Exhibit 99
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For Release July 28, 2004 Contact:
4:01 pm Richard F. Latour
President and CEO
Tel: 781-994-4800
MicroFinancial Incorporated Announces
Second Quarter 2004 Results
Woburn, MA-- July 28, 2004-- MicroFinancial Incorporated (NYSE-MFI), announced
today its financial results for the second quarter and the six months ended June
30, 2004.
Second quarter revenue for the period ended June 30, 2004, was $15.8 million
compared to $24.0 million for the same period last year. The reduction in
revenues is attributable to the decrease in the size of the Company's portfolio
of leases, rentals and service contracts. The reduction in revenues is directly
related to the Company's suspension of virtually all originations beyond October
2002.
The net loss for the quarter was $5.9 million, or ($0.45) per share on
13,182,666 shares as compared with a net loss of $3.7 million or ($0.29) per
share in the prior year's second quarter. The net loss is primarily the result
of a 61.4% decline in lease and loan revenues to $3.2 million, a 33.0% decline
in service contracts to $1.6 million, and a 44.3% decrease in service fees and
other to $1.8 million as compared to the same period last year. Other components
of revenue declined by 8.5% to $9.2 million.
Total operating expenses for the quarter declined approximately 15.3% to $25.6
million as compared to the same period in 2003. Interest expense declined 71.5%
to $0.6 million as a result of lower debt balances of approximately $95.2
million. Selling, general and administrative expenses decreased 21.4% to $6.8
million for the second quarter ended June 30, 2003, versus $8.7 million for the
same period last year. The decrease was attributable to reductions in personnel
related expenses of approximately $0.7 million, a $0.4 million reduction in
sales program costs, a $0.5 million reduction in professional and legal fees,
and a $0.1 million reduction in cost of goods sold. The provision for credit
losses decreased 7.0% to $14.2 million for the quarter ended June 30, 2004 from
$15.2 million for the same period last year, while net charge offs decreased to
$19.7 million. Past due balances greater than 31 days delinquent at June 30,
2004 decreased to 17.7% from 19.2% last quarter. Total cash received from
customers for the quarter decreased 10.7% to $22.5 compared to $25.2 million for
the previous quarter. During the quarter the Company repaid $15.1 million on its
senior credit facility and securitized debt.
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 $14.4 million to $26.1 million. The Company also made its final
payment on the securitized debt.
Year to date revenues for the period ended June 30, 2004 decreased 31.8% to
$33.8 million compared to $49.5 million during the same period in 2003. The
reduction in revenues is directly related to the Company's decision to suspend
funding virtually all 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, 2004 was $10.6 million versus a net
loss of $4.5 million for the same period last year. Net loss per share year to
date was ($0.80) on 13,181,107 shares.
Total operating expenses for the six months ended June 30, 2004 were $51.4
million compared to $57.0 million in 2003. Interest expense declined 69.5% to
$1.5 million as a result of lower average debt balances of approximately $101.3
million. Selling, general and administrative expenses decreased 20.8% to $14.1
million for the six months ended June 30, 2004 versus $17.8 million for the same
period last year. The decrease was driven by a reduction in personnel related
expenses of approximately $1.7 million, a $0.8 million reduction in professional
fees and legal costs, a $0.8 million reduction in sales program expenses, and a
reduction in facilities expenses of $0.8 million. The Company's headcount at
June 30, 2004 was 120, down from 159 from the same period last year. The
provision for credit losses increased 5.9% to $27.6 million for the six months
ended June 30, 2004 from $26.1 million for the same period last year. Year to
date net charge-offs increased to $39.3 million from $36.2 million for the same
period last year, and the Company repaid $32.5 million on its senior credit
facility and securitizations for the six months ended June 30, 2004.
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 0.6 to 1.
Mr. Latour concluded, "MicroFinancial's capital structure and cash flow remain
strong. Although no new originations occurred during the second quarter, the
closing of a new $10 million credit facility in June has allowed the Company to
begin the process of signing new vendors and processing lease applications. We
continue to seek various financing, restructuring and strategic alternatives
that will enable the Company to strengthen its position in the leasing market."
MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31, June 30,
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2003 2004
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ASSETS
Net investment in leases and loans:
Receivables due in installments $ 175,788 $ 113,681
Estimated residual value 19,110 12,788
Initial direct costs 1,804 930
Less:
Advance lease payments and deposits (37) (30)
Unearned income (23,729) (12,279)
Allowance for credit losses (43,011) (31,256)
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Net investment in leases and loans $ 129,925 $ 83,834
Investment in service contracts 8,844 6,679
Cash and cash equivalents 6,533 7,370
Restricted cash 2,376 1,278
Property and equipment, net 5,844 4,308
Other assets 2,892 2,983
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Total assets $ 156,414 $ 106,452
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 58,843 $ 26,249
Subordinated notes payable 3,262 4,374
Capitalized lease obligations 209 121
Accounts payable 3,186 3,033
Other liabilities 4,104 2,914
Income taxes payable 7,789 7,818
Deferred income taxes payable 7,755 710
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Total liabilities 85,148 45,219
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Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at 12/31/03 and 6/30/04 - -
Common stock, $.01 par value; 25,000,000 shares authorized;
13,410,646 shares issued at 12/31/03 and 6/30/04, respectively 134 134
Additional paid-in capital 44,245 44,769
Retained earnings 29,402 18,836
Treasury stock, at cost (234,230 shares at 12/31/03 and 6/30/04) (2,515) (2,447)
Unearned compensation - (59)
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Total stockholders' equity 71,266 61,233
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Total liabilities and stockholders' equity $ 156,414 $ 106,452
========= =========
MICROFINANCIAL INCORPORATED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except share and per
share data)
For the three months ended
June 30,
----------------------------
2003 2004
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Revenues:
Income on financing leases and loans $ 8,378 $ 3,235
Income on service contracts 2,334 1,563
Rental income 8,627 8,164
Loss and damage waiver fees 1,423 1,035
Service fees and other 3,201 1,784
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Total revenues 23,964 15,782
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Expenses:
Selling general and administrative 8,709 6,845
Provision for credit losses 15,249 14,181
Depreciation and amortization 4,087 3,936
Interest 2,145 611
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Total expenses 30,190 25,573
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Loss before benefit for income taxes (6,226) (9,791)
Benefit for income taxes (2,490) (3,917)
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Net loss ($ 3,736) ($ 5,874)
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Net loss per common share - basic ($ 0.29) ($ 0.45)
============================
Net loss per common share - diluted ($ 0.29) ($ 0.45)
============================
Weighted-average shares used to compute:
Basic net income per share 12,917,752 13,182,666
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Fully diluted net income per share 12,917,752 13,182,666
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For the six months ended
June 30,
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2003 2004
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Revenues:
Income on financing leases and loans $ 18,199 $ 7,402
Income on service contracts 4,586 3,294
Rental income 17,175 16,629
Loss and damage waiver fees 2,906 2,166
Service fees and other 6,670 4,299
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Total revenues 49,535 33,790
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Expenses:
Selling general and administrative 17,841 14,124
Provision for credit losses 26,048 27,589
Depreciation and amortization 8,357 8,230
Interest 4,774 1,457
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Total expenses 57,020 51,401
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Loss before benefit for income taxes (7,485) (17,611)
Benefit for income taxes (2,994) (7,045)
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Net loss ($ 4,491) ($ 10,566)
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Net loss per common share - basic ($ 0.35) ($ 0.80)
============================
Net loss per common share - diluted ($ 0.35) ($ 0.80)
============================
Weighted-average shares used to compute:
Basic net income per share 12,917,752 13,181,107
----------------------------
Fully diluted net income per share 12,917,752 13,181,107
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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.