National Auto Credit Reports Third Quarter Results
15 December 1997
National Auto Credit Reports Third Quarter ResultsSOLON, Ohio, Dec. 15 -- National Auto Credit, Inc. , a leading provider of cash advances to dealers in the used car industry, today reported a net loss of $9,929,000, or $(.35) per share, for the nine months ended October 31, 1997, and a net loss of $18,417,000, or $(.65) per share, for the quarter then ended. The reported loss resulted from an increase in the non-cash provision for credit losses relating to dealer advances. The increase is primarily due to the recording of amounts to reflect the results of the Company's evaluation of the collectability of its portfolio utilizing enhanced static pool information applied on a dealer-by-dealer basis. Revenues for the three and nine month periods ended October 31, 1997 were $17,590,000 and $55,203,000, respectively, compared with revenues of $16,163,000 and $46,468,000, respectively, for the same periods in 1996. Based upon data collected from the enhanced static pool information, the Company has established portfolio collection standards for all dealers. Dealers falling below these standards have been eliminated from the program. To date 229 dealers have been deleted, accounting for approximately 12% of the contract volume during the last six months. In addition, the Company is in the process of reducing its bank debt and plans to satisfy its bank debt completely by August 1998. Under its credit agreements, the Company must be in compliance with a fixed charge coverage covenant in the agreements related to its borrowings. The Company reported that it has obtained waivers from its banks and holders of its senior notes with respect to this fixed charge coverage covenant. These waivers are in effect for third quarter reporting requirements. Sam J. Frankino, Chairman of the Board and majority stockholder, stated, "Consistent with recent updates in industry reporting, National Auto Credit has taken certain strategic initiatives to identify and eliminate unprofitable dealers in order to devote its efforts to pursuing growth opportunities while maximizing shareholder value." The statements contained in this release that are not purely historical are forward looking statements within the meaning of the Securities and Exchange Act of 1934. Among the factors that could cause actual results to differ materially from those forward looking statements are the potential for greater than anticipated non-performing contracts, the potential for lower than anticipated recoverability of amounts advanced to the Company's member dealers, availability with regards to the Company's financing arrangements, and other factors as discussed in the Company's annual and quarterly reports filed with the Securities and Exchange Commission. NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Nine Months Ended October 31, October 31, 1997 1996 1997 1996 REVENUE Interest income $16,201 $14,156 $49,988 $41,373 Fee and other income 1,389 2,007 5,215 5,095 Total 17,590 16,163 55,203 46,468 COSTS AND EXPENSES Provision for credit losses 41,741 2,642 57,555 7,031 Operating 1,482 1,489 4,760 4,151 General and administrative 1,448 1,161 4,072 3,537 Interest 1,672 788 4,610 1,616 Total 46,343 6,080 70,997 16,335 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (28,753) 10,083 (15,794) 30,133 Provision (benefit) for income taxes (10,336) 3,419 (5,865) 10,637 INCOME (LOSS) FROM CONTINUING OPERATIONS (18,417) 6,664 (9,929) 19,496 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- (5,098) -- (6,917) NET INCOME (LOSS) $(18,417) $1,566 $(9,929) $12,579 EARNINGS (LOSS) PER SHARE Continuing operations $(0.65) $.23 $(0.35) $.68 Discontinued operations -- (.18) -- (.24) Total $(0.65) $.05 $(0.35) $. 44 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000's) 28,548 28,504 28,537 28,490 NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) October 31, January 31, 1997 1997 ASSETS (Unaudited) Cash and cash equivalents $1,791 $1,756 Installments notes receivable, net 292,145 316,048 Property and equipment, net of accumulated depreciation of $7,029 and $6,264, respectively 8,757 9,224 Other assets 12,209 11,741 Deferred income taxes 21,553 11,641 Total $336,455 $350,410 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Self-insurance claims $5,305 $13,787 Notes payable 13,835 13,354 Operating debt 78,365 66,846 Income taxes payable 4,406 6,777 Other liabilities 15,325 20,098 Total 117,236 120,862 Commitments and Contingencies -- -- Stockholders' Equity Preferred stock - $.05 par value, authorized 2,000,000 shares, none issued -- -- Common stock - $.05 par value, authorized 40,000,000 shares, issued 29,893,912 and 29,845,673 shares, respectively 1,495 1,492 Additional paid-in capital 166,011 165,605 Retained earnings, including cumulative foreign currency translation loss of $1,398 and $1,070, respectively 63,816 74,073 Treasury stock, at cost, 1,345,968 and 1,298,568 shares, respectively (12,103) (11,622) Total 219,219 229,548 Total $336,455 $350,410 NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES (THOUSANDS OF DOLLARS) (UNAUDITED) INSTALLMENT NOTES RECEIVABLE, NET a.) Period End Balances: October 31, January 31, 1997 1997 Gross installment notes receivable $511,224 $496,947 Unearned income (70,552) (72,475) Dealer holdbacks, net of advances (73,674) (74,967) Allowance for credit losses (74,853) (33,457) Installment notes receivable, net $292,145 $316,048 b.) Changes in Gross Installment Notes Receivable: Three Months Ended Nine Months Ended October 31, October 31, 1997 1996 1997 1996 Balance, beginning of period $514,217 $426,030 $496,947 $354,012 Contracts accepted 74,983 97,779 242,331 274,013 Cash collected (44,302) (44,002) (145,442) (124,192) Charge-offs against: Dealer holdbacks (26,558) (15,895) (64,377) (33,727) Unearned/Allowance (7,116) (4,683) (18,235) (10,877) Balance, end of period $511,224 $459,229 $511,224 $459,229 c.) Dealer Holdbacks, Net of Advances: October 31, January 31, 1997 1997 Dealers holdbacks $406,167 $392,733 Advances (332,493) (317,766) Dealer holdbacks, net of advances $73,674 $74,967 d.) Changes in Allowance for Credit Losses: Three Months Ended Nine Months Ended October 31, October 31, 1997 1996 1997 1996 Balance, beginning of period $44,327 $28,078 $33,457 $23,284 Advance reserve fees 5,524 1,356 12,178 2,691 Provision for credit losses 41,741 2,642 57,555 7,031 Net charge-offs and other (16,739) (2,055) (28,337) (2,985) Balance, end of period $74,853 $30,021 $74,853 $30,021 SOURCE National Auto Credit, Inc.