U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
o 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 0-27812
MEDALLION FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
| DELAWARE |
|
No. 04-3291176 |
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|
|
|
| 437 Madison Ave, New York, New York |
|
10022 |
(212)
328-2100
(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 |
o |
Number of shares of Common Stock outstanding at the latest practicable date, November 13, 2002:
| Class Outstanding |
Par Value |
|
Shares Outstanding | |
| |
|
|
|
|
| Common Stock |
$ |
.01 |
|
18,242,728 |
MEDALLION FINANCIAL CORP.
FORM 10-Q
INDEX
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| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
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| ITEM 4. CONTROLS AND PROCEDURES |
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| ITEM 1. LEGAL PROCEEDINGS |
50 | ||||
| 50 | |||||
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
50 | ||||
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| ITEM 5. OTHER INFORMATION |
51 | ||||
| ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K |
51 | ||||
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
Medallion Financial Corp. (the Company) is a closed-end management investment company organized as a Delaware corporation. The Company has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the 1940 Act). The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC), a Small Business Investment Company (SBIC) which originates and services medallion and commercial loans. As an adjunct to the Company’s taxicab medallion finance business, the Company operates a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media).
The financial information is divided into two sections. The first section, Item 1, includes the unaudited consolidated financial statements of the Company including related footnotes. The second section, Item 2, consists of Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended September 30, 2002.
The consolidated balance sheet of the Company as of September 30, 2002, the related consolidated statements of operations for the three and nine months ended September 30, 2002, and the consolidated statement of cash flows for the nine months ended September 30, 2002 included in Item 1 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to summarize fairly the Company’s financial position and results of operations. The results of operations for the three and nine months ended September 30, 2002 or for any other interim period may not be indicative of future performance. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
3
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended September 30, |
|
Nine months ended September 30, |
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2002 |
|
2001 |
|
2002 |
|
2001 |
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| Interest and dividend income on investments |
|
$ |
7,856,537 |
|
$ |
6,721,202 |
|
$ |
25,840,839 |
|
$ |
31,464,181 |
|
| Interest income on short-term investments |
|
|
106,280 |
|
|
313,450 |
|
|
324,314 |
|
|
562,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total investment income |
|
|
7,962,817 |
|
|
7,034,652 |
|
|
26,165,153 |
|
|
32,026,940 |
|
| Notes payable to banks |
|
|
3,040,407 |
|
|
4,325,065 |
|
|
10,043,125 |
|
|
15,810,256 |
|
| SBA debentures |
|
|
989,179 |
|
|
668,842 |
|
|
2,768,238 |
|
|
1,553,597 |
|
| Senior secured notes |
|
|
600,684 |
|
|
839,116 |
|
|
2,493,862 |
|
|
2,499,908 |
|
| Revolving line of credit |
|
|
380,537 |
|
|
— |
|
|
380,537 |
|
|
— |
|
| Commercial paper |
|
|
— |
|
|
1,951 |
|
|
4,167 |
|
|
184,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Total interest expense |
|
|
5,010,807 |
|
|
5,834,974 |
|
|
15,689,929 |
|
|
20,048,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Net interest income |
|
|
2,952,010 |
|
|
1,199,678 |
|
|
10,475,224 |
|
|
11,978,412 |
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| Gain on sale of loans |
|
|
147,295 |
|
|
228,417 |
|
|
735,514 |
|
|
920,953 |
|
| Other income (loss) |
|
|
772,083 |
|
|
(795,160 |
) |
|
3,825,975 |
|
|
1,213,083 |
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| Total noninterest income (loss) |
|
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919,378 |
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(566,743 |
) |
|
4,561,489 |
|
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2,134,036 |
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| Salaries and benefits |
|
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2,220,918 |
|
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2,304,545 |
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6,958,765 |
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7,140,852 |
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| Professional fees |
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557,842 |
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826,974 |
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2,074,370 |
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1,808,558 |
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| Amortization of goodwill |
|
|
— |
|
|
253,606 |
|
|
— |
|
|
521,227 |
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| Costs of debt extinguishment |
|
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5,870,517 |
|
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— |
|
|
8,972,299 |
|
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— |
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| Other operating expenses |
|
|
1,814,863 |
|
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1,611,276 |
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5,205,779 |
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3,764,953 |
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| Total operating expenses |
|
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10,464,140 |
|
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4,996,401 |
|
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23,211,213 |
|
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13,235,590 |
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| Net investment income (loss) |
|
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(6,592,752 |
) |
|
(4,363,466 |
) |
|
(8,174,500 |
) |
|
876,858 |
|
| Net realized losses on investments |
|
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(975,416 |
) |
|
(1,002,839 |
) |
|
(5,044,686 |
) |
|
(2,503,800 |
) |
| Net change in unrealized appreciation (depreciation) on investments |
|
|
(747,249 |
) |
|
(3,685,547 |
) |
|
487,725 |
|
|
(2,719,550 |
) |
|
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| Net realized/unrealized loss on investments |
|
|
(1,722,665 |
) |
|
(4,688,386 |
) |
|
(4,556,961 |
) |
|
(5,223,350 |
) |
| Income tax provision (benefit) |
|
|
68,323 |
|
|
(65,662 |
) |
|
68,323 |
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(13,789 |
) |
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| Net decrease in net assets resulting from operations |
|
$ |
(8,383,740 |
) |
$ |
(8,986,190 |
) |
$ |
(12,799,784 |
) |
$ |
(4,332,703 |
) |
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| Net decrease in net assets resulting from operations per share |
|
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| Basic |
|
|
($0.46 |
) |
|
($0.49 |
) |
|
($0.70 |
) |
($0.27 |
) | |
| Diluted |
|
|
(0.46 |
) |
|
(0.49 |
) |
|
(0.70 |
) |
|
(0.27 |
) |
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| Weighted average common shares outstanding |
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| Basic |
|
|
18,242,728 |
|
|
18,241,383 |
|
|
18,242,728 |
|
|
16,022,814 |
|
| Diluted |
|
|
18,242,728 |
|
|
18,241,383 |
|
|
14,242,728 |
|
|
16,022,814 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
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September 30, 2002 |
|
December 31, 2001 | |||
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| Assets |
|
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|
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| Medallion loans |
|
$ |
202,461,476 |
|
$ |
252,674,634 |
|
| Commercial loans |
|
|
169,339,795 |
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199,328,787 |
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| Equity investments |
|
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4,803,773 |
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3,591,962 |
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| Net investments |
|
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376,605,044 |
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455,595,383 |
|
| Investment in and loans to Media |
|
|
5,382,538 |
|
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6,658,052 |
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| Total investments |
|
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381,987,582 |
|
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462,253,435 |
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| Cash |
|
|
21,047,955 |
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25,409,058 |
|
| Accrued interest receivable |
|
|
4,018,798 |
|
|
3,989,989 |
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| Servicing fee receivable |
|
|
2,975,167 |
|
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3,575,079 |
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| Fixed assets, net |
|
|
1,624,764 |
|
|
1,933,918 |
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| Goodwill, net |
|
|
5,007,583 |
|
|
5,007,583 |
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| Other assets, net |
|
|
16,726,496 |
|
|
5,586,720 |
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| Total assets |
|
$ |
433,388,345 |
|
$ |
507,755,782 |
|
|
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| Liabilities |
|
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| Accounts payable and accrued expenses |
|
$ |
5,632,067 |
|
$ |
7,105,309 |
|
| Dividends payable |
|
|
— |
|
|
1,643,656 |
|
| Accrued interest payable |
|
|
4,528,119 |
|
|
2,138,240 |
|
| Revolving line of credit |
|
|
101,329,935 |
|
|
— |
|
| Notes payable to banks |
|
|
85,535,985 |
|
|
233,000,000 |
|
| Senior secured notes |
|
|
6,933,025 |
|
|
45,000,000 |
|
| SBA debentures |
|
|
67,845,000 |
|
|
43,845,000 |
|
|
|
|
|
|
|
|
|
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| Total liabilities |
|
|
271,804,131 |
|
|
332,732,205 |
|
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| Shareholders’ equity |
|
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|
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| Preferred stock (1,000,000 shares of $0.01 of par value stock authorized - none outstanding) |
|
|
— |
|
|
— |
|
| Common stock (50,000,000 shares of $0.01 par value stock authorized -18,242,728 and 18,242,035 shares outstanding at September 30, 2002 and December 31, 2001, respectively) |
|
|
182,421 |
|
|
182,421 |
|
| Capital in excess of par value |
|
|
183,724,181 |
|
|
184,486,259 |
|
| Accumulated net investment losses |
|
|
(22,322,388 |
) |
|
(9,645,103 |
) |
|
|
|
|
|
|
|
|
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| Total shareholders’ equity |
|
|
161,584,214 |
|
|
175,023,577 |
|
|
|
|
|
|
|
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| Total liabilities and shareholders’ equity |
|
$ |
433,388,345 |
|
$ |
507,755,782 |
|
|
|
|
|
|
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| Number of common shares |
|
|
18,242,728 |
|
|
18,242,035 |
|
| Net asset value per share |
|
$ |
8.86 |
|
$ |
9.59 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Nine months ended September 30, |
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2002 |
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2001 |
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| CASH FLOWS FROM OPERATING ACTIVITIES |
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