UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report
(Date of earliest event reported): October 21, 2004
OCWEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Florida 1-13219 65-0039856
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
- --------------------------------------------------------------------------------
The Forum, Suite 1000
1675 Palm Beach Lakes Boulevard, West Palm Beach, Florida 33401
(Address of principal executive office) (Zip Code)
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Registrant's telephone number, including area code: (561) 682-8000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Page 1 of 9
Exhibit Index on Page 4
ITEM 8.01 OTHER EVENTS
The news release of the Registrant dated October 21, 2004,
announcing its quarter results is attached hereto and filed
herewith as Exhibit 99.1.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) - (b) Not applicable.
(c) Exhibits
The following exhibits are filed as part of this report:
99.1 Text of a press release by the Registrant dated October 21,
2004.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN FINANCIAL CORPORATION
(Registrant)
By: /s/ Mark S. Zeidman
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Mark S. Zeidman
Senior Vice President and Chief Financial Officer
Date: October 21, 2004
3
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
99.1 News release of Ocwen Financial Corporation, dated 5
October 21, 2004, announcing its third quarter 2004
results and certain other information.
4
================================================================================
Exhibit 99.1
[GRAPHIC OMITTED]
OCWEN
OCWEN FINANCIAL CORPORATION(R)
================================================================================
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Robert J. Leist, Jr.
Vice President & Chief Accounting Officer
T: (561) 682-7958
E: rleist@ocwen.com
----------------
OCWEN FINANCIAL CORPORATION ANNOUNCES
THIRD QUARTER 2004 NET INCOME
WEST PALM BEACH, FL - (October 21, 2004) Ocwen Financial Corporation (NYSE:OCN)
today reported net income for the third quarter of 2004 of $39.3 million or
$0.61 per share compared to net income of $4.6 million or $0.07 per share for
the third quarter of 2003. For the nine months ended September 30, 2004 the
Company reported net income of $55.2 million or $0.83 per share as compared to
$0.3 million or $0.005 per share in the same period in 2003. Third quarter 2004
results include a net tax benefit of $31.8 million, primarily reflecting the
partial reversal of the deferred tax asset valuation allowance that was
established in prior years. Pre-tax income for the third quarter of 2004 was
$7.5 million as compared to $4.6 million in the same period last year.
Chairman and CEO William C. Erbey stated, "We are pleased to report $39.3
million of net income for the quarter, inclusive of our realization of
significant tax benefits. Among the points to note in this quarter's results are
the following:
o Our Residential Loan Servicing business continues to be adversely
impacted by low interest rates and high prepayment speeds. Our third
quarter pre-tax income in this business is down by $4.8 million as
compared to the third quarter of last year.
o The aggregate pre-tax income of our other core business units continues
to be strong, increasing $1.0 million in the 2004 third quarter and
$10.9 million year to date as compared to the same periods last year.
These results reflect improvement in Commercial Servicing, which
achieved a year to date break-even result in the third quarter, and
REALServicing(TM), which signed its first major commercial client in the
second quarter of this year.
o Our 2004 pre-tax income also reflects break-even results in our
aggregate non-core businesses in both the quarter and year to date
periods.
o We are reporting pre-tax income of $3.9 million in our Corporate Segment
in the third quarter of 2004, primarily due to interest of $2.7 million
on our federal income tax receivables. In the 2003 third quarter, we
reported a pre-tax loss of $(3.0) million.
o Although we did not close sales of non-core assets in the third quarter,
we did enter into agreements to sell non-core assets that have a net
book value of approximately $60 million. While these agreements remain
subject to due diligence and other contingencies, we are optimistic that
we can achieve further reductions during the fourth quarter of this
year."
The Residential Loan Servicing business reported pre-tax income of $3.4 million
in the third quarter of 2004 vs. $8.2 million in the 2003 third quarter. Year to
date, pre-tax income was $13.8 million as compared to $25.8 million in the same
period of 2003. These results reflect the continuing pressures from low interest
rates and rising prepayment speeds in our portfolio. One important measure of
the impact of these trends is the expense associated with mortgage servicing
rights amortization and compensating interest expense. These combined amounts
increased by $6.4 million or 7% for the nine months ended September 30.
Operating expenses increased in both the third quarter and year to date periods
in 2004 as compared to 2003, reflecting costs associated with our property
management contract with the United States Department of Veteran's Affairs and
as a result of reassuming, in the fourth quarter of 2003, certain collection
activities that had been performed by outside parties. As a result of high
prepayment rates, as well as reduced purchases of servicing rights, our
servicing portfolio has declined somewhat since the end of 2003. As of September
30, 2004, we were the servicer of approximately 328 thousand loans with an
unpaid principal balance (UPB) of $34.4 billion, as compared to approximately
360 thousand loans and $37.7 billion of UPB at December 31, 2003.
Our other core businesses reported aggregate pre-tax income of $0.8 million in
the third quarter of 2004 as compared to a loss of $(0.2) million in the third
quarter of 2003. For the nine months ended September 30, 2004, these businesses
reported aggregate pre-tax income of $7.5 million as compared to a loss of
$(3.4) million in the same period of 2003. These improvements primarily reflect
the reduction in losses for Commercial Servicing, which achieved break-even
results for the nine months ended September 30, 2004.
5
Ocwen Financial Corporation
Third Quarter Results
October 21, 2004
Our non-core businesses recorded an aggregate pre-tax loss of $(0.6) million for
the third quarter as compared to a pre-tax loss of $(0.3) million in 2003. Year
to date, these businesses reported aggregate pre-tax income of $0.3 million as
compared to a pre-tax loss of $(12.3) million in the same period of 2003.
The Corporate Segment reported pre-tax income of $3.9 million in the third
quarter of 2004 as compared to a loss of $(3.0) million in the same period last
year. Year to date, Corporate generated pre-tax income of $1.8 million as
compared to a loss of $(9.5) million in the same period of 2003. Corporate
results for 2004 include interest income on federal income tax return claims of
$2.7 million and $6.5 million for the quarter and year to date periods,
respectively.
Results for the third quarter of 2004 included a net income tax benefit of $31.8
million. This benefit is primarily due to the reversal of $37 million of the
valuation allowance on deferred tax assets that had been provided in prior
years. This allowance was reduced as a result of refund claims of $37 million
filed with the IRS that reduced our deferred tax asset as of September 30, 2004
and increased our receivable balances by the same amount. The tax benefit is net
of $5.1 million of tax expense on 2004 earnings, primarily representing the
company's estimated federal effective tax rate of 20%.
In summary, pre-tax income increased by $2.8 million in the third quarter of
2004 and by $22.7 million year to date as compared to the same periods last
year. Non-core assets have been reduced by 29% since the end of 2003.
Ocwen Financial Corporation is a diversified financial services holding company
with headquarters in West Palm Beach, Florida and operations in Canada, China,
Germany, India, Japan and Taiwan. Ocwen Financial Corporation is engaged in a
variety of businesses related to residential and commercial mortgage servicing,
real estate asset management, asset recovery, business process outsourcing and
the marketing and sales of technology solutions to third parties. Ocwen
Financial Corporation is a global leader in customer service excellence as a
result of our company-wide commitment to quality, integrity and accountability.
Additional information about Ocwen Financial Corporation is available at
www.ocwen.com.
This news release contains 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, including, but not limited to,
interest rates and the impact of changes in interest rates and prepayment speeds
on our Residential Loan Servicing business and the outlook on reduction in
non-core assets. Forward-looking statements are not guarantees of future
performance, and involve a number of assumptions, risks and uncertainties that
could cause actual results to differ materially.
Important factors that could cause actual results to differ materially from
those suggested by the forward-looking statements include, but are not limited
to, the following: general economic and market conditions, prevailing interest
or currency exchange rates, governmental regulations and policies, international
political and economic uncertainty, federal income tax rates, recognition of
deferred tax credits and real estate market conditions and trends, as well as
other risks detailed in OCN's reports and filings with the Securities and
Exchange Commission, including its periodic report on Form 10-K for the year
ended December 31, 2003 and its reports on Form 10-Q for the periods ended March
31, 2004 and June 30, 2004. The forward-looking statements speak only as of the
date they are made and should not be relied upon. OCN undertakes no obligation
to update or revise the forward-looking statements.
6
Ocwen Financial Corporation
Third Quarter Results
October 21, 2004
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Three Months Nine Months
- ------------------------------------------------- ---------------------------- ----------------------------
For the periods ended September 30, 2004 2003 2004 2003
- ------------------------------------------------- ------------ ------------ ------------ ------------
REVENUE
Servicing and related fees ..................... $ 34,587 $ 35,651 $ 115,310 $ 101,703
Vendor management fees ......................... 13,614 7,722 40,442 21,721
Gain (loss) on trading and match funded
securities, net .............................. (171) 159 1,688 2,924
Valuation gains (losses) on real estate ........ (165) (686) (3,990) (6,695)
Gain (loss) on sales of real estate ............ 311 316 (149) 408
Operating income (loss) from real estate ....... 444 1,269 1,017 3,461
Gain (loss) on debt repurchases ................ -- (441) -- (445)
Other income ................................... 4,995 2,852 16,599 5,550
------------ ------------ ------------ ------------
Non-interest revenue ......................... 53,615 46,842 170,917 128,627
------------ ------------ ------------ ------------
Interest income ................................ 4,988 4,071 15,555 17,826
Interest expense ............................... 7,141 10,823 22,040 29,554
------------ ------------ ------------ ------------
Net interest income (expense) before provision
for loan losses .............................. (2,153) (6,752) (6,485) (11,728)
Provision for loan losses ...................... (94) 415 (913) (2,670)
------------ ------------ ------------ ------------
Net interest income (expense) after provision
for loan losses .............................. (2,059) (7,167) (5,572) (9,058)
------------ ------------ ------------ ------------
Total revenue ............................... 51,556 39,675 165,345 119,569
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE
Compensation and employee benefits ............. 21,300 17,667 64,229 52,505
Occupancy and equipment ........................ 3,981 3,254 11,999 8,769
Technology and communication costs ............. 6,190 5,583 19,476 14,577
Loan expenses .................................. 6,885 3,835 22,272 10,836
Loss (gain) on investments in affordable housing
properties ................................... (100) 4 (179) 319
Professional services and regulatory fees ...... 3,187 2,510 16,328 21,854
Other operating expenses ....................... 2,635 2,173 7,890 7,023
------------ ------------ ------------ ------------
Non-interest expense ......................... 44,078 35,026 142,015 115,883
------------ ------------ ------------ ------------
Distributions on Capital Securities ............. -- -- -- 3,058
------------ ------------ ------------ ------------
Income (loss) before minority interest and income
taxes ........................................ 7,478 4,649 23,330 628
Minority interest in net income (loss) of
subsidiaries ................................. 18 28 (50) (308)
Income tax expense (benefit) .................... (31,845) 6 (31,779) 618
------------ ------------ ------------ ------------
Net income (loss) ............................ $ 39,305 $ 4,615 $ 55,159 $ 318
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE
Basic .......................................... $ 0.61 $ 0.07 $ 0.83 $ 0.005
Diluted ........................................ $ 0.60 $ 0.07 $ 0.81 $ 0.005
Weighted average common shares outstanding
Basic .......................................... 64,637,454 66,865,412 66,853,296 67,148,447
Diluted ........................................ 65,813,457 67,880,310 68,146,822 67,864,096
7
Ocwen Financial Corporation
Third Quarter Results
October 21, 2004
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Cash and amounts due from depository institutions .............. $ 189,446 $ 215,764
Interest earning deposits ...................................... 52,541 324
Trading securities, at fair value:
U.S. government and sponsored enterprise securities ......... 98,179 6,679
Subordinates and residuals .................................. 40,310 42,841
Real estate .................................................... 68,480 103,943
Affordable housing properties .................................. 8,356 7,410
Loans, net ..................................................... 11,459 28,098
Match funded assets ............................................ 108,328 130,087
Premises and equipment, net .................................... 39,000 41,944
Advances on loans and loans serviced for others ................ 345,945 374,769
Mortgage servicing rights ...................................... 135,319 166,495
Receivables .................................................... 114,500 88,157
Other assets ................................................... 73,623 33,607
----------- -----------
Total assets ................................................ $ 1,285,486 $ 1,240,118
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits ..................................................... $ 412,117 $ 446,388
Escrow deposits .............................................. 146,074 116,444
Bonds - match funded agreements .............................. 97,712 115,394
Lines of credit and other secured borrowings ................. 35,502 150,384
Notes and debentures ......................................... 231,249 56,249
Accrued interest payable ..................................... 3,083 4,789
Accrued expenses, payables and other liabilities ............. 31,529 31,926
----------- -----------
Total liabilities ........................................... 957,266 921,574
----------- -----------
Minority interest in subsidiaries .............................. 1,296 1,286
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 200,000,000 shares authorized:
62,719,552 and 67,467,220 shares issued and outstanding at
September 30, 2004 and December 31, 2003, respectively ...... 627 675
Additional paid-in capital .................................... 181,071 225,559
Retained earnings ............................................. 145,568 90,409
Accumulated other comprehensive income (loss), net of taxes.... (342) 615
----------- -----------
Total stockholders' equity ................................ 326,924 317,258
----------- -----------
Total liabilities and stockholders' equity .............. $ 1,285,486 $ 1,240,118
=========== ===========
8
Ocwen Financial Corporation
Third Quarter Results
October 21, 2004
PRE-TAX INCOME (LOSS) BY BUSINESS SEGMENT
Three Months Nine Months
------------------------ -----------------------
For the periods ended September 30, 2004 2003 2004 2003
------------------------------------------------- --------- ---------- --------- ---------
(Dollars in thousands)
CORE BUSINESSES
Residential Loan Servicing..................... $ 3,380 $ 8,159 $ 13,763 $ 25,808
OTX............................................ (2,133) (2,353) (2,370) (8,327)
Ocwen Realty Advisors.......................... 1,478 1,156 5,013 3,766
Ocwen Recovery Group........................... 708 1,140 2,998 3,422
Business Process Outsourcing................... 687 1,004 1,791 1,007
Commercial Servicing........................... 63 (1,111) 60 (3,276)
--------- ---------- --------- ---------
4,183 7,995 21,255 22,400
--------- --------- --------- ---------
NON-CORE BUSINESSES
Commercial Assets.............................. (1,845) (2,025) (4,895) (8,692)
Affordable Housing............................. (888) (3) (3,047) (3,608)
Subprime Finance............................... 2,116 1,720 8,243 20
--------- --------- --------- ---------
(617) (308) 301 (12,280)
--------- --------- --------- ---------
CORPORATE ITEMS AND OTHER........................ 3,912 (3,038) 1,774 (9,492)
--------- --------- --------- ---------
Income (loss) before minority interest and
income taxes.................................... $ 7,478 $ 4,649 $ 23,330 $ 628
========= ========= ========= =========
NON-CORE ASSETS
September 30, December 31,
(Dollars in thousands) 2004 2003
------------- ------------
Loans, net
Affordable housing........................................................ $ 3,664 $ 6,545
All other................................................................. 7,795 21,553
Real estate................................................................. 68,480 103,943
Subordinates, residuals and other trading securities........................ 40,310 42,841
Affordable housing properties............................................... 8,356 7,410
--------- ---------
Total non-core assets..................................................... $ 128,605 $ 182,292
========= =========
9
