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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
------------------------
COMMISSION FILE NUMBER: 0-18108
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FINET.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or jurisdiction of incorporation or organization)
2527 CAMINO RAMON, SUITE 200
SAN RAMON, CA 94583
(Address of Principal Executive Office)
94-3115180
(IRS Employer Identification Number)
(925) 242-6550
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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 filing requirements
within the past 90 days.
Yes /X/ No / /
As of November 8, 2000, 95,050,532 shares of the Registrant's Common Stock,
$.01 par value were issued and outstanding.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---- ----------- --------
<C> <S> <C>
PART I--FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of September 30,
2000 and December 31, 1999.................................. 3
Condensed Consolidated Statements of Operations for the nine
and three month periods ended September 30, 2000 and
September 30, 1999.......................................... 4
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 2000 and September 30,
1999........................................................ 5
Notes to Condensed Consolidated Financial Statements........ 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
3. Quantitative and Qualitative Analysis of Market Risk........ 19
PART II--OTHER INFORMATION
1. Legal Proceedings........................................... 20
6. Exhibits and Reports on Form 8-K............................ 20
Signatures.................................................. 21
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FINET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 4,963 $ 18,626
Restricted cash............................................. 400 10,403
Available for sale marketable equity securities, cost basis
of $0..................................................... -- 2,674
Accounts and notes receivable, net of allowances of $1,013
and $1,793................................................ 2,251 2,363
Mortgage loans held for sale, net........................... 84,996 78,691
Furniture, fixtures & equipment, net of accumulated
depreciation.............................................. 3,162 4,471
Goodwill, net of accumulated amortization of $831 and
$240...................................................... 1,441 1,757
Other assets................................................ 970 823
-------- --------
Total assets.............................................. $ 98,183 $119,808
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Warehouse and other lines of credit......................... $ 81,043 $ 80,453
Accounts payable............................................ 330 2,379
Notes payable and capitalized leases........................ 83 141
Accrued expenses and other liabilities...................... 5,369 6,462
-------- --------
Total liabilities......................................... $ 86,825 $ 89,435
-------- --------
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock, par value $.01 per share (150,000 shares
authorized, 95,050 and 93,441 shares issued and
outstanding at September 30, 2000 and December 31, 1999,
respectively)............................................. $ 950 $ 934
Additional paid-in capital.................................. 102,612 100,943
Accumulated deficit......................................... (92,204) (73,208)
Other comprehensive income.................................. -- 1,704
-------- --------
Total stockholders' equity.................................. 11,358 30,373
-------- --------
Total liabilities and stockholders' equity.............. $ 98,183 $119,808
======== ========
</TABLE>
See accompanying notes.
3
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FINET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................................... $ 2,515 $ 1,748 $ 6,042 $ 6,726
Cost of revenues............................ 4,210 3,085 8,180 15,219
------- ------- -------- --------
Gross profit (loss)......................... (1,695) (1,337) (2,138) (8,493)
Operating expenses:
General and administrative................ 4,206 4,790 13,470 16,168
Marketing and advertising................. 401 3,028 1,689 4,442
Depreciation and amortization............. 548 204 1,557 533
Special charges........................... -- 155 964 5,081
Other operating expenses.................. 40 272 124 1,382
------- ------- -------- --------
Total expenses.......................... 5,195 8,449 17,804 27,606
------- ------- -------- --------
Loss from operations........................ (6,890) (9,786) (19,942) (36,099)
Other income and expense:
Gain (loss) on sale of marketable equity
securities.............................. (42) -- 824 --
Other interest income..................... 22 15 174 15
Other interest expense.................... -- -- -- (267)
------- ------- -------- --------
Loss before income taxes.................... (6,910) (9,771) (18,944) (36,351)
Income tax expense.......................... (20) -- (53) (5)
------- ------- -------- --------
Net loss.................................... (6,930) (9,771) (18,997) (36,356)
------- ------- -------- --------
In-substance preferred dividend............. -- -- -- (353)
------- ------- -------- --------
Net loss attributable to common
shareholders.............................. $(6,930) $(9,771) $(18,997) $(36,709)
======= ======= ======== ========
Basic and diluted net loss per common
share..................................... $ (0.07) $ (0.11) $ (0.20) $ (0.46)
======= ======= ======== ========
Weighted average common shares used in
computing basic and diluted net loss per
common share.............................. 94,778 91,445 94,350 79,654
======= ======= ======== ========
</TABLE>
See accompanying notes.
4
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FINET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(18,997) $(36,709)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 1,557 1,050
Compensation attributable to warrant issuance............. 382 1,974
Expense from warrants issued upon conversion of debt...... -- 739
Imputed interest from convertible debentures.............. -- 267
Asset valuation adjustments............................... 964 5,246
Gain on sale of marketable securities..................... (824) --
Changes in operating assets and liabilities:
Decrease in restricted cash............................. 10,003 --
Decrease (increase) in mortgage loans held for sale..... (6,305) 35,551
Decrease (increase) in receivables from sales of
mortgage loans, servicing rights and other
receivables........................................... (308) 3,907
(Decrease) increase in other assets..................... 274 (345)
Increase (decrease) in warehouse borrowings............. 590 (64,325)
Decrease in accounts payable and accrued expenses....... (2,807) 207
-------- --------
Net cash used in operating activities....................... (15,471) (52,438)
INVESTING ACTIVITIES:
Proceeds from sale of mortgage servicing rights........... 420 1,192
Purchase of furniture, fixtures and equipment............. (955) (2,287)
Proceeds from sale of marketable securities............... 1,794 --
-------- --------
Net cash provided by (used in) investing activities....... 1,259 (1,095)
FINANCING ACTIVITIES:
Proceeds (costs) from issuance of common stock, net of
expenses................................................ (210) 56,450
Proceeds from the exercise of common stock warrants and
options................................................. 817 2,426
Redemption of preferred stock............................. -- (2,500)
Repayment of 3% Convertible Debenture..................... -- (1,500)
Repayment of note payable, capitalized leases and line of
credit.................................................. (58) (1,001)
Other equity.............................................. -- (227)
-------- --------
Net cash provided by financing activities................... 549 53,648
-------- --------
Net increase (decrease) in cash............................. (13,663) 115
Cash at beginning of period................................. 18,626 7,418
-------- --------
Cash at end of period....................................... $ 4,963 $ 7,533
======== ========
</TABLE>
5
<PAGE>
FINET.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. THE COMPANY
ORGANIZATION
FiNet.com, Inc. ("FiNet" or "the Company") is a provider of mortgage
services to mortgage broker businesses and consumers, including online mortgage
services. The Company markets its business to business services primarily to
mortgage brokers. The Company markets to consumers through marketing agreements
with general interest websites. FiNet operates its business to business and
consumer-direct segments of these financial services through its wholly owned
subsidiary, Monument Mortgage, Inc. (hereinafter collectively referred to as
"FiNet" or the "Company"), which is licensed to originate and fund mortgage
loans in fifty (50) states and the District of Columbia.
NOTE 2. BASIS OF PRESENTATION
INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of September 30, 2000 are
unaudited. The unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the period ended and as of September 30, 2000. The
results for the three and nine month periods ended September 30, 2000 are not
necessarily indicative of the expected results for the year ending December 31,
2000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The condensed consolidated balance sheet at December 31, 1999 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K dated
December 31, 1999.
RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to the
current period presentation.
REVENUE RECOGNITION
Lending transaction fee income and expenses are deferred until the related
loan is sold, and are included in Gain on Sale of Mortgage Loans.
Loan servicing fees represent fees earned for servicing loans for various
investors. The fees earned for this service are based on a contractual
percentage of the outstanding principal balance, or are a fixed dollar amount
per loan. Fees are credited to income when the related payments are received.
6
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Loan brokerage fees include amounts earned for the processing of mortgage
loan applications of third party lenders. These fees are recognized when the
loan is funded.
The Company's revenue for the three and nine month periods ended
September 30, 2000 and 1999 is comprised of the following (in thousands)
(unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income on loans held for sale...... $2,041 $ 611 $3,906 $1,806
Gain on sale of servicing rights and
mortgage loans............................ 425 643 1,812 2,405
Loan brokerage fees......................... 42 330 220 1,555
Loan servicing fees......................... 2 76 13 701
Other....................................... 5 88 91 259
------ ------ ------ ------
Total revenues.............................. $2,515 $1,748 $6,042 $6,726
====== ====== ====== ======
</TABLE>
COST OF REVENUE
Certain loan origination costs and other production costs incurred to
originate loans are included in Cost of Revenues in the Company's Condensed
Consolidated Statements of Operations. Such costs include loan production
personnel; loan and receivables losses related to loans and servicing assets
held for sale; interest expense; and other costs of production.
Direct loan origination costs are deferred until the related loan is sold.
Certain loan origination costs are included in Cost of Revenues. Other such
costs are included in the Gain on Sale of Mortgage Loans.
NOTE 3. BORROWING ARRANGEMENTS
Borrowing arrangements consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
<S> <C> <C>
Warehouse lines of credit were utilized as follows:
$75 million committed, bearing interest at LIBOR plus
variable spread, expires February 28, 2001.............. $67,330 $73,125
$20 million temporary commitment, bearing interest at
prime less 1%........................................... 12,458 --
Purchase/Repurchase agreements:
$10 million, bearing interest at prime (Mical)............ -- 12
$15 million, bearing interest at Fed Funds + 0.70%, no
expiration date......................................... 1,255 7,316
------- -------
$81,043 $80,453
======= =======
</TABLE>
WAREHOUSE LINES OF CREDIT
FiNet's primary warehouse borrowing facility with the Residential Funding
Corporation ("RFC"), provides the Company with a committed $75 million warehouse
borrowing facility with interest rates ranging from LIBOR plus 1.75% to LIBOR
plus 2.25%. The sixth amendment to this borrowing agreement dated October 12,
2000 extended the maturity date to February 28, 2001. The Company recorded
interest expense on Warehouse Lines of Credit of $2.0 million and $0 for the
three month periods ended September 30, 2000 and 1999, and $3.1 million and
$1.5 million for the nine month periods then ended. Interest expense on
Warehouse Lines of Credit is included in Cost of Revenues on the Condensed
Consolidated Statements of Operations. Borrowings under Warehouse Lines of
Credit are secured by the
7
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underlying mortgages held for sale. At September 30, 2000 and December 31, 1999,
LIBOR was 6.62% and 6.49%, respectively.
The Company's available credit lines also include a $15 million
purchase/repurchase agreement with the Federal National Mortgage Association
("Fannie Mae") program entitled "As Soon as Pooled/Early Purchase Option" ("ASAP
Plus"). Under ASAP Plus, Fannie Mae reimburses FiNet for loans funded by the
Company and delivered to Fannie Mae with the required mortgage collateral.
Fannie Mae subsequently purchases the mortgage loans upon completion of the
necessary documentation.
In the third quarter of 2000, the Company entered into a temporary borrowing
agreement with Countrywide Warehouse Lending ("Countrywide") under which
Countrywide funded the loans it had committed to purchase from the Company.
During October 2000, all such loans were purchased by Countrywide.
WAREHOUSE FACILITY COVENANTS
The agreement for the RFC warehouse line of credit contains various
financial covenants including minimum net worth, current ratio, tangible net
worth, and leverage ratio requirements. Should an event of default occur, as
defined in the agreement, outstanding principal and interest are due on demand.
At September 30, 2000 the Company was not in compliance with the Guarantor's Net
Loss and the Guarantor's Tangible Net Worth covenants requirements. The Company
has requested a waiver from RFC for the non-compliance of these covenants.
PARTICIPATION AGREEMENTS
On July 19, 2000, FiNet entered into an agreement with Gateway Bank, FSB
("Gateway"), in which the Company may sell participation interests in mortgage
loans to Gateway. Transactions under this agreement do not reduce the Company's
committed warehouse borrowing capacity. The maximum total participation
outstanding under this agreement is $20 million. Sales in the secondary market
of these participated interests reduce the total amount outstanding with
Gateway. Under this agreement, Gateway earns a yield of prime less 1% on
participated balances. This agreement expires on July 31, 2001. At
September 30, 2000, the total participated loans to Gateway totaled
$21.3 million.
NOTE 4. COMMITMENTS AND CONTINGENCIES
LITIGATION
On January 14, 1998, prior to the Company's acquisition of Mical
Mortgage Inc. ("Mical"), a lawsuit was filed against Mical in the United States
District Court for the Middle District of Georgia. The complaint alleges, among
other things, that in connection with residential mortgage loan closings, Mical
made certain payments to mortgage brokers in violation of the Real Estate
Settlement Procedures Act and induced mortgage brokers to breach their alleged
fiduciary duties to their customers. The plaintiffs seek unspecified
compensatory and punitive damages as to certain claims. Management believes that
its compensation programs for mortgage brokers comply with applicable laws and
with long standing industry practices. The Company intends to defend vigorously
against this action and believes that the ultimate resolution will not have a
material adverse effect on its business, results of operations and financial
condition.
On April 16, 1999, a lawsuit was filed in the Superior Court of the State of
California, County of San Francisco by a former director and officer of FiNet
against FiNet and one of its then current and now former directors. The original
complaint alleged, among other things, that the plaintiff and the Company's then
current director entered into an oral contract, wherein they agreed to share all
profits from bonus shares that were issued to either party under certain
specific circumstances. It further alleged that the Company issued to the then
current director 1,800,000 shares of stock and that the Company's then current
8
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director failed to provide the plaintiff one-half of the stock, or 900,000
shares. The plaintiff filed a third amended complaint wherein he sought either
to recover 1,800,000 shares of the Company's common stock based upon the claim
that plaintiff was entitled to the same number of shares issued to the then
current director or 900,000 shares based upon the claim that he was entitled to
half of the shares issued to the then current director or monetary damages in
lieu of shares and punitive damages as to certain of the claims. FiNet and the
Company's then current director each filed a general denial of all claims. On
August 25, 2000 a settlement was reached in this lawsuit among all of the
parties in an amount that is not significant to the operations of the Company.
On December 16, 1999, a lawsuit was filed in the Judicial District Court of
Dallas County, Texas, by FC Capital Corp. d/b/a First City Capital Corporation
("First City"). The complaint alleges breach of contract by Coastal Federal
Mortgage ("Coastal") for failure to repurchase loans in accordance with the
terms and conditions of a purchase agreement entered into by Coastal and First
City in March 1998. The plaintiff has named Finet as a defendant alleging that
Finet assumed all of Coastal's debts and obligations when Finet acquired Coastal
in April 1998. The plaintiff seeks to recover actual damages in the amount of
$1.7 million and premium rebates in the approximate amount of $26,000. The
action was removed to the United States District Court, Northern District of
Texas, Dallas Division ("Court") on January 18, 2000. On May 31, 2000 the Court
granted Finet's Motion to Dismiss for Lack of Personal Jurisdiction and
dismissed the action without prejudice. Thereafter, the Company and Coastal
filed a declaratory relief action against First City in the San Francisco
Superior Court with respect to the issues that had been raised by First City in
the dismissed Texas action. First City removed the action to the United States
District Court, Northern District of California, and filed a motion to dismiss
or in the alternative to change venue to New York. At a hearing held on
August 28, 2000 the Court denied First City's motion to dismiss. The lawsuit is
currently in the discovery phase and the Company intends to defend vigorously
against the action and believes that the ultimate resolution will not have a
material adverse effect on its business, results of operations or financial
condition.
An employment dispute existed between the Company and its former Executive
Vice President of Capital Markets, Michael Conway, who was terminated by the
Company effective February 1, 2000. Mr. Conway alleged that his termination was
not for "just cause" as that term is defined in his written Employment and
Compensation Agreement ("Agreement"), and that he was therefore entitled to a
continuation of his salary through the termination date under the Agreement and
the immediate vesting of all options or damages in an equivalent amount and
sought punitive damages as to certain claims. The dispute was submitted
unsuccessfully for mediation in March with JAMS/Endispute Mediation Service and
was scheduled for arbitration on October 30, 2000 with the American Arbitration
Association. On October 27, 2000 the parties agreed to settle the dispute upon
the payment of $450,000 to Mr. Conway by the Company.
The Company and certain subsidiaries are defendants in various other legal
proceedings. Although it is difficult to predict the outcome of such cases,
after reviewing with counsel all such proceedings, management does not expect
the aggregate liability, if any, resulting therefrom, will have a material
adverse effect on the consolidated financial position or results of operations
of the Company and its subsidiaries.
NOTE 5. EMPLOYEE STOCK PURCHASE PLAN
During the first quarter of 2000, the Company implemented the Company's 1999
Employee Stock Purchase Plan ("ESPP") under which all employees, including
executive officers, may purchase stock at a discount to the market price.
Employees pay for stock purchases through payroll deductions ranging between 2%
and 10% of earnings. Shares issued under the ESPP are immediately vested. There
are 500,000 shares reserved for issuance under the Plan. As of September 30,
2000, there are 41,413 shares issued under the Plan.
9
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NOTE 6. SPECIAL ITEMS
The Company replaced certain loan origination and tracking software and
systems. During the quarter ended March 31, 2000 the Company had recorded
expense of $1,299,000 related to this replacement. During the quarter ended
June 30, 2000, when amounts payable to the software vendor were reduced, we
recovered $355,000 of the amount previously expensed, resulting in net expense
for the nine months ended September 30, 2000 of $964,000.
During the first three quarters of 1999, FiNet recorded special charges
totaling $4.9 million related to the closures of Mical and Coastal, wholly-owned
subsidiaries of the Company, as well as to the write-off of capitalized costs of
software that would no longer be used in the Company's continuing business
strategy. In connection with Mical's closure, the Company determined the
remaining related goodwill balance was not recoverable from future cash flows.
As of result, the remaining unamortized goodwill of $3.2 million was written
off. Mical also recognized $0.6 million of exit costs primarily for occupancy
lease costs, and severance for employee terminations related to the closure. In
connection with Coastal's closure, Coastal expensed $0.4 million for the net
book value of certain fixed assets used in Coastal's business. In addition,
FiNet expensed $0.7 million, representing the unamortized balance of its Real
Estate Office Software technology, which will no longer be used in the Company's
future strategic direction.
In connection with the Company's relocation of its headquarters and
operating facilities from Walnut Creek, California to San Ramon, California, the
Company recorded an expense of $155,000 in the third quarter of 1999 to
write-off fixed furniture, fixtures and equipment.
NOTE 7. SEGMENT INFORMATION
In accordance with Statement of Financial Accounting Standards No. 131
("SFAS No. 131") "Disclosures about Segments of an Enterprise and Related
Information" the Company discloses certain information about operating segments
in a format that is consistent with how management evaluates the
10
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performance of that segment. The Company has identified two reportable business
segments: Business-to-Business, and Consumer-Direct. Information related to
these segments is as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDING NINE MONTHS ENDING
--------------------------- ---------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue
Business-to-Business...................... $ 2,165 $ 1,727 $ 5,136 $ 5,381
Consumer-Direct........................... 350 21 906 1,345
------- ------- -------- --------
Total segment revenue................... 2,515 1,748 6,042 6,726
Corporate................................. -- -- -- --
------- ------- -------- --------
Total revenue......................... $ 2,515 $ 1,748 $ 6,042 $ 6,726
======= ======= ======== ========
Operating loss
Business-to-Business...................... $(3,100) $(4,404) $(10,763) $(23,218)
Consumer-Direct........................... (1,379) (1,957) (4,063) (3,273)
------- ------- -------- --------
Total segment operating loss............ (4,479) (6,361) (14,826) (26,491)
Corporate................................. (2,411) (3,425) (5,116) (9,608)
------- ------- -------- --------
Total operating loss.................. $(6,890) $(9,786) $(19,942) $(36,099)
======= ======= ======== ========
Capital expenditures
Business-to-Business...................... $ 69 $ 1,341 $ 793 $ 1,860
Consumer-Direct........................... 13 251 84 282
------- ------- -------- --------
Total segment capital expenditures...... 82 1,592 877 2,142
Corporate................................. 4 84 77 145
------- ------- -------- --------
Total capital expenditures............ $ 86 $ 1,676 $ 954 $ 2,287
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
<S> <C> <C>
Identifiable assets
Business-to-Business...................................... 83,456 $101,837
Consumer-Direct........................................... 4,909 5,990
------- --------
Total segment identifiable assets....................... 88,365 107,827
Corporate................................................. 9,818 11,981
------- --------
Total identifiable assets............................. $98,183 $119,808
======= ========
Long-lived assets
Business-to-Business...................................... $ 2,688 $ 3,800
Consumer-Direct........................................... 158 223
------- --------
Total segment long-lived assets......................... 2,846 4,023
Corporate................................................. 316 448
------- --------
Total long-lived assets............................... $ 3,162 $ 4,471
======= ========
</TABLE>
NOTE 8. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133"), establishes
accounting and reporting standards for derivative
11
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instruments, including certain derivative instruments embedded in other
contracts, and hedging activities. In June 1999, Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133" ("SFAS
No. 137"), was issued and extends the effective date for SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. In
June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities--an amendment of FASB Statement
No. 133" ("SFAS No. 138"). SFAS No. 138 addresses a limited number of issues
causing implementation difficulties for entities that apply SFAS No. 133, and
amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. Based on the Company's
current level of derivative and hedging activities, the implementation on
January 1, 2001 of SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138,
should not have a material impact on the Company's consolidated financial
statements.
NOTE 9. SUBSEQUENT EVENT
On October 13, 2000, the Company entered into a Common Stock Purchase
Agreement with various investors (the "Private Placement"). Pursuant to the
agreement, the Company sold 18.5 million shares of common stock and received
proceeds of $7.4 million. In connection with the agreement, the Company, subject
to the approval of its stockholders, also agreed to issue to certain financial
advisors, as compensation for services in connection with the Private Placement,
warrants to purchase 6,000,000 shares of the Company's common stock. The
warrants have a five year term and are exercisable at a price of $0.75 per
share. The warrants issued in connection with the Private Placement reflected a
fair market value of approximately $2.2 million based on a Black-Scholes warrant
pricing model valuation.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
ARE SUBJECT TO RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS INCLUDE
INFORMATION CONCERNING POSSIBLE OR ASSUMED FUTURE RESULTS OF OPERATIONS.
STATEMENTS INCLUDING WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "PLAN",
"COULD", "INTEND", OR SIMILAR EXPRESSIONS, ARE FORWARD-LOOKING IN NATURE. AN
INVESTMENT IN FINET'S SECURITIES INVOLVES CERTAIN RISKS AND UNCERTAINTIES
REGARDING THE COMPANY'S FUTURE FINANCIAL RESULTS. AS A RESULT OF CERTAIN
FACTORS, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS. SUCH FACTORS ARE SET FORTH UNDER THE HEADING
"FACTORS THAT MAY AFFECT FUTURE PERFORMANCE" AND ELSEWHERE IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K DATED DECEMBER 31, 1999, ("1999 FORM 10-K").
THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH BOTH THE 1999 FORM 10-K AND THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED HEREIN.
OVERVIEW
FiNet.com is a full service, on-line mortgage banker that offers an
easy-to-use, one stop mortgage source for mortgage brokers and consumers. The
Company provides on-line and e-commerce technologies and loan process management
tools to mortgage broker businesses. FiNet believes these tools enable mortgage
brokers to more effectively compete with on-line and other national lenders and
brokers, as well as assist their customers in making better informed borrowing
decisions. The Company operates one of the original Internet sites developed to
enable the consumer to apply for and receive credit approval on-line, and to
electronically search, analyze and select from a wide variety of mortgage loan
products and rates offered by both FiNet and other lenders. The Company believes
that this mortgage process is easier and more understandable for potential
borrowers, and that it maintains quality service by coordinating the consumer's
entire mortgage lending process.
The Company generates revenue by both originating and selling mortgage
loans. Loans funded and brokered by the Company generate loan origination income
and other loan-related fee income. Loan origination income consists of
origination fees and points paid by borrowers. Other loan-related fees consist
of application, documentation and processing fees paid by borrowers.
Loans sold by the Company generate premium income and interest income.
Premium income consists of the net gain on the sale of mortgage loans and
mortgage servicing rights. This net gain is calculated as the difference between
the combined selling price of the loans plus related servicing rights, and the
carrying value of the mortgage loans plus servicing rights sold. Interest income
consists of interest received from borrowers on mortgage loans held for sale.
Costs and expenses related to revenues consists primarily of the following:
- Interest paid on warehouse credit facilities;
- Loan-related expenses, including fees paid to third parties for appraisal
and credit report services, and reserves for potential loan repurchase and
premium recapture obligations;
- Salaries, commissions and benefits paid to employees;
- General and administrative expenses such as occupancy costs, office
expenses and professional services; and
- Depreciation and amortization expense for facilities, computers and
goodwill.
13
<PAGE>
IMPACT OF DISCONTINUED UNITS: MICAL, COASTAL AND LOAN SERVICING BUSINESS
The Mical and Coastal subsidiaries incurred significant losses in 1999. The
Company discontinued these business units during the first half of 1999. In
addition, during the first half of 1999, the Company decided to discontinue loan
servicing activities, and began preparing the servicing portfolios for sale. The
impact of these discontinued business units on consolidated operating results
for the three and nine-month periods ended September 30, 2000 and 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................................... $ 19 $ (11) $ 96 $ 957
Cost of revenues............................ 244 (1,161) (95) (9,354)
----- ------- ----- --------
Gross profit................................ 263 (1,172) 1 (8,397)
Other expenses
General and administrative................ (180) (468) (828) (2,896)
Marketing and advertising................. -- 0 -- (49)
Special charges........................... -- 0 -- (4,236)
Depreciation and amortization............. (1) (30) (1) (282)
----- ------- ----- --------
Total expenses.............................. (181) (498) (829) (7,463)
----- ------- ----- --------
Loss from operations........................ 82 (1,670) (828) (15,860)
Other interest expense...................... -- 0 -- (38)
----- ------- ----- --------
Net loss.................................... $ 82 $(1,670) $(828) $(15,898)
===== ======= ===== ========
</TABLE>
Any future losses from these discontinued business units will be included in
the Company's consolidated operating results.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999
REVENUES AND LOAN VOLUME
The total volume of loans funded by FiNet's production units for the quarter
ended September 30 is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
------------ ------------
<S> <C> <C>
Business-to-Business................................ $274,703 $150,687
Consumer-Direct..................................... 41,412 25,668
-------- --------
Total loan volume............................... $316,115 $176,355
======== ========
</TABLE>
In the third quarter of year 2000, closed loan volume increased 79.2% to
$316.1 million, from $176.4 million for the same period of 1999. Revenues also
increased 43.9%, to $2.5 million in the 2000 period, from $1.7 million in the
1999 period.
During year 2000, the Company's increased focus on the Business-to-Business
segment of its operations resulted in an expansion of that segment's sales force
and a corresponding increase in loan volume. Although closed loan volumes have
increased significantly, revenues have not increased as significantly as a
portion of late quarter volumes will not be reflected in the current quarter
revenues.
14
<PAGE>
In addition, during the 1999 quarter, the Company maintained servicing
rights, recording servicing revenue of $76,000. The Company sold the portfolio
of servicing rights in July of 1999, and therefore, the Company recorded only a
small amount of servicing income during the nine months ended September 30,
2000.
COST OF REVENUES AND GROSS PROFIT
In the third quarter of year 2000, cost of revenues increased 36.5% to
$4.2 million from $3.1 million for the same period of 1999. Significant increase
in closed loan volume in the third quarter of year 2000 attributed to increased
interest expense on the additional warehouse facility borrowing. Interest
expense on warehouse facilities increased $2.1 million for the quarter ended
September 30, 2000 from $0 for the quarter ended September 30, 1999 as the
Company primarily self-funded loans during the quarter ended September 30, 1999.
GENERAL AND ADMINISTRATIVE EXPENSE
In the third quarter of year 2000, general and administrative expense
decreased 12.2% to $4.2 million from $4.8 million for the same period of 1999,
due to stock based compensation valued for services received in the 1999 period
that was significantly less in the quarter ended September 30, 2000.
MARKETING AND ADVERTISING EXPENSE
In the third quarter of year 2000, marketing and advertising expense fell
86.8% to $0.4 million from $3.0 million in the same quarter of 1999. The 1999
expense includes costs associated with a Consumer-Direct marketing campaign that
began in the second quarter of that year. In year 2000, the Company changed its
focus to the Business-to-Business segment, resulting in lower marketing and
advertising expenses. The Company expects to stabilize its marketing spending
for the remainder of 2000.
SPECIAL CHARGES
In connection with the Company's relocation of its headquarters and
operating facilities from Walnut Creek, California to San Ramon, California, the
Company recorded an expense of $155,000 in the third quarter of 1999 to
write-off fixed furniture, fixtures and equipment.
LOSS FROM OPERATIONS
In the third quarter of year 2000, loss from operations decreased to
$6.9 million from $9.8 million in the same period of 1999. Significant decreases
in operating expenses and loan loss expenses combined with an increase in
revenue due to the Company's focus on higher margin loan products contributed to
this decrease.
GAIN (LOSS) ON SALE OF MARKETABLE SECURITIES
The company recorded $42,000 loss on the sale of available for sale
marketable securities for the quarter ended September 30, 2000 compared to $0
for the quarter ended September 30, 1999. The company acquired these marketable
securities in October of 1999, therefore, marketable securities transactions did
not occur in the prior period.
15
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
REVENUES AND LOAN VOLUMES
The total volume of loans funded by FiNet's production units for the first
nine months is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
------------ ------------
<S> <C> <C>
Business-to-Business................................ $579,831 $400,461
Consumer-Direct..................................... 103,494 174,939
-------- --------
Total Closed Loan Volume........................ $683,325 $575,400
======== ========
</TABLE>
In the first nine months of year 2000, closed loan volume increased 18.8% to
$683.3 million, from $575.4 million for the same period of 1999. Revenues
decreased 10.2%, to $6.0 million in the 2000 period, from $6.7 million in the
1999 period.
Revenues decreased due to the impact of the discontinued units' revenue in
1999 that did not occur in 2000. We expect to increase revenues through the
planned expansion of the Company's wholesale sales force and increased emphasis
on the Business-to-Business segment of FiNet's operations. There can be no
assurance that such increased revenues will be achieved. The Company's quarterly
revenues and operating results are likely to continue to vary significantly.
COST OF REVENUES AND GROSS PROFIT
In the first three quarters of 2000, cost of revenues decreased 46.3% to
$8.2 million from $15.2 million for the same period of 1999. The decrease is due
primarily to a significant decrease in loan loss expenses recorded by the
discontinued units during the first quarter of 1999 as well as a decrease at the
continuing units totaling $6.0 million, a decrease in expenses associated with
servicing portfolio valuation adjustments of $681,000 and decreases in other
costs associated with the discontinued units.
In the first three quarters of 2000, interest expense on the warehouse line
of credit borrowings increased 104.1% to $3.1 million from $1.5 million for the
same period of 1999. Higher loan volume in the 2000 period resulted in increased
interest expense on the additional warehouse facility borrowing incurred to
accommodate the loan volume. In addition, during a portion of the nine months
ended September 30, 2000 the Company incurred significantly higher interest
rates associated with the Company's difficulty in selling certain loans on the
secondary market resulting in a significantly higher warehouse facility balance.
GENERAL AND ADMINISTRATIVE
In the first three quarters of 2000, personnel and other general and
administrative costs of our continuing businesses decreased 16.6% to
$13.5 million from $16.2 million for the same period of 1999. This improvement,
primarily due to discontinuing the units of Coastal and Mical in 1999 was
partially offset by increased costs of professional services.
MARKETING AND ADVERTISING
In the first three quarters of 2000, marketing and advertising expense fell
62.0% to $1.7 million from $4.4 million in the same period of 1999. The 1999
expense includes costs associated with a Consumer-Direct marketing campaign that
began in the second quarter of that year. In 2000, the Company changed its focus
to the Business-to-Business segment, decreased marketing expenses significantly
resulting in lower
16
<PAGE>
marketing and advertising expenses. The Company expects to stabilize its
marketing spending for the remainder of 2000.
SPECIAL ITEMS
During the quarter ended March 31, 2000, FiNet recorded a $1,299,000 expense
for the purchase of certain loan origination and tracking software and systems
that were subsequently determined to not meet the needs of the Company. During
the second quarter of 2000, the Company recovered $335,000 of this amount from
the vendor, resulting in a net expense of $964,000 for the nine months ended
September 30, 2000.
Special charges recorded during the nine months ended September 30, 1999
relate to the Coastal and Mical business unit closures and to the write-off of
capitalized costs of software that would no longer be used in the Company's
continuing business strategy. In connection with Mical's closure, the Company
assessed the remaining goodwill balance relating to the acquisition of that unit
and determined that the amount was not recoverable from future cash flows.
Therefore, the remaining unamortized goodwill of $3,189,000 was expensed. In
addition, Mical recorded $642,000 of expense to recognize exit costs primarily
for occupancy lease costs and severance relating to employee terminations in
connection with the closure. In connection with Coastal's closure, Coastal wrote
off $405,000 of net book value of fixed assets. In addition, the Company
expensed $690,000 representing the unamortized balance of its Real Estate Office
Software technology, upon determination that it would no longer employ this
technology in its future strategic direction.
LOSS FROM OPERATIONS
In the first three quarters of 2000, loss from operations decreased to 44.8%
to $19.9 million from $36.1 million for the same period of 1999. Significant
decreases in operating expenses and loan loss expenses more than offset the
decrease in revenue associated with discontinued business units.
GAIN ON SALE OF MARKETABLE SECURITIES
The Company recorded an $824,000 gain on the sale of available for sale
marketable securities for the nine months ended September 30, 2000 compared to
$0 for the nine months ended September 30, 1999. The Company acquired these
marketable securities in October of 1999, therefore, marketable securities
transactions did not occur in the prior period. All marketable securities were
sold during the nine months ended September 30, 2000.
FINANCIAL CONDITION
FiNet's stockholders' equity decreased $19.0 million to $11.4 million at
September 30, 2000 from $30.4 million at December 31, 1999 primarily due to the
Company's operating losses incurred in 2000 and due to a decrease in Other
Comprehensive Income due to the recognition of gains on the sale of
available-for-sale marketable equity securities.
Cash decreased to $5.0 million at September 30, 2000 from $18.6 million at
December 31, 1999. Cash was used for general operations and for working capital
needs such as funding mortgages. During year 2000 cash was generated from the
collection of the proceeds on the sale of the Company's servicing portfolio,
and, to a lesser extent, from sales of marketable equity securities.
At December 31, 1999 the Company had restricted cash of $10,403,000 relating
to amounts received for settlements on sales of mortgage loans that had not yet
been applied to reduce the warehouse line of credit. This amount was used to pay
down the warehouse line in early 2000.
During year 2000, the Company sold all of the marketable securities held at
December 31, 1999.
17
<PAGE>
Warehouse borrowings increased slightly, from $80.5 million at December 31,
1999 to $81.0 million at September 30, 2000. Loans Held for Sale inventory
increased, to $84.9 million at September 30, 2000 from $78.7 million at year-end
1999.
Improving results of operations and financial condition depends on the
Company's ability to significantly increase loan origination volumes, to achieve
highly efficient operations, to manage warehouse and operating expenses in
proportion to loan volume and to increase the percentage of higher margin loan
products. FiNet's financial condition is further dependent on economic
conditions such as the general health of the economy and demand for mortgage
loans. There can be no assurance that the Company's financial condition or
results of operations will improve.
LIQUIDITY AND CAPITAL RESOURCES
The nature of the mortgage lending business requires FiNet to advance cash
on a daily basis to fund newly originated loans. These funds are provided
through conventional mortgage warehouse lines of credit, "purchase/repurchase"
arrangements, or the use of existing cash balances. Additional cash resources,
obtained primarily through the private placement of the Company's common stock,
are used to satisfy its obligations to lenders, to fund ongoing expenses such as
administration and marketing, to invest in product development and to expand the
business geographically. Current operations are not generating sufficient cash
to meet operating requirements.
At December 31, 1999 the Company had restricted cash of $10,403,000 relating
to amounts received for settlements on sales of mortgage loans that had not yet
been applied to reduce the warehouse line of credit. This amount was used to pay
down the warehouse line in early 2000.
Operating activities, including general operating expenditures, repayment of
warehouse borrowings and funding new loans, used cash of $15.5 million during
the first three quarters of 2000. The Company has also used cash to fund
originated loans.
The Company's investing activities included expenditures of $1.0 million for
furniture, fixtures and equipment, and the collection of $0.4 million for
servicing rights that were sold in 1999. The Company does not expect capital
spending to increase significantly in the coming quarters. In addition the
Company generated $1.8 million in cash from the sale of marketable equity
securities during 2000.
The Company expects that in the future it will need to arrange for
additional sources of capital through additional warehouse facilities and/or
through the issuance of debt or equity securities. The Company currently has no
commitments for additional financings, and cannot be certain that it will be
able to obtain such additional financing at the times required and on terms and
conditions acceptable to it. In such event, the Company's growth could slow and
operations could be adversely affected.
POTENTIAL FOR NASDAQ DELISTING
On August 30, 2000, the Company was notified by NASDAQ that the Company's
common stock had failed to maintain a minimum bid price of $1.00 over the
previous 30 consecutive trading days as required for continued listing on the
NASDAQ SmallCap Market as set forth in Marketplace Rule 4310 (c)(4) (the
"Rule"). The Company was provided 90 calendar days, or until November 28, 2000,
to maintain its stock at a price of at least $1.00 for a minimum of 10
consecutive trading days or the Company's common stock will be delisted at the
opening of business on November 30, 2000. Delisting from the NASDAQ and
inclusion of the Company's common stock on the OTC Bulleting Board or other
similar quotation system could adversely affect the liquidity and price of its
stocks. The Company can give no assurances that it will regain compliance with
the Rule and continue to be listed on the NASDAQ SmallCap Market.
18
<PAGE>
SUBSEQUENT EVENTS
On November 1, 2000, Patrick Mackin was named Executive Vice President and
Chief Financial Officer of the Company.
On October 13, 2000, the Company entered into a Common Stock Purchase
Agreement with various investors (the "Private Placement"). Pursuant to the
Private Placement, the Company sold 18.5 million shares of common stock and
received proceeds of $7.4 million. In connection with the agreement, the
Company, subject to the approval of its shareholders, also agreed to issue to
certain financial advisors, as compensation for services in connection with the
Private Placement, warrants to purchase 6,000,000 shares of the Company's common
stock. The warrants have a five year term and are exercisable at a price of
$0.75 per share. The warrants issued in connection with the Private Placement
reflected a fair market value of approximately $2.2 million based on a
Black-Scholes warrant pricing model valuation.
ITEM 3. QUANTITATIVE AND QUALITATIVE ANALYSIS OF MARKET RISK
FiNet's primary market risk of loss is interest rate risk. From the time we
extend an interest rate commitment to the borrower until the loan is priced for
sale to an investor, we are subject to interest rate risk. If interest rates
rise during that period, the price at which the loan can be sold to an investor
declines, resulting in a loss on the sale of the loan. We attempt to mitigate
such losses and manage our interest rate risk exposure through hedging
transactions using a combination of forward sales of mortgage-backed securities
and forward whole-loan sales to fix the sales price of loans we expect to fund.
Before entering into hedging transactions, we analyze our loans with committed
interest rates. We consider factors such as the estimated portion of loans that
will ultimately be funded, note rates, interest rates, inventory of loans and
applications and other factors to determine the type and amount of forward
commitment and hedging transactions.
FiNet attempts to make forward commitments to hedge substantially all of its
estimated interest rate risk on the loans. We had mandatory and optional forward
commitments at September 30, 2000 and December 31, 1999 aggregating $128,085,350
and $110,223,000 respectively. At September 30, 2000 and December 31, 1999,
these commitments covered the market risk associated with mortgages held for
sale to investors of $84,996,000 and $78,691,000 respectively, and loans for
which interest rates were committed at September 30, 2000 and December 31, 1999
of $43,693,577 and $36,458,000 respectively. We attempt to limit our credit
exposure on forward sales arrangements by entering into these arrangements with
institutions that we believe are sound credit risks and by limiting exposure to
any single institution.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information required by this Item is incorporated by reference from Part I,
Item I, Notes to Consolidated Condensed Financial Statements, Note 4 Commitments
and Contingencies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<C> <S>
10.1 Fourth Amendment to First Amended and Restated Warehousing
Credit and Security Agreement, dated July 14, 2000 between
Monument Mortgage, Inc., and Residential Funding
Corporation.
10.2 Fifth Amendment to First Amended and Restated Warehousing
Credit and Security Agreement, dated August 22, 2000 between
Monument Mortgage, Inc., and Residential Funding
Corporation.
10.3 Sixth Amendment to First Amended and Restated Warehousing
Credit and Security Agreement, dated October 12, 2000
between Monument Mortgage, Inc., and Residential Funding
Corporation.
10.4 Master Loan Participation and Custodian Agreement, dated
July 10, 2000 between Monument Mortgage, Inc., and Gateway
Bank, F.S.B.
10.5 Guaranty of Payment and Performance and Contract of
Affirmative Covenants, dated July 10, 2000 between Monument
Mortgage, Inc., and Gateway Bank, F.S.B.
10.6 Employment and Compensation Agreement between the registrant
and Patrick J. Mackin, dated November 1, 2000.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
On October 13, 2000, the Company filed a Form 8-K to report it had entered
into a Common Stock Purchase Agreement with private investors.
20
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
<TABLE>
<S> <C> <C>
FINET.COM, INC.
/s/ RICK COSSANO
-----------------------------------------
Rick Cossano
(CHIEF EXECUTIVE OFFICER & PRESIDENT)
Date: November 14, 2000
/S/ PATRICK J. MACKIN
-----------------------------------------
Patrick J. Mackin
(EXECUTIVE VICE PRESIDENT & CHIEF
FINANCIAL OFFICER)
DATE: NOVEMBER 14, 2000
</TABLE>
21
