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 June 30, 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: (847) 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 June 30, 1996, there were 4,282,665 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 Six Months Ended
June 30, 1996 and 1995 3
Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1996 and 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
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenues:
Rentals on
leased equipment $ 249,091 $ 155,021 $ 298,997 $ 371,280
Direct financing
leases 477,779 124,172 628,297 540,334
Fee income 1,704,034 1,139,230 6,079,583 3,765,454
Gain on sale of
leased equipment 12,157 6,657 15,846 21,273
Interest 140,949 252,038 583,319 522,083
Other income 41,188 74,127 119,760 105,751
Total revenues 2,625,198 1,751,245 7,725,802 5,326,175
Expenses:
Depreciation of
leased equipment 119,570 40,709 138,724 170,498
Selling, general and
administrative 1,732,826 1,624,120 3,238,615 3,840,356
Interest 465,662 108,797 1,150,266 562,752
Net capitalized initial
direct costs (160,532) (20,814) (189,856) (56,028)
Total expenses 2,157,526 1,752,812 4,337,749 4,517,578
Income (loss) before
income tax expense 467,672 (1,567) 3,388,053 808,597
Income tax expense -- -- -- --
Net income (loss) $ 467,672 $(1,567) $ 3,388,053 $808,597
Net income (loss) per common
and common equivalent
share: $ 0.11 $ 0.00 $ 0.79 $ 0.19
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
ASSETS 1996 1995
Cash and cash equivalents $ 1,027,975 $ 2,001,949
Receivables:
Rentals on leased equipment 77,718 100,589
Due from equipment trusts 12,043 38,068
Other 3,952,081 2,473,095
Net investment in direct
financing leases 29,251,419 58,561,185
Leased equipment, net of
accumulated depreciation of
$138,193 and $164,542 at
June 30, 1996 and
December 31, 1995, respectively 6,089,615 2,581,032
Deposits on equipment --- 114,836
Property and equipment, net
of accumulated depreciation of
$1,129,124 and $1,062,527
at June 30, 1996 and
December 31, 1995, respectively 310,832 285,599
Other assets 6,325,333 3,798,073
Total assets $ 47,047,016 $ 69,954,426
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to banks $ 26,813,759 $ 58,300,252
Accounts payable for equipment 8,398,919 4,057,179
Accrued expenses and
other liabilities 3,838,263 4,246,376
Deposits and advances 1,820,489 563,711
Total liabilities 40,871,430 67,167,518
Stockholders' equity
Common stock, $0.05 par
value: authorized 10,000,000
shares; issued and outstanding
4,376,865 and 4,374,365 at
June 30, 1996 and
December 31, 1995, respectively 218,843 218,718
Additional paid-in capital 9,681,725 9,681,225
Accumulated deficit (3,425,182) (6,813,235)
Treasury stock, at
cost; 94,200 shares
at June 30, 1996 and
December 31, 1995 (299,800) (299,800)
Total stockholders' equity 6,175,586 2,786,908
Total liabilities and
stockholders' equity $ 47,047,016 $ 69,954,426
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,388,053 $ 808,597
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation 205,321 226,904
Amortization of unearned income (628,297) (540,334)
Gain on securitization (4,078,614) (2,531,830)
Changes in assets and liabilities:
Rentals on leased equipment and other
receivables (1,456,115) 210,249
Deferred charges 728,536 223,113
Other assets (2,442,098) (1,015,712)
Accrued expenses and other liabilities (408,113) 371,997
Due from equipment trusts 26,025 31,492
Net cash used by operating activities (4,665,302) (2,215,524)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired for lease (53,576,279) (50,195,268)
Proceeds from sale of assets 586,985 ---
Net cash used in investing activities (52,989,294) (50,195,268)
CASH FLOWS FROM FINANCING ACTIVITIES:
Discounted lease proceeds and proceeds from
sale of fully leveraged finance leases 27,920,218 23,501,406
Repayment of notes payable to banks (31,486,493) (3,321,708)
Proceeds from securitization, net of
expenses 60,246,897 31,244,662
Net cash provided by financing activities 56,680,622 51,424,360
Decrease in cash and cash equivalents (973,974) (986,432)
Cash and cash equivalents:
Beginning of period 2,001,949 1,945,353
End of period 1,027,975 958,921
Cash paid during the period for:
Interest $ 993,247 $ 562,752
Income taxes $ -- $ --
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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The financial results of 1995 and the first half of 1996 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) 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) 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.
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 JUNE 30, 1996
Net Income (Loss)
Net income for the three months ended June 30, 1996 was
approximately $468,000 as compared to a net loss of approximately
$1,600 for the same quarter of 1995.
Revenues
Revenues for the three months ended June 30, 1996 were
approximately $2,625,000 as compared to revenues of approximately
$1,751,000 for the same period last year. The increase was
largely attributable to an increase in fee income.
Direct finance lease income increased by approximately $354,000
in 1996 compared to the same period in 1995 due to the timing of
the securitizations in those years. The January 1996
securitization provided a two month base of activations from
which to recognize income at the beginning of the second quarter.
Since the 1995 securitization took place in March of 1995, the
second quarter of 1995 started with a much smaller base of
warehoused contracts.
Expenses
Expenses for the three months ended June 30, 1996 were
approximately $2,158,000 compared to expenses of approximately
$1,753,000 during the same period of 1995, an increase of
approximately 23%. This increase is mainly due to increased
interest expense due to carrying a higher level of debt for the
three month period of 1996 compared to the same period in 1995.
Selling, general and administrative expenses increased
approximately $109,000 in the second quarter of 1996 compared to
the same period in 1995 due mainly to expenses associated with
increased personnel and other expenses associated with increased
volume.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996
Net Income
Net income for the six months ended June 30, 1996 was
approximately $3,388,000 or $ 0.79 per share compared to a net
income of approximately $809,000 or $ 0.19 per share for the same
period last year. The increase in net income resulted primarily
from the $85,273,000 securitization completed in January 1996
compared to the $56,726,000 securitization completed in March
1995. A decrease in expenses also contributed to the increase in
net income.
Revenues
Revenues for the six months ended June 30, 1996 were
approximately $7,726,000 versus approximately $5,326,000 for the
same six months of last year. The increase was largely
attributable to the increase in fee income associated with the
January 1996 securitization compared to that recognized in the
March 1995 securitization.
Expenses
Expenses for the first six months of 1996 were approximately
$4,338,000 compared to approximately $4,518,000 during the same
period of 1995.
Selling, general and administrative expenses decreased
approximately $602,000 in the first half of the year compared to
the same period in 1995 due mainly to the recognition of
nonrecurring charges in the first half of 1995 related to the
write off of $442,000 of prepaid expenses and the establishment
of a reserve for pending tax audits of $418,000 offset by
increased expenditures in 1996 related to increases in personnel.
Interest expense increased approximately $588,000 in the first
half of 1996 compared to the same period of 1995 due to increased
expenses associated with the Company's warehouse facilities and a
higher level of interest expenses associated with the larger
Janauary 1996 securitization compared to the March 1995
securitization.
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. 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.
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)
August 13, 1996 /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
August 13, 1996 /s/ James A. Friedman
James A. Friedman, Chief
Executive Officer.
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