<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1994
Commission File No. 0-18071
----------------
INDUSTRIAL FUNDING CORP.
(Exact name of registrant as specified in its charter)
OREGON 93-1013278
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2121 S.W. BROADWAY
SUITE 100
PORTLAND, OREGON 97201
(Address of principal executive offices, including zip code)
(503)228-2111
(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 No
--- ---
----------------
Outstanding at
Class October 12, 1994
----- ----------------
Class A, Without Par Value 1,875,000 shares
Class B, Without Par Value 5,625,000 shares
(The number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date)
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<PAGE>
INDUSTRIAL FUNDING CORP.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Net Assets 3
Consolidated Statements of Income and Changes
in Net Assets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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INDUSTRIAL FUNDING CORP. UNAUDITED
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Consolidated Statement of Net Assets (liquidation basis) as of August 31,
1994 and Consolidated Balance Sheets (going concern basis) as of August
31, and November 30, 1993
<TABLE>
<CAPTION>
August 31, August 31, November 30,
--------------------------------------
(DOLLARS IN THOUSANDS) 1994 1993 1993
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<S> <C> <C> <C>
ASSETS:
Cash and temporary investments $5,380 $3,259 $6,586
Restricted cash 1,165 - 800
Short-term investments 23,577 18,108 18,260
Notes receivable 12,695 19,043 15,869
Nonperforming assets - 4,360 3,025
Other assets 685 486 55
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TOTAL $43,502 $45,256 $44,595
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LIABILITIES:
Accounts payable and accrued liabilities $912 $711 $619
Reserve for litigation settlement 5,000 - -
Reserve for estimated costs during the period of liquidation 1,627 - -
-------------------------------------
Total liabilities 7,539 711 619
COMMITMENTS AND CONTINGENCIES (Note 3)
REDEEMABLE PREFERRED STOCK
Series A Cumulative Preferred Stock (without par value,
134,310 shares issued and outstanding - at redemption
and liquidation value of $100 per share) 20,036 18,126 18,604
-------------------------------------
Total Liabiliites and Redeemable Preferred Stock 27,575 18,837 19,223
SHAREHOLDERS' EQUITY:
Preferred stock (10,000,000 shares authorized, 134,310
redeemable preferred shares outstanding) - - -
Common stock:
Class A (20,000,000 no par value shares authorized,
1,875,000 outstanding) - 20,381 20,381
Class B (10,000,000 no par value shares authorized,
5,625,000 outstanding) - 27,831 27,831
Accumulated deficit - (21,793) (22,840)
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Total shareholders' equity - 26,419 25,372
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TOTAL 27,575 $45,256 $44,595
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NET ASSETS IN LIQUIDATION $15,927 - -
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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INDUSTRIAL FUNDING CORP. UNAUDITED
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Consolidated Statements of Income and Changes in Net Assets
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
August 31, August 31, August 31, August 31,
--------------------------- ---------------------------
(Dollars In Thousands Except Per Share Data) 1994 1993 1994 1993
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LIQUIDATION GOING CONCERN LIQUIDATION GOING CONCERN
BASIS BASIS BASIS BASIS
<S> <C> <C> <C> <C>
REVENUE:
Net lease revenue - - - $7,374
Gain on sale of equipment - - - 1,103
Gain on nonperforming portfolio $818 - $818 -
Interest and dividend income 578 - 1,524 -
Gain (loss) on sale of investments 28 - (311) -
Unrealized loss on market value (1) - (79) -
Other revenue 11 $484 39 1,361
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Total revenue 1,434 484 1,991 9,838
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EXPENSES:
Net selling, general and administrative - 1,081 1,820 5,244
Provision for credit loss - - - 55
Interest expense - - - 3,821
Loss on sale of assets - 636 - 1,328
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Total expenses 0 1,717 1,820 10,448
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INCOME (LOSS) FROM OPERATIONS 1,434 (1,233) 171 (610)
LITIGATION SETTLEMENT (5,000) - (5,000) -
ADJUSTMENT FOR LIQUIDATION BASIS 978 - (3,182) -
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LOSS BEFORE INCOME TAX BENEFIT (2,588) (1,233) (8,011) (610)
INCOME TAX BENEFIT - (202) - (2,478)
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NET INCOME (LOSS) ($2,588) ($1,031) ($8,011) $1,868
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NET INCOME (LOSS) PER SHARE (Exhibit 11.1) ($0.41) ($0.20) ($1.26) $0.06
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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INDUSTRIAL FUNDING CORP. UNAUDITED
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Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
For the Nine Months Ended
August 31,
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(DOLLARS IN THOUSANDS) 1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTVITIES:
Net income (loss) ($8,011) $1,868
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization - 1,807
Provision for credit loss - 55
Gain on sale of equipment - (1,103)
Gain on nonperforming portfolio (818) -
Adjustment to liquidation basis 1,627 -
Provision for litigation settlement 5,000
Increase in restricted cash (365) -
Increase in other assets (630) (255)
Recovery of unrealized loss on short-term investments 79 -
Loss on sale of short-term investments 311 -
(Inrease) Decrease in accounts payable and other liabilities 293 (2,567)
Decrease in deferred income taxes - (2,057)
Loss on sale of assets - 1,328
Other (50) (15)
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Total adjustments 5,447 (2,807)
-------------------------
Net cash used in operating activities (2,564) (939)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on lease receivables - 27,697
Payments received on sale of equipment - 9,904
Payments received on nonperforming assets 3,891 -
Increase in short-term investments (32,789) (18,108)
Payments received on sale of short-term investments 27,082 -
Principal payment received on note receivable 3,174 -
Cash received on sale of assets (Net of $12,829 cash sold) - 7,356
Purchase of equipment to be financed - (2,773)
Initial direct costs - deferred - (130)
Purchase of property and equipment - (81)
-------------------------
Net cash provided by investing activities 1,358 23,865
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt - (44,311)
Decrease in restricted cash - 23,478
-------------------------
Net cash used in financing activities 0 (20,833)
-------------------------
INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS (1,206) 2,093
CASH AND TEMP. INVESTMENTS AT BEGINNING OF PERIOD 6,586 1,166
-------------------------
CASH AND TEMP. INVESTMENTS AT END OF PERIOD $5,380 $3,259
-------------------------
-------------------------
SUPPLEMENTAL DISCLOSURES:
Interest paid - $3,890
Income taxes refunded - (650)
Non-cash - preferred stock dividends accreted $1,432 1,432
Non-cash - note receivable from sale of assets - 19,043
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Industrial Funding Corp. (the "Company"), a majority owned subsidiary
of IFC Holdings Inc. ("IFC Holdings"), was incorporated in October of
1989, as a holding company formed for the purpose of owning Industrial
Leasing Corporation ("Industrial Leasing"). During 1992, First City Realty
Investment Corp. ("FCRIC"), the Company's previous majority shareholder,
transferred all of its interest in the Company to IFC Holdings. The
accompanying consolidated financial statements include all of the accounts
of the Company and its wholly-owned subsidiary. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Until May of 1993, the business of the Company was providing capital
equipment lease financing to small businesses. At that time, the Company
completed a sale of substantially all of the assets of Industrial Leasing
(the "Asset Sale"), to ILC Acquisition Corp., a wholly owned subsidiary of
Parrish Equipment Partners L.P. ("Parrish"), in a transaction approved by
shareholders of the Company on May 17, 1993.
Subsequent to the Asset Sale, Company activities include the
collection and disposition of remaining assets, the investment of liquid
assets, and the management of legal proceedings against the Company.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). While
these statements reflect all necessary, normal and recurring adjustments,
including those required for liquidation basis accounting, which in the
opinion of management are required to present fairly, in all material
respects, the financial position, results of operation and cash flows of
the Company and its subsidiary at August 31, 1994, and for the three and
nine months then ended, they do not include all information and notes
required by generally accepted accounting principles for complete
financial statements. Further information is contained in the annual
financial statements of the Company and notes thereto, for the year ended
November 30, 1993, contained in the Company's Form 10-K, filed with the
SEC pursuant to the Securities Exchange Act of 1934. Operating results for
the three and nine month periods ended August 31, 1994, are not
necessarily indicative of the results that may be expected for the full
year. See Note 2 regarding a plan of liquidation.
NOTE 2. PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION
The Board of Directors of the Company approved a Plan of Dissolution
and Compete Liquidation (the "Plan of Liquidation"), on May 20, 1994, for
submission to the shareholders of the Company. A Special Meeting of
Shareholders was scheduled on
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August 18, 1994, for shareholder consideration of approval of the Plan of
Liquidation. However, on August 15, 1994, the Company reached a
preliminary agreement to settle the securities class action lawsuits
currently pending against the Company. See Note 3,-Contingencies. Due to
the material implications of the proposed settlement, the Special Meeting
was adjourned to enable the Company to revise the Proxy Statement, and
provide its shareholders with additional information concerning the terms
of the proposed settlement. No date has been established for the
continuation of the Special Meeting.
The Plan of Liquidation will be effective the date on which it is
approved by the shareholders. IFC Holdings Inc., an Ontario company and
record owner of 100% of the Company's Class B Common Stock, which
represents 75% of the ownership of the Company and 96.8% of the
outstanding Common Stock voting rights, has a sufficient number of votes
to approve the Plan of Liquidation, regardless of the vote of any other
shareholder. IFC Holdings has provided the Company with a proxy for those
shares, to be voted by management in favor of the proposed Plan of
Liquidation, and as a result, approval of the Plan of Liquidation is
assured.
As a result of the Board's approval of the Plan of Liquidation, the
Company's financial statements have been prepared on a liquidation basis
since May 31, 1994. Accordingly, assets are valued at their net
realizable value, and liabilities include estimated costs associated with
carrying out the Plan of Liquidation.
The net adjustment at May 31, 1994, required to convert from a going
concern (historical cost) basis to a liquidation basis of accounting was a
decrease in the carrying value of net assets of $4.2 million which was
included in the consolidated statement of income and changes in net assets
(liquidation basis). This decrease in the carrying value of net assets is
a result of recording estimated liabilities associated with carrying out
the Plan of Liquidation. At August 31, 1994, as a result of the
preliminary settlement agreement (See Note 3-Contingencies), the Company
reduced the reserve for estimated costs during the period of liquidation
by $975,000, as legal expenses previously estimated are not expected to
be incurred.
Under the liquidation basis, the Company has estimated future
liabilities associated with carrying out the Plan of Liquidation (see
assumptions below). The Company has not reflected future revenues by way
of interest income or gains associated with the nonperforming portfolio as
such income will be recognized when realized.
The statement of net assets as of August 31, 1993, and November 30,
1993, and the consolidated statement of income and changes for the three
and nine months ended August 31, 1993, have been prepared using the
historical cost (going concern) basis of accounting on which the Company
has previously reported its financial condition and results of operation.
The conversion of the Company's assets and liabilities to the
liquidation basis of accounting requires significant estimates and
judgments by management of the Company.
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<PAGE>
A summary of the Plan of Liquidation, and the significant judgments and
estimates made, are described below.
The Plan of Liquidation calls for an orderly liquidation of the
Company over a five year period from the effective date of the Plan of
Liquidation. This period may be shortened or lengthened if it is deemed to
be in the best interest of the shareholders. The Company may engage in
transactions as may be appropriate to its complete liquidation, including
the sale, exchange, or other disposition of all or part of its remaining
assets for cash, shares, bonds, or other security or property, or any
combination of the foregoing. Prior to a final distribution of the assets
of the Company to its shareholders, the Company will invest its cash or
other liquid assets, and will discharge or otherwise provide for all of
its liabilities and obligations.
The Company has made the following assumptions in the valuation of
the assets and liabilities of the Company on the liquidation basis of
accounting:
1) Short-term investments are carried at their estimated realizable
value. No accrual has been made for future income or loss on investments
except for unrealized gains or losses that existed on August 31, 1994, if
any.
2) The Company has the present intent and ability to hold the
purchase note receivable, received in connection with the Asset Sale, to
maturity, which is May 27, 1996. No valuation allowance is deemed
necessary. Interest income will be recognized when earned, calculated at
a rate of 6% per annum.
3) Nonperforming assets are carried at their net realizable value.
Gains on the collection of the nonperforming assets are recorded at the
time that they are realized. The Company estimates that the collection
effort on the nonperforming assets will cease at approximately December
31, 1994; however, this date is subject to change should facts and
circumstances change.
4) Preferred stock dividends are accreted through August 31, 1994.
Additional dividends will be accreted as earned. The Company intends to
redeem the preferred stock and accumulated dividends as soon as possible
after the final completion of the settlement of the securities litigation
currently pending against the Company, but in no event prior to final
court approval of the settlement of the securities litigation. (See Note
3-Contingencies).
5) The reserve for estimated costs during the period of liquidation
represent management estimates of expenses to be incurred to liquidate the
company. Major assumptions, are as follows:
a) Nonperforming assets will be liquidated as of December 31,
1994.
b) Administrative costs have been accrued through May 31, 1996,
the anticipated date of the final payment on the note
receivable. No costs have
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<PAGE>
been accrued subsequent to May 1996, as the Company currently
anticipates all matters will be resolved by the time.
6) The reserve for the litigation settlement represents the amount
anticipated to be paid by the Company to settle the securities litigation
outstanding against the Company, pursuant to the preliminary settlement
agreement. The proposed agreement is subject to final court approval.
All of the above assumptions are subject to change should facts and
circumstances change.
NOTE 3. CONTINGENCIES
There is litigation pending against the Company, Industrial Leasing,
the Company's previous majority shareholder, First City, and certain of
its former affiliates and subsidiaries, certain directors, certain former
directors and officers, its independent auditor, and the underwriters of
its December 8, 1989, initial public offering. The class action lawsuits,
WADE et. al. v. INDUSTRIAL et. al. filed January 1992, and a related case
BOWER et. al. v. BELZBERG et. al. filed February 1992, allege violation of
federal securities law. The Wade lawsuit also alleged violations of
California state law; however these claims were dismissed by the Court in
January of 1994. These lawsuits were filed in the United States District
Court for the Northern District of California (the "Court"), and
allege that plaintiffs were damaged as a result of alleged misstatements
and omissions in documents disseminated in connection with the initial
public offering and in subsequent communications and public filings by the
Company, through February 1991. Plaintiff allege damages of approximately
$22.5 million.
In connection with the WADE and BOWER litigation, the Company filed a
lawsuit against two insurance carriers, demanding coverage from American
Home, under a directors and officers liability policy, in the amount of
approximately $5 million (Canadian), and from Continental Insurance under
a general liability policy and an umbrella policy, of approximately $4
million (Canadian), and $16 million (Canadian) respectively. Both
insurance carriers denied liability.
In January 1993, Alex Brown & Sons and Piper Jaffrey, Inc., the
underwriters of the Company's initial public offering, filed an action
against the Company demanding that the Company pay the underwriters'
attorney fees and costs associated with their defense of the securities
litigation, in accordance with the Underwriting Agreement entered into by
the Company. The Court granted the underwriters' motion for summary
judgment on July 9, 1993, and ordered the Company to pay the underwriters'
costs and expenses as they are incurred. An appeal to this decision is
pending before the Court of Appeals. In the interim, the Company has
deposited funds with the Court to cover the underwriters' fees and costs.
As of August 31, 1994, the amount on deposit with the court was
approximately $1.2 million, and this amount is reflected on the
Consolidated Statement of Net Assets as Restricted Cash.
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On August 15, 1994, the Company announced that a preliminary
agreement had been reached to settle these lawsuits. A settlement
agreement was executed by the parties and will be filed with the court
during October, 1994. The agreement is subject to approval of the court.
When approved, all claims will be settled in the WADE, BOWER, American
Home, Continental, and the Alex Brown cases.
Under the terms of the settlement agreement, the Company will
contribute $5 million, without any presumption or admission of liability,
of a total settlement of $10 million. The Company maintains that its
litigation positions have merit, but agreed to a settlement in order to
avoid the risk and exposure of further legal proceedings.
Also under the terms of the settlement agreement, the restricted cash
previously deposited with the court in the Alex Brown case will be paid to
the Company. Additionally, Continental Insurance has agreed to reimburse
the Company for reasonable defense fees and costs. The Company and
Continental have agreed to negotiate the amount of the reimbursement, and
both parties have further agreed to submit the matter to binding
arbitration if negotiations are not successful. Through August 31, 1994,
the Company has submitted approximately $4.9 million in such defense costs
and fees to Continental, and Continental has reimbursed the Company
approximately $1.6 million. Any additional reimbursement from Continental
will be recorded as income when realized.
The settlement agreement is subject to final approval by the court.
The settlement agreement, by its terms, will be deemed effective thirty
one days after it is approved by the court, unless an appeal is sought of
the court order approving the settlement agreement. The Company is unable
to predict when the settlement agreement will be approved.
The Company is also a defendant in various lawsuits resulting from
normal business activity. In the opinion of management, the disposition of
all other such litigation currently pending will not have a material
effect on the financial position or results of operation of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company services a non-performing lease portfolio through
collection and disposition activities. This portfolio was specifically
excluded from the Asset Sale completed on May 27, 1993. During the three
month period ended August 31, 1994, the carrying value of the
nonperforming assets, as reflected on the financial statements of the
Company, was extinguished, and therefore all subsequent recoveries are
recorded on the financial records of the Company as gains. The Company
reported gains associated with the collection of the nonperforming
portfolio of $818,000 for the three months ended August 31, 1994.
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Although the Company believes it may record additional gains in the
future, the Company's recent experience associated with the collection of
its nonperforming lease portfolio suggests that recovery amounts are
reducing, and that future recoveries will be more limited. Therefore, the
Company has entered into an agreement to attempt to sell all of its
remaining nonperforming assets by auction in December 1994. If
successful, the auction will result in the full and final liquidation of
the nonperforming portfolio.
The Company invests cash, through financial advisors, primarily in
securities issued or guaranteed by the United States government, in mutual
funds, or in investments identified by investment advisors in conformity
with the Company's Investment Policy. Additionally, the Company generates
interest income in connection with a purchase note associated with the
Asset Sale completed on May 27, 1993, and from funds on deposit with the
Company's principal banker. Management reviews the performance of these
investments on a regular basis, and within the limitations provided in its
Investment Policy, makes investment decisions based upon general
government bond market conditions.
As of May 31, 1994, the Company revised its financial presentation to
a liquidation basis. Accordingly, the Company adjusted the carrying value
of net assets by $4.2 million, which was included in the consolidated
statements of income and changes in net assets. This decrease in carrying
value was the result of recording estimated liabilities associated with
completing the Plan of Liquidation. The May 31, 1994 adjustment will be
reviewed by management periodically, and further adjustment made in
accordance with revised estimates.
RESULTS OF OPERATIONS
Three Months Ended August 31, 1994 Compared to August 31, 1993
As a result of the revised presentation of the financial statements
from a historical basis to a liquidation basis, management believes that
performance and results are not comparable with prior periods.
Revenues for the three months ended August 31, 1994 were $1.4
million, and consisted of gains associated with collection of the
nonperforming portfolio, interest and dividend income, and other income.
This compares to revenues of $484 thousand for the same period a year ago.
As of May 31, 1994, the Company changed its financial presentation to
a liquidation basis. Accordingly, the Company adjusted the carrying value
of net assets by $4.2 million, which was included in the consolidated
statement of income and changes in net assets. This decrease in carrying
value was the result of recording estimated liabilities associated with
carrying out the Plan of Liquidation. Therefore, the Company estimated all
expected costs associated with carrying out the Plan of Liquidation.
Accordingly, the Company's actual general and administrative expenses for
the three months ended August 31, 1994 of $1.5 million were charged to the
Reserve for estimated costs during the
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period of liquidation, resulting in operating income for the period of
$1.4 million. This compares to expenses of $1.7 million, and an operating
loss of $1.2 million for the same period a year earlier.
The net asset adjustment reflected as of May 31, 1994, included an
estimate of future defense costs and expenses associated with the class
action litigation pending against the Company. As a result of the
preliminary settlement agreement, the Company has reduced the reserve for
estimated costs during the period of liquidation by $975,000, as legal
expenses previously estimated are not expected to be incurred.
Additionally, the Company has adjusted net assets by the amount of
$5.0 million, to reflect the amount to be paid by the Company in
accordance with the Settlement Agreement. This adjustment is included in
the consolidated statement of income and changes in net assets for the
three months ended August 31, 1994.
Therefore, the Company reports a net loss of $2.6 million, or $0.41
per common share, as compared to a net loss of $1.0 million, or $0.20 per
common share a year earlier.
NINE MONTHS ENDED AUGUST 31, 1994 COMPARED TO AUGUST 31, 1993
As a result of the Asset Sale completed on May 27, 1993, and the
change in the presentation of the Company's financial results from a
historical basis to a liquidation basis, management believes that
performance is not comparable.
Total revenues for the nine months ended August 31, 1994 were $2.0
million, compared to $9.8 million a year earlier. Expenses for the nine
month period were $10.0 million in 1994, compared to $10.4 million a year
earlier.
The Company reports a net loss of $8.0 million, or $1.26 per common
share for the nine months ended August 31, 1994, as compared to net income
of $1.9 million or $0.06 per common share a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no available short-term or long-term debt facilities.
The Company believes that its present invested cash, combined with the
future collection of its notes receivable, will allow it to manage the
collection of the nonperforming assets, and implement the Plan of
Liquidation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 3, Contingencies, in Notes to the Consolidated Financial
Statements, beginning on Page 9.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The Board of Directors approved a Plan of Dissolution and Complete
Liquidation (the "Plan of Liquidation"), on May 20, 1994, for submission
to the shareholders of the Company. A Special Meeting of Shareholders was
scheduled on August 18, 1994, for shareholder consideration of approval of
the Plan of Liquidation. However, on August 15, 1994, the Company reached
a preliminary agreement to settle the securities class action lawsuits
currently pending against the Company. See Note 3-Contingencies. Due to
the material implications of the proposed settlement, the Special Meeting
was adjourned to enable the Company to revise the Proxy Statement, and
provide its shareholders with additional information concerning the terms
of the proposed settlement. No date has been established for the
continuation of the Special Meeting.
ITEM 6. EXHIBITS
8-K The Company has filed a Form 8-K related to the preliminary
settlement agreement, on August 16, 1994
11.1 Exhibit 11.1 is a statement of computation of per share earnings that
include the preferred stock dividend.
27. Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INDUSTRIAL FUNDING CORP.
(Registrant)
Date: October 12, 1994 By: /s/ JOHN J. ESTOK
-----------------
John J. Estok
President and Chief Executive
Officer
Date: October 12, 1994 By: /s/ JOHN W. PITT
------------------
John W. Pitt
Vice President and Secretary
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INDUSTRIAL FUNDING CORP.
- -------------------------------------------------------------------------------
Exhibit 11.1
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
August 31, August 31,
----------------------------- ---------------------------
(Amounts In Thousands Except Per Share Data) 1994 1993 1994 1993
----------------------------- ----------------------------
LIQUIDATION GOING CONCERN LIQUIDATION GOING CONCERN
BASIS BASIS BASIS BASIS
<S> <C> <C> <C> <C>
Net income (loss) $ (2,588) $ (1,031) $ (8,011) $ 1,868
Cumulative preferred stock dividend (477) (477) (1,432) (1,432)
-------------------------------------------------------------------
Earnings (loss) on common stock $ (3,065) $ (1,508) $ (9,443) $ 436
Average number of common
shares outstanding 7,500 7,500 7,500 7,500
-------------------------------------------------------------------
Earnings (loss) per common share $ (0.41) $ (0.20) $ (1.26) $ 0.06
-------------------------------------------------------------------
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</TABLE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------
FORM 8K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 17 1994
(Date of earliest event reported)
INDUSTRIAL FUNDING CORP.
(Exact name of registrant specified in its charter)
OREGON 0-18071 93-1013278
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
2121 S.W. BROADWAY
SUITE 100
PORTLAND, OREGON 97201
(Address of principal executive offices, including zip code)
(503)228-2111
(Registrant's telephone number, including area code)
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Page 1 of 2 pages
<PAGE>
On August 15, 1994, Industrial Funding Corp. concluded a preliminary
agreement to settle the securities class action litigation pending against
Industrial Funding Corp., its subsidiary Industrial Leasing Corporation, its
previous majority shareholder, First City, and certain of its former affiliates
and subsidiaries, certain directors, certain former directors and officers, its
independent auditor, and the underwriters of its December 8, 1989 initial
public offering. The proposed settlement is subject to further negotiations of
release terms by the parties, and the final approval of the United States
District Court for the Northern District of California. When finalized, all
claims will be settled in the cases WADE ET AL. V. INDUSTRIAL FUNDING ET AL.,
BOWER ET AL. V. BELZBERG ET AL., and ALEX BROWN V. INDUSTRIAL FUNDING,
originally filed in January of 1992.
Under the terms of the proposed settlement the Company will contribute
$5 million of a total settlement of $10 million. Both sides maintain that their
respective litigation positions have merit, but agree to the settlement to avoid
the risk and expense of further litigation.
All claims for reimbursement of defense costs will also be resolved in
the settlement except for the Company's claim against Continental Insurance for
recovery of additional legal expenses incurred as a result of these action.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INDUSTRIAL FUNDING CORP.
(Registrant)
Date: August 17, 1994 By: /s/JOHN J. ESTOK
----------------
John J. Estok
President and Chief Executive Officer
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF NET ASSETS AS OF AUGUST 31, 1994 AND THE CONSOLIDATED
STATEMENT OF INCOME AND CHANGES IN NET ASSETS FOR THE NINE MONTHS ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> AUG-31-1994
<CASH> 6,545
<SECURITIES> 23,577
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,502
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,502
<CURRENT-LIABILITIES> 7,539
<BONDS> 0
<COMMON> 48,212
20,036
0
<OTHER-SE> (32,285)
<TOTAL-LIABILITY-AND-EQUITY> 43,502
<SALES> 0
<TOTAL-REVENUES> 1,991
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,011)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,011)
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
