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 December 31, 1995.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________ to
_________.
1-7921
(Commission file number)
SECURITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3003070
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
1111 NORTH LOOP WEST, SUITE 400, HOUSTON, TEXAS 77008
(Address of principal executive offices, including zip code)
(713) 880-7100
(Registrant's telephone number, including area code)
N.A.
(Former address, if changed since last report)
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 [ ].
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: as of February 10,
1996, there were 32,482,034 outstanding shares of Class A Common Stock, par
value $ .01, and 3,238 outstanding shares of Common Stock, par value $ .01, of
the registrant.
<PAGE>
1
Consolidated Statements of Income
Security Capital Corporation and Subsidiaries
(Unaudited)
For the Three Months
Ended December 31,
------------------------
1995 1994
-------- --------
(Dollars in thousands, except per share amounts)
OPERATING REVENUES
Operating income ................................... $ -- $ --
-------- --------
Total operating revenues ........................... $ -- $ --
-------- --------
OPERATING EXPENSES
Other general and administrative ................... $ 72 $ 77
-------- --------
Total operating expenses ........................... $ 72 $ 77
-------- --------
Operating loss ..................................... $ (72) $ (77)
-------- --------
OTHER INCOME(EXPENSES)
Loss from joint enterprise ......................... $ (90) $ (138)
Interest income .................................... 158 114
Other income ....................................... 16 --
-------- --------
Total other income ................................. $ 84 $ (24)
-------- --------
Income (loss) before provision for Federal
income taxes ....................................... $ 12 $ (101)
Provision for Federal income taxes ................. -- --
-------- --------
Net income (loss) .................................. $ 12 $ (101)
Less preferred stock dividends ..................... (113) (113)
-------- --------
Net loss applicable to common stockholders ......... $ (101) $ (214)
-------- --------
Earnings (loss) per common share ................... $ -- $ (.01)
-------- --------
Weighted average shares outstanding ................ 32,485 32,485
-------- --------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
2
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, September 30,
1995 1995
-------- --------
(Unaudited) (Audited)
-------- --------
(Dollars in Thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 9,827 $ 9,794
Account receivable - joint enterprise ............. 13 63
Other current assets .............................. 67 117
-------- --------
Total current assets .............................. 9,907 9,974
Property and equipment (net of accumulated
depreciation of $354 and $353) .............. 13 14
Licenses and other assets (net of accumulated
amortization of $289 and $289) .............. 285 285
Investment in and advances to joint enterprise .... 462 653
-------- --------
Total Assets ...................................... $ 10,667 $ 10,926
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest payable and other liabilities .... $ 193 $ 464
Accounts payable - FGS ............................ 166 166
-------- --------
Total current liabilities ......................... 359 630
Total Liabilities ................................. $ 359 $ 630
-------- --------
Commitments and Contingencies ..................... $ -- $ --
-------- --------
Class A preferred stock (redeemable), $.01
par value, 50,000 shares authorized, 30,000
shares issued (including dividends in arrears
of $1,088 and $975) ............................ $ 4,088 $ 3,975
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 7,500 shares
authorized; 4,512 shares issued ................ $ -- $ --
Class A common stock, $.01 par value,
60,000,000 shares authorized; 35,029,368
shares issued .................................. 350 350
Preferred stock, $.01 par value, 2,500,000
shares authorized, none issued ................ -- --
Additional paid-in capital ........................ 62,238 62,238
Accumulated deficit ............................... (51,153) (51,052)
Less: Treasury stock, at cost, 2,548,608 shares ... (5,215) (5,215)
-------- --------
Total Stockholders' Equity ........................ $ 6,220 $ 6,321
-------- --------
Total Liabilities and Stockholders' Equity ........ $ 10,667 $ 10,926
-------- --------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months
Ended
December 31,
------- -------
1995 1994
------- -------
(Dollars in Thousands)
Cash flows from operating activities:
Net income (loss) ...................................... $ 12 $ (101)
Adjustments to reconcile income (loss) to net
cash used by operating activities:
Depreciation and amortization of property and
equipment, and amortization of
deferred items ................................. 1 8
Net change in receivables and other assets ..... 291 197
Net change in payables ......................... (271) (35)
------- -------
Net cash provided (used) by operating activities ....... 33 69
------- -------
Cash flows from financing activities ................... -- --
------- -------
Net cash provided (used) by financing activities ....... -- --
------- -------
Net increase in cash and cash equivalents .............. 33 69
Cash and cash equivalents, beginning of period ......... 9,794 9,381
------- -------
Cash and cash equivalents, end of period ............... $ 9,827 $ 9,450
------- -------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
Security Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(1) ACCOUNTING AND FINANCIAL REPORTING POLICIES
The accompanying consolidated financial statements include the accounts of
Security Capital Corporation and all of its subsidiaries engaged in continuing
operations ("Security Capital" or the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation . The condensed
consolidated financial statements included herein have been prepared by Security
Capital, in accordance with the rules and regulations of the Securities and
Exchange Commission, without audit.
Security Capital's accounting and financial reporting policies conform with
generally accepted accounting principles and include adjustments in interim
periods, consisting only of normal recurring items, considered necessary for a
fair presentation of the financial statements. 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, although Security Capital believes that
the accompanying disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the latest Annual Report of Security Capital on
Form 10-K.
Prior period financial statements are presented for comparative purposes.
(2) FEDERAL INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" during fiscal year 1994. SFAS No. 109
requires the Company to compute deferred income taxes based on the difference
between the financial statement basis and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The adoption had no effect on financial position or results
of operations because of a 100% valuation allowance applied against the deferred
tax assets.
The tax effects of the items comprising the Company's net deferred tax asset at
September 30, 1995 in the Company's statement of financial position are as
follows:
September 30, 1995
Deferred tax assets: (In thousands)
Operating loss carryforwards.............. $ 12,635
Partnership income........................ (139)
----------
12,496
100% Valuation allowance................. (12,496)
Net deferred tax asset........................ $ -0-
==========
The Company continued to provide a 100% valuation allowance on all net deferred
tax assets at September 30, 1995. In addition, the net deferred tax asset at
December 31, 1995 has not changed materially since September 30, 1995.
5
Security Capital files a consolidated Federal income tax return with its
subsidiaries. At September 30, 1995, the Company had net operating loss
carryforwards for Federal income tax purposes of approximately $18.6 million,
the expiration dates of which are as follows:
September 30, Amount
(In thousands)
1997 $ 1,776
2000 2,304
2001 1,330
2002 3,555
2003 1,052
2004 4,974
2005 2,430
2007 398
2008 162
2009 581
----------
$ 18,562
==========
In addition, in connection with the disposition of a former subsidiary of the
Company, the Company incurred a tax loss amounting to approximately $26 million.
The Company believes that a substantial portion of this loss is an ordinary loss
for Federal income tax purposes which may be carried forward to 2004, although
there can be no assurance that this position would prevail, if challenged. The
Company's Federal income tax returns have been examined by the Internal Revenue
Service (the "IRS") through fiscal year 1986 and the above loss carryforwards,
including the loss on disposition of the aforementioned subsidiary, remain
subject to review by the IRS.
(3) EARNINGS PER SHARE FISCAL YEAR 1995 AND FISCAL YEAR 1994
Earnings per common and common equivalent share amounts are based on the
weighted average number of shares of Common Stock and Class A Common Stock
outstanding and the dilutive effect, if any, of outstanding stock options. The
sum of Common Stock and Class A Common Stock is used because the two classes are
identical except for certain transfer restrictions imposed on the Class A Common
Stock. The assumed conversion of these options was anti-dilutive for all periods
presented, and are thus excluded from the primary and fully diluted earnings per
share calculations.
The weighted average number of shares outstanding used in the computation of
primary and fully diluted earnings per share is as follows (in thousands):
FISCAL YEAR 1996 FISCAL YEAR 1995
3 MONTHS 3 MONTHS
-------- --------
Primary 32,485 32,485
Fully diluted 32,485 32,485
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Security Capital reported net income of $12,000 for the three month period ended
December 31, 1995 as compared to a net loss of $101,000 for the same period of
the prior fiscal year. The Company reported $0 earnings per common share (after
accrual for Class A Preferred Stock dividends) for the three month period ended
December 31, 1995 as compared to a net loss per share of $.01 for the same
period of the prior fiscal year.
The Company had no significant operating revenues for the current or prior
fiscal periods, due to the formation, effective as of January 1, 1993, of Bowen,
Miclette, Descant & Britt, ("BMD&B"), an independent insurance agency. BMD&B is
a partnership consisting of Foster Insurance Services, Inc., the Company's
insurance agency affiliate, and Bowen, Miclette & Descant, Inc., an unaffiliated
independent insurance agency. The Company's percentage of BMD&B's net revenues
and expenses is included under the caption "Loss from Joint Enterprise". The
loss amounted to $90,000 for the three month period ended December 31, 1995.
This compares to a loss of $138,000 for the same period of the prior fiscal
year. The Company's share of partnership income and losses was 50% during
calendar year 1995. The Company's share of such income or losses will remain at
50% for every year thereafter. Interest income increased by $44,000 to $158,000
for the quarter ended Decmber 31, 1995 as compared to $114,000 for the same
prior year fiscal quarter. This increase in interest income is primarily due to
the receipt of a deposit, with accrued interest, of $42,986 from the County of
San Diego which included interest of $26,666 and principal of $16,320.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $33,000 to $9,827,000 at December 31,
1995 as compared to $9,794,000 at September 30, 1995. The slight increase during
the quarter can be attributed to the receipt of a deposit and interest thereon
for a real estate project for the county of San Diego, in the amount of $42,986.
The Company's consolidated working capital at December 31, 1995 increased by
$204,000 to $9,548,000 from $9,344,000 at September 30, 1995. This increase in
working capital is primarily due to the receipt of advances due from BMDB which
were classified on the Company's balance sheet as noncurrent assets and repaid
to the Company during the current quarter. These funds were used to pay New York
City taxes accrued at September 30, 1995 in the amount of $155,396.
The Company's working capital and operating expenditure requirements have been
funded by excess cash at the holding company level and from dividends from the
Company's insurance agency operations, the proceeds of the Rights Offering and
the sale of $3,000,000 of Class A Preferred Stock in July 1993. The holding
company's expenses consist of management fees of $37,500 payable to CP, Inc. and
legal, accounting and other holding company expenses of approximately $200,000.
It is anticipated that the Company will receive less income from its insurance
agency operations due to an increase anticipated during fiscal year 1996 in the
bonus percentage due officers from 25% to 50% pursuant to the terms of the
Agency Agreement. The Company believes that with the receipt of the proceeds
from the Rights Offering and the funds expected to be generated from the
Company's insurance agency affiliate, there will be sufficient cash on hand to
meet the Company's working capital and operating expenditure requirements during
fiscal year 1996 and to compete seriously for acquisition opportunities.
7
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
(a) None
(b) The Company's Class A Preferred Stock bears a dividend of 15% per
annum payable. Upon redemption or the liquidation of the Company,
dividends on Preferred Stock are payable only out of cumulative net
income since January, 1990. (At a redemption date or upon the
liquidation of the Company, accumulated but unpaid dividends are
payable in full regardless of earnings since January 1, 1990.)
Therefore, since there has been a cumulative net loss since January 1,
1990 of $1,529,000 preferred stock dividends of $1,087,500 accrued from
July 30, 1993 to December 31, 1995 were in arrears at December 31,
1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS: None
(b) REPORTS ON FORM 8-K: The Company did not file any reports on Form
8-K during the fiscal quarter for which this report is submitted.
8
SIGNATURES
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.
SECURITY CAPITAL CORPORATION
Date: February 13, 1996 By: A. GEORGE GEBAUER
A. George Gebauer, President
Date: February 13, 1996 By: LARRY M. KARREN
Larry M. Karren, Treasurer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Financial Data Schedule contains summary financial information extracted
from Security Capital Corporation's quarterly report on Form 10-Q for the period
ended 12/31/95 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 9827
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<RECEIVABLES> 13
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9907
<PP&E> 13
<DEPRECIATION> 1
<TOTAL-ASSETS> 10667
<CURRENT-LIABILITIES> 359
<BONDS> 0
4088
0
<COMMON> 350
<OTHER-SE> 5870
<TOTAL-LIABILITY-AND-EQUITY> 10667
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 72
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 12
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