EX-99.1 2 h15148exv99w1.txt PRESS RELEASE 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):
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) =============== ===============
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):
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
(MORE) (2) 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):
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 --------- --------- --------- --------- --------- ---------
* 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):
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 ------------ ------------ ------------ ------------ ------------ ------------ ------------
*** 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. (MORE) (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 (MORE) (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)
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
SELECTED UNAUDITED BALANCE SHEET DATA
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
5 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
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 $ -- ============ ============
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
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 ============ ============
6 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
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 =============== ===============
7 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
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 =============== ===============
(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