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Press Release
Household Reports Record Quarterly and Full-Year Net Income
- Fourth Quarter Earnings Per Share Rises 14%, to $1.17
- Fourth Quarter Net Income Increases to $549 Million
- Receivables Up $5.2 Billion in the Quarter, to $100.8 Billion
- Full Year Earnings Per Share of $4.08, Up 15%
- Full Year Net Income of $1.9 Billion
- Revenues Grow 18% for the Year
For the full year, Household reported earnings per share of $4.08, representing a 15 percent increase from $3.55 in 2000. Net income for 2001 totaled $1.9 billion, also an all-time high, 13 percent above $1.7 billion earned in 2000.
"Household's fourth quarter results were simply outstanding," said William F. Aldinger, chairman and chief executive officer, "demonstrating the tremendous strength and earnings power of the Household franchise. Receivable and revenue growth exceeded our expectations while credit indicators weakened only modestly in a tough economic environment. Recognizing the importance of a strong balance sheet, we provided $154 million in excess of owned chargeoffs, bringing our reserves to their highest level ever."
Commenting on the full-year results, Aldinger added, "In 2001, we demonstrated that our business model generates superior results in a weak economy as well as in the strong economic periods of previous years. Exceptional revenue growth of 18 percent more than offset the increases in credit losses during the year. We further strengthened our balance sheet while investing in sales and marketing to position our franchise for sustainable growth in the future. We are well-positioned to deliver 13 to 15 percent EPS growth for 2002."
Fourth Quarter Review
Receivable Growth
At December 31, 2001, the company's managed portfolio reached $100.8 billion, up $5.2 billion, or 5.4 percent, from the third quarter. Growth was strong across all products. The real estate secured portfolio increased the most, up $2.8 billion in the quarter. This portfolio
comprises over 44 percent of total managed receivables.
During the quarter, the company purchased a private label credit card portfolio totaling approximately $725 million at December 31, 2001. In addition, the company sold approximately $1 billion in MasterCard/Visa receivables in the United Kingdom to Centrica, its former partner in the Goldfish Card program, as part of a settlement agreement.
Revenues
Fourth quarter managed net revenues grew $506 million, or 21 percent, from a year ago. An expanded net interest margin and higher receivable volume drove the increase.
Household's managed net interest margin for the fourth quarter was $2.2 billion, an increase of $466 million, or 27 percent, compared to a year ago. The company's managed net interest margin percent widened to 8.85 percent from 8.01 percent a year ago. Lower funding costs were the primary reasons for the expansion.
Managed fee income increased $17 million, or 4 percent, compared to the fourth quarter of 2000, principally reflecting higher levels of credit card fees.
The company's risk adjusted revenue (managed net revenues less securitization revenues and chargeoffs) expanded to 7.79 percent from 7.60 percent a year ago.
Operating Expenses
Operating expenses rose 22 percent from a year ago, driven by higher payroll costs for sales personnel and collectors, higher sales incentives, and increased marketing and technology spending. Household's efficiency ratio was 31.2 percent in the fourth quarter, compared to 30.8 percent a year ago.
Credit Quality and Loss Reserves
At December 31st, the managed delinquency ratio (60+days) was 4.46 percent, up 3 basis points from 4.43 percent in the third quarter. The managed delinquency ratio was 4.20 percent a year ago. The annualized managed net chargeoff ratio for the fourth quarter was 3.90 percent, up 16 basis points from 3.74 percent in the third quarter. The managed net chargeoff ratio in the year-ago quarter was 3.41 percent.
Managed credit loss reserves increased by $256 million during the quarter, to $3.8 billion. Compared to year-end 2000, credit loss reserves were up $617 million. The ratio of reserves-to-managed receivables was 3.78 percent at December 31, 2001 compared to 3.72 percent at September 30th and 3.65 percent a year earlier. Reserves-to-nonperforming loans were 105 percent at December 31st, compared to 104 percent at September 30th and 107 percent a year ago.
Capital
The company strengthened its ratio of tangible equity to tangible managed assets to 7.87 percent at December 31st, from 7.82 percent at September 30th and 7.41 percent a year earlier.
In connection with its $2 billion share repurchase program, announced on March 9, 1999, Household bought back 2.2 million shares in the fourth quarter, totaling $140 million.
The company's new, two-year $2 billion share repurchase program went into effect on January 1, 2002. At December 31st, Household had agreements with third parties to purchase, on a forward basis, approximately 6.5 million shares of common stock at a weighted average price of $59.14 per share.
Full Year Highlights
Notice of Live Webcast
Household will broadcast its fourth quarter earnings teleconference call over the Internet on its website at www.household.com. The call will begin at 9:00 a.m. Central Standard Time on January 16, 2002. A replay will also be available shortly after the end of the call.
This press release contains certain estimates and projections that may be forward-looking in nature, as defined by the Private Securities Litigation Reform Act of 1995. A variety of factors may cause actual results to differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference are discussed in Household International's Annual Report on Form 10-K, filed with the SEC.
Click here to view the Quarterly Financial Supplement in .PDF format.
(free Adobe® Acrobat Reader® provided here)
CONTACTS:
Craig A. Streem, Vice President - Corporate Relations and Communications: 847 564-6053, or
Celeste M. Murphy, Director - Investor Relations: 847 564-7568,
both of Household International
