UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------
FORM 10-Q/A
---------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended JULY 31, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ______ to _____
---------
Commission File Number 1-7797
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PHH CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0551284
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
11333 McCormick Road, Hunt Valley, Maryland 21031
(Address of principal executive offices) (Zip Code)
(410) 771-3600
(Registrant's telephone number, including area code)
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
--- ---
Number of shares of PHH Corporation common stock outstanding on August 31, 1996
was 34,831,643.
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<PAGE>
PHH CORPORATION
INDEX
------------------------------------------------
Page No.
PART I--FINANCIAL INFORMATION:
Item 1 - Financial Statements
Condensed Consolidated Statements of Income--Three
Months Ended July 31, 1996 and 1995 3
Condensed Consolidated Balance Sheets --
July 31, 1996 and April 30, 1996 4
Condensed Consolidated Statements of Cash Flows--
Three Months Ended July 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II--OTHER INFORMATION:
Item 4 - Submission of Matters to a Vote of Security
Holders 13
Item 6 - Exhibits and Reports on Form 8-K 13
Index to Exhibits 14
Signatures 17
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<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
PHH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
------------------------------
1996 1995
---- ----
<S> <C>
Revenues:
Vehicle management services $ 339,236 $ 333,762
Real estate services 67,133 63,578
Mortgage banking services 69,392 43,643
---------- ---------
475,761 440,983
--------- --------
Expenses:
Depreciation on vehicles under
operating leases 238,485 231,488
Costs, including interest, of
carrying and reselling homes 30,476 34,669
Direct costs of mortgage banking
services 29,812 12,280
Interest 57,231 53,452
Selling, general and administrative 82,644 77,431
----------- -----------
438,648 409,320
---------- ----------
Income before income taxes 37,113 31,663
Income taxes 15,341 13,362
----------- -----------
Net income $ 21,772 $ 18,301
=========== ===========
Net income per share $ .61 $ .52
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE>
Item 1. Financial Statements (Continued).
PHH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, 1996 April 30, 1996
------------- --------------
(Unaudited)
(In thousands)
<S> <C>
Assets:
Cash $ 9,854 $ 9,288
Accounts receivable, less allowance for
doubtful accounts of $5,723 at July 31
and $5,478 at April 30 454,804 468,938
Carrying costs on homes under management 43,476 46,560
Mortgage loans held for sale 900,511 874,794
Mortgage servicing rights and fees 259,947 230,209
Property and equipment, net 91,133 93,089
Goodwill, net 48,189 49,081
Other assets 118,367 117,999
--------- ---------
1,926,281 1,889,958
--------- ---------
Assets Under Management Programs:
Net investment in leases and leased vehicles 3,269,968 3,216,224
Equity advances on homes 635,836 566,808
---------- ----------
3,905,804 3,783,032
--------- ---------
$5,832,085 $5,672,990
========= =========
Liabilities:
Accounts payable and accrued expenses $ 465,176 $ 434,109
Advances from clients and deferred revenue 99,120 96,439
Other debt 836,601 903,442
Deferred income taxes 201,700 191,700
---------- ----------
1,602,597 1,625,690
--------- ---------
Liabilities Under Management Programs 3,600,047 3,438,804
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, authorized 3,000,000 shares __ __
Common stock, no par value, authorized
75,000,000 shares; issued and out-
standing 34,806,602 shares at July 31
and 34,661,524 shares at April 30 98,604 96,081
Cumulative foreign currency translation
adjustment (20,225) (23,483)
Retained earnings 551,062 535,898
----------- ----------
629,441 608,496
----------- ----------
$ 5,832,085 $5,672,990
========== ==========
</TABLE>
See accompanying notes.
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<PAGE>
Item 1. Financial Statements (Continued).
PHH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended July 31,
--------------------------------
(In thousands) 1996 1995
<S> <C> ---- ----
Operating Activities:
Net income $ 21,772 $ 18,301
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation on vehicles under operating leases 238,485 231,488
Other depreciation and amortization 8,613 8,229
Amortization and write-down of
capitalized servicing rights and fees 11,815 5,666
Additions to originated mortgage servicing rights (26,185) (16,615)
Additions to excess mortgage servicing fees (16,222) (12,145)
Gain on sales of mortgage servicing rights (1,449) (3,386)
Deferred income taxes 9,734 7,521
Gain on sale of assets (2,944) -
Changes in:
Accounts receivable 16,093 3,056
Carrying costs on homes under management 3,188 2,095
Mortgage loans held for sale (25,717) (75,893)
Accounts payable and accrued expenses 28,183 15,055
Advances from clients and deferred revenue 2,271 (1,872)
All other operating activity (1,621) (12,463)
---------- ----------
Cash provided by operating activities 266,016 169,037
---------- ----------
Investing Activities:
Investment in leases and leased vehicles (429,623) (391,712)
Repayment of investment in leases and leased vehicles 149,324 151,934
Equity advances on homes under management (932,886) (1,359,511)
Repayment of advances on homes under management 866,570 1,189,690
Purchases of mortgage servicing rights - (5,713)
Proceeds from sales of mortgage servicing rights 2,303 4,382
Additions to property and equipment, net of dispositions (4,115) (4,216)
Proceeds from sale of assets 4,400 -
All other investing activities 2,294 (11,413)
---------- ----------
Cash used in investing activities (341,733) (426,559)
---------- ----------
Financing Activities:
Net change in borrowings with terms of less than 90 days 123,499 175,967
Proceeds from issuance of other borrowings 209,909 241,764
Principal payment on other borrowings (244,787) (146,638)
Stock option plan transactions 2,523 5,865
Payment of dividends (6,608) (5,795)
---------- ----------
Cash provided by financing activities 84,536 271,163
---------- ----------
Effect of exchange rate changes on cash (8,253) 929
---------- ----------
Increase in cash 566 14,570
Cash at beginning of period 9,288 3,412
---------- ----------
Cash at end of period $ 9,854 $ 17,982
========== ==========
Supplemental disclosures of cash flow information:
Cash payments for interest $ 66,010 $ 61,497
========== ==========
Cash payments (refunds) for income taxes $ (72) $ 479
========== ==========
</TABLE>
See accompanying notes.
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<PAGE>
Item 1. Financial Statements (Continued).
PHH CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements included in this Form 10-Q reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report included as part of Form 10-K
for the year ended April 30, 1996.
Reclassifications
Certain reclassifications have been made to the prior year's consolidated
financial statements for comparative purposes. Included in these
reclassifications are the effects of reducing real estate services revenue and
"costs, including interest, of carrying and reselling homes" for direct costs
reimbursed by client corporations. Such costs were $149,896 and $140,874 for the
three months ended July 31, 1996 and 1995, respectively.
Capital Stock
On June 24, 1996, the Board of Directors authorized a two-for-one common stock
split which was distributed July 31, 1996, to stockholders of record on July 5,
1996. All per share amounts herein and data as to outstanding common stock at
April 30, 1996, have been adjusted for the common stock split.
On August 19, 1996, the shareholders voted to amend the Company's charter to
increase the number of authorized shares of common stock from 50,000,000 to
75,000,000.
Net Income Per Share
Net income per share is computed on the basis of the weighted average number of
shares of common stock outstanding during each period and common stock
equivalents arising from the assumed exercise of outstanding stock options under
the treasury stock method. See Exhibit 11 to this Form 10-Q which details the
computation of net income per share.
CONTINGENT LIABILITIES
The Company and its subsidiaries are involved in pending litigation of the usual
character incidental to the business transacted by them. In the opinion of
management, such litigation will not have a material effect on the Company's
consolidated financial statements.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PHH CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS - Three months Ended July 31, 1996 vs. July 31, 1995
All comparisons within the following discussion are to the same period of the
previous year, unless otherwise stated.
Consolidated net income and net income per share for the first quarter of fiscal
1997 increased 19 percent to $21.8 million and 17 percent to $.61, respectively.
The increase resulted from improved operations in each of the Company's business
segments, led by the vehicle management services and real estate services
segments, with a slight increase in the mortgage banking services segment.
Consolidated revenues increased 8% to $475.8 million for the first quarter of
fiscal 1997. Vehicle management services revenues increased 2% to $339.2 million
primarily from increased leasing revenues as a result of an increased number of
and average carrying amount of leased vehicles, partially offset by a decrease
in other vehicle revenues primarily due to a decrease in gains on sale of used
vehicles. Real estate services revenues increased 6% to $67.1 million in the
first quarter of fiscal 1997 primarily as a result of a 6% increase in
transferee homes sold and a 14% increase in the number of fee-based
transactions. Mortgage banking revenue increased 59% to $69.4 million in the
first quarter of fiscal 1997 primarily due to revenues earned on the 47%
increase in loans closed and servicing revenues generated from a 34% growth in
the servicing portfolio which was $23.0 billion at July 31, 1996.
Consolidated expenses increased 7% to $438.6 million for the first quarter of
fiscal 1997. Increased depreciation on vehicles under operating leases is
primarily due to increases in leased vehicles as discussed above. Costs,
including interest, of carrying and reselling homes increased 6% for the first
quarter, primarily as a result of the effects of the increase in homes closed as
discussed above. Direct costs of mortgage banking services increased 143% to
$29.8 million for the first quarter, primarily due to an increase in
amortization of servicing rights and fees and costs associated with the increase
in the loan portfolio. These costs were also affected by the increase in loan
closings as discussed above. Interest expense increased 7% for the first quarter
of fiscal 1997 compared with the same period in the prior year primarily due to
an increase in the average borrowings in the first quarter of fiscal 1997, which
were substantially higher than the prior year due to the significant increase in
loan closings and timing of loan sales during the period. Selling, general, and
administrative costs increased 7% to $82.7 million for the first quarter of
fiscal 1997 compared with the same period in the prior year. Increases in
personnel and other operating costs to support the growth in real estate
services fee-based transactions and mortgage production as well as increased US
relocation systems costs, were partially offset by decreases in vehicle
management services costs as a result of effective cost management, reduction in
system spending, reduction in vehicles acquired and by the decrease in the North
American truck fuel management subsidiary (NTS) expenses as a result of its sale
in February 1996.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont.)
PHH CORPORATION AND SUBSIDIARIES
The Company's effective tax rate was 41 percent for the first three months of
fiscal 1997 as compared to 42 percent for the same period a year ago.
Management analyzes its business results in terms of net revenues and total
operating expenses. Net revenues, as defined by the Company, include revenues
earned reduced by direct costs and by related interest required to fund assets.
Direct costs include depreciation on vehicles under operating leases,
amortization of mortgage servicing rights and certain other costs, including
payments to third parties incurred as a component of service delivery. Operating
expenses are all other costs incurred in delivering services to clients.
Three Months Ended
July 31,
----------------------------
Operating Income (in thousands) 1996 1995
------------------------------- ---- ----
Net revenues $156,637 $ 140,727
Operating expenses 119,524 109,064
------- -------
Total operating income $ 37,113 $ 31,663
======== ========
Vehicle Management Services
Vehicle management services are primarily offered to corporations and government
agencies to assist them in effectively managing their vehicle fleet costs,
reducing in-house administrative costs and enhancing driver productivity.
Asset-based services generally require an investment by the Company and include
new vehicle purchasing, open- and closed-end leasing, and used vehicle
marketing. Fee-based services include maintenance management programs, expense
reporting, fuel management programs, accident and safety programs and other
driver services which generate recurring fee transactions for managing various
aspects of clients' vehicle fleets.
Three Months Ended
July 31,
----------------------------
Operating Income (in thousands) 1996 1995
------------------------------- ---- ----
Net revenues:
Asset-based $ 33,139 $ 33,058
Fee-based 26,186 28,353
-------- --------
Total net revenues 59,325 61,411
Operating expenses 43,950 50,381
-------- --------
Operating income $ 15,375 $ 11,030
======= ========
Net revenues for vehicle management services represents revenues earned and
billed to clients, reduced by depreciation on vehicles under operating leases
and related interest. Total net revenues for this segment decreased 3 percent
for the first quarter of fiscal 1997. However, the results of operations of the
Company's former North American truck fuel management subsidiary (TFM) which was
sold in February 1996, are included in the fiscal 1996 net revenues. If such
results are excluded, net revenues increased by 7 percent.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont.)
PHH CORPORATION AND SUBSIDIARIES
Net revenues derived from asset-based products were flat for the first quarter
of fiscal 1997. Net revenues resulting from increases in the number of vehicles
leased were offset by the anticipated reduction in domestic volume and per
vehicle gains of remarketed vehicles under closed-end operating leases.
Net revenues from fee-based services declined 1 percent. However, excluding the
TFM operations in fiscal 1996, net revenues derived from fee-based services
increased 17 percent for the first quarter of fiscal 1997. The increase was due
to continued growth in fuel, maintenance and accident management programs,
primarily in the UK, as well as growth in truck management programs in the UK
and US.
Vehicle management services operating income increased 39 percent for the first
quarter of fiscal 1997. The increase resulted from changes in net revenues
described above and decreases in operating expenses, primarily in North America.
These decreases reflect the sale of the TFM operations as well as reduced
systems costs and effective cost management programs in North America.
The Company's profitability from vehicle management services is affected by the
number of vehicles managed and related services provided for clients. Therefore,
profitability can be negatively affected by the general economy as corporate
clients exercise a higher degree of fiscal caution by decreasing the size of
their vehicle fleets or by extending the service period of existing fleet
vehicles. Conversely, operating results are positively affected as clients
increasingly choose to outsource their vehicle management service operations.
Results can also be enhanced as the Company expands into new markets, increases
its product diversity, broadens its client base and continues its productivity
and quality improvement efforts.
Real Estate Services
Real estate services primarily consist of the purchase, management and resale of
homes for transferred employees of corporate clients, government agencies and
members of affinity group clients. Asset-based services are defined as
relocation services involving the purchase and resale of a home. Fee-based
services include assistance in selecting homes in destination locations,
marketing homes, moving household goods and property disposition services for
financial institutions.
Three Months Ended
July 31,
---------------------------
Operating Income (in thousands) 1996 1995
------------------------------- ---- ----
Net revenues:
Asset-based $ 27,951 $ 27,336
Fee-based 24,172 20,934
Gain on sale of assets 2,944 -
--------- ---------
Total net revenues 55,067 48,270
Operating expenses 47,398 41,487
--------- ---------
Operating income $ 7,669 $ 6,783
========= =========
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont.)
PHH CORPORATION AND SUBSIDIARIES
Real estate services net revenues are those earned and billed to clients,
reduced by direct costs paid on behalf of clients and related interest. Total
real estate services net revenues increased 14 percent for the first quarter of
fiscal 1997.
Asset-based net revenues increased 2 percent for the first quarter of fiscal
1997, primarily reflecting a slight increase in the number of US transferee
homes sold and increases in the market value of these homes as compared to that
of the prior year.
Fee-based net revenues increased 15 percent for the first quarter of fiscal
1997, primarily due to more household goods moves in the US and increased
referral fees from the Company's network partners. These increases were
partially offset by a decrease in the disposition volume on residential
properties managed for financial institutions in the US. Fiscal 1997 net
revenues also benefited from the gain on the sale of the Company's site
selection consulting operations in July 1996.
Real estate services operating income increased 13 percent for the first quarter
of fiscal 1997. The increases in net revenues described above were partially
offset by increased systems costs in the US and increased staffing costs
primarily to support the volume growth in fee-based services.
The Company is generally not at risk on its carrying value of homes should there
be a downturn in the housing market. Management anticipates its clients will
continue to reassess their relocation plans as part of cost control measures,
authorizing fewer home purchase transactions while utilizing a greater portion
of fee-based real estate services. At the same time, operating results may be
affected positively as clients increasingly choose to outsource their real
estate services and as the Company expands into new markets, enhances its
product diversity, broadens its client base and continues its productivity and
quality improvement efforts.
Mortgage Banking Services
Mortgage banking services primarily consist of the origination, sale and
servicing of residential first mortgage loans. The Company markets a variety of
first mortgage products to consumers through relationships with corporations,
affinity groups, government agencies, credit unions, real estate brokerage
firms, banks and other mortgage brokers.
Three Months Ended
July 31,
---------------------------
Operating Income (in thousands) 1996 1995
------------------------------- ---- ----
Net revenues:
Loan production $ 26,849 $ 15,292
Servicing fees 13,947 12,368
Gain on sale of servicing rights 1,449 3,386
-------- --------
Total net revenues 42,245 31,046
Operating expenses 28,176 17,196
-------- --------
Operating income $ 14,069 $ 13,850
======== ========
Mortgage banking services net revenues, measured as revenues earned reduced by
direct costs for amortization and payments to third-party service providers,
increased 36 percent for the first quarter of fiscal 1997.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont.)
PHH CORPORATION AND SUBSIDIARIES
The increase in loan production net revenues resulted from a 47 percent increase
in the volume loans sold as well as a slight increase in margins realized on
loans sold compared to the same period in the prior year. Mortgage loan closings
increased from $1.5 billion to $2.2 billion for the first quarter of fiscal
1997. This increase was a result of increased market share due primarily to
expanded relationships with affinity groups which represented 23 percent of the
increase in the quarter, and with financial institutions which represented 15
percent of the increase. Mortgages for residential properties being purchased
continue to represent the majority of mortgage closing volume and totaled 83
percent of closing volume compared to 86 percent in the prior year.
Net servicing fee revenue increased 13 percent in the first quarter of fiscal
1997 due to growth of the average servicing portfolio, partially offset by the
increased amortization of mortgage servicing rights. The increased amortization
relates primarily to originated mortgage servicing rights which the Company has
been capitalizing since the beginning of fiscal 1996. The servicing portfolio
balance at July 31, 1996, was $23.0 billion as compared to $17.1 billion at July
31, 1995.
The gain on sale of servicing rights decreased due to a lower level of servicing
rights sales in the first three months of fiscal 1997 compared to the same
period a year ago.
Mortgage banking services operating income increased 2 percent for the first
quarter of fiscal 1997, due to higher net revenues, as described above,
substantially offset by higher operating expenses. Operating expense increased
in support of volume increases of mortgage loan production and additional staff
training to support increased business from affinity and financial institution
relationships.
The Company's profitability from mortgage banking services will be affected by
such external factors as capacity within the industry, the level of interest
rates, the strength of the economy, and the related condition of residential
real estate markets. The Company's broad-based marketing strategies, including
further penetration of existing affinity group and credit union clients,
expansion of its client base, and maintaining its system of delivering mortgages
in a cost-efficient manner, should positively affect operating results in the
future.
LIQUIDITY AND CAPITAL RESOURCES
The Company manages its funding sources to ensure adequate liquidity.
The sources of liquidity fall into three general areas: ongoing liquidation of
assets under management, global capital markets, and committed credit agreements
with various high-quality domestic and international banks. In the ordinary
course of business, the liquidation of assets under management programs, as well
as cash flows generated from operating activities, provide the cash flow
necessary for the repayment of existing liabilities. For the three months ended
July 31, 1996 cash provided by operating activities increased 57% to $266.0
million primarily due to timing of operating activities, including a $25.7
million increase in mortgage loans held for sale in fiscal 1997 compared with a
$75.9 million increase in fiscal 1996, and increased depreciation on vehicles
under operating leases. Cash used in investing activities decreased 20% to
$341.7 million in fiscal 1997 primarily as a result of a reduction in the growth
in equity advances on homes under management during the three months ended July
31, 1996 compared with the same period in the prior year.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont.)
PHH CORPORATION AND SUBSIDIARIES
Using historical information, the Company projects the time period that a
client's vehicle will be in service or the length of time that a home will be
held in inventory before being sold on behalf of a client. Once the relevant
asset characteristics are projected, the Company generally matches the projected
dollar amount, interest rate and maturity characteristics of the assets within
the overall funding program. This is accomplished through stated debt terms or
effectively modifying such terms through other instruments, primarily interest
rate swap agreements and revolving credit agreements. Within mortgage banking
services, the company funds the mortgage loans on a short-term basis until sale
to unrelated investors which generally occurs within sixty days. Interest rate
risk on mortgages originated for sale is managed through the use of forward
delivery contracts, financial futures and options. Such financial derivatives
are also used as a hedge to minimize earnings volatility as it relates to
mortgage servicing assets.
The Company has maintained broad access to global capital markets by maintaining
the quality of its assets under management. This is achieved by establishing
credit standards to minimize credit risk and the potential for losses. Depending
upon asset growth and financial market conditions, the Company utilizes the
United States, Euro and Canadian commercial paper markets, as well as other
cost-effective short-term instruments. Foreign currency forward contracts are
utilized to convert to local currency when necessary. In addition, the Company
utilizes the public and private debt markets to issue unsecured senior corporate
debt. Augmenting these sources, the Company has reduced outstanding debt by the
sale or transfer of managed assets to third parties while retaining fee-related
servicing responsibility. The Company's aggregate commercial paper outstanding
totaled $2.3 billion and $2.2 billion at July 31, 1996 and April 30, 1996,
respectively. At July 31, 1996, $2.0 billion in medium-term notes and $59
million in other debt securities were outstanding compared to $2.1 billion and
$54 million, respectively, at April 30, 1996. The Company maintains a leverage
ratio between 7 to 1 and 8 to 1.
Cash provided by financing activities decreased 69% to $84.5 million primarily
as a result of the decline in funding requirements related to changes in
mortgage loans held for sale and equity advances on homes as discussed above.
The shift of net borrowings from borrowings with terms of less than 90 days to
other borrowings in fiscal 1997 compared with the prior year primarily reflects
that the company chose to fund, under the terms of its medium-term note
programs, more favorable conditions existed under that program than from issuing
commercial paper. The effect of the changes in the British pound-sterling
exchange rate during fiscal 1997 had a negative impact on the Company's cash
position compared with the prior year period.
To provide additional financial flexibility, the Company's current policy is to
ensure that minimum committed bank facilities aggregate 80% of the average
amount of outstanding commercial paper. Committed revolving credit agreements
totaling $2.2 billion and uncommitted lines of credit aggregating approximately
$400 million are currently in place with 31 domestic and international banks.
Management closely evaluates not only the credit quality of the banks but the
maturity of the various agreements to ensure ongoing availability. Of the
Company's $2.2 billion in committed facilities at July 31, 1996, the full amount
was undrawn and available. Management believes that its current policy provides
adequate protection should volatility in the financial markets limit the
Company's access to commercial paper or medium-term note funding.
These established means of effectively matching floating and fixed interest rate
and maturity characteristics of funding to related assets, the variety of short-
and long-term domestic and international funding sources, and the committed
banking facilities minimize the Company's exposure to interest rate and
liquidity risk.
-12-
<PAGE>
PART II--OTHER INFORMATION
PHH CORPORATION AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Stockholders' Meeting held on August 19, 1996, the
stockholders elected directors for a three-year term as follows: George L.
Bunting, Jr. (14,899,739 shares voted for, 91,574 shares withheld), Alan P.
Hoblitzell, Jr. (14,888,871 shares voted for, 102,442 shares withheld), Donald
J. Shepard (14,899,447 shares voted for, 91,866 shares withheld) and Alexander
B. Trowbridge (14,896,537 shares voted for, 94,776 shares withheld).
The names of the directors whose terms in office have continued are: James S.
Beard; Andrew F. Brimmer; Paul X. Kelley; L. Patton Kline; Robert D. Kunisch;
Francis P. Lucier; Kent C. Nelson; and Anne M. Tatlock.
The stockholders also accepted the proposed amendment to the Company's charter
to increase the number of authorized shares of common stock from 50,000,000 to
75,000,000 with 14,288,028 shares voted for the amendment, 662,941 shares
against and 40,344 shares abstained.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
(a) Exhibit (11) - Schedule containing information used in the computation
of net income per share.
(b) Exhibit (12) - Schedule containing information used in the computation
of the ratio of earnings to fixed charges.
Reports on Form 8-K. None.
-13-
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
Index to Exhibits
-----------------
<TABLE>
<CAPTION>
Exhibit No. Page No.
- - ----------- --------
<S> <C>
Exhibit (11) - Schedule containing information used in
the computation of net income per share 15
Exhibit (12) - Schedule containing information used in the
computation of the ratio of earnings to fixed charges 16
</TABLE>
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<PAGE>
SIGNATURES
PHH CORPORATION AND SUBSIDIARIES
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.
PHH CORPORATION
Date: March 27, 1997 ________________________
Nan A. Grant
Corporate Controller
-17-
EXHIBIT (11)
PHH CORPORATION AND SUBSIDIARIES
Information Used in the Computation of Net Income Per Share
<TABLE>
<CAPTION>
Three Months Ended July 31,
---------------------------------
(In thousands except per share data) 1996 1995
---- ----
<S> <C>
NET INCOME - as reported $ 21,772 $ 18,301
======== ========
Weighted average number of shares outstanding 34,747 33,984
Give effect to the exercise of dilutive options
determined under the treasury stock method 665 664
Reflect the period-end market price when greater
than the average market price during the
quarter - 240
-------- --------
Number of shares used in the computation of net
income per share 35,412 34,888
======== ========
NET INCOME PER SHARE .61 $ .52
======== ========
</TABLE>
-15-
EXHIBIT (12)
PHH CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Three Year Ended April 30
Months Ended --------------------------------------------------------------------
July 31, 1996 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C>
Income from continuing operations
before income taxes $ 37,113 $ 139,148 $ 121,318 $ 109,796 $ 94,238 $ 83,117
Add:
Interest expense 65,365 252,966 194,196 162,108 193,935 237,058
Interest portion of rentals* 2,011 7,840 8,065 9,088 8,456 8,665
---------- --------- --------- --------- --------- ----------
Earnings available for fixed charges $ 104,489 $ 399,954 $ 323,579 $ 280,992 $ 296,629 $ 328,840
========== ========= ========= ========= ========= =========
Fixed charges:
Interest expense $ 65,365 $ 252,966 $ 194,196 $ 162,108 $ 193,935 $ 237,058
Interest portion of rentals* 2,011 7,840 8,065 9,088 8,456 8,665
---------- --------- --------- --------- --------- ---------
$ 67,376 $ 260,806 $ 202,261 $ 171,196 $ 202,391 $ 245,723
========== ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 1.55 1.53 1.60 1.64 1.47 1.34
========== ========= ========= ========= ========= =========
</TABLE>
*Amounts reflect a one-third portion of rentals, the portion deemed
representative of the interest factor.
Note: The interest included in fixed charges consists of the amounts
identified as interest expense in the Consolidated Statements of Income,
the substantial portion of which represents interest on debt incurred to
finance leasing activities and mortgage banking activities, as well as
the interest costs associated with home relocation services which are
ordinarily recovered through direct billings to clients and are included
with "Costs, including interest, of carrying and reselling homes" in the
Consolidated Financial Statements.
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PHH CORPORATION FILED ON
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000077776
<NAME> PHH CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> .001
<CASH> 9,854
<SECURITIES> 0
<RECEIVABLES> 460,527
<ALLOWANCES> 5,723
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 91,133
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,832,085
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 98,604
<OTHER-SE> 530,837
<TOTAL-LIABILITY-AND-EQUITY> 5,832,085
<SALES> 0
<TOTAL-REVENUES> 475,761
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 381,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,231
<INCOME-PRETAX> 37,113
<INCOME-TAX> 15,341
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,772
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
