Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-43082
ZIEGLER LEASING CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1148992
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 334-5521
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 ( )
The number of shares outstanding of the registrant's Common Stock, par
value $1.00 per share, at March 31, 1996 was 2,000 shares.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
PART I
ZIEGLER LEASING CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
For the Three Months Ended
March 31, March 31,
1995 1996
Revenues:
Operating leases $1,591,125 $1,395,152
Financing leases 622,416 625,104
Leveraged leases 39,007 32,752
Fee income 73,620 61,639
Interest income 143,273 245,026
Gain on sale of equipment, net 91,216 155,080
Other 2,792 43,473
Total revenues 2,563,449 2,558,226
Expenses:
Depreciation 1,209,205 1,080,686
Interest 727,111 710,462
Provision for losses 30,000 60,035
Selling 27,657 34,750
General and administrative 454,408 459,570
Total expenses 2,448,381 2,345,503
Income before income taxes 115,068 212,723
Provision for income taxes 81,000 80,000
Net income $ 34,068 $ 132,723
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
ZIEGLER LEASING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, March 31,
1995 1996
ASSETS
Cash $ 5,645 $ 270,884
Short-term investments 2,100,112 2,019,239
Total cash and cash equivalents 2,105,757 2,290,123
Investments in leases, net:
Financing leases 25,743,614 26,246,806
Leveraged leases 2,380,402 2,336,603
Operating leases 14,148,253 12,594,883
Total investment in leases 42,272,269 41,178,292
Receivables:
Notes receivable 8,274,711 8,793,855
Other receivables 435,071 44,696
Other assets 1,046,176 894,439
Total assets $54,133,984 $53,201,405
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-term debt:
Notes payable to parent $ 8,318,462 $ 8,355,783
Current maturities of long-term debt18,724,186 17,649,511
Accounts payable for leased equipment
purchases 725,218 129,424
Other accounts payable and accrued
expenses 870,022 1,266,783
Deferred income taxes 6,659,583 6,690,381
Long-term debt 7,516,751 8,107,038
Total liabilities 42,814,222 42,198,920
Commitments
Stockholder's equity:
Common stock -- $1 par; 40,000 shares
authorized; 2,000 shares issued and
outstanding 2,000 2,000
Additional paid-in capital 1,748,000 1,748,000
Retained earnings 9,569,762 9,252,485
Total stockholder's equity 11,319,762 11,002,485
Total liabilities and
stockholder's equity $54,133,984 $53,201,405
The accompanying notes to consolidated condensed financial statements
are an integral part of these balance sheets.
ZIEGLER LEASING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31, March 31,
1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 34,068 $ 132,723
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,275,351 1,142,027
Provision for losses 30,000 60,035
Gain on sale of leased equipment (91,216) (155,080)
Deferred income taxes (220,395) 214,823)
Changes in assets and liabilities:
Decrease (increase) in -
Other receivables (302,323) 390,375)
Other operating assets 8,451 (600,066)
Increase (decrease) in -
Other accounts payable and
accrued expenses 597,689 212,736
Other operating liabilities (21) (321)
Net cash provided by operating
activities 1,331,604 1,397,252
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 238,469 1,544,252
Issuance of notes receivable (4,184,020) (4,553,819)
Purchase of assets to be leased (2,700,061) (303,323)
Principal payments received under leases2,848,513 2,943,422
Proceeds from sale of leased equipment 287,209 473,421
Net cash provided (used)
by investing activities (3,509,890) 103,953)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable to parent 10,948,000 9,712,000
Principal payments of notes payable
to parent (10,257,000) (9,647,000)
Principal payments of notes payable
to banks (386,967) (484,388)
Principal payments on nonrecourse debt (538,905) (647,451)
Cash dividends paid (100,000) (250,000)
Net cash used by financing
activities (334,872) (1,316,839)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,513,158) 184,366)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,294,953 2,105,757
CASH AND EQUIVALENTS AT END OF PERIOD $ 781,795 $ 2,290,123
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the period $ 522,000 $ 679,000
Income taxes paid during the period $ 36,215 $ 121,000
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES:
Conversion of notes receivable to
leased equipment $ 2,665,000 $ 2,490,000
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
(1) Basis of Presentation -
The condensed consolidated financial statements included herein have
been prepared by Ziegler Leasing Corporation and subsidiary (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Management
believes, however, that these condensed consolidated financial statements
reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the periods presented. All such
adjustments are of a normal, recurring nature. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K.
(2) Consolidation -
Ziegler Leasing Corporation's wholly-owned subsidiary, Ziegler
Medical Equipment Group, Inc. ("ZMEG"), is in the business of refurbishing
and remarketing used medical equipment.
(3) Allowance for possible losses -
The Company provides for the possibility that ultimately some
customers will be unable to fulfill their lease obligations. Management
monitors its past due accounts on a continuous basis, and provides for
possible losses based on knowledge of its current customers and the
industry it serves, as well as historical data. Activity in the allowance
for possible losses for 1995 and for the first quarter of 1996 is
summarized below.
Balance, December 31, 1994 $587,132
Provision for losses 185,269
Charge-offs, net (296,275)
Balance, December 31, 1995 476,126
Provision for losses 60,035
Recovery, net 5,000
Balance, March 31, 1996 $541,161
(4) Commitments -
As of March 31, 1996, the Company had outstanding written agreements
to provide equipment lease financing totalling approximately $4,431,000.
To manage the off-balance sheet credit and interest rate risk exposure
related to those commitments, the Company retains the right to adjust or
cancel the commitments if adverse interest rate or credit conditions arise.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended
March 31, 1996 and 1995
Total revenues of the Company decreased $5,223 (0%) from $2,563,449
during the first quarter of 1995 to $2,558,226 during the first quarter of
1996. The primary components of revenue consist of lease income from
operating and financing leases as well as gains on the sale of leased
equipment at lease termination.
The revenues from operating leases decreased $195,973 (12%) from
$1,591,125 during the first quarter of 1995 to $1,395,152 during the first
quarter of 1996. The decrease in revenue resulted primarily from a 20%
decrease in the average net investment in operating leases during the first
quarter of 1996 vs the first quarter of 1995.
The revenue from financing leases increased $2,688 (0%) form $622,416
during the first quarter of 1995 to $625,104 during the first quarter of
1996. The increase in revenue resulted primarily from the timing of
financing lease activations and terminations, as the average net investment
in financing leases actually decreased 3% in the first quarter of 1996 vs
the first quarter of 1995.
The gain on sale of equipment at lease termination increased $63,864
(70%) from $91,216 during the first quarter of 1995 to $155,080 during the
first quarter of 1996. An increase in equipment coming off lease was the
primary reason for the increase in 1996.
Total expenses for the Company decreased $102,878 (4%) from
$2,448,381 during the first quarter of 1995 to $2,345,503 during the first
quarter of 1996. The primary components of total expenses consist of
depreciation of rental equipment, interest expense, general and
administrative expenses and provision for losses.
Depreciation of rental equipment decreased $128,519 (11%) from
$1,209,205 during the first quarter of 1995 to $1,080,686 during the first
quarter of 1996. The decrease in depreciation expense was due primarily to
a 20% decrease in the average net investment in operating leases during the
first quarter of 1996 vs the first quarter of 1995.
Interest expense decreased $16,649 (2%) from $727,111 during the
first quarter of 1995 to $710,462 during the first quarter of 1996. This
decrease was due primarily to a 1% decrease in average debt outstanding
during the first quarter of 1996 vs the first quarter of 1995.
General and administrative expenses increased $5,162 (1%) from
$454,408 during the first quarter of 1995 to $459,570 during the first
quarter of 1996. General and administrative expenses are comprised of many
expenses, the largest of which are employee compensation and benefits and
amortization of initial direct costs.
Employee compensation and benefits increased $28,801 (14%) from
$200,780 during the first quarter of 1995 to $229,581 during the first
quarter of 1996. The increase was due to the creation of additional sales
positions.
Initial direct costs are those expenses which are directly related to
lease origination and are capitalized at the inception of the lease and
amortized over the lease term. The amount of initial direct costs
amortized is influenced by the following factors: net lease activations
(number, amount and term), expected and unexpected lease terminations, and
the presence or absence of broker commissions. Amortization of initial
direct costs decreased $3,719 (5%) from $68,474 during the first quarter of
1995 to $64,755 during the first quarter of 1996.
All other general and administrative expenses decreased $19,920 (11%)
from $185,154 during the first quarter of 1995 to $165,234 during the first
quarter of 1996. This decrease was due primarily to a reduction in costs
associated with the operation of the Company's subsidiary.
Provision for losses increased $30,035 (100%) from $30,000 during the
first quarter of 1995 to $60,035 during the first quarter of 1996. This
increase is due to an additional reserve established for an impaired lease.
Net income increased $98,655 (290%) from $34,068 during the first
quarter of 1995 to $132,723 during the first quarter of 1996.
PART II
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K: None
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.
ZIEGLER LEASING CORPORATION
Dated: May 14, 1996 By
Mark E. Sedlmeier
President and
Chief Executive Officer
Dated: May 14, 1996 By
Kevin A. Kalnins
Controller