UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 1-1177
BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0003820
(State of incorporation) (I.R.S. Employer Identification
No.)
301 North Walnut Street
Wilmington, Delaware 19801
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (302) 425-2500
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 twelve 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
At July 31, 1995, the number of shares outstanding of the registrant's common
stock was 52,974,540.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
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June 30, December 31,
1995 1994
ASSETS
Cash and Equivalents . . . . . . . . . . . . $ 258.1 $ 189.5
Finance Receivables (Note 2). . . . . . . . . . 11,995.2 12,322.6
Allowance for Credit Losses (Note 3) . . . . . . (347.4) (331.6)
Net Finance Receivables. . . . . . . . . . 11,647.8 11,991.0
Investment Securities (Note 4) . . . . . . . . . 1,432.0 1,306.3
Property and Equipment. . . . . . . . . . . . 184.4 185.9
Other Assets . . . . . . . . . . . . . . . 725.9 703.9
TOTAL ASSETS . . . . . . . . . . . . . $14,248.2 $14,376.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-Term Debt (Note 5) . . . . . . . . . . . $ 3,204.3 $ 3,473.9
Deposits Payable (includes employee thrift deposits). . 787.4 654.4
Long-Term Debt (Note 6) . . . . . . . . . . . 7,147.0 7,324.8
Total Interest-Bearing Debt . . . . . . . . . 11,138.7 11,453.1
Accounts Payable and Accrued Liabilities. . . . . . 462.2 438.5
Insurance Policy and Claim Reserves . . . . . . . 1,180.2 1,084.7
Total Liabilities. . . . . . . . . . . . . 12,781.1 12,976.3
Shareholders' Equity:
Preferred Stock . . . . . . . . . . . . . 114.9 114.9
Common Stock . . . . . . . . . . . . . . 52.9 52.5
Additional Capital . . . . . . . . . . . . 261.0 246.5
Net Unrealized Gain (Loss) on Investment Securities . 6.4 (8.8)
Accumulated Foreign Currency Translation Adjustments . (46.1) (47.0)
Retained Earnings. . . . . . . . . . . . . 1,078.0 1,042.2
Total Shareholders' Equity . . . . . . . . . 1,467.1 1,400.3
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . $14,248.2 $14,376.6
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
REVENUE
Finance Charges and Fees . . . . .$487.2 $417.2 $978.8 $828.9
Interest Expense. . . . . . . . 198.3 157.5 410.5 317.2
Lending Spread. . . . . . . . 288.9 259.7 568.3 511.7
Insurance Premiums . . . . . . . 38.5 34.2 80.2 70.2
Other . . . . . . . . . . . 68.5 59.7 95.4 149.2
Total . . . . . . . . . . 395.9 353.6 743.9 731.1
OPERATING EXPENSES
Salaries and Employee Benefits . . .94.9 90.3 194.2 176.7
Insurance Benefits . . . . . . . 22.0 19.8 48.9 43.8
Provision for Credit Losses . . . . 45.3 37.3 97.0 84.6
Other . . . . . . . . . . . 127.3 109.3 262.3 224.1
Total . . . . . . . . . . 289.5 256.7 602.4 529.2
Income Before Income Taxes . . . . . 106.4 96.9 141.5 201.9
Provision for Income Taxes . . . . . 43.6 40.7 58.0 84.8
NET INCOME . . . . . . . . . .$ 62.8 $ 56.2 $ 83.5 $117.1
EARNINGS PER COMMON SHARE . . . . .$ 1.15 $ 1.05 $ 1.52 $ 2.18
DIVIDENDS PER COMMON SHARE . . . . .$ .43 $ .38 $ .86 $ .76
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . .$ 83.5 $117.1
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Provision for Credit Losses . . . . . . . . . . . 97.0 84.6
Provision for Deferred Income Taxes . . . . . . . . (9.7) (4.5)
Depreciation and Amortization . . . . . . . . . . 23.4 24.6
Insurance Policy & Claim Reserves . . . . . . . . . 95.5 92.0
Accounts Payable & Accrued Liabilities . . . . . . . 23.7 33.6
Net Cash Provided by Operating Activities. . . . . . 313.4 347.4
CASH FLOWS FROM INVESTING ACTIVITIES
Receivables Originated or Acquired . . . . . . . . .(4,420.5)(3,599.7)
Receivables Collected. . . . . . . . . . . . . . 3,635.8 2,920.3
Receivables Securitized . . . . . . . . . . . . . 1,103.8 757.0
Other Receivables, Net Change . . . . . . . . . . . 10.7 13.6
Investment Securities Purchased . . . . . . . . . . (175.2) (258.9)
Investment Securities Sold . . . . . . . . . . . . 20.6 24.7
Investment Securities Matured . . . . . . . . . . . 64.2 120.0
Property and Equipment Purchased . . . . . . . . . . (17.6) (13.3)
Other . . . . . . . . . . . . . . . . . . . (33.4) 31.2
Net Cash Provided (Used) by Investing Activities. . . . 188.4 (5.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-Term Debt, Net Change. . . . . . . . . . . . (277.8) (140.7)
Deposits Payable, Net Change . . . . . . . . . . . 100.4 (10.1)
Long-Term Debt Issued. . . . . . . . . . . . . . 1,299.3 1,000.9
Long-Term Debt Repaid. . . . . . . . . . . . . .(1,507.4)(1,113.0)
Dividends Paid . . . . . . . . . . . . . . . . (47.7) (42.0)
Net Cash Used in Financing Activities . . . . . . . (433.2) (304.9)
NET INCREASE IN CASH AND EQUIVALENTS . . . . . . . . . 68.6 37.4
Cash and Equivalents at Beginning of Period. . . . . . . 189.5 181.9
CASH AND EQUIVALENTS AT END OF PERIOD. . . . . . . . .$ 258.1 $ 219.3
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid . . . . . . . . . . . . . . . .$ 403.1 $ 325.4
Income Taxes Paid . . . . . . . . . . . . . . . 81.1 90.5
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies used in the preparation of the unaudited quarterly
financial statements are consistent with accounting policies described in the
notes to financial statements contained in the Company's 1994 Form 10-K to
Shareholders. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation have been
reflected. Certain prior period amounts have been reclassified to conform with
the 1995 presentation. Interim results are not necessarily indicative of
results for a full year.
2. FINANCE RECEIVABLES
Finance receivables consisted of the following (in millions):
June 30, December 31,
1995 1994
Receivables Owned:
Real Estate Secured. . . . . . . . $ 6,317.7 $ 6,859.5
Personal Unsecured . . . . . . . . 2,604.1 2,485.9
Credit Cards . . . . . . . . . . 2,146.3 2,061.7
Sales Finance Contracts . . . . . . 822.8 810.4
Commercial. . . . . . . . . . . 104.3 105.1
Total Owned 11,995.2 12,322.6
Receivables Sold with Servicing Retained
(all real estate secured) . . . . . 1,435.3 630.4
Total Owned and Serviced . . . . . . . $13,430.5 $12,953.0
3. ALLOWANCE FOR CREDIT LOSSES
An analysis of the allowance for credit losses follows (in millions):
1995
Balance at January 1 . . . . . . . . . . . . . $331.6
Accounts Charged Off . . . . . . . . . . . . . (104.1)
Recoveries on Accounts Previously Charged Off . . . . . 18.8
Provision for Credit Losses . . . . . . . . . . . 97.0
Other . . . . . . . . . . . . . . . . . . 4.1
Balance at June 30 . . . . . . . . . . . . . . $347.4
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT SECURITIES
Investment securities were as follows (in millions):
June 30, 1995 December 31, 1994
Carrying Market Carrying Market
Value Value Value Value
AVAILABLE-FOR-SALE
Debt Securities:
Corporate $ 322.9 $ 322.9 $ 267.1 $ 267.1
Mortgage-backed 123.3 123.3 121.6 121.6
Municipal 4.2 4.2 3.8 3.8
U.S. Government 87.6 87.6 62.7 62.7
Foreign Government 38.5 38.5 34.9 34.9
576.5 576.5 490.1 490.1
Equity Securities 6.8 6.8 7.4 7.4
Total $ 583.3 $ 583.3 $ 497.5 $ 497.5
HELD-TO-MATURITY
Debt Securities:
Corporate $ 481.5 $ 481.2 $ 448.0 $ 402.7
Mortgage-backed 232.5 236.4 236.1 222.1
Municipal 22.2 22.2 22.4 20.5
U.S. Government 65.5 67.0 55.1 53.0
Foreign Government 30.8 30.6 31.4 28.2
Other 16.2 16.2 15.8 15.8
Total $ 848.7 $ 853.6 $ 808.8 $ 742.3
TOTAL INVESTMENT SECURITIES $1,432.0 $1,436.9 $1,306.3 $1,239.8
There were no investments transferred from Held-To-Maturity to Available-
For-Sale, nor were there any sales of Held-To-Maturity investments during
the six-month period ended June 30, 1995.
5. SHORT-TERM DEBT
Short-term debt outstanding consisted of the following (in millions):
June 30, December 31,
1995 1994
Commercial Paper. . . . . . . . . . $2,787.8 $3,209.5
Bank Borrowings . . . . . . . . . . 416.5 264.4
Total . . . . . . . . . . . $3,204.3 $3,473.9
The weighted average interest rates (including the costs of maintaining
lines of credit) on short-term borrowings during the six months ended June 30
were as follows:
1995 1994
U.S. Dollar Borrowings. . . . . . . . 6.25% 3.73%
Other Currency Borrowings. . . . . . . 7.38 5.25
Overall. . . . . . . . . . . . . 6.50 3.91
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
6. LONG-TERM DEBT
Long-term debt is shown below in the earliest year it could become payable
(in millions):
Weighted Average
Interest Rates at June 30, December 31,
Maturity June 30, 1995 1995 1994
1995 7.16% $1,192.6 $2,499.8
1996 7.18 1,398.9 1,070.8
1997 7.47 1,363.7 976.3
1998 8.23 980.3 877.3
1999 7.70 890.2 867.6
2000-2004 8.06 1,056.1 812.1
2005-2023 7.62 265.6 221.3
Unamortized Discount (.4) (.4)
Total 7.58 $7,147.0 $7,324.8
The weighted average interest rates (including issuance costs) on the
Company's long-term debt during the six months ended June 30 were as follows:
1995 1994
U.S. Dollar Borrowings. . . . . . . . 7.65% 7.37%
Other Currency Borrowings. . . . . . . 7.34 6.85
Overall. . . . . . . . . . . . . 7.63 7.32
Long-term debt outstanding at June 30, 1995, and December 31, 1994,
includes $2,001.8 million and $2,191.5 million, respectively, of variable-rate
debt that reprices based on various indices. Such variable-rate debt generally
has an original maturity of one-to-two years.
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward agreements and options to
hedge its net investment in foreign subsidiaries. At June 30, 1995, and
December 31, 1994, the Company had purchased options to deliver British pounds
and Canadian dollars in exchange for US$404.9 million and US$372.1 million,
respectively. Concurrently, the Company had sold options to buy British pounds
and Canadian dollars in exchange for US$407.5 million and US$372.7 million in
1995 and 1994, respectively. Additionally, at June 30, 1995, and December 31,
1994, the Company had forward sales of German marks obligating the Company to
deliver DM150.0 million and DM140.0 million, respectively, for US$104.9 million
and US$90.2 million. In 1995, options entered into in 1994 to buy German marks
for US$8.4 million and deliver German marks for US$8.4 million expired.
The Company accrued pretax losses of $3.7 million at June 30, 1995, and
pretax gains of $6.2 million at December 31, 1994, on open hedges. All hedge
gains and losses, including the mark to spot on open options and forwards, are
recognized in a separate component of equity. There were no gains or losses
recognized in net income attributable to the above hedging activities.
The Company utilizes interest-rate swaps to allow it to match fund its
variable- and fixed-rate receivables and to manage basis risk. The amounts to
be paid or received under the agreements are accrued in interest expense
consistent with the terms of the agreements. At June 30, 1995, accrued interest
payable related to these interest-rate swaps totaled $28.5 million, which is
largely offset by $28.1 million of accrued interest receivable. The impact of
swap activities on the Company's weighted average borrowing rates and on the
reported interest expense for the six months ended June 30, 1995, was .06%
(annualized) and $3.0 million, respectively.
The following table summarizes the interest-rate swaps outstanding at June
30, 1995:
Weighted Average Weighted
Notional Interest Rates Average
Amount Pay Receive Maturity*
(millions)
Pay fixed-rate - receive floating-rate $ 778.8 7.22% 6.65% 2.0
Pay floating-rate - receive fixed-rate 335.9 6.89 7.36 5.8
Pay floating-rate - receive floating-rate 1,156.0 6.22 6.02 1.1
Total $2,270.7 6.66% 6.44% 2.1
*Remaining Term in years.
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
8. EARNINGS PER COMMON SHARE
Computations of primary and fully diluted earnings per common share are as
follows:
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(in millions, except per share amounts)
PRIMARY EARNINGS
Net Income. . . . . . . . . . . $62.8 $56.2 $83.5 $117.1
Dividends on Preferred Stock. . . . . (1.3) (1.3) (2.6) (2.6)
Net Income Applicable to Common Stock. . $61.5 $54.9 $80.9 114.5
Weighted Average Shares Outstanding:
Common . . . . . . . . . . . 52.5 51.9 52.3 51.8
Common Stock Equivalents . . . . . .9 .8 .9 .8
Total . . . . . . . . . . . 53.4 52.7 53.2 52.6
Primary Earnings per Common Share. . . . $1.15 $1.05 $1.52 $2.18
FULLY DILUTED EARNINGS
Net Income. . . . . . . . . . . $62.8 $56.2 $83.5 $117.1
Dividends on Non-Convertible
Preferred Stock . . . . . . . . (1.2) (1.2) (2.5) (2.5)
Net Income Applicable to Common Stock. . $61.6 $55.0 $81.0 $114.6
Weighted Average Shares Outstanding:
Common . . . . . . . . . . . 52.5 51.9 52.3 51.8
Common Stock Equivalents . . . . . 1.2 1.0 1.3 1.1
Total . . . . . . . . . . . 53.7 52.9 53.6 52.9
Fully Diluted Earnings per Common Share. . $1.15 $1.04 $1.51 $2.17
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
9. RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended
(dollar amounts in millions) June 30,
1995 1994
Net Income. . . . . . . . . . . . . $ 83.5 $117.1
Add Provision for Income Taxes . . . . . . . 58.0 84.8
Earnings Before Income Taxes . . . . . .141.5 201.9
Fixed Charges:
Interest and Debt Expense . . . . . . . .410.5 317.2
Interest Factor Portion of Rentals . . . . . 8.5 8.1
Total Fixed Charges . . . . . . . . .419.0 325.3
Earnings Before Income Taxes and Fixed Charges $560.5 $527.2
Ratio of Earnings to Fixed Charges . . . . . 1.34 1.62
In computing the ratio of earnings to fixed charges, earnings consist of
net income to which has been added income taxes and fixed charges. Fixed
charges consist principally of interest on all indebtedness and that portion of
rentals considered to represent an appropriate interest factor.
BENEFICIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Reflecting the sale of $1.1 billion of variable-rate home equity loans
through a securitization in the capital markets in March 1995, Beneficial's
leverage (the ratio of interest-bearing debt to equity) was reduced to 7.59 to 1
at June 30, 1995, from 8.18 to 1 at year-end 1994.
As a result of the securitization, finance receivables declined $327
million during the first half of 1995, compared to a decline of $133 million
during the first half of 1994, which reflected a $757 million securitization in
March of that year. Before the securitizations, finance receivables gained $776
million this year compared to $624 million in the prior year. Removing the
foreign exchange translation impact, in addition to the securitizations, in both
years reveals a gain of $698 million in this year's first half compared to a
gain of $576 million in the comparable prior year period. The receivables
growth was in real estate secured loans and personal loan products.
Reflecting this year's securitization, as well as the remaining balance of
receivables serviced from previous securitizations, total receivables sold with
servicing retained were $1,435 million at June 30, 1995, compared to $1,628
million at March 31, 1995, and $630 million at the end of 1994.
At June 30, 1995, the allowance for credit losses as a percentage of
finance receivables was 2.90%, compared to 2.97% at March 31, 1995, and 2.69% at
December 31, 1994. At the June 30 level, the reserve covered annualized first
half net chargeoffs 2.0 times, the same as at March 31. As a percentage of
average receivables, annualized first half net chargeoffs represented 1.36% of
the portfolio in the first half of 1995, compared to 1.28% in the first half of
1994.
All loan and sales finance balances delinquent two months and greater on a
contractual basis increased to 2.89% of total outstandings at June 30, 1995,
from 2.56% a year earlier but compared favorably to 2.95% at March 31 of this
year.
Results of Operations
Reflecting excellent loan growth, continued wide lending margins and good
credit quality, second quarter 1995 earnings of $62.8 million were up 12% over
the comparable period in 1994. For the first half, earnings fell 29% to $83.5
million from $117.1 million in the first half of 1994 because of the large
refund anticipation loan (RAL) loss provision in the first quarter this year.
The prior year's second quarter and first half included pretax earnings of $14.1
million ($8.5 million aftertax) and $44.1 million ($26.5 million aftertax),
respectively, from the RAL business, while this year's second quarter and first
half reflected pretax losses from the RAL business of $1.3 million ($0.8 million
aftertax) and $66.3 million ($39.8 million aftertax), respectively.
As previously announced, the RAL business was significantly impacted this
year when the Internal Revenue Service released payment of the earned income tax
credit portion of thousands of refunds directly to taxpayers who had already
received these refunds through the RAL program, even though the taxpayer had
given written instructions to the IRS to send the refund to Beneficial National
Bank, the Company's banking subsidiary, in order to repay the loan. Due to this
action, the Company recorded a $65 million pretax loss ($39 million net
aftertax) for the RAL business during the first quarter of this year.
Collection experience has been encouraging, with 68% of the over $313
million of RAL receivables affected by the IRS action collected to date. While
indications are that the provision was adequate and that no further losses
should occur, collections have not yet reached a level that would warrant
reversal of any of the provision recorded in the first quarter.
The lending spread income increased $29.2 million or 11% in the second
quarter and $56.6 million or 11% in the first half over the 1994 periods, with
the increases primarily attributable to higher average receivables. As a
percentage of average receivables, the lending spread of 9.78% in the second
quarter of 1995 improved from 9.13% in the first quarter this year and 9.74% in
the prior year second quarter. For the first half, the lending spread
percentage declined slightly to 9.40% in 1995 from 9.44% in 1994. Spread
pressure in the North American loan offices has been largely offset by a higher
proportion of private-label credit card receivables, which have wider lending
margins.
Driven by higher servicing revenues on securitized receivables, other
revenues increased 15% in the second quarter compared to the second quarter of
1994. For the first half, however, other revenues declined 36% in comparison to
the 1994 period, reflecting the large RAL loss provision in the first quarter
this year.
As a percentage of average receivables, other revenues for the 1995 second
quarter improved slightly to 2.32% from 2.24% in the 1994 second quarter, but
for the six months fell to 1.58% from 2.75% in 1994. In addition to the large
provision for losses established for the earned income tax credit refunds, RAL
pretax profits in 1995 were down because of higher fees paid to H&R Block this
year and lower collections of prior year losses in comparison to 1994's strong
recoveries.
For the first half, insurance pretax earnings increased 9% to $36.7 million
from $33.6 million in the prior six month period. However, the second quarter
was virtually flat compared with the prior year second quarter. Insurance
profits continue to benefit from much stronger credit insurance premium
production and improved loss ratios.
Reflecting higher net chargeoffs on significantly higher average
receivables in 1995, the provision for credit losses increased 21% in the second
quarter and 15% in the first half in comparison with the same periods in 1994.
As an annualized percentage of average receivables owned, second quarter net
chargeoffs rose to 1.41% of the portfolio from 1.16% in the 1994 second quarter,
while first half net chargeoffs increased to 1.36% from 1.28% a year earlier.
The higher percentages were driven by increased personal loan chargeoffs.
Salaries and other operating expenses, combined, were up 11% and 14%,
respectively, in the second quarter and first half of this year compared to the
1994 periods. Relating these operating expenses to average receivables generates
an operating expense ratio of 7.52% in the second quarter compared to 7.49% in
the 1994 second quarter. On the same basis, the first half operating expense
ratio was 7.55% compared to 7.39% a year earlier, as this year's results reflect
higher expenses related to the RAL business.
Liquidity
The principal sources of cash are collections of finance receivables,
proceeds from the issuance of short- and long-term debt, and cash provided
through operations. The Company derives a constant source of liquidity from
maturities and repayments of its receivables. The monthly collections of cash
principal as a percentage of average receivables averaged 5.01% in the first
half of 1995, compared to 4.49% in the first half of 1994. The increase year-to-
year in the percentage collected is attributable to a higher proportion of
credit cards in the portfolio during the current year.
Substantial additional liquidity is available through committed bank lines
that the Company maintains in support of its commercial paper borrowings and
through long-term borrowings through both private and public debt offerings.
Also, subsidiaries of the Company sell, from time to time, home equity loans
through securitizations in the capital markets.
The principal uses of cash are loans to customers, repayments of maturing
debt, dividends to shareholders, and general operating needs.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," effective for
fiscal years beginning after December 15, 1995. This Statement requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
addition, FAS 121 requires that certain long-lived assets and intangibles to be
disposed of be reported at the lower of carrying amount or fair value less cost
to sell. The Company has not yet determined the timing of adoption of this
accounting standard; however, it does not expect the adoption to have a material
effect on its consolidated financial statements.
Effective January 1, 1995, the Company adopted FAS 114, "Accounting by
Creditors for Impairment of a Loan," and FAS 118, "Accounting for Impairment of
a Loan - Income Recognition and Disclosures," which describe how impaired loans
should be measured when determining the amount of loan loss accrual. These
statements do not apply to large groups of smaller-balance homogeneous loans
that are collectively evaluated for impairment, such as the Company's consumer
receivable portfolio. As a result, their adoption did not have a significant
effect on the Company's consolidated operating results or financial position.
The consolidated financial statements and related notes should be read in
conjunction with the preceding review.
BENEFICIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of stockholders on May 18, 1995.
The matters voted on at the meeting were: (1) the election of director and (2)
the ratification of the selection of Deloitte & Touche LLP as independent
auditors of the Company for 1995.
All of the nominees for director were elected and the results were as
follows:
Votes Votes Against Abstentions and
For or Withheld Broker Non-Votes
Bower 48,606,549 398,627 0
Callander 48,902,208 102,968 0
Cannada 48,615,335 389,841 0
Caspersen 48,634,873 370,303 0
Coleman 48,911,873 93,303 0
Farris 48,638,527 366,649 0
Gilliam 48,642,184 362,992 0
Halvorsen 48,642,955 362,221 0
Hernandez 48,910,168 95,008 0
Hillier 48,917,473 87,703 0
Holm 48,904,284 100,892 0
Kean 48,916,808 88,368 0
Muller 48,901,180 103,996 0
Ross 48,917,629 87,547 0
Tucker 48,625,402 379,774 0
Wachter 48,918,723 86,453 0
Watts 48,911,463 93,713 0
Worthy 48,617,314 387,862 0
BENEFICIAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
(CONTINUED)
On the ratification of the selection of Deloitte & Touche LLP, the
results were as follows:
Votes for: 48,889,046
Votes against or withheld: 33,028
Abstentions: 63,454
Broker Non-Votes: 19,648
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit
Number Exhibit
3.1 Copy of the Company's Restated Certificate of
Incorporation, as amended, is incorporated by reference to
Exhibit 3.1 of the Annual Report on Form 10-K for the year
ended December 31, 1994.
3.2 Copy of the Company's By-Laws, as amended, is incorporated
by reference to Exhibit 3.2 of the Annual Report on Form 10-
K for the year ended December 31, 1990.
10 Draft of Letter of Agreement to be entered into by the
Company and MDE Associates, Inc. relating to personal
financial counseling services to be made available to
certain key officers of the Company and its subsidiaries.
Services to be provided under the terms of this Letter of
Agreement commenced during the period covered by this Form
10-Q.
27 Financial Data Schedule (in EDGAR filing only).
b) The Company filed the following report on Form 8-K during the
period covered by this Form 10-Q:
1) A report on Form 8-K, dated April 25, 1995, was filed relating to
the Company's first-quarter earnings, which were announced on
April 25, 1995.
BENEFICIAL CORPORATION AND SUBSIDIARIES
SIGNATURES
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.
Date August 10, 1995 /s/ Ronald E. Bombolis
Ronald E. Bombolis
Sr. Vice President
and Controller
(Chief Accounting
Officer)
Date August 10, 1995 /s/ Andrew C. Halvorsen
Andrew C. Halvorsen
Member of the Office
of the President and
Director (Chief
Financial Officer)
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Copy of the Company's Restated Certificate of
Incorporation, as amended, is incorporated by reference to
Exhibit 3.1 of the Annual Report on Form 10-K for the year
ended December 31, 1994.
3.2 Copy of the Company's By-Laws, as amended, is incorporated
by reference to Exhibit 3.2 of the Annual Report on Form 10-
K for the year ended December 31, 1990.
10 Draft of Letter of Agreement to be entered into by the
Company and MDE Associates, Inc. relating to personal
financial counseling services to be made available to
certain key officers of the Company and its subsidiaries.
Services to be provided under the terms of this Letter of
Agreement commenced during the period covered by this Form
10-Q.
27 Financial Data Schedule (in EDGAR filing only).
EXHIBIT 10
DRAFT
BENEFICIAL CORPORATION
LETTER OF AGREEMENT
WITH
MDE ASSOCIATES, INC
FOR
PERSONAL FINANCIAL COUNSELING
Mr. Mitchell D. Eichen, Principal
MDE Associates, Inc.
7 Century Drive
Parsippany, New Jersey 07054
Dear Mr. Eichen:
By this Letter of Agreement (the "Agreement"), Beneficial Corporation
(sometimes hereinafter referred to as the "Company"), wishes to engage MDE
Associates, Inc. (sometimes hereinafter referred to as MDE Associates) to
provide a comprehensive Personal Financial Counseling Service to certain
designated key executives of the Company and its subsidiaries who enroll in MDE
Associates' Personal Financial Counseling Service under the terms of this
Agreement (the "Participants").
SERVICES PROVIDED BY MDE ASSOCIATES
1. For the members of the Executive Committee of Beneficial Corporation and
for the members of the Senior Management Group, in the initial year of
participation MDE Associates shall provide each Participant with the
following personal financial counseling services:
A.An introductory fact-finding meeting to assist each Participant to
complete his/her Fact Finder checklist, to gather all additional
necessary information and to establish each Participant's near-term
and long-term goals, thereby encouraging each Participant to become
more actively involved in the financial counseling process on an
expedited basis.
B.Preparation of a Complete Financial Management binder, the first half of
which shall include comprehensive and individualized five-year tax,
cash flow, company benefit and net worth projections and, where
relevant, education funding and retirement projections. Each set of
projections shall include a complete list of assumptions and
recommendations. Included in these assumptions and recommendations
shall be an analysis of each Participant's employee benefits and MDE
Associates' recommendations as to ways in which his/her use of the
Beneficial Corporation employee benefit programs available to the
Participants could be maximized, within the context of existing plan
rules and limitations.
C.An individual working session wherein all of the above exhibits shall be
thoroughly reviewed with each Participant.
D.Preparation of the second half of the Complete Financial Management binder
which shall include comprehensive and individualized estate planning, survivor
income and other relevant projections. Each set of projections shall include a
complete list of assumptions and comprehensive planning recommendations.
E.An individual meeting where all of the above exhibits shall be thoroughly
reviewed and discussed with each Participant.
F.One additional follow-up meeting, for those Participants who are members of
the Executive Committee only, wherein MDE Associates shall revise and update all
exhibits set forth in Paragraphs 1.B & 1.D. above, review the same with the
Participant and ensure that the Participant agrees with, and will begin to
implement, the recommendations made therein.
G.Continued proactive counseling, including reasonable telephone
consultation, which may be reasonably required throughout the Participant's
participation in the Personal Financial Counseling program.
2.For those individuals who are U.S. Group Presidents, in the initial year
of participation MDE Associates shall provide each Participant with the
following personal financial counseling services:
A.Attendance at a full day group seminar to be scheduled and arranged by
the Company which shall cover all relevant Personal Financial
Counseling disciplines.
B.An introductory fact finder meeting as more fully described in
paragraph 1.A above.
C.Preparation of a Complete Financial Management binder including those
exhibits more fully described in paragraphs 1.B and 1.D above.
D.An individual working session as more fully described in paragraph 1.C
above.
E.Continuous proactive counseling as more fully described in paragraph
1.G above.
3. After the initial year of participation in the Personal Financial
Counseling Service, all Participants who are members of the Beneficial
Corporation Executive Committee shall be provided with no fewer than three
meetings per year; all Participants who are members of the Senior Management
Group shall be provided with no fewer than two meetings per year; and all
Participants who are U.S. Presidents shall be provided with no less than one
meeting per year. New sets of tax, cash flow, net worth and other necessary and
relevant exhibits, along with complete sets of assumptions and recommendations,
shall be prepared for, and presented during, each meeting.
A.To the extent more than one meeting is provided, the meeting(s) in the
first half of the year would focus on near-term planning for the current year.
The meeting(s) held during the second half of the year would focus on year-end
and long-range planning issues. New sets of five year exhibits, which would
focus on the attainment of long-term goals, will be prepared for, and presented
during, the year-end meeting.
B.Continued proactive counseling, including reasonable telephone
consultation, which may be reasonably required throughout the Participant's
participation in the Personal Financial Counseling Service.
FEES
For those Participants who are members of the Beneficial Corporation
Executive Committee and members of the Senior Management Group, the annual cost
for the above-described service shall be $3,000 per Participant. For those
Participants who are U.S. Group Presidents the annual cost for the above-
described services shall be $2,000 per Participant. The Company shall be
notified in advance of any future fee adjustments.
In addition to the above fees, MDE Associates shall be reimbursed for all
reasonable and necessary expenses related to the services performed herein.
OBLIGATIONS OF THE COMPANY
The Company agrees to provide MDE Associates with all general written
material on the Company's compensation and benefits plans, as well as periodic
information on changes in these plans. Furthermore, the Company shall provide
detailed written information on the Participant's salary, stock options,
projected pension benefit, savings plan balances and interest in any other
company plans, including revised data, from time to time, of each Participant
who has consented to such disclosure, when requested by MDE Associates.
CONFIDENTIALITY
It is understood that all Beneficial Corporation and individual Participant
information and documentation shall be maintained by MDE Associates on a
confidential basis and shall only be used in connection with advice and
consultation provided to the Participants. Such information shall not be
released to third parties unless so expressly authorized by the Company and/or
the Participants. No Participant's personal information shall be discussed with
the Company, or any of its employees, unless expressly so authorized by the
Participant.
OTHER SERVICES
MDE Associates sells no financial products upon which it earns a fee or
commission. Except as otherwise provided herein, to the extent a Participant
needs and desires other financial services such as money management, tax
preparation, estate planning documentation or other such similar services, it is
agreed that any other such services elected by the Participant are not covered
by the terms hereof and become the Participant's independent contractual
obligation for which he or she shall be solely responsible.
NOTICES
All notices and other communications provided for by this Agreement shall
be in writing and shall be deemed to have been given if mailed or transmitted by
any standard form of written telecommunication to the party entitled thereto at
the address stated below or to such other person at such other address as may be
designated in a notice mailed or transmitted as aforesaid:
To the Company: One Christina Centre
301 North Walnut Street
Wilmington, Delaware 19801
Attention: Scott A. Siebels
Vice President and
Secretary
(Fax: 302 425-2518)
To MDE Associates: 7 Century Drive
Parsippany, NJ 07054
Attention: Mitchell D. Eichen
Principal
(Fax: 201 993-1902)
TERMINATION OF THIS AGREEMENT
It is understood that either party to this Agreement may terminate the
Agreement at any time upon written notice to the other. Notice of termination
shall be effective only upon receipt thereof. MDE Associates' fees shall be
prorated to termination date.
Upon termination of this Agreement, MDE shall return all individual data
and worksheets to the respective Participant, upon request of the Participant,
and all Company data to the Company. Following termination, MDE Associates
shall continue to respect the confidentiality of all information and knowledge
of the Company, its compensation and benefit programs, and of the personal
financial information of Participants distributed during the term of this
Agreement, pursuant to its terms.
While MDE Associates shall use its best judgment and information which it
believes to be reliable in making its recommendations to each Participant,
actions taken by Participants based upon such recommendations are done so at
their own risk. It is agreed that MDE Associates shall not be liable on account
of any action, omission, information, or recommendation made within the context
of the Personal Financial Counseling Service, except for negligence or
misconduct. It is understood that the federal and state securities laws impose
liabilities under certain circumstances on persons who act in good faith.
Therefore, nothing herein constitutes a waiver of, or limitation on, any rights
which the Participants may have under the federal securities laws or other laws.
Very tuly yours,
BENEFICIAL CORPORATION
Date
:
Scott A. Siebels, Vice
President
and Secretary
ACCEPTED BY: MDE ASSOCIATES, INC.
Date
:
Mitchell D. Eichen, Principal
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BALANCE SHEET AND
STATEMENT OF INCOME (BOTH DATED 6/30/95) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 258
<SECURITIES> 0<F1>
<RECEIVABLES> 11995
<ALLOWANCES> 347
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 440<F3>
<DEPRECIATION> 255<F3>
<TOTAL-ASSETS> 14248
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 7147<F4>
<COMMON> 53
0
115
<OTHER-SE> 1299<F5>
<TOTAL-LIABILITY-AND-EQUITY> 14248
<SALES> 0
<TOTAL-REVENUES> 1154<F6>
<CGS> 0
<TOTAL-COSTS> 411<F7>
<OTHER-EXPENSES> 505<F8>
<LOSS-PROVISION> 97
<INTEREST-EXPENSE> 0<F9>
<INCOME-PRETAX> 142
<INCOME-TAX> 58
<INCOME-CONTINUING> 83
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.51
<FN>
<F1>CURRENT MARKETABLE EQUITY SECURITIES ARE NOT SEPARATELY STATED ON THE BALANCE
SHEET
<F2>DO NOT PREPARE CLASSIFIED BALANCE SHEET
<F3>PP&E PER BALANCE SHEET (184.4) IS SHOWN NET OF DEPRECIATION
<F4>LONG-TERM DEBT PER BALANCE SHEET
<F5>INCLUDES ADDITIONAL CAPITAL (261), NET UNREALIZED GAIN ON INVESTMENTS (6.4),
FOREIGN CURRENCY TRANSLATION ADJ (46.1), AND RETAINED EARNINGS (1078) PER
BALANCE SHEET = 1299.3
<F6>INCLUDES FINANCE CHANGES AND FEES (978.8), INSURANCE PREMIUMS (80.2), AND OTHER
REVENUE (95.4) PER INCOME STATEMENT 1154.4
<F7>INTEREST EXPENSE PER INCOME STATEMENT
<F8>INCLUDES SALARIES AND BENEFITS (194.2), INSURANCE BENEFITS (48.9) AND OTHER
(262.3) PER INCOME STATEMENT = 505.4
<F9>COMPANY'S PRIMARY COST OF GENERATING BUSINESS IS INTEREST EXPENSE WHICH IS
INCLUDED IN TOTAL COSTS (ABOVE)
</FN>
</TABLE>
