Exhibit 99.1
News for Immediate Release
Contact: Gary Santo
Investor Relations
First Marblehead
800 Boylston Street, 34th FL
Boston, MA 02199
617.638.2065
FIRST MARBLEHEAD ANNOUNCES THIRD QUARTER FINANCIAL RESULTS
Year-to-date Monogram® loan originations total $53 million; Deconsolidation of GATE Trusts and sale of trust administration business result in gains of $23.4 million
BOSTON, MA — 05/02/12 — The First Marblehead Corporation (NYSE: FMD) today announced its financial and operating results for the third quarter of fiscal 2012 and the nine month period ended March 31, 2012. Results for the quarter reflect the sale of the Company’s legacy trust administrator, First Marblehead Data Services, Inc. (FMDS) on March 2, 2012 for $13.7 million in cash as well as the deconsolidation of the GATE Trusts effective March 30, 2012. The deconsolidation of the GATE Trusts completes the removal of the variable interest entities originally consolidated by the Company upon the adoption of ASU 2009-17 on July 1, 2010.
For the third quarter of fiscal 2012, the Company recorded net income of $9.9 million, or $0.09 per common share on a fully diluted basis, compared to a net loss for the third quarter of fiscal 2011 of $39.3 million, or ($0.39) per fully diluted share. The improvement in earnings of $49.2 million was largely driven by a $26.4 million decrease in the loss from operations combined with an increase of $23.4 million in other income. The lower overall loss from operations was principally due to the exclusion of the deconsolidated NCSLT Trusts for the third quarter of fiscal 2012, which had the impact of increasing net interest income after provision for loan losses by $11.3 million and decreasing general and administrative expenses by $9.1 million. The increase of $23.4 million in other income was due to the $12.5 million gain from the sale of FMDS and a $10.9 million non-cash gain from the deconsolidation of the GATE Trusts.
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For the nine months ended March 31, 2012, the Company reported net income of $1.12 billion, or $10.10 per common share on a fully diluted basis, compared to a net loss of $137.7 million, or ($1.37) per fully diluted share, for the nine months ended March 31, 2011. The net income of $1.12 billion for the nine months ended March 31, 2012 includes $1.25 billion in non-cash gains as a result of the deconsolidations of the NCSLT Trusts and the GATE Trusts.
”During the quarter, we continued to originate high quality student loans and achieved remarkable results from our school sales team. These efforts support our brand investment and position us well for the upcoming peak lending season,” said Daniel Meyers, Chairman and Chief Executive Officer. “We believe the positive results at Union Federal and TMS coupled with the execution of various expense reduction initiatives demonstrates our continued progress towards a return to profitability,” added Mr. Meyers.
The Company presents two distinct reporting segments: Education Financing and Securitization Trusts. The Education Financing segment includes the services the Company performs in designing, implementing, and originating various private education loan programs as well as other services, including tuition payment processing, portfolio management, and retail banking.
Education Financing Segment Results
The net income (loss) for the Education Financing segment for the three months ended March 31, 2012 improved by $43.4 million to $1.7 million, or $0.02 per fully diluted common share, from ($41.7) million, or ($0.41) per fully diluted share, for the three months ended March 31, 2011. The improvement over the third quarter 2011 was principally due to an increase of $29.8 million in revenues primarily as a result of recording a non-cash loss on the valuation of the Company’s service revenue receivables of $26.4 million for the quarter ended March 31, 2011 and an increase of $12.5 million in other income for the gain on the sale of FMDS.
The net loss for the Education Financing segment for the nine months ended March 31, 2012 improved by $41.9 million to $20.0 million, or ($0.18) per fully diluted share, from $61.9 million, or ($0.61) per fully diluted share, for the nine months ended March 31, 2011. The
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improvement was principally a result of a $21.0 million decrease in non-cash losses recorded on the valuation of the Company’s service revenue receivables compared to the prior year’s nine month period, an increase in other income of $5.9 million primarily resulting from the gain on the sale of FMDS, and a higher income tax benefit of $12.8 million as a result of the Massachusetts Appellate Tax Board’s decision in the prior quarter.
During the first nine months of the fiscal year, the Company has booked approximately $53 million in Monogram-based loans, including approximately $33 million on behalf of Union Federal Savings Bank.
Securitization Trusts Segment Results
Effective March 30, 2012, the Company was no longer considered the primary beneficiary of the three GATE Trusts, and as a result, deconsolidated those trusts. As such, the Company deconsolidated $258.4 million of assets and $260.1 million of liabilities and recognized a non-cash gain of $1.7 million in the Securitization Trust segment. Effective March 30, 2012, the Company has deconsolidated all of the securitization trusts previously required to be consolidated and does not expect to utilize the Securitization Trusts segment on a prospective basis.
Net income was $2.3 million for each of the three month periods ended March 31, 2012 and 2011. The net income (loss) for the nine months ended March 31, 2012 and 2011 were $1.13 billion, or $10.23 per fully diluted common share, and ($75.4) million, or ($0.75) per fully diluted share, respectively. The improvement in the loss was attributable to the $1.24 billion non-cash gain recorded upon the deconsolidation of the NCSLT Trusts.
Company Liquidity
As of March 31, 2012, the Company had $210.5 million in cash, cash equivalents and short-term investments compared to $267.4 million at June 30, 2011. The decrease of $56.9 million resulted primarily from the purchases of $62.6 million in mortgage-backed securities, the funding of $31.7 million of Monogram-based loans at Union Federal, and $41.6 million used to
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fund operations, which were partially offset by $26.7 million in proceeds from the sales of certain service revenue receivables and FMDS, and $53.3 million in deposit growth at Union Federal, including $40.0 million from TMS.
Net operating cash usage* was $12.5 million for the quarter ended March 31, 2012, down from the prior quarter’s $13.4 million.
| * | See below under the heading “Use of Non-GAAP Financial Measures.” |
Quarterly Conference Call
First Marblehead will host a conference call on May 2, 2012 at 5:00 p.m. Eastern time to discuss its operating results. Investors and other interested parties are invited to listen to the conference call via a simultaneous internet broadcast on the Company’s website at www.firstmarblehead.com, under For Investors, or by dialing (866) 783-2144 in the United States or (857) 350-1603 from abroad and entering the pass code 56535383.
A replay will be available approximately two hours after completion of the call on First Marblehead’s website or by dialing (888) 286-8010 from the U.S. or (617) 801-6888 from abroad, and entering the pass code 77852372. The replay will be available for two weeks.
About The First Marblehead CorporationFirst Marblehead helps meet the need for education financing by offering national and regional financial institutions and educational institutions the Monogram® platform, an integrated suite of design, implementation and credit risk management services for private label, customizable private education loan programs. For more information, please seewww.firstmarblehead.com. First Marblehead supports responsible lending and is a strong proponent of the smart borrowing principle, which encourages students to access scholarships, grants and federally-guaranteed loans before considering private education loans; please seewww.SmartBorrowing.org. Through its subsidiary, Union Federal Savings Bank, First Marblehead offers private education loans, residential and commercial mortgage loans, and retail savings, money market and time deposit products. For more information, please seewww.unionfsb.com. First Marblehead also offers outsourced tuition planning, billing, payment technology services, and refund management services through its subsidiary Tuition Management Systems LLC. For more information, please seewww.afford.com.
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Statements in this press release, including the financial tables, regarding First Marblehead’s future financial and operating results and liquidity, including the characteristics, pricing or performance of future Monogram-based private education loan portfolios, as well as any other statements that are not purely historical, constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon our historical performance, the historical performance of certain of the securitization trusts that we have facilitated (the “GATE Trusts”) and on our plans, estimates and expectations as of May 2, 2012. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future results, plans, estimates, intentions or expectations expressed or implied by us will be achieved. You are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause our actual financial or operating results, including the performance of the GATE Trusts and resulting cash flows, facilitated loan volumes and resulting cash flows or financing-related revenues, or the timing of events, to be materially different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: market acceptance of, and demand for, our Monogram platform and fee-based service offerings, including our success in negotiating loan program agreements with additional clients; the successful sales and marketing of Monogram-based loan offerings, including the volume of loan applications and the extent to which loan applications ultimately result in disbursed loans; the volume, timing and performance of disbursed loans; the size and structure of any credit enhancement provided by First Marblehead in connection with the Monogram platform; our success in designing, implementing and commercializing private education loan programs through Union Federal Savings Bank, including receipt of and compliance with regulatory approvals and conditions with respect to such programs; capital markets conditions and our ability to structure securitizations or alternative financings; the size, structure and timing of any such securitizations or alternative financings; any investigation, audit, claim, regulatory action or suit relating to the transfer of the trust certificate of NC Residuals Owners Trust or the asset services agreement between the purchaser and First Marblehead, including any challenge to tax refunds previously received as a result of the audit being conducted by the Internal Revenue Service; resolution of litigation and regulatory proceedings pertaining to our Massachusetts state income tax returns; the estimates and assumptions we make in preparing our financial statements, including quantitative and qualitative factors used to calculate our allowance for loan losses and related provision and the estimate of the fair value of service revenue receivables; and the other factors set forth under the caption “Part II– Item 1A. Risk Factors” in First Marblehead’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on February 9, 2012. Important factors that could cause or contribute to future adjustments to the estimates and assumptions we make in preparing our financial statements include: actual transactions or market observations relating to asset-backed securities, loan portfolios or corporate debt securities; variance between our performance assumptions and the actual performance of the loan portfolios held by the GATE Trusts, Union Federal or First Marblehead’s clients (the “Portfolios”); economic, legislative, regulatory, competitive and other factors affecting discount, default, recovery and prepayment rates on the Portfolios, including general economic conditions, the consumer credit environment and unemployment rates; management’s determination of which qualitative and quantitative factors should be weighed in our estimates, and the weight to be given to such factors; capital markets receptivity to securities backed by private education loans; and interest rate trends. We specifically disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release, even if our estimates change, and you should not rely on those statements as representing our views as of any date subsequent to the date of this press release.
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| | | The First Marblehead Corporation and Subsidiaries
Consolidated Statements of Operations By Reporting Segment
For the Three Months Ended March 31, 2012 and 2011
(Unaudited)
(dollars and shares in thousands, except per share amounts) | |
| | | 2012 | | | 2011 | |
| | | Education
Financing | | | Securitization
Trusts | | | Eliminations | | | Total | | | Education
Financing | | | Securitization
Trusts | | | Eliminations | | | Total | |
| |
Revenues: | | | | |
Net interest income | | | 741 | | | | 1,940 | | | | — | | | | 2,681 | | | | 351 | | | | 64,442 | | | | 9 | | | | 64,802 | |
Provision for loan losses | | | 222 | | | | (303 | ) | | | — | | | | (81 | ) | | | (10 | ) | | | (73,745 | ) | | | — | | | | (73,755 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (loss) after provision for loan losses | | | 963 | | | | 1,637 | | | | — | | | | 2,600 | | | | 341 | | | | (9,303 | ) | | | 9 | | | | (8,953 | ) |
Non-interest revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tuition payment processing fees | | | 7,697 | | | | — | | | | — | | | | 7,697 | | | | 7,055 | | | | — | | | | — | | | | 7,055 | |
Additional structural advisory fees, asset servicing fees and residuals trust updates | | | 2,454 | | | | — | | | | (4,043 | ) | | | (1,589 | ) | | | (26,372 | ) | | | — | | | | 21,646 | | | | (4,726 | ) |
Other administrative fees | | | 4,072 | | | | 7 | | | | (117 | ) | | | 3,962 | | | | 4,359 | | | | 1,818 | | | | (2,368 | ) | | | 3,809 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total non-interest revenues | | | 14,223 | | | | 7 | | | | (4,160 | ) | | | 10,070 | | | | (14,958 | ) | | | 1,818 | | | | 19,278 | | | | 6,138 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 15,186 | | | | 1,644 | | | | (4,160 | ) | | | 12,670 | | | | (14,617 | ) | | | (7,485 | ) | | | 19,287 | | | | (2,815 | ) |
Non-interest expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 11,645 | | | | — | | | | — | | | | 11,645 | | | | 11,615 | | | | — | | | | — | | | | 11,615 | |
General and administrative | | | 13,864 | | | | 1,078 | | | | (855 | ) | | | 14,087 | | | | 15,563 | | | | (9,724 | ) | | | 19,157 | | | | 24,996 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total non-interest expenses | | | 25,509 | | | | 1,078 | | | | (855 | ) | | | 25,732 | | | | 27,178 | | | | (9,724 | ) | | | 19,157 | | | | 36,611 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from operations | | | (10,323 | ) | | | 566 | | | | (3,305 | ) | | | (13,062 | ) | | | (41,795 | ) | | | 2,239 | | | | 130 | | | | (39,426 | ) |
Other income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gain from deconsolidations of trusts | | | — | | | | 1,709 | | | | 9,156 | | | | 10,865 | | | | — | | | | — | | | | — | | | | — | |
Gain on sale of trust administrator | | | 12,571 | | | | — | | | | — | | | | 12,571 | | | | — | | | | — | | | | — | | | | — | |
Proceeds from TERI settlement | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18 | | | | — | | | | 18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total other income | | | 12,571 | | | | 1,709 | | | | 9,156 | | | | 23,436 | | | | — | | | | 18 | | | | — | | | | 18 | |
Income (loss) before income taxes | | | 2,248 | | | | 2,275 | | | | 5,851 | | | | 10,374 | | | | (41,795 | ) | | | 2,257 | | | | 130 | | | | (39,408 | ) |
Income tax expense (benefit) | | | 516 | | | | — | | | | — | | | | 516 | | | | (82 | ) | | | — | | | | — | | | | (82 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 1,732 | | | $ | 2,275 | | | $ | 5,851 | | | $ | 9,858 | | | $ | (41,713 | ) | | $ | 2,257 | | | $ | 130 | | | $ | (39,326 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.02 | | | $ | 0.02 | | | $ | 0.05 | | | $ | 0.09 | | | $ | (0.41 | ) | | $ | 0.02 | | | $ | — | | | $ | (0.39 | ) |
Diluted | | | 0.02 | | | | 0.02 | | | | 0.05 | | | | 0.09 | | | | (0.41 | ) | | | 0.02 | | | | — | | | | (0.39 | ) |
Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | | | | | | | | | | | | | 101,554 | | | | | | | | | | | | | | | | 100,834 | |
Diluted | | | | | | | | | | | | | | | 110,573 | | | | | | | | | | | | | | | | 100,834 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | The First Marblehead Corporation and Subsidiaries
Consolidated Statements of Operations By Reporting Segment
For the Nine Months Ended March 31, 2012 and 2011
(Unaudited)
(dollars and shares in thousands, except per share amounts) | |
| | | 2012 | | | 2011 | |
| | | Education
Financing | | | Securitization
Trusts | | | Eliminations | | | Total | | | Education
Financing | | | Securitization
Trusts | | | Eliminations | | | Total | |
| |
Revenues: | | | | |
| | | | | | | | |
Net interest income | | | 1,551 | | | | 92,019 | | | | 18 | | | | 93,588 | | | | 655 | | | | 202,372 | | | | 29 | | | | 203,056 | |
Provision for loan losses | | | 476 | | | | (189,232 | ) | | | — | | | | (188,756 | ) | | | (277 | ) | | | (305,679 | ) | | | — | | | | (305,956 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (loss) after provision for loan losses | | | 2,027 | | | | (97,213 | ) | | | 18 | | | | (95,168 | ) | | | 378 | | | | (103,307 | ) | | | 29 | | | | (102,900 | ) |
Non-interest revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tuition payment processing fees | | | 22,172 | | | | — | | | | — | | | | 22,172 | | | | 7,055 | | | | — | | | | — | | | | 7,055 | |
Additional structural advisory fees, asset servicing fees and residuals trust updates | | | 202 | | | | — | | | | (4,956 | ) | | | (4,754 | ) | | | (20,890 | ) | | | — | | | | 16,552 | | | | (4,338 | ) |
Other administrative fees | | | 11,373 | | | | 578 | | | | (3,436 | ) | | | 8,515 | | | | 13,144 | | | | 2,393 | | | | (7,478 | ) | | | 8,059 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total non-interest revenues | | | 33,747 | | | | 578 | | | | (8,392 | ) | | | 25,933 | | | | (691 | ) | | | 2,393 | | | | 9,074 | | | | 10,776 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 35,774 | | | | (96,635 | ) | | | (8,374 | ) | | | (69,235 | ) | | | (313 | ) | | | (100,914 | ) | | | 9,103 | | | | (92,124 | ) |
Non-interest expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 33,321 | | | | — | | | | — | | | | 33,321 | | | | 27,640 | | | | — | | | | — | | | | 27,640 | |
General and administrative | | | 47,275 | | | | 19,092 | | | | (4,757 | ) | | | 61,610 | | | | 40,088 | | | | 17,083 | | | | 9,538 | | | | 66,709 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total non-interest expenses | | | 80,596 | | | | 19,092 | | | | (4,757 | ) | | | 94,931 | | | | 67,728 | | | | 17,083 | | | | 9,538 | | | | 94,349 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from operations | | | (44,822 | ) | | | (115,727 | ) | | | (3,617 | ) | | | (164,166 | ) | | | (68,041 | ) | | | (117,997 | ) | | | (435 | ) | | | (186,473 | ) |
Other income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gain from deconsolidations of trusts | | | — | | | | 1,239,068 | | | | 9,514 | | | | 1,248,582 | | | | — | | | | — | | | | — | | | | — | |
Gain on sale of trust administrator | | | 12,571 | | | | — | | | | — | | | | 12,571 | | | | — | | | | — | | | | — | | | | — | |
Proceeds from TERI settlement | | | 1,405 | | | | 6,885 | | | | — | | | | 8,290 | | | | 8,112 | | | | 42,587 | | | | — | | | | 50,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total other income | | | 13,976 | | | | 1,245,953 | | | | 9,514 | | | | 1,269,443 | | | | 8,112 | | | | 42,587 | | | | — | | | | 50,699 | |
Income (loss) before income taxes | | | (30,846 | ) | | | 1,130,226 | | | | 5,897 | | | | 1,105,277 | | | | (59,929 | ) | | | (75,410 | ) | | | (435 | ) | | | (135,774 | ) |
Income tax expense (benefit) | | | (10,891 | ) | | | — | | | | — | | | | (10,891 | ) | | | 1,957 | | | | — | | | | — | | | | 1,957 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (19,955 | ) | | $ | 1,130,226 | | | $ | 5,897 | | | $ | 1,116,168 | | | $ | (61,886 | ) | | $ | (75,410 | ) | | $ | (435 | ) | | $ | (137,731 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | (0.18 | ) | | $ | 10.25 | | | $ | 0.05 | | | $ | 10.12 | | | $ | (0.61 | ) | | $ | (0.75 | ) | | $ | (0.01 | ) | | $ | (1.37 | ) |
Diluted | | | (0.18 | ) | | | 10.23 | | | | 0.05 | | | | 10.10 | | | | (0.61 | ) | | | (0.75 | ) | | | (0.01 | ) | | | (1.37 | ) |
Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | | | | | | | | | | | | | 101,459 | | | | | | | | | | | | | | | | 100,809 | |
Diluted | | | | | | | | | | | | | | | 110,499 | | | | | | | | | | | | | | | | 100,809 | |
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The First Marblehead Corporation and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2012 and June 30, 2011
(Unaudited)
(Dollars in thousands)
| | | | | | | | |
| | | March 31,
2012 | | | June 30,
2011 | |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 140,525 | | | $ | 217,367 | |
Short-term investments, at cost | | | 70,000 | | | | 50,000 | |
Restricted cash and investments, at cost | | | 45,955 | | | | 252,396 | |
Investments available for sale, at fair value | | | 70,841 | | | | 11,019 | |
Education loans held to maturity, net of allowance of $1,276 and $450,150 | | | 31,054 | | | | 6,946,169 | |
Mortgage loans held to maturity, net of allowance of $814 and $882 | | | 7,955 | | | | 6,417 | |
Interest receivable | | | 621 | | | | 66,104 | |
Deposits for participation interest accounts, at fair value | | | 3,726 | | | | 8,512 | |
Service revenue receivables, at fair value | | | 16,238 | | | | 8,192 | |
Goodwill | | | 19,548 | | | | 19,548 | |
Intangible assets, net | | | 21,454 | | | | 23,040 | |
Other assets | | | 13,370 | | | | 44,018 | |
| | | | | | | | |
Total assets (1) | | $ | 441,287 | | | $ | 7,652,782 | |
| | | | | | | | |
| | |
Liabilities and Stockholders’ Equity (Deficit) | | | | | | | | |
Liabilities: | | | | | | | | |
Deposits | | $ | 73,783 | | | $ | 60,492 | |
Restricted funds due to clients | | | 85,357 | | | | 121,888 | |
Accounts payable, accrued expenses and other liabilities | | | 17,451 | | | | 36,391 | |
Income taxes payable | | | 23,703 | | | | 39,979 | |
Net deferred tax liability | | | 1,039 | | | | 831 | |
Long-term borrowings | | | — | | | | 8,273,140 | |
| | | | | | | | |
Total liabilities (1) | | | 201,333 | | | | 8,532,721 | |
Commitments and contingencies: | | | | | | | | |
Stockholders’ equity (deficit): | | | | | | | | |
Preferred stock, par value $0.01 per share; 20,000 shares authorized; 133 shares issued and outstanding | | | 1 | | | | 1 | |
Common stock, par value $0.01 per share; 250,000 shares authorized; 110,018 and 109,717 shares issued; 101,558 and 101,318 shares outstanding | | | 1,100 | | | | 1,097 | |
Additional paid-in capital | | | 451,689 | | | | 448,088 | |
Accumulated deficit | | | (26,687 | ) | | | (1,142,855 | ) |
Treasury stock, 8,460 and 8,399 shares held, at cost | | | (186,629 | ) | | | (186,551 | ) |
Accumulated other comprehensive income | | | 480 | | | | 281 | |
| | | | | | | | |
Total stockholders’ equity (deficit) | | | 239,954 | | | | (879,939 | ) |
| | | | | | | | |
Total liabilities and stockholders’ equity (deficit) | | $ | 441,287 | | | $ | 7,652,782 | |
| | | | | | | | |
| (1) | Our consolidated assets at June 30, 2011 include total assets of $7,168,168 of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include restricted cash and guaranteed investment contracts of $127,709, education loans held to maturity, net of allowance for loan losses, of $6,946,169, interest receivable of $66,031, and other assets of $28,709. Our consolidated liabilities at June 30, 2011 include liabilities of certain VIEs for which the VIE creditors do not have recourse to FMD. These liabilities include long-term borrowings of $8,273,140 and accounts payable and accrued expenses of $11,682. |
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The First Marblehead Corporation and Subsidiaries
Loan Volume Data
For the Nine Months Ended March 31, 2012
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Booked Loans | | | | |
Applications | | Loan
Application
Volume | | | Booked
Loans | | | Weighted
Average
FICO | | | Weighted
Average
Rate | | | Disbursed
Loans | |
| | | | | |
66,008 | | $ | 654,660,842 | | | $ | 52,889,723 | | | | 759 | | | | 6.55 | % | | $ | 52,255,191 | |
| | | | | | | | | | | | | | | | | | | | |
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on U.S. generally accepted accounting principles (“GAAP”), the Company has included in this press release an additional financial metric that we refer to as “net operating cash usage” and that was not prepared in accordance with GAAP. We define “net operating cash usage” to mean approximate cash required to fund our operations. “Net operating cash usage” is not directly comparable to our consolidated statement of cash flows prepared in accordance with GAAP. Legislative and regulatory guidance discourages the use of, and emphasis on, non-GAAP financial metrics and requires companies to explain why a non-GAAP financial metric is relevant to management and investors.
The Company’s management and its board of directors use this non-GAAP financial metric, in addition to GAAP financial measures, as a basis for measuring and forecasting our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measure is also used by us in our financial and operational decision-making.
We believe that the inclusion of this non-GAAP financial metric helps investors to gain a better understanding of our quarterly and annual results, including our non-interest expenses and quarter-end liquidity position, particularly in light of dislocations in the private education loan industry and the capital markets that have affected us. In addition, our presentation of this non-GAAP financial measure is consistent with how we expect that analysts may calculate their estimates of our financial results in their research reports and with how clients, investors, analysts and financial news media may evaluate our financial results.
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There are limitations associated with reliance on any non-GAAP financial measure because any such measure is specific to our operations and financial performance, which makes comparisons with other companies’ financial results more challenging. Nevertheless, by providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies, while also gaining a better understanding of our operating performance, consistent with management’s evaluation.
“Net operating cash usage” should be considered in addition to, and not as a substitute for, or superior to, financial information prepared in accordance with GAAP. “Net operating cash usage” relates solely to the Education Financing segment, and excludes the effects of income taxes, acquisitions or divestitures, participation interest account net fundings and changes in other assets and other liabilities that are solely related to short-term timing of cash payments or receipts.
In accordance with the requirements of Regulation G promulgated by the Securities and Exchange Commission, the table below presents the most directly comparable GAAP financial measure, income (loss) before income taxes, for the three months and nine months ended March 31, 2012 and 2011 and reconciles the GAAP measure to the comparable non-GAAP financial metric:
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The First Marblehead Corporation and Subsidiaries
Net Operating Cash Usage, a non-GAAP Financial Measure
For the Three and Nine Months Ended March 31, 2012 and 2011
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
March 31, | | | Nine Months Ended
March 31, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (dollars in thousands) | |
Income (loss) before income taxes | | $ | 10,374 | | | $ | (39,408 | ) | | $ | 1,105,277 | | | $ | (135,774 | ) |
(Income) loss and related eliminations attributable to: | | | | | | | | | | | | | | | | |
NCSLT Trusts | | | — | | | | (597 | ) | | | (1,125,036 | ) | | | 80,316 | |
GATE Trusts | | | (2,275 | ) | | | (1,660 | ) | | | (5,190 | ) | | | (4,906 | ) |
Eliminations | | | (5,851 | ) | | | (130 | ) | | | (5,897 | ) | | | 435 | |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes—Education Financing | | | 2,248 | | | | (41,795 | ) | | | (30,846 | ) | | | (59,929 | ) |
Adjustments to income (loss) before income taxes—Education Financing: | | | | | | | | | | | | | | | | |
Trust update (income) losses—additional structural advisory fees and residuals: | | | | | | | | | | | | | | | | |
Securitization Trusts segment | | | (4,043 | ) | | | 21,646 | | | | (4,956 | ) | | | 16,552 | |
Off-balance sheet VIEs | | | 1,589 | | | | (233 | ) | | | 4,486 | | | | 102 | |
Asset servicing fees | | | — | | | | 4,959 | | | | 268 | | | | 4,236 | |
Non-cash gains from TERI settlements | | | — | | | | — | | | | — | | | | (5,021 | ) |
Gain on sale of trust administrator | | | (12,571 | ) | | | — | | | | (12,571 | ) | | | — | |
Depreciation and amortization | | | 1,138 | | | | 2,126 | | | | 3,635 | | | | 6,573 | |
Stock-based compensation expense | | | 1,081 | | | | 1,275 | | | | 3,603 | | | | 3,526 | |
TMS deferred revenue | | | (1,601 | ) | | | 558 | | | | (3,694 | ) | | | 558 | |
Cash receipts from education loans, net of interest income accruals | | | 146 | | | | 118 | | | | 568 | | | | 413 | |
Cash receipts from trust distributions | | | 520 | | | | 32 | | | | 575 | | | | 460 | |
Other | | | (1,031 | ) | | | (1,778 | ) | | | (2,669 | ) | | | (4,511 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP net operating cash usage | | $ | (12,524 | ) | | $ | (13,092 | ) | | $ | (41,601 | ) | | $ | (37,041 | ) |
| | | | | | | | | | | | | | | | |
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