Attached files
| file | filename |
|---|---|
| 8-K - 8-K - EMERGENT CAPITAL, INC. | a8kq22018-earnings.htm |
Emergent Capital, Inc. Announces Second Quarter 2018 Results
Boca Raton, Fla., August 20, 2018 – Emergent Capital, Inc. (OTCQX: EMGC) ("Emergent" or the "Company"), today announced its financial results for the three and six month periods ended June 30, 2018.
Second Quarter 2018 Financial Highlights
Total income from continuing operations was $5.6 million for the three month period ended June 30, 2018 compared to $3.5 million for the same period in 2017. Income was impacted by a $10.8 million gain on the maturity of seven policies during the quarter compared to a $2.7 million gain on maturity of three policies for the same period in 2017. Income for the three month period ended June 30, 2018 was negatively impacted by updated life expectancies procured by the Company in respect to the insureds' lives and policy maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health improved, therefore lengthening their life expectancies relative to the prior life expectancies.
The following table provides a summary of the components of income from the Company's life settlements.
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | |||||||
Change in estimated probabilistic cash flows | $ | 22,792 | $ | 23,181 | ||||
Premiums paid during period | (22,504) | (21,451) | ||||||
Change in life expectancy evaluation | (7,156) | (1,091) | ||||||
Change in discount rates | 1,582 | — | ||||||
Realized gain on maturities | 10,761 | 2,743 | ||||||
Change in fair value of life settlements | $ | 5,475 | $ | 3,382 | ||||
Total expenses from continuing operations were $12.0 million for the three month period ended June 30, 2018 compared to $9.9 million for the same period in 2017. The increase was primarily attributable to an increase of $1.8 million on the loss in fair value of the Revolving Credit Facility, $456,000 and $253,000 increase in professional fees and legal fees, respectively. These were offset mainly by a decrease in personnel costs of approximately $110,000.
The Company reported net loss from continuing operations of $9.6 million, or $(0.06) per diluted share for the three month period ended June 30, 2018, compared to a net loss of $6.5 million, or $(0.23) per diluted share for the same period in 2017.
Our loss three months ended June 30, 2018 was impacted by an estimated tax expense of approximately $3.1 million. This amount is principally due to expected income inclusions under the Global Intangible Low-Taxed Income ("GILTI") tax regime, limitations imposed on the use of historical net operating losses ("NOLs"), and interest expense limitations under IRC Sec. 264(a)(4) that are expected to apply when determining tested income for the GILTI inclusion. The Company is evaluating a number of tax planning strategies to help mitigate the impact of the GILTI provisions including its intent and ability to restructure its operations.
Six Months Ended June 30, 2018
Total income from continuing operations was $11.2 million for the six month period ended June 30, 2018 compared to $29.1 million for the same period in 2017. Income was impacted by a $28.0 million gain on the maturity of twelve policies during the quarter compared to a $19.0 million gain on maturity of seven policies for the same period in 2017. Income for the three month period ended June 30, 2018 was negatively impacted by updated life expectancies procured by the Company in respect to the insureds' lives and maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health improved, therefore, lengthening their life expectancies relative to the prior life expectancies.
The following table provides a summary of the components of income from the Company's life settlements.
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | |||||||
Change in estimated probabilistic cash flows | $ | 46,137 | $ | 45,781 | ||||
Premiums paid during period | (44,896) | (42,033) | ||||||
Change in life expectancy evaluation | (19,903) | 6,207 | ||||||
Change in discount rates | 1,582 | (40) | ||||||
Realized gain on maturities | 28,000 | 19,007 | ||||||
Change in fair value of life settlements | $ | 10,920 | $ | 28,922 | ||||
Total expenses from continuing operations were $21.6 million for the six month period ended June 30, 2018 compared to $33.6 million for the same period in 2017. The decrease was primarily attributable to a decrease of $12.4 million on the loss on the change in fair value of our White Eagle revolving credit facility, a decrease of $297,000 in interest expense and a $427,000 decrease in personnel costs, offset by increases of $981,000 in legal fees and $92,000 in professional fees.
The Company reported net loss from continuing operations of $13.6 million, or $(0.09) per diluted share for the six month period ended June 30, 2018, compared to a net loss of $4.6 million, or $(0.16) per diluted share for the same period in 2017.
Life Settlements Portfolio Highlights
On June 30, 2018, the estimated fair value of the Company’s 596 life insurance policies was $569.4 million compared to $567.5 million for 608 life insurance policies at December 31, 2017. The weighted average discount rate was 15.93% and 15.95% at June 30, 2018 and December 31, 2017, respectively. The aggregate face value of the Company's portfolio of life insurance policies was approximately $2.8 billion as of June 30, 2018.
During the quarter, seven life insurance policies that served as collateral under our revolving credit facility matured with a face value totaling $26.2 million.
As of June 30, 2018, the Company had cash and cash equivalents and certificates of deposit of $27.3 million and a book value per share of $1.16.
About Emergent Capital, Inc.
Emergent (OTCQX: EMGC) is a specialty finance company that invests in life settlements. More information about Emergent can be found at www.emergentcapital.com.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of Emergent Capital, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although Emergent believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Emergent does not assume a duty to update these forward-looking statements.
Company Contact:
Rob Fink
Hayden IR
Phone: 646.415.8972
Email: Rob@HaydenIR.com
IR@emergentcapital.com
www.emergentcapital.com
# # #
-SELECTED FINANCIAL TABLES FOLLOW-
Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except share and per share data) | |||||||||||||||
Income | |||||||||||||||
Change in fair value of life settlements | $ | 5,475 | $ | 3,382 | $ | 10,920 | $ | 28,922 | |||||||
Other income | 88 | 79 | 234 | 129 | |||||||||||
Total income | 5,563 | 3,461 | 11,154 | 29,051 | |||||||||||
Expenses | |||||||||||||||
Interest expense | 7,797 | 8,163 | 15,401 | 15,698 | |||||||||||
Change in fair value of White Eagle Revolving Credit Facility | 12 | (1,785 | ) | (2,377 | ) | 10,046 | |||||||||
Personnel costs | 939 | 1,049 | 1,706 | 2,133 | |||||||||||
Legal fees | 910 | 657 | 2,633 | 1,652 | |||||||||||
Professional fees | 1,660 | 1,204 | 2,899 | 2,807 | |||||||||||
Insurance | 199 | 198 | 396 | 390 | |||||||||||
Other selling, general and administrative expenses | 529 | 449 | 974 | 913 | |||||||||||
Total expenses | 12,046 | 9,935 | 21,632 | 33,639 | |||||||||||
Income (loss) from continuing operations before income taxes | (6,483 | ) | (6,474 | ) | (10,478 | ) | (4,588 | ) | |||||||
(Benefit) provision for income taxes | 3,120 | — | 3,120 | — | |||||||||||
Net income (loss) from continuing operations | $ | (9,603 | ) | $ | (6,474 | ) | $ | (13,598 | ) | $ | (4,588 | ) | |||
Discontinued Operations: | |||||||||||||||
Income (loss) from discontinued operations before income taxes | (4 | ) | (35 | ) | (5 | ) | (225 | ) | |||||||
(Benefit) provision for income taxes | — | — | — | — | |||||||||||
Net income (loss) from discontinued operations | (4 | ) | (35 | ) | (5 | ) | (225 | ) | |||||||
Net income (loss) | $ | (9,607 | ) | $ | (6,509 | ) | $ | (13,603 | ) | $ | (4,813 | ) | |||
Basic and Diluted income (loss) per share: | |||||||||||||||
Continuing operations | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.09 | ) | $ | (0.16 | ) | |||
Discontinued operations | $ | — | $ | — | $ | — | $ | (0.01 | ) | ||||||
Net income (loss) - basic and diluted | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.09 | ) | $ | (0.17 | ) | |||
Weighted average shares outstanding: | |||||||||||||||
Basic and diluted | 155,810,449 | 28,169,414 | 155,800,082 | 28,159,080 | |||||||||||
Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS
June 30, 2018 | December 31, 2017* | ||||||
(Unaudited) | |||||||
(In thousands except share data) | |||||||
ASSETS | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 8,314 | $ | 18,131 | |||
Cash and cash equivalents (VIE Note 4) | 17,949 | 13,136 | |||||
Certificates of deposit | 1,014 | 1,010 | |||||
Prepaid expenses and other assets | 934 | 617 | |||||
Prepaid expenses and other assets (VIE Note 4) | 30 | 53 | |||||
Deposits - other | 1,377 | 1,377 | |||||
Life settlements, at estimated fair value (Note 15) | 1,006 | 750 | |||||
Life settlements, at estimated fair value (VIE Note 4 & Note 15) | 568,367 | 566,742 | |||||
Receivable for maturity of life settlements (VIE Note 4) | 47,980 | 30,045 | |||||
Fixed assets, net | 104 | 145 | |||||
Investment in affiliates | 2,384 | 2,384 | |||||
Total assets | $ | 649,459 | $ | 634,390 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 2,019 | $ | 2,015 | |||
Accounts payable and accrued expenses (VIE Note 4) | 1,425 | 753 | |||||
Other liabilities | 182 | 451 | |||||
Other liabilities (VIE Note 4) | 48 | — | |||||
Interest payable - 8.5% Convertible Notes (Note 10) | 46 | 46 | |||||
8.5% Convertible Notes, net of discount and deferred debt costs (Note 10) | 1,139 | 1,098 | |||||
Interest payable - 5.0% Convertible Notes (Note 11) | 1,432 | 1,432 | |||||
5.0% Convertible Notes, net of discount and deferred debt costs (Note 11) | 69,222 | 68,654 | |||||
Interest payable - 8.5% Senior Secured Notes (Note 13) | 124 | 132 | |||||
8.5% Senior Secured Notes, net of deferred debt costs (Note 13) | 34,056 | 33,927 | |||||
White Eagle Revolving Credit Facility, at estimated fair value (VIE Note 4 & Note 9) | 353,387 | 329,240 | |||||
Current tax liability | 3,120 | — | |||||
Total liabilities | 466,200 | 437,748 | |||||
Commitments and Contingencies (Note 17) | |||||||
Stockholders’ Equity | |||||||
Common stock (par value $0.01 per share, 415,000,000 authorized at June 30, 2018 and December 31, 2017; 159,028,458 issued and 158,420,458 outstanding as of June 30, 2018;158,495,399 issued and 157,887,399 outstanding as of December 31, 2017) | 1,590 | 1,585 | |||||
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of June 30, 2018 and December 31, 2017) | — | — | |||||
Treasury Stock, net of issuance cost (608,000 shares as of June 30, 2018 and December 31, 2017) | (2,534 | ) | (2,534 | ) | |||
Additional paid-in-capital | 333,844 | 333,629 | |||||
Accumulated deficit | (149,641 | ) | (136,038 | ) | |||
Total stockholders’ equity | 183,259 | 196,642 | |||||
Total liabilities and stockholders’ equity | $ | 649,459 | $ | 634,390 | |||
* Derived from audited consolidated financial statements.
Selected Operating Data (dollars in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
End of Period — Policies Owned | ||||||||||||||||
Number of policies owned | 596 | 614 | 596 | 614 | ||||||||||||
Average age of insured | 83.9 | 82.9 | 83.9 | 82.9 | ||||||||||||
Average death benefit per policy | $ | 4,743 | $ | 4,729 | $ | 4,743 | $ | 4,729 | ||||||||
Average Life Expectancy — Calculated LE (Years) | 8.0 | 8.7 | 8.0 | 8.7 | ||||||||||||
Aggregate Death Benefit | $ | 2,826,863 | $ | 2,903,899 | $ | 2,826,863 | $ | 2,903,899 | ||||||||
Aggregate fair value | $ | 569,373 | $ | 526,282 | $ | 569,373 | $ | 526,282 | ||||||||
Monthly premium — average per policy | $ | 13.5 | $ | 11.5 | $ | 13.5 | $ | 11.5 | ||||||||
Period Maturities | ||||||||||||||||
Number of policies matured | 7 | 3 | 12 | 7 | ||||||||||||
Average age of insured at maturity | 84.6 | 88.8 | 84.7 | 83.5 | ||||||||||||
Average life expectancy - Calculated LE (Years) | 3.0 | 3.5 | 4.7 | 3.5 | ||||||||||||
Aggregate death benefit | $ | 26,235 | $ | 5,223 | $ | 53,935 | $ | 43,073 | ||||||||
Gains on maturity | $ | 10,761 | $ | 2,743 | $ | 28,000 | $ | 19,007 | ||||||||
Proceeds collected | $ | 12,700 | $ | 16,173 | $ | 36,045 | $ | 26,173 | ||||||||
Investor Contact:
Investor Relations
Rob Fink
Hayden IR
646.415.8972
IR@emergentcapital.com
www.emergentcapital.com