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NETWORK REPORTS FISCAL YEAR END RESULTS; OPERATIONS RESTRUCTURING COMPLETED; EXPECTS TO OBTAIN FINANCING WITHIN 45 DAYS

NETWORK REPORTS FISCAL YEAR END RESULTS; OPERATIONS RESTRUCTURING
 COMPLETED; EXPECTS TO OBTAIN FINANCING WITHIN 45 DAYS
 SOQUEL, Calif., Oct. 19 /PRNewswire/ -- Network Financial Services Inc. (NASDAQ: NETW) today reported revenues of $14.6 million for the fiscal year ended June 30, 1992, up 44 percent from $10.3 million in fiscal 1991. Lee Danna, chairman and chief executive officer, said, "A strong performance by our mortgage banking subsidiary, Network Capital Group, fueled revenue growth. However, due to costs associated with our company restructuring, we reported a loss for the year of $746,000, or 18 cents per share, compared with a loss of $391,000, or 12 cents per share, last year."
 Mortgage Banking Opportunities
 "This has been an extraordinary year of transition for Network Financial Services," Danna continued. "Recognizing the significant opportunities in the mortgage banking arena, we refocused our efforts to capitalize on the expanding demand for third-party loan origination.
 "We believe our expertise, coupled with our extensive retail network of real estate brokerage offices, will make us a strong, long-term player in this market. However, to date, a lack of capital has been our primary barrier to faster growth and profitability in mortgage banking.
 "This barrier may be broken shortly. We are in negotiations with three different investor groups to obtain approximately $20 million in financing for the mortgage operations. The completion of any one of these agreements, coupled with $15 million in current mortgage volume, would more than double Network's capacity to originate and sell mortgages. We believe completion of one of the financing arrangements should enable Network to achieve ongoing profitability," Danna said.
 "Understanding the need to develop a strong financial structure to obtain capital and support such growth, the company has taken several steps during the year to strengthen its financial position, spending approximately $250,000 in reorganization efforts. In addition, it has established reserves of more than $200,000 against previous loans and accounts receivable. The new management team, additionally, has adopted more conservative business practices. Finally, due to the above mentioned management and business practice changes, the company delayed revenue recognition of $150,000, which under prior management would have been reported in fiscal 1992. While these actions suppressed income for the past year, the company believes it has built a strong base for Network Financial Services to grow on in the coming years."
 New Management Depth
 "The restructuring is now complete, we have our partnerships in place, our strategic plan completed and, most important, a greatly enhanced management team. Robert A. Podesta, an experienced investment banker, joined the firm as vice chairman with the initial responsibility of assisting the firm in acquiring additional capital. Erwin Lenowitz, the former vice president of worldwide planning and development at Sun Microsystems, became president and chief financial officer in June, charged with developing more comprehensive and sophisticated financial management systems. And, C. Beth De George, a highly regarded 18-year mortgage banking veteran, joined the firm as president and chief executive officer of Network Capital Group to head up our expanded efforts in this area.
 "We have nearly completed software development for our real estate, insurance and mortgage banking operations and our training programs are well along in development. When our financing is completed, we will be ready to quickly become profitable on an ongoing basis."
 Commenting on the outlook for the company's real estate operations, Danna said that over the next twelve months he expects to see modest growth at best. During 1992, real estate commissions expanded 25 percent, and gross margin on commissions increased to 8.5 percent, up from 5.3 percent in the prior year. "Given the weak real estate environment over the year, that is relatively strong performance," Danna said.
 "In fiscal 1993, we expect this modest growth to continue as we plan to add approximately 10 to 12 new offices across Northern California," Danna continued. "Longer term, we are very excited. Our ERA affiliation combined with the insurance and mortgage revenue potential and the ownership incentive plan available to our current and future agents will assure Network of fast, profitable growth in a healthier real estate market."
 Ongoing Profitability
 Podesta added, "With our restructuring finalized and armed with our just completed year-end financial statements from our new auditors, Ernst and Young, we are now entering into detailed discussions that should lead to new capital within several weeks. Our mortgage banking operation stands ready to capitalize on the very profitable mortgage markets. When our new capital arrives, it will be utilized almost instantly, and profits should appear shortly afterward."
 De George said, "When better capitalized, we plan to take advantage of the current opportunities in mortgage banking by purchasing and redistributing loans originated by others. This should add to the bottom line immediately. Concurrently, we continue to train our retail network and build the branch infrastructure necessary for long-term success."
 Network Financial Services is a uniquely integrated provider of "one-stop shopping" for real estate, mortgage, insurance and other related services to home buyers and sellers throughout Northern California. The company operates three divisions: Network Real Estate, one of the largest and fastest growing real estate brokerage firms in Northern California; Network Capital Group, a 25-year-old mortgage banking operation; and Network Home Services, a provider of insurance brokerage and property care services. The company has grown rapidly over the last several years, and currently operates more than 41 offices with over more than 415 agents. Network's 4.6 million common shares are traded on the NASDAQ under the symbol NETW.
 -0- 10/19/92
 /CONTACT: Lee J. Danna, chairman of Network Financial Services Inc., 408-462-6200; or Nick Farina, 312-266-7800, or Lise Needham, 415-986-1591, or Kathy Phelan, 212-661-8030, all of Financial Relations Board, for Network Financial Services Inc./
 (NETW) CO: Network Financial Services Inc. ST: California IN: FIN SU: ERN


ML-GT -- SF001 -- 1325 10/19/92 08:02 EDT
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Date:Oct 19, 1992
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