-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D6X+2pq2s8iPhjitI4N5agPZkZ1OPzy/FvEPa8KakyIp2OJIxYd3ucbFkN5fxviO UFZDZlXJBjRmf9ZoDOttqA== 0001005477-96-000225.txt : 19960814 0001005477-96-000225.hdr.sgml : 19960814 ACCESSION NUMBER: 0001005477-96-000225 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOINFO INC CENTRAL INDEX KEY: 0000351017 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 132867481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11497 FILM NUMBER: 96609518 BUSINESS ADDRESS: STREET 1: 1600 ROUTE 208 CITY: FAIR LAWN STATE: NJ ZIP: 07410 BUSINESS PHONE: 2017030500 MAIL ADDRESS: STREET 1: 1600 ROUTE 208 CITY: FAIR LAWN STATE: NJ ZIP: 07410 10-Q 1 FORM 10-Q FOR THE 2ND QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 1996 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission File Number: 0-14786 AUTOINFO, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-2867481 - -------------------------------------------------------------------------------- (State or other (I.R.S. Employer jurisdiction of incorporation Identification number) or organization) 1600 Route 208, Fair Lawn, New Jersey 07410 - -------------------------------------------------------------------------------- (Address of principal executive office) (201) 703-0500 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Number of shares outstanding of the registrant's common stock as of August 12, 1996: 7,954,752 shares of common stock, $.01 par value. 1 AUTOINFO, INC. AND SUBSIDIARIES INDEX Part I. Financial Information: Item 1. Financial Statements: Page Condensed Balance Sheet - June 30, 1996 and December 31, 1995......................... 3 Condensed Statements of Operations - Three and six months ended June 30, 1996 and and May 31, 1995............................................ 4 Condensed Statement of Changes in Financial Position - Six months ended June 30, 1996 and May 31, 1995............. 5 Notes to Unaudited Condensed Financial Statements........... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 9 Part II. Other Information 12 Signatures ............................................................. 13 Exhibit 11 ............................................................. 14 2 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, 1996 1995 ------------ ------------ Unaudited ASSETS Cash $ 1,588,461 $ 964,842 Short-term investments 10,100,984 23,906,459 Installment contracts receivable, net 39,084,061 25,073,858 Fixed assets, net 1,184,027 256,269 Goodwill and other intangibles, net 16,114,824 14,302,274 Other assets 2,399,413 1,291,674 ------------ ------------ $ 70,471,770 $ 65,795,376 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Revolving line of credit $ 26,279,025 $ 20,679,024 Subordinated notes and other debt 10,218,113 12,067,166 Accounts payable and accrued liabilities 922,514 1,462,555 Income taxes payable 779,154 568,278 ------------ ------------ Total liabilities 38,198,806 34,777,023 ------------ ------------ Stockholders' Equity: Common stock - authorized 20,000,000 shares $.01 par value; issued and outstanding - 7,954,752 as of June 30, 1996 and 7,772,752 as of December 31, 1995 79,548 77,778 Additional paid-in capital 18,171,282 17,782,677 Officer note receivable (466,797) (466,797) Deferred compensation under stock bonus plan (395,012) (404,092) Retained earnings 14,883,943 14,028,787 ------------ ------------ Total stockholders' equity 32,272,964 31,018,353 ------------ ------------ $ 70,471,770 $ 65,795,376 ============ ============ See notes to condensed unaudited financial statements 3 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, May 31, June 30, May 31, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Revenues Interest and other finance revenue $ 5,188,038 $ -- $ 2,857,467 $ -- Investment income 515,019 357,971 230,613 252,905 Long distance telephone services 280,149 482,594 137,083 197,888 ----------- ----------- ----------- ----------- Total revenues 5,983,206 840,565 3,225,163 450,793 ----------- ----------- ----------- ----------- Costs and expenses: Interest expenses 1,670,531 156,574 848,972 77,915 Operating expenses 2,757,521 2,832,995 1,542,832 2,474,418 Depreciation & amortization 489,123 12,792 252,460 11,709 ----------- ----------- ----------- ----------- Total operating expenses 4,917,175 3,002,361 2,644,264 2,564,042 ----------- ----------- ----------- ----------- Income (loss) from continuing operations 1,066,031 (2,161,796) 580,899 (2,113,249) Income taxes (benefit) 210,876 (223,335) 127,293 (199,203) ----------- ----------- ----------- ----------- Net income (loss) from continuing operations 855,155 (1,938,461) 453,606 (1,914,046) Income from discontinued operations, net -- 9,480,160 -- 9,105,295 ----------- ----------- ----------- ----------- Net Income $ 855,155 $ 7,541,699 $ 453,606 $ 7,191,249 =========== =========== =========== =========== Net Income (loss) per share: Continuing operations $ .11 $ (.26) $ .06 $ (.26) Discontinuing operations -- 1.28 -- 1.23 ----------- ----------- ----------- ----------- Net income per share $ .11 $ 1.02 $ .06 $ .97 =========== =========== =========== =========== Weighted average number of common and common equivalent shares 7,885,487 7,460,196 7,987,088 7,571,812
See notes to condensed unaudited financial statements 4 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, May 31, 1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 855,155 $ 7,541,699 Adjustments to reconcile net income to net cash provided by (used in) operations activities: Depreciation and amortization 489,123 12,792 Amortization of deferred compensation 9,081 9,081 Gain on sale of discontinued operations (16,544,329) Preferred stock investment write-off 1,648,797 Changes in assets and liabilities: Installment contracts receivable (16,010,203) -- Other current assets 152,994 Other assets (1,107,739) 68,287 Income taxes payable 7,131,543 Accounts payable and accrued liabilities (329,166) 629,540 ------------ ------------ Net cash provided by (used in) continuing operations (16,093,749) 650,404 ------------ ------------ Net cash used by discontinued operations and non-cash charges -- (238,087) ------------ ------------ Cash flows from investing activities: Proceeds from the sale of discontinued operations 30,350,000 Officer note receivable (466,797) Capital expenditures (1,229,431) (2,476) Proceeds from redemptions short term investments 21,717,616 -- Purchases of short term investments (7,912,141) (30,759,038) ------------ ------------ Net cash provided (used in) investing activities 12,576,044 (878,311) Cash flows from financing activities: Increase in (reduction of) borrowings 3,750,948 (346,549) Issuance of common stock 390,375 -- Exercise of stock options -- 1,235,895 ------------ ------------ Net cash used for financing activities 4,141,323 889,346 ------------ ------------ Net (decrease) increase in cash 623,618 423,352 Cash at beginning of period 964,842 98,516 ------------ ------------ Cash at end of period $ 1,588,460 $ 521,868 ============ ============
See notes to condensed unaudited financial statements 5 AUTOINFO, INC. AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 - Business and Summary of Significant Accounting Policies Business On December 6, 1995, AutoInfo, Inc. (the "Company"), through a wholly owned subsidiary, acquired the operating assets of FALK Finance Company (FFC), a Norfolk, Virginia based specialized financial services company. As a result of this acquisition, the Company's primary business is to purchase non-prime automobile retail installment contracts from new and used automobile dealers. The Company services these dealers by providing specialized financing programs for buyers who typically have impaired credit histories and are unable to access traditional sources of available consumer credit. During the fiscal year ended May 31,1995 and on July 20, 1995, the Company sold substantially all of its operating assets for $34,100,000 in cash in two separate transactions. As a result, the Company's sole operating business which remained provides long distance telephone communications services. The long distance telephone communication service is marketed to over 1,400 customers through an independent commissioned sales force Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. Installment Contracts Receivable Installment contracts receivable represent retail installment sales contracts purchased from new and used automobile dealers at discounts ranging from 10% to 20%. Allowance for Credit Losses The Company established an allowance for credit losses in the acquired portfolio as of the date of acquisition based upon an evaluation of a number of factors including prior loss experience, contractual delinquencies, the value of underlying collateral and other factors. All discounts on the purchase of installment contracts from dealers are added to the allowance. The allowance is evaluated for adequacy based upon estimated future losses inherent in the existing finance receivable portfolio. A provision for losses, if any, is charged to income in order to maintain the allowance at an adequate level. Revenue Recognition The Company recognizes interest income from installment contracts receivable on the interest method. The accrual of interest income is suspended when a loan is ninety days contractually delinquent. All discounts on the purchase of installment contracts from dealers are held in reserve and are considered to cover future anticipated credit losses. The Company recognizes revenue from long distance telephone communications services as services are rendered. 6 Goodwill and Other Intangibles The excess of cost over the fair value of net assets acquired is allocated to goodwill and other intangibles and is being amortized using the straight-line method over periods of up to twenty years. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company adopted SFAS No.121 to evaluate the carrying amount of goodwill commencing with the period ended December 31, 1995 and no impairment of goodwill existed as of December 31, 1995 or June 30, 1996. Fiscal Year On February 28, 1996, the Company made an election to change its fiscal year-end from May 31 to December 31. The Company believes that this change provides shareholders with information on a basis more comparable to other public entities in the specialized automobile finance industry. The Company will continue to present the most comparable prior year fiscal period, the three and six month periods ended May 31, 1995 for this Form 10-Q Report. Note 2 - General The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1996 and May 31, 1995 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the financial statement and footnotes thereto included in the Company's transition period report on Form 10-K for the seven month period ended December 31, 1995. Note 3 - Marketable Securities Effective June 1, 1994, the Company, as required, adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". This pronouncement establishes the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. This statement supersedes Statement No. 12 "Accounting for Certain Marketable Securities". In connection with the adoption of SFAS No. 115, debt and equity securities used as part of the Company's investment management that may be sold in response to cash needs, changes in interest rates, and other factors have been classified as securities available for sale. Such securities are reported at cost which approximates fair value and have maturities of less than one year and included common stock and bond funds ($3,675,944 as of June 30, 1996 and $3,613,394 as of December 31, 1995), money market instruments ($2,131,236 as of June 30, 1996 and $4,585,558 as of December 31, 1995) and municipal bonds ($4,356,488 as of June 30, 1996 and $15,727,507 as of December 31, 1995). As of June 30, 1996 and December 31, 1995, unrealized gains and losses were not material. Unrealized gains and losses, if material, would be excluded from earnings and reported as a separate component of stockholders' equity. During the six month period ended June 30, 1996, there were no material gains or losses arising from the disposition of marketable securities. Gains and losses on disposition of securities are recognized on the specific identification method in the period in which they occur. 7 Note 4 - Installment Contracts Receivable The following is a summary of Installment contracts receivable as of June 30, 1996 and December 31, 1995: June 30, December 31, 1996 1995 ------------ ------------ Gross installment contracts receivable $ 64,140,379 $ 44,070,860 Less: Unearned finance charges and fees (17,582,558) (12,178,807) Less: Allowance for credit losses (7,473,760) (6,818,195) ------------ ------------ Installment contracts receivable, net $ 39,084,061 $ 25,073,858 ------------ ------------ Note 5 - Adjustment of the Fair Market Value of Assets Acquired In connection with the acquisition of FALK Finance Company in December 1995, the Company allocated a portion of the purchase price to the Allowance for Credit Losses based upon certain estimates. Based upon the completion of the evaluation of the Allowance for Credit Losses, the preliminary allocation of the purchase price has been adjusted to reflect an additional $2,000,000 which has been added to the allowance and the excess cost over the fair market value of net assets acquired (goodwill). 8 AUTOINFO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition And Results of Operations Liquidity and Capital Resources The Company's liquid assets amounted to $10.1 million as of June 30, 1996. The Company has sufficient liquid assets to meet its short and long term capital requirements. The total amount of debt outstanding as of June 30, 1996 was $38.2 million, none of which is due in less than one year. This debt was comprised of subordinated notes of $10.2 million included in the liabilities assumed with the acquisition of FFC in December 1995, and $2 million of subordinated notes issued by the Company in January 1994. The Company retired $1.6 million of subordinated notes during the three months ended March 31, 1996. The Company has adequate resources to meet these obligations. Inflation and changing prices had no material impact on revenues or the results of operations for the six month period ended June 30, 1996. There are no trends or commitments which may have an impact on the Company's liquidity. Installment contracts receivable increased by approximately $16.1 million in the six month period ended June 30, 1996 as a result of an increase in the number of contracts purchased from dealers due to the Company's expanded marketing program. Short term investments decreased by approximately $13.8 million as a direct result of funding the Company's growth in installment contract receivable and the retirement of $1.6 million in subordinated notes. Results of Operations On April 1, 1995, the Company consummated the sale of certain assets, net of certain liabilities, constituting the operating assets of the Orion Network, Compass Network, Checkmate Computer Systems, and Insurance Parts Locator businesses. On July 20, 1995, the Company consummated the sale of the operating assets of its insurance inspection services business. The Results of Operations of these businesses have been classified as discontinued operations. On December 6, 1995, the Company, through a wholly owned subsidiary, acquired the operating assets of FALK Finance Company (FFC), a Norfolk, Virginia based specialized financial services company. As a result of this acquisition, the Company's primary business is to purchase non-prime automobile retail installment contracts from new and used automobile dealers. The Company services these dealers by providing specialized financing programs for buyers who typically have impaired credit histories and are unable to access traditional sources of available consumer credit. On February 28, 1996, the Company made an election to change its fiscal year-end from May 31 to December 31. The Company believes that this change provides shareholders with information on a basis more comparable to other public entities in the specialized automobile finance industry. The Company will continue to present the most comparable prior year fiscal period, the three months ended May 31, 1995 for this Form 10-Q Report. 9 The Company's continuing operations consist of its non-prime automobile finance business and its long distance telephone services business. Except as otherwise noted, the following discussion of the results of operations is with respect to the Company's continuing operations. Due to this change in both operations and fiscal periods, the following discussion and analysis focuses on the current quarter ended June 30, 1996. Three and Six Months Ended June 30, 1996 Revenues Revenues for the three and six month periods ended June 30, 1996 were derived from the non-prime automobile finance business ($2,857,000 and $5,188,000, respectively), the long-distance telephone service business ($137,000 and $280,000, respectively) and investment income ($231,000 and $515,000, respectively). Net Interest Income on Automobile Installment Contracts Receivable The Company's principal revenue source is the net interest income, or net spread, earned on its automobile installment contracts receivable. 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 the Company's automobile contracts receivable portfolio for the three and six month periods ended June 30, 1996: Six months ended Three months ended June 30, June 30, 1996 1996 ------------ ------------ Average loans receivable $ 38,071,000 $ 42,089,000 Average loan payable 30,687,000 31,185,000 ------------ ------------ Interest income $ 4,980,000 $ 2,721,000 Interest expense 1,595,000 811,000 ------------ ------------ Net interest expense $ 3,385,000 $ 1,910,000 ------------ ------------ (1) (1) Yield on loans 26.2% 25.9% Cost of funds 10.4% 10.4% ------------ ------------ Net interest spread 15.8% 15.5% ------------ ------------ Net interest margin (2) 17.8% 18.2% ------------ ------------ (1) Percentages are presented on an annualized basis (2) Net interest margin is net interest income divided by average loans outstanding 10 Costs and Expenses Interest expense for the three and six month periods ended June 30, 1996 ($848,000 and $1,671,000, respectively) was primarily related to the debt outstanding under the Company's senior credit facility ($26.3 million as of June 30, 1996) and subordinated notes ($10.2 million as of June 30, 1996). Operating expenses for the three and six month periods ended June 30, 1996 ($1,543,000 and $2,758,000, respectively) consisted primarily of the operating expenses of the non-prime automobile finance business and corporate overhead. Depreciation and amortization expense for the three and six month periods ended June 30, 1996 ($252,000 and $489,000, respectively) consisted primarily of the amortization of goodwill and other intangible assets associated with the acquisition of FFC in December 1995. Income from Operations Income from continuing operations for the three and six month periods ended June 30, 1996 was $581,000 and $1,066,000, respectively. Income taxes were $127,000 and $211,000, respectively, or an effective tax rate of 22% and 20%, respectively, as a result of a portion of the Company's investment income being derived from instruments exempt from federal taxation. Installment contracts receivable The following table provides information regarding the Company's allowance for credit losses as of June 30, 1996: Allowance for credit losses $ 7,474,000 Percentage of outstanding installment contracts 16.1% The following table summarizes the Company's delinquent accounts that are more than 60 days delinquent as of June 30, 1996: Amount %(1) -------------------- 60 to 89 days delinquent $2,176,000 3.5% 90 days or more delinquent 1,151,000 2.0% -------------------- Total delinquent loans $3,327,000 5.5% -------------------- (1) All percentages are gross loans outstanding and are presented on an annualized basis Management has reviewed its past due loans and repossessed collateral as of June 30, 1996 and, in management's opinion, the allowance for credit losses is adequate to absorb losses in the portfolio. 11 AUTOINFO, INC. AND SUBSIDIARIES Part II - OTHER INFORMATION Item 1 - 3: Inapplicable Item 4: Submission of Matters to a Vote of Security Holders None Item 5: Inapplicable Item 6(a): The following exhibits are filed with this report. Exhibit 11 - Calculation of Earnings Per Share. Item 6(b): No reports on Form 8-K were filed by the Registrant during the quarter for which this report is filed. 12 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto authorized. AUTOINFO, INC. (Registrant) /s/ Scott Zecher ----------------------------------- Scott Zecher President & Chief Operating Officer Date: August 12, 1996 /s/ William I. Wunderlich ----------------------------------- William I. Wunderlich Treasurer, Secretary And Principal Financial Officer 13 EX-11 2 CALCULATION OF EARNINGS PER SHARE Exhibit 11 AUTOINFO, INC. AND SUBSIDIARIES Calculation of Earnings Per Share
Six Months Ended Three Months Ended June 30, May 31, June 30, May 31, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Primarily and fully diluted earnings (loss): Earnings (loss) from operations applicable to common stock: From continuing operations $ 855,155 $(1,938,461) $ 453,606 $(1,914,046) From discontinued operations -- 9,480,160 -- 9,105,285 ----------- ----------- ----------- ----------- Net income $ 855,155 $ 7,541,699 $ 453,606 $ 7,191,239 ----------- ----------- ----------- ----------- Shares: Weighted average number of common shares outstanding 7,851,966 7,360,169 7,926,181 7,465,052 Add shares issuable from assumed exercise of options and warrants 33,521 100,027 60,907 106,760 ----------- ----------- ----------- ----------- Weighted average number of common shares as adjusted 7,885,487 7,460,196 7,987,088 7,571,812 ----------- ----------- ----------- ----------- Primary and fully diluted earnings per common share: From continuing operations $ 0.11 $ (0.26) $ 0.06 $ (0.26) From discontinued operations -- 1.28 -- 1.23 ----------- ----------- ----------- ----------- Net income $ 0.11 $ 1.02 $ 0.06 $ 0.97 ----------- ----------- ----------- -----------
EX-27 3 ART. 5 FDS FOR THE SECOND QUARTER 10-Q
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-01-1996 1,588,461 10,100,984 46,558,061 (7,474,000) 0 53,172,919 1,364,557 (180,530) 70,471,770 1,701,668 36,497,138 79,548 0 0 32,193,416 70,471,770 5,983,206 5,983,206 0 4,917,175 0 0 1,670,531 1,066,031 (210,876) 855,155 0 0 0 855,155 0.110 0.110
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