-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nWdE/M8rCYksPWNs1FKk1BDhGlh6uSFtQtIo85KESKr9MgYDmsbn9/mn1/JkKE0q d2L1+jS3FOkfoVBtwthm1g== 0000007214-95-000002.txt : 199507120000007214-95-000002.hdr.sgml : 19950711 ACCESSION NUMBER: 0000007214-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARISTAR INC CENTRAL INDEX KEY: 0000007214 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 954128205 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03521 FILM NUMBER: 95523879 BUSINESS ADDRESS: STREET 1: 8900 GRAND OAK CIRCLE CITY: TAMPA STATE: FL ZIP: 33637-1050 MAIL ADDRESS: STREET 1: 8900 GRAND OAK CIRCLE CITY: TAMPA STATE: FL ZIP: 33637 FORMER COMPANY: FORMER CONFORMED NAME: FAMILY FINANCE CORP QUALIFIED STOCK OPTI DATE OF NAME CHANGE: 19761222 FORMER COMPANY: FORMER CONFORMED NAME: FAMILY FINANCE CORP THRIFT CLUB DATE OF NAME CHANGE: 19731106 FORMER COMPANY: FORMER CONFORMED NAME: FAMILY FINANCE CORP DATE OF NAME CHANGE: 19730712 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from . . . .to . . . . . . . . . . Commission file number 1-3521 ARISTAR, INC. (Exact name of registrant as specified in its charter) DELAWARE 95-4128205 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8900 Grand Oak Circle, Tampa, FL 33637-1050 (Address of principal executive offices) (Zip Code) (813) 632-4500 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Name of each exchange Title of each class on which registered 7 3/4 % Senior Notes due June 15, 2001 New York Stock Exchange 7 1/2 % Senior Subordinated Notes due July 1, 1999 New York Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: Not applicable The aggregate market value of Common Stock held by non-affiliates: None As of February 28, 1995, there were 1,000 shares of Common Stock outstanding. Documents incorporated by reference: None Registrant meets the conditions set forth in General Instruction (J)(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format. 2 ARISTAR, INC. ANNUAL REPORT ON FORM 10-K Table of Contents
Page PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 3 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . 8 Item 7. Management's Analysis of the Results of Operations for the Year Ended December 31, 1994. . . . . . . . 8 Item 8. Financial Statements and Supplementary Data. . . . . 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . 29 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . 29
Note: Items 4, 6, 10, 11, 12 and 13 are not included as per conditions met by Registrant set forth in General Instruction J(1)(a) and (b) of Form 10-K. 3 PART I Item 1. Business Aristar, Inc. (the "Company"), incorporated in Delaware in 1986 as a successor to a company incorporated in 1927, is a holding company headquartered in Tampa, Florida whose subsidiaries are engaged in the consumer finance business. All of the Company's equity securities are owned indirectly by Great Western Financial Corporation ("GWFC"). The operations of the Company consist principally of a network of 477 consumer finance offices located in 22 states, which generally operate under the names Blazer Financial Services and City Finance Company. The Company makes direct consumer instalment loans and purchases retail instalment contracts from local retail establishments. These consumer credit transactions are primarily for personal, family or household purposes. Instalment loans written in 1994 had original terms ranging from 12 to 180 months and averaged 48 months. For the year ended December 31, 1994, 85% of the volume of all instalment loans was either unsecured or secured by guarantors, luxury consumer goods, automobiles or other personal property, with the remaining 15% being secured by real estate. While the interest yield on real estate loans is generally lower than for other direct loans, such loans are typically larger and the ratio of cost to amounts loaned is lower. Additionally, credit loss experience on real estate loans has been significantly lower than on other loan types. Retail instalment sales contracts are generally acquired without recourse to the originating merchant and provide a vehicle for developing future loan business. Where these contracts result from the sale of consumer goods, payment is generally secured by such goods, and, in some cases, a portion of the purchase price is withheld from the merchant pending satisfactory payment of the obligation. Contracts are typically written with original terms from 3 to 60 months and for 1994 had an average original term of 24 months. At December 31, 1994, the average portfolio yield written by loan type was as follows:
Average Yield Real Estate Secured Loans 14.2% Other Direct Loans 25.4% Retail Instalment Sales Contracts 18.8%
4 Portfolio Composition The following table provides an analysis by type of the Company's notes and contracts receivable (net of unearned finance charges and deferred loan fees) at the dates shown:
December 31, (Dollars in thousands) 1994 1993 1992 Notes and Contracts Receivable $ 1,581,225 $1,492,232 $1,410,350 Type as a percent of Total Receivables Real Estate Secured Loans 27.0% 27.3% 30.1% Other Direct Loans 54.3 53.4 52.2 Retail Instalment Sales Contracts 18.7 19.3 17.7 100.0% 100.0% 100.0%
Notes and contracts written including balances renewed, but excluding bulk purchases, for the years ended December 31, 1994, 1993 and 1992 totaled $1.75 billion, $1.60 billion and $1.42 billion, respectively. Credit Loss Experience The Company closely monitors portfolio delinquency in measuring the quality of the portfolio and the potential for ultimate credit losses. Under the Company's policy, non-real estate secured delinquent accounts are charged off based on the number of days contractually delinquent (120 days for closed-end loans and 180 days for open-end loans). Collection efforts continue after an account has been charged off until the customer obligation is satisfied or until it is determined that the obligation is not collectible or that the cost of continuing collection efforts will not be offset by the potential recovery. 5 The following table sets forth the credit loss experience for the past three years and the allowance for doubtful accounts at the end of each year:
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Allowance for Doubtful Accounts at End of Year $ 41,311 $39,094 $36,046 Percent of Year-End Net Receivables 2.6% 2.6% 2.6% Provision for Credit Losses 38,334 35,131 38,601 Amounts Charged-Off Net of Recoveries: Amount 37,137 33,570 38,219 Percent of Average Net Receivables(1) 2.5% 2.4% 2.8%
(1) Average of notes and contracts receivable (net of unearned finance charges) at each month end during the period. Accounts past due 60 days and over, based on contract payments, were as follows as of the end of each of the past three years:
December 31, (Dollars in thousands) 1994 1993 1992 Amount $ 32,712 $ 31,883 $ 33,214 Percent of Year-End Gross Receivables 1.7% 1.8% 1.9%
Interest Rate Spreads and Cost of Borrowed Funds A relatively high ratio of borrowings to invested capital is customary in consumer finance activities due to the liquidity of the assets employed by the business. The spread between the revenues received from loans and interest expense is a significant factor in determining the net income of the Company. 6 The table below sets forth certain percentages relative to the spread between interest the Company received on the loan portfolio and interest expense for each of the last three years:
Year Ended December 31, 1994 1993 1992 Ratio to Average Net Receivables: Interest and Fee Income 20.0% 21.0% 21.4% Interest and Debt Expense 5.8 6.2 6.4 Gross Spread 14.2% 14.8% 15.0%
Credit Insurance Operations The Company makes available, at the option of its customers, credit life, credit accident and health, and credit casualty insurance products. Credit life insurance provides that the customer's credit obligation, to the extent of the policy limits, is paid in the event of death. Credit accident and health insurance provides for the payment of instalments due on the customer's credit obligation in the event of disability resulting from illness or injury. Credit casualty insurance insures payment, to the extent of the policy limits, of the credit obligation or cost to repair certain property used as collateral for such obligation in the event such property is destroyed or damaged. Purchase of such insurance is not a condition to obtaining a loan, although the Company may require casualty insurance covering collateral to be obtained from unaffiliated sources by the customer. The Company does not sell insurance to non-customers. Credit insurance sold by the Company is written by unaffiliated insurance companies and is substantially all reinsured by the Company, which earns reinsurance premiums thereon. Ratio of Earnings to Fixed Charges The Company's ratio of earnings to fixed charges, which represents the number of times fixed charges were covered by earnings, was 2.02 in 1994, 1.89 in 1993, 1.83 in 1992, 1.77 in 1991 and 1.40 in 1990. For purposes of computing this ratio, earnings consist of income from operations before income taxes and, in 1992, before the cumulative effect of a change in accounting method, plus fixed charges. Fixed charges consist of interest and debt expense and an appropriate portion of rentals. The combination of increased pretax income and lower interest expense in 1994, 1993, 1992 and 1991 resulted in the improved ratios for those years, as reflected above. 7 Governmental Regulation The Company's operations are, for the most part, regulated by federal and state consumer finance laws or similar legislation. All of the states in which finance subsidiaries of the Company are licensed to do business have laws, which vary from state to state, regulating the consumer finance business. These laws, among other things, typically limit the size of loans, set maximum interest rates and maximum maturities and regulate certain lending and collection activities. Although consumer finance laws have been in effect for many years, amending and new legislation is frequently proposed. The Company is unable to predict whether or when any such proposals might ultimately be enacted into law or to assess the impact any such enactment might have on the Company. The Company has been named as a defendant in several class action suits in Alabama, in which various industry-wide practices arising from routine business activities are being challenged and various damages are being sought. The Company believes that its practices are permissible under state and federal laws and will defend these suits accordingly. At this time, the Company is unable to determine the probability of any adverse outcome or the effect, if any, of such an outcome on the Company. Competition The consumer finance business is highly competitive. The Company's principal competitors are other local, regional and national finance companies, banks, credit unions, savings associations, and other similar financial institutions. Based upon information published in the American Banker in December 1993, the Company was ranked as the 25th largest among all finance companies in the United States, as measured by size of capital funds (consisting of stockholder's equity and subordinated debt). Employees The Company employs approximately 2,300 full-time employees. None of these employees are represented by a union. Management considers relations with its employees to be satisfactory. Item 2. Properties The Company completed the relocation of its headquarters from Memphis, Tennessee to Tampa, Florida in the first quarter of 1994. In connection with this relocation, the Company constructed a 71,000 square foot headquarters building on 6 acres of land at a total cost of approximately $8 million. In Memphis, Tennessee, the Company had leased approximately 62,000 square feet of office space as its headquarters; this lease, which would have expired on October 31, 1994, was terminated in the first quarter of 1994. The Company's consumer finance offices, located in 22 states, are leased typically for terms of three to five years with options to renew. Typical locations include shopping centers, office buildings and storefronts, generally of relatively small size sufficient to accommodate a staff of four to eight employees. See Note 10 to the Consolidated Financial Statements for additional information on rental expense and lease commitments. 8 Item 3. Legal Proceedings The Company and its subsidiaries are routinely involved in litigation incidental to their businesses. It is management's opinion that the aggregate liability arising from the disposition of all such pending litigation will not have a material adverse effect on the Company. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Company is an indirect wholly-owned subsidiary of GWFC and the Company's common stock is not traded on any national exchange or in any other established market. Payment of dividends is within the discretion of the Company's Board of Directors; however, it is projected that quarterly dividends totalling $32.5 million will be paid in 1995. Provisions of certain of the Company's debt agreements restrict the payment of dividends to a maximum prescribed proportion of cumulative earnings and contributed capital and otherwise provide for the maintenance of minimum levels of equity and maximum leverage ratios. The Company declared and paid dividends on a quarterly basis, totalling $25 million during 1994 and $20.5 million during 1993. Item 7. Management's Analysis of the Results of Operations for the Year Ended December 31, 1994 The Company's average net finance receivables grew $100.7 million in 1994, while, as a reflection of interest rate and competitive pressures, the overall portfolio yield decreased .97% as compared to the prior year. As a result, loan interest and fee income increased $6.5 million, or 2.2%, for the year ended December 31, 1994, as compared to the prior year. Income from investment securities increased $164 thousand, with increases in the invested balances being offset by reduced interest rates. As a result, total interest income increased by $6.7 million. During the first half of 1994, the Company funded its receivables growth primarily by issuing commercial paper at a 3.7% weighted average interest rate for that period, substantially lower than available long- term debt rates. This strategy resulted in a minimal increase in interest and debt expense of $689 thousand, or .8%, for the year ended December 31, 1994, as compared to 1993. These changes caused an increase in net interest income before provision for credit losses of $6.0 million, or 2.8%. In July, 1994, the Company issued $150 million of 7.75% senior notes maturing in 2001. The proceeds were used primarily to reduce outstanding commercial paper. On September 1, 1994, the Company retired $50 million of 14.25% senior debentures, which were due on that date. In December, 1994, the Company issued $100 million of 8.125% senior notes maturing in 1997, using the proceeds to reduce outstanding commercial paper. The provision for credit losses for the year ended December 31, 1994 was 2.55% as an annualized percentage of average net finance receivables for that period, as compared to 2.50% for 1993. The increase in provision rate reflects management's assessment of the quality of the Company's receivables portfolio at this time. 9 Income from insurance operations increased $1.7 million, or 8.4%, in 1994 as compared to 1993, paralleling the growth in net finance receivables. Other income in 1994 includes $1.2 million from a sale of a nonexclusive right to the Company's proprietary computer software. Personnel expenses were $2.5 million, or 4.0%, lower in 1994 as compared to 1993, primarily as a result of an increase in deferred direct loan costs. Before such deferrals, personnel expenses reflect an increase of $1.9 million, or 2.6%; while 1994 includes normal compensation increases, 1993 reflected various one-time relocation incentives. Advertising expense for 1994 increased $213 thousand, or 4.2%, over 1993 primarily due to various promotions aimed at increasing the balance of outstanding consumer instalment loans. Other operating expenses declined $3.4 million, or 8.5%, in 1994 compared to 1993, primarily as a result of an increase in deferred direct loan costs. Before such deferrals, other operating expenses reflect a decrease of $1.1 million, or 2.6%, primarily because the cost of the Company's proprietary computer software became fully amortized in 1994. Productivity, defined as the ratio of operating and administrative expenses (before deferral of direct loan costs) to average outstanding finance receivables, improved to 8.5% in 1994 as compared to 9.1% in 1993. The Company's effective tax rate was 36.5% for 1994 as compared to 35.8% for 1993. The increase is primarily because 1993 included a $2.5 million credit for the effect of tax legislation changes regarding intangibles. 10 Item 8. Financial Statements and Supplementary Data Report of Independent Certified Public Accountants To the Board of Directors and Stockholder of Aristar, Inc. In our opinion, the accompanying consolidated statements of financial condition and the related consolidated statements of operations and retained earnings and of cash flows present fairly, in all material respects, the financial position of Aristar, Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, in 1992 the Company changed its method of accounting for postretirement benefits other than pensions. PRICE WATERHOUSE LLP Tampa, Florida January 17, 1995 11 ARISTAR, INC. and Subsidiaries Consolidated Statements of Financial Condition
(Dollars in thousands) December 31, 1994 December 31, 1993 ASSETS Finance receivables, net $ 1,539,914 $1,453,138 Investment securities 106,600 93,114 Cash 9,668 13,724 Property and equipment, less accumulated depreciation and amortization: 1994, $21,684; 1993, $19,205 13,327 12,936 Deferred charges 12,605 14,135 Excess of cost over equity of companies acquired, less accumulated amortization: 1994, $38,021; 1993, $31,014 68,990 75,997 Other assets 19,832 11,127 TOTAL ASSETS $ 1,770,936 $1,674,171 LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities Short-term debt $ 179,085 $ 279,607 Long-term debt 1,092,545 892,683 Total debt 1,271,630 1,172,290 Accounts payable and other liabilities 45,636 72,241 Federal and state income taxes 421 8,701 Insurance claims and benefits reserves 7,792 7,877 Unearned insurance premiums and commissions 53,890 50,653 Total liabilities 1,379,369 1,311,762 Commitments and contingencies (Notes 10 and 11) Stockholder's equity Common stock: $1.00 par value; 10,000 shares authorized: 1,000 shares issued and outstanding 1 1 Paid-in capital 44,894 44,894 Retained earnings 350,266 317,069 Net unrealized holding gain (loss) on investment securities (3,594) 445 Total stockholder's equity 391,567 362,409 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,770,936 $ 1,674,171
See Notes to Consolidated Financial Statements. 12 ARISTAR, INC. and Subsidiaries Consolidated Statements of Operations and Retained Earnings
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Loan interest and fee income $ 300,969 $ 294,474 $ 296,342 Investment securities income 6,018 5,854 6,390 306,987 300,328 302,732 Interest and debt expense 87,074 86,385 89,005 Net interest income before provision for credit losses 219,913 213,943 213,727 Provision for credit losses 38,334 35,131 38,601 Net interest income 181,579 178,812 175,126 Other operating income Net insurance operations and other income 28,679 25,816 24,925 Other expenses Personnel expenses 61,353 63,882 62,341 Occupancy expense 8,504 9,075 8,739 Advertising expense 5,240 5,027 5,072 Amortization of excess cost over equity of companies acquired 7,007 7,007 7,007 Other operating expenses 36,562 39,954 41,164 118,666 124,945 124,323 Income before income taxes and cumulative effect of a change in accounting method 91,592 79,683 75,728 Provision for federal and state income taxes 33,395 28,560 33,909 Income before cumulative effect of a change in accounting method 58,197 51,123 41,819 Cumulative effect on prior years (to December 31, 1991) of a change in the method of recognizing post- retirement benefits other than pensions, net of income taxes of $5,660 (8,036) Net Income 58,197 51,123 33,783 Retained earnings Beginning of year 317,069 286,446 264,663 Dividends (25,000) (20,500) (12,000) End of year $ 350,266 $ 317,069 $ 286,446
See Notes to Consolidated Financial Statements. 13 ARISTAR, INC. and Subsidiaries Consolidated Statements of Cash Flows
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Cash flows from operating activities Net income $ 58,197 $ 51,123 $ 33,783 Adjustments to reconcile net income to net cash provided by operating activities Provision for credit losses 38,334 35,131 38,601 Depreciation and amortization 15,350 14,714 13,359 Deferred income taxes 600 (14,900) (9,180) Increase (decrease) in Accounts payable and other liabilities (26,605) 8,970 22,210 Unearned insurance premiums and commissions and insurance claims and benefits reserves 3,152 3,012 1,457 Currently payable income taxes (6,744) (7,212) 9,626 (Increase) decrease in other assets (8,705) 2,860 6,837 Net cash provided by operating activities 73,579 93,698 116,693 Cash flows from investing activities Securities purchased (43,252) (51,257) (39,811) Securities matured 23,278 51,153 21,391 Loans originated or purchased (1,166,986) (1,039,439) (914,768) Loans repaid or sold 1,040,918 927,335 885,742 Capital expenditures, net (4,039) (5,967) (981) Net cash used in investing activities (150,081) (118,175) (48,427) Cash flows from financing activities Net change in commercial paper and other short-term borrowings (100,522) 76,515 (375,698) Proceeds from issuance of long-term debt 249,625 149,769 398,782 Long-term debt issue costs (1,657) (1,095) (3,337) Repayments of long-term debt (50,000) (175,000) (83,405) Dividends paid (25,000) (20,500) (12,000) Net cash provided by (used in) financing activities 72,446 29,689 (75,658) Net increase (decrease) in cash and cash equivalents (4,056) 5,212 (7,392) Cash and cash equivalents Beginning of year 13,724 8,512 15,904 End of year $ 9,668 $ 13,724 $ 8,512 Supplemental disclosures of cash flow information Interest paid $88,612 $88,251 $ 80,010 Intercompany payments in lieu of federal and state income taxes 40,734 53,473 28,099
See Notes to Consolidated Financial Statements. 14 ARISTAR, INC. and Subsidiaries Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies Ownership. The Company is an indirect, wholly-owned subsidiary of Great Western Financial Corporation ("GWFC"). Principles of Consolidation. The consolidated financial statements include the accounts of Aristar, Inc. and its wholly-owned subsidiaries (the "Company") after elimination of all material intercompany balances and transactions. Certain amounts in prior years have been reclassified to conform to the current year's presentation. Income Recognition from Finance Operations. Unearned finance charges on all types of consumer notes and contracts receivable are recognized on an accrual basis, using the interest method. Accrual generally is suspended when payments are more than three months contractually overdue. Loan fees and directly related lending costs are deferred and amortized using the interest method over the contractual life of the related loans. Provision and Allowance for Credit Losses. The Company provides, through charges to income, an allowance for losses which, based upon management's evaluation of numerous factors, including current economic trends, loan portfolio agings, historical loss experience and evaluation of collateral, is deemed adequate to cover reasonably expected losses on outstanding loans. Losses on loans are charged to the allowance for credit losses based upon the number of days delinquent or when collectibility becomes questionable and the underlying collateral, if any, is considered insufficient to liquidate the loan balance (see Note 2). Recoveries on previously written-off loans are credited to the allowance. Investment Securities. As of December 31, 1993, investments classified as available for sale are accounted for according to Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"). This statement requires that debt and equity securities classified as available for sale be reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of taxes, as a separate component of stockholder's equity. The adoption of FAS 115 resulted in the Company recording, at December 31, 1993, a net unrealized holding gain of $445,000 as a separate component of stockholder's equity and a deferred tax liability of $324,000. Property, Equipment and Leasehold Improvements. Property, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are provided principally on the straight-line method over the estimated useful life or, if less, the term of the lease. Deferred Charges. Expenditures that are deferred are amortized over the period benefited. Amortization is computed principally using the straight-line method. Excess of Cost Over Equity of Companies Acquired. The excess of cost over the fair value of net assets of companies acquired is amortized on a straight-line basis, generally over periods of up to 25 years. 15 Insurance Premiums and Acquisition Costs. Insurance premiums are deferred and subsequently amortized into revenue over the terms of the related insurance contracts. The methods of amortization used are pro rata, sum-of-the-digits and a combination thereof. Policy acquisition costs (principally ceding commissions and premium taxes) are deferred and charged to expense over the terms of the related policies in proportion to premium recognition. Insurance Claims and Benefits Reserves. Reserves for reported claims on credit life and health insurance are established based upon standard actuarial assumptions used in the insurance business for such purposes. Claims reserves for reported property and casualty insurance claims are based upon estimates of costs and expenses to settle each claim. Additional amounts of reserves, based upon prior experience and insurance in force, are provided for each class of insurance for claims which have been incurred but not reported as of the balance sheet date. Income Taxes. The Company is included in the consolidated Federal income tax return filed by GWFC. Currently payable Federal income taxes will be paid to GWFC. Federal income taxes are allocated between GWFC and its subsidiaries in proportion to the respective contribution to consolidated income or loss. Beginning in 1993, allocations for state income taxes approximate the amount the Company would have paid on a separate entity basis. Prior to 1993, state income taxes were allocated using a combined GWFC effective tax rate. Deferred income taxes are provided on elements of income or expense that are recognized in different periods for financial and tax reporting purposes. Taxes on income are determined by using the liability method as prescribed by Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS 109"). This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, FAS 109 requires the consideration of all expected future events other than enactments of changes in the tax law or rates. Statement of Cash Flows. For purposes of reporting cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 16 Accounting Changes. The Company adopted Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS 106") as of January 1, 1992. FAS 106 requires that the expected cost of postretirement benefits other than pensions be charged to expense during the period over which eligible employees render active service. The unfunded benefit obligation as of January 1, 1992 reflected in liabilities on the Consolidated Statements of Financial Condition and shown as an accounting change on the Consolidated Statements of Operations follows:
(Dollars in thousands) January 1, 1992 Accumulated postretirement benefits obligation Retirees $ 6,971 Active plan participants 6,725 13,696 Income tax benefit 5,660 $ 8,036
In 1992, the Company also adopted FAS 109, which supersedes Statement No. 96 "Accounting for Income Taxes," which was adopted by the Company in 1987. The adoption of FAS 109 did not have a significant impact on the financial statements for 1992. Market Value Disclosures. The Company adopted Statement of Financial Accounting Standards No. 107 "Disclosures about Fair Value of Financial Instruments" ("FAS 107") in December 1992. FAS 107 requires disclosures about fair value for all financial instruments, whether recognized or not in the body of the financial statements or in the accompanying notes, and the methods and significant assumptions used to estimate their fair value. Quoted market prices are used, where available, to estimate the market value of financial instruments. Because no quoted market prices exist for a significant portion of the Company's financial instruments, market value is estimated using comparable market prices for similar instruments or using management's estimates of appropriate discount rates and cash flows for the underlying asset or liability. A change in management's assumptions could significantly affect these estimates; accordingly, the Company's market value estimates are not necessarily indicative of the value which would be realized upon disposition of the financial instruments. 17 Note 2 Finance Receivables Finance receivables at December 31, 1994 and 1993 are summarized as follows:
(Dollars in thousands) 1994 1993 Consumer finance receivables Real estate secured loans $ 518,757 $ 510,229 Other consumer finance instalment loans 1,055,723 971,532 Retail instalment contracts 331,424 328,042 Gross consumer finance receivables 1,905,904 1,809,803 Less: Unearned finance charges and deferred loan fees (324,679) (317,571) Allowance for credit losses (41,311) (39,094) Net consumer finance receivables $1,539,914 $1,453,138
The amount of gross nonaccruing receivables included above was approximately $19.8 million and $19.3 million at December 31, 1994 and 1993, respectively. Contractual maturities, net of unearned finance charges and deferred loan fees, at December 31, 1994 are as follows:
Over 1 But Within Within Over 1 year 5 years 5 years Total (Dollars in thousands) Real estate secured loans $ 51,063 $ 164,278 $ 210,893 $ 426,234 Other consumer finance instalment loans 344,356 514,119 506 858,981 Retail instalment contracts 135,063 160,269 678 296,010 $ 530,482 $ 838,666 $ 212,077 $1,581,225
Consumer finance receivables have maximum terms of 180 months, while retail contracts have maximum terms of 60 months. The weighted average contractual term of all loans and contracts written during the years ended December 31, 1994 and 1993 was 41 months. Experience has shown that a substantial portion of the receivables will be renewed or repaid prior to contractual maturity. Therefore, the tabulation of contractual payments should not be regarded as a forecast of future cash collections. During the years ended December 31, 1994 and 1993, the ratio of principal cash collections to average net consumer finance receivables outstanding was 69% and 66%, respectively. Additionally, the majority of loans provide for a fixed rate of interest over the contractual life of the loan. 18 The approximate fair value of the Company's net finance receivables as of December 31, 1994 and 1993 follows:
(Dollars in thousands) 1994 1993 Approximate Approximate Net Book Fair Net Book Fair Value Value Value Value Real estate secured loans $ 426,234 $ 417,456 $ 407,416 $ 418,641 Other consumer finance instalment loans 858,981 855,318 796,357 794,704 Retail instalment contracts 296,010 296,010 288,459 288,459 $1,581,225 $1,568,784 $1,492,232 $1,501,804
The approximate fair value of finance receivables is estimated by discounting the future cash flows using current rates at which similar loans would be made with similar maturities to borrowers with similar credit ratings. The current rates for finance receivables approximate the weighted average rates of the portfolio at December 31, 1994 and 1993; therefore, there is no significant difference between the estimated fair value of the loan portfolio and its net book value. The fair value is not adjusted for the value of potential loan renewals from existing borrowers. Because the Company primarily lends to consumers, it did not have receivables from any industry group that comprised 10 percent or more of total consumer finance receivables at December 31, 1994. Activity in the Company's allowance for credit losses is as follows:
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Balance, January 1 $ 39,094 $ 36,046 $ 35,114 Provision for credit losses 38,334 35,131 38,601 Amounts charged off (52,197) (48,635) (52,200) Recoveries 15,060 15,065 13,981 Allowances on notes purchased 1,020 1,487 550 Balance, December 31 $ 41,311 $ 39,094 $ 36,046
19 Note 3 Investment Securities Investment securities as of December 31, 1994 and 1993 are as follows:
(Dollars in thousands) December 31, 1994 Approximate Original Amortized Gross Unrealized Fair Cost Cost Gains Losses Value Government obligations $ 18,357 $ 18,352 $ 2 $ 1,487 $ 16,867 Corporate obligations 89,763 89,237 107 4,023 85,321 Certificates of deposit and other 4,525 4,540 37 165 4,412 $112,645 $112,129 $ 146 $ 5,675 $ 106,600
(Dollars in thousands) December 31, 1993 Approximate Original Amortized Gross Unrealized Fair Cost Cost Gains Losses Value Government obligations $ 18,261 $ 18,179 $ 89 $ 49 $ 18,219 Corporate obligations 69,197 68,827 1,389 415 69,801 Certificates of deposit and other 5,265 5,339 1 246 5,094 $ 92,723 $ 92,345 $1,479 $ 710 $ 93,114
There were no significant realized gains or losses during 1994 or 1993. The following table presents the maturity of the investment securities at December 31, 1994:
(Dollars in thousands) Approximate Amortized Fair Cost Value Due in one year or less $ 17,249 $ 17,078 Due after one year through five years 65,162 62,508 Due after five years through ten years 26,036 23,439 Due after ten years 3,682 3,575 $112,129 $106,600
20 Note 4 Deferred Charges Deferred charges, net of amortization, as of December 31, 1994 and 1993 are as follows:
(Dollars in thousands) 1994 1993 Long-term debt issuance costs $ 3,838 $ 3,449 Premiums on purchased accounts 8,767 9,308 System development costs 1,378 $12,605 $14,135
Amortization of these deferred charges for each of the last three years is as follows:
(Dollars in thousands) 1994 1993 1992 Long-term debt issuance costs $1,268 $1,581 $1,499 Premiums on purchased accounts 3,385 3,667 3,805 System development costs 1,378 2,052 2,052
Note 5 Short-term Debt Short-term debt at December 31, 1994 and 1993 consisted of commercial paper notes issued in the minimum amount of $500,000 with original terms to 92 days. The book value of short-term debt at December 31, 1994 approximates its estimated fair value. Additional information concerning total short-term borrowings is as follows:
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Outstanding during the year Maximum amount at any month end $ 287,793 $ 279,607 $ 581,556 Average amount 235,682 170,852 298,531 Weighted average interest rate 4.2% 3.6% 4.3% Balance at end of year Amount $ 179,085 $ 279,607 $ 203,092 Weighted average interest rate 6.0% 3.8% 4.1%
Weighted average interest rates include the effect of commitment fees. 21 Short-term notes totalling $74 million and $65 million were issued in December, 1994 and 1993, respectively. The proceeds of these notes were used to purchase investment securities and were repaid through liquidation of these securities in the January following issuance. This short-term debt has been reflected net of the securities balances in the accompanying Consolidated Statements of Financial Condition. In 1994, the Company entered into a $450 million revolving credit agreement with several domestic and foreign banks. The agreement, which replaced previous revolving credit agreements of $120 million and $200 million, has a four-year term with repayment in full of any balance outstanding in October, 1998. There were no borrowings under any revolving credit agreements in 1994 or 1993. 22 Note 6 Long-term Debt Long-term debt at December 31, 1994 and 1993 was comprised of the following:
(Dollars in thousands) 1994 1993 Senior Debentures and Notes 14.25%, due September 1, 1994 $ $ 50,000 9.47%, due April 6, 1995 50,000 50,000 8.55%, due June 1, 1995 100,000 100,000 9.5%, due July 30, 1995 21,000 21,000 6.25%, due July 15, 1996 99,986 99,977 7.375%, due February 15, 1997 99,953 99,932 8.125%, due December 1, 1997 99,722 5.75%, due July 15, 1998 149,830 149,787 7.875%, due February 15, 1999 99,827 99,792 7.75%, due June 15, 2001 149,905 Medium Term Notes, Series C, due through 1996, at interest rates of 8.75% to 8.90% 10,000 10,000 Medium Term Notes, Series D, due through 1995, at interest rate of 9.72% 13,000 13,000 Total Senior Debt 893,223 693,488 Senior Subordinated Notes and Debentures 8.875%, due August 15, 1998 99,894 99,869 7.5%, due July 1, 1999 99,428 99,326 Total Senior Subordinated Debt 199,322 199,195 Total Long-term Debt $1,092,545 $ 892,683
23 Aggregate maturities and sinking fund requirements at December 31, 1994 are as follows:
(Dollars in thousands) Senior Senior Subordinated Debt Notes Total 1995 $ 189,000 $ 189,000 1996 104,986 104,986 1997 199,675 199,675 1998 149,830 $ 99,894 249,724 1999 99,827 99,428 199,255 Thereafter 149,905 149,905 $ 893,223 $199,322 $1,092,545
The approximate fair value of the Company's long-term debt as of December 31, 1994 and 1993 is as follows:
(Dollars in thousands) 1994 1993 Book Approximate Book Approximate Value Fair Value Value Fair Value Senior debt $ 893,223 $ 869,781 $ 693,488 $ 724,100 Senior subordinated notes 199,322 196,035 199,195 217,700 $1,092,545 $1,065,816 $ 892,683 $ 941,800
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the approximate fair value of existing debt. In March, 1992, the Company filed a $600 million shelf registration statement. Under this registration statement, the Company issued in July, 1992, $100 million of 6.25% senior notes maturing July 15, 1996 and $100 million of 7.5% senior subordinated notes maturing July 1, 1999; in July, 1993, $150 million of 5.75% senior notes maturing July 15, 1998; in July, 1994, $150 million of 7.75% senior notes maturing June 15, 2001; and in December, 1994, $100 million of 8.125% senior notes maturing December 1, 1997. The proceeds of each of these issues were used principally to reduce outstanding commercial paper. 24 Note 7 Income Taxes The components of income tax expense are as follows:
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Currently payable Federal $ 27,562 $ 37,270 $ 26,284 State 5,233 6,190 11,145 Deferred 600 (14,900) (3,520) 33,395 28,560 33,909 Adjustment to deferred tax for cumulative effect of change in accounting method (5,660) $ 33,395 $ 28,560 $ 28,249
Deferred taxes result from temporary differences in the recognition of certain items for tax and financial reporting purposes. Deferred tax liabilities (assets) are comprised of the following:
December 31, (Dollars in thousands) 1994 1993 Amortization of intangibles $ 19,649 $ 21,991 Employee benefits accruals 1,613 2,389 Depreciation 1,175 1,197 Loan interest and fee income 272 Other deferred income items 91 223 Total deferred tax liabilities 22,800 25,800 Credit loss reserves (12,852) (14,826) Unearned insurance commissions (2,833) (4,909) Loan interest and fee income (382) Other miscellaneous accruals (2,392) (2,619) State taxes (4,898) (4,166) Other deferred deduction items (2,025) (1,698) Total deferred tax assets (25,000) (28,600) Net deferred tax asset $ (2,200) $ (2,800)
25 The provisions for income taxes differ from the amounts determined by multiply- ing pretax income by the statutory Federal income tax rate of 35% for 1994 and 1993 and 34% for 1992. A reconciliation between these amounts is as follows:
Year Ended December 31, (Dollars in thousands) 1994 1993 1992 Income taxes at statutory rates $ 32,057 $ 27,889 $ 25,748 Increase (reduction) in taxes resulting from: State income taxes, net of Federal benefit 3,467 3,024 6,253 Other (2,129) (2,353) 1,908 $ 33,395 $ 28,560 $ 33,909
Note 8 Stockholder's Equity Provisions of certain of the Company's debt agreements restrict the payment of dividends to a maximum prescribed proportion of cumulative earnings and contributed capital and provide for the maintenance of minimum levels of equity and maximum leverage ratios. At December 31, 1994, approximately $82 million was available under the debt agreement restriction for future dividends. Note 9 Retirement and Savings Plans GWFC's non-contributory defined benefit pension plan covers substantially all of the Company's employees. Accumulated plan benefits and annual pension expense are derived from an allocation formula based on the Company's total participants and the Plan's total participants. Pension expense for the Company's participants for the years ended December 31, 1994, 1993 and 1992 was $1,740,000, $1,515,000 and $1,200,000, respectively. Due to the Company's participation in a multiemployer defined benefit plan, information as to separate Company participant assets and vested benefits is not presented. The Company's employees also participate in GWFC's employee savings plan, which allows employees to defer part of their pretax compensation until retirement. Company contributions equal 50% of the contributions made by employees up to 6% plus annual discretionary amounts, if any, as determined by management. The Company's cost is based on the actual contribution related to its participating employees. Total expense was $1,277,000, $1,342,000 and $1,388,000 for the years ended December 31, 1994, 1993 and 1992, respectively. The Company's employees also participate in GWFC's defined benefit post- retirement plans which provide medical and life insurance coverage to eligible employees and dependents based on age and length of service. Medical coverage options are the same as available to active employees. The accumulated post- retirement benefit obligation and related expense are derived from an allocation formula based on the Company's total participants and the Plan's total participants. 26 The net postretirement medical and life insurance expense allocated to the Company for the years ended December 31, 1994, 1993 and 1992 were $737,000, $1,300,000 and $1,216,000, respectively. Note 10 Leases At December 31, 1994, the Company was lessee of office space, principally for loan offices, computer and other office equipment and automobiles, generally for terms of five or fewer years. The lease for the Company's former headquarters was terminated in the first quarter of 1994 due to the purchase of its new headquarters in Tampa, Florida. The Company has no material capital leases. Under operating leases that have initial or remaining noncancelable lease terms in excess of one year, approximate aggregate annual minimum rentals are $5,300,000 in 1995; $4,300,000 in 1996; $3,200,000 in 1997; $1,800,000 in 1998; and $900,000 in 1999. Rent expense for the years ended December 31, 1994, 1993 and 1992 was $7,687,000, $8,560,000, and $8,007,000, respectively. Note 11 Contingencies The Company is routinely involved in litigation incidental to its businesses. It is management's opinion that the aggregate liability arising from the disposition of all such pending litigation will not have a material adverse effect on the Company. Note 12 Transactions with Related Parties During 1991, the Company borrowed $264,130,000 from a subsidiary of GWFC under a short-term master note, which was repaid in July, 1992, the proceeds of which were used primarily to reduce commercial paper and other nonaffiliated debt. Interest expense related to this debt was $2.5 million in 1992. 27 Other transactions with GWFC or its subsidiaries are identified as follows: * The Company provides supervisory and administrative services to affiliates engaged in industrial banking and other consumer finance activities at no cost to such affiliates. The Company also provides data processing services to such affiliates, and revenue from these services totalled approximately $757,000 in 1994, $768,000 in 1993, and $699,000 in 1992. From time to time, the Company advances funds to these operations. At December 31, 1994 and 1993, there were outstanding advances of $7,981,000 and $855,000, respectively. * A subsidiary of GWFC provides the Company with certain administrative services, including human resources and cash management. The Company paid this affiliate management fees of $1,365,000 in 1994, $1,239,000 in 1993, and $1,163,000 in 1992. * The Company makes payments to GWFC in accordance with GWFC's tax allocation policy and in connection with the retirement and savings plans. Note 13 Approximate Fair Values of Financial Instruments A summary of the approximate fair values of the Company's financial instruments, as compared to their carrying values, is set forth in the following table:
(Dollars in thousands) December 31, 1994 December 31, 1993 Carrying Approximate Carrying Approximate Value Fair Value Value Fair Value Finance receivables Note 2 $1,581,225 $1,568,784 $1,492,232 $1,501,804 Investment securities Note 3 106,600 106,600 93,114 93,114 Short-term debt Note 5 179,085 179,085 279,607 279,607 Long-term debt Note 6 1,092,545 1,065,816 892,683 941,800
See the referenced Notes for additional information. Note 14 Business Segments The Company is engaged primarily in the consumer finance business. 28 Note 15 Selected Quarterly Financial Data (Unaudited) A summary of the quarterly results of operations for the years ended December 31, 1994 and 1993 is set forth below:
Quarter Ended March 31, June 30, September 30, December 31, (Dollars in Thousands) 1994 1993 1994 1993 1994 1993 1994 1993 Revenue $83,032 $80,811 $82,062 $80,167 $83,400 $81,966 $87,172 $83,200 Interest and other expenses 51,868 52,853 51,775 52,212 51,853 54,062(1) 50,244 52,203 Provision for credit losses 8,552 8,928 7,621 8,315 9,513 8,335 12,648 9,553 Total expenses 60,420 61,781 59,396 60,527 61,366 62,397 62,892 61,756 Income before taxes 22,612 19,030 22,666 19,640 22,034 19,569 24,280 21,444 Income tax provision 8,143 8,014 8,183 8,375 7,695 5,311(2) 9,374 6,860(3) Net income $14,469 $11,016 $14,483 $11,265 $14,339 $14,258 $14,906 $14,584
(1) Includes approximately $1.2 million associated with the relocation of the Company's headquarters from Memphis, Tennessee to Tampa, Florida. (2) Reflects a decrease in the Company's effective tax rate primarily attributable to the increased deductibility of current and prior year's amortization of intangible assets resulting from the Omnibus Budget Reconciliation Act of 1993. (3) Reflects a change in GWFC's income tax allocation policy, which provides that the Company's state income taxes will be charged or credited in amounts approximating such taxes as computed on a separate entity basis. 29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Index of Documents filed as a part of this Report: 1. Financial Statements Included in Part II of this Report:
PAGE Report of Independent Certified Public Accountants. . . . . . . 10 Aristar, Inc. and Subsidiaries: Consolidated Statements of Financial Condition at December 31, 1994 and 1993. . . . . . . . . . . . . . . . . 11 Consolidated Statements of Operations and Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 . . . . . 12 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 . . . . . 13 Notes to Consolidated Financial Statements . . . . . . . . . . 14
2. Financial Statement Schedules All schedules are omitted because of the absence of the conditions under which they are required or because the required information is set forth in the financial statements or related notes. 3. Exhibits Included in Part IV of this Report: Exhibit Number (3) (a) Certificate of Incorporation of Aristar, Inc. as presently in effect. (1) (b) By-Laws of Aristar, Inc. as presently in effect. (1) (4) (a) Indenture dated as of July 15, 1984, between Aristar, Inc. and Bank of Montreal Trust Company, as trustee. (2) (b) First supplemental indenture to Exhibit (4)(a) dated as of June 1, 1987. (2) 30 (c) Indenture dated as of August 15, 1988, between Aristar, Inc. and Bank of Montreal Trust Company, as trustee. (3) (d) Indenture dated as of May 1, 1991 between Aristar, Inc. and Security Pacific National Bank, as trustee. (4) (e) Indenture dated as of May 1, 1991 between Aristar, Inc. and The First National Bank of Boston, as trustee. (4) (f) Indenture dated as of July 1, 1992 between Aristar, Inc. and The Chase Manhattan Bank, N.A., as trustee. (5) (g) Indenture dated as of July 1, 1992 between Aristar, Inc. and Citibank, N.A., as trustee. (5) (h) The registrant hereby agrees to furnish the Securities and Exchange Commission upon request with copies of all instruments defining rights of holders of long-term debt of Aristar and its consolidated subsidiaries. (10)(a) Great Western Financial Corporation Income Tax Allocation Policy. (6) (b) Amendment Number 1 to Great Western Financial Corporation Income Tax Allocation Policy. (6) (c) Amendment Number 2 to Great Western Financial Corporation Income Tax Allocation Policy. (7) (12) Statement Re: Computation of Ratios. (23) Consent of Independent Certified Public Accountants. (24) Power of Attorney included on Page 32 of the Form 10-K. (27) Financial Data Schedule. 31 (1) Incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987, Commission file number 1-3521. (2) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, Commission file number 1-3521. (3) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, Commission file number 1-3521. (4) Incorporated by reference to Registrant's Current Report on Form 8-K dated May 29, 1991, Commission file number 1-3521. (5) Incorporated by reference to Registrant's Current Report on Form 8-K dated June 24, 1992, Commission file number 1-3521. (6) Incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992, Commission file number 1-3521. (7) Incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, Commission file number 1-3521. (b) Reports on Form 8-K On December 12, 1994, the Company filed a Current Report on Form 8-K dated December 5, 1994, disclosing, under Item 7, the terms of the issuance of $100,000,000 of 8.125% senior notes maturing December 1, 1997. 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ARISTAR, INC. By /s/ James A. Bare March 23, 1995 James A. Bare, Senior Vice President Date and Chief Financial Officer (and Principal Accounting Officer) POWER OF ATTORNEY Each person whose signature appears below hereby authorizes James A. Bare as attorney-in-fact to sign on his behalf as an individual and in every capacity stated below, and to file all amendments to the registrant's Form 10-K, and the registrant hereby confers like authority to sign and file in its behalf. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 23, 1995. /s/ Michael M. Pappas Michael M. Pappas, President and Director (Principal Executive Officer) /s/ James A. Bare James A. Bare, Director /s/ Carl F. Geuther Carl F. Geuther, Director /s/ J. Lance Erikson J. Lance Erikson, Director EX-12 2 Exhibit 12 ARISTAR, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
Year Ended December 31, (Dollars in Thousands) 1994 1993 1992 1991 1990 Income from operations before income taxes and cumulative effect of a change in accounting principle $ 91,592 $ 79,683 $ 75,728 $ 63,430 $ 37,480 Fixed charges: Interest and debt expense on all indebtedness 87,074 86,385 89,005 80,261 92,154 Appropriate portion of rentals (33%) 2,537 2,825 2,358 2,157 2,062 Total fixed charges 89,611 89,210 91,363 82,418 94,216 Earnings available for fixed charges $181,203 $168,893 $167,091 $145,848 $131,696 Ratio of earnings to fixed charges 2.02 1.89 1.83 1.77 1.40
EX-23 3 Exhibit 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the prospectus constituting part of the Registration Statements on Form S-3 (No. 33-23185) of Aristar, Inc. and subsidiaries of our report dated January 17, 1995 appearing on page 10 of this Form 10-K. PRICE WATERHOUSE LLP Tampa, Florida March 23, 1995 EX-27 4
9 This Schedule contains summary financial information extracted from the Company's financial statements filed as part of its Annual Report on Form 10-K for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. YEAR DEC-31-1994 DEC-31-1994 9,668 0 0 0 106,600 0 0 1,581,225 (41,311) 1,770,936 0 179,085 45,636 1,092,545 1 0 0 346,672 1,770,936 300,969 6,018 0 306,987 0 87,074 219,913 38,334 0 118,666 91,592 0 0 0 58,197 0 0 11.28 19,842 0 0 0 39,094 (52,197) 15,060 41,311 0 0 41,311 Aristar, Inc. is technically a Commercial and Industrial Company subject to Article 5 of Regulation S-X. However, as its primary business is consumer finance, the Company, although not a bank holding company, is engaged in similar lending activities. Therefore, in accordance with Staff Accounting Bulletin Topic 11-K, "Application of Article 9 and Guide 3," the Company has prepared its Financial Data Schedule for the year ended December 31, 1994 using the Article 9 format.
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