PHH reports 19 percent earnings increase Executive's annual bonus more than doubles to $1 million

August 20, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

PHH Corp. yesterday reported a 19 percent earnings increase as shareholders of the Hunt Valley-based real estate, mortgage and vehicle management company convened for a brief and friendly annual meeting.

The meeting included no questions from shareholders about the company's sale of its corporate relocation unit or of chairman and CEO Robert D. Kunisch's $1 million bonus -- an amount 2 1/2 times his bonus last year.

For the company's first quarter, which ended July 31, PHH's net income was $21.8 million, compared with $18.3 million in the same period last year. Earnings per share increased 17 percent, from 52 cents to 61 cents. Analysts had anticipated earnings between 55 cents and 58 cents.

At a meeting that lasted about 45 minutes, Kunisch attributed the earnings gain to "a good balance of all our business segments."

Operating income for vehicle management, PHH's largest unit, soared 39 percent to $15.4 million. Kunisch cited the strength of the United Kingdom truck business and lower costs domestically.

PHH's real estate services business reported a 13 percent increase in operating income, to $7.7 million. The number of homes sold and the value of those homes each increased by 6 percent. The home-finding and moving businesses showed "solid gains," Kunisch said.

The company also benefited from the sale of its Fantus corporate relocation division to Deloitte and Touche LLP. Company officials said the price was between $2.5 million and $3 million.

Roy Meierhenry, PHH's chief financial officer, said profits from the sale were offset by investments in computer systems in PHH's Canadian real estate and in PHH's asset management businesses.

The mortgage banking business' operating income increased 2 percent to $14 million. Its servicing portfolio was $23 billion, 34 percent higher than in the same period last year. Loan closings increased 47 percent. But revenues "were partially offset by increased costs" and training expenses, Kunisch said.

Yesterday's report marked the 19th consecutive quarterly earnings increase for the company. PHH's stock closed yesterday at $29.125, up 37.5 cents.

"The business is doing very well," said Clifford Ransom, an analyst who follows PHH for Nat- West Securities Corp. "This is not a comet-in-the-sky kind of company. It's steady Eddie. They are simply executing the game plan they came up with five years ago."

Part of PHH's plan is the sale of Fantus, a corporate relocation unit seen by some analysts as a drag on the company's stock. The sale became effective last month. Fantus' 40 employees have been offered the opportunity to keep their jobs, Meierhenry said.

After yesterday's meeting, Kunisch said Fantus "just broke even" and failed to contribute to the company's growth. He also said that big corporate moves that were common in the 1980s and early 1990s are slowing down.

Calling Fantus a small part of PHH, Ransom said it "was like a fly on a rhino." Its sale is "just not material" to the company's value, he said.

Kunisch said his fiscal 1996 bonus of $1,030,000 -- an increase from $395,560 last year -- was based on the company's earnings per share and return on equity.

Kunisch also said the bonus was higher than last year's because it included not only a sum from the annual incentive plan, but also a sum from a long-term incentive plan, which rewards executive performance in even-numbered years.

Ransom said he wouldn't call the bonus a small amount. "But I'm not losing sleep over it," he said. "The company had record earnings and is in better shape than it's been in a long, long time," he said.

He credited Kunisch, in his seventh year as CEO and his 30th year with PHH, with many accomplishments.

Ransom called Kunisch "the principal architect" of cross-selling, a term describing the company's attempts to sell a range of services to its customer base. He also said Kunisch pushed the company into the marketing of its services to trade groups, unions and other groups.

Pub Date: 8/20/96

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