Brooke Corporation Announces Third Quarter Earnings
November 06 2007 - 4:48PM
PR Newswire (US)
Brooke Credit and Brooke Capital Subsidiaries Become Publicly
Traded Companies During the Quarter OVERLAND PARK, Kan., Nov. 6
/PRNewswire-FirstCall/ -- Brooke Corporation (NASDAQ:BXXX) today
reported its third quarter financial results. The company also
announced that shareholders of Brooke Capital have approved the
proposal that provides for the merger of Brooke Corporation's
wholly-owned subsidiary, Brooke Franchise Corporation, into Brooke
Capital Corporation. The merger will be consummated as soon as all
other closing conditions have been met, including regulatory
approvals. The merger of Brooke Franchise into Brooke Capital
mostly completes the process of transition of Brooke Corporation
from operating a portfolio of diversified privately-held businesses
to holding investments in publicly-traded companies. Starting with
the third quarter of 2007, Brooke Credit and Brooke Capital will
conduct their own quarterly conference calls with the investment
community to discuss their operational and financial results. We
encourage our investors to participate in these calls. "The third
quarter represented one of the most exciting periods of time in our
company's history. The process of Brooke Credit and Brooke Capital
becoming publicly-traded companies during the third quarter
required substantial managerial attention and resources; however,
we believe that Brooke Corporation investors will benefit from the
enhanced industry focus and increased accountability provided by
this separation," said Keith Bouchey, Brooke Corporation's
president and chief executive officer. "We also believe our
investors will benefit from the additional flexibility that allows
Brooke Corporation to sell part or all of its interest in one
subsidiary to reinvest in another business activity or for other
corporate purposes. Finally, the Brooke Credit merger allows Brooke
Corporation shareholders to diversify their exposure to the credit
markets and share the risk related to recent credit market
uncertainties." The consolidated total equity of Brooke
Corporation, including minority shareholder interests, was
approximately $130,000,000 on Sept. 30, 2007, as compared to
consolidated total equity of approximately $57,000,000 on Sept. 30,
2006. Primarily as a result of the merger of Brooke Credit with the
publicly-traded Oakmont Acquisition Corporation, the capital
raising activities and the impact of the year-to-date retained
earnings, the Brooke Corporation book value per share has increased
to $4.41 from $3.24, a 36% increase since December 31, 2006," said
Bouchey. Financial Results Consolidated Activities For accounting
purposes, Brooke Corporation currently consolidates the financial
results of Brooke Credit and Brooke Capital (its investment
activities), with Brooke Corporation's banking and other operations
(its non- investment activities). Brooke Corporation's ownership of
and relationship with Brooke Credit and Brooke Capital may
eventually be changed so as to require that one or both of these
companies instead be reflected in Brooke Corporation financials as
investment assets. Factors causing such change include, without
limitation, sales by Brooke Corporation of some or all of its
shares in Brooke Credit or Brooke Capital, exercise by
non-affiliates of warrants in Brooke Credit and direct issuance and
sale of new shares by Brooke Credit or Brooke Capital. As
summarized below, Brooke Credit and Brooke Capital are profitable
and continue to grow rapidly. However, Brooke Corporation incurred
a consolidated loss of $0.7 million on consolidated revenues of
$54.1 million for the third quarter, as compared to a profit of
$2.6 million on revenues of $48.7 million in the third quarter of
2006. The quarterly loss was due primarily to expenses associated
with the Brooke Credit and Brooke Capital merger transactions.
"Given the one-time nature of most of these transaction-related
expenses, we expect that third quarter losses were an isolated
incident and expect to return to profitability in the fourth
quarter of 2007," continued Keith Bouchey. Specifically, Brooke
Capital incurred merger and listing related expenses in the third
quarter totaling $0.5 million, Brooke Credit incurred merger
related stock compensation expenses in the third quarter totaling
approximately $1.0 million and Brooke Corporation incurred
additional separate merger related expenses in the third quarter
totaling at least $0.2 million. Brooke Corporation also established
a $3.0 million reserve for its guaranty of franchise receivables in
conjunction with the Brooke Capital merger. Consolidated 2007
year-to-date revenues increased 29%, to $174.7 million from $135.4
million during the same period of 2006. Despite a third quarter
loss, Brooke Corporation's consolidated 2007 year-to-date profits
total $8.9 million which is approximately the same as 2006
year-to-date profits of $9.1 million. Investment Activities Brooke
Credit and Brooke Capital are managed by executives with experience
and expertise in their respective industries, not by Brooke
Corporation. As such, Brooke Corporation's primary analysis of its
investment in these companies focuses on stock price. As of Sept.
30, 2007, Brooke Corporation owned 15,967,444 shares of Brooke
Credit or 62 percent of Brooke Credit's outstanding shares. During
the third quarter, the stock price of Brooke Credit ranged from a
high of $5.81 to a low of $4.90, resulting in unrealized investment
gains up to approximately $14 million. Brooke Credit's profits for
the nine months ended Sept. 30, 2007, were $10.7 million on
revenues of $34.9 million, as compared to profits of $5.4 million
on revenues of $19.4 million for the comparable period in the
previous year. Brooke Credit's profits for the three months ended
Sept. 30, 2007, were $2.3 million on revenues of $10.1 million, as
compared to profits of $2.9 million on revenues of $9.7 million for
the comparable period in the previous year. Adjusted to include
shares issued at the anticipated closing of the announced merger
and exchange, at Sept. 30, 2007, Brooke Corporation owned 7,338,967
shares of Brooke Capital or 81 percent of Brooke Capital's
outstanding shares. During the third quarter, the stock price of
Brooke Capital ranged from a high of $6.85 to a low of $5.15,
resulting in unrealized investment gains up to approximately $43.0
million. Brooke Capital's profits (on pro forma basis to reflect
the previously announced merger and exchange) for the nine months
ended Sept. 30, 2007, were $5.5 million on revenues of $142.7
million, as compared to profits of $2.4 million on revenues of
$124.0 million for the comparable period in the previous year.
Brooke Capital's profits for the three months ended Sept. 30, 2007,
were $1.3 million on revenues of $42.8 million, as compared to a
loss of $1.5 million on revenues of $40.1 million for the
comparable period in the previous year. Non-Investment Activities
Brooke Corporation's non-investment related activities are limited
primarily to banking operations and corporate activities. Brooke
Corporation conducts its banking and other operations through a
wholly-owned subsidiary, Brooke Brokerage Corporation, and through
Brooke Savings Bank, which is wholly-owned by Brooke Brokerage.
Brooke Corporation believes that future development of Brooke
Savings Bank's independent agent banking program will increasingly
contribute to its profits. Brooke Brokerage, however, is not
expected to significantly impact overall financial results for
Brooke Corporation in the near future. "Moving forward, we are very
excited about implementing our strategy of offering a full spectrum
of retail banking products through both dedicated bank agents and
bank agents who are also Brooke insurance franchisees," added
Bouchey. "Our bank agent program will get a healthy boost once we
receive regulatory approval to consummate the previously announced
transaction with Bank of the West to acquire a 45 location agent
bank network in Kansas." Brooke Brokerage's (including Brooke
Savings Bank) had a profit of $0.1 million for the three months
ended Sept. 30, 2007 and a loss of $0.1 million for the nine months
ended Sept. 30, 2007. Brooke Corporation's corporate expenses
increased significantly during the third quarter primarily as the
result of merger-related expenses. Earnings Conference Call Mr.
Bouchey will host a conference call tomorrow, Wednesday, Nov. 7 at
noon EST to discuss Brooke Corporation's banking and corporate
results for the third quarter of 2007. To join the Brooke
Corporation call, please dial (866) 831-6247 in the United States
and Canada, or (617) 213-8856 if calling internationally. The
conference ID number is 13787597. Brooke Corporation shareholders,
as indirect shareholders of Brooke Credit and Brooke Capital, are
encouraged to participate in the earnings calls held tomorrow,
Wednesday, Nov. 7 at 10 a.m. EST by Brooke Credit (finance company)
executives and at 11 a.m. EST by Brooke Capital's (insurance and
insurance agency franchising) executives. To join the Brooke Credit
call, please dial (866) 271-6130 in the United States and Canada,
or (617) 213-8894 if calling internationally. The conference ID
number is 57012444. To join the Brooke Capital call, please dial
(866) 356-4281 in the United States and Canada, or (617) 597-5395
if calling internationally. The conference ID number is 20099154.
About Brooke Corporation ... Brooke Corporation is a holding
company listed on the Nasdaq Global Market under the symbol "BXXX".
Brooke Corporation owns 100 percent of Brooke Brokerage
Corporation, a banking organization with a federally-chartered
thrift institution that operates an "agent bank". Brooke
Corporation owns 62 percent of Brooke Credit Corporation, a finance
company specializing in insurance-related lending. Brooke
Corporation owns (before adjustment for closing of the announced
merger and exchange) 52 percent of Brooke Capital Corporation
(AMEX:BCP), an insurance organization with a life insurance company
and, subject to closing of a merger with Brooke Franchise
Corporation, a non-standard auto insurance company and an insurance
agency franchisor. E-mail Distribution ... To receive electronic
press alerts, visit the Brooke Corporation media room at
http://brookecorp.mediaroom.com/ and subscribe to our E-mail alerts
online through the Get the News link. This press release contains
forward-looking statements. All forward-looking statements involve
risks and uncertainties, and several factors could cause actual
results to differ materially from those in the forward-looking
statements. The following factors, among others, could cause actual
results to differ from those indicated in the forward-looking
statements: the uncertainty that the company and its affiliates
will successfully establish Brooke Credit and Brooke Capital as
independent, publicly-traded companies, the market price of the
shares of Brooke Credit and Brooke Capital common stock,
uncertainties associated with market acceptance of and demand for
the company's products and services, the impact of competitive
products and pricing, the dependence on third-party suppliers and
their pricing, the ability of the company and its affiliates to
meet product demand, the availability of funding sources, the
exposure to market risks, uncertainties associated with the
development of technology, changes in the law and in economic,
political and regulatory environments, changes in management, the
dependence on intellectual property rights, the effectiveness of
internal controls, and risks and factors described from time to
time in reports and registration statements filed by Brooke
Corporation with the Securities and Exchange Commission. A more
complete description of Brooke's business is provided in Brooke
Corporation's most recent annual, quarterly and current reports,
which are available from Brooke Corporation without charge or at
http://www.sec.gov/. DATASOURCE: Brooke Corporation CONTACT:
Investor Relations, Kate Sidorovich, of Market Street Partners,
+1-415-445-3236, , for Brooke Corporation Web site:
http://www.brookecorp.com/
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