UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
COMMISSION FILE NUMBER: 0-2616
CONSUMERS FINANCIAL CORPORATION
1200 CAMP HILL BY-PASS
CAMP HILL, PA 17011
PENNSYLVANIA 23-1666392
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be 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
registrant was required to file such reports), and (2) has been subject to
filing such requirements for the past 90 days.
Yes XX No
Indicate the number of shares outstanding of each of the issuer s classes
of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock July 31, 1998
$.01 Stated Value 2,583,835 shares
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART 1. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements:
Consolidated Statement of Net Assets in Liquidation - 3
June 30, 1998
Consolidated Statement of Changes in Net Assets in Liquidation - 4
For the Period from March 25, 1998 to June 30, 1998
Consolidated Balance Sheet - December 31, 1997 5
Consolidated Statements of Operations - 6
For the Period from January 1, 1998 to March 24, 1998
and for the Six and Three Months Ended June 30, 1997
Consolidated Statements of Cash Flows - 7
For the Period from January 1, 1998 to March 24, 1998
and for the Six Months Ended June 30, 1997
Notes to Consolidated Financial Statements 8 - 14
Item 2. Management s Discussion and Analysis of Results of 15-17
Operations and Financial Condition
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>(in thousands)
<S> <C>
Assets
Investments:
Fixed maturities $3,195
Mortgage loans on real estate 1,867
Other invested assets 122
Short-term investments 3,674
Total investments 8,858
Cash 788
Accrued investment income 77
Receivables 21,218
Prepaid reinsurance premiums 36,987
Deferred policy acquisition costs 25
Property and equipment 1,298
Other real estate 191
Other assets 838
Total assets 70,280
Liabilities and Redeemable Preferred Stock
Liabilities:
Future policy benefits 16,895
Unearned premiums 37,924
Other policy claims and benefits payable 3,895
Due to reinsurer on sale of credit insurance business 2,998
Other liabilities 2,093
Income taxes:
Current 440
Deferred (362)
63,883
Redeemable preferred stock:
Series A, 8 1/2% cumulative convertible 4,815
Total liabilities and redeemable preferred stock 68,698
Net assets in liquidation $1,582
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE PERIOD FROM MARCH 25, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>(in thousands)
<S> <C> <C>
Net assets as of March 25, 1998 $1,715
Operating income:
Net investment income $263
Fees from sale of customer accounts 155
Joint venture fees 178
Net realized investment gains 1
Gain on disposal of discontinued business 125
Miscellaneous 80 802
Operating expenses:
Rent 79
Salaries, wages and employee benefits 153
Professional fees 165
Taxes, licenses and fees 134
Miscellaneous 48 (579)
Income tax expense (113)
Decrease in unrealized appreciation of debt securities (16)
Preferred stock dividends (102)
Adjustment of preferred stock to redemption value (175)
Retirement of treasury shares-preferred 57
Purchase of treasury shares-common (7)
Net assets as of June 30, 1998 $1,582
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>(in thousands)
<S> <C>
Assets
Investments:
Fixed maturities $5,857
Mortgage loans on real estate 2,086
Other invested assets 295
Short-term investments 32,763
Total investments 41,001
Cash 641
Accrued investment income 268
Receivables 16,639
Prepaid reinsurance premiums 9,572
Deferred policy acquisition costs 13,570
Property and equipment 1,350
Other real estate 783
Other assets 1,211
$85,035
Liabilities, Redeemable Preferred Stock and Shareholders Equity
Liabilities:
Future policy benefits $21,467
Unearned premiums 49,994
Other policy claims and benefits payable 2,539
Other liabilities 4,556
Income taxes:
Current 430
Deferred (445)
78,541
Redeemable preferred stock:
Series A, 8 1/2% cumulative convertible, net of treasury stock 4,688
Shareholders equity:
Common stock 30
Capital in excess of stated value 7,989
Net unrealized appreciation of debt securities 54
Deficit (4,796)
Treasury stock (1,471)
1,806
$85,035
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION> For the Period
from
January 1, 1998 Six Months Three Months
to March 24, Ended Ended
(in thousands, except per share data) 1998 June 30, 1997 June 30, 1997
<S> <C> <C> <C>
Revenues:
Premiums written ($17) ($6)
Decrease in unearned premiums 197 94
Premium income 180 88
Net investment income $112 38 9
Net realized investment gains 24 192 264
Fees and other income 181 9 4
317 419 365
Benefits and expenses:
Death and other benefits 231 127
Amortization of deferred policy
acquisition costs 5 3
Operating expenses 420 531 321
420 767 451
Loss from continuing operations before
income tax expense (benefit) (103) (348) (86)
Income tax expense (benefit) (15) (116) 8
Loss from continuing operations (88) (232) (94)
Discontinued operations:
Loss from operations of discontinued
businesses (net of income taxes) (958) (617)
Gain (loss) on disposal of
discontinued businesses (net of
income taxes) 112 (118) 13
112 (1,076) (604)
Net income (loss) $24 ($1,308) ($698)
Basic and diluted income (loss) per
common share:
Loss from continuing operations ($0.08) ($0.18) ($0.08)
Discontinued operations 0.04 (0.41) (0.23)
Net loss ($0.04) ($0.59) ($0.31)
Weighted average number of
shares outstanding 2,596 2,606 2,603
Cash dividends declared per common share NONE NONE NONE
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
For the Period from
<CAPTION> January 1, 1998 to Six Months Ended
(in thousands) March 24, 1998 June 30, 1997
<S> C> <C>
Cash flows from operating activities:
Net income (loss) $24 ($1,308)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Deferred policy acquisition costs incurred (4,779)
Amortization of deferred policy costs 4,609
Other amortization and depreciation 24 126
Change in future policy benefits (2,911)
Change in unearned premiums (3,950)
Change in amounts due reinsurers (142) (83)
Income taxes (15) (1,396)
Change in prepaid reinsurance premiums 5,112
Change in other receivables 1,497 3,668
Change in other liabilities (376) (179)
Net assets transferred in sale of credit
insurance business (3,647)
Other (434) (411)
Total adjustments (3,093) (194)
Net cash used in operating activities (3,069) (1,502)
Cash flows from investing activities:
Purchase of investments (3) (8,962)
Maturity of investments 1,000 669
Sale of investments 1,829 9,885
Net cash provided by investing activities 2,826 1,592
Cash flows from financing activities:
Purchase of treasury stock (61)
Cash dividends to shareholders (109) (209)
Net cash used in financing activities (109) (270)
Net decrease in cash (352) (180)
Cash at beginning of period 641 556
Cash at end of period $289 $376
</TABLE>
CONSUMERS FINANCIAL CORPORATION AND SUBSIDIARIES
(IN PROCESS OF LIQUIDATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1. OVERVIEW AND BASIS OF ACCOUNTING:
The operating losses incurred by the Company over the past five years have
significantly reduced its net worth and liquidity position. As a result, in
late 1997, the Company signed an agreement to sell its core credit insurance
and related products business, which had been its only remaining business
operation, following the sales in 1994 and 1997 of all of its universal life
insurance business and the 1996 sale of its auto auction business. Settlement
on the sale of the credit insurance business took place in May 1998. The
Company s income or loss from operations now consists principally of (i)
earned premium and related costs associated with a small, closed block of
extended service contract business, (ii) fee revenues received from Life of
the South Corporation (LOTS), a Georgia-based financial services holding
company which acquired the Company s credit insurance customer accounts, (iii)
investment income on remaining assets and (iv) corporate expenses.
On March 24, 1998, the Company s shareholders approved a Plan of Liquidation
and Dissolution, as discussed in Note 2 below. Accordingly, the Company has
adopted a liquidation basis of accounting for the period subsequent to
March 24, 1998. Under the liquidation basis of accounting, assets are stated
at their estimated net realizable values and liabilities are stated at
their anticipated settlement amounts. Prior to March 25, 1998, the Company
reported the results of its operations and its asset and liability amounts
using accounting principles applicable to going concern entities.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1997 Form 10-K.
The changes in net assets for the period from March 25, 1998 to June 30,
1998 are not necessarily indicative of the changes to be expected for the full
year.
2. DISCONTINUED OPERATIONS AND PLAN OF LIQUIDATION:
On December 30, 1997, the Company entered into an agreement with LOTS,
pursuant to which the Company would (i) sell its credit insurance and fee
income accounts to LOTS effective October 1, 1997, (ii) sell its
September 30, 1997 inforce block of credit insurance business to
American Republic Insurance Company (American Republic), LOTS financial
partner in the transaction, effective January 1, 1998 and (iii) sell one of
its wholly-owned reinsurance subsidiaries to LOTS as of January 1, 1998. LOTS
and the Company also agreed that, with respect to the Company s principal
insurance subsidiary, new credit insurance business produced by that
subsidiary s former customer accounts, which were transferred to LOTS, will
continue to be written on the policy or certificate forms of the subsidiary
until September 30, 1999, or an earlier date which may be agreed to by the
parties. This premium and the related insurance risk are also being reinsured
100% to American Republic.
The sale of the inforce block of business referred to in (ii) above was
completed on May 13, 1998 after the required approvals of the Company s
preferred and common shareholders and state insurance regulators in the states
of Delaware and Ohio were received. The sale of the reinsurance subsidiary is
expected to be approved by the insurance regulators in the State of Arizona on
August 21, 1998, and closing on the sale should occur in early September.
The sale of the inforce block of business resulted in an after-tax loss of
approximately $3,665,000, of which $3,919,000 was reflected in the Company s
fourth quarter 1997 financial statements through a write-down of deferred
policy acquisition costs. The 1997 loss included an $819,000 loss from
operations from September 30, 1997 (the measurement date) to December 31,
1997. An offsetting gain on disposal of $254,000, which results
from adjustments to certain estimates made in 1997, has been included in the
Company s 1998 financial statements.
In addition to approving the sale of the inforce credit insurance business,
at the Special Meeting of Shareholders held on March 24, 1998, the Company s
shareholders also approved a Plan of Liquidation and Dissolution, pursuant to
which the Company intends to liquidate its remaining assets, provide for all of
its liabilities, redeem its preferred stock at par value ($10 per share) and
distribute all remaining cash to its common shareholders. Pursuant to the terms
of its agreement with LOTS, the Company will receive payments from LOTS over a
five-year period based on the amount of credit insurance premiums produced by
the customer accounts sold by the Company to LOTS. The Company may also receive
a payment from a contingency fund established by the parties based on the
claims experience on the inforce credit insurance business from October 1,
1997 to September 30, 2002. As a result, the final distribution to the
Company s common shareholders will not be made until late in 2002 when the
amounts due from LOTS have been received. The Company has made substantial
reductions in its number of employees during the past several years as a
result of the discontinuation of its various businesses. As of August 14,
1998, six people are employed by the Company. During the liquidation period,
the Company intends to outsource most of the functions which will continue
to be required.
3. INCOME TAXES:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows (in 000's):
<TABLE>
<CAPTION> June 30, December 31,
1998 1997
<S> <C> <C>
Deferred tax liabilities:
Fixed maturities $22 $28
Deferred policy acquisition costs 8 4,614.
00
Other 36 168
66 4,810
Deferred tax assets:
Future policy benefits and financial
reinsurance 70 5,252
Net operating loss carryforwards 2,260 2,011
Other 352 225
2,682 7,488
Valuation allowance for deferred
tax assets (2,254) (2,233)
428 5,255
Net deferred tax asset ($362) ($445)
</TABLE>
3. INCOME TAXES (CONTINUED):
Significant components of the provision for income taxes are as follows
(in 000's):
TABLE
<PAGE>
<CAPTION> For the Period
from January 1, Six Months Three Months
1998 Ended Ended
to March 24, 1998 June 30, 1997 June 30, 1997
<S> <C> <C> <C>
Current:
Federal ($18) ($141) ($66)
State 2 35 6
Total current (16) (106) (60)
Deferred 1 (10) 68
Income tax expense (benefit)
related to continuing
operations (15) (116) 8
Income tax benefit included with
discontinued operations:
Current (332) (81)
Deferred (149) (27)
0 (481) (108)
Total income tax benefit ($15) ($597) ($100)
</TABLE>
3. INCOME TAXES (CONTINUED):
The reconciliation of the provision for income taxes and the amount which
would have been provided at statutory rates is as follows (in 000's):
<TABLE>
<CAPTION> For the Period Six Months
from Ended
January 1, 1998 June 30, 1997
to March 24,
1998
<S> <C> <C>
Loss from continuing operations before
income tax benefit ($103) ($348)
Income tax benefit at 34% statutory rate
on pre-tax loss ($35) ($118)
Dividends received deduction (4) (3)
State income taxes 2 35
Items not includable for tax purposes 79 28
Other, net (57) (58)
Actual income tax benefit ($15) ($116)
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
In 1989, the Company entered into an agreement for the lease of office
space. The facility contains approximately 44,500 square feet of office space.
The term of the lease is ten years with an option to renew for one additional
term of five years. Until March 1994, monthly lease payments were $35,000. In
March 1994, the Company exercised its option to acquire a 50% interest in this
property at a price of $1,750,000. The Company continues to lease the entire
building, which is classified as an operating lease, but at monthly rent of
$17,000 through July 1999, although the Company has subleased a portion of the
office space which it does not otherwise occupy. The Company has no other
significant leases.
In August 1997, the Company received a notice of proposed adjustment from
the Internal Revenue Service as a result of a tax examination for the years
ended December 31, 1992 and 1993. The Company is currently seeking to have the
adjustment rescinded. Based on the current status of the matter, the Company
does not believe it is probable that a material amount of additional taxes will
be due.
4. COMMITMENTS AND CONTINGENCIES (CONTINUED):
In connection with the cancellation of a joint venture agreement in 1996,
the Company agreed to pay its former joint venture partner a pro rata share of
the proceeds, if any, it receives from the sale of its credit insurance
accounts. Accordingly, over the next five years the Company will pay its former
partner approximately 19% of any gross fee revenues received from LOTS for the
sale of its customer accounts.
Reinsured risks would give rise to liability to the insurance subsidiaries
only in the event that the reinsuring company is unable to meet its obligations
under the reinsurance agreements in force.
In November 1997, the Company and a third party reinsurer were sued by a
former general agency with whom the Company had a partnership agreement. The
partnership agreement provided that the agency would market universal life
insurance business for the Company, pursuant to specific criteria established
by the Company, and would also be entitled to a share of the profits, if
any, which arose from the business produced. The claimant is seeking
monetary damages to compensate it for the Company s alleged failure to share
profits and for other alleged losses resulting from the Company s rejection
of policy applications involving unacceptable risks. While management believes
this claim is completely without merit and intends to vigorously defend itself
in this matter, the ultimate outcome of this claim cannot be determined
at this time.
In connection with the sale of the business and related operating assets of
Interstate Auto Auction, Inc. in November 1996, the Company provided the buyer
with limited indemnifications with respect to certain potential environmental
liabilities asserted within two years from the closing date. The Company does
not believe that these limited indemnifications will have a materially adverse
effect on the Company s financial position or results of operations.
Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company or its
subsidiaries. In the opinion of management, based on opinions of legal
counsel, adequate reserves, if deemed necessary, have been established for
these matters and their outcome will not result in a significant effect on
the financial condition or future operating results of the Company or its
subsidiaries. The Company has taken certain income tax positions in previous
years that it believes are appropriate. If such positions were to be
successfully challenged by the Internal Revenue Service, the Company could
incur additional income taxes as well as interest and penalties. Management
believes that the ultimate outcome of any such challenges will not have a
material effect on the Company s financial statements.
5. PER SHARE INFORMATION:
The following table sets forth the computation of basic and diluted per share
data.
<TABLE>
<CAPTION> For the Period from Six Months Three Months
January 1, 1998 Ended Ended
(in thousands, except per share amounts) to March 24, 1998 June 30, 1997 June 30, 1998
<S> <C> <C> <C>
Loss from continuing operations ($88) ($232) ($94)
Preferred stock dividends (109) (209) (107)
Accretion of carrying value of
preferred stock (9) (18) (9)
Numerator for basic loss per share -
loss attributable to
common shareholders (206) (459) (210)
Effect of dilutive securities 0 0 0
Numerator for diluted loss per share ($206) ($459) ($210)
Denominator for basic loss per share -
weighted average shares 2,596 2,606 2,603
Effect of dilutive securities 0 0 0
Denominator for diluted loss per share 2,596 2,606 2,603
Basic and diluted loss per common share ($0.08) ($0.18) ($0.08)
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A review of the significant factors which affected the Company's 1998
operating performance as well as its financial position at June 30, 1998 is
presented below. Information relating to 1997 is also presented for comparative
purposes. This analysis should be read in conjunction with the Consolidated
Financial Statements and the related Notes appearing elsewhere in this Form
10-Q.
OVERVIEW
At a Special Meeting of Shareholders held on March 24, 1998, the Company's
preferred and common shareholders approved the sale of the Company's core
credit insurance and related products business, which was the Company's
only remaining business operation, following various sales over the past six
years of its traditional and universal life insurance business and its
auto auction business.
At the Special Meeting, the shareholders also approved a Plan of
Liquidation and Dissolution, pursuant to which the Company plans
to liquidate its remaining assets, provide for all of its liabilities,
redeem its preferred stock at par value ($10 per share) and distribute
all remaining cash to its common shareholders. Because payments for the
sale of the credit insurance customer accounts will be received from the
purchaser over a five-year period, and since any potential distribution
from a contingency fund established by the Company and the purchaser will not
be made to the Company until 2002, the final liquidating distribution to the
common shareholders cannot be made until late in 2002 when all amounts due
from the purchaser have been received. The Company has reduced its number of
employees to six and will eventually outsource most of the functions which
will continue to be required to complete the liquidation process.
As a result of the approval of the Plan of Liquidation, the Company has
adopted a liquidation basis of accounting in its financial statements for
periods subsequent to March 24, 1998. Under liquidation accounting rules,
assets are stated at their estimated net realizable values and liabilities
are stated at their anticipated settlement amounts. Prior to March 25, 1998,
the Company reported the results of its operations and its asset and
liability amounts using accounting principles applicable to going concern
entities.
RESULTS OF OPERATIONS
As a result of the sale of its remaining business and the adoption of the
Plan of Liquidation, as discussed above, the Company's operating income and
expenses now consist principally of (i) fee income from Life of the South
Corporation (LOTS) for the sale of the Company's customer accounts, (i)
investment income on existing assets and (iii) corporate expenses, primarily
salaries, legal and accounting fees and building rent and related costs. A
discussion of the material factors which affected the Company's results from
both continuing operations and discontinued operations (for the period prior to
March 25, 1998) and its changes in net assets (for the period from March 25,
1998 to June 30, 1998) is presented below. Information for 1997 is also
presented for comparative purposes.
During the period from March 25, 1998 through June 30, 1998, the Company's
excess of operating income over operating expenses totaled $223,000. A key
reason for the excess is the fact that settlement on the sale of the Company's
credit insurance business to LOTS, which involved the transfer of approximately
$30 million to the purchaser, did not occur until May 13, 1998. The Company
therefore earned investment income on these assets until they were transferred.
Investment income will decline substantially in future periods. The Company
also reported a significant increase in joint venture fees earned on a now
terminated venture due to improved claims experience. Fees from LOTS for the
sale of the customer accounts were $155,000 from March 25 to June 30.
Operating expenses during this period were $579,000 which included $153,000 in
salaries and related benefits and $165,000 in legal, accounting and other
fees. Both salaries and fees are expected to decline in future periods. The
Company also reported income tax expense of $113,000 for the March 25 to
June 30 period.
During the period from January 1, 1998 to March 24, 1998, the Company
reported an $88,000 loss from continuing operations, income of $112,000 from
discontinued operations (representing an adjustment to certain estimates made
in 1997 with respect to the loss on the sale of the credit insurance business)
and net income of $24,000 ( a loss of $.04 per share).
On a year-to-date basis, the Company's net income for the first half of
1998 totaled $134,000 compared to a $1.3 million net loss in the first
six months of 1997. Virtually all of the improvement results from the
elimination of the losses which were being incurred in the credit
insurance business prior to its sale and from further reductions
of overhead expenses.
ESTIMATED NET EXPENSES DURING LIQUIDATION PERIOD
As indicated above, the Company's liquidation process is expected to
continue for a period of approximately five years, at which time all fee
payments and other potential distributions will have been received from LOTS.
During this period, certain corporate expenses will continue to be incurred and
investment income will continue to earn on any assets which have not been
distributed to shareholders. Further, the Board of Directors may determine
during this period that distributions to the common shareholders would be
increased by transferring all of the Company's remaining net assets into a
liquidating trust, in which case the trustees of such trust would be
responsible for liquidating all remaining assets, paying all liabilities and
making the final distributions to shareholders. Based on current estimates
which exclude any potential savings, if any, from the use of a liquidating
trust, the Company believes that its future operating expenses and other
costs, including preferred stock dividends, will exceed fee income and other
revenues during the five-year period by approximately $330,000. Actual fee
income and expenses could vary significantly from the present estimates due to
uncertainties as to when certain assets will be liquidated, when the preferred
stock will be redeemed, the level of actual expenses which will be incurred
and the ultimate resolution of various contingencies which may arise.
FINANCIAL CONDITION
The Company's net assets in liquidation were $1,715,000 at March 24, 1998
compared to $1,582,000 at June 30, 1998. Net assets increased by $110,000 as a
result of the excess of operating income over operating expenses during the
period. That increase was offset by $102,000 in preferred stock dividends and a
$175,000 adjustment to reflect the preferred stock at its redemption value of
$10 per share. In May, the Company reduced both its assets and liabilities by
approximately $30 million when it closed on the sale of its credit insurance
business.
INVESTED ASSETS
Total investments decreased from $41 million at the end of 1997 to $8.9
million at June 30, 1998. The decrease is the result of the transfer of $33.3
million to the purchaser of the Company s credit insurance business. The
remaining $3 million due to the purchaser will be transferred in the third
quarter from the proceeds the Company receives from the sale of one of its
insurance subsidiaries.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except for the matters discussed in Note 4 of the Notes to Consolidated
Financial Statements included elsewhere in this Form 10-Q, neither the
registrant nor its subsidiaries are involved in any pending legal
proceedings other than routine litigation incidental to the normal
conduct of its business nor have any such proceedings been terminated
during the three months ended June 30, 1998.
ITEM 2. CHANGES IN SECURITIES
During the three months ended June 30, 1998, there have been no
limitations or qualifications, through charter documents, loan agreements
or otherwise, placed upon the holders of the registrant's common or
preferred stock to receive dividends.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The registrant has not defaulted in the payment of principal, interest or
in any other manner on any indebtedness and is current with all its
accounts. There is no arrearage in the payment of dividends on the
registrant's preferred stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the registrant
during the three months ended June 30, 1998.
ITEM 5. OTHER INFORMATION
None<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
None
(b) No reports on Form 8-K were filed by the Company during the three
months ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSUMERS FINANCIAL CORPORATION
Registrant
Date August 19, 1998 By /S/
James C. Robertson, President
(Chief Executive Officer)
Date August 19, 1998 By /S/
R. Fredric Zullinger
Senior Vice President,
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997 JUN-30-1998 JUN-30-1997
DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997 JUN-30-1998 JUN-30-1997
DEC-31-1997
<DEBT-HELD-FOR-SALE> 0 0 3,194,877 0
5,856,835
<DEBT-CARRYING-VALUE> 0 0 0 0
0
<DEBT-MARKET-VALUE> 0 0 0 0
0
<EQUITIES> 0 0 0 0
0
<MORTGAGE> 0 0 1,867,427 0
2,085,760
<REAL-ESTATE> 0 0 0 0
0
<TOTAL-INVEST> 0 0 8,858,044 0
41,000,598
<CASH> 0 0 787,523 0
641,234
<RECOVER-REINSURE> 0 0 0 0
0
<DEFERRED-ACQUISITION> 0 0 25,075 0
13,569,943
<TOTAL-ASSETS> 0 0 70,280,427 0
85,035,320
<POLICY-LOSSES> 0 0 16,894,673 0
21,466,953
<UNEARNED-PREMIUMS> 0 0 37,923,990 0
49,994,397
<POLICY-OTHER> 0 0 3,894,821 0
2,538,593
<POLICY-HOLDER-FUNDS> 0 0 0 0
0
<NOTES-PAYABLE> 0 0 0 0
0
0 0 0 0
0
0 0 4,814,610 0
4,687,913
<COMMON> 0 0 29,492 0
30,191
<OTHER-SE> 0 0 4,814,610 0
4,687,913
<TOTAL-LIABILITY-AND-EQUITY> 0 0 70,280,427 0
85,035,320
0 0 179,348 10,249,682
0
<INVESTMENT-INCOME> 0 0 833,689 1,139,341
0
<INVESTMENT-GAINS> 0 0 24,761 245,900
0
<OTHER-INCOME> 0 0 532,583 542,035
0
<BENEFITS> 0 0 0 6,635,991
0
<UNDERWRITING-AMORTIZATION> 0 0 0 4,608,915
0
<UNDERWRITING-OTHER> 0 0 1,592,700 2,719,023
0
<INCOME-PRETAX> 0 0 (22,319) (1,786,971)
0
<INCOME-TAX> 0 0 97,394 (597,237)
0
<INCOME-CONTINUING> 0 0 0 0
0
<DISCONTINUED> 0 0 254,339 (118,007)
0
<EXTRAORDINARY> 0 0 134,588 (1,307,741)
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 0 0 134,686 (1,307,741)
0
<EPS-PRIMARY> 0 0 0 0
0
<EPS-DILUTED> 0 0 0 0
0
<RESERVE-OPEN> 0 0 0 0
0
<PROVISION-CURRENT> 0 0 0 0
0
<PROVISION-PRIOR> 0 0 0 0
0
<PAYMENTS-CURRENT> 0 0 0 0
0
<PAYMENTS-PRIOR> 0 0 0 0
0
<RESERVE-CLOSE> 0 0 0 0
0
<CUMULATIVE-DEFICIENCY> 0 0 0 0
0
</TABLE>
