MicroFinancial Incorporated Announces Third Quarter 2009 Results

October 21, 2009 4:01 PM EDT

WOBURN, Mass.--(BUSINESS WIRE)-- MicroFinancial Incorporated (NASDAQ: MFI), a financial intermediary specializing in vendor-based leasing and finance programs for microticket transactions, today announced financial results for the third quarter and the nine months ended September 30, 2009.

Quarterly Highlights:

    --  Cash received from customers increased by 27% to $19.5 million, or $1.36
        per diluted share, with net cash from operations increasing by 32% to
        $14.8 million, or $1.03 per diluted share, as compared to the same
        period last year.
    --  Total revenues increased by 19% to $12.0 million as compared to the same
        period last year
    --  Net income for the quarter was $1.2 million or $0.09 per diluted share
    --  Leverage continues to be conservative at 0.85 times total liabilities to
        stockholder equity
    --  Lease originations increased by 29% to over $20 million as compared to
        the same period last year.

Third Quarter Results:

Net income for the third quarter ended September 30, 2009 was $1.2 million or $0.09 per diluted share based upon 14,328,613 shares, compared to net income of $1.6 million, or $0.11 per diluted share based upon 14,179,080 shares for the same period last year.

Revenue for the third quarter of 2009 increased 18.7% to $12.0 million compared to $10.1 million in the third quarter of 2008 driven by growth in lease revenues for the quarter which were slightly offset by expected declines in rental and service contracts income. Revenue from leases was $7.6 million, up $1.6 million from the same period last year and rental income was $2.1 million, down $0.2 million from September 30, 2008. Other revenue components contributed $2.3 million for the current quarter, up $0.5 million from the same period last year.

Total operating expenses for the current quarter increased 31.3% to $10.0 million from $7.6 million in the third quarter of 2008. The third quarter 2009 provision for credit losses increased by $1.7 million to $5.4 million compared to the third quarter of 2008 due to an increase in receivables due in installments, higher delinquencies and higher charge-off levels. Third quarter net charge-offs increased to $5.1 million from $2.9 million in the comparable period of 2008. Selling, General and Administrative expenses increased $0.1 million to $3.4 million from $3.3 million as compared to the third quarter of last year primarily due to increases in employee related expenses associated with increased headcount. Headcount as of September 30, 2009 was 101 as compared to 94 at the same period in 2008. Depreciation and amortization expense increased by $0.2 million to $0.4 million for the quarter, due to an increase in the number of rental contracts being depreciated. Interest expense increased $0.4 million to $0.8 million as a result of an increase in borrowings under our revolving line of credit.

Cash received from customers in the third quarter increased 27.1% to $19.5 million compared to $15.3 million during the same period in 2008. New originations in the quarter increased by 29.0% to $20.7 million for the third quarter of 2009 as compared to the third quarter 2008.

Richard Latour, President and Chief Executive Officer said, "The current economic environment continues to present many challenges to the financial services industry. In order to manage through these difficult times, we will continue to focus our efforts on maintaining a disciplined credit approach, ensuring we have ample liquidity under our line of credit, and providing premium customer service to our dealer base. With this approach we have increased our total cash received from customers and our new lease originations while at the same time we have continued to grow our portfolio with a conservative leverage ratio. During the third quarter of 2009, we processed over 13,800 applications and approved an additional 304 vendors bringing the total vendor count to approximately 4,500."

Year to Date Results:

For the nine months ended September 30, 2009, net income was $2.8 million versus net income of $5.0 million for the same period last year. Net income per diluted share year to date was $0.20 based on 14,242,420 shares versus $0.35 based on 14,174,576 shares for the same period in 2008.

Year to date revenues for the nine months ended September 30, 2009 increased 17.2% to $34.0 million compared to $29.0 million during the same period in 2008. Revenue from leases was $21.5 million, up $5.0 million from the same period last year and rental income was $6.5 million, down $1.1 million from September 30, 2008. Other revenue components contributed $6.0 million, up $1.2 million from the same period last year. New contract originations year to date September 30, 2009 were $57.4 million versus $51.4 million through the same period last year.

Total operating expenses for the nine months ended September 30, 2009 increased 38.0% to $29.4 million versus $21.3 million for the same period last year. The provision for credit losses increased to $15.9 million for the nine months ended September 30, 2009, as compared to $10.2 million for the same period last year due to an increase in receivables due in installments, higher delinquencies and higher charge-off levels. Year to date net charge-offs increased to $13.7 million as compared to $5.5 million for the same period last year. Selling, General and Administrative expenses increased $0.7 million to $10.4 million primarily due to increases in employee related expenses associated with increased headcount. Interest expense increased by $1.2 million to $1.9 million as a result of higher outstanding debt balances on our line of credit. Year to date cash from customers increased 28.4% to $55.4 million as compared to $43.2 million for the same period last year.

MICROFINANCIAL INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

(Unaudited)

                                                    September 30,   December 31,

                                                    2009            2008

ASSETS

Cash and cash equivalents                           $ 540           $ 5,047

Restricted cash                                       722             528

Net investment in leases:

Receivables due in installments                       169,934         142,881

Estimated residual value                              18,216          15,257

Initial direct costs                                  1,472           1,211

Less:

Advance lease payments and deposits                   (2,028  )       (982    )

Unearned income                                       (55,071 )       (49,384 )

Allowance for credit losses                           (13,876 )       (11,722 )

Net investment in leases                              118,647         97,261

Investment in service contracts, net                  0               32

Investment in rental contracts, net                   448             240

Property and equipment, net                           695             759

Other assets                                          1,009           983

Total assets                                        $ 122,061       $ 104,850

LIABILITIES AND STOCKHOLDERS' EQUITY

                                                    September 30,   December 31,

                                                    2009            2008

Revolving Line of Credit                            $ 47,207        $ 33,325

Capital lease obligation                              109             125

Accounts payable                                      2,067           1,648

Dividends payable                                     -               702

Other liabilities                                     1,797           1,308

Income taxes payable                                  753             8

Deferred income taxes                                 3,995           3,396

Total liabilities                                     55,928          40,512

Stockholders' equity:

Preferred stock, $.01 par value; 5,000,000
shares authorized; no shares issued at September      -               -
30, 2009 and December 31, 2008

Common stock, $.01 par value; 25,000,000 shares
authorized; 14,173,076 and 14,038,257 shares          142             140
issued at September 30, 2009 and December 31,
2008, respectively

Additional paid-in capital                            46,170          45,774

Retained earnings                                     19,821          18,424

Total stockholders' equity                            66,133          64,338

Total liabilities and stockholders' equity          $ 122,061       $ 104,850

MICROFINANCIAL INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

(Unaudited)

                       Three Months Ended            Nine Months Ended

                       September 30,                 September 30,

                       2009           2008           2009           2008

Revenues:

Income on financing    $ 7,635        $ 6,030        $ 21,522       $ 16,566
leases

Rental income            2,124          2,330          6,471          7,566

Income on service        162            221            526            720
contracts

Loss and damage          1,048          849            3,052          2,305
waiver fees

Service fees and         1,001          632            2,371          1,712
other

Interest income          0              23             14             110

Total revenues           11,970         10,085         33,956         28,979

Expenses:

Selling, general         3,349          3,260          10,413         9,697
and administrative

Provision for            5,437          3,782          15,883         10,199
credit losses

Depreciation and         440            245            1,158          705
amortization

Interest                 751            310            1,928          696

Total expenses           9,977          7,597          29,382         21,297

Income before
provision for            1,993          2,488          4,574          7,682
income taxes

Provision for            767            905            1,761          2,670
income taxes

Net income             $ 1,226        $ 1,583        $ 2,813        $ 5,012

Net income per
common share:

Basic                  $ 0.09         $ 0.11         $ 0.20         $ 0.36

Diluted                $ 0.09         $ 0.11         $ 0.20         $ 0.35

Weighted-average
shares:

Basic                    14,170,079     14,016,167     14,138,374     13,992,951

Diluted                  14,328,613     14,179,080     14,242,420     14,174,576

About The Company

MicroFinancial Inc. (NASDAQ: MFI), is a financial intermediary specializing in microticket leasing and financing. MicroFinancial has been operating since 1986, and is headquartered in Woburn, Massachusetts.

Statements in this release that are not historical facts, including statements about future dividends or growth plans, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates," "expects," "views," "will" and similar expressions are intended to identify forward-looking statements. We caution that a number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Readers should not place undue reliance on forward-looking statements, which reflect our views only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. We cannot assure that we will be able to anticipate or respond timely to changes which could adversely affect our operating results. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results or other factors may result in fluctuations in the price of our common stock. For a more complete description of the prominent risks and uncertainties inherent in our business, see the risk factors described in documents that we file from time to time with the Securities and Exchange Commission.

    Source: MicroFinancial Incorporated

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