EX-99 3 a4555681_ex991.txt ADVANTA CORP. EXHIBIT 99.1 Exhibit 99.1 Advanta Reports Fourth Quarter and Full Year 2003 Earnings SPRING HOUSE, Pa.--(BUSINESS WIRE)--Jan. 23, 2004--Advanta Corporation (NASDAQ:ADVNB; ADVNA) today reported net income from core operations of $0.44 per diluted share for fourth quarter and $1.30 per diluted share for full year 2003 for Class A and Class B shares combined, consistent with the Company's expectations. Advanta reported consolidated net income for the quarter of $11.2 million or $0.44 per diluted share and $28.2 million or $1.13 per diluted share for full year 2003 for Class A and Class B shares combined. This compares to consolidated net loss of $1.36 per diluted share for fourth quarter 2002 and consolidated net loss of $0.97 per diluted share for full year 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. "Strong credit performance and customer activity delivered the robust fourth quarter earnings that we anticipated" said Dennis Alter, Chairman and CEO. "In 2003, we experienced the favorable asset quality benefits expected from our high credit quality customers. In fact, the quarter's credit performance was the strongest in almost three years." Business Card results for the fourth quarter include a 58 basis point decline in net principal charge-offs on managed receivables to 7.31% on an annualized basis as compared to 7.89% for the quarter ended December 31, 2002. Over 30 day delinquencies on managed receivables declined 33 basis points to 5.82% and over 90 day delinquencies on managed receivables decreased 20 basis points to 2.93%, each as compared to fourth quarter 2002. Business Card ended the quarter with managed receivables of $3 billion as compared to $2.6 billion at December 31, 2002. Net principal charge-offs on owned receivables increased approximately 39 basis points to 6.84% on an annualized basis for fourth quarter 2003 as compared to 6.45% for fourth quarter 2002. Over 30 day delinquencies on owned receivables declined 38 basis points to 4.88% and over 90 day delinquencies on owned receivables decreased 24 basis points to 2.45%, each as compared to fourth quarter 2002. Owned Business Card receivables were $518 million at December 31, 2003 as compared to $445 million at December 31, 2002. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, January 23, 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 550678. 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 December 31, 2003 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other (A) Total ---------- -------- --------- -------- Interest income $ 24,464 $ 0 $ 1,890 $ 26,354 Interest expense 9,859 90 3,232 13,181 --------- --------- --------- -------- Net interest income 14,605 (90) (1,342) 13,173 Provision for credit losses 10,163 0 (14) 10,149 --------- --------- --------- -------- Net interest income after provision for credit losses 4,442 (90) (1,328) 3,024 Noninterest revenues: Securitization income 32,896 0 0 32,896 Servicing revenues 11,298 0 0 11,298 Other revenues, net 25,995 (6) 2,651 28,640 --------- --------- --------- -------- Total noninterest revenues 70,189 (6) 2,651 72,834 Operating expenses 55,790 573 1,323 57,686 --------- --------- --------- -------- Income (loss) before income taxes 18,841 (669) 0 18,172 Income tax expense (benefit) 7,254 (258) 0 6,996 --------- --------- --------- -------- Net income (loss) $ 11,587 $ (411) $ 0 $ 11,176 ========= ========= ========= ======== Three Months Ended December 31, 2002 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other (A) Total --------- --------- --------- -------- Interest income $ 24,831 $ 1 $ 2,212 $ 27,044 Interest expense 10,321 152 576 11,049 --------- --------- --------- -------- Net interest income 14,510 (151) 1,636 15,995 Provision for credit losses 9,227 0 217 9,444 --------- --------- --------- -------- Net interest income after provision for credit losses 5,283 (151) 1,419 6,551 Noninterest revenues: Securitization income 30,138 0 0 30,138 Servicing revenues 9,554 0 0 9,554 Other revenues, net 26,387 (777) 146 25,756 Loss on transfer of consumer credit card business 0 0 (43,000) (43,000) --------- --------- --------- -------- Total noninterest revenues 66,079 (777) (42,854) 22,448 Expenses: Operating expenses 53,018 590 311 53,919 Minority interest in income of consolidated subsidiary 0 0 2,220 2,220 --------- --------- --------- -------- Total expenses 53,018 590 2,531 56,139 --------- --------- --------- -------- Income (loss) before income taxes 18,344 (1,518) (43,966) 27,140) Income tax expense (benefit) 7,063 (584) (373) 6,106 --------- --------- --------- -------- Net income (loss) $ 11,281 $ (934) $ (43,593)$(33,246) ========= ========= ========= ======== (A) Other includes investment and other activities not attributable to the Advanta Business Cards or Venture Capital segments. ADVANTA 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 --------------------------- December 31, December 31, 2003 2002 ------------ ------------ Interest income $ 114,504 $ 105,195 Interest expense 20,946 20,473 ------------ ------------ Net interest income 93,558 84,722 Provision for credit losses 54,053 48,165 ------------ ------------- Net interest income after provision for credit losses 39,505 36,557 Noninterest revenues 35,126 34,805 ------------ ------------- Risk-adjusted revenues (A) 74,631 71,362 Operating expenses 55,790 53,018 ------------ ------------- Income before income taxes 18,841 18,344 Income tax expense 7,254 7,063 ------------ ------------- Net income $ 11,587 $ 11,281 ============ ============= Average managed business credit card receivables $ 2,958,835 $ 2,441,218 (A) Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses. ADVANTA HIGHLIGHTS (in thousands, except per share data) Percent Three Months Ended Change From ------------------------- Dec. Sept. Dec. 31, 30, 31, Prior Prior EARNINGS 2003 2003 2002 Quarter Year ---------------------------------------------------------------------- Basic income (loss) from continuing operations per common share: Class A $ 0.45 $ 0.27 $ (1.38) 66.7 % N/M % Class B 0.47 0.29 (1.35) 62.1 N/M Combined (A) 0.47 0.28 (1.36) 67.9 N/M Diluted income (loss) from continuing operations per common share: Class A 0.43 0.26 (1.38) 65.4 N/M Class B 0.44 0.28 (1.35) 57.1 N/M Combined (A) 0.44 0.27 (1.36) 63.0 N/M Basic net income (loss) per common share: Class A 0.45 0.27 (1.38) 66.7 N/M Class B 0.47 0.29 (1.35) 62.1 N/M Combined (A) 0.47 0.28 (1.36) 67.9 N/M Diluted net income (loss) per common share: Class A 0.43 0.26 (1.38) 65.4 N/M Class B 0.44 0.28 (1.35) 57.1 N/M Combined (A) 0.44 0.27 (1.36) 63.0 N/M Return on average common equity 13.41 % 8.36 % (37.76)% 60.4 N/M Non-GAAP financial measure: Diluted net income from core operations per combined common share (B) $ 0.44 $ 0.32 $ 0.43 37.5 2.3 COMMON STOCK DATA ---------------------------------------------------------------------- Weighted average common shares used to compute: Basic earnings per common share Class A 8,803 8,978 9,171 (1.9)%(4.0)% Class B 15,186 15,100 15,292 0.6 (0.7) ------- ------- ------- Total 23,989 24,078 24,463 (0.4) (1.9) Diluted earnings per common share Class A 8,803 8,978 9,171 (1.9) (4.0) Class B 16,704 16,251 15,292 2.8 9.2 ------- ------- ------- Total 25,507 25,229 24,463 1.1 4.3 Ending shares outstanding Class A 9,607 9,687 10,041 (0.8) (4.3) Class B 17,344 17,390 17,430 (0.3) (0.5) ------- ------- ------- Total 26,951 27,077 27,471 (0.5) (1.9) Stock price: Class A High $ 13.48 $ 11.75 $ 11.00 14.7 22.5 Low 10.60 9.49 8.25 11.7 28.5 Closing 12.93 10.98 8.98 17.8 44.0 Class B High 13.42 11.95 11.10 12.3 20.9 Low 10.55 9.66 8.00 9.2 31.9 Closing 12.72 10.69 9.39 19.0 35.5 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 13.87 13.56 13.11 2.3 5.8 (A) Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding. (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 BUSINESS CREDIT CARD STATISTICS (in thousands) Three Months Ended Percent ------------------------------------ Change From Dec. 31, Sept. 30, Dec. 31, Prior Prior 2003 2003 2002 Quarter Year --------------------------------------------------- Transaction volume $1,944,617 $1,816,195 $1,707,416 7.1% 13.9% Securitization volume increase (decrease) excluding replenishment sales 119,750 (19,750) 331,975 N/M (63.9) Average managed receivables: Owned 594,034 734,715 572,069 (19.1) 3.8 Securitized 2,364,801 2,124,472 1,869,149 11.3 26.5 ----------- ----------- ----------- Managed (A) 2,958,835 2,859,187 2,441,218 3.5 21.2 Ending managed receivables: Owned 518,040 533,398 445,083 (2.9) 16.4 Securitized 2,463,747 2,343,221 2,149,147 5.1 14.6 ----------- ----------- ----------- Managed (A) 2,981,787 2,876,619 2,594,230 3.7 14.9 ---------------------------------------------------------------------- CREDIT QUALITY - OWNED ---------------------- Receivables 30 days or more delinquent $ 25,301 $ 30,681 $ 23,406 Receivables 90 days or more delinquent 12,696 14,225 11,959 As a percentage of gross receivables: Receivables 30 days or more delinquent 4.88% 5.75% 5.26% (15.1)% (7.2)% Receivables 90 days or more delinquent 2.45 2.67 2.69 (8.2) (8.9) Net principal charge-offs: Amount $ 10,163 $ 15,544 $ 9,227 As a percentage of average gross receivables (annualized) 6.84% 8.46% 6.45% (19.1) 6.0 CREDIT QUALITY - SECURITIZED ------------------- Receivables 30 days or more delinquent $ 148,177 $ 146,206 $ 136,128 Receivables 90 days or more delinquent 74,762 67,795 69,335 As a percentage of gross receivables: Receivables 30 days or more delinquent 6.01% 6.24% 6.33% (3.7)% (5.1)% Receivables 90 days or more delinquent 3.03 2.89 3.23 4.8 (6.2) Net principal charge-offs: Amount $ 43,890 $ 43,588 $ 38,938 As a percentage of average gross receivables (annualized) 7.42% 8.21% 8.33% (9.6) (10.9) CREDIT QUALITY - MANAGED (A) ------------------- Receivables 30 days or more delinquent $ 173,478 $ 176,887 $ 159,534 Receivables 90 days or more delinquent 87,458 82,020 81,294 As a percentage of gross receivables: Receivables 30 days or more delinquent 5.82% 6.15% 6.15% (5.4)% (5.4)% Receivables 90 days or more delinquent 2.93 2.85 3.13 2.8 (6.4) Net principal charge-offs: Amount $ 54,053 $ 59,132 $ 48,165 As a percentage of average gross receivables (annualized) 7.31% 8.27% 7.89% (11.6) (7.4) (A) 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 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 December 31, 2003 ---------------------------------------- Advanta Advanta Business Business Securitization Cards Cards GAAP Adjustments Managed ---------- -------------- ---------- INCOME STATEMENT MEASURES Interest income $ 24,464 $ 90,040 $ 114,504 Interest expense 9,859 11,087 20,946 Net interest income 14,605 78,953 93,558 Securitization income 32,896 (32,896) 0 Servicing revenues 11,298 (11,298) 0 Other revenues, net 25,995 9,131 35,126 Total noninterest revenues 70,189 (35,063) 35,126 Provision for credit losses 10,163 43,890 (A) 54,053 ---------- --------------- ---------- BALANCE SHEET MEASURES Average business credit card receivables 594,034 2,364,801 2,958,835 Ending business credit card receivables 518,040 2,463,747 2,981,787 Business credit card receivables: 30 days or more delinquent 25,301 148,177 173,478 90 days or more delinquent 12,696 74,762 87,458 Net principal charge-offs 10,163 43,890 54,053 Three Months Ended December 31, 2002 ---------------------------------------- Advanta Advanta Business Business Securitization Cards Cards GAAP Adjustments Managed ---------- -------------- ---------- INCOME STATEMENT MEASURES Interest income $ 24,831 $ 80,364 $ 105,195 Interest expense 10,321 10,152 20,473 Net interest income 14,510 70,212 84,722 Securitization income 30,138 (30,138) 0 Servicing revenues 9,554 (9,554) 0 Other revenues, net 26,387 8,418 34,805 Total noninterest revenues 66,079 (31,274) 34,805 Provision for credit losses 9,227 38,938 (A) 48,165 ---------- --------------- ---------- BALANCE SHEET MEASURES Average business credit card receivables 572,069 1,869,149 2,441,218 Ending business credit card receivables 445,083 2,149,147 2,594,230 Business credit card receivables: 30 days or more delinquent 23,406 136,128 159,534 90 days or more delinquent 11,959 69,335 81,294 Net principal charge-offs 9,227 38,938 48,165 (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 RECONCILIATION OF NON-GAAP NET INCOME FROM CORE OPERATIONS TO GAAP NET INCOME (in thousands, except per share data) 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 Ended Three Months Ended December 31, 2003 September 30, 2003 -------------------- -------------------- Amount Per Amount Per Diluted Diluted In Common In Common Thousands Share (B) Thousands Share (B) ---------- --------- ---------- --------- GAAP net income (loss) $ 11,176 $ 0.44 $ 6,851 $ 0.27 Add back: Other segment net loss (A) 0 0.00 0 0.00 Valuation adjustments from venture capital investments, net of tax at 38.5% 4 0.00 1,221 0.05 Effect of difference in dilutive shares (B) 0 0.00 0 0.00 ---------- --------- ---------- --------- Non-GAAP net income from core operations $ 11,180 $ 0.44 $ 8,072 $ 0.32 ========== ========= ========== ========= Three Months Ended December 31, 2002 --------------------- Amount Per Diluted In Common Thousands Share (B) ----------- --------- GAAP net income (loss) $ (33,246) $ (1.36) Add back: Other segment net loss (A) 43,593 1.78 Valuation adjustments from venture capital investments, net of tax at 38.5% 477 0.02 Effect of difference in dilutive shares (B) 0 (0.01) ----------- --------- Non-GAAP net income from core operations $ 10,824 $ 0.43 =========== ========= (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, unless there is a GAAP loss from continuing operations. If there is a GAAP loss from continuing operations, the denominator used for non-GAAP net income from core operations equals the denominator that would have been used for GAAP net income had there been GAAP income from continuing operations, rather than a loss. Amounts per diluted common share are calculated using total diluted shares as follows: Non-GAAP net income from Three months ended: GAAP net income core operations -------------------- --------------- ---------------- December 31, 2003 25,507 25,507 September 30, 2003 25,229 25,229 December 31, 2002 24,463 25,278 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