-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M35j5xJz/dnENVtC+A6yjvh4/5A93sdUZn8XujRlMfithyLkUDgKyHHkcFih6RO7 1zZEJDkxgFfBXnsBeUKq+A== 0000854711-97-000004.txt : 19970610 0000854711-97-000004.hdr.sgml : 19970610 ACCESSION NUMBER: 0000854711-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970609 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINANCIAL FEDERAL CORP CENTRAL INDEX KEY: 0000854711 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS BUSINESS CREDIT INSTITUTION [6159] IRS NUMBER: 880244792 STATE OF INCORPORATION: NV FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20220 FILM NUMBER: 97620885 BUSINESS ADDRESS: STREET 1: 400 PARK AVE STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128883344 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended: April 30, 1997 Commission file number: 1-12006 FINANCIAL FEDERAL CORPORATION (Exact name of registrant as specified in its charter) Nevada 88-0244792 (State of incorporation) (I.R.S. Employer Identification Number) 400 Park Avenue, New York, NY 10022 (Address of principal executive offices) (Zip code) (212) 888-3344 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At June 6, 1997, 9,842,482 shares of the Registrant's common stock, $.50 par value, were outstanding. FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES Quarterly Report on Form 10-Q for the quarter ended April 30, 1997 INDEX Part I - Financial Information Page No. Item 1 Financial Statements - FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet at April 30, 1997 (unaudited) and July 31, 1996 (audited) 3 Consolidated Statement of Operations and Retained Earnings for the three months and nine months ended April 30, 1997 and 1996 (unaudited) 4 Consolidated Statement of Cash Flows for the nine months ended April 30, 1997 and 1996 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 Part II - Other Information Item 4 Submission of matters to a vote of Security Holders 9 Item 6 Exhibits and Reports on Form 8-K 9 FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
April 30, 1997 (Unaudited) July 31, 1996 * ------------ ------------ ASSETS Cash $2,569,000 $2,426,000 Finance receivables 541,369,000 437,706,000 Less allowance for possible losses (9,638,000) (8,008,000) ------------ ------------ Finance receivables - net 531,731,000 429,698,000 Other assets 1,036,000 963,000 ------------ ------------ TOTAL ASSETS $535,336,000 $433,087,000 ============ ============ LIABILITIES Senior debt: Short - term $38,829,000 $830,000 Long - term ($12,713,000 at April 30, 1997 and $9,376,000 at July 31, 1996 due to related parties) 370,000,000 310,000,000 Accrued interest, taxes and other liabilities 11,749,000 12,160,000 Subordinated debentures ($2,181,000 at April 30, 1997 and $3,178,000 at July 31, 1996 due to related parties) 2,290,000 6,957,000 Deferred income taxes 10,379,000 8,949,000 ------------ ------------ Total liabilities 433,247,000 338,896,000 ------------ ------------ STOCKHOLDERS' EQUITY Common stock 4,921,000 4,980,000 Additional paid-in capital 57,316,000 58,289,000 Warrants 29,000 29,000 Retained earnings 39,823,000 30,893,000 ------------ ------------ Total stockholders' equity 102,089,000 94,191,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $535,336,000 $433,087,000 ============ ============ * Reproduced from balance sheet included in the 1996 Annual Report to Stockholders. The notes to consolidated financial statements are made a part hereof.
FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
Three Months Ended April 30, Nine Months Ended April 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Finance income $13,999,000 $10,905,000 $39,885,000 $31,821,000 Interest expense 5,942,000 4,695,000 16,698,000 14,386,000 ------------ ------------ ------------ ------------ Finance income before provision for possible losses on finance receivables 8,057,000 6,210,000 23,187,000 17,435,000 Provision for possible losses on finance receivables 650,000 400,000 1,800,000 1,220,000 ------------ ------------ ------------ ------------ Net finance income 7,407,000 5,810,000 21,387,000 16,215,000 Salaries and other expenses 2,062,000 1,895,000 6,116,000 5,171,000 ------------ ------------ ------------ ------------ Earnings before income taxes 5,345,000 3,915,000 15,271,000 11,044,000 Provision for income taxes 2,058,000 1,476,000 5,878,000 4,164,000 ------------ ------------ ------------ ------------ NET EARNINGS 3,287,000 2,439,000 9,393,000 6,880,000 Retirements of treasury stock (463,000) (840,000) Three-for-two stock split (1,372,000) Retained earnings - beginning of period 36,536,000 25,724,000 30,893,000 23,495,000 ------------ ------------ ------------ ------------ RETAINED EARNINGS - END OF PERIOD $39,823,000 $28,163,000 $39,823,000 $28,163,000 ============ ============ ============ ============ Earnings per common share: Primary $0.31 $0.27 $0.87 $0.76 ============ ============ ============ ============ Fully diluted $0.31 $0.27 $0.87 $0.75 ============ ============ ============ ============ Average number of shares used: Primary 10,765,208 9,153,099 10,741,687 9,095,175 ============ ============ ============ ============ Fully diluted 10,765,208 9,153,099 10,765,661 9,136,854 ============ ============ ============ ============ The notes to consolidated financial statements are made a part hereof.
FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended April 30, ----------------------------- 1997 1996 ------------ ------------ Cash flows from operating activities: Net earnings $9,393,000 $6,880,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 163,000 142,000 Provision for possible losses on finance receivables 1,800,000 1,220,000 Amortization of deferred origination costs 3,049,000 2,520,000 Deferred income taxes 1,430,000 880,000 (Increase) in other assets (112,000) (303,000) Increase (decrease) in accrued interest, taxes and other liabilities (411,000) 1,697,000 ------------ ------------ Net cash provided by operating activities 15,312,000 13,036,000 ------------ ------------ Cash flows from investing activities: Finance receivables: Originated (332,188,000) (246,739,000) Collected 225,306,000 181,461,000 Other (124,000) (202,000) ------------ ------------ Net cash (used in) investing activities (107,006,000) (65,480,000) ------------ ------------ Cash flows from financing activities: Commercial paper: Maturities 90 days or less (net) 10,422,000 4,418,000 Maturities greater than 90 days: Proceeds 115,167,000 10,179,000 Repayments (75,690,000) (12,328,000) Notes payable - banks: Maturities 90 days or less (net) 43,100,000 64,425,000 Maturities greater than 90 days: Proceeds 5,000,000 Repayments (55,000,000) Proceeds from institutional term notes 55,000,000 Repayment of senior subordinated note (15,000,000) Repayments of subordinated debentures (4,667,000) Acquisitions of treasury stock - 124,300 shares (1,630,000) Proceeds from exercise of stock options 61,000 56,000 Tax benefit relating to stock options 74,000 ------------ ------------ Net cash provided by financing activities 91,837,000 51,750,000 ------------ ------------ NET INCREASE (DECREASE) IN CASH 143,000 (694,000) Cash - beginning of period 2,426,000 3,090,000 ------------ ------------ CASH - END OF PERIOD $2,569,000 $2,396,000 ============ ============ Supplemental disclosures of cash flow information: Interest paid $16,453,000 $14,653,000 ============ ============ Income taxes paid $4,322,000 $2,481,000 ============ ============ The notes to consolidated financial statements are made a part hereof.
FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION In the opinion of Financial Federal Corporation and Subsidiaries (the "Company"), the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as at April 30, 1997, and the results of operations and cash flows for the three and nine month periods ended April 30, 1997 and 1996. These condensed financial statements should be read in conjunction with the consolidated financial statements and note disclosures of Financial Federal Corporation and Subsidiaries for the fiscal year ended July 31, 1996 included in the Company's July 31, 1996 Annual Report on Form 10-K. The consolidated results of operations for the three and nine month periods ended April 30, 1997 and 1996 are not necessarily indicative of the results for the respective full years. NOTE 2 - EARNINGS PER COMMON SHARE Earnings per common share is calculated by dividing net earnings by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents consist of dilutive stock options and warrants that are assumed to be exercised for the calculation. NOTE 3 - LONG-TERM SENIOR DEBT At April 30, 1997, the Company had $315.0 million of committed unsecured revolving credit facilities expiring after one year from various banks. Long-term senior debt of $370.0 million at April 30, 1997 includes $89.0 million of borrowings under these facilities, $226.0 million of commercial paper and short-term bank borrowings which are supported by these facilities and $55.0 million of term notes payable in September 2001. The Company is presently negotiating the private placement of $50.0 million of senior term notes with maturities expected to be in the range of three to three and one half years. NOTE 4 - COMMON STOCK REPURCHASE PROGRAM In May 1997, the Board of Directors authorized an increase in the size of Company's common stock repurchase program from $2.5 million to $4.1 million. As of June 6, 1997, 124,300 shares have been repurchased for $1.6 million. Shares repurchased are retired. NOTE 5 - RECENT PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This standard, which becomes effective in the Company's quarter ending January 31, 1998, replaces the current primary and fully diluted earnings per share presentation, both of which include the effects of common stock equivalents, with basic and diluted earnings per share. Under SFAS 128, basic earnings per share, which is calculated by dividing net income by the weighted average number of common shares outstanding during the period, would be $0.33 and $0.95 per share for the three and nine months ended April 30, 1997, respectively. Diluted earnings per share would be the same as primary earnings per share for the three and nine months ended April 30, 1997. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." This standard requires either the recognition or disclosure of compensation expense based on the fair value of equity instruments granted to employees. The Company has adopted the disclosure provisions of this standard in this fiscal year ending July 31, 1997. PART I Item 2 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Comparison of Three Months Ended April 30, 1997 to Three Months Ended April 30, 1996 Finance income increased 28% to $14.0 million in the third quarter of fiscal 1997 from $10.9 million in the third quarter of fiscal 1996. The increase was primarily the result of the $132 million, or 34%, increase in the amount of average finance receivables outstanding from the third quarter of fiscal 1996 ($391 million) to the third quarter of fiscal 1997 ($523 million) and was partially offset by lower finance rates charged by the Company. Financings booked in the third quarter of fiscal 1997 increased 23% to $111 million from $90 million in the third quarter of fiscal 1996 primarily as a result of the expansion of the Company's marketing efforts into new geographic areas and further penetration into its existing areas. Interest expense increased 27% to $5.9 million in the third quarter of fiscal 1997 from $4.7 million in the third quarter of fiscal 1996. The overall increase was mainly due to the 29% increase in average borrowings during the third quarter of fiscal 1997 from the third quarter of fiscal 1996, partially offset by decreases in costs of funds. Finance income before provision for possible losses on finance receivables increased by 30% to $8.1 million in the third quarter of fiscal 1997 from $6.2 million in the third quarter of fiscal 1996. Finance income before provision for possible losses, expressed as an annual percentage of average finance receivables outstanding, decreased to 6.2% in the third quarter of fiscal 1997 from 6.3% in the third quarter of fiscal 1996. The decrease was primarily due to a decrease in the Company's net interest spread, partially offset by the interest savings of approximately $400,000 on the debt repaid from the net proceeds of the Company's public offering of 1.7 million shares of its common stock in May 1996. The provision for possible losses on finance receivables increased by 63% to $650,000 in the third quarter of fiscal 1997 from $400,000 in the third quarter of fiscal 1996. The increase was primarily due to the increase in finance receivables. The allowance for possible losses, which increased to $9.6 million at April 30, 1997 from $7.6 million at April 30, 1996, was 1.8% of finance receivables at April 30, 1997 as compared to 1.9% at April 30, 1996. Management continually evaluates the allowance for possible losses based on past, current and projected economic, industry and geographic conditions. Finance receivables on which the Company has suspended income recognition decreased to $4.8 million, or 0.9% of total finance receivables, at April 30, 1997, from $5.8 million, or 1.4% of total finance receivables, at April 30, 1996. Salaries and other expenses increased 9% to $2.1 million in the third quarter of fiscal 1997 from $1.9 million in the third quarter of fiscal 1996. The increase was primarily due to increased marketing costs and salary increases. Net earnings increased by 35% to $3.3 million in the third quarter of fiscal 1997 from $2.4 million in the third quarter of fiscal 1996. Primary and fully diluted earnings per share increased by 15% to $0.31 per share in the third quarter of fiscal 1997 from $0.27 per share in the third quarter of fiscal 1996. The percentage increase in earnings per share was lower than the percentage increase in net earnings primarily due to the sale of 1.7 million shares of the Company's common stock in a public offering in May 1996. Comparison of Nine Months Ended April 30, 1997 to Nine Months Ended April 30, 1996 Finance income increased 25% to $39.9 million in the first nine months of fiscal 1997 from $31.8 million in the first nine months of fiscal 1996. The increase was primarily the result of the $117 million, or 31%, increase in the amount of average finance receivables outstanding from the first nine months of fiscal 1996 ($372 million) to the first nine months of fiscal 1997 ($489 million) and was partially offset by decreased finance rates charged by the Company on new financings and on variable rate finance receivables as a result of the period to period decline in average market interest rates. Financings booked in the first nine months of fiscal 1997 increased 35% to $329 million from $244 million in the first nine months of fiscal 1996 primarily as a result of the expansion of the Company's marketing efforts into new geographic areas and further penetration into its existing areas. In November 1996, the Company opened a new full service office in Mesa, Arizona. Interest expense increased 16% to $16.7 million in the first nine months of fiscal 1997 from $14.4 million in the first nine months of fiscal 1996. The overall increase was mainly due to the 24% increase in average borrowings during the first nine months of fiscal 1997 from the first nine months of fiscal 1996, partially offset by decreases in costs of funds and average market interest rates. Finance income before provision for possible losses on finance receivables increased by 33% to $23.2 million in the first nine months of fiscal 1997 from $17.4 million in the first nine months of fiscal 1996. Finance income before provision for possible losses, expressed as an annual percentage of average finance receivables outstanding, increased to 6.3% in the first nine months of fiscal 1997 from 6.2% in the first nine months of fiscal 1996. The increase was primarily due to the interest savings of approximately $1.2 million on the debt repaid from the net proceeds of the Company's public offering of 1.7 million shares of its common stock in May 1996, offset by a slight decrease in the Company's net interest spread. The provision for possible losses on finance receivables increased by 48% to $1.8 million in the first nine months of fiscal 1997 from $1.2 million in the first nine months of fiscal 1996. The increase was primarily due to the increase in finance receivables. Salaries and other expenses increased 18% to $6.1 million in the first nine months of fiscal 1997 from $5.2 million in the first nine months of fiscal 1996. The increase was primarily due to increased marketing costs and salary increases. Net earnings increased by 37% to $9.4 million in the first nine months of fiscal 1997 from $6.9 million in the first nine months of fiscal 1996. Primary earnings per share increased by 14% to $0.87 per share in the first nine months of fiscal 1997 from $0.76 per share in the first nine months of fiscal 1996 and fully diluted earnings per share increased by 16% to $0.87 per share in the first nine months of fiscal 1997 from $0.75 per share in the first nine months of fiscal 1996. The increases in earnings per share were lower than the increase in net earnings primarily due to the sale of 1.7 million shares of the Company's common stock in a public offering in May 1996. LIQUIDITY AND CAPITAL RESOURCES The Company endeavors to maximize its liquidity by diversifying its sources of funds, which include cash flows from operations, dealer placed and direct issuance of commercial paper, borrowings under long-term and short-term revolving credit facilities with banks, placements of term debt and sales of additional equity. The Company issues investment grade commercial paper directly and through a $250.0 million program with recognized commercial paper dealers. Commercial paper outstanding at April 30, 1997 was $239.9 million. All of the Company's commercial paper is unsecured and matures within 270 days. Increases in commercial paper are generally offset by decreases in bank borrowings, and vice versa. The Company's policy is to maintain unused committed revolving credit facilities from banks greater than the amount of commercial paper outstanding. At April 30, 1997, the Company had $315.0 million of long-term committed unsecured revolving credit facilities with various banks under which $89.0 million of borrowings were outstanding and $70.0 million of short-term committed unsecured revolving credit facilities with various banks under which $25.0 million of borrowings were outstanding. At April 30, 1997, the Company also had $55.0 million of institutional term notes due on September 1, 2001 and was negotiating the private placement of $50.0 million of senior term notes with maturities expected to be in the range of three to three and one half years. PART II Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the quarter ended April 30, 1997. Item 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 11 - Computation of Earnings Per Share 27 - Financial Data Schedule (EDGAR version only) (b) Reports on Form 8-K The Company did not file any Reports on Form 8-K during the quarter ended April 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FINANCIAL FEDERAL CORPORATION (Registrant) By: /s/ Michael C. Palitz Executive Vice President and Treasurer By: /s/ David H. Hamm Controller and Assistant Treasurer June 9, 1997 (Date) INDEX TO EXHIBITS Exhibit No. Exhibit Page 11 Computation of Earnings Per Share 12 27 Financial Data Schedule (EDGAR version only) EX-11 2 Exhibit 11 FINANCIAL FEDERAL CORPORATION & SUBSIDIARIES SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
Three months ended April 30, Nine months ended April 30, ---------------------------- --------------------------- 1997 1996 1997 1996 ----------- ------------ ---------- ----------- PRIMARY Net earnings for primary per share amounts $3,287,000 $2,439,000 $9,393,000 $6,880,000 ========== ========== ========== ========== Weighted average number of common shares outstanding 9,842,390 8,235,342 9,862,800 8,235,342 Add - common equivalent shares (determined using the "treasury stock" method) 922,818 917,757 878,887 859,833 --------- --------- --------- --------- Weighted average number of shares used in calculation of primary net earnings per common share 10,765,208 9,153,099 10,741,687 9,095,175 ========== ========= ========== ========= Primary net earnings per common share $0.31 $0.27 $0.87 $0.76 ===== ===== ===== ===== FULLY DILUTED Net earnings for fully diluted per share amounts $3,287,000 $2,439,000 $9,393,000 $6,880,000 ========== ========== ========== ========== Weighted average number of shares used in calculation of fully diluted net earnings per common share 10,765,208 9,153,099 10,765,661 9,136,854 ========== ========= ========== ========= Fully diluted net earnings per common share $0.31 $0.27 $0.87 $0.75 ===== ===== ===== =====
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF FINANCIAL FEDERAL CORPORATION AND SUBSIDIARIES AS OF APRIL 30, 1997 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE NINE MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS JUL-31-1997 APR-30-1997 2569 0 541369 9638 0 0 0 0 535336 0 0 0 0 4921 97168 535336 0 39885 0 0 0 1800 16698 15271 5878 9393 0 0 0 9393 .87 .87 THE FINANCIAL STATEMENTS INCLUDE A NONCLASSIFIED BALANCE SHEET
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