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): April 15, 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 April
15, 1998, announcing the Company's year-end results and the completion of a $20
million private placement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Exhibits.
(99) Press Release, dated April 15, 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: April 16, 1998.
NATIONAL AUTO FINANCE COMPANY, INC.
By: /s/ Kevin G. Adams
Name: Kevin G. Adams
Title: Senior Vice President, Finance
NATIONAL AUTO FINANCE COMPANY, INC.
FORM 8-K
CURRENT REPORT
Exhibit Index
Exhibit No. Description Page
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(99) Press Release,
dated April 15, 1998
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EXHIBIT 99
[National Auto Finance Company, Inc. Logo]
Contact: Roy E. Tipton Keith B. Stein
President Vice Chairman
(800) 999-7535 (800) 999-7535
NATIONAL AUTO FINANCE COMPANY, INC.
ANNOUNCES YEAR-END RESULTS AND
COMPLETION OF $20 MILLION PRIVATE PLACEMENT
BOCA RATON, Fla. (April 15, 1998) - National Auto Finance Company, Inc.
(Nasdaq/NM:NAFI) today reported a loss of $18.6 million, or $2.62 per share, for
the year ended December 31, 1997, compared to net income of $2.8 million, or
$0.66 per share, for the year ended December 31, 1996 on a pro forma basis.
The loss was primarily the result of (a) the impact of changes in
assumptions relating to the calculation of gain on sale of loans and the related
valuation of retained interest in securitizations, including an increase in
estimated cumulative net losses from 7% in 1996 to 12.88% in 1997 and an
increase in the discount rate applied to the Company's retained interest in
securitizations from 11% in 1996 to 14% in 1997; (b) the present valuing at
December 31, 1997, in conjunction with the implementation of Statement of
Financial Accounting Standards No. 125 (SFAS No. 125) on January 1, 1997, of the
Company's spread accounts, that include cash deposits and over-collateralization
residuals and is a component of the Company's retained interest in
securitizations; (c) start-up and duplicative expenses, in the aggregate amount
of $2.6 million in 1997, associated with the Company's transition from an
outside servicer to in-house servicing, including the opening of a
44,000-square-foot service center in Jacksonville, Florida; (d) the expensing in
1997 of $720,000 relating to the early extinguishment of certain senior
subordinated debt; and (e) the expensing in 1997 of $700,000 relating to the
modification of certain terms of payment guarantee agreements with the Company's
securitized trusts insurer.
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 the historical performance of its loan
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NAFI Reports Year-End Results
Page 2
April 15, 1998
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portfolio. This process of refinement has resulted in changes to certain
assumptions and methodologies previously employed in each of the first three
quarters of fiscal year 1997 and, as a result thereof, the Company anticipates
restating the results of each of the first, second and third quarters of 1997 to
allocate the effects of these changes appropriately throughout such quarters.
Further, the Company anticipates filing its annual report on Form 10-K shortly.
As a result of the negative impact on revenues due to the changes
previously described, for the year ended December 31, 1997, total revenues
decreased 72% to $4.1 million, compared with $14.8 million reported in fiscal
1996. The Company reported a loss of $18.6 million, or $2.62 per share, for the
year ended December 31, 1997, compared with pro forma earnings of $2.8 million,
or $0.66 per share, for fiscal 1996.
Delinquencies increased during the fourth quarter, relative to the third
quarter ended September 30, 1997. Loans that were 31 days or more delinquent as
of December 31, 1997, represented 9.75% of contracts purchased and serviced by
NAFI, up from 8.99% as of September 30, 1997. The ratio of loans which were 61
days or more delinquent was 3.4%, up from 3.1% as of September 30, 1997.
The Company reported that purchases of motor vehicle retail installment
sales contracts from automobile dealers and through its portfolio acquisition
program totaled $187.4 million for the year ended December 31, 1997, an increase
of 120% over loan purchase volume of $85.0 million for the prior-year period.
Because of the aforementioned financial results for 1997, the Company is in
violation of certain 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 recently-appointed Chief Financial Officer,
stated, "While we are obviously very disappointed by the Company's financial
performance in 1997, we have built
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NAFI Reports Year-End Results
Page 3
April 15, 1998
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considerably more refined assumptions into our modeling. We believe these
changes will strengthen our Company going forward."
National Auto Finance also today announced the private placement on March
21, 1998 with an institutional investor of $20 million principal amount of
Senior Subordinated Notes with detachable warrants. The Notes, which mature in
seven years, bear interest of 11.875% per annum until December 22, 2000, and
increase thereafter. In connection with the placement of the Notes, the Company
issued detachable warrants with a ten-year maturity, exercisable into 593,671
shares of common stock of the Company at $0.01 per share, representing a 5.27%
interest in the Company on a diluted basis.
Roy E. Tipton, President, commented, "While we had a poor year in 1997 from
an earnings perspective, we strongly believe that our business is sound and that
our portfolio's performance should continue to improve. Our new service center
in Jacksonville, Florida has had a very positive effect on our portfolio, as
evidenced by the fact that our delinquencies have decreased from 10.45% as of
June 30, 1997, when we started taking over collections from our outside
servicer, to 8.18% as of February 28, 1998. With many of the recent difficulties
behind us, we believe that we should see further improved results in 1998."
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 Year-End Results
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April 15, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
Condensed Consolidated Statements of Income
(In thousands, except earnings per share data)
Year Ended
December 31,
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Revenue: 1997 1996
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Securitization related income (loss) $ (323) $ 13,564
Other income 4,468 1,227
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4,145 14,791
Total expenses 21,864 10,300
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Income (loss) before income taxes and
extraordinary item (17,719) 4,491
Income taxes -- 1,689(1)
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Net income (loss) before extraordinary item (17,719) 2,802
Extraordinary item (720) --
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Net income (loss) before preferred stock dividends (18,439) 2,802
Less preferred stock dividends 148 --
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Net income (loss) available for common shareholders $(18,587) $ 2,802
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Earnings (loss) per share before extraordinary item $ (2.52) --
Extraordinary item(2) (0.10) --
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Loss per common share - basic and diluted $ (2.62) --
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Pro forma earnings per share -- $ 0.66
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Weighted average shares outstanding 7,087 --
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Pro forma shares outstanding -- 4,230
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(1) Pro forma income taxes for the year ended December 31, 1996, calculated as
if the Company had operated as a "C" Corporation.
(2) Reflects loss on early extinguishment of subordinated debt.
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NAFI Reports Year-End Results
Page 5
April 15, 1998
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NATIONAL AUTO FINANCE COMPANY, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, December 31,
1997 1996
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ASSETS
Assets:
Cash and cash equivalents $ 26,467 $ 5,066
Retained interest in securitizations, at fair value 31,569 23,404
Fixed assets, net 2,262 515
Deferred financing costs 2,539 1,849
Other assets 2,038 367
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Total assets $ 64,875 $ 31,201
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LIABILITIES AND OWNERSHIP EQUITY
Liabilities:
Subordinated debt $ 36,486 $ 19,122
Other liabilities 5,095 2,528
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Total liabilities 41,581 21,650
Mandatorily redeemable preferred stock 2,336 --
Ownership and Stockholders' Equity:
Stockholders' equity(1) 20,958 9,551
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Total liabilities, mandatorily redeemable
preferred stock and ownership equity $ 64,875 $ 31,201
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(1) Equity for December 31, 1996 reflects partners' capital of National Auto
Finance Company, L.P.
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