Advanta Corporation to explore strategic alternatives to maximize shareholder value, provides financial outlook for 1997, retains BT Wolfensohn to assist in exploration process.SPRING HOUSE, Pa.--(BUSINESS WIRE)--March 17, 1997--Advanta Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ADVNB, ADVNA ADVNA Advanta Corporation (stock symbol) ) today announced that its Board of Directors and senior management have commenced a thorough and systematic review of its business strategy, growth prospects and operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. aimed at maximizing the Company's value for its shareholders and other constituents. Advanta Advanta is an American banking company. Currently, it controls two banks, Advanta Bank Corp and Advanta National Bank. The banking corporation is not associated with Advanta Energy Corp., an energy consulting practice based in California. said it has retained the firm of BT Wolfensohn to assist it in the process, and to explore all strategic alternatives that build upon the historic strength and success of the Company as a whole and of its business units, including its mortgage, leasing and insurance operations as well as its core credit card business. There can be no assurance that the Company will elect to pursue any of the strategic actions it may consider. Advanta also reported that, in light of the foregoing, Alex (language) Alex - 1. A polymorphic language being developed by Stephen Crawley <sxc@itd.dtso.oz.au> of Defence Science & Tech Org, Australia. Alex has abstract data types, type inference and inheritance. 2. The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , who has resigned. The nature and responsibilities of the job of Chief Operating Officer are now very different from what was contemplated when Mr. Brooks joined the Company two months ago. Separately, Advanta announced that it expects to report 1997 results well below previous expectations. For the first quarter, the Company currently expects to report a loss in the area of $20 million, or approximately $0.44 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , compared to earnings of $41 million, or $0.91 per share, in the first quarter of 1996. Advanta said that the interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. in its historical pattern of strong financial results reflects a number of factors, including continuing increases in consumer bankruptcies and charge-offs and lower receivable balances than originally anticipated in its credit card business. The Company emphasized that its mortgage, leasing and insurance businesses continue to perform very well. The Company said that it currently expects to report a net profit for full-year 1997, with estimated earnings for the full year of approximately $1.50 per share. In 1996, Advanta earned $3.89 per share. Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the Alter, Chairman of the Board of Advanta Corporation, said, "Since Advanta was formed 46 years ago, we have successfully pursued a business strategy that has created significant value for our shareholders, customers and employees. Today, the credit card industry is undergoing structural change. Taking that change into consideration, we believe we can best build value by actively exploring all available strategic opportunities. "We expect that the process we have launched will lead to the identification of a number of possible strategic options, one or more of which we may elect to pursue based on their potential to enable us to more effectively and profitably serve our customers, grow our revenues and earnings, and maximize shareholder value," Mr. Alter said. Advanta said it is pursuing a number of steps to return the Company to its historical levels of financial performance by increasing revenue and stemming credit card losses. These steps include: -- More aggressively repricing Repricing To change the price of an asset. In derivatives, it sometimes refers to the exchange of options of with different strike prices. repricing certain segments of the Company's credit card portfolio to match better the risk profiles of particular customer segments. -- Bringing the Company's credit card fees, some of which are below the industry average, more into line with current industry norms. -- Improving the Company's collection process by further customizing collection methods. -- Reducing the introductory-rate period applied to certain new cardholders. -- Tightening underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. standards further to improve the credit quality of the receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed portfolio. -- More quickly identifying and intervening in·ter·vene intr.v. in·ter·vened, in·ter·ven·ing, in·ter·venes 1. To come, appear, or lie between two things: You can't see the lake from there because the house intervenes. 2. on potentially troubled accounts by means of advanced risk management systems. -- Developing new retention marketing programs to build upon existing relationships with high-credit-quality cardholders. -- Continuing to develop additional products that offer customers added value Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:
price. Mr. Hart said, "In 1996, Advanta achieved its eighth consecutive year of increased earnings and its sixth consecutive year of meeting or exceeding a return on equity of 25%. During the past five years, Advanta's net income has grown at a compound annual rate of 47% to $176 million in 1996. We have grown our customer base to nearly 6 million cardholders from 2 million over the same period, and are now the ninth-largest card issuer in the country based on outstanding balances. Our mortgage, leasing and insurance business units continue to perform well. Our commitment to building shareholder value, and our success in doing so over many years, are clear. Going forward, we will maintain that commitment, building upon the many strengths of our organization including its talented employees, its marketing skills, its strategic alliances and its millions of customers." The Company also announced that its Board of Directors has adopted a Shareholder Rights Plan in which rights will be distributed as a dividend at the rate of one Class A Right for each share of Class A Common Stock and one Class B Right for each share of Class B Common Stock of the Company held by shareholders of record as of the close of business on April 11, 1997. The rights will expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on April 11, 2007. If any shareholder acquires beneficial ownership of 15% or more of either the outstanding Class A Common Stock or the total common stock, all shareholders, other than the acquiror, will have the right to purchase $300 of stock for a purchase price of $150. Depending on the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , the stock to be purchased may be a new Series A Junior Participating Preferred Stock Participating Preferred Stock A type of preferred stock that, under certain conditions, gives holders the right to receive earnings payouts over and above the specified dividend rate. , common stock of the class then held by the rightholder or common stock of an entity that acquires a significant portion of the Company's business. The Rights Plan is designed to help ensure Advanta shareholders' ability to realize the full value of their investment in the Company. It aims to deter coercive co·er·cive adj. Characterized by or inclined to coercion. co·er  cive·ly adv. takeover tactics including the
accumulation of shares in the open market or through private
transactions and to prevent an acquiror from gaining control of the
Company under circumstances the Board considers inappropriate. The
Rights Plan was not adopted in response to any takeover attempt Noun 1. takeover attempt - an attempt to take control of a corporationbear hug - a takeover bid so attractive that the directors of the target company must approve it or risk shareholder protest . With nearly six million customers, over $19 billion in managed assets and more than 3,500 employees, Advanta is a consumer financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. enterprise that proudly serves consumers and small businesses through high-quality, innovative offerings of credit cards, mortgages, leases, insurance and deposit products. This Press Release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including but not limited to projections of future earnings, 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 margin, which in turn is affected by the Company's success in originating new credit card accounts, the receivables volume and initial pricing of new accounts, the impact of repricing existing accounts and account attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: , the mix of account types and interest rate fluctuations; (2) the level of delinquencies and charge-offs; and (3) the level of expenses. Earnings also may be affected by factors that affect consumer debt, competitive pressures and the ratings on debt of the Company and its subsidiaries. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. . -0- The attached Advanta Corporation Statistical Supplement and Other Information are part of this release.
Advanta Corporation
Other Information For Full Year 1997
(dollars in billions)
Volumes
Ending Receivables (12/31/97)
Credit Cards $13.5 to $14.5
Total $19.0 to $20.0
Managed Net Interest Margin 8.0% to 9.0%
Net Charge-off Ratio
Credit Cards 6.5% to 7.5%
Total 5.0% to 6.0%
Note: The net charge-off ratio is assumed to increase
throughout the year.
Operating Expense Ratio 3.0% to 3.5%
(excluding amortization of credit card DAC)
Note: The above information reflects the Company's good-faith
estimates of certain preliminary projected results for 1997.
This information is subject to various risks and
uncertainties, as described in the accompanying press release.
Advanta Corporation
STATISTICAL SUPPLEMENT
(dollars in millions except earnings per share data)
The amounts stated for the current fiscal quarter ending March 31,
1997 are estimates based on information currently available to
management, and are subject to adjustment after the books are closed
following the quarter end. Management believes that the results will
be within the stated ranges, but such results cannot be assured.
Three Months Ended Three Months Ended
March 31, 1997 Dec. 31, March 31,
Estimated Range 1996 1996
EARNINGS
Net revenues $180 - $195 $241 $188
Net interest revenues 25 - 30 22 17
Noninterest revenues(a) 155 - 165 219 171
Provision for credit
losses 55 - 60 30 15
Operating expenses 150 - 155 144 110
Pretax income (loss) (26) - (28) 67 62
Net income (loss)(a)(b) (19) - (21) 45 41
Earnings (loss) per
common share(a)(b) (0.42) - (0.46) 1.00 0.91
KEY RATIOS (ANNUALIZED)
Return on average assets (1.0)% - (1.5)% 3.2% 3.4%
Return on average common
equity (10.0) - (12.0) 23.7 25.8
Equity/owned assets 15.0 - 17.0 17.1 14.3
Equity/managed assets 4.2 - 5.0 5.0 4.4
As a % of average managed
receivables:(b)
Net revenues 4.0 - 5.0 6.0 5.8
Operating expenses 3.3 - 3.6 3.1 2.8
Managed net interest
margin 7.0 - 7.5 6.9 6.2
AVERAGE MANAGED
RECEIVABLES
Credit cards $12,400 -$12,500 $12,771 $10,557
Personal finance loans 2,900 - 2,950 2,468 1,851
Business loans 865 - 875 766 445
Other loans 20 - 25 18 10
Total average managed
receivables $16,185 -$16,350 $16,022 12,863
Total average serviced
receivables $20,650 -$20,850 $18,915 $13,639
Charge-off Information
(managed basis)
Credit Card
- Amount $205 - $210 $145 $84
- % of receivables(b) 6.6% - 7.0% 4.6% 3.2%
Total
- Amount $214 - $220 $155 $90
- % of receivables(b) 5.2% - 5.6% 3.9% 2.8%
Delinquency Ratios
(Total loans 30 days
or more delinquent)
Credit Card 5.2% - 5.6% 5.0% 2.7%
Total 5.7% - 6.1% 5.4% 3.2%
Reserve for Credit
Losses (owned basis)
Total $100 - $105 $89 $57
(a) These amounts assume completion of a securitization
transaction later in March. If the transaction does not close before
the quarter end, it is expected to close early in April.
(b) Some of the amounts in the columns relating to the quarter
ending March 31, 1997 interrelate with others, and increases in some
items will necessarily cause decreases in others. Accordingly, the
amounts shown for "Net income (loss)" are not intended to be a
summation of the preceding figures. The amounts shown for "Earnings
(loss) per common share" are based on "Net income (loss)" amounts in the
respective columns. Similarly, certain ratios are not intended to be
an exact percentage of the revenue or expense amounts shown in the
respective columns.
CONTACT: Advanta Corp. Madeline Madeline gazed at in awe by Porphyro. [Br. Lit.: “The Eve of St. Agnes” in Magill I, 263–264] See : Beauty, Sensual Madeline individualist; only girl “out of line.” [Children’s Lit. Hopkins Hopkins, city (1990 pop. 16,534), Hennepin co., SE Minn., a suburb of Minneapolis; inc. as West Minneapolis 1893, name changed 1928. The city manufactures machinery, computer and electronic parts, steel products, air pollution equipment, ophthalmic lenses, tools, , 215/444-5335 (Investor Relations Investor relations The process by which the corporation communicates with its investors. ) Phyllis Phyllis is a character in Greek mythology. Daughter of Lycurgus, King of Thrace, she married Demophoon, son of Theseus, while he stopped in Thrace on his journey home from the Trojan war. Hoffman, 215/444-4499 (Corporate Communications Corporate communications is the process of facilitating information and knowledge exchanges with internal and key external groups and individuals that have a direct relationship with an enterprise. ) or Kekst and Company James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Fingeroth or Roy Winnick, 212/593-2655 |
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