UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-11599
AMRESCO, INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 N. Pearl Street, Suite 2400, LB 342, Dallas, Texas 75201-7424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 953-7700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
48,769,469 shares of common stock, $.05 par value per share, as of
May 10, 1999.
AMRESCO, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1999 and 3
December 31, 1998
Consolidated Statements of Income - Three Months
Ended March 31, 1999 and 1998 4
Consolidated Statement of Shareholders' Equity -
Three Months Ended March 31, 1999 5
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures 17
About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 19
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
AMRESCO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share amounts)
March 31, December 31
1999 1998
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 61,533 $ 66,422
Loans and asset portfolios, net 971,469 943,119
Loans held for sale, net 577,153 694,397
Retained interests in securitizations - trading (at fair value) 389,592 538,977
Asset-backed securities - available for sale (at fair value) 134,956 141,181
Mortgage servicing rights, net of accumulated
amortization of $6,360 and $3,872 77,689 49,387
Intangible assets, net of accumulated amortization of
$40,712 and $34,470 338,442 262,815
Deferred income taxes 29,035 30,755
Premises and equipment, net of accumulated depreciation
of $18,553 and $16,769 23,843 23,223
Accounts receivable, net of reserves of $502 and $696 16,304 20,683
Income taxes receivable 65,937
Other assets 79,993 81,814
TOTAL ASSETS $2,700,009 $2,918,710
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 30,625 $ 43,280
Accrued employee compensation and benefits 16,008 28,420
Income taxes payable 15,060
Notes payable 814,851 957,871
Senior subordinated notes 580,171 580,179
Senior notes 57,500 57,500
Warehouse loans payable 460,107 587,426
Other liabilities 74,416 78,627
Total liabilities 2,048,738 2,333,303
SHAREHOLDERS' EQUITY:
Common stock, $0.05 par value, authorized 150,000,000
shares; 49,796,924 and 49,099,135 shares issued 2,491 2,456
Capital in excess of par 546,324 543,871
Common stock to be issued for earnouts 59,605
Treasury stock, $0.05 par value, 1,024,339 shares in 1999 and 1998 (17,363) (17,363)
Accumulated other comprehensive loss (14,505) (12,651)
Unamortized stock compensation (9,594) (4,981)
Retained earnings 84,313 74,075
Total shareholders' equity 651,271 585,407
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,700,009 $2,918,710
</TABLE>
See notes to consolidated financial statements.
AMRESCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1999 1998
REVENUES:
Interest and other investment income $ 73,377 $ 83,049
Gain on sale of loans and investments, net 64,369 24,766
Mortgage banking and servicing fees 26,607 24,661
Asset management and resolution fees 4,837 2,657
Other revenues 1,144 5,665
Total revenues 170,334 140,798
EXPENSES:
Personnel 67,541 41,348
Interest 42,823 49,843
Other general and administrative 28,723 15,577
Depreciation and amortization 10,545 4,276
Provision for loan and asset portfolio losses 3,718 6,847
Total expenses 153,350 117,891
Income before income taxes 16,984 22,907
Income tax expense 6,746 8,858
NET INCOME $ 10,238 $ 14,049
Earnings per share:
Basic $ 0.21 $ 0.36
Diluted 0.21 0.35
Weighted average number of common shares outstanding:
Basic 47,677 39,027
Diluted 49,162 40,446
See notes to consolidated financial statements.
AMRESCO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
$0.05 par value
Accumulated
Number Capital in Other Total
of Excess of Treasury Comprehen. Retained Compr. Sharehoders'
Shares Amount Par Other Stock Income(Loss) Earnings Income Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1999 49,099 $2,456 $543,871 $(4,981) $(17,363) $(12,651) $74,075 $585,407
Comprehensive income:
Net income 10,238 $10,238
Other comprehensive income
(loss), net of tax:
Unrealized loss on securities
(net of $1,687 tax) (2,650) (2,650)
Foreign currency translation
adjustments (net of $488 tax) 796 796
Other comprehensive loss (1,854)
Comprehensive income $ 8,384 8,384
Issuance of common stock for earnout 27 1 194 195
Exercise of stock options
(including tax benefit) 4 31 31
Issuance of common stock
for unearned stock compensation 674 34 6,380 (6,414)
Purchase of subsidiary - adjustment
related to stock price change (4,049) (4,049)
Amortization of unearned stock
compensation 1,698 1,698
Common stock to be issued for earnouts 59,605 59,605
Other (7) (103) 103
MARCH 31, 1999 49,797 $2,491 $546,324 $50,011 $(17,363) $(14,505) $84,313 $651,271
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
AMRESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
1999 1998
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 10,238 $ 14,049
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Gain on sale of loans and investments (64,369) (24,766)
Depreciation and amortization 10,545 4,276
Accretion of interest income, net 1,277 (6,811)
Provisions for loan and asset portfolio losses 3,718 6,847
Deferred income taxes 1,720 (6,817)
Other 3,848 1,792
Increase (decrease) in cash for changes in (exclusive
of assets and liabilities acquired in business
combinations):
Loans held for sale, net 165,552 (710,025)
Retained interests in securitizations 154,497 (4,951)
Accounts receivable, net 4,379 (14,991)
Other assets 844 (5,240)
Accounts payable (12,655) (9,226)
Income taxes payable/receivable 80,997 (109)
Warehouse loans payable (127,319) 628,675
Other liabilities and accrued compensation and benefits (27,122) (7,332)
Net cash provided by (used in) operating activities 206,150 (134,629)
INVESTING ACTIVITIES:
Origination of loans and purchase of asset portfolios (152,848) (209,117)
Collections on loans and asset portfolios 131,282 119,577
Purchase of asset-backed securities - available for sale (90,486)
Proceeds from sale of and collections on asset-backed
securities - available for sale 265 12,698
Origination and purchase of mortgage servicing rights (30,792) (10,375)
Purchase of subsidiaries (14,848) (15,716)
Investment in and advances to equity affiliate (6,947)
Distribution from equity affiliate 1,299
Purchase of premises and equipment (2,408) (1,495)
Net cash used in investing activities (68,050) (201,861)
FINANCING ACTIVITIES:
Net proceeds from notes payable and other debt 277,917 472,934
Repayment of notes payable and other debt (420,937) (599,091)
Proceeds from issuance of senior subordinated notes,
net of issuance costs 320,828
Proceeds from common stock offering 147,799
Stock options exercised and tax benefits from
employee stock compensation 31 3,314
Net cash provided by (used in) financing activities (142,989) 345,784
Net increase (decrease) in cash and cash equivalents (4,889) 9,294
Cash and cash equivalents, beginning of period 66,422 25,866
Cash and cash equivalents, end of period $ 61,533 $ 35,160
SUPPLEMENTAL DISCLOSURE:
Common stock to be issued for earnouts $ 59,605
Interest paid 58,021 $ 42,779
Common stock issued for unearned stock compensation,
net 6,311 4,998
Income taxes paid 339 12,793
Common stock issued for the purchase of subsidiaries
and earnouts 195 19,907
</TABLE>
See notes to consolidated financial statements
AMRESCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of
AMRESCO, INC. and subsidiaries (the "Company") have been prepared by
the Company in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
March 31, 1999 are not necessarily indicative of the results that may
be expected for the entire fiscal year or any other interim period.
It is recommended that these statements be read in conjunction with
the Company's consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. Certain reclassifications of prior period
amounts have been made to conform to the current period presentation.
2. Notes Payable and Other Debt
Revolving Credit Agreement - On February 28, 1999, the Company
entered into a Third Modification of the Credit Agreement (the
"Credit Agreement") with a syndicate of lenders led by NationsBank,
N.A., as administrative agent and Credit Suisse First Boston, as
syndication agent, to replace a waiver. The maximum amount available
under the Credit Agreement is $737.5 million (subject to certain
requirements such as a contractually determined advance percentage
applied to each asset that is pledged as collateral under the Credit
Agreement). The short and long term revolving facilities of $167.5
million and $502.5 million terminate August 11, 1999 and August 12,
2001, respectively, and the term loan commitment of $67.5 million
terminates August 12, 2003. Based on the current agreement, on
August 11, 1999, any amount of the Credit Agreement drawn on in
excess of $570.0 million (the sum of long term revolving facility and
the term loan commitment) would need to be repaid. At March 31,
1999, $553.4 million was outstanding under the Credit Agreement.
Warehouse Debt - On January 11, 1999, a wholly-owned subsidiary
of the Company entered into a Master Repurchase Agreement (the
"Repurchase Agreement") with Bear Stearns Home Equity Trust ("Bear
Stearns") for an amount not to exceed $250.0 million for the sale and
repurchase of certain home equity loans. At March 31, 1999, $42.3
million was outstanding under the Repurchase Agreement.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Small Business
Facility") to redefine the maturity date of the Small Business
Facility as December 31, 1999. At March 31, 1999, $105.0 million was
outstanding under the Small Business Facility.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Franchise
Facility") to redefine the maturity date of the Franchise Facility as
December 31, 1999. At March 31, 1999, $39.7 million was outstanding
under the Franchise Facility.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Leasing Facility")
to redefine the maturity date of the Leasing Facility as December 31,
1999. At March 31, 1999, there was no amount was outstanding under
the Leasing Facility.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an Amended and Restated Master Repurchase Agreement (the
"Master Repurchase Agreement") with Prudential Securities Credit
Corporation ("Prudential") to redefine the termination date as
December 31, 1999. At March 31, 1999, $3.7 million was outstanding
under the Repurchase Agreement.
3. Shareholders' Equity
On January 15, 1999, February 23, 1999 and March 15, 1999, the
Company issued options to purchase approximately 255,000, 25,000 and
40,000 shares, respectively, of common stock at market price at the
date of issuance. On March 15, 1999, the Company issued
approximately 674,000 restricted shares of the Company's common stock
(which vest over a two year term) to certain key employees.
The Company has accrued the value of common stock to be issued
related to certain business acquisition purchase contracts. The
number of shares included in weighted average diluted shares
outstanding related to such purchase contracts is determined at the
end of each reporting period based upon the then current market price
until the shares are actually issued. The value of the common stock
to be issued, which totaled $59.6 million, was accrued at March 31,
1999.
Under the original Agreement and Plan of Merger (the "Original
Agreement") to purchase Mortgage Investors Corporation ("MIC"), the
former owners of MIC were to receive an earnout payment of between
$70.0 million and $105.0 million over a three year period with the
payments structured to be paid 82% in the Company's common stock and
18% in cash. Effective April 12, 1999, the Original Agreement was
amended (the "Amended Agreement") to fix the earnout payment at
$105.0 million with payments remaining at 82% in the Company's common
stock and 18% in cash. Additionally, under the Amended Agreement,
the Company may effect a redemption of the earnout prior to September
30, 1999. In the event the Company elects to redeem the earnout
obligation, a cash payment of $44.3 million would be due on September
30, 1999 and a further cash payment of $51.0 million would be due on
March 31, 2000, with the obligation to make such payments evidenced
by short-term promissory notes. The Original Agreement called for
the issuance of a portion of the common stock consideration on April
30, 1999, which is now delayed until at least September 30, 1999 with
a final installment anticipated on March 31, 2000. An additional
$28.7 million of "common stock to be issued for earnouts" and $6.3
million of cash payments were accrued in April 1999 for the
incremental $35.0 million ($105.0 - $70.0 million) of consideration.
4. Segments
The following represents the Company's reportable segment
position as of and for the periods ended March 31, 1999 and 1998
(unaudited, in thousands):
<TABLE>
<CAPTION>
March 31, 1999
Commercial Residential Home
Asset Mortgage Commercial Mortgage Equity
Management Banking Finance Banking(1) Lending(2) All Other Eliminations Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from external sources $ 30,856 $ 28,732 $ 34,652 $ 38,780 $ 35,079 $ 2,235 $ - $ 170,334
Gain on sale of loans and
investments, net 5,570 946 7,282 37,020 13,551 64,369
Interest expense 7,747 1,671 14,229 1,314 12,280 5,582 42,823
Depreciation and amortization 195 2,976 2,317 2,046 1,965 1,046 10,545
Operating income (loss) 13,407 (1,377) 7,932 11,427 (2,794) (11,611) 16,984
Segment assets 568,443 364,708 1,019,167 185,001 453,210 707,338 (597,858) 2,700,009
March 31, 1998
Commercial Residential Home
Asset Mortgate Commercial Mortgage Equity
Management Banking Finance Banking (1) Lending(2) All Other Elimination Total
Revenues from external sources $ 26,329 $ 41,420 $ 15,424 $ - $ 55,208 $ 2,417 $ - $ 140,798
Gain on sale of loans and
investments, net 6,614 656 1,641 15,855 24,766
Interest expense 6,471 9,924 5,761 23,441 4,246 49,843
Depreciation and amortization 195 1,387 730 1,195 769 4,276
Operating income (loss) 13,311 7,232 2,944 9,785 (10,365) 22,907
Segment assets 570,349 488,934 541,307 1,883,434 460,990 (311,864) 3,633,150
</TABLE>
(1) Acquired operations August 11, 1998.
(2) Discontinued bulk purchases and correspondent operations in late 1998.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company is a diversified financial services company with
five principal segments: asset management, commercial mortgage
banking, commercial finance, residential mortgage banking and home
equity lending. The asset management segment involves acquiring
asset portfolios at a discount to face value and managing and
resolving such asset portfolios to maximize cash recoveries. In
addition, in its asset management segment, the Company provides
special servicing for nonperforming and underperforming loans in
commercial mortgage-backed bond trusts and similar securitized
commercial asset-backed loan portfolios. The commercial mortgage
banking segment involves fee-based origination and servicing of
commercial real estate mortgages and commercial real estate
brokerage. In its commercial finance segment, the Company focuses on
(i) loans to franchisees of nationally recognized restaurant,
hospitality and service organizations, (ii) loans to small business
owners, (iii) real estate structured finance, (iv) communications
finance and (v) single family residential construction lending. The
residential mortgage banking segment, consisting of the acquired
operations of Mortgage Investors Corporation ("MIC"), originates and
sells Veterans Administration ("VA") streamlined re-financed loans.
The home equity lending segment involves originating, selling and
servicing nonconforming first mortgage loans.
Revenues from the Company's asset management activities
primarily consist of earnings on asset portfolios, gains on sale of
investments, and fees charged for the management of asset portfolios
and for the successful resolution of the assets within such asset
portfolios. The Company's revenues from its commercial mortgage
banking activities are primarily earned from fees generated by the
(i) origination and underwriting of commercial real estate mortgage
loans, (ii) placement of such loans with permanent investors and
(iii) servicing of loans, interest earned on commercial loans held
for sale and deposits. Revenues from the Company's commercial
finance business are primarily earned from (i) interest and fees on
real estate structured finance activities, communications finance
activities, loans to franchisees of nationally recognized restaurant,
hospitality, service organizations and other small business owners
and loans to single family residential contractors, (ii) accrued
earnings on retained interests in securitizations and (iii) gains on
the securitization and sale of loans. Revenues from the Company's
residential mortgage banking activities consist primarily of cash
gains from sales of Veterans Administration streamlined re-financed
loans. Revenues from the Company's home equity lending activities
primarily consist of interest earned on originated home equity loans,
accrued earnings on retained interests in securitizations, cash gains
from whole-loan sales of home equity loans and fees generated by the
origination, underwriting and servicing of home equity loans.
Corporate and other revenues primarily consist of interest earned on
investments in residential mortgage backed securities and other
miscellaneous income. Corporate and other expenses primarily include
corporate personnel, overhead and unallocated interest expense.
Results of Operations
The following discussion and analysis presents the significant
changes in results of operations of the Company for the three months
ended March 31, 1999 and 1998 by segment. The results of operations
of acquired businesses are included in the consolidated financial
statements from the date of acquisition. This discussion should be
read in conjunction with the consolidated financial statements and
notes thereto.
Three Months Ended
(unaudited, in thousands, except per share data) March 31,
1999 1998
Revenues:
Asset management $ 30,856 $ 26,329
Commercial mortgage banking 28,732 41,420
Commercial finance 34,652 15,424
Residential mortgage banking 38,780 -
Home equity lending 35,079 55,208
Corporate and other 2,235 2,417
Total revenues 170,334 140,798
Operating expenses:
Asset management 17,449 13,018
Commercial mortgage banking 30,109 34,188
Commercial finance 26,720 12,480
Residential mortgage banking 27,353 -
Home equity lending 37,873 45,423
Corporate and other 13,846 12,782
Total operating expenses 153,350 117,891
Operating income (loss):
Asset management 13,407 13,311
Commercial mortgage banking (1,377) 7,232
Commercial finance 7,932 2,944
Residential mortgage banking 11,427 -
Home equity lending (2,794) 9,785
Corporate and other (11,611) (10,365)
Total operating income 16,984 22,907
Income tax expense 6,746 8,858
Net income $ 10,238 $ 14,049
Earnings per share:
Basic $ 0.21 $ 0.36
Diluted 0.21 0.35
Weighted average shares outstanding:
Basic 47,677 39,027
Diluted 49,162 40,446
Three Months Ended March 31, 1999 Compared to Three Months Ended
March 31, 1998
The Company reported a 21% increase in revenues from $140.8
million to $170.3 million due primarily to an increase in cash gain
on sale of loans in residential mortgage banking (the acquired MIC
operation). Operating income decreased from $22.9 million for the
first quarter of 1998 to $17.0 million for the first quarter of 1999,
or 26%, and net income decreased from $14.0 million to $10.2 million,
or 27%, as compared to the prior year period. The decreases in
operating income and net income were due primarily to the
discontinuance of the home equity lending capital markets operation
and increased personnel and overhead expenses associated with new
business acquisitions made during the latter part of 1998. These
decreases were offset, in part, by cash gains on sales of loans
provided by residential mortgage banking. Diluted weighted average
common shares outstanding increased 22% due primarily to the early
1998 public offering of the Company's common stock and stock issued
in acquisitions offset, partially, by share repurchases. Diluted
earnings per share decreased 40% from $0.35 for the first three
months of 1998 to $0.21 for the first three months of 1999.
Asset Management. Revenues for the three months ended March 31,
1999 primarily consisted of $19.8 million in interest income, $5.6
million in gain on sale of investments and $4.8 million in asset
management and resolution fees. The $4.6 million increase in
revenues from $26.3 million for the first quarter of 1998 to $30.9
million for the first quarter of 1999 was primarily comprised of a
$2.7 million increase in asset management and resolution fees and
$2.5 million in interest and other investment revenue. The increase
in asset management and resolution fees was due primarily to
increased special servicing and asset management contracts (primarily
foreign management contracts). The increase in interest income was
due primarily to increased aggregate investments for the Company's
own account.
Operating expenses for the quarter ended March 31, 1999
primarily consisted of $7.7 million in interest expense, $4.9 million
in personnel cost and $4.5 million in other general and
administrative expenses. The $4.4 million increase in expenses from
$13.0 million for the prior year period to $17.4 million for the
quarter ended March 31, 1999 was due primarily to a $2.0 million
increase in personnel expense, a $1.5 million increase in other
general and administrative expenses related to business growth and a
$1.3 million increase in interest expense related to financing for
increased investment balances.
Commercial Mortgage Banking. Revenues for the quarter ended
March 31, 1999 primarily consisted of $22.6 million in origination,
underwriting and servicing revenues and $5.2 million in interest
income. The $12.7 million decrease in revenues from $41.4 million
for the prior year period to $28.7 million for the quarter ended
March 31, 1999 relates primarily to a $7.8 million decrease in
interest income as a result of exiting the conduit operation as a
principal thereby holding reduced balances of mortgage loans held for
sale and a $4.8 million decrease in other revenues as a result of
exiting the AMRESCO Capital conduit joint venture.
Operating expenses for the quarter ended March 31, 1999
consisted of $19.0 million in personnel expense, $6.4 million of
other general and administrative expense, $3.0 million of
depreciation and amortization and $1.7 million of interest expense.
The $4.1 million decrease in expenses from $34.2 million for the
prior year period to $30.1 million for the quarter ended March 31,
1999 was due primarily to an $8.3 million reduction of interest
expense related to financing reduced balances of commercial loans
held for sale offset, in part, by a $1.6 million increase in
personnel expense due primarily to expanded operations and a $1.6
million increase in depreciation and amortization due primarily to
amortization of increased balances of mortgage servicing rights.
Commercial Finance. Revenues for the three months ended March
31, 1999 primarily consisted of $26.2 million of interest income and
$7.3 million of gain on securitization and sale of loans. The $19.3
million increase in revenues from $15.4 million for the prior year
period to $34.7 million for the three months ended March 31, 1999
relates primarily to a $13.4 million increase in interest and other
investment income and a $5.6 million increase in gain on sale of
loans. The increase in interest and other investment income was due
primarily to increased balances of loans held by the real estate,
communication and builder groups and loans held for sale by
Independence Funding and TeleCapital (both businesses were acquired
in mid-1998). The increase in gain on sale of loans was due
primarily to a small business loan pre-fund transfer gain recorded in
the first quarter of 1999.
Operating expenses for the quarter ended March 31, 1999
primarily consisted of $14.2 million of interest expense, $6.2
million of personnel expense, $3.2 million of other general and
administrative expense and $2.3 million in depreciation and
amortization. The $14.2 million increase in expenses from $12.5
million for the prior year period to $26.7 million for the quarter
ended March 31, 1999 was due primarily to an increase of $8.5 million
of interest expense related to the financing for increased levels of
loans held for sale and $3.4 million of personnel expense, $1.6
million of depreciation and amortization and $1.5 million of other
general and administrative expenses related primarily to expanded
operations.
Residential Mortgage Banking. Revenues of $38.8 million
consisted primarily of cash gain on sale of loans of $37.0 million.
Operating expenses of $27.4 million primarily consisted of $18.6
million in personnel expense (primarily commissions), $5.4 million in
other general and administrative expenses and $2.0 million in
depreciation and amortization.
Home Equity Lending. Revenues for the three months ended March
31, 1999 primarily consisted of $18.3 million in interest income,
$13.6 million of gains on whole loan sales and $2.8 million in
mortgage banking and servicing fees. The $20.1 million decrease in
revenues from $55.2 million for the prior year period to $35.1
million for the quarter ended March 31, 1999 was due primarily to a
$19.8 million decrease in interest income related to holding reduced
balances of loans held for sale due to the discontinuance of the
capital markets operation.
Operating expenses for the quarter ended March 31, 1999
primarily consisted of $12.3 million of interest expense, $11.0
million of personnel expense, $9.9 million of other general and
administrative expense, $2.7 million of provisions for loan losses
and $2.0 million of depreciation and amortization. Operating
expenses decreased by $7.5 million from $45.4 million for the prior
year period to $37.9 million for the quarter ended March 31, 1999.
This decrease primarily consisted of $11.2 million of reduced
interest expense and a $2.1 million decrease in provision for loan
and investment losses due primarily to holding reduced balances of
mortgage loans held for sale offset, in part, by a $4.9 million
increase in other general and administrative expenses due primarily
to AMRESCO Residential Mortgage Corporation expansion.
Corporate, Other and Intercompany Eliminations. Revenues of
$2.2 million for the three months ended March 31, 1999 primarily
consisted of interest income from investments in residential mortgage
backed securities. The $1.0 million increase in expenses from $12.8
million for the prior year period to $13.8 million for the quarter
ended March 31, 1999 was due primarily to increased unallocated
interest expense.
Liquidity and Capital Resources
Cash and cash equivalents totaled $61.5 million at March 31,
1999. Cash flows provided by operating activities plus principal
collections on loans, asset portfolios and asset-backed securities
totaled $337.7 million for the first three months of 1999 compared to
a $2.4 million use for the same period in 1998. The variance from
the prior period was due primarily to net cash receipts of $138.0
million from a net interest margin transaction (the proceeds of which
were used to pay down existing debt), receipt of a $79.3 million
income tax receivable related to 1998 losses, a lower level of loans
held for sale and related warehouse debt and the Company exiting the
capital intensive home equity lending capital markets operation. The
following table is a summary of selected cash flow activity and debt
ratios during the first three months of 1999 and 1998 (dollars in
thousands):
For the Three Months
Ended March 31,
1999 1998
Net cash provided by (used in) operating activities $ 206,150 $(134,629)
Net cash used in investing activities (68,050) (201,861)
Net cash provided by (used in) financing activcities (142,989) 345,784
Other financial measures:
Cash flow from operations and collections on
loans, asset portfolios and asset-backed securities 337,697 (2,354)
Cash provided by new capital and borrowings (used in
in repayment), net (excluding warehouse loans payable) (143,020) 342,470
Cash used for purchase of asset portfolios,
asset-backed securities, mortgage servicing
rights and originations of loans (183,640) (309,978)
EBITDA (1) 70,352 77,026
Interest coverage ratio (2) 0.7x 1.9x
The following table is a summary of selected debt ratios as of March
31, 1999 and December 31, 1998:
1999 1998
Ratio of total debt to equity 2.9:1 3.7:1
Ratio of core debt to equity (3) 2.2:1 2.7:1
(1) EBITDA is calculated as operating income before interest, income
taxes, depreciation and amortization. The Company has included
information concerning EBITDA because EBITDA is one measure of an
issuer's historical ability to service its indebtedness. EBITDA
should not be considered as an alternative to, or more meaningful
than, net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.
(2) Interest coverage ratio means the rolling twelve month ratio of
earnings before interest, taxes, depreciation and amortization to
cash interest expense.
(3) Excludes indebtedness under warehouse lines of credit.
The following table shows the components of the Company's
capital structure, including certain short-term debt, as of March 31,
1999 and December 31, 1998 (dollars in millions):
1999 1998
% of % of
Dollars Total Dollars Total
Shareholders' equity $ 651.3 25% $ 585.4 21%
Senior notes 57.5 2 57.5 2
Senior subordinated notes 580.2 23 580.2 21
Mortgage warehouse loans 460.1 18 587.4 21
Notes payable 814.8 32 957.9 35
Total $2,563.9 100% $2,768.4 100%
Total assets decreased $0.2 billion to $2.7 billion at March 31,
1998 from $2.9 billion at December 31, 1998. The decrease was due
primarily to a sale of retained interests in securitization through a
net interest margin transaction, sales of loans held for sale, and
receipt of an income tax receivable offset, in part, by an increase
in intangibles due to acquisition earnouts.
Revolving Credit Agreement
On February 28, 1999, the Company entered into a Third
Modification of the Credit Agreement (the "Credit Agreement") with a
syndicate of lenders led by NationsBank, N.A., as administrative
agent and Credit Suisse First Boston, as syndication agent, to
replace a waiver. The maximum amount available under the Credit
Agreement is $737.5 million (subject to certain requirements such as
a contractually determined advance percentage applied to each asset
pledged to the Credit Agreement ("asset coverage test") as well as
the maximum amount of the agreement). The short and long-term
revolving facilities of $167.5 million and $502.5 million terminate
August 11, 1999 and August 12, 2001, respectively, and the term loan
commitment of $67.5 million terminates August 12, 2003. Based on the
current agreement, on August 11, 1999, the amount of the Credit
Agreement then outstanding in excess of $570.0 million (the sum of
the long term revolving facility and the term loan commitment) would
need to be repaid. As of May 7, 1999, approximately $634.3 million
was available under the Credit Agreement as determined by the asset
coverage test and $546.1 million was outstanding.
Commercial Finance Warehouse Facilities
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Small Business
Facility") to define the maturity date of the Small Business Facility
December 31, 1999. At March 31, 1999, $105.0 million was outstanding
under the Small Business Facility.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Franchise
Facility") to define the maturity date of the Franchise Facility as
December 31, 1999. At March 31, 1999, $39.7 million was outstanding
under the Franchise Facility.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an amendment of a Secured Note (the "Leasing Facility")
to define the maturity date of the Leasing Facility as December 31,
1999. At March 31, 1999, there was no was outstanding under the
Leasing Facility.
Home Equity Lending Warehouse Facilities
On January 11, 1999, a wholly-owned subsidiary of the Company
entered into a Master Repurchase Agreement (the "Repurchase
Agreement") with Bear Stearns Home Equity Trust ("Bear Stearns") for
an amount not to exceed $250.0 million for the sale and repurchase of
certain home equity loans. At March 31, 1999, $42.3 million was
outstanding under the Repurchase Agreement.
On March 31, 1999, a wholly-owned subsidiary of the Company
entered into an Amended and Restated Master Repurchase Agreement (the
"Master Repurchase Agreement") with Prudential Securities Credit
Corporation ("Prudential") which extended the termination date to
December 31, 1999. At March 31, 1999, $3.7 million was outstanding
under the Repurchase Agreement.
General
The Company believes it has sufficient liquidity to meet its
obligations, including any then outstanding obligation related to the
short-term portion ($167.5 million) of the Credit Agreement due in
August 1999, the $57.5 million of senior notes due July 1999 and
funding requirements to maintain its operations at the currently
reduced investment pace. The primary sources of liquidity currently
include internally generated funds, additional availability under the
Credit Agreement, to the extent described above, the warehouse
facilities and cash balances. In addition, the Company is seeking to
renew a portion of the short-term facility and to obtain third party
financing for certain assets which, if successful, would result in
additional capacity under the Credit Agreement.
The Company has historically accessed the capital markets as an
important part of its capital raising activities, which included
raising funds in debt and equity offerings, to finance the
acquisition of assets, the origination and accumulation of loans and
to securitize and sell mortgage loans originated by its different
business lines. Due to current market conditions related to the
Company's securities, debt and equity, and debt constraints placed
upon the Company through certain debt agreements, the Company
believes its access to the capital markets will continue to be
significantly limited for the foreseeable future and that other
sources of third party financing will also be limited.
Other Matters
The actual weighted average annual prepayment rate on the
Company's home equity securitizations was 25.2% for the period from
inception of each security through February 25, 1999, which is higher
than originally projected, and is modeled to be 28.8% for the next
twelve months. Prepayment rates on the Company's franchise and small
business loan securitizations are in line with expectations. Current
valuations take into account the change in prepayment assumptions as
well as other assumptions influenced by market conditions. The
discount rate used to value the retained interests is influenced
primarily by volatility and predictability of the underlying cash
flows which generally become more certain as the securities season.
The weighted-average discount rate used to value the Company's
retained interests at March 31, 1999 was 17.8%. The Company has
utilized, for initial valuation purposes, a 20% discount rate on its
home equity securitizations, discount rates ranging from 18% - 20%
for its commercial finance franchise loan securitizations and a 15%
discount rate on its commercial finance small business loan
securitizations. The lower discount rates on the commercial finance
securitizations were due to the reduced risk resulting from a
borrower cross-collateralization feature in these securitizations.
Retained interests in securitizations at March 31, 1999 consisted of
$281.1 million of home equity loan interests, $85.3 million of
commercial finance loan interests and $23.2 million related to a
commercial mortgage whole loan sale.
Year 2000 Issue
General
Many of the world's computers, software programs and other
equipment using microprocessors or embedded chips currently have date
fields that use two digits rather than four digits to define the
applicable year. These computers, programs and chips may be unable
to properly interpret dates beyond the year 1999; for example,
computer software that has date sensitive programming using a two-
digit format may recognize a date using "00" as the year 1900 rather
than the year 2000. Such errors could potentially result in a system
failure or miscalculation causing disruptions of operations,
including, among other things, a temporary inability to process
transactions or engage in similar normal business activities, which,
in turn, could lead to disruptions in the Company's operations or
performance.
The Company's assessments of the cost and timeliness of
completion of Year 2000 modifications set forth below are based on
management's best estimates, which were derived using numerous
assumptions relating to future events, including, without limitation,
the continued availability of certain internal and external resources
and third party readiness plans. Furthermore, as the Company's Year
2000 initiative (described below) progresses, the Company continues
to revise its estimates of the likely problems and costs associated
with the Year 2000 problem and to adapt its contingency plan.
However, there can be no assurance that any estimate or assumption
will prove to be accurate.
The Company's Year 2000 Initiative
The Company has been conducting a comprehensive Year 2000
initiative with respect to its internal business-critical systems
since mid-1997. This initiative encompasses information technology
("IT") systems and applications, as well as non-IT systems and
equipment with embedded technology, such as fax machines and
telephone systems, which may be impacted by the Year 2000 problem.
Business-critical systems encompass internal accounting systems,
including general ledger, accounts payable and financial reporting
applications; cash management systems; loan servicing systems; and
decision support systems; as well as the underlying technology
required to support the software. The initiative includes assessing,
remediating or replacing, testing and upgrading the Company's
business-critical IT systems with the assistance of a consulting firm
that specializes in Year 2000 readiness. Based upon a review of the
completed and planned stages of the initiative, and the testing done
to date, the Company does not anticipate any material difficulties in
achieving Year 2000 readiness with respect to its internal business-
critical systems, and the Company achieved that Year 2000 readiness
with respect to virtually all its internal business-critical systems
by March 31, 1999.
In addition to its own internal IT systems and non-IT systems,
the Company may be at risk from Year 2000 failures caused by or
occurring to third parties. These third parties can be classified
into two groups. The first group includes borrowers, significant
business partners, lenders, vendors and other service providers with
whom the Company has a direct contractual relationship. The second
group, while encompassing certain members of the first group, is
comprised of third parties providing services or functions to large
segments of society, both domestically and internationally such as
airlines, utilities and national stock exchanges.
As is the case with most other companies, the actions the
Company can take to avoid any adverse effects from the failure of
companies, particularly those in the second group, to become Year
2000 ready is extremely limited. However, the Company has
communicated with those companies that have significant business
relationships with the Company, particularly those in the first
group, to determine their Year 2000 readiness status and the extent
to which the Company could be affected by any of their Year 2000
readiness issues. In connection with this process, the Company has
sought to obtain written representations and other independent
confirmations of Year 2000 readiness from the third parties with whom
the Company has material contracts. Responses from all third parties
having material contracts with the Company have not been received.
In addition to contacting these third parties, where there are direct
interfaces between the Company's systems and the systems of these
third parties in the first group, the Company plans to complete
testing by the end of the second quarter of 1999 in conformance with
the guidelines of the Federal Financial Institutions Examination
Council. Based on responses received and testing to date, it is not
currently anticipated that the Company will be materially affected by
any third party Year 2000 readiness issues.
For virtually all business-critical systems interfaces,
readiness was achieved by March 31, 1999. Backup products and
servicers suppliers that have achieved Year 2000 readiness have been
put in place for significant third party providers that did not
complete their Year 2000 initiatives by March 31, 1999.
There can be no assurance that the systems of the Company or
those of third parties will not experience adverse effects after
December 31, 1999. Furthermore, there can be no assurance that a
failure to convert by another company, or a conversion that is not
compatible with the Company's systems or those of other companies on
which the Company's systems rely, would not have a material adverse
effect on the Company.
The Company does not anticipate that it will incur material
expenditures in connection with any modifications necessary to
achieve Year 2000 readiness. The Company incurred approximately
$750,000 of costs related to its Year 2000 initiative through March
31, 1999, and the Company anticipates that it will incur an
additional $250,000 of costs in the future with respect to the
initiative. These cost estimates do not include costs associated
with internal resources assigned to the initiative.
Potential Risks
In addition to the Company's internal systems and the systems
and embedded technology of third parties with whom the Company does
business, there is a general uncertainty regarding the overall
success of global remediation efforts relating to the Year 2000
problem, including those efforts of providers of services to large
segments of society, as described above in the second group. Due to
the interrelationships on a global scale that may be impacted by the
Year 2000 problem, there could be short-term disruptions in the
capital or real estate markets or longer-term disruptions that would
affect the overall economy.
Due to the general uncertainty with respect to how this issue
will affect businesses and governments, it is not possible to list
all potential problems or risks associated with the Year 2000
problem. However, some examples of problems or risks to the Company
that could result from the failure by third parties to adequately
deal with the Year 2000 problem include:
in the case of lenders, the potential for liquidity stress due
to disruptions in funding flows;
in the case of exchanges and clearing agents, the potential for
funding disruptions and settlement failures; and
in the case of vendors or providers, service failures or
interruptions, such as failures of power, telecommunications and the
embedded technology of building systems (such as HVAC, sprinkler and
fire suppression, elevators, alarm monitoring and security, and
building and parking garage access).
With respect to the Company's loan portfolios, risks due to the
potential failure of third parties to be ready to deal with the Year
2000 problem include:
potential borrower defaults resulting from computer failures of
retail systems of major tenants in retail commercial real estate
properties such as shopping malls and strip shopping centers;
potential borrower defaults resulting from increased expenses or
legal claims related to failures of embedded technology in building
systems, such as HVAC, sprinkler and fire suppression, elevators,
alarm monitoring and security, and building and parking garage
access; and
delays in reaching projected occupancy levels due to
construction delays, interruptions in service or other market
factors.
These risks are also applicable to the Company's portfolios of
mortgage backed securities, as these securities are dependent upon
the pool of mortgage loans underlying them. If the investors in
these types of securities demand higher returns in recognition of
these potential risks, the market value of any future MBS portfolios
of the Company also could be adversely affected.
Other problems that could result from the failure of the Company
or third parties to achieve Year 2000 readiness include impairment of
the Company's ability to report to investors and owners with respect
to portfolio performance and collect and remit payments, including
those with respect to return on investments, taxes and insurance.
Furthermore, the Company's loan servicing operations rely on
computers to process and manage loans. These operations are of such
a volume and nature that manual processing would be time consuming
and expensive. Therefore, a failure of the Company's own systems or
the systems provided by third parties and used by the Company to be
timely compliant could have a material adverse effect on the
Company's loan servicing operations.
The Company believes that the risks most likely to affect the
Company adversely relate to the failure of third parties, including
its borrowers and sources of capital, to achieve Year 2000 readiness.
If its borrowers' systems fail, the result could be a delay in making
payments to the Company or the complete business failure of such
borrowers. The failure, although believed to be unlikely, of the
Company's sources of capital to achieve Year 2000 readiness could
result in the Company being unable to obtain the funds necessary to
continue its normal business operations.
Some of the risks associated with the Year 2000 problem may be
mitigated through insurance maintained or purchased by the Company,
its business partners, borrowers and vendors. However, the scope of
insurance coverage in addressing these potential issues under
existing policies has yet to be tested, and the economic impact on
the solvency of the insurers has not been explored. Therefore, no
assurance can be given that insurance coverage will be available or,
if it is available, that it will be available on a cost-effective
basis or that it will cover all or a significant portion of any
potential loss.
Business Continuity/Disaster Recovery Plan
The Company currently has a business continuity/disaster
recovery plan that includes business resumption processes that do not
rely on computer systems and the maintenance of hard copy files,
where appropriate. The business continuity/disaster recovery plan is
monitored and updated as potential Year 2000 readiness issues of the
Company and third parties are specifically identified. Due to the
inability to predict all of the potential problems that may arise in
connection with the Year 2000 problem, there can be no assurance that
all contingencies will be adequately addressed by such plan.
Private Litigation Securities Reform Act of 1995
This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
forward-looking statements are made pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
The factors that could cause actual results to differ materially
include the following: industry conditions and competition, interest
rates, business mix, availability of additional financing, and the
risks described from time to time in the Company's reports to the
Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Disclosure
The Company is subject to interest rate risk due to the
Company's balance sheet being primarily comprised of loans and
interest bearing investments primarily financed by LIBOR based notes
payable and warehouse loans payable. The Company manages this risk
by striving to balance its origination and mortgage banking
activities with its asset management and servicing operations which
are generally counter cyclical in nature. In addition, the Company
is a party to financial instruments with off-balance sheet risk in
the normal course of business to hedge against changes in interest
rates. The Company may reduce its exposure to fluctuations in
interest rates by creating offsetting positions through the use of
derivative financial instruments. Derivatives are used to lower
funding costs, to diversify sources of funding, or to alter interest
rate exposures arising from mismatches between assets and
liabilities. The Company does not use derivative financial
instruments for trading or speculative purposes, nor is the Company
party to highly leveraged derivatives. These financial instruments
include interest rate cap agreements, put options and forward and
futures contracts. The instruments involve, to varying degrees,
elements of interest rate risk in excess of the amount recognized in
the consolidated statements of financial condition. The Company
controls the risk of its hedging agreements, interest rate cap
agreements and forward and futures contracts through approvals,
limits and monitoring procedures.
As part of its interest rate risk management process, the
Company performs various sensitivity analyses that quantify the net
financial impact of changes in interest rates on its interest rate
sensitive assets, liabilities and derivative portfolio. The analyses
incorporate scenarios under which the assets, liabilities and
derivatives are valued based upon their projected discounted cash
flows or market values as provided by Bloomberg quotations adjusted
for certain selected hypothetical changes in interest rates.
Included in the analyses are pre-payment rates, discount rates,
credit losses and effects related to re-pricing. The following are
the Company's interest rate sensitivity analyses as of March 31,
1999:
Retained Interests in Securitization (trading):
Change in Hypothetical Hypothetical
Interest Fair Value Change ($) Change (%)
Rates
10% $394.3 $4.7 1.2%
0 389.6 - -
(10)% 378.2 (11.4) (2.9)
A hypothetical increase in interest rates is projected to
decrease loan pre-payments increasing the fair value of the retained
interests. This increase is projected to more than offset a decrease
in fair value of the retained interests caused by higher market
interest rates.
Other than Trading:
Change in Hypothetical Hypothetical
Interest Fair Value Change Change
Rates
10% $566.7 $(3.5) (0.6)%
0 570.1 - -
(10) 574.4 4.3 0.8
The other than trading category includes loans held for sale,
loans and asset portfolios, asset backed securities, derivative
positions, senior notes, senior subordinated notes and the amount
outstanding under the Company's Credit Agreement to the extent the
fair value could be affected by a widening of spreads. In an
increasing interest rate environment, the Company projects the fair
value of its asset and derivative portfolio to decrease offset, in
part, by a fair value reduction in its debt obligations.
Foreign Exchange Risk
Foreign exchange risk arises from the possibility that changes
in foreign exchange rates will impact the value of financial
instruments. The Company is subject to foreign exchange risk to the
extent its income bearing assets exceeds its related foreign
denominated debt. The following tables summarize the hypothetical
impact to the Company's financial position due to changes in foreign
currency exchange rates (dollars in millions):
Net Assets - United Kingdom:
Change in
Foreign
Exchange Rates Hypothetical Hypothetical
per Dollar Fair Value Change Change
10% $48.5 $ (8.0) (14.2)%
0 56.5 - -
(10)% 66.4 9.9 17.5
Net Assets - Other (Canada, Mexico and Japan):
Change in
Foreign
Exchange Rates Hypothetical Hypothetical
per Dollar Fair Value Change Change
10% $21.0 $ (1.4) (6.3)%
0 22.4 - -
(10)% 24.3 1.9 8.5
Any market interest rate change would adjust the Company's
projected cash flows from its variable rate assets and liabilities.
Such changes in cash flows are not reflected in the above analysis as
the fair values of variable assets and liabilities would not
materially be affected by a 10% change in interest rates. As with
any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table.
For example, although certain assets and liabilities may have similar
maturities or periods to re-pricing, they may react in different
degrees to changes in interest rates. Changes in interest rates
related to certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates while changes in interest
rates related to other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as variable
rate loans, have features which restrict changes in interest rates on
a short-term basis and over the life of the asset. Additionally,
changes in market interest rates may increase or decrease due to pre-
payments and defaults influenced by changes in market interest rates
affecting the valuation of certain assets. Accordingly, the data
presented in the above table should not be relied upon as indicative
of actual results in the event of changes in interest rates.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits and Exhibit Index
Exhibit No.
11 Computation of Per Share Earnings.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURE
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, thereunto duly authorized.
AMRESCO, INC.
Registrant
Date: May 11, 1999 By:/s/ Barry L. Edwards
Barry L. Edwards
Executive Vice President
and Chief Financial Officer
AMRESCO, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1999 1998
Basic:
Net income $10,238,000 $14,049,000
Weighted average common shares outstanding 48,201,216 39,127,179
Contingently issuable shares 218,895
Restricted shares (523,849) (318,834)
Total 47,677,367 39,027,240
Earnings per share $0.21 $0.36
Diluted:
Net income $10,238,000 $14,049,000
Weighted average common shares outstanding 48,201,216 39,127,179
Contingently issuable shares 218,895
Effect of stock options 961,155 1,099,489
Total 49,162,371 40,445,563
Earnings per share $0.21 $0.35
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> $ 61,533
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<RECEIVABLES> 16,806
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<TOTAL-REVENUES> 170,334
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