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 Quarterly Period Ended September 30, 2002
Commission File No. 0-22910
T F C E N T E R P R I S E S, I N C.
(Exact name of registrant as specified in its
charter)
| Delaware |
|
54-1306895 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
| 5425 Robin Hood Road | ||
| Suite 101 B | ||
| Norfolk, Virginia 23513 | ||
| (Address of principal executive offices) (zip code) | ||
|
| ||
| Registrant’s telephone number, including area code -- (757) 858-1400 | ||
|
| ||
| Securities registered pursuant to Section 12(b) of the Act: | ||
| None | ||
|
| ||
| Securities registered pursuant to Section 12(g) of the Act: | ||
| Common Stock, $.01 par value per share | ||
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 |
o |
As of October 8, 2002, there were 11,541,033 outstanding shares of the registrant’s $.01 par value per share common stock.
TFC ENTERPRISES, INC.
QUARTERLY REPORT ON FORM 10-Q FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
Table of Contents and 10-Q Cross Reference Index
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Page No. | |
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| Part I - Financial Information |
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| 3 | ||
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| Financial Statements- unaudited (Item 1) |
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4 | |
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5-6 | |
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7 | |
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8 | |
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9 | |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2) |
15 | |
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| Quantitative and Qualitative Disclosures about Market Risk (Item 3) |
21 | |
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| 22 | ||
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| 23 | ||
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| 24 | ||
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| 25-26 | ||
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| 27 | ||
2
TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
|
|
|
Three months ended |
|
Nine months ended |
| ||||||||
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|
|
|
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| ||||||||
| (in thousands, except per share amounts) |
|
2002 |
|
2001 |
|
2002 |
|
2001 |
| ||||
| |
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|
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| ||||
| Net income before cumulative effect of change in accounting principle |
|
$ |
910 |
|
$ |
1,604 |
|
$ |
2,692 |
|
$ |
4,583 |
|
| Cumulative effect of change in accounting principle |
|
|
— |
|
|
— |
|
$ |
(6,777 |
) |
|
— |
|
| Net (loss) income |
|
$ |
910 |
|
$ |
1,604 |
|
$ |
(4,085 |
) |
$ |
4,583 |
|
| Net income per basic common share before cumulative effect of change in accounting principle |
|
$ |
0.08 |
|
$ |
0.14 |
|
$ |
0.23 |
|
$ |
0.40 |
|
| Net income per diluted common share before cumulative effect of change in accounting principle |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
0.23 |
|
$ |
0.38 |
|
| Net (loss) income per basic common share |
|
$ |
0.08 |
|
$ |
0.14 |
|
$ |
(0.35 |
) |
$ |
0.40 |
|
| Net (loss) income per diluted common share |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
(0.34 |
) |
$ |
0.38 |
|
| Average common shares outstanding (in thousands) |
|
|
11,541 |
|
|
11,460 |
|
|
11,538 |
|
|
11,456 |
|
|
|
|
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| Performance ratios (annualized, as appropriate) |
|
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|
|
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|
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| Return on average common equity (b) |
|
|
7.82 |
% |
|
12.90 |
% |
|
7.74 |
% |
|
12.70 |
% |
| Return on average assets (b) |
|
|
1.72 |
|
|
2.48 |
|
|
1.59 |
|
|
2.35 |
|
| Yield on interest-earning assets |
|
|
18.97 |
|
|
20.39 |
|
|
18.99 |
|
|
20.92 |
|
| Cost of interest-bearing liabilities |
|
|
8.62 |
|
|
9.48 |
|
|
8.54 |
|
|
9.92 |
|
| Net interest margin |
|
|
12.37 |
|
|
12.88 |
|
|
12.22 |
|
|
13.15 |
|
| Operating expense as a percentage of average interest-earning assets |
|
|
8.92 |
|
|
8.78 |
|
|
9.08 |
|
|
9.44 |
|
| Total net charge-offs to average gross contract receivables, net of unearned interest |
|
|
10.08 |
|
|
15.52 |
|
|
13.43 |
|
|
14.79 |
|
| 60+ days delinquencies to period-end gross contract receivables |
|
|
5.30 |
|
|
6.15 |
|
|
5.30 |
|
|
6.15 |
|
| 30+ days delinquencies to period-end gross contract receivables |
|
|
7.44 |
|
|
8.96 |
|
|
7.44 |
|
|
8.96 |
|
| Total allowance, nonrefundable reserve and unearned discount to period end gross contract receivables, net of unearned interest |
|
|
5.63 |
|
|
8.36 |
|
|
5.63 |
|
|
8.36 |
|
| Equity to assets, period end |
|
|
22.65 |
|
|
19.99 |
|
|
22.65 |
|
|
19.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| Average balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest-earning assets (a) |
|
$ |
202,146 |
|
$ |
249,802 |
|
$ |
213,029 |
|
$ |
255,779 |
|
| Total assets |
|
|
211,297 |
|
|
258,800 |
|
|
225,323 |
|
|
259,874 |
|
| Interest-bearing liabilities |
|
|
154,655 |
|
|
197,892 |
|
|
168,791 |
|
|
200,602 |
|
| Equity |
|
|
46,568 |
|
|
49,753 |
|
|
46,386 |
|
|
48,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Throughout this report, ratios are based on unrounded
numbers and factors contributing to changes between periods are noted in descending order of materiality.
(a) Gross contract receivables net of unearned interest
revenue.
(b) Before cumulative effect of change in accounting principle.
3
TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
September 30, |
|
December 31, |
| |||
| (in thousands, except share amounts) |
|
2002 |
|
2001(a) |
| |||
| |
|
|
|
|
| |||
| Assets |
|
|
|
|
|
|
| |
| Cash and cash equivalents |
|
$ |
312 |
|
$ |
422 |
| |
| Restricted cash |
|
|
14,942 |
|
|
23,176 |
| |
| Net contract receivables |
|
|
186,139 |
|
|
209,291 |
| |
| Equipment and leasehold improvements, net |
|
|
1,756 |
|
|
2,094 |
| |
| Intangible assets, net |
|
|
735 |
|
|
7,770 |
| |
| Other assets |
|
|
3,646 |
|
|
4,033 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total assets |
|
$ |
207,530 |
|
$ |
246,786 |
|
|
|
|
|
|
|
|
|
| |
| Liabilities and shareholders’ equity |
|
|
|
|
|
|
| |
| Liabilities: |
|
|
|
|
|
|
| |
| Revolving lines of credit |
|
$ |
83,747 |
|
$ |
117,751 |
| |
| Automobile receivables-backed notes |
|
|
56,915 |
|
|
55,056 |
| |
| Subordinate notes and other term debt |
|
|
10,188 |
|
|
12,927 |
| |
| Accounts payable and accrued expenses |
|
|
2,945 |
|
|
2,989 |
| |
| Income taxes payable and other liabilities |
|
|
6,307 |
|
|
6,254 |
| |
| Refundable dealer reserve |
|
|
425 |
|
|
728 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total liabilities |
|
|
160,527 |
|
|
195,705 |
|
| Shareholders’ equity: |
|
|
|
|
|
|
| |
| Preferred stock, $.01 par value, 1,000,000 shares authorized; none outstanding |
|
|
— |
|
|
— |
| |
| Common stock, $.01 par value, 40,000,000 shares authorized; 11,541,033 and 11,534,890 shares issued and outstanding, respectively |
|
|
51 |
|
|
51 |
| |
| Additional paid-in capital |
|
|
56,194 |
|
|
56,187 |
| |
| Accumulated deficit |
|
|
(9,242 |
) |
|
(5,157 |
) | |
|
|
|
|
|
|
|
|
| |
|
|
Total shareholders’ equity |
|
|
47,003 |
|
|
51,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
207,530 |
|
$ |
246,786 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
(a) Numbers are extracted from audited information.
4
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
Nine months ended |
| |||||
|
|
|
|
| |||||
| (in thousands, except per share amounts) |
|
2002 |
|
2001 |
| |||
| |
|
|
|
|
| |||
| Interest and other finance revenue |
|
$ |
30,339 |
|
$ |
40,140 |
| |
| Interest expense |
|
|
10,810 |
|
|
14,923 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Net interest revenue |
|
|
19,529 |
|
|
25,217 |
|
| Provision for credit losses |
|
|
1,761 |
|
|
854 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Net interest revenue after provision for credit losses |
|
|
17,768 |
|
|
24,363 |
|
|
|
|
|
|
|
|
|
| |
| Other revenue: |
|
|
|
|
|
|
| |
| Commissions on ancillary products |
|
|
800 |
|
|
685 |
| |
| Other |
|
|
318 |
|
|
864 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total other revenue |
|
|
1,118 |
|
|
1,549 |
|
|
|
|
|
|
|
|
|
| |
|
|
Total net interest and other revenue |
|
|
18,886 |
|
|
25,912 |
|
|
|
|
|
|
|
|
|
| |
| Operating expense: |
|
|
|
|
|
|
| |
| Salaries |
|
|
7,202 |
|
|
9,310 |
| |
| Employee benefits |
|
|
1,480 |
|
|
1,768 |
| |
| Occupancy |
|
|
904 |
|
|
864 |
| |
| Equipment |
|
|
976 |
|
|
1,117 |
| |
| Amortization of intangible assets |
|
|
230 |
|
|
833 |
| |
| Other |
|
|
3,722 |
|
|
4,215 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total operating expense |
|
|
14,514 |
|
|
18,107 |
|
|
|
|
|
|
|
|
|
| |
| Income before income taxes |
|
|
4,372 |
|
|
7,805 |
| |
| Provision for income taxes |
|
|
1,680 |
|
|
3,222 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Net income before cumulative effect of change in accounting principle |
|
|
2,692 |
|
$ |
4,583 |
|
|
|
|
|
|
|
|
|
| |
|
|
Cumulative effect of change in accounting principle (Note 5) |
|
|
(6,777 |
) |
|
— |
|
|
|
|
|
|
|
|
|
| |
|
|
Net (loss) income |
|
$ |
(4,085 |
) |
$ |
4,583 |
|
|
|
|
|
|
|
|
|
|
|
| Net income per common share before cumulative effect of change in accounting principle: |
|
|
|
|
|
|
| |
|
|
Basic |
|
$ |
0.23 |
|
$ |
0.40 |
|
|
|
Diluted |
|
$ |
0.23 |
|
$ |
0.38 |
|
| Cumulative effect of change in accounting principle: |
|
|
|
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