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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1994
Commission File Number 1-2964
__________________
TRANSAMERICA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0932740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices)
(Zip Code)
(4l5) 983-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Number of shares of Common Stock, $1 par value, outstanding as of close
of business on April 29, 1994: 74,864,848 shares.
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TRANSAMERICA CORPORATION
FORM 10-Q
Part I. Financial Information
Item 1. Financial Statements.
The following unaudited consolidated financial statements of
Transamerica Corporation and Subsidiaries, for the periods ended March 31,
1994 and 1993, do not include complete financial information and should be
read in conjunction with the Consolidated Financial Statements filed with the
Commission in Transamerica's Annual Report on Form 10-K for the year ended
December 31, 1993. The financial information presented in the financial
statements included in this report reflects all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of management,
necessary for a fair statement of results for the interim periods presented.
In the first quarter of 1994 Transamerica adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. This new standard requires Transamerica to report at fair
value those investments which it does not have the positive intent and ability
to hold to maturity. There is no effect on the income statement. To the
extent the securities marked to fair value relate to interest sensitive
insurance products an adjustment to deferred policy acquisition costs is also
made. The effect of these adjustments, net of federal income taxes, is
recorded in a separate component of shareholders' equity. All of
Transamerica's investments in debt securities have been classified as
available for sale at March 31, 1994. As of that date the unrealized gain
included in shareholders' equity as a result of adopting this new accounting
standard was $201.2 million.
On March 15, 1994, Transamerica acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
of Tiphook for $1,065 million in cash. For a discussion of this transaction
see Item 2 on Page 8 of this document.
On April 13, 1994, Transamerica sold its remaining 21% ownership interest
in Sedgwick Group plc. Proceeds from the sale approximated $320 million and
resulted in no gain or loss. Transamerica's investment in Sedgwick and its
share of Sedgwick's operating results and related goodwill amortization have
been separated from those of Transamerica's continuing operations and are
classified as discontinued operations. Prior period financial statements have
been reclassified accordingly.
On May 9, 1994, Transamerica commenced a tender offer to purchase up to
4,500,000 shares of its common stock, at prices not greater than $55 nor less
than $48 per share, as set forth in the Offer to Purchase dated May 9, 1994.
Transamerica will determine a single price (not greater than $55 nor less
than $48 per share) that it will pay for shares validly tendered, taking into
account the number of shares tendered and the prices specified by tendering
stockholders. Transamerica will select the Purchase Price that will enable it
to purchase up to 4,500,000 shares pursuant to the Offer. The Offer will
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expire on June 6, 1994, unless extended. Transamerica will use a portion of
the net proceeds from the sale of its remaining 21% ownership interest in
Sedgwick Group plc to purchase such shares.
* * * * *
The consolidated ratios of earnings to fixed charges were computed by
dividing income from continuing operations before fixed charges and income
taxes by the fixed charges. Fixed charges consist of interest and debt
expense and one-third of rent expense, which approximates the interest factor.
Results for the three months are not necessarily indicative of the
results for the entire year for most of the Corporation's businesses. This is
particularly true in the life insurance field, where mortality results in
interim periods may vary substantially from such results over a longer period.
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________
CONSOLIDATED BALANCE SHEET
Assets
March 31, December 31,
1994 1993
Investments, principally of life
insurance subsidiaries:
Fixed maturities--held for investment $18,553.0
Fixed maturities--available for sale $20,513.3 872.4
Mortgage loans and real estate 480.5 493.0
Equity securities, at fair value 449.2 466.1
Loans to life insurance policyholders 396.5 396.5
Short-term investments 301.7 190.8
_________ _________
22,141.2 20,971.8
Finance receivables 7,108.6 6,908.5
Less unearned fees ($236.6 in 1994
and $240.8 in 1993) and allowance for
losses 428.8 426.0
_________ _________
6,679.8 6,482.5
Cash and cash equivalents 100.8 92.7
Trade and other accounts receivable 2,339.7 2,015.4
Net assets of discontinued operations 304.8 310.2
Property and equipment, less accumulated
depreciation of $849.3 in 1994 and
$831.6 in 1993:
Land, buildings and equipment 347.3 345.7
Equipment held for lease 2,477.8 1,306.5
Deferred policy acquisition costs 1,664.4 1,929.3
Separate accounts administered by life
insurance subsidiaries 1,398.2 1,366.5
Goodwill, less accumulated amortization of
$117.1 in 1994 and $113.4 in 1993 491.7 495.4
Other assets 753.8 734.5
_________ _________
$38,699.5 $36,050.5
========= =========
(Amounts in millions)
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
_________________
CONSOLIDATED BALANCE SHEET (Continued)
Liabilities and Shareholders' Equity
March 31, December 31,
1994 1993
Life insurance policy liabilities $22,452.6 $21,951.8
Notes and loans payable, principally of
finance subsidiaries, of which $2,414
in 1994 and $2,023 in 1993 matures
within one year 8,933.8 7,704.0
Accounts payable and other liabilities 1,965.5 1,352.4
Income taxes 433.3 312.3
Separate account liabilities 1,398.2 1,366.5
Shareholders' equity:
Preferred Stock ($100 par value):
Authorized--1,200,000 shares; issuable
in series, cumulative
Outstanding--Dutch Auction Rate Trans-
ferable Securities, 2,250 shares, at
liquidation preference of $100,000
per share, weighted average dividend
rate of 3.02% in 1994 and 3.05% in 1993 225.0 225.0
Outstanding--Series D, 400,000 shares,
at liquidation preference of $500 per
share, cumulative dividend rate of 8.5% 200.0 200.0
Preference Stock (without par value)--
5,000,000 shares authorized; none
outstanding
Common Stock ($1 par value):
Authorized--150,000,000 shares
Outstanding--75,053,015 shares in 1994
and 76,398,888 shares in 1993, after
deducting 4,685,447 shares and
3,339,574 shares in treasury 75.0 76.4
Additional paid-in capital 403.9 475.2
Retained earnings 2,357.1 2,297.9
Net unrealized gain from investments
marked to fair value 298.8 124.1
Foreign currency translation adjustments (43.7) (35.1)
_________ _________
3,516.1 3,363.5
_________ _________
$38,699.5 $36,050.5
========= =========
(Amounts in millions except for share data)
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
_______________
CONSOLIDATED STATEMENT OF INCOME
Three months ended
March 31,
1994 1993
REVENUES
Life insurance premiums and related
income $ 330.5 $ 292.2
Investment income 432.0 425.4
Finance charges and other fees 246.3 246.3
Leasing revenues 113.6 89.7
Real estate and tax service revenues 82.2 67.2
Gain on investment transactions 2.6 4.3
Other 28.2 23.9
________ ________
1,235.4 1,149.0
EXPENSES
Life insurance benefits 546.3 511.3
Life insurance underwriting, acquisition
and other expenses 131.0 122.4
Leasing operating and maintenance costs 57.8 42.9
Interest and debt expense 122.6 133.1
Provision for losses on receivables 24.2 21.1
Other, including administrative and general
expenses 188.3 170.3
________ ________
1,070.2 1,001.1
________ ________
165.2 147.9
Income taxes 61.5 54.9
________ ________
Income from continuing operations 103.7 93.0
Loss from discontinued operations (0.7) (1.2)
________ ________
Net income $ 103.0 $ 91.8
======== ========
Earnings per share of common stock (based
on weighted average number of shares
outstanding of 75,811,000 in 1994 and
79,335,000 in 1993 after deduction of
preferred dividends):
Income from continuing operations
before investment transactions $1.27 $1.07
Gain on investment transactions 0.02 0.03
_____ _____
Income from continuing operations 1.29 1.10
Loss from discontinued operations (0.01) (0.02)
_____ _____
Net income $1.28 $1.08
===== =====
Dividends per share of common stock $0.50 $0.50
===== =====
Ratio of earnings to fixed charges 2.27 2.05
(Dollar amounts in millions except for share data)
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
____________
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Three months ended
March 31,
1994 1993
Balance at beginning of year $2,297.9 $2,100.2
Net income 103.0 91.8
Dividends on common stock (37.9) (39.8)
Dividends on preferred stock (5.9) (6.0)
________ ________
Balance at end of period $2,357.1 $2,146.2
======== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
March 31,
1994 1993
OPERATING ACTIVITIES
Income from continuing operations $ 103.7 $ 93.0
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Increase in life insurance policy
liabilities, excluding policyholder
balances on interest-sensitive policies 257.4 321.8
Amortization of policy acquisition costs 53.6 42.6
Policy acquisition costs deferred (81.8) (82.6)
Other 93.3 102.4
________ ________
Net cash provided by operating activities 426.2 477.2
INVESTING ACTIVITIES
Finance receivables originated (4,135.0) (3,073.8)
Finance receivables collected 3,893.2 2,880.1
Purchase of investments (2,156.3) (1,872.8)
Sales or maturities of investments 1,852.3 1,132.7
Purchase of the container division assets
of Tiphook plc (1,065.0)
Cash transactions with discontinued operations (162.6)
Other (155.5) (90.0)
________ ________
Net cash used by investing activities (1,766.3) (1,186.4)
FINANCING ACTIVITIES
Receipts from interest-sensitive policies
credited to policyholder account balances 965.8 948.7
Return of policyholder account balances on
interest-sensitive policies (722.4) (521.8)
Proceeds from debt financing 2,831.6 1,677.1
Payment of notes and loans (1,610.3) (1,349.9)
Dividends (43.8) (45.8)
Common stock transactions (72.7) 15.2
________ ________
Net cash provided by financing activities 1,348.2 723.5
________ ________
Increase in cash and cash equivalents 8.1 14.3
Cash and cash equivalents at beginning
of year 92.7 22.0
________ ________
Cash and cash equivalents at end of period $ 100.8 $ 36.3
======== ========
(Amounts in millions)
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Transamerica Corporation receives funds from its subsidiaries in the
form of dividends, income taxes and interest on loans. The Corporation uses
these funds to pay dividends to its shareholders, reinvest in the operations
of its subsidiaries and pay corporate interest, expenses and taxes.
Reinvested funds are allocated among subsidiaries on the basis of
profitability and capital requirements. Reinvestment may be accomplished by
allowing a subsidiary to retain all or a portion of its earnings, or by
making capital contributions or loans.
The Corporation also borrows funds to finance acquisitions or to lend to
certain of its subsidiaries to finance their working capital needs.
Subsidiaries are required to maintain prudent financial ratios consistent
with other companies in their respective industries and retain the capacity
through committed credit lines to repay working capital loans from the
Corporation.
On March 15, 1994, Transamerica acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
of Tiphook (collectively the "Container Operations"). Transamerica assumed
certain specified liabilities of the Container Operations including trade
accounts payable. Transamerica did not assume any borrowings, tax liabilities
or contingent liabilities of Tiphook. Transamerica paid to Tiphook
$1 billion, with further payments of $14.3 million to be made upon delivery of
bills of sale and releases of liens, and delivered $50.7 million to escrow
agents for the establishment of a general escrow account ($40.4 million) and a
repairs escrow account ($10.3 million).
Adjustments to the purchase price, if any, will be determined on
completion of examination of the closing balance sheet of the Container
Operations as of March 15, 1994 by Transamerica's auditors and Tiphook's
auditors. Unresolved disputes, if any, will be referred to a third
independent auditor.
Tiphook, at the closing, entered into a non-compete agreement with
Transamerica prohibiting Tiphook and its affiliates from competing with the
Container Operations for a period of seven years. After the closing, Tiphook
is providing certain transitional services to Transamerica pursuant to the
terms of a transitional services agreement. Tiphook has granted Transamerica
an exclusive, perpetual license to the name "Tiphook" in the business of
leasing containers (on a worldwide basis) and tank chassis (in the United
States). The transaction was accounted for as a purchase and the operations
of the business included in the consolidated statement of income from the date
of acquisition.
On April 13, 1994, Transamerica sold its remaining 21% ownership interest
in Sedgwick Group plc. Proceeds from the sale approximated $320 million and
resulted in no gain or loss. Transamerica's investment in Sedgwick and its
share of Sedgwick's operating results and related goodwill amortization have
been separated from those of Transamerica's continuing operations and are
classified as discontinued operations. Prior period financial statements have
been reclassified accordingly.
Page 9
On May 9, 1994, Transamerica commenced a tender offer to purchase up to
4,500,000 shares of its common stock, at prices not greater than $55 nor less
than $48 per share, as set forth in the Offer to Purchase dated May 9, 1994.
Transamerica will determine a single price (not greater than $55 nor less
than $48 per share) that it will pay for shares validly tendered, taking into
account the number of shares tendered and the prices specified by tendering
stockholders. Transamerica will select the Purchase Price that will enable it
to purchase up to 4,500,000 shares pursuant to the Offer. The Offer will
expire on June 6, 1994, unless extended. Transamerica will use a portion of
the net proceeds from the sale of its remaining 21% ownership interest in
Sedgwick Group plc to purchase such shares.
Transamerica's income from continuing operations for the first quarter of
1994 increased $10.7 million (11%) compared to the first quarter of 1993.
Income from continuing operations for the first quarter of 1994 included net
after tax gains from investment transactions aggregating $1.7 million
compared to $2.8 million in the first quarter of 1993. Income from continuing
operations before investment transactions increased $11.8 million (13%) due
primarily to increases in real estate services, life insurance, commercial
lending and asset management operating results and lower unallocated expenses.
Partially offsetting these improvements were declines in consumer lending and
leasing operating results.
Gain (loss) on investment transactions, pretax, included in consolidated
revenues, comprises (amounts in millions):
Three months ended
March 31,
1994 1993
Net gain on sale of investments $12.9 $40.2
Adjustment for impairment in value (7.5) (30.9)
Accelerated amortization of deferred
policy acquisition costs (2.8) (5.0)
_____ _____
$ 2.6 $ 4.3
===== =====
As required by generally accepted accounting principles, the amortization
of deferred policy acquisition costs was accelerated due to gains realized on
the sale of certain investments. The accelerated amortization of deferred
policy acquisition costs has been included in investment transactions as an
offset to the related gain. Investment transactions also reflected loss
provisions primarily for impairment in the value of certain nonperforming
fixed maturity investments, mortgage loans, real estate investments and real
estate acquired through foreclosure.
Transamerica Corporation's continuing operations, principally through its
life insurance subsidiaries, maintain an investment portfolio which aggregated
$22.1 billion at March 31, 1994. Of this amount $20.5 billion was invested in
fixed maturities. At March 31, 1994, 96.6% of the fixed maturities was rated
as "investment grade" with an additional 2.4% rated in the BB category or its
equivalent. Fixed maturity investments are generally held for long-term
investment and used primarily to support life insurance policy liabilities.
The amortized cost of delinquent below investment grade securities, before
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provision for impairment in value, was $29.4 million at March 31, 1994
compared to $31.1 million at December 31, 1993. Provision for impairment in
value has been made to reduce the amortized cost of certain fixed maturity
investments by $103.8 million at March 31, 1994 and $104 million at
December 31, 1993.
Additionally, $480.5 million (2.2% of the investment portfolio), net of
allowance for losses of $65.3 million, was invested in mortgage loans and real
estate including $349.3 million in commercial mortgage loans, $37.8 million in
residential mortgage loans, $113.8 million in real estate investments and
$44.9 million in foreclosed real estate. Foreclosed commercial real estate
decreased $8.3 million (15.7%) from December 31, 1993 to March 31, 1994 due
primarily to the sale of foreclosed properties. Problem loans, defined as
delinquent loans and restructured loans yielding less than 8%, totaled
$12.3 million at March 31, 1994. Problem loans decreased $6.2 million from
December 31, 1993 to March 31, 1994. Allowances for possible losses of
$65.3 million at March 31, 1994 and $70.7 million at December 31, 1993 have
been established to cover possible losses from mortgage loans and real estate
investments.
The net unrealized gain on marketable equity securities, after related
taxes, which is included in shareholders' equity decreased $26.5 million
during the quarter ended March 31, 1994 and increased $13.7 million during the
first quarter of 1993.
In the first quarter of 1994 Transamerica adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. This new standard requires Transamerica to report at fair
value those investments which it does not have the positive intent and ability
to hold to maturity. There is no effect on the income statement. To the
extent the securities marked to fair value relate to interest sensitive
insurance products an adjustment to deferred policy acquisition costs is also
made. The effect of these adjustments, net of federal income taxes, is
recorded in a separate component of shareholders' equity. All of
Transamerica's investments in debt securities have been classified as
available for sale at March 31, 1994. As of that date the unrealized gain
included in shareholders' equity as a result of adopting this new accounting
standard was $201.2 million.
Changes in the earnings, capital requirements and liquidity of the
Corporation's consolidated operations are best understood by considering the
Corporation's separate business segments, which are discussed below.
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REVENUES AND INCOME BY LINE OF BUSINESS
Three months ended March 31,
Revenues Income
1994 1993 1994 1993
(Amounts in millions)
Consumer lending $ 163.3 $ 160.2 $ 21.4 $24.2
Commercial lending 89.9 94.2 11.4 7.6
Leasing 116.7 94.9 13.0 13.2
Real estate services 89.0 72.7 24.6 19.6
Amortization of goodwill (3.3) (3.2)
________ ________ ______ _____
Finance 458.9 422.0 67.1 61.4
Life insurance 767.6 722.2 58.9 58.5
Asset management 10.7 10.7 0.8 (0.2)
Amortization of goodwill (0.4) (0.4)
________ ________ ______ _____
Insurance 778.3 732.9 59.3 57.9
Unallocated investment
transactions, interest
and expenses, less
related income taxes (1.8) (5.9) (22.7) (26.3)
________ ________ ______ _____
Total revenues and
income from continuing
operations $1,235.4 $1,149.0 $103.7 $93.0
======== ======== ====== =====
Consumer Lending
Consumer lending income, before the amortization of goodwill, for the
first quarter of 1994 decreased $2.8 million (11%) from the first quarter of
1993 due to increased operating expenses and an increased provision for losses
on receivables that more than offset higher revenues and lower interest
expense.
Revenues increased $3.1 million (2%) in the first quarter of 1994
compared to 1993's first quarter mainly due to increased finance charges
resulting from slightly higher average owned finance receivables outstanding.
Operating expenses for the first quarter of 1994 increased $6 million
(13%) over the first quarter of 1993 mainly due to an increase in the number
of branches, from 515 at March 31, 1993 to 570 at March 31, 1994, and new loan
products, which are intended to stimulate future growth. The provision for
losses on receivables increased $5.4 million (46%) due to increased credit
losses. Credit losses, net of recoveries, on an annualized basis as a
percentage of average consumer finance receivables outstanding, net of
unearned finance charges and insurance premiums, were 1.93% for the first
quarter of 1994 compared to 1.25% for the first quarter of 1993. Credit
losses increased mainly due to continued sluggishness in the California
economy and a continued weak California real estate market. Interest expense
declined $3.1 million (5%) due to a lower average interest rate.
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Net consumer finance receivables at March 31, 1994 included $3.1 billion
of real estate secured loans, principally first and second mortgages secured
by residential properties, of which approximately 49% are located in
California. Company policy generally limits the amount of cash advanced on
any one loan, plus any existing mortgage, to between 70% and 80% (depending on
location) of the appraised value of the mortgaged property, as determined by
qualified independent appraisers at the time of loan origination.
Delinquent finance receivables, which are defined as receivables
contractually past due 60 days or more, were $86.8 million (2.24% of finance
receivables outstanding) at March 31, 1994 compared to $78.8 million (2.01% of
finance receivables outstanding) at December 31, 1993 and $69.6 million (1.80%
of finance receivables outstanding) at March 31, 1993. Management has
established an allowance for losses equal to 2.83% of net consumer finance
receivables outstanding at March 31, 1994, December 31, 1993 and March 31,
1993.
Generally, by the time an account secured by residential real estate
becomes past due 90 days, foreclosure proceedings have begun, at which time
the account is moved from finance receivables to other assets and is written
down to the estimated realizable value of the collateral if less than the
account balance. After foreclosure, repossessed assets are carried at the
lower of cost or fair value less estimated selling costs. Accounts in
foreclosure and repossessed assets held for sale totaled $233.6 million at
March 31, 1994 compared to $214.7 million at December 31, 1993 and
$200.1 million at March 31, 1993. The increase primarily reflects a higher
number of units in inventory in California, due to its continuing weak real
estate market.
Commercial Lending
Commercial lending income, before the amortization of goodwill, for the
first quarter of 1994 increased $3.8 million (49%) over the first quarter of
1993. The increase was primarily due to stronger margins brought about by the
declining interest rate environment. The interest rates at which the
commercial lending operation borrows funds for its businesses have moved more
quickly than the rates at which it lends to its customers. As a result,
margins have been enhanced by the declining interest rate environment. Lower
operating expenses and a lower provision for losses also contributed to the
increase.
Revenues in the first quarter of 1994 decreased $4.3 million (5%) from
the first quarter of 1993 mainly as a result of lower finance charges in the
liquidating portfolio and slightly reduced yields attributable to the current
low interest rate environment.
Expenses decreased in the first quarter of 1994 by $9.6 million (12%)
from the first quarter of 1993. Interest expense declined $5.3 million (18%)
due to a lower average interest rate. The provision for losses on
receivables declined $2.2 million (24%) principally due to lower credit
losses. Credit losses, on an annualized basis as a percentage of average
commercial finance receivables outstanding, net of unearned finance charges,
were a negative 0.08% as recoveries on previously recorded losses exceeded
credit losses for the first quarter of 1994 compared to 1.57% in 1993's first
quarter. Operating expenses declined $2.1 million (5%) mainly as a result of
Page 13
reduced expenses incurred relating to the management of the liquidating
portfolio and restructuring of the commercial lending unit's infrastructure.
Net commercial finance receivables outstanding increased $228.8 million
(8%) from December 31, 1993 to March 31, 1994 due to growth in the inventory
finance and business credit portfolios. Management has established an
allowance for losses equal to 2.76% of net commercial finance receivables
outstanding as of March 31, 1994 compared to 2.71% at December 31, 1993 and
2.92% at March 31, 1993.
Delinquent receivables, which are defined as the instalment balance for
inventory finance and business credit receivables and the receivable balance
for all other receivables over 60 days past due, were $25.6 million (0.80% of
receivables outstanding) at March 31, 1994 compared to $28.9 million (0.96% of
receivables outstanding) at December 31, 1993 and $56.8 million (1.84% of
receivables outstanding) at March 31, 1993.
Nonearning receivables, which are defined as balances from borrowers
that are over 90 days delinquent or at such earlier time as full
collectibility becomes doubtful, were $34.4 million (1.07% of receivables
outstanding) at March 31, 1994 compared to $33.6 million (1.12% of receivables
outstanding) at December 31, 1993 and $73.7 million (2.38% of receivables
outstanding) at March 31, 1993.
Assets held for sale as of March 31, 1994 totaled $79.8 million, net of
a $155.3 million valuation allowance, and consisted of rent-to-own finance
receivables of $111.3 million, repossessed rent-to-own stores of $104.9
million and other repossessed assets of $18.9 million. Assets held for sale
at December 31, 1993 totaled $90.1 million, net of a $157 million valuation
allowance, and comprised rent-to-own finance receivables of $120.5 million,
repossessed rent-to-own stores of $107.2 million and other repossessed assets
of $19.4 million. Assets held for sale at March 31, 1993 totaled
$175.4 million, net of a $119.9 million valuation allowance, and comprised
rent-to-own finance receivables of $161.5 million, repossessed rent-to-own
stores of $103.6 million and other repossessed assets of $30.2 million. Of
the rent-to-own finance receivables, $26.8 million were classified as both
delinquent and nonearning at March 31, 1994 compared to $27.5 million at
December 31, 1993 and $35.6 million at March 31, 1993.
Leasing
As previously discussed on Page 8, on March 15, 1994, the leasing
operation purchased substantially all of the assets of the container rental
businesses of Tiphook plc for $1,065 million in cash. The acquired fleet of
standard containers and tank containers totaled 363,000 units. The
transaction has been accounted for as a purchase and the operations of the
business acquired have been included in the results of the leasing operation
from the date of acquisition. Results for the first quarter include the
sixteen days of operations subsequent to the acquisition and reduced net
income for the quarter by $300,000.
Leasing income, excluding the effect of Tiphook discussed above and
before the amortization of goodwill, for the first quarter of 1994 increased
$100,000 (1%) from the first quarter of 1993 mainly as a result of higher
utilization in the rail trailer business.
Page 14
Revenues, including $8.8 million from the Tiphook operation, for the
first quarter of 1994 increased $21.8 million (23%) over the first quarter of
1993. The increase was mainly due to a larger standard and refrigerated
container fleet, higher utilization in the rail trailer and European trailer
product lines and a larger finance lease portfolio.
Expenses, including $9.3 million from the Tiphook operation, for the
first quarter of 1994 increased $21.9 million (30%) over the first quarter of
1993 mainly due to higher ownership and operating costs due to a larger fleet.
The combined utilization (including Tiphook) of standard containers,
refrigerated containers, domestic containers, tank containers and chassis
averaged 82% for the first quarter of 1994 compared to 81% during the first
quarter of 1993. Rail trailer utilization was 90% for the first quarter of
1994 compared to 86% in the first quarter of 1993. European over-the-road
trailer utilization was 96% during the 1994 first quarter compared to 86%
during the comparable 1993 period.
Real Estate Services
Real estate services comprise Transamerica's real estate tax, property
management and other services.
Income for the first quarter of 1994 increased $5 million (25%) over the
first quarter of 1993 primarily due to continued high levels of mortgage
refinancings and higher levels of home sales.
Revenues for the first quarter of 1994 increased $16.3 million over the
first quarter of 1993 as a result of increased business at the real estate tax
service operation where new life of loan tax service contracts written were
1 million in the first quarter of 1994 compared to 677,000 in the first
quarter of 1993.
Life Insurance
Income for the first quarter of 1994 increased $400,000 (0.6%) over the
first quarter of 1993. Income for the first quarter of 1994 and 1993
includes $3.3 million and $6.7 million net after tax gains from investment
transactions. The life insurance, structured settlements, living benefits and
group pension lines in 1994 all experienced increases in income over the first
quarter of 1993, excluding net gains from investment transactions, resulting
primarily from asset growth, increased charges on a larger base of interest-
sensitive policies, improved or maintained interest spreads and expense
control.
Investment transactions in the first quarter of 1994 included after tax
gains of $8 million realized on the sale of investments compared to
$22.4 million in the first quarter of 1993. As required by generally accepted
accounting principles, the amortization of deferred policy acquisition costs
was accelerated by $1.8 million in 1994 and $3.3 million in 1993 due to the
investment gains. The accelerated amortization of deferred policy acquisition
costs has been included in investment transactions as an offset to the related
Page 15
gains. Investment transactions in the first quarter of 1994 also reflected a
downward adjustment of $2.9 million after tax, compared to $12.4 million in
the first quarter of 1993, primarily for impairment in the value of certain
nonperforming fixed maturity investments.
Premiums and related income increased $38.4 million (13%) in the first
quarter of 1994 compared to the first quarter of 1993 primarily due to higher
policy charges on interest-sensitive policies and increased income from
reinsurance assumed, partially offset by an increase in reinsurance premiums
ceded.
Net investment income for the first quarter of 1994 increased
$12.2 million (3%) over the comparable 1993 period due primarily to increased
investments. Net investment income for the first quarter of 1994 included a
$4.6 million addition to investment income from the accretion of discounts on
securities called or expected to be called. Net investment income for the
first quarter of 1993 included a $15.6 million addition to investment income
from such accretion of discounts.
Life insurance benefits and expenses increased $43.5 million (7%) in the
first quarter of 1994 over the first quarter of 1993 principally due to
increased benefits attributable to the larger base of life insurance and
annuities in force, higher benefit payments for reinsurance assumed and
increased amortization of deferred policy acquisition costs (exclusive of
accelerated amortization related to investment gains). Other expenses in the
first quarter of 1993 included charges of $8.5 million primarily attributable
to the establishment of an allowance for possible loss related to a receivable
from the sale of a business unit in 1991 and anticipated guaranty fund
assessments.
Cash provided by operations for the first quarter of 1994 was
$96.8 million which was $273.7 million (74%) below the 1993 amount primarily
as a result of the timing in the settlement of certain receivables and
payables, including reinsurance receivables and payables. The company
continues to maintain a sufficiently liquid portfolio to cover its operating
requirements, with the remaining funds invested in longer term securities.
Asset Management
Asset management results, before goodwill amortization, for the first
quarter of 1994 were income of $800,000 compared to a loss of $200,000 for
the comparable period of 1993. The improvement was due primarily to higher
revenues from increased assets under management.
Unallocated Investment Transactions, Interest and Expenses
Unallocated investment transactions, interest and expenses, after
related income taxes, for the first quarter of 1994 decreased $3.6 million
(14%) from the first quarter of 1993. The decrease was principally due to
lower interest expense on lower outstanding debt.
Page 16
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
At the Corporation's Annual Meeting of Stockholders held on April 28,
1994, its stockholders approved a number of proposals and nominations.
Results of these proposals and nominations were:
Votes Votes Votes Broker--
For Against Withheld Abstentions Non--Votes
Nomination for director:
Forrest N. Shumway 64,711,147 -- 744,164 -- --
Peter V. Ueberroth 63,406,537 -- 2,048,774 -- --
Ratification of auditors 64,717,756 396,621 -- 340,933 --
Ratifying an amendment
to the 1985 Stock Option
and Award Plan 47,224,056 11,742,760 -- 1,040,113 5,448,381
Approving the adoption
of the Value Added
Incentive Plan 59,494,828 4,906,908 -- 1,053,575 --
A total of 65,455,311 shares were present in person or by proxy at the Annual
Meeting.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
EX-10.1 1994 Corporate Bonus Plan.
EX-10.2 Value Added Incentive Plan.
EX-10.3 Form of Non-qualified Stock Option Agreement under the
1985 Stock Option and Award Plan.
EX-10.4 Form of Non-qualified Stock Option Agreement for
Nonemployee Directors under the 1985 Stock Option and
Award Plan.
EX-10.5 Form of Amendment No. 6 to the 1985 Stock Option and
Award Plan.
EX-11 Statement Re: Computation of Per Share Earnings.
EX-12 Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K. None
Page 17
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSAMERICA CORPORATION
(Registrant)
Burton E. Broome
Vice President and Controller
(Chief Accounting Officer)
Date: May 9, 1994