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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 3, 1999
UNITED COMPANIES FINANCIAL CORPORATION
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(Exact name as specified in its charter)
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Louisiana 1-7067 71-0430414
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(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
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Twelve United Plaza, 8549 United Plaza Boulevard
Baton Rouge, Louisiana 70809
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (225) 987-0000
Not Applicable
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(Former name of former address if changed since last report)
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Item 5. Other Events.
The Registrant files herewith the exhibit listed in Item 7(c) below.
Item 7(c). Exhibits.
The following exhibit is furnished in accordance with Item 601 of
Regulation S-K:
99 Press Release dated September 3, 1999 - United Companies
Reports Net Loss of $583.9 Million for 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNITED COMPANIES FINANCIAL CORPORATION
(Registrant)
Date: September 3, 1999 By: /s/ MICHAEL W. TRICKEY
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Michael W. Trickey
Chief Financial Officer
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INDEX TO EXHIBITS
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SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
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99 Press Release dated September 3, 1999 - United
Companies Reports Net Loss of $583.9 Million
for 1998
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EXHIBIT 99
FOR MORE INFORMATION, CONTACT:
Deborah Hicks Midanek
Chief Executive Officer
504.987.2385 or 800.234.8232
RELEASE DATE: September 3, 1999
UNITED COMPANIES REPORTS NET LOSS OF $583.9 MILLION FOR 1998
BATON ROUGE, LA - United Companies Financial Corporation (OTC: UCFNQ),
which has been in Chapter 11 reorganization since March 1, 1999, today reported
a net loss for 1998 of $583.9 million or $20.74 per share compared to net
income of $74.6 million or $2.30 per share for 1997. The Company's announcement
was delayed pending completion of its audited consolidated financial statements
as of December 31, 1998, and for the year then ended. A copy of these financial
statements and the notes thereto, along with the independent auditor's report
thereon, will be filed by the Company on a Form 8-K with the Securities and
Exchange Commission, and condensed consolidated balance sheets and statements
of operations are included at the end of this release. The Company had
previously announced on April 16, 1999, that it anticipated its audited
financial statements would reflect a substantial write-down of the value of
certain of its assets, that such write-down was likely to be of such a
magnitude that there could be no assurance that the Company's assets (net of
the amount of the write-down) would exceed its liabilities and, furthermore,
that there could be no assurance that the ultimate value received for the
Company's assets would cover the Company's outstanding liabilities and debt
claims.
The net loss in 1998 resulted primarily from a $605.6 million writedown to
the valuation of the Company's Interest-only and residual certificates at
December 31, 1998. This writedown of the Interest-only and residual
certificates, net of the allowance for loan losses, was comprised of the
following components:
1) $160.8 million from an increase in the effective discount rate
assumptions applied by the Company to expected future cash releases
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from the trusts established in the Company's prior securitization
transactions;
2) $338.3 million from an increase in the Company's estimated cumulative
credit loss rate;
3) $69.5 million from increasing the Company's prepayment speed
assumptions;
4) $20.0 million from the estimated impact of delinquency triggers in
the related securitization trusts which require increased levels of
reserve accounts and overcollateralization under specified
circumstances; and
5) $17.0 million from marking certain subordinated certificates retained
by the Company in securitization transactions to estimated market
value.
The effective discount rate assumption on cash flows (net of the related
allowance for loan losses) from the Company's home equity loan securitization
transactions expected to be received by the Company, including certain cash in
the related reserve accounts, was increased from approximately 9% at December
31, 1997, to approximately 22% at December 31, 1998. The effective discount rate
assumption on cash flows (net of the related allowance for loan losses) expected
to be received by the Company from manufactured housing product securitization
transactions was increased from approximately 12% at December 31, 1997, to 18%
at December 31, 1998. The increase in the discount rate assumptions reflects a
number of factors, including, but not limited to, the Company's determination of
the market's demand at December 31, 1998 for a higher rate of return on
Interest-only and residual certificates backed by subprime home equity loans and
the effect of the distressed state of the Company. The Company raised its
estimate of the cumulative undiscounted credit loss assumption on home equity
loans at December 31, 1998, from 2.5% for its fixed products and 2.0% for its
ARM products to 7.7% on all home equity products to reflect a number of factors,
including, but not limited to, anticipated increased loss severity, higher out
of pocket costs of disposal of repossessed properties and increased delinquency
in the portfolio of loans serviced.
On a quarterly basis, the Company analyzes the prepayment speed
assumptions utilized in valuing its Interest-only and residual certificates and
revises its estimates when required. As of December 31, 1998, the Company,
based on current data and expectations, increased its estimates of life-to-date
(i.e., an average lifetime prepayment speed) prepayment speeds on its
securitized home equity loans as follows:
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1) from 24.1% to 30.1% for fixed-rate loans,
2) from 29.5% to 33.3% for its adjustable-rate mortgage (ARM) loans,
and
3) from 25.1% to 30.5% for its hybrid loans.
The Company's revised assumptions were used by it in the valuation of its
Interest-only and residual certificates as of December 31, 1998, and in the
calculation of loan sale gains for home equity loans and manufactured housing
contracts sold during the quarter then ended. At December 31, 1998, the
contractual balance of home equity loans serviced was approximately $6.4
billion, including $3.7 billion in fixed rate home equity loans, $0.9 billion
in ARMs and $1.8 billion in hybrid loans, of which $1.5 billion of hybrid loans
originally had fixed rates for three years. Home equity loans serviced at
December 31, 1998 also include $697.5 million of loans in the Company's 1998
fourth quarter home equity loan securitization transaction for which the
servicing was sold and transferred in the first quarter of 1999. Additionally,
the contractual balance of manufactured housing contracts serviced at December
31, 1998 was $721 million.
The percentage of home equity loans thirty days or more delinquent,
including defaulted loans (i.e. bankruptcies and foreclosures), at December 31,
1998 was 12.24% compared to 10.63% at December 31, 1997 and 10.82% at September
30, 1998. The percentage of manufactured housing contracts thirty days or more
delinquent at December 31, 1998 was 7.15% compared to 5.73% at December 31,
1997 and 6.14% at September 30, 1998.
Net charge-offs on home equity loans were $48.7 million for the year ended
December 31, 1998 compared to $31.0 million for the year ended December 31,
1997 and $12.5 million for the quarter ended December 31, 1998, compared to
$14.2 million for the quarter ended September 30, 1998. The charge-off rate on
the average aggregate principal balance of home equity loans serviced for the
year ended December 31, 1998 was .81% compared to .65% for the year ended
December 31, 1997. Net charge-offs on manufactured housing contracts were $5.5
million for the year ended December 31, 1998 compared to $0.9 million for the
year ended December 31, 1997. The charge-off rate on the average aggregate
principal balance of manufactured housing contracts serviced for the year ended
December 31, 1998 was .85% compared to .27% for the year ended December 31,
1997.
The reserve for loan losses on owned and serviced home equity loans totaled
$502.1 million (or 7.7% of total home equity loans owned and serviced) at
December 31, 1998 compared to $87.4 million (or
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1.6% of total home equity loans owned and serviced) at December 31, 1997. The
reserve for loan losses on owned and serviced manufactured housing contracts
totaled $58.0 million (or 7.0% of total manufactured housing contracts owned
and serviced) at December 31, 1998 compared to $21.9 million (or 4.9% of total
manufactured housing contracts owned and serviced) at December 31, 1997.
The Company also announced that it expects to report a loss for each of the
first and second quarters of 1999. The Company is working to complete its first
and second quarter 1999 financial statements.
Separately, the Company announced that with the completion and release of
its 1998 financial statements, Michael W. Trickey will step down as Chief
Financial Officer to develop his consulting business. Mr. Trickey, who joined
United Companies in April 1999, will be available to the Company on a
consulting basis as it formulates its plan of reorganization.
United Companies is a specialty finance company that services
non-traditional consumer loan products. The Company has been in a Chapter 11
reorganization since March 1, 1999.
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: The statements contained in this release that
are not historical facts are forward-looking statements based on the Company's
current expectations and beliefs concerning future developments and their
potential effects on the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by the Company.
Actual results may differ from those projected in the forward-looking
statements. These forward-looking statements involve significant risks and
uncertainties (some of which are beyond the control of the Company) and are
subject to change based upon various factors, including but not limited to the
following risks and uncertainties: the developments in and outcome of the
Company's Chapter 11 reorganization proceedings; the ability to access loan
facilities in amounts necessary to fund the Company's operations; the
successful disposition of its existing loan portfolio and repossessed real
estate properties; the ability of the Company to successfully restructure its
balance sheet; the ability of the Company to retain an adequate number and mix
of its employees; the effect of the Company's policies including the amount of
Company expenses; actual prepayment rates and credit losses on loans sold as
compared to prepayment rates and credit losses assumed by the Company at the
time of sale for purposes of its gain on sale computations; the quality of the
Company's owned and serviced loan portfolio including levels of delinquencies,
customer bankruptcies and charge-offs; adverse economic conditions;
competition; various legal, regulatory and litigation risks and other risks
detailed from time to time in the Company's Securities and Exchange Commission
filings. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as the result of new information, future
events or otherwise.
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UNITED COMPANIES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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December 31,
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1998 1997
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ASSETS (IN THOUSANDS)
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Cash and cash equivalents ...................................................... $ 230,013 $ 582
Interest-only and residual certificates--net ................................... 462,504 882,116
Loans-- net .................................................................... 191,282 172,207
Investment securities - available for sale ..................................... 1,918 16,853
Accrued interest receivable and servicer advances .............................. 148,622 85,258
Property-- net ................................................................. 45,883 62,050
Capitalized mortgage servicing rights .......................................... 40,148 48,760
Other assets ................................................................... 36,002 34,613
Net assets of discontinued operations .......................................... 85,403 36,163
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Total assets ......................................................... $ 1,241,775 $ 1,338,602
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable .................................................................. $ 1,219,025 $ 691,826
Deferred income taxes payable .................................................. -- 95,385
Managed cash overdraft ......................................................... -- 13,625
Other liabilities .............................................................. 136,909 57,137
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Total liabilities .................................................... 1,355,934 857,973
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Stockholders' equity (deficit):
Preferred stock, $2 par value;
Authorized -- 20,000,000 shares; Issued -- 1,657,770 and 1,898,070
shares of 6 3/4% PRIDES(sm) ($44 per share liquidation preference) ...... 3,315 3,796
Common stock, $2 par value;
Authorized -- 100,000,000 shares; Issued -- 30,353,033 and
29,971,356 shares ....................................................... 60,706 59,943
Additional paid-in capital ................................................... 186,614 187,418
Accumulated other comprehensive income........................................ 113 98
Retained earnings (deficit) .................................................. (345,703) 250,429
Treasury stock ............................................................... (7,409) (7,409)
ESOP debt .................................................................... (11,795) (13,646)
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Total stockholders' equity (deficit) ................................. (114,159) 480,629
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Total liabilities and stockholders' equity (deficit) ............... $ 1,241,775 $ 1,338,602
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UNITED COMPANIES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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YEAR ENDED DECEMBER 31,
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1998 1997 1996
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(IN THOUSANDS)
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Revenues:
Loan sale gains .................................................... $ 191,383 $ 247,022 $ 186,653
Finance income, fees earned and other loan income .................. 128,599 139,029 122,826
Writedown of Interest-only and residual certificates - net ......... (605,562) -- --
Investment income .................................................. 39,509 24,230 13,156
Other .............................................................. 15,336 8,312 6,070
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Total ...................................................... (230,735) 418,593 328,705
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Expenses:
Personnel .......................................................... 141,505 120,800 89,724
Interest ........................................................... 72,710 54,865 36,131
Advertising ........................................................ 48,559 36,490 12,039
Restructuring ...................................................... 6,368 -- --
Other operating .................................................... 128,823 79,590 55,834
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Total ...................................................... 397,965 291,745 193,728
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Income (loss) from continuing operations
before income taxes ............................................... (628,700) 126,848 134,977
Provision (benefit) for income taxes ................................. (84,769) 44,661 47,428
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Income (loss) from continuing operations ............................. (543,931) 82,187 87,549
Loss from discontinued operations:
Loss from discontinued operations, net of
income tax expense (benefit) of $(830),$(2,698) and
$1,021, respectively ............................................ (1,541) (7,587) (5,889)
Loss on disposal, net of income tax benefit of $5,550 .............. (38,424) -- --
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Total ......................................................... (39,965) (7,587) (5,889)
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Net income (loss) .................................................... $ (583,896) $ 74,600 $ 81,660
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