-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KzEbPjQsDS4Ta7GeYI/6sVMkRV4GLjnPWN8UDtIagWt5inur7QR49pjjQlQAQS8V DqwMHO+87DCD/9dr2dlMGg== 0000950117-96-001506.txt : 19961126 0000950117-96-001506.hdr.sgml : 19961126 ACCESSION NUMBER: 0000950117-96-001506 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961125 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CAPITAL CORP /DE/ CENTRAL INDEX KEY: 0000897708 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 223211453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11237 FILM NUMBER: 96671761 BUSINESS ADDRESS: STREET 1: 44 WHIPPANY ROAD CITY: MORRISTOWN STATE: NJ ZIP: 07962-1983 BUSINESS PHONE: 2013973000 MAIL ADDRESS: STREET 1: 44 WHIPPANY RD CITY: MORRISTOWN STATE: NJ ZIP: 07962-1983 10-Q/A 1 AT&T CAPITAL CORP. 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q/A (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 1996 ( ) 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 1-11237 AT&T CAPITAL CORPORATION A DELAWARE I.R.S. EMPLOYER CORPORATION NO. 22-3211453 44 Whippany Road, Morristown, New Jersey 07962-1983 Telephone Number 201-397-3000 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 ----- ----- At October 31, 1996, 90,000,000 shares of common stock, par value $.01 per share, were outstanding. 2 FORM 10-Q/A The undersigned registrant hereby amends Item 2 ("Management's Discussion and Analysis of Financial Condition and Results of Operations") of its Form 10-Q filed with the Securities and Exchange Commission on November 14, 1996, for the quarter ended September 30, 1996, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The following change has been made within the first paragraph of Item 2; "...eight billion Trust Originated Preferred Securities..." was changed to "...eight million Trust Originated Preferred Securities...". The entire text of Item 2, reflecting the aforementioned correction, is set forth in the pages attached hereto. 3 FORM 10-Q/A AT&T CAPITAL CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations On October 1, 1996, the Company completed its merger with a leasing consortium including certain management team members (the "Merger"). As a result of the Merger, AT&T Capital's shareowners received $45 in cash for each outstanding share of the Company's Common Stock. The total Merger consideration for the outstanding shares and stock options was approximately $2.2 billion. On October 15, 1996 the Company securitized $3.0 billion of lease and loan receivables (including $0.3 billion of receivables previously sold and recently repurchased by the Company) (the "Securitization"). On October 25, 1996 the Company issued to the public eight million Trust Originated Preferred Securities ("TOPrS")(the "Preferred Offering"). For a more detailed discussion of the Merger, the Securitization, the Preferred Offering and their related impacts on the Company, see Notes 4 and 5 to the unaudited consolidated financial statements and the pro forma financial statements included in the Company's Form 8-K dated October 1, 1996. RESULTS OF OPERATIONS Three months ended September 30, 1996 versus September 30, 1995 Unless otherwise indicated, all period to period comparisons represent balances or activity at or for the three months ended September 30, 1996 versus September 30, 1995, respectively. Net income of $40.5 million increased 24.6% from $32.5 million. Earnings per share of $0.85 increased 23.4% from $0.69. These increases were generated principally through increased portfolio revenues resulting from a higher level of average net portfolio assets, increased computer trading activity and a lower effective income tax rate. This activity was partially offset by increased interest expense, operating and administrative ("O&A") expenses and provision for credit losses, all of which were associated with a higher level of portfolio assets. Finance revenue of $52.4 million increased $5.6 million, or 12.0%. A 21.6% increase in the average net finance receivables contributed $10.1 million of the increase, while the decline in average yield from 11.28% to 10.39% offset this increase by $4.5 million. The growth in the portfolio was primarily due to increases in the large-ticket structured finance and certain small-ticket portfolios. The decline in yield was experienced in certain large and small-ticket portfolios. In connection with the Securitization, the Company's net investment in finance receivables decreased by approximately $.1 billion. As a result, the Company's average finance receivables will be lower and generate less finance revenue in the future. However, the Company will earn portfolio servicing fees for managing such securitized assets. Capital lease revenue of $169.1 million increased $18.7 million, or 12.4%. Of the total increase, $14.9 million was due to an 9.9% increase in the average net capital lease portfolio. A strengthened yield of 10.56% up from 10.32% contributed $3.8 million to the increase. The Company experienced higher yields in certain small-ticket portfolios which were somewhat offset by lower yields in certain international portfolios. In 4 FORM 10-Q/A connection with the Securitization, the Company's net investment in capital leases decreased by approximately $2.8 billion. As a result, the Company's average capital lease portfolio will be lower and generate less capital lease revenue in the future. However, the Company will earn portfolio servicing fees for managing such securitized assets. Rental revenue on operating leases of $179.9 million increased 26.9% and depreciation expense on operating leases of $117.4 million increased 32.9%. Rental revenue less associated depreciation ("operating lease margin") was $62.5 million, or 34.7% of rental revenue, compared with $53.5 million, or 37.7% of rental revenue. The decreased operating lease margin percent relates primarily to increased depreciation on certain computer-related assets. Net interest margin (finance revenue, capital lease revenue and rental revenue, less depreciation on operating leases and interest expense) of $163.8 million or 6.76% of average net portfolio assets decreased slightly from 6.78%. The decrease in the net interest margin percentage is consistent with the decrease in the total portfolio yield from 11.75% to 11.72% and the increase in average borrowings reflective of the increased debt to equity ratio (to 6.50 times from 6.07 times) partially offset by a decrease in the average cost of debt (to 6.38% from 6.72%). The decrease in the third quarter cost of debt is primarily due to a shift in the debt mix towards commercial paper, which carries a lower cost. Revenue from sales of equipment of $24.0 million increased from $10.4 million. Similarly, cost of equipment sales of $21.0 million increased from $9.9 million. Revenue from sales of equipment less associated cost of equipment sales ("equipment sales margin") was $3.0 million, or 12.5% of revenue from sales of equipment compared to $0.5 million, or 4.6%. The increased equipment sales and equipment sales margin was primarily due to a heightened demand for mainframes and other emerging technology equipment. Average borrowings outstanding of $7.5 billion increased 19.4%, or $1.2 billion. This increase was due to growth in portfolio assets and an increased debt to equity ratio. The increased debt to equity ratio was impacted by the Company's decision to defer its quarterly securitization in anticipation of the merger-related Securitization. The Company anticipates that approximately 30% of its annual financing volume originated each year will be securitized. Interest expense of $120.3 million increased 13.4%, or $14.2 million. Higher average borrowings contributed $20.6 million of the increase and was partially offset by $6.4 million due to a decline in the average cost of debt. In October, 1996, the Company repaid approximately $1.6 billion of commercial paper with proceeds from the Securitization and Preferred Offering, net of amounts used to purchase Company common stock. Consequently, the lower borrowings outstanding will reduce the Company's interest expense. Conversely, the Company's cost of debt in the future will be negatively impacted by the loss of interest free loans from AT&T pursuant to a Gross Profit Tax Deferral ("GPTD") Interest Free Loan Agreement (the "GPTD Agreement"). As discussed below in "Liquidity and Capital Resources", the Company's debt ratings were lowered in connection with the Merger. As a result, the Company estimates its cost of issuing debt will increase by approximately 20 to 25 basis points. See Notes 4 and 5 to the unaudited consolidated financial statements for further discussion of the Merger, Securitization, Preferred Offering and other related 5 FORM 10-Q/A transactions. O&A expenses of $126.8 million increased 8.9% from $116.5 million. This increase was due to increased costs associated with managing a higher level of assets. Third quarter annualized O&A expenses to quarter-end assets equaled 4.95% in 1996 and 5.16% in 1995. The ratio's improvement reflects strong asset growth more than offsetting increased O&A costs. As a percentage of owned and managed assets, three months annualized O&A expenses were 4.09% and 4.07% at September 30, 1996 and 1995 respectively. The provision for credit losses of $22.9 million increased 10.8% from $20.7 million. See "Credit Quality" below for a discussion of the provision for credit losses. The Company's effective income tax rate decreased to 35.0% from 40.3%. The decrease in the overall effective income tax rate was due to several factors including a lower impact of foreign taxes, a decrease in the effect of non-tax deductible goodwill and other factors. The Company's non-AT&T/Lucent businesses continue to make improved contributions. Non-AT&T/Lucent businesses represented 67.7%, 63.1% and 40.7% of total assets, revenues and net income, respectively, all increasing from 65.1%, 59.9% and 32.2%, respectively. Nine months ended September 30, 1996 versus September 30, 1995 Unless otherwise indicated, all period to period comparisons represent balances or activity at or for the nine months ended September 30, 1996 versus September 30, 1995, respectively. Net income of $115.3 million increased 34.9% from $85.5 million. Earnings per share of $2.43 increased 33.7% from $1.82. These increases were generated principally through increased portfolio revenues resulting from a higher level of average net portfolio assets, increased computer trading activity, a gain on a first quarter 1996 securitization of lease receivables and a lower effective income tax rate. This activity was partially offset by increased interest expense, O&A expenses and provision for credit losses all of which were associated with a higher level of portfolio assets. Finance revenue of $149.4 million increased 16.8% from $127.8 million. The 20.4% increase in average net finance receivables accounted for this increase. The growth in the portfolio generated approximately $26.0 million of additional revenue and was driven by increases in the large-ticket structured finance and certain small-ticket portfolios. A decline in the overall average yield from 10.63% to 10.32% reduced revenue by $4.4 million. See the third quarter "Results of Operations" discussion regarding the impact of the Securitization on future finance revenue. Capital lease revenue of $492.4 million increased 15.0% from $428.1 million. The 12.7% increase in the average net capital lease portfolio contributed $54.5 million of the increase while an improved average yield of 10.45% from 10.24% contributed the remaining $9.8 million. The growth in the portfolio primarily occurred in the small-ticket leasing portfolios and international businesses. The improved yield was primarily due to increased levels of higher yielding assets in certain small-ticket and automotive portfolios. Also contributing to the increase were stronger 6 FORM 10-Q/A yields in the Company's mid-range and mainframe computer portfolios. See the third quarter "Results of Operations" discussion regarding the impact of the Securitization on future capital lease revenue. Revenue on operating leases of $505.4 million increased 22.9% and depreciation expense on operating leases of $329.3 million increased 26.9%. Operating lease margin was $176.0 million, or 34.8% of rental revenue compared with $151.7 million, or 36.9% of rental revenue. The increased revenue was primarily generated in the Company's small-ticket telecommunication portfolios. The decreased operating lease margin percent relates primarily to increased depreciation on certain computer-related assets and certain small-ticket portfolios. Net interest margin of $467.4 million or 6.62% of average net portfolio assets decreased slightly from 6.65%. While total portfolio yields were relatively unchanged, the net interest margin percentage was impacted by the increase in the debt to equity ratio partially offset by a decrease in the average cost of debt (to 6.45% from 6.59%). The decrease in the cost of debt resulted from the issuance of medium and long-term debt at a lower cost than the maturing debt and a shift in the mix toward commercial paper. Revenue from sales of equipment of $72.6 million increased from $27.4 million. Similarly, cost of equipment sales of $61.7 million increased from $25.2 million. Equipment sales margin of $10.9 million, or 15.1% of revenue from sales of equipment increased from $2.2 million, or 7.9%. The revenue and margin improvements were primarily due to a heightened demand for mainframes and other emerging technology equipment. Other revenue increased 3.1% to $150.8 million from $146.2 million. This increase resulted primarily from a $5.0 million pre-tax gain relating to a securitization of $75.2 million of lease receivables in the first quarter of 1996. No lease receivables were securitized during the first three quarters of 1995. As a result of the Securitization, the Company will recognize a pre-tax gain of approximately $133 million in the fourth quarter. In the future, the Company will also recognize portfolio servicing fees for managing such securitized assets. As previously discussed, the Company anticipates that approximately 30% of its annual financing volume originated each year will be securitized. Average borrowings outstanding of $7.2 billion increased 18.9%, or $1.2 billion. This increase was primarily due to growth in portfolio assets and an increased debt to equity ratio. Interest expense of $350.4 million increased 16.4%, or $49.5 million. Higher average borrowing contributed $57.1 million of the increase and was partially offset by $7.6 million due to a decline in the average cost of debt. See the third quarter "Results of Operations" discussion regarding certain expected increases and decreases in the Company's cost of debt as a result of the Merger, Securitization, Preferred Offering and other related transactions. O&A expenses of $375.2 million increased 6.8% from $351.4 million. This increase was due to increased costs associated with managing a higher level of assets. At September 30, 1996, nine months annualized O&A expenses to quarter-end total assets decreased to 4.88% from 5.19%. A majority of the Company's operations contributed to the improvement due to increased utilization of infrastructure, increased operating efficiencies and increased total assets. As a percentage of quarter-end total owned and 7 FORM 10-Q/A managed assets, nine months annualized O&A expenses were 4.03% and 4.09% at September 30, 1996 and 1995, respectively. The provision for credit losses of $71.5 million increased 18.4% from $60.4 million. See "Credit Quality" below for a discussion of the provision for credit losses. The Company's effective income tax rate of 36.8% decreased from 40.3%. The decrease in the overall effective tax rate was due to several factors, including a lower impact of both state and foreign taxes, a decrease in the effect of non-tax deductible goodwill and other factors. Non-AT&T/Lucent businesses represented 67.7%, 62.2% and 32.7% of the total assets, revenues and net income, respectively, all increasing from 65.1%, 57.8% and 15.7%, respectively. The increases in the asset and revenue mix was generated widely across the Company's businesses. The increase in the net income percentage was due to growth in certain small-ticket, automobile and large-ticket specialty and structured finance portfolios, as well as a securitization of lease receivables in the first quarter of 1996. Without such securitization, the non-AT&T/Lucent businesses would have contributed 30.9% of the total net income. CREDIT QUALITY The active management of credit losses is an important element of the Company's business. The Company seeks to minimize its credit risk through diversification of its portfolio assets by customer, industry segment, geographic location and maturity. The Company's financing activities have been spread across a wide range of equipment types (e.g., telecommunications, general equipment (such as general office, manufacturing and medical equipment), information technology and transportation) and real estate and a large number of customers located throughout the United States and, to a lesser extent, abroad. The following chart reflects the Company's portfolio credit performance indicators:
At At September 30, December 31, (dollars in millions) 1996 1995 1995 - ----------------------------------------------------------------------------- Allowance for credit losses $235.2 $214.7 $223.2 Nonaccrual assets $148.3 $101.9 $118.5 Net charge-offs*/Portfolio assets 0.76% 0.57% 0.50% Allowance for credit losses/Portfolio assets 2.34% 2.41% 2.39% Nonaccrual assets/Portfolio assets 1.48% 1.15% 1.27% Delinquency (two months or greater) 2.13% 1.31% 1.46%
(*) Net charge-offs are based upon the twelve months ended September 30, 1996 and 1995 and December 31, 1995. At or for the nine months ended September 30, 1996, nonaccrual assets, net charge-offs and delinquencies increased from the comparable prior year period. An increased level of portfolio assets largely drove the increase in allowance, nonaccruals and provision levels. Also contributing to the increases were a large write-off in 1996, previously included in nonaccrual assets, and a large delinquent financing in the Company's structured finance portfolio and certain retail industry-related accounts. 8 FORM 10-Q/A The Company maintains an allowance for credit losses at a level management believes is adequate to cover estimated losses in the portfolio based on a review of historical loss experience, a detailed analysis of delinquencies and problem portfolio assets, and an assessment of probable losses in the portfolio as a whole, given its diversification. Management also takes into consideration the potential impact of existing and anticipated economic conditions. Certain credit statistics will be impacted as a result of the Securitization. The Company's allowance for credit losses is expected to decrease approximately pro rata with the decrease in the Company's portfolio assets. In addition, certain credit ratios which include portfolio assets (e.g. nonaccrual assets/portfolio assets) will increase. Management believes that the Company's allowance for credit losses continues to be adequate to cover estimated losses on portfolio assets. FINANCIAL CONDITION Net portfolio assets increased 7.6% or $0.7 billion to $9.8 billion at September 30, 1996 compared to December 31, 1995. A significant portion of the growth was generated from U.S. businesses, primarily in small-ticket portfolios. In August, 1996, the Company acquired a $162 million Canadian office equipment and automobile leasing portfolio. The growth was slightly offset by the sale of $95.7 million of SBA and other loans, and a $75.2 million securitization of lease receivables. As of September 30, 1996, both the composition of the portfolio assets by financing product as well as by type of equipment remained relatively consistent with December 31, 1995. As a result of the Securitization, the Company's net portfolio assets decreased by $2.9 billion. The Securitization decreased net investment in capital leases by $2.8 billion and net investment in finance receivables by $.1 billion. At September 30, 1996, the total portfolio assets managed by the Company on behalf of others (including assets formerly owned by the Company which have been previously securitized) was $2.2 billion, approximately the same as at December 31, 1995. Increases in managed assets were experienced in the AT&T and SBA portfolios. Normal portfolio run-off offset such increases. Of the total assets managed by the Company on behalf of others, 69.0% at September 30, 1996 and 68.0% at December 31, 1995 were assets managed on behalf of AT&T and its affiliates. On October 15, 1996, the Company securitized through a public placement, $3.0 billion of lease and loan receivables (which includes $0.3 billion of receivables previously sold and recently repurchased by the Company). A portion of the Securitization proceeds were used to finance the Merger transaction. As a result of the Securitization, the Company's managed asset base will substantially increase to approximately $5.0 billion. Correspondingly, the AT&T managed portfolio will drop to approximately one-third of total managed assets. LIQUIDITY AND CAPITAL RESOURCES The Company generates a substantial portion of its funds to support the Company's operations from lease and rental receipts, but is also highly dependent upon external financing, including the issuance of commercial paper and medium and long-term debt in public markets, foreign bank lines of credit and, historically to a lesser extent, privately placed asset- 9 FORM 10-Q/A backed financings (or securitizations). As a key part of the Company's on-going financing strategy to manage leverage and credit risk, the Company currently anticipates that approximately 30% of its annual financing volume originated each year will be securitized through public and/or private securitizations. As a result, the Company may securitize additional assets in the fourth quarter of 1996. The Securitization and anticipated ongoing securitizations of approximately 30% of annual volumes will have significant impacts on the Company's financial results depending upon their timing and magnitude. These impacts, some of which are described in the Results of Operations, include, but are not limited to, the following: net investment in finance receivables and capital leases (including residual values, allowance for credit losses and initial direct costs) will decrease; lower asset levels will result in lower finance revenue and capital lease revenue; cash proceeds generated from the sale will generally be used to reduce debt; lower debt levels will reduce interest expense and leverage; securitization gains will typically be generated as the assets are sold; fees will be earned for servicing the portfolios; residual values will be frozen at the present value at the time of securitization and reclassified to other assets and deferred charges; capital lease revenue will no longer be recognized on the residuals; with lower carrying values of frozen residuals, income (losses) generated from renewals and sales of assets at end of lease will be higher (lower) than if the assets were not securitized; yields and margins on owned assets are likely to be lower due to the fact the securitizations will typically include small-ticket products which generally have higher yields and margins; portfolio quality measures such as delinquency, non-accrual assets, and net charge-offs/portfolio assets will likely increase due to the sale of generally better performing assets (these same measures on an owned and managed asset basis would not be affected by the Securitization); assets, revenues and income derived from the AT&T/Lucent businesses will change; finally, productivity measures such as O&A to period end total assets will increase due to the reduction in the asset base (this measure on an owned and managed asset basis would not be affected by the Securitization). In connection with the Merger, the Company's four rating agencies took the following actions: Standard & Poor's ("S&P") lowered the Company's senior medium and long-term debt and commercial paper, previously rated A and A-1, to BBB and A-2, respectively; Duff & Phelps Credit Rating Co. ("Duff & Phelps") lowered the Company's senior medium and long-term debt and commercial paper, previously rated A and D-1, to BBB and D-2, respectively; Fitch Investor Services ("Fitch"), which began rating the Company's commercial paper in May, 1996 lowered the Company's F-1 rating to F-2 and rated the Company's senior medium and long-term debt BBB. Moody's Investors Service ("Moody's") has lowered the Company's senior medium and long-term debt and commercial paper to Baa3 from A-3 and P-3 from P-1, respectively. See "Results of Operations" for discussion of the impact on interest expense. In the first nine months of 1996, the Company issued short-term notes (principally commercial paper) of $29.9 billion and made repayments of $29.1 billion, and issued medium and long-term debt of $1.3 billion and repaid $1.1 billion. In the first nine months of 1995, the Company issued short-term notes of $18.8 billion and made repayments of $19.0 billion and issued medium and long-term debt of $1.6 billion and repaid $0.9 billion. 10 FORM 10-Q/A During the nine months ended September 30, 1996 and 1995, principal collections from customers, proceeds from securitized receivables and proceeds from SBA and other loan sales of $3.3 billion and $3.0 billion, respectively, were received. These receipts were primarily used for finance receivables and lease equipment purchases (including purchases of finance asset portfolios and businesses) of $4.3 billion and $4.1 billion, respectively, in the first nine months of 1996 and 1995. On May 31, and August 30, 1996, the Company paid dividends of eleven cents per share to shareowners of record as of May 10, and August 9, 1996, respectively. As a result of the Merger, the Company anticipates that it will no longer pay dividends in the short-term, and may incur certain obligations which may restrict the payment of future dividends. In September 1995, the Company registered with the SEC $3.0 billion of debt securities (including medium-term notes) and warrants to purchase debt securities, currency warrants, index warrants and interest rate warrants. At September 30, 1996, $0.7 billion of medium and long-term debt was available under such debt registration. In September 1996, the Company renegotiated its back-up credit facility of $1.8 billion. This facility, negotiated with a consortium of 24 lending institutions, supports the commercial paper issued by the Company. At September 30, 1996, this facility was unused. Under the most restrictive provision of the Company's back-up facility, the Company is required to initially maintain a minimum consolidated tangible net worth of $500.0 million. The Company is in compliance with this and all other covenants of the agreement. The Company also has available local lines of credit to meet local funding requirements in Europe, Asia/Pacific and Canada of approximately $0.9 billion, of which approximately $0.6 billion was available at September 30, 1996. In October 1996, under the Preferred Offering, a wholly-owned subsidiary of the Company issued to the public eight million preferred securities for $25 per share. Holders of the securities will be entitled to receive cash distributions at an annual rate of 9.06%, which is guaranteed by the Company. The securities are rated BBB- by S&P, Fitch and Duff & Phelps. Moody's has rated the preferred securities ba2. Prior to the Merger, the Company has, from time to time, borrowed funds directly from AT&T, including on an interest-free basis pursuant to the GPTD Agreement. As a result of the Merger, the Company is no longer a member of AT&T's consolidated group for federal income tax purposes and was required to repay to AT&T $247.4 million of interest free loans. Future financing is contemplated to be arranged as necessary to meet the Company's capital and other requirements with the timing of issue, principal amount and form depending on the Company's needs and prevailing market and general economic conditions. The Company considers its current financial resources, together with the debt facilities referred to above and estimated future cash flows from its portfolio assets, to be adequate to fund the Company's future growth and operating requirements. 11 FORM 10-Q/A ASSET AND LIABILITY MANAGEMENT AT&T Capital's asset and liability management process takes a coordinated approach to the management of interest rate and foreign currency risks. The Company's overall strategy is to match the duration and average cash flows of its borrowings with the duration and average cash flows of its portfolio assets, as well as the currency denominations of its borrowings with those of its portfolio assets, in a manner intended to reduce the Company's interest rate and foreign currency exposure. At September 30, 1996, the total notional amount of the Company's interest rate and currency swaps was $1.4 billion and $0.6 billion, respectively, as compared to $2.2 billion and $.3 billion, respectively, as of December 31, 1995. The U.S. dollar equivalent of the Company's foreign currency forward exchange contracts was $0.8 billion and $0.7 billion at September 30, 1996 and December 31, 1995, respectively. There were no past due amounts or reserves for credit losses at September 30, 1996 related to derivative transactions. The Company has never experienced a credit related charge-off associated with derivative transactions. RECENT PRONOUNCEMENTS See Note 3 to the unaudited consolidated financial statements. RECENT EVENTS See Note 4 to the unaudited consolidated financial statements. SUBSEQUENT EVENTS See Note 5 to the unaudited consolidated financial statements. 12 FORM 10-Q/A 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. AT&T CAPITAL CORPORATION November 22, 1996 Ramon Oliu, Jr. ------------------------------- Ramon Oliu, Jr. Controller Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----