-----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, GQu38PiS9M8uVDbWUUSoayeVhlpxtEFQv/wWQE0ZWuPC7dj1OJ+rpiGAX84X7Vef t4GAcb64+rnXknK6fBdp3g== 0000893220-98-000775.txt : 19980424 0000893220-98-000775.hdr.sgml : 19980424 ACCESSION NUMBER: 0000893220-98-000775 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980421 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980422 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-14120 FILM NUMBER: 98598300 BUSINESS ADDRESS: STREET 1: P.O. BOX 844 STREET 2: WELSH & MCKEAN ROADS CITY: SPRING HOUSE STATE: PA ZIP: 19044 BUSINESS PHONE: 2156574000 MAIL ADDRESS: STREET 1: BRANDYWINE CORPORATE CENTER STREET 2: 650 NAAMANS ROAD CITY: CLAYMONT STATE: DE ZIP: 19703 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 8-K 1 ADVANTA CORP. FORM 8-K DATED 4/21/98 1 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 Date of Report (Date of earliest event reported): April 21, 1998 Advanta Corp. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-14120 23-1462070 - ---------------------------- ---------------- -------------------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) Welsh and McKean Roads, P.O. Box 844, Spring House, PA 19477 - ------------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 657-4000 2 Item 5. Other Events On April 21, 1998 Advanta Corporation announced, consistent with earlier estimates, that it realized an after tax gain of $536.4 million in the first quarter from its transaction with Fleet Financial Group. The Company also announced that it closed the quarter with equity of $650.1 million after recognizing the effects of: (1) the gain from the Fleet transaction; (2) after tax charges totaling $132.7 million for restructuring and other similar items (as set forth in detail in the supplement); and (3) the Company's previously announced $850 million share repurchase. As previously estimated, as a result of the Fleet transaction and share repurchase, the Company had approximately $600 million available in unrestricted cash at the Parent. At March 31, 1998, the Company continues to have a strong cash position with approximately $400 million of unrestricted cash, cash equivalents and marketable securities at the Parent after using some of its cash to finance receivables on an interim basis. In addition, the Company had approximately $1.1 billion in cash, cash equivalents and marketable securities at its two banks. Management also reaffirmed that it is on track to earn $70 million in 1998 from its ongoing mortgage and business services units. This $70 million represents dilutive earnings per share of $2.64, for Class A and Class B shares combined, based on the share count at March 31, 1998 of approximately 26.5 million shares. In this quarter, Advanta reported net income from Advanta Mortgage and Advanta Business Services of $6.3 million. Highlights relating to the first quarter operating results of these businesses and the Company's first quarter restructuring charge follow: - Managed receivables for the Company's ongoing businesses, Advanta Mortgage and Advanta Business Services, expanded by 11.6% in the first quarter to $7.38 billion from $6.61 billion at year-end 1997, an annualized growth rate of over 46%. - The Company's operating expense ratio was 3.36%, compared to 3.65% in the last quarter and 3.23% reported in the first quarter of last year. - Advanta Mortgage originated a record $1.14 billion in new loans during the first quarter, an increase of 58.6% over the year-ago level. Managed receivables expanded by $0.74 billion during this quarter to $6.05 billion. - As of March 31, 1998, Advanta Mortgage serviced $8.8 billion of loans for third parties on a fee basis compared to $5.6 billion at this time last year and $9.2 billion at the end of 1997. - Net managed charge-off and delinquency rates for Advanta Mortgage were 0.87% and 7.05%, respectively. Charge-offs decreased slightly from the 0.91% reported in the last quarter and the delinquency rate was below the 7.38% at the end of that period. - In accordance with Advanta's practice of regularly reviewing and, where appropriate, adjusting the gain receivable (IO Strip) assumptions for the Company's experience, the Company recognized a pretax charge against first quarter earnings of $9.8 million. Prepayment rate assumptions used in valuing the Company's IO Strip were revised to 24% for fixed rate loans, 29% for intermediate rate loans and 34% for ARMs. 3 - Advanta Business Services' managed business loan and lease receivables of $1.29 billion at March 31, 1998 grew by 35.7% from $0.95 billion at the close of the first quarter of last year and 2.4% since the prior quarter. - Net managed charge-offs on business loans and leases were 4.54%. This represents an increase from 3.68% reported in the last quarter, while the over 30 day delinquency rate decreased to 6.15% from 6.46%. - Including the $536.4 million gain on the transaction with Fleet, the $132.7 million after-tax charges for restructuring and other similar items, and other income, which primarily consists of net income of the consumer card unit until the Fleet transaction, of $8.8 million, the Company reported consolidated net income of $418.8 million. This represents diluted earnings per share of $11.04, for Class A and Class B shares combined, on approximately 37.9 million weighted average shares outstanding. Last year, in the same period, the Company had reported a net loss of $19.8 million, or diluted loss per share of $0.51, on 42.5 million weighted average shares outstanding. Advanta is a highly focused financial services company with 2,300 employees, approximately $10.0 billion in managed assets and an additional $8.8 billion in assets serviced for third parties. Advanta provides consumers and small businesses with innovative products and services including mortgages, equipment leases, corporate credit cards, insurance and deposit products. The Company also provides a full range of loan purchasing, contract servicing and securitization services to the mortgage industry. This Report on Form 8-K contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The most significant among these risks and uncertainties are: (1) factors that affect consumer debt; (2) competitive pressures; (3) the level of delinquencies and charge-offs; (4) the rate of prepayments; (5) the level of expenses; (6) the timing of the securitizations of the Company's receivables; and (7) the ratings on the debt of the Company and its subsidiaries. Additional risks that may affect the Company's future performance are detailed in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. 4 Form 8-K Advanta Corp. April 21, 1998 Item 7. Financial Statements and Exhibits. (c) Exhibits: The following exhibits are filed as part of this Report on Form 8-K. 27 Financial Data Schedule. 99 Selected Summary Financial Data. 5 Form 8-K Advanta Corp. April 21, 1998 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Advanta Corp. By: /s/ ELIZABETH H. MAI --------------------------------- Elizabeth H. Mai, Senior Vice President, Secretary and General Counsel April 21, 1998 6 Form 8-K Advanta Corp. April 21, 1998 Index to Exhibits Exhibit Number Per Item 60l of Regulation S-K Description of Document - ------------------ ----------------------- 27 Financial Data Schedule. 99 Selected Summary Financial Data EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS MAR-31-1998 MAR-31-1998 94,517 230,746 114,300 0 1,571,764 0 0 916,166 17,914 3,532,356 935,041 662,888 311,415 972,911 0 1,010 258 548,833 3,532,356 46,454 26,857 0 73,311 36,249 31,295 5,767 33,961 32 264,373 397,328 397,328 0 0 418,787 11.84 11.84 .64 33,691 0 0 0 137,773 39,153 3,753 17,914 14,180 0 3,734
EX-99 3 FINANCIAL HIGHLIGHTS 1 Exhibit 99 ADVANTA AND SUBSIDIARIES FINANCIAL HIGHLIGHTS SUPPLEMENTARY SUMMARY OF EQUITY (in millions)
THREE MONTHS ENDED MARCH 31, 1998 ------------------ Balance at December 31, 1997 (including Mandatorily Redeemable Preferred Securities) $ 1,027.0 ------------ Components of net income: Gain on transfer of credit cards 536.4 Restructure/other similar charges, net of tax (132.7) Mortgage, Leases & Corporate Cards, net of tax 6.3 Other, net 8.8 ------------ Total net income 418.8 ------------ Components of other changes in equity: Share repurchase (850.0) Capital credits from stock option exercises associated with the Fleet transaction 50.1 Other, net 4.2 ------------ Total other changes in equity (795.7) ------------ Balance at March 31, 1998 ------------ (including Mandatorily Redeemable Preferred Securities) $ 650.1 ============
2 ADVANTA AND SUBSIDIARIES FINANCIAL HIGHLIGHTS SUPPLEMENTAL SUMMARY OF RESTRUCTURING/OTHER SIMILAR CHARGES (in millions)
THREE MONTHS ENDED MARCH 31, 1998 ------------------ Severance & outplacement costs associated with workforce reduction, option exercise and other employee costs associated with Fleet Transaction/Tender Offer $ 62.3 Expense associated with exited business/product 54.1 Impairment of facility assets related to restructuring 8.7 Equity losses 42.5 ------------ Total restructure/other similar charges before income tax benefit 167.6 Related income tax benefit 34.9 ------------ Total restructure/other similar charges after income tax benefit $ 132.7 ============
3 ADVANTA AND SUBSIDIARIES FINANCIAL HIGHLIGHTS SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT (in millions) Three Months Ended March 31, 1998
Advanta Advanta Business Mortgage Services Other Total ------------ ------------ ------------ ------------ Revenues: Income from personal finance activities $ 45.2 $ 45.2 Business loan and lease revenues $ 17.2 17.2 Gain on transfer of credit cards $ 541.3 541.3 Other 9.3 5.9 119.3 134.5 ------------ ------------ ------------ ------------ Total revenues 54.5 23.1 660.6 738.2 ------------ ------------ ------------ ------------ Expenses: Provision for credit losses 2.6 3.1 28.3 34.0 Restructure/other similar charges 167.6 167.6 Other 45.0 17.9 76.4 139.3 ------------ ------------ ------------ ------------ Total expenses 47.6 21.0 272.3 340.9 ------------ ------------ ------------ ------------ Income before income tax 6.9 2.1 388.3 397.3 (Benefit)/Provision for income taxes 2.1 .6 (24.2) (21.5) ------------ ------------ ------------ ------------ Net income $ 4.8 $ 1.5 $ 412.5 418.8 ============ ============ ============ ============
Note: Other includes income from the credit card division up to the February 20, 1998 date of the Fleet transaction. 4 ADVANTA AND SUBSIDIARIES FINANCIAL HIGHLIGHTS OPERATING RESULTS ($ in millions, except per share data)
THREE MONTHS ENDED MARCH 31 1998 1997 ---------- ---------- Net Revenues(1) $ 154.4 $ 182.5 Provision for Losses $ 34.0 $ 60.4 Operating Expenses(2) $ 264.4 $ 148.8 Net Income $ 418.8 ($ 19.8) Diluted Earnings Per Common Share(3) $ 11.04 ($ 0.51) Weighted Average Diluted Shares (Millions) 37,915 42,521 Return on Common Equity 260.14% (20.49%)
(1) March 1998 revenues exclude a $541.3 million one time pretax gain on transfer of credit card relationships and includes equity loss of $42.5 million which is reflected in Restructure/other similar charges in the Supplemental Consolidating Income Statement. (2) March 1998 operating expenses include pretax restructuring and other similar charges of $125.1 million. Excluding amortization of credit card DAC and restructuring and other similar charges, operating expenses decreased 7.6% from the prior year's first quarter. (3) All periods reflect adoption of FAS 128; diluted EPS includes common stock equivalents. 5 ADVANTA AND SUBSIDIARIES FINANCIAL HIGHLIGHTS FINANCIAL CONDITION ($ in millions, except per share data)
% CHANGE MAR. 1998 MAR. 31, DEC. 31, MAR. 31, VERSUS 1998 1997 1997 MAR. 1997 ------------ ------------ ------------ ------------ Managed Receivables* Advanta Mortgage(A) $ 6,046 $ 5,309 $ 3,276 84.6% Advanta Business Services(B) $ 1,294 $ 1,264 $ 954 35.7% Other Loans $ 12 $ 41 $ 25 (52.4%) Total Managed Receivables(C) $ 7,352 $ 6,614 $ 4,255 72.8% Total Serviced Receivables(C) $ 16,124 $ 15,795 $ 9,822 64.2% Total Managed Assets(C) $ 9,979 $ 9,902 $ 7,971 25.2% Stockholders' Equity(D) $ 650 $ 1,027 $ 937 (30.6%) Book Value Per Common Share $ 20.53 $ 19.01 $ 17.38 18.1% Equity/Managed Assets(D) 6.5% 4.9% 4.7% 40.0% Reserve for Credit Losses(E) $ 17.9 $ 19.4 $ 11.3 58.4% Customer Accounts Advanta Mortgage 114 103 64 77.1% Advanta Business Services 291 271 193 51.0% CREDIT QUALITY Managed Net Charge-off Rate For the Quarter ended Advanta Mortgage(A) 0.87% 0.91% 0.60% Advanta Business Services(B) 4.54% 3.68% 2.13% Managed 30+ Day Delinquency Rate Advanta Mortgage(A) 7.05% 7.38% 6.35% Advanta Business Services(B) 6.15% 6.46% 6.95%
(A) Includes Mortgages and Auto Loans. Excludes mortgages serviced on a third party basis which at March 31, 1998, December 31, 1997 and March 31, 1997 approximated $8.8 billion, $9.2 billion and $5.6 billion, respectively. (B) Includes Leases and Business Cards. (C) Excludes consumer credit card balances of $11.2 billion at December 31, 1997 and $12.2 billion at March 31, 1997. (D) Equity includes capital securities and stockholders' equity. (E) Excludes reserves related to the consumer credit business at March 31, 1997 and December 31, 1997. * Managed figures combine both owned and securitized receivables. --Statistical Supplement Available Upon Request-- 6 ADVANTA AND SUBSIDIARIES GUIDANCE INFORMATION ($ IN MILLIONS) NOTE: ALL DATA RELATES TO THE MANAGED PORTFOLIO UNLESS OTHERWISE NOTED
UPDATED AS OF APRIL 21, 1998 ----------------------------- ENDING RECEIVABLES ADVANTA MORTGAGE $8,000 TO $9,000(A) MORTGAGE LOANS SERVICED FOR FEE $9,000 TO $12,000(A) ADVANTA BUSINESS SERVICES $1,500 TO $1,800 REVENUES OWNED NET INTEREST MARGIN 2.00% TO 3.00%(A) ADVANTA MORTGAGE 2.80% TO 3.00% (EXCLUDES CONTRACT-FOR-FEE) ADVANTA BUSINESS SERVICES 6.50% TO 7.00% NET CHARGE-OFF RATIOS ADVANTA MORTGAGE 70 BP TO 80 BP ADVANTA BUSINESS SERVICES 400 BP TO 450 BP(A) ADVANTA MORTGAGE GAIN ON SALE ASSUMPTIONS USED AS OF MARCH 31, 1998 ASSUMED PREPAYMENT RATES FIXED 24.0% ARMS 34.0%(A) INTERMEDIATE 29.0%(B) ASSUMED LOSS RATE 80 BP ASSUMED DISCOUNT RATE 14% OPERATING EXPENSES 3.25% TO 3.45% EQUITY/MANAGED ASSETS 6% TO 7% SEGMENT NET INCOME ADVANTA MORTGAGE APPROX. $60 ADVANTA BUSINESS SERVICES APPROX. $10 NET INCOME APPROX. $70 2ND QUARTER $6 TO $7(B)
7 3RD QUARTER $15 TO $20(B) 4TH QUARTER $35 TO $40(B)
NOTE: THE ABOVE INFORMATION REFLECTS THE COMPANY'S GOOD-FAITH ESTIMATES OF CERTAIN PRELIMINARY PROJECTED RESULTS FOR 1998. THIS INFORMATION IS SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, AS DESCRIBED IN THE ACCOMPANYING PRESS RELEASE. (A) INDICATES MODIFICATION TO PREVIOUS GUIDANCE (B) INDICATES NEW GUIDANCE CATEGORY -----END PRIVACY-ENHANCED MESSAGE-----