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, 1994. Unless the context otherwise requires, reference to First Capital or Associates includes each parent company and all its subsidiaries.
At December 31, 1994, First Capital had 1,473 branch offices in the United States and employed approximately 13,700 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, 1994, 77% of the gross outstanding balance of residential real estate-secured receivables was secured by first mortgages. At December 31, 1994, the gross consumer finance receivables included credit card receivables ($4.0 billion) owned or originated by Associates National Bank (Delaware), a subsidiary of First Capital.
The interest rates currently earned on all types of consumer finance receivables average approximately 17% simple interest per annum. At December 31, 1994, 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 89% 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 149 months and original maturities of other consumer receivables, excluding credit card and manufactured housing receivables, average 33 months. Original maturities of manufactured housing receivables average 217 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 and machinery used in various manufacturing and distribution processes. 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, 1994, the interest rates charged on approximately 14% 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 earned on all types of commercial finance receivables average approximately 9% simple interest per annum. Original maturities of the commercial receivables average 46 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 for the periods indicated:
Gross Volume of Finance Receivables Purchased and Loans Made
Commercial Finance Consumer Finance Heavy-Duty Residential Installment, Truck and Real Estate- MHO and Industrial Secured Credit Card Equipment Total Receivables Receivables Receivables Gross (a) (a) (b) Volume (Dollar Amounts in Millions)
Year Ended December 31 1994 $6,283.3 $12,568.2 $12,274.7 $31,126.2 20% 40% 40% 100% 1993 $4,518.2 $ 9,381.6 $ 9,955.1 $23,854.9 19% 39% 42% 100% 1992 $4,479.9 $ 6,939.6 $ 7,329.6 $18,749.1 24% 37% 39% 100% 1991 $5,193.8 $ 6,671.8 $ 6,697.3 $18,562.9 28% 36% 36% 100% 1990 $1,946.1 $ 5,153.0 $ 5,904.3 $13,003.4 15% 40% 45% 100%
(a) Included in 1994 are $60.8 million of warehouse loan facilities purchased from First Collateral Services, Inc. and $416.0 million of credit card receivables purchased from Amoco Oil Company ("Amoco"). Included in 1993 are $182.2 million of gross residential real estate- secured and installment finance receivables attributable to the acquisition of Allied Finance Company and $215.9 million of credit card receivables purchased from Great Western Financial Corporation. Included in 1992 are $304.5 million of gross residential real estate- secured and installment finance receivables purchased from Signal Financial Corporation and $795.4 million of gross residential real estate-secured and installment finance receivables attributable to the acquisition of First Family Financial Services H.C., Inc. Included in 1991 are $2.7 billion of gross residential real estate-secured receivables and contracts for the purchase of manufactured housing purchased from Ford Motor Credit Company ("Ford Credit") and $336.5 million of gross installment finance receivables attributable to the acquisition of Kentucky Finance Co., Inc. Included in 1990 are $605.7 million in gross residential real estate-secured receivables and installment finance receivables attributable to the acquisition of Mellon Financial Services Corporation. (b) Included in 1993 are $596.9 million of gross heavy-duty truck and truck trailer finance receivables purchased from Mack Financial Corporation. Included in 1992 are $56.7 million of gross industrial equipment finance receivables attributable to the acquisition of Trans-National Leasing, Inc. Included in 1991 are $930.9 million of gross industrial equipment finance receivables attributable to the acquisition of Chase Manhattan Leasing Company (Michigan), Inc. (renamed "Clark Credit").
Average Size and Number of Accounts Based on Gross Finance Receivables Volume
Consumer Finance Commercial Finance Residential Installment, Heavy-Duty Truck Real Estate- MHO and and Industrial Secured Credit Card Equipment Receivables Receivables Receivables (b)
Year Ended December 31 1994 Average Size $46,283 $ 975 $51,447 Number of Accounts 135,757 12,889,405(a) 122,542 1993 Average Size $46,659 $1,527 $48,216 Number of Accounts 96,833 6,141,881 113,766 1992 Average Size $42,489 $1,511 $41,191 Number of Accounts 105,436 4,594,106 105,533 1991 Average Size $44,253 $1,588 $30,094 Number of Accounts 117,365 4,201,643 140,962 1990 Average Size $36,020 $1,647 $44,308 Number of Accounts 54,029 3,129,480 80,197
(a) Includes 4.9 million accounts pertaining to the credit card receivables purchased from Amoco, which accounts had lower average balances than the remaining Associates receivables. (b) Excludes wholesale receivables.
During the year ended December 31, 1994, 25% 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 $10,150 and the average additional advance was $3,589.
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 1994 $12,002.7 $12,064.4 $10,878.4 $34,945.5 34% 35% 31% 100% 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%
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 1994 Average Size $38,690 $1,528 $35,884 Number of Accounts 310,230 7,894,845* 303,157 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
* Includes 3.1 million accounts pertaining to the credit card receivables purchased from Amoco.
The Company has geographically dispersed finance receivables portfolios as further described in NOTE 3 to the consolidated financial statements. The ten largest customer accounts at December 31, 1994, other than accounts with affiliates (as described in NOTE 14 to the consolidated financial statements), represented 0.9% of the total gross finance receivables outstanding. Of such ten accounts (all of which were current at December 31, 1994), four were secured by truck leasing arrangements, three were secured by construction equipment, one was secured by a manufacturer's endorsement and related to communications equipment, one was secured by manufactured housing and one was secured by auto leasing arrangements. At December 31, 1994, the largest gross balance outstanding in such accounts was $54.4 million and the average gross balance was $30.5 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 1994 1993 1992 1991 1990
NET CREDIT LOSSES Consumer Finance Amount $455.9 $371.3 $382.9 $354.2 $254.2 % of Average Net Receivables 2.33% 2.19% 2.64% 2.84% 3.06% % of Receivables Liquidated 3.09 3.41 4.57 5.65 5.51
Commercial Finance Amount $ 8.4 $ 22.4 $ 41.8 $ 34.6 $ 23.4 % of Average Net Receivables .09% .30% .64% .60% .44% % of Receivables Liquidated .08 .26 .61 .61 .41
Total Net Credit Losses Amount $464.3 $393.7 $424.7 $388.8 $277.6 % of Average Net Receivables 1.62% 1.61% 2.02% 2.13% 2.03% % of Receivables Liquidated 1.84 2.03 2.80 3.24 2.69
ALLOWANCE FOR LOSSES Balance at End of Period $944.3 $808.9 $699.2 $590.9 $449.7 % of Net Receivables 3.03% 3.07% 3.06% 2.93% 3.02%
The Company maintains an allowance for losses on finance receivables at an amount which it believes is sufficient to provide adequate protection against future losses in the portfolios. The allowance is determined principally on the basis of historical loss experience, and reflects management's judgment of additional loss potential considering future economic conditions and the nature and characteristics of the finance receivables. 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. Collateral held for resale is not considered significant to total assets.
Finance receivables are charged to the allowance for losses when they are deemed to be uncollectible. Additionally, Company policy generally provides for charge-off of various types of accounts on a contractual basis (described below). Consumer direct and other installment and credit card receivables are charged to the allowance for losses when they become 180 days 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 one year delinquent. A delinquent account is one on which the customer has not made payments as contractually agreed. Extensions are granted on receivables from customers with satisfactory credit and with prior approval of management. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected. The following table shows total gross balances contractually delinquent 60 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 and 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, 1994, 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.
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 1994 1993 1992 1991 1990
Automobile Physical Damage $118.6 $ 97.6 $ 79.9 $ 69.2 $ 86.8 Fire and Extended Coverage 50.1 41.3 27.8 15.8 31.2 Other Casualty Coverage 35.5 20.1 25.0 23.6 17.0 Total Net Premiums Written $204.2 $159.0 $132.7 $108.6 $135.0
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):
Year Ended or at December 31 1994 1993 1992 1991 1990
Premium Income $ 136.1 $ 111.4 $ 92.6 $ 83.5 $ 79.7 Life Insurance in Force 8,306.3 7,133.9 6,110.4 5,533.6 4,770.4
The following table summarizes the revenue of the insurance operation from all lines of business for the years indicated (in millions):
Year Ended December 31 1994 1993 1992 1991 1990
Premium Revenue* $293.5 $242.2 $209.9 $202.5 $212.7 Investment Income 44.9 38.4 41.5 53.3 58.4 Total Revenue $338.4 $280.6 $251.4 $255.8 $271.1
* Includes compensation for insurance programs underwritten by other companies.
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, in the past 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, a Utah industrial loan company, 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, 1994 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 $273.0 million and $226.0 million were paid during the years ended December 31, 1994 and 1993, 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, 1994. 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): Year Ended or at December 31 (a) 1994 1993 1992 1991 1990
Consolidated Statement of Earnings Information Revenue $ 4,405.3 $ 3,705.6 $ 3,346.6 $ 3,187.1 $ 2,725.5 Interest Expense 1,558.2 1,340.5 1,281.4 1,347.8 1,217.3 Provision for Losses on Finance Receivables 577.5 476.1 512.6 434.2 309.6 Earnings Before Provision for Income Taxes 888.0 751.8 606.4 540.4 448.0 Net Earnings (b) 548.1 470.1 382.8 347.3 287.8 Ratio of Earnings to Fixed Charges (c) 1.57 1.56 1.47 1.40 1.37
Consolidated Balance Sheet Information Finance Receivables Consumer Finance $24,067.1 $20,495.8 $17,942.6 $15,334.7 $10,136.6 Commercial Finance 10,878.4 9,077.2 7,672.0 7,209.7 6,310.2 Total Receivables 34,945.5 29,573.0 25,614.6 22,544.4 16,446.8 Unearned Finance Income 3,769.5 3,208.2 2,781.0 2,395.5 1,574.4 Allowance for Losses on Finance Receivables 944.3 808.9 699.2 590.9 449.7 Total Assets 32,247.0 27,695.6 24,034.3 21,551.3 16,880.5 Notes Payable 12,211.9 10,208.2 8,919.6 8,327.6 6,186.3 Long-term Debt 15,654.1 13,600.8 11,870.4 10,223.4 8,392.8 Stockholder's Equity 2,959.9 2,506.4 2,062.0 1,868.1 1,375.1
(a) During 1994, 1993 and 1992, the Company acquired gross finance receivables approximating $0.5 billion, $1.0 billion and $1.2 billion, respectively. See NOTE 3 to the consolidated financial statements. During 1991 and 1990, the Company acquired gross finance receivables approximating $4.0 billion and $0.6 billion, respectively. (b) 1992 is net of a $10.4 million charge representing the cumulative effect of changes in accounting principles. (c) For purposes of computing the Ratio of Earnings to Fixed Charges, "Earnings" represent earnings before provision for income taxes and cumulative effect of changes in accounting principles, plus fixed charges. "Fixed Charges" represent interest expense and a portion of rentals representative of an implicit interest factor for such rentals.
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, 1994 increased $699.7 million (19%), compared with the year ended December 31, 1993. The components of the increase were as follows:
Finance charges increased $621.9 million (19%), primarily caused by an increase in average net finance receivables outstanding, and to a lesser extent, an increase in average revenue rates. Average net finance receivables outstanding were $28.6 billion and $24.4 billion for the years ended December 31, 1994 and 1993, respectively, a 17% increase. Total net finance receivables increased by approximately $4.8 billion (18%) from December 31, 1993 to December 31, 1994. Of the total growth, 29% was in the residential real estate-secured portfolio, 22% was in the direct installment and credit card portfolios, 16% was in the manufactured housing and other portfolios, 12% was in the heavy-duty truck portfolio and 21% was in the industrial equipment portfolio. The growth was primarily generated from internal sources, but included the acquisitions of net finance receivables of Amoco Oil Company ($416 million) in September 1994 and First Collateral Services, Inc. ($61 million) in December 1994, as described in NOTE 3 to the consolidated financial statements. The average revenue rates on aggregate net receivables were 13.6% and 13.4% for the years ended December 31, 1994 and 1993, respectively.
Insurance premiums increased $51.3 million (21%) as a result of increased sales of insurance products, primarily in the credit life, credit accident and health, and casualty insurance products.
Investment and other income increased $26.5 million (14%), primarily due to an increase in fee-based financial services revenue (i.e. auto club fees, broker fees, affiliate guarantee fees, etc.), and an increase in interest income, primarily from investments in marketable securities due to a general increase in market rates. In June 1994, the Company sold its investment in mortgage servicing rights. The effect of this sale on future earnings of the Company will not be significant. Fees from mortgage servicing have been included as a component of investment and other income.
EXPENSES - Total expenses for the year ended December 31, 1994 increased $563.5 million (19%), compared with the year ended December 31, 1993. The components of the increase were as follows:
Interest expense increased $217.7 million (16%). This change was primarily caused by an increase in average outstanding debt, attributable to higher net finance receivables outstanding. The annual average interest rates on total debt, including amortization of discount and issuance expense, were as follows: For the Year Ended December 31 1994 1993
Short-term Notes Payable 4.26% 3.11% Long-term Debt 7.35 8.03 Total Debt 6.01 5.94
The net interest margin was 8.18% and 7.92% for the years ended December 31, 1994 and 1993, respectively. The increase was primarily due to the aforementioned increase in average revenue rates.
Operating expenses increased $215.2 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 increased $101.4 million (21%), primarily due to increased losses resulting from an increase in net finance receivables. Net credit losses, measured as a percent of average net finance receivables, were 1.62%, substantially unchanged from the prior year. The allowance for losses increased $135.4 million (17%) to $944.3 million at December 31, 1994 from $808.9 million at December 31, 1993. The increase primarily relates to the growth in net finance receivables. The allowance for losses, measured as a percent of net finance receivables, was 3.03% at December 31, 1994 as compared to 3.07% at December 31, 1993. The Company maintains an allowance for losses on finance receivables at an amount which it believes is sufficient to provide adequate protection against future losses in the portfolios. The allowance is determined principally on the basis of historical loss experience, and reflects management's judgment of additional loss potential considering future economic conditions and the nature and characteristics of the finance receivables.
Insurance benefits paid or provided increased $29.2 million (25%) in 1994, primarily due to an increase in overall claims activity, and an increase in the reserve for credit accident and health, and casualty insurance claims.
EARNINGS BEFORE PROVISION FOR INCOME TAXES - As a result of the aforementioned changes, earnings before provision for income taxes increased $136.2 million (18%) during 1994.
PROVISION FOR INCOME TAXES - The provision for income taxes represented 38.3% and 37.5% of earnings before provision for income taxes for the years ended December 31, 1994 and 1993, respectively. The increase in the effective tax rate is primarily related to an increase in state taxes as described in NOTE 8 to the consolidated financial statements.
NET EARNINGS - As a result of the aforementioned changes, net earnings increased $78.0 million (17%) during 1994.
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, 1994, $453.6 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, 1994, Associates tangible net worth was approximately $3.4 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, 1994 and 1993, amounted to 1.0% and 1.5%, respectively, of its aggregate gross receivables as of those dates.
At December 31, 1994, First Capital had contractually committed bank lines of credit of $90.0 million, and revolving credit facilities of $250.0 million, none of which was in use. During 1994, First Capital raised $321.4 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 1994 was 4.26%.
Associates issues intermediate-term debt publicly and privately in the domestic and foreign markets. During the year ended December 31, 1994, Associates raised $3.9 billion through public and private offerings at a weighted average effective interest rate and a weighted average term of 7.13% and 4.9 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, 1994, short-term bank lines and revolving credit facilities with banks totaled $9.2 billion, none of which was in use at that date. These facilities represented 76% of net short-term borrowings outstanding at December 31, 1994. 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, 1994 and 1993, 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
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures", both effective 1995. The American Institute of Certified Public Accountants has issued Statement of Position 93-7, "Reporting on Advertising Costs", which is effective in 1995. The 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 accompanying consolidated balance sheets of Associates First Capital Corporation (an indirect subsidiary of Ford Motor Company) as of December 31, 1994 and 1993, and the related consolidated statements of earnings, changes in stockholder's equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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, 1994 and 1993 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
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 L.L.P.
Dallas, Texas January 27, 1995
ASSOCIATES FIRST CAPITAL CORPORATION CONSOLIDATED STATEMENT OF EARNINGS (In Millions)
Year Ended December 31 1994 1993 1992
REVENUE Finance charges $3,898.2 $3,276.3 $2,960.3 Insurance premiums 293.5 242.2 209.9 Investment and other income 213.6 187.1 176.4 4,405.3 3,705.6 3,346.6
EXPENSES Interest expense 1,558.2 1,340.5 1,281.4 Operating expenses 1,237.5 1,022.3 846.2 Provision for losses on finance receivables - NOTE 4 577.5 476.1 512.6 Insurance benefits paid or provided 144.1 114.9 100.0 3,517.3 2,953.8 2,740.2
EARNINGS BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 888.0 751.8 606.4 PROVISION FOR INCOME TAXES - NOTE 8 339.9 281.7 213.2 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 548.1 470.1 393.2 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - NOTE 2 (10.4)
NET EARNINGS $ 548.1 $ 470.1 $ 382.8
See notes to consolidated financial statements.
ASSOCIATES FIRST CAPITAL CORPORATION CONSOLIDATED BALANCE SHEET (In Millions)
December 31 1994 1993
ASSETS
CASH AND CASH EQUIVALENTS $ 410.0 $ 290.3 INVESTMENTS IN MARKETABLE SECURITIES - NOTE 16 605.1 633.7 FINANCE RECEIVABLES - NOTE 3 Consumer Finance 24,067.1 20,495.8 Commercial Finance 10,878.4 9,077.2 Total finance receivables 34,945.5 29,573.0 Less Unearned finance income 3,769.5 3,208.2 Allowance for losses on finance receivables - NOTE 4 944.3 808.9 30,231.7 25,555.9 OTHER ASSETS - NOTE 13 1,000.2 1,215.7
Total assets $32,247.0 $27,695.6
LIABILITIES AND STOCKHOLDER'S EQUITY
NOTES PAYABLE - NOTE 6 Commercial Paper $11,640.5 $ 9,735.8 Bank Loans 571.4 472.4 ACCOUNTS PAYABLE AND ACCRUALS 875.5 950.4 INSURANCE POLICY AND CLAIMS RESERVES 545.6 429.8 LONG-TERM DEBT - NOTES 7 and 9 15,654.1 13,600.8 STOCKHOLDER'S EQUITY Common Stock, no par value, 250 shares authorized, issued and outstanding, at stated value 47.0 47.0 Paid-in Capital - NOTE 14 1,104.4 904.4 Retained Earnings 1,826.1 1,551.0 Unrealized (Loss) Gain on Marketable Securities - NOTES 2 and 16 (17.6) 4.0 Total stockholder's equity 2,959.9 2,506.4
Total liabilities and stockholder's equity $32,247.0 $27,695.6
See notes to consolidated financial statements.
ASSOCIATES FIRST CAPITAL CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (In Millions)
Unrealized (Loss) Gain on Total Common Paid-in Retained Marketable Stockholder's Stock Capital Earnings Securities Equity
DECEMBER 31, 1991 $47.0 $ 704.4 $1,114.1 $ 2.6 $1,868.1 Net Earnings 382.8 382.8 Cash Dividends (190.0) (190.0) Current Period Adjustment 1.1 1.1
DECEMBER 31, 1992 47.0 704.4 1,306.9 3.7 2,062.0 Net Earnings 470.1 470.1 Contributions from Parent - NOTE 14 200.0 200.0 Cash Dividends (226.0) (226.0) Current Period Adjustment 0.3 0.3
DECEMBER 31, 1993 47.0 904.4 1,551.0 4.0 2,506.4 Net Earnings 548.1 548.1 Contributions from Parent - NOTE 14 200.0 200.0 Cash Dividends (273.0) (273.0) Current Period Adjustment (21.6) (21.6)
DECEMBER 31, 1994 $47.0 $1,104.4 $1,826.1 $(17.6) $2,959.9
See notes to consolidated financial statements.
ASSOCIATES FIRST CAPITAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (In Millions)
See notes to consolidated financial statements.
ASSOCIATES FIRST CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
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"). Associates Corporation of North America ("Associates") is the principal operating subsidiary of First Capital.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements consolidate First Capital and its subsidiaries. Amounts of goodwill relating to acquisitions are being amortized by the straight-line method over periods not exceeding forty years. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period financial statement amounts have been reclassified to conform to the current year presentation.
REVENUE RECOGNITION
Finance charges on receivables are recognized as revenue using the interest (actuarial) method. Premiums and discounts on purchased receivables are considered as yield adjustments. The unamortized balance is included in finance receivables and the associated amortization is included in finance charge revenue. Finance charge accruals are generally suspended on accounts more than 30 days contractually delinquent. At December 31, 1994 and 1993, net finance receivables on which revenue was not accrued approximated $424.0 million and $366.5 million, respectively.
Insurance premiums are recorded as unearned premiums when collected or when written and are subsequently amortized into income based on the nature and term of the underlying insurance contracts. The methods of amortization used are pro rata, sum-of-the-years-digits and a combination thereof.
Gains or losses on sales of debt securities are included in revenue when realized. Unrealized gains or losses on debt securities are reported as a component of stockholder's equity, net of tax. Realized and unrealized gains or losses on equity securities are included in revenue as incurred. The cost of debt and equity securities sold is determined by the specific identification method.
ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
The Company maintains an allowance for losses on finance receivables at an amount which it believes is sufficient to provide adequate protection against future losses in the portfolios. The allowance is determined principally on the basis of historical loss experience, and reflects management's judgment of additional loss potential considering future economic conditions and the nature and characteristics of the finance receivables. Additions to the allowance are charged to the provision for losses on finance receivables.
Finance receivables are charged to the allowance for losses when they are deemed to be uncollectible. Additionally, Company policy generally provides for charge-off of various types of accounts on a contractual basis (described below). Consumer direct and other installment and credit card receivables are charged to the allowance for losses when they become 180 days 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 one year delinquent. A delinquent account is one on which the customer has not made payments as contractually agreed. Extensions are granted on receivables from customers with satisfactory credit and with prior approval of management. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.
INSURANCE RESERVES
The reserves for future benefits and refunds upon cancellation of credit life and health insurance and property and casualty insurance are provided for in the unearned premium reserve for such business. In addition, reserves for reported claims on credit accident and health insurance are established based on standard morbidity tables used in the insurance business for such purposes. Claim reserves for reported property and casualty insurance claims are based on estimates of costs and expenses to settle each claim. Additional amounts of reserves, based on prior experience and insurance in force, are provided for each class of insurance for claims which have been incurred but not reported as of the balance sheet date.
FEDERAL INCOME TAXES
First Capital and its subsidiaries are included in the consolidated Federal income tax return of Holdings. The provision for income taxes is computed on a separate-return basis. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The amounts reported in the Consolidated Balance Sheet approximate fair value.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The consolidated financial statements present the information required by Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments". Amounts disclosed represent estimates of fair values at a particular point in time. Significant assumptions regarding economic conditions, loss experience and risk characteristics associated with particular financial instruments and other factors were used for purposes of this disclosure. These assumptions are subjective in nature and involve matters of judgment. Changes in assumptions could have a material impact on these estimates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative financial instruments for trading purposes. The Company's derivative activity is limited to currency swap transactions designed to hedge its currency risk on specific foreign currency-denominated loans to certain foreign affiliates denominated in British Sterling, and one interest rate swap transaction assumed in 1993 as a part of a business acquisition. Gains and losses on qualifying hedges are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs.
CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The adoption of this standard was not significant to the Company's consolidated financial statements. See NOTE 16 to the consolidated financial statements for additional information.
Effective January 1, 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment 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.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes". The Company recorded a one-time cumulative effect of changes in accounting principles of $10.4 million consisting of a $40.2 million after-tax charge relating to SFAS 106 and a $29.8 million benefit relating to SFAS 109. See NOTES 11 and 8 to the consolidated financial statements for additional information.
NOTE 3 - FINANCE RECEIVABLES
COMPOSITION OF FINANCE RECEIVABLES
At December 31, 1994 and 1993, finance receivables consisted of the following (in millions): 1994 1993
Consumer Finance Residential real estate-secured receivables $12,002.7 $10,626.0 Direct installment and credit card receivables 7,200.4 6,060.2 Manufactured housing and other installment receivables 4,864.0 3,809.6 24,067.1 20,495.8
Commercial Finance Heavy-duty truck receivables 5,001.6 4,333.7 Other industrial equipment receivables 5,876.8 4,743.5 10,878.4 9,077.2 34,945.5 29,573.0 Unearned Finance Income (3,769.5) (3,208.2) Net finance receivables $31,176.0 $26,364.8
The estimated maturities of gross finance receivables, at December 31, 1994, during subsequent years were as follows (in millions):
Consumer Commercial Year Due Finance Finance Total
1995 $ 3,842.8 $ 4,760.1 $ 8,602.9 1996 2,975.1 2,792.8 5,767.9 1997 2,539.0 1,873.0 4,412.0 1998 1,832.0 1,007.6 2,839.6 1999 and thereafter 12,878.2 444.9 13,323.1 $24,067.1 $10,878.4 $34,945.5
Estimated maturities are based on contractual terms and do not give effect to possible prepayments.
Included in other industrial equipment receivables are direct financing leases as follows (in millions): December 31 1994 1993
Minimum lease rentals $2,291.4 $1,882.1 Unguaranteed residual values 52.4 26.4 Future minimum lease rentals 2,343.8 1,908.5 Unearned finance income (328.7) (256.2) Allowance for losses on finance receivables (46.8) (42.0) Net investment in direct financing leases $1,968.3 $1,610.3
Future minimum lease rentals on direct financing leases for each of the years succeeding December 31, 1994 are as follows (in millions): 1995 - $730.2; 1996 - - $617.2; 1997 - $476.2; 1998 - $328.0; 1999 - $144.7 and 2000 and thereafter - - $47.5.
ESTIMATED FAIR VALUE OF NET FINANCE RECEIVABLES
The estimated fair value of net finance receivables at December 31, 1994 and 1993 was approximately $33.4 billion and $27.8 billion, respectively. In order to determine the fair values of loans, the loan portfolio was segmented based on loan type, credit quality and repricing characteristics. The fair value was estimated by discounting the expected cash flows from such loans at discount rates which approximate gross finance charge rates that would achieve an expected return on assets with similar risk characteristics. The estimated fair value of the credit card receivables was based on the Company's experience in pricing similar portfolios for acquisition purposes.
DISPERSION OF FINANCE RECEIVABLES
The Company has geographically dispersed finance receivables portfolios. At December 31, 1994, the finance receivables were dispersed among 50 states, with four percent or more of the receivables in the states of California (11%), Florida (6%), Texas (6%), Georgia (5%), North Carolina (5%), Pennsylvania (4%), New York (4%), Ohio (4%), Illinois (4%) and Tennessee (4%). The ten largest customer accounts at December 31, 1994, other than accounts with affiliates, represented 0.9% of the total gross finance receivables outstanding. The largest gross balance outstanding in such accounts was $54.4 million and the average gross balance was $30.5 million.
ACQUISITIONS OF FINANCE BUSINESSES AND FINANCE RECEIVABLES
During the years ended December 31, 1994, 1993 and 1992, the Company made acquisitions of finance businesses and finance receivables, the most significant of which were as follows:
In September 1994, Associates acquired the credit card portfolio and certain other assets of Amoco Oil Company. The fair market value of assets acquired totaled $426 million. The transaction was accounted for as a purchase.
In December 1994, Associates acquired the assets of First Collateral Services, Inc., principally consisting of warehouse loan facilities extended to mortgage brokers secured by mortgage contracts. The fair market value of total assets acquired and liabilities assumed was $62 million and $3 million, respectively. The transaction was accounted for as a purchase.
In April 1993, Associates purchased the stock of Allied Finance Company, with assets primarily consisting of $146 million of net consumer finance receivables, principally comprised of residential real estate-secured, direct installment and indirect installment receivables. The fair market value of total assets acquired and liabilities assumed was $197 million and $112 million, respectively. The transaction was accounted for as a purchase.
In September 1993, Associates purchased the assets of Mack Financial Corporation, the financing division of Mack Trucks, Inc., consisting of $552 million of net commercial finance receivables, principally secured by heavy-duty trucks and truck trailers. The fair market value of total assets acquired and liabilities assumed was $587 million and $380 million, respectively. The transaction was accounted for as a purchase.
In September 1993, Associates acquired the credit card portfolio of Great Western Financial Corporation. The outstanding balances totaled $216 million.
In April 1992, Associates purchased from Signal Financial Corporation $290 million of net consumer finance receivables. The receivables consisted primarily of direct installment and residential real estate-secured loans. The fair market value of total assets acquired and liabilities assumed was $303 million and $2 million, respectively. The transaction was accounted for as a purchase.
In November 1992, Associates purchased substantially all the assets of First Family Financial Services H.C., Inc. Such assets included $546 million of net consumer finance receivables, principally residential real estate-secured and direct installment loans. The fair market value of total assets acquired and liabilities assumed was $697 million and $543 million, respectively. The transaction was accounted for as a purchase.
In December 1992, First Capital purchased the stock of Trans-National Leasing, Inc. Approximately $48 million of net commercial finance receivables relating to the financing of fleet vehicles was acquired in the transaction. The fair market value of assets acquired and liabilities assumed was $52 million and $45 million, respectively. The transaction was accounted for as a purchase. Trans-National Leasing, Inc. was subsequently merged with an affiliate and contributed by First Capital to Associates in December 1992. See NOTE 14 to the consolidated financial statements for additional information.
NOTE 4 - ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during the periods indicated were as follows (in millions):
Year Ended December 31 1994 1993 1992
Balance at beginning of period $ 808.9 $ 699.2 $ 590.9 Provision for losses 577.5 476.1 512.6 Recoveries on receivables charged off 101.0 88.5 72.6 Losses sustained (565.3) (482.2) (497.3) Other adjustments, primarily reserves of acquired businesses 22.2 27.3 20.4
Balance at end of period $ 944.3 $ 808.9 $ 699.2
NOTE 5 - BANK CREDIT FACILITIES
First Capital had contractually committed bank lines of credit of $90.0 million at December 31, 1994. Additionally, at December 31, 1994, Associates, the principal operating subsidiary of First Capital, had contractually committed lines of credit at 119 banks, aggregating $3.8 billion, with various maturities through December 31, 1995, none of which was utilized at December 31, 1994. Also at December 31, 1994, Associates had agreements with 105 banks extending revolving credit facilities of $4.4 billion, with maturity dates ranging from February 1, 1995 through January 1, 2000, and $1.0 billion of receivables purchase facilities, $500.0 million of which is available through April 30, 1995 and $500.0 million of which is available through April 15, 1997; none of these facilities was utilized as of December 31, 1994. At December 31, 1994, First Capital had revolving credit facilities of $250.0 million. The aggregate credit facilities available to Associates as of December 31, 1994 were $9.2 billion with 146 banks. 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. Bank fees incurred during 1994, 1993 and 1992 approximated $11.0 million, $9.6 million and $6.8 million, respectively, and are .05% to .25% of 1% per annum of the amount of the facilities. At December 31, 1994, the Company had outstanding debt agreements that required compensating balances totaling $1.6 million.
NOTE 6 - NOTES PAYABLE
Commercial paper notes are issued by Associates in the minimum amount of $100,000 with terms from 1 to 270 days. Bank loan terms range from 4 to 7 days. Information pertaining to the Company's commercial paper notes and bank loans is set forth below for the periods indicated (dollar amounts in millions):
Commercial Bank Paper Notes Loans
Ending balance at December 31, 1994 $11,640.5 $571.4 Weighted average interest rate at December 31, 1994 5.88% 6.79%
Ending balance at December 31, 1993 $ 9,735.8 $472.4 Weighted average interest rate at December 31, 1993 3.25% 3.84%
Ending balance at December 31, 1992 $ 8,453.6 $466.0 Weighted average interest rate at December 31, 1992 3.35% 3.51%
The amounts reported in the Consolidated Balance Sheet approximate fair value.
NOTE 7 - LONG-TERM DEBT
Outstanding balances of long-term debt at December 31 were as follows (in millions):
Interest Rate Range Maturities 1994 1993
Senior: Notes 4.06-13.75% 1995-2010 $15,157.7 $13,007.5 Investment notes 4.15-10.50 1995-1999 354.6 351.4 15,512.3 13,358.9
Subordinated and Capital: Subordinated 7.63- 8.15 1998-2009 141.2 241.2 Capital 4.68- 9.00 1995-2002 0.6 0.7 141.8 241.9
Total long-term debt $15,654.1 $13,600.8
The weighted average interest rate for total long-term debt was 7.24% at December 31, 1994 and 7.54% at December 31, 1993.
The estimated fair value of long-term debt at December 31, 1994 and 1993 was $15.1 billion and $14.5 billion, respectively. 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: 1995, $2,132.6 million; 1996, $2,772.1 million; 1997, $3,171.1 million; 1998, $1,820.7 million; 1999, $2,161.0 million and 2000 and thereafter, $3,596.6 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, 1994, 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, 1994 Current: $ 400.1 $31.5 $ 431.6 Deferred: Leasing transactions 29.2 29.2 Finance revenue (5.7) (5.7) Provision for losses on finance receivables and other (115.2) (115.2) $ 308.4 $31.5 $ 339.9
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
At December 31, 1994 and 1993, the components of the Company's net deferred tax asset were as follows (in millions):
1994 1993
Deferred tax assets: Provision for losses on finance receivables and other $ 517.2 $ 368.8 Postretirement and other employee benefits 74.0 68.1 591.2 436.9 Deferred tax liabilities: Leasing transactions (175.1) (145.9) Finance revenue and other (214.3) (192.6) (389.4) (338.5) Net deferred tax asset $ 201.8 $ 98.4
Due to the Company's earnings level, 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 1994 1993 1992
Statutory tax rate 35.0% 35.0% 34.0% State tax rate 2.3 1.8 1.0 Other 1.0 0.7 0.2 Effective tax rate 38.3% 37.5% 35.2%
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, 1994, $453.6 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, 1994, Associates tangible net worth was approximately $3.4 billion.
LIMITATION OF 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, 1994 and 1993, amounted to 1.0% and 1.5%, 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 initial term. Total rent expense for the years ended December 31, 1994, 1993 and 1992 was $48.7 million, $43.9 million, and $38.3 million, respectively. Minimum rental commitments as of December 31, 1994 for all noncancelable leases (primarily office leases) for the years ending December 31, 1995, 1996, 1997, 1998 and 1999 are $42.8 million, $34.8 million, $23.8 million, $16.2 million and $6.1 million, respectively, and $3.8 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 1994 1993 1992
Service cost $ 13.7 $ 10.0 $ 8.4 Interest cost 21.3 18.1 16.1 Actual return on Plan assets (0.4) (21.6) (10.0) Net amortization (10.9) 7.4 (2.5) Net periodic pension cost $ 23.7 $ 13.9 $ 12.0 Assumed discount rate, beginning of year 7.00% 8.00% 8.50%
The funded status of the Plan is as follows (in millions):
December 31 1994 1993 Qualified Nonqualified Qualified Nonqualified Plan Plan Plan Plan
Actuarial present value of benefit obligation: Vested $187.6 $16.8 $197.9 $17.5 Nonvested 9.0 0.8 8.2 0.2 Accumulated benefit obligation 196.6 17.6 206.1 17.7 Effect of projected future salary increases 50.4 6.2 62.4 4.0 Projected benefit obligation 247.0 23.8 268.5 21.7 Plan assets at fair market value 204.7 197.5 Excess of plan obligation over plan assets 42.3 23.8 71.0 21.7 Unamortized transition obligation and amendments (6.5) (4.3) (9.4) (0.7) Unamortized net loss (13.3) (1.5) (42.5) (3.3) Accrued pension liability $ 22.5 $18.0 $ 19.1 $17.7 Assumed discount rate 8.25% 8.25% 7.00% 7.00% Projected compensation increases 6.00% 6.00% 6.00% 6.00% Expected return 9.00% 9.00% 9.50% 9.50% A determination of the Federal income tax status related to the qualified Pension Plan has not been requested. An application is expected to be filed in March 1995. 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 ("IRS"). An application for determination is expected to be filed with the IRS in March 1995. For the years ended December 31, 1994, 1993 and 1992, the Company's pretax contributions to the plan were $15.9 million, $14.0 million and $12.1 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.
The amount paid for postretirement benefits for the years ended December 31, 1994, 1993 and 1992 was approximately $1.8 million, $1.5 million and $2.1 million, respectively.
Net periodic postretirement benefit cost for 1994 and 1993 includes the following components (in millions) December 31 1994 1993
Service cost $ 5.5 $ 4.2 Interest cost 6.3 6.3 Net amortization (1.0) (0.7) Net periodic postretirement benefit cost $10.8 $ 9.8 Assumed discount rate, beginning of year 7.50% 8.50%
Accrued postretirement benefit cost at December 31, 1994 and 1993 is composed of the following (in millions): December 31 1994 1993 Accumulated postretirement benefit obligation ("APBO"): Retired participants $33.9 $ 33.6 Fully eligible participants 18.6 21.1 Other active participants 29.5 30.7 Total APBO 82.0 85.4 Unamortized amendments 9.8 11.5 Unrecognized actuarial loss (2.7) (16.8) Accrued postretirement benefit cost $89.1 $ 80.1 Assumed discount rate 8.75% 7.50%
For measurement purposes, a 12.10% and 12.50% weighted average annual rate of increase in per capita cost of covered health care benefits was assumed for 1994 and 1993, respectively, decreasing gradually to 5.50% by the year 2009. Increasing the assumed health care cost trend rate by one percentage point each year would increase the APBO as of December 31, 1994 and 1993 by $6.0 million and $6.2 million, respectively, and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost by $0.9 million and $0.8 million, respectively.
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 consolidated financial position or operations of First Capital.
NOTE 13 - OTHER ASSETS
The components of Other Assets at December 31, 1994 and 1993 were as follows (in millions): December 31 1994 1993
Balances with related parties - NOTE 14 $ 68.7 $ 170.4 Goodwill 362.0 382.2 Other 569.5 663.1 Total other assets $1,000.2 $1,215.7
NOTE 14 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES
CAPITAL TRANSACTIONS
In both 1994 and 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, provides debt financing or advances to certain of its former foreign subsidiaries. At December 31, 1994 and 1993, amounts due from foreign affiliates totaled $68.7 million and $142.1 million, respectively, and were included in Other Assets. These receivables or advances bear fluctuating interest rates (as applicable) and are payable on demand. Interest income related to these transactions was $14.4 million, $21.3 million and $34.0 million for the years ended December 31, 1994, 1993 and 1992, respectively. The estimated fair value of these receivables was $70.4 million and $150.2 million at December 31, 1994 and 1993, respectively.
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. Services and usage are charged to the affiliates based on the nature of the service. Fees for financial accommodations range from .25% to 1% of the average outstanding debt guaranteed. Management believes such charges reflect the market value for such services, usage and guarantees. The amounts paid or accrued under these arrangements for the years ended December 31, 1994, 1993 and 1992 were $53.7 million, $40.1 million and $35.5 million, respectively.
The Company provides certain auto club and relocation services to Ford. Revenues related to these services were $19.4 million, $12.1 million and $6.7 million for the years ended December 31, 1994, 1993 and 1992, respectively.
At December 31, 1994 and 1993, the Company was a guarantor on debt and related accrued interest of its foreign affiliates in Canada and Puerto Rico amounting to $339.9 million and $256.7 million, respectively.
At December 31, 1994 and 1993, First Capital's current income taxes payable to Holdings amounted to $30.4 million and $40.2 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.
Amounts under currency and interest rate swap contracts at December 31, 1994 were approximately $95.7 million. The Company is at market and interest rate risk for any currency and/or interest rate differential should a counterparty to these contracts fail to meet the terms of the contracts. At December 31, 1994, the Company estimates its exposure to loss resulting from currency and/or interest rate differentials, in the event of nonperformance by certain counterparties, was $0.2 million; the Company estimates its benefit resulting from currency differentials in the event of nonperformance by certain counterparties, was $0.9 million. The estimated fair value of amounts under contract approximated $0.7 million. Such value was determined based on the foreign currency exchange rates/interest rate for similar transactions in effect at the balance sheet date. It is the Company's policy that each counterparty's debt rating must be rated Aa3, AA- or better by at least two nationally recognized rating agencies at the time any such contract is entered into. The Company monitors such ratings on an ongoing basis.
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, 1994 and 1993 approximated $9.0 billion and $8.2 billion, respectively. 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, 1994 and 1993, the unused portion of these lines aggregated approximately $455.2 million and $712.4 million, respectively. 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, 1994 and 1993, the unused portion of these lines aggregated approximately $849.7 million and $684.6 million, respectively. 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
The Company invests in debt securities, principally bonds and notes, with the intention of holding them to maturity. However, if market conditions change, the Company may sell these securities prior to maturity. Accordingly, concurrent with the adoption of SFAS No. 115, the Company classified its investments in debt securities as available for sale and adjusted its recorded value to market. Prior to adoption of this standard, the Company carried these investments at amortized cost. The estimated market value at December 31, 1994 and 1993 was $563.2 million and $612.0 million, respectively. Amortized cost at December 31, 1994 and 1993 was $590.3 million and $598.7 million, respectively. During 1994, realized gains and losses on sales amounted to $2.1 million and $0.3 million, respectively. Unrealized gains or losses are reported as a component of stockholder's equity, net of tax. The following table sets forth, by type of security issuer, the amortized cost, gross unrealized holding gains, gross unrealized holding losses, and estimated market value at December 31, 1994 (in millions):
Gross Gross Unrealized Unrealized Estimated Amortized Holding Holding Market Cost Gains Losses Value
U.S. Government obligations $422.4 $0.7 $(25.2) $397.9 Corporate obligations 66.8 0.2 (0.5) 66.5 Mortgage-backed 96.3 (2.3) 94.0 Other 4.8 4.8 Total debt securities $590.3 $0.9 $(28.0) $563.2
The amortized cost and estimated market value of debt securities at December 31, 1994, by contractual maturity, are shown below (in millions):
Estimated Amortized Market Cost Value
Due in one year or less $ 93.2 $ 92.1 Due after one year through five years 384.3 369.6 Due after five years through ten years 110.8 99.6 Due after ten years 2.0 1.9 $590.3 $563.2
EQUITY SECURITIES
Equity security investments, principally common stock held by the Company's insurance subsidiaries, are recorded at market value. Concurrent with the adoption of SFAS No. 115, the Company classified its investments in equity securities as trading securities and included in earnings unrealized gains or losses on such securities. Prior to adoption, unrealized gains or losses were reported as a component of stockholder's equity, net of tax. The estimated market value at December 31, 1994 and 1993 was $41.9 million and $35.0 million, respectively. Historical cost at December 31, 1994 and 1993 was $38.9 million and $28.9 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, credit accident and health, property and 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):
Capital expenditures and depreciation and amortization expense are not significant.
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, 1994, 1993 and 1992 were as follows (in millions):
CONDENSED STATEMENT OF EARNINGS
Year Ended December 31 1994 1993 1992
Revenue Interest and other income $ 8.7 $ 6.7 $ 6.1 Dividends from subsidiaries 270.5 242.7 191.6 279.2 249.4 197.7
Expenses Interest expense 54.8 51.1 56.5 Operating expenses 16.2 15.3 15.2 71.0 66.4 71.7
Income before credit for Federal income taxes and equity in net earnings of subsidiaries 208.2 183.0 126.0 Credit for Federal income taxes resulting from tax agreements with subsidiaries 21.7 21.2 21.7 Earnings before equity in undistributed earnings of subsidiaries 229.9 204.2 147.4 Equity in undistributed earnings of subsidiaries 318.2 265.9 235.1 Net earnings $548.1 $470.1 $382.8
See notes to condensed financial information.
CONDENSED BALANCE SHEET
December 31 1994 1993
Assets Investment in and advances to subsidiaries, eliminated in consolidation, and other $3,829.4 $3,198.9 Total assets $3,829.4 $3,198.9
Liabilities and Stockholder's Equity Accounts payable and accruals $ 33.0 $ 19.9 Notes payable and long-term debt (2) 836.5 672.7 Stockholder's equity (1) 2,959.9 2,506.3 Total liabilities and stockholder's equity $3,829.4 $3,198.9
The estimated fair value of notes payable and long-term debt at December 31, 1994 and 1993 was $829.4 million and $685.3 million, respectively. 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 1994 1993 1992
Cash Flows from Operating Activities Net earnings $ 548.1 $ 470.1 $ 382.8 Adjustments to net earnings for noncash items: Amortization and depreciation 0.1 0.1 0.1 Increase (decrease) in accounts payable and accruals 13.1 (6.5) (13.7) Equity in undistributed earnings of subsidiaries (318.2) (265.9) (235.1) Other (20.9) (0.6) 1.0 Net cash provided from operating activities 222.2 197.2 135.1 Cash Flows from Investing Activities Cash dividends from subsidiaries (1) 270.5 242.7 191.6 Increase in investments in and advances to subsidiaries (583.7) (402.7) (151.7) Net cash (used for) provided from investing activities (313.2) (160.0) 39.9 Cash Flows from Financing Activities Increase in notes payable and long-term debt (2) 352.7 231.6 241.8 Capital contribution from parent 200.0 200.0 Cash dividends paid (273.0) (226.0) (190.0) Retirement of long-term debt (188.9) (244.2) (228.4) Net cash provided from (used for) financing activities 90.8 (38.6) (176.6)
Decrease in cash and cash equivalents (0.2) (1.4) (1.6) Cash and cash equivalents at beginning of period (0.9) 0.5 2.1
Cash and cash equivalents at end of period $ (1.1) $ (0.9) $ 0.5
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 4.15% to 13.75%. The estimated maturities of the notes outstanding, at December 31, 1994, during subsequent years were as follows (in millions):
1995 $351.1 1996 220.2 1997 151.0 1998 73.9 1999 40.3 $836.5
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 STATEMENTS AND REPORTS ON FORM 8-K.
(a) Financial Statements Page
Report of Independent Accountants 15 Consolidated Statement of Earnings for the years ended December 31, 1994, 1993 and 1992 16 Consolidated Balance Sheet at December 31, 1994 and 1993 17 Consolidated Statement of Changes in Stockholder's Equity for the years ended December 31, 1994, 1993 and 1992 18 Consolidated Statement of Cash Flows for the years ended December 31, 1994, 1993 and 1992 19 Notes to consolidated financial statements 20
(b) Reports on Form 8-K.
During the quarter ended December 31, 1994, 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.
(21) Subsidiaries of the registrant. Omitted in accordance with General Instruction J.(2)(b) to Form 10-K.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedule.
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 21, 1995
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
KEITH W. HUGHES* Chairman of the Board, (Keith W. Hughes) Principal Executive Officer and Director
JAMES E. JACK* Senior Executive Vice President, (James E. Jack) Principal Financial Officer and Director
ROY A. GUTHRIE* Senior Vice President, March 21, 1995 (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
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 its request.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the registrant. Omitted in accordance with General Instruction J.(2)(b) to Form 10-K.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedule.
EXHIBIT 12
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar Amounts In Millions)
Year Ended December 31 1994 1993 1992 1991 1990
Fixed Charges (a) Interest expense $1,558.2 $1,340.5 $1,281.4 $1,347.8 $1,217.3 Implicit interest in rent 8.3 8.0 7.8 7.4 7.9 Total fixed charges $1,566.5 $1,348.5 $1,289.2 $1,355.2 $1,225.2
Earnings (b) $ 888.0 $ 751.8 $ 606.4 $ 540.4 $ 448.0 Fixed charges 1,566.5 1,348.5 1,289.2 1,355.2 1,225.2 Earnings, as defined $2,454.5 $2,100.3 $1,895.6 $1,895.6 $1,673.2
Ratio of Earnings to Fixed Charges 1.57 1.56 1.47 1.40 1.37
(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. Prior year implicit interest amounts have been restated to conform to current calculation methodology.
(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 23
EXHIBIT 23
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 January 27, 1995, on our audits of the consolidated financial statements of Associates First Capital Corporation as of December 31, 1994 and 1993, and for the years ended December 31, 1994, 1993, and 1992, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Dallas, Texas March 21, 1995
EXHIBIT 24
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 AND CHESTER D. LONGENECKER, 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, 1994, 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 AND CHESTER D. LONGENECKER, 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 AND CHESTER D. LONGENECKER, 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 10th day of February, 1995.
SIGNATURE:/s/ Keith W. Hughes Keith W. Hughes
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, 1994, 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 13th day of January, 1995.
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, 1994, 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 13th day of January, 1995.
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, 1994, 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 13th day of January, 1995.
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, 1994, 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 13th day of January, 1995.
SIGNATURE:/s/ Roy A. Guthrie Roy A. Guthrie
OFFICE: Senior Vice President, Comptroller and Principal Accounting Officer