UNITED STATES
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, 1998
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
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COMMERCIAL CREDIT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 52-0883351
(State or other jurisdiction of (I.R.S. Employer
incorporation Identification No.)
or organization)
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 Citigroup Inc.
(formerly 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, 1998 and 1997 3
Condensed Consolidated Statement of Financial Position -
September 30, 1998 (Unaudited) and December 31, 1997 4
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1998 and 1997 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 13
Exhibit Index 14
Signatures 15
2
<PAGE>
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,
- --------------------------------------------------------------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------
Revenues
Finance related interest and other
charges $447.9 $372.0 $1,276.3 $ 998.7
Insurance premiums 52.0 43.1 150.1 126.7
Net investment income 16.4 20.9 47.4 57.4
Other income 28.1 47.9 73.9 73.4
- --------------------------------------------------------------------------------
Total revenues 544.4 483.9 1,547.7 1,256.2
- --------------------------------------------------------------------------------
Expenses
Interest 181.5 152.2 522.2 410.8
Non-insurance compensation and benefits 47.5 40.6 139.6 112.5
Provision for consumer finance credit
losses 85.0 63.7 263.3 208.3
Policyholder benefits and claims 17.2 14.8 49.9 43.9
Insurance underwriting, acquisition
and operating 6.7 6.6 20.2 19.6
Other operating 83.5 78.9 241.9 191.5
- --------------------------------------------------------------------------------
Total expenses 421.4 356.8 1,237.1 986.6
- --------------------------------------------------------------------------------
Income before income taxes 123.0 127.1 310.6 269.6
Provision for income taxes 44.6 45.6 112.0 94.6
- --------------------------------------------------------------------------------
Net income $ 78.4 $ 81.5 $ 198.6 $ 175.0
================================================================================
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
Commercial Credit Company and Subsidiaries
Condensed Consolidated Statement of Financial Position
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
- -----------------------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 57.4 $ 18.4
Investments:
Fixed maturities, primarily available for sale, at market
value (amortized cost - $1,022.8 and $910.7) 1,070.5 926.8
Equity securities, at market value (cost - $71.4 and $71.8) 74.5 74.4
Short-term and other 147.9 92.7
- -----------------------------------------------------------------------------------------------
Total investments 1,292.9 1,093.9
- -----------------------------------------------------------------------------------------------
Consumer finance receivables 12,766.1 11,137.0
Allowance for losses (363.8) (321.4)
- -----------------------------------------------------------------------------------------------
Net consumer finance receivables 12,402.3 10,815.6
Other receivables 203.6 384.5
Deferred policy acquisition costs 4.1 4.2
Cost of acquired businesses in excess of net assets 475.5 476.8
Other assets 380.2 265.3
- -----------------------------------------------------------------------------------------------
Total assets $14,816.0 $13,058.7
===============================================================================================
Liabilities
Certificates of deposit $ 195.2 $ 57.3
Short-term borrowings 5,129.6 3,871.6
Long-term debt 6,250.0 6,300.0
- -----------------------------------------------------------------------------------------------
Total debt 11,574.8 10,228.9
Insurance policy and claims reserves 524.7 452.3
Accounts payable and other liabilities 657.8 523.1
- -----------------------------------------------------------------------------------------------
Total liabilities 12,757.3 11,204.3
- -----------------------------------------------------------------------------------------------
Stockholder's equity
Common stock ($.01 par value; authorized: 1,000 shares;
issued: 1 share) -- --
Additional paid-in capital 686.1 685.1
Retained earnings 1,340.1 1,157.5
Accumulated other changes in equity from nonowner sources 32.5 11.8
- -----------------------------------------------------------------------------------------------
Total stockholder's equity 2,058.7 1,854.4
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $14,816.0 $13,058.7
===============================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
Commercial Credit Company and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In millions of dollars)
Nine Months Ended September 30, 1998 1997
- -------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 736.5 $ 492.5
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities
Net change in credit card receivables (274.3) (278.4)
Loans originated or purchased (4,818.8) (3,551.7)
Loans repaid or sold 3,172.3 2,233.3
Purchases of investments (353.4) (286.6)
Proceeds from sales of investments 188.1 148.2
Sale of other assets -- 240.1
Business acquisition -- (1,617.6)
Proceeds from maturities of investments 2.8 1.1
Other, net 55.8 --
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (2,027.5) (3,111.6)
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities
Dividends paid (16.0) (137.8)
Capital Contribution -- 520.0
Issuance of long-term debt 300.0 900.0
Payments of long-term debt (350.0) (350.0)
Net change in short-term borrowings 1,258.0 1,675.0
Net change in certificates of deposit 138.0 24.7
- -------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,330.0 2,631.9
- -------------------------------------------------------------------------------
Change in cash and cash equivalents 39.0 12.8
Cash and cash equivalents at beginning of period 18.4 11.4
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 57.4 $ 24.2
===============================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 506.2 $ 384.4
Cash paid during the period for income taxes $ 81.4 $ 77.8
===============================================================================
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
Commercial Credit Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
Commercial Credit Company (CCC) is a wholly owned subsidiary of CCC
Holdings, Inc., which is a wholly owned subsidiary of Travelers Group Inc.
(TRV). On October 8, 1998, Citicorp merged with and into a newly formed,
wholly owned subsidiary of TRV. Following the Merger, TRV changed it name
to Citigroup Inc. The condensed consolidated financial statements include
the accounts of CCC and its subsidiaries (collectively, the Company).
The accompanying condensed consolidated financial statements as of
September 30, 1998 and for the three-month and nine-month periods ended
September 30, 1998 and 1997 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 CCC's
Annual Report on Form 10-K for the year ended December 31, 1997.
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.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
2. Changes in Accounting Principles and Accounting Standards not yet Adopted
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 130, "Reporting Comprehensive Income" (FAS
No. 130). FAS No. 130 establishes standards for the reporting and display
of comprehensive income and its components in a full set of
general-purpose financial statements. All items that are required to be
recognized under accounting standards as components of comprehensive
income are to be reported in an annual financial statement that is
displayed with the same prominence as other financial statements. This
statement stipulates that comprehensive income reflect the change in
equity of an enterprise during a period from transactions and other events
and circumstances from nonowner sources. Comprehensive income will thus
represent the sum of net income and other changes in stockholder's equity
from nonowner sources. The accumulated balance of changes in equity from
nonowner sources is required to be displayed separately from retained
earnings and additional paid-in capital in the statement of financial
position. The adoption of FAS No. 130 resulted primarily in the Company
reporting unrealized gains and losses on investments in debt and equity
securities held by the insurance subsidiaries in changes in equity from
nonowner sources. The Company's total changes in equity from nonowner
sources is as follows:
6
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- -----------------
(millions) 1998 1997 1998 1997
------ ------ ------ ------
Net income $ 78.4 $ 81.5 $198.6 $175.0
Other changes in equity from
nonowner sources 15.7 9.9 20.7 9.4
------ ------ ------ ------
Total changes in equity
from nonowner sources $ 94.1 $ 91.4 $219.3 $184.4
====== ====== ====== ======
In the 1998 third quarter, the Company adopted the Accounting Standards
Executive Committee of the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use" (SOP 98-1).
SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use and for determining when
specific costs should be capitalized and when they should be expensed. The
impact of adopting SOP 98-1 was not significant.
In June 1998, the Financial Accounting Standards Board (FASB) issued FAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(FAS No. 133), which becomes effective on January 1, 2000 for calendar
year companies such as the Company. The new standard will significantly
change the accounting treatment of end-user derivative and foreign
exchange contracts by the Company and its customers. Depending on the
underlying risk management strategy, these accounting changes could affect
reported earnings, assets, liabilities, and stockholders' equity. As a
result, the Company and the customers to which it provides derivatives and
foreign exchange products will have to reconsider their risk management
strategies, since the new standard will not reflect the results of many of
those strategies in the same manner as current accounting practice. The
Company is in the process of evaluating the potential impact of the new
accounting standard.
3. Consumer Finance Receivables
Consumer finance receivables, net of unearned finance charges of $734.7
million and $728.3 million at September 30, 1998 and December 31, 1997,
respectively, consisted of the following:
<TABLE>
<CAPTION>
(millions) September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Real estate-secured loans $6,085.7 $5,107.6
Personal loans 4,231.9 3,922.2
Credit cards 1,407.4 1,164.6
Sales finance and other 944.9 857.0
--------- ---------
Consumer finance receivables,
net of unearned finance charges 12,669.9 11,051.4
Accrued interest receivable 96.2 85.6
Allowance for credit losses (363.8) (321.4)
--------- ---------
Net consumer finance receivables $12,402.3 $10,815.6
========= =========
</TABLE>
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
In March 1998, Travelers Bank & Trust, fsb, a subsidiary of the Company,
and The Travelers Bank USA, also a subsidiary of the Company, entered into
a securitized transaction pursuant to which they transferred approximately
$356.5 million of their credit card receivables to an affiliated special
purpose corporation which transferred such receivables to a trust. The
trust sold to the public $227.5 million of securities securitized by such
receivables.
4. Debt
CCC 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, 1998 and
December 31, 1997, short-term borrowings consisted of commercial paper
totaling $5,129.6 million and $3,871.6 million, respectively. CCC may
borrow under its revolving credit facilities at various interest rate
options (LIBOR, CD, base rate or money market) and compensates the banks
for the facilities through commitment fees.
TRV, CCC 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 TRV, CCC or TIC. The revolving credit facility
consists of a five-year facility that expires in June 2001. At September
30, 1998, $300 million was allocated to CCC. TRV and CCC also have $200
million in 364-day facilities which expire in August 1999 and may be
allocated to either of TRV or CCC. At September 30, 1998, $50 million was
allocated to CCC. In addition TRV and CCC also have a $500 million 60-day
facility which expires in November 1998 and may be allocated to either of
TRV or CCC. At September 30, 1998 all of this facility was allocated to
CCC. At September 30, 1998, there were no borrowings outstanding under any
of these facilities.
CCC also has committed and available revolving credit facilities on a
stand-alone basis of $4.750 billion, consisting of $3.4 billion in five
year facilities expiring in 2002 and $1.350 billion in a 364-day facility
which expires in July 1999.
CCC is limited by covenants in its revolving credit agreements as to the
amount of dividends and advances that may be made to its parent or its
affiliated companies. At September 30, 1998, CCC would have been able to
remit $750.7 million to its parent under its most restrictive covenants.
5. Related Party Transactions
To facilitate cash management the Company has entered into an agreement
with TRV under which the Company or TRV may borrow from the other party at
any time an amount up to the greater of $50.0 million or 1% of the
Company's consolidated assets up to a maximum of $100.0 million. 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.
In July 1997 CCC issued, at a premium, $50 million of 15% coupon debt
securities yielding 5.62% due July 10, 1998. Concurrently, CCC entered
into a $50 million notional amount swap transaction with Smith Barney
Capital Services Inc., an affiliated company, to receive fixed and to pay
variable interest. The swap is accounted for as a hedge of the related
liability and the periodic receipts or payments are accrued as adjustments
to interest expense. This swap contract terminated on July 10, 1998.
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) 1998 1997 1998 1997
- -------------------------------------------------------------------------
Revenues $544.4 $483.9 $1,547.7 $1,256.2
=========================================================================
Net Income $ 78.4 $ 81.5 $ 198.6 $ 175.0
=========================================================================
Results of Operations
The consolidated net income of Commercial Credit Company (CCC) and subsidiaries
(collectively, the Company) for the three months ended September 30, 1998 was
$78.4 million compared to $81.5 million in the corresponding 1997 period.
Revenues for the quarter ended September 30, 1998 were $544.4 million compared
to $483.9 million in the corresponding 1997 period.
The net income of the Company for the nine months ended September 30, 1998 was
$198.6 million compared to $175.0 million in the corresponding 1997 period.
Revenues for the nine months ended September 30, 1998 were $1,547.7 million
compared to $1,256.2 million in the corresponding 1997 period.
On July 31, 1997, CCC acquired Security Pacific Financial Services (Security
Pacific) from BankAmerica Corporation for a purchase price of approximately $1.6
billion. The purchase included approximately $1.2 billion of net consumer
finance receivables and approximately $70 million of other net assets. The
excess of the purchase price over the estimated fair value of net assets was
$393.2 million and is being amortized over 25 years. The purchase price for the
transaction was financed primarily by CCC and by an equity contribution by
Travelers Group Inc. (TRV) of $520 million.
The following discussion presents in more detail each segment's performance.
Segment Results for the Three Months Ended September 30, 1998 and 1997
Consumer Finance Services
Three Months Ended September 30,
------------------------------------------------
(In millions) 1998 1997
- ----------------------------------------------------------------------------
Revenues Net income Revenues Net income
- ----------------------------------------------------------------------------
Consumer Finance Services $541.5 $83.2 $447.3 $65.1
============================================================================
Earnings in the third quarter of 1998 were $83.2 million compared to $65.1
million in the third quarter of 1997. This excellent performance reflects
continued internal receivables growth in all major products, an improved
charge-off rate, and the integration of Security Pacific into the Commercial
Credit branch system since July 1997.
9
<PAGE>
Receivables owned reached a record $12.67 billion, up 19% from the prior year
period and up $1.62 billion or 15% since year-end 1997. This excludes $255.1
million in credit card receivables securitized on March 6, 1998. Much of the
growth in real estate-secured loans resulted from the continued strong
performance of the $.M.A.R.T. Program, as well as solid sales in the branch
network. On a managed basis, including securitized assets, receivables totaled
$13.01 billion, an increase of $1.77 billion since year-end 1997.
During the third quarter of 1998, the average yield on owned receivables was
14.21%, down from 14.57% in the third quarter of 1997, reflecting the shift in
the portfolio mix toward lower-risk real estate-secured loans, which have lower
margins. At September 30, 1998, the owned portfolio consisted of 48% real
estate-secured loans, 34% personal loans, 11% credit cards and 7% sales finance
and other.
The charge-off rate on owned receivables of 2.39% in the third quarter of 1998
continued to improve from 2.50% in the third quarter of 1997 and from 2.66% in
the second quarter of 1998. Delinquencies over 60 days on owned receivables were
2.27% at September 30, 1998, down from 2.35% at year-end 1997, but up from 2.17%
at the end of the comparable quarter last year, which contained a short-term
benefit from the transition of Security Pacific's portfolio to Commercial
Credit's charge-off policies.
As of, or for the
Three Months Ended September 30,
--------------------------------
1998 1997
--------------------------------
Allowance for credit losses as % of
net outstandings 2.87% 3.05%
Charge-off rate for the period 2.39% 2.50%
60 + days past due on a contractual
basis as a % of gross consumer
finance receivables at quarter end 2.27% 2.17%
Corporate and Other
Three Months Ended September 30,
------------------------------------------
(In millions) 1998 1997
- -----------------------------------------------------------------------
Net income Net income
Revenues (expense) Revenues (expense)
- -----------------------------------------------------------------------
Corporate and Other (1) $2.9 $(4.8) $36.6 $16.4
=======================================================================
(1) Revenues and net income in 1997 include reported portfolio gains of $27.0
million and $16.5 million, respectively.
Segment Results for the Nine Months Ended September 30, 1998 and 1997
The overall operating trends for the nine months ended September 30, 1998 and
1997 were substantially the same as those of the third quarter periods except as
noted below:
10
<PAGE>
Consumer Finance Services
Nine Months Ended September 30,
-------------------------------------------------
(millions) 1998 1997
- ------------------------------------------------------------------------------
Revenues Net income Revenues Net income
- ------------------------------------------------------------------------------
Consumer Finance Services $1,539.1 $211.6 $1,202.5 $165.9
==============================================================================
During the first nine months of 1998, the average yield on owned receivables was
14.18%, down from 14.55% in the first nine months of 1997. The charge-off rate
on owned receivables of 2.60% in the first nine months of 1998 was improved from
the 2.74% rate in the first nine months of 1997.
Corporate and Other
Nine Months Ended September 30,
------------------------------------------
(millions) 1998 1997
- -------------------------------------------------------------------------------
Net income Net income
Revenues (expense) Revenues (expense)
- -------------------------------------------------------------------------------
Total Corporate and Other (1) $8.6 $(13.0) $53.7 $ 9.1
===============================================================================
(1) Revenues and net income in 1997 include reported portfolio gains of $27.0
million and $16.5 million, respectively.
Liquidity and Capital Resources
CCC 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. CCC may borrow under its revolving
credit facilities at various interest rate options (LIBOR, CD, base rate or
money market) and compensates the banks for the facilities through commitment
fees.
TRV, CCC 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 TRV, CCC or TIC. The revolving credit facility consists of a five-year
facility which expires in June 2001. At September 30, 1998, $300 million was
allocated to CCC. TRV and CCC also have $200 million in 364-day facilities which
expire in August 1999 and may be allocated to either of TRV or CCC. At September
30, 1998, $50 million was allocated to CCC. In addition TRV and CCC also have a
$500 million 60-day facility which expires in November 1998 and may be allocated
to either of TRV or CCC. At September 30, 1998 all of this facility was
allocated to CCC. At September 30, 1998, there were no borrowings outstanding
under any of these facilities.
In addition, CCC has committed and available revolving credit facilities on a
stand-alone basis of $4.750 billion, consisting of $3.4 billion in five year
facilities expiring in 2002 and $1.350 billion in a 364-day facility which
expires in July 1999.
CCC has unused credit availability of $5.6 billion under the revolving credit
facilities referred to above.
11
<PAGE>
CCC is limited by covenants in its revolving credit agreements as to the amount
of dividends and advances that may be made to its parent or its affiliated
companies. At September 30, 1998, CCC would have been able to remit $750.7
million to its parent under its most restrictive covenants.
Year 2000 Date Conversion
The Company is highly dependent on computer systems and system applications for
conducting its ongoing business functions. In 1996, the Company began the
process of identifying, assessing and implementing changes to computer programs
to address the year 2000 issue and developed a comprehensive plan to address the
issue. The issue involves the ability of computer systems that have time
sensitive programs to recognize properly the year 2000. The inability to do so
could result in major failure or miscalculations that would disrupt the
Company's ability to meet its customer and other obligations on a timely basis.
The Company is in the process of implementing necessary changes, in accordance
with its Year 2000 plan, to bring all its critical business systems into year
2000 compliance by early 1999. As part of and following, achievement of year
2000 compliance, systems have been, and will continue to be, subjected to a
certification process which validates the renovated code before it is certified
for use in production. In addition, the Company is developing contingency plans
to be used in the event of an unexpected failure, which may result from the
complex interrelationships among our clients, business partners, and other
parties upon whom it relies. These plans are expected to be in place by December
31, 1998.
The total pre-tax cost associated with the required modifications and
conversions is expected to be between $7 million and $10 million and is being
expensed as incurred in the period 1996 through 1999, and is not expected to
have a material effect on the Company's financial position, results of
operations or liquidity. The Company also has third party customers, financial
institutions, vendors and others with which it conducts business and has
communicated with them on their plans to address and resolve year 2000 issues on
a timely basis. While it is likely that these efforts by third party vendors
will be successful, it is possible that a series of failures by third parties
could have a material adverse effect on the Company's results of operations in
future years.
Future Application of Accounting Standards
See Note 2 of Notes to Condensed Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
Forward Looking Statements
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by the words "believe," "expect," "anticipate," "intend,"
"estimate," and similar expressions. These forward-looking statements involve
risks and uncertainties including, but not limited to, the following: the
ability of the Company and third party vendors to modify computer systems for
the Year 2000 date conversion in a timely manner. Readers also are directed to
other risks and uncertainties discussed in documents filed by the Company with
the Securities and Exchange Commission.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
On July 27, 1998, CCC filed a Current Report on Form 8-K, dated July
20, 1998 reporting under Item 5 thereof the results of its
operations for the quarter ended June 30, 1998, and certain other
selected financial data.
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
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).
12.01+ Computation of Ratio of Earnings to Fixed Charges.
27.01+ Financial Data Schedule.
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.
- ----------
+ Filed herewith.
14
<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 12, 1998 By Raymond L. Fischer, Jr.
---------------------------
Raymond L. Fischer, Jr.
Executive Vice President
(Principal Financial Officer)
Date: November 12, 1998 By Irwin Ettinger
-------------------------
Irwin Ettinger
Executive Vice President
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
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).
12.01+ Computation of Ratio of Earnings to Fixed Charges.
27.01+ Financial Data Schedule.
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.
- ----------
+ Filed herewith.
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,
-------------------------------
1998 1997
------- -------
Income before income taxes $310.6 $269.6
Elimination of undistributed equity earnings (0.4) (0.7)
Interest 522.2 410.8
Portion of rentals deemed to be interest 8.5 7.1
------- -------
Earnings available for fixed charges $840.9 $686.8
======= =======
Fixed charges
Interest $522.2 $410.8
Portion of rentals deemed to be interest 8.5 7.1
------- -------
Fixed charges $530.7 $417.9
======= =======
Ratio of earnings to fixed charges 1.58x 1.64x
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1998 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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 57,400
<SECURITIES> 1,292,900 <F1>
<RECEIVABLES> 12,969,700 <F2>
<ALLOWANCES> (363,800)
<INVENTORY> 0 <F3>
<CURRENT-ASSETS> 0 <F3>
<PP&E> 0 <F3>
<DEPRECIATION> 0 <F3>
<TOTAL-ASSETS> 14,816,000
<CURRENT-LIABILITIES> 0 <F3>
<BONDS> 11,574,800 <F4>
0 <F3>
0
<COMMON> 0
<OTHER-SE> 2,058,700 <F5>
<TOTAL-LIABILITY-AND-EQUITY> 14,816,000
<SALES> 0 <F3>
<TOTAL-REVENUES> 1,547,700
<CGS> 0 <F3>
<TOTAL-COSTS> 1,237,100
<OTHER-EXPENSES> 0 <F3>
<LOSS-PROVISION> 263,300 <F6>
<INTEREST-EXPENSE> 522,200 <F6>
<INCOME-PRETAX> 310,600
<INCOME-TAX> 112,000
<INCOME-CONTINUING> 198,600
<DISCONTINUED> 0 <F3>
<EXTRAORDINARY> 0 <F3>
<CHANGES> 0 <F3>
<NET-INCOME> 198,600
<EPS-PRIMARY> 0 <F3>
<EPS-DILUTED> 0 <F3>
<FN>
<F1> Includes the following items from the financial statements: total
investments $1,292,900.
<F2> Includes the following items from the financial statements: consumer
finance receivables $12,766,100 and other receivables $203,600.
<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 $195,200; short-term borrowings $5,129,600 and long-term debt
$6,250,000.
<F5> Includes the following items from the financial statements: additional
paid-in capital $686,100; retained earnings $1,340,100; accumulated other
changes in equity from nonowner sources $32,500.
<F6> Included in total costs and expenses applicable to sales and revenues.
</FN>
</TABLE>
