<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended SEPTEMBER 30, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________________
to _________________.
Commission File Number 0-16271
DVI, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2722773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (215) 345-6600
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 the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date:
COMMON STOCK, $.005 PAR VALUE - 14,213,608 SHARES AS OF OCTOBER 31, 1999.
<PAGE> 2
DVI, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -
<S> <C>
September 30, 1999 (unaudited) and June 30, 1999........................... 3-4
Consolidated Statements of Operations (unaudited) -
Three months ended September 30, 1999 and 1998............................. 5
Consolidated Statements of Shareholders' Equity (unaudited) -
July 1, 1998 through September 30, 1999.................................... 6
Consolidated Statements of Cash Flows (unaudited) -
Three months ended September 30, 1999 and 1998............................. 7-8
Notes to Consolidated Financial Statements (unaudited)......................... 9-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. 13-15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................... 16-21
PART II. OTHER INFORMATION..................................................................... 22
Signatures..................................................................... 23
</TABLE>
2
<PAGE> 3
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
(in thousands of dollars except share data) 1999 1999
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents....................................................... $ 8,618 $ 5,695
Restricted cash and cash equivalents............................................ 51,082 36,744
Amounts due from portfolio sale................................................. 1,536 7,827
Receivables:
Investment in direct financing leases and notes secured by equipment or
medical receivables:
Receivables in installments.............................................. 863,097 776,705
Receivables and notes - related parties.................................. 2,520 2,550
Recourse credit enhancements............................................. 55,765 62,106
Net notes collateralized by medical receivables.......................... 218,591 187,327
Residual valuation....................................................... 29,667 27,761
Unearned income.......................................................... (97,750) (84,443)
------------- -------------
Net investment in direct financing leases and notes secured
by equipment or medical receivables........................................ 1,071,890 972,006
Less: Allowance for losses on receivables.................................... (13,520) (12,279)
------------- -------------
Net receivables................................................................. 1,058,370 959,727
Equipment on operating leases
(net of accumulated depreciation of $7,625 and $6,464, respectively)......... 21,648 16,570
Furniture and fixtures
(net of accumulated depreciation of $4,274 and $3,900, respectively)......... 4,883 4,970
Investments..................................................................... 8,480 10,814
Goodwill, net................................................................... 10,112 10,359
Other assets.................................................................... 56,759 43,566
------------ ------------
Total assets.................................................................... $ 1,221,488 $ 1,096,272
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, June 30,
(in thousands of dollars except share data) 1999 1999
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Accounts payable................................................................ $ 65,273 $ 63,010
Accrued expenses and other liabilities.......................................... 22,336 24,769
Borrowings under warehouse facilities........................................... 350,099 270,434
Deferred income taxes........................................................... 36,696 36,696
Long-term debt:
Discounted receivables (primarily limited recourse)........................ 294,881 276,560
97/8% Senior notes due 2004................................................ 155,000 155,000
Other debt................................................................. 76,250 56,553
Convertible subordinated notes............................................. 13,900 13,900
------------ ------------
Total long-term debt............................................................ 540,031 502,013
------------ ------------
Total liabilities............................................................... 1,014,435 896,922
Minority interest in consolidated subsidiaries.................................. 7,735 7,703
Shareholders' equity:
Preferred stock, $10.00 par value; authorized 100,000 shares; no shares
issued
Common stock, $.005 par value; authorized 25,000,000 shares;
outstanding 14,213,608 and 14,168,608 shares, respectively............. 71 71
Additional capital......................................................... 135,100 134,610
Retained earnings.......................................................... 64,627 59,055
Accumulated other comprehensive loss....................................... (480) (2,089)
------------- ------------
Total shareholders' equity...................................................... 199,318 191,647
------------ ------------
Total liabilities and shareholders' equity...................................... $ 1,221,488 $ 1,096,272
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
(in thousands of dollars except share data) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Finance and other income:
<S> <C> <C>
Amortization of finance income.............................................. $ 24,388 $ 17,919
Other income................................................................ 7,482 3,896
---------- ----------
Total finance and other income.................................................. 31,870 21,815
Interest expense................................................................ 17,909 12,543
---------- ----------
Net interest and other income................................................... 13,961 9,272
Net gain on sale of financing transactions...................................... 7,201 6,854
---------- ----------
Net finance income.............................................................. 21,162 16,126
Selling, general and administrative expenses.................................... 8,732 6,646
Provision for losses on receivables ............................................ 2,757 1,505
---------- ----------
Earnings before minority interest, equity in net loss of investees, and
provision for income taxes.................................................. 9,673 7,975
Minority interest in net loss of consolidated subsidiaries...................... 133 69
Equity in net loss of investees................................................. - (92)
Provision for income taxes ..................................................... 4,234 3,408
---------- ----------
Net earnings ................................................................... $ 5,572 $ 4,544
========== ==========
Net earnings per share:
Basic....................................................................... $ 0.39 $ 0.32
========== ==========
Diluted..................................................................... $ 0.37 $ 0.30
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
$.005 Par Value Accumulated
------------------ Other Total
$.005 Par Value Additional Retained Comprehensive Shareholders'
(in thousands of dollars except share data) Shares Amount Capital Earnings Loss Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1998.................... 14,080,358 $ 70 $ 133,516 $ 39,387 $ (688) $172,285
Net earnings........................... 19,668 19,668
Currency translation adjustment........ (1,401) (1,401)
-----------
Comprehensive income............... 18,267
Issuance of common stock upon
exercise of stock options and
warrants........................... 88,250 1 1,116 1,117
Cost of issuance of common stock....... (199) (199)
Non-employee stock option grants....... 177 177
------------ ---- ---------- --------- ------- ----------
BALANCES AT JUNE 30, 1999................... 14,168,608 71 134,610 59,055 (2,089) 191,647
Net earnings........................... 5,572 5,572
Currency translation adjustment........ 1,609 1,609
----------
Comprehensive income............... 7,181
Issuance of common stock upon
exercise of stock options and
warrants........................... 45,000 468 468
Non-employee stock option grants....... 22 22
------------ ---- ---------- --------- ------- ----------
BALANCES AT SEPTEMBER 30, 1999.............. 14,213,608 $ 71 $ 135,100 $ 64,627 $ (480) $199,318
============ ==== ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
(in thousands of dollars) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings................................................................ $ 5,572 $ 4,544
---------- ----------
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Equity in net loss of investees........................................... - 92
Depreciation and amortization............................................. 5,156 3,323
Provision for losses on receivables....................................... 2,757 1,505
Net gain on sale of financing transactions................................ (7,201) (6,854)
Minority interest in net loss of consolidated subsidiaries................ (133) (69)
Cumulative translation adjustments........................................ 1,609 931
Changes in assets and liabilities:
(Increases) decreases in:
Restricted cash and cash equivalents.................................. (14,338) 534
Amounts due from portfolio sale....................................... 6,291 (10,766)
Receivables........................................................... 6,851 (1,141)
Other assets.......................................................... (14,835) (1,252)
Increases (decreases) in:
Accounts payable...................................................... 1,116 22,626
Accrued expenses and other liabilities................................ (2,694) 460
----------- ----------
Total adjustments......................................................... (15,421) 9,389
----------- ----------
Net cash provided by (used in) operating activities......................... (9,849) 13,933
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business..................................................... - (74,678)
Receivables originated or purchased......................................... (210,987) (167,502)
Portfolio receipts net of amounts included in income and
proceeds from sale of financing transactions.............................. 157,033 135,621
Net increase in notes collateralized by medical receivables................. (31,264) (2,551)
Furniture and fixtures additions............................................ (264) (870)
----------- -----------
Net cash used in investing activities....................................... (85,482) (109,980)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants...................................... 468 -
Cost of issuance of common stock............................................ - (198)
Borrowings under warehouse facilities, net of repayments.................... 59,768 140,056
Borrowings under long-term debt............................................. 77,691 28,149
Repayments on long-term debt................................................ (39,673) (40,333)
---------- ----------
Net cash provided by financing activities................................... 98,254 127,674
---------- ----------
</TABLE>
continued
7
<PAGE> 8
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
(in thousands of dollars) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase in cash and cash equivalents....................................... $ 2,923 $ 31,627
Cash and cash equivalents, beginning of period.................................. 5,695 15,192
---------- ----------
Cash and cash equivalents, end of period........................................ $ 8,618 $ 46,819
========== ==========
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest..................................................................... $ 18,591 $ 13,578
========== ==========
Income taxes, net of refunds................................................. $ (34) $ (2,088)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In this discussion, the terms "DVI", the "Company", "we", "us" and "our" refer
to DVI, Inc. and its subsidiaries, except where it is made clear that such terms
mean only DVI, Inc. or an individual subsidiary.
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles (GAAP) for complete financial
statements. The consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in our latest annual
report on Form 10-K for the fiscal year ended June 30, 1999.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement of the consolidated balance sheets as of
September 30, 1999 and June 30, 1999, the consolidated statements of operations
for the three month periods ended September 30, 1999 and 1998, the consolidated
statements of shareholders' equity for the period from July 1, 1998 through
September 30, 1999, and the consolidated statements of cash flows for the three
month periods ended September 30, 1999 and 1998. The results of operations for
the three month period ended September 30, 1999 are not necessarily indicative
of the results of operations to be expected for the fiscal year ending June 30,
2000.
Certain amounts as previously reported have been reclassified to conform to the
presentation for the three month period ended September 30, 1999.
NOTE 2. ALLOWANCE FOR LOSSES ON RECEIVABLES
The following is an analysis of the allowance for losses on receivables:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
(IN THOUSANDS OF DOLLARS) 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period.................................... $ 12,279 $ 9,955
Provision for losses on receivables............................. 2,757 1,505
Allowance assumed in business acquisition....................... - 1,337
Net charge-offs................................................. (1,516) (903)
-------- --------
Balance, end of period...................................... $ 13,520 $ 11,894
======== ========
</TABLE>
9
<PAGE> 10
NOTE 3. RECONCILIATION OF EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) 1999 1998
----------------------------------------------------------------------------------------------------------
BASIC
<S> <C> <C>
Income available to common shareholders............................................ $ 5,572 $ 4,544
Average common shares.............................................................. 14,184 14,080
Basic earnings per common share.................................................... $ 0.39 $ 0.32
======= ========
DILUTED
Income available to common shareholders............................................ $ 5,572 $ 4,544
Effect of dilutive securities:
Convertible debentures........................................................... 184 184
------- --------
Diluted income available to common shareholders.................................... $ 5,756 $ 4,728
Average common shares.............................................................. 14,184 14,080
Effect of dilutive securities:
Warrants......................................................................... 10 23
Options.......................................................................... 244 435
Convertible debentures........................................................... 1,311 1,311
------- --------
Diluted average common shares...................................................... 15,749 15,849
Diluted earnings per common share.................................................. $ 0.37 $ 0.30
======= ========
</TABLE>
NOTE 4. HEDGE TRANSACTIONS
At September 30, 1999, we had $300.0 million in Treasury locks and $17.4 million
in interest rate swaps. In addition, we also had 375.0 million Spanish pesetas
and 10.0 million German deutsche marks in forward contracts.
10
<PAGE> 11
NOTE 5. SEGMENT REPORTING
In June 1999, we adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards for
the reporting of operating segments in interim and annual financial statements,
as well as requiring related disclosures about products and services, geographic
areas and major customers. In accordance with this standard, we have determined
the following reportable segments based on the types of our financings:
- - Equipment financing, which includes:
- Sophisticated medical equipment financing directly to U.S. and
international end users,
- Medical equipment contracts acquired from originators that
generally do not have access to cost-effective permanent
funding and
- "Small ticket" equipment financing.
- - Medical receivables financing, which includes:
- Medical receivable lines of credit issued to a wide variety of
healthcare providers and
- Software tracking of medical receivables.
- - Corporate and all other, which includes:
- Interim real estate financing, mortgage loan placement,
subordinated debt financing for assisted living facilities
and, to a lesser extent, merger and acquisition advisory
services to our customers operating in the long-term care,
assisted care and specialized hospital markets;
- Asset-backed financing (including lease lines of credit) to
emerging growth companies and
- Miscellaneous corporate income and overhead allocations.
The following information reconciles our reportable segment information to
consolidated totals:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------------------
TOTAL FINANCE AND INTEREST NET MANAGED NET
(IN THOUSANDS OF DOLLARS) OTHER INCOME EXPENSE EARNINGS FINANCED ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment financing.......................... $ 20,459 $ 12,984 $ 3,518 $ 1,526,720
Medical receivables financing................ 6,829 4,128 451 217,233
Corporate and all other...................... 4,582 797 1,603 70,232
---------- --------- --------- -----------
Consolidated total...................... $ 31,870 $ 17,909 $ 5,572 $ 1,814,185
========== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------------------------------
TOTAL FINANCE AND INTEREST NET MANAGED NET
(IN THOUSANDS OF DOLLARS) OTHER INCOME EXPENSE EARNINGS FINANCED ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment financing.......................... $ 16,340 $ 9,726 $ 5,206 $ 1,197,335
Medical receivables financing................ 5,388 2,956 575 139,105
Corporate and all other...................... 87 (139) (1,237) 19,398
---------- ---------- ---------- -----------
Consolidated total...................... $ 21,815 $ 12,543 $ 4,544 $ 1,355,838
========== ========= ========= ===========
</TABLE>
11
<PAGE> 12
GEOGRAPHIC INFORMATION
We attribute finance and other income earned and managed net financed assets to
geographic areas based on the location of our subsidiaries. Finance and other
income earned and the balances of managed net financed assets for the three
month periods ended and as of September 30, 1999 and 1998 by geographic area are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------
TOTAL FINANCE AND MANAGED NET
(IN THOUSANDS OF DOLLARS) OTHER INCOME FINANCED ASSETS
------------------------- ----------------- ---------------
<S> <C> <C>
United States.................................... $ 25,848 $ 1,565,480
International.................................... 6,022 248,705
---------- -----------
Total........................................ $ 31,870 $ 1,814,185
========== ===========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------
TOTAL FINANCE AND MANAGED NET
(IN THOUSANDS OF DOLLARS) OTHER INCOME FINANCED ASSETS
------------------------- ----------------- ---------------
<S> <C> <C>
United States.................................... $ 17,819 $ 1,184,230
International.................................... 3,996 171,608
---------- -----------
Total........................................ $ 21,815 $ 1,355,838
========== ===========
</TABLE>
MAJOR CUSTOMER INFORMATION
We have no single customer that accounts for 10% or more of revenue for the
three month periods ending September 30, 1999 and 1998.
NOTE 6. SUBSEQUENT EVENTS
We sold 143,000 shares of Cisco Systems, Inc. (Nasdaq: CSCO) in early November
1999, generating income of $10.5 million. The shares were acquired by our Third
Coast Capital unit following its exercise of warrants issued by privately-held
Cerent Corporation. The warrants were converted into the right to receive shares
of Cisco common stock following its acquisition of Cerent Corporation. We
recognized $3.8 million of income in the quarter ended September 30, 1999 to
reflect the pre-acquisition value of the unexercised warrants.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Total equipment financing contracts originated and acquired were $211.3 million
for the three month period ended September 30, 1999 compared with $214.6 million
for the three month period ended September 30, 1998, a decrease of 1.5%. Net
financed assets totaled $1.1 billion at September 30, 1999, an increase of
$105.0 million or 10.6% over the total as of June 30, 1999. Not included in net
financed assets were the contracts sold but still serviced by us, which
increased to $776.4 million as of September 30, 1999 compared to $735.3 million
as of June 30, 1999, an increase of 5.6%. Managed net financed assets, the
aggregate of those appearing on our balance sheet and those which have been sold
and are still serviced by us, totaled $1.8 billion as of September 30, 1999,
representing a 9.2% increase over the total as of June 30, 1999.
During the three month period ended September 30, 1999, new commitments of
credit in our medical receivables financing business were $24.7 million compared
with $33.3 million for the same period of the prior fiscal year, a decrease of
25.8%. Net medical receivables funded at September 30, 1999 totaled $218.6
million, an increase of $31.3 million or 16.7% over the total as of June 30,
1999.
Total finance and other income increased 46.1% to $31.9 million for the three
month period ended September 30, 1999 from $21.8 million for the three month
period ended September 30, 1998. Finance income was $24.4 million for the three
month period ended September 30, 1999, or 5.7% of average net financed assets of
$1.1 billion on an annualized basis. This compares to $17.9 million for the
three month period ended September 30, 1998, which was an annualized 9.1% of
that period's average net financed assets of $790.4 million. This 36.1% increase
in finance income was largely due to the overall increase in the size of our
loan portfolio. Other income increased 92.0% to $7.5 million for the three month
period ended September 30, 1999 as compared to $3.9 million in the comparable
prior year period. Other income consists primarily of medical receivables fees,
consulting and advisory fees, servicing fees, late charges, amounts received
upon exercise of warrants issued by other companies (including Cerent
Corporation warrants - see note 6), and contract fees and penalties.
Interest expense was $17.9 million for the three month period ended September
30, 1999, or 6.7% of average net financed assets on an annualized basis. This
compares to $12.5 million of interest expense for the three month period ended
September 30, 1998, which was an annualized 6.3% of average net financed assets
during that period. The $5.4 million increase in interest expense is directly
attributed to higher levels of debt necessary to finance a larger average
portfolio. The weighted average interest rate on discounted receivables
increased to 8.0% for the three month period ended September 30, 1999 compared
to 7.7% for the three month period ended September 30, 1998.
The net gain on sale of financing transactions increased 5.1% to $7.2 million
for the three month period ended September 30, 1999, representing 7.9% of the
$91.1 million in contracts sold during that period. This compares to $6.9
million recognized for the three month period ended September 30, 1998, or 9.5%
of the $72.7 million in contracts sold. The increase in gain is principally due
to the increased number of contracts sold for the three month period ended
September 30, 1999.
Selling, general and administrative expenses increased 31.4% to $8.7 million for
the three month period ended September 30, 1999 from $6.6 million for the same
quarter of the prior fiscal year. The increase is related primarily to our
acquisitions subsequent to the three month period ending September 30, 1998, the
development of our medical receivables and international businesses, and our
36.7% growth in average managed net financed assets.
The allowance for losses was $13.5 million at September 30, 1999, or 0.75% of
our managed portfolio, compared to $12.3 million at June 30, 1999, or 0.74% of
the managed portfolio at that time. We made provisions for losses on receivables
for the three month period ended September 30, 1999 of $2.8 million, compared to
$1.5 million for the same period ended September 30, 1998. On a quarterly basis,
we evaluate the collectibility of our receivables and record a provision for
amounts deemed necessary to maintain an adequate allowance. In the opinion of
management, the provisions are adequate based on current trends in our
delinquencies and losses.
Earnings before minority interest, equity in net loss of investees and provision
for income taxes increased 21.3% to $9.7 million for the three month period
ended September 30, 1999 compared to $8.0 million for the same period ended
September 30, 1998. Net earnings increased 22.6% to $5.6 million from $4.5
million in comparing the three month period ended
13
<PAGE> 14
September 30, 1999 to the same period ended September 30, 1998. Diluted earnings
per share increased 23.3% to $0.37 from $0.30 when comparing the three month
period ended September 30, 1999 to September 30, 1998. The increase in diluted
earnings per share resulted from an increase in our net earnings combined with a
decrease in diluted shares.
FINANCIAL CONDITION
Total shareholders' equity increased $7.7 million to $199.3 million at September
30, 1999 from $191.6 million at June 30, 1999. The increase was primarily due to
net earnings of $5.6 million and a cumulative foreign currency translation
adjustment of $1.6 million.
We believe that our present warehouse and permanent funding sources are
sufficient to fund our current needs for our equipment and medical receivables
financing businesses.
At September 30, 1999, we had available an aggregate of $607.7 million in
warehouse facilities of which $350.1 million was utilized.
Through September 30, 1999, we have completed 24 securitizations for medical
equipment and medical receivables financings totaling approximately $2.2
billion, consisting of public debt issues totaling $0.6 billion and private
placements of debt and contract sales totaling $1.6 billion. We expect to
continue to use securitization (on both a public and private basis) or other
structured finance transactions as our principal means to permanently fund our
contracts for the foreseeable future.
YEAR 2000 CONCERNS
The Year 2000 issue deals with electronic systems that were designed with a
two-digit representation of the year. When calendar dates do not include the
first two digits of the year, systems have "understood" that prefix to be "19".
Elsewhere, some computer systems that project calculations into the future have
already begun to malfunction, generating errors based upon next year being
regarded as 1900 by the system, instead of 2000. These problems will affect even
more systems worldwide, including hardware, when the current date becomes 2000.
If the systems and products we use are not properly equipped to identify and
recognize the Year 2000, our systems could fail or create erroneous results. We
could be temporarily unable to process transactions, originate contracts,
service third party contracts and engage in other normal business activities.
Under these circumstances, the Year 2000 problem could have a material adverse
effect on our products, services, operations and financial results.
Our medical receivables finance business is dependent on the successful
repayment of receivables from third party payors such as Medicare and Medicaid.
Although these providers demonstrated Year 2000 compliance before March 31,
1999, we may be unable to collect on our medical receivables in a timely manner,
or at all, if third party payors fail to become Year 2000 compliant. This could
have a material adverse effect on our medical receivables financing business. We
cannot provide any assurance regarding a third party's ability to become Year
2000 compliant.
Like many financial companies, our computer systems have already been working
with calculations that project three to five years into the future. While
successfully testing systems in a "live" environment has given us some measure
of comfort, it was still necessary to perform a full Year 2000 evaluation.
Several other advantages have simplified the Year 2000 project:
1. As a relatively young company, we do not have an investment in
non-compliant hardware.
2. All of our critical systems use "off-the-shelf" software. No
consultants or staff programmers were needed to reprogram our systems.
3. We use strong internal controls and standards for technology purchases.
Critical systems worldwide are centralized in our United States
headquarters, which has allowed us to focus our assessment and
remediation efforts on relatively few hardware and software platforms.
Adequate internal resources were available to devote to this project.
We began a formal Year 2000 project in December 1997 with the formation of a
Year 2000 Committee, chaired by our senior information technology manager. The
Committee has members from various business units and departments within
14
<PAGE> 15
the organization, and provides status reports periodically to senior management
and Directors. The first task for the Committee was to formulate a plan for
addressing the Year 2000 problem. The Committee selected a five-phase approach,
which is outlined below.
PHASE 1 - INVENTORY
We performed a worldwide assessment of all devices that may be affected by the
Year 2000 problem. We investigated computer hardware, operating systems,
applications software, networking systems, telephone systems, building security
systems, fax machines, elevators and other electronic office equipment. This
phase was completed in May 1998.
PHASE 2 - ASSESSMENT
Once the Committee had identified the current inventory of systems, they
performed an assessment of how critical each system was to the operation of the
business, and the potential impact of failure, in order to establish priorities
for repair or replacement. To ensure that the Inventory and Assessment phases
were thorough, we enlisted outside professionals to help with the assessment.
Vendors for each component provided written certification about their Year 2000
compliance status. When this assessment was completed in June 1998, we had
identified three off-the-shelf software packages that would need to be upgraded
through maintenance releases. This was the only remediation deemed necessary for
all critical and non-critical systems within our worldwide offices.
PHASE 3 - REMEDIATION
All non-compliant software packages have been upgraded.
PHASE 4 - TESTING
Although our systems vendors have certified their products as Year 2000
compliant, the next phase required that we thoroughly test these certifications
in our own environment. We recognize that our vendors test and certify products
in an isolated, laboratory environment, which does not account for the unique
mix of hardware and software in customer locations. In-house testing is the only
way to verify that our current systems will be compliant next year. Testing
began in the beginning of calendar year 1999 and will continue for the remainder
of the year.
PHASE 5 - CONTINGENCY PLANNING
We developed contingency plans for all systems deemed critical during the
assessment phase. These contingency plans are designed to protect us from
business interruptions related to the Year 2000 problem. Many of the critical
systems we use may be substituted for a short period of time with manual
procedures. Whenever possible, alternate suppliers and vendors have been
identified in the event that our current vendors are affected by the Year 2000
problem. In addition to the Year 2000 contingency planning, we maintain and
deploy standard plans that address various types of business interruptions. Some
of these plans address the interruption of support provided by third parties
resulting from their failure to be Year 2000 compliant.
COSTS
We do not have any investment in "custom" programming that will require
extensive reprogramming. Virtually all of the software systems are
"off-the-shelf" products which have been developed by outside vendors. The cost
of the software upgrades discussed in the remediation phase was included in
standard maintenance agreements, and has not required any additional expenses.
At this time, we project our direct costs to become Year 2000 compliant to be
less than $50,000.
OTHER CONCERNS
We have identified significant relationships that may affect the operation of
our business, including vendors, customers, asset management and funding
counterparties, and all other third parties. Failure by these entities to become
Year 2000 compliant could have a material adverse effect on us. There can be no
assurances that any of our contingency plans will be sufficient to anticipate
all of the problems and issues that may arise.
CONCLUSION
We believe that the Year 2000 issue will not pose any significant operational
problems to our internal systems and will not have a material adverse effect on
our future financial condition, liquidity or results of operations during
calendar year 1999 and in future periods. This section discussing Year 2000
issues contains forward-looking statements.
15
<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to two primary types of market risk: interest rate risk and
foreign currency exchange risk. We actively manage both of these risks.
INTEREST RATE RISK
The majority of our assets and liabilities are financial instruments with fixed
and variable rates. Any mismatch between the repricing or maturity
characteristics of our assets and liabilities exposes us to interest rate risk
when interest rates fluctuate. For example, our equipment loans are structured
and permanently funded on a fixed-rate basis, but we use warehouse facilities
until the permanent matched funding is obtained. Since funds borrowed through
warehouse facilities are obtained on a floating-rate basis, we are exposed to a
certain degree of risk if interest rates rise and increase our borrowing costs.
In addition, when we originate equipment loans, we base our pricing in part on
the spread we expect to achieve between the interest rate we charge our
equipment loan customers and the effective interest cost we will pay when we
permanently fund those loans. Increases in interest rates which increase our
permanent funding costs between the time the loans are originated and the time
they are permanently funded could narrow, eliminate or even reverse this spread.
In addition, changes in interest rates affect the fair market value of fixed
rate assets and liabilities. In a rising interest rate environment, fixed rate
assets lose market value whereas fixed rate liabilities gain market value and
vice versa.
In order to manage our interest rate risk, we employ a hedging strategy. We use
derivative financial instruments such as forward rate agreements, Treasury
locks, and interest rate swaps, caps and collars to manage interest sensitivity
adjustments from mismatches, the pricing of anticipated loan securitizations and
sales, and interest rate spreads. We do not use derivative financial instruments
for trading or speculative purposes. We manage the credit risk of possible
counterparty default in these derivative transactions by dealing exclusively
with counterparties with investment grade ratings.
Before entering into a derivative transaction for hedging purposes, we determine
that a high correlation exists between the change in the value of the hedged
item and the change in the value of the derivative from a movement in interest
rates. High correlation means that the change in the value of the derivative
will be substantially equal and opposite to the change in the value of the
hedged asset or liability. We monitor this correlation throughout the hedged
period. If a high degree of correlation is not maintained, the hedge becomes
ineffective, and gains or losses in the value of the derivative are recognized
in income.
There can be no assurance that our hedging strategies or techniques will be
effective, that our profitability will not be adversely affected during any
period of change in interest rates or that the costs of hedging will not exceed
the benefits.
The following table provides information about certain financial instruments
held that are sensitive to changes in interest rates. For assets and
liabilities, the table presents principal cash flows and related weighted
average interest rates by expected maturity date at September 30, 1999. For
derivative financial instruments, the table presents notional amounts and
weighted average interest rates by expected (contractual) maturity dates. These
notional amounts generally are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates, which are
generally LIBOR-based, represent the interest rates in effect at September 30,
1999. The information is presented in U.S. dollar equivalents, which is our
reporting currency. The actual cash flows are denominated in U.S. dollars (US),
German deutsche marks (DEM), Spanish pesetas (ESP), Singapore dollars (SGD),
Japanese yen (JPY), Australian dollars (AUD), and British pounds (GBP), as
indicated in parentheses. The table excludes investments in direct financing
leases in accordance with disclosure requirements, although our lease contracts
are exposed to interest rate risk. The information does not include any
estimates for prepayments, reinvestment, refinancing or credit losses.
16
<PAGE> 17
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE - QTR ENDED SEPTEMBER 30, THERE- FAIR
----------------------------------------------------
(IN THOUSANDS OF DOLLARS) 2000 2001 2002 2003 2004 AFTER TOTAL VALUE
- ------------------------- -------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE-SENSITIVE ASSETS:
Fixed rate receivables in
installments (US)........... $ 81,347 $ 62,065 $ 50,039 $ 30,731 $ 20,136 $ 15,514 $ 259,832 $252,777
Average interest rate......... 9.87% 9.89% 9.94% 9.96% 9.88% 9.83% 9.88%
Fixed rate receivables in
installments (DEM).......... $ 2,813 $ 3,480 $ 2,840 $ 1,877 $ 2,004 $ 2,733 $ 15,747 $ 14,495
Average interest rate......... 8.53% 9.00% 9.23% 9.39% 9.45% 9.38% 9.15%
Fixed rate receivables in
installments (ESP).......... $ 436 $ 387 $ 410 $ 71 - - $ 1,304 $ 1,160
Average interest rate......... 10.19% 10.19% 10.19% 10.19% - - 10.19%
Fixed rate receivables in
installments (SGD).......... $ 881 $ 431 $ 479 $ 533 $ 577 $ 306 $ 3,207 $ 3,076
Average interest rate......... 10.78% 10.78% 10.78% 10.78% 10.71% 10.68% 10.78%
Fixed rate receivables in
installments (JPY).......... $ 3,486 $ 1,365 $ 1,441 $ 1,521 $ 659 - $ 8,472 $ 7,512
Average interest rate......... 5.63% 5.44% 5.44% 5.44% 5.44% - 5.63%
Fixed rate receivables in
installments (AUD).......... $ 471 $ 339 $ 145 $ 1 - - $ 956 $ 851
Average interest rate......... 10.41% 10.39% 10.36% 10.25% - - 10.41%
Fixed rate receivables in
installments (GBP).......... $ 82 $ 55 $ 61 $ 68 $ 5 - $ 271 $ 265
Average interest rate......... 9.27% 10.88% 10.88% 10.88% 10.88% - 9.27%
Floating rate receivables in
installments (US)........... $ 55,374 $ 33,576 $ 22,067 $ 14,571 $ 10,051 $ 615 $ 136,254 $136,254
Average interest rate......... 8.51% 7.90% 7.50% 8.11% 9.53% 6.40% 8.22%
Floating rate notes collateralized
by medical receivables (US).. $120,207 $ 94,400 $ 4,601 $ 5,753 - - $ 224,961 $224,961
Average interest rate......... 10.41% 10.39% 10.36% 10.25% - - 10.41%
Fixed rate recourse credit
enhancements (US)........... $ 13,663 $ 11,266 $ 10,391 $ 12,813 $ 6,057 $ 1,576 $ 55,766 $ 51,602
Average interest rate......... 6.72% 6.76% 6.72% 6.70% 6.93% 7.01% 6.72%
-------- -------- -------- -------- -------- --------- --------- --------
Totals...................... $278,760 $207,364 $ 92,474 $ 67,939 $ 39,489 $ 20,744 $ 706,770 $692,653
======== ======== ======== ======== ======== ========= ========= ========
Average interest rate....... 9.62% 9.58% 8.93% 8.86% 9.25% 9.47% 9.42%
====== ====== ====== ====== ====== ====== ======
DERIVATIVES MATCHED AGAINST ASSETS:
INTEREST RATE SWAPS
Pay variable rate swaps (US)..... - - $ 5,000 - - - $ 5,000 $ (27)
Weighted average pay rate..... - - 5.58% - - - 5.58%
Weighted average receive rate. - - 5.83% - - - 5.83%
-------- --------- ---------
Totals...................... $ 5,000 $ 5,000 $ (27)
======== ========= =========
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE - QTR ENDED SEPTEMBER 30, THERE- FAIR
----------------------------------------------------
(IN THOUSANDS OF DOLLARS) 2000 2001 2002 2003 2004 AFTER TOTAL VALUE
- ------------------------- -------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE-SENSITIVE LIABILITIES:
Variable rate borrowings under
warehouse facilities (US)........ $312,244 - - - - - $ 312,244 $312,244
Average interest rate......... 6.87% - - - - - 6.87%
Variable rate borrowings under
warehouse facilities (AUD)....... $ 2,034 - - - - - $ 2,034 $ 2,034
Average interest rate......... 6.16% - - - - - 6.16%
Variable rate borrowings under
warehouse facilities (DEM)....... $ 9,123 - - - - - $ 9,123 $ 9,123
Average interest rate......... 4.09% - - - - - 4.09%
Variable rate borrowings under
warehouse facilities (GBP)....... - $ 9,098 - - - - $ 9,098 $ 9,098
Average interest rate......... - 7.33% - - - - 7.33%
Variable rate borrowings under
warehouse facilities (JPY)....... $ 11,724 - - - - - $ 11,724 $ 11,724
Average interest rate......... 3.13% - - - - - 3.13%
Variable rate borrowings under
warehouse facilities (SGD)....... $ 5,876 - - - - - $ 5,876 $ 5,876
Average interest rate......... 5.39% - - - - - 5.39%
Fixed rate discounted
receivables (US)................. $ 83,626 $ 54,365 $ 33,129 $ 18,246 $ 5,181 $ 334 $ 194,881 $192,899
Average interest rate......... 6.80% 6.38% 6.37% 6.41% 6.51% 6.24% 6.80%
Variable rate discounted
receivables (US)................. $ 25,000 $ 75,000 - - - - $ 100,000 $100,000
Average interest rate......... 7.61% 6.32% - - - - 6.64%
Senior notes (US)................ - - - - $155,000 - $ 155,000 $151,625
Average interest rate......... - - - - 9.88% - 9.88%
Other debt (US).................. $ 18,762 $ 10,603 $ 6,370 $ 11,003 $ 2,000 $ 25,000 $ 73,738 $ 67,399
Average interest rate......... 7.55% 7.90% 8.36% 7.57% 8.34% 7.85% 7.80%
Other debt (GBP)................. $ 692 $ 740 $ 651 $ 429 - - $ 2,512 $ 2,467
Average interest rate......... 8.13% 8.13% 8.22% 9.10% - - 8.32%
Convertible subordinated
notes (US)....................... - - $ 13,900 - - - $ 13,900 $ 21,473
Average interest rate......... - - 9.13% - - - 9.13%
-------- -------- -------- -------- -------- --------- --------- --------
Totals...................... $469,081 $149,806 $ 54,050 $ 29,678 $162,181 $ 25,334 $ 890,130 $885,962
======== ======== ======== ======== ======== ========= ========= ========
Average interest rate....... 6.76% 6.52% 7.34% 6.88% 9.75% 7.83% 7.39%
====== ====== ====== ====== ====== ====== ======
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE - QTR ENDED SEPTEMBER 30, THERE- FAIR
----------------------------------------------------
(IN THOUSANDS OF DOLLARS) 2000 2001 2002 2003 2004 AFTER TOTAL VALUE
- ------------------------- -------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DERIVATIVES MATCHED AGAINST
LIABILITIES:
INTEREST RATE SWAPS
Pay fixed rate swaps (US)........ - - - - - $ 10,000 $ 10,000 $ 85
Weighted average pay rate..... - - - - - 5.84% 5.84%
Weighted average receive rate. - - - - - 5.06% 5.06%
Pay fixed rate swaps (AUD)....... - - $ 2,366 - - - $ 2,366 $ 3
Weighted average pay rate..... - - 5.56% - - - 5.56%
Weighted average receive rate. - - 4.93% - - - 4.93%
TREASURY LOCKS (US).............. $300,000 - - - - - $ 300,000 $ (884)
Average strike rate........... 5.85% - - - - - 5.85%
Average index rate............ 5.67% - - - - - 5.67%
-------- -------- --------- --------- ---------
Totals...................... $300,000 $ 2,366 $ 10,000 $ 312,366 $ (796)
======== ======== ========= ========= =========
</TABLE>
FOREIGN CURRENCY EXCHANGE RATE RISK
We have international operations and foreign currency exposures due to lending
in some areas in local currencies. As a general practice, we have not hedged the
foreign exchange exposure related to either the translation of overseas earnings
into U.S. dollars or the translation of overseas equity positions back to U.S.
dollars. Our preferred method for minimizing foreign currency transaction
exposure is to fund local currency assets with local currency borrowings. For
specific local currency-denominated receivables or for a portfolio of local
currency-denominated receivables for a specific period of time, hedging with
derivative financial instruments may be necessary to manage the foreign currency
exposure derived from funding in U.S. dollars. The types of derivative
instruments used are foreign exchange forward contracts and cross-currency
interest rate swaps.
The following table provides information about certain financial instruments
held that are sensitive to changes in foreign exchange rates. For assets and
liabilities, the table presents principal cash flows and related weighted
average interest rates by expected maturity date at September 30, 1999. For
foreign currency forward exchange agreements, the table presents notional
amounts and weighted average exchange rates by expected (contractual) maturity
dates. These notional amounts generally are used to calculate the contractual
payments to be exchanged under the contract. The information is presented in
U.S. dollar equivalents, which is our reporting currency. The actual cash flows
are denominated in German deutsche marks (DEM), Spanish pesetas (ESP), Singapore
dollars (SGD), Japanese yen (JPY), Australian dollars (AUD), and British pounds
(GBP), as indicated in parentheses. The table excludes investments in direct
financing leases in accordance with disclosure requirements, although our lease
contracts are exposed to foreign currency rate risk. The information does not
include any estimates for prepayments, reinvestment, refinancing or credit
losses.
19
<PAGE> 20
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE - QTR ENDED SEPTEMBER 30,
---------------------------------------------------- THERE- FAIR
(IN THOUSANDS OF DOLLARS) 2000 2001 2002 2003 2004 AFTER TOTAL VALUE
- ------------------------- -------- -------- -------- -------- -------- --------- --------- --------
FOREIGN CURRENCY SENSITIVE ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables in installments (DEM) $ 2,813 $ 3,480 $ 2,840 $ 1,877 $ 2,004 $ 2,733 $ 15,747 $ 14,495
Average interest rate......... 8.53% 9.00% 9.23% 9.39% 9.45% 9.38% 9.15%
Receivables in installments (ESP) $ 436 $ 387 $ 410 $ 71 - - $ 1,304 $ 1,160
Average interest rate......... 10.19% 10.19% 10.19% 10.19% - - 10.19%
Fixed rate receivables in
installments (SGD)............ $ 881 $ 431 $ 479 $ 533 $ 577 $ 306 $ 3,207 $ 3,076
Average interest rate......... 10.78% 10.78% 10.78% 10.78% 10.71% 10.68% 10.78%
Fixed rate receivables in
installments (JPY)............ $ 3,486 $ 1,365 $ 1,441 $ 1,521 $ 659 - $ 8,472 $ 7,512
Average interest rate......... 5.63% 5.44% 5.44% 5.44% 5.44% - 5.63%
Fixed rate receivables in
installments (AUD)............ $ 471 $ 339 $ 145 $ 1 - - $ 956 $ 851
Average interest rate......... 10.41% 10.39% 10.36% 10.25% - - 10.41%
Fixed rate receivables in
installments (GBP)............ $ 82 $ 55 $ 61 $ 68 $ 5 - $ 271 $ 265
Average interest rate......... 9.27% 10.88% 10.88% 10.88% 10.88% - 9.27%
-------- -------- -------- --------- -------- --------- --------- --------
Totals...................... $ 8,169 $ 6,057 $ 5,376 $ 4,071 $ 3,245 $ 3,039 $ 29,957 $ 28,611
======== ======== ======== ======== ======== ========= ========= ========
Average interest rate....... 7.74% 8.50% 8.47% 8.14% 8.86% 9.51% 8.42%
====== ====== ====== ====== ====== ====== ======
DERIVATIVES MATCHED AGAINST ASSETS:
FOREIGN EXCHANGE AGREEMENTS
Receive U.S. $ / Pay DEM......... $ 5,463 - - - - - $ 5,463 $ (92)
Avg. contractual exchange rate 1.85 - - - - - 1.85
Receive U.S. $ / Pay ESP......... $ 2,408 - - - - - $ 2,408 $ (41)
Avg. contractual exchange rate 158.04 - - - - - 158.04
-------- --------- ---------
Totals...................... $ 7,871 $ 7,871 $ (133)
======== ========= =========
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE - QTR ENDED SEPTEMBER 30,
---------------------------------------------------- THERE- FAIR
(IN THOUSANDS OF DOLLARS) 2000 2001 2002 2003 2004 AFTER TOTAL VALUE
- ------------------------- -------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOREIGN CURRENCY SENSITIVE
LIABILITIES:
Warehouse borrowings (DEM)....... $ 9,123 - - - - - $ 9,123 $ 9,123
Average interest rate......... 4.09% - - - - - 4.09%
Warehouse borrowings (AUD)....... $ 2,034 - - - - - $ 2,034 $ 2,034
Average interest rate......... 6.16% - - - - - 6.16%
Warehouse borrowings (GBP)....... - $ 9,098 - - - - $ 9,098 $ 9,098
Average interest rate......... - 7.33% - - - - 7.33%
Variable rate borrowings under
warehouse facilities (JPY).... $ 11,724 - - - - - $ 11,724 $ 11,724
Average interest rate......... 3.13% - - - - - 3.13%
Variable rate borrowings under
warehouse facilities (SGD).... $ 5,876 - - - - - $ 5,876 $ 5,876
Average interest rate......... 5.39% - - - - - 5.39%
Other Debt (GBP)................. $ 692 $ 740 $ 651 $ 429 - - $ 2,512 $ 2,467
Average interest rate......... 8.13% 8.13% 8.22% 9.10% - - 8.32%
-------- -------- -------- -------- --------- --------
Totals...................... $ 29,449 $ 9,838 $ 651 $ 429 $ 40,367 $ 40,322
======== ======== ======== ======== ========= ========
Average interest rate....... 4.20% 7.39% 8.22% 9.10% 5.10%
====== ====== ====== ====== ======
</TABLE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Any statements contained in this Form 10-Q which are not historical facts are
forward-looking statements; and, therefore, many important factors could cause
actual results to differ materially from those in the forward-looking
statements. Such factors include, but are not limited to, changes (legislative
and otherwise) in the healthcare industry, those relating to demand for our
services, pricing, market acceptance, the effect of economic conditions,
litigation, competitive products and services, the results of financing efforts,
the ability to complete transactions, and other risks identified in our
Securities and Exchange Commission filings.
21
<PAGE> 22
PART II - OTHER INFORMATION
Items 1 through 5 have been omitted because the related information is either
inapplicable or has been previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Form 8-K
None
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DVI, INC.
(Registrant)
Date: November 15, 1999 By /s/ MICHAEL A. O'HANLON
----------------------------------
Michael A. O'Hanlon
President and Chief Executive Officer
Date: November 15, 1999 By /s/ STEVEN R. GARFINKEL
----------------------------------
Steven R. Garfinkel
Executive Vice President and Chief
Financial Officer
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR
QUARTER ENDING 9/30/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-K FOR YEAR END 6/30/99.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 59,700
<SECURITIES> 0
<RECEIVABLES> 1,071,890
<ALLOWANCES> 13,520
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,157
<DEPRECIATION> (4,274)
<TOTAL-ASSETS> 1,221,488
<CURRENT-LIABILITIES> 437,708
<BONDS> 0
0
0
<COMMON> 71
<OTHER-SE> 199,247
<TOTAL-LIABILITY-AND-EQUITY> 1,221,488
<SALES> 0
<TOTAL-REVENUES> 39,071
<CGS> 0
<TOTAL-COSTS> 17,909
<OTHER-EXPENSES> 8,599
<LOSS-PROVISION> 2,757
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,806
<INCOME-TAX> 4,234
<INCOME-CONTINUING> 5,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,572
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.37
</TABLE>
