EX-99.1 3 h08409exv99w1.txt PRESS RELEASE ISSUED ON AUGUST 14, 2003 NEWS RELEASE (FIRST CITY FINANCIAL CORPORATION LOGO) contact: Suzy W. Taylor (866) 652-1810 FIRSTCITY FINANCIAL ANNOUNCES SECOND QUARTER 2003 RESULTS WACO, TEXAS AUGUST 14, 2003... FirstCity Financial Corporation (Nasdaq FCFC) today announced earnings from continuing operations for the quarter ended June 30, 2003 of $4,237,000. Earnings to common shareholders were $3,750,000 or $.33 per share on a diluted basis, after subtracting $67,000 in accrued and unpaid dividends on the Company's preferred stock. Components of the profits for the second quarter and six months ended June 30, 2003 and 2002 are detailed below:
(UNAUDITED) FOR THE FOR THE QUARTER ENDED SIX MONTHS ENDED ($ THOUSANDS) JUNE 30, JUNE 30, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Portfolio Acquisition and Resolution $ 4,636 $ 5,982 $ 6,413 $ 8,313 Consumer 2,052 395 2,627 (686) Corporate interest (1,188) (847) (2,360) (1,669) Corporate overhead (1,263) (1,328) (2,462) (2,590) ------------ ------------ ------------ ------------ Earnings from continuing operations 4,237 4,202 4,218 3,368 ------------ ------------ ------------ ------------ Loss from discontinued operations (420) (1,500) (420) (2,000) Accrued preferred dividends (67) (642) (133) (1,284) ------------ ------------ ------------ ------------ Net earnings to common stockholders $ 3,750 $ 2,060 $ 3,665 $ 84 ============ ============ ============ ============
PORTFOLIO ASSET ACQUISITION Operating contribution for the quarter was $4.6 million, and includes an additional $.8 million of profits representing the Company's share of a $1.7 million gain recorded in several domestic acquisition partnerships that completed a bulk loan sale of performing and non-performing assets with a carrying value of $8.3 million for proceeds of $10 million. As a result of the sale, the Company also recorded additional servicing fees of $.3 million. The operating contribution was also positively impacted by $1.3 million in foreign currency gains related to the Mexican peso ($1.1 million), and the Euro ($143,000). Profit contribution of this business was comprised of $9.8 million in revenues, net of $5.2 million of expenses. The major components of revenue for the quarter include equity earnings in Acquisition Partnerships of $4.2 million, servicing fees of $4.1 million, and interest income of $1.1 million. The business generated 55% of the revenues from domestic investments, 39% from investments in Mexico and 6% from investments in Europe. Acquisitions were strong during the second quarter totaling $32.2 million. Purchases were comprised of four portfolios, two in France for a total purchase price of $20.1 million, one in the United States for $6.7 million, and one in Mexico for $5.4 million. The Company invested $11.4 million in these portfolios of which $3.4 million was invested in the U.S., $1.1 million in Mexico and $6.9 million in France. 31% INTEREST IN DRIVE FINANCIAL FirstCity owns a 31% interest in Drive Financial Services L.P., a subprime auto lending company. Drive originated $128 million of receivables during the quarter. Defaults and losses have risen to 21.46% and 11.07%, respectively, at the end of the quarter compared to 17.70% and 8.43%, respectively, for the same period last year. These increases are primarily a result of a continued weakness in the economy and the resulting impact on used car prices. Delinquencies were 6.00%, down from 6.76% for the prior year quarter. (more) (2) Drive continues on a strategy to grow the balance sheet and record interest income from loans and interest expense on the related debt as incurred to build an earnings stream over time. The trend is detailed in the table below:
(UNAUDITED) INCOME (LOSS) BEFORE PROVISIONS ON PROVISIONS ON NET INCOME FIRSTCITY'S 31% $ Thousands LOAN INVENTORY TOTAL ASSETS RESIDUAL ASSETS RESIDUAL ASSETS (LOSS) SHARE --------------- --------------- --------------- --------------- --------------- --------------- 2nd Quarter 2003 $ 511,212 $ 619,269 $ 8,251 $ (1,240) $ 7,011 $ 2,173 1st Quarter 2003 $ 443,099 $ 551,412 $ 3,707 $ (1,217) $ 2,490 $ 689 Prior year: 4th Quarter 2002 368,379 472,553 3,207 (3,303) (96) (29) 3rd Quarter 2002 310,540 416,295 1,025 (112) 913 282 2nd Quarter 2002 238,096 341,882 1,281 -- 1,281 398 1st Quarter 2002 159,052 254,647 (3,470) -- (3,470) (1,076)
As the table shows, the trend of income (loss) before provisions for residual assets reflects the positive effects of growing the balance sheet. DISCONTINUED OPERATIONS The anticipated net realizable value of the Company's investment in discontinued operations decreased slightly to $7.7 million at June 30, 2003, down from $7.9 million at March 31, 2003. The $7.7 million valuation is net of reserves of $.3 million. The provision for discontinued operations of $420,000 for the quarter resulted primarily due to increased prepayments. CONFERENCE CALL FirstCity will host a conference call to discuss the quarterly results today, Thursday, August 14, 2003 at 9:00 a.m., CDT. James T. Sartain, FirstCity's President and Chief Executive Officer will lead the call. To participate, dial 1-888-614-6579 and specify conference I.D. number 234147. 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 1-800-615-3210. The pass code for the replay is 234147. The replay will be available through Wednesday August 27, 2003. 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 FirstCity's actual results to differ materially. These factors include, but are not limited to, the performance of FirstCity'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; the degree to which FirstCity is leveraged, FirstCity's continued need for financing, availability of FirstCity's credit facilities, the impact of certain covenants in loan agreements of FirstCity and its subsidiaries, risks of declining value of loans, collateral or assets, the ability of FirstCity to utilize net operating loss carryforwards, 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 Financial Condition and Results of Operations," risk factors and other risks identified in FirstCity's Annual Report on Form 10-K, filed with the SEC on April 15, 2003, as well as in FirstCity's other filings with the SEC. (more) (3) Many of these factors are beyond FirstCity's control. In addition, it should be noted that past financial and operational performance of FirstCity 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. FirstCity expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in FirstCity's expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based. FirstCity 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. FIRSTCITY FINANCIAL CORPORATION SUMMARY OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Revenues: Servicing fees from affiliates $ 4,086 $ 4,170 $ 7,593 $ 6,392 Gain on resolution of Portfolio Assets 272 456 967 700 Equity in earnings of investments 6,933 3,939 9,024 5,414 Interest income from affiliates 911 1,081 1,826 2,101 Interest income - other 157 276 345 561 Gain on sale of interest in equity investments -- 1,779 -- 1,779 Other income 254 936 616 1,176 ---------- ---------- ---------- ---------- Total revenues 12,613 12,637 20,371 18,123 Expenses: Interest and fees on notes payable to affiliates 1,804 1,531 3,695 2,936 Interest and fees on notes payable - other 52 94 114 237 Salaries and benefits 4,098 3,425 7,594 6,160 Provision for loan and impairment losses (56) 22 (22) 121 Occupancy, data processing, communication and other 1,736 2,460 3,730 4,370 ---------- ---------- ---------- ---------- Total expenses 7,634 7,532 15,111 13,824 Earnings from continuing operations before income taxes and minority interest 4,979 5,105 5,260 4,299 (Provision) benefit for income taxes (133) 6 (254) (7) ---------- ---------- ---------- ---------- Earnings from continuing operations before minority interest 4,846 5,111 5,006 4,292 Minority interest (609) (909) (788) (924) ---------- ---------- ---------- ---------- Earnings from continuing operations 4,237 4,202 4,218 3,368 Loss from discontinued operations (420) (1,500) (420) (2,000) ---------- ---------- ---------- ---------- Net earnings 3,817 2,702 3,798 1,368 Accumulated preferred dividends in arrears (67) (642) (133) (1,284) ---------- ---------- ---------- ---------- Net earnings to common shareholders $ 3,750 $ 2,060 $ 3,665 $ 84 ========== ========== ========== ========== Basic and diluted earnings per common share are as follows: Earnings from continuing operations $ 0.37 $ 0.43 $ 0.37 $ 0.25 Discontinued operations (0.04) (0.18) (0.04) (0.24) Net earnings per common share $ 0.33 $ 0.25 $ 0.33 $ 0.01 Wtd. avg. common shares outstanding 11,204 8,376 11,203 8,376
SELECTED UNAUDITED BALANCE SHEET DATA
JUNE 30, DECEMBER 31, 2003 2002 ------------ ------------ Cash $ 3,995 $ 4,118 Portfolio acquisition and resolution assets 79,849 77,744 Consumer assets 12,114 9,127 Deferred tax asset 20,101 20,101 Net assets of discontinued operations 7,696 7,764 Total assets 131,709 126,456 Notes payable to affiliates 95,542 95,560 Notes payable other 2,685 1,113 Preferred stock 3,713 3,705 Total common shareholders' equity 22,575 18,752
4 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ SUMMARY OPERATING STATEMENT DATA FOR EACH BUSINESS Portfolio Asset Acquisition and Resolution: Revenues $ 9,823 $ 12,098 $ 16,659 $ 18,889 Expenses 5,243 6,094 10,268 10,455 ------------ ------------ ------------ ------------ Operating contribution before provision for loan and impairment losses 4,580 6,004 6,391 8,434 Provision for loan and impairment losses (56) 22 (22) 121 ------------ ------------ ------------ ------------ Operating contribution, net of direct taxes $ 4,636 $ 5,982 $ 6,413 $ 8,313 ============ ============ ============ ============ Consumer Lending: Revenues, net of equity in loss of investment $ 2,716 $ 497 $ 3,577 $ (848) Expenses, net of minority interest 664 102 950 (162) ------------ ------------ ------------ ------------ Operating contribution (loss), net of direct taxes $ 2,052 $ 395 $ 2,627 $ (686) ============ ============ ============ ============ PORTFOLIO ASSET ACQUISITION AND RESOLUTION: OVERVIEW AGGREGATE PURCHASE PRICE OF PORTFOLIOS ACQUIRED: Acquisition partnerships Domestic $ 6,750 $ 7,724 $ 6,750 $ 20,494 Mexico 5,400 -- 5,400 11,709 France 20,055 27,502 20,055 27,502 Italy -- 16,943 -- 16,943 ------------ ------------ ------------ ------------ Total $ 32,205 $ 52,169 $ 32,205 $ 76,648 ============ ============ ============ ============
PURCHASE FIRSTCITY'S PRICE INVESTMENT ------------ ------------ HISTORICAL ACQUISITIONS - ANNUAL: 2003 year to date $ 32,205 $ 11,365 2002 171,769 16,717 2001 224,927 24,319 2000 394,927 22,140 1999 210,799 11,203 1998 139,691 28,478
JUNE 30, JUNE 30, 2003 2002 ------------ ------------ PORTFOLIO ACQUISITION AND RESOLUTION ASSETS BY REGION: Domestic $ 41,011 $ 44,023 Mexico 16,840 20,054 France and Italy 21,998 13,095 ------------ ------------ Total $ 79,849 $ 77,172 ============ ============ REVENUES BY REGION: Domestic $ 5,387 $ 8,515 $ 9,794 $ 11,961 Mexico 3,795 931 5,220 3,367 France and Italy 641 2,648 1,645 3,556 Other foreign -- 4 -- 5 ------------ ------------ ------------ ------------ Total $ 9,823 $ 12,098 $ 16,659 $ 18,889 ============ ============ ============ ============ REVENUES BY SOURCE: Equity earnings $ 4,217 $ 3,442 $ 5,447 $ 6,262 Servicing fees 4,086 4,170 7,593 6,392 Interest income - loans 1,062 1,313 2,158 2,590 Gain on sale of interest in equity investment -- 1,779 -- 1,779 Gain on resolution of Portfolio Assets 272 456 967 700 Other 186 938 494 1,166 ------------ ------------ ------------ ------------ Total $ 9,823 $ 12,098 $ 16,659 $ 18,889 ============ ============ ============ ============
5 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------------- ---------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- ANALYSIS OF EQUITY INVESTMENTS IN ACQUISITION PARTNERSHIPS: FIRSTCITY'S AVERAGE INVESTMENT IN ACQUISITION PARTNERSHIPS Domestic $ 33,089 $ 33,385 $ 33,109 $ 33,181 Mexico 1,036 1,189 1,040 1,258 France 11,628 8,767 11,535 8,825 France-Servicing subsidiaries 3,737 2,650 3,575 2,399 ----------- ----------- ----------- ----------- Total $ 49,490 $ 45,991 $ 49,259 $ 45,663 =========== =========== =========== =========== FIRSTCITY SHARE OF EQUITY EARNINGS (LOSS): Domestic $ 3,264 $ 4,544 $ 5,611 $ 6,502 Mexico 390 (1,897) (1,670) (1,914) France 460 534 1,187 994 France-Servicing subsidiaries 103 261 319 680 ----------- ----------- ----------- ----------- Total $ 4,217 $ 3,442 $ 5,447 $ 6,262 =========== =========== =========== =========== SELECTED OTHER DATA: AVERAGE INVESTMENT IN WHOLLY OWNED PORTFOLIO ASSETS AND LOANS RECEIVABLE: Domestic $ 8,262 $ 13,662 $ 8,553 $ 14,167 Mexico 14,816 20,366 14,877 19,717 France 1,001 -- 715 -- ----------- ----------- ----------- ----------- Total $ 24,079 $ 34,028 $ 24,145 $ 33,884 =========== =========== =========== =========== INCOME FROM WHOLLY OWNED PORTFOLIO ASSETS AND LOANS RECEIVABLE: Domestic $ 462 $ 748 $ 1,375 $ 1,284 Mexico 855 1,021 1,733 2,006 France 17 -- 17 -- ----------- ----------- ----------- ----------- Total $ 1,334 $ 1,769 $ 3,125 $ 3,290 =========== =========== =========== =========== SERVICING FEE REVENUES: Domestic partnerships: $ Collected $ 40,644 $ 104,388 $ 64,694 $ 136,211 Servicing fee revenue 1,541 2,333 2,582 3,150 Average servicing fee % 3.8% 2.23% 4.0% 2.31% Mexico partnerships: $ Collected $ 13,513 $ 29,156 $ 30,025 $ 48,350 Servicing fee revenue 2,484 1,632 4,879 2,986 Average servicing fee % 18.4% 5.60% 16.2% 6.18% Incentive service fees $ 61 $ 205 $ 132 $ 256 Total Service Fees: $ Collected $ 54,157 $ 133,544 $ 94,719 $ 184,561 Servicing fee revenue 4,086 4,170 7,593 6,392 Average servicing fee % 7.5% 3.12% 8.0% 3.46% SERVICING PORTFOLIO (FACE VALUE) Domestic $ 361,957 $ 406,918 Mexico 1,222,626 1,391,792 France and Italy 905,224 731,566 ----------- ----------- Total $ 2,489,807 $ 2,530,276 =========== =========== NUMBER OF PERSONNEL AT PERIOD END: Domestic 70 78 Mexico 166 82 ----------- ----------- Total personnel 236 160 =========== ===========
6 FIRSTCITY FINANCIAL CORPORATION SUPPLEMENTAL INFORMATION (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- CONSUMER LENDING: (1) Retail installment contracts acquired $ 127,706 $ 100,780 $ 253,825 $ 214,181 Origination characteristics: Face value to wholesale value 98.71% 99.56% 98.79% 100.46% Weighted average coupon 21.04% 21.18% 20.97% 21.06% Purchase discount (% of face value) 17.50% 15.40% 17.29% 15.59% Servicing portfolio (face value in $) 768,889 637,229 Defaults (% of original balance at time of default) 21.46% 17.70% Net loss on defaults after recovery 11.07% 8.43% Delinquencies (% of total serviced portfolio) 6.00% 6.76% Equity in earnings (loss) of Drive $ 2,716 $ 497 $ 3,577 $ (848) Minority interest (543) (99) (715) 170 ----------- ----------- ----------- ----------- Net equity in earnings (loss) of Drive $ 2,173 $ 398 $ 2,862 $ (678) =========== =========== =========== =========== (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.
7