ITEM 1. BUSINESS.
The following description of business is provided in accordance with General Instruction J.(2)(d).
Associates First Capital Corporation ("First Capital" or the "Company"), a Delaware corporation, is an indirect subsidiary of Ford Motor Company ("Ford"). All the outstanding Common Stock of First Capital is owned by Ford Holdings, Inc. ("Holdings"). First Capital's principal operating subsidiary is Associates Corporation of North America ("Associates"), the second largest independent finance company in the United States as of September 30, 1993. Unless the context otherwise requires, reference to First Capital or Associates includes each parent company and all its subsidiaries.
At December 31, 1993, First Capital had 1,390 branch offices in the United States and employed approximately 12,400 persons. Corporate headquarters are located in Irving, Texas.
First Capital's primary business activities are consumer finance, commercial finance and insurance underwriting. See NOTE 17 to the consolidated financial statements for financial information by business segment.
Consumer Finance
Consumer finance consists of making and investing in residential real estate-secured loans to individuals, making secured and unsecured installment loans to individuals, purchasing consumer retail installment obligations, investing in credit card receivables, financing manufactured housing ("MHO") purchases, and providing other consumer financial services. In addition, First Capital offers insurance to its consumer finance customers.
Loans made to individuals are secured by mortgages on real property, by liens on personal property (the realizable value of which may be less than the amount of the loans secured) or are unsecured. At December 31, 1993, 74% of the gross outstanding balance of residential real estate-secured receivables was secured by first mortgages. At December 31, 1993, the gross consumer finance receivables included credit card receivables ($3.3 billion) owned or originated by Associates National Bank (Delaware), a subsidiary of First Capital.
The interest rates currently charged on all types of consumer finance receivables average approximately 16% simple interest per annum. At December 31, 1993, the interest rates charged on approximately 38% of the net consumer finance receivables outstanding varied during the term of the contract at specified intervals in relation to a base rate established at the time the loan was made. State laws establish maximum allowable finance charges for certain consumer loans; approximately 91% of the outstanding gross consumer finance receivables were either not subject to such state maximums, or if subject, such maximum finance charges did not, in most cases, materially restrict the interest rates charged. Original maturities of residential real estate-secured receivables average 147 months and original maturities of other consumer receivables, excluding credit card and manufactured housing receivables, average 35 months. Original maturities of manufactured housing receivables average 240 months.
Commercial Finance
Commercial finance consists of the purchase of time sales obligations and leases, direct leases and secured direct loans, and sales of other financial services, including automobile club, mortgage banking and relocation services. In addition, First Capital offers insurance to its commercial finance customers.
The types of equipment financed or leased are heavy-duty trucks, truck trailers, autos and other transportation equipment, construction equipment, machinery used in various manufacturing and distribution processes and communications equipment. Except for lease transactions in which First Capital owns the equipment, liens on the equipment financed secure the receivables. In many cases, First Capital obtains the endorsement or a full or limited repurchase agreement of the seller or the manufacturer of the goods, and in some cases, a portion of the purchase price of the installment obligations is withheld as a reserve.
At December 31, 1993, the interest rates charged on approximately 13% of the net commercial finance receivables were established to vary during the term of the contract in relation to a base rate. Commercial finance receivables are generally not subject to maximum finance charges established by state law, and where such restrictions apply, at the present time, they do not materially restrict the interest rates charged. The interest rates currently charged on all types of commercial finance receivables average approximately 9% simple interest per annum. Original maturities of the commercial receivables average 36 months.
Volume of Financing
The following tables set forth the gross volume of finance business by major categories and average size and number of accounts based on gross finance receivables volume (excluding wholesale receivables) for the periods indicated:
During the year ended December 31, 1993, 23% of the total gross volume of consumer loans, excluding credit card receivables, was made to current creditworthy customers that requested additional funds. The average balance prior to making an additional advance was $9,115 and the average additional advance was $3,112.
Finance Receivables
The following tables set forth the amounts of gross finance receivables held at year end by major categories and average size and number of accounts held at year end for the years indicated:
Gross Finance Receivables Held at End of Year
Consumer Finance Commercial Finance Residential Installment, Heavy-Duty Truck Total Real Estate- MHO and and Industrial Gross Secured Credit Card Equipment Finance Receivables Receivables Receivables Receivables (Dollar Amounts in Millions)
At December 31 1993 $10,626.0 $9,869.8 $9,077.2 $29,573.0 36% 33% 31% 100% 1992 $ 9,820.0 $8,122.6 $7,672.0 $25,614.6 38% 32% 30% 100% 1991 $ 8,146.0 $7,188.7 $7,209.7 $22,544.4 36% 32% 32% 100% 1990 $ 4,900.5 $5,236.1 $6,310.2 $16,446.8 30% 32% 38% 100% 1989 $ 3,766.4 $4,176.6 $6,144.1 $14,087.1 27% 29% 44% 100%
Average Size and Number of Accounts Based on Gross Finance Receivables Held at End of Year
Consumer Finance Commercial Finance Residential Installment, Heavy-Duty Truck Real Estate- MHO and and Industrial Secured Credit Card Equipment Receivables Receivables Receivables
At December 31 1993 Average Size $37,787 $2,489 $31,218 Number of Accounts 281,206 3,965,781 290,765 1992 Average Size $36,725 $2,551 $27,792 Number of Accounts 267,394 3,183,747 276,055 1991 Average Size $33,829 $2,469 $27,506 Number of Accounts 240,798 2,910,995 262,110 1990 Average Size $33,928 $2,097 $28,002 Number of Accounts 144,438 2,496,411 225,349 1989 Average Size $32,310 $2,055 $28,357 Number of Accounts 116,570 2,032,490 216,670
The ten largest customer accounts at December 31, 1993, other than accounts with affiliates (as described in NOTE 14 to the consolidated financial statements), represented 0.8% of the total gross finance receivables outstanding. Of such ten accounts, five were secured by heavy- duty trucks or truck trailers, two were secured by construction equipment, two were secured by a manufacturer's endorsement and related to communications equipment and one was secured by auto leasing arrangements. At December 31, 1993, the largest gross balance outstanding in such accounts was $31.2 million and the average gross balance was $24.9 million.
Credit Loss and Delinquency Experience
The credit loss experience, net of recoveries, of the finance business for the years indicated is set forth in the following table (dollar amounts in millions):
Year Ended or at December 31 1993 1992 1991 1990 1989
NET CREDIT LOSSES Consumer Finance Amount $371.3 $382.9 $354.2 $254.2 $186.1 % of Average Net Receivables 2.19% 2.64% 2.84% 3.06% 2.59% % of Receivables Liquidated 3.41 4.57 5.65 5.51 5.05
Commercial Finance Amount $ 22.4 $ 41.8 $ 34.6 $ 23.4 $ 11.7 % of Average Net Receivables .30% .64% .60% .44% .22% % of Receivables Liquidated .26 .61 .61 .41 .20
Total Net Credit Losses Amount $393.7 $424.7 $388.8 $277.6 $197.8 % of Average Net Receivables 1.61% 2.02% 2.13% 2.03% 1.59% % of Receivables Liquidated 2.03 2.80 3.24 2.69 2.09
ALLOWANCE FOR LOSSES Balance at End of Period $808.9 $699.2 $590.9 $449.7 $390.1 % of Net Receivables 3.07% 3.06% 2.93% 3.02% 3.07%
The allowance for losses on finance receivables is based on percentages of net finance receivables established by management for each major category of receivables based on historical loss experience, plus an amount for possible adverse deviation from historical experience. Additions to the allowance are charged to the provision for losses on finance receivables. An analysis of changes in the allowance for losses is included in NOTE 4 to the consolidated financial statements.
Finance receivables are charged to the allowance for losses when they are deemed to be uncollectible. Additionally, Company policy provides for charge-off of various types of accounts as follows: consumer direct installment receivables, except those collateralized by residential real estate, are charged to the allowance for losses when no cash payment has been received for six months; credit card receivables are charged to the allowance for losses when the receivable becomes contractually six months delinquent; all other finance receivables are charged to the allowance for losses when any of the following conditions occur: (i) the related security has been converted or destroyed; (ii) the related security has been repossessed and sold or held for sale for one year; or (iii) the related security has not been repossessed and the receivable has become contractually one year delinquent. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.
Delinquency on consumer residential real estate-secured and direct installment and credit card receivables is determined by the date of the last cash payment received from the customer (recency of payment basis), a delinquent loan being one on which the customer has paid no cash whatsoever for a period of time. It is not First Capital's policy to accept token payments on delinquent accounts. A delinquent account on all types of receivables, other than consumer residential real estate-secured and direct installment and credit card receivables, is one on which the customer has not made payments as contractually agreed (contractual payment basis).
Extensions are granted on receivables from customers with satisfactory credit and with prior approval of management.
The following tables show (i) the gross account balances delinquent sixty through eighty-nine days, ninety days and more, and total gross balances delinquent sixty days and more; and (ii) total gross balances delinquent sixty days and more by type of business at the dates indicated (dollar amounts in millions):
Insurance Underwriting
First Capital is engaged in the property and casualty and accidental death and dismemberment insurance business through Associates Insurance Company ("AIC") and in the credit life, credit accident and health insurance business through Associates Financial Life Insurance Company ("AFLIC"), principally for customers of the finance operations of First Capital. At December 31, 1993, AIC was licensed to do business in 50 states, the District of Columbia and Canada, and AFLIC was licensed to do business in 49 states and the District of Columbia. In addition, First Capital receives compensation for certain insurance programs underwritten by other companies through marketing arrangements in a number of states.
The operating income produced by the finance operations' sale of insurance products is included in the respective finance operations' operating income.
The following table sets forth the net property and casualty insurance premiums written by major lines of business for the years indicated (in millions):
Year Ended December 31 1993 1992 1991 1990 1989
Automobile Physical Damage $ 97.6 $ 79.9 $ 69.2 $ 86.8 $ 85.0 Fire and Extended Coverage 41.3 27.8 15.8 31.2 30.7 Other Liability (a) 20.1 25.0 23.6 17.0 14.5 Total Net Premiums Written $159.0 $132.7 $108.6 $135.0 $130.2
(a) Includes contractual liability for auto club road service program.
The following table sets forth the aggregate premium income relating to credit life, credit accident and health and accidental death and dismemberment insurance for the years indicated, and the life insurance in force at the end of each respective year (in millions):
The following table summarizes the revenue of the insurance operation for the years indicated (in millions):
Year Ended December 31 1993 1992 1991 1990 1989
Premium Revenue (a) $242.2 $209.9 $202.5 $212.7 $196.9 Investment Income 38.4 41.5 53.3 58.4 56.3 Total Revenue $280.6 $251.4 $255.8 $271.1 $253.2
(a) Includes compensation for insurance programs underwritten by other companies through marketing arrangements.
Competition and Regulation
The interest rates charged for the various classes of receivables of First Capital's finance business vary with the type of risk and maturity of the receivable and are generally affected by competition, current interest rates and, in some cases, governmental regulation. In addition to competition with finance companies, competition exists with, among others, commercial banks, thrift institutions, credit unions and retailers.
Consumer finance operations are subject to detailed supervision by state authorities under legislation and regulations which generally require finance companies to be licensed and which, in many states, govern interest rates and charges, maximum amounts and maturities of credit and other terms and conditions of consumer finance transactions, including disclosure to a debtor of certain terms of each transaction. Licenses may be subject to revocation for violations of such laws and regulations. In some states, the commercial finance operations are subject to similar laws and regulations. Customers may seek damages for violations of state and Federal statutes and regulations governing lending practices, interest rates and other charges. Federal legislation preempts state interest rate ceilings on first mortgage loans and state laws which restrict various types of alternative residential real estate-secured receivables, except in those states which have specifically opted out of such preemption. Certain Federal and state statutes and regulations, among other things, require disclosure of the finance charges in terms of an annual percentage rate, make credit discrimination unlawful on a number of bases, require disclosure of a maximum rate of interest on variable or adjustable rate mortgage loans, and limit the types of security that may be taken in connection with non-purchase money consumer loans. Federal and state legislation in addition to that mentioned above has been, and from time to time may be, introduced which seeks to regulate the maximum interest rate and/or other charges on consumer finance receivables, including credit cards.
Associates National Bank (Delaware) (the "Bank"), is under the supervision of, and subject to examination by, the Office of the Comptroller of the Currency. In addition, the Bank is subject to the rules and regulations of the Federal Reserve Board and the Federal Deposit Insurance Corporation ("FDIC"). Associates Investment Corporation is regulated by the FDIC and the Utah Department of Financial Institutions. Areas subject to regulation by these agencies include capital adequacy, loans, deposits, consumer protection, the payment of dividends and other aspects of operations.
The insurance business is subject to detailed regulation, and premiums charged on certain lines of insurance are subject to limitation by state authorities. Most states in which insurance subsidiaries of First Capital are authorized to conduct business have enacted insurance holding company legislation pertaining to insurance companies and their affiliates. Generally, such laws provide, among other things, limitations on the amount of dividends payable by any insurance company and guidelines and standards with respect to dealings between insurance companies and affiliates.
It is not possible to forecast the nature or the effect on future earnings or otherwise of present and future legislation, regulations and decisions with respect to the foregoing, or other related matters.
ITEM 2.
ITEM 2. PROPERTIES.
The furniture, equipment and other physical property owned by First Capital and its subsidiaries represent less than 1% of total assets at December 31, 1993 and are therefore not significant in relation to total assets. The branch finance operations are generally conducted on leased premises under short-term operating leases normally not exceeding five years.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Because the finance and insurance businesses involve the collection of numerous accounts, the validity and priority of liens, and loss or damage claims under many types of insurance policies, the finance and insurance subsidiaries of First Capital are plaintiffs and defendants in numerous legal proceedings, including class action lawsuits. Neither First Capital nor any of its subsidiaries is a party to, nor is the property thereof the subject of, any pending legal proceedings which depart from the ordinary routine litigation incident to the kinds of business conducted by First Capital and its subsidiaries or, if such proceedings constitute other than routine litigation, in which there is a reasonable possibility of an adverse decision which could have any material adverse effect upon the financial condition of First Capital. There are no proceedings pending or, to the Company's knowledge, threatened by or on behalf of any administrative board or regulatory body which would materially affect or impair the right of First Capital or any of its subsidiaries to carry on any of their respective businesses. PART II
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted in accordance with General Instruction J.(2)(c) to Form 10-K.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
All of the outstanding Common Stock of First Capital is owned by Ford Holdings, Inc. There is no market for First Capital stock.
Dividends on the Common Stock are paid when declared by the Board of Directors. Annual Common Stock dividends of $226.0 million and $190.0 million were paid during the years ended December 31, 1993 and 1992, respectively.
Associates, First Capital's principal operating subsidiary, is subject to various limitations under the provisions of its outstanding debt and revolving credit agreements, including limitations on the payment of dividends. See Liquidity/Capital Resources under Item 7, herein, for a description of such limitations.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The information that follows is being provided in lieu of the information called for by Item 6 of Form 10-K, in accordance with General Instruction J.(2)(a) to Form 10-K.
The following table sets forth selected consolidated financial information regarding the Company's financial position and operating results which has been extracted from the Company's consolidated financial statements for the five years ended December 31, 1993. The information should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and accompanying footnotes included elsewhere in this report (dollar amounts in millions):
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management's narrative analysis of the results of operations is provided in lieu of management's discussion and analysis, in accordance with General Instruction J.(2)(a) to Form 10-K.
Results of Operations
REVENUE - Total revenue for the year ended December 31, 1993 increased $359.0 million (11%), compared with the year ended December 31, 1992. The components of the increase were as follows:
Finance charges increased $316.0 million (11%), primarily caused by an increase in average net finance receivables outstanding, which was partially offset by a decrease in average revenue rates. Average net finance receivables outstanding were $24.4 billion and $21.0 billion for the years ended December 31, 1993 and 1992, respectively, a 16% increase. Total net finance receivables increased by approximately $3.5 billion (15%) from December 31, 1992 to December 31, 1993. Of the total growth, 23% was in the residential real estate-secured portfolio, 20% was in the direct installment and credit card portfolios, 19% was in the manufactured housing and other portfolios, 23% was in the heavy-duty truck portfolio and 15% was in the industrial equipment portfolio. The growth was due, in part, to the acquisitions of finance businesses or finance receivables of Allied Finance Company (April 1993), and Mack Financial Corporation and Great Western Financial Corporation (September 1993) as described in NOTE 3 to the consolidated financial statements. The average revenue rates on aggregate net receivables were 13.4% and 14.1% for the years ended December 31, 1993 and 1992, respectively. The decline in the average revenue rates was principally due to changes in market conditions, including lower prevailing market rates affecting yields on new business and variable and adjustable rate loans, and a shift in the loan portfolio mix toward a higher percentage of commercial loans, which generally have lower yields than consumer loans.
Insurance premiums increased $32.3 million (15%) as a result of increased sales of insurance products, primarily in the credit life and credit accident and health insurance programs.
Investment and other income increased $10.7 million (6%), due to an increase in fee-based financial services revenue, which was partially offset by a decrease in interest income from loans to former foreign subsidiaries of First Capital as a result of decreased balances outstanding, and a general decrease in the interest rates on investments.
EXPENSES - Total expenses for the year ended December 31, 1993 increased $213.6 million (8%), compared with the year ended December 31, 1992. The components of the increase were as follows:
Interest expense increased $59.1 million (5%). This change was caused by an increase in average outstanding debt ($186.7 million) attributable to higher net finance receivables outstanding, which was partially offset by a decrease in average interest rates ($127.6 million). The annual average interest rates on total debt, including amortization of discount and issuance expense, were as follows:
Year Ended December 31 1993 1992
Short-term Debt 3.11% 3.68% Long-term Debt 8.03 8.78 Total Debt 5.94 6.55
The net interest margin was 7.92% and 7.98% for the years ended December 31, 1993 and 1992, respectively.
Operating expenses increased $176.1 million (21%), primarily as a result of increased salaries, employment benefits and other operating expenses generally related to increased volumes of business, including acquisitions.
The provision for loan losses decreased by $36.5 million (7%), primarily due to decreased losses. Net credit losses, measured in dollars and as a percent of average net finance receivables, declined during the twelve-month period ended December 31, 1993, compared to the same period ended December 31, 1992. The allowance for losses increased $109.7 million (16%) to $808.9 million at December 31, 1993 from $699.2 million at December 31, 1992. The increase primarily relates to the growth in net finance receivables. The allowance for losses, measured as a percent of net finance receivables, remained at a relatively constant level at December 31, 1993 (3.07%) compared to December 31, 1992 (3.06%). The allowance for losses is maintained at a level which considers, among other factors, historical loss experience, possible deviations from historical loss experience and varying economic conditions.
Insurance benefits paid or provided increased $14.9 million (15%) in 1993, primarily due to an increase in property and casualty insurance claims.
EARNINGS BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - As a result of the aforementioned changes, earnings before provision for income taxes and cumulative effect of changes in accounting principles increased $145.4 million (24%) during 1993.
PROVISION FOR INCOME TAXES - The provision for income taxes represented 37.5% and 35.2% of earnings before provision for income taxes for the years ended December 31, 1993 and 1992, respectively. The increase in the effective tax rate is primarily related to an increase in the Federal statutory rate and the method of computing state taxes as described in NOTE 8 to the consolidated financial statements.
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - Earnings before cumulative effect of changes in accounting principles increased $76.9 million (20%) during 1993.
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - In 1992, the Company recorded a one-time charge of $10.4 million relating to the adoption of two new accounting standards. See NOTE 2 to the consolidated financial statements for additional information.
NET EARNINGS - As a result of the aforementioned changes, net earnings increased $87.3 million (23%) during 1993.
Liquidity/Capital Resources
The following sets forth liquidity and capital resources for First Capital and its subsidiaries other than Associates and its subsidiaries.
First Capital's primary sources of funds have been (i) borrowings from both commercial banks and the public and (ii) borrowings and dividends from Associates. The amount of dividends which may be paid by Associates is limited by certain provisions of its outstanding debt and revolving credit agreements. A restriction contained in one series of debt securities maturing August 1, 1996, generally limits payments of cash dividends on Associates Common Stock in any one year to not more than 50% of Associates consolidated net earnings for such year, subject to certain exceptions, plus increases in contributed capital and extraordinary gains. Any such amounts available for the payment of dividends in such fiscal year and not so paid, may be paid in any one or more of the five subsequent fiscal years. In accordance with this provision, at December 31, 1993, $221.9 million was available for dividends. A restriction contained in certain revolving credit agreements requires Associates to maintain a minimum tangible net worth, as defined, of $1.5 billion. At December 31, 1993, Associates tangible net worth was approximately $2.9 billion. A debt agreement of Associates limits the total of all affiliate-related receivables, as defined, to 7% of the aggregate gross receivables owned by Associates. An affiliate within the meaning of affiliate-related receivables includes First Capital, its parent corporation, and any corporation, other than Associates and its subsidiaries, of which First Capital or its parent corporation owns or controls at least 50% of its stock. The net total of all affiliate-related receivables which Associates owned at December 31, 1993 and 1992, amounted to 1.5% and 1.2%, respectively, of its aggregate gross receivables as of those dates.
At December 31, 1993, First Capital had contractually committed bank lines of credit of $75.0 million, and revolving credit facilities of $250.0 million, none of which was in use. During 1993, First Capital raised $209.3 million through public and private offerings of medium- and long-term debt.
The following sets forth liquidity and capital resources for Associates:
Associates endeavors to maximize its liquidity by diversifying its sources of funds, which include: (i) its operations; (ii) the issuance of commercial paper; (iii) the issuance of unsecured intermediate-term debt in the public and private markets; (iv) borrowings available from short-term and revolving credit facilities with commercial banks; and (v) receivables purchase facilities.
Issuance of Short- and Intermediate-Term Debt
Commercial paper, with maturities ranging from 1 to 270 days, is the primary source of short-term debt. The average commercial paper interest rate incurred during 1993 was 3.11%.
Associates issues intermediate-term debt publicly and privately in the domestic and foreign markets. During the year ended December 31, 1993, Associates raised $3.6 billion through public and private offerings at a weighted average effective interest rate and a weighted average term of 5.64% and 6.5 years, respectively.
Credit Facilities and Related Borrowings
Associates policy is to maintain bank credit facilities in support of its net short-term borrowings consistent with market conditions. Bank credit facilities provide a means of refinancing maturing commercial paper obligations as needed. At December 31, 1993, short-term bank lines and revolving credit facilities with banks totaled $8.2 billion, none of which was in use at that date. These facilities represented 80% of net short-term borrowings outstanding at December 31, 1993. Bank lines and revolvers may be withdrawn only under certain standard conditions. Associates pays fees or maintains compensating balances or utilizes a combination of both to maintain the availability of its bank credit facilities. Fees are .05% to .25% of 1% per annum of the amount of the facilities.
At December 31, 1993 and 1992, Associates short-term debt, as defined, as a percent of total debt was 52%. Short-term debt, for purposes of this computation, includes the current portion of long-term debt but excludes short-term investments. See NOTES 5, 6 and 7 to the consolidated financial statements for a description of credit facilities, notes payable and long- term debt, respectively.
Recent Accounting Pronouncements
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postretirement Benefits" and SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts". The adoption of these standards was not significant to the Company's consolidated financial statements.
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" effective 1995, SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" effective 1994, and SFAS No. 116, "Accounting for Contributions Received and Contributions Made" effective 1995. Adoption of these pronouncements is not expected to be significant to the Company's consolidated financial statements.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors Associates First Capital Corporation
We have audited the consolidated financial statements and the financial statement schedule listed in Item 14(a) of this Form 10-K of Associates First Capital Corporation (an indirect subsidiary of Ford Motor Company). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Associates First Capital Corporation as of December 31, 1993 and 1992 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
As discussed in NOTE 2 to the consolidated financial statements, effective January 1, 1992, the Company changed its methods of accounting for postretirement benefit costs other than pensions and income taxes.
COOPERS & LYBRAND
Dallas, Texas February 1, 1994
ASSOCIATES FIRST CAPITAL CORPORATION CONSOLIDATED STATEMENT OF EARNINGS (In Millions)
Year Ended December 31 1993 1992 1991
REVENUE Finance charges $3,276.3 $2,960.3 $2,786.9 Insurance premiums 242.2 209.9 202.5 Investment and other income 187.1 176.4 197.7 3,705.6 3,346.6 3,187.1
EXPENSES Interest expense 1,340.5 1,281.4 1,347.8 Operating expenses 1,022.3 846.2 773.6 Provision for losses on finance receivables - NOTE 4 476.1 512.6 434.2 Insurance benefits paid or provided 114.9 100.0 91.1 2,953.8 2,740.2 2,646.7
EARNINGS BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 751.8 606.4 540.4 PROVISION FOR INCOME TAXES - NOTE 8 281.7 213.2 193.1 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 470.1 393.2 347.3 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - NOTE 2 (10.4)
NET EARNINGS $ 470.1 $ 382.8 $ 347.3
See notes to consolidated financial statements.
The weighted average interest rate for total long-term debt was 7.54% for 1993 and 8.33% for 1992.
The estimated fair value of long-term debt at December 31, 1993 was $14.5 billion. The fair value was determined by discounting expected cash flows at discount rates currently available to the Company for debt with similar terms and remaining maturities.
Long-term borrowing maturities during the next five years, including the current portion of notes payable after one year are: 1994, $2,203.1 million; 1995, $2,097.6 million; 1996, $2,334.4 million; 1997, $2,029.6 million; 1998, $1,316.1 million; and 1999 and thereafter $3,620.0 million.
Certain debt issues contain call provisions or may be subject to repayment provisions at the option of the holder on specified dates prior to the maturity date. At December 31, 1993, approximately 3,500 warrants were outstanding to purchase $154.8 million aggregate principal amount of senior notes at par with interest rates ranging from 7.00% to 10.50%. The warrants are exercisable at various dates through October 1, 1999 at prices ranging from $1,000 to $25,000,000 per warrant. All of the above issues are unsecured except for a $50 million, 8.25% Senior Note due August 15, 2001, which is collateralized by First Capital's corporate offices.
NOTE 8 - PROVISION FOR INCOME TAXES
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act") was enacted. Among other changes, the Act increased the Federal income tax rate for corporations by one percentage point to 35% effective January 1, 1993. Net income for 1993 included a reduction of $2.1 million in the provision for income taxes as a result of restating deferred tax balances. The favorable effect reflects the higher tax rate applied to the Company's net deferred tax assets.
Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes". The cumulative effect of the accounting change was recognized in the December 31, 1992 Consolidated Statement of Earnings as a one-time increase to net earnings in the amount of $29.8 million.
The following table sets forth the components of the provision for U.S. Federal and State income taxes and deferred income tax (benefit) for the periods indicated (in millions): Federal State Total Year ended December 31, 1993 Current $337.1 $20.5 $357.6 Deferred: Leasing transactions 3.6 3.6 Finance revenue 3.9 3.9 Provision for losses on finance receivables and other (83.4) (83.4) $261.2 $20.5 $281.7 Year ended December 31, 1992 Current $226.0 $ 8.8 $234.8 Deferred: Leasing transactions 13.6 13.6 Finance revenue 12.9 12.9 Provision for losses on finance receivables and other (48.1) (48.1) $204.4 $ 8.8 $213.2 Year ended December 31, 1991 Current $182.7 $ 6.4 $189.1 Deferred: Leasing transactions 15.1 15.1 Finance revenue 16.8 16.8 Provision for losses on finance receivables and other (27.9) (27.9) $186.7 $ 6.4 $193.1
In 1993, the Company entered into a tax-sharing agreement with Ford whereby state income taxes are provided on a separate-return basis. Prior to 1993, state income taxes were provided on a consolidated-return basis.
At December 31, 1993 and 1992, the components of the Company's net deferred tax asset were as follows (in millions):
1993 1992
Deferred tax assets: Provision for losses on finance receivables and other $ 368.8 $ 301.7 Postretirement and other employee benefits 68.1 45.8 436.9 347.5
Deferred tax liabilities: Leasing transactions (145.9) (143.4) Finance revenue and other (192.6) (182.6) (338.5) (326.0) Net deferred tax asset $ 98.4 $ 21.5
Due to the Company's earnings levels, no valuation allowance related to the deferred tax asset has been recorded.
The effective tax rate differed from the statutory U.S. Federal income tax rate as follows: % of Pretax Income Year Ended December 31 1993 1992 1991
Statutory tax rate 35.0% 34.0% 34.0% State and other 2.5 1.2 1.7 Effective tax rate 37.5% 35.2% 35.7%
NOTE 9 - DEBT RESTRICTIONS
Associates, First Capital's principal operating subsidiary, is subject to various limitations under the provisions of its outstanding debt and revolving credit agreements. The most significant of these limitations are summarized as follows:
LIMITATION ON PAYMENT OF DIVIDENDS
A restriction contained in one series of debt securities maturing August 1, 1996, generally limits payments of cash dividends on Associates Common Stock in any year to not more than 50% of Associates consolidated net earnings for such year, subject to certain exceptions, plus increases in contributed capital and extraordinary gains. Any such amounts available for the payment of dividends in such fiscal year and not so paid, may be paid in any one or more of the five subsequent fiscal years. In accordance with this provision, at December 31, 1993, $221.9 million was available for dividends.
LIMITATION ON MINIMUM TANGIBLE NET WORTH
A restriction contained in certain revolving credit agreements requires Associates to maintain a minimum tangible net worth, as defined, of $1.5 billion. At December 31, 1993, Associates tangible net worth was approximately $2.9 billion.
LIMITATION ON AFFILIATE RECEIVABLES
A debt agreement of Associates limits the total of all affiliate-related receivables, as defined, to 7% of the aggregate gross receivables owned by Associates. An affiliate within the meaning of affiliate-related receivables includes First Capital, its parent corporation, and any corporation, other than Associates and its subsidiaries, of which First Capital or its parent corporation owns or controls at least 50% of its stock. The net total of all affiliate-related receivables which Associates owned at December 31, 1993 and 1992, amounted to 1.5% and 1.2%, respectively, of its aggregate gross receivables as of those dates.
NOTE 10 - LEASE COMMITMENTS
Leases are primarily short-term and generally provide for renewal options not exceeding the original term. Total rent expense for the years ended December 31, 1993, 1992 and 1991 was $43.9 million, $38.3 million, and $34.5 million, respectively. Minimum rental commitments as of December 31, 1993 for all noncancelable leases (primarily office leases) for the years ending December 31, 1994, 1995, 1996, 1997 and 1998, are $37.0 million, $29.8 million, $22.2 million, $11.4 million and $5.1 million, respectively, and $4.6 million thereafter.
NOTE 11 - EMPLOYEE BENEFITS
DEFINED BENEFIT PLANS
The Company sponsors various qualified and nonqualified pension plans (the "Plan" or "Plans"), which together cover substantially all permanent employees who meet certain eligibility requirements.
Net periodic pension cost for the years indicated includes the following components (in millions): December 31 (a) 1993 1992 1991
Service cost $ 10.0 $ 8.4 $ 6.6 Interest cost 18.1 16.1 13.9 Actual return on Plan assets (21.6) (10.0) (28.4) Net amortization 7.4 (2.5) 19.0 Net periodic pension cost $ 13.9 $ 12.0 $ 11.1
The funded status of the Plans is as follows (in millions):
The projected benefit obligation at December 31, 1993 and 1992 was determined using a discount rate of 7.0% and 8.0%, respectively, projected compensation increases of 6.0% and expected return on plan assets of 9.5%.
A determination of the Federal income tax status related to the qualified Pension Plan has not been requested because the Internal Revenue Service has only recently begun accepting certain qualified pension plan applications. An application is expected to be filed during 1994. If a favorable determination letter is not received, First Capital has agreed to make any changes required to receive a favorable determination letter.
RETIREMENT SAVINGS AND PROFIT SHARING PLAN
The Company sponsors a defined contribution plan intended to provide assistance in accumulating personal savings for retirement and is designed to qualify under Sections 401(a) and 401(k) of the Internal Revenue Code. The savings plan has not been submitted to the Internal Revenue Service for approval as a qualified tax-exempt plan. Consequently, the plan provisions are subject to issuance of a favorable determination letter by the Internal Revenue Service. For the years ended December 31, 1993, 1992 and 1991, the Company's pretax contributions to the plan were $14.0 million, $12.1 million and $9.9 million, respectively.
EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain postretirement benefits through unfunded plans sponsored by First Capital. These benefits are currently provided to substantially all permanent employees who meet certain eligibility requirements. The benefits or the plan can be modified or terminated at the discretion of the Company. The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1992. As of January 1, 1992, the Company recorded a one-time charge to net earnings of approximately $40.2 million, which represents the estimated accumulated postretirement benefit obligation on that date of $64.9 million, net of deferred income taxes of approximately $20.7 million and amounts recorded as purchase accounting adjustments of approximately $4.0 million. This amount has been reflected in the Consolidated Statement of Earnings as a component of the cumulative effect of changes in accounting principles.
Prior to 1992, the cost of providing these benefits was recognized as a charge to income as claims were paid. The amount paid for postretirement benefits for the years ended December 31, 1993, 1992 and 1991 was approximately $1.5 million, $2.1 million and $1.2 million, respectively.
Net periodic postretirement benefit cost for 1993 and 1992 includes the following components (in millions): December 31 1993 1992
Service cost $ 4.2 $3.2 Interest cost 6.3 5.8 Net amortization (0.7) Net periodic postretirement benefit cost $ 9.8 $9.0
Accrued postretirement benefit cost at December 31, 1993 and 1992 is composed of the following (in millions): December 31 1993 1992
Accumulated postretirement benefit obligation ("APBO"): Retired participants $ 33.6 $27.8 Fully eligible participants 21.1 15.6 Other active participants 30.7 32.8 total APBO 85.4 76.2 Unamortized amendments 11.5 Unrecognized actuarial loss (16.8) (4.4) Accrued postretirement benefit cost $ 80.1 $71.8
For measurement purposes, a 12.50% and 13.32% weighted average annual rate of increase in per capita cost of covered health care benefits was assumed for 1993 and 1992, respectively, decreasing gradually to 5.50% by the year 2009. Discount rates of 7.50% and 8.50% were used in measuring the APBO at December 31, 1993 and 1992, respectively. Increasing the assumed health care cost trend rate by one percentage point each year would increase the APBO as of December 31, 1993 and 1992 by $6.2 million and $5.1 million, respectively, and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for each year then ended by $0.8 million.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
First Capital and its subsidiaries are defendants in various legal proceedings which arose in the normal course of business. In management's judgment (based upon the advice of counsel) the ultimate liabilities, if any, from such legal proceedings will not have a material adverse effect on the financial position of First Capital.
NOTE 13 - OTHER ASSETS
The components of Other Assets at December 31, 1993 and 1992 were as follows (in millions):
December 31 1993 1992
Balances with related parties - NOTE 14 $ 167.5 $ 193.2 Goodwill 382.2 405.2 Other 666.0 589.9 Total other assets $1,215.7 $1,188.3
Other assets include residential real estate-secured receivables held for sale by Associates National Mortgage Corporation, a subsidiary of the Company. At December 31, 1993, the aggregate book value was $77.6 million, which approximates estimated fair value. The estimated fair value was determined by discounting expected cash flows from such receivables at current market rates.
NOTE 14 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES
CAPITAL TRANSACTIONS
Effective as of December 15, 1993, First Capital received from Ford Holdings a capital contribution of $200.0 million in the form of cash.
OTHER TRANSACTIONS AND BALANCES
First Capital, through Associates, provided debt financing to certain of its former foreign subsidiaries. At December 31, 1993 and 1992, amounts due from foreign affiliates totaled $167.5 million and $193.2 million, respectively, and were included in Other Assets. These receivables bear fluctuating interest rates and are payable on demand. Interest income related to these transactions was $21.3 million, $34.0 million and $47.5 million for the years ended December 31, 1993, 1992 and 1991, respectively. The estimated fair value of these receivables was $175.6 million at December 31, 1993.
At December 31, 1992, the gross consumer finance receivables included a participation in consumer receivables of $142.0 million of First Nationwide Bank, FSB, an affiliate of First Capital. This balance was included in Finance Receivables. The Company provides certain services of an administrative nature, use of certain tangible and intangible assets, including trademarks, guarantees of debt and related interest, and other management services to certain of its foreign affiliates in Japan, Canada, Puerto Rico and the United Kingdom. Such services and usage are charged to the affiliates based on the nature of the service. Fees for such guarantees range from .25% to 1% of the average outstanding debt guaranteed. Management believes the percentages represent fair value. The amounts paid or accrued under these arrangements for the years ended December 31, 1993, 1992 and 1991 were $40.1 million, $35.5 million and $25.3 million, respectively.
At December 31, 1993 and 1992, the Company was a guarantor on debt and related accrued interest of its foreign affiliates in Canada and Puerto Rico amounting to $256.7 million and $154.5 million, respectively.
At December 31, 1993 and 1992, First Capital's current income taxes payable to Holdings amounted to $40.2 million and $45.1 million, respectively.
NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS
The Company maintains cash, cash equivalents, investments, and certain other financial instruments with various major financial institutions. To the extent such deposits exceed maximum insurance levels, they are uninsured.
Currency swap contracts are entered into as part of the Company's funding strategy. The Company has an interest rate swap contract acquired as part of a business acquisition. Amounts under currency and interest rate swap contracts at December 31, 1993 were approximately $202.9 million. Should a counterparty to these contracts fail to meet the terms of the contracts, the Company could be at market risk for any currency and/or interest rate differentials. At December 31, 1993, the Company estimated its exposure to loss resulting from currency and interest rate differentials, in event of non-performance by all counterparties, was $14.0 million, which also approximated the estimated fair value of amounts under contract.
Associates National Bank (Delaware) a subsidiary of First Capital, makes available credit lines to holders of their credit cards. The unused portion of the available credit is revocable by the bank under specified conditions. The unused portion of the available credit at December 31, 1993 approximated $8.2 billion. The potential risk associated with, and the estimated fair value of, the unused credit lines are not considered to be significant.
The consumer operation grants revolving lines of credit to certain of its customers. At December 31, 1993, the unused portion of these lines aggregated approximately $712.4 million. The potential risk associated with, and the estimated fair value of, the unused credit lines are not considered to be significant.
The commercial operation grants lines of credit to certain dealers of truck, construction equipment and manufactured housing. At December 31, 1993, the unused portion of these lines aggregated approximately $684.6 million. The potential risk associated with, and the estimated fair value of, the unused credit lines are not considered to be significant.
NOTE 16 - INVESTMENTS IN MARKETABLE SECURITIES
DEBT SECURITIES
Debt security investments, principally bonds and notes, are intended to be held for the foreseeable future and are carried at amortized cost. However, if market conditions or other factors subsequently change, such securities may be sold prior to maturity with the realized gain or loss included in investment and other income. Amortized cost at December 31, 1993 and 1992 was $598.7 million and $480.0 million, respectively. The following table sets forth, by type of security issuer, the amortized cost, gross unrealized gains and estimated market value at December 31, 1993 (in millions):
Gross Estimated Amortized Unrealized Market Cost Gains Value
U.S. Government obligations $456.5 $12.4 $468.9 Corporate obligations 58.0 0.8 58.8 Mortgage-backed and other obligations 84.2 0.1 84.3 Total debt securities $598.7 $13.3 $612.0
The amortized cost and estimated market value of debt securities at December 31, 1993, by contractual maturity, are shown below (in millions):
Estimated Amortized Market Cost Value
Due in one year or less $ 52.3 $ 52.4 Due after one year through five years 370.1 378.2 Due after five years through ten years 168.5 172.9 Due after ten years 7.8 8.5 $598.7 $612.0
EQUITY SECURITIES
Equity security investments, principally common stock held by the Company's insurance subsidiaries, are recorded at market value. Market value at December 31, 1993 and 1992 was $35.0 million and $27.3 million, respectively. Historical cost of these investments at December 31, 1993 and 1992 was $28.9 million and $21.8 million, respectively.
Estimated market values of debt and equity securities are based on quoted market prices.
NOTE 17 - BUSINESS SEGMENT INFORMATION
First Capital's primary business activities are consumer finance, commercial finance and insurance underwriting. The consumer finance operation is engaged in making and investing in residential real estate-secured receivables, consumer direct installment and revolving credit receivables, including credit card receivables, primarily through a wholly-owned credit card bank, purchasing consumer retail installment obligations, and providing other consumer financial services. The commercial finance operation is principally engaged in financing sales of transportation and industrial equipment and leasing, and sales of other financial services, including automobile club, mortgage banking and relocation services. The insurance operation is engaged in underwriting credit life and credit accident and health, property, casualty and accidental death and dismemberment insurance, principally for customers of the finance operations, and such sales are the principal amounts included in the intersegment revenue shown below. The following table sets forth information by business segment (in millions):
NOTE 18 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
Condensed unconsolidated financial information of Associates First Capital Corporation as of or for the years ended December 31, 1993, 1992 and 1991 were as follows (in millions): CONDENSED STATEMENT OF EARNINGS
Year Ended December 31 1993 1992 1991
Revenue Interest and other income $ 6.7 $ 6.1 $ 20.9 Dividends from subsidiaries 242.7 191.6 201.3 249.4 197.7 222.2
Expenses Interest expense 51.1 56.5 78.5 Operating expenses 15.3 15.2 10.3 66.4 71.7 88.8
Income before credit for Federal income taxes and equity in net earnings of subsidiaries 183.0 126.0 133.4 Credit for Federal income taxes resulting from tax agreements with subsidiaries 21.2 21.7 23.1 Earnings before equity in undistributed earnings of subsidiaries 204.2 147.7 156.5 Equity in undistributed earnings of subsidiaries 265.9 235.1 190.8 Net earnings $470.1 $382.8 $347.3
CONDENSED BALANCE SHEET
December 31 1993 1992
Assets Investment in and advances to subsidiaries, eliminated in consolidation, and other $3,198.9 $2,773.7 Total assets $3,198.9 $2,773.7
Liabilities and Stockholder's Equity Accounts payable and accruals $ 19.9 $ 26.4 Notes payable and long-term debt (1) 672.7 685.4 Stockholder's equity (2) 2,506.3 2,061.9 Total liabilities and stockholder's equity $3,198.9 $2,773.7
The estimated fair value of notes payable and long-term debt at December 31, 1993 was $685.3 million. Fair values were estimated by discounting expected cash flows at discount rates currently available to the Company for debt with similar terms and remaining maturities.
See notes to condensed financial information.
CONDENSED STATEMENT OF CASH FLOWS (In Millions)
Year Ended December 31 1993 1992 1991
Cash Flows from Operating Activities Net earnings $ 470.1 $ 382.8 $ 347.3 Adjustments to net earnings for noncash items: Amortization and depreciation 0.1 0.1 0.1 (Decrease) increase in accounts payable and accruals (6.5) (13.7) 6.4 Equity in undistributed earnings of subsidiaries (265.9) (235.1) (190.8) Other (0.6) 1.0 2.9 Net cash provided from operating activities 197.2 135.1 165.9 Cash Flows from Investing Activities Cash dividends from subsidiaries (1) 242.7 191.6 201.3 Increase in investments in and advances to subsidiaries (402.7) (151.7) (96.2) Net cash provided from (used for) investing activities (160.0) 39.9 105.1 Cash Flows from Financing Activities Increase in notes payable and long-term debt (2) 231.6 241.8 23.2 Cash dividends paid (226.0) (190.0) (173.0) Retirement of long-term debt (244.2) (228.4) (271.0) Capital contribution from parent 200.0 154.0 Net cash used for financing activities (38.6) (176.6) (266.8)
(Decrease) increase in cash and cash equivalents (1.4) (1.6) 4.2 Cash and cash equivalents at beginning of period 0.5 2.1 (2.1)
Cash and cash equivalents at end of period $ (0.9) $ 0.5 $ 2.1
NOTES TO CONDENSED FINANCIAL INFORMATION:
(1) The ability of the Company's subsidiaries to transfer funds to the Company in the form of cash dividends is restricted pursuant to the terms of certain debt agreements entered into by the Company's principal operating subsidiary, Associates Corporation of North America. See NOTE 9 to the consolidated financial statements for a summary of the most significant of these restrictions.
(2) Notes payable and long-term debt bear interest at rates from 4.00% to 13.75%. The estimated maturities of the notes outstanding, at December 31, 1993, during subsequent years were as follows (in millions):
1994 $356.0 1995 120.5 1996 89.5 1997 60.3 1998 46.4 $672.7
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Items 10-13 has been omitted in accordance with General Instruction J.(2)(c) to Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements Page
Report of Independent Accountants 16 Consolidated Statement of Earnings for the years ended December 31, 1993, 1992 and 1991 17 Consolidated Balance Sheet at December 31, 1993 and 1992 18 Consolidated Statement of Changes in Stockholder's Equity for the years ended December 31, 1993, 1992 and 1991 19 Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1992 and 1991 20 Notes to consolidated financial statements 21
(2) Financial Statement Schedules
II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other than Related Parties.
All other schedules are omitted because either they are not applicable or the information required to be included therein is provided in the consolidated financial statements or related notes.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1993, First Capital filed no Current Reports on Form 8-K.
(c) Exhibits
(3) (a) Certificate of Incorporation. Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the fiscal year ended October 31, 1986.
(b) By-laws. Incorporated by reference to Exhibit 3 to the Company's Form 10-K for the year ended December 31, 1990.
(4) Instruments with respect to issues of long-term debt have not been filed as exhibits to this annual report on Form 10-K as the authorized principal amount of any one of such issues does not exceed 10% of the total assets of the registrant and its consolidated subsidiaries. Registrant agrees to furnish to the Commission a copy of each such instrument upon its request.
(12) Computation of Ratio of Earnings to Fixed Charges.
(22) Subsidiaries of the registrant. Omitted in accordance with General Instruction J.(2)(b) to Form 10-K.
(24) Consent of Independent Accountants.
(25) Powers of Attorney.
SIGNATURES
No annual report to security holders or proxy material has been or will be sent to security holders. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASSOCIATES FIRST CAPITAL CORPORATION
By /s/ ROY A. GUTHRIE Senior Vice President and Comptroller March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date
REECE A. OVERCASH, JR.* Chairman of the Board, (Reece A. Overcash, Jr.) Principal Executive Officer and Director
KEITH W. HUGHES* President, Chief Operating (Keith W. Hughes) Officer and Director
JAMES E. JACK* Senior Executive Vice President and (James E. Jack) Principal Financial Officer
ROY A. GUTHRIE* Senior Vice President, March 25, 1994 (Roy A. Guthrie) Comptroller and Principal Accounting Officer
HAROLD D. MARSHALL* Director (Harold D. Marshall)
JOSEPH M. McQUILLAN* Director (Joseph M. McQuillan)
By signing his name hereto, Roy A. Guthrie signs this document on behalf of himself and each of the other persons indicated above pursuant to powers of attorney duly executed by such persons.
*By /s/ ROY A. GUTHRIE Attorney-in-fact
SCHEDULE II
INDEX TO EXHIBITS
Sequentially Exhibit Numbered Number Exhibit Page
(3) (a) Certificate of Incorporation. Incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the fiscal year ended October 31, 1986.
(b) By-laws. Incorporated by reference to Exhibit 3 to the Company's Form 10-K for the year ended December 31, 1990.
(4) Instruments with respect to issues of long-term debt have not been filed as exhibits to this annual report on Form 10-K as the authorized principal amount of any one of such issues does not exceed 10% of the total assets of the registrant and its consolidated subsidiaries. Registrant agrees to furnish to the Commission a copy of each such instrument upon request.
(12) Computation of Ratio of Earnings to Fixed Charges.
(22) Subsidiaries of the registrant. Omitted in accordance with General Instruction J.(2)(b) to Form 10-K.
(24) Consent of Independent Accounts.
(25) Powers of Attorney.
EXHIBIT 12
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar Amounts In Millions)
Year Ended December 31 1993 1992 1991
Fixed Charges (a) Interest expense $1,340.5 $1,281.4 $1,347.8 Implicit interest in rent 1.9 1.6 2.2 Total fixed charges $1,342.4 $1,283.0 $1,350.0
Earnings (b) $ 751.8 $ 606.4 $ 540.4 Fixed charges 1,342.4 1,283.0 1,350.0 Earnings, as defined $2,094.2 $1,889.4 $1,890.4
Ratio of Earnings to Fixed Charges 1.56 1.47 1.40
(a) For purposes of such computation, the term "Fixed Charges" represents interest expense and a portion of rentals representative of an implicit interest factor for such rentals.
(b) For purposes of such computation, the term "Earnings" represents earnings before provision for income taxes and cumulative effect of changes in accounting principles, plus fixed charges.
EXHIBIT 24
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of Associates First Capital Corporation on Form S-3 (No. 33-65752) of our report dated February 1, 1994, on our audits of the consolidated financial statements and financial statement schedule of Associates First Capital Corporation as of December 31, 1993 and 1992, and for the years ended December 31, 1993, 1992, and 1991, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND
Dallas, Texas March 25, 1994
EXHIBIT 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ Reece A. Overcash, Jr. Reece A. Overcash, Jr.
OFFICE: Chairman of the Board, Principal Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ Keith W. Hughes Keith W. Hughes
OFFICE: President, Chief Operating Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ Harold D. Marshall Harold D. Marshall
OFFICE: Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ Joseph M. McQuillan Joseph M. McQuillan
OFFICE: Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ James E. Jack James E. Jack
OFFICE: Senior Executive Vice President, Principal Financial Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or a director of ASSOCIATES FIRST CAPITAL CORPORATION (the "Company"), has made, constituted and appointed and by these presents does hereby make, constitute and appoint THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, his true and lawful attorneys, for him and in his name, place and stead, and in his office and capacity as aforesaid, to sign and file the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises, as fully, to all intents and purposes, as he might or could do if personally present, hereby ratifying and confirming in all respects all that said THOMAS E. DALE, ROY A. GUTHRIE, CHESTER D. LONGENECKER and REECE A. OVERCASH, JR., or any of them, as said attorneys, may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28th day of February, 1994.
SIGNATURE:/s/ Roy A. Guthrie Roy A. Guthrie
OFFICE: Senior Vice President, Comptroller and Principal Accounting Officer