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Selling, general and administrative 51,785 28,529 19,341
Interest 47,242 33,657 16,988
Total costs and expenses 417,821 280,167 244,130
Earnings before income taxes 53,809 21,371 8,984
Income taxes 24,432 5,730 1,870
Net Earnings $ 29,377 $ 15,641 $ 7,114
Net Earnings Per Common and Common
Equivalent Share $ 2.27 $ 1.35 $ .65

See accompanying notes to consolidated financial statements.
821
Case: Comdisco, Inc. (A)




91
Part 4 Additional Cases




CONSOLIDATED STATEMENTS OF STOCKHOLDERS™ EQUITY
(in thousands)

Years Ended September 30, 1982, 1981 and 1980
Deferred
Common Stock Additional Retained Translation
$.10 Par Palue Paid-in Capital Earnings Adjustment

Balance at September 30, 1979 $ 541 $12,405) $22,56) $ ”)
Net earnings ” ”) 7,114) ”)
Dividends paid ” ”) (865) ”)
Stock options exercised 46 639) ”) ”)
Income tax bene¬ts resulting




Comdisco (A)
from exercise of non-
quali¬ed stock options ” 1,123) ”) ”)
Balance at September 30, 1980 587 14,167) 28,811) ”)
Net earnings ” ”) 15,641) ”)
Dividends paid ” ”) (1,093) ”)
Stock split 148 (148) ”) ”)
Stock options exercised 22 611) ”) ”)
Balance at September 30, 1981 757 14,630) 43,359) ”)
Cumulative amount as of
September 30, 1981 ” ”) ”) (232)
Net earnings ” ”) 29,377) ”)
Dividends paid ” ”) (1,468) ”)
Stock split 391 (400) ”) ”)
Stock options exercised 14 835) ”) ”)
Common stock issued 15 2,648) ”) ”)
Translation adjustment ” ”) ”) (122)
Income tax bene¬ts resulting
from exercise of non-
quali¬ed stock options ” 1,252) ”) ”)
Balance at September 30, 1982 $1,177 $18,965) $71,26) $(354)


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




92 Part 4 Additional Cases




CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(in thousands)

Years Ended September 30, 1982 1981 1980

Source of Funds:
From operations
Net earnings $ 29,377 $ 15,641 $ 7,114
Noncash charges (credits) to operations:
Depreciation and amortization 133,902 77,528 46,212
Increase in receivables (12,849) (5,531) (12,278)
Investment in sales-type and direct ¬nancing leases (5,792) (11,732) 323
Income taxes 23,180 5,730 747
Comdisco (A)




Increase in accounts payable and accrued liabilities 14,248 18,611 11,322
Other, net 474 (1,233) 2,490
Total provided from operations 182,540 99,014 55,930
Proceeds from issuance of subordinated debentures ” 48,560 ”
Increase (decrease) in notes payable (1,060) (33,460) 25,339
Obligations under capital leases 5,663 14,249 2,885
Discounted lease rentals 145,626 183,557 62,786
Other 4,201 924 766
336,970 312,844 147,706

Application of Funds:
Increase in leased equipment and inventory 190,180 202,002 75,361
Reduction of discounted lease rentals and obligations under
capital leases 87,795 75,781 55,916
Purchase of subordinated debentures ” 2,162 ”
Capitalized leases”computer equipment 5,663 14,249 2,885
Other assets and deferred charges 21,950 12,343 13,555
Cash dividends 1,468 1,093 865
307,056 307,630 148,582
Increase (decrease) in cash and marketable securities 29,914 5,214 (876)
Cash and marketable securities at beginning of year 9,848 4,634 5,510
Cash and marketable securities at end of year $ 39,762 $ 9,848 $ 4,634


See accompanying notes to consolidated financial statements.
823
Case: Comdisco, Inc. (A)




93
Part 4 Additional Cases




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Signi¬cant Accounting Policies tions, which are structured as tax advantaged
leases, entitle the Company to the use of such
Principles of Consolidation: The accompanying
equipment for periods ranging generally from one
consolidated ¬nancial statements include the
to six years subsequent to the initial lease expiration
accounts of the Company and its wholly-owned sub-
date.
sidiaries after elimination of intercompany accounts
and transactions. The Company, through its CFS subsidiary, has
entered into certain computer equipment transac-
Revenue Recognition: Leases are accounted for
tions in which it has leased equipment (the “Lease”)
either as sales-type, direct ¬nancing or operating
and in turn has subleased such equipment (the
leases. Lease terms generally range from four
“Sublease”). In substantially all of these transactions,
months to ¬ve years. Revenue from sales-type leases
the Lease term exceeds the Sublease term. Monthly
is recorded upon acceptance of the equipment by
Sublease rentals are greater than the monthly Lease
the customer and is re¬‚ected as sale of computer




Comdisco (A)
rentals; however, the present value of the total Sub-
equipment. Revenue from direct ¬nancing leases is
lease rentals (“Sublease Proceeds”) may be less than
recorded over the term of the lease as interest
the present value of the total Lease rentals (“Lease
income calculated using the interest method. Rental
Obligations”) due to the difference in lease terms.
revenue from operating leases is recognized in
Rentals from the sublease are discounted by the
equal monthly amounts over the term of the lease.
Company with a ¬nancial institution on a nonre-
Revenue from the sale of computer equipment and course basis. An escrow account is established to
the related cost of equipment is re¬‚ected in earnings fund the Company™s obligations under the lease for
at the time of acceptance of the equipment by the the period after the expiration of the Sublease. In the
customer. event the Sublease Proceeds exceed the Lease Obli-
gations, the Company recognizes pro¬t. When
Revenue from the sale of equipment subject to oper-
Lease Obligations exceed the Sublease Proceeds, no
ating leases is recognized at the closing of the trans-
pro¬t is recognized and the next excess Lease Obli-
actions and is included as sale of computer
gation is deferred to be recovered from the Com-
equipment in ¬scal 1981 and 1980. In addition to
pany™s right to future rentals during the remaining
this revenue, the Company is also entitled to the use
term of the Lease. At September 30, 1982 and
of such equipment subsequent to the lease expira-
1981, $21,258,000 and $10,148,000, respectively,
tion date for periods ranging generally from six
of costs were deferred in connection with such trans-
months to four years. Revenue, if any, from the re-
actions and are included in the balance sheet cap-
leasing of such equipment during this period is rec-
tion “Other assets and deferred charges.” The
ognized upon acceptance of the equipment by the
Company recognized $3,113,000, $4,286,000,
customer and is re¬‚ected as other revenue.
and $1,890,000 of interest income on investments
Under the provisions of the Economic Recovery Tax
held in escrow during the years ended September
Act of 1981, the Company sold the tax bene¬ts
30, 1982, 1981 and 1980, respectively.
(investment tax credits and cost recovery allowances)
Inventory of Computer Equipment: Inventory of
on new equipment purchased for the Company™s
computer equipment is stated at the lower of cost or
lease portfolio. The proceeds from the sale of tax
market.
bene¬ts are recorded as ¬nancial services revenue.
Also included as ¬nancial services revenue are fees
Equipment, Depreciation and Amortization: Leased
for arranging tax bene¬t transfer agreements with
equipment owned by the Company is generally
third parties.
recorded at cost. Depreciation and amortization of
Fees from the sale of equipment included in the leased equipment are computed on the straight-line
Company™s lease portfolio of used equipment are method for ¬nancial reporting purposes to esti-
recognized at the closing of the transactions and mated fair market value at lease termination (See
included as ¬nancial services revenue. Such transac- Note 2).
824 Case: Comdisco, Inc. (A)




94 Part 4 Additional Cases




Deferred Lease Costs: Salesmen™s commissions and 2. Depreciable Lives
other direct expenses related to operating leases are Effective October 1, 1980 the Company extended its
deferred and amortized over the lease term. estimates of depreciable lives of certain IBM periph-
eral equipment. Effective January 1, 1981 the Com-
Income Taxes and Investment Tax Credits: Deferred
pany extended its estimates of depreciable lives and
income taxes have been provided for income and
salvage values of certain IBM peripheral equipment.
expenses which are recognized in different periods
Previously, this equipment was depreciated to zero
for income tax purpose than for ¬nancial reporting
by September 30, 1983. The changes in estimates
purposes. Investment tax credits are accounted for
were made based on revised market conditions and
on a ¬‚ow-through basis.
re¬‚ect current estimates of the equipment™s useful
Pro¬t Sharing Plan: The Company has a pro¬t shar- lives and salvage values. The effect of the changes
ing plan covering all employees. Company contri- on recorded leased equipment at the effective dates
butions to the plan are based on a percentage of of the changes was an increase in net earnings of
employees™ compensation, as de¬ned. Pro¬t sharing $4,488,000 (net of income taxes of $4,142,000), or
Comdisco (A)




payments are based on amounts accumulated on $.37 per share, for the year ended September 30,
an individual employees basis. Pro¬t sharing 1981.
expense for the years ended September 30, 1982,
3. Investment in Sales-Type and Direct
1981 and 1980 amounted to $590,000, $489,000
Financing Leases
and $178,000, respectively.
The following table lists the components of the net
Earnings Per Share: Earnings per common and
investment in sales-type and direct ¬nancing leases
common equivalent share are computed based on
as of September 30:
the weighted average number of common and com-
mon equivalent shares outstanding during each
1982 1981
period including the assumed conversion of the 13%
Minimum lease payments (in thousands)
convertible subordinated debentures, after elimina-
receivable $24,142 $18,504
tion of the related interest expense (net of tax) and

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