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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event) October 13, 1998
ASSOCIATES CORPORATION OF NORTH AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 74-1494554
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
1-6154
(Commission File Number)
250 E. Carpenter Freeway, Irving, Texas 75062-2729
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 652-4000
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Item 5. Other Events.
Associates Corporation of North America (the "Company") recorded net earnings
for the three-month period ended September 30, 1998 of $239.9 million,
compared with $230.0 million for the prior year period, a 4% increase. Net
earnings for the nine-month period ended September 30, 1998 were $711.9
million compared with $671.1 million for the prior year period, a 6% increase.
Earnings before provision for income taxes increased 5% to $381.3 million for
the three-month period ended September 30, 1998 compared with $364.7 million
for the prior year period. Earnings before provision for income taxes
increased 6% to $1,122.5 million for the nine-month period ended September 30,
1998 compared with $1,061.1 million for the prior year period.
Consumer finance receivables primarily consist of residential real
estate-secured receivables, personal loans, sales financing of consumer
durable goods, participations in credit card receivables and other products
and services. Consumer finance net receivables decreased from $31.7 billion
at December 31, 1997 to $28.0 billion at September 30, 1998 primarily due to
the second quarter sale (the "Sale"), at book value, of $5.2 billion of the
Company's participation interest in the U.S. bankcard credit card receivables
of its parent company, Associates First Capital Corporation ("First Capital").
The decrease caused by the Sale was partially offset by strong growth in the
Company's home equity lending portfolio. 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 aforementioned loan between First Capital and the Company.
Commercial finance receivables primarily result from the financing and leasing
of transportation, construction, communications, material handling and
industrial equipment. The Company is also a significant provider of
automobile fleet leasing services and other products and services. Commercial
finance net receivables increased from $16.1 billion at December 31, 1997 to
$16.8 billion at September 30, 1998.
The Company's composite ratio of net credit losses to average net finance
receivables was 1.98% for the nine-month period ended September 30, 1998, a
decrease of 45 basis points from the 2.43% reported by the Company for the
year ended December 31, 1997. The decrease was primarily attributable to the
aforementioned sale which resulted in a shift in product mix toward more
secured portfolios. Secured portfolios typically have lower losses than
unsecured portfolios. As a result of the foregoing, the allowance for losses
to net finance receivables decreased to 3.06% at September 30, 1998 from 3.47%
at December 31, 1997. Management believes the allowance for losses at
September 30, 1998 is sufficient to provide adequate protection against losses
in its portfolios.
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Certain unaudited financial information for the nine months and three months
ended or at September 30, 1998 for Associates Corporation of North America is
as follows (dollar amounts in millions):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1998 1997 %Change 1998 1997 %Change
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE $5,327.7 $5,286.9 1% $1,732.1 $1,826.0 (5)%
EARNINGS BEFORE
PROVISION FOR
INCOME TAXES 1,122.5 1,061.1 6 381.3 364.7 5
NET EARNINGS 711.9 671.1 6 239.9 230.0 4
</TABLE>
<TABLE>
<CAPTION>
September 30 December 31 September 30
1998 1997 1997
<S> <C> <C> <C>
NET FINANCE RECEIVABLES
Consumer Finance $28,038.6 $31,715.6 $31,957.9
Commercial Finance 16,805.6 16,138.9 14,974.0
Total Net Finance
Receivables $44,844.2 $47,854.5 $46,931.9
TOTAL ASSETS $54,757.7 $50,531.1 $48,004.2
TOTAL DEBT 46,934.8 43,522.0 41,189.4
STOCKHOLDERS' EQUITY 6,759.5 6,048.7 5,760.0
60+DAYS CONTRACTUAL
DELINQUENCY 2.38% 2.35% 2.47%
NET CREDIT LOSSES (as
a % of ANR) 1.98 2.43 2.43
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $ 1,370.3 $ 1,661.9 $ 1,637.1
Percent of net finance
receivables 3.06% 3.47% 3.49%
</TABLE>
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 hereunto duly authorized.
ASSOCIATES CORPORATION OF NORTH AMERICA
By: /s/ John F. Stillo
Senior Vice President and Comptroller
Date: October 13, 1998
