<PAGE> 1
FORM 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: January 29, 1999
----------------
HOUSEHOLD FINANCE CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-75 36-1239445
- --------------------------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
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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Item 5. Other Events
Set forth in the Exhibit hereto are selected consolidated financial
statements which present the financial position and results of
operations and selected owned and managed financial information for
Household Finance Corporation (the "Company") as of and for the years
ended December 31, 1998 and 1997.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
--- --------
12 Statement on the Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred Stock
Dividends.
27 Financial Data Schedule.
99 Selected consolidated financial statements and selected
owned and managed financial information with respect to
the operations of Household Finance Corporation as of and
for the years ended December 31, 1998 and 1997.
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOUSEHOLD FINANCE CORPORATION
-----------------------------
(Registrant)
By: /s/ David A. Schoenholz
-----------------------------
David A. Schoenholz
Executive Vice President
and Chief Financial Officer,
(a Principal Financial Officer),
Director and on behalf of
Household Finance Corporation
Dated: January 29, 1999
----------------
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
12 Statement on Computation of Ratio of Earnings to Fixed Charges and
to Combined Fixed Charges and Preferred Stock Dividends.
27 Financial Data Schedule.
99 Selected consolidated financial statements and selected owned and
managed financial information with respect to the operations of
Household Finance Corporation as of and for the years ended
December 31, 1998 and 1997.
<PAGE> 1
EXHIBIT 12
HOUSEHOLD FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
1998 1997 1996 1995 1994
---------- -------- ---------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income from continuing operations $ 304.9 $ 767.1 $ 650.0 $ 412.3 $ 434.1
Income taxes 361.8 391.9 358.1 295.3 252.0
---------- -------- ---------- --------- ---------
Income before income taxes 666.7 1,159.0 1,008.1 707.6 686.1
Fixed charges:
Interest expense (1) 2,005.3 1,863.0 1,727.9 1,675.9 1,330.2
Interest portion of rentals (2) 48.1 46.8 45.2 37.1 24.9
---------- -------- ---------- --------- ---------
Total fixed charges 2,053.4 1,909.8 1,773.1 1,713.0 1,355.1
Total earnings as defined 2,720.1 $3,068.8 $ 2,781.2 $ 2,420.6 $ 2,041.2
---------- -------- ---------- --------- ---------
Ratio of earnings to fixed charges 1.32 1.61 1.57 1.41 1.51
---------- -------- ---------- --------- ---------
Preferred stock dividends (3) - $ 14.6 $ 19.4 $ 21.3 $ 19.6
---------- -------- ---------- --------- ---------
Ratio of earnings to combined fixed
charges and preferred stock
dividends(4) 1.32 1.59 1.55 1.40 1.48
---------- -------- ---------- --------- ---------
Ratio of earnings to combined fixed
charges and preferred stock
dividends, excluding merger and
integration related costs 1.81 - - - -
---------- -------- ---------- --------- ---------
</TABLE>
(1) For financial statement purposes, these amounts are reduced for income
earned on temporary investment of excess funds, generally resulting from
over-subscriptions of commercial paper issuances.
(2) Represents one-third of rentals, which approximates the portion
representing interest.
(3) Preferred stock dividends are grossed up to their pretax equivalents.
(4) The 1998 ratios have been negatively impacted by the one-time merger and
integration related costs associated with our merger with Beneficial
Corporation. As a result, ratios excluding these costs have also been
presented for comparative purposes.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 428,400
<SECURITIES> 2,944,400
<RECEIVABLES> 34,446,000
<ALLOWANCES> 2,105,300
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,005,700
<DEPRECIATION> 628,800
<TOTAL-ASSETS> 42,363,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,186,100
0
0
<COMMON> 1
<OTHER-SE> 5,810,400
<TOTAL-LIABILITY-AND-EQUITY> 42,363,000
<SALES> 0
<TOTAL-REVENUES> 7,103,300
<CGS> 0
<TOTAL-COSTS> 2,188,000
<OTHER-EXPENSES> 1,000,000<F2>
<LOSS-PROVISION> 1,253,100
<INTEREST-EXPENSE> 1,995,500
<INCOME-PRETAX> 666,700
<INCOME-TAX> 361,800
<INCOME-CONTINUING> 304,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304,900
<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.
<F2>REPRESENTS MERGER AND INTEGRATION RELATED COSTS ASSOCIATED WITH THE
COMPANY'S MERGER WITH BENEFICIAL CORPORATION, ACCOUNTED FOR AS A POOLING OF
INTERESTS.
</FN>
</TABLE>
<PAGE> 1
Consolidated Statements of Income Exhibit 99
Household Finance Corporation and Subsidiaries
In millions.
<TABLE>
<CAPTION>
Year ended December 31 1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Finance income $4,581.4 $4,205.1
Other interest income 36.5 35.1
Interest expense 1,995.5 1,853.5
-------- --------
Net interest margin 2,622.4 2,386.7
Provision for credit losses on owned receivables 1,253.1 1,252.1
-------- --------
Net interest margin after provision for
credit losses 1,369.3 1,134.6
-------- --------
Securitization income 1,058.5 1,232.0
Insurance revenues 352.9 352.9
Investment income 146.7 152.6
Fee income 498.7 514.8
Other income 239.2 310.5
Gain on sale of Beneficial Canada 189.4 -
-------- --------
Total other revenues 2,485.4 2,562.8
-------- --------
Salaries and fringe benefits 921.7 925.3
Other operating expenses 889.9 1,233.1
Amortization of acquired intangibles
and goodwill 168.8 143.4
Policyholders' benefits 207.6 236.6
Merger and integration related costs 1,000.0 -
-------- --------
Total costs and expenses 3,188.0 2,538.4
-------- --------
Income before income taxes 666.7 1,159.0
Income taxes 361.8 391.9
-------- --------
Net income $ 304.9 $ 767.1
======== ========
</TABLE>
<PAGE> 2
Consolidated Balance Sheets
Household Finance Corporation and Subsidiaries
In millions, except share data.
<TABLE>
<CAPTION>
At December 31 1998 1997
---------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash $ 428.4 $ 545.3
Investment securities 2,944.4 2,336.8
Receivables, net 34,283.2 32,152.5
Advances to parent company and affiliates 494.0 10.5
Acquired intangibles and goodwill, net 1,682.7 1,777.9
Properties and equipment, net 376.9 464.8
Real estate owned 235.1 187.8
Other assets 1,918.3 1,973.3
---------- ----------
Total assets $ 42,363.0 $ 39,448.9
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Debt:
Deposits - $ 555.3
Commercial paper, bank and other
borrowings $ 7,143.1 9,547.1
Senior and senior subordinated debt
(with original maturities over one year) 27,186.1 20,909.2
---------- ----------
Total debt 34,329.2 31,011.6
Insurance policy and claim reserves 1,076.2 1,182.3
Other liabilities 1,147.2 1,451.3
---------- ----------
Total liabilities 36,552.6 33,645.2
Common shareholder's equity:
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding at
December 31, 1998 and 1997, and additional
paid-in capital 2,960.3 2,555.1
Retained earnings 2,836.4 3,296.9
Foreign currency translation adjustments (8.3) (56.5)
Unrealized gain (loss) on investments, net 22.0 8.2
---------- ----------
Total common shareholder's equity 5,810.4 5,803.7
---------- ----------
Total liabilities and shareholder's equity $ 42,363.0 $ 39,448.9
========== ==========
</TABLE>
<PAGE> 3
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1. RECEIVABLES
<TABLE>
<CAPTION>
In millions.
At December 31 1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Home equity $ 17,158.7 $ 12,806.1
Auto finance 805.0 476.5
MasterCard/Visa 3,805.5 5,052.4
Private label 7,041.4 8,039.2
Other unsecured 4,953.3 5,071.3
Commercial 682.1 937.8
---------- ----------
Total owned receivables 34,446.0 32,383.3
Accrued finance charges 470.8 400.1
Credit loss reserve for owned receivables (1,448.9) (1,417.5)
Unearned credit insurance premiums and claims
reserves (410.6) (344.2)
Amounts due and deferred from receivables sales 1,882.3 1,838.6
Reserve for receivables serviced with limited
recourse (656.4) (707.8)
---------- ----------
Total owned receivables, net 34,283.2 32,152.5
Receivables serviced with limited recourse 12,699.2 18,043.0
---------- ----------
Total managed receivables, net $ 46,982.4 $ 50,195.5
========== ==========
The outstanding balance of receivables serviced with limited recourse consisted
of the following:
In millions.
At December 31 1998 1997
---------- ----------
(Unaudited)
Home equity $ 3,637.4 $ 6,038.6
Auto finance 960.3 395.9
MasterCard/Visa 3,397.5 6,775.7
Private label 811.5 1,025.0
Other unsecured 3,892.5 3,807.8
---------- ----------
Total $ 12,699.2 $ 18,043.0
========== ==========
The combination of receivables owned and receivables serviced with limited
recourse, which we consider our managed portfolio, is shown below:
In millions.
At December 31 1998 1997
---------- ----------
(Unaudited)
Home equity $ 20,796.1 $ 18,844.7
Auto finance 1,765.3 872.4
MasterCard/Visa 7,203.0 11,828.1
Private label 7,852.9 9,064.2
Other unsecured 8,845.8 8,879.1
Commercial 682.1 937.8
---------- ----------
Managed receivables $ 47,145.2 $ 50,426.3
========== ==========
</TABLE>
<PAGE> 4
The following table sets forth the activity in our credit loss reserves:
<TABLE>
<CAPTION>
In millions.
Year ended December 31 1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Credit loss reserves for owned receivables at
January 1 $1,417.5 $ 1,169.7
Provision for credit losses 1,253.1 1,252.1
Chargeoffs (1,426.8) (1,199.1)
Recoveries 127.6 141.5
Portfolio acquisitions, net 77.5 53.3
-------- --------
Total credit loss reserves for owned receivables
at December 31 1,448.9 1,417.5
-------- --------
Credit loss reserves for receivables serviced with
limited recourse at January 1 707.8 576.2
Provision for credit losses 805.3 738.9
Chargeoffs (800.1) (695.4)
Recoveries 50.7 43.7
Other, net (107.3) 44.4
-------- --------
Total credit loss reserves for receivables serviced
with limited recourse at December 31 656.4 707.8
-------- --------
Total credit loss reserves for managed receivables
at December 31 $2,105.3 $2,125.3
======== ========
</TABLE>
- ------------------------------------------------------------------------------
2. MANAGED CONSUMER TWO-MONTHS-AND-OVER CONTRACTUAL DELINQUENCY RATIOS
<TABLE>
<CAPTION>
1998 Quarter End 1997 Quarter End
---------------------------------------- -----------------------------------------
4 3 2 1 4 3 2 1
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Home equity 3.55% 3.66% 3.48% 3.59% 3.59% 3.03% 2.82% 3.05%
Auto finance(1) 2.29 2.05 1.67 1.84 1.97 - - -
MasterCard/Visa 5.19 4.68 4.31 3.32 3.28 3.42 3.39 3.34
Private label 7.38 7.21 6.22 6.22 6.01 5.85 5.25 4.82
Other unsecured 8.86 8.92 8.55 8.22 8.25 7.89 7.36 7.32
----- ----- ----- ----- ----- ----- ----- -----
Total 5.41% 5.37% 5.01% 4.79% 4.77% 4.57% 4.24% 4.29%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
(1) Prior to the fourth quarter of 1997, delinquency statistics for auto finance
receivables were not significant. For prior periods, delinquency data for
these receivables were included in other unsecured receivables.
<PAGE> 5
- --------------------------------------------------------------------------------
3. MANAGED CONSUMER NET CHARGEOFF RATIOS
<TABLE>
<CAPTION>
1998 Quarter Annualized 1997 Quarter Annualized
Full Year --------------------------------- Full Year ----------------------------------
1998 4 3 2 1 1997 4 3 2 1
--------- ----- ----- ----- ----- --------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home equity .56% .62% .68% .40% .58% .58% .59% .47% .60% .69%
Auto finance(1) 5.39 5.63 4.89 5.18 5.95 4.68 5.33 - - -
MasterCard/Visa 6.03 6.97 6.62 5.31 5.65 5.35 5.45 6.24 5.13 4.59
Private label 5.96 6.04 5.51 6.43 6.02 4.84 5.47 5.02 4.58 4.32
Other unsecured 7.70 7.53 8.40 8.13 6.91 6.37 6.76 6.48 6.04 6.02
------- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total 4.11% 4.15% 4.27% 4.10% 4.04% 3.69% 3.83% 3.81% 3.61% 3.47%
======= ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
(1) Prior to the fourth quarter of 1997, chargeoff statistics for auto finance
receivables were not significant and were included in other unsecured
receivables.
- ------------------------------------------------------------------------------
4. NONPERFORMING ASSETS
<TABLE>
<CAPTION>
In millions.
At December 31 1998 1997
--------- ---------
<S> <C> <C>
Nonaccrual managed receivables $ 1,165.5 $ 1,121.3
Accruing managed consumer receivables 90 or
more days delinquent 707.7 639.1
Renegotiated commercial loans 12.3 12.4
--------- ---------
Total nonperforming managed receivables 1,885.5 1,772.8
Real estate owned 235.1 187.8
--------- ---------
Total nonperforming managed assets $ 2,120.6 $ 1,960.6
========= =========
Managed credit loss reserves as a percent
of nonperforming managed receivables 111.7% 119.9%
--------- ---------
</TABLE>
