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 March 31, 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 March 31, 1995, there were 4,280,165 shares of common stock outstanding.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Operations --
Three Months Ended
March 31, 1995 and 1994. . . . . . . . . . . . . 3
Consolidated Balance Sheets --
March 31, 1995 and December 31, 1994 . . . . . . 4
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 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
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1995 1994
REVENUES:
RENTALS ON LEASED EQUIPMENT $ 216,259 $ 82,043
DIRECT FINANCING LEASES 416,162 79,202
FEE INCOME 2,626,224 288,132
GAIN ON SALE OF LEASED EQUIPMENT 14,616 197,151
INTEREST 270,045 49,651
OTHER INCOME 31,624 22,010
TOTAL REVENUES 3,574,930 718,189
EXPENSES:
AMORTIZATION OF DEFERRED FINANCE COSTS -- 3,045
DEPRECIATION OF LEASED EQUIPMENT 129,789 38,432
SELLING, GENERAL AND ADMINISTRATIVE 2,216,236 1,056,022
INTEREST 453,955 15,457
NET CAPITALIZED INITIAL DIRECT COSTS (35,214) (70,471)
TOTAL EXPENSES 2,764,766 1,042,485
INCOME (LOSS) BEFORE INCOME TAX EXPENSE 810,164 (324,296)
INCOME TAX EXPENSE -- --
NET INCOME (LOSS) $ 810,164 $ (324,296)
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE: $ 0.19 $ (0.08)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31,
ASSETS 1995 1994
CASH AND EQUIVALENTS $ 2,116,473 $ 1,945,353
RECEIVABLES:
RENTALS ON LEASED EQUIPMENT 42,118 59,329
DUE FROM EQUIPMENT TRUSTS 37,079 68,609
OTHER 3,016,950 2,107,271
NET INVESTMENT IN DIRECT FINANCING LEASES 1,444,946 16,846,541
LEASED EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF $73,254 AT
DECEMBER 31, 1994 -- 1,924,634
DEPOSITS ON EQUIPMENT 243,909 755,354
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF
$970,204 AND $942,890 AT MARCH
31, 1995 AND DECEMBER 31, 1994
RESPECTIVELY 274,118 272,134
OTHER ASSETS 3,640,056 2,962,224
TOTAL ASSETS $10,815,649 $26,941,449
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 1,703,810 $ 7,889,502
ACCOUNTS PAYABLE FOR EQUIPMENT 321,298 11,919,579
ACCRUED EXPENSES AND OTHER LIABILITIES 2,942,319 1,996,002
DEPOSITS AND ADVANCES 414,917 513,225
TOTAL LIABILITIES 5,382,344 22,318,308
STOCKHOLDERS' EQUITY
COMMON STOCK, $0.05 PAR VALUE:
AUTHORIZED 10,000,000 SHARES; ISSUED
AND OUTSTANDING 4,374,365 SHARES AT
MARCH 31, 1995 AND DECEMBER 31, 1994 218,718 218,718
ADDITIONAL PAID-IN CAPITAL 9,681,225 9,681,225
ACCUMULATED DEFICIT (4,166,838) (4,977,002)
TREASURY STOCK, AT COST; 94,200 SHARES
AT MARCH 31, 1995 AND DECEMBER 31, 1994 (299,800) (299,800)
TOTAL STOCKHOLDERS' EQUITY 5,433,305 4,623,141
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,815,649 $26,941,449
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 810,164 $ (324,296)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:
DEPRECIATION 157,103 67,714
AMORTIZATION OF UNEARNED INCOME (416,162) (79,202)
AMORTIZATION OF DEFERRED FINANCE
COSTS ON DIRECT FINANCE LEASES -- 3,045
GAIN ON SECURITIZATION (2,268,999) --
CHANGES IN ASSETS AND LIABILITIES:
RENTALS ON LEASED EQUIPMENT AND
OTHER RECEIVABLES 237,816 386,482
DEFERRED CHARGES 138,670 (158,192)
OTHER ASSETS (845,502) (305,922)
ACCRUED EXPENSES AND OTHER
LIABILITIES 946,318 (614,775)
DUE FROM EQUIPMENT TRUSTS 31,530 134,997
NET CASH USED BY OPERATING ACTIVITIES (1,209,062) (890,149)
CASH FLOWS FROM INVESTING ACTIVITIES:
COST OF EQUIPMENT ACQUIRED FOR LEASE (32,435,599) (8,723,404)
PROCEEDS FROM SALE OF ASSETS -- 475,993
NET CASH USED IN INVESTING ACTIVITIES (32,435,599) (8,247,411)
CASH FLOWS FROM FINANCING ACTIVITIES:
DISCOUNTED LEASE PROCEEDS AND PROCEEDS
FROM SALE OF FULLY LEVERAGED
FINANCE LEASES 10,323,341 4,344,567
PROCEEDS (REPAYMENTS) OF NOTES PAYABLE
TO BANKS (6,185,692) 4,242,505
PROCEEDS FROM SECURITIZATION, NET OF
EXPENSES 29,678,132 --
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,815,781 8,587,072
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 171,120 (550,488)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 1,945,353 4,060,079
END OF PERIOD $ 2,116,473 $ 3,509,591
CASH PAID DURING THE PERIOD FOR:
INTEREST $ 453,955 $ 15,457
INCOME TAXES $ -- $ --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
DISCOUNTED LEASE RENTALS ON DIRECT
FINANCE LEASES COLLECTED BY
FINANCIAL INSTITUTIONS $ -- $ 129,322
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The financial results of 1994 and the first quarter 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 origination. 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, (ii) it has determined that the lease can be
either discounted with a bank or financial institution on a non-recourse
basis, and (iii) it is determined that it 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 a "one-off" basis.
On March 16, 1995, the Company complete the issuance and sale of $56,725,781
worth of equipment lease-backed pay-through notes. Through this issuance
the Company permanently financed certain assets and liabilities carried on
the Company's balance sheet as of December 31, 1994; thus removing them from
the balance sheet and recognizing sales treatment in the first quarter of 1995.
Results of Operations - Three Months Ended March 31, 1995
Net Income (Loss)
Net income for the three months ended March 31, 1995 was approximately
$810,000 or $.19 per share, as compared to a net loss of approximately
($324,000) or ($0.08) per share for the same quarter of 1994.
The increase in net income resulted primarily from; (i) the securitization
completed in March 1995 which included assets that were capitalized as of
December 31, 1994 of approximately $17,325,000, and (ii) increased volume
of transactions activated for the three months ended March 31, 1995
(approximately $27,999,000 as compared to approximately $7,160,000 for the
same quarter of 1994). Of this increased volume approximately $11,350,000
(41%) was originated by the vendor group, approximately $8,350,000
(30%) was originated by the structured finance group, and approximately
$8,296,000 (29%) was originated by the healthcare leasing and finance group.
In comparison, in 1994 approximately $5,737,000 (80%)
was originated by the healthcare leasing group, approximately $720,000 (10%)
was originated by the structured finance group, and approximately $701,000
(10%) was originated by the vendor group.
<PAGE>
Revenues
Total revenues for the three months ended March 31, 1995 were approximately
$3,575,000 compared to revenues of approximately $718,000 for the same period
last year. The increase was largely attributable to increases in all
revenue categories relative to the March securitization (with the exception
of gain on sale of leased equipment) due to (i) a carry forward of capitalized
transactions from 1994 that were sold in March 1995 and (ii) an increase
in volume of transactions activated in the first quarter of 1995 versus
1994 that were included in the securitization.
Rental on leased equipment increased approximately $134,000 in the first
quarter of 1995 compared to the same period in 1994. This is a result of an
increase in first quarter volume, of the Company maintaining transactions on
its books from the fourth quarter of 1994 and of the recognition of rental
income on these transactions in January and February until the sale in
March 1995.
Direct financing lease revenues increased approximately $337,000 in the first
quarter of 1995 compared to the same period in 1994. This is a result of
an increase in first quarter volume, of the Company maintaining transactions
on its books from the fourth quarter of 1994 and of the recognition of direct
financing revenues on these transactions in January and February until
the sale in March 1995.
Fee income increased approximately $2,338,000 in the first quarter of 1995
compared to the same period in 1994 as a result of the gain recorded on the
sale of assets in the March 1995 securitization. There was no
securitization of assets in the first quarter of 1994.
Gains from equipment sales decreased approximately $183,000 in the first
quarter of 1995 compared to the same period in 1994. Reportable remarketing
gains represent the Company's share of realized residual values on
investor-owned equipment. The reduction is primarily a result of the
expiration of the remaining leases in the program.
Interest income increased approximately $220,000 in the first quarter of
1995 compared to the same period in 1994 as a result of interest earned in
relation to the March 1995 securitization.
Expenses
Total expenses for the three months ended March 31, 1995 were approximately
$2,765,000 compared to approximately $1,042,000 during the same period of
1994, an increase of approximately 165%. This is the result of;
(i) the Company incurring higher expenses associated with warehousing a higher
volume of business throughout the first quarter of 1995, (ii) increased
selling, general and administrative expenses associated with expanded
marketing, (iii) writing off prepaid expenses, and (iv) establishing
reserves for potential tax liabilities.
Depreciation expense increased approximately $91,000 in the first quarter of
1995 compared to the same period of 1994 as a result of the Company
originating and retaining a higher volume of equipment subject
to operating leases and carrying over operating leases activated in 1994.
<PAGE>
Selling, general, and administrative expenses increased approximately
$1,160,000 in the first quarter of 1995 compared to the same period of 1994.
In the third quarter of 1994 the Company invested in expanding its
operations (S,G, & A) to increase its ability to originate new business
in vendor and other wholesale origination. These increased S, G, & A
expenses (approximately $490,000 higher than the first quarter of 1994
S, G, & A on an operating basis) were not included in the comparable
first quarter of 1994. Second, in the first quarter of 1995 the Company
wrote off prepaid expenses totaling approximately $253,000 and established
a reserve related to certain pending tax audits totaling approximately
$418,000. These expenses are non-recurring in nature.
Interest expense increased by approximately $438,000 in the first quarter
of 1995 compared to the same period of 1994 due to the Company's decision to
warehouse originations pending securitization and the increased volume of
business.
Financial Condition
The Company's financial condition is dependent upon certain critical elements.
First, the Company must continue to be able to obtain recourse and
non-recourse financing to fund the future acquisition 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 origination.
In 1994 the Company's healthcare leasing business was effected 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 in the second half of 1994, resulted in
the Company originating a much higher volume of business in the first
quarter of 1995 compared to 1994. Finally, much of this increased volume
is expected to continue as the nature of vendor origination is repeat
business rather than individual transactions.
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.
<PAGE>
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)
May 08, 1995 /s/ David L. Daum_____________________
David L. Daum, Senior Vice President
David L. Daum is the Principal Financial
and Accounting Officer and has been duly
authorized to sign on behalf of the
Registrant
May 08, 1995 /s/ James A. Friedman
James A. Friedman, Chief Executive
Officer.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,116,473
<SECURITIES> 0
<RECEIVABLES> 3,096,147
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,461,519
<PP&E> 1,244,322
<DEPRECIATION> 970,204
<TOTAL-ASSETS> 10,815,649
<CURRENT-LIABILITIES> 5,382,344
<BONDS> 0
<COMMON> 218,718
0
0
<OTHER-SE> 5,214,587
<TOTAL-LIABILITY-AND-EQUITY> 10,815,649
<SALES> 3,273,261
<TOTAL-REVENUES> 3,574,930
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,346,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 453,955
<INCOME-PRETAX> 810,164
<INCOME-TAX> 0
<INCOME-CONTINUING> 810,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 810,164
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.17
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