By Christopher Menkin
Marlin Business Services Corp. (MRLN), Mount Laurel, N.J., issued a press release that showed in the Condensed Consolidate Balance Sheets that total assets had shrunk from $565.8 million to $468 million although profits were up to $5.6 million and equity grew form $151.9 million to $160 million.
|Net Income (loss)|
Daniel P. Dyer, Marlin's CEO said, "Looking ahead to 2011, we are well positioned to serve the growing credit needs of small and mid-sized businesses led by a financially strong, well-capitalized balance sheet and the overall strength of our funding platform led by (its banking subsidiary) Marlin Business Bank."
This is not a full report of the 114 page SEC year-end filing as it does not cover the refilling of taxes (to Marlin's favor), bank regulation (most likely to Marlin's favor), officer and executive salaries, plus stock options (you guessed it) or charge offs or other matters (all seemingly favorable), but is more of a repeat of what Leasing News has been reporting for several years, that Evergreen leases (120 day notification requirement by the lessee or leases goes into automatic renewal, especially on copies) is the real gist of the report.
Marlin Business Services, Mount Laurel, N.J., Year-end 2010 SEC filing shows:
“Our leases offer our end user customers the option to own the purchased equipment at lease expiration. As of December 31, 2010, approximately 69% of our leases were one dollar purchase option leases, 28% were fair market value leases and 3% were fixed purchase option leases, the latter of which typically contain a purchase price equal to 10% of the original equipment cost. As of December 31, 2010, there were $37.3 million of residual assets retained on our Consolidated Balance Sheet, of which $30.6 million, or 82.0%, were related to copiers. As of December 31, 2009, there were $43.9 million of residual assets retained on our Consolidated Balance Sheet, of which $35.1 million, or 79.9%, were related to copiers. No other group of equipment represented more than 10% of equipment residuals as of December 31, 2010 and 2009, respectively.
“Improvements in technology and other market changes, particularly in copiers, could adversely impact our ability to realize the recorded residual values of this equipment.”
“Our leases generally include renewal provisions and many leases continue beyond their initial contractual term. Based on the Company's experience, the amount of ultimate realization of the residual value tends to relate more to the customer's election at the end of the lease term to enter into a renewal period, purchase the leased equipment or return the leased equipment than it does to the equipment type. We consider renewal income a component of residual performance. Renewal income, net of depreciation, totaled approximately $7.7 million, $7.2 million and $7.0 million for the years ended December 31, 2010, 2009 and 2008, respectively.”
In previous filings, it was noted these Evergreen renewals were mostly in copier leases, which continue to high in the equiment leased by
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- the average original lease transaction was approximately $11,300, with an average remaining balance of approximately $5,400;
- the average original lease term was approximately 50 months;
- our active leases were spread among approximately 60,000 different end user customers, with the largest single end user customer accounting for only 0.14% of the aggregate minimum lease payments receivable;
- over 81.6% of the aggregate minimum lease payments receivable were with end user customers who had been in business for more than five years...”
“Personnel costs represent our most significant overhead expense and we actively manage our staffing levels to the requirements of our lease portfolio. As a result of the challenging economic environment, we proactively lowered expenses in the first quarter of 2009, including reducing our workforce by 17% and closing our two smallest satellite sales offices (Chicago and Salt Lake City). A total of 49 employees company-wide were terminated in connection with the staff reductions in the first quarter of 2009. We incurred pretax severance costs in the three months ended March 31, 2009 of approximately $0.5 million related to the staff reductions.
“During the second quarter of 2009, we announced a further workforce reduction of 24%, or 55 employees company-wide, including the closure of our Denver satellite office. We incurred pretax severance costs in the three months ended June 30, 2009 of approximately $0.7 million related to these staff reductions.
“During the year ended December 31, 2010, our strong asset quality and our access to funding enabled us to increase the number of our sales account executives by 49, from 38 sales account executives at December 31, 2009 to 87 at December 31, 2010. This action was part of our plan to rebuild our sales organization to increase originations and to match our current funding capacity.”
“On November 2, 2007, the Company's Board of Directors approved a stock repurchase plan. Under this program, the Company is authorized to repurchase up to $15 million in value of its outstanding shares of common stock...The repurchases are funded using the Company's working capital.
“The Company purchased 21,822 shares of its common stock for $0.2 million during the year ended December 31, 2010. The Company purchased 88,894 shares of its common stock for $0.3 million during the year ended December 31, 2009. At December 31, 2010, the Company had $10.4 million remaining in its stock repurchase plan authorized by the Board of Directors.
“In addition to the repurchases described above, pursuant to the Company's 2003 Equity Compensation Plan (as amended, the "2003 Plan"), participants may have shares withheld to cover income taxes. There were 59,103 and 13,720 shares repurchased to cover income taxes during the years ended December 31, 2010 and 2009, respectively, at average per-share costs of $9.12 and $3.89, respectively.”
“We believe our leased facilities are adequate for our current needs and sufficient to support our current operations and anticipated future requirements.”
“At December 31, 2010, we operated from five leased facilities including our executive office facility, a Philadelphia office facility, two branch offices and the headquarters of MBB. Our Mount Laurel, N.J., executive offices are housed in a leased facility of approximately 50,000 square feet under a lease that expires in May 2013. We also lease 3,524 square feet of office space in Philadelphia, Pa., where we perform our lease recording and acceptance functions. Our Philadelphia lease expires in July 2013. In addition, we have a regional office in Johns Creek, Ga., (a suburb of Atlanta). Our Georgia office is 5,822 square feet and the lease expires in July 2013. The headquarters of MBB in Salt Lake City is 5,764 square feet and the lease expires in October 2014. We also lease 300 square feet for a sales office in Sherwood, Oregon. This lease commenced September 2010 and is on a month-to-month basis.”
Previous Marlin and Evergreen Clause Profits:
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.