Lomas Financial Corp. announced a mammoth loss of $182.7 million for its year ended June 30.
At the same time, the company said it had made asset sales that should bring more than $25 million in cash into its coffers, easing a liquidity crunch.
Much of the $9.07 per share loss systems from special charges. Operating losses from continuing operations were $12.9 million.
But the Dallas-based company made an $80 million writedown to the value of its servicing portfolio as well as $74.2 million in charges to its discontinued information processing and short-term lending units.
Lomas also recorded a charge of $15.6 million related to layoffs and restructurings.
Lomas executives attempted to focus on the positive side of the news.
"The $180 million loss doesn't look so good, but we are now at the end of a five-year restructuring," said Bert Byedey, senior vice president and treasurer.
Key to this is the sale of Lomas Information Systems to Prudential Insurance Corp., announced last week. Lomas Information was a drag on earning for several years, loosing more than $23 million last year.
"It's a mixed bag; it's good that they stopped cash losses... but all the results are still on the come," said Michael Corasaniti, an analyst at Alex. Brown who has long had a "sell" rating on Lomas.
Under a deal announced last week, but detailed Tuesday, Prudential Insurance Corp. will buy Lomas Information Systems for a mix of cash, securities and an earn-out provision.
The deal in short:
* A $2.5 million cash payment at closing.
* An $8.0 million payment-i.nkind note due five years after closing, against which certain ongoing losses may be debited.
* A royalty provision equalling 35% of the Lomas Information Systems revenues in excess of $55 million per year from 19952001.
Lomas values the payment at $40 million. "The LIS sale is a win-win situation," said Jess Hay, Lomas' chairman. "For Lomas it means the elimination of operating losses which in fiscal 1994 totaled $23.2 million and the cessation of cash subsidies ... of $15 million per year."
However, to get to the $40 million figure, Prudential will have to pay Lomas $102 million over the seven-year earnout. That figure implies average revenues of more than $90 million a year at the unit, up from $35 million.
The $35 million was produced by servicing 1.3 million loans. Lomas expects that Prudential will have some 7.2 million loans on board in five to six years, a spectacular rise.
Lomas also hailed its progress in disposing of the assets of its Short-Term Lending unit.
By selling 12 properties, the company will be able to retire $19 million of debt and upstream about $24 million of cash.
"The cash isn't a lifesaver, but we have been fairly cash constrained," said ML Byerley.
The news, announced after trading Tuesday, pushed shares of Lomas upward yesterday by as much as 78 cents, to $5.25.
Having disposed of Lomas Information Systems and made strides with ST Lending, the company may now seek to sell its mortgage banking operations..
