EX-99 3 a4502488ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Advanta Reports Third Quarter Earnings SPRING HOUSE, Pa.--(BUSINESS WIRE)--Oct. 28, 2003--Advanta Corporation (NASDAQ:ADVNB; ADVNA) today reported net income from core operations of $0.32 per diluted share for third quarter 2003 for Class A and Class B shares combined, in line with the Company's previously described expectations, as compared to $0.38 per diluted share for third quarter 2002. Advanta reported consolidated net income for the quarter of $6.9 million or $0.27 per diluted share for Class A and Class B shares combined up from $6.3 million or $0.25 per diluted share for the third 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. Third quarter 2003 consolidated net income includes a $0.05 per diluted share asset valuation charge associated with the Company's venture capital portfolio. "The execution of our strategy has delivered another quarter of solid results that were in line with our expectations," said Dennis Alter, Chairman and CEO. "We established new alliances that broaden our reach in the small business community and deepen our relationship with targeted, higher credit quality customers." Business Card results for the third quarter include a 66 basis point decline in net principal charge-offs on managed receivables to 8.27% on an annualized basis as compared to 8.93% for the quarter ended September 30, 2002. Over 30 day delinquencies on managed receivables declined 51 basis points to 6.15% and over 90 day delinquencies on managed receivables decreased 14 basis points to 2.85% as compared to third quarter 2002. Business Card ended the quarter with managed receivables of $2.9 billion as compared to $2.3 billion at September 30, 2002. Net principal charge-offs on owned receivables increased approximately 21 basis points to 8.46% on an annualized basis for third quarter 2003 as compared to 8.25% for third quarter 2002. Over 30 day delinquencies on owned receivables declined 68 basis points to 5.75% and over 90 day delinquencies on owned receivables decreased 22 basis points to 2.67% as compared to third quarter 2002. Owned Business Card receivables were $533 million at September 30, 2003 as compared to $445 million at September 30, 2002. The Company continued its stock repurchase program bringing the total purchases to approximately 2,563,000 Class B shares and 374,000 Class A shares through October 27, 2003. The Company intends further stock repurchases under the remaining unused authorization of approximately 63,000 shares. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, October 28, 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 310585. 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 "Corporate Info" 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 and direct mail, 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 from those projected. 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 SEGMENT INCOME STATEMENT (in thousands) Three Months Ended September 30, 2003 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other(A) Total --------- -------- ------- ------- Interest income $ 31,597 $ 0 $ 1,969 $33,566 Interest expense 12,339 117 2,729 15,185 --------- -------- ------- ------- Net interest income 19,258 (117) (760) 18,381 Provision for credit losses 16,544 0 19 16,563 --------- -------- ------- ------- Net interest income after provision for credit losses 2,714 (117) (779) 1,818 Noninterest revenues: Securitization income 28,558 0 0 28,558 Servicing revenues 9,549 0 0 9,549 Other revenues, net 26,947 (1,985) 1,015 25,977 --------- -------- ------- ------- Total noninterest revenues 65,054 (1,985) 1,015 64,084 Operating expenses 53,983 543 236 54,762 --------- -------- ------- ------- Income (loss) before income taxes 13,785 (2,645) 0 11,140 Income tax expense (benefit) 5,307 (1,018) 0 4,289 --------- -------- ------- ------- Net income (loss) $ 8,478 $ (1,627) $ 0 $ 6,851 ========= ======== ======= ======= Three Months Ended September 30, 2002 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other(A) Total --------- -------- ------- ------- Interest income $ 21,082 $ 0 $ 2,837 $23,919 Interest expense 8,978 176 1,898 11,052 --------- -------- ------- ------- Net interest income 12,104 (176) 939 12,867 Provision for credit losses 9,179 0 242 9,421 --------- -------- ------- ------- Net interest income after provision for credit losses 2,925 (176) 697 3,446 Noninterest revenues: Securitization income 29,168 0 0 29,168 Servicing revenues 8,334 0 0 8,334 Other revenues, net 24,150 (3,505) (126) 20,519 --------- -------- ------- ------- Total noninterest revenues 61,652 (3,505) (126) 58,021 Expenses: Operating expenses 47,983 688 306 48,977 Minority interest in income of consolidated subsidiary 0 0 2,220 2,220 --------- -------- ------- ------- Total expenses 47,983 688 2,526 51,197 --------- -------- ------- ------- Income (loss) before income taxes 16,594 (4,369) (1,955) 10,270 Income tax expense (benefit) 6,388 (1,682) (752) 3,954 --------- -------- ------- ------- Net income (loss) $ 10,206 $ (2,687) $(1,203) $ 6,316 ========= ======== ======= ======= (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 ------------------------ Sept. 30, Sept. 30, 2003 2002 ---------- ---------- Interest income $ 114,977 $ 102,719 Interest expense 21,696 19,314 ---------- ---------- Net interest income 93,281 83,405 Provision for credit losses 60,132 49,762 ---------- ---------- Net interest income after provision for credit losses 33,149 33,643 Noninterest revenues 34,619 30,934 ---------- ---------- Risk-adjusted revenues (A) 67,768 64,577 Operating expenses 53,983 47,983 ---------- ---------- Income before income taxes 13,785 16,594 Income tax expense 5,307 6,388 ---------- ---------- Net income $ 8,478 $ 10,206 ========== ========== Average managed business credit card receivables $2,859,187 $2,230,089 (A) Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses. ADVANTA HIGHLIGHTS (in thousands except per share data) Three Months Percent Change Ended From ----------------------- Sept. June Sept. 30, 30, 30, Prior Prior EARNINGS 2003 2003 2002 Quarter Year ---------------------------------------------------------------------- Basic income from continuing operations per common share: Class A $ 0.27 $ 0.25 $ 0.24 8.0% 12.5% Class B 0.29 0.27 0.26 7.4 11.5 Combined (A) 0.28 0.26 0.25 7.7 12.0 Diluted income from continuing operations per common share: Class A 0.26 0.24 0.23 8.3 13.0 Class B 0.28 0.26 0.25 7.7 12.0 Combined (A) 0.27 0.26 0.25 3.8 8.0 Basic net income per common share: Class A 0.27 0.16 0.24 68.8 12.5 Class B 0.29 0.19 0.26 52.6 11.5 Combined (A) 0.28 0.18 0.25 55.6 12.0 Diluted net income per common share: Class A 0.26 0.16 0.23 62.5 13.0 Class B 0.28 0.18 0.25 55.6 12.0 Combined (A) 0.27 0.18 0.25 50.0 8.0 Return on average common equity 8.36% 5.30% 6.99% 57.7 19.6 Non-GAAP financial measure: Diluted net income from core operations per combined common share (B) $ 0.32 $ 0.29 $ 0.38 10.3 (15.8) COMMON STOCK DATA ---------------------------------------------------------------------- Weighted average common shares used to compute: Basic earnings per common share Class A 8,978 9,151 9,162 (1.9)% (2.0)% Class B 15,100 14,893 15,876 1.4 (4.9) ------- ------- ------- Total 24,078 24,044 25,038 0.1 (3.8) Diluted earnings per common share Class A 8,978 9,151 9,163 (1.9) (2.0) Class B 16,251 15,445 16,501 5.2 (1.5) ------- ------- ------- Total 25,229 24,596 25,664 2.6 (1.7) Ending shares outstanding Class A 9,687 9,886 10,041 (2.0) (3.5) Class B 17,390 17,274 18,199 0.7 (4.4) ------- ------- ------- Total 27,077 27,160 28,240 (0.3) (4.1) Stock price: Class A High $ 11.75 $ 10.45 $ 11.45 12.4 2.6 Low 9.49 6.70 7.60 41.6 24.9 Closing 10.98 9.84 10.05 11.6 9.3 Class B High 11.95 11.00 11.44 8.6 4.5 Low 9.66 7.47 7.35 29.3 31.4 Closing 10.69 9.99 10.33 7.0 3.5 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 13.56 13.41 14.44 1.1 (6.1) (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. ADVANTA BUSINESS CREDIT CARD STATISTICS (in thousands) Percent Change Three Months Ended From ------------------------------------ Sept. 30, June 30, Sept. 30, Prior Prior 2003 (A) 2003 (A) 2002 Quarter Year --------------------------------------------------- Transaction volume $ 1,816,195 $ 1,677,804 $ 1,348,154 8.2% 34.7% Securitization volume increase (decrease) excluding replenishment sales (19,750) 86,182 65,000 N/M N/M Average managed receivables: Owned 734,715 506,200 445,264 45.1 65.0 Securitized 2,124,472 2,290,671 1,784,825 (7.3) 19.0 ----------- ----------- ----------- Managed (B) 2,859,187 2,796,871 2,230,089 2.2 28.2 Ending managed receivables: Owned 533,398 442,769 445,241 20.5 19.8 Securitized 2,343,221 2,365,176 1,808,272 (0.9) 29.6 ----------- ----------- ----------- Managed (B) 2,876,619 2,807,945 2,253,513 2.4 27.7 ---------------------------------------------------------------------- CREDIT QUALITY - OWNED ------------------- Receivables 90 days or more delinquent $ 14,225 $ 13,184 $ 12,883 Receivables 30 days or more delinquent 30,681 25,839 28,625 As a percentage of gross receivables: Receivables 90 days or more delinquent 2.67% 2.98% 2.89% (10.4)% (7.6)% Receivables 30 days or more delinquent 5.75 5.84 6.43 (1.5) (10.6) Net principal charge-offs: Amount $ 15,544 $ 9,555 $ 9,179 As a percentage of average gross receivables (annualized) 8.46% 7.55% 8.25% 12.1 2.5 CREDIT QUALITY - SECURITIZED ------------------- Receivables 90 days or more delinquent $ 67,795 $ 76,459 $ 54,389 Receivables 30 days or more delinquent 146,206 150,380 121,512 As a percentage of gross receivables: Receivables 90 days or more delinquent 2.89% 3.23% 3.01% (10.5)% (4.0)% Receivables 30 days or more delinquent 6.24 6.36 6.72 (1.9) (7.1) Net principal charge-offs: Amount $ 43,588 $ 46,585 $ 40,583 As a percentage of average gross receivables (annualized) 8.21% 8.13% 9.10% 1.0 (9.8) CREDIT QUALITY - MANAGED (B) ------------------- Receivables 90 days or more delinquent $ 82,020 $ 89,643 $ 67,272 Receivables 30 days or more delinquent 176,887 176,219 150,137 As a percentage of gross receivables: Receivables 90 days or more delinquent 2.85% 3.19% 2.99% (10.7)% (4.7)% Receivables 30 days or more delinquent 6.15 6.28 6.66 (2.1) (7.7) Net principal charge-offs: Amount $ 59,132 $ 56,140 $ 49,762 As a percentage of average gross receivables (annualized) 8.27% 8.03% 8.93% 3.0 (7.4) (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 when the account was classified as fraudulent, bankrupt, deceased, 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 is still discontinued when the account is classified as fraudulent, bankrupt, deceased, hardship or credit counseling. 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. N/M - Not Meaningful 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 September 30, 2003 -------------------------------------- Advanta Advanta Business Business Cards Securitization Cards GAAP Adjustments Managed --------- ----------------- ----------- INCOME STATEMENT MEASURES Interest income $ 31,597 $ 83,380 $ 114,977 Interest expense 12,339 9,357 21,696 Net interest income 19,258 74,023 93,281 Securitization income 28,558 (28,558) 0 Servicing revenues 9,549 (9,549) 0 Other revenues, net 26,947 7,672 34,619 Total noninterest revenues 65,054 (30,435) 34,619 Provision for credit losses 16,544 43,588 (A) 60,132 -------------------------------------- BALANCE SHEET MEASURES Ending business credit card receivables 533,398 2,343,221 2,876,619 Average business credit card receivables 734,715 2,124,472 2,859,187 Business credit card receivables: 90 days or more delinquent 14,225 67,795 82,020 30 days or more delinquent 30,681 146,206 176,887 Net principal charge-offs 15,544 43,588 59,132 Three Months Ended September 30, 2002 -------------------------------------- Advanta Advanta Business Business Cards Securitization Cards GAAP Adjustments Managed --------- ---------------- ----------- INCOME STATEMENT MEASURES Interest income $ 21,082 $ 81,637 $ 102,719 Interest expense 8,978 10,336 19,314 Net interest income 12,104 71,301 83,405 Securitization income 29,168 (29,168) 0 Servicing revenues 8,334 (8,334) 0 Other revenues, net 24,150 6,784 30,934 Total noninterest revenues 61,652 (30,718) 30,934 Provision for credit losses 9,179 40,583 (A) 49,762 -------------------------------------- BALANCE SHEET MEASURES Ending business credit card receivables 445,241 1,808,272 2,253,513 Average business credit card receivables 445,264 1,784,825 2,230,089 Business credit card receivables: 90 days or more delinquent 12,883 54,389 67,272 30 days or more delinquent 28,625 121,512 150,137 Net principal charge-offs 9,179 40,583 49,762 (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 Sept. 30, 2003 June 30, 2003 Sept. 30, 2002 ------------------- ------------------ ------------------ Amount Amount Amount Per Per Per Diluted Diluted Diluted In Common In Common In Common Thousands Share(B) Thousands Share(B) Thousands Share(B) --------- -------- --------- -------- --------- -------- GAAP net income $6,851 $0.27 $4,313 $0.18 $6,316 $0.25 Add back: Other segment net loss (A) 0 0.00 1,968 0.08 1,203 0.05 Valuation adjustments from venture capital investments, net of tax at 38.5% 1,221 0.05 764 0.03 2,156 0.08 --------- ------- --------- -------- --------- ------- Non-GAAP net income from core operations $8,072 $0.32 $7,045 $0.29 $9,675 $0.38 ========= ======== ========= ======== ========= ======== (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 25,229 for the three months ended September 30, 2003, 24,596 for the three months ended June 30, 2003 and 25,664 for the three months ended September 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 KEYWORD: PENNSYLVANIA INDUSTRY KEYWORD: BANKING CONFERENCE CALLS EARNINGS SOURCE: Advanta Corporation