Exhibit 99
For Release July 22, 2003 Contact:
4:01 pm Richard F. Latour
President and CEO
Tel: 781-994-4800
MicroFinancial Incorporated Announces
Second Quarter 2003 Results
Woburn, MA-- July 22, 2003-- MicroFinancial Incorporated (NYSE-MFI), a leader in
Microticket leasing and finance, announced today its financial results for the
second quarter and the six months ended June 30, 2003.
Second quarter revenue for the period ended June 30, 2003, was $24.0 million
compared to $33.0 million for the same period last year. The reduction in
revenues is directly related to the Company's decision in October 2002 to cease
funding new originations as a result of its Lenders' decision not to renew the
revolving credit facility on September 30, 2002.
The net loss for the quarter was $3.7 million, or ($0.29) per diluted share as
compared with net income of $2.0 million or $0.15 per diluted share in the prior
year's second quarter. The decline in net income for the quarter is primarily
the result of a 39.2% decline in lease and loan revenues to $8.4 million, a
46.3% decline in service fee and other revenues to $3.2 million, and a 40.9%
increase in the provision for credit losses to $15.2 million as compared with
the second quarter ended June 30, 2002. The additional provision for credit
losses was required to maintain the Company's reserve policy requirement, which
the Company continues to believe is appropriate.
Total operating expenses for the quarter, before the provision for credit
losses, declined approximately 21% to $14.9 million as compared to the same
period in 2002. Interest expense declined 18.1% to $2.1 million as a result of
lower debt balances of approximately $71.5 million offset by an increase in the
Company's average interest rates of 139 basis points. Selling, general and
administrative expenses decreased 23.7% to $8.7 million for the second quarter
ended June 30, 2003, versus $11.4 million for the same period last year. The
decrease was attributable to reductions in personnel related expenses of
approximately $1.2 million, a $1 million reduction in cost of goods sold, and a
$0.4 million reduction in collection related expenses. The provision for credit
losses increased to $15.2 million for the quarter ended June 30, 2003 from $10.8
million for the same period last year, while net charge offs increased to $22.4
million. Past due balances greater than 31 days delinquent at June 30, 2003
decreased to 23.0% from 24.3% last quarter. Exclusive of a federal tax refund in
excess of $11 million, net cash provided by operating activities for the quarter
decreased 20.1% to $20.5 million compared to $25.7 million for the previous
quarter. The Company repaid debt of $35.0 million on its senior credit facility
and securitizations during the quarter.
Richard Latour, President and Chief Executive Officer stated, "I am pleased that
the collections from our existing portfolio remained strong in the second
quarter. The Company's ongoing strategy of driving down expenses while
maximizing collections continued."
The Company remains in full compliance with the terms and conditions of its
securitizations and senior credit facility. The Company operates within all
delinquency and charge-off covenants and has made or exceeded all scheduled
payments on these debt instruments in a timely manner. During the quarter,
MicroFinancial's successful collections efforts allowed the Company to reduce
its bank debt by $26.1 million to $88.9 million.
Year to date revenues for the period ended June 30, 2003 decreased 27.4% to
$49.5 million compared to $68.2 million during the same period in 2002. The
reduction in revenues is directly related to the Company's decision to cease
funding new originations since October 2002 as a result of its Lenders' decision
not to renew the revolving credit facility on September 30, 2002.
The net loss year to date ending June 30, 2003 was $4.5 million versus net
income of $5.2 million for the same period last year. Earnings per share year to
date were ($0.35) on 12,917,752 shares.
Total operating expenses for the six months ended June 30, 2003 were $57.0
million compared to $59.6 million in 2002. Interest expense declined 11.0% to
$4.8 million as a result of lower average debt balances of approximately $58.2
million. Selling, general and administrative expenses decreased 25.6% to $17.8
million for the six months ended June 30, 2003 versus $24.0 million for the same
period last year. The decrease was driven by a reduction in personnel related
expenses of approximately $2.9 million, a $1.6 million reduction in cost of
goods sold, and a reduction in collection related expenses of $1.3 million. The
Company's headcount at June 30, 2003 was 159, down from 356 from the same period
last year while depreciation and amortization decreased 1.6% to $8.4 million
compared to $8.5 million in 2002. The provision for credit losses increased
19.6% to $26.0 million for the six months ended June 30, 2003 from $21.8 million
for the same period last year. Year to date net charge-offs increased to $36.2
million and the Company repaid debt balances on its senior credit facility and
securitizations of $58.7 million for the six months ended June 30, 2003.
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 1.7 to 1.
Mr. Latour concluded, "MicroFinancial's capital structure and cash flow remain
strong. We continue to seek various financing, restructuring and strategic
alternatives that will enable the Company to reenter the financing market."
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31, June 30,
------------- ------------
2002 2003
---- ----
ASSETS
Net investment in leases and loans:
Receivables due in installments $ 334,623 $ 257,680
Estimated residual value 30,754 25,813
Initial direct costs 4,891 3,247
Loans receivable 1,796 1,771
Less
Advance lease payments and deposits (96) (52)
Unearned income (67,574) (44,715)
Allowance for credit losses (69,294) (59,180)
--------- ---------
Net investment in leases and loans $ 235,100 $ 184,564
Investment in service contracts 14,463 11,383
Cash and cash equivalents 5,494 8,189
Restricted cash 18,516 12,197
Property and equipment, net 9,026 6,935
Income taxes receivable 8,652 --
Other assets 3,834 6,088
--------- ---------
Total assets $ 295,085 $ 229,356
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 168,927 $ 110,095
Subordinated notes payable 3,262 3,262
Capitalized lease obligations 471 297
Accounts payable 3,840 3,141
Other liabilities 6,776 5,542
Income taxes payable 1,400 3,838
Deferred income taxes payable 23,806 20,812
--------- ---------
Total liabilities 208,482 146,987
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at 12/31/02 and 6/30/03 -- --
Common stock, $.01 par value; 25,000,000 shares authorized;
13,410,646 and 13,765,116 shares issued at 12/31/02 and 6/30/03, respectively 134 138
Additional paid-in capital 47,723 46,316
Retained earnings 45,089 40,599
Treasury stock (588,700 and 426,366 shares of common stock at
12/31/02 and 6/30/03, respectively), at cost (6,343) (4,590)
Unearned compensation 0 (94)
--------- ---------
Total stockholders' equity 86,603 82,369
--------- ---------
Total liabilities and stockholders' equity $ 295,085 $ 229,356
========= =========
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
For the three months ended
June 30,
-----------------------------
2002 2003
---- ----
Revenues:
Income on financing leases and loans $ 13,790 $ 8,378
Income on service contracts 2,458 2,334
Rental income 9,220 8,628
Loss and damage waiver fees 1,532 1,423
Service fees and other 5,961 3,201
---------------------------
Total revenues 32,961 23,964
---------------------------
Expenses:
Selling general and administrative 11,409 8,709
Provision for credit losses 10,824 15,249
Depreciation and amortization 4,851 4,087
Interest 2,618 2,145
---------------------------
Total expenses 29,702 30,190
---------------------------
Income/(loss) before provision for income taxes 3,259 (6,226)
Provision/(benefit) for income taxes 1,304 (2,490)
---------------------------
Net income/(loss) $ 1,955 ($3,736)
===========================
Net income/(loss) per common share - basic $ 0.15 ($0.29)
===========================
Net income/(loss) per common share - diluted $ 0.15 ($0.29)
===========================
Weighted-average shares used to compute:
Basic net income per share 12,821,946 12,917,752
---------------------------
Fully diluted net income per share 12,901,149 12,917,752
---------------------------
For the six months ended
June 30,
-----------------------------
2002 2003
---- ----
Revenues:
Income on financing leases and loans $ 29,026 $ 18,199
Income on service contracts 4,853 4,586
Rental income 19,083 17,175
Loss and damage waiver fees 3,057 2,906
Service fees and other 12,227 6,669
---------------------------
Total revenues 68,246 49,535
---------------------------
Expenses:
Selling general and administrative 23,983 17,841
Provision for credit losses 21,788 26,048
Depreciation and amortization 8,490 8,357
Interest 5,365 4,774
---------------------------
Total expenses 59,626 57,020
---------------------------
Income/(loss) before provision for income taxes 8,620 (7,485)
Provision/(benefit) for income taxes 3,448 (2,994)
---------------------------
Net income/(loss) $ 5,172 ($4,491)
===========================
Net income/(loss) per common share - basic $ 0.40 ($0.35)
===========================
Net income/(loss) per common share - diluted $ 0.40 ($0.35)
===========================
Weighted-average shares used to compute:
Basic net income per share 12,821,946 12,917,752
---------------------------
Fully diluted net income per share 12,877,839 12,917,752
---------------------------
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
MicroFinancial Inc. (NYSE: MFI), headquartered 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.