CRIIMI MAE Reports Second Quarter Results
ROCKVILLE, Md., Aug. 14 /PRNewswire/ -- CRIIMI MAE Inc. (NYSE: CMM) today reported results for the three and six months ended June 30, 2000.
For the three months ended June 30, 2000, CRIIMI MAE reported net income available to common shareholders under generally accepted accounting principles (GAAP) of approximately $3.7 million, or six cents per basic share and five cents per diluted share. This compares with a net loss to common shareholders for the second quarter of 1999 of approximately $2.0 million, or four cents per basic and diluted share.
The increase in net income for the three months ended June 30, 2000 as compared to the same period in 1999 was primarily due to the recognition of an unrealized loss on warehouse obligations of $10.9 million during the second quarter of 1999. CRIIMI MAE did not recognize any losses on warehouse obligations during 2000 because the Company sold all of the mortgage loans originated under one of its warehouse programs in 1999. Partially offsetting this increase in net income was a $4.9 million reduction in net interest margin, as discussed below.
For the first half of 2000, net income available to common shareholders was approximately $7.8 million, or 13 cents per basic share and 11 cents per diluted share, compared to approximately $11.4 million, or 21 cents per basic share and 20 cents per diluted share for the same period in 1999.
The decrease in net income for the first half of 2000 as compared to 1999 was primarily due to a reduction in net interest margin and a net increase in reorganization items. This decrease was partially offset by a reduction of $6.9 million in unrealized loss on warehouse obligations recognized in the first half of 1999.
The net interest margin decreased for the three and six months ended June 30, 2000 compared to corresponding periods due, in part, to the sale of certain CMBS in February and in April 2000 which reduced CRIIMI MAE's commercial mortgage-backed securities ("CMBS") holdings. Also contributing to the decrease in net interest margin was an increase in interest expense, caused, in part, by the replacement during 1999 of a portion of the Company's variable-rate debt with higher, fixed-rate debt.
Included in the decrease in net income for the six months ended June 30, 2000 were reorganization items aggregating $14.9 million during the six months ended June 30, 2000 versus $10.9 million for the six months ended June 30, 1999. The increase in reorganization items was principally due to impairment and losses related to the Company's assets. Impairment is recognized through the income statement when the fair market value of an investment declines below its amortized cost for a significant period of time and the entity no longer has the ability or intent to hold the investment until the value recovers to amortized cost.
The table that follows the text of this release identifies other items that contributed to the changes in GAAP earnings during the three and six months ended June 30, 2000.
Consistent with the Company's plan of reorganization, on March 15, 2000, CRIIMI MAE elected for tax purposes to be classified as a trader in securities effective January 1, 2000. Such trading activity is, or is expected to be, in certain types of mortgage-backed securities, including subordinated CMBS. As a trader in securities, the Company will mark-to-market its trading assets for the current and future tax years.
The Company initially marked-to-market its trading assets on January 1, 2000, resulting in losses for tax purposes of approximately $478 million. Beginning with the 2000 tax year, the Company expects to recognize these losses evenly over four years at a rate of approximately $120 million per year. Any accumulated and unused losses generally may be carried forward for up to 20 years to offset taxable income until fully utilized.
For tax purposes, the estimated net operating loss for the six months ended June 30, 2000 was approximately $32.6 million or a loss of 52 cents per weighted average share, which includes a realized loss of approximately $5.7 million on the sale of certain CMBS. This compares with tax basis income of approximately $31.5 million, or 59 cents per weighted average share for the first half of 1999. For the first six months of 2000, the net operating loss included one-half, or approximately $60 million, of this year's portion of the $478 million four-year mark-to-market loss.
The Company's trader election will require that its trading assets be marked-to-market at the end of each tax year. The resulting year-end adjustments will be reflected as unrealized ordinary gains and losses in the Company's tax return. In addition, CRIIMI MAE expects to realize ordinary gains and losses during the year on dispositions of trading assets. So long as available, net operating losses are expected to offset all or a portion of each year's taxable income.
In order to retain its 1999 tax status as a Real Estate Investment Trust ("REIT") and avoid corporate income tax liability, the Company must distribute all of its 1999 taxable income. As a result, CRIIMI MAE expects to declare and pay a taxable stock dividend before year-end 2000. There can be no assurance that the Company will be able to make such distribution with respect to its 1999 taxable income.
For a more complete discussion of the Company's trader election, including related risks and the effect on taxable income (loss), REIT distribution requirements and cash flows, reference is made to the Company's Current Report on Form 10-Q for the quarter ended June 30, 2000.
CRIIMI MAE's shareholders' equity increased to approximately $250 million ($3.05 per diluted share) at June 30, 2000, from approximately $219 million ($2.75 per diluted share) at December 31, 1999. The increase in shareholders' equity during this period primarily resulted from an overall net increase in the fair market value of the Company's portfolio of CMBS and insured mortgage securities, and net income for the six months ended June 30, 2000.
In July 2000, CRIIMI MAE decided that, as part of its plan of reorganization, it would sell its remaining interest in CMO-IV, a securitization of commercial mortgage loans completed by the Company in June 1998. If the sale of CMO-IV took place as of June 30, 2000, based on the June 30, 2000 balance sheet and estimated fair values (along with the de- recognition of corresponding assets and liabilities), the Company would recognize an approximate $24 million loss for financial statement purposes, and an approximate $23 million loss for tax purposes.
The United States Bankruptcy Court for the District of Maryland, Greenbelt Division has scheduled a hearing on August 23, 2000, to review the proposed ballots submitted to the Bankruptcy Court to be sent to members of all classes of impaired creditors and equity security holders in connection with the Company's plan of reorganization.
The Company's plan of reorganization was filed with the support of the Official Committee of Equity Security Holders of CRIIMI MAE, which is a co- proponent of the plan. The Official Committee of Unsecured Creditors of CRIIMI MAE has agreed to support confirmation of the Company's plan of reorganization subject to the completion of mutually acceptable documentation regarding the treatment of certain classes of claims. Under the plan, Merrill Lynch Mortgage Capital Inc. and German American Capital Corporation, two of the Company's largest secured creditors, would provide a significant portion of the recapitalization financing contemplated by the plan.
Once the disclosure statement and ballots have been approved by the Bankruptcy Court, the plan will be sent, together with the approved disclosure statement and ballots, to members of all classes of impaired creditors and equity security holders for acceptance or rejection.
Since filing for protection under Chapter 11 of the U.S. Bankruptcy Code on October 5, 1998, CRIIMI MAE has suspended its loan origination, loan securitization and CMBS acquisition businesses. The Company continues to own a substantial portfolio of subordinated CMBS and, through its servicing affiliate, acts as a servicer of commercial mortgage loans.
More information on CRIIMI MAE is available on its web site -- www.criimimaeinc.com -- or for investors, call Susan Railey, 301-468-3120, or for news media, call Jim Pastore, 202-546-6451.
Note: Except for historical information, forward-looking statements contained in this release involve a variety of risks and uncertainties. These risks and uncertainties include the continued uncertainty of the capital markets; the ability of the Company to obtain recapitalization financing, including but not limited to a restructuring of certain of its debt and the sale of certain assets, as contemplated by the Company's plan of reorganization, to a party or parties for sufficient proceeds; the ability to obtain new equity should it be determined by the Company to proceed with new equity as part of the Company's plan of reorganization; the ability of relevant parties to finalize and execute constituent and operative documents called for by the Company's plan of reorganization; the possible confirmation of an alternative plan; the trends in the CMBS market; competitive pressures; the effect of future losses on the Company's need for liquidity; confirmation, effectiveness and consummation of the Company's plan of reorganization; the effects of the bankruptcy proceeding on the Company's ongoing business; the actions of CRIIMI MAE's creditors and equity security holders; the possibility that the Company's trader election may be challenged on the grounds that the Company is not in fact a trader in securities or that it is only a trader with respect to certain securities and that the Company will, therefore, not be able to mark-to-market its securities, or that it will be limited in its ability to recognize certain losses, resulting in an increase in shareholder distribution requirements with the possibility that the Company may not be able to make such distributions or maintain REIT status; the likelihood that mark-to-market losses will increase and decrease due to changes in the fair market value of the Company's trading assets; and the outcome of litigation to which the Company is a party, as well as the risks and uncertainties that are set forth in the Company's disclosure statement, and from time to time in the Company's SEC reports, including its Annual Report on Form 10-K for the year ended December 31, 1999 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
-table to follow-
CRIIMI MAE Inc.
For the three months For the six months
ended June 30, ended June 30,
2000 1999 2000 1999
FINANCIAL STATEMENT NET INCOME (ON A CONSOLIDATED BASIS)
Interest Income
Subordinated CMBS $35,392,863 $38,418,611 $74,562,634 $76,903,756
Insured mortgage
securities 7,670,728 8,489,030 15,467,929 17,389,338
Originated loans 8,210,791 8,647,815 16,698,417 17,488,642
Total interest
income 51,274,382 55,555,456 106,728,980 111,781,736
Interest and related expenses
Fixed-rate
collateralized
bond
obligations-CMBS 6,192,363 5,948,766 12,678,575 9,449,286
Fixed-rate
collateralized
mortgage
obligations
-insured
securities 9,308,798 8,304,889 16,355,730 16,709,161
Fixed-rate
collateralized
mortgage
obligations- originated loans 6,783,741 6,687,220 13,541,862 13,250,128
Fixed-rate senior
unsecured notes 2,281,251 2,281,251 4,562,502 4,562,502
Variable-rate
secured
borrowings-CMBS 11,294,515 12,397,081 24,015,610 26,367,454
Other financing
facilities 2,031,259 1,689,082 3,952,600 3,398,688
Total interest
expense 37,891,927 37,308,289 75,106,879 73,737,219
Net interest
margin 13,382,455 18,247,167 31,622,101 38,044,517
Equity in
(losses from)
investments (26,270) 121,016 (38,186) (1,485,616)
Other income 981,861 787,508 1,318,546 1,423,540
Net gains on
mortgage security
dispositions 225,835 778,608 241,312 1,585,812
Gain on originated
loan dispositions 37,885 58,810 37,885 160,210
General and
administrative
expenses (2,665,231) (3,617,040) (5,803,988) (6,251,154)
Amortization of
assets acquired
in the Merger (719,394) (719,394) (1,438,788) (1,438,788)
Unrealized loss on
warehouse obligation - (10,871,970) - (6,925,495)
Reorganization items:
Other (2,723,109) (5,438,943) (6,971,564) (10,946,781)
Impairment
on CMBS (1,809,062) - (5,252,821) -
Impairment on REO (924,283) - (924,283) -
Loss on Sale
of CMBS (357,188) - (1,711,214) -
(7,978,956) (18,901,405) (20,543,101) (23,878,272)
Net income (loss)
before dividends accrued on
preferred shares 5,403,499 (654,238) 11,079,000 14,166,245
Dividends accrued
on preferred
shares (1,661,015) (1,378,961) (3,300,905) (2,782,495)
Net income (loss)
available to
common
shareholders $3,742,484 ($2,033,199) $7,778,095 $11,383,750
FINANCIAL STATEMENT EARNINGS PER SHARE:
Total GAAP Basis
Income per
share - Basic $0.06 ($0.04) $0.13 $0.21
Weighted Average
Shares - Basic 62,353,170 53,553,161 61,934,051 53,282,424
Total GAAP Basis
Income per
share - Diluted $0.05 ($0.04) $0.11 $0.20
Weighted Average
Shares - Diluted 76,364,479 53,553,161 77,577,654 60,889,109
CRIIMI MAE Inc
As of As of
June 30, 2000 December 31, 1999
Balance Sheet Data
Subordinated CMBS $1,018,145,199 $1,179,270,306
Insured mortgage securities 381,201,135 394,857,239
Investment in originated loans 464,478,082 470,204,780
Total assets 2,133,546,337 2,293,661,246
Shareholders' equity 250,038,643 219,348,586
SOURCE CRIIMI MAE Inc.
CO: CRIIMI MAE Inc.
ST: Maryland
IN: FIN
SU: ERN
08/14/2000 08:01 EDT prnewswire.com |
