<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
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 1-8198
------
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3121988
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 564-5000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
At October 31, 1994, there were 96,344,336 shares of registrant's
common stock outstanding.<PAGE>
<PAGE> 2
Part 1. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
Household International, Inc. and Subsidiaries
STATEMENTS OF INCOME
- --------------------
<TABLE>
<CAPTION>
All dollar amounts except per share data are stated in millions.
- ------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income. . . . . . . . . . . . . . . . . . . . . . $1,945.6 $1,932.9 $677.6 $650.4
Interest income from noninsurance investment securities . 90.7 101.8 29.8 33.8
Interest expense. . . . . . . . . . . . . . . . . . . . . 878.6 878.2 327.0 279.8
--------------------------------------------
Net interest margin . . . . . . . . . . . . . . . . . . . 1,157.7 1,156.5 380.4 404.4
Provision for credit losses on owned receivables. . . . . 502.2 561.1 173.3 204.1
--------------------------------------------
Net interest margin after provision for credit losses . . 655.5 595.4 207.1 200.3
--------------------------------------------
Securitization and servicing fee income . . . . . . . . . 520.9 301.3 183.8 109.8
Insurance premiums and contract revenues. . . . . . . . . 196.1 216.0 36.1 78.6
Investment income . . . . . . . . . . . . . . . . . . . . 388.1 441.7 128.7 167.8
Fee income. . . . . . . . . . . . . . . . . . . . . . . . 193.9 219.8 65.1 80.3
Other income. . . . . . . . . . . . . . . . . . . . . . . 68.2 98.5 21.6 35.3
--------------------------------------------
Total other revenues. . . . . . . . . . . . . . . . . . . 1,367.2 1,277.3 435.3 471.8
--------------------------------------------
Net interest margin after provision for credit losses
and other revenues. . . . . . . . . . . . . . . . . . . 2,022.7 1,872.7 642.4 672.1
--------------------------------------------
Salaries and fringe benefits. . . . . . . . . . . . . . . 497.0 450.8 165.3 151.4
Other operating expenses. . . . . . . . . . . . . . . . . 799.7 707.6 254.7 264.9
Policyholders' benefits . . . . . . . . . . . . . . . . . 343.9 405.4 84.7 139.5
--------------------------------------------
Total costs and expenses. . . . . . . . . . . . . . . . . 1,640.6 1,563.8 504.7 555.8
--------------------------------------------
Income before income taxes. . . . . . . . . . . . . . . . 382.1 308.9 137.7 116.3
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 125.5 103.2 43.2 40.8
--------------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 256.6 $ 205.7 $ 94.5 $ 75.5
============================================
Earnings per common share:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 256.6 $ 205.7 $ 94.5 $ 75.5
Preferred dividends . . . . . . . . . . . . . . . . . . . (20.7) (21.2) (6.9) (6.9)
--------------------------------------------
Earnings available to common shareholders . . . . . . . . $ 235.9 $ 184.5 $ 87.6 $ 68.6
============================================
Average common and common equivalent shares . . . . . . . 97.2 94.0 97.4 96.6
============================================
Fully diluted earnings per common share . . . . . . . . . $ 2.43 $ 1.96 $ .90 $ .71
============================================
Primary earnings per common share . . . . . . . . . . . . $ 2.45 $ 2.00 $ .90 $ .72
============================================
Dividends declared per common share . . . . . . . . . . . $ .915 $ .88 $ .315 $ .30
============================================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 3
Household International, Inc. and Subsidiaries
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
In millions.
- --------------------------------------------------------------------------------------------
September 30, December 31,
1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320.2 $ 317.4
Investment securities (fair value of $8,754.0
and $9,045.5). . . . . . . . . . . . . . . . . . . . . . 8,672.9 8,795.1
Finance and banking receivables . . . . . . . . . . . . . . 21,326.4 19,563.0
Liquidating commercial assets . . . . . . . . . . . . . . . 1,301.2 1,555.7
Deferred insurance policy acquisition costs . . . . . . . . 603.3 381.6
Acquired intangibles. . . . . . . . . . . . . . . . . . . . 553.9 473.4
Properties and equipment. . . . . . . . . . . . . . . . . . 462.1 434.3
Assets acquired through foreclosure . . . . . . . . . . . . 211.5 251.8
Other assets. . . . . . . . . . . . . . . . . . . . . . . . 1,353.0 1,189.2
------------------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . $34,804.5 $32,961.5
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Debt:
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . $ 7,490.9 $ 7,516.1
Commercial paper, bank and other borrowings . . . . . . . 5,955.2 5,642.1
Senior and senior subordinated debt (with original
maturities over one year) . . . . . . . . . . . . . . . 10,378.7 9,113.8
------------------------
Total debt. . . . . . . . . . . . . . . . . . . . . . . . . 23,824.8 22,272.0
Insurance policy and claim reserves . . . . . . . . . . . . 6,582.3 6,064.2
Other liabilities . . . . . . . . . . . . . . . . . . . . . 1,951.6 2,207.7
------------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 32,358.7 30,543.9
------------------------
Convertible preferred stock subject to mandatory redemption 3.7 19.3
------------------------
Preferred stock . . . . . . . . . . . . . . . . . . . . . . 320.0 320.0
------------------------
Common shareholders' equity:
Common stock. . . . . . . . . . . . . . . . . . . . . . . 114.9 113.3
Additional paid-in capital. . . . . . . . . . . . . . . . 356.7 337.3
Retained earnings . . . . . . . . . . . . . . . . . . . . 2,323.8 2,176.3
Foreign currency translation adjustments. . . . . . . . . (138.4) (132.7)
Unrealized gain (loss) on investments, net. . . . . . . . (83.1) 40.5
Common stock in treasury. . . . . . . . . . . . . . . . . (451.8) (456.4)
------------------------
Total common shareholders' equity . . . . . . . . . . . . . 2,122.1 2,078.3
------------------------
Total liabilities and shareholders' equity. . . . . . . . . $34,804.5 $32,961.5
========================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 4
Household International, Inc. and Subsidiaries
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
In millions.
- -------------------------------------------------------------------------------------------
Nine months ended September 30 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 256.6 $ 205.7
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit losses on owned receivables. . . . . . . . 502.2 561.1
Insurance policy and claim reserves . . . . . . . . . . . . . . 205.1 201.2
Depreciation and amortization . . . . . . . . . . . . . . . . . 182.8 187.7
Net realized (gains) losses from sales of assets. . . . . . . . 75.5 (12.8)
Deferred insurance policy acquisition costs . . . . . . . . . . (70.7) (63.2)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 52.8 (254.5)
-------------------------
Cash provided by operations . . . . . . . . . . . . . . . . . . . 1,204.3 825.2
-------------------------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,859.9) (2,460.2)
Matured . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656.0 631.0
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,903.7 1,855.0
Short-term investment securities, net change. . . . . . . . . . . 25.4 (148.4)
Receivables, excluding bankcard:
Originated or purchased . . . . . . . . . . . . . . . . . . . . (9,076.8) (7,448.4)
Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,542.0 5,545.2
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,241.6 1,740.3
Bankcard receivables:
Originated or collected, net. . . . . . . . . . . . . . . . . . (10,540.1) (5,088.8)
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,019.0) -
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,425.5 3,961.7
Acquisition of banking organizations:
Assets acquired, net . . . . . . . . . . . . . . . . . . . . . - (51.1)
Deposits and other liabilities assumed, net . . . . . . . . . . - 330.9
Acquisition of credit card relationships. . . . . . . . . . . . . (138.1) -
Properties and equipment purchased. . . . . . . . . . . . . . . . (97.9) (75.6)
Properties and equipment sold . . . . . . . . . . . . . . . . . . 8.2 5.6
-------------------------
Cash decrease from investments in operations. . . . . . . . . . . (2,929.4) (1,202.8)
-------------------------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt, net change . . . . . . . . . . . . . . . . . . . 79.9 248.0
Time certificates accepted. . . . . . . . . . . . . . . . . . . . 2,732.6 1,636.4
Time certificates paid. . . . . . . . . . . . . . . . . . . . . . (2,592.9) (2,341.8)
Senior and senior subordinated debt issued. . . . . . . . . . . . 3,346.1 2,232.9
Senior and senior subordinated debt retired . . . . . . . . . . . (2,068.2) (1,962.9)
Policyholders' benefits paid. . . . . . . . . . . . . . . . . . . (404.8) (290.1)
Cash received from policyholders. . . . . . . . . . . . . . . . . 718.2 638.5
Shareholders' dividends . . . . . . . . . . . . . . . . . . . . . (109.1) (105.3)
Issuance of preferred stock . . . . . . . . . . . . . . . . . . . - 100.0
Repurchase of preferred stock . . . . . . . . . . . . . . . . . . - (35.0)
Issuance of common stock. . . . . . . . . . . . . . . . . . . . . 6.2 298.0
-------------------------
Cash increase from financing and capital transactions . . . . . . 1,708.0 418.7
-------------------------
Effect of exchange rate changes on cash . . . . . . . . . . . . . 19.9 (5.3)
-------------------------
Increase in cash. . . . . . . . . . . . . . . . . . . . . . . . . 2.8 35.8
Cash at January 1 . . . . . . . . . . . . . . . . . . . . . . . . 317.4 255.8
-------------------------
Cash at September 30. . . . . . . . . . . . . . . . . . . . . . . $ 320.2 $ 291.6
=========================
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . $ 873.0 $ 880.1
=========================
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . $ 136.1 $ 102.3
=========================
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 5
Household International, Inc. and Subsidiaries
BUSINESS SEGMENT DATA
- ---------------------
<TABLE>
<CAPTION>
In millions.
- -----------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
- --------
Finance and Banking . . . . . . . . . . . . . . . . . . . . $2,892.1 $2,715.2 $1,008.6 $ 938.6
Individual Life Insurance . . . . . . . . . . . . . . . . . 434.8 508.2 113.1 183.9
----------------------------------------
Core Business . . . . . . . . . . . . . . . . . . . . . . . 3,326.9 3,223.4 1,121.7 1,122.5
Liquidating Commercial Lines. . . . . . . . . . . . . . . . 76.6 88.6 21.0 33.5
----------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $3,403.5 $3,312.0 $1,142.7 $1,156.0
========================================
NET INCOME
- ----------
Finance and Banking . . . . . . . . . . . . . . . . . . . . $ 237.2 $ 212.2 $ 83.7 $ 78.8
Individual Life Insurance . . . . . . . . . . . . . . . . . 39.7 35.0 17.4 13.5
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . (13.1) (22.8) (4.9) (6.3)
----------------------------------------
Core Business . . . . . . . . . . . . . . . . . . . . . . . 263.8 224.4 96.2 86.0
Liquidating Commercial Lines. . . . . . . . . . . . . . . . (7.2) (18.7) (1.7) (10.5)
----------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 256.6 $ 205.7 $ 94.5 $ 75.5
========================================
Return on average owned assets - Core Business (1). . . . . 1.09% .97% 1.17% 1.10%
========================================
Return on average owned assets - Total (1). . . . . . . . . 1.02% .84% 1.10% .91%
========================================
Return on average common shareholders' equity-Core Business(1) 19.97% 19.32% 21.20% 21.03%
========================================
Return on average common shareholders' equity-Total (1) . 14.94% 13.27% 16.46% 13.84%
========================================
Efficiency ratio (2). . . . . . . . . . . . . . . . . . . . 59.5% 57.1% 57.5% 56.5%
========================================
(1) Annualized
(2) Salaries and fringe benefits and other operating expenses as a percent of net interest margin and
total other revenues less policyholders' benefits.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Assets September 30, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . $25,936.4 $24,362.5
Individual Life Insurance . . . . . . . . . . . . . . . . . . . . 7,464.3 6,959.0
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.6 84.3
--------------------------------
Core Business . . . . . . . . . . . . . . . . . . . . . . . . . . 33,503.3 31,405.8
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 1,301.2 1,555.7
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,804.5 $32,961.5
================================
- ------------------------------------------------------------------------------------------------------
Receivables owned September 30, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . $21,092.2 $19,340.5
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 932.2 1,189.9
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,024.4 $20,530.4
================================
- ------------------------------------------------------------------------------------------------------
Receivables managed September 30, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . $31,818.0 $29,168.3
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 932.2 1,189.9
--------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,750.2 $30,358.2
================================
See notes to condensed financial statements.
</TABLE>
<PAGE>
<PAGE> 6
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting policies used in preparation of the quarterly condensed
financial statements are consistent with accounting policies
described in the notes to financial statements contained in
Household International, Inc.'s (the "company") Annual Report on
Form 10-K for its fiscal year ended December 31, 1993, as
supplemented by the Current Report on Form 8-K, filed October 11,
1994. The information furnished herein reflects all adjustments
which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. All such adjustments
are of a normal recurring nature. Certain prior period amounts have
been reclassified to conform with the current period's presentation.
2. INVESTMENT SECURITIES
---------------------
Investment securities consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
In millions. September 30, 1994 December 31, 1993
---------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRADING INVESTMENTS
Government securities and other . . . . . . . . . . . . $ 91.9 $ 91.9 $ 108.8 $ 108.8
------------------------------------------
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities:
Common stocks . . . . . . . . . . . . . . . . . . . . 34.3 34.3 18.5 18.5
Preferred stocks. . . . . . . . . . . . . . . . . . . 56.1 56.1 66.3 66.3
Corporate securities. . . . . . . . . . . . . . . . . . 2,277.2 2,277.2 2,047.1 2,047.1
Government securities . . . . . . . . . . . . . . . . . 283.2 283.2 536.3 536.3
Mortgage-backed securities. . . . . . . . . . . . . . . 1,733.1 1,733.1 1,983.9 1,983.9
Commercial paper. . . . . . . . . . . . . . . . . . . . 197.0 197.0 52.6 52.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . 163.9 163.9 295.2 295.2
------------------------------------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . 4,744.8 4,744.8 4,999.9 4,999.9
------------------------------------------
HELD-TO-MATURITY INVESTMENTS
Corporate securities. . . . . . . . . . . . . . . . . . 1,884.4 1,905.4 1,852.3 2,049.4
Government securities . . . . . . . . . . . . . . . . . 34.6 31.5 34.5 36.7
Mortgage-backed securities. . . . . . . . . . . . . . . 998.8 1,061.2 882.1 928.1
Mortgage loans on real estate . . . . . . . . . . . . . 169.5 169.5 222.4 226.0
Policy loans. . . . . . . . . . . . . . . . . . . . . . 69.8 69.8 81.6 81.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . 551.8 552.6 494.6 496.1
------------------------------------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . 3,708.9 3,790.0 3,567.5 3,817.9
------------------------------------------
Accrued investment income . . . . . . . . . . . . . . . 127.3 127.3 118.9 118.9
------------------------------------------
Total investment securities . . . . . . . . . . . . . . $8,672.9 $8,754.0 $8,795.1 $9,045.5
==========================================
/TABLE
<PAGE>
<PAGE> 7
3. FINANCE AND BANKING RECEIVABLES
-------------------------------
Finance and banking receivables consisted of the following:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1994 1993
------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage. . . . . . . . . . . . . . . . . . . . . $ 3,572.7 $ 3,534.1
Home equity . . . . . . . . . . . . . . . . . . . . . . 3,222.0 2,850.9
Other secured . . . . . . . . . . . . . . . . . . . . . 863.8 875.4
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . 4,379.2 4,356.9
Merchant participation. . . . . . . . . . . . . . . . . 3,063.7 2,636.5
Other unsecured . . . . . . . . . . . . . . . . . . . . 5,185.0 4,320.8
Equipment financing and other . . . . . . . . . . . . . 805.8 765.9
------------------------------
Receivables owned . . . . . . . . . . . . . . . . . . . 21,092.2 19,340.5
Accrued finance charges . . . . . . . . . . . . . . . . 288.2 251.8
Credit loss reserve for owned receivables . . . . . . . (450.5) (424.0)
Unearned credit insurance premiums and claims reserves. (128.0) (117.5)
Amounts due and deferred from receivables sales . . . . 766.0 735.0
Reserve for receivables serviced with limited recourse. (241.5) (222.8)
------------------------------
Total receivables owned, net. . . . . . . . . . . . . . 21,326.4 19,563.0
Receivables serviced with limited recourse. . . . . . . 10,725.8 9,827.8
Receivables serviced with no recourse . . . . . . . . . 16,872.5 15,229.4
------------------------------
Total receivables owned or serviced, net. . . . . . . . $48,924.7 $44,620.2
==============================
The outstanding balance of receivables serviced with limited recourse consisted of the following:
------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1994 1993
------------------------------------------------------------------------------------------
First mortgage. . . . . . . . . . . . . . . . . . . . . $ 150.0 -
Home equity . . . . . . . . . . . . . . . . . . . . . . 4,592.4 $ 5,029.5
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . 5,828.3 4,485.7
Merchant participation. . . . . . . . . . . . . . . . . 155.1 312.6
------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $10,725.8 $ 9,827.8
==============================
The combination of receivables owned and receivables serviced with limited recourse, which the company
considers its managed portfolio, is shown below:
------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1994 1993
------------------------------------------------------------------------------------------
First mortgage. . . . . . . . . . . . . . . . . . . . . $ 3,722.7 $ 3,534.1
Home equity . . . . . . . . . . . . . . . . . . . . . . 7,814.4 7,880.4
Other secured . . . . . . . . . . . . . . . . . . . . . 863.8 875.4
Bankcard. . . . . . . . . . . . . . . . . . . . . . . . 10,207.5 8,842.6
Merchant participation. . . . . . . . . . . . . . . . . 3,218.8 2,949.1
Other unsecured . . . . . . . . . . . . . . . . . . . . 5,185.0 4,320.8
Equipment financing and other . . . . . . . . . . . . . 805.8 765.9
------------------------------
Receivables managed . . . . . . . . . . . . . . . . . . $31,818.0 $29,168.3
==============================
The outstanding balance of receivables serviced with no recourse consisted of the following:
------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1994 1993
------------------------------------------------------------------------------------------
First mortgage. . . . . . . . . . . . . . . . . . . . . $16,095.0 $13,917.5
Other unsecured . . . . . . . . . . . . . . . . . . . . 777.5 1,311.9
------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $16,872.5 $15,229.4
==============================
/TABLE
<PAGE>
<PAGE> 8
The amounts due and deferred from receivables sales of $766.0
million at September 30, 1994 included unamortized excess servicing
assets and funds established pursuant to the recourse provisions and
holdback reserves for certain sales totaling $694.4 million. The
amounts due and deferred also included customer payments not yet
remitted by the securitization trustee to the company. In addition,
the company has made guarantees relating to certain securitizations
of $281.3 million plus unpaid interest and has subordinated
interests in certain transactions, which are recorded as
receivables, for $123.9 million at September 30, 1994. The company
maintains credit loss reserves pursuant to the recourse provisions
for receivables serviced with limited recourse which are based on
estimated probable losses under such provisions. These reserves
totaled $241.5 million at September 30, 1994 and represent the
company's best estimate of probable losses on receivables serviced
with limited recourse.
See Note 5, "Credit Loss Reserves" for an analysis of credit loss
reserves for receivables. See "Management's Discussion and
Analysis" on pages 19 through 21 for additional information related
to the credit quality of Finance and Banking receivables.
4. LIQUIDATING COMMERCIAL ASSETS
-----------------------------
Liquidating commercial assets consisted of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C>
Receivables
Commercial real estate. . . . . . . . . . . . . . . . $ 245.9 $ 297.1
Acquisition finance and other . . . . . . . . . . . . 686.3 892.8
---------------------------
Receivables owned . . . . . . . . . . . . . . . . . . . 932.2 1,189.9
Accrued finance charges . . . . . . . . . . . . . . . . 9.7 9.2
Reserve for credit losses . . . . . . . . . . . . . . . (158.1) (172.9)
---------------------------
Total receivables owned, net. . . . . . . . . . . . . . 783.8 1,026.2
Real estate owned . . . . . . . . . . . . . . . . . . . 241.7 256.6
Other assets. . . . . . . . . . . . . . . . . . . . . . 275.7 272.9
---------------------------
Total liquidating commercial assets . . . . . . . . . . $1,301.2 $1,555.7
===========================
</TABLE>
See Note 5, "Credit Loss Reserves" for an analysis of credit loss
reserves for receivables. See "Management's Discussion and
Analysis" on page 24 for additional information related to the
credit quality of Liquidating Commercial Assets.
<PAGE>
<PAGE> 9
5. CREDIT LOSS RESERVES
--------------------
<TABLE>
<CAPTION>
An analysis of credit loss reserves for the nine months ended September 30 is as follows:
-----------------------------------------------------------------------------------------
In millions. 1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables at January 1 . . . . . . . .$621.9 $564.1
------------------
Provision for credit losses - owned receivables:
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . 462.0 479.1
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 40.2 72.0
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10.0
------------------
Total provision for credit losses - owned receivables . . . . . . . 502.2 561.1
------------------
Owned receivables charged off:
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . (522.0) (510.4)
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . (55.9) (90.3)
------------------
Total owned receivables charged off . . . . . . . . . . . . . . . . (577.9) (600.7)
------------------
Recoveries on owned receivables:
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . 87.1 74.0
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . .8 .9
------------------
Total recoveries on owned receivables . . . . . . . . . . . . . . . 87.9 74.9
------------------
Credit loss reserves on receivables purchased, net. . . . . . . . . .4 .5
Other, net (1). . . . . . . . . . . . . . . . . . . . . . . . . . . (.9) 25.8
------------------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES AT SEPTEMBER 30. . 633.6 625.7
------------------
Credit loss reserves for receivables serviced with
limited recourse at January 1 . . . . . . . . . . . . . . . . . . 222.8 160.7
Provision for credit losses . . . . . . . . . . . . . . . . . . . . 194.1 176.2
Chargeoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (183.9) (139.3)
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 3.5
Other, net (1). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (30.5)
------------------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED WITH
LIMITED RECOURSE AT SEPTEMBER 30. . . . . . . . . . . . . . . . . 241.5 170.6
------------------
TOTAL CREDIT LOSS RESERVES AT SEPTEMBER 30. . . . . . . . . . . . . $875.1 $796.3
==================
Total credit loss reserves for owned receivables at September 30:
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . $450.5 $414.8
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 158.1 185.9
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.0 25.0
------------------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES AT SEPTEMBER 30. . $633.6 $625.7
==================
Total credit loss reserves for managed receivables at September 30:
Finance and Banking . . . . . . . . . . . . . . . . . . . . . . . $692.0 $585.4
Liquidating Commercial Lines. . . . . . . . . . . . . . . . . . . 158.1 185.9
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.0 25.0
------------------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES AT SEPTEMBER 30. $875.1 $796.3
==================
(1) 1993 amounts include the transfer, from serviced with limited recourse to owned, of credit loss reserves
associated with the return of receivables to the owned portfolio upon the culmination of a securitization
transaction.
/TABLE
<PAGE>
<PAGE> 10
6. INCOME TAXES
------------
Effective tax rates for the nine months ended September 30, 1994 and
1993 of 32.8 and 33.4 percent, respectively, differ from the
statutory federal income tax rate for the respective periods
primarily because of the effects of (a) foreign loss carry forwards,
(b) amortization of intangible assets, (c) state and local income
taxes, (d) reduction of noncurrent tax requirements and (e)
leveraged lease tax benefits.
In the third quarter of 1993, new Federal tax legislation was
enacted which resulted in the statutory income tax rate being
increased from 34 percent to 35 percent retroactive to January 1,
1993. The effect of the new tax legislation was recorded as a year-
to-date adjustment at September 30, 1993.
7. EARNINGS PER COMMON SHARE
-------------------------
<TABLE>
<CAPTION>
Computations of earnings per common share for the nine months ended September 30 were as follows:
---------------------------------------------------------------------------------------------------
1994 1993
----------------- -----------------
Fully Fully
In millions, except per share data. Primary Diluted Primary Diluted
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Net income. . . . . . . . . . . . . . . . . . . . . . $256.6 $256.6 $205.7 $205.7
Preferred dividends . . . . . . . . . . . . . . . . . (21.6) (20.7) (23.6) (21.2)
-----------------------------------------
Net income available to common shareholders . . . . . . $235.0 $235.9 $182.1 $184.5
=========================================
Average shares:
Common. . . . . . . . . . . . . . . . . . . . . . . . 95.2 95.2 90.2 90.2
Common equivalents. . . . . . . . . . . . . . . . . . .8 2.0 .9 3.8
-----------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 96.0 97.2 91.1 94.0
=========================================
Earnings per common share . . . . . . . . . . . . . . . $ 2.45 $ 2.43 $ 2.00 $ 1.96
=========================================
</TABLE>
Common share equivalents assume exercise of stock options, if
dilutive. Fully diluted earnings per share computations also assume
conversion of dilutive convertible preferred stock into common
equivalents. Preferred stock is considered dilutive if its dividend
rate per common share assuming conversion is less than primary
earnings per common share.
8. LEASES AND OTHER SIMILAR ARRANGEMENTS
-------------------------------------
In the fourth quarter of 1991, the company purchased credit card
receivables of approximately $1 billion from CoreStates Financial
Corporation. In connection with that purchase, an unaffiliated
third party acquired the rights to the account relationships
associated with the receivables and entered into an agreement to
license these rights to the company. In the second quarter of 1994,
the company terminated the license agreement and acquired these
account relationships resulting in an increase of approximately $140
million in acquired intangibles.
9. OTHER MATTERS
-------------
In October 1994, the company consummated an agreement with an
unaffiliated thrift institution to assume certain liabilities and
assets, including approximately $1.2 billion in customer deposits
and approximately $3.0 million in receivables, and purchased 26
consumer bank branch facilities located in Illinois.
<PAGE>
<PAGE> 11
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated Results of Operations
----------------------------------
Net income for the third quarter and first nine months of 1994 was
$94.5 and $256.6 million, up 25 percent from $75.5 and $205.7
million in both respective periods of 1993. The improvements in
consolidated net income for both periods primarily were due to
increased earnings in the Finance and Banking and Individual Life
Insurance segments and lower corporate expenses. In addition, net
income for both periods benefited from reduced losses in the
Liquidating Commercial Lines ("LCL") segment. Fully diluted
earnings per share were $.90 in the third quarter and $2.43 for the
first nine months of 1994, up from $.71 and $1.96 in the same
periods in 1993.
During the third quarter and first nine months of 1994, the
company's operations, financial position and profitability were
affected by the following:
- The domestic private-label credit card and bankcard businesses
increased earnings in both the third quarter and first nine months
of 1994 over the year-ago periods. Private-label credit card
earnings increased primarily due to growth in the managed
portfolio. The domestic bankcard business exhibited continued
earnings growth primarily as a result of the company's association
with the General Motors credit card ("GM Card") program. GM Card
managed receivable growth generated higher net interest margins
and substantial fee income, offset somewhat by higher operating
expenses related to servicing and increased provision for credit
losses. Domestic consumer finance earnings for the first nine
months of 1994 increased over the same 1993 period primarily due
to higher managed net interest margin, increased servicing fee
income and lower credit costs. In the third quarter of 1993, the
company began servicing without recourse an unsecured consumer
loan portfolio which totaled approximately $.8 billion at
September 30, 1994. Mortgage banking earnings in the third
quarter and first nine months of 1994 were down significantly from
the year-ago periods primarily due to a lower average owned
portfolio and narrower spreads. Mortgage banking earnings for both
periods of 1994 were also negatively impacted by lower gains on
sales of first mortgage receivables held for trade resulting from
lower originations. In October 1994, the company took action to
rationalize the cost base of this business in order to align the
size of its mortgage origination capability with the contracted
first mortgage market.
- Collectively, the foreign businesses were profitable in both the
third quarter and first nine months of 1994 compared to a profit
in the prior year quarter and a loss in the prior year nine month
period. The United Kingdom operation earned $8.8 million in the
third quarter, up from $4.9 million in 1993. For the first nine
months of 1994, the United Kingdom earned $18.7 million compared
to $3.7 million. The improvement in earnings for the nine month
period was due largely to portfolio growth, higher fee income and
lower credit costs. Portfolio growth and fee income benefited
from the launch of the GM Card from Vauxhall in the United Kingdom
in January 1994. Although the Canadian operation lost money in
the third quarter of 1994, its results of operations were better
than the prior quarters in 1994 and 1993. Nine month results in
1994 were improved over the prior year. Based on existing trends,
the company expects continued improvement in its Canadian
operation. The Australian operation remained profitable.
- In August 1994, the company sold most of the operations of its
brokerage business. This sale did not significantly impact the
quarter's results. The company does not anticipate that the sale
of this business will have a significant impact on the future
results of the company's operations.
- Managed consumer receivables (owned receivables plus those
serviced with limited recourse), excluding first mortgage
receivables, increased 20 percent on an annualized basis during
the third quarter. The majority of the domestic growth occurred
in the unsecured products, primarily other unsecured receivables
which grew 16 percent in the quarter, and bankcards and private-
label credit cards which each grew 5 percent. The domestic first
mortgage portfolio increased 21 percent over the previous quarter
<PAGE>
<PAGE> 12
due to the purchase of approximately $320 million of receivables
and as a result of an agreement, consummated in the third quarter,
to underwrite and service with limited recourse first mortgage
receivables for a third party. This portfolio was essentially
flat compared to the second quarter excluding these transactions.
The domestic home equity receivable portfolio was flat compared to
the second quarter due to the continued liquidation of an acquired
portfolio.
Managed consumer receivables were up 14 percent over the prior
year period. Demand for new loans, in particular credit cards and
unsecured loans, remained strong as volume increased 37 percent
during the first nine months compared to the same year-ago period.
Originations of domestic first mortgage receivables were down
compared to the prior year as a result of the impact of the rising
interest rate environment which has significantly decreased the
demand for refinancings, and the company's desire to maintain its
pricing discipline and credit standards on products it chooses to
keep in portfolio. Excluding first mortgage receivables, loan
volume year to date increased 47 percent over the prior year.
- Consumer two-months-and-over contractual delinquency
("delinquency") as a percent of managed consumer receivables was
3.24 percent, down from 3.32 percent at June 30, 1994 and 3.85
percent at September 30, 1993. The annualized total consumer
managed chargeoff ratio in the third quarter of 1994 decreased to
2.69 percent compared to 2.87 percent in the prior quarter and
2.86 percent in the year-ago quarter.
The ratio of common and preferred shareholders' equity (including
convertible preferred stock) to total assets was 7.03 percent
compared to 7.33 percent at December 31, 1993. The ratios were
affected by the adoption of Statement of Financial Accounting
Standards No. 115 ("FAS No. 115") which requires that unrealized
gains or losses in certain debt and equity securities be recorded as
an adjustment to shareholders' equity. The rise in interest rates
in the first nine months of the year resulted in a net unrealized
loss of $83.1 million at September 30, 1994 in the company's
available-for-sale investment portfolio and a corresponding
reduction in shareholders' equity. While FAS No. 115 provides for
the adjustment of certain debt and equity securities to fair value,
it does not allow for a corresponding adjustment for a change in
related liabilities. Therefore, the unrealized loss does not
reflect the change in the economic value of shareholders' equity due
to higher interest rates. The company believes that the change in
fair value of liabilities should offset a significant amount of the
reduction in the fair value of its investment portfolio. Excluding
the effect of the FAS No. 115 component of shareholders' equity, the
ratio of common and preferred shareholders' equity to total assets
was 7.27 percent at September 30, 1994, up from 7.21 percent at
December 31, 1993.
<PAGE>
<PAGE> 13
Consolidated Credit Loss Reserves
---------------------------------
The company's credit portfolios and credit management policies have
historically been divided into two distinct components - consumer
and commercial. For consumer products, credit policies require
effective portfolio management focusing on product type and specific
portfolio risk factors. The consumer credit portfolio is
diversified by product and geographic location. The commercial
credit portfolio is monitored by individual transaction as well as
being evaluated by overall risk factors. See Note 3, "Finance and
Banking Receivables" and Note 4, "Liquidating Commercial Assets" in
the accompanying financial statements for receivables by product
type.
Total managed credit loss reserves, which include reserves for
recourse obligations for receivables sold, were as follows (in
millions):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
September 30, June 30, December 31, September 30,
1994 1994 1993 1993
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance and Banking:
Owned . . . . . . . . . . . . . . . $450.5 $423.2 $424.0 $414.8
Serviced with limited recourse. . . 241.5 240.4 222.8 170.6
------------------------------------------------
Managed . . . . . . . . . . . . . . 692.0 663.6 646.8 585.4
Liquidating Commercial Lines. . . . . 158.1 165.0 172.9 185.9
Corporate . . . . . . . . . . . . . . 25.0 25.0 25.0 25.0
------------------------------------------------
Total . . . . . . . . . . . . . . . . $875.1 $853.6 $844.7 $796.3
================================================
</TABLE>
Consumer credit loss reserves as a percent of managed delinquency
were 67.2 percent at September 30, 1994, up from 66.8 percent at
June 30, 1994 and 54.5 percent at September 30, 1993. Despite the
decline in consumer delinquencies in the quarter, the company
continued to strengthen its consumer credit loss reserves due to
growth in credit card and unsecured receivables, which due to their
nature, have higher risk.
Reserves for LCL receivables were down slightly during the quarter
due to improvements in the portfolio. LCL credit loss reserves at
September 30, 1994 as a percent of nonperforming loans increased
over December 31, 1993 and September 30, 1993 levels.
Total owned and managed credit loss reserves as a percent of
receivables were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
September 30, June 30, December 31, September 30,
1994 1994 1993 1993
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Owned:
Finance and Banking . . . . . . . . 2.14% 2.15% 2.19% 2.14%
Liquidating Commercial Lines. . . . 16.96 16.47 14.53 13.90
---------------------------------------------
Total owned (1) . . . . . . . . . . . 2.88% 2.97% 3.03% 3.02%
=============================================
Managed:
Finance and Banking . . . . . . . . 2.17% 2.22% 2.22% 2.09%
Liquidating Commercial Lines. . . . 16.96 16.47 14.53 13.90
---------------------------------------------
Total managed (1) . . . . . . . . . . 2.67% 2.76% 2.78% 2.71%
=============================================
(1) Includes credit loss reserve of the Corporate Segment.
/TABLE
<PAGE>
<PAGE> 14
The level of reserves for consumer credit losses is based on
delinquency and chargeoff experience by product, and judgmental
factors when there is not clear experience. The level of reserves
for commercial credit losses is based on a quarterly review process
for all commercial credits and management's evaluation of probable
future losses in the portfolio as a whole given its geographic and
industry diversification and historical loss experience. The
general credit loss reserve at the corporate level is maintained to
strengthen overall credit loss reserves and is based upon
management's evaluation of the receivable portfolio as a whole,
including the geographic concentrations of receivables and
unpredictability of ultimate potential exposure in individually
large receivables in the Finance and Banking and Liquidating
Commercial Lines segments. This reserve will be charged against
segment operations in the future as it is used to absorb credit
losses in those operations. Management also evaluates the potential
impact of existing and anticipated national and regional economic
conditions on the managed receivable portfolio when establishing
consumer, commercial and corporate credit loss reserves. While
management allocates substantially all reserves among the company's
various products and segments, all reserves are considered to be
available to cover total loan losses. See Note 5, "Credit Loss
Reserves" in the accompanying financial statements for analyses of
reserves.<PAGE>
<PAGE> 15
FINANCE AND BANKING
-------------------
Statements of Income
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
All dollar amounts are stated in millions. 1994 1993 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income. . . . . . . . . . . . . . . . . . . . $ 1,884.3 $ 1,844.4 $ 659.2 $ 620.8
Interest income from noninsurance investment securities 90.7 101.8 30.0 33.9
Interest expense. . . . . . . . . . . . . . . . . . . 827.4 812.7 309.3 265.8
--------------------------------------------
Net interest margin . . . . . . . . . . . . . . . . . 1,147.6 1,133.5 379.9 388.9
--------------------------------------------
Securitization and servicing fee income . . . . . . . 520.9 301.3 183.8 109.8
Insurance premiums and contract revenues. . . . . . . 133.4 121.2 47.5 45.0
Investment income . . . . . . . . . . . . . . . . . . 15.9 28.3 4.2 17.5
Fee income. . . . . . . . . . . . . . . . . . . . . . 192.8 218.3 64.9 79.7
Other income. . . . . . . . . . . . . . . . . . . . . 54.1 99.9 19.1 32.1
--------------------------------------------
Other revenues. . . . . . . . . . . . . . . . . . . . 917.1 769.0 319.5 284.1
--------------------------------------------
Net interest margin and other revenues. . . . . . . . 2,064.7 1,902.5 699.4 673.0
--------------------------------------------
Provision for credit losses on owned receivables. . . 462.0 479.1 165.2 160.2
--------------------------------------------
Costs and expenses:
Operating expenses. . . . . . . . . . . . . . . . . 1,196.0 1,045.3 394.8 370.3
Policyholders' benefits . . . . . . . . . . . . . . 58.6 64.1 19.2 24.5
Income taxes. . . . . . . . . . . . . . . . . . . . 110.9 101.8 36.5 39.2
--------------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . $ 237.2 $ 212.2 $ 83.7 $ 78.8
============================================
Average receivables:
Owned . . . . . . . . . . . . . . . . . . . . . . . $19,714.6 $19,342.3 $20,452.6 $19,698.1
Serviced with limited recourse. . . . . . . . . . . 9,846.6 7,944.7 10,193.5 8,125.1
--------------------------------------------
Average receivables managed . . . . . . . . . . . . . 29,561.2 27,287.0 30,646.1 27,823.2
Serviced with no recourse . . . . . . . . . . . . . . 16,757.8 12,315.5 17,098.2 13,804.0
--------------------------------------------
Average receivables owned or serviced . . . . . . . . $46,319.0 $39,602.5 $47,744.3 $41,627.2
============================================
Return on average owned assets - annualized . . . . . 1.27% 1.15% 1.30% 1.26%
============================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
September 30, December 31,
1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C>
End-of-period receivables:
Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,092.2 $19,340.5
Serviced with limited recourse. . . . . . . . . . . . . . . 10,725.8 9,827.8
---------------------------------
Receivables managed . . . . . . . . . . . . . . . . . . . . . 31,818.0 29,168.3
Serviced with no recourse . . . . . . . . . . . . . . . . . . 16,872.5 15,229.4
---------------------------------
Receivables owned or serviced . . . . . . . . . . . . . . . . $48,690.5 $44,397.7
=================================
End-of-period deposits. . . . . . . . . . . . . . . . . . . . $ 7,490.9 $ 7,516.1
=================================
/TABLE
<PAGE>
<PAGE> 16
Overview
--------
Domestic Finance and Banking earnings for the third quarter and
first nine months of 1994 increased to $75.4 and $223.8 million, up
from $74.8 and $212.8 million in the year-ago periods primarily due
to improved operating results in the bankcard and private-label
credit card businesses, partially offset by lower year-over-year
results in the mortgage banking operations as discussed earlier.
Earnings for the domestic consumer finance business were up for the
first nine months of 1994 compared to the same 1993 period but were
down slightly in the 1994 third quarter compared to 1993. The
company anticipates year-over-year earnings improvements for the
domestic consumer finance and credit card operations for the
remainder of 1994 absent unforeseen circumstances. These increases
are expected to be offset by lower earnings in the mortgage banking
business due to contraction in the overall market for first
mortgages. As previously discussed, the company has taken steps to
rationalize the cost base of this business in light of this
contraction.
The operating results of the foreign businesses in both the third
quarter and first nine months were sharply improved compared to the
prior year periods. The company expects continued stable
performance in its United Kingdom operation over the remainder of
1994 and anticipates its Canadian business will be operating near a
breakeven level by the end of 1994.
Receivables
-----------
Receivables owned totaled $21.1 billion at September 30, 1994, up
from both June 30, 1994 and December 31, 1993. The level of owned
receivables from quarter to quarter may vary depending on the timing
and significance of securitization transactions in a particular
period. In the third quarter of 1994, the company completed
securitizations and sales of approximately $1 billion of bankcard
receivables and purchased an interest representing approximately
$500 million of GM Card receivables which had been previously
securitized and sold. In the third quarter of 1994, the company
entered into an agreement to underwrite first mortgage receivables
and service them with limited recourse. This portfolio totaled
$150 million at September 30, 1994.
Since 1989, securitizations and sales of consumer receivables have
been an important source of liquidity for the company. The company
continues to service the securitized receivables after such
receivables are sold and retains a limited recourse obligation.
Securitizations impact the classification of revenues and expenses
in the income statement. Amounts related to receivables serviced,
including net interest margin, fee income, such as interchange fees,
and provision for credit losses on receivables serviced with limited
recourse are reported as a net amount in securitization and
servicing fee income in the company's statements of income.
The company monitors its Finance and Banking segment on a managed
basis as well as on the historical owned basis reflected in its
statements of income. The managed basis assumes that the
receivables securitized and sold are instead still held in the
portfolio. Pro forma statements of income on a managed basis for
the Finance and Banking segment for the third quarter and nine
months ended September 30, 1994 and 1993 are presented on the
following page. For purposes of this analysis, the results do not
reflect the differences between the company's accounting policies
for owned receivables and receivables serviced with limited
recourse. Accordingly, net income on the pro forma managed basis
equals net income on a historical owned basis.<PAGE>
<PAGE> 17
PRO FORMA MANAGED FINANCE AND BANKING STATEMENTS OF INCOME
----------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
All dollar amounts are September 30, September 30,
stated in millions. 1994 1993 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income. . . . . . .$ 2,766.7 11.63%* $ 2,577.0 11.70%* $ 975.8 11.93%* $ 861.8 11.52%*
Interest income from
noninsurance investment
securities. . . . . . . . 90.7 .38 101.8 .46 30.0 .37 33.9 .46
Interest expense. . . . . . 1,189.2 5.00 1,104.1 5.01 447.2 5.47 364.1 4.87
------------------------------------------------------------------------
Net interest margin . . . . 1,668.2 7.01 1,574.7 7.15 558.6 6.83 531.6 7.11
------------------------------------------------------------------------
Servicing fee income. . . . 55.0 .23 3.3 .02 20.5 .25 5.5 .07
Insurance premiums and
contract revenues . . . . 133.4 .55 121.2 .55 47.5 .58 45.0 .60
Investment income . . . . . 15.9 .07 28.3 .13 4.2 .05 17.5 .23
Fee income. . . . . . . . . 332.2 1.40 251.3 1.14 109.5 1.34 102.8 1.38
Other income. . . . . . . . 54.1 .23 99.9 .45 19.1 .23 32.1 .43
------------------------------------------------------------------------
Other revenues. . . . . . . 590.6 2.48 504.0 2.29 200.8 2.45 202.9 2.71
------------------------------------------------------------------------
Net interest margin and
other revenues. . . . . . 2,258.8 9.49 2,078.7 9.44 759.4 9.28 734.5 9.82
------------------------------------------------------------------------
Provision for credit losses 656.1 2.76 655.3 2.98 225.2 2.75 221.7 2.96
------------------------------------------------------------------------
Costs and expenses:
Operating expenses. . . . 1,196.0 5.02 1,045.3 4.75 394.8 4.82 370.3 4.95
Policyholders' benefits . 58.6 .25 64.1 .29 19.2 .24 24.5 .33
Income taxes. . . . . . . 110.9 .46 101.8 .46 36.5 .45 39.2 .53
------------------------------------------------------------------------
Net income. . . . . . . . .$ 237.2 1.00% $ 212.2 .96% $ 83.7 1.02% $ 78.8 1.05%
========================================================================
Average receivables
managed . . . . . . . . .$29,561.2 $27,287.0 $30,646.1 $27,823.2
Average noninsurance
investments . . . . . . 2,172.9 2,072.1 2,079.8 2,102.6
------------------------------------------------------------------------
Average managed interest-
earning assets . . . . .$31,734.1 $29,359.1 $32,725.9 $29,925.8
========================================================================
* As a percent, annualized, of average managed interest-earning assets.
</TABLE>
The discussion below on revenues, where applicable, and provision
for credit losses includes comparisons to amounts reported on the
company's historical statements of income ("Owned Basis") as well as
on the above pro forma statements of income ("Managed Basis").
Net interest margin
-------------------
Net interest margin on an Owned Basis was $379.9 and $1,147.6
million for the third quarter and first nine months of 1994, down
from $388.9 million in the 1993 third quarter but higher than
$1,133.5 million for the nine months ended September 30, 1993. Net
interest margin on a Managed Basis increased to $558.6 and $1,668.2
million for the third quarter and first nine months of 1994, up from
$531.6 and $1,574.7 million in the same year-ago periods primarily
due to higher levels of managed interest-earning assets and a shift
in product mix towards higher yielding credit card receivables with
a reduction in first mortgage and home equity receivables. Net
interest margin as a percent of average managed interest-earning
assets, annualized, was 6.83 percent compared to 6.94 percent in the
previous quarter and 7.11 percent in the year-ago quarter. The
decline in the third quarter compared to the previous quarter
primarily was due to a combination of higher funding costs and
higher relative debt levels.
Other revenues
--------------
Securitization and servicing fee income on an Owned Basis consists
of two components: income associated with the securitization and
sale of receivables and servicing fee income related to the
servicing of first mortgage loans with no recourse and unsecured<PAGE>
<PAGE> 18
receivables. Securitization income on an Owned Basis, which
includes net interest income, interchange and other fee income, and
provision for credit losses related to receivables serviced with
limited recourse, increased compared to the same year-ago periods
due to higher levels of securitized receivables outstanding and an
increase in fee income from securitized credit card receivables.
The growth in interchange and other credit card fee income outpaced
the growth in the securitized bankcard portfolio due to an increase
in the number of credit cards issued and greater transaction volume.
The components of securitization income are reclassified to the
applicable lines in the statements of income on a Managed Basis.
Servicing fee income on a Managed Basis increased over the third
quarter and first nine months of 1993 due to serviced receivable
portfolio growth and lower write-downs of servicing rights in 1994
compared to 1993. Average receivables serviced with no recourse
increased to $17.1 billion for the third quarter of 1994, up from
$13.8 billion in the same period in 1993. The portfolio of loans
serviced with no recourse continued to grow primarily due to
originations and sales of first mortgages to investors with
servicing rights retained. Additionally, in the third quarter of
1993, the company began servicing an unsecured consumer loan
portfolio totaling $.8 billion at September 30, 1994.
Insurance premiums and contract revenues increased from both the
third quarter and the first nine months of 1993. The increase from
the 1993 third quarter was due to higher sales volumes of specialty
and credit insurance in the United Kingdom operation. The increase
over the first nine months of 1993 was due to higher sales of both
domestic and foreign specialty and credit insurance. Investment
income for the third quarter and first nine months of 1994 was lower
than the respective prior year periods due to lower capital gains
resulting from fewer sales of available-for-sale investments.
Fee income on an Owned Basis includes revenues from fee-based
products such as bankcards, consumer banking deposits and private-
label credit cards, as well as commission income from the company's
brokerage business. Fee income was $64.9 and $192.8 million in the
third quarter and first nine months of 1994, respectively, down from
$79.7 and $218.3 million in the comparable periods of the prior year
primarily due to lower interchange fees as a result of the
securitizations of GM Card receivables beginning in the second
quarter of 1993. Fee income on securitized receivables is
transferred to securitization income upon sale. The decrease was
partially offset by higher other fee income. Fee income on a
Managed Basis, which in addition to the items discussed above
includes interchange and other fees related to receivables serviced
with limited recourse, increased from $102.8 and $251.3 million in
the third quarter and first nine months of 1993, respectively, to
$109.5 and $332.2 million in the same periods in 1994 primarily due
to GM Card receivable growth.
Provision for credit losses
---------------------------
The provision for credit losses for receivables on an Owned Basis
for the third quarter and first nine months of 1994 totaled $165.2
and $462.0 million, up 3 percent from $160.2 million but down 4
percent from $479.1 million in the comparable prior year periods.
The level of provision for credit losses on an Owned Basis may vary
from quarter to quarter, depending on the significance of
securitizations and sales of receivables in a particular period, as
provision related to the securitized receivables is transferred to
securitization and servicing fee income.
The provision for credit losses for receivables on a Managed Basis
totaled $225.2 and $656.1 million in the third quarter and first
nine months of 1994, respectively, up slightly from $221.7 and
$655.3 million in the comparable periods of 1993. As a percent of
average managed interest-earning assets, annualized, the provision
decreased to 2.76 percent from 2.98 percent in the first nine months
of 1993, reflecting the underlying improvement in the credit quality
of the managed portfolio, which experienced lower delinquency in the
first nine months of 1994 than in the first nine months of 1993.
See the following credit quality section for further discussion of
factors affecting the provision for credit losses.
Expenses
--------
Operating expenses, which the company defines as salaries and fringe
benefits plus other operating expenses, were $394.8 and $1,196.0<PAGE>
<PAGE> 19
million in the third quarter and first nine months of 1994,
respectively, up from $370.3 and $1,045.3 million in the same
periods of 1993. Operating expenses in the 1994 third quarter were
slightly below both the first and second quarters of 1994. The
increases in 1994 over the comparable 1993 periods were primarily
due to increased costs associated with servicing the larger owned or
serviced receivables portfolio. In addition, the 1994 nine month
amount also increased over the same period of 1993 due to marketing
initiatives undertaken in the first half of 1994.
The effective tax rate for the Finance and Banking segment was 30.4
and 31.9 percent, compared to 33.2 and 32.4 percent in the third
quarter and first nine months of 1993. The 1994 effective tax rates
reflect the favorable resolution of several prior year state tax
issues. The 1993 effective tax rates included the impact of a
retroactive year to date increase in the Federal statutory tax rate
from 34 percent to 35 percent.
Credit Quality
--------------
Overall credit quality statistics of the Finance and Banking
portfolio improved in the third quarter of 1994, as delinquency and
chargeoff levels declined from the prior quarter.
Delinquency
-----------
Delinquency levels are monitored for both receivables owned and
receivables managed. The company looks at delinquency levels which
include receivables serviced with limited recourse because this
portfolio is subjected to underwriting standards comparable to the
owned portfolio, is managed by operating personnel without regard to
portfolio ownership and results in a similar credit loss exposure
for the company.
<TABLE>
<CAPTION>
Two-Months-and-Over Contractual Delinquency (as a percent of managed consumer receivables):
------------------------------------------------------------------------------------------
9/30/94 6/30/94 3/31/94 12/31/93 9/30/93
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic:
First mortgage. . . . . . . . . . . 1.66% 1.68% 2.31% 1.42% 1.21%
Home equity . . . . . . . . . . . . 2.67 2.75 3.10 3.16 3.38
Other secured . . . . . . . . . . . 1.71 2.64 1.62 1.38 1.83
Bankcard. . . . . . . . . . . . . . 2.40 2.34 2.41 2.41 2.57
Merchant participation. . . . . . . 5.03 4.53 5.02 5.01 5.43
Other unsecured . . . . . . . . . . 5.43 6.01 6.48 6.63 7.23
-------------------------------------------------
Total domestic. . . . . . . . . . . . 3.07 3.10 3.37 3.28 3.50
-------------------------------------------------
Foreign:
Canada. . . . . . . . . . . . . . . 3.57 3.83 4.14 4.65 5.11
United Kingdom. . . . . . . . . . . 4.71 5.27 5.99 6.74 7.34
Australia . . . . . . . . . . . . . 6.84 7.43 7.98 8.93 9.59
------------------------------------------------
Total foreign . . . . . . . . . . . . 4.34 4.78 5.25 5.82 6.32
------------------------------------------------
Total . . . . . . . . . . . . . . . . 3.24% 3.32% 3.61% 3.58% 3.85%
================================================
</TABLE>
Delinquency as a percent of managed consumer receivables decreased
from both the prior quarter and prior year levels. The decline in
the delinquency ratio was driven by improvements in all the foreign
operations and in the domestic home equity and other unsecured
products, which were partially offset by an increase in merchant
participation and bankcard delinquencies. Improvements in both the
foreign and domestic portfolios were primarily due to growth of
higher quality receivables which were recently underwritten,
resulting from tighter underwriting standards instituted in the
early 1990's. The United Kingdom ratio also benefited from the
issuance of the GM Card from Vauxhall there beginning in early 1994,
as new accounts were added to the receivables base but made only a
small contribution to delinquency. Excluding the impact of the
United Kingdom GM Card from Vauxhall portfolio, the United Kingdom
and total foreign delinquency ratios still improved during the
quarter.
<PAGE>
<PAGE> 20
The level of delinquent receivables also continued to be impacted by
first mortgage receivables on which the company temporarily extended
payment terms in the first quarter of 1994 due to the January
California earthquake. This increased first mortgage delinquency by
37 basis points at September 30, 1994. The company continues to
believe that its ultimate exposure on the impacted first mortgage
receivables is small.
Bankcard delinquency increased compared to the prior quarter but
improved significantly compared to the year-ago quarter.
Improvement in the non-GM Card portfolio was offset by an increase
in delinquent GM Card receivables resulting from the aging of the GM
Card portfolio. The GM Card program continues to have better than
average delinquency experience. The company expects GM Card
delinquency to stabilize over the remainder of the year, and also
anticipates further improvement in the non-GM Card portfolio.
The company believes that, although further reductions are possible,
the overall declining delinquency trend has begun to stabilize.
Future changes in delinquency will depend on economic conditions in
the various countries and regional areas where the company operates,
the composition of the managed receivables base, and the maturation
of the GM Card portfolio.
Nonperforming Assets
--------------------
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
In millions. 9/30/94 6/30/94 3/31/94 12/31/93 9/30/93
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual managed receivables. . . . $489.1 $483.3 $517.6 $528.7 $ 565.4
Accruing managed receivables 90 or more
days delinquent . . . . . . . . . . 225.3 218.5 215.6 207.3 198.5
--------------------------------------------------
Total nonperforming managed receivables 714.4 701.8 733.2 736.0 763.9
--------------------------------------------------
Real estate owned . . . . . . . . . . 153.4 161.4 165.7 168.9 193.1
Other assets acquired through
foreclosure . . . . . . . . . . . . 58.1 79.8 81.3 82.9 84.4
--------------------------------------------------
Total nonperforming assets. . . . . . $925.9 $943.0 $980.2 $987.8 $1,041.4
==================================================
Credit loss reserves for managed
receivables as a percent of
nonperforming managed receivables . 96.9% 94.6% 88.8% 87.9% 76.6%
Nonperforming managed receivables
as a percent of total managed
receivables . . . . . . . . . . . . 2.2 2.3 2.5 2.5 2.7
--------------------------------------------------
</TABLE>
Total nonperforming managed Finance and Banking assets declined from
the prior quarter due to the reduction in other assets acquired
through foreclosure as a result of a cash settlement received from a
previous borrower.
<PAGE>
<PAGE> 21
Net Chargeoffs of Consumer Receivables
--------------------------------------
<TABLE>
<CAPTION>
Net Chargeoffs of Consumer Receivables (as a percent, annualized, of average consumer receivables managed):
------------------------------------------------------------------------------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
1994 1994 1994 1993 1993
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic:
First mortgage. . . . . . . . . . . .43% .28% .46% .21% .59%
Home equity . . . . . . . . . . . . 1.00 1.37 1.20 1.17 .87
Other secured . . . . . . . . . . . .99 .15 .05 .64 3.11
Bankcard. . . . . . . . . . . . . . 3.82 3.88 4.22 3.99 3.78
Merchant participation. . . . . . . 3.91 3.83 3.91 4.26 4.44
Other unsecured . . . . . . . . . . 4.36 5.10 5.26 5.41 5.99
-------------------------------------------------
Total domestic. . . . . . . . . . . . 2.76 2.91 2.97 2.82 2.78
-------------------------------------------------
Foreign:
Canada. . . . . . . . . . . . . . . 1.82 2.43 2.89 3.86 2.83
United Kingdom. . . . . . . . . . . 2.77 2.48 2.96 4.07 4.62
Australia . . . . . . . . . . . . . 2.24 3.72 2.74 3.77 2.61
-------------------------------------------------
Total foreign . . . . . . . . . . . . 2.23 2.59 2.90 3.92 3.38
-------------------------------------------------
Total . . . . . . . . . . . . . . . . 2.69% 2.87% 2.96% 2.96% 2.86%
=================================================
</TABLE>
Net chargeoffs as a percent of average managed receivables for the
1994 third quarter decreased compared to both the second quarter and
the year-ago quarter. Net chargeoffs on a dollar basis in the third
quarter were $200.9 million, compared to $205.1 million in the
second quarter of 1994. Improvements in the domestic other
unsecured and home equity portfolios and in the Canadian operation
in the third quarter were the primary contributors to the decline in
the chargeoff ratio. The improvement in these portfolios was due to
the favorable performance of recently underwritten receivables.
Bankcard chargeoffs also declined in the quarter, as an increase in
the GM Card portfolio chargeoff ratio was offset by improvements in
the non-GM Card portfolio. However, while GM Card chargeoffs
increased compared to the prior quarter, they remained better than
management's expectations as this portfolio ages.
The foreign chargeoff ratio benefited from lower Canadian
chargeoffs, which have continued to improve since the fourth quarter
of 1993, due to an improving economy. The foreign chargeoff ratio
also benefited from growth in the GM Card from Vauxhall, which was
introduced in the United Kingdom in early 1994 and which have
experienced minimal chargeoffs to date. Excluding the impact of GM
Card from Vauxhall receivables originated in the United Kingdom,
United Kingdom and total foreign chargeoffs were 3.22 and 2.36
percent, respectively, for the 1994 third quarter, compared to 2.81
and 2.71 percent, respectively, in the second quarter.
Chargeoffs are a lagging indicator of credit quality and generally
reflect prior delinquency trends. However, growth associated with
the domestic GM Card portfolio has resulted in a shift in product
mix toward bankcard receivables, which have higher chargeoff rates
than secured receivables. As stated previously, GM Card chargeoffs
during the quarter remained better than management's expectations.
The company expects that chargeoff ratios associated with the GM
Card will begin to stabilize and also anticipates further
improvement in other domestic products and the foreign operations.
However, future changes in chargeoff trends may be impacted by
factors such as the continued shift in product mix toward bankcard
receivables, economic conditions, and the impact of personal
bankruptcies. Consequently, the extent and timing of improvements
in the chargeoff trend remains uncertain.
<PAGE>
<PAGE> 22
INDIVIDUAL LIFE INSURANCE
-------------------------
Individual Life Insurance net income was $17.4 and $39.7 million, up
from $13.5 and $35.0 million in the prior year periods.
<TABLE>
<CAPTION>
Statements of Income
--------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
All dollar amounts are stated in millions. 1994 1993 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income . . . . . . . . . . . $372.1 $413.4 $124.5 $150.3
Contract revenues . . . . . . . . . . . 62.7 94.8 (11.4) 33.6
---------------------------------------
Total revenues. . . . . . . . . . . . . 434.8 508.2 113.1 183.9
Costs and expenses:
Policyholders' benefits . . . . . . . 285.3 341.3 65.5 115.0
Operating expenses. . . . . . . . . . 87.6 111.5 20.4 46.4
Income taxes. . . . . . . . . . . . . 22.2 20.4 9.8 9.0
---------------------------------------
Net income. . . . . . . . . . . . . . . $ 39.7 $35.0 $ 17.4 $ 13.5
=======================================
Return on average assets - annualized . .75% .75% .97% .87%
=======================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
September 30, December 31,
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Investment securities . . . . . . . . . . . $ 6,578.3 $ 6,358.0
Life insurance in-force . . . . . . . . . . 34,882.8 32,371.6
===============================
Investment securities for the Individual Life Insurance segment
totaled $6.6 billion, up from both the June 30, 1994 and December
31, 1993 levels. The Individual Life Insurance portfolio
represented approximately 76 percent of the company's total
investment portfolio at September 30, 1994. Higher-risk securities,
which include non-investment grade bonds, common and preferred
stocks, commercial mortgage loans and real estate, represented 7.3
percent of the insurance investment portfolio at September 30,
1994,compared to 6.9 percent at June 30, 1994 and 7.0 percent at
December 31, 1993.
At September 30, 1994 the market value for the insurance held-to-
maturity investment portfolio was 103 percent of the carrying value
compared to 102 percent at June 30, 1994 and 108 percent at December
31, 1993. The decrease in market value over book value during the
first nine months of 1994 was mainly the result of the rising
interest rate environment. The company continuously monitors the
fair value of its available-for-sale investment portfolio in light
of market interest rate conditions and may sell securities in an
attempt to maximize its capital position.
Investment income in the third quarter and first nine months of 1994
was $124.5 and $372.1 million, down compared with the year-ago
periods due to lower yields on investment securities and lower gains
resulting from fewer sales of available-for-sale investment
securities in 1994.
In the third quarter of 1994, the company ceded a line of life
insurance business under an assumption agreement, and as a result,
both contract revenues and policyholders' benefits were reduced by
$47.8 million. This represented the amount of claim reserves on the
ceded policies which were transferred to the new insurer. Excluding
the impact of this transaction, contract revenues in both periods
increased due to higher levels of insurance in-force, and
policyholders' benefits for both periods decreased due to lower
interest credited to policyholders caused by lower yields on
investment securities.
<PAGE>
<PAGE> 23
Operating expense in the third quarter and first nine months was
down compared to the year-ago periods due to lower amortization of
deferred insurance policy acquisition costs ("DAC") resulting from
lower investment income and from the periodic reevaluation of the
asset carrying value.
The effective tax rate was 36.0 and 35.9 percent for the third
quarter and first nine months of 1994, respectively, compared to
40.0 and 36.8 percent in the respective periods of 1993. The 1993
effective tax rates included a retroactive, year to date adjustment
in the Federal statutory tax rate from 34 percent to 35 percent.
LIQUIDATING COMMERCIAL LINES
----------------------------
The net loss for the Liquidating Commercial Lines segment was $1.7
and $7.2 million in the third quarter and first nine months of 1994
compared to a net loss of $10.5 and $18.7 million in the same
periods in 1993.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
In millions. 1994 1993 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest margin . . . . . . . . . . . . . . $ 25.0 $ 45.7 $ 6.0 $ 22.7
Other revenues. . . . . . . . . . . . . . . . . 15.3 9.8 2.6 7.0
---------------------------------------------
Net interest margin and other revenues. . . . . 40.3 55.5 8.6 29.7
Provision for credit losses . . . . . . . . . . 40.2 72.0 8.1 43.9
Operating expenses. . . . . . . . . . . . . . . 9.4 11.1 3.1 1.5
Income tax benefit. . . . . . . . . . . . . . . (2.1) (8.9) (.9) (5.2)
---------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . $ (7.2) $ (18.7) (1.7) $ (10.5)
=============================================
Average receivables owned . . . . . . . . . . . $1,056.3 $1,474.7 $958.5 $1,400.8
=============================================
</TABLE>
Net interest margin for the third quarter and first nine months of
1994 decreased compared to the prior year periods primarily due to
lower asset levels. The 1993 third quarter and nine month amounts
included gains on terminating debt and related hedges associated
with assets which were liquidated. Increased other revenues in the
first nine months of 1994 primarily related to the company's 25
percent equity investment in a commercial joint venture. Other
revenues for the 1994 third quarter were lower than the prior year
primarily due to lower revenues resulting from lower asset levels in
this joint venture. Provisions for credit losses were $8.1 and
$40.2 million, down from $43.9 and $72.0 million in both respective
periods of 1993. The 1993 quarter and year-to-date provisions
reflected chargeoffs of $37 million taken during the 1993 third
quarter in connection with a cash settlement on the company's
largest credit exposure at that time. See pages 13 and 14 in
Management's Discussion and Analysis on Consolidated Credit Loss
Reserves for factors impacting overall loss reserve levels.
Operating expenses were $3.1 and $9.4 million in the third quarter
and first nine months of 1994, respectively, up from $1.5 million
but down from $11.1 million in the year-ago periods. The decrease
from the prior year nine month amount was principally due to lower
write-downs and net expenses for real estate owned.
<PAGE>
<PAGE> 24
<TABLE>
<CAPTION>
Commercial Nonperforming Loans and Real Estate Owned:
------------------------------------------------------------------------------------------
In millions. 9/30/94 6/30/94 3/31/94 12/31/93 9/30/93
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate nonaccrual. . . . . . . . $ 48.5 $ 47.7 $ 49.3 $ 54.8 $ 79.6
Other nonaccrual. . . . . . . . . . . 74.4 114.8 151.1 173.9 164.1
--------------------------------------------------
Total nonaccrual. . . . . . . . . . . 122.9 162.5 200.4 228.7 243.7
Renegotiated. . . . . . . . . . . . . 44.9 28.5 29.2 28.7 17.3
--------------------------------------------------
Total nonperforming loans . . . . . . 167.8 191.0 229.6 257.4 261.0
Real estate owned . . . . . . . . . . 241.7 244.2 249.7 256.6 262.2
--------------------------------------------------
Total . . . . . . . . . . . . . . . . $409.5 $435.2 $479.3 $514.0 $523.2
==================================================
Credit loss reserves as a percent of
nonperforming loans . . . . . . . . 94.2% 86.4% 74.4% 67.2% 71.2%
--------------------------------------------------
</TABLE>
The company expects the longer term downward trend in nonperforming
loans to continue, although it may stabilize in the near future
before decreasing. In addition, comparisons between periods may be
impacted by individual transactions which mask the overall trend.
The company continues to estimate its ultimate loss exposure on
nonperforming loans based on performance and specific reviews of
individual loans and its outlook for economic conditions. Because
the portfolio consists of a number of loans with relatively large
balances, changes in individual borrower circumstances which
currently are unforeseen have the potential to change the estimate
of ultimate loss exposure in the future.
To preserve value in liquidating the real estate owned portfolio
over time, the company has segregated its portfolio into two
categories. Properties in weak markets or with poor cash flows,
which have been written down an average of 50 percent, represented
17 percent of the commercial real estate owned portfolio at
September 30, 1994. Properties with positive and/or improved cash
flows and in markets which, the company believes, have potential for
improvement are being held for sale at prices which reflect this
value. Subsequent to September 30, 1994, the company sold, for
cash, several real estate owned properties with a net book value of
$37 million to a joint venture in which the company will maintain a
50 percent ownership interest. The properties were sold to the
joint venture without recourse. In addition, the company also sold
to a third party, for cash, another real estate owned property with
a net book value of $19.4 million. The company will have no
continuing interest in this property. These sales will have no
impact on the operating results of this segment. Revenues on all
commercial real estate properties, net of write-downs and carrying
costs, were $.9 million in the third quarter of 1994 compared to
$1.6 million in the same period in 1993.
Corporate
---------
Corporate expenses, net of tax benefits, for the third quarter and
first nine months of 1994 were $4.9 and $13.1 million, compared to
$6.3 million in the 1993 third quarter and $22.8 million in the
first nine months of 1993. The decrease from the 1993 nine month
amount was due to a $10 million unallocated provision for credit
losses made in the second quarter of 1993.<PAGE>
<PAGE> 25
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii) Bylaws of Household International, as amended September
13, 1994.
10.8 Executive Employment Agreement between the Company and
W. F. Aldinger.
10.9 Executive Employment Agreement between the Company and
A. Shusta.
10.10 Executive Employment Agreement between the Company and
J. W. Saunders.
10.11 Executive Employment Agreement between the Company and
R. F. Elliott.
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred
Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the third quarter of 1994, the Registrant filed a
Current Report on Form 8-K dated August 8, 1994, reporting
pursuant to Item 5, "Other Events" the sale of most of the
operations of its regional retail securities broker/dealer
subsidiary, Hamilton Investments, to Principal Financial
Securities, a member of The Principal Financial Group, and a
Current Report on Form 8-K dated August 10, 1994, reporting
pursuant to Item 5, "Other Events" the appointment of William
F. Aldinger as President and Chief Executive Officer and a
Director of Household International, Inc.
<PAGE>
<PAGE> 26
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.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date: November 14, 1994 By: /s/ David A. Schoenholz
----------------- ----------------------------
David A. Schoenholz,
Senior Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
<PAGE>
<PAGE> 27
Exhibit Index
-------------
3(ii) Bylaws of Household International, as amended
September 13, 1994.
10.8 Executive Employment Agreement between the Company and
W. F. Aldinger.
10.9 Executive Employment Agreement between the Company and
A. Shusta.
10.10 Executive Employment Agreement between the Company and
J. W. Saunders.
10.11 Executive Employment Agreement between the Company and
R. F. Elliott.
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred
Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
C:\ELINK\FILING\I10Q930.AS1
<PAGE> 1
HOUSEHOLD INTERNATIONAL, INC.
Bylaws
______________
(As in effect September 13, 1994)
<PAGE>
<PAGE> 2
_______________________________________________________________
BYLAWS OF
HOUSEHOLD INTERNATIONAL, INC.
________________________________________________________________
ARTICLE I.
DEFINITIONS, PLACES OF MEETINGS.
SECTION l. Definitions. When used herein, "Board" shall mean
the Board of Directors of this Corporation, and "Chairman" shall
mean Chairman of the Board of Directors.
SECTION 2. Places of Meetings of Stockholders and Directors.
Unless the Board shall fix another place for the holding of the
meeting, meetings of stockholders and of the Board shall be held at
the Corporation's International Headquarters, Prospect Heights,
Cook County, Illinois, or at such other place in Cook County
specified by the person or persons calling the meeting.
ARTICLE II.
STOCKHOLDERS MEETINGS.
SECTION l. Annual Meeting of Stockholders. The annual
meeting of stockholders shall be held on such date and at such time
as is fixed by the Board. Any previously scheduled annual meeting
of stockholders may be postponed by resolution of the Board of
Directors upon public announcement given prior to the date
previously scheduled for such annual meeting of stockholders.
SECTION 2. Special Meetings.
CALL. Special meetings of the stockholders may be called
at any time by the Chairman of the Board, the President, or a
majority of the Board of Directors. Any previously scheduled
special meeting of stockholders may be postponed by resolution of
the Board of Directors upon public announcement given prior to the
date previously scheduled for such special meeting of stockholders.
REQUISITES OF CALL. A call for a special meeting of
stockholders shall be in writing, filed with the Secretary, and
shall specify the time and place of holding such meeting and the
purpose or purposes for which it is called.
SECTION 3. Notice of Meetings. Written notice of a meeting
of stockholders setting forth the place, date, and hour of the
meeting and the purpose or purposes for which the meeting is called
shall be mailed not less than ten nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at the
meeting.
SECTION 4. Quorum and Adjournments. At any meeting of
stockholders, the holders of a majority of all the outstanding
shares entitled to vote, present in person or by proxy, shall
constitute a quorum for the transaction of business, and a majority
of such quorum shall prevail except as otherwise required by law,
the Certificate of Incorporation, or the bylaws.
If the stockholders necessary for a quorum shall fail to be
present at the time and place fixed for any meeting, the holders of
a majority of the shares entitled to vote who are present in person
or by proxy may adjourn the meeting from time to time, until a
quorum is present, provided, however, that any stockholders'
meeting, annual or special, whether or not a quorum is present, may
be adjourned from time to time by the Chairman of the meeting. At
any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
SECTION 5. Inspectors of Election. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof.
The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no<PAGE>
<PAGE> 3
inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares
represented at a meeting and the validity of proxies and ballots,
(iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting,
and their count of all votes and ballots. The inspectors may
appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
SECTION 6. List of Stockholders. The Secretary shall
prepare, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is
to be held. The list shall be produced and kept at the time and
place of the meeting during the whole time thereof and may be
inspected by any stockholder present.
SECTION 7. Polls. The date and time of the opening and the
closing of the polls for each matter upon which the stockholders
will vote at a meeting shall be announced at the meeting. No
ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the inspectors after the closing of
the polls unless the Court of Chancery of the State of Delaware
upon application by a stockholder shall determine otherwise.
SECTION 8. Nomination and Stockholder Business.
(A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors of the Corporation
and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of
the Board of Directors, or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving
of notice provided for in this Section 8, who is entitled to vote
at the meeting and who complied with the notice procedures set
forth in this Section 8.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this Section 8, the stockholder
must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the 90th day prior to
such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the<PAGE>
<PAGE> 4
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 8 to the contrary, in the event
that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement naming all of the nominees for Director or specifying
the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by
this Section 8 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase,
if it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public
announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's
notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders
at which directors are to be elected pursuant to the Corporation's
notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for
in this Section 8, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section
8. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice required by paragraph
(A)(2) of this Section 8 shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the
90th day prior to such special meeting and not later than the close
of business on the later of the 60th day prior to such special
meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at
such meeting.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 8 shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this Section 8. The Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed
to be brought before the meeting was made in accordance with the
procedures set forth in this Section 8 and, if any proposed
nomination or business is not in compliance with this Section 8, to
declare that such defective proposal shall be disregarded.
(2) For purposes of this Article II, "public
announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 8, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 8.
Nothing in this Section 8 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
<PAGE>
<PAGE> 5
ARTICLE III.
BOARD OF DIRECTORS.
SECTION l. General Powers. The business and affairs of this
Corporation shall be managed under the direction of the Board.
NUMBER. The number of directors shall be fixed from time
to time by resolution of the Board.
TENURE. The directors shall be elected at the annual
meeting of stockholders. Each director shall hold office until his
successor is elected and qualified or until his earlier resignation
or removal.
VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office though
less than a quorum.
SECTION 2. Annual Meetings of the Board. The annual meeting
of the Board shall be held following the annual meeting of
stockholders and shall be a meeting of the directors elected at
such meeting of stockholders. No notice shall be required.
SECTION 3. Regular Meetings of the Board. Regular meetings
of the Board shall be held at such times and places as the Board
may fix. No notice shall be required.
SECTION 4. Special Meetings of the Board. Special meetings of
the Board shall be held whenever called by the Chairman, the
President, or any four or more directors. At least twenty-four
hours' written or oral notice of each special meeting shall be
given to each director. If mailed, notice must be deposited in the
United States mail at least seventy-two hours before the meeting.
SECTION 5. Quorum. A majority of the members of the Board if
the total number is odd or one-half thereof if the total number is
even shall constitute a quorum for the transaction of business, but
if at any meeting of the Board there is less than a quorum the
majority of those present may adjourn the meeting from time to time
until a quorum is present. At any such adjourned meeting, a quorum
being present, any business may be transacted which might have been
transacted at the original meeting.
Except as otherwise provided by law, the Certificate of
Incorporation, or the bylaws, all actions of the Board shall be
decided by vote of a majority of those present.
SECTION 6. Committees. The Board may, by resolution passed
by a majority of the entire Board, designate one or more committees
of directors which to the extent provided in the resolution shall
have and may exercise powers and authority of the Board in the
management of the business and affairs of the Corporation.
SECTION 7. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting if all the members
of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE IV.
OFFICERS.
SECTION l. Officers. The General Officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a
President, such number of Executive Vice Presidents, Group
Executives or Senior Vice Presidents as may be determined by the
Board, a Secretary and a Treasurer. The Chairman and President
shall be directors.
The Board may from time to time designate, employ, or appoint
such other officers and assistant officers, agents, employees,
counsel, and attorneys at law or in fact as it shall deem desirable
for such periods and on such terms as it may deem advisable, and
such persons shall have such titles, only such power and authority,<PAGE>
<PAGE> 6
and perform such duties as the Board may determine.
SECTION 2. Duties of Chairman of the Board. The Chairman
shall sign and issue, jointly with the President, all reports to
the stockholders and shall preside at all meetings of stockholders
and of the Board. He shall, in general, perform all duties
incident to the office of Chairman, and such other duties as may be
prescribed by the Board and perform the duties of the President in
his absence or inability to act.
SECTION 3. Duties of Chief Executive Officer. At each annual
meeting of the Board, or other meeting at which General Officers
are or may be elected, the Board shall designate the Chairman or
the President as the Chief Executive Officer of the Corporation.
The Chief Executive Officer shall have general authority over all
matters relating to the business and affairs of the Corporation
subject to the control and direction of the Board.
SECTION 4. Duties of President. The President shall, in
general, perform all duties incident to the office of President and
shall perform such other duties as may be prescribed by the Board.
In the absence or inability of the Chairman to act, the President
shall perform the duties of the Chairman pertaining to management
of the Corporation, and the Chairman of the Executive Committee of
the Board shall perform those duties of the Chairman pertaining to
Board functions.
SECTION 5. Duties of Executive Vice Presidents, Group
Executives and Senior Vice Presidents. Each Executive Vice
President, Group Executive and Senior Vice President shall have
such powers and perform such duties as may be prescribed by the
Chief Executive Officer of the Corporation or the Board. The order
of seniority among the Executive Vice Presidents, Group Executives
and Senior Vice Presidents shall be as designated from time to time
in writing by the Chief Executive Officer of the Corporation and
filed with the Secretary. In the absence or inability to act of
the Chairman and the President to act, the senior of the Executive
Vice Presidents, Group Executives and Senior Vice Presidents
available at the time shall perform the duties of the President.
SECTION 6. Duties of Secretary. The Secretary shall record
the proceedings of meetings of the stockholders and directors, give
notices of meetings, and shall, in general, perform all duties
incident to the office of Secretary and such other duties as may be
prescribed by the Board.
SECTION 7. Duties of Treasurer. The Treasurer shall have
custody of all funds, securities, evidences of indebtedness, and
other similar property of the Corporation, and shall, in general,
perform all duties incident to the office of Treasurer and such
other duties as may be prescribed by the Board."
ARTICLE V.
MISCELLANEOUS PROVISIONS.
SECTION l. Waiver of Notice. Whenever notice is required to
be given, a written waiver thereof signed by the person entitled to
notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 2. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any
other action; except that the establishment of a record date for
determination of stockholders entitled to express consent to
corporate action in writing without a meeting shall be established
pursuant to Article VII of the bylaws.<PAGE>
<PAGE> 7
ARTICLE VI.
EMERGENCY BYLAWS.
SECTION l. When Operative. Notwithstanding any different
provision in the preceding Articles of the bylaws or in the
Certificate of Incorporation, the emergency bylaws provided in this
Article VI shall be operative during any emergency resulting from
an attack on the United States or on a locality in which the
Corporation conducts its business or customarily holds meetings of
its Board or its stockholders, or during any nuclear or atomic
disaster, or during the existence of any catastrophe, or other
similar emergency condition, as a result of which a quorum of the
Board or a standing committee thereof cannot readily be convened
for action.
SECTION 2. Board Meetings. During any such emergency, a
meeting of the Board may be called by any director or, if
necessary, by any officer who is not a director. The meeting shall
be held at such time and place, within or without Cook County,
Illinois, specified by the person calling the meeting and in the
notice of the meeting which shall be given to such of the directors
as it may be feasible to reach at the time and by such means as may
be feasible at the time, including publication or radio. Such
advance notice shall be given as, in the judgment of the person
calling the meeting, circumstances permit. Two directors shall
constitute a quorum for the transaction of business. To the extent
required to constitute a quorum at the meeting, the officers
present shall be deemed, in order of rank and within the same rank
in order of seniority, directors for the meeting.
SECTION 3. Amendments to Emergency Bylaws. These emergency
bylaws may be amended, either before or during any emergency, to
make any further or different provision that may be practical and
necessary for the circumstances of the emergency.
ARTICLE VII.
CONSENTS TO CORPORATE ACTION.
SECTION 1. Action by Written Consent. Unless otherwise
provided in the Certificate of Incorporation, any action which is
required to be or may be taken at any annual or special meeting of
stockholders of the Corporation, subject to the provisions of
Sections (2) and (3) of this Article VII, may be taken without a
meeting, without prior notice and without a vote if a consent in
writing, setting forth the action so taken, shall have been signed
by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or to
take such action at a meeting at which all shares entitled to vote
thereon were present and voted; provided, however, that prompt
notice of the taking of the corporate action without a meeting and
by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 2. Determination of Record Date for Action by Written
Consent. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting
shall be fixed by the Board of Directors of the Corporation. Any
stockholder seeking to have the stockholders authorize or take
corporate action by written consent without a meeting shall, by
written notice to the Secretary, request the Board of Directors to
fix a record date. Upon receipt of such a request, the Secretary
shall, as promptly as practicable, call a special meeting of the
Board of Directors to be held as promptly as practicable. At such
meeting, the Board of Directors shall fix a record date as provided
in Section 213(b) (or its successor provision) of the Delaware
General Corporation Law; that record date, however, shall not be
more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board nor more than 15 days from
the date of the receipt of the stockholder's request. Notice of
the record date shall be published in accordance with the rules and
policies of any stock exchange on which securities of the
Corporation are then listed. Should the Board fail to fix a record
date as provided for in this Section 2, then the record date shall
be the day on which the first written consent is duly delivered
pursuant to Section 213(b) (or its successor provision) of the
Delaware General Corporation Law, or, if prior action is required
by the Board with respect to such matter, the record date shall be<PAGE>
<PAGE> 8
at the close of business on the day on which the Board adopts the
resolution taking such action.
SECTION 3. Procedures for Written Consent. In the event of
the delivery to the Corporation of a written consent or consents
purporting to represent the requisite voting power to authorize or
take corporate action and/or related revocations, the Secretary of
the Corporation shall provide for the safekeeping of such consents
and revocations and shall promptly engage nationally recognized
independent inspectors of elections for the purpose of promptly
performing a ministerial review of the validity of the consents and
revocations. No action by written consent without a meeting shall
be effective until such inspectors have completed their review,
determined that the requisite number of valid and unrevoked
consents has been obtained to authorize or take the action
specified in the consents, and certified such determination for
entry in the records of the Corporation kept for the purpose of
recording the proceedings of meetings of stockholders.
C:\ELINK\FILING\IBYLAWS.AS1
<PAGE> 1 EXHIBIT 10.8
September 13, 1994
Mr. William F. Aldinger
2700 Sanders Road
Prospect Heights, IL 60070
Dear Bill:
SUBJECT: Employment Agreement
- ------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction
arising out of uncertain personal circumstances in a change in
control environment. We recognize that in the event of a
Change in Control of Household (as such term is defined herein)
it is likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as President and
Chief Executive Officer. In that capacity you are
entitled to the following:
a. A minimum annual salary of $700,000;
b. An annual bonus having a targeted value equal to
65% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if any,
will depend on the achievement of the corporate and
your individual goals established for that year and
the terms of the Household International Corporate
Executive Bonus Plan, and any successor or substitute
plan or plans (the "Bonus Plan"). Your bonus will be
prorated based on the number of elapsed months in the
performance period in the case of death, permanent and
total disability, or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan;
c. An annual grant of any combination of performance unit
awards and restricted stock rights under the Household
International Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 40% of your then annual salary at
the time of the grant. The performance unit awards
are to be earned over a three year cycle, which will
be prorated on the number of elapsed months in the
performance period in the case of death, permanent and
total disability or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan. Performance unit awards will be
valued at their targeted value and restricted stock
rights will be valued at the fair market value of
stock at the date of grant; and
d. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to the following three sentences and to
termination as provided herein, the term of this Agreement
shall be for 18 whole calendar months, shall commence on
the date hereof, and shall be "evergreen"; that is shall<PAGE>
<PAGE> 2
continue monthly as an 18 month term, unless the
Corporation gives to you not less than 17 whole calendar
months notice that the term as monthly continued shall not
be so continued; provided further, that in no event shall
the term be continued beyond your sixty-fifth birthday.
It is our mutual intent that this Agreement be revised at
least every two (2) years to reflect more accurate lump
sum cash payment percentages in paragraphs 4 and 5 due to
changes in projected pension benefits and compensation.
As a result of these changes, the percentages could
increase or decrease. In no event, however, will the
percentages be reduced below 300%.
3. During your employment with Household you will devote your
reasonably full time and energies to the faithful and
diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it is
mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because within
6 whole calendar months of your resignation one or
more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted value
of any combination of performance unit awards
and restricted stock rights calculated as
provided in paragraph 1c was reduced and
compensation equivalent in aggregate value was
not substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified status
and such reductions were not supplemented in
the Household Supplemental Retirement Income
Plan ("HSRIP"); or your benefits under HSRIP
were reduced;
iv. your other benefits or perquisites were reduced
and such reductions were not uniformally
applied with respect to all similarly situated
employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by acquisition
of stock or substantially all of the assets, by
merger or otherwise, failed to expressly adopt
or otherwise repudiated this Employment
Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount equal
to 300% of your then annual salary (prior to any of the<PAGE>
<PAGE> 3
aforesaid reductions) (representing approximately the
present value of what you would have received had your
employment, compensation and participation in benefit
plans, other than stock options, continued for the term of
this employment contract); provided, however, if the term
of this Agreement is less than 18 months because you are
within 18 months of becoming age 65, the amount shall be
multiplied by a fraction the numerator of which is the
number of months left in the term, and the denominator of
which is 18. This payment shall be in addition to all
other compensation and benefits accrued to the date of
termination of employment. Also, the Compensation
Committee of Household's Board of Directors has determined
that you will be entitled to receive a portion of your
bonus and performance unit awards for the performance
periods in which your employment terminates. Such portion
will be determined on the basis of the portion of the
performance period elapsed as of your date of termination
over the total performance period, and it will be assumed
that individual and corporate target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a; or
b. should you resign your position for any reason
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including the
lump sum payment) described in paragraph 4 regardless of
whether you are otherwise entitled to them under paragraph
4. In addition, Household or its successor shall promptly
make a lump sum cash payment to you in an amount equal to
300% of your then annual salary (prior to any reduction).
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
i. any "person" (as the term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of
1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
ii. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the Board
of Directors of Household or its successor by merger,
consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you as
the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event that
any excise tax is assessed against you pursuant to the
provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such<PAGE>
<PAGE> 4
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or its
successor shall assume that you are taxed at the highest
individual federal and state income tax rates (without
regard to Section 1(g) of the Code or successor provisions
thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning of
section 280G(b)(2)(A) of the Code, and a reduction of the
amount by 10% or less would totally avoid the imposition
of any excise tax, such amounts shall be reduced so that
the aggregate present value of the amounts constituting
such parachute payments will be equal to 299% of your
"annualized includible compensation for the base period,"
as such term is defined in section 280G(d)(1) of the Code.
For the purpose of this subparagraph, present value shall
be determined in accordance with section 280G(d)(4) of the
Code.
8. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has
expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of such
a judgment, all reasonable legal and other professional
fees and expenses incurred by you in contesting or
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided for in this
Agreement or in otherwise pursuing your claim will be
promptly paid by Household or its successor with interest
thereon at the highest statutory rate of your state of
domicile for interest on judgments against private parties
from the date of payment thereof by you to the date of
reimbursement to you by Household or its successor.
9. You agree that you will not, without prior written consent
of the Board of Directors of Household, during the term of
or after the termination of your employment under this
Agreement, directly or indirectly, disclose to any
individual, corporation, or other entity (other than
Household, or any subsidiary or affiliate thereof, or its
officers, directors, or employees entitled to such
information, or any other person or entity to whom such
information is regularly disclosed in the normal course of
Household's business), or use for your own benefit or for
the benefit of such individual, corporation or other
entity, any information whether or not reduced to written
or other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall cease
to be subject to the restrictions of this paragraph.
10. Any successor to the Corporation, by acquisition of stock
or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
<PAGE>
<PAGE> 5
11. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require the
segregation of any funds or property. Notwithstanding the
foregoing, in the discretion of the Corporation, the
Corporation may establish a grantor trust or other vehicle
to assist it in meeting its obligations hereunder, but any
such trust or other vehicle shall not create a funded
account or security interest for you.
12. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Raymond C. Tower
-----------------------------------
Raymond C. Tower
Chairman of the Compensation
Committee of the Board of Directors
/s/ William F. Aldinger
-----------------------------------
William F. Aldinger
C:\ELINK\FILING\IEX108.AS1
<PAGE> 1 EXHIBIT 10.9
July 11, 1994
Ms. Antonia Shusta
2700 Sanders Road
Prospect Heights, IL 60070
Dear Tonia:
SUBJECT: Employment Agreement
- ------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction
arising out of uncertain personal circumstances in a change in
control environment. We recognize that in the event of a
Change in Control of Household (as such term is defined herein)
it is likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive-Office of the President. In that capacity you
are entitled to the following:
a. A minimum annual salary of $400,000;
b. An annual bonus having a targeted value equal to
50% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if any,
will depend on the achievement of the corporate and
your individual goals established for that year and
the terms of the Household International Corporate
Executive Bonus Plan, and any successor or substitute
plan or plans (the "Bonus Plan"). Your bonus will be
prorated based on the number of elapsed months in the
performance period in the case of death, permanent and
total disability, or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan;
c. An annual grant of any combination of performance
units and restricted stock rights under the Household
International Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
are to be earned over a three year cycle, which will
be prorated on the number of elapsed months in the
performance period in the case of death, permanent and
total disability or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan. Performance unit awards will be
valued at their targeted value and restricted stock
rights will be valued at the fair market value of
stock at the date of grant; and
d. A one-time grant on February 1, 1994, of Performance
Share Awards which will vest at 25% on the third
anniversary of the date of grant if a performance unit
award payment is made with respect to the award
granted for the three-year cycle 1994-1996, 25% on the
fourth anniversary if a performance unit award payment
is made with respect to the award granted for the
three-year cycle 1995-1997, and 50% on the fifth<PAGE>
<PAGE> 2
anniversary if a performance unit award payment is
made with respect to the award granted for the three-
year cycle 1996-98. In the event that your employment
is terminated pursuant to the provisions of paragraph
4a or if you resign pursuant to the provisions of
paragraph 4b(i), 4b(vi), 4b(vii) or 5c, you will
receive 100% of the shares represented by the
Performance Share Award on your last day of employment
regardless of whether you have completed the vesting
period or the performance condition has been met; and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to the following two sentences and to termination
as provided herein, the term of this Agreement shall be
for 18 whole calendar months, shall commence on the date
hereof, and shall be "evergreen"; that is shall continue
monthly as an 18 month term, unless the Corporation gives
to you not less than 17 whole calendar months notice that
the term as monthly continued shall not be so continued;
provided further, that in no event shall the term be
continued beyond your sixty-fifth birthday. It is the
intent to revise this Agreement at least every two (2)
years to reflect more accurate lump sum cash payment
percentages in paragraphs 4 and 5 due to changes in
projected pension benefits and compensation. In no event,
however, will the percentages be reduced below 290%.
3. During your employment with Household you will devote your
reasonably full time and energies to the faithful and
diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it is
mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because within
6 whole calendar months of your resignation one or
more of the following events occurred to you:
i. your annual salary was reduced or your consumer
and mortgage banking responsibilities have been
substantially reduced;
ii. your annual target bonus or the targeted value
of any combination of performance unit awards
and restricted stock rights calculated as
provided in paragraph 1c was reduced and
compensation equivalent in aggregate value was
not substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified status
and such reductions were not supplemented in
the Household Supplemental Retirement Income
Plan ("HSRIP"); or your benefits under HSRIP
were reduced;
<PAGE>
<PAGE> 3
iv. your other benefits or perquisites were reduced
and such reductions were not uniformally
applied with respect to all similarly situated
employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by acquisition
of stock or substantially all of the assets, by
merger or otherwise, failed to expressly adopt
or otherwise repudiated this Employment
Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount equal
to 290% of your then annual salary (prior to any of the
aforesaid reductions) (representing approximately the
present value of what you would have received had your
employment, compensation and participation in benefit
plans, other than stock options, continued for the term of
this employment contract); provided, however, if the term
of this Agreement is less than 18 months because you are
within 18 months of becoming age 65, the amount shall be
multiplied by a fraction the numerator of which is the
number of months left in the term, and the denominator of
which is 18. This payment shall be in addition to all
other compensation and benefits accrued to the date of
termination of employment. Also, the Compensation
Committee of Household's Board of Directors has determined
that you will be entitled to receive a portion of your
bonus and performance unit awards for the performance
periods in which your employment terminates. Such portion
will be determined on the basis of the portion of the
performance period elapsed as of your date of termination
over the total performance period, and it will be assumed
that individual and corporate target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including the
lump sum payment) described in paragraph 4 regardless of
whether you are otherwise entitled to them under paragraph
4. In addition, Household or its successor shall promptly
make a lump sum cash payment to you in an amount equal to
290% of your then annual salary (prior to any reduction).
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not receive
at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of any combination of performance unit awards
and restricted stock rights under the Long-Term Plan
for years in which awards were payable under the Long-
Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those<PAGE>
<PAGE> 4
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign, payments
shall be made to you as outlined earlier in this
paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of
1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the Board
of Directors of Household or its successor by merger,
consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you as
the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event that
any excise tax is assessed against you pursuant to the
provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or its
successor shall assume that you are taxed at the highest
individual federal and state income tax rates (without
regard to Section 1(g) of the Code or successor provisions
thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning of
section 280G(b)(2)(A) of the Code, and a reduction of the
amount by 10% or less would totally avoid the imposition
of any excise tax, such amounts shall be reduced so that
the aggregate present value of the amounts constituting
such parachute payments will be equal to 299% of your
"annualized includible compensation for the base period,"
as such term is defined in section 280G(d)(1) of the Code.
For the purpose of this subparagraph, present value shall
be determined in accordance with section 280G(d)(4) of the
Code.
8. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has
expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of such
a judgment, all reasonable legal and other professional
fees and expenses incurred by you in contesting or<PAGE>
<PAGE> 5
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided for in this
Agreement or in otherwise pursuing your claim will be
promptly paid by Household or its successor with interest
thereon at the highest statutory rate of your state of
domicile for interest on judgments against private parties
from the date of payment thereof by you to the date of
reimbursement to you by Household or its successor.
9. You agree that you will not, without prior written consent
of the Chairman of the Board and Chief Executive Officer
or the General Counsel of Household, during the term of or
after the termination of your employment under this
Agreement, directly or indirectly, disclose to any
individual, corporation, or other entity (other than
Household, or any subsidiary or affiliate thereof, or its
officers, directors, or employees entitled to such
information, or any other person or entity to whom such
information is regularly disclosed in the normal course of
Household's business), or use for your own benefit or for
the benefit of such individual, corporation or other
entity, any information whether or not reduced to written
or other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall cease
to be subject to the restrictions of this paragraph.
10. This Agreement supersedes and replaces the Employment
Agreement dated April 22, 1994, the Employment Agreement
dated May 28, 1993, the Employment Agreement dated May 1,
1991, the Employment Agreement dated August 16, 1990, and
the Employment Agreement dated December 1, 1989, between
you and Household, and the Senior Executive Employment
Agreement dated April 18, 1988, and the Supplemental
Employment Agreement dated April 18, 1988, between you and
Household Finance Corporation, all in furtherance of the
objectives authorized and deemed by the Board of Directors
of Household to serve the best interests of the
Corporation.
11. Any successor to the Corporation, by acquisition of stock
or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
12. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require the
segregation of any funds or property. Notwithstanding the
foregoing, in the discretion of the Corporation, the
Corporation may establish a grantor trust or other vehicle
to assist it in meeting its obligations hereunder, but any
such trust or other vehicle shall not create a funded
account or security interest for you.
13. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and <PAGE>
<PAGE> 6
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Donald C. Clark
----------------------------
Donald C. Clark
Chief Executive Officer
/s/ Antonia Shusta
-----------------------------
Antonia Shusta
C:\ELINK\FILING\IEX109.AS1
<PAGE> 1 EXHIBIT 10.10
July 11, 1994
Mr. Joseph W. Saunders
Household Credit Services, Inc.
1441 Schilling Place
Salinas, CA 93901
Dear Joe:
SUBJECT: Employment Agreement
- ------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction
arising out of uncertain personal circumstances in a change in
control environment. We recognize that in the event of a
Change in Control of Household (as such term is defined herein)
it is likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive-Office of the President. In that capacity you
are entitled to the following:
a. A minimum annual salary of $390,000;
b. An annual bonus having a targeted value equal to
50% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if any,
will depend on the achievement of the corporate and
your individual goals established for that year and
the terms of the Household International Corporate
Executive Bonus Plan, and any successor or substitute
plan or plans (the "Bonus Plan"). Your bonus will be
prorated based on the number of elapsed months in the
performance period in the case of death, permanent and
total disability, or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan;
c. An annual grant of any combination of performance
units and restricted stock rights under the Household
International Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
are to be earned over a three year cycle, which will
be prorated on the number of elapsed months in the
performance period in the case of death, permanent and
total disability or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan. Performance unit awards will be
valued at their targeted value and restricted stock
rights will be valued at the fair market value of
stock at the date of grant;
d. A one-time grant on February 1, 1994, of Performance
Share Awards which will vest at 25% on the third
anniversary of the date of grant if a performance unit
award payment is made with respect to the award
granted for the three-year cycle 1994-1996, 25% on the
fourth anniversary if a performance unit award payment
is made with respect to the award granted for the
three-year cycle 1995-1997, and 50% on the fifth<PAGE>
<PAGE> 2
anniversary if a performance unit award payment is
made with respect to the award granted for the three-
year cycle 1996-98. In the event that your employment
is terminated pursuant to the provisions of paragraph
4a or if you resign pursuant to the provisions of
paragraph 4b(i), 4b(vi), 4b(vii) or 5c, you will
receive 100% of the shares represented by the
Performance Share Award on your last day of employment
regardless of whether you have completed the vesting
period or the performance condition has been met; and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to the following two sentences and to termination
as provided herein, the term of this Agreement shall be
for 18 whole calendar months, shall commence on the date
hereof, and shall be "evergreen"; that is shall continue
monthly as an 18 month term, unless the Corporation gives
to you not less than 17 whole calendar months notice that
the term as monthly continued shall not be so continued;
provided further, that in no event shall the term be
continued beyond your sixty-fifth birthday. It is the
intent to revise this Agreement at least every two (2)
years to reflect more accurate lump sum cash payment
percentages in paragraphs 4 and 5 due to changes in
projected pension benefits and compensation. In no event,
however, will the percentages be reduced below 290%.
3. During your employment with Household you will devote your
reasonably full time and energies to the faithful and
diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it is
mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because within
6 whole calendar months of your resignation one or
more of the following events occurred to you:
i. your annual salary was reduced or your bankcard
responsibility has been substantially reduced;
ii. your annual target bonus or the targeted value
of any combination of performance unit awards
and restricted stock rights calculated as
provided in paragraph 1c was reduced and
compensation equivalent in aggregate value was
not substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified status
and such reductions were not supplemented in
the Household Supplemental Retirement Income
Plan ("HSRIP"); or your benefits under HSRIP
were reduced;
iv. your other benefits or perquisites were reduced
and such reductions were not uniformally<PAGE>
<PAGE> 3
applied with respect to all similarly situated
employees;
v. you were reassigned to a geographical area
outside of the Salinas, California area;
vi. any successor to the Corporation by acquisition
of stock or substantially all of the assets, by
merger or otherwise, failed to expressly adopt
or otherwise repudiated this Employment
Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount equal
to 290% of your then annual salary (prior to any of the
aforesaid reductions) (representing approximately the
present value of what you would have received had your
employment, compensation and participation in benefit
plans, other than stock options, continued for the term of
this employment contract); provided, however, if the term
of this Agreement is less than 18 months because you are
within 18 months of becoming age 65, the amount shall be
multiplied by a fraction the numerator of which is the
number of months left in the term, and the denominator of
which is 18. This payment shall be in addition to all
other compensation and benefits accrued to the date of
termination of employment. Also, the Compensation
Committee of Household's Board of Directors has determined
that you will be entitled to receive a portion of your
bonus and performance unit awards for the performance
periods in which your employment terminates. Such portion
will be determined on the basis of the portion of the
performance period elapsed as of your date of termination
over the total performance period, and it will be assumed
that individual and corporate target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including the
lump sum payment) described in paragraph 4 regardless of
whether you are otherwise entitled to them under paragraph
4. In addition, Household or its successor shall promptly
make a lump sum cash payment to you in an amount equal to
292% of your then annual salary (prior to any reduction).
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not receive
at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of any combination of performance unit awards
and restricted stock rights under the Long-Term Plan
for years in which awards were payable under the Long-
Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign, payments<PAGE>
<PAGE> 4
shall be made to you as outlined earlier in this
paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of
1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the Board
of Directors of Household or its successor by merger,
consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you as
the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event that
any excise tax is assessed against you pursuant to the
provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or its
successor shall assume that you are taxed at the highest
individual federal and state income tax rates (without
regard to Section 1(g) of the Code or successor provisions
thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning of
section 280G(b)(2)(A) of the Code, and a reduction of the
amount by 10% or less would totally avoid the imposition
of any excise tax, such amounts shall be reduced so that
the aggregate present value of the amounts constituting
such parachute payments will be equal to 299% of your
"annualized includible compensation for the base period,"
as such term is defined in section 280G(d)(1) of the Code.
For the purpose of this subparagraph, present value shall
be determined in accordance with section 280G(d)(4) of the
Code.
8. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has
expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of such
a judgment, all reasonable legal and other professional
fees and expenses incurred by you in contesting or
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided for in this
Agreement or in otherwise pursuing your claim will be<PAGE>
<PAGE> 5
promptly paid by Household or its successor with interest
thereon at the highest statutory rate of your state of
domicile for interest on judgments against private parties
from the date of payment thereof by you to the date of
reimbursement to you by Household or its successor.
9. You agree that you will not, without prior written consent
of the Chairman of the Board and Chief Executive Officer
or the General Counsel of Household, during the term of or
after the termination of your employment under this
Agreement, directly or indirectly, disclose to any
individual, corporation, or other entity (other than
Household, or any subsidiary or affiliate thereof, or its
officers, directors, or employees entitled to such
information, or any other person or entity to whom such
information is regularly disclosed in the normal course of
Household's business), or use for your own benefit or for
the benefit of such individual, corporation or other
entity, any information whether or not reduced to written
or other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall cease
to be subject to the restrictions of this paragraph.
10. This Agreement supersedes and replaces the Employment
Agreement dated April 22, 1994, the Employment Agreement
dated May 28, 1993, the Employment Agreement dated May 1,
1991, and the Employment Agreement dated August 16, 1990,
between you and Household, all in furtherance of the
objectives authorized and deemed by the Board of Directors
of Household to serve the best interests of the
Corporation.
11. Any successor to the Corporation, by acquisition of stock
or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
12. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require the
segregation of any funds or property. Notwithstanding the
foregoing, in the discretion of the Corporation, the
Corporation may establish a grantor trust or other vehicle
to assist it in meeting its obligations hereunder, but any
such trust or other vehicle shall not create a funded
account or security interest for you.
13. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and<PAGE>
<PAGE> 6
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Donald C. Clark
----------------------------------
Donald C. Clark
Chief Executive Officer
/s/ Joseph W. Saunders
----------------------------------
Joseph W. Saunders
C:\ELINK\FILING\IEX1010.AS1
<PAGE> 1 EXHIBIT 10.11
July 11, 1994
Mr. Robert F. Elliott
2700 Sanders Road
Prospect Heights, IL 60070
Dear Bob:
SUBJECT: Employment Agreement
- ------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction
arising out of uncertain personal circumstances in a change in
control environment. We recognize that in the event of a
Change in Control of Household (as such term is defined herein)
it is likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive-Office of the President. In that capacity you
are entitled to the following:
a. A minimum annual salary of $335,000;
b. An annual bonus having a targeted value equal to
50% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if any,
will depend on the achievement of the corporate and
your individual goals established for that year and
the terms of the Household International Corporate
Executive Bonus Plan, and any successor or substitute
plan or plans (the "Bonus Plan"). Your bonus will be
prorated based on the number of elapsed months in the
performance period in the case of death, permanent and
total disability, or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan;
c. An annual grant of any combination of performance
units and restricted stock rights under the Household
International Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
are to be earned over a three year cycle, which will
be prorated on the number of elapsed months in the
performance period in the case of death, permanent and
total disability or retirement under the Household
Retirement Income Plan or any successor tax qualified
defined benefit plan. Performance unit awards will be
valued at their targeted value and restricted stock
rights will be valued at the fair market value of
stock at the date of grant; and
d. A one-time grant on February 1, 1994, of Performance
Share Awards which will vest at 25% on the third
anniversary of the date of grant if a performance unit
award payment is made with respect to the award
granted for the three-year cycle 1994-1996, 25% on the
fourth anniversary if a performance unit award payment
is made with respect to the award granted for the
three-year cycle 1995-1997, and 50% on the fifth<PAGE>
<PAGE> 2
anniversary if a performance unit award payment is
made with respect to the award granted for the three-
year cycle 1996-98. In the event that your employment
is terminated pursuant to the provisions of paragraph
4a or if you resign pursuant to the provisions of
paragraph 4b(i), 4b(vi), 4b(vii) or 5c, you will
receive 100% of the shares represented by the
Performance Share Award on your last day of employment
regardless of whether you have completed the vesting
period or the performance condition has been met; and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to the following two sentences and to termination
as provided herein, the term of this Agreement shall be
for 18 whole calendar months, shall commence on the date
hereof, and shall be "evergreen"; that is shall continue
monthly as an 18 month term, unless the Corporation gives
to you not less than 17 whole calendar months notice that
the term as monthly continued shall not be so continued;
provided further, that in no event shall the term be
continued beyond your sixty-fifth birthday. It is the
intent to revise this Agreement at least every two (2)
years to reflect more accurate lump sum cash payment
percentages in paragraphs 4 and 5 due to changes in
projected pension benefits and compensation. In no event,
however, will the percentages be reduced below 290%.
3. During your employment with Household you will devote your
reasonably full time and energies to the faithful and
diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it is
mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because within
6 whole calendar months of your resignation one or
more of the following events occurred to you:
i. your annual salary was reduced or your consumer
finance responsibility has been substantially
reduced;
ii. your annual target bonus or the targeted value
of any combination of performance unit awards
and restricted stock rights calculated as
provided in paragraph 1c was reduced and
compensation equivalent in aggregate value was
not substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified status
and such reductions were not supplemented in
the Household Supplemental Retirement Income
Plan ("HSRIP"); or your benefits under HSRIP
were reduced;
<PAGE>
<PAGE> 3
iv. your other benefits or perquisites were reduced
and such reductions were not uniformally
applied with respect to all similarly situated
employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by acquisition
of stock or substantially all of the assets, by
merger or otherwise, failed to expressly adopt
or otherwise repudiated this Employment
Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount equal
to 401% of your then annual salary (prior to any of the
aforesaid reductions) (representing approximately the
present value of what you would have received had your
employment, compensation and participation in benefit
plans, other than stock options, continued for the term of
this employment contract); provided, however, if the term
of this Agreement is less than 18 months because you are
within 18 months of becoming age 65, the amount shall be
multiplied by a fraction the numerator of which is the
number of months left in the term, and the denominator of
which is 18. This payment shall be in addition to all
other compensation and benefits accrued to the date of
termination of employment. Also, the Compensation
Committee of Household's Board of Directors has determined
that you will be entitled to receive a portion of your
bonus and performance unit awards for the performance
periods in which your employment terminates. Such portion
will be determined on the basis of the portion of the
performance period elapsed as of your date of termination
over the total performance period, and it will be assumed
that individual and corporate target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including the
lump sum payment) described in paragraph 4 regardless of
whether you are otherwise entitled to them under paragraph
4. In addition, Household or its successor shall promptly
make a lump sum cash payment to you in an amount equal to
478% of your then annual salary (prior to any reduction).
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not receive
at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of any combination of performance unit awards
and restricted stock rights under the Long-Term Plan
for years in which awards were payable under the Long-
Term Plan as it existed prior to the Change in
Control,
<PAGE>
<PAGE> 4
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign, payments
shall be made to you as outlined earlier in this
paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of
1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the Board
of Directors of Household or its successor by merger,
consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you as
the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event that
any excise tax is assessed against you pursuant to the
provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or its
successor shall assume that you are taxed at the highest
individual federal and state income tax rates (without
regard to Section 1(g) of the Code or successor provisions
thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning of
section 280G(b)(2)(A) of the Code, and a reduction of the
amount by 10% or less would totally avoid the imposition
of any excise tax, such amounts shall be reduced so that
the aggregate present value of the amounts constituting
such parachute payments will be equal to 299% of your
"annualized includible compensation for the base period,"
as such term is defined in section 280G(d)(1) of the Code.
For the purpose of this subparagraph, present value shall
be determined in accordance with section 280G(d)(4) of the
Code.
8. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has
expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of such
a judgment, all reasonable legal and other professional<PAGE>
<PAGE> 5
fees and expenses incurred by you in contesting or
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided for in this
Agreement or in otherwise pursuing your claim will be
promptly paid by Household or its successor with interest
thereon at the highest statutory rate of your state of
domicile for interest on judgments against private parties
from the date of payment thereof by you to the date of
reimbursement to you by Household or its successor.
9. You agree that you will not, without prior written consent
of the Chairman of the Board and Chief Executive Officer
or the General Counsel of Household, during the term of or
after the termination of your employment under this
Agreement, directly or indirectly, disclose to any
individual, corporation, or other entity (other than
Household, or any subsidiary or affiliate thereof, or its
officers, directors, or employees entitled to such
information, or any other person or entity to whom such
information is regularly disclosed in the normal course of
Household's business), or use for your own benefit or for
the benefit of such individual, corporation or other
entity, any information whether or not reduced to written
or other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall cease
to be subject to the restrictions of this paragraph.
10. This Agreement supersedes and replaces the Employment
Agreement dated April 22, 1994, the Employment Agreement
dated May 28, 1993, the Employment Agreement dated May 1,
1991, and the Employment Agreement dated August 16, 1990,
between you and Household, all in furtherance of the
objectives authorized and deemed by the Board of Directors
of Household to serve the best interests of the
Corporation.
11. Any successor to the Corporation, by acquisition of stock
or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
12. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require the
segregation of any funds or property. Notwithstanding the
foregoing, in the discretion of the Corporation, the
Corporation may establish a grantor trust or other vehicle
to assist it in meeting its obligations hereunder, but any
such trust or other vehicle shall not create a funded
account or security interest for you.
13. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and <PAGE>
<PAGE> 6
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Donald C. Clark
----------------------------------
Donald C. Clark
Chief Executive Officer
/s/ Robert F. Elliott
----------------------------------
Robert F. Elliott
C:\ELINK\FILING\IEX1011.AS1
EXHIBIT 12
----------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
- -----------------------------------------------------------------
All dollar amounts are stated in millions.
Nine Months Ended September 30 1994 1993
- -----------------------------------------------------------------
Net income $ 256.6 $ 205.7
- -----------------------------------------------------------------
Income taxes 125.5 103.2
- -----------------------------------------------------------------
Fixed charges:
Interest expense (1) 883.3 882.4
Interest portion of rentals (2) 26.2 25.2
- -----------------------------------------------------------------
Total fixed charges 909.5 907.6
- -----------------------------------------------------------------
Total earnings as defined $1,291.6 $1,216.5
- -----------------------------------------------------------------
Ratio of earnings to fixed charges 1.42 1.34
=================================================================
Preferred stock dividends (3) $ 32.1 $ 35.5
=================================================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.37 1.29
=================================================================
(1) For financial statement purposes, interest expense includes
income earned on temporary investment of excess funds, generally
resulting from over-subscriptions of commercial paper.
(2) Represents one-third of rentals, which approximates the portion
representing interest.
(3) Preferred stock dividends are grossed up to their pretax
equivalent based upon an effective tax rate of 32.8 and 33.4
percent for September 30, 1994 and 1993, respectively.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF HOUSEHOLD INTERNATIONAL, INC.
- ---------------------------------------------
As of September 30, 1994 the following subsidiaries were directly
or indirectly owned by the Registrant. Certain subsidiaries
which in the aggregate do not constitute significant subsidiaries
may be omitted.
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Hamilton Investments, Inc. Delaware 100%
Alpha Source Asset Management, Inc. Delaware 100%
Craig-Hallum Corporation Delaware 100%
Craig-Hallum, Inc. Minnesota 100%
ProValue Investments, Inc. Delaware 100%
Household Bank, f.s.b U.S. 100%
Household Affinity Funding Corporation Delaware 100%
Household Bank (SB), N.A. U.S. 100%
Household Home Title Services, Inc. California 100%
Household Home Title Services, Inc. II Maryland 100%
Household Investment Services, Inc. California 100%
Household Insurance Services, Inc. Illinois 100%
Housekey Financial Corporation California 100%
Associations Service Corporation Indiana 100%
Household Mortgage Services, Inc. Delaware 100%
Security Investment Corporation Maryland 100%
Household Credit Services, Inc. Delaware 100%
Household Finance Corporation Delaware 100%
HFC Funding Corporation Delaware 100%
HFC Revolving Corporation Delaware 100%
HFS Funding Corporation Delaware 100%
Household Bank (Nevada), N.A. U.S. 100%
Household Card Services, Inc. Nevada 100%
Household Bank (Illinois), N.A. U.S. 100%
Household Credit Services of Mexico, Inc. Delaware 100%
Household Finance Receivables Corporation IIDelaware 100%
Household Financial Services, Inc. Delaware 100%
Household Group, Inc. Delaware 100%
Alexander Hamilton Life Insurance Company Michigan 100%
of America
Alexander Hamilton Capital Management, Michigan 100%
Inc.
Alexander Hamilton Insurance Agency, Inc. Michigan 100%
Alexander Hamilton Life Insurance Co. Arizona 100%
of Arizona <PAGE>
<PAGE> 2
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
First Alexander Hamilton Life New York 100%
Insurance Co.
Hamilton National Life Insurance Company Michigan 100%
Alexander Hamilton Insurance Company Michigan 100%
of America
Cal-Pacific Services, Inc. California 100%
Household Business Services, Inc. Delaware 100%
Household Capital Markets, Inc. Delaware 100%
Household Commercial Financial Delaware 100%
Services, Inc.
Business Realty Inc. Delaware 100%
Business Lakeview, Inc. Delaware 100%
Capital Graphics, Inc. Delaware 100%
Color Prelude Inc. Delaware 100%
HCFS Business Equipment Corporation Delaware 100%
HFC Commercial Realty, Inc. Delaware 100%
Cast Iron Building Corporation Delaware 100%
Center Realty, Inc. Delaware 100%
Com Realty, Inc. Delaware 100%
Lighthouse Property Corporation Delaware 100%
G.C. Center, Inc. Delaware 100%
Land of Lincoln Builders, Inc. Illinois 100%
PPSG Corporation Delaware 100%
HFC Leasing, Inc. Delaware 100%
First HFC Leasing Corporation Delaware 100%
Second HFC Leasing Corporation Delaware 100%
Valley Properties Corporation Tennessee 100%
Fifth HFC Leasing Corporation Delaware 100%
Sixth HFC Leasing Corporation Delaware 100%
Seventh HFC Leasing Corporation Delaware 100%
Eighth HFC Leasing Corporation Delaware 100%
Tenth HFC Leasing Corporation Delaware 100%
Eleventh HFC Leasing Corporation Delaware 100%
Thirteenth HFC Leasing Corporation Delaware 100%
Fourteenth HFC Leasing Corporation Delaware 100%
Seventeenth HFC Leasing Corporation Delaware 100%
Nineteenth HFC Leasing Corporation Delaware 100%
Twenty-second HFC Leasing Corporation Delaware 100%
Twenty-sixth HFC Leasing Corporation Delaware 100%
Beaver Valley, Inc. Delaware 100%
Hull 752 Corporation Delaware 100%
Hull 753 Corporation Delaware 100%
Third HFC Leasing Corporation Delaware 100%
Macray Corporation California 100%<PAGE>
<PAGE> 3
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Fourth HFC Leasing Corporation Delaware 100%
Pargen Corporation California 100%
Fifteenth HFC Leasing Corporation Delaware 100%
Hull Fifty Corporation Delaware 100%
Household Capital Investment Corporation Delaware 100%
B&K Corporation Michigan 94%
Household Commercial of California, Inc. California 100%
Amstelveen FSC, Ltd. Bermuda 99%
Night Watch FSC, Ltd. Bermuda 100%
Overseas Leasing Two FSC, Ltd. Bermuda 99%
Overseas Leasing Four FSC, Ltd. Bermuda 99%
Overseas Leasing Five FSC, Ltd. Bermuda 99%
Household Real Estate Equities, Inc. Delaware 100%
SPG General, Inc. Delaware 100%
OLC, Inc. Rhode Island 100%
OPI, Inc. Virginia 100%
The Generra Company Delaware 80%
Household Finance Consumer Discount Company Pennsylvania 100%
Household Finance Corporation II Delaware 100%
Household Finance Corporation of Alabama Alabama 100%
Household Finance Corporation of California Delaware 100%
Household Finance Corporation of Nevada Delaware 100%
Household Finance Realty Corporation of Delaware 100%
New York
Household Finance Industrial Loan Company Iowa 100%
of Iowa
Household Finance Realty Corporation of Delaware 100%
Nevada
Household Finance Corporation III Delaware 100%
Household Realty Corporation Delaware 100%
Overseas Leasing One FSC, Ltd. Bermuda 100%
Household Retail Services, Inc. Delaware 100%
HRSI Funding, Inc. Nevada 100%
Household Financial Center Inc. Tennessee 100%
Household Group Australia, Inc. Delaware 100%
HFC of Australia, Ltd. Victoria 100%
Household Financial Services, Ltd. NewSouthWales 100%
BFC Finance Limited Victoria 100%
Eastrock Finance Corporation Pty. Ltd. Victoria 100%
Heritage General Insurance Limited NewSouthWales 100%
Heritage Life Insurance Ltd. NewSouthWales 100%
HFC Leasing Ltd. NewSouthWales 100%
Household Building Society Tasmania 100%
Inter City Lease Management Pty. Ltd. NewSouthWales 100%<PAGE>
<PAGE> 4
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
HFC Australia Deposits Pty Limited NewSouthWales 100%
Household Industrial Finance Company Minnesota 100%
Household Industrial Loan Co. of Kentucky Kentucky 100%
Household Insurance Agency, Inc. Nevada 100%
Household Recovery Services Corporation Delaware 100%
Household Relocation Management, Inc. Illinois 100%
Mortgage One Corporation Delaware 100%
Mortgage Two Corporation Delaware 100%
Sixty-First HFC Leasing Corporation Delaware 100%
Household Bank (California), N.A. U.S. 100%
Household Receivables Funding Corporation Nevada 100%
Household Receivables Funding Delaware 100%
Corporation II
Household Receivables Funding, Inc. Delaware 100%
Household Financial Group, Ltd. Delaware 100%
Household Global Funding, Inc. Delaware 78%
Household International (U.K.) Limited England 100%
D.L.R.S. Limited Cheshire 100%
HFC Bank plc U.K. 100%
Hamilton Life Assurance Co. Limited U.K. 100%
Hamilton Insurance Company Limited U.K. 100%
Hamilton Financial Planning Services U.K. 100%
Limited
HFC Pension Plan Limited England 100%
Household Funding Limited U.K. 100%
Household Investments Limited England/Wales 100%
Household Leasing Limited England 100%
Household Management Corporation Limited England/Wales 100%
Household Overseas Limited England 100%
Household International Netherlands, B.V. Netherlands 100%
Household Financial Corporation Limited Ontario 100%
HFC of Canada Canada 100%
Household Realty Corporation Limited Ontario 100%
Household Trust Company Canada 100%
Merchant Retail Services Limited Ontario 100%
Household Mexico, Inc. Delaware 100%
Household de Mexico S.A. de C.V. Mexico 99%
Household Reinsurance Ltd. Bermuda 100%
U:\WP\EMP819\EDGAR\IEX21.WP1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 320,200
<SECURITIES> 8,672,900
<RECEIVABLES> 22,024,400
<ALLOWANCES> 875,100
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 942,400
<DEPRECIATION> 480,300
<TOTAL-ASSETS> 34,804,500
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,378,700
<COMMON> 114,900
3,700
320,000
<OTHER-SE> 2,007,200
<TOTAL-LIABILITY-AND-EQUITY> 34,804,500
<SALES> 0
<TOTAL-REVENUES> 3,403,500
<CGS> 0
<TOTAL-COSTS> 1,640,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 502,200
<INTEREST-EXPENSE> 878,600
<INCOME-PRETAX> 382,100
<INCOME-TAX> 125,500
<INCOME-CONTINUING> 256,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256,600
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.43
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE WITH
FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE COMPANY'S
BALANCE SHEETS WERE NON-CLASSIFIED.
</FN>
</TABLE>
