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years.
Total costs and expenses of $417.8 million for¬scal
1982 increased 49% over total costs and expenses
International Operations
of $280.2 million in ¬scal 1981. Fiscal 1981 total
costs and expenses were 15% higher than ¬scal The Company operated principally in three geo-
1980. The increases were the result of the growth in graphic areas during ¬scal 1982 and 1981; United
the Company™s lease portfolio and customer base States, Europe and Canada. The Company has sub-
and the continuing expansion in marketing of the sidiaries in Belgium, Germany, Switzerland, the
Company™s services. Netherlands, France, the United Kingdom and Can-
ada. These subsidiaries offer services similar to
Selling, general and administrative expenses were
those offered in the United States.
$51.8 million in ¬scal 1982, $28.5 million in ¬scal
1981 and $19.3 million in ¬scal 1980. The
A more favorable environment in ¬scal 1982
increases were primarily due to costs associated with
resulted in an increase in revenue from international
the Company™s expanding marketing activities,
operations of 42% from $55.9 million in ¬scal 1981
including higher commissions and administrative
to $79.6 million in ¬scal 1982. The prior year™s
expenses.
results had been depressed as a result of computer
The increases in interest expense in ¬scal 1982 and users deferring action pending shipment of new
¬scal 1981 were due to increased discounted lease products. International revenues represented 17% of
rentals as a result of the growth in the Company™s the Company™s total revenue in ¬scal 1982, and
leasing activity. Interest expense on discounted 18% in ¬scal 1981.
leases, which is a non-cash expense, is the largest
component of total interest expense (69% and 46% Market and Dividend Information
of total interest expense in ¬scal 1982 and 1981,
respectively). The Company ¬nances leases by The Company™s common stock is traded on the New
assigning the noncancellable rentals to ¬nancial York Stock Exchange under the symbol CDO. The
institutions on a nonrecourse basis at a ¬xed interest following table shows the quarterly price range and
rate and receives from the lender the present value dividends paid for ¬scal years 1982 and 1981,
of the rental payments (the discounted amount). As adjusted to re¬‚ect the three-for-two and ¬ve-for-four
rental payments are made directly to the lender, the common stock splits effected in March 1982 and
Company recognizes interest expense. 1981, respectively.
817
Case: Comdisco, Inc. (A)




87
Part 4 Additional Cases




has declined in each of the last three ¬scal years, to
1982 1981
Qtr. High Low Div. High Low Div. 16% at September 30, 1982, compared to 29% at
September 30, 1980. Improved earnings have con-
1st $18.00 $11.75 $.05 $13.27 $ 7.87 $.04
2nd 18.00 13.50 .06 15.50 11.50 .05 tributed to the high returns on average stockholders™
3rd 19.25 15.50 .06 16.09 13.17 .05
equity. This key ¬nancial measure of performance
4th 23.00 15.00 .06 15.33 10.67 .05
reached 39.2% in ¬scal 1982, compared with
30.6% in ¬scal 1981. The Company™s strong ¬nan-
At September 30, 1982, there were approximately
cial position and history of earnings growth provide
2,900 record holders of common stock.
a solid base for obtaining the necessary ¬nancial
resources to ¬nance additional growth and for
Financial Position
investment opportunities.
During ¬scal 1982, the Company™s ¬nancial posi-
tion and liquidity improved signi¬cantly, with cash Ratios
and marketable securities amounting to $39.8 mil- The following table presents ratios which illustrate
lion at September 30, 1982 compared to $9.8 mil-




Comdisco (A)
the changes and trends for the last three ¬scal years:
lion at September 30, 1981. These improvements
1982 1981 1980
were due to an increased earnings level and contin-
Return on average stockholders™
ued emphasis on effective asset management.
equity 39.2% 30.6% 18.0%
Major sources and uses of funds are set forth in the Return on average assets 6.2% 4.9% 3.5%
Consolidated Statements of Changes in Financial Earnings before income taxes (as a
Position. percentage of revenue) 11.4% 7.1% 3.5%
Net earnings (as a percentage of
At September 30, 1982, the Company had $45 mil- revenue) 6.2% 5.2% 2.8%
lion of available borrowing capacity under various
lines of credit from commercial banks. During ¬scal
1982, the Company entered into agreements for the
purpose of issuing commercial paper which may be
used from time to time to meet some of the Com-
pany™s short term debt requirements. These facilities
ensure the availability of signi¬cant funds to ¬nance
additional growth.
The trend of computer users toward leasing rather
than purchasing computer equipment is expected to
continue due to economic conditions, IBM pricing
policies, and new product announcements. The
major portion of funds required by the Company to
¬nance the purchase of equipment acquired for
leasing is generated by assigning the noncancelable
rentals to various ¬nancial institutions at ¬xed inter-
est rates on a nonrecourse basis.
In June 1981, the Company sold $50 million of
13% convertible subordinated debentures.The pro-
ceeds of the lower cost, ¬xed-rate long term debt
were used to replace bank borrowings. The Com-
pany had no short term debt at September 30,
1982.
Total notes and debentures as a percentage of total
capital (the sum of notes and debentures payable,
discounted lease rentals and stockholders™ equity)
818 Case: Comdisco, Inc. (A)




88 Part 4 Additional Cases




CONSOLIDATED FINANCIAL STATEMENTS

FIVE YEAR SELECTED FINANCIAL DATA

Years Ended September 30, 1982 1981 1980 1979 1978

Consolidated Summary of Earnings (in thousands):

Revenue
Rental $206,592 $131,571 $ 80,979 $ 60,947 $ 42,524
Sale of computer equipment 166,705 125,384 149,708 149,983 103,995
Financial services 73,879 30,837 14,079 9,991 4,046
Other 24,454 13,746 8,348 4,355 2,717
Total Revenue 471,630 301,538 253,114 225,276 153,282
Comdisco (A)




Cost and expenses
Equipment depreciation,
amortization and rental 160,523 99,413 68,328 47,698 32,260
Cost of computer equipment 149,654 111,784 134,595 128,470 93,176
Financial services 8,617 6,784 4,878 5,108 1,768
Selling, general and admin-
istrative 51,785 28,529 19,341 16,176 9,246
Interest 47,242 33,657 16,988 13,319 10,360
Total cost and expenses 417,821 280,167 244,130 210,771 146,810
Earnings before income taxes 53,809 21,371 8,984 14,505 6,472
Income taxes 24,432 5,730 1,870 3,900 1,550
Net earnings $ 29,377 $ 15,641 $ 7,114 $ 10,605 $ 4,922

Common and Common Equivalent Share Data:
Net earnings $ 2.27 $ 1.35 $ .65 $ 1.07 $ .53
Stockholders™ equity $ 7.74 $ 5.17 $ 3.95 $ 3.50 $ 1.77
Average shares outstanding (in
thousands) 14,487 12,270 11,051 9,929 9,222
Cash dividends paid $ .23 $ .18 $ .15 $ .12 $ .06

Financial Position (in thousands):
Total assets $536,679 $404,507 $229,170 $173,950 $144,223
Total long-term debt 83,271 84,945 29,055 25,573 25,447
Discounted lease rentals 261,780 197,672 85,612 74,569 61,703
Stockholders™ equity 91,056 58,746 43,565 35,508 14,994


Common and common equivalent share data have been adjusted to reflect a three-for-two stock split effected in
February 1978, a two-for-one common stock split effected July 1978, a three-for-two common stock split effected in
February 1979, a five-for-four common stock split effected in March 1981, and a three-for-two common stock split ef-
fected in March 1982.
819
Case: Comdisco, Inc. (A)




89
Part 4 Additional Cases




CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares)

September 30, 1982 1981

ASSETS
Cash and marketable securities (at cost of $3,909 in 1982 and $1,883 in
1981 which approximates market) $ 39,762 $ 9,848
Receivables:
Accounts and notes (Net of allowance for doubtful accounts of $628 in
1982 and $528 in 1981) 41,368 28,379
Other 3,687 3,827
Inventory of computer equipment 35,382 25,036




Comdisco (A)
Net investment in sales-type and direct ¬nancing leases 23,682 17,890
Leased and other equipment:
Leased computer equipment 502,494 374,044
Capitalized leases”computer equipment 24,158 23,225
Buildings, furniture and other 7,959 4,184
Total equipment 534,611 401,453
Less: accumulated depreciation and amortization 192,714 115,073
Net equipment 341,897 286,380
Other assets and deferred charges 50,901 33,147
$536,679 $404,507

LIABILITIES AND STOCKHOLDERS™ EQUITY
Note payable to bank $ 2,385 $ 3,445
Convertible subordinated debentures 50,000 50,000
Subordinated debentures 12,250 12,250
Accounts payable 19,110 27,492
Obligations under capital leases 18,636 19,250
Income taxes:
Current 6,076 ”
Deferred 30,121 13,017
Other liabilities 45,265 22,635
Discounted lease rentals 261,780 197,672
445,623 345,761
Stockholders™ equity:
Common stock $.10 par value. Authorized 50,000,000 shares in 1982 and
15,000,000 shares in 1981; issued 11,769,043 shares (7,571,151 in
1981) 1,177 757
Additional paid-in capital 18,965 14,630
Deferred translation adjustment (354) ”
Retained earnings 71,268 43,359
Total stockholders™ equity 91,056 58,746
$536,679 $404,507

See accompanying notes to consolidated financial statements.
820 Case: Comdisco, Inc. (A)




90 Part 4 Additional Cases




CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share data)

Years Ended September 30, 1982 1981 1980

Revenue
Rental $206,592 $131,571 $ 80,979
Sale of computer equipment 166,705 125,384 149,708
Financial services 73,879 30,837 14,079
Other 24,454 13,746 8,348
Total revenue 471,630 301,538 253,114

Cost and Expenses
Equipment depreciation, amortization and rental 160,523 99,413 68,328
Comdisco (A)




Cost of computer equipment 149,654 111,784 134,595
Financial services 8,617 6,784 4,878

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