UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-14888
PRIME CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3347311
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
10275 West Higgins Road, Suite 200, Rosemont, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 294-6000
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 ___
As of September 30, 1995, there were 4,280,165 shares of common stock
outstanding.
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Operations --
Three and Nine Months Ended
September 30, 1995 and 1994. . . . . . . . . . . 3
Consolidated Balance Sheets --
September 30, 1995 and December 31, 1994 . . . . 4
Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1995 and 1994. . 5
Notes to Consolidated Financial Statements . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . 7-9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . 9
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . .10
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, Six Months Ended September 30,
1995 1994 1995 1994
Revenues:
Rentals on leased
equipment $ 132,604 $ 296,276 $ 503,884 $ 562,011
Direct financing leases 211,092 330,722 751,426 604,802
Fee income 506,893 842,355 4,272,347 1,293,335
Gain on sale of leased
equipment 2,125 24,574 23,398 262,502
Interest 98,619 249,746 620,702 425,745
Other income 57,698 146,714 163,449 210,460
Total revenues 1,009,031 1,890,387 6,335,206 3,358,855
Expenses:
Amortization of deferred
finance costs -- 452 -- 4,243
Depreciation of leased
equipment 38,267 181,656 208,765 346,583
Selling, general and
administrative 1,619,133 1,257,310 5,459,489 3,515,974
Interest 114,483 467,440 677,235 626,955
Net capitalized initial
direct costs (32,761) (81,072) (88,789) (235,506)
Total expenses 1,739,122 1,825,786 6,256,700 4,258,249
Income (loss) before
income tax expense (730,091) 64,601 78,506 (899,394)
Income tax expense --- --- --- ---
Net income (loss) $ (730,091) $ 64,601 $ 78,506 $ (899,394)
Net income (loss) per common
and common equivalent share: ($0.17) $0.02 $0.02 $(0.21)
Average shares outstanding 4,280,165 4,280,165 4,280,165 4,280,165
See accompanying notes to consolidated financial statements
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
September 30, December 31,
ASSETS 1995 1994
Cash and cash equivalents $ 1,352,042 $ 1,945,353
Receivables:
Rentals on leased equipment 75,477 59,329
Due from equipment trusts 10,857 68,609
Other 2,849,770 2,107,271
Net investment in direct financing leases 23,964,608 16,846,541
Leased equipment, net of accumulated
depreciation of $56,127 and $73,254
at September 30, 1995 and December 31, 1994
respectively 981,707 1,924,634
Deposits on equipment 340,515 755,354
Property and equipment, net of accumulated
depreciation of $1,030,742 and $942,890
at September 30, 1995 and December 31, 1994,
respectively 295,344 272,134
Other assets 3,779,081 2,962,224
Total assets $33,649,401 $26,941,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to bank $24,734,445 $7,889,502
Accounts payable for equipment 567,135 11,919,579
Accrued expenses and other liabilities 3,126,158 1,996,002
Deposits and advances 520,016 513,225
Total liabilities 28,947,754 22,318,308
Stockholders' equity
Common stock, $0.05 par value:
authorized 10,000,000 shares; issued and
outstanding 4,374,365 shares at September 30, 1995
and December 31, 1994 218,718 218,718
Additional paid-in capital 9,681,225 9,681,225
Accumulated deficit (4,898,496) (4,977,002)
Treasury stock, at cost; 94,200 shares
at September 30, 1995 and
December 31, 1994 (299,800) (299,800)
Total stockholders' equity 4,701,647 4,623,141
Total liabilities and stockholders'
equity $33,649,401 $26,941,449
See accompanying notes to consolidated financial statements.
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 78,506 $ (899,394)
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Depreciation 296,618 434,933
Amortization of unearned income (751,426) (596,628)
Amortization of deferred finance costs on
direct finance leases -- 4,243
Gain on securitization (2,508,887) (743,737)
Changes in assets and liabilities:
Rentals on leased equipment and
other receivables 371,638 634,873
Deferred charges 562,963 (547,077)
Other assets (1,486,034) (1,453,447)
Accrued expenses and other liabilities 1,130,157 792,100
Due from equipment trusts 57,752 100,854
Net cash used by operating activities (2,248,713) (2,273,280)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired for lease (78,172,188) (44,015,370)
Proceeds from sale of assets 273,243 479,951
Net cash used in investing activities (77,898,945) (43,535,419)
CASH FLOWS FROM FINANCING ACTIVITIES:
Discounted lease proceeds and proceeds from
sale of fully leveraged finance leases 31,487,685 9,661,660
Proceeds from notes payable to banks 16,844,943 (224,158)
Proceeds from securitization,
net of expenses 31,221,719 35,474,015
Net cash provided by financing activities 79,554,347 44,911,517
Decrease in cash and cash equivalents (593,311) (897,182)
Cash and equivalents:
Beginning of period 1,945,353 4,060,079
End of period $ 1,352,042 $ 3,162,897
Cash paid during the period for:
Interest $ 677,235 $ 626,955
Income taxes $ -- $ --
Supplemental schedule of noncash financing activities:
Discounted lease rentals on direct finance leases
collected by financial institutions $ -- $ 155,721
See accompanying notes to consolidated financial statements.
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of Management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The financial results of 1994 and the first nine months of 1995 were
influenced by a number of economic and strategic issues including: (i) over
the past several years the Company's healthcare market has changed
in both size and the type of financing required by the marketplace,
(ii) in 1994 the Company invested in and expanded operations in several areas
to diversify its origination capabilities, (iii) the Company completed a
securitization in September of 1994 totaling $39,424,940, but elected
not to securitize its remaining portfolio of leases as of year end, and
(iv) a securitization totaling $56,725,781 was completed in March 1995.
In fiscal year 1994 the Company invested in expanding its origination
capabilities in its wholesale originations such as vendor and structured
finance. The Company acquired Financial Alliance Corporation
in July 1994 to expand its vendor originations. Further, the Company
expanded its staffing and efforts in the structured finance group to develop
new products and industry expertise. The focus of the structured finance
group is to broaden the Company's wholesale origination capabilities.
The Company conducts its business in a manner designed to conserve its
working capital and minimize its credit exposure. The Company does not
purchase equipment until; (i) it has received a noncancelable
lease from its customer, and (ii) it has determined that the lease
(a) can be discounted with a bank or financial institution on a non-recourse
basis, or (b) meets the lease origination standards established for
a securitized pool. The Company intends to continue to pursue a
diversified strategy of funding which will include; (i) periodically
securitizing aggregated pools of transactions, (ii) specific program financing
agreements, (iii) portfolio sales, and (iv) financing selected transactions
on an individual basis (i.e. non-pooled).
On March 16, 1995, the Company issued and sold equipment lease-backed
pay-through notes in an aggregate initial principal amount of $56,725,781.
Through this issuance the Company permanently financed certain assets and
liabilities carried on the Company's balance sheet as of December 31, 1994.
Pursuant to FASB Statement No. 77, these assets and liabilities were removed
from the balance sheet and
the resulting gain was recognized on the Company's statement of operations
in the first quarter of 1995.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995
Net Income (Loss)
Net loss for the three months ended September 30, 1995 was approximately
$730,000 or ($0.17) per share compared to net income of approximately
$65,000 or $0.02 per share for the same quarter of 1994. The decrease in
net income for the current quarter, as compared to the same quarter in 1994,
was principally due to decreases in all revenue categories relative to the
September 1994 securitization. A securitization totaling $39,424,940
was completed in September of 1994. No comparable securitzation occurred in
the third quarter of 1995.
Revenues
Revenues for the three months ended September 30, 1995 were approximately
$1,009,000 compared to revenues of approximately $1,890,000 for the same
period last year. The decrease was largely attributable to decreases in
securitization fee income, rental income and interest income.
Fee income decreased approximately $335,000 in the third quarter of 1995 as
compared to the same period in 1994. This decrease was primarily a result
of higher fee income earned through the completion of an asset backed
securitiztion during the third quarter of 1994; the Company did not complete a
securitization in the third quarter of 1995.
Rental income decreased approximately $164,000 in the third quarter of 1995
compared to the same period of 1994. The decrease is a result of the
Company orginating a lower volume of equipment subject to operating leases.
Interest income decreased approximately $151,000 for the third quarter of
1995 as compared to the same period last year. The decrease was primarily
due to interest of approximately $206,000 which was earned as a part of the
completion of the asset backed securitization during the third quarter of
1994.
Expenses
Expenses for the three months ended September 30, 1995 were approximately
$1,739,000 compared to expenses of approximately $1,826,000 during the same
period of 1994, a decrease of approximately 5%.
Selling, general and administrative expenses increased approximately
$362,000 in the third quarter of 1995 compared to the same period in 1994
mainly as a result of a one time non-recurring write-offs and
payment of commissions.
Interest expense decreased approximately $353,000. The Company did not
warehouse as many transactions in the third quarter of 1995 as in the
third quarter of 1994.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995
Net Income (Loss)
Net income for the nine months ended September 30, 1995 was approximately
$79,000 or $0.02 per share compared to a net loss of approximately
$899,000 or $(0.21) per share for the same period last year. The
increase in net income resulted primarily from (i) the gain on
securitization completed in March 1995,
(ii) the permanent financing of individual transactions in 1995, and
(iii) an increased volume of activated business for the the nine months ended
September 30, 1995 of approximately $92,000,000 as compared
to approximately $43,000,000 for the first nine months of 1994. The Company
experienced an approximate 89% increase in revenues which was partially
offset by an approximate 47% increase in expenses mainly attributable to
the one-time non-recurring expenses and increased salaries and commissions.
Revenues
Revenues for the nine months ended September 30, 1995 were approximately
$6,335,000 versus approximately $3,359,000 for the same nine months of
last year. The increase was largely attributable
to; (i) the gain on the March 1995 securitization, (ii) the permanent
financing of individual transactions, and (iii) an increase in the volume of
transactions activated during the first nine months of 1995 versus 1994.
Expenses
Expenses for the first nine months of 1995 were approximately $6,257,000
compared to expenses of approximately $4,258,000 during the same period of
1994. This increase is a result of (i) increased selling, general and
administrative expenses associated with expanded marketing efforts as
evidenced by higher salaries and commissions, and (ii) one-time
non-recurring expenses.
During the first nine months of 1995, the Company wrote off prepaid expenses
totaling approximately
$537,000 and established a reserve related to certain pending tax audits
totaling approximately $418,000. These expenses are non-recurring in nature.
Financial Condition
The Company's financial condition will continue to be dependent upon certain
critical elements. First, the Company must be able to obtain recourse and
nonrecourse financing to fund future acquisitions of
leases. Second, the Company must originate a sufficient volume of new
business which is structured and priced in such a way that the Company
covers its costs and realizes profits from its lease originations.
In 1994 the Company's healthcare leasing business was affected by uncertainty
in the healthcare market as a result of the national debate on healthcare
reform. The debate concluded in late 1994 and healthcare
providers appear to have a renewed interest in acquiring equipment.
The new marketing efforts initiated resulted in the Company originating
a much higher volume of business in the first nine months of 1995 compared
to 1994. Finally, much of this increased volume is expected to continue as
vendor agreements tend to result in a continuing stream of transactions with
the vendor's customers.
Liquidity and Capital Resources
Based upon the Company's estimates of volume of transactions, the Company
believes that existing cash balances, cash flows from its activities,
available warehouse and permanent non-recourse borrowing, and
securitized asset sales will be sufficient to meet its foreseeable financing
needs.
PART II - OTHER INFORMATION
Items omitted in Part II are either not applicable or the answer to the
items is no.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PRIME CAPITAL CORPORATION
(Registrant)
November 14, 1995 /s/ Robert C.Benson
Robert C. Benson, Chief Financial Officer
Robert C. Benson is the Principal
Financial and Accounting Officer and has
been duly authorized to sign on behalf of
the Registrant
November 14, 1995 /s/ James A. Friedman
James A. Friedman, Chief Executive
Officer.