UNITED STATES
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, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ______ to_______.
1-7921
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(Commission file number)
SECURITY CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3003070
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE PICKWICK PLAZA, SUITE 310, GREENWICH, CT. 06830
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(Address of principal executive offices, including zip code)
(203) 625-0770
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(Registrant's telephone number, including area code)
N.A.
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(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 [ ].
As of November 14, 2000, there were 6,442,309 outstanding shares of Class
A Common Stock, par value $ .01, and 380 outstanding shares of Common Stock, par
value $ .01, of the registrant.
<PAGE>
TABLE OF CONTENTS
PAGE
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations............................. 1
Consolidated Balance Sheets....................................... 2
Consolidated Statements of Cash Flows............................. 3
Notes to the Consolidated Financial Statements.................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk........10
Part II Other Information
Item 5. Other Information.................................................11
Item 6. Exhibits and Reports on Form 8-K..................................11
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
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FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
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2000 1999 2000 1999
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(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Net seasonal products sales .......... $ 18,555 $ 18,853 $ 28,666 $ 27,503
Educational services revenues ........ 1,754 1,450 5,108 2,591
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Total revenues ........................... 20,309 20,303 33,774 30,094
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Cost of revenues:
Seasonal products cost of sales ...... 8,006 8,371 12,943 12,873
Educational services cost of revenues 373 358 1,100 657
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Total cost of revenues ................... 8,379 8,729 14,043 13,530
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Gross profit ............................. 11,930 11,574 19,731 16,564
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Selling, general and administrative ...... 4,264 4,562 10,336 9,888
Depreciation and amortization ............ 601 617 1,788 1,431
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Operating income ......................... 7,065 6,395 7,607 5,245
Interest expense ......................... (944) (975) (2,384) (2,123)
Other income (expense) ................... (235) (403) (294) (244)
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Income before income tax expense and
minority interests ..................... 5,886 5,017 4,929 2,878
Income tax expense ....................... 2,244 466 1,893 260
Minority interests in subsidiaries ....... 655 558 511 404
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Net income ............................... 2,987 3,993 2,525 2,214
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Less preferred stock accretion ........... 78 66 227 135
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Net income available to common
stockholders ........................... $ 2,909 $ 3,927 $ 2,298 $ 2,079
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Earnings per share:
Basic ................................ $ 0.45 $ 0.61 $ 0.36 $ 0.34
Diluted .............................. $ 0.41 $ 0.58 $ 0.35 $ 0.34
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Basic weighted average shares outstanding: 6,442 6,442 6,442 6,044
Diluted weighted average shares outstanding: 6,942 6,942 6,942 6,368
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Balance Sheets
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SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
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ASSETS (In thousands, except share
and per share amounts)
Current assets:
Cash and cash equivalents ................ $ 970 $ 1,813
Accounts receivable (net of allowance for
doubtful accounts of $152 and $213) ... 22,136 4,982
Inventory ................................ 6,443 4,193
Deferred tax asset ....................... 209 287
Other current assets ..................... 950 946
-------- --------
Total current assets ..................... 30,708 12,221
Property and equipment (net of accumulated
depreciation of $714 and $478) ........ 1,838 1,781
Goodwill and intangible assets (net of
accumulated amortization of $5,493 and
$3,825) ............................... 37,230 38,841
Deferred tax asset ....................... 586 1,875
Other assets ............................. 465 602
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Total assets ............................. $ 70,827 $ 55,320
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ........ $ 4,322 $ 3,617
Accounts payable ......................... 2,018 891
Accrued expenses and other liabilities ... 3,386 986
Unearned revenues ........................ 2,171 1,631
Notes payable ............................ 12,750 1,250
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Total current liabilities ................ 24,647 8,375
Long-term debt ........................... 13,998 17,304
Other long-term obligations .............. 2,075 2,566
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Total liabilities ........................ 40,720 28,245
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Minority interests ....................... 1,708 1,197
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Redeemable preferred stock (liquidation
value - $5,000) ........................ 2,434 2,206
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Common stock, $.01 par value, 7,500 shares
authorized, 539 shares issued; 380
shares outstanding .................... -- --
Class A common stock, $.01 par value,
10,000,000 shares authorized; 6,760,725
shares issued; 6,442,309 shares
outstanding ........................... 68 68
Additional paid-in capital ............... 72,074 72,302
Accumulated deficit ...................... (40,962) (43,483)
Less: treasury stock, at cost, 318,575
shares ................................ (5,215) (5,215)
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Total stockholders' equity ............... 25,965 23,672
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Total liabilities and stockholders' equity $ 70,827 $ 55,320
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The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
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FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
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2000 1999
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(In thousands)
Cash flows from operating activities:
Net income ............................. $ 2,525 $ 2,214
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Deferred taxes .................... 1,337 --
Warrant obligation adjustment ..... 318 241
Depreciation and amortization ..... 1,979 1,576
Minority interests in subsidiaries 511 404
Changes in operating assets and
liabilities, net of effects from
acquired business:
(Increase) decrease in accounts
receivable .................. (17,121) (17,327)
(Increase) decrease in
inventories ................. (2,250) (738)
(Increase) decrease in other
current assets .............. 102 314
Increase (decrease) in accounts
payable, accrued expenses,
and unearned revenues ....... 3,286 875
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Net cash used in operating activities .. (9,313) (12,441)
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Cash flows from investing activities:
Capital expenditures ............... (261) (194)
Acquisition of subsidiaries, net
of cash acquired ................. -- (25,033)
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Net cash used in investing activities .. (261) (25,227)
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Cash flows from financing activities:
Proceeds from long-term borrowings .. -- 13,150
Repayments of long-term borrowings .. (2,767) (2,370)
Proceeds from line of credit ........ 11,498 13,321
Issuance of stock ................... -- 5,000
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Net cash provided by financing
activities ........................... 8,731 29,101
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Decrease in cash and cash equivalents .. (843) (8,567)
Cash and cash equivalents, beginning
of period ............................ 1,813 9,133
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Cash and cash equivalents, end of
period ............................... $ 970 $ 566
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The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Security Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
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(1) Financial Statements
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The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and the instructions for Form 10-Q. The interim financial statements are
unaudited. In the opinion of management, all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the financial position
and results of operations for the interim periods presented have been made. 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 Corporation on Form
10-K. Certain prior amounts have been classified to conform with current period
classifications.
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(2) Organization And Description of Business
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Security Capital Corporation ("Security Capital") operates as a holding company
that participates in the management of its subsidiaries while encouraging
operating autonomy and preservation of entrepreneurial environments. Currently,
Security Capital has three portfolio operating subsidiaries (together with
Security Capital, referred to as the "Company"), known as Primrose, Pumpkin and
Possible Dreams. Primrose is a 98%-owned subsidiary involved in the franchising
of educational child care centers. Primrose also operates one child care center.
Primrose is primarily based in the southern, central and western sections of the
United States. Pumpkin is an 80%-owned subsidiary in the business of
manufacturing and distributing pumpkin carving kits and related accessories.
Pumpkin's activities are centered in the United States. Possible Dreams is a
90%-owned subsidiary that operates as an importer, designer and distributor of
collectible Christmas figurines and ornaments.
On September 9, 2000, Security Capital signed a definitive agreement, subject to
acceptable financing, to acquire Health Power, Inc. ("HPI") (OTC: HPWR).
Pursuant to the terms of the agreement HPI would become a subsidiary of the
Security Capital and stockholders of HPI would receive approximately $26,500,000
in exchange for their shares. Security Capital would also assume or pay
approximately $9,750,000 in liabilities and expenses of HPI, including amounts
needed to extinguish certain severance benefits. The Company expects to close by
the end of calendar year 2000.
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(3) Inventories
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(In thousands)
Finished goods ......... $5,961 $3,411
Raw materials .......... 482 782
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Total .................. $6,443 $4,193
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(4) Other Income (Expense)
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<PAGE>
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FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
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2000 1999 2000 1999
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(In thousands)
Interest income ................... $ 3 $ 3 $ 8 $ 30
Warrant obligation adjustment ..... (257) (457) (318) (241)
Other ............................. 19 51 16 (33)
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Total ............................. $(235) $(403) $(294) $(244)
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(5) Acquisition of Primrose
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On April 6, 1999, the Company acquired 98% of the outstanding shares of common
stock of Primrose from Paul L. Erwin and The Paul L. Erwin Grantor Retained
Annuity Trust (the "Primrose Acquisition").
The following unaudited pro forma financial information presents the
consolidated results of the Company and Primrose as if the Primrose Acquisition
had taken place on January 1, 1999. The pro forma amounts give effect to certain
adjustments, including the amortization of goodwill and intangibles, increased
interest expense and income tax effects. This pro forma information does not
necessarily reflect the results of operations as they would have been if the
business had been managed by the Company during this period and is not
indicative of results that may be obtained in the future:
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FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
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(In thousands)
Pro-Forma:
Revenues ................. $ 33,257
Net income ............... $ 2,373
Earnings per common share:
Basic .................. $ .33
Diluted ................ $ .33
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(6) Earnings Per Share
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Stock-Based Compensation Plans - The Company records compensation expense for
its stock-based employee compensation plan in accordance with the
intrinsic-value method prescribed by APB No.25, "Accounting for Stock Issued to
Employees." Intrinsic value is the amount by which the market price of the
underlying stock exceeds the exercise price of the stock option or award on the
measurement date, which is generally the date of grant.
Security Capital Corporation - Pursuant to the provisions of the 2000 Long-Term
Incentive Plan on July 13, 2000 the Company granted options to acquire 549,000
shares of its Class A common stock at market value, which was $6.125. Of the
549,000 shares granted 48,000 vest over a three year period while the remaining
501,000 vest over a five year period. The Company, but not the holder, has the
right to settle the options in cash.
Possible Dreams - Options to acquire 87.5 shares at $1,905 per share and 87.5
shares at $3,810 per share of Possible Dreams stock, were granted on August 15,
2000. Such options vest over five years and expire in 2009. The Company, but not
the holder, has the right to settle the options in cash. If all such outstanding
options and warrants had been exercised for Possible Dreams' shares at September
30, 2000, the Company's ownership share of Possible Dreams would have been 71%.
<PAGE>
Diluted earnings per share reflect per share amounts that would have resulted in
dilutive potential common stock had been converted to common stock. The
following reconciles amounts reported in the financial statements:
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FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
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2000 1999 2000 1999
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Diluted earnings:
Net income available to common
stockholders ....................... $ 2,909 $ 3,927 $ 2,298 $ 2,079
Preferred stock accretion ............ 78 66 227 135
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Net income ........................... 2,987 3,993 2,525 2,214
Effect of dilutive securities settled
for cash ........................... (117) -- (117) --
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Diluted earnings ..................... $ 2,870 $ 3,993 $ 2,408 $ 2,214
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Diluted weighted average shares
outstanding
Common stock ......................... 6,442 6,442 6,442 6,044
Options settled for stock ............ -- --
Preferred stock ...................... 500 500 500 324
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Diluted weighted average shares
outstanding ........................ 6,942 6,942 6,942 6,368
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(7) Segment Disclosure
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The Company has an educational services segment and a seasonal products segment.
The educational services segment consists of Primrose, and the seasonal products
segment consists of Pumpkin and Possible Dreams. Management evaluates the
performance of its segments based upon segment income or adjusted EBITDA,
defined for the purposes of the segment disclosures as earnings before interest,
taxes, depreciation, amortization, minority interest expense, management fees
and non-recurring charges or gains.
<PAGE>
<TABLE>
<CAPTION>
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FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
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2000 1999 2000 1999
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues from external customers:
Seasonal products .............. $ 18,555 $ 18,853 $ 28,666 $ 27,503
Educational services ........... 1,754 1,450 5,108 2,591
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Total revenues ..................... $ 20,309 $ 20,303 $ 33,774 $ 30,094
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Segment income:
Seasonal products .............. $ 7,076 $ 6,542 $ 7,692 $ 6,235
Educational services ........... 861 654 2,484 1,063
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Total segment income ............... 7,937 $ 7,196 $ 10,176 $ 7,298
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Reconciliation to net income (loss):
Depreciation and
amortization expense ......... (601) (617) (1,788) (1,431)
Interest expense ............... (944) (975) (2,384) (2,123)
Income tax benefit (expense) ... (2,244) (466) (1,893) (260)
Minority interest in
subsidiaries ................. (655) (558) (511) (404)
Management fees ................ (166) (170) (499) (442)
Other income (expenses) ........ (235) (403) (294) (244)
Corporate and other expense .... (105) (14) (282) (180)
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Net Income ......................... $ 2,987 $ 3,993 $ 2,525 $ 2,214
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</TABLE>
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(In thousands)
Segment assets:
Educational services ........ $29,074 $29,303
Seasonal products ........... 40,669 23,850
Corporate and other ............ 1,084 2,167
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Total assets ................... $70,827 $55,320
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(8) Income Taxes
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The Company has recorded income tax expense at a rate of 38% and 9% for the nine
month periods ended September 30, 2000 and 1999, respectively. The Company
recorded its tax expense based upon projected changes in its valuation
allowance. The Company continues to reevaluate its valuation allowance applied
to its net operating loss carry-forwards based upon current developments of its
operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of the Company and the related notes thereto appearing elsewhere in
this Report on Form 10-Q. Additional information concerning factors that could
cause results to differ materially from those forward-looking statements is
contained under "Part II -- Item 5. Other Information."
RESULTS OF OPERATIONS
Security Capital reported net income of $2,987,000 and $2,525,000 for the three
and nine month periods ended September 30, 2000, respectively, as compared to
net income of $3,993,000 and $2,214,000 for the same periods of the prior year.
The Company reported basic net income per common share of $0.45 and $0.36 for
the three and nine month periods ended September 30, 2000, respectively, as
compared to basic net income per common share of $0.61 and $0.34 for the same
periods of the prior year. The Company reported diluted net income per common
share of $0.41 and $0.35 for the three and nine month periods ended September
30, 2000, respectively, as compared to diluted net income per common share of
$0.58 and $0.34 for the same periods of the prior year. Net income reported
includes income tax expense recorded at 38% for the three and nine month periods
ended September 30, 2000, as compared to income tax expense recorded at 9% for
the same periods of the prior year. The Company recorded its tax expense based
upon projected changes in its valuation allowance. The Company continues to
reevaluate its valuation allowance applied to its net operating loss
carry-forwards based upon current developments of its operations.
Revenues increased by $6,000 and $3,680,000, or 0.01% and 12%, to $20,309,000
and $33,774,000 for the three and nine month periods ended September 30, 2000,
as compared to the same periods of the prior year. The Company's seasonal
products segment revenues decreased by $298,000 and increased by $1,163,000, or
-2% and 4%, to $18,555,000 and $28,666,000 for the three and nine month periods
ended September 30, 2000, as compared to the same periods of the prior year. The
decrease in the revenues for the three month period ended September 30, 2000 is
attributable to the timing of shipments in the second quarter. The increase of
$1,163,000 for the nine month period ended September 30, 2000 was primarily
attributable to strong demand.
Reported educational services segment revenues were $1,754,000 and $5,108,000
for the three and nine month periods ended September 30, 2000, respectively. As
a measure of the increasing success of the educational services segment's
concept, the Company monitors the revenues generated by its franchises. Total
educational system revenues, or gross revenues of all educational based child
care center franchises, increased by $3,489,000 and $10,654,000, or 24% and 25%,
to $17,839,000 and $53,072,000 for the three and nine month periods ended
September 30, 2000, as compared to the historical pre-acquisition records of the
predecessor Company for the same periods of the prior year. Total royalty
revenues earned from the educational services segment system increased by
$244,000 and $741,000, or 24% and 25%, to $1,236,000 and $3,666,000 for the
three and nine month periods ended September 30, 2000, as compared to the
historical pre-acquisition records of the predecessor Company for the same
periods of the prior year. These increases were generated by a 17% increase in
the number of educational based childcare centers, which was 81 and 69 as of
September 30, 2000 and 1999, respectively. As of September 30, 2000, this
segment had awarded 38 franchise agreements with associated unearned revenues of
$2,171,000 recorded on the balance sheet.
Selling, general and administrative expenses decreased by $298,000 and increased
by $448,000 to $4,264,000 and $10,336,000, respectively, for the three and nine
month periods ended September 30, 2000, respectively, as compared to the same
periods of the prior year. The $448,000 increase for the nine month period ended
September 30, 2000 was primarily due to the selling, general and administrative
expenses of the Company's educational segment being included in the entire nine
month period ended September 30, 2000, as compared to only six months in the
prior nine month period ended September 30, 1999.
<PAGE>
Depreciation and amortization decreased by $16,000 and increased by $357,000 to
$601,000 and $1,788,000 for the three and nine month periods ended September 30,
2000, respectively, as compared to the same periods of the prior year. The
$357,000 increase was attributable to normal and expected depreciation and
amortization of the Company's assets. Additionally, the depreciation and
amortization expense of the Company's educational segment increased
approximately $340,000, as compared to the prior nine month period due to that
segment's results being included in the entire nine month period ended September
30, 2000, as compared to only six months in the nine month period ended
September 30, 1999.
Interest expense decreased by $31,000 and increased by $261,000 to $944,000 and
$2,384,000 for the three and nine month periods ended September 30, 2000,
respectively, as compared to the same periods of the prior year. The decrease
for the three month period ended September 30, 2000 was primarily due to reduced
average debt levels, as compared to the prior year. The increase for the nine
months ended September 30, 2000 was primarily due to the Company's acquisition
of Primrose in April 1999, and therefore no interest expense attributable to
that acquisition was incurred during the first quarter of 1999.
The Company has recorded income tax expense at a rate of 38% and 9% for the nine
month periods ended September 30, 2000 and 1999, respectively. The Company
recorded its tax expense based upon projected changes in its valuation
allowance. The Company continues to reevaluate its valuation allowance applied
to its net operating loss carry-forwards based upon current developments of its
operations.
SEASONALITY
The seasonal products segment consists of Possible Dreams and Pumpkin. This
segment experiences a significant seasonal pattern in its working capital
requirements and operating results. In 1999, the seasonal products segment
received orders representing approximately 21% and 11% of its annual sales
during the first and second quarters, respectively. It ships products throughout
the year, with a majority of the shipping from July through November. Temporary
employees are hired to accommodate peak shipping periods. This segment provides
extended payment terms to some of its customers for seasonal merchandise and,
accordingly, collects a substantial portion its accounts receivable in the
fourth quarter. Due to the seasonal pattern, the seasonal products segment has
had greater working capital needs in its peak seasons and has experienced
greater cash availability in the fourth calendar quarter. As a result of this
sales pattern, a substantial portion of its revenues is typically recorded in
the third calendar quarter. The seasonal products segment has historically
financed its operations through internally generated cash flow and short-term
seasonal borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $843,000, from $1,813,000 at December 31,
1999 to $970,000 at September 30, 2000. The educational services segment
decreased its cash and cash equivalents by $22,000. The seasonal products
segment's cash and cash equivalents decreased by $1,040,000 due to its need for
working capital during that segment's traditionally slowest period. The
remaining $219,000 increase was primarily attributable to other corporate
activities.
The Company's consolidated working capital increased by $2,215,000, from
$3,846,000 at December 31, 1999 to $6,061,000 at September 30, 2000. The
educational services segment's working capital decreased by $355,000. The
seasonal products segment's increase in working capital was approximately
$2,275,000 and was primarily due to its results from operations and working
capital utilization during that segment's traditionally strongest period and the
reclassification of a $780,000 warrant liability from non-current to current
because of the warrant holders option to put the warrants to the Company for
cash in May 2001. The remaining increase of $295,000 was primarily attributable
to holding company corporate activities.
The Company's educational services segment maintains a $2,500,000 revolving line
of credit, which had a balance of $700,000 outstanding and $1,800,000 available
at September 30, 2000. The seasonal products segment, in the aggregate,
maintains revolving lines of credit, which had a balance of $12,050,000
outstanding and $5,370,000 available at September 30, 2000, which was due to
this segment's seasonal pattern.
<PAGE>
Total term debt, excluding original issue discounts, decreased by $2,767,000,
from $22,074,000 at December 31, 1999 to $19,307,000 at September 30, 2000. Term
debt in the aggregate had an approximate 9.87% average interest rate and current
maturities of $4,322,000 at September 30, 2000. Term debt also has certain
covenants at the subsidiary level, the more significant of which require the
subsidiary operating companies to maintain minimum earnings before interest,
taxes, depreciation and amortization ("EBITDA"), leverage ratio, interest
coverage ratio, fixed charge ratio and maximum lease expense. At September 30,
2000, the Company was in compliance with all its covenants.
The Company had no major capital expenditures during the nine month period
ended September 30, 2000 and expects no major capital expenditures during the
remainder of calendar year 2000.
On September 9, 2000, Security Capital signed a definitive agreement, subject to
acceptable financing, to acquire Health Power, Inc. ("HPI") (OTC: HPWR).
Pursuant to the terms of the agreement HPI would become a subsidiary of the
Security Capital and stockholders of HPI would receive approximately $26,500,000
in exchange for their shares. Security Capital would also assume or pay
approximately $9,750,000 in liabilities and expenses of HPI, including amounts
needed to extinguish certain severance benefits. The Company has obtained
financing commitments and expects to close by the end of the calendar year 2000.
NEW ACCOUNTING PRONOUNCEMENTS
In September 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes standards for the accounting and reporting for derivative
instruments and for hedging activities and requires the recognition of all
derivatives as assets or liabilities measured at their fair value. Gains or
losses resulting from changes in the fair value of derivatives would be
recognized in earnings in the period of change unless certain hedging criteria
are met. The Company does not expect a material impact from this statement on
the consolidated results. SFAS No. 133, as amended by SFAS No. 137, is effective
for fiscal years beginning after September 15, 2000.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
On September 26, 2000, the SEC issued SAB 101B to defer the effective date of
implementation of SAB 101 until no later than the fourth fiscal quarter of
fiscal years beginning after December 31, 2000. The Company does not expect a
material impact from this bulletin on the consolidated results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of the Company. The
Company is exposed to market risk associated with changes in interest rates. The
Company's notes payable and long-term debt bear interest primarily at variable
rates. The Company is subject to increases and decreases in interest expense on
its variable rate debt resulting from fluctuations in the interest rates on such
debt. The effect of a percentage point change in interest rates would have
impacted interest expense by approximately $75,000 and $210,000 for the three
and nine month periods ended September 30, 2000, respectively.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
This filing contains "forward-looking" statements within the meaning of the
"safe harbor" provisions of the Private Litigation Reform Act of 1995. Such
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in the forward looking statements. Such factors
and uncertainties include, but are not limited to: the level of orders that are
received and shipped by the Company in any given quarter, the rescheduling and
cancellation of orders by customers, availability and cost of materials, the
Company's ability to enhance its existing products and to develop, manufacture
and successfully introduce and market new products, new product developments by
the Company's competitors, market acceptance of products of both the Company and
its competitors, competitive pressures on prices, the ability to attract and
maintain qualified personnel, significant damage to or prolonged delay in
operations at the manufacturing facilities of the Company's suppliers, interest
rate and foreign exchange fluctuations, political instability in the Pacific
Rim, and the Company's ability to attract qualified franchises.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS: 27-Financial Data Schedule
(b) REPORTS ON FORM 8-K: None
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: November 14, 2000 By: /s/ BRIAN D. FITZGERALD
Brian D. Fitzgerald
President
Date: November 14, 2000 By: /s/ WILLIAM R. SCHLUETER
William R. Schlueter
Chief Financial Officer
(Principal Financial and
Accounting Officer)
