UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
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 0-21370
LEASING SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0116801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 ALMADEN BOULEVARD, SUITE 1500, SAN JOSE, CALIFORNIA 95113
(Address of principal executive offices) (Zip code)
(408) 995-6565
(Registrant's telephone number, including area code)
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 [ ]
The number of shares of Registrant's common stock outstanding at August 12,
1998 was 8,238,286 shares.
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
June 30, 1998 and December 31, 1997
Consolidated Condensed Income Statements
Three and six month periods ended June 30, 1998 and 1997
Consolidated Condensed Statements of Cash Flows
Six month periods ended June 30, 1998 and 1997
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
(unaudited)
ASSETS
Cash and cash equivalents........................... $15,816 $16,569
Accounts receivable................................. 44,063 16,318
Investment in direct finance leases-net............. 20,363 24,269
Investment in operating leases-net.................. 577,626 527,025
Property and equipment-net.......................... 3,790 3,545
Other assets........................................ 23,553 9,005
----------- -----------
TOTAL ASSETS..................................... $685,211 $596,731
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable-equipment purchases................ $25,267 $17,143
Accrued and other liabilities....................... 26,298 17,605
Recourse debt....................................... 370,477 269,591
Nonrecourse debt.................................... 164,867 202,259
Deferred income taxes............................... 13,199 13,546
----------- -----------
TOTAL LIABILITIES................................ 600,108 520,144
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, authorized 20,000,000 shares; shares
outstanding: 8,234,285 and 8,181,800............ 39,178 38,625
Retained earnings................................... 45,645 37,852
Accumulated translation adjustment.................. 280 110
----------- -----------
TOTAL SHAREHOLDERS' EQUITY....................... 85,103 76,587
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....... $685,211 $596,731
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Operating lease revenue............. $73,947 $52,763 $140,318 $97,379
Earned lease income................. 451 1,087 983 1,442
Other............................... 2,147 2,047 2,201 4,005
--------- --------- --------- ---------
TOTAL REVENUES.................. 76,545 55,897 143,502 102,826
--------- --------- --------- ---------
COSTS AND EXPENSES:
Depreciation - operating leases..... 51,660 38,317 97,597 70,562
Selling, general and administrative. 6,153 4,605 11,573 8,417
Interest............................ 10,054 7,422 19,165 13,641
Other............................... 1,511 394 1,751 709
--------- --------- --------- ---------
TOTAL COSTS AND EXPENSES........ 69,378 50,738 130,086 93,329
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES............. 7,167 5,159 13,416 9,497
PROVISION FOR INCOME TAXES............. 2,998 2,166 5,623 3,979
--------- --------- --------- ---------
NET INCOME............................. $4,169 $2,993 $7,793 $5,518
========= ========= ========= =========
NET INCOME PER COMMON SHARE ........... $0.51 $0.37 $0.95 $0.67
========= ========= ========= =========
NET INCOME PER COMMON
SHARE - ASSUMING DILUTION............ $0.47 $0.36 $0.89 $0.66
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES......... 8,217 8,195 8,207 8,192
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
AND EQUIVALENT SHARES............... 10,677 8,327 10,671 8,384
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES................. $116,242 $90,653
--------- ---------
INVESTING ACTIVITIES:
Cost of equipment acquired for lease..................... (186,433) (166,549)
Cash received over revenue recognized on leases.......... 2,696 38,483
Property and equipment purchases......................... (586) (775)
--------- ---------
Net cash used for investing activities................... (184,323) (128,841)
--------- ---------
FINANCING ACTIVITIES:
Borrowings:
Nonrecourse............................................ 46,507 104,007
Recourse............................................... 387,466 198,522
Repayments:
Nonrecourse............................................ (81,632) (72,377)
Recourse............................................... (285,220) (170,183)
Issuance of common stock................................. 552 650
--------- ---------
Net cash provided by financing activities................ 67,673 60,619
--------- ---------
Net cash provided by financing activities................ 76,830 32,494
IMPACT OF EXCHANGE RATE
CHANGES ON CASH.......................................... (345) (150)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS..................... (753) 22,281
--------- ---------
CASH AND CASH EQUIVALENTS:
Beginning of period...................................... 16,569 6,888
--------- ---------
End of period............................................ $15,816 $29,169
========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission for
interim financial statements. Accordingly, the interim statements do not
include all of the information and disclosures required for annual
financial statements. In the opinion of the Company's management, all
adjustments (consisting solely of adjustments of a normal recurring nature)
necessary for a fair presentation of these interim results have been
included. Intercompany accounts and transactions have been eliminated.
These financial statements and related notes should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
The balance sheet at December 31, 1997 has been derived from the audited
financial statements included in the Annual Report on Form 10-K. The
results for the interim three and six month periods ended June 30, 1998 are
not necessarily indicative of the results to be expected for the entire
year.
2. CASH AND CASH EQUIVALENTS
Cash equivalents are comprised of highly liquid debt instruments with
maturities of three months or less. At June 30, 1998 and December 31,
1997, $5,342,000 and $3,964,000, respectively, of such amount was
restricted solely for repayment of the debt securities of Leasing Solutions
Receivables II, Inc. and Leasing Solutions Receivables III, Inc., the
Company's wholly-owned subsidiaries, issued in private placements in 1997,
and as collateral therefor, and was not available to other creditors or for
other uses.
3. INVESTMENT IN LEASES
--------------------
The components of the net investment in direct finance leases and
operating leases as of June 30, 1998, and December 31, 1997, are
below (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
<S> <C> <C>
Direct finance leases:
Minimum lease payments receivable.... $19,875 $22,857
Estimated unguaranteed residual value 3,306 4,345
Initial direct costs - net........... 51 33
Unearned lease income (2,869) (2,966)
--------- ---------
Investment in direct finance leases - $20,363 $24,269
========= =========
Operating leases:
Equipment under operating leases.....$894,448 $783,784
Initial direct costs - net........... 7,985 7,540
Accumulated depreciation.............(324,549) (264,071)
Allowance for doubtful accounts...... (258) (228)
--------- ---------
Investment in operating leases - net..$577,626 $527,025
========= =========
</TABLE>
4. ACQUISITION
In April 1997, the Company acquired substantially all of the assets,
including lease portfolio and related equipment, of Scott Capital, a
Canadian company engaged primarily in leasing personal computers. The net
purchase price was $8,898,000 in cash. In connection with the transaction,
the Company acquired tangible assets (primarily leases) with a total value
of $34,836,000, assumed recourse and nonrecourse debt of $28,258,000, and
recorded goodwill of $2,320,000. The transaction was accounted for as a
purchase. In addition, the Company assumed the office leases of the seller
and hired its 19 employees. The results of the Canadian operation have been
included in the Company's operations from April 1997, the month of
acquisition.
5. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). SFAS 128 requires a dual presentation of basic and diluted EPS.
Basic EPS excludes dilution and is computed by dividing net income
available to common shareholders by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. The Company adopted SFAS
128 in the fourth quarter of fiscal 1997, and earnings per share (EPS) data
for the quarter and six month periods ended June 30, 1997 have been
restated to conform with SFAS 128. The following table sets forth the
computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ende Six Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerator - net income available
to common shareholders............... $4,168 $2,993 $7,793 $5,518
Effect of dilutive securities
- convertible debt (net of tax)...... 828 -- 1,657 --
--------- --------- --------- ---------
$4,996 $2,993 $9,450 $5,518
========= ========= ========= =========
Denominator for basic net income per share -
weighted average shares outstanding.. 8,217 8,195 8,207 8,192
Effect of dilutive securities:
employee stock options............... 401 132 405 192
convertible debt..................... 2,059 -- 2,059 --
--------- --------- --------- ---------
Denominator for diluted net income per
share - adjusted weighted average shares
outstanding and assumed conversion of
dilutive securities.................. 10,677 8,327 10,671 8,384
========= ========= ========= =========
Net income per share - basic $0.51 $0.37 $0.95 $0.67
========= ========= ========= =========
Net income per share - diluted $0.47 $0.36 $0.89 $0.66
========= ========= ========= =========
</TABLE>
In the first quarter of 1998, the Company adopted SFAS No. 130, Reporting
"Comprehensive Income" which requires an enterprise to report, by major
components and as a single total, the change in net assets during the
period from nonowner sources. For the three and six month periods ended
June 30, 1998, comprehensive income was $3,905,000 and $7,963,000,
respectively, compared to $3,056,000 and $5,368,000, respectively, for the
comparable periods in 1997. The difference between net income and
comprehensive income arises due to changes in accumulated translation
adjustment.
In June 1997, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas, and major
customers. SFAS 131 will be effective for the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
6. RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform to the
current period presentation.
7. SUBSEQUENT EVENT
In July 1998, the Company acquired substantially all of the stock of
Bayshore Leasing ("Bayshore"), a Canadian company specializing in the
origination, processing and administration of transactions with respect to
equipment with an original purchase price typically under $20,000 (Cdn.).
The purchase price was approximately $16,900,000, $14,000,000 of which was
paid in cash at closing with the proceeds of a borrowing from a money center
bank. The loan matures in October 2002, bears interest, at the election of
the Company, at the Bank's prime rate (8.5% at June 30, 1998), or LIBOR
(5.7% at June 30, 1998) plus 200 basis points, with interest payable
monthly, and requires principal payments of 16 equal quarterly instalments
beginning in January 1999. The balance of the purchase price was
represented by promissory notes of the Company due in June 1999. In
connection with the transaction, the Company acquired tangible assets
(primarily leases) with a total value of $67,350,000, assumed recourse and
nonrecourse debt of $63,437,000, and recorded goodwill of $13,214,000. The
transaction was accounted for as a purchase. In addition, the office leases
of the Bayshore remained in place and Bayshore retained its 51 employees.
The Bayshore Leasing acquisition is not included in the Company's operating
results for the second quarter or six months ended June 30, 1998.
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998.
Results of Operations
Total revenues increased $20,648,000, or 37%, to $76,545,000, and $40,676,000,
or 40%, to $143,502,000, for the three and six month periods ended June 30,
1998, respectively, compared with the corresponding prior year periods. The
increase in total revenues is primarily due to an increase in operating lease
revenues. Operating lease revenue increased $21,184,000, or 40%, to
$73,947,000, and $42,939,000, or 44%, to $140,318,000 for the three and six
months ended June 30, 1998, respectively, compared with $52,763,000 and
$97,379,000, respectively, for the same periods one year ago. The increase in
operating lease revenue in the second quarter of 1998 reflects a higher
average investment in operating leases, resulting from increases in operating
leases originated by the Company in the United States, Europe and Canada
compared to the same period in 1997. For the six month period ended June 30,
1998, the increase over the comparable period in 1997 is also attributable, in
part, to the acquisition of the assets, principally a lease portfolio, of a
Canadian leasing company in April 1997.
The increases in operating lease revenues were partially offset by decreases
in earned lease income related to direct finance leases for both the three and
six month periods ended June 30, 1998. Earned lease income decreased
$636,000, or 59%, to $451,000, and $459,000, or 32%, to 938,000 for the three
and six month periods ended June 30, 1998, respectively, compared with
$1,087,000 and $1,442,000, respectively, for the comparable periods in 1997.
The decreases in earned lease income are the result of decreases in
origination of direct finance leases.
The increase in operating lease income for the six months ended June 30, 1998
was also partially offset by a decrease in other income. Other income for the
first six months of 1998 decreased $1,804,000 or 45%, to $2,201,000 from
$4,005,000 for the first half of 1997. The decrease in other income for the
six month period was primarily the result of a decrease in gains on sales of
assets.
Depreciation expense for operating leases increased $13,343,000, or 35%, to
$51,660,000 and $27,035,000, or 38%, to $97,597,000 for the three and six
month periods ended June 30, 1998, respectively, compared with $38,317,000 and
$70,562,000, respectively, in the same periods one year ago. The increases
are primarily due to increases in the operating lease base, resulting from
increases in operating leases originated by the Company in the United States,
Canada and Europe over the past year or acquired as part of the Canadian
acquisition described above.
Selling, general and administrative expenses increased $1,548,000, or 34%, to
$6,153,000 and $3,156,000, or 38%, to $11,573,000 for the three and six month
periods ended June 30, 1998, respectively, compared with $4,605,000 and
$8,417,000, respectively, for the comparable periods in 1997. The increase is
primarily attributable to increased compensation and benefit costs associated
with an increase in the number of employees, as a result of the Canadian
acquisition described above, expansion of the Company's European operations as
well as continued growth in the United States. In addition, selling, general
and administrative expenses for the quarter ended June 30, 1998 included
increases in travel expenses and occupancy, fixed asset depreciation and
telecommunication costs when compared to the same period of 1997. Generally,
these increases are attributable to expansion of the Company's international
operations as well as the continued growth of the operating lease portfolio in
the United States.
Interest expense increased $2,632,000, or 35%, to $10,054,000 and $5,524,000,
or 41%, to $19,165,000 for the three and six month periods ended June 30,
1998, respectively, compared with $7,422,000 and $13,641,000, respectively,
for the corresponding periods in 1997. The increase is primarily due to
higher average recourse and nonrecourse debt outstanding, which resulted from
additional borrowings to fund the growth in the Company's lease portfolio
offset, in part, by a decrease in the Company's average borrowing rate.
Other expenses for the quarter ended June 30, 1998 increased $1,117,000, or
147%, to $1,511,000 from $394,000 for the same quarter in 1997. For the six
month period ended June 30, 1998, other expenses increased 1,042,000, or 283%,
to $1,751,000 from $709,000 for same period last year. The increase in other
expenses for both the quarter and six month period ended June 30, 1998 is
primarily due to a provision for inventory reserves in the second quarter of
1998.
The provision for income taxes was $2,998,000 and $5,623,000 for the three and
six month periods ended June 30, 1998, respectively, representing increases of
$832,000, or 38%, and $1,644,000, or 41%, respectively, over $2,166,000 and
$3,979,000, respectively, for the comparable periods in 1997. The increase is
attributable to a corresponding increase in pre-tax income in the second
quarter and six months ended June 30, 1998, compared to the same periods one
year earlier. The Company's effective tax rate was 42% for the three and six
month periods ended June 30, 1998 and 1997.
Net income increased $1,175,000, or 28%, to $4,169,000 and $2,275,000, or 41%,
to $7,793,000 for the three and six month periods ended June 30, 1998,
respectively, compared with $2,993,000 and $5,518,000, respectively, for the
corresponding periods one year earlier. The increase in net income was
principally a result of the increase in the components of total revenues,
reduced by the increases in the components of total costs, specifically
described above. Diluted earnings per share increased 31% to $.47 for the
second quarter of 1998 from $.36 for the same period one year earlier. For
the six months ended June 30, 1998, earnings per share increased 35% to $.89
from $.66 for the comparable period in 1997.
Liquidity and Capital Resources
The Company generated cash flow from operations of $116,242,000 during the
first half of 1998, compared to net income of $7,793,000 for the same period.
Cash flow from operations was higher than net income primarily as a result of
non-cash expenses, such as depreciation and amortization, of $98,547,000, and
the combined net effect of other sources and uses of cash from operations,
including resulting changes in accounts receivable, accounts payable, deferred
income taxes, and other assets and liabilities, totaling $9,902,000.
Investing activities, which are primarily related to investments in equipment
for lease, used $184,323,000 during the period. Financing activities
generated $67,673,000 from $433,973,000 in new borrowings of recourse and
nonrecourse debt and $552,000 from the Company's issuance of common stock upon
exercise of options, reduced by $366,852,000 used to repay recourse and
nonrecourse borrowings. In addition, exchange rate changes had the impact of
reducing cash and cash equivalents during the period by $345,000. The net
result of the above activity for the quarter ended June 30, 1998 was a
decrease in cash and cash equivalents of $753,000.
The financing necessary to support the Company's leasing activities has
principally been provided from nonrecourse and recourse debt. Historically,
the Company has obtained recourse and nonrecourse borrowings from money center
banks, regional banks, insurance companies, finance companies and financial
intermediaries. The Company recently began issuing commercial paper, backed
by a letter of credit and liquidity line of credit, to fund a portion of its
borrowing requirements.
The Company's debt financing activities have historically provided
approximately 85% to 90% of the purchase price of the equipment purchased by
the Company for lease to its customers. The 10% to 15% balance of the purchase
price (the Company's "equity" investment in equipment) has generally been
financed by cash flow from the Company's operations, recourse debt, or common
stock or convertible debt sold by the Company. In connection with its
commercial paper financing, the Company has been able to borrow more than half
of its equity investment at favorable debt rates.
In October 1996, the Company closed a public debt offering for $71,875,000 of
convertible subordinated notes. The notes constitute general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future debt of the Company. The Company received net proceeds of
approximately $69,400,000 from the offering. The seven-year notes bear
interest at a rate of 6.875% per annum and are convertible into Common
Stock at a conversion price of $34.90. Interest is payable in April and
October of each year. Principal is payable upon maturity in October 2003.
The Company may call, or prepay, all or a portion of the notes beginning in
October 1999. This public debt public offering and prior public offerings of
the Company's Common Stock were made principally to raise "equity" for the
Company's purchase of equipment for lease to its customers.
Prior to the permanent financing of its leases, interim financing has been
obtained through short-term, secured, recourse facilities. The Company's
available credit under short-term, revolving recourse facilities in the United
States totaled $230,000,000 at June 30, 1998. A brief description of each of
those facilities follows.
(1) $175,000,000 revolving facility syndicated with eleven banks,
expiring October 1998. At June 30, 1998, $158,773,000, with a
weighted average interest rate of 7.4% per annum, was outstanding
under the facility. Borrowings bear an interest rate, at the
Company's option, of the agent bank's prime rate (8.5% at June 30,
1998) or LIBOR (5.7% at June 30, 1998) plus 120 basis points.
(2) $15,000,000 revolving facility (none outstanding at June 30, 1998)
with one bank, with borrowings available through June 1999, and
repayments due 240 days after borrowing. Borrowings bear interest
at LIBOR (5.7% at June 30, 1998) plus 150 basis points.
(3) $25,000,000 revolving facility ($18,500,000 outstanding at June 30,
1998) with one bank, expiring October 1998. Borrowings bear
interest at the bank's prime rate (8.5% at June 30, 1998) plus 95
basis points.
The Company also has a $15,000,000 revolving recourse facility ($9,182,000
outstanding at June 30, 1998), expiring October 1998, with one bank.
Borrowings bear interest at the bank's prime rate (8.5% at June 30, 1998). The
proceeds of borrowings under this line may be used only to fund certain
accounts payable to two of the Company's vendors resulting from the purchase
of equipment for lease to specified significant customers of the Company.
In November 1997, the Company's subsidiary in the United Kingdom entered into
a revolving recourse line of credit with availability of approximately
$50,000,000 (L30,000,000 British pounds) from a syndicate of three banks to
provide short-term financing for leasing activities in Europe. The Company
has guaranteed the subsidiary's obligations under the line. Borrowings under
the facility may be made in a number of European currencies and bear interest
at LIBOR ( . % at June 30, 1998) plus 145 basis points. There was
approximately $37,794,000 outstanding under this facility at June 30, 1998.
The line expires in November 1998.
The Company's Canadian subsidiary maintains a three-tiered recourse credit
facility with a Canadian bank, with borrowing availability through August
1998, to provide short-term financing for leasing activities in Canada. The
Company has guaranteed the subsidiary's obligations under the line. The first
tier is an approximately $10,500,000 ($15,000,000 Canadian) revolving facility
with repayments due 180 days after each borrowing. Borrowing under this
facility bear interest, at the subsidiary's election, at the Canadian prime
rate (6.5% at June 30, 1998) plus 25 basis points or Canadian dollar LIBOR (
5.05% at June 30, 1998) plus 135 basis points. There was $10,195,000
outstanding under this facility with a weighted average interest rate of 6.53%
at June 30, 1998.
The second tier is an approximately $4,200,000 ($6,000,000 Canadian) revolving
facility with repayments due 90 days after each borrowing. Borrowing under
this facility bear interest, at the subsidiary's election, at the Canadian
prime rate ( 6.5% at June 30, 1998) plus 25 basis points or Canadian dollar
LIBOR ( 5.05% at June 30, 1998) plus 135 basis points. There was $739,000
outstanding under this facility with a weighted average interest rate of 6.75%
at June 30, 1998.
The third tier is an approximately $2,100,000 ($3,000,000 Canadian) revolving
facility with repayments due 364 days after each borrowing. Borrowing under
this facility bear interest at the Canadian prime rate (6.5% at June 30, 1998)
plus 150 basis points. There were no borrowings outstanding under this
facility at June 30, 1998.
The Company maintains a $100,000,000, nonrecourse revolving facility with an
affiliate of a money center bank. This revolving facility expires in March
1999, and borrowings under the facility bear interest at a rate of 125 to 200
basis points over average life treasuries at the time of borrowing. Through
June 30, 1998, the Company has refinanced approximately $98,476,000 of
borrowings under its other short-term facilities through this facility. At
June 30, 1998, $24,239,000 was outstanding under this facility at a weighted
average interest rate of 7.3%.
In January 1997, the Company's, through one of its wholly-owned subsidiaries
in the United States, obtained long-term financing for the Company's leasing
activities through a $50,000,000 commercial paper-backed conduit, nonrecourse
line of credit provided by an affiliate of a money center bank. This is a
revolving facility expiring in March 1999. Through June 30, 1998, the Company
has financed approximately $103,693,000 of borrowings under this facility. At
June 30, 1998, the Company had $41,513,000 outstanding under this facility, at
a weighted average interest rate of 7.2%.
The Company's Canadian subsidiary maintains a revolving recourse line of
credit of $10,500,000 ($15,000,000 Canadian) with a Canadian financial
institution, with borrowing available through February 1999, to provide long-
term financing for its leasing activities. The Company has guaranteed the
subsidiary's obligations under the line. Borrowing under this facility bear
interest, at the subsidiary's election, at Canadian prime rate (6.5% at June
30, 1998) plus 25 basis points or Canadian dollar LIBOR ( 5.05% at June 30,
1998) plus 135 basis points. There were no borrowings outstanding under this
facility at June 30, 1998.
In June 1998, the Company completed its first commercial paper offering. The
commercial paper is supported by a letter of credit issued by a money center
bank. The letter of credit is backed by a $60,000,000 liquidity line of
credit, with four banks, which expires in June 1999. The commercial paper is
rated A-1 by Standard & Poors and P-1 by Moody's Investors Service. The
Company may borrow the net present value of the periodic rental payments of
the leases financed with the proceeds of the commercial paper, plus up to 7%
of the Company's equity in the related equipment, the sum of which may not
exceed 95% of the original cost of the equipment. At June 30, 1998, an
aggregate of $25,390,000, with a weighted average interest rate of 5.6%, was
outstanding under the issued commercial paper. The Company expects to roll
over the outstanding commercial paper as it becomes due (generally from 30 to
90 days after issuance) at market rates for such debt.
In June 1998, the Company obtained a $25,000,000, 90-day revolving, recourse
line of credit from a financial affiliate of a major investment bank.
Borrowings under the line bear interest at the rate of one month LIBOR (5.7%
at June 30, 1998), plus 1.25%, per annum. The Company's obligations under the
line are secured by its interest in the residuals from a portfolio of leased
equipment. The line was put into place to provide interim financing prior to
the completion of a planned global securitization offering by the Company, to
be managed by the investment bank, currently anticipated to close in the third
quarter. Although no assurances can be given, if the securitization is not
completed prior to the expiration of the line of credit, the Company expects
to be able to extend the line of credit for up to an additional 90 days.
In June 1997, the Company, through one of its wholly-owned subsidiaries in the
United States, financed a portion of its residual interest in a lease
portfolio, pursuant to an arrangement accounted for as a sale, through an
affiliate of a major life insurance company. The transaction generated gross
proceeds of $8,500,000, a portion of which was used to repay certain
subordinated debt of the Company owed to the same financing source. In June
1998, the Company financed its residual interest in a lease portfolio,
pursuant to an arrangement accounted for as a sale, through a leasing
affiliate of a money center bank. The transaction generated gross proceeds of
$18,270,000, a portion of which was used to repay certain debt of the Company
owed to the same financing source.
Occasionally, the Company will obtain long-term financing for individual
significant lease transactions at the time, or shortly after, it purchases the
related equipment. An aggregate of $112,144,000 ($13,666,000 of which is
recourse), with a weighted average interest rate of 7.4% per annum, remained
outstanding under all such arrangements as of June 30, 1998.
Historically, debt financing for all or a portion of the Company's "equity"
investment in equipment purchased for lease to others has not been readily
available in the marketplace and, when available, often required an interest
rate materially higher than is required by the Company's conventional debt
financing. As described above, the Company's recently closed commercial paper
facility will allow it to borrow in excess of one-half of the equity with
respect to equipment subject to leases financed under the facility at
commercial paper rates. Although the Company expects that the credit quality
of its lessees and its residual return history will continue to allow it to
obtain such financing, no assurances can be given that such financing will
continue to be available, at favorable terms or at all.
The agreements for most of the facilities described above contain covenants
regarding leverage, interest coverage, minimum net worth and profitability and
a limitation on the payment of dividends.
Borrowings under the above-described facilities or transactions are generally
secured by the lease receivables financed under such arrangements and the
related equipment. Payments under the Company's borrowings and the maturities
of its long-term borrowings, other than with respect to its equity investment,
are typically structured to match the payments due under the leases securing
the borrowings.
The Company's current lines of credit, if renewed or replaced and expanded,
its expected access to the public and private securities markets, both debt
and equity, anticipated new lines of credit (both short-term and long-term and
recourse and nonrecourse), anticipated long-term financing of individual
significant lease transactions, and its estimated cash flow from operations
are expected to provide adequate capital to fund the Company's operations,
including acquisitions and financings under its vendor programs, for the next
twelve months. Although no assurances can be given, the Company expects to be
able to renew or timely replace, and expand, its existing and recently expired
lines of credit, to continue to have access to the public and private
securities markets, both debt and equity, and to be able to enter into new
lines of credit and individual financing transactions. However, no assurances
can be given as to the rates that the Company may be required to pay under any
of such financing arrangements.
Potential Fluctuations in Quarterly Operating Results
The Company's future quarterly operating results and the market price of its
stock may fluctuate. In the event the Company's revenues or earnings for any
quarter are less than the level expected by securities analysts or the market
in general, such shortfall could have an immediate and significant adverse
impact on the market price of the Company's stock. Any such adverse impact
could be greater if any such shortfall occurs near the time of any material
decrease in any widely followed stock index or in the market price of the
stock of one or more public equipment leasing companies or major customers or
vendors of the Company.
The Company's quarterly results of operations are susceptible to fluctuations
for a number of reasons, including, without limitation, as a result of sales
by the Company of equipment it leases to its customers. Such sales of
equipment, which are an ordinary but not predictable part of the Company's
business, will have the effect of increasing revenues, and, to the extent
sales proceeds exceed net book value, net income, during the quarter in which
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
the sale occurs. Furthermore, any such sale may result in the reduction of
revenue, and net income, otherwise expected in subsequent quarters, as the
Company will not receive lease revenue from the sold equipment in those
quarters.
Given the possibility of such fluctuations, the Company believes that
comparisons of the results of its operations to immediately preceding quarters
are not necessarily meaningful and that such results for one quarter should
not be relied upon as an indication of future performance.
Factors That May Affect Future Operating Results
Potential Reduction in Residual Values of Leased Equipment. The Company
has historically emphasized operating leases with a term of 24 to 36 months,
rather than direct finance leases. In general, under the Company's operating
leases, the present value of the monthly lease payments will pay back 85% to
90% of the purchase price of the equipment, whereas the present value of the
monthly lease payments under its direct finance leases will generally pay back
the Company's entire investment in the equipment. As a result, under its
operating leases, the Company assumes the risk of not recovering its entire
investment in the equipment through the remarketing process.
At the inception of each operating lease, the Company estimates a residual
value for the leased equipment based on guidelines established by the
Company's Investment Committee. However, as is typical of information
processing and communications equipment, the equipment owned and leased by the
Company is subject to rapid technological obsolescence. Furthermore,
decreases in manufacturers' prices of equipment, such as those experienced
recently with respect to desktop and laptop computers, may adversely affect
the market value of such equipment, and thus its residual value. While the
Company's experience generally has resulted in aggregate realized residual
values for equipment in excess of the initial estimated residual values for
such equipment, a decrease in the market value of such equipment at a rate
greater than expected by the Company, whether due to rapid technological
obsolescence, price decreases or other factors, would adversely affect the
residual values of such equipment. In addition, over the last five years, the
Company has entered into several new vendor programs and arrangements that
have produced substantial lease volume. The Company estimates that during
this period, desktop and laptop computers represented approximately 85% of its
Dollar Volume. The initial lease terms of the leases to which most of such
equipment is subject have not yet expired and, as a result, the Company does
not yet have substantial remarketing experience and accumulated historical
data with respect to such equipment. Additionally, the desktop and laptop
computer equipment purchased as a result of such new programs and arrangements
is a different type of information processing and communications equipment
than equipment for which the Company has significant remarketing experience
and accumulated historical data. Therefore, the company's historical
experience in estimating residual values may not be applicable to such desktop
and laptop computers, and the Company's historical remarketing experience is
not necessarily indicative of future performance.
The Company obtains the maximum residual value on its equipment by remarketing
it "in-place" to its end-user customer, whether by extension of the lease
term, month-to-month extensions or sale. To date, the Company has been
relatively successful in its ability to remarket equipment in-place. However,
the recent decreases in prices for desktop and laptop computers may have the
effect of creating an incentive for an end-user to replace the Company's
equipment, rather than to extend an existing lease, even if the end user is
offered a substantially lower rental rate. In the event desktop or laptop
computers are returned to the Company at the end of the lease term, the
Company's potential residual recovery from such equipment will be
substantially reduced. No assurances can be given that a substantial amount
of the equipment leased by the Company will be remarketed in-place.
Accordingly, there can be no assurances that the Company's estimated residual
values for equipment will be achieved. If the Company's estimated residual
values with respect to any type of equipment are reduced or not realized in
the future, the Company may not recover its investment in such equipment and,
as a result, its operating results, cash flows and financial condition could
be materially adversely affected.
Dependence on Availability of Financing. The operating lease business on
which the Company focuses is a capital intensive business. The typical
operating lease transaction requires a cash investment by the Company of 10%
to 15% of the original equipment cost, commonly known in the equipment leasing
industry as an "equity" investment. The Company's equity investment typically
has been financed with either recourse borrowings, the net proceeds of the
sale of debt or equity securities or internally generated funds. The balance
of the equipment cost typically has been financed with the proceeds of long-
term, nonrecourse debt. In addition, the Company typically finances the
acquisition of equipment for lease through short-term, "warehouse" lines of
credit prior to obtaining long-term, permanent financing for the equipment.
Accordingly, the Company's ability to successfully execute its business
strategy and to sustain its growth is dependent, in part, on its ability to
obtain recourse and nonrecourse debt capital, both short-term and long-term,
and to raise additional debt or equity capital to meet its equity investment
requirements in the future. Although, to date, the Company has been able to
obtain the recourse and nonrecourse borrowing, and raise the other capital, it
requires to finance its business, no assurances can be given that the
necessary amount of such capital will continue to be available to the Company
on favorable terms or at all. In particular, any material failure of the
Company to achieve its residual value estimates through the remarketing of
equipment would adversely affect its ability to finance its equity investment.
If the Company were unable to obtain any portion of its required financing on
favorable terms, the Company would be required to reduce its leasing activity,
which would have a material adverse effect on the Company's results of
operations and financial condition. See "MD&A Liquidity and Capital
Resources."
Interest Rate Risk. The Company's equipment leases are structured on a
fixed periodic (i.e., monthly or quarterly) rental basis. Prior to obtaining
long-term financing for its leases and the related equipment, the Company
typically finances the purchase of those assets through short-term,
"warehouse" lines of credit which bear interest at variable rates. The
Company is exposed to interest rate risk on leases financed through its
warehouse facilities to the extent interest rates increase between the time
the leases are initially financed and the time they are permanently financed.
Increases in interest rates during this period could narrow or eliminate the
spread, or result in a negative spread, between the effective interest rate
the Company realizes under its leases and the interest rate that the Company
pays under its warehouse facilities or, more importantly, under the borrowings
used to provide long-term financing for such leases. To provide the
opportunity, as necessary, to protect the Company against this risk, the
Company's Board of Directors has approved a hedging strategy and, as
appropriate, the Company will hedge against such interest rate risk. To date,
the Company has not engaged in any such hedges. There can be no assurance,
however, that the Company's hedging strategy or techniques will be effective;
that the profitability of the Company will not be adversely affected during
any period of changes in interest rates or that the costs of hedging will not
exceed the benefits. See "MD&A Liquidity and Capital Resources."
Dependence on Major Customers. The Company has two customers, Ernst &
Young and Xerox, which accounted for 19% and 11%, respectively, of 1997
revenues. In addition, Ernst & Young and Northern Telecom represented 19% and
15%, respectively, of the Company's Dollar Volume in 1997 and 20% and 9%,
respectively, of the Company's net book value at December 31, 1997. The
Company's outstanding lease agreements with Ernst & Young and Northern Telecom
expire over the next three years. Most of the leases, by Dollar volume of
related equipment, with Xerox expired by June 30, 1998 or will expire in the
near future. In the event that Ernst & Young or Northern Telecom, or any of
the Company"s other major customers, ceases to lease additional equipment or
materially reduces the amount of equipment it leases from the Company in the
future, or determines to return to the Company a material amount of the
equipment it has leased at the expiration of the term of the respective lease,
the Company"s operating results and financial condition could be materially
adversely affected.
Management of Growth. In the past five years, the Company has financed a
significantly greater number of leases than it had in the prior seven years of
its existence. As a result of this rapid growth, the Company's investment in
leases grew from $125 million at December 31, 1994 to $598 million at June 30,
1998. In light of this growth, the historical performance of the Company's
lease portfolio may be of limited relevance in predicting future lease
portfolio performance. Any credit or other problems associated with the large
number of leases financed in recent years will not become apparent until
sometime in the future.
In order to support the anticipated growth of its business, the Company
has added a substantial number of new personnel since the beginning of 1995
and expects to add a substantial number of additional personnel during the
remainder of 1998. In the process of implementing its expansion goals (see
"Global Expansion" and "Small Ticket Operations", below), the Company has
acquired three separate leasing operations, with an aggregate of approximately
90 employees, and their own software systems. The Company is absorbing, and
will continue to absorb in the future, the effects of additional personnel
costs and the implementation and integration of new software systems necessary
to manage such growth. The Company's future operating results will depend on
its ability to attract, hire and retain skilled employees and on the ability
of its officers and key employees to continue to implement and improve its
operational and financial control systems and to train and manage its
employees. The Company's inability to manage growth effectively, should it
occur, or to attract and retain the personnel it requires, could have a
material adverse effect on the Company's results of operations.
Global Expansion. In April 1996, the Company expanded its lease financing
activities to Western Europe by acquiring a small independent leasing company
in the United Kingdom. It now has sales offices, and leasing activities, in
Germany, France, Belgium and the Netherlands, and the ability to finance
leases for equipment in Italy Spain and Finland. In April 1997, the Company
acquired the lease portfolio and operations of a Canadian leasing company,
with lease operations similar to the Company's operations, and now conducts
business throughout Canada. In July 1998, the Company acquired a Canadian
company, with operations thoughout Canada, in the so-called "small-ticket"
leasing business (see "Small Ticket Operations").
International activities pose certain risks not faced by leasing companies
that limit themselves to United States lease financing activities.
Fluctuations in the value of foreign currencies relative to the U.S. dollar,
for example, could adversely impact the Company's results of operations.
International activities also could be adversely affected by factors beyond
the Company control, including the imposition of or changes in government
controls, export license requirements, or tariffs, duties or taxes and changes
in economic and political conditions. In addition, cross-border leasing
transactions within Western Europe raise the risk that VAT or other taxes that
are not reimbursable by the lessee may be imposed on the transaction.
Competition. The information processing and communications equipment
leasing business is characterized by significant competition. The Company
competes with leasing companies, both captive and independent, commercial
banks and other financial institutions with respect to opportunities to
provide lease financing to end-user customers and to provide vendor programs
to manufacturers and distributors of such equipment. A substantial number of
the Company's competitors are significantly larger, and have substantially
greater resources, than the Company. The Company's relatively limited amount
of capital places it at a disadvantage in relation to its larger competitors,
particularly in connection with financing lease transactions involving large
dollar volumes of equipment where the cost of the equipment substantially
exceeds the amount of debt available for such financings. See "Business
Competition" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
Year 2000. As the year 2000 approaches, a critical issue has emerged for
all companies, including the Company, with respect to whether application
software programs and operating systems utilized by a company and the
companies with which it does business can accommodate this date value. In
brief, many software products in the marketplace only accommodate a two-digit
date position which represents the year (e.g., "95" is stored on the system
and represents the year 1995). As a result, the year 1999 (i.e., "99") could
be the maximum date value these products would be able to process accurately.
The Company has, for several months, been engaged in a review of the
software and systems it uses in an effort to determine whether it or its
operations may be materially adversely affected by this so-called "Year 2000"
conversion. In that review, the Company has identified certain software
applications as being "critical applications" used in daily operations. Such
applications include lease management, accounting and financial reporting
systems, as well as spreadsheet programs. The Company has inquired of, and
generally obtained the assurances of, the providers of such software with
respect to it being Year 2000 compliant. Based on its review, the Company
does not presently believe that Year 2000 compliance issues with respect to
its software and systems will materially adversely affect the Company or its
operations. However, no assurances can be given that such review uncovered
every potential adverse effect of the Year 2000 conversion in connection with
any of such software or systems.
The Company has recently commenced a review of whether the software and
systems of the vendors, financing sources, customers, equipment manufacturers
or distributors or other parties with which it deals may, as a result of the
Year 2000 conversion, have a material adverse effect on the Company or its
operations. It is too early for the Company to be able to predict whether
such software or systems of such parties may have such effect. As part of
this review, the Company will attempt to obtain assurances from each of such
parties, whose dealings with the Company are material to the Company or its
operations, that such party does not and will not utilize software or systems
that may interface with the Company, or are or will be important to the
operations of such party, that may cause problems to such party or the Company
as a result of the Year 2000 conversion. However, no assurances can be given
that the Company will be able to obtain such assurances from each of such
parties or that it will be able to obtain the information from such parties
necessary for the Company to determine whether it may be materially adversely
affected by the software or systems of such parties.
The Company will maintain an ongoing effort to recognize and evaluate
potential exposures relating to the Year 2000 conversion arising from its use
of software supplied by other parties or its dealings with other parties. At
present, the Company cannot adequately estimate the total cost to it of
recognizing, evaluating and addressing any such exposures.
Small Ticket Operations
In July 1998, the Company acquired a Canadian company engaged in so-called
"small ticket" lease financing. The acquired company specializes in high
volume origination, processing and administration of lease transactions,
typically involving under $20,000 of equipment, to small businesses. Although
no assurances can be given, the Company hopes to expand the existing "small
ticket" operations in Canada and ultimately provide a "small ticket" leasing
capability to its U.S. customers. The acquired Canadian company has been
profitable and has an experienced management team, each of which has agreed to
remain with the business for at least a year. However, the Company's
management team has had limited experience in managing a high volume, people
intensive small ticket operation with its relatively lower credit profile
lessees. In addition, there can be no assurances that the Company will be able
to expand those operations in Canada or begin providing small ticket financing
capabilities in the U.S. without exacerbating the potential problems it faces
in managing the growth of its overall business, including its historic lease
financing activities, and increasing the resultant risks (see "Management of
Growth", above). If the operations of the acquired company or the anticipated
expansion of the Company's small-ticket activities are not well managed, the
Company could suffer losses from its small-ticket operations, which could have
a material adverse affect on the results of operations and financial condition
of the Company.
Recent Accounting Pronouncements
In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from nonowner sources. For the three and six month periods ended June 30,
1998, comprehensive income was $3,905,000 and $7,963,000, respectively,
compared to $3,056,000 and $5,368,000, respectively, for the comparable
periods in 1997. The difference between net income and comprehensive income
primarily arises due to changes in accumulated translation adjustment.
In June 1997, the Financial Accounting Standards Board adopted Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas, and major
customers. SFAS 131 will be effective for the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
This report includes certain statements that may be deemed to be "forward-
looking statements." All statements, other than statements of historical
facts, included in this report that address activities, events or developments
that the Company expects, believes or anticipates will or may occur in the
future, including, without limitation, with respect to demand and competition
for the Company's lease financing services and the products to be leased by
the Company, the continued availability to the Company of adequate financing
to support its global expansion and activities, risks and uncertainties of
doing business in Europe and Canada and other foreign countries, the ability
of the Company to recover its investment in equipment through remarketing, the
ability of the Company to enter into new strategic relationships and extend
existing strategic relationships, the performance of the Company's strategic
partners, and the ability of the Company to manage its growth, particularly
relating to its global expansion and expansion into small-ticket leasing, are
forward-looking statements. These statements are based on certain assumptions
and, in certain cases, analyses made by the Company in light of its experience
and its perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of assumptions, risks
or uncertainties, including the risk factors described above under "Factors
That May Affect Future Operating Results", general economic and business
conditions, the business opportunities (or lack thereof) that may be presented
to and pursued by the Company, changes in laws or regulations and other
factors, many of which are beyond the control of the Company. Prospective
investors and existing shareholders are cautioned that any such statements are
not guarantees of future performance and that actual results or developments
may differ materially from those projected in forward-looking statements.
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Under Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(A) The Company's Annual Meeting of Shareholders was held on May 21, 1998.
(B) See (c) 1 below
The Company has no other Directors
(C) At the 1998 Annual Meeting, the shareholders took the following actions:
1. Elected five directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified;
and
In the election of directors, no candidates were nominated for
election as a director other than the nominees of the Board of
Directors whose names were set forth in the Company's proxy
statement dated April 9, 1998. Set forth below is a tabulation of
the votes cast in the election of Directors with respect to each
nominee for office.
Votes Cast Votes
Name of Nominee For Election Withheld
---------------------- ----------- ----------
Hal J Krauter 7,371,718 424,682
Louis R. Adimare 7,371,718 424,682
George L. Bragg 7,371,718 424,682
James C. Castle 7,371,718 424,682
Peter K. Nevitt 7,370,118 426,282
2. Approved an amendment to the 1995 Stock Option and Incentive Plan,
increasing the total number of shares of Common Stock reserved for
issuance therunder by 600,000 shares, based on the following vote:
Votes
For Against Abstentions Withheld
----------- ---------- ----------- ----------
5,044,510 1,292,016 24,828 1,435,829
3. Approved an increase in the number of authorized shares of Common
Stock from 20,000,000 to 60,000,000, based on the following vote:
Votes
For Against Abstentions Withheld
----------- ---------- ----------- ----------
5,688,112 2,083,553 24,735 0
4. Approved a change in the state of incorporation of the Company from
California to Delaware, based on the following vote:
Votes
For Against Abstentions Withheld
----------- ---------- ----------- ----------
4,400,690 1,935,053 24,828 1,435,829
(D) Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit
No. Document
- --------- -------------------------------------------------------------------
3.11 Certificate of Amendment of Articles of Incorporation
27 Financial Data Schedule
LEASING SOLUTIONS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
LEASING SOLUTIONS, INC.
By: /s/ Hal J Krauter
Hal J Krauter
President and Chief Executive Officer
By: /s/ Steven L. Yeffa
Steven L. Yeffa
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
DATE: August 14, 1998
Exhibit 3.11
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF LEASING SOLUTIONS, INC.
The undersigned do hereby certify as follows:
1. They are the President and Secretary, respectively, of
Leasing Solutions, Inc., a California corporation (the "Corporation").
2. Subparagraph (a) of Article Four of the Articles of
Incorporation of the Corporation is amended to read as follows:
"Four: (a) The Corporation is authorized to issue two
classes of shares to be designated, respectively, as "Common
Stock" and "Preferred Stock". The total number of
authorized shares of stock which the Corporation may issue
is 65,000,000, of which 60,000,000 shares shall be shares of
Common Stock and 5,000,000 shall be shares of Preferred
Stock."
3. The foregoing amendment of Articles of Incorporation has
been duly approved by the Board of Directors of the Corporation.
4. The foregoing amendment of Articles of Incorporation has
been duly approved by the required vote of shareholders of the
Corporation in accordance with Section 902 of the California
Corporations Code. The total number of outstanding shares of the
Corporation is 8,202,101 shares of Common Stock. The number of shares
voting in favor of the amendment equaled or exceeded the vote required.
The percentage vote required was more than 50%. No preferred shares
outstanding.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are
true and correct of our own knowledge.
DATED: May 26, 1998
Hal J Krauter, President
Glenda B. Allen, Secretary
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<FISCAL-YEAR-END> DEC-31-1998
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