<PAGE> 1
FORM 10-Q
UNITED STATES
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, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-75
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HOUSEHOLD FINANCE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-1239445
- ------------------------ -----------------------------------
(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
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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, 1999, there were 1,000 shares of registrant's common
stock outstanding.
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form 10-Q with the reduced disclosure format.
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HOUSEHOLD FINANCE CORPORATION AND SUBSIDIARIES
Table of Contents
PART I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Unaudited) - Three Months
Ended March 31, 1999 and 1998 2
Condensed Consolidated Balance Sheets -
March 31, 1999 (Unaudited) and December 31, 1998 3
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Three Months Ended
March 31, 1999 and 1998 4
Financial Highlights 5
Notes to Interim Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
<PAGE>
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PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Household Finance Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------
All amounts, are stated in millions.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Three months ended March 31 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Finance income $1,180.2 $1,115.7
Other interest income 16.6 8.7
Interest expense 506.7 500.2
-------- --------
Net interest margin 690.1 624.2
Provision for credit losses on owned receivables 331.7 336.6
-------- --------
Net interest margin after provision for credit losses 358.4 287.6
-------- --------
Securitization income 192.2 323.3
Insurance revenues 92.0 91.4
Investment income 37.5 37.2
Fee income 99.6 125.8
Other income 70.7 86.5
Gain on sale of Beneficial Canada - 189.4
-------- --------
Total other revenues 492.0 853.6
-------- --------
Salaries and fringe benefits 221.5 250.7
Occupancy and equipment expense 53.4 75.7
Other marketing expenses 42.1 64.9
Other servicing and administrative expenses 94.9 130.7
Amortization of acquired intangibles and goodwill 36.1 41.2
Policyholders' benefits 58.8 57.5
-------- --------
Total costs and expenses 506.8 620.7
-------- --------
Income before income taxes 343.6 520.5
Income taxes 121.8 196.0
-------- --------
Net income* $ 221.8 $ 324.5
======== ========
* Net operating income, which excludes the gain on sale of
Beneficial Canada, was $206.0 for the three months ended March
31, 1998.
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 4
Household Finance Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------
In millions, except share data.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
- ----------------------------------------------------------------------------------------
ASSETS (Unaudited)
- ------
<S> <C> <C>
Cash $ 311.1 $ 428.4
Investment securities 3,588.4 2,944.4
Receivables, net 35,536.1 34,283.2
Advances to parent company and affiliates 235.9 494.0
Acquired intangibles and goodwill, net 1,648.6 1,682.7
Properties and equipment, net 377.0 376.9
Real estate owned 229.9 235.1
Other assets 1,845.3 1,918.3
--------- ---------
Total assets $43,772.3 $42,363.0
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
Debt:
Commercial paper, bank and other borrowings $ 8,306.8 $ 7,143.1
Senior and senior subordinated debt (with
original maturities over one year) 27,794.5 27,186.1
--------- ---------
Total debt 36,101.3 34,329.2
Insurance policy and claim reserves 1,139.4 1,076.2
Other liabilities 792.4 1,147.2
--------- ---------
Total liabilities 38,033.1 36,552.6
--------- ---------
Common shareholder's equity:
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding at
March 31, 1999 and December 31, 1998, and
additional paid in capital 2,960.3 2,960.3
Retained earnings 2,788.2 2,836.4
Foreign currency translation adjustments (3.3) (8.3)
Unrealized gain (loss) on investments, net (6.0) 22.0
--------- ---------
Total common shareholder's equity 5,739.2 5,810.4
--------- ---------
Total liabilities and shareholder's equity $43,772.3 $42,363.0
========= =========
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 5
Household Finance Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------
In millions.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Three months ended March 31 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net income $ 221.8 $ 324.5
Adjustments to reconcile net income to cash
provided by operations:
Provision for credit losses on owned receivables 331.7 336.6
Insurance policy and claim reserves 69.8 (100.6)
Depreciation and amortization 71.2 71.6
Other, net 88.3 59.2
-------- ---------
Cash provided by operations 782.8 691.3
-------- ---------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased (440.6) (364.9)
Matured 95.1 66.4
Sold 360.4 209.6
Short-term investment securities, net change (734.5) 128.6
Receivables:
Originations, net (2,448.0) (4,031.7)
Purchases and related premiums (1,163.1) (2,123.4)
Sold 1,717.9 3,957.8
Properties and equipment purchased (39.0) (9.2)
Properties and equipment sold 2.4 20.1
Advances to parent company and affiliates, net 258.1 (57.0)
--------- ---------
Cash decrease from investments in operations (2,391.3) (2,203.7)
--------- ---------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and deposits, net change 1,163.7 300.0
Senior and senior subordinated debt issued 1,986.8 3,140.5
Senior and senior subordinated debt retired (1,379.3) (1,956.1)
Policyholders' benefits paid (32.0) (26.8)
Cash received from policyholders 22.0 22.0
Dividends paid to parent company (270.0) (75.0)
Dividends paid - pooled affiliate - (43.6)
Capital contribution from parent company - 200.0
--------- ---------
Cash increase from financing and capital transactions 1,491.2 1,561.0
--------- ---------
Increase (decrease) in cash (117.3) 48.6
Cash at January 1 428.4 545.3
--------- ---------
Cash at March 31 $ 311.1 $ 593.9
========= =========
Supplemental cash flow information:
Interest paid $ 460.8 $ 422.9
--------- ---------
Income taxes paid (received) 73.5 (56.4)
--------- ---------
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
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Household Finance Corporation and Subsidiaries
FINANCIAL HIGHLIGHTS
- ---------------------
All dollar amounts are stated in millions.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Three months ended March 31 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net operating income <F1> $ 221.8 $ 206.0
Beneficial Canada gain - 118.5
--------- --------
Net income $ 221.8 $ 324.5
========= =========
Net interest margin and other revenues <F2> $ 1,123.3 $ 1,420.3
--------- ---------
Return on average common shareholder's
equity <F3> 15.2% 13.8%
--------- ---------
Return on average owned assets <F3> 2.01 1.99
--------- ---------
All dollar amounts are stated in millions.
- -----------------------------------------------------------------------------------
March 31, December 31,
1999 1998
- -----------------------------------------------------------------------------------
Total assets:
Owned $43,772.3 $42,363.0
Managed 56,370.1 55,062.2
--------- ---------
Receivables:
Owned $35,635.2 $34,446.0
Serviced with limited recourse 12,597.8 12,699.2
--------- ---------
Managed $48,233.0 $47,145.2
========= =========
Debt to total shareholder's equity 6.3:1 5.9:1
--------- ---------
<FN>
<F1> Net income excluding the gain on the sale of Beneficial Canada.
<F2> Policyholders' benefits have been netted against other revenues.
<F3> Annualized. Excludes the gain on the sale of Beneficial Canada.
</FN>
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 7
Household Finance Corporation and Subsidiaries
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
- ------------------------
The accompanying unaudited condensed consolidated financial
statements of Household Finance Corporation ("HFC") and its
subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Additionally, these financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31,
1999 should not be considered indicative of the results for any
future quarters or the year ending December 31, 1999. HFC and its
subsidiaries may also be referred to in this Form 10-Q as "we,"
"us" or "our." For further information, refer to the consolidated
financial statements and footnotes included in our Annual Report on
Form 10-K for the year ended December 31, 1998.
2. INVESTMENT SECURITIES
- ------------------------
Investment securities consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
In millions. March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities $ 63.5 $ 66.3 $ 68.2 $ 70.8
Corporate debt securities 1,681.4 1,670.0 1,691.9 1,717.8
U.S. government and federal
agency debt securities 287.0 285.3 290.0 295.2
Other 1,532.7 1,532.7 829.6 829.6
-------- -------- -------- --------
Subtotal 3,564.6 3,554.3 2,879.7 2,913.4
Accrued investment income 34.1 34.1 31.0 31.0
-------- -------- -------- --------
Total investment securities $3,598.7 $3,588.4 $2,910.7 $2,944.4
======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE> 8
3. RECEIVABLES
- --------------
Receivables consisted of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
March 31, December 31,
In millions. 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Home equity $18,969.4 $17,158.7
Auto finance 944.8 805.0
MasterCard/Visa 3,099.1 3,805.5
Private label 6,447.7 7,041.4
Other unsecured 5,542.0 4,953.3
Commercial 632.2 682.1
--------- ---------
Total owned receivables 35,635.2 34,446.0
Accrued finance charges 547.7 470.8
Credit loss reserve for owned receivables (1,448.8) (1,448.9)
Unearned credit insurance premiums and
claims reserves (407.2) (410.6)
Amounts due and deferred from
receivables sales 1,868.0 1,882.3
Reserve for receivables serviced with
limited recourse (658.8) (656.4)
--------- ---------
Total owned receivables, net 35,536.1 34,283.2
Receivables serviced with limited recourse 12,597.8 12,699.2
--------- ---------
Total managed receivables, net $48,133.9 $46,982.4
========= =========
</TABLE>
The outstanding balance of receivables serviced with limited recourse
consisted of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
March 31, December 31,
In millions. 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Home equity $ 3,298.8 $ 3,637.4
Auto finance 1,101.3 960.3
MasterCard/Visa 3,572.5 3,397.5
Private label 753.3 811.5
Other unsecured 3,871.9 3,892.5
--------- ---------
Total $12,597.8 $12,699.2
========= =========
</TABLE>
The combination of receivables owned and receivables serviced with limited
recourse, which we consider our managed portfolio, is shown below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
March 31, December 31,
In millions. 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Home equity $22,268.2 $20,796.1
Auto finance 2,046.1 1,765.3
MasterCard/Visa 6,671.6 7,203.0
Private label 7,201.0 7,852.9
Other unsecured 9,413.9 8,845.8
Commercial 632.2 682.1
--------- ---------
Total $48,233.0 $47,145.2
========= =========
</TABLE>
<PAGE>
<PAGE> 9
The amounts due and deferred from receivables sales were $1,868.0
million at March 31, 1999 and $1,882.3 million at December 31,
1998. The amounts due and deferred included unamortized
securitization assets and other assets established under the
recourse provisions for certain sales totaling $1,820.4 million at
March 31, 1999 and $1,802.5 million at December 31, 1998. It also
included net customer payments not yet received from the
securitization trustee of $31.3 million at March 31, 1999 and $62.3
million at December 31, 1998. We have agreements with a "AAA"-rated
third party who will insure us for up to $21.2 million in losses
relating to certain securitization transactions. We maintain credit
loss reserves under the recourse requirements for receivables
serviced with limited recourse which are based on estimated
probable losses under those requirements. The reserves totaled
$658.8 million at March 31, 1999 and $656.4 million at December 31,
1998 and represents our best estimate of probable losses on
receivables serviced with limited recourse.
4. CREDIT LOSS RESERVES
- -----------------------
An analysis of credit loss reserves for the three months ended
March 31 was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
In millions. 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables
at January 1 $1,448.9 $1,417.5
Provision for credit losses 331.7 336.6
Chargeoffs (389.8) (339.1)
Recoveries 35.5 30.5
Portfolio acquisitions and other, net 22.5 64.5
-------- --------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES
AT MARCH 31 1,448.8 1,510.0
-------- --------
Credit loss reserves for receivables serviced with
limited recourse at January 1 656.4 707.8
Provision for credit losses 145.9 179.6
Chargeoffs (160.3) (216.2)
Recoveries 6.9 13.5
Other, net 9.9 (.1)
-------- --------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED
WITH LIMITED RECOURSE AT MARCH 31 658.8 684.6
-------- --------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES
AT MARCH 31 $2,107.6 $2,194.6
======== ========
</TABLE>
5. MERGER AND INTEGRATION RESERVE
- ---------------------------------
As of March 31, 1999, we have substantially completed the execution
of our merger and integration plan relating to the Beneficial
acquisition. Amounts remaining in our merger and integration reserve
are not significant.
6. INCOME TAXES
- ---------------
The effective tax rate was 35.4 percent for the three months ended
March 31, 1999 and 37.7 percent in the year-ago period. The
effective tax rate differs from the statutory federal income tax
rate in these years primarily because of the effects of (a) state
and local income taxes and (b) leveraged lease tax benefits.
<PAGE>
<PAGE> 10
7. TRANSACTIONS WITH PARENT COMPANY AND AFFILIATES
- --------------------------------------------------
We periodically advance funds to Household International and
affiliates or receive amounts in excess of our parent company's
current requirements. Advances to parent company and affiliates
were $235.9 million at March 31, 1999 compared to $494.0 million at
December 31, 1998. There were no advances from parent company and
affiliates at March 31, 1999 and December 31, 1998. Net interest
income on affiliated balances was $11.9 million for the first
quarter of 1999 and $1.8 million for the prior year quarter.
8. COMPREHENSIVE INCOME
- -----------------------
In accordance with the interim reporting guidelines of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which was adopted in 1998, comprehensive income was $198.8
million for the quarter ended March 31, 1999 and $349.8 million for
the quarter ended March 31, 1998. Excluding the impact of the gain
on sale of Beneficial Canada, comprehensive income was $231.3
million for the quarter ended March 31, 1998.
9. SEGMENT REPORTING
- --------------------
We have one reportable segment, Consumer, which includes our branch-
based consumer finance, private label, auto finance and domestic
MasterCard and Visa businesses. This differs from the basis of
segmentation presented in our Annual Report on Form 10-K for the
year ended December 31, 1998 where we presented the domestic
MasterCard and Visa business as a separate reportable segment. The
domestic MasterCard and Visa business is included in Consumer
because discrete financial information about HFC's domestic
MasterCard and Visa business is not regularly reviewed by the chief
operating decision maker in allocating resources and assessing
performance. There has been no change in the measurement of segment
profit as compared with our Form 10-K.
Information about our reportable segment for the three months ended
March 31, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Owned Basis
In millions. Total
For the three months ended March 31, 1999 Consumer
- --------------------------------------------------------------------
<S> <C>
Net interest margin and other revenues <F1> $ 1,062.5
Intersegment revenues 34.1
Segment net income 177.5
Total segment assets 38,034.3
Total segment assets - managed 50,667.6
---------
- --------------------------------------------------------------------
Owned Basis
In millions. Total
For the three months ended March 31, 1998 Consumer
- --------------------------------------------------------------------
Net interest margin and other revenues <F1> $ 1,055.8
Intersegment revenues 25.0
Segment net income 188.9
Total segment assets 34,092.2
Total segment assets - managed 51,452.1
---------
<FN>
<F1> Net interest margin and other revenues, including intersegment
revenues, net of policyholders' benefits.
</FN>
</TABLE>
<PAGE>
<PAGE> 11
A reconciliation of the reportable segment's net income to consolidated
net income for the three months ended March 31 is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
In millions. 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Reportable segment net income $177.5 $188.9
Other operations not individually reportable 73.0 163.4
Adjustments/eliminations (28.7) (27.8)
------ ------
Total consolidated net income $221.8 $324.5
====== ======
</TABLE>
10. ACCOUNTING PRONOUNCEMENTS
- ------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS No. 133").
FAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in
the balance sheet as either an asset or liability measured at its
fair value. FAS No. 133 requires that changes in a derivative's
fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset
the related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge
accounting.
FAS No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement FAS No. 133 as of the beginning
of any fiscal quarter after issuance (that is, fiscal quarters
beginning June 16, 1998 and thereafter). FAS No. 133 cannot be
applied retroactively. FAS No. 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997. We expect to adopt
FAS No. 133 on January 1, 2000 and have not yet quantified its
impact on our financial statements.
<PAGE>
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the consolidated
financial statements, notes and tables included elsewhere in this
report and in the Household Finance Corporation Annual Report on
Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K")
filed with the Securities and Exchange Commission. Management's
discussion and analysis may contain certain estimates and
projections that may be forward-looking in nature, as defined by
the Private Securities Litigation Reform Act of 1995. A variety of
factors may cause actual results to differ materially from the
results discussed in these forward-looking statements. Factors that
might cause such a difference are discussed herein and in the 1998
Form 10-K.
OPERATIONS SUMMARY
- ------------------
Our net income for the first quarter of 1999 was $221.8 million,
compared to net operating income of $206.0 million a year ago. The
improved results were due to strong growth in our consumer finance
business and significant year-over-year declines in operating
expenses. Including the gain on the sale of Beneficial Canada,
first quarter 1998 net income was $324.5 million.
Our annualized return on average common shareholder's equity for
the first quarter of 1999 was 15.2 percent and, excluding the gain
on the sale of Beneficial Canada, 13.8 percent in the year-ago
period. Our annualized return on average owned assets was 2.01
percent in the 1999 first quarter and, excluding the gain on the
sale of Beneficial Canada, 1.99 percent a year ago. Our annualized
return on average managed assets was 1.57 percent in the first
quarter of 1999 and, excluding the gain on the sale of Beneficial
Canada, 1.40 percent a year ago. Including the gain on the sale of
Beneficial Canada for the first quarter of 1998, our annualized
return on average common shareholder's equity was 21.8 percent, our
return on average owned assets was 3.14 percent and our return on
average managed assets was 2.20 percent.
- - The following summarizes our operating results for our
reportable operating segment for the first quarter of 1999
compared with the prior year period:
Our Consumer segment reported lower earnings in the first
quarter of 1999. Return on average owned assets was 1.87 percent
in the first quarter of 1999, compared with 2.34 percent for the
same period in 1998. Return on average managed assets was 1.41
percent in the first quarter of 1999 compared with 1.52 percent
in 1998. The decrease in operating results was primarily due to
lower average managed receivables, increased loss provision and
lower fee income. Additionally, the Consumer segment experienced
higher credit losses reflecting increased personal bankruptcies
as well as the maturing of promotional balances in our private
label business. Compared with the fourth quarter, the Consumer
segment experienced a decrease in chargeoffs and delinquency.
Managed receivables in our Consumer segment were $48.0 billion
at March 31, 1999, compared with $48.5 billion at March 31,
1998. The decrease reflected attrition associated with the
restructuring of our MasterCard* and Visa* portfolio in 1998,
which included the sale of $1.9 billion of non-core receivables
to third parties, the sale of $1.9 billion of GM Card
receivables to an affiliate and the impact of repricing
initiatives mailed late last year. This decrease was partially
offset by solid growth in home equity, other unsecured and auto
finance receivables. The home equity and unsecured loan growth
in the first quarter reflects the benefits and on-going
potential of the now-integrated HFC and Beneficial systems.
* MasterCard is a registered trademark of MasterCard
International, Incorporated and Visa is a registered trademark
of VISA USA, Inc.
<PAGE>
<PAGE> 13
- - Revenue from our tax refund anticipation loan ("RAL") business
was up from the prior year. The number of electronic filings of
tax returns increased 20 percent over last year and refund
processing with the Internal Revenue Service went smoothly in
the quarter.
- - During the first quarter of 1998, we completed the sale of
Beneficial's Canadian operations and recorded an after-tax gain
of approximately $118.5 million. In April 1998, the sale of
Beneficial's German operations was also completed. Beneficial
announced its intent to sell the German operations in 1997 and
recorded an after-tax loss of approximately $27.8 million after
consideration of a $31.0 million tax benefit. No additional
losses were realized in 1998 as a result of the sale.
BALANCE SHEET REVIEW
- --------------------
- - Managed consumer receivables (receivables on our balance sheet
plus receivables serviced with limited recourse) declined 5 percent
from the prior year. This decrease reflected attrition associated
with the restructuring of our MasterCard and Visa portfolio in
1998, which included the sale of $1.9 billion of non-core
receivables to third parties, the sale of $1.9 billion of GM Card
receivables to an affiliate and the impact of repricing initiatives
mailed late last year.
Managed consumer receivables, other than MasterCard and Visa,
grew over 8 percent from a year ago, with the strongest growth
coming in our home equity business. During 1999, we took
advantage of a pricing opportunity in the bulk home equity
market and acquired a $750 million portfolio. Excluding this
bulk purchase, our home equity portfolio still grew 12 percent
over last year. Auto finance receivables more than doubled from
a year ago reflecting solid loan growth coupled with firm
pricing and good quality credit. This business continued to
benefit from weakened competition and an expanded sales force.
Other unsecured receivables grew slightly from the prior year
driven by strong responses to direct mail and branch-originated
programs. The year-over-year growth rate was impacted by the
purchase of an $850 million unsecured consumer finance portfolio
during the first quarter of 1998. Private label receivables were
down from the prior year as this business experienced attrition
as the result of less promotional activity in 1998. Also
contributing to the decrease was the sale of Beneficial's German
operations in April 1998.
- - Managed consumer receivables were up compared to the fourth
quarter of 1998. Excluding the MasterCard and Visa portfolio,
managed consumer receivables grew 4 percent, led by dynamic growth
in our consumer finance business. Our home equity portfolio grew 7
percent from the prior quarter due to strong branch and
correspondent originations. Excluding the bulk purchase discussed
above, home equity receivables grew 3 percent from year-end 1998.
First quarter growth of 6 percent in other unsecured receivables
was driven by strong responses to direct mail and branch-originated
programs. Auto finance receivables grew 16 percent from the prior
quarter. This growth was attributable to continued weakened
competition in the industry and an expanded sales force. Both our
private label and MasterCard and Visa portfolios were down from the
prior quarter due to normal, seasonal runoff in the first quarter,
which was in line with our expectations. Additionally, our
MasterCard and Visa portfolio experienced some attrition in the
1999 quarter due to repricing initiatives mailed late last year.
- - Consumer receivables on our balance sheet were $35.0 billion
at March 31, 1999, up from $33.8 billion at December 31, 1998 and
$33.2 billion at March 31, 1998. The level of our owned receivables
may vary from period to period depending on the timing and
significance of securitization transactions.
<PAGE>
<PAGE> 14
- - Our managed credit loss reserves were $2,107.6 million at
March 31, 1999, $2,105.3 million at December 31, 1998 and $2,194.6
million at March 31, 1998. Credit loss reserves as a percent of
managed receivables were 4.37 percent, compared with 4.47 percent
at December 31, 1998 and 4.27 percent at March 31, 1998. Reserves
as a percent of nonperforming managed receivables were 106.3
percent, compared with 111.7 percent at December 31, 1998 and 119.3
percent at March 31, 1998. Consumer two-months-and-over contractual
delinquency ("delinquency") as a percent of managed consumer
receivables was 5.22 percent, compared with 5.41 percent at
December 31, 1998 and 4.79 percent at March 31, 1998. The
annualized total consumer managed chargeoff ratio in the first
quarter of 1999 was 4.30 percent, compared with 4.35 percent in the
prior quarter and 4.04 percent in the year-ago quarter.
- - Our debt to total shareholder's equity ratio was 6.3 to 1
compared with 5.9 to 1 at December 31, 1998. The increase was due
to higher debt levels primarily attributable to higher average
owned receivables at March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Our major use of cash is the origination or purchase of receivables
or purchases of investment securities. Our main sources of cash are
the collection of receivable balances, maturities or sales of
investment securities, proceeds from the issuance of debt and
securitization of consumer receivables, and cash provided by
operations.
The following describes major changes in our funding base from
December 31, 1998 to March 31, 1999:
- - We paid $270 million of dividends to our parent company during
the quarter.
- - Commercial paper, bank and other borrowings increased 17
percent to $8.3 billion from $7.1 billion. Senior and senior
subordinated debt (with original maturities over one year)
increased slightly to $27.8 billion from $27.2 billion. The
increase in debt levels from year end is primarily attributable to
the increase in owned receivables. Senior debt issuances during the
quarter included $1.3 billion of ten-year debt which lengthened the
overall maturities of our funding.
- - Our securitized portfolio of home equity, auto finance,
MasterCard and Visa, private label and other unsecured receivables
totaled $12.6 billion at March 31, 1999, compared with $12.7
billion at December 31, 1998. In the first quarter of 1999, we
securitized, excluding replenishments of certificate holder
interests, $.8 billion of auto finance, MasterCard and Visa and
other unsecured receivables, compared with $.3 billion of other
unsecured receivables a year ago.
The composition of these securitizations by type is as follows
(in billions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
March 31, March 31,
Three months ended 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Auto finance $ .3 $ -
MasterCard/Visa .2 -
Other unsecured .3 .3
----- -----
Total $ .8 $ .3
===== =====
</TABLE>
<PAGE>
<PAGE> 15
The market for securities backed by receivables is a reliable,
efficient and cost-effective source of funds. Although they
currently represent a smaller portion of our total funding mix, we
plan to utilize securitizations as a source of funding in the
future. Securitization balances at the end of the 1999 quarter, as
a percent of the total managed portfolio, were 26 percent of our
funding mix, compared to about 34 percent a year ago.
INCOME STATEMENT REVIEW
- -----------------------
Net interest margin
- -------------------
Net interest margin was $690.1 million for the first quarter of
1999, compared to $624.2 million in the prior year. Owned margin
improved due to an increase in average owned home equity loans. Net
interest margin as a percent of average owned interest-earning
assets, annualized, was 7.36 percent compared to 7.19 percent in
the year-ago quarter. The improvement reflected lower funding costs
and better pricing.
Due to the securitization of assets over the past several years,
the comparability of net interest margin between years may be
affected by the level and type of assets securitized. As
receivables are securitized rather than held in our portfolio, net
interest income is reclassified to securitization income. Net
interest margin on a managed basis, assuming receivables
securitized were held in our portfolio, was $988.2 million for the
first quarter of 1999, compared to $1,044.7 million in the year-ago
period. The decrease was primarily due to a decline in average
managed MasterCard and Visa receivables, partially offset by an
increase in average managed home equity loans. Net interest margin
on a managed basis as a percent of average managed interest-earning
assets, annualized, was 7.98 percent compared to 8.02 percent in
the year-ago quarter. The decrease in the net interest margin
percentage compared to the prior year quarter was attributable to a
change in our product mix. Our receivables portfolio in the first
quarter of 1999 was comprised of a larger portion of home equity
loans as compared to the prior year. Home equity loans typically
carry lower interest rates than our unsecured loan products which
carry more risk.
Provision for credit losses
- ---------------------------
The provision for credit losses for receivables on an owned basis
for the first quarter of 1999 totaled $331.7 million, compared to
$336.6 million in the prior year period. The provision for credit
losses on an owned basis may vary from quarter to quarter,
depending on the amount of securitizations in a particular period.
Other revenues
- --------------
Securitization income was $192.2 million for the three months ended
March 31, 1999 and $323.3 million for the same period in 1998.
Securitization income consists of income associated with the
securitization and sale of receivables with limited recourse,
including net interest income, fee and other income and provision
for credit losses related to those receivables. The decrease in
securitization income compared to the first quarter of 1998 was
primarily due to the decrease in average securitized receivables.
Fee income on an owned basis includes revenues from fee-based
products such as credit cards. Fee income was $99.6 million in the
first quarter of 1999, compared to $125.8 million in the comparable
period of the prior year. The decrease in fee income in 1999
reflected lower interchange income and other credit card related
fees as compared to the prior year quarter.
<PAGE>
<PAGE> 16
Other income was $70.7 million in the first quarter of 1999,
compared to $86.5 million in 1998. The decrease in other income is
due to lower commercial income and third party servicing fees,
partially offset by higher RAL income.
Total other revenue for the first quarter of 1998 included a pretax
gain of $189.4 million from the sale of Beneficial's Canadian
operations, as previously discussed.
Expenses
- --------
Operating expenses for the first quarter of 1999 were $448.0
million, down $115.2 million from $563.2 million in the comparable
prior year period reflecting the cost saves from the Beneficial
integration, as well as continued cost control efforts.
Salaries and fringe benefits were $221.5 million compared with
$250.7 million in the first quarter of 1998. The decrease was due
to efficiencies from the Beneficial merger, partially offset by
higher sales-related compensation related to growing the consumer
finance business.
Occupancy and equipment expense was $53.4 million in the first
quarter of 1999, down from $75.7 million in the prior year. The
decrease was primarily due to the elimination of duplicative branch
offices and operating centers as a result of the Beneficial merger
and sublease of the Beneficial office complex in Peapack, New
Jersey.
Other marketing expenses were $42.1 million compared with $64.9
million in the first quarter of 1998. The decrease in expense in
1999 was primarily due to lower marketing spending on programs in
our MasterCard and Visa business.
Other servicing and administrative expenses were $94.9 million in
the first quarter of 1999, down from $130.7 million in the prior
year. The decrease was primarily due to cost saves in systems as a
result of the consolidation of Beneficial's operations, partially
offset by higher telephone and real estate owned expenses.
Amortization of acquired intangibles and goodwill was $36.1 million
in the first quarter of 1999, down from $41.2 million in the prior
year period. The decrease reflects the write-off of intangible
assets in conjunction with portfolio sales in 1998 due to the
repositioning of our bank subsidiary's credit card portfolio.
CREDIT LOSS RESERVES
- --------------------
Our consumer credit management policies focus on product type and
specific portfolio risk factors. The consumer credit portfolio is
diversified by product and geographic location. See Note 3,
"Receivables" in the accompanying financial statements for
receivables by product type.
Total managed credit loss reserves, which include reserves
established on the off-balance sheet portfolio when receivables are
securitized, were as follows (in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
March 31, December 31, March 31,
1999 1998 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Owned $1,448.8 $1,448.9 $1,510.0
Serviced with limited recourse 658.8 656.4 684.6
-------- -------- --------
Total $2,107.6 $2,105.3 $2,194.6
======== ======== ========
/TABLE
<PAGE>
<PAGE> 17
Managed credit loss reserves as a percent of nonperforming managed
receivables were 106.3 percent, compared to 111.7 percent at
December 31, 1998 and 119.3 percent at March 31, 1998.
Total owned and managed credit loss reserves as a percent of
receivables were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
March 31, December 31, March 31,
1999 1998 1998
- -------------------------------------------------------------------
<S> <C> <C> <C>
Owned 4.07% 4.21% 4.43%
Managed 4.37 4.47 4.27
---- ---- ----
</TABLE>
The level of reserves for consumer credit losses is based on
delinquency and chargeoff experience by product and judgmental
factors. We also evaluate the potential impact of existing and
anticipated national and regional economic conditions on the
managed receivable portfolio when establishing credit loss
reserves. Reserve levels also reflect the impact of a growing
percentage of secured loans. See Note 4, "Credit Loss Reserves" in
the accompanying financial statements for analyses of reserves.
CREDIT QUALITY
- --------------
Delinquency and chargeoff levels in the consumer portfolio were
down compared to the prior quarter, but were higher than the first
quarter of 1998. We track delinquency and chargeoff levels on a
managed basis. We include the off-balance sheet portfolio since we
apply the same credit and portfolio management procedures as on our
owned portfolio. This results in a similar credit loss exposure for us.
Delinquency
- -----------
Two-Months-and-Over Contractual Delinquency (as a percent of managed
consumer receivables):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
3/31/99 12/31/98 9/30/98 6/30/98 3/31/98
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home equity 3.36% 3.55% 3.59% 3.39% 3.59%
Auto finance 1.74 2.29 2.05 1.67 1.84
MasterCard/Visa 4.69 5.19 4.67 4.35 3.32
Private label 8.00 7.38 7.32 6.27 6.22
Other unsecured 8.62 8.86 9.15 8.74 8.22
---- ---- ---- ---- ----
Total 5.22% 5.41% 5.39% 5.03% 4.79%
==== ==== ==== ==== ====
</TABLE>
Delinquency as a percent of managed consumer receivables decreased
from the prior quarter but increased from the prior year quarter.
The decrease from the prior quarter was primarily due to a $32
million decline in dollars of delinquency, led by improvement in
our MasterCard and Visa business. This was the second consecutive
quarter of delinquency improvement and dollars of delinquency have
declined by over $57 million in the last six months.
The increase in the managed delinquency ratio from a year ago was
due to seasoning of our MasterCard and Visa and other unsecured
portfolios as well as the maturing of certain special promotional
balances in our private label portfolio.
<PAGE>
<PAGE> 18
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
1999 1998 1998 1998 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home equity .48% .65% .68% .40% .58%
Auto finance 5.45 5.63 4.89 5.18 5.95
MasterCard/Visa 9.60 7.66 6.98 5.31 5.65
Private label 6.66 6.22 5.46 6.43 6.02
Other unsecured 7.16 7.89 8.66 8.13 6.91
---- ---- ---- ---- ----
Total 4.30% 4.35% 4.36% 4.10% 4.04%
==== ==== ==== ==== ====
</TABLE>
Net chargeoffs as a percent of average managed consumer receivables for
the first quarter of 1999 decreased from the prior quarter but increased
from the prior year quarter. The first quarter chargeoff ratio was lower
than fourth quarter 1998, as total dollars of chargeoffs dropped in the
quarter, led by improvement in our home equity and other unsecured
portfolios. Chargeoff ratios in our MasterCard and Visa portfolio
continued to increase, due, in part, to lower receivables. Bankruptcy
chargeoffs in our MasterCard and Visa business were down compared to the
fourth quarter level. Chargeoffs in the private label portfolio increased
due to higher levels of personal bankruptcies as well as the maturing of
certain special promotional balances.
The higher chargeoff ratio compared to a year ago was primarily due
to increased chargeoffs in our MasterCard and Visa portfolio,
coupled with lower receivables in this portfolio compared to the
prior year.
<PAGE>
<PAGE> 19
Nonperforming Assets
- --------------------
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
In millions. 3/31/99 12/31/98 9/30/98 6/30/98 3/31/98
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual owned receivables $ 935.9 $ 822.7 $ 900.1 $ 759.2 $ 708.6
Accruing owned consumer
receivables 90 or more days
delinquent 553.0 602.6 527.0 502.1 451.1
Renegotiated commercial
loans 12.3 12.3 12.3 12.3 12.3
-------- -------- -------- -------- --------
Total nonperforming owned
receivables 1,501.2 1,437.6 1,439.4 1,273.6 1,172.0
Real estate owned 229.9 235.1 212.9 202.3 188.1
-------- -------- -------- -------- --------
Total nonperforming owned
assets $1,731.1 $1,672.7 $1,652.3 $1,475.9 $1,360.1
======== ======== ======== ======== ========
Owned credit loss reserves as
a percent of nonperforming
owned receivables 96.5% 100.8% 108.3% 119.7% 128.8%
-------- -------- -------- -------- --------
Nonaccrual managed
receivables $1,307.1 $1,165.5 $1,261.9 $1,186.8 $1,165.2
Accruing managed consumer
receivables 90 or more days
delinquent 663.9 707.7 683.8 675.5 662.4
Renegotiated commercial
loans 12.3 12.3 12.3 12.3 12.3
-------- -------- -------- -------- --------
Total nonperforming managed
receivables 1,983.3 1,885.5 1,958.0 1,874.6 1,839.9
Real estate owned 229.9 235.1 212.9 202.3 188.1
-------- -------- -------- -------- --------
Total nonperforming managed
assets $2,213.2 $2,120.6 $2,170.9 $2,076.9 $2,028.0
======== ======== ======== ======== ========
Managed credit loss reserves as
a percent of nonperforming
managed receivables 106.3% 111.7% 116.7% 117.8% 119.3%
-------- -------- -------- -------- --------
</TABLE>
YEAR 2000
- ---------
We continue to remain on target to be substantially complete with
remediation, replacement and testing of all systems for Year 2000
compliance by the end of the second quarter of 1999. Consistent
with previous disclosures, the costs for Year 2000 compliance have
not been, and are not expected to be, material to our operations.
Household International currently estimates that the aggregate cost
of the Year 2000 effort remains at $20 million after-tax, of which
approximately $17 million has been incurred as of March 31, 1999.
<PAGE>
<PAGE> 20
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.
27 Financial Data Schedule.
27.1 Restated Financial Data Schedule.
99.1 Debt Securities Ratings.
(b) Reports on Form 8-K
During the first quarter of 1999, the Registrant filed a
Current Report on Form 8-K dated January 29, 1999 with
respect to the financial results of Household Finance
Corporation for the year ended December 31, 1998, and a
Current Report on Form 8-K dated February 5, 1999 in
connection with the offering of 5 7/8% Notes due February
1, 2009.
<PAGE>
<PAGE> 21
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 FINANCE CORPORATION
-----------------------------
(Registrant)
Date: May 13, 1999 By: /s/ David A. Schoenholz
------------ -----------------------------
David A. Schoenholz
Executive Vice President and
Chief Financial Officer,
Director and on behalf of
Household Finance Corporation
<PAGE>
<PAGE> 22
Exhibit Index
--------------
12 Statement of Computation of Ratio of Earnings
to Fixed Charges.
27 Financial Data Schedule.
27.1 Restated Financial Data Schedule.
99.1 Debt Securities Ratings.
EXHIBIT 12
----------
HOUSEHOLD FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Net income $ 221.8 $ 324.5
Income taxes 121.8 196.0
-------- --------
Income before income taxes 343.6 520.5
-------- --------
Fixed charges:
Interest expense <F1> 509.0 502.2
Interest portion of rentals <F2> 8.9 14.9
-------- --------
Total fixed charges 517.9 517.1
-------- --------
Total earnings as defined $ 861.5 $1,037.6
======== ========
Ratio of earnings to fixed charges 1.66 2.01
======== ========
<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.
</FN>
</TABLE>
<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> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 311,100
<SECURITIES> 3,588,400
<RECEIVABLES> 35,635,200
<ALLOWANCES> (2,107,600)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,042,100
<DEPRECIATION> (665,100)
<TOTAL-ASSETS> 43,772,300
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,794,500
0
0
<COMMON> 1
<OTHER-SE> 5,739,200
<TOTAL-LIABILITY-AND-EQUITY> 43,772,300
<SALES> 0
<TOTAL-REVENUES> 1,688,800
<CGS> 0
<TOTAL-COSTS> 506,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 331,700
<INTEREST-EXPENSE> 506,700
<INCOME-PRETAX> 343,600
<INCOME-TAX> 121,800
<INCOME-CONTINUING> 221,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 221,800
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998<F1>
<PERIOD-END> MAR-31-1998
<CASH> 593,900
<SECURITIES> 2,307,400
<RECEIVABLES> 34,087,700
<ALLOWANCES> (2,194,600)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 1,105,600
<DEPRECIATION> (668,200)
<TOTAL-ASSETS> 41,665,500
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 22,118,700
0
0
<COMMON> 1
<OTHER-SE> 6,346,000
<TOTAL-LIABILITY-AND-EQUITY> 41,665,500
<SALES> 0
<TOTAL-REVENUES> 1,978,000
<CGS> 0
<TOTAL-COSTS> 620,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 336,600
<INTEREST-EXPENSE> 500,200
<INCOME-PRETAX> 520,500
<INCOME-TAX> 196,000
<INCOME-CONTINUING> 324,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 324,500
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>RESTATED
<F2>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>
EXHIBIT 99.1
------------
HOUSEHOLD FINANCE CORPORATION AND SUBSIDIARIES
DEBT SECURITIES RATINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Standard Moody's Duff & Phelps
& Poor's Investors Fitch Credit Thomson
Corporation Service IBCA Rating Co. BankWatch
- ------------------------------------------------------------------------------------------------------------
At March 31, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Household Finance Corporation
Senior debt A A2 A+ A+ A+
Senior subordinated debt A- A3 A A A
Commercial paper A-1 P-1 F-1 Duff 1+ TBW-1
------ ------ ------ ------- ------
Household Bank (Nevada), N.A.
Senior debt A A2 A+ A+ A+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
