<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
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 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
incorporation or organization) Identification No.)
DIAL CORPORATE CENTER, PHOENIX, ARIZONA 85077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602/207-6900
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 such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 3, 1994, 28,205,746 shares of Common Stock ($0.01 par value) were
outstanding.
<PAGE> 2
GFC FINANCIAL CORPORATION
TABLE OF CONTENTS
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Financial Information:
Consolidated Balance Sheet - June 30, 1994 and
December 31, 1993 1 - 2
Consolidated Income Statement - Quarter and Six Months
Ended June 30, 1994 and 1993 3
Consolidated Statement of Stockholders' Equity -
Six Months Ended June 30, 1994 and 1993 4
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1994 and 1993 5
Notes to Interim Consolidated Financial Information 6 - 16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16 - 19
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 19
SIGNATURES 20
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(Dollars in Thousands)
June 30, December 31,
1994 1993
---------------- ------------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 24,507 $ 929
INVESTMENT IN FINANCING TRANSACTIONS:
Loans and other financing contracts, less unearned
income of $241,030 and $72,747, respectively 3,629,612 2,343,755
Direct financing leases 693,447 71,812
Operating leases 351,683 147,222
Leveraged leases 286,225 283,782
Factored receivables 152,838
------------ -------------
5,113,805 2,846,571
Less reserve for possible credit losses (115,469) (64,280)
------------- -------------
Investment in financing transactions - net 4,998,336 2,782,291
OTHER ASSETS AND DEFERRED CHARGES 198,688 51,102
------------- -------------
$ 5,221,531 $ 2,834,322
============= =============
</TABLE>
See notes to interim consolidated financial information.
1
<PAGE> 4
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in Thousands)
June 30, December 31,
1994 1993
------------------ ------------------
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 167,451 $ 46,067
Customer deposits 2,687 3,064
Due to factored clients 115,624
Interest payable 28,452 23,633
Short-term debt 501 510
Senior debt 3,963,223 1,991,986
Subordinated debt 86,790
Deferred income taxes 190,912 178,972
------------- -------------
4,468,850 2,331,022
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 100,000,000 shares
authorized, 28,422,000 and 20,372,000 shares
issued, respectively 284 204
Additional capital 689,724 464,487
Retained income 74,904 54,901
Cumulative translation adjustments (5,603) (7,773)
Common stock in treasury, 227,000 and 292,000 shares,
respectively (6,628) (8,519)
------------- -------------
752,681 503,300
------------- -------------
$ 5,221,531 $ 2,834,322
============= =============
</TABLE>
See notes to interim consolidated financial information.
2
<PAGE> 5
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, except per share data)
Quarter Ended Six Months Ended
June 30, June 30,
----------------------------------- ------------------------------------
1994 1993 1994 1993
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Interest and other income $ 91,929 $ 55,394 $ 157,531 $ 106,796
Financing lease income 15,863 4,302 19,592 8,901
Operating lease income 14,099 4,252 18,729 7,765
----------- ----------- ----------- -----------
Interest earned from
financing transactions 121,891 63,948 195,852 123,462
Interest expense 53,648 31,423 86,781 61,991
Operating lease depreciation 8,324 1,592 10,281 2,844
----------- ----------- ----------- -----------
Interest margins earned 59,919 30,933 98,790 58,627
Provision for possible credit
losses 4,888 827 8,138 3,528
----------- ----------- ----------- -----------
Net interest margins earned 55,031 30,106 90,652 55,099
Gains on securitizations
and sale of assets 4,500 179 4,503 2,240
----------- ----------- ----------- -----------
59,531 30,285 95,155 57,339
Selling, administrative and
other operating expenses 29,314 14,195 46,617 27,833
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 30,217 16,090 48,538 29,506
Income taxes 12,912 5,767 19,844 10,638
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS 17,305 10,323 28,694 18,868
Income from discontinued
operations 2,870 4,208
----------- ----------- ----------- -----------
NET INCOME $ 17,305 $ 13,193 $ 28,694 $ 23,076
=========== =========== =========== ===========
Earnings per common and
equivalent share:
Income from continuing
operations $ 0.73 $ 0.51 $ 1.30 $ 0.92
Preferred dividends 0.03 0.06
----------- ----------- ----------- ------------
Income from continuing
operations after preferred
dividends 0.73 0.48 1.30 0.86
Income from discontinued
operations 0.14 0.21
----------- ----------- ------------ -----------
Earnings per common and
equivalent share $ 0.73 $ 0.62 $ 1.30 $ 1.07
=========== ============ ============ ===========
Dividends declared per
common share $ 0.18 $ 0.16 $ 0.36 $ 0.32
=========== =========== ============ ===========
Average outstanding
common and equivalent
shares 23,744,000 20,387,000 22,080,000 20,437,000
=========== =========== ============ ===========
</TABLE>
See notes to interim consolidated financial information.
3
<PAGE> 6
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
Six Months Ended
June 30,
-------------------------------------
1994 1993
----------------- --------------
<S> <C> <C>
COMMON STOCK:
Balance, beginning of period $ 204 $ 204
Issuance of common stock 80
-------- ---------
Balance, end of period 284 204
-------- ---------
ADDITIONAL CAPITAL:
Balance, beginning of period 464,487 465,955
Net change in unamortized amount of restricted stock (1,114) 236
Issuance of common stock 226,488
Common stock in treasury used in connection with
employee benefit plans (137) (229)
-------- --------
Balance, end of period 689,724 465,962
-------- --------
NET UNREALIZED INVESTMENT LOSSES:
Balance, beginning of period (387)
Change in net unrealized investment losses (16)
-------- ---------
Balance, end of period --- (403)
-------- ---------
RETAINED INCOME:
Balance, beginning of period 54,901 32,524
Net income 28,694 23,076
Dividends (8,691) (7,575)
--------- ----------
Balance, end of period 74,904 48,025
--------- ----------
CUMULATIVE TRANSLATION ADJUSTMENTS:
Balance, beginning of period (7,773) (6,685)
Unrealized translation gain 2,170 53
--------- ----------
Balance, end of period (5,603) (6,632)
--------- ----------
COMMON STOCK IN TREASURY:
Balance, beginning of period (8,519) (3,215)
Purchase of shares (5,338)
Shares used in connection with employee benefit plans 1,891 860
--------- ----------
Balance, end of period (6,628) (7,693)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 752,681 $ 499,463
========= =========
</TABLE>
See notes to interim consolidated financial information.
4
<PAGE> 7
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
Six Months Ended
June 30,
------------------------------------
1994 1993
---------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 28,694 $ 23,076
Adjustments to reconcile net income to net cash (used) provided
by operating activities:
Provision for possible credit losses 8,138 3,528
Operating lease depreciation 10,281 2,844
Other depreciation and amortization 3,174 1,270
Gains on securitization of assets (3,959)
Income from discontinued operations (4,208)
Gains on sale of assets (544) (2,240)
Deferred income taxes 11,940 2,300
Change in assets and liabilities, net of effects from subsidiaries
purchased:
Increase in other assets (15,920) (6,502)
Decrease in accounts payable and accrued expenses (55,475) (1,427)
Decrease in customer deposits (398) (1,966)
Increase (decrease) in interest payable 4,819 (6,266)
Other 1,056 289
--------- ----------
Net cash (used) provided by operating activities (8,194) 10,698
--------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of assets 3,100 2,482
Proceeds from assets securitized 115,507
Principal collections on financing transactions 426,449 279,954
Expenditures for financing transactions (611,146) (351,656)
Net change in short-term financing transactions (87,512)
Purchase of Asset Based Finance (69,808)
Purchase of Ambassador Factors (246,285)
Purchase of TriCon (344,212)
Net advances to discontinued insurance subsidiary 21,204
Other 672 24
---------- ----------
Net cash used by investing activities (743,427) (117,800)
---------- ----------
FINANCING ACTIVITIES:
Long-term borrowings 827,550 298,648
Net borrowings under commercial paper 456,184 85,633
Repayment of long-term borrowings (743,443) (268,628)
Issuance of common stock 226,568
Proceeds from exercise of stock options 1,754 631
Common stock purchased for treasury (5,338)
Dividends (8,691) (7,575)
Net change in due to factored clients 15,277
---------- ----------
Net cash provided by financing activities 775,199 103,371
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,578 (3,731)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 929 18,203
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 24,507 $ 14,472
========== ==========
</TABLE>
See notes to interim consolidated financial information.
5
<PAGE> 8
GFC FINANCIAL CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
NOTE A SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements present the financial position,
results of operations and cash flows of GFC Financial Corporation ("GFC
Financial" or the "Company") and include Greyhound Financial Corporation
("GFC") and its subsidiaries, including Ambassador Factors Corporation
(formerly known as Fleet Factors Corp.) ("Ambassador") acquired on February 14,
1994 and TriCon Capital ("TriCon") acquired on April 30, 1994. The Company
sold its discontinued mortgage insurance operations, Verex Corporation and
subsidiaries, in July 1993.
This information should be read in connection with the financial
statements set forth in the GFC Financial Annual Report for the year ended
December 31, 1993 heretofore filed with the Commission as Annex "A" to the
Registrant's Annual Report on Form 10- K, as amended. The accounting policies
utilized in the preparation of the financial information herein are the same as
set forth in such Annual Report, as modified for interim accounting policies
which are within the guidelines set forth in Accounting Principles Board
Opinion No. 28.
The Financial Accounting Standards Board ("FASB") has issued a new
accounting standard, Statement of Financial Accounting Standards ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"). This
standard requires that impaired loans that are within the scope of this
statement generally be measured based on the present value of expected cash
flows discounted at the loan's effective interest rate or the fair value of the
collateral, if the loan is collateral dependent. Under SFAS 114, a loan is
considered impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due. Presently,
the reserve for possible credit losses represents management's estimate of the
amount necessary to cover potential losses in the portfolio considering
delinquencies, loss experience and collateral. The impact of the new standard,
which is effective for fiscal years beginning after December 15, 1994, has not
yet been determined.
Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". Analogous to SFAS No. 106
for postretirement benefits, this standard requires companies to accrue for
estimated future postemployment benefits during the periods when employees are
working. Postemployment benefits are any benefits other than retirement
benefits that are provided after employment is discontinued. The adoption of
the new standard did not have a material impact on the Company's financial
position or results of operations.
The interim consolidated financial information is unaudited. In the
opinion of management all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the financial position as of June 30,
1994, the results of operations for the quarter and six months ended June 30,
1994 and 1993 and cash flows for the six months ended June 30, 1994 and 1993,
have been included. Interim results of operations are not necessarily
indicative of the results of operations for the full year.
NOTE B PORTFOLIO QUALITY
The following table presents a breakdown (by line of business) of the
Company's investment in financing transactions before the reserve for possible
credit losses at the dates indicated.
6
<PAGE> 9
<TABLE>
<CAPTION>
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
JUNE 30, 1994
(Dollars in Thousands)
Revenue Accruing
------------------------------------------------------
Repos-
Original Rewritten Operating sessed
Rate Contracts Leases Assets(3)
------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Real Estate Finance $ 611,586 $ 5,907 $ $ 28,586
Transportation Finance (1) 458,508 14,127 169,940
Resort Finance 582,259 4,231 538 12,662
Communications Finance 565,251 6,188 8,976
Corporate Finance 220,932 26,291 6,882
Asset Based Finance 228,504
Consumer Rediscounting 40,390
European Finance (2) 87,600 2,099 4,533
Ambassador Factors 331,490
Medical Finance 306,798 151,586
Franchise Finance 272,211 4,239
Commercial Equipment Finance 239,772 975 25,086
Vendor Service 216,618
Commercial Credit Services 208,933
Government Finance 71,858
Capital Services 11,206
------------ --------- --------- ---------
TOTAL (4) $ 4,453,916 $ 64,057 $ 351,683 $ 57,106
============ ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Nonaccruing
----------------------------------
90 Days Repos- Total
Delin- sessed Carrying
quent Assets Other Amount %
---------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Commercial Real Estate Finance $ 1,004 $ 27,976 $ $ 675,059 13.2
Transportation Finance (1) 642,575 12.6
Resort Finance 20,110 143 619,943 12.1
Communications Finance 7,264 28,348 616,027 12.0
Corporate Finance 3,881 3,002 310 261,298 5.1
Asset Based Finance 228,504 4.5
Consumer Rediscounting 40,390 0.8
European Finance (2) 22,248 10 116,490 2.3
Ambassador Factors 10,734 1,964 344,188 6.7
Medical Finance 2,623 461,007 9.0
Franchise Finance 13,229 289,679 5.7
Commercial Equipment Finance 9,688 275,521 5.4
Vendor Service 23,009 239,627 4.7
Commercial Credit Services 836 209,769 4.1
Government Finance 451 72,309 1.4
Capital Services 10,213 21,419 0.4
-------- --------- ------- ------------ ------
TOTAL (4) $ 105,180 $ 81,410 $ 453 $ 5,113,805 100.0
========== ========= ======= ============ ======
</TABLE>
NOTES:
(1) Domestic Transportation Finance includes $46.4 million of
new aircraft finance business booked through the London
office. In addition, operating leases include certain
aircraft and engines having a carrying amount of $52.2
million that were combined as one transaction pursuant to a
participation agreement with an engine and hushkitting
company.
(2) European Finance includes $42.5 million of Consumer Finance
assets, of which $8.2 million are nonaccruing. Consumer
Finance accounts are generally considered nonaccruing after
being 180 days delinquent.
(3) The Company earned income totaling $1.8 million on
repossessed assets during 1994, including $0.9 million in
Commercial Real Estate Finance, $0.4 million in
Communications Finance, $0.4 million in Resort Finance and
$0.1 million in Corporate Finance.
(4) Excludes $345.8 million of assets securitized which the
Company manages.
<PAGE> 10
<TABLE>
<CAPTION>
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 1993
(Dollars in Thousands)
Revenue Accruing
------------------------------------------------------
Repos-
Original Rewritten Operating sessed
Rate Contracts Leases Assets(4)
------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Real estate Finance (1) $ 500,598 $ 1,574 $ $ 27,844
Transportation Finance (1) (2) 457,741 146,675
Resort Finance 530,070 4,869 547 12,163
Communications Finance 487,890 7,989 8,949
Corporate Finance (1) 221,711 27,921
Asset Based Finance 176,068
Consumer Rediscounting 19,439
European Finance (3) 107,486 4,430
------------ ----------- ----------- -----------
TOTAL $ 2,501,003 $ 46,783 $ 147,222 $ 48,956
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Nonaccruing
----------------------------------
90 Days Repos- Total
Delin- sessed Carrying
quent Assets Other Amount %
----------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Commercial Real estate Finance (1) $ 1,055 $ 25,542 $ $ 556,613 19.6
Transportation Finance (1) (2) 841 605,257 21.2
Resort Finance 19,001 440 567,090 19.9
Communications Finance 8,264 25,030 538,122 18.9
Corporate Finance (1) 2,277 7,428 386 259,723 9.1
Asset Based Finance 176,068 6.2
Consumer Rediscounting 19,439 0.7
European Finance (3) 12,320 23 124,259 4.4
----------- ---------- ------- ----------- -----
$ 24,757 $ 77,024 $ 826 $ 2,846,571 100.0
=========== ========== ======= =========== =====
</TABLE>
NOTES:
(1) Reclassifications (effective January 1, 1993): Approximately $169
million of accruing assets were reclassified from Corporate Finance
with $163 million going to Transportation Finance because they
primarily represented aircraft financing and $6 million to Commercial
Real Estate Finance. Additionally, $6.5 million of nonaccruing assets
($5.1 million classified as repossessed assets and $1.4 million
classified as 90 days delinquent) were reclassified from Corporate
Finance to Commercial Real Estate Finance.
(2) Domestic Transportation Finance includes $31.9 million of new aircraft
finance business booked through the London office. In addition,
operating leases include certain aircraft and engines having a
carrying amount of $53.0 million that were combined as one transaction
pursuant to a participation agreement with an engine and hushkitting
company.
(3) European Finance includes $45.3 million of Consumer Finance assets, of
which $9.6 million are nonaccruing. Consumer Finance accounts are
generally considered nonaccruing after being 180 days delinquent.
(4) The Company earned income totaling $2.7 million on repossessed
accruing assets during 1993, including $1.5 million in Commercial Real
Estate Finance, $0.6 million in Communications Finance and $0.6
million in Resort Finance.
<PAGE> 11
REWRITTEN CONTRACTS:
In the normal course of business, the Company has renegotiated certain
contracts and has modified them with respect to rates and other terms. At
June 30, 1994 and December 31, 1993, the Company had approximately $64.1
million and $46.8 million, respectively, of these rewritten contracts
requiring disclosure under the provisions of SFAS No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings". These contracts are
all current under the revised terms and yield on a weighted average basis a
return of approximately 10.3%.
NONACCRUING ASSETS:
Income recognition on an account is suspended and the account
generally is classified as nonaccruing at the earlier of the date when an
account is 90 days or more past due (180 days for Consumer Finance contracts
in the United Kingdom) or when, in the opinion of management, a full recovery
of income and principal becomes doubtful. Payments (full or partial) are
currently being received on some of these accounts; however, income generally
is not recognized until performance is demonstrated to be resumed.
Total nonaccruals increased to $187.0 million at June 30, 1994 from
$102.6 million at December 31, 1993. This increase primarily is due to the
inclusion of nonaccruing assets of TriCon ($60 million) and Ambassador ($14.7
million). The total at June 30, 1994 represented 3.4% of funds employed and
assets securitized ("managed assets") compared to 3.6% of funds employed at
December 31, 1993.
RESERVE AND ACCRUED LIABILITIES FOR POSSIBLE CREDIT LOSSES:
The reserve and accrued liabilities for possible credit losses of
$134.2 million at June 30, 1994 represents 2.5% of the aggregate carrying
amount of managed assets before deducting such reserve. Accrued liabilities
of $18.7 million represent an allowance for estimated losses under certain
recourse provisions on $345.8 million of assets securitized. Changes in the
reserve for possible credit losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
1994 1993
--------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Balance, beginning of period $ 64,280 $ 69,291
Provision for possible credit losses 8,138 3,528
Write-offs (12,021) (6,672)
Recoveries 668 104
Other (including TriCon and Ambassador) 54,404 1,261
---------- ----------
Balance, end of period $ 115,469 $ 67,512
========== ==========
</TABLE>
The Company believes that collateral values significantly reduce its
loss exposure and that the reserve for possible credit losses is adequate.
9
<PAGE> 12
NOTE C RECEIVABLE TRANSFER AGREEMENTS (SECURITIZATIONS)
During the six months ended June 30, 1994, the Company transferred its
interests in approximately $125.4 million of its direct finance lease portfolio
for $135.0 million. These transfers provide limited recourse for credit losses
to the Company and certain of its assets. As of June 30, 1994, $60.5 million
of finance lease receivables are the sole collateral for certain limited
recourse provisions. In addition to such finance lease receivables, the
Company has recourse exposure limited to $95.9 million. An outstanding
allowance for estimated losses under these recourse provisions of $18.7 million
is included in accounts payable and accrued expenses. The Company will service
these lease contracts for the transferee and has deferred a portion of the
proceeds to be recognized as service fee income over the term of the
agreements.
NOTE D BORROWINGS
At June 30, 1994 and December 31, 1993, commercial paper and
short-term bank borrowings totaling $972 million and $516 million,
respectively, have been presented as long-term debt because they are supported
by available unused revolving credit lines which if not renewed are convertible
to long-term debt at GFC's option.
Senior and subordinated debt was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------------- --------------------
(Dollars in Thousands)
<S> <C> <C>
Senior debt:
Commercial paper and short-term bank loans
supported by unused long-term bank revolving credit
agreements, less unamortized discount $ 972,061 $ 515,876
Medium-term notes due to 2003, 4.6% to 12.5% 1,303,686 751,500
Term loans payable to banks due to 1996, 4.2% 129,665 150,000
Loan payable to Bell Atlantic due December 31, 1994 307,071
Senior notes due to 2002, 8.3% to 16.0%, less
unamortized discount 1,232,651 555,666
Nonrecourse installment notes due to 2002, 10.6%
(assets of $25,189 and $25,613, respectively,
pledged as collateral) 18,089 18,944
------------ -------------
Total senior debt 3,963,223 1,991,986
------------ -------------
Subordinated debt repaid in 1994, 14.1% 86,790
------------ -------------
TOTAL $ 3,963,223 $ 2,078,776
============ =============
</TABLE>
10
<PAGE> 13
NOTE E INCOME TAXES
The federal statutory income tax rate is reconciled to the effective
income tax rate as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1994 1993
---------- --------
<S> <C> <C>
Federal statutory income tax rate 35.0% 34.0%
State income tax 5.0% 3.6%
Foreign tax effects 1.5% (0.9)%
Other (0.6)% (0.6)%
-------- --------
Provision for income taxes 40.9% 36.1%
======== ========
</TABLE>
NOTE F RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
The following are the ratios of income to combined fixed charges and
preferred stock dividends for the six months ended June 30, 1994 and 1993 and
the years ended December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, December 31,
---------------- ---------------------------
1994 1993 1993 1992 1991
---------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Ratio of income to combined fixed charges
and preferred stock dividends 1.56 1.44 1.52 1.35 --
====== ======= ======= ====== ========
</TABLE>
Note: Preferred stock dividends are included in periods subsequent to
March 1992 through July 30, 1993.
Variations in interest rates generally do not have a substantial
impact on the ratio because fixed-rate and floating-rate assets are generally
matched with liabilities of similar rate and term.
Income available for fixed charges, for purposes of the computation of
the ratio of income to combined fixed charges and preferred stock dividends,
consists of the sum of income before income taxes (adjusted for the effect of
reduced tax rates on income from leveraged leases) and fixed charges. Combined
fixed charges include interest and related debt expense and a portion of rental
expense determined to be representative of interest and preferred stock
dividends grossed up to a pre-tax basis.
For the year ended December 31, 1991, earnings were inadequate to
cover combined fixed charges by $35.3 million. The decline in the ratio in
1991 was due to restructuring and other charges and transaction costs recorded
in the fourth quarter of 1991. Those charges and costs were recorded in
connection with the spin-off of the Company from The Dial Corp in March 1992.
11
<PAGE> 14
NOTE G PURCHASES OF AMBASSADOR FACTORS AND TRICON CAPITAL CORPORATION
On February 14, 1994, GFC acquired Ambassador from Fleet Financial
Group, Inc. ("Fleet"). The cash purchase price of the acquisition was
$246,285,000 and represented Ambassador's stockholder's equity, including a
premium ($76,285,000), and repayment of the intercompany balance due from
Ambassador to Fleet ($170,000,000). In addition, GFC assumed $100,348,000 due
to factored clients, $928,000 of accrued liabilities and $8,800,000 of
additional liabilities and transaction costs. The acquisition has been
accounted for as a purchase and created 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, simultaneous with the acquisition, increased
its investment in GFC by contributing $40,000,000 of intercompany loans as
additional paid in capital of GFC.
On April 30, 1994, GFC acquired all of the stock of TriCon from Bell
Atlantic Corporation ("Bell Atlantic"), in an all-cash transaction. The cash
purchase price of the acquisition was $344,212,000. In addition, GFC assumed
outstanding indebtedness and liabilities of TriCon totaling $1,500,650,000 and
incurred additional liabilities and acquisition costs of $7,500,000. The
acquisition has been accounted for as a purchase and created approximately
$69,817,000 of goodwill, which will be amortized on a straight line basis over
20 years.
The cash purchase price was financed initially with the proceeds from
the issuance of $300,000,000 of debt securities of GFC and the remainder with
internally generated funds. A portion of the interim debt was replaced with
the net proceeds from a public offering completed in May 1994 of 8,050,000
shares of the Company's common stock (the "Offering").
The following Pro Forma Statements of Consolidated Income for the six
months ended June 30, 1994 and 1993 have been prepared to reflect net income as
adjusted to reflect the acquisitions of Ambassador and TriCon as if such
acquisitions had occurred on January 1, 1994 and 1993, respectively and give
effect to the Offering as of such dates. The Pro Forma Statements of
Consolidated Income are unaudited and are not necessarily indicative of the
results that would have occurred if such acquisitions had been consummated as
of January 1, 1994 or January 1, 1993, nor are they necessarily indicative of
the results of future operations.
12
<PAGE> 15
GFC FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1994
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------------------------
Company Ambassador
Excluding Feb. thru TriCon May TriCon Jan
Ambassador June 1994 and June Ambassador thru April
& TriCon (1) (1) 1994 (1) Company (1) Jan 1994 (1) 1994 (1)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned from
financing
transactions $ 143,620 $ 16,309 $ 35,923 $ 195,852 $ 3,072 $ 75,566
Interest expense
and depreciation 75,437 2,868 18,757 97,062 563 37,711
------------ ------------ ----------- ------------ ------------ ----------
Interest margins
earned 68,183 13,441 17,166 98,790 2,509 37,855
Provision for
possible credit 2,941 2,500 2,697 8,138 500 7,749
------------ ------------ ----------- ------------ ------------ ----------
losses
Net interest margins
earned 65,242 10,941 14,469 90,652 2,009 30,106
Gains on sale of
assets 4 4,499 4,503
------------ ------------ ----------- ------------ ------------ ----------
65,246 10,941 18,968 95,155 2,009 30,106
Selling,
administrative
and other operating 31,544 3,706 11,367 46,617 634 18,198
expenses
------------ ------------ ----------- ------------ ------------ ----------
33,702 7,235 7,601 48,538 1,375 11,908
Income taxes 14,135 2,861 2,848 19,844 649 4,059
------------ ------------ ----------- ------------ ------------ ----------
NET INCOME $ 19,567 $ 4,374 $ 4,753 $ 28,694 $ 726 $ 7,849
============ ============ =========== ============ ============ ==========
Earnings per
common share (13) $ 1.30
============
Average outstanding
and equivalent shares
(13) 22,080,000
============
</TABLE>
<TABLE>
<CAPTION>
GFC FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1994
(Dollars in Thousands, except per share data)
Pro Forma Adjustments
---------------------------------------
Ambassador TriCon (1)
(1) Pro Forma
--------------------------------------- -----------------
<S> <C> <C> <C>
Interest earned from
financing transactions $ $ (3,158) (7) $ 271,832
500 (8)
Interest expense
and depreciation 271 (2) 1,529 (9) 137,136
------- --------- -----------
Interest margins
earned (271) (4,187) 134,696
Provision for
possible credit losses 16,387
------- --------- -----------
Net interest margins
earned (271) (4,187) 118,309
Gain on sale of
assets 4,503
------- -------- ------------
(271) (4,187) 122,812
Selling, administrative
and other operating
expenses 206 (3) 1,164 (10) 67,155
83 (4) 253 (8)
------- --------- ------------
(560) (5,604) 55,657
Income taxes (224) (5) (2,242) (11) 21,987
(99) (6)
-------- --------- ------------
NET INCOME $ (237) $ (3,362) $ 33,670
======== ========= ============
Earnings per
common share(13) $ 1.18
============
Average outstanding
and equivalent shares(13) 28,440,000
============
</TABLE>
<PAGE> 16
GFC FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED JUNE 30, 1993
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Historical
----------------------------------------
Company Ambassador TriCon
----------------------------------------
<S> <C> <C> <C>
Interest earned from financing transactions $ 123,462 $ 19,075 $ 115,887
Interest expense and depreciation 64,835 3,280 62,069
------------ ------------ ---------
Interest margins earned 58,627 15,795 53,818
Provision for possible credit losses 3,528 3,400 14,990
------------ ------------ ---------
Net interest margins earned 55,099 12,395 38,828
Gains on sale of assets 2,240
------------ ------------ ---------
57,339 12,395 38,828
Selling, administrative and other
operating expenses 27,833 4,145 24,105
------------ ------------ ---------
29,506 8,250 14,723
Income taxes 10,638 3,922 5,303
------------ ------------ ---------
Income from continuing operations 18,868 4,328 9,420
Income from discontinued operations 4,208
Cumulative effect of changes in
accounting principles 480 5,763
------------ ------------ ---------
NET INCOME $ 23,076 $ 4,808 $ 15,183
============ ============ =========
Income from continuing operations after
preferred dividends (13) $ 0.86
============
Earnings per common share (13) $ 1.07
============
Average out standing common
and equivalent shares (13) 20,437,000
============
</TABLE>
GFC FINANCIAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED ICNOME
SIX MONTHS ENDED JUNE 30, 1993
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------- Pro
Ambassador TriCon Forma
----------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Interest earned from financing $ $ (2,325) (7) $ 256,849
750 (8)
Interest expense and depreciation 2,113 (2) 2,294 (9) 134,591
------------ ----------- ------------
Interest margins earned (2,113) (3,869) 122,258
Provision for possible credit losses 21,918
------------ ----------- ------------
Net interest margins earned (2,113) (3,869) 100,340
Gains on sale of assets 2,240
------------ ----------- ------------
(2,113) (3,869) 102,580
Selling, administrative and other
operating expenses 1,235 (3) 1,746 (10) 59,943
500 (4) 379 (8)
------------ ----------- ------------
(3,848) (5,994) 42,637
Income taxes (1,539) (5) (2,398) (11) 15,434
(492) (6)
------------ ----------- ------------
Income from continuing operations (1,817) (3,596) 27,203
Income from discontinued operations 4,208
Cumulative effect of changes in
accounting principles 6,243
------------ ----------- ------------
NET INCOME $ (1,817) $ (3,596) $ 37,654
============ =========== ============
Income from continuing operation after
preferred dividends (13) $ 0.92
============
Earnings per common share (13) $ 1.28
============
Average out standing common
and equivalent shares (13) 28,487,000
============
</TABLE>
<PAGE> 17
NOTES TO PRO FORMA STATEMENTS OF CONSOLIDATED INCOME
(1) The Pro Forma Statement of Consolidated Income for the six months
ended June 30, 1994 has been expanded to separately identify the
operations of Ambassador and TriCon subsequent to their acquisition by
the Company. Pro forma adjustments included in the Pro Forma
Statement of Consolidated Income for the six months ended June 30,
1994 related to the acquisitions of Ambassador and TriCon present the
effect of the one month and four months, respectively, not included in
the Company's historical financial statements.
ACQUISITION OF AMBASSADOR
(2) To record the estimated interest expense ($271,000 - 1994; $2,113,000
- 1993) arising from the debt incurred to fund the acquisition and the
repayment of the intercompany payable due to Fleet.
(3) To record amortization of goodwill ($206,000 - 1994; $1,235,000 -
1993) based on an amortization period of twenty years and amortization
of the covenant not to compete over one year (see Note (12)).
(4) To record administrative expenses for additional employees and general
overhead ($83,000 - 1994; $500,000 - 1993).
(5) To record the income tax effect ($224,000 - 1994; $1,539,000 - 1993)
of Notes (2), (3), and (4) at the Company's effective incremental
income tax rate of 40%.
(6) To adjust income taxes for the lower state income tax rate applicable
to the Company ($99,000 - 1994; $492,000 - 1993).
ACQUISITION OF TRICON
(7) To reduce interest earned from financing transactions for the income
recorded on assets not purchased by the Company in 1994 and 1993
($3,158,000 - 1994; $2,325,000 - 1993).
(8) To reflect base fees ($500,000 - 1994; $750,000 - 1993) and
incremental costs ($253,000 - 1994; $380,000 - 1993) related to an
agreement to manage leveraged leases for Bell Atlantic by TriCon.
(9) To record interest expense ($1,529,000 - 1994; $2,294,000 - 1993)
resulting from the additional debt issued to purchase TriCon and
certain debt to Bell Atlantic incurred to fund a deferred tax payment
and dividends, reduced by the interest savings applicable to the debt
not transferred in the TriCon acquisition.
(10) To record amortization of goodwill ($1,164,000 - 1994; $1,746,000 -
1993) based on an amortization period of twenty years (see Note (12)).
(11) To record the income tax effect ($2,242,000 - 1994; $2,398,000 - 1993)
of Notes (7) through (10) at the Company's effective incremental
income tax rate of 40%.
(12) Goodwill may be adjusted as the final allocation of the values of the
purchased assets and liabilities is established.
15
<PAGE> 18
(13) Pro forma per share amounts are calculated assuming the 8,050,000
shares of the Company's common stock were issued at the beginning of
the respective periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1994
TO THE SIX MONTHS ENDED JUNE 30, 1993
The following discussion relates to GFC Financial Corporation ("GFC
Financial" or the "Company"), including Greyhound Financial Corporation ("GFC")
and subsidiaries, including Ambassador Factors ("Ambassador") acquired on
February 14, 1994 and TriCon Capital ("TriCon") acquired on April 30, 1994.
RESULTS OF OPERATIONS
Income from continuing operations increased 52% during the six months
of 1994 to $28.7 million from $18.9 million in the comparable 1993 period. The
1994 results include five months of income from Ambassador and two months of
income from TriCon. Net income for the 1994 period rose to $28.7 million from
$23.1 million in 1993, an increase of 24%. Net income in 1993 included $4.2
million of income from the Company's discontinued mortgage insurance subsidiary
sold in July 1993.
INTEREST MARGINS EARNED. Interest margins earned, which represent the
difference between interest earned from financing transactions and interest
expense and operating lease depreciation, increased to $98.8 million for the
six months of 1994 from $58.6 million from the comparable period in 1993, an
increase of 69%.
This increase was driven by the portfolio growth of the core finance
operations, as well as the acquisitions of TriCon and Ambassador in 1994. The
source of the growth of the core finance operations was the new business volume
of $699 million for the six months of 1994 compared to $352 million for the
1993 period (an increase of 99%).
Interest margins earned, measured as a percent of average earning
assets, were strong at 6.0%. This measurement compares to 5.4% for the 1993
period and reflects the contributions of the acquisitions made in 1994 as well
as the continuing strong returns of the core finance operations.
The improvement in interest margins more than offset the higher
provisions for possible credit losses and the higher selling, administrative
and other operating expenses (collectively "operating expenses").
NON-INTEREST EXPENSE. Loss provisions, which increase the reserve for
possible credit losses ("reserve"), were higher by $4.6 million during the
first six months of 1994 compared to the same period in 1993. The higher loss
provisions are consistent with the requirements of a larger portfolio and the
risk characteristics of some of the businesses acquired. Higher interest
margins generated by Ambassador and certain TriCon businesses are used to cover
the higher risk profile associated with those businesses. Management believes
that reserve coverage (reserve and accrued liabilities/nonaccruing assets)
remains adequate at 71.7% of nonaccruing assets and at 2.5% of funds employed
and securitizations.
16
<PAGE> 19
Selling, administrative and other operating expenses were up by
approximately $18.8 million in the 1994 period primarily attributable to the
acquisitions of TriCon and Ambassador in 1994. The running rate of these
expenses (measured as a percent of interest margins earned) declined to 47.2%
(for the combined entities) in 1994 from 47.5% for GFC (which excluded TriCon
and Ambassador) in 1993. On July 18, 1994, the Company announced the
reorganization and integration of its operations with newly- acquired TriCon
and an estimated 10% reduction in personnel over the next several months.
These cost saving initiatives are expected to reduce this running rate for
expenses even further in the future.
GAINS ON SECURITIZATIONS AND SALE OF ASSETS. Gains on securitizations
and sale of assets were $2.3 million higher in 1994 compared to the same period
in 1993. The increase principally is the result of a $4.0 million ($2.4
million after-tax) gain from the securitization of assets by TriCon recorded in
the second quarter of 1994.
INCOME TAXES. Income taxes for the six months of 1994 increased to
$19.8 million from $10.6 million in 1993. This increase is attributable to:
(a) higher income before income taxes; (b) higher income tax rates in 1994
(both federal and state), and (c) increased foreign income taxes. The overall
effective income tax rate for the Company, including both federal and state
income taxes, approximates 40%.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Funds employed increased by $2.3 billion to $5.1 billion at June 30,
1994 from $2.8 billion at December 31, 1993. This increase is attributable to
the acquisition of TriCon ($1,802 million) and Ambassador ($329 million) in
1994 and new business generated ($699 million) by the core finance operations
in 1994.
The reserve and accrued liabilities increased by $69.9 million in 1994
to $134.2 million. The increase in the reserve and accrued liabilities during
the six months consisted of increases due to loss provisions of $8.1 million
which were applicable to portfolio growth, $62.6 million of reserves and
accrued liabilities acquired with TriCon and $10.4 million of reserves acquired
with Ambassador, partially offset by decreases due to write-offs of $12.0
million.
The Company had total debt of approximately $3,966 million or 5.3
times its equity base of $753 million at June 30, 1994. The Company also had
deferred income taxes of $191 million at that date as part of its capital base
to help finance its lending activities.
Growth in funds employed is typically financed by internally generated
cash flow and additional borrowings. During the first six months of 1994, GFC
issued $827.6 million of new senior debt, which, together with general
corporate funds, was used to finance new business and redeem or retire $743.4
million of maturing debt.
GFC satisfies a significant portion of its cash requirements from a
diversified group of worldwide funding sources and is not dependent upon any
one lender. Additionally, GFC relies on the issuance of commercial paper as a
major funding source. During the first six months of 1994, GFC issued $3.8
billion of commercial paper (with an average of $593 million outstanding during
this period) and raised $827.6 million, as noted above, through new long-term
financing facilities of one to seven year durations. GFC recently filed a
shelf-registration statement with the Securities and Exchange Commission that
would allow for the issuance of up to $1.0 billion of senior debt securities.
GFC currently maintains a three-year revolving credit facility with numerous
lenders, in the aggregate principal amount of $950 million. Separately, GFC
also has a 364 day revolving credit facility with the same lenders in the
aggregate principal amount of $950 million. Both of these facilities support
GFC's outstanding commercial paper and short- term borrowings.
Maturities of long-term debt outstanding at June 30, 1994 due through
June 2003 (excluding the amount supported by the revolving credit agreements
expected to be renewed) will approximate $445,875,000
17
<PAGE> 20
(for the last six months of 1994), $563,202,000 (1995), $399,221,000 (1996),
$358,625,000 (1997), $349,305,000 (1998) and $874,934,000 (thereafter).
The Company utilizes derivative instruments to manage exposure to
fluctuations in interest rates arising from normal business operations.
Typically, these agreements are entered into when the Company issues new debt
to match the interest rate characteristics of its assets and liabilities. The
Company continually monitors its position relative to derivatives and does not
utilize speculative derivative instruments. The agreements have been entered
into with major financial institutions which are expected to fully perform
under the terms of the agreements, thereby mitigating the credit risk from the
transactions.
GFC had outstanding 43 interest rate conversion agreements with
notional principal amounts totaling $1.8 billion. Seventeen agreements with
notional principal amounts of $573 million were arranged to effectively convert
certain floating interest rate obligations into fixed interest rate obligations
and require interest payments on the stated principal amount at rates ranging
from 4.1% to 9.3% (remaining terms of one to five years) in return for receipts
calculated on the same notional amounts at floating interest rates. In
addition, 26 agreements with notional principal amounts of $1.19 billion were
arranged to effectively convert certain fixed interest rate obligations into
floating interest rate obligations and require interest payments on the stated
principal amount at the three month or six month LIBOR (remaining terms of one
to nine years) in return for receipts calculated on the same notional amounts
at fixed interest rates of 4.9% to 7.6%. In the third quarter of 1993, GFC
entered into four three year interest rate hedge agreements on $750 million of
floating-rate borrowings to effectively guarantee a spread of approximately
2.3% between its borrowing rate (the London Interbank Offered Rate ("LIBOR"))
and the Prime interest rate. The Company has also entered into three basis
swaps with notional principal amounts of $178 million and remaining terms of
four months to four years.
GFC's aggregate cost of funds has declined to 6.0% for the six months
of 1994 from 6.3% for the six months of 1993. GFC's cost of and access to
capital resources is significantly influenced by its debt ratings.
GFC Financial announced in the third quarter of 1992 that it intended
to repurchase its securities on the open market, from time to time, to provide
sufficient shares to fund its obligations pursuant to employee stock options,
benefit plans and similar obligations. The repurchase program was commenced in
the fourth quarter of 1992 with 487,409 shares being acquired through December
31, 1993. No shares were acquired in the first six months of 1994. The
program may be discontinued at any time.
The agreements pertaining to long-term debt of GFC include various
restrictive covenants and require the maintenance of certain defined financial
ratios with which GFC has complied. Under one of these covenants, dividend
payments are limited to 50 percent of the sum of accumulated earnings and the
proceeds from equity issued, excluding the Offering, after December 31, 1991.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS
Following the spin-off from The Dial Corp in March 1992, the Company
decided to focus its resources and capital on its core domestic commercial
finance activities. The Company embarked on a program of selling or winding
down those businesses included in the spin-off that were not associated with
the Company's core domestic commercial finance activities. The Company has
concentrated on redeploying the capital previously invested in such businesses
and has raised additional capital to support internal portfolio growth and to
make selected acquisitions which complement the Company's core operations.
This strategy has resulted in (i) the managed liquidation and sale of the
Greyhound European Financial Group and Latin America loan portfolios, (ii) an
increase (excluding acquisitions) in GFC's domestic loan portfolio from March
31, 1992, (iii) the acquisition of the Asset Based Finance group from U.S.
Bancorp, (iv) the sale of the discontinued mortgage insurance subsidiary, (v)
the acquisition of Ambassador, and (vi) the acquisition of TriCon. In 1994,
the Company raised an additional $226.6 million of equity through the sale of
8,050,000 shares in a secondary offering, has expanded its debt sources through
a $1 billion shelf registration with the SEC and has increased its revolving
credit lines to $1.9 billion. As a result of the execution of its business
strategy, management
18
<PAGE> 21
believes that the Company now ranks among the largest independent commercial
finance companies, based on assets, in the United States, and can direct its
energies primarily to its core business operations in the United States, rather
than on terminating discontinued operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Document
---------- --------
<S> <C> <C>
11 Computation of Earnings Per Share.
12 Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends (interim period).
</TABLE>
(b) Reports on Form 8-K:
A Report on Form 8-K dated April 14, 1994 was filed by Registrant,
which reported under Items 5 and 7 the revenues, net income and
selected financial data and ratios for the three months ended March
31, 1994 (unaudited).
A Report on Form 8-K dated May 2, 1994 was filed by Registrant, which
reported under Item 5 the consummation of the TriCon acquisition.
A Report on Form 8-K dated May 23, 1994 was filed by Registrant, which
reported under Item 5 the completion of the sale of 8,050,000 shares
of common stock to the public and the expanded credit facilities with
various lenders to $1.9 billion, divided between a three-year and
one-year facility for $950 million each and under Item 7 the Sixth
Amendment and Restatement to the Credit Agreement dated as of May 31,
1976 and the Credit Agreement (Short-term Facility) dated as of May
16, 1994.
A Report on Form 8-K dated July 19, 1994 was filed by Registrant,
which reported under Items 5 and 7 the revenues, net income and
selected financial data and ratios for the three months and six months
ended June 30, 1994 (unaudited).
19
<PAGE> 22
GFC FINANCIAL CORPORATION
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: August 5, 1994 By: /s/ Bruno A. Marszowski
---------------------------------------------------
Bruno A. Marszowski, Vice President-Controller
Principal Accounting Officer/Authorized Officer
20
<PAGE> 23
GFC FINANCIAL CORPORATION
COMMISSION FILE NUMBER 1-11011
EXHIBIT INDEX
JUNE 30, 1994 FORM 10-Q
<TABLE>
<CAPTION>
Page No. in
Sequentially
Numbered
Form 10-Q
No. Title Report
- - --------------- -------------------------------------------------- ---------------------
<S> <C> <C>
(11) Computation of Earnings Per Share. 22
(12) Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends. 23
</TABLE>
21
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11
GFC FINANCIAL CORPORATION
Computation of Earnings Per Share
(Dollars in Thousands, except per share data)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------------- -----------------------------------------
1994 1993 1994 1993
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Primary and Fully
Diluted:
Net income $ 17,305 $ 13,193 $ 28,694 $ 23,076
Preferred dividends 562 1,125
------------ ------------ ------------ -------------
Earnings available to
common shareholders $ 17,305 $ 12,631 $ 28,694 $ 21,951
============ ============ ============ =============
Average common shares
outstanding before
common equivalents 23,450,000 20,080,000 21,795,000 20,145,000
Common equivalent
stock options 294,000 307,000 285,000 292,000
------------- ------------ ------------ -------------
Average outstanding
common and equivalent
shares 23,744,000 20,387,000 22,080,000 20,437,000
============ ============= ============ =============
Earnings per common
and equivalent share $ 0.73 $ 0.62 $ 1.30 $ 1.07
============ ============ ============ =============
</TABLE>
22
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 12
GFC FINANCIAL CORPORATION
Computation of Ratio of Income to Combined Fixed Charges
and Preferred Stock Dividends
(Dollars in Thousands)
Six Months Ended Year Ended
June 30, December 31,
------------------------ ----------------------------------------
1994 1993 1993 1992 1991
------------------------ ----------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) before
income taxes $ 48,538 $ 29,506 $ 66,422 $ 50,593 $ (37,014)
Add leverage lease
adjustment 425 707 1,505 1,059 1,758
Add fixed charges:
Interest expense 86,781 61,991 123,853 136,107 157,560
One-third rentals 933 700 1,387 1,498 1,148
----------- ---------- ----------- ----------- -----------
Total fixed charges 87,714 62,691 125,240 137,605 158,708
----------- ---------- ----------- ----------- -----------
Net income as adjusted $ 136,677 $ 92,904 $ 193,167 $ 189,257 $ 123,452
----------- ---------- ----------- ----------- -----------
Ratio of income to fixed
charges 1.56 1.48 1.54 1.38 ---
=========== ========== =========== =========== ===========
Preferred stock dividends on
a pre-tax basis $ $ 1,815 $ 2,139 $ 2,826
Total combined fixed
charges and preferred
stock dividends $ 87,714 $ 64,506 $ 127,379 $ 140,431 $ 158,708
----------- ---------- ----------- ----------- -----------
Ratio of income to combined
fixed charges and preferred
stock dividends 1.56 1.44 1.52 1.35 ----
=========== ========== =========== =========== ===========
</TABLE>
23
