United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission File Number: 0-26412
UNION ACCEPTANCE CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1908796
------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
250 N. Shadeland Avenue, Indianapolis, IN 46219
----------------------------------------- -----
(Address of principal executive office) (Zip Code)
(317) 231-6400
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether 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
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:
Class Outstanding at May 5, 2000
Class A Common Stock, without par value 5,816,024 Shares
- --------------------------------------- ----------------
Class B Common Stock, without par value 7,461,608 Shares
- --------------------------------------- ----------------
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements (unaudited):
Consolidated Condensed Balance Sheets as of
March 31, 2000 and June 30, 1999 3
Consolidated Condensed Statements of Earnings
for the Three and Nine Months Ended March 31, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows for the
Nine Months Ended March 31, 2000 and 1999 5
Consolidated Condensed Statement of Shareholders' Equity for the
Nine Months Ended March 31, 2000 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Part II. OTHER INFORMATION 22
Signatures 23
<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
Assets 2000 1999
-------- --------
<S> <C> <C>
Cash and cash equivalents $ 9,381 $ 8,088
Restricted cash 14,692 12,215
Receivables held for sale, net 302,525 267,316
Retained interest in securitized assets 194,692 191,029
Accrued interest receivable 2,493 2,035
Property, equipment, and leasehold improvements, net 9,962 8,375
Other assets 22,340 25,868
Total Assets $556,085 $514,926
======== ========
Liabilities and Shareholders' Equity
Liabilities
Amounts due under warehouse facilities $246,691 $185,500
Long-term debt 177,000 199,000
Accrued interest payable 2,474 5,287
Amounts due to trusts 13,897 13,152
Dealer premiums payable 2,370 2,564
Current and deferred income taxes payable 5,441 16,022
Other payables and accrued expenses 5,130 3,922
-------- --------
Total Liabilities 453,003 425,447
-------- --------
Commitment and Contingencies -- --
Shareholders' Equity
Preferred Stock, without par value, authorized
10,000,000 shares; none issued and outstanding -- --
Class A Common Stock, without par value, authorized
30,000,000 shares; 5,816,024 and 5,099,344 shares issued and
outstanding at March 31, 2000 and June 30, 1999, respectively 58,632 58,452
Class B Common Stock, without par value, authorized
20,000,000 shares; 7,461,608 and 8,150,266 shares issued and
outstanding at March 31, 2000 and June 30, 1999, respectively -- --
Accumulated other comprehensive earnings, net of income taxes 2,771 199
Retained earnings 41,679 30,828
-------- --------
Total Shareholders' Equity 103,082 89,479
-------- --------
Total Liabilities and Shareholders' Equity $556,085 $514,926
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------ ------------------------------------------
2000 1999 2000 1999
------------------------------ ------------------------------------------
<S> <C> <C> <C> <C>
Interest on receivables held for sale $8,221 $ 8,087 $23,050 $23,276
Retained interest and other 6,704 4,875 18,874 15,702
------------------------------ ------------------------------------------
Total interest income 14,925 12,962 41,924 38,978
Interest expense 6,805 6,996 19,548 20,597
------------------------------ ------------------------------------------
Net interest margin 8,120 5,966 22,376 18,381
Provision for estimated credit losses 840 1,225 2,255 4,825
------------------------------ ------------------------------------------
Net interest margin after provision
for estimated credit losses 7,280 4,741 20,121 13,556
------------------------------ ------------------------------------------
Gain on sales of receivables, net 2,754 6,386 10,545 13,179
Servicing fees 6,217 5,601 18,473 16,023
Late charges and other fees 1,667 1,442 4,680 3,821
------------------------------ ------------------------------------------
Other revenues 10,638 13,429 33,698 33,023
------------------------------ ------------------------------------------
Salaries and benefits 7,354 6,328 21,018 17,451
Other general and administrative expenses 5,215 4,913 15,122 14,090
------------------------------ ------------------------------------------
Total operating expenses 12,569 11,241 36,140 31,541
------------------------------ ------------------------------------------
Earnings before provision for income taxes 5,349 6,929 17,679 15,038
Provision for income taxes 2,065 2,665 6,828 5,794
------------------------------ ------------------------------------------
Net earnings $3,284 $ 4,264 $10,851 $ 9,244
============================== ==========================================
Net earnings per common share (basic and diluted) $ 0.25 $ 0.32 $0.82 $ 0.70
Basic weighted average number of common
shares outstanding 13,277,632 13,249,260 13,264,175 13,238,944
Common stock options 16,682 27,870 34,520 7,302
------------------------------ ------------------------------------------
Diluted weighted average number of common
shares outstanding 13,294,314 13,277,130 13,298,695 13,246,246
============================== ==========================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------------------
2000 1999
--------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 10,851 $9,244
Adjustments to reconcile net earnings to net cash
from operating activities:
Increase in receivables held for sale, net of liquidations (988,171) (1,073,788)
Dealer premiums paid, net on receivables held for sale (24,516) (40,178)
Proceeds from securitization of receivables held for sale 950,206 947,838
Gain on sales of receivables (19,907) (30,772)
Proceeds on sale of interest-only strip - 2,847
Impairment of retained interest in securitized assets 4,243 9,464
Accretion of discount on retained interest in securitized assets (17,784) (13,992)
Provision for estimated credit losses 2,255 4,825
Amortization and depreciation 2,471 3,576
Restricted cash (2,476) 5,456
Other assets and accrued interest receivable 1,422 (7,106)
Amounts due to trusts 745 (2,387)
Other payables and accrued expenses (12,082) 8,864
--------------- ----------------
Net cash from operating activities (92,743) (176,109)
--------------- ----------------
Cash flows from investing activities:
Collections on retained interest in securitized assets
and change in spread accounts 57,663 36,173
Capital expenditures (2,465) (1,590)
--------------- ----------------
Net cash from investing activities 55,198 34,583
--------------- ----------------
Cash flows from financing activities:
Principal payment on long-term debt (22,000) (22,000)
Stock options exercised 93 -
Net change in warehouse credit facilities 61,191 97,253
Payment of borrowing fees (446) (102)
--------------- ----------------
Net cash from financing activities 38,838 75,151
--------------- ----------------
Change in cash and cash equivalents 1,293 (66,375)
Cash and cash equivalents, beginning of period 8,088 75,612
--------------- ----------------
Cash and cash equivalents, end of period $ 9,381 $9,237
=============== ================
Supplemental disclosures of cash flow information:
Income taxes paid $ 19,297 $ 171
Interest paid $ 21,858 $ 24,457
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Nine Months Ended March 31, 2000
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Number of Common Stock Accumulated
Shares Outstanding Other Total
------------------------------- Common Comprehensive Retained Shareholders'
Class A Class B Stock Earnings Earnings Equity
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999 5,099,344 8,150,266 $58,452 $199 $ 30,828 $ 89,479
Comprehensive earnings:
Net earnings - - - - 10,851 10,851
Net unrealized gain on retained
interest in securitized assets - - - 4,133 - 4,133
Income taxes related to unrealized
gain in securitized assets - - - (1,561) - (1,561)
--------------
Total comprehensive earnings 13,423
Grants of common stock 10,550 - 75 - - 75
Stock options exercised 17,472 - 93 - - 93
Other - - 12 - - 12
Conversion of Class B
Common Stock into
Class A Common Stock 688,658 (688,658) - - - -
--------------------------------------------------------------------------------------------
Balance at March 31, 2000 5,816,024 7,461,608 $58,632 $ 2,771 $ 41,679 $103,082
============================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
Note 1 - Basis of Presentation
The foregoing consolidated condensed financial statements are
unaudited. However, in the opinion of management, all adjustments necessary for
a fair presentation of the results of the interim period presented have been
included. All adjustments are of a normal and recurring nature. Results for any
interim period are not necessarily indicative of results to be expected for the
year. The consolidated condensed financial statements include the accounts of
Union Acceptance Corporation ("UAC") and its subsidiaries.
The consolidated condensed interim financial statements have been
prepared in accordance with Form 10-Q specifications and therefore do not
include all information and footnotes normally shown in annual financial
statements. A summary of the Company's significant accounting policies is set
forth in "Note 1" of the "Notes to Consolidated Financial Statements" in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999. Certain
amounts for the prior period have been reclassified to conform to the current
period presentation.
Note 2 - Retained Interest in Securitized Assets
Retained Interest in Securitized Assets is recorded as an "available
for sale" security and is recorded at fair value. The associated unrealized
gains and losses attributable to changes in fair value, net of income taxes are
recorded as a separate component of shareholders' equity ("accumulated other
comprehensive earnings"). Other than temporary impairment charges are recorded
through earnings as a component of gain on sale of receivables, net.
In determining the fair value of the Retained Interest in Securitized
Assets ("Retained Interest"), the Company must estimate the future prepayments,
rates of gross credit losses and credit loss severity, and delinquencies, as
they impact the amount and timing of the estimated cash flows. The Company
estimates prepayments by evaluating historical prepayment performance of
comparable receivables and the impact of trends in the economy. The Company has
used annual prepayment estimates ranging from 22.32% to 28.00% and 10.73% to
20.50% on Tier I and Tier II receivables, respectively, at March 31, 2000. The
Company estimates gross credit losses and credit loss severity using available
historical loss data for comparable receivables and the specific characteristics
of the receivables purchased by the Company. The Company used estimated net
credit losses ranging from 4.00% to 6.58% and 12.00% to 16.16% on Tier I and
Tier II receivables, respectively, as a percentage of the original principal
balance over the life of the receivables to value Retained Interest at March 31,
2000. The Company determines the estimated fair value of its Retained Interest
by discounting the expected cash flows released from the Trust (the cash out
method) using a discount rate which the Company believes is commensurate with
the risks involved. The Company used tiered discount rates based on a pool's
specific risk factors up to 900 basis points over the applicable U.S. Treasury
Rate ranging from 9.25% to 15.55% and 11.25% to 16.41% on Tier I and Tier II
receivables, respectively, at March 31, 2000. The weighted average discount rate
used to value Retained Interest at March 31, 2000 was 13.98% compared to 12.83%
at June 30, 1999.
<PAGE>
Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
Retained Interest in Securitized Assets is as follows (in thousands) at:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------- -----------
Estimated gross interest spread from receivables,
<S> <C> <C>
net of estimated prepayments and fees $ 277,183 $ 248,687
Estimated dealer premium rebates refundable 18,464 22,923
Estimated credit losses on securitized receivables (105,916) (104,448)
Spread accounts 57,071 69,921
Discount to present value (52,110) (46,054)
----------- -----------
Total Retained Interest in Securitized Assets $ 194,692 $ 191,029
=========== ===========
Outstanding balance of securitized receivables $ 2,411,047 $ 2,256,415
=========== ===========
Estimated credit losses as a percentage of
securitized receivables serviced 4.39% 4.63%
</TABLE>
Note 3 - Retained Interest and Other Interest Income
Retained interest and other interest income primarily includes the
discount accretion recognized on Retained Interest, the discount accretion
related to the servicing asset, interest earned on cash collection accounts on
all securitization transactions before January 1, 1997, and interest earned on
cash and cash equivalents.
Note 4 - Segment Information
The Company adopted Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information ("SFAS
131") effective June 30, 1999. SFAS 131 provided new guidance on segment
reporting. The Company determined it has a single reportable segment which is
acquiring, securitizing and servicing retail automobile installment sales
contracts originated by dealerships affiliated with major domestic and foreign
automobile manufacturers. The single segment was determined based on
management's approach to operating decisions, assessing performance and
reporting financial information.
Note 5 - Earnings Per Share
Options to purchase shares of common stock are excluded from the
calculation of Earnings Per Share ("EPS") assuming dilution when the exercise
prices of these options are greater than the average market price of the common
share during the period. The following chart indicates the numbers of shares
which were excluded from the calculation of EPS assuming dilution for the
periods indicated
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------ ------------ ------------
439,911 362,145 422,073 382,713
<PAGE>
Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
Note 6 - Current Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement, as amended, is effective for
fiscal years beginning after June 15, 2000, with earlier application allowed.
Management is currently assessing the impact, if any, of this Statement on the
financial condition and operations of the Company upon adoption.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Acquisition Volume. The Company currently acquires receivables in 38
states from over 4,600 manufacturer-franchised auto dealerships. The Company
focuses its efforts on acquiring receivables on late model used and, to a lesser
extent, new automobiles made to purchasers who exhibit a favorable credit
profile ("Tier I"). Total receivable acquisitions were $395.6 million for the
quarter ended March 31, 2000, compared to $263.8 million for the quarter ended
December 31, 1999, and $321.9 million for the same quarter of last fiscal year.
The Company believes the increase in receivables acquisitions is the result of
better dealer service, primarily due to an increase in staffing for nights and
weekends to better handle the volume, and an increase in active dealers. The
Company had receivable acquisitions of $119.9 million for the month of April.
The Company's primary focus remains on acquiring high quality, profitable
receivables and plans to continue its expansion into the northeastern states
during the fourth quarter. The Company believes that its increased emphasis on
growing existing markets and its planned expansion will result in future
increased acquisition volume. See - "Discussion of Forward-Looking Statements".
Gross and Net Spreads. The gross and net spreads on the third quarter
securitization of fiscal 2000 were 5.88% and 4.94% compared to 7.19% and 6.16%,
respectively, over the same quarter of last fiscal year. Gross spread is defined
as the difference between the weighted average receivable rate and the weighted
average certificate rate on the asset-backed securities. Net spread is defined
as gross spread less servicing fees, upfront costs, ongoing credit enhancement
and trustee fees, and hedging gains or losses.
Net spreads are currently targeted at 5.00% to 5.50% on securitizations
for the quarter ended June 30, 2000. Although management believes these targeted
net spreads can be achieved, material factors affecting the net spreads are
difficult to predict and could cause management's projections to be materially
inaccurate. These include current market conditions with respect to interest
rates and demand for asset-backed securities generally and for securities issued
in securitizations sponsored by the Company. See - "Discussion of
Forward-Looking Statements".
Portfolio Performance. The Company saw a stabilization of net credit
losses during the three quarters ended September 30, 1999, but experienced an
increase for the quarters ended March 31, 2000 and December 31, 1999. As shown
in the following tables, Tier I net credit losses totaled 2.30% for the quarter
ended March 31, 2000, compared to 2.40% and 1.97% for the quarters ended
December 31, 1999 and March 31, 1999, respectively. Tier I net credit losses for
the nine months ended March 31, 2000 were 2.23% which was lower than 2.29% for
the nine months ended March 31, 1999. Delinquency on the Tier I automobile
portfolio was 2.73% at March 31, 2000, compared to 3.33% and 2.63% at December
31, 1999 and March 31, 1999, respectively. Recoveries as a percentage of gross
charge-offs on the Tier I portfolio increased to 40.91% for the quarter ended
March 31, 2000, compared to 38.87% and 39.93% for the quarters ended December
31, 1999 and March 31, 1999, respectively. This increase in recoveries over the
prior year is primarily due to an increase in the retail sale of repossessed
vehicles at the Company's new car franchised dealership in Indianapolis for the
quarter ended March 31, 2000, compared to the quarter ended March 31, 1999, and
the increased focus on recoveries. This method of disposing of repossessions
along with stricter monitoring of the repossession and resale process may
increase the recovery rate over time. Recovery rates for repossessed automobiles
sold by the Company's retail operation are significantly higher than recovery
rates on vehicles sold at auction. Approximately 19% of repossessed automobiles
were sold at the Company's retail operation during the three months ended March
31, 2000, compared to approximately 18% for the three months ended March 31,
1999. For those automobiles sold at retail during the quarter ended March 31,
2000, the net proceeds received were approximately 53% of the percentage of the
gross charge-off amount. See - "Discussion of Forward-Looking Statements".
<PAGE>
Provisions are made for estimated net credit losses in conjunction with
each receivable sale. The current assumption utilized in the gain on sale of
receivables calculation for estimated net credit losses on the fiscal 2000 third
quarter securitization was 4.50% over the life of the pool and included only
Tier I receivables. Estimated net credit losses as a percentage of securitized
receivables serviced (inherent in Retained Interest) was 4.39% at March 31,
2000, compared to 4.47% and 4.60% at December 31, 1999 and March 31, 1999,
respectively.
Certain information concerning the Company's experience pertaining to
net credit losses and delinquencies on the Tier I fixed rate retail automobile,
light truck and van receivables serviced by the Company is shown in the
following tables. There can be no assurance that future net credit loss and
delinquency experience on receivables will be comparable to that set forth
below. See "Discussion of Forward-Looking Statements".
<TABLE>
<CAPTION>
Tier I Credit Loss Experience
For the Three Months Ended
-------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999 March 31, 1999
------------------------- --------------------------------- ------------------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Average servicing portfolio 222,413 $ 2,619,461 217,695 $ 2,537,094 206,174 $2,329,127
Gross charge-offs 2,214 $25,467 2,232 $24,948 1,841 $19,139
Recoveries 10,417 9,698 7,643
------------ ---------------- ----------------
Net charge-offs $15,050 $15,250 $11,496
============ ================ ================
Gross charge-offs as a percentage
of average servicing portfolio (1) 3.98% 3.89% 4.10% 3.93% 3.57% 3.29%
Recoveries as a percentage of
gross charge-offs 40.91% 38.87% 39.93%
Net charge-offs as a percentage
of average servicing portfolio (1) 2.30% 2.40% 1.97%
</TABLE>
(1) Annualized
<TABLE>
<CAPTION>
For the Nine Months Ended
--------------------------------------------------------------------
March 31, March 31,
2000 1999
---------------------------------- --------------------------------
(Dollars in thousands)
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Average servicing portfolio 218,872 $ 2,557,339 199,072 $ 2,217,348
Gross charge-offs 6,449 $71,504 5,923 $62,129
Recoveries 28,787 24,098
----------------- ----------------
Net charge-offs $42,717 $38,031
================= ================
Gross charge-offs as a percentage
of average servicing portfolio (1) 3.93% 3.73% 3.97% 3.74%
Recoveries as a percentage
of gross charge-offs 40.26% 38.79%
Net charge-offs as a percentage
of average servicing portfolio (1) 2.23% 2.29%
</TABLE>
(1) Annualized
<PAGE>
<TABLE>
<CAPTION>
Tier I Delinquency Experience
--------------------------------------------------------------------------------------------------
At March 31, 2000 At December 31, 1999 At March 31, 1999
------------------------------- ------------------------------- --------------------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
-------------- --------------- -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Servicing portfolio 225,458 $2,672,470 217,904 $2,540,391 207,705 $2,355,418
Delinquencies:
30-59 days 3,577 $ 39,441 4,636 $49,988 3,650 $ 37,890
60-89 days 1,978 23,070 2,202 24,505 1,633 17,279
90 days or more 957 10,524 944 10,151 646 6,818
-------------- --------------- -------------- ---------------- -------------- -----------------
Total delinquencies 6,512 $ 73,035 7,782 $84,644 5,929 $ 61,987
============== =============== ============== ================ ============== =================
Delinquency as a percentage
of servicing portfolio 2.89% 2.73% 3.57% 3.33% 2.85% 2.63%
</TABLE>
Net earnings are summarized in the table below. Net earning decreased
23.0%, for the quarter ended March 31, 2000, compared to the quarter ended March
31, 1999. Net earnings increased 17.4% for the nine months ended March 31, 2000,
compared to the nine months ended March 31, 1999. The decrease over the same
quarter of the prior year is primarily due to a lower gain on sale of
receivables, net of impairments. The decrease was partially offset by an
increase in net interest margin after provision for estimated credit losses. The
increase in the net earnings for the nine months ended March 31, 2000 was
primarily related to the increase in the net interest margin and the decrease in
the provision for estimated credit losses over the same period of the prior
fiscal year.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
---------------------------------- -----------------------------------
2000 1999 2000 1999
-------------- -------------- --------------- --------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income $ 3,284 $ 4,264 $ 10,851 $ 9,244
Net Earnings Per Share $ 0.25 $ 0.32 $ 0.82 $ 0.70
(basic and diluted)
</TABLE>
Net interest margin after provision for estimated credit losses
increased 53.5% to $7.3 million and 48.4% to $20.1 million for the quarter and
nine months ended March 31, 2000, respectively, compared to $4.7 million and
$13.6 million for the corresponding periods ended March 31, 1999. During the
fourth quarter of fiscal 1999, the Company increased the discount rate used in
the gain on sale calculation which resulted in a higher initial discount
recorded for each sale on a prospective basis. The discount accretion was $2.0
million higher in the quarter ended March 31, 2000 compared to the quarter ended
March 31, 1999. Additionally, a lower provision for estimated credit losses was
recorded in the third quarter of fiscal 2000 compared to the same quarter of the
prior year. The increase for the nine months ended March 31, 2000 as compared to
the previous fiscal period was primarily due to a decrease in the provision for
estimated credit losses and an increase in the discount accretion included in
retained interest and other interest income.
Interest on receivables held for sale, net increased 1.7% to $8.2
million and decreased 1.0% to $23.1 million for the quarter and nine months
ended March 31, 2000, respectively, compared to $8.1 million and $23.3 million
for the same periods of fiscal 1999. The increase over the prior year related to
a higher average held for sale portfolio for the quarter ended March 31, 2000,
compared to the quarter ended March 31, 1999 and the decrease for the prior nine
months related to a lower average held for sale portfolio for the nine months
ended March 31, 2000 compared to the same period ended March 31, 1999.
Retained interest and other interest income increased 37.5% to $6.7
million and 20.2% to $18.9 million for the quarter and nine months ended March
31, 2000, respectively, compared to $4.9 million and $15.7 million for the
corresponding periods ended March 31, 1999. The discount component of Retained
Interest increased at June 30, 1998 by implementing the "cash out" method and
again at June 30, 1999 by increasing the discount rate used to record the gain
on sale of receivables during the fourth quarter of fiscal 1999. (A more
detailed discussion can be found in the Company's Annual Report on Form 10-K for
fiscal 1999). The resulting effect during the current period was an increase in
the amount of the discount accreted into income. The individual components of
Retained interest and other interest income are shown in the following table.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
2000 1999 2000 1999
------------- ------------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Discount accretion $ 6,438 $ 4,445 $17,922 $14,266
Other interest income 266 430 952 1,436
------------- ------------- ------------- ------------
$ 6,704 $ 4,875 $18,874 $15,702
</TABLE>
Interest expense decreased 2.7% to $6.8 million and 7.6% to $19.5
million for the quarter and nine months ended March 31, 2000, respectively,
compared to $7.0 million and $20.6 million for the corresponding periods ended
March 31, 1999. These decreases were primarily the result of lower long-term
debt interest expense due to the second principal payment made on the senior
debt in August 1999. This decrease in long-term interest expense was offset by
higher warehouse borrowing needs as a result of an increase in receivable
acquisitions for both the quarter and nine months ended March 31, 2000 as
compared to the quarter and nine months ended March 31, 1999.
Provision for estimated credit losses decreased 31.4% to $840,000 and
53.3% to $2.3 million for the quarter and nine months ended March 31, 2000,
respectively, compared to $1.2 million and $4.8 million, respectively, for the
same periods of the fiscal 1999. The decrease is due to continued improvement in
the held for sale portfolio and a smaller portfolio of Tier II and modified
receivables held on the balance sheet.
Gain on sales of receivables, net decreased 59.6% and 20.0% for the
quarter and nine months ended March 31, 2000, respectively. The gain on sales of
receivables continues to be a significant element of the Company's net earnings.
The gain on sales of receivables is affected by several factors but is primarily
affected by the amount of receivables securitized, the net spread, and the level
of estimation for net credit losses. The components of the gain on sales of
receivable, net are:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
---------------------------------- -----------------------------------
2000 1999 2000 1999
-------------- ------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Gain on sale of receivables $ 2,754 $ 10,679 $ 14,788 $ 22,643
Impairments (4,293) (4,243) (9,464)
------------ ------------- --------------- --------------
Gain on sale of receivables, net $ 2,754 $ 6,386 $ 10,545 $ 13,179
</TABLE>
The receivables sold in the securitizations were $282.7 million for the
quarter ended March 31, 2000, compared to $320.5 million for the quarter ended
March 31, 1999. The decrease in the securitization transaction gain primarily
relates to a lower net spread for the third quarter of fiscal 2000 gain on sale
compared to the gain on sale recorded in the same period of the prior fiscal
year. The receivables sold in the securitization for the quarter ended March 31,
2000 primarily included receivable acquisitions for the months of November and
December 1999 and January 2000. The receivables sold in the securitization for
the quarter ended March 31, 1999 primarily included receivable acquisitions for
the months of November and December of 1998 and January 1999.
Set forth below is certain information relating to the third quarter
fiscal 2000 and 1999 securitizations.
Third Quarter Securitizations Fiscal
-------------------------------
2000 1999
---- ----
2000 - A 1999 - A
Amount securitized (in millions) $282.7 $320.5
Weighted average receivable rate 13.08% 12.99%
Weighted average certificate rate 7.20% 5.80%
Gross spread (1) 5.88% 7.19%
Net spread (2) 4.94% 6.16%
Credit loss assumption 4.50% 4.50%
Annual prepayment speed assumption 28.00% 28.00%
Discount rate assumption 15.61% 9.84%
Weighted average remaining maturity (in months) 68.9 71.5
Weighted average life (in years) 1.99 1.99
Gain as a percentage of amount securitized 0.99% 3.38%
(1) Gross spread - difference between the weighted average receivable rate and
weighted average certificate rate on the asset-backed securities.
(2) Net spread - gross spread less servicing fees, upfront costs, ongoing
credit enhancement and trustee fees, and hedging gain or losses.
Gain on sale of receivables, net also includes charges, if applicable based
on management's review, for other than temporary impairments. On a regular
basis, management reviews the fair value of the estimated recoverable cash flows
associated with the retained interest for other than temporary impairments. Some
of the factors considered in this evaluation are discussed further in the Notes
to Consolidated Financial Statements. See - "Note 2 of the Consolidated
Condensed Financial Statements". Based on management's review as of the Retained
Interest, there were no additional other than temporary impairments charges for
the quarter ended March 31, 2000. See - "Discussion of Forward-Looking
Statements".
Servicing fees increased 11.0% to $6.2 million and 15.3% to $18.5
million for the quarter and nine months ended March, 2000, respectively,
compared to $5.6 million and $16.0 million for the quarter and nine months ended
March 31, 1999, respectively. The increase was related to a higher average
securitized servicing portfolio for the quarter and nine months ended March 31,
2000 compared to the same period of the prior fiscal year. Servicing fees
consist primarily of contractual servicing fees of 1.0% on Tier I
securitizations.
Late charges and other fees increased 20.4% to $1.7 million and 22.5%
to $4.7 million for the quarter and nine months ended March 31, 2000, compared
to $1.4 million and $3.8 million for the corresponding periods of fiscal 1999.
Other fees consist primarily of late charges, the gross profit from the
dealership sales, and other fee income.
Salaries and benefits expense increased 16.2% to $7.4 million and 20.4%
to $21.0 million for the quarter and nine months ended March 31, 2000,
respectively, from $6.3 million and $17.5 million for the corresponding periods
ended March 31, 1999. The increase was primarily related to an increase in
full-time equivalent employees. The average full-time equivalents for the
quarter and nine months ended March 31, 2000 were 597 and 569, respectively,
compared to 522 and 530 for the same periods of fiscal 1999.
Other general and administrative expense increased 6.2% to $5.2 million
and 7.3% to $15.1 million for the quarter and nine months ended March 31, 2000,
respectively, compared to $4.9 million and $14.1 million for the same periods of
fiscal 1999. Other operating expense includes occupancy and equipment costs,
outside and professional services, receivable expenses, promotional expenses,
travel, office supplies and other. Total operating expenses (including salaries
and benefits) as a percentage of the average servicing portfolio were 1.89% and
1.85% for the quarter and nine months ended March 31, 2000, respectively,
compared to 1.88% and 1.84% for the same periods of fiscal 1999 and continues to
be below the industry average.
Financial Condition
Receivables held for sale, net and servicing portfolio. Receivables
held for sale, net includes the principal balance of receivables held for sale,
net of unearned discount and allowance for estimated net credit losses,
receivables in process, and prepaid dealer premiums. Selected information
regarding the Receivables held for sale, net and servicing portfolio at March
31, 2000 and June 30, 1999 is summarized in the following table.
March 31, June 30,
2000 1999
-------------------- ------------------
(In thousands)
Receivables held for sale, net $ 302,525 $267,316
Allowance for net credit losses $2,898 $2,754
Securitized assets serviced $2,411,047 $2,256,415
Total servicing portfolio $2,710,105 $2,519,070
Retained interest in securitized assets ("Retained Interest"). Retained
Interest increased $3.7 million to $194.7 million at March 31, 2000, from $191.0
million at June 30, 1999. The Retained Interest balance increased or decreased
by the amounts capitalized upon consummation of the first three quarters'
securitizations including estimated dealer premium rebates, collections,
accretion of discount, change in spread accounts, impairment and net change in
unrealized gain. The Company's collections are the receipt of the net interest
spread.
<PAGE>
The following table illustrates the activity of Retained Interest for the nine
months ended March 31, 2000 (in thousands):
Balance at June 30, 1999 $191,029
Amounts capitalized (including estimated dealer rebates) 43,652
Collections (44,813)
Accretion of discount 17,784
Change in spread accounts (12,850)
Impairment (4,243)
Net change in unrealized gain (loss) 4,133
---------
Balance at March 31, 2000 $194,692
=========
Allowance for net credit losses on securitized receivables is included
as a component of Retained Interest. At March 31, 2000, the allowance related to
both Tier I and Tier II securitized receivables totaled $105.9 million, or 4.39%
of the total securitized receivable portfolio, compared to $104.4 million, or
4.63%, at June 30, 1999. The Company's assumptions for valuing Retained Interest
on a "cash out" basis at March 31, 2000, include the Company's latest estimates
for net credit losses of 4.00% to 6.58% on Tier I receivables and 12.00% to
16.16% on Tier II receivables as a percentage of original principal balance over
the life of receivables, annual prepayment estimates ranging from 22.32% to
28.00% on Tier I receivables and 10.73% to 20.50% on Tier II receivables, and
discount rates ranging from 9.25% to 15.55% on Tier I receivables and 11.25% to
16.41% on Tier II receivables. The weighted average discount rate used to value
Retained Interest at March 31, 2000 was 13.98% compared to 12.83% at June 30,
1999. Impairment of Retained Interest, an available-for-sale security, is
measured on a disaggregate (pool by pool) basis in accordance with SFAS 115. See
- - "Discussion of Forward-Looking Statements".
Amounts due under revolving warehouse credit facility were $246.7
million at March 31, 2000, compared to $185.5 million at June 30, 1999. The
increase is a result of higher acquisition volume after the close of the
securitization transaction in the March quarter compared to the June quarter of
last year.
Long-term debt was $177 million at March 31, 2000, compared to $199
million at June 30, 1999. The decrease in long-term debt was a result of a
required principal payment on the Company's Senior Notes in August 1999 of $22.0
million.
Current and deferred income taxes payable totaled $5.4 million at March
31, 2000, compared to $16.0 million at June 30, 1999. The decrease is primarily
the result of tax payments made during the first two quarters, which are
partially offset by an increase in the tax liability associated with current
year earnings.
Liquidity and Capital Resources
Sources and Uses of Cash in Operations. Net cash used in operating
activities decreased to $92.7 million for the nine months ended March 31, 2000,
from net cash used in operating activities of $176.1 million for the nine months
ended March 31, 1999. The decrease was primarily attributable to a decrease in
receivables securitized relative to receivables acquired. Net cash from
investing activities was $55.2 million and $34.6 million for the nine months
ended March 31, 2000 and 1999, respectively. The increase over prior year
primarily relates to higher collections on Retained Interest and change in
spread accounts due to lower net credit losses and the release of the 1995B and
1995C spread accounts of approximately $13.8 million due to repurchasing the
remaining receivables from these securitizations.
Derivative financial instruments. Derivative financial instrument
transactions may represent a source or a use of cash during a given period
depending on the change in interest rates. In the first three quarters of fiscal
2000, derivative financial instrument transactions provided a source of cash of
$5.0 million compared to a use of cash of $4.5 million during the first three
quarters of fiscal 1999.
Financing Activities. Net cash from financing activities for the nine
months ended March 31, 2000 was $38.8 million compared to net cash from
financing activities of $75.1 million for the nine months ended March 31, 1999.
The primary factor for this change is the net change in the warehouse borrowings
since the beginning of the applicable nine month period. The net increase in
warehouse borrowings for the nine months ended March 31, 2000 was lower than the
net increase in warehouse borrowings for the same period ended March 31, 1999.
The Company has substantial capital requirements to support its ongoing
operations and anticipated growth. The Company's sources of liquidity are
currently funds from operations, securitization transactions and external
financing including long-term debt and the revolving warehouse credit facility.
Historically, the Company has used the securitization of receivable pools as its
primary source of long-term funding. In August 1999, the Company established an
additional source of liquidity through a securitization arrangement with a
commercial paper conduit which will be available for future use as management
deems appropriate. This facility, originally established at $250 million, was
increased to $375 million in March 2000. All of the existing capacity is
currently available. Securitization transactions enable the Company to improve
its liquidity, to recognize gains from the sales of the receivable pools while
maintaining the servicing rights to the receivables, and to control interest
rate risk by matching the repayment of amounts due to investors in the
securitizations with the actual cash flows from the securitized assets. Between
securitization transactions, the Company relies primarily on the revolving
warehouse credit facility to fund ongoing receivable acquisitions not including
dealer premiums. In addition to receivable acquisition funding, the Company also
requires substantial capital on an ongoing basis to fund the advances of dealer
premiums, securitization costs, servicing obligations and other cash
requirements previously described. The Company's ability to borrow under the
revolving warehouse credit facility is dependent upon its compliance with the
terms and conditions thereof. The Company's ability to obtain successor
facilities or similar financing will depend on, among other things, the
willingness of financial institutions to participate in funding automobile
financing business and the Company's financial condition and results of
operations. Moreover, the Company's growth may be inhibited, at least
temporarily, if the Company is not able to obtain additional funding through
these or other facilities, or if it is unable to satisfy the conditions to
borrowing under the revolving warehouse credit facility. The Company
consistently assesses its long-term receivable funding arrangements with a view
to optimizing cash flows and reducing costs. The Company has several options for
funding including, but not limited to, a public asset-backed securitization, a
sale into the commercial paper facility, a private sale, or temporarily holding
the receivables. The Company continues to evaluate market conditions and
available liquidity and could decide to alter the timing of its securitizations
in the future depending on the Company's cash position and available short-term
funding.
Warehouse facility. The Company has borrowing arrangements with an
independent financial institution for a $500.0 million revolving warehouse
credit facility that is insured by a surety bond provider to fund Tier I
receivable acquisitions. At March 31, 2000, $246.7 million of the capacity was
utilized, and an additional $39.0 million was available to borrow based on the
outstanding principal balance of eligible receivables. At June 30, 1999, and
March 31, 1999, $185.5 million and $170.5 million of the capacity was utilized,
and an additional $67.2 million and $54.5 million was available to borrow based
on the outstanding principal balance of eligible receivables, respectively.
The Company's credit agreements, among other things, require compliance
with monthly and quarterly financial maintenance tests and restrict the
Company's ability to create liens, incur additional indebtedness, sell or merge
assets and make investments. The Company is in compliance with all covenants and
restrictions imposed by the terms of indebtedness.
Based on current cash flow projections, management believes that the
Company's existing capital resources, the revolving warehouse credit facility
described above, future earnings, expected growth in receivable acquisitions,
and periodic securitization of receivables should provide the necessary capital
and liquidity for its operations through at least the next twelve months. The
period during which its existing capital resources will continue to be
sufficient will, however, be affected by the factors described above affecting
the Company's cash requirements. A number of these factors are difficult to
predict, particularly including the cash effect of hedging transactions, the
availability of outside credit enhancement in securitizations or other financing
transactions and other factors affecting the net cash provided by
securitizations. Depending on the Company's ongoing cash and liquidity
requirements, market conditions and investor interest, the Company may seek to
issue additional debt or equity securities in the near term. The sale of
additional equity, including Class A Common Stock or preferred stock, would
dilute the interests of current shareholders. See - "Discussion of
Forward-Looking Statements".
Year 2000 Compliance
All mission critical systems were monitored and tested during the
December 31st through January 2nd weekend. Three known issues have arisen since
the rollover weekend. The first two were identified and corrected without any
outages or service delays. The third issue centered around custom code on two
non-mission critical download files that slipped through testing. Once the issue
was identified and corrected, normal operation was restored. There were two days
of incomplete files with limited impact. There were also concerns related to the
impact of the leap year on February 29, 2000. As with the year 2000 rollover,
the Company did not experience any significant rollover problems related to the
leap year.
The replacement or remedied costs for year 2000 compliance issues with
the Company was estimated to be less than $100,000, which the Company recognized
as incurred. This estimated cost was mostly due to software upgrades that
include new features which were combined with Year 2000 corrections. See -
"Discussion of Forward-Looking Statements".
Discussion of Forward-Looking Statements
The above discussions and notes to consolidated condensed financial
statements contain forward-looking statements made by the Company regarding its
results of operations, effects of changes in accounting policies, cash flow
needs and liquidity, receivable acquisition volume, target spreads, potential
credit losses, recovery rates, prepayment rates, servicing income, and other
aspects of its business. Similar forward-looking statements may be made by the
Company from time to time. In particular, the Company's gain on sale of
receivables and retained interest in securitized assets are reported on the
basis of significant estimates of future portfolio performance. Such
forward-looking statements are subject to a number of important factors that
cannot be predicted with certainty and which could cause such forward-looking
statements to be materially inaccurate. Such factors include, for example,
demand for new and used autos, competition, and consumer credit and delinquency
trends. See the "Discussion of Forward-Looking Information" under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for fiscal 1999 which is incorporated
herein by this reference.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company bears the primary risk of loss due to credit losses in its
servicing portfolio. Credit loss rates are impacted by general economic factors
that affect customers' ability to continue to make timely payments on their
indebtedness. Prepayments on receivables in the servicing portfolio reduce the
size of the portfolio and reduce the Company's servicing income. The gain on
sales of receivables in connection with each securitization transaction and the
amount of Retained Interest recognized in each transaction reflect deductions
for estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted periodically to reflect differences between estimated
and actual net credit losses and prepayments on past securitization. For
example, if net credit losses increased or decreased by 100 basis points on a
$300.0 million securitization, the gain on sale would result in a reduction or
an increase of the Gain (Loss) on Sales of Receivables by approximately $3.0
million pre-tax, before consideration of discounting. The same 100 basis points
increase or decrease would result in a reduction or an increase of the Retained
Interest of approximately $24.0 million, before consideration of discounting,
based on a securitized receivable portfolio of $2.4 billion at March 31, 2000.
The forgoing examples are developed utilizing the cash flow model employed by
management to calculate the fair value of Retained Interest by changing the
credit loss assumption as described. The Company does not believe fluctuations
in interest rates materially affect the rate of prepayments on receivables.
The Company's sources of funds generally have variable rates of
interest, and its receivable portfolio bears interest at fixed rates. The
Company therefore bears interest rate risk on receivables until they are
securitized and employs derivative financial instruments to mitigate this risk.
The Company uses a hedging strategy that primarily consists of the execution of
forward interest rate swaps having a maturity approximating the average maturity
of the receivable production during the relevant period. There is no assurance
that this strategy will completely offset changes in interest rates. In
particular, such strategy depends on management's estimates of receivable
acquisition volume and timing of its securitizations. The Company realizes a
gain on its hedging transactions during periods of increasing interest rates and
widening swap spreads and realizes a loss on such transactions during periods of
decreasing interest rates and tightening swap spreads. The hedging gain or loss
should substantially offset changes in interest rates as seen by a lower or
higher reported gain on sales of receivables, respectively. Recognition of
unrealized gains or losses is deferred until the sale of receivables during the
securitization. On the date of the sale, deferred hedging gains and losses are
recognized as a component of Gain (Loss) on Sales of Receivables. Increases or
decreases in interest rates reduce or increase the fair value of long-term debt,
respectively. At March 31, 2000, the Company had an unrealized hedging loss on
forward interest rate swaps of $413,000 based on notional amounts outstanding of
$426.1 million.
<PAGE>
The following table presents the principal cash repayments and related
weighted average interest rates by maturity date for the current variable rate
and long-term debt at March 31, 2000.
<TABLE>
<CAPTION>
Three months 2001 2002 2003 Total Fair Value
ended June 30,
2000
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due under warehouse facility $ 246,691 $- $ - $ - $ 246,691 $246,691
Weighted average variable rate 5.13%
Long-term debt $- $ 22,000 $43,667 $111,333 $ 177,000 $163,513
Weighted average fixed rate 0.00% 8.53% 8.14% 8.86% 8.64%
</TABLE>
Sensitivity analysis on Retained Interest
At March 31, 2000, key economic assumptions and the sensitivity of the
current fair value of Retained Interest to immediate 10% and 20% adverse changes
in assumed economics is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Amounts as of March 31, 2000 Tier I Tier II Total
<S> <C> <C> <C>
Fair value of retained interest (1) $197,897,761 $3,828,996 $ 201,726,757
Prepayment speed assumption (annual rate) 22.32% - 28.00% 10.73% - 20.50%
Impact on fair value of 10% adverse change $192,267,728 $3,804,433 $ 196,072,161
Impact on fair value of 20% adverse change $186,924,911 $3,780,484 $ 190,705,395
Net loss rate assumption (pool life rate) 4.00% - 6.58% 12.00% - 16.16%
Impact on fair value of 10% adverse change $176,273,897 $2,978,536 $ 179,252,433
Impact on fair value of 20% adverse change $154,535,999 $2,154,260 $ 156,690,259
Discount rate assumption (annual rate) 9.25% - 15.55% 11.25% - 16.41%
Impact on fair value of 10% adverse change $192,980,899 $3,753,057 $ 196,733,956
Impact on fair value of 20% adverse change $188,299,896 $3,679,689 $ 191,979,585
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Retained Interest on the balance sheet is lower than the total fair value
included in this analysis. The difference primarily relates to the inventory
value of repossessed autos that have not been sold. This amount is included in
Retained Interest as part of the allowance for estimated credit losses on
securitized receivables but not included in the total fair value.
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, any change in fair value based on a particular percentage
variation in assumptions cannot be extrapolated because the relationship of the
change in fair value is not linear. Also, in this table, the effect of a
variation in a particular assumption on the fair value of the retained interest
is calculated independent from any change in another assumption; in reality,
changes in one factor may result in changes in another, which might magnify or
counteract the sensitivities. See "Discussion of Forward-Looking Statements."
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended March 31, 2000.
<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.
Union Acceptance Corporation
May 12, 2000 By: /S/ John M. Stainbrook
----------------------
John M. Stainbrook
President and Chief Executive Officer
May 12, 2000 By: /S/ Rick A. Brown
-----------------
Rick A. Brown
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000927790
<NAME> Union Acceptance Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 24,073
<SECURITIES> 0
<RECEIVABLES> 307,916
<ALLOWANCES> (2,898)
<INVENTORY> 0
<CURRENT-ASSETS> 329,091
<PP&E> 15,029
<DEPRECIATION> (5,067)
<TOTAL-ASSETS> 556,085
<CURRENT-LIABILITIES> 18,672
<BONDS> 434,331
0
0
<COMMON> 58,632
<OTHER-SE> 44,450
<TOTAL-LIABILITY-AND-EQUITY> 556,085
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<TOTAL-REVENUES> 75,622
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<INCOME-TAX> 6,828
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</TABLE>
