NEW YORK, NEW YORK -- (Marketwire) -- 11/03/08 -- Crystal River Capital, Inc. (NYSE: CRZ) -
Crystal River's management will host a dial-in teleconference to review its third quarter 2008 financial results on November 3, 2008 at 4:30 p.m. (EST). The teleconference can be accessed by dialing 888-208-1427 or 913-312-0838 (International). A replay of the recorded teleconference will be available through November 17, 2008. The replay can be accessed by dialing 888-203-1112 or 719-457-0820 (International) and entering passcode 5394173. A live audio webcast of the call will be accessible on the Company's website, www.crystalriverreit.com, via a link from the Investor Relations section. A replay of the audio webcast will be archived in the Investor Relations section of the Company's website.
Crystal River Capital, Inc. ("Crystal River" or the "Company") (NYSE: CRZ) today announced its results for the quarter ended September 30, 2008.
Separately, the Company announced that its Board of Directors has declared a fourth quarter dividend of $0.10 per share.
For additional information, please refer to Crystal River's letter to stockholders, which has been posted to the Investor Relations section of the Company's website at www.crystalriverreit.com.
I. THIRD QUARTER UPDATE
- Liquidity and leverage update: Crystal River continued its focus on reducing leverage by paying down its repurchase agreement debt to $8.3 million at September 30, 2008 from $22.1 million at June 30, 2008. The amount drawn under the Company's revolving credit facility was $41.4 million at September 30, 2008.
- Operating results: The net loss for the quarter ended September 30, 2008 totaled $56.7 million, or $2.28 per share. Operating Earnings (defined below) for the quarter ended September 30, 2008 totaled $13.9 million, or $0.56 per share, compared to $20.9 million, or $0.83 per share, for the third quarter of 2007 and $16.6 million, or $0.67 per share, for the second quarter of 2008. The decrease over the second quarter of 2008 was primarily attributable to lower interest income resulting from the sale of Crystal River's Agency MBS portfolio and the sale and repayment of a portion of the Company's real estate loan portfolio, partially offset by lower interest expense.
- Dividend: Cash flow from operations for the third quarter represented approximately three times coverage of the quarterly dividend of approximately $2.5 million, with the remainder being used to pay down liabilities.
- Book value: Crystal River's GAAP book value per share decreased to $0.07 at September 30, 2008 from $2.46 at June 30, 2008.
- Portfolio activity and subsequent events: As previously announced, Crystal River sold $27.1 million of whole loans that the Company had previously designated for sale. Furthermore, Crystal River's $9.6 million investment in a construction loan matured during the third quarter of 2008. The investment, which paid off at par, had a floating-rate coupon of LIBOR plus 3.1%. The proceeds from the sales and the loan repayment were used to repay debt.
Discussion of Results
Net Investment Income (defined below) for the quarter ended September 30, 2008 totaled $18.3 million, or $0.73 per share, compared to Net Investment Income of $23.5 million, or $0.94 per share, for the third quarter of 2007 and Net Investment Income of $21.6 million, or $0.87 per share, for the second quarter of 2008. The decrease over the second quarter of 2008 was primarily attributable to lower interest income resulting from the sale of Crystal River's Agency MBS portfolio and the sale and repayment of a portion of the Company's real estate loan portfolio, partially offset by lower interest expense.
The net loss for the quarter ended September 30, 2008 totaled $56.7 million, or $2.28 per share, compared to a net loss of $93.9 million, or $3.76 per share, for the third quarter of 2007 and a net loss of $75.5 million, or $3.04 per share, for the second quarter of 2008. The primary contributors to the third quarter 2008 net loss were impairment charges and mark-to-market adjustments totaling $59.2 million. Finally, the Company also recorded a $4.4 million loan loss allowance on its real estate loan holdings during the quarter ended September 30, 2008.
The following table details the Company's impairment charges and mark-to-market adjustments on its available for sale securities by type and by sector and its CDO liabilities for the quarter ended September 30, 2008:
Impairment charges and mark-to-market adjustments of assets and liabilities:
CDO Assets and Liabilities:
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Subprime
($ in millions) CMBS(4) Prime RMBS(5) RMBS Liabilities Total
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Cash flows(1) $ (57.4) $ (2.8) $ (3.6) $ - $ (63.8)
Yield-spread
widening(2) (4.4) (5.3) (0.4) - (10.1)
MTM(3) assets (4.0) - 0.1 - (3.9)
MTM liabilities - - - 45.5 45.5
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Total $ (65.8) $ (8.1) $ (3.9) $ 45.5 $ (32.3)
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(1) Accounting rule EITF 99-20 refers to changes in cash flow assumptions
on underlying assets.
(2) Accounting rule EITF 99-20 refers to excessive yield-spread widening
on underlying assets.
(3) Mark-to-market adjustments under SFAS 159 ("MTM").
(4) Commercial mortgage-backed securities ("CMBS").
(5) Residential mortgage-backed securities ("RMBS").
Non-CDO Assets:
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Subprime
($ in millions) CMBS Prime RMBS RMBS Total
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Cash flows $ (4.9) $ (4.4) $ (0.3) $ (9.6)
Yield-spread
widening (13.0) (3.3) (1.0) (17.3)
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Total $ (17.9) $ (7.7) $ (1.3) $ (26.9)
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GAAP Book Value
GAAP common equity book value per share was $0.07 at September 30, 2008. Following Crystal River's adoption of Statement of Financial Accounting Standards ("SFAS") No. 159 on January 1, 2008, the Company carries both the assets and liabilities of its two securitized CDO entities at their fair values. As a result, unrealized gains and losses on the available for sale securities held within the Company's CDOs, the corresponding CDO liabilities, and swaps previously designated as a hedge are recorded directly into earnings in the Company's consolidated statements of operations.
Dividend Information
Crystal River announced that its Board of Directors declared a cash distribution for the quarter ended December 31, 2008 of $0.10 per share of common stock. The cash distribution will be paid on January 30, 2009 to stockholders of record as of the close of business on December 31, 2008.
In setting the dividend, the Board of Directors considered a number of factors, including, but not limited to, operating results, taxable income and REIT qualification requirements, available tax losses, economic conditions, capital requirements, liquidity, retention of capital and other operating trends. Given the variability of these considerations, the Board of Directors will continually reevaluate these factors when determining future dividends.
About Crystal River
Crystal River Capital, Inc. (NYSE: CRZ) is a specialty finance REIT. The Company invests in commercial real estate, real estate loans, and real estate-related securities, such as commercial and residential mortgage-backed securities. For more information, visit www.crystalriverreit.com.
II. CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
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September 30, June 30, December 31,
($ in thousands, except 2008 2008 2007
share and per share data) (unaudited) (unaudited)
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ASSETS
Available for sale securities,
at fair value $ 191,367 $ 295,836 $ 1,815,246
Real estate loans 11,069 24,370 170,780
Real estate loans
held for sale 20,375 47,504 -
Commercial real estate, net 229,885 231,511 234,763
Other investments 1,550 1,550 37,761
Intangible assets 76,949 78,357 81,174
Cash and cash equivalents 7,035 7,754 27,521
Restricted cash 26,924 27,646 68,706
Receivables 21,621 22,119 31,637
Prepaid expenses and
other assets 1,097 1,763 540
Deferred financing costs, net 1,553 1,707 10,750
Derivative assets 5 28 560
-------------- ------------- --------------
Total Assets $ 589,430 $ 740,145 $ 2,479,438
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-------------- ------------- --------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts payable, accrued
expenses and other $ 2,666 $ 2,610 $ 1,817
Due to manager 57 360 678
Due to affiliate - - -
Dividends payable 2,498 7,454 16,828
Intangible liabilities 73,635 75,005 77,745
Repurchase agreements 8,335 22,117 1,276,121
Collateralized debt
obligations(1) 153,362 204,769 486,608
Junior subordinated notes 51,550 51,550 51,550
Mortgages payable 219,380 219,380 219,380
Senior mortgage-backed
notes, related party - 24,087 99,815
Secured revolving credit
facility, related party 41,420 38,420 67,319
Interest payable 2,457 2,454 9,256
Derivative liabilities 32,320 31,037 61,729
-------------- ------------- --------------
Total Liabilities 587,680 679,243 2,368,846
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Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $0.001
per share, 100,000,000 shares
authorized, no shares
issued and outstanding - - -
Common stock, $0.001 par
value, 500,000,000
shares authorized,
24,875,282; 24,775,283; and
24,704,945 shares issued and
outstanding, respectively 25 25 25
Additional paid-in capital 564,441 563,900 562,930
Accumulated other
comprehensive loss (10,171) (9,724) (15,481)
Accumulated deficit (552,545) (493,299) (436,882)
-------------- ------------- --------------
Total Stockholders' Equity 1,750 60,902 110,592
-------------- ------------- --------------
Total Liabilities and
Stockholders' Equity $ 589,430 $ 740,145 $ 2,479,438
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-------------- ------------- --------------
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(1) Fair value at September 30, 2008, and June 30, 2008 and cost at
December 31, 2007.
Condensed Consolidated Statements of Operations (Unaudited)
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($ in thousands,
except share Three months ended Nine months ended
and per share Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
data) 2008 2008 2007 2008 2007
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Revenues
Interest income -
available
for sale
securities $ 21,069 $ 24,355 $ 52,945 $ 85,361 $ 153,972
Interest
income real
estate loans 936 2,207 4,512 5,755 13,241
Other interest
and dividend
income 185 218 2,220 1,072 7,196
---------- ----------- ---------- ---------- -----------
Total interest
and dividend
income 22,190 26,780 59,677 92,188 174,409
Rental income, net 5,399 5,550 4,998 16,611 10,656
---------- ----------- ---------- ---------- -----------
Total revenues 27,589 32,330 64,675 108,799 185,065
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Expenses
Interest expense 9,302 10,732 41,920 44,302 125,218
Management fees,
related party 243 418 1,416 1,328 5,597
Professional fees 480 585 857 1,733 2,843
Depreciation and
amortization 3,022 3,022 2,816 9,066 5,925
Incentive fees - - - - 124
Insurance expense 480 480 265 1,290 672
Directors' fees 86 127 173 366 513
Public company
expense 105 302 225 518 457
Commercial real
estate expenses 348 420 333 1,185 677
Provision for
loss on real
estate loans 4,401 7,386 - 20,850 -
Other expenses 237 521 105 1,133 401
---------- ----------- ---------- ---------- -----------
Total expenses 18,704 23,993 48,110 81,771 142,427
---------- ----------- ---------- ---------- -----------
Other revenues
(expenses)
Realized net gain
(loss) on sale of
securities
available for
sale, real
estate loans,
and other
investments 97 (1,263) (2,502) (4,951) (1,322)
Realized and
unrealized
gain (loss)
on derivatives (6,152) 5,351 (27,644) (44,183) (39,851)
Impairments on
available for
sale securities (26,876) (18,310) (81,293) (112,340) (103,986)
Net change in
assets and
liabilities
valued under
fair value
option (32,305) (69,355) - (134,508) -
Foreign currency
exchange gain - - (459) - 4,292
Income (loss) from
equity investments - - 741 (40) 2,179
Other (397) (295) 658 (975) 586
---------- ----------- ---------- ---------- -----------
Total other
expenses (65,633) (83,872) (110,499) (296,997) (138,102)
---------- ----------- ---------- ---------- -----------
Net loss $ (56,748) $ (75,535) $ (93,934) $ (269,969) $ (95,464)
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Net loss per
share - basic
and diluted $ (2.28) $ (3.04) $ (3.76) $ (10.88) $ (3.82)
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Weighted average
shares of common
stock outstanding:
Basic and
diluted 24,882,612 24,807,529 24,995,885 24,813,649 25,023,058
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Dividends
declared per
share of
common stock $ 0.10 $ 0.30 $ 0.68 $ 1.08 $ 2.04
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Net Investment Income (Unaudited)
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($ in thousands,
except share Three months ended Nine months ended
and per share Sept. 30, June 30, Sept. 30, Sept. 30, Sept.
