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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) February 4, 2000
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.
Below is a summary of the significant transactions, earnings, growth and
credit quality of Associates Corporation of North America ("the Company") for
the year ended December 31, 1999.
Significant 1999 Transactions
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Contribution of Associates World Capital Corporation
On December 31, 1999, Associates First Capital Corporation ("First
Capital"), the Company's parent, contributed its wholly-owned subsidiary,
Associates World Capital Corporation ("AWCC"), to the Company. The net
assets of AWCC were approximately $300 million on the date of the
contribution. AWCC, through its principal operating subsidiary Associates
First Capital B.V., issues unsecured debt which is used to fund First
Capital's international consumer and commercial finance operations.
The consolidated financial statements of the Company have been restated
to reflect the results of this contribution in a manner similar to a pooling-
of-interests method of accounting in accordance with generally accepted
accounting principles. Upon consummation of the contribution, the restated
financial statements became the historical consolidated financial statements
of the Company. Accordingly, all the financial information presented in this
filing has been restated to reflect the AWCC contribution.
Avco Acquisition
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 Avco's
domestic and Puerto Rico consumer finance operations 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,
the Company sold 128 Avco domestic consumer finance branches to a unit of
Citigroup, Inc., for approximately $640 million.
Private-Label Credit Card Receivable Sales
During 1999, the Company sold to First Capital, at book value,
approximately $1.7 billion of the Company's participation interest in First
Capital's private label credit card receivables (the "Private Label Sale").
These receivables were subsequently securitized and sold by First Capital.
Home Equity Lending Receivable Portfolio Securitization and Sale
During the fourth quarter of 1999, the Company securitized and sold a
$2.4 billion home equity lending receivable portfolio and retained an
approximate $460 million interest in the related securitization master trust.
Also during the fourth quarter of 1999, the Company sold an $80 million home
equity lending portfolio. A net gain of approximately $30 million was
recorded on these transactions.
Earnings
Associates Corporation of North America (the "Company") recorded net
earnings for the year ended December 31, 1999 of $1.1 billion, compared with
$974 million in 1998. Earnings before provision for income taxes were $1.7
billion in 1999 compared with $1.5 billion in 1998.
Growth in Finance Receivables
Net finance receivables increased to $49.8 billion at December 31, 1999
from $46.0 billion at December 31, 1998. The Avco acquisition mentioned
above was the primary cause for the increase.
Credit Quality
The allowance for losses to net finance receivables ("Allowance
Ratio")was 2.83% at December 31, 1999 a decrease from 3.00% at December 31,
1998. Similarly, the Company's composite ratio of allowance for losses to
trailing net credit losses declined to 1.61x for the year ended December 31,
1999 from 1.76x for 1998. Net credit losses as a percentage of average net
receivables also declined in 1999, from 1.94% for the year ended December 31,
1998 to 1.83% for the year ended December 31, 1999. These declines were
primarily due to a shift in product mix toward more secured receivables
during 1999. The shift in mix was primarily caused by the Private Label
Sale described above. The mix of average secured receivables increased in
1999 to 83% from 78% in 1998. Secured receivables generally have lower
losses than unsecured receivables. Accordingly, the Allowance Ratio
decreased in 1999 as the mix of secured receivables increased. Management
believes the allowance for losses at December 31, 1999 is sufficient to
provide adequate protection against losses in its portfolios.
Certain unaudited financial information for the years ended or at
December 31, 1999 and 1998 for Associates Corporation of North America is
as follows (dollar amounts in millions):
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<CAPTION>
Year Ended or at
December 31
1999(1) 1998(1) %Change
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<S> <C> <C> <C>
TOTAL REVENUE $ 7,528.8 $ 7,156.8 5%
EARNINGS BEFORE PROVISION FOR
INCOME TAXES 1,720.4 1,537.2 12
NET EARNINGS 1,104.5 974.2 13
NET FINANCE RECEIVABLES 49,766.7 46,038.5 8
TOTAL ASSETS 60,180.1 59,699.6 1
TOTAL DEBT 49,501.9 51,033.4 (3)
STOCKHOLDERS' EQUITY 9,279.3 6,815.1 36
60+DAYS CONTRACTUAL
DELINQUENCY 2.86% 2.41%
NET CREDIT LOSSES (as a % of average
net finance receivables) 1.83% 1.94%
ALLOWANCE FOR LOSSES ON
FINANCE RECEIVABLES
Amount $1,408.4 $1,378.9 2
Percent of net finance
receivables 2.83% 3.00%
Multiple to net losses (2) 1.61x 1.76x
(1) As described previously, all of the financial information presented has
been restated to reflect the December 31, 1999 AWCC contribution.
(2) The multiple to net losses is calculated as a ratio of the allowance for
losses to related annualized or trailing net credit losses on receivables
owned at the end of the period.
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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
Executive Vice President and Comptroller
Date: February 4, 2000
