FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: February 1, 1994
----------------
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
- --------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Identification
incorporation) Number) Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 564-5000
--------------
<PAGE>
Item 5. Other Events
Press Release pertaining to the financial results of
Household International, Inc. for the quarter and year
ended December 31, 1993. Said release is filed as an
exhibit hereto.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not Applicable
(b) Pro forma financial information.
Not Applicable
(c) Exhibits.
No. Exhibit
--- -------
99 Press Release titled "Household Reports
Fourth Quarter Results" dated
February 1, 1994.
<PAGE>
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 hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
By: /s/ John W. Blenke
-----------------------------
John W. Blenke
Assistant General Counsel &
Secretary
Dated: February 1, 1994
----------------
U:\WP\HFSC98\EDGAR\I8K2194.WP <PAGE>
Exhibit Index
-------------
Exhibit
No. Exhibit
- ------- -------
99 Press Release titled "Household
Reports Fourth Quarter Results"
dated February 1, 1994.
For Release: Immediately
Contact: Michael H. Morgan
Vice President-Corporate Communications
708/564-6053
Robert J. Hartney
Director-Public Relations
708/564-7060 or home: 708/480-9859
HOUSEHOLD INTERNATIONAL REPORTS:
FOURTH QUARTER INCOME UP 56%, EPS UP 46%; QUARTERLY RECORDS SET
FULL YEAR INCOME ALSO A RECORD, UP 56%
PROSPECT HEIGHTS, IL., February 1, 1994 -- Household
International today reported that net income increased 56 percent
to $93 million for the fourth quarter of 1993, compared with
$59.8 million for the fourth quarter of 1992. Fully diluted
earnings per share (adjusted for a 2-for-1 stock split in October
1993) were 89 cents, compared with 61 cents a year earlier, an
increase of 46 percent. It was the company's eighth consecutive
quarter of net income improvement, and represented a record level
of quarterly income and earnings per share.
Household said, as a result of the strong fourth quarter,
full-year net income also increased to a record level, 56 percent
above the prior year.
Compared to the prior year, earnings for the quarter were
reduced by 5 cents per share because of the issuance of 4 million
shares of common stock in the first quarter of 1993, 3 cents per
share as a result of adopting the new accounting standard for
post-retirement benefits, and 4 cents per share because of a
higher corporate tax rate from new tax legislation.
Donald C. Clark, chairman and chief executive officer of
Household, said, "We finished the year with a very strong quarter
which slightly exceeded our expectations. The quarter saw
improved performance at most of our businesses and an
increasingly positive consumer market. The fourth quarter
benefited from seasonal factors including strong growth in
interchange income from our credit card business. Domestic
managed consumer receivables grew 5 percent in the quarter and 14
percent for all of 1993, largely due to the continuing success of
the GM Card. Credit quality improved throughout the company with
consumer delinquency declining for the seventh consecutive
quarter to the lowest level since 1989."
Household said that despite declining delinquency, credit
loss reserves for the managed finance and banking portfolio were
increased by $61 million, or 10 percent, in the quarter, largely
to recognize the rapid growth of the GM card portfolio and that
credit losses will naturally rise as the portfolio ages.
Finance and Banking Segment Results
- -----------------------------------
Household said income from its finance and banking segment
was $91 million in the fourth quarter, up 40 percent from $64.8
million in the fourth quarter of 1992 and up 15 percent from the
third quarter of 1993. The improvement was due to increased
profitability in the bankcard and domestic consumer finance
operations and improved results in the United Kingdom.
Net interest spreads on a managed basis were stable to
slightly higher versus both the previous quarter and year ago
quarter, due to the relatively stronger growth in higher margin
unsecured products.
The company said that overall improved foreign results were
achieved despite an increased loss in its Canadian operation due
to higher loss provisions and expenses relating to the company's
plans for restructuring that operation. Household said its
United Kingdom unit posted a profit of $6.5 million in the
quarter, compared with a loss of nearly $8 million in the prior
year quarter.
For the quarter, overall two-months-and-over consumer
delinquency was 3.58 percent of managed consumer receivables,
compared with 3.85 percent at the previous quarter-end and 4.48
percent a year ago. Credit loss reserves for the managed finance
and banking portfolio at December 31 were higher than a year ago
by $140 million, or 28 percent, despite a $128 million, or 11
percent, decline in delinquency.
Total annualized consumer net chargeoffs as a percent of
average consumer receivables managed were 2.96 percent for the
quarter, up slightly from the prior quarter due to higher,
nonrecurring Canadian chargeoffs and the maturing GM Card
portfolio. Excluding the Canadian impacts, chargeoffs would have
been 2.87 percent, flat with the prior quarter. The GM Card
portfolio contributed 10 basis points of the increase in net
chargeoffs in the quarter. Reductions in other parts of the
portfolio partially offset the Canadian and GM Card increases.
Chargeoffs in 1993 represented a substantial decline from 3.38
percent for the fourth quarter of 1992.
Operating expenses for the finance and banking segment
totaled $370 million in the quarter, flat with the prior quarter
and compared with $317 million in the year ago quarter.
Contributing to the year-over-year increase were expenses related
to a 54 percent increase in the size of the managed credit card
portfolio. Operating expenses as a percent of average
receivables owned or serviced were at an annual rate of 3.40
percent in the fourth quarter, compared with 3.56 percent in the
prior quarter and 3.49 percent in the year ago quarter.
Individual Life Insurance Segment Results
- -----------------------------------------
Net income in the individual life insurance segment was
$10.2 million, compared with $15.4 million for the fourth quarter
of 1992. The decline, which was expected, was due to a lower
level of capital gains in the investment portfolio.
Liquidating Commercial Lines Segment Results
- --------------------------------------------
The fourth quarter loss of $2.5 million for the liquidating
commercial lines segment was consistent with the company's
expectations and represented a sharp reduction from the $10.5
million loss in the prior quarter. Total nonperforming assets in
the segment of $514 million (including nonaccrual loans,
renegotiated loans and real estate owned) were $192 million, or
27 percent, below the year ago level and were down $9 million in
the quarter. Reserves for credit losses stood at $173 million at
year end, compared with $203 million a year ago. Reserves as a
percent of nonperforming loans increased to 67 percent at
December 31, compared with 45 percent a year ago.
Net chargeoffs for the segment were $31 million for the
quarter, compared with $47 million in the prior quarter and $18
million in the prior year quarter. Operating expenses were $10.5
million, up slightly from $8.3 million in the 1992 fourth
quarter. The company said its real estate owned portfolio
generated net operating income of about 8 percent of the carrying
value of the portfolio in the fourth quarter on an annualized
basis.
Liquidating commercial assets at December 31 totaled $1.56
billion, $295 million below the level of a year ago.
Corporate
- ---------
Corporate expenses, net of tax benefits, were $5.7 million,
compared with $16.6 million for the fourth quarter of 1992. The
1992 fourth quarter included a $15 million provision for credit
losses to establish an unallocated corporate credit loss reserve.
Full Year Results
- -----------------
For the full year 1993, Household's net income totaled a
record $298.7 million, an increase of 56 percent over 1992.
Fully diluted earnings per share (adjusted for a 2-for-1 stock
split in October 1993) were $2.85 compared with $1.93 in the
prior year, an increase of 48 percent.
Compared to the prior year, earnings for 1993 were reduced
by 16 cents per share because of the 4 million share common stock
issuance, 11 cents per share related to post-retirement benefits
and 9 cents per share because of the new tax law.
Finance and banking segment earnings totaled $303.2 million,
51 percent higher than 1992 earnings of $200.6 million. The
higher earnings were due to higher profits from bankcard,
domestic consumer finance and the company's United Kingdom
business.
Income for the individual life insurance segment was $45.2
million, an 8 percent increase over 1992.
The full year loss at the liquidating commercial lines
segment was $21.2 million, compared with $14 million in the prior
year. The higher loss was primarily attributable to a higher
level of chargeoffs taken in the third quarter of 1993 related to
the resolution of the company's largest problem credit in a cash
settlement.
Household International, Inc. is a major provider of
consumer finance and banking services and consumer insurance and
investment products.
(See attached financial tables)
# # #
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
Household International, Inc. and Subsidiaries
All dollar amounts other than per share data are stated in millions.*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Percent
Three months ended December 31 1993 1992 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest margin and other revenues $ 871.2 $ 749.0 16.3%
Provision for credit losses - owned receivables 174.7 201.8 (13.4)
Total costs and expenses 554.7 464.4 19.4
Income taxes 48.8 23.0 112.2
- ---------------------------------------------------------------------------------------------------
Net income $ 93.0 $ 59.8 55.5%
===================================================================================================
Earnings per common share:
Primary $ .90 $ .63 42.9%
Fully diluted .89 .61 45.9
Average number of common shares outstanding:
Primary 95.1 83.0 14.6
Fully diluted 96.9 86.6 11.9
Dividends declared per common share $ .30 $ .29 3.4%
===================================================================================================
Three months ended December 31
- ---------------------------------------------------------------------------------------------------
Segment income:
Finance and Banking $ 91.0 $ 64.8 40.4%
Individual Life Insurance 10.2 15.4 (33.8)
Corporate (5.7) (16.6) NM
- ---------------------------------------------------------------------------------------------------
Core Business 95.5 63.6 50.2
Liquidating Commercial Lines (2.5) (3.8) 34.2
- ---------------------------------------------------------------------------------------------------
Total $ 93.0 $ 59.8 55.5%
===================================================================================================
Dec. 31, Sept. 30, Dec. 31,
1993 1993 1992
- ---------------------------------------------------------------------------------------------------
Assets $32,961.5 $32,462.8 $31,128.4
Financing and Banking receivables managed 29,168.3 28,042.6 26,395.6
Liquidating commercial assets 1,555.7 1,658.6 1,851.2
Deposits 7,516.1 7,587.5 8,030.3
Convertible preferred stock 19.3 20.1 36.0
Preferred Stock 320.0 365.0 300.0
Common shareholders' equity** 2,078.3 1,967.1 1,545.6
Book value per common share** $ 22.01 $ 20.95 $ 18.64
Total shareholders' equity as a percent of assets** 7.33% 7.25% 6.04%
Number of common shares outstanding:
Primary 95.3 94.9 83.6
Fully diluted 97.1 96.8 86.8
- ---------------------------------------------------------------------------------------------------
* All share and per share data reflect a 2-for-1 stock split effective October 15, 1993.
** The company adopted Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for Income Taxes" on
January 1, 1993. The effect of adopting this accounting standard reduced retained earnings at December 31, 1992
by $63 million. As a result, book value per share and total shareholder's equity as a percent of assets have
been restated. The impact of FAS 109 on these statements of income for periods prior to January 1, 1993 is
immaterial. At December 31, 1993, equity includes a positive adjustment of $40.5 million related to
implementation of FAS 115 which marks certain investment securities to market.
</TABLE>
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
FULL YEAR FINANCIAL HIGHLIGHTS
Household International, Inc. and Subsidiaries
All dollar amounts other than per share data are stated in millions.*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Percent
Year ended December 31 1993 1992 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest margin and other revenues $3,305.0 $2,760.4 19.7%
Provision for credit losses-owned receivables 735.8 671.5 9.6
Total costs and expenses 2,118.5 1,810.9 17.0
Income taxes 152.0 87.1 74.5
- ---------------------------------------------------------------------------------------------------
Net income $ 298.7 $ 190.9 56.5%
===================================================================================================
Earnings per common share:
Primary $ 2.91 $ 1.97 47.7%
Fully diluted 2.85 1.93 47.7
Average number of common shares outstanding:
Primary 92.0 81.6 12.7
Fully diluted 94.8 86.0 10.2
Dividends declared per common share $ 1.18 $ 1.145 3.1%
===================================================================================================
Year ended December 31
Segment income:
Finance and Banking $ 303.2 $ 200.6 51.1%
Individual Life Insurance 45.2 41.7 8.4
Corporate (28.5) (37.4) 23.8
- ---------------------------------------------------------------------------------------------------
Core Business 319.9 204.9 56.1
Liquidating Commercial Lines (21.2) (14.0) (51.4)
- ---------------------------------------------------------------------------------------------------
Total $ 298.7 $ 190.9 56.5%
===================================================================================================
*All share and per share data reflect a 2-for-1 stock split effective October 15, 1993.
/TABLE
<PAGE>
QUARTERLY FINANCIAL SUPPLEMENT
December 31, 1993
RECEIVABLES ANALYSIS
<TABLE>
<CAPTION>
=====================================================================================================================
% Change from Prior:
Managed Portfolio ($ millions) 12/31/93 9/30/93 12/31/92 Qtr. Year
- ---------------------------------------------------------------------------------------------------------------------
The combination of receivables owned and receivables which have been sold to public and private investors with
limited recourse.
<S> <C> <C> <C> <C> <C>
First mortgage $ 3,534.1 $ 3,754.9 $ 4,513.8 (5.9)% (21.7)%
Home equity 7,880.4 7,986.6 7,742.9 (1.3) 1.8
Other secured 875.4 818.1 827.9 7.0 5.7
Bankcard 8,842.6 7,730.8 5,726.6 14.4 54.4
Merchant Participation 2,949.1 2,772.7 2,666.3 6.4 10.6
Other unsecured 4,320.8 4,165.4 4,085.4 3.7 5.8
Equipment financing and other 765.9 814.1 832.7 (5.9) (8.0)
- ---------------------------------------------------------------------------------------------------------------------
Managed Portfolio $29,168.3 $28,042.6 $26,395.6 4.0 % 10.5 %
=====================================================================================================================
Receivables (% of Managed Portfolio)
- ---------------------------------------------------------------------------------------------------------------------
First mortgage 12.1% 13.4% 17.1%
Home equity 27.0 28.5 29.3
Other secured 3.0 2.9 3.1
Bankcard 30.3 27.6 21.7
Merchant participation 10.1 9.9 10.1
Other unsecured 14.8 14.8 15.5
Equipment financing and other 2.7 2.9 3.2
- ---------------------------------------------------------------------------------------------------------------------
Receivables ($ millions)
- ---------------------------------------------------------------------------------------------------------------------
First mortgage $ 3,534.1 $ 3,754.9 $ 4,513.8 (5.9)% (21.7)%
Home equity 2,850.9 3,154.4 2,943.6 (9.6) (3.1)
Other secured 875.4 818.1 827.9 7.0 5.7
Bankcard 4,356.9 4,300.6 3,416.9 1.3 27.5
Merchant participation 2,636.5 2,389.5 2,063.8 10.3 27.7
Other unsecured 4,320.8 4,165.4 3,850.6 3.7 12.2
Equipment financing and other 765.9 814.1 832.7 (5.9) (8.0)
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned 19,340.5 19,397.0 18,449.3 (0.3) 4.8
- ---------------------------------------------------------------------------------------------------------------------
Accrued finance charges 251.9 267.0 257.7 (5.7) (2.3)
Credit loss reserve for receivables owned (424.0) (414.8) (345.8) 2.2 22.6
Unearned credit insurance premiums and claims reserves (117.5) (121.5) (113.7) (3.3) 3.3
Amounts due and deferred from consumer receivable sales 735.0 805.2 873.8 (8.7) (15.9)
Reserve for receivables serviced with limited recourse (222.8) (170.6) (160.7) 30.6 38.6
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned, net 19,563.1 19,762.3 18,960.6 (1.0) 3.2
- ---------------------------------------------------------------------------------------------------------------------
Receivables serviced with limited recourse:
Home equity 5,029.5 4,832.2 4,799.3 4.1 4.8
Bankcard 4,485.7 3,430.2 2,309.7 30.8 94.2
Merchant participation 312.6 383.2 602.5 (18.4) (48.1)
Other unsecured --- --- 234.8 0.0 (100.0)
- ---------------------------------------------------------------------------------------------------------------------
Total receivables serviced with limited recourse 9,827.8 8,645.6 7,946.3 13.7 23.7
- ---------------------------------------------------------------------------------------------------------------------
Receivables serviced with no recourse 15,229.4 14,808.7 11,406.7 2.8 33.5
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned or serviced $44,620.3 $43,216.6 $38,313.6 3.2 % 16.5 %
=====================================================================================================================
/TABLE
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
=====================================================================================================================
Three Months Ended: % Change from Prior:
Consolidated ($ millions) 12/31/93 9/30/93 12/31/92 Qtr. Year
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance income $ 628.5 $ 650.4 $ 632.7 (3.4)% (0.7)%
Interest income from noninsurance investments 27.5 33.8 36.9 (18.6) (25.5)
Interest expense 271.3 279.8 325.3 (3.0) (16.6)
- ---------------------------------------------------------------------------------------------------------------------
Interest margin 384.7 404.4 344.3 (4.9) 11.7
Provision for credit losses-owned 174.7 204.1 201.8 (14.4) (13.4)
- ---------------------------------------------------------------------------------------------------------------------
Interest margin after loss provision 210.0 200.3 142.5 4.8 47.4
- ---------------------------------------------------------------------------------------------------------------------
Securitization and servicing fee income 158.7 109.8 125.9 44.5 26.1
Insurance premiums/contract revenues 72.3 78.6 68.9 (8.0) 4.9
Investment income 132.3 167.8 130.7 (21.2) 1.2
Fee income 72.8 80.3 64.3 (9.3) 13.2
Other income 50.4 35.3 14.9 42.8 +100.0
- ---------------------------------------------------------------------------------------------------------------------
Interest margin after provision and other revenues 696.5 672.1 547.2 3.6 27.3
- ---------------------------------------------------------------------------------------------------------------------
Salaries and fringe benefits 164.6 151.4 136.3 8.7 20.8
Other operating expenses 256.4 264.9 199.0 (3.2) 28.8
Policyholders' benefits 133.7 139.5 129.1 (4.2) 3.6
- ---------------------------------------------------------------------------------------------------------------------
Total costs and expenses 554.7 555.8 464.4 (0.2) 19.4
- ---------------------------------------------------------------------------------------------------------------------
Income before taxes 141.8 116.3 82.8 21.9 71.3
Income taxes 48.8 40.8 23.0 19.6 +100.0
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 93.0 $ 75.5 $ 59.8 23.2 % 55.5 %
=====================================================================================================================
OPERATIONS BY SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Finance and Banking $ 91.0 $ 78.8 $ 64.8 15.5 % 40.4 %
Individual Life Insurance 10.2 13.5 15.4 (24.4) (33.8)
Corporate (5.7) (6.3) (16.6) 9.5 65.7
- ---------------------------------------------------------------------------------------------------------------------
Core business 95.5 86.0 63.6 11.0 50.2
Liquidating Commercial Lines (2.5) (10.5) (3.8) 76.2 34.2
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 93.0 $ 75.5 $ 59.8 23.2 % 55.5 %
=====================================================================================================================
FINANCE AND BANKING SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Finance income $ 603.9 $ 620.8 $ 600.1 (2.7)% 0.6 %
Interest income from noninsurance investments 27.4 33.9 36.8 (19.2) (25.5)
Interest expense 253.7 265.8 295.5 (4.6) (14.1)
- ---------------------------------------------------------------------------------------------------------------------
Interest margin 377.6 388.9 341.4 (2.9) 10.6
- ---------------------------------------------------------------------------------------------------------------------
Securitization and servicing fee income 158.7 109.8 125.9 44.5 26.1
Insurance premiums/contract revenues 39.2 45.0 39.3 (12.9) (0.3)
Investment income 5.3 17.5 15.1 (69.7) (64.9)
Fee income 72.3 79.7 64.1 (9.3) 12.8
Other income 27.4 32.1 20.9 (14.6) 31.1
- ---------------------------------------------------------------------------------------------------------------------
Interest margin and other revenues 680.5 673.0 606.7 1.1 12.2
- ---------------------------------------------------------------------------------------------------------------------
Provision for credit losses-owned 156.6 160.2 175.3 (2.2) (10.7)
Operating expenses 370.3 370.3 316.9 0.0 16.9
Policyholders' benefits 18.1 24.5 23.5 (26.1) (23.0)
Income taxes 44.5 39.2 26.2 13.5 69.8
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 91.0 $ 78.8 $ 64.8 15.5 % 40.4 %
=====================================================================================================================
Average receivables owned $19,265.1 $19,698.1 $18,432.1 (2.2)% 4.5%
Average receivables serviced with limited recourse 9,199.7 8,125.1 7,048.9 13.2 30.5
- ---------------------------------------------------------------------------------------------------------------------
Average receivables managed 28,464.8 27,823.2 25,481.0 2.3 11.7
Average receivables serviced with no recourse 15,131.0 13,804.0 10,823.2 9.6 39.8
- ---------------------------------------------------------------------------------------------------------------------
Average receivables owned or serviced $43,595.8 $41,627.2 $36,304.2 4.7 % 20.1 %
=====================================================================================================================
Finance & Banking op. exp. as a % of avg.
receivables owned or serviced 3.40% 3.56% 3.49% 1.1 % 4.1 %
- ---------------------------------------------------------------------------------------------------------------------
INDIVIDUAL LIFE INSURANCE SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Investment income $ 124.6 $ 150.3 $ 115.6 (17.1)% 7.8 %
Contract revenues 33.1 33.6 29.6 (1.5) 11.8
- ---------------------------------------------------------------------------------------------------------------------
Revenues 157.7 183.9 145.2 (14.2) 8.6
- ---------------------------------------------------------------------------------------------------------------------
Policyholders' benefits 115.6 115.0 105.6 0.5 9.5
Operating expenses 26.3 46.4 16.2 (43.3) 62.3
Income taxes 5.6 9.0 8.0 (37.8) (30.0)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 10.2 $ 13.5 $ 15.4 (24.4)% (33.8)%
=====================================================================================================================
LIQUIDATING COMMERCIAL LINES SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Interest margin $ 13.6 $ 22.7 $ 12.8 (40.1)% 6.3 %
Other income 13.1 7.0 1.2 87.1 +100.0
- ---------------------------------------------------------------------------------------------------------------------
Interest margin and other revenues 26.7 29.7 14.0 (10.1) 90.7
- ---------------------------------------------------------------------------------------------------------------------
Provision for credit losses-owned 18.1 43.9 11.5 (58.8) 57.4
Operating expenses 10.5 1.5 8.3 +100.0 26.5
Income tax benefit 0.6 (5.2) (2.0) (100.0) (100.0)
- ---------------------------------------------------------------------------------------------------------------------
Net loss $ (2.5) $ (10.5) $ (3.8) 76.2 % 34.2 %
=====================================================================================================================
Average receivables owned $ 1,247.2 $ 1,400.8 $ 1,662.7 (11.0)% (25.0)%
Average assets $ 1,590.6 $ 1,717.9 $ 1,884.1 (7.4)% (15.6)%
- ---------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
Finance and Banking Segment
- ---------------------------
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
retain a limited recourse obligation. Securitizations impact the
classification of revenues and expenses in the income statement. Net
interest margin, non-interest income such as interchange fee income and
provision for loan losses related to receivables sold are reported net
non-interest income.
Managed Income Statement
- ------------------------
To aid in analysis, the following table shows the pro forma impact on
income statement classifications assuming the receivables securitized and
sold were instead held in portfolio. This pro forma analysis does not
adjust the results to reflect the differences between the company's
accounting policies for receivables held in portfolio and receivables
sold and serviced with limited recourse. Accordingly, net income on the
pro forma managed basis equals net income on a historical owned basis.
FOR THE QUARTER ENDED 12/31/93
<TABLE>
<CAPTION>
As Managed
($ millions) Reported Adjustments Basis
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest margin $377.6 $169.6 $547.2
Non-interest income 302.9 (64.8) 238.1
- ----------------------------------------------------------------------------
Interest margin and other revenues 680.5 104.8 785.3
Provision for credit losses 156.6 104.8 261.4
Other costs and expenses 388.4 0.0 388.4
- ----------------------------------------------------------------------------
Total costs and expenses 545.0 104.8 649.8
- ----------------------------------------------------------------------------
Income before taxes 135.5 0.0 135.5
Income taxes 44.5 0.0 44.5
- ----------------------------------------------------------------------------
Net income $ 91.0 0.0 $ 91.0
============================================================================
</TABLE>
Income Statement on a Managed Basis
- -----------------------------------
As receivables are securitized and sold rather than held in portfolio,
net interest income is shifted to securitization and servicing fee income.
Due to the growing level of securitized assets, the comparability of net
interest margin between periods may be distorted. To aid in analysis, net
interest margin is presented below on a pro forma basis as if receivables
securitized and sold were held in portfolio.
<TABLE>
<CAPTION>
% Change from Prior:
($ millions) 12/31/93 ** 9/30/93 ** 12/31/92 ** Qtr. Year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income $ 873.3 12.3% $ 861.8 12.4% $ 832.9 13.1% 1.3 % 4.9 %
Investment income from noninsurance investments 27.4 5.2 33.9 6.4 36.8 7.8 (19.2) (25.5)
Interest expense 353.5 5.0 364.1 5.2 387.5 6.1 (2.9) (8.8)
- --------------------------------------------------------------------------------------------------------------------------
Net interest margin 547.2 7.2% 531.6 7.1% 482.2 7.0% 2.9 13.5
Non-interest income 238.1 202.9 206.0 17.3 15.6
- --------------------------------------------------------------------------------------------------------------------------
Interest margin and other revenues 785.3 734.5 688.2 6.9 14.1
Provision for credit losses 261.4 221.7 256.8 17.9 1.8
Other costs and expenses 388.4 394.8 340.4 (1.6) 14.1
- --------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 649.8 616.5 597.2 5.4 8.8
- --------------------------------------------------------------------------------------------------------------------------
Income before taxes 135.5 118.0 91.0 14.8 48.9
Income taxes 44.5 39.2 26.2 13.5 69.8
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 91.0 $ 78.8 $ 64.8 15.5 % 40.4 %
==========================================================================================================================
Average managed receivables $28,464.8 $27,823.2 $25,481.0 2.3 % 11.7 %
- --------------------------------------------------------------------------------------------------------------------------
Average non-insurance investments 2,106.1 2,102.6 1,884.7 0.2 11.7
- --------------------------------------------------------------------------------------------------------------------------
Average interest-earning assets $30,570.9 $29,925.8 $27,365.7 2.2 % 11.7 %
==========================================================================================================================
**% Columns: comparison to appropriate earning assets, annualized.
/TABLE
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CREDIT QUALITY/CREDIT LOSS RESERVES
<TABLE>
<CAPTION>
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($ millions) 12/31/93 9/30/93 12/31/92
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TWO MONTHS AND OVER CONTRACTUAL DELINQUENCY
As a percent of managed consumer receivables, excludes continuing commercial.
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<S> <C> <C> <C>
Domestic:
First mortgage 1.42% 1.21% 1.08%
Home equity 3.16 3.38 4.05
Other secured 1.38 1.83 2.71
Bankcard 2.41 2.57 2.70
Merchant participation 5.01 5.43 6.34
Other unsecured 6.63 7.23 7.77
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Total domestic 3.28 3.50 3.89
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United Kingdom 6.74 7.34 10.13
Canada 4.65 5.11 6.17
Australia 8.93 9.59 12.48
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Total foreign 5.82 6.32 8.08
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Total 3.58% 3.85% 4.48%
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QUARTER-TO-DATE CHARGEOFFS, NET OF RECOVERIES
As a percent of average managed consumer receivables, annualized, excludes continuing commercial.
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Domestic:
First mortgage 0.21% 0.59% 0.15%
Home equity 1.17 0.87 1.16
Other secured 0.64 3.11 2.03
Bankcard 3.99 3.78 5.18
Merchant participation 4.26 4.44 4.60
Other unsecured 5.41 5.99 6.91
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Total domestic 2.82 2.78 3.07
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United Kingdom 4.07 4.62 8.64
Canada 3.86 2.83 3.70
Australia 3.77 2.61 3.48
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Total foreign 3.92 3.38 5.18
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Total 2.96% 2.86% 3.38%
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FINANCE AND BANKING (managed basis)
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Nonaccrual loans $ 528.7 $ 565.4 $ 683.9
Loans 90 or more days delinquent and still accruing* 207.3 198.5 210.4
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Total nonperforming loans 736.0 763.9 894.3
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Real estate owned 168.9 193.1 197.5
Other assets acquired through foreclosure 82.9 84.4 102.6
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Total nonperforming assets $ 987.8 $1,041.4 $1,194.4
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*consists primarily of bankcard and merchant participation receivables,
consistent with industry practice.<PAGE>
LIQUIDATING COMMERCIAL LINES
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Nonaccrual loans-real estate $ 54.8 $ 79.6 $ 80.7
Nonaccrual loans-other 173.9 164.1 178.5
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Total nonaccrual loans 228.7 243.7 259.2
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Renegotiated loans 28.7 17.3 196.8
Real estate owned (REO) 256.6 262.2 249.6
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Total nonperforming assets 514.0 523.2 705.6
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Liquidating commercial assets $1,555.7 $1,658.6 $1,851.2
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CREDIT LOSS RESERVES
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Reserves for owned receivables at beginning of quarter $ 625.7 $ 591.8 $ 559.4
Provision for credit losses-owned:
Finance and Banking 156.6 160.2 175.3
Liquidating Commercial Lines 18.1 43.9 11.5
Corporate 0.0 0.0 15.0
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Total provision for credit losses-owned 174.7 204.1 201.8
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Owned receivables-chargeoffs, net of recoveries:
Finance and Banking (153.3) (152.3) (162.3)
Liquidating Commercial Lines (31.1) (46.9) (17.6)
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Total net chargeoffs-owned (184.4) (199.2) (179.9)
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Credit loss reserves on receivables purchased, net 1.1 (1.0) (8.4)
Other, net 4.8 30.0 (8.8)
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Reserves for owned receivables at end of quarter 621.9 625.7 564.1
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Credit loss reserves for receivables serviced
with limited recourse at beginning of quarter 170.6 182.5 119.4
Provision for credit losses 104.8 61.5 81.5
Chargeoffs, net of recoveries (52.3) (40.4) (46.1)
Other, net (0.3) (33.0) 5.9
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Credit loss reserves for receivables serviced
with limited recourse at end of quarter 222.8 170.6 160.7
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Total credit loss reserves at end of quarter $ 844.7 $ 796.3 $ 724.8
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Finance and Banking credit loss reserves * * *
Receivables owned $ 424.0 2.19% $ 414.8 2.14% $ 345.8 1.87%
Receivables serviced with limited recourse 222.8 2.27 170.6 1.97 160.7 2.02
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Receivables managed 646.8 2.22% 585.4 2.09% 506.5 1.92%
Liquidating Commercial Lines credit loss reserves 172.9 185.9 203.3
Corporate reserves 25.0 25.0 15.0
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Total credit loss reserves $ 844.7 $ 796.3 $ 724.8
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*% Columns: comparisons to appropriate receivables
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