Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 15, 2007
Date of Report (Date of earliest event reported)
NOVASTAR FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland 001-13533 74-2830661
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
8140 Ward Parkway, Suite 300, Kansas City, MO 64114
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(Address of principal executive offices)
(Zip Code)
(816) 237-7000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)
Item 2.05 Costs Associated with Exit or Disposal Activities
On August 15, 2007, the Audit Committee of the Board of Directors of the Company
committed to a workforce reduction pursuant to a plan of termination (the
"Plan") as described in paragraph 8 of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 146 Accounting for Costs
Associated with Exit or Disposal Activities (SFAS No. 146), under which material
charges will be incurred under generally accepted accounting principles
applicable to the Company.
The Company is undertaking the Plan to align its organization and costs with an
expected reduction in loan originations. The Plan will result in the elimination
of approximately 500 positions resulting in an approximate 37% reduction in the
Company's overall workforce. Subject to completion of the necessary legal
notices and requirements, implementation of the Plan will begin immediately and
conclude during the fourth quarter of 2007. The actions focus on the Company's
wholesale loan origination group and related functions, including employees at
the Company's headquarters in Kansas City and will lead to closing wholesale
operation centers in California and Ohio. The Company's servicing and portfolio
management organizations are not affected by the reduction.
The Company estimates that the total pre-tax charge to earnings associated with
the Plan will range between $17 million and $21 million consisting of $5 million
to $7 million in cash expenditures relating to severance costs, $2 million to $3
million in cash expenditures relating to contract termination costs and $10
million to $11 million in one-time non-cash charges primarily related to
property, plant and equipment. The Company anticipates that substantially all of
the pre-tax charges to earnings and cash expenditures will be incurred in the
third quarter of 2007; however, some may be incurred in the fourth quarter of
2007.
A copy of the Company's press release announcing the Plan is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
Item 5.02 Departure of Certain Officers
As part of the Plan, David A. Pazgan, Chief Executive Officer of NovaStar
Mortgage, Inc. will leave the Company. The Company's President and Chief
Operating Officer, W. Lance Anderson, will assume Mr. Pazgan's responsibilities
upon Mr. Pazgan's departure. The Company will amend this Form 8-K to report the
actual date of his departure and any amendments to Mr. Pazgan's employment
agreement or other compensatory arrangements executed in connection with his
termination.
References to the registrant's website do not incorporate by reference the
information on the registrant's website into this Current Report and the
registrant disclaims any such incorporation by reference.
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Item 9.01 Financial Statement and Exhibits
(d) Exhibits.
Exhibit No. Document
99.1 Press Release dated August 17, 2007 "NovaStar Financial,
Inc. Announces Reduction in Workforce."
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOVASTAR FINANCIAL, INC.
DATE: August 21, 2007 /s/ Gregory S. Metz
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Gregory S. Metz
Chief Financial Officer
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Index to Exhibits
Exhibit No. Document
99.1 Press Release dated August 17, 2007 "NovaStar Financial,
Inc. Announces Reduction in Workforce."
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