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Popular Inc. has a market cap of $1.71 billion; its shares were traded at around $2.68 with and P/S ratio of 0.62. BPOP is in the portfolios of Daniel Loeb of Third Point, LLC, Steve Mandel of Lone Pine Capital, Arnold Schneider of Schneider Capital Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Richard Pzena of Pzena Investment Management LLC, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:The Corporation reported a net loss of $55.8 million for the quarter ended June 30, 2010, compared with a net loss of $183.2 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, the Corporation’s net loss totaled $140.9 million, compared to a net loss of $235.7 million for the same period in 2009. Table A provides selected financial data and performance indicators for the quarters ended June 30, 2010 and 2009.
As indicated earlier, depositary shares representing an interest in contingent convertible perpetual non-cumulative preferred stock, Series D (the “Preferred Stock”) were converted into common stock upon shareholder approval of a charter amendment to increase the Corporation’s authorized shares of common stock in May 2010. This approval triggered the conversion of the Preferred Stock into approximately 383 million shares of common stock. Accordingly, the conversion resulted in a non-cash beneficial conversion of $191.7 million, representing the intrinsic value between the conversion rate of $3.00 and the common stock closing price of $3.50 on April 13, 2010, the date the Preferred Stock was offered. The conversion was recorded as a deemed dividend to the preferred shareholders reducing retained earnings (with no impact in consolidated net income or loss), with a corresponding offset to surplus (paid in capital), and thus did not affect total shareholders’ equity or the book value of the common stock. However, the deemed dividend on preferred stock increased the net loss attributable to common shareholders and affected the calculation of basic and diluted net loss per common share for the quarter and six months ended June 30, 2010.
As indicated in previous filings with the SEC, in late 2008, the Corporation discontinued the operations of Popular Financial Holdings (“PFH”) by selling assets and closing service branches and other units. The loss from discontinued operations, net of taxes, for the quarter and six months ended June 30, 2009 was $6.6 million and $16.5 million, respectively. This loss was primarily related to salary and other expenses incurred in providing loan portfolio servicing to affiliated companies and other costs for employees that were retained for a transition period, as well as adjustments to indemnity reserves on loans sold in prior periods. The results of PFH are presented as part of “Loss from discontinued operations, net of income tax” in Table A. The discussions in this MD&A pertain to Popular, Inc.’s continuing operations, unless otherwise indicated.
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