Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report 31 164K
2: EX-3.1 Articles of Incorporation/Organization or By-Laws 60± 220K
3: EX-3.2 Articles of Incorporation/Organization or By-Laws 11± 42K
4: EX-10.1 Material Contract 5 20K
5: EX-12 Statement re: Computation of Ratios 2± 9K
6: EX-21 Subsidiaries of the Registrant 7± 32K
7: EX-27 Financial Data Schedule 2± 10K
8: EX-27.1 Restated Financial Data Schedule 2± 9K
9: EX-99.1 Miscellaneous Exhibit 1 8K
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- --------------
Commission file number 1-8198
------
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3121988
------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois 60070
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 564-5000
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
At July 31, 1998, there were 492,408,398 shares of registrant's
common stock outstanding.
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
Table of Contents
PART I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
(Unaudited) - Three Months and Six Months
Ended June 30, 1998 and 1997 2
Condensed Consolidated Balance Sheets -
June 30, 1998 (Unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended
June 30, 1998 and 1997 4
Financial Highlights 5
Notes to Interim Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II. Other Information
Item 1. Legal Proceedings 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 28
Signature 29
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------
All amounts, except per share data, are stated in millions.
[Enlarge/Download Table]
-------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
-------------------------------------------------------------------------------------------------
Finance income $1,372.6 $1,239.2 $2,686.2 $2,512.6
Other interest income 11.1 18.8 26.4 30.0
Interest expense 616.8 574.3 1,229.0 1,154.1
-------- -------- -------- --------
Net interest margin 766.9 683.7 1,483.6 1,388.5
Provision for credit losses on owned
receivables 391.6 351.0 780.9 729.5
-------- -------- -------- --------
Net interest margin after provision for
credit losses 375.3 332.7 702.7 659.0
-------- -------- -------- --------
Securitization income 394.2 422.2 813.5 788.4
Insurance revenues 117.8 111.3 237.3 222.6
Investment income 38.5 39.9 78.4 85.1
Fee income 145.0 119.7 292.3 238.6
Other income 40.1 61.6 127.8 227.6
Gain on sale of Beneficial Canada - - 189.4 -
-------- -------- -------- --------
Total other revenues 735.6 754.7 1,738.7 1,562.3
-------- -------- -------- --------
Salaries and fringe benefits 264.4 264.6 540.6 517.3
Occupancy and equipment expense 82.5 79.2 167.6 163.9
Other marketing expenses 99.0 98.8 202.0 213.6
Other servicing and administrative expenses 187.6 179.0 381.5 391.1
Amortization of acquired intangibles
and goodwill 44.8 37.1 87.2 73.9
Policyholders' benefits 55.3 65.1 118.9 134.9
Merger and integration related costs 1,000.0 - 1,000.0 -
-------- -------- -------- --------
Total costs and expenses 1,733.6 723.8 2,497.8 1,494.7
-------- -------- -------- --------
Income (loss) before income taxes (622.7) 363.6 (56.4) 726.6
Income taxes (benefit) (121.1) 125.0 87.4 255.8
-------- -------- -------- --------
Net income (loss) $ (501.6) $ 238.6 $ (143.8) $ 470.8
======== ======== ======== ========
Earnings (loss) per common share:
Net income (loss) $ (501.6) $ 238.6 $ (143.8) $ 470.8
Preferred dividends (4.1) (4.2) (8.3) (8.7)
-------- -------- -------- --------
Earnings (loss) available to
common shareholders $ (505.7) $ 234.4 $ (152.1) $ 462.1
======== ======== ======== ========
Average common shares 489.4 457.4 487.5 457.2
Average common and common equivalent
shares - 465.9 - 465.7
-------- -------- -------- --------
Basic earnings (loss) per common share $ (1.03) $ .51 $ (.31) $ 1.01
Diluted earnings (loss) per common share (1.03) .50 (.31) .99
-------- -------- -------- --------
Dividends declared per common share .15 .15 .30 .26
-------- -------- -------- --------
See notes to interim condensed consolidated financial statements.
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
In millions, except share data.
[Enlarge/Download Table]
-----------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
-----------------------------------------------------------------------------------------
(Unaudited)
ASSETS
------
Cash $ 364.7 $ 534.3
Investment securities 3,436.6 2,898.6
Receivables, net 40,227.8 38,337.6
Acquired intangibles and goodwill, net 1,908.9 1,798.4
Properties and equipment, net 445.1 538.7
Real estate owned 224.2 212.8
Other assets 2,895.0 2,496.6
--------- ---------
Total assets $49,502.3 $46,817.0
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Debt:
Deposits $ 1,780.1 $ 2,344.2
Commercial paper, bank and other borrowings 11,356.7 10,666.1
Senior and senior subordinated debt (with
original maturities over one year) 25,740.3 23,736.2
--------- ---------
Total debt 38,877.1 36,746.5
Insurance policy and claim reserves 1,324.5 1,382.6
Other liabilities 2,608.4 2,074.4
--------- ---------
Total liabilities 42,810.0 40,203.5
--------- ---------
Company obligated mandatorily redeemable
preferred securities of subsidiary trusts* 375.0 175.0
--------- ---------
Preferred stock 264.5 264.5
--------- ---------
Common shareholders' equity:
Common stock, $1.00 par value, 750,000,000
shares authorized (increased as of
May 13, 1998); 541,420,354 and 536,870,946
shares issued at June 30, 1998
and December 31, 1997, respectively 541.4 536.9
Additional paid-in capital 1,572.5 1,423.5
Retained earnings 4,666.4 4,978.6
Foreign currency translation adjustments (160.0) (176.5)
Unrealized gain on investments, net 27.3 8.8
Less common stock in treasury, 50,668,222 and
51,519,429 shares at June 30, 1998 and
December 31, 1997, respectively, at cost (594.8) (597.3)
--------- ---------
Total common shareholders' equity 6,052.8 6,174.0
--------- ---------
Total liabilities and shareholders' equity $49,502.3 $46,817.0
========= =========
* As described in note 9 to the financial statements, the sole
assets of the three trusts are Junior Subordinated Deferrable
Interest Notes issued by Household International, Inc. in March
1998, June 1996 and June 1995, bearing interest at 7.25, 8.70
and 8.25 percent, respectively, with principal balances of
$206.2, $103.1 and $77.3 million, respectively, and due December
31, 2037, June 30, 2036 and June 30, 2025, respectively.
See notes to interim condensed consolidated financial statements.
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
In millions.
[Enlarge/Download Table]
-----------------------------------------------------------------------------------------
Six months ended June 30 1998 1997
-----------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS
Net income (loss) $ (143.8) $ 470.8
Adjustments to reconcile net income to cash
provided by operations:
Provision for credit losses on owned receivables 780.9 729.5
Merger and integration related costs 1,000.0 -
Insurance policy and claim reserves (66.9) 13.8
Depreciation and amortization 155.8 147.2
Net realized (gains) losses from sales of assets (189.8) (64.6)
Other, net (598.9) 8.4
--------- ----------
Cash provided by operations 937.3 1,305.1
--------- ----------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased (802.8) (753.1)
Matured 300.6 219.7
Sold 453.0 497.0
Short-term investment securities, net change (455.7) 9.8
Receivables:
Originations, net (13,640.4) (13,702.9)
Purchases and related premiums (2,248.0) (435.1)
Sold 13,221.1 15,907.0
Purchase capital stock of Transamerica Financial
Services Holding Company - (1,065.0)
Properties and equipment purchased (49.6) (32.8)
Properties and equipment sold 21.3 6.1
---------- ----------
Cash increase (decrease) from investments in operations (3,200.5) 650.7
---------- ----------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and demand deposits, net change 233.3 (564.9)
Time certificates, net change (125.1) (267.4)
Senior and senior subordinated debt issued 5,620.1 5,026.6
Senior and senior subordinated debt retired (2,742.5) (4,020.5)
Prepayment of debt (890.6) -
Repayment of Transamerica Financial Services Holding
Company debt - (2,795.0)
Policyholders' benefits paid (53.3) (74.5)
Cash received from policyholders 31.8 102.9
Shareholders' dividends (105.0) (88.2)
Shareholders' dividends - pooled affiliate (61.8) (55.5)
Redemption of preferred stock - (55.0)
Purchase of treasury stock (9.8) -
Treasury stock activity - pooled affiliate (11.0) (63.3)
Issuance of common stock 13.3 1,006.6
Issuance of company obligated mandatorily redeemable
preferred securities of subsidiary trusts 200.0 -
---------- ----------
Cash increase (decrease) from financing and
capital transactions 2,099.4 (1,848.2)
---------- ----------
Effect of exchange rate changes on cash (5.8) 9.1
---------- ----------
Increase (decrease) in cash (169.6) 116.7
Cash at January 1 534.3 518.8
---------- ----------
Cash at June 30 $ 364.7 $ 635.5
========== ==========
Supplemental cash flow information:
Interest paid $ 1,115.9 $ 1,138.7
---------- ----------
Income taxes paid 213.0 229.3
---------- ----------
See notes to interim condensed consolidated financial statements.
Household International, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
--------------------
[Enlarge/Download Table]
All dollar amounts are stated in millions.
--------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
--------------------------------------------------------------------------------------------------------
Net income excluding merger costs and
Beneficial Canada gain
Household $ 201.9 $ 150.3 $ 372.2 $ 281.8
Beneficial 47.5 88.3 116.5 189.0
-------- -------- -------- --------
Total net income excluding merger costs
and Beneficial Canada gain 249.4 238.6 488.7 470.8
Merger and integration related costs (751.0) - (751.0) -
Beneficial Canada gain - - 118.5 -
-------- -------- -------- --------
Net income (loss) (501.6) 238.6 (143.8) 470.8
======== ======== ======== ========
Diluted earnings (loss) per common share (1.03) .50 (.31) .99
======== ======== ======== ========
Diluted earnings per common share excluding
merger costs and Beneficial Canada gain .49 .50 .96 .99
======== ======== ======== ========
Pro forma pre-merger diluted earnings per
common share excluding merger costs and
Beneficial Canada gain <F1>
Household .61 .49 1.12 .92
======== ======== ======== ========
Beneficial .81 1.61 2.02 3.41
======== ======== ======== ========
Net interest margin and other revenues <F2> 1,447.2 1,373.3 3,103.4 2,815.9
-------- -------- -------- --------
Return on average common shareholders' equity <F3> 14.7% 19.6% 14.7% 19.7%
-------- -------- -------- --------
Return on average owned assets <F3> 2.00 2.14 1.99 2.10
-------- -------- -------- --------
Managed basis efficiency ratio, normalized <F4> 39.1 41.3 39.8 42.0
-------- -------- -------- --------
[Enlarge/Download Table]
All dollar amounts are stated in millions.
--------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
--------------------------------------------------------------------------------------------------------
Total assets:
Owned $49,502.3 $46,817.0
Managed 72,083.8 71,295.5
--------- ---------
Receivables:
Owned $40,699.4 $38,682.0
Serviced with limited recourse 22,581.5 24,478.5
--------- ---------
Managed $63,280.9 $63,160.5
========= =========
Total shareholders' equity as a percent 13.52% 14.13%
--------- ---------
Total shareholders' equity as a percent of managed assets <F5> 9.28 9.28
--------- ---------
<FN>
<F1> Calculated based on average common and common equivalent shares outstanding for the
respective companies for the periods presented prior to the merger.
<F2> Policyholders' benefits have been netted against other revenues.
<F3> Annualized. Excludes merger and integration related costs and the Beneficial Canada gain.
<F4> Ratio of normalized operating expenses to managed net interest margin and other revenues
less policyholders' benefits. Excludes merger and integration related costs and the Beneficial
Canada gain.
<F5> Total shareholders' equity at June 30, 1998 and December 31, 1997 includes common shareholders'
equity, preferred stock and company obligated mandatorily redeemable preferred securities of
subsidiary trusts.
</FN>
See notes to interim condensed consolidated financial statements.
Household International, Inc. and Subsidiaries
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
--------------------------
The accompanying unaudited condensed consolidated financial
statements of Household International, Inc. ("Household") and its
subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Additionally, these financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Certain prior period
amounts have been reclassified to conform with the current period's
presentation. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the
three and six months ended June 30, 1998 should not be considered
indicative of the results for any future quarters or the year
ending December 31, 1998. Household and its subsidiaries may also
be referred to in this Form 10-Q as "we," "us" or "our." These
financial statements should be read in conjunction with the
supplemental consolidated financial statements for the year ended
December 31, 1997 contained in Household's Current Report on
Form 8-K dated June 30, 1998.
On March 10, 1998, the Board of Directors approved a three-for-one
split of our common stock effected in the form of a dividend,
issued on June 1, 1998, to shareholders of record as of May 14,
1998. The split was subject to shareholder approval to increase
authorized shares which was received on May 13, 1998. Accordingly,
all common share and per common share data in these interim
condensed consolidated financial statements includes the effect of
our stock split.
2. HOUSEHOLD MERGER WITH BENEFICIAL CORPORATION
-------------------------------------------------
On June 30, 1998, Household completed its merger with Beneficial
Corporation ("Beneficial"), a consumer finance holding company
headquartered in Wilmington, Delaware. Beneficial's total assets
were $16.1 billion and common shareholders' equity was $2.0 billion
on the date of the merger, excluding the impact of the merger and
integration related costs. Each outstanding share of Beneficial
common stock was converted into 3.0666 shares of Household's common
stock, resulting in the issuance of approximately 168.4 million
common shares to the former Beneficial shareholders. Each share of
Beneficial $5.50 Convertible Preferred Stock was converted into the
number of shares of Household common stock the holder would have
been entitled to receive in the merger had the holder converted his
or her shares of Beneficial $5.50 Convertible Preferred Stock into
shares of Beneficial common stock immediately prior to the merger.
Additionally, each other share of preferred stock of Beneficial
outstanding immediately prior to the merger has been converted into
one share of a newly created series of preferred stock of Household
with terms substantially similar to those of existing Beneficial
preferred stock. The merger was accounted for as a pooling of
interests and therefore, these interim condensed consolidated
financial statements include the results of operations, financial
position, and changes in cash flows of Beneficial for all periods
presented.
The separate results of operations for Household and Beneficial
were as follows:
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
In millions. 1998 1997 1998 1997
------------------------------------------------------------------------------------------------
Net interest margin and other
revenues <F1>
Household $ 984.2 $ 875.2 $1,915.7 $1,790.8
Beneficial 463.0 498.1 1,187.7 1,025.1
-------- ------- -------- --------
Total $1,447.2 $1,373.3 $3,103.4 $2,815.9
======== ======== ======== ========
Net income (loss)
Household $ 201.9 $ 150.3 $ 372.2 $ 281.8
Beneficial 47.5 88.3 116.5 189.0
Merger and integration
related costs (751.0) - (751.0) -
Beneficial Canada gain - - 118.5 -
-------- -------- -------- --------
Total $ (501.6) $ 238.6 $ (143.8) $ 470.8
======== ======== ======== ========
<FN>
<F1> Policyholders' benefits have been netted against other revenues.
</FN>
In connection with the merger, we incurred pre-tax merger and
integration related costs of approximately $1 billion ($751 million
after-tax) in the quarter. These costs included approximately $305
million in lease exit costs, $50 million in fixed asset write-offs
related to closed facilities, $255 million in severance and change
in control payments, $230 million in asset writedowns to reflect
modified business plans, $75 million in investment banking fees,
$25 million in legal and other expenses, and $60 million in
prepayment premiums related to debt.
The following table summarizes the activity in the merger and
restructuring reserve for the three months ended June 30, 1998:
[Download Table]
--------------------------------------------------------------
Three Months Ended
In millions. June 30, 1998
--------------------------------------------------------------
Balance at beginning of period -
Establishment of reserve $1,000.0
Cash payments (113.7)
Non-cash items (249.5)
--------
Balance on June 30, 1998 $ 636.8
========
3. BUSINESS DIVESTITURES
--------------------------
On April 28, 1998, the sale of Beneficial's German operations was
completed. An after-tax loss of $27.8 million was recorded in the
fourth quarter of 1997. This loss was recorded after consideration
of a $31.0 million tax benefit, primarily generated by the expected
utilization of capital losses to cover the expected loss associated
with disposing of the German operations. No additional losses were
realized in 1998 as a result of the sale.
On March 2, 1998, the sale of Beneficial's Canadian operations was
completed. An after-tax gain of $118.5 million was recorded upon
consummation of the transaction.
4. INVESTMENT SECURITIES
--------------------------
Investment securities consisted of the following:
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------
In millions. June 30, 1998 December 31, 1997
---------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities $ 69.0 $ 72.5 $ 129.0 $ 132.5
Corporate debt securities 1,613.5 1,648.8 1,581.8 1,600.5
U.S. government and federal
agency debt securities 623.6 626.4 390.3 380.5
Other 1,050.1 1,051.0 745.8 746.5
-------- -------- -------- --------
Subtotal 3,356.2 3,398.7 2,846.9 2,860.0
Accrued investment income 37.9 37.9 38.6 38.6
-------- -------- -------- --------
Total investment securities $3,394.1 $3,436.6 $2,885.5 $2,898.6
======== ======== ======== ========
5. RECEIVABLES
----------------
Receivables consisted of the following:
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------
June 30, December 31,
In millions. 1998 1997
--------------------------------------------------------------------------------------------
First mortgage $ 328.0 $ 396.6
Home equity 16,317.1 13,786.2
Auto finance 537.2 487.5
MasterCard/Visa 7,051.3 6,874.7
Private label 8,252.2 9,356.9
Other unsecured 7,437.5 6,823.1
Commercial 776.1 957.0
--------- ---------
Total owned receivables 40,699.4 38,682.0
Accrued finance charges 548.1 536.7
Credit loss reserve for owned receivables (1,757.2) (1,642.1)
Unearned credit insurance premiums and
claims reserves (477.3) (452.3)
Amounts due and deferred from
receivables sales 2,077.7 2,094.2
Reserve for receivables serviced with
limited recourse (862.9) (880.9)
--------- ---------
Total owned receivables, net 40,227.8 38,337.6
Receivables serviced with limited recourse 22,581.5 24,478.5
--------- ---------
Total managed receivables, net $62,809.3 $62,816.1
========= =========
The outstanding balance of receivables serviced with limited
recourse consisted of the following:
[Download Table]
--------------------------------------------------------------------
June 30, December 31,
In millions. 1998 1997
--------------------------------------------------------------------
Home equity $ 4,403.7 $ 6,038.6
Auto finance 700.7 395.9
MasterCard/Visa 12,195.2 12,337.0
Private label 927.9 1,025.0
Other unsecured 4,354.0 4,682.0
--------- ---------
Total $22,581.5 $24,478.5
========= =========
The combination of receivables owned and receivables serviced with
limited recourse, which we consider our managed portfolio, is shown
below:
[Download Table]
--------------------------------------------------------------------
June 30, December 31,
In millions. 1998 1997
--------------------------------------------------------------------
First mortgage $ 328.0 $ 396.6
Home equity 20,720.8 19,824.8
Auto finance 1,237.9 883.4
MasterCard/Visa 19,246.5 19,211.7
Private label 9,180.1 10,381.9
Other unsecured 11,791.5 11,505.1
Commercial 776.1 957.0
--------- ---------
Total $63,280.9 $63,160.5
========= =========
The amounts due and deferred from receivables sales were $2,077.7
million at June 30, 1998 and $2,094.2 million at December 31, 1997.
The amounts due and deferred included unamortized securitization
assets and funds set up under the recourse requirements for certain
sales totaling $2,104.5 million at June 30, 1998 and $2,082.3
million at December 31, 1997. It also included net customer
payments owed by us to the securitization trustee of $52.3 million
at June 30, 1998 and $11.7 million at December 31, 1997. In
addition, we have subordinated interests in certain transactions,
which were recorded as receivables, of $1,250.1 million at June 30,
1998 and $1,098.1 million at December 31, 1997. We have agreements
with a "AAA"-rated third party who will insure us for up to $21.2
million in losses relating to certain securitization transactions.
We maintain credit loss reserves under the recourse requirements
for receivables serviced with limited recourse which are based on
estimated probable losses under those requirements. The reserves
totaled $862.9 million at June 30, 1998 and $880.9 million at
December 31, 1997 and represents our best estimate of probable
losses on receivables serviced with limited recourse.
6. CREDIT LOSS RESERVES
-------------------------
An analysis of credit loss reserves for the three and six months
ended June 30 was as follows:
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
In millions. 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
Credit loss reserves for owned
receivables at beginning
of period $1,725.6 $1,438.4 $1,642.1 $1,398.4
Provision for credit losses 391.6 351.0 780.9 729.5
Chargeoffs (417.7) (356.0) (820.2) (717.3)
Recoveries 40.7 54.4 83.3 95.0
Portfolio acquisitions, net 17.0 68.6 71.1 50.8
-------- -------- -------- --------
TOTAL CREDIT LOSS RESERVES FOR
OWNED RECEIVABLES AT JUNE 30 1,757.2 1,556.4 1,757.2 1,556.4
-------- -------- -------- --------
Credit loss reserves for
receivables serviced with
limited recourse at beginning
of period 847.4 767.6 880.9 710.6
Provision for credit losses 295.4 229.6 556.9 478.7
Chargeoffs (312.1) (273.4) (626.5) (478.0)
Recoveries 23.2 12.9 42.0 22.8
Other, net 9.0 .6 9.6 3.2
-------- -------- -------- --------
TOTAL CREDIT LOSS RESERVES FOR
RECEIVABLES SERVICED WITH
LIMITED RECOURSE AT JUNE 30 862.9 737.3 862.9 737.3
-------- -------- -------- --------
TOTAL CREDIT LOSS RESERVES FOR
MANAGED RECEIVABLES AT JUNE 30 $2,620.1 $2,293.7 $2,620.1 $2,293.7
======== ======== ======== ========
7. INCOME TAXES
-----------------
The effective tax rate for the first six months of 1998 was 35.7
percent excluding merger and integration related costs. The
inclusion of this item resulted in a $249 million net tax benefit
for the first six months of 1998. The effective tax rate was 35.2
percent in the year-ago period. The effective tax rate differs from
the statutory federal income tax rate in these years primarily
because of the effects of (a) state and local income taxes, (b) in
1997, capital losses from the sale of German operations, (c)
leveraged lease tax benefits, (d) amortization and write-offs of
intangible assets, (e) reduction of noncurrent tax requirements and
(f) in 1998, nondeductible merger costs.
8. EARNINGS (LOSS) PER COMMON SHARE
-------------------------------------
Computations of earnings (loss) per common share for the three and
six months ended June 30 were as follows:
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------
Three Months Ended
June 30,
In millions, except per share data. 1998 1997
---------------------------------------------------------------------------------------------
Diluted<F1> Basic Diluted Basic
------- ------- ------ ------
Earnings (loss):
Net income (loss) $(501.6) $(501.6) $238.6 $238.6
Preferred dividends (4.1) (4.1) (4.2) (4.2)
------- ------- ------ ------
Earnings (loss) available to common
shareholders $(505.7) $(505.7) $234.4 $234.4
======= ======= ====== ======
Average shares:
Common 489.4 489.4 457.4 457.4
Common equivalents <F1> - - 8.5 -
------- ------- ------ ------
Total 489.4 489.4 465.9 457.4
======= ======= ====== ======
Earnings (loss) per common share $ (1.03) $ (1.03) $ .50 $ .51
======= ======= ====== ======
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------
Six Months Ended
June 30,
In millions, except per share data. 1998 1997
---------------------------------------------------------------------------------------------
Diluted<F1> Basic Diluted Basic
------- ------- ------ -------
Earnings (loss):
Net income (loss) $(143.8) $(143.8) $470.8 $470.8
Preferred dividends (8.3) (8.3) (8.7) (8.7)
------- ------- ------ ------
Earnings (loss) available to common
shareholders $(152.1) $(152.1) $462.1 $462.1
======= ======= ====== ======
Average shares:
Common 487.5 487.5 457.2 457.2
Common equivalents <F1> - - 8.5 -
------- ------- ------ ------
Total 487.5 487.5 465.7 457.2
======= ======= ====== ======
Earnings (loss) per common share $ (.31) $ (.31) .99 1.01
======= ======= ====== ======
<FN>
<F1> Common equivalent shares are not presented for purposes of earnings per
share calculations during these periods because it results in antidilution.
</FN>
9. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS
--------------------------------------------------------------------
In March 1998 Household Capital Trust IV ("HCT IV"), a wholly-owned
subsidiary of Household, issued 8 million 7.25 percent Trust
Preferred Securities ("preferred securities") at $25 per preferred
security. The sole asset of HCT IV is $206.2 million of 7.25
percent Junior Subordinated Deferrable Interest Notes issued by
Household. The junior subordinated notes held by HCT IV mature on
December 31, 2037 and are redeemable by Household in whole or in
part beginning on March 19, 2003, at which time the HCT IV
preferred securities are callable at par ($25 per preferred
security) plus accrued and unpaid dividends. Net proceeds from the
issuance of preferred securities were used for general corporate
purposes.
In June 1996 Household Capital Trust II ("HCT II"), a wholly-owned
subsidiary of Household, issued 4 million 8.70 percent preferred
securities at $25 per preferred security. The sole asset of HCT II
is $103.1 million of 8.70 percent Junior Subordinated Deferrable
Interest Notes issued by Household. The junior subordinated notes
held by HCT II mature on June 30, 2036 and are redeemable by
Household in whole or in part beginning on June 30, 2001, at which
time the HCT II preferred securities are callable at par ($25 per
preferred security) plus accrued and unpaid dividends.
In 1995 Household Capital Trust I ("HCT I"), a wholly-owned
subsidiary of Household, issued 3 million 8.25 percent preferred
securities at $25 per preferred security. The sole asset of HCT I
is $77.3 million of 8.25 percent Junior Subordinated Deferrable
Interest Notes issued by Household. The junior subordinated notes
held by HCT I mature on June 30, 2025 and are redeemable by
Household in whole or in part beginning June 30, 2000, at which
time the HCT I preferred securities are callable at par ($25 per
preferred security) plus accrued and unpaid dividends. HCT I may
elect to extend the maturity of its preferred securities to June
30, 2044.
The obligations of Household with respect to the junior
subordinated notes, when considered together with certain
undertakings of Household with respect to HCT I, HCT II and HCT IV,
constitute full and unconditional guarantees by Household of HCT
I's, HCT II's and HCT IV's obligations under the respective
preferred securities. The preferred securities are classified in
our balance sheets as company obligated mandatorily redeemable
preferred securities of subsidiary trusts (representing the
minority interest in the trusts) at their face and redemption
amount of $375 million at June 30, 1998 and $175 million at
December 31, 1997. The preferred securities have a liquidation
value of $25 per preferred security. Dividends on the preferred
securities are cumulative, payable quarterly in arrears, and are
deferrable at Household's option for up to five years from date of
issuance. Household cannot pay dividends on its preferred and
common stocks during such deferments.
10. COMPREHENSIVE INCOME (LOSS)
--------------------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS No. 130"), effective for fiscal years
beginning after December 15, 1997. This statement establishes
standards for the reporting and presentation of comprehensive
income. Comprehensive income, in addition to traditional net
income, includes the mark-to-market adjustments on available-for-
sale securities, cumulative translation adjustments and other items
which represent a change in equity from "nonowner" sources. FAS No.
130 does not change existing requirements for certain items to be
reported as a separate component of shareholders' equity. In
accordance with the interim reporting guidelines of FAS No. 130,
comprehensive income (loss) was $(490.5) million for the quarter
ended June 30, 1998, $260.6 million for the quarter ended June 30,
1997, $(108.8) million for the six months ended June 30, 1998 and
$459.3 million for the six months ended June 30, 1997. Excluding
the impact of the merger and integration related costs as well as
the gain on sale of Beneficial Canada, comprehensive income was
$260.5 million for the quarter ended June 30, 1998 and $523.7
million for the six months ended June 30, 1998.
11. COMMITMENTS AND CONTINGENT LIABILITIES
-------------------------------------------
In 1992, the Internal Revenue Service ("IRS") completed its
examination of Beneficial's federal income tax returns for 1984
through 1987. The IRS proposed $142.0 million in adjustments that
relate principally to activities of a former subsidiary, American
Centennial Insurance Company, prior to its sale in 1987.
In order to limit the further accrual of interest on the proposed
adjustments, Beneficial paid $105.5 million of tax and interest
during the third quarter of 1992.
The issues were not resolved during the administrative appeals
process, and the IRS issued a statutory Notice of Deficiency
asserting the unresolved adjustments and increased the disallowance
to $195.0 million in the third quarter of 1996.
Beneficial has initiated litigation in the United States Tax Court
to oppose the disallowance. While the conclusion of this matter in
its entirety cannot be predicted with certainty, management does
not anticipate the ultimate resolution to differ materially from
amounts accrued.
12. ACCOUNTING PRONOUNCEMENTS
------------------------------
In March 1998, Statement of Position 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"),
was issued. This statement, effective for financial statements issued
for fiscal years beginning after December 15, 1998, provides guidance on
accounting for the costs of computer software developed or obtained for
internal use. We do not expect the adoption of SOP 98-1 to have a
material impact on our consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("FAS No. 133"). FAS
No. 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value.
FAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. FAS No. 133 is effective for fiscal years
beginning after June 15, 1999, and can be implemented as of the
beginning of any fiscal quarter after issuance (that is, fiscal
quarters beginning June 16, 1998 and thereafter). FAS No. 133
cannot be applied retroactively. We expect to adopt FAS No. 133 on
January 1, 2000 and have not yet quantified the impacts of adopting
this statement on our financial statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains certain estimates and projections regarding
Household and our merger with Beneficial Corporation ("Beneficial"),
that may be forward-looking in nature, as defined by the Private
Securities Litigation Reform Act of 1995. A variety of factors may
cause actual results to differ materially from the results discussed
in these forward-looking statements. Factors that might cause such a
difference are discussed herein and in Household International's and
Beneficial Corporation's Annual Reports on Forms 10-K, for the year
ended December 31, 1997, all filed with the Securities and Exchange
Commission.
On June 30, 1998, we merged with Beneficial, a consumer finance
holding company headquartered in Wilmington, Delaware. Each
outstanding share of Beneficial common stock was converted into
3.0666 shares of Household's common stock, resulting in the
issuance of approximately 168.4 million shares of common stock.
Each share of Beneficial $5.50 Convertible Preferred Stock (the
"Beneficial Convertible Stock") was converted into the number of
shares of Household common stock the holder would have been
entitled to receive in the merger had the Beneficial Convertible
Stock been converted into shares of Beneficial common stock
immediately prior to the merger. Additionally, each other share of
Beneficial preferred stock outstanding was converted into one share
of a newly-created series of Household preferred stock with terms
substantially similar to those of existing Beneficial preferred
stock. The merger was accounted for as a pooling of interests and,
therefore, the information included in this report presents the
combined results of Household and Beneficial as if the two
companies had operated as a combined entity for all periods
presented.
In connection with the merger, we incurred pre-tax merger and
integration related costs of approximately $1 billion ($751 million
after-tax) in the second quarter. These costs included
approximately $305 million in lease exit costs, $50 million in
fixed asset write-offs related to closed facilities, $255 million
in severance and change in control payments, $230 million in asset
writedowns to reflect modified business plans, $75 million in
investment banking fees, $25 million in legal and other expenses,
and $60 million in prepayment premiums related to debt.
The merger and integration related costs included approximately
$291 million in non-cash charges. Cash payments of approximately
$709 million will be funded through our existing operations and by
issuing additional commercial paper and other borrowings. In
addition, we received tax benefits of approximately $249 million.
Substantially all of the cash payments are expected to be made by
the end of 1998.
OPERATIONS SUMMARY
------------------
Our operating income (net income excluding merger and integration
related costs and the gain on sale of Beneficial's Canadian
operations) for the second quarter of 1998 was $249.4 million, up
from $238.6 million in 1997. Operating income for the first six
months of 1998 was $488.7 million, up from $470.8 million a year
ago. Diluted operating earnings per share was $.49 in the second
quarter and $.96 for the first six months of 1998, compared to $.50
and $.99 per share in the same periods in 1997. The difference
between the increases in operating income and the decreases in
diluted operating earnings per share was due to the issuance of
over 27 million common shares in June 1997. Including merger and
integration related costs and, for the first six months of 1998,
the gain on sale of Beneficial's Canadian operations, we recognized
a net loss of $(501.6) million for the second quarter and $(143.8)
million for the first six months of 1998. Additionally, diluted loss
per share was $(1.03) for the second quarter and $(.31) for the first
six months of 1998.
On a stand-alone basis and excluding merger costs, Household's net
income for the second quarter of 1998 was $201.9 million, up from
$150.3 million in 1997, while Beneficial's net income for the
second quarter was $47.5 million, compared to $88.3 million last
year. On a stand-alone basis, Household's diluted earnings per
share for the quarter was $.61, up 24 percent from $.49 last year,
while Beneficial's diluted earnings per share was $.81, down from
$1.61 last year. Beneficial's second quarter 1997 diluted earnings
per share included about $.59 of non-transactional gains, mostly
securitization gains on home equity loans. There were no Beneficial
securitizations during the second quarter of 1998. Excluding the
prior year's nonrecurring items, Beneficial's stand-alone diluted
earnings per share for the quarter was down about 21 percent. The
decline was due to increased credit losses, partially offset by an
improved net interest margin. Beneficial's results for the quarter
were consistent with our expectations.
Excluding merger and integration related costs and the gain on sale
of Beneficial's Canadian operations, our annualized return on
average common shareholders' equity was 14.7 percent for both the
second quarter and first six months of 1998. This compares to an
annualized return on average common shareholders' equity of 21.1
percent for the second quarter of 1997 and 21.4 percent for the
first six months of 1997. The decrease in 1998 was a result of the
June 1997 common stock offering which decreased our leverage,
resulting in more of our assets being funded by equity as compared
to the prior year.
- On March 10, 1998, the Board of Directors approved a three-for-
one split of Household's common stock effected in the form of a
dividend, issued on June 1, 1998, to shareholders of record as of
May 14, 1998. The split was subject to shareholder approval to
increase authorized shares which was received on May 13, 1998.
Accordingly, all common share and per common share data in this
report includes the effect of Household's stock split.
- On April 28, the sale of Beneficial's German operations was
completed. An after-tax loss of $27.8 million was recorded in the
fourth quarter of 1997. This loss was recorded after consideration
of a $31.0 million tax benefit, primarily generated by the expected
utilization of capital losses to cover the expected loss associated
with disposing of the German operations. No additional losses were
realized in 1998 as a result of the sale.
- On March 2, 1998, the sale of Beneficial's Canadian operations
was completed. An after-tax gain of $118.5 million was recorded
upon consummation of the transaction.
- The following summarizes our operating results for our key
businesses for the second quarter and first six months of 1998
compared to the corresponding prior year periods:
Results for our domestic consumer finance business improved from
the prior year periods reflecting higher net interest margin and
fee income due mainly to higher levels of average managed
receivables. These improvements were partially offset by higher
credit losses resulting primarily from increased personal
bankruptcy filings.
Our MasterCard* and Visa* credit card business reported lower
net interest margin and, for the first six months, higher credit
losses, partially offset by higher fee income. This business
includes our co-branding and affinity relationship strategies,
in particular our alliance with General Motors Corporation
("GM") to issue the GM Card, a co-branded credit card, and the
AFL-CIO's Union Privilege affinity relationship.
* MasterCard is a registered trademark of MasterCard
International, Incorporated and Visa is a registered trademark
of VISA USA, Inc.
Our private label credit card business reported higher credit
losses, partially offset by higher net interest margin and fee
income, and improved efficiency. Higher credit losses reflected
higher personal bankruptcies as well as the maturing of
promotional balances in the first quarter of 1998.
Beneficial's tax refund anticipation loan ("RAL") business
profits declined from the prior year periods, reflecting certain
limited measures taken by the Internal Revenue Service to delay
payment on the returns of selected taxpayers claiming an earned
income tax credit.
Net income increased in our United Kingdom ("U.K.") operation
primarily due to improved efficiency, as well as higher
interchange income and insurance premiums, due to receivables
growth. The Goldfish Card, issued in alliance with the Centrica
Group, contributed significantly to the growth in credit card
receivables during the quarter.
- Our normalized managed basis efficiency ratio improved to 39.1
percent for the second quarter of 1998 and 39.8 percent for the
first six months of 1998 compared to 41.3 percent in the second
quarter of 1997 and 42.0 percent for the first six months of
1997. The efficiency ratio is the ratio of operating expenses to
the sum of our managed net interest margin and other revenues
less policyholders' benefits. We normalize, or adjust for, items
that are not indicative of ongoing operations. The improvement
in the managed ratio in the second quarter of 1998 resulted from
a 9 percent growth in normalized managed net revenues over the
prior year, compared to a 3 percent increase in normalized
operating expenses over the comparable period. The improvement
in the managed ratio for the first six months of 1998 resulted
from growth in normalized managed net revenues over the prior
year, compared to essentially no change in normalized operating
expenses over the comparable period.
On a stand-alone basis, Household's normalized managed
efficiency ratio was 34.2 percent, down from 36.0 percent last
quarter and 36.5 percent a year ago. Beneficial's normalized
managed efficiency ratio for the quarter was 52.7 percent,
essentially unchanged from the first quarter, and up from 52.2
percent last year.
BALANCE SHEET REVIEW
--------------------
- Managed consumer receivables (receivables on our balance sheet
plus receivables serviced with limited recourse) grew 3 percent
over the prior year. Core products increased 7 percent from a year
ago to $62.2 billion. Core products exclude first mortgages and
commercial receivables, Beneficial's German and Canadian
receivables which were sold in the first half of 1997 and
Household's student loan receivables which were sold in the fourth
quarter of 1997. Growth in auto finance receivables reflect the
acquisition of ACC Consumer Finance Corporation ("ACC") in October
1997. New loan originations in our retail branch network were up,
however, the higher level of refinancings continued to impact home
equity loan growth. MasterCard and Visa receivables were up from a
year ago due to solid growth in our U.K. bankcard business and the
purchase of a $925 million portfolio in the first quarter of 1998.
This growth was offset by the non-strategic portfolio sales which
occurred in the second half of 1997. Other unsecured receivables
were up compared to the prior year reflecting the purchase of an
$850 million portfolio in the first quarter. In addition, other
unsecured growth was affected by our slowed origination of new
unsecured business in recent quarters because of the uncertain
credit environment.
On a stand-alone basis, Household's core portfolio grew 7
percent and Beneficial's core portfolio increased 6 percent year-
over-year.
- Compared to the first quarter, core products were relatively
flat. New loan originations in the HFC retail branch network were
up over 20 percent in the quarter. However, the higher level of
refinancings continued to impact home equity loan growth. Our other
unsecured portfolio declined slightly in the quarter as run-off
outpaced new volume. As discussed above, the decline in other
unsecured is attributable to our slowing growth somewhat due to
credit quality concerns. MasterCard/Visa receivables were flat with
the first quarter. Starting in the first quarter, we actively
repriced our MasterCard/Visa portfolios and cut credit lines to
minimize future loss experience. These actions, however, led to
greater attrition than anticipated. Private label receivables were
down in the quarter from attrition at two major merchants due to
less promotional activity by Beneficial.
- Consumer receivables on our balance sheet were $39.9 billion
at June 30, 1998, up from $39.2 billion at March 31, 1998 and $38.0
billion at June 30, 1997. Changes in these owned receivables from
period to period may vary depending on the timing and significance
of securitization transactions.
- Our managed credit loss reserves were $2,620.1 million at June
30, 1998, up from $2,573.0 million at March 31, 1998 and $2,293.7
million at June 30, 1997. Credit loss reserves as a percent of
managed receivables were 4.14 percent, up from 4.06 percent at
March 31, 1998 and 3.73 percent at June 30, 1997. Reserves as a
percent of nonperforming managed receivables were 116.9 percent,
compared to 116.1 percent at March 31, 1998 and 119.6 percent at
June 30, 1997. Consumer two-months-and-over contractual delinquency
("delinquency") as a percent of managed consumer receivables was
4.65 percent at June 30, 1998 and March 31, 1998 and 4.18 percent
at June 30, 1997. The annualized total consumer managed chargeoff
ratio in the second quarter of 1998 was 4.26 percent, compared to
4.17 percent in the prior quarter and 3.86 percent in the year-ago
quarter.
- The ratio of total shareholders' equity (including company
obligated mandatorily redeemable preferred securities of subsidiary
trusts) to total owned assets was 13.52 percent, compared to 14.13
percent at December 31, 1997. The ratio of total shareholders'
equity to managed assets was 9.28 percent, unchanged from December
31, 1997. The ratios in 1998 were impacted by the merger and
integration related costs incurred in the quarter.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Our subsidiaries use cash to originate loans, purchase loans or
investment securities or acquire businesses. Their main sources of
cash are the collection and securitization of receivable balances;
maturities or sales of investment securities; proceeds from the
issuance of debt and deposits; and cash provided by operations.
The following describes major changes in our funding base from
December 31, 1997 to June 30, 1998:
- In March 1998, a subsidiary trust issued $200 million of
company obligated mandatorily redeemable preferred securities.
- Deposits decreased 22 percent to $1.8 billion from $2.3
billion due to the sale of Beneficial's German operations, as
previously discussed.
- Commercial paper, bank and other borrowings increased 7
percent to $11.4 billion from $10.7 billion. Senior and senior
subordinated debt (with original maturities over one year)
increased 8 percent to $25.7 billion from $23.7 billion. The
increase in debt levels from year end is primarily attributable to
the increase in owned receivables.
- In connection with the Beneficial merger, we have repurchased
or have commitments to repurchase approximately $1.1 billion of
senior and senior subordinated debt and bank and other borrowings.
We funded the debt repurchase with senior debt and other borrowings.
Cash payments of approximately $709 million for merger and
integration related costs will be funded through our existing
operations, senior debt and other borrowings.
- In June 1998, we issued 168.4 million shares of common stock
in connection with the Beneficial merger, as previously discussed.
- Our securitized portfolio of home equity, auto finance,
MasterCard and Visa, private label and other unsecured receivables
totaled $22.6 billion at June 30, 1998, compared to $24.5 billion
at December 31, 1997. During the three months ended June 30, 1998,
we securitized, excluding replenishments of certificate holder
interests, $1.7 billion of auto finance and MasterCard/Visa
receivables. During the six months ended June 30, 1998, we
securitized, excluding replenishments of certificate holder
interests, $2.0 billion of auto finance, MasterCard/Visa and other
unsecured receivables.
The composition of these securitizations by type is as follows
(in billions):
[Download Table]
-----------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
1998 1998
-----------------------------------------------------------
Auto finance $ .4 $ .4
Visa/MasterCard 1.3 1.3
Other unsecured - .3
------- -------
Total $ 1.7 $ 2.0
======= =======
The market for securities backed by receivables is a reliable,
efficient and cost-effective source of funds, which we plan to
continue to utilize in the future.
PRO FORMA MANAGED STATEMENTS OF INCOME
--------------------------------------
Securitizations of consumer receivables have been, and will
continue to be, an important source of funding. We continue to
service securitized receivables after they have been sold and
retain a limited recourse liability for future credit losses. We
include revenues and credit-related expenses related to the off-
balance sheet portfolio in one line item in our owned statements of
income. Specifically, we report net interest margin, fee and other
income, and provision for credit losses for securitized receivables
as a net amount in securitization income.
We monitor our operations on a managed basis as well as on the
owned basis shown in our statements of income. The managed basis
assumes that the securitized receivables have not been sold and are
still on our balance sheet. The income and expense items discussed
above are reclassified from securitization income into the
appropriate caption. Pro forma managed statements of income, which
reflect these reclassifications, are presented below. For purposes
of this analysis, the managed results do not reflect the
differences between our accounting policies for owned receivables
and the off-balance sheet portfolio. Therefore, net income on a pro
forma managed basis equals net income on an owned basis.
Pro Forma Managed Statements of Income
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
All dollar amounts are June 30, June 30,
stated in millions. 1998 * 1997 * 1998 * 1997 *
--------------------------------------------------------------------------------------------------------------
Finance and other interest
income $ 2,200.7 13.77% $ 2,043.1 13.65% $ 4,435.0 13.78% $ 4,063.9 13.61%
Interest expense 961.9 6.02 905.9 6.06 1,941.8 6.03 1,788.9 5.99
--------- ----- --------- ----- --------- ----- --------- -----
Net interest margin 1,238.8 7.75 1,137.2 7.67<F1> 2,493.2 7.75 2,275.0 7.66<F1>
Provision for credit losses 687.0 580.6 1,337.8 1,208.2
--------- --------- --------- ---------
Net interest margin after
provision for credit losses 551.8 556.6 1,155.4 1,066.8
--------- --------- --------- ---------
Insurance revenues 117.8 111.3 237.3 222.6
Investment income 38.5 39.9 78.4 85.1
Fee income 362.7 318.0 653.1 619.2
Other income 40.1 61.6 127.8 227.6
Gain on sale of Beneficial
Canada - - 189.4 -
--------- --------- --------- ---------
Total other revenues 559.1 530.8 1,286.0 1,154.5
--------- --------- --------- ---------
Salaries and fringe
benefits 264.4 264.6 540.6 517.3
Occupancy and equipment
expense 82.5 79.2 167.6 163.9
Other marketing expenses 99.0 98.8 202.0 213.6
Other servicing and
administrative expenses 187.6 179.0 381.5 391.1
Amortization of acquired
intangibles and goodwill 44.8 37.1 87.2 73.9
Policyholders' benefits 55.3 65.1 118.9 134.9
--------- --------- --------- ---------
Total costs and expenses
before merger charge 733.6 723.8 1,497.8 1,494.7
Merger and integration
related costs 1,000.0 - 1,000.0 -
--------- --------- --------- ---------
Total costs and expenses
including merger charge 1,733.6 723.8 2,497.8 1,494.7
--------- --------- --------- ---------
Income (loss) before taxes (622.7) 363.6 (56.4) 726.6
Income taxes (benefit) (121.1) 125.0 87.4 255.8
--------- --------- --------- ---------
Net income (loss) $ (501.6) $ 238.6 $ (143.8) $ 470.8
========= ========= ========= =========
Average managed receivables $63,097.1 $58,743.4 $63,375.6 $58,821.0
Average noninsurance
investments 519.0 1,149.3 676.3 885.3
Other interest-earning
assets 305.8 - 293.5 -
--------- --------- --------- ---------
Average managed interest-
earning assets $63,921.9 $59,892.7 $64,345.4 $59,706.3
========= ========= ========= =========
* As a percent, annualized, of appropriate earning assets.
<FN>
<F1> Managed net interest margin as a percent of average managed interest-
earning assets for the second quarter and first six months of 1997 excludes
temporary investments relating to acquisitions. Including the impact of these
temporary investments, managed net interest margin was 7.59 percent for the
second quarter and 7.62 percent for the first six months ended June 30, 1997.
</FN>
The following discussion on revenues, where applicable, and
provision for credit losses includes comparisons to amounts
reported on our historical owned statements of income ("Owned
Basis"), as well as on the above pro forma managed statements of
income ("Managed Basis").
Net interest margin
-------------------
Net interest margin on an Owned Basis was $766.9 million for the
second quarter of 1998, up from $683.7 million for the prior year
quarter. Net interest margin on an Owned Basis for the first six
months of 1998 was $1,483.6 million, up from $1,388.5 million in
the prior year period. Owned margin improved due to an increase in
average owned home equity loans as a result of the acquisition of
Transamerica Financial Services Holding Company ("TFS") in 1997,
but was offset by a decrease in average owned private label and
other unsecured receivables.
Net interest margin on a Managed Basis was $1,238.8 million for the
second quarter of 1998, up 9 percent compared to the year-ago period.
Managed Basis net interest margin for the first six months of 1998 was
$2,493.2 million, up 10 percent compared to the prior year period. The
increases were primarily due to managed receivable growth. Net interest
margin as a percent of average managed interest-earning assets, annualized,
was 7.75 percent, flat with the previous quarter, and up from 7.59 percent
in the year-ago quarter. The net interest margin percentage on a Managed
Basis in the second quarter of 1997 was adversely affected by temporary
investments that were used to pre-fund the acquisition of TFS. Excluding
the impact of these temporary investments, net interest margin as a percent
of average managed interest-earning assets, annualized, was 7.67 percent in
the second quarter of 1997. The improvement in net interest margin over the
year-ago quarter was primarily due to the continuing change in product mix,
improved pricing and lower leverage.
On a stand-alone basis, Household's managed net interest margin expanded
to 7.45 percent from 7.41 percent last quarter. The improvement was
primarily due to improved pricing and lower leverage.
Provision for credit losses
---------------------------
The provision for credit losses for receivables on an Owned Basis
for the second quarter of 1998 totaled $391.6 million, up 12
percent from $351.0 million in the prior year quarter. The
provision for the first six months of 1998 was $780.9 million, up 7
percent from $729.5 million in the year-ago period. The provision
as a percent of average owned receivables, annualized, was 3.80
percent in the second quarter of 1998 compared to 3.77 percent in
the second quarter of 1997. Owned provision in excess of owned
chargeoffs was $15 million for the three months ended June 30,
1998, compared to $49 million for the three months ended June 30,
1997. Owned provision in excess of owned chargeoffs for the six
months ended June 30, 1998 was $44 million, compared to $107
million for the six months ended June 30, 1997. The provision for
credit losses on an Owned Basis may vary from quarter to quarter,
depending on the amount of securitizations in a particular period.
The provision for credit losses for receivables on a Managed Basis totaled
$687.0 million in the second quarter of 1998, up 18 percent from $580.6
million in the prior year quarter. The provision for credit losses on a
Managed Basis for the first six months of 1998 was $1,337.8 million, up
11 percent from $1,208.2 million in the year-ago period. As a percent of
average managed receivables, annualized, the provision was 4.36 percent,
compared to 3.95 percent in the second quarter of 1997. The Managed Basis
provision includes the over-the-life reserve requirement on the off-balance
sheet portfolio. This provision is impacted by the type and amount of
receivables securitized in a given period and substantially offsets the
income recorded on the securitization transactions. Managed provision in
excess of managed chargeoffs for the three months ended June 30, 1998 was
$21 million, compared to $19 million for the three months ended June 30,
1997. Managed provision in excess of managed chargeoffs was $16 million for
the six months ended June 30, 1998, compared to $131 million for the six
months ended June 30, 1997. In the second quarter of 1998, we securitized
approximately $1.7 billion of auto finance and MasterCard/Visa receivables,
compared to approximately $1.9 billion of home equity and MasterCard/Visa
receivables a year ago. For the first six months of 1998, we securitized
approximately $2.0 billion of auto finance, MasterCard/Visa and other
unsecured receivables, compared to approximately $3.9 billion of home
equity, MasterCard/Visa and other unsecured receivables in the year ago
period. See the credit quality section for further discussion of factors
affecting the provision for credit losses.
Other revenues
--------------
Securitization income on an Owned Basis was $394.2 million for the second
quarter of 1998, compared to $422.2 million for the same period in 1997.
Securitization income on an Owned Basis for the first six months of 1998
was $813.5 million, up from $788.4 million in the year-ago period.
Securitization income consists of income associated with the securitization
and sale of receivables with limited recourse, including net interest
income, fee and other income and provision for credit losses related to
those receivables. The decrease in securitization income compared to the
second quarter of 1997 was primarily due to Beneficial's securitization
gains on home equity loans in the prior year quarter. Securitization
income for the first six months of 1998 increased compared to a year ago
due to an increase in average securitized receivables. The components of
securitization income are reclassified to the appropriate caption in the
statements of income on a Managed Basis.
Fee income on an Owned Basis includes revenues from fee-based
products such as credit cards. Fee income was $145.0 million in the
second quarter of 1998, up from $119.7 million in the comparable
period of the prior year. Fee income for the first six months of
1998 was $292.3 million, up from $238.6 million for the same period
in 1997. The increase in fee income reflected higher credit card
fees as compared to the prior year periods.
Fee income on a Managed Basis, which in addition to the items
discussed above, includes fees and other income related to the off-
balance sheet portfolio. Managed Basis fee income was $362.7
million in the second quarter of 1998, up from $318.0 million in
the 1997 quarter. Managed Basis fee income was $653.1 million for
the first six months of 1998, up from $619.2 million in the year-
ago period. The increases were primarily due to higher credit card
and interchange fees, offset by lower securitization revenue.
Other income was $40.1 million in the second quarter of 1998, down
from $61.6 million in the second quarter of 1997. Other income for
the first six months of 1998 was $127.8 million, compared to $227.6
million in the year-ago period. The decrease in other income in
1998 is due to lower RAL income. Additionally, the 1997 year-to-
date amount included approximately $50 million of non-recurring
gains on the sales of certain non-strategic assets and a gain from
the sale of a Beneficial life insurance portfolio in June 1997.
Total other revenue for the first six months of 1998 included a
pretax gain of $189.4 million from the sale of Beneficial's
Canadian operations, as previously discussed.
Expenses
--------
Operating expenses for the second quarter of 1998, excluding the
one-time merger and integration related costs of approximately $1.0
billion, were $678.3 million, compared to $658.7 million in the
comparable prior year quarter. Operating expenses for the first six
months of 1998, excluding the one-time merger related costs, were
$1,378.9 million, compared to $1,359.8 million in the year-ago
period.
Salaries and fringe benefits for the second quarter were $264.4
million compared to $264.6 million in the second quarter of 1997.
Salaries and fringe benefits for the first six months of 1998 were
$540.6 million compared to $517.3 million for the first half of
1997. The expense was flat in the second quarter as the increase in
the average number of employees in our domestic consumer finance
and auto finance businesses in connection with Household's
acquisitions of TFS in June 1997 and ACC in October 1997 were
offset by the sale of Beneficial's Canadian operations in March
1998 and German operations in April 1998. The higher expense for
the first six months was primarily due to the increase in the
average number of employees in connection with the acquisitions of
TFS and ACC.
Other marketing expenses for the second quarter were $99.0 million,
relatively unchanged from $98.8 million in 1997. Other marketing
expense for the first six months of 1998 totaled $202.0 million,
compared to $213.6 million in the year-ago period. Other marketing
expense was down from the prior year due to increased spending on
private label programs in 1997 for several Beneficial private label
merchants.
Other servicing and administrative expenses were $187.6 million in
the second quarter of 1998, up from $179.0 million in the prior
year. Other servicing and administrative expenses for the first six
months of 1998 were $381.5 million, down from $391.1 million for
the same period in 1997. The increase from the prior year quarter
was due to higher expenses for systems development costs. The
decrease in expense for the first six months of 1998 was primarily
due to reductions in fraud losses and lower real estate owned
costs.
Amortization of acquired intangibles and goodwill was $44.8 million
in the second quarter of 1998, up from $37.1 million in the prior
year quarter. Amortization expense for the first six months of
1998 was $87.2 million, up from $73.9 million in the prior year
period. The increase reflects our acquisitions of TFS and ACC in
1997.
CREDIT LOSS RESERVES
--------------------
Our consumer credit management policies focus on product type and
specific portfolio risk factors. The consumer credit portfolio is
diversified by product and geographic location. See Note 5,
"Receivables" in the accompanying financial statements for
receivables by product type.
Total managed credit loss reserves, which include reserves
established on the off-balance sheet portfolio when receivables are
securitized, were as follows (in millions):
[Enlarge/Download Table]
----------------------------------------------------------------------------------------
June 30, March 31, December 31, June 30,
1998 1998 1997 1997
----------------------------------------------------------------------------------------
Owned $1,757.2 $1,725.6 $1,642.1 $1,556.4
Serviced with limited recourse 862.9 847.4 880.9 737.3
-------- -------- -------- --------
Total $2,620.1 $2,573.0 $2,523.0 $2,293.7
======== ======== ======== ========
Managed credit loss reserves as a percent of nonperforming managed
receivables were 116.9 percent, compared to 116.1 percent at March
31, 1998 and 119.6 percent at June 30, 1997.
Total owned and managed credit loss reserves as a percent of
receivables were as follows:
[Enlarge/Download Table]
----------------------------------------------------------------------------------------
June 30, March 31, December 31, June 30,
1998 1998 1997 1997
----------------------------------------------------------------------------------------
Owned 4.32% 4.31% 4.25% 3.99%
Managed 4.14 4.06 3.99 3.73
---- ---- ---- ----
The level of reserves for consumer credit losses is based on
delinquency and chargeoff experience by product and judgmental
factors. We also evaluate the potential impact of existing and
anticipated national and regional economic conditions on the
managed receivable portfolio when establishing credit loss
reserves. See Note 6, "Credit Loss Reserves" in the accompanying
financial statements for analyses of reserves.
CREDIT QUALITY
--------------
Delinquency and chargeoff statistics reflect the impact of the
portfolio acquisitions during the quarter. Delinquency levels in
the consumer portfolio were flat compared to the prior quarter, but
increased from the year-ago quarter. Chargeoffs were up compared to
the prior and year-ago quarters. We track delinquency and chargeoff
levels on a managed basis. We include the off-balance sheet
portfolio since we apply the same credit and portfolio management
procedures as on our owned portfolio. This results in a similar
credit loss exposure for us.
Delinquency
-----------
Two-Months-and-Over Contractual Delinquency (as a percent of
managed consumer receivables):
[Enlarge/Download Table]
------------------------------------------------------------------------------------------
6/30/98 3/31/98 12/31/97 9/30/97 6/30/97
------------------------------------------------------------------------------------------
First mortgage 11.07% 9.33% 10.35% 9.27% 10.27%
Home equity 3.55 3.68 3.69 3.16 2.97
Auto finance <F1> 1.67 1.84 2.09 - -
MasterCard/Visa 3.30 3.10 3.10 3.20 3.13
Private label 6.10 6.04 5.81 5.72 5.15
Other unsecured 7.82 7.72 7.81 7.14 6.70
----- ---- ----- ---- -----
Total 4.65% 4.65% 4.64% 4.47% 4.18%
===== ==== ===== ==== =====
<FN>
<F1> Prior to the fourth quarter of 1997, delinquency statistics for
auto finance receivables were not significant. For prior
periods, delinquency data for these receivables were included
in other unsecured receivables.
</FN>
Delinquency as a percent of managed consumer receivables for the
combined company was flat from the prior quarter but increased from
the prior year quarter. On a stand-alone basis, Household's
delinquency ratio fell 8 basis points, to 4.71 percent, while
Beneficial's delinquency ratio increased 24 basis points to 4.50
percent. Dollars of delinquency at Household declined nearly $30
million and reflected a trend of stabilizing delinquency over the
last four months. The improvement was mainly in our home equity and
private label businesses and continues to be most evident in early-
stage delinquency. We attribute some of the Beneficial increase to
transition in the quarter.
The increase in the managed delinquency ratio for the combined
company from a year ago was due to seasoning of the home equity,
MasterCard/Visa and other unsecured portfolios and the maturing of
certain special promotional balances in our private label
portfolio. The seasoning or maturing of a product is the effect of
a growing portfolio reaching expected levels of chargeoffs as loans
age. Dollars of delinquency in the first mortgage portfolio were
down as this portfolio continued to liquidate.
Net Chargeoffs of Consumer Receivables
--------------------------------------
Net Chargeoffs of Consumer Receivables (as a percent, annualized,
of average managed consumer receivables):
[Download Table]
---------------------------------------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
1998 1998 1997 1997 1997
---------------------------------------------------------------------
First mortgage .21% .81% 1.29% 1.21% .87%
Home equity .52 .61 .62 .53 .67
Auto finance <F1> 5.18 5.94 5.31 - -
MasterCard/Visa 5.49 5.78 5.56 6.22 5.66
Private label <F2> 6.05 5.73 5.19 4.79 4.37
Other unsecured 7.26 6.22 5.85 5.66 5.23
---- ---- ---- ---- ----
Total 4.26% 4.17% 3.94% 3.98% 3.86%
==== ==== ==== ==== ====
<FN>
<F1> Prior to the fourth quarter of 1997, chargeoff statistics for
auto finance receivables were not significant and were included
in other unsecured receivables.
<F2> Following the merger, Household adopted Beneficial's presentation
of chargeoffs related to private label receivables. As a result, at
the time a receivable is charged off, the principal balance is
written off against the allowance for credit losses, and accrued
finance charges and other fees are reversed against the respective
items on the statement of operations. Chargeoffs, net interest margin,
provision for credit losses and fee income have been restated for all
periods.
</FN>
The second quarter chargeoff ratio for the combined company was
4.26 percent compared to 4.17 percent in the first quarter. On a
stand-alone basis, Household's chargeoff ratio declined 3 basis
points from the first quarter to 4.68 percent, with all products
except other unsecured contributing to the improvement. For
Beneficial, chargeoffs increased 31 basis points in the quarter to
3.09 percent, led by increases in both unsecured consumer loans and
private label credit cards. We are currently taking steps to
address the chargeoff increases in the Beneficial portfolio.
The increase in the chargeoff ratio for the combined company
compared to a year ago was primarily due to increased bankruptcy
filings in and continued seasoning of the private label and other
unsecured portfolios.
Nonperforming Assets
--------------------
Nonperforming assets consisted of the following:
[Enlarge/Download Table]
-------------------------------------------------------------------------------------------
In millions. 6/30/98 3/31/98 12/31/97 9/30/97 6/30/97
-------------------------------------------------------------------------------------------
Nonaccrual owned receivables $ 948.5 $ 901.2 $ 939.0 $ 816.5 $ 807.3
Accruing owned consumer
receivables 90 or more days
delinquent 548.7 494.7 499.6 509.9 470.9
Renegotiated commercial loans 12.3 12.3 12.4 12.9 12.9
-------- -------- -------- -------- --------
Total nonperforming owned
receivables 1,509.5 1,408.2 1,451.0 1,339.3 1,291.1
Real estate owned 224.2 214.7 212.8 222.5 217.1
-------- -------- -------- -------- --------
Total nonperforming owned assets $1,733.7 $1,622.9 $1,663.8 $1,561.8 $1,508.2
======== ======== ======== ======== ========
Owned credit loss reserves as
a percent of nonperforming
owned receivables 116.4% 122.5% 113.2% 118.6% 120.5%
-------- -------- -------- -------- --------
Nonaccrual managed receivables $1,409.6 $1,390.3 $1,364.9 $1,220.0 $1,177.4
Accruing managed consumer
receivables 90 or more days
delinquent 818.6 812.7 807.8 757.6 728.2
Renegotiated commercial
loans 12.3 12.3 12.4 12.9 12.9
-------- -------- -------- -------- --------
Total nonperforming managed
receivables 2,240.5 2,215.3 2,185.1 1,990.5 1,918.5
Real estate owned 224.2 214.7 212.8 222.5 217.1
-------- -------- -------- -------- --------
Total nonperforming assets $2,464.7 $2,430.0 $2,397.9 $2,213.0 $2,135.6
======== ======== ======== ======== ========
Managed credit loss reserves as
a percent of nonperforming
managed receivables 116.9% 116.1% 115.5% 117.3% 119.6%
-------- -------- -------- -------- --------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1992, the Internal Revenue Service ("IRS") completed its
examination of Beneficial's federal income tax returns for 1984
through 1987. The IRS proposed $142.0 million in adjustments that
relate principally to activities of a former subsidiary, American
Centennial Insurance Company, prior to its sale in 1987.
In order to limit the further accrual of interest on the proposed
adjustments, Beneficial paid $105.5 million of tax and interest
during the third quarter of 1992.
The issues were not resolved during the administrative appeals
process, and the IRS issued a statutory Notice of Deficiency
asserting the unresolved adjustments and increased the disallowance
to $195.0 million in the third quarter of 1996.
Beneficial has initiated litigation in the United States Tax Court
to oppose the disallowance. While the conclusion of this matter in
its entirety cannot be predicted with certainty, management does
not anticipate the ultimate resolution to differ materially from
amounts accrued.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Stockholders of Household International was
held on Wednesday, May 13, 1998, for the purpose of (1) electing
directors; (2) approving an increase in the authorized shares of
Household Common Stock from 250 to 750 million shares; (3)
approving the 1998 Key Executive Bonus Plan; and (4) ratifying the
appointment of Arthur Andersen LLP as the public accountants for
Household. The voting results, which have been adjusted for
Household's 3-for-1 stock split effected in the form of a stock
dividend and paid on June 1, 1998, were as follows:
Each of the following persons received the number of votes set out
after his or her name and were elected directors to hold office for
the ensuing year and until their successors shall be elected and
shall qualify:
FOR WITHHELD
------------- -------------
- -
W.F. Aldinger 281,109,258 691,278
R.J. Darnall 281,006,346 794,190
G.G. Dillon 281,090,106 710,430
J.A. Edwardson 281,125,815 674,721
M.J. Evans 281,047,260 753,276
J.D. Fishburn 281,130,255 670,281
C.F. Freidheim, Jr. 281,137,146 663,390
L.E. Levy 281,130,810 669,726
G.A. Lorch 281,137,263 663,273
J.D. Nichols 281,128,158 672,378
J.B. Pitblado 281,126,553 673,983
S.J. Stewart 281,141,889 658,647
L.W. Sullivan, M.D. 281,044,239 756,294
Proposal to increase the authorized shares of Household Common
Stock from 250 million to 750 million:
FOR AGAINST ABSTAIN BROKER NON-VOTE
------------ ----------- --------- ----------------
248,512,479 32,648,850 637,935 1,269
Approval of the 1998 Key Executive Bonus Plan:
FOR AGAINST ABSTAIN BROKER NON-VOTE
------------ ----------- --------- ----------------
264,723,384 15,333,201 1,743,948 0
Ratification of the appointment of Arthur Andersen LLP as
Household's public accountants for the year 1998:
FOR AGAINST ABSTAIN BROKER NON-VOTE
------------ ----------- --------- ----------------
281,000,673 309,558 490,302 0
A Special Meeting of Stockholders of Household International was
held on Tuesday, June 30, 1998, for the purpose of (1) approving
the issuance of shares of Common Stock, par value $1.00 per share,
of Household International, Inc. pursuant to the Agreement and Plan
of Merger, dated as of April 7, 1998, among Household, Household
Acquisition Corporation II and Beneficial Corporation; and (2)
approving the adjournment of the Household Special Meeting, if
necessary, to allow for the soliciting of additional proxies in the
event that there were not sufficient votes at the time of the
Special Meeting to approve the foregoing proposal or for any such
other reason deemed appropriate. The voting results, which have
been adjusted for Household's 3-for-1 stock split effected in the
form of a stock dividend and paid on June 1, 1998, were as follows:
Proposal to approve the issuance of shares of Common Stock, par
value $1.00 per share, of Household International, Inc. pursuant to
the Agreement and Plan of Merger, dated as of April 7, 1998, among
Household, Household Acquisition Corporation II and Beneficial
Corporation:
FOR AGAINST ABSTAIN BROKER NON-VOTE
------------ ----------- --------- ----------------
244,364,589 521,937 227,853 0
Proposal to approve to the adjournment of the Household Special
Meeting, if necessary, to allow for the soliciting of additional
proxies in the event that there were not sufficient votes at the
time of the Special Meeting to approve the foregoing proposal or
for any such other reason deemed appropriate:
FOR AGAINST ABSTAIN BROKER NON-VOTE
------------ ----------- ---------- ----------------
188,252,376 49,583,931 7,278,069 3
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation of
Household International, Inc.
3.2 Bylaws of Household International, Inc. as
amended June 4, 1998.
10.1 Household International, Inc. 1998 Key Executive
Bonus Plan.
12 Statement of Computation of Ratio of Earnings
to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
27.1 Restated Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
(b) Reports on Form 8-K
During the second quarter of 1998, the Registrant filed
Current Reports on Form 8-K dated April 7 and 20, 1998
pertaining to its merger agreement with Beneficial
Corporation, and a Current Report on Form 8-K dated June
30, 1998 with respect to supplemental consolidated
financial statements restating Household's historical
consolidated financial statements as of and for the three
years ended December 31, 1997 and as of and for the three
months ended March 31, 1998 and 1997.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date: August 14, 1998 By: /s/ David A. Schoenholz
--------------- -----------------------------
David A. Schoenholz
Executive Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
Exhibit Index
-------------
3.1 Restated Certificate of Incorporation of
Household International, Inc.
3.2 Bylaws of Household International, Inc. as
amended June 4, 1998.
10.1 Household International, Inc. 1998 Key
Executive Bonus Plan.
12 Statement of Computation of Ratio of Earnings
to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
27.1 Restated Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000354964-98-000030 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Sat., Apr. 27, 9:09:46.1am ET 
