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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
____________________
For the Fiscal Year Ended Commission File Number
December 31, 1993 1-11011
GFC FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 86-0695381
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Dial Tower, Phoenix, Arizona 85077
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code - 602-207-6900
____________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
_____________________________ _______________________
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 and 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 filings requirements for the past 90 days.
Yes X No
_____ _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Registration S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
_____
As of March 1, 1994, approximately 20,087,000 shares of Common Stock ($0.01
par value) were outstanding, and the aggregate market value of the Common
Stock (based on its closing price per share on such date) held by
nonaffiliates was approximately $586,402,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part Where
Document Incorporated
1. Proxy Statement relating to 1994 Annual Meeting of
Stockholders of GFC Financial Corporation (but
excluding information contained therein furnished
pursuant to items 402(k) and (l) of SEC Regulation S-K). III
2. Prospectuses and Prospectus Supplements dated February
17, 1994 filed pursuant to SEC Rule 424(b) for
$100,000,000 of Greyhound Financial Corporation's
Floating-Rate Notes and $250,000,000 of Medium-Term
Notes, respectively. I
3. GFC Financial Corporation Current Reports on Form 8-K,
dated January 18, and 21, 1994 and February 14, 1994,
as amended. I
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<PAGE>
NOTE Q SUBSEQUENT EVENT (Unaudited) - PURCHASE OF AMBASSADOR FACTORS AND
TRICON CAPITAL CORPORATION
On February 14, 1994, GFC acquired Fleet Financial Group, Inc.'s
("Fleet") factoring and asset based lending subsidiary, Fleet Factors
Corporation, which operates under the trade name Ambassador Factors
("Ambassador"). The cash purchase price of the acquisition was $248,285,000
and represented Ambassador's stockholder's equity, including a premium
($76,285,000), and repayment of the intercompany balance due from Ambassador
to Fleet ($172,000,000). In addition, GFC assumed $111,526,000 due to
factored clients, $4,843,000 of accrued liabilities and $8,800,000 of
additional liabilities and transaction costs. The acquisition will be
accounted for as a purchase and will create approximately $30,400,000
of goodwill, which will be amortized on a straight line basis over 20 years.
The acquisition was financed with proceeds received from the sale of
GFC Financial's discontinued mortgage insurance subsidiary and cash
generated from operations. GFC Financial, simultaneously with the
acquisition, increased its investment in GFC by contributing $40,000,000 of
intercompany loans as additional paid in capital of GFC.
On March 4, 1994, GFC signed a definitive purchase agreement under
which it will acquire all of the stock of TriCon Capital Corporation
("TriCon") from Bell Atlantic Corporation ("Bell Atlantic"), in an all-cash
transaction. This transaction is subject to regulatory approvals and
certain other conditions. Accordingly, there can be no assurance that the
acquisition will be consummated. The cash purchase price of the acquisition
is $344,250,000. In addition, GFC will assume outstanding indebtedness and
liabilities of Tricon totaling $1,453,201,000 and incur additional accrued
liabilities and acquisition costs of $7,500,000. The acquisition is
expected to be accounted for as a purchase and will create approximately
$69,817,000 of goodwill, which will be amortized on a straight line basis
over 20 years.
The cash purchase price is expected to be financed initially with the
proceeds of interim debt and internally generated funds. A portion of the
interim debt is expected to be replaced with additional equity to be raised
in the near future by GFC Financial in public or private offerings which,
together with the remaining intercompany loans from GFC Financial to GFC and
other assets, will be contributed as additional paid in capital of GFC. It
is not expected that such equity securities of GFC Financial will be issued
prior to the consummation of the acquisition of TriCon by GFC. There can be
no assurance that such an offering or the raising of the interim debt will
occur.
GFC's obligation to consummate the acquisition of TriCon is conditioned
upon its receipt of waivers or consents from lenders under certain of its
credit and loan agreements with respect to certain financial covenants
contained therein. GFC is in the process of obtaining such consents and
waivers, believes they will be obtained and will not complete the
acquisition until they are obtained. Upon receipt, such waivers and consents
will be conditioned upon the receipt by GFC, not later than 120 days
following the consummation of the acquisition of TriCon, of the equity
investment from GFC Financial referred to above. The failure of GFC
Financial to complete the equity offering or offerings and invest the
required proceeds in GFC by such date would constitute a default under such
credit and loan agreements, unless GFC could obtain additional waivers,
consents or amendments to such credit and loan agreements. GFC's
inability to obtain additional waivers, consents or amendments to such
credit and loan agreements would allow GFC's lenders to declare an event of
default and could result in the acceleration of the indebtedness due
thereunder. Such default and/or acceleration would constitute a default
under other borrowing arrangements and could result in the acceleration of
substantially all of GFC's outstanding indebtedness, which would have a
material adverse effect on GFC's business, financial condition and results
of operations. There can be no assurance that GFC Financial will complete
such equity offering or offerings and make the required investment in
GFC by the required date or at any other date.
The following Pro Forma Consolidated Balance Sheet (unaudited) of GFC
Financial as of December 31, 1993 and Pro Forma Statement of Consolidated
Income From Continuing Operations (unaudited) for the year ended December
31, 1993 have been prepared to reflect the historical financial position and
income from continuing operations as adjusted to reflect the acquisition of
Ambassador and the pending acquisition of TriCon by GFC. The Pro Forma
Consolidated Balance Sheet has been prepared as if such acquisitions
occurred on December 31, 1993 and the Pro Forma Statement of Consolidated
Income From Continuing Operations has been prepared as if such acquisitions
occurred on January 1, 1993. The pro forma consolidated financial
information is unaudited and is not necessarily indicative of the results
that would have occurred if the acquisitions had been consummated as of
December 31, 1993 or January 1, 1993.
Total assets on a pro forma basis increased to $5,008,135,000 at
December 31, 1993. Pro forma income from continuing operations would have
been $66,693,000 ($2.46 per common and equivalent share) after a
$4,857,000 ($0.18 per common and equivalent share) adjustment for deferred
taxes applicable to leveraged leases. Excluding the $4,857,000 charge, pro
forma income from continuing operations would be approximately $72
million ($2.64 per common and equivalent share). Pro forma income per share
assumes a 6,250,000 increase in the number of common shares outstanding.
<TABLE>
GFC FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Dollars in Thousands)
ASSETS
<CAPTION>
----------------------------------------------------------------------------------------------------------
Historical Pro Forma Adjustments
------------------------------------ -----------------------
Ambassador Ambas-
GFCFC (1) TriCon sador TriCon Pro Forma
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash $ 929 $ 7,072 $ 4,483 $ $ 135 (9) $ 12,619
equivalents
Investment in financing
transactions:
Loans and other
financing contracts 2,343,755 334,656 912,964 3,591,375
Direct finance leases 71,812 647,055 718,867
Operating leases 147,222 240,057 (53,460) (10) 333,819
Leveraged leases 283,782 283,782
- ------------------------------------------------------------------------------------------------------------
2,846,571 334,656 1,800,076 (53,460) 4,927,843
Less reserve for
possible credit losses (64,280) (9,207) (43,191) (116,678)
- ------------------------------------------------------------------------------------------------------------
2,782,291 325,449 1,756,885 (53,460) 4,811,165
Other assets and
deferred charges 51,102 5,941 27,091 30,400 (2) 69,817 (13) 184,351
- ------------------------------------------------------------------------------------------------------------
$2,834,322 $338,462 $1,788,459 $30,400 $16,492 $5,008,135
============================================================================================================
</TABLE>
<TABLE>
(continued)
GFC FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
- -------------------------------------------------------------------------------------------------
Historical Pro Forma Adjustments
------------------------------------ ------------------------
Ambassador Ambas-
GFCFC (1) TriCon sador TriCon Pro Forma
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accounts payable and
accruals $ 72,764 $ 4,843 $ 75,302 $ 8,800 (2) $5,000 (13) $ 166,709
Due to factored clients 111,526 111,526
Due to Fleet 172,000 (172,000) (3)
Due to Bell Atlantic 611,194 83,900 (11)
(695,094) (12)
Debt 2,079,286 709,508 76,285 (2) (53,460) (10) 3,858,970
172,000 (3) 721,851 (12)
153,500 (13)
Deferred income taxes 178,972 (4,592) 81,100 (83,900) (11) 174,380
2,800 (13)
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2,331,022 283,777 1,477,104 85,085 134,597 4,311,585
Stockholders' equity 503,300 54,685 311,355 (54,685) (2) 135 (9) 696,550
(26,757) (12)
193,250 (13)
(284,733) (13)
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$2,834,322 $338,462 $1,788,459 $ 30,400 $ 16,492 $5,008,135
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(concluded)
</TABLE>
<PAGE>
<TABLE>
GFC FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME FROM CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(Dollars in Thousands, except per share data)
Historical Pro Forma Adjustments
---------------------------------- -----------------------
Ambassador Ambas- Pro Forma
GFCFC (1) TriCon sador TriCon
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest earned from
financing
transactions $ 248,700 $35,235 $245,300 $ $ (7,667) (10) $523,068
1,500 (14)
Interest expense 123,853 5,780 80,211 4,226 (4) 6,004 (15) 220,074
- --------------------------------------------------------------------------------------------------------
Interest margins
earned 124,847 29,455 165,089 (4,226) (12,171) 302,994
Provision for
possible credit
losses 5,706 7,177 21,634 34,517
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Net interest margins
earned 119,141 22,278 143,455 (4,226) (12,171) 268,477
Gains on sale of
assets 5,439 5,439
- --------------------------------------------------------------------------------------------------------
124,580 22,278 143,455 (4,226) (12,171) 273,916
Selling and
administrative
expenses 58,158 8,125 48,128 2,470 (5) 3,491 (16) 122,131
1,000 (6) 759 (14)
Depreciation 41,582 41,582
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66,422 14,153 53,745 (7,696) (16,421) 110,203
Income taxes:
Current and
deferred 23,719 6,481 22,164 (3,078) (7) (6,569) (18) 38,653
(820) (8) (3,244) (17)
Adjustment to
deferred taxes 4,857 4,857
========================================================================================================
Income from
continuing
operations $37,846 $7,672 $31,581 $(3,798) $ (6,608) $66,693
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Income from
continuing
operations
per common and
equivalent share
(19) $1.80 $2.46
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Average outstanding
common and
equivalent shares
(19) 20,332,000 26,582,000
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</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) The Pro Forma Consolidated Balance Sheet, as of December 31, 1993 and
the Pro Forma Statement of Consolidated Income From Continuing
Operations for the year ended December 31, 1993 include the historical
balance sheet of Ambassador, incorporated herein by reference from the
Company's Current Report on Form 8-K, dated February 14, 1994, as
amended, as of November 30, 1993 and the historical statement of
income of Ambassador for the eleven months ended November 30, 1993.
ACQUISITION OF AMBASSADOR
(2) To record the purchase of Ambassador, including the accrual of various
liabilities and the resulting goodwill, using the proceeds advanced to
GFC upon the sale of GFCFC's discontinued mortgage insurance
subsidiary and cash generated from operations.
(3) To record repayment of Ambassador's intercompany payable to Fleet
using the proceeds advanced to GFC upon the sale of GFCFC's
discontinued mortgage insurance subsidiary and cash generated from
operations.
(4) Adjustments to reflect interest expense of debt repaid in 1993 with
proceeds received from the sale of GFCFC's discontinued mortgage
insurance operations and cash generated from operations. Such debt is
assumed to be outstanding for the entire pro forma period.
(5) To record amortization of goodwill based on an amortization period of
twenty years and amortization of the covenant not to compete over one
year. (See item (19))
(6) To record additional administrative expenses for additional employees
and general overhead.
(7) To record the income tax effect of items (4), (5) and (6) at GFCFC's
effective incremental income tax rate of 40%.
(8) To adjust income taxes for the lower state income tax rate
applicable to GFC.
ACQUISITION OF TRICON
(9) To record the original capital contribution by Bell Atlantic as part
of the incorporation of TriCon.
(10) To transfer assets and the related debt of TriCon, not purchased by
by GFC, to Bell Atlantic and reduce interest earned from financing
transactions for the income recorded on such assets in 1993.
(11) To record issuance of notes payable to fund the deferred tax payment
to Bell Atlantic for an amount equal to the deferred taxes of
TriCon, exclusive of deferred tax assets.
(12) To record a dividend from TriCon to Bell Atlantic and the issuance
of a note payable to Bell Atlantic for the remaining principal
amount of the short-term borrowings from affiliates of TriCon.
(13) To record the purchase of TriCon. The acquisition of TriCon is
expected to be financed initially with interim debt, the assumption
of outstanding indebtedness of TriCon to Bell Atlantic, the assumption
of TriCon's third party debt and liabilities and internally generated
funds. A portion of the interim debt is assumed to be replaced with
proceeds from the issuance of 6,250,000 shares of GFCFC's common stock
which issuance is assumed in the accompanying pro forma consolidated
balance sheet. The interest expense related to the debt that is being
replaced with equity and, therefore, nonrecurring and excluded from
the pro forma consolidated statement of income from continuing
operations is approximately $2,000,000.
Including new debt, the debt assumed, the accrual of various
additional liabilities and acquisition costs, the total purchase price
of the acquisition is estimated to be $1,804,951,000 resulting in
$69,817,000 of goodwill. The purchase will result in a new tax basis
for TriCon's assets, eliminating the remaining deferred tax asset.
(14) To reflect base fees and incremental costs related to an agreement to
manage leveraged leases for Bell Atlantic.
(15) To record additional interest expense resulting from additional debt
to Bell Atlantic and interim debt not replaced with the proceeds from
the common stock issuance in item (13). The adjustment is partially
offset by interest saved on debt transferred to Bell Atlantic.
(16) To record amortization of goodwill based on an amortization period of
twenty years. (See item (19))
(17) To reduce TriCon's income taxes for the effect of increases in income
tax rates for 1993 (principally the increase in the federal tax rate)
due to the deferred tax payment and new tax basis in assets at the
beginning of the pro forma period.
(18) To record the income tax effect of adjustments (10) and (14) through
(16) at GFCFC's effective incremental income tax rate of 40%.
(19) Goodwill may be adjusted as the final allocation of the values of the
purchased assets and liabilities is established.
(20) Pro forma income from continuing operations per common and equivalent
share is calculated assuming the 6,250,000 common shares are issued at
$32.00 per share which represents GFCFC's closing stock price on March
4, 1994. The following table shows the effect on pro forma income
from continuing operations per common and equivalent share for issue
prices ranging from $30.00 per share to $40.00 per share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Estimated Range of Issue Prices for new GFCFC Common Stock
- ------------------------------------------------------------------------------------------------
$30 $32 $34 $36 $38 $40
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pro Forma:
Income from
continuing
operations per
common and
equivalent share $2.42 $2.46 $2.49 $2.53 $2.55 $2.58
================================================================================================
Average
outstanding
common and
equivalent share 26,999,000 26,582,000 26,214,000 25,888,000 25,595,000 25,332,000
================================================================================================
</TABLE>
