the Company. Annual
increases in cash surrender value have exceeded premiums paid by the
Company in each of the past three fiscal years.
The following table sets forth the number of shares of the
Company's common stock subject to stock options granted to the
individuals listed in the Summary Compensation Table during fiscal
1995 pursuant to the 1992 Executive Management Group Stock Option
Plan, together with related information.
Option Grants in Last Fiscal Year
Individual Grants
- ------------------------------------------------------------Potential realizable
value at assumed
Percent of annual rates of
total options Exercise stock price
Options granted to or base Expir- appreciation for
granted employees in price ation option term
Name (#) (1) fiscal year (2) ($/Sh) date 5% ($) 10% ($)
- ---------------- ------- ---------------- -------- ------- ------- ---------
R. Grossman - - % $- $- $-
N. Smagley - - - - -
J. Rabito 499 14.4 3.50 8/11/97 269 559
657 18.9 5.25 8/11/97 355 736
B. Cascarano (3) 499 14.4 3.50 8/11/97 269 559
657 18.9 5.25 8/11/97 355 736
(1) Options are immediately exercisable.
(2) The remaining 33.3 percent of options was granted to an
individual who resigned during the fiscal year. These options
were cancelled on the date of resignation.
(3) Effective August 31, 1995, Mr. Cascarano ceased to be employed by
the Company. All outstanding options were forfeited effective
August 31, 1995.
The following table sets forth the number of shares of the
Company's common stock subject to stock options exercised by the
individuals listed in the Summary Compensation Table during fiscal
1995, together with related information, and the value of the
unexercised options.
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<PAGE>
Aggregated Option Exercises in Last Fiscal Year,
and FY-End Option Values
Value of
Number of unexercised
unexercised in-the-money
Shares options options
acquired on Value at FY-end (#) at FY-end ($)
exercise realized exercisable/ exercisable/
Name (#) ($) unexercisable unexercisable
- ---------------- ------- -------- ------------- ----------------
R. Grossman - $ - 25,000/ 0 $ - /$ 0
N. Smagley - - 10,000/ 0 - / 0
J. Rabito - - 26,156/ 0 - / 0
B. Cascarano (1) - - 41,156/ 0 - / 0
(1) Effective August 31, 1995, Mr. Cascarano ceased to be employed by
the Company. All outstanding options were forfeited effective
August 31, 1995.
Directors' Warrants
The Company has granted to each of its directors, other than
Richard Grossman, immediately exercisable warrants entitling them to
purchase shares of Common Stock. Larry S. Grossman, Michael J. Heyman
and Mark C. Matthews each have warrants to purchase 25,000 shares at
an exercise price of $3.25 and 10,000 shares at an exercise price of
$6.00; Clifford V. Brokaw, III has warrants to purchase 25,000 shares
at an exercise price of $5.25 and 10,000 shares at an exercise price
of $6.00; and John W. Stodder has warrants to purchase 25,000 shares
at an exercise price of $5.25, 30,000 shares at an exercise price of
$4.25 and 10,000 shares at an exercise price of $6.00. The exercise
prices of such warrants are subject to adjustment in certain events
and the warrant holders have the right, under certain circumstances,
to have the warrants and shares issuable thereunder included in
registrations of the Company's Common Stock.
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<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The table below shows, as of September 27, 1995, the shares of the
Company's common stock, the only class of stock the Company has
outstanding, beneficially owned by each director and for all directors
and officers as a group.
Shares Owned Percent
Name Beneficially (1) of Class (2)
- ------------------------ ---------------- ---------------
Richard Grossman (3) 1,952,000 47%
Norman Smagley 10,000 * (4)
Joseph Rabito 28,425 * (4)
Brian F. Cascarano (5) 1,500 * (4)
Clifford V. Brokaw, III 150,000 4%
Larry S. Grossman 39,000 * (4)
Michael J. Heyman 39,000 * (4)
Mark C. Matthews 35,000 * (4)
John W. Stodder 70,000 2%
All Directors & Officers as a Group 2,324,925 52%
(1) These figures include shares covered by options or warrants as
follows: Richard Grossman -- 25,000; Norman Smagley -- 10,000;
Joseph Rabito -- 26,156; Clifford V. Brokaw, III -- 35,000;
Larry S. Grossman -- 35,000; Michael J. Heyman -- 35,000; Mark C.
Matthews -- 35,000; John W. Stodder -- 65,000; and all officers
and directors as a group -- 266,156.
(2) Percentages are rounded to the nearest whole percentage point.
(3) Mr. Grossman's address is c/o Trans Leasing International, Inc.,
3000 Dundee Road, Northbrook, IL 60062.
(4) Indicates less than 1% of outstanding shares.
(5) Effective August 31, 1995, Mr. Cascarano ceased to be employed by
the Company. All outstanding options were forfeited effective
August 31, 1995.
Item 13. Certain Relationships and Related Transactions
The Company leases two automobiles and certain equipment to Mark
C. Matthews, a director of the Company, and his affiliates. The
remaining required lease payments on such leases at August 24, 1995
were approximately $30,000 in the aggregate.
The Company leases an automobile to MOKSHA Worldwide, Inc., of
which Michael J. Heyman, a director of the Company, is President. The
remaining required lease payments on this lease at August 24, 1995
were approximately $42,000.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report.
The page number, if any, listed opposite a document indicates the page
number in the sequential numbering system in the manually signed
original of this Report where such document can be found.
(1) The consolidated financial statements filed
as part of this Report are listed in Item 8.
(2) Financial Statement Schedules
Schedules have been omitted because they are
not applicable, or not required, or because
the required information is shown in the
consolidated financial statements or notes
thereto.
(3) Exhibits
3.1(a) Restated Certificate of Incorporation of
the Registrant in the State of Delaware,
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
3.1(b) Certificate of Amendment to Restated Certificate of
Incorporation, dated December 12, 1986,
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
3.2(a) By-laws of the Registrant, incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
3.2(b) Amendment to the By-laws of Registrant,
dated April 27, 1988, incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
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<PAGE>
4.1 Instruments defining the rights of holders of long-term
debt of the Registrant are included in
item 10 below.
10.1 1986 Employees Stock Option and Performance Unit Plan,
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on February
13, 1986, with respect to an offering of
its Common Stock (Registration No. 33-3322).
10.2 1992 Executive Management Group Stock Option Plan,
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23, 1992
with respect to an offering of its Common
Stock (Registration No. 33-50228).
10.3(a) Trans Leasing International, Inc. Savings Plan,
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
10.3(b) First Amendment to Trans Leasing International, Inc.
Savings Plan, dated as of February 16,
1989, incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
10.3(c) Second Amendment to Trans Leasing International, Inc.
Savings Plan, dated as of September 16,
1992, incorporated by Reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
10.4(a) Form of 1987 directors' warrants, incorporated by
reference to the Registrant's
Registration Statement on Form S-1,
originally filed on July 30, 1992, as
amended filed September 23, 1992 with
respect to an offering of its Common
Stock (Registration No. 33-50228).
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<PAGE>
10.4(b) Form of 1991 directors' warrants,incorporated by
reference to the Registrant's
Registration Statement on Form S-1,
originally filed on July 30, 1992, as
amended filed September 23, 1992 with
respect to an offering of its Common
Stock (Registration No. 33-50228).
10.4(c) Form of 1992 directors' warrants, incorporated by
reference to the Registrant's
Registration Statement on Form S-1,
originally filed on July 30, 1992, as
amended filed September 23, 1992 with
respect to an offering of its Common
Stock (Registration No. 33-50228).
10.4(d) Amendments to form of 1987 directors'warrants
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
10.4(e) Amendments to form of 1991 directors'warrants
incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No 33-50228).
10.4(f) Amendments to form of 1992 directors'
warrants incorporated by reference to
the Registrant's Registration Statement
on Form S-1, originally filed on July
30, 1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration N. 33-50228).
10.5 Lease-backed certificate purchase
agreement dated March 6, 1992 between
Registrant and Trans Leasing Finance
Corp. incorporated by reference to the
Registrant's Registration Statement on
Form S-1, originally filed on July 30,
1992, as amended filed September 23,
1992 with respect to an offering of its
Common Stock (Registration No. 33-50228).
10.6 Indenture dated as of October 1, 1992
between Registrant and American National
Bank and Trust Company of Chicago, as
Trustee, incorporated by reference to
the Registrant's Form 10-K Annual Report
for the fiscal year ended June 30, 1993
(File No. 0-15167).
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<PAGE>
10.7 Lease-backed note purchase agreement
dated October 28, 1992 between
Registrant and TL Lease Funding Corp.
II, incorporated by reference to the
Registrant's Form 10-K Annual Report for
the fiscal year ended June 30, 1993
(File No. 0-15167).
10.8 Lease-backed note purchase agreement
dated February 12, 1993 between
Registrant and TL Lease Funding Corp.
II, incorporated by reference to the
Registrant's Form 10-K Annual Report for
the fiscal year ended June 30, 1993
(File No. 0-15167).
10.9 Amended and Restated Contribution and
Sale Agreement, dated August 2, 1994,
between the Registrant and TL Lease
Funding Corp. III, incorporated by
reference to the Registrant's Form 10-K
Annual Report for the fiscal year ended
June 30, 1994 (File No. 0-15167).
10.10 Receivables Acquisition Agreement, dated
August 2, 1994, between TL Lease Funding
Corp. III and Prudential Securities
Secured Financing Corporation,
incorporated by reference to the
Registrant's Form 10-K Annual Report for
the fiscal year ended June 30, 1994
(File No. 0-15167).
10.11 Pooling and Servicing Agreement, dated
August 2, 1994, among the Registrant,
Prudential Securities Secured Financing
Corporation, and PSSFC Equipment Lease
Trust 1994-1, incorporated by reference
to the Registrant's Form 10-K Annual
Report for the fiscal year ended June
30, 1994 (File No. 0-15167).
10.12 Indenture, dated August 2, 1994, between
PSSFC Equipment Lease Trust 1994-1 and
Manufacturers and Traders Trust Company,
incorporated by reference to the
Registrant's Form 10-K Annual Report for
the fiscal year ended June 30, 1994
(File No. 0-15167).
10.13 Trust Agreement, dated August 2, 1994,
between Prudential Securities Secured
Financing Corporation and Bankers Trust
(Delaware), incorporated by reference to
the Registrant's Form 10-K Annual Report
for the fiscal year ended June 30, 1994
(File No. 0-15167).
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<PAGE>
10.14 Administration Agreement, dated August
2, 1994, between PSSFC Equipment Lease
Trust 1994-1 and the Registrant,
incorporated by reference to the
Registrant's Form 10-K Annual Report for
the fiscal year ended June 30, 1994
(File No. 0-15167).
10.15 Loan and Security Agreement, dated
August 2, 1994, between Prudential
Securities Secured Financing Corporation
and First Union National Bank of North
Carolina, incorporated by reference to
the Registrant's Form 10-K Annual Report
for the fiscal year ended June 30, 1994
(File No. 0-15167).
10.16 Credit Agreement dated as of December 9,
1994 between Registrant and First Union
National Bank of North Carolina,
incorporated by reference to the
Registrant's Form 10-Q Quarterly Report
for the quarter period ended December
31, 1994 (File No. 0-15167).
10.17 Amended and Restated Note Agreement
dated as of November 30, 1994 between
Registrant and certain lenders named
therein, incorporated by reference to
the Registrant's Form 10-Q Quarterly
Report for the quarter period ended
December 31, 1994 (File No. 0-15167).
10.18 Amended and Restated Note Agreement
dated as of November 30, 1994 between
Registrant and Massachusetts Mutual Life
Insurance Company, incorporated by
reference to the Registrant's Form 10-Q
Quarterly Report for the quarter period
ended December 31, 1994 (File No. 0-15167).
10.19 Amendment No. 1 dated as of March 29,
1995 to Credit Agreement dated December
9, 1994 between Registrant and First
Union National Bank of North Carolina. 60
10.20 Revolving Credit and Term Loan and
Security Agreement dated as of April 18,
1995 between TL Lease Funding Corp. IV
and First Union National Bank of North
Carolina, incorporated by reference to
the Registrant's Form 10-Q Quarterly
Report for the quarter period ended
March 31, 1995 (File No. 0-15167).
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<PAGE>
10.21 Limited Recourse Agreement dated as of
April 18, 1995 between Registrant and
First Union National Bank of North
Carolina, incorporated by reference to
the Registrant's Form 10-Q Quarterly
Report for the quarter period ended
March 31, 1995 (File No. 0-15167).
10.22 Servicing Agreement dated as of April
18, 1995 between TL Lease Funding Corp.
IV and First Union National Bank of
North Carolina, incorporated by
reference to the Registrant's Form 10-Q
Quarterly Report for the quarter period
ended March 31, 1995 (File No. 0-15167).
10.23 Contribution and Sale Agreement dated as
of April 18, 1995 between Registrant and
TL Lease Funding Corp IV, incorporated
by reference to the Registrant's Form
10-Q Quarterly Report for the quarter
period ended March 31, 1995 (File No. 0-15167).
10.24 Amendment No. 2 dated as of April 18,
1995 to Credit Agreement dated December
9, 1994 between Registrant and First
Union National Bank of North Carolina,
incorporated by reference to the
Registrant's Form 10-Q Quarterly Report
for the quarter period ended March 31,
1995 (File No. 0-15167).
10.25 Amendment No. 1 dated as of June 19,
1995 to Revolving Credit and Term Loan
and Security Agreement dated as of April
18, 1995 between TL Lease Funding Corp.
IV and First Union National Bank of
North Carolina. 61
10.26 Amendment No. 1 dated as of June 19,
1995 to Limited Recourse Agreement dated
as of April 18, 1995 between Registrant
and First Union National Bank
of North Carolina. 63
10.27 Amendment No. 3 dated as of September 8,
1995 to Credit Agreement dated as of
December 9, 1994 between Registrant and
First Union National Bank of North
Carolina. 65
10.28 Amendment No. 2 dated as of September 8,
1995 to Revolving Credit and Term Loan
and Security Agreement dated as of April
18, 1995 between TL Lease Funding Corp
IV and First Union National Bank of
North Carolina. 66
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<PAGE>
10.29 Amendment No. 3 dated as of September
27, 1995 to Revolving Credit and Term
Loan and Security Agreement dated as of
April 18, 1995 between TL Lease Funding
Corp IV and First Union National Bank
of North Carolina. 67
10.30 Amendment No. 4 dated as of September
27, 1995 to Credit Agreement dated as of
December 9, 1994 between Registrant and
First Union National Bank of North
Carolina. 70
10.31 Amendment dated as of December 9, 1994
to Credit Agreement dated as of
December 9, 1994 between Registrant and
First Union National Bank of North
Carolina. 72
10.32 Amendment dated as of May 11, 1995 to
Credit Agreement dated as of December
9, 1994 between Registrant and First
Union National Bank of North Carolina. 73
22.1 Subsidiaries of the Registrant.
74
27 Financial Data Schedule
75
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<PAGE>
(b) Reports on Form 8-K
No Form 8-K has been filed by the Registrant during the last
quarter covered by this report.
-57-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, as
of this 29th day of September, 1995.
TRANS LEASING INTERNATIONAL, INC.
By: RICHARD GROSSMAN
----------------------------------
Richard Grossman
Chairman of the Board
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<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated as of this 29th day of
September, 1995.
RICHARD GROSSMAN President, Chief Executive Officer,
------------------------- Chairman of the Board of Directors
Richard Grossman
NORMAN SMAGLEY Vice President, Finance and
------------------------- Chief Financial Officer
Norman Smagley (Principal Accounting and Financial
Officer)
JOSEPH RABITO Vice President, Operations
-------------------------
Joseph Rabito
CLIFFORD V. BROKAW, III Director
-------------------------
Clifford V. Brokaw, III
LARRY S. GROSSMAN Director
-------------------------
Larry S. Grossman
MICHAEL J. HEYMAN Director
-------------------------
Michael J. Heyman
MARK C. MATTHEWS Director
-------------------------
Mark C. Matthews
JOHN W. STODDER Director
-------------------------
John W. Stodder
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<PAGE>
AMENDMENT NO. 1
TO CREDIT AGREEMENT
This Amendment No. 1 is entered into as of March 29,
1995, between TRANS LEASING INTERNATIONAL, INC., a Delaware
corporation (the "Company"), and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("First Union"), individually and as Agent.
The parties hereto are the parties to a Credit Agreement
dated as of December 9, 1994 (the "Credit Agreement") and
desire to increase the maximum amount of loans which may be made
thereunder from $50,000,000 to $60,000,000. All capitalized
terms used herein shall have the same meanings as in the Credit
Agreement.
NOW THEREFORE, in consideration of the foregoing
premises and the agreements hereinafter set forth, and for the
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 1.1 of the Credit Agreement is
hereby amended by substituting the figure $60,000,000 for the
figure $50,000,000 in clause (b) of the definition of Revolving
Loan Commitment Amount. The signature page of the Credit Agreement
is hereby amended by substituting the figure $60,000,000 for
the figure $50,000,000 thereon.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness; Notes. This Amendment shall become
effective upon the execution and delivery by the Company of a
substitute promissory note reflecting this Amendment.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, individually and as Agent
By:______________________________________
Title:____________________________________
TLI10-1.CWE
<PAGE>
AMENDMENT NO. 1 TO
REVOLVING CREDIT AND TERM LOAN
AND SECURITY AGREEMENT
This Amendment No. 1 is entered into as of June 19, 1995,
between TL LEASE FUNDING CORP. IV, a Delaware corporation (the
"Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("First
Union").
The parties hereto are the parties to a Revolving Credit
and Term Loan and Security Agreement, dated as of April 18, 1995
(the "Credit Agreement"), and desire to increase the maximum amount
of loans which may be made thereunder from $60,000,000 to
$80,000,000. All capitalized terms used herein shall have the same
meanings as in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendments. (a) Recital A of the Credit Agreement
is hereby amended by substituting the figure $80,000,000 for the
figure $60,000,000 therein and (b) Section 1.1 of the Credit
Agreement is hereby amended by substituting the figure $80,000,000
for the figure $60,000,000 in the definition of Loan Commitment
Amount.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness; Note. This Amendment shall become
effective upon the execution and delivery by the Company of a
substitute promissory note reflecting this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first written above.
TL LEASE FUNDING CORP. IV
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT NO. 1
TO LIMITED RECOURSE AGREEMENT
This Amendment No. 1 is entered into as of June 19, 1995,
between TRANS LEASING INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union").
The parties hereto are the parties to a Limited Recourse
Agreement, dated as of April 18, 1995 (the "Recourse Agreement"),
and desire to increase the maximum amount that the Company shall be
required to pay or contribute to TL Lease Funding Corp. IV, a Delaware
corporation, thereunder from $3,000,000 to $4,000,000. All capitalized
terms used herein shall have the same meanings as in the Recourse Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Amendment. As of the date hereof, Recital C of the Recourse
Agreement is hereby amended by substituting the figure $4,000,000 for the
figure $3,000,000 therein, and the proviso in the first paragraph of Section
2 of the Recourse Agreement is hereby amended by substituting the figure
$4,000,000 for the figure $3,000,000 therein.
2. No Further Amendment. Except as set forth above, the Recourse
Agreement shall continue in full force and effect without modification.
3. Amendment to Credit Agreement. The Company hereby acknowledges
the execution and delivery of Amendment No. 1, dated as of June 19, 1995, to
the Revolving Credit and Term Loan and Security Agreement, dated as of
April 18, 1995, each between TL Lease Funding Corp. IV and First Union, and
hereby agrees that such amendment shall not affect the obligations of
the Company under the Recourse Agreement except as provided herein.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of
the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT NO. 3
TO CREDIT AGREEMENT
This Amendment No. 3 is entered into as of September 8,
1995, between TRANS LEASING INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union"), individually and as Agent.
The parties hereto are the parties to a Credit Agreement
dated as of December 9, 1994 (as amended through the date hereof,
the "Credit Agreement") and desire to extend the Conversion Date
from September 11, 1995 to September 30, 1995. All capitalized
terms used herein shall have the same meanings as in the Credit
Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 1.1 of the Credit Agreement is
hereby amended by substituting the date September 30, 1995 for the
date September 11, 1995 in the definition of Conversion Date.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness. This Amendment shall become effective
upon the execution and delivery by the Company and by First
Union of a copy of this Amendment. This Amendment may be executed
in two counterparts, each of which shall be an original, but all of
which will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed by their respective officers thereunto duly
authorized as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, individually and as Agent
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT NO. 2 TO
REVOLVING CREDIT AND TERM LOAN
AND SECURITY AGREEMENT
This Amendment No. 2 is entered into as of September 8,
1995, between TL LEASE FUNDING CORP. IV, a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union").
The parties hereto are the parties to a Revolving Credit
and Term Loan and Security Agreement, dated as of April 18, 1995
(as amended through the date hereof, the "Credit Agreement"), and
desire to extend the Commitment Expiration Date from September 9,
1995 to September 30, 1995. All capitalized terms used herein
shall have the same meanings as in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 1.1 of the Credit Agreement is
hereby amended by substituting the date September 30, 1995 for the
date September 9, 1995 in the definition of Expiration Date Commitment.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness. This Amendment shall become effective
upon the execution and delivery by the Company and by First
Union of a copy of this Amendment. This Amendment may be executed
in two counterparts, each of which shall be an original, but all of
which will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized as of the date first written above.
TL LEASE FUNDING CORP. IV
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT NO. 3 TO
REVOLVING CREDIT AND TERM LOAN
AND SECURITY AGREEMENT
This Amendment No. 3 is entered into as of September 27,
1995, between TL LEASE FUNDING CORP. IV, a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union").
The parties hereto are the parties to a Revolving Credit
and Term Loan and Security Agreement, dated as of April 18, 1995
(as amended through the date hereof, the "Credit Agreement"), and
desire to extend the Commitment Expiration Date, to decrease the
Loan Commitment Amount, to change the manner in which the Asset
Base is calculated and increasing certain interest rates. All
capitalized terms used herein shall have the same meanings as in
the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendments. (a) Section 1.1 of the Credit Agreement
is amended by substituting the date March 31, 1996 for the date
September 30, 1995 in the definition of Commitment Expiration Date,
(b) (i) Recital A of the Credit Agreement is amended by substituting
the figure $75,000,000 for the figure $80,000,000 therein and
(ii) Section 1.1 of the Credit Agreement is amended by substituting
the figure $75,000,000 for the figure $80,000,000 in the
definition of Loan Commitment Amount, (c) (i) Section 1.1 of the
Credit Agreement is amended by (A) substituting the figure 93% for
the figure 89% in the definition of Advance Rate and (B) substituting
the phrase "Aggregate Discounted Lease Balance" for the phrase
"Aggregate Discounted Lease and Residual Balance" in the definition
of Asset Base, (ii) Section 3.1(b) of the Credit Agreement is
amended by substituting the phase "Aggregate Discounted Lease
Balance" for the phrase "Aggregate Discounted Lease and Residual
Balance" in each place where it appears, (iii) Exhibit B-1 of the
Credit Agreement is amended by substituting the phrase "Aggregate
Discounted Lease Balance" for the phrase "Aggregate Discounted
Lease and Residual Balance" in the third paragraph thereof, (iv)
Exhibit C of the Credit Agreement is amended by deleting the Form
of Schedule 1 to Asset Base Certificate thereto in its entirely and
substituting the Form of Schedule 1 to Asset Base Certificate
attached hereto as Annex I therefor, and (v) Exhibit J of the
Credit Agreement is amended by substituting the phrase "Aggregate
Discounted Lease Balance" for the phrase "Aggregate Discounted
Lease and Residual Balance" in the second paragraph thereof and (d)
on and after the earlier of (i) October 13, 1995 and (ii) the
closing date of the sale of the Notes described in the preliminary
prospectus supplement dated September 18, 1995 to the Company's
form S-3 registration statement (file no. 33-95108) (A) Recital A
of the Credit Agreement is amended by substituting the figure
$35,000,000 for the figure $75,000,000 therein and (B) Section 1.1
of the Credit Agreement is amended by substituting the figure
$35,000,000 for the figure $75,000,000 in the definition of Loan
Commitment Amount.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness. This Amendment shall become effective
upon the execution and delivery by the Company and by First
Union of a copy of this Amendment. This Amendment may be executed
in two counterparts, each of which shall be an original, but all of
which will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized as of the date first written above.
TL LEASE FUNDING CORP. IV
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________________
Title:____________________________________<PAGE>
Annex I
Exhibit C (cont'd)
Form of Schedule 1 to Asset Base Certificate
Schedule 1
to
Asset Base Certificate
dated ____________, 199_
A. Aggregate Discounted Lease Balance
(i) Total remaining Scheduled Lease Payments of
Eligible Leases $__________________
(ii) Discount Rate ___________________%
(iii) Present value of Item (i) using the Discount
Rate in Item (ii) ("Aggregate Discounted
Lease Balance") $__________________
B. Collection Account Balance $__________________
C. Asset Base (sum of (1) Item A (iii) multiplied by the
Advance Rate and (2) Item B) $__________________
D. Outstanding Principal Balance of the Loans $__________________
E. Excess Asset Base (Shortfall)
(i) Borrowing Availability (excess of Item C over
Item B) $__________________
(ii) Asset Base Shortfall (excess of Item D over
Item C) $__________________
F. Advance Rate
(i) Effective Advance Rate (Item D minus Item B
divided by Item A (iii)) __________________%
(ii) Maximum Advance Rate 93.0%
<PAGE>
AMENDMENT NO. 4
TO CREDIT AGREEMENT
This Amendment No. 4 is entered into as of September 27,
1995, between TRANS LEASING INTERNATIONAL, INC., a Delaware
corporation (the "Company"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("First Union"), individually and as Agent.
The parties hereto are the parties to a Credit Agreement
dated as of December 9, 1994 (as amended through the date hereof,
the "Credit Agreement") and desire to extend the Conversion Date,
to change the Revolving Loan Commitment Amount and to increase the
interest rate. All capitalized terms used herein shall have the
same meanings as in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendments. (a) Section 1.1 of the Credit Agreement
is amended by substituting the date March 31, 1996 for the date
September 30, 1995 in the definition of Conversion Date, (b) (i)
Section 1.1 of the Credit Agreement is amended by substituting the
figure $30,000,000 for the figure $15,000,000 in clause (b) of the
definition of Revolving Loan Commitment Amount and (ii) the signature
page of the Credit Agreement is amended by substituting the
figure $30,000,000 for the figure $15,000,000 thereon, (c) on and
after the earlier of (i) October 13, 1995 and (ii) the closing date
of the sale of the Notes described in the preliminary prospectus
supplement dated September 18, 1995 to the form S-3 registration
statement of TL Lease Funding Corp. IV (file No. 33-95108) (A) the
provisions set forth in Section 1(b) hereof shall no longer be
effective and (B) (1) Section 1.1 of the Credit Agreement is
amended by substituting the figure $15,000,000 for the figure
$30,000,000 in clause (b) of the definition of Revolving Loan
Commitment Amount and (2) the signature page of the Credit
Agreement is amended by substituting the figure $15,000,000 for the
figure $30,000,000 thereon, and (d) on and after January 1, 1996
(i) Section 1.1 of the Credit Agreement is amended by adding the
phrase, "plus seventy-five basis points (.75%) per annum" to the
end of the first sentence of the definition of Reference Rate and
(ii) Section 5.1(b) of the Credit Agreement is amended by substituting
the phrase "one hundred fifty basis points (1.50%)" for the
phrase "seventy-five basis points (.75%)" therein.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness; Note. This Amendment shall become
effective upon the execution and delivery by the Company and by
First Union of a copy of this Amendment and the execution and
delivery by the Company of a substitute promissory note reflecting
the amendment set forth in Section 1(b). This Amendment may be
executed in two counterparts, each of which shall be an original,
but all of which will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, individually and as Agent
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT
TO CREDIT AGREEMENT
This Amendment is entered into as of December 9, 1994,
between TRANS LEASING INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union"), individually and as Agent.
The parties hereto are the parties to a Credit Agreement
dated as of December 9, 1994 (as amended through the date hereof,
the "Credit Agreement") and desire to increase the aggregate amount
of rental payments the Company and its Subsidiaries may become
obligated for under certain leases. All capitalized terms used
herein shall have the same meanings as in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 9.23 of the Credit Agreement is
amended by substituting the figure $2,000,000 for the figure
$1,600,000 in clause (ii) thereof.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness. This Amendment shall be effective as
of the date first written above upon the execution and delivery by
the Company and by First Union of a copy of this Amendment. This
Amendment may be executed in two counterparts, each of which shall
be an original, but all of which will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized as of the date hereof.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, individually and as Agent
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT
TO CREDIT AGREEMENT
This Amendment is entered into as of May 11, 1995,
between TRANS LEASING INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("First Union"), individually and as Agent.
The parties hereto are the parties to a Credit Agreement
dated as of December 9, 1994 (as amended through the date hereof,
the "Credit Agreement") and desire to amend the restrictions on
certain payments by the Company thereunder. All capitalized terms
used herein shall have the same meanings as in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for the good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendment. Section 9.17 of the Credit Agreement is
deleted in its entirety and the following is substituted therefor:
9.17 Restricted Payments. Not purchase
or redeem any shares of its stock, declare or
pay any dividend thereon (other than stock
dividends), make any distribution to stockholders
or set aside any funds for any such purchase,
and not prepay, purchase or redeem, and
not permit any Subsidiary to purchase, any
subordinated indebtedness of the Company or any
Subsidiary (other than to the extent of the net
proceeds to the Company or any Subsidiary from
the issue after December 31, 1992 of other
subordianted debt) (collectively, "Restricted
Payments"), if after giving effect thereto the
aggregate amount of Restricted Payments made
during the period from and after December 31,
1992 to and including the date of the making of
the Restricted Payment in question, would exceed
the sum of (a) $2,000,000, (b) 50% of the
Company's consolidated net income for such
period (or if net income is a deficit figure,
then minus 100% of such deficit) and (c) the
net proceeds to the Company from the issue or
sale after December 31, 1992 of shares of capital
stock of the Company or warrants, rights or
options to purchase or acquire any shares of
the capital stock of the Company.
2. No Further Amendment. Except as set forth above,
the Credit Agreement shall continue in full force and effect
without modification.
3. Effectiveness. This Amendment shall be effective as
of the date first written above upon the execution and delivery by
the Company and by First Union of a copy of this Amendment. This
Amendment may be executed in two counterparts, each of which shall
be an original, but all of which will constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their respective officers thereunto duly
authorized as of the date hereof.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________________
Title:___________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, individually and as Agent
By:______________________________________
Title:____________________________________
<PAGE>
Exhibits of the Registrant
22.1 Subsidiaries of the Registrant include:
Name State of Incorporation
-------------------------- ----------------------
Trans Leasing Insurance Illinois
Services, Inc.
T.L.I. Auto Leasing Illinois
Group, Inc.
Nuvotron, Inc. Illinois
Trans Leasing Finance Delaware
Corp.
TL Lease Funding Corp. II Delaware
TL Lease Funding Corp. III Delaware
TL Lease Funding Corp. IV Delaware
Each of the above listed subsidiaries conducts business solely
under its own name.
-74-
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