<PAGE>
Page 1
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, 1996
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 21, 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.
<PAGE>
Page 2
TABLE OF CONTENTS
Page
____
Part I:
Item 1. Business ................................................. 3
Item 2. Properties ............................................... 19
Item 3. Legal Proceedings ........................................ 19
Item 4. Submission of Matters to a Vote of Security Holder ....... 19
Part II:
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters ........................................... 19
Item 6. Selected Financial Data .................................. 19
Item 7. Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations ........................... 19
Item 8. Financial Statements and Supplementary Data .............. 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 19
Part III:
Item 10. Directors and Executive Officers of the Registrant ....... 20
Item 11. Executive Compensation ................................... 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 20
Item 13. Certain Relationships and Related Transactions ........... 20
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ................................................. 20
<PAGE>
Page 3
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 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.
On March 13, 1997, Transamerica announced that it intends to sell
substantially all of its consumer lending operation as part of its strategy to
redeploy its capital while moving ahead with a plan to build a new,
centralized real estate secured lending operation. The assets to be offered
for sale include approximately $3.6 billion of gross receivables, principally
real estate secured loans, a network of approximately 420 branch offices and
other assets, including intangibles, of approximately $100 million. In
addition, another $550 million of real estate secured loans, non real estate
secured loans and foreclosed properties will be sold or liquidated separately.
This amount includes approximately $300 million remaining from the $1.1
billion segregated in the plan announced in 1996 to accelerate efforts to
reduce the consumer lending operations exposure to non real estate consumer
loans by further curtailing production of these loans, liquidating most of the
non real estate loan portfolio and intensifying collection efforts. Net
proceeds from the sale will be used to reduce debt, fund the new centralized
operations, purchase Transamerica common stock and for other corporate
purposes.
On October 14, 1996, Transamerica acquired all of the outstanding shares
of Trans Ocean Ltd., a closely held container leasing company, in exchange for
approximately 1.6 million shares ($112.7 million) of Transamerica common stock
of which 337,000 shares ($24.2 million) remain in escrow pending the
resolution of certain items.
On March 31, 1995, Transamerica purchased for $1,027.3 million in cash
substantially all the assets and assumed certain liabilities of the home
equity business of ITT Consumer Financial Corporation (ITT). Transamerica 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.
<PAGE>
Page 4
On March 15, 1994, Transamerica 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 $1.1 billion in cash.
Transamerica assumed certain specified liabilities of the Container Operations
including trade accounts payable. Transamerica 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 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 $9.9 billion at December 31,
1996 and $9.7 billion at December 31, 1995. Variable rate debt was $5.5
billion at December 31, 1996 compared to $4.8 billion at December 31, 1995.
The ratio of debt to tangible equity was 6.9:1 at December 31, 1996 and 7.0:1
at December 31, 1995. Tangible equity is defined as total equity less
goodwill plus minority interest.
The Company offers publicly, from time to time, senior or subordinated
debt securities. Public debt issued totaled $688 million in 1996, $832
million in 1995 and $1,516 million in 1994. Under a shelf registration filed
in April 1995 with the Securities and Exchange Commission the company may
offer up to $3 billion of senior or subordinated debt securities (which may
include medium term notes) with varying terms, of which $1.9 billion had not
been issued at December 31, 1996. For a further discussion regarding
borrowing operations and derivative activity, see Note D, Notes and Loans
Payable 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 $17.4 billion during 1996, $17.5
billion during 1995 and $14.8 billion during 1994.
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. Unless
otherwise indicated, all dollar and other amounts represent information as of
December 31, 1996.
<PAGE>
Page 5
Consumer Lending
Consumer lending services are provided by Transamerica Financial
Services, based in Los Angeles, California, which has approximately 500 branch
lending offices. Branch offices are located in the United States, Canada (19)
and the United Kingdom (13). In 1996, the consumer lending operation began a
restructuring to refocus on real estate secured first and second mortgage
lending using a new business model to convert from a branch based system to
centralize back office support, reduce operating costs and implement database
marketing. The consumer lending operation also announced in 1996 a plan to
accelerate efforts to reduce its exposure to non real estate consumer loans by
further curtailing production of these loans, liquidating most of the non real
estate loan portfolio, and intensifying collection efforts. After expansion
to include certain real estate secured loans, the plan covered a total of $1.1
billion in receivables. On March 13, 1997, Transamerica announced that it
intends to sell substantially all of its consumer lending operation as part of
its strategy to redeploy its capital while moving ahead with a plan to build a
new, centralized real estate secured lending operation.
During 1994 and 1995 the consumer lending operation continued to broaden
its receivables 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, credit insurance 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 consumer lending operation'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, 1996, 83% are secured by real
estate, principally one to four family residential properties. Of the
consumer lending operation's net finance receivables secured by real estate,
54% are secured by first mortgages. The consumer lending operation's 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.
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 consumer
lending operation'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.
<PAGE>
Page 6
The following table sets forth certain statistical information relating
to the consumer lending operation's finance receivables for the years
indicated.
Years Ended December 31,
__________________________________
1996 1995 1994
(Dollar amounts in millions)
Volume of finance receivables
acquired:
Secured by residential
real estate(1) ................ $1,326.6 $2,067.9 $1,708.8
Other(2) ........................ 402.9 759.4 696.3
________ ________ ________
Total $1,729.5 $2,827.3 $2,405.1
======== ======== ========
Finance receivables outstanding
at end of year:
Principally secured by residen-
tial real estate(3) ........... $3,678.3 $5,150.8 $4,340.0
Less unearned finance charges ... 128.8 214.5 198.0
________ ________ ________
Net finance receivables - core
business ...................... 3,549.5 4,936.3 4,142.0
Other receivables - special
assets(3) ..................... 484.2
Less unearned finance charges -
special assets ................ 21.9
________
Net finance receivables -
special assets ................ 462.3
________ ________ ________
Net finance receivables before
foreclosures 4,011.8 4,936.3 4,142.0
Foreclosures in process(4) ...... 144.3 112.7 79.3
________ ________ ________
Net finance receivables ......... $4,156.1 $5,049.0 $4,221.3
======== ======== ========
Allowance for losses at end of
year(5):
Core business ................... $ 160.7 $ 164.1 $ 117.2
Special assets .................. 110.0
Ratio to outstandings less
unearned finance charges(5):
Core business ................... 4.53% 3.32% 2.83%
Special assets .................. 23.80%
Provision for credit losses
charged to income(6) .......... $ 272.9 $ 97.8 $ 82.2
Credit losses (net of recoveries):
Real estate secured finance
receivables(7) ................ $ 105.3 $ 64.8 $ 46.9
Non-real estate secured finance
receivables(8) ................ 53.0 39.0 28.3
Ratio to average net finance
receivables outstanding(9) .... 3.38% 2.15% 1.93%
<PAGE>
Page 7
_______
(1) Volume for 1996 was lower than 1995 because volume for 1995 includes
$1 billion acquired from ITT on March 31, 1995. Excluding the effects of
that acquisition, volume in 1996 increased as a result of the consumer lending
operation's increased marketing effort. Loan originations in 1995, excluding
the effects of the ITT acquisition, 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. The 1994 volume also included
$117 million of purchased receivables.
(2) The decrease in 1996 reflects a curtailment in consumer lending's
non real estate secured loan business.
(3) In the fall of 1996 a plan was announced to accelerate efforts to
reduce exposure to non real estate consumer loans and certain real estate
loans by further curtailing production of these loans, liquidating parts of
the loan portfolio and intensifying collection efforts. The plan covered a
total of $1.1 billion in receivables as of September 30, 1996. In the fourth
quarter $422.4 million of these receivables were sold and $106.3 million were
transferred back into the base business portfolio leaving $462.3 million
remaining at December 31, 1996 after collections and charge offs. Other
declines in 1996 were attributable to expected payoffs of accounts acquired
from ITT, which contributed to the increase in outstandings in 1995 over 1994,
as well as other payoffs exceeding loan originations.
(4) Foreclosures in process have continued to increase reflecting a
continued growth in California foreclosure activity to recover real estate
collateralized receivables. Foreclosures in process are carried at their
estimated net realizable value.
(5) The increase in 1996 reflects added provisions due to higher charge
offs and higher delinquency during the year. The increase in 1995 is due to
the acquisition of the ITT portfolio on March 31, 1995, parts of which were
purchased at a discount to reflect the delinquency in the portfolio.
(6) The provision for credit losses increased in 1996 and 1995 due to
increases in credit losses and higher delinquency (see notes 7 and 8 below).
In addition, in the third quarter of 1996, the consumer lending operation
established a $125 million allowance in conjunction with the plan discussed in
note 3 above.
(7) The increases were primarily due to continued sluggishness in the
California economy and a continued weak California real estate market. In the
fourth quarter of 1995, the company consolidated and accelerated California
branch foreclosure activity 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 $3.5 million in 1996, $15.4 million in
1995 and $7.3 million in 1994, 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.
(8) 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.
<PAGE>
Page 8
(9) The increased ratios were due to corresponding fluctuations in
credit losses (see notes 7 and 8 above).
_____________________
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 for
which the foreclosure process has not commenced to finance receivables
outstanding for each category and in total for the years indicated:
As of December 31,
______________________
1996 1995 1994
Finance receivables principally
secured by residential real
estate(1) .................. 3.17% 2.79% 2.08%
Other receivables - special
assets(2) .................. 21.34
______ _____ _____
Total ...................... 5.28% 2.79% 2.08%
====== ===== =====
_______
(1) The increases in 1996 and 1995 were 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) Represents delinquent accounts segregated for liquidation.
________________
Nonearning Receivables. Nonearning consumer finance receivables, which
are defined generally as those past due more than 29 days and for which the
foreclosure process has not commenced, amounted to $466.9 million, $308
million and $194.3 million at December 31, 1996, 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.
Accounts in Foreclosure and Repossessed Assets. When foreclosure
proceedings begin on an account secured by real estate, the account is written
down to the fair value of the collateral, less estimated selling costs.
Accounts in process of foreclosure totaled $144.3 million, $112.7 million and
$79.3 million at December 31, 1996, 1995 and 1994. Repossessed assets held
for sale totaled $83.1 million, $94.6 million and $146.8 million at December
31, 1996, 1995 and 1994. The total increase in 1996 reflects continued high
foreclosure activity, especially in California.
<PAGE>
Page 9
Commercial Lending
Commercial lending services are provided by two core business units:
distribution finance and business credit. The commercial lending business
operates from 20 branch lending offices located in the United States (14),
Canada (2) and Europe (4). The lending activities of these core businesses
are discussed below.
Distribution finance (formerly inventory finance) primarily provides
wholesale financing which 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 information technology
products. 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 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. Distribution finance also provides
complementary retail, leasing and asset recovery services.
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 retained credit lines typically from $5 million to $40 million with
terms ranging from three to five years. Actual borrowings originated by
business credit's asset based lending group 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 provides collateralized equipment loans and leases secured by equipment
essential to the borrower's business. Credit risk is managed by rigorous
underwriting and transaction structuring which provides an acceptable
collateral coverage. Collateral coverage is enhanced by structuring loans
such that loan balances amortize at a faster rate than the underlying
equipment depreciates. In addition, most leases are structured with
guaranteed residuals and those residuals without guarantees are recorded using
conservative estimates of the projected fair market value of the collateral at
lease expiration. In addition to orginating loans, business credit purchases
participations in loans orginated by others.
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.
<PAGE>
Page 10
In 1995, the commercial lending operation sold for cash a portfolio of
consumer rediscount loans totaling $118 million of net outstanding
receivables which resulted in an after tax gain of $4.8 million.
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.
The following table sets forth certain statistical information relating
to the commercial lending operation's finance receivables for the years
indicated.
<PAGE>
Page 11
Years Ended December 31,
_____________________________________
1996 1995 1994
(Dollar amounts in millions)
Volume of finance receivables
acquired:
Distribution finance(1) ......... $ 8,315.6 $ 7,479.4 $ 7,347.4
Business credit(2) .............. 8,528.8 8,929.8 6,602.2
_________ _________ _________
Core businesses ............... 16,844.4 16,409.2 13,949.6
Other ........................... 0.1 18.8 74.9
_________ _________ _________
Total ........................ $16,844.5 $16,428.0 $14,024.5
========= ========= =========
Finance receivables outstanding
at end of year:
Distribution finance(3) ......... $ 2,530.9 $ 2,242.2 $ 2,078.5
Business credit(4) .............. 953.4 680.8 655.0
_________ _________ _________
Core businesses ............... 3,484.3 2,923.0 2,733.5
Other ........................... 3.2 6.9 75.3
_________ _________ _________
3,487.5 2,929.9 2,808.8
Less unearned finance charges ... 122.7 58.4 36.2
_________ _________ _________
Net finance receivables ......... $ 3,364.8 $ 2,871.5 $ 2,772.6
========= ========= =========
Allowance for losses at end of
year(5) ......................... $ 77.1 $ 73.0 $ 86.5
Ratio to outstandings less
unearned finance charges:(6) .. 2.29% 2.54% 3.12%
Provision for credit losses
charged to income ............... $ 7.8 $ 14.1 $ 18.7
Credit losses (net of
recoveries) ..................... $ 3.2 $ 8.8 $ 8.7
Ratio to average net finance
receivables outstanding:(7) ..... 0.10% 0.32% 0.32%
<PAGE>
Page 12
_______
(1) The 1996 increase is due to aggressive sales and marketing in most
of the products financed.
(2) The decrease in 1996 is due to lower direct originations offset in
part by an increase in purchased participations relative to 1995. The
increase in 1995 reflects a shift in focus from purchasing participations from
other financial institutions to originating and selling participations in
loans.
(3) The 1996 increase is due to aggressive sales and marketing in most
of the product lines financed. The 1995 increase was due mainly to increased
volume and a slower turnover in customer inventories.
(4) The 1996 increase is primarily due to an increase in net receivables
in the equipment finance and lease division. The 1995 increase is primarily
due to the addition of $123.9 million of net receivables in the equipment
finance and lease division offset by the sale of $118 million of rediscount
loans.
(5) The 1996 increase in the allowance for losses was attributable to
receivables growth in the core businesses. The 1995 decrease in the allowance
for losses was attributable to the sale of the Puerto Rico receivables
portfolio which had a larger reserve requirement and more than offset the
increase due to growth in the core businesses.
(6) The decline is primarily due to the decreased allowance from
portfolios sold and liquidated which had a larger percentage reserve
requirement and continued improvement in the credit quality of accounts in the
core businesses.
(7) The changes in ratios were due to corresponding fluctuations in
credit losses.
_____________________
<PAGE>
Page 13
Delinquent Receivables. Delinquent receivables are defined as the
instalment balance for inventory finance and business credit asset based
lending receivables more than 60 days past due and the receivable 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,
______________________
1996 1995 1994
Distribution finance ........... 0.30% 0.20% 0.11%
Business credit ................ _ _ _
_____ _____ _____
Core businesses .............. 0.22 0.15 0.08
Other(1) ....................... 79.23 53.47 20.63
_____ _____ _____
Total ....................... 0.29% 0.28% 0.63%
===== ===== =====
_______
(1) Represents finance receivables retained from businesses sold or
exited which are being liquidated. The increase in the 1996 and 1995 ratios
resulted from the reduction in receivables outstanding primarily due to the
sale of the Puerto Rico portfolio in 1995 which had a lower delinquency ratio
in relation to the other receivables included in this caption. The remaining
balance as of December 31, 1996 totals $3.2 million.
_____________________
Nonearning Receivables. Nonearning receivables are defined as balances
from borrowers that are more than 90 days delinquent or sooner if it appears
doubtful they will be fully collectible. Accrual of finance charges is
suspended on nonearning receivables until past due amounts are collected.
Nonearning receivables were $15.7 million (0.45% of receivables outstanding),
$15.5 million (0.53% of receivables outstanding), and $21.9 million (0.78% of
receivables outstanding) at December 31, 1996, 1995 and 1994.
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
<PAGE>
Page 14
facilities in 48 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, distribution
companies and motor carriers.
On October 14, 1996 the leasing operation acquired Trans Ocean Ltd., a
container leasing company, in exchange for approximately 1.6 million shares
($112.7 million) of Transamerica common stock. The Trans Ocean fleet
comprised approximately 185,600 owned, leased and managed units consisting of
a variety of intermodal equipment types.
On March 15, 1994, the leasing operation purchased substantially all of
the assets of the container rental businesses of Tiphook plc for $1.1 billion.
The acquired fleet of standard containers and tank containers totaled 363,000
units.
The leasing operation is one of the largest lessors 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 an extensive worldwide network of offices and third party depots and
by offering a wide variety 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 equipment leasing companies. The leasing operation experienced
increased competition in 1996 due to growth in the size of the worldwide
container fleet and a slower rate of growth in world trade.
At December 31, 1996, the leasing operation's fleet consisted of standard
twenty and forty foot dry containers and specialized containers such as
refrigerated containers, tank containers, high cube, open top and flatrack
equipment types, chassis and U.S. domestic containers totaling 896,300 units
which are owned or managed, and leased from approximately 370 depots
worldwide; 34,500 rail trailers leased to all major United States railroads
and to roll on/roll off steamship operators, shippers, shippers' agents and
regional truckers; and 10,300 over-the-road trailers in Europe.
The following table sets forth the leasing operation's fleet size, in
units, as of December 31, of the year indicated:
As of December 31,
_________________________
1996 1995 1994
Containers and chassis(1) 896,300 708,400 685,400
Rail trailers(2) ......... 34,500 36,900 39,300
European trailers(3) ..... 10,300 7,700 5,700
_______
(1) The 1996 increase was largely due to the acquisition of Trans Ocean.
(2) The 1996 and 1995 decreases resulted from the sale of older units as
intermodal loadings declined year to year.
(3) The 1996 and 1995 increases reflect expansion into the European
trailer market.
___________________
<PAGE>
Page 15
The percent of the leasing operation's fleet on term lease or service
contract minimum lease was 53% in 1996, 51% in 1995 and 47% in 1994. The
increase in 1996 reflects the continuing trend toward increasing term and
service contract minimum leases which was partially reduced by a lower
percentage of term and service contract minimum leases from the acquired Trans
Ocean fleet. The increase in 1995 reflected the full integration of the
Tiphook container fleet into the leasing operation's fleet. At December 31,
1996 lease terms were one to 15 years.
The following table sets forth the leasing operation's fleet utilization
for the years indicated:
Years Ended December 31,
________________________
1996 1995 1994
Containers and chassis(1) ..... 81% 85% 81%
Rail trailers(2) .............. 82% 77% 92%
European trailers(3) .......... 92% 95% 96%
_______
(1) The 1996 decline is associated with lower equipment demand due to a
slower rate of growth in world trade compared to growth in the size of the
worldwide container fleet. The 1995 increase was due to higher demand
resulting from higher export levels from China and the Far East.
(2) The 1996 increase resulted from a continuing strong U.S. economy
and a decline in the supply of equipment. The 1995 decline was due to
decreased U.S. intermodal trailer loadings.
(3) The level of utilization for 1996 declined from 1995 and 1994 due to
a greater number of rental units in the fleet and flat demand in most of
continental Europe.
_______________________
The following tables set forth the volume of lease finance receivables
acquired during the years indicated and the amount of lease finance
receivables outstanding at the end of each such year:
Years Ended December 31,
______________________________
1996 1995 1994
(Dollar amounts in millions)
Volume of Lease Finance
Receivables Acquired: (1)
Domestic ................ $ 46.9 $ 22.7 $ 31.3
Foreign ................. 212.1 102.9 141.4
______ ______ ______
Total ................... $259.0 $125.6 $172.7
====== ====== ======
<PAGE>
Page 16
_______
(1) The increase in 1996 reflects the overall improvement in the economy
and increased sales and marketing programs.
________________
As of December 31,
__________________________________
1996 1995 1994
(Dollar amounts in millions)
Lease Finance Receivables
Outstanding: (1)
Domestic ..................... $ 37.4 $ 28.3 $ 25.5
Foreign ...................... 411.7 311.8 280.7
______ ______ ______
Net finance receivables ...... $449.1 $340.1 $306.2
====== ====== ======
_______
(1) The 1996 increase was due mainly to increased volume.
____________________
Following is certain information regarding delinquent lease finance
receivables. 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 remains uncertain.
Delinquent receivables are defined as the receivables contractually past
due 60 days or more.
The following table shows the ratio of delinquent lease finance
receivables to total lease finance receivables outstanding as of the end of
each of the years indicated.
As of December 31,
________________________
1996 1995 1994
Lease finance (1) ............ 0.10% 0.22% 0.45%
_______
(1) The decrease in 1996 and 1995 is due to increased collection efforts
by management.
____________________
<PAGE>
Page 17
Certain information regarding credit losses on lease finance receivables
for the leasing operation during the years indicated is set forth in the
following table:
Years Ended December 31,
_____________________________
1996 1995 1994
(Dollar amounts in millions)
Provision for credit losses charged
to income .......................... $ 0.7 $(0.2) $ 1.4
Credit losses (net of recoveries) ..... $(0.3) $(0.4)
Ratio to average net finance
receivables outstanding ............ 0.08% 0.13%
EMPLOYEES
The Company employed approximately 4,500 persons at December 31, 1996.
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,
____________________________
1996 1995 1994
Return on assets(1) ............ 0.8% 1.8% 1.9%
Return on equity(2) ............ 5.6% 12.9% 12.4%
Dividend payout ratio(3) ....... 209.4% 111.0% 80.2%
Equity to assets ratio(4) ...... 13.8% 14.3% 15.2%
_______
(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).
_________________
<PAGE>
Page 18
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, 1996.
Years Ended December 31,
____________________________________
1996 1995 1994 1993 1992
1.23 1.56 1.62 1.50 1.59
The ratios were computed by dividing income before fixed charges, income
taxes, and extraordinary loss on early extinguishment of debt in 1993 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 19
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, 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 20
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 21
10.1 Amended and Restated Guaranty dated February 1, 1995 by the
Registrant in favor of Corporate Asset Funding Company, Inc.
et al (incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-K Annual Report (File No. 1-6798) for
the year ended December 31, 1995).
12 Ratio of Earnings to Fixed Charges Calculation.
23 Consent of Ernst & Young LLP to the incorporation by
reference of their report dated February 19, 1997 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 1996: 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 22
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 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 20, 1997 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:
THOMAS J. CUSACK* Director
RICHARD H. FINN* Director
EDGAR H. GRUBB* Director
DAVID H. HAWKINS* Director
FRANK C. HERRINGER* Director
STEVEN A. READ* Director
CHARLES E. TINGLEY* Director
ROBERT A. WATSON* Director
*Austin D. Kim
Attorney-in-Fact
<PAGE>
Page 23
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, 1996
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SAN FRANCISCO, CALIFORNIA
<PAGE>
Page 24
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, 1996 and 1995
Consolidated Statement of Income--Years ended December 31, 1996, 1995 and
1994
Consolidated Statement of Cash Flows--Years ended December 31, 1996, 1995
and 1994
Consolidated Statement of Stockholder's Equity--Years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements--December 31, 1996
Management's Discussion and Analysis of the Results of Operations
Supplementary Financial Information--Years ended December 31, 1996 and
1995
The following consolidated financial statement schedule of Transamerica
Finance Corporation and subsidiaries is included in Item 14(d):
None
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 25
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, 1996 and
1995, 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, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall 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, 1996 and
1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California
February 19, 1997
Except for Note L, as to which the
date is March 13, 1997
<PAGE>
Page 26
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in millions, except for share data)
<CAPTION>
December 31
1996 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents ..................................... $ 431.8 $ 2.7
Investment securities.......................................... 126.3 139.1
Finance receivables, net of unearned finance charges
and insurance premiums: .................................. 7,970.0 8,260.6
Less allowance for losses ................................... (352.3) (241.2)
_________ _________
7,617.7 8,019.4
Property and equipment - less accumulated depreciation of
$1,020.9 in 1996 and $882.6 in 1995:
Land, buildings and equipment ............................... 73.3 46.1
Equipment held for lease .................................... 3,118.5 2,862.0
Advances to Transamerica affiliates ........................... 319.5 187.8
Goodwill, less accumulated amortization of $131.1 in
1996 and $119.5 in 1995 ..................................... 328.3 339.9
Assets held for sale
less valuation allowance of $1.8 in 1996 and
$6.0 in 1995 .............................................. 86.5 99.1
Other assets .................................................. 403.6 410.1
_________ _________
$12,505.5 $12,106.2
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Debt:
Unsubordinated .............................................. $ 8,969.5 $ 8,747.7
Subordinated ................................................ 904.6 942.2
_________ _________
Total debt ................................................ 9,874.1 9,689.9
Accounts payable and other liabilities ........................ 706.3 511.9
Income taxes payable, of which $176.4 in 1996 and
$139.1 in 1995 is deferred .................................. 243.5 189.9
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 .................. 14.6 14.6
Additional paid-in capital .................................. 1,667.5 1,594.6
Retained earnings ........................................... 103.5
Net unrealized gain from investments marked to
fair value ................................................ 2.7 6.6
Foreign currency translation adjustments .................... (3.2) (4.8)
_________ ________
Total stockholder's equity .................................. 1,681.6 1,714.5
_________ _________
$12,505.5 $12,106.2
========= =========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 27
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions)
<CAPTION>
Years Ended December 31
1996 1995 1994
<S> <C> <C> <C>
REVENUES
Finance charges ................................... $1,152.7 $1,158.6 $1,012.9
Leasing revenues ................................... 689.1 669.5 594.2
Income from affiliates ............................. 14.5 10.4 17.2
Other .............................................. 73.4 76.6 53.5
________ ________ ________
Total revenues ................................... 1,929.7 1,915.1 1,677.8
EXPENSES
Interest and debt expense .......................... 607.8 625.3 485.6
Depreciation on equipment held for lease ........... 255.0 236.6 197.3
Salaries and other operating expenses .............. 640.5 603.3 582.0
Provision for losses on receivables
and assets held for sale ........................ 280.7 91.8 99.1
________ ________ ________
Total expenses ................................... 1,784.0 1,557.0 1,364.0
Income before income taxes ......................... 145.7 358.1 313.8
Income taxes ....................................... 51.2 145.5 125.6
________ ________ ________
Net income ......................................... $ 94.5 $ 212.6 $ 188.2
======== ======== ========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 28
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in millions)
<CAPTION>
Years Ended December 31
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ......................................... $ 94.5 $ 212.6 $ 188.2
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 287.2 265.2 223.0
Provision for losses on receivables .............. 280.7 91.8 99.1
Amortization of discount on long-term debt ....... 9.6 22.9 19.3
Change in accounts payable and other liabilities.. 115.1 (27.2) (25.2)
Change in income taxes payable ................... (1.1) 147.7 40.7
Other ............................................ 29.7 30.4 94.3
__________ __________ _________
Net cash provided by operating activities ...... 815.7 743.4 639.4
INVESTING ACTIVITIES
Finance receivables originated ..................... (17,890.5) (17,590.9) (15,705.5)
Finance receivables collected ...................... 17,442.9 17,494.8 14,846.7
Purchase of property and equipment held for lease .. (406.8) (591.7) (455.3)
Sales of property and equipment held for lease ..... 387.1 86.5 31.3
Purchase of investment securities ................. (24.3) (25.5) (15.4)
Sales or maturities of investment securities ...... 31.5 15.1 9.0
Decrease (increase) in investments in and advances
to affiliates .................................... (131.7) 72.9 111.4
Purchase of finance receivables and other assets
from ITT Consumer Financial Corporation .......... (1,027.3)
Purchase of the container division assets of
Tiphook plc ...................................... (1,061.4)
Other .............................................. 596.7 (28.8) ( 31.3)
__________ __________ __________
Net cash provided (used) by investing
activities .................................... 4.9 (1,594.9) (2,270.5)
FINANCING ACTIVITIES
Proceeds from debt financing ....................... 6,779.3 8,281.5 7,189.4
Payments of debt ................................... (6,933.0) (7,333.6) (5,528.1)
Capital contributions from parent company .......... 11.3 131.0 99.2
Cash dividends paid ................................ (198.0) (232.4) (151.0)
Return of capital .................................. (51.1)
__________ __________ __________
Net cash provided (used) by financing
activities ...................................... (391.5) 846.5 1,609.5
__________ __________ ___________
Increase (decrease) in cash and cash equivalents ... 429.1 (5.0) (21.6)
Cash and cash equivalents at beginning of year ..... 2.7 7.7 29.3
__________ __________ __________
Cash and cash equivalents at end of year ........... $ 431.8 $ 2.7 $ 7.7
========== ========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 29
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(Amounts in millions)
<CAPTION>
Net Unrealized
Gain (Loss) Foreign
Additional From Investments Currency
Common Paid-in Retained Marked to Translation
Stock Capital Earnings Fair Value Adjustments
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ........... $14.6 $1,356.5 $ 87.1 $ (8.7)
Effect of adopting Statement of Finan-
cial Accounting Standards No. 115 .... $ 5.6
Net income ............................. 188.2
Capital contribution from parent
company .............................. 99.2
Dividends declared ..................... (151.0)
Other changes .......................... (8.9) (0.4)
______ ________ _______ _______ _______
Balance at December 31, 1994 ........... 14.6 1,455.7 124.3 (3.3) (9.1)
Net income ............................. 212.6
Capital contribution from parent company 138.9
Dividends declared ..................... (233.4)
Other changes .......................... 9.9 4.3
______ ________ _______ _____ _______
Balance at December 31, 1995 ........... 14.6 1,594.6 103.5 6.6 (4.8)
Net income ............................. 94.5
Capital contribution from parent
company .............................. 124.0
Dividends declared ..................... (198.0)
Return of capital ...................... (51.1)
Other changes .......................... (3.9) 1.6
______ ________ _______ _____ _______
Balance at December 31, 1996 $ 14.6 $1,667.5 $ $ 2.7 $ (3.2)
====== ======== ======= ===== ======
<FN>
See notes to financial statements
</TABLE>
<PAGE>
Page 30
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 is the primary market for the
services offered by the consumer and commercial lending operations while the
leasing business operates in the container business worldwide.
Consolidation: The consolidated financial statements include the
accounts of Transamerica Finance Corporation and its wholly owned consumer
lending, commercial lending and leasing subsidiaries. Certain amounts
reported in the consolidated financial statements are based on management
estimates. Such amounts may ultimately 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, including
equipment held for lease, 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 using the straight-line method 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 its 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 J, 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.
<PAGE>
Page 31
Finance Charges: Finance charges, including loan origination fees,
offset by direct loan origination costs, are generally recognized as earned on
an effective yield method. Accrual of finance charges is suspended
on accounts that contractually become past due in excess of 29 days for
consumer receivables or 90 days for commercial receivables. Accrual of
finance charges on accounts in nonaccrual status is resumed only when the
accounts have been paid up to contractually current status. Charges collected
in advance, including renewal charges, on distribution 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 and at
time of foreclosure. After foreclosure, repossessed assets are carried at the
lower of cost or estimated fair value less estimated selling costs and are
reclassified to assets held for sale. 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: Leasing revenues include revenues earned from rental and
operating leases. Rental revenues are recognized in the period earned.
Operating lease revenue is recognized on the straight-line method over the
lease term. Finance lease income, included in finance charges, represents the
excess of the total lease receivable over the net cost of the related
equipment and is deferred and amortized over the term of the lease using an
accelerated method which provides a level rate of return on the outstanding
lease contract receivable.
Derivatives: The Company uses derivative financial instruments to hedge
some of its interest rate and foreign exchange rate risks. The cost of each
derivative contract is amortized over the life of the contract. The
amortization is classified with the results of the underlying hedged item.
Contracts are designated and accounted for as hedges of certain of the
Company's liabilities and outstanding indebtedness and are not marked to
market. Gains or losses on terminated hedges are deferred and amortized over
the remaining life of the hedged item.
<PAGE>
Page 32
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 provides an unlimited carryforward period for the utilization of
federal net operating losses and foreign tax credits. The Company provides
deferred taxes based on enacted tax rates in effect on the dates temporary
differences between the book and tax basis of assets and liabilities reverse.
New Accounting Standard: In 1994, the Company adopted Statement of
Financial Accounting Standard No. 115 "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
these adjustments, 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.
Reclassification: Certain amounts in the consolidated financial
statements for the prior periods have been reclassified to conform to the
current year presentation.
<PAGE>
Page 33
NOTE B--FINANCE RECEIVABLES
The carrying amounts of finance receivables outstanding were as follows:
Maximum
Original Term
Receivables (in months)
At December 31 At December 31
_______________________ _____________
1996 1995 1996 1995
(Dollar amounts in millions)
Consumer:
Consumer instalment loans:
Real estate secured ........ $3,592.4 $4,212.7 180 180
Other ...................... 85.9 938.1 60 60
Special assets ............... 484.2
________ ________
4,162.5 5,150.8
Loans in foreclosure ......... 144.3 112.7
________ ________
4,306.8 5,263.5
Less unearned finance
charges .................... 150.7 214.5
________ ________
Net finance receivables ...... 4,156.1 5,049.0
________ ________
Commercial:
Distribution finance ......... 2,530.9 2,242.2 12 12
Business credit .............. 953.4 680.8 84 84
________ ________
Core businesses ............ 3,484.3 2,923.0
Other ........................ 3.2 6.9
________ ________
3,487.5 2,929.9
Less unearned finance
charges .................... 122.7 58.4
________ ________
Net finance receivables ...... 3,364.8 2,871.5
________ ________
Leasing:
Finance receivables .......... 594.0 449.1 144 144
Less unearned finance
charges .................... 144.9 109.0
________ ________
Net finance receivables ...... 449.1 340.1
________ ________
7,970.0 8,260.6
Less allowance for losses .. 352.3 241.2
________ ________
Total net finance
receivables ................ $7,617.7 $8,019.4
======== ========
<PAGE>
Page 34
Special assets represent certain non real estate and real estate consumer
loans segregated for liquidation.
At December 31, 1996 and 1995, finance receivables for which the accrual
of finance charges was suspended amounted to $488.3 million and $323.5
million.
Contractual maturities of finance receivables outstanding excluding loans
in foreclosure, before deduction of unearned finance charges and insurance
premiums, at December 31, 1996 were:
<TABLE>
<CAPTION>
Consumer % Commercial % Leasing % Total %
(Dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 ................ $ 966.3 23.2% $2,771.3 79.5% $ 124.6 21.0% $3,862.2 46.8%
1998 ................ 506.7 12.2 337.3 9.7 111.8 18.8 955.8 11.6
1999 ................ 406.2 9.7 191.1 5.5 107.1 18.0 704.4 8.6
2000 ................ 274.4 6.6 76.3 2.2 86.7 14.6 437.3 5.3
2001 ................ 216.0 5.2 45.8 1.3 67.9 11.4 329.7 4.0
Thereafter .......... 1,792.9 43.1 65.8 1.8 95.9 16.2 1,954.6 23.7
________ ______ ________ ______ _______ ______ ________ ______
Total ....... $4,162.5 100.0% $3,487.6 100.0% $ 594.0 100.0% $8,244.0 100.0%
======== ====== ======== ====== ======= ====== ======== ======
</TABLE>
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 1996 and 1995, the
ratio of principal cash collections for consumer finance receivables
(excluding balances refinanced) to average net finance receivables was 26%
and 24%.
The commercial lending operation's business credit unit provides
revolving lines of credit, letters of credit and standby letters of credit.
At December 31, 1996 and 1995, borrowers' unused credit available under such
arrangements totaled $774.6 million and $511.4 million.
<PAGE>
Page 35
Concentration of Risk
The Company engages in the extension of credit to homeowners, electronics
and appliance dealers, retail recreational products dealers and computer
stores. Additionally the Company leases, services and manages containers,
chassis and trailers throughout the world. 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, 1996 were
primarily real estate secured loans, principally first and second mortgages
secured by residential properties, of which approximately 38% were located in
California. The commercial and leasing finance receivables portfolio
included 25 customers with individual balances in excess of $15 million.
These accounts represent 18% of total commercial and leasing net finance
receivables outstanding at December 31, 1996.
<PAGE>
Page 36
NOTE C--NOTES AND LOANS PAYABLE
At December 31,
_____________________
1996 1995
(Amounts in millions)
Short-term debt:
Commercial paper ............................... $3,884.6 $4,163.7
Bank loans ..................................... 153.5 103.8
Revolving lines of credit ...................... 66.1 67.1
Current portion of long-term debt:
Unsubordinated ............................. 1,026.9 585.7
Subordinated ............................... 202.1 157.6
________ ________
5,333.2 5,077.9
Less amounts classified as long-term debt
under noncancelable long-term
credit agreements ............................ 4,104.2 4,334.6
________ ________
Total short-term debt ........................ 1,229.0 743.3
Long-term debt due subsequent to one year:
5.24% to 12.67% notes and debentures,
maturing through 2011 ........................ 4,501.3 4,189.4
Zero to 6.50% notes and debentures due 2007 to
2012 issued at a discount to yield 13.8% to
13.88%; effective cost of 8.79% to 12.35%;
maturity value of $582.8 million.............. 171.5 162.0
5.42% to 9.95% subordinated notes and
debentures maturing through 2003 ............. 904.6 942.2
________ ________
5,577.4 5,293.6
Less amounts due in less than one year ......... 1,229.0 743.3
________ ________
4,348.4 4,550.3
Short-term debt supported by noncancelable
credit agreements expiring through 2001 ...... 4,104.2 4,334.6
________ ________
Total long-term debt due subsequent to
one year ................................. 8,452.6 8,884.9
Demand loans due Transamerica Corporation .......... 192.5 61.7
_________ ________
Total debt ................................... $9,874.1 $9,689.9
======== ========
The weighted average interest rate on short-term borrowings at December
31, 1996 and 1995 was 5.5% and 5.8%.
<PAGE>
Page 37
Long-term debt outstanding at December 31, 1996 matures as follows:
Average
Unsubordinated Subordinated Total Rate
(Amounts in millions)
1997 ............... $1,026.9 $202.1 $1,229.0 6.54%
1998 ............... 818.6 250.5 1,069.1 6.07%
1999 ............... 867.2 222.0 1,089.2 7.01%
2000 ............... 450.8 167.5 618.3 6.53%
2001 ............... 567.3 2.0 569.3 6.45%
Thereafter (1) ..... 942.0 60.5 1,002.5 8.75%
________ ______ ________
Total ............ $4,672.8 $904.6 $5,577.4
======== ====== ========
(1) Includes the accreted values at December 31, 1996 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. 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, 1996, the Company and its ultimate parent, Transamerica
Corporation, share credit agreements with various banks and had the ability to
borrow up to $5.2 billion with interest at variable rates. There were no
borrowings outstanding under these credit lines at December 31, 1996. These
credit agreements, which expire through 2001, require the Company to pay an
annual fee on the amounts committed.
Demand loans due to Transamerica Corporation, in the amount of $192.5
million and $61.7 million at December 31, 1996 and December 31, 1995, accrue
interest daily based on the 30 day commercial paper rate.
<PAGE>
Page 38
Interest rates on borrowings during the years indicated were as follows:
Years Ended December 31,
________________________
1996 1995 1994
Weighted average annual interest
rate during year:(1)
Short-term borrowings .......... 5.39% 6.05% 4.41%
Long-term borrowings ........... 7.49% 7.36% 7.69%
_____ _____ _____
Total borrowings ............... 6.49% 6.78% 6.05%
===== ===== =====
_______
(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 swap
agreements, totaled $618.2 million in 1996, $616.5 million in 1995, and $561.8
million in 1994.
The Company uses derivative financial instruments to hedge some of its
interest rate and foreign exchange rate risk. The Company uses interest rate
exchange agreements to hedge the interest rate risk of its outstanding
indebtedness. These interest rate exchange agreements are intended to help
the Company more closely match the cash flow received from its assets to the
payment on its liabilities, and generally provide that one party pays
interest at a floating rate in relation to movements in a underlying index and
the other party pays interest at a fixed rate. The Company also uses cross
currency exchange agreements, which fix by contract the amounts of various
currencies to be exchanged at a future date with other contracting parties,
and forward exchange contracts whereby the Company agrees to sell to other
contracting parties at a future date a specified amount of foreign currency
for a specified amount of dollars. These agreements are intended to hedge the
Company's exposure to fluctuations in foreign exchange rates when the Company
settles its debt denominated in foreign currencies.
<PAGE>
Page 39
At December 31, 1996 and 1995, contracts designated as hedges of
outstanding indebtedness comprised:
<TABLE>
<CAPTION>
1996 1995
_______________________________ ______________________________
Weighted Weighted Weighted Weighted
Average Average Average Average
Fixed Floating Fixed Floating
Notional Interest Interest Notional Interest Interest
Amount Rate Rate Amount Rate Rate
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Interest rate exchange agreements -
the Company pays:
Floating rate interest expense, receives
fixed rate interest income ............ $ 654.0 6.8% 5.6% $ 45.0 7.1% 6.0%
======= ==== ==== ====== ==== ====
Fixed rate interest expense, receives
floating rate interest income ......... $ 483.0 6.5% 5.4% $473.9 6.7% 5.7%
======= ==== ==== ====== ==== ====
Floating rate interest expense based on
one index (5.9%) and receives floating
rate interest income based on another
index (5.8%) .......................... $ -- $101.0
======= ======
Cross currency exchange and foreign
interest rate swaps ................... $ 116.5 $144.4
======= ======
</TABLE>
While the Company is exposed to credit risk in the event of
nonperformance by the other party, the likelihood of nonperformance is
considered low due to the high credit ratings of the counterparties. At
December 31, 1996, the interest rate exchange agreements are with financial
institutions with investment grade ratings of A or better by one or more of
the major credit rating agencies.
<PAGE>
Page 40
NOTE D--ALLOWANCE FOR LOSSES
Changes in the allowance for losses on finance receivables and assets
held for sale are as follows:
<TABLE>
<CAPTION>
Finance Receivables Assets
__________________________________________________ Held
Consumer Commercial Leasing Total For Sale
________ __________ _______ ________ ________
<C> <C> <C> <C> <C>
(Amounts in millions)
<S>
Balance at December 31, 1993 ............. $ 103.3 $ 76.1 $ 2.5 $ 181.9 $ 159.5
Provision charged to expense ............. 80.4 18.7 99.1 2.1
Charge-offs .............................. (74.8) (17.0) (91.8) (85.4)
Recoveries ............................... 2.3 8.3 10.6
Other .................................... 6.0 0.4 1.4 7.8 (8.8)
_______ ______ ______ _______ _______
Balance at December 31, 1994 ............. 117.2 86.5 3.9 207.6 67.4
Provision charged to expense ............. 97.8 14.1 111.9 (20.1)
Charge-offs .............................. (106.6) (16.4) (123.0) (60.3)
Recoveries ............................... 2.8 7.6 10.4
Increase in connection with
purchase of receivables ................ 52.9 52.9
Other .................................... (18.8) 0.2 (18.6) 19.0
_______ _______ ______ _______ _______
Balance at December 31, 1995 ............. 164.1 73.0 4.1 241.2 6.0
Provision charged to expense ............. 272.9 7.8 280.7 (3.5)
Charge-offs .............................. (162.8) (9.2) (172.0) (0.7)
Recoveries ............................... 4.5 6.0 10.5
Decrease in connection with
purchased receivables .................. (8.0) (8.0)
Other .................................... (0.5) 0.4 (0.1)
_______ ______ ______ _______ _______
Balance at December 31, 1996 ............. $ 270.7 $ 77.1 $ 4.5 $ 352.3 $ 1.8
======= ======= ====== ======= =======
</TABLE>
<PAGE>
Page 41
NOTE E--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. The loan agreements also
specify the minimum level of capital that must be maintained. At December 31,
1996, the Company's capital level exceeded the minimum requirements by $284.1
million.
NOTE F--FAIR VALUE OF FINANCIAL INSTRUMENTS
Investment Securities
The amortized cost and fair value of investment securities were $122.2
million and $126.3 million at December 31, 1996 and $128.9 million and $139.1
million at December 31 1995. Fair value for actively traded securities is
based on quoted market prices. For fixed maturity securities that are not
actively traded, fair value is estimated using information obtained from
independent pricing services.
Finance Receivables
The carrying amounts and estimated fair values of the finance receivable
portfolio at December 31, 1996 and 1995 were as follows:
1996 1995
_______________________ _______________________
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
(Amounts in millions)
Fixed rate
receivables: ........... $ 4,719.9 $ 5,315.0 $ 5,378.2 $ 6,021.1
Variable rate
receivables: ........... 2,897.8 2,897.8 2,641.2 2,641.2
_________ _________ _________ _________
Total $ 7,617.7 $ 8,212.8 $ 8,019.4 $ 8,662.3
========= ========= ========= =========
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 and other 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 loans, which comprise the majority of the commercial loan
portfolio, the carrying amount represents a reasonable estimate of fair
value. Receivables in the process of foreclosure have been written down to
their realizable value, which approximates fair value.
<PAGE>
Page 42
Notes and Loans Payable
At December 31, 1996 and 1995 the estimated fair value of debt, using
rates currently available for debt with similar terms and maturities, was
$10.2 billion and $10.1 billion.
The net present value of the interest rate and cross currency exchange
agreements offsets changes in the fair value of the hedged indebtedness, which
are also carried at amortized cost. The fair value of interest rate and cross
currency exchange agreements is the estimated amounts that the Company would
receive or pay to terminate the agreements at the reporting date, taking into
consideration current interest rates and the current creditworthiness of the
exchange agreement counterparties. The fair value of the liability hedges at
December 31, 1996 and December 31, 1995 were gross obligations to
counterparties of $13.4 million and $21.1 million and gross benefits of $18.9
million and $1.7 million resulting in a net benefit from counterparties of
$5.5 million at December 31, 1996 and a net obligation to counterparties of
$19.4 million at December 31, 1995.
<PAGE>
Page 43
NOTE G--INCOME TAXES
Provision for income taxes comprised:
1996 1995 1994
(Amounts in millions)
Current taxes:
Federal ................................ $ 41.6 $ 58.3 $ 71.5
State .................................. 10.3 10.4 18.1
Foreign ................................ 3.1 6.5
_______ ______ ______
55.0 68.7 96.1
Deferred taxes:
Federal ................................ 2.1 62.1 31.5
State .................................. (7.1) 11.7 1.9
Foreign ................................ 1.2 3.0 (3.9)
________ ______ ______
(3.8) 76.8 29.5
_______ ______ ______
Total income taxes ................... $ 51.2 $145.5 $125.6
======= ====== ======
The difference between federal income taxes computed at the statutory
rate and the provision for income taxes was:
1996 1995 1994
(Amounts in millions)
Federal income taxes at statutory rate ... $ 51.0 $125.3 $109.8
State income taxes, net of federal income
tax benefit ............................ 2.0 14.4 13.0
Book and tax basis difference of assets
acquired ............................... 4.1 4.1 4.1
Other .................................... (5.9) 1.7 (1.3)
_______ ______ ______
$ 51.2 $145.5 $125.6
======= ====== ======
<PAGE>
Page 44
Deferred tax liabilities (assets) comprised the following at
December 31:
1996 1995
(Amounts in millions)
Accelerated depreciation .................... $ 619.4 $ 441.7
Discount amortization on notes and loans
payable ................................... 71.6 68.7
Direct finance and sales type leases ........ 29.1 23.2
Other ....................................... 51.8 28.4
_______ _______
Gross deferred tax liabilities ............ 771.9 562.0
Allowance for losses ........................ (110.2) (74.1)
Net operating loss and foreign tax credit
carryforwards ............................. (364.5) (296.6)
Other ....................................... (120.8) (52.2)
_______ _______
Gross deferred tax assets ................. (595.5) (422.9)
_______ _______
Net deferred tax liability ................ $ 176.4 $ 139.1
======= =======
Income tax payments, net of refunds, totaled $48.6 million in 1996, $65.1
million in 1995 and $87.1 million in 1994.
NOTE H--PENSION AND STOCK SAVINGS PLANS AND OTHER POST EMPLOYMENT BENEFITS
The Company participates with Transamerica and its subsidiaries in a
number of noncontributory defined pension plans covering substantially all
employees. The Company also participates in various programs sponsored by
Transamerica 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 recognized, for both the pension plan and the
401(k) plan, income of $1.3 million in 1996, and expense of $6.3 million and
$9.4 million in 1995 and 1994.
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 $45.7 million in 1996, $43.3 million in 1995 and $67.2 million in
1994.
<PAGE>
Page 45
Minimum future rental commitments under operating leases for real estate
and equipment as of December 31, 1996 were as follows (in millions):
1997 $ 82.7
1998 75.4
1999 65.8
2000 58.5
2001 54.1
Thereafter 256.9
______
$593.4
======
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
<TABLE>
<CAPTION>
Revenues Operating Profit (Loss)(1)
____________________________________ ____________________________________
1996 1995 1994 1996 1995 1994
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending .............. $ 759.8 $ 782.5 $ 688.6 $ (76.5) $ 134.0 $ 148.5
Commercial lending ............ 397.0 392.1 341.4 98.9 106.5 62.9
Leasing ....................... 765.6 733.9 637.9 120.2 119.7 101.9
Other (2) ..................... 7.3 6.6 9.9 3.1 (2.1) 0.5
________ ________ ________ ________ _______ ________
$1,929.7 $1,915.1 $1,677.8 145.7 358.1 313.8
======== ======== ========
Income taxes ......................................................... (51.2) (145.5) (125.6)
________ _______ ________
Net income ........................................................... $ 94.5 $ 212.6 $ 188.2
======== ======= ========
<CAPTION>
Assets Liabilities
______________________________________ ____________________________________
1996 1995 1994 1996 1995 1994
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending ............ $ 4,251.6 $ 5,308.3 $ 4,478.1 $ 3,690.2 $ 4,646.2 $3,930.7
Commercial lending .......... 3,804.7 3,247.3 3,324.9 3,165.7 2,631.2 2,695.7
Leasing ..................... 3,928.5 3,477.8 3,184.2 3,474.8 3,055.9 2,786.6
Other(2)..................... 520.7 72.8 (32.4) 493.2 58.4 (40.6)
_________ _________ _________ _________ _________ ________
Total ..................... $12,505.5 $12,106.2 $10,954.8 $10,823.9 $10,391.7 $9,372.4
========= ========= ========= ========= ========= ========
<FN>
(1) For income by segment as used for management purposes, see table included with Management's Discussion and
Analysis.
(2) Unallocated items including intercompany eliminations
<PAGE>
Page 46
<CAPTION>
Additions, at Cost,
to Property & Equipment Depreciation Expense
____________________________________ ____________________________________
1996 1995 1994 1996 1995 1994
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending ............ $ 7.5 $ 8.7 $ 4.1 $ 7.4 $ 4.4 $ 3.9
Commercial lending .......... 1.6 5.4 4.9 4.9 5.1 5.7
Leasing ..................... 926.2 573.3 1,525.3 263.3 244.1 201.7
Other .......................
_______ ________ ________ _______ ________ ________
Total ..................... $ 935.3 $ 587.4 $1,534.3 $ 275.6 $ 253.6 $ 211.3
======= ======== ======== ======= ======== ========
</TABLE>
Foreign revenues of the Company's foreign domiciled operations and export
sales were as follows:
<TABLE>
<CAPTION>
------------------ 1996 ------------------- -------------------- 1995 -----------------
Foreign Export Foreign Export
Revenue Sales Total % Revenue Sales Total %
_______ ______ _____ ____ _______ ______ _____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pacific ........ $208.0 $208.0 35.2% $201.5 201.5 34.2%
Europe ......... $ 97.7 183.6 281.3 47.6% $ 81.8 196.7 278.5 47.2%
Other .......... 27.6 74.6 102.2 17.2% 31.5 78.1 109.6 18.6%
______ ______ ______ _____ ______ ______ _____ _____
Total $125.3 $466.2 $591.5 100% $113.3 $476.3 $589.6 100%
====== ====== ====== ===== ====== ====== ====== =====
Percent of
total revenues 6.5% 24.2% 30.7% 5.9% 24.9% 30.8%
</TABLE>
Foreign revenues are generated from operations located outside the United
States. Export sales are revenues earned by the Company's U.S. operation
from customers in foreign countries.
<PAGE>
Page 47
NOTE K--TRANSACTIONS WITH AFFILIATES
Advances to Transamerica affiliates consisted of unsecured receivables at
December 31:
1996 1995
(Amounts in millions)
Transamerica Insurance Finance Corporation ....... $191.0 $120.6
Transamerica HomeFirst, Inc. ..................... 96.8 51.0
Transamerica Finance Group, Inc. ................. 31.7 16.2
______ ______
Total ........................................ $319.5 $187.8
====== ======
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 6.09% in 1996, 6.61% in 1995 and 4.98% in 1994. The
receivable from Transamerica Finance Group is noninterest-bearing. Under the
terms of certain debt agreements, the Company may maintain investments in and
advances to affiliates up to $881.6 million at December 31, 1996.
Income from affiliates comprised the following for the years ended
December 31:
1996 1995 1994
(Amounts in thousands)
Interest income ......................... $14.5 $10.4 $11.1
Other ................................... 6.1
_____ _____ _____
Total ............................... $14.5 $10.4 $17.2
===== ===== =====
In 1996, the Company acquired Trans Ocean Ltd., ("TOL") a container
leasing company, through a non-cash capital contribution from its ultimate
parent, Transamerica Corporation. Transamerica Corporation acquired TOL
through the exchange of approximately 1.6 million shares of Transamerica
common stock for the outstanding stock of Trans Ocean Ltd. The fleet
contained approximately 185,600 owned and managed units, consisting of a
variety of equipment types. The acquisition has increased the size of the
Company's leasing fleet by approximately 25%.
NOTE L--SUBSEQUENT EVENT
On March 13, 1997, Transamerica announced that it intends to sell
substantially all of its consumer lending operation as part of its strategy to
redeploy its capital while moving ahead with a plan to build a new,
centralized real estate secured lending operation.
<PAGE>
Page 48
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 and leasing operations and provides funding for these
businesses. Its principal assets are finance receivables and equipment held
for lease, which totaled a combined $10.7 billion at December 31, 1996 and
$10.9 billion at December 31, 1995. These operations have a high level of
liquidity since the majority of their assets are finance receivables.
Principal cash collections of finance receivables totaled $17.4 billion in
1996, $17.5 billion in 1995, and $14.8 billion in 1994. Transamerica Finance
Corporation's total notes and loans payable were $9.9 billion at December 31,
1996 and $9.7 billion at December 31, 1995. Its variable rate debt totaled
$5.5 billion at December 31, 1996 compared to $4.8 billion at December 31,
1995. Transamerica Finance Corporation's ratio of debt to tangible equity was
6.9:1 at December 31, 1996 and 7:1 at December 31, 1995.
Transamerica Finance Corporation publicly offers, from time to time,
senior or subordinated debt securities. It issued a total of $688 million of
public debt in 1996, $832 million in 1995 and $1,516 million in 1994. Under a
shelf registration statement filed in April 1995 with the Securities and
Exchange Commission, Transamerica Finance Corporation may offer up to $3
billion of senior or subordinated debt securities with varying terms, of which
$1.9 billion had not been issued at December 31, 1996.
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
_____________________________________ ____________________________________
1996 1995 1994 1996 1995 1994
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Consumer lending .......... $ 759.8 $ 782.5 $ 688.6 $ (45.1) $ 80.5 $ 89.7
Commercial lending ........ 397.0 392.1 341.4 68.6 69.9 46.2
Leasing ................... 765.6 733.9 637.9 80.8 75.1 63.6
Other ..................... 7.3 6.6 9.9 1.8 (1.3) 0.3
Amortization of goodwill .. (11.6) (11.6) (11.6)
________ ________ ________ _______ ______ ______
Total ................... $1,929.7 $1,915.1 $1,677.8 $ 94.5 $212.6 $188.2
======== ======== ======== ======= ====== ======
</TABLE>
The following discussion should be read in conjunction with the
information presented under Item 1, Business.
<PAGE>
Page 49
Consumer Lending
Transamerica's consumer lending operation makes loans primarily secured
by real estate to consumers in the United States, Canada and the United
Kingdom. At the end of 1996, we had $4.2 billion in net consumer loan
receivables outstanding, 83% of which were fixed-rate first and second
mortgages. Receivables outstanding declined by 18% in 1996 from 1995. The
five largest states, in terms of receivables, are California, Arizona,
Illinois, Ohio and Washington.
In 1996, we reported a loss from consumer lending operations of $45.1
million compared to income of $80.5 million in 1995. The loss was primarily
due to a higher provision for losses on receivables and higher operating
expenses.
During 1996 we began to refocus this business on real estate secured
lending, using a new business model to centralize back office support, reduce
operating costs and implement database marketing. We also announced a plan to
accelerate efforts to reduce our exposure to non real estate consumer loans by
further curtailing production of these loans, liquidating parts of the non
real estate loan portfolio, and intensifying collection efforts. When we
later expanded this plan to include certain real estate secured loans, the
plan covered a total of $1.1 billion in receivables. During the third
quarter, we established a centralized collection unit and arranged to have
outside parties assist in our accelerated collection effort. In the fourth
quarter we sold $422.4 million of the receivables covered by the plan in a
series of sales and transferred $106.3 million of receivables back into the
base business portfolio, leaving approximately $462.3 million remaining at
December 31, 1996 after collections and charge offs. In the fourth quarter,
we consolidated 39 branches into other locations.
In 1995 the consumer lending operation purchased for $1,027.3 million in
cash substantially all the assets and assumed certain liabilities of the home
equity business of ITT Consumer Financial Corporation (ITT). During that
year, consumer lending operating income decreased $9.9 million (11%) from
1994, primarily due to higher operating and interest expenses and an increased
provision for losses on receivables. Together these factors more than offset
increased revenues, including those from the ITT receivables. Our 1995
results included a fourth-quarter charge of $12 million after tax to
consolidate and accelerate foreclosures in California, and to dispose of
certain repossessed California real estate.
Revenues decreased $22.7 million (3%) in 1996 following an increase of
$93.9 million (13%) in 1995 because we had fewer receivables outstanding. In
1996 we curtailed our non real estate business and sold many of those loans.
As expected, there was also runoff of the ITT receivables. Revenues increased
in 1995 due to higher interest income from the ITT acquisition.
<PAGE>
Page 50
The provision for losses on receivables increased $175.1 million (179%)
in 1996 and $15.6 million (19%) in 1995 primarily due to increased
delinquencies and credit losses, and the accelerated disposition plan
discussed above. Net credit losses as a percentage of average net receivables
outstanding before foreclosures were 3.38% in 1996 compared to 2.15% for 1995
and 1.93% for 1994. Net credit losses increased $54.5 million (53%) from
1995. Losses on loans included in the plan represented $20.4 million of the
increase. Losses in the core portfolio of principally real estate secured
loans increased $34.1 million, of which $11.4 million was due to higher losses
in the ITT portfolio. Excluding the ITT loans, 1996's higher losses were
primarily due to increased foreclosures in California. The 1995 increase was
due to continued sluggishness in the California economy and a continued weak
real estate market there.
Interest expense decreased $24.1 million (8%) in 1996 primarily because
of the lower levels of finance receivables outstanding and a decrease in
short-term interest rates. Interest expense increased $67.1 million (27%) in
1995 primarily due to higher levels of finance receivables outstanding and an
increase in short-term interest rates. Other operating expenses increased
$36.8 million (16%) from 1995 because of the higher expenses we incurred in
disposing of repossessed assets, higher advertising costs, higher contract
service fees related to customer service and collections, the cost of
consolidating and centralizing processing functions, and a $6.4 million
writedown of the company's computer system. In 1995, other operating expenses
increased $23.3 million (11%) primarily due to amortization of customer
renewal rights associated with the ITT acquisition and an increase in losses
on disposition of repossessed property in California.
Average net receivables decreased $113 million (2%) in 1996 primarily due
to the runoff of the ITT portfolio, the sale of many non real estate loans,
and the runoff of other loan portfolios which exceeded new loan originations.
In 1995, receivables increased $794.3 million (19%) primarily due to the ITT
acquisition. Excluding the ITT loans, receivables declined by $16 million
(less than 1%) in 1995. Net consumer finance receivables at December 31, 1996
and December 31, 1995, excluding amounts segregated for liquidation or in
foreclosure, were $3.5 billion and $4.9 billion. These receivables were
principally first and second mortgages secured by residential properties,
approximately 34% of which were located in California.
<PAGE>
Page 51
Delinquent finance receivables, which are defined as finance receivables
contractually past due 60 days or more and for which the foreclosure process
has not begun, are shown below as of December 31:
1996 1995
(Dollar amounts in millions)
Delinquent Receivables
Finance receivables primarily secured by
residential real estate ................ $116.6 3.17% $143.6 2.79%
Other receivables - special assets ....... 103.3 21.34%
______ ______ ______ _____
Total ............................... $219.9 5.28% $143.6 2.79%
====== ====== ====== =====
Approximately 40% of the increase in the delinquency percentage of gross
receivables outstanding was due to having lower receivables outstanding at
December 31, 1996. The rest was caused by an increase in delinquencies of
$76.3 million. Active management of delinquent accounts has become
temporarily more difficult as we move to a new business model.
We have established an allowance for losses equal to 6.75% of net
consumer finance receivables (excluding foreclosures in process) at December
31, 1996 compared to 3.32% at December 31, 1995. Foreclosures in process have
already been written down to estimated net realizable value. The higher
allowance is in response to increased delinquencies and is part of our plan to
reduce our exposure to the non real estate loan segment as discussed above.
The December 31, 1996 allowance comprises 4.53% of real estate secured and
other finance receivables, and 23.80% of receivables segregated for
liquidation.
We suspend the accrual of interest and other finance charges on accounts
that become contractually past due by more than 29 days. At December 31, 1996
and 1995 nonearning net receivables, which excludes accounts in process of
foreclosure, totaled $467 million and $308 million. When we receive payments
on accounts in nonaccrual status, we apply them to principal and interest
income according to the terms of the loan.
When foreclosure proceedings begin on an account secured by real estate,
the amount is written down to the lower of the account balance or the fair
value of the collateral less estimated selling costs. Accounts in process of
foreclosure totaled $144.3 million at December 31, 1996, 47% of which was in
California, and $112.7 million at December 31, 1995, 55% of which was in
California. Repossessed assets held for sale totaled $83.1 million, 71% of
which was in California, at December 31, 1996 and $94.6 million, 85% of which
was in California, at December 31, 1995.
Factors such as economic conditions, competition, and, for accounts
secured by real estate, the state of the real estate market (particularly in
California) all affect trends in receivables levels, credit losses,
delinquencies, accounts in foreclosure, repossessed assets and our results of
operations.
<PAGE>
Page 52
Commercial Lending
Income from our commercial lending operations decreased $1.3 million (2%)
in 1996 and increased $23.7 million (51%) in 1995. Operating results for 1996
included a $4.5 million benefit primarily from the favorable resolution of
disputed issues surrounding the 1995 sale of assets in Puerto Rico. Operating
results for 1995 included a $12.2 million after tax benefit from reversing a
valuation allowance no longer required following the Puerto Rican asset sale
and a $4.8 million after tax gain on the sale of a portfolio of consumer
rediscount loans. Results for 1994 included a $5.5 million after tax charge
for relocation expenses, and a $4 million after tax gain from the sale of
repossessed rent-to-own stores.
Excluding the items discussed above, commercial lending income from
operations increased $11.2 million (21%) in 1996 and $5.2 million (11%) in
1995. Growth in each of the core businesses during 1996 led to higher average
receivables outstanding and increased operating income. In 1995 operating
income rose because of improved margins, reduced operating expenses and a
lower provision for losses. Margins were enhanced in both years due to the
higher spread between the indices at which the commercial lending operation
loans to customers and the indices at which it borrows funds.
Revenues in 1996 increased $4.9 million (1%) from 1995 principally as
a result of growth in average net receivables outstanding. Revenues rose
$50.7 million (15%) in 1995 due to a higher average portfolio yield caused by
higher interest rates.
Interest expense fell $800 thousand (1%) in 1996 from 1995 because of the
lower average interest rate paid on borrowings, which was partially offset by
a higher average debt level due to receivables growth. Interest expense
increased $37.3 million (34%) in 1995 compared to 1994 due to a higher average
interest rate.
Operating expenses decreased $500 thousand (-%) in 1996 primarily because
of the reversal of reserves related to the resolution of previous disputed
issues associated with the 1995 sale of Puerto Rican assets. This decrease
was offset by increases due to growth in the size of the company. In 1995,
operating expenses declined $5.5 million (4%) from 1994 primarily because 1994
included a $9 million ($5.5 million after tax) charge for the relocation of
the commercial lending home office. This charge was partially offset by a
$5.3 million ($4 million after tax) gain on the sale of repossessed rent-to-
own stores. Excluding these items, operating expenses decreased $1.8 million
(1%) in 1995 mainly because expenses were lower for managing the liquidating
receivables portfolio and the assets held for sale portfolio, which we
disposed of in 1995.
<PAGE>
Page 53
In 1996 the provision for losses on receivables decreased $6.3 million
(45%) from 1995 due to lower credit losses and because reserves were higher in
the liquidating loan portfolio than were ultimately necessary. In 1995, the
provision for losses declined $4.6 million (24%) from 1994 principally due to
higher charges in 1994 on the consumer rediscount loan portfolio which was
sold in 1995, and lower 1995 losses in the liquidating portfolio. Credit
losses, net of recoveries, as a percentage of average commercial finance
receivables outstanding net of unearned finance charges, were 0.10% in 1996,
0.32% in 1995 and 1994.
Net commercial finance and lease receivables outstanding at December 31,
1996 increased $493.3 million (17%) from December 31, 1995. Receivables grew
in both of the core businesses. The distribution finance unit gained $285
million of receivables by increasing the penetration of its existing markets
through joint venture alliances and other activities. Business credit
receivables increased $212 million due to growth in the equipment finance and
leasing operation. We have established an allowance for losses equal to 2.29%
of net commercial finance receivables outstanding as of December 31, 1996
compared to 2.54% as of December 31, 1995.
Delinquent receivables are defined as instalments for inventory finance
and business credit asset-based lending receivables more than 60 days past due
and the receivables balance for all other receivables more than 60 days past
due. At December 31, 1996, delinquent receivables were $10.1 million (0.29%
of receivables outstanding) compared to $8.2 million (0.28% of receivables
outstanding) at December 31, 1995.
Nonearning receivables are defined as balances from borrowers that are
more than 90 days delinquent or sooner if it appears doubtful they will be
fully collectible. Accrual of finance charges is suspended on nonearning
receivables until past due amounts are collected. Nonearning receivables were
$15.7 million (0.45% of receivables outstanding) at December 31, 1996,
compared to $15.5 million (0.53% of receivables outstanding) at December 31,
1995.
<PAGE>
Page 54
Leasing
Transamerica Leasing's fleet of intermodal transportation equipment is
one of the largest in the world. In addition to service and term operating
leases, we provide structured financing that enables customers to purchase
equipment over time. We lease this equipment to and manage it for steamship
lines, railroads, shippers, distribution companies and motor carriers.
Most of our intermodal containers are used in international trade, while
our chassis, rail trailers and domestic containers are used primarily within
North America. We also have an over the road trailer leasing business in
Europe. In 1996, utilization rates for our international containers declined
to 81% from 85% in 1995 as the rate of growth in world trade slowed and the
size of the worldwide container fleet grew. Utilization of our rail trailers
increased in 1996 to 82% from 77% in 1995 as the U.S. economy remained strong
and the supply of equipment declined.
Our major strategies are to improve returns on our standard container
product line, provide new services, such as broking interchanges among our
customers, reduce our operating costs and expand our specialized equipment
product lines.
In October 1996, we acquired all of the outstanding shares of Trans Ocean
Ltd., a container leasing company, in exchange for approximately 1.6 million
shares of Transamerica common stock. The Trans Ocean fleet approximated
185,600 owned and managed units, consisting of a variety of equipment types.
It has increased the size of Transamerica Leasing's fleet by about 25%. The
transaction has been accounted for as a purchase with revenues and expenses
included in our leasing operations' results from the date of acquisition.
Income from leasing operations in 1996 rose $5.7 million (8%) from 1995.
The increase resulted from a larger portfolio of finance leases and lower
ownership costs for the rail trailer business. Income also increased due to
the resolution of outstanding tax issues totaling $4.4 million and benefits
from entering into structured lease transactions. Partially offsetting these
increases were reduced earnings in standard and refrigerated containers and
chassis due to lower utilization rates, and lower standard containers and
chassis rental rates.
In 1995, income from operations increased $11.5 million (18%) over 1994
mainly due to higher utilization rates and increased fleet size in the
standard, refrigerated and tank container lines, and to a larger European
trailer fleet. Increased used equipment sales resulted in additional after
tax gains in 1995 of $7.2 million. 1995 earnings also benefited from a $2.2
million after tax depreciation adjustment taken following final settlement of
the purchase price for the container operations purchased from Tiphook plc in
March 1994, and from a $1.8 million benefit from the resolution of an
outstanding state tax issue. Partially offsetting these increases were lower
earnings in the rail trailer business where utilization fell due to lower U.S.
intermodal rail loadings.
<PAGE>
Page 55
Revenues increased in 1996 by $31.7 million (4%) primarily because we had
a larger on-hire fleet of refrigerated containers, tank containers and
European trailers and a larger portfolio of finance leases. Partially
offsetting these revenue increases were reduced standard container revenues
due to lower utilization and rental rates and lower gain on used equipment
sales. Rail trailers also had lower revenues because of a smaller fleet and
lower gains on used equipment sales.
Revenues for 1995 increased $96 million (15%) from 1994 because we had
more on-hire standard, tank and refrigerated containers, chassis and European
trailers, and because the Tiphook acquisition increased the size of our
standard and tank container fleets. Partially offsetting these increases were
lower revenues from the rail trailer business because we had fewer units on
hire.
Expenses excluding income taxes increased $31.2 million (5%) in 1996 as
a result of larger refrigerated container, chassis and European trailer
fleets, partially offset by lower operating expenses from a smaller rail
trailer fleet. Expenses excluding income taxes grew $78.3 million (15%) in
1995 mainly due to the higher depreciation and interest expenses, and
operating costs associated with these larger fleets.
The combined utilization of standard containers, refrigerated containers,
domestic containers, tank containers and chassis averaged 81% for 1996, 85%
in 1995 and 81% in 1994. Rail trailer utilization was 82% in 1996, 77% in
1995 and 92% in 1994. European trailer utilization was 92% in 1996, 95% in
1995 and 96% in 1994. Utilization of our fleet is dependent on worldwide
economic conditions, market pressures and industry fleet size.
Our fleet of standard containers, refrigerated containers, domestic
containers, tank containers and chassis totaled 896,300 units at the end of
1996. It increased by 187,900 units (27%) in 1996 and 23,000 units (3%) in
1995. The 1996 increase was largely due to the acquisition of Trans Ocean.
<PAGE>
Page 56
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY FINANCIAL INFORMATION
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amounts in millions)
Three Months Ended Year Ended
_________________________________________ December 31,
3/31/96 6/30/96 9/30/96 12/31/96 1996
Revenues ...... $477.6 $475.8 $472.4 $503.9 $1,929.7
====== ====== ======= ====== ========
Net income
(loss) ..... $ 47.8 $ 27.9 $(25.5) $ 44.3 $ 94.5
====== ====== ======= ====== ========
Three Months Ended Year Ended
_________________________________________ December 31,
3/31/95 6/30/95 9/30/95 12/31/95 1995
Revenues ...... $452.5 $486.1 $486.2 $490.3 $1,915.1
====== ====== ====== ====== ========
Net income .... $ 46.9 $ 52.7 $ 54.6 $ 58.4 $ 212.6
====== ====== ====== ====== ========
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Years Ended December 31,
______________________________________________
1996 1995 1994 1993 1992
(Dollar amounts in millions)
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest and debt expense ....... $607.7 $625.3 $485.6 $414.5 $459.5
One-third of rent expense ....... 15.2 14.5 22.4 18.3 20.1
______ ______ ______ ______ ______
Total ......................... $622.9 $639.8 $508.0 $432.8 $479.6
====== ====== ====== ====== ======
Earnings:
Income (loss) from continuing
operations before income taxes
and extraordinary loss on
early extinguishment of
debt in 1993 .................. $145.8 $358.1 $313.8 $218.2 $283.7
Fixed charges ................... 622.9 639.8 508.0 432.8 479.6
______ ______ ______ ______ ______
Total ......................... $768.7 $997.9 $821.8 $651.0 $763.3
====== ====== ====== ====== ======
Ratio of earnings to fixed
charges ......................... 1.23 1.56 1.62 1.50 1.59
==== ==== ==== ==== ====
</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 19, 1997 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, 1996.
Ernst & Young LLP
San Francisco, California
March 20, 1997
<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 1996 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 20th day
of March, 1997.
THOMAS J. CUSACK FRANK C. HERRINGER
______________________________ __________________________
Thomas J. Cusack Frank C. Herringer
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 ROBERT A. WATSON
______________________________ __________________________
David H. Hawkins Robert A. Watson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 432
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3192
<DEPRECIATION> 1,021
<TOTAL-ASSETS> 12,506
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 1667
<TOTAL-LIABILITY-AND-EQUITY> 12,506
<SALES> 0
<TOTAL-REVENUES> 1,930
<CGS> 0
<TOTAL-COSTS> 255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 281
<INTEREST-EXPENSE> 608
<INCOME-PRETAX> 146
<INCOME-TAX> 51
<INCOME-CONTINUING> 95
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
