AMRESCO, INC. Announces Fourth Quarter Results
DALLAS, March 31 /PRNewswire/ -- AMRESCO, INC. (Nasdaq: AMMB) reported a
net loss from continuing operations of $162.2 million and a net loss of
$161.2 million for the quarter ended December 31, 1999, or $3.37 and $3.35 per
share, respectively. For the year ended December 31, 1999, net loss from
continuing operations was $228.3 million and net loss was $220.8 million, or
$4.77 and $4.61 per share, respectively. Losses for the quarter and year
ended December 31, 1999 were primarily attributable to (i) non-cash write-
downs on retained interests in home equity loan securitizations of
approximately $56.4 million and $146.4 million, respectively, (ii) a non-cash
impairment of the intangible assets associated with the residential mortgage
banking unit of approximately $103.3 million for both periods, (iii) non-cash
impairment of assets related to the closing of home equity retail branches of
approximately $0 and $8.7 million, respectively, and (iv) a mark-to-market
loss on the real estate structured finance portfolio of approximately
$9.6 million for both periods.
Changes in the capital markets and the specialty finance industry as a
whole placed significant constraints on the Company's ability to make new
investments in home equity lending, asset management, real estate structured
finance, communications lending and commercial mortgage servicing in the
latter part of 1998 and early 1999. In light of these capital constraints,
the Company began exploring strategic alternatives for its capital-intensive
businesses in early 1999. As a result of this effort, in 1999, the Company
(i) agreed to transfer its home equity lending operations to a joint venture
with Lehman Capital, a division of Lehman Brothers Holding Inc. (the transfer
of this unit was completed in the first quarter of 2000), (ii) agreed to sell
to Lend Lease (US) Services, Inc. its commercial mortgage banking line of
business and its asset management and real estate structured finance
platforms, which subsequently closed on March 17, 2000, (iii) sold
substantially all of its communications loan portfolio and (iv) agreed to sell
a significant portion of its real estate structured finance portfolio, which
subsequently closed on January 28, 2000. As a result of the Lend Lease sale,
the commercial mortgage banking division has been reflected as a discontinued
operation in the 1999 financial statements. All prior periods have been
restated accordingly.
In January 2000, the Company and former owners of Mortgage Investors
Corporation ("MIC") entered into an option agreement that grants the Company
the right to fully settle an accrued earn-out of $86.1 million payable in
common stock by paying the former owners of MIC approximately $25 million in
cash, forgiving approximately $17 million of indebtedness and transferring all
of the outstanding capital stock of MIC to the former owners. The Company
anticipates that it will exercise this option by April 30, 2000. As a result
of this transaction, in the fourth quarter of 1999, the Company recorded a
$103.3 million non-cash impairment of the intangible assets associated with
MIC.
In March 2000, the Company and former shareholders of Commercial Lending
Corporation ("CLC") agreed to amend the Asset Purchase Agreement pursuant to
which the Company acquired CLC. This agreement provides that the amount of
the final earn-out payment of $37.5 million in common stock, due on June 30,
2000, may be satisfied with $37.5 million in promissory notes. The promissory
notes, which may be prepaid without penalty at anytime, will provide for
principal payments of $12.5 million each on June 30, September 30, and
December 29, 2000. In the event that the Company does not issue such notes,
the full $37.5 million will be payable in company stock on June 30, 2000.
Also in March 2000, the Company completed the sale of its European assets
and operations for a total sales price of approximately 102 million British
Pounds ($160 million), which approximated book value.
Following the sale of the commercial mortgage banking, asset management
and real estate structured finance lines of business to Lend Lease, the sale
of the European assets and operations and the execution of the MIC option, the
Company's operations will be centered around the commercial finance line of
business. The Company's primary operating activity will include small
business lending, franchise lending, lending to residential homebuilders and
equipment lending. The commercial finance line of business had total earning
assets of approximately $565 million at December 31, 1999, net of the real
estate structured finance loans sold in January 2000. In addition, at
December 31, 1999, the Company has retained approximately $475 million in net
earning assets related to the asset management assets (net of the European
assets sold in March 2000), home equity residuals and commercial mortgage
backed securities.
The commercial finance line of business earned $66.7 million in operating
profit in 1999 and grew revenues by $54.2 million over 1998, an increase of
44.4%. Revenues from the Company's commercial finance business are primarily
earned from (i) interest and origination fees on loans, (ii) accrued earnings
on retained interests in securitizations, (iii) gains on sale and
securitization of loans and (iv) loan servicing fees.
With the closing of the Lend Lease and European transactions, a
substantial portion of the senior secured credit facility was paid-off and the
available commitment on the facility was reduced accordingly. In March 2000,
the Company executed a modification and amendment to such senior secured
credit facility which provided for the assignment of the existing commitments
to Bank of America and affiliates of Farallon Capital Management, LLC. The
modification and amendment provides a revolving credit commitment of up to
$75 million. As of March 30, 2000, the Company had drawn approximately
$24.8 million on this commitment. The total liquidity of the Company as of
March 30, 2000 was approximately $48.0 million, which consisted primarily of
availability under the senior revolver.
Prudential Securities Credit Corporation has provided $250 million in
warehouse financing facilities to AMRESCO Commercial Finance, Inc. to fund the
Company's franchise and small business lending operation. The terms of the
facility were amended in March 2000, to extend the maturity of this facility
to March 31, 2001. As of December 31, 1999, approximately $38 million was
outstanding under these facilities.
Transamerica Business Credit Corporation ("Transamerica") has provided a
$75 million working capital facility to AMRESCO Independence Funding, Inc. to
finance the Company's SBA 7(a) loan origination operation. This facility has
a maturity of December 31, 2001. In November 1999, the facility was amended
to include a mandatory repayment period of 359 days for each advance under the
facility. As of December 31, 1999, the outstanding balance under this
facility was approximately $47.2 million.
The Company has engaged Prudential Securities Incorporated to assist in
identifying and evaluating strategic alternatives for the Company's remaining
businesses.
Bob Lutz, the Company President and Chief Executive Officer, stated,
"Despite 1999 being another challenging year for AMRESCO, we have made
significant progress. Over the past year we have consummated several
significant transactions that have simplified our business model and de-
leveraged our balance sheet. We have worked diligently to downsize the
Company and reduce expenses. We will continue to minimize costs as we
complete our transition to a commercial finance centered business. As we work
through this transition process it continues to be our intent to optimize
value for our shareholders and bondholders, while at the same time minimizing
risks."
Going forward, AMRESCO will concentrate its efforts around its Commercial
Finance line of business and remains one of the largest conventional business
lenders and sixth largest SBA lender in the country. |
