<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1995 Commission file number 2-80466
Norwest Financial, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42 1186565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
206 Eighth Street, Des Moines, Iowa 50309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515) 243-2131
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock (without par
value): 1,000 shares outstanding as of May 1, 1995.
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 with the reduced
disclosure format.
<PAGE> 2
PART I. FINANCIAL INFORMATION
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets (Unaudited)
(Thousands of Dollars)
March 31, December 31,
Assets 1995 1994
Cash and cash equivalents $ 106,584 $ 63,496
Marketable securities 637,682 570,314
Finance receivables:
Consumer:
Loans 2,990,646 2,854,971
Sales finance 1,314,078 1,225,389
Other 367,508 258,469
Commercial 495,655 500,270
Total finance receivables 5,167,887 4,839,099
Less allowance for credit losses 144,268 135,952
Finance receivables - net 5,023,619 4,703,147
Notes receivable - affiliate 144,483 376,886
Property and equipment (at cost, less
accumulated depreciation of $85,098
for 1995 and $81,030 for 1994) 59,195 58,342
Deferred income taxes 57,405 63,387
Other assets 162,599 289,170
Total assets $6,191,567 $6,124,742
See accompanying notes to consolidated financial statements.
<PAGE> 3
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets (Unaudited)
(Thousands of Dollars)
March 31, December 31,
Liabilities and
Stockholder's Equity 1995 1994
Loans payable - short-term:
Commercial paper $1,201,138 $1,549,067
Affiliates 38,929 35,946
Other 201,977
Unearned insurance premiums and commissions 129,587 128,812
Insurance claims and policy reserves 34,174 32,287
Accrued interest payable 66,733 53,759
Other payables to affiliates 25,734 4,705
Other liabilities 181,747 208,498
Long-term debt:
Senior 3,311,059 2,797,623
Subordinated 300,750 295,000
Total long-term debt 3,611,809 3,092,623
Total liabilities 5,289,851 5,307,674
Stockholder's equity:
Common stock without par value
(authorized 1,000 shares,
issued 1,000 shares) 3,855 3,855
Additional paid in capital 90,766 71,413
Retained earnings (note 2) 817,402 764,295
Foreign currency translation adjustment (7,911) (8,029)
Net unrealized holding loss on
marketable securities (2,396) (14,466)
Total stockholder's equity 901,716 817,068
Total liabilities and
stockholder's equity $6,191,567 $6,124,742
See accompanying notes to consolidated financial statements.
<PAGE> 4
NORWEST FINANCIAL, INC.
Statements of Consolidated Earnings (Unaudited)
(Thousands of Dollars)
Three Months Ended March 31,
1995 1994
Income:
Finance charges and interest $268,075 $232,875
Insurance premiums and commissions 27,817 24,128
Other income (note 3) 26,383 22,692
Total income 322,275 279,695
Expenses:
Operating expenses 114,224 106,703
Interest and debt expense 79,431 60,419
Provision for credit losses 30,314 25,146
Insurance losses and loss expenses 9,553 7,170
Total expenses 233,522 199,438
Earnings before income taxes 88,753 80,257
Income taxes 31,776 28,109
Net earnings $ 56,977 $ 52,148
See accompanying notes to consolidated financial statements.
<PAGE> 5
NORWEST FINANCIAL, INC.
Statements of Consolidated Cash Flows (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(Thousands of Dollars)
Three Months Ended March 31,
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 56,977 $ 52,148
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Provision for credit losses 30,314 25,146
Depreciation and amortization 6,364 7,000
Deferred income taxes 3,054 (6,636)
Other assets 3,016 (2,143)
Unearned insurance premiums
and commissions (778) 1,959
Insurance claims and policy reserves 970 598
Accrued interest payable 12,197 12,880
Other payables to affiliates 18,564 44,836
Other liabilities (32,228) (6,453)
Net cash flows from operating activities 98,450 129,335
Cash flows from investing activities:
Finance receivables:
Principal collected 1,208,168 1,105,532
Receivables originated or purchased (1,273,225) (1,135,518)
Proceeds from sales of marketable securities 8,612 20,277
Proceeds from maturities of
marketable securities 12,375 45,837
Purchase of marketable securities (37,422) (84,259)
Net additions to property and equipment (3,004) (4,418)
Net decrease in note receivable - affiliate 51,197 30,922
Contributed subsidiaries received, net of
cash and cash equivalents 2,477
Other 122,421 33,621
Net cash flows from investing activities 91,599 11,994
Cash flows from financing activities:
Net decrease in loans payable - short-term (546,923) (221,987)
Proceeds from issuance of long-term debt:
Senior 450,000 307,409
Subordinated 20,000
Repayments of long-term debt:
Senior (38) (154,984)
Dividends paid (50,000) (40,000)
Net cash flows from financing activities (146,961) (89,562)
Net increase in cash and cash equivalents 43,088 51,767
Cash and cash equivalents beginning of period 63,496 80,762
Cash and cash equivalents end of period $ 106,584 $ 132,529
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements (Unaudited)
The accompanying unaudited financial statements and notes have been prepared
in accordance with the accounting policies set forth in Norwest Financial,
Inc.'s 1994 Annual Report on Form 10-K and should be read in conjunction
with the Notes to Consolidated Financial Statements therein. In the opinion
of management, all adjustments (none of which were other than normal
recurring accruals) necessary to present fairly the financial statements for
the periods presented have been included.
1. Principles of Consolidation.
The consolidated financial statements include the accounts of Norwest
Financial, Inc. (the "Company") and subsidiaries. Intercompany accounts and
transactions are eliminated. The Company is a wholly owned subsidiary of
Norwest Financial Services, Inc. which is a wholly-owned subsidiary of
Norwest Corporation.
2. Dividend Restrictions.
Certain long-term debt instruments restrict payment of dividends on and
acquisitions of the Company's common stock. In addition, such debt instru-
ments and many of the Company's bank credit agreements contain certain
requirements as to maintenance of net worth (as defined). Approximately
$216 million of consolidated retained earnings was unrestricted at March 31,
1995.
3. Interest Income from Marketable Securities and Cash Equivalents.
Interest and dividends from marketable securities and cash equivalents were
$11.6 million and $8.5 million for the quarters ended March 31, 1995 and
1994, respectively.
4. Statements of Consolidated Cash Flows
Effective January 1, 1995, Norwest Financial Services, Inc. made a capital
contribution, without consideration, to the Company of the outstanding
common stock of Community Credit Co. and Dial National Bank. These capital
contributions have been accounted for in a manner similar to a pooling of
interests, except that results of prior periods have not been restated.
Community Credit Co. and Dial National Bank had assets of $326,491,000 and
liabilities of $261,345,000 at the time of the contribution.
5. Reclassifications.
Certain amounts in the 1994 financial statements have been reclassified to
conform to the presentation used in the 1995 financial statements.
<PAGE> 7
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Effective January 1, 1995, Norwest Financial Services, Inc. made a capital
contribution, without consideration, to the Company of the outstanding
common stock of Community Credit Co. and Dial National Bank (the
"Contributed Subsidiaries"). These capital contributions to the Company
have been accounted for in a manner similar to a pooling of interests,
except that results of prior periods have not been restated.
Norwest Financial's total income (revenue) increased 15% for the first three
months ($322.3 million in the first three months of 1995 compared with
$279.7 million in the first three months of 1994). Total income increased
10% excluding the Contributed Subsidiaries.
Income from finance charges and interest also increased 15% for the first
three months ($268.1 million in the first three months of 1995 compared with
$232.9 million in the first three months of 1994). Income from finance
charges and interest increased 9% excluding the Contributed Subsidiaries.
Changes in income from finance charges and interest result primarily from
(1) changes in the amount of finance receivables outstanding and (2) changes
in the rate of charge on those receivables. In total, average finance
receivables outstanding in the first three months of 1995 increased 15% from
the first three months of 1994; average consumer receivables outstanding
increased 17% while average commercial receivables outstanding remained the
same.
Three Months Ended March 31,
Rate of charge on finance receivables: 1995 1994
Consumer 21.47% 21.66%
Commercial 14.85 14.22
Total 20.83 20.83
The increase in income from finance charges and interest was due to growth
in average finance receivables outstanding. The increase in average finance
receivables was due primarily to regular business activity combined with the
increase due to the Contributed Subsidiaries. Excluding the Contributed
Subsidiaries, average finance receivables increased 8%.
Insurance premiums and commissions increased 15% ($27.8 million in the first
three months of 1995 compared with $24.1 million in the first three months
of 1994). Changes in insurance premiums and commissions generally correspond
to changes in average consumer finance loans outstanding (those secured by
real estate and not secured by real estate). Average consumer finance loans
outstanding increased 11% in the first three months of 1995 compared with
the first three months of 1994. Insurance losses and loss expenses
increased 33% ($9.6 million in the first three months of 1995 compared with
$7.2 million in the first three months of 1994). Insurance losses and loss
expenses were lower in 1994 due to a change in Canadian reinsurance
agreements. The Contributed Subsidiaries did not have a significant effect
on insurance premiums and commissions and insurance losses and loss
expenses.
<PAGE> 8
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Other income increased 16% ($26.4 million in the first three months of 1995
compared with $22.7 million in the first three months of 1994). An increase
in investment income accounted for the majority of the increase. Other
income would have increased 12% excluding the Contributed Subsidiaries.
Operating expenses increased 7% ($114.2 million in the first three months of
1995 compared with $106.7 million in the first three months of 1994).
Operating expenses increased 3% excluding the Contributed Subsidiaries.
Interest and debt expense increased 31% ($79.4 million in the first three
months of 1995 compared with $60.4 million in the first three months of
1994). Interest and debt expense would have increased 24% excluding the
Contributed Subsidiaries. Changes in interest and debt expense result
primarily from (1) changes in the amount of borrowings outstanding due to
funding requirements for receivables and (2) changes in the cost of those
borrowings. Average total outstanding borrowings in the first three months
of 1995 including borrowing from affiliates increased 17% from the first
three months of 1994.
Three Months Ended March 31,
Costs of funds: 1995 1994
Short-term 6.27% 3.59%
Long-term 6.96 7.07
Total 6.75 6.02
Changes in average debt outstanding generally correspond to changes in
average finance receivables outstanding. Average finance receivables
increased 15% from the first three months of 1994.
Provision for credit losses increased 21% ($30.3 million in the first three
months of 1995 compared with $25.1 million in the first three months of
1994). Provision for credit losses increased 16% excluding the Contributed
Subsidiaries. Net write-offs as a percentage of average net receivables
outstanding increased to .57% in the first three months of 1995 compared
with .54% in the first three months of 1994.
Federal and state income taxes increased 13% ($31.8 million in the first
three months of 1995 compared with $28.1 million in the first three months
of 1994). The increase was due primarily to the increase in earnings before
income taxes. The effective tax rate was 35.8% for the first three months
of 1995 and 35.0% the first three months of 1994.
The Company and one of its Canadian subsidiaries maintain bank lines of
credit and revolving credit agreements to provide an alternative source of
liquidity to support the commercial paper borrowings. At March 31, 1995,
lines of credit and revolving credit agreements totaling $1,148 million were
being maintained at 34 unaffiliated banks. None of this credit was in use
at the time.
<PAGE> 9
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Concluded
The Company and one of its Canadian subsidiaries obtain long-term debt
capital primarily from (i) the issuance of debt securities to the public
through underwriters on a firm-commitment basis, (ii) the issuance of debt
securities to institutional investors, and (iii) term borrowings from
commercial banks. The Company also obtains long-term debt from the issuance
of medium-term notes (which may have maturities ranging from nine months to
30 years) through underwriters (acting as agent or principal).
Norwest Financial anticipates the continued availability of borrowed funds,
at prevailing interest rates, to provide for Norwest Financial's growth in
the foreseeable future. Funds are also generated internally from payments
of principal and interest received on Norwest Financial's finance
receivables.
<PAGE> 10
PART II. OTHER INFORMATION
NORWEST FINANCIAL, INC.
Item 5. Other Information.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
Norwest Financial, Inc. and its subsidiaries for the periods indicated:
Three Months Ended Years Ended December 31,
March 31, 1995 1994 1993 1992 1991 1990
2.08 2.26 2.22 2.02 1.74 1.70
The ratios of earnings to fixed charges have been computed by dividing net
earnings plus fixed charges and income taxes by fixed charges. Fixed
charges consist of interest and debt expense plus one-third of rentals
(which is deemed representative of the interest factor).
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit (12) Computation of ratios of earnings to fixed charges for
the years ended December 31, 1994, 1993, 1992, 1991 and
1990 and the three months ended March 31, 1995.
(b) Reports on 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
S I G N A T U R E S
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.
NORWEST FINANCIAL, INC.
Date: May 1, 1995
By
Robert W. Bettle
Vice President and Controller
(Principal Accounting Officer)
NORWEST FINANCIAL, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Exhibit (12)
<TABLE>
<CAPTION>
Three
Months
Ended
March 31,
1995 Years Ended December 31,
(Thousands of Dollars)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net earnings $ 56,977 $223,340 $203,297 $164,204 $130,880 $115,366
Add:
Fixed charges:
Interest including
amortization of
debt expense 79,431 259,605 242,440 236,337 255,075 242,151
One-third of
rentals* 2,497 9,747 10,146 8,207 7,209 6,583
Total fixed
charges 81,928 269,352 252,586 244,544 262,284 248,734
Provision for
income taxes 31,776 116,900 104,228 84,334 63,985 58,119
Total net earnings,
fixed charges and
income taxes -
"Earnings" $170,681 $609,592 $560,111 $493,082 $457,149 $422,219
Ratio of earnings
to fixed charges 2.08 2.26 2.22 2.02 1.74 1.70
</TABLE>
*One-third of rentals is deemed representative of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
FINANCIAL INC AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 106,584
<SECURITIES> 637,682
<RECEIVABLES> 5,167,887
<ALLOWANCES> 144,268
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 144,293
<DEPRECIATION> 85,098
<TOTAL-ASSETS> 6,191,567
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,851,876<F2>
<COMMON> 3,855
0
0
<OTHER-SE> 897,861
<TOTAL-LIABILITY-AND-EQUITY> 6,191,567
<SALES> 0
<TOTAL-REVENUES> 322,275
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 123,777
<LOSS-PROVISION> 30,314
<INTEREST-EXPENSE> 79,431
<INCOME-PRETAX> 88,753
<INCOME-TAX> 31,776
<INCOME-CONTINUING> 56,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,977
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NORWEST FINANCIAL INC HAS A NON-CLASSIFIED BALANCE SHEET
SO THIS INFORMATION IS UNAVAILABLE.
<F2>INCLUDES $1.2 BILLION OF SHORT-TERM LOANS.
</FN>
</TABLE>
