Dynex Capital, Inc. Reports Results of Recapitalization and Tender Offer, and the Results for First Quarter.Business Editors GLEN ALLEN Glen Allen is the name of several places in the United States of America:
Dynex Capital, Inc. (NYSE NYSE See: New York Stock Exchange : DX) reported results for its recently completed recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. and tender offer, and the results for the first quarter of 2004. Information contained in this press release includes: -- The Company's shareholders overwhelmingly approved a recapitalization plan for the Company, and holders of the Series A, Series B and Series C preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. tendered for $823,000 in senior notes; -- As a result of the recapitalization plan, on a preliminary basis, the Company's 1,866,677 shares of Series A, Series B and Series C preferred stock will convert into a maximum 5,628,794 shares of Series D preferred stock and 1,288,554 shares of common stock; -- On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis as of March 31, 2004, book value per common share will increase by $0.19 as a result of the implementation of the recapitalization plan; -- Results for the first quarter include: -- The Company's investment portfolio generated cash flow of $11.1 million for the quarter; -- The Company incurred a net loss of $5.4 million for the quarter, and a net loss to common shareholders of $6.6 million on continued high provision for loan losses; -- The Company reported book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: of $6.98 at March 31, 2004 versus $7.55 at December 31, 2003; and -- During the first quarter, the Company also entered into an agreement to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. and subsequently re-sell certain manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. financing bonds outstanding at a net premium to the Company of $7.4 million. The Company received this $7.4 million on the redemption and resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. in April 2004, which lowered the effective borrowing rate on approximately $154.8 million of securitization financing from 7.1% to 5.6%. The Company has scheduled a conference call for Wednesday, May 12, 2004, at 11:00 a.m. Eastern Daylight Time to discuss first quarter results and the recapitalization transaction. Investors can listen in on the call by dialing in at (800) 731-2911. Recapitalization Transaction The Company's shareholders approved the Company's recapitalization plan at special meetings held at the Company's headquarters and, pursuant to the tender offer that expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. at 9:00 a.m. Eastern Daylight Time on May 10, 2004, have tendered for $823,000 in senior unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. notes due May 2007. As a result of the shareholder approval of the recapitalization plan, on a preliminary basis, the Series A, Series B and Series C preferred stock will convert into a maximum 5,628,794 shares of Series D preferred stock and 1,288,554 shares of common stock. The Series D preferred stock will have an issue price of $10 per share and pay $0.95 per year in dividends. All prior dividends-in-arrears on the Series A, Series B and Series C preferred stock will be extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. . Interest on the senior notes and dividends on the Series D preferred stock will begin to accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. as of April 7, 2004. On a pro forma basis, utilizing information as of March 31, 2004, the Company's book value per common share will increase by $0.19 per share. On a preliminary basis, common stock outstanding after the recapitalization transaction closes will increase from 10,873,903 to 12,162,457 shares. On a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, assuming the conversion of the Series D preferred stock at its one-for-one conversion ratio, outstanding common stock would be 17,791,251 shares. First Quarter 2004 Results For the quarter ended March 31, 2004, the Company reported a net loss of $5.4 million versus net income of $2.0 million for the same period for 2003. After consideration of the preferred stock charge, the Company reported a net loss to common shareholders of $6.6 million or $0.60 per common share for 2004 versus net income of $12.5 million, or $1.15 per common share for 2003. Net income per common share for 2003 included a benefit of $10.4 million from the tender offer on preferred stock completed in February 2003. The Company reported that cash flow from its investment portfolio was $11.1 million for the first quarter 2004, versus $13.2 million for the fourth quarter of 2003. Cash flow declined in the first quarter principally as a result of reduced collections from the Company's delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. property tax 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, declines in interest-earning assets from prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. in the investment portfolio, and lower overall yields on investments. Delinquent property tax receivable collections were $1.8 million in the first quarter 2004 versus $3.5 million in the fourth quarter 2003, in part due to seasonality issues and in part due to a now-resolved uncertainty as to allowable charges allowable charge, n the maximum dollar amount on which benefit payment is based for each dental procedure. allowable charge on the collection of certain liens. The Company reported net interest margin before provision for loan losses on its investment portfolio of $6.4 million in the first quarter 2004 compared to $11.4 million in the first quarter 2003. After provision for loan losses, net interest margin was a negative $0.8 million versus $5.6 million in 2003. Provision for loan losses in the first quarter 2004 was $7.2 million versus $5.8 million in 2003. Provision for loan losses for the first quarter 2004 includes $6.1 million related to the Company's manufactured housing loan portfolio. The Company expects to provide a similar amount in the second quarter 2004. Beginning in the third quarter 2004, provision for loan losses should decline as the Company will have substantially reserved its remaining net credit exposure on manufactured housing loans. Impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges for the first quarter of 2004 were $1.7 million versus $2.1 million for the same period in 2003. Impairment charges for 2004 include principally those charges on a debt-security backed principally by manufactured housing loans. General and administrative expenses were $2.5 million in first quarter 2004 versus $2.0 million in the first quarter 2003. General and administrative expenses included approximately $0.6 million in fees and costs associated with the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. in Texas, where the jury found against the Company in the amount of $252,577. The Company continues to contest the verdict in the case and the Court hears motions to enter the jury verdict later this month. Balance Sheet Total assets at March 31, 2004, were $1.8 billion, a decline of $65.7 million from December 31, 2003. The decline in assets was primarily the result of prepayments in the Company's securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. finance receivables. Prepayment speed Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. for the entire investment portfolio as measured by the "constant prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rate", or CPR Cardiopulmonary Resuscitation (CPR) Definition Cardiopulmonary resuscitation (CPR) is a procedure to support and maintain breathing and circulation for a person who has stopped breathing (respiratory arrest) and/or whose heart has stopped (cardiac , was 18% during the first quarter of 2004 versus 21% during the fourth quarter of 2003. Prepayments reduce the amount of the Company's interest-earning assets. CPR on the Company's single-family mortgage loan and securities portfolio was 30% during the quarter. Of the $1.8 billion of assets in the investment portfolio, approximately $326.8 million were adjustable-rate assets, substantially all of which were single-family loans and securities. The balance of investment portfolio assets are fixed-rate, substantially all of which are manufactured housing loans and commercial mortgage loans. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. declined to $144.8 million at March 31, 2004, versus $149.8 million at December 31, 2003. The decrease in shareholders' equity was due to the net loss for the quarter. Common book value per share, net of liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy preference on Series A, Series B, and Series C Preferred Stock, was $6.98 per share at March 31, 2004. On a pro forma basis, considering the impact of the recapitalization transaction, book value per common share is $7.17. Discussion Mr. Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs B. Akin AKIN American Kurdish Information Network , Chairman of the Board of Directors of the Company, stated, "We are extremely pleased that the shareholders overwhelmingly approved the recapitalization plan of the Company. This was a very important event for the Company, and signals that the shareholders are solidly behind the Board and management as we pursue strategic alternatives. Currently we have $15 million of free cash to invest, which should grow to in excess of $23 million by the end of the second quarter. Our MERIT Series 13 manufactured housing loan securitization financing reaches its optional redemption date Redemption date The date on which a bond matures or is redeemed. redemption date The date on which a debt security is scheduled to be redeemed by the issuer. The redemption date is the scheduled maturity date or, if applicable, a call date. in August, and the two most senior classes in that Series will carry coupons in excess of 8.00%, suggesting there is value in this optional redemption right not reflected in our balance sheet. The Board will be actively engaged over the coming months to review strategic alternatives with the hope of providing guidance to our shareholders over the balance of the year. The market is anticipating the Federal Reserve will begin to raise rates in the very near term, and while that will impact our investment portfolio cash flows, we believe it may provide opportunities for the Company to begin to strategically deploy its capital. The Company will be patient in that regard." In regard to first quarter results, Mr. Stephen J. Benedetti, Chief Financial Officer of the Company, added, "First quarter 2004 results include approximately $6.0 million of provisions for loan losses on the Company's manufactured housing loan portfolio, resulting in a negative net margin of $0.8 million. The Company anticipates being substantially reserved for this credit exposure by the end of the second quarter, and barring unforeseen 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 , would expect to begin reporting modest net income in the third quarter of 2004 as provision for loan losses decline. General and administrative expenses during the first quarter were high due to costs associated with the litigation in Texas. The hearing to enter the verdict against the Company is later this month, and the Company anticipates appealing the verdict if it is entered by the Court." Mr. Benedetti continued, "Cash flows from the investment portfolio were $11.1 million during the quarter. We expect cash flows in the second quarter to approximate $19 million, inclusive of inclusive of prep. Taking into consideration or account; including. the $7.4 million received on the redemption and resale of the securitization financing bonds in April. The Federal Reserve has clearly indicated that short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. rates will be increasing in the near-term, which will have the effect of driving up our borrowing costs, but also should slow prepayments in the investment portfolio. As the majority of securitization financing on the balance sheet is fixed-rate, however, and considering the interest-rate hedges entered into previously to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. the risk of rising interest rates on a portion of its
variable-rate financing, the Company does not expect a significant
reduction in our quarterly investment portfolio cash flow in 2004 from
rising interest rates based on the forward LIBOR LIBORSee: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). curve." Mr. Akin concluded, "The conversion of the Series A, Series B, and Series C preferred stock to Series D preferred stock and related issuance of common stock, and the issuance of the senior notes, should occur no later than the end of this month. We will pay a dividend on the Series D preferred stock for the second quarter in July. Beyond that, the Board will continue to look at attractive alternatives for the use of our capital." Dynex Capital, Inc. is a 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. company that elects to be treated as a real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ) for federal income tax purposes. Additional information about Dynex Capital, Inc. is available at www.dynexcapital.com. Note: This document 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. " within the meaning of the Private Securities Litigation Act of 1995. The words "believe," "expect," "forecast," "anticipate," "estimate," "project", "plan", and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. The Company's actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, changes in general economic and market conditions, disruptions in the capital markets, fluctuations in interest rates, defaults by borrowers, defaults by third-party servicers, prepayments of investment portfolio assets, the accuracy of subjective estimates used in determining the fair value of certain financial assets Financial assets Claims on real assets. of the Company, the impact of recently issued financial accounting standards, increases in costs and other general competitive factors. For additional information, see the Company's 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. for the year ended December 31, 2003, as filed with the Securities and Exchange Commission.
DYNEX CAPITAL, INC.
Consolidated Balance Sheets
(Thousands except share data)
(unaudited)
March 31, Dec. 31,
2004 2003
--------------- ---------------
ASSETS
Cash and cash equivalents $ 5,279 $ 7,386
Other assets 4,199 4,174
--------------- ---------------
9,478 11,560
Investments:
Securitized finance receivables:
Loans, net 1,471,819 1,518,613
Debt securities, available for sale 244,045 255,580
Other investments 36,315 37,903
Securities 30,008 33,275
Other loans 7,828 8,304
--------------- ---------------
1,790,015 1,853,675
--------------- ---------------
$1,799,493 $1,865,235
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Collateralized bonds $1,631,260 $1,679,830
Repurchase agreements 21,505 23,884
Senior Notes - 10,049
Other liabilities 1,929 1,626
--------------- ---------------
1,654,694 1,715,389
--------------- ---------------
SHAREHOLDERS' EQUITY:
Preferred stock 47,014 47,014
Common stock 109 109
Additional paid-in capital 360,684 360,684
Accumulated other comprehensive loss (3,542) (3,882)
Accumulated deficit (259,466) (254,079)
--------------- ---------------
144,799 149,846
--------------- ---------------
$1,799,493 $1,865,235
=============== ===============
Preferred dividends in arrears $ 19,655 $ 18,466
=============== ===============
Book value per common share (inclusive
of dividends in arrears) $ 6.98 $ 7.55
=============== ===============
DYNEX CAPITAL, INC.
Consolidated Statements of Operations
(Thousands except share data)
(unaudited)
Three Months Ended
March 31,
-------------------------
2004 2003
------------ ------------
Interest income $ 33,631 $ 40,837
Interest and related expense (27,196) (29,394)
------------ ------------
Net interest margin before
provision for loan losses 6,435 11,443
Provision for loan losses (7,200) (5,844)
------------ ------------
Net interest margin (765) 5,599
Impairment charges (1,661) (2,078)
(Loss) gain on sale of investments, net (34) 527
Other (459) 17
General and administrative expenses (2,469) (2,021)
------------ ------------
Net (loss) income (5,388) 2,044
Preferred stock benefit (charge) (1,191) 10,444
------------ ------------
Net (loss) income to common
shareholders $ (6,579) $ 12,488
============ ============
Change in net unrealized loss
during the period on:
Investments classified as
available-for-sale 259 626
Hedge instruments 81 (440)
------------ ------------
Comprehensive (loss) income $ (5,048) $ 2,230
============ ============
Net (loss) income per common share
Basic $ (0.60) $ 1.15
============ ============
Diluted $ (0.60) $ 1.13
============ ============
Weighted average number of common
shares outstanding 10,873,903 10,873,903
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