We occupy temporary space in Stamford, CT. on a month to month basis.
The following is a summary of our selected consolidated financial data. Due to the deteriorating environment for non-prime automobile finance companies, beginning in 1997 we, among other actions, restructured operations, sold assets, and reduced costs and, subsequently eventually withdrew from the non-prime automobile finance business. In January 1999, our wholly-owned subsidiary filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code and in February 2000, we filed a disclosure statement and reorganization plan pursuant to Chapter 11 of the United States Bankruptcy Code. Currently, we are in the process of exploring new business opportunities. Accordingly, the following financial data arises from operations all of which have been discontinued and should be read as representing our discontinued operations.
Cautionary statement identifying important factors that could cause our actual results to differ from those projected in forward looking statements.
Pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, readers of this report are advised that this document contains both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of our plans and objectives with respect to business transactions and enhancement of shareholder value, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about our business prospects.
This report also identifies important factors which could cause actual results to differ materially from those indicated by the forward looking statements. These risks and uncertainties include the factors discussed under the heading "Certain Factors That May Affect Future Growth" beginning at page 4 of this report.
During the fourth quarter of 1997, we closed our northeast regional center in Norwalk, Connecticut.
During the fourth quarter of 1998, we sold all remaining repossessed vehicles, closed our Norfolk, Virginia operating facility, further reduced overhead and completed the restructuring of outstanding debt under our warehouse facility and with our subordinated note holders. After the sale of all of our automobile receivables, we owed the warehouse lender approximately $4.5 million which agreed to a reduction of $2.25 million and we paid the remaining balance of approximately $2.3 million in cash. We also granted the warehouse lender a five year warrant to purchase 1,357,467 common shares at $ .03 per share. Further, the holders of our $8.2 million of 12% subordinated notes, due in 1999 and 2000, exchanged such notes for new notes totaling approximately $9.35 million due in 2007 and 2008 (the "New Notes"). The New Notes include the capitalization of interest of approximately $1.15 million through December 31, 1998 to principal. Interest on these new notes is due quarterly at our option at the rate of 10% if paid in cash and 12% if paid in our common shares. In addition, representatives of these note holders have designated three members of our board of directors, one of whom subsequently resigned.
On February 2, 2000, we filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. Certain objections and issues have been raised by the court and other interested parties. These issues will be addressed in an amended disclosure statement that we will file. A hearing to consider our amended disclosure statement and compliance with the disclosure requirements has been scheduled for May 11, 2000. No assurances can be given that our reorganization plan will be confirmed by the court.
Investment income consisting of interest and dividends on short-term investments totaled $96,000 for the year ended December 31, 1999 as compared with $132,000 in the prior year period. The decrease of $36,000 is directly related to the decrease in cash and short-term investments. Interest and other finance revenue of $6,809,000 and long distance telephone services revenue of $63,000 for the year ended December 31, 1998 related to businesses discontinued.
Depreciation and amortization expense totaled $19,000 for the year ended December 31, 1999 as compared with $438,000 in the prior year period. The decrease of $419,000 relates directly to the discontinuance of our non-prime auto finance business as well as other reductions in corporate overhead. During the quarter ended June 30, 1999, we terminated our lease in Montvale, New Jersey and vacated the premises. Accordingly, the remaining net fixed assets were written-off.
Restructuring charges totaling $204,000 relate primarily to the termination of the lease in Montvale, New Jersey and vacating the premises. Accordingly, the remaining net fixed assets were written-off. Restructuring charges of $2,972,000 for the year ended December 31, 1998 related directly to the discontinuance of our non-prime auto finance business.
Investment in and advances to subsidiary of $742,000 represent the write-off of the net liabilities of our non-prime automobile subsidiary as of December 31, 1999. On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code.. The carrying amount of CLC's net liabilities as of December 31, 1998 amounted to $742,000 and was classified as Investment in and advances to subsidiary. At the time of filing, CLC had no assets. As of March 2000, counsel for the Trustee has indicated that no distribution to creditors is contemplated and that the proceedings should be concluded within sixty to ninety days with all liabilities compromised. Accordingly, the investment in and advances to subsidiary has been written off to operations as of December 31, 1999.
Loss on disposition of securities of $46,000 for the year ended December 31, 1999 represents the loss on disposition of securities recognized on the specific identification method in the period in which they occur.
Net loss from discontinued operations totaled ($1,109,000) for the year ended December 31, 1999 as compared with ($9,935,000) in the prior year period. The decrease is related directly to the discontinuance of our non-prime auto finance business offset by the gain on debt extinguishments of $3,689,000 for the year ended December 31, 1998.
Interest expense for the year ended December 31, 1998 was $4,685,000 as compared to $8,146,000 in the prior year. Interest expenses was primarily related to the non-prime automobile financing business and the debt outstanding under our senior credit facilities, securitized notes and subordinated and other debt. The senior credit facility and the securitized notes were repaid during 1998, primarily as a result of the collection of customer accounts in the ordinary course of business and the sale of automobile receivables. The decrease in interest expense of $3,461,000 is directly related to the sale of portfolio assets and the ceasing to operate as a non-prime automobile finance company.
Restructuring charges for the year ended December 31, 1998 consists primarily of costs related to the ceasing to operate as a non-prime automobile finance company. The restructuring charge for the year ended December 31, 1997 of $867,000, which includes severance and other operating costs as well as the write-off of certain assets in its Connecticut operating center, is the result of our decision to consolidate operations in its Norfolk, Virginia operating center during the fourth quarter.
The gain on debt settlement consists of $1,703,000 from the extinguishment of the Company's $2 million of 7.55% subordinated notes, in exchange for two off-balance sheet assets and its long
Our principal revenue source was the net interest income, or net spread, earned on its automobile receivables. This net spread is the differential between interest income received on loans receivable and the interest expense on related loans payable. The following table summarizes the pertinent data on our automobile receivables portfolio as of and for the year ended December 31, 1997:
Yield on loans 19.6% Cost of funds 9.8% ----------- Net interest spread 9.8% -----------
The increase in average loans receivable and average debt and the corresponding increase in interest revenue and interest expense was directly related to the growth in our non-prime automobile business. The decline in yield on loans is the result of the growth of our portfolio in states with lower
interest rate caps as well as the allocation of a portion of unearned future interest to reserves at the date of loan acquisition.
Depreciation and amortization expense for the year ended December 31, 1997 was $708,000 as compared to $1,189,000 in the prior year and was primarily attributable to the amortization of goodwill and other intangible assets associated with the acquisition of FFC in December 1995. The decrease in depreciation and amortization expense of $481,000 is related to the reduction in amortization ($784,000) due to the write off of $11,193,000 of this goodwill as of December 31, 1996 offset by an increase in depreciation ($303,000) related to the expansion of our northeast regional office and relocation of corporate headquarters.
The following table provides information regarding our allowance for credit losses as of December 31, 1997:
------------ Allowance for credit losses $ 19,000,000 Percentage of outstanding automobile receivables 19.5%
The following table summarizes our delinquent accounts that were more than 60 days delinquent as of December 31, 1997:
We have no remaining automobile receivables and has ceased to operate as an automobile finance company. We are in the process of identifying new business opportunities in furtherance of our plan to rebuild the company and create shareholder value. No assurances can be given, however, that we will successfully consummate any transaction, or if consummated, that such transaction will enhance shareholder value. As a result, there is substantial doubt about our ability to continue as a going concern.
During 1998, we ceased to operate as an automobile finance company. On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code.
Accordingly, on February 2, 2000, we filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of our common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. Certain objections and issues have been raised by the court and other interested parties. These issues will be addressed in an amended disclosure statement that we will file. A hearing to consider our amended disclosure statement and compliance with the disclosure requirements has been scheduled for May 11, 2000. No assurances can be given that our reorganization plan will be confirmed by the court. All documents on file in our bankruptcy
proceeding, case no. 00-10368, can be viewed on the Bankruptcy Court's Internet site at: http://ecf.nysb.uscourts.gov/index.html
The foregoing factors raise substantial doubt about our ability to continue as a going concern.
Since our entry into the non-prime automobile industry in December 1995 and until we ceased the operations of our non-prime automobile business during 1998, we funded our operations with payments received from automobile receivables, borrowings under senior credit facilities and the issuance of asset backed secured notes.
1999 1998 ---- ---- Weighted Weighted Average Average Balance Rate Balance Rate ---------------------------------------------- Subordinated debt $9.35 12.0% $9.35 12.0% Other debt $0.05 7.75 $0.65 7.75