<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 1-6155
AMERICAN GENERAL FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-0416090
(State of Incorporation) (I.R.S. Employer
Identification No.)
601 N.W. Second Street, Evansville, IN 47708
(Address of principal executive offices) (Zip Code)
(812) 424-8031
(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 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.
At May 14, 1998, there were 10,160,012 shares of the registrant's common
stock, $.50 par value, outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
(dollars in thousands)
<S> <C> <C>
Revenues
Finance charges $319,017 $311,590
Insurance 42,961 47,529
Other 23,653 21,264
Total revenues 385,631 380,383
Expenses
Interest expense 119,304 109,862
Operating expenses 122,615 114,495
Provision for finance
receivable losses 47,867 65,808
Insurance losses and loss
adjustment expenses 22,037 24,004
Total expenses 311,823 314,169
Income before provision for
income taxes 73,808 66,214
Provision for Income Taxes 27,802 24,453
Net Income $ 46,006 $ 41,761
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE> 3
<TABLE>
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
(dollars in thousands)
<S> <C> <C>
Assets
Finance receivables, net of unearned
finance charges:
Real estate loans $4,210,237 $4,067,500
Non-real estate loans 2,425,467 2,502,051
Retail sales finance 1,243,608 1,257,485
Net finance receivables 7,879,312 7,827,036
Allowance for finance receivable
losses (358,126) (363,126)
Net finance receivables, less allowance
for finance receivable losses 7,521,186 7,463,910
Investment securities 953,873 928,411
Cash and cash equivalents 98,134 91,076
Notes receivable from parent 177,688 185,028
Other assets 626,606 572,180
Total assets $9,377,487 $9,240,605
Liabilities and Shareholder's Equity
Long-term debt $4,005,665 $3,941,486
Short-term notes payable:
Commercial paper 3,201,532 3,157,671
Banks and other 2,650 -
Insurance claims and policyholder
liabilities 429,144 436,859
Other liabilities 298,218 308,601
Accrued taxes 46,535 21,073
Total liabilities 7,983,744 7,865,690
Shareholder's equity:
Common stock 5,080 5,080
Additional paid-in capital 718,914 718,914
Accumulated other comprehensive
income 33,648 34,512
Retained earnings 636,101 616,409
Total shareholder's equity 1,393,743 1,374,915
Total liabilities and shareholder's equity $9,377,487 $9,240,605
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<TABLE>
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
(dollars in thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 46,006 $ 41,761
Reconciling adjustments to net cash
provided by operating activities:
Provision for finance receivable losses 47,867 65,808
Depreciation and amortization 22,378 18,933
Deferral of finance receivable
origination costs (10,230) (9,645)
Deferred federal income tax (benefit) charge (1,903) 1,913
Change in other assets and other liabilities (16,037) 11,256
Change in insurance claims and
policyholder liabilities (7,715) (16,883)
Change in taxes receivable and payable 51,465 24,526
Operations related to assets held for sale - 20,108
Other, net 980 9,200
Net cash provided by operating activities 132,811 166,977
Cash Flows from Investing Activities
Finance receivables originated or purchased (1,247,839) (984,740)
Principal collections on finance receivables 1,121,564 1,057,244
Net collections on assets held for sale - 35,337
Advances for purchases of finance receivables (22,240) (855)
Investment securities purchased (65,710) (43,078)
Investment securities called, matured and sold 41,296 37,623
Transfer of fixed assets from affiliate (18,844) -
Change in notes receivable from parent
and affiliates 7,340 (3,877)
Other, net (25,086) (688)
Net cash (used for) provided by
investing activities (209,519) 96,966
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 536,270 -
Repayment of long-term debt (472,701) (205,500)
Change in short-term notes payable 46,511 (72,215)
Capital contribution from parent - 16,000
Dividends paid (26,314) -
Net cash provided by (used for)
financing activities 83,766 (261,715)
Increase in cash and cash equivalents 7,058 2,228
Cash and cash equivalents at beginning of period 91,076 90,197
Cash and cash equivalents at end of period $ 98,134 $ 92,425
Supplemental Disclosure of Cash Flow Information
Income taxes received $(22,335) $ (3,952)
Interest paid $136,124 $126,549
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE> 5
<TABLE>
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
(dollars in thousands)
<S> <C> <C>
Net income $46,006 $41,761
Other comprehensive income:
Net unrealized losses on investment securities (1,327) (19,662)
Income tax effect 464 6,881
Net unrealized losses on investment securities,
net of tax (863) (12,781)
Reclassification adjustment for realized
gains included in net income (2) (82)
Income tax effect 1 29
Realized gains included in net income, net of tax (1) (53)
Other comprehensive income, net of tax (864) (12,834)
Comprehensive income $45,142 $28,927
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE> 6
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998
Note 1. Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim periods and include the accounts of American General Finance
Corporation and its subsidiaries. American General Finance Corporation
will be referred to as "AGFC" or, collectively with its subsidiaries,
whether directly or indirectly owned, as the "Company". The subsidiaries
are wholly-owned, and all intercompany items have been eliminated. Per
share information is not included because AGFC is a wholly-owned subsidiary
of American General Finance, Inc. (AGFI). AGFI is a wholly-owned
subsidiary of American General Corporation (American General).
Note 2. Adjustments and Reclassifications
These condensed consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, considered necessary by
management for a fair presentation of the Company's consolidated financial
position at March 31, 1998 and December 31, 1997, its consolidated results
of operations for the three months ended March 31, 1998 and 1997, its
consolidated cash flows for the three months ended March 31, 1998 and 1997,
and its consolidated comprehensive income for the three months ended March
31, 1998 and 1997. These 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, 1997.
To conform with the 1998 presentation, certain items in the prior period
have been reclassified.
Note 3. Accounting Changes
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income", which
resulted in reporting comprehensive income and its components in the
Company's financial statements. SFAS 130 requires unrealized gains and
losses on the Company's investment securities, which prior to adoption were
reported separately in shareholder's equity, to be included in accumulated
other comprehensive income. Adoption of SFAS 130 did not change
recognition or measurement of net income and, therefore, did not impact the
Company's consolidated results of operations or financial position. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS 130.
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<PAGE> 7
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information",
which changes the way companies report segment information. This statement
is effective for years beginning after December 15, 1997, but need not be
applied to interim financial statements in the initial year of application.
Restatement of comparative information for all periods presented will be
required upon adoption. Adoption of this statement will result in more
detailed disclosures but will not have an impact on the Company's
consolidated results of operations or financial position.
Note 4. Derivative Financial Instruments
AGFC makes limited use of derivative financial instruments to manage the
cost of its debt and is neither a dealer nor a trader in derivative
financial instruments. AGFC's use of derivative financial instruments is
generally limited to interest rate swap and treasury rate lock agreements.
AGFC uses interest rate swap agreements to reduce its exposure to adverse
future fluctuations in interest expense rates by effectively converting
short-term and certain long-term floating-rate debt to a fixed-rate basis.
Interest rate swap agreements in which AGFC contracted to pay interest at
fixed rates and receive interest at floating rates totaled $940.0 million
in notional amount at March 31, 1998, with a weighted average interest rate
payable of 7.39% and a weighted average interest rate receivable of 5.52%.
Treasury rate lock agreements are used to hedge against the risk of rising
interest rates on anticipated long-term debt issuances. These agreements
provide for future cash settlements that are a function of specified U.S.
Treasury rates. During fourth quarter 1997, AGFC entered into treasury
rate lock agreements with settlement dates in 1998. At March 31, 1998, the
notional amount of these agreements was $192.0 million.
AGFC's use of interest rate swap and treasury rate lock agreements did not
have a material effect on the Company's weighted average interest rate or
reported interest expense in the first three months of 1998 or 1997.
Note 5. Assets Held For Sale
During fourth quarter 1996, the Company decided to offer for sale $874.8
million of non-strategic, underperforming finance receivable portfolios,
consisting of $520.3 million of credit card and $354.5 million of private
label finance receivables. The Company reclassified these finance
receivables and $70.0 million of allowance for finance receivable losses to
assets held for sale on December 31, 1996.
The Company hired an outside advisor to market the portfolios. Based on
negotiations with prospective purchasers subsequent to year end 1996, the
Company determined that a write-down of $137.0 million ($88.1 million
aftertax) at December 31, 1996 was necessary to reduce the carrying amount
of the assets held for sale to net realizable value, after considering
related expenses.
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<PAGE> 8
In April 1997, the Company repurchased $100.0 million of private label and
credit card finance receivables that previously had been sold through
securitization. No gain or loss resulted from this transaction. These
repurchased credit card finance receivables were offered for sale along
with the Company's other credit card finance receivables, which increased
the carrying amount of assets held for sale by approximately $70.0 million
in April 1997.
In June 1997, the Company sold all of the assets held for sale (with a
remaining balance of $658.1 million) and $81.4 million of other private
label finance receivables. In connection with these sales, the Company
recorded a loss of $42.2 million ($27.0 million aftertax) in second quarter
1997. This loss primarily resulted from establishing a liability for
estimated future payments to the purchaser of the credit card portfolio
under a five-year loss sharing arrangement.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company's sources of funds include operations, issuances of fixed-rate
and floating-rate debt, borrowings under credit facilities, and the sale of
securitized finance receivables. Management believes that the overall
sources of liquidity available to the Company will continue to be
sufficient to satisfy its foreseeable financial obligations and operational
requirements.
Liquidity
Operating cash flow, which includes net income adjusted for non-cash
revenues and expenses, totaled $132.8 million for the three months ended
March 31, 1998 compared to $167.0 million for the same period in 1997. The
decrease in operating cash flow for the three months ended March 31, 1998
when compared to the same period in 1997 was primarily due to the sale of
non-strategic assets in June 1997. Operating cash flow combined with the
net proceeds from issuance of debt generated cash flow of $242.9 million
for the three months ended March 31, 1998. This cash flow was used
principally to finance the net originations and purchases of finance
receivables of $126.3 million and to pay dividends to AGFI of $26.3
million. Operating cash flow combined with the net collections of finance
receivables and assets held for sale and a capital contribution of $16.0
million from AGFI generated cash flow of $290.8 million for the three
months ended March 31, 1997. This cash flow was used principally to fund
the net repayments of debt of $277.7 million.
Dividends are typically paid to manage the Company's leverage to a target
of 6.5 to 1 of debt to tangible equity (equity less goodwill and net
unrealized gains or losses on fixed-maturity investment securities). The
debt to tangible equity ratio at March 31, 1998 was 6.51 to 1. Certain of
AGFC's financing agreements effectively limit the amount of dividends AGFC
may pay; however, management does not expect those limits to affect AGFC's
ability to maintain the Company's targeted leverage.
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<PAGE> 9
Capital Resources
The Company's capital requirements vary directly with the level of net
finance receivables. The targeted mix of capital between debt and equity
is based primarily upon maintaining leverage that supports cost-effective
funding. At March 31, 1998, the Company's capital totaled $8.6 billion,
consisting of $7.2 billion of debt and $1.4 billion of equity, compared to
$8.5 billion at March 31, 1997, consisting of $7.1 billion of debt and $1.4
billion of equity.
The Company issues a combination of fixed-rate debt, principally long-term,
and floating-rate debt, principally short-term. AGFC and one of its
subsidiaries sell commercial paper notes with maturities ranging from 1 to
270 days directly to banks, insurance companies, corporations, and other
institutional investors. AGFC may also offer medium-term notes with
original maturities of nine months or longer to certain institutional
investors. AGFC obtains the remainder of its capital funds primarily
through underwritten public debt offerings with maturities generally
ranging from three to ten years.
The Company manages anticipated cash flows of its assets and liabilities in
an effort to reduce the risk associated with unfavorable changes in
interest rates. The Company's mix of fixed-rate and floating-rate debt is
determined by management based, in part, on the nature of the assets being
supported. The Company limits its exposure to market interest rate
increases by fixing interest rates that it pays for term periods. The
primary means by which the Company accomplishes this is through the
issuance of fixed-rate debt. To supplement fixed-rate debt issuances, AGFC
also uses interest rate swap agreements to synthetically create fixed-rate
debt by altering the nature of floating-rate funding, thereby limiting its
exposure to adverse interest rate movements. In addition, AGFC uses
treasury rate lock agreements to hedge against the risk of rising interest
rates on anticipated long-term debt issuances.
Credit Facilities
The Company participates in credit facilities to support the issuance of
commercial paper and to provide an additional source of funds for operating
requirements. At March 31, 1998, the Company was an eligible borrower
under $4.8 billion of committed credit facilities extended to American
General and certain of its subsidiaries (the "shared committed
facilities"). The annual commitment fees for the shared committed
facilities ranged from .05% to .07%. The Company pays only an allocated
portion of the commitment fees for such committed facilities. At March 31,
1998, the Company also had $141.0 million of uncommitted credit facilities
and was an eligible borrower under $200.0 million of uncommitted credit
facilities extended to American General and certain of its subsidiaries.
Available borrowings under all facilities are reduced by any outstanding
borrowings. At March 31, 1998, there were no borrowings under any credit
facilities.
<PAGE>
<PAGE> 10
Securitization
In April 1997, the Company repurchased all $100.0 million of the private
label and credit card finance receivables that had previously been sold
through securitization. No gain or loss resulted from the repurchase
transaction. Of the $100.0 million repurchased, approximately $70.0
million was classified as assets held for sale in April 1997. The
repurchase facilitated the sale of the credit card portfolio included in
assets held for sale and sold in June 1997.
Year 2000 Contingency
The Company is in the process of modifying its computer systems to be Year
2000 compliant. During the first quarter of 1998, the Company incurred and
expensed $.1 million related to this project. The Company estimates that
it will incur future costs in excess of $6.2 million for additional
internal staff, third-party vendors, and other expenses to render its
systems Year 2000 compliant.
The Company expects to substantially complete this project during 1998.
However, risks and uncertainties exist in most significant systems
development projects. If conversion of the Company's systems is not
completed on a timely basis, due to nonperformance by third-party vendors
or other unforeseen circumstances, the Year 2000 issue could have a
material adverse impact on the operations of the Company.
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<PAGE> 11
SELECTED FINANCIAL INFORMATION
The following table shows selected financial information of the Company:
At or for the
Three Months Ended
March 31,
1998 1997
(dollars in thousands)
Average finance receivables net
of unearned finance charges
(average net receivables) $7,818,487 $7,363,221
Average borrowings $7,113,312 $7,303,721
Yield - finance charges (annualized)
as a percentage of average net
receivables 16.47% 17.07%
Borrowing cost - interest expense
(annualized) as a percentage of
average borrowings 6.73% 6.73%
Interest spread - yield less
borrowing cost 9.74% 10.34%
Insurance revenues (annualized) as
a percentage of average net
receivables 2.20% 2.58%
Operating expenses (annualized) as
a percentage of average net
receivables 6.27% 6.22%
Return on average assets
(annualized) 1.98% 1.78%
Return on average equity
(annualized) 13.20% 12.35%
Charge-off ratio - net charge-offs
(annualized) as a percentage of
the average of net finance
receivables at the beginning
of each month during the period 2.71% 3.83%
Allowance ratio - allowance for
finance receivable losses as a
percentage of net finance
receivables 4.55% 5.23%
Ratio of earnings to fixed charges
(refer to Exhibit 12 for
calculations) 1.60 1.53
<PAGE>
<PAGE> 12
Selected Financial Information (Continued)
At or for the
Three Months Ended
March 31,
1998 1997
Delinquency ratio - finance receivables
60 days or more past due as a
percentage of related receivables 3.52% 3.77%
Debt to tangible equity ratio - debt to
equity less goodwill and net unrealized
gains or losses on fixed-maturity
investment securities 6.51 6.45
Debt to equity ratio 5.17 5.19
ANALYSIS OF OPERATING RESULTS
Net Income
Net income increased $4.2 million, or 10%, for the three months ended March
31, 1998 when compared to the same period in 1997.
The Company experienced a significant decline in credit quality beginning
in third quarter 1995. Accordingly, the Company recorded a $216.0 million
increase in the allowance for finance receivable losses in fourth quarter
1995. Since 1995, the Company has focused on an action program to improve
credit quality. The components of this action program included selling
under-performing receivable portfolios, raising underwriting standards, and
rebalancing the portfolio to increase the proportion of real estate loans.
See Note 5. of the Notes to Condensed Consolidated Financial Statements in
Item 1. for further information on the sale of the Company's non-strategic
assets.
Results of the action program became evident in 1997 and continued to
improve the Company's operating results in the first quarter of 1998.
Although yield decreased 60 basis points for the three months ended March
31, 1998 when compared to the same period in 1997, this was more than
offset by a 112 basis point improvement in the charge-off ratio. The
delinquency ratio also improved to 3.52% at March 31, 1998 from 3.77% at
March 31, 1997.
Factors which specifically affected the Company's operating results are as
follows:
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<PAGE> 13
Finance Charges
Finance charge revenues increased $7.4 million, or 2%, for the three months
ended March 31, 1998 when compared to the same period in 1997 due to an
increase in average net receivables, partially offset by a decrease in
yield. Average net receivables increased $455.3 million, or 6%, for the
three months ended March 31, 1998 when compared to the same period in 1997
primarily due to growth in real estate loans, partially offset by the sale
of certain private label receivables in second quarter 1997. Yield
decreased 60 basis points for the three months ended March 31, 1998 when
compared to the same period in 1997 primarily due to the larger proportion
of finance receivables that are real estate loans, which generally have
lower yields.
Insurance Revenues
Insurance revenues decreased $4.6 million, or 10%, for the three months
ended March 31, 1998 when compared to the same period in 1997 primarily due
to a decrease in earned premiums. Earned premiums decreased primarily due
to a decrease in related loan volume in 1996 and the first three quarters
of 1997.
Other Revenues
Other revenues increased $2.4 million, or 11%, for the three months ended
March 31, 1998 when compared to the same period in 1997 primarily due to
increases in investment revenue and interest revenue on notes receivable
from parent, partially offset by a decrease in revenue on foreclosed real
estate. The increase in investment revenue for the three months ended
March 31, 1998 when compared to the same period in 1997 was primarily due
to an increase in adjusted portfolio yield for the insurance operations of
86 basis points and growth in average invested assets of $47.0 million.
Realized gains and losses remained at near the same level for the three
months ended March 31, 1998 when compared to the same period in 1997.
Investment revenue reflects $1.5 million of net gains on calls and tenders
on investment securities that are included in adjusted portfolio yield for
the three months ended March 31, 1998, compared to $27,000 that are
included in realized gains and losses for the three months ended March 31,
1997.
Interest Expense
Interest expense increased $9.4 million, or 9%, for the three months ended
March 31, 1998 when compared to the same period in 1997 due to an increase
in average borrowings to support finance receivable growth, partially
offset by a reduction in interest expense due to the assets held for sale
being sold in second quarter 1997. The borrowing cost of 6.73% for the
three months ended March 31, 1998 remained the same when compared to the
same period in 1997.
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<PAGE> 14
Operating Expenses
Operating expenses increased $8.1 million, or 7%, for the three months
ended March 31, 1998 when compared to the same period in 1997 primarily due
to increases in salaries and benefits, collections, data processing, and
professional services expenses. The increase in salaries and benefits
expense reflects an increase in incentive program expenses, partially
offset by a workforce reduction of approximately 580 positions since March
31, 1997 which includes the effects of a net decrease of 29 branch offices.
Provision for Finance Receivable Losses
Provision for finance receivable losses decreased $17.9 million, or 27%,
for the three months ended March 31, 1998 when compared to the same period
in 1997 due to a decrease in net charge-offs.
Net charge-offs for the three months ended March 31, 1998 decreased to
$52.9 million from $70.8 million for the same period in 1997. Net charge-
offs for the three months ended December 31, 1997 were $67.6 million. The
charge-off ratio for first quarter 1998 was 2.71% compared to 3.66% for
fourth quarter 1997 and 3.83% for first quarter 1997.
At March 31, 1998, delinquencies were $298.5 million compared to $303.7
million at December 31, 1997 and $297.3 million at March 31, 1997. The
delinquency ratio at March 31, 1998 was 3.52% compared to 3.61% at December
31, 1997 and 3.77% at March 31, 1997.
The allowance for finance receivable losses decreased to $358.1 million
from $380.3 million at March 31, 1997. The allowance ratio at March 31,
1998 was 4.55% compared to 4.64% at December 31, 1997 and 5.23% at March
31, 1997. The decrease in the allowance ratio for each period reflects the
results of the action program to improve credit quality, including the
increased proportion of real estate loans. The Company maintains the
allowance for finance receivable losses at a level based on periodic
evaluation of the finance receivable portfolio and reflects an amount that,
in management's opinion, is adequate to absorb anticipated losses in the
existing portfolio.
Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses decreased $2.0 million, or
8%, for the three months ended March 31, 1998 when compared to the same
period in 1997 due to decreases in provision for future benefits and in
claims paid. Provision for future benefits decreased $.6 million due to
reduced sales of non-credit insurance products. Claims decreased $1.4
million primarily due to decreased business.
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<PAGE> 15
Provision for Income Taxes
The provision for income taxes increased $3.3 million, or 14%, for the
three months ended March 31, 1998 when compared to the same period in 1997
primarily due to higher taxable income.
Forward-looking Statements
The statements contained in this filing on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Forward-looking statements are
made based upon management's current expectations and beliefs concerning
future developments and their potential effects upon the Company. There
can be no assurance that future developments affecting the Company will be
those anticipated by management. Actual results may differ materially from
those included in the forward-looking statements.
These forward-looking statements involve risks and uncertainties including,
but not limited to, the following: changes in general economic conditions,
including the performance of financial markets, interest rates, and the
level of personal bankruptcies; competitive, regulatory, or tax changes
that affect the cost of or demand for the Company's products; adverse
litigation results; the Company's ability to render its computer systems
Year 2000 compliant; and the Company's failure to achieve anticipated
levels of expense savings from cost-saving initiatives. Readers are also
directed to other risks and uncertainties discussed in documents filed by
the Company with the Securities and Exchange Commission.
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<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In addition to those lawsuits or proceedings disclosed in the Company's
1997 Form 10-K, AGFC and certain of its subsidiaries are parties to various
other lawsuits and proceedings arising in the ordinary course of business.
Many of these lawsuits and proceedings arise in jurisdictions, such as
Alabama, that permit damage awards disproportionate to the actual economic
damages incurred. Based upon information presently available, the Company
believes that the total amounts that will ultimately be paid, if any,
arising from these lawsuits and proceedings will not have a material
adverse effect on the Company's consolidated results of operations and
financial position. However, it should be noted that the frequency of
large damage awards, including large punitive damage awards, that bear
little or no relation to actual economic damages incurred by plaintiffs in
jurisdictions like Alabama continues to increase and creates the potential
for an unpredictable judgment in any given suit.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated January 9, 1998, with respect to the
authorization for issuance of $200 million aggregate principal amount
of the Company's 5.90% Senior Notes due January 15, 2003.
Current Report on Form 8-K dated January 27, 1998, with respect to the
issuance of an Earnings Release announcing certain unaudited financial
results of the Company for the year ended December 31, 1997.
Current Report on Form 8-K dated March 5, 1998, with respect to the
authorization for issuance of $200 million aggregate principal amount
of the Company's 6.20% Senior Notes due March 15, 2003.
Current Report on Form 8-K dated April 29, 1998, with respect to the
issuance of an Earnings Release announcing certain unaudited financial
results of the Company for the quarter ended March 31, 1998.
<PAGE>
<PAGE> 17
Signature
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.
AMERICAN GENERAL FINANCE CORPORATION
(Registrant)
Date: May 14, 1998 By /s/ Robert A. Cole
Robert A. Cole
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
<PAGE>
<PAGE> 18
Exhibit Index
Exhibits Page
(12) Computation of Ratio of Earnings to Fixed Charges. 19
(27) Financial Data Schedule. 20
<PAGE>
<PAGE>
<PAGE> 19
Exhibit 12
<TABLE>
AMERICAN GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
(dollars in thousands)
<S> <C> <C>
Earnings:
Income before provision for income
taxes $ 73,808 $ 66,214
Interest expense (including $12,447
for 1997 to fund assets held for
sale) 119,304 122,309
Implicit interest in rents 2,918 3,498
Total earnings $196,030 $192,021
Fixed charges:
Interest expense (including $12,447
for 1997 to fund assets held for
sale) $119,304 $122,309
Implicit interest in rents 2,918 3,498
Total fixed charges $122,222 $125,807
Ratio of earnings to fixed charges 1.60 1.53
</TABLE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 98,134
<SECURITIES> 953,873
<RECEIVABLES> 7,879,312<F1>
<ALLOWANCES> 358,126<F2>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F4>
<PP&E> 0<F4>
<DEPRECIATION> 0<F4>
<TOTAL-ASSETS> 9,377,487
<CURRENT-LIABILITIES> 0<F4>
<BONDS> 4,005,665<F5>
0<F3>
0<F3>
<COMMON> 5,080
<OTHER-SE> 1,388,663<F6>
<TOTAL-LIABILITY-AND-EQUITY> 9,377,487
<SALES> 0<F3>
<TOTAL-REVENUES> 385,631<F7>
<CGS> 0<F3>
<TOTAL-COSTS> 0<F4>
<OTHER-EXPENSES> 144,652<F8>
<LOSS-PROVISION> 47,867<F9>
<INTEREST-EXPENSE> 119,304<F10>
<INCOME-PRETAX> 73,808
<INCOME-TAX> 27,802
<INCOME-CONTINUING> 46,006
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 46,006
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0<F3>
<PAGE>
<FN>
<F1>RECEIVABLES IN THIS EXHIBIT REPRESENTS NET FINANCE RECEIVABLES REPORTED
IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F2>ALLOWANCES IN THIS EXHIBIT REPRESENTS ALLOWANCE FOR FINANCE RECEIVABLE
LOSSES REPORTED IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<F3>NOT APPLICABLE.
<F4>NOT REPORTED SEPARATELY (OR NOT REPORTED SEPARATELY AS DEFINED BY
ARTICLE 5 OF REGULATION S-X) IN DOCUMENT FILED.
<F5>BONDS IN THIS EXHIBIT REPRESENTS LONG-TERM DEBT REPORTED IN THE COMPANY'S
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS WHICH INCLUDES
OTHER LONG-TERM DEBT.
<F6>OTHER STOCKHOLDER'S EQUITY IN THIS EXHIBIT REPRESENTS ADDITIONAL PAID-IN-
CAPITAL, ACCUMULATED OTHER COMPREHENSIVE INCOME, AND RETAINED EARNINGS
REPORTED IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
<F7>TOTAL REVENUES IN THIS EXHIBIT REPRESENTS TOTAL REVENUES REPORTED IN THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F8>OTHER EXPENSES IN THIS EXHIBIT REPRESENTS OPERATING EXPENSES AND
INSURANCE LOSSES AND LOSS ADJUSTMENT EXPENSES REPORTED IN THE COMPANY'S
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F9>LOSS PROVISION IN THIS EXHIBIT REPRESENTS PROVISION FOR FINANCE
RECEIVABLE LOSSES REPORTED IN THE COMPANY'S UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
<F10>INTEREST EXPENSE IN THIS EXHIBIT REPRESENTS INTEREST EXPENSE REPORTED
IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
</FN>
</TABLE>
