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 March 31, 1998 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
IOS 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)
NONE
(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, 1998.
Common Stock, $.01 par value per share 1,000 shares
Registered Debt Outstanding as of April 30, 1998 $1,710,750,000
The registrant, an indirect wholly owned subsidiary of IKON Office Solutions,
Inc. ("IKON"), 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
IOS CAPITAL, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets--March 31, 1998 and
September 30, 1997
Statements of Income--Three and six months ended
March 31, 1998 and March 31, 1997
Statements of Cash Flows--Six months ended
March 31, 1998 and March 31, 1997
Notes to Financial Statements--March 31, 1998
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 (unaudited)
IOS Capital, Inc.
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, September 30,
1998 1997
Assets
Investment in leases:
Direct financing leases $1,848,712 $1,640,559
Less: Unearned income (320,102) (286,769)
------------------ -----------------
1,528,610 1,353,790
Funded leases, net 555,952 485,658
------------------ -----------------
2,084,562 1,839,448
Cash 805
Accounts receivable 57,502 55,589
Due from IKON Office Solutions 4,463
Prepaid expenses and other assets 12,641 13,436
Leased equipment-operating rentals at cost
less accumulated depreciation of:
3/98 - $37,222; 9/97 - $ 33,598 63,742 50,945
Property and equipment at cost, less
accumulated depreciation of:
3/98 - $4,632; 9/97 - $ 3,771 11,439 12,330
================== =================
Total assets $2,230,691 $1,976,211
================== =================
Liabilities and shareholder's equity
Liabilities:
Accounts payable and accrued expenses $48,979 $51,018
Accrued interest 33,832 27,785
Due to IKON Office Solutions 1,891
Notes payable to banks 25,000 25,000
Medium term notes 1,735,750 1,542,250
Deferred income taxes 84,965 64,177
------------------ -----------------
Total liabilities 1,930,417 1,710,230
Shareholder's equity:
Common Stock - $.01 par value, 1,000 shares
authorized, issued, and outstanding
Contributed capital 149,415 144,415
Retained earnings 150,859 121,566
------------------ -----------------
Total shareholder's equity 300,274 265,981
================== =================
Total liabilities and shareholder's equity $2,230,691 $1,976,211
================== =================
</TABLE>
See notes to financial statements.
<PAGE>
IOS Capital, Inc.
STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
March 31 March 31
-------------------------------- --------------------------------
1998 1997 1998 1997
-------------- ------------ ------------- -------------
Revenues:
Lease finance income $54,787 $40,657 $106,266 $77,557
Rental income 9,098 5,136 18,149 9,928
Interest on IKON tax deferrals 3,844 2,888 7,505 5,624
Other income 3,130 2,097 5,365 3,831
-------------- ------------ ------------- ------------
70,859 50,778 137,285 96,940
Expenses:
Interest 27,208 19,602 53,073 37,228
General and administrative 17,972 15,113 35,743 28,072
-------------- ------------ ------------- ------------
45,180 34,715 88,816 65,300
Gain on sale of lease receivables 617 664 1,181 1,277
-------------- ------------ ------------- ------------
Income before income taxes 26,296 16,727 49,650 32,917
Provision for income taxes 10,782 6,858 20,357 13,496
-------------- ------------ ------------- ------------
Net income $15,514 $9,869 $29,293 $19,421
============== ============ ============= ============
</TABLE>
See notes to financial statements.
<PAGE>
IOS Capital, Inc.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
March 31,
------------------------------
1998 1997
------------- -------------
Operating activities:
Net income $29,293 $19,421
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 16,221 7,872
Provision for deferred taxes 20,788 13,900
Gain on sale of lease receivables (1,181) (1,277)
Changes in operating assets and liabilities:
Accounts receivable (1,913) (4,842)
Prepaid expenses and other assets 1,976 4,586
Accounts payable and accrued expenses (2,039) (640)
Accrued interest 6,047 2,338
------------- -------------
Net cash provided 69,192 41,358
------------- -------------
Investing activities:
Purchases of leased equipment, net (28,142) (16,447)
Purchases of property and equipment, net 15 (3,082)
Direct financing leases:
Additions (631,051) (619,015)
Cancellations 123,443 87,839
Collections 280,517 225,802
Proceeds from sale 52,271 51,407
Funded leases:
Additions (210,120) (187,360)
Cancellations 41,103 26,587
Collections 98,723 78,111
------------- -------------
Net cash used (273,241) (356,158)
------------- -------------
Financing activities:
Payments on bank borrowings 0 (33,000)
Proceeds from issuance of medium term notes 348,500 385,500
Payments on medium term notes (155,000) (43,000)
Capital contributed by IKON 5,000 19,000
------------- -------------
Net cash provided 198,500 328,500
------------- -------------
(Increase) decrease in cash and amounts due to IKON (5,549) 13,700
Due from (to) IKON at beginning of year 4,463 (24,330)
============= =============
Cash and due to IKON at end of period ($1,086) ($10,630)
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
IOS Capital, Inc.
Notes to Financial Statements
March 31, 1998
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 annual report on Form 10-K for the
year ended September 30, 1997.
Note 2: Medium Term Note Program
During the six months ended March 31, 1998, IOS Capital issued $348.5
million under its medium term note program. At March 31, 1998, $1,735.8 million
of medium term notes were outstanding with a weighted average interest rate of
6.5%. The remaining amount available under this registration statement is
$1,298.2 million.
Note 3: Asset Securitization
IOS Capital has asset securitization agreements for $275 million of
eligible direct financing receivables that expire September 1998 ($150 million)
and March 1999 ($125 million). Both of these agreements are expected to be
renewed. Under these agreements, the Company sold $52.3 million in direct
financing leases during the first six months of fiscal 1998, replacing leases
which had been liquidated during the period and recognized a pretax gain of
approximately $1.2 million. Under the terms of the sales agreements, the Company
will continue to service the lease portfolio.
Note 4: Name Change
On January 22, 1998, the Company changed its name from IKON Capital,
Inc. to IOS Capital, Inc.
<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, 1998 Compared
with the Three Months Ended March 31, 1997
Comparative summarized results of operations for the three months ended March
31, 1998 and 1997 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>
<S> <C> <C> <C> <C>
Three Months
(dollars in thousands) Ended March 31 Increase
1998 1997 Amount Percent
Revenues:
Lease finance income $54,787 $40,657 $14,130 34.8%
Rental income 9,098 5,136 3,962 77.1%
Interest on IKON tax deferrals 3,844 2,888 956 33.1%
Other income 3,130 2,097 1,033 49.3%
---------- ---------- ----------
70,859 50,778 20,081 39.5%
Expenses:
Interest 27,208 19,602 7,606 38.8%
General and administrative 17,972 15,113 2,859 18.9%
---------- ---------- ----------
45,180 34,715 10,465 30.1%
Gain on sale of lease receivables 617 664 (47) (7.1)%
---------- ---------- ----------
Income before income taxes 26,296 16,727 9,569 57.2%
Provision for income taxes 10,782 6,858 3,924 57.2%
---------- ---------- ----------
Net income $ 15,514 $ 9,869 $ 5,645 57.2%
========== ========== ==========
</TABLE>
Revenues
Total revenues increased $20.1 million or 39.5% in the second quarter of fiscal
1998 compared to the second quarter of fiscal 1997. Approximately 70.4% or $14.1
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. The lease portfolio, net of lease receivables that were sold in asset
securitization transactions, increased 31.3 % from March 31, 1997 to March 31,
1998.
Office equipment placed on rental by the IKON marketplaces to customers, with
cancelable terms, may be purchased by the Company. During the second quarters of
fiscal 1998 and 1997, IOS Capital purchased operating lease equipment of $9.4
million and $9.6 million, respectively. Operating leases contributed $9.1
million in rental income during the second quarter of fiscal 1998, compared to
$5.1 million in the second quarter of fiscal 1997.
<PAGE>
The Company earns interest income on the deferred tax liabilities of the IKON
marketplaces associated with leases funded through the Company at a rate
consistent with the Company's weighted average outside borrowing rate of
interest. The Company's average rate was 6.5% for the second quarter of fiscal
1998 and 6.8% for the second quarter of fiscal 1997. In addition, the deferred
tax base upon which these payments are calculated increased 31.7% to $244.3
million at March 31, 1998 from $185.5 million at March 31, 1997. Primarily as a
result of the increased deferred tax liabilities, interest income on deferred
taxes rose $956,000 or 33.1% when comparing the three months ended March 31,
1998 to the three months ended March 31, 1997.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1997. 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 $1.0 million or 49.3%, when comparing the second
quarter of fiscal 1998 to the same period of fiscal 1997.
Expenses
Average borrowings to finance the lease portfolio in the form of loans from
banks and the issuance of medium term notes in the public market increased by
31.7% from March 31, 1997, to $1,760.8 million outstanding at March 31, 1998.
The Company paid a weighted average interest rate on all borrowings of 6.5% for
the second quarter of fiscal 1998 and 6.8% for the second quarter of fiscal
1997. Primarily as a result of the increased borrowings, interest expense grew
by $7.6 million or 38.8%, when comparing the second quarter of fiscal 1998 to
the second quarter of fiscal 1997. At March 31, 1998, the Company's debt to
equity ratio, including intercompany amounts due to IKON was 5.9 to 1.
Total general and administrative expenses for the quarter ended March 31, 1998
increased by $2.9 million or 18.9%, over the quarter ended March 31, 1997. The
general and administrative expense category in the second quarter of fiscal 1998
includes depreciation expense on leased equipment totaling $7.7 million,
compared to $3.7 million for the second quarter of fiscal 1997. In addition, the
general and administrative expense category includes lease bonus subsidy
payments to either IKON or directly to the IKON marketplaces, based on the level
of dealer participation in the Company's leasing programs or for the funding of
targeted new lease volume. During the second quarter of fiscal 1998, lease bonus
subsidy payments totaled $3.8 million compared to $3.5 million during the second
quarter of fiscal 1997. Excluding the effects of increased depreciation expense
on operating leases and lease bonus subsidy payments, remaining general and
administrative expenses decreased by $1.5 million or 18.5% compared to general
and administrative expenses in the second quarter of fiscal 1997. This decrease
is due to recent cost controls initiated within the Company.
Gain on Sale of Lease Receivables
The Company has asset securitization agreements for $275 million of eligible
direct financing lease receivables that expire September 1998 ($150 million) and
March 1999 ($125 million). Both of these agreements are expected to be renewed.
As collections reduce previously sold interests, new leases can be sold up to
the agreement amount. During the three months ended March 31, 1998, collections
reduced previously sold interests by approximately $26.5 million on these two
agreements. The Company sold an additional $26.5 million in net eligible direct
financing leases during the three months of fiscal 1998 and recognized pretax
gains of $617,000.
<PAGE>
Income Before Income Taxes
Income before income taxes for the second quarter of fiscal 1998 increased by
$9.6 million or 57.2% over the second quarter of fiscal 1997. This increase in
income before income taxes was essentially the effect of higher earnings due to
a larger lease portfolio base, net of increased general and administrative
expenses, partially offset by higher borrowing costs resulting from increased
debt to fund the lease portfolio.
Provision for Income Taxes
Income taxes for the second quarter of fiscal 1998 increased by $3.9 million or
57.2% over the second quarter of fiscal 1997. This increase in income taxes is
directly attributable to the increase in income before taxes in the second
quarter of fiscal 1998 compared to the second quarter of fiscal 1997. The
effective tax rate was 41% for both the second quarter of fiscal 1998 and 1997.
Six Months Ended March 31, 1998 Compared
with the Six Months Ended March 31, 1997
Comparative summarized results of operations for the six months ended March 31,
1998 and 1997 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>
<S> <C> <C> <C> <C>
Six Months
(dollars in thousands) Ended March 31 Increase
1998 1997 Amount Percent
Revenues:
Lease finance income $106,266 $77,557 $28,709 37.0%
Rental income 18,149 9,928 8,221 82.8%
Interest on IKON tax deferrals 7,505 5,624 1,881 33.4%
Other income 5,365 3,831 1,534 40.0%
---------- -------- ---------
137,285 96,940 40,345 41.6%
Expenses:
Interest 53,073 37,228 15,845 42.6%
General and administrative 35,743 28,072 7,671 27.3%
---------- -------- ---------
88,816 65,300 23,516 36.0%
Gain on sale of lease receivables 1,181 1,277 (96) (7.5)%
---------- -------- ---------
Income before income taxes 49,650 32,917 16,733 50.8%
Provision for income taxes 20,357 13,496 6,861 50.8%
---------- -------- ---------
Net income $ 29,293 $ 19,421 $ 9,872 50.8%
========== ======== =========
</TABLE>
Revenues
Total revenues increased $40.3 million or 41.6% in the first six months of
fiscal 1998 compared to the first six months of fiscal 1997. Approximately 71.2%
or $28.7 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. The lease portfolio, net of lease receivables that were sold in
asset securitization transactions, increased 31.3 % from March 31, 1997 to March
31, 1998.
<PAGE>
Office equipment placed on rental by the IKON marketplaces to customers, with
cancelable terms, may be purchased by the Company. During the first six months
of fiscal 1998 and 1997, IOS Capital purchased operating lease equipment of
$28.1 million and $16.4 million, respectively. Operating leases contributed
$18.1 million in rental income during the first six months of fiscal 1998,
compared to $9.9 million in the first six months of fiscal 1997.
The Company earns interest income on the deferred tax liabilities of the IKON
marketplaces associated with leases funded through the Company at a rate
consistent with the Company's weighted average outside borrowing rate of
interest. The Company's average rate was 6.6% for the first six months of fiscal
1998 and 6.8% for the first six months fiscal 1997. In addition, the deferred
tax base upon which these payments are calculated increased 31.7% to $244.3
million at March 31, 1998 from $185.5 million at March 31, 1997. Primarily as a
result of the increased deferred tax liabilities, interest income on deferred
taxes rose $1.9 or 33.4% when comparing the first six months ended March 31,
1998 to the first six months ended March 31, 1997.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1997. 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 $1.5 million or 40%, when comparing the first six
months of fiscal 1998 to the same period of fiscal 1997.
Expenses
Average borrowings to finance the lease portfolio in the form of loans from
banks and the issuance of medium term notes in the public market increased by
31.7%, to $1,760.8 million outstanding at March 31, 1998 from March 31, 1997.
The Company paid a weighted average interest rate on all borrowings of 6.6% for
the first six months of fiscal 1998 and 6.8% for the first six months of fiscal
1997. Primarily as a result of the increased borrowings, interest expense grew
by $15.8 million or 42.6%, when comparing the first half of fiscal 1998 to the
first half of fiscal 1997. At March 31, 1998, the Company's debt to equity
ratio, including intercompany amounts due to IKON was 5.9 to 1.
Total general and administrative expenses for the first six months ended March
31, 1998 increased by $7.7 million or 27.3%, over the first six months ended
March 31, 1997. The general and administrative expense category in the first six
months of fiscal 1998 includes depreciation expense on leased equipment totaling
$15.3 million, compared to $7.9 million for the first six months of fiscal 1997.
In addition, the general and administrative expense category includes lease
bonus subsidy payments to either IKON or directly to the IKON marketplaces,
based on the level of dealer participation in the Company's leasing programs or
for the funding of targeted new lease volume. During the first six months of
fiscal 1998, lease bonus subsidy payments totaled $7.6 million compared to $5.6
million during the first six months of fiscal 1997. Excluding the effects of
increased depreciation expense on operating leases and lease bonus subsidy
payments, remaining general and administrative expenses decreased by $1.8
million or 12.4% compared to general and administrative expenses in the first
six months of fiscal 1997. This decrease is due to recent cost controls
initiated within the Company.
Gain on Sale of Lease Receivables
The Company has asset securitization agreements for $275 million of eligible
direct financing lease receivables that expire September 1998 ($150 million) and
March 1999 ($125 million). Both of these agreements are expected to be renewed.
As collections reduce previously sold interests, new leases can be sold up to
the agreement amount. During the six months ended March 31, 1998, collections
reduced previously sold interests by approximately $52.3 million on these two
agreements. The Company sold an additional $52.3 million in net eligible direct
financing leases during the first six months of fiscal 1998 and recognized
pretax gains of $1.2 million.
<PAGE>
Income Before Income Taxes
Income before income taxes for the first six months of fiscal 1998 increased by
$16.7 million or 50.8% over the first six months of fiscal 1997. This increase
in income before income taxes was essentially the effect of higher earnings due
to a larger lease portfolio base, net of increased general and administrative
expenses, partially offset by higher borrowing costs resulting from the
increased debt to fund the lease portfolio.
Provision for Income Taxes
Income taxes for the first six months of fiscal 1998 increased by $6.9 million
or 50.8% over the first six months of fiscal 1997. This increase in income taxes
is directly attributable to the increase in income before taxes in the first
half of fiscal 1998 compared to the first half of fiscal 1997. The effective tax
rate was 41% for both the first half of fiscal 1998 and 1997.
FORWARD-LOOKING INFORMATION
This document contains disclosures which are forward-looking statements relating
to the Company or its parent, IKON, within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the 1934 Act. Such forward-looking statements address, among other things,
strategic initiatives (including plans for enhancing the Company's or IKON's
business through new acquisitions, information technology systems, sales
strategies, market growth plans, margin enhancement initiatives, capital
expenditure requirements and financing sources). Such forward-looking
information is based upon management's current plans or expectations and is
subject to a number of uncertainties and risks that could significantly affect
the Company's and/or IKON's current plans, anticipated actions and future
financial condition and results. These uncertainties and risks include, but are
not limited to, those relating to IKON's successful management of an aggressive
program to acquire and integrate new companies, including companies with
technical services and products that are relatively new to IKON, and also
including companies outside the United States, which present additional risks
relating to international operations; risks and uncertainties (applicable to
both the Company and IKON) relating to conducting operations in a competitive
environment; delays, difficulties, technological changes and employment issues
(applicable to both the Company and IKON) associated in a large-scale
transformation project; debt service requirements (applicable to both the
Company and IKON) including sensitivity to fluctuation in interest rates; and
general economic conditions. As a consequence, current plans, anticipated
actions and future financial condition and results may differ from those
expressed in any forward-looking statements made by or on behalf of the Company
or IKON.
<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. (27) Financial Data Schedule
(b) Reports on Form 8-K
On April 27, 1998, the registrant filed a Current Report on Form
8-K to file, under Item 5 of the form, the press release dated
April 22, 1998 of its parent, IKON, which reported IKON's earnings
for the fiscal quarter ended March 31, 1998, provided earnings
estimates for the remainder of IKON's 1998 fiscal year and provided
additional information regarding IKON's business, acquisitions and
transformation process.
<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.
IOS CAPITAL, INC.
Date May 14, 1998 /s/ Harry G. Kozee
Harry G. Kozee
Vice President - Finance
(Chief Accounting Officer)
<PAGE>
Index to Exhibits
Exhibit Number
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of IOS 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-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 805,000
<SECURITIES> 0
<RECEIVABLES> 2,142,064,000<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 117,035,000<F2>
<DEPRECIATION> 41,854,000<F2>
<TOTAL-ASSETS> 2,230,691,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,760,750,000
0
0
<COMMON> 0<F3>
<OTHER-SE> 300,274,000
<TOTAL-LIABILITY-AND-EQUITY> 2,230,691,000
<SALES> 0
<TOTAL-REVENUES> 137,285,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 35,743,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,073,000
<INCOME-PRETAX> 49,650,000
<INCOME-TAX> 20,357,000
<INCOME-CONTINUING> 29,293,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,293,000
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<FN>
<F1>Includes net investments in leases of $2,084,562,000 and other accounts
receivable.
<F2>Includes leased equipment of: cost - $100,964,000; accumulated depreciation
- - $37,222,000.
<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>
