SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number 1-6594
COMMERCIAL CREDIT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 52-0883351
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
300 St. Paul Place, Baltimore, Maryland 21202
(Address of principal executive offices) (Zip Code)
(410) 332-3000
(Registrant's telephone number, including area code)
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
----- -----
The registrant is an indirect wholly owned subsidiary of Travelers Group
Inc. As of the date hereof, one share of the registrant's Common Stock,
$.01 par value, was outstanding.
REDUCED DISCLOSURE FORMAT
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH
THE REDUCED DISCLOSURE FORMAT.
<PAGE>
Commercial Credit Company and Subsidiaries
TABLE OF CONTENTS
-----------------
Part I - Financial Information
Item 1. Financial Statements: Page No.
--------
Condensed Consolidated Statement of Income (Unaudited) -
Three and Nine Months Ended September 30, 1995 and 1994 3
Condensed Consolidated Statement of Financial Position -
September 30, 1995 (Unaudited) and December 31, 1994 4
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements - (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Exhibit Index 15
Signatures 16
2
<PAGE>
<TABLE><CAPTION>
Commercial Credit Company and Subsidiaries
Condensed Consolidated Statement of Income (Unaudited)
(In millions of dollars)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Finance related interest and other charges $284.5 $262.4 $833.0 $760.6
Insurance premiums 35.8 98.8 99.2 284.0
Net investment income 12.7 18.9 37.2 55.4
Other income 22.7 25.0 66.8 81.9
- ---------------------------------------------------------------------------------------------------------------
Total revenues 355.7 405.1 1,036.2 1,181.9
- ---------------------------------------------------------------------------------------------------------------
Expenses
Interest 116.7 103.1 346.8 293.4
Policyholder benefits and claims 12.6 59.8 36.8 174.3
Insurance underwriting, acquisition and operating 7.2 28.4 20.5 76.7
Non-insurance compensation and benefits 49.4 45.9 147.8 137.1
Provision for credit losses 41.1 35.3 121.9 112.3
Other operating 38.1 37.8 114.3 114.3
- ---------------------------------------------------------------------------------------------------------------
Total expenses 265.1 310.3 788.1 908.1
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 90.6 94.8 248.1 273.8
Provision for income taxes 29.7 33.1 85.9 95.8
- ---------------------------------------------------------------------------------------------------------------
Income before minority interest 60.9 61.7 162.2 178.0
Minority interest, net of income taxes - (3.9) - (11.4)
- ---------------------------------------------------------------------------------------------------------------
Net income $ 60.9 $ 57.8 $ 162.2 $166.6
===============================================================================================================
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
Commercial Credit Company and Subsidiaries
Condensed Consolidated Statement of Financial Position
(In millions of dollars, except per share amounts)
September 30, 1995 December 31,1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (Unaudited)
Cash and cash equivalents $ 13.5 $ 23.6
Investments:
Fixed maturities:
Available for sale, at market value (cost - $723.7 and $713.6) 727.9 673.4
Equity securities, at market value (cost - $29.9 and $20.7) 32.0 19.6
Mortgage loans 183.5 173.0
Short-term and other 65.7 36.6
- --------------------------------------------------------------------------------------------------------------
Total investments 1,009.1 902.6
- --------------------------------------------------------------------------------------------------------------
Consumer finance receivables 7,186.9 6,927.7
Allowance for losses (188.9) (181.9)
- --------------------------------------------------------------------------------------------------------------
Net consumer finance receivables 6,998.0 6,745.8
Other receivables 166.6 216.4
Deferred policy acquisition costs 22.4 18.3
Cost of acquired businesses in excess of net assets 99.2 102.1
Other assets 195.4 218.0
- --------------------------------------------------------------------------------------------------------------
Total assets $8,504.2 $8,226.8
==============================================================================================================
Liabilities
Certificates of deposit $ 74.7 $ 73.5
Short-term borrowings 1,287.2 2,304.6
Long-term debt 5,150.0 4,010.0
- --------------------------------------------------------------------------------------------------------------
Total debt 6,511.9 6,388.1
Insurance policy and claims reserves 390.3 386.5
Accounts payable and other liabilities 407.9 339.8
- --------------------------------------------------------------------------------------------------------------
Total liabilities 7,310.1 7,114.4
- --------------------------------------------------------------------------------------------------------------
Stockholder's equity
Common stock ($.01 par value; authorized shares: 1,000; share issued: 1) - -
Additional paid-in-capital 163.5 163.5
Retained earnings 1,026.7 974.5
Unrealized gain (loss) on investments 4.2 (25.3)
Cumulative translation adjustments (.3) (.3)
- --------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,194.1 1,112.4
- --------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $8,504.2 $8,226.8
==============================================================================================================
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE><CAPTION>
Commercial Credit Company and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In millions of dollars)
Nine months ended September 30, 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Income before income taxes and minority interest $ 248.1 $ 273.8
Adjustments to reconcile income before income taxes and minority interest to
net cash provided by (used in) operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 5.2 41.6
Additions to deferred policy acquisition costs (9.1) (59.1)
Provision for credit losses 121.9 112.3
Changes in:
Insurance policy and claims reserves 3.8 98.6
Other, net 148.2 (22.4)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operations 518.1 444.8
Income taxes (paid) (90.5) (112.0)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 427.6 332.8
- ---------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Net change in credit card receivables (23.0) -
Loans originated or purchased (2,050.4) (2,137.1)
Loans repaid or sold 1,656.8 1,588.1
Purchases of investments (314.9) (565.0)
Proceeds from sales of investments 255.8 468.0
Proceeds from maturities of investments 1.1 80.3
Redemption of Parent Company Series Z preferred stock - 100.0
Other, net 23.1 (5.2)
- ---------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (451.5) (470.9)
- ---------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Dividends paid (110.0) (135.0)
Issuance of long-term debt 1,800.0 200.0
Payments of long-term debt (660.0) (243.7)
Net change in short-term borrowings (1,017.4) 285.2
Net change in certificates of deposit 1.2 17.3
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 13.8 123.8
- ---------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (10.1) (14.3)
Cash and cash equivalents at beginning of period 23.6 25.6
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 13.5 $ 11.3
===============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 323.8 $285.3
===============================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
Commercial Credit Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions of dollars)
1. Basis of Presentation
---------------------
Commercial Credit Company (the Company) is a wholly owned subsidiary of
CCC Holdings, Inc. which is a wholly owned subsidiary of Travelers
Group Inc. (the Parent). The condensed consolidated financial
statements include the accounts of the Company and its subsidiaries.
On December 30, 1994 the Company sold its remaining 50% interest in
Commercial Insurance Resources, Inc., the parent of Gulf Insurance
Company (Gulf), to an affiliate, The Travelers Indemnity Company, for
$150 in cash and accordingly results of operations for 1995 do not
include Gulf's results. The exclusion of Gulf's operations from 1995
results of operations has resulted in a reduction compared to the 1994
period in insurance-related revenues and expenses. The remaining
insurance-related revenues and expenses represent the credit insurance
activities of the Company's other insurance subsidiaries, the
operations of which are reflected in the Consumer Finance segment.
The accompanying condensed consolidated financial statements as of
September 30, 1995 and for the three-month and nine-month periods ended
September 30, 1995 and 1994 are unaudited. In the opinion of
management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation have been reflected.
The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
related notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
Certain financial information that is normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles but is not required for interim reporting
purposes has been condensed or omitted.
FAS 114 and FAS 118. Effective January 1, 1995 the Company adopted
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures," which describe how
impaired loans should be measured when determining the amount of a loan
loss accrual. These Statements amended existing guidance on the
measurement of restructured loans in a troubled debt restructuring
involving a modification of terms. These Statements do not apply to
large groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment, such as the Company's portfolio of consumer
finance receivables, and their adoption did not have a material impact
on the Company's financial condition, results of operations or
liquidity.
6
<PAGE>
Notes to Condensed Consolidated Financial Statements
(continued)
2. Consumer Finance Receivables
----------------------------
Consumer finance receivables, net of unearned finance charges of $695.6
and $673.7 at September 30, 1995 and December 31, 1994, respectively,
consisted of the following:
September 30, 1995 December 31, 1994
------------------ -----------------
Real estate-secured loans $2,927.8 $2,844.7
Personal loans 3,045.7 2,874.7
Credit cards 723.6 712.5
Sales finance and other 448.6 453.5
-------- --------
Consumer finance receivables 7,145.7 6,885.4
Accrued interest receivable 41.2 42.3
Allowance for credit losses (188.9) (181.9)
-------- -------
Net consumer finance receivables $6,998.0 $6,745.8
3. Debt
----
The Company issues commercial paper directly to investors and maintains
unused credit availability under its bank lines of credit at least
equal to the amount of its outstanding commercial paper. At September
30, 1995 and December 31, 1994, short-term borrowings consisted of
commercial paper totaling $1,287.2 and $2,304.6, respectively. The
Company may borrow under its revolving credit facility at various
interest rate options and compensates the banks for the facilities
through commitment fees. The Parent, the Company and The Travelers
Insurance Company (TIC) have an agreement with a syndicate of banks to
provide $1,000 of revolving credit, to be allocated to any of the
Parent, the Company or TIC. The revolving credit facility consists of
a five-year revolving credit facility which expires in 1999. At
September 30, 1995, $475 was allocated to the Company.
At September 30, 1995, the Company had a committed and available
revolving credit facility on a stand-alone basis of $1,500 which
expires in 1999.
The Company is limited by covenants in its revolving credit agreements
as to the amount of dividends and advances that may be made to the
Parent or its affiliated companies. At September 30, 1995, the Company
would have been able to remit $285.9 to the Parent under its most
restrictive covenants.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
The Company completed the following long-term debt offerings during the
first nine months of 1995 and, as of November 10, 1995, had $550
available for debt offerings under its shelf registration statement:
- 7 7/8% Notes due February 1, 2025 . . . . . . . . . . . . . $200
- 7 3/4% Notes due March 1, 2005 . . . . . . . . . . . . . . $200
- 7 3/8% Notes due March 15, 2002 . . . . . . . . . . . . . . $200
- 7 3/8% Notes due April 15, 2005 . . . . . . . . . . . . . . $200
- 6 7/8% Notes due May 1, 2002 . . . . . . . . . . . . . . . $200
- 6 3/4% Notes due May 15, 2000 . . . . . . . . . . . . . . . $200
- 6 5/8% Notes due June 1, 2015 . . . . . . . . . . . . . . . $200
- 6 1/2% Notes due June 1, 2005 . . . . . . . . . . . . . . . $200
- 6 3/8% Notes due September 15, 2002 . . . . . . . . . . . . $200
4. Related Party Transactions
--------------------------
To facilitate cash management the Company has entered into an agreement
with the Parent under which the Company or the Parent may borrow from
the other party at any time an amount up to the greater of $50.0 or 1%
of the Company's consolidated assets up to a maximum of $100.0. The
agreement may be terminated by either party at any time. The interest
rate to be charged on borrowings outstanding will be equivalent to an
appropriate market rate.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION
and RESULTS of OPERATIONS
Consolidated Results of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
(In millions) 1995 1994 1995 1994
---------------------------------------------------------------------
Revenues $355.7 $405.1 $1,036.2 $1,181.9
===== ===== ======= =======
Net income $ 60.9 $57.8 $162.2 $166.6
===== ===== ======= =======
Results of Operations
On December 30, 1994 Commercial Credit Company ("the Company") sold its
remaining 50% interest in Commercial Insurance Resources, Inc., the parent
of Gulf Insurance Company (Gulf), to an affiliate, The Travelers Indemnity
Company, for $150 million in cash and accordingly results of operations for
1995 do not include Gulf's results. The exclusion of Gulf's operations
from 1995 results of operations has resulted in a reduction compared to the
1994 period in insurance-related revenues and expenses. The remaining
insurance-related revenues and expenses represent the credit insurance
activities of the Company's other insurance subsidiaries, the operations of
which are reflected in the Consumer Finance segment.
The net income of the Company for the quarter ended September 30, 1995 was
$60.9 million compared to $57.8 million in the corresponding 1994 period.
Revenues for the quarter ended September 30, 1995 were $355.7 million compared
to $405.1 million in the corresponding 1994 period, reflecting the impact of
the sale referred to above.
The net income of the Company for the nine months ended September 30, 1995
was $162.2 million compared to $166.6 million in the corresponding 1994
period. Revenues for the nine months ended September 30, 1995 were $1,036.2
million compared to $1,181.9 million in the corresponding 1994 period, also
reflecting the impact of the sale referred to above.
The following discussion presents in more detail each segment's
performance.
Segment Results for the Three Months Ended September 30, 1995 and 1994
----------------------------------------------------------------------
Consumer Finance Services
Three Months Ended September 30,
-----------------------------------------------
(In millions) 1995 1994
----------------------------------------------------------------------------
Revenues Net income Revenues Net income
----------------------------------------------------------------------------
Consumer Finance Services $343.0 $65.1 $312.5 $59.1
============================================================================
9
<PAGE>
The 10% increase in Consumer Finance net income in the third quarter of
1995 over the same period last year reflects continued growth in
receivables outstanding. Receivables outstanding (before allowance for
losses and accrued interest receivable) totaled $7.146 billion at the end
of the third quarter of 1995 reflecting a 6% increase over September 30,
1994. Receivables growth has been at a somewhat slower pace than in 1994,
and could be adversely affected by increasing first mortgage refinancings
in the latter part of 1995. Proceeds of such refinancings are sometimes
used by the borrowers to pay off second mortgages in the consumer finance
portfolio.
The average yield on the portfolio was up 28 basis points from a year ago,
to 15.77%. Net interest margin was 8.86% in both periods, reflecting in
the current period the higher yield offset by a higher cost of funds to the
segment.
The charge-off rate, which is expected to continue to trend up from the
record low levels in 1994, was 2.24% for the quarter versus 1.91% in the
comparable 1994 period. 60+ day delinquencies were at 1.97% up from 1.90%
in the third quarter of 1994.
Since the beginning of the year, the number of branches increased by 49,
bringing the total number of offices to 877 at quarter end.
As of, and for, the
Three Months Ended September 30,
---------------------------------
1995 1994
---------------------------------
Allowance for losses as % of
consumer finance receivables 2.64% 2.64%
Charge-off rate 2.24% 1.91%
60 + days past due on a contractual
basis as % of gross consumer
finance receivables at quarter end 1.97% 1.90%
Insurance Services
Three Months Ended September 30,
-------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------
Revenues Net income Revenues Net income
- --------------------------------------------------------------------------------
Gulf $ - $ - $79.5 $7.7
Minority interest - Gulf - - - (3.9)
- --------------------------------------------------------------------------------
Total Insurance Services $ - $ - $79.5 $ 3.8
================================================================================
As previously described, on December 30, 1994 the Company sold its
remaining 50% interest in Commercial Insurance Resources, Inc., the parent
of Gulf, to an affiliate, The Travelers Indemnity Company, for $150 million
in cash and accordingly results of operations for 1995 do not include
Gulf's results.
10
<PAGE>
Corporate and Other
Three Months Ended September 30,
-------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------
Revenues Net income Revenues Net income
(expense) (expense)
- --------------------------------------------------------------------------------
Corporate and other $12.7 $(4.2) $13.1 $(5.1)
================================================================================
The decrease in Corporate and Other net expense for the third quarter of
1995 compared to the third quarter of 1994 is primarily attributable to
lower staff expenses and was offset by increases in interest costs borne at
the corporate level.
Segment Results for the Nine Months Ended September 30, 1995 and 1994
---------------------------------------------------------------------
The overall operating trends for the nine months ended September 30, 1995
and 1994 were substantially the same as those of the third quarter periods
except as noted below.
Consumer Finance Services
Nine Months Ended September 30,
-------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------
Revenues Net income Revenues Net income
- --------------------------------------------------------------------------------
Consumer Finance Services $1,003.4 $180.6 $914.3 $164.9
================================================================================
The average yield on the portfolio was up 26 basis points from a year ago,
to 15.59%. Net interest margin increased 6 basis points to 8.73%,
reflecting the higher yield offset by a higher cost of funds to the
segment. The charge-off rate for the first nine months of 1995 was 2.18%,
compared to 2.08% in the 1994 period.
Insurance Services
Nine Months Ended September 30,
-------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------
Revenues Net income Revenues Net income
- --------------------------------------------------------------------------------
Gulf $ - $ - $231.9 $22.8
Minority interest Gulf - - - - (11.4)
- --------------------------------------------------------------------------------
Total Insurance Services $ - $ - $231.9 $ 11.4
================================================================================
11
<PAGE>
Nine Months Ended September 30,
-------------------------------------------------
(In millions) 1995 1994
- --------------------------------------------------------------------------------
Revenues Net income Revenues Net income
(expense) (expense)
- --------------------------------------------------------------------------------
Corporate and other $32.8 $(18.4) $35.7 $(9.7)
================================================================================
The increase in Corporate and Other net expense for the first nine months
of 1995 compared to the first nine months of 1994 is primarily attributable
to increases in interest costs borne at the corporate level.
Liquidity and Capital Resources
The Company issues commercial paper directly to investors and maintains
unused credit availability under committed revolving credit agreements at
least equal to the amount of commercial paper outstanding. The Company may
borrow under its revolving credit facilities at various interest rate
options and compensates the banks for the facilities through commitment
fees.
Travelers Group Inc. (the Parent), the Company and The Travelers Insurance
Company (TIC) have an agreement with a syndicate of banks to provide $1.0
billion of revolving credit, to be allocated to any of the Parent, the
Company or TIC. The revolving credit facility consists of a five-year
revolving credit facility which expires in 1999. At September 30, 1995,
$475 million was allocated to the Company. In addition at September 30,
1995, the Company had committed and available revolving credit facilities
on a stand-alone basis of $1.500 billion which expires in 1999.
As of September 30, 1995, the Company had unused credit availability of
$1.975 billion under five-year revolving credit facilities.
The Company completed the following long-term debt offerings in 1995 and,
as of November 10, 1995, had $550 million available for debt offerings
under its shelf registration statement:
- 7 7/8% Notes due February 1, 2025 . . . . . . . . . $200 million
- 7 3/4% Notes due March 1, 2005 . . . . . . . . . . $200 million
- 7 3/8% Notes due March 15, 2002 . . . . . . . . . . $200 million
- 7 3/8% Notes due April 15, 2005 . . . . . . . . . . $200 million
- 6 7/8% Notes due May 1, 2002 . . . . . . . . . . . $200 million
- 6 3/4% Notes due May 15, 2000 . . . . . . . . . . . $200 million
- 6 5/8% Notes due June 1, 2015 . . . . . . . . . . . $200 million
- 6 1/2% Notes due June 1, 2005 . . . . . . . . . . . $200 million
- 6 3/8% Notes due September 15, 2002 . . . . . . . . $200 million
The Company is limited by covenants in its revolving credit agreements as
to the amount of dividends and advances that may be made to the Parent or
its affiliated companies. At September 30, 1995, the Company would have
been able to remit $285.9 million to the Parent under its most restrictive
covenants.
12
<PAGE>
Accounting Standards Not Yet Adopted
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). This statement addresses alternative accounting
treatments for stock-based compensation, such as stock options and
restricted stock. FAS 123 permits either expensing the value of
stock-based compensation over the period earned or disclosing in the
financial statement footnotes the pro forma impact to net income as if the
value of stock-based compensation awards had been expensed. The value of
awards would be measured at the grant date based upon estimated fair value,
using option pricing models. The requirements of this statement will be
effective for 1996 financial statements, although earlier adoption is
permissible if an entity elects to expense the cost of stock-based
compensation. The Company along with affiliated companies participates in
stock option and incentive plans sponsored by the Parent. The Company is
currently evaluating the disclosure requirements and expense recognition
alternatives addressed by this statement.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For information concerning certain purported class action
lawsuits filed against the Company and certain of its subsidiaries in May
and June 1994, see the description that appears in the second paragraph of
page 2 of the Company's filing on Form 8-K dated July 13, 1994, which
description is incorporated by reference herein. A copy of the pertinent
paragraph of such filing is included as an exhibit to this Form 10-Q. The
Lawrence case was stayed pending a decision by the Supreme Court of Alabama
- --------
in a case raising similar issues regarding credit life insurance. In
October, 1995 the Supreme Court of Alabama reversed the dismissal of that
case and, as such, the Company anticipates that the stay will be lifted.
The Erkins case was dismissed without prejudice in March 1995, and claims
------
relating only to nonfiling insurance have been restated in an amended
complaint filed in March 1995 in the Nobels action. On September 22,
------
1995, an additional purported class action lawsuit was filed against
subsidiaries of the Company in Alabama. The case, entitled Royster
------
v. Commercial Credit Corporation and American Health and Life Insurance
- -----------------------------------------------------------------------
Company was filed in the Circuit Court for Walker County on behalf of
- -------
borrowers who purchased credit life insurance in connection with installment
purchase contracts and other personal loans. Plaintiffs, who seek unspecified
compensatory and punitive damages, declaratory relief, voiding excess premium
charges, and injunctive relief, assert claims for breach of contract, fraud,
outrage and unconscionability. The Company believes it has meritorious defenses
and intends to contest the allegations.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
On July 17, 1995, the Company filed a Current Report on Form
8-K, dated July 17, 1995, reporting under Item 5 thereof the results of its
operations for the three months and six months ended June 30, 1995, and
certain other selected financial data.
On September 18, 1995, the Company filed a Current Report on
Form 8-K, dated September 14, 1995, filing certain exhibits under Item 7
thereof relating to the offer and sale of the Company's 6 3/8% Notes due
September 15, 2002.
No other reports on Form 8-K have been filed by the Company
during the quarter ended September 30, 1995; however, on October 16, 1995,
the Company filed a Current Report on Form 8-K, dated October 16, 1995,
reporting under Item 5 thereof the results of its operations for the three
months and nine months ended September 30, 1995, and certain other selected
financial data.
14
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Filing
Number Description of Exhibit Method
- ------ ---------------------- ------
3.01 Restated Certificate of Incorporation of Commercial
Credit Company (the "Company"), included in Certificate
of Merger of CCC Merger Company into the Company;
Certificate of Ownership and Merger merging CCCH
Acquisition Corporation into the Company; and Certificate
of Ownership and Merger merging RDI Service Corporation
into the Company, incorporated by reference to
Exhibit 3.01 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992
(File No. 1-6594).
3.02 By-laws of the Company, as amended May 14, 1990,
incorporated by reference to Exhibit 3.02.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-6594).
4.01.1 Indenture, dated as of December 1, 1986 (the "Indenture"),
between the Company and Citibank, N.A., relating to the
Company's debt securities, incorporated by reference to
Exhibit 4.01 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988 (File No. 1-
6594).
4.01.2 First Supplemental Indenture, dated as of June 13, 1990,
to the Indenture, incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated June 13,
1990 (File No. 1-6594).
The total amount of securities authorized
pursuant to any other instrument defining rights
of holders of long-term debt of the Company does
not exceed 10% of the total assets of the Company
and its consolidated subsidiaries. The Company
will furnish copies of any such instrument to
the Securities and Exchange Commission upon
request.
12.01 Computation of Ratio of Earnings to Fixed Charges. Electronic
27.01 Financial Data Schedule Electronic
99.01 The second paragraph of page 2 of the Company's Current Electronic
Report on Form 8-K dated July 13, 1994, File No. 1-6594.
15
<PAGE>
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.
Commercial Credit Company
Date: November 13, 1995 By /s/ William R. Hofmann
-----------------------------
William R. Hofmann
Vice President
(Principal Financial Officer)
Date: November 13, 1995 By /s/ Irwin Ettinger
---------------------------------------
Irwin Ettinger
Senior Vice President
(Chief Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Filing
Number Description of Exhibit Method
- ------ ---------------------- ------
3.01 Restated Certificate of Incorporation of Commercial
Credit Company (the "Company"), included in Certificate
of Merger of CCC Merger Company into the Company;
Certificate of Ownership and Merger merging CCCH
Acquisition Corporation into the Company; and Certificate
of Ownership and Merger merging RDI Service Corporation
into the Company, incorporated by reference to
Exhibit 3.01 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992
(File No. 1-6594).
3.02 By-laws of the Company, as amended May 14, 1990,
incorporated by reference to Exhibit 3.02.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-6594).
4.01.1 Indenture, dated as of December 1, 1986 (the "Indenture"),
between the Company and Citibank, N.A., relating to the
Company's debt securities, incorporated by reference to
Exhibit 4.01 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988 (File No. 1-
6594).
4.01.2 First Supplemental Indenture, dated as of June 13, 1990,
to the Indenture, incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated June 13,
1990 (File No. 1-6594).
The total amount of securities authorized
pursuant to any other instrument defining rights
of holders of long-term debt of the Company does
not exceed 10% of the total assets of the Company
and its consolidated subsidiaries. The Company
will furnish copies of any such instrument to
the Securities and Exchange Commission upon
request.
12.01 Computation of Ratio of Earnings to Fixed Charges. Electronic
27.01 Financial Data Schedule Electronic
99.01 The second paragraph of page 2 of the Company's Current Electronic
Report on Form 8-K dated July 13, 1994, File No. 1-6594.
Exhibit 12.01
Commercial Credit Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions of dollars, except for ratio)
Nine months ended September 30,
-----------------------------------
1995 1994
---- ----
Income before income taxes and minority interest $248.1 $273.8
Elimination of undistributed equity earnings (1.0) (1.6)
Pre-tax minority interest - (15.5)
Interest 346.8 293.4
Portion of rentals deemed to be interest 7.2 8.2
----- -----
Earnings available for fixed charges $601.1 $558.3
===== =====
Fixed charges
- -------------
Interest $346.8 $ 293.4
Portion of rentals deemed to be interest 7.2 8.2
----- -----
Fixed charges $354.0 $301.6
===== =====
Ratio of earnings to fixed charges 1.70x 1.85x
==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE SEPTEMBER 30, 1995 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
COMMERCIAL CREDIT COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> $ 13,500
<SECURITIES> 1,009,100<F1>
<RECEIVABLES> 7,353,500<F2>
<ALLOWANCES> (188,900)
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F3>
<PP&E> 0<F3>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 8,504,200
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 6,511,900<F4>
<COMMON> 0
0<F3>
0
<OTHER-SE> 1,194,100<F5>
<TOTAL-LIABILITY-AND-EQUITY> 8,504,200
<SALES> 0<F3>
<TOTAL-REVENUES> 1,036,200
<CGS> 0<F3>
<TOTAL-COSTS> 788,100
<OTHER-EXPENSES> 0<F3>
<LOSS-PROVISION> 121,900<F6>
<INTEREST-EXPENSE> 346,800<F6>
<INCOME-PRETAX> 248,100
<INCOME-TAX> 85,900
<INCOME-CONTINUING> 162,200
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 162,200
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0<F3>
<FN>
<F1> Includes the following items from the financial statements:
total investments $1,009,100.
<F2> Includes the following items from the financial statements:
consumer finance receivables $7,186,900 and other
receivables $166,600.
<F3> Items which are inapplicable relative to the underlying
financial statements are indicated with a zero as required.
<F4> Includes the following items from the financial
statements: certificates of deposit $74,700; short-term
borrowings $1,287,200 and long-term debt $5,150,000.
<F5> Includes the following items from the financial
statements: additional paid-in capital $163,500;
retained earnings $1,026,700; unrealized gain (loss)
on investments $4,200; and cumulative translation
adjustment $(300).
<F6> Included in total costs and expenses applicable to
sales and revenues.
</FN>
</TABLE>
Exhibit 99.01
Company's Form 8-K
July 13, 1994
Page 2
In May and June 1994, three purported class action lawsuits were filed
against the Company and its subsidiaries Commercial Credit Corporation,
Voyager Guaranty Insurance Company and American Health and Life Insurance
Company. Two of such actions, Erkins v. First Franklin Financial Corp.,
et al. and Lawrence v. Commercial Credit Corp., et al., were filed in the
Circuit Court, Jefferson County, Alabama. The third action, Princess Nobels
v. Associates Corporation of North America, was filed in the U.S. District
Court for the Middle District of Alabama. The suits allege, among other things,
that the Company's subsidiaries charged excessive premiums on credit life
insurance, credit property insurance and nonfiling insurance, and that as a
result, the Company and its subsidiaries violated various federal and state
laws and regulations. The plaintiffs seek, among other things, compensatory
and punitive damages in an unspecified amount. The Company believes it has
meritorious defenses to these actions and intends to contest the allegations.
