National Auto Credit Announces Financial Results for Fiscal 2001 Q3
18 December 2000
National Auto Credit Announces Financial Results for Fiscal 2001 Third Quarter and Adoption of Five-Year Business Plan
SOLON, Ohio, Dec. 15 National Auto Credit, Inc.
(OTC Bulletin Board: NAKD) today announced financial results for its third
fiscal quarter ended October 31, 2000, first nine months of its fiscal year
2001 ended October 31, 2000 and the adoption of a five-year business plan.
For the three-month period ended October 31, 2000, the Company had net
income of $396,000 or $0.01 per share on the basis of 34,754,000 average
shares outstanding. For the three-month period ended October 31, 1999, the
Company had a net loss of $1,163,000 or $0.04 per share on 28,630,000 average
shares outstanding. The results for the quarter ended October 31, 2000
included $2,875,000 of litigation and other non-recurring charges and a gain
of $2,868,000 from the Company's sale of land and buildings located in Solon,
Ohio which had housed its corporate headquarters (the Company will continue to
occupy a small portion of one of the buildings under a cancelable lease).
Revenues declined from $2,148,000 to $1,407,000 from the prior year's quarter.
Revenues for the quarter ended October 31, 2000 declined due to the sale
of substantially all of the Company's loan portfolio in March 2000. The
decline in interest income from loans was partially offset by interest earned
from the Company's investment of the proceeds of the sales. Costs and
expenses declined as the result of the reduction of the Company's staffing
levels which began in the last quarter of fiscal 2000 and were completed in
the second quarter of fiscal 2001 when the Company completed the sale of its
loans and ceased its loan underwriting, processing and collection activities.
For the nine-month period ended October 31, 2000, the Company had a loss
from continuing operations of $6,525,000 or $0.20 per share and a net loss of
$5,466,000 or $0.17 per share on the basis of 32,623,000 average shares
outstanding. For the prior year nine-month period ended October 31, 1999, the
Company had a net loss of $10,003,000 or $0.35 per share on 28,634,000 average
shares outstanding. The net loss for the nine-month period ended October 31,
2000 included $6,290,000 of litigation and other non-recurring charges and a
gain of $2,868,000 from the sale of the land and buildings located in Solon,
Ohio. The results for the nine months ended October 31, 2000 also includes
losses of $1,709,000 from the loan sales, a charge of $500,000 relating to the
expiration of the Company's option to acquire additional assets from Reading
Entertainment, Inc., and a $874,000 write-down of assets held for sale.
Revenues declined from $6,926,000 to $4,278,000 from the prior year's
comparable nine-month period.
Both revenues and expenses decreased for the nine months ended October 31,
2000 due to the decline in the size of the Company's loan portfolio and the
eventual sale, in March 2000, of substantially all of the Company's loans.
The decline in interest income from loans was partially offset by interest
earned from the Company's investment of the proceeds of the sales.
On November 6, 2000 (during the fourth fiscal quarter 2001 ending
January 31, 2001), the Company announced that it has settled all outstanding
litigation with Samuel J. Frankino and has agreed to repurchase all of the
Company securities held by Mr. Frankino and certain of his related parties.
Certain disputes and differences had arisen between Mr. Frankino and the
Company, which resulted in litigation styled National Auto Credit, Inc. v. Sam
J. Frankino, C.A. No. 17973 and Sam J. Frankino v. David L. Huber, et al.,
C.A. No. 17984, both pending in the Court of Chancery of the State of
Delaware. Pursuant to the settlement reached on November 3, 2000, among other
things, the litigation has been dismissed, the Company has agreed to
repurchase from Mr. Frankino and related parties 15,863,360 Company common
shares for an aggregate purchase price of $35,521,000. In addition, Mr.
Frankino and certain of his related parties have agreed to certain standstill
and related restrictions regarding their future involvement with the Company.
The Company also agreed to reimburse Mr. Frankino for certain legal expenses.
The Company simultaneously repurchased from Reading Entertainment, Inc.
and affiliates (collectively, "Reading") 5,277,879 of the 10,055,000 common
shares owned by Reading and all 100 of the Company preferred shares owned by
Reading for an aggregate purchase price of $8,469,000. Pursuant to the terms
of the agreement, Reading and the Company have agreed to certain standstill
restrictions, voting arrangements, corporate governance and related matters.
As a result of these two stock repurchases, there were 13,611,723 Company
common shares outstanding. The repurchases will result in a charge against
the Company's operating results for the fourth quarter ending January 31, 2001
of approximately $30,000,000.
The Company announced that on November 28, 2000, it received a Final
Judgment and Order in the United States District Court for the Northern
District of Ohio (Eastern Division) approving the settlement of the class
action securities litigation filed against the Company and certain of its
former officers and directors.
As previously announced, the terms of the settlement provided for the
payment by the Company of $6,500,000 to the plaintiffs' class in consideration
for, among other things, the release of all defendants from liability. The
settlement is not an admission of liability by any party.
The Company previously recorded an accrual for the $6,500,000 settlement
in the fourth quarter of fiscal 2000.
The Company today also announced the adoption of a five-year business
plan. The plan calls for the Company to use its liquidity to acquire, merge
with or form other alliances with mature entities which would both increase
the Company's profitability and provide opportunities for additional growth.
The Company will also consider reentering businesses similar or related to
those in which it previously has operated. The Company will refine and
reconsider its plan, and its acquisition strategy, over the five-year period
of the plan.
National Auto Credit, Inc.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
(Unaudited)
October 31, January 31,
2000 2000
ASSETS
Cash and cash equivalents $74,599 $54,333
Marketable securities 8,295 -
Installment loans, net - 29,306
Investment in AFC 9,985 -
Property and equipment, net of accumulated
depreciation of $1,775, and $5,219,
respectively 895 7,677
Assets held for sale 6,138 6,861
Income taxes refundable 3,663 3,664
Other assets 1,217 2,121
TOTAL ASSETS $104,792 $103,962
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Self-insurance claims $1,678 $4,089
Accrued income taxes 2,298 2,926
Other liabilities 12,774 13,068
16,750 20,083
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock - $.05 par value,
authorized 2,000,000 shares, issued 100 and
0 shares, respectively - -
Common stock - $.05 par value authorized 40,000,000
shares, issued 36,710,907 and
29,963,301 shares, respectively 1,836 1,498
Additional paid-in capital 173,073 166,139
Retained deficit (79,972) (69,104)
Accumulated other comprehensive income (57) -
Treasury stock, at cost, 1,957,945 and 4,195,598
shares, respectively (6,838) (14,654)
Total 88,042 83,879
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $104,792 $103,962
National Auto Credit, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
2000 1999 2000 1999
REVENUE
Interest income from loans $ - $1,530 $404 $5,316
Interest income from investments 1,234 576 3,518 1,481
Income from AFC investment 173 - 233 -
Other income - 42 123 129
Total 1,407 2,148 4,278 6,926
COSTS AND EXPENSES
Provision for credit losses (161) (3,000) (1,183) (3,186)
Loss on sale of loans - - 1,709 -
Operating 138 2,621 1,577 8,347
General and administrative 1,410 1,309 3,904 3,902
Litigation and non-recurring
charges 2,875 1,657 6,290 5,642
Gain on sale of property (2,868) - (2,868) -
Cost related to purchase of
shares - 724 - 2,224
Write-down of assets held for
sale - - 874 -
Write-off of option - - 500 -
Total 1,394 3,311 10,803 16,929
INCOME (LOSS) FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES 13 (1,163) (6,525) (10,003)
Provision for income taxes - - - -
INCOME (LOSS) FROM CONTINUING
OPERATIONS 13 (1,163) (6,525) (10,003)
DISCONTINUED OPERATIONS, NET OF TAX 383 - 1,059 -
NET INCOME (LOSS) $396 $(1,163) $(5,466) $(10,003)
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE
Continuing operations $ - $(.04) $(.20) $(.35)
Discontinued operations .01 - .03 -
Net earnings (loss) per
share $.01 $(.04) $(.17) $(.35)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic and diluted 34,754 28,630 32,623 28,634