Advanta Reports First Quarter Results; Net Income of $72.7 million or $2.55 per Share; Book Value Increases to $17.72 per Share; Advanta Business Cards Results on Track for 2005.SPRING HOUSE, Pa. -- Advanta Corp. (NASDAQ:ADVNB; ADVNA) today reported consolidated net income of $72.7 million or $2.55 per diluted share for first quarter 2005 for Class A and Class B shares combined, as compared to $9.4 million or $0.35 per combined diluted share for first quarter 2004. Book value per share increased $2.82 in the quarter, including a $2.56 increase representing the net after-tax gain and increase in additional paid-in capital associated with the previously announced agreement with Bank of America Corporation (NYSE: BAC). Consolidated net income for first quarter 2005 includes a $2.18 per combined diluted share gain relating to the agreement with Bank of America, a $0.06 per combined diluted share charge resulting from the previously announced separation agreement with a former employee and a $0.02 per combined diluted share asset valuation charge associated with the Company's venture capital portfolio. The book value per share increase of $2.56 associated with the Bank of America agreement is higher than the diluted earnings per share increase of $2.18 due to the $6 million increase in additional paid-in capital and differences in the number of shares used in the calculations for book value per share and diluted earnings per share following U.S. generally accepted accounting principles. Consolidated net income for first quarter 2004 includes a $0.02 per combined diluted share charge associated with the closing of the Company's New York venture capital office. Advanta Business Cards earned net income of $11.2 million for the quarter as compared to $10.1 million for first quarter 2004. First quarter 2005 results for Advanta Business Cards include the $1.6 million after-tax charge resulting from the separation agreement. The Company estimates the separation agreement will have no impact on full year 2005 since the first quarter charge will be offset during the remaining quarters of 2005 with lower compensation and other expenses as a result of the employee's termination of employment. "Advanta Business Cards' first quarter performance continues to benefit from our strategy of targeting higher credit quality customers. We continue to see improved asset quality metrics through lower net credit losses and delinquencies," said Dennis Alter, Chairman and CEO. "As a result of our solid Business Cards performance and the gain resulting from the Bank of America agreement, we are pleased with the increase to our shareholder value." Advanta Business Cards results for first quarter 2005 reflect a 170 basis point decline in net principal charge-offs on average managed 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 to the company, even if the debts are not currently due. to 5.49% on an annualized basis as compared to 7.19% for
first quarter 2004. Over 30 day delinquencies on ending managed
receivables declined 126 basis points to 4.11% and over 90 day
delinquencies on ending managed receivables declined 77 basis points to
1.91%, each as compared to first quarter 2004. Managed receivables ended
the quarter at approximately $3.35 billion as compared to $3.08 billion
at March 31, 2004.Owned receivables at quarter end were $784 million as compared to $528 million at March 31, 2004. Net principal charge-offs on owned business credit card receivables declined 111 basis points to 5.35%, as compared to 6.46% for first quarter 2004. Over 30 day delinquencies on owned credit card receivables declined 158 basis points to 3.51% and over 90 day delinquencies on owned credit card receivables decreased 90 basis points to 1.63%, each as compared to first quarter 2004. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, April 26, 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 1449116. The conference call may include a discussion of non-GAAP financial measures that 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 and business professionals 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 from those projected. 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
March 31, 2005
----------------------------------------------------------------------
Advanta
Business Venture
Cards Capital Other(A) Total
------------ -------- -------- --------
Interest income $ 28,866 $ 0 $ 3,313 $ 32,179
Interest expense 8,521 38 4,026 12,585
------------ -------- -------- --------
Net interest income 20,345 (38) (713) 19,594
Provision for credit
losses 10,419 0 25 10,444
------------ -------- -------- --------
Net interest income after
provision for credit
losses 9,926 (38) (738) 9,150
Noninterest revenues:
Interchange income 35,696 0 0 35,696
Securitization income 30,396 0 0 30,396
Servicing revenues 12,599 0 0 12,599
Business credit card
rewards (10,795) 0 0 (10,795)
Gain on transfer of
consumer credit card
business 0 0 67,679 67,679
Other revenues, net 2,969 (1,041) 984 2,912
------------ -------- -------- --------
Total noninterest
revenues 70,865 (1,041) 68,663 138,487
Operating expenses 62,374 0 246 62,620
------------ -------- -------- --------
Income (loss) before
income taxes 18,417 (1,079) 67,679 85,017
Income tax expense
(benefit) 7,183 (421) 5,585 12,347
------------ -------- -------- --------
Net income (loss) $ 11,234 $ (658) $ 62,094 $ 72,670
============ ======== ======== ========
Three Months Ended
March 31, 2004
----------------------------------------------------------------------
Advanta
Business Venture
Cards Capital Other(A) Total
------------ -------- -------- --------
Interest income $ 21,849 $ 0 $ 1,562 $ 23,411
Interest expense 9,123 88 2,320 11,531
------------ -------- -------- --------
Net interest income 12,726 (88) (758) 11,880
Provision for credit
losses 9,413 0 98 9,511
------------ -------- -------- --------
Net interest income after
provision for credit
losses 3,313 (88) (856) 2,369
Noninterest revenues:
Interchange income 31,575 0 0 31,575
Securitization income 32,540 0 0 32,540
Servicing revenues 12,133 0 0 12,133
Business credit card
rewards (9,221) 0 0 (9,221)
Other revenues, net 3,235 32 1,133 4,400
------------ -------- -------- --------
Total noninterest
revenues 70,262 32 1,133 71,427
Operating expenses 56,910 1,007 277 58,194
------------ -------- -------- --------
Income (loss) before
income taxes 16,665 (1,063) 0 15,602
Income tax expense
(benefit) 6,583 (420) 0 6,163
------------ -------- -------- --------
Net income (loss) $ 10,082 $ (643) $ 0 $ 9,439
============ ======== ======== ========
(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
(in thousands)
In addition to evaluating the financial performance of the Advanta
Business Cards segment under U.S. generally accepted accounting
principles (GAAP), we evaluate Advanta Business Cards' performance on
a managed basis. Our managed business credit card 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.
Three Months Ended
-----------------------
Mar. 31, Mar. 31,
2005 2004
---------- ----------
Interest income $ 119,608 $ 114,956
Interest expense 28,395 20,457
---------- ----------
Net interest income 91,213 94,499
Provision for credit losses 45,689 55,600
---------- ----------
Net interest income after provision for credit
losses 45,524 38,899
Noninterest revenues 35,267 34,676
---------- ----------
Risk-adjusted revenues (A) 80,791 73,575
Operating expenses 62,374 56,910
---------- ----------
Income before income taxes 18,417 16,665
Income tax expense 7,183 6,583
---------- ----------
Net income $ 11,234 $ 10,082
========== ==========
Average managed business credit card
receivables $3,327,915 $3,067,184
(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
Mar. 31, Dec. 31, Mar. 31, Prior Prior
EARNINGS 2005 2004 2004 Quarter Year
----------------------------------------------------------------------
Basic income from continuing
operations per common share:
Class A $ 2.82 $ 0.51 $ 0.37 452.9% 662.2%
Class B 2.85 0.54 0.39 427.8 630.8
Combined (A) 2.84 0.53 0.38 435.8 647.4
Diluted income from
continuing operations per
common share:
Class A 2.54 0.46 0.34 452.2 647.1
Class B 2.55 0.48 0.36 431.3 608.3
Combined (A) 2.55 0.47 0.35 442.6 628.6
Basic net income per common
share:
Class A 2.82 0.52 0.37 442.3 662.2
Class B 2.85 0.55 0.39 418.2 630.8
Combined (A) 2.84 0.54 0.38 425.9 647.4
Diluted net income per common
share:
Class A 2.54 0.47 0.34 440.4 647.1
Class B 2.55 0.49 0.36 420.4 608.3
Combined (A) 2.55 0.48 0.35 431.3 628.6
Return on average common
equity 67.30% 14.24% 10.86% 372.6 519.7
COMMON STOCK DATA
----------------------------------------------------------------------
Weighted average common
shares used to compute:
Basic earnings per common
share
Class A 8,812 8,811 8,786 0.0% 0.3%
Class B 16,705 16,630 15,502 0.5 7.8
------- ------- -------
Total 25,517 25,441 24,288 0.3 5.1
Diluted earnings per
common share
Class A 8,812 8,811 8,786 0.0 0.3
Class B 19,670 19,589 17,656 0.4 11.4
------- ------- -------
Total 28,482 28,400 26,442 0.3 7.7
Ending shares outstanding
Class A 9,607 9,607 9,607 0.0 0.0
Class B 18,399 18,350 17,710 0.3 3.9
------- ------- -------
Total 28,006 27,957 27,317 0.2 2.5
Stock price:
Class A
High $ 22.80 $ 24.19 $ 16.88 (5.7) 35.1
Low 20.23 20.34 12.92 (0.5) 56.6
Closing 20.80 22.62 16.83 (8.0) 23.6
Class B
High 24.70 26.07 16.90 (5.3) 46.2
Low 21.84 21.68 12.55 0.7 74.0
Closing 23.00 24.27 16.50 (5.2) 39.4
Cash dividends declared:
Class A 0.095 0.095 0.063 0.0 50.0
Class B 0.113 0.113 0.076 0.0 50.0
Book value per common share 17.72 14.90 14.08 18.9 25.9
(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
Mar. 31, Dec. 31, Mar. 31, Prior Prior
2005 2004 2004 Quarter Year
---------------------------------------------------
New account
originations 44,781 40,663 39,135 10.1% 14.4%
Average number of
active accounts
(A) 577,301 575,204 592,114 0.4 (2.5)
Ending number of
accounts 786,967 777,943 788,330 1.2 (0.2)
Transaction volume $2,176,809 $2,214,215 $1,921,933 (1.7) 13.3
Securitization
volume increase
excluding
replenishment
sales $ 0 $ 55,000 $ 90,000 (100.0) (100.0)
Average managed
receivables:
Owned $ 779,176 $ 722,088 $ 551,652 7.9 41.2
Securitized 2,548,739 2,536,711 2,515,532 0.5 1.3
---------- ---------- ----------
Managed (B) 3,327,915 3,258,799 3,067,184 2.1 8.5
Ending managed
receivables:
Owned $ 783,916 $ 730,483 $ 528,204 7.3 48.4
Securitized 2,565,085 2,564,147 2,548,942 0.0 0.6
---------- ---------- ----------
Managed (B) 3,349,001 3,294,630 3,077,146 1.7 8.8
----------------------------------------------------------------------
CREDIT QUALITY -
OWNED
----------------
Receivables 30
days or more
delinquent $ 27,507 $ 28,287 $ 26,908
Receivables 90
days or more
delinquent 12,775 13,638 13,368
As a percentage of
gross
receivables:
Receivables 30
days or more
delinquent 3.51% 3.87% 5.09% (9.3)% (31.0)%
Receivables 90
days or more
delinquent 1.63 1.87 2.53 (12.8) (35.6)
Net principal
charge-offs:
Amount $ 10,419 $ 10,721 $ 8,913
As a percentage
of average
gross
receivables
(annualized) 5.35% 5.94% 6.46% (9.9) (17.2)
CREDIT QUALITY -
SECURITIZED
------------------
Receivables 30
days or more
delinquent $ 110,069 $ 107,546 $ 138,440
Receivables 90
days or more
delinquent 51,318 51,770 69,087
As a percentage of
gross
receivables:
Receivables 30
days or more
delinquent 4.29% 4.19% 5.43% 2.4% (21.0)%
Receivables 90
days or more
delinquent 2.00 2.02 2.71 (1.0) (26.2)
Net principal
charge-offs:
Amount $ 35,270 $ 38,457 $ 46,187
As a percentage
of average
gross
receivables
(annualized) 5.54% 6.06% 7.34% (8.6) (24.5)
CREDIT QUALITY -
MANAGED (B)
------------------
Receivables 30
days or more
delinquent $ 137,576 $ 135,833 $ 165,348
Receivables 90
days or more
delinquent 64,093 65,408 82,455
As a percentage of
gross
receivables:
Receivables 30
days or more
delinquent 4.11% 4.12% 5.37% (0.2)% (23.5)%
Receivables 90
days or more
delinquent 1.91 1.99 2.68 (4.0) (28.7)
Net principal
charge-offs:
Amount $ 45,689 $ 49,178 $ 55,100
As a percentage
of average
gross
receivables
(annualized) 5.49% 6.04% 7.19% (9.1) (23.6)
(A) Active accounts are defined as accounts with a balance at
month-end. Active account statistics do not include charged-off
accounts. The statistics reported above are the average number of
active accounts for the periods presented.
(B) 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 U.S. generally accepted accounting
principles (GAAP), we evaluate Advanta Business Cards' performance on
a managed basis. Our managed business credit card 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
March 31, 2005
-----------------------------------
Advanta Advanta
Business Business
Cards Securitization Cards
GAAP Adjustments Managed
-------- -------------- ----------
INCOME STATEMENT MEASURES
Interest income $ 28,866 $ 90,742 $ 119,608
Interest expense 8,521 19,874 28,395
Net interest income 20,345 70,868 91,213
Interchange income 35,696 0 35,696
Securitization income 30,396 (30,396) 0
Servicing revenues 12,599 (12,599) 0
Business credit card rewards (10,795) 0 (10,795)
Other revenues, net 2,969 7,397 10,366
Total noninterest revenues 70,865 (35,598) 35,267
Provision for credit losses 10,419 35,270 (A) 45,689
------------------------ -----------
BALANCE SHEET MEASURES
Average business credit card
receivables 779,176 2,548,739 3,327,915
Ending business credit card
receivables 783,916 2,565,085 3,349,001
Business credit card
receivables:
30 days or more delinquent 27,507 110,069 137,576
90 days or more delinquent 12,775 51,318 64,093
Net principal charge-offs 10,419 35,270 45,689
Three Months Ended
March 31, 2004
-----------------------------------
Advanta Advanta
Business Business
Cards Securitization Cards
GAAP Adjustments Managed
-------- -------------- ----------
INCOME STATEMENT MEASURES
Interest income $ 21,849 $ 93,107 $ 114,956
Interest expense 9,123 11,334 20,457
Net interest income 12,726 81,773 94,499
Interchange income 31,575 0 31,575
Securitization income 32,540 (32,540) 0
Servicing revenues 12,133 (12,133) 0
Business credit card rewards (9,221) 0 (9,221)
Other revenues, net 3,235 9,087 12,322
Total noninterest revenues 70,262 (35,586) 34,676
Provision for credit losses 9,413 46,187 (A) 55,600
----------------------- -----------
BALANCE SHEET MEASURES
Average business credit card
receivables 551,652 2,515,532 3,067,184
Ending business credit card
receivables 528,204 2,548,942 3,077,146
Business credit card
receivables:
30 days or more delinquent 26,908 138,440 165,348
90 days or more delinquent 13,368 69,087 82,455
Net principal charge-offs 8,913 46,187 55,100
(A) Includes the amount by which 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.
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