Exhibit 99.l
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended Three Months Ended
September 30 September 30
2000 1999 2000 1999
--------- --------- --------- ---------
REVENUE
Finance charges $ 7,115.3 $ 6,787.6 $ 2,500.0 $ 2,241.6
Servicing related income 1,441.2 892.2 502.6 386.1
Insurance premiums 857.1 785.5 302.5 268.7
Investment and other
income 501.4 509.7 214.5 144.2
--------- --------- --------- ---------
9,915.0 8,975.0 3,519.6 3,040.6
EXPENSES
Interest expense 3,061.4 2,917.8 1,052.2 992.5
Operating expenses 3,228.4 2,900.0 1,137.7 948.9
Provision for losses on
finance receivables 1,390.7 1,096.5 489.8 369.3
Insurance benefits paid
or provided 435.7 330.2 166.3 111.3
--------- --------- --------- ---------
8,116.2 7,244.5 2,846.0 2,422.0
--------- --------- --------- ---------
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 1,798.8 1,730.5 673.6 618.6
PROVISION FOR INCOME TAXES 647.5 648.8 231.2 231.8
--------- --------- --------- ---------
NET EARNINGS $ 1,151.3 $ 1,081.7 $ 442.4 $ 386.8
========= ========= ========= =========
NET EARNINGS PER SHARE
Basic $ 1.58 $ 1.49 $ 0.61 $ 0.53
========= ========= ========= =========
Diluted $ 1.58 $ 1.48 $ 0.61 $ 0.53
========= ========= ========= =========
See notes to consolidated interim financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars In Millions, Except Per Share Information)
September 30 December 31
2000 1999
--------- ---------
(Unaudited)
ASSETS
CASH AND CASH EQUIVALENTS $ 3,203.4 $ 1,026.3
INVESTMENTS IN DEBT AND EQUITY SECURITIES 9,483.3 7,176.5
FINANCE RECEIVABLES, net of unearned finance
income, allowance for losses and insurance
policy and claims reserves 67,554.8 65,656.8
OTHER ASSETS 12,776.1 9,097.2
--------- ---------
Total assets $93,017.6 $82,956.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
Commercial Paper $32,844.2 $25,991.9
Bank Loans 460.0 1,261.5
ACCOUNTS PAYABLE AND ACCRUALS 5,079.7 4,498.9
LONG-TERM DEBT
Senior Notes 43,507.4 40,978.8
Subordinated and Capital Notes 425.1 425.2
--------- ---------
43,932.5 41,404.0
MINORITY INTEREST IN EQUITY OF CONSOLIDATED
SUBSIDIARY 76.7 --
STOCKHOLDERS' EQUITY
Series A Junior Participating Preferred
Stock, $0.01 par value, 734,500 shares
authorized, no shares issued or outstanding -- --
Class A Common Stock, $0.01 par value,
1,150,000,000 shares authorized, 729,191,583
and 728,747,443 shares issued in 2000 and
1999, respectively 7.3 7.3
Class B Common Stock, $0.01 par value,
144,118,820 shares authorized, no shares
issued or outstanding -- --
Paid-in Capital 5,288.0 5,282.1
Retained Earnings 5,511.0 4,501.8
Accumulated Other Comprehensive (Loss) Income (162.4) 44.7
Less 638,495 and 597,785 shares of Class A
Common Stock at cost held in treasury in 2000
and 1999, respectively and Other (19.4) (35.4)
--------- ---------
Total stockholders' equity 10,624.5 9,800.5
--------- ---------
Total liabilities and stockholders' equity $93,017.6 $82,956.8
========= =========
See notes to consolidated interim financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
(Unaudited)
Nine Months Ended
September 30
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,151.3 $ 1,081.7
Adjustments to reconcile net earnings for
Non-cash and other operating activities:
Provision for losses on finance receivables 1,390.7 1,096.5
Amortization of goodwill and other
intangible assets 210.5 160.6
Depreciation and other amortization 339.7 210.9
Other operating activities (109.0) (374.9)
--------- ---------
Net cash provided from operating
activities 2,983.2 2,174.8
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables originated (41,952.3) (48,489.4)
Finance receivables liquidated 33,686.8 43,078.8
Sale of finance businesses and branches -- 1,659.4
Acquisitions of loan portfolios and other
finance businesses, net (3,984.1) (5,112.0)
Proceeds from securitization of finance
receivables 3,694.9 2,479.4
Other investing activities 576.4 (1,126.0)
--------- ---------
Net cash used for investing
activities (7,978.3) (7,509.8)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 11,514.9 9,635.8
Retirement of long-term debt (9,827.6) (7,249.6)
Increase (decrease) in notes payable 5,651.7 (943.6)
Other financing activities (141.0) (94.7)
--------- ---------
Net cash provided from financing
activities 7,198.0 1,347.9
--------- ---------
EFFECT OF FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS ON CASH (25.8) 89.5
--------- ---------
INCREASE(DECREASE) IN CASH AND CASH
EQUIVALENTS 2,177.1 (3,897.6)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,026.3 4,665.6
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,203.4 $ 768.0
========= =========
See notes to consolidated interim financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Associates First Capital Corporation (the "Company"), a Delaware
corporation, is a leading diversified finance organization providing finance,
leasing, insurance and related services to consumers and businesses in the
United States and internationally.
In September 2000, the Company and Citigroup Inc. announced they had
entered into a definitive merger agreement. Pursuant to an Agreement and Plan of
Merger dated as of October 6, 2000 (the "Agreement"), the Company and Citigroup
Inc. have agreed to merge a wholly-owned subsidiary of Citigroup Inc. with and
into the Company. Under the Agreement, holders of the Company's common stock
will receive 0.7334 shares of Citigroup Inc. common stock for each share of the
Company's common stock. The merger is expected to be completed prior to December
31, 2000. Upon consummation of the merger, the Company will become an indirect
wholly-owned subsidiary of Citigroup Inc.
NOTE 2 - BASIS OF PRESENTATION AND CONSOLIDATION
The consolidated interim financial statements include the accounts of the
Company and its subsidiaries after elimination of all significant intercompany
balances and transactions. These statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Certain prior period financial statement amounts have been reclassified to
conform to the current period presentation.
In the opinion of management, all adjustments, consisting only of normal,
recurring accruals, necessary to present fairly the results of operations and
financial position have been made. The financial position and results of
operations as of and for any interim period are unaudited and not necessarily
indicative of the results of operations for a full year. This Form 10-Q should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires the use of management
estimates. These estimates are subjective in nature and involve matters of
judgment. Actual results could differ from these estimates.
NOTE 3 - SIGNIFICANT TRANSACTIONS
In January 2000, the Company entered into an agreement with KeyCorp, under
which the companies jointly manage KeyCorp's credit card program. Additionally,
the Company acquired KeyCorp's credit card receivables portfolio with a fair
market value of $1.3 billion and intangible assets, primarily related to
customer lists and operating agreements, of approximately $350 million for $1.7
billion.
In April 2000, the Company acquired Arcadia Financial Ltd. ("Arcadia") for
approximately $195 million which approximated the fair value of the intangible
assets established in the acquisition. Arcadia had approximately $470 million in
senior and subordinated notes at the time of the acquisition. At September 30,
2000, the Company managed approximately $3.0 billion of Arcadia's serviced
assets originated and sold with servicing retained prior to the acquisition. In
addition, the Company continues to securitize new originations.
<PAGE>
In July 2000, the Company completed the purchase of approximately $0.6
billion in credit card receivables from Zale Corporation ("Zale") and entered
into an operating agreement for Zale's on-going credit card business.
In September 2000, the Company acquired a 73% interest (22% of which was
transferred to the Company from escrow on October 20, 2000) in Unimat Life
Kabushiki Kaisha ("Unimat") for approximately $0.6 billion. The balance sheet
reflects the minority interest in equity of consolidated subsidiary. Goodwill
and other intangibles were approximately $0.3 billion. At the time of the
acquisition, the fair market value of Unimat's net assets was approximately $0.4
billion. The Company expects to acquire the remaining minority interest, as set
forth in the purchase agreement, in the first quarter of 2001.
All of the transactions described above were accounted for as purchases.
The results of operations are included in the consolidated results of the
Company from the respective acquisition dates. The allocation of the purchase
price for these transactions is based upon preliminary estimates and may be
refined as additional information is available.
NOTE 4 - EARNINGS PER SHARE
Earnings per share on a basic and diluted basis for the periods indicated
is calculated as follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic net earnings per share: (1)
Net earnings $ 1,151.3 $ 1,081.7 $ 442.4 $ 386.8
Weighted average shares
outstanding 727.6 728.0 728.0 728.1
$ 1.58 $ 1.49 $ 0.61 $ 0.53
========= ========= ========= =========
Diluted net earnings per share: (1)
Net earnings $ 1,151.3 $ 1,081.7 $ 442.4 $ 386.8
Weighted average shares
outstanding plus assumed
conversions 729.1 732.2 730.0 731.6
$ 1.58 $ 1.48 $ 0.61 $ 0.53
========= ========= ========= =========
Calculation of weighted average
shares outstanding plus
assumed conversions:
Weighted average shares
outstanding 727.6 728.0 728.0 728.1
Effect of dilutive securities 1.5 4.2 2.0 3.5
--------- --------- --------- ---------
729.1 732.2 730.0 731.6
========= ========= ========= =========
</TABLE>
(1) Net earnings and earnings per share for the nine months ended September 30,
2000 include a special pre-tax charge of approximately $112 million as described
in Note 7. Excluding the special pre-tax charge, net earnings would have been
$1,222.1 million and basic and diluted earnings per share would have been $1.68.
During the nine months ended September 30, 2000 and 1999, the Company
declared and paid cash dividends of $0.195 and $0.165 per common share,
respectively.
<PAGE>
NOTE 5 - COMPREHENSIVE INCOME
The components of accumulated other comprehensive (loss) income, net of
tax, are as follows (in millions):
September 30 December 31
2000 1999
------------ -----------
Foreign currency translation adjustments $ (32.8) $ 148.8
Net unrealized loss on available-for-sale
securities (129.6) (104.1)
------- -------
Accumulated other comprehensive (loss)income $(162.4) $ 44.7
======= =======
Comprehensive income, net of tax, for the nine and three-month periods
ended September 30, 2000 and 1999 consisted of the following components (in
millions):
Nine Months Ended Three Months Ended
September 30 September 30
2000 1999 2000 1999
-------- -------- -------- --------
Net earnings $1,151.3 $1,081.7 $ 442.4 $ 386.8
Foreign currency translation
adjustments (181.6) (0.9) (67.1) 14.0
Net unrealized (loss) gain on
available-for-sale securities (25.5) (31.5) (19.5) 5.9
-------- -------- -------- --------
Comprehensive income $ 944.2 $1,049.3 $ 355.8 $ 406.7
======== ======== ======== ========
NOTE 6 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
Available-for-sale securities consist of retained securitization
interests, notes and preferred stock and other equity securities primarily held
by the Company's insurance subsidiaries. The estimated market value at September
30, 2000 and December 31, 1999 was $9.5 billion and $7.1 billion, respectively.
The amortized cost at September 30, 2000 and December 31, 1999 was $9.7 billion
and $7.3 billion, respectively. Realized gains or losses on sales are included
in investment and other income. Unrealized gains or losses are included, net of
tax, in other comprehensive income, a component of stockholders' equity.
<PAGE>
NOTE 7 - FINANCE RECEIVABLES
At September 30, 2000 and December 31, 1999, finance receivables consisted
of the following (in millions):
September 30 December 31
2000 1999
------------ -----------
Home equity $27,344.0 $25,015.0
Personal lending and retail sales finance 17,552.1 16,012.4
Truck and truck trailer 12,404.7 13,130.3
Equipment 7,134.6 6,977.3
Credit card 2,149.8 2,247.1
Auto fleet leasing 2,196.5 2,070.1
Warehouse lending, government guaranteed
lending and municipal finance 2,046.3 1,515.9
Manufactured housing -- 1,849.0
--------- ---------
Finance receivables, net of unearned finance
income of approximately $5.1 billion and $4.7
billion at September 31, 2000 and December
31, 1999 ("net finance receivables") 70,828.0 68,817.1
Allowance for losses on finance receivables (2,221.2) (2,174.4)
Insurance policy and claims reserves (1,052.0) (985.9)
--------- ---------
Finance receivables, net of unearned
finance income, allowance for losses
and insurance policy and claims
reserves $67,554.8 $65,656.8
========= =========
In January 2000, the Company announced it would discontinue originating
loans for manufactured housing. As a result of this decision, the Company took a
pre-tax charge against earnings of approximately $112 million. At September 30,
2000, the Company included such finance receivables and related allowance for
losses of $1.6 billion and $0.2 billion, respectively, in other assets as
finance receivables held for sale or securitization.
During the nine months ended September 30, 2000, the Company securitized
and sold home equity, credit card and automobile retail sales finance
receivables portfolios totaling $4.4 billion and retained interests in the
related securitization trusts totaling $794 million. Pre-tax gains of
approximately $90 million were recorded on these transactions.
In September 2000, the Company was notified by certain investors in its
securitization transactions that such investors intended to exercise put options
totaling approximately $2.0 billion during the fourth quarter of 2000.
<PAGE>
NOTE 8 - ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during the
periods indicated were as follows (in millions):
Nine Months Ended Year Ended
September 30 December 31
2000 1999 1999
-------- -------- --------
Balance at beginning of period $2,174.4 $1,978.7 $1,978.7
Provision for losses 1,390.7 1,096.5 1,506.4
Recoveries on receivables
charged off 216.8 226.7 268.8
Losses sustained (1,428.7) (1,284.9) (1,717.1)
Reserves of receivables sold
or held for securitization (199.7) (178.0) (214.0)
Reserves of acquired
businesses 99.4 298.7 316.2
Other (31.7) 33.2 35.4
-------- -------- --------
Balance at end of period $2,221.2 $2,170.9 $2,174.4
======== ======== ========
NOTE 9 - OTHER ASSETS
The components of other assets at September 30, 2000 and December 31, 1999
were as follows (in millions):
September 30 December 31
2000 1999
------------ -----------
Goodwill $ 3,968.0 $ 3,747.8
Notes and other receivables 2,069.9 1,877.9
Finance receivables held for
sale or securitization, net (1) 2,375.8 153.0
Other intangible assets, net 2,137.8 1,579.4
Property and equipment 764.5 662.2
Collateral held for resale 670.9 431.7
Relocation client advances 288.8 185.4
Other 500.4 459.8
--------- ---------
Total other assets $12,776.1 $ 9,097.2
========= =========
(1) At September 30, 2000, finance receivables held for sale or securitization
includes approximately $575 million of credit card finance receivables acquired
from Zale and approximately $1.4 billion of manufactured housing net finance
receivables as discussed in Note 7.
<PAGE>
NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to hedge specific
exposures as part of its risk management program. The Company hedges its yen
denominated net investment in its Japanese subsidiaries through the use of
forward contracts. Other instruments currently used by the Company are currency
swap, interest rate swap, interest rate option, municipal bond and treasury
futures and option contracts. All of these instruments are held for purposes
other than trading. The Financial Accounting Standards Board has issued new
standards for accounting for derivative transactions to become effective in
2001. The Company has not completed its analysis of the impact this
pronouncement will have on future operating results.
Foreign currency forward exchange agreements have been designated for
accounting purposes as hedges of certain of the Company's foreign currency
denominated net investments. Under these agreements, the Company is obligated to
deliver specific foreign currencies in exchange for United States dollars at
varying times over the next year. The aggregate notional amount of these
agreements was $5.3 billion and $2.8 billion at September 30, 2000 and December
31, 1999, respectively. The fair value of such agreements at September 30, 2000
and December 31, 1999 would have been an asset of $19.0 million and a liability
of $389.0 million, respectively.
Foreign currency swap agreements have been designated for accounting
purposes as hedges of specific foreign currency exposures under certain debt
obligations. Under these agreements, the Company and the agreement
counterparties are obligated to exchange specific foreign currencies at varying
times over the next four years. The aggregate notional amount of these
agreements at September 30, 2000 and December 31, 1999 was $5.6 billion and $5.9
billion, respectively. The fair value of such agreements at September 30, 2000
and December 31, 1999 would have been a liability of $330.0 million and $307.9
million, respectively.
Interest rate swap and interest rate option agreements are used by the
Company to hedge the effect of interest rate movements on existing debt and
anticipated debt and asset securitization transactions. The aggregate notional
amount of interest rate swap agreements at September 30, 2000 and December 31,
1999 was $15.8 billion and $9.2 billion, respectively. The fair value of such
agreements at September 30, 2000 and December 31, 1999 would have been a
liability of $96.1 million and $46.7 million, respectively. The aggregate
notional amount of interest rate option agreements was $1.5 billion at September
30, 2000. The fair value of such agreements at September 30, 2000 would have
been a liability of $5.2 million. Interest rate swap and interest rate option
agreements mature on varying dates over the next 30 years.
Treasury futures and option contracts are used to minimize fluctuations in
the value of preferred stock investments. The aggregate notional amount of
futures and option contracts at September 30, 2000 and December 31, 1999 was
$306.5 million and $536.2 million, respectively. The fair value of these
contracts at September 30, 2000 and December 31, 1999 would have been a
liability of $0.4 million and an asset of $12.4 million, respectively. Such
contracts mature on varying dates through 2000.
Municipal bond futures are used to minimize fluctuations in the value of
municipal bond investments. The aggregate notional amount of municipal bond
futures contracts at September 30, 2000 and December 31, 1999 was $261.6 million
and $180.1 million, respectively. The fair value of these contracts at September
30, 2000 and December 31, 1999 would have been an asset of $2.7 million and $2.4
million, respectively. Such contracts mature on varying dates through 2000.
<PAGE>
NOTE 11 - SEGMENT REPORTING
The Company is organized into five primary business units: U.S. credit
card, U.S. consumer branch, U.S. home equity, commercial and international
finance. The U.S. consumer branch and U.S. home equity business units are
aggregated into one reportable U.S. consumer finance segment due to their
similar operating characteristics. The Company's corporate activities include,
among others, managing the operations of its domestic and foreign subsidiaries,
accessing the global debt, securitization and capital markets and managing the
mix of businesses in its portfolio. The Company fully allocates its corporate
activities to its business segments primarily based upon managed receivables.
The Company allocates resources to and evaluates the performance of its
segments primarily based on total revenue, net interest margin, segment earnings
and managed finance receivables adjusted to include the impact of receivables
either held for sale or sold with servicing retained ("Managed Basis"). Managed
Basis revenue, earnings and receivables information for each of the Company's
reportable segments is presented below (in millions):
<TABLE>
<CAPTION>
U.S. U.S.
Credit Consumer International
Card Finance Commercial Finance Total
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Total revenue
Nine months ended:
September 30, 2000 $ 2,752.7 $ 3,478.4 $ 2,133.9 $ 2,545.3 $10,910.3
September 30, 1999 2,097.9 3,249.0 2,330.9 2,065.2 9,743.0
Three months ended:
September 30, 2000 $ 1,014.5 $ 1,219.6 $ 749.6 $ 900.5 $ 3,884.2
September 30, 1999 728.8 1,070.5 790.7 720.3 3,310.3
Segment earnings
Nine months ended:
September 30, 2000 (2) $ 434.9 $ 564.5 $ 106.6 $ 692.8 $ 1,798.8
September 30, 1999 280.8 541.8 375.5 532.4 1,730.5
Three months ended:
September 30, 2000 $ 191.2 $ 178.6 $ 34.8 $ 269.0 $ 673.6
September 30, 1999 117.4 175.3 118.0 207.9 618.6
Finance receivables (1):
September 30, 2000 $15,848.0 $33,891.0 $22,311.5 $16,357.1 $88,407.6
December 31, 1999 13,234.9 30,091.1 22,397.9 13,196.0 78,919.9
</TABLE>
(1) Commercial finance receivables exclude the manufactured housing owned
finance receivables and serviced assets of $1.6 billion and $3.3 billion,
respectively, at September 30,2000 and $1.8 billion and $3.6 billion at December
31, 1999, respectively. The owned receivables have been reclassified to finance
receivables held for sale or securitization and are included in other assets.
Additionally, U.S. Consumer Finance receivables excludes the serviced assets of
Arcadia securitized prior to the acquisition of Arcadia of $3.0 billion at
September 30, 2000.
(2) Excluding the pre-tax charge for Associates Housing Finance ("AHF"),
commercial segment earnings and total earnings would have been $219.0 million
and $1.9 billion, respectively.
