<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended March 31, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period from ____________ to _______________
Commission File No. 0-27268
ACC CONSUMER FINANCE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
a Delaware corporation 33-0682821
- ------------------------------- -----------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
12750 High Bluff Drive, Suite 320
San Diego, California 92130
- ---------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (619) 793-6300
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed to Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
--- ----
As of May 6, 1997, the following number of shares of the Company's
capital stock were outstanding: 8,476,978
Indicated by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
herein, and will not be contained, to the best of registrant's knowledge, in the
definitive proxy or information statement incorporated by reference in Part III
of this Form 10-Q or any amendment to this Form 10-Q [ ]
Exhibit Index on Page 17
<PAGE> 2
ACC CONSUMER FINANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents ........................................ $ 2,861,655 $ 1,101,598
Restricted Cash .................................................. 3,278,945 1,561,293
Credit Enhancement Cash Reserves ................................. 10,633,270 8,353,180
Installment Contracts Held-for-Sale, Net ......................... 21,371,143 21,078,692
Installment Contracts Held-for-Investment, Net ................... 2,969,232 3,428,643
Asset-Backed Securities Available-for-Sale ....................... 7,212,000 7,832,174
Excess Servicing Receivables, at Fair Value ...................... 20,056,000 15,573,618
Accounts Receivable .............................................. 1,788,090 3,229,933
Interest Receivable .............................................. 273,000 324,889
Fixed Assets, Net ................................................ 1,198,096 1,140,525
Repossessed Vehicles ............................................. 308,601 297,565
Prepaid Expenses ................................................. 358,347 394,571
Other Assets ..................................................... 503,971 316,709
----------- -----------
Total Assets ................................................ 72,812,350 64,633,390
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interim Financing Facilities, Net ................................ 14,245,480 11,026,130
Subordinated Notes, Net .......................................... 19,158,515 19,196,110
Other Borrowings ................................................. 2,447,618 --
Amount Due to Bank ............................................... -- 3,070,453
Lease Liability .................................................. 278,590 332,259
Tax Liability .................................................... 3,493,143 3,305,287
Accounts Payable and Accrued Liabilities ......................... 5,123,349 3,183,435
----------- -----------
Total Liabilities ........................................... 44,746,695 40,113,674
Shareholders' Equity:
Preferred Stock, $.001 Par Value, 1,817,718 Shares
authorized and No Shares Issued and Outstanding ......... -- --
Common Stock, $.001 Par Value, Authorized 18,000,000,
8,476,978 and 8,292,478 Shares Issued and Outstanding as
of March 31, 1997 and December 31, 1996, Respectively ... 8,477 8,292
Additional Paid-in Capital .................................... 21,629,950 19,931,825
Unrealized Gain on Securities, Net ............................ 1,007,796 168,175
Retained Earnings ............................................. 5,419,432 4,411,424
----------- -----------
Total Shareholders' Equity .................................. 28,065,655 24,519,716
Commitments and Contingencies
Total Liabilities and Shareholders' Equity .................. $72,812,350 $64,633,390
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
ACC CONSUMER FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
MAR. 31, 1997 MAR. 31, 1996
-------------- --------------
<S> <C> <C>
Interest Income
Interest Income ...................... $ 2,679,167 $ 2,024,393
Interest Expense ..................... (1,542,377) (1,092,925)
----------- -----------
Net Interest Income ............... 1,136,790 931,468
Contract Losses
Provision for Contract Losses ........ (217,503) (148,863)
----------- -----------
Net Interest Income after Provision
for Contract Losses ........... 919,287 782,605
Other Income
Servicing and Ancillary Fees ......... 1,801,472 848,879
Gain on Sale of Contracts ............ 5,822,777 2,901,586
----------- -----------
Total Other Income ................ 7,624,249 3,750,465
Total Income ...................... 8,543,536 4,533,070
Expenses
Personnel ............................ 2,594,234 1,853,738
General and Administrative ........... 1,410,263 748,555
Servicing ............................ 660,749 380,906
Occupancy and Equipment .............. 217,613 92,701
Depreciation and Amortization ........ 132,842 99,620
----------- -----------
Total Expenses .................... 5,015,701 3,175,520
Income Before Taxes ............... 3,527,835 1,357,550
Income Tax Provision .............. (1,482,000) (570,000)
----------- -----------
Income From Continuing Operations ........ 2,045,835 787,550
Extraordinary Items:
Loss on Termination of Repurchase
Facility, Net of Tax .... (1,037,827) --
----------- -----------
Net Income ............................... $ 1,008,008 $ 787,550
=========== ===========
Preferred Stock Dividends ................ -- (72,720)
----------- -----------
Net Income Available to Common
Shareholders ..................... $ 1,008,008 $ 714,830
=========== ===========
Net Income per Common Share and
Common Share Equivalent
Continuing Operations ......... $ 0.24 $ 0.13
Extraordinary Item ............ (0.12) --
----------- -----------
Net Income .................... $ 0.12 $ 0.13
=========== ===========
Weighted Average Shares ................... 8,489,887 6,295,655
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
ACC CONSUMER FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
MAR. 31, 1997 MAR. 31, 1996
-------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income .............................. $ 1,008,008 $ 787,550
Adjustments to Reconcile Net Income
to Net Cash Used in Operating Activities:
Gain on Sale of Contracts ............. (5,822,777) (2,901,586)
Amortization and Depreciation ......... 1,494,647 886,784
Provision for Contract Losses ......... 217,503 148,863
Deferred Acquisition Expenses ......... (726,240) (302,060)
Loss on Termination of the
Repurchase Facility ............ 1,784,184 --
Changes in Operating Assets:
Net Cash Deposited into
Restricted Accounts .............. (3,997,742) (964,139)
Net Decrease in Contracts-
Held-for-Sale .................... 1,307,391 2,548,319
Interest Receivable ................... 51,889 70,132
Accounts Receivable ................... 1,441,843 (3,038,797)
Other Assets .......................... (195,000) (110,022)
Prepaid Expenses ...................... 36,224 (194,334)
Changes in Operating Liabilities:
Accounts Payable and Accrued
Liabilities ..................... 1,461,390 1,563,110
----------- -----------
Net Cash Used in Operating
Activities ........................ (1,938,679) (1,506,180)
Cash Flows from Investing Activities:
Net Decrease (Increase) in Contracts
Held-for-Investment ................... 196,247 (272,519)
Principal Paydowns of Asset-Backed
Securities ............................ 890,314 468,562
Proceeds from Liquidation of
Repossessed Vehicles .................. 405,300 545,950
Purchases of Fixed Assets, Net .......... (182,675) (116,574)
----------- -----------
Net Cash Provided by Investing
Activities .................... $ 1,309,186 $ 625,419
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
ACC CONSUMER FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
MAR. 31, 1997 MAR. 31, 1996
------------- --------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net (Decrease) Increase in
Interim Financing Facilities ........... $ 3,033,441 $(3,794,040)
Proceeds from Other Borrowings ........... 2,407,731 3,143,172
Repayment of Other Borrowings ............ -- (533,452)
Net Decrease in Capital Leases ........... (53,669) (44,640)
Increase (Decrease) in Amount
due Bank ............................... (3,070,453) 1,029,845
Net Proceeds from Exercise of Employee
Common Stock Options ................... 72,500 --
Net Proceeds from Issuance of
Preferred Stock ........................ -- 1,000.995
----------- -----------
Net Cash Provided by Financing
Activities .......................... 2,389,550 801,880
Increase (Decrease) in Cash and
Cash Equivalents ............................. 1,760,057 (78,881)
Cash and Cash Equivalents at
Beginning of Period .......................... 1,101,598 120,672
----------- -----------
Cash and Cash Equivalents at End of Period ....... $ 2,861,655 $ 41,791
=========== ===========
Supplemental Disclosure:
Interest Paid ................................ $ 1,789,175 $ 856,377
Taxes Paid ................................... $ 1,138,582 $ --
Non-Cash Issuance of Common Stock ............ $ 1,613,776 $ --
Transfers of Contracts:
Held-for-Sale to Asset-Backed Securities .. $ -- $ 1,613,000
Held-for-Investment to Repossessed Vehicles $ 416,336 $ 560,831
Held-for-Investment to Held-for-Sale ...... $ 3,428,643 $ 1,040,695
Held-for-Sale to Held-for-Investment ...... $ 3,799,318 $ 1,150,831
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of ACC
Consumer Finance Corporation (ACC) and its wholly-owned subsidiaries, OFL-A
Receivables Corp. (OFL-A), ACC Receivables Corp. (Receivables), ACC Funding
Corp. (Funding), and ACC Liquidity, LLC (Liquidity) (collectively, the Company).
All material intercompany accounts and transactions have been eliminated. The
consolidated financial statements as of March 31, 1997, and for the three-month
periods ended March 31, 1997, and 1996, are unaudited and reflect all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results in the interim periods. The consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1996. The
results of operations for the three-month periods ended March 31, 1997, are not
necessarily indicative of the results for the entire year ending December 31,
1997.
(b) New Accounting Pronouncements
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinquishment of Liabilities". This
statement specifies when financial assets and liabilities are to be removed from
an entity's financial statements, the accounting for servicing assets and
liabilities and the accounting for assets that can be contractually prepaid in
such a way that the holder would not recover substantially all of its recorded
investment. Under SFAS No. 125, an entity recognizes only assets it controls and
liabilities it has incurred, discontinues recognition of assets only when
control has been surrendered, and discontinues recognition of liabilities only
when they have been extinguished. SFAS No. 125 requires that the selling entity
continue to carry retained interests relating to assets it no longer recognizes.
Such retained interests are based on the relative fair values of the retained
interests of the subject assets at the date of transfer. Transfers not meeting
the criteria for sale recognition are accounted for as a secured borrowing with
a pledge of collateral. Under SFAS No. 125, certain collateralized borrowings
may result in assets no longer being recognized if the assets are provided as
collateral and the secured party takes control of the collateral. This
determination is based upon whether: (1) the secured party is permitted to
repledge or sell the collateral and (2) the debtor does not have the right to
redeem the collateral on short notice. Extinguishments of liabilities are
recognized only when the debtor pays the creditor and is relieved of its
obligation for the liability, or when the debtor is legally released from being
the primary obligor under the liability, either judicially or by the creditor.
SFAS No. 125 requires an entity to recognize its obligation to service financial
assets that are retained in a transfer of assets in the form of a servicing
asset or liability. The servicing asset is to be amortized in proportion to, and
over the period of, net servicing income. Servicing assets and liabilities are
to be assessed for impairment based on their fair value. SFAS No. 125 modifies
the accounting for interest-only strips or retained interests in
securitizations, such as capitalized servicing fees receivable, that can be
contractually prepaid or otherwise settled in such a way that the holder would
not recover substantially all of its recorded investment. In this case, it
requires that they be classified as available-for-sale or as trading securities.
Interest-only strips and retained interests are to be recorded at fair value.
Changes in fair value are included in operations, if classified as trading
securities, or in shareholders' equity as unrealized holding gains or losses,
net of the related tax effect, if classified as available for sale. Beginning
January 1, 1997, the Company adopted SFAS No. 125 and recorded its Excess
Servicing Receivables (ESRs) and other retained interests at fair value. An
adjustment to the ESRs carrying value of $1.3 million was included in
shareholders' equity as unrealized gains, net of tax.
5
<PAGE> 7
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) INSTALLMENT CONTRACTS HELD-FOR-SALE
Installment Contracts held-for-sale are summarized as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Principal Balance .................... $ 22,302,086 $ 21,888,020
Purchase Discount .................... (1,125,606) (1,071,263)
Net Deferred Expenses ................ 241,270 231,586
Unrealized Hedge (Gains) Losses ...... (46,607) 30,349
============ ============
$ 21,371,143 $ 21,078,692
============ ============
</TABLE>
In addition to the Contracts owned by the Company, the Company serviced
$278 million and $225 million of Contracts for others as of March 31, 1997, and
December 31, 1996, respectively. The Company services Contracts for borrowers
residing in approximately 40 states, with the largest concentrations of
Contracts in California, Florida, Pennsylvania, and Texas . An economic slowdown
or recession or a change in the regulatory or legal environment in one or more
of these states could have a material adverse effect on the performance of the
Company's existing servicing portfolio and on its Contract purchases.
(3) INSTALLMENT CONTRACTS HELD-FOR-INVESTMENT
Contracts held-for-investment represent Contracts that are ineligible
for sale (primarily due to their delinquent status) or represent Contracts which
management has no present intention to sell. Also included in Installment
Contracts held-for-investment are performing Contracts, which are pledged in
connection with the ACC Auto Grantor Trust 1996-D Transaction. The principal
balance of these pledged Contracts was $2.8 million and $2.9 million as of March
31, 1997 and December 31, 1996, respectively. The Contracts held-for-investment
are comprised of the following:
<TABLE>
<CAPTION>
MAR. 31, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Principal Balance .................... $ 3,509,104 $ 4,151,152
Purchase Discount .................... (168,735) (200,292)
Net Deferred Expenses ................ 38,863 42,783
Allowance for Contract Losses ........ (410,000) (565,000)
=========== ===========
$ 2,969,232 $ 3,428,643
=========== ===========
</TABLE>
(4) EXCESS SERVICING RECEIVABLES
The Company has created ESRs as a result of the sale of Contracts in
the securitization transactions. ESRs are determined by computing the present
value of the excess of the weighted average coupon on the Contracts sold
(ranging from 19.77% to 20.62%) over the sum of: (i) the coupon on the
asset-backed securities (ranging from 5.95% to 6.96%), (ii) a base servicing fee
paid to the Company (ranging from 3.00% to 3.15%) and (iii) the net charge-offs
expected to be incurred on the portfolio of Contracts sold. For purposes of the
projection of the excess servicing cash flows, the Company assumes that net
charge-offs (including accrued interest) will approximate 11.5% to 12.5% of the
original principal of the Contracts sold, over the life of the portfolio.
Further, the Company uses an estimated average Contract life of 1.5 to 1.8
years. The cash flows expected to be received by the Company, before expected
losses, are then discounted at a market interest rate that the Company believes
an unaffiliated third-party purchaser would require as a rate of return on such
a financial instrument. Expected losses are discounted using a risk-free rate
equivalent to the rate earned on securities rated AAA/Aaa or better with a
duration similar to the duration estimated for the underlying Contracts. This
results in an effective overall discount rate of approximately 16% on an
annualized basis. The excess servicing cash flows are only available to the
Company to the extent that there is no impairment of the credit enhancements
established at the time the Contracts are sold. ESRs are amortized using the
interest method and are offset
6
<PAGE> 8
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
against servicing and ancillary fees. To the extent that the actual future
performance results are different from the estimated excess cash flows, the
ESRs will be adjusted on a quarterly basis with corresponding adjustments
made to income.
A summary of the activity in ESRs is as follows:
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED YEAR ENDED
MAR. 31, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Beginning Balance ........................ $ 15,573,618 $ 5,590,878
Additions from Securitizations .... 4,587,000 14,864,000
Amortization of Excess Servicing .. (1,402,000) (4,881,260)
Unrealized Gain ................... 1,297,382 --
------------ ------------
Ending Balance ........................... $ 20,056,000 $ 15,573,618
============ ============
</TABLE>
In connection with the valuation of ESRs, the Company projects losses in the
pool of Contracts which effectively represents the estimated undiscounted
recourse loss allowance offset against the ESRs. As of March 31, 1997, and
December 31, 1996, the estimated undiscounted recourse loss allowance embedded
in the ESRs, excluding accrued interest, was $23.9 Million and $19.2 million,
respectively. This recourse loss allowance represents 8.6% and 8.8% of the
Contracts serviced for others as of March 31, 1997, and December 31, 1996,
respectively.
(5) INTERIM FINANCING FACILITIES, NET
The Company has entered into financing arrangements, the object of which is
to provide financing for the Contracts during the interim period between
purchase of the Contracts and the sale of those Contracts in asset-backed
securities. As of March 31, 1997, the Company's primary financing facility was
the Alpine commercial paper backed facility (the CP Facility). Prior to March
31, 1997, the Company's primary financing facility was the Repurchase Facility
with Cargill.
(a) Alpine Commercial Paper backed Facility
On March 27,1997, the Company entered into a $100 million interim warehouse
facility. The lenders are Alpine Corporation (Alpine) and Credit Suisse First
Boston (CSFB) and the borrower is ACC Liquidity LLC (Liquidity), a newly-formed
Delaware limited liability company, wholly-owned by special purpose subsidiaries
of ACC. The facility is secured by Contracts pledged by Liquidity (purchased in
a true sale from OFL-A or ACC) and is guaranteed by Financial Securities
Assurance Corp. (FSA). The facility bears interest at the weighted average
interest rate of the commercial paper issued by Alpine plus commissions and
expenses, repriced daily, unless the lenders, in their sole discretion,
determine in good faith that the commercial paper rate is unavailable or not
desirable and apply a bank rate equal to the euro-dollar rate plus 75 basis
points. The interest rate on the CP Facility was 7.0% and the outstanding
balance was $14.5 million as of March 31, 1997.
Advances under the CP Facility are limited to the borrowing base. The
borrowing base is calculated under a formula that takes into account, among
other factors, the principle balance of the eligible Contracts pledged under the
facility, the current interest rate for US Treasury securities with a 21-month
remaining term or the one-month LIBOR, which ever is greater, and the weighted
average coupon rate of the Contracts pledged under the facility. The borrowing
base cannot exceed 93% of the principal balance of eligible Contracts. The CP
Facility requires the borrower to do a take out financing within four months of
the closing of the CP Facility and at least once each six months thereafter.
Additionally, prior to September 1997, the Company is obligated to secure an
additional warehouse facility from another lender, with a minimum line of credit
of the lesser of $50 million or 50% of the prior quarter's Contract purchases.
The Company is in the process of procuring a second warehouse line.
7
<PAGE> 9
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The events of default under the CP Facility include a downgrade of the
claims paying ability of FSA by S&P or Moody's, the average delinquency rate on
the Contracts pledged in connection with the facility exceeding 2.5% during the
preceding four months or the occurrence of a servicer event of default. A
servicer event of default include: (i) total delinquencies as a percentage of
the Company's servicing portfolio in excess of 8% during the preceding three
months or (ii) annualized net charge-offs as a percentage of the average
servicing portfolio in excess of 7% during the preceding six months. The lenders
have the right to replace ACC as the servicer upon the occurrence of a servicer
event of default. In addition, the CP Facility contains certain covenants. If
these covenants are not met, a termination of the facility could occur. As of
March 31, 1997, management believes the Company was in compliance with all such
covenants.
(b) Repurchase Facility
In January 1997, the Company entered into an agreement with Cargill that
gave the Company the option to terminate the Repurchase Facility through May 31,
1997. In exchange for this early termination option, the Company issued Cargill
174,500 shares of unregistered Common Stock. Also included in this agreement, is
a modification of the NIM Facility (included in Other Borrowings on the
Consolidated Balance Sheet) that reduced maximum borrowings from $15 million to
$10 million. The Company exercised this option and terminated the repurchase
facility on March 31, 1997. The Company recognized an extraordinary loss of
approximately $1.0 million in connection with this termination, which equals the
value of the shares issued to Cargill and certain unamortized debt issuance
costs, net of tax.
Cargill financed 100% of the purchase price of the Contracts under the
Repurchase Facility. The interest rate on the Repurchase Facility was the
one-month LIBOR, plus 3.25%. The relevant LIBOR was 5.7% as of March 31, 1997,
and 5.5% as of December 31, 1996. Under the terms of the Repurchase Facility,
the Company would sell Contracts to Cargill with an agreement to repurchase the
Contracts. The repurchase was intended to occur concurrent with the sale of the
Contracts. When the Contracts were repurchased from Cargill, the Company was
obligated to pay Cargill a repurchase fee that is calculated as a percentage of
the Contracts ranging from 2% to 0.5%, depending upon the cumulative amount of
Contract dispositions.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussion includes forward looking information that involves risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause such differences includes those
discussed in the Company's form 10K for the year ended December 31, 1996.
From the inception of the Company on July 15, 1993, through April 30,
1995, the primary source of revenue for the Company was net interest income on
the Contracts owned by the Company. In May 1995, the Company initiated an
asset-backed securitization program by which the Company sells its Contracts and
retains subordinate asset-backed securities (Subordinated Securities) or
performing Contracts pledged as credit enhancements (Spread Receivables), excess
servicing receivables (ESRs) and credit enhancement cash reserves. Through March
31, 1997, the Company has sold $367 million of Contracts through asset
securitizations. Since initiation of the asset-backed securitization program,
the Company's earnings have been increasingly attributable to the gains
recognized on the sale of the Contracts and servicing revenues generated in
conjunction with servicing those sold Contracts. In contrast, interest income
has been a declining portion of total revenues.
On March, 27, 1997, the Company entered in to a new $100 million
commercial paper backed warehouse facility to finance its Contract purchases
during the interim period between the purchase of Contracts and the sale of
Contracts through asset-backed securities (the CP Facility). Since inception of
the Company and through March 27, 1997, the Company's interim financing facility
was the Repurchase Facility with Cargill. On March 31, 1997, the Company
terminated the Repurchase Facility pursuant to an option granted to the Company
in January 1997, in exchange for the issuance of 174,500 shares of unregistered
Common Stock. The shares issued to Cargill were valued at $1.6 million. The
value of these shares as well as certain unamortized deferred expenses, were
recognized as an extraordinary item during the three-month period ended March
31, 1997. The Repurchase Facility and the CP Facility are referred to as the
Interim Facility in the discussion below.
RESULTS OF OPERATIONS
The Three-Month Period ended March 31, 1997, Compared to the Three-Month Period
ended March 31, 1996
During the three-month period ended March 31, 1997, income from
continuing operations increased 160% to $2.0 million. This increase is primarily
due to increases in the gain on sale of Contracts and servicing and ancillary
fees totaling $3.9 million which resulted from an increase in the sale of
Contracts and an increase in the average balance of sold Contracts (the
Servicing Portfolio). During the three-month period ended March 31, 1997,
Contracts sold were $74.9 million and the average Servicing Portfolio was $233
million, compared to $36.3 million of Contracts sold and an average Servicing
Portfolio of $91 million during the same period in 1996. Partially offsetting
these increases was an increase in operating expenses of $1.8 million as a
result of the Company's expanded purchasing and servicing operations. The
Company purchased $76.7 million of Contracts during the three-months ended March
31, 1997, as compared to $33.7 million during the same period in the prior year.
The Company recognized a $1.0 million fee paid to terminate the Repurchase
Facility, net of tax, as an extraordinary item during the three-month period
ended March 31, 1997. The Company reported net income of $1.0 million during the
three-month period ended March 31, 1997, compared to $788,000 for the
three-month period ended March 31, 1996.
NET INTEREST INCOME. The Company earned approximately $1.1 million of
net interest income during the three-month period ended March 31, 1997, compared
to $931,000 during the three-month period ended March 31, 1996. The principal
source of the Company's net interest income was the net yield on Contracts
(yield on Contracts less the cost of the Interim Facility) which amounted to
$805,000 during the three-month period ended March 31, 1997, compared to
$954,000 during the three-month period ended March 31, 1996. This decrease
resulted primarily from a lower yield on Contracts and a higher average
outstanding Interim Facility balance during the three-month period ended March
31, 1997, compared to the same period in 1996. The yield on Contracts decreased
to 20.6% during the three-month period ended March 31, 1997, compared to 21.2%
during the three-month period ended March 31, 1996. The average outstanding
Interim Facility balance was $42 million during the three-month period ended
March 31, 1997, compared to $34 million during the three-month period ended
March 31, 1996.
9
<PAGE> 11
During the three-month period ended March 31, 1997, the Company earned
interest income of $950,000 on asset-backed securities, cash balances held in
restricted accounts and as credit enhancement cash reserves, compared to
$297,000 during the three-month period ended March 31, 1996. This increase is
due to significant expansion of the asset-backed security program since March
31, 1996.
The Company recognized interest expense on long term borrowings (total
amounts owed in connection with the $20 million subordinated notes issued in
November 1996 (the Notes), the NIM Facility and the lease liability) of $618,000
during the three-month period ended March 31, 1997, compared to $319,000 in the
prior year. This increase is due to interest payments on the Notes, partially
offset by reduced interest payments on the NIM Facility. During the three-month
period ended March 31, 1997, the Company recognized $518,000 of interest expense
in connection with the Notes. Expenses related to NIM Facility advances
decreased to $45,000 during the three-month period ended March 31, 1997, from
$291,000 during the three-month period ended March 31, 1996. A $2 million
advance on the NIM Facility was outstanding for six days during the three-month
period ended March 31, 1997, as compared to an average balance of $8.4 million
during the entire three-month period ended March 31, 1996.
CONTRACT LOSS PROVISION. The Company recorded a provision for Contract
losses of $218,000 for the three-month period ended March 31, 1997, compared to
$149,000 for the three-month period ended March 31, 1996. The allowance for
Contract losses is maintained at a level deemed by management to be adequate to
provide for losses in the held-for-investment portfolio. The increase in the
provision for contract losses was due to a higher balance of delinquent
Contracts as of March 31, 1997 as compared to March 31, 1996.
SERVICING REVENUES. The Company recorded $1.8 million of servicing and
ancillary fees for the three-month period ended March 31, 1997, compared to
$849,000 for the three-month period ended March 31, 1996. This substantial
increase in servicing revenues arose from an increase in the average size of the
Servicing Portfolio to $233 million during the three-month period ended March
31, 1997, as compared to $91 million during the same period in 1996. Future
servicing revenues could be adversely affected if the level of charge-offs and
prepayments in any pool of Contracts sold exceeds the Company's estimate of such
levels at the time of the sale of such Contracts in asset-backed securities.
GAIN ON THE SALE OF CONTRACTS. The Company recognized a gain on sale of
Contracts of $5.8 million during the three-month period ended March 31, 1997,
representing approximately 7.8% of the $74.9 million of Contracts sold in
connection with the ACC Auto Grantor Trust 1997-A Transaction, compared to $2.9
million, or approximately 8.0% of the $36.3 million of Contracts sold in
connection with the Auto Grantor Trust 1996-A Transaction in the three-month
period ended March 31, 1996.
OPERATING EXPENSES. The Company reported operating expenses of $5.0
million during the three-month period ended March 31, 1997, compared to $3.2
million for the three-month period ended March 31, 1996. The increase in
expenses reflected the growth in the amount of Contracts purchased and serviced
by the Company. The operating expense ratio (annualized operating expenses as a
percentage of average Contracts owned and serviced) improved to 7.3% for the
three-month period ended March 31, 1997, from 9.7% during the three-month period
ended March 31, 1996.
Personnel expenses for the three-month period ended March 31, 1997,
were $2.6 million, compared to $1.9 million during the three-month period ended
March 31, 1996. Personnel expenses consisted primarily of salaries and wages,
performance incentives, employee benefits and payroll taxes. The overall
increase in personnel expenses reflected the growth of the Company's full-time
employees from 161 as of March 31, 1996, to 266 as of March 31, 1997. The
Company expects that its number of full-time employees will continue to increase
commensurate with the growth of the Company's servicing portfolio.
The Company's general and administrative expenses increased to $1.4
million for the three-month period ended March 31, 1997, from $749,000 for the
three-month period ended March 31, 1996. These expenses consisted primarily of
telecommunications expenses, travel expenses, marketing expenses, professional
fees, insurance expenses, credit bureau expenses and management information
systems expenses. The increase in general and administrative expenses reflected
the substantial expansion of the Company's operations.
10
<PAGE> 12
Servicing expenses increased to $661,000 for the three-month period
ended March 31, 1997, compared to $381,000 for the three-month period ended
March 31, 1996, due to the substantial growth of the total Contracts owned and
serviced. These expenses consisted primarily of out-of-pocket collection,
repossession and liquidation expenses.
Occupancy and equipment expenses increased to $218,000 for the
three-month period ended March 31, 1997, from $93,000 for the three-month period
ended March 31, 1996. The increase in occupancy and equipment expenses reflected
the expansion of the Company's headquarters office space and its regional
operations since March 31, 1996. The Company expects its occupancy expenses to
continue to increase as the Company expands its headquarters facility to
accommodate the expansion of the Company's operations.
INCOME TAXES. The effective tax rate for the three-month periods ended
March 31, 1997 and 1996, was 42%.
CREDIT PERFORMANCE
The tables below provide the Company's historic delinquency experience and
net charge-off experience with respect to its entire Contract portfolio, which
includes Contracts owned by the Company and Contracts sold in asset-backed
securities, at the dates, and for the periods, indicated. All amounts and
percentages are based on the full amount remaining to be repaid on each
Contract, net of any unearned finance charges.
DELINQUENCY EXPERIENCE AS OF:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31,
1997 1996 1996 1996 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross Servicing Portfolio (000s) . $303,986 $251,751 $209,761 $172,562 $139,969
Period of Delinquencies (000s)(1):
31-60 Days ..................... 8,149 8,323 6,234 4,827 2,256
61-90 Days ..................... 2,957 2,847 1,832 1,347 1,010
91 Days ........................ 1,512 1,516 1,088 662 561
-------- -------- -------- -------- --------
Total Delinquencies (000s) ....... $ 12,618 $ 12,686 $ 9,154 $ 6,836 $ 3,827
======== ======== ======== ======== ========
Total Delinquencies as a Percentage
of Servicing Portfolio ......... 4.15% 5.04% 4.36% 3.96% 2.73%
Amount in Repossession (000's)(2). $ 2,454 $ 2,216 $ 1,685 $ 1,369 $ 1,130
Amount in Repossession as a
Percentage of Servicing
Portfolio ...................... 0.81% 0.88% 0.80% 0.79% 0.81%
</TABLE>
NET CHARGE-OFF EXPERIENCE FOR THE THREE MONTHS ENDED:
<TABLE>
<CAPTION>
------------------------------------------------------------------
MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31,
1997 1996 1996 1996 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Servicing Portfolio
Outstanding (000s) (3).......... $274,507 $232,617 $ 191,162 $156,266 $ 128,754
Net Charge-Offs (000s) (4)(5)....... $3,543 $ 2,945 $ 2,227 $ 1,329 $ 1,417
Annualized Net Charge-Offs as a
Percentage of Average Servicing
Portfolio........................ 5.16% 5.06% 4.66% 3.40% 4.40%
</TABLE>
(1) The Company considers a Contract delinquent when an obligor fails to make
at least 90% of the contractual payment by the stated due date. The
period of delinquency is based upon the number of days payments are
contractually past due. Contracts not yet 31 days past due are not
considered to be delinquent. As of March 31, 1997, the Company had
granted payment extensions of 30 days or more for Contracts representing
1.7%
11
<PAGE> 13
of the outstanding balance of the entire Contract portfolio, and
these Contracts were not considered delinquent.
(2) Amount in repossession represents the outstanding principal on Contracts
for which vehicles have been repossessed, but not yet liquidated.
(3) For the three-month period ended December 31, 1996, and March 31, 1997,
average equals average of Contract balances outstanding as of the
beginning and the end of the month during the period. For prior periods,
average equals average of Contract balances outstanding as of the
beginning and the end of the period presented.
(4) Charge-off amounts exclude the effect of accrued interest, discounts paid
by the dealers and potential recoveries from legal proceedings against
borrowers.
(5) Net charge-offs are net of recoveries and include the remaining Contract
balance at time of charge-off. In the case of repossession, net
charge-offs include the remaining Contract balance at the time of
repossession less liquidation proceeds (for disposed vehicles), NADA
wholesale value (for vehicles repossessed but not sold), claims
receivable under the Company's VSI insurance, or rebates receivable from
dealers relating to extended warranty policies on charged-off Contracts
refundable under the Dealer Agreement. Net charge-offs do not include
repossessions that are less than 120 days delinquent and are not yet
charged-off.
The management of the Company believes that the payment practices of its
borrowers are partially a function of the time of year. Since these borrowers
typically have low disposable incomes, they tend with more frequency to become
late in payments on their Contracts during the fall and early winter months,
when the holiday season generates competing demands for their limited disposable
income and when these borrowers encounter weather-related work slow-downs. As a
result, if all other factors are equal, management expects delinquencies to be
highest in the fourth calendar quarter. Due to the 60-120 day lag between
initial delinquency and charge-off, management expects these seasonal factors to
cause charge-offs to be highest in the fourth and first calendar quarters. The
increase in charge-offs and delinquencies during the three-month period ended
March 31, 1997, as compared to the three-month period ended March 31, 1996, is
primarily due to the seasoning of the total Contract portfolio.
Since January 1, 1995, the Company has maintained, at its own expense,
vendor single interest (VSI) insurance that protects the Company's interest in
the collateral against uninsured physical damaged (including total loss). For
the periods presented above, the Company's recoveries on its VSI insurance
reduced its net charge-offs (including Contracts owned and sold) by $1.5 million
and the total premiums paid by the Company were $1.1 million. Commencing January
1, 1997, VSI insurance was provided by a new carrier. The terms of this new
policy are almost identical in nature as the previous policy except that losses
due to skips are no longer covered. Historically, most skips have been located
either by the Company or by the VSI insurance provider, and the Company believes
that it can manage skips more efficiently internally. The average net loss rate
for periods in which the VSI policy covered skips in the table above was 4.5%,
annually. Proceeds collected in connection with skips approximated $240,000
during those same periods. Had the VSI policy not covered skips, the average net
loss rate would have been 4.6% annually for those same periods.
ALLOWANCE FOR CONTRACT LOSSES
The Company maintains an allowance for losses on Contracts that are
held-for-investment. The Company determines an allowance for Contract losses
based on an estimate of the losses inherent in the held-for-investment
portfolio, including estimates of the frequency of defaults for various
delinquency ranges and the expected average severity of losses on these
defaults. As of March 31, 1997, and December 31, 1996, in addition to delinquent
Contracts, Contracts held-for-investment included Contracts pledged as
additional credit enhancement in connection with the 1996-D Transaction (the
Spread Receivables). The allowance for Contract losses as of March 31, 1997, was
$410,000, or 12% of the total Contracts held-for-investment. As of December 31,
1996, the allowance for Contract losses was $565,000, or 14% of the total
Contracts held-for-investment.
In connection with the valuation of the ESRs, the Company projects losses in
the pool of Contracts which effectively represents the estimated undiscounted
recourse loss allowance contained within the valuation of the ESRs. As of March
31, 1997, and December 31, 1996, the estimated undiscounted recourse loss
allowance embedded in the ESRs (excluding accrued interest) was $23.9 million
and $19.2 million, respectively. The combined allowance for losses on Contracts
held-for-investment and the recourse loss allowance embedded in the ESRs was
8.0% of the Contracts owned and serviced as of March 31, 1997, as compared to
7.9% at December 31, 1996.
12
<PAGE> 14
FINANCIAL CONDITION AND LIQUIDITY
To date, the Company's financing needs have been primarily driven by two
factors. First, the Company requires working capital to fund its operating
expenses, interest on its indebtedness, and income taxes because the net
interest income earned on the Contracts owned by the Company is restricted and
not available for general operating purposes. Second, the securitization program
is capital intensive as the Company must fund credit enhancement and
securitization expenses. Additionally, as of March 27, 1997, the Company also
requires cash to fund a portion of the Contracts purchased as the CP Facility
does not cover 100% of the purchase price. The Company expects to have an
ongoing need for cash to support operations, Contract purchases and the
securitization program. ACC's only substantial source of cash comes from fees
generated from servicing Contracts pledged in conjunction with its Interim
Facility and Contracts sold in asset-backed securities. Because ACC is
responsible for virtually all operating expenses, ACC regularly requires cash
infusions from its subsidiaries to fund operating expenses and to service ACC's
indebtedness. These cash infusions are recognized as intercompany loans and are
eliminated during consolidation of the financial statements of the Company.
Prior to March 31, 1997, the Company has financed its acquisition of
Contracts primarily through the Repurchase Facility with Cargill. Cargill
financed 100% of the purchase price of the Contracts under the Repurchase
Facility. On March 27,1997, the Company entered into a new $100 million interim
warehouse facility. The lenders are Alpine Corporation (Alpine), a commercial
paper issuer, and Credit Suisse First Boston and the borrower is ACC Liquidity
(Liquidity), a newly-formed Delaware limited liability company, wholly-owned by
special purpose subsidiaries of ACC. The CP Facility is secured by Contracts
pledged by Liquidity (purchased in a true sale from OFL-A or ACC) and is
guaranteed by Financial Security Assurance Corp. The CP Facility bears interest
at the weighted average of the commercial paper issued by Alpine plus
commissions and expenses, repriced daily. The interest rate on the CP Facility
was 7.0% as of March 31, 1997.
Advances under the CP Facility are limited to the borrowing base. The
borrowing base is calculated under a formula that takes into account, among
other factors, the principal balance of the Contracts pledged under the
facility, the current interest rate for US Treasury securities with a 21-month
remaining term or the one-month LIBOR, whichever is greater, and the weighted
average coupon rate of the Contracts pledged under the CP Facility. The
borrowing base cannot exceed 93% of the principal balance of eligible Contracts.
As of March 31, 1997, the advance rate was 91% of eligible Contracts, including
a 1% liquidity cash reserve. If Treasury rates or LIBOR rises or the weighted
average coupon of Contracts being purchased by the Company declines, then the
advance rate will decline if all other factors remain the same. A decrease in
advance rates will increase the Company's capital requirements for the facility
and adversely effect its liquidity.
Historically, the Company has operated on a negative cash flow basis and,
depending upon the Company's growth of Contract purchase volumes and its
Contract securitization program, its negative cash flow may continue into the
foreseeable future. The Company has funded its negative operating cash flows
principally through borrowings under the NIM Facility, proceeds from the Notes
and from the sale of equity securities. Additionally, the Company has begun to
sell the Subordinated Securities created in connection with its securitization
transactions. During the three-month period ended March 31, 1997, the Company
received $4.7 million in cash from the sale of Subordinated Securities from the
1997-A transaction. The Company intends to continue this practice in future
transactions, but there is no assurance that there will be a liquid market for
such Subordinated Securities. During the three-month period ended March 31,
1997, the Company also reduced its current cash requirements by changing the
structure of its asset securitization transactions to a structure that permits
deferral of income taxes on the gain on sale. In all prior securitization
transactions, the gain on sale has resulted in a cash tax obligation in the
current period. In order to execute its business strategy, the Company is
dependent upon the Interim Facility, its asset securitization program, its
ongoing ability to access capital markets to obtain long term debt and equity
capital and the sale of Subordinated Securities. As of March 31, 1997, there
were $2.0 million in advances outstanding on the NIM Facility and the facility
has a borrowing base of $10 million based upon collateral available to be
pledged. If the Company continues to sell the Subordinated Securities in
connection with future securitization transactions, the Company's available
borrowing base under the NIM Facility, which is based upon the facility's
valuation of Subordinated Securities and ESRs pledged as collateral, may decline
to less than $10 million. Factors that affect the Company's access to capital
markets or the cost of capital include, among others, interest rates, general
economic conditions and the Company's results of operations, financial
condition, business prospects (including competitive conditions), leverage and
the performance of its asset securitizations. In addition, covenants
13
<PAGE> 15
in the indenture for the Notes and in future debt securities and financing
facilities may significantly restrict the Company's ability to incur
additional indebtedness or issue new equity securities.
During the three-month periods ended March 31, 1997, and 1996, cash
generated from payments received on Contracts financed under the Interim
Facility were used to reduce indebtedness under, or was deposited into
restricted accounts as additional collateral for, the Interim Facility. Proceeds
from the securitization of Contracts were also used by the Company to reduce
indebtedness under the Interim Facility. Following each of the asset
securitization transactions, excess servicing cash flows were deposited into
restricted accounts to build credit enhancement cash reserves. Once the amounts
in these credit enhancements reach required levels, any additional excess
servicing revenues are distributed to the Company. During the three-month period
ended March 31, 1997, the Company successfully renegotiated the net loss,
default and delinquency trigger levels for its outstanding securitization
transactions and increased the required credit enhancement levels from 7% to 8%
of the outstanding Contracts. As of March 31, 1997, the net loss, default and
delinquency levels of the various securitized Contract pools were below the
renegotiated trigger levels. Under normal circumstances, for securitization
transactions prior to the 1997-A Transaction, the Company expects to reach
required credit enhancement levels eight to 12 months following the effective
date of the securitizations. The 1997-A Transaction, and future securitizations
if the Company continues to sell the Subordinated Securities, will take six to
12 months longer as all excess distributions from the spread accounts will be
used to pay down the Subordinated Securities. During the three-month period
ended March 31, 1997, $1.0 million was distributed to the Company from the
spread accounts from prior transactions.
During the three-month period ended March 31, 1997, the Company used net
cash from operations of $1.9 million, compared to $1.5 million during the
three-month period ended March 31, 1996. This increase in cash used by operating
activities is primarily due to increases in net cash deposited into restricted
accounts less decreases in net cash from Contracts held for sale and accounts
receivable.
The net cash provided by investing activities was $1.3 million during the
three-month period ended March 31, 1997, compared to $625,000 in the three-month
period ended March 31, 1996. This increase in cash provided was primarily due to
principal paydowns associated with a larger portfolio of asset-backed
securities, as well as a smaller balance of Contracts held-for-investment during
the three-month period ended March 31, 1997, as compared to the three-month
period ended March 31, 1996.
The net cash provided by financing activities was $2.4 million for the
three-month period ended March 31, 1997, compared to $802,000 during the
three-month period ended March 31, 1996. This increase in cash provided by
financing activities is the result of increases in cash from the Interim
Facilities less cash used to repay amounts due bank and the absence of cash from
the issuance of preferred stock.
The Company anticipates that funds available under the new CP Facility,
proceeds from the sale of Subordinated Securities and borrowings under the NIM
Facility will be sufficient to satisfy the Company's estimated cash requirements
for the next 12 months. Additionally, under the CP Facility, the Company is
obligated to secure an additional warehouse facility from another lender, with a
minimum line of credit of the lesser of $50 million or 50% of the prior quarters
Contract purchases. If these funds are not available for any reason or if the
Company's cash requirements increase, the Company may be required to seek
additional funding.
INTEREST RATE RISK MANAGEMENT
The Company maintains an ongoing hedging program for the purpose of
mitigating the potential impact of changing interest rates on the gain on the
sale of Contracts. The hedging strategy is implemented through the purchase of
futures contracts on two-year Treasury instruments. Gains and losses on the
hedging program are recorded as an adjustment to the accounting basis of the
Contracts until such time that the Contracts are sold. At the time of sale, the
previously unrealized gains or losses are recognized as an adjustment to the
gain on the sale of the Contracts.
The market value of these futures contracts responds inversely to changes in
the value of the Contracts. The Company recognized net losses on the hedging
program of $268,000 during the three-month period ended March 31, 1997, as
compared to net gains of $143,000 during the three-month period ended March 31,
1996. As of March
14
<PAGE> 16
31, 1997, the Company had unrealized gains under the hedging program of
$47,000. As of December 31, 1996, the Company had unrealized losses under the
hedging program of $30,000.
The Company began actively using the hedging program in January 1995 and the
extent to which the Contracts held by the Company are hedged has varied and will
continue to vary from time to time, depending upon prevailing interest rates and
other economic factors. The Company may choose not to maintain the hedging
program based on management's assessment of interest rate risk and the costs
associated with the hedging program. As of March 31, 1997, the Company owned $23
million of Contracts (excluding approximately $2.8 million of performing
Contracts pledged as credit enhancements) and maintained a $10 million hedge
position.
15
<PAGE> 17
Part II. Other Information
ITEM 2. CHANGES IN SECURITIES
(c) On January 31, 1997, the Company issued 174,500 unregistered shares of
Common Stock (the Shares) to Cargill Financial Services Corporation (Cargill) in
exchange for and option to terminate early a Repurchase Facility. The Shares had
a market value of $10.88 per share based upon the closing price of the Company's
stock on the NASDAQ National Market on the date of issuance The Shares issued in
a negotiated private transaction in reliance upon Section 4(2) of the Securities
Act of 1933, as amended. Following the transaction, Cargill owned 1,132,450
shares of Common Stock of the Company or approximately 13.37% of the outstanding
Common Stock.
16
<PAGE> 18
INDEX
<TABLE>
<CAPTION>
Part 1: Financial Information Page
----
<S> <C>
Item 1: Financial Statements:
Consolidated balance sheets as of March 31, 1997, and
December 31, 1996 ..................................................... 1
Consolidated statements of operations for the three-month periods ended
March 31, 1997, and 1996 .............................................. 2
Consolidated statements of cash flows for the three-month periods ended
March 31, 1997, and 1996 .............................................. 3
Notes to condensed consolidated financial statements .................. 5
Item 2: Management's discussion and analysis of financial condition ........ 9
Part 2: Other Information
Item 2. Changes in Securities .............................................. 16
Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a. Exhibits
Exhibit 11: Computation of weighted average shares outstanding ..... 18
Exhibit 27: Financial data schedule ................................. 20
</TABLE>
17
<PAGE> 19
Exhibit 11: COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------- ---------------
<S> <C> <C>
Beginning Shares outstanding................................. 8,292,478 6,292,478
Issuance of Common Stock................................ 116,333 --
Employee Stock Options
Treasury Stock Method.............................. 78,054 3,177
Exercise of Employee Stock
options........................................... 3,022 --
--------- ---------
Weighted average shares outstanding.......................... 8,489,887 6,295,655
========= =========
</TABLE>
18
<PAGE> 20
SIGNATURES
In accordance with the Securities Exchange Act of 1934, this report has
been duly signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: May 13, 1997 By: /s/ Rocco J. Fabiano
------------------------------
Rocco J. Fabiano
Chief Executive Officer
Date: May 13, 1997 By: /s/ Rellen M. Stewart
------------------------------
Rellen M. Stewart
Chief Financial Officer
Date: May 13, 1997 By: /s/ Shaemus A. Garland
------------------------------
Shaemus A. Garland
Vice President and Controller
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,773,870
<SECURITIES> 7,212,000
<RECEIVABLES> 1,788,090
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,784,194
<PP&E> 1,954,777
<DEPRECIATION> (756,681)
<TOTAL-ASSETS> 72,812,350
<CURRENT-LIABILITIES> 25,588,180
<BONDS> 19,158,515
0
0
<COMMON> 21,638,427
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 72,812,350
<SALES> 0
<TOTAL-REVENUES> 10,303,416
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (5,015,701)
<LOSS-PROVISION> (217,503)
<INTEREST-EXPENSE> (1,542,377)
<INCOME-PRETAX> 3,527,835
<INCOME-TAX> (1,482,000)
<INCOME-CONTINUING> 2,045,835
<DISCONTINUED> 0
<EXTRAORDINARY> (1,037,827)
<CHANGES> 0
<NET-INCOME> 1,008,008
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
