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): November 15, 2004
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2243266
(I.R.S. employer identification no.)
0-17771
Commission file number)
Six Harrison Street
New York, New York
(Address of principal executive
offices)
10013
(Zip code)
Registrant's telephone number, including area code: (212) 925-8745
Item 8.01 Other Events
On November 15, 2004, Franklin Credit Management Corporation (the "Company"), a
Delaware Corporation, issued a press release entitled "Franklin Credit
Management Reports 73 percent increase in third quarter earnings." A copy of
the Company's press release is attached as Exhibit 99.1
Item 7 Exhibits
Exhibit No Description
99.1 Press Release, dated Novenber 15, 2004 entitled " Franklin Credit
Management reports 73 percent increase in third quarter earnings."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRANKLIN CREDIT MANAGEMENT CORPORATION
By: /s/ Jeff Johnson
Jeff Johnson
Chief Executive Officer
Date: November 15, 2004.
Exhibit 99.1
For Immediate Release
Contact: Alan Joseph, CFO
Franklin Credit Management Corp.
(212) 925-8745 ext. 169
ajoseph@franklincredit.com
FRANKLIN CREDIT MANAGEMENT REPORTS 73 PERCENT INCREASE IN
THIRD QUARTER EARNINGS
NINE-MONTH DILUTED E.P.S. OF $0.92 COMPARE WITH $0.73 IN
PRIOR-YEAR PERIOD
NEW YORK, New York (November 15, 2004) - Franklin Credit Management Corp. (OTC
BB: FCSC), a specialty financial services company that originates, acquires,
manages and sells subprime residential mortgage assets, today announced record
sales and earnings for the third quarter and first nine months of 2004.
For the three months ended September 30, 2004, revenues increased 56% to $22.0
million, compared with $14.1 million in the third quarter of the previous year.
Net Income increased 73% to a record $2,517,786, or $0.37 per diluted share,
compared with $1,455,424, or $0.22 the previous year.
"We are very pleased to report record revenues and earnings for the third
quarter of 2004," stated Jeffrey Johnson, Chief Executive Officer of Franklin
Credit Management Corporation. "Significant gains in interest income, purchase
discounts earned, and gains on the sale of notes receivable resulted from our
portfolio acquisition programs, including the bulk purchase of $310 million of
subprime loans from Bank One on June 30, 2004, and I can report that the
assimilation of these loans into our servicing organization was completed in a
very efficient manner. Gains on the sale of loans originated by our Tribeca
Lending subsidiary continued to increase during the most recent quarter
reflecting our strong loan production activity. We also recorded a modest loss
on the sale of other real estate owned (OREO), reflecting a decrease in the
quality of a few of the 62 OREO properties that were sold in the period."
"Operating expenses grew at a slower rate than revenues, allowing our pretax
profit margin to expand to 21.0% of revenues in the third quarter of 2004,
compared with 19.0% in the prior-year quarter."
For the nine months ended September 30, 2004, the Company reported record
revenues of $52.8 million, which represented an increase of 26% when compared
with $42.0 million in the corresponding period of the previous year. Net income
rose 31% to a record $6,192,100, or $0.92 per diluted share, versus net income
of $4,732,045, or $0.73 per diluted share, in the nine months ended September
30, 2003.
"Shortly after the end of the third quarter, we announced the bulk purchase of
$99.4 million in subprime mortgage loans from Master Financial Corporation, a
national mortgage banking company," continued Johnson.
"We expect a strong fourth quarter and are optimistic that earnings for the year
ending December 31, 2004 will exceed last year's record $1.02 per diluted share.
With interest rates expected to rise in coming months, the "spread" between our
portfolio yield and the interest rates at which we borrow will likely narrow.
However, we are optimistic that the growth in our loan portfolio and related
activities will contribute to the Company's revenues and earnings," concluded
Johnson.
About Franklin Credit Management Corp.
Franklin Credit Management Corporation ("FCMC", and together with its
wholly-owned subsidiaries, the "Company") is a specialty consumer finance and
asset management company primarily engaged in the acquisition, origination,
servicing and resolution of performing, sub-performing and non-performing
residential mortgage loans and residential real estate. The Company acquires
these mortgages from a variety of mortgage bankers, banks, and other specialty
finance companies. These loans are generally purchased in pools at discounts
from their aggregate contractual balances, from sellers in the financial
services industry. Real estate is acquired in foreclosure or otherwise and is
also generally acquired at a discount relative to the appraised value of the
asset. The Company conducts its business from its executive and main office in
New York City and through its website www.franklincredit.com. Its common
stock trades on the OTC Bulletin Board under the symbol "FCSC".
Statements contained herein that are not historical fact may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are subject to a variety of risks and uncertainties. There are a number
of important factors that could cause actual results to differ materially from
those projected or suggested in forward-looking statements made by the
Company. These factors include, but are not limited to: (i) unanticipated
changes in the U.S. economy, including changes in business conditions such as
interest rates, and changes in the level of growth in the finance and housing
markets; (ii) the status of relations between the Company and its sole Senior
Debt Lender and the Senior Debt Lender's willingness to extend additional
credit to the Company; (iii) the availability for purchases of additional
loans; (iv) the status of relations between the Company and its sources for
loan purchases; (v) unanticipated difficulties in collections under loans in
the Company's portfolio; and (vi)other risks detailed from time to time in
the Company's SEC reports. Additional factors that would cause actual results
to differ materially from those projected or suggested or suggested in any
forward-looking statements are contained in the Company's filings with the
Securities and Exchange Commission, including, but not limited to, those
factors discussed under the caption "Real Estate Risk" in the Company's
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which the
Company urges investors to consider. The Company undertakes no obligation to
publicly release the revisions to such forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrences of unanticipated events, except as other wise required by
securities and other applicable laws. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to release publicly the results
on any events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
For further information, please contact:
Alan Joseph, CFO of Franklin Credit Management Corp. at 212-925-8745 (Ext. 169)
Financial Highlights to Follow
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
-------------------------------------------------------------------------------
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
2004 2003 2004 2003
----------- ---------- ---------- ---------
REVENUES:
Interest income $16,628,125 $10,438,099 $38,618,733 $31,721,768
Purchase discount earned 2,969,825 1,385,753 6,039,002 3,366,675
Gain on sale of
notes receivable 229,840 36,991 1,074,742 633,105
Gain on sale of originated
loans held for sale 1,026,372 895,774 3,171,801 2,302,819
Gain on sale of other
real estate owned (145,846) 174,651 227,551 927,845
Rental income 9,725 29,874 33,675 103,674
Prepayments and other
income 1,247,416 1,096,582 3,646,884 2,899,019
---------- ---------- ---------- ---------
21,965,457 14,057,724 52,812,388 41,954,905
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Interest expense 9,939,303 5,489,147 20,733,508 16,102,017
Collection, general and
administrative 5,974,354 4,476,633 16,167,756 12,995,727
Provision for loan losses 728,504 783,854 2,436,763 2,368,299
Amortization of deferred
financing costs 584,916 516,483 1,738,043 1,356,875
Depreciation 118,590 120,283 368,214 327,742
---------- ---------- ---------- ----------
17,345,667 11,386,400 41,444,284 33,150,660
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,619,790 2,671,324 11,368,104 8,804,245
---------- ---------- ---------- ----------
PROVISION FOR INCOME TAXES 2,102,004 1,215,900 5,176,004 4,072,200
---------- ----------- ---------- ----------
NET INCOME $2,517,786 $1,455,424 $6,192,100 $4,732,045
========== =========== ========== ==========
NET INCOME PER COMMON SHARE:
Basic $ 0.43 $ 0.25 $ 1.05 $ 0.80
Diluted $ 0.37 $ 0.22 $ 0.92 $ 0.73
========== =========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING BASIC 5,916,527 5,916,527 5,916,527 5,916,527
========== =========== ========== =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING DILUTED 6,815,141 6,573,879 6,749,544 6,506,560
=========== =========== ========== =========
CONSOLIDATED BALANCE SHEETS (Unaudited)
-------------------------------------------------------------------------------
ASSETS September 30, 2004 December 31, 2003
CASH AND CASH EQUIVALENTS $ 22,533,835 $ 14,418,876 35
RESTRICTED CASH 113,457 413,443
NOTES RECEIVABLE:
Principal 796,079,203 465,553,870
Purchase discount (38,809,394) (25,678,165)
Allowance for loan losses (84,031,931) (46,247,230)
------------- --------------
Net notes receivable 673,237,878 393,628,475
ORIGINATED LOANS HELD FOR SALE 34,861,339 27,372,779
ORIGINATED LOANS HELD FOR INVESTMENT 43,212,524 9,536,669
ACCRUED INTEREST RECEIVABLE 7,764,609 4,332,419
OTHER REAL ESTATE OWNED 16,684,155 13,981,665
OTHER RECEIVABLES 4,664,500 2,893,735
MARKETABLE SECURITIES 256,697 202,071
DEFERRED TAX ASSET 614,166 681,398
OTHER ASSETS 4,440,257 3,720,163
BUILDING, FURNITURE AND EQUIPMENT - Net 1,341,133 1,252,711
DEFERRED FINANCING COSTS- Net 7,033,597 4,298,942
------------- --------------
TOTAL ASSETS $ 816,758,147 $ 476,733,346
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 7,088,629 $ 4,979,806
Financing agreements 35,180,332 23,315,301
Notes payable 747,154,565 427,447,844
Income tax liability:
Current 61,011
Deferred 1,402,204 1,311,089
------------ -------------
TOTAL LIABILITIES 790,886,741 457,054,040
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
10,000,000 authorized shares; issued
and outstanding: 5,916,527 59,167 59,167
Additional paid-in capital 6,985,968 6,985,968
Retained earnings 18,826,271 12,634,171
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 25,871,406 19,679,306
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $816,758,147 $476,733,346
============= ============