<PAGE>
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 March 31, 1996 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 0-20405
------------------------------------------------------
IKON CAPITAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2493042
- --------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1738 Bass Road, Macon, Georgia 31210
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(912) 471-2300
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
ALCO CAPITAL RESOURCE, INC.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
* Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1996.
Common Stock, $.01 par value per share 1,000 shares
Registered Debt Outstanding as of April 30, 1996 $751,500,000
The registrant, an indirect wholly owned subsidiary of Alco Standard Corporation
("Alco"), meets the conditions set forth in General Instruction H(1)(a) and (b)
of Form 10-Q and is, therefore, filing with the reduced disclosure format
contemplated thereby.
<PAGE>
INDEX
IKON CAPITAL, INC.
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Balance Sheets--March 31, 1996 and
September 30, 1995
Statements of Income--Three months ended
March 31, 1996 and March 31, 1995 and
Six months ended March 31, 1996 and March 31, 1995
Statements of Cash Flows--Six months ended
March 31, 1996 and March 31, 1995
Notes to Financial Statements--March 31, 1996
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1: Financial Statements
- ----------------------------
IKON CAPITAL, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Assets
Investments in leases:
Direct financing leases $ 1,003,699 $ 824,876
Less: Unearned income (162,728) (132,428)
------------- -------------
840,971 692,448
Funded leases, net 284,204 178,948
------------- -------------
1,125,175 871,396
Accounts receivable 32,263 26,647
Due from Alco 26,577
Prepaid expenses and other assets 8,480 7,648
Leased equipment-operating rentals at cost
less accumulated depreciation of:
3/96 - $11,659 9/95 - $5,912 28,163 25,247
Property and equipment at cost, less
accumulated depreciation of:
3/96 - $2,185 9/95 - $1,869 5,387 4,660
------------- -------------
Total assets $ 1,199,468 $ 962,175
============= =============
Liabilities and shareholder's equity
Liabilities:
Accounts payable and accrued expenses $ 13,494 $ 10,840
Accrued interest 16,885 12,549
Due to Alco 22,076
Notes payable to Banks 193,000 173,000
Medium Term Notes 741,500 602,000
Deferred income taxes 52,706 33,898
------------- -------------
Total liabilities 1,039,661 832,287
Shareholder's equity:
Common Stock - $.01 par value, 1,000 shares
authorized, issued, and outstanding
Contributed capital 99,415 82,415
Retained earnings 60,392 47,473
------------- -------------
Total shareholder's equity 159,807 129,888
------------- -------------
Total liabilities and shareholder's equity $ 1,199,468 $ 962,175
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
IKON CAPITAL, INC.
STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $28,180 $17,614 $53,540 $33,797
Rental income 3,346 1,267 6,577 1,834
Interest on Alco income tax deferrals 2,122 1,500 4,011 2,796
Other income 1,721 1,195 3,089 2,135
---------- ---------- ---------- ----------
35,369 21,576 67,217 40,562
Expenses:
Interest $13,696 8,149 27,113 15,200
General and administrative 10,487 6,599 18,796 11,908
---------- ---------- ---------- ----------
24,183 14,748 45,909 27,108
Gain on sale of lease receivables 277 292 589 573
---------- ---------- ---------- ----------
Income before income taxes 11,463 7,120 21,897 14,027
Provision for income taxes 4,700 2,683 8,978 5,377
---------- ---------- ---------- ----------
Net income $6,763 $4,437 $12,919 $8,650
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
IKON CAPITAL, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Operating activities:
Net income $12,919 $8,650
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 6,532 1,849
Provision for deferred taxes 18,808 2,001
Gain on sale of lease receivables (589) (573)
Changes in operating assets and liabilities:
Accounts receivable (5,616) (2,593)
Prepaid expenses and other assets (243) (804)
Accounts payable and accrued expenses 2,654 2,109
Accrued interest 4,336 3,199
---------- ---------
Net cash provided 38,801 13,838
---------- ---------
Investing activities:
Purchases of leased equipment for operating rentals, net (9,132) (14,335)
Purchases of property and equipment, net of disposals (1,043) (1,481)
Direct financing leases:
Additions (365,156) (271,502)
Cancellations 60,577 43,256
Collections 129,602 86,186
Proceeds from sale 26,454 33,586
Funded leases:
Additions (163,217) (66,464)
Cancellations 18,462 10,589
Collections 39,499 19,936
---------- ---------
Net cash used (263,954) (160,229)
---------- ---------
Financing activities:
Proceeds from bank borrowings 60,000
Payments on bank borrowings (40,000) (50,000)
Proceeds from issuance of medium term notes 169,500 203,000
Payments on medium term notes (30,000)
Contributed capital 17,000 7,000
---------- ---------
Net cash provided 176,500 160,000
---------- ---------
(Increase) decrease in amounts due to Alco (48,653) 13,609
Due from (to) Alco at beginning of period 26,577 (11,419)
---------- ---------
Due (to) from Alco at end of period ($22,076) $2,190
========== =========
</TABLE>
See notes to financial statements.
<PAGE>
IKON Capital, Inc.
Notes to Financial Statements
March 31, 1996
Note 1: Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the financial statements and
footnotes thereto included in the Company's report on Form 10-K for the year
ended September 30, 1995. Certain prior year amounts have been reclassified to
conform with the current year presentation.
Note 2: Medium Term Note Program
------------------------
During the six months ended March 31, 1996, IKON Capital issued an
additional $169.5 million under its medium term note program. At March 31,
1996, $741.5 million of medium term notes remain outstanding with a weighted
average interest rate of 6.7%, leaving $728.5 million available under this
program.
Note 3: Asset Securitization
--------------------
Under its $125 million asset securitization agreement commenced in
September 1994, IKON Capital sold $26.5 million of direct financing leases
during the first half of fiscal 1996, replacing leases which had been liquidated
during the period and recognized a pretax gain of $589,000. Under the terms of
the sales agreement, the Company continues to service the sold lease portfolio.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Pursuant to General Instruction H(2) (a) of Form 10-Q, the following analysis of
the results of operations is presented in lieu of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Three Months Ended March 31, 1996 Compared
------------------------------------------
with the Three Months Ended March 31, 1995
------------------------------------------
Comparative summarized results of operations for the three months ended March
31, 1996 and 1995 are set forth in the table below. This table also shows the
increase in the dollar amounts of major revenue and expense items between
periods, as well as the related percentage increase/decrease.
<TABLE>
<CAPTION>
(dollars in thousands) Three Months
Ended March 31 Increase (Decrease)
---------------- -------------------
1996 1995 Amount Percent
------ ------ -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $28,180 $17,614 $10,566 60.0%
Rental income 3,346 1,267 2,079 164.1%
Interest on Alco income
tax deferrals 2,122 1,500 622 41.5%
Other income 1,721 1,195 526 44.0%
------- ------- -------
35,369 21,576 13,793 63.9%
Expenses:
Interest 13,696 8,149 5,547 68.1%
General and administrative 10,487 6,599 3,888 58.9%
------- ------- -------
24,183 14,748 9,435 64.0%
Gain on sale of lease
receivables 277 292 (15) (5.1)%
------- ------- -------
Income before taxes 11,463 7,120 4,343 61.0%
Provision for income taxes 4,700 2,683 2,017 75.2%
------- ------- -------
Net income $ 6,763 $ 4,437 $ 2,326 52.4%
======= ======= =======
</TABLE>
Revenues
- --------
Total revenues increased $13.8 million or 63.9% in the second quarter of fiscal
1996 compared to the second quarter of fiscal 1995. Approximately 76.6% or
$10.6 million of this increase in revenues was a result of increased lease
finance income due to continued growth in the portfolio of direct financing and
funded leases. During the twelve month period from March 31, 1995 to March 31,
1996, the portfolio grew at a 65.5% rate, net of lease receivables that were
sold in asset securitization transactions.
Effective October 1, 1994, the Company began offering a new operating lease
program to the IKON dealer network, whereby office equipment placed on rental
with a customer, with cancelable terms, could be funded through the Company and
rented back to the IKON dealer. In prior years, this equipment was funded by
the respective IKON dealer instead of the Company. At March 31, 1996, equipment
with a net book value of $28.2 million was leased under this program, compared
to $12.8 million at March 31, 1995, resulting in rental income of $3.3 million
in the second quarter of fiscal 1996 compared to $1.3 million in the second
quarter of fiscal 1995.
<PAGE>
The Company continues to charge Alco interest on the benefit that Alco receives
for income tax deferrals associated with the Company's leasing transactions. By
agreement with Alco, the Company earns interest income on the deferred tax
balances at a rate consistent with the Company's average cost of debt capital.
Under this agreement, the Company earned interest at a 6.8% rate for the second
quarter of fiscal 1996, compared to 6.4% for the second quarter of fiscal 1995.
At March 31, 1996, the deferred tax base upon which these payments are
calculated increased to $135.6 million, up from $90.5 million at March 31, 1995.
Due to the combined effect of the increased rate of interest and the increased
deferred tax balances, interest on Alco income tax deferrals rose $622,000 or
41.5% when comparing the three months ended March 31, 1996 to the three months
ended March 31, 1995.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1995. The growth in other income from fees is primarily due to the increased
size of the lease portfolio upon which these fees are based. Overall, fee income
from these sources grew by $526,000 or 44%, when comparing the second quarter of
fiscal 1996 to the same period of fiscal 1995.
Expenses
- --------
Debt to fund the lease portfolio in the form of loans from major banks and the
issuance of medium term notes in the public markets rose by 58.9%, to a total of
$934.5 million outstanding at March 31, 1996, up from $588 million outstanding
at March 31, 1995. Due to the combined effect of increased borrowing to fund the
portfolio and an increase in the Company's overall weighted average interest
rate on all borrowings, interest expense grew by $5.5 million or 68.1% when
comparing the second quarter of fiscal 1996 to the second quarter of fiscal
1995. At March 31, 1996, the Company's debt to equity ratio, including
intercompany amounts due to Alco, was 6.0 to 1.
Total general and administrative expenses grew by approximately $3.9 million or
58.9%, when comparing the second quarter of fiscal 1996 to the same period of
fiscal 1995. However, the general and administrative category includes
depreciation expense on leased equipment which was higher in the second quarter
of fiscal 1996 as compared to the second quarter of fiscal 1995, due to growth
in the balance of leased equipment. Depreciation expense was $3.2 million for
the second quarter of fiscal 1996 and $1.1 million for the second quarter of
fiscal 1995. In addition, lease bonus subsidy payments to IKON dealers were
$2.1 million for the second quarter of fiscal 1996 compared to $2.5 million for
the second quarter of fiscal 1995. This reduction in lease bonus payments
reflects a change in the method of calculating the bonus subsidy in fiscal 1996.
Excluding the effects of the additional depreciation expense on operating leases
and the reduction of dealer lease bonus payments in the second quarter of fiscal
1996, remaining general and administrative expenses grew $2.1 million or 71.4%,
when comparing the second quarter of fiscal 1996 to the second quarter of fiscal
1995. This increase is a direct result of the growth of the serviced lease
portfolio.
Gain on Sale of Lease Receivables
- ---------------------------------
Under an asset securitization program entered into in September 1994, the
Company sold an undivided ownership interest in $125 million of eligible direct
financing lease receivables. This agreement, which expires in March 1997, was
structured as a revolving securitization so that as collections reduce
previously sold interests, new leases can be sold up to $125 million. During
the three months ended March 31, 1996, collections reduced previously sold
interests by approximately $13.3 million. The Company sold an additional $13.3
million in net eligible direct financing leases during the quarter and
recognized gains of $277,000.
<PAGE>
Income Before Taxes
- -------------------
Income before taxes increased by $4.3 million or 61%, when comparing the second
quarters of fiscal 1996 and fiscal 1995. This increase resulted primarily from
higher earnings on a larger lease portfolio base, partially offset by higher
borrowing costs due to the increased debt to fund the lease portfolio and a
slightly higher average cost of debt in fiscal 1996 versus fiscal 1995.
Taxes on Income
- ---------------
The $2.0 million or 75.2% increase in income taxes in the three month period
ended March 31, 1996 compared to the three month period ended March 31, 1995 is
directly attributable to the higher income before taxes in the second quarter of
fiscal 1996 as compared to the second quarter of fiscal 1995. The effective tax
rate was 41% for the second quarter of fiscal 1996 as compared to an effective
tax rate of 38% for the second quarter of fiscal 1995.
Six Months Ended March 31, 1996 Compared
-----------------------------------------
with the Six Months Ended March 31, 1995
----------------------------------------
Comparative summarized results of operations for the six months ended March 31,
1996 and 1995 are set forth in the table below. This table also shows the
increase in the dollar amounts of major revenue and expense items between
periods, as well as the related percentage increase.
<TABLE>
<CAPTION>
Six Months
(dollars in thousands) Ended March 31 Increase
-------------- --------
1996 1995 Amount Percent
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $53,540 $33,797 $19,743 58.4%
Rental income 6,577 1,834 4,743 258.6%
Interest on Alco income tax
deferrals 4,011 2,796 1,215 43.5%
Other income 3,089 2,135 954 44.7%
------- ------- -------
67,217 40,562 26,655 65.7%
Expenses:
Interest 27,113 15,200 11,913 78.4%
General and administrative 18,796 11,908 6,888 57.8%
------- ------- -------
45,909 27,108 18,801 69.4%
Gain on sale of lease receivables 589 573 16 2.8%
------- ------- -------
Income before taxes 21,897 14,027 7,870 56.1%
Provision for income taxes 8,978 5,377 3,601 67.0%
------- ------- -------
Net income $12,919 $ 8,650 $ 4,269 49.4%
======= ======= =======
</TABLE>
Revenues
- --------
Total revenues increased $26.7 million or 65.7% in the first six months of
fiscal 1996 compared to the first six months of fiscal 1995. Approximately
74.1% or $19.7 million of this increase in revenues was a result of increased
lease finance income due to continued growth in the portfolio of direct
financing and funded leases. During the twelve month period from March 31, 1995
to March 31, 1996, the portfolio grew at a 65.5% rate, net of lease receivables
that were sold in asset securitization transactions.
<PAGE>
Effective October 1, 1994, the Company began offering a new operating lease
program to the IKON dealer network, whereby office equipment placed on rental
with a customer, with cancelable terms, could be funded through the Company and
rented back to the IKON dealer. In prior years, this equipment was funded by
the respective IKON dealer instead of the Company. At March 31, 1996, equipment
with a net book value of $28.2 million was leased under this program, compared
to $12.8 million at March 31, 1995, resulting in rental income of $6.6 million
for the first half of fiscal 1996 as compared to $1.8 million for the first half
of fiscal 1995.
The Company continues to charge Alco interest on the benefit that Alco receives
for income tax deferrals associated with the Company's leasing transactions. By
agreement with Alco, the Company earns interest income on the deferred tax
balances at a rate consistent with the Company's average cost of capital. Under
this agreement, the Company earned interest at a 6.8% rate for the first six
months of fiscal 1996, compared to 6.4% for the first six months of fiscal 1995.
At March 31, 1996, the deferred tax base upon which these payments are
calculated increased to $135.6 million, up from $90.5 million at March 31, 1995.
Due to the combined effect of the increased rate of interest and the increased
deferred tax balances, interest on Alco income tax deferrals rose $1.2 million
or 43.5%, when comparing the first half of fiscal 1996 to the first half of
fiscal 1995.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1995. The growth in other income from fees is primarily due to the increased
size of the lease portfolio upon which these fees are based. Overall, fee
income from these sources grew by $954,000 or 44.7%, when comparing the first
half of fiscal 1996 to the same period of fiscal 1995.
Expenses
- --------
Debt to fund the lease portfolio in the form of loans from major banks and the
issuance of medium term notes in the public markets rose by 58.9%, to a total of
$934.5 million outstanding at March 31, 1996, up from $588 million outstanding
at March 31, 1995. Due to the combined effect of increased borrowing to fund
the portfolio and an increase in the Company's overall weighted average interest
rate on all borrowings, interest expense grew by $11.9 million or 78.4%, when
comparing the first six months of fiscal 1996 to the first six months of fiscal
1995. At March 31, 1996, the Company's debt to equity ratio, including
intercompany amounts due to Alco, was 6.0 to 1.
Total general and administrative expenses grew by approximately $6.9 million or
57.8%, when comparing the six month period ending March 31, 1996 to the six
month period ending March 31, 1995. However, the general and administrative
category includes depreciation expense on leased equipment which was higher in
the first half of fiscal 1996 as compared to the first half of fiscal 1995, due
to growth in the balance of leased equipment. Depreciation expense was $6.2
million for the first six months of fiscal 1996 and $1.6 million for the first
six months of fiscal 1995. Additionally, lease bonus subsidy payments to IKON
dealers were $2.6 million during the first six months of fiscal 1996 compared to
$4.2 million during the first six months of fiscal 1995. This reduction was due
to the suspension of the program during the first two months of fiscal 1996.
This program, which was reinstated in December 1995, is expected to continue for
the remainder of fiscal 1996 at levels consistent with fiscal 1995.
Excluding the effects of the additional depreciation expense on operating leases
and the reduction of dealer lease bonus payments, the remaining general and
administrative expenses grew $3.8 million or 61.6%, when comparing the first
half of fiscal 1996 to the same period of fiscal 1995. This increase is a
direct result of growth of the serviced lease portfolio.
<PAGE>
Gain of Sale of Lease Receivables
- ---------------------------------
Under an asset securitization program entered into in September 1994, the
Company sold an undivided ownership interest in $125 million of eligible direct
financing lease receivables. This agreement, which expires in September 1996
and can be renewed, was structured as a revolving securitization so that as
collections reduce previously sold interests, new leases can be sold up to $125
million. During the first six months of fiscal 1996, collections reduced
previously sold interest by approximately $26.5 million. The Company sold an
additional $26.5 million in net eligible direct financing leases during the
first half of fiscal 1996 and recognized gains of $589,000.
Income Before Taxes
- -------------------
Income before taxes increased $7.9 million or 56.1%, when comparing the first
six months of fiscal 1996 and fiscal 1995. This increase resulted primarily
from higher earnings on a larger lease portfolio base, partially offset by
higher borrowing costs due to the increased debt to fund the lease portfolio and
a slightly higher average cost of debt in fiscal 1996 versus fiscal 1995.
Taxes on Income
- ---------------
The $3.6 million or 67% increase in income taxes in the first half of fiscal
1996 as compared to the first half of fiscal 1995 is directly attributable to
the higher income before taxes in fiscal 1996 as compared to fiscal 1995. The
effective tax rate was 41% for the first half of fiscal 1996 as compared to an
effective tax rate of 38% for the first half of fiscal 1995.
Other
- -----
On April 17, 1996, Alco announced that its Board of Directors has approved the
structuring of its businesses, IKON Office Solutions and Unisource, under
separate ownership in order to maximize the future growth potential of both
businesses. Alco is actively considering a variety of alternatives for
separating the two businesses. Alco plans to reach a decision as to the method
of separation by the end of June, with an estimated completion date of not later
than December 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The following Exhibits are furnished pursuant to Item 601 of Regulation
S-K:
Exhibit No. (10.20) First Amendment dated as of September 15, 1995, and
Second Amendment dated as of March 15, 1996 to Receivables Transfer
Agreement among IKON Capital, Inc., Twin Towers, Inc. & Deutsche
Bank AG, New York Branch, filed as Exhibit 10.20 to Alco Standard
Corporation's Form 10-Q for the quarter dated March 31, 1996 is
incorporated herein by reference.
Exhibit No. (27) Financial Data Schedule
(b) Reports on Form 8-K
On March 8, 1996, the registrant filed a Current Report on Form 8-K
to file, under Item 5 of the Form, the announcement made March 4, 1996
of the name change of the registrant from Alco Capital Resource, Inc. to
IKON Capital, Inc.
On April 22, 1996, the registrant filed a Current Report on Form 8-K to
file, under Item 5 of the Form, the announcement made by Alco, to
structure Alco's two businesses, IKON Office Solutions, Inc. and
Unisource Worldwide, Inc., under separate ownership.
<PAGE>
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. This report has also been signed by the
undersigned in his capacity as the chief accounting officer of the Registrant.
IKON CAPITAL, INC.
Date May 14, 1996 /s/Robert M. Kearns II
---------------- ----------------------
Robert M. Kearns II
Vice President
(Chief Accounting Officer)
<PAGE>
Index to Exhibits
-----------------
Exhibit Number
- --------------
(27) Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IKON CAPITAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,157,438,000<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 47,394,000<F2>
<DEPRECIATION> 13,844,000<F2>
<TOTAL-ASSETS> 1,199,468,000
<CURRENT-LIABILITIES> 0
<BONDS> 934,500,000
0
0
<COMMON> 0<F3>
<OTHER-SE> 159,807,000
<TOTAL-LIABILITY-AND-EQUITY> 1,199,468,000
<SALES> 0
<TOTAL-REVENUES> 67,217,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,796,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,113,000
<INCOME-PRETAX> 21,897,000
<INCOME-TAX> 8,978,000
<INCOME-CONTINUING> 12,919,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,919,000
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<FN>
<F1> Includes net investments in leases of $1,125,175,000 and other accounts
receivable.
<F2> Includes leased equipment of: cost - $39,822,000; accumulated depreciation
- $11,659,000
<F3> Common stock, $.01 par value, 1,000 shares outstanding. Since total is less
than $1,000, zero is reported
<F4> Not required as the registrant is a wholly-owned subsidiary.
</FN>
</TABLE>
