FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of a Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month(s) of: July 1, 1998 to September 30, 1998
NEWCOURT CREDIT GROUP INC.
BCE Place, 181 Bay Street
Suite 3500, P.O. Box 827
Toronto, Ontario
Canada, M5J 2T3
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F / / Form 40-F /X/
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.]
Yes / / No /X/
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b)]
82-
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.
Date: October 28,1998
NEWCOURT CREDIT GROUP INC.
By: John P. Stevenson
Corporate Secretary
NEWCOURT CREDIT GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the nine months ended September 30, 1998
Newcourt Credit Group Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
[in thousands of Canadian dollars]
September 30, December 31,
1998 1997
$ $
ASSETS
Cash and cash held in escrow 303,733 1,778,413
Finance assets held for investment
[notes 3 and 5] 12,778,941 2,185,568
Operating leases held for investment
and sale [notes 4 and 5] 3,322,238 275,833
Finance assets held for sale 2,316,715 1,091,398
Investment in affiliated companies 329,763 173,918
Accounts receivable, prepaids and other 358,008 181,736
Future income tax receivable 354,934 0
Fixed assets [note 6] 136,274 87,396
Goodwill [note 7] 1,913,251 408,754
Total Assets 21,813,857 6,183,016
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
liabilities 1,151,099 303,968
Debt [note 8] 16,097,409 2,789,816
Future income tax liability 0 27,739
Total Liabilities 17,248,508 3,121,523
Shareholders' Equity
Share capital [note 9] 4,310,400 2,935,402
Retained earnings 254,949 126,091
Total Shareholders' Equity 4,565,349 3,061,493
Total Liabilities and
Shareholders' Equity 21,813,857 6,183,016
See accompanying notes
Newcourt Credit Group Inc.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
[in thousands of Canadian dollars, except for per share amounts]
Nine Months Ended
September 30, September 30,
1998 1997
$ $
Asset finance income
Net finance and rental income 595,223 55,156
Revenue on sale of finance assets 296,095 109,206
Management and other fees 158,811 27,859
Total asset finance income 1,050,129 192,221
Operating expenses
Salaries and wages 325,150 53,544
Operating and administrative 324,805 52,320
Depreciation and amortization 92,958 11,040
Restructuring charge 0 48,000
Operating income before taxes 307,216 27,317
Provision for (recovery of) income taxes 116,562 (5,818)
Net income for the period 190,654 33,135
Retained earnings, beginning of period 126,091 100,774
Premium on redemption of preferred
Securities (44,343) 0
Dividends paid on common shares (17,100) (6,681)
Options purchased (353) (1,100)
Retained earnings, end of period 254,949 126,128
Earnings per common share:
Basic $1.35 $0.50
Fully diluted $1.35 $0.50
See accompanying notes
Newcourt Credit Group Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
[in thousands of Canadian dollars]
Nine Months Ended
September 30, September 30,
1998 1997
$ $
OPERATING ACTIVITIES
Net income for the period 190,654 33,135
Add (deduct) items not requiring
an outlay of cash
Future income taxes 29,159 (8,738)
Depreciation and amortization 92,958 11,040
Restructuring charge 0 48,000
Cash flow from operations 312,771 83,437
Net change in non-cash assets
and liabilities (22,404) (115,168)
Cash provided by (used in)
operating activities 290,367 (31,731)
INVESTING ACTIVITIES
Finance assets, underwritten
and purchased (14,429,783) (3,916,706)
Finance assets, sold 7,166,771 2,898,247
Finance assets, repayments and others 4,410,669 565,430
Finance assets and assets held
for sale (2,852,343) (453,029)
Business acquisitions (1,645,029) (581,682)
Investment in affiliated companies (155,845) (24,164)
Purchase of fixed assets (31,192) (64,722)
Cash used in investing activities (4,684,409) (1,123,597)
FINANCING ACTIVITIES
Debt issued, net 2,725,124 721,256
Redemption of preferred securities (330,903) 0
Issue of common shares, net 2,279,882 473,858
Deferred tax on share issues 33,712 8,079
Dividends paid on common shares (17,100) (6,681)
Options purchased (353) (1,100)
Cash provided by financing activities 4,690,362 1,195,412
Increase in cash during the period 296,320 40,084
Cash (net of cash held in escrow of
$1,771,000 [January 1, 1997 - nil]),
beginning of period 7,413 56,151
Cash, end of period 303,733 96,235
See accompanying notes
1. NATURE OF THE COMPANY'S OPERATIONS
The Company is an independent, non-bank financial
services enterprise with operations primarily in
Canada and the United States and has recently
expanded its operations into the United Kingdom
and Australia. The acquisition of AT&T Capital
Corporation ("AT&T Capital") has expanded the
Company's operations into Europe, the
Asia/Pacific region, Mexico and South America.
The Company originates, sells and manages asset-
based financing by way of secured loans, leases
and conditional sales contracts. Generally, the
Company retains an interest in the financings it
originates. The loan origination activities
focus on the commercial and corporate finance
segments of the asset-based lending market.
The Company originates loans in the commercial
finance market through vendor finance programs.
These agreements are established with select
equipment manufacturers, dealers and distributors
to provide equipment sales and inventory
financing. The Company serves the corporate
finance market through financing services it
delivers via vendors to major corporations,
public sector institutions and governments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been
prepared in accordance with accounting principles
generally accepted in Canada. The more
significant accounting policies are summarized
below:
Principles of consolidation
The consolidated financial statements of the
Company include the accounts of all its wholly
owned subsidiaries. All inter-company
transactions and balances have been eliminated.
Finance assets held for investment
Net investment in finance assets is comprised of
loans, the aggregate of capital lease
receivables, estimated unguaranteed residual
values, unearned income, allowance for credit
losses and the Company's investment in
securitization receivables. Income is recognized
on finance assets held for investment on an
actuarial basis which produces a constant rate of
return on the investment in finance assets.
Recognition of finance income is generally
suspended when, in management's view, a loss is
likely to occur but in no event later than 90
days after an account has gone into arrears.
Accrual is resumed when the receivable becomes
contractually current and management believes
there is no longer any significant probability of
loss.
Operating leases held for investment and sale
Equipment under operating leases is generally
depreciated over the estimated useful life of the
asset. During the term of the related lease,
annual depreciation is generally calculated on a
straight-line basis based on the estimated
unguaranteed residual values at the end of the
respective lease terms. Rental revenue is
recognized on a straight-line basis over the
related lease terms.
Estimated unguaranteed residual values
Estimated unguaranteed residual values are
established upon acquisition and leasing of the
equipment based upon the estimated value of the
equipment at the end of the lease term. Values
are determined on the basis of studies prepared
by the Company, historical experience and
industry data. Although it is reasonably
possible that a change in the unguaranteed
residual values could occur in the near term, the
Company actively manages its residual values by
communicating with lessees and vendors during the
lease term to encourage lessees to extend their
leases or upgrade and enhance their leased
equipment. Residual values are continually
reviewed and monitored by the Company. Declines
in residual values for capital leases are
recognized as an immediate charge to income.
Declines in residual values for operating leases
are recognized as adjustments to depreciation
expense over the shorter of the useful life of
the asset or the remaining term of the lease.
Deferred costs
Direct incremental costs of acquisition of
finance assets, operating leases and of investing
in affiliated companies are deferred and
amortized over the shorter of the term of the
finance asset or operating lease and the expected
period of future benefit. As finance assets are
securitized, the unamortized portion of the
acquisition costs related to the assets being
securitized is expensed. Costs incurred during
the pre-operating period of new business ventures
are deferred and amortized over the expected
period of future benefit.
Allowance for credit losses
Losses on finance assets and the carrying value
of repossessed assets are determined by
discounting at the rate of interest inherent in
the original asset the expected future cash flows
of the finance assets including realization of
collateral values and estimated recoveries under
third party guarantees and vendor support
agreements.
General allowances are established for probable
losses on loans and leases whose impairment
cannot otherwise be measured.
Revenue on sale of finance assets
The Company sells certain of its asset-based
financing originations to securitization
vehicles.
The securitization transactions are accounted for
as sales of finance assets, resulting in the
removal of the assets from the Company's
consolidated balance sheet, the recording of
assets received and the computation of a gain on
sale. The asset received is generally cash.
Assets retained represent an interest in the
cash flows of the receivables sold. Such
retained interest may include cash collateral
accounts, excess spread assets, securities backed
by the transferred assets and residual interests
in securitized trusts. Proceeds on sale are
computed as the aggregate of the initial cash
consideration and the present value of any
additional sale proceeds, net of a provision for
anticipated credit losses on the securitized
assets and the amount of a normal servicing fee.
The sale of finance assets is recorded when the
significant risks and rewards of ownership are
transferred.
Income is earned on the securitization
receivables and is recognized on an accrual
basis. The carrying value of this asset is
reduced, as required, based upon changes in the
Company's share of the estimated credit losses on
the securitized assets. The Company continues to
manage the securitized assets and recognizes
income equal to a normal servicing fee over the
term of the securitized assets.
Certain finance assets are underwritten and sold
to institutional investors for cash. These
transactions generate syndication fees for the
Company, which generally continues to service
these assets on behalf of the investors.
Fees received for syndicating finance assets are
included in income when the related transaction
is substantially complete provided the yield on
any portion of the asset retained by the Company
is at least equal to the average yield earned by
the other participants involved.
Fixed assets
Fixed assets are recorded at cost. Depreciation
is provided on a straight-line basis at the
following rates:
Buildings 20 years
Furniture and fixtures 10 years
Computers and office equipment 5 years
Goodwill
Goodwill is recorded at cost less accumulated
amortization. Under generally accepted
accounting principles, goodwill can be amortized
over a period not to exceed 40 years. The
Company's amortization periods for goodwill range
from 20 to 35 years. The valuation and
amortization of goodwill is evaluated on an on-
going basis and, if considered permanently
impaired, is written down. The determination as
to whether there has been an impairment in value
is made by comparing the carrying value of the
goodwill to the projected undiscounted net
revenue stream to be generated by the related
activity.
Foreign currency translation
Prior to 1998, assets and liabilities denominated
in foreign currencies of certain foreign
operations were translated using the temporal
method, whereby monetary assets and liabilities
were converted into Canadian dollars at exchange
rates in effect at the consolidated balance sheet
dates. Gains and losses on finance assets and
debt were deferred and amortized over the
remaining lives of the related items on a
straight-line basis. Non-monetary assets and
liabilities were translated at historical rates.
Revenue and expenses were translated at the
exchange rate in effect on the date of the
transaction.
As a consequence of the acquisition of AT&T
Capital, the Company's foreign operations
function financially and operationally
independent of the parent, and therefore are
considered, for the purposes of foreign currency
translation, to be self-sustaining operations.
As a result, the assets and liabilities of these
operations are translated into Canadian dollars
at rates in effect at the balance sheet date.
Revenue and expenses are translated at the
average exchange rates prevailing during the
year. Unrealized foreign currency translation
gains and losses on these self-sustaining
operations are netted with share capital.
Income taxes
During 1997, the Canadian Institute of Chartered
Accountants approved the adoption of the
liability method of accounting for income taxes
effective for fiscal years beginning on or after
January 1, 2000. Effective January 1, 1996, the
Company adopted the provisions of the standard.
The adoption of the standard amends the Company's
method of accounting for income taxes from the
comprehensive tax allocation method to an asset
and liability approach. Under the asset and
liability method, future tax assets and
liabilities are provided for all significant
temporary differences between the financial
statement and tax bases of assets and liabilities
and are adjusted for tax rate changes as they
occur.
The Company has retroactively adopted this
standard. This standard does not have a material
impact on the Company's financial position or
results of operations in the current period or
preceding periods.
Earnings per common share
Basic earnings per common share is computed based
on the weighted average number of common shares
outstanding during the period. Fully diluted
earnings per common share has been computed based
on the weighted average number of common shares
outstanding after giving effect to the exercise
of all outstanding options to acquire common
shares.
Derivative financial instruments
Derivative financial instruments are used to
hedge the Company's exposure to interest and
currency risk by creating positions which are
opposite to, and offset, on-balance sheet
positions which arise from normal operations.
The most frequently used derivatives are interest
rate and currency swaps, bond forwards and
foreign exchange forward contracts.
Contract and notional amounts associated with
derivative financial instruments are not recorded
as assets or liabilities on the balance sheet.
Off-balance sheet treatment is accorded where an
exchange of the underlying asset or liability has
not occurred or is not assured, or where notional
amounts are used solely to determine cash flows
to be exchanged.
Swaps and bond forward contracts are accounted
for on the accrual basis. Net accrued interest
receivable/payable and deferred gains/losses are
recorded in accounts payable and accrued
liabilities, as appropriate. Realized
gains/losses on terminated contracts are
recognized/expensed or deferred and amortized
over the remaining life of any applicable
corresponding position.
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. Significant areas in which estimates
are used include residual values, income taxes,
retained interests in securitized assets and
related reserves, allowance for credit losses,
valuation of assets held for sale, restructuring
reserves and contingencies.
3. FINANCE ASSETS HELD FOR INVESTMENT
Finance assets held for investment consist of
loans, capital leases and the Company's
investment in securitization receivables and are
as follows:
September 30, December 31,
1998 1997
$ $
Receivables 12,067,907 2,005,661
Estimated unguaranteed residual values 834,859 57,421
Unearned income (1,176,087) (190,020)
Allowance for credit losses (239,249) (38,563)
Securitization receivables 1,291,511 351,069
Finance assets held for investment 12,778,941 2,185,568
As at September 30, 1998, the minimum annual payments are as follows:
$
Due in one year 3,700,272
Due in two years 2,446,309
Due in three years 1,819,976
Due in four years 1,190,066
Due in five years 870,836
Thereafter 2,040,448
12,067,907
Included in finance assets held for investment is
US$6,569,560 [December 31, 1997 - US$693,758].
Substantially all of the finance assets held for
investment bear interest at varying levels of
fixed rates of interest. There are no
significant concentrations.
The loans included in finance assets held for
investment are collateralized by the related
finance assets.
4. OPERATING LEASES HELD FOR INVESTMENT AND SALE
The following is a summary of equipment under operating leases:
September 30, December 31,
1998 1997
$ $
Original equipment cost:
Information technology 2,205,785 364,608
Telecommunications 1,014,700 0
Transportation 618,676 0
Manufacturing 384,155 0
Healthcare 23,897 0
General equipment and other 718,593 0
4,965,806 364,608
Less: accumulated depreciation (1,724,079) (88,775)
Rental receivables, net 80,511 0
Investment in operating leases 3,322,238 275,833
Minimum annual future rentals to be received on
non-cancelable operating leases as at September 30, 1998,
are as follows:
$
Due in one year 1,061,634
Due in two years 795,754
Due in three years 388,547
Due in four years 145,133
Due in five years 53,986
Thereafter 15,956
2,461,010
Included in operating leases held for investment and sale is
US$2,697,857 [December 31, 1997 - $182,824].
5. ALLOWANCE FOR CREDIT LOSSES
An analysis of the Company's allowance for credit losses
and its finance assets and operating leases held for investment
and sale are as follows:
September 30, June 30,
1998 1998
$ $
Finance assets held for investment and
operating leases held for investment and sale 16,101,179 14,808,323
Allowance for credit losses, beginning of period 261,430 257,763
Provisions for credit losses during the period
including acquisitions 36,575 24,223
Write-offs, net of recoveries (26,403) (20,556)
Allowance for credit losses, end of period 271,602 261,430
Allowance as a percentage of investment assets 1.7% 1.8%
Investment assets in arrears (90 days and over) 200,892 153,775
Arrears as a percentage of investment assets 1.2% 1.0%
Investment assets in repossession, at estimated net
realizable value 136,497 107,793
6. FIXED ASSETS
Fixed assets consist of the following:
September 30, 1998 December 31, 1997
Accumulated Accumulated
Cost depreciation Cost depreciation
$ $ $ $
Land and buildings 44,363 24,805 14,654 3,281
Furniture and fixtures 83,701 41,909 48,658 15,143
Computers and office
Equipment 149,038 78,572 56,552 17,300
Other 5,467 1,009 4,182 926
282,569 146,295 124,046 36,650
Net book value 136,274 87,396
7. ACQUISITIONOn January 12, 1998, the Company
purchased all of the outstanding common shares of
AT&T Capital for approximately US$1.7 billion
(Cdn $2.4 billion), of which approximately
US$1.15 billion (Cdn $1.6 billion) was paid in
cash and the remaining US$550 million (Cdn $789
million) was satisfied through the issuance of
approximately 17.6 million common shares of the
Company. AT&T Capital is a full-service,
diversified equipment leasing and finance company
that operates predominately in the United States.
This acquisition has been accounted for as a
purchase, and accordingly the Company's
consolidated financial statements include the
results of operations of the acquired business
from the date of acquisition. The net assets
acquired are as follows:
$
Net assets acquired at approximate fair values
Cash 12,346
Finance assets held for investment 9,380,053
Operating leases held for investment and sale 2,287,583
Accounts receivable, prepaids and other 498,933
Future income tax receivable 327,870
12,506,785
Accounts payable and accrued liabilities 1,074,621
Debt 10,213,136
Preferred securities 286,560
11,574,317
Net assets acquired 932,468
Consideration
Cash 1,645,029
Common shares 789,997
Total consideration 2,435,026
Goodwill 1,502,558
The goodwill amount is subject to adjustment upon final
determination of the fair value of assets and liabilities acquired.
8. DEBT
Debt consists of the following:
September 30, December 31,
1998 1997
$ $
Fixed Rate Debt
U.S. senior notes, bearing interest varying from 6.84%
to 8.26%, maturing in the years 2000 to 2005 311,660 149,011
U.S. senior notes, bearing interest at 8.26%,
maturing in the year 2005 0 143,280
Medium term notes, bearing interest rates varying from
4.85% to 9.34% maturing in the years 1998 to 2007 1,102,003 1,118,433
U.S. medium term notes, bearing interest varying from
5.53% to 8.08% maturing in the years 1998 to 2005 6,965,262 0
7.625% debenture, maturing in June, 2001 124,844 124,802
6.45% debenture, maturing in June, 2002 149,818 149,782
Other fixed rate debt 620,134 270,227
Floating rate debt
Floating rate U.S. medium term notes, interest
periodically reprices based upon various indices, average
interest rate ranges from 5.88% to 6.15%, maturing in
the years 1998 to 2000 1,948,451 0
Floating rate medium term notes, interest
periodically reprices based upon CDOR index,
maturing in the year 2000 100,000 0
Commercial paper and other short term borrowings 4,775,237 834,281
16,097,409 2,789,816
Interest expense on the debt outstanding during
the period was $709,733 [1997 - $59,941].
On August 12, 1997, the Company increased its
Canadian bank facility to $750 million. On May
14, 1997, the Company renewed and increased its
U.S. bank facility to US$600 million. The
Canadian bank facility and one-third of the U.S.
bank facility is a 364-day committed unsecured
revolving credit facility with a syndicate of
Canadian, U.S. and international banks. The
remaining two-thirds of the U.S. bank facility is
a three-year committed unsecured revolving credit
facility. These credit facilities are used as
interim funding pending syndication, sale,
securitization, collection of proceeds of
financing assets, or as support for the Company's
$750 million Canadian commercial paper program
and its US$600 million U.S. commercial paper
program. The Canadian and U.S. bank facilities
attract interest at bankers' acceptance plus 45
basis points and LIBOR plus 45 basis points,
respectively.
The Company renegotiated its various bank
facilities in April, 1998 to support the existing
commercial paper programs and for general
corporate purposes. The U.S. bank facility was
increased to US$2.3 billion with US$1.535 billion
having a term of 364 days and US$765 million
having a term of 5 years. In addition, the
Canadian bank facility was increased to $1.2
billion with a term of 364 days.
Included in debt is US$9,659,932 [December 31,
1997 - US$1,388,211] of which US$8,991,754
[December 31, 1997 - US$1,323,211] was used to
fund leases and loans which are repayable in U.S.
dollars.
As at September 30, 1998, scheduled annual
repayments are as follows:
$
Due in one year 10,953,430
Due in two years 1,571,654
Due in three years 1,931,686
Due in four years 460,864
Due in five years 319,536
Thereafter 860,239
16,097,409
9. SHARE CAPITAL
Authorized -
The Company's authorized share capital consists of the following:
[i] Unlimited Common Shares with voting rights;
[ii] Unlimited Special Shares without voting rights convertible into Common
Shares on a share-for-share basis; and
[iii] Unlimited Class A Preference Shares issuable in series.
Outstanding -
The following is a summary of the changes in share capital during the period:
September 30, December 31,
1998 1997
# $ # $
Subscription Rights
Outstanding, beginning of period 38,500,000 1,758,493 0 0
Exchange for common shares (38,500,000) (1,758,493) 0 0
Proceeds of rights issue, net 0 0 38,500,000 1,758,493
Outstanding, end of period 0 0 38,500,000 1,758,493
Common Shares
Outstanding, beginning of period 83,070,958 1,176,909 60,182,688 415,160
Proceeds of share issue, net 0 0 13,910,000 481,030
Shares issued for subscription rights 38,500,000 1,725,864 0 0
Shares issued for warrants 8,668,446 572,605 0 0
Issued on acquisition [note 7] 17,633,857 789,997 8,214,843 277,295
Stock options exercised 402,018 3,359 743,172 2,839
Others 17,803 1,138 20,255 585
Outstanding, end of period 148,293,082 4,269,872 83,070,958 1,176,909
Total 148,293,082 4,269,872 121,570,958 2,935,402
Unrealized foreign
currency translation adjustment 0 40,528 0 0
Total share capital 148,293,082 4,310,400 121,570,958 2,935,402
Public Offerings
On March 11, 1997, the Company completed a public
offering of 2,475,000 (4,950,000 post split)
common shares at $51.00 per share for gross
proceeds of $126,225. Expenses of this issue,
net of deferred income tax recoveries of $2,508,
amounted to $3,066.
On August 29, 1997, the Company completed a
public offering of 7,260,000 common shares at
$38.50 per share for gross proceeds of $279,510.
Expenses of this issue, net of deferred income
tax recoveries of $5,571, amounted to $6,809.
On December 3, 1997, the Company completed a
public offering of 38,500,000 subscription rights
at $46.00 per right for gross proceeds to the
Company of $1.77 billion. Expenses of this
issue, net of deferred income tax recoveries of
$36,929, amounted to $45,136.
On January 12, 1998, the subscription rights were
exchanged for 38,500,000 common shares at $46.00
per share.
On June 4, 1998, all of the special warrants
outstanding were exercised without additional
payment.
Treasury Issue
On September 24, 1997, the Company completed a
private placement of 1,700,000 common shares at
$50.10 per share for proceeds of $85,170.
On January 12, 1998, the Company completed a
private placement of 17,633,857 common shares at
US$31.19 per share for proceeds of US$550,000.
On May 20, 1998, the Company completed a private
placement of 8,668,446 special warrants at
US$46.14 per warrant. Each special warrant
entitled the holder thereof to acquire one common
share of the Company.
Subdivision of Common Shares
Effective April 14, 1997, the Company subdivided
on a two-for-one basis all of the Company's
issued and outstanding common shares and all the
Company's common shares reserved for issuance.
10. SUMMARIZED FINANCIAL INFORMATION OF AT&T
CAPITAL CORPORATION
The table below shows summarized consolidated
financial information for AT&T Capital
Corporation ("AT&T Capital"), an indirect wholly-
owned subsidiary of the Company. The Company has
guaranteed ("Guarantee") on a full and
unconditional basis the existing registered debt
securities and certain other indebtedness of AT&T
Capital. The Company has not disclosed financial
statements or other information regarding AT&T
Capital on a stand alone basis since management
does not believe that it is material to debt
holders due to the Guarantee.
The following summarized consolidated financial
information for AT&T Capital has been prepared in
accordance with accounting principles generally
accepted in Canada.
Nine Months Ended
September 30,
1998
$
Total asset
finance income 641,156
Operating expenses 520,794
Operating income before taxes 120,362
Net income for the period 66,518
September 30,
1998
$
ASSETSFinance assets held for investment 8,157,289
Operating leases held for investment
and sale 2,442,826
Other assets 4,296,108
Total Assets 14,896,223
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Debt 12,789,560
Accrued liabilities 829,890
Total Liabilities 13,619,450
Total Shareholders' Equity 1,276,773
Total Liabilities and Shareholders' Equity 14,896,223
Included in total asset finance income is $51.6
million of interest income related to
intercompany receivables due from certain
subsidiaries of the Company.Included in other assets is $2.9 billion of
intercompany receivables due from certain
subsidiaries of the Company.The purchase price the Company paid for AT&T
Capital has not been "pushed down" to AT&T
Capital's stand alone financial statements.11.
FINANCE ASSETS UNDER MANAGEMENTIncluded in finance assets under management are
finance assets which have been securitized or
syndicated by the Company and are not reflected
on the consolidated balance sheets.
Finance assets under management are as follows:
September 30, June 30,
1998 1998
$ $
Securitized finance assets 13,101,133 12,621,174
Syndicated finance assets 1,943,843 4,047,070
Syndicated finance assets
of affiliated companies 567,731 600,381
15,612,707 17,268,625
12. YEAR 2000 ISSUE
The Year 2000 Issue arises because many
computerized systems use two digits rather than
four to identify a year. Date-sensitive systems
may recognize the Year 2000 as 1900 or some other
date, resulting in errors when information using
Year 2000 dates is processed. In addition,
similar problems may arise in some systems which
use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000
Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may
range from minor errors to significant systems
failure which could affect an entity's ability to
conduct normal business operations. It is not
possible to be certain that all aspects of the
Year 2000 Issue affecting the Company, including
those related to the efforts of customers,
suppliers, or other third parties, will be fully
resolved.
Management has developed and is implementing a
plan designed to identify and address the
expected effects of the Year 2000 Issue on the
Company. As at September 30, 1998, the Company
has commenced the identification of computer
systems that will require modification or
replacement. An assessment of the readiness of
third parties such as customers, suppliers and
others is ongoing.
13. COMPARATIVE AMOUNTS
Certain comparative amounts have been
reclassified to conform to the presentation
adopted in the current year.