<PAGE>
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): February 14, 2000
AAMES FINANCIAL CORPORATION
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 0-19604 95-340340
- ---------------------------- -------------- -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
350 South Grand Avenue, 52nd Floor
Los Angeles, California 90071
(Address of Principal Executive Offices)
(323) 210-5000
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(Registrant's Telephone Number, Including Area Code)
NA
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS
Reference is made to the press release of Registrant issued on January 14,
2000 which contains information meeting the requirements of this Item 5 and is
incorporated herein by this reference. A copy of the press release is attached
to this Form 8-K as Exhibit 99.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99 Press release issued February 14, 2000.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
AAMES FINANCIAL CORPORATION
Dated: February 16, 2000 By: /s/ Ralph W. Flick
-------------------------------
Ralph W. Flick
Assistant Secretary
3
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EXHIBIT INDEX
<TABLE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------
<S> <C>
99 Press release issued February 14, 2000.
</TABLE>
4
<PAGE>
EXHIBIT 99
Contact: David Sklar
Aames Financial Corporation
(323) 210-5311
FOR IMMEDIATE RELEASE
AAMES FINANCIAL CORPORATION REPORTS SECOND QUARTER RESULTS
RECORDS $45 MILLION NET LOSS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999;
ACQUIRES CERTAIN SUB-PRIME MORTGAGE ASSETS AND OPERATIONS OF
UNITED PANAM FINANCIAL CORP.;
CLOSES A NEW $200 MILLION REVOLVING WAREHOUSE LINE INCLUDING
A WORKING CAPITAL SUBLINE
LOS ANGELES, CALIFORNIA, FEBRUARY 14, 2000 - AAMES FINANCIAL CORPORATION
(NYSE: AAM), a leader in subprime home equity lending, today reported the
results of operations for the three and six months ended December 31, 1999. The
Company also announced that continuing difficult market conditions on the
Company's operations caused it to record a net loss in valuation of its residual
interests and mortgage servicing rights in the amount of $35.2 million and a net
operating loss of $12.5 million for the quarter ended December 31, 1999. The
Company also announced that it closed a new $200 million warehouse lending
facility which includes a $35 million working capital subline and acquired
sub-prime mortgage origination assets of another subprime mortgage originator
which exited the business.
Results of Operations and Adjustment to Residual Assets and Mortgage
Servicing Rights
Total revenue for the three and six months ended December 31, 1999 was
$12.9 million and $73.9 million, as compared to $(154.4) million and $(96.7)
million for the three and six months ended December 31, 1998, respectively. The
1999 revenues include a $35.2 million write down to the Company's interest-only
strips and mortgage servicing rights (discussed below).
Net loss for the quarter and six month period was $47.7 million and $46.9
million, respectively, compared to net loss of $195.7 million and $197.9 million
for the same periods a year ago. Excluding the $35.2 million write-down, the
Company had a net operating loss for the quarter of $12.5 million due to adverse
market condition. On a basic and diluted per share basis, net loss per share for
the three month period was $1.60 and $1.60 compared to $6.31 and $6.31,
respectively, in the prior year. For the six month period, on a basic and
diluted per share basis, net loss per share was $1.63 and $1.63, respectively,
compared to $6.39 and $6.39 for the prior year's period.
A. Jay Meyerson, Aames' chief executive officer, stated, "The Company
has committed to periodically review and validate the value of its residual
assets and mortgage servicing rights and the write-down for the quarter ended
December 31, 1999 reflects that commitment. The Company continues to feel the
adverse effects of previous large bulk purchased and broker programs that have
been discontinued. In response to changing market conditions we are focusing on
improving our loan origination platform to insure that we become more efficient
and originate higher quality risk priced loans. I have also ordered an increased
emphasis on loss mitigation."
<PAGE>
Loan Production
Mr. Meyerson, said, "The Company increased its loan production by $57.4
million to $580.9 million for the December 1999 quarter from $523.5 million for
the September 1999 quarter. Loan production for the December 1999 quarter was
also up $30.6 million from the December 1998 quarter. Loan production for the
six months ended December 31, 1999 of $1.1 billion has not yet recovered to the
production levels of $1.3 billion for the comparable six month period in the
prior year because of a $183.8 million decrease in correspondent production
which resulted from the Company's focus on its core retail and broker production
instead of correspondent production in the last year. Core retail and broker
production increased $12.9 million over the September 1999 quarter.
In the later part of the quarter ended December 31, 1999, the Company
commenced originating loans through the Internet, through an affiliation with
certain Internet lending sites. Retail production for the quarter included $6.1
million of loans originated through this production channel. We expect Internet
originations to grow and increase the value of our retail franchise."
Meyerson said that the Company sold $588.1 million and $1.3 billion of
loans during the three and six months ended December 31, 1999, respectively,
compared to $501.4 million and $1.2 billion of loans sold during the comparable
period for 1998. He added that the Company's loan dispositions during the
December 1999 quarter included a $403.5 million securitization, and whole loan
sales totaling $184.6 million which reflects the Company's strategy of
disposition of loans through a combination of securitizations and whole loan
sales.
Mr. Meyerson reported that the Company's loan servicing portfolio at
December 31, 1999 increased to $3.9 billion, net of run-off, up $52.0 million
from the prior quarter. "By completing the securitization of servicing retained
mortgages during the most recent quarter, the Company increased its servicing
portfolio for the second consecutive quarter. Although, the servicing portfolio
has not yet recovered to its peak of $4.4 billion at December 31, 1998, by
continuing to securitize a portion of our loan production, we hope to slowly
grow the portfolio back to that level."
Acquisition of Sub-Prime Mortgage Assets
In January and February, the Company closed on transactions to hire a
majority of the retail and broker loan production employees, and acquire certain
assets including portions of the retail and wholesale origination platform,
customer and broker relationships and in-process loans, as well as selected
operations and technology assets of United Pan American Mortgage, the sub-prime
mortgage division of Pan American Bank, FSB, a wholly-owned subsidiary of United
PanAm Financial Corp.
"This transaction includes valuable national mortgage origination
assets and a strong loan origination sales force which will allow us to
capitalize on consolidation in the sector and expand our loan origination
platform at an attractive cost by leveraging our operating scale," Mr. Meyerson
said.
Warehouse and Working Capital Facility
On February 11, 2000, the Company secured $35 million in working
capital secured by certain of its residual interests and certain other
collateral through the renewal of a $90.0 million committed warehouse line which
expired on February 9, 2000. The committed warehouse line was increased to
$200.0 million and included a $35 million non-revolving working capital subline,
which the Company drew down on February 11, 2000.
"By closing this facility, the Company was able to improve its overall
liquidity and strengthen its franchise," Mr. Meyerson said. "Further, we were
able to obtain liquidity against this asset from a recognized market
participant."
Aames Financial Corporation is a leading home equity lender, and at
December 31, 1999 operated 105 retail Aames Home Loan offices and 21 wholesale
branches nationwide.
<PAGE>
From time to time the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company's business include the
following: negative cash flow and continued access to outside sources of cash to
fund operations; dependence on funding sources; third party rights to terminate
mortgage servicing; high delinquencies and losses in our securitization trusts;
prepayment risk; changes in interest rates; basis risk; prolonged interruptions
or reductions in the secondary market for mortgage loans; timing of loan sales;
dependence on broker network; competition; concentration of operations in
California and Florida; economic conditions; contingent risks on loans we sell;
government regulation; changes in federal income tax laws; Year 2000 compliance;
our ability to pay dividends and the concentrated ownership of our controlling
stockholder. For a more complete discussion of these risks and uncertainties,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" in the Company's Annual Report on Form
10-K and 10-K/A for the fiscal year ended June 30, 1999 and "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" in Form 10-Q for the quarter ended September 30,
1999, and subsequent Company Filings with the United States Securities and
Exchange Commission.
[Financial Tables Follow]
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
-------------------- --------------------
(UNAUDITED) (AUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 16,018,000 $ 20,764,000
Loans held for sale, at lower of cost or market 371,728,000 559,869,000
Accounts receivable 58,853,000 56,964,000
Residual interests, at estimated fair market value 342,595,000 332,327,000
Mortgage servicing rights, net 16,643,000 20,928,000
Equipment and improvements, net 11,141,000 13,495,000
Prepaid and other 11,039,000 15,013,000
Income tax refund receivable - 1,737,000
-------------------- --------------------
Total assets $ 828,017,000 $ 1,021,097,000
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings $ 281,220,000 $ 281,220,000
Revolving warehouse and repurchase facilities 366,171,000 535,997,000
Accounts payable and accrued expenses 51,927,000 50,505,000
Income taxes payable 8,571,000 7,819,000
-------------------- --------------------
Total liabilities 707,889,000 875,541,000
-------------------- --------------------
Commitments and contingencies - -
Stockholders' equity:
Series A Preferred Stock, par value $0.001 per share;
500,000 shares authorized; none outstanding - -
Series B Convertible Preferred Stock, par value $0.001 per share;
29,704,000 and 100,000,000 shares authorized ; 26,704,000 and 27,000 27,000
26,704,000 shares outstanding
Series C Convertible Preferred Stock, par value $0.001 per share; 101,000 75,000
107,105,000 and 100,000,000 shares authorized; 101,106,000
and 75,046,000 shares outstanding
Common Stock, par value $0.001 per share 400,000,000 and
50,000,000 shares authorized; 31,044,870 and 30,016,964 31,000 31,000
shares outstanding
Additional paid-in capital 367,231,000 342,193,000
Retained deficit (247,262,000) (196,770,000)
-------------------- --------------------
Total stockholders' equity 120,128,000 145,556,000
-------------------- --------------------
Total liabilities and stockholders' equity $ 828,017,000 $ 1,021,097,000
==================== ====================
</TABLE>
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------------ --------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
---------------------- ------------------- ------------------- ------------------
Revenue:
<S> <C> <C> <C> <C>
Gain on sale of loans $ 9,553,000 $ 8,752,000 $ 31,350,000 $ 28,429,000
Write-down of residual interests and
mortgage servicing rights (35,190,000) (191,646,000) (35,190,000) (186,451,000)
Origination fees 10,371,000 9,633,000 21,758,000 21,784,000
Loan servicing 4,420,000 6,847,000 8,175,000 13,116,000
Interest 23,762,000 11,991,000 47,760,000 26,460,000
------------------- ------------------- ------------------- ------------------
Total revenue, including write-down
of residual interests and mortgage
servicing rights 12,916,000 (154,423,000) 73,853,000 (96,662,000)
------------------- ------------------- ------------------- ------------------
Expenses:
Compensation 22,370,000 19,907,000 45,482,000 43,701,000
Production 6,974,000 10,559,000 15,615,000 21,489,000
General and administrative 17,031,000 13,784,000 31,302,000 27,172,000
Interest 12,886,000 9,403,000 26,434,000 22,285,000
------------------- ------------------- ------------------- ------------------
Total expenses 59,261,000 53,653,000 118,833,000 114,647,000
------------------- ------------------- ------------------- ------------------
Loss before income taxes (46,345,000) (208,076,000) (44,980,000) (211,309,000)
Provision (benefit) for income taxes 1,350,000 (12,331,000) 1,925,000 (13,408,000)
------------------- ------------------- ------------------- ------------------
Net loss $ (47,695,000) $ (195,745,000) $ (46,905,000) $ (197,901,000)
=================== =================== =================== ==================
Net loss per share:
Basic $ (1.60) $ (6.31) $ (1.63) $ (6.39)
=================== =================== =================== ==================
Diluted $ (1.60) $ (6.31) $ (1.63) $ (6.39)
=================== =================== =================== ==================
Dividends per share $ - $ - $ - $ 0.03
=================== =================== =================== ==================
Weighted average number of shares outstanding:
Basic 31,027,000 31,007,000 31,018,000 30,992,000
=================== =================== =================== ==================
Diluted 31,027,000 31,007,000 31,018,000 30,992,000
=================== =================== =================== ==================
</TABLE>
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AAMES FINANCIAL CORPORATION
THREE AND SIX MONTHS STATISTICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------- ----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
---------------------- ---------------------- ---------------------- ----------------------
(In thousands)
ORIGINATION VOLUME:
<S> <C> <C> <C> <C>
Broker network $ 365,992 $ 289,492 $ 697,538 $ 640,293
Retail 202,574 197,937 381,790 426,114
Correspondent 12,286 62,789 25,047 208,868
---------------------- ---------------------- ---------------------- ----------------------
Total $ 580,852 $ 550,218 $ 1,104,375 $ 1,275,275
====================== ====================== ====================== ======================
SERVICING PORTFOLIO $ 3,922,000 $ 4,429,000
SERVICED IN HOUSE $ 3,586,000 $ 4,429,000
LOAN SALES:
Loans pooled and sold
in securitizations $ 403,492 $ - $ 803,557 $ 649,999
Whole loan sales 184,617 501,358 477,218 547,124
---------------------- ---------------------- ---------------------- ----------------------
$ 588,109 $ 501,358 $ 1,280,775 $ 1,197,123
====================== ====================== ====================== ======================
</TABLE>
