<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 3, 1998
SEARCH FINANCIAL SERVICES INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-9539 41-1356819
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
600 N. PEARL STREET
SUITE 2500
DALLAS, TEXAS 75201-2899
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 965-6000
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On February 3, 1998, Registrant announced that it is exiting the
non-prime auto finance business and will cease auto loan originations
immediately. Registrant also announced that it has deferred consideration of
its previously announced exchange offer of common stock for preferred stock and
that it has received notice from The Nasdaq National Market, Inc. that its
common stock will be delisted from The Nasdaq National Market on March 30, 1998
if prior to that date Registrant does not regain compliance with the conditions
for continued listing set forth in The Nasdaq Stock Market's Marketplace Rules.
The press release issued by Registrant with respect to the foregoing
is filed herewith as Exhibit 99.
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(C) EXHIBITS.
Exhibit No. Description
- ----------- -----------
99 Press Release dated February 3, 1998
-3-
<PAGE> 4
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 hereunto duly authorized.
SEARCH FINANCIAL SERVICES INC.
By: /s/ ELLIS A. REGENBOGEN
----------------------------------
Ellis A. Regenbogen
Executive Vice President
Dated: February 3, 1998
-4-
<PAGE> 5
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99 Press Release dated February 3, 1998
-5-
<PAGE> 1
Contact: James F. Leary
Vice Chairman, Finance
214-965-6011
or
Robert D. Idzi
Senior Executive VP &CEO
214-965-6002
For Immediate Release: February 3, 1998
SEARCH FINANCIAL SERVICES INC. TO EXIT
NONPRIME AUTO INDUSTRY TO ALLOCATE TIME
AND RESOURCES TO THE CONSUMER FINANCE INDUSTRY
DALLAS, Texas - - Search Financial Services Inc. today announced that it is
exiting the non-prime auto finance business and will cease auto loan
originations immediately. In making the announcement, George C. Evans,
Chairman, President and Chief Executive Officer, said the decision was based on
two principal factors: Search's inability to renegotiate the terms of the MSF
Financial, Inc. ("MSF") loan agreement with Fleet Bank, N.A. and the other
members of the MSF bank group to permit continued loan funding and higher than
anticipated losses from Search's "C" paper business. The move is expected to
result in immediate staff reductions of 55 people with an annualized cost
saving of approximately $3.2 million. Primarily affected are the Company's
marketing, credit, funding and administrative support groups. Search's
collection department will continue to service its auto loan portfolio.
Said Evans, "Search is continuing its negotiations with the MSF bank
group to obtain waivers of existing defaults under the loan agreement and to
provide for a mutually agreeable maturity date. We are also in discussions
with respect to a number of third-party transactions that could enable us to
meet the banks' payment requirements and are reviewing other strategic
alternatives."
Evans added, "Our loan agreement with Hibernia National Bank, which
provides funding for our consumer finance operations, remains in effect. We
are currently at our borrowing limit under that agreement, but are in
discussions with a third party regarding a loan sale transaction to free up
availability under that agreement. All of our available funding will go
towards growing our consumer finance operations, which currently include 21
branches with $16 million in loans outstanding in six states and Puerto Rico."
As of August 1st, at the completion of the MSF acquisition, Search and
its subsidiaries had 306 employees. Over the next 90 days, Search closed the
MSF Jackson, Mississippi headquarters and the MSF collection center in Mobile,
Alabama and reduced the overall work force by 77 employees. During the last
quarter of 1997, Search was engaged in due diligence and negotiations regarding
the acquisition of a $400 million non-prime company, and was advised by the
company's investment banker that it was one of the acquisition finalists.
Extra
<PAGE> 2
personnel were carried during this period in anticipation of the possible
acquisition, which failed to materialize.
With the reduction of 55 personnel announced today, Search has cut its
work force by 132 employees since August 1st, and from 306 to 174 today, a 43%
reduction.
Search's decision to exit the non-prime auto industry is necessitated
by lenders and banks pulling back lending to the industry and escalating
repayment of debt. Prospective lenders have indicated to Search that they
would consider lending to the consumer operation if Search would have an
orderly withdrawal form the non-prime auto industry. Therefore, the decision
was made to support consumer lending operations where capital and credit lines
are available vs. non-prime auto, where equity and credit lines are virtually
impossible to obtain.
Evans advised that although it is in the preliminary stage of due
diligence, Search is engaged in a prospective merger/sale with other companies
who have strong balance sheets.
Search also announced that it has deferred consideration of its
previously announced exchange offer of common stock for preferred stock until
after the arrangements with the MSF bank group are finalized and the previously
announced litigation with Hall Phoenix/Inwood, Ltd. has been resolved.
Finally, Search announced that it has received notice from The Nasdaq
National Market, Inc. that its common stock will be delisted from The Nasdaq
National Market on March 30, 1998 if prior to that date it does not regain
compliance with the conditions for continued listing set forth in The Nasdaq
Stock Market's Marketplace Rules. To regain compliance, the common stock must
have a reported closing bid price of $1.00 or more for 10 consecutive trading
days or, alternatively, Search must maintain net tangible assets of at least $4
million and the market value of Search's common stock held by persons other
than officers, directors and persons owning of record or beneficially 10
percent or more of the outstanding shares must be at least $3 million for 10
consecutive trading days. If necessary, Search may request a hearing to review
this action.
Search Financial Services Inc. is a specialized financial services
company that has been engaged in the purchasing, financing and servicing of
non-prime automobile installment loans originated by franchised and independent
automobile dealers. Search will now concentrate on its direct lending consumer
finance operations. Search common shares and its 9%/7% convertible preferred
shares are currently traded on The NASDAQ national Market under the symbols
"SFSI" and "SFSIP," respectively.
# # #
