EX-99 3 a4440595_ex991.txt ADVANTA EXHIBIT 99.1 Exhibit 99.1 Advanta Reports Second Quarter Earnings SPRING HOUSE, Pa.--(BUSINESS WIRE)--July 24, 2003--Advanta Corporation (NASDAQ: ADVNB; ADVNA) today reported net income from core operations of $0.29 per diluted share for second quarter 2003 for Class A and Class B shares combined, in line with the Company's previously described expectations, as compared to $0.32 per diluted share for second quarter 2002. Advanta reported consolidated net income for the quarter of $4.3 million or $0.18 per diluted share for Class A and Class B shares combined as compared to net loss of $1.5 million or $0.06 per diluted share for the second quarter of 2002. Net income from core operations is a non-GAAP financial measure defined by the Company as net income of the Advanta Business Cards segment and the Venture Capital segment with the exception of venture capital valuation adjustments, net of tax. Second quarter 2003 consolidated net income includes a $0.03 per diluted share asset valuation charge associated with the Company's venture capital portfolio and an $0.08 charge associated with discontinued operations. "Our strategic focus on high credit quality customers and strong asset quality continues to yield solid results," said Dennis Alter, Chairman and CEO. "At the same time, we are developing tools and services for small business that enable us to effectively meet our customer's needs, recently winning an award for our customer-centric website." Business Card results for the second quarter include an approximate 100 basis point decline in net principal charge-offs on managed receivables to 8.0% on an annualized basis as compared to 9.0% for the quarter ended June 30, 2002. Over 30 day delinquencies on managed receivables declined 31 basis points to 6.28% and over 90 day delinquencies on managed receivables decreased 17 basis points to 3.19% as compared to second quarter 2002. Business Card ended the quarter with managed receivables of $2.8 billion as compared to $2.2 billion at June 30, 2002. Net principal charge-offs on owned receivables declined approximately 65 basis points to 7.6% on an annualized basis for second quarter 2003 as compared to 8.2% for second quarter of 2002. Over 30 day delinquencies on owned receivables declined 64 basis points to 5.84% and over 90 day delinquencies on owned receivables decreased 34 basis points to 2.98% as compared to second quarter 2002. Owned Business Card receivables were $443 million at both June 30, 2003 and 2002. The Company continued its stock repurchase program bringing the total purchases to approximately 2,563,000 Class B shares and 177,000 Class A shares through July 23, 2003. The Company intends further stock repurchases under the remaining unused authorization of approximately 260,000 shares. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, July 24, 2003, at 9:00 a.m. Eastern time. The call will be broadcast simultaneously for the public over the Internet through www.advanta.com or www.vcall.com. To listen to the live call, please go to the website at least 15 minutes early to register, download, and install any necessary audio software. Replays of the call will be available beginning at noon today on the Internet at www.advanta.com or www.vcall.com or by dialing (719) 457-0820 and referring to confirmation code 480773. The conference call may include a discussion of non-GAAP financial measures, which are reconciled to the most directly comparable GAAP financial measure in this press release or our statistical supplement, both available at www.advanta.com in the "About Advanta" section. About Advanta Advanta is a highly focused financial services company serving the small business market. Advanta leverages direct marketing and information based expertise to identify potential customers and new target markets and to provide a high level of service tailored to the unique needs of small business. Using these distinctive capabilities, Advanta has become one of the nation's largest issuers of MasterCard business credit cards to small businesses. Since 1951, Advanta has pioneered many of the marketing techniques common in the financial services industry today, including remote lending, direct mail, and affinity and relationship marketing. Learn more about Advanta at www.advanta.com. This Press Release 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) the Company's managed net interest income; (2) competitive pressures; (3) political, social and/or general economic conditions that affect the level of new account originations, customer spending, delinquencies and charge-offs; (4) factors affecting fluctuations in the number of accounts or receivable balances, including the retention of cardholders after promotional pricing periods have expired; (5) interest rate fluctuations; (6) the level of expenses; (7) the timing of the securitizations of the Company's receivables; (8) factors affecting the value of investments held by the Company; (9) the effects of government regulation, including restrictions and limitations imposed by banking laws, regulators, examinations, and the agreements between the Company's bank subsidiaries and their regulators; (10) relationships with customers, significant vendors and business partners; (11) difficulties or delays in the development, production, testing and marketing of products or services; (12) the amount and cost of financing available to the Company; (13) the ratings on the debt of the Company and its subsidiaries; (14) revisions to estimates associated with the discontinued operations of the Company's mortgage and leasing businesses; and (15) the impact of litigation. 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. In addition to the GAAP results provided throughout this document, the Company has provided managed receivable data and other non-GAAP financial measurements. Management believes that these non-GAAP financial measures used in managing the business may provide users additional useful information. The tables attached to this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure and a description of why the non-GAAP financial measures are useful to investors. ADVANTA CORP. SEGMENT INCOME STATEMENT (in thousands) Three Months Ended June 30, 2003 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other(A) Total --------- -------- ------- ------- Interest income $ 23,007 $ 1 $ 2,442 $25,450 Interest expense 11,269 135 1,707 13,111 --------- -------- ------- ------- Net interest income 11,738 (134) 735 12,339 Provision for credit losses 9,555 0 (290) 9,265 --------- -------- ------- ------- Net interest income after provision for credit losses 2,183 (134) 1,025 3,074 Noninterest revenues: Securitization income 31,752 0 0 31,752 Servicing revenues 9,873 0 0 9,873 Other revenues, net 24,658 (1,242) 1,513 24,929 --------- -------- ------- ------- Total noninterest revenues 66,283 (1,242) 1,513 66,554 Expenses: Operating expenses 55,819 1,058 318 57,195 Minority interest in income of consolidated subsidiary 0 0 2,220 2,220 --------- -------- ------- ------- Total expenses 55,819 1,058 2,538 59,415 --------- -------- ------- ------- Income (loss) before income taxes 12,647 (2,434) 0 10,213 Income tax expense (benefit) 4,869 (937) 0 3,932 --------- -------- ------- ------- Income (loss) from continuing operations 7,778 (1,497) 0 6,281 Loss, net, on discontinuance of mortgage and leasing businesses, net of tax 0 0 (1,968) (1,968) --------- -------- ------- ------- Net income (loss) $ 7,778 $ (1,497) $(1,968) $ 4,313 ========= ======== ======= ======= Three Months Ended June 30, 2002 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other(A) Total --------- -------- ------- ------- Interest income $ 23,358 $ 0 $ 2,877 $26,235 Interest expense 8,775 181 3,413 12,369 --------- -------- ------- ------- Net interest income 14,583 (181) (536) 13,866 Provision for credit losses 11,100 0 241 11,341 --------- -------- ------- ------- Net interest income after provision for credit losses 3,483 (181) (777) 2,525 Noninterest revenues: Securitization income 30,023 0 0 30,023 Servicing revenues 8,143 0 0 8,143 Other revenues, net 22,921 (31) 109 22,999 --------- -------- ------- ------- Total noninterest revenues 61,087 (31) 109 61,165 Expenses: Operating expenses 50,008 567 (688) 49,887 Minority interest in income of consolidated subsidiary 0 0 2,220 2,220 --------- -------- ------- ------- Total expenses 50,008 567 1,532 52,107 --------- -------- ------- ------- Income (loss) before income taxes 14,562 (779) (2,200) 11,583 Income tax expense (benefit) 5,606 (300) (847) 4,459 --------- -------- ------- ------- Income (loss) from continuing operations 8,956 (479) (1,353) 7,124 Loss, net, on discontinuance of mortgage and leasing businesses, net of tax 0 0 (8,610) (8,610) --------- -------- ------- ------- Net income (loss) $ 8,956 $ (479) $(9,963) $(1,486) ========= ======== ======= ======= (A) Other includes investment and other activities not attributable to the Advanta Business Cards or Venture Capital segments. ADVANTA CORP. SUPPLEMENTAL NON-GAAP DISCLOSURE ADVANTA BUSINESS CARDS MANAGED INCOME STATEMENT (in thousands) In addition to evaluating the financial performance of the Advanta Business Cards segment under generally accepted accounting principles (GAAP), we evaluate Advanta Business Cards' performance on a managed basis. Our managed receivable portfolio is comprised of both owned and securitized business credit card receivables. We sell business credit card receivables through securitizations accounted for as sales under GAAP. We continue to own and service the accounts that generate the securitized receivables. Managed data presents performance as if the securitized receivables had not been sold. We believe that performance on a managed basis provides useful supplemental information because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Revenue and credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. A reconciliation of these managed financial measures to the most directly comparable GAAP financial measures is included in this press release. Three Months Ended ----------------------------- June 30, June 30, 2003 2002 ------------ ------------ Interest income $ 112,826 $ 100,684 Interest expense 20,953 18,151 ------------ ------------ Net interest income 91,873 82,533 Provision for credit losses 56,140 48,876 ------------ ------------ Net interest income after provision for credit losses 35,733 33,657 Noninterest revenues 32,733 30,913 ------------ ------------ Risk-adjusted revenues (A) 68,466 64,570 Operating expenses 55,819 50,008 ------------ ------------ Income before income taxes 12,647 14,562 Income tax expense 4,869 5,606 ------------ ------------ Net income $ 7,778 $ 8,956 ============ ============ Average managed business credit card receivables $ 2,796,871 $ 2,110,420 (A) Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses. ADVANTA CORP. HIGHLIGHTS (in thousands except per share data) Three Months Ended Percent Change -------------------------- From June 30, Mar. 31, June 30, Prior Prior EARNINGS 2003 2003 2002 Quarter Year ---------------------------------------------------------------------- Basic income from continuing operations per common share: Class A $ 0.25 $ 0.22 $ 0.27 13.6 % (7.4)% Class B 0.27 0.25 0.29 8.0 (6.9) Combined (A) 0.26 0.24 0.28 8.3 (7.1) Diluted income from continuing operations per common share: Class A 0.24 0.22 0.26 9.1 (7.7) Class B 0.26 0.25 0.27 4.0 (3.7) Combined (A) 0.26 0.24 0.27 8.3 (3.7) Basic net income (loss) per common share: Class A 0.16 0.22 (0.07) (27.3) N/M Class B 0.19 0.25 (0.05) (24.0) N/M Combined (A) 0.18 0.24 (0.06) (25.0) N/M Diluted net income (loss) per common share: Class A 0.16 0.22 (0.06) (27.3) N/M Class B 0.18 0.25 (0.05) (28.0) N/M Combined (A) 0.18 0.24 (0.06) (25.0) N/M Return on average common equity 5.30 % 7.32 % (1.62)% (27.6) N/M Non-GAAP financial measure: Diluted net income from core operations per combined common share (B) $ 0.29 $ 0.25 $ 0.32 16.0 (9.4) COMMON STOCK DATA ---------------------------------------------------------------------- Weighted average common shares used to compute: Basic earnings per common share Class A 9,151 9,183 9,144 (0.3)% 0.1 % Class B 14,893 14,816 16,176 0.5 (7.9) ------- ------- ------- Total 24,044 23,999 25,320 0.2 (5.0) Diluted earnings per common share Class A 9,151 9,184 9,150 (0.4) 0.0 Class B 15,445 15,212 17,640 1.5 (12.4) ------- ------- ------- Total 24,596 24,396 26,790 0.8 (8.2) Ending shares outstanding Class A 9,886 10,041 10,041 (1.5) (1.5) Class B 17,274 17,141 18,521 0.8 (6.7) ------- ------- ------- Total 27,160 27,182 28,562 (0.1) (4.9) Stock price: Class A High $ 10.45 $ 9.75 $ 14.55 7.2 (28.2) Low 6.70 5.95 10.40 12.6 (35.6) Closing 9.84 6.83 10.86 44.1 (9.4) Class B High 11.00 10.20 14.04 7.8 (21.7) Low 7.47 6.91 10.24 8.1 (27.1) Closing 9.99 7.58 10.93 31.8 (8.6) Cash dividends declared: Class A 0.063 0.063 0.063 0.0 0.0 Class B 0.076 0.076 0.076 0.0 0.0 Book value per common share 13.41 13.30 14.20 0.8 (5.6) (A) Combined represents a weighted average of Class A and Class B earnings per common share. (B) Net income from core operations is a non-GAAP financial measure used by management, and includes net income of the Advanta Business Cards segment and the Venture Capital segment with the exception of the venture capital valuation adjustments, net of tax. Management believes the analysis of net income from core operations provides useful supplemental information needed to make meaningful comparisons of our current results to prior and future periods. Venture capital valuation adjustments are excluded from results of core operations because of their volatility related to market conditions. Net income (loss) of the Other segment and results of discontinued operations are also excluded, if applicable, since they are not indicative of what is expected from our continuing businesses on a prospective basis. A reconciliation of non-GAAP net income from core operations to GAAP net income is included in this press release. N/M - Not Meaningful ADVANTA CORP. BUSINESS CREDIT CARD STATISTICS (in thousands) Three Months Ended Percent Change ----------------------------------- From June 30, Mar. 31, June 30, Prior Prior 2003 (A) 2003 (A) 2002 Quarter Year ----------- ----------- ------------------------- Transaction volume $1,677,804 $1,602,498 $1,305,479 4.7% 28.5% Securitization volume (excluding replenishment sales) 86,182 124,775 110,000 (30.9) (21.7) Average managed receivables: Owned 506,200 515,452 472,010 (1.8) 7.2 Securitized 2,290,671 2,171,815 1,638,410 5.5 39.8 ---------- ---------- ---------- Managed (B) 2,796,871 2,687,267 2,110,420 4.1 32.5 Ending managed receivables: Owned 442,769 465,436 443,377 (4.9) (0.1) Securitized 2,365,176 2,278,746 1,744,669 3.8 35.6 ---------- ---------- ---------- Managed (B) 2,807,945 2,744,182 2,188,046 2.3 28.3 -------------------- ----------- ----------- ------------------------- CREDIT QUALITY - OWNED -------------------- Receivables 90 days or more delinquent $ 13,184 $ 13,403 $ 14,703 Receivables 30 days or more delinquent 25,839 27,846 28,739 As a percentage of gross receivables: Receivables 90 days or more delinquent 2.98% 2.88% 3.32% 3.5% (10.2)% Receivables 30 days or more delinquent 5.84 5.98 6.48 (2.3) (9.9) Net principal charge-offs: Amount $ 9,555 $ 8,408 $ 9,694 As a percentage of average gross receivables (annualized) 7.55% 6.52% 8.22% 15.8 (8.2) CREDIT QUALITY - SECURITIZED -------------------- Receivables 90 days or more delinquent $ 76,459 $ 71,255 $ 58,836 Receivables 30 days or more delinquent 150,380 146,570 115,500 As a percentage of gross receivables: Receivables 90 days or more delinquent 3.23% 3.13% 3.37% 3.2% (4.2)% Receivables 30 days or more delinquent 6.36 6.43 6.62 (1.1) (3.9) Net principal charge-offs: Amount $ 46,585 $ 45,475 $ 37,776 As a percentage of average gross receivables (annualized) 8.13% 8.38% 9.22% (3.0) (11.8) CREDIT QUALITY - MANAGED (B) -------------------- Receivables 90 days or more delinquent $ 89,643 $ 84,658 $ 73,539 Receivables 30 days or more delinquent 176,219 174,416 144,239 As a percentage of gross receivables: Receivables 90 days or more delinquent 3.19% 3.08% 3.36% 3.6% (5.1)% Receivables 30 days or more delinquent 6.28 6.36 6.59 (1.3) (4.7) Net principal charge-offs: Amount $ 56,140 $ 53,883 $ 47,470 As a percentage of average gross receivables (annualized) 8.03% 8.02% 9.00% 0.1 (10.8) (A) Prior to October 1, 2002, the billing and recognition of interest and fees was discontinued when the related receivable became 90 days past due or upon notification of fraud, bankruptcy, death, hardship or credit counseling. Effective October 1, 2002, we continue to bill and recognize interest and fees on accounts when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses. The billing and recognition of interest and fees on fraudulent, bankrupt, deceased, hardship and credit counseling accounts is still discontinued upon receipt of notification of these events. Provisions for interest and fee losses are recorded as direct reductions to interest and fee income. (B) Managed statistics are non-GAAP financial measures and represent the sum of owned (GAAP) business credit card statistics and securitized business credit card statistics. We believe that performance on a managed basis provides useful supplemental information because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. ADVANTA CORP. RECONCILIATION OF MANAGED INCOME STATEMENT AND BALANCE SHEET MEASURES TO GAAP FINANCIAL MEASURES (in thousands) In addition to evaluating the financial performance of the Advanta Business Cards segment under generally accepted accounting principles (GAAP), we evaluate Advanta Business Cards' performance on a managed basis. Our managed receivable portfolio is comprised of both owned and securitized business credit card receivables. We sell business credit card receivables through securitizations accounted for as sales under GAAP. We continue to own and service the accounts that generate the securitized receivables. Managed data presents performance as if the securitized receivables had not been sold. We believe that performance on a managed basis provides useful supplemental information because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Revenue and credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. Three Months Ended June 30, 2003 ---------------------------------------------------------------------- Advanta Advanta Business Business Cards Securitization Cards GAAP Adjustments Managed -------- -------------- --------- INCOME STATEMENT MEASURES Interest income $23,007 $89,819 $112,826 Interest expense 11,269 9,684 20,953 Net interest income 11,738 80,135 91,873 Securitization income 31,752 (31,752) 0 Servicing revenues 9,873 (9,873) 0 Other revenues, net 24,658 8,075 32,733 Total noninterest revenues 66,283 (33,550) 32,733 Provision for credit losses 9,555 46,585 (A) 56,140 ------------------------------------- BALANCE SHEET MEASURES Ending business credit card receivables 442,769 2,365,176 2,807,945 Average business credit card receivables 506,200 2,290,671 2,796,871 Business credit card receivables: 90 days or more delinquent 13,184 76,459 89,643 30 days or more delinquent 25,839 150,380 176,219 Net principal charge-offs 9,555 46,585 56,140 Three Months Ended June 30, 2002 --------------------------------------------------------------------- Advanta Advanta Business Business Cards Securitization Cards GAAP Adjustments Managed -------- -------------- --------- INCOME STATEMENT MEASURES Interest income $23,358 $77,326 $100,684 Interest expense 8,775 9,376 18,151 Net interest income 14,583 67,950 82,533 Securitization income 30,023 (30,023) 0 Servicing revenues 8,143 (8,143) 0 Other revenues, net 22,921 7,992 30,913 Total noninterest revenues 61,087 (30,174) 30,913 Provision for credit losses 11,100 37,776 (A) 48,876 ------------------------------------- BALANCE SHEET MEASURES Ending business credit card receivables 443,377 1,744,669 2,188,046 Average business credit card receivables 472,010 1,638,410 2,110,420 Business credit card receivables: 90 days or more delinquent 14,703 58,836 73,539 30 days or more delinquent 28,739 115,500 144,239 Net principal charge-offs 9,694 37,776 47,470 (A) The provision for credit losses includes the amount by which the provision for credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses on securitized receivables been equal to actual reported charge-offs. ADVANTA CORP. RECONCILIATION OF NON-GAAP NET INCOME FROM CORE OPERATIONS TO GAAP NET INCOME Net income from core operations is a non-GAAP financial measure used by management, and includes net income of the Advanta Business Cards segment and the Venture Capital segment with the exception of the venture capital valuation adjustments, net of tax. Management believes the analysis of net income from core operations provides useful supplemental information needed to make meaningful comparisons of our current results to prior and future periods. Venture capital valuation adjustments are excluded from results of core operations because of their volatility related to market conditions. Net income (loss) of the Other segment and results of discontinued operations are also excluded, if applicable, since they are not indicative of what is expected from our continuing businesses on a prospective basis. Three Months Three Months Three Months Ended Ended Ended June 30, 2003 March 31, 2003 June 30, 2002 ------------------ ------------------ ------------------ Amount Per Amount Per Amount Per Diluted Diluted Diluted In Common In Common In Common Thousands Share(B) Thousands Share(B) Thousands Share(B) --------- -------- --------- -------- --------- -------- GAAP net income (loss) $4,313 $0.18 $5,905 $0.24 $(1,486) $(0.06) Add back: Other segment net loss (A) 1,968 0.08 0 0.00 9,963 0.38 Valuation adjustments from venture capital investments, net of tax at 38.5% 764 0.03 375 0.01 19 0.00 -------- -------- -------- -------- -------- ------- Non-GAAP net income from core operations $7,045 $0.29 $6,280 $0.25 $8,496 $0.32 ======== ======== ======== ======== ======== ======= (A) Other segment net loss includes investment and other activities not attributable to the Advanta Business Cards or Venture Capital segments and loss on discontinuance of mortgage and leasing businesses, net of tax, if applicable. (B) The same denominator is used for both non-GAAP net income from core operations and GAAP net income per common share calculations. Amounts per diluted common share are calculated using total diluted shares of 24,596 for the three months ended June 30, 2003, 24,396 for the three months ended March 31, 2003 and 26,790 for the three months ended June 30, 2002. Statistical Supplement available at www.advanta.com CONTACT: Advanta Corporation David Weinstock Vice President, Investor Relations (215) 444-5335 dweinstock@advanta.com or David Goodman Director, Communications (215) 444-5073 AdvantaCommunications@advanta.com