EX-99.1 2 a4690531ex991.txt NEWS RELEASE Exhibit 99.1 Advanta Reports Second Quarter Earnings; Raises 2004 Earnings Guidance SPRING HOUSE, Pa.--(BUSINESS WIRE)--July 29, 2004--Advanta Corp. (NASDAQ:ADVNB;ADVNA) today reported income from continuing operations of $10.8 million or $0.40 per diluted share for second quarter 2004 for Class A and Class B shares combined, as compared to $6.3 million or $0.26 per diluted share for second quarter 2003. The current quarter's earnings reflect an 104 basis point decline in net principal charge-offs on managed business credit card receivables to 6.99% on an annualized basis, as compared to 8.03% for second quarter 2003. Net principal charge-offs on owned business credit card receivables declined 80 basis points to 6.75%, as compared to 7.55% for second quarter 2003. Advanta reported consolidated net income for the quarter of $11 million or $0.41 per diluted share up from $4.3 million or $0.18 per diluted share for second quarter 2003. The results for second quarter 2004 include a $0.01 per diluted share net gain associated with discontinued operations, and the results for second quarter 2003 included a $0.03 per diluted share asset valuation charge associated with the valuation of the Company's venture capital portfolio and an $0.08 charge associated with discontinued operations. Advanta also announced today that it was raising its 2004 earnings guidance. "Our high credit quality customers are delivering the benefits that we are seeking," said Dennis Alter, Chairman and CEO. "As a result of our favorable asset quality performance, we now expect earnings for the year to be at the upper end of our initial guidance range to 10 cents above that range." The Company's initial guidance for 2004 earnings from continuing operations was between $1.40 and $1.60 per diluted share for Class A and Class B shares combined. The initial and revised guidance estimates assume no gains or losses associated with the Company's venture capital portfolio as such amounts are based on future market conditions that cannot be reliably forecasted. These estimates also do not include the recently announced agreement with Bank of America to resolve all outstanding litigation, including partnership tax disputes, between Advanta and FleetBoston Financial Corporation, which is expected to increase earnings by approximately $2.30 per diluted share and book value by approximately $2.45 per share. The agreement is subject to the Internal Revenue Service's final approval of the settlement of the tax disputes, which the IRS is expected to approve. Consistent with historical presentation, the gain associated with the settlement will be classified as earnings from continuing operations. Advanta ended the quarter with managed business credit card receivables of $3.1 billion as compared to $2.8 billion at June 30, 2003. Over 30 day delinquencies on managed business credit card receivables declined 148 basis points to 4.80% and over 90 day delinquencies decreased 69 basis points to 2.50%, each as compared to second quarter 2003. At June 30, 2004, owned business credit card receivables were $550 million as compared to $443 million at June 30, 2003. Over 30 day delinquencies on owned business credit card receivables declined 120 basis points to 4.64% and over 90 day delinquencies decreased 56 basis points to 2.42%, each as compared to second quarter 2003. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, July 29, 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 726552. 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 supplements, both available at www.advanta.com in the "Corporate Info" section. About Advanta Advanta focuses on the small business market and related community, providing funding and support to the nation's small businesses through innovative products and services. Using its direct marketing and information based expertise, Advanta identifies potential customers and provides a high level of service tailored to the unique needs of small businesses. Advanta is one of the nation's largest issuers (through Advanta Bank Corp.) 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 materially from those projected. The most significant among these risks and uncertainties are: (1) the Company's managed net interest income including changes resulting from fluctuations in the volume of receivables and the range and timing of pricing offers to cardholders; (2) competitive pressures; (3) political conditions, social conditions, monetary and fiscal policies and 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 and examinations; (10) effect of, and changes in, tax laws, rates, regulations and policies; (11) relationships with customers, significant vendors and business partners; (12) difficulties or delays in the development, production, testing and marketing of products or services; (13) the amount and cost of financing available to the Company; (14) the ratings on the debt of the Company and its subsidiaries; (15) revisions to estimates associated with the discontinued operations of the Company's mortgage and leasing businesses; (16) obtaining the approval of the Internal Revenue Service as required under the agreement with Bank of America; (17) the impact of litigation; (18) the proper design and operation of our disclosure controls and procedures; and (19) the ability to attract and retain key personnel. 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 SEGMENT INCOME STATEMENT (in thousands) Three Months Ended June 30, 2004 ---------------------------------------------------------------------- Advanta Business Venture Cards Capital Other (A) Total ---------- --------- ----------- --------- Interest income $ 23,735 $ 0 $ 1,499 $ 25,234 Interest expense 8,590 86 2,170 10,846 ---------- --------- ----------- --------- Net interest income 15,145 (86) (671) 14,388 Provision for credit losses 10,654 0 (160) 10,494 ---------- --------- ----------- --------- Net interest income after provision for credit losses 4,491 (86) (511) 3,894 Noninterest revenues: Securitization income 32,627 0 0 32,627 Servicing revenues 12,499 0 0 12,499 Other revenues, net 27,989 0 790 28,779 ---------- --------- ----------- --------- Total noninterest revenues 73,115 0 790 73,905 Operating expenses 59,608 9 279 59,896 ---------- --------- ----------- --------- Income (loss) before income taxes 17,998 (95) 0 17,903 Income tax expense (benefit) 7,109 (38) 0 7,071 ---------- --------- ----------- --------- Income (loss) from continuing operations 10,889 (57) 0 10,832 Gain, net, on discontinuance of mortgage and leasing businesses, net of tax 0 0 160 160 ---------- --------- ----------- --------- Net income (loss) $ 10,889 $ (57) $ 160 $ 10,992 ========== ========= =========== ========= 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 ========== ========= =========== ========= (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 AND MANAGED INCOME RATIOS (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. Advanta Business Cards Managed Income Statement ----------------------------------------------- Three Months Ended ------------------------- June 30, June 30, 2004 2003 ------------ ------------ Interest income $ 115,781 $ 112,826 Interest expense 19,963 20,953 ------------ ------------ Net interest income 95,818 91,873 Provision for credit losses 55,294 56,140 ------------ ------------ Net interest income after provision for credit losses 40,524 35,733 Noninterest revenues 37,082 32,733 ------------ ------------ Risk-adjusted revenues (A) 77,606 68,466 Operating expenses 59,608 55,819 ------------ ------------ Income before income taxes 17,998 12,647 Income tax expense 7,109 4,869 ------------ ------------ Net income $ 10,889 $ 7,778 ============ ============ Average managed business credit card receivables $ 3,116,466 $ 2,796,871 (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 Ended Percent -------------------------- Change From June 30, Mar. 31, June 30, Prior Prior EARNINGS 2004 2004 2003 Quarter Year ---------------------------------------------------------------------- Basic income from continuing operations per common share: Class A $ 0.42 $ 0.37 $ 0.25 13.5% 68.0% Class B 0.44 0.39 0.27 12.8 63.0 Combined (A) 0.43 0.38 0.26 13.2 65.4 Diluted income from continuing operations per common share: Class A 0.39 0.34 0.24 14.7 62.5 Class B 0.40 0.36 0.26 11.1 53.8 Combined (A) 0.40 0.35 0.26 14.3 53.8 Basic net income per common share: Class A 0.42 0.37 0.16 13.5 162.5 Class B 0.45 0.39 0.19 15.4 136.8 Combined (A) 0.44 0.38 0.18 15.8 144.4 Diluted net income per common share: Class A 0.40 0.34 0.16 17.6 150.0 Class B 0.41 0.36 0.18 13.9 127.8 Combined (A) 0.41 0.35 0.18 17.1 127.8 Return on average common equity 12.21% 10.86% 5.30% 12.4 130.4 COMMON STOCK DATA ---------------------------------------------------------------------- Weighted average common shares used to compute: Basic earnings per common share Class A 8,794 8,786 9,151 0.1% (3.9)% Class B 16,172 15,502 14,893 4.3 8.6 -------- -------- -------- Total 24,966 24,288 24,044 2.8 3.8 Diluted earnings per common share Class A 8,794 8,786 9,151 0.1 (3.9) Class B 18,329 17,656 15,445 3.8 18.7 -------- -------- -------- Total 27,123 26,442 24,596 2.6 10.3 Ending shares outstanding Class A 9,607 9,607 9,886 0.0 (2.8) Class B 18,093 17,710 17,274 2.2 4.7 -------- -------- -------- Total 27,700 27,317 27,160 1.4 2.0 Stock price: Class A High $ 23.21 $ 16.88 $ 10.45 37.5 122.1 Low 15.43 12.92 6.70 19.4 130.3 Closing 21.93 16.83 9.84 30.3 122.9 Class B High 24.12 16.90 11.00 42.7 119.3 Low 15.13 12.55 7.47 20.6 102.5 Closing 22.92 16.50 9.99 38.9 129.4 Cash dividends declared: Class A 0.095 0.063 0.063 50.0 50.0 Class B 0.113 0.076 0.076 50.0 50.0 Book value per common share 14.28 14.08 13.41 1.4 6.5 (A) Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding. ADVANTA BUSINESS CREDIT CARD STATISTICS (in thousands) Three Months Ended Percent ---------------------------------- Change From June 30, Mar. 31, June 30, Prior Prior 2004 2004 2003 Quarter Year --------------------------------------------------- Transaction volume $1,994,647 $1,921,933 $1,677,804 3.8% 18.9% Securitization volume increase excluding replenishment sales 0 90,000 86,182 (100.0) (100.0) Average managed receivables: Owned 583,581 551,652 506,200 5.8 15.3 Securitized 2,532,885 2,515,532 2,290,671 0.7 10.6 ----------- ----------- ----------- Managed (A) 3,116,466 3,067,184 2,796,871 1.6 11.4 Ending managed receivables: Owned 549,862 528,204 442,769 4.1 24.2 Securitized 2,546,777 2,548,942 2,365,176 (0.1) 7.7 ----------- ----------- ----------- Managed (A) 3,096,639 3,077,146 2,807,945 0.6 10.3 ---------------------------------------------------------------------- CREDIT QUALITY - OWNED ------------------ Receivables 30 days or more delinquent $ 25,493 $ 26,908 $ 25,839 Receivables 90 days or more delinquent 13,309 13,368 13,184 As a percentage of gross receivables: Receivables 30 days or more delinquent 4.64% 5.09% 5.84% (8.8)% (20.5)% Receivables 90 days or more delinquent 2.42 2.53 2.98 (4.3) (18.8) Net principal charge-offs: Amount $ 9,854 $ 8,913 $ 9,555 As a percentage of average gross receivables (annualized) 6.75% 6.46% 7.55% 4.5 (10.6) CREDIT QUALITY - SECURITIZED ------------------ Receivables 30 days or more delinquent $ 123,123 $ 138,440 $ 150,380 Receivables 90 days or more delinquent 63,980 69,087 76,459 As a percentage of gross receivables: Receivables 30 days or more delinquent 4.83% 5.43% 6.36% (11.0)% (24.1)% Receivables 90 days or more delinquent 2.51 2.71 3.23 (7.4) (22.3) Net principal charge-offs: Amount $ 44,640 $ 46,187 $ 46,585 As a percentage of average gross receivables (annualized) 7.05% 7.34% 8.13% (4.0) (13.3) CREDIT QUALITY - MANAGED (A) ------------------ Receivables 30 days or more delinquent $ 148,616 $ 165,348 $ 176,219 Receivables 90 days or more delinquent 77,289 82,455 89,643 As a percentage of gross receivables: Receivables 30 days or more delinquent 4.80% 5.37% 6.28% (10.6)% (23.6)% Receivables 90 days or more delinquent 2.50 2.68 3.19 (6.7) (21.6) Net principal charge-offs: Amount $ 54,494 $ 55,100 $ 56,140 As a percentage of average gross receivables (annualized) 6.99% 7.19% 8.03% (2.8) (13.0) (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. 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 June 30, 2004 ---------------------------------------------- Advanta Advanta Business Cards Securitization Business Cards GAAP Adjustments Managed -------------- -------------- -------------- INCOME STATEMENT MEASURES Interest income $ 23,735 $ 92,046 $ 115,781 Interest expense 8,590 11,373 19,963 Net interest income 15,145 80,673 95,818 Securitization income 32,627 (32,627) 0 Servicing revenues 12,499 (12,499) 0 Other revenues, net 27,989 9,093 37,082 Total noninterest revenues 73,115 (36,033) 37,082 Provision for credit losses 10,654 44,640 (A) 55,294 ---------------------------------------------- BALANCE SHEET MEASURES Average business credit card receivables 583,581 2,532,885 3,116,466 Ending business credit card receivables 549,862 2,546,777 3,096,639 Business credit card receivables: 30 days or more delinquent 25,493 123,123 148,616 90 days or more delinquent 13,309 63,980 77,289 Net principal charge- offs 9,854 44,640 54,494 Three Months Ended June 30, 2003 ---------------------------------------------- Advanta Advanta Business Cards Securitization Business 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 Average business credit card receivables 506,200 2,290,671 2,796,871 Ending business credit card receivables 442,769 2,365,176 2,807,945 Business credit card receivables: 30 days or more delinquent 25,839 150,380 176,219 90 days or more delinquent 13,184 76,459 89,643 Net principal charge- offs 9,555 46,585 56,140 (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 FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES (in thousands) The examples in the tables below provide a reconciliation of original and revised forward-looking managed receivables and managed principal charge-offs as a percentage of average managed receivables (non-GAAP financial measures) to owned receivables and owned principal charge-offs as a percentage of average owned receivables (the most directly comparable GAAP financial measures). The examples presented below depict only certain possibilities out of a large set of possible scenarios. A discussion of why management believes that performance of the Advanta Business Cards segment on a managed basis provides useful supplemental information is included in this press release. December 31, 2004 ------------------------------------------- Original Guidance Revised Guidance -------------------------- ---------------- Low End of High End of Low End of Forward-Looking Business Range Range Range Credit Card Receivable ------------ ------------- ---------------- Balances: Owned $ 570,000 $ 622,000 $ 738,000 Securitized 2,710,000 2,956,000 2,542,000 ------------ ------------- ---------------- Managed $ 3,280,000 $ 3,578,000 $ 3,280,000 Year Ended December 31, 2004 -------------------------- Original Revised Forward-Looking Average Guidance Guidance Business Credit Card ------------ ------------- Receivable Balances: Owned $ 600,000 $ 645,000 Securitized 2,650,000 2,505,000 ------------ ------------- Managed $ 3,250,000 $ 3,150,000 Year Ended December 31, 2004 ------------------------------------------- Original Guidance Revised Guidance -------------------------- ---------------- Low End of High End of Low End of Range Range Range Forward-Looking Business ------------ ------------- ---------------- Credit Card Credit Data: Owned net principal charge-offs $ 37,800 $ 42,000 $ 41,000 As a percentage of average receivables 6.3% 7.0% 6.4% Securitized net principal charge-offs $ 189,700 $ 208,250 $ 166,900 As a percentage of average receivables 7.2% 7.9% 6.7% Managed net principal charge-offs $ 227,500 $ 250,250 $ 207,900 As a percentage of average receivables 7.0% 7.7% 6.6% -Statistical supplement available at www.advanta.com- CONTACT: Advanta Corp. David Weinstock Investor Relations (215) 444-5335 dweinstock@advanta.com or Jennifer Lyons Communications (215) 444-5073 AdvantaCommunications@advanta.com