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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number 1-7725
COMDISCO, INC.
(a Delaware Corporation)
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6111 North River Road
Rosemont, Illinois 60018
Telephone (708) 698-3000
I.R.S. Employer Identification Number 36-2687938
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Titles of each class on which registered
---------------------------- ----------------------------
Common Stock New York Stock Exchange
$.10 par value Chicago Stock Exchange, Inc.
Common Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange, Inc.
8.75% Cumulative Preferred Stock, Series A and B New York Stock Exchange
$25 stated value and liquidation preference
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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 XX 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]
The aggregate market value of the common stock held by nonaffiliates of the
Registrant as of December 1, 1995 was approximately $812,606,000. For purposes
of the foregoing calculation only, all directors and executive officers of the
registrant have been deemed affiliates. As of September 30, 1995, there were
52,270,596 shares of the Registrant's common stock, $.10 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Annual Report to Stockholders for the fiscal
year ended September 30, 1995 are incorporated by reference into
Part I and II.
2. Portions of Comdisco, Inc.'s definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on January 23, 1996 filed
within 120 days of fiscal year end are incorporated by reference
into Part III.
1
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Comdisco, Inc. and Subsidiaries
TABLE OF CONTENTS
PART I.
Item 1. Business...................................................3
Item 2. Properties.................................................7
Item 3. Legal Proceedings .........................................7
Item 4. Submission of Matters to a Vote of Security Holders........7
PART II.
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.........................8
Item 6. Selected Financial Data....................................9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation .....................9
Item 8. Financial Statements and Supplementary Data................9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................9
PART III.
Item 10. Directors and Executive Officers of Registrant..............9
Item 11. Executive Compensation .....................................9
Item 12. Security Ownership of Certain Beneficial Owners
and Management..........................................9
Item 13. Certain Relationships and Related Transactions.............10
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.....................................10
SIGNATURES................................................................... 11
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES...............12
INDEX TO EXHIBITS.............................................................15
2
PART I.
Item 1. Business
GENERAL
Comdisco, Inc. (with its subsidiaries, the "Company" or "Comdisco") is
primarily engaged in the buying, selling and leasing of new and used
computer and other high technology equipment and in providing disaster
recovery services (also referred to as "business continuity services").
In addition, the Company provides technology planning and asset
management services, integrating leasing and business continuity
services with customized asset acquisition, asset management software
tools and data center moves and/or consolidations, disposition and
migration strategies. These services are designed to provide
integrated, long-term, cost effective asset and technological planning
to users of high technology equipment.
Note 9 of Notes to Consolidated Financial Statements on page 42 of the
Annual Report to Stockholders for the year ended September 30, 1995 is
incorporated herein by reference (said footnote contains information
regarding discontinued operations).
The Company was founded in 1969 and incorporated in Delaware in 1971.
The executive offices of the Company are located in the Chicago area,
at 6111 North River Road, Rosemont, Illinois 60018, and its telephone
number is (708) 698-3000. At September 30, 1995, the Company had
approximately 2,100 full-time employees.
The Company does not own any patents, trademarks, licenses, or
franchises which would be considered significant to the Company's
businesses.
The Company's businesses are not seasonal, however, quarter-to-quarter
results from operations can vary significantly.
The amount of backlog orders is not applicable to the Company's
businesses.
The Company's operations are conducted through its principal office in
the Chicago area and approximately fifty offices in the United States,
Canada, Europe and the Pacific Rim. The Company also operates in South
America, however, it does not maintain local offices. Subsidiaries in
Europe and Canada offer services similar to those offered in the United
States, although the Company's European leasing operations are
predominately in the computer marketplace. The Company's disaster
recovery activities include the domestic, Canadian and European
marketplaces.
See "International Operations" on page 30 of the Annual Report to
Stockholders for the fiscal year ended September 30, 1995 (which is
incorporated herein by reference) for a discussion of the Company's
geographic results of operations in fiscal 1995, 1994 and 1993 and Note
15 of Notes to Consolidated Financial Statements on pages 46 and 47 of
the Annual Report to Stockholders for the year ended September 30,
1995, which includes geographic segment and export sales information
and is incorporated herein by reference.
LEASING
In its leasing activities, the Company specializes in central
processing units, desktop equipment, electronics, telecommunications
equipment and, through a subsidiary, medical equipment.
3
The Company offers its customers alternatives in managing high
technology equipment needs, including the leasing of equipment. The
Company works closely with its customers to develop strategies
governing when and where to acquire equipment, when to upgrade existing
equipment and when to order new equipment to take advantage of current
technology. The Company also has the ability to act as an outlet for
the equipment being displaced.
The Company's customers include "Fortune 1000" corporations or
companies of a similar size as well as smaller corporations. A
substantial portion of the Company's transactions are with repeat
customers. The Company's business is not dependent on any single
customer or on any single source for the purchasing, selling or leasing
of equipment.
Computer: Central Processing Units: The Company buys or leases,
and in turn sells, leases or subleases IBM computer
equipment as well as equipment manufactured by others.
The Company's sale and lease transactions include the
"mainframe" central processing units, midrange, and/or
various peripherals, such as printers, tape and disk
drives and other equipment used with a mainframe.
The mainframe industry has been characterized by rapid
and continuous technological advances permitting
broadened user applications. The introduction of new
equipment and/or technology by IBM or other
manufacturers does not cause existing equipment to
become technically obsolete, but usually results in
adjustments in the "price/performance ratio" (the
number of computations or relative performance per
dollar of cost) of the existing equipment. Users
upgrade equipment as their existing equipment becomes
inappropriate for their needs or as a result of changes
in the required amount of data processing capacity. To
the extent equipment replaced by newer models becomes
available for remarketing, a secondary market in used
equipment is created. Recent technological advances in
mainframe technology by International Business Machines
("IBM") have focused on "parallel processing" systems.
These systems include transaction processing and
database server models, designed for both "legacy" and
newer technologies in open systems.
See "Leasing" on pages 27 and 28 of the Annual Report
to Stockholders for the fiscal year ended September 30,
1995 for a discussion of mainframes and client/server
(which is incorporated herein by reference).
The focus of the Company's activities with respect to
particular models of computer equipment changes
periodically as a result of changes in market
conditions and advances in computer technology. During
the last eighteen months, the mainframe market has
remained strong. Recent announcements by the major
manufacturers indicate a backlog in orders. In
September, 1994, IBM began shipping the first of its
CMOS-based parallel processors, which have been
positioned as price-competitive replacements models for
pre-1990 IBM mainframes and the Company includes these
models in its activities. Additionally, Hitachi Data
Systems has announced the "Skyline" family of
processors that are expected to begin shipment in late
1995. In addition to mainframes there are technological
advances in both direct access storage devices and tape
drives. The Company remains an active participant in
the mainframe, client/server and related peripheral
markets.
Advances in technology affect the market for computer
products and may also have an impact on the way the
Company conducts its leasing activities.
Desktop: The Company leases PC's and workstations made
by most of the leading manufacturers. The Company's
lease transactions also include high-end servers,
4
printers and other desktop related equipment. The
Company's integrated asset management software tools
let customers order, track and manage their inventory
of desktop equipment. The Company has business
partnerships and/or vendor leasing programs with major
workstation manufacturers.
Other services: In fiscal 1994, the Company formed a
systems integration group to address the needs of the
developing open systems market, including client/server
(client/server computing is a type of processing in
which a client requests a service or information from a
server that performs the service and/or returns the
requested information to the client). The Company
provides services and consultants to assist customers
in implementing or utilizing an open systems platform.
These services, which are designed to complement the
company's computer leasing activities, include
transitional strategies, integration planning and
implementation, financing (hardware and software), and
business continuity planning. The Company, together
with its consultants and strategic alliances with
client/server product providers, provides customers
with solutions based on requirements and goals.
The Company's asset management services assist
customers in: planning and implementing major data
center relocations and consolidations; evaluating
information technology needs and system assessments;
equipment procurement strategies and timing.
Other
High
Technology
Equipment: Medical: Through its subsidiaries, the Company
leases medical and other high technology equipment
to healthcare providers, including used, reconditioned
medical equipment. The Company's portfolio includes
angiography, MRI systems, CT Scanners and nuclear
imaging devices. Additionally, the Company has a
comprehensive medical equipment refurbishing facility
and has earned ISO 9002 certification for its
facility.
Electronics: The Company leases new and used electronic
manufacturing, testing and monitoring equipment,
including semiconductor production equipment, automated
test equipment, assembly equipment and
scientific/analytical instrumentation. Additionally,
the Company maintains a dedicated refurbishing and
sales facility in the Silicon Valley area.
Telecommunications: The Company buys, sells, and leases
new and refurbished telecommunications equipment
throughout North America. The Company also provides its
customers with a market for, and a source of, used
equipment. The telecommunications portfolio includes
PBX systems, VSATs, voice mail, modems and bridges,
routers and concentrators. The Company also
reconditions and configures used systems.
Other: The Company buys, sells and leases new and used
point-of-sale terminals and leases other office
equipment such as fax machines and copiers, test
equipment such as oscillascopes, analyzers and testers
and laboratory equipment such as microscopes and
centrifuges.
5
The Company competes in the leasing marketplace as a lessor and as a dealer of
new and used computer and selected other high technology equipment. The Company
competes with different firms in each of its activities. The Company's
competition includes equipment manufacturers such as IBM, Hewlett Packard,
Amdahl, Hitachi Data Systems, AT&T, Rolm, Hitachi Medical Systems, Siemens
Medical Systems and General Electric, other equipment dealers, brokers and
leasing companies (including captive or related leasing companies of IBM, AT&T
and General Electric and others) as well as financial institutions, including
commercial banks and investment banking firms. While its competitive
methodologies will differ, in general, the Company competes mainly on the basis
of its expertise in remarketing equipment, terms offered in its transactions,
its reliability in meeting its commitments, its manufacturers' independence and
its ability to develop and offer alternative solutions and options to high
technology equipment users. The Company believes it is a full service lessor.
Primarily as a result of technological changes, competition has increased in the
leasing industry and the number of companies offering competitive services, such
as asset management and other high technology equipment leasing, has increased.
Competitive alliances have also impacted the leasing industry.
In mainframes the Company believes that it competes primarily with the
manufacturers and their captive or related leasing companies, if any, and with a
few other leasing companies. The Company also believes that, aside from IBM and
its captive leasing company, IBM Credit Corp., it is one of the largest
purchasers, sellers and lessors of IBM equipment. The Company does not believe
that a significant amount of used IBM equipment is sold independently by
owner-users of the equipment to other owner-users. The Company's continued
ability to compete effectively may be affected by policies of IBM.
In desktop, medical, electronics and telecommunications, the Company believes it
competes with the manufacturers and their captive leasing companies and
approximately five significant leasing companies, as well as banks and other
lessors and financial and lending institutions throughout the United States and
Canada. In its other services, the Company competes with manufactures and other
national and regional consulting and services organizations.
The Company's continued ability to compete is also affected by its ability to
attract and retain well qualified personnel and the availability of financing.
DISASTER RECOVERY SERVICES
These services include emergency data processing backup, principally for large
system users of IBM and IBM-compatible equipment, business (end user) recovery,
including workarea and voice recovery capabilities, consulting services in
business continuity planning, network services and data protection, as well as
other related data processing services, throughout the United States, Canada and
Europe. These services are designed to help minimize the impact of a significant
interruption of the operations of, or inaccessibility to, the customer's data
processing facility and/or communications network. The Company also provides
backup capabilities for Digital Equipment Corporation, IBM midrange processors,
Unisys, Hewlett Packard, Stratus, and Tandem System equipment users.
The Company believes that it competes with approximately two significant
domestic companies, IBM and SunGard Data Systems, Inc., as well as other
regional firms in the domestic, Canadian and European marketplace, which provide
contract disaster recovery services and that it is the largest international
provider of such services.
Through its network and facilities strategy entitled CDRS Net, the Company
offers customers access to its North American facilities, including a range of
data processing recovery services at hot sites, Customer Control Centers ("CCC")
and shell sites. Hot sites are equipped computer facilities that include central
processing units, peripherals and communications equipment. A CCC interfaces
customers to geographically separated hot sites by means of telecommunications
lines. Most facilities also include workarea, voice, and network capabilities.
Capabilities also include client/server platforms and midrange systems.
Of the Company's thirty-one locations, nine serve as data center recovery
environments providing hot site and/or shell site services. These nine regional
recovery centers serve major commercial centers, including New York, Chicago,
Northern and Southern California, Texas, Georgia, as well as a location in
Southern New Jersey that serves the Mid-Atlantic region and a center located in
Toronto, Canada. Each recovery center has at least one hot site or CCC and
6
includes telecommunications capabilities, conference rooms, office space,
support areas, and appropriate on-site technical personnel.
Item 2. Properties
The Company owns its principal executive office building in Rosemont, Illinois
that has approximately 269,000 square feet, and has pledged the property as part
of a mortgage agreement. The Company leases office space for sales offices in
various domestic and international locations. The Company's technical services
division utilizes a 250,000 square foot building owned by the Company in
Schaumburg, Illinois. This space is used primarily for refurbishing, maintenance
and equipment storage. The Company's disaster recovery services division
presently occupies eight recovery centers owned by the Company, including
151,000 square feet in Illinois, 34,000 square feet in Texas, 42,000 square feet
in Georgia, 56,000 square feet in Toronto, Canada, two recovery centers each in
New Jersey of 81,000 and 72,000 square feet, and California of 52,000 and 38,000
square feet. The Company's disaster recovery services division also leases
255,000, 14,000 and 10,000 square feet in New Jersey, Missouri, and Canada,
respectively. Existing Company-owned facilities can be enlarged and expanded as
required to support additional growth. The Company's disaster recovery services
division also owns and leases facilities in several European countries. The
Company's medical refurbishment subsidiary leases approximately 100,000 square
feet in Wood Dale, Illinois. The Company's electronic group leases approximately
35,000 square feet in San Jose, California, to be used primarily for
refurbishing, maintenance and equipment storage.
Item 3. Legal Proceedings
No material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the three
months ended September 30, 1995.
7
PART II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
STOCK SPLIT
On November 7, 1995, the Board of Directors authorized a three-for-two split of
the Company's common stock to be distributed on December 8, 1995, to holders of
record on November 17, 1995. Accordingly, all references in the Company's Annual
Report to Stockholders' for the year ended September 30, 1995 and the Company's
Annual Report on Form 10-K for the year ended September 30, 1995 to common share
data have been adjusted to reflect the split.
PRICE RANGE OF COMMON STOCK
Price Range of Common Stock on page 30 of the Annual Report to Stockholders
for the year ended September 30, 1995 is incorporated herein by reference.
COMMON STOCK REPURCHASE PROGRAM
During fiscal 1995, the company purchased 5,260,167 shares of its outstanding
common stock at an aggregate cost of $86 million. These purchases, when added to
the shares purchased in prior years, bring the total number of common shares
purchased to 24.1 million (1.5 million shares were issued upon conversion of a
6% convertible subordinated promissory note in fiscal 1995 and an additional 2.9
million shares were distributed as a common stock dividend on March 30, 1992),
at an aggregate cost of $283 million. At September 30, 1995, the company had a
remaining authorization of approximately $16 million to purchase common stock.
An additional 760,200 shares of common stock were purchased between September
30, 1995 and November 7, 1995 at a cost of $14 million. On November 7, 1995, the
Board of Directors authorized an additional $50 million for the company's stock
repurchase program.
SHAREHOLDER RIGHTS PLAN
On November 18, 1987, the Board adopted a shareholders rights plan and pursuant
thereto declared a dividend distribution of one Right for each outstanding share
of common stock of the Company to stockholders of record at the close of
business on November 27, 1987 (the "Record Date"). The shareholder rights plan
was amended and restated as of November 7, 1994. Each Right entitles the
registered holder under certain circumstances to purchase from the Company one
share of common stock at a Purchase Price of $63.49, subject to adjustment in
certain circumstances. The Purchase Price is to be paid in cash. The Rights
become exercisable if (i) a person or group (other than any holder of 20% or
more of the common stock on the Record Date and its successors) (an "Acquiring
Person") becomes the beneficial owner of 15% or more of the outstanding common
stock (and the Company does not redeem the Rights within 15 days thereafter),
(ii) a person or group makes a tender or exchange offer which upon consummation
would result in such person or group beneficially owning 15% or more of the
common stock (and the Company does not redeem the Rights within 15 days
thereafter) or (iii) the Board of Directors determines that a beneficial owner
of 10% or more of the common stock is an Adverse Person (as defined in the
Rights Agreement). Upon the occurrence of any such event, each Right (other than
those held by an Acquiring Person or Adverse Person) will become exercisable for
one share of common stock at an adjusted Purchase Price equal to 20% of the then
market price of the common stock. The terms of the Rights are set forth in the
amended and restated Rights Agreement, dated as of November 7, 1994 (the "Rights
Agreement"), between the Company and Chemical Bank, N.A. (formerly Manufacturers
Hanover Trust Company), as Rights Agent. The Rights Agreement and a related form
of the rights certificate is incorporated by reference to Exhibit 4.04 filed
with the Company's Current Report on Form 8-K, filed on December 6, 1994, File
No. 1-7725. The foregoing description of the shareholder rights plan does not
purport to be complete and is qualified in its entirety by reference to such
exhibit.
8
DIVIDENDS
The Company has paid cash dividends quarterly since February 1979. Cash
dividends paid on common stock were $13 million in both fiscal 1995 and 1994.
The most recently declared quarterly common stock cash dividend, $.07 per share,
was paid on December 8, 1995 to stockholders of record on November 17, 1995.
Subject to the prior right of the holders of the Series A and Series B Preferred
Stock, there are no restrictions on the Company's present or future ability to
pay common dividends, except its agreement to maintain a debt to net worth ratio
pursuant to, and certain other limitations contained in, the Company's
multi-option and global revolving credit agreements, none of which have any
current application. The Company expects to continue its policy of paying
regular cash dividends, although there is no assurance as to future dividends
because they are dependent upon the Company's profit levels and capital
requirements as well as financial and other conditions existing at the time.
Common stock cash dividends paid were $.24 per share in fiscal 1995 and $.23 per
share in fiscal 1994.
Item 6. Selected Financial Data
Six Year Summary on pages 24 and 25 of the Annual Report to Stockholders for the
fiscal year ended September 30, 1995 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 26 through 30 of the Annual Report to Stockholders for the
fiscal year ended September 30, 1995 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements and the accompanying Notes to Consolidated
Financial Statements on pages 31 through 47 of the Annual Report to Stockholders
for the fiscal year ended September 30, 1995 is incorporated herein by
reference. Quarterly Financial Data on page 46 of the Annual Report to
Stockholders for the fiscal year ended September 30, 1995 is incorporated herein
by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III.
Item 10. Directors and Executive Officers of Registrant
A description of Directors and Executive Officers of Registrant contained in the
Company's definitive Proxy Statement filed within one hundred twenty days of the
last day of the year ended September 30, 1995 is incorporated herein by
reference.
Item 11. Executive Compensation
A description of Executive Compensation contained in the Company's definitive
Proxy Statement filed within one hundred twenty days of the last day of the year
ended September 30, 1995 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
A description of Security Ownership of Certain Beneficial Owners and Management
contained in the Company's definitive Proxy Statement filed within one hundred
twenty days of the last day of the year ended September 30, 1995 is incorporated
herein by reference.
9
Item 13. Certain Relationships and Related Transactions
A description of Certain Relationships and Related Transactions contained in the
Company's definitive Proxy Statement filed within one hundred twenty days of the
last day of the year ended September 30, 1995 is incorporated herein by
reference.
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a)(1) and (a)(2) Certain Documents Filed as Part of the Form 10-K:
The financial statements, including supporting
schedules, listed in the Index to Financial
Statements and Financial Statement Schedule
are filed as part of this Form 10-K on page 12.
(a)(3) Exhibits:
See Index to Exhibits filed as part of this Form 10-K
on pages 15 through 19.
(b) Reports on Form 8-K:
On November 27, 1995, the Company filed a current
report on Form 8-K, dated November 7, 1995, reporting
Item 5. Other Events and Item 7. Financial Statements
and Exhibits. The filing was for the Company's
announcement of fourth quarter and fiscal 1995
results of operations and included the Company's
press release dated November 7, 1995.
(c) Exhibits:
Included in Item (a)(3) above.
(d) Financial Statement Schedules Required by Regulation S-X:
Included in Item (a)(1) and (a)(2) above.
The Registrant hereby undertakes to furnish to the Commission any instrument
with respect to long-term debt of the Registrant which does not exceed 10
percent of the total assets of the Registrant and its subsidiaries.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
COMDISCO, INC.
DATE: December 20, 1995 By: /s/ David J. Keenan
David J. Keenan
Vice President and
Corporate Controller
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ John F. Slevin
John F. Slevin
Chief Executive Officer ______________________
(Principal Executive Officer), Philip A. Hewes
President and Director Director
/s/ John J. Vosicky /s/ Alan J. Andreini
John J. Vosicky Alan J. Andreini
Chief Financial Officer (Principal Director
Financial Officer), Treasurer
and Director
/s/ David J. Keenan /s/ William N. Pontikes
David J. Keenan William N. Pontikes
Vice President (Principal Accounting Officer) Director
and Corporate Controller
__________________________ /s/ Nicholas K. Pontikes
Robert A. Bardagy Nicholas K. Pontikes
Director Director
/s/ Edward H. Fiedler, Jr. /s/ Rick Kash
Edward H. Fiedler, Jr. Rick Kash
Director Director
/s/ C. Keith Hartley /s/ Basil R. Twist, Jr.
C. Keith Hartley Basil R. Twist, Jr.
Director Director
_________________________
Thomas H. Patrick
Director Each of the above signatures is
affixed as of December 20, 1995
11
Comdisco, Inc. and Subsidiaries
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements and notes to consolidated
financial statements of Comdisco, Inc. and Subsidiaries and related Independent
Auditors' Report, included in the Registrant's Annual Report to Stockholders for
the fiscal year ended September 30, 1995, are incorporated by reference in Item
8:
Annual Report
Page Number
-------------
Consolidated Statements of Earnings --
Years Ended September 30, 1995, 1994 and 1993.................... 31
Consolidated Balance Sheets -- September 30, 1995 and 1994......... 32
Consolidated Statements of Stockholders' Equity --
Years Ended September 30, 1995, 1994 and 1993.................... 33
Consolidated Statements of Cash Flows --
Years Ended September 30, 1995, 1994 and 1993.................... 34-35
Notes to Consolidated Financial Statements......................... 36 - 47
Independent Auditors' Report....................................... 48
The following consolidated financial statement schedule of Comdisco, Inc. and
Subsidiaries is included in Item 14(d):
Form 10-K
Page Number
-----------
Schedule II -- Valuation and Qualifying Accounts.................. 14
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
12
[KPMG Peat Marwick LLP Letterhead]
Independent Auditors' Report
The Board of Directors and Stockholders
Comdisco, Inc.:
Under date of November 7, 1995, we reported on the consolidated balance sheets
of Comdisco, Inc. and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1995,
as contained in the 1995 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended September 30, 1995. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related consolidated financial statement schedule as listed in
the accompanying index. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/KPMG PEAT MARWICK LLP
Chicago, Illinois
November 7, 1995
13
Comdisco, Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended September 30, 1995
(in millions)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end
Description of period expenses Other of period
------------------------------ ---------- ---------- ----- ----------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1993:
Allowance for
doubtful accounts $21 $10 $(18)<F1> $13
=== === ==== ===
Litigation reserve $15 $ - $ (9) $ 6
=== === ==== ===
YEAR ENDED SEPTEMBER 30, 1994:
Allowance for
doubtful accounts $13 $10 $(13)<F1> $10
=== === ==== ===
Litigation reserve $ 6 $10 $(13) $ 3
=== === ==== ===
YEAR ENDED SEPTEMBER 30, 1995:
Allowance for
doubtful accounts $10 $12 $ (5)<F1> $17
=== === ==== ===
Litigation reserve $ 3 $ - $ - $ 3
=== === ==== ===
<FN>
<F1> Write off of receivables net of recoveries.
</FN>
</TABLE>
14
Comdisco, Inc. and Subsidiaries
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
---------- ---------------------------------------------------------
3.01 Restated Certificate of Incorporation of Registrant dated
February 12, 1988
Incorporated by reference to Exhibit 4.1 filed
with the Company's Registration Statement on
Forms S-8 and S-3, File No. 33-20715, filed March
8, 1988.
3.02 Certificate of Designations with respect to the Company's
8 3/4% Cumulative Preferred Stock, Series A, as filed
with the Secretary of State of Delaware on September 18,
1992
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K
dated September 17, 1992, as filed with the
Commission October 9, 1992, File No. 1-7725.
3.03 Certificate of Designations with respect to the Company's
8 3/4% Cumulative Preferred Stock, Series B, as filed
with the Secretary of State of the State of Delaware on
July 2, 1993
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K
dated June 30, 1993, as filed with the Commission
July 21, 1993, File No. 1-7725.
3.04 By-Laws of Registrant as amended through November 18,1987
Incorporated by reference to Exhibit 3.5 filed
with the Company's Annual Report for the year
ended September 30, 1987 on Form 10-K, File No.
1-7725.
4.01 Indenture Agreement between Registrant and Citibank,N.A.,
as Trustee dated as of June 15, 1992
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K
dated September 1, 1992, as filed with the
Commission on September 2, 1992, File No. 1-7725,
the copy of Indenture, dated as of June 15, 1992,
between Registrant and Citibank, N.A., as Trustee
(said Indenture defines certain rights of
security holders).
4.02 Indenture Agreement between Registrant and Chemical
Bank, N.A., as Trustee, dated as of April 1, 1988
Incorporated by reference to Exhibit 4.5 filed
with the Company's Form 8 dated February 21,
1991, File No. 1-7725, the copy of Indenture
dated as of April 1, 1988, between Registrant and
Manufacturers Hanover Trust Company (said
Indenture defines certain rights of security
holders).
4.03 First Supplemental Indenture between Registrant and
Chemical Bank, N.A., as Trustee, dated as of
January 1, 1990
Incorporated by reference to Exhibit 4.8 filed
with the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1990, File No.
1-7725, the copy of the First Supplemental
Indenture dated as of January 1, 1990, between
Registrant and Manufacturers Hanover Trust
Company, as Trustee (said Indenture defines
certain rights of security holders).
15
Exhibit No. Description of Exhibit
------------- --------------------------------------------------------
4.04 Shareholder Rights Agreement, dated as of November 18,
1987, as amended and restated as of November 7, 1994,
between Comdisco, Inc. and Chemical Bank, as Rights
Agent, which includes as Exhibit A thereto the Form of
Rights Certificate.
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K,
filed on December 6, 1994, File No. 1-7725.
4.05 Indenture Agreement between Registrant and The Fuji Bank
and Trust Company, as Trustee, dated as of
February 1, 1995
Incorporated by reference to Exhibit 4.1 filed
with the Company's Current Report on Form 8-K
dated May 15, 1995, as filed with the Commission
on May 15, 1995, File No. 1-7725, the copy of
the Indenture dated as of February 1, 1995
between the Registrant and The Fuji Bank and
Trust Company, as Trustee (said Indenture
defines certain rights of security holders).
10.01 Employment Agreement with John F. Slevin dated
October 20, 1994
Incorporated by reference to Exhibit 10.01 filed
with the Company's Annual Report for the year
ended September 30, 1994 on Form 10-K, File
No. 1-7725.
10.02 Amendment to Employment Agreement dated September 29,1995
10.03 1979 Stock Option Plan of the Registrant
Incorporated by reference to Exhibit 10.3 filed
with the Company's Annual Report for the year
ended September 30, 1982 on Form 10-K, File No.
1-7725.
10.04 1981 Stock Option Plan of the Registrant
Incorporated by reference to Exhibit 10.4 filed
with the Company's Annual Report for the year
ended September 30, 1982 on Form 10-K, File No.
1-7725.
10.05 Amendment to 1979 and 1981 Stock Option Plans of the
Registrant dated December 15, 1986
Incorporated by reference to Exhibit 10.6 filed
with the Company's Annual Report for the year
ended September 30, 1987 on Form 10-K, File No.
1-7725.
10.06 1987 Stock Option Plan of the Registrant
Incorporated by reference to Exhibit 10.7 filed
with the Company's Annual Report for the year
ended September 30, 1988 on Form 10-K, File No.
1-7725.
10.07 Amendment to 1979, 1981 and 1987 Stock Option Plans of
the Registrant dated November 4, 1987
Incorporated by reference to Exhibit 10.9 filed
with the Company's Annual Report for the year
ended September 30, 1987 on Form 10-K, File No.
1-7725.
16
Exhibit No. Description of Exhibit
-------------- ---------------------------------------------------------
10.08 1989 Non-Employee Director Stock Option Plan.
Incorporated by reference to Exhibit 10.11 filed
with the Company's Annual Report for the year
ended September 30, 1990 on Form 10-K, File No.
1-7725.
10.09 1991 Stock Option Plan
Incorporated by reference to Exhibit 10.08 filed
with the Company's Annual Report for the year
ended September 30, 1992 on Form 10-K, File No.
1-7725.
10.10 1992 Long-Term Stock Ownership Incentive Plan
Incorporated by reference to Exhibit 10.09 filed
with the Company's Annual Report for the year
ended September 30, 1992 on Form 10-K, File No.
1-7725
10.11 Comdisco, Inc. Employee Stock Purchase Plan
Incorporated by reference to Exhibit 15 to the
Company's Registration Statement on Form S-8
filed on March 19, 1982 and Post-Effective
Amendment filed December 21, 1982, File No.
2-76569.
10.12 Management Compensation Arrangements and Plans
10.13 Purchase/Sale Agreement - Riverway Project
Incorporated by reference to Exhibit 10.1 filed
with the Company's Form 10-Q dated March 31,
1988, File No. 1-7725.
10.14 Financing Agreement - Riverway Project
Incorporated by reference to Exhibit 10.18 filed
with the Company's Annual Report for the year
ended September 30, 1988 on Form 10-K, File No.
1-7725.
10.15 Facility agreement dated December 30, 1994 and
made between Comdisco, Inc. National Westminster
Bank PLC, Barclays Bank PLC and the banks thereto
Incorporated by reference to Exhibit 10.01 filed
with the Company's Current Report on Form 8-K,
filed February 15, 1995, File No. 1-7725.
10.16 Revolving Credit Facility dated December 30, 1994 between
the Company and National Westminster Bank PLC as arranger
and administrative agent, the Co-Agents (as defined
therein) and the Banks (as defined therein)
Incorporated by reference to Exhibit 10.01 filed
with the Company's Current Report on Form 8-K,
filed February 15, 1995, File No. 1-7725.
10.17 Note Agreement dated as May 31, 1991
Incorporated by reference to Exhibit 10.23 filed
with the Company's Annual Report for the year
ended September 30, 1992 on Form 10-K, file No.
1-7725.
17
Exhibit No. Description of Exhibit
----------- --------------------------------------------------------
10.18 Third Amended and Restated Global Credit Agreement by and
among Comdisco, Inc., Citibank, N.A. and Nationsbank
of North Carolina, N.A. as Co-agents and Co-arrangers
and the Financial Institutions Party thereto dated as of
December 20, 1994
Incorporated by reference to Exhibit 10.01 filed
with the Company's Current Report on Form 8-K,
filed February 15, 1995, File No. 1-7725.
10.19 Credit Agreement by and among Comdisco, Inc., Citibank,
N.A. and Nationsbank of North Carolina, N.A. as
Co-agents and Co-arrangers and the Financial Institutions
Party thereto dated as of December 20, 1994
Incorporated by reference to Exhibit 10.01 filed
with the Company's Current Report on Form 8-K,
filed February 15, 1995, File No. 1-7725.
10.20 Purchase Agreement dated January 27, 1995 by and among
Computer Discount Corporation, Nicholas K. Pontikes,
as executor of the Estate of Kenneth N. Pontikes, and
Nicholas K. Pontikes as trustee of the Pontikes Trust
Incorporated by reference to Exhibit 2 to
Amendment No. 2 to Schedule 13-D filed by
Nicholas K. Pontikes, the Pontikes Trust and the
Ponchil Limited Partnership, dated as of January
27, 1995 and filed with the Commission on
February 2, 1995, File No.
1-7725.
10.21 Agreement and Plan of Dissolution of NBB Oil & Gas
Partners (U.S.A.) among Comdisco, Inc. and Comdisco
Exploration, Inc. and Comdisco Resources, Inc. and NBB
Energy Partners I, L.P.
Incorporated by reference to Exhibit 10.24 filed
with the Company's Annual Report for the year
ended September 30, 1994 on Form 10-K, File No.
1-7725.
10.22 Exchange Agreement among NBB Oil & Gas Partners (USA)
Incorporated by reference to Exhibit 10.25 filed
with the Company's Annual Report for the year
ended September 30, 1994 on Form 10-K, File No.
1-7725.
11.00 Computation of Earnings Per Share
12.00 Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends
13.00 Annual Report to Security Holders
Six Year Summary, Management's Discussion and
Analysis of Financial Condition and Results of
Operations, and the Consolidated Financial
Statements on pages 24 through 47 and the
Quarterly Financial Data on page 46 and the
Independent Auditors' Report on page 48 of the
Annual Report to security holders for the fiscal
year ended September 30, 1995 have been
incorporated by reference as part of this Form
10-K.
21.00 Subsidiaries of Registrant
23.00 Consent of KPMG Peat Marwick LLP dated December 20, 1995
18
Exhibit No. Description of Exhibit
----------- -------------------------------------------------
27.00 Financial Data Schedule
19
Exhibit 10.02
AMENDMENT TO EMPLOYMENT AGREEMENT
The Compensation Committee of the Board of Directors has reviewed and
approved the following amendments to the Employment Agreement dated as of
October 20, 1994 between Comdisco, Inc. and John F. Slevin, which amendments
include a grant of Performance Units by the Committee of the Comdisco, Inc. 1992
Long-Term Stock Ownership Incentive Plan (the "92 Plan").
1. SALARY
The fixed salary as set forth in Section 3 of the Employment Agreement
shall be increased from $433,000 to $550,000 per year.
2. INCENTIVE COMPENSATION
The incentive compensation as set forth in Section 4 of the Employment
Agreement shall be revised as follows for the 1996 fiscal year:
(i) one percent (1%) of Comdisco's fiscal 1996 pre-tax earnings between
$130 million and $175 million, and (ii) two percent (2%) of pre-tax earnings in
excess of $175 million.
As an example, if Comdisco has pre-tax earnings of $180,000,000 in
fiscal 1996, the annual incentive compensation shall be $550,000.
3. ANNUAL STOCK OPTION INCENTIVE
If Comdisco achieves its 1996 Pre-Tax Earnings of $100 million, you
will also be entitled to a stock option grant of 11,658 shares at the closing
price on September 30, 1996. These options would vest at the rate of 33.3% per
year over a three year term.
If the Pre-Tax Earnings achieved is more than $100 million, then the
number of shares granted will be based on the percentage of (i) the Pre-Tax
Earnings achieved divided by (ii) the Pre-Tax Earnings of $100 million.
Notwithstanding the foregoing, there shall be a cap of 20,984 options to be
awarded under this section.
4. LONG-TERM PERFORMANCE UNIT GRANT
The Committee of the 92 Plan hereby awards you with 366 Performance
Units.
a. Performance Objective and Performance Period
The Committee has set a target Performance Objective that Comdisco's
"Total Shareholder Return" (as defined below) be ranked at or above the 50th
percentile of the Total Shareholder Return of all companies contained in the S&P
500 for the period running from October 2, 1995 through September 30, 1998 (the
"Performance Period").
"Total Shareholder Return" is defined as the sum of the stock price
appreciation plus dividends (reinvested) through the Performance Period.
b. Determination of Performance Unit Value
The actual Performance Unit Value will be determined based upon
Comdisco's Total Shareholder Return over the Performance Period. The target
Performance Unit Value has been set at $500. The actual Performance Unit Value
will be determined by multiplying the target Performance Unit Value times the
Performance Percentage specified in the following table:
TSR % Rank Performance Target Unit Actual Unit
in S&P 500 % x Value = Value
---------- ----------- ----------- -----------
below 50th 0% $500 = $ 0
50th 100% 500 500
55 150 500 750
60 200 500 1,000
65 260 500 1,300
70 320 500 1,600
75 390 500 1,950
80 460 500 2,300
85 530 500 2,650
90+ 600 500 3,000
c. Method of Distribution
Within 15 days of the date of this Agreement, you must decide upon one
of the following distribution methods by signing the Election Statement attached
hereto:
i. Cash Distribution - You may elect to have 100% of the actual
Performance Unit Value paid in cash (less applicable taxes).
ii. Restricted Stock - You may elect to have 100% of the actual
Performance Unit Value paid in the form of Restricted Stock.
In such event, the actual Performance Unit Value will be
multiplied by 120% and the product thereof will be used to
acquire Restricted Stock based on the closing price of
Comdisco's stock on September 30, 1998.
d. Restrictions
The Performance Unit Award is conditioned upon (i) your continuing as
an employee throughout the Performance Period and (ii) if you have elected to
receive Restricted Stock, your continuing as an employee for an additional one
year beyond the Performance Period. The effects of a termination of employment
within these periods are set forth in Section 14 of the 92 Plan.
e. Exercise of Performance Units
Performance Units may be exercised by delivery to the Secretary of
Comdisco of written notice of intent to exercise a specific number of
Performance Units.
f. Incorporation of 92 Plan Provisions
This award of Performance Units shall incorporate the terms and
conditions of the 92 Plan.
g. Acceptance
By execution of the attached Election Statement, you accept the terms
and conditions of this Performance Unit Grant.
5. CASH TO OPTION CONVERSION ALTERNATIVE.
Within 15 days of the date of this Agreement, you may elect to convert
cash compensation into stock options. You may elect to convert cash compensation
paid under Base Salary (Section 3 of the Employment Agreement), Annual Cash
Incentive (Section 4 of the Employment Agreement) and Long-Term Performance
Units into stock options on a one for two basis. You must elect to forego cash
compensation equally from the above three sources in $1,000 increments. For each
$1,000 foregone, you will receive stock options with an "option value" of
$2,000.
If you make this election, you will receive a stock option grant at the
closing price of Comdisco stock on the date the election notice is received. The
following example will illustrate this alternative.
September 29, 1995
- Election to forego $10,000 each from Salary, Annual Cash
Incentive and Performance Units
- Comdisco stock closes at $30.00
- $30,000 foregone x 2 = $60,000
- Option Value = $30.00/3 = $10.00
- $60,000/$10.00 = 6,000 options granted at $30.00
- Vests at 20% per year commencing 9/30/96
This agreement shall not be construed to give you any employment
rights.
Dated this 29th day of September, 1995.
/s/ Keith Hartley /s/ Jack Slevin
On behalf of the Committee Jack Slevin
ELECTION STATEMENT
The undersigned hereby acknowledges receipt of the Amendment to
Employment Agreement, a copy of the 1992 Long-Term Stock Ownership Incentive
Plan, and copies of Comdisco's latest financial statements.
Performance Unit Method of Distribution
Pursuant to Section 4, I elect the following method of distribution for
any Performance Units:
i) Cash Distribution ___________
please initial
ii) Restricted Stock ___________
please initial
Cash to Option Conversion Alternative
Pursuant to Section 5, I elect to convert the following cash
compensation components into stock options:
Base Salary $50,000
Annual Cash Incentive $50,000
Performance Units $50,000
By:_________________________
Jack Slevin
Date: _______________________
MANAGEMENT COMPENSATION ARRANGEMENTS AND PLANS Exhibit 10.11
COMPENSATION AND BENEFITS
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to
compensation for services in all capacities paid by Comdisco and its
subsidiaries for the past three years, to or on behalf of (i) Jack Slevin,
President and Chief Executive Officer, and (ii) each of the four other most
highly compensated executive officers of Comdisco serving at September 30, 1995.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------- -------
SECURITIES LONG-
RESTRICTED UNDERLYING TERM ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS INCENTIVE COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS (SHARES) PAYOUTS <F1><F2>
------------------ ---- -------- -------- --------------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Slevin 1995 $400,000 $401,000 $-0- $-0- 132,979 $-0- $6,074
President and CEO 1994 350,000 450,000 -0- -0- 187,500 -0- 5,643
1993 150,000 650,000 -0- -0- -0-
Alan J. Andreini 1995 200,000 200,000 -0- -0- 211,905 -0- 43,392<F3>
Executive Vice President 1994 225,000 275,800 -0- -0- -0- -0- 5,643
1993 150,000 300,000 -0- -0- -0-
Robert A. Bardagy 1995 365,000 365,000 -0- -0- 52,746 -0- 6,074
Executive Vice President 1994 350,000 509,000 -0- -0- -0- -0- 5,643
1993 200,000 663,500 -0- -0- -0-
Nicholas K. Pontikes 1995 230,000 230,000 -0- -0- 68,307 -0- 6,074
Executive Vice President 1994 200,000 385,000 -0- -0- 37,500 -0- 5,643
1993 137,500 -0- -0- -0- -0-
John J. Vosicky 1995 235,000 235,000 -0- -0- 53,364 -0- 6,074
Executive Vice President
and 1994 225,000 276,000 -0- -0- -0- -0- 5,643
Chief Financial Officer 1993 150,000 300,000 -0- -0- -0-
--------
<FN>
<F1>In accordance with the revised rules on executive officer and director
compensation disclosure adopted by the SEC, amounts of Other Annual
Compensation and All Other Compensation are excluded for Comdisco's 1993
fiscal year.
<F2>Amounts of All Other Compensation are amounts contributed by Comdisco for
fiscal 1995 and 1994 under Comdisco's Profit Sharing and Employee Stock
Ownership Plans for the persons named above.
<F3>Includes $6,074 in Comdisco contributions to retirement plans as outlined in
footnote (2) above and $37,318 paid pursuant to the terms of the Comdisco
Financial Services, Inc. Residual Incentive Compensation Plan as described
in the Other Transactions Section above.
</FN>
</TABLE>
8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to grants of
stock options made to named executive officers during the fiscal year ended
September 30, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------- -----------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE GRANT
SARS GRANTED TO OR BASE DATE
GRANTED EMPLOYEES IN PRICE MARKET EXPIRATION
NAME (#) FISCAL YEAR ($/SH) PRICE DATE 0% 5% 10%
---- ---------- ------------ -------- ------ ---------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Slevin 15,367 .7% $13.67 $13.67 10/17/04 $ 0 $ 132,082 $ 334,722
44,550 2.1% $13.33 $13.33 09/30/04 $ 0 $ 364,296 $ 917,987
27,699 1.3% $19.83 $19.83 09/28/05 $ 0 $ 345,372 $ 875,172
45,363 2.1% $19.83 $19.83 09/28/05 $ 0 $ 565,620 $ 1,433,280
Alan J. Andreini 8,122 .4% $13.67 $13.67 10/17/04 $ 0 $ 69,812 $ 176,917
67,500 3.1% $13.33 $13.33 09/30/04 $ 0 $ 551,963 $ 1,390,890
75,000 3.5% $13.33 $13.33 12/12/04 $ 0 $ 628,895 $ 1,593,742
15,919 .7% $19.83 $19.83 09/28/05 $ 0 $ 198,496 $ 502,989
45,363 2.1% $19.83 $19.83 09/28/05 $ 0 $ 565,620 $ 1,433,280
Robert A. Bardagy 15,367 .7% $13.67 $13.67 10/17/04 $ 0 $ 132,082 $ 334,722
13,500 .6% $13.33 $13.33 09/30/04 $ 0 $ 110,393 $ 278,178
23,878 1.1% $19.83 $19.83 09/28/05 $ 0 $ 297,735 $ 754,460
Nicholas K. Pontikes 7,243 .3% $13.67 $13.67 10/17/04 $ 0 $ 62,257 $ 157,772
27,000 1.2% $13.33 $13.33 09/30/04 $ 0 $ 220,785 $ 556,356
15,919 .7% $19.83 $19.83 09/28/05 $ 0 $ 198,496 $ 502,989
18,144 .8% $19.83 $19.83 09/28/05 $ 0 $ 226,233 $ 573,274
John J. Vosicky 8,122 .4% $13.67 $13.67 10/17/04 $ 0 $ 69,812 $ 176,917
20,250 .9% $13.33 $13.33 09/30/04 $ 0 $ 165,589 $ 417,267
15,919 .7% $19.83 $19.83 09/28/05 $ 0 $ 198,496 $ 502,989
9,072 .4% $19.83 $19.83 09/28/05 $ 0 $ 113,117 $ 286,637
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUE
The following table sets forth information with respect to the named executive
officers in the Summary Compensation Table concerning the exercise of options
during the last fiscal year and unexercised options held as of the end of the
fiscal year.
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES TOTAL VALUE OF
NUMBER OF UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
SHARES OPTIONS HELD AT OPTIONS HELD AT
ACQUIRED SEPTEMBER 30, 1995 SEPTEMBER 30, 1995<F1>
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Slevin............. 21,813 $144,521 46,999 327,556 $347,744 $1,964,017
Alan J. Andreini........ 0 0 45,393 252,442 283,078 1,391,757
Robert A. Bardagy....... 0 0 32,625 104,871 207,062 673,254
Nicholas K. Pontikes.... 0 0 5,400 100,407 35,100 566,318
John J. Vosicky......... 9,450 87,444 93,037 104,139 665,244 663,676
--------
<FN>
<F1>Based on the closing price of the Common Stock on September 29, 1995,
$19.83, as adjusted for the Stock Split.
</FN>
-------
</TABLE>
LONG TERM INCENTIVE PLAN ("LTIP") AWARDS
The following table sets forth information with respect to the named executive
officers concerning the grants of Performance Unit Awards under the Comdisco,
Inc. 1992 Long-Term Stock Ownership Incentive Plan during the fiscal year ended
September 30, 1995. The target performance objective is
9
that Comdisco's Total Shareholder Return, as hereinafter defined, be ranked at
or above the 60th percentile of the Total Shareholder Return of all companies in
the S&P 500 for the period running from October 3, 1994 through September 30,
1997. The minimum performance objective is a 50th percentile ranking. If the
actual ranking is less than the 50th percentile, then no compensation will be
paid under these awards.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
NON-STOCK PRICE-BASED PLANS
---------------------------
(A) (B) (C) (D) (E) (F)
-------------------------- ------ ------------------ --------- -------- --------
PERFORMANCE OR
NUMBER OTHER PERIOD UNTIL
OF MATURATION OR
NAME UNITS PAYMENT THRESHOLD TARGET MAXIMUM
---- ------ ------------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Jack Slevin............... 288 September 30, 1997 $144,000 $288,000 $864,000
Alan J. Andreini.......... 166 September 30, 1997 $ 83,000 $166,000 $498,000
Robert A. Bardagy......... 250 September 30, 1997 $125,000 $250,000 $750,000
Nicholas K. Pontikes...... 166 September 30, 1997 $ 83,000 $166,000 $498,000
John J. Vosicky........... 166 September 30, 1997 $ 83,000 $166,000 $498,000
</TABLE>
COMPENSATION COMMITTEE REPORT
ROLE OF THE COMMITTEE
In 1993, the Board of Directors defined the scope of authority that would be
delegated to the non-employee Directors who serve as members of the Compensation
Committee. Overall direction was given to this Committee to review and approve
the Company's compensation policies to ensure that executive officers are
rewarded appropriately for their contributions to Comdisco's growth and
profitability and to ensure that compensation policies support Comdisco's
business objectives, organization structure, culture and stockholder interests.
Specific direction was given to determine the compensation of the Chief
Executive Officer and to review and approve the compensation of the executive
officers of the Company.
COMPENSATION STRATEGY
During fiscal year 1995, the Compensation Committee has continued to evaluate
Comdisco's compensation plans in accordance with the Committee's previously
announced objectives of linking compensation to profit measures and stockholder
value. The senior management team continues to be compensated in the following
manner as originally suggested by outside compensation consultants in 1994. The
total compensation for the Chief Executive Officer and certain Executive
Officers is comprised of the following components: (i) base salary, (ii) annual
incentive (cash and stock options) based on Company pre-tax earnings objectives
and (iii) long term performance units based on Total Shareholder Return
objectives. Each of the foregoing components constituted approximately one-third
of the executive's total compensation. Thus over two-thirds of the executive's
compensation is subject to both Company performance and stockholder returns.
TAX CONSIDERATIONS
The Compensation Committee has continued to monitor legislation which was
enacted in 1993 that precludes a publicly held corporation from taking a
deduction for compensation in excess of $1 million paid to its chief executive
officer and its four other highest paid executive officers. Certain qualified
performance based compensation is exempt from this deduction limit. In order to
attempt to meet the deductibility requirements, the Company is seeking
stockholder approval of the 1995 Long-Term Stock Ownership Incentive Plan and
approval of certain performance goals to be established for the award of
Performance Units thereunder. Assuming the receipt of such approvals, it is
expected that most, if not all, compensation paid to the executive officers will
qualify as a tax deductible expense.
10
Notwithstanding the foregoing, the Compensation Committee believes that the
new tax law requirements may not always be consistent with sound executive
compensation principles. To achieve full tax deductibility, the tax law
requirements do not allow the flexibility or discretion to respond to changing
market conditions, to utilize subjective performance factors or to reward
extraordinary performance of an unforseen type. Therefore, the Compensation
Committee reserves the right to approve nondeductible compensation based upon
the circumstances at the time.
1995 CHIEF EXECUTIVE OFFICER COMPENSATION
Jack Slevin's compensation package for fiscal 1995 reflects the Committee's
strategy of placing a majority of the compensation at risk subject to the
attainment of pre-tax earnings goals and longer-term Total Shareholder Return
goals. The Company has an employment agreement with Mr. Slevin which provided
for a base salary of $433,000 for fiscal 1995. Annual cash incentive
compensation for Mr. Slevin was equal to 1% of Comdisco's 1995 fiscal year
pre-tax earnings between $125 million and $170 million and 2% of pre-tax
earnings in excess of $170 million. The Committee also approved a discretionary
annual cash incentive payment of $4,000 based upon Mr. Slevin's positive
contributions during the last year. The amount of annual cash incentive payments
can be found in the Summary Compensation Table. Mr. Slevin's employment
agreement also provided for an annual stock option award which was contingent
upon the attainment of pre-tax earnings objectives for fiscal 1995. In
accordance with the terms of the award, Mr. Slevin received 88% of the award
which equaled 27,699 option shares at $19.83 (the closing price of Comdisco's
Common Stock on September 29, 1995, as adjusted for the Stock Split). For the
long term perspective, Mr. Slevin was granted 288 Performance Units under the
Comdisco, Inc. 1992 Long-Term Stock Ownership Incentive Plan. The performance
period and performance objectives are set forth in the Long-Term Incentive Plan
("LTIP") Awards section above. To further align Mr. Slevin's interests with
those of the Company's stockholders, the Committee offered Mr. Slevin the right
to forego cash compensation in exchange for stock options. Under this
"Cash-to-Option Alternative" Mr. Slevin elected to forego $99,000 in cash
compensation. In return, Mr. Slevin received a stock option to acquire 44,550
shares at the closing price of Comdisco's Common Stock on the date such election
was made ($19.83).
1995 EXECUTIVE OFFICER COMPENSATION
During fiscal year 1995, the Company entered into incentive compensation
agreements with certain of its executive officers. The agreements included the
following elements: base salary; annual bonus based on the Company meeting its
pre-tax earnings objectives; Performance Units to be paid if the Company meets 3
year total shareholder return goals; and stock options to be granted if the
Company met its annual pre-tax earnings objectives. The executive officers also
participated in the "Cash-to-Option Alternative" under which they had the right
to forego cash compensation in exchange for stock options.
This report has been provided by C. Keith Hartley, Rick Kash, and Thomas H.
Patrick, the members of the Compensation Committee.
Comdisco, Inc. and Subsidiaries Exhibit 11.00
COMPUTATION OF EARNINGS PER SHARE
(in millions except per share data)
Average shares used in computing earnings per common and common equivalent share
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Average shares outstanding 71 71 71 71 71
Effect of dilutive options 2 1 - - 2
Treasury stock (18) (14) (11) (9) (11)
----- ---- ----- ----- -----
Total 55 58 60 62 62
===== ==== ===== ===== =====
Earnings from continuing
operations before extraordinary items
and cumulative effect of change in
accounting principle, net of
preferred dividends $ 96 $ 44 $ 80 $ 20 $ 83
Loss from
discontinued operations
(net of income taxes) - -- (20) - (14)
Extraordinary items
(net of income taxes) - - - (29) -
Cumulative effect of change in
accounting principle - - 20 - -
----- ---- ---- ----- ----
Net earnings (loss)
to common stockholders $ 96 $ 44 $ 80 $ (9) $ 69
===== ==== ==== ===== ====
Net earnings (loss) per
common and common
equivalent share:
Earnings from continuing
operations $1.73 $.77 $1.31 $ .33 $1.35
Loss from
discontinued operations - - (.33) - (.23)
Extraordinary items - - - (.47) -
Cumulative effect of change in
accounting principle - - .33 - -
----- ---- ----- ----- -----
Net earnings (loss) to common
stockholders $1.73 $.77 $1.31 $(.14) $1.12
===== ==== ===== ===== =====
</TABLE>
On November 7, 1995, the Board of Directors authorized a three-for-two split of
the Company's common stock to be distributed on December 8, 1995, to holders of
record on November 17, 1995. On March 30, 1992, a 5% common stock dividend was
distributed to common stockholders of record as of March 12, 1992. All data with
respect to earnings per common share, dividends per common share, and weighted
average number of common shares outstanding has been retroactively adjusted to
reflect the three-for-two split and the common stock dividend.
Comdisco, Inc. and Subsidiaries Exhibit 12.00
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(dollars in millions)
<TABLE>
<CAPTION>
For the years ended September 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed charges
Interest expense<F1> $278 $266 $295 $355 $371
Approximate portion of
rental expense representative
of an interest factor 11 13 22 29 37
---- ---- ---- ---- ----
Fixed charges 289 279 317 384 408
Preferred stock dividends<F2> 13 15 11 - -
---- ---- ---- ---- ----
Combined fixed charges and preferred
stock dividends 302 294 328 384 408
Earnings from continuing operations before income taxes,
extraordinary items and cumulative effect of change in
accounting principle, net of preferred
stock dividends 160 80 137 34 136
---- ---- ---- ---- ----
Earnings from continuing operations before income taxes,
extraordinary items, cumulative effect of change in
accounting principle and combined fixed
charges and preferred stock dividends $462 $374 $465 $418 $544
==== ==== ==== ==== ====
Ratio of earnings to combined
fixed charges and preferred
stock dividends 1.53 1.27 1.42 1.09 1.33
==== ==== ==== ==== ====
Rental expense:
Equipment subleases $22 $ 30 $ 57 $ 77 $103
Office space, furniture, etc. 10 8 8 10 9
---- ---- ---- ---- ----
Total $ 32 $ 38 $ 65 $ 87 $112
==== ==== ==== ==== ====
1/3 of rental expense $ 11 $ 13 $ 22 $ 29 $ 37
==== ==== ==== ==== ====
<FN>
<F1> Includes interest expense incurred by disaster recovery services and
included in disaster recovery expense on the consolidated statements of
earnings.
<F2> There were no preferred stock dividend requirements for fiscal years 1991
and 1992.
</FN>
</TABLE>
Comdisco, Inc. and Subisidiaries
Six-Year Summary
(in millions except per share data)
Years ended September 30, 1995, 1994, 1993, 1992, 1991 and 1990
<TABLE>
<CAPTION>
95 94 93 92 91 90
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF EARNINGS
Revenue
Leasing $1,573 $1,538 $1,583 $1,662 $1,633 $ 1,465
Sales 358 271 313 311 360 319
Disaster recovery 267 242 216 193 150 118
Other 42 47 41 39 31 18
------ ------ ------ ------ ------ ------
Total revenue 2,240 2,098 2,153 2,205 2,174 1,920
Costs and expenses
Leasing 1,023 1,004 1,040 1,094 1,026 884
Sales 304 225 275 274 313 279
Disaster recovery 238 224 206 175 132 104
Selling, general and administrative 233 213 197 198 201 181
IBM litigation settlement - 70 - - - -
Litigation and receivables charge - 10 - 45 - -
Restructuring charge - - - 35 - -
Interest 274 263 291 350 366 338
------ ------ ------ ------ ------ ------
Total costs and expenses 2,072 2,009 2,009 2,171 2,038 1,786
------ ------ ------ ------ ------ ------
Earnings from continuing operations before income taxes, extraordinary items and
cumulative effect of change in accounting principle 168 89 144 34 136 134
Income taxes 64 36 57 14 53 51
------ ------ ------ ------ ------ ------
Earnings from continuing operations before extraordinary items and cumulative effect
of change in accounting principle 104 53 87 20 83 83
Earnings (loss) from discontinued operations (net of income taxes) - - (20) - (14) 2
------ ------ ------ ------ ------ ------
Earnings before extraordinary items and cumulative effect of
change in accounting principle 104 53 67 20 69 85
Extraordinary items (net of income taxes in fiscal 1992) - - - (29) - 10
------ ------ ------ ------ ------ ------
Earnings (loss) before cumulative effect of change in accounting principle 104 53 67 (9) 69 95
Cumulative effect of change in accounting principle - - 20 - - -
------ ------ ------ ------ ------ ------
Net earnings (loss) before preferred dividends 104 53 87 (9) 69 95
Preferred dividends (8) (9) (7) - - -
------ ------ ------ ------ ------ ------
Net earnings (loss) to common stockholders $ 96 $ 44 $ 80 $ (9) $ 69 $ 95
====== ====== ====== ====== ====== ======
COMMON AND COMMON EQUIVALENT SHARE DATA
Earnings from continuing operations $ 1.73 $ .77 $ 1.31 $ .33 $ 1.35 $ 1.30
Earnings (loss) from discontinued operations - - (.33) - (.23) .03
Extraordinary items - - - (.47) - .15
Cumulative effect of change in accounting principle - - .33 - - -
Net earnings (loss) to common stockholders 1.73 .77 1.31 (.14) 1.12 1.48
Common stockholders' equity (per common share outstanding) 13.10 11.65 11.03 10.25 10.42 9.59
Cash dividends paid on common stock .24 .23 .19 .19 .18 .17
Average common and common equivalent shares (in thousands) 55,167 57,758 60,312 61,286 61,373 63,957
FINANCIAL POSITION
Total assets $ 5,039 $ 4,807 $4,960 $5,236 $5,006 $4,785
Notes payable 661 593 655 766 353 589
Total long-term debt 1,796 1,364 1,325 1,314 1,502 1,021
Discounted lease rentals 1,124 1,548 1,670 1,823 1,900 2,047
Stockholders' equity 776 741 739 699 634 589
LEASING DATA
Total noncancelable rents of new leases $ 2,300 $ 1,800 $1,900 $2,400 $2,400 $2,400
Future noncancelable lease rentals and disaster recovery subscription fees 4,380 4,185 4,265 4,601 4,363 4,322
</TABLE>
24 AND 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Fiscal 1995 net earnings to common stockholders (hereinafter referred to as "net
earnings") were $96 million, or $1.73 per common share, compared to $44 million,
or $.77 per common share, and $80 million, or $1.31 per common share, in fiscal
1994 and 1993, respectively. The increase in net earnings in fiscal 1995
compared to the prior period is due to fiscal 1994 charges of $70 million ($42
million after-tax, or $.73 per common share) for the settlement and resolution
of the IBM litigation, and charges of $10 million ($6 million after-tax, or $.11
per common share) (collectively, the "Charges") for increases to thelitigation
reserve to cover costs of the then ongoing litigation. The IBM litigation is
discussed in Note 8 of Notes to Consolidated Financial Statements. In fiscal
1995, increases in earnings contributions from operating leases were offset by
reduced contributions from sales-type and direct financing leases and higher
selling, general and administrative expenses. Earnings contributions from
disaster recovery activities increased in both fiscal 1995 and 1994 compared to
the prior year. A decrease in the effective tax rate from 40% in fiscal 1994 to
38% in the current year period also positively impacted net earnings. Earnings
per common share in fiscal 1995 benefited from the company's stock repurchase
program, which has reduced the average common equivalent shares outstanding. The
decrease in fiscal 1994 compared to fiscal 1993 is due to the Charges. Fiscal
year-to-year net earnings comparisons are also affected by the following fiscal
1994 items:
The receipt of key-man life insurance proceeds of $20 million, or $.35 per
common share, (the "Insurance Proceeds") as a result of the death of the
company's Founder, Chairman of the Board and President, Mr. Kenneth N.
Pontikes, in June, 1994.
During the quarter ended June 30, 1994, the company recorded a
contribution charge of $10 million ($6 million after-tax, or $.11 per
common share), to establish and fund the Comdisco Foundation
(the "Contribution") (see "Costs and Expenses" for a discussion of the
Contribution).
In addition to the items discussed above, fiscal 1994 to fiscal 1993 net
earnings comparisons are affected by the following items:
Fiscal 1993 netearnings include after-tax charges related to discontinued
operations of $(20)million, or $(.33) per common share. The charges
resulted from management's revised estimate of the net realizable value
of the company's oil and gas investment. See Note 9 of Notes to
Consolidated Financial Statements.
Fiscal 1993 net earnings include a noncash cumulative benefit of $20
million, or $.33 per common share, for adoption of a new standard of
accounting for income taxes effective October 1, 1992.
FINANCIAL CONDITION
The company's operating activities during the year ended September 30, 1995,
including capital expenditures for equipment, were funded primarily by cash flow
from operations (primarily lease and rental receipts), including the realization
of residual values through remarketing activities, and external financing. See
Note 6 of Notes to Consolidated Financial Statements for information on the
company's interest-bearing liabilities, including average daily borrowings,
effective interest rates and maturities.
During the last five years, equipment purchased for leasing totaled $8.7
billion. Expenditures for equipment in fiscal 1995 totaled approximately $1.9
billion, its highest total in three fiscal years and an increase of 30% compared
to the prior year. Expenditures for equipment are estimated at approximately
$2.0 billion for fiscal 1996.
During fiscal 1995, the company purchased 5,260,167 shares of its
outstanding common stock at an aggregate cost of $86 million. These purchases,
when added to the shares purchased in prior years, bring the total number of
common shares purchased to 24.1 million (1.5 million shares were issued upon
conversion of a 6% convertible subordinated promissory note in fiscal 1995 and
an additional 2.9 million shares were distributed as a common stock dividend on
March 30, 1992), at an aggregate cost of $283 million. At September 30, 1995,
the company had a remaining authorization of approximately $16 million to
purchase common stock. An additional 760,200 shares of common stock were
purchased between September 30, 1995 and November 7, 1995 at a cost of $14
million. On November 7, 1995, the board of directors authorized an additional
$50 million for the company's stock repurchase program.
The company believes that its estimated cash flow from operations and
current financial resources will be sufficient to fund anticipated future growth
and operating requirements. In addition, the company expects to continue to
utilize a variety of financial instruments to fund its short- and long-term
needs.
Cash Flows: Net cash provided by operating activities was $1.9 billion,
$1.6 billion and $1.9 billion in fiscal 1995, 1994 and 1993, respectively. In
fiscal 1993, the company sold direct financing and sales-type lease receivables
for $181 million. There were no such sales in fiscal 1995 and 1994. Net cash
provided by operating activities has been used to finance equipment purchases
and, accordingly, has had a positive impact on the level of borrowing required
to support the company's investment in its lease portfolio. The company
estimates that existing lease and disaster recovery contracts at September 30,
1995 may generate gross cash receipts of approximately $4.4 billion in the
future, including $1.9 billion in fiscal 1996. The company's liquidity is
augmented by the realization of cash from the future remarketing of leased
equipment. Utilizing independent forecasts of equipment values at lease
termination or management estimates, the estimated gross cash receipts to be
provided from remarketing in future years totals $1.1 billion.
26
Credit Lines: During fiscal 1995, the company re-established and expanded
its existing $400 million multi-option facility, which was to expire in March,
1997, and its $400 million global revolving credit facility, which was to expire
in December, 1996 (collectively, the "Facilities") with new Facilities totaling
$900 million, of which $600 million will expire in December, 1997. The new
Facilities, negotiated with a consortium of twenty-nine lending institutions,
provide for reduced borrowing margins and commitment fees compared to the prior
agreements. These Facilities, combined with other committed and uncommitted
lines of credit, provide the company with a total of $1.2 billion of available
domestic and international borrowing capacity, of which $554 million was unused
at September 30, 1995.
Senior Notes: On February 13, 1995, the company filed a registration
statement on Form S-3 with the Securities and Exchange Commission for a shelf
offering of up to $500 million of senior debt securities (the "1995 Shelf") on
terms to be set at the time of each sale.
Pursuant to the 1995 Shelf, the company, on April 13, 1995 (the "Funding
Date"), issued $200 million of 7.25% Notes Due April 15, 1998 (the "7.25%
Notes"). Between the Funding Date and the maturity of the company's outstanding
8.95% Senior Notes due May 15, 1995, which aggregated $150 million in principal
amount (the "8.95% Senior Notes"), the company used the net proceeds from the
sale of the 7.25% Notes to reduce outstanding notes payable (short-term debt),
which in turn made short-term debt available to redeem the 8.95% Senior Notes.
Pursuant to the 1995 Shelf, the company, on June 15, 1995, issued $200
million of 6.50% Notes Due June 15, 2000 (the "6.50% Notes"). The net proceeds
from the sale of the 6.50% Notes were used for general corporate purposes.
Pursuant to the 1995 Shelf, the company sold $50 million of medium-term
notes between February 13, 1995 and September 30, 1995. At September 30, 1995,
an aggregate of $50 million of medium-term notes remained available for issuance
under the 1995 Shelf, all of which was issued between September 30, 1995 and
November 7, 1995.
On October 31, 1995, the company filed a registration statement on Form S-3
with the Securities and Exchange Commission for a shelf offering of up to $750
million of senior debt securities on terms to be set at the time of each sale.
The company plans to continue to be active in issuing senior debt during fiscal
1996, primarily to support the anticipated growth of the leased assets.
Secured Debt: Proceeds from the discounting of lease rentals, including
proceeds from the sale of lease-backed certificates, were $279 million, $725
million, and $762 million in fiscal 1995, 1994 and 1993, respectively. Beginning
in fiscal 1995, the company de-emphasized secured debt as a significant source
of liquidity. Secured debt is currently utilized as a tool to manage credit risk
and concentration risk. The company's credit committee establishes concentration
levels by credit rating and customer.
Asset/Liability and Risk Management: The company has an on-going program to
manage its assets and liabilities. This program includes establishing levels of
fixed and floating rate debt, liquidity and duration analysis, monitoring credit
quality of the lease portfolio and related account review procedures and
oversight of interest rate and foreign exchange hedging policies. This program
includes the use of derivatives in certain, identifiable situations to manage
risk. The company does not speculate on interest rates, but rather manages its
portfolio of assets and liabilities to mitigate the impact of interest rate
fluctuations.
The ratio of commercial paper and short-term borrowings to total debt was
18.5% at September 30, 1995, compared with 16.9% and 17.9% at September 30, 1994
and 1993, respectively. At September 30, 1995, the company had debt of $1.9
billion scheduled to mature in fiscal 1996, including $.7 billion of commercial
paper and short-term bank borrowings. At September 30, 1995, the company had
expected future net cash to be provided by existing lease and disaster recover
contracts of $1.9 billion in fiscal 1996. See Notes 5 and 6 of Notes to
Consolidated Financial Statements for information on the lease base and
interest-bearing liabilities, respectively. Although the company expended $86
million to repurchase its common stock in fiscal 1995, the ratio of debt to
total stockholders' equity improved from 4.7:1 at September 30, 1994 to 4.6:1 at
September 30, 1995. The ratio of debt to total stockholders' equity was 4.9:1 at
September 30,1993.
REVENUE
Total revenue for fiscal 1995 was $2.2 billion, an increase of 7% over fiscal
1994. This compares to decreases in fiscal 1994 and 1993 of 3% and 2%,
respectively. The increase in leasing revenue in fiscal 1995 compared to fiscal
1994 is due to increased operating lease revenue (the first year-to-year
increase since fiscal 1991), offset by declines in sales-type and direct
financing lease revenue. The decline in operating lease revenue in fiscal 1994
and 1993 as compared to the prior year reflects the lack of growth in operating
lease volume during those fiscal years. The declines in direct financing revenue
in both fiscal 1995 and 1994 as compared to the prior year reflect a decline in
interest rates and a change in the mix of leases written, with a higher
percentage of operating leases to total leases. The increase in sales-type lease
revenue in fiscal 1994 compared to fiscal 1993 was due to the company's strong
remarketing activities. See "Disaster Recovery" for a discussion of disaster
recovery revenue and margins and "Sales" for a discussion of sales revenue and
margins.
Leasing: Leasing volume increased in fiscal 1995 compared to the prior
year. This compares to decreases in leasing volume in both fiscal 1994 and 1993.
Remarketing activity, which was at record levels in fiscal 1994, remained strong
throughout the current fiscal year and margins on remarketing remained stable.
In general, improving worldwide economies coupled with continued demand for high
27
technology equipment, including traditional mainframes and the newer
technologies in parallel machines and client/server, have had a favorable impact
on volume in the current fiscal year. Other factors having a positive impact on
volume include the acquisition of Promodata S.A. in June, 1994 (the
"Acquisition"), the growth of the company's semiconductor manufacturing
equipment leasing activities, and improving markets in Europe.
During the last three fiscal years, the company's mainframe portfolio
decreased, while its portfolio of other high technology assets increased as a
percentage of the total portfolio, thereby reducing the company's future
dependence on mainframe activity. The higher earnings contributions from
remarketing, primarily in fiscal 1994, illustrate the value of the company's
lease portfolio and the company's ability to realize residual values.
Cost of equipment placed on lease was $2.1 billion in fiscal 1995, compared
to cost of equipment placed on lease of $1.6 billion and $1.7 billion in fiscal
1994 and 1993, respectively. Cost of equipment other than mainframe and related
peripheral devices placed on lease was $891 million and $775 million for fiscal
1995 and 1994, respectively. European lease volume increased in fiscal 1995,
with cost of equipment placed on lease of $511 million, including $224 million
contributed by Promodata S.A., in comparison to $190 million in fiscal 1994 (see
International Operations - Europe).
Under the terms of the Acquisition, the company assumed management
responsibility for the Promodata lease portfolio through initial lease
termination and ownership of the equipment thereafter. The company earns a fee
for managing the Promodata lease portfolio. The Acquisition has had a favorable
impact on the company's operating lease portfolio and related operating lease
revenue. The Acquisition also increased selling, general and administrative
expenses, primarily personnel related costs.
There have been a number of changes in the information technology industry
in the last five years, including the emergence of technological alternatives to
traditional mainframe processing and applications. While there are few clear
trends, it appears that traditional mainframes remain the primary platform for
enterprisewide computing and, for highly data-intensive applications, mainframe
applications are still the most cost effective. However, the reality is that the
power of computing is moving out of a centralized platform and onto the desktop.
The company believes that the emerging markets for client/server and distributed
processing represent opportunities for hardware, disaster recovery and
consulting services. Early indications are that, similar to the traditional
mainframe market, leasing provides flexibility and preserves capital, while
managing technological risks for the user. Secondly, because of the costs and
complexity of transitioning to client/server and object-oriented technologies,
users are looking to their suppliers for an integrated, service-oriented
approach. The company believes that having the interdisciplinary
skills--traditional legacy systems, disaster recovery, distributed processing,
asset management tools, network technology--is the key to successful systems
integration and an important component of the company's long-term data
processing growth strategy.
Lower hardware costs (including mainframe costs), and a higher emphasis on
client/server and personal computer leases have resulted in reductions in the
average lease transaction and reduced residual values and shortened lease terms,
while putting pressure on lease margins. Accordingly, the company has focused
its efforts on cost containment and operating efficiencies to operate profitably
in this changing market. While the company's customer base and independence
remain its strongest assets, it is clear that customers are seeking more than
financing alternatives or cost per MIPS--traditional competitive methodologies
of the company. The company believes that customers will choose financial
partners that know the technology, understand the product trends and offer
financial solutions tailored to their business and technology plans.
Operating lease revenue minus operating lease costs was $293 million, or
26.2% of operating lease revenue (the "Operating Lease Margin"), and $256
million, or 25.5% of operating lease revenue, in fiscal 1995 and 1994,
respectively. The company expects the Operating Lease Margin to remain at or
slightly above current levels in fiscal 1996. The Sales-type Lease Margin
increased in fiscal 1995 and 1994 as compared to the prior years, reflecting
higher margins on remarketing of equipment in the lease portfolio. The following
graph presents the Lease Margin for total leasing, operating, and sales-type
leases for the five years ended September 30, 1995.
{GRAPH ILLUSTRATES CHANGES IN THE LEASE MARGIN}
Sales: Revenue from sales, which includes remarketing and buy/sell
activities, totaled $358 million in fiscal 1995, compared to $271 million and
$313 million in fiscal 1994 and 1993, respectively. The increase in fiscal 1995
was primarily due to sales of semiconductor manufacturing equipment and
equipment other than mainframe and related peripherals. The decrease in sales
revenue in fiscal 1994 compared to the prior year is primarily due to reduced
mainframe sales and lower sales revenue per unit on mainframes. Margins on sales
were 15% in fiscal 1995 compared to 17% and 12% in fiscal 1994 and 1993,
respectively.
28
The higher margins in fiscal 1994 reflect improved margins from
remarketing equipment other than mainframe and related peripherals.
Disaster Recovery: Revenue from disaster recovery services (also referred
to as business continuity services) of $267 million in fiscal 1995 and $242
million in fiscal 1994 represented increases of 10% and 12%, respectively, over
each of the preceding years. The increases are primarily the result of the
growth in customer base, products and services. As of September 30, 1995, the
company had strategically located recovery facilities throughout North America
and Europe connected by advanced network capabilities.
Disaster recovery costs of $238 million for fiscal 1995 increased 6% over
disaster recovery costs of $224 million in fiscal 1994. Fiscal 1994 costs and
expenses were 9% higher than fiscal 1993. Cost containment efforts by the
company, primarily as a result of its capital investment strategy, called
"Project 2000," slowed the growth of disaster recovery costs in both fiscal 1995
and 1994, and improved disaster recovery margins significantly over the prior
year. Higher revenues coupled with successful cost containment efforts resulted
in disaster recovery pretax earnings of $29 million in fiscal 1995 compared to
$18 million in fiscal 1994.
In October, 1995, the company announced an agreement in principle to
acquire NetforceMTI, a privately held communications network services company.
Its services include network assessment, design, planning, implementation,
configuration, installation, and management. These services are expected to
complement and expand the company's network experience in leasing, remarketing,
and business continuity, and will play an important role in the company's
systems integration and desktop asset management services. The cost of the
acquisition is not expected to be material.
In October, 1995, the company announced the opening of its Chicago-based
client/server supersite. The addition expands the company's commitment to
workarea recovery and the evolving business continuity needs across all
platforms.
Other revenue: Other revenue was $42 million, $47 million and $41 million
in fiscal 1995, 1994 and 1993, respectively. Fiscal 1994 includes the receipt of
the Insurance Proceeds of $20 million. Excluding the Insurance Proceeds, the
increase in fiscal 1995 compared to the prior year period is primarily due to
revenue from managing the Promodata S.A. portfolio and gains generated from the
sale of stock, originally received by the company in fiscal 1993 in connection
with the sale of all of the assets of its wholly-owned subsidiary, Comdisco
Systems, Inc. Revenue from the sale of ownership positions generated in
conjunction with the company's lease financing transactions with early-stage
high technology companies was $11 million in fiscal 1995 compared to $9 million
in fiscal 1994 and 1993.
COSTS AND EXPENSES
Total costs and expenses were $2.1 billion and $2.0 billion in fiscal 1995 and
1994, respectively. Excluding the IBM litigation settlement, total costs and
expenses increased 7% in fiscal 1995 compared to fiscal 1994, primarily due to
increased leasing costs and cost of sales related to increasing operating lease
revenue and sales revenue, respectively. Other factors contributing to the
increase include higher selling, general and administrative costs (excluding the
Contribution) and an increase in interest expense. Fiscal 1994 total costs and
expenses were 3% lower than fiscal 1993. The decrease in fiscal 1994 compared to
fiscal 1993 was primarily due to reduced leasing costs related to declining
operating lease revenue and a decrease in interest expense.
Selling, general and administrative expenses totaled $233 million in fiscal
1995, $213 million in fiscal 1994, and $197 million in fiscal 1993,
respectively. The Contribution was recorded in the quarter ended June 30, 1994
to establish and fund the Comdisco Foundation. The Comdisco Foundation is
intended to fulfill the company's social and philanthropic responsibilities to
the communities in which it operates. Excluding the Contribution, selling,
general and administrative expenses increased 15% in fiscal 1995 compared to
fiscal 1994. The increase is primarily due to the Acquisition, which increased
selling, general and administrative expenses by approximately $15 million in
fiscal 1995. Other factors contributing to the increase include the development
of the company's system integration activities, offset by reduced expenditures
resulting from improved operating efficiencies in the company's leasing
operations. Based on an analysis of customer needs, coupled with the relative
infancy of the client/server marketplace (when compared to the installed legacy
base), the company has redefined its system integration activities from a lead
offering to a business partner with its existing core competencies, primarily in
asset management. Accordingly, the company has slowed the expansion in personnel
in this area. Excluding the Contribution, selling, general and administrative
expenses increased 3% in fiscal 1994 compared to fiscal 1993, reflecting the
impact of the company's emphasis on cost containment.
Interest expense for fiscal 1995 totaled $274 million in comparison to $263
million in fiscal 1994 and $291 million in fiscal 1993, respectively. The
increase in fiscal 1995 compared to fiscal 1994 is due to higher average daily
borrowings and higher interest rates. Generally, a higher interest rate
environment does not impact the company's margins since the effects of higher
borrowing costs would be reflected in the rates on newly leased assets. In
addition, the company attempts to match the maturities of its borrowings with
the cash flows from its leased assets, thereby reducing the company's interest
rate exposure. The decreases in interest expense in fiscal 1994 and 1993
compared to the prior years primarily reflects declining interest rates and
lower average daily borrowings. In both fiscal
29
1993 and 1994, net cash from operations exceeded equipment purchases, and the
excess was utilized to reduce debt (see Note 6 of Notes to Consolidated
Financial Statements for information on the company's average daily borrowings
and effective interest rates).
INCOME TAXES
Note 10 of Notes to Consolidated Financial Statements on page 42 provides
details about the company's income tax provision and the impact of adopting FAS
109 in fiscal 1993.
INTERNATIONAL OPERATIONS
The company operates principally in four geographic areas: the United States,
Europe, Canada and the Pacific Rim. The company also operates in South America.
Revenue from international operations, including export sales and disaster
recovery operations, was $518 million in fiscal 1995 compared to $390 million
and $481 million in fiscal 1994 and 1993, respectively. International revenues
represented 23% of the company's total revenue in fiscal 1995, 19% in fiscal
1994 and 22% in fiscal 1993.
Canada: Total revenue, primarily from leasing activities, for fiscal 1995
in Canada was $50 million compared to $62 million and $79 million in fiscal 1994
and 1993, respectively. Cost of equipment placed on lease in fiscal 1995 and
1994 was $57 million and $58 million, respectively. Net cash provided by
operations is the company's primary source of funds for its Canadian operations,
although the company has short-term lines of credit in Canada to support
short-term liquidity requirements.
Europe: The company's European operations, excluding disaster recovery
activities, had pretax earnings of $8 million and $3 million in fiscal 1995 and
1994, respectively, compared to a break-even level in fiscal 1993. Total leasing
and sales revenue from European operations was $369 million in fiscal 1995
compared to $231 million in fiscal 1994 and $303 million in fiscal 1993. The
European lease base has been financed primarily by utilizing existing short-term
lines of credit, parent company loans and discounted lease rentals.
The company's European operations contributed positively to the company's
results of operations for fiscal 1995 and 1994. The company believes these
results reflect changes made by the company to improve the financial performance
of its European operations. Remarketing activity in the European marketplace
also contributed to its performance during the last two fiscal years. The
Acquisition had a favorable impact on lease volume, operating lease revenue and
pretax earnings in fiscal 1995. The Acquisition also enhanced the company's
position in the European marketplace for information technology. While the
company is pleased with these results, the company recognizes that sustaining
such results over the long-term will require continued management focus.
Geographic area data is included in Note 15 of Notes to Consolidated
Financial Statements on page 46. Discontinued Oil and Gas Activities Note 9 of
Notes to Consolidated Financial Statements on page 42 contains information
regarding the company's discontinued oil and gas activities.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments, became effective
December, 1994. This Standard required or suggested certain disclosures with
respect to derivative financial instruments. Note 6 of Notes to Consolidated
Financial Statements contains information about the company's derivative
financial instruments, including the purposes for which such instruments are
held.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, was issued in October, 1995. The company will be
required to adopt the new standard no later than fiscal 1997, although early
adoption is permitted. This standard establishes the fair value based method
(the "FAS 123 Method") rather than the intrinsic value based method as the
preferred accounting methodology for stock based compensation arrangements.
Entities are allowed to (1) continue to use the intrinsic value based
methodology in their basic financial statements and provide in the footnotes pro
forma net income and earnings per share information as if the FAS 123 Method had
been adopted, or (2) adopt the FAS 123 methodology. The FAS 123 Method will
result in higher compensation cost for the company, as the company believes
employee stock options, which give employees a financial stake in the company's
growth, are an important management incentive.
OTHER MATTERS
The company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates.
PRICE RANGE OF COMMON STOCK
The company's common stock is listed on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol CDO. At September 30, 1995, there were
approximately 2,000 holders of record of the company's common stock. The
following table shows the quarterly price range of the company's common stock,
as traded on the New York Stock Exchange, and cash dividends paid on common
stock for fiscal 1995 and 1994, adjusted for the three-for-two stock split (see
Note 16 of Notes to Consolidated Financial Statements).
95 94
----------------------- -----------------------
Quarter High Low Dividends High Low Dividends
------- ------ ------ --------- ------ ------ ---------
First $15.59 $12.92 $.06 $14.00 $11.17 $.05
Second 18.25 14.67 .06 16.17 12.67 .06
Third 20.59 17.59 .06 15.25 11.83 .06
Fourth 21.67 18.83 .06 14.92 12.09 .06
30
Comdisco, Inc. and Subsidiaries
Consolidated Statements of Earnings
(in millions except per share data)
For the Three Years Ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Years ended September 30,
95 94 93
------ ------ ------
<S> <C> <C> <C>
Revenue
Leasing:
Operating ....................................................... $1,117 $1,002 $1,099
Direct financing ................................................ 180 186 190
Sales-type ...................................................... 276 350 294
Total leasing ................................................. 1,573 1,538 1,583
Sales ............................................................. 358 271 313
Disaster recovery ................................................. 267 242 216
Other ............................................................. 42 47 41
------ ------ ------
Total revenue ................................................... 2,240 2,098 2,153
Costs and expenses
Leasing:
Operating ....................................................... 824 746 815
Sales-type ...................................................... 199 258 225
Total leasing ................................................. 1,023 1,004 1,040
Sales ............................................................. 304 225 275
Disaster recovery ................................................. 238 224 206
Selling, general and administrative ............................... 233 213 197
IBM litigation settlement ......................................... -- 70 --
Litigation charge ................................................. -- 10 --
Interest .......................................................... 274 263 291
------ ------ ------
Total costs and expenses ........................................ 2,072 2,009 2,009
Earnings from continuing operations before income taxes and
cumulative effect of change in accounting principle ............. 168 89 144
Income taxes ...................................................... 64 36 57
------ ------ ------
Earnings from continuing operations before cumulative effect of
change in accounting principle .................................. 104 53 87
Loss from discontinued oil and gas activities (net of income taxes) -- -- (20)
------ ------ ------
Earnings before cumulative effect of change in accounting principle 104 53 67
Cumulative effect of change in accounting principle ............... -- -- 20
------ ------ ------
Net earnings before preferred dividends ........................... 104 53 87
Preferred dividends ............................................... (8) (9) (7)
------ ------ ------
Net earnings to common stockholders ............................. $ 96 $ 44 $ 80
====== ====== ======
Net earnings per common and common equivalent share:
Earnings from continuing operations ............................. $ 1.73 $ .77 $ 1.31
Loss from discontinued oil and gas activities ................... -- -- (.33)
Cumulative effect of change in accounting principle ............. -- -- .33
------ ------ ------
Net earnings to common stockholders ........................... $ 1.73 $ .77 $ 1.31
====== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
31
Comdisco, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions except number of shares and per share data)
<TABLE>
<CAPTION>
September 30
95 94
------ ------
<S> <C> <C>
Assets
Cash and cash equivalents ...................................................... $ 85 $ 51
Cash - legally restricted ...................................................... 30 37
Receivables, net ............................................................... 176 169
Inventory of equipment ......................................................... 133 145
Leased assets:
Direct financing and sales-type .............................................. 1,968 2,144
Operating (net of accumulated depreciation) .................................. 2,107 1,696
Net leased assets .......................................................... 4,075 3,840
Buildings, furniture and other, net ............................................ 163 168
Other assets ................................................................... 377 397
------ ------
$5,039 $4,807
====== ======
Liabilities and Stockholders' Equity
Notes payable .................................................................. $ 661 $ 593
Term notes payable ............................................................. 507 291
Senior and subordinated debt ................................................... 1,289 1,073
Accounts payable ............................................................... 111 84
Deferred income taxes .......................................................... 244 229
Other liabilities .............................................................. 327 248
Discounted lease rentals ....................................................... 1,124 1,548
------ ------
4,263 4,066
Stockholders' equity:
Preferred stock $.10 par value. Authorized 100,000,000 shares: 8.75%
Cumulative Preferred Stock, Series A and Series B $25 stated value and
liquidation preference, issued 3,625,800 shares
(4,000,000 in 1994) ........................................................ 91 100
Common stock $.10 par value. Authorized 200,000,000 shares;
issued 71,936,982 shares (70,950,081 in 1994) .............................. 5 5
Additional paid-in capital ................................................... 154 139
Deferred compensation (ESOP) ................................................. (8) (10)
Deferred translation adjustment .............................................. 13 --
Retained earnings ............................................................ 764 681
1,019 915
------ ------
Common stock held in treasury, at cost; 19,666,386 shares (15,906,219 in 1994) (243) (174)
------ ------
Total stockholders' equity ................................................. 776 741
------ ------
$5,039 $4,807
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
32
Comdisco, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in millions except per share data)
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional Deferred Deferred Common
Preferred Common paid-in compen-translation Retained stock in
stock stock capital sation adjustment earnings treasury
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992 $75 $5 $139 $(14) $(18) $582 $(106)
Net earnings 87
Cash dividends - preferred (7)
Cash dividends - common ($.19 per share) (12)
Issuance of Series B preferred stock 25 (1)
Translation adjustment (25)
Reduction of guaranteed ESOP debt 2
Purchase of common stock (29)
---------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1993 100 5 138 (12) (7) 650 (135)
Net earnings 53
Cash dividends - preferred (9)
Cash dividends - common ($.23 per share) (13)
Stock options exercised 1
Translation adjustment 7
Reduction of guaranteed ESOP debt 2
Purchase of common stock (39)
---------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 100 5 139 (10) - 681 (174)
Net earnings 104
Cash dividends - preferred (8)
Cash dividends - common ($.24 per share) (13)
Stock options exercised 12
Translation adjustment 13
Issuance of common stock upon
conversion of subordinated debt 3 17
Reduction of guaranteed ESOP debt 2
Purchase of preferred stock (9)
Purchase of common stock (86)
---------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 $91 $5 $154 $ (8) $(13) $764 $(243)
=== == ==== ==== ==== ==== =====
</TABLE>
See accompanying notes to consolidated financial statements.
33
Comdisco, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Years ended September 30,
95 94 93
------- ------- -------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Operating lease and other leasing receipts ................................. $ 1,282 $ 1,122 $ 1,246
Direct financing and sales-type leasing receipts ........................... 973 907 863
Sales of direct financing and sales-type lease receivables ................. -- -- 181
Leasing costs, primarily rentals paid ...................................... (33) (49) (78)
Sales ...................................................................... 352 283 315
Sales costs ................................................................ (196) (147) (175)
Disaster recovery receipts ................................................. 266 240 210
Disaster recovery costs .................................................... (215) (200) (187)
Other revenue .............................................................. 42 48 36
Selling, general and administrative expenses ............................... (228) (193) (215)
IBM litigation settlement .................................................. -- (70) --
Interest ................................................................... (272) (268) (290)
Income taxes ............................................................... (32) (34) (33)
------- ------- -------
Net cash provided by operating activities ................................ 1,939 1,639 1,873
Cash flows from investing activities:
Equipment purchased for leasing ............................................ (1,865) (1,433) (1,547)
Investment in disaster recovery facilities ................................. (34) (18) (15)
Other ...................................................................... (1) (12) (19)
------- ------- -------
Net cash used in investing activities .................................... (1,900) (1,463) (1,581)
Cash flows from financing activities:
Discounted lease proceeds .................................................. 279 725 762
Net increase (decrease) in notes payable ................................... 68 (62) (111)
Issuance of term notes, senior notes, and subordinated debt ................ 1,268 300 123
Maturities and repurchases of term notes, senior notes and subordinated debt (816) (262) (110)
Principal payments on secured debt ......................................... (703) (849) (945)
Decrease in legally restricted cash ........................................ 7 11 20
Issuance of preferred stock ................................................ - - 24
Preferred stock purchased .................................................. (9) - -
Common stock purchased and placed in treasury .............................. (86) (39) (29)
Dividends paid on common stock ............................................. (13) (13) (12)
Dividends paid on preferred stock .......................................... (8) (9) (7)
Other ...................................................................... 8 3 (11)
------- ------- -------
Net cash used in financing activities .................................... (5) (195) (296)
------- ------- -------
Net increase (decrease) in cash and cash equivalents ......................... 34 (19) (4)
Cash and cash equivalents at beginning of year ............................... 51 70 74
------- ------- -------
Cash and cash equivalents at end of year ..................................... $ 85 $ 51 $ 70
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
34
Comdisco, Inc. and Subsidiaries
Consolidated Statements of Cash Flows--Continued
(in millions)
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Years ended September 30,
95 94 93
------ ------ ------
<S> <C> <C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings ...................................................................... $ 104 $ 53 $ 87
Adjustments to reconcile net earnings to net cash provided by operating activities:
Leasing costs, primarily depreciation and amortization .......................... 990 955 962
Leasing revenue, primarily principal portion of direct
financing and sales-type lease rentals ........................................ 682 491 526
Sales of direct financing and sales-type lease receivables ...................... - - 181
Cost of sales ................................................................... 108 78 100
Income taxes .................................................................... 32 2 24
Interest ........................................................................ 2 (5) 1
Discontinued oil and gas activities ............................................. - - 20
Cumulative effect of change in accounting principle ............................. - - (20)
Other, net ...................................................................... 21 65 (8)
------ ------ ------
Net cash provided by operating activities ....................................... $1,939 $1,639 $1,873
====== ====== ======
Supplemental schedule of noncash financing activities:
Assumption of discounted lease rentals in lease portfolio acquisition ........... $ -- $ 2 $ 30
====== ====== ======
Common stock issued upon conversion of
6% convertible subordinated promissory note ................................... $ 20 $ -- $ --
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
35
Note 1 Summary of Significant Accounting Policies
Nature of operations: Comdisco, Inc. is primarily engaged in the buying, selling
and leasing of new and used computer and other high technology equipment and in
providing disaster recovery services. In addition, the company provides
technology planning and asset management services, integrating leasing and
business continuity services with customized asset acquisition, asset management
software tools and data center moves and/or consolidations, disposition and
migration strategies. Its principal markets are the United States, Europe,
Canada and the Pacific Rim.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of consolidation: The consolidated financial statements include the
accounts of the company and its wholly-owned subsidiaries. Intercompany accounts
and transactions have been eliminated.
Income taxes: In the first quarter of fiscal 1993, the company adopted FASB
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," ("FAS 109") as of October 1, 1992. The adoption of this standard changed
the company's method of accounting for income taxes from the deferred method to
an asset and liability approach. FAS 109 requires deferred taxes on the balance
sheet to be stated at enacted tax rates expected to be in effect when these
balances reverse, i.e., when taxes actually will be paid or recovered. See also
Note 10 of Notes to Consolidated Financial Statements. The accounting change
does not affect the company's cash flows.
Lease accounting: See "Leasing" section on pages 36 through 38 for a description
of lease accounting policies, lease revenue recognition and related costs.
Disaster recovery: Revenue from disaster recovery contracts is recognized
monthly as subscription fees become due.
Cash and cash equivalents: Cash equivalents are comprised of highly liquid debt
instruments with original maturities of 90 days or less.
Cash - legally restricted: Legally restricted cash represents cash and cash
equivalents that are restricted solely for use as collateral in secured
borrowings and are not available to other creditors.
Oil and gas: See Note 9 of Notes to Consolidated Financial Statements for a
discussion of discontinued oil and gas activities.
Inventory of equipment: Inventory of equipment is stated at the lower of cost or
market by categories of similar equipment.
Derivatives: Interest rate differentials on swaps are accrued as interest rates
change over the contract period. Premiums paid for purchased interest rate cap
agreements are amortized to interest expense over the terms of the caps. Amounts
receivable under cap agreements are accrued as a reduction of interest expense.
Earnings per common share: Earnings per common and common equivalent share are
computed based on the weighted average number of common and common equivalent
shares outstanding during each period after giving retroactive effect to the
three-for-two stock split authorized by the board of directors November 7, 1995
(see Note 16 of Notes to Consolidated Financial Statements).
Dilutive stock options included in the number of common and common
equivalent shares are based on the treasury stock method. The number of common
and common equivalent shares used in the computation of earnings per common
share for the years ended September 30, 1995, 1994 and 1993 were 55,167,389,
57,758,144, and 60,311,994, respectively.
Leasing
Note 2 Lease Accounting Policies
FASB Statement of Financial Accounting Standards No. 13 requires that a
lessor account for each lease by either the direct financing, sales-type or
operating method.
Leased Assets:
Direct financing and sales-type leased assets consist of the present value of
the future minimum lease payments plus the present value of the residual
(collectively referred to as the net investment). Residual is the estimated
fair market value at lease termination. In estimating the equipment's fair
value at lease termination, the company relies on historical experience by
equipment type and manufacturer and, where available, valuations by
independent appraisers, adjusted for known trends. The company's estimates
are reviewed continuously to ensure realization, however the amounts the
company will ultimately realize could differ from the estimated amounts.
Operating leased assets consist of the equipment cost, less the amount
depreciated to date.
Revenue, Costs and Expenses:
Direct financing leases - Revenue consists of interest earned on the present
value of the lease payments and residual. Revenue is recognized periodically
over the lease term as a constant percentage return on the net
36
investment. There are no costs and expenses related to direct financing
leases since leasing revenue is recorded on a net basis.
Sales-type leases - Revenue consists of the present value of the total
contractual lease payments which is recognized at lease inception. Costs and
expenses consist of the equipment's net book value at lease inception, less
the present value of the residual. Interest earned on the present value of
the lease payments and residual, which is recognized periodically over the
lease term as a constant percentage return on the net investment, is included
in direct financing lease revenue in the statement of earnings.
Operating leases - Revenue consists of the contractual lease payments and is
recognized on a straight-line basis over the lease term. Costs and expenses
are principally depreciation of the equipment. Depreciation is recognized on
a straight-line basis over the lease term to the company's estimate of the
equipment's fair market value at lease termination, also commonly referred to
as "residual" value. In estimating the equipment's fair value at lease
termination, the company relies on historical experience by equipment type
and manufacturer and, where available, valuations by independent appraisers,
adjusted for known trends. The company's estimates are reviewed continuously
to ensure realization, however the amounts the company will ultimately
realize could differ from the amounts assumed in determining depreciation on
the equipment in the operating leased portfolio at September 30, 1995.
Equity transactions - The company enters into equity transactions with
third-party investors who obtain ownership rights, which include tax
depreciation deductions and residual interests. The company retains control
and the use of the equipment generally throughout its economic life by
leasing back the equipment from the third-party investor. Accordingly, the
leased asset cost related to the period of control remains on the balance
sheet. Revenue consists of the profit recognized on equity transactions and
is included in operating lease revenue. Profit is recognized on a
straight-line basis over the leaseback term (life of the transaction).
Initial direct costs related to operating and direct financing leases,
including salesperson's commissions, are capitalized and amortized over the
lease term.
Note 3 Leased Assets
The components of the net investment in direct financing and sales-type leases
as of September 30 are as follows:
(in millions) 95 94
--------------------- ------ ------
Minimum lease payments receivable $2,014 $2,177
Estimated residual values 216 260
Less: unearned revenue (262) (293)
------ ------
Net investment in direct financing
and sales-type leases $1,968 $2,144
====== ======
Unearned revenue is recorded as leasing revenue over the lease terms.
Operating leased assets include the following as of September 30:
(in millions) 95 94
--------------------- ------- -------
Operating leased assets $ 3,685 $ 3,132
Less: accumulated depreciation
and amortization (1,578) (1,436)
------- -------
Net $ 2,107 $ 1,696
======= =======
Note 4 Lease Portfolio Information
The size of the company's lease portfolio can be measured by the cost of leased
assets at the date of lease inception. Cost at lease inception represents either
the equipment's original cost or its net book value at termination of a prior
lease. The following table summarizes, by year of lease commencement and by year
of projected lease termination, the cost at lease inception for all leased
assets recorded at September 30, 1995 (in millions):
Projected year of lease termination
-----------------------------------
Cost at 2000
Year lease lease and
commenced inception 96 97 98 99 after
----------- --------- ------ ------ ------ ---- -----
1991
and prior $1,133 $ 730 $ 257 $ 98 $ 30 $ 18
1992 947 503 320 73 16 35
1993 1,205 505 318 276 56 50
1994 1,367 330 560 244 217 16
1995 2,051 177 442 869 325 238
------ ------ ------ ------ ---- ----
$6,703 $2,245 $1,897 $1,560 $644 $357
====== ====== ====== ====== ==== ====
37
The following table summarizes the estimated net book value at lease
termination for all leased assets recorded at September 30, 1995. The table is
presented by year of lease commencement and by year of projected lease
termination (in millions):
Projected year of lease termination
-----------------------------------
Net book
value at 2000
Year lease lease and
commenced termination 96 97 98 99 after
---------- ----------- ---- ---- ---- ---- -----
1991
and prior $ 57 $ 51 $ 3 $ 3 $ - $ -
1992 89 48 32 2 1 6
1993 138 59 34 43 2 -
1994 213 54 83 32 43 1
1995 328 32 69 150 62 15
---- ---- ---- ---- ---- ---
$825 $244 $221 $230 $108 $22
==== ==== ==== ==== ==== ===
Note 5 Owned Equipment - Future Noncancelable Lease Rentals and Disaster
Recovery Subscription Fees Presented below is a summary of future noncancelable
lease rentals on owned equipment and future subscription fees on noncancelable
disaster recovery contracts (collectively, "cash in-flows").
The summary presents expected cash in-flows due in accordance with the
contractual terms in existence as of September 30, 1995. The table also presents
the amounts to be received by financial institutions for leases discounted on a
nonrecourse basis (see Note 6 of Notes to Consolidated Financial Statements.)
<TABLE>
<CAPTION>
Years ending September 30,
---------------------------------------------------------
2000
and
(in millions) 96 97 98 99 after Total
----------------------------- ------ ------ ---- ---- --- ------
<S> <C> <C> <C> <C> <C> <C>
Expected future cash in-flows:
Operating leases $ 923 $ 554 $255 $ 66 $15 $1,813
Direct financing and sales-type leases 788 639 347 193 47 2,014
Disaster recovery contracts 223 163 104 45 18 553
------ ------ ---- ---- --- ------
Total 1,934 1,356 706 304 80 4,380
Less: To be received by financial institutions
Operating leases 285 151 50 13 2 501
Direct financing and sales-type leases 337 225 111 50 11 734
------ ------ ---- ---- --- ------
Total 622 376 161 63 13 1,235
------ ------ ---- ---- --- ------
To be received by the company $1,312 $ 980 $545 $241 $67 $3,145
====== ====== ==== ==== === ======
</TABLE>
38
Financing
Note 6 Interest-Bearing Liabilities Interest-bearing liabilities include the
following (dollars in millions):
<TABLE>
<CAPTION>
95 94
------------------------------------ --------------------------------------
At September 30 Average At September 30 Average
--------------- --------------- ---------------- -----------------
Balance Rate Balance Rate Balance Rate Balance Rate
------- ----- ------- ---- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes payable:
Credit lines $ 365 6.20% $ 321 6.10% $ 223 5.00% $ 182 4.91%
Commercial paper 296 5.94% 417 6.33% 370 5.04% 416 5.43%
Term notes 507 6.83% 385 7.01% 291 6.36% 240 5.54%
Senior notes 1,276 7.80% 1,140 8.26% 1,040 8.24% 1,083 8.45%
Subordinated debt 13 11.00% 21 8.85% 33 7.97% 14 9.75%
Discounted lease rentals 1,124 7.08% 1,340 7.25% 1,548 6.90% 1,618 7.27%
------ ----- ------ ---- ------ ---- ------ ----
$3,581 7.13% $3,624 7.34% $3,505 6.95% $3,553 7.19%
====== ===== ====== ==== ====== ==== ====== ====
</TABLE>
The changes in financing activities for the years ended September 30 were
as follows (notes payable changes are shown net):
<TABLE>
<CAPTION>
95 94
-------------------------------------------------- ---------------------------------------------------
Out- Out- Out- Out-
standing Maturities standing standing Maturities standing
beginning Issu- and end Fair beginning Issu- and end Fair
(in millions) of year ances repurchases Other of year value of year ances repurchases Other of year value
--------------------- ------ ------ ------- --- ------ ------ ------ ------ ------- --- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Notes payable:
Credit lines $ 223 $ 142 $ - $- $ 365 $ 365 $ 248 $ - $ (25) $- $ 223 $ 223
Commercial paper 370 - (74) - 296 296 407 - (37) - 370 370
Term notes 291 731 (515) - 507 511 206 87 (2) - 291 293
Senior notes 1,040 537 (301) - 1,276 1,323 1,107 193 (260) - 1,040 1,061
Subordinated debt 33 - (20) - 13 13 12 20 - 1 33 33
Discounted lease rentals 1,548 279 (703) - 1,124 1,121 1,670 725 (849) 2 1,548 1,521
------ ------ ------- -- ------ ------ ------ ------ ------- -- ------ ------
$3,505 $1,689 $(1,613) $- $3,581 $3,629 $3,650 $1,025 $(1,173) $3 $3,505 $3,501
====== ====== ======= == ====== ====== ====== ====== ======= == ====== ======
</TABLE>
The fair value of the company's interest-bearing liabilities was estimated
based generally on quoted market prices for the same or similar instruments or
on current rates offered the company for similar debt of the same maturity.
The annual maturities of all interest-bearing liabilities at September 30,
1995 were as follows:
Years ending September 30,
2000
and
(in millions) 96 97 98 99 after Total
-------------- ---- ---- ---- ---- ---- ------
Notes payable:
Credit lines $ 365 $ - $ - $ - $ - $ 365
Commercial paper 296 - - - - 296
Term notes 457 3 47 - - 507
Senior notes 239 343 250 133 311 1,276
Subordinated debt 13 - - - - 13
Discounted lease
rentals 561 344 149 58 12 1,124
------ ---- ---- ---- ---- ------
$1,931 $690 $446 $191 $323 $3,581
====== ==== ==== ==== ==== ======
Notes payable: The company had the following unsecured bank lines available in
the United States and foreign countries at September 30:
(in millions) 95 94
------------------- ------ ------
Total credit lines:
Committed $ 950 $ 875
Uncommitted 265 175
------ ------
$1,215 $1,050
====== ======
Credit lines utilized at September 30:
Committed $ 595 $ 500
Uncommitted 66 93
------ ------
$ 661 $ 593
====== ======
Credit lines available at September 30 $ 554 $ 457
====== ======
Maximum amount outstanding
at any month end $ 922 $ 828
====== ======
The company had outstanding interest rate caps totaling $3 million on
short-term borrowings to mitigate interest rate risks.
39
Committed lines: The company's committed lines have been established with thirty
banks, nine of which are U.S. banks. A majority of the banks are rated AA or
better by rating agencies. At September 30, 1995, the company had committed
domestic and foreign unsecured lines of credit as follows:
Facility Number of banks Expiration date
---------------------- --------------- ----------------
Multi-Option Facilities 11
$300 million facility December, 1997
$150 million facility December, 1995
Global Facilities 18
$300 million facility December, 1997
$150 million facility December, 1995
Other credit agreement:
$ 50 million 1 June, 1996
There are no compensating balance requirements on any of the committed
lines. At September 30, 1995, the company had $595 million outstanding under its
committed lines, including $296 million supporting the company's commercial
paper program.
The multi-option revolving credit agreements and the global revolving
credit agreements (collectively, the "Facilities") permit the company to borrow
in U.S. dollars or in other currencies, on a revolving credit basis. Interest
rates on debt outstanding under the Facilities are negotiated at the time of the
borrowings based either on "bid rates" from the participating banks, LIBOR plus
thirty-five basis points or, for the two $150 million facilities, forty basis
points, or at the banks' then current base rates. The Facilities call for the
company to pay: 1) an annual fee of twenty basis points per annum on $600
million of the committed amount and fifteen basis points per annum on $300
million of the committed amount, plus 2) letter of credit usage fees.
The other credit agreement permits the company to borrow in U.S. dollars or
other currencies. Interest rates on debt outstanding are set at the time of the
borrowings based on LIBOR plus forty basis points, or other alternative rates.
The company also pays an annual facility fee of fifteen basis points on the
committed amount.
Uncommitted lines: In addition to the committed lines, the company maintains
various domestic and international lines of credit for short-term debt with
banks under which $265 million may be borrowed on an unsecured basis on such
terms as the company and banks may mutually agree. The majority of these
arrangements do not have maturity dates, and can be withdrawn at the banks'
option. There are no fees or compensating balances associated with these lines.
Commercial paper: At September 30, 1995, the company had $500 million of
commercial paper facilities (of which $296 million was outstanding at September
30, 1995) all of which are supported by its committed lines of credit.
Domestically, the facilities were rated A-2 by Standard & Poors, and either D-2
by Duff & Phelps or P-2 by Moodys.
Term notes payable: Term notes payable include the following at September 30:
(in millions) 95 94
--------------------- ---- ----
Receivable backed commercial paper
(floating rate; due 1996) $225 $150
Floating rate; due 1996 230 87
Building mortgage (9.70%; due 1998) 44 44
Guaranteed senior ESOP
notes (8.19%; due 1998) 8 10
---- ----
$507 $291
==== ====
Subsequent to the issuance of the mortgage, the company entered into an
interest rate swap agreement that effectively converted this obligation to a
floating rate obligation through maturity. See Note 13 of Notes to Consolidated
Financial Statements regarding the senior ESOP notes.
Senior notes and subordinated debt: Senior notes and subordinated debt include
the following at September 30:
<TABLE>
<CAPTION>
(in millions) 95 94
------------------ ----- -----
<S> <C> <C>
Senior notes:
Medium term notes ( 5.88% to 9.99%)<F1> $ 569 $ 564
8.95% Senior Notes due 1995<F2> - 150
9.75% Senior Notes due 1997<F3> 200 200
7.25% Senior Notes due 1998 200 -
7.75% Senior Notes due 1999 89 89
6.50% Senior Notes due 2000 199 -
9.02% Senior Notes, Series B, due 1995 - 18
9.38% Senior Notes, Series C, due 1996 19 19
----- -----
Total senior notes 1,276 1,040
Subordinated debt 13 33
----- -----
$1,289 $1,073
====== ======
---------------
<FN>
<F1> The company had outstanding interest rate swap agreements at September 30,
1995 and 1994 that effectively converted $76 million and $51 million,
respectively, of medium-term fixed rate borrowings to floating rate obligations
with an effective interest rate of 5.965% and 5.200%, respectively. The company
also had interest rate swap agreements at September 30, 1995 that effectively
converted $25 million of medium-term floating rate borrowings to fixed rate
obligations with an effective interest rate of 6.65%. The remaining terms of
these swap agreements are more than one year at September 30, 1995.
<F2>Subsequent to the issuance of these notes, the company entered into interest
rate swap agreements that effectively converted $50 million of these notes to a
floating rate obligation through May, 1994 and the balance to a floating rate
obligation through maturity.
<F3> Subsequent to the issuance of these notes, the company entered into an
interest rate swap agreement to effectively convert $50 million of these notes
to a floating rate obligation.
</FN>
-------------
</TABLE>
40
There are no sinking fund requirements associated with any of the company's
senior notes. At September 30, 1995, $50 million remains available for the sale
of debt securities under the most recent Form S-3 registration statement.
Discounted lease rentals: The company utilizes its lease rentals receivable and
underlying equipment in leasing transactions as collateral to borrow from
financial institutions at fixed rates on a nonrecourse basis. In return for this
secured interest, the company receives a discounted cash payment. In the event
of a default by a lessee, the financial institution has a first lien on the
underlying leased equipment, with no further recourse against the company.
Proceeds from discounting are recorded on the balance sheet as discounted lease
rentals; as lessees make payments to financial institutions, lease revenue
(i.e., interest income on direct financing and sales-type leases and rental
revenue on operating leases) and interest expense are recorded. Discounted lease
rentals are reduced by the interest method.
Future minimum lease payments and interest expense on leases that have been
discounted as of September 30, 1995 are as follows (in millions):
Rentals to be
received by Discounted
Years ending financial lease Interest
September 30, institutions rentals expense
------------ ------------ ------- --------
1996 $ 622 $ 561 $ 61
1997 376 344 32
1998 161 149 12
1999 63 58 5
2000 13 12 1
------ ------ ----
$1,235 $1,124 $111
====== ====== ====
Interest expense on discounted lease rentals was $98 million, $118 million,
and $144 million in fiscal 1995, 1994, and 1993, respectively.
Comdisco Receivables, Inc., a special purpose subsidiary of the company,
filed a statement for an offering of Certificates to be issued by the Comdisco
Receivables Trust 1993-A. In February, 1993, the Certificates were sold for $268
million with limited recourse to the company. Subsequent to the February, 1993
issuance, the company entered into an interest rate cap agreement to reduce its
exposure to rising interest rates.
The portion of the proceeds relating to direct financing leases was $180
million which resulted in a corresponding reduction in the net investment in
direct financing leases. The remaining proceeds of $88 million resulted from
operating leases and were included in discounted lease rentals.
Interest rate swap agreements and other derivative financial instruments: The
company is a party to a variety of interest rate and cross-currency interest
rate swap agreements and other financial instruments in order to limit its
exposure to a loss resulting from adverse fluctuations in foreign currency
exchange and interest rates. Interest rate swap contracts generally represent
the contractual exchange of fixed and floating rate payments of a single
currency. Cross-currency interest rate swap contracts generally involve the
exchange of payments which are based on the interest reference rates available
at the inception of the contract on two different currency principal balances
that are exchanged. The principal balances are re-exchanged at an agreed upon
rate at a specified future date. Credit and market risk exist with respect to
these instruments.
The following table presents the contract or notional (face) amounts
outstanding and the fair value of the contracts based generally on their
termination values at September 30:
95 94
--------------- ----------------
Notional Fair Notional Fair
(in millions) amount value amount value
----------------------- ------- ----- ------ -----
Interest rate swap
agreements $230 $(3) $359 $(11)
Cross-currency interest
rate swap agreements 70 (5) - -
Interest rate caps 23 - 122 -
Forwards and futures 112 - - -
The impact of these contracts on interest expense for fiscal years 1995 and
1994 was immaterial. The average notional amount outstanding of the floating
rate to fixed rate contracts in fiscal 1995, including those noted in the
discussions above, was $61 million, with an average pay rate of 8.87% and an
average receive rate of 6.01%. The average notional amount outstanding of the
fixed rate to floating rate contracts in fiscal 1995, including those noted in
the discussions above, was $191 million, with an average pay rate of 5.99% and
an average receive rate of 5.66%. The company is exposed to credit loss in the
event of non-performance by the other parties to the interest rate swap
agreements. However, because of the credit quality of the counterparties, the
company does not anticipate non-performance by the counterparties.
41
Other Financial Information
Note 7 Receivables
Receivables (net of allowance for doubtful accounts of $17 million in 1995 and
$10 million in 1994) include the following as of September 30:
(in millions) 95 94
------------- ---- ----
Accounts, net $106 $ 99
Income taxes 15 32
Notes 13 4
Other 42 34
---- ----
$176 $169
==== ====
The allowance for doubtful accounts includes management's estimate of the
amounts expected to be lost on specific accounts and for losses on other as of
yet unidentified accounts included in receivables at September 30, 1995,
including estimated losses on future noncancelable lease rentals and
subscription fees, net of estimated recoveries from remarketing of related
leased equipment. In estimating the reserve component for unidentified losses
within the receivables and lease portfolio, management relies on historical
experience, adjusted for any known trends, including industry trends, in the
portfolio.
Note 8 IBM Litigation Settlement and Contingencies
Note 16 to the 1993 Consolidated Financial Statements discussed contingencies of
the company arising out of three legal actions filed against Comdisco by
International Business Machines Corporation ("IBM"), IBM Credit Corporation
("ICC") and certain IBM-related limited partnerships. On August 26, 1994, all of
the parties to the three lawsuits entered into a settlement agreement. Pursuant
to the settlement, Comdisco and all of the parties to the litigation exchanged
mutual general release; the company agreed not to engage in the future sale or
lease of altered IBM parts except pursuant to the requirements of the
Stipulation and Order for Permanent Injunction entered into between the parties
and ordered by the Court in IBM v. Comdisco, 91 C6777 (N.D. Ill.); the company
agreed not to lease, sublease, sell or relocate any ICC-owned equipment without
IBM's prior written consent; the company agreed not to copy any IBM copyrighted
microcode and software other than in accordance with license agreements
pertaining thereto; and the company paid IBM $70 million. During the quarters
ended March 31, 1992 and June 30, 1994, the company recorded charges of $20
million ($12 million after-tax) and $10 million ($6 million after-tax),
respectively, for the establishment of, and increases to, a litigation reserve
to cover estimated costs associated with the litigation.
The company is also party to various other legal actions and administrative
proceedings and subject to various claims arising in the ordinary course of
business. The company believes that the disposition of these matters will not
have a material adverse effect on the financial position of the company.
Note 9 Discontinued Operations
In November, 1991, the company's board of directors voted to discontinue the
company's involvement in the oil and gas business.
Based on certain events occurring in fiscal 1993, management revised its
estimate of the net realizable value of the company's oil and gas investment,
resulting in a loss provision of $33 million ($(20) million after-tax).
In September, 1994, the joint venture adopted a plan of dissolution and
transferred certain assets, specifically the leases, personal property and
incidental rights and the crude oil and other hydrocarbons, along with the
assumption of certain liabilities, for a minority interest in Consolidated Oil &
Gas, Inc. The exchange was based on the estimated fair value of the assets,
which approximated book value. The assets remaining in the joint venture were
disposed of during fiscal 1995. In September, 1995, Hugoton Energy Corporation
acquired control of Consolidated Oil & Gas, Inc. As a result of the merger, the
company received $14 million in cash and 3.6 million shares of Hugoton Energy
Corporation common stock.
Note 10 Income Taxes
Effective October 1, 1992, the company adopted FAS 109 (see also Note 1 of Notes
to Consolidated Financial Statements). The cumulative effect of the change
increased net earnings to common stockholders by $20 million, or $.33 per common
share. The cumulative effect primarily represents the impact of adjusting
deferred taxes to reflect the then current Federal tax rate of 34% as opposed to
the higher rates that were in effect when the deferred taxes originated. As
permitted by FAS 109, the company has elected not to restate the financial
statements of any prior years.
Income taxes included in the Consolidated Statements of Earnings were as
follows:
(in millions) 95 94 93
----------------------- --- --- ----
Continuing operations $64 $36 $ 57
Discontinued operations - - (13)
Cumulative effect of
accounting change - - (20)
--- --- ----
$64 $36 $ 24
=== === ====
42
The geographical sources of earnings from continuing operations before
income taxes and cumulative effect of accounting change were as follows:
(in millions) 95 94 93
--------------------- ---- --- ----
United States $154 $63 $132
Outside United States 14 26 12
---- --- ----
$168 $89 $144
==== === ====
Cumulative unremitted earnings of foreign operations amounting to $49
million after foreign taxes at September 30, 1995, were expected by management
to be reinvested. Accordingly, no provision has been made for additional U.S.
taxes which would be payable if such earnings were to be remitted to the parent
company as dividends. The amount of U.S. taxes, if any, are impracticable to
determine.
The components of the income tax provision (benefit) charged (credited) to
continuing operations were as follows:
(in millions) 95 94 93
--------------------- --- ---- ---
Current:
U.S. Federal $16 $(11) $33
U.S. state and local 10 8 3
Outside United States 9 7 5
--- ----- ---
35 4 41
--- ----- ---
Deferred:
U.S. Federal 30 32 11
U.S. state and local (1) (4) 4
Outside United States - 4 1
--- ----- ---
29 32 16
--- ----- ---
Total tax provision $64 $ 36 $57
=== ===== ===
The reasons for the difference between the U.S. Federal income tax rate and
the effective income tax rate for earnings from continuing operations were as
follows:
Percentage of pretax earnings
-----------------------------
95 94 93
---- ---- ----
U.S. Federal income tax rate 35.0% 35.0% 34.8%
Increase (reduction) resulting from:
State income taxes, net
of U.S. Federal tax benefit 3.6 2.8 3.6
Foreign income tax rate
differential .1 6.4 .2
Tax effect of foreign
losses (utilized)/deferred 2.2 (4.8) 1.3
Insurance proceeds - (8.7) -
Changes in estimates of
previously provided taxes (2.0) 12.1 -
Cumulative effect of U.S. tax
rate change - - 3.4
Utilization of capital loss - (2.7) (3.4)
Other, net (.9) (.1) .1
---- ---- ----
38.0% 40.0% 40.0%
==== ==== ====
Deferred tax assets and liabilities at September 30, 1995 and 1994 were as
follows:
(in millions) 95 94
--------------------------------------- ---- ----
Deferred tax assets:
Equity transactions $431 $256
Foreign loss carryforwards 34 30
U.S. net operating loss carryforwards 67 171
AMT credit carryforwards 78 62
Deferred income 30 32
Other, net - 9
Gross deferred tax assets 640 560
Less: valuation allowance (34) (30)
---- ----
Total deferred tax assets 606 530
---- ----
Deferred tax liabilities:
Lease accounting 803 714
Foreign 39 44
Deferred expenses 8 1
---- ----
Total deferred tax liabilities 850 759
---- ----
Net deferred tax liabilities $244 $229
==== ====
43
For financial reporting purposes, the company has approximately $80 million
of foreign net operating loss carryforwards, most of which have no expiration
date. The company has recognized a valuation allowance of $34 million to offset
this deferred tax asset. During fiscal 1995, changes in the valuation allowance
included increases of $3 million from deferring foreign losses and $1 million
from foreign exchange rate and tax rate changes.
At September 30, 1995, the company has available for U.S. Federal income
tax purposes, the following carryforwards (in millions):
Net
Year scheduled operating
to expire loss
-------------- ---------
2004 $ 2
2005 5
2006 4
2007 163
2008 3
----
$177
====
For U.S. Federal income tax purposes, the company has approximately $78
million of alternative minimum tax ("AMT") credit carryforwards available to
reduce regular taxes in future years. AMT credit carryforwards do not have an
expiration date.
All years prior to fiscal year 1989 are closed to further assessment by the
Internal Revenue Service (the "Service") due to the expiration of the Statute of
Limitations. In February, 1992 the Service commenced an income tax audit for
fiscal years 1989 and 1990. In May, 1994, a 30-Day Letter was received by the
company proposing income tax deficiencies of $9.8 million and $2.5 million for
fiscal years 1989 and 1990, respectively. In August, 1994, the company filed a
Protest with the Service requesting a conference with the Appeals Division
("Appeals") to discuss the issues which are in disagreement. The company,
Appeals, and the Service arediscussing the resolution of these issues. The
company believes that all issues raised will be resolved with no material impact
on the company's financial condition. Additionally, during March, 1994, the
Service commenced routine income tax audits for fiscal years 1991, 1992 and
1993.
The company also undergoes audits by foreign, state and local tax
jurisdictions. To date, no material assessments have been made by these tax
authorities.
Note 11 Preferred Stock
There are 100,000,000 authorized shares of preferred stock - $.10 par value. The
board of directors establishes and designates the series and fixes the number of
shares and the relative rights, preferences and limitations of the
respective series. Whenever dividends on preferred stock are in arrears six
quarters or more, holders of such stock (voting as a class) have the right to
elect two directors of the company until all cumulative dividends have been
paid. Dividends on outstanding preferred stock must be declared and paid before
dividends may be paid or set apart for payment on the common stock. Dividends
paid on preferred stock were $8 million, $9 million and $7 million in fiscal
1995, 1994 and 1993 respectively.
8.75% Cumulative Preferred Stock (at $25 stated value and liquidation
preference): The company issued 3,000,000 shares of 8.75% Cumulative Preferred
Stock, Series A (the "Series A Preferred Stock") on September 24, 1992, and
1,000,000 shares of 8.75% Cumulative Preferred Stock, Series B (the "Series B
Preferred Stock") (collectively, the "Series A and B Preferred Stock") on July
12, 1993. The Series A and B Preferred Stock have no preemptive rights, are not
convertible into shares of common stock or any other class of stock of the
company, and are not subject to any sinking fund or other obligation of the
company to repurchase or retire the Series A and B Preferred Stock.
The Series A Preferred Stock and the Series B Preferred Stock are not
redeemable prior to September 24, 1997 and July 12, 1998, respectively. After
September 24, 1997 and July 12, 1998, respectively, the Series A Preferred Stock
and the Series B Preferred Stock are subject to redemption at the company's
option, at any time, at $25 per share (plus accrued dividends). Net proceeds
received from the sale of the Series A Preferred Stock and the Series B
Preferred Stock, after deducting underwriting discounts and other expenses, were
$73 million and $24 million, respectively. The company, in connection with its
stock repurchase program, has repurchased, through the open market, 374,200
shares of its outstanding preferred stock. These shares have been retired.
Note 12 Common Stock
Cash dividends paid were $.24 per share in fiscal 1995, $.23 per share in fiscal
1994, and $.19 per share in fiscal 1993.
At September 30, 1995, 7,502,291 common shares were reserved for future
issuance under various stock option plans andthe Employee Stock Purchase Plan.
The company purchased 5,260,167 shares and 2,993,466 shares of common stock
at an aggregate cost of $86 million and $39 million in fiscal 1995 and 1994,
respectively. On March 1, 1995, the company issued 1,500,000 shares from
Treasury upon the conversion of a $20 million convertible subordinated
promissory note. These shares were repurchased on the same day at a price of
$16.67 per share.
44
In November, 1987, the company adopted a "Shareholder Rights Plan" (the
"Rights Plan") to deter coercive takeover tactics and to prevent an acquirer
from gaining control of the company without offering a fair price to all of the
company's stockholders. Under the Rights Plan, stockholders of record on
November 27, 1987 received a dividend distribution of one right for each share
of the company's common stock. The Rights Plan was amended and restated as of
November 7, 1994. The Rights Plan is incorporated by reference in the company's
Form 10-K for fiscal 1994 and the company's filing on Form 8-K in December,
1994.
Note 13 Employee Benefits Plans
In fiscal 1988, the company established the Comdisco, Inc. Employee Stock
Ownership Trust (the "Trust"). The Trust borrowed $20 million (the "ESOP Debt")
to purchase 1,508,982 shares of common stock held in treasury by the company at
a market price at the date of purchase of $13.25 per share.
The ESOP Debt is guaranteed by the company. The outstanding balance of the
ESOP Debt has been recorded in term notes payable in the consolidated balance
sheet and a like amount of deferred compensation has been recorded as a
reduction of stockholders' equity. Commencing November 1, 1989 and continuing
over the period of the ESOP Debt, the shares purchased by the Trust with the
ESOP Debt proceeds will be allocated to plan participants and deferred
compensation will be reduced by the amount of the principal payment on the ESOP
Debt. The company's annual contribution to the Trust plus dividends accumulated
on the unallocated common stock held by the Trust are used to repay the ESOP
Debt. The amount of the company's annual contribution is discretionary except
that it must be sufficient to enable the Trust to meet its current obligations.
The company has a profit sharing plan which, together with the Employee
Stock Ownership Plan (the "Plans"), covers substantially all domestic employees.
Company contributions to the Plans are based on a percentage of employees'
compensation, as defined. Benefits are accumulated on an individual employee
basis. Total expense under the Plans for each of the years ended September 30,
1995, 1994 and 1993, including interest expense of $1 million on the ESOP Debt
in each fiscal year, amounted to $4 million. The company utilizes the shares
allocated method for recognizing compensation on the Employee Stock Ownership
Plan. The amount contributed in fiscal 1995, 1994, and 1993 was $3 million,
net of dividends, and was used for debt service in each fiscal year.
The company's stock option plans provide for the granting of incentive
stock options and/or nonqualified options to employees and agents to purchase
shares of common stock.
On January 18, 1990, the stockholders approved the 1989 Non-Employee
Directors' Stock Option Plan (the "Non-Employee Plan"). Under the Non-Employee
Plan, each October 1, each individual who is a Non-Employee Director during the
fiscal year shall automatically be granted an option for 3,000 shares of the
company's common stock at the then fair market value.
Additional information on shares subject to options is as follows:
<TABLE>
<CAPTION>
(in thousands except option price range) 95 94 93
---------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Number of shares:
Shares under option at
beginning of year .................. 6,026 5,873 6,353
Options granted ......................... 939 2,868 35
Options exercised ....................... (1,034) (167) (69)
Options terminated ...................... (366) (2,548) (446)
-------- -------- --------
Shares under option at
end of year ........................ 5,565 6,026 5,873
======== ======== ========
Options available for future
grant at end of year ............... 1,643 2,216 2,535
======== ======== ========
Option price range of
outstanding options ................ $ 8.75- $ 6.08- $ 4.71-
$ 21.35 $ 21.35 $ 21.35
Aggregate option price:
Shares under option at
beginning of year .................. $ 65,367 $ 65,499 $ 70,877
Options granted ......................... 12,733 35,623 350
Options exercised ....................... (11,821) (1,209) (367)
Options terminated ...................... (4,116) (34,546) (5,361)
-------- -------- --------
Shares under option at
end of year ........................ $ 62,163 $ 65,367 $ 65,499
======== ======== ========
Options exercisable at
end of year ........................ 3,126 3,392 3,087
======== ======== ========
Aggregate option price of
exercisable options
outstanding at end of year $ 35,835 $ 38,650 $ 38,242
======== ======== ========
</TABLE>
45
Note 14 Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for the fiscal years ended September 30,
1995 and 1994, is as follows (in millions except for per share amounts):
<TABLE>
<CAPTION>
Quarter ended
----------------------------------------------------------------------
December 31, March 31, June 30, September 30,
--------------- --------------- --------------- ---------------
94 93 95 94 95 94 95 94
----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue $ 524 $ 536 $ 593 $ 529 $ 539 $ 514 $ 584 $ 519
Net earnings (loss) to common stockholders $ 23 $ 21 $ 24 $ 22 $ 24 $ 22 $ 25 $ (21)
Net earnings (loss) per common and
common equivalent share $0.41 $ 0.36 $0.43 $0.37 $0.44 $0.38 $0.45 $(0.35)
</TABLE>
Note 15 Segment Information
The company operates predominantly in the leasing industry. The company operated
in four principal geographic locations during fiscal 1995. The company also
operates in South America.
Transfers between geographic areas include a reasonable profit that is
eliminated in consolidation. Presented on page 47 is financial information
reflecting the company's leasing and disaster recovery operations by
geographic area for the years ended September 30, 1995, 1994 and 1993.
Note 16 Subsequent Event
On November 7, 1995, the board of directors authorized a three-for-two split of
the company's common stock to be distributed on December 8, 1995, to holders of
record on November 17, 1995. Accordingly, all references in the financial
statements and notes to common share data have been adjusted to reflect the
split.
46
<TABLE>
<CAPTION>
United Pacific Export Elimin- Consol-
(in millions) States Europe Canada Rim sales ations idated
---------------------------------- ------ ------ ---- ---- --- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Revenue from unaffiliated customers
Leasing ......................................... $1,503 $ 369 $ 50 $ 51 $ - $ - $1,973
Disaster recovery ............................... 219 33 15 - - - 267
------ ------ --- ---- --- ------ ------
Total revenue from unaffiliated customers............. 1,722 402 65 51 - - 2,240
Transfers between geographic areas ................... 13 24 12 3 8 (60) -
------ ------ ---- ---- --- ------ ------
Total revenue ............................ $1,735 $ 426 $ 77 $ 54 $ 8 $ (60) $2,240
====== ====== ==== ==== === ====== ======
Earnings (loss) from continuing operations
before income taxes and cumulative
effect of change in accounting principle
Leasing .......................................... $ 124 $ 8 $ 13 $ (5) $ - $ (1) $ 139
Disaster recovery ................................ 30 (2) 1 - - - 29
------ ------ ---- ---- --- ------ ------
Total earnings (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle............... $ 154 $ 6 $ 14 $ (5) $ - $ (1) $ 168
====== ====== ==== ==== === ===== ======
Total assets (end of year)
Leasing .......................................... $3,922 $ 680 $126 $100 $23 $(107) $4,744
Disaster recovery ................................ 239 61 19 - - (24) 295
------ ------ ---- ---- --- ----- ------
Total assets .................................... $4,161 $ 741 $145 $100 $23 $(131) $5,039
====== ====== ==== ==== === ===== ======
1994
Revenue from unaffiliated customers
Leasing .......................................... $1,507 $ 231 $ 62 $ 56 $ - $ - $1,856
Disaster recovery ................................ 201 25 16 - - - 242
------ ------ ---- ---- --- ----- ------
Total revenue from unaffiliated customers............. 1,708 256 78 56 - - 2,098
Transfers between geographic areas ................... 9 37 6 4 3 (59) -
------ ------ ---- ---- --- ----- ------
Total revenue $1,717 $ 293 $ 84 $ 60 $ 3 $ (59) $2,098
====== ====== ==== ==== === ===== ======
Earnings (loss) from continuing operations
before income taxes and cumulative
effect of change in accounting principle
Leasing .......................................... $ 57 $ 3 $ 12 $ 1 $ - $ (2) $ 71
Disaster recovery ................................ 19 (2) 1 - - - 18
------ ------ ---- ---- --- ----- ------
Total earnings (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle .............. $ 76 $ 1 $ 13 $ 1 $ - $ (2) $ 89
====== ====== ==== ==== === ===== ======
Total assets (end of year)
Leasing .......................................... $3,814 $ 545 $143 $100 $22 $ (66) $4,558
Disaster recovery ................................ 211 42 16 - - (20) 249
------ ------ ---- ---- --- ----- ------
Total assets .................................... $4,025 $ 587 $159 $100 $22 $ (86) $4,807
====== ====== ==== ==== === ===== ======
1993
Revenue from unaffiliated customers
Leasing .......................................... $1,501 $ 303 $ 79 $ 54 $ - $ - $1,937
Disaster recovery ................................ 171 29 16 - - - 216
------ ------ ---- ---- --- ----- ------
Total revenue from unaffiliated customers ............ 1,672 332 95 54 - - 2,153
Transfers between geographic areas ................... 13 8 26 9 4 (60) -
------ ------ ---- ---- --- ----- ------
Total revenue ................................. $1,685 $ 340 $121 $ 63 $ 4 $ (60) $2,153
====== ====== ==== ==== === ===== ======
Earnings (loss) from continuing operations
before income taxes and cumulative
effect of change in accounting principle
Leasing ........................................... $ 126 $ - $ 9 $ 2 $ - $ (3) $ 134
Disaster recovery ................................. 11 (1) - - - - 10
------ ------ ---- ---- --- ----- ------
Total earnings (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle ............... $ 137 $ (1) $ 9 $ 2 $ - $ (3) $ 144
====== ====== ==== ==== === ===== ======
Total assets (end of year)
Leasing ........................................... $3,983 $ 608 $169 $ 85 $21 $(90) $4,776
Disaster recovery ................................. 151 41 11 - - (19) 184
------ ------ ---- ---- --- ----- ------
Total assets ..................................... $4,134 $ 649 $180 $ 85 $21 $(109) $4,960
====== ====== ==== ==== === ===== ======
</TABLE>
47
Independent Auditors' Report
The Stockholders and Board of Directors, Comdisco, Inc.:
We have audited the accompanying consolidated balance sheets of Comdisco, Inc.
and subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended September 30, 1995.These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated 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 financial position of Comdisco,
Inc. and subsidiaries at September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1 and Note 10 of Notes to Consolidated Financial
Statements, the company adopted the provisions of FASB Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, in 1993.
/s/ KPMG PEAT MARWICK LLP
Chicago, Illinois
November 7, 1995
48
Exhibit 21.00
<TABLE>
<CAPTION>
State or Jurisdiction Percentage of Voting
of Incorporation Securities Owned
--------------------- --------------------
<S> <C> <C>
Comdisco Australia PTY. Ltd. Australia 100%
Comdisco Aviation, Inc. Delaware 100%
Comdisco Belgium S.A. Belgium 100%
Comdisco Canada Ltd. Canada 100%
Comdisco Canada Exploration Ltd. Canada 100%
Comdisco Canada Resources Ltd. Canada 100%
Comdisco Danmark A/S Denmark 100%
Comdisco Deutschland GmbH Germany 100%
Comdisco Disaster Recovery Services
Canada Ltd. Canada 100%
Comdisco Disaster Recovery Services
Deutschland GmbH Germany 100%
Comdisco Disaster Recovery Services
Nederland B.V. Netherlands 100%
Comdisco Disaster Recovery Services
U.K. Limited United Kingdom 100%
Comdisco Exploration, Inc. Delaware 100%
Comdisco Factoring (Nederland) B.V. Netherlands 100%
Comdisco Financial Services, Inc. Delaware 100%
Comdisco Finland OY Finland 100%
Comdisco Finance (Nederland) B.V. Netherlands 100%
Comdisco Financial Services VmbH Germany 100%
Comdisco France S.A. France 100%
Comdisco Funding Limited (U.K.) United Kingdom 100%
Comdisco Group, Inc. Delaware 100%
Comdisco Handelsgesellschaft M.B.H. Austria 100%
Comdisco Holdings U.K. Ltd. United Kingdom 100%
Comdisco Investment Group, Inc. Delaware 100%
Comdisco Italia SRL Italy 100%
Comdisco Leasing Ltd. U.K. United Kingdom 100%
Comdisco Leasing S.A./N.V. Belgium 100%
Comdisco Medical Equipment Group, Inc. Delaware 100%
Comdisco Medical Exchange, Inc. Delaware 100%
Comdisco Nederland B.V. Netherlands 100%
Comdisco Japan, Inc. Japan 95%
Comdisco Norway A/S Norway 100%
Comdisco Portugal Computadores, LDA Portugal 100%
Comdisco Receivables, Inc. Delaware 100%
Comdisco Resources, Inc. Delaware 100%
Comdisco, S.A. Switzerland 100%
Comdisco Sweden, A.B. Sweden 100%
Comdisco Switzerland, S.A. Switzerland 100%
Comdisco Systems, Inc. Delaware 100%
Comdisco Trade, Inc. Delaware 100%
Comdisco United Kingdom Limited United Kingdom 100%
Comdisco International Trade
Corporation Virgin Islands 100%
Aegeris International France 100%
Failsafe/Roc Ltd. United Kingdom 100%
ROC Ltd. United Kingdom 100%
Comdisco Computing Services
Corporation Delaware 100%
CDS Foreign Holdings, Inc. Delaware 100%
Comdisco Asia PTE. LTD. Singapore 100%
Computer Discount Corporation Illinois 100%
Computer Discount Corporation
S.A. - Madrid Spain 100%
Computer Recovery Centre
SDN BHD Malaysia 10%
Promodata S.A. France 90%
628761 Alberta Ltd. Canada 100%
</TABLE>
Subsidiaries of the Registrant are included in the consolidated financial
statements.
Exhibit 23.00
[KPMG Peat Marwick LLP Letterhead]
Consent of KPMG Peat Marwick LLP
The Board of Directors
Comdisco, Inc.:
We consent to incorporation by reference in Registration Statement No. 2-76569
on Form S-8, Registration Statement No. 33-20715 on Forms S-8 and S-3,
Registration Statement No. 33-63823 on Form S-3 and Registration Statement No.
33-50659 on Form S-8 of Comdisco, Inc. of our reports dated November 7, 1995,
relating to the consolidated balance sheets of Comdisco, Inc. and subsidiaries
as of September 30, 1995 and 1994 and the related consolidated statements of
earnings, stockholders' equity, and cash flows and related schedule for each of
the years in the three-year period ended September 30, 1995 which reports
appear, or are incorporated by reference, in the September 30, 1995 annual
report on Form 10-K of Comdisco, Inc.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
December 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information
extracted from the Annual Report on Form 10-K
for the year ended September 30, 1995 and is qualified
in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000722487
<NAME> Comdisco, Inc.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> Oct-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 193
<ALLOWANCES> 17
<INVENTORY> 133
<CURRENT-ASSETS> 394
<PP&E> 4,075
<DEPRECIATION> 5,653
<TOTAL-ASSETS> 1,578
<CURRENT-LIABILITIES> 772
<BONDS> 1,289
<COMMON> 5
<PREFERRED-MANDATORY> 0
<PREFERRED> 91
<OTHER-SE> 680
<TOTAL-LIABILITY-AND-EQUITY> 5,039
<SALES> 1,573
<TOTAL-REVENUES> 2,240
<CGS> 1,023
<TOTAL-COSTS> 1,798
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274
<INCOME-PRETAX> 168
<INCOME-TAX> 64
<INCOME-CONTINUING> 104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96
<EPS-PRIMARY> 1.730
<EPS-DILUTED> 1.730
</TABLE>