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, 1996
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 forsuch 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, 1996, there were 4,280,165 shares of common stock outstanding.<PAGE>
<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, 1996 and March 31, 1995 . . . . . . . 3
Consolidated Balance Sheets --
March 31, 1996 and December 31, 1995 . . . . . . 4
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1996 and March 31, 1995 . . 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 I. Financial Statements
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
1996 1995
Revenues:
Rentals on leased equipment $ 49,906 $ 216,259
Direct financing leases 150,517 416,162
Fee income 4,375,550 2,626,224
Gain on sale of leased equipment 3,689 14,616
Interest 442,370 270,045
Other income 78,572 31,624
Total revenues 5,100,604 3,574,930
Expenses:
Depreciation of leased equipment 19,154 129,789
Selling, general and administrative 1,505,789 2,216,236
Interest 684,604 453,955
Net capitalized initial direct
costs (29,324) (35,214)
Total expenses 2,180,223 2,764,766
Income before income tax
expense 2,920,381 810,164
Income tax expense --- --
Net income $ 2,920,381 $ 810,164
Net income per common and common
equivalent share: $ 0.68 $ 0.19
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
ASSETS 1996 1995
Cash and cash equivalents $ 2,708,424 $ 2,001,949
Receivables:
Rentals on leased equipment 87,114 100,589
Due from equipment trusts 64,398 38,068
Other 2,694,970 2,473,095
Net investment in direct
financing leases 13,064,217 58,561,185
Leased equipment,
net of accumulated
depreciation of $18,623
and $164,542 at
March 31, 1996 and
December 31, 1995
respectively 88,250 2,581,032
Deposits on equipment 171,586 114,836
Property and equipment,
net of accumulated
depreciation of $1,094,645
and $1,062,527
at March 31, 1996 and
December 31, 1995,
respectively 298,101 285,599
Other assets 6,031,631 3,798,073
Total assets $ 25,208,691 $ 69,954,426
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to banks $ 13,343,066 $ 58,300,252
Accounts payable for equipment 778,029 4,057,179
Accrued expenses and
other liabilities 4,211,149 4,246,376
Deposits and advances 1,169,158 563,711
Total liabilities 19,501,402 67,167,518
Stockholders' equity
Common stock, $0.05 par value:
authorized 10,000,000 shares;
issued and
outstanding 4,374,365 shares
at March 31, 1996
and December 31, 1995 218,718 218,718
Additional paid-in capital 9,681,225 9,681,225
Accumulated deficit (3,892,854) (6,813,235)
Treasury stock, at cost; 94,200 shares
at March 31, 1996 and
December 31, 1995 (299,800) (299,800)
Total stockholders' equity 5,707,289 2,786,908
Total liabilities and
stockholders' equity $ 25,208,691 $ 69,954,426
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,920,381 $ 810,164
Adjustments to reconcile net
income to net cash
used by operating
activities:
Depreciation 51,271 157,103
Amortization of unearned income (150,517) (416,162)
Gain on securitization (4,102,760) (2,268,999)
Changes in assets and liabilities:
Rentals on leased equipment and
other receivables 692,217 237,816
Deferred charges 4,055 138,670
Other assets (2,281,546) (845,502)
Accrued expenses and
other liabilities (35,227) 946,318
Due from equipment trusts (26,330) 31,530
Net cash used by operating activities (2,928,456) (1,209,062)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment
acquired for lease (13,608,305) (32,435,599)
Proceeds from sale of assets 221,654 ---
Net cash used in investing activities (13,386,651) (32,435,599)
CASH FLOWS FROM FINANCING ACTIVITIES:
Discounted lease proceeds
and proceeds from
sale of fully leveraged
finance leases 1,707,725 10,323,341
Repayments of
notes payable to banks (44,957,186) (6,185,692)
Proceeds from securitization,
net of expenses 60,271,043 29,678,132
Net cash provided by
financing activities 17,021,582 33,815,781
Increase in cash and cash
equivalents 706,475 171,120
Cash and cash equivalents:
Beginning of period 2,001,949 1,945,353
End of period $ 2,708,424 $ 2,116,473
Cash paid during the period for:
Interest $ 684,604 $ 453,955
Income taxes $ -- $ --
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 1. 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 1995 and the first quarter of 1996 were influenced
by a number of economic and strategic issues including:
(i) over the past several years the Company's health care market has changed
in both size and the type of financing required by the marketplace,
(ii) a securitization totaling
$56,725,781 was completed in March 1995 and (iii) a securitization
totaling $85,273,476 was completed in January 1996.
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) a.) it has determined that the lease
can be either discounted with a bank or financial institution on a
non-recourse basis, or b.) 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 issued and sold equipment lease-backed
pay-through notes in an aggregate initial principal amount of
$56,725,781. Through this issuance of such notes, 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.
On January 22, 1996, the Company issued and sold equipment lease-backed
pay-through notes in an aggregate initial principal amount of
$85,273,476. Through this issuance of such Securitization notes,
the Company permanently financed certain assets and liabilities carried on the
Company's balance sheet as of December 31, 1995. 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 1996.
Results of Operations - Three Months Ended March 31, 1996
Net Income
Net income for the three months ended March 31, 1996 was approximately
$2,920,000 or $.68 per share, as compared to net income of
approximately $810,000 or $0.19 per share for the same quarter of 1995.
The increase in net income resulted primarily from the securitization
completed in January 1996 which included assets that were capitalized
as of December 31, 1995 of approximately $85,273,000 compared
to the March 1995 securitization which included assets that were capitalized
as of December 31, 1994 of approximately $56,726,000.
Revenues
Total revenues for the three months ended March 31, 1996 were approximately
$5,101,000 compared to revenues of approximately $3,575,000 for the same
period last year. The increase was largely attributable to increases
in all revenue categories relative to the January 1996 securitization with
the exception of rentals on leased equipment, direct financing lease
income and gain on sale of leased equipment.
Rentals on leased equipment and direct financing lease revenues decreased
approximately $166,000 (77%) and $266,000 (64%), respectively, due to the
fact that the 1995 securitization took place in March and the 1996
securitization took place in January. The first quarter of 1995 had
two additional months of associated income from leased assets before
securitization than the first quarter of 1996.
Fee income increased approximately $1,749,000 in the first quarter of
1996 compared to the same period in 1995 as a result of the larger gain
recorded on the sale of assets in the January 1996 securitization.
Gains from equipment sales decreased approximately $11,000 in the first
quarter of 1996 compared to the same period in 1995.
Interest income increased approximately $172,000 (64%) in the first
quarter of 1996 compared to the same period in 1995 as a result of interest
earned in relation to the January securitization and interest income
on the reserve funds held in connection with prior securitizations.
Expenses
Total expenses for the three months ended March 31, 1996 were approximately
$2,180,000 compared to approximately $2,765,000 during the same period of
1995, a decrease of approximately 21%. The $585,000 decrease was due
mainly to a decrease in selling, general and administrative expenses
($710,000) and a decrease in depreciation of leased equipment ($111,000),
partially offset by an increase in interest expense of approximately $231,000.
Depreciation expense decreased approximately $111,000 in the first quarter
of 1996 compared to the same period of 1995 as a result of the Company
retaining equipment subject to operating leases for a longer
period of time in 1995 than in 1996.
Selling, general, and administrative expenses decreased approximately
$710,000 in the first quarter of 1996 compared to the same period of 1995.
This decrease is due mainly to nonrecurring charges
recognized in the first quarter of 1995 (a write-off of prepaid
expenses totaling approximately $253,000
and the establishment of a reserve related to certain pending tax
audits totaling approximately $418,000.)
Interest expense increased by approximately $231,000 in the first quarter
of 1996 compared to the same period of 1995 due to increased expenses
associated with the Company's warehouse facilities.
Financial Condition
The Company's financial condition continues to be dependent upon
certain critical elements. First, the
Company must be able to obtain recourse and non-recourse financing to fund
future acquisitions and originations of Financial Contracts. Second, the
Company must originate a sufficient volume of new
business which is structured and priced in such a way so as to permit
the Company to finance or sell those Financial Contracts for an amount
which, in the aggregate, covers the Company's cost of operations, plus
provides a return on stockholders' equity. The Company intends to utilize a
combination of interim warehouse borrowing and long-term funding
methodologies to provide it with borrowing and funding
availability at market competitive rates of interest. The long-term funding
methodologies will include:
(i) the continued issuance of asset backed securities; (ii) portfolio sales,
(iii) program financings, and (iv) the discounting of individual
Financial Contracts.
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 15, 1996
_______________________________
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
May 15, 1996
James A. Friedman, Chief Executive
Officer.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,708,424
<SECURITIES> 0
<RECEIVABLES> 2,846,482
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,254,174
<PP&E> 1,392,746
<DEPRECIATION> (1,094,645)
<TOTAL-ASSETS> 25,208,691
<CURRENT-LIABILITIES> 19,501,402
<BONDS> 0
0
0
<COMMON> 218,718
<OTHER-SE> 5,488,571
<TOTAL-LIABILITY-AND-EQUITY> 25,208,691
<SALES> 4,379,239
<TOTAL-REVENUES> 5,100,604
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,495,619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 684,604
<INCOME-PRETAX> 2,920,381
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,920,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,920,381
<EPS-PRIMARY> .68
<EPS-DILUTED> .63
</TABLE>
