SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C, 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 18, 1994
GFC FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-11011 86-0695381
(State or Other Jurisdiction (Commission (I.R.S. Employer
Incorporation) File Number) Identification No.)
DIAL TOWER, PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602/207-6900
Item 5. Other Events.
GFC Financial Corporation announced on January 18, 1994, revenues,
net income and selected financial data and ratios for the fourth
quarter and year ended December 31, 1993 (unaudited).
A copy of the press release issued by GFC Financial Corporation is
attached as Exhibit 28 to this report.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit
No. Title
------- --------------------------------
28 Press Release of GFC Financial
Corporation dated January 18,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GFC FINANCIAL CORPORATION
(Registrant)
Dated: January 19, 1994 By /s/ Bruno A. Marszowski
------------------------------------------------
Bruno A. Marszowski, Vice President - Controller
Principal Financial Officer/Authorized Officer
EXHIBIT 28
Nancy Archer 1/18/94
602/ 207-2821
GFC FINANCIAL CORPORATION
ANNOUNCES INCREASES OF 25% IN 1993 FOURTH QUARTER
AND 19% IN YEAR TO DATE OPERATING EARNINGS PER SHARE
PHOENIX, Arizona, January 18, 1994 -- GFC Financial Corporation (NYSE:GFC)
today reported results for the fourth quarter and year ended December 31,
1993.
Income from continuing operations for the fourth quarter of 1993 was
$12.2 million ($0.60 per common and equivalent share) compared to $10.5
million ($0.48 per common and equivalent share) for the fourth quarter of
1992, a 16% increase in earnings from continuing operations and a 25%
increase in earnings per common and equivalent share. Excluding a one-time
$4.9 million third quarter adjustment for deferred taxes applicable to
leveraged leases, income from continuing operations for 1993 rose to $42.7
million ($2.04 per common and equivalent share) from $36.8 million ($1.71
per common and equivalent share) in 1992, a 16% increase in earnings from
continuing operations and a 19% increase in earnings per common and
equivalent share. The $4.9 million adjustment in 1993 represented the
effects of the recent increases in federal and state income tax rates as
they applied to deferred income taxes generated by the company's leveraged
lease portfolio. Income from continuing operations, including the
adjustment for deferred taxes, was $37.8 million ($1.80 per common and
equivalent share).
Net income for the fourth quarter of 1993 was $7.5 million ($0.37 per
common and equivalent share), down from $14.6 million ($0.68 per common and
equivalent share) for the fourth quarter of 1992. This reduction in
earnings is attributable to discontinued operations which reported a loss of
$4.7 million ($0.23 per common and equivalent share) for the fourth quarter
of 1993 compared to income of $4.1 million ($0.20 per common and equivalent
share) for the fourth quarter of 1992.
On July 16, 1993, the company announced the sale of Verex Corporation
("Verex"), its discontinued residential mortgage insurance unit to General
Electric Capital Mortgage Corporation ("GECMC"). The loss from discontinued
operations of $4.7 million includes $3.4 million of additional charges to
Verex's operations for 1993 and a $1.3 million loss on the sale of Verex
after accounting for all transaction costs and providing for additional
liabilities. Net income for 1993 was $37.3 million ($1.77 per common and
equivalent share) after the one-time $4.9 million ($0.24 per common and
equivalent share) adjustment for deferred income taxes. Excluding the $4.9
million deferred tax adjustment, net income for 1993 was $42.2 million
($2.01 per common and equivalent share) compared to $49.0 million ($2.31 per
common and equivalent share) in 1992. The primary reason for the lower
earnings in 1993 is the loss of $0.5 million ($0.03 per common and
equivalent share) reported from discontinued operations in 1993 compared to
income of $12.2 million ($0.60 per common and equivalent share) in 1992.
The $0.5 million loss for the year consists of $0.8 million of income from
operations and the loss of $1.3 million on the sale of Verex.
Sam Eichenfield, GFC Financial Corporation Chairman, said that "1993
was an outstanding year for the company because its core finance operations
had a record year, both in terms of earnings, even after the one-time charge
for taxes, and in new business volume, which reached $1 billion.
Additionally, funds employed grew by 17% with margins and the quality of
assets continuing to meet or exceed expectations." Nonaccruing assets,
including Europe, declined as a percentage of funds employed to 3.6% at year
end 1993 from 4.1% at year end 1992.
Eichenfield went on to say that he was pleased with the significant
goals that the company achieved in 1993. "We helped build the foundation
for the future by the successful sale of Verex, along with the acquisition
of the Asset Based Finance operations, the start up of the Consumer
Rediscount business and the pending purchase of Ambassador Factors. With
these endeavors, the company is positioned to expand its financial service
operations into three new niche-businesses."
As previously announced on November 29, 1993, GFC Financial Corporation
and Fleet Financial Group, Inc. announced an agreement in principle for GFC
to acquire Fleet Financial's factoring and asset-based lending subsidiary,
Fleet Factors Corp., operating under the trade name Ambassador Factors.
Interest earned from financing transactions, increased to $64.6 million
for the fourth quarter of 1993 from $59.6 million for the fourth quarter of
1992 and to $248.7 million for the year 1993 from $240.8 million in 1992.
These increases primarily were driven by the growth in funds employed,
partially offset by the runoff of high yielding assets in the European
portfolio and the effects of foreign exchange gains and other items recorded
in 1992.
Interest margins earned increased by 23% to $33.6 million for the
fourth quarter of 1993 from $27.3 million for the fourth quarter of 1992 and
by 19% to $124.8 million for 1993 from $104.7 million in 1992. These
margins were helped significantly by more favorable debt costs in 1993 when
compared to 1992 (approximately a 1.0% reduction in the aggregate cost of
debt). Also contributing to the improved margins were the growth of the
portfolio and higher prepayment fees.
Provisions for possible credit losses were lower in 1993 primarily due
to lower write-offs. Reserve coverage (reserves for possible credit losses
divided by nonaccruing assets) still remains strong at approximately 63% of
nonaccruing assets and five times 1993 write-offs of $12.6 million.
Also contributing to the improved results were higher gains on sale of
assets in 1993, both for the fourth quarter and the year, primarily due to
the amount and type of assets sold.
Selling, administrative and other operating expenses were higher by
15%, both for the quarter and year ended December 31, 1993, due to the
addition of the Asset Based Finance operations (purchased in February 1993),
expenses previously charged to discontinued operations and legal expenses
incurred in connection with certain problem accounts.
Income taxes, excluding the $4.9 million adjustment, were higher in
1993 and more in the range of an ongoing effective tax rate for the company,
both for the fourth quarter and the year. In the fourth quarter of 1992
income taxes were reduced by $3.1 million representing tax adjustments
related to the refinancing of the company's debt (when it was spun-off from
The Dial Corp in March 1992).
Earnings per common and equivalent share for the fourth quarter and
year ended December 31, 1993 were aided by a reduction in dividends on
preferred stock as a result of the acquisition of Greyhound Financial
Corporation's preferred stock by GFC Financial Corporation on July 30, 1993.
GFC Financial Corporation is a major domestic commercial finance
company that provides secured financing of selected commercial and real
estate activities.
<PAGE>
GFC FINANCIAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF CONSOLIDATED INCOME
(UNAUDITED)
(Dollars in Thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
-----------------------------------------------
1993 1992 1993 1992
-----------------------------------------------
Interest earned from
financing transactions $ 64,632 $ 59,645 $ 248,700 $ 240,806
Interest expense 31,074 32,368 123,853 136,107
---------- ---------- ---------- ----------
Interest margins earned 33,558 27,277 124,847 104,699
Provision for possible
credit losses 2,000 3,890 5,706 6,740
Gains on sale of assets 3,199 1,549 5,439 3,362
Selling, administrative
and other operating
expenses 16,114 14,024 58,158 50,728
---------- ---------- ---------- ----------
Income before income
taxes 18,643 10,912 66,422 50,593
Income taxes:
Current 6,415 403 23,719 13,843
Adjustment to deferred
taxes (Note 1) 4,857
---------- ---------- ---------- ----------
Income from continuing
operations 12,228 10,509 37,846 36,750
Discontinued operations (4,707) 4,107 (499) 12,207
---------- ---------- ---------- ----------
Net Income $ 7,521 $ 14,616 $ 37,347 $ 48,957
========== ========== ========== ==========
Earnings per common and
equivalent share:
Income from continuing
operations before
adjustment for deferred
taxes $ 0.60 $ 0.51 $ 2.10 $ 1.80
Preferred dividends 0.03 0.06 0.09
---------- ---------- ---------- ----------
Operating earnings
before adjustment
for deferred taxes 0.60 0.48 2.04 1.71
Adjustment for
deferred taxes 0.24
---------- ---------- ---------- ----------
Earnings from
continuing operations
per common and
equivalent share 0.60 0.48 1.80 1.71
Discontinued operations (0.23) 0.20 (0.03) 0.60
---------- ---------- ---------- ----------
Earnings per common and
equivalent share $ 0.37 $ 0.68 $ 1.77 $ 2.31
========== ========== ========== ==========
Dividends declared per
common share $ 0.18 $ 0.14 $ 0.68 $ 0.42
========== ========== ========== ==========
Average outstanding
common and equivalent
shares 20,281,000 20,563,000 20,332,000 20,464,000
========== ========== ========== ==========
Note 1: The results of operations for the year ended December 31, 1993
include a one time adjustment of $4,857,000 representing the
effect of recent federal and state income tax increases applicable
to deferred income taxes generated by the company's leveraged
lease portfolio.
<PAGE>
GFC FINANCIAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA AND RATIOS
UNAUDITED
(Dollars in Thousands)
Year Ended
or as of
December 31,
------------------------
FINANCIAL DATA: 1993 1992
------------------------
Funds employed $ 2,846,571 $ 2,428,523
Nonaccruing assets 102,607 100,422
Reserve for possible credit losses 64,280 69,291
Debt 2,082,350 1,898,773
Preferred stock 25,000
Stockholders' equity 503,300 488,396
New business 1,007,794 682,369
Write-offs 12,575 23,661
RATIOS:
Spread percentage (Note 1) 5.44% 5.16%
Nonaccruals/funds employed 3.6% 4.1%
Reserves/funds employed 2.3% 2.9%
Reserves/nonaccruals 62.6% 69.0%
Write-offs/average funds employed 0.5% 1.0%
Expenses/average funds employed 2.2% 2.2%
Expenses/interest margins earned 46.6% 48.5%
Debt & preferred stock/equity 4.1x 3.9x
Note 1: Spread percentages represent interest margins earned as a
percentage of earning assets, net of deferred taxes applicable to
leveraged leases.
