SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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FINANCIAL FEDERAL CORPORATION
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FINANCIAL FEDERAL
CORPORATION
Notice of Annual
Meeting of Stockholders
and Proxy Statement
Tuesday, December 9, 2003
at 10:00 a.m. Eastern Time
270 Park Avenue, 11th Floor
New York, New York 10017
FINANCIAL FEDERAL CORPORATION
733 THIRD AVENUE, 7TH FLOOR
NEW YORK, NEW YORK 10017
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, DECEMBER 9, 2003
10:00 a.m.
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(the "Annual Meeting" or "Meeting") of Financial Federal Corporation,
a Nevada corporation (the "Company"), will be held at 270 Park Avenue,
11th Floor, New York, New York 10017 on Tuesday, December 9, 2003, at
10:00 a.m. Eastern Time, for the following purposes:
(1) Electing six directors to serve until the next annual
meeting of stockholders;
(2) Ratifying the appointment of KPMG LLP as the
Company's independent public accountants for the fiscal
year ending July 31, 2004; and
(3) Transacting such other business as may properly come
before the Annual Meeting.
The Board of Directors of the Company has fixed the close of
business on October 22, 2003 as the record date for the determination
of stockholders entitled to notice of and to vote at the Annual
Meeting. The list of stockholders entitled to vote at the Annual
Meeting will be available for inspection by any stockholder for any
valid purpose related to the Annual Meeting at the office of Financial
Federal Corporation, 733 Third Avenue, 7th Floor, New York, New York
10017 for the ten days prior to the Annual Meeting. The list will
also be available during the Annual Meeting for inspection by any
stockholder present at the Meeting. We are enclosing a copy of the
Company's Annual Report to Stockholders for the fiscal year ended July
31, 2003.
All stockholders are cordially invited to attend the Annual
Meeting. Whether or not you plan to attend the Annual Meeting, please
complete, date, sign and return the enclosed proxy card as soon as
possible in the enclosed reply envelope.
FINANCIAL FEDERAL CORPORATION
Troy H. Geisser
Secretary
November 5, 2003
New York, New York
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE
FILL IN, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE
UNITED STATES.
FINANCIAL FEDERAL CORPORATION
733 THIRD AVENUE, 7TH FLOOR
NEW YORK, NEW YORK 10017
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 9, 2003
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This Proxy Statement and the accompanying form of proxy are solicited
by the Board of Directors (the "Board of Directors" or the "Board") of
Financial Federal Corporation, a Nevada corporation (the "Company"), to be
voted at the Annual Meeting of Stockholders to be held at 270 Park Avenue,
11th Floor, New York, New York 10017 on December 9, 2003 and at any
postponements or adjournments thereof.
Shares represented by properly executed proxies, that are received in
time and not revoked, will be voted at the Meeting in the manner described
in the proxies. A stockholder may revoke his proxy at any time prior to
its exercise by notice in writing to the Secretary of the Company
indicating that his/her proxy is revoked, by submitting another proxy with
a later date or by attending the Meeting and voting in person. Please
note, however, that if a stockholder's shares are held of record by a
broker, bank or other nominee and that stockholder wishes to vote at the
Meeting, the stockholder must bring a letter from the broker, bank or other
nominee confirming such stockholder's beneficial ownership of shares.
At the Meeting, the Company's stockholders will be asked (i) to elect
the Board of Directors to serve until the next annual meeting of
stockholders; (ii) to ratify the appointment of KPMG LLP ("KPMG") as the
Company's independent public accountants for the fiscal year ending July
31, 2004; and (iii) to take such other action as may properly come before
the Meeting. Each proposal is described in more detail in this Proxy
Statement.
The approximate date on which this Proxy Statement and accompanying
form of proxy are first being sent or given to stockholders is November 5,
2003. Holders of the Company's common stock, par value $.50 per share (the
"Common Stock"), as of the record date, the close of business on October
22, 2003, are entitled to vote at the Meeting. As of October 22, 2003, the
Company had 18,617,344 shares of Common Stock outstanding and had no
preferred stock, par value $1.00 per share, outstanding.
Each share of Common Stock entitles the holder thereof on the record
date to one vote on matters to be considered at the Meeting. The presence,
in person or by proxy, of stockholders holding a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum. Abstentions and broker non-votes are
each included for purposes of determining the presence or absence of a
sufficient number of shares to constitute a quorum for the transaction of
business. A broker non-vote is when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that proposal and
has not received instructions from the beneficial owner.
Unless contrary instructions are indicated on the proxy, shares
represented by each properly executed and returned proxy card (and not
revoked before they are voted) will be voted "FOR" the election of the
nominees for directors named below, "FOR" the ratification of the
appointment of KPMG as independent public accountants for the fiscal year
ending July 31, 2004 and by the proxies in their discretion on any other
matters to properly come before the Meeting, or any postponement or
adjournment thereof. If a stockholder specifies a different choice on the
proxy, such stockholder's shares of Common Stock will be voted in
accordance with the specification so made.
The entire expense of this proxy solicitation will be borne by the
Company. Solicitation will be made primarily by mail. Proxies may also be
solicited personally and by telephone by regular employees of the Company
without any additional remuneration and at minimal cost. Management may
also request banks, brokerage houses, custodians, nominees and fiduciaries
to obtain authorization for the execution of proxies and may reimburse them
for expenses incurred by them in connection therewith. The Company has
retained Georgeson Shareholder Communications, Inc. to assist in the
solicitation of proxies, at an estimated cost of $1,000 plus other
reasonable expenses.
2
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company,
information regarding the ownership of Common Stock by (i) each person who
may be deemed to be the beneficial owner of more than 5% of the Common
Stock outstanding as of October 22, 2003 or such other date as may be noted
below, (ii) each director and each nominee for election as a director,
(iii) each executive officer named in the Summary Compensation Table, and
(iv) all directors and executive officers of the Company as a group. There
were 18,617,344 shares of Common Stock outstanding as of October 22, 2003.
Number of Shares Percent of
Name and Address of Beneficial Owner 1 Beneficially Owned 2 Ownership
-------------------------------------- -------------------- ----------
Waddell & Reed Financial Services 3 1,804,275 9.7
6300 Lamar Avenue
Shawnee Mission, KS 66201
Westcap Investors LLC 3 1,800,337 9.7
1111 Santa Monica Blvd., Suite 820
Los Angeles, CA 90025
Kayne Anderson Rudnick Investment
Management, LLC 3 1,531,023 8.2
1800 Avenue of the Stars
Los Angeles, CA 90067
Franklin Resources, Inc. 3 1,182,070 6.3
One Franklin Parkway
San Mateo, CA 94403
M. A. Weatherbie & Co., Inc. 3 1,045,178 5.6
265 Franklin Street
Boston, MA 02110
Transamerica Investment Management LLC 3 958,219 5.1
1150 South Olive St., Suite 2700
Los Angeles, CA 90015
Lawrence B. Fisher 4 7,500 *
William M. Gallagher 5 143,781 *
Troy H. Geisser 6 104,676 *
John V. Golio 7 121,807 *
Steven F. Groth 8 118,250 *
William C. MacMillen, Jr. 9 25,000 *
Michael C. Palitz 10 585,452 3.1
Thomas F. Robards 11 11,000 *
Paul R. Sinsheimer 12 421,595 2.3
H. E. Timanus, Jr. 13 16,500 *
Stephen D. Weinroth 14 10,000 *
All directors and executive 1,611,888 8.6
officers as a group (13 persons)15
* Less than 1% of Common Stock outstanding.
1 Unless otherwise indicated, the address of each person listed is c/o
Financial Federal Corporation, 733 Third Avenue, 7th Floor, New York,
New York 10017.
2 Unless otherwise noted, each person listed has the sole power to vote,
or direct the voting of, and power to dispose, or direct the disposition
of, all such shares. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes
options that are exercisable or will become exercisable within 60 days
of October 22, 2003 and shares of restricted stock.
3 Share ownership as recently communicated by the beneficial owner.
4 Mr. Fisher's holdings include (i) 2,500 shares of Common Stock, and
(ii) options to purchase 5,000 shares of Common Stock.
5 Mr. Gallagher's holdings include (i) 105,281 shares of Common Stock,
(ii) options to purchase 19,750 shares of Common Stock, and (iii) 18,750
shares of restricted stock that are subject to forfeiture.
3
6 Mr. Geisser's holdings include (i) 19,676 shares of Common Stock, (ii)
options to purchase 12,500 shares of Common Stock, and (iii) 72,500
shares of restricted stock that are subject to forfeiture.
7 Mr. Golio's holdings include (i) 9,432 shares of Common Stock, (ii)
options to purchase 22,375 shares of Common Stock, and (iii) 90,000
shares of restricted stock that are subject to forfeiture.
8 Mr. Groth's holdings include (i) 15,530 shares of Common Stock, (ii)
options to purchase 32,220 shares of Common Stock, and (iii) 70,500
shares of restricted stock that are subject to forfeiture.
9 Mr. MacMillen's holdings include (i) 20,000 shares of Common Stock,
and (ii) options to purchase 5,000 shares of Common Stock.
10 Mr. Palitz's holdings include (i) 206,097 shares of Common Stock, (ii)
options to purchase 5,000 shares of Common Stock, (iii) 373,830 shares
of Common Stock held by a corporation owned and controlled by Mr.
Palitz, (iv) 225 shares of Common Stock held by Mr. Palitz's wife, as to
which shares Mr. Palitz disclaims beneficial ownership, and (v) 300
shares of Common Stock owned by Mr. Palitz's children, as to which
shares Mr. Palitz disclaims beneficial ownership.
11 Mr. Robards' holdings include (i) 1,000 shares of Common Stock, and
(ii) options to purchase 10,000 shares of Common Stock.
12 Mr. Sinsheimer's holdings include (i) 332,701 shares of Common Stock,
and (ii) 88,894 shares of restricted stock that are subject to
forfeiture. Mr. Sinsheimer's holdings do not include 118,056 stock
units held that do not constitute beneficially owned securities.
13 Mr. Timanus' holdings include (i) 11,500 shares of Common Stock, and
(ii) options to purchase 5,000 shares of Common Stock.
14 Mr. Weinroth's holdings include options to purchase 10,000 shares of
Common Stock.
15 Includes (i) 1,098,072 shares of Common Stock, options to purchase
126,845 shares of Common Stock, and 340,644 shares of restricted stock
that are subject to forfeiture as described in notes 4 through 14 above,
as well as (ii) 8,702 shares of Common Stock, options to purchase 15,000
shares of Common Stock, and 22,625 shares of restricted stock that are
subject to forfeiture held by executive officers not named in the table.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and certain beneficial owners of
the Company's equity securities (the "Section 16 Reporting Persons") to
file reports of holdings of and transactions in the Company's equity
securities with the Securities and Exchange Commission ("SEC") and the New
York Stock Exchange, Inc., and to furnish the Company with all copies of
Section 16(a) forms they file. Based solely on the Company's review of the
copies of such forms that the Company has received, or written
representations from the Section 16 Reporting Persons, to the Company's
knowledge, all transactions in the Company's equity securities by the
Company's Section 16 Reporting Persons during the Company's last fiscal
year were reported on-time.
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Corporate Governance and Nominating Committee and the Board of
Directors have nominated the persons listed below to serve as directors of
the Company until the next annual meeting and until their respective
successors are elected and qualified, or until their earlier resignation or
removal. It is intended that shares represented by proxies solicited by
the Board will, unless authority to vote for some or all of the nominees is
withheld, be voted in favor of electing as directors the nominees listed
below. The Company has no reason to believe any of the nominees will be
disqualified or unable or unwilling to serve if elected. However, if any
nominee becomes unavailable for any reason, the shares will be voted for
another person nominated by the Board, unless the Board by resolution
provides for a lesser number of directors. Steven G. Weinroth, whose term
as a director expires at the Annual Meeting, will not be standing for re-
election.
The election of the six director nominees requires an affirmative
vote by a plurality of votes cast at the meeting of stockholders by the
stockholders entitled to vote in the election. Any shares not voted (by
abstention, broker non-vote, or otherwise) have no impact on the vote.
The Board of Directors recommends that stockholders vote "FOR" each
of the nominees listed below.
4
Nominees for Election as Directors
The name, age, principal occupation or employment, and other data
regarding each nominee, based on information received from the respective
nominees, are set forth below:
Lawrence B. Fisher, 65, has served as a director of the Company since
1992. Mr. Fisher has been a partner of Orrick, Herrington & Sutcliffe LLP,
a law firm, since December 1995. He had previously been a partner of
Kelley Drye & Warren LLP, a law firm, from 1985 to December 1995. He is
also a director of National Bank of New York City, a privately owned
commercial bank.
William C. MacMillen, Jr.,90, has served as a director of the Company
since 1989. Mr. MacMillen is the President of William C. MacMillen & Co.,
Inc., an investment banking firm. He served as a director of Republic New
York Corporation and Republic National Bank of New York until December 1999
and as a director of Commercial Alliance Corporation, an equipment finance
company, from its inception in 1963 to 1984.
Michael C. Palitz, 45, has served as a director of the Company since
July 1996. He is currently a Managing Director of Preston Partners LLC, a
Manhattan based merchant banking firm. He is also a director of City and
Suburban Financial Corporation. He served as an Executive Vice President
of the Company from July 1995 until he resigned as an officer and employee
of the Company on March 14, 2003. Mr. Palitz served as a Senior Vice
President of the Company from February 1992 to July 1995 and served as a
Vice President of the Company from its inception in 1989 to February 1992.
He has also served as Treasurer and Assistant Secretary of the Company
since its inception in 1989 and as Chief Financial Officer from 1989
through September 2000.
Thomas F. Robards, 57, has served as a director of the Company since
2000. Mr. Robards is the Chief Financial Officer and a Senior Vice
President of the American Museum of Natural History, New York, New York.
From April 2000 until September 2002, Mr. Robards was the Chief Financial
Officer of Datek Online Holdings Corp., until it was acquired by Ameritrade
Holding Corp. From 1976 until December 1999, he was employed by Republic
New York Corporation. He served as its Chief Financial Officer from March
1995 through March 1999 and as a director from 1998 until March 1999.
Paul R. Sinsheimer, 56, has served as Chairman of the Board and Chief
Executive Officer of the Company since December 2000, as President of the
Company since September 1998, as an Executive Vice President of the Company
from its inception in 1989 to September 1998 and as a director of the
Company since its inception in 1989. From 1970 to 1989, Mr. Sinsheimer was
employed by Commercial Alliance Corporation, where he served in various
positions including Executive Vice President.
H. E. Timanus, Jr., 58, has served as a director of the Company since
1999. Mr. Timanus is the President and Chief Operating Officer of
Prosperity Bank, Houston, Texas; Executive Vice President and Chief
Operating Officer of Prosperity Bancshares, Inc., Houston, Texas; and
Executive Vice President and Chief Operating Officer of Prosperity
Holdings, Inc., Wilmington, Delaware. He was formerly Chairman of the
Board and Chief Executive Officer of Heritage Bank, Houston, Texas, which
merged into Prosperity Bank; President and Chief Executive Officer of
Commercial Bancshares, Inc., Houston, Texas, which merged into Prosperity
Bancshares, Inc.; and President and Chief Executive Officer of Heritage
Bancshares, Inc., Wilmington, Delaware, which merged into Prosperity
Holdings, Inc. Mr. Timanus began his career with Commercial Bancshares,
Inc. in 1982.
Board of Directors Meetings and Committees
The Board has established an Executive Committee, currently composed
of four directors. The Executive Committee can exercise all of the powers
of the Board between meetings of the Board. The current members of the
Executive Committee are Messrs. Fisher, Palitz, Robards and Sinsheimer.
The Board has established an Audit Committee, currently composed of
three independent directors. The Audit Committee is responsible for the
engagement of the Company's independent public accountants and reviews the
scope and timing of their audit services and any other services they are
asked to perform, their report on the Company's financial statements
following completion of their audit and the Company's policies and
procedures with respect to internal auditing and financial controls. The
Audit Committee operates under a written charter adopted by the Board. The
current members of the Audit Committee are Messrs. Robards, Timanus and
Weinroth. Upon consideration of the attributes of an audit committee
financial expert as set forth in Section 401(h) of Regulation S-K
promulgated by the Securities and Exchange Commission, the Board of
Directors determined that Mr. Robards possessed these attributes through
5
his experience as Chief Financial Officer of the American Museum of Natural
History, Datek Online Holdings Corp. and Republic New York Corporation, and
he was designated as the Audit Committee financial expert. Mr. Robards is
independent as such term is defined in item 7(d)(3)(iv)(A) of Schedule
14(a) under the Securities Exchange Act of 1934, as amended.
The Board has established an Executive Compensation and Stock Option
Committee, currently composed of four independent directors. The Executive
Compensation and Stock Option Committee is responsible for approving
appointments and promotions and determining salaries of senior executives
of the Company between meetings of the full Board and is responsible for
administering the Company's 2001 Management Incentive Plan (the "MIP") and
the Amended and Restated 1998 Stock Option/Restricted Stock Plan (the "1998
Plan"). All actions of the Committee with respect to appointments,
promotions and determining salaries of senior executive officers, to remain
effective, must be ratified by a majority vote of the Board within six
months of such action. The current members of the Executive Compensation
and Stock Option Committee are Messrs. MacMillen, Robards, Timanus and
Weinroth.
The Board has established a Corporate Governance and Nominating
Committee, currently composed of four independent directors. The Corporate
Governance and Nominating Committee is responsible for nominating qualified
candidates for appointments to the Board, corporate governance issues and
establishing the code of ethics for the Company. The Corporate Governance
and Nominating Committee will consider nominees recommended by
stockholders. The Corporate Governance and Nominating Committee expects to
adopt a written charter that will set forth the procedures to be followed
by stockholders in submitting such recommendations. The current members of
the Corporate Governance and Nominating Committee are Messrs. MacMillen,
Robards, Timanus and Weinroth.
During the Company's fiscal year ended July 31, 2003, the Board of
Directors met five times, the Executive Committee met once, the Audit
Committee met eight times, the Executive Compensation and Stock Option
Committee met five times and the Corporate Governance and Nominating
Committee met once. Each member of the Board attended, either
telephonically or in person, at least 90% of the total number of meetings
of the Board and its committees of which they were members during such
fiscal year. The Board has no other standing committees.
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between any member of the
Executive Compensation and Stock Option Committee and any member of any
other company's Board of Directors or compensation committee. Mr. Fisher,
a director of the Company, is a partner of the law firm of Orrick,
Herrington & Sutcliffe LLP, which has been retained by the Company in
connection with certain legal matters.
Compensation of Directors
Directors who are not officers or employees of the Company or any of
its subsidiaries receive stipends, as follows:
1. Annual stipend of $35,000 payable upon their election by
the stockholders after the annual meeting of stockholders
each year. If a director joins the Board during the year,
the stipend will be pro rated.
2. Additional annual stipend of $5,000 to the Audit Committee
chairperson, $3,000 to the Executive Compensation and Stock
Option Committee chairperson and $2,000 to the Corporate
Governance and Nominating Committee chairperson.
3. Additional stipend of $1,000 for each Board meeting
attended.
4. Additional stipend of $1,000 for each Committee meeting
attended.
The Company does not have a formal policy of granting stock options
to directors. Nevertheless, current directors were each granted a
nonqualified stock option, shortly after joining the Board as an outside
director, to purchase 5,000 shares of Common Stock at the fair market value
on the date of grant. In addition, to more fully align the interests of
outside directors with Company stockholders, on April 16, 2003, each
outside director was granted a fully vested non-qualified stock option
under the 1998 Plan to purchase 5,000 shares of Common Stock at the fair
market value on the date of grant. The options are exercisable until April
16, 2008.
Directors who are officers of the Company receive no additional
compensation for attending Board or committee meetings.
6
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation paid to those persons who were, at July 31, 2003,
the Chief Executive Officer ("CEO") and the other four most highly
compensated executive officers of the Company.
Annual Long-term Compensation
Compensation ($) Awards
--------------------- --------------------------
Restricted Securities
Fiscal Stock Underlying All Other
Name and Principal Position(s) Year Salary Bonus Award (1)($) Options (#) Compensation ($)
------------------------------ ------ --------- --------- ------------ ----------- ----------------
Paul R. Sinsheimer 2003 750,634 508,375 0 0 0
CEO, President and 2002 757,350 750,000 6,290,000 0 0
Director 2001 750,634 375,000 861,000 0 0
John V. Golio 2003 303,416 0 0 0 0
Executive Vice President 2002 307,545 0 2,925,000 0 0
2001 294,582 0 143,500 50,000 0
Steven F. Groth 2003 293,548 0 0 0 0
Senior Vice President and 2002 344,608 0 2,340,000 0 0
Chief Financial Officer 2001 336,741 0 28,700 60,000 0
Troy H. Geisser 2003 291,135 0 0 0 0
Senior Vice President 2002 290,254 0 2,340,000 0 0
and Secretary 2001 267,690 0 143,500 50,000 0
William M. Gallagher 2003 290,633 0 0 0 0
Senior Vice President 2002 290,633 0 585,000 0 0
2001 253,133 0 71,750 20,000 0
(1) Amounts were determined by multiplying the number of shares of
restricted stock and stock units granted by the fair market value of
the Common Stock on the date of the award. Shares of restricted stock
were granted to Mr. Sinsheimer under the MIP as follows: 100,000 in
March 2002 and 30,000 in February 2001. Mr. Sinsheimer also received a
grant of 100,000 stock units in June 2002 as a supplemental retirement
benefit. The stock units will be paid out in the form of an equivalent
number of shares of Common Stock reserved for issuance under the 1998
Plan. Shares of restricted stock were granted in March 2002 under the
1998 Plan as follows: Mr. Golio 100,000; Mr. Groth 80,000; Mr. Geisser
80,000 and Mr. Gallagher 20,000. Shares of restricted stock were
granted in February 2001 as follows: Mr. Golio 5,000; Mr. Groth 1,000;
Mr. Geisser 5,000 and Mr. Gallagher 2,500. The restricted stock and
stock units granted in fiscal 2002 vest ratably in annual increments
over eight years subject to earlier vesting upon a sale of the Company
or qualifying terminations of employment. The restricted stock granted
in February 2001 vest ratably in annual increments over four years. If
the Company decided to pay dividends on the Common Stock, dividends
would be paid to holders of restricted stock. The aggregate holdings
of restricted stock and stock units as of July 31, 2003 follow: Mr.
Sinsheimer 206,950; Mr. Golio, 90,000; Mr. Groth 70,500; Mr. Geisser
72,500 and Mr. Gallagher 18,750. The values of such restricted stock
and stock units as of July 31, 2003 follow: Mr. Sinsheimer $6,270,585;
Mr. Golio $2,727,000; Mr. Groth $2,136,150; Mr. Geisser $2,196,750 and
Mr. Gallagher $568,125.
7
Option Grants In Last Fiscal Year
No options to purchase Company securities or stock appreciation rights
were granted to any of the named executive officers in the last fiscal year.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Unexercised Options Held In-the-Money Options
Shares At July 31, 2003 (#) At July 31, 2003 (1) ($)
Acquired on Value -------------------------- --------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
----------------------- ------------ ----------- ----------- ------------- ----------- -------------
Paul R. Sinsheimer 11,250 269,561 200,000 0 2,335,000 0
John V. Golio 0 0 34,750 42,750 291,019 312,544
Steven F. Groth 0 0 33,886 15,834 373,358 144,941
Troy H. Geisser 0 0 25,750 44,000 203,444 327,138
William M. Gallagher 0 0 17,500 19,500 158,438 153,058
(1) Only the value of unexercised, in-the-money options are reported.
Value was calculated by (i) subtracting the total exercise price per
share from the fiscal year-end value of $30.30 per share and (ii)
multiplying by the number of shares subject to the option. All of the
options held by the named executive officers at July 31, 2003 were in
the money.
REPORT OF THE EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
The Executive Compensation and Stock Option Committee (the
"Committee") is pleased to present its report on executive compensation.
The Committee is composed of William C. MacMillen, Jr., Thomas F. Robards,
H. E. Timanus, Jr. and Stephen D. Weinroth. Messrs. MacMillen, Robards,
Timanus and Weinroth are independent directors of the Company. This report
to stockholders presents an overview of the role of the Committee and of
the Company's present compensation philosophy. All actions of the
Committee with respect to appointments, promotions and determinations of
executive officers' salary to remain effective, must be ratified by a
majority vote of the Board within six months of such action; and all such
actions to date have been so ratified.
It is the Committee's philosophy that a significant portion of
executive compensation be linked directly to the Company's success in
meeting profit, growth and other corporate performance goals, operating
efficiencies, success in handling non-performing assets, the Company's
overall performance regarding its return on earning assets and average
equity, as well as the quality and integrity of the Company's receivables.
The Company compensates certain officers through salary, a portion of which
may be deferred by agreement between the Company and its officers, and
through grants of restricted stock, stock units and stock options. The
Committee believes granting restricted stock, stock units and stock options
to employees and officers further aligns their objectives with those of the
Company and its stockholders. The Committee, in its discretion, determines
the proportion of the equity awards to grant to employees and officers in
order to maximize long-term incentives.
The Committee reviews the Company's compensation programs and consults
with independent experts from time to time to ensure that the compensation
and benefits offered to its executives are competitive and reflect the
Company's performance. In order to attract and retain exceptionally high
caliber employees and executives, the Company offers competitive salaries
and long-term incentives compared to other financial services companies of
similar size.
The Committee's compensation evaluation procedures include reviewing
public filings of other financial services companies and performing an
informal survey as well as a comparison and review of its competitors and
other companies.
The Committee, in establishing compensation for the CEO, generally
used the same criteria as it did for other employees and officers.
Competitive CEO pay practices were assessed using proxy statements of a
comparison group of publicly traded financial institutions and a report by
an independent compensation consultant as well as its proprietary database
of compensation survey sources.
8
Compensation of the Chief Executive Officer
The CEO's annual rate of salary for fiscal 2003 was $750,000 and is
unchanged as of the date of the mailing of this proxy. The Committee
established a target bonus for the first half of fiscal 2003 under the MIP
for the CEO consisting of (i) $375,000 and (ii) 50,000 shares of restricted
stock (granted in fiscal 2002), each subject to the Company's future
performance and accomplishment of performance goals set by the Committee.
Based upon the Company's performance and accomplishment of such goals for
the first half of fiscal 2003, the actual cash incentive bonus paid to Mr.
Sinsheimer under the MIP for the first half of fiscal 2003 was $258,375.
Additionally, the performance-based goals were satisfied with respect to
34,450 shares of the 50,000 shares of restricted stock granted in fiscal
2002 and 15,550 shares were forfeited. The 34,450 shares of restricted
stock granted in fiscal 2002 are also subject to satisfaction of time-based
vesting requirements and vest ratably in annual increments over eight years
subject to earlier vesting upon a sale of the Company or qualifying
terminations of employment. The Committee did not establish performance
goals under the MIP for the CEO for the second half of fiscal 2003. The
Committee awarded Mr. Sinsheimer a discretionary cash bonus, outside of the
MIP, in the amount of $250,000 for the Company's performance for the second
half of fiscal 2003. The discretionary cash bonus was awarded to Mr.
Sinsheimer because the Committee recognized the difficult external economic
environment the Company operated under and believed that the CEO's
performance for the second half of fiscal year 2003 warranted a bonus based
on the Company's performance under such adverse circumstances.
Policy with Respect to Qualifying Compensation for Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)") limits the deduction allowable to the Company for
compensation paid to the CEO and each of the named executive officers
listed in the Summary Compensation Table to $1.0 million per individual per
fiscal year. Qualified performance-based compensation is excluded from
this limitation if certain requirements are met. The Committee's policy is
generally to preserve the federal income tax deductibility of compensation
paid. The Committee believes that awards to the CEO under the MIP, as
previously approved by the stockholders, and its award of options made
under the stock option plans for employees, will qualify as performance-
based compensation and thereby be excluded from the $1.0 million
limitation. Notwithstanding the Committee's desire to generally preserve
the federal income tax deductibility of compensation payments, under
certain circumstances in the interests of offering competitive
compensation, the Committee, in its discretion, may authorize payments that
are not deductible under Section 162(m).
This report is submitted by the members of the Executive Compensation
and Stock Option Committee of the Board of Directors:
William C. MacMillen, Jr.
Thomas F. Robards
H. E. Timanus, Jr.
Stephen D. Weinroth
9
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on Financial Federal Corporation's Common Stock during
the five-year period ending July 31, 2003 with the cumulative total return
on the Russell 2000 Index and on the S&P Financial Index. The comparison
assumes $100 was invested on July 31, 1998 in each of such indices. Note
that historical stock price is not indicative of future stock price
performance. All amounts have been calculated as if all dividends were
reinvested.
Financial Federal Corporation's Common Stock listed on the New York
Stock Exchange, Inc. on June 22, 1998, and was previously listed on the
American Stock Exchange.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
7/1998 7/1999 7/2000 7/2001 7/2002 7/2003
------ ------ ------ ------ ------ ------
Financial Federal Corporation $100 $ 92.7 $ 79.6 $106.8 $116.9 $122.1
Russell 2000 100 107.4 122.2 120.1 98.5 121.3
S&P Financial * 100 101.5 109.5 120.4 100.8 114.7
* Copyright 2003, Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
The Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Graph produced by Research Data Group
10
CERTAIN TRANSACTIONS
Paul R. Sinsheimer and Michael C. Palitz (including his affiliates),
directors of the Company, held $219,939 and $8,859,246, respectively, of
the Company's commercial paper at July 31, 2003. Such debt was issued at
prevailing interest rates and on customary terms. Mr. Fisher, a director
of the Company, is a partner of the law firm of Orrick, Herrington &
Sutcliffe LLP, which has been retained by the Company in connection with
certain legal matters.
CHANGE IN AUDITORS
On June 6, 2002, the Board of Directors, on the recommendation of the
Audit Committee, appointed the firm of KPMG as the Company's independent
public accountants for the fiscal year ending July 31, 2002 and dismissed
Arthur Andersen LLP ("Andersen") who have subsequently ceased operations.
Andersen's report on the financial statements of the Company for fiscal
2001 did not contain any adverse opinion or disclaimer of opinion nor was
it in any way qualified or modified as to uncertainty, audit scope or
accounting principles.
The decision to change accountants was recommended by management and
approved by the Audit Committee of the Board of Directors and the full
Board as well.
During fiscal 2001, and the interim period preceding the dismissal,
there were no disagreements between the Company and Andersen on any matter
of accounting principles or practices, financial statement disclosure or
audit scope or procedure. The Company has never been advised by Andersen
that internal controls necessary for the Company to develop reliable
financial statements do not exist or that any information has come to the
attention of Andersen which would have caused it not to be able to rely on
management's representations or that has made Andersen unwilling to be
associated with the financial statements prepared by management. Andersen
has not advised the Company of any need to significantly expand the scope
of its audit or that information has come to their attention that upon
further investigation may materially impact on the fairness or reliability
of a previously issued audit report or financial statements issued or which
would cause them to be unwilling to rely on management's representations or
be associated with the Company's financial statements.
Andersen has not advised the Company of any information which they
concluded materially impacts upon the fairness or reliability of either a
previously issued audit report, underlying financial statements or the
financial statements issued or to be issued since the last financial
statements covered by an audit report.
11
AUDIT COMMITTEE REPORT
The Audit Committee is composed of Thomas F. Robards, H.E. Timanus,
Jr. and Stephen D. Weinroth. Each member of the Audit Committee is
independent as currently defined under the New York Stock Exchange listing
standards. The Audit Committee operates under a written charter adopted by
the Board of Directors.
Management is responsible for the Company's internal financial
controls and the financial reporting process. The Company's independent
public accountants, KPMG, are responsible for performing an independent
audit of the Company's consolidated financial statements and to express an
opinion as to whether those financial statements fairly present the
financial position, results of operations and cash flows of the Company, in
conformity with accounting principles generally accepted in the United
States. The Audit Committee's responsibility is to monitor and oversee
these processes. The Audit Committee pre-approves all work and fees, which
are performed by the Company's independent auditors.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the year ended July 31, 2003, with the
Company's management. The Audit Committee has discussed with the Company's
independent public accountants the matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit
Committees."
The Company's independent public accountants provided to the Audit
Committee the written disclosure required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The
Audit Committee discussed with the independent accountants that firm's
independence and considered whether the non-audit services provided by the
independent accountants are compatible with maintaining its independence.
Based on the Audit Committee's review and discussions noted above,
the Audit Committee recommended to the Board that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-
K for the year ended July 31, 2003, for filing with the SEC.
This report is submitted by the members of the Audit Committee of the
Board of Directors:
Thomas F. Robards
H.E. Timanus, Jr.
Stephen D. Weinroth
12
RATIFICATION OF AUDITORS
(Item 2 on Proxy Card)
General
The Board of Directors, on the recommendation of the Audit Committee,
has appointed the firm of KPMG as the Company's independent public
accountants for the fiscal year ending July 31, 2004 and recommends that
the stockholders vote "FOR" ratification of such appointment. KPMG has
audited the Company's financial statements since June 6, 2002. It is
expected that a representative of KPMG will be present at the Meeting and
will have the opportunity to make a statement and will be available to
respond to appropriate questions.
Stockholder ratification of the appointment of KPMG as the Company's
independent public accountants is not required by the Company's bylaws or
other applicable legal requirement. However, the Board is submitting the
appointment of KPMG to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the
appointment, the Audit Committee and the Board will reconsider whether or
not to retain that firm. Even if the appointment is ratified, the Board
may direct the appointment of a different independent accounting firm at
any time during the year if it determines that such a change would be in
the Company's best interests and in the best interests of the Company's
stockholders.
Ratification of the appointment of auditors requires a majority of
the votes cast thereon. Abstentions with respect to this proposal have the
same effect as a vote against the proposal. Broker non-votes with respect
to this proposal will not be counted with regard to this proposal.
Principal Accountant and Fees
For the fiscal years ended July 31, 2003 and 2002 the fees related to
services performed by the Company's independent public accountants follow:
Current Accountant Former Accountant
========================== =================
Fee Category Fiscal 2003 Fiscal 2002 Fiscal 2002
------------------ ----------- ----------- -----------
Audit Fees $240,000 $50,000 $75,000
Audit-Related Fees 0 0 0
Tax Fees 0 0 0
All Other Fees 40,000 0 12,925
----------- ----------- -----------
Total Fees $280,000 $50,000 $87,925
=========== =========== ===========
Audit Fees. Consists of fees billed for professional services
rendered for the audit of the Company's consolidated financial statements
and review of the interim consolidated financial statements included in
quarterly reports and services that are normally provided in connection
with statutory and regulatory filings or engagements.
Audit-Related Fees. There were no fees billed in fiscal 2003 and 2002
for assurance and related services that were related to the performance of
the audit or review of the Company's consolidated financial statements.
Tax Fees. There were no fees billed in fiscal 2003 and 2002 for
professional services for tax compliance, tax advice and tax planning. In
the proxy statement for fiscal 2002, the Company disclosed $50,000 for tax
fees; however, KPMG did not perform these services for fiscal 2002 and
therefore was not paid a fee.
All Other Fees. Consists of fees for products and services other than
the services reported above. In fiscal 2003, services were provided for an
agreed-upon procedures report required by one of the Company's debt
agreements.
The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of KPMG LLP as the Company's independent
public accountants.
13
STOCKHOLDER PROPOSALS
As a stockholder, you may be entitled to present proposals for action
at a forthcoming meeting if you comply with the requirements of the proxy
rules established by the SEC. All proposals of stockholders to be
presented for consideration at the Company's next Annual Meeting of
Stockholders, expected to be held on December 14, 2004, must be directed to
the Secretary of the Company at the Company's principal executive office
and, if they are to be considered for possible inclusion in the Proxy
Statement and form of proxy for such Annual Meeting in accordance with the
rules and regulations of the SEC, must be received on or before July 8,
2004.
The attached proxy card grants the proxy holders discretionary
authority to vote on any matter raised at the Meeting. If you intend to
submit a proposal at the Company's next Annual Meeting of Stockholders,
which is not eligible for inclusion in the Proxy Statement and form of
proxy relating to that meeting, you must do so no later than September 21,
2004. If you fail to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary voting authority when
the proposal is raised at the Company's next Annual Meeting of
Stockholders, without any discussion of the matter in the Proxy Statement.
OTHER BUSINESS
As of the date of this Proxy Statement, neither the Company nor the
Board of Directors knows of any matters, other than those indicated above,
to be presented at the Meeting. If any additional matters are properly
presented, the persons named in the proxy will have discretion to vote the
shares represented by such proxy in accordance with their judgment.
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
JULY 31, 2003 WAS MAILED TOGETHER WITH THE PROXY STATEMENT AND IS AVAILABLE
ON THE INTERNET IN THE INVESTOR RELATIONS SECTION OF THE COMPANY'S WEBSITE
AT www.financialfederal.com. ADDITIONAL COPIES OF THE ANNUAL REPORT MAY BE
OBTAINED BY CALLING THE COMPANY AT (212) 599-8000. UPON RECEIPT OF A
WRITTEN REQUEST, THE COMPANY ALSO WILL FURNISH TO ANY STOCKHOLDER, WITHOUT
CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 2003
REQUIRED TO BE FILED WITH THE SEC UNDER THE SECURITIES EXCHANGE ACT OF
1934. WRITTEN REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS AT
FINANCIAL FEDERAL CORPORATION, 733 THIRD AVENUE, NEW YORK, NY 10017.
BY ORDER OF THE BOARD OF DIRECTORS
Troy H. Geisser
Secretary
DATE: November 5, 2003
14
FINANCIAL FEDERAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON DECEMBER 9, 2003
The undersigned stockholder of Financial Federal Corporation (the
"Corporation") hereby appoints Paul R. Sinsheimer and Troy H. Geisser, or
either of them, with full power of substitution, as proxies for the
undersigned to attend and act for and on behalf of the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held at 270 Park
Avenue, New York, New York on December 9, 2003 at 10:00 a.m., and at any
adjournment thereof, to the same extent and with the same power as if the
undersigned were present in person thereat and with authority to vote and act
in such proxyholder's discretion with respect to other matters which may
properly come before the Meeting. Such proxyholder is specifically directed
to vote or withhold from voting the shares registered in the name of the
undersigned as indicated below.
Notes:
(1) This form of proxy must be executed by the stockholder or his attorney
authorized in writing or, if the stockholder is a corporation, under the
corporate seal or by an officer or attorney thereof duly authorized.
Joint holders should each sign. Executors, administrators, trustees, etc.
should so indicate when signing. If undated, this proxy is deemed to bear
that date it was mailed to the stockholder.
(2) The shares represented by this proxy
will, on a show of hands or any ballot
that may be called for, be voted or FINANCIAL FEDERAL CORPORATION
withheld from voting in accordance P.O. BOX 111O2
with the instructions given by the NEW YORK, N.Y. 10203-0102
stockholder, in the absence of any
contrary instructions, this proxy will
be voted "FOR" the itemized matters.
(Continued on reverse side)
Whether or not you plan to attend [X]
---- the meeting, please mark, sign,
| | date and return this proxy promptly Votes must be indicated
---- in the envelope provided. (x) in Black or Blue ink.
The Board of Directors recommends a vote FOR proposals 1 and 2:
1. ELECTION OF DIRECTORS
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: Lawrence B. Fisher, William C. MacMillen, Jr., Michael C. Palitz,
Thomas F. Robards, Paul R. Sinsheimer, H.E. Timanus, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name.)
FOR AGAINST ABSTAIN
2. In respect of the resolution on ratifying the
appointment of KPMG LLP as auditors of the [ ] [ ] [ ]
Corporation for the fiscal year ending
ending July 31, 2004.
To change your address, please mark this box. [ ]
To include any comments, please mark this box. [ ]
The signature on this Proxy should correspond exactly
with stockholder's name as printed to the left. In the
case of joint tenancies, co-executors, or co-trustees,
both should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give their
full title.
Date Share Owner sign here Co-Owner sign here
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