<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
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 33-70732
TELMARK INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 16-0907546
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
333 BUTTERNUT DRIVE, DEWITT, NEW YORK 13214
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 315-449-7935
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
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 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.
X
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Yes No
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN ANY DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE OF PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. X
-----
STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON
EQUITY HELD BY NON-AFFILIATES OF THE REGISTRANT AUGUST 22, 1997.
ZERO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT AUGUST 22, 1997
----- ------------------------------
COMMON STOCK, $1 PAR VALUE 400,000 SHARES
TELMARK IS A DIRECT WHOLLY OWNED SUBSIDIARY OF AGWAY HOLDINGS, INC., A
SUBSIDIARY OF AGWAY, INC., WHICH IS A REPORTING COMPANY UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
J(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
PAGE 1 OF 21. EXHIBIT INDEX APPEARS ON SEQUENTIALLY NUMBERED PAGE 20.
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<PAGE>
FORM 10-K ANNUAL REPORT - 1997
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
CROSS-REFERENCE SHEET
PART I
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1. & 2. Business and Properties.................................. 3
Item 3. Legal Proceedings........................................ 4
Item 4. Not Required
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 5
Item 6. Not Required
Item 7. Management's Discussion and Analysis of
Results of Operations.................................. 5
Item 8. Financial Statements..................................... 6
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................. 18
PART III
Item 10. Not Required
Item 11. Not Required
Item 12. Not Required
Item 13. Not Required
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K................................ 20
Signatures............................................... 21
</TABLE>
2
<PAGE>
PART I
ITEM 1. & 2. BUSINESS AND PROPERTIES
Telmark Inc. ("Telmark" or the "Company") was organized in 1964 under the
Business Corporation Law of the State of New York. It is a wholly owned
subsidiary of Agway Holdings, Inc., which is an indirect subsidiary of Agway,
Inc. ("Agway").
Agway is subject to certain informational reporting requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports and
other information with the Commission. Reports filed with the Commission can be
inspected at the Public Reference Section of the Commission at 450 Fifth Street
N.W., Washington D.C. 20549 and at the regional offices of the Commission at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such materials can be obtained from the Commission at
prescribed rates.
The Company's operations are comprised almost exclusively of direct finance
leasing of agricultural related equipment, vehicles and buildings to farmers or
other rural businesses that serve the agricultural marketplace (herein,
"customers" or "lessees"). The Company's leases offer customers an alternative
to directly purchasing or borrowing to purchase as a means of acquiring the use
of equipment, vehicles or buildings. Telmark has branded its leasing service as
Agrilease(R) and TFS(SM), and the Company highlights its service-oriented
approach in its advertisements and product brochures. Telmark offers a variety
of lease financing packages, with varying payment schedules on a monthly,
quarterly, semiannual or annual basis, depending on the expected timing of
customer cash flows and customer credit quality and the customer's individual
preferences.
With a direct finance lease the customers have use of the leased property over a
specified term for a periodic rental charge: i.e. the lease payment. Lease
payments are made in advance of the period and typically the equivalent of two
monthly payments are required in advance at the outset of the lease to provide
Telmark with some protection in the event of default. Most of the direct finance
leases offered by Telmark are for a period which does not exceed its estimate of
the useful life of the equipment, vehicle, or the building leased. Equipment
leases are typically offered for a period of 3 to 6 years, and generally do not
exceed eight years. Building leases are typically offered for longer terms
(e.g., 5 to 10 years) than for equipment leases, up to maximum terms of 15
years. As of June 30, 1997, the Company's outstanding leases had an average
original term of approximately 5 years and average remaining term of less than 4
years.
Generally, the lessee selects the supplier of the equipment or other property to
be leased and the Company is not responsible for its suitability, performance,
life, or any other characteristics. The Company's primary responsibility is to
buy the property from the supplier, lease it to the lessee, and collect the
lease payments, although in certain circumstances it has agreed to indemnify
lessees in the event that certain unintended and adverse tax consequences to
such lessee arise in connection with the relevant lease. While Telmark's
liability, if any, under such arrangements cannot be predicted with any
certainty, it views the likelihood of such liability as remote and believes that
the net effect of such liability, if any, would be immaterial. Telmark also
offers financing through specific equipment manufacturer programs. The lessee
assumes all obligations of insurance, repairs, maintenance, service, and
property taxes, while Telmark retains title to the leased property. At the
expiration of the direct finance lease term, the lessee has an option to (i)
purchase the leased property, (ii) renew the lease, or (iii) return the leased
property to the Company. Historically, 95% of the Company's lease transactions,
the lessee has purchased the leased property or equipment upon termination of
the lease.
Bankruptcies, contract disputes, or defaults by lessees could result in the
non-payment of amounts due to the Company under its leases. The ultimate
collectibility of amounts due under its leases is directly dependent upon the
credit practices employed by Telmark and the creditworthiness of the lessees
under the individual leases comprising its portfolio. Despite current credit
practices and the existence of financial reserves to anticipate the potential
impact of default or nonpayment of leases, there are other factors that could
significantly impact the Company's lease collection experience and its earnings.
These factors include: (i) changes in general economic conditions; (ii) changes
in the level of government expenditures on farm programs and other changes in
government agricultural programs that adversely effect the level of income of
customers of the Company; (iii) adverse weather-related conditions that
negatively impact the agricultural productivity and income of customers of the
Company; and (iv) oversupply of, or reduced demand for, agricultural commodities
produced by customers of the Company.
3
<PAGE>
ITEM 1. & 2. BUSINESS AND PROPERTIES (CONT.)
Credit approvals are made based on the total amount of leases outstanding to the
customer. Lending authority is assigned to members of management depending on
position, training, and experience. The Board of Directors must approve all
lease amounts exceeding $1 million. Potential lessees undergo a thorough credit
approval process after a Telmark field representative completes a financial
application. In order to protect its investment, Telmark retains title to the
equipment or building leased. In addition, Telmark sometimes obtains a second
lien on the real estate owned by the farmer or lessee as collateral for payments
under a building lease. Telmark maintains monthly delinquency reports which
monitor leases that have been delinquent for over 30 days, and non-earning
leases. Generally, accounts past due at least 120 days, as well as accounts in
foreclosure or bankruptcy, are transferred to non-earning status. The potential
losses from non-earning leases are generally mitigated by the ability of the
Company to repossess leased property and to foreclose on other property in which
the Company has been granted a security interest.
The Company realizes most of its net earnings (profits) to the extent that
revenues from its leases exceeds the Company's operating expenses and income
taxes. The Company's "revenue" from a lease is the sum of all payments due under
the lease plus the residual value of the leased property, less the cost of
purchasing the leased property. "Operating expenses" include interest expense,
provision for credit losses (the dollar amount the Company sets aside to cover
its estimated losses should a lessee fail to make required payments under a
lease), and selling, general and administrative expenses, including the
Company's payroll costs, rent, advertising costs and fees paid for credit
checking and legal and accounting services. "Interest expense" is the single
largest operating cost of the Company and is primarily the interest it must pay
on the amounts borrowed by the Company from banks and other investors to finance
its leases.
The Company leases all of the office space it uses from Agway. It does not own
any of the real property it uses for office facilities.
During 1997, Telmark formed TFS Limited and Telmark Lease Funding Corp. I,
wholly owned subsidiaries of Telmark Inc. TFS Limited is a Canadian Corporation
formed to conduct certain lease transactions with Canadian customers. Telmark
Lease Funding Corp. I is a New York Corporation that was established solely to
enable a lease securitization financing entered into during 1997.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation or legal proceedings pending, or to
the best of its knowledge threatened, which, in the opinion of its management,
individually or in the aggregate, would have a material adverse affect on its
results of operations, financial condition, or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not required.
4
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
All of the common stock of Telmark is indirectly owned by Agway. There is no
public market for such stock and none is expected to develop. During the years
ended June 30, 1997, and 1996, Telmark declared no dividends with respect to its
common stock. Under a loan covenant, dividends are prohibited to the extent they
exceed 75% of net income for the period beginning on January 1, 1997, through
the date of determination, inclusive. As of June 30, 1997, $3,291,000 of
retained earnings were free of this restriction.
ITEM 6. SELECTED FINANCIAL DATA
Not required.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1997 COMPARED TO 1996. Telmark's net income increased by $1.1 million (16.8%)
from $6.8 million in 1996 to $7.9 million in 1997. The increase is principally
due to a larger outstanding portfolio of leases during the year.
Revenue is recognized over the term of the Company's outstanding leases.
Increases in the lease portfolio resulting from new booked volume of $223.1
million in 1997 and $175.0 million in 1996 exceeded lease reductions from
collection and net bad debt expense of $151.9 million and $133.5 million in 1997
and 1996, respectively. The increase in new booked volume in excess of
collections and bad debt provisions has the effect of increasing total revenues.
Total revenues of $56.9 million in 1997 represents an increase of $8.3 million
(17.1%) as compared to $48.6 million in 1996. The increase is attributable in
part to $71.2 million (19.0%) increase in net leases and notes during 1997 as
compared to 1996. Interest and finance charges, as a percentage of average net
leases and notes, increased slightly from 12.9% in 1996 to 13.0% in 1997. During
the same period, the average cost of interest paid on debt remained unchanged at
7.5%.
Selling, general, and administrative expenses of $12.5 million in 1997 increased
by $2.7 million (27.4%) compared to $9.8 million in 1996. Those increases were
primarily the result of additional personnel, incentives paid relating to the
additional new business booked, and advertising. Other administrative expenses
remained low due to tight expense control. While the average cost of interest
paid on debt remained unchanged, interest expense of $23.5 million in 1997
represents an increase of $3.2 million (15.7%) compared to $20.3 million in
1996, due to increased borrowings required to finance the growth of the lease
portfolio.
The provision for credit losses of $7.9 million in 1997 represents an increase
of $0.9 million (13.5%) compared to $7 million in 1996. This increase is based
on the Company's analysis of reserves required to provide for uncollectible
receivables. Telmark's allowance for credit losses is determined by a periodic
review of the lease portfolio, including analysis of delinquent accounts,
current economic conditions, estimated residual values, and creditworthiness of
customers. Reserves are established at a level sufficient to cover estimated
losses in the portfolio. The basis for the amount of reserves is a comprehensive
review of all large and non-earning accounts and a quantitative and qualitative
review of the entire portfolio based on prior experience. During 1996 and 1997,
the general economy remained strong and the total value of non-earning accounts
was reduced from $2.9 million in 1996 to $2.7 million in 1997. However,
management believes that it was prudent to increase the level of reserve to
approximately $24.0 million because of the increase in the size of the overall
lease portfolio over the prior year. Accordingly, the provision for credit
losses increased.
5
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)
LIQUIDITY
The Company has principally financed its operations and financing for new leases
through repayment of existing leases and other operating cash flow, borrowings
under lines of credit, private placements of debt with institutional investors,
sale of debentures to the public, sale of leases, and lease-backed asset
securitization. Cash flows from operations were $16.0 million, $13.2 million,
and $12.0 million for 1997, 1996, and 1995 respectively. Other cash used in
investing was generated from financing activities. Management conducts ongoing
discussions and negotiations with existing and potential lenders for its future
financing needs. See footnote 5 to the Consolidated Financial Statements
"Borrowing under Lines of Credit and Term Debt."
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
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PAGES
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TELMARK INC. AND CONSOLIDATED SUBSIDIARIES:
Report of Independent Accountants.................................................................... 7
Consolidated Balance Sheets, June 30, 1997 and 1996.................................................. 8
Consolidated Statements of Income and Retained Earnings,
for the years ended June 30, 1997, 1996 and 1995............................................ 9
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 1997, 1996 and 1995........ 10
Notes to Consolidated Financial Statements........................................................... 11
</TABLE>
6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Telmark Inc.:
We have audited the accompanying balance sheets of TELMARK INC. (a wholly-owned
subsidiary of Agway Holdings, Inc.) and Consolidated Subsidiaries as of June 30,
1997 and 1996, and the related Consolidated statements of income and retained
earnings and cash flows for the years ended June 30, 1997, 1996 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financing statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Telmark Inc. and
Consolidated Subsidiaries as of June 30, 1997 and 1996 and the results of their
operations and their cash flows for the years ended June 30, 1997, 1996 and 1995
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Syracuse, New York
August 8, 1997
7
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
------------ ------------
<S> <C> <C>
Leases and notes, net........................................................ $445,769,893 $374,561,114
Investments.................................................................. 10,807,417 10,038,421
Equipment, net............................................................... 1,055,377 1,061,672
Deferred income taxes........................................................ 10,643,896 11,903,065
Income taxes prepaid to Agway Inc............................................ 979,599 0
Other assets................................................................. 937,120 634,018
------------ ------------
Total Assets................................................................. $470,193,302 $398,198,290
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
1997 1996
------------ ------------
Borrowings under lines of credit and term debt.............................. $339,482,406 $273,000,427
Subordinated Debentures..................................................... 31,043,938 24,258,200
Accounts payable............................................................ 4,398,757 4,645,459
Payable to Agway Inc........................................................ 712,678 9,521,703
Income taxes payable to Agway Inc........................................... 0 2,135,917
Accrued expenses, including interest of
$4,785,997 - 1997 and $4,061,387 - 1996 .............................. 8,149,485 6,122,135
------------ ------------
Total Liabilities........................................................... 383,787,264 319,683,841
------------ ------------
Commitments & Contingencies
Common Stock, $1 par value;
authorized 1,000,000 shares;
issued and outstanding 400,000 shares................................. 400,000 400,000
Additional paid-in capital.................................................. 31,600,000 31,600,000
Retained earnings........................................................... 54,406,038 46,514,449
------------ ------------
Total Shareholder's Equity.................................................. 86,406,038 78,514,449
------------ ------------
$470,193,302 $398,198,290
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME AND RETAINED EARNINGS
FISCAL YEARS ENDED JUNE 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
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<S> <C> <C> <C>
Revenues:
Interest and finance charges........ $55,450,925 $47,241,547 $40,668,073
Other service fees and other income. 1,492,165 1,385,011 1,273,999
----------- ----------- ------------
Total revenues.................. 56,943,090 48,626,558 41,942,072
----------- ----------- ------------
Expenses:
Interest expense.................... 23,485,503 20,305,365 17,674,736
Provision for credit losses......... 7,947,000 7,000,000 6,812,695
Selling, general and administrative 12,507,095 9,819,581 8,182,331
----------- ----------- ------------
Total expenses.................. 43,939,598 37,124,946 32,669,762
----------- ----------- ------------
Income before income taxes...... 13,003,492 11,501,612 9,272,310
Provision for income taxes............... 5,111,903 4,744,778 4,239,990
----------- ------------ ------------
Net income...................... 7,891,589 6,756,834 5,032,320
Retained earnings, beginning of year..... 46,514,449 39,757,615 35,043,295
Dividends to parent ..................... 0 0 (318,000)
------------ ----------- ------------
Retained Earnings, End of Year........... $54,406,038 $46,514,449 $39,757,615
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
9
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED JUNE 30, 1997, 1996, AND 1995
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................. $ 7,891,589 $ 6,756,834 $ 5,032,320
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization ...... 529,016 450,453 256,992
Deferred taxes ..................... 1,259,169 1,893,115 (929,732)
Patronage refund received in stock . (768,996) (659,694) (1,436,651)
Provision for doubtful accounts .... 7,947,000 7,000,000 6,812,695
Changes in assets and liabilities:
Other assets .................. (303,100) 261,966 (120,365)
Payables ...................... (246,702) (2,178,295) 1,106,381
Income taxes payable .......... (3,115,516) (1,877,774) (751,267)
Accrued expenses .............. 2,027,350 915,670 631,633
-------------- -------------- --------------
Net cash flow provided by
operating activities .......... 15,219,810 12,562,275 10,602,006
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Leases originated ...................... (223,061,417) (174,998,949) (170,494,948)
Leases repaid .......................... 143,905,638 126,529,122 107,648,633
Purchases of equipment ................. (522,723) (1,127,445) (735,302)
Proceeds from sale of equipment ........ 0 1,290,252 0
Proceeds from sale of investments ...... 0 0 457,948
-------------- -------------- --------------
Net cash flow used
in investing activities ....... (79,678,502) (48,307,020) (63,123,669)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ............ 155,844,442 52,000,000 98,000,000
Repayment of notes payable ............. (89,296,526) 34,622,222) (58,022,222)
Repayment of capital lease ............. (65,937) (46,968) 0
Repayment of subordinated notes payable 0 (27,000,000) 0
Proceeds from subordinated notes payable 0 0 6,500,000
Net change in payable to Agway Inc. .... (8,809,025) 2,329,735 1,899,885
Proceeds from sale of debentures ....... 6,785,738 16,084,200 4,462,000
Proceeds from capital contribution ..... 0 27,000,000 0
Cash dividends paid .................... 0 0 (318,000)
-------------- -------------- --------------
Net cash flow provided by
financing activities ........ 64,458,692 35,744,745 52,521,663
-------------- -------------- --------------
Net change in cash .......................... 0 0 0
Cash at beginning of year ................... 0 0 0
Cash at end of year ......................... $ 0 $ 0 $ 0
============== ============== ==============
Cash paid during period for:
Interest ........................... $ 22,760,893 $ 19,927,395 $ 16,983,499
Taxes .............................. $ 6,968,250 $ 4,729,205 $ 5,941,459
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
10
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Operations
Telmark Inc. ("The Company") is in the business of leasing agricultural
related equipment, vehicles, and buildings. Telmark's customers are farmers and
other rural businesses as well as manufacturers and independent dealers that
serve the agricultural marketplace. The Company is indirectly owned and
controlled by Agway Inc. ("Agway"), one of the largest agricultural supply and
services cooperatives in the United States. Telmark is a direct wholly-owned
subsidiary of Agway Holdings, Inc. ("Holdings"), a subsidiary of Agway. Telmark
operates throughout the continental United States and the Company's field
representatives serve customers in 27 states including Alabama, Connecticut,
Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Vermont, Virginia, West Virginia and Wisconsin.
Basis of Consolidation
The consolidated financial statements include the accounts of all wholly
owned subsidiaries. All significant intercompany transactions and balances have
been eliminated in consolidation.
Cash and Equivalents
The Company considers all investments with a maturity of three months or
less when purchased to be cash equivalents. Certain cash accounts amounting to
$716,553 at June 30, 1997 related to securitized leases are held in segregated
cash accounts pending distribution to the lease-backed note holders and are
restricted in their use.
Lease Accounting
Completed lease contracts, which qualify as direct finance leases as
defined by Statement of Financial Accounting Standards ("SFAS") No. 13
"Accounting for Leases," are accounted for by recording on the balance sheet the
total future minimum lease payments receivable plus the estimated unguaranteed
residual value of leased equipment less the unearned interest and finance
charges. Unearned interest and finance charges represents the excess of the
total future minimum lease payments plus the estimated unguaranteed residual
value expected to be realized at the end of the lease term over the cost of the
related equipment. Interest and finance charge income is recognized as revenue,
by using the interest method over the term of the lease, which for most
commercial and agricultural leases is 60 months or less with a maximum of 180
months for buildings. Income recognition is suspended on all leases and notes
which become past due greater than 120 days. As of June 30, 1997, and 1996, the
recognition of interest income was suspended on leases and notes totaling
$2,735,128 and $2,890,781, respectively.
Gains on lease sales are reduced for estimated future servicing fees and
estimated losses under the recourse provisions of the sale (limited to 7.5% of
the sale proceeds). Servicing amounts are amortized over the life of the sold
leases.
Initial direct costs incurred in consummating a lease are capitalized as
part of the investment in direct finance leases and amortized over the lease
term as a reduction in the yield. Initial direct costs incurred were $5,353,850,
$4,747,801, and $4,931,842 for the years ended June 30, 1997, 1996, and 1995,
respectively.
Provisions for credit losses are charged to income in amounts sufficient
to maintain the allowance at a level considered adequate to cover losses in the
existing portfolio. The net investment in a lease is charged against the
allowance for credit losses when determined to be uncollectible.
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
(SFAS 125), effective for the Company on January 1,1997, provides new methods of
accounting and reporting for transfers and servicing of financial assets and
extinguishments of liabilities. The Company has applied SFAS 125 to
securitization transactions occurring after January 1, 1997. The effect of
adopting SFAS 125 has not had a material effect on the Company's results of
operation, financial position or liquidity.
11
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT )
Investments
Investments comprise capital stock of a cooperative bank acquired from the
bank at par or stated value. This stock is not traded and is historically
redeemed on a periodic basis by the bank at cost. By its nature, this stock is
held for redemption and is reported at cost. Dividends on this stock are
recorded as a reduction of interest expense and totalled $1,098,566, $942,420,
and $635,298 for the years ended June 30, 1997, 1996, and 1995, respectively.
Impairment of Long Lived Assets
In the first quarter of fiscal 1997, the Company adopted Financial
Accounting Standards, Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be measured and recorded on long-lived assets, whether
these assets are held for disposal or used in operations, when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. There was no effect
when the Company adopted Statement 121.
Equipment
Depreciation is calculated using the straight-line method over the
estimated useful lives of the equipment.
Advertising Costs
The Company generally expenses advertising costs as incurred. Advertising
expense for the years ended June 30, 1997, 1996, and 1995, was approximately
$829,300, $607,500, and $216,800.
Income Taxes
The Company provides for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the liability method specified by SFAS No. 109, deferred
tax assets and liabilities are based on the difference between the financial
statement and tax basis of assets and liabilities as measured by the tax rates
which are anticipated to be in effect when these differences reverse. The
deferred tax provision represents the net change in the assets and liabilities
for deferred tax.
The Company is included in a consolidated federal tax return filed by
Agway Inc.. Under the Agway/Telmark tax sharing agreement, the provision for
income taxes and related credits and carry forwards are calculated on a separate
company basis and billed to the Company as appropriate on an interim basis. The
Company files separate state tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
12
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. LEASES, NOTES AND ALLOWANCE FOR CREDIT LOSSES
Leases and notes as of June 30 were as follows:
1997 1996
------------- -------------
Leases:
Commercial and agricultural $ 596,390,764 $ 505,563,322
Leasing to Agway Inc.
and subsidiaries 459,886 591,255
------------- -------------
596,850,650 506,154,577
Retail installment loans 16,681,989 4,770,950
------------- -------------
Total leases and notes $ 613,532,639 $ 510,925,527
============= =============
Net investment in leases and notes at June 30 are summarized as follows:
1997 1996
------------- ------------
Leases and notes $ 613,532,639 $ 510,925,527
Unearned interest and finance charges (152,590,770) (124,230,756)
Net deferred origination costs 8,841,537 7,642,305
------------- -------------
Net investment 469,783,406 394,337,076
Allowance for credit losses (24,013,513) (19,775,962)
------------- -------------
Leases and notes, net $ 445,769,893 $ 374,561,114
============= =============
Included within the above leases and notes is unguaranteed estimated residual
values of leased property approximating $63,670,000 and $54,400,000 at June 30,
1997, and 1996, respectively.
Contractual maturities of leases and notes were as follows at June 30, 1997:
Leases Retail
Commercial To Agway Installment
and Inc. and Loans and
Agricultural Subsidiaries Miscellaneous Total
-------------- ------------ ------------- -------------
1998 $ 179,984,150 $ 149,847 $ 6,920,106 $187,054,103
1999 142,994,545 72,888 4,887,623 147,955,056
2000 103,631,449 72,888 2,609,697 106,314,034
2001 65,440,095 80,728 1,603,304 67,124,127
2002 37,657,099 50,878 553,666 38,261,643
Thereafter 66,683,426 32,657 107,593 66,823,676
-------------- ------------ ------------- -------------
Totals $ 596,390,764 $ 459,886 $ 16,681,989 $613,532,639
============== ============ ============= =============
Changes in the allowance for credit losses for the years ended June 30 were
as follows:
1997 1996 1995
----------- ----------- -----------
Balance, beginning of year $19,775,962 $15,331,008 $12,433,825
Provision for credit losses
charged to operations 7,947,000 7,000,000 6,812,695
Charge-offs (5,480,557) (4,611,546) (6,104,708)
Recoveries 1,771,108 2,056,500 2,189,196
----------- ----------- -----------
Balance, end of year $24,013,513 $19,775,962 $15,331,008
=========== ============ ============
13
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. EQUIPMENT
Equipment, at cost, including capital leases, consisted of the following
at June 30:
<TABLE>
<CAPTION>
1997 Owned Leased Combined
---- ------------ ---------- -------------
<S> <C> <C> <C>
Office and other equipment................. $ 2,016,769 $ 202,950 $ 2,219,719
Less accumulated depreciation
and amortization................... 1,045,954 118,388 1,164,342
------------ ---------- -------------
$ 970,815 $ 84,562 $ 1,055,377
============ =========== =============
1996
----
Office and other equipment................. $ 1,735,256 $ 202,950 $ 1,938,206
Less accumulated depreciation
and amortization................... 825,796 50,738 876,534
------------ ----------- -------------
$ 909,460 $ 152,212 $ 1,061,672
============ =========== =============
</TABLE>
4. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Currently payable:
Federal.................. $ 3,214,446 $ 1,998,193 $ 4,373,703
State.................... 638,288 853,470 796,019
Deferred...................... 1,259,169 1,893,115 (929,732)
------------- ------------- ------------
$ 5,111,903 $ 4,744,778 $ 4,239,990
============= ============= ============
</TABLE>
The Company's effective income tax rate on pre-tax income differs from the
federal statutory tax rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate ........ 34.0% 34.0% 35.0%
Tax effects of:
State taxes, net of federal benefit 5.4 6.7 7.2
Adjustment of prior years accruals ( .5) .2 4.0
Other items........................... .4 .4 ( .5)
----- ----- -----
Effective income tax rate ................ 39.3% 41.3% 45.7%
===== ===== =====
</TABLE>
14
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONT.)
The components of the net deferred tax asset as of June 30 were as follows:
1997 1996
------------- -------------
Deferred tax assets:
Lease receivable reserves...... $ 9,514,153 $ 7,356,164
Difference between book and
tax treatment of leases..... 0 3,582,485
Other reserves................. 812,939 717,038
Alternative minimum tax
credit carry forward........ 1,117,817 0
Other.......................... 469,370 430,887
------------- -------------
Total deferred tax assets 11,914,279 12,086,574
------------- -------------
Deferred tax liabilities:
Difference between book and
tax treatment of leases.... 1,086,874 0
Other.......................... 183,509 183,509
------------- -------------
Total deferred tax liabilities 1,270,383 183,509
------------- -------------
Net deferred tax asset $ 10,643,896 $ 11,903,065
============= =============
Based on the Company's history of taxable earnings and its expectations for the
future, management has determined that operating income will more likely than
not be sufficient to recognize its deferred tax assets. At June 30, 1997 the
Company's federal AMT credit can be carried forward indefinitely.
5. BORROWINGS UNDER LINES OF CREDIT AND TERM DEBT
As of June 30, 1997, the Company had two separate credit facilities available
from banks which allow the Company to borrow up to an aggregate of $204,000,000.
An uncommitted short-term line of credit agreement permits the Company to borrow
up to $4,000,000 on an unsecured basis with interest paid upon maturity. The
line bears interest at money market variable rates. A committed $200,000,000
partially collateralized revolving term loan facility permits the Company to
draw short-term funds bearing interest at money market rates or draw long-term
debt at rates appropriate for the term of the note drawn. The total amount
outstanding as of June 30, 1997, under the short-term line of credit and the
revolving term loan facility was $4,000,000 and $190,900,000, respectively.
On May 28, 1997, the Company, through a newly created wholly owned special
purpose subsidiary, Telmark Lease Funding Corp. I, issued $23,998,609 of Class A
lease-backed notes and $1,945,833 of Class B lease-backed notes to three
insurance companies. The subsidiary pays interest at 6.58% on the Class A notes
and 7.01% on the Class B notes. The notes are collateralized by 1,165 leases
having an aggregate present value of contractual lease payments equal to the
principal balance of the notes, and the notes are further secured by the
residual values of these leases. Final scheduled maturity of the notes is
December 15, 2004.
Telmark borrows under its short-term line of credit agreement and its revolving
term agreement from time to time to fund its operations. Short-term debt serves
as interim financing between the issuances of long-term debt. Telmark renews its
lines of credit annually. The $4,000,000 line of credit has been renewed through
December 1997. The $200,000,000 revolving term agreement loan facility is
available through February 1, 1998. The Company believes it has sufficient lines
of credit in place to meet interim funding needs.
15
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. BORROWINGS UNDER LINES OF CREDIT AND TERM DEBT (CONT.)
At June 30, term debt consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
Notes payable to banks due in varying amount and dates through
July 15, 2000 with interest ranging from 5.95% to 8.40%........ $194,900,000 $146,000,000
Unsecured notes payable to insurance companies due in varying
amount and dates through May 15, 2004, with interest
ranging from 5.90% to 8.88%.................................... 119,722,223 126,844,445
Lease-backed notes payable to insurance companies in varying
amounts and dates through December 15, 2004, with interest
rates ranging from 6.58% to 7.01%.............................. 24,770,138 0
Capital lease payable in annual installments of $78,720
due in 1999.................................................... 90,045 155,982
------------ -------------
Total Term Debt.............................................. 339,482,406 273,000,427
Subordinated debentures due in varying amount and dates through
March 31, 2002, with interest ranging from 6.00% to 8.50%...... 31,043,938 24,258,200
------------ ------------
Total Debt................................................... $370,526,344 $297,258,627
============ ============
</TABLE>
The notes payable to banks represents the portion outstanding of the amount
available under two credit facilities $204,000,000 outstanding at June 30, 1997,
and 1996, respectively. The notes are partially collateralized by the Company's
investment in a cooperative bank having a book value of $10,807,417 and
$10,038,421 at June 30, 1997, and 1996, respectively. The subordinated
debentures represent the outstanding balance of registered debentures offered to
and held by the general public. The debentures are unsecured and are subordinate
to all senior debt of the Company. The carrying amounts and estimated fair
values of the Company's significant financial instruments held for purposes
other than trading at June 30, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Liabilities:
Long-Term Debt (excluding capital leases) $339,392,361 $344,972,085 $272,844,445 $274,016,881
Subordinated Debentures 31,043,937 30,946,003 24,258,200 24,105,602
</TABLE>
The aggregate amounts of notes payable, capital leases, and Subordinated
Debentures maturing after June 30, 1997, are as follows:
<TABLE>
<CAPTION>
Notes Payable
------------------------------ Capital Subordinated
Fiscal Year Ending June 30, Bank Ins. Companies Lease Debentures Total
------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1998 $ 74,900,000 $ 58,125,583 $ 78,720 $ 11,018,895 $144,123,198
1999 73,000,000 30,603,023 19,680 0 103,622,703
2000 43,000,000 9,477,105 0 17,007,280 69,484,385
2001 4,000,000 16,754,460 0 0 20,754,460
2002 0 10,461,593 0 3,017,763 13,479,356
Thereafter 0 19,070,597 0 0 19,070,597
------------ -------------- ------------ ------------ ------------
194,900,000 144,492,361 98,400 31,043,938 370,534,699
Imputed Interest 0 0 (8,355) 0 (8,355)
------------ -------------- ------------- ------------ ------------
$194,900,000 $ 144,492,361 $ 90,045 $ 31,043,938 $370,526,344
============ ============== ============= ============ ============
</TABLE>
The Company has various loan covenants, of which the most restrictive is to
maintain a tangible net worth of at least $70,000,000, and the debt to equity
ratio (as defined) no greater than five to one. In addition, dividend
distributions and restricted investments (as defined) made after January 1,
1997, are prohibited to the extent they exceed 75% of net income for the period
beginning on January 1, 1997, through the date of determination, inclusive. As
of June 30, 1997, $3,291,000 of retained earnings were free of this restriction.
16
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE BENEFIT PLANS
Employees of Telmark participate in Agway's employee benefit plans, which
include a defined benefit retirement plan, a defined contribution 401(K) plan, a
medical and dental benefit plan, a postretirement medical plan, and a life and
health insurance plan. Total benefit costs under these plans are allocated by
Agway to Telmark primarily based on payroll costs. Benefit costs for those plans
included in selling, general and administrative expense were approximately
$1,189,000, $820,000, and $649,000 for the periods ended June 30, 1997, 1996,
and 1995, respectively.
7. RELATED PARTY TRANSACTIONS
Cash Management
In lieu of having its own cash account the Company utilizes the depository
accounts of its parent, Agway Inc., drawing checks against these accounts and
making deposits to them. The balance in the Payable to Agway Inc. is dependant
on the timing of deposits and the drawing of checks.
Inter-Company Transactions Selected amounts related to transactions with
Agway Inc. and Subsidiaries are separately disclosed in the financial
statements. Certain other transactions for the years ended June 30 with Agway
Inc. and Subsidiaries were approximately:
(Revenue) Expense 1997 1996 1995
- ----------------- ----------- ----------- ----------
Interest and finance charges............. $ (38,000) $ (52,000) $ (259,000)
Administrative and general expense....... 1,780,000 1,828,000 3,034,000
Interest and finance charges are earned on equipment leases to Agway Inc. and
subsidiaries. The administrative and general expense caption described above
includes certain shared expenses incurred by Agway Inc. on behalf of the
Company, including the corporate insurance program, information services,
payroll and accounts payable administration and facilities management. These
expenses were allocated to the Company and management believes the methodology
used is reasonable.
In 1996, the Board of Directors of Agway approved a Capital contribution of
$27,000,000 from Holdings to Telmark. There were no other changes in paid in
Capital or Common Stock in the three years ended June 30, 1997.
8. COMMITMENTS & CONTINGENCIES
COMMITMENTS
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since some
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Outstanding commitments to extend lease financing at June 30, 1997, and 1996,
approximated $12,900,000 and $14,800,000, respectively.
During 1994 and prior, the Company entered into lease sale contracts which
contain limited recourse provisions which are limited to 7.5% of the sale
proceeds. At June 30, 1997, the Company was contingently liable for
approximately $2,000,000 under the limited recourse provisions. The Company
includes this potential liability in establishing its allowance for credit
losses.
LEGAL PROCEEDINGS
The Company is not a party to any litigation or legal proceedings pending, or to
the best of its knowledge threatened, which, in the opinion of its management,
individually or in the aggregate, would have a material adverse affect on its
results of operations, financial position or liquidity.
17
<PAGE>
TELMARK INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR 2000
The Company has and will continue to make certain investments in its software
systems and applications to ensure the Company is year 2000 compliant; the
financial impact to the Company has not been and is not anticipated to be
material to its results of operations, financial position, or liquidity.
9. FINANCIAL INSTRUMENTS
Off Balance-Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of its business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit not
recognized in the balance sheet. In the event of non-performance by the other
party to the financial instrument, the Company's credit risk is limited to the
amount of Telmark's commitment to extend credit. The Company's exposure to
credit loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit is represented by the contractual
amount of the instrument. The Company uses the same credit and collateral
policies in making commitments as it does for on-balance sheet instruments.
Market Risk
Telmark's business is concentrated in agriculture in the New England,
Mid-Atlantic, and Midwest states with approximately 75% of its leases directly
related to production agriculture. At June 30, 1997, approximately 49% of the
Company's net lease investment was in the states of Michigan, New York, Ohio,
and Pennsylvania. Adverse developments in any of these areas of concentration
could affect operating results adversely.
The Company endeavors to limit the effects of changes in interest rates by
matching as closely as possible, on an ongoing basis, the maturity and repricing
characteristics of funds borrowed to finance its leasing activities with the
maturity and repricing characteristics of its lease portfolio. However, a rise
in interest rates would increase that portion of the debt which is not precisely
matched to the characteristics of the portfolio and could lower the value of the
Company's outstanding leases in the secondary market.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not Required.
ITEM 11. EXECUTIVE COMPENSATION
Not Required.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not Required.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Required.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE
(A) INDEX TO DOCUMENT LIST LOCATION
--------
(1) FINANCIAL STATEMENTS
Among the responses to this Item 14(a)(1) are the following
financial statements which are included in Item 8.
(i) Report of Independent Accountants............................7
(ii) Consolidated Balance Sheets, June 30, 1997 and 1996..........8
(iii) Consolidated Statements of Income and Retained Earnings,
for the years ended June 30, 1997, 1996, and 1995............9
(iv) Consolidated Statements of Cash Flow,
for the years ended June 30, 1997, 1996, and 1995...........10
(v) Notes to the Consolidated Financial Statements..............11
(2) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted for the reason that they are not
required or are not applicable, or the required information
is shown in the financial statements or notes thereto.
(3) THE FOLLOWING REQUIRED EXHIBITS ARE HEREBY INCORPORATED BY REFERENCE
TO PREVIOUSLY FILED REGISTRATION STATEMENTS FILED AS SPECIFIED.
3 - ARTICLES OF INCORPORATION
3(a) - Certificate of Incorporation of Telmark Inc. dated
June 4, 1964, as amended September 8, 1964; January 15,
1975; and June 16, 1987, filed by reference to Exhibit 3
of the Registration Statement (Form S-1), File No.
33-70732, dated October 22, 1993.
BY-LAWS
3(b) - By-laws of Telmark Inc. as amended September 19, 1995,
filed by reference to Exhibit 3 of the Registration
Statement (Form 10-K) dated August 23, 1996.
4 - INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4(a) - The Indenture dated as of September 30, 1993, between
Telmark Inc. and OnBank & Trust Co. of Syracuse,
New York, Trustee, filed by reference to Exhibit 4
of the Registration Statement (Form S-1), File No.
33-70732, dated October 22, 1993.
4(b) - Telmark Inc. Board of Directors resolutions dated as
of June 21, 1995, authorizing the issuance of
Debentures under the Indenture filed by reference to
Exhibit 4 of the post effective Amendment No. 1 to the
Registration Statement (Form S-1), File No. 33-84442,
dated August 28, 1995.
10 - MATERIAL CONTRACTS
10(a)- The Agreement dated as of October 1, 1986 among
Agway Inc., Agway Financial Corporation, Telmark Inc.,
and Agway Holdings, Inc., as amended by Addendum to
Agreement effective June 29, 1990, filed by reference to
Exhibit 10 of the Registration Statement (Form S-1),
File No. 33-70732, dated October 22, 1993.
(B) REPORT ON FORM 8-K
No reports on Form 8-K for the three months ended June 30,
1997, have been filed.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TELMARK INC.
(Registrant)
By DANIEL J. EDINGER
President
(Principal Executive Officer)
Date 8/22/97
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
DANIEL J. EDINGER President 8/22/97
(Principal Executive Officer)
PETER J. O'NEILL Treasurer and Chairman of the Board 8/22/97
and Director
(Principal Financial Officer
& Principal Accounting Officer)
SAMUEL F. MINOR Director 8/22/97
GARY K. VANSLYKE Director 8/22/97
WILLIAM W. YOUNG Director 8/22/97
STANLEY A. WEEKS Director 8/22/97
CHRISTIAN F. WOLFF, JR. Director 8/22/97
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 613,532,639
<ALLOWANCES> 24,013,513
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,219,719
<DEPRECIATION> 1,164,342
<TOTAL-ASSETS> 470,193,302
<CURRENT-LIABILITIES> 0
<BONDS> 370,526,344
0
0
<COMMON> 400,000
<OTHER-SE> 86,006,038
<TOTAL-LIABILITY-AND-EQUITY> 470,193,302
<SALES> 0
<TOTAL-REVENUES> 56,943,090
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,947,000
<INTEREST-EXPENSE> 23,485,503
<INCOME-PRETAX> 13,003,492
<INCOME-TAX> 5,111,903
<INCOME-CONTINUING> 7,891,589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,891,589
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
