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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 1-6798
TRANSAMERICA FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-1077235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 983-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
8-1/2% Notes Maturing at Holder's New York Stock Exchange
Option Annually on July 1 and
due July 1, 2001
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. Yes X 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 definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
All of the outstanding shares of the registrant's capital stock are owned
by Transamerica Finance Group, Inc., which is wholly owned by Transamerica
Corporation.
Number of shares of common stock, $10 par value, outstanding as of close
of business on March 28, 1996: 1,464,285.
The registrant meets the conditions set forth in General Instruction
J(1)(a) and (b) of Form 10-K and is therefore filing this form with the
reduced disclosure format.
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TABLE OF CONTENTS
Page
____
Part I:
Item 1. Business ................................................. 3
Item 2. Properties ............................................... 21
Item 3. Legal Proceedings ........................................ 21
Item 4. Submission of Matters to a Vote of Security Holder ....... 21
Part II:
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters ........................................... 21
Item 6. Selected Financial Data .................................. 21
Item 7. Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations ........................... 21
Item 8. Financial Statements and Supplementary Data .............. 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 21
Part III:
Item 10. Directors and Executive Officers of the Registrant ....... 22
Item 11. Executive Compensation ................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 22
Item 13. Certain Relationships and Related Transactions ........... 22
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ................................................. 22
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PART I
ITEM 1. BUSINESS
The Company
Transamerica Finance Corporation is a wholly owned subsidiary of
Transamerica Finance Group, Inc. ("TFG") which is a wholly owned subsidiary
of Transamerica Corporation. Transamerica Corporation ("Transamerica") is a
financial services organization which engages through its subsidiaries in
consumer lending, commercial lending, leasing, life insurance and real estate
services. Transamerica Finance Corporation includes Transamerica's consumer
lending, commercial lending (excluding Insurance Premium Finance) and leasing
operations. Unless the context indicates otherwise, the terms "Company" and
"Registrant" as used herein refer to Transamerica Finance Corporation and its
subsidiaries.
The Company was incorporated in Delaware in 1931 under the name Pacific
Finance Corporation, as successor to a California corporation of the same name
organized in 1920.
The Company provides funding for its subsidiaries' consumer lending,
commercial lending and leasing operations and for the operations of certain
wholly owned subsidiaries of TFG. Capital is allocated among the operations
on the basis of expected returns and creation of shareholder value. The
Company's total notes and loans payable were $9,689,858,000 at December 31,
1995 and $8,724,258,000 at December 31, 1994. Variable rate debt was
$4,836,038,000 at December 31, 1995 compared to $4,279,886,000 at December 31,
1994. The ratio of debt to tangible equity was 7.0:1 at December 31, 1995 and
7.1:1 at December 31, 1994.
The Company offers publicly, from time to time, senior or subordinated
debt securities. Public debt issued totaled $832,000,000 in 1995,
$1,516,000,000 in 1994 and $407,000,000 in 1993. Under a shelf registration
filed in April 1995 with the Securities and Exchange Commission the company
may offer up to $3,000,000,000 of senior or subordinated debt securities
(which may include medium term notes) with varying terms, of which
$2,600,000,000 had not been issued at December 31, 1995. For a further
discussion regarding borrowing operations and derivative activity, see Note C,
Financial Instruments in the financial statements included in Item 8.
Liquidity is a characteristic of the Company's operations since the
majority of the assets consist of finance receivables. Principal cash
collections of finance receivables totaled $17,444,556,000 during 1995,
$14,807,548,000 during 1994 and $11,535,766,000 during 1993.
BUSINESS SEGMENT INFORMATION
"Note J. Business Segment Information" in the financial statements
included in Item 8 is incorporated herein by reference.
The Company's business activities are more fully described below.
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CONSUMER LENDING
Consumer lending services are provided by Transamerica Financial
Services, based in Los Angeles, California, which has 555 branch lending
offices. Branch offices are located in the United States (528 in 42 states),
Canada (15) and the United Kingdom (12). Products offered by the consumer
lending operation include first and second mortgage loans, revolving real
estate secured lines of credit, secured and unsecured personal loans, sales
finance contracts, credit insurance and retail used automobile financing.
Since 1991, the consumer lending operation has continued to broaden its
receivable portfolio by expanding its revolving real estate secured lines of
credit, its personal loan business (which includes loans secured by
automobiles or other property as well as unsecured loans), its purchase from
dealers of retail finance contracts covering principally appliances,
furniture and services, and retail used automobile financing. The products
offered by the consumer lending operation have traditionally been fixed rate;
in 1995 the company commenced offering variable rate products.
The company's primary business is making fixed rate home equity loans
that generally range up to $200,000. Of the company's net finance receivables
outstanding at December 31, 1995, 82% are secured by real estate, principally
one to four family residential properties. Of the company's net finance
receivables secured by real estate, 63% are secured by first mortgages.
Company policy generally limits the amount of cash advanced on any one loan,
plus any existing mortgage, to between 70% and 80% (depending on location) of
the appraised value of the mortgaged property, as determined by qualified
independent appraisers at the time of loan origination.
On March 31, 1995, the Company purchased for $1,027,298,000 in cash
substantially all the assets and assumed certain liabilities of the home
equity business of ITT Consumer Financial Corporation (ITT). The purchase
price was allocated as follows: net consumer finance receivables of
$966,427,000, which were all real estate secured, of which 14% was located in
California; allowance for losses of $52,673,000; assets held for sale of
$26,752,000; customer renewal rights of $97,793,000; and assumed liabilities
of $11,000,000. The Company did not assume any borrowings, tax liabilities or
contingent liabilities of ITT. The initial financing of the acquisition was
provided through short-term bank loans which have been repaid and refinanced
with long-term debt.
When permitted by law, the consumer lending operation offers credit life
and disability insurance in connection with consumer instalment loans and
generally requires that property securing consumer loans be insured. Credit
life insurance satisfies the obligation of the borrower in the event of
death, while credit disability insurance satisfies the borrower's obligation
to pay instalments during a period of disability. Property insurance insures
the collateral against damage or loss.
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Competition
The consumer lending operation's principal market involves the
origination and servicing of home equity loans for debt consolidation and
other purposes. Traditionally, the company has relied on an extensive loan-
by-mail program, currently involving approximately 50 million solicitation
pieces annually, to attract potential customers. However, competition has
been increasing in the U.S. home equity market, and competitors include
numerous other finance companies, banks, savings associations and mortgage
bankers as well as loan brokerage operations. In response, the company's
competitive strategies have included product diversification and emphasis on
superior service to better meet customer needs as well as exploration of
additional products and certain foreign markets.
Consumer Finance Receivables
The following tables set forth the volume of consumer finance receivables
acquired during the years indicated and the amount of consumer finance
receivables outstanding at the end of each such year:
Years Ended December 31,
______________________________________
1995 1994 1993
(Dollar amounts in thousands)
Volume of Consumer Finance
Receivables Acquired:
Consumer instalment loans:
Real estate secured(1) ........ $2,067,889 $1,708,806 $1,039,394
Other(2) ...................... 655,312 623,619 524,241
__________ __________ __________
2,723,201 2,332,425 1,563,635
Other finance receivables(3) .... 104,080 72,708 29,181
__________ __________ __________
Total ......................... $2,827,281 $2,405,133 $1,592,816
========== ========== ==========
______
(1) Volume for 1995 includes $1,004,869,000 acquired from ITT on March
31, 1995, of which $676,078,000 (excluding renewals) remained outstanding at
December 31, 1995. Excluding the effects of that acquisition, 1995 loan
originations were less than in 1994 principally due to a decline in renewal
volume (which was caused in part by a return to higher rates in early 1995)
and increased competition. In 1994, in response to increased competition,
principally in California, the company introduced lower interest rates which
were not continued into 1995, which led to a high level of refinancing
activity in 1994. The 1994 and 1993 volume also included $117,000,000 and
$22,691,000 of purchased receivables.
(2) The increases reflect general expansion in consumer lending's
personal loan business.
(3) The increases resulted from expansion in the retail finance contract
business. The 1994 volume included $7,855,000 of bulk purchases of contracts.
_________________
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As of December 31,
______________________________________
1995 1994 1993
(Dollar amounts in thousands)
Consumer Finance Receivables
Outstanding:
Consumer instalment loans:
Real estate secured(1) ........ $4,212,704 $3,522,966 $3,214,468
Other(2) ...................... 853,647 758,798 595,284
__________ __________ __________
5,066,351 4,281,764 3,809,752
Other finance receivables(3) .... 84,447 58,197 22,276
__________ __________ __________
5,150,798 4,339,961 3,832,028
Less unearned finance charges and
insurance premiums ............ 214,506 197,975 181,505
__________ __________ __________
Total net finance
receivables ................. $4,936,292 $4,141,986 $3,650,523
========== ========== ==========
_______
(1) See footnote 1 on preceding table.
(2) See footnote 2 on preceding table.
(3) See footnote 3 on preceding table.
_______________
Earned finance charges as a percentage of the average amount of net
finance receivables outstanding were 15.8% in 1995, 17.5% in 1994, and 17.5%
in 1993.
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A summary of instalment loan activity for the years indicated is as
follows:
Years Ended December 31,
______________________________________
1995 1994 1993
Volume by source:
New borrowers (1).............. 60.2% 41.3% 45.5%
Former borrowers .............. 4.4 8.5 15.6
Renewals:
Balances refinanced ......... 20.2 27.7 19.6
Additions to renewed balances 15.2 22.5 19.3
___________ __________ __________
Total ..................... 100.0% 100.0% 100.0%
=========== ========== ==========
Average size of loan made
including renewals ............ $ 12,720 $ 12,154 $ 11,561
Outstanding at end of year:
Amount (in thousands).......... $5,066,351 $4,281,764 $3,809,752
Number ........................ 353,880 309,133 251,457
Average balance ............... $ 14,317 $ 13,851 $ 15,151
(1) Excluding the receivables purchased from ITT, volume by source from new
borrowers was 41.1% in 1995.
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Following is certain information regarding delinquent receivables,
nonearning receivables, accounts in foreclosure and repossessed assets.
Because future improvements may be impacted by factors such as economic
conditions and the state of the real estate market, particularly in
California, the extent and timing of any change in the trend of delinquent
receivables, nonearning receivables and foreclosures and repossessed assets
remains uncertain.
Delinquent Receivables
The following table shows the ratio of consumer finance receivables which
are contractually past due 60 days or more and 90 days or more to finance
receivables outstanding for each category and in total for the years
indicated:
As of December 31,
____________________________
1995 1994 1993
Consumer instalment loans:
Real estate secured:(1)
60 days and over ............ 2.35% 1.78% 1.86%
90 days and over ............ 1.36 1.08 1.20
Other consumer instalment
loans:(2)
60 days and over ............ 4.85 3.35 2.71
90 days and over ............ 3.52 2.38 2.22
_____ _____ _____
Total consumer instalment
loans:
60 days and over ........ 2.77 2.06 1.99
90 days and over ........ 1.73 1.31 1.36
Other finance receivables:(2)
60 days and over ............ 4.10 3.65 3.96
90 days and over ............ 3.22 2.55 2.30
_____ _____ _____
Total finance
receivables:
60 days and over ........ 2.79% 2.08% 2.00%
===== ===== =====
90 days and over ........ 1.75% 1.33% 1.36%
===== ===== =====
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_______
(1) The increase in 1995 was due to worsening in the condition of the
non ITT portfolio and the ITT portfolio acquisition which included the
purchase of delinquent accounts at a discount.
(2) Typically loans do not go into default until some period of time
after they were originated. Therefore, in periods of rapidly increasing
volume the delinquency ratio tends to lag behind the growth in the portfolio.
The increase in 1995 reflects the "seasoning" of non-real estate products
that were introduced in 1993. The increase in 1994 for other instalment
loans reflected the changing mix of products in the non-real estate portfolio
and the introduction of new products with higher delinquency experience.
_________________
Nonearning Receivables
Nonearning consumer finance receivables, which are defined generally as
those past due more than 29 days, amounted to $308,050,000 and $194,272,000
at December 31, 1995 and 1994. Payments received on nonearning receivables
are applied to principal and interest according to the terms of the loan;
however, accrued interest receivable and amortization of other finance charges
are recognized in income only on accounts past due less than 30 days.
Nonearning receivables exclude accounts in foreclosure. During 1995 and
1994, the gross amount of interest income that would have been recorded on
receivables classified as nonearning at year end, had they been current
throughout the year or since origination, was $49,218,000 and $28,539,000, and
the amount of interest on those loans that was recognized in income was
$29,478,000 and $17,904,000.
Accounts in Foreclosure and Assets Held for Sale
When foreclosure proceedings begin on an account secured by real estate,
the account is moved from finance receivables to other assets and is written
down to the fair value of the collateral, less estimated selling costs, if
less than the account balance. After foreclosure, repossessed assets are
carried at the lower of cost or fair value less estimated selling costs.
Accounts in foreclosure and repossessed assets held for sale totaled
$207,323,000 at December 31, 1995 compared to $226,119,000 at December 31,
1994. The decrease in 1995 reflects the consolidation and acceleration of
California foreclosure activity in the fourth quarter, which more than offset
the increase caused by the acquisition of the ITT portfolio.
Credit Loss Experience
Certain information regarding credit losses on finance receivables for
the consumer lending operation during the years indicated is set forth in the
following table:
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Years Ended December 31,
____________________________________
1995 1994 1993
(Dollar amounts in thousands)
Provision for credit losses
charged to income(1) ............ $ 97,835 $ 80,406 $ 62,349
Credit losses (net of recoveries):
Real estate secured instalment
loans(2) ...................... $ 64,817 $ 44,145 $ 41,452
Non-real estate secured
instalment loans(3) ........... 37,266 27,854 19,171
________ ________ ________
Total consumer instalment
loans ..................... 102,083 71,999 60,623
Other finance receivables ......... 1,723 496 30
________ ________ ________
Total ..................... $103,806 $ 72,495 $ 60,653
======== ======== ========
Ratio to average net finance
receivables outstanding:
Consumer instalment loans:(4)
Real estate secured instalment
loans ......................... 1.62% 1.42% 1.35%
Non-real estate secured
instalment loans .............. 4.78 4.16 3.43
________ ________ ________
Total consumer instalment
loans ..................... 2.14 1.90 1.67
Other finance receivables (4) ..... 2.97 1.73 0.35
________ ________ ________
Total ..................... 2.15% 1.90% 1.67%
======== ======== ========
Allowance for losses at end
of year(5) ...................... $164,066 $117,218 $103,313
Ratio to outstandings less
unearned finance charges
and insurance premiums .......... 3.32% 2.83% 2.83%
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________
(1) The provision for credit losses increased due to increases in
credit losses (see notes 2 and 3 below) and, in 1994, increased growth in net
finance receivables.
(2) The increases were due to continued sluggishness in the California
economy and a continued weak California real estate market. Also, in 1995,
the Company consolidated and accelerated California branch foreclosure
activity in the fourth quarter and also recognized credit losses that had been
anticipated in connection with the ITT acquisition, both of which contributed
to the increase over 1994. Credit losses exclude losses on the disposal of
repossessed assets, which amounted to $15,441,000 in 1995, $7,314,000 in 1994
and $5,952,000 in 1993, and which are classified as operating expenses. The
1995 increase in losses on the disposal of repossessed assets was mainly due
to the consolidation and acceleration of foreclosure activity in California.
(3) The increases were caused by growth in the related outstanding
receivables which tend to have a higher loss ratio than the real estate
secured portfolio. Because new receivables generally do not go into
default for some period of time after origination, the increases also reflect
the "seasoning" of this portfolio.
(4) The increased ratios were due to corresponding fluctuations in
credit losses (see notes 2 and 3 above).
(5) The increase in 1995 is due to the acquisition of the ITT portfolio
on March 31, 1995. The increase in 1994 was caused by growth in outstanding
finance receivables.
_______________
Regulation
The Company's consumer lending operation is subject to various state and
federal laws. Depending upon the type of lending, these laws may require
licensing and certain disclosures and may limit the amounts, terms and
interest rates that may be offered.
COMMERCIAL LENDING
Commercial lending services are provided by two core business units:
inventory finance and business credit. The commercial lending business
operates from 22 branch lending offices located in the United States (17),
Canada (2) and Europe (3). The lending activities of these core businesses
are discussed below.
Inventory finance (also known as wholesale financing or floor plan
financing) consists principally of financing dealers' purchases from
distributors or manufacturers of goods for inventory. The products financed
include boats, recreational products, electronics and appliances,
manufactured housing, lawn and garden equipment and personal computers. Loan
terms typically provide for repayment within 30 days following sale of the
inventory by the borrower. After initial review of a borrower's credit
worthiness, the ongoing management of credit risk in this area may include
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various monitoring techniques, such as periodic physical inventory checks and
review of the borrower's sales, as well as maintenance of repurchase
agreements with manufacturers which provides a degree of security in the event
of a repossession.
Business credit consists of secured loans, primarily revolving, to
manufacturers, distributors and selected service businesses and collateralized
equipment lending. The asset based lending loans are collateralized and
consist of credit lines typically from $5 million to $25 million with terms
ranging from three to five years. Actual borrowings are limited to specified
percentages of the borrower's inventory, receivables and other eligible
collateral which are regularly monitored to ascertain that receivables
outstanding are within approved limits. Credit risk is managed by monitoring
the quality and performance of the borrower's collateral and compliance with
financial covenants. The equipment finance and lease division of business
credit began operations in 1995 and provides collateralized equipment lending
to companies that acquire capital equipment for their own use. The financings
are structured as both leases and loans. Credit risk is managed by
structuring loans such that loan balances amortize at a faster rate than the
equipment depreciates, thus maintaining collateral value, and by structuring
most leases with guaranteed residuals. In addition, financed equipment must
be essential to the operations of the borrower.
The relatively short-term nature of the company's financings enables the
commercial lending operation to adjust its finance charges in response to
competitive factors and changes in its costs. The interest rates at which the
commercial lending operation borrows funds generally move more quickly than
the rates at which it lends to customers. As a result, in rising interest
rate environments, margins are normally compressed until changes in the prime
lending rates are effected. Conversely, in declining interest rate
environments, margins are generally enhanced.
In 1995, the commercial lending operation sold for cash a portfolio of
consumer rediscount loans totaling $118,000,000 of net outstanding receivables
which resulted in an after tax gain of $4,800,000. It also liquidated and
sold $56,858,000 in net receivables and other assets resulting from the
decision to exit its operations in Puerto Rico and sold substantially all of
its rent-to-own finance receivables.
In 1994, the commercial lending operation sold its U.S. and Canadian
repossessed rent-to-own stores with a net carrying value of $17,666,000.
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Competition
The commercial lending industry is highly competitive and has seen
increasing numbers of new market entrants. In addition to competition from
other finance companies, there is competition from captive finance
subsidiaries of manufacturing companies and commercial banks. The commercial
lending operation competes by offering a variety of financing products,
superior customer service including prompt credit review, and competitive
pricing.
Commercial Finance Receivables
The following tables set forth the volume of commercial finance
receivables acquired during the years indicated and the amount of commercial
finance receivables outstanding at the end of each such year:
Years Ended December 31,
_______________________________________
1995 1994 1993
(Dollar amounts in thousands)
Volume of Commercial Finance
Receivables Acquired:
Inventory finance(1) ....... $ 7,479,383 $ 7,347,448 $ 6,773,720
Business credit(2) ......... 8,929,780 6,602,199 3,696,180
___________ ___________ ___________
Core businesses .......... 16,409,163 13,949,647 10,469,900
Other(3) ................... 18,815 74,860 170,705
___________ ___________ ___________
Total .................... $16,427,978 $14,024,507 $10,640,605
=========== =========== ===========
Domestic ................... $15,010,277 $12,718,350 $ 9,296,240
Foreign .................... 1,417,701 1,306,157 1,344,365
___________ ___________ ___________
Total .................... $16,427,978 $14,024,507 $10,640,605
=========== =========== ===========
_______
(1) The increase in 1994 reflects the overall improvement in the economy
and increased sales and marketing programs.
(2) The increases primarily reflect a shift in focus from purchasing
participations from other financial institutions to originating and selling
participations in loans. As a result, volume and collections have increased.
(3) The decreases reflect reduced receivable activity in portfolios of
businesses which the company has sold or exited and are being liquidated.
________________
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As of December 31,
______________________________________
1995 1994 1993
(Dollar amounts in thousands)
Commercial Finance Receivables
Outstanding:
Inventory finance(1) ............ $2,242,238 $2,078,519 $1,959,757
Business credit(2) .............. 680,771 654,966 553,859
__________ __________ __________
Core businesses ................. 2,923,009 2,733,485 2,513,616
Other(3) ........................ 6,893 75,262 127,687
__________ __________ __________
2,929,902 2,808,747 2,641,303
Less unearned finance charges ... 58,372 36,167 40,856
__________ __________ __________
Total net finance
receivables .................. $2,871,530 $2,772,580 $2,600,447
========== ========== ==========
Domestic ........................ $2,485,992 $2,430,424 $2,247,851
Foreign ......................... 385,538 342,156 352,596
__________ __________ __________
Net finance receivables ......... $2,871,530 $2,772,580 $2,600,447
========== ========== ==========
_______
(1) The 1995 increase was due mainly to increased volume and a slower
turnover in customer inventories. The 1994 increase was due to increased
volume in both consumer electronics and appliances, and home and recreational
products.
(2) The 1995 increase was primarily due to the addition of $123,852,000
of net receivables in the new equipment finance and lease division offset by
the sale of $118,000,000 of rediscount loans. The 1994 increase resulted from
a higher level of new business volume during the year.
(3) The decreases reflect the liquidation of receivables from businesses
being exited.
_________________
Earned finance charges as a percentage of the average amount of net
finance receivables outstanding were 13.0% in 1995, 11.8% in 1994, and 11.3%
in 1993.
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Following is certain information regarding delinquent receivables,
nonearning receivables and assets held for sale. Because future changes may
be impacted by factors such as economic conditions, the extent and timing of
any change in the trend of delinquent receivables, nonearning receivables and
assets held for sale remains uncertain.
Delinquent Receivables
Delinquent receivables are defined as the instalment balance for
inventory finance and asset based lending receivables and the outstanding
loan balance for all other receivables over 60 days past due.
The following table shows the ratio of delinquent commercial finance
receivables to finance receivables outstanding for each category and in total
as of the end of each of the years indicated.
As of December 31,
________________________
1995 1994 1993
Inventory finance .... 0.20% 0.11% 0.13%
Business credit ...... - - -
______ ______ ______
Core businesses ...... 0.15 0.08 0.10
Other(1) ............. 53.47 20.63 19.14
______ ______ ______
Total ................ 0.28% 0.63% 1.02%
====== ====== ======
_______
(1) Represents finance receivables retained from businesses sold or
exited which are being liquidated. The increase in the 1995 ratio resulted
from the reduction in receivables outstanding due to the sale of the Puerto
Rico portfolio which had a lower delinquency ratio in relation to the other
receivables included in this caption. The remaining balance as of December
31, 1995 totals $6,893,000.
_________________
Nonearning Receivables
Nonearning receivables are defined as balances from borrowers that are
over 90 days delinquent or at such earlier time as full collectibility becomes
doubtful. Accrual of finance charges is suspended on nonearning receivables
until such time as past due amounts are collected. Nonearning receivables
were $15,465,000 (0.53% of receivables outstanding) and $21,872,000 (0.78% of
receivables outstanding) at December 31, 1995 and 1994. During 1995 and 1994,
the gross amount of interest income that would have been recorded on
receivables classified as nonearning at year end had they been current
throughout the year or since origination was $3,702,000 and $1,825,000 and the
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amount of interest on those loans that was recognized in income was
$2,401,000 and $956,000. The decline in nonearning receivables was primarily
due to the sale of the Puerto Rico receivables.
Assets Held for Sale
Assets held for sale at December 31, 1995 totaled $4,445,000, net of a
$6,037,000 valuation allowance, and consisted of rent-to-own finance
receivables of $5,595,000 and other assets of $4,887,000. Assets held for
sale at December 31, 1994 totaled $10,908,000, net of a $65,086,000 valuation
allowance, and comprised rent-to-own finance receivables of $72,381,000 and
other assets of $3,613,000. Of the finance receivables held for sale at
December 31, 1995, none was classified as delinquent or nonearning compared to
$24,495,000 classified as both delinquent and nonearning at December 31, 1994.
Credit Loss Experience
Certain information regarding credit losses on finance receivables for
the commercial lending operation during the years indicated is set forth in
the following table:
Years Ended December 31,
_____________________________
1995 1994 1993
(Dollar amounts in thousands)
Provision for credit losses charged
to income ........................... $14,127 $18,665 $31,793
Credit losses (net of recoveries)(1) .. $ 8,838 $ 8,651 $42,710
Ratio to average net finance
receivables outstanding:
Inventory finance ................. 0.30% 0.28% 1.30%
Business credit(2) ................ 0.92 0.44 (0.02)
_______ _______ _______
Core businesses(1) .............. 0.43 0.32 0.99
Other(3) .......................... (15.70) 0.45 12.93
_______ _______ _______
Total(4) ........................ 0.32% 0.32% 1.64%
======= ======= =======
Allowance for losses at end of year ... $73,028 $86,574 $76,079
Ratio of allowance to net finance
receivables outstanding ............. 2.54% 3.12% 2.93%
======= ======= =======
<PAGE>
Page 17
_______
(1) The 1994 decrease was caused mainly by decreases in delinquent and
nonearning receivables resulting from improved economic conditions and the
effects in 1993 of stronger portfolio management procedures that were
implemented in late 1992.
(2) The 1995 increase was related to additional charge offs incurred
upon the sale of the consumer rediscount portfolio. In 1993, recoveries
exceeded amounts charged off.
(3) Represents credit losses, net of recoveries, from the liquidation of
receivables retained from businesses sold or exited. The remaining balance at
December 31, 1995 was $6,893,000. In 1995, recoveries from amounts charged
off in prior years exceeded current year charge offs by $3,154,000.
(4) The changes in ratios were due to corresponding fluctuations in the
allowance for losses and credit losses (see note 1 above).
__________________
Regulation
The Company's commercial lending operation is subject to various state
and federal laws. Depending upon the type of lending, these laws may require
licensing and certain disclosures and may limit the amounts, terms and
interest rates that may be offered.
LEASING
Transamerica Leasing Inc. leases, services and manages containers,
chassis and trailers throughout the world. The leasing operation is based in
Purchase, New York and maintains approximately 400 offices, depots and other
facilities in 47 countries. The Company specializes in intermodal
transportation equipment, which allows goods to travel by road, rail or ship.
The Company's customers include railroads, steamship lines and motor carriers.
On March 15, 1994, the Company acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
(collectively the "Container Operations") for $1,061,441,000 in cash. The
Company assumed certain specified liabilities of the Container Operations
including trade accounts payable. The Company did not assume any borrowings,
tax liabilities or contingent liabilities of Tiphook. The initial financing
of the acquisition was provided through short-term bank loans which have been
repaid and refinanced with long-term debt. The acquired fleet of standard
containers and tank containers totaled 363,000 units.
<PAGE>
Page 18
Competition
The leasing operation is the second largest lessor of intermodal
transportation equipment in the industry based on units of equipment available
for hire. The leasing operation competes by providing a high level of service
through its worldwide network of offices and third party depots and a wide
offering of equipment and lease types. The leasing operation's management
information system provides employees and other users, including customers,
around the world, with on-line access to key billing and operational
information. The leasing operation's main competitors are other
transportation leasing companies.
Revenue Earning Equipment
At December 31, 1995, the leasing operation's fleet consisted of standard
containers, refrigerated containers, domestic containers, tank containers and
chassis totaling 708,400 units which are owned or managed and leased from
approximately 360 depots worldwide; 36,900 rail trailers leased to all major
United States railroads and to roll on/roll off steamship operators, shippers,
shippers' agents and regional truckers; and 7,700 over-the-road trailers in
Europe.
The percent of the leasing operation's fleet on term lease or service
contract minimum lease was 51% in 1995, 47% in 1994 and 56% in 1993. The
decrease in 1994 reflects the impact of the acquisition of the Tiphook plc
container fleet. The increase in 1995 reflects the full integration of the
Tiphook container fleet into the leasing operation's fleet. At December 31,
1995 lease terms were one to 13 years.
The following table sets forth the leasing operation's fleet size, in
units, for the years indicated:
As of December 31,
_________________________
1995 1994 1993
Containers and chassis(1) 708,400 685,400 316,000
Rail trailers(2) ......... 36,900 39,300 36,500
European trailers(3) ..... 7,700 5,700 3,800
_______
(1) The 1994 increase was largely due to the acquisition of
substantially all of the operating assets of the container operations of
Tiphook plc.
(2) The 1995 decrease resulted from the sale of older units as
intermodal loadings declined year to year.
(3) The increases reflect entry and expansion into the European trailer
market.
___________________
<PAGE>
Page 19
The following table sets forth the leasing operation's fleet utilization
for the years indicated:
Years Ended December 31,
________________________
1995 1994 1993
Containers and chassis(1) ..... 85% 81% 83%
Rail trailers(2) .............. 77% 92% 91%
European trailers(3) .......... 95% 96% 89%
_______
(1) The 1995 increase was due to higher demand resulting from higher
export levels from China and the Far East. The 1994 decline was due to slow
economic growth in key European economies and Japan and the impact of the
Tiphook fleet acquisition.
(2) The 1995 decline was due to decreased U.S. intermodal loadings. The
1994 increase was primarily due to higher domestic economic activity and
because many shippers moved from trucks to rail transport for long-haul
shipments.
(3) The level of utilization for 1995 and 1994 exceeded 1993 due to a
greater number of units on long term lease in the United Kingdom and Europe,
and continued growth in the United Kingdom economy.
_____________________
EMPLOYEES
The Company employed approximately 4,500 persons at December 31, 1995.
<PAGE>
Page 20
Return on Assets and Equity
Certain information regarding the Company's consolidated return on assets
and equity, and certain other ratios, are set forth below:
Years Ended December 31,
____________________________
1995 1994 1993
Return on assets(1) ............ 1.8% 1.9% 1.1%
Return on equity(2) ............ 12.9% 12.4% 6.9%
Dividend payout ratio(3) ....... 111.0% 80.2% 75.2%
Equity to assets ratio(4) ...... 14.3% 15.2% 16.2%
_______
(1) Net income divided by total average assets (2 point method).
(2) Net income divided by total average equity (2 point method).
(3) Cash dividends declared divided by net income.
(4) Average total equity divided by total average assets (2 point
method).
_________________
Consolidated Ratios of Earnings to Fixed Charges
The following sets forth the consolidated ratio of earnings to fixed
charges for each of the five years ended December 31, 1995.
Years Ended December 31,
____________________________________
1995 1994 1993 1992 1991
1.56 1.62 1.50 1.59 0.77
The ratios were computed by dividing income before fixed charges, income
taxes, extraordinary loss on early extinguishment of debt in 1993 and the
cumulative effect of change in accounting for post employment benefits other
than pensions in 1991 by the fixed charges. Fixed charges consist of interest
and debt expense, and one-third of rent expense, which approximates the
interest factor.
<PAGE>
Page 21
ITEM 2. PROPERTIES
Not applicable.
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the
Company or one or more of its subsidiaries involve tax matters, alleged
breaches of contract, torts, employment discrimination, violations of
antitrust laws and miscellaneous other causes of action arising in the course
of their businesses. Some of these proceedings involve claims for punitive or
treble damages in addition to other specific relief.
Based upon information presently available, and in light of legal and
other defenses and insurance coverage available to the Company and its
subsidiaries, contingent liabilities arising from threatened and pending
litigation, income taxes and other matters are not expected to have a material
effect on the consolidated financial position or results of operations of the
Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted in accordance with General Instruction J.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not applicable. All of the outstanding shares of the Registrant's
capital stock is owned by Transamerica FInance Group, Inc., which is wholly
owned by Transamerica Corporation.
ITEM 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction J.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Omitted in accordance with General Instruction J. See "Management's
Discussion and Analysis of the Results of Operations" following the Notes to
Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
Page 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction J.
ITEM 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction J.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted in accordance with General Instruction J.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction J.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) List of Exhibits:
3(i) Transamerica Finance Corporation Certificate of Amendment of
Certificate of Incorporation as filed with the Secretary of
State of Delaware on February 19, 1991 (incorporated by
reference to Exhibit 3.1a to Registrant's Form 10-K Annual
Report (File No. 1-6798) for the year ended December 31,
1990).
3(ii) Transamerica Finance Corporation By-Laws, as amended, last
amendment - February 19, 1991 (incorporated by reference to
Exhibit 3(ii) to Registrant's Form 10-K Annual Report (File
No. 1-6798) for the year ended December 31, 1994).
4.1 Indenture dated as of April 1, 1991 between Registrant and
Harris Trust and Savings Bank, as Trustee (incorporated by
reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-3 (File No. 33-40236) as filed with the
Commission on August 16, 1991).
4.2*
_________
*Pursuant to the instructions as to exhibits, the registrant
is not filing certain instruments with respect to long-term debt
since the total amount of securities currently authorized under each
of such instruments does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. The
registrant hereby agrees to furnish a copy of any such instrument to
the Commission upon request.
<PAGE>
Page 23
10.1 Amended and Restated Guaranty dated February 1, 1995 by the
Registrant in favor of Corporate Asset Funding Company,
Inc. et al.
12 Ratio of Earnings to Fixed Charges Calculation.
23 Consent of Ernst & Young LLP to the incorporation by
reference of their report dated February 14, 1996 in the
Registrant's Registration Statement on Form S-3 (File No.
33-58365).
24 Power of Attorney executed by the directors of the
Registrant.
27 Financial Data Schedule.
(b) Reports on Form 8-K filed in the fourth quarter of 1995: None
(c) Exhibits: Certain of the exhibits listed in Item (a) 3 above have
been submitted under separate filings, as indicated.
(d) Financial Statement Schedules: The response to this portion of
Item 14 is submitted as a separate section of this report.
<PAGE>
Page 24
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.
TRANSAMERICA FINANCE CORPORATION
Burton E. Broome
Vice President and Controller
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 29, 1996 by the following persons on
behalf of the registrant and in the capacities indicated.
Signature Title
Principal Executive Officer:
RICHARD H. FINN* President, Chief Executive Officer and
Director
Principal Financial Officer:
David H. Hawkins Senior Vice President, Treasurer and
Director
Principal Accounting Officer:
Burton E. Broome Vice President, Controller and Assistant
Secretary
Directors:
RUSSELL T. CHARLTON* Director
KENT L. COLWELL* Director
RICHARD H. FINN* Director
EDGAR H. GRUBB* Director
DAVID H. HAWKINS* Director
FRANK C. HERRINGER* Director
ROBERT R. LINDBERG* Director
STEVEN A. READ* Director
CHARLES E. TINGLEY* Director
*Austin D. Kim
Attorney-in-Fact
A majority of the members of the Board of Directors.
<PAGE>
Page 25
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), and ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
and
FINANCIAL STATEMENT SCHEDULES
Year Ended December 31, 1995
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SAN FRANCISCO, CALIFORNIA
<PAGE>
Page 26
FORM 10-K - ITEM 14(a)(1) and (2)
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements:
The following consolidated financial statements of Transamerica Finance
Corporation and subsidiaries are included in Item 8:
Consolidated Balance Sheet--December 31, 1995 and 1994
Consolidated Statement of Income--Years ended December 31, 1995, 1994 and
1993
Consolidated Statement of Cash Flows--Years ended December 31, 1995, 1994
and 1993
Consolidated Statement of Stockholder's Equity--Years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements--December 31, 1995
Management's Discussion and Analysis of the Results of Operations
Supplementary Financial Information--Years ended December 31, 1995 and
1994
The following consolidated financial statement schedule of Transamerica
Finance Corporation and subsidiaries is included in Item 14(d):
V - Valuation and Qualifying Accounts--Years ended December 31, 1995,
1994 and 1993
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission pertain to
items which do not appear in the financial statements of Transamerica Finance
Corporation and subsidiaries or to items which are not significant or to
items as to which the required disclosure have been made elsewhere in the
financial statements and supplementary notes, and such schedules have
therefore been omitted.
<PAGE>
Page 27
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholder and
Board of Directors
Transamerica Finance Corporation
We have audited the accompanying consolidated balance sheet of
Transamerica Finance Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, cash flows, and
stockholder's equity for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule 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 and related
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and related schedule. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial 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 consolidated financial position
of Transamerica Finance Corporation and subsidiaries at December 31, 1995 and
1994, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
San Francisco, California
February 14, 1996
<PAGE>
Page 28
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except for share data)
<CAPTION>
December 31
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents ..................................... $ 2,665 $ 7,719
Investments ................................................... 139,056 113,159
Finance receivables, net of unearned finance charges and
insurance premiums:
Consumer lending ............................................ 4,936,292 4,141,986
Commercial lending .......................................... 2,871,530 2,772,580
___________ ___________
Net finance receivables ................................... 7,807,822 6,914,566
Less allowance for losses ................................... 237,094 203,792
___________ ___________
7,570,728 6,710,774
Property and equipment - less accumulated depreciation of
$882,642 in 1995 and $735,451 in 1994:
Land, buildings and equipment ............................... 46,079 47,392
Equipment held for lease .................................... 2,861,982 2,606,578
Advances to Transamerica affiliates ........................... 187,853 259,639
Goodwill, less accumulated amortization of $119,465 in
1995 and $109,909 in 1994 ................................... 339,906 351,562
Assets held for sale .......................................... 105,090 225,036
Less valuation allowance ...................................... 6,037 67,368
___________ ___________
99,053 157,668
Other assets .................................................. 858,926 700,313
___________ ___________
$12,106,248 $10,954,804
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Debt:
Unsubordinated .............................................. $ 8,747,703 $ 7,730,703
Subordinated ................................................ 942,155 993,555
___________ ___________
Total debt ................................................ 9,689,858 8,724,258
Accounts payable and other liabilities ........................ 511,946 541,210
Income taxes payable, of which $139,106 in 1995 and
$47,696 in 1994 is deferred ................................. 189,930 106,995
Stockholder's equity:
Preferred stock - authorized, 250,000 shares without
par value; none issued
Common stock - authorized, 2,500,000 shares of $10 par value;
issued and outstanding, 1,464,285 shares .................. 14,643 14,643
Additional paid-in capital .................................. 1,594,637 1,455,717
Retained earnings ........................................... 103,480 124,347
Net unrealized gain (loss) from investments marked to
fair value ................................................ 6,624 (3,272)
Foreign currency translation adjustments .................... (4,870) (9,094)
___________ ___________
Total stockholder's equity ................................ 1,714,514 1,582,341
___________ ___________
$12,106,248 $10,954,804
=========== ===========
<FN>
See notes to financial statement
</TABLE>
<PAGE>
Page 29
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands)
<CAPTION>
Years Ended December 31
1995 1994 1993
<S> <C> <C> <C>
REVENUES
Finance charges .................................... $1,125,022 $ 986,433 $ 929,464
Leasing revenues ................................... 703,106 620,680 388,327
Servicing fees ..................................... 308 942
Income from affiliates ............................. 10,359 17,193 18,021
Other .............................................. 76,613 53,213 55,372
__________ __________ __________
Total revenues ................................... 1,915,100 1,677,827 1,392,126
EXPENSES
Interest and debt expense .......................... 625,346 485,643 414,556
Depreciation on equipment held for lease ........... 236,597 197,295 102,538
Salaries and other operating expenses .............. 603,158 582,025 512,652
Provision for losses on receivables ................ 111,962 99,071 94,142
Provision for losses on assets held for sale ....... (20,100) 50,000
__________ __________ __________
Total expenses ................................... 1,556,963 1,364,034 1,173,888
__________ __________ __________
Income before income taxes and extraordinary item .. 358,137 313,793 218,238
Income taxes ....................................... 145,493 125,551 95,357
__________ __________ __________
Income before extraordinary item ................... 212,644 188,242 122,881
Extraordinary loss on early extinguishment of debt,
net of applicable income tax benefit of $11,447 .. (23,084)
__________ __________ __________
Net income ......................................... $ 212,644 $ 188,242 $ 99,797
========== ========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 30
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
Years Ended December 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ......................................... $ 212,644 $ 188,242 $ 99,797
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 265,205 223,044 126,513
Provision for losses on receivables .............. 111,962 99,071 94,142
Provision for losses on assets held for sale ..... (20,100) 50,000
Amortization of discount on long-term debt ....... 22,878 19,292 30,419
Change in accounts payable and other liabilities . (27,182) (25,254) (75,151)
Change in income taxes payable ................... 147,662 40,688 (18,747)
Extraordinary loss on early extinguishment
of debt ........................................ 23,084
Other ............................................ 30,308 94,329 138,676
___________ ___________ ___________
Net cash provided by operating activities ...... 743,377 639,412 468,733
INVESTING ACTIVITIES
Finance receivables originated ..................... (17,510,658) (15,594,856) (11,756,552)
Finance receivables collected ...................... 17,444,556 14,807,548 11,535,766
Purchase of property and equipment ................. (591,686) (455,353) (424,187)
Sales of property and equipment .................... 86,524 31,336 55,760
Purchase of investments ............................ (25,513) (15,375) (35,953)
Sales or maturities of investments ................. 15,130 9,022 23,523
Decrease (increase) in investments in and advances
to affiliates .................................... 72,858 111,373 (80,772)
Purchase of finance receivables and other assets
from ITT Consumer Financial Corporation .......... (1,027,298)
Purchase of the container division assets of
Tiphook plc ...................................... (1,061,441)
Other .............................................. (58,834) (102,807) (109,831)
___________ ___________ ___________
Net cash used by investing activities .......... (1,594,921) (2,270,553) (792,246)
FINANCING ACTIVITIES
Proceeds from debt financing ....................... 8,281,514 7,189,405 5,500,571
Payments of debt ................................... (7,333,630) (5,528,050) (5,112,147)
Capital contributions from parent company .......... 131,000 99,184 3,915
Cash dividends paid ................................ (232,394) (151,000) (100,000)
___________ ___________ ___________
Net cash provided by financing activities ...... 846,490 1,609,539 292,339
___________ ___________ ___________
Decrease in cash and cash equivalents .............. (5,054) (21,602) (31,174)
Cash and cash equivalents at beginning of year ..... 7,719 29,321 60,495
___________ ___________ ___________
Cash and cash equivalents at end of year ........... $ 2,665 $ 7,719 $ 29,321
=========== =========== ===========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 31
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(Amounts in thousands)
<CAPTION>
Net Unrealized
Gain (Loss) Foreign
Additional Retained From Investments Currency
Common Paid-in Earnings Marked to Translation
Stock Capital (Deficit) Fair Value Adjustments
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 ............. $14,643 $1,352,618 $ 62,308 $ 54 $ (687)
Net income ............................. 99,797
Capital contribution from parent company 3,915
Dividends declared ..................... (75,000)
Other changes .......................... (54) (7,973)
_______ __________ ________ _______ _______
Balance at December 31, 1993 ........... 14,643 1,356,533 87,105 (8,660)
Effect of adopting Statement of Finan-
cial Accounting Standards No. 115 .... 5,581
Net income ............................. 188,242
Capital contribution from parent company 99,184
Dividends declared ..................... (151,000)
Other changes .......................... (8,853) (434)
_______ __________ ________ _______ _______
Balance at December 31, 1994 ........... 14,643 1,455,717 124,347 (3,272) (9,094)
Net income ............................. 212,644
Capital contribution from parent company 138,920
Dividends declared ..................... (233,511)
Other changes .......................... 9,896 4,224
_______ __________ ________ _______ _______
Balance at December 31, 1995 ........... $14,643 $1,594,637 $103,480 $ 6,624 $(4,870)
======= ========== ======== ======= =======
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 32
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Transamerica Finance Corporation, the "Company," through its
subsidiaries, is principally engaged in consumer lending, commercial lending
and leasing operations. The Company is a wholly owned subsidiary of
Transamerica Finance Group, Inc., which is a wholly owned subsidiary of
Transamerica Corporation. The United States represents the primary market for
the services offered by the consumer and commercial lending operations while
the leasing business operates in the container shipping business worldwide.
Consolidation - The consolidated financial statements include the
accounts of Transamerica Finance Corporation and its subsidiaries. Certain
amounts reported in the consolidated financial statements are based on
management estimates. The ultimate resolution of these items may differ from
those estimates.
Cash and Cash Equivalents - Cash and cash equivalents include money
market funds and marketable securities with original maturities of three
months or less.
Depreciation and Amortization - Property and equipment, which are stated
on the basis of cost, are depreciated by use of the straight-line method over
their estimated useful lives. Other intangible assets, principally renewal,
referral and other rights incident to businesses acquired, are amortized over
estimated future benefit periods ranging from five to 25 years in proportion
to acquired gross profits. Goodwill is amortized over periods up to 40 years.
Foreign Currency Translation - The net assets and operations of foreign
subsidiaries included in the consolidated financial statements are
attributable to Canadian and European operations. The accounts of these
subsidiaries have been converted at rates of exchange in effect at year end as
to balance sheet accounts and at average rates for the year as to operations.
The effect of changes in exchange rates in translating foreign subsidiaries'
financial statements is accumulated in a separate component of stockholder's
equity.
Transactions with Affiliates - In the normal course of operations, the
Company has various transactions with Transamerica Corporation and certain of
its other subsidiaries. In addition to the filing of consolidated income tax
returns and the transactions discussed in Notes H and K, these transactions
include computer and other specialized services, various types of insurance
coverage and pension administration, the effects of which are insignificant
for all years presented.
Finance Charges - Finance charges, including loan origination fees,
offset by direct loan origination costs, are generally recognized as earned on
an effective yield method, except that accrual of finance charges is suspended
<PAGE>
Page 33
on accounts that become past due contractually in excess of 29 days for
consumer loans or 90 days for commercial loans. At December 31, 1995 and
1994, finance receivables for which the accrual of finance charges was
suspended amounted to $323,515,000 and $216,144,000. Charges collected in
advance, including renewal charges, on inventory finance receivables are taken
into income on a straight-line basis over the periods to which the charges
relate.
Allowance for Losses - The allowance for losses is maintained in an
amount sufficient to cover estimated uncollectible receivables. Such
estimates are based on percentages of net finance receivables outstanding
developed from historical credit loss experience and, if appropriate,
provision for deviation from historical averages, supplemented in the case of
commercial loans by specific reserves for accounts known to be impaired. The
allowance is provided through charges against current income. Accounts are
charged against the allowance when they are deemed to be uncollectible. When
foreclosure proceedings are begun in the case of a real estate secured
consumer loan, the account is moved from finance receivables to other assets
and is written down to the fair value of the collateral, less estimated
selling costs, if less than the account balance. After foreclosure,
repossessed assets are carried at the lower of cost or fair value less
estimated selling costs and are reclassified to assets held for sale.
Additionally, accounts are generally charged against the allowance when no
payment has been received for six months for consumer lending and when all
avenues for repayment have been exhausted for commercial lending.
Leasing Revenues - Leasing revenues include income from operating,
finance and sales-type leases. Operating lease income is recognized on the
straight-line method over the lease term. Finance lease income, represented
by the excess of the total lease receivable (reduced by the amount
attributable to contract maintenance) over the net cost of the related
equipment, is deferred and amortized over the noncancelable term of the lease
using an accelerated method which provides a level rate of return on the
outstanding lease contract receivable. Profit on sales-type leases,
represented by the excess of the total fair value of the equipment over its
cost or carrying value, is recognized at the inception of the lease. Unearned
income is amortized over the term of the lease in the same manner described
above.
Derivatives - The Company uses derivative financial instruments to hedge
some of its interest rate risk. Contracts are designated and accounted for as
hedges of certain of the Company's outstanding indebtedness. Gains or losses
on terminated hedges are deferred and amortized over the remaining life of the
hedged item.
Income Taxes - Taxable results of each of the Company's operations are
included in the consolidated federal and certain state income tax returns
filed by Transamerica Corporation, which by the terms of a tax sharing
agreement generally requires the Company to accrue and settle income tax
obligations as if the individual operations filed separate returns with the
applicable taxing authorities. Under the tax sharing agreement, Transamerica
Corporation guarantees an unlimited carryforward period for the utilization of
federal net operating losses and foreign tax credits. The Company provides
<PAGE>
Page 34
deferred income taxes based on enacted rates in effect on the dates temporary
differences between the book and tax bases of assets and liabilities reverse.
New Accounting Standards - In 1995, the Company adopted the Financial
Accounting Standards Board's new standard on accounting for impairment of
loans. The new standard requires that impaired loans be measured based on
either the fair value of the loan, if discernible, the present value of
expected cash flows discounted at the loan's effective interest rate, or the
fair value of the collateral if the loan is collateral dependent. The new
standard did not have a material effect on the consolidated financial
statements of the Company.
In March 1995, the Financial Accounting Standards Board issued a new
standard on accounting for the impairment of long lived assets and for long
lived assets to be disposed of. The Company will adopt this new standard in
the first quarter of 1996. The new standard requires that the Company assess
whether the carrying amount of an asset is recoverable whenever events or
changes in circumstances indicate that a significant change in the value of
the asset may have occurred. At adoption this new standard will not have a
material effect on the consolidated financial statements of the Company.
In May 1995, the Financial Accounting Standards Board issued a new
standard on accounting for mortgage servicing rights. The Company will adopt
this new standard in the first quarter of 1996. The new standard requires
that mortgage servicing rights be capitalized when acquired either through the
purchase or origination of mortgage loans that are subsequently sold or
securitized with the servicing rights retained and when the relative fair
values of the loans and the related mortgage servicing rights can be
estimated. At adoption this new standard will not have a material effect on
the consolidated financial statements of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's
new standard on accounting for certain investments in debt and equity
securities. Beginning in 1994 with the adoption of this standard, all of the
Company's investments in debt securities have been classified as available for
sale and reported at fair value. The effect of this adjustment, net of
federal income taxes, is recorded in a separate component of stockholder's
equity. There is no effect on the income statement. Prior to 1994,
investments in debt securities were carried at amortized cost.
NOTE B--ACQUISITIONS
In March 1994, the Company acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
(collectively the "Container Operations") for $1,061,441,000 in cash. The
Company assumed certain specific liabilities of the Container Operations
including trade accounts payable. The Company did not assume any borrowings,
tax liabilities or contingent liabilities of Tiphook. The acquired fleet of
standard containers and tank containers totaled 363,000 units. The
<PAGE>
Page 35
acquisition has been accounted for as a purchase and, accordingly, the
operations of Tiphook have been included in the Consolidated Statement of
Income from the date of acquisition.
Had the acquisition of the Container Operations been accomplished as of
January 1, 1993, revenues for the Company would have been approximately
$1,720,000,000 and $1,640,000,000 for the years ended December 31, 1994 and
1993. The pro forma effect on net income would have been immaterial. This
information is for illustrative purposes only and is not necessarily
indicative of the future results of the operations of the combined company, or
of the results of the operations of the combined company that would have
actually occurred had the transaction been in effect for the periods
presented.
NOTE C--FINANCIAL INSTRUMENTS
Investments
The cost and fair value of fixed maturities at December 31, 1995 and
1994 were as follows:
Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
(Amounts in thousands)
December 31, 1995:
Fixed maturities ........ $128,864 $10,233 $ 41 $139,056
======== ======= ====== ========
December 31, 1994:
Fixed maturities ........ $118,193 $ 1,253 $6,287 $113,159
======== ======= ====== ========
<PAGE>
Page 36
Finance Receivables
The carrying amounts and estimated fair values of the finance receivable
portfolio at December 31, 1995 and 1994 were as follows:
1995 1994
_______________________ _______________________
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
(Amounts in thousands)
Fixed rate receivables:
Consumer ............... $4,772,226 $5,408,981 $4,024,768 $4,500,191
Commercial ............. 157,306 157,189 125,950 128,659
Variable rate receivables:
Commercial ............. 2,641,196 2,641,196 2,560,056 2,560,056
__________ __________ __________ __________
Total $7,570,728 $8,207,366 $6,710,774 $7,188,906
========== ========== ========== ==========
The estimated fair values of consumer finance receivables, substantially
all of which are fixed rate instalment loans collateralized by residential
real estate, and the fixed rate commercial finance loans are based on the
discounted value of the future cash flows expected to be received using
available secondary market prices for securities backed by similar loans after
adjustment for differences in loan characteristics. In the absence of readily
available market prices, the expected future cash flows are discounted at
effective rates currently offered by the Company for similar loans. For
variable rate commercial loans, which comprise the majority of the commercial
loan portfolio, the carrying amount represents a reasonable estimate of fair
value.
<PAGE>
Page 37
Additional information pertaining to finance receivables outstanding
follows:
Maximum
Original Term
Receivables (in months)
_______________________ _____________
1995 1994 1995 1994
(Dollar amounts in thousands)
Consumer:
Consumer instalment loans:
Real estate secured ....... $4,212,704 $3,522,966 180 180
Other ..................... 853,647 758,798 60 60
Other finance receivables ... 84,447 58,197 36 36
__________ __________
5,150,798 4,339,961
Less unearned finance charges
and insurance premiums .... 214,506 197,975
__________ __________
Net finance receivables ..... 4,936,292 4,141,986
__________ __________
Commercial:
Inventory finance ........... 2,242,238 2,078,519 12 12
Business credit ............. 680,771 654,966 84 60
__________ __________
Core businesses ........... 2,923,009 2,733,485
Other ....................... 6,893 75,262
__________ __________
2,929,902 2,808,747
Less unearned finance charges 58,372 36,167
__________ __________
Net finance receivables ..... 2,871,530 2,772,580
__________ __________
Total net finance
receivables ............. $7,807,822 $6,914,566
========== ==========
Contractual maturities of finance receivables outstanding, before
deduction of unearned finance charges and insurance premiums, at December 31,
1995 are:
Consumer % Commercial % Total %
(Dollar amounts in thousands)
1996 .......... $1,171,280 22.7% $2,444,644 83.4% $3,615,924 44.7%
1997 .......... 786,252 15.3 244,635 8.3 1,030,887 12.8
1998 .......... 604,671 11.7 175,216 6.0 779,887 9.7
1999 .......... 461,833 9.0 29,090 1.0 490,923 6.1
2000 .......... 298,458 5.8 19,480 0.7 317,938 3.9
Thereafter .... 1,828,304 35.5 16,837 0.6 1,845,141 22.8
__________ ______ __________ ______ __________ ______
Total ....... $5,150,798 100.0% $2,929,902 100.0% $8,080,700 100.0%
========== ====== ========== ====== ========== ======
<PAGE>
Page 38
Experience of the Company has shown that a substantial portion of the
consumer finance receivables will be renewed or prepaid many months prior to
contractual maturity dates. Accordingly, the above schedule should not be
regarded as a forecast of future cash collections. For 1995 and 1994, the
ratio for consumer finance receivables of principal cash collections
(excluding balances refinanced) to average net finance receivables was 24%
and 28%.
The commercial lending operation's business credit unit provides
revolving lines of credit, letters of credit and standby letters of credit.
At December 31, 1995 and 1994, borrowers' unused credit available under such
arrangements totaled $511,386,000 and $535,214,000.
Concentration of Risk
The Company's consumer and commercial lending operations engage in the
extension of credit to homeowners, electronics and appliance dealers, retail
recreational products dealers, computer stores and others. The risk
associated with this credit is subject to economic, competitive and other
influences. While a substantial portion of the risk is diversified, certain
operations are concentrated in one industry or geographic area.
The Company's consumer finance receivables at December 31, 1995 included
$4,036,828, net of unearned finance charges and insurance premiums, of real
estate secured loans, principally first and second mortgages secured by
residential properties, of which approximately 37% were located in California.
The commercial finance receivables portfolio represents lending arrangements
with over 25,000 customers. At December 31, 1995, the portfolio included 12
customers with individual balances in excess of $15,000,000. These accounts
represented 10% of total commercial net finance receivables outstanding at
December 31, 1995.
<PAGE>
Page 39
Notes and Loans Payable
At December 31,
_____________________
1995 1994
(Amounts in thousands)
Short-term debt and current portion of
long-term debt:
Commercial paper and master note obligations ... $4,230,843 $3,989,211
Bank loans and current portion of
long-term debt ............................... 847,011 1,070,434
__________ __________
5,077,854 5,059,645
Less classified as long-term debt
under non cancelable long-term
credit agreement ............................. 4,334,550 3,480,500
__________ __________
Total short-term debt ........................ 743,304 1,579,145
Long-term debt due subsequent to one year:
Short-term debt supported by noncancelable
credit agreements ............................ 4,334,550 3,480,500
5.24% to 9.41% notes and debentures due 1997
to 2010 ...................................... 3,603,754 2,477,282
Zero to 6.50% notes and debentures due 2007 to
2012 issued at a discount to yield 13.80% to
13.88%; with benefits from deferred taxes,
effective cost of 8.79% to 12.35%; maturity
value of $582,760,000......................... 161,976 154,176
Subordinated notes and debentures 5.57% to
9.95% notes due 1997 to 2003 ................. 784,580 841,155
__________ __________
Total long-term debt due subsequent to
one year ................................. 8,884,860 6,953,113
Demand loans due Transamerica Corporation
at various interest rates ........................ 61,694 192,000
_________ _________
Total debt ................................... $9,689,858 $8,724,258
========== ==========
The weighted average interest rate on short-term borrowings at December
31, 1995 and 1994 was 5.80%.
<PAGE>
Page 40
Long-term debt outstanding at December 31, 1995 matures as follows:
Unsubordinated Subordinated Total
(Amounts in thousands)
1996 ............ $ 585,729 $157,575 $ 743,304
1997 ............ 989,714 102,100 1,091,814
1998 ............ 824,352 250,480 1,074,832
1999 ............ 612,440 202,000 814,440
2000 ............ 447,062 167,500 614,562
Thereafter ...... 892,162 62,500 954,662
__________ ________ __________
Total (1) ..... $4,351,459 $942,155 $5,293,614
========== ======== ==========
(1) Includes the accreted values at December 31, 1995 on original issue
discount debt and not the amount due at maturity.
_________________
Short-term borrowings before reclassification to long-term debt, are
primarily in the form of commercial paper notes issued by the Company. Such
commercial paper is continuously offered, with maturities not exceeding 270
days in the U.S. and 365 days in Canada, at prevailing rates for major finance
companies. Additionally, bank loans are another source of short-term
borrowings. At December 31, 1995, $866,109,000 of uncommitted bank credit
lines were available to the Company, $75,000,000 of which were also available
to Transamerica Corporation. At December 31, 1995, all borrowings under these
lines were made by the Company and amounted to $298,636,000. The cost of
short-term borrowings is directly related to prevailing rates of interest in
the money market; such rates are subject to fluctuation.
In support of the short-term debt classified as long-term debt at
December 31, 1995, Transamerica Finance Corporation and its ultimate parent,
Transamerica Corporation, share credit agreements with various banks and had
the ability to borrow up to $5,200,000,000 with interest at variable rates.
There were no borrowings outstanding under these credit lines at December 31,
1995. These credit agreements, which expire through 2000, require a fee on
the commitment.
<PAGE>
Page 41
Interest rates on borrowings during the years indicated were as follows:
Years Ended December 31,
________________________
1995 1994 1993
Weighted average annual interest
rate during year:(1)
Short-term borrowings ........ 6.05% 4.41% 3.41%
Long-term borrowings ......... 7.36% 7.69% 8.24
_____ _____ _____
Total borrowings ........... 6.78% 6.05% 6.00%
===== ===== =====
_______
(1) Excludes the cost of maintaining credit lines and the effect of
interest rates on borrowings denominated in foreign currencies.
_________________
Interest payments, net of amounts received from interest rate exchange
agreements, totaled $616,462,000 in 1995, $561,874,000 in 1994, and
$513,541,000 in 1993.
At December 31, 1995 and 1994 the estimated fair value of debt, using
rates currently available for debt with similar terms and maturities, was
$10,114,000,000 and $8,644,000,000.
Derivatives
The operations of the Company are subject to risk of interest rate
fluctuations to the extent that there is a difference between the cash flows
from the Company's interest-earning assets and the cash flows related to its
liabilities that mature or are repriced in specified periods. In the normal
course of its operations, the Company hedges some of its interest rate risk
with derivative financial instruments. These derivatives comprise primarily
interest rate swap agreements. The Company does not use derivative financial
instruments for trading or speculative purposes, nor is the Company a party to
any leveraged derivative contracts.
The interest rate swap agreements are intended to help the Company to
more closely match the cash flow received from its assets to the payments on
its liabilities. The Company's interest rate swap agreements generally
provide that one party pays interest at a floating rate in relation to
movements in an underlying index and the other party pays interest at a fixed
rate. The interest rate swap contracts are designated and accounted for as
hedges of a portion of the Company's outstanding indebtedness.
<PAGE>
Page 42
At December 31, 1995 and 1994, contracts designated as hedges of
outstanding indebtedness comprise:
<TABLE>
<CAPTION>
------------ 1995 ------------- ------------ 1994 ------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Fixed Floating Fixed Floating
Notional Interest Interest Notional Interest Interest
Amount Rate Rate Amount Rate Rate
(Dollars amounts in thousands)
<S) <C> <C> <C> <C> <C> <C>
Interest rate swap agreements - the
Company pays:
Floating rate interest expense, receives
fixed rate interest income ............ $ 45,000 7.1% 6.0% $103,000 7.7% 7.0%
======== ==== ==== ======== ==== ====
Fixed rate interest expense, receives
floating rate interest income ......... $473,900 6.7% 5.7% $540,100 6.6% 5.9%
======== ==== ==== ======== ==== ====
Floating rate interest expense based on
one index (5.9%) and receives floating
rate interest income based on another
index (5.8%) .......................... $101,000 $101,000
======== ========
Cross currency swaps and foreign interest
rate swaps ............................ $144,450
========
</TABLE>
The net present value of these interest rate swap agreements offsets
changes in the fair value of the hedged indebtedness, which are also carried
at amortized cost. The fair value of the liability hedges at December 31,
1995 and December 31, 1994 were gross obligations to counterparties of
$21,134,000 and $2,850,000 and gross benefits of $1,720,000 and $13,495,000,
resulting in a net obligation to counterparties of $19,414,000 at December 31,
1995 and a net benefit from counterparties of $10,645,000 at December 31,
1994.
While the Company is exposed to credit risk in the event of
nonperformance by the other party, nonperformance is not anticipated due to
the credit rating of the counterparties. At December 31, 1995, the interest
rate swap agreements are with financial institutions rated A or better by one
or more of the major credit rating agencies.
<PAGE>
Page 43
NOTE D--ALLOWANCE FOR LOSSES
Changes in the allowance for losses on finance receivables are:
Consumer Commercial Total
(Amounts in thousands)
Balance at January 1, 1993 .......... $101,195 $ 87,169 $188,364
Provision charged to income ......... 62,349 31,793 94,142
Receivables charged off ............. (62,524) (51,832) (114,356)
Recoveries .......................... 1,871 9,122 10,993
Other ............................... 422 (173) 249
________ ________ ________
Balance at December 31, 1993 ........ 103,313 76,079 179,392
Provision charged to income ......... 80,406 18,665 99,071
Receivables charged off ............. (74,870) (17,038) (91,908)
Recoveries .......................... 2,375 8,387 10,762
Other ............................... 5,994 481 6,475
________ ________ ________
Balance at December 31, 1994 ........ 117,218 86,574 203,792
Provision charged to income ......... 97,835 14,127 111,962
Receivables charged off ............. (106,579) (16,472) (123,051)
Recoveries .......................... 2,773 7,634 10,407
Increase in connection with
purchase of receivables ........... 52,856 52,856
Other ............................... (37) (18,835) (18,872)
________ ________ ________
Balance at December 31, 1995 ........ $164,066 $ 73,028 $237,094
======== ======== ========
<PAGE>
Page 44
NOTE E--ASSETS HELD FOR SALE
1995 1994
(Amounts in thousands)
Consumer:
Repossessed residential properties ...... $ 91,658 $145,633
Other repossessed assets ................ 2,950 3,409
________ ________
94,608 149,042
Less valuation allowance ................ 2,282
________ ________
94,608 146,760
Commercial:
Rent-to-own finance receivables ......... 5,595 72,381
Other repossessed assets ................ 4,887 3,613
________ ________
10,482 75,994
Less valuation allowance ................ 6,037 65,086
________ ________
4,445 10,908
________ ________
Total ................................. $ 99,053 $157,668
======== ========
In 1994, the commercial lending operation sold its U.S. and Canadian
repossessed rent-to-own stores with a net carrying value of $17,666,000 for
$22,939,000. The transaction resulted in a $5,273,000 ($3,980,000 after tax)
gain. In 1995, the commercial lending operation liquidated and sold
$56,858,000 of the assets of its Puerto Rican operations and sold
substantially all of its rent-to-own finance receivables. Due to the
favorable terms on disposition of assets held for sale (principally operations
in Puerto Rico) in 1995, the company reversed $20,100,000 ($12,200,000 after
tax) of excess valuation allowance.
NOTE F--DIVIDEND AND OTHER RESTRICTIONS
Under certain circumstances, the provisions of loan agreements and
statutory requirements place limitations on the amount of funds which can be
remitted by the Company to its parent company. Consolidated equity is
restricted by the provisions of debt agreements. At December 31, 1995,
$92,034,000 was available for dividends.
<PAGE>
Page 45
NOTE G--INCOME TAXES
The provision for income taxes comprises:
1995 1994 1993
(Amounts in thousands)
Current taxes:
Federal ................................ $ 58,316 $ 71,514 $41,617
State .................................. 10,371 18,023 15,354
Foreign ................................ 6,529 88
________ ________ _______
68,687 96,066 57,059
Deferred taxes:
Federal ................................ 62,052 31,544 32,461
State .................................. 11,749 1,859 5,034
Foreign ................................ 3,005 (3,918) 803
________ ________ _______
76,806 29,485 38,298
________ ________ _______
Total income taxes ................... $145,493 $125,551 $95,357
======== ======== =======
The difference between federal income taxes computed at the statutory
rate and the total provision for income taxes is:
1995 1994 1993
(Amounts in thousands)
Federal income taxes at statutory rate ... $125,348 $109,828 $76,383
State income taxes, net of federal income
tax benefit ............................ 14,379 12,978 13,913
Book and tax basis difference of assets
acquired ............................... 4,107 4,053 2,999
Other .................................... 1,659 (1,308) 2,062
________ ________ _______
Total income taxes ..................... $145,493 $125,551 $95,357
======== ======== =======
<PAGE>
Page 46
Deferred tax liabilities (assets) are comprised of the following at
December 31:
1995 1994
(Amounts in thousands)
Accelerated depreciation .................... $441,658 $319,949
Discount amortization on notes and loans
payable ................................... 68,721 65,790
Direct finance and sales type leases ........ 23,244 21,942
Other ....................................... 28,440 36,384
________ ________
Gross deferred tax liabilities ............ 562,063 444,065
Allowance for losses ........................ (74,119) (121,273)
Net operating loss and foreign tax credit
carryforwards ............................. (296,657) (244,817)
Other ....................................... (52,181) (30,279)
________ ________
Gross deferred tax assets ................. (422,957) (396,369)
________ ________
Net deferred tax liability ................ $139,106 $ 47,696
======== ========
Income tax payments, net of refunds, totaled $65,121,000 in 1995,
$87,098,000 in 1994 and $77,089,000 in 1993.
NOTE H--PENSION AND STOCK SAVINGS PLANS AND OTHER POST EMPLOYMENT BENEFITS
The Company participates in the Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates (the pension plan). The Company also
participates in various programs sponsored by Transamerica Corporation that
provide medical and certain other benefits to eligible retirees. The pension
plan is a noncontributory defined benefit plan covering substantially all
employees. Pension benefits are based on the employee's compensation during
the highest paid 60 consecutive months during the 120 months before
retirement. Pension costs are allocated to the Company based on the number of
participants. The Company also participates in the Transamerica Corporation
Employee Stock Savings Plan (the 401(k) plan). The 401(k) plan is a
contributory defined contribution plan covering eligible employees who elect
to participate. The Company's total costs for both the pension plan and the
401(k) plan were $6,329,000 in 1995, $9,447,000 in 1994 and $9,163,000 in
1993.
NOTE I--COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have noncancelable lease agreements
expiring mainly through 1999. These agreements are principally operating
leases for facilities used in the Company's operations. Total rental expense
amounted to $43,345,000 in 1995, $67,193,000 in 1994 and $54,799,000 in 1993.
<PAGE>
Page 47
Contingent liabilities arising from litigation, income taxes and other
matters are not expected to have a material effect on the consolidated
financial position or results of operations of the Company and its
subsidiaries.
NOTE J--BUSINESS SEGMENT INFORMATION
Business segment information is:
<TABLE>
<CAPTION>
Revenues Operating Profit (1)
____________________________________ ____________________________________
1995 1994 1993 1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending .............. $ 782,521 $ 688,608 $ 651,218 $ 133,999 $ 148,461 $ 157,435
Commercial lending ............ 393,778 350,639 333,297 106,470 62,924 (31,074)
Leasing ....................... 733,873 637,904 407,774 119,674 101,890 91,470
Other (2) ..................... 4,928 676 (163) (2,006) 518 407
__________ __________ __________ __________ __________ __________
$1,915,100 $1,677,827 $1,392,126 358,137 313,793 218,238
========== ========== ==========
Income taxes ......................................................... (145,493) (125,551) (95,357)
__________ __________ __________
Income before extraordinary item ..................................... $ 212,644 $ 188,242 $ 122,881
========== ========== ==========
<CAPTION>
Assets Liabilities
______________________________________ ____________________________________
1995 1994 1993 1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending ............ $ 5,308,281 $ 4,478,101 $3,985,720 $ 4,646,198 $3,930,693 $3,511,823
Commercial lending .......... 3,247,368 3,324,967 3,461,316 2,631,173 2,695,733 2,836,763
Leasing ..................... 3,477,797 3,184,195 1,696,983 3,055,952 2,786,654 1,417,965
Other(2)..................... 72,802 (32,459) (112,649) 58,411 (40,617) (184,802)
___________ ___________ __________ ___________ __________ __________
Total ..................... $12,106,248 $10,954,804 $9,031,370 $10,391,734 $9,372,463 $7,581,749
=========== =========== ========== =========== ========== ==========
<FN>
(1) For income by segment as used for management purposes, see table included with Management's Discussion and
Analysis.
(2) Includes intercompany eliminations
<PAGE>
Page 48
<CAPTION>
Additions, at Cost,
to Property & Equipment Depreciation Expense
____________________________________ ____________________________________
1995 1994 1993 1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending ............ $ 8,748 $ 4,168 $ 6,169 $ 4,405 $ 3,933 $ 3,525
Commercial lending .......... 5,384 4,872 6,992 5,054 5,732 5,396
Leasing ..................... 577,554 1,525,344 411,026 244,098 201,722 105,852
Other ....................... 82
__________ __________ __________ __________ __________ __________
Total ..................... $ 591,686 $1,534,384 $ 424,187 $ 253,557 $ 211,387 $ 114,855
========== ========== ========== ========== ========== ==========
</TABLE>
Revenues of the domestic leasing operation derived from foreign customers
were $476,358,000 in 1995, $440,246,000 in 1994 and $210,301,000 in 1993, of
which European customers accounted for 41%, 48%, and 41%. Revenues of
foreign-domiciled leasing operations were less than 8% of the consolidated
total in each of the three years for the period ended December 31, 1995.
NOTE K--TRANSACTIONS WITH AFFILIATES
On November 1, 1990, the Company sold without recourse a pool of real
estate secured receivables to Transamerica Financial Services Finance Co.
(TFSFC) for cash of $547,655,000, plus interest of $9,661,000 to the closing
date of December 17, 1990. The purchase price, which represented the fair
value of the receivables sold, was based on an independent appraisal. For
financial reporting purposes, the intercompany gain on this sale was deferred
and was amortized to income as a component of the Company's equity in the
distributable earnings of TFSFC. TFSFC subsequently securitized and sold to
outside investors a $430,000,000 participation interest in the receivable
pool. The Company serviced these receivables for a fee. In 1994, the
Company repurchased the remaining serviced receivables and the operations of
TFSFC ceased.
Advances to Transamerica affiliates consist of unsecured receivables at
December 31:
1995 1994
(Amounts in thousands)
Transamerica Insurance Finance Corporation ....... $120,565 $225,694
Transamerica HomeFirst, Inc. ..................... 51,039 33,945
Transamerica Finance Group, Inc. ................. 16,249
________ ________
Total ........................................ $187,853 $259,639
======== ========
<PAGE>
Page 49
The receivables from Transamerica Insurance Finance Corporation and
Transamerica HomeFirst, Inc. are payable on demand and bear interest at a rate
that varies based on the Company's average cost of borrowings. The weighted
average interest rate was 6.61% in 1995, 4.98% in 1994 and 4.21% in 1993. The
receivable from Transamerica Finance Group is non interest bearing. Under
the terms of certain debt agreements, the Company may maintain investments in
and advances to affiliates up to $914,514,000 at December 31, 1995.
Income from affiliates comprises the following for the years ended
December 31:
1995 1994 1993
(Amounts in thousands)
Interest income ......................... $10,359 $11,085 $11,572
Servicing fees .......................... 585 833
Amortization of deferred gain and equity
in earnings of TFSFC .................. 5,523 5,616
_______ _______ _______
Total ............................... $10,359 $17,193 $18,021
======= ======= =======
<PAGE>
Page 50
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS
Transamerica Finance Corporation includes Transamerica's consumer
lending, commercial lending (excluding insurance premium finance) and leasing
operations and provides funding for these operations. The principal assets of
Transamerica Finance Corporation comprise finance receivables and equipment
held for lease totaling $10,432,710,000 at December 31, 1995 and
$9,317,352,000 at December 31, 1994. Transamerica Finance Corporation's total
notes and loans payable were $9,689,858,000 at December 31, 1995 and
$8,724,258,000 at December 31, 1994. Variable rate debt was $4,836,038,000 at
December 31, 1995 compared to $4,279,886,000 at the end of 1994. The ratio of
debt to tangible equity was 7.0:1 at December 31, 1995 and 7.1:1 at December
31, 1994.
Transamerica Finance Corporation offers publicly, from time to time,
senior or subordinated debt securities. Public debt issued totaled
$832,000,000 in 1995, $1,516,000,000 in 1994 and $407,000,000 in 1993. Under
a shelf registration statement filed in April 1995 with the Securities and
Exchange Commission, the company may offer up to $3,000,000,000 of senior or
subordinated debt securities (which may include medium-term notes) with
varying terms, of which $2,600,000,000 had not been issued at December 31,
1995.
Liquidity is a characteristic of these operations since the majority of
the assets consists of finance receivables. Principal cash collections of
finance receivables totaled $17,444,556,000 during 1995, $14,807,548,000
during 1994 and $11,535,766,000 during 1993.
The following table sets forth revenues and income from operations by
line of business for the periods indicated:
<TABLE>
<CAPTION>
Income (loss) before
Revenues Extraordinary Item
_____________________________________ ____________________________________
1995 1994 1993 1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending .......... $ 782,521 $ 688,608 $ 651,218 $ 80,504 $ 89,765 $ 91,742
Commercial lending ........ 393,778 350,639 333,297 69,912 46,276 (12,775)
Leasing ................... 733,873 637,904 407,774 75,071 63,552 53,641
Other ..................... 4,928 676 (163) (1,186) 306 1,931
Amortization of goodwill .. (11,657) (11,657) (11,658)
__________ __________ __________ ________ ________ ________
Total ................... $1,915,100 $1,677,827 $1,392,126 $212,644 $188,242 $122,881
========== ========== ========== ======== ======== ========
</TABLE>
The following discussion should be read in conjunction with the
information presented under Item 1, Business.
<PAGE>
Page 51
Consumer Lending
On March 31, 1995, the consumer lending operation purchased for
$1,027,300,000 in cash substantially all the assets and assumed certain
liabilities of the home equity business of ITT Consumer Financial Corporation
(ITT). The purchase price was allocated as follows: net consumer finance
receivables of $966,427,000, which were all real estate secured, of which 14%
was located in California; allowance for losses of $52,673,000; assets held
for sale of $26,751,000; customer renewal rights of $97,793,000; and assumed
liabilities of $11,000,000. The consumer lending operation did not assume
any borrowings, tax liabilities or contingent liabilities of ITT.
Consumer lending income from operations for 1995 decreased $9,261,000
(10%) from 1994. The decrease resulted from higher operating and interest
expenses and an increased provision for losses on receivables that more than
offset increased revenues. Additionally, the 1995 decrease includes a fourth
quarter charge of $12,000,000 after tax which resulted from consolidating and
accelerating California branch foreclosure activity and disposing of certain
repossessed real estate in California.
Consumer lending income from operations in 1994 decreased $1,977,000 (2%)
from 1993. Excluding a $5,269,000 benefit ($3,088,000 after tax) recorded in
1993 from the reversal of reserves related to a 1990 securitization and sale
of real estate secured receivables, income for 1994 increased $1,111,000
(1%). The increase resulted from higher revenues, offset in part by increased
operating and interest expenses and an increased provision for losses on
receivables.
Revenues increased $93,913,000 (14%) in 1995 and $37,390,000 (6%) in
1994. The 1995 increase was mainly due to higher interest income resulting
from the effects of the ITT acquisition, which more than offset the effects of
lower fee income. The 1994 increase was mainly due to increased finance
charges resulting from higher average finance receivables outstanding
and higher fee income. In 1994, in response to increased competition,
principally in California, the company introduced lower interest rates which
were not continued into 1995. The lower rates produced a higher level of
customer renewals and related fee income in 1994 over 1995 and 1993 but a
lower level of interest income in 1995.
Interest expense increased $67,082,000 (27%) in 1995 and $8,454,000 (3%)
in 1994 primarily as a result of the higher levels of finance receivables
outstanding and an increase in short-term interest rates.
The provision for losses on receivables increased $17,429,000 (22%) in
1995 and $18,057,000 (29%) in 1994 due to increases in credit losses, and in
1994, increased growth in net finance receivables over 1993. Credit losses,
net of recoveries, as a percentage of average consumer finance receivables
outstanding, net of unearned finance charges, were 2.15% for 1995 compared to
1.90% for 1994 and 1.67% for 1993. The 1995 and 1994 increases resulted from
the effects of higher credit losses. Credit losses (net of recoveries)
increased $31,311,000 (43%) in 1995 and $11,842,000 in 1994 (20%). Growth in
the non real estate portfolio, which tends to have a higher ratio of net
credit losses than the real estate secured portfolio, as well as continued
sluggishness in the California economy and a continued weak California real
estate market contributed to increased credit losses in both 1995 and 1994.
The consolidation and acceleration of California branch foreclosure activity
<PAGE>
Page 52
also contributed to the 1995 increase in net credit losses as did the
recognition of credit losses anticipated in connection with the ITT
acquisition. Because future credit losses may be impacted by factors such as
economic conditions and the state of the real estate market, particularly in
California, the extent and timing of any change in the recent trend remains
uncertain.
Operating expenses increased $23,864,000 (11%) in 1995 primarily due to
amortization of customer renewal rights associated with the ITT acquisition
and an increase in losses on disposition of repossessed real property in
California. Operating expenses for 1994 increased $19,853,000 (11%).
Excluding the $5,269,000 reserve reversal recorded in 1993, operating
expenses in 1994 increased $14,584,000 (8%). The increase was mainly due to
the higher level of finance receivables outstanding, an increase in the
average number of branches during 1994 and costs of developing new loan
information systems to handle additional loan products.
Consumer lending receivables grew 19% in 1995 due to the portfolio
purchased from ITT. Excluding the loans acquired from ITT, receivables
declined by $16,034,000 (less than 1%) in 1995. During 1994 and 1993 the
company acquired $124,855,000 and $22,691,000 of receivables in bulk purchase
transactions. Including these acquisitions, the portfolio increased
$491,463,000 (13%) in 1994 and $71,180,000 (2%) in 1993.
Net consumer finance receivables at December 31, 1995 and 1994 included
$4,036,828,000 and $3,349,235,000 of real estate secured loans, principally
first and second mortgages secured by residential properties, of which
approximately 37% and 45% were located in California. Real estate loans
originated in 1995 were $1,074,215,000 compared to $1,708,806,000 in 1994, due
to a decline in renewal volume (which was caused in part by a return to higher
rates in early 1995) and increased competition. The non-real estate loan
portfolio has grown 13% since December 31, 1994, reflecting management's
strategy to pursue growth in that area.
Delinquent finance receivables, which are defined as receivables
contractually past due 60 days or more, were $143,632,000 (2.79% of finance
receivables outstanding) at December 31, 1995 compared to $90,232,000 (2.08%
of finance receivables outstanding) at December 31, 1994. Approximately two-
thirds of the $53,400,000 increase in delinquency during 1995 was attributable
to real estate secured receivables, of which approximately one-half was due to
the ITT portfolio acquisition which included the purchase of delinquent
receivables at a discount, with the remainder relating to non real estate
products which tend to have higher delinquency ratios than real estate secured
receivables. Management has established an allowance for losses equal to
3.32% of net consumer finance receivables outstanding at December 31, 1995
compared to 2.83% at December 31, 1994; the increase in the percentage is due
to the acquisition of the ITT portfolio which had a higher ratio of allowance
for losses to net consumer finance receivables outstanding.
When foreclosure proceedings begin on an account secured with real
estate, the account is moved from finance receivables to other assets and is
written down to the estimated realizable value of the collateral if less than
the account balance. After foreclosure, repossessed assets are carried at the
lower of cost or fair value less estimated selling costs. Accounts in
foreclosure and repossessed assets held for sale totaled $207,323,000 at
December 31, 1995, of which 69% pertained to California, compared to
$226,119,000 at December 31, 1994, of which 79% pertained to California.
<PAGE>
Page 53
Because future improvements may be impacted by factors such as economic
conditions and the state of the real estate market, particularly in
California, the extent and timing of any change in the trend of foreclosures
and repossessed assets remain uncertain.
Commercial Lending
Income from operations increased $23,636,000 (51%) in 1995 and
$59,051,000 in 1994. Operating results for 1995 included a $12,200,000 after
tax benefit from the reversal of a valuation allowance no longer required
following the sale of assets held for sale (principally in Puerto Rico), and a
$4,800,000 after tax gain from the sale of a portfolio of consumer rediscount
loans. Results for 1994 included a $5,450,000 after tax charge for the
relocation of the corporate home office, and a $3,980,000 after tax gain from
the sale of the repossessed rent-to-own stores. Results for 1993 included:
(i) a $35,960,000 after tax provision to reduce the net carrying value of
repossessed rent-to-own stores to their estimated realizable value; (ii) an
$8,799,000 after tax charge for the restructuring of the commercial lending
unit's infrastructure; (iii) a $4,224,000 after tax provision for anticipated
legal and other costs associated with the runoff of the liquidating portfolio;
(iv) a $4,224,000 tax benefit from the resolution of prior years' tax matters;
and (v) a tax benefit of $1,455,000 from the revaluation of the January 1,
1993 deferred tax liability for the effect of the one percent federal tax
increase.
Excluding the items discussed above, commercial lending income from
operations increased $5,166,000 (11%) in 1995 and $17,217,000 (56%) in 1994.
The increases resulted from increased margins, reduced operating expenses and
a lower provision for losses. Margins improved as a result of a greater
spread between the indices at which the commercial lending operation loaned to
customers and the indices at which funds were borrowed.
Revenues in 1995 increased $43,139,000 (12%) due to a higher average
portfolio yield attributable to higher interest rates. Revenues in 1994
increased $17,342,000 (5%) as a result of increased average net receivables
in the core businesses and a higher average portfolio yield attributable to
rising interest rates.
Interest expense increased $29,724,000 (25%) in 1995 and $9,616,000 (9%)
in 1994 due to a higher average interest rate on borrowings.
Operating expenses declined $5,493,000 (4%) in 1995 and $23,143,000
(14%) in 1994. Expenses in 1994 included an $8,967,000 ($5,450,000 after tax)
charge for the relocation of the corporate home office partially offset by the
$5,273,000 ($3,980,000 after tax) gain on the sale of the repossessed rent-to-
own stores. Operating expenses in 1993 include the previously described
restructuring charge and provision for anticipated legal and other costs
associated with the runoff of the liquidating portfolios aggregating
$21,500,000 ($13,023,000 after tax). Excluding these items in both years,
operating expenses decreased $1,799,000 (1%) in 1995 and $5,337,000 (4%) in
1994 mainly as a result of reduced expenses incurred in the management of the
liquidating receivables portfolio and receivables included in assets held for
sale which were disposed of in 1995.
<PAGE>
Page 54
The provision for losses on receivables declined 4,538,000 (24%) in 1995
principally due to charges in 1994 related to the consumer rediscount loan
portfolio which was sold in 1995 and lower losses during 1995 in the
liquidating portfolio. The provision for losses on receivables in 1994 was
$13,128,000 (41%) less than in 1993 due to lower credit losses and lower
delinquent and nonearning receivables. Credit losses, net of recoveries, as a
percentage of average commercial finance receivables outstanding, net of
unearned finance charges, were 0.32% in 1995, 0.32% in 1994 and 1.64% in 1993.
Net commercial finance receivables outstanding at December 31, 1995
increased $98,950,000 (4%) from December 31, 1994. The higher net
receivables reflect receivables growth in inventory finance and equipment
finance and leasing operations. The equipment finance and leasing operation
began operations during 1995 and provides collateralized equipment lending.
These increases were offset in part by the 1995 sale of the consumer
rediscount loan portfolio comprising $118,000,000 of net outstanding
receivables and the liquidation and sale of $51,283,000 in net receivables
outstanding resulting from the decision to exit its operations in Puerto Rico.
Management has established an allowance for losses equal to 2.54% of net
commercial finance receivables outstanding as of December 31, 1995 compared to
3.12% at December 31, 1994. This decrease is primarily the result of selling
the Puerto Rico receivables, which had a larger reserve requirement.
Delinquent receivables, which are defined as the instalment balance for
inventory finance and asset based lending receivables and the receivable
balance for all other receivables over 60 days past due, were $8,176,000
(0.28% of receivables outstanding) at December 31, 1995 compared to
$17,736,000 (0.63% of receivables outstanding) at December 31, 1994.
Nonearning receivables, which are defined as balances from borrowers
that are over 90 days delinquent or at such earlier time as full
collectibility becomes doubtful, were $15,465,000 (0.53% of receivables
outstanding) at December 31, 1995 compared to $21,872,000 (0.78% of
receivables outstanding) at December 31, 1994. The decline in both delinquent
and nonearning receivables was primarily due to the sale of the Puerto Rico
receivables.
Assets held for sale as of December 31, 1995 totaled $4,445,000, net of
a $6,037,000 valuation allowance, and consisted of rent-to-own receivables of
$5,595,000 and other assets of $4,887,000. In 1995 the commercial lending
operation sold substantially all of its rent-to-own receivables. Assets held
for sale at December 31, 1994 totaled $10,908,000, net of a $65,086,000
valuation allowance, and consisted of rent-to-own finance receivables of
$72,381,000 and other assets of $3,613,000. Of the finance receivables held
for sale at December 31, 1995, none was classified as delinquent or nonearning
compared to $24,495,000 classified as both delinquent and nonearning at
December 31, 1994.
<PAGE>
Page 55
Leasing
The leasing operation has grown substantially since 1993 largely due to
the March 1994 acquisition of substantially all the operating assets of the
Container Operations of Tiphook plc ("Tiphook"), a London-based transportation
equipment rental company, including certain dry cargo containers, tank
containers, tank chassis, operating leases and other assets for $1,061,441,000
in cash. The acquired fleet of standard containers and tank containers
totaled 363,000 units which by December 31, 1994 were integrated into the
leasing operation. The transaction has been accounted for as a purchase and
the revenues and expenses associated with operating the assets acquired have
been included in the results of the leasing operation from the date of
acquisition. This acquisition is the primary reason revenues and expenses
increased by more than 50% in 1994.
Leasing income from operations for 1995 increased $11,519,000 (18%)
mainly due to higher utilization and increased fleet size in the standard,
refrigerated and tank container fleet lines, as well as an increase in the
European trailer fleet. A 1995 increase in sales of used equipment resulted
in additional gains of $7,170,000 after tax. Earnings in 1995 also benefited
from a $2,250,000 after tax favorable depreciation adjustment resulting from
the final settlement of the Tiphook purchase price and a $1,791,000
resolution of an outstanding state tax issue. Partially offsetting these
increases were lower earnings in the rail trailer business which experienced a
downturn in utilization resulting from decreased U.S. intermodal loadings.
Leasing income from operations for 1994 increased $9,911,000 (18%).
Included in the 1993 results was a $4,320,000 additional tax provision from
the revaluation of the January 1, 1993 deferred tax liability. Excluding the
effect of this adjustment, leasing income increased $5,591,000 (10%) in 1994.
The increase was primarily due to a larger fleet size, more on-hire rail
trailer and chassis units and an increased finance lease portfolio, partially
offset by lower utilization and rates in the standard container line.
Revenues for 1995 increased $95,969,000 (15%). The increase was due to
additional on-hire standard, tank and refrigerated containers, chassis and
European trailers. Revenues also increased due to a larger standard and tank
container fleet, resulting from the acquisition of the container division
assets of Tiphook. Partially offsetting these increases were lower revenues
in the rail trailer business resulting from fewer units-on-hire.
Revenues for 1994 increased $230,130,000 (56%). The increase was due
primarily to the acquisition of the container division assets of Tiphook.
Revenue increases were also generated by a larger fleet of new standard and
refrigerated containers, more on-hire rail trailer and chassis units and a
larger finance lease portfolio.
Expenses increased $78,185,000 (15%) in 1995 mainly due to higher
depreciation expense, interest expense and operating costs associated with
larger standard, tank and refrigerated container, chassis and European trailer
fleets.
Expenses increased $219,710,000 (70%) in 1994 mainly due to higher
depreciation expense, interest expense and operating costs related to the
acquisition of the container division assets of Tiphook.
<PAGE>
Page 56
The combined utilization of standard containers, refrigerated containers,
domestic containers, tank containers and chassis averaged 85% in 1995, 81% in
1994, and 83% in 1993. Rail trailer utilization was 77% in 1995, 92% in 1994,
and 91% in 1993. European trailer utilization was 95% in 1995, 96% in 1994,
and 89% in 1993. Utilization of the company's fleet is dependent upon world
wide economic conditions, market pressures and industry fleet size.
The company's standard container, refrigerated container, domestic
container, tank container and chassis fleet of 708,400 units increased by
23,000 units (3%) in 1995, and 369,400 units (117%) in 1994. The 1994
increase was largely due to the acquisition of the container division assets
of Tiphook. The rail trailer fleet of 36,900 units decreased by 2,400 units
(6%) in 1995 after a 2,800 unit (8%) increase in 1994. The European over-the-
road trailer fleet of 7,700 units increased by 2,000 units (35%) in 1995 and
1,900 units (50%) in 1994.
<PAGE>
Page 57
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY FINANCIAL INFORMATION
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in thousands)
Three Months Ended Year Ended
_________________________________________ December 31,
3/31/95 6/30/95 9/30/95 12/31/95 1995
Revenues ...... $452,532 $486,087 $486,177 $490,304 $1,915,100
======== ======== ======== ======== ==========
Net income .... $ 46,887 $ 52,701 $ 54,602 $ 58,454 $ 212,644
======== ======== ======== ======== ==========
Three Months Ended Year Ended
_________________________________________ December 31,
3/31/94 6/30/94 9/30/94 12/31/94 1994
Revenues ...... $359,977 $429,613 $434,830 $453,407 $1,677,827
======== ======== ======== ======== ==========
Net income .... $ 40,780 $ 48,904 $ 47,170 $ 51,388 $ 188,242
======== ======== ======== ======== ==========
<PAGE>
Page 58
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
Financial Statement Schedule
Year Ended December 31, 1995
<PAGE>
Page 59
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Additions
_______________________
(1) (2)
Charged
Balance at Charged to to Other Balance at
Beginning of Costs and Accounts - Deductions - End
DESCRIPTION Period Expenses Describe Describe of Period
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Deducted from assets:
Allowance for losses:
Consumer:
Finance receivables ... $117,218 $ 97,835 $ 52,819 (C) $103,806 (F) $164,066
Assets held for sale .. 2,282 2,282 (G)
Commercial:
Finance receivables ... 86,574 14,127 (18,835)(D) 8,838 (F) 73,028
Assets held for sale .. 65,086 (20,100) (B) 21,372 (E) 60,321 (H) 6,037
________ ________ ________ ________ ________
$271,160 $ 91,862 $ 55,356 $175,247 $243,131
======== ======== ======== ======== ========
Year Ended December 31, 1994:
Deducted from assets:
Allowance for losses:
Consumer:
Finance receivables ... $103,313 $ 80,406 $ 5,994 (C) $ 72,495 (F) $117,218
Assets held for sale .. 2,547 7,314 (A) 7,579 (G) 2,282
Commercial:
Finance receivables ... 76,079 18,665 481 (D) 8,651 (F) 86,574
Assets held for sale .. 156,985 (5,211)(B) (1,308)(E) 85,380 (H) 65,086
________ ________ ________ ________ ________
$338,924 $101,174 $ 5,167 $174,105 $271,160
======== ======== ======== ======== ========
Year Ended December 31, 1993:
Deducted from assets:
Allowance for losses:
Consumer:
Finance receivables ... $101,195 $ 62,349 $ 422 (C) $ 60,653 (F) $103,313
Assets held for sale .. 2,206 5,952 (A) 5,611 (G) 2,547
Commercial:
Finance receivables ... 87,169 31,793 (173)(D) 42,710 (F) 76,079
Assets held for sale .. 121,549 50,000 (B) 365 (E) 14,929 (H) 156,985
________ ________ ________ ________ ________
$312,119 $150,094 $ 614 $123,903 $338,924
======== ======== ======== ======== ========
<PAGE>
Page 60
<FN>
_______
(A) Provision charged to operating expenses for losses on disposal of repossessed assets.
(B) Reversal of excess valuation allowance no longer required due to the favorable terms on disposition of
assets held for sale (principally operations in Puerto Rico) in 1995. 1994 includes $5,273,000
reversal of valuation allowance from sale of the rent-to-own stores. 1993 includes a $50,000,000
provision to reduce the net carrying value of repossessed rent-to-own stores.
(C) Increase in connection with purchase of receivables and other adjustments.
(D) The decrease in 1995 was associated with the transfer of Puerto Rico receivables to assets held for
sale (see note E). The 1994 increase and 1993 decrease were due to foreign exchange and other
adjustments.
(E) The increase in 1995 was primarily associated with the transfer of Puerto Rico receivables from
finance receivables (see note D). The decrease in 1994 was associated with the settlement of
litigation on previously charged off accounts. The increase in 1993 was due to recoveries on assets
held for sale.
(F) Charges for net credit losses.
(G) Charges for losses on disposal of assets held for sale.
(H) Charges for losses on disposal of assets held for sale, which in 1995 includes $41,166,000 related to
the disposal of rent-to-own receivables and $17,752,000 related to the disposal of Puerto Rico
receivables and in 1994 includes $78,735,000 related to the disposal of the rent-to-own stores.
</TABLE>
<PAGE>
EXHIBIT 10.1
GUARANTY
AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of February 1,
1995, made by Transamerica Finance Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Guarantor"), in favor
of Corporate Asset Funding Company, Inc. ("CAFCO"), Ciesco L.P. ("CIESCO") and
Preferred Receivables Funding Corporation ("PREFCO" and, together with CAFCO
and CIESCO, collectively the "Investors" and individually an "Investor") and
the other Owners (the "Owners") of Eligible Assets and the other Indemnified
Parties (subject, in the case of Participants as defined in the Agreement
referred to below, to the proviso to the definition of the term "Participant"
in Section 1.01 of such Agreement) (the "Indemnified Parties") (in each case
as defined in the Agreement referred to below), Citicorp North America, Inc.,
as Agent (the "Agent") for the Owners, and The First National Bank of Chicago,
as Co-Agent (the "Co-Agent") for the Owners.
PRELIMINARY STATEMENTS:
(1) The Investors, the Agent and the Co-Agent have entered into a Second
Amended and Restated Trade Receivables Purchase and Sale Agreement dated as of
February 1, 1995 (said Agreement, as it may hereafter be amended or otherwise
modified from time to time, being the "Agreement", the terms defined therein
and not otherwise defined herein being used herein as therein defined) with
Transamerica Insurance Finance Corporation, a corporation organized and
existing under the laws of the State of Maryland ("TIFCO Maryland"), and
Transamerica Insurance Finance Corporation, California, a corporation
organized and existing under the laws of the State of California ("TIFCO
California" and, together with TIFCO Maryland, collectively the "Sellers" and
individually a "Seller"), amending and restating in their entirety the
Maryland Amended Agreement and the California Amended Agreement referred to
therein.
(2) The Guarantor has entered into (a) a Guaranty dated July 31, 1990, as
modified by the Consent dated as of November 5, 1991 and the Consent dated as
of December 30, 1993 (the "Maryland Guaranty"), with respect to the Maryland
Amended Agreement and the "Original Agreement" as defined in the Maryland
Amended Agreement, and (b) a Guaranty dated July 31, 1990, as modified by the
Consent dated as of November 5, 1991 and the Consent dated as of December 30,
1993 (the "California Guaranty"), with respect to the California Amended
Agreement and the "Original Agreement" as defined in the California Amended
Agreement.
(3) It is a condition precedent to the effectiveness of the Agreement
that the Guarantor shall have executed and delivered this Guaranty amending
and restating the Maryland Guaranty and the California Guaranty as set forth
below.
NOW, THEREFORE, in consideration of the premises and in order to cause
the effectiveness of the Agreement, the Guarantor hereby agrees that,
effective as of the Effective Date, each of the Maryland Guaranty and the
California Guaranty is hereby amended and restated in its entirety to read as
follows:
<PAGE>
SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees
the punctual payment when due (in accordance with the terms of the Agreement)
of all obligations of (a) each Seller now or hereafter existing under the
Agreement to the extent consisting of either (i) obligations for deemed
Collections pursuant to Section 2.08 of the Agreement, or (ii) obligations in
respect of the indemnification pursuant to Section 10.01 of the Agreement to
the extent resulting from or relating to the voidance or avoidance, in whole
or in part, of, or other adverse effect, in whole or in part, upon, the
undivided fractional ownership or security interest purported to be created
pursuant to the Agreement and the Certificates, to the extent of the
respective Eligible Assets from time to time, in the Receivables in, or
purporting to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, by reason of fraudulent transfer or conveyance
laws or similar laws, and (b) the Collection Agent (if and so long as the
Collection Agent is either Seller or any Affiliate thereof) now or hereafter
existing under the Agreement, including without limitation obligations of the
Collection Agent under Sections 2.06, 2.07 and 2.10 of the Agreement and
Article VI of the Agreement (such obligations under clauses (a) and (b) of
this Section 1 being the "Obligations"), and agrees to pay any and all
expenses (including counsel fees and expenses) incurred by the Agent, the
Co-Agent, any Investor or any Owner in enforcing any rights under this
Guaranty.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the
Agreement, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent, the Co-Agent, the Investors, the Owners or the other Indemnified
Parties with respect thereto. The obligations of the Guarantor under this
Guaranty are independent of the Obligations, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against either or both Sellers
or whether either or both Sellers are joined in any such action or actions.
The liability of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of, and the Guarantor hereby irrevocably waives
any defenses it may now or hereafter have in any way relating to, any and all
of the following:
(i) any lack of validity or enforceability as against either or both
Sellers (or any Affiliate thereof as Collection Agent) of the Agreement,
the Certificates or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Agreement, including,
without limitation, any increase in the Obligations resulting from
additional Purchases or otherwise;
(iii) any taking, exchange, release or non-perfection of any collateral,
or any taking, release or amendment or waiver of or consent to departure
from any other guaranty, for all or any of the Obligations;
2
<PAGE>
(iv) any manner of application of collateral, or proceeds thereof, to all
or any of the Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Obligations or any other assets of
either or both Sellers or any of their respective subsidiaries;
(v) any change, restructuring or termination of the corporate structure
or existence of either or both Sellers or any of their respective
subsidiaries; or
(vi) any other circumstance (including, without limitation, any
existence of or reliance on any representation by the Agent, the
Co-Agent, any Investor, or any Owner or other Indemnified Party) which
might otherwise constitute a defense available to, or a discharge of,
either or both Sellers or a guarantor.
This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by the Agent, the Co-Agent, any Investor or any
Owner or other Indemnified Party upon the insolvency, bankruptcy or
reorganization of either or both Sellers or otherwise, all as though such
payment had not been made.
SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Agent, the
Co-Agent, any Investor or any Owner or other Indemnified Party protect,
secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against either or both
Sellers or any other Person or any collateral.
SECTION 4. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Guaranty, by any payment
made hereunder or otherwise, until all the Obligations and all other amounts
payable under this Guaranty shall have been paid in full and the Facility
Termination Date shall have occurred. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time prior to the later
of (x) the payment in full of the Obligations and all other amounts payable
under this Guaranty and (y) the Facility Termination Date, such amount shall
be held in trust for the benefit of the Agent, the Co-Agent, the Investors,
the Owners and the other Indemnified Parties and shall forthwith be paid to
the Agent, in the case of any such amount payable with respect to any CAFCO
Asset or to any Owner thereof or any Affiliate or Participant of such Owner or
to the Agent or to any Indemnified Party related thereto, or to the Co-Agent,
in the case of any such amount payable with respect to any PREFCO Asset or to
any Owner thereof or any Affiliate or Participant of such Owner or to the
Co-Agent or to any Indemnified Party related thereto, in each case to be
credited and applied upon the Obligations, whether matured or unmatured, in
accordance with the terms of the Agreement or to be held by the Agent or the
Co-Agent, as applicable, as collateral security for any Obligations thereafter
existing. If (i) the Guarantor shall make payment to the Agent, the Co-Agent,
the Investors, the Owners or any other Indemnified Parties of all or any part
of the Obligations, (ii) all the Obligations and all other amounts payable
under this Guaranty shall be paid in full and (iii) the Facility Termination
Date shall have occurred, the Agent, the Co-Agent, the Investors, the Owners
3
<PAGE>
and the other Indemnified Parties will, at the Guarantor's request, execute
and deliver to the Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantor of an interest in the Obligations resulting from
such payment by the Guarantor.
SECTION 5. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Agreement and is duly qualified to do
business, and is in good standing, and has all requisite power and
authority to conduct its business and to own and lease its properties, in
the State of California to the extent that the failure so to qualify or
to have such power and authority would materially adversely affect the
ability of the Guarantor to enforce any contracts to which it is a party
or to perform its obligations under this Guaranty or would materially
adversely affect the exercise by the Agent, the Co-Agent, any Investor,
any Owner or any other Indemnified Party of their respective rights and
remedies under this Guaranty.
(b) The Guarantor has the corporate power and authority to enter into
and perform its obligations under this Guaranty. The execution, delivery
and performance by the Guarantor of this Guaranty has been duly
authorized by all necessary corporate action and do not conflict with,
constitute an event of default under, or contravene (i) the Guarantor's
certificate of incorporation or by-laws, (ii) any contractual restriction
binding on or affecting the Guarantor, or (iii) any existing law or
governmental regulation or order, writ, judgment, injunction, decree or
award of any court or governmental authority.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Guarantor of this
Guaranty.
(d) This Guaranty is the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms,
except as may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general principles of equity.
(e) There is no pending or, to the knowledge of the Guarantor,
threatened action, suit or proceeding to which the Guarantor is a party
before or by any court or governmental agency or body, the adverse
determination of which is reasonably likely to occur in the reasonable
opinion of Guarantor and, if so adversely determined, would materially
and adversely affect (i) the financial condition of the Guarantor and its
Subsidiaries, taken as a whole, or (ii) the ability of the Guarantor to
perform its obligations under this Guaranty, or which purports to affect
the legality, validity or enforceability of this Guaranty.
4
<PAGE>
(f) The Guarantor is, and after each Purchase in accordance with the
terms of the Agreement and the execution and delivery of this Guaranty
will be, Solvent. For purposes of this Section 5(f) and Sections 3.01(1)
and 5.03(g) of the Agreement, "Solvent" means, with respect to any
Person, that as of any date of determination, (a) the then fair saleable
value of the assets of such Person is (i) greater than the then total
amount of liabilities (including contingent, subordinated, matured and
unliquidated liabilities) of such Person and (ii) greater than the amount
that will be required to pay such Person's probable liability on such
Person's then existing debts as they become absolute and matured, (b)
such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction, and (c) such
Person does not intend to incur, or believe or reasonably should have
believed that it will incur, debts beyond its ability to pay such debts
as they become due.
(g) Each information, financial statement, document, book, record or
report furnished or to be furnished at any time by the Guarantor to the
Agent, the Co-Agent, any Investor, any Owner or any other Indemnified
Party in connection with this Guaranty if prepared by or under the
direction of either Seller or the Guarantor or to the extent that
information contained therein is supplied by either Seller or the
Guarantor, is or will be, and, if not prepared by or under the direction
of either Seller or the Guarantor, to the extent that information
contained therein is not supplied by either Seller or the Guarantor, to
the best of either Seller's or the Guarantor's knowledge is or will be,
accurate in all material respects as of its date or (except as otherwise
disclosed to the Agent, the Co-Agent, such Investor, such Owner or such
Indemnified Party, as the case may be, at such time) as of the date so
furnished, and no such document (if not prepared by or under the
direction of either Seller or the Guarantor or to the extent that
information contained therein is not supplied by either Seller or the
Guarantor, to the best of either Seller's or the Guarantor's knowledge)
contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under
which they were made, not misleading.
(h) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.
(i) The Guarantor has, independently and without reliance upon the
Agent, the Co-Agent, any Investor, any Owner or any other Indemnified
Party and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
SECTION 6. Covenants. The Guarantor covenants and agrees that,
until the later of the Facility Termination Date and the date upon which no
Capital for any Eligible Asset shall be existing, the Guarantor will, unless
the Agent and the Co-Agent shall otherwise consent in writing:
5
<PAGE>
(a) Compliance with Laws, Etc. Comply in all respects with all
applicable laws, rules, regulations and orders with respect to it, its
business and properties, to the extent noncompliance therewith would have
a material adverse effect on the ability of the Guarantor to perform its
obligations under this Guaranty or would have a material adverse effect
on the exercise by the Agent, the Co-Agent, any Investor, any Owner or
any other Indemnified Party of their respective rights and remedies under
this Guaranty.
(b) Consolidation. Not consolidate with or merge into, or convey or
transfer its properties and assets substantially as an entirety to, any
other Person unless:
(i) the corporation formed by such consolidation or into which the
Guarantor is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Guarantor substantially as an
entirety (A) shall be a corporation organized and existing under the laws
of the United States of America or any State or the District of Columbia,
(B) shall be a corporation at least 66 2/3% of the issued and outstanding
capital stock of which shall be owned at all times after giving effect to
such transaction, directly or indirectly, by Transamerica and (C) shall
expressly assume all of the obligations of the Guarantor under this
Guaranty and the performance of every covenant on the part of the
Guarantor to be performed or observed under this Guaranty;
(ii) immediately after giving effect to such transaction, the
representations and warranties contained in this Guaranty shall be
correct in all material respects and no breach of any term, covenant or
agreement contained in this Guaranty shall have occurred and be
continuing; and
(iii) the Guarantor has delivered to the Agent and the Co-Agent, in
form and substance satisfactory to the Agent, an officer's certificate
and an opinion of counsel each stating that such consolidation, merger,
conveyance or transfer comply with this Section 6(b) and that all
conditions precedent herein provided for relating to such transaction
have been herein provided for relating to such transaction have been met.
(c) Preservation of Corporate Existence. Subject to the provisions
of Section 6(b), the Guarantor shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises; provided, however, that the Guarantor
shall not be required to preserve any right or franchise if the failure
to preserve such right or franchise would not materially adversely affect
the interests of the Owners, the Investors, the Agent, the Co-Agent or
the other Indemnified Parties hereunder, or the ability of the Guarantor
to perform its obligations hereunder.
(d) Bankruptcy of the Sellers. Not institute any proceeding against
either Seller relating to bankruptcy, insolvency or reorganization.
6
<PAGE>
(e) Reporting Requirements. Furnish to the Agent:
(i) within ninety days after the end of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor and its
subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, retained earnings and cash flows for
such year, all prepared in accordance with generally accepted accounting
principles consistently applied, audited by and with the opinion of Ernst
& Young or other independent public accountants selected by the Guarantor
and satisfactory to the Agent and the Co-Agent, such opinion not being
limited or qualified because of restricted or limited examination by such
accountant of any material portion of Guarantor's records and together
with a statement of Ernst & Young or such other accountants certifying
that no failure of the Guarantor to perform or observe any term, covenant
or agreement of the Guarantor contained in this Guaranty was discovered
to have occurred and be continuing or, if such failure of performance or
observance was so discovered, stating the nature thereof;
(ii) within sixty days after the end of each of the first three
quarters of each fiscal year of the Guarantor, a consolidated balance
sheet of the Guarantor and its subsidiaries as of the end of such quarter
and the related consolidated statements of income, retained earnings and
cash flows for such period, all prepared in accordance with generally
accepted accounting principles consistently applied and accompanied by a
certificate signed by the President, chief financial officer or chief
accounting officer of the Guarantor stating that such balance sheets and
statements present fairly the consolidated financial positions and
consolidated results of operations of the Guarantor and its subsidiaries
at the end of such quarter in conformity with generally accepted
accounting principles consistently applied and that such officer has no
knowledge, except as specifically stated, of any failure of the
Guarantor to perform or observe any term, covenant or agreement of the
Guarantor contained in this Guaranty;
(iii) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Guarantor files with the
Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended;
(iv) promptly after the filing or receiving thereof, copies of all
reports and notices which the Guarantor or any subsidiary files under
ERISA with the Internal Revenue Service or the PBGC or the U.S.
Department of Labor with respect to any employee benefit plan maintained
by the Guarantor or which the Guarantor or any subsidiary receives from
the PBGC with respect to any employee benefit plan maintained by the
Guarantor; and
(v) promptly, from time to time, such other information, documents,
records or reports respecting the conditions or operations, financial or
otherwise, of the Guarantor or any of its subsidiaries as the Agent or
the Co-Agent may from time to time request.
7
<PAGE>
(f) Financial Covenants. (i) Net Worth. Maintain Net Worth at least
equal to $1,000,000,000.
(ii) Limitations on Indebtedness. Not at any time permit the
Indebtedness of the Guarantor and its consolidated subsidiaries to
exceed 9.5 times Consolidated Tangible Net Worth.
As used in this Section 6(f), the following terms shall have the
following meanings:
"Consolidated Tangible Net Worth" means, at any date, Net Worth minus
goodwill of the Guarantor and its Subsidiaries, determined on a
consolidated basis as of such time in accordance with generally accepted
accounting principles.
"Debt" or "Indebtedness" of any Person means, at any date, all
indebtedness representing money borrowed, which indebtedness is incurred
or guaranteed by such Person.
"Net Worth" means, at any date, the shareholders' equity of the
Guarantor and its consolidated subsidiaries, as it appears on their
consolidated balance sheet, prepared in accordance with generally
accepted accounting principles.
"Subsidiary" means any corporation a majority of the Voting Shares of
which is at the time owned directly or indirectly by the Guarantor or by
one or more Subsidiaries or by the Guarantor and one or more
Subsidiaries.
"Voting Shares" means outstanding shares of capital stock having
voting power for the election of directors, whether at all times or only
so long as no senior class of stock has such voting power because of
default in dividends or other default.
SECTION 7. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty, and no consent to any departure by the Guarantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Agent and the Co-Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 8. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telefax
communication) and mailed, telefaxed or delivered to it, if to the Guarantor,
at its address at 600 Montgomery Street, San Francisco, California 94111,
Attention: Treasurer, and if to the Agent or the Co-Agent, at its address
specified in the Agreement, or, as to any party, at such other address as
shall be designated by such party in a written notice to each other party.
All such notices and other communications shall, when mailed or telefaxed, be
effective when deposited in the mails or telefaxed, respectively.
8
<PAGE>
SECTION 9. No Waiver; Remedies. No failure on the part of the
Agent, the Co-Agent, any Investor, any Owner or any other Indemnified Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 10. Continuing Guaranty; Assignments under Agreement. This
Guaranty is a continuing guaranty and shall (i) remain in full force and
effect until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Guaranty and (y) the Facility Termination
Date, (ii) be binding upon the Guarantor, its successors and assigns, and
(iii) inure to the benefit of, and be enforceable by, the Agent, the Co-Agent,
each Investor, each Owner, each other Indemnified Party and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any Investor or other Owner may assign all or any of
its Eligible Assets under the Agreement to any Assignee, and such Assignee
shall thereupon become vested with all the benefits in respect thereof granted
to such Investor or Owner herein or otherwise, subject, however, to the
provisions of Article VIII (concerning the Agent and the Co-Agent,
respectively) of the Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of New York.
9
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
TRANSAMERICA FINANCE CORPORATION
By: DAVID H. HAWKINS
____________________________________
Senior Vice President, Treasurer and
Director
Accepted as of the date
first written above:
CITICORP NORTH AMERICA, INC.,
as Agent
By: JOSEPH MACKIEWICZ
_______________________________
Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent
By: COLEMAN A. TUGGLE
_______________________________
Managing Director
10
<PAGE>
<TABLE>
EXHIBIT 12
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Years Ended December 31,
_________________________________________________
1995 1994 1993 1992 1991
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest and debt expense ....... $625,346 $485,643 $414,556 $459,518 $ 514,230
One-third of rent expense ....... 14,448 22,398 18,266 20,095 20,966
________ ________ ________ ________ _________
Total ......................... $639,794 $508,041 $432,822 $479,613 $ 535,196
======== ======== ======== ======== =========
Earnings:
Income (loss) from continuing
operations before income taxes,
extraordinary loss on early
extinguishment of debt in 1993
and cumulative effect of change
in accounting for post employ-
ment benefits other than
pensions in 1991 .............. $358,137 $313,793 $218,238 $283,724 $(123,599)
Fixed charges ................... 639,794 508,041 432,822 479,613 535,196
________ ________ ________ ________ _________
Total ......................... $997,931 $821,834 $651,060 $763,337 $ 411,597
======== ======== ======== ======== =========
Ratio of earnings to fixed
charges ......................... 1.56 1.62 1.50 1.59 0.77
==== ==== ==== ==== ====
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 (File No. 33-58365) and related Prospectuses, of
Transamerica Finance Corporation of our report dated February 14, 1996 with
respect to the consolidated financial statements and schedule of Transamerica
Finance Corporation included in this Annual Report (Form 10-K) for the year
ended December 31, 1995.
Ernst & Young LLP
San Francisco, California
March 29, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints BURTON E. BROOME,
GEORGE B. SUNDBY and AUSTIN D. KIM, and each of them with power to act alone,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign (either manually or
electronically through the EDGAR System of the United States Securities and
Exchange Commission) the 1995 Annual Report on Form 10-K for Transamerica
Finance Corporation and any and all amendments thereto, and to file the same,
together with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto such attorney-in-
fact full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises hereof, as fully
to all intents and purposes as he or she might do or could do in person,
hereby ratifying and confirming all that said attorney-in-fact or his or her
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned directors of Transamerica Finance
Corporation have executed this Power of Attorney effective as of the 27th day
of March, 1996.
RUSSELL T. CHARLTON FRANK C. HERRINGER
______________________________ __________________________
Russell T. Charlton Frank C. Herringer
KENT L. COLWELL ROBERT R. LINDBERG
______________________________ __________________________
Kent L. Colwell Robert R. Lindberg
RICHARD H. FINN STEVEN A. READ
______________________________ __________________________
Richard H. Finn Steven A. Read
EDGAR H. GRUBB CHARLES E. TINGLEY
______________________________ __________________________
Edgar H. Grubb Charles E. Tingley
DAVID H. HAWKINS
______________________________ __________________________
David H. Hawkins Robert A. Watson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2908
<DEPRECIATION> 883
<TOTAL-ASSETS> 12,106
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 1700
<TOTAL-LIABILITY-AND-EQUITY> 12,106
<SALES> 0
<TOTAL-REVENUES> 1,915
<CGS> 0
<TOTAL-COSTS> 237
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 92
<INTEREST-EXPENSE> 625
<INCOME-PRETAX> 358
<INCOME-TAX> 145
<INCOME-CONTINUING> 213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
