UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (Zip Code)
executive offices)
Registrant's telephone number, including area code: (302)425-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $1 Par Value New York Stock Exchange
5% Cumulative Preferred Stock, $50 Par Value New York Stock Exchange
$5.50 Dividend Cumulative Convertible
Preferred Stock, No Par Value
$20 Stated Value (convertible into nine
shares of Common Stock) New York Stock Exchange
$4.50 Dividend Cumulative Preferred Stock,
$100 Par Value New York Stock Exchange
$4.30 Dividend Cumulative Preferred Stock, No
Par Value, $100 Stated Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
8% Debentures Maturing at Holder's Option
Annually on June 15, Commencing in 1983
and Due June 15, 2001 New York Stock Exchange
8.40% Debentures Maturing at Holder's Option
Annually on December 15, Commencing in 1986
and Due May 15, 2008 New York Stock Exchange
12 7/8% Debentures, Due August 1, 2013 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
At March 1, 1997, there were 54,123,054 shares outstanding of
the registrant's common stock. The aggregate market value of the
voting stock of the registrant held by non-affiliates of the
registrant was approximately $3.8 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain portions of the
Beneficial Corporation Proxy Statement for the 1997 Annual
Meeting of Stockholders scheduled to be held May 22, 1997.
PART I
Item 1. BUSINESS.
General
Beneficial Corporation (Company) was organized under the
laws of the State of Delaware on May 9, 1929, through the
consolidation of three companies which had been operated under
the same management. The Company traces its origin to 1914
when its first consumer loan office was opened. The Company is
a holding company, subsidiaries of which are engaged
principally in the consumer finance and credit-related
insurance businesses. Operations conducted by the subsidiaries
consist principally of a 1,186-office consumer finance network
located in the United States, Canada, Germany, and the United
Kingdom; Personal Mortgage Corporation, a direct response
mortgage lending unit, which originates home equity loans
chiefly in the Northeast, Middle Atlantic and West Coast
regions; Beneficial National Bank USA, a specialized private-
label credit card bank located in Delaware; Beneficial Credit
Services, which is engaged in sales finance activities;
Beneficial National Bank, a full service commercial bank
located in Delaware, which is also engaged in making income tax
refund anticipation loans; The Central National Life Insurance
Company of Omaha and its subsidiary, First Central National
Life Insurance Company of New York, which underwrite life and
disability consumer credit insurance; Wesco Insurance Company,
which provides credit property insurance; BFC Insurance Limited
which is located in Ireland and underwrites life, accident and
health insurance; and Harbour Island Inc. and subsidiaries,
which are engaged in real estate development in Florida. The
Company and its subsidiaries employed approximately 9,700
people at December 31, 1996.
For information concerning various factors that affected
operations during 1996, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
under Item 7. For pertinent geographical data, see Note 21 to
the financial statements.
Operations
Consumer Finance Operations
Loan Office Network
Consumer loan subsidiaries operate through a loan office
network in the United States, Canada, Germany and the United
Kingdom. In addition to making consumer loans, the
subsidiaries purchase loans and sales finance contracts and
sell certain insurance products. The number of loan offices
has grown noticeably in the last two years. In the United
States, this trend reflects the Company's re-entering smaller
markets and inner-city urban locations, with new, scaled-down
offices, staffed by only two or three people. Expansion in the
United Kingdom reflects plans to increase market share and
capitalize on Beneficial Bank PLC's strong competitive
position. The number of offices in the network for the past
five years is shown in the following table:
Number of Offices at December 31
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
United States 972 927 902 886 883
Canada 109 105 102 103 103
United Kingdom 90 81 69 60 53
Germany 15 17 17 17 17
Total 1,186 1,130 1,090 1,066 1,056
</TABLE>
In addition, consumer finance operations include two
subsidiaries engaged in private-label and bank credit card and
sales finance activities and a commercial bank and its eight
full-service branches located in Delaware.
Finance Receivables
The following table shows the composition of the finance
receivables portfolio at December 31
(in millions):
<TABLE>
<S> <C> <C> <C> <C> <C>
Receivables Owned: 1996 1995 1994 1993 1992
Real Estate Secured $6,067 $ 6,636 $ 6,860 $ 6,708 $5,975
Personal Unsecured 2,983 2,756 2,486 2,275 2,149
Credit Cards 4,596 3,084 2,062 1,243 790
Sales Finance Contracts 926 837 810 696 575
Commercial 100 103 105 97 103
Total 14,672 13,416 12,323 11,019 9,592
Receivables Sold with
Servicing Retained
(all real estate secured) 2,189 1,114 630 192 370
Total Owned and
Service $16,861 $14,530 $12,953 $11,211 $9,962
</TABLE>
Periodically, subsidiaries of the Company sell home equity
loans to trusts created as real estate mortgage investment
conduits and retain servicing. The Company also retains an
economic interest in the residual cash flows of such trusts.
The subsidiaries sold $1,919 million of home equity loans in
1996, $1,104 million in 1995, $757 million in 1994, $620
million in 1991, as well as $248 million in 1989.
The table below discloses at December 31 international
finance receivables by country as translated into U.S. dollars
(in millions):
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Canada $ 714 $ 684 $ 605 $ 517 $ 487
United Kingdom 1,344 1,003 867 666 547
Germany 389 431 421 402 417
Total $2,447 $2,118 $1,893 $1,585 $1,451
Percentage of Receivables 16.7% 15.8% 15.4% 14.4% 15.1%
Owned
</TABLE>
International Operations
The Canadian operation consists of 109 offices located
across Canada, although the provinces of Ontario, Quebec and
British Columbia represented 63% of total Canadian receivables.
At year-end 1996, approximately 42% of Canadian receivables
were real estate secured, 29% were personal unsecured, 20% were
private-label credit cards and 9% were sales finance contracts.
The 5% receivable growth in Canadian dollars in 1996 was
primarily in the private-label credit card and personal
unsecured portfolios. The Canadian operations reported C$20.2
million (US$14.8 million) in net income for 1996, compared with
C$18.5 million (US$13.5 million) in 1995 and C$16.3 million
(US$11.9 million) in 1994. The increase in 1996 earnings was
the result of a higher gross margin, partially offset by
increased operating expenses. Canadian interest rates across
the yield curve plunged during 1996. At year-end, the prime
rate was 4.75%, a 40-year low, and five-year mortgage rates
were at a 30-year low of 6.95%. Net chargeoffs increased to
C$26.2 million (US $19.2 million) in 1996 from C$21.9 million
(US$16.0 million) in 1995, and increased as a percentage of
average receivables outstanding to 2.84% from 2.50% in 1995.
Contractual delinquency decreased moderately to 2.49% at year-
end 1996 from 2.73% a year earlier.
The United Kingdom operation offers consumer loans, sales
finance contracts, credit card and deposit services through 90
offices in the United Kingdom. The United Kingdom operation is
a leading issuer of Visa cards to United Kingdom affinity
groups, entrance into the co-branded credit card market was
established with a large account launched in 1996. United
Kingdom receivables at the end of 1996 were composed of 25%
real estate secured, 40% private-label and Visa credit cards,
25% personal unsecured and 10% sales finance contracts.
Receivable gains were 22% in pounds during 1996. The strong
growth of the past three years (compound growth rate of 20%)
reflects both increased credit card outstandings and the
expansion in the branch network. Profits were pounds 7.1 million
(US$11.0 million) in 1996, down from pounds 10.4 million (US$16.4
million) in 1995 and pounds 9.1 million (US$13.9 million) in 1994.
The reduction in net earnings was caused by increased net
chargeoffs combined with the increase in reserves due to higher
delinquency. The decline in earnings also reflected lower
insurance commissions, although it should be noted that all
United Kingdom credit insurance is now insured by Beneficial's
newly established Irish insurance companies, which recorded
1996 aftertax profits of pounds 3.4 million (US$5.3 million). Net
chargeoffs increased to pounds 13.9 million (US$22.1 million) in 1996
from pounds 10.2 million (US$15.9 million) in 1995; likewise, as a
percentage of average receivables outstanding, net chargeoffs
increased to 1.97% from 1.70% in 1995. Contractual delinquency
increased to 3.75% at year-end 1996 from 3.07% at the end of
1995.
The German consumer banking subsidiary's name was changed
from BFK Bank AG to Beneficial Bank AG (BBAG or Bank) on
October 1, 1996. The Bank offers consumer loans and accepts
deposits through 15 offices in Germany. Earnings were at a
virtual breakeven for 1996 following losses of DM37 million
(US$26 million) in 1995 and DM52 million (US$32 million) in
1994, as the Bank made progress toward acceptable returns in
1996. The losses in the preceding two years were the result of
charges relating to the Fundus Grundstuecks GmbH (Fundus)
portfolios. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," under Item 7
and Note 3 to the financial statements for further details.
Pursuit of new commercial loans came to a halt and the
previously acquired commercial portfolio is being run off. The
Bank's focus on consumer lending has been sharpened with a
concentration on conversion of sales finance accounts and other
direct consumer lending, rather than the previous reliance on
broker-generated loans. Also a bank credit card business is
being developed with five affinity card programs active at year-
end. Further, in October 1996, a settlement agreement relating
to most of the Fundus loans was concluded.
Geographic Distribution
Finance receivables in each of the ten jurisdictions (U.S.
and international) with the highest percentages of total owned
receivables were as follows:
<TABLE>
<S> <C>
Jurisdiction Percent
California 16.4%
United Kingdom 9.2
New York 7.0
Canada 4.9
Texas 4.7
Pennsylvania 4.4
Ohio 3.9
Florida 3.5
Illinois 3.5
New Jersey 3.1
</TABLE>
Portfolio Distribution
The following table shows the distribution by size of real
estate secured and personal unsecured loans made during the
respective years:
Principal Amount of Loans Made in Each Size Class
as a Percent of Total Principal Amount
Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Under $ 5,000.... 40.9% 42.0% 38.8% 35.2% 32.1%
5,001 - 50,000.... 28.8 28.9 26.7 26.0 29.1
50,001 - 100,000.... 15.2 14.4 16.9 18.7 19.3
Over 100,000.... 15.1 14.7 17.6 20.1 19.5
</TABLE>
Credit Quality Measures
Certain data regarding loss experience of finance
receivables on an owned basis are as follows:
(in millions, except percentages)
<TABLE>
<S> <C> <C> <C> <C> <C>
Net
Net Chargeoffs Allowance Allowance
Gross Chargeoffs to Average for Credit for Credit
Amount (after Gross Losses at Losses to
of Receivables offsetting Finance End of Net Finance
Year Charged Off recoveries) Receivables Year Receivables
1996 $363.3 $316.9 2.26% $498.2 3.40%
1995 247.2 209.4 1.64 406.1 3.03
1994 183.3 148.7 1.28 331.6 2.69
1993 176.4 149.1 1.42 279.0 2.53
1992 185.0 162.6 1.75 262.4 2.74
</TABLE>
Note: 1995 and 1994 do not include $15.0 million and $38.0
million, respectively, in chargeoffs related to German
liquidating loan portfolio, which would increase net chargeoffs
to average gross receivables to 1.76% in 1995 and 1.61% in
1994.
The allowance for credit losses at year-end 1996 covered
net chargeoffs 1.57 times, compared with 1.94 times a year
earlier. In addition to the allowance for credit losses, the
balance in dealer reserves at December 31, 1996 and 1995, was
$8.6 million and $10.0 million, respectively. The following
tables summarize delinquency and chargeoff percentages by
product. Amounts are expressed as a percentage of owned
receivables except where noted.
Delinquency By Major Categories
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Real Estate Secured Loans* 2.13% 2.17% 1.88% 2.13% 2.48%
Personal Unsecured Loans 5.81 5.28 4.71 4.41 4.76
Credit Cards 3.23 2.76 1.78 2.25 4.84
Sales Finance Contracts 3.62 2.89 2.12 2.06 3.05
Overall 3.38% 2.98% 2.46% 2.67% 3.24%
</TABLE>
*The percentage is presented on a managed receivable basis.
Chargeoffs By Major Categories
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Real Estate Secured Loans* 0.65% 0.81% 0.76% 0.91% 0.95%
Personal Unsecured Loans 4.55 3.79 3.03 3.36 3.90
Credit Cards 3.81 2.73 2.59 4.15 4.74
Sales Finance Contracts 2.53 2.10 1.67 1.76 2.19
</TABLE>
Note: 1995 and 1994 exclude the effect of the $15.0 million
and $38.0 million German liquidating loan portfolio charges,
respectively.
*Includes losses on disposition of foreclosed property,
including holding costs. The percentage is presented on a
managed receivables basis.
Chargeoffs and delinquencies are generally higher during
periods of adverse economic conditions, such as rising
unemployment, falling housing values, and increased
inflationary pressures, which affect the ability of the
borrower to repay. It is the policy of the subsidiaries
generally not to renew delinquent accounts. Receivables
considered to be uncollectible or to require disproportionate
collection costs are charged to the allowance for credit
losses, but collection efforts are generally continued. For
further discussion on chargeoffs and delinquency, see
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" under Item 7.
Lending Policies
Loans on both a secured and unsecured basis are made after
a thorough credit investigation and a favorable evaluation as
to the borrower's willingness and ability to repay. Real
estate secured loans are either closed-end or revolving, and
rates are either variable or fixed. Of the portfolio of loans
owned at the end of 1996, approximately 57% of real estate
secured loans were fixed-rate and 43% were variable-rate. Real
estate secured loans are subject to carefully monitored
underwriting of both the borrower's ability to repay and the
independent professionally appraised market value of the
property. The loans are well-documented consumer loans based
on the creditworthiness of the borrower, with the collateral of
the real estate providing additional security. U.S. consumer
finance subsidiaries will generally lend to a maximum of only
75% (including the existing first mortgage) of the appraised
value of the real estate as determined by independent
appraisers on second mortgage loans. In the case of a first
mortgage, the subsidiaries will generally lend to only 80%.
Recently, certain of the Company's consumer finance offices
began a controlled test of somewhat higher loan-to-value ratios
in centralized operations where the process can be carefully
evaluated. In these centralized operations, the consumer
finance subsidiaries are testing loan-to-value ratios as high
as 90% on first mortgages,
and 85% on second mortgages. In addition, a rigorous
discipline of credit approval is enforced regarding borrower
debt-to-income ratios and overall consumer credit quality.
Most real estate loans must be approved by regional management,
as well as by the originating loan office manager. Loans above
$250,000 generally require additional approval by senior
operating management at headquarters. Independent appraisers
are evaluated by regional management, as well as by the loan
office manager.
Closed-end loans and revolving loans made under consumer
finance acts generally are not secured by real estate. Closed-
end loans generally do not exceed a 60-month term, and the
interest rate may be limited according to the size of the loan.
Revolving loans are written with fixed rates. Generally, loans
under the consumer finance acts are made at the maximum rates
allowable. Experience indicates that a borrower who qualifies
for additional credit often obtains a new loan in an amount
larger than his existing balance. A portion of the proceeds of
the new loan is applied to extinguish the existing balance.
Sales Finance and Credit Card Activities
Sales finance activities conducted by subsidiaries
featuring the name "Beneficial Credit Services" represent an
important source of new loan customers for the consumer finance
subsidiaries. In 1996, more than 50% of new loan customers for
other consumer finance products originated as sales finance
customers. Beneficial Credit Services programs are marketed
through the loan office network to smaller local and regional
merchants.
Beneficial National Bank USA (BNB USA) is a specialized,
private-label credit card bank located in Wilmington, Delaware.
BNB USA offers customized private-label and co-branded
revolving charge programs to large regional and national
retailers, offering their retail customers open lines of
credit. Additionally, BNB USA provides marketing and
cardholder services designed to meet each retailer's needs.
Targeted retailers include electronics, furniture and apparel
retailers, as well as home centers, warehouse clubs and general
merchandisers. Outstanding receivables totaled $3,870 million
at year-end 1996, up from $2,545 million at the end of 1995 and
$1,613 million at the end of 1994. A significant portion of
the growth was provided by three retailers: Best Buy Company,
Inc. (60% of the total gain), and two new national programs,
PriceCostco Inc. and Kmart Corporation. These three merchants
also accounted for 64% of the portfolio at December 31, 1996.
Additionally, approximately 56% of the portfolio was special
financing plans, which defer customer interest for up to 13
months.
BNB USA profitability was dampened by $65 million of up-
front loan loss provisioning on the strong receivables growth
experienced in 1996 and $10 million of start-up costs relating
to programs for Kmart and PriceCostco. Also, interest margin
declined from 1995, largely the result of a higher proportion
of receivables outstanding during the year from the above-
mentioned special financing plans and a higher level of
convenience usage, (i.e., customers paying off balances within
the grace period before charges accrue). Accordingly, BNB USA
aftertax earnings were at virtual breakeven in 1996 versus
$21.1 million in 1995 and $5.9 million in 1994. Due to the
higher level of receivables growth and the anticipated maturing
of the portfolio, net chargeoffs increased to $118.8 million in
1996 from $49.9 million in 1995. As a percentage of average
receivables outstanding, net chargeoffs rose to 4.00% in 1996
from 2.64% in 1995. Similarly, contractual delinquency
increased to 3.46% at year-end 1996 from 2.98% at December 31,
1995.
Personal Mortgage Corporation
Personal Mortgage Corporation (PMC), which began
operations in July 1991, provides consumers with fast action on
home equity loan applications, all by telephone, with an
initial answer usually within 24 hours. The menu of real
estate products offered by PMC is wider than typically offered
in a loan office and therefore can meet the needs of a broader
demographic base. In July 1996, PMC began operations on the
West Coast, with initial efforts centered on Seattle and
Spokane, Washington, and Sacramento and Fresno, California,
markets. Including these expansion efforts, PMC's operations
now include 12 states in the Northeast and Mid Atlantic
regions, as well as Florida and the West Coast. In 1996, PMC
funded 4,056 loans for $215 million, a 12% improvement over
1995 in number of loans and a 26% improvement in dollars
funded. Approximately 83%, or $179 million, of loans funded
were sold and transferred to other Beneficial consumer loan
subsidiaries in 1996. The remainder were sold to other
originators who provide products to service niches outside of
Beneficial's traditional customer base. PMC made an aftertax
profit contribution of $1.5 million for 1996, down from $1.7
million in 1995.
Commercial Banking
Beneficial National Bank (BNB or Bank), based in
Wilmington, Delaware, is the Company's commercial banking
subsidiary. Through its eight full-service branches in
Delaware, BNB provides a full range of commercial and consumer
banking services to small- and medium-sized businesses and to
consumers in Delaware and surrounding markets. Also, BNB, in
conjunction with affiliated companies, originates and services
a portion of the tax refund anticipation loans (RALs) issued
through H&R Block and certain of its franchisees. In December
1996, BNB introduced a nationwide on-line loan program that
allows consumers to apply for unsecured loans through a
personal computer and receive a decision in two minutes or
less. In addition, the Bank provides significant corporate
cash management and treasury services to the Company and its
operating subsidiaries. All disbursements through the consumer
finance subsidiaries' loan office network, as well as all
checks written by customers on revolving credit lines
originated through the loan office network, are drawn on BNB.
At December 31, 1996, total loans outstanding were $176
million, a decrease of 22% and 21% from 1995 and 1994,
respectively. The Bank's loan portfolio is composed of 48%
commercial and industrial (C&I) loans and 52% consumer loans
and credit card receivables. A large portion of the C&I loans
are commercial mortgage loans or have real estate collateral
as additional security for cash flow-oriented business loans.
Total deposits at December 31, 1996 were $319 million, down
slightly from $321 million at December 31, 1995 and up
moderately from $289 million at December 31, 1994.
The Bank's earnings include processing fees for
originating and servicing the RAL program. These earnings
have also been included with the earnings reported in the tax
refund anticipation loan program section that follows, so that
all earnings related to RAL can be set forth separately.
BNB's net income excluding RAL processing fees was $6.8
million in 1996, down from $7.0 million in 1995 and up from
$6.1 million in 1994. The decrease in earnings in 1996
resulted mainly from lower interest income compared with 1995.
Refund Anticipation Loan Program
Through BNB, RALs are made to consumers entitled to a tax
refund who electronically file their returns with the Internal
Revenue Service (IRS) through either H&R Block's (Block)
electronic filing system or systems of other independent
electronic filers approved by the IRS. After the return is
processed, refund proceeds are directly transferred from the
IRS via electronic funds transfer to a unique customer
loan/deposit account at BNB, with the proceeds applied to
repay the outstanding loan. In early February 1995, the IRS
began delaying the payment of the earned income tax credit
(EITC) portion of the tax refund payable to BNB on returns
filed in 1995, and subsequently confirmed that, when finally
released, the held earned income portion would be sent
directly to the taxpayer, rather than to BNB as directed by
the taxpayer. This IRS action created serious collection
problems for BNB as related credit losses totaled $96 million.
Of the $314 million in RALs affected by the IRS's action, $248
million, or 79%, was recovered by year-end 1996. For
discussion on the new BNB agreement with H&R Block Tax
Services, Inc., see "Management Discussion and Analysis of
Financial Condition and Results of Operations" under Item 7.
The RAL program rebounded dramatically in 1996 with
aftertax income of $69.8 million as compared with an aftertax
loss of $37.9 million in 1995 and aftertax income of $25.1
million in 1994. As mentioned in the Commercial Banking
section, income includes BNB processing fees. Gross revenues
in 1996 fell to $141.3 million from $152.6 million in 1995
while up from $81.1 million in 1994. The number of RALs made
in 1996 fell slightly to 2,650,000 from 2,717,000 in 1995 and
2,829,000 in 1994. The average loan amount was $853 in 1996
down from $1,162 in 1995 and $1,452 in 1994. The decrease in
RALs made and the average loan amount is the result of more
stringent credit criteria and the decision to suspend lending
on the EITC portion of tax refunds. BNB will resume lending
on the portion of tax refunds attributable to the EITC in
1997, primarily to prior customers in good standing.
Insurance Operations
Operations of the Beneficial Insurance Group (BIG) consist
primarily of The Central National Life Insurance Company of
Omaha (CNL) and its subsidiary, First Central National Life
Insurance Company of New York (FCNL), which underwrite life and
disability consumer credit insurance. In mid-1993, BIG acquired
Wesco Insurance Company (Wesco), a property/casualty insurance
company licensed in 41 jurisdictions. The addition of Wesco
allowed BIG to directly underwrite the credit property coverage
for the Beneficial consumer finance network. In addition,
insurance agency relationships are maintained with several
outside insurance companies that offer selected non-credit
related products. These products are marketed chiefly through
the domestic Beneficial loan office network. Agency operations
earn a commission, while the insurance risk of loss rests with
the insurance carrier. In October 1995, BFC Insurance Limited,
located in Ireland, began to provide credit-related life,
accident and health insurance products on United Kingdom
originations.
CNL and its subsidiary, FCNL, rank among the industry
leaders in the highly specialized consumer credit insurance
marketplace, offering both life and disability coverages. The
credit products are generally marketed through the U.S.
consumer finance subsidiary network. During 1996, A.M. Best
again affirmed its rating of A+ (Superior) for CNL. CNL also
carries a claim-paying ability rating of AA, which is
considered excellent, from Standard & Poor's Corporation.
Credit life insurance policies typically cover the life of
the borrower and provide for the full payment of the
outstanding balance in the event of the insured's death.
Credit accident and health insurance policies provide for the
payments of the installments as they become due on the
insured's obligation during a period of unemployment or
disability due to illness or injury. Credit property insurance
is written to protect the property pledged as security for the
obligation. Purchases of credit life and credit accident and
health are entirely voluntary and at the borrower's request.
Additionally, purchases of property insurance are also at the
borrower's request, except for property damage coverage for
property pledged as collateral if the borrower does not provide
evidence of coverage with another insurance carrier.
In late 1995, the decision was made to exit the annuity
business based on the conclusion that this product line could
not offer acceptable profitability or a strategic fit with the
core business. Further, recent research indicated that the
Beneficial core consumer is likely to remain a borrower well
into their mature years. In March 1996, CNL effectively
disposed of the $957 million annuity portfolio to SunAmerica
Life Insurance Company through a co-insurance agreement.
Accordingly, approximately $900 million of investment
securities were sold or transferred to SunAmerica, which
resulted in capital gains on disposition of investments and an
$8.4 million gain after consideration of related taxes. As a
result of the disposition, a substantial upstream dividend of
$124 million was paid to Beneficial Corporation at year-end
1996.
The 1996 and 1995 earnings improvement was driven by BIG's
successful focus on credit insurance sales opportunities within
the rapidly growing Beneficial customer base. Reflecting the
overwhelming attractiveness of this customer group and
distribution channel, BIG also elected during 1996 to exit the
minimally profitable non-affiliated credit insurance business
conducted with other consumer lenders. This decision will not
materially affect either the Company's financial condition or
results of operations.
BIG's total net premiums written in the U.S., largely by
CNL, were $169.2 million in 1996, down 11% from $189.2 million
in 1995. Total net premiums written in Ireland were pounds 27.5
million ($43.0 million) in 1996, up from pounds 6.1 million ($9.6
million) in 1995. Total credit premiums written in the U.S.,
were $159.7 million in 1996 compared with $164.8 million in
1995. Premiums written through the loan office network
increased 9% to $139.2 million from $127.9 million in 1995.
The following table sets forth information concerning the
consolidated insurance operations (U.S. and Ireland) (in
millions):
Years Ended December 31
<TABLE>
<S> <C> <C> <C>
Premiums Earned 1996 1995 1994
Consumer Finance Subsidiaries:
Credit-related $133.5 $104.8 $ 96.1
Other 3.9 3.9 5.2
Independent:
Credit-related 20.8 23.2 17.1
Ordinary 7.7 8.8 9.4
All Other 2.8 12.0 15.9
Total Premiums Earned $168.7 $152.7 $143.7
Operating Income
Consumer Finance Subsidiaries:
Credit-related $ 51.3 $ 39.1 $ 34.0
Agencies 18.0 15.1 12.4
Other 2.9 3.4 3.3
Total 72.2 57.6 49.7
Independent:
Credit-related (2.8) (1.5) (5.0)
Ordinary 0.9 1.0 --
Annuity 22.4* 0.6 4.5
Other (0.4) (0.5) (0.4)
Total 20.1 (0.4) (0.9)
All Other (primarily unallocated
investment income and capital gains) 17.6 20.2 21.1
Total Operating Income $109.9 $ 77.4 $ 69.9
Net Income $ 73.3 $ 50.7 $ 45.1
</TABLE>
*Includes gain on disposition of annuity-related assets.
Investment income (net of interest paid on annuities)
decreased 18% to $42.7 million in 1996 from $52.1 million in
1995 and $50.1 million in 1994. Investment yield declined to
6.56% at the end of 1996 compared with 7.21% in 1995 and 1994.
The decline is due to the disposition of the annuity block and
the investment portfolio. The market value of investments at
$479 million at year-end 1996, was down significantly from $1.5
billion at year-end 1995 reflecting the transfer of assets
related to the annuity block.
Real Estate Investments
Harbour Island is a 177-acre, mixed-use real estate
development attractively located off the southern waterfront of
downtown Tampa, Florida. The island is connected to downtown
Tampa by two bridges. The Development of Regional Impact plan
for full development of the island has been approved and
provides for commercial, hotel, residential and retail space.
At year-end 1996, the investment in and advances to
Harbour Island amounted to $80 million, down from $89 million
at the end of 1995. Some of the more significant assets of
Harbour Island include approximately 63 acres of undeveloped
land, a 300-room "four star" hotel (currently under lease to
Wyndam Hotels), and a mixed-use office/retail operation
currently being leased. This reduction in the Company's
investment was largely due to the sale of two luxury garden
apartment complexes which netted a pretax gain of approximately
$1.6 million. The lessee of the hotel has full operating
responsibilities and makes basic rental payments to Harbour
Island. Contingent rent is received if net operating income
exceeds the basic rent plus a management fee.
On a fully debt-funded basis, Harbour Island incurred a
pretax operating loss of $18.7 million for 1996, compared with
pretax losses of $19.5 million in 1995 and $18.0 million in
1994. The project is charged interest on all net cash advanced
since inception at Beneficial's annual overall melded cost-of-
funds rate. Accordingly, nearly all of the losses in recent
years represent interest cost to carry and non-cash
depreciation charges. However, until significant parcels of
the raw land or entire ventures are sold, accounting losses
from Harbour Island are not likely to decline substantially
because of the continuing significant cost to carry.
Other Real Estate
Subsidiaries of the Company also own nearly 700 acres of
real estate adjacent to the Peapack, New Jersey, office
complex. Including buildings, this real estate is carried at
approximately $15 million. Sales of significant parcels of
this land are not planned for the immediate future.
Financing
The Company and its subsidiaries obtain funds both in the
United States and in foreign markets through sales of long-term
debt securities and commercial paper and through short-term
borrowings on unsecured lines of credit from banks. At
December 31, 1996, long-term debt totaled $8,631 million
(including $3,816 million of variable-rate medium-term notes)
and short-term borrowings aggregated $4,169 million (consisting
of $3,695 million of commercial paper and $474 million of bank
borrowings). In addition, deposits payable totaled $635
million. Lines of credit are used to support commercial paper
borrowings by the Company and its subsidiaries. At December
31, 1996, the total of all lines of credit was $4,212 million.
In 1995, in support of commercial paper issuances, the Company
concluded a $3 billion, five-year, syndicated revolving credit
agreement, which replaced the various one- and three-year
bilateral agreements. The unused portion of all lines of
credit was $3,795 million at December 31, 1996. The overall,
weighted average annual interest cost, including the costs of
maintaining lines of credit, of all short- and long-term
borrowings of the Company and consolidated subsidiaries was
6.54%, 7.22%, 6.57%, 6.77%, and 7.87% in 1996, 1995, 1994, 1993
and 1992, respectively.
Continuously offered medium-term notes (MTNs) are the
primary vehicle used by the Company to place senior term debt.
During 1996, $1.8 billion of variable-rate MTNs were sold at an
all-in cost roughly equivalent to the Company's cost of
commercial paper borrowings. The average maturity was 2.4
years. In addition, fixed-rate MTNs provided $.6 billion in
funds during 1996, at an average coupon of 6.54% and a weighted
average maturity of 6.5 years The Company had available under
a shelf registration with the Securities and Exchange
Commission $1.5 billion of unissued debt securities at the end
of 1996.
Beneficial Corporation guarantees the borrowings of its
Canadian, United Kingdom, and German subsidiaries, thereby
increasing such subsidiaries' access to local capital markets
and minimizing interest costs for these foreign operations.
The Canadian operation is funded through commercial paper
borrowings and notes sold in the Canadian financial market.
The United Kingdom operation generates a modest amount of
deposits but is chiefly funded through bank borrowings,
sterling commercial paper sales, and medium-term debt
placements. The German consumer banking subsidiary is funded
chiefly with deposits.
Regulations
Real estate secured loans are supervised under and
regulated by state legislation, which generally requires that
the lender be licensed. Most states do not limit rate, but
rate is a competitive factor whether limited or not. While the
statutes of several states place no maximum limit on the
contractual term of closed-end loans secured by real estate,
the consumer finance subsidiaries generally limit loans of this
type to periods ranging from 60 to 180 months. The consumer
finance subsidiaries also operate under consumer finance acts
(small loan statutes), which typically require that the lender
be licensed. Licenses are subject to revocation for cause.
The subsidiaries also make non-real estate secured installment
loans under statutes other than consumer finance acts. The
banking subsidiaries are subject to regulations of certain
federal agencies and undergo periodic examination by these
regulatory authorities.
The insurance operations are subject to regulation in the
jurisdictions in which they are authorized to conduct business.
Generally, such laws cover, among other things, types of
insurance that may be sold, policy reserve requirements,
permissible investments, premiums charged, limitations on the
amount of dividends payable by any insurance company and
guidelines and standards with respect to dealings between
insurance companies and affiliates. In the United States, most
states have also enacted insurance holding company legislation
pertaining to insurance companies and their affiliates.
The consumer finance subsidiaries are required to comply
with the Federal Truth-in-Lending Act, which requires, among
other things, disclosure of pertinent elements of consumer
credit transactions, including the finance charges and the
comparative costs of credit expressed as an annual percentage
rate. In addition, the subsidiaries are also required to
comply with the Federal Equal Credit Opportunity Act (which
prohibits discrimination in any aspect of a credit transaction
on the basis of sex, marital status, race, color, religion,
national origin, age, receipt of income from a public
assistance program or the good faith exercise of rights under
the Federal Consumer Credit Protection Act) and with the Real
Estate Settlement Procedures Act.
The products and operations of the international
subsidiaries are subject to regulations in their respective
counties. The Canadian operations are subject to federal and
provincial legislation which regulates various aspects of its
operations, including disclosure of contractual terms,
collection practices and creditor remedies. The United Kingdom
subsidiary is an authorized institution under the Banking Act
1987 and, as such, is subject to supervision by the Bank of
England and holds a full license under the Consumer Credit Act
of 1974. As a fully-licensed German Bank, Beneficial Bank AG
is regulated by the Federal German Banking Act and other
Federal and consumer legislation. The Bank is also a member of
the Deposit Insurance System for private German banks which
provides specific standards for its members.
Competition
In the consumer finance industry, the Company's
subsidiaries face strong competition from banks, savings
institutions, credit unions, finance companies and other
financial institutions. Rate competition among finance
companies is minimal for small consumer loans. The
subsidiaries compete for these loans primarily on the basis of
name recognition, service and reputation. There is
considerable rate competition within the home equity loan
market. Competition has accelerated in recent years, as
smaller companies have aggressively entered the sub-prime
market using securitization as essentially their sole funding
tool. This approach has reduced the cost of capital and
lowered industry entry barriers. In six years, BNB USA has
grown to one of the nation's largest private-label credit card
banks. This fiercely competitive business is based upon
service, pricing and product flexibility. In addition, the
business of the subsidiaries may be adversely affected in the
future by unforeseen factors, such as rate reductions, credit
restrictions, economic conditions, judicial decisions or
legislative acts.
Item 2. PROPERTIES.
The Company and its subsidiaries do not hold any
substantial amount of property other than the real estate
investments described previously and properties acquired
through a security interest. Substantially all of the property
utilized by the Company and its subsidiaries are held under
lease. Loan offices generally have lease terms of five years
with a renewal option for a like term. Most of the leases
provide for cancellation rights after two years. Information
as to minimum rental commitments on leased property and periods
of expiration is contained in Note 25 to the financial
statements.
Item 3. LEGAL PROCEEDINGS.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Beneficial Corporation's Common Stock is listed on the New
York Stock Exchange. The aggregate amounts of common dividends
paid during 1996 and 1995 were $105.3 million and $94.5
million, respectively. As of March 1, 1997, Common Stock was
held of record by 14,132 stockholders. Additional information
pertaining to the Company's Common Stock is set forth below:
Three Months Ended
<TABLE>
<S> <C> <C> <C> <C> <C>
3/31 6/30 9/30 12/31 Total
1996
Dividends per Common Share $ .47 $ .47 $ .52 $ .52 $1.98
Market Price of Common Stock:
High 58-3/8 61-1/4 59-1/2 66-1/2
Low 43-1/2 54-1/8 50-7/8 57-1/8
Close 57-5/8 56-1/8 57-1/2 63-3/8
1995
Dividends per Common Share $ .43 $ .43 $ .47 $ .47 $1.80
Market Price of Common Stock:
High 42-1/2 45-3/4 53-3/4 55-1/2
Low 37 39-1/4 43-5/8 46-1/8
Close 39-1/4 44 52-1/4 46-5/8
</TABLE>
Item 6. SELECTED FINANCIAL DATA.
BENEFICIAL CORPORATION AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(in millions, except where noted)
<TABLE>
<S> <C> <C> <C> <C> <C>
During The Year 1996 1995 1994 1993 1992
Net Income (Loss)
Income from Continuing
Operations (a) $ 281.0 150.5 177.7 186.0 148.4
Loss from Discontinued
Operations $ -- -- -- -- (1.4)
Extraordinary Items $ -- -- -- (2.8) (3.1)
Cumulative Effect of
Accounting Changes $ -- -- -- -- (98.6)
Net Income $ 281.0 150.5 177.7 183.2 45.3
Earnings (Loss) per
Common Share (dollars)
Continuing Operations (a) $ 5.08 2.72 3.28 3.45 2.75
Discontinued Operations $ -- -- -- -- (.03)
Extraordinary Items $ -- -- -- (.05) (.06)
Cumulative Effect of
Accounting Changes $ -- -- -- -- (1.89)
Earnings Per Common Share $ 5.08 2.72 3.28 3.40 .77
Average Number of Common
Shares Outstanding 54.3 53.5 52.6 52.4 52.0
Dividends Paid per Common
Share (dollars) $ 1.98 1.80 1.62 1.43 1.35
Gross Revenue $ 2,771.9 2,398.2 2,137.4 1,957.5 1,819.3
Interest Expense $ 812.8 816.2 673.6 633.2 642.7
Lending Spread $ 1,330.7 1,198.4 1,080.1 974.2 874.5
Lending Spread as a % of
Average Receivables 9.84 9.71 9.65 9.62 9.80
Provision for Credit
Losses (b) $ 398.8 280.2 198.7 171.8 164.1
Total Expenses $ 2,313.4 2,127.8 1,811.3 1,642.3 1,567.7
Income before Income Taxes $ 458.5 270.4 326.1 315.2 251.6
% of Monthly Cash Principal
Collections to Average
Monthly Balances 5.51 5.03 4.52 3.85 3.91
% of Finance Receivables
Charged Off (less
recoveries) to Average
Monthly Balances (b) 2.26 1.64 1.28 1.42 1.75
At Year-End
Finance Receivables $14,672.0 13,416.2 12,322.6 11,018.7 9,592.3
Number of Accounts 7.0 5.1 4.4 3.5 3.0
Allowance for Credit Losses $ 498.2 406.1 331.6 279.0 262.4
Total Assets $16,931.2 15,737.3 14,376.6 12,916.9 11,472.9
Short-Term Debt $ 4,169.3 4,023.9 3,473.9 2,934.4 2,649.8
Long-Term Debt $ 8,631.1 7,792.5 7,324.8 6,754.8 5,847.7
Shareholders' Equity $ 1,694.8 1,503.0 1,400.3 1,312.2 1,207.6
Book Value per Common Share
(dollars) $ 28.79 25.80 24.34 22.78 20.90
% of Allowance for Credit
Losses to Finance
Receivables 3.40 3.03 2.69 2.53 2.74
% of Finance Receivables
with Delinquency Two Months
and Greater on a
Contractual Basis 3.38 2.98 2.46 2.67 3.24
Holders of Common Shares
(whole numbers) 14,200 14,800 15,300 15,300 15,600
Employees (whole numbers) 9,700 9,000 8,500 8,200 7,900
Consumer Finance Offices
(whole numbers) 1,186 1,130 1,090 1,066 1,056
</TABLE>
(a) Income from continuing operations includes a provision for
credit losses related to the German liquidating portfolio of
$15.0 ($.28 per share) in 1995 and $38.0 ($.72 per share) in
1994, and a $5.9 aftertax ($.11 per share) provision for
restructuring in 1995.
(b) 1995 and 1994 do not reflect $15.0 (0.12% of average
monthly balances) and $38.0 (0.33% of average monthly
balances), respectively, of credit losses related to the
German liquidating loan portfolio.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis provides information
that management believes to be relevant to an understanding of
the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with
the consolidated financial statements and the notes thereto.
Financial Condition
Reflecting two sales of $1,919 million of variable-rate
revolving home equity lines of credit to trusts created as a
real estate mortgage investment conduit (REMIC), the Company's
leverage (the ratio of interest-bearing debt to total equity)
decreased to 7.93 times at the end of 1996 from 8.29 times at
the end of 1995. The Company also completed a $1,104 million
securitization in 1995 and is planning further securitizations
during 1997.
The Company believes sufficient cash resources exist to
support its long-term growth strategies. These resources
include cash generated by operations (including repayments of
receivables) and the Company's ability to obtain additional
financing through short-term borrowings (primarily commercial
paper supported by committed bank lines), long-term borrowings
through both private and public debt offerings and periodic
securitizations. The Company's long-term debt is rated A or A+
and commercial paper 1 by all four major rating agencies.
Growth in finance receivables is primarily funded through debt
issuance.
Total owned finance receivables increased $1,256 million,
or 9%, in 1996, compared with a gain of $1,094 million, or 9%,
in 1995. Similar to 1995, growth was the strongest during the
fourth quarter and from a product line perspective, was highest
in private-label revolving charge programs marketed to large
regional and national retailers by Beneficial National Bank USA
(BNB USA), the Company's credit card bank subsidiary. Gains at
BNB USA were $1,325 million during 1996, resulting in year-end
receivables of $3,870 million. Of these gains, 87% are
attributable to three merchants, Best Buy Company, Inc. (60% of
the total gain), Kmart Corporation and PriceCostco Inc. These
three merchants also account for 64% of year-end receivables.
Reflecting the above-mentioned securitizations, variable-rate
real estate receivables declined $655 million or 20% in 1996.
Personal unsecured receivables increased $227 million or 8%.
In total, unsecured loan portfolios represented 58% of the
Company's total owned receivables outstanding at year-end 1996,
versus 50% at the end of 1995 and 43% at the end of 1994.
Total managed receivables increased $2,331 million, or
16%, compared with a gain of $1,577 million or 12% in 1995.
This trend was in large part the result of 1996 growth at BNB
USA exceeding 1995 growth by $394 million. Reflecting this
year's securitizations, as well as the remaining balance of
receivables serviced from previous securitizations, total
receivables sold with servicing retained were $2,189 million at
December 31, 1996, compared with $1,114 million at year-end
1995.
Total loans owned delinquent two months and greater on a
contractual basis increased to 3.38% at the end of 1996 from
2.98% at the end of 1995. This increase reflects both a
greater proportion of, and higher delinquency in, the credit
card and unsecured portfolios in addition to a weaker overall
consumer credit environment in North America and the United
Kingdom. On a loans managed basis, delinquency similarly
increased to 3.20% at the end of 1996 from 2.97% at the end of
1995. The table below details delinquency by product on both
an owned and managed basis for 1996 and 1995.
Managed Basis Owned Basis
<TABLE>
<S> <C> <C> <C> <C>
1996 1995 Delinquency 1996 1995
2.13% 2.17% Real Estate Secure 2.17% 2.07%
5.81 5.28 Personal Unsecured 5.81 5.28
3.23 2.76 Credit Card 3.23 2.76
3.62 2.89 Sales Finance 3.62 2.89
3.20% 2.97% Overall 3.38% 2.98%
</TABLE>
Net chargeoffs were $316.9 million versus $209.4 million
in 1995 ($224.4 million including the charges related to the
Company's German liquidating loan portfolio, discussed further
in the Results of Operations that follow). As a percentage of
average receivables, net chargeoffs increased to 2.26% from
1.64% in 1995 (1.76% including the German liquidating loan
charges). At year-end 1996, the allowance for credit losses as
a percentage of finance receivables owned was 3.40%, compared
with 3.03% at the end of 1995. At this level, the allowance
covers full-year chargeoffs 1.57 times, compared with 1.94
times in 1995 (excluding German liquidating loan charges).
During the year, the balance of the reserve increased $92.1
million to $498.2 million.
At March 31, 1996, the Company effectively disposed of the
$957 million annuity portfolio of the Central National Life
Insurance Company of Omaha, a subsidiary of the Beneficial
Insurance Group, Inc., to SunAmerica Life Insurance Company
through a co-insurance agreement. Accordingly, approximately
$900 million of investment securities were sold or transferred
to SunAmerica as part of this disposition, which resulted in
capital gains on disposition of investments and an $8.4 million
gain, after consideration of related taxes. Although the risks
of ownership have been substantially transferred to SunAmerica
by the co-insurance agreement, SunAmerica has not yet legally
assumed the policies. Therefore, the remaining $908 million in
policy reserves related to the annuity portfolio and an
offsetting deposit in other assets remain on the Company's
balance sheet to be reduced as SunAmerica legally assumes or
rewrites the policies. These policy reserves declined $49
million through December 31, 1996.
Investment securities decreased $941 million, or 63%, in
1996, largely related to the disposition of the annuity
portfolio. Following the decision to exit the annuity
business, and given the one-time reclassification allowed
temporarily under "A Guide to Implementation of Statement of
Financial Accounting Standards (SFAS) No. 115," the Company
transferred $795 million of debt securities from the "Held to
Maturity" category to the "Available for Sale" category in
December 1995, and as a result, a separate component of
shareholders' equity was increased by $12 million for net
aftertax unrealized gains on the transferred securities. The
$15.8 million reduction in unrealized gains in a separate
component of shareholders' equity during 1996 was largely the
result of the annuity portfolio disposition. See Note 7 to the
Financial Statements for more information on investment
securities.
On November 21, 1996, the Company's Board of Directors
authorized the repurchase of up to 1.2 million, or
approximately 2%, of outstanding common shares. The shares
will be repurchased from time-to-time at prices deemed
appropriate by the Company and will be placed in treasury for
general corporate purposes. This program corresponds to the
$169 million in dividends paid by the insurance, commercial
banking and Canadian subsidiaries in the fourth quarter of
1996.
Results of Operations
Net income in 1996 increased to $281.0 million from $150.5
million in 1995 and $177.7 million in 1994. The earnings
improvement in 1996 stemmed primarily from the turnaround of
the tax refund anticipation loan (RAL) business. For the year,
consolidated results included pretax earnings of $116 million
or $70 million aftertax from the RAL business, versus a pretax
loss of $63 million or $38 million aftertax in 1995 and pretax
earnings of $42 million or $25 million aftertax in 1994. The
RAL business was severely impacted in 1995 when the Internal
Revenue Service (IRS) released payment of the earned income tax
credit (EITC) portion on thousands of refunds directly to the
taxpayers who had already received the approximate amount of
their refunds through the RAL program, rather than to the
Company's banking subsidiary to repay the loan as directed by
the taxpayer. Conversely, the 1996 RAL results benefited from
prior-year bad debt collections of $48.6 million as well as
smooth and efficient processing of tax refunds by the IRS. For
the 1996 season, the Company's subsidiary, Beneficial National
Bank (BNB), did not lend on the EITC portion of any refunds.
In 1997, BNB will resume lending on the EITC portion of
refunds, primarily to prior customers in good standing.
In July 1996, BNB signed a new 10-year agreement with H&R
Block Tax Services, Inc., giving BNB the exclusive right to
offer RALs to eligible H&R Block (Block) customers in all of
Block's company-owned offices. In return for the longer-term
exclusivity given to BNB, the new agreement gives Block a share
in both the revenue and credit risk of the RALs by allowing
Block Financial Corporation to purchase an interest in the
portfolio of RALs originated by Block's company-owned offices.
For the first two years of the contract, the Block interest
will be 40%; for years three through 10, the interest will be
49.99%. Although some near-term profits will be sacrificed,
the new agreement provides longevity and stability to BNB's RAL
product. Prior agreements called for the renegotiation of a
contract every three years.
The absolute lending spread increased from the preceding
year by 11% in both 1996 and 1995, with the increases largely
attributable to higher average owned receivables. As a
percentage of average owned receivables, the lending spread was
9.84%, compared with 9.71% in 1995 and 9.65% in 1994. The
average yield on the portfolio was 15.85% in 1996, compared
with 16.32% in 1995 and 15.67% in 1994. Over the same periods,
interest expense as a percentage of average owned receivables
was 6.01% in 1996 versus 6.61% in 1995 and 6.02% in 1994. In
North America, the fixed-rate real estate secured loans
originated in 1996 were written at an average yield of 13.23%,
compared with 13.85% in 1995 and 14.51% in 1994, while variable-
rate real estate secured loans were written at a spread over
prime of approximately 366 basis points in 1996, compared with
approximately 400 and 440 basis points during the prior two
years. In 1996, the average yield on unsecured personal loans
written in North America was 25.64%, compared with 25.41% and
25.28% in 1995 and 1994, respectively. The average yield on
the credit card portfolio was 16.02% in 1996, versus 17.45% in
1995 and 16.26% in 1994.
Interest expense decreased $3.4 million from the preceding
year in 1996 and increased $142.6 million in 1995. 1996
worldwide average borrowing costs decreased to 6.54% from 7.22%
in 1995 and 6.57% in 1994. Higher borrowing levels added
$101.4 million and $72.9 million in interest costs from the
preceding year in 1996 and 1995, while the corresponding
fluctuations resulting from interest rate changes were a
decrease of $104.8 million in 1996 and an increase of $69.7
million in 1995. The Company minimizes its exposure to
interest rate risk by closely managing the gap between its
interest-sensitive assets and liabilities. The Company
utilizes interest rate swaps to moderate its exposure to
interest rate fluctuations. See Notes 2h and 23 to the
Financial Statements for more information on derivatives.
Lending spreads, as a percentage of average receivables,
were up modestly from 1995 in both the U.S. consumer finance
subsidiaries and in the international operations. The
increased lending spread from 1995 also reflected a reduced
cost of carry on RAL receivables. These favorable trends were
mitigated by lower spreads at BNB USA, where the interest
margin declined by approximately 120 basis points from 1995.
This spread reduction was largely the result of a higher
proportion of receivables outstanding during the year from
special financing plans, which defer customer interest for up
to 13 months, as well as a higher level of convenience usage
(i.e., customers paying off balances within the grace period
before finance charges accrue). Further, special financing
portfolio performance was not consistent with pricing
assumptions. BNB USA is in the process of attempting to
rectify these situations. At December 31, 1996, special
financing plans represented 56% of BNB USA's portfolio.
BNB USA profitability was further dampened by $65 million
of up-front loan loss provisioning on the strong receivables
growth experienced in 1996 and $10 million of start-up costs
relating to programs for Kmart and PriceCostco. Accordingly,
BNB USA earnings were at virtual breakeven in 1996, versus
pretax profits of $35.1 million and $9.8 million in 1995 and
1994, respectively. While management anticipates considerable
profit improvement at BNB USA in 1997, the actual results will
depend on the outcome of pricing renegotiations with a number
of the larger merchants, the magnitude of special financing
conversion to standard plans, and the level of continuing start-
up costs associated with the two new merchant programs.
The Beneficial Insurance Group, Inc., reported pretax
income of $104.0 million ($79.6 million excluding the annuity-
related capital gains) in 1996, versus $77.1 million and $69.9
million in 1995 and 1994. These trends reflect the
continuation of strong production of credit insurance and well-
controlled loss ratios. During the third quarter of 1996, the
decision was made to discontinue marketing credit insurance
through non-affiliated independent credit providers. The
customer base of this business was primarily commercial banks
and thrift institutions in the Northeast. This decision will
not materially affect either the Company's financial condition
or results of operations.
Harbour Island Inc., the Company's real estate subsidiary
in Tampa, Florida, recorded a pretax loss, on a fully debt-
funded basis, of $18.7 million in 1996, down from $19.5 million
in 1995, but increased from $18.0 million in 1994. The 1996
results reflect the sale of two luxury apartment complexes at a
pretax gain of $1.6 million. These sales reduced the Company's
investment in Harbour Island by approximately $10 million.
Nearly all of the losses in recent years represent imputed
interest costs computed at the Company's overall melded cost of
funds rate and depreciation charges. The pretax loss relating
to Harbour Island Inc. is likely to continue at current levels,
unless substantial portions of the real estate on Harbour
Island are sold.
Other revenues increased 99% in 1996 from the preceding
year following a decrease of 4% in 1995. The 1996 increase in
other revenue of $228.8 million related to the previously
mentioned turnaround of the RAL business, the capital gain
related to the disposition of the annuity portfolio, increased
servicing revenue relating to securitized receivables and
securitization gains of $55.3 million in 1996 versus $23.5
million and $15.4 million in 1995 and 1994, respectively.
Comparing 1995 with 1994, the previously discussed fluctuations
from the RAL business were largely offset by increased
servicing revenue and gains from the aforementioned
securitization.
The provision for credit losses increased $118.6 million,
or 42%, in 1996 compared with an increase of $81.5 million, or
41%, in 1995 (excluding the German charge). The increase in
1996 and 1995 reflects higher chargeoffs, as well as additions
to the allowance for credit losses corresponding to increased
unsecured receivables growth. The increased chargeoffs were
entirely in the unsecured product lines, reflecting both the
expected maturing of the BNB USA portfolio and a higher
incidence of bankruptcies in North America. As a percentage of
receivables, credit card chargeoffs increased to 3.81% in 1996
from 2.73% in 1995, and personal unsecured chargeoffs increased
to 4.55% from 3.79% in 1995. Management expects this credit
card trend to continue in 1997 (though at a less rapid rate of
increase than in prior years) as the portfolio matures, while
the personal unsecured rates will continue to reflect the
economic cycle and the economic health of the consumer. As a
percentage of average owned receivables, the provision was
2.95%, compared with 2.27% in 1995 (2.39% including the German
liquidating loan charges).
Salaries and other operating expenses, combined, were up
10% in 1996 and 14% in 1995 over the respective prior years,
generally reflecting normal increases attributable to growth in
receivables. These trends also reflected the previously
mentioned costs associated with new merchant programs and
expenses relating to a second data center opened during the
fourth quarter of 1996. The 1996 comparisons with the prior
year benefited from lower RAL collection expenses, and savings
from the fourth-quarter 1995 restructuring. As a percentage of
average managed receivables, salaries and other operating
expenses were 6.65%, 6.85% and 6.89% in 1996, 1995 and 1994,
respectively.
In December 1994, the Company announced its intent to sell
its German consumer banking subsidiary, BFK Bank AG (BFK).
Simultaneously, the Company recorded a $38.0 million, or $0.72
per share, charge to reflect potential credit losses and
related expenses at BFK on a block of loans granted to finance
the purchase of campground sites by German consumers from
Fundus Grundstuecks GmbH (Fundus), a German financial services
company that ultimately went bankrupt.
During 1995, negotiations and other work-out efforts
relating to the Fundus loans, both apart from and in
conjunction with the possible BFK sales, did not progress as
anticipated in the original loss estimates. As a result, in
December 1995, the Company recorded a $15.0 million, or $0.28
per share, charge for additional potential losses relating to
the Fundus portfolio. In December 1995, the Company announced
the decision to retain BFK as no acceptable offers were
received, and new management was put in place. Following a
thorough analysis of BFK's entire loan portfolio, and the
supporting collateral, the Company recorded a $10.0 million, or
$0.19 per share provision for loan losses related to other (non-
Fundus) commercial loans. None of the above mentioned German
charges had a tax offset because of BFK's net operating loss
position at that time. In October 1996, BFK was renamed
Beneficial Bank AG (BBAG).
Also in October 1996, a settlement agreement relating to
most of the Fundus loans was concluded. In return for certain
cash payments from the borrowers, the loans were canceled and
BBAG obtained title to the underlying collateral. The
previously established loss reserves were evaluated in light of
the settlement and determined to be adequate by management.
The campground sites will be professionally managed until
liquidation. This collateral had a carrying value of $5.0
million at December 31, 1996.
In the fourth quarter of 1995, the Company implemented an
expense-reduction program principally within its headquarters
operations. This program resulted in a $9.8 million pretax
restructuring charge, which was largely early retirement and
severance expenses corresponding to workforce reductions of
225. This restructuring charge reduced net income on an
aftertax basis by $5.9 million or $0.11 per share in 1995.
Although the statutory rate was 35% for all years, the
Company's effective tax rates were 38.7% in 1996, 44.3% in 1995
and 45.5% in 1994. The effective rate in 1996 benefited from
the utilization of approximately $8 million of additional
foreign tax credits, resulting from the Company's election to
modify the methodology for calculating foreign tax credit
limitations. This election is expected to improve the
Company's ability to utilize foreign tax credits in the future
with a resulting benefit to the future effective rate. The
effective tax rate was substantially higher in 1995 and 1994
because of the German charges, which were not offset by tax
benefits. Beyond these items, taxes are higher than the U.S.
federal statutory rate primarily because of state income taxes.
Because of the Company's earnings level, a valuation allowance
is established only on foreign tax credit carryforwards. The
net deferred tax assets is approximately $232 million at
December 31, 1996. Management has determined, based on the
Company's history of prior operating earnings and its
expectations for future earnings, that operating income of the
Company will be sufficient to recognize fully these deferred
tax assets. See Note 17 to the Financial Statements for
further discussion.
In 1992, the IRS completed its examination of the
Company's federal income tax returns for 1984 through 1987 and
proposed certain adjustments that relate principally to
activities of the Company's former subsidiary, American
Centennial Insurance Company, prior to its sale in 1987.
Although prepayments were made thereon in 1992, the Company
contested the proposed adjustments within the administrative
appeals process of the IRS. During the third quarter of 1996,
the IRS issued a statutory Notice of Deficiency asserting the
unresolved adjustments. The Company fully intends to oppose
the adjustments through litigation. Management does not expect
the ultimate resolution of these issues to have a material
effect on the Company's financial position, results of
operations or liquidity. See Note 27 to the Financial
Statements for further discussion of the assessment.
During the fourth quarter of 1996, the Company decided to
implement a broad-based option program for substantially all
employees who do not participate in the existing option plan.
This program resulted in the issuance of approximately 900,000
options on January 31, 1997, at a strike price 20% above the
market price at the date of issuance. See Note 20 to the
Financial Statements for further information regarding stock
options.
Changes in Cash Flow and Liquidity
The principal sources of cash are collections of finance
receivables, proceeds from the issuance of short- and long-term
debt, and cash provided from operations (including maturities
and repayments of its receivables). The monthly collections of
cash principal as a percentage of average receivables were
5.51% in 1996 and 5.03% in 1995. Also, from time to time,
subsidiaries of the Company sell home equity loans through
securitizations in the capital markets.
Substantial additional liquidity is available through
committed bank credit lines that the Company maintains in
support of its commercial paper borrowings. During the fourth
quarter of 1995, the Company entered into a $3 billion, five-
year syndicated revolving credit agreement, which replaced the
various one-and three-year bilateral agreements, totaling $2.9
billion, that the Company had previously maintained. This
syndicated revolving credit agreement has a $1.0 billion net-
worth test. At year-end 1996, total standby lines of credit
were $4.2 billion, of which $3.8 billion was unused.
One of the Company's financial strengths is its ability to
raise long-term debt in a wide variety of domestic and
international markets. Including medium-term notes, long-term
debt represented 64% of the Company's funding base at the end
of 1996, compared with 63% at the end of 1995. In 1996, the
Company issued $1.8 billion in variable-rate medium-term notes
at an all-in cost slightly above the Company's cost of
commercial paper borrowings. The average maturity was 2.4
years. Fixed-rate medium-term note issuances totaled $0.6
billion, at an average coupon of 6.54% and an average maturity
of 6.5 years. In addition, the Company had available under
shelf registrations with the Securities and Exchange Commission
$1.5 billion of unissued debt securities at year-end 1996.
The Company hedges the majority of its investment in
foreign subsidiaries by selling at-the-money (spot) call
options and buying out-of-the-money (spot) put options on
Canadian dollars and British pounds. With the exception of the
strike rates, all terms of the call and put are identical. The
notional amount of each option is an amount that will generally
produce offsetting gains or losses (on an aftertax basis) to
the gains or losses produced by the underlying net investment.
The combination of these instruments (a "no cost collar") is
effectively a partial hedge, as hedging gains or losses occur
only when the spot rates fluctuate outside the range of the
respective strike rates. These option transactions generally
have a maturity of three to six months. Foreign currency swaps
and forward exchange agreements are also utilized to hedge a
portion of the Company's investment in foreign subsidiaries.
The Company monitors the effectiveness of its hedging
program through a quarterly analysis comparing the foreign
exchange gains and losses on the investments in foreign
operations to hedge gains and losses because of currency
fluctuations. Hedge gains and losses are calculated by
comparing the option strike rate to the spot exchange rate on
each financial statement date as though the option were
exercised at that time. There were no amounts recognized in
net income during the three years ended December 31, 1996.
Gains and losses in excess of the amount needed to offset gains
or losses on investments in foreign subsidiaries because of
currency fluctuations are not expected given the above hedging
strategy. See Notes 2h and 23 to the Financial Statements for
further information on derivatives.
The Company minimizes all off-balance-sheet credit risk
exposure by limiting the counterparties to major international
banks and financial institutions. The Company has never
experienced nonperformance by any counterparty.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," and SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of SFAS
No 125." SFAS 125 as amended by SFAS 127 standardizes the
accounting and disclosures required for securitizations and
transfers and servicing of other financial assets. The
statement is effective for certain transactions occurring after
December 31, 1996. The statement will not have a material
effect on the Company's financial position or result of
operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
OF BENEFICIAL CORPORATION:
We have audited the accompanying consolidated balance
sheets of Beneficial Corporation and Subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of income and retained earnings and cash flows for
each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of the
Corporation's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Beneficial Corporation and Subsidiaries as of
December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 28, 1997
BENEFICIAL CORPORATION AND SUBSIDIARIES
BALANCE SHEET
<TABLE>
<S> <C> <C>
December 31
1996 1995
(in millions)
ASSETS
Cash and Equivalents $ 279.6 $ 273.1
Finance Receivables (Note 5) 14,672.0 13,416.2
Allowance for Credit Losses (Note 6) (498.2) (406.1)
Net Finance Receivables 14,173.8 13,010.1
Investment Securities (Note 7) 550.3 1,491.4
Property and Equipment 204.9 183.1
Other Assets (Note 8) 1,722.6 779.6
TOTAL ASSETS $16,931.2 $15,737.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-Term Debt (Note 10) $ 4,169.3 $ 4,023.9
Deposits Payable 635.0 642.5
Long-Term Debt (Note 11) 8,631.1 7,792.5
Total Interest-Bearing Debt 13,435.4 12,458.9
Accounts Payable and Accrued
Liabilities (Note 9) 534.0 509.9
Insurance Policy and Claim Reserves 1,267.0 1,265.5
Total Liabilities $15,236.4 $14,234.3
Shareholders' Equity:
Preferred Stock (Note 12) 114.8 114.8
Common Stock (160.0 shares authorized;
54.0 and 53.2 shares outstanding)
(Note 12) 54.0 53.2
Additional Capital (Note 13) 305.3 270.0
Net Unrealized Gain on Investment
Securities (Note 7) 2.6 18.4
Accumulated Foreign Currency
Translation Adjustments (45.4) (46.4)
Retained Earnings 1,263.5 1,093.0
Total Shareholders' Equity 1,694.8 1,503.0
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $16,931.2 $15,737.3
</TABLE>
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF INCOME AND RETAINED EARNINGS
Years Ended December 31
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
(in millions, except per share amounts)
REVENUE
Finance Charges and Fees $2,143.5 $2,014.6 $1,753.7
Interest Expense 812.8 816.2 673.6
Lending Spread 1,330.7 1,198.4 1,080.1
Insurance Premiums 168.7 152.7 143.7
Other (Note 18) 459.7 230.9 240.0
Total 1,959.1 1,582.0 1,463.8
OPERATING EXPENSES
Salaries and Employee Benefits 412.6 384.6 350.7
Insurance Benefits 82.8 80.4 86.5
Provision for Credit Losses 398.8 280.2 198.7
Provision for Credit Losses on German
Liquidating Loan Portfolio (Note 3) -- 15.0 38.0
Provision for Restructuring (Note 4) -- 9.8 --
Other (Note 19) 606.4 541.6 463.8
Total 1,500.6 1,311.6 1,137.7
Income Before Income Taxes 458.5 270.4 326.1
Provision for Income Taxes (Note 17) 177.5 119.9 148.4
NET INCOME 281.0 150.5 177.7
Retained Earnings, Beginning of Period 1,093.0 1,042.2 953.7
Dividends Paid (Note 22) (110.5) (99.7) (89.2)
RETAINED EARNINGS, END OF PERIOD $1,263.5 $1,093.0 $1,042.2
EARNINGS PER COMMON SHARE $ 5.08 $ 2.72 $ 3.28
DIVIDENDS PER COMMON SHARE $ 1.98 $ 1.80 $ 1.62
AVERAGE COMMON SHARES OUTSTANDING 54.3 53.5 52.6
</TABLE>
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
Years Ended
December 31
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 281.0 $ 150.5 $ 177.7
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Provision for Credit Losses 398.8 280.2 198.7
Provision for Credit Losses on German
Liquidating Loan Portfolio -- 15.0 38.0
Provision for Restructuring -- 9.8 --
Provision for Deferred Income Taxes (32.5) (35.0) (30.9)
Depreciation and Amortization 49.6 48.8 49.1
Insurance Policy and Claim Reserves 1.5 180.8 169.0
Accounts Payable and Accrued Liabilities 24.1 50.2 63.5
Net Cash Provided by Operating
Activities 722.5 700.3 665.1
CASH FLOWS FROM INVESTING ACTIVITIES
Receivables Originated or Acquired (12,341.8) (9,860.3) (8,251.3)
Receivables Collected 8,943.2 7,443.3 6,064.1
Receivables Securitized 1,919.3 1,103.8 757.0
Available-For-Sale Investments Purchased (492.8) (313.9) (219.7)
Held-To-Maturity Investments Purchased (13.0) (78.2) (251.1)
Available-For-Sale Investments Sold 1,032.6 97.5 55.0
Available-For-Sale Investments Matured 372.9 154.5 158.9
Held-To-Maturity Investments Matured 5.3 21.1 66.3
Property and Equipment Purchased (62.6) (37.2) (25.0)
Deposit from Reinsurer (908.3) -- --
Other 43.1 (15.4) (7.4)
Net Cash Used in Investing
Activities (1,502.1) (1,484.8) (1,653.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-Term Debt, Net Change 88.9 556.4 537.3
Deposits Payable, Net Change 9.2 (29.4) 9.0
Long-Term Debt Issued 2,782.3 3,102.1 2,767.1
Long-Term Debt Repaid (1,983.8) (2,661.3) (2,228.5)
Dividends Paid (110.5) (99.7) (89.2)
Net Cash Provided by Financing
Activities 786.1 868.1 995.7
NET INCREASE IN CASH AND EQUIVALENTS 6.5 83.6 7.6
Cash and Equivalents at Beginning of Period 273.1 189.5 181.9
CASH AND EQUIVALENTS AT END OF PERIOD $ 279.6 $ 273.1 $ 189.5
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid $ 816.2 $ 823.4 $ 680.0
Income Taxes Paid 222.9 154.8 150.5
</TABLE>
See Notes to Financial Statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(in millions, except per share amounts)
1. NATURE OF OPERATIONS
Beneficial Corporation (Company) is a holding company,
subsidiaries of which provide financial services through their
various consumer finance, banking and insurance operations
located throughout the United States, Canada, Germany, Ireland
and the United Kingdom. The Beneficial consumer finance loan
office network includes more than 1,100 offices, offering both
real estate secured loans and unsecured loans, as well as credit-
related insurance products. Additionally, other subsidiaries
offer credit card products (largely private-label), tax refund
anticipated loans and selected non-credit-related insurance
products. Approximately 40% of loans owned outstanding are
secured by real estate. The majority of net income is derived
from the consumer finance operations and credit insurance
products related to the consumer finance business. Operations in
any one country outside the United States are not significant in
relation to the Company's overall operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES
a) Basis of Consolidation. The consolidated financial
statements include the accounts of the Company and its
subsidiaries, after elimination of all significant intercompany
accounts and transactions, and have been prepared in accordance
with generally accepted accounting principles. Certain prior-
period amounts have been reclassified to conform with the 1996
presentation.
b) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
c) Finance Operations. The financial statements are prepared on
the accrual basis. Finance charges are recognized as income
using the interest method or methods that produce similar
results. Loan origination fees are deferred and amortized into
interest income over the estimated lives of the related loans,
except to the extent that they offset directly related lending
costs. Direct origination costs for credit cards are deferred
and amortized over 12 months. Income accrual is generally
suspended after 30 days on delinquent loans.
Provisions for credit losses are charged to income in amounts
sufficient to maintain the allowance for credit losses at a level
considered adequate to cover the losses of principal and interest
in the finance receivables portfolio.
Delinquent real estate secured receivables are reviewed
individually by management, and accounts known to be
uncollectible are charged off. In general, other receivables are
automatically charged off after no payment has been made for six
months. For all types of loans, collection efforts are generally
continued.
Real estate properties acquired through foreclosure are carried
at the lower of cost or estimated fair market value, minus
estimated costs to sell, determined on an individual asset basis.
Valuations are periodically performed by management, and an
allowance for possible losses is established if the book value
exceeds the estimated fair market value minus estimated costs to
sell. Residual gains or losses on disposition are recorded in
expense as incurred.
Certain real estate secured loans are accounted for as foreclosed
property ("in-substance foreclosure") even though the actual
foreclosure has not occurred. These loans are carried at the
lower of cost or estimated fair value when the borrower has
little or no equity in the collateral at its current estimated
fair value and it appears unlikely that the borrower will repay
the loan other than through liquidation of the property.
d) Receivables Sold with Servicing Retained. Periodically,
subsidiaries of the Company have sold home equity loans to trusts
created as real estate mortgage investment conduits and retain
the servicing. At the date of such securitizations, the Company
allocates the total cost of the home equity loans to mortgage
servicing rights and the loans based on their relative fair
values. Fair values are determined based on present valuing the
expected future cash flows using a discount rate commensurate
with the risks involved, adjusted for prepayments and bad debts.
Mortgage servicing rights are amortized in proportion to, and
over the period of, estimated net servicing income.
e) Insurance Operations. The Company's insurance subsidiaries
are engaged in writing credit life, credit accident and health
insurance, credit property and ordinary life insurance. Premiums
on credit life insurance are taken into income using the sum-of-
the-digits or actuarial methods, except in the case of level-term
contracts, which are taken into income using the straight-line
method over the lives of the policies. Premiums on credit
accident and health insurance are generally taken into income
using an average of the sum-of-the-digits and the straight-line
methods. Premiums for credit property are generally taken into
income using the sum-of-the-digits method or on a pro-rata basis.
Premiums for ordinary life insurance are included in income when
due. Premiums collected on annuity contracts are included as a
liability in insurance policy and claim reserves. Policy
reserves for credit life, credit accident and health insurance,
and credit property are equal to related unearned premiums.
Additionally, claim reserves for credit life, credit accident and
health insurance, and credit property are adjusted to reflect
claim experience. Liabilities for future life insurance policy
benefits associated with ordinary life contracts are accrued when
premium revenue is recognized and are computed on the basis of
assumptions as to investment yields, mortality, morbidity and
withdrawals.
f) Valuation of Investment Securities. Investments are owned
principally by the insurance subsidiaries and consist primarily
of debt securities. Investments in debt securities that the
subsidiaries have both the ability and the intention of holding
until maturity are classified as held-to-maturity securities and
reported at amortized cost (remaining principal net of
unamortized premiums or discounts). Investments that may be sold
prior to maturity to support the subsidiaries' investment
strategy, such as in response to changes in interest rates or tax
deductibility of interest, are considered as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate
component of shareholders' equity. The subsidiaries do not hold
any securities for trading purposes. The cost of investments
sold is determined on the specific cost identification basis.
g) Translation of Foreign Currencies. Operations outside the
United States are conducted through subsidiaries located in
Canada, Germany, Ireland and the United Kingdom. Assets and
liabilities of these subsidiaries are translated at the rates of
exchange at the balance sheet dates, while income and expense
items are translated at the average exchange rates for each
period covered by the statement of income and retained earnings.
The resulting translation adjustments are included in accumulated
foreign currency translation adjustments, a separate component of
shareholders' equity.
h) Derivative Financial Instruments. To hedge its investment in
foreign subsidiaries and to moderate its exposure to interest
rate fluctuations, the Company enters into various transactions
involving off-balance-sheet financial instruments. These
transactions include options, currency swaps and forwards for
foreign currency risk management and interest rate swaps and
forward rate agreements for interest rate exposure management.
Gains or losses on foreign currency instruments designated as
hedges of the Company's net investments in foreign subsidiaries
are included with translation adjustments in shareholders'
equity. Gains or losses on these instruments in excess of the
amount needed to offset net investment losses or gains are
included in income. The net amount of interest income and
interest expense on agreements used to hedge interest rate
exposure is recognized in interest expense over the lives of the
instruments. The indices on derivatives used to hedge interest
rate exposure match an index corresponding to either a specific
long-term debt instrument or to a pool of short-term debt. The
Company does not terminate these derivatives prior to maturity.
In the unlikely event of termination, gain or loss would be
reflected in the income statement, or deferred and recognized
over the remaining life of the hedged instrument.
The Company does not serve as a financial intermediary to make
markets in any off-balance-sheet financial instruments nor does
it hold or issue derivative financial instruments for trading
purposes.
i) Amortization of Intangible Assets. Premiums paid on
receivables purchased are amortized using straight-line and
accelerated methods generally over the estimated life of the
loans. Excess cost applicable to acquisitions is generally
amortized on a straight-line basis over 40 years.
j) Earnings per Common Share. Earnings per common share are
computed by deducting dividend requirements on preferred stocks
of the Company from net income and dividing the remainder by
average common shares outstanding and their equivalents. None of
the preferred stocks are common stock equivalents.
k) Cash Equivalents. The Company considers all highly liquid
debt instruments with original maturities of three months or less
to be cash equivalents.
3. PROVISION FOR CREDIT LOSSES ON GERMAN LIQUIDATING LOAN PORTFOLIO
In December 1994, the Company announced the intent to sell its
German banking subsidiary, BFK Bank AG (BFK). Simultaneously,
the Company recorded a $38.0, or $0.72 per share, charge to
reflect credit losses and related expenses on a block of BFK
loans granted to finance the purchase of campground sites by
German consumers from Fundus Grundstuecks GmbH (Fundus), a German
financial services company that ultimately went bankrupt.
During 1995, negotiations and other work-out efforts relating to
the Fundus loans, both apart from and in conjunction with the
possible BFK sale, did not progress as anticipated in the
original loss estimates. As a result, in December 1995, the
Company recorded a $15.0, or $0.28 per share, charge for
additional potential losses relating to the Fundus portfolio.
In December 1995, the Company announced the decision to retain
BFK as no acceptable offers were received, and new management was
put in place. BFK was renamed Beneficial Bank AG (BBAG) in
October 1996.
Also, in October 1996, a settlement agreement relating to most of
the Fundus loans was concluded. In return for certain cash
payments from the borrowers, the loans were canceled and BBAG
obtained title to the underlying collateral. The previously
established loss reserves were evaluated in light of the
settlement, and in management's judgment were adequate and
appropriate. The campground sites will be professionally managed
until liquidation. This collateral had a carrying value of $5.0
at December 31, 1996.
4. PROVISION FOR RESTRUCTURING
In the fourth quarter of 1995, the Company implemented an expense-
reduction program, principally within its headquarters
operations. The resulting restructuring charge reduced net
income by $5.9, or $0.11 per share, and was largely related to
early retirement and severance expenses corresponding to
workforce reductions of 225.
5. FINANCE RECEIVABLES
Finance receivables at December 31 consisted of the following:
<TABLE>
<S> <C> <C>
1996 1995
Receivables Owned:
Real Estate Secured $ 6,067.5 $ 6,636.6
Personal Unsecured 2,982.9 2,756.1
Credit Cards 4,595.8 3,084.0
Sales Finance Contracts 926.3 836.6
Commercial 99.5 102.9
Total Owned 14,672.0 13,416.2
Receivables Sold with Servicing
Retained (all real estate secured) 2,189.0 1,113.5
Total Managed $16,861.0 $14,529.7
</TABLE>
Average receivables during the years ended December 31 were as
follows:
<TABLE>
<S> <C> <C>
1996 1995
Average Receivables Owned $13,520.8 $12,339.7
Average Receivables Sold With Servicing
Retained 1,798.1 1,182.1
Average Managed $15,318.9 $13,521.8
</TABLE>
From time to time, subsidiaries of the Company have sold home
equity loans through securitizations and have retained collection
and administrative responsibilities as servicer for the trust
holding the home equity loans.
Scheduled contractual maturities of finance receivables owned to
be received after December 31, 1996, were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 1998 1999 2000 Beyond
Real Estate Secured 18% 12% 13% 13% 44%
Personal Unsecured 44 33 16 3 4
Credit Cards 56 6 6 3 29
Sales Finance Contracts 69 21 7 2 1
Commercial 25 11 12 14 38
Overall 38% 15% 11% 28% 8%
</TABLE>
While the statutes of several states place no maximum limit on
the contractual term of closed-end loans secured by real estate,
the consumer finance subsidiaries generally limit loans of this
type to periods ranging from 60 to 180 months. Terms of closed-
end unsecured loans and sales finance contracts generally do not
exceed 60 months. It is the Company's experience that a
substantial portion of all consumer receivables is renewed or
repaid prior to contractual maturity dates. Accordingly, the
previous tabulation should not be viewed as a forecast of future
cash collections. During the years ended December 31, 1996 and
1995, cash collections totaled $8,943.2 and $7,443.3,
respectively. The monthly collections of cash principal as a
percentage of average receivables were 5.51% in 1996 and 5.03% in
1995.
6. ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses were as follows:
<TABLE>
<S> <C> <C>
1996 1995
Balance at Beginning of Year $ 406.1 $ 331.6
Accounts Charged Off (363.3) (247.2)*
Recoveries on Accounts Previously Charged Off 46.4 37.8
Provision for Credit Losses 398.8 280.2*
Other 10.2 3.7
Balance at End of Year $ 498.2 $ 406.1
</TABLE>
*Does not reflect $15.0 pertaining to German liquidating loan
portfolio (see Note 3).
7. INVESTMENT SECURITIES
In the fourth quarter of 1995, the Company decided to exit its
annuity business. The actual disposition of the annuity business
and the capital gain from the sale of corresponding investments
increased net income by $8.4, or $0.16 per share, in March 1996.
In light of this decision, and the one-time reclassification
allowed temporarily under "A Guide to Implementation of Statement
of Financial Accounting Standards (SFAS) No. 115," the Company
transferred $795.4 of debt securities from the "Held-To-Maturity"
category to the "Available-For-Sale" category in December 1995.
An unrealized gain of $12.4, net of income taxes of $6.7, was
recorded in the separate component of shareholders' equity as a
result of this transfer. As of December 31, 1996, shareholders'
equity included a net unrealized gain of $2.6, consisting of a
$3.8 net gain on the Available-For-Sale portfolio, offset by a
$1.2 of applicable income taxes.
Investments at December 31 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
1996 Cost Gains Losses Value
Available-For-Sale
Debt Securities:
Corporate $273.6 $5.3 $3.4 $275.5
Mortgage-backed 35.1 1.2 .2 36.1
Municipal 7.3 .1 .1 7.3
U.S. Government 93.9 .6 .2 94.3
Foreign Government 42.4 .5 -- 42.9
452.3 7.7 3.9 456.1
Equity Securities .6 -- -- .6
Total $452.9 $7.7 $3.9 $456.7
Held-To-Maturity
Debt Securities:
Corporate $ 48.9 $ .1 $ .7 $ 48.3
Mortgage-backed 2.6 -- .1 2.5
Municipal 8.5 .2 -- 8.7
U.S. Government 14.4 -- .2 14.2
Foreign Government 1.1 -- -- 1.1
Other 18.1 -- -- 18.1
Total $ 93.6 $ .3 $1.0 $ 92.9
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
1995 Cost Gains Losses Value
Available-For-Sale
Debt Securities:
Corporate $ 777.4 $32.9 $2.8 $ 807.5
Mortgage-backed 327.0 8.6 .1 335.5
Municipal 19.5 .7 -- 20.2
U.S. Government 172.8 3.5 -- 176.3
Foreign Government 56.8 2.6 -- 59.4
1,353.5 48.3 2.9 1,398.9
Equity Securities 6.3 -- -- 6.3
Total $1,359.8 $48.3 $2.9 $1,405.2
Held-To-Maturity
Debt Securities:
Corporate $41.2 $ .4 $.1 $41.5
Mortgage-backed 2.6 .1 -- 2.7
Municipal 7.9 .4 -- 8.3
U.S. Government 17.5 .1 .1 17.5
Foreign Government 1.1 -- -- 1.1
Other 15.9 -- -- 15.9
Total $86.2 $1.0 $.2 $87.0
</TABLE>
The contractual maturities of debt securities at December 31,
1996, are shown in the table that follows. Actual maturities may
differ from contractual maturities because some borrowers may
have the right to prepay obligations, with or without prepayment
penalties.
<TABLE>
<S> <C> <C>
Amortized Estimated
1996 Cost Market Value
Available-For-Sale
Due within one year $ 45.9 $ 46.3
Due one through five years 142.4 144.4
Due five through ten years 255.2 256.0
Due after ten years 8.8 9.4
Total $452.3 $456.1
Held-To-Maturity
Due within one year $ 6.4 $ 6.4
Due one through five years 43.6 43.2
Due five through ten years 34.3 34.2
Due after ten years 9.3 9.1
Total $ 93.6 $ 92.9
</TABLE>
Proceeds from sales of Available-For-Sale securities totaled
$1,032.6 in 1996, compared with $97.5 in 1995. Gross gains of
$27.5 in 1996 and $4.0 in 1995, and gross losses of $1.6 in 1996
and $0.4 in 1995, were realized on those sales.
8. OTHER ASSETS
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Annuity Deposit $ 908.3 $ --
Deferred Income Tax Benefits 232.3 195.5
Excess Cost of Net Assets Acquired 14.6 16.6
Excess Servicing Asset 54.9 19.9
Investments in and Advances to
Discontinued Operations 15.0 15.7
Miscellaneous Accounts and
Notes Receivables 70.1 91.5
Prepaid Expenses 130.7 116.7
Property Acquired by Foreclosure 100.2 101.2
Recoverable Income Taxes 44.6 45.7
Unamortized Insurance Policy
Acquisition Costs 36.0 54.8
Other 115.9 122.0
Total $1,722.6 $779.6
</TABLE>
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Accounts Payable $191.5 $144.6
Accrued and Deferred Compensation 72.1 76.1
Accrued Interest 69.5 72.9
Accrued Postretirement Benefits 61.1 60.5
Accrued Pension Cost 18.4 19.9
Income Taxes Payable 42.0 85.2
Insurance Premiums Payable 32.2 20.8
Other 47.2 29.9
Total $534.0 $509.9
</TABLE>
10.SHORT-TERM DEBT
Short-term debt, including $916.9 and $922.9 relating to foreign
subsidiaries at year-end 1996 and 1995, respectively, consisted
of the following:
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Commercial Paper $3,695.4 $3,506.2
Bank Borrowings 473.9 517.7
Total $4,169.3 $4,023.9
</TABLE>
Selected details of short-term borrowings are as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Highest Aggregate at Any Month-End $4,571.3 $4,023.9 $4,052.6
Daily Average Amount 3,846.2 3,366.3 3,110.5
Weighted Average Interest Rates:
At Year-End
Commercial Paper 5.38% 5.85% 6.05%
Bank Borrowings 6.17 6.71 6.23
Overall 5.49 5.98 6.07
Paid During Year*
Commercial Paper 5.52 6.24 4.51
Bank Borrowings 6.46 7.19 5.83
Overall 5.63% 6.37% 4.58%
</TABLE>
*Weighted average interest rates paid during the year have been
determined by relating short-term interest costs (including the
costs of maintaining lines of credit) for each year to the daily
average dollar amounts outstanding.
The Company maintains committed revolving credit agreements in
support of its outstanding commercial paper. At December 31,
1996, the Company had lines of credit of $4,211.5, of which
$3,795.4 was unused. The most significant of these credit
agreements has a net-worth test of $1,000. Annual commitment fee
requirements to support availability of credit agreements at the
end of 1996 totaled $4.1.
The impact of interest rate hedging activities on the Company's
weighted average short-term borrowing rates and on the reported
short-term interest expense were increases as follows: .13% and
$5.1 in 1996; .05% and $1.7 in 1995; and .16% and $4.9 in 1994.
11.LONG-TERM DEBT
<TABLE>
<S> <C> <C>
At December 31 1996 1995
United States $7,832.2 $7,263.6
Canada 338.6 285.3
Germany 31.6 72.3
United Kingdom 428.7 171.3
Total $8,631.1 $7,792.5
</TABLE>
Long-term debt, including weighted average interest rates by year
of maturity on debt outstanding at December 31, 1996, is shown
below in the earliest year it could become payable:
<TABLE>
<S> <C> <C> <C>
Average Rates
Maturity 1996 1996 1995
1996 $2,063.5
1997 6.49% $2,610.1 2,164.5
1998 7.00 1,982.0 1,189.9
1999 6.65 1,669.7 891.2
2000 7.57 554.9 422.8
2001 7.19 632.4 330.5
2002-2006 6.93 984.7 532.8
2007-2023 7.84 197.3 197.3
Total 6.84% $8,631.1 $7,792.5
</TABLE>
The weighted average annual interest rates on debt outstanding at
year-end were 6.84%, 7.24% and 7.62% for 1996, 1995 and 1994,
respectively. Weighted average interest rates (including
issuance costs) paid during the year on average long-term debt
outstanding were 7.07%, 7.56% and 7.39% for years ended December
31, 1996, 1995 and 1994, respectively.
Long-term debt outstanding at December 31, 1996 and 1995,
includes $3,815.7 and $2,817.4, 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.
The impact of interest rate hedging activities on the Company's
weighted average long-term borrowing rates and on the reported
long-term interest expense were increases (or decreases) as
follows: .06% and $4.8 in 1996; .05% and $3.7 in 1995; and (-%)
and ($.2) in 1994.
12.CAPITAL STOCK
Shares of capital stock outstanding were as follows:
<TABLE>
<S> <C> <C> <C>
At December 31 1996 1995 1994
5% Cumulative Preferred - $50 par value.
Authorized, 585,730 407,718(a 407,718(a 407,718(a
$5.50 Dividend Cumulative Convertible
Preferred - no par value - $20 stated
value (each share convertible into nine
shares of Common; maximum liquidation
value, $1,845,700, $2,031,000 and
$2,236,200). Authorized, 1,164,077
Outstanding Shares Beginning of Year 20,310 22,362 25,525
Conversion into Common. (1,853) (2,052) (3,163)
Outstanding Shares End of Year 18,457 20,310 22,362
$4.50 Dividend Cumulative Preferred -
$100 par value. Authorized, 103,976 103,976 103,976 103,976
$4.30 Dividend Cumulative Preferred -
no par value - $100 stated value.
Authorized, 1,069,204 836,585 836,585 836,585
Common - $1 par value. Authorized
160,000,000
Outstanding Shares Beginning of
Year 53,197,422 52,509,728 52,170,270
Conversion of $5.50 Preferred
into Common 16,677 18,468 28,467
Exercise of Stock Options 827,115 669,903 310,991
Transfer into Treasury from Treasury
Shares Held as an Asset -- (677) --
Outstanding Shares End of Year 54,041,214(b 53,197,422(b 52,509,728(b
After deducting treasury shares:
a) 5% Cumulative Preferred 178,012 178,012 178,012
b) Common 2,800,304 3,627,419 4,269,645
</TABLE>
In addition, the Company is authorized to issue 500,000 shares of
preferred stock (no par value) and 2,500,000 shares of preferred
stock ($1.00 par value). Included within such shares are 570,000
shares of Series A Participating Preferred Stock ($1.00 par
value) that the Company is authorized to issue in connection with
Preferred Stock Purchase Rights (see Note 14). None of these
authorized preferred shares are issued or outstanding.
At December 31, 1996, a total of 166,113 shares of common stock
was reserved for conversion of $5.50 Dividend Cumulative
Convertible Preferred Stock.
13.ADDITIONAL CAPITAL
Additional capital increased by $35.3 and $23.5 in 1996 and 1995,
respectively. The increase in both years resulted from stock
issuances in connection with various employee stock plans,
primarily the non-qualified stock option plan described in Note
20.
14.PREFERRED STOCK PURCHASE RIGHTS
In 1987, the Company issued one Preferred Stock Purchase Right
(Right) for each outstanding share of common stock of the
Company. Under certain circumstances, each Right entitles the
registered holder to purchase from the Company one two-hundredth
of a share of the Company's Series A Participating Preferred
Stock at a price of $87.50, subject to adjustment. Until the
Rights become exercisable, expire or are redeemed, they will
automatically trade with the common stock but will at no time
have voting power.
The Rights will be exercisable under circumstances generally
involving certain acquisitions of, or tender offers for, the
common stock, or if a 10% stockholder is declared an "Adverse
Person" by the Board of Directors. If, at any time after the
Rights become exercisable, but before they expire or are
redeemed, the Company is acquired in a merger or other business
combination or sells 50% or more of its assets or earning power,
the holder of a Right will be entitled to buy, at the exercise
price, a number of shares of Common Stock of the acquiring or
surviving company having a market value of twice the exercise
price of each Right.
Generally, the Rights may be redeemed by the Company for $.025
per Right at any time prior to the expiration of the Rights on
November 23, 1997.
On August 22, 1996, the Board of Directors of the Company adopted
a Renewed Rights Agreement which will become effective upon the
expiration date of the existing Rights Agreement. One new
Preferred Stock Purchase Right will be issued for each share of
common stock, par value $1.00 per share, of the Company
outstanding on the expiration date of the existing Rights
Agreement and for each share of common stock issued thereafter.
The Renewed Rights Agreement is substantially identical to the
existing Rights Agreement, except that (i) the exercise price per
Preferred Stock Purchase Right has been increased from $87.50 to
$235, (ii) the redemption price per Right has been reduced from
$.025 to $.01, (iii) the amendment provisions have been changed
to permit the Company to alter the exercise price of the Rights
or to extend the Renewed Rights Agreement's duration beyond its
10-year term, and (iv) each Right will entitle the registered
holder to purchase from the Company one one-hundredth of a share
of the Company's Series A Participating Preferred Stock. As with
the existing Rights agreement, until the Rights become
exercisable, expire or are redeemed, they will automatically
trade with the common stock but will at no time have voting
power.
15.EMPLOYEE RETIREMENT PLANS
The Company has a non-contributory defined benefit pension plan
covering substantially all employees of the Company and its
subsidiaries in the United States. The benefits provided are
based on the employee's age, years of service, and average
compensation during the highest three consecutive years of
earnings. The Company has made annual contributions at least
equal to the amounts accrued for retirement expense. Plan assets
are invested primarily in equity securities and corporate bonds.
Employees of subsidiaries outside the United States generally
receive retirement benefits from Company-sponsored plans or from
statutory plans administered by governmental agencies in other
countries.
Net pension expense for domestic operations was $7.5, $6.8 and
$6.6 for 1996, 1995 and 1994, respectively. Pension expense for
the Company's subsidiaries outside the United States was $2.7,
$2.6 and $1.7 for the same periods. In addition, the Company
funds two 401(k) savings plans, which collectively cover
substantially all employees of the Company and its subsidiaries
in the United States, under which basic contributions are made
annually up to 2.5% of each eligible employee's annual
compensation up to $0.15. Related costs charged to income for
the years ended December 31, 1996, 1995 and 1994, were $4.8, $4.6
and $4.8, respectively.
The domestic plan's funded status and amounts recognized in the
Company's balance sheet are as follows:
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Actuarial Present Value of
Benefit Obligation:
Vested Benefits $ 45.4 $ 43.4
Non-Vested Benefits 15.0 16.9
Accumulated Benefit Obligation 60.4 60.3
Effect of Future Salary Increases 43.5 42.5
Projected Benefit Obligation 103.9 102.8
Less Plan Assets at Fair Value 65.0 64.8
Projected Benefit Obligation in Excess
of Plan Assets 38.9 38.0
Less Unrecognized Net Loss 20.5 18.1
Accrued Pension Cost Included in
Accounts Payable and Accrued
Liabilities $ 18.4 $ 19.9
</TABLE>
For 1996, the projected benefit obligation was determined using
an assumed discount rate of 7.50% (compared with 7.25% in 1995),
an assumed long-term rate of return on assets of 9.0%, and an
assumed long-term rate of increase in future compensation levels
of 4.5%.
The following table details the components of net pension expense
for domestic operations:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Service Cost - Benefits Earned During Period $ 5.4 $ 4.4 $ 4.7
Interest Cost on Projected Benefit Obligation 7.6 7.6 6.8
Actual Return on Plan Assets (7.1) (12.3) --
Net Amortization and Deferral 1.6 7.1 (4.9)
Net Periodic Pension Cost $ 7.5 $ 6.8 $ 6.6
</TABLE>
16.POSTRETIREMENT BENEFITS
The Company provides postretirement health and dental care
benefits to eligible employees in the United States, along with
their spouses and eligible dependents. Employees become eligible
for these benefits if they meet minimum age and service
requirements and if they agree to contribute a portion of the
cost. The associated plans are unfunded, and approved claims are
paid from Company funds. Under the terms of the plans, the
Company reserves the right to modify or terminate the plans.
Most employees outside the United States are covered by
government health care programs. The cost of such programs is
not significant to the Company.
The cost to the Company of postretirement benefits consisted of
the following components:
<TABLE>
<S> <C> <C> <C>
At December 31 1996 1995 1994
Postretirement Benefit Cost:
Service Cost - benefits attributable
to service during the year $2.0 $1.5 $1.6
Interest Cost on Accumulated
Benefit Obligation 4.1 4.2 3.7
Amortization of Deferred Gain (0.3) (0.8) (0.7)
Total $5.8 $4.9 $4.6
</TABLE>
The actuarial and recorded liabilities for these benefits were as
follows:
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Accumulated Postretirement Benefit
Obligation:
Retirees $38.8 $39.9
Fully Eligible Active Plan Participants 10.3 8.9
Other Active Plan Participants 12.0 11.7
Total $61.1 $60.5
</TABLE>
For measurement purposes, a 10.2% pre-65 trend rate was used for
1996, decreasing from 11.0% in 1995, with an ultimate rate of
5.0% in 2012. In addition, a 9.7% post-64 trend rate was used
for 1996, decreasing from 10% in 1995, with an ultimate rate of
5.0% in 2017. For dental costs, a trend rate of 6.0% was used
for 1996, down from 6.5% in 1995, with an ultimate rate of 4.0%
in 2000. The discount rate was 7.50% at December 31, 1996, and
7.25% at December 31, 1995. A one-percentage-point increase in
the health care trend rate would have increased the accumulated
postretirement benefit obligation by $5.7 at year-end 1996 and
would have added $0.8 to the benefit cost for the year.
17.INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Federal:
Current:
U.S. $177.0 $124.1 $149.8
Foreign 16.0 18.4 16.4
Total 193.0 142.5 166.2
Deferred:
U.S. (32.8) (34.2) (30.9)
Foreign 0.3 (0.8) --
Total (32.5) (35.0) (30.9)
State and Local 17.0 12.4 13.1
Total Provision for Income Taxes $177.5 $119.9 $148.4
</TABLE>
Temporary differences that gave rise to deferred tax assets and
liabilities were as follows:
<TABLE>
<S> <C> <C>
At December 31 1996 1995
Deferred Tax Assets:
Allowance for Credit Losses $163.9 $137.1
Retiree Benefit Plans 29.8 30.4
Accrued and Deferred Compensation 19.2 17.0
Foreign Tax Credits* 8.0 16.1
All Other 77.9 79.1
Subtotal 298.8 279.7
Deferred Tax Liabilities:
Real Estate Partnership Losses 23.7 25.6
Deferred Acquisition Costs 15.7 26.4
All Other 19.1 16.1
Subtotal 58.5 68.1
Valuation Allowance* (8.0) (16.1)
Net Deferred Taxes $232.3 $195.5
</TABLE>
*Foreign Tax Credits are fully offset by valuation allowances
because utilization is uncertain. The tax credits expire over
the next five years.
A reconciliation of the differences between income taxes computed
at the statutory U.S. income tax rate and the consolidated tax
provisions is as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Statutory U.S. Tax Rate 35.0% 35.0% 35.0%
Increase (Decrease):
Differential Due to Operations
Outside U.S. .3 4.0* 5.9*
State and Local Income Taxes 2.4 3.0 2.6
Foreign Tax Credit Utilization (1.7) -- --
Other 2.7 2.3 2.0
Effective Tax Rate 38.7% 44.3% 45.5%
</TABLE>
*Includes 3.2% in 1995 and 4.1% in 1994 resulting from the non-
deductibility of credit losses at the German banking subsidiary.
The foreign tax credit utilization resulted from the Company's
election to modify the limitation calculation. U.S. income taxes
were not provided at December 31, 1996, on $35.1 of undistributed
earnings of foreign subsidiaries, which are expected to be
permanently invested in foreign countries, and on $77.8 of
undistributed earnings of life insurance subsidiaries accumulated
as policyholders' surplus under tax laws in effect prior to 1984.
Should these amounts be distributed, the additional income taxes
payable would be approximately $1.7 and $27.2, respectively.
18.OTHER REVENUE
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Investment Income $ 80.2 $ 67.8 $ 61.3
Net Tax Service (RAL) Revenue 140.9 (14.9) 59.2
Securitization Revenue 192.3 123.6 63.7
Other 46.3 54.4 55.8
Total $459.7 $230.9 $240.0
</TABLE>
19.OTHER EXPENSES
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Collection Expense $ 20.4 $ 16.4 $ 13.6
Data Processing Costs 42.1 35.6 31.7
Depreciation 40.8 40.0 41.0
Insurance Commissions 18.5 21.7 20.7
Losses on Real Estate Foreclosures 38.1 45.9 34.9
Marketing 77.1 58.2 47.1
Occupancy 78.1 75.8 72.5
Origination Costs 29.1 26.7 20.7
Postage 32.3 26.6 20.4
Premium Amortization 35.2 25.3 21.9
Printing 27.6 22.6 18.6
Professional Services 29.9 26.6 19.3
Telecommunications 32.6 30.6 26.7
Travel 21.4 20.3 17.9
Other 83.2 69.3 56.8
Total $606.4 $541.6$ 463.8
</TABLE>
20.STOCK OPTIONS
The Company has a non-qualified stock option plan (Plan), adopted
in 1990, which provides for grants of options to officers,
directors and key employees of the Company and its participating
subsidiaries. Under the Plan, the option price shall not be less
than 100% of fair market value on the date the option is granted.
Options generally become exercisable in cumulative annual
increments of 25% each year, commencing one year after date of
grant and expiring after 10 years. The aggregate number of
options for any calendar year may not exceed 1.75% of the total
issued and outstanding common stock of the Company as measured on
the first day of any such calendar year. If during any such
calendar year the total number of authorized options is not
granted, the remainder will be available for granting during any
succeeding year during the term of the Plan. Shares of common
stock to be issued upon exercise of options may be treasury
shares reacquired by the Company or authorized and unissued
common shares or a combination of both.
The Company has adopted the disclosure-only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation." Accordingly,
no compensation cost has been recognized for the Plan. Had
compensation cost for the Plan been determined based on the fair
value at the grant date of awards in 1996 and 1995 consistent
with the provisions of SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<S> <C> <C>
1996 1995
Net Income - reported $281.0 $150.5
Net Income - pro forma 278.8 150.3
Earnings per share - as reported 5.08 2.72
Earnings per share - pro forma 5.04 2.72
</TABLE>
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996,
1995 and 1994, respectively: dividend yield of 3.54%, 4.00% and
4.20%; risk-free interest rate of 5.95%, 5.77% and 7.68%;
expected volatility of 28.1%; and expected lives of 5.4 for all
years. The pro forma effect on net income for 1996 and 1995 is
not representative of the pro forma effect on net income in
future years because it does not take into consideration pro
forma compensation expense related to grants made prior to 1995.
The weighted average fair value at the date of grant for options
granted during 1996, 1995 and 1994 was $16.21, $13.10 and $9.80
per option, respectively.
The following table summarizes the activity relating to the Plan:
<TABLE>
<S> <C> <C>
Weighted-Average
Shares Under Option Number Exercise Price
Options Outstanding December 31, 1993 3,047,232 $30.94
Options Exercised (310,991) 25.87
Options Canceled (41,025) 32.29
Options Granted 939,350 37.48
Options Outstanding December 31, 1994 3,634,566 33.05
Options Exercised (669,903) 28.82
Options Canceled (132,425) 35.26
Options Granted 955,130 49.19
Options Outstanding December 31, 1995 3,787,368 37.79
Options Exercised (827,115) 32.79
Options Canceled (68,056) 40.38
Options Granted 1,042,350 64.32
Options Outstanding December 31, 1996 3,934,547 $45.82
Options Exercisable December 31, 199 1,600,294 $35.47
</TABLE>
The following table summarizes information about stock
options outstanding at December 31, 1996:
Options Outstanding Options Exercisable
<TABLE>
<S> <C> <C> <C> <C> <C>
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
$21.75 - $22.44 55,202 4 years $22.02 55,202 $22.02
29.16 - 31.13 639,405 5.6 years 29.90 639,405 29.90
37.44 - 38.78 1,321,225 7.5 years 37.69 712,125 37.78
49.19 - 49.25 876,365 9 years 49.19 193,562 49.20
61.81 - 64.44 1,042,350 10 years 64.32 - -
$21.75 - 64.44 3,934,547 8.2 years $45.82 1,600,294 $35.47
</TABLE>
21.GEOGRAPHIC INFORMATION
Data by geographic area for the years ended December 31 are shown
in the following table:
<TABLE>
<S> <C> <C> <C> <C>
Inter-
United Company
States Foreign Eliminations Total
1996
Revenue $ 2,371.2 $ 409.6 $ (8.9) $ 2,771.9
Income before Income Taxes 423.9 34.6 -- 458.5
Net Assets 1,398.6 296.2 -- 1,694.8
Total Assets 14,410.0 2,589.7 (68.5) 16,931.2
1995
Revenue 2,018.5 389.0 (9.3) 2,398.2
Income before Income Taxes 251.7 18.7 -- 270.4
Net Assets 1,250.0 253.0 -- 1,503.0
Total Assets 13,572.3 2,219.2 (54.2) 15,737.3
1994
Revenue 1,821.3 326.2 (10.1) 2,137.4
Income before Income Taxes 321.6 4.5 -- 326.1
Net Assets 1,181.7 218.6 -- 1,400.3
Total Assets 12,461.3 2,014.1 (98.8) 14,376.6
</TABLE>
22.DIVIDENDS PAID
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Preferred Stock:
5% $ 1.0 $ 1.0 $ 1.0
$5.50 Convertible .1 .1 .1
$4.50 .5 .5 .5
$4.30 3.6 3.6 3.6
5.2 5.2 5.2
Common Stock 105.3 94.5 84.0
Total Dividends $110.5 $99.7 $89.2
</TABLE>
23.DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward agreements,
options and currency swaps to hedge its net investment in foreign
subsidiaries. The forward exchange agreements do not subject the
Company to risk caused by exchange-rate movements because gains
and losses on these agreements offset losses and gains on the
assets and liabilities being hedged. The forward exchange
agreements generally have maturities that do not exceed six
months.
Outstanding forward agreements as of December 31, 1996,
consisted of sales of DM38.0 and pounds 46.0 in exchange for
US$24.7 and US$71.6, respectively. This compares with
forward sales of DM107.0 for US$75.5 at December 31, 1995.
The Company sells at-the-money (spot) call options and buys out-
of-the-money (spot) put options on Canadian dollars and British
pounds. The strike rate of each call option is set at the then-
current exchange rate, and the strike rate of each put option
purchased is set at a rate whereby the premium received on the
related call option exactly offsets the premium paid for such put
option, resulting in no out-of-the-pocket cost. With the
exception of the strike rates, all terms of the call and put are
identical. The notional amount of each option is an amount that
will generally produce offsetting gains or losses (on an aftertax
basis) to the gains or losses produced by the underlying net
investment. Further, the combination of these instruments (a so-
called "no cost collar") is effectively a partial hedge, as
hedging gains or losses occur only when the spot rates fluctuate
outside the range of the respective strike rates. These option
transactions generally have a maturity of three to six months.
At December 31, 1996, the Company had purchased options to
deliver British pounds in exchange for US$166.0, as compared to
December 31, 1995, when the Company owned the right to deliver
British pounds and Canadian dollars for US$391.5. Concurrently,
the Company had sold options to buy British pounds for US$166.3
at December 31, 1996, as compared with sales of call options on
British pounds and Canadian dollars for US$393.3 at year-end
1995.
Through the use of currency swaps, the Company exchanges
principal denominated in U.S. dollars for principal
denominated in a foreign currency at the then-current
exchange rate and agrees to make the opposite exchanges on
the swaps' termination date. Semi-annual interest payments
are made on the notional amounts over the life of the
agreements.
Currency swaps outstanding at year-end obligate the Company
to pay DM47.0 in exchange for US$31.1 in September 1998, to
pay C$165.0 in exchange for US$120.4 in July 1999 and to pay
C$100.0 in exchange for US$74.5 in November 2000. There were
no currency swaps outstanding at December 31, 1995.
The Company recorded unrealized pretax losses of $18.5 at
December 31, 1996, and unrealized pretax gains of $1.2 at
December 31, 1995, on open hedges. These gains and losses
represent a mark to spot on all open hedges and are recognized in
a separate component of equity.
There were no gains or losses recognized in net income
attributable to the above hedging programs during the three years
ended December 31, 1996. Gains and losses in excess of the
amount needed to offset gains or losses on investments in foreign
subsidiaries due to currency fluctuations are not expected given
the above hedging strategy.
The Company and its subsidiaries utilize interest rate swaps to
manage interest rate risk. The agreements effectively changed
interest rates on certain medium-term notes and other
indebtedness issued by the Company and its subsidiaries to
variable commercial paper or LIBOR indices or fixed rate, with
interest received exactly offsetting interest paid on medium-term
notes or other indebtedness. The risks inherent in interest rate
swaps are the potential inability of a counterparty to meet the
terms of each contract. These agreements to exchange fixed and
floating, or floating versus floating, interest rate payments are
with major international financial institutions that are expected
to fully perform under the terms of the agreements, thereby
mitigating credit risk from the transactions.
The amounts to be paid or received under the agreements are
accrued in interest expense consistent with the terms of the
agreements. At December 31, 1996, accrued interest payable
related to these interest rate swaps totaled $15.1, which is
offset by $15.6 of accrued interest receivable. The impacts of
the interest rate hedging activities on the Company's weighted
average borrowing rates and on the reported interest expense were
increases as follows: .08% and $9.9 in 1996; .05% and $5.4 in
1995; and .05% and $4.7 in 1994.
The following table summarizes the interest-rate swaps
outstanding at December 31, 1996:
<TABLE>
<S> <C> <C> <C> <C>
Weighted Average Weighted
Notional Interest Rates Average
Amount Pay Receive Maturity*
Pay fixed-rate - receive
floating rate $ 610.9 7.46% 6.16% 2.6
Pay floating-rate - receive
fixed-rate
Denominated in
US$ 125.0 6.08 6.49 10.4
British pounds 134.2 6.49 7.96 2.5
Pay floating-rate -
receive floating-rate 1,235.0 5.59 5.57 1.0
Total $2,105.1 6.22% 5.95% 2.1
</TABLE>
*Remaining term in years.
24.CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to finance receivables
are limited because the Company's subsidiaries primarily lend to
consumers across many different geographic areas. The highest
percentage of owned receivables in any geographic area is in
California (16%), with no other state or country having more than
9%. About 70% of receivables in California are real estate
secured, compared with 41% for the Company in total. Second
mortgage loans are generally limited to 75% of the appraised
value of the home as determined by certified, independent
appraisers. In the case of first mortgages, the lending cap is
80%. In addition, a rigorous discipline of credit approval is
enforced regarding borrower debt-to-income ratios and overall
consumer credit quality.
In meeting the financing needs of its customers, subsidiaries of
the Company issue commitments to extend additional credit to
customers under revolving real estate and sales finance contracts
as long as there is no violation of any conditions established in
the contract. The commitments generally have fixed expiration
dates or other termination clauses and generally require payment
of a fee. The Company uses the same credit procedures when
entering into such commitments as it does for traditional lending
products. At December 31, 1996, committed lines totaled
$16,289.2, compared with $12,741.2 at year-end 1995, of which 60%
at the end of 1996 was available for further loans. A large
majority of these commitments expire without being exercised. As
a result, total contractual commitments do not represent future
credit exposure of liquidity requirements.
25.LEASES
The consumer finance system operates from premises under leases
generally having an original term of five years with a renewal
option for a like term. The Company leases its headquarters in
Wilmington, Delaware, under a lease expiring in 2010. Also, a
subsidiary leases an office complex in Peapack, N.J., with a
primary term expiring in 2010 and renewal options totaling 47
years. Data processing equipment lease terms range from one to
four years and are generally renewable. The minimum rental
commitments under noncancelable operating leases at December 31,
1996, were as follows:
<TABLE>
<S> <C>
1997 $ 63.7
1998 60.5
1999 52.3
2000 44.9
2001 40.7
2002-2006 177.3
2007-2021 119.9
Total $559.3
</TABLE>
26.FAIR VALUE OF FINANCIAL INSTRUMENTS
The information provided below is required by SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." These
amounts represent estimates of fair value of financial
instruments at a point in time. Significant estimates using
available market information and appropriate valuation
methodologies were used for the purposes of this disclosure. The
estimates are not necessarily indicative of the amounts the
Company could realize in a current market exchange, and the use
of different market assumptions or methodologies could have a
material effect on the estimated fair value amounts.
<TABLE>
<S> <C> <C> <C> <C>
1996 1995
Carrying Estimated Carrying Estimated
At December 31 Value Fair Value Value Fair Value
Assets
Cash and Equivalents $ 279.6 $ 279.6 $ 273.1 $ 273.1
Investment Securities 550.3 549.6 1,491.4 1,492.2
Finance Receivables, Net 14,173.8 15,226.7 13,010.1 14,073.6
Excess Servicing Assets 54.9 54.9 19.9 19.9
Liabilities
Short-Term Debt 4,169.3 4,169.3 4,023.9 4,023.9
Deposits 635.0 635.0 642.5 642.5
Long-Term Debt 8,631.1 8,812.6 7,792.5 8,108.9
Accounts Payable 534.0 534.0 509.9 509.9
</TABLE>
December 31
<TABLE>
<S> <C> <C>
1996 1995
Net Unrealized Loss on Derivative Financial Instruments $33.9 $22.5
</TABLE>
The fair value of investment securities is based on quoted market
prices. The fair market value of real estate secured and
personal unsecured loans was estimated by discounting the future
cash flows over the estimated remaining term, based on past cash
collection experience. For credit cards and sales finance
products, the carrying amount is a reasonable estimate of fair
value. The discount factor was determined by taking into
consideration current funding costs, chargeoff experience and
premiums paid on acquisitions of receivables with similar
characteristics.
Demand deposits are shown at their face values. For short-term
and long-term debt, the fair values are estimated, using the
interest rates currently offered for debt with similar terms and
remaining maturities. The estimated fair value of accounts
payable approximates their carrying value. The fair value of
interest-rate swap agreements, forward exchange contracts and
foreign exchange options is the estimated amount the Company
would receive or pay to terminate the agreements at the balance
sheet date, taking into account current interest rates, foreign
exchange rates and the creditworthiness of the counterparties.
The fair value estimates presented were based on information
available to the Company at December 31, 1996 and 1995. While
management is not aware of any significant factors that would
affect the year-end 1996 estimate since that date, current
estimates of fair value could differ significantly from the
amounts disclosed.
27.CONTINGENT LIABILITIES
In July 1992, the Internal Revenue Service (IRS) completed its
examination of the Company's federal income tax returns for 1984
through 1987 and proposed certain adjustments that relate
principally to activities of the Company's former subsidiary,
American Centennial Insurance Company (ACIC), prior to its sale.
The Company sold its entire interest in ACIC in May 1987. The
IRS has proposed, among other items, $142.0 in adjustments
relating to 1986 and 1987 ACIC additions to loss reserves. In
order to limit the further accrual of interest on the proposed
adjustments, the Company paid $105.5 of tax and interest during
the third quarter of 1992.
Within the administrative appeals process, all but two issues
were resolved. Both of the remaining unresolved issues relate to
the 1986 and 1987 ACIC additions to loss reserves. During the
third quarter of 1996, the IRS issued a statutory Notice of
Deficiency asserting the unresolved adjustments and increased the
disallowance to $195.0.
The Company's management and independent tax advisers continue to
believe that the IRS's proposed adjustments are unlikely to be
sustained. The Company fully intends to oppose the adjustments
through litigation in the United States Tax Court. While the
conclusion of this matter cannot be predicted with certainty,
management does not anticipate the ultimate resolution to differ
materially from amounts accrued. Resolution is not expected to
occur within one year.
The Company is involved in various other claims and lawsuits
incidental to its business. In the opinion of management,
these claims and suits in the aggregate will not have a
material adverse effect on the Company's consolidated
financial statements.
BENEFICIAL CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in millions, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Quarter Ended 3/31 6/30 9/30 12/31
1996
Gross Revenue $751.1 $682.4 $678.8 $659.6
Income before Income Taxes 184.7 139.6 109.5 24.7
Net Income 107.4 82.4 67.9 23.3
Earnings per Common Share 1.96 1.50 1.22 .40
Dividends per Common Share .47 .47 .52 .52
1995
Gross Revenue $560.2 $594.2 $606.4 $637.4
Income before Income Taxes 35.1 106.4 101.9 27.0
Net Income 20.7 62.8 60.1 6.9
Earnings per Common Share .37 1.15 1.10 .10
Dividends per Common Share .43 .43 .47 .47
</TABLE>
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Executive Officers of the Registrant
<TABLE>
<S> <C> <C>
Name Age Position and Offices Held as of
March 1, 1997
Finn M.W. Caspersen 55 Director (1975 to present), Chairman
of the Board of Directors, Chief
Executive Officer and Chairman of
Executive Committee (1976 to
present), Member of Executive
Committee (1975 to present), and
Member of Finance Committee (1975 to
present) of the Company.
David J. Farris 61 Director (1982 to present), Member
of Office of the President (1984 to
present), Chief Operating Officer
(1987 to present), Member of
Executive Committee (1983 to
present) and Member of Finance
Committee (1988 to present) of the
Company; President and Chief
Executive Officer (1982 to present)
of Beneficial Management
Corporation, a subsidiary of the
Company.
James H. Gilliam, Jr. 51 Director (1984 to present),
Executive Vice President (1989 to
present), General Counsel (1986 to
present), Secretary (1987 to 1992),
and Member of Executive Committee
(1987 to present) of the Company;
Chairman (1987 to present) of
Beneficial National Bank, a
subsidiary of the Company.
Andrew C. Halvorsen 50 Director (1984 to present), Member
of Office of the President, First
Vice President and Chief Financial
Officer (1986 to present) and Member
of Executive and Finance Committees
(1984 to present) of the Company.
Ronald E. Bombolis 48 Senior Vice President, Controller
and Chief Accounting Officer (1992
to present) of the Company; Vice
President and Controller (1985 to
1992) of Beneficial Management
Corporation, a subsidiary of the
Company.
Samuel F. McMillan 42 Senior Vice President and Treasurer
(1995 to present), Assistant Vice
President (1988 to 1991) of the
Company, Vice President - Capital
Markets (1992 to 1995) of Beneficial
Management Corporation, a subsidiary
of the Company.
Scott A. Siebels 42 Vice President and Secretary (1995
to present) and Associate Counsel
(1990 to present), Assistant Vice
President (1993 to 1995); and
Assistant Secretary (1991 to 1995)
of the Company.
Robert G. Heinle 50 Vice President - Tax (1988 to
present) of the Company.
J.C. Heywood 50 Executive Vice President (1996 to
present), Senior Vice President -
Operating (1992 to 1995) of
Beneficial Management Corporation, a
subsidiary of the Company; Group
President - North Central Group
(1984 to 1992) of Beneficial
Management Corporation of America, a
subsidiary of the Company.
Ross N. Longfield 56 Senior Vice President (1992 to
present) of Beneficial Management
Corporation; President of Beneficial
Tax Masters Inc. (1982 to present);
Chairman (1995 to present),
President and CEO (1990 to present)
of Beneficial National Bank USA,
subsidiaries of the Company.
Michael J. Mayer 53 Executive Vice President (1996 to
present) and head of Marketing and
Business Development (1993 to
present); Senior Vice President
(1993 to 1995) of Beneficial
Management Corporation, a subsidiary
of the Company; Vice President -
Consumer Credit Marketing (1986 to
1993) of Beneficial Management
Corporation of America, a subsidiary
of the Company.
Michael A. Woodall 49 Executive Vice President -
International (1996 to present) of
Beneficial Management Corporation, a
subsidiary of the Company; Deputy
Chairman (1997 to present), Chief
Executive Officer and a Director
(1991 to 1997), Group President -
International (1994 to 1996), Group
President - United Kingdom (1991 to
1994) of Beneficial Bank PLC, a
subsidiary of the Company; Managing
Director, Avco Trust plc (1988 -
1991).
Officers of the Company hold office until the next Annual
Meeting of the Directors, to be held May 22, 1997, or until their
successors are otherwise elected as provided in the By-Laws.
Information required under this Item relating to disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K and
to the directors of the Company will be contained in the
Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders, which is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION.
Information required under this Item will be contained in
the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders, which is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required under this Item will be contained in
the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders, which is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item will be contained in
the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders, which is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
The following represents a listing of all financial statements,
financial statement schedules, and exhibits filed as part of this
report.
(1) Financial Statements
The following financial statements of Beneficial
Corporation and Subsidiaries and Independent Auditors'
Report are included in Item 8:
Independent Auditors' Report.
Balance Sheet at December 31, 1996 and 1995.
Statement of Income and Retained Earnings for the three
years ended December 31, 1996.
Statement of Cash Flows for the three years ended
December 31, 1996.
Notes to Financial Statements.
Selected Quarterly Financial Data (unaudited).
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts and
Reserves for the three years ended December 31, 1996.
(3) Exhibits
The Exhibit Index on pages 53-55 of this Annual Report on
Form 10-K lists the exhibits that are filed as part of
this report.
The Company filed the following reports on Form 8-K during the
last quarter of the period covered by this report:
(1) A report on Form 8-K, dated October 24, 1996, was filed
relating to the Company's third-quarter earnings, which
were announced on October 24, 1996.
(2) A report on Form 8-K, dated November 21, 1996, was
filed relating to the Company's announcement of
authorization to repurchase up to 1.2 million shares of
the Company's Common Stock.
BENEFICIAL CORPORATION
SUPPLEMENTAL FINANCIAL DATA
The Financial Statements and Notes to Financial Statements
of Beneficial Corporation and Subsidiaries are supplemented by
the information in the following Schedule II. All other
schedules are omitted because of the absence of the conditions
under which they are required or because all material information
called for is set forth in the Financial Statements and the Notes
referred to in this Item.
SCHEDULE
II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Three Years Ended December 31, 1996
(in millions)
Column A Column B Column C Column D Column E
Additions
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Balance Charge to Charged Balance at
Beginning Costs and to Other End
Description of Year Expenses Accounts Deductions of Year
YEAR ENDED
DECEMBER 31, 1996
Reserves shown
separately:
Insurance policy and
claim reserves:
Policy reserves $1,215.2 $ --- $212.2(A) $168.7(C) $1,200.9
49.0(G)
8.8(H)
Claim reserves 50.3 82.8(D) --- 67.0(E) 66.1
Total $1,265.5 $ 82.8 $212.2 $293.5 $1,267.0
Allowance for credit
losses on
finance receivables $ 406.1 $398.8 $ 10.2 $316.9(F) $ 498.2
YEAR ENDED DECEMBER 31, 1995
Reserves shown separately:
Insurance policy and
claim reserves:
Policy reserves $1,041.5 $ -- $192.7(A) $152.7(C) $1,215.2
133.7(B)
Claim reserves 43.2 80.4(D) -- 73.3(E) 50.3
Total $1,084.7 $ 80.4 $326.4 $226.0 $1,265.5
Allowance for credit
losses on
finance receivables $ 331.6 $295.2 $ 3.7 $224.4(F) $ 406.1
YEAR ENDED DECEMBER 31, 1994
Reserves shown separately:
Insurance policy and
claim reserves:
Policy reserves $ 880.0 $ --- $172.2(A) $143.7(C) $1,041.5
133.0(B)
Claim reserves 35.7 86.5(D) --- 79.0(E) 43.2
Total $ 915.7 $ 86.5 $305.2 $222.7 $1,084.7
Allowance for credit
losses on
finance receivables $ 279.0 $236.7 $ 2.6 $186.7(F) $ 331.6
</TABLE>
NOTES
(A) Net premiums written and reinsurance assumed.
(B) Premiums collected on annuity contracts.
(C) Earned premiums.
(D) Provision for insurance claims.
(E) Claims paid.
(F) Finance receivables charged off (after offsetting recoveries)
during the period.
(G) Change in annuity policy
(H) Foreign currency
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BENEFICIAL CORPORATION
Date: March 18, 1997 By /s/ Andrew C. Halvorsen
Andrew C. Halvorsen, Member of
the Office of the President,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
Chairman of the Board
of
Directors and Chief
Executive
Officer and Director
(Principal
* Executive Officer) March 18, 1997
(Finn M.W. Caspersen)
Member of the Office of
the
President, Chief
Financial Officer and
Officer and Director
/s/ Andrew C. Halvorsen (Principal Financial March 18, 1997
(Andrew C. Halvorsen) Officer)
Senior Vice President
and Controller
(Principal
/s/ Ronald E. Bombolis Accounting Officer) March 18, 1997
(Ronald E. Bombolis)
* Director March 18, 1997
(Charles W. Bower)
* Director March 18, 1997
(Robert J. Callander)
* Director March 18, 1997
(Leonard S. Coleman, Jr.)
* Director March 18, 1997
(David J. Farris)
* Director March 18, 1997
(James H. Gilliam, Jr.)
* Director March 18, 1997
(Roland A. Hernandez)
* Director March 18, 1997
(J. Robert Hillier)
* Director March 18, 1997
(Gerald L. Holm)
* Director March 18, 1997
(Thomas H. Kean)
* Director March 18, 1997
(Steven Muller)
* Director March 18, 1997
(Susan Julia Ross)
* Director March 18, 1997
(Robert A. Tucker)
* Director March 18, 1997
(Susan M. Wachter)
* Director March 18, 1997
(Charles H. Watts, II)
</TABLE>
* Andrew C. Halvorsen, pursuant to Powers of Attorney
(executed by each of the directors listed above as signing) filed
with the Securities and Exchange Commission, does hereby sign and
execute this report on behalf of such directors.
/s/ Andrew C. Halvorsen
Andrew C. Halvorsen
March 18, 1997
EXHIBIT INDEX
<TABLE>
<S> <C>
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.
4.1 Amended and Restated Standard Multiple-Series
Indenture Provisions (incorporated by reference
to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (Reg. No. 33-38287)).
4.2 First Supplemental and Restated Indenture dated
as of December 1, 1990 between the Company and
The Chase Manhattan Bank (National Association),
as Trustee (incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on
Form S-3 (Reg. No. 33-51833)).
4.3 A form of the Fixed Rate Medium-Term Notes
(Global) (incorporated by reference to Exhibit
4.7 to the Company's Registration Statement on
Form S-3 (Reg. No. 33-51833)).
4.4 A form of the Fixed Rate Medium-Term Notes
(Certificated) (incorporated by reference to
Exhibit 4.8 to the Company's Registration
Statement on Form S-3 (Reg. No. 33-51833)).
4.5 A form of the Floating Rate Medium-Term Notes
(Global) (incorporated by reference to Exhibit
4.9 to the Company's Registration Statement on
Form S-3 (Reg. No. 33-51833)).
4.6 A form of the Floating Rate Medium-Term Notes
(Certificated) (incorporated by reference to
Exhibit 4.10 to the Company's Registration
Statement on Form S-3 (Reg. No. 33-51833)).
4.7 Copy of Credit Agreement dated as of November
15, 1995 among Beneficial Corporation as a
borrower and as a guarantor, the borrowers
defined in Article I, the lenders defined in
Article I, Bank of America National Trust and
Savings Association, Chemical Bank and Union
Bank of Switzerland as co-arrangers, and Credit
Suisse as administrative agent for the lenders
is incorporated by reference to Exhibit 10(t) of
the Annual Report on Form 10-K for the year
ended December 31, 1995.
10.1 Copies of forms of agreement by and between
Beneficial Corporation and certain key
management employees of the Company and its
subsidiaries is incorporated by reference to
Exhibit 10(a) of the Quarterly Report on Form 10-
Q for the period ended March 31, 1996.
Exhibit
Number Exhibit
10.2 Copies of forms of Severance Agreements by and
between Beneficial Corporation and key executive
officers of the Company and its subsidiaries is
incorporated by reference to Exhibit 10(b) of
the Quarterly Report on Form 10-Q for the period
ended March 31, 1996.
10.3 Copy of Lease, dated as of June 28, 1982,
between Hamilton Associates Limited Partnership
and Beneficial Management Corporation is
incorporated by reference to Exhibit 10(f) of
the Annual Report on Form 10-K for the year
ended December 31, 1982.
10.4 Guaranty, dated as of June 28, 1982, of
Beneficial Corporation relating to Lease
included as Exhibit 10.3 hereto is incorporated
by reference to Exhibit 10(h) of the Annual
Report on Form 10-K for the year ended December
31, 1982.
10.5 Copy of Form of Indemnification Agreement
between Beneficial Corporation and its
directors, dated August 21, 1986, is
incorporated by reference to Exhibit 10(s) of
the Annual Report on Form 10-K for the year
ended December 31, 1986.
10.6 Copy of Amended and Restated Directors' Annuity
Plan dated May 23, 1996 between Beneficial
Corporation and its directors and directors
emeriti is incorporated by reference to Exhibit
10 of the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
10.7 Copy of the Company's Rights Plan is
incorporated by reference to Form 8-A filed with
the Securities and Exchange Commission on
November 20, 1987, with respect to the
registration of Preferred Stock Purchase Rights.
10.8 Copy of the Company's Amended and Restated
Rights Agreement is incorporated by reference to
Form 8 filed with the Securities and Exchange
Commission on May 25, 1990.
10.9 Copy of the Company's Renewed Rights Agreement
dated as of August 22, 1996 is incorporated by
reference to Exhibit 10(a) of the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996. The Renewed Rights
Agreement will become effective upon the
expiration of the existing Rights Agreement,
which is scheduled to expire on November 23,
1997.
10.10 Copy of Refund Anticipation Loan Operations
Agreement dated July 19, 1996 among H & R Block
Tax Services, Inc., HRB Royalty, Inc.,
Beneficial Tax Masters Inc., Beneficial National
Bank, and Beneficial Franchise Company, Inc. is
incorporated by reference to Exhibit 10(b) of
the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
10.11 Copy of Refund Anticipation Loan Participation
Agreement dated as of July 19, 1996 among Block
Financial Corporation, Beneficial National Bank
and Beneficial Tax Masters, Inc. is incorporated
by reference to Exhibit 10(c) of the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996. Confidential treatment has
been requested with respect to certain portions
of the agreement; such portions have been
separately filed with the Securities and
Exchange Commission.
Exhibit
Number Exhibit
10.12 Copy of Beneficial Corporation Key Employees
Stock Bonus Plan, as amended.
10.13 Copy of Beneficial Corporation 1990 Non-
Qualified Stock Option Plan, as amended.
10.14 Copy of Beneficial Corporation Supplemental
Pension Plan is incorporated by reference to
Exhibit 10(n) of the Annual Report on Form 10-K
for the year ended December 31, 1992.
10.15 Copy of Beneficial Corporation Deferred
Compensation Plan is incorporated by reference
to Exhibit 10(r) of the Annual Report on Form 10-
K for the year ended December 31, 1994.
10.16 Copy of letter agreement 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 is incorporated by
reference to Exhibit 10(s) of the Annual Report
on Form 10-K for the year ended December 31,
1995.
11 Computation of Earnings per Common Share of
Beneficial Corporation and Subsidiaries.
12 Computation of Ratio of Earnings to Fixed
Charges of Beneficial Corporation and
Subsidiaries (continuing operations only).
21 List of the names and states of incorporation of
the Company's subsidiaries.
23 Consent of independent auditors.
24 Powers of Attorney.
27 Financial Data Schedule (in EDGAR filing only).
</TABLE>
The Company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument defining the
rights of holders of its long-term debt where the securities
authorized thereunder does not exceed 10 percent of the total
assets of the Company and its subsidiaries on a consolidated
basis.
The Company will furnish to each stockholder, upon written
request, copies of the exhibits referred to above. Requests
should be addressed to Scott A. Siebels, Vice President and
Corporate Secretary, Beneficial Corporation, 301 North Walnut
Street, Wilmington, Delaware 19801.
EXHIBIT 10.12
Employee Benefit Plan
Key Plan
Plan Document
BENEFICIAL CORPORATION
KEY EMPLOYEES STOCK
BONUS PLAN
1. Purposes
The purposes of the Beneficial Corporation Key Employees
Stock Bonus Plan are (a) to encourage key employees of the
Company and its subsidiaries to continue to devote their
best efforts to the business of the Company by rewarding such
employees for services which contribute to the success of
the enterprise and fostering among them an increased ownership
interest in the Company, and (b) to attract persons of
outstanding ability to executive positions with the Company
and its subsidiaries.
2. Definitions
The terms used in the Plan shall have the following
meanings:
(a) "Account" means the account of a Participant
as described in Section 5(b) hereof.
(b) "Award" means an award under the Plan made by
the Committee pursuant to Section 6 hereof.
(c) "Beneficial" or the "Company" means Beneficial
Corporation and any corporate successor thereto.
(d) "Beneficiary" means the person or entity
designated by a Participant in writing in a form approved by the
Committee to receive a distribution of an Award in case of the death
of a Participant prior to the distribution of an Award, provided
that such designation is in effect at the time of death of such
Participant.
(e) "Board" means the Board of Directors of
Beneficial.
(f) "Committee" means the Compensation Committee
of the Board or any committee which is a successor thereto.
(g) "Employee" means any person who is employed on
a permanent basis by and receives a regular salary from the
Company or a Participating Subsidiary, other than a person whose
customary employment with such company is less than twenty
hours per week.
(h) "Participating Subsidiary" means any
Subsidiary that is designated by the Board to participate in the Plan.
(i) "Participant" means any Employee who has
received an Award. A person shall remain a Participant until all
securities, cash and other property in his Account have been
distributed or forfeited under Section 7 hereof.
(j) "Plan" means the Beneficial Corporation Key
Employees Stock Bonus Plan as set forth herein and as from
time to time amended.
(k) "Stock" means the Common Stock of Beneficial.
(l) "Subsidiary" means any corporation the stock
of which possessing at least 80 percent of the total combined
voting power of all classes of voting stock and comprising at least
80 percent of the total number of shares of any other class of
stock is owned by Beneficial and/or one or more other
Subsidiaries.
(m) "Trust" means the trust as described in
Section 5(a) hereof.
(n) "Trustee" means the trustee as described in
Section 5(a) hereof.
3. Administration of the Plan
(a) The Committee shall have the full power and
authority to administer and interpret the Plan. The
Committee may from time to time adopt such rules, regulations, forms
and agreements, not inconsistent with the provisions of the
Plan, as it may deem advisable to carry out the Plan. All Committee
determinations with respect to the Plan shall be final,
binding and conclusive.
(b) The Committee may, in its discretion, delegate
recordkeeping, ministerial and similar administrative duties
with respect to the Plan to any person. However, the Committee
may not delegate its authority to apply or interpret the
provisions of, or make determinations specified in, Sections 4, 6 and 7
hereof.
(c) Committee members shall not be eligible, nor
shall they have been eligible at any time within one year prior to
their appointment to the Committee, to participate in the
Plan or in any other plan of the Company or any of its affiliates
under which such member has been eligible for selection on a
discretionary basis as a person to whom stock of Beneficial
or any of its affiliates, or stock options or stock
appreciation rights in respect thereof, may be awarded.
4. Eligibility
To be eligible to receive Awards for any calendar year
an Employee shall have been employed at any time during such
year by Beneficial or any Participating Subsidiary. An Employee who
is eligible to receive an Award for any year may receive an
Award for services rendered in such year, even though the Award is
made during the following year and the Employee is not eligible
to receive an Award for services rendered in such following
year.
5. Trust Agreement
(a) Beneficial shall enter into an agreement with
a bank or other institutional trustee selected by Beneficial
for the purpose of creating an irrevocable trust in which
contributions to the Plan shall be held. The Trustee shall
at all times have a combined capital and surplus of at least
$5,000,000. Any stock, cash or other property held in the
Trust that was contributed by Beneficial, other than stock, cash
or other property to the extent Beneficial has been reimbursed
therefor by a Participating Subsidiary, or that was received
with respect to any unreimbursed contribution by Beneficial,
shall at all times be subject to the claims of those general
creditors of Beneficial whose claims are not satisfied because of the
bankruptcy or insolvency of the Company; provided, however,
that Beneficial's obligations to pay Awards under this Plan shall
be unconditional regardless of the availability of assets held
under the Trust. Any Stock, cash or other property, held in the
Trust that was contributed, or reimbursed to Beneficial, by any
Participating Subsidiary or that was received with respect
to any such contribution or reimbursement by the Participating
Subsidiary, shall at all times be subject to the claims of
those general creditors of such Participating Subsidiary whose
claims are not satisfied because of the bankruptcy or insolvency of
such Participating Subsidiary; provided, however, that each
Participating Subsidiary's obligations to pay Awards under
this Plan shall be unconditional regardless of the availability
of assets held under the Trust.
(b) The Trustee and/or the Company will create and
maintain a separate Account for each Participant. The
Trustee shall credit a Participant's Account with (i) the number of
shares of Stock awarded to the Participant or purchased with
cash awarded to the Participant and any cash remaining after such
purchase, (ii) the number of shares of Stock purchased with
any cash dividend paid on the Stock held in the Participant's
Account and any cash remaining after such purchase, (iii) the number
of shares of Stock received as stock dividends or stock splits
with respect to the shares of Stock in such Account and (iv)
warrants or any other property received with respect to the Stock in
such Account. The Trustee shall debit a Participant's Account to
reflect any distributions or forfeitures with respect to the
Participant under Section 7 below. Stock that is
contributed to the Plan for any year and Stock that is purchased by the
Trustee with the contributions of the Company or a Participating
Subsidiary for such year shall each be separately allocated
to the Accounts of the Participants on a pro-rata basis based
on the Participant's respective Awards for such year. Any Trust
assets distributed by the Trustee to the general creditors in
bankruptcy or insolvency of Beneficial or any Participating Subsidiary
shall be debited to the Accounts of the Participants on a pro-rata
basis based on the value of the Participants' respective
Accounts that is attributable to contributions made by such
corporation at the time of such distribution.
(c) The Trustee and/or the Company shall maintain
records for each Account showing (i) the aggregate number of
shares of Stock so credited and debited, (ii) the number of
shares of Stock which are awarded or purchased for each
calendar year during which the Plan is in effect, (iii) the Account
investments apart from such shares of stock, (iv) the
Account balance, and (v) such other matters as the Trustee and/or
the Company may deem necessary or advisable.
(d) No fractional share shall be purchased for or
credited to the Account of any Participant.
(e) Unless otherwise provided by Beneficial, the
Trustee shall have custody of the certificate or
certificates representing all the shares of Stock held in the Trust under
the Plan. The Trustee shall register such certificate or
certificates in its own name or in the name of a nominee of
the Trustee.
(f) The power of Beneficial to determine the
period during which any person shall serve as Trustee and the power
to remove any such person at any time shall be exercised by
Beneficial in accordance with the directions of the
Committee. Subject to the provisions of the Plan, the agreement with
the Trustee shall contain such other provisions as Beneficial
shall deem appropriate.
6. Annual Awards
Awards will be made on the following basis:
(a) At each November meeting of the Board in a
calendar year during which the Plan is in effect, the Board shall
make a preliminary determination regarding the maximum percentage
of the consolidated net after-tax income, if any, of the Company
and its Subsidiaries for that year which may, in the Committee's
discretion, be contributed to the Plan for such year and at
the meeting of the Board held the following February shall make
a final determination regarding such maximum percentage. The
maximum percentage for any such year shall not exceed 5% of
the net after-tax income, if any, of the Company and its
Subsidiaries for such year, computed on a consolidated basis in
accordance with generally accepted accounting principles; provided,
however, that for the purpose of calculating such net income, there
shall not be taken into account (i) the after-tax cost to the
Company of the contribution to the Plan for such year, and (ii)
extraordinary or unusual nonrecurring items that are
realized otherwise than in the ordinary course of trade or business
as determined by the Committee (e.g. gains or losses resulting
from the sale of a Subsidiary). The Board shall also determine,
at its February meeting referred to above in this paragraph
(a), whether the contribution shall be in cash or Stock or partly
in cash and partly in Stock, in which case the Board shall
specify the percentage to be contributed in cash and Stock,
respectively.
(b) As soon as practicable following the public
announcement of the Company's consolidated financial results
for each calendar year during which the Plan is in effect, the
Committee shall determine (i) the dollar amount of the
contribution to the Plan for such calendar year, subject to
the maximum percentage of net after-tax income determined by the
Board pursuant to the provisions of paragraph (a) of this
Section 6; (ii) which Employees from among those eligible shall
receive an Award for such year; and (iii) the portion of the annual
contribution for such year that is allocable to each
Participant. The Committee shall determine the amount of
each Award based on the performance of each eligible Employee and
such other factors as it may determine to be appropriate. Upon
the request of the Committee the Executive Committee of the
Board shall furnish to it such information regarding the
performance of eligible Employees as the Committee shall deem necessary and
appropriate.
(c) If after the determinations set forth in
paragraph (b) of this Section 6 have been made, but within the same
calendar year, the Committee determines in its discretion
that additional Awards are appropriate to Employees included
among those determined at Section 6(b)(ii) above, based solely
upon such Employees' exceptional performance during the calendar
year for which the Award is made, it may grant such Awards
subject to the maximum percentage of net after-tax income determined by
the Board pursuant to the provisions of paragraph (a) of this
Section 6. Such additional awards are to be granted only in unusual
circumstances where information regarding Employees'
performance was not available or fully measurable when the
determinations set forth in paragraph (b) of this Section 6 were made.
(d) As soon as practicable after the Awards
pursuant to paragraphs (b) and (c) of this Section 6 are determined,
Beneficial shall transfer the corresponding contributions to
the Trustee. The contributions shall be made, in whole or in
part, as determined by the Board pursuant to the provisions of
paragraph (a) of this Section 6, in cash or Stock, which
Stock shall consist of treasury shares (whether or not acquired
for purposes of the Plan). The value of any Stock contribution
shall be determined by the Committee based on the mean between the
high and the low price for a share of Stock on the New York Stock
Exchange (consolidated trading) on the last day for which
price quotes are available preceding the date on which such
contribution is transferred to the Trustee.
(e) As soon as practicable after the Trustee
receives (i) any cash awarded to a Participant or (ii) any cash
dividend paid on Stock held in a Participant's Account, the Trustee
shall use such cash (and any other cash then in the Participant's
Account) to buy in one or more transactions the largest
practicable whole number of shares of Stock for such Account
(which may include purchases of Stock executed on a national
securities exchange) after deductions for the payment of
brokers' fees and stock transfer and similar taxes, if any,
applicable to such purchases. The Trustee shall limit the daily volume
and prices of such purchases as required by regulations of the
Securities and Exchange Commission, if applicable, and
otherwise to the extent it deems necessary or advisable.
(f) Upon (i) the distribution of Stock, cash or
other property from the Account of a Participant who was an
Employee of a Participating Subsidiary during the year for which the
Award was made to which such Stock, cash or other property
relates, or (ii) the payment of such Stock, cash or other property by
Beneficial directly to a Participant pursuant to Section
7(h) hereof, such Participating Subsidiary shall pay to the
Company an amount equal to the fair market value of such Stock, cash or
other property as of the date of such distribution or
payment. The determination of such fair market value shall be made by
the Committee and, with respect to Stock, shall be based on the
mean between the high and the low price of a share of Stock on
the New York Stock Exchange (consolidated trading) on the last day
for which price quotes are available preceding the date of such
distribution or payment.
7. Vesting and Payment of Awards
(a) Except as provided in Section 7(b) hereof,
Stock in a Participant's Account shall vest in the Participant at the
earliest to occur of the following:
(i) January 1 of the 5th calendar year
following the year for which such Stock was awarded; or
(ii) the date on which the Participant ceases
to be employed by the Company or a Subsidiary, if such termination
of employment is on account of death, total disability, a
discharge at the direction of the Company or a Subsidiary (other than
a discharge for cause) or a termination of employment under
circumstances which would entitle the Participant to a
continuation of compensation and benefits for a period of
time following such termination pursuant to the terms of an
agreement entered into between the Participant and the Company or a
Subsidiary providing for such a continuation in limited
instances following a change in control of the Company (as defined in
or as otherwise construed for purposes of such agreement). For
purposes of the foregoing, a total disability shall be
defined in accordance with Section 10.03 (or any successor provision)
of Beneficial's Retirement Plan and a "discharge for cause"
shall be defined in accordance with Section 8.04 (or any successor
provision) of such Plan.
(b) Distributions of Stock (whether through a
Stock split or Stock dividend) or other property on Stock in a
Participant's Account, and Stock purchased with any cash
dividend paid on Stock in his Account, shall vest in the Participant
as of the date the Stock with respect to which the cash, Stock or
other property was received vests under Section 7(a) or 7(d)
hereof.
(c) If a Participant ceases to be employed by the
Company or a Subsidiary other than (i) as provided in clause
(ii) of Section 7(a) above, or (ii) by reason of retirement on or
after January 1 of the calendar year in which the
Participant attains age 60 at a time when the Participant is eligible to
retire early pursuant to Section 4 of the Beneficial
Corporation Pension Plan dated October 1, 1983, as amended, and before
Stock is vested under clause (i) of Section 7(a) above or Section
7(b) hereof, as the case may be, the Participant shall thereupon
forfeit his interest in such Stock and in any cash or
property then in his Account that was received with respect to such
Stock. Any Stock, cash or property forfeited hereunder
shall be returned to the Company.
(d) Any Award made prior to November 12, 1992, if
not already vested under Section 7(a) hereof, and if not
previously forfeited under Section 7(c) hereof, shall vest in the
Participant on January 1 of the calendar year in which the
Participant attains age 60.
(e) Except as provided in Section 7(f) below, as
soon practicable after a Participant acquires a vested interest
in any of the shares of Stock or other property held in his
Account, the Trustee shall distribute the same to the Participant.
Distribution shall be made to the Participant or, if
deceased, to his surviving Beneficiary or Beneficiaries or to his estate
if he has not named a Beneficiary who has survived him.
(f) A Participant may elect to defer receipt of
all, but not a portion, of any interest in his Account in which
he will become vested during a particular calendar year, until
a specific date following the date such interest will become
vested, but not for a period extending beyond the fifth
anniversary of such date. An election to defer the receipt
of an Award, and any distributions in respect of such an Award, or
any Stock purchased with cash dividends paid on such an Award,
must be made in the year prior to the year to which such Award
relates. The election shall be made in writing, shall be
irrevocable, and shall be in such form as the Committee may
designate.
(g) Beneficial and/or a Participating Subsidiary
may impose such requirements for the payment of withholding or
other taxes in connection with the distribution of any Stock, cash
or other property in a Participant's Account as such
corporation shall determine to be necessary or appropriate prior to any
distribution.
(h) In the event that Stock, cash or other
property in a Participant's Account is withdrawn therefrom solely to
satisfy, in whole or in part, claims of a judgment creditor of
Beneficial against such corporation, Beneficial shall be obligated to
ensure that such Participant shall nevertheless receive an
equivalent amount of Stock, cash and/or other property, if any, that he
would have received, and at the time or times at which such
receipt would have occurred hereunder, had there been no
such withdrawal of assets. At the option of Beneficial, such
obligations may be discharged by the making of a further
contribution of the requisite amount and type of assets to
such Participant's Account in substitution for the assets so
withdrawn, or by payment from Beneficial directly to such
Participant.
(i) Each Participant shall be entitled to
designate one or more persons or entities to be a Beneficiary or
Beneficiaries hereunder, and to revoke or otherwise change at any time any
such designation. No such designation, revocation or change
shall be effective until received by the Committee on a form which it
has approved for such purpose.
(j) Notwithstanding anything herein to the
contrary, if for any calendar year which ends on or after December 31,
1997 a Participant is classified as a "Covered Employee" for
purposes of Section 162(m) of the Internal Revenue Code of 1986 (or the
corresponding provisions of any future U.S. internal revenue
law) (the "Code"), then the awards, if any, which may be made
pursuant to the Plan to such Participant with respect to such
Participant's performance during 1993 or subsequent years,
in accordance with the provisions of Section 6, and credited
pursuant to Section 5 (b)(i) of the Plan to such Participant
on or after February 1, 1994 (and not previously distributed),
together with any shares of stock or other rights credited
pursuant to Section 5 (b)(ii), (iii) or (iv) of the Plan
with respect to such awards (the "Award" or collectively
"Awards"), shall, notwithstanding Section 7 (e) of the Plan not be
distributable to such Participant, though earlier vested
pursuant to Section 7(a) of the Plan, prior to the earliest to occur
of the following:
(i) the first business day of the calendar
year following the year in which such Participant's
employment with the Corporation shall have
terminated for any reason, or
(ii) the last business day of any calendar
year ending on or after December 31, 1998 in which
such Participant shall not be so classified as a
"Covered Employee", or
(iii) the last business day of any calendar
year ending on or after December 31, 1998 in which
such Participant's "applicable employee
remuneration", computed pursuant to Section 162(m)(4) of the
Code without regard to the Awards, shall not exceed
$1,000,000,
provided, however, that if termination of employment
pursuant to subparagraph (i) above is under circumstances which would
entitle the Participant to continuation of compensation and benefits
following a change of control within the meaning of Section
7 (a)(ii) of the Plan, such distribution shall occur as soon
as practicable after such termination, and provided further
that the portion of any Award or Awards which shall become
distributable in any particular year pursuant to subparagraph (iii) above
shall be limited to an amount sufficient to cause the
Participant's "applicable employee remuneration" for such year to equal
(but not exceed) $1,000,000 (such Awards to be distributed in the
order awarded, with the full amount of any earlier-granted
Award distributed prior to any distribution with respect to a
later-granted Award). Any shares of stock or other rights
credited pursuant to Section 5 (b) (i), (ii), (iii) or (iv)
of the Plan with respect to such Awards shall remain, until
distributed to such Participants, held as assets of the
trust created pursuant to Section 5 (a) of the Plan and in
accordance with Section 5 (e) of the Plan, and shall in all respects
remain fully subject to the claims of those general creditors of
the Corporation or its Participating Subsidiaries whose claims
are not satisfied because of the bankruptcy or insolvency of the
Corporation or Participating Subsidiaries pursuant to such
Section 5(a) of the Plan. Any such Awards shall otherwise
be administered in accordance with the provisions of the Plan,
including without limitation the vesting and forfeiture
provisions of Section 7 of the Plan, and the voting and
offer to purchase provisions of Section 8 of the Plan.
8. Voting Rights; Offer to Purchase Stock
Each Participant shall have the right and shall be
afforded the opportunity to instruct the Trustee how to vote the
shares of Stock held in his Account. The Trustee shall vote any
shares of Stock for which it does not receive instructions in the same
proportions on each matter to be voted upon as the shares
for which the Trustee does receive instructions. In the event
any offer is made to shareholders of the Company generally by
any person, corporation or other entity (the "Offeror") to
purchase any or all of the Company's outstanding Stock, including the
Stock then held in Participants' Accounts, then and in that
event the Trustee shall promptly forward to each Participant all
materials and written information furnished to the Trustee
by the Offeror and/or by the Company in connection therewith, and
shall notify each Participant in writing of the number of shares
of Stock which is then credited to such Participant's Account.
Such notice shall also set forth the rights afforded each
Participant by the following sentence and shall state that, absent
timely instructions from such Participant to the Trustee, no tender
to the Offeror shall be made of any of the shares specified in
such written notice. Each Participant shall be entitled to
confidentially instruct the Trustee as to whether all (but
not less than all) of the shares of Stock standing to his credit
should be tendered by the Trustee pursuant to such offer.
The Trustee shall tender only those shares of Stock held in a
Participant's Account for which it receives instructions to
so tender from such Participant, and shall not tender any
shares as to which such instructions are not so received. In the
event that Stock held in a Participant's Account is tendered
pursuant to this section, the proceeds received upon the acceptance
of such tender by the Offeror shall be credited to such
Participant's Account (and shall be subject to the same
terms and conditions as were applicable to the Stock so tendered).
Pending the distribution of such proceeds pursuant to Section 7
hereof, the Trustee shall invest any cash portion of such proceeds
in such short-term or intermediate-term obligations issued or
guaranteed by the Government of the United States or any
agency or instrumentality thereof, and in such commercial paper
(other than obligations of the Company), certificates of deposit
and other investments of a short-term or intermediate-term
nature, as the Trustee, in its discretion, deems suitable for the
investment of trust funds.
9. Non-alienation of Benefits
No right, benefit or payment under the Plan shall be
subject to anticipation, sale, assignment, pledge, encumbrance, or
charge by any Participant or any Beneficiary thereof. Any attempt
by a Participant or such Beneficiary to anticipate, sell, assign,
pledge, encumber, or charge the same shall be void. If any
Participant or Beneficiary hereunder should become bankrupt
or attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge any right or benefit or payment hereunder, then
such right, benefit or payment, in the sole discretion of the
Committee, shall be forfeited. In the absence of a
designated Beneficiary, the right of a Participant to receive a
distribution hereunder shall be transferable only by will or the laws of
descent and distribution.
10. Effective Date of Plan
The Plan shall become effective for the calendar year
ending on December 31, 1982, subject to approval, in accordance
with Beneficial's By-laws, of the holders of the outstanding
shares of the capital stock of Beneficial having ordinary voting power
for the election of directors of Beneficial, other than stock
having such power only by reason of the happening of a contingency,
and the receipt of any governmental approvals or rulings which
the Company determines to be appropriate.
11. Amendment of Termination of the Plan
(a) The Board may amend, suspend or terminate any
or all of the provisions of the Plan at any time, except that,
without prior approval, in accordance with Beneficial's By-
laws, of the holders of the outstanding shares of the capital
stock of Beneficial having ordinary voting power for the election of
directors of Beneficial, other than stock having such power
only by reason of the happening of a contingency, no amendment
may be made that will (i) increase the maximum amount that may be
contributed to the Plan for any year under Section 6(a)
hereof, or (ii) accelerate in any way the vesting requirements, or
change the forfeiture provisions, under Section 7 above.
(b) Any amendment, suspension or termination of
the Plan shall not adversely affect the rights of Participants
to Awards theretofore made, except to the extent, if any,
required to obtain governmental approvals or rulings which the
Company determines to be appropriate.
05/18/88 - Stockholder approval of Key Employees Stock
Bonus Plan
05/19/88 - Board of Directors approved provision for
confidential voting
02/08/89 - Board of Directors authorized changes to 6(a) and
6(c) re-timing of setting percentages.
11/12/92 - Board of Directors authorizes changes to Section 6(c) and
Section 7 removing acceleration of vesting at age 60
provisions.
02/01/94 - Adopted as of 2/01/94. Amended to restrict
certain 1993 awards to senior executives as to date first
eligible for distribution.
03/21/94 - Amended to restrict 1994 and subsequent awards to
senior executives as to date first eligible for
distribution.
EXHIBIT 10.13
BENEFICIAL CORPORATION
1990 NON-QUALIFIED STOCK OPTION PLAN
1. Purpose of Plan. The purpose of the Beneficial
Corporation 1990 Non-Qualified Stock Option Plan ("Plan") is to
attract and retain able and experienced key management employees
and directors and to provide an incentive to those persons to
improve operations and increase profits by affording them an
opportunity to acquire stock ownership in Beneficial Corporation
("Corporation"). The options granted under the Plan are not
intended to comply with Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Administration of Plan. This Plan shall be
administered by the Compensation Committee ("Committee") of the
Board of Directors of the Corporation ("Board") which shall
consist of not less than three members of the Board, none of whom
shall be eligible to participate in this Plan, other than
pursuant to Section 8 hereof, for a period of at least one year
prior to appointment. The determinations of the Committee shall
be made in accordance with their judgments as to the best
interests of the Corporation and its stockholders and in
accordance with the purposes of the Plan. A majority of members
of the Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee if in
writing signed by all of the Committee members. No member of the
Committee or the Board shall be liable for any action taken or
determination made in good faith with respect to this Plan or any
option ranted hereunder.
The Committee shall have full authority and discretion to
(a) determine, consistent with the provisions of this Plan, the
employees to be granted options, the times at which options shall
be granted, the number of shares subject to each option, the
period during which each option becomes exercisable (subject to
Section 7 hereof), and the terms contained in each option
agreement, and (b) adopt rules and regulations and prescribe or
approve any forms or documents to carry out the purposes and
provisions of this Plan. Notwithstanding the foregoing, the
number of shares subject to option which may be granted to any
employee, regardless of position or title, during any calendar
year under this Plan may not exceed 200,000, provided that such
limitation shall be subject to adjustment consistent with the
provisions of Section 12 hereof with respect to any change in the
Common Stock of the Corporation which shall occur on or after
November 21, 1996. The Committee's interpretation and
construction of any provisions of this Plan or determination of
any grant hereunder shall be binding and conclusive, except as
such may be otherwise modified, amended or changed by the Board.
The authority of the Board under this Section shall not be
exercised in any manner which could jeopardize the status of the
Committee as disinterested administrator of the Plan.
3. Eligibility. The class of employees eligible to
participate in this Plan shall consist of those headquarters
employees holding the title of Assistant Vice President or above,
or the equivalent of that position in function and responsibility
in the case of subsidiaries of the Corporation, and those
employees in the Corporation's field operations holding the title
of Director and above. An employee who has been granted an
option may be granted an additional option or options under this
Plan if the Committee shall so determine. The granting of an
option under this Plan shall not affect any outstanding stock
option previously granted to an optionee under this Plan. The
term "subsidiary" shall mean any domestic or foreign corporation
of which the Corporation owns, directly or indirectly, in excess
of 50% of the total combined voting power of all classes of stock
of such corporation. Notwithstanding any language of this
Section to the contrary, no individual shall be eligible to
receive an option as an employee of the Corporation or any of its
subsidiaries for a period of one year after having been eligible
to receive options pursuant to Section 8 hereof. Those eligible shall
include individuals who are subject to the personal income tax laws of
foreign countries, including Canada, the United Kingdom, and the
German Federal Republic, and employed by the Corporation or any
of its subsidiaries, and the Committee shall have the discretion,
but shall not be required, to include as a part of the terms of
each option agreement provisions and conditions consistent with
the Plan, intended to comply with the applicable requirements of
the internal revenue laws of such foreign countries.
4. Shares Subject to Plan. Subject to adjustment as
provided in Section 12, the aggregate number of shares which
shall be authorized to be issued pursuant to options granted by
the Committee under this Plan for any calendar year shall not
exceed that number of shares equal to one and three-quarter
percent (.0175) of the total issued and outstanding Common Stock
of the Corporation, par value $1.00 per share, as measured on the
first day of any such calendar year, which may be treasury shares
reacquired by the Corporation or authorized and unissued shares
or a combination of both. If during any such calendar year
options for less than the total number of shares so authorized
are granted under the Plan, the balance of such shares shall be
available for the granting of options during any succeeding year.
Any shares subject to an option under this Plan which shall
expire or be terminated for any reason shall be available for the
granting of options in that, or any succeeding year during the
term of this Plan.
5. Option Price. The option price per share under each
option granted by the Committee shall be not less than 100% of
the fair market value per share on the date an option is granted,
but in no event less than the par value thereof. The fair market
value shall be the average between the highest and lowest quoted
selling price per share on the New York Stock Exchange Composite
Transactions Tape "Composite Tape") on the date the option is
granted (subject to adjustment under Section 12 hereof). If
there should be no sale of the shares reported on such date, then
the option price per share shall be the average between the
highest and lowest quoted selling price per share reported on the
Composite Tape on the next preceding day on which there shall
have been a sale.
6. Exercise of Option.
(a) Each Option granted under the Plan shall be exercisable
on the dates and for the number of shares as shall be provided in
a stock option agreement between the Corporation and optionee
evidencing the option granted by the Committee and the terms
thereof. Shares shall be issued to the optionee upon payment in
full either in cash or by an exchange of shares of Common Stock
of the Corporation previously owned by the optionee for at least
six months prior to the date of exercise, or a combination of
both, in an amount or having a combined value equal to the
aggregate purchase price for the shares subject to the option or
portion thereof being exercised. The value of the previously
owned shares of Common Stock exchanged in full or partial payment
for the shares purchased upon the exercise of an option shall be
equal to the aggregate fair market value, as defined in Section
5, of such shares on the date of the exercise of such options.
(b) The Corporation shall be entitled to withhold the
amount of any tax attributable to any amounts payable or shares
deliverable under the Plan after giving the person entitled to
receive the payment or delivery (or the person liable for the
tax, if different) notice as far in advance as practicable, and
the Corporation may defer making payment or delivery of any
benefits under the Plan if any tax is payable until indemnified
to its satisfaction. The Committee may, in its discretion and
subject to rules which it may adopt, permit an optionee to pay
all or a portion of all taxes arising in connection with the
exercise of an option by electing to (i) have the Corporation
withhold shares of Common Stock, or (ii) deliver other shares of
Common Stock previously owned by the optionee for at least six
months having a fair market value (as defined in Section 5) equal
to the amount to be withheld provided, however, that the amount
to be withheld shall not exceed the optionee's estimated total
Federal, State and local tax obligations associated with the
transaction. The fair market value of fractional shares
remaining after payment of the withholding taxes shall be paid to
the optionee in cash.
7. Term of Option. Options granted under the Plan shall
become exercisable at such intervals or dates and over such
period of time ("Exercise Period") and for such number of shares
which may be purchased at any one time as shall be determined by
the Committee (collectively "Option Terms") to be set forth in
the stock option agreements between individual optionees and the
Corporation under the Plan ("Option Agreements"), but in no event
shall the Exercise Period commence prior to one year after the
date of grant (except as permitted in Sections 11(c) and 10(e)
hereof) or extend more than 10 years after the date of grant.
The Committee may, consistent with Section 13 hereof, authorize
existing Option Agreements to be amended to provide for different
Option Terms, in whole or in part, including an amendment to
permit transferability in accordance with Section 9 hereof.
Options which are not exercised prior to the end of the Exercise
Period shall expire, and the shares subject to such options shall
become available for the granting of other options under the Plan
during that or any succeeding year.
8. Grants to Outside Directors.
(a) On the 15th day of the month of December of each year
prior to the termination of this Plan, each member of the Board
of Directors of the Corporation (excluding Emeritus Directors)
who is not then an employee of the Corporation or any of its
subsidiaries ("Outside Director") shall automatically be issued
an option pursuant to this Plan to purchase 4000 shares of the
Common Stock of the Corporation, provided, however, that such
number of shares shall be automatically proportionately adjusted
upon the occurrence of any event described in Section 12 hereof,
in a manner consistent with any adjustment affected pursuant to
that Section. In the event that December 15 shall in any year
fall on a day on which the New York Stock Exchange is not open
for trading, options shall instead be issued pursuant to this
Section on the next preceding trading day.
(b) Such options shall be granted at an option price equal
to the fair market value per share (as defined at Section 5) on
the date of grant, shall be exercisable at any time after one
year following the date of grant and prior to ten years following
the date of grant, and shall be subject to the restrictions on
transferability provided in Section 9(a) hereof.
(c) If for any reason during the term of an unexercised and
unexpired option issued pursuant to this Section, the optionee
shall cease to be a voting member of the Board of Directors of
the Corporation, the option may be exercised at any time during
its normal exercise period, provided however, that any option not
exercisable on the date of such cessation shall expire on such
date.
(d) Options issued pursuant to this Section shall be
subject to adjustment pursuant to Section 12 hereof.
(e) Notwithstanding any provisions of this Section to the
contrary, no Outside Director of the Corporation shall be
eligible to receive any option pursuant to the Plan for a period
of one year after having been eligible to receive options
pursuant to the Plan as an employee of the Corporation or any of
its subsidiaries.
(f) The provisions of this Section 8 may be amended by the
Board from time to time, affecting the issuance date, number of
shares under option, and terms of options issued to Outside
Directors hereunder.
9. Transferability of Options.
Options or LSAR's granted under this Plan shall be
transferable by the optionee by will or the laws of descent and
distribution, and shall also be transferable by the optionee to
(i) the spouse, siblings, parents and lineal descendants of the
optionee ("Immediate Family Members"), (ii) organizations
described at Section 501(c)(3) of the Code ("Charities"), (iii) a
trust or trusts for the exclusive benefit of such Immediate
Family Members or Charities, or (iv) a partnership or
partnerships in which such Immediate Family Members are the only
partners, provided that (A) there may be no consideration for any
such transfer, (B) the stock option agreement pursuant to which
options were granted under this Plan must expressly provide for
transferability in a manner consistent with this Section 9, (C)
subsequent transfers of transferred options shall be prohibited
except those pursuant to will or the laws of descent and
distribution, and (D) any such transfer must expressly provide
that the optionee is designated as agent of the transferee for
purposes of notices from the Plan or the Committee with respect
to the options, and for purposes of any notices to the Plan or
the Committee from the transferee with respect to the options,
including but not limited to notices of intent to exercise.
Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of Sections 6 and
13 hereof the term "optionee" shall be deemed to refer to the
transferee. The events of termination of employment of Section
10 hereof shall continue to be applied with respect to the
original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the
periods specified at Sections 10(b), 10(c), 10(d) and 10(e).
Absent a transfer in accordance with the provisions of this
Section 9, options or LSAR's granted under the Plan shall be
exercisable during the optionee's lifetime only by the optionee
(or the legal representative of the optionee under Section
10(c)).
10. Termination of Employment and Death of Optionee.
(a) If during the term of an unexercised option the
optionee terminates employment with the Corporation or any of its
subsidiaries for any reason (other than those specified at (b)
through (e) of this Section) the option shall expire and cease to
be exercisable immediately upon such termination.
(b) If during the term of an unexercised option employment
with the corporation or any of its subsidiaries is terminated by
reason of the death of such optionee, the option may be exercised
within a two year period following the date of death to the
extent that such option is exercisable at the date of death, but
in no event later than the Exercise Period specified in the
Option Agreement by which such option was granted. The option
shall be exercisable during such period by the optionee's estate
or by any person who acquires the right to exercise the option by
reason of the optionee's death.
(c) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by
reason of the "long term disability" of the optionee, as such
term is defined for purposes of the Long Term Disability Benefits
Plan maintained by the Corporation, the option may be exercised,
to the extent that it was exercisable at termination, at any time
during the Exercise Period specified in the Option Agreement by
which such option was granted. The optionee's legal
representative, if appointed, shall be entitled to exercise the
option
(d) If during the term of an unexercised option employment
with the Corporation or any of its subsidiaries is terminated by
reason of retirement at any time following the date the optionee
is eligible to retire early pursuant to Section 4 of the
Beneficial Corporation Pension Plan dated October 1, 1983, as
amended ("Pension Plan") the option may be exercised at any time
during the three month period following his or her Early
Retirement Date (as defined in the Pension Plan), to the extent
that such option is exercisable on such Early Retirement Date,
but in no event later than the Exercise Period specified in the
Option Agreement by which such option was granted.
(e) If during the term of an unexercised option
employment with the Corporation or any of its subsidiaries is
terminated by reason of retirement at any time following the date
the optionee is eligible to retire early, as defined at 10(d)
above, and after the date on which such optionee attains the age
of sixty two years, the option shall be exercisable at any time
during the Exercise Period specified in the Option Agreement by
which such option was granted. Notwithstanding the provisions of
Section 7 hereof and the terms of each Option Agreement, all
options held at retirement, then unexercised and unexpired, by
any optionee whose employment is terminated as provided for in
this Section 10(e) shall become immediately exercisable upon the
later to occur of (i) the optionee's retirement date, or (ii) the
expiration of a period of six months following the date of grant
of any affected option.
(f) The portion of any option subject to this Section 10
which is not exercisable at the beginning of, or exercised within
the periods permitted by paragraphs (b) through (e) above shall
lapse, and the shares subject to such option shall become
available for the granting of other options under this Plan
during that or any succeeding year.
11. Change of Control.
(a) Qualifying Event. The occurrence of a "Change in
Control of the Corporation", as that term is defined herein,
shall constitute a "Qualifying Event" for purposes of the Plan.
A "Change in Control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A (or the corresponding
provision of any future schedule of required proxy statement
information) of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or
not the Corporation is then subject to such reporting
requirement; provided, that, without limitation, such a change in
control shall be deemed to have occurred if:
(i) the Corporation shall cease to be a publicly owned
corporation having at least 1000 stockholders; or
(ii) any "person" (as defined in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifteen
percent (15%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(iii) during any period of two (2) consecutive years (not
including any period prior to the adoption of this Plan) there
shall cease to be a majority of the Board comprised as follows:
individuals who at the beginning of such period constitute the
Board and any new director(s) whose election by the Board or
nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning
of the period or whose election or nomination for election was
previously so approved.
(b) Limited Stock Appreciation Rights. Upon the occurrence
of a Qualifying Event, there shall automatically be issued in
connection with all options granted pursuant to the Plan, then
unexercised and unexpired, to persons at such time subject to
restrictions on purchase and sale of the Common Stock of the
Corporation under Section 16(b) of the Exchange Act, Limited
Stock Appreciation Rights ("LSAR"), as hereinafter defined. The
number of shares subject to each LSAR shall be the same as that
for the underlying option to which such LSAR relates. For
purposes of the Plan an LSAR shall represent the privilege to
receive from the Corporation (without payment to the Corporation
except for applicable withholding taxes) upon exercise of such
LSAR a payment solely in cash equal to the "Option Spread". The
"Option Spread" shall be (i) the difference between the highest
fair market value per share (as defined in Section 5) during the
90-day period beginning on the day of the Qualifying Event and
the per share option price of the related option, times (ii) the number of
shares subject to the LSAR. An LSAR shall be exercisable in
whole or in part at any time during the 30 day period following
the expiration of six months after the date of the Qualifying
Event, upon notice to the Corporation in the manner prescribed by
the Committee. Notwithstanding Section 10(a) hereof, options or
LSAR's granted hereunder shall remain exercisable during such six
month and 30 day periods, if within the Exercise Period. Upon
the exercise of an LSAR, the related option granted pursuant to
the Plan shall cease to be exercisable to the extent of the
shares of Common Stock with respect to which such LSAR is
exercised. Upon the exercise or termination of a related option,
the LSAR with respect to such related option shall terminate to
the extent of the shares of Common Stock with respect to which
the related option was exercised or terminated.
(c) Acceleration of Vesting. Notwithstanding the
provisions of Section 7 hereof and the terms of each stock option
agreement, upon the occurrence of any Qualifying Event all
options granted under the Plan, then unexercised and unexpired,
shall be immediately exercisable.
12. Adjustment Provisions. In the event of any change in the
Common Stock of the Corporation, $1.00 par value, by reason of
any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares,
extraordinary dividend, or of any similar change affecting such
Common Stock, then in any such event the number and kind of
shares subject to options granted pursuant to the Plan and their
purchase price per share shall be appropriately adjusted
consistent with such change in such manner as the Committee of
the Plan may deem equitable to prevent substantial dilution or
enlargement of the rights granted pursuant to any option
agreement issued hereunder. Any adjustments so made shall be
final and binding upon all parties.
13. Duration, Amendment and Termination. This Plan is
intended to be perpetual and shall have no stated termination
date. The Board of Directors may amend the Plan from time to time
or terminate the Plan at any time. However, no action or
amendment authorized by this Section or Section 7 shall reduce
the amount of any existing benefits or change the terms and
conditions thereof without the optionee's consent.
To the extent then required by Rule 16(b)(3), as promulgated by
the Securities and Exchange Commission, approval of the
stockholders of the Corporation shall be required for any
amendment to the Plan which shall (a) materially increase the
total number of shares which may be issued under the Plan; (b)
materially reduce the minimum purchase price of shares of Common
Stock which may be made subject to options under the Plan, or (c)
materially modify the requirements as to eligibility for options
under the Plan.
By mutual agreement between the Corporation and an optionee
hereunder or under any other stock option plan of the
Corporation, options or rights may be granted to the optionee in
substitution and exchange for, and in cancellation of, any
benefits previously granted to the optionee under this Plan or
any other stock option plan of the Corporation.
14. Compliance With Law. This Plan, all options issued
hereunder, and the obligation of the Corporation to sell and
deliver shares of Common Stock hereunder, shall be subject to all
applicable Federal and State laws, rules and regulations and to
such approvals by any governmental or regulatory agency as may be
required.
15. No Rights as Stockholder. Individuals granted options
pursuant to the Plan and transferees shall have no rights as
stockholders with respect to any shares of Common Stock subject
to such options prior to the date of issuance to them of
certificates for such shares. Other than pursuant to Section 12
hereof no adjustment shall be made for dividends or distributions
or other rights with respect to such shares for which the record
date is prior to the date on which they shall become the holder
of record thereof.
16. Stockholder Approval. The Plan was adopted by the Board
of Directors on November 15, 1990, subject to stockholder
approval. The Plan was approved by the stockholders of the
Corporation on May 22, 1991.
EXHIBIT 11
BENEFICIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in millions, except per share amounts)
Years Ended December 31
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Primary Earnings
Net Income $281.0 $150.5 $177.7
Dividends on Preferred Stock (5.2) (5.2) (5.2)
Net Income Applicable to Common Stock $275.8 $145.3 $172.5
Weighted Average Shares Outstanding
Common 53.1 52.5 51.9
Common Stock Equivalents 1.2 1.0 .7
Total 54.3 53.5 52.6
Primary Earnings per Common Share $ 5.08 $ 2.72 $ 3.28
Fully Diluted Earnings*
Net Income $281.0 $150.5 $177.7
Dividends on Non-Convertible
Preferred Stock (5.1) (5.1) (5.1)
Net Income Applicable to Common Stock $275.9 $145.4 $172.6
Weighted Average Shares Outstanding
Common 53.1 52.5 51.9
Common Stock Equivalents 1.6 1.3 1.0
Total 54.7 53.8 52.9
Fully Diluted Earnings per Common Share $ 5.04 $ 2.70 $ 3.26
</TABLE>
* This calculation is submitted in accordance with Regulation S-
K item 601(b)(11) although not required by footnote 2 to
paragraph 14 of APB Opinion No. 15 because it results in
dilution of less than 3%.
EXHIBIT 12
BENEFICIAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Continuing Operations Only)
Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
(in millions)
Income From Continuing Operations $ 281.0 $ 150.5 $ 177.7 $186.0 $148.4
Add Provision for Income Taxes 177.5 119.9 148.4 129.2 103.2
Earnings Before Income Taxes 458.5 270.4 326.1 315.2 251.6
Fixed charges:
Interest and Debt Expense 812.8 816.2 673.6 633.2 642.7
Interest Factor Portion of Rentals 23.3 22.3 16.3 15.8 15.7
Total Fixed Charges 836.1 838.5 689.9 649.0 658.4
Earnings Before Income Taxes
and Fixed Charges $1,294.6 $1,108.9 $1,016.0 $964.2 $910.0
Ratio of Earnings to Fixed Charges 1.55 1.32 1.47 1.49 1.38
Preferred Dividend Requirements $ 8.5 $ 9.3 $ 9.5 $ 8.8 $ 8.8
Ratio of Earnings to Fixed Charges
and Preferred Dividend
Requirements 1.53 1.31 1.45 1.47 1.36
</TABLE>
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.
Preferred dividend requirements are grossed up to their pretax
equivalent.
EXHIBIT 21
LIST OF BENEFICIAL CORPORATION SUBSIDIARIES 01/06/97
COMPRISING THE FINANCE DIVISION
<TABLE>
<S> <C>
Name of Subsidiary State
and of
Principal Place of Business Incorporation
Bencharge Credit Service Holding Company DE
301 North Walnut St., Wilmington, DE 19801
Bencharge Credit Service of America, Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services of Connecticut Inc. DE
926 Main St., East Hartford, CT 06108
Beneficial Credit Services of Mississippi Inc. DE
2310 Highway 80 W., Jackson, MS 39204
Beneficial Credit Services of South Carolina DE
Inc., 1660 Sam Ritterburg Blvd., Charleston,
SC 29407
Beneficial Arizona Inc. DE
7315 North Oracle Road, Ste. 107, Tucson,
AZ 85704
Beneficial California Inc. DE
1731 W. Colorado Blvd., Los Angeles, CA 90041
Beneficial Colorado Inc. DE
3200 South Wadsworth Blvd., Lakewood, CO 80227
Beneficial Connecticut Inc. DE
926 Main St., East Hartford, CT 06108
Beneficial Delaware Inc. DE
514 Jefferic Blvd., Unit 1, Dover, DE 19901
Beneficial Florida Inc. DE
2777 University Blvd. W., Ste. 65,
Jacksonville, FL 32216
Beneficial Mortgage Co. of Florida DE
2777 University Blvd. W., Ste. 65,
Jacksonville, FL 32216
Beneficial Georgia Inc. DE
700 North Main St., Ste. 10, Alpharetta, GA 30201
Beneficial Hawaii Inc. DE
James Campbell Bldg., 826 Ft. Street Mall,
Honolulu, HI 96813
Beneficial Idaho Inc. DE
1003 Vista Ave., Boise, ID 83709
Beneficial Illinois Inc. DE
4012 West 79th St., Chicago, IL 60652
Beneficial Indiana Inc. DE
812 S. Scatterfield Rd., Anderson, IN 46012
Beneficial Iowa Inc. IA
301 North Walnut St., Wilmington, DE 19801
Beneficial Kansas Inc. KS
Capitol Hills Shops, 400 SW 29th St., Ste. L,
Topeka, KS 66611
Beneficial Kentucky Inc. DE
8512 Preston Hwy., Louisville, KY 40219
Beneficial Louisiana Inc. DE
11439 Florida Blvd., Baton Rouge, LA 70815
Beneficial Maine Inc. DE
1041 Breighton Avenue, Portland, ME 04102
Beneficial Maryland Inc. DE
79 Forest Dr., Annapolis, MD 21401
Beneficial Massachusetts Inc. DE
Gr. Fl., 236 Cabot St., Beverly, MA 01915
Beneficial Michigan Inc. DE
12900 Hall Road., Ste. 190, Sterling Hts.,
MI 48313
Beneficial Minnesota Inc. DE
5180 Central Ave., NE Columbia Heights, MN 55421
Beneficial Mississippi Inc. DE
2310 Highway 80 W., Jackson, MS 39204
Beneficial Missouri, Inc. DE
2219 C Missouri Blvd., Jefferson City, MO 65109
Beneficial Montana Inc. DE
1520 3rd St., NW, Ste. A,
Great Falls, MT 59404
Beneficial Nebraska Inc. NE
5005 O Street, Lincoln, NE 68510
Beneficial Nevada Inc. DE
1055 South Wells, Ste. 115, Reno, NV 89502
Beneficial New Hampshire Inc. DE
45 S. Main St., Concord, NH 03301
Beneficial New Jersey Inc. DE
146 South Street, Morristown, NJ 07960
Beneficial New Mexico Inc. DE
7200 Montgomery Blvd, NE, Ste. B 3-4,
Albuquerque, NM 87109
Beneficial North Carolina Inc. DE
6300 - 170 Creedmoor Road
Raleigh, NC 27612
Beneficial Oklahoma Inc. DE
6935 South Lewis, Tulsa, OK 74136
Beneficial Oregon Inc. DE
3671 SW Hall St., Beaverton, OR 97005
Beneficial Rhode Island Inc. DE
457 Main St., East Greenwich, RI 02818
Beneficial South Carolina Inc. DE
1660 Sam Ritterburg Blvd., Charleston, SC 29407
Beneficial Tennessee Inc. TN
3802 B Nolensville Rd., Nashville, TN 37211
Beneficial Texas Inc. TX
6406 N. 1 H-35, Lincoln Village Shopping Center
Austin, TX 78752
Beneficial Utah Inc. DE
1741 West 7800 South, West Jordan, UT 84088
Beneficial Virginia Inc. DE
10175 Hull Street Road, Midlothian, VA 23112
Beneficial Washington Inc. DE
2111 N. Northgate Way, Seattle, WA 98133
Beneficial West Virginia, Inc. WV
100 Lee Street West, Charleston, WV 25302
Beneficial Wisconsin Inc. DE
11102 West National Ave., West Allis, WI 53227
Beneficial Commercial Holding Corporation DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Commercial Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Beneficial Finance Leasing Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Beneficial Leasing Group, Inc. DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Lee J. Grenci
Neil Corporation DE
200 Beneficial Center, Peapack,
NJ 07977
*same as above, Lee J. Grenci
Silliman Corporation DE
200 Beneficial Center, Peapack,
NJ 07977
*same as above, Lee J. Grenci
Beneficial Consumer Discount Company PA
3368 Paxton St., Scottsdale Plaza
Harrisburg, PA 17111
Beneficial Discount Co. of Virginia DE
10175 Hull Street Road, Midlothian, VA 23113
Beneficial Finance Co. of West Virginia DE
100 Lee Street West, Charleston, WV 25302
Beneficial Finance Services, Inc. KS
8771 W. 95th St., Overland Park, KS 66204
Beneficial Income Tax Service Holding Co., Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Tax Masters Inc. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Industrial Loan Company of Kentucky DE
8512 Preston Hwy., Louisville, KY 40219
Beneficial Investment Co. DE
301 North Walnut St., Wilmington, DE 19801
B B Credit Corp. DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Credit Services of New York, Inc.
(Inactive) DE
622 Yonkers Ave., Yonkers, NY 10704
Beneficial New York Inc. NY
622 Yonkers Ave., Yonkers, NY 10704
Beneficial Homeowner Service Corporation DE
622 Yonkers Ave., Yonkers, NY 10704
Beneficial Homeowners Inc. (Inactive) DE
301 North Walnut St., Wilmington, DE 19801
Beneficial Loan & Thrift Co. MN
5180 Central Ave., NE.
Columbia Heights, MN 55421
Beneficial Mortgage Holding Company DE
301 North Walnut St., Wimington, DE 19801
Beneficial Excess Servicing Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Beneficial Home Mortgage Loan Corp. DE
457 Main St., East Greenwich, RI 02818
Beneficial Mortgage Co. of Arizona DE
7315 North Oracle Road, Ste. 107, Tucson,
AZ 85704
Beneficial Mortgage Co. of Colorado DE
3200 South Wadsworth Blvd., Lakewood, CO 80227
Beneficial Mortgage Co. of Connecticut DE
926 Main St., East Hartford, CT 06108
Beneficial Mortgage Co. of Georgia DE
700 North Main Street, Ste. 10
Alpharetta, GA 30201
Beneficial Mortgage Co. of Idaho DE
1003 Vista Ave., Boise, ID 83709
Beneficial Mortgage Co. of Indiana DE
812 S. Scatterfield Rd., Anderson, IN 46012
Beneficial Mortgage Co. of Kansas, Inc. DE
Capitol Hills Shops, 400 SW 29th St., Ste. L,
Topeka, KS 66611
Beneficial Mortgage Co. of Louisiana DE
11439 Florida Blvd., Baton Rouge, LA 70815
Beneficial Mortgage Co. of Maryland DE
79 Forest Dr., Annapolis, MD 21401
Beneficial Mortgage Co. of Massachusetts DE
Gr. Fl., 236 Cabot St., Beverly, MA 01915
Beneficial Mortgage Co. of Mississippi DE
2310 Highway 80 W., Jackson, MS 39204
Beneficial Mortgage Co. of Missouri, Inc . DE
2219 C Missouri Blvd., Jefferson City, MO 65109
Beneficial Mortgage Co. of Nevada DE
1055 South Wells, Ste. 115, Reno, NV 89502
Beneficial Mortgage Co. of New Hampshire DE
45 S. Main St., Concord, NH 03301
Beneficial Mortgage Co. of North Carolina DE
6300 - 170 Creedmoor Road
Raleigh, NC 27612
Beneficial Mortgage Co. of Oklahoma DE
6935 South Lewis, Tulsa, OK 74136
Beneficial Mortgage Co. of Rhode Island DE
457 Main St., East Greenwich, RI 02818
Beneficial Mortgage Co. of South Carolina DE
1660 Sam Ritterburg Blvd., Charleston, SC 29407
Beneficial Mortgage Co. of Texas DE
6406 N. 1 H-35, Lincoln Village Shopping Center
Austin, TX 78752
Beneficial Mortgage Co. of Utah DE
1741 West 7800 South, West Jordan, UT 84088
Beneficial Mortgage Co. of Virginia DE
10175 Hull Street Road, Midlothian, VA 23112
Beneficial Savings Bank, FSB A
430 Knights Run Ave., Tampa, FL 33602 Federal
*same as above, Andrea J. Kaplan Savings Bank
Beneficial Service Corporation DE
430 Knights Run Ave., Tampa, FL 33602
Benevest Group Inc. DE
301 N. Walnut Street, Wilmington, DE 19801
Benevest Services, Inc. WA
2111 N. Northgate Way, Seattle, WA 98133
Alabama Properties, Inc. DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in the District of Columbia
and State of Colorado
BMC Holding Company DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Mortgage Corporation DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Credit Corp. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Beneficial Finance Limited UK
Beneficial House, Easthampstead Road,
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Beneficial Insurance Group Holding Company DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
BFC Agency, Inc. DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Acts as an insurance agency
BFC Insurance Agency of America WY
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Acts as an insurance agency
Beneficial Bank Public Limited Company UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Operates in the banking field in the
United Kingdom
Beneficial Building Company Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Data Systems Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Financial Services Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Financing Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee,
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Leasing Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Trust (Guernsey) Limited UK
*Rysaffe International Services Ltd.
La Tonnelle House, Les Banques,
St. Sampson, Guernsey, Channel
Islands Performs services for
Beneficial Bank Public
Limited Company
Beneficial Trust Investments Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
* same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Trust (Jersey) Limited UK
*Rysaffe International Services Ltd.
La Tonnelle House, Les Banques,
St. Sampson, Guernsey, Channel
Islands
Performs services for Beneficial
Bank Public
Limited Company
Beneficial Trust Nominees Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
The Loan Corporation Limited UK
Abbey Gardens, 6 Abbey Street,
Reading,
Berkshire RG1 3BA, England
*Anthony Lee, Beneficial House,
Easthampstead Road., Bracknell,
Berkshire, RG 12 1NS, England
Performs a Loan Broker Service
for Sterling
Bank & Trust Limited
Security Trust Limited UK
Beneficial House, Easthampstead Road
Bracknell, Berkshire, RG12 1NS
*same as above, Anthony Lee
Performs services for Beneficial
Bank Public
Limited Company
Sterling Credit Limited UK
Abbey Gardens, 6 Abbey Street,
Reading,
Berkshire RG1 3BA, Eng.
*Anthony Lee, 6th Floor, Beneficial
House, Easthampstead Road, Bracknell,
Berkshire, RG12 1NS
Engages in making Second Mortgage
Consumer Loans.
Sterling Credit Management Limited UK
Abbey Gardens, 4 Abbey Street,
Reading, Berkshire RG1 3BA, England
*Anthony Lee, Beneficial House,
Easthampstead Road, Bracknell,
Berkshire, RG12 1NS
Engages in Managing and Collecting
Loan Portfolios of Third Parties.
Beneficial Canada Holdings Inc. Canada
8500 Leslie St., Ste. 600,
Thornhill, Ont., Canada
*same as above, Jean A. Bedard
A holding company
Beneficial Canada Inc. Canada
8500 Leslie St., Ste. 600
Thornhill, Ont., Canada
*same as above, Jean A. Bedard
Engaged in the business of making
consumer loans to individuals,
purchasing installment sales
contracts, evidencing time
sales of merchandise on services
and related activities in Canada
Beneficial Realty Ltd. Canada
8500 Leslie St., Ste. 600
Thornhill, Ont., Canada
*same as above, Jean A Bedard
Engaged in the business of second
mortgage loans.
Beneficial Direct Inc. NJ
400 Beneficial Center
Peapack, NJ 07977
*same as above, Barbara Hill
Direct Marketing of Credit Life
Insurance and other related products.
BFC Ireland (Holdings) Limited Ireland
3 Burlington Road
Dublin 4, Ireland
*same as above, Matsack Trust Limited
a Holding Company
BFC Insurance (Life) Limited Ireland
22-24 Lower Mount Street
Newmount House, Dublin 2, Ireland
*Matsack Trust Limited,
3 Burlington Road,
Dublin 4, Ireland
Will operate as a full line life,
accident and health insurance company
BFC Insurance Limited Ireland
22-24 Lower Mount Street
Newmount House, Dublin 2, Ireland
*Matsack Trust Limited,
3 Burlington Road,
Dublin 4, Ireland
Will operate as a full line life,
accident and health insurance company
Beneficial Bank A.G. Germany
Augustenstrasse 7
7000 Stuttgart 1, Germany
*Dr. Klaus A. Gerstenmaier,
Lenzhalde 83,
7000, Stuttgart 1, Germany
Engaged in consumer loans in Germany
Beneficial Corporation Agency GMBH Germany
Augustenstrasse 7
7000 Stuttgart 1, Germany
*Dr. Klaus A. Gerstenmaier,
Lenzhalde 83,
7000, Stuttgart 1, Germany
Engaged in consumer loans
in Germany
Extracard Corp. DE
301 North Walnut St., Wilmington,
DE 19801
*same as above, Elizabeth A. Dawson
Engage in any lawful acts or activities
for which corporations may be organized
under the General Corporation Law of
Delaware.
BFC Insurance Agency of Nevada NV
301 N. Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Acts as an insurance agency
Beneficial Insurance Group, Inc. DE
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
A management company
Service Administrators, Inc. (USA) CO
205 E. 10th St., Amarillo, TX 79101
*400 Beneficial Center, Peapack, NJ 07977
Leonard Fisher
Service General Insurance Company OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Beneficial Ohio Inc. DE
5025 Arlington Centre Blvd., Columbus,
OH 43220
Service Management Corporation OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
B.I.G. Insurance Agency, Inc. OH
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
The Central National Life Insurance Company DE
of Omaha
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Full line life, accident and health
insurance company
The Central National Life Insurance Company NJ
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
First Central National Life Insurance Company NY
of New York
400 Beneficial Center, Peapack, NJ 07977
*same as above, Leonard Fisher
Wesco Insurance Company DE
400 Beneficial Center, Peapack, NJ 07977
*Elizabeth A. Dawson, 301 N. Walnut St.
Wilmington, DE 19801
Selling non-filing insurance in Delaware
Southwest Texas General Agency, Inc. TX
205 East 10th St., Amarillo, TX 79101
*same as above, Leah Kelley
Beneficial Land Company, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in the Borough of Peapack &
Gladstone, NJ
Beneficial Management Corporation DE
200 Beneficial Center, Peapack, NJ 07977
*same as above, Millicent A. Picker, Esq.
Provides Management, Accounting Services and
Advertising for Affiliates.
Beneficial Management Institute, Inc. NY
200 Beneficial Center, Peapack, NJ 07977
*same as above, Millicent A. Picker, Esq.
Beneficial Management Corporation of America DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Janice L. Lewis
Management companies providing supervision, audit,
legal, training and other services for financial
and other subsidiaries, at cost
Beneficial Franchise Company Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Engages in the Management and Ownership of
Trademarks and Patents.
Beneficial Mark Holding Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Beneficial Trademark Co. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
An Investment Company
Beneficial Management Headquarters, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone
Borough, NJ and Bedminster Township, NJ
Beneficial Facilities Corporation NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone
Borough, NJ
Beneficial National Bank National
1300 Market Street, Wilmington, DE 19801 Banking Assoc.
*same as above, Kevin T. Peck, Esq.
A commercial bank doing business in
the State of Delaware
Beneficial Service Corporation of Delaware DE
1300 Market Street, Wilmington, DE 19801
To sell Insurance on behalf of its Parent
Corporation
Beneficial National Bank USA National
301 North Walnut St., Wilmington, DE 19801 Banking Assoc.
*Same as above, Kevin T. Peck (DE)
A private label credit card operation
Beneficial Service Corporation of New Jersey DE
301 North Walnut St., Wilmington, DE 19801
To sell Insurance on behalf of its Parent
Corporation.
Beneficial Real Estate Company, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone
Borough, NJ
Beneficial Systems Development Corporation DE
101 East Kennedy Blvd., Ste. 700, Tampa,
FL 33602
Will engage in the business of applications,
development, computer programming, consulting
and other related services in Tampa, Florida
Beneficial Technology Corporation DE
500 Beneficial Center, Peapack, NJ 07977
*same as above, Peter R. Callas
Performs data processing services for finance
and other subsidiaries
Bon Secour Properties Inc. AL
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Peapack and Gladstone
Borough, NJ
Capital Financial Services Inc. NV
5025 Arlington Centre Blvd, Columbus, OH 43220
Corporate Security Engineering Services, Inc. NJ
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Engaged in the business of designing security
and life safety systems for commercial use
Garrison Platt Properties Inc. FL
200 Beneficial Center, Peapack, NJ 07977
*same as above, Matthew J. Broas, Esq.
Owns real estate in Tampa, FL
Harbour Island Inc. FL
424 Knights Run Avenue
Tampa, FL 33602
*Matthew J. Broas, Esq., 200 Beneficial Center,
Peapack, NJ 07977
Oversees the development of a piece of
real estate in Florida and all activities
related thereto
Harbour Island Property Management Inc. FL
Harbour Island Security Co., Inc. FL
H I Venture One, Inc. FL
H I Venture Three, Inc. FL
H I Venture Four, Inc. FL
Tampa Island Transit Company, Inc. FL
All the above, 424 Knights Run Avenue
Tampa, FL 33602
*Matthew J. Broas, Esq.,
200 Beneficial Center,
Peapack, NJ 07977
Personal Mortgage Holding Company DE
301 North Walnut St., Wilmington, DE 19801
Personal Mortgage Corporation DE
100 Business Center Dr., Hwy. 22,
Brewster, NY 10509
Southern Trust Company DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
Acts as transfer agent for certain subsidiaries
of Beneficial Corporation
Southwest Beneficial Finance, Inc. IL
301 North Walnut St., Wilmington, DE 19801
Wasco Properties, Inc. DE
301 North Walnut St.,
Wilmington, DE 19801
*same as above, Carolyn Micolucci
Holds real estate
Beneficial Real Estate Joint Ventures, Inc. DE
301 North Walnut St., Wilmington, DE 19801
*same as above, Elizabeth A. Dawson
</TABLE>
* Minutes of company kept at this address
** Remaining shares are Directors' qualifying shares
*** Remaining shares are owned by Beneficial Corporation
01/06/97
<TABLE>
<S> <C>
State of
INACTIVE CORPORATIONS Incorporation
Bencharge Credit Service, Inc. DE
Beneficial Alabama Inc. AL
Beneficial Business Credit Corp. DE
Beneficial Credit Services of DE
Alabama Inc.
Beneficial Direct, Inc. NJ
Beneficial Finance Co. DE
Beneficial Finance Co. of Alaska DE
Beneficial Finance Co. of Canada Canada
Beneficial Finance Co. of Columbia DC
Beneficial Finance Co. of Maine ME
Beneficial Financial Center, Inc. DE
Beneficial Marketing Corporation OH
Beneficial North Dakota Inc. DE
Beneficial PayNet Systems, Inc. DE
Beneficial Premium Services Limited UK
Beneficial Securities, Inc. DE
Beneficial South Dakota Inc. DE
Beneficial Vermont Inc. DE
Beneficial Wyoming Inc. WY
Benevest Escrow Company DE
Benevest Service Company DE
Capital Credit Services Inc. DE
Guaranty and Indemnity DE
Insurance Company
Personal Finance Company, Inc. NY
Sterling Mortgages Limited UK
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in
Registration Statements No. 33-64357 and No. 33-57541 on Form S-
3 and Registration Statement No. 333-02737 on Form S-8 of our
report dated January 28, 1997 appearing in this Annual Report on
Form 10-K of Beneficial Corporation for the year ended December
31, 1996.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 20, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, CHARLES W. BOWER, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th
day of March, 1997.
/s/ CHARLES W. BOWER
CHARLES W. BOWER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROBERT J.
CALLANDER, a Director of Beneficial Corporation, One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN, JAMES H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers
of the Company, or any of them, with full power to act without
the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th
day of March, 1997.
/s/ ROBERT J. CALLANDER
ROBERT J. CALLANDER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, FINN M. W.
CASPERSEN, a Director of Beneficial Corporation, One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN, JAMES H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers
of the Company, or any of them, with full power to act without
the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th
day of March, 1997.
/s/ FINN M. W. CASPERSEN
FINN M. W. CASPERSEN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, LEONARD S. COLEMAN,
JR., a Director of Beneficial Corporation, One Christina Centre,
301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN, JAMES H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers
of the Company, or any of them, with full power to act without
the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th
day of March, 1997.
/s/ LEONARD S. COLEMAN, JR.
LEONARD S. COLEMAN, JR.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, DAVID J. FARRIS, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th
day of March, 1997.
/s/ DAVID J. FARRIS
DAVID J. FARRIS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, JAMES H. GILLIAM,
JR., a Director of Beneficial Corporation, One Christina Centre,
301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN and RONALD E. BOMBOLIS, officers of the Company, or
either of them, with full power to act without the other, my true
and lawful attorney-in-fact or agent for me and in my name, place
and stead, in any and all capacities, to sign the Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 pursuant
to the Securities Exchange Act of 1934, as amended, and any
amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th
day of March, 1997.
/s/ JAMES H. GILLIAM, JR.
JAMES H. GILLIAM, JR.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ANDREW C.
HALVORSEN, a Director of Beneficial Corporation, One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint JAMES H.
GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company, or
either of them, with full power to act without the other, my true
and lawful attorney-in-fact or agent for me and in my name, place
and stead, in any and all capacities, to sign the Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 pursuant
to the Securities Exchange Act of 1934, as amended, and any
amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th
day of March, 1997.
/s/ ANDREW C. HALVORSEN
ANDREW C. HALVORSEN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROLAND A.
HERNANDEZ, a Director of Beneficial Corporation, One Christina
Centre, 301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN, JAMES H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers
of the Company, or any of them, with full power to act without
the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th
day of March, 1997.
/s/ ROLAND A. HERNANDEZ
ROLAND A. HERNANDEZ
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, J. ROBERT HILLIER,
a Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th
day of March, 1997.
/s/ J. ROBERT HILLIER
J. ROBERT HILLIER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, GERALD L. HOLM, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th
day of March, 1997.
/s/ GERALD L. HOLM
GERALD L. HOLM
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, THOMAS H. KEAN, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th
day of March, 1997.
/s/ THOMAS H. KEAN
THOMAS H. KEAN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, STEVEN MULLER, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th
day of March, 1997.
/s/ STEVEN MULLER
STEVEN MULLER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, SUSAN JULIA ROSS, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th
day of March, 1997.
/s/ SUSAN JULIA ROSS
SUSAN JULIA ROSS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, ROBERT A. TUCKER, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th
day of March, 1997.
/s/ ROBERT A. TUCKER
ROBERT A. TUCKER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, SUSAN M. WACHTER, a
Director of Beneficial Corporation, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware 19801 (the "Company"),
do hereby make, constitute and appoint ANDREW C. HALVORSEN, JAMES
H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers of the Company,
or any of them, with full power to act without the others, my
true and lawful attorney-in-fact or agent for me and in my name,
place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
pursuant to the Securities Exchange Act of 1934, as amended, and
any amendment thereto, to be filed by Beneficial Corporation, a
Delaware corporation, with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th
day of March, 1997.
/s/ SUSAN M. WACHTER
SUSAN M. WACHTER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: THAT I, CHARLES H. WATTS,
II a Director of Beneficial Corporation, One Christina Centre,
301 North Walnut Street, Wilmington, Delaware 19801 (the
"Company"), do hereby make, constitute and appoint ANDREW C.
HALVORSEN, JAMES H. GILLIAM, JR. and RONALD E. BOMBOLIS, officers
of the Company, or any of them, with full power to act without
the others, my true and lawful attorney-in-fact or agent for me
and in my name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 pursuant to the Securities Exchange Act of
1934, as amended, and any amendment thereto, to be filed by
Beneficial Corporation, a Delaware corporation, with the
Securities and Exchange Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th
day of March, 1997.
/s/ CHARLES H. WATTS, II
CHARLES H. WATTS, II
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF INCOME (BOTH DATED 12/31/96) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 280
<SECURITIES> 0<F1>
<RECEIVABLES> 14672
<ALLOWANCES> 498
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 508<F3>
<DEPRECIATION> 303<F3>
<TOTAL-ASSETS> 16931
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 8631<F4>
0
115
<COMMON> 54
<OTHER-SE> 1526<F5>
<TOTAL-LIABILITY-AND-EQUITY> 16931
<SALES> 0
<TOTAL-REVENUES> 2772<F6>
<CGS> 0
<TOTAL-COSTS> 813<F7>
<OTHER-EXPENSES> 1102<F8>
<LOSS-PROVISION> 399
<INTEREST-EXPENSE> 0<F9>
<INCOME-PRETAX> 458
<INCOME-TAX> 177
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281
<EPS-PRIMARY> 5.08
<EPS-DILUTED> 5.04
<FN>
<F1>CURRENT MARKETABLE EQUITY SECURITIES ARE NOT SEPARATELY STATED.
<F2>DO NOT PREPARE CLASSIFIED BALANCE SHEET.
<F3>PP&E PER BALANCE SHEET (204.9) IS SHOWN NET OF DEPRECIATION.
<F4>LONG-TERM DEBT PER BALANCE SHEET.
<F5>INCLUDES ADDITIONAL CAPITAL (305.3), NET UNREALIZED GAIN ON INVESTMENTS
(2.6), FOREIGN CURRENCY TRANSLATION ADJ (-45.4), & RETAINED EARNINGS
(1263.5) PER BALANCE SHEET = 1526.0
<F6>INCLUDES FINANCE CHARGES AND FEES (2143.5), INSURANCE PREMIUMS (168.7)
AND OTHER REVENUE (459.7) PER INCOME STATEMENT = 2771.9.
<F7>INTEREST EXPENSE PER INCOME STATEMENT.
<F8>INCLUDES SALARIES & BENEFITS (412.6), INSURANCE BENEFITS (82.8) AND OTHER
(606.4) PER INCOME STATEMENT = 1101.8.
<F9>COMPANY'S PRIMARY COST OF GENERATING REVENUE IS INTEREST EXPENSE WHICH IS
INCLUDED IN TOTAL COSTS (ABOVE).
</FN>
</TABLE>
