<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 March 31, 1996
--------------
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: (847) 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 April 30, 1996, there were 97,341,146 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
- --------------------
All dollar amounts except per share data are stated in millions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Three months ended March 31 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Finance income . . . . . . . . . . . . . . . . . . . . . . . . $679.5 $681.7
Interest income from noninsurance investment securities. . . . 20.3 36.3
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 353.4 377.4
------------------
Net interest margin. . . . . . . . . . . . . . . . . . . . . . 346.4 340.6
Provision for credit losses on owned receivables . . . . . . . 191.3 164.3
------------------
Net interest margin after provision for credit losses. . . . . 155.1 176.3
------------------
Securitization income. . . . . . . . . . . . . . . . . . . . . 279.4 212.8
Insurance premiums and contract revenues . . . . . . . . . . . 63.9 87.7
Investment income. . . . . . . . . . . . . . . . . . . . . . . 56.9 139.8
Fee income . . . . . . . . . . . . . . . . . . . . . . . . . . 49.9 46.8
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 25.3 40.9
------------------
Total other revenues . . . . . . . . . . . . . . . . . . . . . 475.4 528.0
------------------
Salaries and fringe benefits . . . . . . . . . . . . . . . . . 131.7 145.8
Occupancy and equipment expense. . . . . . . . . . . . . . . . 52.4 59.6
Other marketing expenses . . . . . . . . . . . . . . . . . . . 100.4 91.8
Other servicing and administrative expenses. . . . . . . . . . 110.8 123.3
Policyholders' benefits. . . . . . . . . . . . . . . . . . . . 73.2 140.2
------------------
Total costs and expenses . . . . . . . . . . . . . . . . . . . 468.5 560.7
------------------
Income before income taxes . . . . . . . . . . . . . . . . . . 162.0 143.6
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 47.6
------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $110.5 $ 96.0
==================
Earnings per common share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $110.5 $ 96.0
Preferred dividends. . . . . . . . . . . . . . . . . . . . . (4.1) (6.9)
------------------
Earnings available to common shareholders. . . . . . . . . . $106.4 $ 89.1
==================
Average common and common equivalent shares. . . . . . . . . 98.5 98.3
------------------
Fully diluted earnings per common share. . . . . . . . . . . $ 1.08 $ .91
------------------
Primary earnings per common share . . . . . . . . . . .. . . 1.08 .91
------------------
Dividends declared per common share . . . . . . . . . . .. . . .34 .315
------------------
</TABLE>
See notes to condensed financial statements.<PAGE>
<PAGE> 3
Household International, Inc. and Subsidiaries
BALANCE SHEETS
- --------------
In millions.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 274.2 $ 270.4
Investment securities. . . . . . . . . . . . . . . . . . . . . . 3,898.7 4,639.5
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . 21,326.0 21,844.1
Acquired intangibles . . . . . . . . . . . . . . . . . . . . . . 561.4 578.5
Properties and equipment . . . . . . . . . . . . . . . . . . . . 380.8 391.7
Real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 123.1 136.5
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,328.0 1,358.1
--------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $27,892.2 $29,218.8
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Debt:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,766.5 $ 4,708.8
Commercial paper, bank and other borrowings. . . . . . . . . . 4,616.5 6,659.4
Senior and senior subordinated debt (with original
maturities over one year). . . . . . . . . . . . . . . . . . 11,619.5 11,227.9
--------------------------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,002.5 22,596.1
Insurance policy and claim reserves. . . . . . . . . . . . . . . 2,393.6 2,229.3
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . 1,515.2 1,422.5
--------------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 24,911.3 26,247.9
--------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trust* . . . . . . . . . . . . . . . 75.0 75.0
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . 205.0 205.0
--------------------------
Common shareholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . 115.2 115.2
Additional paid-in capital . . . . . . . . . . . . . . . . . . 384.1 383.4
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 2,769.9 2,696.6
Foreign currency translation adjustments . . . . . . . . . . . (128.7) (127.1)
Unrealized gain on investments, net. . . . . . . . . . . . . . 28.7 94.3
Common stock in treasury . . . . . . . . . . . . . . . . . . . (468.3) (471.5)
--------------------------
Total common shareholders' equity. . . . . . . . . . . . . . . . 2,700.9 2,690.9
--------------------------
Total liabilities and shareholders' equity . . . . . . . . . . . $27,892.2 $29,218.8
==========================
</TABLE>
* As described in note 8 to the financial statements contained in Household
International, Inc.'s Annual Report on Form 10-K for its fiscal year ended
December 31, 1995, the sole asset of the trust is $75 million of 8.25
percent Junior Subordinated Notes due June 30, 2025 issued by Household
International, Inc.
See notes to condensed financial statements.<PAGE>
<PAGE> 4
Household International, Inc. and Subsidiaries
STATEMENTS OF CASH FLOWS
- ------------------------
In millions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Three months ended March 31 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110.5 $ 96.0
Adjustments to reconcile net income to cash provided by operations:
Provision for credit losses on owned receivables . . . . . . . . . . 191.3 164.3
Insurance policy and claim reserves . . . . . . . . . . . . . . . . 7.8 111.3
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 53.2 70.3
Net realized gains from sales of assets. . . . . . . . . . . . . . . (3.4) (4.1)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.8 (25.7)
------------------------
Cash provided by operations. . . . . . . . . . . . . . . . . . . . . . 537.2 412.1
------------------------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,044.3) (618.0)
Matured. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146.2 269.4
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,372.6 469.6
Short-term investment securities, net change . . . . . . . . . . . . . 153.9 (652.8)
Receivables, excluding Visa*/MasterCard*
Originated or purchased . . . . . . . . . . . . . . . . . . . . . . (3,091.5) (2,840.0)
Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,854.8 1,743.3
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,186.6 685.2
Visa/MasterCard receivables:
Originated or collected, net . . . . . . . . . . . . . . . . . . . . (4,858.6) (4,226.8)
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71.5) -
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278.6 4,747.9
Disposition of banking organizations:
Assets sold, net . . . . . . . . . . . . . . . . . . . . . . . . . . - .2
Deposits and other liabilities sold. . . . . . . . . . . . . . . . . - (13.7)
Acquisition of business. . . . . . . . . . . . . . . . . . . . . . . . (12.7) -
Properties and equipment purchased . . . . . . . . . . . . . . . . . . (14.7) (23.8)
Properties and equipment sold. . . . . . . . . . . . . . . . . . . . . 1.9 3.5
------------------------
Cash increase (decrease) from investments in operations. . . . . . . . 901.3 (456.0)
------------------------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and demand deposits, net change. . . . . . . . . . . . (2,051.6) 259.7
Time certificates accepted . . . . . . . . . . . . . . . . . . . . . . 416.8 762.2
Time certificates paid . . . . . . . . . . . . . . . . . . . . . . . . (361.7) (631.5)
Senior and senior subordinated debt issued . . . . . . . . . . . . . . 887.3 731.6
Senior and senior subordinated debt retired. . . . . . . . . . . . . . (495.6) (1,109.7)
Policyholders' benefits paid . . . . . . . . . . . . . . . . . . . . . (11.8) (212.7)
Cash received from policyholders . . . . . . . . . . . . . . . . . . . 173.1 220.7
Shareholders' dividends. . . . . . . . . . . . . . . . . . . . . . . . (37.2) (37.5)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . 1.6 10.9
------------------------
Cash decrease from financing and capital transactions. . . . . . . . . (1,479.1) (6.3)
------------------------
Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . 44.4 7.2
------------------------
Increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . 3.8 (43.0)
Cash at January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . 270.4 541.2
------------------------
Cash at March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 274.2 $ 498.2
========================
Supplemental cash flow information:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 349.2 $ 304.1
------------------------
Income taxes paid (received) . . . . . . . . . . . . . . . . . . . . . (91.2) 6.5
------------------------
</TABLE>
See notes to condensed financial statements.
*VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International, Incorporated respectively.<PAGE>
<PAGE> 5
Household International, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
- --------------------
All dollar amounts are stated in millions.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Three months ended March 31 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110.5 $ 96.0
----------------------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175.2 1,246.0
----------------------------
Return on average common shareholders' equity <F1> <F2> . . . . . . . 15.7% 15.6%
----------------------------
Return on average owned assets <F1> . . . . . . . . . . . . . . . . . 1.53 1.11
----------------------------
Efficiency ratio, normalized <F3> . . . . . . . . . . . . . . . . . . 52.8 58.3
----------------------------
All dollar amounts are stated in millions.
- -----------------------------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- -----------------------------------------------------------------------------------------------------
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,892.2 $29,218.8
---------------------------
Total shareholders' equity as a percent of owned assets <F4> . . . . . 10.69% 10.17%
---------------------------
Total shareholders' equity as a percent of managed assets <F4> . . . . 6.87 6.74
---------------------------
<FN>
<F1> Annualized
<F2> Excluding the impact of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities",
the return on average common shareholders' equity was 16.1 percent in
the first quarter of 1996 and 15.1 percent in the first quarter of 1995.
<F3> Ratio of operating expenses to net interest margin and other revenues
less policyholders' benefits. The 1995 efficiency ratio has been
normalized to exclude certain nonrecurring items. Including these
nonrecurring items, the efficiency ratio was 57.7 percent. There were
no nonrecurring items in the first quarter of 1996.
<F4> Includes company obligated mandatorily redeemable preferred securities
of subsidiary trust.
</FN>
</TABLE>
See notes to condensed financial statements.<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, 1995. 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. March 31, 1996 December 31, 1995
---------------------------------------------------------------------------------------------------------
Amortized Carrying Amortized Carrying
Cost Value Cost Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities . . . . . . . . . . . . . . . . $ 276.9 $ 275.5 $ 321.6 $ 327.1
Corporate debt securities. . . . . . . . . . . . . . . . . . 1,596.7 1,645.3 1,433.2 1,560.0
Government debt securities . . . . . . . . . . . . . . . . . 175.0 171.6 140.2 142.1
Mortgage-backed securities . . . . . . . . . . . . . . . . . 259.4 259.5 1,046.5 1,053.7
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . 809.0 809.0 821.4 821.4
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 692.8 693.7 689.7 690.9
-------------------------------------------
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . 3,809.8 3,854.6 4,452.6 4,595.2
-------------------------------------------
Accrued investment income. . . . . . . . . . . . . . . . . . 44.1 44.1 44.3 44.3
-------------------------------------------
Total investment securities. . . . . . . . . . . . . . . . . $3,853.9 $3,898.7 $4,496.9 $4,639.5
===========================================
</TABLE>
For available-for-sale investments, carrying value equals fair value,
in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
<PAGE>
<PAGE> 7
3. RECEIVABLES
-----------
Receivables consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage . . . . . . . . . . . . . . . . . . . . . . . $ 1,896.7 $ 2,066.9
Home equity. . . . . . . . . . . . . . . . . . . . . . . . . 4,645.4 4,148.2
Visa/MasterCard. . . . . . . . . . . . . . . . . . . . . . . 4,997.4 5,512.0
Merchant participation . . . . . . . . . . . . . . . . . . . 3,740.4 3,696.2
Other unsecured. . . . . . . . . . . . . . . . . . . . . . . 4,614.3 5,019.2
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . 1,179.3 1,289.6
----------------------------
Total owned receivables. . . . . . . . . . . . . . . . . . . 21,073.5 21,732.1
Accrued finance charges. . . . . . . . . . . . . . . . . . . 379.7 381.6
Credit loss reserve for owned receivables. . . . . . . . . . (758.1) (720.4)
Unearned credit insurance premiums and claims reserves . . . (162.6) (159.9)
Amounts due and deferred from receivables sales. . . . . . . 1,326.2 1,067.7
Reserve for receivables serviced with limited recourse . . . (532.7) (457.0)
----------------------------
Total owned receivables, net . . . . . . . . . . . . . . . . 21,326.0 21,844.1
Receivables serviced with limited recourse . . . . . . . . . 15,490.3 14,884.6
----------------------------
Total managed receivables, net . . . . . . . . . . . . . . . $36,816.3 $36,728.7
============================
The outstanding balance of receivables serviced with limited recourse
consisted of the following:
---------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
Home equity. . . . . . . . . . . . . . . . . . . . . . . . . $ 4,169.2 $ 4,661.9
Visa/MasterCard. . . . . . . . . . . . . . . . . . . . . . . 8,209.6 7,831.1
Merchant participation . . . . . . . . . . . . . . . . . . . 750.0 750.0
Other unsecured. . . . . . . . . . . . . . . . . . . . . . . 2,361.5 1,641.6
----------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,490.3 $14,884.6
============================
The combination of receivables owned and receivables serviced with
limited recourse, which the company considers its managed portfolio,
is shown below:
---------------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
First mortgage . . . . . . . . . . . . . . . . . . . . . . . $ 1,896.7 $ 2,066.9
Home equity. . . . . . . . . . . . . . . . . . . . . . . . . 8,814.6 8,810.1
Visa/MasterCard. . . . . . . . . . . . . . . . . . . . . . . 13,207.0 13,343.1
Merchant participation . . . . . . . . . . . . . . . . . . . 4,490.4 4,446.2
Other unsecured. . . . . . . . . . . . . . . . . . . . . . . 6,975.8 6,660.8
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . 1,179.3 1,289.6
----------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,563.8 $36,616.7
============================
</TABLE>
<PAGE>
<PAGE> 8
The amounts due and deferred from receivables sales of $1,326.2 million
at March 31, 1996 included unamortized excess servicing assets and funds
established pursuant to the recourse provisions and holdback reserves
for certain sales totaling $1,246.4 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 $191.8 million
plus unpaid interest and has subordinated interests in certain
transactions, which are recorded as receivables, for $468.1 million at
March 31, 1996. The company has an agreement with a "AAA"-rated third
party who will indemnify the company for up to $21.2 million in losses
relating to certain securitization transactions. 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 $532.7 million
at March 31, 1996 and represent the company's best estimate of probable
losses on receivables serviced with limited recourse.
See Note 4, "Credit Loss Reserves" for an analysis of credit loss
reserves for receivables. See "Management's Discussion and Analysis"
on pages 15 and 16 for additional information related to the credit
quality of receivables. Effective January 1, 1996, other unsecured
receivables in the United States and Canadian consumer finance
operations are charged off if an account is nine months contractually
delinquent and minimum payments have not been received in six months.
In any event, these receivables are charged off when the accounts are
18 months contractually delinquent. Previously, such accounts were
charged off when they were nine months contractually delinquent.
Delinquency statistics will continue to be reported on a contractual
basis for these receivables. Procedures for secured and credit card
receivables were unaffected. The implementation of this new procedure
did not have a material impact on the company's financial statements
for the first quarter of 1996.
4. CREDIT LOSS RESERVES
--------------------
An analysis of credit loss reserves for the three months ended March 31
was as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
In millions. 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables at January 1. . . . . . . . $ 720.4 $ 546.0
Provision for credit losses - owned receivables. . . . . . . . . . . . 191.3 164.3
Owned receivables charged off. . . . . . . . . . . . . . . . . . . . . (189.3) (173.6)
Recoveries on owned receivables . . . . . . . . . . . . . . . . . . . 32.4 33.0
Credit loss reserves on receivables purchased, net . . . . . . . . . . 10.1 2.6
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6.8) 8.4
---------------------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES AT MARCH 31 758.1 580.7
---------------------
Credit loss reserves for receivables serviced with
limited recourse at January 1. . . . . . . . . . . . . . . . . . . . 457.0 336.5
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . 209.1 62.9
Chargeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (137.5) (86.1)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 3.8
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.7) 4.0
---------------------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED WITH
LIMITED RECOURSE AT MARCH 31 . . . . . . . . . . . . . . . . . . . . 532.7 321.1
---------------------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES AT MARCH 31 . . . . $1,290.8 $ 901.8
=====================
</TABLE>
5. INCOME TAXES
------------
Effective tax rates for the three months ended March 31, 1996 and 1995
of 31.8 and 33.1 percent, respectively, differ from the statutory federal
income tax rate for the respective periods primarily because of the
effects of (a) domestic and foreign loss carryforwards, (b) amortization
of intangible assets, (c) state and local income taxes and (d) leveraged
lease tax benefits.
<PAGE>
<PAGE> 9
6. EARNINGS PER COMMON SHARE
-------------------------
Computations of earnings per common share for the three months ended
March 31 were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1996 1995
----------------- -----------------
Fully Fully
In millions, except per share data. Primary Diluted Primary Diluted
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $110.5 $110.5 $96.0 $96.0
Preferred dividends. . . . . . . . . . . . . . . . . . . . (4.1) (4.1) (7.0) (6.9)
-------------------------------------------
Net income available to common shareholders. . . . . . . . . 106.4 106.4 $89.0 $89.1
===========================================
Average shares:
Common . . . . . . . . . . . . . . . . . . . . . . . . . . 97.3 97.3 96.8 96.8
Common equivalents . . . . . . . . . . . . . . . . . . . . 1.1 1.2 1.0 1.5
-------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.4 98.5 97.8 98.3
===========================================
Earnings per common share. . . . . . . . . . . . . . . . . . $ 1.08 $ 1.08 $ .91 $ .91
===========================================
</TABLE>
Common share equivalents assume exercise of stock options, if dilutive.
The fully diluted earnings per share computation for 1995 also assumed
conversion of dilutive convertible preferred stock into common
equivalents.
<PAGE>
<PAGE> 10
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATIONS SUMMARY
------------------
Net income for the first quarter of 1996 was $110.5 million, up 15 percent
from $96.0 million in 1995. Fully diluted earnings per share were $1.08
per share in the first quarter of 1996, up 19 percent from $.91 per share
in 1995. The difference in the percentage increase between net income and
earnings per share was attributable to lower preferred dividends in 1996
resulting from preferred stock redemptions in the third quarter of 1995.
The company's annualized return on average common shareholders' equity for
the first quarter of 1996 was 15.7 percent compared to 15.6 percent in the
year-ago period. The annualized return on average owned assets improved
to 1.53 percent in the 1996 first quarter, up from 1.11 percent a year ago.
- The following is a summary of the operating results of the company's
businesses for the first quarter of 1996 compared to the prior year
period:
The domestic consumer finance business increased earnings in
the first quarter of 1996 primarily due to portfolio growth,
wider spreads and improved efficiency.
The credit card business reported lower earnings in the first
quarter of 1996, as lower earnings in the private-label credit
card business offset slightly higher earnings in the
Visa*/MasterCard* business. The private-label credit card
business experienced narrower spreads, due to competitive
pricing pressure, and higher credit costs, primarily due to
discontinued merchant programs. The Visa/MasterCard business
reported higher net interest margin and fee income resulting
from portfolio growth, partially offset by higher credit costs
resulting from portfolio seasoning and increased bankruptcy
filings. This business continued to benefit from the company's
association with the General Motors credit card ("GM Card")
program.
Net income increased in the United Kingdom operation primarily
due to improved efficiency, as well as higher net interest
margin and insurance premiums resulting from managed receivable
growth, particularly in unsecured products.
The Canadian operation reported a profit in the first quarter
of 1996 compared to a loss in the first quarter of 1995.
Operating results of this business benefited from improved
efficiency. Net interest margin increased as a result of wider
spreads and a shift in product mix toward unsecured receivables.
The commercial business reported higher earnings than a year
ago primarily due to gains on the sales of assets, utilization
of tax carryforwards, and lower credit costs, as it continued
to liquidate its portfolio.
- The company's normalized efficiency ratio improved to 52.8 percent
for the first quarter of 1996 compared to 58.3 percent a year ago.
The efficiency ratio is the ratio of operating expenses to net
interest margin and other revenues less policyholders' benefits
(operating expenses include salaries and fringe benefits, occupancy
and equipment expense, other marketing expenses, and other servicing
and administrative expenses). The normalized efficiency ratio
excludes nonrecurring gains and losses and charges. The improvement
over the prior year was primarily due to lower expenses resulting
from sales of less efficient businesses during 1995.
*VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International, Incorporated respectively.<PAGE>
<PAGE> 11
BALANCE SHEET REVIEW
--------------------
- Owned consumer receivables were $19.9 billion at March 31, 1996,
down from $20.4 billion at December 31, 1995 and up slightly from
$19.1 billion at March 31, 1995. Changes in owned receivables
from period to period may vary depending on the timing and
significance of securitization transactions. In the first quarter
of 1996, the company securitized and sold, excluding replenishments
of certificate holder interests, $1.4 billion of Visa/MasterCard
and other unsecured receivables.
- Managed consumer receivables (owned and serviced with limited
recourse) were essentially flat compared to year-end 1995. Core
products, which excludes first mortgages and commercial receivables,
increased 10 percent, annualized, in the first quarter, after
adjusting for seasonal runoff of holiday balances in the
Visa/MasterCard business. On an annualized basis, credit cards
were up 11 percent, seasonally adjusted, and other unsecured
receivables increased 19 percent during the first quarter. Home
equity receivables were flat compared to December 31, 1995. The
domestic consumer finance business grew its retail home equity
receivable portfolio 3 percent in the first quarter of 1996, on
an annualized basis.
Core products increased 18 percent over the prior year. Other
unsecured receivables were 22 percent above year-ago levels, and
credit card receivables increased 23 percent. In the fourth
quarter of 1995, the company acquired two Visa/MasterCard
portfolios totaling approximately $570 million. The home equity
portfolio was 6 percent higher compared to a year ago.
- Credit loss reserves as a percent of managed receivables were 3.53
percent, compared to 3.22 percent at December 31, 1995 and 2.69
percent at March 31, 1995. Reserves as a percent of nonperforming
managed receivables were 125.3 percent compared to 111.4 percent
at December 31, 1995 and 102.2 percent at March 31, 1995. Consumer
two-months-and-over contractual delinquency ("delinquency") as a
percent of managed consumer receivables was 3.60 percent, up from
3.46 percent at December 31, 1995 and 3.10 percent at March 31,
1995. The annualized total consumer managed charge-off ratio in
the first quarter of 1996 was 3.24 percent, compared to 3.28 percent
in the prior quarter and 2.71 percent in the year-ago quarter.
- In April, 1996 the company entered into an agreement to sell its
remaining consumer banking operations, including $2.9 billion in
deposits, approximately $300 million of home equity and other
unsecured receivables, and 51 branches in the metropolitan Chicago
market. The sale is expected to close in mid-1996.
- The ratio of total shareholders' equity (including company obligated
mandatorily redeemable preferred securities of subsidiary trust) to
total owned assets was 10.69 percent compared to 10.17 percent at
December 31, 1995. The ratio of total shareholders' equity to
managed assets was 6.87 percent, up from 6.74 percent at December 31,
1995.
<PAGE>
<PAGE> 12
PRO FORMA MANAGED INCOME STATEMENT
----------------------------------
Securitizations and sales of consumer receivables have been, and will
continue to be, 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 and other income and provision for credit losses on
receivables serviced with limited recourse are reported as a net amount
in securitization income in the company's statements of income.
Management monitors the company's operations 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 are presented below. 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.
Pro Forma Managed Statements of Income
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
All dollar amounts are
stated in millions.
Three months ended March 31 1996 * 1995 *
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income . . . . . . . . . . . . . . . . . . . . . $ 1,211.0 12.76% $ 1,117.7 12.34%
Interest income from noninsurance
investment securities. . . . . . . . . . . . . . . . . 20.3 .21 36.3 .40
Interest expense . . . . . . . . . . . . . . . . . . . . 575.7 6.06 582.4 6.43
-----------------------------------------------
Net interest margin. . . . . . . . . . . . . . . . . . . 655.6 6.91 571.6 6.31
Provision for credit losses. . . . . . . . . . . . . . . 400.4 4.22 227.2 2.51
-----------------------------------------------
Net interest margin after
provision for credit losses. . . . . . . . . . . . . . 255.2 2.69 344.4 3.80
-----------------------------------------------
Insurance premiums and
contract revenues. . . . . . . . . . . . . . . . . . . 63.9 87.7
Investment income. . . . . . . . . . . . . . . . . . . . 56.9 139.8
Fee income . . . . . . . . . . . . . . . . . . . . . . . 229.2 91.5
Other income . . . . . . . . . . . . . . . . . . . . . . 25.3 40.9
-----------------------------------------------
Total other revenues . . . . . . . . . . . . . . . . . . 375.3 359.9
-----------------------------------------------
Salaries and fringe benefits . . . . . . . . . . . . . . 131.7 145.8
Occupancy and equipment expense. . . . . . . . . . . . . 52.4 59.6
Other marketing expenses . . . . . . . . . . . . . . . . 100.4 91.8
Other servicing and administrative . . . . . . . . . . .
expenses . . . . . . . . . . . . . . . . . . . . . . . 110.8 123.3
Policyholders' benefits. . . . . . . . . . . . . . . . . 73.2 140.2
-----------------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . 468.5 560.7
-----------------------------------------------
Income before taxes. . . . . . . . . . . . . . . . . . . 162.0 143.6
Income taxes . . . . . . . . . . . . . . . . . . . . . . 51.5 47.6
-----------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 110.5 $ 96.0
===============================================
Average managed receivables. . . . . . . . . . . . . . . $36,665.6 $33,638.1
Average noninsurance
investments. . . . . . . . . . . . . . . . . . . . . . 1,307.3 2,581.5
-----------------------------------------------
Average managed interest-
earning assets . . . . . . . . . . . . . . . . . . . . $37,972.9 $36,219.6
===============================================
</TABLE>
* As a percent, annualized, of average managed interest-earning assets.
<PAGE>
<PAGE> 13
The following discussion 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 $346.4 million for the first
quarter of 1996, essentially unchanged compared to $340.6 million in the
prior year. Net interest margin on a Managed Basis was $655.6 million for
the first quarter of 1996, up 15 percent compared to the year-ago period,
driven by managed receivable growth. Net interest margin as a percent of
average managed interest-earning assets, annualized, was 6.91 percent
compared to 6.69 percent in the previous quarter and 6.31 percent in the
year-ago quarter. The improvement was primarily due to wider spreads on
variable rate products, the continued shift in product mix toward unsecured
receivables and lower leverage.
Provision for credit losses
- ---------------------------
The provision for credit losses for receivables on an Owned Basis for the
first quarter of 1996 totaled $191.3 million, up 16 percent from $164.3
million in the prior year period. The level of provision for credit losses
on an Owned Basis may vary from quarter to quarter, depending on the amount
of securitizations and sales of receivables in a particular period.
The provision for credit losses for receivables on a Managed Basis totaled
$400.4 million in the first quarter of 1996, up 76 percent from $227.2
million in the comparable period of 1995. As a percent of average managed
interest-earning assets, annualized, the provision increased to 4.22 percent
from 2.51 percent in the first quarter of 1995. The company increased credit
loss reserves due to continued growth and seasoning of unsecured products,
uncertainty over the economy and consumer payment patterns, and the change
in the chargeoff policy related to certain other unsecured receivables. In
addition, the provision also included the over-the-life reserve requirement
on the other unsecured receivables that were securitized in the quarter,
which substantially offset the income recorded on the securitization, as
discussed below. See the credit quality section for further discussion of
factors affecting the provision for credit losses.
Other revenues
- --------------
Securitization income on an Owned Basis consists of income associated with
the securitizations and sales of receivables with limited recourse, including
net interest income, fee and other income and provision for credit losses
related to those receivables. Securitization income on an Owned Basis
increased over the prior year due to growth in securitized receivables,
particularly unsecured products, which carry wider spreads. The components
of securitization income are reclassified to the appropriate lines in the
statements of income on a Managed Basis.
Insurance premiums and contract revenues were lower than a year ago due to
the sale of the individual life and annuity lines of business in the fourth
quarter of 1995. Insurance premiums and contract revenues of the specialty
and credit business, which the company retained, increased 12 percent over
the prior year due to growth in the company's domestic and United Kingdom
receivable base.
Investment income of $56.9 million was below the year ago amount of $139.8
million due to the sale of the individual life and annuity lines of business,
including $5.7 billion of investments, in the fourth quarter of 1995.
Fee income on an Owned Basis includes revenues from fee-based products such
as credit cards and consumer banking deposits. Fee income was $49.9 million
in the first quarter of 1996, up slightly from $46.8 million in the comparable
period of the prior year. Owned Basis interchange and other fees were higher
in the first quarter of 1996 as a result of the increase in the amount of
owned credit card receivables compared to the prior year.
<PAGE>
<PAGE> 14
Fee income on a Managed Basis, which in addition to the items discussed above
includes fees and other income related to receivables serviced with limited
recourse, increased from $91.5 million in the first quarter of 1995 to $229.2
million in 1996. The increase was due to higher interchange and other fee
income resulting from growth in the managed credit card portfolio and
increased transaction volume. Fee income also included income associated
with the securitization and sale of other unsecured receivables during the
quarter, which was substantially offset by the over-the-life reserve for
estimated credit losses on those receivables as previously discussed.
Other income decreased compared to the first quarter of 1995 primarily due
to lower servicing income from first mortgages and unsecured loans serviced
with no recourse. The company sold its domestic first mortgage servicing
portfolio in the second quarter of 1995.
Expenses
- --------
Salaries and fringe benefits were $131.7 million compared to $145.8 million
in the first quarter of 1995. The improvement was primarily due to fewer
employees compared to the prior year as a result of actions taken throughout
1995 to improve the operating efficiency of certain businesses and to exit
others.
Occupancy and equipment expense was below the year ago period primarily as
a result of rationalization of office space and sales of businesses which
occurred during 1995.
Other marketing expenses increased compared to the prior year as a result of
higher expenses related to the credit card portfolio.
Other servicing and administrative expenses declined from $123.3 million in
the first quarter of 1995 to $110.8 million while average managed receivables
increased 9 percent.
Policyholders' benefits of $73.2 million were below the first quarter of 1995
amount due to the sale of the individual life and annuity lines of business.
Policyholders' benefits of the retained specialty and credit business were
essentially flat compared to a year ago.
CREDIT LOSS RESERVES
- --------------------
The company's credit portfolios and credit management policies are divided
into two distinct components - consumer and commercial. For consumer
products, credit policies focus 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 on an
individual transaction basis and is also evaluated based on overall risk
factors. See Note 3, "Receivables" 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>
- ----------------------------------------------------------------------------
March 31, December 31, March 31,
1996 1995 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Owned . . . . . . . . . . . . . . $ 758.1 $ 720.4 $580.7
Serviced with limited recourse . . . 532.7 457.0 321.1
-------------------------------------
Total . . . . . . . . . . . . . . $1,290.8 $1,177.4 $901.8
=====================================
Managed credit loss reserves were up 10 percent from December 31, 1995 and
up 43 percent from March 31, 1995. Managed credit loss reserves as a
percent of nonperforming managed receivables were 125.3 percent, up from
111.4 percent at December 31, 1995 and 102.2 percent at March 31, 1995.
Total owned and managed credit loss reserves as a percent of receivables
were as follows:
- ----------------------------------------------------------------------------
March 31, December 31, March 31,
1996 1995 1995
- ----------------------------------------------------------------------------
Owned . . . . . . . . . . . . . . 3.60% 3.31% 2.78%
Managed . . . . . . . . . . . . . . 3.53 3.22 2.69
-------------------------------------
/TABLE
<PAGE>
<PAGE> 15
The level of reserves for consumer credit losses is based on delinquency
and chargeoff experience by product and judgmental factors. The level of
reserves for commercial credit losses is based on a regular 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. Management also evaluates
the potential impact of existing and anticipated national and regional
economic conditions on the managed receivable portfolio when establishing
consumer and commercial credit loss reserves. While management allocates
all reserves among the company's various products, all reserves are
considered to be available to cover total loan losses. See Note 4, "Credit
Loss Reserves" in the accompanying financial statements for analyses of
reserves.
CREDIT QUALITY
- --------------
Delinquency levels in the consumer portfolio were up compared to the prior
and year-ago quarters. Chargeoffs were essentially unchanged compared to
the fourth quarter of 1995 but were higher than the first quarter of 1995.
Delinquency and chargeoff levels are monitored on a managed basis which
includes both receivables owned and receivables serviced with limited
recourse. The latter portfolio is included since it 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.
Effective January 1, 1996, other unsecured consumer finance receivables
in the United States and Canada are charged off if an account is nine
months contractually delinquent and minimum payments have not been
received in six months. In any event, these receivables are charged off
when the accounts are 18 months contractually delinquent. Previously,
such accounts were charged off when they were nine months contractually
delinquent. Delinquency statistics will continue to be reported on a
contractual basis for these receivables. Procedures for secured and credit
card receivables were unaffected. The application of the new procedure did
not have a significant impact on the company's delinquency statistics
in the first quarter of 1996, but positively impacted the first quarter
chargeoff ratio by 8 basis points.
Delinquency
- -----------
Two-Months-and-Over Contractual Delinquency (as a percent of managed
consumer receivables):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
3/31/96 12/31/95 9/30/95 6/30/95 3/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First mortgage . . . . . . . . . . . . . . . 3.28% 3.29% 2.16% 1.74% 1.79%
Home equity. . . . . . . . . . . . . . . . . 3.20 3.24 3.14 2.78 2.75
Visa\MasterCard. . . . . . . . . . . . . . . 2.42 2.22 2.29 2.31 2.33
Merchant participation . . . . . . . . . . . 4.74 4.51 4.25 4.00 4.42
Other unsecured. . . . . . . . . . . . . . . 5.71 5.60 5.10 5.41 5.07
-------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . 3.60% 3.46% 3.26% 3.13% 3.10%
=============================================================
</TABLE>
Delinquency as a percent of managed consumer receivables increased from the
prior quarter and the prior year, resulting from higher delinquencies in
credit cards and other unsecured receivables and the company's shift in
portfolio mix away from traditional first mortgages and toward unsecured
products. This mix change contributed 14 basis points of the year-over-year
increase.
<PAGE>
<PAGE> 16
Net Chargeoffs of Consumer Receivables
- --------------------------------------
Net Chargeoffs of Consumer Receivables (as a percent, annualized, of
average managed consumer receivables):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
1996 1995 1995 1995 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage . . . . . . . . . . . .51% .47% .32% .36% .29%
Home equity. . . . . . . . . . . . . .89 .95 1.12 1.04 .90
Visa/MasterCard. . . . . . . . . . . 4.44 4.67 4.24 4.05 4.04
Merchant participation . . . . . . . 4.51 5.14 4.63 4.71 4.29
Other unsecured. . . . . . . . . . . 3.91 3.46 3.45 3.21 3.25
--------------------------------------------------------------
Total . . . . . . . . . . . . . . 3.24% 3.28% 2.97% 2.81% 2.71%
==============================================================
Net chargeoffs as a percent of average managed consumer receivables for the
first quarter of 1996 were flat compared to the fourth quarter of 1995 but
were up from the prior year first quarter. Approximately 23 basis points of
the increase over the prior year quarter was attributable to increased
bankruptcy filings in the Visa/MasterCard portfolio. Another 11 basis points
of the year-over-year increase was due to the shift in portfolio mix away
from traditional first mortgages. The remainder of the increase was due to
maturation of unsecured products and the impact of discontinued merchant
programs.
Chargeoffs are a lagging indicator of credit quality and generally reflect
prior delinquency trends. The company has increased and modified its
collection activities. The company anticipates that chargeoff ratios will
remain roughly in the present range before declining in late 1996. However,
chargeoffs in any given quarter may be affected by events such as changes
in national or regional economic conditions and increases in personal
bankruptcies. Future chargeoff levels may also be impacted by the
continuing shift in product mix to credit card and other unsecured
receivables, which have higher chargeoff rates than secured products.
Nonperforming Assets
- --------------------
Nonperforming assets consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
In millions. 3/31/96 12/31/95 9/30/95 6/30/95 3/31/95
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual managed receivables . . . . . . . $ 740.1 $ 768.5 $ 711.0 $ 629.3 $ 558.4
Accruing managed consumer receivables
90 or more days delinquent . . . . . . . . 269.2 267.2 233.6 255.9 238.5
Renegotiated commercial loans. . . . . . . . 20.4 21.2 22.0 41.8 85.9
---------------------------------------------------------------
Total nonperforming managed
receivables. . . . . . . . . . . . . . . . 1,029.7 1,056.9 966.6 927.0 882.8
Real estate owned. . . . . . . . . . . . . . 123.1 136.5 148.7 157.1 187.8
---------------------------------------------------------------
Total nonperforming assets . . . . . . . . . $1,152.8 $1,193.4 $1,115.3 $1,084.1 $1,070.6
===============================================================
Managed credit loss reserves
as a percent of nonperforming
managed receivables. . . . . . . . . . . . 125.4% 111.4% 105.2% 103.3% 102.2%
---------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE> 17
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 first quarter of 1996, the Registrant filed two Current
Reports on Form 8-K dated January 25, 1996. One report disclosed
the financial results of Household International for the quarter
and year ended December 31, 1995, and the other report disclosed
supplementary financial information for Household International
for the year ended December 31, 1995, as a result of the October 1,
1995, sale by Household Group, Inc., a wholly-owned subsidiary of
Household International, of Alexander Hamilton Life Insurance
Company of America to Jefferson-Pilot Corporation.
<PAGE>
<PAGE> 18
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: May 13, 1996 By: /s/ David A. Schoenholz
------------ ----------------------------
David A. Schoenholz,
Executive Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
<PAGE>
<PAGE> 19
Exhibit Index
-------------
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.
----------
EXHIBIT 12
----------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Net income $110.5 $ 96.0
- --------------------------------------------------------------------------
Income taxes 51.5 47.6
- --------------------------------------------------------------------------
Fixed charges:
Interest expense <F1> 356.5 379.1
Interest portion of rentals <F2> 7.5 8.8
- --------------------------------------------------------------------------
Total fixed charges 364.0 387.9
- --------------------------------------------------------------------------
Total earnings as defined $526.0 $531.5
==========================================================================
Ratio of earnings to fixed charges 1.45 1.37
- --------------------------------------------------------------------------
Preferred stock dividends <F3> $ 6.0 $ 10.5
- --------------------------------------------------------------------------
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.42 1.33
- --------------------------------------------------------------------------
<FN>
<F1> For financial statement purposes, interest expense includes income
earned on temporary investment of excess funds, generally resulting
from over-subscriptions of commercial paper.
<F2> Represents one-third of rentals, which approximates the portion
representing interest.
<F3> Preferred stock dividends are grossed up to their pretax equivalent
based upon an effective tax rate of 31.8 and 33.1 percent for the
three months ended March 31, 1996 and 1995, respectively.
</FN>
</TABLE>
Exhibit 21
SUBSIDIARIES OF HOUSEHOLD INTERNATIONAL, INC.
- ---------------------------------------------
As of March 31, 1996, 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%
Craig-Hallum Corporation Delaware 100%
Craig-Hallum, Inc. Minnesota 100%
Household Bank, f.s.b U.S. 100%
HHTS, Inc. Illinois 100%
Household Home Title Services, Inc. II Maryland 100%
Household Bank (SB), N.A. U.S. 100%
Household Affinity Funding Corporation Delaware 100%
Household Service Corporation
of Illinois, Inc. Illinois 100%
Household Insurance Services, Inc. Illinois 100%
Housekey Financial Corporation Illinois 100%
Associations Service Corporation Indiana 100%
Household Mortgage Services, Inc. Delaware 100%
Security Investment Corporation Maryland 100%
Household Capital Corporation Delaware 100%
Household Commercial Canada Inc. Canada 100%
Household Finance Corporation Delaware 100%
HFC Auto Credit Corp. 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 Funding Corporation Delaware 100%
Household Receivables Funding Corporation Nevada 100%
Household Receivables Funding Delaware 100%
Corporation II
Household Receivables Funding, Inc. Delaware 100%
Household Capital Markets, Inc. Delaware 100%
Household Card Services, Inc. Nevada 100%
Household Bank (Illinois), N.A. U.S. 100%
Household Consumer Loan Corporation Nevada 100%
Household Corporation Delaware 100%
Household Credit Services, Inc. Delaware 100%
Household Credit Services of Mexico, Inc. Delaware 100%
<PAGE>
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Finance Receivables Corporation II Delaware 100%
Household Financial Services, Inc. Delaware 100%
Household Group, Inc. Delaware 100%
AHLIC Investment Holdings Corporation Delaware 100%
Household Insurance Agency, Inc. Michigan 100%
Household Insurance Company Michigan 100%
Household Life Insurance Co. of Arizona Arizona 100%
Household Life Insurance Company Michigan 100%
Prospect Life Insurance Company Arizona 100%
Cal-Pacific Services, Inc. California 100%
Household Business Services, 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%
HCFS Corporate Finance Venture, Inc. Delaware 100%
HFC Commercial Realty, Inc. Delaware 100%
G.C. Center, Inc. Delaware 100%
Cast Iron Building Corporation Delaware 100%
Com Realty, Inc. Delaware 100%
Lighthouse Property Corporation Delaware 100%
MRP General, Inc. Delaware 100%
Center Realty, Inc. Delaware 100%
Household OPEB I, Inc. Illinois 100%
Land of Lincoln Builders, Inc. Illinois 100%
PPSG Corporation Delaware 100%
Steward's Glenn 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%
<PAGE>
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
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%
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%
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 100%
Household Finance Consumer Discount Company Pennsylvania 100%
Overseas Leasing Two FSC, Ltd. Bermuda 99%
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%
Amstelveen FSC, Ltd. Bermuda 99%
HFC Agency of Connecticut, Inc. Connecticut 100%
HFC Agency of Michigan, Inc. Michigan 100%
Night Watch FSC, Ltd. Bermuda 99%
<PAGE>
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Realty Corporation Delaware 100%
Overseas Leasing One FSC, Ltd. Bermuda 100%
Overseas Leasing Four FSC, Ltd. Bermuda 99%
Overseas Leasing Five FSC, Ltd. Bermuda 99%
Household Retail Services, Inc. Delaware 100%
HRSI Funding, Inc. Nevada 100%
Household Financial Center Inc. Tennessee 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 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 England 100%
Hamilton Financial Planning Services
Limited England 100%
Hamilton Insurance Company Limited England 100%
Hamilton Life Assurance Co. Limited England 100%
HFC Pension Plan Limited England 100%
Household Funding Limited England 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%
Household Finance Corporation 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 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 274,200
<SECURITIES> 3,898,700
<RECEIVABLES> 21,073,500
<ALLOWANCES> 1,290,800
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 871,500
<DEPRECIATION> 490,700
<TOTAL-ASSETS> 27,892,200
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,619,500
<COMMON> 115,200
0
205,000
<OTHER-SE> 2,660,700
<TOTAL-LIABILITY-AND-EQUITY> 27,892,200
<SALES> 0
<TOTAL-REVENUES> 1,175,200
<CGS> 0
<TOTAL-COSTS> 468,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 191,300
<INTEREST-EXPENSE> 353,400
<INCOME-PRETAX> 162,000
<INCOME-TAX> 51,500
<INCOME-CONTINUING> 110,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,500
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<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>
