Monaco Finance Announces Strategic Initiatives
11 September 1998
Monaco Finance Announces Strategic Initiatives to Bolster Company's Expansion
DENVER--Sept. 11, 1998--Pacific USA Holdings Corp. Converts $4.5 Million Monaco Debt To
Equity
Matisse Capital Partners Retained As Strategic Advisor For
Financing And Acquisitions
Monaco Finance, Inc. (Nasdaq National Market: MONFA), a sub-prime automobile lender, announced today strategic initiatives intended to bolster the Company's expansion.
The Company announced that Pacific USA Holdings Corp., Monaco's largest shareholder, converted $4.5 million of its $5 million outstanding loan to Monaco into 4,698,157 shares of the Company's restricted Class A Common Stock at a premium to market, or $0.95 per share, effective July 1, 1998. Pacific USA Holdings Corp. now owns 7,009,309 shares, or 49.9%, of Monaco Common Stock. The Company noted that the remaining $536,750 owed to Pacific is in the form of an unsecured term note which matures December 31, 1998.
Monaco also announced that the Company has retained the services of Matisse Capital Partners, LLC as a strategic adviser, to provide financial advisory services and to assist in capital transactions and acquisitions aimed at enhancing the Company's financial performance.
In addition to the refinancing and the hiring of a strategic adviser, other recent initiatives undertaken by Monaco include the appointment of Joseph A. Cutrona, Jr., Executive Vice President of Pacific USA Holdings Corp., to Chief Executive Officer of Monaco Finance. Mr. Cutrona has over 25 years of experience in consumer finance and capital markets, and will lead the Company as it enhances its position in the sub-prime lending industry.
"My primary focus is to put in place the programs that will allow Monaco to enhance shareholder value and return the Company to profitability," commented Joseph A. Cutrona, Jr., Chief Executive Officer of Monaco Finance. "The auto finance market has changed dramatically over the past few years from both a capital markets and a competitive standpoint. We are now positioned to effect the changes necessary to compete successfully in this rapidly evolving environment."
Cutrona continued, "The debt to equity refinancing with Pacific USA Holdings Corp. had a conversion price significantly higher than market, which underscores Pacific's support of Monaco and the value of Monaco's origination and servicing platform. We have made progress in repositioning Monaco but there are no quick fixes and our strategy will take some time to succeed. While the Company's long-term success is contingent on its ability to access significant capital, the financial support of Pacific and the assistance of Matisse, has positioned Monaco to take the first steps toward achieving a successful turnaround."
Since his appointment Mr. Cutrona has moved quickly to reposition the Company. Initial steps include:
- Extensively reviewing the Company's organizational strengths,
strategic capabilities and strategic needs;
- Establishing a business model with benchmarks to increase
shareholder value;
- Formulating and implementing a capital plan to enhance the
balance sheet and develop additional liquidity;
- Implementing a business development strategy.
Cutrona concluded, "I am very excited about the opportunities that lie ahead for Monaco and the steps we are taking to improve our competitive and financial performance. While we expect these strategic building initiatives to have some impact on Monaco's near term financial results, they are essential to return Monaco to profitability. An integral part of Monaco's repositioning will be to direct our attention to alternative marketing channels. As part of this effort, the Company will be looking for opportunities to consolidate other auto loan companies and assets across the country."
On August 15, 1998, Monaco Finance reported results for the three and six months ended June 30, 1998. For the three-month period, revenues increased 67% to $5.2 million from $3.1 million in the comparable 1997 period. The Company reported a net loss of ($1.3) million, or ($0.14) per share, versus a net loss of ($1.0) million, or ($0.14) per share, in the comparable 1997 quarter. The results for the three months ended June 30, 1998 were affected by a decrease in net interest margin. This decrease was due primarily to lower interest income from loans acquired earlier in 1998 as a result of portfolio repurchase obligations, the reversal in the second quarter of interest income related to the charge off of loans acquired and higher interest expense to debt.
For the six-month period ended June 30, 1998, revenues increased 81% to $11.7 million from $6.5 million in the comparable 1997 period. For the six-month period, net interest margins decreased due to higher interest expense to debt. Net loss for the six-month period was ($1.3) million, or ($0.15) per share, versus ($2.4) million, or ($0.32) per share, in the comparable 1997 six-month period. Management noted that for the three and six-month periods ended June 30, 1998, there were 21% and 24% more weighted shares outstanding, respectively, compared to the 1997 periods.
Monaco Finance, which is based in Denver and operates in 29 states, is one of the nation's most experienced secondary auto finance companies specializing in acquiring, from automobile dealerships, retail installment contracts of purchasers of new and late model automobiles. Monaco has developed sophisticated credit evaluation systems and state-of-the-art loan monitoring programs to provide a solid platform for future growth.
The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward looking statements are reasonable, any of the assumptions could be inaccurate and therefore, there can be no assurance that the forward looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Monaco Finance, Inc.
Financial Highlights
(unaudited)
Condensed Consolidated Balance Sheet
Three Months Ended June 30,
(dollars in thousands) June 30, December 31,
1998 1997
Assets:
Cash and cash equivalents $1,336 $758
Restricted cash 7,467 8,080
Finance receivables - net of
allowance for doubtful accounts
of $11,124 (1998) and $6,850 (1997) 130,538 74,324
Repossessed vehicles held for sale: 5,372 1,738
Deferred income taxes 1,542 1,580
Furniture and equipment, net
of accumulated depreciation of
$2,223 (1998) and $2,095 (1997) 2,542 2,056
Other assets 1,881 2,062
Total assets $150,678 $90,598
Liabilities and Stockholders' Equity:
Accounts payable $2,196 $1,538
Accrued expenses and other liabilities 856 888
Notes payable - LaSalle - 6,376
Warehouse notes payable 100,496 30,000
Heartland promissory note payable - 1,135
Pacific USA Holdings Corp. promissory
note payable 2,500 -
Convertible subordinated debt - 1,385
Senior subordinated debt - Rothschild 1,900 3,333
Senior subordinated debt - Black Diamond 4,865 5,000
Automobile receivables-backed notes 24,279 32,421
Total liabilities 137,092 82,076
Total stockholders' equity 13,586 8,522
Total liabilities and
stockholders' equity $150,678 $90,598
-0-
Monaco Finance, Inc
Financial Highlights
(unaudited)
Consolidated Statements of Operations and Ratios
Three months ended June 30
1998 1997
(dollars in thousands, As a % of As a % of
except per share, and all Avg. Avg.
percentages are annualized) Portfolio Portfolio
$ Bal. $ Bal.
Avg. Interest Bearing
Portfolio Balance $144,228 $76,934
Interest income $5,178 14.4% $3,091 16.1%
Interest expense 2,693 7.5% 1,353 7.0%
Net interest margin 2,485 6.9% 1,738 9.1%
Operating expenses 3,780 10.5% 2,709 14.1%
Provision for
credit losses 9 - 77 0.4%
Other income 8 - - -
Net operating expenses
and other income 3,781 10.5% 2,786 14.5%
Net (loss) (1,296) -3.6% ($1,048) -5.4%
Net (loss) per common
share-basic
and dilutive ($0.14) ($0.14)
Weighted avg. common
shares outstanding 9,308,346 7,724,594
-0-
Monaco Finance, Inc
Financial Highlights
(unaudited)
Consolidated Statements of Operations and Ratios
Six months ended June 30
1998 1997
(dollars in thousands, As a % of As a % of
except per share, and all Avg. Avg.
percentages are annualized) Portfolio Portfolio
$ Bal. $ Bal.
Avg. Interest Bearing
Portfolio Balance $148,000 $78,925
Interest income $11,727 15.9% $6,357 16.1%
Interest expense 5,748 7.8% 2,755 7.0%
Net interest margin 5,979 8.1% 3,602 9.1%
Operating expenses 7,296 9.9% 5,888 14.9%
Provision for
credit losses 26 - 194 0.5%
Other income 9 - 122 -0.3%
Net operating expenses
and other income 7,313 9.9% 5,960 15.1%
Net (loss) ($1,334) -1.8% ($2,358) -6.0%
Net (loss) per common
share-basic
and dilutive ($0.15) ($0.32)
Weighted avg.
common shares
outstanding 9,095,558 7,348,344