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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 14, 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.
Earnings
Associates Corporation of North America (the "Company") recorded net earnings
for the three-month period ended September 30, 1999 of $247.6 million,
compared with $239.9 million for the prior year period. Net earnings for the
nine-month period ended September 30, 1999 were $737.5 million compared with
$711.9 million for the prior year period. Earnings before provision for
income taxes were $377.7 million for the three-month period ended September
30, 1999 compared with $381.3 million for the prior year period. Earnings
before provision for income taxes increased to $1,154.6 million for the nine-
month period ended September 30, 1999 compared with $1,122.5 million for the
prior year period.
Growth in Finance Receivables
Net finance receivables increased 10% to $50.7 billion at September 30, 1999
from $46.0 billion at December 31, 1998. Internally generated growth,
particularly in the home equity lending portfolio, and the transactions
described below were the primary causes for the change in receivables
outstanding during the first nine months of 1999.
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 transferred substantially all of the domestic and Puerto Rico consumer
finance operations of Avco to the Company, which included approximately $4
billion in finance receivables. Avco's domestic and Puerto Rico consumer
finance product offerings include home equity lending, real estate sales
finance and consumer loans. In March of 1999, approximately $525 million of
such receivables were sold.
In June 1999, the Company sold to First Capital, at book value, approximately
$900 million of the Company's participation interest in First Capital's
private label receivables (the "Private Label Sale"). These receivables were
subsequently securitized and sold by First Capital. In addition,
approximately $714 million of the Company's participation interest in First
Capital's private label receivables were transferred to other assets as
receivables held for sale, reflecting management's intent to sell these
receivables to First Capital during the 4th quarter of 1999 in a similar
transaction.
Credit Quality
The allowance for losses to net finance receivables ("Allowance Ratio")was
2.85% at September 30, 1999, a decrease from 3.00% and 3.06% at December 31,
and September 30, 1998, respectively. Similarly, the Company's composite
ratio of net credit losses to average net finance receivables ("Loss
Ratio")declined to 1.77% for the nine-month period ended September 30, 1999
as compared to 1.98% for the prior year period. These decreases were
primarily attributable to a modest shift in product mix toward more secured
portfolios. Secured portfolios generally have lower loss levels than
unsecured portfolios. This 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 and the aforementioned Private Label Sale.
Increased losses in the Company's secured portfolios somewhat offset the
decline in losses caused by the shift in mix.
Management believes the allowance for losses at September 30, 1999 is
sufficient to provide adequate protection against losses in its portfolios.
Certain unaudited financial information for the nine months and three months
ended or at September 30, 1999 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
1999 1998 %Change 1999 1998 %Change
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE $5,396.6 $5,327.7 1% $1,795.4 $1,732.1 4%
EARNINGS BEFORE
PROVISION FOR
INCOME TAXES 1,154.6 1,122.5 3 377.7 381.3 (1)
NET EARNINGS 737.5 711.9 4 247.6 239.9 3
</TABLE>
<TABLE>
<CAPTION>
September 30 December 31 September 30
1999 1998 1998
<S> <C> <C> <C>
NET FINANCE RECEIVABLES $50,674.2 $46,038.5 $44,844.2
TOTAL ASSETS 58,287.4 56,577.3 54,757.7
TOTAL DEBT 47,176.5 48,633.4 46,934.8
STOCKHOLDERS' EQUITY 9,339.0 6,756.2 6,759.5
60+DAYS CONTRACTUAL
DELINQUENCY 2.70% 2.41% 2.38%
NET CREDIT LOSSES (as
a % of ANR) 1.77 1.94 1.98
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $ 1,445.1 $ 1,378.9 $ 1,370.3
Percent of net finance
receivables 2.85% 3.00% 3.06%
</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
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Executive Vice President
and Comptroller
Date: October 14, 1999
