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): August 14, 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 August
14, 1998, announcing: (a) the Company's second quarter 1998 results; (b) the
naming of Keith B. Stein as the permanent Chief Executive Officer of the Company
and Thomas Costanza as the Chief Financial Officer of the Company; and (c) that
The Nasdaq Stock Market, Inc. has advised the Company of the possibility that
the Company's common stock will be delisted on November 17, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Exhibits.
(99) Press Release, dated August 14, 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 August 14, 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: August 17, 1998.
NATIONAL AUTO FINANCE COMPANY, INC.
By: /s/ Joel B. Ronkin
Name: Joel B. Ronkin
Title: Vice President, Secretary and
General Counsel
EXHIBIT 99
[National Auto Finance Company, Inc. Logo]
Contact: Joel B. Ronkin
Vice President
(800) 999-7535
NATIONAL AUTO FINANCE COMPANY, INC.
ANNOUNCES SECOND QUARTER RESULTS
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Keith B. Stein Named Permanent CEO and CFO Appointed
BOCA RATON, Fla. (August 14, 1998) - National Auto Finance Company, Inc.
(Nasdaq/NM:NAFIE) today reported a loss of approximately $4.3 million, or $0.48
per share, for the second quarter ended June 30, 1998, compared with restated
net income of approximately $0.2 million, or $0.02 per share, for the
year-earlier period. Total revenues for the second quarter of 1998 were
approximately $3.7 million compared with approximately $5.3 million for the
second quarter of 1997.
For the six months ended June 30, 1998, the Company reported a loss of
approximately $9.5 million, or $1.05 per share, compared with a restated net
loss of approximately $6.0 million, or $0.86 per share, for the year-earlier
period. Total revenues for the first half of 1998 were approximately $5.8
million compared with approximately $8.0 million for the first half of 1997.
The second 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, a significant decline in loan origination volume
during the second quarter, and a resulting increase in the Company's expense
ratio. The Company deposited $6.8 million in cash into the spread accounts for
its Master Trust and its permanent securitizations as credit enhancement in
support of new and existing loans, which cash was then discounted using a rate
of 14%, thus reducing significantly the securitization income reported for the
second quarter. Additionally, loan volume declined in the second quarter
primarily because of the Company's decision to temporarily curtail loan
originations to allow the Company to preserve its cash while undertaking a debt
and operational restructuring process, in light of the losses recently incurred
by the Company.
Delinquencies increased during the second quarter ended June 30, 1998,
relative to the first quarter ended March 31, 1998. Loans that were 31 days or
more delinquent as of June 30, 1998, represented 9.10% of the Company's average
serviced portfolio, up from 7.40% as of March 31, 1998. The ratio of loans that
were 61 days or more delinquent was 2.42%, down slightly from 2.43% as of
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<PAGE>
NAFI Reports Second Quarter Results
Page 2
August 14, 1998
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March 31, 1998. The Company believes that the overall increase in delinquencies
experienced in the second quarter was largely due to difficulties and delays
associated with the conversion of the Company's loan portfolio data from its
outside servicer's computer systems to its new internal computer system, which
hindered the Company's ability to properly service its loan portfolio in the
second quarter. The installation of the Company's new computer system, the
Consumer Loan Asset Servicing System developed by BNI, Inc., is still ongoing
and certain aspects of the system are not yet completed or fully functioning.
The continuing delays in completing this installation has had and may continue
to have a negative impact on the performance of the Company's loan portfolio.
The Company reported that purchases of motor vehicle retail installment
sales contracts from automobile dealers and through its portfolio acquisition
program totaled $34.7 million for the quarter ended June 30, 1998, a decrease of
21% over loan purchase volume of $43.8 million for the prior-year period. The
Company eliminated its portfolio acquisition program in May 1998, shifting its
focus entirely to its core origination program.
Because of the aforementioned financial results for the first six
months of 1998 and the year ended December 31, 1997, the Company is in violation
of various financial covenants in agreements with certain of its lenders and, as
part of its restructuring process, 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, although the Company continues to have
borrowing availability under its Master Trust warehouse facility, it is in
discussions with its warehouse facility lender to restructure certain terms of
that facility. If the Company is unsuccessful in those discussions, it may not
be able to fund the purchase of additional loans on an ongoing basis through
that facility.
The Company also announced that it has recently entered into three-year
employment agreements with each member of its senior management team, and named
Keith B. Stein its Chief Executive Officer on a permanent basis. Mr. Stein has
been serving as the interim Chief Executive Officer of the Company since May 15,
1998. The Company also announced that it has appointed Thomas Costanza to the
position of Vice President and Chief Financial Officer of the Company. In this
capacity, Mr. Costanza will be responsible for all financial and accounting
functions of the Company. Mr. Costanza most recently served as the Corporate
Controller of Golf Technology Holding, Inc., a publicly held corporation, and
was responsible for all financial and accounting functions for that company.
Prior to joining Golf Technology, Mr. Costanza was in corporate audit management
at Barnett Banks, Inc., specializing in its consumer mortgage finance division.
Additionally, Mr. Costanza's experience includes work at Ernst & Young LLP as a
Senior Accountant.
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NAFI Reports Second Quarter Results
Page 3
August 14, 1998
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National Auto Finance also today announced that The Nasdaq Stock
Market, Inc. has advised the Company that unless the closing bid price of the
Company's common stock allows for the maintenance of a greater than $5 million
public float for at least ten consecutive trading days during the period ending
November 13, 1998, the Company's common stock will be delisted on November 17,
1998. In addition, Nasdaq has also identified other listing standards that the
Company is not satisfying, any one of which is a possible basis for delisting,
but none of which Nasdaq has specifically identified as the current basis for a
potential delisting.
Keith B. Stein, the Company's Chief Executive Officer, stated, "We are
disappointed with the results of the second quarter of 1998, but they were in
line with our expectations, given our deliberate scaling back of loan
originations and the anticipated disruptions during our systems' conversions. We
believe that the senior management team we have assembled is well-equipped to
handle the near-term challenges we face in repositioning the Company for renewed
growth. I am particularly pleased that Tom Costanza has agreed to join our
management team and believe his financial and accounting experience and business
acumen will prove invaluable. We also expect that the restructuring of the
Company's operations will result in significant cost savings to the Company of
approximately $5 million to $8 million over the next 12 months. As part of that
restructuring, we will consolidate all of our operations to our facilities in
Jacksonville, Florida, by moving the activities we currently handle in our Boca
Raton offices to Jacksonville. We are also working closely with our lenders to
solidify their continued support and are appreciative of the support they have
exhibited thus far."
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. 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.
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NAFI Reports Second Quarter Results
Page 4
August 14, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
Statements of Operations (unaudited)
(In thousands, except earnings per share data)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
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(Restated) (Restated)
<S>
<C> <C> <C> <C> <C>
Revenue:
Securitization related income $ 1,380 $ 4,119 $ 1,454 $ 6,171
Servicing income 1,643 838 2,915 1,375
Interest income 599 202 1,295 369
Other income 78 93 156 134
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Total revenue 3,700 5,252 5,820 8,049
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Expenses:
External servicing expenses 1,221 763 2,685 1,375
Internal servicing expenses 1,105 -- 1,945 --
Interest expense 2,112 345 3,643 760
Salaries and employee benefits 1,659 1,671 3,302 2,995
Direct loan acquisition expenses 573 865 1,223 1,566
Depreciation and amortization 232 214 419 393
Other operating expenses 1,088 1,069 2,025 1,822
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Total expenses 7,990 4,927 15,242 8,911
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Income (loss) before income taxes (4,290) 325 (9,422) (862)
Income taxes (benefit) -- 125 -- (332)
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Income (loss) before taxes from reorganization
of partnership (4,290) 200 (9,422) (530)
Income taxes from reorganization of partnership -- -- -- 5,416
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Net income (loss) (4,290) 200 (9,422) (5,946)
Preferred stock dividends 40 41 80 67
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Income (loss) attributed to common shareholders $ (4,330) $ 159 $ (9,502) $ (6,013)
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Per share data:
Earnings (loss) per common share - basic $ (0.48) $ 0.02 $ (1.05) $ (0.86)
Earnings (loss) per common share - diluted $ (0.48) $ 0.02 $ (1.05) $ (0.86)
Weighted average common shares outstanding:
Basic 9,031 7,026 9,031 6,976
Diluted 9,031 7,026 9,031 6,976
</TABLE>
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<PAGE>
NAFI Reports Second Quarter Results
Page 5
August 14, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
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(Unaudited)
<S>
<C> <C> <C>
Assets:
Cash and cash equivalents $ 15,167 $ 26,467
Retained interest in securitizations, at fair value 51,427 31,569
Furniture, fixtures and equipment, net 3,667 2,262
Deferred financing costs 3,020 2,539
Related party receivables -- 155
Other assets 946 1,883
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Total assets $ 74,227 $ 64,875
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Liabilities:
Accounts payable and accrued expenses $ 2,158 $ 3,260
Accrued interest payable - related parties 39 39
Accrued interest payable - senior subordinated notes -- 132
Accrued interest payable - notes -- 50
Junior subordinated notes - related parties 1,940 1,940
Senior subordinated notes 53,043 34,546
Notes payable 1,251 1,614
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Total liabilities 58,431 41,581
Mandatorily redeemable preferred stock 2,336 2,336
Total stockholders' equity 13,460 20,958
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Total liabilities, mandatorily redeemable preferred stock and
stockholders' equity $ 74,227 $ 64,875
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</TABLE>
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