<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-44197
ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-0876639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East Carpenter Freeway, Irving, Texas 75062-2729
(Address of principal executive offices)
(Zip Code)
972-652-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes..X.. No.....
As of March 31, 1997, the registrant had 1,550,000,000 shares of Common Stock
authorized, 90,773,299 shares of Class A Common Stock issued, of which
90,703,299 shares were outstanding, and 255,881,180 shares of Class B Common
Stock issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS.
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions)
Three Months Ended
March 31
1997 1996
REVENUE
Finance charges $1,761.7 $1,505.0
Insurance premiums 99.1 93.1
Investment and other income 65.9 46.9
1,926.7 1,645.0
EXPENSES
Interest expense 637.4 580.5
Operating expenses 531.2 461.2
Provision for losses on finance receivables 344.5 252.3
Insurance benefits paid or provided 36.1 34.2
1,549.2 1,328.2
EARNINGS BEFORE PROVISION FOR INCOME TAXES 377.5 316.8
PROVISION FOR INCOME TAXES 139.7 124.5
NET EARNINGS $ 237.8 $ 192.3
EARNINGS PER SHARE* $ 0.69 $ 0.55
*Based on 346.7 million weighted average shares outstanding and in whole
dollars.
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In Millions)
March 31 December 31
1997 1996
ASSETS
CASH AND CASH EQUIVALENTS $ 344.4 $ 446.9
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- NOTE 3 1,148.1 1,051.1
FINANCE RECEIVABLES, net of unearned finance
income, allowance for credit losses and
insurance policy and claims reserves - NOTE 4 45,300.4 44,236.9
OTHER ASSETS - NOTE 6 2,417.9 2,533.5
Total assets $49,210.8 $48,268.4
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
Commercial Paper $17,897.7 $15,907.9
Bank Loans 342.8 1,167.3
ACCOUNTS PAYABLE AND ACCRUALS 1,735.4 1,726.2
LONG-TERM DEBT
Senior Notes 23,250.7 23,604.0
Subordinated and Capital Notes 425.5 425.5
23,676.2 24,029.5
STOCKHOLDERS' EQUITY
Class A Common Stock, $0.01 par value,
1,150,000,000 shares authorized,
90,773,299 shares issued 0.9 0.9
Class B Common Stock, $0.01 par value,
400,000,000 shares authorized,
255,881,180 shares issued and outstanding 2.6 2.6
Paid-in Capital 4,007.6 4,007.5
Retained Earnings 1,407.4 1,204.3
Foreign Currency Translation Adjustments 154.4 222.8
Unrealized Loss on Available-for-Sale
Securities - NOTE 3 (11.0) (0.6)
5,561.9 5,437.5
Less 70,000 shares of Class A Common Stock
in Treasury, at cost (3.2)
Total stockholders' equity 5,558.7 5,437.5
Total liabilities and stockholders' equity $49,210.8 $48,268.4
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
Three Months Ended
March 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 237.8 $ 192.3
Adjustments to net earnings for noncash items:
Provision for losses on finance receivables 344.5 252.3
Increase in accounts payable and accruals 53.6 169.0
Depreciation and amortization 69.8 53.6
Increase in insurance policy and claims
reserves 11.8 11.3
Deferred income taxes (13.7) 6.0
Net cash provided from operating activities 703.8 684.5
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables originated or purchased (10,891.5) (10,011.9)
Finance receivables liquidated 9,279.8 8,466.7
(Increase) decrease in real estate loans held
for sale (7.6) 3.1
Decrease (increase) in other assets 34.0 (19.2)
Purchases of available-for-sale securities (131.8) (270.8)
Sales and maturities of available-for-sale
securities 18.6 198.4
Net cash used for investing activities (1,698.5) (1,633.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 566.6 1,133.2
Retirement of long-term debt (801.0) (1,302.6)
Increase in notes payable 1,167.1 1,225.2
Cash dividends to Ford (140.0)
Cash dividends paid on common stock (34.7)
Purchase of Class A Common Stock in
treasury (3.2)
Net cash provided from financing activities 894.8 915.8
EFFECT OF FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS ON CASH (2.6) (40.7)
DECREASE IN CASH AND CASH EQUIVALENTS (102.5) (74.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 446.9 532.2
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 344.4 $ 458.1
CASH PAID FOR:
Interest $ 594.4 $ 509.5
Income taxes $ 118.2 $ 10.2
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Associates First Capital Corporation ("First Capital" or the "Company"),
a Delaware corporation, is a majority-owned subsidiary of Ford FSG, Inc. and
a majority indirect-owned subsidiary of Ford Motor Company ("Ford").
Associates Corporation of North America ("Associates") is the principal
U.S.-based operating subsidiary of First Capital. AIC Corporation ("AIC")
is the principal foreign-based operating subsidiary of First Capital.
NOTE 2 - BASIS OF PRESENTATION
On May 8, 1996 prior to an initial public offering of the common stock of
First Capital, Ford contributed to First Capital, for stock, certain foreign
finance operations that were managed by First Capital although owned by other
Ford subsidiaries (the "Associates International Group"). The entities
comprising Associates International Group had operations in Japan, the United
Kingdom, Canada, Puerto Rico, Bermuda, Netherlands and Mexico. The effect of
this contribution was retroactively included, on a fully consolidated basis,
in the supplemental combined financial statements of First Capital as part of
its initial public offering. These supplemental combined financial
statements became the historical consolidated financial statements of First
Capital. The contribution was accounted for in a manner similar to the
pooling of interests method of accounting in accordance with generally
accepted accounting principles.
In the opinion of the management of First Capital, all adjustments
necessary to present fairly the results of operations and financial position
have been made and are of a normal recurring nature. The results of
operations for any interim period are not necessarily indicative of the
results of operations for a full year. Certain prior period financial
statement amounts have been reclassified to conform to the current period
presentation.
NOTE 3 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
DEBT SECURITIES
The Company invests in debt securities, principally bonds and notes held
by the Company's insurance subsidiaries, with the intention of holding them
to maturity. However, if market conditions change, the Company may sell
these securities prior to maturity. Accordingly, the Company classifies its
investments in debt securities as available-for-sale securities and adjusts
its recorded value to market. The estimated market value at March 31, 1997
and December 31, 1996 was $1.1 billion and $1.0 billion, respectively.
Amortized cost at March 31, 1997 and December 31, 1996 was $1.2 billion and
$1.0 billion, respectively. Realized gains or losses on sales are included
in investment and other income. Unrealized gains or losses are reported as a
component of stockholders' equity, net of tax.
EQUITY SECURITIES
Equity security investments are recorded at market value. The Company
classifies its investments in equity securities as trading securities and
includes in earnings unrealized gains or losses on such securities. The
estimated market value at March 31, 1997 and December 31, 1996 was $10.3
million. Historical cost at March 31, 1997 and December 31, 1996 was $7.8
million.
<PAGE>
NOTE 4 - FINANCE RECEIVABLES
At March 31, 1997 and December 31, 1996, finance receivables consisted of
the following (in millions):
March 31 December 31
1997 1996
Consumer Finance
Home equity lending $16,965.5 $16,691.4
Personal lending and retail sales finance 7,677.1 7,425.1
Credit card 6,691.3 6,023.8
Manufactured housing (1) 1,066.9 1,262.7
32,400.8 31,403.0
Commercial Finance
Truck and truck trailer 8,687.3 8,598.3
Equipment 4,679.7 4,571.8
Auto fleet leasing and other 1,933.3 1,939.8
15,300.3 15,109.9
Finance receivables, net of unearned
finance income ("net finance receivables") 47,701.1 46,512.9
Allowance for losses on finance receivables (1,675.9) (1,563.1)
Insurance policy and claims reserves (724.8) (712.9)
Finance receivables, net of unearned
finance income, allowance for credit
losses and insurance policy and claims
reserves $45,300.4 $44,236.9
(1) During the first quarter of 1997 and the year ended December 31, 1996,
the Company securitized and sold approximately $400 million and $1.3
billion of manufactured housing finance receivables, respectively.
From time to time, subsidiaries of the Company have sold manufactured
housing and recreational vehicles receivables through securitizations and
have retained collection and administrative responsibilities as servicer for
the trust holding the receivables. Receivables sold with servicing retained
were $2.6 billion at March 31, 1997.
In March 1997, First Capital acquired a portfolio of credit card
receivables from The Bank of New York. J. Carter Bacot, a director of the
Company, is chairman and chief executive officer of The Bank of New York.
The Bank of New York and the Company are not otherwise affiliated. The fair
market value of such assets acquired totaled approximately $800 million. The
transaction was accounted for as a purchase.
In September 1996, First Capital acquired Teletech Financial Corporation.
The assets of Teletech Financial principally consist of equipment
telecommunications receivables. The fair market value of total assets
acquired and liabilities assumed was $116.8 million and $82.6 million,
respectively. The transaction was accounted for as a purchase.
In August 1996, Associates acquired $1.2 billion of net finance
receivables, principally home equity and personal lending receivables and
other assets and liabilities, from Fleet Financial Group. The fair market
value of total assets acquired and liabilities assumed was $1.3 billion and
$1.0 million, respectively.
In July 1996, Associates acquired $837.6 million of certain assets of USL
Capital, an affiliate and Ford subsidiary. Such assets acquired consisted
principally of vehicle fleet leasing receivables. The transaction was
accounted for at historical cost. The excess of purchase price over the
historical value of assets acquired was $31.4 million which was recorded as
an adjustment to stockholders' equity.
In May 1996, First Capital acquired Fleetwood Credit Corp., which was
engaged in the financing of recreational vehicles. The fair market value of
total assets acquired and liabilities assumed was $473.5 million and $342.1
million, respectively.
During the first quarter of 1997, First Capital signed an agreement with
Texaco Refining and Marketing, Inc. and its affiliate, Star Enterprise, to
purchase proprietary credit card receivables and stock in the approximate
amount of $700 million. This transaction was completed in May 1997. Also
during the first quarter of 1997, the Company signed an agreement with J.C.
Penney, Inc. to purchase approximately $740 million in bankcard credit card
receivables. This transaction was completed in April 1997.
NOTE 5 - ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during the
periods indicated were as follows (in millions):
Three Months Ended Year Ended
March 31 December 31
1997 1996 1996
Balance at beginning of period $1,563.1 $1,268.6 $ 1,268.6
Provision for losses 344.5 252.3 1,086.5
Recoveries on receivables
charged off 53.0 36.2 147.2
Losses sustained (328.2) (212.1) (1,032.5)
Reserves of acquired businesses
and other 43.5 23.8 93.3
Balance at end of period $1,675.9 $1,368.8 $ 1,563.1
NOTE 6 - OTHER ASSETS
The components of other assets at March 31, 1997 and December 31, 1996
were as follows (in millions):
March 31 December 31
1997 1996
Goodwill $1,221.1 $1,282.5
Property and equipment 265.4 261.3
Collateral held for resale 177.9 169.1
Other 753.5 820.6
Total other assets $2,417.9 $2,533.5
NOTE 7 - DEBT RESTRICTIONS
Associates, the Company's principal operating subsidiary, is subject to
various limitations under the provisions of its outstanding debt and credit
facilities. The most significant of these limitations are summarized as
follows:
LIMITATION ON PAYMENT OF DIVIDENDS
A restriction contained in one issue of Associates debt securities, which
matures on March 15, 1999, generally limits payments of cash dividends on
Associates Common Stock in any year to not more than 50% of Associates
consolidated net earnings for such year, subject to certain exceptions, plus
increases in contributed capital and extraordinary gains. Any such amounts
available for the payment of dividends in such fiscal year and not so paid,
may be paid in any one or more of the five subsequent fiscal years. In
accordance with this provision, $382.4 million was available for dividends at
March 31, 1997.
<PAGE>
LIMITATION ON MINIMUM TANGIBLE NET WORTH
A restriction contained in certain revolving credit agreements requires
Associates to maintain a minimum tangible net worth, as defined, of $2.0
billion. At March 31, 1997, Associates tangible net worth was approximately
$4.9 billion.
NOTE 8 - RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges of First Capital for the three
months ended March 31, 1997 and 1996 was 1.59 and 1.54, respectively. For
purposes of such computation, the term "earnings" represents earnings before
provision for income taxes, plus fixed charges. The term "fixed charges"
represents interest expense and a portion of rentals representative of an
implicit interest factor for such rentals.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net earnings for the three-month period ended March 31, 1997 were $237.8
million, a 24% increase over the same period in the previous year. The
increase in earnings was principally due to growth in net finance
receivables, an improvement in the ratio of net interest margin to average
net receivables and an increase in operating expense efficiency, all of which
more than offset an increase in the provision for losses on finance
receivables.
Finance charge revenue, on a dollar basis, increased for the three months
ended March 31, 1997, compared to the same period in the prior year,
principally as a result of growth in average net finance receivables
outstanding. Finance charge revenue as a percentage of average net finance
receivables (the "Finance Charge Ratio") was 14.82% for the first quarter of
1997 compared to 14.91% for the same period in 1996. The decrease in the
Finance Charge Ratio is principally due to decreases in finance charge rates,
primarily in the Company's foreign operations, on outstanding loans which
vary with market rates, partially offset by changes in the product mix.
Interest expense increased for the first quarter of 1997 compared to
1996, primarily due to an increase in average debt outstanding related to the
aforementioned growth in average net finance receivables. Debt is the
primary source of funding to support the Company's growth in net finance
receivables. The increase due to growth was partially offset by a decline in
the Company's average short- and long-term borrowing rates, principally due
to changes in market conditions. As a result, the Company's total average
borrowing rate for the first quarter of 1997 was 6.08% compared to 6.45% for
the same period in the prior year.
As a result of the aforementioned changes in finance charge revenue and
interest expense, the Company's net interest margin increased to $1,124.3
million for the first quarter of 1997 compared to $924.5 million for the
prior-year period. The Company's net interest margin expressed as a ratio to
average net finance receivables also improved to 9.46% compared to 9.30% for
the same period in the prior year. The 1996 net margin ratio has been
restated to exclude certain one-time charges related to the Company's initial
public offering. The principal cause of the increase in the Company's net
interest margin ratio was the decline in the Company's total average
borrowing rate.
First quarter operating expenses were greater in 1997 than in 1996
reflecting growth in the size of the Company. However, operating expense
efficiency, measured as the ratio of total operating expenses divided by
total revenue net of interest expense and insurance benefits paid or
provided, improved to 42.4% for the first three months of 1997 from 44.8% for
the same period in the prior year.
The Company's provision for losses increased from $252.3 million during
the first quarter of 1996 to $344.5 million for the same period in 1997,
principally due to increased net credit losses. Total net credit losses as a
percentage of average net receivables (the "Loss Ratio") were 2.31% for the
first quarter of 1997 compared to 1.74% for the same period in 1996. The
Loss Ratio increased in most of the Company's portfolios, primarily driven by
increased losses resulting from consumer bankruptcies.
The provision for income taxes expressed in dollars increased for the
three-month period ended March 31, 1997 compared to the first quarter of
1996, principally as a result of an increase in pretax earnings. The
effective tax rates for the three-month periods ended March 31, 1997 and
March 31, 1996 were 37.0% and 39.3%, respectively. The change in the
effective tax rate from the first quarter of 1996 compared to the first
quarter of 1997 was principally due to an increase in the amount of estimated
foreign tax credits available to the Company related to estimated taxes paid
or accrued by the Company on its Japan-based earnings.
Financial Condition
Net finance receivables managed by the Company grew $1.7 billion (13.8%
annualized) during the first quarter of 1997 compared to $1.4 billion (13.8%
annualized) for the same period in 1996. Managed net finance receivables at
March 31, 1997 includes approximately $2.6 billion of securitized
manufactured housing and recreational vehicle receivables. The Company had
growth in substantially all of its product lines during the first quarter of
1997. Of the total growth, approximately 71% was from major acquisitions,
principally the acquisition of a credit card portfolio.
Total 60+days contractual delinquency was 2.25% of gross finance
receivables at March 31, 1997, which was higher than the 1.78% at March 31,
1996 and 2.20% at December 31, 1996. The increase in contractual delinquency
was principally due to less favorable trends in economic conditions
including, among other factors, the increased leverage of consumer borrowers.
The aforementioned increases in net credit losses and uncertainty in economic
conditions led the Company to increase its allowance for losses to 3.51% of
net finance receivables at March 31, 1997 compared to 3.36% at December 31,
1996. The allowance for losses divided by net credit losses (trailing four
quarters) was 1.70 times losses at March 31, 1997 compared to 2.09 times
losses and 1.77 times losses at March 31, 1996 and December 31, 1996,
respectively. Management believes the allowance for losses at March 31, 1997
is sufficient to provide adequate coverage against losses in its portfolios.
During the three months ended March 31, 1997, stockholders' equity
increased principally as a result of the aforementioned increase in net
earnings. The increase was partially offset by unrealized foreign currency
translation losses of $68.4 million, principally related to the Company's
yen- denominated net investment in its Japan operation. Stockholders' equity
was also adjusted during the three-month period for unrealized losses on its
insurance subsidiaries' investments in marketable debt securities of $10.4
million and purchases of treasury stock of $3.2 million. The Company also
paid a cash dividend of $.10 per share, or $34.7 million, during the first
quarter of 1997, of which $27.9 million was paid to Ford.
As a result of the aforementioned, the Company's return on average
assets, average equity and average tangible equity for the three-month period
ended March 31, 1997 was 1.94%, 17.36% and 22.46%, respectively. This
compares to a return on average assets, average equity and average tangible
equity for the three months ended March 31, 1996 of 1.92%, 16.56% and 22.33%,
respectively. The 1996 returns have been restated to exclude certain one-time
charges related to the Company's initial public offering which was
consummated in May, 1996.
<PAGE>
LIQUIDITY/CAPITAL RESOURCES
Through its asset and liability management function, the Company
maintains a disciplined approach to the management of liquidity, capital,
interest rate risk and foreign exchange risk. The Company has a formal
process for managing its liquidity in the U.S. and internationally to ensure
that funds are available at all times to meet the Company's commitments.
The principal sources of cash for the Company are proceeds from issuance
of short- and long-term debt and cash provided from the Company's operations.
Management believes that the Company has sufficient liquidity, from a
combination of cash provided from operations and external borrowings, to
support its operations.
A principal strength of the Company is its ability to access the global
debt markets in a cost-efficient manner. Continued access to the public and
private debt markets is critical to the Company's ability to continue to fund
its operations. The Company seeks to maintain a conservative liquidity
position and actively manage its liability and capital levels, debt
maturities, diversification of funding sources and asset liquidity to ensure
that the Company is able to meet its obligations. The Company's U.S.
operations are principally funded through domestic borrowings made by
Associates and, to a lesser extent, borrowings made directly by the Company.
The Company's foreign subsidiaries are principally financed through private
debt borrowings made directly by each foreign entity in its transactional
currency and, to a lesser extent, fully hedged intercompany borrowings.
At March 31, 1997, the Company had short- and long-term debt outstanding
of $18.2 billion and $23.7 billion, respectively. Short-term debt
principally consists of commercial paper issued by the Company and represents
the Company's primary source of short-term liquidity. Long-term debt
principally consists of unsecured long-term debt issued publicly and
privately by Associates in the United States and abroad, and to a lesser
extent, private borrowings made by the Company's foreign subsidiaries.
During the three months ended March 31, 1997 and 1996, the Company raised
debt aggregating $0.5 billion and $1.1 billion, respectively, through public
and private offerings.
Substantial additional liquidity is available to the Company's domestic
operations through established credit facilities in support of its net
short-term borrowings. Such credit facilities provide a means of
refinancing its maturing short-term obligations as needed. At
March 31, 1997, these short-term bank lines, revolving credit facilities
and receivable purchase facilities totaled $13.9 billion, which represented
80% of net short-term indebtedness outstanding at March 31, 1997.
Interest rate risk is measured and controlled through the use of two
different techniques; static gap analysis and financial forecasting, both of
which incorporate assumptions as to future events. The Company's gap
position is defined as the sum of floating rate asset balances and principal
payments on fixed rate assets, less the sum of floating rate liability
balances and principal payments on fixed rate liabilities. The Company
measures its gap position at various time horizons, ranging from three months
to five years. The Company seeks to maintain a positive one-year gap
position within a range of 15% of total earnings assets, although the one-year
gap position is not necessarily illustrative of the gap position at
shorter or longer time horizons. The Company's twelve-month gap indicates
that a greater percentage of assets than liabilities reprice within a one-year
time frame. Generally, the combination of a positive gap position and a
rising rate environment will result in assets repricing to higher rates more
quickly than liabilities, thereby producing wider lending spreads over a
given time frame. Conversely, the combination of a positive gap and a
falling rate environment will generally result in narrowing lending spreads
over a given time frame. The Company believes that its portfolio has
repricing characteristics that mitigate the impact of rate movements over
both the short- and long-term. In addition to the gap analysis, the Company
uses financial forecasting to evaluate the impact on earnings under a variety
of scenarios that may incorporate changes in the absolute level of interest
rates, the shape of the yield curve, prepayments, interest rate spread
relationships and changes in the volumes and rates of various asset and
liability categories.
Additionally, the Company believes it has access to other sources of
liquidity, which to date it has either accessed only on a limited basis, such
as securitization of assets, or has not accessed, such as the issuance of
alternative forms of capital, including preferred stock.
Management believes that the Company has limited exposure to exchange
rate risk related to its foreign operations. At March 31, 1997,
approximately 10% of the Company's revenues and 14% of its consolidated net
earnings were denominated in foreign currencies, principally the Japanese
yen. Prior to 1995, the Japanese yen had generally appreciated against the
U.S. dollar, which had a positive impact on the translated value of the
Company's yen-denominated investment in Japan to its consolidated equity and
translated value of Japanese earnings to the Company's consolidated earnings.
From 1995 through March 1997, the value of the Japanese yen has generally
depreciated against the U.S. dollar, which has had the opposite impact on
consolidated equity and earnings.
The Company has historically considered currency hedging as a tool to
manage foreign exchange risk on predictable cash flows between the U.S. and
its foreign subsidiaries. However, it has not been the historical practice
of the Company to hedge its net investment in such subsidiaries, and
therefore at March 31, 1997 the Company was exposed to unrealized translation
adjustments that arise from movements in foreign currencies, principally the
yen. During the first quarter of 1997, the Company began taking measures to
hedge a portion of its net investment in its Japanese subsidiary, principally
through the use of foreign currency exchange contracts.
Year 2000 Compliance
The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is year 2000
compliant. The financial impact to the Company has not been and is not
anticipated to be material to its financial position or results of
operations.
Recent Accounting Pronouncements
In February 1997, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 specifies new requirements for the computation,
presentation and disclosure of earnings per share information effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. On adoption, it will require the restatement of
all prior period earnings per share data. The Company will adopt SFAS 128 in
the fourth quarter of 1997. At such time, all prior period earnings per
share data will be restated. The adoption of SFAS 128 is not expected to
have a significant effect on the Company's previously reported earnings per
share data.<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None to report.
ITEM 2. CHANGES IN SECURITIES.
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None to report.
ITEM 5. OTHER INFORMATION.
None to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
During the first quarter ended March 31, 1997, First Capital
filed a Current Report on Form 8-K dated January 28, 1997
announcing financial results for the year ended December 31,
1996.
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 thereunto duly authorized.
May 13, 1997
ASSOCIATES FIRST CAPITAL CORPORATION
(registrant)
By/s/ Kevin P. Hegarty
Senior Vice President, Comptroller and
Principal Accounting Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT
NUMBERED
NUMBER EXHIBIT PAGE
-----------------------------------------------------------------------------
<S> <C> <C>
12 -- Computation of Ratio of Earnings to Fixed Charges
27 -- Financial Data Schedule
</TABLE>
------------
<PAGE>
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
Three Months Ended
March 31
1997 1996
Fixed Charges (a)
Interest expense $ 637.4 $580.5
Implicit interest in rent 6.0 4.8
Total fixed charges $ 643.4 $585.3
Earnings (b)
Earnings before provision for income
taxes $ 377.5 $316.8
Fixed charges 643.4 585.3
Earnings, as defined $1,020.9 $902.1
Ratio of Earnings to Fixed Charges 1.59 1.54
(a) For purposes of such computation, the term "fixed charges" represents
interest expense and a portion of rentals representative of an implicit
interest factor for such rentals.
(b) For purposes of such computation, the term "earnings" represents earnings
before provision for income taxes, plus fixed charges.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
0 MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. This schedule contains
summary financial information extracted from the Company's unaudited
consolidated financial statements as of March 31, 1997 and the three months
then ended and is qualified in its entirety by reference to such consolidated
financial statements.
</LEGEND>
<CIK> 0000007974
<NAME> ASSOCIATES FIRST CAPITAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 344
<SECURITIES> 1,148
<RECEIVABLES> 47,701
<ALLOWANCES> 1,676
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,211
<CURRENT-LIABILITIES> 0
<BONDS> 41,917
<COMMON> 4
0
0
<OTHER-SE> 5,555
<TOTAL-LIABILITY-AND-EQUITY> 49,211
<SALES> 1,927
<TOTAL-REVENUES> 1,927
<CGS> 0
<TOTAL-COSTS> 1,549
<OTHER-EXPENSES> 567
<LOSS-PROVISION> 344
<INTEREST-EXPENSE> 637
<INCOME-PRETAX> 378
<INCOME-TAX> 140
<INCOME-CONTINUING> 238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0
</TABLE>
