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) June 3, 1997
Mercury Finance Company
(Exact name of registrant as specified in charter)
Delaware 1-10176 36-3627010
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Field Drive, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 295-8600
N/A
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits
On June 3, 1997, the Registrant sold all of the outstanding shares of the
capital stock of Lyndon Property Insurance Company and its subsidiaries
("Lyndon") for $92 million pursuant to a stock purchase agreement dated March
28, 1997. The previous Current Report on Form 8-K filed for this transaction
omitted the pro forma financial information which are included herein.
(b) Pro forma financial information
The following unaudited pro forma financial information is included herein:
(i) Unaudited Pro Forma Consolidated Condensed Balance Sheet as of
March 31, 1997
(ii) Unaudited Pro Forma Consolidated Condensed Income Statement for the
Year ended December 31, 1996
(iii) Unaudited Pro Forma Consolidated Condensed Income Statement for the
Quarter ended March 31, 1997
The pro forma consolidated condensed financial statements reflect the
disposition as if the transaction had been completed with all proceeds received
as of the beginning of the period presented for the consolidated condensed
income statements and as of March 31, 1997 for the consolidated condensed
balance sheet. The unaudited pro forma condensed financial information should
be read in conjunction with Mercury Finance Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
The unaudited pro forma consolidated condensed financial statements are
presented for informational purposes only and do not purport to be indicative of
the results which would actually be reported if the transaction had occurred on
such dates or which may be reported in the future.
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
<CAPTION>
ELIMINATION
OF ASSETS
AND NET PROCEEDS PAYDOWN
(dollars in thousands) Historical LIABILITIES FROM SALE OF DEBT Pro forma
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 25,790 ($ 21,022) $ 89,823 ($ 70,000) $ 24,591
Short-term investments 20,437 20,437
Investments available-for-sale, at 192,937 (192,937) 0
fair value
Investments held-to-maturity, at cost 8,047 (8,047) 0
Finance Receivables 1,126,119 1,126,119
Less allowance for finance credit (111,584) (111,584)
losses
Less nonrefundable dealer reserves (80,677) (80,677)
FINANCE RECEIVABLES, NET 933,858 0 0 0 933,858
Deferred income taxes, net 39,260 6,574 45,834
Income taxes receivable 51,072 51,072
Premises and equipment, net 7,043 7,043
Goodwill 14,248 14,248
Reinsurance receivable 98,353 (98,353) 0
Deferred acquisition costs and 43,503 (43,503) 0
present value
of future profits
Other assets (including 61,087 (31,482) 29,605
repossessions)
TOTAL ASSETS $1,495,635 ($ 388,770) $ 89,823 ($ 70,000) $1,126,688
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Senior debt, commercial paper and $ 503,619 ($ 35,529) $468,090
notes
Senior debt, term notes 488,625 (34,471) 454,154
Subordinated notes 22,500 22,500
Accounts payable and other 70,779 ($ 12,560) 58,219
liabilities
Unearned premium and claim reserves 227,450 (227,450) 0
Reinsurance payable 30,026 (30,026) 0
Reserve for loss on sale of Lyndon 29,528 ($ 29,528) 0
TOTAL LIABILITIES 1,372,527 (270,036) (29,528) (70,000) 1,002,963
SHAREHOLDERS' EQUITY
Common stock - $1.00 par value per 177,901 177,901
share:
Paid in capital 8,244 8,244
Retained earnings (deficit) (8,756) (8,756)
Unrealized appreciation on available-
for-sale
securities, net of tax (617) 617 0
Treasury stock (53,664) (53,664)
TOTAL SHAREHOLDERS' EQUITY 123,108 617 0 0 123,725
TOTAL LIABILITIES AND $1,495,635 ($ 269,419) ($ 29,528) ($ 70,000) $1,126,688
SHAREHOLDERS' EQUITY
See accompanying notes to pro forma consolidated condensed financial statements.
</TABLE>
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<CAPTION>
ELIMINATION
OF REVENUES INTERCOMPANY INTEREST
(dollars in thousands, except per share AND INSURANCE ON
amounts) Historical EXPENSES COMMISSIONS PROCEEDS Pro forma
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Finance charges and loan fees $ 258,602 $258,602
Investment income 13,287 ($ 12,688) $ 991 1,590
Total finance charges, fees and 271,889 (12,688) 0 991 260,192
investment income
Interest expense 64,789 (6,300) 58,489
Interest income before provision 207,100 (12,688) 0 7,291 201,703
for
finance credit losses
Provision for finance credit losses 215,171 215,171
NET INTEREST INCOME (8,071) (12,688) 0 7,291 (13,468)
OTHER INCOME
Insurance premiums 83,277 (83,277) 0
Fees, commissions and other income 18,708 (10,215) $ 12,000 20,493
TOTAL OTHER INCOME 101,985 (93,492) 12,000 0 20,493
OTHER EXPENSES
Salaries and employee benefits 54,942 (3,643) 51,299
Occupancy expense 5,923 (348) 5,575
Equipment expense 3,158 3,158
Data processing expense 2,366 2,366
Incurred insurance claims and other 47,243 (59,243) 12,000 0
underwriting expense
Other operating expenses 29,665 (2,684) 26,981
TOTAL OTHER EXPENSES 143,297 (65,918) 12,000 0 89,379
OPERATING LOSS (49,383) (40,262) 0 7,291 (82,354)
Credit for income taxes (20,415) (13,012) 2,771 (30,656)
NET LOSS ($ 28,968) ($ 27,250) $ 0 $ 4,520 ($51,698)
NET LOSS PER COMMON SHARE ($ 0.17) ($ 0.30)
See accompanying notes to pro forma consolidated condensed financial statements.
</TABLE>
<TABLE>
MERCURY FINANCE COMPANY & SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<CAPTION>
ELIMINATION
OF REVENUES
(dollars in thousands, except per share AND ELIMINATION OF INTEREST
amounts) Historical EXPENSES LOSS ON SALE ON PROCEEDS Pro forma
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Finance charges and loan fees $ 63,491 $ 63,491
Investment income 3,289 ($ 3,052) $ 248 485
Total finance charges, fees and 66,780 (3,052) 0 248 63,976
investment income
Interest expense 20,716 (1,575) 19,141
Interest income before provision 46,064 (3,052) 0 1,823 44,835
for
finance credit losses
Provision for finance credit losses 30,462 30,462
NET INTEREST INCOME 15,602 (3,052) 0 1,823 14,373
OTHER INCOME
Insurance premiums 23,220 (23,220) 0
Fees, commissions and other income 3,503 (100) 3,403
TOTAL OTHER INCOME 26,723 (23,320) 0 0 3,403
OTHER EXPENSES
Salaries and employee benefits 14,644 (1,227) 13,417
Occupancy expense 1,555 (98) 1,457
Equipment expense 852 852
Data processing expense 543 543
Incurred insurance claims and other 16,715 (16,715) 0
underwriting expense
Other operating expenses 8,692 (1,586) 7,106
TOTAL OTHER EXPENSES 43,001 (19,626) 0 0 23,375
OPERATING LOSS (676) (6,746) 0 1,823 (5,599)
Loss on sale of Lyndon 29,528 ($ 29,528) 0
Other non-operating expenses 5,129 5,129
LOSS BEFORE INCOME TAXES (35,333) (6,746) 29,528 1,823 (10,728)
Credit for income taxes (2,165) (2,220) 693 (3,692)
NET LOSS ($ 33,168) ($ 4,526) $ 29,528 $ 1,130 ($ 7,036)
NET LOSS PER COMMON SHARE ($ 0.19) ($ 0.04)
See accompanying notes to pro forma consolidated condensed financial statements.
</TABLE>
NOTES TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) Balance Sheet
Elimination of assets and liabilities - Elimination of the assets sold and
liabilities that were assumed that were included in the consolidated financial
statements as of March 31, 1997.
Net proceeds from sale - Records the net cash proceeds, after direct expenses,
and eliminate reserve for the loss on sale.
Paydown of debt - Reflects the paydown of a portion of the net proceeds as a
reduction in outstanding debt. Pursuant to agreement with the creditors of the
Company, $70 million of the proceeds were utilized to paydown debt and the
balance is to be retained as additional working capital.
2) Income Statement
Elimination of revenues and expenses - Elimination of the revenues and expenses
of Lyndon that were included in the consolidated condensed financial statements
presented.
Elimination of loss on sale - Elimination of the provision recorded in the first
quarter for the loss on the sale of Lyndon.
Intercompany insurance commissions - Reflects the reinstatement of insurance
commissions that would not have been eliminated in consolidation in 1996 if
Mercury did not have an insurance subsidiary.
Interest on proceeds - Reflects reduction of interest expense for the assumed
$70 million paydown of debt at an annual interest expense rate of 9% and the
increase in investment income for the interest earned on the net retained
working capital balance at an annual interest income rate of 5%. The income tax
provision has been provided at an effective rate of 38%.
SIGNATURES
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.
Mercury Finance Company
Date: February 19, 1998
By: Patrick J. O'Malley
Its: Principal Financial and
Accounting Officer
