Financial Federal (FIF)

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Neena Mishra

www.zacks.com

Financial Federal Corporation (FIF) is a national commercial finance company. FIF specializes in providing collateralized loans, leases, and installment sales for heavy-duty industrial and commercial equipment (including bulldozers, cranes, earthmovers, trucks) to middle-market companies (typical annual revenues less than $25 million). Its clients are concentrated in industries such as general construction, road / infrastructure construction and repair, transportation, waste services, and manufacturing. FIF provides financing services through five full-service operations centers across the U.S. and roughly 15 additional marketing locations.

FIF originates receivables primarily through relationships with equipment dealers, and secondarily through manufacturers, which are sent directly to end-users (the company does not use brokers). Typical transactions range from $50,000 to $1 million, are fixed-rate, and have 2- to 5-year terms. The average transaction size is about $200,000. FIF focuses on financing equipment with the following characteristics: (1) caters to revenue-producing/essential-use purposes (2) movable and can be used in multiple industries (3) has an economic life that is longer than the term of the related financing (4) is not subject to rapid technological obsolescence and (5) has a broad resale market. Competitors include GE Capital, CitiCapital, and CIT Group as well as banks, captive finance subsidiaries, and other independent finance/leasing companies.

Management remains focused on the quality of growth, maintaining control of margins and credit quality rather than shooting for maximum growth. As of October 31, 2007 (end of fiscal 1Q08), FIF had total finance receivables of $2.1 billion and shareholders' equity of $388 million.

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