UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-K405
ANNUAL REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 1-10176
MERCURY FINANCE COMPANY (Exact name of registrant as specified in
its charter)
DELAWARE (State or other jurisdiction of incorporation or
organization) 36-3627010 (I.R.S. Employer Identification No.)
100 Field Drive, Suite 340, Lake Forest, Illinois 60045
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: 847-295-8600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK ($1 par value) (Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 OR 15(D) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes XX No
Indicate by check mark if disclosure statement of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein and
will not be contained, to the best of registrant's knowledge, in
definitive Proxy or information statements incorporated by
reference in Part III of this form 10-K or any amendment to this
for. XX
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. SUCH AGGREGATE MARKET VALUE
TOTALED $1,923,995,444 (BASED ON THE CLOSING PRICE OF THE COMPANY'S
COMMON STOCK ON THE NEW YORK STOCK EXCHANGE, AS REPORTED BY THE
WALL STREET JOURNAL (MIDWEST EDITION FOR MARCH 26, 1996)).
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
COMMON STOCK, $1 PAR VALUE 172,583,306 SHARES OUTSTANDING AT MARCH
26, 1996 (NET OF TREASURY STOCK).
Documents incorporated by reference: List the following documents
if incorporated by reference and the part of the form 10-K into
which the document is incorporated: (1) Any annual report to
security holders; and (2) Proxy or information statement; and (3)
Any prospectus files pursuant to Rule 424(B) Or (C) Under the
Securities Act of 1933.
PORTIONS OF THE 1995 ANNUAL REPORT TO SHAREHOLDERS AND THE
DEFINITIVE PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF
SHAREHOLDERS (FILED ON MARCH 6, 1996 ARE INCORPORATED HEREIN BY
REFERENCE).
<PAGE>
PART I
THE COMPANY
ITEM 1.
BUSINESS - GENERAL
Mercury Finance Company ("Mercury") ("Company") is a consumer
finance concern engaged in the business of purchasing individual
installment sales finance contracts from automobile dealers and
retail vendors, extending short-term installment loans directly to
consumers and selling credit insurance and other related products.
Mercury was organized in 1988, as a wholly owned subsidiary of
First Illinois Corporation (an Evanston, Illinois based bank
holding company), in order to hold 100% of the outstanding
common stock of First Illinois Finance Company and First Illinois
Life Insurance Company. On March 4, 1989 the Board of Directors of
First Illinois Corporation approved a plan to spin-
off Mercury in a stock distribution to its shareholders. On April
24, 1989, First Illinois Corporation distributed to its
shareholders of record on April 10, 1989 one share of Mercury
for each two shares of First Illinois Corporation stock held.
Following the stock distribution, First Illinois Finance Company
was dissolved and Mercury became the sole shareholder of each of
the state consumer finance subsidiaries. First Illinois
Life Insurance Company was renamed Mercury Life Insurance Company
("Mercury Life").
Mercury's operating subsidiaries commenced operations in February
1984 for the purpose of penetrating the market for small dollar
amount consumer loans (average of $3,000 or less). The initial
focus was toward small, short term, direct installment loans made
to the U.S. military servicemen. Building on this direct lending
niche, Mercury has also built a substantial, diversified consumer
finance portfolio by purchasing individual installment sales
finance contracts from retail vendors and automobile dealers.
On April 1, 1993 Mercury acquired all the shares of Gulfco
Investment Inc. for $22.3 million in cash. Gulfco Investment Inc.
was the parent company which owned all of the stock of Gulfco
Finance Company and Gulfco Life Insurance Company. Gulfco Finance
Company conducted its consumer finance business through a branch
network of 62 offices located in Louisiana, Mississippi and Texas.
The acquisition was accounted for under the purchase method of
accounting. Accordingly their results of operations have been
included in the consolidated financial statements since the date of
acquisition. The excess of cost over fair value of net assets
acquired (goodwill) relating to the acquisition is being amortized
over twenty years on the straight line method.
On September 30, 1994 Mercury acquired all the shares of Midland
Finance Co. for $15.1 million in cash and the assumption of its net
liabilities. Midland Finance Co. conducted its consumer finance
business through a central office in Chicago, Illinois. The
acquisition was accounted for under the purchase method of
accounting. Accordingly their results of operations have been
included in the consolidated financial statements of income and
statements of cash flow since the date of acquisition. The excess
of cost over fair value of net assets acquired (goodwill) relating
to the acquisition is being amortized over twenty years on the
straight line method.
On October 20, 1995 Mercury acquired all the shares of ITT Lyndon
Property and ITT Lyndon Life Insurance Company for $72.5 million in
cash and the assumption of their net liabilities. ITT Lyndon
Property and ITT Lyndon Life Insurance Company conducted their
business through a central office in St. Louis, Missouri.
Following the acquisition, the names of the companies
were changed to Lyndon Property and Lyndon Life Insurance Companies
("Lyndon"). The acquisition was accounted for under the purchase
method of accounting. Accordingly their results of operations have
been included in the consolidated statements of income and
statements of cash flow since the date of acquisition. The excess
of fair value over cost of net assets acquired (negative goodwill
of $10,299) relating to the acquisition was offset against the
present value of future profits of acquired insurance in force.
The balance of the present value of future profits was $16.6
million at December 31, 1995 and is being amortized over an
approximate three year period.
Mercury's loans range for periods from 3 months to 48 months at
annual interest rates ranging, with minor exception, from 18% to
40%. Generally all loans are repayable in monthly installments.
Generally late payment fees are assessed to accounts which fail to
make their scheduled payments within 10 days of the scheduled due
date.
<PAGE>
Direct finance receivables on which no payment is received within
149 days, on a recency basis, are charged off. Sales finance
receivables which are contractually delinquent 150 days are
charged off in the month before they become 180 days delinquent.
Accounts which are deemed uncollectible prior to the maximum charge
off period are charged off immediately. Management may authorize
an extension if collection appears imminent during the next
calendar month.
Accounts which become 60 or more days contractually delinquent and
no full contractual payment is received in the month the account
attains such delinquency status cease earning interest.
Mercury has certain legal remedies in the event of defaulted loans.
Remedies include the repossession of secured collateral.
Repossession of such collateral is determined and executed
on individual contract basis at various stages of delinquency. In
addition, Mercury may also pursue legal remedies toward any
deficiency balances created by the repossession.
Mercury believes its growth is due to its targeted marketing
strategy and its experienced consumer finance professionals who are
able to assess, structure and initiate or purchase high margin
consumer loans. Growth has come from an increase in existing
office volume as well as new office openings and the acquisitions
of Gulfco Investment Inc. and Midland Finance Co..
BRANCH OFFICE NETWORK/OPERATIONS
Mercury's branch office network consists of 276 offices in 28
states located primarily in the southeastern, central and western
United States. An office typically starts with 2 employees and
is expanded based on receivables generated. The largest office has
approximately 20 people with a network average of approximately 6
people per office. Mercury is divided into 30 geographically
organized districts, with each district headed by a district
supervisor. A district supervisor is generally responsible for 7
to 11 offices (depending on size and geographical dispersion).
District supervisors report directly to five group Vice Presidents
of Operations.
Management has developed its workforce by attracting and training
experienced consumer lending professionals. The training program
includes classroom simulation of branch operations, actual training
at branch offices and personal interviews by senior operating
management of the Company. The training program which is called
"Pride Program" is administered by the branch managers and district
supervisors and is a requirement for all branch personnel. In
addition the Company also conducts a Manager's Qualification
Program (MQP) for prospective managers.
<PAGE>
The Company instituted an Accelerated Training Program (ATP) in
July, 1991. The program is designed for either college graduates
or individuals with comparable work experience who, in the opinion
of the management of the Company, possess an above average ability
to learn and succeed in the consumer finance business. The ATP
supplements the Company's supply of promotable employees from the
regular training program. ATP is a highly structured training
program that is designed to be completed within a maximum of 12
months. Currently, there are 26 individuals participating at
different training phases in the program. All ATP trainees must
be willing to relocate. The Company has specific training offices
with experienced training managers who are responsible for an ATP
employee's development. In addition, to ensure broad based
development of the trainees, the program is structured
so as to include all levels of Operating Management in the training
process.
Mercury locates and opens new offices based on availability of
branch managers and the conclusions reached from market research.
The market research conducted includes population and income
demographics, regulatory issues, on-site visitations and
introductory sales calls. The conclusion reached from the market
research enables the Company to estimate growth and earnings
potential for a possible branch location. On the average
Mercury's offices are generally profitable within 9 to 12 months of
commencing operations.
Mercury's 276 offices are strategically located in areas of high
traffic density for potential customers. Such sites are determined
during the market research process. The traffic patterns are
periodically reviewed. This process of site selection and
review allows Mercury to maximize market potential and availability
of potential borrowers. Since inception, Mercury has
closed two branch offices because traffic patterns and market
potential changed from the original site selection.
Mercury's borrowers represent a broad cross section of the military
and non-military population. Approximately 25% of Mercury's branch
offices are located in the general vicinity of major U.S. military
installations. These offices generally lend to both military and
non-military personnel. The remaining offices are located in urban
areas and primarily provide services to civilians. Recently
proposed military base closings will have, in management's opinion,
no material effect on the operations of the Company.
The business mix of Mercury's branch office network between sales
finance receivables which constitutes 87% of total receivables, and
direct consumer loans constituting 13% of total receivables is
generally consistent with the 30 supervisory districts of the
country. The business mix in any one branch office is dependent
upon the location of the office and the background of an office's
loan personnel.
<PAGE>
The geographic distribution of Mercury's offices are as follows:
<TABLE>
<CAPTION>
State Office Locations
<S> <C>
Alabama 4
Arizona 5
California 5
Delaware 2
Colorado 2
Florida 37
Georgia 14
Illinois 20
Indiana 8
Kansas 1
Kentucky 5
Louisiana 42
Michigan 5
Mississippi 15
Missouri 3
Nevada 4
New Mexico 2
North Carolina 12
Ohio 12
Oklahoma 3
Oregon 1
Pennsylvania 3
South Carolina 5
Tennessee 8
Texas 37
Virginia 13
Washington 2
Wisconsin 6
TOTAL 276
</TABLE>
LOAN ORIGINATION AND MARKETING
Mercury originates loans and purchases individual sale finance
contracts through its office network based on a decentralized
approval process tailored to the market in which the specific
offices operates. All credit extensions are reviewed and approved
at the branch level. Each branch office has specific credit limit
authorization and any extension of credit above the branch
limit must be approved by the district supervisor. Although
Mercury's branch offices maintain local credit authority, all
credit extensions must conform to the objective credit worthiness
policies of Mercury. These policies require completed
applications, background credit investigations, employment
verification and evaluation and decision guidelines. While the
ability and intent of the consumer to repay are essential
prerequisites to any loan, collateral provides additional security
for the lender. All of Mercury's sales finance contracts are
secured with collateral while the majority of its direct consumer
loans are also secured with collateral. The amount of collateral
required depends upon the purpose of the loan, the size of the loan
and the risk factors associated with the loan.
Applications for installment sales finance receivables originate
from local dealers (household goods, appliance and automobile) and
are subjected to the same credit review and credit worthiness
policies as direct consumer loans. A specific installment sales
finance contract is purchased only after objective investigations
of the credit worthiness of the borrower and a determination of the
underlying value of the asset through use of industry publications,
combined with the subjective assessment by an office's loan
personnel. Every sales finance contract is reviewed individually
and extensions of credit are made based upon the credit worthiness
of each contract.
<PAGE>
Individual sales finance contracts are purchased pursuant to formal
agreements with local merchants negotiated at the branch office
level and subsequently approved by supervision. Mercury purchases
sales finance contracts from local dealers with which Mercury has
established ongoing relationships. A relationship with a dealer
begins only after the soundness of their business is determined.
Mercury conducts credit investigations, independent interviews with
state regulatory agencies and inquiries to local civic and
community organizations to aid in this determination.
Relationships with dealer and volume of contracts
purchased are conducted and developed on an ongoing basis. Mercury
branch offices have conducted business with many dealers since the
inception of a branch.
As part of certain dealer arrangements, dealers reserve and
recourse agreements are entered into to protect Mercury from credit
losses and early prepayments on installment sales finance
contracts. These nonrefundable reserves are negotiated on a dealer
by dealer basis and are subject to change based upon the
performance of the sales finance contracts purchased.
Mercury encourages a decentralized marketing approach which allows
each office to pursue and develop business leads which are unique
to individual markets. Mercury does no national advertising.
Branch offices may advertise in local publications and most branch
offices rely on the endorsement of customers to build upon its
client base. Mercury believes that client service in the form of
timely loan application processing makes customer referrals the
most cost effective primary marketing tool.
INSURANCE OPERATIONS
In conjunction with their lending practices, the consumer finance
subsidiaries, as agents for Gulfco Life, Lyndon and unaffiliated
insurers, offer credit life, accident and health and property
insurance to borrowers who obtain finance receivables directly from
the consumer finance subsidiaries, and to borrowers under sales
finance contracts and financing contracts purchased from merchants
and automobile dealers. Commissions on credit life insurance and
credit accident and health insurance from unaffiliated insurers are
earned by Mercury over the average terms of the related policies on
the sum-of-the-months digits method.
Lyndon is engaged in the business of direct writing of credit life,
accident and health and health and various other credit related
insurance policies for customers of Mercury and other companies.
Lyndon Life is licensed in forty-eight (48) states and Lyndon
Property is licensed in forty-seven (47) states. Mercury Life and
Gulfco Life are engaged primarily in the business of reinsuring and
direct writing respectively, of credit life and accident and health
insurance policies issued to borrowers of finance receivables and
sales finance contracts originated by Mercury. The policies insure
the holder of a sales finance contract or other debt instrument for
the outstanding balance payable in the event of death or disability
of the debtor. Premiums are earned over the life of the contracts
principally using pro-rata and sum-of-the months digits
methods or in relation to anticipated benefits to the policy
holder.
Mercury Life, Gulfco Life and Lyndon have established policy
liabilities and claim reserves. The claim reserves are based upon
accumulated estimates of claims reported, plus estimates of
incurred but unreported claims.
<PAGE>
SOURCE OF FUNDS
Mercury funds its operations through payments of principal and
interest from finance receivables, capital funds and the sale of
debt securities. At December 31, 1995, Mercury had total debt of
$958.2 million. Of this total, 51% was in commercial paper and
notes, 46% was in fixed rate senior term notes, 3% in fixed rate
subordinated term notes.
In addition to its outstanding debt Mercury has unused bank lines
of credit and maintains bank revolving credit facilities which
totalled $500 million at December 31, 1995. These funds were
totally available to Mercury at December 31, 1995.
In the past, Mercury had entered into interest exchange agreements
ranging in maturity from one to five years. These agreements
called for Mercury to pay interest at a fixed rate and receive
interest at a floating rate on notional amounts. At December 31,
1995 Mercury was not a party to open interest exchange agreements.
Related to its placement of commercial paper Mercury maintains an
investment grade rating of F-2 (upgraded in May 1990) with Fitch
Investors Service Inc., D-1-, with Duff and Phelps Inc.
(upgraded in May 1992) a A2 with Standard & Poors, a P2 with
Moody's Investors Service, Inc., and Thomson BankWatch 1.
COMPETITION
The consumer finance business is intensely competitive. Mercury
competes with other consumer finance companies, personal loan
departments and commercial banks, federally insured credit
unions, industrial banks, credit card issuers and companies which
finance the sales of their own merchandise or the merchandise of
others.
All lending institutions compete in the area of customer service,
response time and interest rate charges. Although in some
instances Mercury's interest rate charges may be greater than some
of its competitors Mercury believes that its decentralized approval
process provides Mercury with excellent customer service in the
form of quicker response time to potential customers.
EMPLOYEES
As of December 31, 1995, Mercury had approximately 1,800 employees.
Mercury expects the total number of employees to increase as it
continues to expand and believes that it has excellent
relationships with its employees. None of its employees are
represented by a collective bargaining agreement.
<PAGE>
GOVERNMENT REGULATION
All consumer finance operations are subject to federal and state
regulations. Personal loan lending laws generally require
licensing of the lender; limitations on the amount, duration and
charges for various categories of loans, adequate disclosure of
certain contract terms; and limitations on certain collection
policies and creditor remedies. Federal consumer credit statutes
primarily require disclosures of credit terms in consumer finance
transactions. In general, the business is conducted under licenses
issued by individual states. Each office is subject to
periodic examination by state regulatory authorities. The state
licenses are revocable for cause. Mercury believes it complies in
all aspect with these regulations. Mercury is also subject to the
provisions of the Federal Consumer Credit Protection Act and its
related regulations.
Credit insurance offered in connection with the direct lending and
sales fiance activities of Mercury and the premiums payable by
credit customers and commissions payable to insurers to the
originators of such insurance are also subject to state laws
and regulations. Mercury Life is subject to regulation and
supervision by the Arizona Department of Insurance. Gulfco Life
is subject to regulation and supervision by the Louisiana
Department of Insurance.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
Period Served as
Officer of the
Company, Affiliated
Company, or
Name Age The Company Predecessor Company
<S> <C> <C> <C>
John N. Brincat 59 President, Director and 1983 to Date
Chief Executive Officer of
the Company since 1989.
Formerly Chairman of the
Board and Chief Executive
Officer of the First
Illinois Finance Company (
the Company's predecessor)
from 1985 to 1989. Executive
Vice President prior thereto.
President and Chief Operating
Officer of the financial ser
vice group of First Illinois
Corporation, 1987 to 1989.
James A. Doyle 44 Senior Vice President, 1977 to Date
Controller and Secretary
of the Company since
January 1991. Formerly
Vice President, Controller
and Secretary of the Company
since 1989. Formerly
Executive Vice President and
Chief Financial Officer of
First Illinois Corporation
from 1987 to 1989.
<PAGE>
Rich P. Bosson 53 Vice President - Operations 1986 to Date
of the Company since October
1991. Formerly Assistant
Vice Presient/Regional
Director of Company and
First Illinois Finance
Company (the Company's
predecessor) from 1987,
Branch Manager prior thereto.
Edward G.
Stautzenbach 57 Vice President. Marketing 1988 to Date
since 1991. Formerly
Assistant Vice President
from 1988. Formerly part
owner of a mail marketing
company from 1984.
John J. Pratt 56 Vice President - Operations 1985 to Date
of the Company since
September 1992. Formerly
Assistant Vice President/
Regional Director of
Company and First Illinois
Finance Company (the
Company's predecessor)
from 1986. Branch Manager
prior thereto.
Sheila M. Tilson44 Vice President - Operations 1984 to Date
Assistant Secretary since
1995. Assistant Vie Pres
ident Operations from
January 1987. Administrat
ive Assistant prior thereto.
<PAGE>
John N. Brincat
, Jr. 34 Vice President - Operations 1985 to Date
of the Company since July
1994. Formerly Assistant
Vice President/Regional
Director of Company from
1991. Branch Manager prior
thereto.
Jeffrey R.
Brincat 33 Vice President, Admin 1991 to Date
istration 1994 to date.
Formerly Assistant Vice
President from 1993 to
November 1994. Formerly
Branch Manager from 1992 to
1993. Formerly Management
Trainee 1991 to 1992. Waste
Management Inc. from 1990 to
1991. Formerly Captain U.S.
Marine Corps 1984 to 1990.
Charles H. Lam 44 Vice President - Operations 1987 to Date
of the Company since
February, 1996. Formerly
Assistant Vice President/
Regional Director of Company
from October 1990. Branch
Manager prior thereto.
Geral M. Mizel 62 Vice President - Operations 1994 to Date
since October 1994. Formerly
Executive Vice President
Midland Finance.
Bradley S.
Vallem 42 Assistant Vice President 1995 to Date
and Treasurer since July
1995. Formerly Vice Presi
dent - Finance Bank One,
Chicago, from 1992 to 1995.
Prior thereto Senior Vice
President and Controller
with First Illinois Bank of
Evanston and First Illinois
Corporation.
Michael W.
Stremlau 33 Vice President of Insurance 1993 to Date
since February 1996. Assist
ant Vice President of
Insurance from 1993.
Formerly Vice Presidents
of Insurance American
Bankers Insurance Group
prior thereto.
</TABLE>
<PAGE>
ITEM 2.
PROPERTIES
The executive offices of Mercury are located at 100 Field Drive,
Lake Forest, Illinois 60045, telephone number (847)295-8600.
Mercury occupies approximately 11,750 square feet of a
modern office building and is under a lease having a six year
initial term expiring on April 1, 1996 with an option to extend for
an additional five years. Mercury also leases space for all its
branch offices. The leases for the branch offices are generally
for terms from 3 to 5 years. Total rent expense for the Company
approximated $4,176,000, $3,169,000, $2,619,000 in 1995, 1994 and
1993 respectively.
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of its business, Mercury and its subsidiaries
are named as defendants in legal proceedings. A number of such
actions, including two cases which have been brought as
putative class actions, are pending in the various states in which
subsidiaries of Mercury do business. It is the policy of Mercury
and its subsidiaries do vigorously defend litigation, but
Mercury and (or) its subsidiaries have and may in the future enter
into settlements of claims where management deems appropriate.
Although management is of the opinion that the resolution of these
proceedings will not have a material effect on the financial
position of Mercury, it is not possible at this time to estimate
the amount of damages or settlement expenses that may be incurred.
Accordingly, no provision has been made in the consolidated
financial statements for any of the pending proceedings.
At December 31, 1995, Lyndon was a party to a number of reinsurance
agreements entered into by its former reinsurance operation. These
agreements resulted in Lyndon assuming business on low risk basis
primarily form large and highly rated life and health insurers for
the purpose of providing statutory surplus to the ceding companies.
Prior to the acquisition of Lyndon by Mercury, this business was
retroceded to a joint venture of third party reinsurers under
similar terms as the original agreements. Al the risks of this
business have been effectively transferred to the third party
reinsurers. ITT Corporation has also agreed to indemnify Mercury
Finance in the event any losses are incurred by Lyndon under the
agreements. There was approximately $567 million of statutory
surplus provided (assumed and ceded) under these agreements as of
December 31, 1995. Virtually all of these reinsurance agreements
are expected to be either terminated or novated during 1996 which
will remove Lyndon from any potential contingent liabilities
related to these agreements.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information is presented on page 26 of the Registrant's
Annual Report and is incorporated herein by reference.
<PAGE>
ITEM 6.
SELECTED FINANCIAL DATA
Information is presented on page 11 of the Registrant's
Annual Report and is incorporated herein by reference.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information is presented on pages 27 to 30 of the Registrant's
Annual Report and is incorporated herein by reference.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Information is presented on pages 12 to 26 of the
Registrant's Annual Report and is incorporated herein by reference.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES.
None.
<PAGE>
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is contained in Mercury's
1996 Proxy and information regarding executive officers is set
forth in Item 1 herein.
ITEM 11.
EXECUTIVE COMPENSATION
Information is contained in Mercury's 1996 Proxy and is
incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNER'S AND
MANAGEMENT
Information is contained in Mercury's 1996 Proxy and is
incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information is contained in Mercury's 1996 Proxy and is
incorporated herein by reference.
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
Financial Statements Filed in Mercury's 1995 Annual Report
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income for the Three Year Period Ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Changes in Shareholders' Equity for the
Three Year Period Ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Three Year Period
Ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements for the Three Year
Period Ended December 31, 1995, 1994 and 1993.
Independent Auditors' Report.
<PAGE>
FINANCIAL STATEMENT SCHEDULE
None. All schedules omitted are inappropriate or the information
required is shown in the consolidated financial statements or notes
hereto.
REPORTS ON FORM 8-K
Mercury filed a report on Form 8-K on November 10, 1995. In that
report, Mercury disclosed that on October 23, 1995, it had acquired
all the stock of ITT Life Insurance Company and ITT
Lyndon Property Insurance Company for $72.5 million in cash.
Financial statements were filed for this acquisition in a
subsequent report on Form 8-K January 9, 1996.
EXHIBITS
A list of all exhibits included as part of this report is set forth
in the Exhibit Index accompanying this report, which is included
herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to signed on its behalf by the undersigned, thereunto
duly authorized.
MERCURY FINANCE COMPANY
(Registrant)
March 29, 1996 John N. Brincat
[DATE] John N. Brincat
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrants and in the capacities and on the dates
indicated.
March 29, 1996 John N. Brincat
Date John N. Brincat
Chief Executive Officer
March 29, 1996 James A. Doyle
Date James A. Doyle
Principal Accounting Officer
March 29, 1996 Bradley S. Vallem
Date Bradley S. Vallem
Principal Financial Officer
The Board of Directors of the registrant has given the following
persons its power of attorney for signing this report on its behalf
and on behalf of the individual directors of the registrant.
March 29, 1996 John N. Brincat
Date John N. Brincat
Chief Executive Officer
March 29, 1996 James A. Doyle
Date James A. Doyle
Principal Accounting Officer
March 29, 1996 Bradley S. Vallem
Date Bradley S. Vallem
Principal Financial Officer
As attorneys in fact pursuant to power of attorney granted to said
parties.
<PAGE>
The following exhibits required by Item 601 of Regulation S-K are
not contained herein (except exhibits 11, 12, 13, 22 and 24) but
are filed separately with this Form 10-K filing:
<TABLE>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS ENCLOSED
NUMBERS
<S> <C> <C>
3A *Certificate of Incorporation
3B *Bylaws
10A *1989 Stock Option Plan
10B *Employee Stock Purchase Plan
10C *Retirement Plan and Trust
10D *Deferred Compensation Plan for Directors
10E *Dividend Reinvestment Plan
10G *Employment Agreement Dated as of January 1, 1989, Between
First Illinois Corporation and John N. Brincat
10H **Employment Agreement Dated as of February 20, 1989,
Between Mercury Finance Company and Charely A. Pond
10J *Lease Dated December 6, 1985 Between Teachers Realty
Corporation and First Illinois Finance Company
10K *Life Reinsurance Agreement Between American Bankers Life
Assurance Company of Florida and First Illinois Finance
Company
10L *Accident and Health Reinsurance Agreement Between
American Bankers Life Assurance Company of Florida and
First Illinois Finance Company Dated as of June 1, 1986.
10M *Agency Agreement Dated February 1, 1985 Between American
Bankers Insurance Group and First Illinois Finance
Company
10N *Form of Mercury Finance Company Commercial Paper Note
10O *$200,000,000 Credit Agreement Dated as of December 23,
1988 Among Mercury Finance Company and Harris Trust and
Savings Bank
10P **First Amendment Dated as of December 18, 1989 to
$200,000,000 Credit Agreement Dated as of December 23,
1988 Among Mercury Finance Company and Harris Trust and
Savings Bank as agent for the Bank Parties thereto
10Q **Second Amendment Dated as of December 31, 1989 to
$200,000,000 Credit Agreement Dated as of December 23,
1988 Among Mercury Finance Company and Harris Trust and
Savings Bank as agent for the Bank Parties thereto
<PAGE>
10R Third Amendment Dated as of May 14, 1990 to
$200,000,000 Credit Agreement Dated as of December 23,
1988 Among Mercury Finance Company and Harris Trust and
Savings Bank as agent for the Bank Parties thereto
10S Fourth Amendment Dated as of December 23, 1990 to
$200,000,000 Credit Agreement Dated as of December 23,
1988 Among Mercury Finance Company and Harris Trust and
Savings Bank as agent for the Bank Parties thereto
10T *Senior Subordinated Note Dated as of March 3, 1989
Between Australia and New Zealand Banking Group Limited
and First Illinois Finance Company
10U *Note Purchase Agreement Dated as of May 30, 1986 Between
First Illinois Finance Company and American Bankers Life
Assurance Company of Florida
10V *Note Purchase Agreement Dated as of May 30, 1986 Between
First Illinois Finance Company and American Bankers Life
Assurance Company of Florida
10W *Interest Rate Swap Agreement Dated as of May 10, 1988
Between Continental Illinois National Bank and Trust
Company of Chicago and First Illinois Finance Company
10X *Master Interest Rate Swap Agreement Dated as of June 18,
1986 Between Harris Trust and Savings Bank and First
Illinois Finance Company
10Y **Term Loan Agreement Dated as of September 27, 1989
Between Mercury Finance Company and National Westminster
Bank, U.S.A
10Z **Term Loan Agreement Dated as of September 28, 1989
Between Mercury Finance Company and Northern Trust Company
10AA **Term Loan Agreement Dated as of September 29, 1989
Between Mercury Finance and Mellon Bank, N.A.
10AB **Subordinated Note Agreement Dated as of October 17,
1989, Between mercury Fiannce Company and State Bank of
South Australia
10AC **Amendment Dated December 1, 1989 to Subordinated Note
Agreement Dated as of October 17, 1989 Between Mercury
Finance Company and State Bank of South Australia
<PAGE>
10AD **Senior Note Agreement Series A and B Dated as of
December 1, 1989 Between Mercury Finance Company and:
- Insurance Company of North America
- Life Insurance Company of North America
- The Lincoln National Life Insurance Company
- First-Penn Pacific Life Insurance Company
- The Mutual Life Insurance Company
- Phoenix Mutual Life Insurance Company
- Provident Mutual Life Insurance Company
- SMA Life Assurance Company
- State Mutal Life Assurance Company
- State Mutal Life Assurance Company of America
10AE **Senior Subordinated Note Agreement Series C Dated as of
December 1, 1989 Between Mercury Finance Company and:
- Cigna Property and Casualty Insurance Company
- Connecticut Genral Life Insurance Company
- Life Insruance Company of North America
- Phoenix Mutal Life Insurance Company
10AF ***Senior Subordinated Note Agreement Series D Dated as of
May 15, 1990 Between Mercury Finance Company and:
- Cigna Property and Casualty Company
_ Connecticut Genral Life Insurance Company
10AG ***Senior Note Agreement Dated as of September 1, 1990
Between Mercury Finance Company and Aetna Life Insurance
Company
10AH ****Senior Note Agreement Dated as of June 1, 1991 Between
Mercury Finance Company and Allstate Insurance Company
10AI ****Senior Note Agreement Dated as of September 1, 1991
Between Mercury Finance Company and Principal Mutual Life
Insurance Company
10AJ ****Loan Agreement Dated October 30, 1992 Between mercury
Finance Company and Allomon Funding Corporation
(Uncommitted Credit Facility)
10AK *****Senior Note Agreement Dated march 1, 1992 Between
Mercury Finance Company and Principal Mutual Life
Insurance Company
10AL *****Senior Note Agreement Dated may 1, 1992 Between
Mercury Finance Company and:
- Allstate Life Insurance Company
- State Mutual Life Assurance Company of America
10AM *****Interest Rate Swap Transaction Dated July 2, 1992
Between Mercury Finance Company and Continental Bank N.A.
10AN *****Senior Note Agreement Dated September 1, 1992 Between
Mercury Finance Company and The Equitable Life Assurance
Society of the United States
<PAGE>
10AO *****Senior Note Agreement Dated September 15, 1992
Between Mercury Finance Company and The Equitable Life
Assurance Society of the United States
10AP *****Credit Agreement Dated September 15, 1992 Between
Mercury Finance Company and:
*****Credit Agreement Dated September 15, 1992 Between
Mercury Finance Company and:
- Harris Trust and Savings Bank
- Continental Bank N.A.
- Canadian Imperial Bank of Commerce
- The Northern Trust Company
- The Daiwa Bank, Ltd.
- Mellon Bank, N.A.
- Bank One, Evanston, N.A.
- NBD Bank, N.A.
- First Wisconsin national Bank of Milwaukee
- Dresdner Bank AG/Chicago Branch/Grand Cayman Branch
- Bank Hapoalim B.M.
- Bank of Hawaii
10AQ *****Credit Agreement Dated September 15, 1992 Between
Mercury Finance Company and:
- Harris Trust and Savings Bank
- Continental Bank N.A.
- Canadian Imperial Bank of Commerce
- The Northern Trust Company
- The Daiwa Bank, Ltd.
- Mellon Bank, N.A.
- Bank One, Evanston, N.A.
- NBD Bank, N.A.
- First Wisconsin National Bank of Milwaukee
- Dresdner Bank AG/Chicago Branch/Grand Cayman Branch
- Bank Hapoalim B.M.
- Bank of Hawaii
<PAGE>
10AR ******Purchase Agreement Dated April 1, 1993 Between
Mercury Finance Company and Independent Life Insurance
Company
10AS ******Senior Note Agreement Dated March 1, 1993 Between
Mercury Finance Company and Principal Mutual Life
Insurance Company
10AT ******Senior Note Agreement Dated July 1, 1993 Between
Mercury Finance Company and Pacific Mutual Life Insurance
Company
10AU ******Senior Note Agreement Dated December 1, 1993 Between
Mercury Finance Company and:
- American United Life Insurance Company
- MONY Capital Management
- Pacific Mutual Life Insurance Company
- Principal Mutual Life Insurance Company
10AV ******Second Amendment to Revolving Credit Agreement Dated
July 15, 1993 Between Mercury Finance Company and:
- Harris Trust and Savings Bank
- Continental Bank N.A.
- Canadian Imperial Bank of Commerce
- The Northern Trust Company
- The Daiwa Bank, Ltd.
- Mellon Bank, N.A.
- Bank One, Evanston, N.A.
- NBD Bank, N.A.
- First Wisconsin National Bank of Milwaukee
- Dresdner Bank AG/Chicago Branch/Grand Cayman Branch
- Bank Hapolim B.M.
- Bank of Hawaii
10AW ******Third Amendment to Revolving Credit Agreement Dated
July 15, 1993 Between Mercury Fiannce Company and:
- Harris Trust and Savings Bank
- Continental Bank N.A.
- Canadian Imperial Bank of Commerce
- The Northern Trust Company
- The Daiwa Bank, Ltd.
- Mellon Bank, N.A.
- Bank One, Evanston, N.A.
- NBD Bank, N.A.
- First Wisconsin National Bank of Milwaukee
- Dresdner Bank AG/Chicago Branch/Grand Cayman Branch
- Bank Hapoalim B.M.
- Bank of Hawaii
10AX *******Purchase Agreement Dated September 30, 1994 Between
Mercury Finance Company and Midland Finance Co.
<PAGE>
10AY ********Employment Agreement Dated January 1, 1994 Between
Mercury Finance Company and John N. Brincat
10AZ ********Senior Note Agreement Dated December 15, 1994
Between Mercury Finance Company and Norddeutsche
Landesbank Girozentrale
10BA ********Senior Note Agreement Dated December 15, 1994
Between Mercury Finance Company and The Long-Term Credit
Bank of Japan, Ltd.
10BB Senior Note Agreement Dated June 29, 1995 Between Mercury
Finance Company and:
- Allstate Life Insurance Company
- Allstate Insurance Company
- Metropolitan Life Insurance Company
- Principal Mutual Life Insurance Company
- Pacific Mutual Life Insurance Company
- PM Group Life Insurance Company
- TMG Life Insurance Company
- Lincolm-Security Life Insurance Company
- Security-Connecticut Life Insurance Company
- Oxford Life Insurance Company
- London Life International Reinsurance Corporation
- American States Life Insurance Comppany
- Phoenix Home Life Mutual Insurance Company
- Phoenix American Life Insurance Company
- American Guardian Life Assurance Company
10BC Senior Note Agreement Date October 3, 1995 Between Mercury
Finance Company and Bank of America Illinois
10BD Fourth Amendment to Revolving Credit Agreement Date July
15, 1993 Between Mercury Finance Company and:
- Nations Bank
- Bank One
- Harris Trust and Savings Bank
- Bank of America Illinois
- NBD Bank
- Westdeutsche Landesbank Girozentale
- The Daiwa Bank, Ltd.
- Mellon Bank, N.A.
- Dresdner Ban AG
- Bank Hapolim B.M.
- Union Bank
- The Northern Trust Company
- Credit Lyonnais New York Branch
- LaSalle National Bank
- Bank of Hawaii
- First Interstate Bank of California
- The Boatmen's National Bank of St. Louis
- Firststar Bank Milwaukee, N.A.
- First National Bank of Chicago
<PAGE>
10BE Purchase Agreement Dated October 20, 1995 Between Mercury
Finance Company and ITT Corporation
11 Computation of Net Income Per Share
12 Ratio of Earnings to Fixed Charges
13 Annual Report to Shareholders (for information of the
Securities and Exchange Commission and not being filed
with Commission except for this portion expressly)
22 Subsidiaries of Mercury Finance Company
23 Consent of KPMG Peat Marwick LLP
* Incorporated by reference to the Form 10K filed by
Mercury Finance Company 1989
** Incorporated by reference to the 1989 Form 10K filed by
Mercury Finance Company
*** Incorporated by reference to the 1990 Form 10K filed by
Mercury Finance Company
**** Incorporated by reference to the 1991 Form 10K filed by
Mercury Finance Company
***** Incorporated by reference to the 1992 Form 10K filed by
Mercury Finance Company
****** Incorporated by reference to the 1993 Form 10K filed by
Mercury Finance Company
******* Incorporated by reference to the 1994 Form 10K filed by
Mercury Finance Company
</TABLE>
<PAGE>
EXHIBIT 11
MERCURY FINANCE COMPANY
<TABLE>
<CAPTION>
COMPUTATION OF NET INCOME PER SHARE
Year Ended December 31 (dollars in thousands except per share
amounts)
Income Data: 1995 1994 1993
<S> <C> <C> <C>
1. Net Income $110,907 $86,545 $64,927
2. Weighted average common
shares outstanding, adjusted
for stock splits 175,631 173,864 172,977
3. Weighted average shares of
treasury stock outstanding,
adjusted for stock splits 3,182 522 95
4. Weighted average shares reserved
for stock options (utilizing the
treasury stock method) 1,660 1,808 2,568
NET INCOME PER COMMON SHARE
5. Common Shares Outstanding 174,109 175,150 175,450
(Line 2-3+4)
6. Net income per common shares $.64 $.49 $.37
(Line 1 - 5)
DIVIDEND DATA
1. Dividends Declared $42,849 $33,581 $23,351
2. Average common shares
outstanding on dividend
record date 172,548 173,694 173,019
3. Dividends per common share $.25 $.19 $.14
</TABLE>
<PAGE>
EXHIBIT 12
MERCURY FINANCE COMPANY
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31 (dollars in thousands)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Income $110,907 $86,545 $64,927 $45,723 $32,816
Added fixed charges:
Cost of Borrowing 57,303 39,375 32,993 29,525 28,796
One-third of
rentals 1,370 1,056 873 635 536
Total fixed charges$58,673 $40,431 $33,806 $30,160 $29,332
Provisions for
income taxes:
Federal 56,207 46,797 34,634 23,914 17,429
State 9,419 7,648 5,306 4,025 3,257
Total income taxes $65,626 $54,445 $39,940 $27,939 $20,686
Total "earnings"
(net income,
fixed charges
and income
taxes) $235,206 $181,421 $138,673 $103,822 $82,834
Ratio of "earnin
gs" to fixed
charges 4.01 4.48 4.10 3.44 2.82
</TABLE>
<PAGE>
EXHIBIT 22
MERCURY FINANCE COMPANY
SUBSIDIARIES
Mercury Life Insurance Company (Ariz)
Mercury Finance Corporation of Alabama (Ala)
Mercury Finance Company of Arizona (Ariz)
Merc Finance Company of California (Cal)
Mercury Finance Company of Colorado (Del)
Mercury Finance Company of Delaware (Del)
Mercury Finance Company of Florida (Del)
Mercury Finance Company of Georgia (Del)
Mercury Finance Company of Illinois (Del)
Mercury Finance Company of Indiana (Del)
Mercury Finance Company of Kansas (Del)
Mercury Finance Company of Kentucky (Del)
Mercury Finance Company of Louisiana (Del)
Mercury Finance Company of Michigan (Del)
Mercury Finance Company of Mississippi (Del)
Mercury Finance Company of Missouri (Del)
Mercury Finance Company of Nevada (Nev)
Mercury Finance Company of New Mexico (Del)
Mercury Finance Company of North Carolina (Del)
Mercury Finance Company of Ohio (Del)
Mercury Finance Company of Oklahoma (Del)
Mercury Finance Company of Oregon (Del)
Mercury Finance Company of Pennsylvania (Del)
Mercury Finance Company of South Carolina (Del)
Mercury Finance Company of Tennessee (Tenn)
MFC Finance Company of Texas (Del)
Mercury Finance Company of Virginia (Del)
Mercury Finance Company of Washington (Del)
Mercury Finance Company of Wisconsin (Del)
MFC Financial Services, Inc. (Fla)
Gulfco Investment Inc. (La)
Gulfco Finance Company (La)
Gulfco Life Insurance Company (La)
Midland Finance Co.
Lyndon Life Insurance Company
Lyndon Property Insurance Company
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Mercury Finance Company:
RE: REGISTRATION STATEMENTS OF FORM S-8
* Employee Stock Purchase Plan
* 1989 Stock Option and Incentive Compensation Plan
* 401(k) Plan
We consent to incorporatation by reference in the subject
Registration statements (filed with the Securities and Exchange
Commission on May 3, 1989, May 11, 1989 and June 26, 1989) of
Mercury finance Company of our report dated February 12, 1996,
relating to the consolidate balance sheets of Mercury Finance
Company and subsidiaries as of December 31, 1995 ad 1994, and the
related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the years in the three year
period ended December 31, 1995, which report appears in the
December 31, 1995 annual report on Form 10-K of Mercury Finance
Company.
KPMG Peat Marick LLP
Chicago, Illinois
March 28, 1996
