Fog Cutter Capital Group Inc. Reports Second Quarter 2002 Financial Results
PORTLAND, Ore.--(BUSINESS WIRE)--July 31, 2002--Fog Cutter Capital Group Inc. (Nasdaq:FCCG), a diversified investment group specializing in mortgage and real estate related assets, reports net income of $10.7 million or $1.10 per share for its second quarter ended June 30, 2002.
For the comparable quarter ended June 30, 2001, the Company incurred a net loss of $1.9 million or $0.18 per share. Year-to-date earnings for the six months ended June 30, 2002 totaled $10.2 million or $1.01 per share compared with a net loss during the same period in 2001 of $6.7 million or $0.64 per share.
The results for the second quarter of 2002 include net gains on the sale of loans and securities of $10.2 million and the Company's 26% share of earnings from its investment in Bourne End Properties PLC. ("Bourne End") of $2.1 million.
Total assets increased $7.6 million during the quarter to $94.7 million. Total liabilities increased $0.9 million to $49.2 million during the same period. As of June 30, 2002, stockholders' equity (including temporary equity in the amount of $4.0 million) totaled $45.5 million or $4.64 per share, an increase of $6.7 million or $0.68 per share for the quarter. (Temporary equity represents shares of the Company's common stock which are subject to options which could require the Company to repurchase the shares.)
During the second quarter, the Company sold its entire holdings of approximately 2.9 million shares of the common stock of Wilshire Financial Services Group Inc. The sales were prompted by recently improved market conditions surrounding WFSG and resulted in cash to the Company of $9.9 million. The sales transactions resulted in a gain of $6.3 million, which, net of previously recorded unrealized gains, increased stockholders' equity by $3.2 million. With the disposal of its entire interest in WFSG, the Company has withdrawn its application for change in control of a bank holding company (Form H-(e)1) which had been filed with the Office of Thrift Supervision on March 29, 2002.
The carrying value of the Company's mortgage-backed securities portfolio decreased by $5.8 million during the second quarter of 2002. The decrease was primarily the result of the sale of securities which had a carrying value of $7.0 million. The net proceeds from these sales were $9.8 million. The Company recorded a $3.8 million gain on the sale, which, net of previously recorded unrealized gains, resulted in an increase to stockholders' equity of $2.7 million.
During the second quarter, Bourne End, a specialist investor in retail property located in the United Kingdom, sold three shopping centers totaling 359,000 square feet. These sales, together with the operations of other shopping centers owned by Bourne End, resulted in the recognition of $2.1 million in earnings by Fog Cutter for its share of the investment. In December 2000, Fog Cutter Capital Group organized and led a group of investors, including Merrill Lynch (Jersey) Holdings Limited (a subsidiary of Merrill Lynch & Co., Inc.), to purchase all of the outstanding capital stock of Bourne End,. At the time of the acquisition, Bourne End had approximately GBP 169.6 million ($245.1 million) of assets and GBP 123.1 million ($177.9 million) of debt. The real estate assets consisted of 1.7 million square feet in fifteen shopping centers.
As of June 30, 2002, Bourne End had sold nine properties since the acquisition by Fog Cutter and its partners. These sales have been consistent with the group's strategy to reposition each of the centers, including new capital expenditures on existing space and new development on excess or adjoining land, with the goal of reselling many of the properties. Based on square footage, the sales to date represent 43% of the original Bourne End portfolio and are in line with the acquiring group's business plan. Bourne End currently owns six town shopping centers located in England and Scotland. The remaining centers range in size from 96,000 square feet to 330,000 square feet.
The second quarter results also reflect the consolidated operations of George Elkins Mortgage Banking Company ("Elkins"). In May 2002, the Company acquired a 51% interest in the mortgage banking operation of Elkins. Headquartered in Los Angeles, with offices in Santa Barbara, San Diego and Newport Beach, Elkins provides brokerage services in the origination of commercial mortgages. Elkins specializes in commercial real estate loans in a variety of property types and loan amounts. The operations of Elkins reflected in the consolidated statements of operation of the Company, from the acquisition date through June 30, 2002, resulted in a net loss of $0.1 million, after the expensing of $0.2 million in deferred compensation and legal fees paid in connection with the acquisition.
During the quarter ending June 30, 2002, the Company repaid or refinanced all of its remaining short-term fully-recourse repurchase agreements and replaced them with non-recourse repurchase agreements held in wholly-owned subsidiaries. As a result, the potential risk to the Company from collateral calls has been significantly reduced.
During the second quarter, the Company established a liability for income taxes payable of $2.4 million. This was the result of a provision for income taxes of $0.8 million and the establishment of a tax liability of $1.6 million relating to unrealized appreciation on the mortgage-backed securities portfolio. As of June 30, 2002, the Company had, for U.S. Federal tax purposes, a net operating loss carryforward ('NOL") of approximately $90 million, which begins to expire in 2018. The Company believes that the NOL may significantly reduce or eliminate the future payment of the tax liabilities established at June 30, 2002.
The Company has declared and paid quarterly cash dividends of $0.13 per share for each of the last four calendar quarters |
