| Delaware (State or other jurisdiction of incorporation or organization) |
48-1090909 (IRS Employer Identification No.) |
| 5775 Roscoe Court San Diego, California (Address of principal executive offices) |
92123 (Zip 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 last 90 days. | |
| Yes [X ] No [ ] |
| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) | |
| Yes[ ] No [X] |
There were 7,434,633 shares of common stock outstanding as of August 12, 2003.
1
| June 30, 2003 (unaudited) |
December 31, 2002 (A) | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash | $ | 4,250 | $ | 752 | ||||
| Restricted cash | 593 | 3,105 | ||||||
| Investment in receivable portfolios, net (Notes 5 and 6) | 76,910 | 64,168 | ||||||
| Investment in retained interest (Note 6) | 3,798 | 8,256 | ||||||
| Property and equipment, net (Note 7) | 3,472 | 3,541 | ||||||
| Deferred tax assets, net (Note 9) | – | 6,813 | ||||||
| Other assets | 3,334 | 3,339 | ||||||
| Total assets | $ | 92,357 | $ | 89,974 | ||||
| Liabilities and stockholders' equity | ||||||||
| Accounts payable and accrued liabilities (Note 8) | $ | 8,530 | $ | 10,688 | ||||
| Accrued profit sharing arrangement (Note 8) | 11,116 | 11,180 | ||||||
| Income tax payable (Note 9) | 394 | 531 | ||||||
| Deferred tax liability, net (Note 9) | 24 | – | ||||||
| Notes payable and other borrowings, net of discount | ||||||||
| of $672 and $742 as of June 30, 2003, and | ||||||||
| December 31, 2002, respectively (Note 8) | 41,121 | 47,689 | ||||||
| Capital lease obligations (Note 13) | 610 | 344 | ||||||
| Total liabilities | 61,795 | 70,432 | ||||||
| Commitments and contingencies (Notes 13 and 14) | ||||||||
| Stockholders' equity (Notes 1, 4, 10, 11, 12, and 13): | ||||||||
| Convertible preferred stock, $.01 par value, 5,000 shares | ||||||||
| authorized, 1,000 shares issued and outstanding | ||||||||
| (Liquidation value of $93,000 at June 30, 2003) | 10 | 10 | ||||||
| Common stock, $.01 par value, 50,000 shares authorized, | ||||||||
| and 7,431 shares and 7,411 shares issued and outstanding | ||||||||
| at June 30, 2003 and December 31, 2002, respectively | 74 | 74 | ||||||
| Additional paid-in capital | 31,534 | 31,479 | ||||||
| Accumulated deficit | (1,163 | ) | (12,388 | ) | ||||
| Accumulated other comprehensive income | 107 | 367 | ||||||
| Total stockholders' equity | 30,562 | 19,542 | ||||||
| Total liabilities and stockholders' equity | $ | 92,357 | $ | 89,974 | ||||
(A) Derived from the audited
consolidated financial statements as of December 31, 2002.
See accompanying
notes to condensed consolidated financial statements
2
| Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 | |||||||||||
| Revenues | ||||||||||||||
| Revenue from portfolio receivables (Note 5) | $ | 28,001 | $ | 17,985 | $ | 55,257 | $ | 33,232 | ||||||
| Revenue from retained interest (Note 6) | 86 | 1,419 | 214 | 3,218 | ||||||||||
| Servicing fees and related revenue (Note 13) | 304 | 725 | 1,043 | 1,875 | ||||||||||
| Total revenues | 28,391 | 20,129 | 56,514 | 38,325 | ||||||||||
| Operating expenses | ||||||||||||||
| Salaries and employee benefits | 9,482 | 8,934 | 19,129 | 17,202 | ||||||||||
| Other operating expenses | 2,634 | 1,837 | 5,011 | 3,348 | ||||||||||
| Cost of legal collections | 4,161 | 2,453 | 7,518 | 4,469 | ||||||||||
| General and administrative expenses | 1,539 | 1,547 | 3,013 | 2,971 | ||||||||||
| Depreciation and amortization | 477 | 598 | 1,013 | 1,191 | ||||||||||
| Total operating expenses | 18,293 | 15,369 | 35,684 | 29,181 | ||||||||||
| Income before other income (expense) | ||||||||||||||
| and income taxes | 10,098 | 4,760 | 20,830 | 9,144 | ||||||||||
| Other income and expense | ||||||||||||||
| Interest expense | (4,546 | ) | (3,990 | ) | (8,956 | ) | (8,012 | ) | ||||||
| Other income | 15 | 66 | 7,289 | 157 | ||||||||||
| Income before income taxes | 5,567 | 836 | 19,163 | 1,289 | ||||||||||
| Income tax provision | (2,258 | ) | (144 | ) | (7,687 | ) | (363 | ) | ||||||
| Net Income | 3,309 | 692 | 11,476 | 926 | ||||||||||
| Other comprehensive income : | ||||||||||||||
| Increase (decrease) in unrealized gain on | ||||||||||||||
| non-qualified deferred compensation plan assets | (65 | ) | 20 | (46 | ) | 20 | ||||||||
| Decrease in unrealized gain on retained interest | ||||||||||||||
| in securitized receivables, net of tax | (87 | ) | (216 | ) | (214 | ) | (540 | ) | ||||||
| Comprehensive income | $ | 3,157 | $ | 496 | $ | 11,216 | $ | 406 | ||||||
| Earnings per share - Basic (Note 10) | $ | 0.43 | $ | 0.08 | $ | 1.51 | $ | 0.10 | ||||||
| Earnings per share - Diluted (Note 10) | $ | 0.17 | $ | 0.04 | $ | 0.58 | $ | 0.06 | ||||||
| Shares used for computation | ||||||||||||||
| Basic (Note 10) | 7,421 | 7,367 | 7,416 | 7,265 | ||||||||||
| Diluted (Note 10) | 20,000 | 17,838 | 19,723 | 14,936 | ||||||||||
See accompanying notes to condensed consolidated financial statements
3
| Six Months Ended June 30 |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | |||||||
| Operating activities | ||||||||
| Gross Collections | $ | 93,733 | $ | 69,620 | ||||
| Proceeds from litigation settlement | 11,100 | – | ||||||
| Less: | ||||||||
| Amounts collected on behalf of third parties | (3,027 | ) | (5,835 | ) | ||||
| Amounts applied to principal of receivable portfolios | (31,135 | ) | (21,398 | ) | ||||
| Amounts applied to principal of securitization 98-1 | (4,100 | ) | (5,937 | ) | ||||
| Litigation settlement proceeds applied to principal of | ||||||||
| receivable portfolios | (692 | ) | – | |||||
| Legal and other costs related to litigation settlement | (3,198 | ) | – | |||||
| Servicing fees | 1,043 | 1,876 | ||||||
| Operating Expenses | ||||||||
| Salaries and employee benefits | (19,882 | ) | (17,325 | ) | ||||
| Other operating expenses | (5,147 | ) | (3,662 | ) | ||||
| Collection legal costs | (7,518 | ) | (4,469 | ) | ||||
| General and administrative | (2,573 | ) | (3,301 | ) | ||||
| Interest payments | (10,694 | ) | (2,625 | ) | ||||
| Other income | 79 | 157 | ||||||
| Decrease (increase) in restricted cash | 2,512 | (1,172 | ) | |||||
| Income taxes | (808 | ) | – | |||||
| Net cash provided by operating activities | 19,693 | 5,929 | ||||||
| Investing activities | ||||||||
| Purchases of receivable portfolios | (45,073 | ) | (23,622 | ) | ||||
| Collections applied to principal of receivable portfolios | 31,135 | 21,398 | ||||||
| Litigation settlement proceeds applied to principal of | ||||||||
| receivable portfolios | 692 | – | ||||||
| Collections applied to principal of securitization 98-1 | 4,100 | 5,937 | ||||||
| Proceeds from put-backs of receivable portfolios | 504 | 389 | ||||||
| Purchases of property and equipment | (403 | ) | (321 | ) | ||||
| Net cash provided by (used in) investing activities | (9,045 | ) | 3,781 | |||||
| Financing activities | ||||||||
| Proceeds from notes payable and other borrowings | 39,993 | 28,099 | ||||||
| Repayment of notes payable and other borrowings | (46,629 | ) | (41,864 | ) | ||||
| Capitalized loan costs relating to financing arrangement | – | (154 | ) | |||||
| Proceeds from exercise of common stock options | 13 | – | ||||||
| Proceeds from exercise of common stock warrants | – | 2 | ||||||
| Proceeds from sale of preferred stock | – | 4,590 | ||||||
| Payment of preferred dividend | (250 | ) | – | |||||
| Repayment of capital lease obligations | (277 | ) | (506 | ) | ||||
| Net cash used in financing activities | (7,150 | ) | (9,833 | ) | ||||
| Net increase (decrease) in cash | 3,498 | (123 | ) | |||||
| Cash, beginning of period | 752 | 1,412 | ||||||
| Cash, end of period | $ | 4,250 | $ | 1,289 | ||||
See accompanying notes to condensed consolidated financial statements
4
| Six Months Ended June 30 |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | |||||||
| Net income | $ | 11,476 | $ | 926 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization | 1,013 | 1,191 | ||||||
| Amortization of loan costs and debt discount | 293 | 429 | ||||||
| Deferred income tax expense | 7,023 | 364 | ||||||
| Increase in income on retained interest | ||||||||