UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
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 FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 36-1239445 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| 2700 Sanders Road, Prospect Heights, Illinois | 60070 | |
| (Address of principal executive offices) | (Zip Code) | |
(847) 564-5000
Registrant’s telephone number, including area code
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
At July 31, 2004, there were 1,000 shares of the registrant’s common stock outstanding, all of which were owned by Household International, Inc.
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
Form 10-Q
TABLE OF CONTENTS
2
Item 1. Consolidated Financial Statements
CONSOLIDATED STATEMENT OF INCOME
| Three months ended June 30, |
Six months ended June 30, 2004 |
March 29 through June 30, 2003 |
January 1 through March 28, 2003 | ||||||||||||
| 2004 | 2003 | ||||||||||||||
| (Successor) | (Successor) | (Successor) | (Successor) | (Predecessor) | |||||||||||
| (in millions) | |||||||||||||||
| Finance and other interest income |
$ | 2,398.4 | $ | 2,296.2 | $ | 4,683.5 | $ | 2,363.9 | $ | 2,266.9 | |||||
| Interest expense |
510.3 | 457.5 | 1,021.0 | 471.6 | 784.6 | ||||||||||
| Net interest income |
1,888.1 | 1,838.7 | 3,662.5 | 1,892.3 | 1,482.3 | ||||||||||
| Provision for credit losses |
924.6 | 979.5 | 1,773.6 | 1,011.0 | 920.7 | ||||||||||
| Net interest income after provision for credit losses |
963.5 | 859.2 | 1,888.9 | 881.3 | 561.6 | ||||||||||
| Other revenues: |
|||||||||||||||
| Securitization revenue |
249.1 | 273.1 | 587.9 | 281.3 | 413.2 | ||||||||||
| Insurance revenue |
121.5 | 124.5 | 248.6 | 128.5 | 118.8 | ||||||||||
| Investment income |
25.1 | 31.5 | 61.5 | 32.7 | 75.8 | ||||||||||
| Fee income |
223.2 | 207.9 | 471.0 | 215.9 | 262.1 | ||||||||||
| Other income |
171.7 | 153.8 | 486.4 | 158.5 | 240.1 | ||||||||||
| Total other revenues |
790.6 | 790.8 | 1,855.4 | 816.9 | 1,110.0 | ||||||||||
| Costs and expenses: |
|||||||||||||||
| Salaries and employee benefits |
352.5 | 404.4 | 728.2 | 417.1 | 378.1 | ||||||||||
| Sales incentives |
86.6 | 78.5 | 156.9 | 79.8 | 34.8 | ||||||||||
| Occupancy and equipment expenses |
57.5 | 80.3 | 117.9 | 83.0 | 77.9 | ||||||||||
| Other marketing expenses |
125.8 | 130.2 | 250.6 | 134.6 | 127.5 | ||||||||||
| Other servicing and administrative expenses |
163.6 | 220.6 | 336.1 | 228.0 | 268.6 | ||||||||||
| Support services from HSBC affiliates |
181.9 | - | 346.2 | - | - | ||||||||||
| Amortization of intangibles |
69.3 | 72.2 | 175.5 | 73.9 | 12.3 | ||||||||||
| Policyholders’ benefits |
59.0 | 78.5 | 137.0 | 80.9 | 71.1 | ||||||||||
| Total costs and expenses |
1,096.2 | 1,064.7 | 2,248.4 | 1,097.3 | 970.3 | ||||||||||
| Income before income tax expense |
657.9 | 585.3 | 1,495.9 | 600.9 | 701.3 | ||||||||||
| Income tax expense |
217.8 | 200.6 | 503.6 | 206.1 | 240.6 | ||||||||||
| Net income |
$ | 440.1 | $ | 384.7 | $ | 992.3 | $ | 394.8 | $ | 460.7 | |||||
The accompanying notes are an integral part of the consolidated financial statements.
3
CONSOLIDATED BALANCE SHEET
| June 30, 2004 |
December 31, 2003 | |||||
| (Successor) | (Successor) | |||||
| (in millions, except share data) | ||||||
| Assets |
||||||
| Cash |
$ | 89.4 | $ | 395.0 | ||
| Securities |
6,387.8 | 10,545.0 | ||||
| Receivables, net |
87,508.5 | 81,239.1 | ||||
| Intangible assets, net |
2,451.8 | 2,627.3 | ||||
| Goodwill |
2,326.9 | 2,107.7 | ||||
| Properties and equipment, net |
361.8 | 391.6 | ||||
| Real estate owned |
620.7 | 626.6 | ||||
| Derivative financial assets |
2,088.8 | 2,939.7 | ||||
| Other assets |
1,985.0 | 2,087.9 | ||||
| Total assets |
$ | 103,820.7 | $ | 102,959.9 | ||
| Liabilities |
||||||
| Debt: |
||||||
| Commercial paper, bank and other borrowings |
$ | 10,018.0 | $ | 7,983.8 | ||
| Due to affiliates |
1,556.9 | 2,101.7 | ||||
| Senior and senior subordinated debt (with original |
73,047.4 | 74,597.6 | ||||
| Total debt |
84,622.3 | 84,683.1 | ||||
| Insurance policy and claim reserves |
1,145.1 | 1,127.0 | ||||
| Derivative related liabilities |
458.2 | 549.7 | ||||
| Other liabilities |
2,699.6 | 2,872.6 | ||||
| Total liabilities |
88,925.2 | 89,232.4 | ||||
| Shareholder’s equity |
||||||
| Common shareholder’s equity: |
||||||
| Common stock ($1.00 par value, 1,000 shares authorized, issued and outstanding) and additional paid-in capital |
12,016.1 | 12,016.1 | ||||
| Retained earnings |
2,441.7 | 1,449.4 | ||||
| Accumulated other comprehensive income |
437.7 | 262.0 | ||||
| Total common shareholder’s equity |
14,895.5 | 13,727.5 | ||||
| Total liabilities and shareholder’s equity |
$ | 103,820.7 | $ | 102,959.9 | ||
The accompanying notes are an integral part of the consolidated financial statements.
4
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY
| Six months ended June 30, 2004 |
March 29 June 30, 2003 |
January 1 March 28, 2003 |
||||||||||
| (in millions) | ||||||||||||
| Common shareholder’s equity |
||||||||||||
| Common stock and additional paid-in capital |
||||||||||||
| Balance at beginning of period |
$ | 12,016.1 | $ | 12,016.1 | $ | 3,790.8 | ||||||
| Effect of push-down accounting of HSBC’s purchase price on net assets |
- | - | 8,225.3 | |||||||||
| Balance at end of period (successor) |
$ | 12,016.1 | $ | 12,016.1 | $ | 12,016.1 | ||||||
| Retained earnings |
||||||||||||
| Balance at beginning of period |
$ | 1,449.4 | $ | - | $ | 6,642.4 | ||||||
| Net income |
992.3 | 394.8 | 460.7 | |||||||||
| Effect of push-down accounting of HSBC’s purchase price on net assets |
- | - | (7,103.1 | ) | ||||||||
| Balance at end of period (successor) |
$ | 2,441.7 | $ | 394.8 | $ | - | ||||||
| Accumulated other comprehensive income |
||||||||||||
| Balance at beginning of period |
$ | 262.0 | $ | - | $ | (391.7 | ) | |||||
| Net change in unrealized gains (losses) on: |
||||||||||||
| Derivatives classified as cash flow hedges |
185.6 | (7.5 | ) | 110.6 | ||||||||
| Securities available for sale and interest-only strip receivables |
(6.7 | ) | 140.6 | (30.7 | ) | |||||||
| Foreign currency translation adjustment |
(3.2 | ) | 6.4 | 2.5 | ||||||||
| Other comprehensive income, net of tax |
175.7 | 139.5 | 82.4 | |||||||||
| Effect of push-down accounting of HSBC’s purchase price on net assets |
- | - | 309.3 | |||||||||
| Balance at end of period (successor) |
$ | 437.7 | $ | 139.5 | $ | - | ||||||
| Total common shareholder’s equity |
$ | 14,895.5 | $ | 12,550.4 | $ | 12,016.1 | ||||||
| Comprehensive income |
||||||||||||
| Net income |
$ | 992.3 | $ | 394.8 | $ | 460.7 | ||||||
| Other comprehensive income |
175.7 | 139.5 | 82.4 | |||||||||
| Comprehensive income </ | ||||||||||||