Conformed
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) January 28, 1998
Beneficial Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-1177 51-0003820
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
301 North Walnut Street, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302)425-2500
No Change
(Former name or former address, if changed since last report)
Item 5. Other Events.
The following is the text of a press release of Beneficial
Corporation, issued on January 28, 1998:
BENEFICIAL CORPORATION REPORTS FOURTH-QUARTER NET LOSS
OF $12.8 MILLION AFTER $46.5 MILLION OF SPECIAL CHARGES
- Before These Charges, Fourth-Quarter Diluted Operating
Earnings Per Share Total $0.60. 1996 Fourth-Quarter Diluted
Earnings Per Share were $0.39 -
-- Full-Year Net Income Declines 10% to $253.7 Million
from $ 281.0 Million in 1996 -
- In Final Stages of Negotiation for Sale of Canadian Subsidiary -
WILMINGTON, Del. -- Beneficial Corporation (NYSE: BNL) today reported a net
loss after special charges of $12.8 million, or $0.25 per share, for the
fourth quarter of 1997, compared to earnings of $23.3 million, or $0.39 per
share for the fourth quarter of 1996. In accord with the new accounting
rule, all earnings per share numbers are now presented on a diluted basis.
Fourth-quarter 1997 results were reduced by a $27.8 million, or $0.51 per
share, net aftertax provision for the planned disposition of the Company's
German consumer banking subsidiary, and by a total of $18.7 million in
aftertax ($31.1 million pretax), or $0.34 per share, of special charges.
Before all of these charges, core operating fourth-quarter diluted earnings
per share total $0.60.
The $18.7 million in aftertax charges relate to Beneficial's overall
restructuring and reorganization plan. The charges consist of additions to
litigation reserves, writedowns of real estate holdings on Harbour Island
and elsewhere that are in the process of being sold, and charges related to
the reorganization and restructuring program.
For the full year, net income fell 10% to $253.7 million, from the 1996
record level of $281.0 million. Comparable diluted earnings per share
declined 10% to $4.54, from $5.05 in 1996. Excluding the fourth quarter
special charges, proforma 1997 core diluted operating earnings would have
been $5.39 per share, or 7% growth over 1996 results of $5.05 per share.
Finn M.W. Caspersen, chairman and chief executive officer, commented, "Our
results reflect the changes taking place at Beneficial. Although earnings
and profitability are not yet at acceptable levels, we are pleased that
fourth-quarter earnings before the special charges rose from 1996 levels. We
are well into the initial stages of the loan office re-engineering effort,
and branch personnel are excited about
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the systems and process improvements that are in development. The
effect of these changes will be to enhance receivables growth and
reduce costs over time, leading to improved earnings performance."
Caspersen continued, "Looking forward, incremental costs of the
re-engineering effort will burden near-term operating earnings, before
benefits of the re-engineering begin to be realized in 1999. At this time,
we are assuming only modest revenue enhancement benefits from the
re-engineering effort this year. Accordingly, we expect only low
single-digit earnings per share growth in 1998 relative to 1997 core diluted
operating earnings of $5.39. As the re-engineering efforts are fully
implemented, we project earnings per share growth will improve to at least a
12% rate longer term.
"We are also making very good progress on our other strategic initiatives
announced last October -- namely, the sale of our Canadian and German
subsidiaries. With respect to Canada, we are in the final stages of
negotiation with one purchaser and expect to announce quite soon a
definitive agreement that will produce a large gain in the first quarter of
1998. Similarly, we are progressing on the sale of our German consumer
banking subsidiary. The full anticipated loss on the divestiture of Germany
has been recorded in fourth-quarter results. As previously announced, the
proceeds from the sales are being used to fund a 3 million share buyback
program, which has just begun. Finally, we are close to a transaction for
sale of our large Hamilton Farm parcel of property in New Jersey, but are
not yet at closure.
"Our franchise remains extremely valuable as evidenced by the strong auction
of our Canadian business. 1998 will be an exciting year for Beneficial
Corporation. Management is extremely optimistic about the potential earnings
benefits of both the loan office re-engineering effort and the overall
restructuring plan. Both should deliver significant value to our
shareholders. We will report on our progress on both scores during the
year," Caspersen concluded.
For the fourth quarter, managed receivables grew $743 million, compared with
the all-time record growth of $1,228 million in the fourth quarter of 1996,
which benefited from particularly rapid receivables growth from one merchant
at Beneficial National Bank USA (BNB USA), the Company's private-label
credit card subsidiary. Managed receivables outstanding ended the year at
$17.9 billion, representing a gain of $1.1 billion, or 6% for the year,
compared to 1996's record gain of $2.3 billion, or 16%. Excluding Canada and
Germany, which are in the process of being sold, managed receivables gained
$1.1 billion, or 7%, to end the year at $16.9 billion.
Fourth-quarter net chargeoffs increased 19% to $117.4 million from $98.7
million in the fourth quarter of 1996. As an annualized percentage of
average owned receivables, net chargeoffs rose to 3.26% from 2.75% a year
earlier, and 2.96% in the third quarter of 1997. On the basis of managed
receivables outstanding, net chargeoffs rose to 2.73% from 2.37% of
receivables in the fourth quarter of 1996, and 2.50% in this year's third
quarter. The increase in the chargeoff rate is due to the continuing higher
incidence of consumer bankruptcy in
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North America, and the expected maturing of BNB USA's large private-label
credit card portfolio.
For the full year, net chargeoffs increased 30% to $412.2 million, from
$316.9 million in 1996, and to 2.85% from 2.26% as a percentage of average
receivables owned. On a managed receivables basis, net chargeoffs for the
full year rose to 2.43% from 2.01% in 1996.
Total owned delinquency at year-end was essentially unchanged from the
prior-quarter level. All owned loan and sales finance balances delinquent
two months and greater on a contractual basis increased to 4.24% from 3.38%
a year earlier, but declined slightly from 4.26% at September 30, 1997.
Including securitized receivables, and examining delinquency of all managed
receivables, reveals a similar pattern of 4.02% at year-end, compared to
3.20% a year earlier, and 3.94% at September 30, 1997.
At December 31, 1997, the allowance for credit losses was $559.9 million, or
3.73% of outstanding receivables, compared to $498.2 million, or 3.43% of
receivables at the end of 1996, and $525.2 million, or 3.75% of receivables
at September 30, 1997. Accordingly, during the fourth quarter, $34.7 million
was added to the balance of the reserve. At the year-end level the reserve
covers 1997 net chargeoffs 1.36 times, a conservative ratio by industry
standards.
This press release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties that could
cause actual results to differ materially. The potential risks and
uncertainties that could cause actual results to differ materially include
the ultimate costs of the systems and process improvements referred to above
and the degree to which benefits from the systems and process improvements
are realized; the results of the refund anticipation loan business; the
ultimate successful consummation of the sale of the Canadian and German
subsidiaries; continuing competitive and pricing pressures; continuing
increases in the incidence of consumer bankruptcy in North America; and the
onset of a recession or a similar downturn in the economic cycle in North
America resulting in adverse consequence to the economic health of the
consumer. Further information on factors that could affect the Company's
financial results are included in the Company's filings with the Securities
and Exchange Commission, including the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and the Annual Report on Form 10-K for the
year ended December 31, 1997, which will be filed in March.
Beneficial Corporation is a $17 billion, New York Stock Exchange-listed
financial services holding company. Subsidiaries of the Company provide
financial services through their various consumer-finance, credit-card,
banking and insurance operations located throughout the United States,
Canada, the United Kingdom, Ireland, and Germany.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BENEFICIAL CORPORATION
(Registrant)
By /s/ Samuel F. McMillan
Samuel F. McMillan
Senior Vice President
and Treasurer
Dated: January 28, 1998
