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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 25, 2000
Advanta Corp.
(Exact name of registrant as specified in its charter)
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Delaware 0-14120 23-1462070
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
Welsh and McKean Roads, P.O. Box 844, Spring House, PA 19477
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (215) 657-4000
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Item 5. Other Events
On April 25, 2000 Advanta Corp. (the "Company" or "Advanta") announced pro forma
net operating income for the first quarter 2000 of $16.2 million, or $0.63 per
share on a diluted basis for its Class A and Class B shares combined. This
represents an increase of 59% over the net operating income of $10.2 million or
$0.40 per share for the first quarter of 1999. These results reflect income for
Advanta Mortgage that is essentially the same as a portfolio lender.
Highlights this quarter include:
- - Advanta Business Cards net income of $8.6 million, a 156% increase over the
quarter ended March 31, 1999.
- - Advanta Mortgage net income of $9.5 million, a 38.4% increase over the
quarter ended March 31, 1999.
- - Improved asset quality at Advanta Mortgage with over 30 day delinquencies
falling to 8.04% from 8.63% at December 31, 1999.
- - Continued improvements in asset quality at Advanta Business Cards with over
30 day delinquencies improving to 3.44% as compared to 3.70% at December
31, 1999.
Net income for the quarter was $17.1 million or $0.67 per share on a diluted
basis for Class A and Class B shares combined. These results include $10.9
million of pretax gains in connection with investments of Advanta Partners, the
Company's private equity investment affiliate. Also impacting results was a
reduction in the Company's retained interests in leasing securitizations of
approximately $9.5 million which strengthened the balance sheet. Excluding these
items, net income for the quarter was $16.2 million or $0.63 per share on a
diluted basis for Class A and Class B shares combined.
On a basis that is essentially the same as a portfolio lender, net income for
Advanta Mortgage was $9.5 million, as compared to $6.9 million for the quarter
ended March 31, 1999. This increase reflects higher yields on originations and
an increase in subservicing revenues from growth in the subservicing portfolio.
The weighted average yield of mortgage loans originated in the first quarter
increased by 35 basis points over the fourth quarter of 1999. Advanta Mortgage's
sub-serviced portfolio increased to $13.1 billion at the end of this quarter
from $11.9 billion at the end of 1999.
Net income for Advanta Business Cards was $8.6 million this quarter compared to
$3.3 million for the first quarter of 1999. This increase resulted principally
from growth in the number of accounts and receivables. Account originations
increased approximately 58% this quarter as compared to the quarter ended
December 31, 1999. Approximately 18% of accounts added this quarter were
originated entirely online through Advanta's website (which provides instant,
real time decisioning) as compared to 10% in the fourth quarter of 1999. Managed
receivables for Advanta Business Cards at the end of the quarter were $1.2
billion.
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Advanta generated $30.6 million of cash flow from operations, after considering
key mortgage non-cash income and expense items and the cash impact of mortgage
loan originations. Advanta ended the quarter with approximately $750 million in
total liquidity after paying down $122 million of Medium Term Notes during the
quarter. In addition, the Company had financed, with parent and bank funds, loan
receivables on its books totaling $1.6 billion and had available approximately
$1.1 billion in unused warehouse lines and Commercial Paper conduit facilities
at March 31, 2000.
Advanta management will hold a conference call today, April 25, 2000, at 9:00 am
Eastern time. Investors can listen to the call live over the Internet through
http://www.advanta.com or http://www.vcall.com. To listen to the live call,
please go to the web site at least fifteen minutes early to register, download,
and install any necessary audio software. For those unable to listen to the live
broadcast, replays will be available shortly after the call on the Vcall site.
Advanta (http://www.advanta.com) is a highly focused financial services company
with over 2,800 employees, servicing over $25 billion of assets, including $12.5
billion in managed assets and over $13 billion in assets serviced for third
parties. Advanta provides consumers and small businesses with targeted financial
products and services, including non-conforming mortgages, business credit
cards, equipment leases, insurance and deposit products. The Company is also one
of the largest servicers of non-conforming mortgages for third parties in the
country.
Advanta has leveraged its first-class direct marketing and information based
expertise to develop state-of-the-art data warehousing and statistical modeling
tools that identify potential customers and new target markets. Advanta created
one of the first automated underwriting and sales engines in the non-conforming
mortgage industry. The Company also offers its customers and business partners a
broad range of self-service financial solutions and other services on the
Internet. Advanta was ranked one of the 500 Most Admired Companies in America in
FORTUNE Magazine's most recent annual survey.
This Current Report on Form 8-K contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. The most significant among these risks
and uncertainties are: (1) the Company's managed net interest margin; (2)
competitive pressures; (3) factors that affect the level of delinquencies and
charge-offs, including a deterioration of general economic conditions; (4) the
rate of prepayments; (5) interest rate fluctuations; (6) the level of expenses;
(7) managed and sub-serviced receivables volume; (8) the timing of the
securitizations of the Company's receivables; (9) the level of insurance policy
renewals; (10) the effects of government regulation; (11) relationships with
significant vendors, business partners and customers; (12) the amount and cost
of financing available to the Company; and (13) the ratings on the debt of the
Company and its subsidiaries. Additional risks that may affect the Company's
future performance are detailed in the Company's filings with the Securities and
Exchange Commission, including its most recent Annual Report on Form 10-K and
its Quarterly Reports on Form 10-Q.
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Form 8-K Advanta Corp.
April 25, 2000
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
The following exhibits are filed as part of this Report on
Form 8-K.
99 Selected Summary Financial Data.
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Form 8-K Advanta Corp.
April 25, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanta Corp.
By: /s/ Elizabeth H. Mai
Elizabeth H. Mai,
Senior Vice President,
Secretary and General Counsel
April 25, 2000
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Form 8-K Advanta Corp.
April 25, 2000
Index to Exhibits
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Exhibit Number Per
Item 60l of
Regulation S-K Description of Document
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99 Selected Summary Financial Data
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Exhibit 99
ADVANTA CORP.
SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT
(IN THOUSANDS)
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THREE MONTHS ENDED MARCH 31, 2000
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ADVANTA ADVANTA
ADVANTA BUSINESS LEASING
MORTGAGE CARDS SERVICES OTHER (a) TOTAL
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REVENUES:
Interest income $ 47,732 $15,884 $ 4,039 $14,499 $ 82,154
Securitization income 26,476 13,244 (7,465)[b] 0 32,255
Servicing revenues 32,119 3,840 1,728 0 37,687
Other revenues, net 1,479 14,038 5,185 10,039 30,741
--------------- --------------- --------------- --------------- ---------------
Total revenues 107,806 47,006 3,487 24,538 182,837
--------------- --------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 63,848 19,102 8,787 1,972 93,709
Interest expense 24,575 6,101 3,001 14,078 47,755
Provision for credit losses 2,123 7,620 1,656 0 11,399
Minority int. in inc. of consolidated
sub 1,798 244 178 0 2,220
--------------- --------------- --------------- --------------- ---------------
Total expenses 92,344 33,067 13,622 16,050 155,083
--------------- --------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 15,462 13,939 (10,135) 8,488 27,754
Income tax expense (benefit) 5,953 5,367 (3,902) 3,267 10,685
--------------- --------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 9,509 $ 8,572 $ (6,233) $ 5,221 $ 17,069
=============== =============== =============== =============== ===============
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(a) Other includes insurance operations and investment activities not
attributable to other segments.
(b) Leasing securitization income includes a $9,500 reduction in Advanta's
retained interests in leasing securitizations.
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ADVANTA CORP.
RECONCILIATION OF ADVANTA MORTGAGE TO
PORTFOLIO LENDER EARNINGS FORMAT
(IN THOUSANDS)
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THREE MONTHS ENDED MARCH 31, 2000
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ADVANTA
ADVANTA MORTGAGE AS PRO FORMA
MORTGAGE AS PRO FORMA PORTFOLIO REMAINING PRO FORMA
REPORTED ADJUSTMENTS LENDER BUSINESSES [f] CONSOLIDATED
----------------- --------------- --------------- --------------- ---------------
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REVENUES:
Interest income $ 47,732 $177,904 [a] $225,636 $34,422 $260,058
Securitization income 26,476 (26,476) [b] 0 15,279 15,279
Servicing revenues 32,119 (12,238) [c] 19,881 5,568 25,449
Other revenues, net 1,479 0 1,479 18,348 19,827
----------------- --------------- --------------- --------------- ---------------
Total revenues 107,806 139,190 246,996 73,617 320,613
----------------- --------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 63,848 1,809 [d] 65,657 29,861 95,518
Interest expense 24,575 115,787 [a] 140,362 23,180 163,542
Provision for credit losses 2,123 21,594 [e] 23,717 9,276 32,993
Minority interest in income of
consolidated subsidiary 1,798 0 1,798 422 2,220
----------------- --------------- --------------- --------------- ---------------
Total expenses 92,344 139,190 231,534 62,739 294,273
----------------- --------------- --------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 15,462 0 15,462 10,878 26,340
Income tax expense 5,953 0 5,953 4,188 10,141
----------------- --------------- --------------- --------------- ---------------
NET INCOME $ 9,509 $ 0 $ 9,509 $ 6,690 $16,199
================= =============== =============== =============== ===============
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FOOTNOTES FOR PRO FORMA ADJUSTMENTS:
[a] Represents the adjustment to interest income and interest expense as if the
securitized mortgage loans were still owned by Advanta and remained on the
balance sheet for the period presented.
[b] Represents the reclassification of net gains recognized on the sale of
mortgage loans for the period.
[c] Represents the reclassification of servicing revenues on securitized
mortgage loans for the period presented.
[d] Represents the reclassification of securitization costs incurred by
Advanta.
[e] Represents the amount by which the provision for credit losses would have
increased had the securitized mortgage loans remained on the balance sheet
and the provision for credit losses on securitized receivables been equal
to actual reported charge-offs.
[f] Adjusted to exclude the pretax gain associated with Advanta Partners
investments of $10,914, and a pretax reduction in Advanta's retained
interests in leasing securitizations of $9,500.
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ADVANTA CORP.
HIGHLIGHTS
(IN THOUSANDS)
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THREE MONTHS ENDED
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PERCENT CHANGE
MARCH 31, DECEMBER 31, MARCH 31, FROM
ORIGINATIONS 2000 1999 1999 PRIOR QUARTER
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Direct $380,040 $441,299 $403,204 -13.9%
Broker 183,254 198,820 174,087 -7.8
Conduit 0 3,506 117,286 -100.0
Corp. Finance 1,454 960 16,773 51.5
Auto 0 0 5,103 0.0
---------------- ---------------- --------------- ------------------
Total Advanta Mortgage loans $564,748 $644,585 $716,453 -12.4%
Business cards $747,587 $609,078 $400,428 22.7%
Leases 109,082 117,677 109,836 -7.3
SECURITIZATION/SALES VOLUME
Advanta Mortgage $483,944 $163,542 $634,147 195.9%
Business cards 157,067 35,942 25,000 337.0
Leases 107,253 105,300 95,574 1.9
---------------- ---------------- --------------- ------------------
Total securitization/sales volume $748,264 $304,784 $754,721 145.5%
AVERAGE MANAGED RECEIVABLES
Mortgage loans $8,346,321 $8,261,925 $8,114,144 1.0%
Business cards 1,120,635 974,025 822,852 15.1
Leases 805,404 766,871 663,874 5.0
Auto loans 77,445 93,189 198,321 -16.9
Other loans 20,752 17,643 17,820 17.6
---------------- ---------------- --------------- ------------------
Total average managed receivables $10,370,557 $10,113,653 $9,817,011 2.5%
Total average serviced receivables $22,877,022 $21,239,095 $18,397,098 7.7%
ENDING MANAGED RECEIVABLES
Mortgage loans $8,390,122 $8,299,685 $8,212,797 1.1%
Business cards 1,226,210 1,040,114 832,086 17.9
Leases 821,258 795,643 700,383 3.2
Auto loans 74,652 83,851 185,621 -11.0
Other loans 19,521 21,930 17,093 -11.0
---------------- ---------------- --------------- ------------------
Total managed receivables $10,531,763 $10,241,223 $ 9,947,980 2.8%
Total serviced receivables $23,607,975 $22,142,890 $18,858,811 6.6%
IO AND CMSR ROLLFORWARD
Beginning balance $208,277 $245,551 $283,521
Retained IO on sales, net 18,663 3,701 32,769
Hedge impact (1,918) (201) (3,614)
Write-down related to auto loans 0 0 (7,828)
Interest income 20,346 14,030 15,902
Cash received (38,830) (44,365) (48,001)
Additional reserves 0 (10,439) 0
Other, net 0 0 (873)
---------------- ---------------- ---------------
Ending balance $206,538 $208,277 $271,876
================ ================ ===============
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ADVANTA CORP.
HIGHLIGHTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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THREE MONTHS ENDED
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PERCENT
CHANGE
MARCH 31, DECEMBER 31, MARCH 31, FROM
2000 1999 1999 PRIOR QUARTER
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EARNINGS
As a % of average managed receivables:
Operating expenses 3.45% 3.30% 3.47% 4.5%
Charge-offs 1.84 1.80 1.36 2.2
Efficiency ratio 60.81 60.35 72.35 0.8
Basic earnings per common share $ 0.68 $ 0.67 $ 0.25 1.9
Diluted earnings per common share $ 0.67 $ 0.66 $ 0.25 1.3
Return on average common equity 11.37% 11.45% 4.50% -0.7
COMMON STOCK DATA
Weighted average common shares
used to compute:
Basic earnings per common share 24,785 24,611 23,087 0.7%
Diluted earnings per common share 25,384 25,139 23,178 1.0
Ending shares outstanding 27,280 27,344 25,310 -0.2
Stock price:
Class A
High $ 21.875 $ 20.375 $ 15.188 7.4
Low 16.875 14.625 10.313 15.4
Closing 20.313 18.250 11.063 11.3
Class B
High 15.500 $ 15.875 $ 12.313 -2.4
Low 11.500 10.438 7.750 10.2
Closing 14.484 14.063 8.938 3.0
Cash dividends declared
Class A $ 0.063 $ 0.063 $ 0.063 0.0
Class B 0.076 0.076 0.076 0.0
Book value per common share $ 23.68 $ 23.14 $ 22.41 (a) 2.3
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(a) Assumes conversion of the Class B Preferred Stock for periods prior to
September 1999.
-Statistical Supplement Available Upon Request-
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