National Auto Credit, Inc. has announced financial results for its third fiscal quarter ended Oct. 31, 2000, first nine months of its fiscal year 2001 ended Oct. 31, 2000, and the adoption of a five-year business plan.
For the three-month period ended Oct. 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 Oct. 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 Oct. 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 Oct. 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 Oct. 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 Oct. 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 Oct. 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 Oct. 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 Nov. 6, 2000 (during the fourth fiscal quarter 2001 ending Jan. 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 Frankino and "certain of his related parties."
"Certain disputes and differences" had arisen between Frankino and the company, which resulted in litigation, 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 Nov. 3, 2000, among other things, the litigation has been dismissed, the Company has agreed to repurchase from Frankino and related parties 15,863,360 Company common shares for an aggregate purchase price of $35,521,000.
In addition, 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 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 Jan. 31, 2001 of approximately $30,000,000.
The company announced that on Nov. 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," National Auto Credit said in a statement.
The company previously recorded an accrual for the $6,500,000 settlement in the fourth quarter of fiscal 2000.
Five-Year Business Plan Announced
National Auto Credit 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," according to a statement. "The company will refine and reconsider its plan, and its acquisition strategy, over the five-year period of the plan," the statement reads.
For further information regarding the plan, see the complete copy of the plan attached as an exhibit to the company's Current Report on Form 8-K filed with the Securities and Exchange Commission on Dec. 15, 2000 or visit the company's Web site at www.nationalautocredit.com.