EXHIBIT 99.1
NEWS RELEASE
(FIRST CITY LOGO)
Contact: Suzy W. Taylor
(866) 652-1810
FIRSTCITY FINANCIAL ANNOUNCES FIRST QUARTER 2004 RESULTS
AND 2004 ANNUAL MEETING
WACO, TEXAS MAY 6, 2004... FirstCity Financial Corporation
(NASDAQ FCFC) today announced net earnings to common stockholders for the
quarter ended March 31, 2004 of $4,849,000 or $.41 per share on a diluted basis.
Components of the results for the three months ended March 31, 2004 and 2003,
respectively, are detailed below (dollars in thousands):
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
2004 2003
--------------- ---------------
Portfolio Asset Acquisition and Resolution $ 4,043 $ 1,777
Consumer 3,118 576
Corporate interest (1,000) (1,172)
Corporate overhead (1,312) (1,200)
--------------- ---------------
Earnings from continuing operations 4,849 (19)
Accrued preferred dividends -- (66)
--------------- ---------------
Net earnings (loss) to common stockholders $ 4,849 $ (85)
=============== ===============
Diluted earnings (loss) per common share $ 0.41 $ (0.01)
=============== ===============
</Table>
PORTFOLIO ASSET ACQUISITION AND RESOLUTION
Operating contribution for the quarter was $4.0 million, comprised of $8.9
million in revenues, net of $4.9 million of expenses. The business generated 46%
of the revenues from domestic investments, 29% from investments in Mexico and
25% from investments in Europe. The major components of revenue for the quarter
include equity earnings in Acquisition Partnerships and servicing entities of
$4.2 million, servicing fees of $3.0 million, and interest income of $.5
million.
Operating contribution from the Portfolio Asset Acquisition business for the
quarter includes foreign currency gains of $.8 million, comprised of $.5 million
in Mexican peso gains, and foreign currency gains related to cash collections of
certain Euro investments of $.3 million. Quarterly results have been, and
continue to be impacted by fluctuations in foreign currencies.
The following table details these impacts on corporate earnings (dollars in
thousands):
<Table>
<Caption>
FIRST FIRST
QUARTER QUARTER
ILLUSTRATION OF THE EFFECTS OF CURRENCY FLUCTUATIONS 2004 2003
------------ ------------
Net earnings (loss) to Common Stockholders as reported $ 4,849 $ (85)
Mexican Peso gains (losses) 463 (1,623)
Euro gains 309 247
------------ ------------
Peso exchange rate at valuation date 11.09 11.03
Euro exchange rate at valuation date 0.82 0.93
</Table>
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The Company and its Acquisition Partnerships purchased three portfolios in the
1st Quarter - two domestic portfolios totaling $6.5 million and one $.2 million
portfolio in Chile. The Company invested equity of $3.1 million in these
portfolios. A summary of acquisitions for the recent quarters follows (dollars
in millions):
<Table>
<Caption>
MEXICO/
SOUTH INVESTED
DOMESTIC FRANCE AMERICA ITALY TOTAL EQUITY
--------- --------- --------- --------- --------- ---------
1st Quarter 2004 $ 6.5 $ -- $ 0.2 $ -- $ 6.7 $ 3.1
2003
4th Quarter $ 46.7 $ 11.1 $ -- $ -- $ 57.7 $ 7.6
3rd Quarter 39.3 -- -- -- 39.3 3.9
2nd Quarter 6.7 20.1 5.4 -- 32.2 11.4
1st Quarter -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total Year 2003 $ 92.6 $ 31.2 $ 5.4 $ -- $ 129.2 $ 22.9 *
--------- --------- --------- --------- --------- ---------
Total Year 2002 $ 61.4 $ 81.8 $ 11.7 $ 16.9 $ 171.8 $ 16.7
--------- --------- --------- --------- --------- ---------
</Table>
* The Company invested $3.4 million in partnerships during 2003 in
addition to the acquisitions above.
CONSUMER
Operating contribution for the quarter was $3.1 million, comprised of $4.0
million from the Company's investment in Drive, net of interest and other
expenses of $.9 million. The other expenses of $.9 million include an accrual of
additional interest expense of $.8 million relating to the contingent fee
arrangement with the Bank of Scotland. See additional discussion related to
contingent fee arrangement below.
The Company owns a 31% interest in Drive Financial Services L.P., a sub prime
auto lending company. Drive originated $244.1 million of receivables during the
quarter, nearly doubling originations of the prior year's quarter. Defaults and
losses were 20.77% and 10.98%, respectively, at the end of the quarter compared
to 21.03% and 10.83%, respectively, for the same period last year. These
statistics reflect the weakness in the economy in prior periods and the
resulting impact on used car prices, although recent indicators reflect an
upward trend in used car prices. Delinquencies were 11.52% for the quarter, up
from 4.66% the same period last year as a result of a change in collection
strategies, which in some instances will allow Drive to provide borrowers
additional time to cure delinquencies rather than pursue immediate repossession.
Net income from Drive continues to be positive as originations and the volume of
portfolio assets grow over time. Based on information provided by Drive, the
Company expects that this positive trend will continue.
The following table details this trend (dollars in thousands):
<Table>
<Caption>
INCOME (LOSS) PROVISIONS
LOAN TOTAL BEFORE PROVISIONS ON RESIDUAL NET INCOME FIRSTCITY'S
ORIGINATIONS INVENTORY ASSETS ON RESIDUAL ASSETS ASSETS (LOSS) 31% SHARE
------------ ------------ ------------ ------------------ ------------ ------------ ------------
2004
1st Quarter $ 244,121 $ 770,042 $ 915,128 $ 13,001 $ -- $ 13,001 $ 4,031
2003
4th Quarter 102,228 623,389 738,829 6,308*** (2,087) 4,221 1,308
3rd Quarter 128,688 577,974 700,760 9,132 (3,904) 5,228 1,621
2nd Quarter 127,706 511,212 619,269 8,251 (1,240) 7,011 2,173
1st Quarter 126,118 443,099 551,412 3,707 (1,217) 2,490 689
------------ ------------ ------------ ------------ ------------ ------------ ------------
</Table>
*** Net of $3.7 million of additional provisions related to loans receivable.
Note: As of March 31, 2004, Drive holds on its balance sheet residual interests
with a book value of $30.1 million compared with $56.6 million as of March 31,
2003.
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(3)
CONTINGENT FEE ARRANGEMENT WITH BANK OF SCOTLAND
As a part of the recapitalization in December 2002, BoS (USA) Inc. provided a
non-recourse loan of $16 million to the Company secured by a 20% interest in
Drive. In connection with the $16 million loan, the Company agreed to pay a
contingent fee to BoS (USA) Inc. equal to 20% of all amounts received by the
Company upon any sale of the Company's 20% interest in Drive or any receipt of
distributions from Drive related to the 20% ownership interest, once such
payments exceed $16 million in the aggregate. During the first quarter, the
Company recorded $.8 million of additional interest expense related to the
contingent fee. The Company currently estimates that additional interest expense
will be recognized in the amount of $160,000 per quarter through December 2007.
This additional interest expense currently has no impact on the Company's cash
flow. The payment of the interest and any gain or income resulting from any sale
or distribution will not be recognized until a sale occurs or distribution is
received. The Company has no present plans to sell any interest in Drive and
does not anticipate that any distributions will be made from Drive in the near
future that would result in an obligation to pay a contingent fee.
DISCONTINUED OPERATIONS
The anticipated realizable value of the Company's investment in discontinued
mortgage operations decreased to $5.9 million, net of reserves of $268,000
million, at March 31, 2004. No additional provisions were required during the
first quarter of 2004.
ANNUAL MEETING/STOCKHOLDER PROPOSALS
The Company will hold its annual meeting of stockholders on August 5, 2004 at
the Company headquarters located at 6400 Imperial Drive, Waco, Texas 76712. The
record date for the meeting is June 8, 2004.
Pursuant to Rule 14a-8 of the Securities and Exchange Act of 1934, stockholder
proposals intended to be presented at the annual meeting of stockholders to be
held on August 5, 2004 must be received at the Company's principal executive
offices no later than May 31, 2004.
CONFERENCE CALL
The Company will host a conference call to discuss the quarterly results today,
Thursday, May 6, 2004 at 9:00 a.m., CDT. James T. Sartain, the Company's
President and Chief Executive Officer will lead the call. To participate, dial
toll free 1-866-206-5917 and specify conference I.D. number 454179.
International callers should dial 1-703-639-1106. Please dial in five minutes
prior to the call. If you are unable to listen to the live conference call, a
replay will be available by dialing 1-888-266-2081. For international callers
the replay number is 1-703-925-2533. The pass code for the replay is 454179. The
replay will be available through Thursday, May 20, 2004.
FORWARD LOOKING STATEMENTS
Certain statements in this press release, which are not historical in fact,
including, but not limited to, statements relating to future performance, may be
deemed to be forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include, without limitation, any
statement that may project, indicate or imply future results, performance or
achievements, and may contain the words "expect", "intend", "plan", "estimate",
"believe", "will be", "will continue", "will likely result", and similar
expressions. Such statements inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. There are many important factors that could cause the Company's
actual results to differ materially.
These factors include, but are not limited to, the performance of the Company's
subsidiaries and affiliates, availability of portfolio assets, assumptions
underlying portfolio asset performance, risks associated with foreign
operations, currency exchange rate fluctuations, interest rate risk, risks of
declining value of loans, collateral or assets; the degree to which the Company
is leveraged, the Company's continued need for financing, availability of the
Company's credit facilities, the impact of certain covenants in loan agreements
of the Company and its subsidiaries, the ability of the Company to utilize net
operating loss carry forwards, uncertainties of any litigation arising from
discontinued operations, general economic conditions, foreign social and
economic conditions, changes (legislative and otherwise) in the asset
securitization industry; fluctuation in residential and commercial real estate
values, capital markets conditions, including the markets for asset-backed
securities; factors more fully discussed and identified under Item 7,
"Management's Discussion and Analysis of
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(4)
Financial Condition and Results of Operations," risk factors and other risks
identified in the Company's Annual Report on Form 10-K, filed with the SEC on
March 30, 2004, as well as in the Company's other filings with the SEC.
Many of these factors are beyond the Company's control. In addition, it should
be noted that past financial and operational performance of the Company is not
necessarily indicative of future financial and operational performance. Given
these risks and uncertainties, investors should not place undue reliance on
forward-looking statements.
The forward-looking statements in this release speak only as of the date of this
release. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any forward-looking
statement is based.
The Company is a diversified financial services company with operations
dedicated to portfolio asset acquisition and resolution and consumer lending
with offices in the U.S. and with affiliate organizations in France and Mexico.
Its common (FCFC) and preferred (FCFCO) stocks are listed on the NASDAQ National
Market System.
(TABLES FOLLOW)
FIRSTCITY FINANCIAL CORPORATION
Summary of Operations
(In thousands, except per share data)
(Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2004 2003
------------ ------------
Revenues:
Servicing fees from affiliates $ 3,032 $ 3,507
Gain on resolution of Portfolio Assets 75 695
Equity in earnings of investments 9,212 2,091
Interest income from affiliates 444 915
Interest income - other 85 188
Other income 1,338 362
------------ ------------
Total revenues 14,186 7,758
Expenses:
Interest and fees on notes payable to affiliates 2,529 1,891
Interest and fees on notes payable - other 69 62
Interest on shares subject to mandatory redemption 66 --
Salaries and benefits 4,077 3,496
Provision for loan and impairment losses -- 34
Occupancy, data processing, communication and other 1,452 1,994
------------ ------------
Total expenses 8,193 7,477
Earnings from continuing operations before income
taxes and minority interest 5,993 281
Provision for income taxes (112) (121)
------------ ------------
Earnings from continuing operations before minority interest 5,881 160
Minority interest (1,032) (179)
------------ ------------
Earnings (loss) from continuing operations 4,849 (19)
Earnings (loss) from discontinued operations -- --
------------ ------------
Net earnings (loss) 4,849 (19)
Accumulated preferred dividends in arrears -- (66)
------------ ------------
Net earnings (loss) to common stockholders $ 4,849 $ (85)
============ ============
Basic earnings (loss) per common share are as follows:
Earnings (loss) from continuing operations $ 0.43 $ (0.01)
Discontinued operations -- --
Net earnings (loss) per common share $ 0.43 $ (0.01)
Wtd. avg. common shares outstanding 11,198 11,202
Diluted earnings (loss) per common share are as follows:
Earnings (loss) from continuing operations $ 0.41 $ (0.01)
Discontinued operations -- --
Net earnings (loss) per common share $ 0.41 $ (0.01)
Wtd. avg. common shares outstanding 11,792 11,202
</Table>
SELECTED UNAUDITED BALANCE SHEET DATA
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2004 2003
--------------- ---------------
Cash $ 2,753 $ 2,745
Portfolio acquisition and resolution assets 78,122 80,428
Consumer assets 20,732 15,685
Deferred tax asset 20,101 20,101
Net assets of discontinued operations 5,882 6,150
Total assets 137,065 132,139
Notes payable to affiliates 82,994 88,628
Notes payable other 4,912 2,432
Preferred stock subject to mandatory redemption (including
accrued and unpaid dividends) 3,912 3,846
Total common stockholders' equity 32,898 28,969
</Table>
5
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2004 2003
------------ ------------
SUMMARY OPERATING STATEMENT DATA FOR EACH BUSINESS
Portfolio Asset Acquisition and Resolution:
Revenues $ 8,942 $ 6,836
Expenses 4,899 5,025
------------ ------------
Operating contribution before provision for
loan and impairment losses 4,043 1,811
Provision for loan and impairment losses -- 34
------------ ------------
Operating contribution, net of direct taxes $ 4,043 $ 1,777
============ ============
Consumer Lending:
Revenues $ 5,040 $ 861
Expenses 1,922 285
------------ ------------
Operating contribution, net of direct taxes $ 3,118 $ 576
============ ============
PORTFOLIO ASSET ACQUISITION AND RESOLUTION:
OVERVIEW
AGGREGATE PURCHASE PRICE OF PORTFOLIOS ACQUIRED:
Acquisition partnerships
Domestic $ 6,549 $ --
South America 150 --
------------ ------------
Total $ 6,699 $ --
============ ============
</Table>
<Table>
<Caption>
PURCHASE FIRSTCITY'S
HISTORICAL ACQUISITIONS - ANNUAL: PRICE INVESTMENT
--------------- ---------------
2004 year to date $ 6,699 $ 3,097
2003 129,192 22,944
2002 171,769 16,717
2001 224,927 24,319
2000 394,927 22,140
1999 210,799 11,203
</Table>
<Table>
<Caption>
MARCH 31, MARCH 31,
2004 2003
------------ ------------
PORTFOLIO ACQUISITION AND RESOLUTION ASSETS BY REGION:
Domestic $ 44,776 $ 41,339
Mexico 13,699 15,407
France and Italy 19,598 15,261
Other foreign 49 --
------------ ------------
Total $ 78,122 $ 72,007
============ ============
REVENUES BY REGION:
Domestic $ 4,143 $ 4,407
Mexico 2,588 1,425
France and Italy 2,202 1,004
Other foreign 9 --
------------ ------------
Total $ 8,942 $ 6,836
============ ============
REVENUES BY SOURCE:
Equity earnings $ 4,175 $ 1,230
Servicing fees 3,032 3,507
Interest income - loans 523 1,096
Gain on resolution of Portfolio Assets 75 695
Other 1,137 308
------------ ------------
Total $ 8,942 $ 6,836
============ ============
</Table>
6
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2004 2003
--------------- ---------------
ANALYSIS OF EQUITY INVESTMENTS IN ACQUISITION PARTNERSHIPS:
FIRSTCITY'S AVERAGE INVESTMENT IN ACQUISITION PARTNERSHIPS
Domestic $ 36,595 $ 32,977
Mexico 1,015 1,042
France 13,946 11,264
France-Servicing subsidiaries 4,513 3,414
--------------- ---------------
Total $ 56,069 $ 48,697
=============== ===============
FIRSTCITY SHARE OF EQUITY EARNINGS (LOSS):
Domestic $ 1,949 $ 2,347
Mexico 112 (2,060)
France 1,784 727
France-Servicing subsidiaries 330 216
--------------- ---------------
Total $ 4,175 $ 1,230
=============== ===============
SELECTED OTHER DATA:
AVERAGE INVESTMENT IN WHOLLY OWNED PORTFOLIO ASSETS
AND LOANS RECEIVABLE:
Domestic $ 6,490 $ 9,558
Mexico 13,133 15,354
France 2,155 --
Other foreign 34 --
--------------- ---------------
Total $ 21,812 $ 24,912
=============== ===============
INCOME FROM WHOLLY OWNED PORTFOLIO ASSETS AND LOANS RECEIVABLE:
Domestic $ 196 $ 913
Mexico 376 878
France 26 --
Other foreign -- --
--------------- ---------------
Total $ 598 $ 1,791
=============== ===============
SERVICING FEE REVENUES:
Domestic partnerships:
$ Collected $ 26,353 $ 24,051
Servicing fee revenue 1,038 1,041
Average servicing fee % 3.9% 4.3%
Mexico partnerships:
$ Collected $ 14,846 $ 16,512
Servicing fee revenue 1,956 2,395
Average servicing fee % 13.2% 14.5%
Incentive service fees $ 38 $ 71
Total Service Fees:
$ Collected $ 41,199 $ 40,563
Servicing fee revenue 3,032 3,507
Average servicing fee % 7.4% 8.6%
SERVICING PORTFOLIO (FACE VALUE)
Domestic $ 415,835 $ 399,403
Mexico 1,007,366 1,141,495
France and Italy 811,951 730,710
--------------- ---------------
Total $ 2,235,152 $ 2,271,608
=============== ===============
NUMBER OF PERSONNEL AT PERIOD END:
Domestic 91 76
Mexico 162 143
--------------- ---------------
Total personnel 253 219
=============== ===============
</Table>
7
FIRSTCITY FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2004 2003
--------------- ---------------
CONSUMER LENDING: (1)
Retail installment contracts acquired $ 244,121 $ 126,118
Origination characteristics:
Face value to wholesale value 102.40% 98.86%
Weighted average coupon 21.10% 20.91%
Purchase discount (% of face value) 17.34% 17.08%
Servicing portfolio (face value in $) 998,491 723,456
Defaults (% of original balance at time of default) 20.77% 21.03%
Net loss on defaults after recovery 10.98% 10.83%
Delinquencies (% of total serviced portfolio) 11.52% 4.66%
Equity in earnings (loss) of Drive $ 5,037 $ 861
Minority interest (1,006) (172)
--------------- ---------------
Net equity in earnings (loss) of Drive $ 4,031 $ 689
=============== ===============
</Table>
(1) Auto lending business conducted by Drive Financial Services LP, of
which FirstCity owns 31% and accounts for its investment using the
equity method of accounting.
8