U.S. SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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| For the Quarterly Period Ended March 31, 2003 | |||
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TRANSITION REPORT PURUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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| For the transition period from ______ to ______ | |||
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| Commission file number 0-27812 | |||
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| MEDALLION FINANCIAL CORP. | |||
| (Exact name of registrant as specified in its charter) | |||
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| DELAWARE |
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No. 04-3291176 | |
| (State of Incorporation) |
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(IRS Employer Identification No.) | |
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| 437 MADISON AVENUE, NEW YORK, NEW YORK |
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10022 | |
| (Address of principal executive offices) |
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(Zip Code) | |
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| (212) 328-2100 | |||
| (Registrants telephone number, including area code) | |||
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| Securities registered pursuant to Section 12(b) of the Act: None | |||
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| Securities registered to Section 12(g) of the Act: | |||
| Common Stock, par value $0.01 per share | |||
| (Title of class) | |||
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 |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes x |
No o |
The number of outstanding shares of registrant’s Common Stock, par value $0.01, as of May 14, 2003 was 18,242,728.
MEDALLION FINANCIAL CORP.
FORM 10-Q
TABLE OF CONTENTS
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3 | |
| ITEM 1. |
3 | |
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
19 |
| ITEM 3. |
40 | |
| ITEM 4. |
40 | |
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40 | |
| ITEM 1. |
40 | |
| ITEM 2. |
40 | |
| ITEM 3. |
40 | |
| ITEM 4. |
40 | |
| ITEM 5. |
41 | |
| ITEM 6. |
41 | |
| 42 | ||
| 43 | ||
2
FINANCIAL INFORMATION
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 (BDC) 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 taxicab medallion and commercial loans. As an adjunct to the Company’s 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 months ended March 31, 2003.
The consolidated balance sheet of the Company as of March 31, 2003, the related consolidated statement of operations for the three months ended March 31, 2003, and the consolidated statement of cash flows for the three months ended March 31, 2003 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 months ended March 31, 2003 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, 2002.
3
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended March 31, |
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2003 |
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2002 |
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| Interest and dividend income on investments |
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$ |
6,461,193 |
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$ |
9,675,378 |
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| Interest income on short-term investments |
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67,091 |
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103,534 |
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| Total investment income |
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6,528,284 |
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9,778,912 |
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| Interest on floating rate borrowings |
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2,196,778 |
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4,895,294 |
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| Interest on fixed rate borrowings |
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1,098,361 |
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861,259 |
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| Total interest expense |
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3,295,139 |
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5,756,553 |
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| Net interest income |
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3,233,145 |
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4,022,359 |
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| Gains on sales of loans |
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188,930 |
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329,627 |
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| Other income |
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1,121,113 |
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891,345 |
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| Total noninterest income |
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1,310,043 |
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1,220,972 |
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| Salaries and benefits |
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2,434,388 |
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2,344,843 |
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| Professional fees |
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119,979 |
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893,238 |
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| Other operating expenses |
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1,683,742 |
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1,766,048 |
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| Total operating expenses |
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4,238,109 |
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5,004,129 |
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| Net investment income |
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305,079 |
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239,202 |
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| Net realized losses on investments |
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(561,565 |
) |
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(699,633 |
) |
| Net change in unrealized appreciation (depreciation) on investments |
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696,505 |
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(948,396 |
) |
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| Net realized/unrealized gain (loss) on investments |
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134,940 |
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(1,648,029 |
) |
| Income tax provision |
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9,999 |
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— |
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| Net increase (decrease) in net assets resulting from operations |
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$ |
430,020 |
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$ |
(1,408,827 |
) |
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| Net increase (decrease) in net assets resulting from operations per share |
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| Basic |
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$ |
0.02 |
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$ |
(0.08 |
) |
| Diluted |
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0.02 |
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(0.08 |
) |
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| Weighted average common shares outstanding |
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| Basic |
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18,242,728 |
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18,242,035 |
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| Diluted |
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18,248,118 |
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18,242,035 |
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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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March 31, 2003 |
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December 31, 2002 |
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| Assets |
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| Medallion loans |
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$ |
230,097,124 |
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$ |
210,475,921 |
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| Commercial loans |
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114,412,457 |
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138,360,895 |
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| Equity investments |
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8,985,448 |
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7,409,628 |
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| Net investments ($241,075,000 at March 31, 2003 and $244,370,000 at December 31, 2002 pledged as collateral under borrowing arrangements) |
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353,495,029 |
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356,246,444 |
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| Investment in and loans to Media |
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3,749,195 |
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4,505,356 |
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| Total investments |
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357,244,224 |
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360,751,800 |
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| Cash ($1,050,000 in 2003 and 2002 restricted as to use by lender) |
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30,725,792 |
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35,369,285 |
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| Accrued interest receivable |
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2,022,198 |
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2,546,101 |
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| Servicing fee receivable |
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2,968,081 |
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2,838,417 |
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| Fixed assets, net |
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1,487,773 |
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1,551,781 |
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| Goodwill, net |
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5,007,583 |
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5,007,583 |
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| Other assets, net |
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14,624,700 |
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17,222,825 |
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| Total assets |
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$ |
414,080,351 |
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$ |
425,287,792 |
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| Liabilities |
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| Accounts payable and accrued expenses |
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$ |
6,930,864 |
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$ |
7,006,118 |
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| Accrued interest payable |
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4,418,257 |
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5,589,754 |
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| Floating rate borrowings |
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172,591,530 |
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182,922,241 |
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| Fixed rate borrowings |
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67,845,000 |
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67,845,000 |
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| Total liabilities |
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$ |
251,785,651 |
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$ |
263,423,113 |
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| Shareholders’ equity |
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| Preferred stock (1,000,000 shares of $0.01 par value stock authorized - none outstanding) |
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— |
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— |
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| Common stock (50,000,000 shares of $0.01 par value stock authorized - 18,242,728 shares outstanding at March 31, 2003 and December 31, 2002) |
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182,427 |
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182,427 |
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| Capital in excess of par value |
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173,693,158 |
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173,449,716 |
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| Accumulated net investment losses |
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(11,580,885 |
) |
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(11,767,464 |
) |
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| Total shareholders’ equity |
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162,294,700 |
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161,864,679 |
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| Total liabilities and shareholders’ equity |
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$ |
414,080,351 |
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$ |
425,287,792 |
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| Number of common shares |
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18,242,728 |
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18,242,728 |
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| Net asset value per share |
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$ |
8.90 |
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$ |
8.87 |
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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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Three Months Ended March 31, |
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2003 |
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2002 |
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| CASH FLOWS FROM OPERATING ACTIVITIES |
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| Net increase (decrease) in net assets resulting from operations |
|
$ |
430,020 |
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$ |
(1,408,827 |
) |
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
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| Depreciation and amortization |
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167,193 |
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159,884 |
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| Amortization of origination costs |
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244,328 |
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|
375,473 |
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| Increase in unrealized appreciation on investments |
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(2,157,196 |
) |
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(565,439 |
) |
| Net realized losses on investments |
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|
561,565 |
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|
699,633 |
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| Net realized gains on sales of loans |
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(188,930 |
) |
|
(329,627 |
) |
| Increase in unrealized depreciation on Media |
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1,460,691 |
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1,513,835 |
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| (Increase) decrease in accrued interest receivable |
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523,891 |
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(187,820 |
) |
| (Increase) decrease in servicing fee receivable |
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(129,652 |
) |
|
199,915 |
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| (Increase) decrease in other assets |
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1,747,423 |
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(1,134,444 |
) |
| Decrease in accounts payable and accrued expenses |
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(135,253 |
) |
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(1,559,561 |
) |
| Increase (decrease) in accrued interest payable |
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(1,171,497 |
) |
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43,709 |
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| Net cash provided by (used in) operating activities |
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1,352,583 |
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(2,193,269 |
) |
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| CASH FLOWS FROM INVESTING ACTIVITIES |
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| Originations of investments |
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(54,285,924 |
) |
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(45,074,287 |
) |
| Proceeds from sales and maturities of investments |
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59,428,277 |
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65,014,766 |
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| Investment in and loans to Media, net |
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(704,530 |
) |
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(670,979 |
) |
| Capital expenditures |
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(103,188 |
) |
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(66,385 |
) |
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| Net cash provided by investing activities |
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4,334,635 |
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19,203,115 |
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| CASH FLOWS FROM FINANCING ACTIVITIES |
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| Net repayments of floating rate borrowings |
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(10,330,711 |
) |
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(14,711,270 |
) |
| Proceeds from fixed rate borrowings |
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— |
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|
6,000,000 |
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| Payments of declared dividends |
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— |
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(1,643,657 |
) |
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| Net cash used for financing activities |
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(10,330,711 |
) |
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(10,354,927 |
) |
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| NET INCREASE (DECREASE) IN CASH |
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