DIRECT YOUR INQUIRIES AND REPORT COMPLAINTS TO THE FOLLOWING:
Daniel C. O'Keefe
Vice President & Chief Accounting Officer
Ocwen Financial Corporation ("RECOVERY GROUP")
12650 Ingenuity Dr, Orlando, FL 32826
Direct: 407-737-5713
Main: (407) 737-5000
Email address: daniel.o'
[email protected]
OCWEN FINANCIAL CORP (MAIN OFFICE):
David J. Gunter
Senior Vice President and Chief Financial Officer
1661 Worthington Road, Suite 100
West Palm Beach, Florida 33409
Office Telephone: (561) 682-8000
Email address:
[email protected]
NOTE: THE INFORMATION ABOVE IS CONTAINED IN THE FOLLOWING 8-K FILING:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report
(Date of earliest event reported): January 26, 2007
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.)
1661 Worthington Road
Suite 100
West Palm Beach, Florida 33409
(Address of principal executive office) (Zip Code)
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 2.02 Results of Operations and Financial Condition
The news release of the Registrant dated January 26, 2007, announcing its fourth quarter and year 2006 results is attached hereto as Exhibit 99.1. The information in Exhibit 99.1 attached hereto shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(a) - (b) Not applicable.
(c) Exhibits
99.1 Text of a press release by the Registrant dated
January 26, 2007.
Page 2 of 9
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/ DAVID J. GUNTER
------------------------------------
David J. Gunter
Senior Vice President and
Chief Financial Officer
Date: January 30, 2007
Page 3 of 9
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99.1 News release of Ocwen Financial Corporation, dated 5
January 26, 2007, announcing its fourth quarter
and year 2006 results and certain other information.
Page 4 of 9
Exhibit 99.1
[GRAPHIC OMITTED]
OCWEN
Ocwen Financial Corporation(R)
================================================================================
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Daniel C. O'Keefe
Vice President & Chief Accounting Officer
T: (407) 737-5713
E: daniel.o'
[email protected]
------------------------
OCWEN FINANCIAL CORPORATION ANNOUNCES
FOURTH QUARTER AND 2006 NET INCOME
West Palm Beach, FL - (January 26, 2007) Ocwen Financial Corporation (NYSE:OCN) today reported net income of $13.9 million or $0.20 per diluted share for the fourth quarter of 2006. This compares to $1.8 million or $0.03 per diluted share for the fourth quarter of 2005. Pre-tax income for the fourth quarter of 2006 was $14.9 million as compared to $2.5 million for the fourth quarter of 2005. Pre-tax income for the fourth quarters of 2006 and 2005 includes $(6.9) million and $(6.3) million, respectively, of pre-tax losses related to our start-up loan origination operation, which we have decided to close. For the year ended December 31, 2006, net income was $206.5 million or $2.91 per diluted share as compared to $15.1 million or $0.24 per diluted share for 2005. For the year ended December 31, 2006, pre-tax income was $80.1 million as compared to $20.9 million in 2005. The results for 2006 include a tax benefit of $126.4 million, primarily reflecting the second quarter reversal of $145.2 million of the valuation allowance that had been established in prior years.
Chairman and CEO William C. Erbey stated "Our pre-tax results for 2006 reflect substantial progress in achieving our goals of growing revenues while containing operating costs. Our annual revenue grew by 15% as compared to last year, while our operating expenses in 2006 declined by 0.5% (or $1.8 million) as compared to 2005 despite an increase of $14.1 million in amortization of servicing rights. Our pre-tax 2006 results reflect the strong performance of our Residential Servicing segment which contributed $80.5 million of pre-tax income in 2006 as compared to $21.7 million in 2005.
In 2006 we continued to evaluate our other segments and narrow our focus to those activities which yield acceptable returns on capital. In that regard, during 2006 we merged our Business Process Outsourcing segment into our Residential Origination Services segment. As we move into 2007, we are making further changes in our operations, having decided to close our domestic commercial servicing operations, while retaining our domestic commercial special servicing and asset management operations as well as our international servicing operations. As a result, we have included our Commercial Servicing segment in Corporate. In our Residential Origination Services segment, we are narrowing the scope of our activities, having decided to close our start-up loan origination operation, which reported pre-tax losses of $(12.4) million and $(6.9) million, respectively, for the year and quarter ended December 31, 2006. We believe that the remaining fee based loan processing activities in this segment, which generated a pre-tax contribution of $15.7 million in 2006, are synergistic with our Servicing operations.
In Ocwen Recovery Group, our focus during 2006 has been on cost reduction and enhancing the execution capabilities of our global work force. We believe that we have achieved this goal and are positioned for growth in 2007.
Page 5 of 9
Ocwen Financial Corporation
Fourth Quarter and Full Year 2006 Results January 26, 2007
Overall, our financial results were strong in 2006. We increased earnings over the prior year while also strengthening our balance sheet, as evidenced by the increase in our equity to assets, which rose from 18.7% at the end of last year to 27.8% at December 31, 2006. Our plans for 2007 will enable us to build on this foundation and increase shareholder value by further optimizing our use of capital."
Segment Results
---------------
Three months Twelve months
---------------------------- ----------------------------
For the periods ended December 31, 2006 2005 2006 2005
------------------------------------- ------------ ------------ ------------ ------------
Residential Servicing
Revenue .......................... $ 93,309 $ 71,646 $ 343,614 $ 279,626
Operating expenses ............... 62,012 56,919 232,465 236,517
Other income (expense) ........... (10,693) (6,308) (30,662) (21,448)
------------ ------------ ------------ ------------
Pre-tax income ................ 20,604 8,419 80,487 21,661
------------ ------------ ------------ ------------
Ocwen Recovery Group
Revenue .......................... 1,869 1,884 7,666 11,683
Operating expenses ............... 1,844 2,777 8,569 12,715
Other income (expense) ........... 26 110 340 348
------------ ------------ ------------ ------------
Pre-tax income (loss) ......... 51 (783) (563) (684)
------------ ------------ ------------ ------------
Residential Origination Services
Revenue .......................... 16,437 18,028 70,944 66,031
Operating expenses ............... 20,334 29,453 84,665 76,662
Other income (expense) ........... 476 3,015 19,623 7,440
------------ ------------ ------------ ------------
Pre-tax income (loss) ......... (3,421) (8,410) 5,902 (3,191)
------------ ------------ ------------ ------------
Corporate Items and Other
Revenue .......................... 2,369 3,404 9,495 18,036
Operating expenses ............... 6,202 5,234 21,549 23,175
Other income (expense) ........... 1,507 5,147 6,361 8,233
------------ ------------ ------------ ------------
Pre-tax income (loss) ......... (2,326) 3,317 (5,693) 3,094
------------ ------------ ------------ ------------
Consolidated pre-tax income ......... $ 14,908 $ 2,543 $ 80,133 $ 20,880
============ ============ ============ ============
As of December 31, 2006, we were the servicer of approximately 474 thousand residential loans with an unpaid principal balance (UPB) of $52.8 billion as compared to approximately 369 thousand loans and $42.8 billion of UPB at December 31, 2005. Residential Servicing revenue in the 2006 periods reflects increased servicing fees and float income from a larger servicing portfolio and higher interest rates. Operating expenses of the Residential Servicing segment for the 2006 periods reflect an increase in amortization expense due to growth in the servicing portfolio. For the full year 2006, this increase was offset by a reduction in interest paid to investors related to loan pay-offs, a decline in bad debt expense and cost reductions that reflect process improvements and automation.
Page 6 of 9
Ocwen Financial Corporation
Fourth Quarter and Full Year 2006 Results January 26, 2007
Ocwen Financial Corporation is a leading provider of servicing and origination processing solutions to the loan industry with headquarters in West Palm Beach, Florida, offices in, Orlando, Florida, Downers Grove, Illinois and Atlanta, Georgia and global operations in Canada, Germany, India and Taiwan. We make our clients' loans worth more by leveraging our superior processes, innovative technology and high-quality, cost-effective global human resources. Additional information 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 our expectations as to growth of our Ocwen Recovery Group division and fee-based loan processing services, as well as our plans to optimize capital to increase shareholder value. 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, availability of adequate and timely sources of liquidity, federal income tax rates, real estate market conditions and trends and the outcome of ongoing litigation 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, 2005 and Form 10-Q for the quarters ended March 31, June 30 and September 30, 2006 and our Forms 8-K filed during 2006. 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.
Page 7 of 9
Ocwen Financial Corporation
Fourth Quarter and Full Year 2006 Results January 26, 2007
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three months Twelve months
---------------------------- ----------------------------
For the periods ended December 31, 2006 2005 2006 2005
----------------------------------------------- ------------ ------------ ------------ ------------
Revenue
Servicing and subservicing fees ........... $ 92,212 $ 73,762 $ 340,649 $ 293,569
Process management fees ................... 18,941 18,854 78,691 71,961
Other revenues ............................ 2,831 2,346 12,379 9,846
------------ ------------ ------------ ------------
Total revenue ......................... 113,984 94,962 431,719 375,376
------------ ------------ ------------ ------------
Operating expenses
Compensation and benefits ................. 21,948 22,176 90,986 94,625
Amortization of servicing rights .......... 29,711 23,672 110,745 96,692
Servicing and origination ................. 14,588 16,199 53,795 61,083
Technology and communications ............. 5,830 7,524 25,001 30,375
Professional services ..................... 8,888 10,514 31,271 25,939
Occupancy and equipment ................... 4,872 4,346 19,456 17,676
Other operating expenses .................. 4,555 9,952 15,994 22,679
------------ ------------ ------------ ------------
Total operating expenses .............. 90,392 94,383 347,248 349,069
------------ ------------ ------------ ------------
Other income (expense)
Interest income ........................... 11,157 8,278 48,034 25,238
Interest expense .......................... (14,713) (11,409) (53,587) (37,261)
Gain (loss) on trading securities ......... (1,477) 3,422 2,006 13
Loss on loans held for resale, net ........ (4,378) (4,380) (5,684) (4,380)
Gain on debt repurchases .................. -- 3,361 25 4,258
Other, net ................................ 727 2,692 4,868 6,705
------------ ------------ ------------ ------------
Other income (expense), net ........... (8,684) 1,964 (4,338) (5,427)
------------ ------------ ------------ ------------
Income before income taxes .................... 14,908 2,543 80,133 20,880
Income tax expense (benefit) .................. 987 718 (126,377) 5,815
------------ ------------ ------------ ------------
Net income ................................ $ 13,921 $ 1,825 $ 206,510 $ 15,065
============ ============ ============ ============
Earnings per share
Basic ...................................... $ 0.22 $ 0.03 $ 3.28 $ 0.24
Diluted .................................... $ 0.20 $ 0.03 $ 2.91 $ 0.24
Weighted average common shares outstanding
Basic ....................................... 62,919,083 63,118,686 62,871,613 62,912,768
Diluted (1) ................................. 72,060,879 64,010,370 71,864,311 63,885,439
(1) For purposes of computing diluted earnings per share, the 2006 periods reflect the assumed conversion of our 3.25% Convertible Notes into 7,962,205 shares of common stock. Conversion of the Convertible Notes has not been assumed for the three and twelve months ended December 31, 2005 because the effect would be anti-dilutive.
Page 8 of 9
Ocwen Financial Corporation
Fourth Quarter and Full Year 2006 Results January 26, 2007
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31, December 31,
2006 2005
----------- -----------
Assets
Cash ................................................................ $ 236,581 $ 269,611
Trading securities, at fair value
Short-term investments .......................................... 74,986 1,685
Mortgage backed securities ...................................... 65,242 30,277
Investment in certificates of deposits .............................. 72,733 --
Loans held for resale, at lower of cost or market ................... 99,064 624,671
Advances ............................................................ 324,137 219,716
Match funded advances ............................................... 572,708 377,105
Mortgage servicing rights ........................................... 183,743 148,663
Receivables ......................................................... 69,314 68,876
Deferred tax assets, net ............................................ 174,132 20,271
Premises and equipment, net ......................................... 35,469 40,108
Other assets ........................................................ 101,634 53,190
----------- -----------
Total assets .................................................... $ 2,009,743 $ 1,854,173
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Match funded liabilities ........................................ $ 510,236 $ 339,292
Servicer liabilities ............................................ 383,549 298,892
Lines of credit and other secured borrowings .................... 324,520 626,448
Debt securities ................................................. 150,329 154,329
Other liabilities ............................................... 81,340 85,952
----------- -----------
Total liabilities ............................................ 1,449,974 1,504,913
----------- -----------
Minority interest in subsidiary ..................................... 1,790 1,853
Stockholders' Equity
Common stock, $.01 par value; 200,000,000 shares authorized;
63,184,867 and 63,133,471 shares issued and outstanding at
December 31, 2006 and 2005, respectively
December 31, 2006 and 2005, respectively ..................... 632 631
Additional paid-in capital ...................................... 186,660 184,262
Retained earnings ............................................... 369,708 163,198
Accumulated other comprehensive income (loss), net of taxes ..... 979 (684)
----------- -----------
Total stockholders' equity ...................................... 557,979 347,407
----------- -----------
Total liabilities and stockholders' equity ................... $ 2,009,743 $ 1,854,173
=========== ===========
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