<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 33-97130-A
THE THAXTON GROUP, INC.
(Name of small business issuer in its charter)
SOUTH CAROLINA 57-0669498
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1524 PAGELAND HIGHWAY, LANCASTER SOUTH CAROLINA 29271
(Address of principal executive offices)
Issuers telephone number: 803-285-4336
Indicate by check mark whether the issuer (1) has filed all reports required to
by filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months(or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
OUTSTANDING AT
CLASS APRIL 24, 1996
COMMON STOCK 3,777,173
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THE THAXTON GROUP, INC.
FORM 10-QSB
March 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1996 3
Consolidated Statements of Income for the three months
ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THE THAXTON GROUP, INC.
Consolidated Balance Sheet
March 31, 1996
ASSETS
<S> <C>
Cash $ 59,048
Finance receivables 53,761,576
Less: Unearned income (12,141,454)
Allowance for credit losses (1,090,326)
-------------------------
Finance receivables, net (notes 2 and 3) 40,529,797
Premises and equipment, net 700,249
Other assets 1,602,640
--------------------------
TOTAL ASSETS $ 42,891,734
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable (note 3) $ 34,619,946
Accrued interest payable 302,803
Other liabilities 416,632
--------------------------
TOTAL LIABILITIES 35,339,381
Common stock, $.01 par value; authorized
50,000,000 shares, issued and
outstanding 3,777,173 shares 37,772
Additional paid-in-capital 5,168,606
Retained earnings 3,136,175
Deferred stock award (787,500)
Less: Treasury stock (300 shares of
common stock at cost) (2,700)
--------------------------
TOTAL STOCKHOLDERS' EQUITY 7,552,353
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 42,891,734
==========================
</TABLE>
3
<PAGE>
THE THAXTON GROUP, INC.
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest and fee income $3,202,385 $1,630,758
Interest expense 874,459 407,385
------------------ -------------------
NET INTEREST INCOME 2,327,925 1,223,373
Provision for credit losses 478,614 108,756
------------------ -------------------
NET INTEREST INCOME AFTER PROVISION 1,849,311 1,114,617
FOR CREDIT LOSSES
Other income:
Insurance premiums and 294,059 174,386
commissions, net
Other income 1,300 4,498
------------------ -------------------
TOTAL OTHER INCOME 295,359 178,885
Operating expenses:
Compensation 830,616 520,311
Telephone, postage, and supplies 183,527 95,207
Net occupancy 141,455 96,055
Insurance 42,925 27,456
Collection expense 47,115 27,391
Travel 26,962 14,338
Professional fees 21,291 9,623
Goodwill amortization 18,867 0
Other 263,342 141,330
------------------ -------------------
TOTAL OPERATING EXPENSES 1,576,099 931,711
------------------ -------------------
NET INCOME BEFORE TAXES 568,571 361,790
Income tax expense (benefit)
Current 236,067 172,157
Deferred (22,114) (30,888)
------------------ -------------------
TOTAL INCOME TAX EXPENSE 213,953 141,269
------------------- ------------------
NET INCOME $ 354,618 $ 220,522
=================== ==================
EARNINGS PER SHARE $ 0.09 $ 0.07
================== ===================
</TABLE>
4
<PAGE>
THE THAXTON GROUP, INC.
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities $ 391,526 $ 200,592
Cash flows from investing activities (4,275,254) (2,442,027)
Cash flows from financing activities 2,114,291 2,314,185
--------- ---------
NET (DECREASE) INCREASE IN CASH (1,769,436) 72,750
CASH AT BEGINNING OF PERIOD 1,828,484 248,842
---------- -------
CASH AT END OF PERIOD $ 59,048 $ 321,592
</TABLE>
5
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THE THAXTON GROUP, INC.
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
The Thaxton Group, Inc. (the Company) is incorporated under the laws of
the state of South Carolina and operates branches in South Carolina,
North Carolina, Virginia and Tennessee. The Company is a diversified
consumer finance company that is engaged primarily in purchasing and
servicing retail installment contracts purchased from independent used
car dealers and making and servicing personal loans to borrowers with
limited credit histories, low incomes or past credit problems. The
Company also offers insurance premium financing to such borrowers. The
Company provides reinsurance through a wholly-owned subsidiary, TICO
Reinsurance, Ltd. (TRL). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
The following is a description of the more significant accounting and
reporting policies which the Company follows in preparing and presenting
its financial statements.
(a) INTEREST AND FEE INCOME
Interest income from finance receivables is recognized using the
interest (actuarial) method on an accrual basis. Accrual of income
on finance receivables continues until the receivable is either
paid off in full or is charged off. Fee income consists primarily
of late fees which are credited to income when they become due
from borrowers. For receivables which are renewed, interest income
is recognized using a method similar to the interest (actuarial)
method.
(b) ALLOWANCE FOR CREDIT LOSSES
Additions to the allowance for credit losses are based on
management's evaluation of the finance receivable portfolio based
on current economic conditions, overall portfolio quality,
charge-off experience, and such other
6
<PAGE>
factors which in management's judgment, deserve recognition in
estimating credit losses. Loans are charged-off when, in the
opinion of management, such loans are deemed to be uncollectible
or six months has elapsed since the date of the last payment,
whichever occurs first. While management uses the best information
available to make evaluations, future adjustments to the allowance
may be necessary if conditions differ substantially from the
assumptions used in making the evaluations.
(c) NON-FILE INSURANCE
Non-file insurance is written in lieu of recording and perfecting
the Company's security interest in the assets pledged on certain
loans. Non-file insurance premiums are collected from the borrower
on certain loans at inception and renewal and are remitted
directly to an insurance company. Certain losses related to such
loans, which are not recoverable through life, accident and
health, or property insurance claims, are reimbursed through
non-file insurance claims subject to policy limitations. Any
remaining losses are charged to the allowance for credit losses.
(d) PREMISES AND EQUIPMENT
Premises and equipment are reported at cost less accumulated
depreciation which is computed using the straight-line method for
financial reporting and accelerated methods for tax purposes.
Maintenance and repairs are charged to expense as incurred and
improvements are capitalized.
(e) INSURANCE
The Company remits a portion of credit life, accident and health,
property and auto insurance premiums written in connection with
certain loans to an unaffiliated insurance company at the time of
origination. Any portion of the premiums remitted to this
insurance company which are not required to cover their
administrative fees or to pay reinsurance claims expense are
returned to the Company through its reinsurnance subsidiary, TRL,
and are included in insurance premiums and commissions in the
accompanying consolidated statements of income. Unearned insurance
commissions are accreted to income over the life of the related
insurance contracts using a method similar to that used for the
recognition of finance charges.
(f) EMPLOYEE SAVINGS PLAN
The Company offers a payroll deduction savings plan to all its
employees. The Company pays interest monthly at an annual rate of
10% on the prior months ending balance. Employees may withdraw
savings on demand.
7
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(g) INCOME TAXES
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(Statement 109), requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset
and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
Effective January 1, 1993, the Company adopted Statement 109 and
has reported a favorable but immaterial impact as a component of
the 1993 income tax provision for the cumulative effect of the
change in the method of accounting.
(h) EARNINGS PER SHARE
Earnings per share is calculated using the weighted average shares
outstanding adjusted for the 10,025.48 for one stock split
declared by the board of directors on September 8, 1995. All share
and per share data have been retroactively adjusted for the stock
split.
(i) INTANGIBLE ASSETS
Intangible assets include the premium paid to acquire Eagle
Premium Finance which is amortized on a straight-line basis over
10 years.
(j) INTERIM UNAUDITED FINANCIAL STATEMENTS
Information with respect to March 31, 1996 and 1995, and the
periods then ended, have not been audited by the Company's
independent auditors, but in the opinion of management, reflect
all adjustments (which include only normal recurring adjustments)
necessary for the fair presentation of the operations of Company.
8
<PAGE>
(2) Finance Receivables
Finance receivables consisted of the following at March 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Consumer $ 47,004,521 22,233,846
Real estate secured 820,323 1,015,360
Insurance premium finance 5,672,881 1,754,228
Wholesale loans 263,851 227,855
-------------- --------------
Total finance receivables 53,761,576 25,231,289
Unearned interest (11,812,494) (5,700,824)
Unearned insurance premiums, net (328,960) (193,846)
Allowance for credit losses (1,090,326) (432,417)
-------------- --------------
Finance receivables, net $ 40,529,797 18,904,203
============== ==============
</TABLE>
Consumer loans include bulk purchases of receivables, auto dealer
receivables under holdback arrangements, and small consumer loan
receivables. With bulk purchase arrangements, the Company typically
purchases a group of receivables from an auto dealer or other retailer at
a discount to par based on management's review and assessment of the
portfolio to be purchased. This discount amount is then maintained in an
unearned income account to which losses on these loans are charged. To
the extent that losses from a bulk purchase exceed the purchase discount,
the allowance for credit losses will be charged. To the extent losses
experienced are less than the purchase discount, the remaining discount
is accreted into income. The amount of bulk purchased receivables, net of
unearned interest and insurance, and the related purchase discount
outstanding were approximately $3,276,463 and $333,730, respectively, at
March 31, 1996 and approximately $1,396,600 and $132,007, respectively,
at March 31, 1995.
With holdback arrangements, an auto dealer or other retailer will assign
receivables to the Company on a loan-by-loan basis, typically at par. The
Company will withhold a certain percentage of the proceeds, generally 5%
to 10%, as a dealer reserve to be used to cover any losses which occur on
these loans. The agreements are structured such that all or a portion of
these holdback amounts can be reclaimed by the dealer based on the
performance of the receivables. To the extent that losses from these
holdback receivables exceed the holdback amounts, the allowance for
credit losses will be charged. The amount of holdback receivables, net of
unearned interest and insurance, and the related holdback amount
outstanding were approximately $24,469,478 and $1,153,450, respectively,
at March 31, 1996 and approximately $8,293,174 and $602,177,
respectively, at March 31, 1995.
9
<PAGE>
The purchase discounts and holdback amounts have been included in
unearned interest.
At March 31, 1996, there were no significant concentrations of
receivables in any type of property or to one borrower.
These receivables are pledged as collateral for a line of credit
agreement.
Changes in the allowance for credit losses for the three months ended
March 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Beginning balance $ 908,800 424,425
Valuation allowance for acquired loans 34,193 -
Provision for credit losses 478,614 108,756
Charge-offs (398,754) (140,605)
Recoveries 67,473 39,841
------------ ------------
Net charge-offs (325,931) (100,764)
------------ ------------
Ending balance $ 1,090,326 432,417
============ ============
</TABLE>
The Company's loan portfolio primarily consists of short term loans, the
majority of which are originated or renewed during the current year.
Accordingly, the Company estimates that fair value of the finance
receivables is not materially different from carrying value.
(3) Indebtedness
At March 31, 1996, the Company maintained a line of credit agreement with
a commercial finance company for $50 million maturing on February 28,
1998. Of this amount, approximately $16.2 million was available at March
31, 1996. Borrowings under this arrangement bear interest at the lender's
prime rate plus a specified percentage, payable monthly. The carrying
amount of this financial instrument approximates market value.
The terms of the line of credit agreement provide that the finance
receivables are pledged as collateral for the amount outstanding. The
agreement requires the Company to maintain certain financial ratios at
established levels and comply with other non-financial requirements.
Also, the agreement prohibits the company from declaring or paying any
dividends upon any shares of its capital stock without prior approval. As
of March 31, 1996, it is management's opinion that the Company met all
such ratios and requirements.
The Company also had borrowings from a credit insurance company which
totaled $500,000 at March 31, 1996 and $300,000 at March 31, 1995.
Borrowings at March 31, 1996 consisted of a $500,000 note maturing in May
1998 and bearing
10
<PAGE>
interest at prime plus 2% and is reset quarterly. The carrying amount of
this financial instrument approximates market value.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Thaxton Group, Inc.(the "Company") is a diversified consumer finance
company that, operating in South Carolina, North Carolina, Virginia and
Tennessee under the name "TICO Credit Company," is engaged primarily in
purchasing and servicing retail installment contracts ("Automobile Sales
Contracts") originated by independent used automobile dealers ("Dealers") and
making and servicing personal loans ("Direct Loans") to persons with limited
credit histories, low incomes or past credit problems ("Non-prime Borrowers").
Under the name "TICO Premium Finance Company" in North Carolina and South
Carolina the Company finances insurance premiums ("Premium Finance Contracts"),
primarily for personal lines of insurance purchased by Non-prime Borrowers
through independent agents ("Premium Finance"). A subsidiary of the Company is
engaged in Premium Finance in Virginia under the name "Eagle Premium Finance".
The Company, as agent, also sells various insurance products (primarily credit
life and credit accident and health) in conjunction with the purchase of
Automobile Sales Contracts or the making of Direct Loans.
The Company believes the best opportunities for continued growth in its
Automobile Sales Contract and Direct Loan portfolios lie in the opening of new
branch offices in small to medium-sized markets in the states where the Company
presently operates and contiguous states that management believes to be under
served by its competitors. The Company plans to open two branch offices in 1996
and three in 1997. The Company estimates that the capital expenditure necessary
for opening each new branch office is approximately $21,000. While there are
certain risks associated with such expansion, the Company believes that its
ability to identify and retain branch management personnel having established
relationships with Dealers, its expertise in extending and servicing credit to
Non-prime Borrowers and other factors will enable it to manage anticipated
growth in its branch office network and in its Automobile Sales Contract and
Direct Loan portfolios. The Company will continue to expand its Premium Finance
Contract portfolio by establishing and broadening relationships with insurance
agencies having a client base in need of premium financing. The Company also
periodically may make bulk purchases of Automobile Sales Contracts and Premium
Finance Contracts if such purchases are deemed beneficial to the Company's
competitive position and portfolio mix.
11
<PAGE>
PROFITABILITY
The following table sets forth certain data relating to the Company's
profitability.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
199 1995
<S> <C> <C>
Average Net Finance Receivables(1) $39,636,208 $17,951,557
Average notes payable (1) 33,382,553 15,584,075
Interest and fee income 3,202,385 1,630,758
Interest expense 874,459 407,385
------------ -----------
Net interest income 2,327,926 1,223,373
Average interest rate earned(1) 32.32% 36.34%
Average interest rate paid(1) 10.48 10.46
----- -----
Net interest rate spread 21.84 25.88
Net interest margin(2) 23.49% 27.26%
</TABLE>
- - ------------
(1) Averages are computed using month-end balances during the periods
presented.
(2) Net interest margin represents net interest income divided by average
Net Finance Receivables.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Finance Receivables at March 31, 1996 were $53,761,576 versus $25,231,289
at March 31, 1995, a 113% increase. The primary component of this increase was
Automobile Sales Contracts, which increased from $13,430,802 at March 31, 1995
to $34,517,347 at March 31, 1996, or 157%. The Company opened four branch
offices in 1995, which generated a significant volume of Automobile Sales
Contracts in 1996. Premium Finance Contracts were up 223%, primarily due to the
purchase of Eagle Premium Finance in September of 1995.
Unearned income at March 31, 1996 was $12,141,454 versus $5,894,669 at
March 31, 1995, a 106% increase which was directly related to the higher volume
of Automobile Sales Contract originations during 1996 and the dealer reserves
associated therewith. The provision for credit losses established for the three
months ended March 31, 1996 was $478,614, versus $108,756 for 1995. The increase
in the provision was due to the increase in receivables outstanding as well as
more conservative reserving practices. The allowance for credit losses as a
percentage of average Net Finance Receivables increased from 2.41% at March 31,
1995 to 2.75% at March 31, 1996.
The growth in finance receivables during the three months ended March 31,
1996 versus the comparable period in 1995 resulted in higher levels of interest
and fee income. Interest and fee income for the three months ended March 31,
1996 was $3,202,385, versus $1,630,758 for the three months ended March 31,
1995, a 96% increase. Interest expense also was higher, increasing to $874,459
for the three months ended March 31, 1996 versus $407,385 for the three months
ended March 31, 1995, a 115% increase. The increase in interest expense was due
to the higher levels of borrowings needed to fund finance receivable
originations.
12
<PAGE>
Net interest income for the three months ended March 31, 1996 increased to
$2,327,925 from $1,223,373 for the comparable period of 1994, a 90% increase.
The increases in net interest income are attributable to the higher levels of
finance receivables, the interest income and fees from which more than offset
the 16% decrease in net interest spread for the three months ended March 31,
1996 versus 1995.
Insurance commissions net of insurance cost increased to $294,059 for the
three months ended March 31, 1996 from $174,386 for 1995, a 69% increase
primarily due to the higher levels of Automobile Sales Contract originations,
the triggering event for most sales of insurance products to borrowers.
Operating expenses increased from $931,711 for the three months ended
March 31, 1995 to $1,576,099 for 1996, a 69% increase. The increase in expenses
was due to opening new offices and expenses incurred related to being a public
company, including one additional executive officer, in addition to a general
increase in costs associated with administering a significantly larger finance
receivable portfolio.
Net income increased to $354,618 for the three months ended March 31, 1996
from $220,522 for 1995. The increase in net income was due to higher levels of
net interest and insurance income, partially offset by higher loss provisions
and expenses.
Stockholders' equity increased from $2,177,209 at March 31, 1995 to
$7,552,353 at March 31, 1996, a 247% increase, as a result of the proceeds of
the initial public offering, conversion of subordinated debt to equity, and
retained earnings from after tax profits during the period.
FINANCIAL CONDITION AT MARCH 31, 1996 AND DECEMBER 31, 1995
Cash decreased from $1,828,484 at December 31, 1995 to $59,048 at March
31, 1996, due to the use of the proceeds from the initial public offering being
used to pay down the Company's Revolving Credit Facility.
Finance receivables at March 31, 1996 were $53,761,576 compared to
$49,252,834 at December 31, 1995, an increase of 9.2%. The primary component of
this increase was Automobile Sales Contracts, which increased $2,061,693, or
6.3%.
Unearned income increased from $11,550,232 at December 31, 1995 to
$12,141,454 at March 31, 1996, a 5.1% increase. The allowance for credit losses
increased from $908,800 at December 31, 1995 to $1,090,326 at March 31, 1996, an
increase of 20%. The increase was due to the increase in receivables outstanding
as well as more conservative reserving practices.
Stockholders' equity increased from $7,177,890 at December 31, 1995 to
$7,552,353 at March 31, 1996, a 5.2% increase, as a result of retained earnings
from after tax profits during the period.
CREDIT LOSS EXPERIENCE
Provisions for credit losses are charged to income in amounts sufficient
to maintain the allowance for credit losses at a level considered adequate to
cover the expected future losses of principal and interest in the existing
finance receivable portfolio. Credit loss experience, contractual delinquency of
finance receivables, the value of underlying collateral and management's
judgement are factors used in assessing the overall adequacy of the allowance
and resulting provision for credit losses. The Company's charge-off policy is
based on an account by account review of delinquent receivables. Losses on
finance receivables secured by automobiles are recognized at the time the
collateral is repossessed. Other finance receivables are charged off when they
become contractually past due 180 days, unless extenuating circumstances exist
leading management to believe such finance receivables will be collectible.
Finance receivables may be charged off prior to the normal charge-off period if
management deems them to be uncollectible.
13
<PAGE>
The following table sets forth the Company's allowance for credit losses at
March 31, 1996, and 1995 and the credit loss experience over the periods
presented.
<TABLE>
<CAPTION>
At or for the Three Months Ended March 31,
1996 1995
<S> <C> <C>
Average net finance receivables(1) $39,636,208 $17,951,557
Allowance for credit losses 1,090,326 432,417
Allowance for credit losses as a percentage of 2.75% 2.41%
average net finance receivables (1)
Dealer reserves and discounts on bulk purchases $1,487,180 $734,184
Dealer reserves and discounts on bulk purchases as 5.85% 5.97%
percentage of Automobile Sales Contracts at period
end(2)
Allowance for credit losses and dealer reserves and 6.50% 6.50%
discount on bulk purchases as a percentage of
average finance receivables (1)
Provision for credit losses $478,614 $108,756
Charge-offs (net of recoveries) 325,931 100,764
Charge-offs (net of recoveries) as a percentage of 3.29% 2.25%
average net finance receivables (1)
</TABLE>
- - ---------------------
(1) Averages are computed using month-end balances of Net Finance Receivables
during the period presented.
(2) Percentages are computed using Automobile Sales Contracts, net of unearned
finance charges only.
14
<PAGE>
The following table presents an allocation of the Company's reserves and
allowances for credit losses, by type of receivable. The allowance for credit
losses has been allocated on an approximate basis between Direct Loans and
Premium Finance Contracts because losses on Automobile Sales Contracts are
charged against dealer reserves if the originating dealer's Specific Reserve
Account is adequate to cover the loss. The entire allowance is, however,
available to absorb losses occurring on any type of finance receivable. The
allocation is not indicative of future losses.
<TABLE>
<CAPTION>
At March 31,
1996 1995
<S> <C> <C>
Dealer reserves and discounts on bulk purchases on Automobile $1,487,180 $734,184
Sales Contracts Allowance for credit losses:
Direct Loans 773,577 369,336
Premium Finance Contracts 316,749 63,081
------- ------
Subtotal 1,090,326 432,417
--------- -------
Total $2,577,506 $1,166,601
</TABLE>
The following table sets forth certain information concerning Automobile
Sales Contracts and Direct Loans at the end of the periods indicated:
<TABLE>
<CAPTION>
At March 31,
1996 1995
<S> <C> <C>
Automobile Sales Contracts and Direct Loans contractually $339,977 $214,566
past due 90 days or more(1)
Automobile Sales Contracts and Direct Loans (1) 36,229,145 18,193,785
Automobile Sales Contracts and Direct Loans contractually .94% 1.18%
past due 90 days or more as a percentage of Automobile
Sales Contracts and Direct Loans
</TABLE>
- - -------------------------
(1) Finance receivable balances are presented net of unearned finance charges,
dealer reserves on Automobile Sales Contracts and discounts on bulk
purchases.
15
<PAGE>
The following table sets forth certain information concerning Premium
Finance Contracts at the end of the periods indicated:
<TABLE>
<CAPTION>
At March 31,
1996 1995
<S> <C> <C>
Premium finance contracts contractually $124,150 $28,460
past due 60 days or more(1)
Premium finance contracts outstanding(1) 5,390,978 1,535,252
Premium finance contracts contractually 2.30% 1.85%
past due 60 days or more as a percentage
of premium finance contracts
</TABLE>
- - -------------------------------------------
(1) Finance receivable balances are presented net of unearned finance charges
and discounts on bulk purchases
LIQUIDITY AND CAPITAL RESOURCES
The Company generally finances its operations and new offices through cash
flow from operations and borrowings under the Revolving Credit Facility. On
February 23, 1996 the Company and its primary lender agreed to amend the
Revolving Credit Facility to provide for borrowings of up to $50 million through
February 28, 1998, an increase of $15 million. As of March 31, 1996, $33,833,000
was outstanding under the Revolving Credit Facility and there was $16,167,000
available for additional borrowing. Funds borrowed under the Revolving Credit
Facility bear interest at a rate equal to a designated prime rate plus a fixed
percentage. The amended Revolving Credit Facility provides for a lower fixed
percentage over prime than did the previous agreement. Amounts outstanding may
not exceed specified percentages of eligible finance receivables. The Revolving
Credit Facility imposes several financial and other covenants, including
leverage tests, dividend restrictions, and minimum net worth requirements. The
Company does not believe these covenants will materially limit its business or
its expansion strategy.
Although the Company's recent public offering of common stock did not
raise sufficient capital to fully implement the Company's long-term business and
growth strategy, management believes that the recent increase in the maximum
borrowings under the Revolving Credit Facility, in addition to cash expected to
be generated from operations, will provide the resources necessary to pursue its
strategy through 1996. The company is currently investigating several options
for raising additional funds to support growth in future years. The Company's
ability to continue its business and growth strategy beyond 1996 may be limited
if its efforts to raise additional capital are unsuccessful.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Information in response to this item is incorporated by
reference from the attached Index to Exhibits.
(B) REPORTS ON FORM 8-K
There were no reports on Form 8-K during the quarter ended March
31, 1996.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE THAXTON GROUP, INC.
(Registrant)
Date: April 30, 1996 /s/JAMES D. THAXTON
James D. Thaxton
President and Chief Executive Officer
Date: April 30, 1996 /s/KENNETH H. JAMES
Kenneth H. James
Vice President, Secretary, and
Chief Financial Officer
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
<S> <C> <C>
2 Stock Purchase Agreement, dated as of September 1, 1995 with Eagle Premium --
Finance Company, Inc.(1)
3.1 Amended and Restated Articles of Incorporation of The Thaxton Group, Inc.(1) --
3.2 Bylaws of the Thaxton Group,Inc.(1) --
10.1 Amended and Restated Loan and Security Agreement dated March 27, 1995 between --
Finova Capital Corporation and the Company(1)
10.2 Loan Agreement dated May 16, 1994 between the American Bankers Insurance --
Company of Florida and the Company(1)
10.3 Promissory note dated April 1, 1995 payable in the amount of $250,000 to --
Thaxton Insurance Group(1)
10.4 Promissory note dated April 1, 1995 payable in the amount of $165,000 to C. L. --
Thaxton, Sr. (1)
10.5 Promissory note dated April 1, 1995 payable in the amount of $250,000 to --
Katherine D. Thaxton(1)
10.6 Promissory note dated April 1, 1995 payable in the amount of $35,000 to --
Katherine D. Thaxton (1)
10.7 Promissory note dated May 1, 1995 payable in the amount of $350,000 to Thaxton --
Insurance Group(1)
10.8 Promissory note dated August 21, 1995 payable in the amount of $100,000 to --
Katherine D. Thaxton(1)
10.9 Security Agreement dated January 19, 1995 between the Company and Oakland Auto --
Sales, including Guaranty by Thaxton Insurance Group, Inc.(1)
10.10 Form of Restricted Stock Award between the Company and Robert L Wilson --
10.11 The Thaxton Group, Inc. 1995 Stock Incentive Plan(1) --
10.12 The Thaxton Group, Inc. Employee Stock Purchase Plan(1) --
10.13 Form of Note Conversion Agreement(1) --
10.14 Amended and Restated Schedule to Loan and Security Agreement dated February 23, --
1996 between Finova Capital Corporation and the Company(2)
10.15 Incentive Stock Option Agreement between Kenneth H. James and the Company (2) --
10.16 Incentive Stock Option Agreement between James A. Cantley and the Company(2) --
10.17 Loan Agreement dated March 18, 1996 between the American Bankers Insurance --
Company of Florida and the Company(2)
11 Statement re: computation of per share earnings 8
21 Subsidiaries of The Thaxton Group, Inc. (1) --
</TABLE>
- - -----------------------------------
(1) Incorporated by reference from Registration Statement on Form SB-2,
Commission File No. 33-97130-A
(2) Incorporated by reference from 1995 Annual Report on Form 10-KSB
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 59,048
<SECURITIES> 0
<RECEIVABLES> 53,761,576
<ALLOWANCES> 1,090,326
<INVENTORY> 0
<CURRENT-ASSETS> 40,588,845
<PP&E> 1,547,288
<DEPRECIATION> 847,038
<TOTAL-ASSETS> 42,891,734
<CURRENT-LIABILITIES> 719,435
<BONDS> 0
0
0
<COMMON> 37,772
<OTHER-SE> 7,514,581
<TOTAL-LIABILITY-AND-EQUITY> 42,891,734
<SALES> 0
<TOTAL-REVENUES> 3,497,744
<CGS> 0
<TOTAL-COSTS> 1,576,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 478,614
<INTEREST-EXPENSE> 874,459
<INCOME-PRETAX> 568,571
<INCOME-TAX> 213,953
<INCOME-CONTINUING> 354,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354,618
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
