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 15, 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
<PAGE>
Item 5. Other Events.
Earnings
Associates Corporation of North America (the "Company") recorded net earnings
for the three-month period ended June 30, 1999 of $253.2 million, compared
with $236.5 million for the prior year period, a 7% increase. Net earnings
for the six-month period ended June 30, 1999 were $489.9 million compared with
$472.0 million for the prior year period, a 4% increase. Earnings before
provision for income taxes increased 7% to $401.4 million for the three-month
period ended June 30, 1999 compared with $374.3 million for the prior year
period. Earnings before provision for income taxes increased 5% to $776.9
million for the six-month period ended June 30, 1999 compared with $741.2
million for the prior year period.
Growth in Finance Receivables
Net finance receivables increased 7% to $49.3 billion at June 30, 1999 from
$46.0 billion at December 31, 1998. The transactions described below were the
primary causes for the change in receivables outstanding during the first six
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 3rd or 4th quarter of 1999 in a similar transaction.
Credit Quality
The allowance for losses to net finance receivables ("Allowance Ratio")was
2.91% at June 30, 1999, a decrease from 3.00% and 3.17% at December 31, and
June 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 six-month period ended June 30, 1999 as compared to 2.14% 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.
Management believes the allowance for losses at June 30, 1999 is sufficient to
provide adequate protection against losses in its portfolios.
Certain unaudited financial information for the six months and three months
ended or at June 30, 1999 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
1999 1998 %Change 1999 1998 %Change
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE $3,601.2 $3,595.6 0% $1,789.0 $1,708.0 5%
EARNINGS BEFORE
PROVISION FOR
INCOME TAXES 776.9 741.2 5 401.4 374.3 7
NET EARNINGS 489.9 472.0 4 253.2 236.5 7
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31 June 30
1999 1998 1998
<S> <C> <C> <C>
NET FINANCE RECEIVABLES $49,285.9 $46,038.5 $43,817.2
TOTAL ASSETS 58,868.5 56,577.3 52,803.4
TOTAL DEBT 48,178.1 48,633.4 45,390.8
STOCKHOLDERS' EQUITY 9,107.7 6,756.2 6,521.8
60+DAYS CONTRACTUAL
DELINQUENCY 2.55% 2.41% 2.28%
NET CREDIT LOSSES (as
a % of ANR) 1.77 1.94 2.14
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $ 1,434.7 $ 1,378.9 $ 1,387.3
Percent of net finance
receivables 2.91% 3.00% 3.17%
</TABLE>
<PAGE>
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
------------------------
Executive Vice President and Comptroller
Date: July 14, 1999
