SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarter Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1998 Commission File Number 0-22919
PRIME COMPANIES, INC.
(Exact name of registrant as specified in charter)
Delaware 52-2031531
(State or other jurisdiction of incorporation(I.R.S. Employer
or organization)Identification No.)
155 Montgomery Street, Suite 406, San Francisco, California 94104
(Address of principal executive offices)(Zip Code)
(415) 398-4242
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report)
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
requires for the past 90 days. Yes X No ___
The number of shares of common stock outstanding as of April
30, 1998 was 3,843,123
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
INDEX
Part I - Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--March 31, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations--Three
Months Ended March 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows--Three
Months Ended March 31, 1998 and 1997 7
Notes to Condensed Consolidated Financial Statements 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition Results of Operations 11
Part II - Other Information
Item 1. Legal Information 13
Item 5. Other Information 13
Item 14. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
March 31, December 31,
1998 1997*
(Unaudited)
ASSETS
Current assets:
Cash 157 201
Accounts receivable, net 1,426 1,402
Accounts receivable - miscellaneous 52 114
Investment accounts 2 436
Driver advances 107 78
Notes receivable - current portion 23 388
Deferred income taxes 21 21
Inventories 12 19
Prepaid expenses 366 601
Total current assets 2,166 3,260
Property and equipment, net 4,812 5,280
Other assets:
Investments, unlisted securities 390 101
Deferred income taxes 380 380
Deposits 257 245
Note receivable, less current portion 237 36
Asset held for resale -- 23
Total assets $8,242 $9,325
* Condensed from audited financial statements.
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
March 31, December 31,
1998 1997*
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current
portion of long-term debt $1,331 727
Deferred expense credit 28 38
Loan payable 91 150
Margin account payable -- 308
Accounts payable and accrued liabilities 1,410 1,604
Security Deposit 10 10
Total current liabilities 2,870 2,837
Long-term liabilities:
Long-term debt, less current portion 2,708 2,683
Deferred income -- 605
Total long-term liabilities 2,708 3,288
Stockholders' equity:
Common stock, shares authorized
50,000,000, par value$.0001,
3,843,123 shares were issued and
outstanding at March 31,1998 and
December 31, 1997, respectively 1 1
Additional paid-in capital 3,812 4,289
Retained deficit (1,149) (1,090)
Total stockholders' equity 2,664 3,200
Total liabilities and
stockholders' equity $8,242 $9,325
* Condensed from audited financial statements.
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, except Per Share Data)
Three Months Ended
March 31,
1998 1997
Transportation revenue $4,137 $ 3,406
Operating costs and expenses:
Purchased transportation 1,597 1,399
Salaries and related expenses 1,380 890
General supplies and expenses 407 257
Operating expenses 883 652
Revenue equipment rentals 264 212
Depreciation and amortization 202 117
Total operating costs and expenses 4,733 3,527
Operating income (loss) (596) (121)
Other income (expense):
Interest expense (130) (70)
Interest income 6 5
Rental income 29 --
Investment income 630 --
Other income 6 18
Gain (loss) on disposition of assets (2) --
Net (loss) from operations before provision for
income taxes (57) (168)
Provision for income tax 2 2
Net (loss) $(59) $(170)
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, except Per Share Data)
Three Months Ended
March 31,
1998 1997
Earnings (loss) per share:
Primary $ (.02) $ (0.10)
Fully diluted $ (.01) $ (0.10)
Weighted average number of shares:
Primary 3,843,124 1,749,143
Fully diluted 6,698,332 1,749,143
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net (loss) from operations $(59) $(170)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 202 117
(Gain) loss on disposition of assets 2 --
Provision for uncollectible accounts receivable 7 4
(Increase) decrease in
Accounts receivable (28) (1,608)
Accounts receivable - miscellaneous 62 (29)
Driver advance (29) (151)
Inventories 7 (23)
Investments 145 561
Prepaid expenses 235 (284)
Deposits (12) (127)
Asset held for resale 23 --
Increase (decrease) in:
Accounts payable and accrued liabilities (194) 831
Deferred income (605) --
Deferred expense credit (10) --
Net cash (used in) operating activities (254) (879)
Cash flows from investing activities:
Additions to property and equipment (24) (167)
Collections on notes receivable 421 6
Net cash provided by investing activities 397 (161)
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from financing activities:
Proceeds from short-term debt $ 400 --
Principal payments on long term debt (220) $(118)
Principal payments loan payable (59) --
Margin account payable (308) (129)
Proceeds from sale of stock-- -- 1,564
Net cash (used by) financing activities (187) 1,317
Increase (decrease) in cash (44) 277
Cash, beginning of period 201 264
Cash, end of period $157 $541
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $128 $82
Income Taxes $6 $--
Noncash investing and financing transactions:
Purchase of property and equipment with debt $27 $3,022
Purchase of note receivable with debt $-- $181
Increase in deferred income $-- $535
Decrease of property and equipment with
reduction in additional paid-in capital $308 $--
Decrease of property and equipment with reduction
In additional paid-in capital $308 $--
Increase in note receivable in
exchange for debt $ 257 $--
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
The accounting policies followed by the Company are set
forth in Note 1 to the Company's consolidated financial
statements included in the Company's Annual Report to
Stockholders for the year ended December 31, 1997.
2. Statement of Information Furnished
The accompanying unaudited consolidated financial
statements have been prepared in accordance with Form 10-Q
instructions and in the opinion of management contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of March
31, 1998, the results of operations for the three months ended
March 31, 1997 and 1998 and the cash flows for the three months
ended March 31, 1998 and 1997. The results of operations for
the three month periods ended March 31, 1998 and 1997 are not
necessarily indicative of the results to be expected for the
full year. These results have been determined on the basis of
generally accepted accounting principles and practices applied
consistently with those used in the preparation of the
Company's 1997 Annual Report.
Certain information and footnote disclosures normally
included in financial statements presented in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities
and Exchange Commission.
3. Property and Equipment
Property and equipment consisted of the following (000
omitted):
March 31, December 31, Estimated
1998 1997 Useful Lives
Land $ 600 $600
Buildings and improvements 270 579 31 years
Communications equipment 140 132 5 years
Revenue equipment 4,502 4,469 4 to 7 years
Service cars 14 14 5 years
Furniture and office equipment 110 100 3 to 5 years
Leasehold improvements 34 33 life of lease
Machinery and equipment 12 12 3 years
5,682 5,939
Less accumulated depreciation
and amortization (870) (659)
$4,812 $5,280
<PAGE>
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the
following (000 omitted):
March 31, December 31,
1998 1997
Accounts payable $578 430
Accrued compensation and related 300 200
Accrued purchased transportation 396 663
Other accrued expenses 136 311
$ 1,410 $ 1,604
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net loss for the quarter ended March 31, 1998 amounted to
$59,000 compared to $170,000 for the prior year period. The
decreased loss was primarily attributable to an increase in
non-operating investment income during the current quarter. Net
operating loss was $596,000 for the three months ended March
31, 1998 as compared to a net operating loss of $121,000 for
the comparable prior year period. The increased loss of
$475,000 is primarily attributable to higher operating costs
during the first quarter of 1998 as compared to the first
quarter of 1997.
First quarter operating revenue increased 21.5% or $731,000 to
$4,137,000 from $3,406,000 for the first quarter of 1997. The
sales increase reflects an increase in the Company's tractor
fleet from 93 units at March 31, 1997 to 110 units at March 31,
1998, producing an increase in loaded miles from 3,170,000 to
3,452,000 for the period. The increase in the number of units
reflects the Company's efforts to expand operations by
continually increasing the size of the fleet. Operating revenue
for the Company's Mid-Cal Express Logistics, Inc. subsidiary
was $384,000 for the quarter ended March 31, 1998, and $-0-
for the quarter ended March 31, 1997, which represents an
increase of $384,000. Mid-Cal Express Logistics, Inc. was
formed in July, 1997 and provides its customers with full-
service logistics capabilities in transportation services,
including truckload and less than truckload distribution.
During the first quarter of 1998, demand for the Company's
temperature-controlled truckload services weakened. This was
due in part to increased competition in produce-related
freight. During the period, pricing remained relatively
constant at $1.09 per loaded mile.
Operating costs for the first quarter of 1998 increased by
$1,206,000 from the prior year. As a percentage of sales,
operating costs for the quarter increased 10% from 1997. This
is primarily attributable to a increase in salaries expense,
operating expenses and general supplies expenses of 7.3%, 2.2%
and 2.3% (as a percentage of revenue) respectively, over the
comparable prior year.
Salaries and related expenses for the quarter ended March 31,
1998 were $1,380,000, or a $490,000 (55%) increase over the
$890,000 for the prior year quarter. The primary cause for the
increase was a higher proportion of company-owned tractors to
the total fleet size. The resulting increase in total company
miles, plus approximately a $.04 per mile pay increase, a
decrease in utilization of lower cost per mile team drivers
over single drivers, and a slight increase in empty miles
percentage contributed to higher driver wage costs. The Company
increased the driver wages to be more competitive with other
transportation companies in an attempt to lower personnel
turnover. General and administrative wages increased as the
Company switched to more full time personnel, as compared to
part time personnel used during the first quarter of 1997 when
the company was beginning to increase operations.
Operating expenses increased 2.2% to 21.3% expressed as a
percentage of sales during the first quarter of 1998, as
compared to 19.1% for the first quarter of 1997. This increase
was principally due to the increased age of the company owned
tractor and trailer fleet.
General supplies and expenses increased 2.2% to 9.8% expressed
as a percentage of sales during the first quarter of 1998, as
compared to the first quarter of 1997. An increase in the
number of personnel was the primary reason for the increase.
Purchased transportation costs decreased .02% to 3.9% during
the first quarter of 1998 expressed as a percentage of sales,
compared to the first quarter of 1997. However, the first
quarter 1998 cost per loaded mile increased $.05, when compared
to the first quarter of 1997. The Company raised the rate of
pay for owner operators in an attempt to be competitive with
other transportation companies, and to attract new owners
operators to the tractor fleet.
Interest Expense increased $60,000 for the first quarter of
1997 as compared to the comparable prior year period. The
increase is due to a accounts receivable financing agreement
the Company has in place during the first quarter 1998, as well
as increased debt service for the addition of new trailers, and
working capital requirements.
The Company increased investment income by $630,000 during the
quarter ended March 31, 1998 as compared to the prior year. The
Company converted several long and short-term investments,
resulting in recognition of prior deferred income.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to an account transfer and purchase agreement dated
November 14, 1997 the Company's truck transportation operation
utilizes an accounts receivable factoring arrangement, which
provides for maximum gross purchases of $1,500,000. The
agreement allows the Company to sell accounts receivable of
certain approved customers at a fixed discount of .25% and a
variable rate equal to 2% over the purchaser's base rate. The
Company, the Company's logistics operation, plus the personal
guarantee of a senior member of management all secure the
agreement.
At March 31, 1998, the Company had total debt of $4,039,000.
The Company's ratio of current assets to current liabilities
and its debt to equity were 0.75:1 and 2.1:1, respectively, as
compared to 1.2:1 and 1.9:1, respectively at December 31, 1997.
At March 31, 1998 the Company has a $1,000,000 commitment from
a revenue equipment manufacturer for the purchase of new
company tractors and is presently seeking financing for another
$1,000,000 to purchase additional tractors. The Company expects
that it will acquire a significant portion of this equipment
through operating leases when leasing is a favorable
alternative.
The Company ended the March 31, 1998 period with $157,000 of
cash and negative working capital of $ 704,000. Based upon the
Company's expected cash flow from operations, and the planned
sale of the Company's rental property, management believes
that the Company's capital resources are sufficient to meet its
presently anticipated operating needs and capital expenditure
requirements. However, should these resources provide
inadequate or are unavailable, the Company may be required to
seek additional financing through capital investment.
SEASONALITY
In the transportation industry generally, results of operations
show a seasonal pattern because customers reduce shipments
during and after the winter holiday season and also because of
weather variations during the winter months The Company's
operating expenses have historically been higher in the winter
months primarily due to decreased fuel efficiency and increased
maintenance costs in colder weather. Extreme prolonged periods
of rain in the western United States can result in adverse
effects on revenue due to the reduced availability of produce
freight.
<PAGE>
PRIME COMPANIES, INC.
and Consolidated Subsidiary Companies
PART II. OTHER INFORMATION
ITEM 1. LEGAL INFORMATION
During the quarter ended March 31, 1988, one of the Company
tractors was involved in an accident, which resulted in
numerous personal injuries. Claims resulting from this
incident will be very substantial. Management's opinion is
that there will be adequate insurance coverage for these
claims.
ITEM 5. OTHER INFORMATION
Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company has reserved the trading symbol of PRMC for such
time as its shares become traded publicly. As of March 31,
1998, there was no public market for the Company's shares.
DIVIDEND POLICY.
The Company has never paid a cash dividend on its common stock.
It is the current intention of the Company's Board of Directors
to continue to retain earnings to finance the growth of the
Company's business rather than to pay dividends. Future
payment of cash dividends will depend upon the financial
condition, results of operations and capital commitments of the
Company, as well as other factors deemed relevant by the Board
of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8K-A #1 was filed on March 12, 1998, which included the
audited financial statements for the company for the years
ended December 31, 1997 and 1996.
<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.
PRIME COMPANIES, INC.
Registrant
DATED: May 14, 1998 /s/ Irving Pfeffer
Irving Pfeffer
Chairman/CEO
DATED: May 14, 1998 /s/ David Lefkowitz
David Lefkowitz
President/COO
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<NAME> PRIME COMPANIES INC.
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