Household 8-K DEC 03
HSBC Holdings PLC
01 March 2004
"The following is a Current Report on Form 8-K containing selected
financial information for the quarter and year ended 31 December 2003 filed with
the United States Securities and Exchange Commission by Household International,
Inc., a subsidiary of HSBC Holdings plc. Copies of the Form 8-K are available on
Household International, Inc.'s website at www.Household.com and on the
SEC website at www.sec.gov."
FORM 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: March 1, 2004
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8198 86-1052062
-------------------- -------------------- -------------------
(State of incorporation) (Commission (IRS Employer
File Number) Identification Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 564-5000
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Registrant's telephone number, including area code
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
99 Quarterly Financial Supplement for the quarter ended December 31, 2003.
Item 12. Results of Operations and Financial Condition
Financial supplement pertaining to the financial results of Household
International, Inc., for the quarter and twelve months ended December 31, 2003.
The information shall not be deemed "filed" for the purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise
incorporated by reference into any filing pursuant to the Securities Act of
1933, as amended, or the Exchange Act except as otherwise expressly stated in
such a filing.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
(Registrant)
By: /s/ Patrick D. Schwartz
Patrick D. Schwartz
Vice President-General Counsel Treasury
and Corporate Law
Dated: March 1, 2004
Quarterly Financial Supplement - December 31, 2003
On March 28, 2003, HSBC Holdings plc ("HSBC") acquired Household
International, Inc. ("Household"). In accordance with the guidelines for
accounting for business combinations, the purchase price paid by HSBC plus
related purchase accounting adjustments have been "pushed-down" and recorded
in our financial statements for periods subsequent to March 28, 2003. This
has resulted in a new basis of accounting reflecting the fair market value of
our assets and liabilities for the "successor" period beginning March 29,
2003. Information for all "predecessor" periods prior to the merger are
presented using our historical basis of accounting, which impacts
comparability to our "successor" periods. To assist in the comparability of
our financial results and make it easier to understand our results of
operations, this Quarterly Financial Supplement combines the "predecessor
period" (January 1 to March 28, 2003) with the "successor period" (March 29
to December 31, 2003) to present "combined" results for the twelve months
ended December 31, 2003.
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). In
addition to GAAP financial results, this Quarterly Financial Supplement
includes references to the following information which is presented on a
non-GAAP basis:
Operating results, percentages and ratios Certain percentages and ratios have
been presented on an operating basis and have been calculated using
"operating net income", a non-GAAP financial measure. "Operating net income"
is net income excluding certain nonrecurring items. These nonrecurring items
are also excluded in calculating our "normalized" efficiency ratios. We
believe that excluding these nonrecurring items helps readers of our
financial statements to better understand the results and trends of our
underlying business.
A reconciliation of net income to operating net income follows:
Three Months Ended Twelve Months Ended
---------------------------------------------------- --------------------------------
($ millions) 12/31/03 9/30/03 12/31/02 12/31/03 12/31/02
-------------------------- -------------- -------------- -------------- -------------- -------------
Net income $ 574.3 $ 471.5 $ 338.2 $ 1,665.2 $ 1,557.8
HSBC acquisition related - - - 167.3 -
costs and other merger
related items incurred by
Household, after-tax
Settlement charge and - - - - 333.2
related expenses,
after-tax
Loss on disposition of - - 240.0 - 240.0
Thrift assets and
deposits, after-tax
--------- --------- --------- --------- ---------
Operating net income $ 574.3 $ 471.5 $ 578.2 $ 1,832.5 $ 2,131.0
--------- --------- --------- --------- ---------
Net income during 2003 was positively impacted by purchase accounting
adjustments and by the discontinuation of the shortcut method of accounting for
our interest rate swaps under SFAS No. 133, both which were the result of the
HSBC merger. Amortization of purchase accounting adjustments increased net
income by $34.1 million for the three months ended December 31, 2003, $32.1
million for the three months ended September 30, 2003, and $109.5 million for
the twelve months ended December 31, 2003. The loss of the shortcut method of
accounting for our interest rate swaps also increased net income by $3.7 million
for the three months ended September 30, 2003, and $51.0 million for the twelve
months ended December 31, 2003. We have restructured our interest rate swap
portfolio to regain use of the shortcut method of accounting and to reduce the
potential volatility of future earnings.
Quarterly Financial Supplement - December 31, 2003
Managed basis reporting We monitor our operations and evaluate trends on a
managed basis (a non-GAAP financial measure), which assumes that securitized
receivables have not been sold and are still on our balance sheet. We manage and
evaluate our operations on a managed basis because the receivables that we
securitize are subjected to underwriting standards comparable to our owned
portfolio, are serviced by operating personnel without regard to ownership and
result in a similar credit loss exposure for us. In addition, we fund our
operations, review our operating results, and make decisions about allocating
resources such as employees and capital on a managed basis.
When reporting on a managed basis, net interest margin, provision for credit
losses and fee income related to receivables securitized are reclassified from
securitization revenue in our owned statements of income into the appropriate
caption. Additionally, charge-off and delinquency associated with these
receivables are included in our managed basis credit quality statistics.
Debt analysts, rating agencies and others also evaluate our operations on a
managed basis for the reasons discussed above and have historically requested
managed basis information from us. We believe that managed basis information
enables investors and other interested parties to better understand the
performance and quality of our entire managed loan portfolio and is important to
understanding the quality of originations and the related credit risk inherent
in our owned portfolio.
Equity Ratios Tangible shareholder's(s') equity to tangible managed assets
("TETMA"), tangible shareholder's(s') equity plus owned loss reserves to
tangible managed assets ("TETMA + Owned Reserves") and tangible common equity
to tangible managed assets are non-GAAP financial measures that are used by
Household management or certain rating agencies to evaluate capital adequacy.
These ratios may differ from similarly named measures presented by other
companies. The most directly comparable GAAP financial measure is common and
preferred equity to owned assets.
We also monitor our equity ratios excluding the impact of purchase accounting
adjustments. We do so because we believe that the purchase accounting
adjustments represent non-cash transactions which do not affect our business
operations, cash flows or ability to meet our debt obligations.
Preferred securities issued by certain non-consolidated trusts are considered
equity in the TETMA and TETMA + Owned Reserves calculations because of their
long-term subordinated nature and the ability to defer dividends. Our
Adjustable Conversion-Rate Equity Security Units, which exclude purchase
accounting adjustments, are also considered equity in these calculations
because they include obligations to purchase HSBC ordinary shares in 2006.
See pages 16 to 22 for quantitative reconciliations of non-GAAP financial
information to the equivalent owned basis GAAP financial information.
2
Household International, Inc.
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Quarterly Financial Supplement - December 31, 2003
Index Page
----------------------------------------------------------------------------- No.
------
Quarterly Highlights 4
Year-to-Date Highlights 5
Consolidated Statements of Income - Owned Basis:
Three Months 6
Twelve Months 7
Credit Quality/Credit Loss Reserves - Owned Basis 8
Balance Sheet Data 9
Receivables Analysis 10
Supplemental Managed Basis Information:
Revenues, Average Interest-Earning Assets and Net Interest Margin 12
Credit Quality/Credit Loss Reserves - Managed Basis 14
Restructuring Statistics 15
Reconciliation to GAAP Financial Measures:
Selected Financial Ratios 16
Revenues, Average Interest-Earning Assets and Net Interest Margin 17
Credit Quality/Credit Loss Reserves:
Two-Months-and-Over Contractual Delinquency and Quarter-to-Date Charge-offs, 18
Net of Recoveries
Real Estate Charge-offs and REO Expense 20
Credit Loss Reserves 20
Nonperforming Assets 21
Equity Ratios 22
3
Household International, Inc.
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Quarterly Highlights
Summary Owned Income Three Months Ended % Change from Prior
Statement ------------------------------------------------ -------------------------------
($ millions) 12/31/03 9/30/03 12/31/02 Qtr. Year
------------------------ -------------- -------------- ------------ -------------- -------------
Net interest margin and $ 3,055.6 $ 2,965.2 $ 2,922.9 3.0 % 4.5 %
other revenues,
excluding loss on
disposition of Thrift
assets and deposits
Loss on disposition of - - 378.2 - (100.0 )
Thrift assets and
deposits
Provision for credit 916.7 1,001.3 985.1 (8.4 ) (6.9 )
losses on owned
receivables
Costs and expenses 1,268.8 1,252.7 1,111.6 1.3 14.1
--------- --------- ------- --------- ---------
Income before income 870.1 711.2 448.0 22.3 94.2
taxes
Income taxes 295.8 239.7 109.8 23.4 100+
--------- --------- ------- --------- ---------
Net income $ 574.3 $ 471.5 $ 338.2 21.8 % 69.8 %
--------- --------- ------- --------- ---------
Operating net income (1) $ 574.3 $ 471.5 $ 578.2 21.8 % (.7 )
%
--------- --------- ------- --------- ---------
Selected Financial
Ratios
Owned Basis:
Return on average common 13.9 % 11.8 % 13.9 % 17.8 % -
shareholder's(s') equity
Return on average owned 1.95 1.68 1.33 16.1 46.6 %
assets
Efficiency ratio 39.8 40.3 41.5 (1.2 ) (4.1 )
Net interest margin 8.14 8.41 7.42 (3.2 ) 9.7
Common and preferred 14.82 14.66 10.64 1.1 39.2
equity to owned assets
--------- --------- ------- --------- ---------
Managed Basis: (1)
Return on average 1.62 % 1.39 % 1.07 % 16.5 % 51.4 %
managed assets
Efficiency ratio 31.1 35.2 33.8 (11.6 ) (8.0 )
Net interest margin 8.78 9.12 8.28 (3.7 ) 6.0
Tangible equity to 7.08 6.79 9.08 4.3 (22.0 )
tangible managed assets
("TETMA") (2)
Tangible equity plus 9.94 9.76 11.87 1.8 (16.3 )
owned loss reserves to
tangible managed assets
("TETMA + Owned
Reserves") (2)
Tangible common equity 5.08 4.71 6.83 7.9 (25.6 )
to tangible managed
assets (2)
--------- --------- ------- --------- ---------
Excluding Nonrecurring
Items: (1)
Owned Basis:
Return on average common 13.9 % 11.8 % 24.4 % 17.8 % (43.0 )%
shareholder's(s') equity
Return on average owned 1.95 1.68 2.27 16.1 (14.1 )
assets
Efficiency ratio, 39.8 40.3 35.9 (1.2 ) 10.9
normalized
Managed Basis:
Return on average 1.62 1.39 1.84 16.5 (12.0 )
managed assets
Efficiency ratio, 31.1 35.2 30.0 (11.6 ) 3.7
normalized
--------- --------- ------- --------- ---------
(1) These non-GAAP financial measures are provided for comparison of our
operating trends and should be read in conjunction with our owned basis GAAP
financial information. Refer to pages one and two for a discussion of
non-GAAP financial information and pages 16 and 17 for quantitative
reconciliations to the equivalent GAAP basis financial measure.
(2) Represents a non-GAAP financial ratio that is used by Household
management or certain rating agencies to measure capital adequacy. The ratio
may differ from similarly named measures presented by other companies. Common
and preferred equity to owned assets is the most directly comparable GAAP
financial measure and is also presented in the table above. Excluding the
impact of "push-down" accounting on our assets and common shareholder's
equity, TETMA would have been 8.89 percent at December 31, 2003 and 8.80
percent at September 30, 2003, TETMA + Owned Reserves would have been 11.76
percent at December 31, 2003 and 11.79 percent at September 30, 2003 and
tangible common equity to tangible managed assets would have been 6.93
percent at December 31, 2003 and 6.76 percent at September 30, 2003. Refer to
pages one and two for a discussion of non-GAAP financial information and page
22 for quantitative reconciliations to the equivalent GAAP basis financial
measure.
4
Household International, Inc.
--------------------------------------------------------------------------------
Year-to-Date Highlights
Summary Owned Income Statement Twelve Months Ended
------------------------------------------
($ millions) 12/31/03 (1) 12/31/02 % Change
--------------------------------------------- ------------------ ------------------ ---------------
Net interest margin and other revenues, $ 11,730.0 $ 11,178.5 4.9 %
excluding loss on disposition of Thrift
assets and deposits
Loss on disposition of Thrift assets and - 378.2 100.0
deposits
Provision for credit losses on owned 3,966.9 3,732.0 6.3
receivables
Costs and expenses, excluding HSBC 4,992.5 4,290.5 16.4
acquisition related costs incurred by
Household and settlement charge and related
expenses
HSBC acquisition related costs incurred by 198.2 - 100.0
Household
Settlement charge and related expenses - 525.0 (100.0 )
--------- --------- ------
Income before income taxes 2,572.4 2,252.8 14.2
Income taxes 907.2 695.0 30.5
--------- --------- ------
Net income $ 1,665.2 $ 1,557.8 6.9 %
--------- --------- ------
Operating net income (2) $ 1,832.5 $ 2,131.0 (14.0 )%
--------- --------- ------
Selected Financial Ratios
Owned Basis:
Return on average common shareholder's(s') equity 11.4 % 17.3 % (34.1 )%
Return on average owned assets 1.51 1.62 (6.8 )
Efficiency ratio 42.4 42.6 (.5 )
Net interest margin 8.10 7.57 7.0
--------- --------- ------
Managed Basis: (2)
Return on average managed assets 1.24 % 1.31 % (5.3 )%
Efficiency ratio 35.3 36.0 (1.9 )
Net interest margin 8.86 8.47 4.6
--------- --------- ------
Excluding Nonrecurring Items: (2)
Owned Basis:
Return on average common shareholder's(s') equity 12.6 % 23.9 % (47.3 )%
Return on average owned assets 1.66 2.21 (24.9 )
Efficiency ratio, normalized 40.7 36.3 12.1
Managed Basis:
Return on average managed assets 1.36 1.80 (24.4 )
Efficiency ratio, normalized 33.9 30.8 10.1
--------- --------- ------
(1) To assist in the comparability of our financial results, the
"predecessor period" (January 1 to March 28, 2003) has been combined
with the "successor period" (March 29 to December 31, 2003) to
present "combined" results for the twelve months ended December 31,
2003. Refer to page one for additional information regarding the
"successor period" and "predecessor period".
(2) These non-GAAP financial measures are provided for comparison of our
operating trends and should be read in conjunction with our owned
basis GAAP financial information. Refer to pages one and two for a
discussion of non-GAAP financial information and pages 16 and 17 for
quantitative reconciliations to the equivalent GAAP basis financial
measure.
5
Household International, Inc.
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Consolidated Statements of Income - Owned Basis
Three Months
Three Months Ended % Change from Prior
-------------------------------------------------- ---------------------------------
($ millions) 12/31/03 9/30/03 12/31/02 Qtr. Year
-------------------------- -------------- -------------- ------------ -------------- --------------
Finance and other interest $ 2,637.8 $ 2,575.5 $ 2,669.1 2.4 % (1.2 )%
income
Interest expense 593.9 556.5 952.6 6.7 (37.7 )
--------- --------- ------- --------- ---------
Net interest margin 2,043.9 2,019.0 1,716.5 1.2 19.1
Provision for credit 916.7 1,001.3 985.1 (8.4 ) (6.9 )
losses on owned
receivables
--------- --------- ------- --------- ---------
Net interest margin after 1,127.2 1,017.7 731.4 10.8 54.1
provision for credit
losses
--------- --------- ------- --------- ---------
Securitization revenue 334.7 381.9 536.0 (12.4 ) (37.6 )
Insurance revenue 192.4 192.7 188.0 (.2 ) 2.3
Investment income 44.2 37.0 44.2 19.5 -
Fee income 314.0 299.5 279.9 4.8 12.2
Other income 126.4 35.1 158.3 100+ (20.2 )
Loss on disposition of - - (378.2 ) - 100.0
Thrift assets and deposits
--------- --------- ------- --------- ---------
Total other revenues 1,011.7 946.2 828.2 6.9 22.2
--------- --------- ------- --------- ---------
Salaries and fringe 507.4 493.3 462.1 2.9 9.8
benefits
Sales incentives 64.6 76.6 73.6 (15.7 ) (12.2 )
Occupancy and equipment 103.6 95.0 91.5 9.1 13.2
expenses
Other marketing expenses 141.3 128.1 121.7 10.3 16.1
Other servicing and 279.6 282.3 253.8 (1.0 ) 10.2
administrative expenses
Amortization of acquired 82.8 82.4 12.7 .5 100+
intangibles and goodwill
Policyholders' 89.5 95.0 96.2 (5.8 ) (7.0 )
benefits
--------- --------- ------- --------- ---------
Total costs and expenses 1,268.8 1,252.7 1,111.6 1.3 14.1
--------- --------- ------- --------- ---------
Income before income taxes 870.1 711.2 448.0 22.3 94.2
Income taxes 295.8 239.7 109.8 23.4 100+
--------- --------- ------- --------- ---------
Net income $ 574.3 $ 471.5 $ 338.2 21.8 % 69.8 %
--------- --------- ------- --------- ---------
Operating net income (1) $ 574.3 $ 471.5 $ 578.2 21.8 % (1 )%
--------- --------- ------- --------- ---------
(1) This non-GAAP financial measure is provided for comparison of
our operating trends and should be read in conjunction with our
owned basis GAAP financial information. Refer to page one for a
discussion of this non-GAAP financial measure and a quantitative
reconciliation to the equivalent GAAP basis financial measure.
Securitization Revenue (1)
Three Months Ended
-----------------------------------------------------------
($ millions) 12/31/03 9/30/03 12/31/02
---------------------------------- --------------- --------------- ---------------
Net initial gains $ 83.8 $ 24.5 $ 95.2
Net replenishment gains 138.7 138.3 139.8
Servicing revenue and excess 112.2 219.1 301.0
spread
----- ----- -----
Total $ 334.7 $ 381.9 $ 536.0
----- ----- -----
(1) Our interest-only strip receivables, net of the related loss
reserve and excluding the mark-to-market adjustment recorded in
accumulated other comprehensive income (loss), decreased $137.4
million in the quarter ended December 31, 2003, decreased $79.6
million in the quarter ended September 30, 2003, and increased
$29.3 million in the quarter ended December 31, 2002.
Receivables Securitized
Three Months Ended
----------------------------------------------------------------
($ millions) 12/31/03 9/30/03 12/31/02
-------------------------------- ------------------ ------------------ ----------------
Auto finance $ 515.9 - $ 952.6
MasterCard/Visa (1) - $ 350.0 184.0
Private label 1,000.0 - 857.2
Personal non-credit card 1,620.0 885.0 1,208.0
--------- --------- -------
Total $ 3,135.9 $ 1,235.0 $ 3,201.8
--------- --------- -------
(1) MasterCard and Visa are registered trademarks of MasterCard
International, Incorporated and VISA USA Inc., respectively.
6
Household International, Inc.
--------------------------------------------------------------------------------
Consolidated Statements of Income - Owned Basis
Twelve Months
Twelve Months Ended
------------------------------------------
($ millions) 12/31/03 (1) 12/31/02 % Change
---------------------------------------------- ------------------ ------------------ ---------------
Finance and other interest income $ 10,262.4 $ 10,525.6 (2.5 )%
Interest expense 2,621.2 3,871.3 (32.3 )
--------- --------- ------
Net interest margin 7,641.2 6,654.3 14.8
Provision for credit losses on owned 3,966.9 3,732.0 6.3
receivables
--------- --------- ------
Net interest margin after provision for credit 3,674.3 2,922.3 25.7
losses
--------- --------- ------
Securitization revenue 1,440.3 2,134.0 (32.5 )
Insurance revenue 745.7 716.4 4.1
Investment income 195.7 182.0 7.5
Fee income 1,170.3 948.4 23.4
Other income 536.8 543.4 (1.2 )
Loss on disposition of Thrift assets and - (378.2 ) 100.0
deposits
--------- --------- ------
Total other revenues 4,088.8 4,146.0 (1.4 )
--------- --------- ------
Salaries and fringe benefits 1,997.9 1,817.0 10.0
Sales incentives 263.5 255.9 3.0
Occupancy and equipment expenses 399.8 371.1 7.7
Other marketing expenses 548.1 531.0 3.2
Other servicing and administrative expenses 1,148.5 888.9 29.2
Amortization of acquired intangibles and 257.8 57.8 100+
goodwill
Policyholders' benefits 376.9 368.8 2.2
HSBC acquisition related costs incurred by 198.2 - 100.0
Household
Settlement charge and related expenses - 525.0 (100.0 )
--------- --------- ------
Total costs and expenses 5,190.7 4,815.5 7.8
--------- --------- ------
Income before income taxes 2,572.4 2,252.8 14.2
Income taxes 907.2 695.0 30.5
--------- --------- ------
Net income $ 1,665.2 $ 1,557.8 6.9 %
--------- --------- ------
Operating net income (2) $ 1,832.5 $ 2,131.0 (14.0 )%
--------- --------- ------
(1) To assist in the comparability of our financial results, the
"predecessor period" (January 1 to March 28, 2003) has been
combined with the "successor period" (March 29 to December 31,
2003) to present "combined" results for the twelve months ended
December 31, 2003. Refer to page one for additional information
regarding the "successor period" and "predecessor period".
(2) This non-GAAP financial measure is provided for comparison of
our operating trends and should be read in conjunction with our
owned basis GAAP financial information. Refer to page one for a
discussion of this non-GAAP financial measure and a quantitative
reconciliation to the equivalent GAAP basis financial measure.
Securitization Revenue(1)
Twelve Months Ended
-----------------------------------------
($ millions) 12/31/03 12/31/02
----------------------------------- ----------------- -----------------
Net initial gains $ 175.9 $ 322.0
Net replenishment gains 548.4 523.2
Servicing revenue and excess spread 716.0 1,288.8
------- -------
Total $ 1,440.3 $ 2,134.0
------- -------
(1) Our interest-only strip receivables, net of the related loss
reserve and excluding the mark-to-market adjustment recorded in
accumulated other comprehensive income (loss), decreased $451.2
million in the twelve months ended December 31, 2003 and
increased $139.0 million in the twelve months ended December 31,
2002.
Receivables Securitized
Twelve Months Ended
------------------------------------------
($ millions) 12/31/03 12/31/02
----------------------------------- ----------------- ------------------
Auto finance $ 1,523.0 $ 3,288.6
MasterCard/Visa 670.0 1,557.4
Private label 1,250.0 1,747.2
Personal non-credit card 3,320.0 3,560.7
------- --------
Total $ 6,763.0 $ 10,153.9
------- --------
7
Household International, Inc.
--------------------------------------------------------------------------------
Credit Quality/Credit Loss Reserves - Owned Basis
Two-Months-and-Over Contractual Delinquency
As a percent of owned consumer 12/31/03 9/30/03 12/31/02
receivables, excludes commercial. --------------- -------------- --------------
----------------------------------
Real estate secured 4.33 %(1) 4.20 % 3.91 %
Auto finance 2.51 2.14 3.96
MasterCard/Visa 5.76 5.99 5.97
Private label 5.42 5.59 6.36
Personal non-credit card 10.01 9.96 8.95
----- ---- ----
Total 5.36 %(1) 5.36 % 5.34 %
----- ---- ----
(1) On December 31, 2003, we sold $2.8 billion of our higher quality
non-conforming real estate secured receivables to HSBC Bank USA.
Excluding this sale, real estate secured delinquency would have been
4.11 percent and total delinquency would have been 5.21 percent.
Quarter-to-Date Charge-offs, Net of Recoveries
As a percent of average owned 12/31/03 9/30/03 12/31/02
consumer receivables, annualized, --------------- --------------- --------------
excludes commercial.
----------------------------------
Real estate secured .94 %(1) .91 % 1.10 %
Auto finance 3.36 (1) 4.62 8.50
MasterCard/Visa 8.55 8.61 9.02
Private label 5.05 5.35 6.35
Personal non-credit card 10.11 10.55 7.74
----- ----- ----
Total 3.75 %(1) 3.98 % 3.87 %
----- ----- ----
Real estate charge-offs and REO 1.37 % 1.35 % 1.47 %
expense as a percent of average
owned real estate secured
receivables
----- ----- ----
(1) In November 2003, we adopted FASB Staff Position Number 144-1,
"Determination of Cost Basis for Foreclosed Assets under FASB
Statement No. 15, and the Measurement of Cumulative Losses Previously
Recognized Under Paragraph 37 of FASB Statement No. 144" ("FSP
144-1"). Under FSP 144-1, sales commissions related to the sale of
foreclosed assets are recognized as a charge-off through the
provision for credit losses. Historically, we had recognized sales
commission expense as a component of other servicing and
administrative expenses in our statements of income. The adoption
increased real estate charge-offs by 7 basis points, auto finance
charge-offs by 12 basis points, and total consumer charge-offs by 4
basis points for the quarter ended December 31, 2003. The impact on
prior periods was not material.
Credit Loss Reserves
($ millions) 12/31/03 9/30/03 12/31/02
--------------------------------------------------- ----------------- ---------------- ----------------
Reserves for owned receivables at beginning of $ 3,779.2 $ 3,658.6 $ 3,127.3
quarter
Provision for credit losses 916.7 1,001.3 985.1
Charge-offs, net of recoveries (883.6 )(1) (898.8 ) (808.3 )
Other, net (19.2 ) 18.1 28.5
------- ------- -------
Reserves for owned receivables at end of quarter $ 3,793.1 $ 3,779.2 $ 3,332.6
------- ------- -------
Reserves as a percent of owned receivables 4.11 % 4.06 % 4.04 %
------- ------- -------
(1) In November 2003, we adopted FASB Staff Position Number 144-1,
"Determination of Cost Basis for Foreclosed Assets under FASB
Statement No. 15, and the Measurement of Cumulative Losses Previously
Recognized Under Paragraph 37 of FASB Statement No. 144" ("FSP
144-1"). Under FSP 144-1, sales commissions related to the sale of
foreclosed assets are recognized as a charge-off through the
provision for credit losses. Historically, we had recognized sales
commission expense as a component of other servicing and
administrative expenses in our statements of income. The adoption
increased total charge-offs by $10.3 million for the quarter ended
December 31, 2003. The impact on prior periods was not material.
8
Nonperforming Assets
($ millions) 12/31/03 9/30/03 12/31/02
-------------------------------- ----------------- ----------------- -----------------
Nonaccrual owned receivables $ 3,143.6 $ 3,197.1 $ 2,665.9
Accruing owned receivables 90 or 904.5 883.1 860.7
more days delinquent
Renegotiated commercial loans 1.6 1.5 1.3
------- ------- -------
Total nonperforming owned 4,049.7 4,081.7 3,527.9
receivables
Real estate owned 631.2 543.0 427.1
------- ------- -------
Total nonperforming assets $ 4,680.9 $ 4,624.7 $ 3,955.0
------- ------- -------
Owned credit loss reserves as a 93.7 % 92.6 % 94.5 %
percent of nonperforming owned
receivables
------- ------- -------
Balance Sheet Data
($ millions) 12/31/03 9/30/03 12/31/02
------------------------------ ------------------ ------------------ ------------------
Owned assets $ 119,153.9 $ 114,519.3 $ 97,860.6
Owned receivables 92,378.2 93,027.9 82,562.3
Investment securities (1) 11,073.1 6,947.5 7,584.0
Managed assets (2) 145,354.3 138,628.2 122,794.1
Managed receivables (2) 118,578.6 117,136.8 107,495.8
Debt (3) 96,407.6 92,797.4 82,700.7
Preferred stock 1,100.0 1,100.0 1,193.2
Common shareholder's(s') equity 16,560.3 15,692.0 9,222.9
--------- --------- ---------
(1) Includes amounts held in our credit card bank and other
liquidity-related portfolios as well as in our insurance business.
The unusually high balance at December 31, 2003 is the result of cash
received from the $2.8 billion real estate secured loan sale to HSBC
Bank USA on December 31, 2003 as well as excess liquidity.
(2) These non-GAAP financial measures are provided for comparison of our
operating trends and should be read in conjunction with our owned
basis GAAP financial information. Refer to page two for a discussion
of managed basis reporting and pages 20 to 22 for quantitative
reconciliations to the equivalent GAAP basis financial measure.
(3) Includes junior subordinated notes issued to Household Capital Trusts
of $1,061.4 million at December 31, 2003 and preferred securities of
Household Capital Trusts totaling $1,020.6 million at September 30,
2003 and $975.0 million at December 31, 2002.
9
Household International, Inc.
--------------------------------------------------------------------------------
Receivables Analysis
End-of-Period Receivables
% Change from Prior
--------------------------
($ millions) 12/31/03 9/30/03 12/31/02 Qtr. Year
---------------------------- ---------------- --------------- --------------- ------------ ---------
Owned receivables:
Real estate secured $ 51,221.0 (1) $ 52,768.9 $ 45,818.5 (2.9 )% 11.8 %
Auto finance 4,138.1 3,701.1 2,023.8 11.8 100+
MasterCard/Visa 11,182.0 9,892.1 8,946.5 13.0 25.0
Private label 12,603.8 12,406.6 11,339.6 1.6 11.1
Personal non-credit card 12,832.0 13,850.3 13,970.9 (7.4 ) (8.2)
Commercial and other 401.3 408.9 463.0 (1.9 ) (13.3)
--------- --------- --------- ----- -----
Total owned receivables 92,378.2 93,027.9 82,562.3 (.7 ) 11.9
--------- --------- --------- ----- -----
Purchase accounting fair 418.9 475.7 - (11.9 ) 100.0
value adjustments
Accrued finance charges 1,572.4 1,557.6 1,537.6 1.0 2.3
Credit loss reserve for (3,793.1 ) (3,779.2 ) (3,332.6 ) .4 13.8
owned receivables
Unearned credit insurance (702.6 ) (674.5 ) (799.0 ) 4.2 (12.1)
premiums and claims reserves
Interest-only strip 953.6 967.0 1,147.8 (1.4 ) (16.9)
receivables (2)
Amounts due and deferred 199.9 178.6 934.4 11.9 (78.6)
from receivables sales
--------- --------- --------- ----- -----
Total owned receivables, net 91,027.3 91,753.1 82,050.5 (.8 ) 10.9
--------- --------- --------- ----- -----
Receivables serviced with
limited recourse:
Real estate secured 193.6 214.0 456.2 (9.5 ) (57.6)
Auto finance 4,674.8 4,699.6 5,418.6 (.5 ) (13.7)
MasterCard/Visa 9,966.7 9,927.1 10,006.1 .4 (.4)
Private label 5,261.3 4,261.4 3,577.1 23.5 47.1
Personal non-credit card 6,104.0 5,006.8 5,475.5 21.9 11.5
--------- --------- --------- ----- -----
Total receivables serviced 26,200.4 24,108.9 24,933.5 8.7 5.1
with limited recourse
--------- --------- --------- ----- -----
Total managed receivables, $ 117,227.7 $ 115,862.0 $ 106,984.0 1.2 % 9.6 %
net (3)
--------- --------- --------- ----- -----
(1) On December 31, 2003, we sold $2.8 billion of our higher quality
non-conforming real estate secured receivables to HSBC Bank USA.
(2) Our estimate of the recourse obligation, which is netted in our
interest-only strip receivables, totaled $2,373.5 million at December
31, 2003, $1,954.0 million at September 30, 2003, and $1,759.5
million at December 31, 2002.
(3) This non-GAAP financial measure is provided for comparison of our
operating trends and should be read in conjunction with our owned
basis GAAP financial information. Refer to page two for a discussion
of managed basis reporting.
10
End-of-Period Managed Receivables (1)
% Change from Prior
--------------------------
($ millions) 12/31/03 9/30/03 12/31/02 Qtr. Year
---------------------------- ---------------- --------------- --------------- ----------- ----------
Real estate secured $ 51,414.6 (2) $ 52,982.9 $ 46,274.7 (3.0 )% 11.1 %
Auto finance 8,812.9 8,400.7 7,442.4 4.9 18.4
MasterCard/Visa 21,148.7 19,819.2 18,952.6 6.7 11.6
Private label 17,865.1 16,668.0 14,916.7 7.2 19.8
Personal non-credit card (3) 18,936.0 18,857.1 19,446.4 .4 (2.6 )
Commercial and other 401.3 408.9 463.0 (1.9 ) (13.3 )
--------- --------- --------- ---- -----
Managed portfolio $ 118,578.6 $ 117,136.8 $ 107,495.8 1.2 % 10.3 %
--------- --------- --------- ---- -----
Percent of managed portfolio 12/31/03 9/30/03 12/31/02
---------------------------------- --------------- --------------- ---------------
Real estate secured 43.4 % 45.2 % 43.0 %
Auto finance 7.4 7.2 6.9
MasterCard/Visa 17.8 16.9 17.6
Private label 15.1 14.2 13.9
Personal non-credit card 16.0 16.1 18.2
Commercial and other .3 .4 .4
----- ----- -----
Managed portfolio 100.0 % 100.0 % 100.0 %
----- ----- -----
(1) This non-GAAP financial measure is provided for comparison of our
trends and should be read in conjunction with our owned basis GAAP
financial information. Refer to page two for a discussion of managed
basis reporting.
(2) On December 31, 2003, we sold $2.8 billion of our higher quality
non-conforming real estate secured receivables to HSBC Bank USA.
(3) Personal non-credit card receivables are comprised of the following:
($ millions) 12/31/03 9/30/03 12/31/02
-------------------------------- ----------------- ----------------- -----------------
Domestic personal non-credit $ 9,966.3 $ 10,046.0 $ 10,156.1
card
Union Plus personal non-credit 713.8 755.4 1,095.4
card
Personal homeowner loans 4,638.8 4,692.0 5,131.7
Foreign non-credit card 3,617.1 3,363.7 3,063.2
-------- -------- --------
Total $ 18,936.0 $ 18,857.1 $ 19,446.4
-------- -------- --------
11
Household International, Inc.
--------------------------------------------------------------------------------
Supplemental Managed Basis Information
Revenues, Average Interest-Earning Assets and Net Interest Margin
Securitizations and sales of consumer receivables are a source of liquidity for
us. We continue to service the securitized receivables after such receivables
are sold and we retain a limited recourse obligation. Securitizations impact the
classification of revenues. When reporting on a managed basis, net interest
margin, provision for credit losses, and fee income related to receivables
securitized and sold are reclassified from securitization revenue in our owned
statements of income into the appropriate caption.
Three Months
Three Months Ended % Change from Prior
--------------------------------------------------------------------------------- ---------------
($ millions) 12/31/03 (1) 9/30/03 (1) 12/31/02 (1) Qtr. Year
------------------ ------------- --------- ------------- --------- ------------- --------- --------------
Finance and other $ 3,471.9 11.11 % $ 3,418.9 11.43 % $ 3,534.0 12.11 % 1.6 % (1.8)%
interest income
Interest expense 728.2 2.33 690.2 2.31 1,119.0 3.83 5.5 (34.9)
--------- --------- --------- --------- -------
Net interest 2,743.7 8.78 % 2,728.7 9.12 % 2,415.0 8.28 % .5 13.6
margin
Provision for 1,748.0 1,420.6 1,543.0 23.0 13.3
credit losses
--------- --------- --------- --------- -------
Net interest $ 995.7 $ 1,308.1 $ 872.0 (23.9 ) 14.2 %
margin after
provision for
credit losses
--------- --------- --------- --------- -------
Insurance revenue $ 192.4 $ 192.7 $ 188.0 (.2 ) 2.3 %
Investment income 44.2 37.0 44.2 19.5 -
Fee income 515.4 491.3 463.9 4.9 11.1
Securitization 264.8 (100.3 ) 211.4 100+ 25.3
revenue
Other income 126.4 35.1 158.3 100+ (20.2)
Loss on - - (378.2) - 100.0
disposition of
Thrift assets and
deposits
--------- --------- --------- --------- -------
Total other $ 1,143.2 $ 655.8 $ 687.6 74.3 % 66.3 %
revenues
--------- --------- --------- --------- -------
Average managed
receivables:
Real estate $ 53,844.9 $ 51,274.3 $ 48,669.9 5.0 % 10.6 %
secured
Auto finance 8,627.7 8,081.7 7,417.9 6.8 16.3
MasterCard/Visa 20,322.6 19,299.8 18,081.1 5.3 12.4
Private label 17,058.5 16,348.1 13,936.5 4.3 22.4
Personal 18,866.3 18,849.5 19,567.1 1 (3.6)
non-credit card
Commercial and 403.1 417.7 467.9 (3.5) (13.8)
other
Purchase 443.7 505.3 - (12.2) 100.0
accounting fair
value adjustments
--------- --------- --------- --------- -------
Total 119,566.8 114,776.4 108,140.4 4.2 10.6
Average 4,792.8 4,308.9 8,009.4 11.2 (40.2)
noninsurance
investments
Other 637.4 632.9 579.1 .7 10.1
interest-earning
assets
--------- --------- --------- --------- -------
Average managed $ 124,997.0 $ 119,718.2 $ 116,728.9 4.4 % 7.1 %
interest-earning
assets
--------- --------- --------- --------- -------
(1) % Columns: comparison to average managed interest-earning assets,
annualized.
12
Twelve Months
Twelve Months Ended
-----------------------------------------------------------------------
($ millions) 12/31/03(2) (1) 12/31/02 (1) % Change
---------------------------- ---------------- ------------ ---------------- ------------ -----------
Finance and other interest $ 13,682.0 11.55 % $ 13,883.0 12.59 % (1.4 )%
income
Interest expense 3,187.2 2.69 4,545.8 4.12 (29.9 )
--------- ----- --------- ----- -----
Net interest margin 10,494.8 8.86 % 9,337.2 8.47 % 12.4
Provision for credit losses 6,241.8 5,655.0 10.4
--------- --------- -----
Net interest margin after $ 4,253.0 $ 3,682.2 15.5 %
provision for credit losses
--------- --------- -----
Insurance revenue $ 745.7 $ 716.4 4.1 %
Investment income 195.7 182.0 7.5
Fee income 1,885.4 1,617.8 16.5
Securitization revenue 146.5 704.7 (79.2 )
Other income 536.8 543.4 (1.2 )
Loss on disposition of - (378.2 ) 100.0
Thrift assets and deposits
--------- --------- -----
Total other revenues $ 3,510.1 $ 3,386.1 3.7 %
--------- --------- -----
Average managed receivables:
Real estate secured $ 50,123.8 $ 47,829.8 4.8 %
Auto finance 7,918.5 6,942.0 14.1
MasterCard/Visa 19,271.9 17,246.2 11.7
Private label 16,015.6 13,615.1 17.6
Personal non-credit card 19,040.9 18,837.1 1.1
Commercial and other 430.4 483.1 (10.9 )
Purchase accounting fair 396.7 - 100.0
value adjustments
--------- --------- -----
Total 113,197.8 104,953.3 7.9
Average noninsurance 4,650.8 4,741.8 (1.9 )
investments
Other interest-earning 629.1 560.2 12.3
assets
--------- --------- -----
Average managed $ 118,477.7 $ 110,255.3 7.5 %
interest-earning assets
--------- --------- -----
(1) % Columns: comparison to average managed interest-earning assets,
annualized.
(2) To assist in the comparability of our financial results, the "predecessor
period" (January 1 to March 28, 2003) has been combined with the "successor
period" (March 29 to December 31, 2003) to present "combined" results for
the twelve months ended December 31, 2003. Refer to page one for additional
information regarding the "successor period" and "predecessor period".
13
Household International, Inc.
--------------------------------------------------------------------------------
Supplemental Managed Basis Information
Credit Quality/Credit Loss Reserves - Managed Basis
Two-Months-and-Over Contractual Delinquency
As a percent of managed consumer receivables, excludes 12/31/03 9/30/03 12/31/02
commercial.
------------------------------------------------------ --------------- --------------- --------------
Real estate secured 4.35 %(1) 4.23 % 3.94 %
Auto finance 3.84 3.82 3.65
MasterCard/Visa 4.16 4.29 4.12
Private label 4.94 5.24 6.03
Personal non-credit card 10.69 10.42 9.41
----- ----- ----
Total 5.39 %(1) 5.36 % 5.24 %
----- ----- ----
------------
(1) On December 31, 2003, we sold $2.8 billion of our higher quality
non-conforming real estate secured receivables to HSBC Bank USA. Excluding
this sale, real estate secured delinquency would have been 4.13 percent and
total delinquency would have been 5.26 percent.
Quarter-to-Date Charge-offs, Net of Recoveries
As a percent of average managed consumer receivables, 12/31/03 9/30/03 12/31/02
annualized, excludes commercial.
------------------------------------------------------ --------------- --------------- --------------
Real estate secured .94 %(1) .91 % 1.11 %
Auto finance 6.27 (1) 7.08 7.62
MasterCard/Visa 7.03 7.12 6.98
Private label 4.95 5.46 5.91
Personal non-credit card 10.05 10.72 7.84
----- ----- ----
Total 4.39 %(1) 4.68 % 4.39 %
----- ----- ----
Real estate charge-offs and REO expense as a percent 1.37 % 1.36 % 1.48 %
of average managed real estate secured receivables
----- ----- ----
(1) In November 2003, we adopted FASB Staff Position Number 144-1,
"Determination of Cost Basis for Foreclosed Assets under FASB Statement No.
15, and the Measurement of Cumulative Losses Previously Recognized Under
Paragraph 37 of FASB Statement No. 144" ("FSP 144-1"). Under FSP 144-1,
sales commissions related to the sale of foreclosed assets are recognized
as a charge-off through the provision for credit losses. Historically, we
had recognized sales commission expense as a component of other servicing
and administrative expenses in our statements of income. The adoption
increased real estate charge-offs by 6 basis points, auto finance
charge-offs by 7 basis points, and total consumer charge-offs by 3 basis
points for the quarter ended December 31, 2003. The impact on prior periods
was not material.
Credit Loss Reserves
($ millions) 12/31/03 9/30/03 12/31/02
-------------------------------------------------- ------------------ ----------------- -----------------
Reserves for managed receivables at beginning of $ 5,733.2 $ 5,638.9 $ 4,688.8
quarter
Provision for credit losses 1,748.0 1,420.6 1,543.0
Charge-offs, net of recoveries (1,304.1 )(1) (1,334.3 ) (1,181.0 )
Other, net (10.5 ) 8.0 41.3
-------- -------- --------
Reserves for managed receivables at end of quarter $ 6,166.6 $ 5,733.2 $ 5,092.1
-------- -------- --------
Reserves as a percent of managed receivables 5.20 % 4.89 % 4.74 %
-------- -------- --------
(1) In November 2003, we adopted FASB Staff Position Number 144-1,
"Determination of Cost Basis for Foreclosed Assets under FASB Statement No.
15, and the Measurement of Cumulative Losses Previously Recognized Under
Paragraph 37 of FASB Statement No. 144" ("FSP 144-1"). Under FSP 144-1,
sales commissions related to the sale of foreclosed assets are recognized
as a charge-off through the provision for credit losses. Historically, we
had recognized sales commission expense as a component of other servicing
and administrative expenses in our statements of income. The adoption
increased total charge-offs $10.7 million for the quarter ended December
31, 2003. The impact on prior periods was not material.
Nonperforming Assets
($ millions) 12/31/03 9/30/03 12/31/02
--------------------------------------------------- ---------------- ---------------- ----------------
Nonaccrual managed receivables $ 4,009.2 $ 3,943.8 $ 3,347.2
Accruing managed receivables 90 or more days 1,215.1 1,187.8 1,173.5
delinquent
Renegotiated commercial loans 1.6 1.5 1.3
------- ------- -------
Total nonperforming managed receivables 5,225.9 5,133.1 4,522.0
Real estate owned 631.2 543.0 427.1
------- ------- -------
Total nonperforming assets $ 5,857.1 $ 5,676.1 $ 4,949.1
------- ------- -------
Managed credit loss reserves as a percent of 118.0 % 111.7 % 112.6 %
nonperforming managed receivables
------- ------- -------
14
Household International, Inc.
--------------------------------------------------------------------------------
Supplemental Managed Basis Information
Restructuring Statistics
Our policies and practices for the collection of consumer receivables, including
our account management policies and practices, permit us to reset the
contractual delinquency status of an account to current, based on indicia or
criteria which, in our judgment, evidence continued payment probability. Such
policies and practices vary by product and are designed to manage customer
relationships, maximize collection opportunities and avoid foreclosure or
repossession if reasonably possible.
As discussed in our Form 10-K for the year ended December 31, 2003, we
implemented certain changes to our restructuring policies in 2003. These changes
are intended to eliminate and/or streamline exception provisions to our existing
policies and are generally effective for receivables originated or acquired
after January 1, 2003. Receivables originated or acquired prior to January 1,
2003 generally are not subject to the revised restructure and customer account
management policies. However, for ease of administration, in the third quarter
of 2003 our mortgage services business elected to adopt uniform policies for all
products regardless of the date an account was originated or acquired.
Implementation of the uniform policy by mortgage services has the effect of only
counting restructures occurring on or after January 1, 2003 in assessing
restructure eligibility for purposes of the limitation that no account may be
restructured more than four times in a rolling 60 month period. Resetting these
counters will not impact the ability of mortgage services to report historical
restructure statistics. Other business units may also elect to adopt uniform
policies. We do not expect the changes to have a significant impact on our
business model or on our results of operations as these changes will generally
be phased in as new receivables are originated or acquired.
The tables below summarize approximate restructuring statistics in our managed
basis domestic portfolio. We manage our restructuring statistics on a managed
basis only because the receivables that we securitize are subject to
underwriting standards comparable to our owned portfolio, are serviced and
collected without regard to ownership and result in a similar credit loss
exposure for us. Our restructure statistics are compiled using certain
assumptions and estimates and we continue to enhance our ability to capture
restructure data across all business units. When comparing restructuring
statistics from different periods the fact that our restructure policies and
practices will change over time, that exceptions are made to those policies and
practices, and that our data capture methodologies will be enhanced over time,
should be taken into account. Further, to the best of our knowledge, most of our
competitors do not disclose account restructuring, reaging, loan rewriting,
forbearance, modification, deferment or extended payment information comparable
to the information we have disclosed, and the lack of such disclosure by other
lenders may limit the ability to draw meaningful conclusions about us and our
business based solely on data or information regarding account restructuring
statistics or policies.
Total Restructured by Restructure Period - Domestic Portfolio (1)
(Managed Basis)
12/31/03 9/30/03 12/31/02
--------------- --------------- ---------------
Never restructured 84.4 % 84.2 % 84.4 %
Restructured:
Restructured in the last 6 months 6.7 7.3 6.5
Restructured in the last 7-12 months 3.8 3.5 4.1
Previously restructured beyond 12 months 5.1 5.0 5.0
----- ----- -----
Total ever restructured (2) 15.6 15.8 15.6
----- ----- -----
Total 100.0 % 100.0 % 100.0 %
----- ----- -----
Total Restructured by Product - Domestic Portfolio (1) (Managed Basis)
($ millions) 12/31/03 9/30/03 12/31/02
------------------------------- ------------------------- ------------------------- ------------------------
Real estate secured $ 9,548.5 19.4 % $ 9,531.5 18.7 % $ 8,473.2 19.0%
Auto finance 1,295.5 14.7 1,268.5 15.1 1,242.9 16.7
MasterCard/Visa 583.7 3.1 578.1 3.3 540.8 3.2
Private label 1,064.6 7.1 1,090.7 7.7 1,255.4 9.7
Personal non-credit card 4,074.9 26.6 4,136.4 26.7 3,768.1 23.0
-------- ---- -------- ---- -------- ----
Total (2) $ 16,567.2 15.6 % $ 16,605.2 15.8 % $ 15,280.4 15.6%
-------- ---- -------- ---- -------- ----
(1) Excludes foreign businesses, commercial and other. Amounts also include
accounts as to which the delinquency status has been reset to current for
reasons other than restructuring (e.g. correcting the misapplication of a
timely payment).
(2) Total including foreign businesses was 14.7% at 12/31/03, 14.9% at 9/30/03,
and 14.8% at 12/31/02.
The amount of domestic and foreign managed receivables in forbearance,
modification, credit card services approved consumer credit counseling
accommodations, rewrites or other account management techniques for which we
have reset delinquency and that is not included in the restructured or
delinquency statistics was approximately $1.0 billion or 0.9 percent of managed
receivables at December 31, 2003, $1.1 billion or 0.9 percent of managed
receivables at September 30, 2003 and approximately $900 million or 0.8 percent
of managed receivables at December 31, 2002.
15
Household International, Inc.
--------------------------------------------------------------------------------
Reconciliations to GAAP Financial Measures
Selected Financial Ratios
Three Months Ended Twelve Months Ended
---------------------------------------------------- --------------------------------
($ millions) 12/31/03 9/30/03 12/31/02 12/31/03 12/31/02
-------------------------- -------------- -------------- -------------- -------------- -------------
Return on Average Common
Shareholder's(s')
Equity:
Net income $ 574.3 $ 471.5 $ 338.2 $ 1,665.2 $ 1,557.8
Dividends on preferred (17.9 ) (17.8 ) (22.2 ) (76.4 ) (62.8 )
stock
--------- --------- --------- --------- ---------
Net income available to $ 556.4 $ 453.7 $ 316.0 $ 1,588.8 $ 1,495.0
common shareholders
HSBC acquisition related - - - 167.3 -
costs and other merger
related items incurred by
Household
Settlement charge and - - - - 333.2
related expenses
Loss on the disposition of - - 240.0 - 240.0
Thrift assets and deposits
--------- --------- --------- --------- ---------
Operating net income $ 556.4 $ 453.7 $ 556.0 $ 1,756.1 $ 2,068.2
available to common
shareholders
--------- --------- --------- --------- ---------
Average common shareholder's(s')
equity $ 16,050.5 $ 15,433.9 $ 9,113.8 $ 13,961.9 $ 8,640.5
--------- --------- --------- --------- ---------
Return on average common
shareholder's(s') equity 13.9 % 11.8 % 13.9 % 11.4 % 17.3 %
Return on average common 13.9 11.8 24.4 12.6 23.9
shareholder's(s') equity,
operating basis
--------- --------- --------- --------- ---------
Return on Average Assets:
Net income $ 574.3 $ 471.5 $ 338.2 $ 1,665.2 $ 1,557.8
Operating net income 574.3 471.5 578.2 1,832.5 2,131.0
--------- --------- --------- --------- ---------
Average assets:
Owned basis $ 117,659.5 $ 112,095.2 $ 101,725.6 $ 110,139.1 $ 96,303.6
Serviced with limited 24,568.0 23,719.3 24,234.7 24,130.6 22,371.3
recourse
--------- --------- --------- --------- ---------
Managed basis $ 142,227.5 $ 135,814.5 $ 125,960.3 $ 134,269.7 $ 118,674.9
--------- --------- --------- --------- ---------
Return on average owned 1.95 % 1.68 % 1.33 % 1.51 % 1.62 %
assets
Return on average owned 1.95 1.68 2.27 1.66 2.21
assets, operating basis
Return on average managed 1.62 1.39 1.07 1.24 1.31
assets
Return on average managed 1.62 1.39 1.84 1.36 1.80
assets, operating basis
--------- --------- --------- --------- ---------
Efficiency Ratio:
Total costs and expenses $ 1,179.3 $ 1,157.7 $ 1,015.4 $ 4,813.8 $ 4,446.7
less policyholders' benefits
HSBC acquisition related - - - (198.2 ) -
costs and other merger
related items incurred by
Household
Settlement charge and - - - - (525.0 )
related expenses
--------- --------- --------- --------- ---------
Total costs and expenses $ 1,179.3 $ 1,157.7 $ 1,015.4 $ 4,615.6 $ 3,921.7
less policyholders' benefits,
excluding nonrecurring
items
--------- --------- --------- --------- ---------
Net interest margin and
other revenues less
policyholders'
benefits:
Owned basis $ 2,966.1 $ 2,870.2 $ 2,448.5 $ 11,353.1 $ 10,431.5
Serviced with limited 831.3 419.3 557.8 2,274.9 1,923.0
recourse
--------- --------- --------- --------- ---------
Managed basis $ 3,797.4 $ 3,289.5 $ 3,006.3 $ 13,628.0 $ 12,354.5
--------- --------- --------- --------- ---------
Loss on disposition of - - $ 378.2 - $ 378.2
Thrift assets and deposits
Net interest margin and
other revenues less
policyholders'
benefits, excluding
nonrecurring items:
Owned basis $ 2,966.1 $ 2,870.2 2,826.7 $ 11,353.1 10,809.7
Serviced with limited 831.3 419.3 557.8 2,274.9 1,923.0
recourse
--------- --------- --------- --------- ---------
Managed basis $ 3,797.4 $ 3,289.5 $ 3,384.5 $ 13,628.0 $ 12,732.7
--------- --------- --------- --------- ---------
Owned basis efficiency 39.8 % 40.3 % 41.5 % 42.4 % 42.6 %
ratio
Owned basis efficiency 39.8 40.3 35.9 40.7 36.3
ratio, operating basis
Managed basis efficiency 31.1 35.2 33.8 35.3 36.0
ratio
Managed basis efficiency 31.1 35.2 30.0 33.9 30.8
ratio, operating basis
--------- --------- --------- --------- ---------
16
Household International, Inc.
--------------------------------------------------------------------------------
Reconciliations to GAAP Financial Measures
Revenues, Average Interest-Earning Assets and Net Interest Margin
----------------------------------------------------------------------------------------------------------
Three Months Ended 12/31/03 Three Months Ended 9/30/03 Three Months Ended 12/31/02
----------------------------------------------------------------------------------------------------------
Serviced with Serviced with Serviced with
Limited Limited Limited
Owned Recourse Managed Owned Recourse Managed Owned Recourse Managed
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
($ millions)
Finance and $ 2,637.8 $ 834.1 $ 3,471.9 $ 2,575.5 $ 843.4 $ 3,418.9 $ 2,669.1 $ 864.9 $ 3,534.0
other interest
income
Interest expense 593.9 134.3 728.2 556.5 133.7 690.2 952.6 166.4 1,119.0
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Net interest 2,043.9 699.8 2,743.7 2,019.0 709.7 2,728.7 1,716.5 698.5 2,415.0
margin
Provision for 916.7 831.3 1,748.0 1,001.3 419.3 1,420.6 985.1 557.9 1,543.0
credit losses
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Net interest $ 1,127.2 $ (131.5 ) $ 995.7 $ 1,017.7 $ 290.4 $ 1,308.1 $ 731.4 $ 140.6 $ 872.0
margin after
provision for
credit losses
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Securitization $ 334.7 $ (69.9 ) $ 264.8 $ 381.9 $ (482.2 ) $ (100.3 ) $ 536.0 $ (324.6 ) $ 211.4
revenue
Insurance 192.4 - 192.4 192.7 - 192.7 188.0 - 188.0
revenue
Investment 44.2 - 44.2 37.0 - 37.0 44.2 - 44.2
income
Fee income 314.0 201.4 515.4 299.5 191.8 491.3 279.9 184.0 463.9
Other income 126.4 - 126.4 35.1 - 35.1 158.3 - 158.3
Loss on - - - - - - (378.2 ) - (378.2)
disposition of
Thrift assets
and deposits
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Total other $ 1,011.7 $ 131.5 $ 1,143.2 $ 946.2 $ (290.4 ) $ 655.8 $ 828.2 $ (140.6 ) $ 687.6
revenues
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Average $ 94,998.8 $ 24,568.0 $ 119,566.8 $ 91,057.1 $23,719.3 $ 114,776.4 $ 83,905.7 $24,234.7 $ 108,140.4
receivables
Average 4,792.8 - 4,792.8 4,308.9 - 4,308.9 8,009.4 - 8,009.4
noninsurance
investments
Other 637.4 - 637.4 632.9 - 632.9 579.1 - 579.1
interest-earning
assets
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Average $ 100,429.0 $ 24,568.0 $ 124,997.0 $ 95,998.9 $23,719.3 $ 119,718.2 $ 92,494.2 $ 24,234.7 $ 116,728.9
interest-earning
assets
---------- --------- ----------- ----------- --------- ----------- ---------- --------- ----------
Net interest 8.14 % 11.39 % 8.78 % 8.41 % 11.97 % 9.12 % 7.42 % 11.53 % 8.28%
margin as a
percentage of
average
interest-earning
assets
----------------------------------------------------------------------------------------------------------
Twelve Months Ended 12/31/03 Twelve Months Ended 12/31/02
----------------------------------------------- ----------------------------------------
Serviced with Serviced with
Limited Limited
Owned Recourse Managed Owned Recourse Managed
--------- ----------- ----------- ----------- ---------- ----------
($ millions)
Finance and other $ 10,262.4 $ 3,419.6 $ 13,682.0 $ 10,525.6 $ 3,357.8 $ 13,883.4
interest income
Interest expense 2,621.2 566.0 3,187.2 3,871.3 674.9 4,546.2
--------- ----------- ----------- ----------- ---------- ----------
Net interest margin 7,641.2 2,853.6 10,494.8 6,654.3 2,682.9 9,337.2
Provision for credit 3,966.9 2,274.9 6,241.8 3,732.0 1,923.0 5,655.0
losses
--------- ----------- ----------- ----------- ---------- ----------
Net interest margin after$ 3,674.3 $ 578.7 $ 4,253.0 $ 2,922.3 $ 759.9 $ 3,682.2
provision for credit
losses
--------- ----------- ----------- ----------- ---------- ----------
Securitization revenue $ 1,440.3 $ (1,293.8 ) $ 146.5 $ 2,134.0 $ (1,429.3 ) $ 704.7
Insurance revenue 745.7 - 745.7 716.4 - 716.4
Investment income 195.7 - 195.7 182.0 - 182.0
Fee income 1,170.3 715.1 1,885.4 948.4 669.4 1,617.8
Other income 536.8 - 536.8 543.4 - 543.4
Loss on disposition of - - - (378.2 ) - (378.2)
Thrift assets and
deposits
--------- ----------- ----------- ----------- ---------- ----------
Total other revenues $ 4,088.8 $ (578.7 ) $ 3,510.1 $ 4,146.0 $ (759.9 ) $ 3,386.1
--------- ----------- ----------- ----------- ---------- ----------
Average receivables $ 89,067.2 $ 24,130.6 $ 113,197.8 $ 82,582.0 $ 22,371.3 $ 104,953.3
Average noninsurance 4,650.8 - 4,650.8 4,741.8 - 4,741.8
investments
Other interest-earning 629.1 - 629.1 560.2 - 560.2
assets
--------- ----------- ----------- ----------- ---------- ----------
Average interest-earning $ 94,347.1 $ 24,130.6 $ 118,477.7 $ 87,884.0 $ 22,371.3 $ 110,255.3
assets
--------- ----------- ----------- ----------- ---------- ----------
Net interest margin as a 8.10 % 11.83 % 8.86 % 7.57 % 11.99 % 8.47%
percentage of average
interest-earning assets
--------- ----------- ----------- ----------- ---------- ----------
17
Household International, Inc.
--------------------------------------------------------------------------------
Reconciliations to GAAP Financial Measures
Credit Quality/Credit Loss Reserves
Two-Months-and-Over Quarter-to-Date Charge-offs,
Contractual Delinquency Net of Recoveries
------------------------------------------- -----------------------------------------
Two-Months- Two-Months-
and-Over Consumer and-Over Average
Contractual Receivables Contractual Net Charge- Consumer Net
Charge-
Delinquency Outstanding Delinquency offs Receivables offs
----------- ------------- ----------- ----------- ------------- ---------
($ millions)
December 31, 2003
Owned:
First mortgage(1) $ 3.2 $ 35.0 9.14 % $ .1 $ 35.4 1.13 %
Real estate secured 2,216.9 51,221.0 4.33 126.3 53,642.1 .94
Auto finance 104.0 4,138.1 2.51 33.3 3,961.1 3.36
MasterCard/Visa 643.7 11,182.0 5.76 221.9 10,379.1 8.55
Private label 683.7 12,603.8 5.42 158.6 12,563.8 5.05
Personal non-credit card 1,284.6 12,832.0 10.01 343.9 13,605.8 10.11
------- --------- ----- ------- --------- -----
Total consumer $ 4,936.1 $ 92,011.9 5.36 % $ 884.1 $ 94,187.3 3.75 %
------- --------- ----- ------- --------- -----
Serviced with Limited
Recourse:
Real estate secured $ 21.4 $ 193.6 11.05 % $ .8 $ 202.8 1.58 %
Auto finance 234.4 4,674.8 5.01 102.0 4,666.6 8.74
MasterCard/Visa 236.8 9,966.7 2.38 135.1 9,943.5 5.43
Private label 199.3 5,261.3 3.79 52.4 4,494.7 4.66
Personal non-credit card 740.0 6,104.0 12.12 130.2 5,260.5 9.90
------- --------- ----- ------- --------- -----
Total $ 1,431.9 $ 26,200.4 5.47 % $ 420.5 $ 24,568.1 6.85 %
------- --------- ----- ------- --------- -----
Managed:
First mortgage(1) $ 3.2 $ 35.0 9.14 % $ .1 $ 35.4 1.13 %
Real estate secured 2,238.3 51,414.6 4.35 127.1 53,844.9 .94
Auto finance 338.4 8,812.9 3.84 135.3 8,627.7 6.27
MasterCard/Visa 880.5 21,148.7 4.16 357.0 20,322.6 7.03
Private label 883.0 17,865.1 4.94 211.0 17,058.5 4.95
Personal non-credit card 2,024.6 18,936.0 10.69 474.1 18,866.3 10.05
------- --------- ----- ------- --------- -----
Total consumer $ 6,368.0 $ 118,212.3 5.39 % $ 1,304.6 $ 118,755.4 4.39 %
------- --------- ----- ------- --------- -----
(1) Includes our liquidating legacy first and reverse mortgage portfolios
September 30, 2003
Owned:
First mortgage(1) $ 4.3 $ 36.9 11.65 % $ .1 $ 37.9 1.06 %
Real estate secured 2,216.7 52,768.9 4.20 116.0 51,047.2 .91
Auto finance 79.3 3,701.1 2.14 36.0 3,113.0 4.62
MasterCard/Visa 592.9 9,892.1 5.99 208.7 9,697.3 8.61
Private label 693.2 12,406.6 5.59 161.8 12,106.7 5.35
Personal non-credit card 1,379.1 13,850.3 9.96 373.9 14,169.9 10.55
------- --------- ----- ------- --------- -----
Total consumer $ 4,965.5 $ 92,655.9 5.36 % $ 896.5 $ 90,172.0 3.98 %
------- --------- ----- ------- --------- -----
Serviced with Limited
Recourse:
Real estate secured $ 25.0 $ 214.0 11.68 % $ 1.1 $ 227.1 1.94 %
Auto finance 241.8 4,699.6 5.15 107.0 4,968.7 8.61
MasterCard/Visa 256.7 9,927.1 2.59 134.7 9,602.5 5.61
Private label 179.4 4,261.4 4.21 61.4 4,241.4 5.79
Personal non-credit card 586.1 5,006.8 11.71 131.3 4,679.6 11.22
------- --------- ----- ------- --------- -----
Total $ 1,289.0 $ 24,108.9 5.35 % $ 435.5 $ 23,719.3 7.34 %
------- --------- ----- ------- --------- -----
Managed:
First mortgage(1) $ 4.3 $ 36.9 11.65 % $ .1 $ 37.9 1.06 %
Real estate secured 2,241.7 52,982.9 4.23 117.1 51,274.3 .91
Auto finance 321.1 8,400.7 3.82 143.0 8,081.7 7.08
MasterCard/Visa 849.6 19,819.2 4.29 343.4 19,299.8 7.12
Private label 872.6 16,668.0 5.24 223.2 16,348.1 5.46
Personal non-credit card 1,965.2 18,857.1 10.42 505.2 18,849.5 10.72
------- --------- ----- ------- --------- -----
Total consumer $ 6,254.5 $ 116,764.8 5.36 % $ 1,332.0 $ 113,891.3 4.68 %
------- --------- ----- ------- --------- -----
(1) Includes our liquidating legacy first and reverse mortgage portfolios
18
Two-Months-and-Over Quarter-to-Date Charge-offs,
Contractual Delinquency Net of Recoveries
----------------------------------------------- -------------------------------------
Two-Months- Two-Months-
and-Over Consumer and-Over Average
Contractual Receivables Contractual Net Charge- Consumer Net Charge-
Delinquency Outstanding Delinquency offs Receivables offs
----------- ----------- ---------- ----------- ----------- -----------
December 31, 2002
Owned:
First mortgage(1) $ 4.3 $ 44.3 9.71 % $ .1 $ 46.8 .85%
Real estate secured 1,793.5 45,818.5 3.91 132.5 48,187.6 1.10
Auto finance 80.1 2,023.8 3.96 46.8 2,204.7 8.50
MasterCard/Visa 534.5 8,946.5 5.97 183.0 8,115.3 9.02
Private label 721.4 11,339.6 6.36 167.8 10,565.6 6.35
Personal non-credit card 1,250.5 13,970.9 8.95 278.1 14,364.6 7.74
----------- ----------- ---------- ----------- ----------- -----------
Total consumer $ 4,384.3 $ 82,143.6 5.34 % $ 808.3 $ 83,484.6 3.87 %
----------- ----------- ---------- ----------- ----------- -----------
Serviced with Limited
Recourse:
Real estate secured $ 31.1 $ 456.2 6.82 % $ 2.0 $ 482.3 1.66 %
Auto finance 191.8 5,418.6 3.54 94.6 5,213.2 7.26
MasterCard/Visa 246.6 10,006.1 2.46 132.5 9,965.8 5.32
Private label 177.4 3,577.1 4.96 38.0 3,370.9 4.51
Personal non-credit card 580.2 5,475.5 10.60 105.6 5,202.5 8.12
----------- ----------- ---------- ----------- ----------- -----------
Total $ 1,227.1 $ 24,933.5 4.92 % $ 372.7 $ 24,234.7 6.15 %
----------- ----------- ---------- ----------- ----------- -----------
Managed:
First mortgage(1) $ 4.3 $ 44.3 9.71 % $ .1 $ 46.8 .85 %
Real estate secured 1,824.6 46,274.7 3.94 134.5 48,669.9 1.11
Auto finance 271.9 7,442.4 3.65 141.4 7,417.9 7.62
MasterCard/Visa 781.1 18,952.6 4.12 315.5 18,081.1 6.98
Private label 898.8 14,916.7 6.03 205.8 13,936.5 5.91
Personal non-credit card 1,830.7 19,446.4 9.41 383.7 19,567.1 7.84
----------- ----------- ---------- ----------- ----------- -----------
Total consumer $ 5,611.4 $ 107,077.1 5.24 % $ 1,181.0 $ 107,719.3 4.39 %
----------- ----------- ---------- ----------- ----------- -----------
(1) Includes our liquidating legacy first and reverse mortgage portfolios
19
Household International, Inc.
--------------------------------------------------------------------------------
Reconciliations to GAAP Financial Measures
Credit Quality/Credit Loss Reserves (Continued)
Serviced with
Limited Managed
($ millions) Owned Recourse
---------------------------------------- ---------------- --------------- -----------------
Real Estate Charge-offs and REO Expense:
Three months ended December 31, 2003
Real estate charge-offs and REO expense $ 183.3 $ .8 $ 184.1
Average real estate secured receivables 53,642.1 202.8 53,844.9
-------- -------- ---------
Real estate charge-offs and REO expense 1.37 % 1.58 % 1.37 %
as a percentage of average real estate
secured receivables
-------- -------- ---------
Three months ended September 30, 2003
Real estate charge-offs and REO expense $ 172.8 $ 1.1 $ 173.9
Average real estate secured receivables 51,047.2 227.1 51,274.3
-------- -------- ---------
Real estate charge-offs and REO expense 1.35 % 1.94 % 1.36 %
as a percentage of average real estate
secured receivables
-------- -------- ---------
Three months ended December 31, 2002
Real estate charge-offs and REO expense $ 177.5 $ 2.0 $ 179.5
Average real estate secured receivables 48,187.6 482.3 48,669.9
-------- -------- ---------
Real estate charge-offs and REO expense 1.47 % 1.66 % 1.48 %
as a percentage of average real estate
secured receivables
-------- -------- ---------
Credit Loss Reserves:
Three months ended December 31, 2003
Reserves for receivables at beginning of $ 3,779.2 $ 1,954.0 $ 5,733.2
quarter
Provision for credit losses 916.7 831.3 1,748.0
Charge-offs, net of recoveries (883.6 ) (420.5 ) (1,304.1 )
Other, net (19.2 ) 8.7 (10.5 )
-------- -------- ---------
Reserves for receivables at end of $ 3,793.1 $ 2,373.5 $ 6,166.6
quarter
-------- -------- ---------
Receivables $ 92,378.2 $ 26,200.4 $ 118,578.6
Credit loss reserves as a percent of 4.11 % 9.06 % 5.20 %
receivables
-------- -------- ---------
Three months ended September 30, 2003
Reserves for receivables at beginning of $ 3,658.6 $ 1,980.3 $ 5,638.9
quarter
Provision for credit losses 1,001.3 419.3 1,420.6
Charge-offs, net of recoveries (898.8 ) (435.5 ) (1,334.3 )
Other, net 18.1 (10.1 ) 8.0
-------- -------- ---------
Reserves for receivables at end of $ 3,779.2 $ 1,954.0 $ 5,733.2
quarter
-------- -------- ---------
Receivables $ 93,027.9 $ 24,108.9 $ 117,136.8
Credit loss reserves as a percent of 4.06 % 8.10 % 4.89 %
receivables
-------- -------- ---------
Three months ended December 31, 2002
Reserves for receivables at beginning of $ 3,127.3 $ 1,561.5 $ 4,688.8
quarter
Provision for credit losses 985.1 557.9 1,543.0
Charge-offs, net of recoveries (808.3 ) (372.7 ) (1,181.0 )
Other, net 28.5 12.8 41.3
-------- -------- ---------
Reserves for receivables at end of $ 3,332.6 $ 1,759.5 $ 5,092.1
quarter
-------- -------- ---------
Receivables $ 82,562.3 $ 24,933.5 $ 107,495.8
Credit loss reserves as a percent of 4.04 % 7.06 % 4.74 %
receivables
-------- -------- ---------
20
Serviced with
($ millions) Owned Limited Recourse Managed
----------------------------------------- --------------- ----------------- ---------------
Nonperforming Assets:
December 31, 2003
Nonaccrual receivables $ 3,143.6 $ 865.6 $ 4,009.2
Accruing receivables 90 or more days 904.5 310.6 1,215.1
delinquent
Renegotiated commercial loans 1.6 - 1.6
------- --------- -------
Total nonperforming receivables 4,049.7 1,176.2 5,225.9
Real estate owned 631.2 - 631.2
------- --------- -------
Total nonperforming assets $ 4,680.9 $ 1,176.2 $ 5,857.1
------- --------- -------
Credit loss reserves as a percent of 93.7 % - 118.0 %
nonperforming receivables
------- --------- -------
September 30, 2003
Nonaccrual receivables $ 3,197.1 $ 746.7 $ 3,943.8
Accruing receivables 90 or more days 883.1 304.7 1,187.8
delinquent
Renegotiated commercial loans 1.5 - 1.5
------- --------- -------
Total nonperforming receivables 4,081.7 1,051.4 5,133.1
Real estate owned 543.0 - 543.0
------- --------- -------
Total nonperforming assets $ 4,624.7 $ 1,051.4 $ 5,676.1
------- --------- -------
Credit loss reserves as a percent of 92.6 % - 111.7 %
nonperforming receivables
------- --------- -------
December 31, 2002
Nonaccrual receivables $ 2,665.9 $ 681.3 $ 3,347.2
Accruing receivables 90 or more days 860.7 312.8 1,173.5
delinquent
Renegotiated commercial loans 1.3 - 1.3
------- --------- -------
Total nonperforming receivables 3,527.9 994.1 4,522.0
Real estate owned 427.1 - 427.1
------- --------- -------
Total nonperforming assets $ 3,955.0 $ 994.1 $ 4,949.1
------- --------- -------
Credit loss reserves as a percent of 94.5 % - 112.6 %
nonperforming receivables
------- --------- -------
21
Household International, Inc.
--------------------------------------------------------------------------------
Reconciliations to GAAP Financial Measures
Equity Ratios
12/31/03 9/30/03 12/31/02
----------------- ----------------- -----------------
($ millions)
Tangible common equity:
Common shareholder's(s') $ 16,560.3 $ 15,692.0 $ 9,222.9
equity
Exclude:
Unrealized (gains) losses on cash flow (97.4 ) (46.3 ) 736.5
hedging instruments
Minimum pension liability - - 30.5
Unrealized gains on investments and (167.0 ) (113.4 ) (319.3 )
interest-only strip receivables
Acquired intangibles (2,855.8 ) (2,917.9 ) (386.4 )
Goodwill (6,697.0 ) (6,629.5 ) (1,122.1 )
--------- --------- ---------
Tangible common equity 6,743.1 5,984.9 8,162.1
Purchase accounting adjustments 2,426.4 2,563.5 -
--------- --------- ---------
Tangible common equity, excluding purchase $ 9,169.5 $ 8,548.4 $ 8,162.1
accounting adjustments
--------- --------- ---------
Tangible shareholder's(s')
equity:
Tangible common equity $ 6,743.1 $ 5,984.9 $ 8,162.1
Preferred stock 1,100.0 1,100.0 1,193.2
Mandatorily redeemable preferred 1,031.2 1,020.6 975.0
securities of Household Capital Trusts
Adjustable Conversion-Rate Equity Security 519.1 511.0 511.0
Units
--------- --------- ---------
Tangible shareholder's(s') 9,393.4 8,616.5 10,841.3
equity
Purchase accounting adjustments 2,370.2 2,517.9 -
--------- --------- ---------
Tangible shareholder's(s') $ 11,763.6 $ 11,134.4 $ 10,841.3
equity, excluding purchase accounting
adjustments
--------- --------- ---------
Tangible shareholder's(s')
equity plus owned loss reserves:
Tangible shareholder's(s') $ 9,393.4 $ 8,616.5 $ 10,841.3
equity
Owned loss reserves 3,793.1 3,779.2 3,332.6
--------- --------- ---------
Tangible shareholder's(s') 13,186.5 12,395.7 14,173.9
equity plus owned loss reserves
Purchase accounting adjustments 2,370.2 2,517.9 -
--------- --------- ---------
Tangible shareholder's(s') $ 15,556.7 $ 14,913.6 $ 14,173.9
equity plus owned loss reserves, excluding
purchase accounting adjustments
--------- --------- ---------
Tangible managed assets:
Owned assets $ 119,153.9 $ 114,519.3 $ 97,860.6
Receivables serviced with limited recourse 26,200.4 24,108.9 24,933.5
--------- --------- ---------
Managed assets 145,354.3 138,628.2 122,794.1
Exclude:
Acquired intangibles (2,855.8 ) (2,917.9 ) (386.4 )
Goodwill (6,697.0 ) (6,629.5 ) (1,122.1 )
Derivative financial assets (3,117.7 ) (2,094.5 ) (1,863.5 )
--------- --------- ---------
Tangible managed assets 132,683.8 126,986.3 119,422.1
Purchase accounting adjustments (431.2 ) (471.3 ) -
--------- --------- ---------
Tangible managed assets, excluding $ 132,252.6 $ 126,515.0 $ 119,422.1
purchase accounting adjustments
--------- --------- ---------
Equity ratios:
Common and preferred equity to owned 14.82 % 14.66 % 10.64 %
assets
Tangible common equity to tangible managed 5.08 4.71 6.83
assets
Tangible shareholder's(s') 7.08 6.79 9.08
equity to tangible managed assets
Tangible shareholder's(s') 9.94 9.76 11.87
equity plus owned loss reserves to
tangible managed assets
Excluding purchase accounting adjustments:
Tangible common equity to tangible managed 6.93 6.76 6.83
assets
Tangible shareholder's(s') 8.89 8.80 9.08
equity to tangible managed assets
Tangible shareholder's(s') 11.76 11.79 11.87
equity plus owned loss reserves to
tangible managed assets
--------- --------- ---------
22
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