SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
A. Full Title of the Plan:
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
B. Name of Issuer of the Securities Held Pursuant to the Plan and the
Address of Its Principal Executive Office:
PHH CORPORATION
11333 McCormick Road
Hunt Valley, Maryland 21031
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits -
December 31, 1995 and 1994 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years Ended December 31, 1995 and 1994 3
Notes to Financial Statements 4
Schedules - Item 27a - Schedule of Assets Held for Investment
Purposes 9
Item 27d - Schedule of Reportable Transactions 10
Signatures 11
Consent of Independent Auditors 12
</TABLE>
********************************
The other schedules required by Item 27 of Department of Labor Form 5500, Annual
Return/Report of Employee Benefit Plan, are inapplicable and are therefore
omitted.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Employee Benefits Committee
PHH Corporation:
We have audited the accompanying statements of net assets available for plan
benefits of the PHH Corporation Employee Investment Plan as of December 31, 1995
and 1994 and the related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 1995 and 1994 and the changes in net assets available for plan benefits for
the years then ended, in conformity with generally accepted accounting
principles.
Our 1995 audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The supplemental schedules have
been subjected to the auditing procedures applied in the audit of the 1995 basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the 1995 basic financial statements taken as a whole.
Baltimore, Maryland
June 3, 1996
-1-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE
FOR PLAN BENEFITS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
---- ----
<S> <C>
Investments, at fair value:
PHH Corporation Common Stock $41,363,751 $29,950,883
Fidelity U.S. Equity Index 10,758,347 7,061,559
Fidelity Magellan Fund 20,356,814 13,936,122
Fidelity Retirement Money Market 11,729,769 10,081,717
Fidelity Asset Manager 2,018,667 1,796,428
Fidelity Europe Fund 1,830,309 1,261,177
Fidelity U.S. Bond Index 597,756 285,836
Participant loans receivable 3,120,224 2,894,981
--------------- --------------
Net assets available for plan benefits (Note 5) $91,775,637 $67,268,703
=============== ==============
</TABLE>
See Accompanying Notes to Financial Statements
-2-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------------------
(Note 3)
1995 1994
---- ----
<S> <C>
Dividend income $3,371,838 $2,269,846
Interest income 230,660 181,845
----------------- ------------------
Total dividend and interest income 3,602,498 2,451,691
----------------- ------------------
Contributions:
Employee 6,625,508 6,108,508
Employer 4,073,174 3,980,879
----------------- ------------------
Total contributions 10,698,682 10,089,387
----------------- ------------------
Withdrawals and distributions to participants (7,166,883) (6,081,824)
Plan expenses incurred (46,244) (75,470)
Net appreciation (depreciation) in fair value of investments 17,418,881 (6,825,855)
----------------- ------------------
Increase (decrease) in net assets available for benefits 24,506,934 (442,071)
Net assets available for benefits:
Beginning of year 67,268,703 67,710,774
----------------- ------------------
End of year $91,775,637 $67,268,703
================ ==================
</TABLE>
See Accompanying Notes to Financial Statements
-3-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
The accompanying financial statements of the PHH Corporation Employee Investment
Plan ("Plan") have been prepared on the accrual basis of accounting and present
the net assets available for plan benefits and the changes in net assets
available for plan benefits.
Purchases and sales of securities are recorded on a trade-date basis.
Investments are carried at fair value as determined by quoted market prices.
In accordance with requirements of the Tax Reform Act of 1986, the Plan is
subjected to a non-discrimination test based on the calculation of the Average
Deferred Percentages (ADP test) for highly compensated versus non-highly
compensated employee groups. The results of this test, as of December 31, 1995,
indicate that the difference in the employee group average deferred percentage
is within permissible limits.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosures of
contingencies at the date of the financial statements and revenues and expenses
recognized during the reporting period. Actual results could differ from those
estimates.
(2) DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
Each employee of the Company may participate in the Plan after six months of
service if he is scheduled to work at least 1,000 hours in a 12 consecutive
month period commencing on his date of employment, or in any Plan year
commencing after his date of employment. There is no age requirement for
eligibility to participate in the Plan. Each participant may contribute to the
Plan each year between 1% and 10% of eligible earnings subject to certain limits
contained in the Internal Revenue Code of 1986, as amended. The Company's
matching contribution is dollar-for-dollar up to 3% of the participant's
eligible deferred earnings and up to an additional 3% of eligible deferred
earnings based upon the profitability of the Company from continuing operations
for the relevant fiscal year. The profitability-based rate of the matchable
portion is determined by a schedule established by the Board of Directors for
each fiscal year. During Plan years 1995 and 1994, additional Company matching
contributions totalling approximately $1,078,500 and $1,091,400 were paid to
participants based upon Company profitability.
Each participant could direct the custodian to invest in any increments in any
of the following investment programs: (a) the common stock of PHH Corporation
comprising the PHH Corporation Common Stock Fund; (b) an Equity-Income Fund
(Fidelity US Equity Index Portfolio) consisting of income-producing equity
securities; (c) a Growth Fund (Fidelity Magellan Fund) consisting of equity
securities of corporations which are growth companies; (d) a Money Market Fund
(Fidelity Retirement Money Market Portfolio) consisting of various short-term
money market instruments; (e) an Asset Allocation Fund (Fidelity Asset Manager)
consisting of domestic and foreign equity securities, bonds and short-term
instruments; (f) an International Growth Fund (Fidelity Europe Fund) consisting
of securities of Western European issues; or (g) a Bond-Income Fund (Fidelity U.
S. Bond Index Portfolio) consisting of securities contained in the Aggregate
Bond Index.
-4-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) DESCRIPTION OF THE PLAN (Continued)
All Company contributions matching the first 3% of the participant's eligible
deferred earnings are invested in the PHH Corporation Common Stock Fund with no
transfers permitted until age 50. All Company contributions matching up to an
additional 3% based upon Company profitability are initially invested in the
Money Market Fund with no transfer restrictions.
Participants have a full and immediate vested interest in amounts contributed by
them and earnings thereon. Participants have a vested interest in the Company's
matching contribution previously made and to be made in the future, determined
by the participants' years of vested service. Generally, after three years of
such service, participants have a 100% vested interest in all Company
contributions made and to be made in the future. Forfeitures of unvested Company
matching contributions are used, as permitted under Plan provisions, to pay Plan
expenses.
Accounts which may be maintained for each participant in the Plan are (a) "Prior
Plan Employee Account" meaning the account relating to his contributions made at
any time prior to May 1, 1985; (b) "Prior Plan Company Match Account" meaning
the account relating to Employer matching contributions attributable to his
contributions made at any time prior to May 1, 1985; (c) "Current Plan Employee
Account" meaning the account relating to his contributions made at any time on
and after May 1, 1985, under Section 401(k) of the Code; (d) "Current Plan
Company Basic Match Account" meaning the account relating to Employer matching
contributions attributable to the first 3% of his contributions made at any time
on and after May 1, 1985, under Section 401(k) of the Code; (e) "Current Plan
Company Profit Match Account" meaning the account relating to Employer matching
contributions attributable to 3% - 6% of his contributions made at any time on
and after May 1, 1985, under Section 401(k) of the Code based on attainment of
certain earnings per share targets set annually by the Company; and (f)
"Rollover Account" meaning the account relating to a Participant's qualifying
contributions under the rollover provisions of the Plan. Each of these accounts
shall have allocated to it the portion of the participant contributions and
related Employer matching contributions in accordance with the Plan together
with appreciation, depreciation, and earnings then attributable to the
participant contributions and related Employer matching contributions as well as
distributions to participants in accordance with the Plan. Participants may
obtain a loan of up to 50% of their vested account balance not to exceed
$50,000. The interest rate charged on loans outstanding is the prime rate as
published in the Wall Street Journal plus 1% fixed for the entire term of the
loan. Loan terms may range up to five years unless the purpose of the loan is to
buy or build a primary residence in which case the loan term may be extended to
ten years. Repayment of the loan principal and interest occurs through equal
payroll deductions. Participants incur no taxable income as a result of taking a
loan unless the loan is not repaid.
Expenses of administering the Plan incurred external to the Company (i.e. the
cost of printing literature and forms, the disbursement of benefits, the
compensation of administrators, consultants, counsel, etc.) , at the direction
of the Company, may be paid from the Trust Property. Internal Company support
costs (i.e. the cost of staff time, etc.) are paid by the Company.
Although it has not expressed any intent to do so, the Company reserves the
right at any time to alter, amend, suspend, discontinue or terminate the Plan;
provided, however, that no such alteration, amendment, suspension,
discontinuance or termination shall have the effect of permitting any of the
Trust Property to be used for or diverted to purposes other than those of the
Plan. If the Plan is discontinued or terminated, all Trust Property under the
Plan will become immediately vested in the participants and none will inure to
the Company.
-5-
<PAGE>
PHH CORPORATION EMPLOYEE INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
(3) ALLOCATION OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS TO
INVESTMENT PROGRAMS
The following is the allocation of changes in net assets available for plan
benefits to investment programs for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
------------------------------------------------------------------------------
PHH Corp
Common U.S. Equity Magellan Fidelity Asset
Stock Fund Index Fund Money Market Manager
-------------- --------------- ------------- --------------- -------------
<S> <C>
Dividend Income $ 1,156,369 $ 257,386 $ 1,166,427 $ 633,463 $ 57,562
Interest Income -- -- -- -- --
-------------- --------------- ------------- --------------- -------------
Total dividend and interest income 1,156,369 257,386 1,166,427 633,463 57,562
-------------- --------------- ------------- --------------- -------------
Contributions:
Employee 1,098,498 1,068,179 2,407,574 1,163,034 420,571
Employer 2,994,783 -- -- 1,078,391 --
-------------- --------------- ------------- --------------- -------------
Total contributions 4,093,281 1,068,179 2,407,574 2,241,425 420,571
-------------- --------------- ------------- --------------- -------------
Interfund transfers (1,480,686) 502,064 220,167 330,155 (49,329)
Withdrawals and distributions to participants (2,771,027) (611,326) (1,432,109) (1,517,273) (458,265)
Plan expenses incurred (739) (2,574) (1,870) (39,718) (846)
Net appreciation in fair value of investments 10,415,670 2,483,059 4,060,503 -- 252,546
-------------- --------------- ------------- --------------- -------------
Increase in net assets available for benefits 11,412,868 3,696,788 6,420,692 1,648,052 222,239
Net assets available for benefits:
Beginning of year 29,950,883 7,061,559 13,936,122 10,081,717 1,796,428
-------------- --------------- ------------- --------------- -------------
End of year $41,363,751 $10,758,347 $20,356,814 $11,729,769 $2,018,667
============== =============== ============= =============== =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
-------------------------------------------------------
Europe U.S. Bond Participant
Fund Index Loans Total
------------ ----------- ------------ ------------
<S> <C>
Dividend Income $ 69,876 $ 30,755 $ -- $ 3,371,838
Interest Income -- -- 230,660 230,660
------------ ----------- ------------ ------------
Total dividend and interest income 69,876 30,755 230,660 3,602,498
------------ ----------- ------------ ------------
Contributions:
Employee 322,933 144,719 -- 6,625,508
Employer -- -- -- 4,073,174
------------ ----------- ------------ ------------
Total contributions 322,933 144,719 -- 10,698,682
------------ ----------- ------------ ------------
Interfund transfers 104,111 191,911 181,607 --
Withdrawals and distributions to participants (95,232) (94,627) (187,024) (7,166,883)
Plan expenses incurred (238) (259) -- (46,244)
Net appreciation in fair value of investments 167,682 39,421 -- 17,418,881
------------ ----------- ------------ ------------
Increase in net assets available for benefits 569,132 311,920 225,243 24,506,934
Net assets available for benefits:
Beginning of year 1,261,177 285,836 2,894,981 67,268,703
------------ ----------- ------------ ------------
End of year $1,830,309 $ 597,756 $3,120,224 $91,775,637
============ =========== ============ ============
</TABLE>
-6-
<PAGE>
PHH CORPORATION EMPLOYEE INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
(3) ALLOCATION OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS TO
INVESTMENT PROGRAMS (Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------------------------------------------------
PHH Corp
Common U.S. Equity Magellan Fidelity Asset
Stock Fund Index Fund Money Market Manager
-------------- ------------ ------------ ------------ ------------
<S> <C>
Dividend Income $ 1,038,669 $ 220,073 $ 543,707 $ 360,626 $ 66,997
Interest Income -- -- -- -- --
-------------- ------------ ------------ ------------ ------------
Total dividend and interest income 1,038,669 220,073 543,707 360,626 66,997
-------------- ------------ ------------ ------------ ------------
Contributions:
Employee 1,141,112 969,404 2,237,921 1,092,999 358,928
Employer 2,889,051 -- -- 1,091,828 --
-------------- ------------ ------------ ------------ ------------
Total contributions 4,030,163 969,404 2,237,921 2,184,827 358,928
-------------- ------------ ------------ ------------ ------------
Interfund transfers (1,079,334) (371,571) (106,030) 356,017 636,222
Withdrawals and distributions to participants (2,906,690) (706,446) (1,241,098) (910,029) (100,355)
Plan expenses incurred (681) (2,338) (1,611) (69,760) (850)
Net appreciation (depreciation) in fair value of investments (5,685,284) (145,957) (808,829) -- (180,095)
--------------- ------------- ------------- ------------- -------------
Increase (decrease) in net assets available for benefits (4,603,157) (36,835) 624,060 1,921,681 780,847
Net assets available for benefits:
Beginning of year 34,554,040 7,098,394 13,312,062 8,160,036 1,015,581
-------------- ------------ ------------ ------------ ------------
End of year $29,950,883 $7,061,559 $13,936,122 $10,081,717 $1,796,428
============== ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-------------------------------------------------------
Europe U.S. Bond Participant
Fund Index Loans Total
------------- ------------ ------------- ------------
<S> <C>
Dividend Income $ 19,265 $ 20,509 $ -- $ 2,269,846
Interest Income -- -- 181,845 181,845
------------- ------------ ------------- ------------
Total dividend and interest income 19,265 20,509 181,845 2,451,691
------------- ------------ ------------- ------------
Contributions:
Employee 226,167 81,977 -- 6,108,508
Employer -- -- -- 3,980,879
------------- ------------ ------------- ------------
Total contributions 226,167 81,977 -- 10,089,387
------------- ------------ ------------- ------------
Interfund transfers 410,658 (51,945) 205,983 --
Withdrawals and distributions to participants (29,774) (4,777) (182,655) (6,081,824)
Plan expenses incurred (147) (83) -- (75,470)
Net appreciation (depreciation) in fair value of investments 22,257 (27,947) -- (6,825,855)
-------------- ------------ -------------- ------------
Increase (decrease) in net assets available for benefits 648,426 17,734 205,173 (442,071)
Net assets available for benefits:
Beginning of year 612,751 268,102 2,689,808 67,710,774
------------- ------------ ------------- ------------
End of year $1,261,177 $285,836 $2,894,981 $67,268,703
============= ============ ============= ============
</TABLE>
-7-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) FEDERAL INCOME TAX EXEMPTION
The Internal Revenue Service issued its latest determination letter on January
23, 1995 which stated that the Plan and its underlying trust qualify under the
applicable provisions of the Internal Revenue Code and therefore are exempt from
federal income taxes. The Plan and its underlying trust have been amended since
the date covered by the letter. In the opinion of the Plan Administrator, the
Plan and its underlying trust have operated within the terms of the Plan and
remain qualified under the applicable provisions of the Internal Revenue Code.
(5) FORM 5500 RECONCILIATION
Amounts due to participants of $196,953 and $153,453, in 1995 and 1994 are
reflected as liabilities and benefit payment expenses in the Plan's Form 5500
but are presented as a component of net assets available for plan benefits in
the financial statements.
-8-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
<TABLE>
<CAPTION>
Par Value or
Number of Current
Name of Issuer and Title of Issue Shares Cost Value
<S> <C>
December 31, 1995
PHH Corporation Common Stock $30,596,053 $41,363,751
884,786
Equity-Income Fund - Fidelity
U.S. Equity Index Portfolio 476,666 7,817,206 10,758,347
Growth Fund - Fidelity
Magellan Fund 236,762 16,875,364 20,356,814
Money Market Fund - Fidelity Retirement
Money Market Portfolio 11,729,769 11,729,769 11,729,769
Asset Allocation Fund - Fidelity
Asset Manager 127,361 1,897,458 2,018,667
International Growth Fund - Fidelity
Europe Fund 80,206 1,662,848 1,830,309
Bond-Income Fund - Fidelity
U.S. Bond Index Portfolio 54,590 581,574 597,756
--------------- --------------
Total investments $71,160,272 $88,655,413
=============== ==============
</TABLE>
-9-
<PAGE>
PHH CORPORATION EMPLOYEE
INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Purchases Sales
------------------------------------- ---------------------------------------------------------
Current Value Current Value
Total Purchase at transaction Total Selling Cost of at transaction Net
Description of Asset # Price date # Price Asset date Gain(Loss)
- ---------------------------------- ------- ------------ ---------------- ------- ---------- ----------- --------------- ----------
<S> <C>
PHH Corporation Common Stock 147 $6,066,527 $6,066,527 127 $5,067,526 $4,132,354 $5,067,526 $935,172
Fidelity U.S. Equity Index 194 2,592,523 2,592,523 117 1,375,995 1,122,445 1,375,995 253,550
Fidelity Magellan Fund 213 6,262,506 6,262,506 160 3,892,795 3,252,865 3,892,795 639,930
Fidelity Retirement Money Market 212 5,461,405 5,461,405 202 3,795,699 3,795,699 3,795,699 --
Fidelity Asset Manager 140 852,446 852,446 88 882,762 883,586 882,762 (824)
Fidelity Europe Fund 140 1,051,721 1,051,721 80 648,942 585,523 648,942 63,419
Fidelity U.S. Bond Index 104 464,106 464,106 51 191,535 190,792 191,535 743
</TABLE>
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefits Committee has duly caused this annual report to be signed on
its behalf by the undersigned here duly authorized.
PHH CORPORATION EMPLOYEE INVESTMENT PLAN
Date: June 14, l996 By
______________________________________
Roy A. Meierhenry
Senior Vice President and Chief
Financial Officer of PHH Corporation
Chairman - Employee Benefits Committee
-11-
<PAGE>
Consent of Independent Auditors
The Stockholders and
Board of Directors
PHH Corporation:
We consent to the incorporation by reference in the Registration Statement (No.
33-53282) on Form S-8 of PHH Corporation of our report dated June 3, 1996,
relating to the statements of net assets available for plan benefits of PHH
Corporation Employee Investment Plan as of December 31, 1995 and 1994, and the
related statements of changes in net assets available for plan benefits for the
years then ended and the related schedules for the year ended December 31, 1995,
which report appears elsewhere in this Form 11-K.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
June 14, 1996
-12-
