<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(For the Quarterly Period ended September 30, 1996)
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ________________to_______________
Commission File Number: 0-24286
EAGLE FINANCE CORP.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2464365
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1425 TRI-STATE PARKWAY, GURNEE, ILLINOIS 60031-4060
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(847) 855-7150
----------------------------------------------------
(Registrant's telephone number, including area code)
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock as of the latest practicable date:
10,000,000 shares of common stock, $0.01 par value per share, were authorized
and 4,189,100 shares were issued and outstanding as of September 30, 1996.
<PAGE>
EAGLE FINANCE CORP.
FORM 10-Q
________________________
TABLE OF CONTENTS
________________________
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets 3
Statements of Income 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 20
Item 2. CHANGES IN SECURITIES 21
Item 3. DEFAULTS UPON SENIOR SECURITIES 21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
Item 5. OTHER INFORMATION 22
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES S-1
2
<PAGE>
EAGLE FINANCE CORP.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND 1995 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------- DECEMBER 31,
1996 1995 1995
-------------- -------------- ------------
<S> <C> <C> <C>
Finance receivables, net $ 122,867,562 $ 136,601,761 $145,718,866
Nonrefundable acquisition discount (3,789,744) (15,571,155) (9,428,152)
Allowance for credit losses (7,949,865) (1,258,679) (10,807,835)
-------------- -------------- ------------
106,261,969 119,771,927 125,482,879
Cash 2,198,112 2,022,286 2,069,217
Money market investments 545,509 545,000 545,000
Prepaid expenses and debt issuance costs 1,875,702 1,322,674 1,142,925
Repossessed or titled assets 5,388,343 1,786,201 4,429,140
Deferred income tax 4,865,984 359,042 4,136,270
Other assets 543,200 413,959 1,253,046
-------------- -------------- ------------
$ 121,678,819 $ 126,221,089 $139,058,477
-------------- -------------- ------------
-------------- -------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt $ 84,491,239 $ 83,153,306 $100,651,557
Subordinated debt 18,006,905 18,029,979 18,045,298
Accrued interest 160,967 324,815 502,834
Accrued income tax -- 108,670 683,144
Accounts payable and accrued liabilities 2,636,405 5,045,595 3,180,328
Unearned insurance commissions 23,884 53,734 46,115
Dealer reserves 278,505 199,236 292,864
-------------- -------------- ------------
Total liabilities 105,597,905 106,915,335 123,402,140
Stockholders' equity:
Preferred Stock, authorized 3,000,000 shares;
none issued -- -- --
Common Stock: $.01 par value, authorized 10,000,000
shares, issued and outstanding 4,189,100 shares 41,891 41,891 41,891
Additional paid-in capital 13,514,422 13,506,187 13,514,422
Retained earnings 2,524,601 5,757,676 2,100,024
-------------- -------------- ------------
Total stockholders' equity 16,080,914 19,305,754 15,656,337
-------------- -------------- ------------
$ 121,678,819 $ 126,221,089 $139,058,477
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
--------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fee income $ 6,949,015 $ 7,166,985 $ 22,308,922 $ 17,908,118
Interest expense (2,406,059) (2,333,322) (7,278,781) (5,564,213)
------------ ------------ ------------- -------------
Net interest income 4,542,956 4,833,663 15,030,141 12,343,905
Provision for credit losses (1,730,000) -- (6,626,000) 52,890
------------ ------------ ------------- -------------
Net interest income after provision
for credit losses 2,812,956 4,833,663 8,404,141 12,396,795
Other income:
Servicing income 1,758,189 308,519 4,111,599 1,666,678
Insurance commissions 8,530 62,809 43,615 229,834
------------ ------------ ------------- -------------
Total other income 1,766,719 371,328 4,155,214 1,896,512
Income before operating expenses 4,579,675 5,204,991 12,559,355 14,293,307
Operating expenses:
Salaries and related costs 2,033,544 1,545,140 5,915,906 4,115,388
Other operating expenses 2,198,669 1,306,940 6,006,450 3,643,056
------------ ------------ ------------- -------------
Total operating expenses 4,232,213 2,852,080 11,922,356 7,758,444
------------ ------------ ------------- -------------
Income before income taxes 347,462 2,352,911 636,999 6,534,863
Applicable income taxes 133,439 924,346 212,423 2,551,766
------------ ------------ ------------- -------------
Net income $ 214,023 $ 1,428,565 $ 424,576 $ 3,983,097
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Per share data:
Net income per common share
(primary) $0.05 $0.34 $0.10 $0.95
----- ----- ----- -----
----- ----- ----- -----
Net income per common share
(fully diluted) $0.05 $0.33 $0.09 $0.91
----- ----- ----- -----
----- ----- ----- -----
Average number of common shares
outstanding (primary) 4,189,100 4,202,000 4,189,100 4,182,000
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Average number of common shares
outstanding (fully diluted) 4,189,100 4,391,000 4,195,809 4,358,000
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
--------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Common stock:
Balance at beginning of period $ 41,891 $ 41,800 $ 41,891 $ 41,800
Stock options exercised -- 91 -- 91
----------- ----------- ----------- -----------
41,891 41,891 41,891 41,891
----------- ----------- ----------- -----------
Additional paid-in capital:
Balance at beginning and end of period 13,514,422 13,506,187 13,514,422 13,506,187
Retained earnings:
Balance at beginning of period 2,310,578 4,329,111 2,100,024 1,774,579
Net income 214,023 1,428,565 424,577 3,983,097
----------- ----------- ----------- -----------
2,524,601 5,757,676 2,524,601 5,757,676
----------- ----------- ----------- -----------
Total stockholders' equity $16,080,914 $19,305,754 $16,080,914 $19,305,754
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF CASH FLOWS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
--------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 214,022 $ 1,428,565 $ 424,576 $ 3,983,097
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Provision for credit losses 1,730,000 -- 6,626,000 (52,890)
Net finance receivable (charge-offs)
recoveries against allowance (2,672,558) 15,917 (9,483,970) 62,769
Decrease (increase) in:
Prepaid expenses (484,003) (346,000) (311,265) (268,195)
Repossessed or titled assets (626,362) (428,607) (959,203) (1,119,776)
Other assets 738,948 643,820 709,846 (113,975)
Deferred tax 772,071 -- -- --
Increase (decrease) in:
Accrued interest (206,386) 21,272 (341,867) 205,386
Accrued income tax (729,714) 108,670 (1,412,858) --
Accounts payable and accrued liabilities (350,539) 793,412 (543,921) 1,943,356
Unearned insurance commissions (6,368) (44,864) (22,231) (50,163)
Dealer reserves (12,196) 126,325 (34,359) 125,308
Nonrefundable acquisition discount (1,568,695) (77,972) (5,618,408) 6,900,035
------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities (3,201,780) 2,240,538 (10,967,660) 11,614,952
------------ ------------ ------------ ------------
Cash flows from investing activities:
Investments 8,646 (545,000) (509) (545,000)
Proceeds from bulk sale of vehicle retail
installment notes 9,463,170 22,775,013 43,745,444 39,975,324
Principal collected on finance receivables 10,728,904 16,395,790 37,868,774 41,532,708
Finance receivables originated or
acquired, net of write-offs (18,719,680) (47,844,111) (53,896,930) (139,245,750)
------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities 1,481,040 (9,218,308) 27,716,779 (58,282,718)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from draws on bank lines 12,170,000 92,425,013 41,450,583 424,754,545
Repayments of borrowings (9,601,631) (85,675,013) (58,082,214) (393,744,545)
Proceeds from issuance of other debt 36,791 88,801 92,519 17,137,702
Repayment of other debt -- (54,587) (130,913) (400,330)
Debt issuance cost (360,954) 107,273 (421,512) (934,040)
Debt issued to an affiliate 20,195 688,588 471,313 907,494
Dividends paid -- -- -- --
Deferred tax credit to additional paid-in capital -- -- -- --
Stock Options Exercised -- 81,900 -- 81,900
Tax benefit from stock options exercised -- 31,941 -- 31,941
------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 2,264,401 7,693,916 (16,620,224) 47,834,667
------------ ------------ ------------ ------------
Cash, net change 543,661 716,146 128,895 1,166,901
Cash at beginning of period 1,654,451 1,306,140 2,069,217 855,385
------------ ------------ ------------ ------------
Cash at end of period $ 2,198,112 $ 2,022,286 $ 2,198,112 $ 2,022,286
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplemental cash flow disclosures - cash paid
during the period for:
Interest $ 1,921,067 $ 2,270,266 $ 5,852,823 $ 5,317,034
Income taxes and Illinois replacement tax $ 91,082 $ 850,991 $ 1,625,282 $ 2,651,584
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
EAGLE FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
1. The financial statements of Eagle Finance Corp., a Delaware corporation
(the "Company"), are unaudited, but in the opinion of management reflect all
necessary adjustments, consisting only of normal recurring accruals, for a
fair presentation of results as of the dates and for the periods covered by
the financial statements. The results for the interim periods are not
necessarily indicative of the results of operations that may be expected for
the fiscal year. Management suggests that the unaudited interim financial
statements contained herein be read in conjunction with the financial
statements and the accompanying notes to the financial statements included in
the Company's 1995 Annual Report on Form 10-K, as amended.
2. Net income per common share amounts are based on the weighted average
number of common shares and common stock equivalents outstanding as reflected
on Exhibit 11 to this Quarterly Report on Form 10-Q.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a specialized financial services company engaged
primarily in acquiring and servicing automobile retail installment sales
contracts ("Installment Contracts") for purchases of late model used
automobiles by "non-prime" consumers, who typically have limited access to
traditional sources of consumer credit. To a lesser extent, the Company also
makes direct consumer loans and finance leases and purchases other retail
installment sale contracts (collectively "Other Loans") and offers, as agent,
insurance and other products related to consumer finance transactions
(collectively "Insurance Products"). The Company maintains its corporate
headquarters and a regional office near Chicago in Gurnee, Illinois, and
operates two other regional offices in Tampa and Orlando, Florida.
As of September 30, 1996, the Company had active relationships (I.E.,
the Company purchased Installment Contracts from such dealers during the
preceding 90 days) with approximately 450 dealers located primarily in
Illinois, Florida, Georgia and South Carolina, and, to a lesser extent, in
Arizona, Colorado, Indiana, Kentucky, New Mexico, Ohio, Tennessee, Texas,
Utah, Wisconsin and Wyoming.
The following is management's discussion and analysis of the financial
condition of the Company at September 30, 1996 (unaudited) as compared to
September 30, 1995 (unaudited) and December 31, 1995, and the results of
operations for the three and nine months ended September 30, 1996 and 1995
(unaudited). This discussion should be read in conjunction with the
Company's financial statements and notes thereto appearing elsewhere in this
quarterly report. Data for the three and nine months ended September 30, 1996
are not necessarily indicative of results expected for the full fiscal year.
The ratios and percentages provided below are calculated using the detailed
financial information contained in the Company's financial statements and the
financial data included elsewhere in this Form 10-Q. References to "net"
finance receivables or Installment Contracts shall mean finance receivables
or Installment Contracts, as appropriate, net of unearned finance charges.
RECENT DEVELOPMENTS
On September 27, 1996, the Company sold approximately $9.4 million (net)
of Texas-originated Installment Contracts to Search Capital Group, Inc.
("Search Capital"). This Installment Contract sale reflects the Company's
deemphasis of its Texas operations.
On September 27, 1996, the Company renegotiated the terms of its
revolving credit facility provided by a group of nine commercial banks
pursuant to an amended and restated Revolving Credit Agreement (as amended
and restated, the "Revolving Credit Agreement"). The Revolving Credit
Agreement was extended through June 30, 1997. SEE "Liquidity and Capital
Resources."
On October 18, 1996, the Company sold approximately $17.0 million (net)
of Installment Contracts to General Electric Capital Corporation ("GECC")
under an Asset Purchase Agreement dated as of June 25, 1996, between the
Company and GECC (the "GECC Agreement"). As of
8
<PAGE>
September 30, 1996, the Company serviced approximately $46.7 million (net) of
Installment Contracts sold to GECC pursuant to an Amended and Restated
Servicing Agreement dated as of June 25, 1996 between the Company and GECC.
SEE "Liquidity and Capital Resources."
On October 25, 1996, the Company completed the securitization of
approximately $35.2 million (net) of Installment Contracts through a
transaction agented by Greenwich Capital Markets, Inc. ("Greenwich"). The
transaction was structured to create three classes of certificates, which
were rated by Duff & Phelps and Fitch. Greenwich, the placement agent, has
sold all three classes of certificates.
GENERAL
Installment Contracts represented approximately 99.3% of the Company's
net finance receivables at September 30, 1996. Installment Contracts are
purchased on a non-recourse basis from automobile dealers and are typically
secured by medium-priced used automobiles. The automobiles are purchased by
non-prime consumers at retail prices typically ranging from approximately
$6,000 to $15,000. Installment Contracts financing such purchases typically
have annual percentage rates of interest ("APRs") ranging from 14% to 28% and
repayment terms ranging from 12 to 60 months. The average original principal
amount financed under Installment Contracts outstanding at September 30, 1996
was approximately $8,400, at an average APR of approximately 27.3%, with an
average original term of approximately 40 months. The Company's experience
has shown, however, that the average life of the Company's Installment
Contracts is substantially less than 40 months due to the amount of payoffs
and repossessions that occur prior to contract maturity.
The Company's portfolio of managed (owned or serviced) finance
receivables, net of unearned finance charges, declined to $164.7 million at
September 30, 1996 from $184.9 million at December 31, 1995 and from $186.3
million at September 30, 1995. The Company's income before income taxes
declined to $425,000 for the nine months ended September 30, 1996 from $4.0
million for the nine months ended September 30, 1995. SEE "Accounting
Matters."
Interest and servicing income on managed Installment Contracts accounts
for most of the Company's revenue. The net amount of Installment Contracts
purchased declined to $87.1 million during the nine months ended September
30, 1996 from $151.5 million during the nine months ended September 30, 1995.
As reflected in the following table, the finance receivables (purchased or
originated) by the Company during the periods presented below consist
primarily of Installment Contracts.
9
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------------- ------------------------------------
1996 1995 1996 1995
---------------- --------------- ---------------- ---------------
% OF % OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------- ------- ------- ------ ------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Installment
Contracts
purchased (1) $29,654 99.6% $54,848 99.7% $87,131 99.6% $151,546 99.8%
Net Other
Loans originated (1) 210 0.4% 145 0.3% 385 0.4% 335 0.2%
------- ------- ------- ------ ------- ------ ------- -------
Total $29,864 100.0% $54,993 100.0% $87,516 100.0% $151,881 100.0%
======= ====== ======= ====== ======= ====== ======== ======
</TABLE>
___________________
(1) Net of unearned finance charges
As part of its funding strategy, the Company sold $34.3 million (net) of
Installment Contracts to GECC during the nine-month period ended September
30, 1996. No gains or losses were recorded at the time the Installment
Contracts were sold, and the Company did not capitalize any servicing fees in
connection with the sales. The Company retained servicing rights on the
Installment Contracts sold. The Company recognizes servicing income over the
life of the related receivables as a percentage of receivables outstanding.
The Company is also eligible to receive bonus servicing fees based on
portfolio performance. Bonus servicing fees are recognized as income when
earned. For prospective sales and securitizations of Installment Contracts,
including the securitization transaction that was completed during October,
1996, the Company presently intends to record a gain or loss on such sales in
a manner consistent with industry practice. The net amount of Installment
Contracts serviced by the Company for third parties was $46.7 million and
$49.7 million at September 30, 1996 and 1995, respectively.
ACCOUNTING MATTERS
Historically, the Company recorded, at the time it purchased Installment
Contracts, a portion of contract interest (which would otherwise have been
recorded as unearned finance charges) as nonrefundable acquisition discount
when the credit risk and potential for future losses warranted such an
allocation. For the three- and nine-month periods ended September 30, 1996,
however, the Company did not allocate any portion of contract interest from
Installment Contracts purchased during the period to nonrefundable
acquisition discount. Instead, the Company established reserves for credit
losses on its portfolio of Installment Contracts through the recognition of a
provision for credit losses that supplemented the balance of nonrefundable
acquisition discount. SEE "Credit Loss Experience."
10
<PAGE>
PROFITABILITY
The following table sets forth certain data relating to the Company's
net income for the three and nine months ended September 30, 1996 and 1995
and for the year ended December 31, 1995:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- ---------------------
FOR THE YEAR ENDED
1996 1995 1996 1995 DECEMBER 31, 1995
-------- -------- --------- -------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average net finance
receivables (1) $121,806 $138,808 $132,576 $113,002 $120,830
Average interest bearing
liabilities 103,865 102,539 110,441 80,548 88,276
Total interest and fee income 6,949 7,167 22,309 17,908 27,100
Total interest expense 2,406 2,333 7,279 5,564 8,093
-------- -------- --------- -------- --------
Net interest income before
provision for credit losses $ 4,543 $ 4,834 $ 15,030 $ 12,344 $ 19,007
======== ======== ========= ======== ========
Average interest rate earned on
net finance receivables (2) 22.82% 20.65% 22.44% 21.13% 22.43%
Average interest rate on interest
bearing liabilities 9.27% 9.10% 8.79% 9.21% 9.17%
-------- -------- --------- -------- --------
Net interest spread 13.55% 11.55% 13.65% 11.92% 13.26%
======== ======== ========= ======== ========
Net interest margin (3) 14.92% 13.93% 15.12% 14.56% 15.73%
======== ======== ========= ======== ========
</TABLE>
_____________________________
(1) Excludes average net finance receivables serviced for third parties of
$51.5 million and $34.0 million for the three months ended September 30,
1996 and 1995, respectively; and $45.0 million and $30.2 million for the
nine months ended September 30, 1996 and 1995, respectively. Average net
finance receivables serviced for third parties were $33.1 million for the
year ended December 31, 1995.
(2) Average interest rates earned typically are less than average APRs charged
to consumers due to the Company's historical policy of allocating to
nonrefundable acquisition discount, at the time Installment Contracts are
purchased, a portion of contract interest (which would otherwise have been
recorded as unearned finance charges) when the credit risk and potential
for losses warrant such allocation. During 1995, the Company made such
allocations, which had the effect of reducing the interest rate earned on
Installment Contracts. With respect to Installment Contracts purchased
during 1996, the Company did not allocate to nonrefundable acquisition
discount any contract interest that would otherwise have been recorded as
unearned finance charges. SEE "Accounting Matters."
(3) Net interest margin represents net interest income on an annualized basis
divided by average net finance receivables.
The principal component of the Company's net income is its net interest
spread. Net interest spread represents the difference between interest
earned on finance receivables and interest paid for borrowed funds. The laws
of certain states establish the maximum interest rates, and prescribe the
types and maximum amounts of fees, insurance premiums and other amounts that
consumers may be charged. As is common in its market segment, the Company's
Installment Contracts generally bear the maximum allowable interest rates,
fees, premiums and other charges permitted under state law.
11
<PAGE>
The Company's liabilities are generally more interest-rate sensitive
than its finance receivables. A primary source of funding for the Company is
the Revolving Credit Agreement with a group of commercial banks with
CoreStates Bank, N.A. as agent. SEE "Liquidity and Capital Resources." The
maximum amount of the revolving credit facility under the Revolving Credit
Agreement is $90 million (subject to reduction pursuant to the terms of the
Revolving Credit Agreement that provide for the reduction of the facility to
$50 million by March, 1997). Under the Revolving Credit Agreement, the
Company has the option of borrowing funds at an interest rate equal to either
the prime rate of the agent bank or the LIBOR rate plus 2.5%. Prior to the
extension of the revolving credit facility, the Revolving Credit Agreement
provided that the interest rate for LIBOR borrowings was LIBOR plus 2.00%. On
September 30, 1996, the prime rate was 8.25% and the three-month LIBOR rate
was 5.625%.
FINANCIAL CONDITION
Total assets decreased $17.4 million (12.5%) to $121.7 million at
September 30, 1996 from $139.1 million at December 31, 1995 primarily due to
a decline in net finance receivables (net of dealer reserves, nonrefundable
acquisition discount and allowance for credit losses) to $106.3 million at
September 30, 1996 from $125.5 million at December 31, 1995. The decline in
assets and finance receivables is, in part, attributable to the sale of
approximately $34.3 million and $9.4 million (net) of Installment Contracts
to GECC and Search Capital, respectively, during the first nine months of
1996 and the September 1996. Total assets were $126.2 million at September
30, 1995 and net finance receivables (net of dealer reserves, nonrefundable
acquisition discount and allowance for credit losses) were $119.8 million at
such date. The net amount of managed Installment Contracts decreased to
$164.2 million at September 30, 1996 from $184.4 million at December 31,
1995. The net amount of managed Installment Contracts was $185.7 million at
September 30, 1995.
Total liabilities decreased $17.8 million (14.4%) to $105.6 million at
September 30, 1996 from $123.4 million at December 31, 1995, primarily due to
a decrease in total debt to $102.5 million at September 30, 1996 from $118.7
million at December 31, 1995. The decrease in total debt was primarily the
result of a reduction in borrowings under the Revolving Credit Agreement to
$83.0 million at September 30, 1996 from $99.7 million at December 31, 1995.
SEE "Liquidity and Capital Resources." Total liabilities were $106.9 million
at September 30, 1995, which included total debt of $101.2 million primarily
comprised of borrowings under the Revolving Credit Agreement of $81.8 million.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain data relating to the Company's
results of operations for the three and nine months ended September 30, 1996
and 1995:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
------ ------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Automobile portfolio interest and fee
income $6,878 $7,162 $22,181 $17,788
------ ------ ------ -------
Total interest and fee income $6,949 $7,167 $22,309 $17,908
Total interest expense 2,406 2,333 7,279 5,564
------ ------ ------ -------
Net interest income before provision for
credit losses 4,543 4,834 15,030 12,344
Provision for credit losses 1,730 -- 6,626 (53)
------ ------ ------ -------
Net interest income after provision for
credit losses 2,813 4,834 8,404 12,397
------ ------ ------ -------
Other Income:
Servicing income (from Installment
Contracts) 1,758 308 4,111 1,666
Insurance products commissions 9 63 44 230
------ ------ ------ -------
Total other income 1,767 371 4,155 1,896
------ ------ ------ -------
Salaries and related costs 2,034 1,545 5,916 4,115
Other operating expenses 2,199 1,307 6,006 3,643
------ ------ ------ -------
Total operating expenses 4,233 2,852 11,922 7,758
------ ------ ------ -------
Income before taxes 347 2,353 637 6,535
Taxes 133 924 212 2,552
------ ------ ------ -------
Net income $ 214 $1,429 $ 425 $ 3,983
====== ====== ====== =======
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995. Net income decreased by 89.3% to $425,000 for the nine
months ended September 30, 1996 from $4.0 million for the comparable 1995
period, primarily due to the difference in the manner in which the Company
established reserves for credit losses during the two periods and the
resulting increase in the provision for credit losses for the nine months
ended September 30, 1996 as well as increases in credit losses during the
1996 period. SEE "Accounting Matters."
Net interest income before the provision for credit losses increased
22.0% to $15.0 million for the nine months ended September 30, 1996 from
$12.3 million for the comparable 1995 period, primarily as a result of
increased income from the Installment Contracts portfolio. The average
interest rate earned on net finance receivables and net interest spread for
the nine months ended September 30, 1996, as compared to the corresponding
figures for the nine months ended September 30, 1995, improved primarily as a
result of the manner in which the Company established its reserves for credit
losses. SEE "Accounting Matters." During the nine months ended September 30,
1996, the Company sold $43.7 million (net) Installment Contracts, $34.3
million (net) of which were sold to GECC, compared to sales of $39.9 million
during the nine months ended September 30, 1995. Although the Company's
periodic sales of finance receivables
13
<PAGE>
to GECC have a negative effect on interest and fee income, because these
sales are made with servicing retained by the Company, they result in
increased servicing income.
Total interest expense increased to $7.3 million for the nine months
ended September 30, 1996 from $5.6 million for the nine months ended
September 30, 1995. The increase resulted from an increase in the amount of
average debt outstanding, partially offset by a decline in interest rates
paid on borrowed funds. The total debt outstanding at September 30, 1996
increased to $102.5 million from $101.2 million at September 30, 1995. The
average debt outstanding for the nine months ended September 30, 1996
increased to $110.4 million from $80.5 million for the nine months ended
September 30, 1995. The weighted average interest rate paid for borrowed
funds decreased to 8.79% for the nine months ended September 30, 1996 from
9.21% for the nine months ended September 30, 1995.
The provision for credit losses was $6.6 million for the nine months
ended September 30, 1996 as compared to ($53,000) for the nine months ended
September 30, 1995. This significant increase was due to the manner in which
the Company established its reserves for credit losses during the two periods
and higher losses experienced on Installment Contracts during the nine months
ended September 30, 1996 than during the corresponding period in 1995. SEE
"Accounting Matters," and "Credit Loss Experience."
Other income, including servicing income and commissions from the sale
of Insurance Products, increased 121.1% to $4.2 million for the nine months
ended September 30, 1996 from $1.9 million for the nine months ended
September 30, 1995, primarily due to an increase in servicing income to $4.1
million (141.2%) for the nine months ended September 30, 1996 from $1.7
million for the nine months ended September 30, 1995. The increase in
servicing income corresponds to the increased average amount of finance
receivables serviced by the Company for third parties during the nine months
ended September 30, 1996 as compared to the comparable 1995 period. Income
from the sale of Insurance Products was $44,000 during the nine months ended
September 30, 1996 as compared to $230,000 during the nine months ended
September 30, 1995.
Total operating expenses increased to $11.9 million for the nine months
ended September 30, 1996 compared to $7.8 million for the nine months ended
September 30, 1995. Salaries and related costs increased from the
corresponding period in 1995 to $5.9 million for the nine months ended
September 30, 1996, due primarily to the substantial increase in the number
of employees, normal pay increases and increased benefits costs. The
Company's other operating expenses increased to $6.0 million for the nine
months ended September 30, 1996 compared to the nine months ended September
30, 1995, also due to the growth of the Company and higher professional fees.
Total operating expenses (annualized) as a percentage of average net finance
receivables owned or serviced increased to 8.9% for the nine months ended
September 30, 1996 as compared to 7.2% for the nine months ended September
30, 1995.
Income tax expense decreased 91.7% to $212,000 for the nine months ended
September 30, 1996 from $2.6 million for the nine months ended September 30,
1995. The decrease resulted from a lower level of pretax income and a lower
effective tax rate during the nine months ended September 30, 1996 versus the
corresponding period in 1995.
14
<PAGE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THREE MONTHS
ENDED SEPTEMBER 30, 1995. Net income decreased by 85.0% to $214,000 for the
three months ended September 30, 1996 from $1.4 million for the comparable
1995 period, primarily due to the difference in the manner in which the
Company established reserves for credit losses during the two periods and the
resulting increase in the provision for credit losses for the three months
ended September 30, 1996 as well as increases in credit losses during the
1996 period. SEE "Accounting Matters."
Net interest income before the provision for credit losses decreased
6.3% to $4.5 million for the three months ended September 30, 1996 from $4.8
million for the comparable 1995 period, primarily as a result of reduced
income from the Installment Contracts portfolio. The average interest rate
earned on net finance receivables and net interest spread for the three
months ended September 30, 1996, as compared to the corresponding figures for
the three months ended September 30, 1995, improved as a result of the manner
in which the Company established its reserves for credit losses. SEE
"Accounting Matters." During the three months ended September 30, 1996, the
Company sold Texas-originated Installment Contracts totaling $9.4 million
(net). No similar sales were made during the three months ended September 30,
1995.
Total interest expense increased to $2.4 million for the three months
ended September 30, 1996 from $2.3 million for the three months ended
September 30, 1995. The increase resulted from an increase in the amount of
average debt outstanding and higher borrowing rates. The total debt
outstanding at September 30, 1996 increased to $102.5 million from $101.2
million at September 30, 1995. The average debt outstanding for the three
months ended September 30, 1996 increased to $103.9 million from $102.5
million for the three months ended September 30, 1995. The weighted average
interest rate paid for borrowed funds increased to 9.27% for the three months
ended September 30, 1996 from 9.10% for the three months ended September 30,
1995.
The provision for credit losses was $1.7 million for the three months
ended September 30, 1996 as compared to no provision for credit losses for
the three months ended September 30, 1995. This significant increase was due
to the manner in which the Company established its reserves for credit losses
during the two periods and higher losses experienced on Installment Contracts
during the three months ended September 30, 1996 than during the
corresponding period in 1995. SEE "Accounting Matters" and "Credit Loss
Experience."
Other income, including servicing income and commissions from the sale
of Insurance Products, increased 375.8% to $1.8 million for the three months
ended September 30, 1996 from $371,000 for the three months ended September
30, 1995, primarily due to an increase in servicing income to $1.8 million
for the three months ended September 30, 1996 from $309,000 for the three
months ended September 30, 1995. The increase in servicing income
corresponds to the increased average amount of finance receivables serviced
by the Company for third parties during the three months ended September 30,
1996 as compared to the comparable 1995 period. Income from the sale of
Insurance Products was $9,000 during the three months ended September 30,
1996 as compared to $63,000 during the three months ended September 30, 1995.
15
<PAGE>
Total operating expenses increased to $4.2 million for the three months
ended September 30, 1996 compared to $2.9 million for the three months ended
September 30, 1995. Salaries and related costs increased from the
corresponding period in 1995 to $2.0 million for the three months ended
September 30, 1996, due primarily to the substantial increase in the number
of employees, normal pay increases and increased benefits costs. The
Company's other operating expenses increased to $2.2 million for the three
months ended September 30, 1996 compared to the three months ended September
30, 1995, also due to the growth of the Company and higher professional fees.
Total operating expenses (annualized) as a percentage of average net finance
receivables owned or serviced increased to 9.53% for the three months ended
September 30, 1996 as compared to 7.82% for the three months ended September
30, 1995.
Income tax expense decreased 85.6% to $133,000 for the three months
ended September 30, 1996 from $924,000 for the three months ended September
30, 1995. The decrease resulted from a lower level of pretax income and a
lower effective tax rate during the three months ended September 30, 1996
versus the corresponding period in 1995.
CREDIT LOSS EXPERIENCE
The Company's credit loss reserves are comprised of three components:
nonrefundable acquisition discount; an allowance for credit losses; and, for
non-Installment Contract finance receivables, refundable dealer reserves.
The total of allowance for credit losses, nonrefundable acquisition discount
and dealer reserves equaled 10.2% and 12.5% of net owned finance receivables
at September 30, 1996 and 1995, respectively. The following discussion
reflects the Company's increased emphasis on the allowance for credit losses
and its reduced emphasis on nonrefundable acquisition discount to establish
credit loss reserves for the Company's Installment Contracts portfolio. SEE
"Accounting Matters."
NONREFUNDABLE ACQUISITION DISCOUNT AND DEALER RESERVES. In order to
achieve an acceptable rate of return and appropriately reflect credit risks
generally associated with the Company's automobile finance business, the
Company purchases Installment Contracts from dealers at a discount from their
principal amount. The Company negotiates the amount of the discounts with
dealers based upon various criteria, one of which is the credit risk
associated with the contracts being purchased. The discount is nonrefundable
and is allocated to the nonrefundable acquisition discount account. As part
of the Company's financing of retail installment sale contracts (other than
Installment Contracts), refundable dealer reserves may be established to
protect the Company from losses associated with such contracts.
16
<PAGE>
The following table presents a reconciliation of the changes in
nonrefundable acquisition discount and dealer reserves for the three and nine
months ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -------------------
1996 1995 1996 1995
---------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period $ 5,649 $15,722 $ 9,721 $ 8,745
Additions applicable to new volume 3,261 10,941 8,642 28,579
Reductions applicable to accounts sold -- (3,507) (3,982) (5,525)
Losses charged, net of recoveries (4,842) (7,386) (10,313) (16,029)
------- ------- -------- --------
Balance at end of period $ 4,068 $15,770 $ 4,068 $ 15,770
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
ALLOWANCE AND PROVISION FOR CREDIT LOSSES/CHARGE-OFFS. The Company
maintains an allowance for credit losses at a level management believes adequate
to absorb potential losses in its finance receivables portfolio. Management
evaluates the adequacy of the allowance for credit losses by reviewing credit
loss experience and delinquency trends using static pool analysis, the value of
the underlying collateral and general economic conditions and trends. A
provision for losses is charged to earnings in an amount sufficient to maintain
the allowance for credit losses at the level believed adequate by management.
The Company's general policy is to charge off delinquent accounts when they are
deemed uncollectible, and in any event prior to their becoming 90 days
contractually delinquent. The Company has experienced higher charge-off rates
during the three and nine months ended September 30, 1996 than during the
corresponding periods of 1995.
The following table reflects the Company's allowance for credit losses and
provision for credit losses for the three and nine months ended September 30,
1996 and 1995:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
------- --------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period $ 8,892 $1,242 $10,807 $1,248
Provision charged to expense 1,730 -- 6,626 (59)
Finance receivables charged off (2,678) (18) (9,534) (46)
Recoveries 6 35 51 116
------- ------- ------- ------
Balance at end of period $ 7,950 $1,259 $ 7,950 $1,259
------- ------- ------- ------
------- ------- ------- ------
Allowance as a percentage of net
finance receivables (owned) at
end of period 6.47% 0.92% 6.47% 0.92%
</TABLE>
17
<PAGE>
DELINQUENCIES
Managed finance receivables that were 60 days and greater contractually
delinquent (net of unearned finance charges) were $3.1 million, $3.5 million and
$4.0 million, representing 1.9%, 1.9% and 2.2% of net managed finance
receivables, as of September 30, 1996, December 31, 1995 and September 30, 1995,
respectively. Owned finance receivables that were 60 days and greater
contractually delinquent (net of unearned finance charges) were $2.3 million,
$3.0 million and $3.5 million, representing 1.9%, 2.6% and 2.5% of net owned
finance receivables, as of September 30, 1996, December 31, 1995 and September
30, 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through cash flow from operations,
borrowings under the Revolving Credit Agreement, borrowings from certain
companies and partnerships in which either or both of Charles F. Wonderlic or
Ronald B. Clonts and members of their immediate families own a direct or
indirect controlling interest (each, a "Commonly Controlled Company"),
subordinated indebtedness and from the periodic sale of Installment Contracts
and other finance receivables.
Net cash provided by (used in) operating activities totaled ($3.2) million
and $2.2 million during the three months ended September 30, 1996 and 1995,
respectively. For the nine months ended September 30, 1996 and 1995, net cash
provided by (used in) operating activities totaled ($11.0) million and $11.6
million, respectively. During these periods, the primary source of net cash
provided by (used in) operating activities has been net income, the net change
in the allowance for credit losses, the net change in the nonrefundable
acquisition discount account and the amount of net finance receivables charged-
off. Net cash used in operating activities for the three and nine months ended
September 30, 1996 was affected by the net change in the allowance for credit
losses, the net change in the nonrefundable acquisition discount account and the
amount of net finance receivables charged-off. Net cash provided by operating
activities for the three and nine months ended September 30, 1995 was affected
by the level of net income and the net change in the nonrefundable acquisition
discount account.
Net cash provided by (used in) investing activities represents the net
investment in, or liquidation of, finance receivables, which for the three-month
period ended September 30, 1996 and 1995 was $1.5 million and ($9.2) million,
respectively. For the nine months ended September 30, 1996 and 1995, net cash
provided by (used in) investing activities was $27.7 million and ($58.3)
million, respectively. During the three and nine months ended September 30,
1996, cash provided from the bulk sale of Installment Contracts was $9.5 million
and $43.7 million, respectively.
Net cash provided by (used in) financing activities for the three and nine
months ended September 30, 1996 and the comparable 1995 periods largely result
from borrowings and repayments under the Revolving Credit Agreement. Net cash
provided by (used in) financing activities for the three months ended September
30, 1996 was $2.3 million and net cash provided by financing activities for the
three months ended September 30, 1995 was $7.7 million. For the
18
<PAGE>
nine months ended September 30, 1996 and 1995, net cash provided by (used in)
financing activities was ($16.6) million and $47.8 million, respectively.
The self-liquidating nature of Installment Contracts and Other Loans
enables the Company to assume a higher debt-to-equity ratio than in most other
businesses. The amount of debt the Company incurs from time to time depends on
the Company's need for cash and its ability to borrow under the terms of the
Revolving Credit Agreement. The Company intends to meet its short- and long-
term liquidity needs with cash flow from operations, borrowings under the
Revolving Credit Agreement, the sale or securitization of finance receivables
and the proceeds from the issuance of securities in the capital markets.
While the Company must comply with customary financial and other covenants
under the Revolving Credit Agreement, the Company believes they will not
materially limit its business strategy. During September, 1996, the Company
entered into an amendment to the Revolving Credit Agreement that, among other
things, reduced the maximum availability under the facility to $90 million (this
amount declines to $50 million by March, 1997), extended the maturity date to
June 30, 1997 and modified certain other terms of the revolving credit facility,
including the cost of LIBOR borrowings (which was increased to LIBOR plus 2.5%
from LIBOR plus 2%). In October 1996, the Company completed its first
securitization, and anticipates relying more heavily upon, alternative funding
sources such as securitization financing.
At September 30, 1996, the Company had total debt of $102.5 million as
compared to $118.7 million at December 31, 1995 and $101.2 million at September
30, 1995. At September 30, 1996, $6.9 million was available under the Revolving
Credit Agreement from committed financial institutions. The following table
presents the Company's debt instruments and the weighted average interest rates
on such instruments for the periods indicated:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------- FOR THE TWELVE MONTHS
1996 1995 ENDED DECEMBER 31, 1995
------------------ ------------------ -----------------------
BALANCE RATE BALANCE RATE BALANCE RATE
---------- ------ -------- ------ --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SENIOR:
Revolving Credit Agreement $ 83,018 8.39% $81,800 8.90% $ 99,650 8.83%
Loan from Commonly Controlled
Company 1,473 4.88% 1,353 5.62% 1,002 5.76%
SUBORDINATED:
Notes payable 18,007 11.04% 18,030 11.77% $ 18,045 11.60%
-------- -------- --------
Total debt $102,498 8.79% $101,183 9.21% $118,697 9.17%
-------- -------- --------
-------- -------- --------
</TABLE>
19
<PAGE>
The following table sets forth information with respect to maturities of
senior and subordinated debt at September 30, 1996:
<TABLE>
<CAPTION>
LOANS FROM
COMMONLY
SENIOR BANK CONTROLLED SUBORDINATED
YEAR LINES OF CREDIT COMPANY NOTES PAYABLE TOTAL
---- --------------- ---------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1996 $ 83,018 $ 1,473 $ 39 $ 84,530
1997 113 113
1998 40 40
1999 856 856
2000 804 804
Thereafter 16,155 16,155
-------- ------- -------- --------
Total $ 83,018 $ 1,473 $ 18,007 $102,498
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
The Company has purchased interest rate caps and interest rate collars in
an aggregate notional amount of $55 million. The interest rate cap purchased by
the Company in an aggregate notional amount of $15 million protects the Company
against increases in the interest rate of a portion of its revolving debt if the
three-month LIBOR rate exceeds 10.5%. The interest rate cap expires in July,
1998.
The interest rate collars purchased by the Company in an aggregate notional
amount of $40 million protect the Company against increases in the interest rate
of its revolving debt when the three-month LIBOR rate exceeds 8%. The Company
must make payments to the counterparties to the interest rate collars if three-
month LIBOR falls below 5%. The interest rate collars expire in September,
2000.
The GECC Agreement provides for the purchase by GECC of Installment
Contracts, on a revolving basis, having maximum principal amount of up to $80
million outstanding at any time. The original term of the GECC Agreement
expires June 25, 1997, however, the GECC Agreement provides for an automatic
one-year extension through June 25, 1998.
Total stockholders' equity at September 30, 1996 was $16.1 million as
compared to $15.7 million at December 31, 1995 and $19.3 million at September
30, 1995. The Company's ability to pay dividends is limited by the Revolving
Credit Agreement.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in the following described
lawsuits: (i) BLAKE V. EAGLE FINANCE CORP., ET AL. -- on April 25, 1996, the
Company and Charles F. Wonderlic, Ronald B. Clonts, Robert J. Braasch and
Richard E. Wonderlic were named as defendants in a class action complaint filed
by David M. Blake in the United States District Court for the Eastern District
of Missouri, Case Number 96 CV 00788 LOD (the "Blake Complaint"). The Blake
Complaint alleges common law fraud, breach of fiduciary duty, negligence and
violations of the
20
<PAGE>
federal Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. Sec.
1962 ET SEQ.) based on the filing by the Company of allegedly inaccurate
quarterly reports with the Securities and Exchange Commission during 1995 and
the subsequent restatement of earnings by the Company that occurred during
April 1996; and (ii) REHM V. EAGLE FINANCE CORP., ET AL. -- on April 29,
1996, the Company and Charles F. Wonderlic, Ronald B. Clonts and Robert J.
Braasch were named as defendants in a class action complaint filed by Alfred
Rehm in the United States District Court for the Northern District of
Illinois, Case Number 96 C 2455 (the "Rehm Complaint"). The Rehm Complaint
alleges violations of Sections 10b and 20(a) of the Securities and Exchange
Act of 1934 and Rule 10b-5 promulgated under Section 10b, based on allegedly
inaccurate press releases and the filing by the Company of allegedly
inaccurate quarterly reports with the Securities and Exchange Commission
during 1995 and the subsequent restatement of earnings by the Company that
occurred during April 1996. The defendants have moved to dismiss both the
Blake Complaint and the Rehm Complaint in their entirety. On October 9,
1996, the Blake litigation was transferred to the United States District
Court for the Northern District of Illinois. The motion to dismiss the Blake
Complaint remains pending and will be decided by the United States District
Court for the Northern District of Illinois. Rehm has responded to
defendants' motion to dismiss, and that motion is now fully briefed. The
Company and the individually named defendants are awaiting the courts'
rulings on their motions. In accordance with applicable law and certain
indemnification agreements entered into with each of the individually named
defendants, the Company is required to indemnify each of the individually
named defendants to the maximum extent allowed with respect to the
above-described lawsuits. The Company intends to contest the above-described
lawsuits vigorously. Although the Company believes that the above-described
lawsuits are without merit, it is not possible at this time to estimate the
likelihood of a favorable or adverse result to the Company or the
individually named defendants.
The Company has also been named as a defendant in a lawsuit captioned
CLEVELAND ET AL. V. WALLACE AUTO SALES, INC., ET AL. On September 19, 1996, the
Company and five unnamed officers of the Company were named as defendants in the
above class action complaint filed in the United States District Court for the
Northern District of Illinois, Case No. 96 C 6045 (the "Cleveland Complaint").
The Cleveland Complaint alleges violations of the federal Racketeer Influenced
and Corrupt Organizations Act ("RICO"), the Illinois Consumer Fraud Act and the
Illinois Sales Finance Agency Act. The plaintiffs purport to represent a class
of plaintiffs who executed contracts that provide for an "amount financed" that
exceeds the retail or loan value of the car by 25% or more and whose contracts
have been assigned to the Company. The Company intends to file a motion to
dismiss the Cleveland Compliant in its entirety. Although the Company intends
to contest the above described lawsuits vigorously and believes the Cleveland
Complaint has numerous substantial deficiencies and that the Company has a
number of defenses, it is not possible at this time to estimate the likelihood
of a favorable or adverse result to the Company or the individually named
defendants.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None
21
<PAGE>
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Third Amendment to Amended and Restated Revolving Credit
Agreement dated June 30, 1996
11 Statement re computation of per share earnings
27 Financial Data Schedule
99.1 Press release issued by the Company announcing earnings for the
three and nine months ended September 30, 1996
(b) Reports on Form 8-K - The Company did not file a report on Form 8-K
during the three months ended September 30, 1996.
22
<PAGE>
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 thereunto duly authorized.
EAGLE FINANCE CORP.
Date: November 12, 1996 ROBERT J. BRAASCH
-------------------------------
Robert J. Braasch
President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
S-1
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.1 Third Amendment to Amended and Restated Revolving Credit Agreement
dated June 30, 1996
11 Statement re computation of per share earnings
27 Financial Data Schedule
99.1 Press release issued by the Company announcing earnings for the three
and nine months ended September 30, 1996
<PAGE>
THIRD AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This Third Amendment to Amended and Restated Revolving Credit Agreement
("Third Amendment") dated as of September 27, 1996 by and among EAGLE FINANCE
CORP., a Delaware corporation ("Borrower"), CORESTATES BANK, N.A., a national
banking association, HARRIS TRUST AND SAVINGS BANK, an Illinois banking
corporation, BANK ONE, CHICAGO, N.A., a national banking association, COLE
TAYLOR BANK, an Illinois banking corporation, FLEET BANK, N.A. (successor in
interest to Natwest Bank N.A.), NBD BANK, a Michigan banking association,
LASALLE NATIONAL BANK, a national banking association, THE SUMITOMO BANK,
LIMITED, Chicago branch, a bank organized under the laws of Japan (successor
in interest to The Daiwa Bank, Limited), THE NORTHERN TRUST COMPANY
(successor in interest to Northern Trust Bank\O'Hare, N.A.) (each
individually a "Bank" and collectively the "Banks" and CORESTATES BANK, N.A.,
as agent for the Banks hereunder (in such capacity as "Agent").
BACKGROUND
A. Borrower, Banks and Agent are parties to a certain Amended and Restated
Revolving Credit Agreement dated as of June 30, 1995, as amended (the "Credit
Agreement"), which they are willing to further amend on the terms and
conditions set forth herein.
B. Capitalized terms used but not otherwise defined in this Third
Amendment shall have the meanings respectively ascribed to them in the Credit
Agreement.
<PAGE>
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
promise and agree as follows:
1. AMENDMENTS.
A. The Credit Agreement is amended by deleting the definitions of
"Termination Date" and "Borrowing Base" contained in Section 1.01 of the
Credit Agreement in their entirety and replacing such definitions with the
following respective definitions:
"Termination Date" means the earlier of (1) June 30, 1997, or
(2) the date of termination of the Commitments pursuant to
Section 2.02 or Section 9.01.
"Borrowing Base" means eighty-five percent (85%) of Eligible
Receivables, PROVIDED, HOWEVER, that the rate of advance shall
be seventy percent (70%) for Eligible Receivables for which
there has been a Modification (other than a Pre-Approved
Modification) during the six (6) month period immediately
preceding September 15, 1996 and, PROVIDED, FURTHER, HOWEVER,
that the rate of advance shall be fifty percent (50%) for
Eligible Receivables rated as D Paper. Aggregate outstanding
advances on Eligible Receivables rated as D Paper shall not
exceed $3,000,000 at any one time.
B. The Credit Agreement is amended by adding the following new
definitions to Section 1.01 of the Credit Agreement:
"EAFC" shall mean Eagle Auto Funding Corp., a wholly owned
special purpose Delaware Subsidiary of Borrower, formed for the
purpose of acquiring and securitizing a pool of Automobile Finance
Receivables from Borrower.
"NET MANAGED RECEIVABLES" means receivables previously owned
by Borrower which have been sold but are being managed by Borrower
in the ordinary course of its business.
"NET OWNED RECEIVABLES" means receivables owned solely by
Borrower which are not being managed for any other Person.
-2-
<PAGE>
C. The Credit Agreement is amended by modifying the definition of
"Eligible Receivable" by deleting Subsections "(xii)" and "(xiii)" thereof,
and inserting the following new Subsections "(xii)" and "(xiii)":
(xii) there has been no more than one (1) Extension (or two
(2) Extensions if two (2) Extensions were already granted during that
portion of the 6 month period which precedes September 1, 1996) with
respect to the receivable during the six (6) month period immediately
preceding the applicable Borrowing Base calculations;
(xiii) there has been (A) no more than one (1) Modification
with respect to the receivable during the six (6) month period
ending September 15, 1996 and (B) no Modification with respect to the
receivable after September 15, 1996.
D. The Credit Agreement is amended by deleting the number
"100,000,000" presently contained in the 29th line of Section 2.01 of the
Credit Agreement and replacing it with the number "$90,000,000" which such
number shall automatically be further reduced to "$70,000,000" as of October
31, 1996, to "$60,000,000" as of December 31, 1996 and "$50,000,000" as of
March 31, 1997. In connection with each such above-stated reduction in the
aggregate Commitments of all of the Banks, each Bank's Commitment is (or, as
the case may be, will be) reduced pro rata to the amount opposite each Bank's
name on the Schedule "A" attached hereto and made part hereof.
E. The Credit Agreement is amended by deleting Subsection 2.05(2)
thereof in its entirety and replacing such Subsection with the following:
(2) For any LIBOR Loan at a rate equal to the LIBOR Interest
Rate plus two and one-half percent (2 1/2%).
- 3 -
<PAGE>
F. The Credit Agreement is amended by deleting Section 2.11
thereof in its entirety and replacing such Section with the following:
SECTION 2.11 TERM. The term of the Commitments and the
and the Credit Facility under which Revolving Credit Loans shall
be made available to Borrower under the terms of this Agreement shall
expire on June 30, 1997, as of which date no further Loans shall be
made available by Banks to Borrower and on which date all of
Borrower's obligations of every kind and nature shall, unless
sooner becoming due under the terms of this Agreement, become due and
payable in full.
G. The Credit Agreement is amended by the following modifications
to Section 6.11:
(1) Subsection 6.11(1) is modified by deleting the number
"sixty (60)" in the first and second lines thereof and replacing
it with the number "forty-five (45)."
(2) Subsection 6.11(3) is modified to add the following in
the fourth line of such subsection after the words "month end,":
and contemporaneously with the submission of each Advance
Request Form, certified as to accuracy by Borrower's chief
financial officer, to the best of his knowledge, a
borrowing base or availability certificate showing the
interim calculations for the Borrowing Base
(3) Subsections (12) and (13) of such Section are each
modified by deleting therefrom the words "forty-five (45) days after
each fiscal quarter" and replacing them with the following words:
thirty (30) days after each month end
H. The Credit Agreement is amended, solely with respect to EAFC,
to waive the requirements contained in Section 6.13 thereof that (1) Borrower
provide Agent with at least 30 days written notice of the formation of such
Subsidiary and (2) Borrower cause EAFC to join in each of the Loan Documents
as a co-borrower.
- 4 -
<PAGE>
I. The Credit Agreement is amended by adding the following
sentences to the end of Section 6.14:
In addition to the foregoing examinations, Borrower shall
cause BDO Seidman to perform additional examinations requested by
Agent and to cause a written report thereof to be promptly
submitted to Banks (the cost and expenses of which shall be
the sole responsibility of Borrower), which examinations shall
in any event include a monthly review of Borrower's reports
related to underwriting exceptions for newly purchased accounts
(which review shall include a sampling of such accounts to test
the validity of the reports) and a monthly review and
verification of the calculations of the Borrowing Base.
J. (1) The Credit Agreement is amended by (a) deleting clause (x)
in the first paragraph of Section 7.04 thereof and replacing it with the
following new clause (x): "that not less than 85% of the consideration for
any such sale or other disposition shall be paid in cash or cash
equivalents," and (b) deleting the last three (3) sentences of the first
paragraph of Section 7.04 (which three (3) sentences had been added in the
Second Amendment to Amended and Restated Loan and Security Agreement dated as
of June 28, 1996 among the parties hereto).
(2) The Credit Agreement is amended by deleting the percentage
"thirty-five percent (35%)" in the fifth line of the second paragraph of
Section 7.04 therein and replacing such percentage with "fifty percent (50%)."
K. The Credit Agreement is amended to add the following 2 new
clauses at the end of Section 7.05 thereof as additional exceptions to the
prohibition on the making of investments by Borrower:
(4) an investment of not more than $250,000 by Borrower in
EAFC reasonably contemporaneously with
- 5 -
<PAGE>
EAFC'S acquisition and securitization of a pool of Automobile Finance
Receivables from Borrower; and
(5) an investment by Borrower in EAFC (to the extent such
transaction would be treated as an investment) in the form of
Borrower's receipt of a Class C Certificate for an amount not to exceed
$5,000,000 issued by EAFC or any other entity or trust formed by EAFC to
facilitate a securitization transaction.
L. The Credit Agreement is amended by deleting Section 8.01 in its
entirety and replacing such Section with the following:
SECTION 8.01 MINIMUM TANGIBLE NET WORTH. Borrower will maintain
at all times during the fiscal quarter ending June 30, 1996, a Tangible
Net Worth of not less than $14,500,000. For each succeeding fiscal
quarter, Borrower shall maintain at all times during such fiscal
quarter a Tangible Net Worth of not less than the minimum Tangible Net
Worth requirement for the immediately preceding fiscal quarter (as
determined in accordance with this Section) plus an amount equal to one
hundred percent (100%) of the actual positive Net Income (i.e. without
any reduction for losses) of Borrower for the immediately preceding
fiscal quarter.
M. The Credit Agreement is amended to add the following sentence at
the end of Section 8.02 thereof:
If Borrower does an on-balance sheet securitization, there shall be
deducted from Tangible Net Worth, solely for the purpose of calculating
this covenant, any capital investment by Borrower in its securitization
Subsidiary, any certificate, instrument or other obligation owing to
Borrower by its securitization Subsidiary, and any reserves required to
be maintained by such Subsidiary as part of a securitization
transaction.
N. The Credit Agreement is amended to add the following sentence at
the end of Section 8.03 thereof:
If Borrower does an off-balance sheet securitization, there shall be
deducted from Capital Base, solely for the purpose of calculating this
covenant, any capital investment by Borrower in its securitization
- 6 -
<PAGE>
Subsidiary, any certificate, instrument or other obligation owing to
Borrower by its securitization Subsidiary, and any reserves required to
be maintained by such Subsidiary as part of a securitization
transaction.
O. The Credit Agreement is amended by deleting Section 8.05 in its
entirety and replacing such Section with the following:
SECTION 8.05. INTEREST COVERAGE RATIO. Borrower will maintain a
ratio of (i) the sum of Net Earnings PLUS Interest Expense to
(ii) Interest Expense of at least 1.05 to 1 at all times through
December 31, 1996 and at least 1.1 to 1 at all times thereafter.
P. The Credit Agreement is amended by deleting Section 8.07 in its
entirety and replacing such Section with the following:
SECTION 8.07 ASSET QUALITY TEST.
(1) Borrower shall not permit the sum of aggregate Net Managed
Receivables with payments 31 days or more contractually past due
to exceed 11.0% of Borrower's Net Managed Receivables at all
times. Borrower shall not permit the sum of aggregate Net
Managed Receivables with payments 62 days or more contractually
past due to exceed 2.5% of Borrower's Net Managed Receivables at
all times.
(2) Borrower shall not permit the sum of aggregate Net Owned
Receivables with payments 31 days or more contractually past due
to exceed $12,000,000. Borrower shall not permit the sum of
aggregate Net Owned Receivables with payments 62 days or more
contractually past due to exceed $2,500,000.
2. EXTENSION FEE.
Borrower shall, contemporaneously with the execution hereof, pay to
Agent in good funds, for the benefit of, and to be distributed to Banks based
on their respective Pro Rata Percentages, an extension fee of $562,500.
- 7 -
<PAGE>
3. MISCELLANEOUS.
A. Borrower represents and warrants to the Banks and Agent that it
has taken all necessary corporate action to authorize the execution, delivery
and performance of this Third Amendment. This Third Amendment is, or when
executed by the Borrower and delivered to the Agent, will be, duly executed
and constitute valid and legally binding obligations of the Borrower,
enforceable against the Borrower in accordance with its terms. Borrower
hereby ratifies and restates each of the representations and warranties of
the Borrower set forth in Article V of the Credit Agreement as being true and
correct on the date hereof.
B. This Third Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the
same agreement.
C. This Third Amendment shall amend and is incorporated into the
Credit Agreement. To the extent of any express inconsistency between the
terms hereof and the terms of the Credit Agreement, the terms hereof shall
control. Except as expressly amended by this Third Amendment, all of the
terms and conditions of the Credit Agreement remain in full force and effect.
D. Borrower acknowledges, confirms, represents and covenants that as
of September 26, 1996, (a) it is indebted to Banks, without defense, setoff,
counterclaim or recoupment of any nature, in the aggregate principal amount
of $91,600,000.00 for Revolving Credit Loans made pursuant to the Credit
Agreement and
- 8 -
<PAGE>
(b) all security interests and liens in the Collateral granted to Agent (for
the benefit of Agent and Banks) under the Credit Agreement continue to be
first priority perfected security interests and continue to secure all
obligations and indebtedness of every kind owing from Borrower to the Banks
and/or Agent.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
executed by their respective duly authorized officers as of the date first
above written.
- 9 -
<PAGE>
SCHEDULE "A"
PRO RATA COMMITMENT SHARES OF BANKS
<TABLE>
<CAPTION>
Prior
Commitment % Share @ 9/30/96 @ 10/31/96 @12/31/96 @ 3/31/97
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CoreStates $16,250,000.00 16.250000% $14,625,000.00 $11,375,000.00 $ 9,750,000.00 $ 8,125,000.00
- -----------------------------------------------------------------------------------------------------------------------
Bank One 12,500,000.00 12.500000% 11,250,000.00 8,750,000.00 7,500,000.00 6,250,000.00
- -----------------------------------------------------------------------------------------------------------------------
Fleet 12,500,000.00 12.500000% 11,250,000.00 8,750,000.00 7,500,000.00 6,250,000.00
- -----------------------------------------------------------------------------------------------------------------------
NBD 12,500,000.00 12.500000% 11,250,000.00 8,750,000.00 7,500,000.00 6,250,000.00
- -----------------------------------------------------------------------------------------------------------------------
LaSalle 12,500,000.00 12.500000% 11,250,000.00 8,750,000.00 7,500,000.00 6,250,000.00
- -----------------------------------------------------------------------------------------------------------------------
Harris 10,000,000.00 10.000000% 9,000,000.00 7,000,000.00 6,000,000.00 5,000,000.00
- -----------------------------------------------------------------------------------------------------------------------
Sumitomo 8,333,333.33 8.333333% 7,500,000.00 5,833,333.33 5,000,000.00 4,166,666.67
- -----------------------------------------------------------------------------------------------------------------------
Northern 8,333,333.33 8.333333% 7,500,000.00 5,833,333.33 5,000,000.00 4,166,666.67
- -----------------------------------------------------------------------------------------------------------------------
Cole Taylor 7,083,333.34 7.083334% 6,375,000.00 4,958,333.34 4,250,000.00 3,541,666.66
=======================================================================================================================
$100,000,000.00 100.00000% $90,000,000.00 $70,000,000.00 $60,000,000.00 $50,000,000.00
=======================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 11
EAGLE FINANCE CORP.
COMPUTATION OF NET INCOME PER SHARE
For the Three and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income data:
1. Income before income taxes $ 347 $2,353 $ 637 $6,535
2. Applicable income taxes 133 924 212 2,552
------ ------ ------ ------
3. Net income $ 214 $1,429 $ 425 $3,983
------ ------ ------ ------
------ ------ ------ ------
Number of outstanding shares:
4. Weighted average common shares
outstanding, adjusted for stock splits 4,189 4,202 4,189 4,182
5. Weighted average shares of treasury
stock outstanding, adjusted for stock splits -- -- -- --
6. Weighted average shares reserved for stock
options (utilizing the treasury stock method) -- 189 7 176
7. Common shares outstanding (Line 4-5+6) 4,189 4,391 4,196 4,358
Net income per share:
8. Net income per common shares (Line 3/4) $0.05 $0.34 $0.10 $0.95
9. Fully diluted net income per common (Line 3/7) $0.05 $0.33 $0.09 $0.91
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,198,112
<SECURITIES> 545,509
<RECEIVABLES> 122,867,562
<ALLOWANCES> 11,739,609
<INVENTORY> 0
<CURRENT-ASSETS> 109,005,590
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 121,678,819
<CURRENT-LIABILITIES> 105,597,905
<BONDS> 0
0
0
<COMMON> 41,891
<OTHER-SE> 16,039,023
<TOTAL-LIABILITY-AND-EQUITY> 121,678,819
<SALES> 0
<TOTAL-REVENUES> 26,464,136
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,922,356
<LOSS-PROVISION> 6,626,000
<INTEREST-EXPENSE> 7,278,781
<INCOME-PRETAX> 636,999
<INCOME-TAX> 212,423
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 424,576
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.09
</TABLE>
<PAGE>
[EAGLE LOGO]
CONTACT:
Robert J. Braasch/Howard J. Adamski John P. Kehoe/Van Negris
Eagle Finance Corp. Kehoe, White, Savage & Company, Inc.
(847) 855-7150 (212) 888-1616
FOR IMMEDIATE RELEASE
EAGLE FINANCE CORP. REPORTS THIRD QUARTER/NINE MONTH OPERATING RESULTS
Gurnee, Illinois - November 7, 1996 - Eagle Finance Corp. (NASDAQ:EFCW) today
reported third quarter net income of $214,000, or $.05 per common share, on a
fully diluted basis, compared to $1.4 million, or $.34 per common share,
earned during the third quarter of 1995.
For the nine months ended September 30, 1996, net income declined to
$425,000, or $.09 per common share, on a fully diluted basis, from $4.0
million or $0.91 per common share for the same period in 1995.
Chuck Wonderlic, Eagles's Chairman and Chief Executive Officer commented:
"The quarter was in keeping with our expectations. We took several steps to
position Eagle for the future. Bob Braasch became President and we recruited
Sam Keith as Chief Operating Officer. Our financial flexibility took several
steps forward as Eagle extended its bank facility, sold non-strategic Texas
receivables and launched its securitization program with Greenwich Capital
Markets, Inc. We believe we have, in place, talented management and
financing sources needed to capitalize on growth opportunities in the
non-prime auto market."
The substantial decline in net income, from the comparable periods last year,
is primarily due to the difference in the manner in which Eagle established
reserves for credit losses during the comparable periods. During the three
and nine months ended September 30, 1996, Eagle did not allocate to
nonrefundable acquisition discount, any contract interest that would
otherwise have been recorded as unearned finance charges. Eagle made such
allocations of contract interest during the corresponding periods of 1995.
Net interest income for the third quarter totaled $4.5 million, representing
a 6% decrease from the $4.8 million reported in the prior year period. For
the nine months, net interest income increased 22% to $15.0 million from the
$12.3 million reported during 1995 in the comparable period. The decline in
third quarter net interest income results from a lower level of owned
receivables due to sales of receivables. The decline in net interest income
during the third quarter was offset by increased servicing income. The nine
month increase in net interest income was due to higher earning asset levels
and higher effective yields on earning assets.
The provision for credit losses totaled $1.7 million and $6.6 million for the
respective three and nine months ended September 30, 1996. No comparable
credit loss provision was made in the third quarter of 1995 and
- MORE -
<PAGE>
EAGLE FINANCE CORP.
NOVEMBER 7, 1996
PAGE TWO
a $53,000 provision was made in the nine month period ended September 30,
1995. The significant increase in the provision for credit losses results
from the manner in which Eagle established its reserves for credit losses
during 1996 as compared to the corresponding periods in 1995.
Other income primarily representing servicing income, increased to $1.8
million and $4.2 million for the respective three and nine month periods
ended September 30, 1996 from $371,000 and $1.9 million in the comparable
1995 periods. This results from increased third-party finance receivables
servicing by the Company. At September 30, 1996 the Company serviced $46.7
million for third parties.
Total operating expenses increased to $11.9 million for the nine months ended
June 30, 1996 from $7.8 million incurred in the similar period a year ago.
Salaries and related costs increased to $5.9 million for the nine months
ended September 30, 1996 from $4.1 million in the comparable 1995 period due
primarily to the growth of the Company. The Company's other operating
expenses increased to $6.0 million for the nine months ended September 30,
1996, from $3.6 million in the comparable period, due to increases in the
amount of managed (owned or serviced) finance receivables and higher
professional fees. Total operating expenses as a percentage of average net
managed (owned or serviced) finance receivables increased to 9.8% for the
nine months ended September 30, 1996, as compared to 6.6% for the nine months
ended September 30, 1995.
At September 30, 1996, Eagle's overall level of reserves for credit losses
was $12.0 million or 10.2% of net owned finance receivables. Delinquency on
owned accounts at September 30, 1996, December 31, 1995 and September 30,
1995 was $11.7 million, $13.1 million and $13.6 million or 9.9%, 9.0% and
10.0% of net owned finance receivables, respectively. Eagle's total managed
(owned or serviced) delinquencies at September 30, 1996, December 31, 1995,
and September 30, 1995 were $15.4 million, $15.2 million and $16.5 million,
respectively, or 9.3%, 8.2% and 8.8% respectively, of net managed (owned or
serviced) finance receivables.
Net managed (owned or serviced) finance receivables at September 30, 1996
were $164.7 million and net Company owned receivables were $118.0 million at
September 30, 1996. Net managed (owned or serviced) finance receivables at
September 30, 1995 were $186.3 million and net Company owned receivables were
$136.6 million at September 30, 1995.
Eagle Finance Corp. is a specialized financial services company which
purchases and services installment contracts. Eagle finances the purchase of
late model used automobiles for consumers who have limited access to
traditional sources of consumer credit. Eagle is headquartered in Gurnee,
Illinois and conducts its operations through three regionally centralized
offices. As of September 30, 1996, Eagle had active relationships with
approximately 450 automobile dealers located in fifteen states.
-MORE-
-STATISTICAL TABLE FOLLOWS-
<PAGE>
EAGLE FINANCE CORP.
NOVEMBER 7, 1996
PAGE THREE
EAGLE FINANCE CORP.
FINANCIAL SUMMARY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ---------------------
1996 1995 1996 1995
------- ------ ------- -------
<S> <C> <C> <C> <C>
Revenues $8,716 $7,538 $26,464 $19,805
Income before taxes $ 347 $2,353 $ 637 $ 6,535
Tax expense $ 133 $ 924 $ 212 $ 2,552
Net income $ 214 $1,429 $ 425 $ 3,983
Earnings per common share (primary) $ 0.05 $ 0.34 $ 0.10 $ 0.95
Earnings per common share (fully diluted) $ 0.05 $ 0.33 $ 0.09 $ 0.91
Weighted average number of common
shares outstanding (primary) 4,189 4,189 4,189 4,189
Weighted average number of common 4,189 4,391 4,196 4,358
shares outstanding (fully diluted)
# # #
</TABLE>
