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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): November 16, 1998
National Auto Finance Company, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-22067 65-0688619
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(Commission File Number) (I.R.S. Employer
Identification No.)
10302 Deerwood Park Boulevard, Suite 100
Jacksonville, Florida 32256
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(Address of Principal Executive Offices) (Zip Code)
(904) 996-2500
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(Registrant's Telephone Number, Including Area Code)
621 N.W. 53rd Street, Suite 200
Boca Raton, Florida 33487
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Filed herewith and incorporated herein by reference is a copy of the
National Auto Finance Company, Inc. (the "Company") Press Release, dated
November 16, 1998, announcing: (a) the Company's third quarter 1998 results; (b)
the execution of a term sheet with its senior subordinated noteholders and
certain of its equityholders; (c) that the Company has requested a hearing
before The Nasdaq Stock Market, Inc. ("Nasdaq") to permit the Company the
opportunity to provide details of its business plan and restructuring in
furtherance of a request for additional time to enable the Company to
reestablish compliance with Nasdaq listing responsibilities; and (d) the filing
of a securities class action lawsuit against the Company and certain of its
officers and directors.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Exhibits.
(99) Press Release, dated November 16, 1998.
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SIGNATURE
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 hereto duly authorized.
Date: November 19, 1998.
NATIONAL AUTO FINANCE COMPANY, INC.
By: /s/ Joel B. Ronkin
Name: Joel B. Ronkin
Title: Vice President, Secretary and
General Counsel
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NATIONAL AUTO FINANCE COMPANY, INC.
FORM 8-K
CURRENT REPORT
Exhibit Index
Exhibit No. Description Page
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(99) Press Release,
dated November 16, 1998
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EXHIBIT 99
[National Auto Finance Company, Inc. Logo]
Contact: Joel B. Ronkin
Vice President
(904) 996-2500
NATIONAL AUTO FINANCE COMPANY, INC.
ANNOUNCES THIRD QUARTER RESULTS AND
FRAMEWORK OF FINANCIAL RESTRUCTURING
JACKSONVILLE, Fla. (November 16, 1998) - National Auto Finance Company, Inc.
(Nasdaq/NM:NAFI) today reported a net loss of approximately $5.7 million, or
$0.63 per share, for the third quarter ended September 30, 1998, compared with
a net loss of approximately $8.8 million, or $1.25 per share, for the
year-earlier period. Total revenue for the third quarter of 1998 was
approximately $1.1 million, compared with total revenue of approximately ($8.6)
million for the third quarter of 1997 arising from previously reported SFAS No.
125 adjustments.
For the nine months ended September 30, 1998, the Company reported a
net loss of approximately $15.2 million, or $1.68 per share, compared with a net
loss of approximately $14.8 million, or $2.11 per share, for the year-earlier
period. Total revenue for the first nine months of 1998 was approximately $7.0
million, compared with total revenue of approximately ($600,000) for the first
nine months of 1997.
The third quarter 1998 loss was primarily the result of a significant
decline in loan origination volume during the quarter, arising from the
Company's decision to temporarily curtail loan originations to allow the Company
to preserve its cash and manage volume to warehouse line availability while
undertaking a debt and operational restructuring, in light of the losses
recently incurred by the Company. Purchases of motor vehicle retail installment
sales contracts from automobile dealers totaled $3.4 million for the quarter
ended September 30, 1998, a decrease of 93% over loan purchase volume of $51.2
million for the prior-year period.
Delinquencies increased during the third quarter ended September 30,
1998, relative to the second quarter ended June 30, 1998. Loans that were 31
days or more delinquent as of September 30, 1998, represented 10.11% of the
Company's average servicing portfolio, up from 9.10% as of June 30, 1998. The
ratio of loans that were 61 days or more delinquent was 3.63%, up from 2.42% as
of June 30, 1998. The Company believes that the overall increase in
delinquencies experienced in the third quarter was primarily due to the decline
in loan originations and the disruption in collection activities associated with
the Company's conversion from its outside servicer's computer systems to its new
internal computer system. The disruption relating to the system conversion has
had and may continue to have a negative impact on the performance of the
Company's loan portfolio. The Company has violated certain portfolio performance
tests in its insurance agreements with its securitized trust insurer. Because of
these violations, in August,
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NAFI Reports Third Quarter Results
Page 2
November 16, 1998
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September and October 1998, the Company did not receive the excess cash flows
from its four permanent securitization trusts that it would otherwise have been
entitled to receive. The Company is currently in discussions with its
securitized trust insurer regarding waivers of those violations that will allow
the Company to resume receiving excess cash flows from those trusts and the form
and amount of the consideration to be paid by the Company for such waivers.
There can be no assurance, however, that the Company will be successful in such
discussions.
As previously disclosed, the Company is in violation of various
financial covenants in agreements with its Senior Subordinated Noteholders and
is in violation of certain non-financial covenants with its warehouse lender,
First Union National Bank. In an effort to deal with these difficulties and to
place the Company on a more solid and certain financial footing, the Company has
been engaged in ongoing discussions with its Noteholders, First Union and
certain of its equityholders. These discussions recently have led to the
execution of a term sheet with such Noteholders and equityholders that sets
forth the framework for a financial restructuring of the Company and the
resolution of certain issues between the parties. The term sheet provides for,
among other things: (1) the waiver of the past financial covenant violations;
(2) the amendment of such financial covenants for the two-year period following
the consummation of the restructuring; (3) granting the Company the option to
pay during that two-year period fifty percent (50%) of the interest owed on the
Senior Subordinated Notes through the issuance of additional debt securities
that are convertible into common stock; (4) the issuance of common stock to the
Noteholders as consideration for the waivers and amendments granted to the
Company; (5) the granting of three additional seats on the Company's Board of
Directors to the Noteholders; and (6) the execution of full and complete
releases by and among the Company and the Noteholders. Moreover, the term sheet
provides for the issuance of additional common stock to those Noteholders that
also purchased common stock of the Company at the time of their debt investment
in exchange for the execution of full and complete releases of any claims
arising by virtue of those Noteholders' equity investment. The term sheet,
however, is an expression of intent only among the parties, and none of the
parties to that term sheet are required to consummate the transactions
contemplated therein until an agreement satisfactory to all parties is
negotiated and executed by the parties and all conditions precedent to closing
have been satisfied or waived.
One of the most significant conditions precedent to closing the
transactions set forth in the term sheet is that the Company reach agreement
with First Union, in form and substance satisfactory in all respects to each of
the Noteholders and the Company in their sole discretion, to provide capital
resources and financial liquidity sufficient to meet the Company's financial
needs for a period of at least two years following the date of the
restructuring. To that end, the Company has received term sheets from First
Union that provide for, among other things, the extension of the Company's
warehouse line for an additional two years (through December 21, 2000) and the
purchase by First Union of up to $15 million of subordinated asset-backed debt
securities in connection with the Company's securitizations over the next two
years. The Company is also engaged in discussions with First Union regarding the
extension of the Company's loan origination referral agreement with First Union
for an additional year (through April 15, 2001). There is no assurance, however,
that the Company will be able to reach agreement with First Union on the terms
of these proposed facilities or arrangements to the extent necessary to satisfy
the Noteholders' conditions precedent, in which event the
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NAFI Reports Third Quarter Results
Page 3
November 16, 1998
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restructuring of the Senior Subordinated Notes described above may not be
consummated and the Company may not be able to fund the purchase of additional
loans on an ongoing basis through the First Union facility.
National Auto Finance also today announced that it has requested a
hearing before The Nasdaq Stock Market, Inc. to permit the Company the
opportunity to provide details of its business plan and restructuring in
furtherance of a request for additional time to enable the Company to
reestablish compliance with the Nasdaq listing requirements. Nasdaq has informed
the Company that no delisting will occur prior to a hearing. Nasdaq had
previously advised the Company that its common stock would be delisted on
November 17, 1998 if it failed to comply with the $5 million public float
requirement by November 13, 1998, or on December 3, 1998 if it failed to comply
with the $1 minimum bid price requirement by December 1, 1998. There can be no
assurance, however, that the Company will not be delisted.
The Company also announced today that it has completed the transition
of all operations to its Jacksonville, Florida facility. In connection with that
transition, the Company closed its Boca Raton, Florida offices.
The Company also announced that on October 29, 1998, a class action
lawsuit was filed in the United States District Court for the Southern District
of Florida on behalf of the named plaintiff and others who purchased the common
stock of the Company during the period January 29, 1997 through April 15, 1998.
The Complaint charges the Company and certain of its current and former officers
and directors with violating federal securities laws. The Company was only
recently served with the complaint and its response is not yet due.
National Auto Finance is a specialized consumer finance company engaged
in the purchase, securitization and servicing of automobile loans primarily
originated by manufacturer-franchised automobile dealers for non-prime
consumers. The Company markets its products and services to dealers through the
efforts of its direct sales force and through strategic referral and marketing
alliances with financial and other institutions that have established
relationships with dealers.
This news release contains statements that are forward-looking
statements within the meaning of applicable federal securities laws and are
based upon the Company's current expectations and assumptions, which are subject
to a number of risks and uncertainties, which could cause actual results to
differ materially from those anticipated. Primary factors that could cause
actual results to differ include the availability of financing on terms and
conditions acceptable to the Company, the ability of the Company to securitize
its finance contracts in the asset-backed securities market on terms and
conditions acceptable to the Company, and changes in the quality or composition
of the serviced loan receivable portfolio. Certain of these as well as other
factors are described in more detail in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, and in certain other reports filed by the
Company with the Securities and Exchange Commission.
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NAFI Reports Third Quarter Results
Page 4
November 16, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except earnings per share data)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1998 1997 1998 1997
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(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenue:
Securitization related income $ (1,439) $ (9,694) $ 15 $ (3,521)
Servicing income 1,972 863 4,887 2,238
Interest income 555 168 1,850 536
Other income 45 43 201 176
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Total revenue 1,133 (8,620) 6,953 (571)
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Expenses:
External servicing expenses 213 903 2,899 2,278
Internal servicing expenses 681 998 2,625 998
Interest expense 2,107 342 5,750 1,103
Salaries and employee benefits 2,301 1,597 5,603 4,591
Direct loan acquisition expenses 188 936 1,411 2,502
Depreciation and amortization 245 148 664 541
Other operating expenses 1,008 265 3,033 2,086
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Total expenses 6,743 5,189 21,985 14,099
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Loss before income taxes (5,610) (13,809) (15,032) (14,670)
Income taxes -- 332 -- --
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Net loss before taxes from reorganization
of partnership (5,610) (14,141) (15,032) (14,670)
Income taxes from reorganization of partnership -- (5,416) -- --
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Net loss (5,610) (8,725) (15,032) (14,670)
Preferred stock dividends 40 40 120 108
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Loss attributed to common shareholders $ (5,650) $ (8,765) $(15,152) $(14,778)
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Per share data:
Loss per common share - basic $ (0.63) $ (1.25) $ (1.68) $ (2.11)
Loss per common share - diluted $ (0.63) $ (1.25) $ (1.68) $ (2.11)
Weighted average common shares outstanding:
Basic 9,031 7,026 9,031 6,994
Diluted 9,031 7,026 9,031 6,994
</TABLE>
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NAFI Reports Third Quarter Results
Page 5
November 16, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 15,613 $ 26,467
Retained interest in securitizations, at fair value 46,579 31,569
Furniture, fixtures and equipment, net 3,717 2,262
Deferred financing costs 2,898 2,539
Related party receivables -- 155
Other assets 999 1,883
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Total assets $ 69,806 $ 64,875
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Liabilities:
Accounts payable and accrued expenses $ 1,964 $ 3,260
Accrued interest payable - related parties 78 39
Accrued interest payable - senior subordinated notes 1,187 132
Accrued interest payable - notes -- 50
Junior subordinated notes - related parties 1,940 1,940
Senior subordinated notes 53,310 34,546
Notes payable 1,141 1,614
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Total liabilities 59,620 41,581
Mandatorily redeemable preferred stock 2,375 2,336
Total stockholders' equity 7,811 20,958
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Total liabilities, mandatorily redeemable preferred stock and
stockholders' equity $ 69,806 $ 64,875
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</TABLE>
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