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Conseco Memo #24 - 1Q02 Earnings
To: Conseco Shareholders
From: Gary Wendt, Chairman & CEO
Date: May 1, 2002
Re: 1Q Earnings
Summary
As indicated in the recent 10-K filing, the 2002 liquidity issues
are behind us. Cash-raising initiatives have been very successful
and accomplished without damage to our business franchises. The
2002 shortfall is covered, and we are confident about liquidity
in 2003.
1Q02 operating earnings were $39.9 million, up 18% from $33.8 million
in 4Q01 (12¢ per share in 1Q02 vs. 10¢ per share in 4Q01).
However, it should be recognized that the previous quarter included
a $28.3 million charge (8¢ per share) for goodwill amortization.
This expense is no longer required under new accounting rules that
went into effect in 2002.
We incurred net non-operating charges (after-tax) of $136.8 million,
resulting in a net loss of $96.9 million for the quarter.
Pre-tax operating earnings in the Finance company were up 23% over
4Q01. Progress is also evident in collections with managed 30+ delinquencies
down 54 basis points and managed 60+ delinquencies down 11 basis
points since the end of 4Q01. We see positive signs that economic
recovery may be taking hold, but the after-effects of the recession
and the glut of manufactured housing repos in the marketplace will
continue to pressure earnings in 2002.
Insurance segment pre-tax operating earnings for 1Q02 were $163.7
million, only $4 million below our 1st quarter expectation, but
down 18% from $200.1 million in 4Q01. Sales were flat to down a
bit for the quarter reflecting, we believe, the distraction of cash
raising initiatives and reorganization activities.
Corporate interest and preferred dividend expense in 1Q02 was $117.7
million, down from $152.3 million in 1Q01, a 23% reduction.
The recently concluded bond exchange successfully smoothed our
2004 – 2009 public debt principal maturities.
Our 2002 guidance for operating earnings remains 60¢ to 70¢
per share.
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Chart
1
|
|
1st
Quarter 2002
|
|
$
millions except per share amounts
|
|
Q2
'01 |
Q3
'01 |
Q4
'01 |
Full
Year 2001 |
Q1
'02 |
| Insurance
and fee based |
$231.6 |
$208.3 |
$200.1 |
$843.2 |
$163.7 |
| Finance |
80.1 |
72.5 |
27.0 |
243.2 |
33.1 |
| Subtotal |
311.7 |
280.8 |
227.1 |
1086.4 |
196.8 |
| Corporate: |
|
|
|
|
|
| Interest
and dividends |
(138.2) |
(130.8) |
(127.7) |
(549.0) |
(117.7) |
| Expns
less chgs to subs |
(9.3) |
(9.3) |
(9.9) |
(20.0) |
(9.6) |
| Int
and div alloctd to CFC |
1.9 |
0.0 |
(0.9) |
6.5 |
(0.9) |
| Pre-tax |
166.1 |
140.7 |
88.6 |
523.9 |
68.6 |
| Taxes |
(68.1) |
(51.8) |
(26.5) |
(194.1) |
(28.7) |
| Total
after-tax pre-goodwill |
98.0 |
88.9 |
62.1 |
329.8 |
39.9 |
| Goodwill
amortization |
(28.4) |
(28.3) |
(28.3) |
(111.8) |
0.0 |
| Operating
earnings |
69.6 |
60.6 |
33.8 |
218.0 |
39.9 |
| Non-Operating
earnings (loss), net of tax |
(99.9) |
(471.2) |
(91.8) |
(636.7) |
(136.8) |
| Operating
earnings per share: |
|
|
|
|
|
| Pre-goodwill |
$0.29 |
$0.26 |
$0.18 |
$0.97 |
$0.12 |
| Post-goodwill |
$0.21 |
$0.18 |
$0.10 |
$0.64 |
$0.12 |
| Net
income (loss) per share |
($0.09) |
($1.21) |
($0.17) |
($1.24) |
($0.28) |
| Equivalent
shares outstanding |
337.8 |
340.3 |
343.3 |
338.1 |
345.2 |
Continued on page
2
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