<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 1-6154
ASSOCIATES CORPORATION OF NORTH AMERICA
(Exact name of registrant as specified in its charter)
Delaware 74-1494554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East Carpenter Freeway, Irving, Texas 75062-2729
(Address of principal executive offices)
(Zip Code)
972-652-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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.....
As of June 30, 1998, the registrant had 260 shares of Common Stock and
1,000,000 shares of Class B Common Stock issued and outstanding, all of
which were owned directly or indirectly by Associates First Capital
Corporation. The registrant meets the conditions set forth in General
Instruction H.(1)(a) and (b) to Form 10-Q and is therefore filing this
Form 10-Q with the reduced disclosure format.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ASSOCIATES CORPORATION OF NORTH AMERICA
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
REVENUE
Finance charges $3,048.0 $3,112.7 $1,375.8 $1,595.5
Insurance premiums 186.7 180.5 88.5 92.9
Investment and other
income 360.9 167.7 243.7 93.0
------- -------- -------- --------
3,595.6 3,460.9 1,708.0 1,781.4
EXPENSES
Interest expense 1,402.9 1,207.7 710.7 623.6
Operating expenses 847.1 882.5 386.5 455.9
Provision for losses on
finance receivables
- NOTE 6 532.4 603.1 206.3 307.5
Insurance benefits paid
or provided 72.0 71.2 30.2 35.8
-------- -------- -------- --------
2,854.4 2,764.5 1,333.7 1,422.8
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 741.2 696.4 374.3 358.6
PROVISION FOR INCOME TAXES 269.2 255.3 137.8 132.9
-------- -------- -------- --------
NET EARNINGS $ 472.0 $ 441.1 $ 236.5 $ 225.7
======== ======== ======== ========
See notes to consolidated financial statements.
ASSOCIATES CORPORATION OF NORTH AMERICA
CONSOLIDATED BALANCE SHEET
(Dollars In Millions)
June 30 December 31
1998 1997
------- -----------
ASSETS
CASH AND CASH EQUIVALENTS $ 199.7 $ 294.8
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- NOTE 4 1,863.2 1,153.5
FINANCE RECEIVABLES, net of unearned finance
income, allowance for credit losses and
insurance policy and claims reserves
- NOTE 5 41,655.8 45,430.2
OTHER ASSETS - NOTE 7 9,084.7 3,652.6
--------- ---------
Total assets $52,803.4 $50,531.1
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
Commercial Paper $18,583.3 $17,184.5
Bank Loans 1,202.1
ACCOUNTS PAYABLE AND ACCRUALS 890.8 960.4
LONG-TERM DEBT
Senior Notes 26,382.1 24,710.0
Subordinated and Capital Notes 425.4 425.4
--------- ---------
26,807.5 25,135.4
STOCKHOLDERS' EQUITY
Class B Common Stock, $100 par value,
2,000,000 shares authorized, 1,000,000
shares issued and outstanding 100.0 100.0
Common Stock, no par value, 5,000 shares
authorized, 260 shares issued and
outstanding, at stated value 47.0 47.0
Paid-in Capital 1,667.8 1,667.8
Retained Earnings 4,701.5 4,229.5
Accumulated Other Comprehensive Income
- NOTE 3 5.5 4.4
--------- ---------
Total stockholders' equity 6,521.8 6,048.7
Total liabilities and stockholders' equity $52,803.4 $50,531.1
========== =========
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES CORPORATION OF NORTH AMERICA
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
Six Months Ended
June 30
1998 1997
----- -----
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 472.0 $ 441.1
Adjustments to reconcile net earnings to
net cash provided from operating activities:
Provision for losses on finance receivables 532.4 603.1
Decrease in accounts payable and accruals (93.9) (125.9)
Depreciation and amortization 133.5 124.3
Unrealized gain on trading securities (4.4) (0.9)
Purchases of trading securities (550.4)
Sales and maturities of trading securities 83.2 4.7
Deferred income taxes 23.7 (3.0)
Increase in insurance policy and claims
reserves 11.6 35.0
---------- ---------
Net cash provided from operating
activities 607.7 1,078.4
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables originated or purchased (20,254.1) (21,927.6)
Finance receivables liquidated 23,174.2 17,350.5
Finance receivables sold 234.9
Purchases of available-for-sale securities (600.3) (164.5)
Sales and maturities of available-for-sale
securities 363.4 51.4
Increase in other assets (5,489.6) (416.4)
---------- ----------
Net cash used for investing
activities (2,571.5) (5,106.6)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 3,903.7 3,565.4
Retirement of long-term debt (2,231.6) (1,616.5)
Increase in notes payable 196.6 1,875.6
---------- ----------
Net cash provided from financing
activities 1,868.7 3,824.5
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (95.1) (203.7)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 294.8 278.4
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 199.7 $ 74.7
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES CORPORATION OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Associates Corporation of North America ("Associates" or the
"Company"), a Delaware corporation, is a wholly-owned subsidiary and
principal U.S.-based operating unit of Associates First Capital
Corporation ("First Capital"). Prior to April 7, 1998, First Capital was
a majority indirect-owned subsidiary of Ford Motor Company ("Ford"). On
April 7, 1998, Ford completed a spin-off of its interest in First Capital
in the form of a tax-free distribution of its First Capital shares to Ford
Common and Ford Class B stockholders. Effective with the distribution,
First Capital is no longer a subsidiary of Ford. All the outstanding
Common Stock of Associates is owned by First Capital. All shares of the
Company's Class B Common Stock are owned by Associates World Capital
Corporation, a wholly-owned subsidiary of First Capital. Class B Common
Stock is redeemable only at the option of the issuer.
NOTE 2 - BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying consolidated financial statements present the
consolidated financial position and operating results of Associates and
its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. Certain prior period financial
statement amounts have been reclassified to conform to the current period
presentation.
In the opinion of the management of Associates, all adjustments
necessary to present fairly the results of operations and financial
position have been made and are of a normal recurring nature. The results
of operations for any interim period are not necessarily indicative of the
results of operations for a full year.
NOTE 3 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income", on January 1, 1998.
Pursuant to SFAS 130, accumulated other comprehensive income was reported
on the consolidated balance sheet and consisted of net unrealized gains
on available-for-sale securities of $5.5 million and $4.4 million at June
30, 1998 and December 31, 1997, respectively.
Comprehensive income for the six- and three-month periods ended June
30, 1998 and 1997 consisted of the following components (in millions):
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
Net earnings $472.0 $441.1 $236.5 $225.7
Net unrealized gain (loss)
on available-for-sale
securities 1.1 (1.9) 4.0 8.5
------ ------ ------ ------
Comprehensive income $473.1 $439.2 $240.5 $234.2
====== ====== ====== ======
NOTE 4 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
AVAILABLE-FOR-SALE SECURITIES
The Company invests in debt and asset-backed securities, principally
bonds and notes held by the Company's insurance subsidiaries, with the
intention of holding them to maturity. However, if market conditions
change, the Company may sell them prior to maturity. Accordingly, the
Company classifies these securities as available-for-sale securities and
adjusts their recorded value to market. The estimated market value and
amortized cost at June 30, 1998 and December 31, 1997 was $1.3 billion and
$1.0 billion, respectively. Realized gains or losses on sales are
included in investment and other income. Unrealized gains or losses are
reported as a component of stockholders' equity, net of tax.
TRADING SECURITIES
Trading securities, principally preferred stock, are recorded at
market value. Unrealized gains or losses on trading securities are
included in earnings. The estimated market value at June 30, 1998 and
December 31, 1997 was $602.6 million and $131.0 million, respectively.
Historical cost at June 30, 1998 and December 31, 1997 was $586.0 million
and $126.7 million, respectively.
NOTE 5 - FINANCE RECEIVABLES
At June 30, 1998 and December 31, 1997, finance receivables
consisted of the following (in millions):
June 30 December 31
1998 1997
------- ----------
Consumer Finance
Home equity lending <F1> $19,127.1 $17,437.3
Personal lending and retail sales finance 6,739.0 6,920.6
Credit card<F2> 1,382.5 7,333.6
Manufactured housing 19.3 24.1
--------- ---------
27,267.9 31,715.6
--------- ---------
Commercial Finance
Truck and truck trailer 9,567.9 9,011.1
Equipment<F3> 4,542.2 4,899.8
Fleet leasing 1,469.7 1,418.9
<PAGE>
Warehouse lending and other 969.5 809.1
--------- ---------
16,549.3 16,138.9
--------- ---------
Finance receivables net of unearned
finance income ("net finance
receivables") 43,817.2 47,854.5
Allowance for losses on finance receivables (1,387.3) (1,661.9)
Insurance policy and claims reserves (774.1) (762.4)
--------- --------
Finance receivables, net of unearned
finance income, allowance for credit
losses and insurance policy and claims
reserves $41,655.8 $45,430.2
========= =========
[FN]
<F1> In March 1998, the Company securitized and sold approximately $235
million of home equity lending receivables. No significant gain or
loss was recorded on this transaction. The Company retained the
servicing responsibilities for these receivables.
<F2> In April 1998, the Company sold, at book value, $5.2 billion of
the Company's participation interest in the U.S. bankcard credit card
receivables of First Capital. The sale was financed by a loan
between the Company and First Capital. Immediately subsequent to
the sale, First Capital securitized and sold, at book value,
substantially all of its U.S. bankcard credit card receivables to
a master trust. First Capital received $2.0 billion in proceeds
from the transaction and retained a $3.2 billion certificated
interest in the master trust. The proceeds were used to pay down
the loan between First Capital and the Company.
<F3> In March 1998, approximately $650 million of equipment finance
receivables were sold at book value to First Capital. No gain or
loss was recorded on the sale.
</FN>
NOTE 6 - ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during
the periods indicated were as follows (in millions):
Six Months Ended Year Ended
June 30 December 31
1998 1997 1997
---- ---- -----------
Balance at beginning of period $1,661.9 $1,371.4 $ 1,371.4
Provision for losses 532.4 603.1 1,195.6
Recoveries on receivables
charged off 87.3 84.8 190.5
Losses sustained (569.3) (614.5) (1,298.3)
Reserves of receivables sold (334.7)
Reserves of acquired
businesses and other 9.7 144.6 202.7
-------- -------- --------
Balance at end of period $1,387.3 $1,589.4 $1,661.9
======== ======== ========
NOTE 7 - OTHER ASSETS
The components of other assets at June 30, 1998 and December 31,
1997 were as follows (in millions):
June 30 December 31
1998 1997
------- -----------
Balances with related
parties - NOTE 5 $7,671.9 $2,331.0
Goodwill 340.4 343.1
Collateral held for resale 208.3 205.6
Property and equipment 193.7 164.2
Other 670.4 608.7
-------- --------
Total other assets $9,084.7 $3,652.6
======== ========
NOTE 8 - DEBT RESTRICTIONS
Associates is subject to various limitations under the provisions
of its outstanding debt and credit facilities. The most significant of
these limitations are summarized as follows:
LIMITATION ON PAYMENT OF DIVIDENDS
A restriction contained in one issue of debt securities which
matures on March 15, 1999, generally limits payments of cash dividends on
the Company's Common Stock in any year to not more than 50% of
consolidated net earnings for such year, subject to certain exceptions,
plus increases in contributed capital and extraordinary gains. Any such
amounts available for the payment of dividends in such fiscal year and not
so paid, may be paid in any one or more of the five subsequent fiscal
years. In accordance with this provision, $1.0 billion was available for
dividends at June 30, 1998.
LIMITATION ON MINIMUM TANGIBLE NET WORTH
A restriction contained in certain revolving credit agreements
requires Associates to maintain a minimum tangible net worth, as defined,
of $2.5 billion. At June 30, 1998, Associates tangible net worth was
approximately $6.2 billion.
NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments for the purpose
of hedging specific exposures as part of its risk management program.
Such instruments to date have been limited to currency swap, interest rate
swap, treasury lock agreements and treasury futures and option contracts.
Foreign currency swap agreements are held for purposes other than
trading and have been designated for accounting purposes as hedges of
specific debt obligations. Under these agreements, the Company and the
agreement counterparties are obligated to exchange specific foreign
currencies at varying times over the next 5 years. The aggregate notional
amount of these agreements at June 30, 1998 and December 31, 1997 was
$822.4 million and $272.7 million, respectively. The fair value of such
agreements at June 30, 1998 and December 31, 1997 was $(13.2) million and
$1.2 million, respectively.
Interest rate swap and treasury lock agreements are held for
purposes other than trading and are used by the Company to hedge the
effect of interest rate movements on existing debt and anticipated debt
and asset securitization transactions. The aggregate notional amount of
interest rate swap and treasury lock agreements at June 30, 1998 and
December 31, 1997 was $1.8 billion and $2.0 billion, respectively. The
fair value of such agreements at June 30, 1998 and December 31, 1997 was
$(7.0) million and $(6.8) million, respectively. Interest rate swap and
treasury lock agreements mature on varying dates over the next 5 years and
3 months, respectively.
Treasury futures and option contracts are used to minimize
fluctuations in the value of preferred stock investments and are held for
purposes other than trading. The aggregate notional amount and fair value
of futures and options contracts at June 30, 1998 was $310.4 million and
$(5.9) million, respectively. Such contracts mature on varying dates over
the next 3 months.
NOTE 10 - SUBSEQUENT EVENT
On August 11, 1998, First Capital announced a definitive agreement
to purchase the assets and assume the liabilities of Avco Financial
Services, Inc. ("Avco"), a wholly-owned subsidiary of Textron Inc. for
$3.9 billion. Avco is a global, diversified financial services company
with approximately $8.9 billion in total assets. Products provided by
Avco include real estate loans, retail sales finance and consumer loans,
equipment, inventory and vendor finance and credit and
collateral-related insurance. Avco has operations in the United States,
Canada, Australia, the United Kingdom, New Zealand, France, Hong Kong,
Spain, Ireland, India and Sweden. The transaction is expected to close
in the fourth quarter of 1998 or the first quarter of 1999, subject to
regulatory approval.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis has been prepared in
accordance with General Instruction H.(2)(a) to Form 10-Q, and should be
read in conjunction with the consolidated financial statements of the
Company and the related notes thereto.
Results of Operations
Net Earnings
Net earnings for the six-month period ended June 30, 1998 were
$472.0 million, a 7% increase over the same period in the previous year.
Net earnings for the three months ended June 30, 1998 were $236.5 million,
an increase of 5% over the same period in the previous year. The increase
in net earnings, on a dollar basis, in both comparative periods was
primarily driven by lower operating expenses and losses, somewhat offset
by lower net interest margins.
Finance Charges
Finance charge revenue, on a dollar basis, decreased for the six-
and three-month periods ended June 30, 1998, compared to the same periods
in the prior year, principally as a result of a decrease in average net
finance receivables outstanding. The sale of the Company's participation
interest in First Capital's bankcard credit card receivables, as described
in NOTE 5 of the consolidated financial statements, was the primary cause
for the decrease in average net finance receivables outstanding.
Finance charge revenue as a percentage of average net finance
receivables (the "Finance Charge Ratio") was 13.53% and 12.81% for the
six- and three-month periods ended June 30, 1998, respectively. This
compares to 14.17% and 14.15% for the comparable periods in 1997. The
decrease in the Finance Charge Ratio in each period was principally due
to the aforementioned credit card receivables sale during the second
quarter of 1998 which caused a significant shift in product mix toward
more secured portfolios. Secured portfolios typically have lower finance
charge rates than unsecured portfolios.
Interest Expense
Interest expense, on a dollar basis, increased for the six- and
three-month periods ended June 30, 1998 compared to the same periods in
1997, primarily due to an increase in average debt outstanding for each
of the comparative periods.
Net Interest Margin
As a result of the aforementioned changes in finance charge revenue
and interest expense, the Company's net interest margin decreased to $1.6
billion and $665.1 million for the six- and three-month periods ended June
30, 1998, respectively, compared to $1.9 billion and $971.9 million for
the comparable periods in the prior year. In addition, the Company's net
interest margin expressed as a ratio to average net finance receivables
declined to 7.30% and 6.19% for the six- and three-month periods ended
June 30, 1998, respectively, from the 8.67% and 8.62% reported in the
comparable periods in the prior year. The principal cause of the decline
in the Company's net interest margin ratio was a decline in the Company's
average net finance receivables and the aforementioned shift in product
mix toward more secured portfolios.
Operating Expenses
Six- and three-month operating expenses for the periods ended June
30, 1998 were lower on a dollar basis than in the corresponding periods
in 1997, reflecting the lower operating expenses associated with the
decrease in average net finance receivables outstanding in both periods.
Provision for Losses
Lower average net finance receivable levels resulting from the
aforementioned second quarter credit card receivables sale was the primary
cause of the decrease in the provision for losses during both comparable
periods. A significant shift in product mix toward a higher percentage
of secured portfolios resulting from the credit card sale was the primary
cause of a decrease in the Company's total net credit losses as a
percentage of average net finance receivables ("Loss Ratio") in both
comparable periods. Secured portfolios generally have lower loss rates
than unsecured portfolios. The Company's Loss Ratio was 2.14% and 1.73%
for the six- and three-month periods ended June 30, 1998, respectively,
compared to 2.41% and 2.48% for the same periods in 1997.
Financial Condition
As described in NOTE 5 of the consolidated financial statements,
during the first six months of 1998 the Company sold net finance
receivables of approximately $6 billion. These sales more than offset
internal receivables growth during the period resulting in a net decrease
in net finance receivables of $4.0 billion during the six-month period
ended June 30, 1998.
Composite 60+days contractual delinquency was 2.28% of gross finance
receivables at June 30, 1998, lower than the 2.35% and 2.36% reported at
December 31, 1997 and June 30, 1997, respectively. The decrease in
contractual delinquency along with a decline in net finance receivables
outstanding were the primary causes for the decrease in the allowance for
losses to net finance receivables to 3.17% at June 30, 1998 from 3.47% at
December 31, 1997. Company management believes the allowance for losses
at June 30, 1998 is sufficient to provide adequate coverage against losses
in its portfolios.
Liquidity and Capital Resources
Through its asset and liability management function, the Company
maintains a disciplined approach to the management of liquidity, capital
and interest rate risk. The Company has a formal process for managing its
liquidity to ensure that funds are available at all times to meet the
Company's commitments.
The principal sources of cash for the Company are proceeds from the
issuance of short- and long-term debt and cash provided from the Company's
operations. While First Capital has made periodic capital contributions
to the Company in the past, no assurance can be made with respect to
future capital contributions by First Capital to the Company.
Nevertheless, management believes that the Company has available
sufficient liquidity, from a combination of cash provided from operations
and external borrowings, to support its operations.
A principal strength of the Company is its ability to access the
global debt markets in a cost-efficient manner. Continued access to the
public and private debt markets is critical to the Company's ability to
continue to fund its operations. The Company seeks to maintain a
conservative liquidity position and actively manages its liability and
capital levels, debt maturities, diversification of funding sources and
asset liquidity to ensure that it is able to meet its obligations as they
mature. The Company's operations are principally funded through
commercial paper borrowings made domestically and long-term debt
borrowings made both domestically and internationally.
At June 30, 1998, the Company had short- and long-term debt
outstanding of $18.6 billion and $26.8 billion, respectively. Short-term
debt principally consists of commercial paper and represents the Company's
primary source of short-term liquidity. Long-term debt principally
consists of senior unsecured long-term debt issued publicly and privately
by the Company in the United States and abroad. During the six months
ended June 30, 1998 and 1997, the Company raised term debt aggregating
$3.9 billion and $3.6 billion, respectively, through public and private
offerings.
Substantial additional liquidity is available to the Company's
operations through established credit facilities in support of its
commercial paper program. Such credit facilities provide a means of
refinancing its maturing short-term obligations as needed. At June 30,
1998, these bank lines, revolving credit facilities and receivable
purchase facilities totaled $16.7 billion, of which $2.6 billion was
allocated for use by First Capital. The remaining $14.1 billion
represents 75% of commercial paper outstanding at June 30, 1998.
Additionally, the Company believes it has access to other sources
of liquidity, which to date it has either accessed only on a limited
basis, such as securitization of assets, or has not accessed, such as the
issuance of alternative forms of capital, including preferred stock.
Year 2000 Compliance
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process date fields containing
a 2 digit year is commonly referred to as the Year 2000 Compliance issue.
As the year 2000 approaches, if such systems are not repaired they may be
unable to accurately process certain date-based information.
The Company has identified all significant applications that require
modification to ensure Year 2000 Compliance. Internal and external
resources are being used to make the required modifications and test Year
2000 Compliance. The modification process of all significant applications
is substantially complete. The Company is on schedule to complete the
testing processes for these applications by December 31, 1998.
In addition, the Company has communicated with others with whom it
does significant business to determine their Year 2000 Compliance
readiness and the extent to which the Company is vulnerable to any third
party Year 2000 issues. However, there can be no guarantee that the
systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have
a material adverse effect on the Company.
Through June 30, 1998 the Company has incurred and expensed
approximately $14 million for incremental costs primarily related to
third-party vendors, outside contractors and additional staff dedicated
to the Year 2000 readiness project. The Company expects that it will
incur future incremental costs related to the project of approximately $8
million. These incremental costs do not include existing resources
allocated to the project effort.
These costs and the date on which the Company plans to complete the
Year 2000 modification and testing processes are based on management's
best estimates, which were derived utilizing numerous assumptions of
future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be
no guarantee that these estimates will be achieved and actual results
could differ from those plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Management has no material changes to report from the disclosure set
forth in the Company's Form 10-K for the year ended December 31, 1997.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None to report.
In accordance with General Instruction H.(2)(b), the following items
have been omitted: Item 2, Changes in Securities; Item 3, Defaults Upon
Senior Securities; and Item 4, Submission of Matters to a Vote of Security
Holders.
ITEM 5. OTHER INFORMATION.
The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 (the
"1995 Act"). The 1995 Act provides a "safe harbor" for forward looking
statements to encourage companies to provide information without fear of
litigation so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially
from those projected. Although the Company does not anticipate that it
will make forward-looking statements as a general policy, the Company will
make forward-looking statements as required by law or regulation, and from
time to time may make such statements with respect to management's
estimation of the future operating results and business of the Company.
The Company hereby incorporates into this report by reference to its
Form 10-K for the year ended December 31, 1997 the cautionary statements
found on pages 23-24 of such Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
During the second quarter ended June 30, 1998, Associates filed
Current Reports on Form 8-K dated April 8, 1998 (announcing the
completion of the spin-off of First Capital by Ford); April 14,
1998 (announcing earnings for the first quarter of 1998);April
17, 1998, May 5, 1998, May 22, 1998 and June 25, 1998 (each
related to a debt issuance or registration pursuant to Rule
415).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 14, 1998
ASSOCIATES CORPORATION OF NORTH AMERICA
(registrant)
By/s/ John F. Stillo
------------------------------------
Senior Vice President, Comptroller and
Principal Accounting Officer
<PAGE>
EXHIBIT 12
ASSOCIATES CORPORATION OF NORTH AMERICA
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
Six Months Ended
June 30
1998 1997
---- ----
Fixed Charges (a)
Interest expense $1,402.9 $1,207.7
Implicit interest in rent 9.2 8.5
Total fixed charges $1,412.1 $1,216.2
Earnings (b)
Earnings before provision for income
taxes $ 741.2 $ 696.4
Fixed charges 1,412.1 1,216.2
Earnings, as defined $2,153.3 $1,912.6
Ratio of Earnings to Fixed Charges 1.52 1.57
(a) For purposes of such computation, the term "fixed charges" represents
interest expense and a portion of rentals representative of an
implicit interest factor for such rentals.
(b) For purposes of such computation, the term "earnings" represents
earnings before provision for income taxes, plus fixed charges.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
0 MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. This schedule
contains summary financial information extracted from the Company's
unaudited consolidated financial statements as of June 30, 1998 and the
six months then ended and is qualified in its entirety by reference to
such consolidated financial statements.
</LEGEND>
<CIK> 0000007973
<NAME> ASSOCIATES CORPORATION OF NORTH AMERICA
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 200
<SECURITIES> 1,863
<RECEIVABLES> 43,817
<ALLOWANCES> 1,387
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,803
<CURRENT-LIABILITIES> 0
<BONDS> 45,391
<COMMON> 147
0
0
<OTHER-SE> 6,375
<TOTAL-LIABILITY-AND-EQUITY> 52,803
<SALES> 3,595
<TOTAL-REVENUES> 3,595
<CGS> 0
<TOTAL-COSTS> 2,854
<OTHER-EXPENSES> 919
<LOSS-PROVISION> 532
<INTEREST-EXPENSE> 1,403
<INCOME-PRETAX> 741
<INCOME-TAX> 269
<INCOME-CONTINUING> 472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
