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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) April 13, 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 three-month period ended March 31, 1999 of $236.7 million,
compared with $235.5 million for the prior year period. Earnings before
provision for income taxes increased to $375.5 million for the period
compared with $366.9 million for the prior year period.
On January 6, 1999, the Company's parent, Associates First Capital
Corporation ("First Capital") purchased the assets and assumed the
liabilities of Avco Financial Services, Inc. ("Avco"). During the first
quarter of 1999, First Capital contributed substantially all of Avco's
domestic and Puerto Rico consumer finance operations to the Company, which
included approximately $4 billion in finance receivables. In March of
1999, approximately $525 million of such receivables were sold. Avco's
domestic and Puerto Rico consumer finance product offerings include home
equity lending, real estate sales finance and consumer loans. The
contribution of Avco receivables was the primary cause of the net increase
in net finance receivables from $46.0 billion at December 31, 1998 to $49.8
billion at March 31, 1999.
The allowance for losses to net finance receivables ("Allowance Ratio")was
3.13% at March 31, 1999, a decrease from the 3.54% reported by the Company
at March 31, 1998. Similarly, the Company's composite ratio of net credit
losses to average net finance receivables ("Loss Ratio")declined to 1.82%
for the three-month period ended March 31, 1999 as compared to 2.47% for
the prior year period. These decreases were primarily attributable to a
shift in product mix toward more secured portfolios. Secured portfolios
generally have lower loss levels than unsecured portfolios. The shift in
product mix was principally caused by the second quarter 1998 sale, at book
value, of $5.2 billion of the Company's participation interest in First
Capital's U.S. bankcard credit card receivables to First Capital (the
"Receivable Sale"). The Avco receivables acquired during the first
quarter of 1999 did not have a significant impact on the Allowance Ratio or
Loss Ratio trends. Management believes the allowance for losses at March
31, 1999 is sufficient to provide adequate protection against losses in its
portfolios.
Total revenue was $1.8 billion and $1.9 billion for the three-month periods
ended March 31, 1999 and 1998, respectively. The decrease in total revenue
was primarily due to lower finance charge revenues primarily caused by the
aforementioned Receivable Sale, which produced a shift in product mix toward
more secured portfolios. Secured portfolios generally have lower yields
than unsecured portfolios. An increase in revenues related to notes
receivable from related parties somewhat offset the decrease in revenues
caused by the shift in product mix.
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Certain unaudited financial information for the three-month period ended on
or at March 31, 1999 and 1998 and December 31, 1998 for Associates
Corporation of North America is as follows (dollar amounts in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998 %Change
---- ---- -------
<S> <C> <C> <C>
TOTAL REVENUE $1,812.2 $1,887.6 (4)
EARNINGS BEFORE PROVISION FOR
INCOME TAXES 375.5 366.9 2
NET EARNINGS 236.7 235.5 1
</TABLE>
<TABLE>
<CAPTION>
March 31 December 31 March 31
1999 1998 1998
-------- ----------- --------
<S> <C> <C> <C>
NET FINANCE RECEIVABLES $49,839.1 $46,038.5 $47,827.2
TOTAL ASSETS 56,268.7 56,577.3 52,133.5
TOTAL DEBT 46,031.4 48,633.4 44,756.3
STOCKHOLDERS' EQUITY 8,867.8 6,756.2 6,281.3
60+DAYS CONTRACTUAL
DELINQUENCY 2.54% 2.41% 2.41%
NET CREDIT LOSSES (as a % of average
net finance receivables) 1.82 1.94 2.47
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $1,558.9 $1,378.9 $1,694.1
Percent of net finance
receivables 3.13% 3.00% 3.54%
</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: April 13, 1999
