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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) January 21, 1999
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 year ended December 31, 1998 of $952.0 million, compared
with $902.5 million for the prior year period, a 5% increase. Earnings
before provision for income taxes also increased 5% to $1,503.0 million for
the period compared with $1,427.0 million for the prior year period.
Net finance receivables decreased from $47.9 billion at December 31, 1997
to $46.0 billion at December 31, 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, Associates First Capital Corporation ("First Capital"). The
participation interest was sold to First Capital and financed by a loan
between the Company and First Capital, resulting in no net decrease in
total assets as a result of the sale. The decrease net finance receivables
caused by the Sale was partially offset by strong growth in the Company's
home equity lending and transportation financing portfolios. 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.
The Company's composite ratio of net credit losses to average net finance
receivables was 1.94% for the year ended December 31, 1998, a decrease of
49 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 3.00% at December 31, 1998
from 3.47% at December 31, 1997. Management believes the allowance for
losses at December 31, 1998 is sufficient to provide adequate protection
against losses in its portfolios.
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Certain unaudited financial information for the years ended or at December
31, 1998 and 1997 for Associates Corporation of North America is as follows
(dollar amounts in millions):
<TABLE>
<CAPTION>
Year Ended or at
December 31
1998 1997 %Change
<S> <C> <C> <C>
TOTAL REVENUE $ 7,099.3 $ 7,151.1 (1)%
EARNINGS BEFORE PROVISION FOR
INCOME TAXES 1,503.0 1,427.0 5
NET EARNINGS 952.0 902.5 5
NET FINANCE RECEIVABLES 46,038.5 47,854.5 (4)
TOTAL ASSETS 56,577.3 50,531.1 12
TOTAL DEBT 48,633.4 43,522.0 12
STOCKHOLDERS' EQUITY 6,756.2 6,048.7 12
60+DAYS CONTRACTUAL
DELINQUENCY 2.41% 2.35%
NET CREDIT LOSSES (as a % of average
net finance receivables) 1.94 2.43
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $1,378.9 $1,661.9 (17)
Percent of net finance
receivables 3.00% 3.47%
</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: January 21, 1999
