-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OX0vM7gpMNt7UQCmf8B3caLcbL6LA2jbJFQyR9oIQQNs4l55ONhzWT0CjgSG8T40 J+LjyyBck0N8zNXLlFABEw== 0001157523-04-001326.txt : 20040212 0001157523-04-001326.hdr.sgml : 20040212 20040212164148 ACCESSION NUMBER: 0001157523-04-001326 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040212 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RESIDENTIAL INVESTMENT TRUST INC CENTRAL INDEX KEY: 0001035744 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330741174 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13485 FILM NUMBER: 04592231 BUSINESS ADDRESS: STREET 1: 445 MARINE VIEW AVE SUITE 230 STREET 2: STE 260 CITY: DEL MAR STATE: CA ZIP: 92014 BUSINESS PHONE: 6193505008 MAIL ADDRESS: STREET 1: 445 MARINE VIEW AVE SUITE 230 CITY: DEL MAR STATE: CA ZIP: 92014 8-K 1 a4571946.txt AMERICAN RESIDENTIAL INVESTMENT TRUST, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 February 12, 2004 ---------------------------------------------- Date of Report (Date of earliest event reported) American Residential Investment Trust, Inc. ---------------------------------------------- (Exact name of registrant as specified in its charter) Maryland ---------------------------------------------- (State or other jurisdiction of incorporation) 1-13485 33-0741174 - --------------------------- ------------------------------------ (Commission File Number) (IRS Employer Identification No.) 10421 Wateridge Circle, Suite 250 San Diego, CA 92121 ------------------------------------------------------ (address of principal executive offices) (Zip Code) 858-909-1200 ---------------------------------------------- (Registrant's telephone number, including area code) Item 7. Financial Statements and Exhibits. (c) Exhibits Exhibit No. Description ---------- ------------ 99.1 February 12, 2004 Press Release by American Residential Investment Trust, Inc. Item 12. Results of Operations and Financial Condition The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by American Residential Investment Trust, Inc. (the "Company") whether before or after the date hereof, regardless of any general incorporation language in such filing. On February 12, 2004, the Company issued a press release which included certain disclosures relating to the Company's financial results for the fiscal quarter and year ended December 31, 2004. The full text of the Company's press release is attached hereto as Exhibit 99.1. The main purpose of the press release was to report financial results of the Company for the quarter and year ended December 31, 2004. The Company's press release contains certain non-GAAP financial measures (as defined under SEC regulations). We earn interest income and incur interest expense in both segments of our operations. In the Mortgage Banking Business, AmNet earns interest on a loan from the date the loan is funded until final disposition of the loan sale. Accordingly, interest income is a function of the volume of loans funded, the interest rate on the loans and the length of time the loans are held prior to sale. To the extent AmNet funds loans with borrowings under its warehouse facilities, it records interest expense based on the same factors. Similarly, in the Mortgage Asset Portfolio Business, we generate revenue on the interest we receive on the mortgage loans we hold for investment and we incur interest expense on the borrowings used to fund our loan portfolio. Because the interest income and interest expense in each segment of our business are closely related and dependant on many of the same factors, in particular the volume of loans we originate or hold for investment, management believes that it is helpful in understanding our operations to analyze the impact of interest income and expense together within each segment of our operations. For this reason, the press release text provides information regarding the net interest income (interest income less interest expense) generated by each segment. Management believes that this is consistent with how financial analysts typically consider interest in analyzing mortgage banking operations. For the same reasons, in our discussion of the Mortgage Banking Business, the discussion of expenses includes a discussion of our operating expenses, which excludes interest expense. Because certain other expenses incurred by AmNet in the Mortgage Banking Business, such as commissions and contract labor, also vary with the volume of AmNet's loan originations, management also believes that it is important in understanding this business to consider the variable and the fixed expenses separately. Accordingly, we have included an estimated breakdown of variable amounts for our mortgage banking operating expenses. Management believes that this will enable a better understanding of the Company's results and the likely impact in the future of changes in our origination volumes. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. American Residential Investment Trust, Inc. Date: February 12, 2004 By: /s/ Judith A. Berry ------------------------------ Judith A. Berry Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 February 12, 2004 Press Release by American Residential Investment Trust, Inc. EX-99.1 3 a4571946ex991.txt EXHIBIT 99.1 Exhibit 99.1 American Residential Reports Fourth-Quarter and 2003 Results SAN DIEGO--(BUSINESS WIRE)--Feb. 12, 2004--American Residential Investment Trust, Inc. (Amex(R): INV), the parent company of American Mortgage Network (AmNet), a wholesale mortgage bank serving mortgage brokers nationwide, today reported fourth-quarter and 2003 results, highlights of which included: -- Fourth-quarter consolidated net loss was $406,000, or $0.05 per diluted share, inclusive of $1.0 million, or $0.13 per diluted share related to tax benefits; -- 2003 consolidated net income, however, was a record $29.0 million, or $3.57 per diluted share, inclusive of $10.9 million, or $1.34 per diluted share related to tax benefits; compared to net income of $1.6 million or $0.20 a share for the year ended December 31, 2002; -- Exclusive of tax benefits, 2003 consolidated net income was $18.1 million or $2.23 per diluted share; -- Mortgage loans funded through AmNet were $1.9 billion in the fourth quarter and $10.2 billion for 2003, compared to $1.9 billion in the fourth quarter of 2002 and $4.2 billion for the year ended December 31, 2002; and -- Book value per outstanding share was $11.24 and cash and cash equivalents were $46.5 million as of December 31, 2003, compared to $7.57 and $14.8 million at December 31, 2002. Consolidated Results American Residential reported a consolidated net loss of $406,000, or $0.05 per diluted share, for the fourth quarter of 2003. Consolidated net income for 2003 was $29.0 million, or $3.57 per diluted share, inclusive of $10.9 million, or $1.34 per diluted share, related to tax benefits. Exclusive of tax benefits, 2003 consolidated net income was $18.1 million or $2.23 per diluted share. Consolidated net income in 2002 was $1.6 million, or $0.20 per diluted share. Commenting on results for the fourth quarter and year, John M. Robbins, Jr., Chief Executive Officer, said, "While the fourth quarter did not meet expectations, 2003 as a whole was a year of significant achievement for American Mortgage Network. Since its inception two years ago, AmNet has become one of the top 25 wholesale lenders in the country. We strengthened our operating platform, enabling us to expand rapidly, grow market share and create value for stockholders. We aggressively expanded into new geographic areas by opening 12 new regional loan production offices, bringing our total to 21. Our product offerings now cover some 80 programs ranging from conforming to Alt-A loans to serve a wide range of borrower's needs in a purchase market. This growth has been accomplished organically as we simultaneously strengthened our balance sheet and accumulated substantial cash reserves. Robbins continued, "Loan volume did decline in the fourth quarter and margins on that volume were compressed. During the second and third quarter, we aggressively entered new markets and increased staff to handle volume and to capitalize on this unprecedented market opportunity. However, when fourth-quarter activity abruptly slowed, the staffing levels we put in place to respond to second and third quarter volumes were no longer necessary, so we have reduced headcount in most branches and eliminated overtime and temporary labor costs. Our ongoing challenge will be to balance future growth opportunities with the reality of today's mortgage market. Consequently, as we enter new markets and add to our sales force, operations in existing branches will continue to be evaluated and rightsized to align infrastructure costs with volume levels." The Company reports its results in two segments -- mortgage banking (AmNet) and mortgage asset portfolio investments (AMREIT). Mortgage Banking Business -- American Mortgage Network (AmNet) AmNet funded $1.9 billion in home loans during the fourth quarter, a 39% decrease over the third quarter of 2003. For the year ended December 31, 2003, AmNet funded $10.2 billion in home loans, compared to $4.2 billion in 2002, an increase of 145%. AmNet Operating Results For the fourth quarter of 2003, AmNet's loss before income taxes was $2.9 million, compared to income before income taxes of $5.1 million in the fourth quarter of 2002. Income before income taxes in 2003 was $23.5 million, compared to 2002's loss before income taxes of $7.4 million. The loss in the fourth quarter of 2003 was a result of a sharp decrease in loan volumes and compressed margins on that volume. Gain on the sale of loans and other fee income, net of hedging, totaled $12.9 million or 69 basis points on $1.9 billion of loan fundings, as compared to 81 basis points in the third quarter, reflecting competitive pricing pressure in the fourth quarter. Interest on mortgage assets in the fourth quarter was $6.0 million and was offset by interest expense of $2.8 million, resulting in a net interest spread on loans held for sale of $3.2 million, or 17 basis points on $1.9 billion of loan fundings. AmNet's operating expenses, excluding interest, totaled $19.0 million during the fourth quarter, or 102 basis points on loan fundings. These expenses included an estimated $6.5 million in sales commissions and other variable expenses, representing approximately 34% of total operating expenses. Commenting on mortgage operations in the fourth quarter, Robbins said, "Although we have reduced our administrative infrastructure, we also expanded our sales presence nationally by opening offices in Dallas and Houston, Texas and recruiting mortgage banking professionals for offices in Florida, New York and Utah. We also added new account executives to our 21 existing offices, bringing the total number of commissioned account executives to 91 at year-end. AmNet's new technology platform, through investment in the IBM I Series, is helping AmNet deliver more speed and flexibility to our broker customers. AmNet's warehouse loan funding capacity totals $1.4 billion at year-end, compared to $750 million at December 31, 2002. AmNet has lending partnerships with Countrywide Warehouse Lending, JPMorgan Chase Bank, UBS Warburg Real Estate Securities Inc and GMAC Residential Funding. Mortgage Asset Portfolio Investments (AMREIT) The Company's total mortgage assets held for portfolio investment were $161.3 million at December 31, 2003 compared to $267.1 million at December 31, 2002. Since 2000, the dollar value of the Company's portfolio of mortgage assets has declined due to the decision to cease loan portfolio acquisitions, build cash reserves and re-deploy capital into the Company's mortgage banking business. In the fourth quarter of 2003, interest on mortgage assets was $2.1 million and interest expense was $1.0 million, resulting in a net interest spread of approximately $1.1 million, or approximately 2.5% of December 31, 2003 bond collateral and real estate owned on an annualized basis. Non-cash loan premium amortization expense totaled $878 thousand for the period. At year-end 2003, remaining unamortized premiums were $3.8 million, down from $7.3 million at December 31, 2002. Liquidity and Book Value Cash and cash equivalents were $ 46.5 million as of December 31, 2003, an increase of 215 % from December 31, 2002, and cash per outstanding share increased from $1.88 at December 31, 2002 to $5.91 at December 31, 2003. The Company's book value per outstanding share was $11.24 at December 31, 2003, compared to $7.57 at December 31, 2002. Strategic Initiatives Robbins added, "Several strategic initiatives are essential to ensure top-line growth and preserve margins. These include: -- Growing our market share through the addition of experienced, commissioned account executives coupled with market penetration of new metropolitan statistical areas (MSAs); -- Expanding our product line to specifically target brokers' needs in a purchase market and deliver loan products that yield higher margins; and -- Leveraging our technology platform to improve efficiencies and increase productivity. We have not let the slowdown in the market stop us. Rather, we intend to pursue the plans for growing our sales presence that have been in place for some time, leveraging the infrastructure already in place. Offices in Fort Lauderdale and Orlando began funding loans in January to extend our presence in Florida. AmNet's loan production office in Long Island, New York also began funding loans. By the end of 2004, we plan to have 32 loan production offices operational--a key element of our carefully orchestrated plan to expand the branch network into the other top MSAs. We continue to recruit experienced mortgage banking professionals and have increased the number of commissioned account executives by 65% since June 30, 2003. In January, we reached a critical milestone -- there are nearly 5,000 broker customers approved to do business with us. Robbins continued, "One of our most significant initiatives was the launch of a subprime program led by Laura Swartz, a recognized industry leader. Laura and her team join a group of senior managers at AmNet who have a wealth of experience in the subprime arena. All subprime loans will be underwritten centrally in our home office, not at the branch offices. Loans will be underwritten to meet the specifications of investors. We have already lined up capital market and investor partners for this program. As with our other loan products, we will sell subprime loans on a servicing released basis to minimize our long-term credit risk to AmNet, as is the case with any other type of loan we originate. In addition, we intend to continue to make investments in our technology platform to increase our value proposition to our broker customers, as well as to give us the ability to more effectively align cost structure with current loan demand by maximizing productivity and efficiency, and lowering unit costs." "I am very pleased to announce that two new directors will join the Board. They are Robert T. Barnum, former Chief Operating Officer of American Savings Bank, a $20 billion California thrift, and Robert A. Gunst, Chairman of the Board of Directors for Garden Fresh Restaurants Corporation and former President and CEO of The Good Guys, Inc. (Nasdaq: GGUY). Both individuals bring immense knowledge and experience to AmNet and are committed to our growth and profitability." Discussing specific metrics for the year, Judith A. Berry, Executive Vice President and Chief Financial Officer, said, "While we expect losses in the first quarter, we anticipate that profitability will be restored during the second quarter with profits increasing in the third and fourth quarters of 2004 as quarter-over-quarter volumes increase and the branch network matures. We are optimistic that a well-executed expansion plan, coupled with the rollout of our subprime initiative, will drive up loan production and help us to expand margins." "We are also looking at a variety of options to enhance stockholder value in 2004," Robbins concluded. At the end of 2003, our cash position exceeded 50% of our stockholders equity balance. Some of our cash will be used to support the anticipated growth in loan funding volume, including investments in the rollout of our subprime business, the expansion of our regional network and marketing support for our broker customers. We continue to evaluate the capital and cash needed for our growth plans as well as other possible uses of cash such as strategic acquisitions. Opportunities occur in a consolidating market and benefit those who have the capital to invest. As growth goals are met, the Board of Directors will continue to consider alternatives which could include dividends and share repurchase." Conference Call and Webcast Management will host a conference call with a simultaneous webcast today at 1:30 p.m. Pacific/4:30 p.m. Eastern to discuss fourth quarter and full-year operating performance. The conference call, featuring Chairman and Chief Executive Officer John M. Robbins and Executive Vice President and Chief Financial Officer Judith A. Berry, will be available live via the Internet. To listen to the webcast, log on to the Company's web site at www.amerreit.com and click on the link that appears on the home page. The webcast will also be available live at www.fulldisclosure.com. An online replay will be available at www.amerreit.com for one year. A telephone replay will be available through February 19, 2004 by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code 5271673. Electronic versions of news releases may be accessed via the Company's web site at www.amerreit.com. About American Mortgage Network Headquartered in San Diego, California, AmNet is a wholly owned subsidiary of American Residential Investment Trust, Inc. AmNet originates loans for the national mortgage broker community through its network of branches and business-to-business over the Internet. AmNet has loan production offices in Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas, Virginia and Washington. AmNet has a total of $1.4 billion in warehouse borrowing capacity and is approved to do business in 49 states and the District of Columbia either by license or exemption. AmNet has nearly 5,000 approved broker customers across the nation. For more information, please visit www.amnetmortgage.com. About American Residential Investment Trust American Residential Investment Trust, Inc. is the parent company of American Mortgage Network. For more information, please visit www.amerreit.com. Forward Looking Statement Certain matters discussed in this press release may constitute forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements regarding the growth of AmNet's sales presence, the number of operational loan production offices by the end of 2004, underwriting locations and specifications for subprime loans, the planned servicing released sales for subprime loans, the Company's intent to continue investing in its technology platform, expected losses for the Company in the first quarter of 2004, profitability being restored and increasing during the second through fourth quarters of 2004, the expectation that the Company's expansion plan and subprime initiative will increase loan production and expand margins, uses of cash in 2004 and the Company's Board of Directors consideration of dividends and share repurchase. Actual results and the timing of certain events could differ materially from those projected in or contemplated by these forward-looking statements due to a number of factors, including but not limited to: the level of interest rates generally; economic conditions generally; the size of the national mortgage market, including subprime loans; the stability of the subprime mortgage secondary market; the predictability of the Company's expenses and margins; the future correlation of volatility in forward mortgage sale instruments to the Company's loan lock commitments; interest rate volatility; the availability of financing for the funding of mortgage loans, including subprime loans; the Company's liquidity position; the availability of qualified mortgage professionals and other risk factors outlined in American Residential's SEC reports. AMERICAN RESIDENTIAL INVESTMENT TRUST, INC. - ---------------------------------------------------------------------- Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended -------------------------------------------- 12/31/2003 12/31/2002 12/31/2003 12/31/2002 -------------------------------------------- Income Statement -- -- -- -- -- -- -- -- -- -- -- -- Mortgage Banking Segment: Revenues Gain on sales of loans $16,444 $21,413 $79,203 $46,667 -------------------------------------------- Derivative financial instruments: Treasury futures and options and related commissions and fees -- (49) -- (18,171) Forward sales of mortgage backed securities (MBS) and options on MBS 1,067 (6,470) 2,182 (16,262) Market adjustment on loan commitment pipeline (4,644) (1,648) (2,104) 2,663 -------------------------------------------- Total derivative financial instruments (3,577) (8,167) 78 (31,770) -------------------------------------------- Interest on mortgage assets 6,032 6,857 29,875 14,908 Other income 18 1 94 10 -------------------------------------------- Total revenue, net of derivative financial instruments 18,917 20,104 109,250 29,815 -------------------------------------------- Expenses Interest expense 2,826 3,557 13,482 7,790 Operating expenses 19,005 11,475 72,220 29,427 -------------------------------------------- Total expenses 21,831 15,032 85,702 37,217 -------------------------------------------- Income (loss) before income taxes - Mortgage Banking Segment $(2,914) $5,072 $23,548 $(7,402) Mortgage Asset Portfolio Segment: Revenues Interest on mortgage assets $2,065 $3,110 $10,906 $16,630 Other income 226 253 1,171 1,326 Litigation Settlement -- -- -- 10,281 -------------------------------------------- Total revenue 2,291 3,363 12,077 28,237 -------------------------------------------- Expenses Interest expense 1,040 1,972 4,840 10,430 Provision for loan losses 964 835 3,441 5,454 (Gain) Loss on sale of real estate owned, net (170) (31) (921) 121 Operating expenses 610 982 2,345 3,263 -------------------------------------------- Total expenses 2,444 3,758 9,705 19,268 -------------------------------------------- Income (loss) before income taxes - Mortgage Asset Portfolio Segment $(153) $(395) $2,372 $8,969 Consolidated Income (loss)- Combined Segments $(3,067) $4,677 $25,920 $1,567 Provision for income tax expense (benefit) (1,642) -- 7,781 7 Income tax benefit from termination of REIT status (1,019) -- (10,884) -- Consolidated Net Income (loss) $(406) $4,677 $29,023 $1,560 Per Share Data - -------------------------- Weighted average common shares outstanding 7,862,949 7,862,490 7,861,988 7,884,983 Consolidated income (loss) per share basic $(0.05) $.59 $3.69 $0.20 Consolidated income (loss) per share diluted $(0.05) $0.59 $3.57 $0.20 Loan Origination Data - -------------------------- Total mortgage loans funded in period ($ millions) $1,855 $1,943 $10,173 $4,159 Number of loans funded 11,055 10,968 57,814 23,553 Balance Sheet Data - -------------------------- Cash and cash equivalents $44,400 $13,647 Restricted cash 2,100 1,125 Bond collateral mortgage loans and real estate owned, net of reserves 161,252 267,094 Mortgage loans held for sale, net 276,781 390,125 Total assets 507,387 685,307 Short-term debt 268,619 378,553 Long-term debt, net 130,295 237,456 Total stockholders' equity $88,486 $59,485 Book value per share basic $11.24 $7.57 Book value per share diluted $10.86 $7.57 Debt to equity ratio 4.7:1 10.5:1 ($ in thousands, except per share data and as noted) CONTACT: American Residential Investment Trust, Inc., San Diego Investor and Analyst Relations: Judith Berry, Executive Vice President and Chief Financial Officer, 858-909-1230 jberry@amnetmortgage.com or Clay Strittmatter, Senior Vice President, Finance 858-909-1340 cstrittmatter@amnetmortgage.com or FRB -- Weber Shandwick Rose Tucker, 310-407-6522 rtucker@webershandwick.com or American Residential Investment Trust, Inc. Media Relations: Kasey Emmel, Vice President, Marketing & Communications 858-909-1335 kemmel@amnetmortgage.com or Forti Communications Inc. Corinne Forti, President, 805-498-0113 cforti@amnetmortgage.com forticomm@aol.com -----END PRIVACY-ENHANCED MESSAGE-----