Exhibit 99
FOR IMMEDIATE RELEASE Contact:
Richard F. Latour
President and CEO
Tel: 781-890-0177
MicroFinancial Incorporated Announces
Preliminary Fourth Quarter and Year End 2002 Results
o Company Engages Financial and Strategic Advisor
Waltham, MA-- March 10, 2003-- MicroFinancial Incorporated (NYSE-MFI), a leader
in Microticket leasing and finance, announced today its preliminary financial
results for the fourth quarter and the year ended December 31, 2002.
The Company also announced today that it is actively considering various
financing, restructuring and strategic alternatives. During the quarter, the
Company engaged a financial and strategic advisory firm, Triax Capital Advisors,
LLC, to assist in this process. As previously disclosed, as of September 30,
2002, MicroFinancial was in default of certain debt covenants in its credit
facility and securitization agreements. The fixed charge coverage covenant that
was in default was the result of a $35 million additional allowance reserved
against certain dealer receivables, as well as delinquent portfolio assets. The
credit facility failed to renew on September 30, 2002, and consequently, the
Company was forced to suspend new origination activity as of October 11, 2002.
Management received a waiver through April 15, 2003 for the covenant violations
in connection with the securitization facility. The Company had obtained a
Forbearance and Modification Agreement from the senior credit facility that
expired on February 7, 2003. Upon expiration of that Agreement, the loan balance
with interest and fees became due and payable immediately per the terms of the
Company's credit facility. To date, the Company has fulfilled all of its debt
obligations in a timely manner.
Based upon the preliminary results for the fourth quarter, the Company continues
to be out of compliance with certain debt covenants. Management and its advisors
continue to work closely with the Company's lenders to obtain long-term
agreements. These events had an adverse effect on the Company's fourth quarter
and year to date financial results. Originations in fiscal 2002 were down $37.1
million to $74.0 million as compared to the prior year.
Preliminary fourth quarter revenue for the period ended December 31, 2002
decreased 24.0%, or $8.9 million, to $28.0 million compared to $36.9 million
last year. The net loss for the quarter was $7.7 million, or ($0.60) per diluted
share, as compared with net income of $2.1 million, or $0.16 per diluted share
in the prior year's fourth quarter. The decline in net income for the quarter is
primarily the result of a 30.4% decline in lease and loan revenues to $11.2
million, a 46.1% decline in service fee and other revenues to $4.0 million, and
a 32.7% increase in the provision for credit losses to $22.5 million as compared
with the fourth quarter ended December 31, 2001. While revenue reductions were
primarily related to lower origination volume, the additional provision for
credit losses was required to maintain the Company's reserve policy
requirements.
Total operating expenses for the quarter, before the provision for credit
losses, remained relatively flat at $18.4 million compared to the same period in
2001. Interest expense declined 1.0% to $3.0 million as a result of lower debt
balances of approximately $34.0 million offset by increased interest costs.
Based on the terms of the Forbearance and Modification Agreement for the senior
credit facility, the interest rate accrued on outstanding borrowings increased
by 275 basis points during the fourth quarter of 2002. Selling, general and
administrative expenses decreased $200,000 to $11.2 million for the fourth
quarter ended December 31, 2002 versus $11.4 million for the same period last
year. The decrease was attributable to reductions in personnel related expenses
of approximately $1.8 million, which was offset by increases in legal expenses.
The provision for credit losses increased to $22.5 million for the quarter ended
December 31, 2002 from $16.9 million for the same period last year, while net
charge offs increased to $28.8 million. Past due balances greater than 31 days
delinquent at December 31, 2002 increased to 22.9% from 17.2% last quarter. Net
cash provided by operating activities for the quarter decreased 4.0% to $29.1
million compared to $30.2 million during the same period in 2001.
Preliminary revenues for the year ended December 31, 2002 decreased 18.0% to
$126.8 million compared to $154.0 million during the same period in fiscal 2001.
The net loss for the year ending December 31, 2002 was $22.1 million versus net
income of $16.3 million for the same period last year. Fully diluted earnings
per share for the year was a loss of $1.72 on 12,862,834 shares.
Total operating expenses for the year, before the provision for credit losses,
increased 2.0% to $74.7 million compared to $73.6 million in 2001. Interest
expense declined 25.0% to $10.8 million as a result of lower average debt
balances of approximately $17.3 million and lower average interest rates, which
declined approximately 122 basis points. Selling, general and administrative
expenses increased $600,000 to $45.5 million for the year ended December 31,
2002 versus $44.9 million for the same period last year. The decrease was driven
by a reduction in personnel related expenses of approximately $2.1 million, as
management reduced headcount from 380 to 203, but this was offset by increases
in legal expenses. Depreciation and Amortization increased 28.0% to $18.3
million compared to $14.4 million in 2001. The provision for credit losses,
including the additional provision of $35.0 million taken in the third quarter
of 2002, increased to $88.9 million for the year ended December 31, 2002 from
$54.1 million for the same period last year. The additional provision was
required to reserve against dealer receivables and certain portfolio assets. Net
charge-offs increased 27.0% to $65.0 million and gross lease investment was down
16.0% or $71.1 million from the same period last year, primarily caused by lower
origination volume activity in 2002. Net cash provided by operating activities
for the year ended December 31, 2002 decreased 1.0% to $120.6 million compared
to $122.3 million for the year ended December 31, 2001.
MicroFinancial Incorporated continues to operate without the use of gain on sale
accounting treatment and a balance sheet with total liabilities less
subordinated debt to total equity plus subordinated debt of 2.2 to 1.
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 31, December 31,
----------------- ----------------
2001 2002
---- ----
ASSETS
Net investment in leases and loans:
Receivables due in installments $ 399,361 $ 334,623
Estimated residual value 37,114 30,754
Initial direct costs 7,090 4,891
Loans receivable 2,248 1,796
Less:
Advance lease payments and deposits (287) (96)
Unearned income (104,538) (67,574)
Allowance for credit losses (45,026) (69,294)
--------- ---------
Net investment in leases and loans $ 295,962 $ 235,100
Investment in service contracts 14,126 14,463
Cash and cash equivalents 4,429 5,494
Restricted Cash 16,216 18,516
Property and equipment, net 16,034 9,026
Other assets 14,961 3,834
--------- ---------
Total assets $ 361,728 $ 286,433
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 203,053 $ 168,927
Subordinated notes payable 3,262 3,262
Capitalized lease obligations 833 471
Accounts payable 2,517 3,840
Dividends payable 642 --
Other liabilities 6,182 6,776
Income taxes payable 4,211 (7,252)
Deferred income taxes payable 30,472 23,806
--------- ---------
Total liabilities 251,172 199,830
--------- ---------
Commitments and contingencies -- --
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at 12/31/01 and 12/31/02 -- --
Common stock, $.01 par value; 25,000,000 shares authorized;
13,410,646 shares issued at 12/31/01 and 12/31/02 134 134
Additional paid-in capital 47,723 47,723
Retained earnings 69,110 45,089
Treasury stock (588,700 shares of common stock
at 12/31/01 and 12/31/02), at cost (6,343) (6,343)
Notes receivable from officers and employees (68) --
--------- ---------
Total stockholders' equity 110,556 86,603
--------- ---------
Total liabilities and stockholders' equity $ 361,728 $ 286,433
========= =========
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
For the three months ended
December 31,
-------------------------
2001 2002
---- ----
Revenues:
Income on financing leases and loans $ 16,035 $ 11,167
Income on service contracts 2,245 2,402
Rental income 9,533 8,859
Loss and damage waiver fees 1,598 1,567
Service fees and other 7,477 4,033
---------------------
Total revenues 36,888 28,028
---------------------
Expenses:
Selling general and administrative 11,438 11,246
Provision for credit losses 16,942 22,488
Depreciation and amortization 3,678 4,182
Interest 2,994 2,964
---------------------
Total expenses 35,052 40,880
---------------------
Income (loss) before provision (benefit) for income taxes 1,836 (12,852)
Provision (benefit) for income taxes (244) (5,142)
---------------------
Net income (loss) $ 2,080 ($ 7,710)
=====================
Net income (loss) per common share - basic $ 0.16 ($ 0.60)
=====================
Net income (loss) per common share - diluted $ 0.16 ($ 0.60)
=====================
For the Years Ended
December 31,
-------------------------
2001 2002
---- ----
Revenues:
Income on financing leases and loans $ 70,932 $ 53,012
Income on service contracts 8,665 9,734
Rental income 37,664 37,154
Loss and damage waiver fees 6,344 6,257
Service fees and other 30,486 20,665
-----------------------
Total revenues 154,091 126,822
-----------------------
Expenses:
Selling general and administrative 44,899 45,535
Provision for credit losses 54,092 88,948
Depreciation and amortization 14,378 18,385
Interest 14,301 10,787
-----------------------
Total expenses 127,670 163,655
-----------------------
Income (loss) before provision (benefit) for income taxes 26,421 (36,833)
Provision (benefit) for income taxes 10,104 (14,735)
-----------------------
Net income (loss) $ 16,317 ($ 22,098)
=======================
Net income (loss) per common share - basic $ 1.28 ($ 1.72)
=======================
Net income (loss) per common share - diluted $ 1.26 ($ 1.72)
=======================
MicroFinancial Inc. (NYSE: MFI), headquartered in Waltham, MA, and with an
additional location in Woburn, MA, 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.
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.