FFCA Reports Fourth Quarter and Year End 2000 Operating Results; Company Posts Record Funds from Operations and Revenues; Board Announces 5.7% Increase in Dividend to $0.56 Per Share
SCOTTSDALE, Ariz.--Jan. 29, 2001--Franchise Finance Corporation of America ("FFCA") , the nation's premier chain store finance company for multi-unit operators of chain restaurants, convenience stores and automotive services and parts outlets, today reported results for its fourth quarter and year ended December 31, 2000.Funds From Operations
Funds from operations ("FFO") for 2000 were $162 million, or $2.86 per share assuming dilution, up 9.6% from $2.61 per diluted share for 1999. For the fourth quarter, FFO was $41 million, or $0.72 per share assuming dilution, versus $0.70 per diluted share for the fourth quarter of 1999.
FFO is a widely used measure of REIT performance that excludes gains or losses on the sale of assets and noncash charges for the depreciation of real estate assets. Gains from the origination and sale of loans, which represent an ongoing part of FFCA's business, are included in FFCA's FFO since the gains are fully realized in cash. FFCA implemented its loan sale program in 2000 in order to further diversify the company's investment funding sources. During the year, approximately 65% of FFCA's loan originations were sold as a result of this strategy, principally to Washington Mutual Bank, N.A.
Financing Activity
During the fourth quarter, FFCA originated new chain store financings of approximately $270 million, bringing the total year 2000 financings to approximately $909 million. The amount of annual financings excludes $25 million in loans made by the company to finance the sales of 51 properties previously owned by FFCA and leased to various chain store operators.
"This past year was both rewarding and challenging for the company," stated Christopher H. Volk, President and Chief Operating Officer of FFCA. "We concluded the year with a strong and diversified balance sheet together with continued stable portfolio performance."
Significant Business Activity in 2000
| -- | FFCA had over $770 million in available liquidity between its unsecured credit lines and loan sales facility as of December 31. |
| -- | The company succeeded in placing $265 million in long-term debt in 2000 that is well suited to its asset maturities and annual cash flows. |
| -- | FFCA successfully completed its sixth loan securitization offering, effectively match-funding $406 million in loans originated during the year. As with the company's past loan securitization transactions, FFCA's shareholders will benefit from loan servicing income, as well as from returns on retained residual securities. |
| -- | The company broadened its capital markets and investment funding capabilities by adding a whole loan sale program. This important new activity for the company was employed to fund approximately 65% of its loan originations in 2000. |
| -- | FFCA sold 140 properties during 2000, with total realized sale proceeds of $83.2 million. The resulting gain from property sales was $2.8 million. FFCA annually sells selected properties in order to more efficiently deploy capital. |
| -- | The company's lack of large transaction activity in 2000 compared to 1999 contributed to a 33% decline of investment activity. In 2000, FFCA completed two financing transactions that were over $100 million each, comprising approximately 27% of the company's financings for the year. In 1999, four transactions of over $100 million each accounted for over 45% of the company's annual financings. |
| -- | FFCA concluded the second half of 2000 with an increased pace of investment activity, closing on $647 million, or 71%, of our total annual financings. |
| -- | FFCA concluded the year with a strongly diversified investment portfolio. For the fourth quarter, over 75% of the company's revenues were received from customers that individually comprise less than 3% each of total FFCA revenues. |
| -- | During the quarter, the company repurchased 582,200 shares at a total cost of $12.67 million under its stock repurchase program, which commenced in November 2000. |
Business Outlook for 2001
-- FFCA anticipates that its FFO growth may fall below the double
digit pace of the past few years. This anticipated slowdown
will in large part stem from the hurdles imposed by the
company's whole loan sale activities. While the whole loan
sale activities provide FFCA high shareholder equity returns,
the gains from such sales require substantial ongoing
financing growth to sustain the kind of growth rate realized
over the past three years. Future FFO growth largely will be
dependent on both investment activity and the portion of
investments subject to the company's new loan sale program.
-- Based on the current investment pipeline, FFCA is targeting
2001 investment originations of approximately $1.1 billion,
resulting in a targeted FFO per share growth ranging from 7%
to 8%. As reported in the past, FFCA's quarterly investment
activity is expected to fluctuate, with the presence of
occasional large transactions contributing to quarterly and
annual FFO and earnings volatility.
-- The company will continue to seek other means to contribute to
FFO growth, including selective prudent asset sales and an
on-going stock repurchase program.
"FFCA approaches the near term challenges from a position of strength," said Volk. "Drawing on more than 20 years of experience, we are confident that our management team, operational infrastructure and unprecedented sources of capital will continue to meet the funding demands of our clients over the long term."
Revenues and Other Income
Revenues for 2000 totaled $232 million, an increase of 6% over $218 million for the prior year. Including $19 million in after-tax gains on whole loan sales, revenues rose 15%. For the fourth quarter 2000, revenues were $58 million, compared to $57 million for the fourth quarter of 1999. Including after-tax gains on whole loan sales, revenues for the fourth quarter rose 12%.
Absent gains from loan sales, moderate growth in revenues for the quarter and the year is attributable principally to property sales activity as well as rental revenue reductions that resulted from a monetary default during the second quarter of 2000 relating to 97 family dining restaurants. FFCA terminated the master lease on the properties in May 2000 and took a deed in lieu of foreclosure on 15 additional properties securing certain related loans. Subsequently, seven properties have been sold and sales are in process for 13 additional properties. Leases for 47 of the properties are expected to become effective during the first quarter of 2001 and rents currently are being received on certain of these properties. We continue to actively market the remaining 45 properties. The impact on 2000 FFO, including direct FFCA default expenditures was $8.1 million, or $0.14 per share.
Net Income
Net income for the company was $141 million for 2000, or $2.48 per diluted share, down 5% from $148.7 million, or $2.68 per diluted share in 1999. Net income was $34 million for the fourth quarter of 2000, or $0.61 per diluted share, down from $40.5 million, or $0.72 per diluted share for the fourth quarter of 1999. The net income reduction largely related to the family dining restaurant default in 2000 and to greater securitization activity in 1999 compared with 2000. While the gains from securitizations do not contribute to FFO, they are a component of net income. In 1999, FFCA completed two loan securitizations totaling $979 million, versus one for $369 million in 2000. In addition to the difference in loan securitization activity, FFCA incurred a $2.3 million charge in the fourth quarter as a result of the cumulative impact of adopting a new accounting principle, Staff Accounting Bulletin 101, which limits the accrual of percentage rentals until they are contractually due. Management believes that the adoption of this convention will simply result in the shifting of the timing of revenue recognition between quarters.
Dividend Increase
FFCA's Board of Directors announced a 5.7% increase in its quarterly dividend to $0.56 per share ($2.24 annualized), from $0.53 per share ($2.12 annualized). The fourth quarter dividend is payable on February 20, 2001, to shareholders of record on February 9, 2001.
Year-End Operating Results Conference Call
Management will conduct a teleconference today at 11:00 am Eastern Standard Time in order to review the fourth quarter and year end 2000 results as announced within this news release. Investors and other interested parties are invited to a listen-only live webcast of the call at www.vcall.com. A direct link is also available at www.ffca.com. An online replay will follow the call at www.vcall.com and continue through Friday, February 2, 2001.
Based in Scottsdale, Arizona, FFCA is the country's premier single-tenant retail property finance company dedicated to providing real estate financing to multi-unit operators of chain restaurants, convenience stores and automotive services and parts outlets. The company's financing alternatives include mortgages and long-term real estate leases, construction and acquisition financing, equipment loans, and other custom financing solutions. Diversified by industry, geographic location, client and chain, FFCA had an investment/servicing portfolio of more than 6,200 properties throughout the U.S. as well as in Canada as of December 31, 2000. Its clients operate some of the best-known chains in the country, including Applebee's, Arby's, Burger King, Checker Auto Parts, Chevron, Circle K, Citgo, Cracker Barrel, Hardee's, Jack in the Box, Long John Silver's, Midas Muffler Shops, Pizza Hut, 7-Eleven, Taco Bell, Texaco, Valvoline Instant Oil Change and Wendy's. Visit our website at www.ffca.com for more information about the company.
The forward-looking statements in this release concerning financing, development and future results are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These and other risks are set forth in FFCA's reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
FINANCIAL TABLES FOLLOW
FRANCHISE FINANCE CORPORATION OF AMERICA
Unaudited Financial Data
For The Quarters and Years Ended December 31, 2000 and 1999
(Amounts in thousands, except per share data)
Selected Operating
and Other Data
For the quarter ended For the year ended
December 31, December 31,
2000 1999 2000 1999
------ ------ ------ ------
Revenues $58,176 $57,272 $232,495 $218,475
Income before
realized/unrealized
gains $25,720 $26,830 $107,607 $107,744
Net income $34,277 $40,482 $140,532 $148,727
Funds from operations $40,796 $39,352 $161,597 $145,137
Net income per share:
Basic $0.61 $0.72 $2.49 $2.69
Diluted $0.61 $0.72 $2.48 $2.68
Funds from operations
per share, assuming
dilution $0.72 $0.70 $2.86 $2.61
Dividend per share $0.56 $0.53 $2.15 $2.00
Weighted average shares
outstanding(1) 56,466 56,206 56,554 55,505
(1) Weighted average shares include incremental shares from assumed
conversions of outstanding stock options. The increase in weighted
average shares outstanding was primarily due to shareholder
participation in FFCA's Dividend Reinvestment Plan.
Selected Balance Sheet Data
As of
December 31, December 31,
2000 1999
-------------- -------------
Real estate before accumulated
depreciation $1,444,233 $1,474,758
Mortgage loans held for sale 163,572 139,703
Mortgage loans receivable 59,588 57,996
Real estate investment securities 181,650 185,252
Total assets 1,700,879 1,710,796
Total debt 723,756 748,359
Total shareholders' equity 918,596 903,632
FRANCHISE FINANCE CORPORATION OF AMERICA
Unaudited Financial Data
For The Quarters and Years Ended December 31, 2000 and 1999
(Amounts in thousands, except per share data)
Supplementary Data
Reconciliation Of Net Income To Funds From Operations(2)
For the quarter ended For the year ended
December 31, December 31,
2000 1999 2000 1999
------ ------ ------ ------
Net income $34,277 $40,482 $140,532 $148,727
Real estate
depreciation and
amortization 8,379 7,933 33,436 29,547
Gain on sale of
assets(3) (5,792) (22,852) (17,428) (40,983)
Unrealized gain on
trading securities (330) 9,200 (1,627) -
Percentage rental
revenue
adjustment(4) 3,302 - 3,302 -
Amortization of
retained investment
in securitization(5) 960 1,614 3,382 4,871
Strategic alliance
costs - 2,975 - 2,975
------ ------ ------ ------
Funds From
Operations(2) $40,796 $39,352 $161,597 $145,137
------ ------ ------ ------
(2) Industry analysts generally consider funds from operations (FFO)
to be an appropriate measure of the performance of an equity REIT. FFO
is defined by the National Association of Real Estate Investment
Trusts ("NAREIT") to mean net income determined in accordance with
generally accepted accounting principles, excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation of
chain store property. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and should not be considered as an alternative to net
income as an indication of FFCA's performance or to cash flow as a
measure of liquidity. FFO presented herein is not necessarily
comparable to FFO presented by other real estate companies due to the
fact that not all real estate companies use the same definition.
(3) Includes gains on the securitization of mortgage loans.
(4) During the quarter ended December 31, 2000, FFCA adopted the
Securities and Exchange Commission's Staff Accounting Bulletin 101,
Revenue Recognition in Financial Statements which required FFCA to
change the timing of the recognition of contingent rental revenues.
The new accounting guidance requires companies to recognize contingent
rentals as revenue when the change in the factor on which the
contingent lease payment is based actually occurs. In prior periods,
FFCA had recognized estimated contingent revenues ratably throughout
the year when it was probable that a property would exceed the sales
threshold where percentage rental revenues were due. FFCA's
calculation of FFO includes an adjustment for percentage rental
revenue to conform to the prior year's accounting treatment.
(5) Generally accepted accounting principles require the carrying
amounts of mortgage loans which are securitized to be allocated among
the securities sold and the securities retained based on their
relative fair market values. Certain of such securities retained by
FFCA are interest-only certificates. By allocating a portion of the
mortgage carrying amount to these certificates, it has the effect of
creating an asset (similar to a receivable) that will be amortized as
cash flow is received. This adjustment represents the portion of cash
received during the period that represents amortization of that asset.