Exhibit 99
For Release October 24, 2003 Contact:
8:01 am Richard F. Latour
President and CEO
Tel: 781-994-4800
MicroFinancial Incorporated Announces
Third Quarter 2003 Results
Woburn, MA -- October 24, 2003 -- MicroFinancial Incorporated (NYSE-MFI),
announced today its financial results for the third quarter and the nine months
ended September 30, 2003.
Third quarter revenue for the period ended September 30, 2003, was $22.1 million
compared to $30.5 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 $3.2 million, or ($0.25) per share as compared
with a net loss of $19.6 million or a loss of $1.53 per share in the prior
year's third quarter. The improvement in net income for the quarter is primarily
due to a lower provision for credit losses as compared to the same period last
year. The reduction in revenues for the quarter is primarily the result of a
44.0% decline in lease and loan revenues to $7.2 million and a 35.0% decline in
service fee and other revenues to $2.9 million.
Total operating expenses for the quarter declined 56.6% to $27.4 million as
compared to the same period in 2002. Interest expense declined 35.4% to $1.6
million as a result of lower debt balances of approximately $99.1 million offset
by an increase in the Company's average interest rates of 149 basis points.
Selling, general and administrative expenses decreased 24.0% to $7.8 million for
the third quarter ended September 30, 2003, versus $10.3 million for the same
period last year. The decrease was attributable to reductions in personnel
related expenses of approximately $1.7 million as well as a $0.7 million
reduction in collection related expenses. The provision for credit losses
decreased to $13.9 million for the quarter ended September 30, 2003 from $44.7
million for the same period last year, while net charge offs increased to $16.6
million. Past due balances greater than 31 days delinquent at September 30, 2003
remained relatively flat at 22.9% from 23.0% last quarter. Exclusive of a
federal tax refund in excess of $11 million received in the second quarter of
2003, net cash provided by operating activities for the third quarter increased
slightly to $20.8 million compared to $20.5 million for the previous quarter.
The Company repaid debt of $24.6 million on its senior credit facility and
securitizations during the quarter.
"I am pleased that during the third quarter the Company was able to reduce our
total interest bearing debt by an additional $24.6 million which brings our year
to date reduction to over $83 million, commented Richard Latour, President and
Chief Executive Officer. "We remain ahead our required repayments and other
financial expectations of our bank agreement by approximately $5.0 million
through September 30, 2003."
The Company remains in full compliance with the terms and conditions of its
securitizations and senior credit facility. The Company 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 $15.4 million to $73.5 million.
For the nine-month period ended September 30, 2003 revenues decreased 27.5% to
$71.6 million compared to $98.8 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 September 30, 2003 was $7.7 million or ($0.59)
per share versus a net loss of $14.4 million or ($1.12) per share for the same
period last year. Total operating expenses for the nine months ended September
30, 2003 were $84.4 million compared to $122.8 million in 2002. Interest expense
declined 18.7% to $6.4 million as a result of lower average debt balances of
approximately $73.3 million. Selling, general and administrative expenses
decreased 25.1% to $25.7 million for the first nine months of the year versus
$34.3 million for the same period last year. The decrease was driven by a
reduction in personnel related expenses of approximately $4.7 million, a $1.5
million reduction in cost of goods sold, and a reduction in collection related
expenses of $2.0 million. The Company's headcount at September 30, 2003 was 144;
down from 300 from the same period last year while depreciation and amortization
decreased 12.3% to $12.5 million compared to $14.2 million in 2002. The
provision for credit losses decreased 40.0% to $39.9 million for the nine-month
period from $66.5 million for the same period last year. Year to date net
charge-offs increased to $52.7 million and the Company repaid debt balances on
its senior credit facility and securitizations of $83.4 million for the nine
months ended September 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 1.4 to 1.
Mr. Latour concluded, "MicroFinancial continues its efforts to secure 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, September 30,
--------------- --------------
2002 2003
---- ----
ASSETS
Net investment in leases and loans:
Receivables due in installments $ 334,623 $ 227,528
Estimated residual value 30,754 22,927
Initial direct costs 4,891 2,515
Loans receivable 1,796 -
Less
Advance lease payments and deposits (96) (43)
Unearned income (67,574) (34,883)
Allowance for credit losses (69,294) (56,470)
--------- ---------
Net investment in leases and loans $ 235,100 $ 161,574
Investment in service contracts 14,463 10,054
Cash and cash equivalents 5,494 7,282
Restricted cash 18,516 8,731
Property and equipment, net 9,026 5,953
Income taxes receivable 8,652 -
Other assets 3,834 3,577
--------- ---------
Total assets $ 295,085 $ 197,171
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 168,927 $ 85,535
Subordinated notes payable 3,262 3,262
Capitalized lease obligations 471 253
Accounts payable 3,840 2,888
Other liabilities 6,776 5,273
Income taxes payable 1,400 2,012
Deferred income taxes payable 23,806 18,681
--------- ---------
Total liabilities
208,482 117,904
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at 12/31/02 and 9/30/03 - -
--------- ---------
Common stock, $.01 par value; 25,000,000 shares authorized;
13,410,646 shares issued at 12/31/02 and 9/30/03, respectively 134 134
Additional paid-in capital 47,723 44,245
Retained earnings 45,089 37,403
Treasury stock (588,700 and 234,230 shares of common stock at
12/31/02 and 9/30/03, respectively), at cost (6,343) (2,515)
--------- ---------
Total stockholders' equity 86,603 79,267
--------- ---------
Total liabilities and stockholders' equity $ 295,085 $ 197,171
========= =========
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
For the three months ended
September 30,
-----------------------------
2002 2003
---- ----
Revenues:
Income on financing leases and loans $12,819 $7,173
Income on service contracts 2,479 2,067
Rental income 9,212 8,589
Loss and damage waiver fees 1,633 1,365
Service fees and other 4,406 2,863
---------------------------
Total revenues 30,549 22,057
---------------------------
Expenses:
Selling general and administrative 10,306 7,837
Provision for credit losses 44,672 13,852
Depreciation and amortization 5,713 4,106
Interest 2,458 1,589
---------------------------
Total expenses 63,149 27,384
---------------------------
Income/(loss) before provision for income taxes (32,600) (5,327)
Provision/(benefit) for income taxes (13,042) (2,131)
---------------------------
Net income/(loss) ($19,558) ($3,196)
===========================
Net income/(loss) per common share - basic ($1.53) ($0.25)
===========================
Net income/(loss) per common share - diluted ($1.53) ($0.25)
===========================
Weighted-average shares used to compute:
Basic net income per share 12,821,946 12,999,035
---------------------------
Fully diluted net income per share 12,821,946 12,999,035
---------------------------
For the nine months ended
September 30,
--------------------------
2002 2003
---- ----
Revenues:
Income on financing leases and loans $41,845 $25,372
Income on service contracts 7,332 6,653
Rental income 28,295 25,763
Loss and damage waiver fees 4,691 4,271
Service fees and other 16,632 9,533
--------------------------
Total revenues 98,795 71,592
--------------------------
Expenses:
Selling general and administrative 34,289 25,677
Provision for credit losses 66,460 39,900
Depreciation and amortization 14,203 12,463
Interest 7,823 6,364
--------------------------
Total expenses 122,775 84,404
--------------------------
Income/(loss) before provision for income taxes (23,980) (12,812)
Provision/(benefit) for income taxes (9,593) (5,125)
--------------------------
Net income/(loss) ($14,387) ($7,687)
==========================
Net income/(loss) per common share - basic ($1.12) ($0.59)
==========================
Net income/(loss) per common share - diluted ($1.12) ($0.59)
==========================
Weighted-average shares used to compute:
Basic net income per share 12,821,946 12,999,035
--------------------------
Fully diluted net income per share 12,821,946 12,999,035
--------------------------
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.