Nicholas Financial, Inc.
2012 Annual Report
From The President
This year marked our 27th year in business and our 25th year as a publicly traded company. Virtually every aspect of our business was working smoothly and we are extremely proud of the performance that our employees delivered during the past fiscal year. Today, Nicholas Financial has grown to 63 branch offices in 15 states. As of March 31, 2012 we had $388,988,000 in gross receivables outstanding. In each successive quarter during the year, we reported increased revenues and increased profits when compared to comparable quarters in the previous year. Year over year our common stock share price rose slightly from $12.20 to $13.19. By virtually every measure we had an excellent year. We reported this very same thing last year and we hope to repeat these same results next year. We are disappointed that our stock price has not matched the financial performance of our company. Our Company achieved outstanding financial results by recording its 21st consecutive year of record revenues. Net income for the fiscal year ended March 31, 2012 increased 32% to $22,230,000 as compared to $16,805,000 for the year ended March 31, 2011. Earnings per share increased 31% to $1.85 as compared to $1.41. Revenue increased 9% to $68,167,000. Shareholder’s equity grew 18% to $135,939,000 from $115,213,000. In August of 2011 our board of directors approved the issuance of a cash dividend equal to $.10 cents per share. The company issued a dividend each quarter since then and expects to continue to do so, provided that the Company meets or exceeds financial measurements imposed by its consortium of lenders. Our board will review and determine how much return they believe the company can pay-out to its shareholders without impeding our growth objectives. We are pleased to report that we returned over $3 million in the form of cash dividends to our shareholders. Additionally we paid down our credit line by $6 million dollars. In the past year we added four new locations to our branch office network. We will continue to evaluate additional markets for future branch locations, and subject to market conditions, we may open several new branch locations during the year. Our plan is to open branch locations in large metro areas in states that we believe are favorable to our specialty vehicle and consumer finance business. We remain convinced that providing auto and light truck financing for Americans who for any numbers of reasons, find themselves with poor credit, will be a strong business for years to come as long as cars and trucks remain the main form of transportation. During the past year we have noticed a huge increase in competition. Like most companies that face new and very aggressive competition our sales people have been challenged by this change in the competitive landscape. Some of our most aggressive competitors are divisions of the very same U.S. banks that the American taxpayer had to bail out when they ran out of money back in late 2008. Now these banks are undercutting our tried and true lending guidelines, which in our business vernacular means bidding more aggressively in their underwriting. In our point of view these banks are biting the hand that has fed them. Another issue that we and our used car dealers experienced during the year was the lack of used car trades. The dealers could not get product. Americans are holding onto their cars and trucks longer causing a shortage in used car inventories. This in turn created higher prices for the used cars that our dealer clients sell. The resulting consequence was that used cars and trucks were commanding a premium price that was out of balance with the customer’s ability to pay. Conversely, our company benefited from the higher resale prices at the auto auctions which reduced our net losses from repossessions considerably. For many years I have made the same statement regarding our accomplishments: “Our consistent financial performance hasn’t happened by accident. It is the result of many people working very hard over a long period of time. The automobiles of our employees are usually the first to arrive in the parking lot each morning and invariably the last to drive away at night.” To the credit of our employees, this statement rings as true today as when it was first written. We, like all companies, have a challenge to find good, hardworking, and qualified people. When we do, we try our best to keep those who work hard and produce results. We reward our employees with decent benefits, including performance-based bonuses and excellent career opportunities. Our ability to mold and retain a veteran team is one of the primary reasons for our success. Several of our senior managers, accounting staff and data processing staff have been with the Company since its inception in the late 1980’s. We are however extremely concerned with the ever increasing cost of health insurance that has risen by 10 to 20 percent a year for several years. We look forward with optimism toward the coming year. Any company that can say, “Our potential market is over $250 billion dollars a year and growing”, should be excited about its business prospects. Our intention is to continue our strategy of controlled growth by increasing our existing branch loan portfolio and building new branch offices. We intend to continue growing our company organically. However, we will stay alert to possible acquisition opportunities that may come to our attention. On a sad note, I would like to mention the passing of one of our most dedicated investors, Marvin Mahan. Marvin passed away last year leaving his wife Ingrid and a large family behind. Marvin loved our business, our company and our staff. He visited with us often over the many years since he made his original investment in our company in 1992. Initially his cash infusion and support of our stock help us immensely. He was my public company mentor and a key business advisor. His main advice to me was, “Keep doing what you do and don’t try to impress anyone. You know your business and if you stay the course you will do fine.” Stephen Bragin, one of our board members, said when describing Marvin, “He was an uncommon man.” The independent members of our Board of Directors have always diligently embraced their fiduciary responsibilities. They take their responsibilities to heart. We are fortunate to have been able to attract these talented individuals. Charlie Neal, Scott Fink and Stephen Bragin are terrific board members. They have taken the time to know our business and to give us excellent business guidance. We are very proud of all our employees whose dedication, talent and loyalty have made Nicholas an important force in automobile financing. We are grateful for the support of our customers, bankers, vendors and shareholders. We remain determined to increase the value of our publicly traded stock. We are convinced that our shareholders will be rewarded if we continue to build the net worth of our Company each year as we have done for the past 22 consecutive years. To all of you who have invested in Nicholas, we wish to thank you for having continued faith in our Company. On behalf of our Board of Directors and our employees, we thank you for the confidence that you have entrusted in us.
Peter L. Vosotas |
