TACOMA, Wash., Feb. 25, 1999 (PRIMEZONE) -- T&W Financial Corporation (NASDAQ: TWFC) announced today its net income increased 144 percent to $16.8 million for the year ended December 31, 1998 from $6.9 million for the year ended December 31, 1997. Net income increased 34 percent to $4.3 million for the quarter ended December 31, 1998 from $3.2 million for the comparable period in 1997.
Fully diluted earnings per share increased to $2.00 for the year ended December 31, 1998 from $1.14 for the year ended December 31, 1997. Diluted earnings per share increased to $0.52 for the quarter ended December 31, 1998 from $0.44 for the comparable period in 1997.
Serviced portfolio increased 77 percent to $572 million at December 31, 1998 from $324 million at December 31, 1997. The number of contracts serviced increased 11 percent to 10,930 at December 31, 1998 from 9,812 at December 31, 1997. The number of leases originated decreased 14 percent to 3,852 for the year ended December 31, 1998 from 4,473 for the year ended December 31, 1997. The company attributes the decrease in the number of leases originated relative to the increase in the managed portfolio to the higher average ticket sizes of the leases originated in 1998. (Average ticket size was $87,000 in 1998 versus $47,000 in 1997.)
In 1998 T&W established joint ventures in various industry niches in which it originates leases. These joint ventures allowed the company to formalize marketing programs with its equipment providers, resulting in leasing larger-ticket equipment. The average yield on the portfolio of leases serviced as of December 31, 1998 was 11.8 percent. Delinquencies on the portfolio of the leases serviced (greater than 30-days past due) improved to 5.48 percent as of December 31, 1998 from 9.18 percent as of December 31, 1997.
Michael Price, chairman and chief executive officer of T&W stated, "We are pleased with our continued growth in earnings and serviced portfolio in fiscal 1998. Equally as important, we are very satisfied with the progress we made throughout 1998 in establishing a solid infrastructure within the organization to ensure we manage our growth prudently. Specifically, in 1998 we made significant investments in technology and personnel to improve our customer service, quality control, internal audit and collection efforts. Our commitment to maintaining strong credit quality within our lease portfolio remains steadfast."
"We believe that our investments to strengthen our internal resources are paying off," stated T&W President Thomas W. Price. "For example, in 1998 we increased our operational staff from 26 to 72 people. We think these efforts are directly reflected in the improvement in the portfolio's delinquencies. Given the investments we have made to bolster our operations, we believe we are in an excellent position to manage our growth expectations without significant increases in expenditures."
During the quarter ended December 31, 1998, the company changed its securitization policy by retaining more assets on its balance sheet. T&W will focus on becoming a balance-sheet lender rather than an off-balance sheet lender, thereby eventually eliminating the use of gain-on-sale accounting. During the fourth quarter of 1998, T&W sold 66 percent of the leases it originated. The company's goals for 1999 and 2000 are to sell 65 percent and 35 percent of its originations, respectively, for accounting purposes and be completely off gain-on-sale accounting in 2001.
Paul B. Luke, senior vice president and director of finance at T&W stated, "We are structuring our future securitizations to eventually eliminate gain-on-sale accounting. Although our securitizations in the past have been cash flow positive, we recognize the investment community's apprehension with gain-on-sale accounting. While securitizations will continue to be a valuable financing source, we have made strong progress in diversifying our financing alternatives, which include bank and other syndicated on-balance-sheet facilities."
"Our business philosophy," added Tom Price, "has always been to manage the company on a portfolio basis (on balance sheet). Given the change in our securitization policy, we feel it is important to disclose to the investment community information which reflects the way we view our business. In addition to reported earnings, we will also disclose earnings on a portfolio basis, as if all leases originated were on balance sheet.
"We hope this form of earnings reconciliation will alleviate many of the concerns regarding gain-on-sale accounting. As the portfolio earnings reflect, we experienced strong growth in earnings in 1998 while allowing for significant investments in our infrastructure," concluded Tom Price.
The accompanying table following the Company's Statements of Income and Balance Sheets reflects reconciled earnings on a portfolio basis.
Based in Tacoma, Washington, and founded in 1976, T&W Financial Corporation is a specialty commercial finance company. It provides equipment leasing, focusing primarily on the "small-ticket" sector of the market, which are leases less than $250,000. Its customers are small-to medium-sized independent businesses throughout the U.S. and Canada.
This release contains forward-looking statements including statements regarding Management's expectations and goals in future periods. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements including the Company's ability to manage growth and credit risk, retain key personnel and effectively change its securitization policy. Readers should not place undue reliance on the forward-looking statements, which reflect the management's view only as of the date hereof. T&W undertakes no obligations to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Readers should also carefully review the risk factors described in documents T&W files from time to time with the Securities and Exchange Commission.
T&W FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
Year Ended
December 31,
1998 1997
-------- --------
Income Statement Data:
Revenues:
Lease contract revenue $ 19,491 $ 14,252
Gain on sale of leases 36,364 12,111
Fee income 2,808 537
Servicing and other income 4,740 2,442
-------- --------
Total revenues $ 63,403 $ 29,342
-------- --------
Expenses:
Interest expense $ 8,494 $ 7,675
Compensation and related
expenses 5,612 3,270
Amortization of initial direct
costs 3,923 3,021
Provision for credit losses 4,461 1,581
Other general and administrative
expenses 10,056 2,633
-------- --------
Total expenses $ 32,546 $ 18,180
-------- --------
Income before minority interest
and income taxes $ 30,857 $ 11,162
Minority interest (4,629) (585)
-------- --------
Income before income taxes 26,228 10,577
Provision for income taxes (9,442) (3,700)
-------- --------
Net income $ 16,786 $ 6,877
-------- --------
-------- --------
Earnings per share,
basic and diluted $ 2.00 $ 1.14
Weighted average number of shares
of Common Stock and Common Stock
equivalent shares outstanding 8,392 6,010
T&W FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
Dec. 31, 1998 Dec. 31, 1997
------------- -------------
Balance Sheet Data (e):
Cash and cash equivalents $ 18,076 $ 28,553
Net investment in leases 141,194 148,954
Total Assets 223,882 212,197
Notes payable - recourse 74,644 76,065
Notes payable - non-recourse 29,624 60,317
Total Liabilities 154,935 164,313
Minority interest 11,271 7,183
Shareholders' equity $ 57,676 $ 40,701
Operating Data:
Lease financing
receivables originated:
Number of contracts 3,852 4,473
Lease originations (a) $ 334,000 $ 210,000
Leases serviced:
Number of contracts 10,930 9,812
Portfolio of leases serviced (b) $ 572,000 $ 324,000
Average portfolio yield (c ) 11.8% 12.2%
Credit quality statistics:
Delinquencies as a percentage
of portfolio of leases serviced
Total over 30 days 5.48% 9.18%
Net charge-offs (d) .61% .24%
Allowance for doubtful accounts and
dealer reserve as a percentage of
managed GAAP net investment. 1.37% 1.12%
(a) -- Represents the equipment costs for leases originated during the
period. 1997 includes the acquisition of the Specialty Vehicle Division from
Transamerica.
(b) -- Represents the aggregate of minimum lease payments, under all leases
serviced by the company held as direct-financing leases and leases sold to
special-purpose entities, including guaranteed residuals.
(c) -- Represents the average yield recognized during the period for the
portfolio of leases serviced.
(d) -- Represents charge-offs (reduced by recoveries), divided by the
respective periods average net investment, under all leases serviced by the
company held as direct-financing leases and leases sold to special purpose
entities.
(e) - U.S. operations only, Canadian subsidiary included on the equity
method.
Reconciliation on a Pro Forma Basis
(Compares Reported Earnings to Earnings on the Portfolio
Method as if Gain on Sale Accounting Was Never Utilized)
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
1998 1997
--------- ---------
Net Income as Reported $ 16,786 $ 6,877
Add: Minority Interest as Reported 4,629 585
Income Tax Expense as Reported 9,442 3,700
--------- ---------
Operating Income 30,857 11,162
Pro Forma Adjustments
Add: Lease Contract Revenue 30,889 8,760
Less: Gain on Sale of Leases (36,236) (12,111)
Interest Expense (14,009) (3,441)
Amortization of Initial Direct Costs (437) (1,102)
Trustee and Servicing Fees (2,081) -
--------- ---------
Adjusted Operating Income 8,983 3,268
Less: Minority Interest on Pro Forma Income (1,347) (490)
Income Tax Expense on Pro Forma Income (2,749) (1,000)
--------- ---------
Pro Forma Income $ 4,887 $ 1,778
--------- ---------
Pro Forma Basic Earnings Per Share $ 0.58 $ 0.30
--------- ---------
* To be read in conjunction with the Company's consolidated statement of
income.
CONTACTS: INVESTOR CONTACT:
Paul B. Luke
Senior Vice President/CFO
T&W Financial Corp.
253-922-5164, ext. 708
or
MEDIA CONTACTS:
Steve Hawkins or Linda Press
both of Sitrick And Company
310-788-2850