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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-27190
PARAMOUNT FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 11-3072768
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE JERICHO PLAZA, JERICHO, NEW YORK 11753
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(516) 938-3400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA 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 PAST 90 DAYS. YES X NO
----- -----
NUMBER OF SHARES OUTSTANDING AT AUGUST 5, 1996:
7,990,000 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE.
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PARAMOUNT FINANCIAL CORPORATION
INDEX TO FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1996
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets
June 30, 1996 and December 31, 1995 . . . . . . . 1
Statements of Operations
Three Months Ended and Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . 2
Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 1996 . . . . . . . . . 3
Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 . . . . . 4
Notes to Unaudited Financial Statements . . . . . 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-9
PART II - Other Information . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 11
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PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PARAMOUNT FINANCIAL CORPORATION
-------------------------------
BALANCE SHEETS
--------------
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
ASSETS
------
Cash and cash equivalents . . . . . . . . $ 1,153,476 $ 4,365,176
Marketable securities available for sale -- 2,435,978
Accounts receivable . . . . . . . . . . . 106,794 819,991
Net investment in direct finance
and sales-type leases . . . . . . . . . 6,446,063 20,824,494
Assets held under operating leases, net of
accumulated depreciation . . . . . . . 3,976,209 5,018,026
696,043 259,540
Other assets . . . . . . . . . . . . . . ----------- -----------
$12,378,585 $33,723,205
Total assets . . . . . . . . . . . . . . ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Notes payable . . . . . . . . . . . . . . $ 1,611,697 $ 18,868
Accounts payable . . . . . . . . . . . . 419,624 786,474
Accounts payable - leases . . . . . . . . 126,990 553,840
Accrued expenses . . . . . . . . . . . . 313,673 253,499
Obligations for financed equipment-non 9,337,883 23,075,120
-recourse . . . . . . . . . . . . . . . ----------- -----------
11,809,867 24,687,801
Total liabilities . . . . . . . . . . . . ----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000
shares authorized, none outstanding . . -- --
Common stock, $.01 par value; 35,000,000
shares authorized, 3,500,000 and
7,990,000 shares issued and outstanding,
respectively . . . . . . . . . . . . . 35,000 79,900
Additional paid-in capital . . . . . . . 5,282,049 13,635,242
(4,748,331) (4,679,738)
Accumulated deficit . . . . . . . . . . . ----------- -----------
568,718 9,035,404
Total stockholders' equity . . . . . . . ----------- -----------
$12,378,585 $33,723,205
Total liabilities and stockholders' equity =========== ===========
See accompanying notes to financial statements.
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PARAMOUNT FINANCIAL CORPORATION
-------------------------------
STATEMENT OF OPERATIONS
-----------------------
UNAUDITED
---------
THREE MONTHS ENDED
JUNE 30,
------------------
1995 1996
---- ----
REVENUES:
Sales . . . . . . . . . . . . . . . . . . . . $14,166,111 $21,006,596
Lease revenue . . . . . . . . . . . . . . . . 486,572 798,769
Fee and other income . . . . . . . . . . . . 5,096 6,316
----------- -----------
Total revenues . . . . . . . . . . . . . . 14,657,779 21,811,681
----------- -----------
DIRECT COSTS:
Cost of sales . . . . . . . . . . . . . . . . 13,569,690 20,117,787
Lease expense . . . . . . . . . . . . . . . . 429,802 792,766
----------- -----------
Total direct costs . . . . . . . . . . . . 13,999,492 20,910,553
----------- -----------
Gross profit . . . . . . . . . . . . . . . 658,287 901,128
----------- -----------
SELLING, GENERAL AND 459,876 685,600
ADMINISTRATIVE EXPENSES . . . . . . . . . . ----------- -----------
Income (loss) from operations . . . . . . 198,411 215,528
INTEREST INCOME, NET . . . . . . . . . . . . 12,558 86,427
----------- -----------
Income before provision for income
taxes . . . . . . . . . . . . . . . . . 210,969 301,955
PROVISION FOR INCOME TAXES . . . . . . . . . 4,240 120,783
----------- -----------
Net income . . . . . . . . . . . . . . . . $ 206,729 $ 181,172
=========== ===========
Earnings per share . . . . . . . . . . . . . $0.02
===========
Weighted average common shares 7,990,000
outstanding . . . . . . . . . . . . . . . . ===========
SIX MONTHS ENDED
JUNE 30,
----------------
1995 1996
---- ----
REVENUES:
Sales . . . . . . . . . . . . . . . . . . . . $22,720,973 $22,083,893
Lease revenue . . . . . . . . . . . . . . . . 1,067,179 1,446,371
82,610 13,266
Fee and other income . . . . . . . . . . . . ----------- -----------
23,870,762 23,543,530
Total revenues . . . . . . . . . . . . . . ----------- -----------
DIRECT COSTS:
Cost of sales . . . . . . . . . . . . . . . . 21,621,779 21,082,089
884,371 1,352,212
Lease expense . . . . . . . . . . . . . . . . ----------- -----------
22,506,150 22,434,301
Total direct costs . . . . . . . . . . . . ----------- -----------
1,364,612 1,109,229
Gross profit . . . . . . . . . . . . . . . ----------- -----------
SELLING, GENERAL AND 883,264 1,144,911
ADMINISTRATIVE EXPENSES . . . . . . . . . . ----------- -----------
Income (loss) from operations . . . . . . 481,348 (35,682)
26,196 150,005
INTEREST INCOME, NET . . . . . . . . . . . . ----------- -----------
Income before provision for income
taxes . . . . . . . . . . . . . . . . . 507,544 114,323
10,294 45,730
PROVISION FOR INCOME TAXES . . . . . . . . . ----------- -----------
$ 497,250 $ 68,593
Net income . . . . . . . . . . . . . . . . =========== ===========
$0.01
Earnings per share . . . . . . . . . . . . . ===========
Weighted average common shares 7,628,571
outstanding . . . . . . . . . . . . . . . . ===========
See accompanying notes to financial statements.
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PARAMOUNT FINANCIAL CORPORATION
-------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
AS OF JUNE 30, 1996
-------------------
UNAUDITED
---------
COMMON STOCK
------------
SHARES AMOUNT
------ ------
BALANCE, DECEMBER 31, 1995 . . . . . 3,500,000 $35,000
Issuance of common stock in the
initial public offering, net of
offering costs of approximately
$2,067,000 . . . . . . . . . . . . 2,990,000 29,900
Issuance of common stock to
bridge lenders . . . . . . . . . . 1,500,000 15,000
-- --
Net income . . . . . . . . . . . . . --------- -------
7,990,000 $79,900
BALANCE, JUNE 30, 1996 . . . . . . . ========= =======
RETAINED
ADDITIONAL EARNINGS
PAID-IN- ACCUMULATED
CAPITAL (DEFICIT) TOTAL
---------- ----------- -----
BALANCE, DECEMBER 31, 1995 . $5,282,049 ($4,748,331) $ 568,718
Issuance of common stock in
the initial public
offering, net of offering
costs of approximately
$2,067,000 . . . . . . . . 8,368,193 -- 8,398,093
Issuance of common stock to
bridge lenders . . . . . . (15,000) -- --
-- 68,593 68,593
Net income . . . . . . . . . ----------- ----------- ----------
$13,635,242 ($4,679,738) $9,035,404
BALANCE, JUNE 30, 1996 . . . =========== =========== ==========
See accompanying notes to financial statements.
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PARAMOUNT FINANCIAL CORPORATION
-------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
UNAUDITED
---------
1995 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . $ 497,250 $ 68,593
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation . . . . . . . . . . . . . . . . 331,082 805,020
Amortization of discounts on marketable
securities . . . . . . . . . . . . . . . . -- (85,270)
Amortization of unearned operating lease
revenue from sublease transactions . . . . (52,037) (19,928)
Amortization of prepaid operating lease
expense from sublease transactions . . . . 46,188 25,067
Purchase of equipment for direct finance
leases and sales type leases . . . . . . . (2,022,987) (17,421,075)
Termination of direct finance leases . . . . 674,699 967,998
Proceeds applied to direct finance leases and
sales type leases . . . . . . . . . . . . . 979,214 2,074,645
Purchase of equipment for operating leases . (222,485) (14,547,245)
Termination of operating leases . . . . . . . 30,200 12,700,409
Increase in non-recourse lease financing . . 2,699,258 27,446,278
Termination of non-recourse lease financing . (612,573) (10,839,734)
Repayments and interest amortization applied
to non-resource lease financing . . . . . . (1,236,414) (2,869,307)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . (8,617) (713,197)
Other assets . . . . . . . . . . . . . . . . (19,331) 411,436
Unearned sales revenue . . . . . . . . . . . (825,000) --
Accounts payable . . . . . . . . . . . . . . (15,016) 366,850
Accounts payable - leases . . . . . . . . . -- 426,850
Accrued expenses . . . . . . . . . . . . . . (67,360) (40,246)
----------- ------------
Net cash provided by (used in) operating 176,071 (1,242,856)
activities . . . . . . . . . . . . . . . . . ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities . . . . . -- (11,184,632)
Proceeds from sale/maturity of marketable -- 8,833,924
securities . . . . . . . . . . . . . . . . ----------- ------------
Net cash (used in) investing activities . . . . -- (2,350,708)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock in an
initial public offering . . . . . . . . . . -- 8,398,093
Distributions to shareholders in cash . . . . (187,489) --
Proceeds from notes payable . . . . . . . . . 98,000 --
Repayment of notes payable . . . . . . . . . (75,199) (1,592,829)
----------- ------------
Net cash (used in) provided by financing (164,688) 6,805,264
activities . . . . . . . . . . . . . . . . . ----------- ------------
Net increase in cash and cash equivalents . . . 11,383 3,211,700
CASH AND CASH EQUIVALENTS, beginning of period 1,286,601 1,153,476
----------- ------------
CASH AND CASH EQUIVALENTS, end of period . . . $ 1,297,984 $ 4,365,176
=========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes . . . . . . . . . $ 10,294 $ 21,746
=========== ============
Cash paid for interest . . . . . . . . . . . $ 231,651 $ 523,203
=========== ============
See accompanying notes to financial statements.
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PARAMOUNT FINANCIAL CORPORATION
-------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
-----------
1. The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and Regulation S-X
related to interim period financial statements and, therefore, do not
include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments and accruals)
considered necessary for a fair presentation of the financial position
of Paramount Financial Corporation ("the Company") at June 30, 1996
and its results of operations and cash flows for the three and six
months ended June 30, 1995 and 1996, respectively, have been included.
The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the entire year.
Reference should be made to the annual financial statements, including
footnotes thereto, included in the Company's Form 10-K for the fiscal
year ended December 31, 1995.
2. On January 22, 1996, the Company consummated an initial public
offering ("IPO") of its securities. In connection with the offering,
the Company issued a total of 1,495,000 units, inclusive of the
underwriter's over-allotment option which was exercised in full, at a
price of $7.00 per unit generating net proceeds to the Company of
approximately $8.4 million. Concurrent with the IPO, the Company
issued 750,000 units, identical to those units issued in the IPO, and
1,500,000 class B warrants to certain lenders (the "Lenders") as
additional compensation for making certain bridge loans to the Company
(the "Bridge Loans"). Each unit sold in the offering consisted of two
shares of common stock and two redeemable, detachable class A
warrants. Concurrent with the IPO, the Company no longer qualified as
a Subchapter "S" Corporation, and became subject to "C" corporation
taxation from that point on.
3. Marketable securities have been classified as available for sale in
accordance with Statement of Financial Accounting Standards Board No.
115, "Accounting for Certain Investments in Debt and Equity
Securities". Marketable securities available for sale consist
primarily of United States government and agency bonds with original
maturities of one year or less. The cost basis of these securities
approximates market value, as such there are no unrealized gains or
losses at June 30, 1996. The cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization, interest income, realized gains and losses are included
in interest income.
4. In January 1996, the Company, utilizing a portion of the net proceeds
from the IPO, repaid the Lenders an aggregate of approximately
$1,040,000 of indebtedness under the Bridge Loans, and in March 1996
the Company repaid $495,000 outstanding under a secured line of
credit.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the unaudited financial statements, including
the notes thereto, included elsewhere in this report.
GENERAL
The operating results of Paramount Financial Corporation ("Paramount"
or the "Company") are subject to quarterly fluctuations resulting from a
variety of factors, including product announcements by computer
manufacturers, economic conditions, interest rate fluctuations and
variations in the mix of leases written by the Company. Furthermore, the
Company's sales volume can fluctuate significantly from quarter to quarter
based on the closing date and nature of each particular sales transaction.
The mix of leases written in a quarter is a result of a combination of
factors, including changes in customer demands and/or requirements, new
product announcements, price changes, changes in delivery dates, changes in
maintenance policies and pricing policies of equipment manufacturers, and
price competition from other lessors. Leasing transactions (other than
sales type leases), in general, do not provide for significant earnings in
the month of lease origination. Instead, revenue and profit from lease
transactions are recorded over the life of the asset and the lease.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30,
1995
For the three months ended June 30, 1996, the Company recorded pre-tax
income of $302,000. This represents an increase of 43.1% over the $211,000
recorded for the comparable period ended June 30, 1995. Over this same
period, total revenue increased by 48.3% to $21.8 million from $14.7
million. The increase in revenue and pre-tax income is a result of the on-
going expansion of the end-user and lease origination sector of the
Company's business. The Company is continuing with its efforts to increase
its end-user relationships, and thus generate new opportunities for lease
origination and sales transactions.
During the three months ended June 30, 1996, the Company recorded
$21.0 million of sales revenue. This represents an increase of 47.9% over
the $14.2 million recorded during the three months ended June 30, 1995.
Included in the sales revenue for the three months ended June 30, 1996 was
$8.2 million of revenue from sales type leases of which there were none
during the three months ended June 30, 1995. In addition, during the
quarter ended June 30, 1996, the Company recorded $12.5 million from the
sale to an equipment investor of a previously recorded lease. In the
quarter ended June 30, 1995, the Company entered into similar transactions
for a total sale price of $9.6 million. Subsequent to a sale of this
variety, the Company generally is a party to a re-marketing agreement under
which it may earn additional income from the asset's future re-lease or
sale value. The Company includes these leases within the aggregate value
of its active portfolio of owned and managed leases.
During the three months ended June 30, 1996, the Company entered into
new lease transactions totaling $10.2 million of equipment cost. Of this
amount, $7.5 million was for sales type leases for which the sale price and
cost of equipment were recorded as sales revenue and cost of sales,
respectively. Of the balance, $1.0 million was classified as direct
finance leases and $1.6 million was classified as operating leases. For
the three months ended June 30, 1995, the Company entered into $1.3 million
of direct finance leases and $163,000 of operating leases. The increase in
new lease origination is a direct result of the Company's efforts to expand
its end-user lease origination business. In addition, the proceeds of the
Company's January 1996 initial public offering (the "IPO") have increased
the Company's ability to make residual value investments in leased
equipment, thus creating new opportunities for lease origination.
Consistent with the growth in new lease volume, during the three months
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ended June 30, 1996, the Company entered into $7.5 million of non-recourse
lease financing arrangements, net of terminations resulting from lease
sales and lease extensions, as compared with $1.3 million for the three
months ended June 30, 1995. See "Liquidity and Capital Resources."
Lease revenue, comprised of rental income from operating leases and
interest income from direct finance and sales type leases, increased by
64.2% to $798,800 for the three months ended June 30, 1996 from $486,600
for the comparable period ended June 30, 1995. Lease expense, which
includes depreciation expense on operating leases, interest expense on
lease financing and sublease rent expense, increased by 84.5% to $792,800
for the three months ended June 30, 1996 from $429,800 for the three months
ended June 30, 1995. Lease revenue and lease expense recognition is
dependent upon a number of factors, including the term of the lease, the
accounting classification of the lease (i.e., operating, direct finance, or
sales type) and the commencement date of the lease and the lease financing
within a particular period. Included in lease expense for the three months
ended June 30, 1996 was interest expense on the financing of certain lease
transactions which were recorded as sales type leases with the associated
revenue recorded as sales revenue rather than lease revenue. Also, during
the three months ended June 30, 1995 the Company had a number of lease
transactions which had renewed on a month-to-month basis which generated
lease revenue without any related lease expense. There was no such revenue
during the three months ended June 30, 1996.
Selling, general and administrative expenses ("SG&A") totaled $685,600
for the three months ended June 30, 1996, representing an increase of 49.1%
over the $459,900 recorded during the three months ended June 30, 1995.
The increase in SG&A is a result of the increased sales and support staff
at the Company as well as the increased compliance costs associated with
being a public company.
During the three months ended June 30, 1996, the Company recorded
$86,400 of interest income, an increase of $73,900 over the period ending
June 30, 1995. This increase is due to the investment of the IPO proceeds
in interest bearing cash accounts, cash equivalents and marketable
securities during the three months ended June 30, 1996.
The provision for income taxes of $120,800 for the three months ended
June 30, 1996 reflects an effective tax rate of 40% for federal and state
taxes. Prior to 1996, the Company was an S-Corporation and not subject to
a corporate federal income tax.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
For the six months ended June 30, 1996, the Company recorded pre-tax
income of $114,300. This represents a decrease of 77.5% over the $507,500
recorded for the comparable period ended June 30, 1995.
During the six months ended June 30, 1996, the Company had total new
business volume (gross revenue from sales transactions and the cost of new
equipment lease transactions) of $33.3 million. This represents an
increase of $8.4 million, or 33.7%, over the six months ended June 30,
1995. The results of operations for the first six months of 1996 represent
a significant change in focus for Paramount as compared to the prior year's
activity. The Company has begun to carry out its business plan to
aggressively expand its end-user lease origination business. Specifically,
the Company has increased its presence in end-user accounts, put greater
emphasis on new lease origination and established a greater marketing
presence in the high-technology community. In addition, the proceeds of
the Company's January 1996 IPO have increased the Company's ability to make
residual value investments in leased equipment, thus creating new
opportunities for lease origination. See "Liquidity and Capital
Resources."
For the six months ended June 30, 1996, the Company recorded sales
revenue of $22.1 million. Of this amount, $8.2 million is from sales type
leases and $12.5 million is from the sale of leased equipment to an
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equipment investor. During the six months ended June 30, 1995, the Company
recorded sales revenue of $22.7 million which included $14.0 million of
sales of equipment leases to equipment investors.
During the six months ended June 30, 1996, the Company entered into
new lease transactions totaling $32.0 million of equipment cost. This
represents an increase of $29.7 million over the cost of equipment leased
during the six months ended June 30, 1995. Of the total cost of equipment
leased during the six months ended June 30, 1996, $12.4 million was
subsequently sold to an equipment investor, and $7.5 million was recorded
as sales type leases. Of the balance of new lease origination for the six
months ended June 30, 1996, $9.9 million was recorded as direct finance
leases and $2.2 million was recorded as operating leases, compared to $2.0
million and $222,500, respectively, for the six months ended June 30, 1995.
During the six months ended June 30, 1996, the Company entered into $16.6
million of non-recourse lease financing arrangements, net of terminations
resulting from lease sales and lease extensions, as compared with $2.1
million for the six months ended June 30, 1995. See "Liquidity and Capital
Resources."
Lease revenue increased by 27.3% to $1.4 million for the six months
ended June 30, 1996 from $1.1 million for the comparable 1995 period.
Lease expense increased by 58.4% to $1.4 million for the six months ended
June 30, 1996 from $884,400 for the six months ended June 30, 1995.
Included in lease expense for the six months ended June 30, 1996 was
interest expense on the financing of certain lease transactions which were
recorded as sales type leases with the associated revenue recorded as sales
revenue rather than lease revenue. Also, during the six months ended June
30, 1995 the Company had a number of lease transactions which had renewed
on a month-to-month basis which generated lease revenue without any related
lease expense. There was no such revenue during the six months ended June
30, 1996.
SG&A totaled $1.1 million for the six months ended June 30, 1996,
representing an increase of 24.5% over the $883,300 recorded during the six
months ended June 30, 1995. The increase in SG&A is a result of the
increased sales and support staff at the Company as well as the increased
compliance costs associated with being a public company.
During the six months ended June 30, 1996, the Company recorded
$150,000 of interest income, an increase of $123,800 over the period ending
June 30, 1995. This increase is due to the investment of the IPO proceeds
in interest bearing cash accounts, cash equivalents and marketable
securities during the six months ended June 30, 1996.
The provision for income taxes of $45,700 for the six months ended
June 30, 1996 reflects an effective tax rate of 40% for federal and state
taxes. Prior to 1996, the Company was an S-Corporation and not subject to
a corporate federal income tax.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had $6.8 million in cash, cash
equivalents and marketable securities. Substantially all of this amount
was invested in interest-bearing savings accounts, money market accounts
established by major commercial banks, or in United States Government or
other AA rated obligations. Since inception, the Company has been able to
cover its operating expenses from internally generated cash flow and has
never had to borrow funds to cover such operating expenses. Although the
Company's business is subject to monthly and quarterly fluctuations that
may require the Company to use its cash balances to cover such expenses for
short periods of time, the Company does not anticipate having to use
significant amounts of its cash balances to cover such expenses.
At June 30, 1996, the Company had three lines of credit available.
These credit lines, established with The Bank of New York, Chemical Bank
and Midlantic Bank, allow the Company, subject to the satisfaction of
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certain financial covenants with respect to the Midlantic Bank credit
facility, to borrow up to $2,750,000 in the aggregate and are secured by
equipment and contracts to sell or lease that equipment. Borrowings under
these lines bear interest at 1% to 1 1/2% above the prime rate. In
addition, one of these lines offers the Company the ability to borrow up to
$100,000 on an unsecured basis. The purpose of these credit lines is to
allow the Company to pay its suppliers on a timely basis while waiting for
the customer to pay or for the non-recourse financing to occur. As of
December 31, 1995, the Company had borrowed $495,000 from one of these bank
lenders in connection with the acquisition of equipment on lease. This
amount was paid in full in March 1996 and no additional amounts were
outstanding as of June 30, 1996. The Company is in the process of
reviewing all of its existing credit relationships and hopes to modify the
terms and increase the amounts of these lines in the near future.
In January 1996, the Company, utilizing a portion of the net proceeds
from the IPO, repaid $1.0 million owed to certain bridge lenders plus the
related interest accrued that was outstanding as of December 31, 1995.
The Company finances substantially all of its leases by discounting
the payment streams on a non-recourse basis through various banks and
financial institutions. Thus, the only cash required in these lease
transactions is the residual value investment by the Company. As a result
of the Company's IPO, the Company believes that it has sufficient resources
to make the residual value investments required to grow its lease
portfolio. In addition, the Company has numerous options available to it
for the financing of residual value investments, including sales of
equipment on lease to equipment investors, recourse loans and non-recourse
loans. The Company intends to use, on an opportunistic basis, all such
available resources in order to maximize its portfolio of equipment on
lease. In June 1996, in connection with an extension and re-financing of a
lease transaction, the Company repaid $60,500 of a residual value loan that
was outstanding as of December 31, 1995. As of June 30, 1996, the Company
had a total of $18,900 of residual value loans outstanding.
-9-
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
--------
27. Financial Data Schedule.
(b) Reports on Form 8-K.
-------------------
None.
-10-
<PAGE>
SIGNATURES
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.
PARAMOUNT FINANCIAL CORPORATION
By: /s/ Paul Vecker
---------------------------------------
Paul Vecker, Senior Vice President and
Chief Financial Officer
-11-
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
BALANCE SHEETS, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,365
<SECURITIES> 2,436
<RECEIVABLES> 820
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,723
<CURRENT-LIABILITIES> 1,613
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 8,956
<TOTAL-LIABILITY-AND-EQUITY> 33,723
<SALES> 21,007
<TOTAL-REVENUES> 21,812
<CGS> 20,911
<TOTAL-COSTS> 20,911
<OTHER-EXPENSES> 686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 302
<INCOME-TAX> (121)
<INCOME-CONTINUING> 181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
