SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): May 5, 1999
ARISTAR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-3521 95-4128205
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
8900 Grand Oak Circle, Tampa, Florida
33637-1050 (Address of principal
executive office)
(813) 632-4500
(Registrant's telephone number including area code)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Presentation made by management of the registrant at an investor
conference on May 5, 1999.
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.
ARISTAR, INC.
By: /s/ Craig Chapman
Craig Chapman
President
ARISTAR
A WASHINGTON MUTUAL COMPANY
AFSA Finance Industry
Investors Conference
May 3-5, 1999
<PAGE>
Company Profile
Headquartered in Tampa, Florida
Founded in 1927
Portfolio Lender - no securitization
$2.8 Billion in Assets
498 offices in 24 States
2,600 Employees
<PAGE>
Product Profile and Mix
Personal Unsecured (45%)
Average Balance of $2,078
Real Estate (45%)
60% First's and 40% Second's
Average Loan-to-value approximately 70%
Average Balance of $26,648
Sales Finance (10%)
8,767 Dealerships in 25 States
Average Balance of $797
<PAGE>
ARISTAR
[MAP OF UNITED STATES]
- ----------------------- -----------------
Receivables -- 12/31/99
Texas 13.4%
Tennessee 10.6
Colorado 9.2
North Carolina 9.0
California 6.0
South Carolina 5.7
Virginia 5.1
Louisiana 4.9
Mississippi 4.3
Florida 4.2
Other 27.6
- ----------------------- -----------------
<PAGE>
ARISTAR
Customer (Demographic profile)
Forty-four year old blue collar or lower-white collar worker
Individual incomes of $30,000 and family incomes of $70,000
Over 65% home owners
Low net worth
Customer (Psycho-graphic)
Cash flow borrowers
Intimidated by doing business with a bank
Payment borrower
Want to be treated with dignity and respect
<PAGE>
ARISTAR
Mission
To become a premier financial services company that provides a superior return
to its shareholder by:
Focusing on our high margin core products
Become the low cost producer
Superior execution
<PAGE>
ARISTAR
Financial Targets
ROA 3.0%
ROE greater than 18.0%
EPS Growth 15.0%
Efficiency Ratio less than 40.0%
Net Charge-Off 2.8%
<PAGE>
ARISTAR
Aristar is a Strong Strategic Fit with Washington Mutual's Growth Strategy
Both company's focus is on high-service consumer lending
WM has traditionally been an "A" lender but is now generating potential
sub-prime customers through its "free checking" marketing programs
WM has excess capital it would like to deploy in its core businesses like
consumer lending - recently announced a share repurchase program
WM has historically been an acquirer and consolidator of financial services
companies and that continues to be part of its strategic focus
<PAGE>
ARISTAR
Competitive Advantages
"The Franchise" - Customer Relationship
Number one position in small to mid-size markets
Speed of service
Flexibility of packaging
<PAGE>
ARISTAR
Strategy - Nurture the Franchise
Leverage existing customer base by
focusing on core products
up-selling and cross-selling
Promote a sales culture to improve the historically slow receivables growth
rate
Eliminate unprofitable ancillary products
Enhance credit risk capabilities
Become the low-cost producer
Manage business mix
Develop segmentation and target marketing capabilities
<PAGE>
ARISTAR
Strategy - Expand the Franchise
Expand national "Franchise"
Reinforce our dominant position in small to mid-size markets
Rationalize and expand branch network to new markets
Diversify distribution beyond retail branch network
Pursue acquisitions
<PAGE>
ARISTAR
Aristar is Improving Credit Quality While Achieving Strong Loan Growth
Aristar has achieved record level organic growth over the past 10 months
Credit quality has not been sacrificed o Delinquency percentage at a three
year low
Credit standards have been tightened for newly originated business
There are strong improvements in underlying credit quality trends
The at risk portfolio continues to be managed aggressively
Aristar continues to be the only major consumer finance company to
exclusively use contractual terms as a measure for delinquencies and charge offs
<PAGE>
ARISTAR
Total Receivables Growth Rate ($)
[Line Graph]
(using May as an Index Month)
97/98 98/99
- -------------------------------- ----------------- ----------------
May 0.00% 0.00%
- -------------------------------- ----------------- ----------------
Jun 0.46% 0.55%
- -------------------------------- ----------------- ----------------
Jul 0.82% 2.27%
- -------------------------------- ----------------- ----------------
Aug 1.04% 4.35%
- -------------------------------- ----------------- ----------------
Sep 0.93% 5.51%
- -------------------------------- ----------------- ----------------
Nov 4.53% 8.83%
- -------------------------------- ----------------- ----------------
Dec 6.68% 11.58
- -------------------------------- ----------------- ----------------
Jan 6.49% 12.73
- -------------------------------- ----------------- ----------------
Feb 5.50% 12.73
- -------------------------------- ----------------- ----------------
Mar 4.62% 13.85
- -------------------------------- ----------------- ----------------
<PAGE>
ARISTAR
Receivables Growth Rate Comparison by Product
[Bar Graph]
May 97 - Mar 98 May 98 - Mar 99
- -------------------- ------------------------------- ----------------------
Total Portfolio 5.56% 13.87%
- -------------------- ------------------------------- ----------------------
Personal Loans 10.34% 16.72%
- -------------------- ------------------------------- ----------------------
Real Estate 8.16% 15.37%
- -------------------- ------------------------------- ----------------------
Sales Finance -14.37% -1.89%
- -------------------- ------------------------------- ----------------------
<PAGE>
ARISTAR
60+ days Delinquencies as a % of Receivables
[Line Graph]
Dec 97 2.73%
- ------------------------- -----------------------
Jan 98 2.76%
- ------------------------- -----------------------
Feb 98 2.74%
- ------------------------- -----------------------
Mar 98 2.63%
- ------------------------- -----------------------
Apr 98 2.64%
- ------------------------- -----------------------
May 98 2.66%
- ------------------------- -----------------------
Jun 98 2.68%
- ------------------------- -----------------------
Jul 98 2.71%
- ------------------------- -----------------------
Sep 98 2.72%
- ------------------------- -----------------------
Oct 98 2.67%
- ------------------------- -----------------------
Nov 98 2.62%
- ------------------------- -----------------------
Dec 98 2.53%
- ------------------------- -----------------------
Jan 99 2.59%
- ------------------------- -----------------------
Feb 99 2.49%
- ------------------------- -----------------------
Mar 99 2.36%
- ------------------------- -----------------------
<PAGE>
ARISTAR
Delinquencies $Growth Rate Comparison
[Bar Graph]
P30 & C30 C60 to C150
- ---------------------------------- --------------------- ---------------------
May 97 - Mar 98 3.38% 6.78%
- ---------------------------------- --------------------- ---------------------
May 98 - May 99 -6.22% 4.04%
- ---------------------------------- --------------------- ---------------------
$25.5 Million $1.5 Million
Improvement Improvement
<PAGE>
ARISTAR
Bankrupt Account Growth Rate - Total Portfolio ($)
[Line Graph]
(using May as an Index Month)
97/98 98/99
- ------------------- ----------------- ----------------
May 0.00% 0.00%
- ------------------- ----------------- ----------------
Jun 1.10% 0.93%
- ------------------- ----------------- ----------------
Jul 2.08% 1.47%
- ------------------- ----------------- ----------------
Aug 1.96% 2.52%
- ------------------- ----------------- ----------------
Sep 4.52% 4.69%
- ------------------- ----------------- ----------------
Oct 8.29% 5.54%
- ------------------- ----------------- ----------------
Nov 8.98% 5.35%
- ------------------- ----------------- ----------------
Dec 8.90% 2.14%
- ------------------- ----------------- ----------------
Jan 11.03% 1.14%
- ------------------- ----------------- ----------------
Feb 12.43% 1.70%
- ------------------- ----------------- ----------------
Mar 14.56% 1.16%
- ------------------- ----------------- ----------------
<PAGE>
ARISTAR
Net Charge-offs as a % of Receivables
[Line Graph]
Dec 97 3.31%
- ------------------------- -----------------------
Jan 98 3.10%
- ------------------------- -----------------------
Feb 98 3.12%
- ------------------------- -----------------------
Mar 98 3.15%
- ------------------------- -----------------------
Apr 98 3.26%
- ------------------------- -----------------------
May 98 3.00%
- ------------------------- -----------------------
Jun 98 3.00%
- ------------------------- -----------------------
Jul 98 2.92%
- ------------------------- -----------------------
Sep 98 3.01%
- ------------------------- -----------------------
Oct 98 3.07%
- ------------------------- -----------------------
Nov 98 3.40%
- ------------------------- -----------------------
Dec 98 3.50%
- ------------------------- -----------------------
Jan 99 3.22%
- ------------------------- -----------------------
Feb 99 2.96%
- ------------------------- -----------------------
Mar 99 2.87%
- ------------------------- -----------------------
Note: May '98 excludes $617,000 recovery from sale of charged off
receivables
<PAGE>
ARISTAR
Loan Receivables at year-end (dollars in millions)
<TABLE>
<CAPTION>
Annual Change
12/31/98 13/31/97 $ %
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Real Estate $1,123 $978 145 14.8%
Personal Loans 1,160 1,026 134 12.9
Sales Finance 291 325 (34) (10.4)
---------------- ----------------- ---------------- -----------------
Total Loans 2,574 2,329 245 10.5
Reserve for loan losses (80) (74) (6) 8.1
================ ================= ================ =================
Total Loans net of Reserves $2,494 $2,255 $239 10.6%
================ ================= ================ =================
</TABLE>
<PAGE>
ARISTAR
Income Statement (dollars in millions)
<TABLE>
<CAPTION>
Change
1998 1997 $ %
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net Interest Income $283.2 $247.2 $36.0 14.6%
Other Income 27.1 26.5 0.6 2.3
---------------- ----------------- ---------------- -----------------
Net Margin 310.3 273.7 36.6 13.3
Provision for loan losses 79.8 66.6 13.2 19.8
G&A Expense 143.0 131.1 11.9 9.1
---------------- ----------------- ---------------- -----------------
Net Income before taxes 87.6 76.0 11.6 15.3
Provision for income taxes 34.7 29.7 5.0 16.8
================ ================= ================ =================
Net Income $52.9 $46.3 $6.6 14.3%
================ ================= ================ =================
</TABLE>
<PAGE>
ARISTAR
Overview of 1999 Business Plan
Net Income projected to increase faster than asset growth
Net Interest Income increase driven by sustained strong organic loan growth
(15% over past 12 months) and stable loan yields
Margin will decline slightly due to change in mix toward more real estate
loans
Moderate Insurance and Other Income increase due to more conservative
accounting
<PAGE>
ARISTAR
Overview of 1999 Business Plan
Increase in Loan Loss Provision to support loan portfolio growth
Operating Expenses should increase more slowly than asset growth:
Profit based incentive compensation and marketing increased to drive
business volume
Facilities upgrade for 30% of branch network
New market expansion planned for 1999
<PAGE>
ARISTAR
Overview of 1999 Business Plan
New Infrastructure added during 1998 & 1999 to maintain credit quality and
improve operating efficiency:
Credit Risk Department
Data Warehouse
Sales Finance Department
Centralization of the Back Office
Alternative Lending Dept
Lending Compliance Dept.
Training Dept.
<PAGE>
ARISTAR
First Quarter 1999 Results
Net Income up 17% from 1998 and on target with Plan
Loan portfolio up $51 million during the first quarter - this was the first
time in the company's history it has experienced first quarter loan growth
Credit Quality improved and reserves strengthened:
Net Loan Charge-offs of $19.7 million declined 6% from $20.9 million in
Q4/98 and were below plan by Approximately $2 million
Reserve coverage to charge-offs strengthened during the quarter -
consistent with plan
Operating expense up slightly (1.8%) from same quarter in 1998
<PAGE>
ARISTAR
Loan Receivables at quarter-end (dollars in millions)
<TABLE>
<CAPTION>
Annual Change
3/31/99 3/31/98 $ %
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Real Estate $1,185 $1,002 183 18.3%
Personal Loans 1,167 999 168 16.8
Sales Finance 274 289 (15) (5.1)
---------------- ----------------- ---------------- -----------------
Total Loans 2,625 2,290 335 14.6
Reserve for loan losses (86) (75) (11) (14.6)
================ ================= ================ =================
Total Loans net of Reserves $2,539 $2,215 $324 14.6%
================ ================= ================ =================
</TABLE>
<PAGE>
ARISTAR
Income Statement (dollars in millions)
<TABLE>
<CAPTION>
Change
Q1/99 Q1/98 $ %
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net Interest Income $78.4 $66.9 $11.5 17.2%
Other Income 6.6 6.5 0.1 1.5
---------------- ----------------- ---------------- -----------------
Net Margin 85.0 73.4 11.6 15.8
Provision for loan losses 25.6 18.0 7.6 42.2
G&A Expense 34.6 34.0 0.6 1.8
---------------- ----------------- ---------------- -----------------
Net Income before taxes 24.8 21.4 3.4 15.9
Provision for income taxes 9.7 8.5 1.2 14.1
================ ================= ================ =================
Net Income $15.1 $12.9 $2.2 17.1%
================ ================= ================ =================
</TABLE>
<PAGE>
ARISTAR
Operating Efficiency Ratio
[Bar Graph]
Op. Eff
- ------------------------- -----------------------
Q1/96 48.48%
- ------------------------- -----------------------
Q2/96 46.10
- ------------------------- -----------------------
Q3/96 48.01
- ------------------------- -----------------------
Q4/96 46.15
- ------------------------- -----------------------
Q1/97 47.47
- ------------------------- -----------------------
Q2/97 43.04
- ------------------------- -----------------------
Q3/97 46.19
- ------------------------- -----------------------
Q4/97 44.70
- ------------------------- -----------------------
Q1/98 44.88
- ------------------------- -----------------------
Q2/98 43.43
- ------------------------- -----------------------
Q3/98 40.76
- ------------------------- -----------------------
Q4/98* 50.20
- ------------------------- -----------------------
Q1/99 40.97
- ------------------------- -----------------------
*Note: Q4/98 includes $4.5 million legal settlement and $2.2 million one-time
accounting adjustments excluding those items the efficiency ratio
would have been 42.18%.
