On August 8, 1997, the Company relocated its principal executive offices from 215 Central NW to 600 Central SW, Albuquerque, New Mexico. At March 31, 1998, this space was being leased on a month-to-month basis. The Company believes that these arrangements are adequate to meet its needs.
The following selected financial data of the Company for the fiscal years ended March 31, 1998, 1997, 1996, 1995, and 1994, has been derived from the Company's audited consolidated financial statements and should be read in conjunction with the consolidated financial statements and the notes thereto. The Company actively pursued the Policies (viatical settlements) business from April 1991 to September 1994. In May 1994, it commenced its Installment Contract Receivables (consumer car loans) business and in December 1995 ceased to purchase Installment Contract Receivables. The Inventory Assistance Program was started in March 1995 and sold in September 1996. The Company has since been engaged in no active business other than to collect the remaining Installment Contract Receivables and the Policies. Accordingly, results of operations are not indicative of future results (see "Management's Discussion and Analysis of Financial Condition and Results of Operations").
The Company commenced its Inventory Assistance Program in March 1995. IAP was unprofitable and was sold on September 18, 1996. Accordingly, for the fiscal years ended March 31, 1997, and 1996, net assets of IAP are included in the Company's financial statements as "Net assets of discontinued operations," and IAP net operating losses are included as "Discontinued operations-loss from operations of discontinued subsidiary," net of applicable income tax.
Fiscal year ended March 31, 1998, compared to fiscal year ended March 31, 1997
While the net loss for the year ended March 31, 1998, was approximately $5.5 million, this loss included a voluntary, non-cash conversion charge of approximately $6.3 million related to the retirement of certain outstanding Debentures. Excluding the Exchange Offer transaction, the Company's earnings were positive (which, as shown in the "Selected Financial Data" herein, is a result which has not been attained in the prior four years). Furthermore, the Exchange Offer incurring the $6.3 million charge resulted in the retirement of $8.3 million in debt, with no cash outlay by the Company, and further resulted in the improvement of the Company's equity by approximately $8 million.
Revenues on the consumer loan portfolio from Installment Contract Receivables (consumer used-car loans) were approximately $0.6 million for the fiscal year ended March 31, 1998, which represented a $1.1 million decrease compared to the $1.7 million realized for the fiscal year ended March 31, 1997. This decrease resulted from the reduced size of the Company's loan portfolio; the Company ceased purchasing consumer loans in December 1995. The principal repayment portion of the loans is not reflected in gross revenues. Future revenue from the remaining portfolio of used-car loans will be substantially less than that realized in the 1998 fiscal year.
During the year ended March 31, 1998, the Company's operating loss was $1.5 million, compared to an operating loss of $7.4 million during the year ended March 31, 1997. The $5.9 million decrease in operating loss was primarily attributable to the developments described above, including the reduction in general and administrative expense of $3.8 million and the reduction of $3.6 million in credit loss provisions, partially offset by net revenues decline of $1.5 million, yielding a net improvement of $5.9 million.
Interest expense related to the outstanding Debentures was $0.9 million for the 1998 fiscal year, as compared to $2.2 million for the prior year, resulting in a $1.3 million improvement.
In connection with Debentures repurchased during the year ended March 31, 1998, the Company realized a $3.2 million gain on early extinguishment of debt.
Net loss for the year ended March 31, 1998, was $5.5 million, or $0.91 per share, as compared to a loss of $11.5 million, or $2.49 per share, for the same period last year. This $6.0 million improvement was due to the factors discussed above, including a $3.8 million decrease in general and administrative expenses, a $3.6 million decrease in provision for credit losses, an improvement of $3.2 million due to early extinguishment of debt, a $1.2 million decrease in accrued interest expense, and a $2.3 million decrease in write-offs related to the consumer car loan and viatical settlements businesses, all of which was partially offset by a $1.5 million decrease in net revenues and a $6.3 million non-cash charge for the Exchange Offer.
Revenues on the consumer loan portfolio from Installment Contract Receivables (consumer used-car loans) were $1.7 million for the fiscal year ended March 31, 1997, which represented a $6.1 million decrease compared to the $7.8 million realized for the fiscal year ended March 31, 1996. This decrease resulted from the reduced size of the Company's loan portfolio; the Company ceased purchasing consumer loans in December 1995. The principal repayment portion of the loans is not reflected in gross revenues.
Net viatical revenues from the Policies were $0.4 million for the year ended March 31, 1997, which represented a $0.1 million decrease compared to the $0.5 million realized for the fiscal year ended March 31, 1996. The decrease in viatical revenues from the Policies resulted from the reduced size of the Company's viatical policy portfolio. The Company generally ceased to purchase Policies after September 1994 and, in May and July 1995, sold most of its portfolio to Viaticus, Inc., for $17.5 million (which represented 225 policies). During the year ended March 31, 1997, the aggregate book value of the Policies had been written down by $0.9 million to estimated current fair market value.
The Company's portfolio of Installment Contract Receivables at March 31, 1998, was $0.5 million (excluding contracts for which there has been a repossession of underlying collateral or a charge-off) before the impact of reserves, and consisted of 178 active used-car loans. The Company ceased purchasing Installment Contracts in December 1995.
Cash used in investing activities for the fiscal year ended March 31, 1998, was $5.2 million, which was primarily the result of funding the $2.0 million escrow deposit account in connection with the NPD transaction for the ITB Shares, and the loan to NPD for $3.0 million. For the fiscal year ended March 31, 1997, cash provided from investing activities was a positive $6.3 million, primarily due to the sale of IAP and the resultant conversion of its receivables to cash.
Cash used in financing activities during the fiscal year ended March 31, 1998, was $5.7 million and was the result of the repurchase of Debentures. There was no cash flow from financing activities for the fiscal year ended March 31, 1997.
Statement of Financial Accounting Standards No. 131, Disclosure about Segments of a Business Enterprise ("SFAS 131"), establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.