Exhibit 99(a)
Press Release
Richard F. Latour
President and CEO
Tel: 781-890-0177
Fax: 781-890-1368
MicroFinancial Incorporated Announces Third Quarter 2002 Results
Waltham, MA--October 30, 2002-- MicroFinancial Incorporated (NYSE-MFI), a leader
in Microticket leasing and finance, announced today its financial results for
the third quarter and the nine months ended September 30, 2002.
Third quarter revenue for the period ended September 30, 2002 decreased 22%, or
$8.8 million to $30.5 million compared to $39.3 million last year. Net income
for the third quarter, before an additional provision of $35 million discussed
below, was $1.4 million, or $0.11 per diluted share as compared with $3.6
million or $0.28 per diluted share in the prior year's third quarter. After the
additional provision, earnings were a net loss of $19.6 million, or ($1.53) per
diluted share. Besides the additional provision, the decline in earnings for the
quarter is primarily the result of a 29% reduction in lease and loan revenues to
$12.8 million and a 43% decline in service fee and other revenues to $4.4
million as compared with the third quarter ended September 30, 2001.
Additionally, gross lease investment was down 7.8% or $34.4 million from the
same period last year, caused in part by lower than anticipated lease
origination volumes.
As part of management's ongoing analysis of its portfolio, it has determined
that an additional allowance of $35 million is warranted. This additional
allowance will provide for 104% coverage of our 90-day past due accounts as
compared to previous quarters which had coverage in the 50-60% range. This
provision will reserve against certain dealer receivables, as well as delinquent
portfolio assets. In the past, dealer receivables had been offset, in some
instances, against the funding of new contracts. Since we have temporarily
suspended the funding of new deals we feel that the collection of these
receivables will be more difficult. Although the company will continue to pursue
collections on these accounts, management believes that the cost associated with
the legal enforcement would outweigh the benefits realized.
Total operating expenses for the quarter before the additional provision
remained relatively flat at $28 million compared to the same period in 2001.
Interest expense declined 29% to $2.5 million as a result of lower debt balances
of approximately $9.0 million and lower interest costs of approximately 162
basis points. Selling, General and Administrative expenses decreased $0.6
million to $10.3 million for the third quarter ended September 30, 2002 versus
$10.9 million for the same period last year. The majority of the decreases are
attributable to reductions in personnel related expenses and collection
expenses. The provision for credit losses, before the additional provision,
decreased to $9.7 million for the quarter ended September 30, 2002 from $15.1
million for the same period last year, while net charge offs decreased 17% to
$9.8 million. Past due balances greater than 31 days delinquent at September 30,
2002 increased to 17.2% from 17.0% last quarter.
Revenues for the nine months ended September 30, 2002 decreased 16% to $98.8
million compared to $117.2 million during the same period in fiscal 2001. Net
income for the nine months ending September 30, 2002 was $6.6 million before the
additional provision. Including the additional provision, the net loss for the
nine months ending September was $14.4 million versus net income of $14.2
million for the same period last year. Fully diluted earnings per share for the
nine months was $0.51 before the provision. Including the additional provision,
fully diluted earnings per share for the nine months was a loss of $1.12 versus
a profit of $1.10 for the same period in 2001.
Based upon the results for the third quarter, the company is no longer in
compliance with the terms of its revolving credit facility. Management is in the
process of working with its lenders to receive a waiver for the covenant
violation. Management recently announced that it is in the process of generating
a plan to revise its capital structure, and business and operating strategy in
order to streamline the business during these difficult economic times. The
revolving credit facility was converted to a three-year term loan on September
30, 2002.
MicroFinancial will hold a webcast of its teleconference to discuss the
financial results with the financial community today, October 30, 2002, at 4:30
p.m. Eastern Time. The webcast can be located at www.microfinancial.com under
the investor relations section of the website. A telephone replay will also be
available for six weeks starting one hour after the conclusion of the
teleconference. Interested persons may listen to the playback of the
teleconference by calling the following toll-free number: (877) 289-8525 toll
free or 416-640-1917 for international callers and entering the passcode number
201445.
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 31, September 30,
----------------------------------
2001 2002
---- ----
ASSETS
Net investment in leases and loans:
Receivables due in installments $399,361 $373,756
Estimated residual value 37,114 32,115
Initial direct costs 7,090 5,597
Loans receivable 2,248 1,911
Less:
Advance lease payments and deposits (287) (130)
Unearned income (104,538) (77,900)
Allowance for credit losses (45,026) (75,726)
----------------- ----------------
Net investment in leases and loans $295,962 $259,623
Investment in service contracts 14,126 15,632
Cash and cash equivalents 4,429 9,916
Restricted Cash 16,216 15,362
Property and equipment, net 16,034 11,033
Other assets 14,961 12,643
----------------- ----------------
Total assets $361,728 $324,209
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $203,053 $194,003
Subordinated notes payable 3,262 3,262
Capitalized lease obligations 833 593
Accounts payable 2,517 2,475
Dividends payable 642 641
Other liabilities 6,182 7,166
Income taxes payable 4,211 1,659
Deferred income taxes payable 30,472 20,131
----------------- ----------------
Total liabilities
251,172 229,930
----------------- ----------------
Commitments and contingencies
- -
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at 12/31/01 and 9/30/02
- -
Common stock, $.01 par value; 25,000,000 shares authorized;
13,410,646 shares issued at 12/31/01 and 9/30/02 134 134
Additional paid-in capital 47,723 47,723
Retained earnings 69,110 52,800
Treasury stock (588,700 shares of common stock at 12/31/01,
588,700 shares of common stock at 9/30/02), at cost (6,343) (6,343)
Notes receivable from officers and employees (68) (35)
----------------- ----------------
Total stockholders' equity 110,556 94,279
----------------- ----------------
Total liabilities and stockholders' equity $361,728 $324,209
================= ================
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
For the three months ended For the nine months ended
September 30, September 30,
------------------------------- -------------------------------
2001 2002 2001 2002
---- ---- ---- ----
Revenues:
Income on financing leases and loans $18,105 $12,819 $54,897 $41,845
Income on service contracts 2,186 2,479 6,420 7,332
Rental income 9,744 9,212 28,131 28,295
Loss and damage waiver fees 1,598 1,633 4,746 4,691
Service fees and other 7,676 4,406 23,010 16,632
------------------------------- -------------------------------
Total revenues 39,309 30,549 117,204 98,795
------------------------------- -------------------------------
Expenses:
Selling general and administrative 10,899 10,306 33,462 34,289
Provision for credit losses 15,064 44,672 37,150 66,460
Depreciation and amortization 3,618 5,713 10,700 14,203
Interest 3,445 2,458 11,307 7,823
------------------------------- -------------------------------
Total expenses 33,026 63,149 92,619 122,775
------------------------------- -------------------------------
Income before provision for income taxes 6,283 (32,600) 24,585 (23,980)
Provision for income taxes 2,644 (13,042) 10,348 (9,593)
------------------------------- -------------------------------
Net income $3,639 ($19,558) $14,237 ($14,387)
=============================== ===============================
Net income per common share - basic $0.28 ($1.53) $1.11 ($1.12)
=============================== ===============================
Net income per common share - diluted $0.28 ($1.53) $1.10 ($1.12)
=============================== ===============================
Weighted-average shares used to compute:
Basic net income per share 12,825,139 12,821,946 12,775,519 12,821,946
------------------------------- -------------------------------
Fully diluted net income per share 13,094,690 12,821,946 12,988,959 12,862,105
------------------------------- -------------------------------
MicroFinancial Inc. (NYSE: MFI), headquartered in Waltham, MA, and with
additional locations in Woburn, MA and Herndon, VA, is a financial intermediary
specializing in leasing and financing for products in the $500 to $10,000 range.
The company has been in operation since 1986 and has been profitable each year
since 1987.
Statements in this release that are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. In addition, words such as "believes,"
"anticipates," "expects," "views, " and similar expressions are intended to
identify forward-looking statements. The Company cautions that a number of
important factors could cause actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company.
Readers should not place undue reliance on forward-looking statements, which
reflect the management's view only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances. The Company cannot assure that it will be
able to anticipate or respond timely to changes which could adversely affect its
operating results in one or more fiscal quarters. Results of operations in any
past period should not be considered indicative of results to be expected in
future periods. Fluctuations in operating results may result in fluctuations in
the price of the Company's common stock. For a more complete description of the
prominent risks and uncertainties inherent in the Company's business, see the
risk factors described in documents the Company files from time to time with the
Securities and Exchange Commission.