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): May 18, 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.)
621 N.W. 53rd Street, Suite 200
Boca Raton, Florida 33487
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(Address of Principal Executive Offices) (Zip Code)
(561) 997-2413
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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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 May 18,
1998, announcing the Company's first quarter results, the resignation of the
Company's Chairman and Chief Executive Officer, the retention of BDO Seidman,
LLP as the Company's auditor for fiscal 1998, and the termination of KPMG Peat
Marwick LLP as the Company's auditor.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Exhibits.
(99) Press Release, dated May 18, 1998.
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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 May 18, 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: May 20, 1998.
NATIONAL AUTO FINANCE COMPANY, INC.
By: /s/ Kevin G. Adams
Name: Kevin G. Adams
Title: Senior Vice President, Finance
EXHIBIT 99
[National Auto Finance Company, Inc. Logo]
Contact: Joel B. Ronkin
Vice President
(800) 999-7535
NATIONAL AUTO FINANCE COMPANY, INC.
ANNOUNCES FIRST QUARTER RESULTS AND
RESIGNATION OF ITS CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BOCA RATON, Fla. (May 18, 1998) - National Auto Finance Company, Inc.
(Nasdaq/NM:NAFI) today reported a loss of approximately $5.2 million, or $0.57
per share, for the first quarter ended March 31, 1998, compared with a restated
loss of approximately $6.2 million, or $0.89 per share, for the year-earlier
period. Total revenues for the first quarter of 1998 were approximately $2.1
million compared with approximately $2.8 million a year ago.
National Auto Finance also announced that, after delivering to the
Company's Board of Directors a proposed three-year strategic realignment plan
for the future operations of the Company, Gary L. Shapiro resigned as Chairman
and Chief Executive Officer of the Company, effective May 15, 1998. Mr. Shapiro
remains a director of the Company. Keith B. Stein, the Company's Vice Chairman,
Chief Financial Officer and Treasurer, has been appointed Chief Executive
Officer of the Company on an interim basis.
The first quarter 1998 loss was primarily the result of the valuation
of the Company's retained interest in securitizations, and, in particular, the
discounting of spread accounts. The Company was required to deposit $15.3
million in cash into the spread accounts for its Master Trust as additional
credit enhancement, which cash was then discounted using a rate of 14%, reducing
the securitization income reported for the first quarter.
As previously reported, in January 1997, the Company adopted SFAS No.
125. Since then, the Company has undertaken a continuing process of refining the
assumptions and methodologies used to measure the fair value of its retained
interest in securitizations based upon historical performance of its loan
portfolio. This process of refinement has resulted in changes to certain
assumptions and methodologies previously employed in each of the first three
quarters of 1997 and, as a result thereof, and as previously indicated, the
Company will restate the results of each of the first, second and third quarters
of 1997 to allocate the effects of these changes appropriately throughout such
quarters. The restated results for the first quarter of 1997 reported herein
primarily result from the application of such changes in assumptions and
methodologies, including, in particular, the discounting of the spread accounts.
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NAFI Reports First Quarter Results
Page 2
May 18, 1998
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Delinquencies decreased during the first quarter ended March 31, 1998,
relative to the fourth quarter ended March 31, 1997. Loans that were 31 days or
more delinquent as of March 31, 1998, represented 7.40% of contracts purchased
and serviced by NAFI, down from 9.75% as of December 31, 1997. The ratio of
loans which were 61 days or more delinquent was 2.4%, down from 3.4% as of
December 31, 1997.
The Company reported that purchases of motor vehicle retail installment
sales contracts from automobile dealers and through its portfolio acquisition
program totaled $49.0 million for the quarter ended March 31, 1998, an increase
of 37% over loan purchase volume of $35.8 million for the prior-year period.
Because of the aforementioned financial results for the first quarter
of 1998 and for the year ended December 31, 1997, the Company is in violation of
various financial covenants in agreements with certain of its lenders, and is
seeking waivers of those covenant violations. There is no assurance, however,
that the Company will be successful in obtaining those waivers, in which case
such lenders may accelerate the maturity of their debt. Additionally, the
Company is in discussions with its warehouse facility lender to continue
availability under that facility. If the Company is unsuccessful in those
discussions, the Company may not be able to fund the purchase of additional
loans on an ongoing basis.
Keith B. Stein, the Company's Chief Executive Officer, stated, "We are
disappointed with the reported results of the first quarter of 1998, and believe
that the application of SFAS No. 125 in reporting such results may not truly
reflect the expected future performance of the Company's loan portfolio. The
Company is continuing to develop a plan to strategically realign its operations
and expects to complete the development of that plan in the near future. We
believe that this new plan, once implemented, will strengthen the Company's
long-term business prospects. We are also working closely with our lenders to
give the Company the best chance of success in the future. The Company wishes to
express its appreciation to Mr. Shapiro for his extensive efforts over the past
four years on behalf of the Company. We look forward to his continued
participation in the Company's affairs as a director."
The Company also announced today the retention of BDO Seidman, LLP as
the Company's auditor for fiscal 1998, and the termination of KPMG Peat Marwick
LLP as the Company's auditor.
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
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NAFI Reports First Quarter Results
Page 3
May 18, 1998
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alliances with financial and other institutions that have established
relationships with dealers. The Company has contractual relationships with
approximately 2,600 dealers in 40 states.
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.
NATIONAL AUTO FINANCE COMPANY, INC.
Condensed Consolidated Statements of Income
(In thousands, except earnings per share data)
First Quarter Ended
March 31,
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1998 1997
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(Restated)
Revenue:
Securitization related income $ 74 $ 2,052
Other income 2,046 745
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Total revenue 2,120 2,797
Total expenses 7,252 3,984
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Loss before income taxes (5,132) (1,187)
Income taxes (benefit) -- (457)
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Net loss before taxes from reorganization
of partnership (5,132) (730)
Income taxes from reorganization
of partnership -- 5,416
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Net loss (5,132) (6,146)
Preferred stock dividends 40 27
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Loss attributed to common shareholders $ (5,172) $ (6,173)
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Loss per common share - basic and diluted $ (0.57) $ (0.89)
Weighted average common shares outstanding
- basic and diluted 9,031 6,898
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NAFI Reports First Quarter Results
Page 4
May 18, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
1998 1997
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Assets:
Cash and cash equivalents $ 26,724 $ 26,467
Retained interest in securitizations,
at fair value 45,100 31,569
Furniture, fixtures and equipment 2,430 2,262
Deferred financing costs 3,168 2,539
Other assets 2,791 2,038
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Total assets $ 80,213 $ 64,875
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Liabilities:
Subordinated debt $ 54,714 $ 36,486
Other liabilities 5,373 5,095
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Total liabilities 60,087 41,581
Mandatorily redeemable preferred stock 2,336 2,336
Total stockholders' equity 17,790 20,958
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Total liabilities, mandatorily
redeemable preferred stock and
stockholders' equity $ 80,213 $ 64,875
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