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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) July 14, 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 June 30, 1998 of $236.5 million, compared
with $225.7 million a year earlier, a 5% increase. Net earnings for the six-
month period ended June 30, 1998 were $472.0 million compared with $441.1
million for prior year period, a 7% increase. Earnings before provision for
income taxes increased 4% to $374.3 million for the three-month period ended
June 30, 1998 compared with $358.6 million for the prior year period.
Earnings before provision for income taxes increased 6% to $741.2 million for
the six-month period ended June 30, 1998 compared with $696.4 million for the
prior year period.
Consumer finance net receivables decreased from $31.7 billion at December 31,
1997 to $27.3 billion at June 30, 1998. The decrease in consumer finance net
receivables was primarily due to the sale, at book value, of substantially all
of the Company's approximate $5 billion participation interest in the U.S.
bank card receivables of its parent company, Associates First Capital
Corporation ("First Capital"). The sale was financed by a loan between the
Company and First Capital. Immediately subsequent to this transaction, First
Capital sold, at book value, substantially all of its U.S. bank card
receivables to a master trust. The trust then sold $2 billion of its assets
in a private securitization transaction. The proceeds of the sale of the
trust assets were used to pay down the aforementioned loan between First
Capital and the Company. 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.
Commercial finance net receivables increased from $16.1 billion at December
31, 1997 to $16.5 billion at June 30, 1998. 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.
The Company's composite ratio of net credit losses to average net finance
receivables was 2.14% for the six-month period ended June 30, 1998, a decrease
from the 2.43% reported by the Company for the year ended December 31, 1997,
and 2.41% reported for the prior year period. The decrease was primarily
attributed 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 3.17% at June 30, 1998
compared to 3.47% at December 31, 1997. Management believes the allowance for
losses at June 30, 1998 is sufficient to provide adequate protection against
losses in its portfolios.
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Certain unaudited financial information for the six months and three months
ended or at June 30, 1998 for Associates Corporation of North America is as
follows (dollar amounts in millions):
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30 June 30
1998 1997 %Change 1998 1997 %Change
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE $3,595.6 $3,460.9 4% $1,708.0 $1,781.4 (4)%
EARNINGS BEFORE
PROVISION FOR
INCOME TAXES 741.2 696.4 6 374.3 358.6 4
NET EARNINGS 472.0 441.1 7 236.5 225.7 5
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31 June 30
1998 1997 1997
<S> <C> <C> <C>
NET FINANCE RECEIVABLES
Consumer Finance $27,267.9 $31,715.6 $31,399.8
Commercial Finance 16,549.3 16,138.9 14,494.3
Total Net Finance
Receivables $43,817.2 $47,854.5 $45,894.1
TOTAL ASSETS $52,803.4 $50,531.1 $46,731.9
TOTAL DEBT 45,390.8 43,522.0 40,355.9
STOCKHOLDERS' EQUITY 6,521.8 6,048.7 5,525.4
PORTFOLIO QUALITY
60+DAYS CONTRACTUAL
DELINQUENCY 2.28% 2.35% 2.36%
NET CREDIT LOSSES (as
a % of ANR) 2.14 2.43 2.41
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $ 1,387.3 $ 1,661.9 $ 1,589.4
Percent of net finance
receivables 3.17% 3.47% 3.46%
</TABLE>
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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: July 14, 1998
