As filed with the Securities and Exchange Commission on May 15, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2000
or
_____ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From _____________ to ____________
For Quarter Ended March 31, 2000 Commission File Number 0-9667
WINMILL & CO. INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 13-1897916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 Hanover Square, New York, New York 10005
(Address of principal executive offices) (Zip Code)
212-785-0900
(Company's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes__X__ No_____
The number of shares outstanding of each of the registrant's classes of
common stock, as of April 30, 2000, were as follows:
Class A Common Stock non-voting, par value $.01 per share - 1,635,017 shares
Class B Common Stock voting, par value $.01 per share - 20,000 shares
<PAGE>
WINMILL & CO. INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
- (Unaudited) March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income (Loss)
- (Unaudited) Three Months Ended March 31, 2000
and March 31, 1999 4
Consolidated Statements of Changes in Shareholders' Equity
- (Unaudited) Three Months Ended
March 31, 2000 and March 31, 1999 5
Consolidated Statements of Cash Flows
- (Unaudited) Three Months Ended
March 31, 2000 and March 31, 1999 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders During First Quarter
of the Year Ended December 31, 2000 17
Management's Representation and Signatures 18
<PAGE>
WINMILL & CO. INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
ASSETS
Current Assets:
Cash and cash equivalents $ 1,589,743 $ 2,560,093
Marketable securities (Note 3) 3,462,329 4,600,928
Management, distribution and shareholder
administration fees receivable 219,515 272,800
Interest, dividends and other receivables 83,857 43,429
Prepaid expenses and other assets 288,669 128,962
Total Current Assets 5,644,113 7,606,212
Real estate, net 1,342,344 1,325,693
Equipment, furniture and fixtures, net 92,466 102,702
Excess of cost over net book value of
subsidiaries, net 639,954 650,001
Deferred income taxes (Note (10) 120,000 140,000
Other 273,671 265,421
2,468,435 2,483,817
Total Assets $ 8,112,548 $ 10,090,029
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued income taxes $ 56,123 $ 1,866,600
Accounts payable 169,793 201,926
Accrued professional fees 74,555 75,055
Accrued payroll and other related costs 5,310 72,049
Accrued other expenses 5,000 25,928
Other current liabilities 9,836 9,836
Total Current Liabilities 320,617 2,251,394
Contingencies (Note 13) - -
Shareholders' Equity: (Notes 3, 6, 7 and 8)
Common Stock, $.01 par value
Class A, 10,000,000 shares authorized;
1,635,017 shares
issued and outstanding 16,351 16,351
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200 200
Additional paid-in capital 6,872,454 6,872,454
Retained earnings 1,505,326 1,203,303
Notes receivable for common stock issued (603,675) (603,675)
Accumulated other comprehensive income 1,275 350,002
Total Shareholders' Equity 7,791,931 7,838,635
Total Liabilities and Shareholders' $ 8,112,548 $ 10,090,029
Equity
See accompanying notes to consolidated financial statements.
<PAGE>
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended March 31,
2000 1999
Revenues:
Management, distribution, service
and administrative fees $ 657,703 $ 720,812
Real estate rental income 68,883 41,754
Consulting fee 50,000 -
Net realized and unrealized gains from investments 270,362 56,704
Dividends, interest and other 106,942 6,977
1,153,890 826,247
Expenses:
General and administrative 508,737 504,924
Marketing 73,734 146,152
Expense reimbursements to the Funds (Note 11) 76,789 72,430
Subadvisory fees - 42,136
Professional fees 31,476 19,683
Amortization and depreciation 37,677 43,106
728,413 828,431
Income (loss) from continuing operations
before income taxes 425,477 (2,184)
Income taxes (Note 10) 123,454 16,347
Income (loss) from continuing operations 302,023 (18,531)
Discontinued Operations:
Income from discontinued operations (net
of $2,070,000 in income taxes)(Note 2) - 2,354,642
Net Income $302,023 $2,336,111
Per share data:
Basic
Income (loss) from continuing operations $ 0.18 $(.01)
Income from discontinued operations - 1.42
Net Income $ 0.18 $ 1.41
Diluted
Income (loss) from continuing operations $ 0.18 $(.01)
Income from discontinued operations - 1.39
Net Income $ 0.18 $ 1.38
Average shares outstanding:
Basic 1,655,017 1,655,017
Diluted 1,661,473 1,694,453
See accompanying notes to the consolidated financial statements.
<PAGE>
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Notes
Additional Receivable For
Class A Class B Class A Class B Paid-in- Common Stock
Common Common Common Common Capital Issued
Three Months Ended March 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 1,635,017 20,000 $16,351 $200 $6,872,454 $(603,675)
Net income - - - - - -
Other comprehensive income
Change in unrealized gains
on marketable securities - - - - - -
Comprehensive income
Balance, March 31, 1999 1,635,017 20,000 $16,351 $200 $6,872,454 $(603,675)
Three Months Ended March 31, 2000
Balance, January 1, 2000 1,635,017 20,000 $16,351 $200 $6,872,454 $(603,675)
Net income - - - - - -
Other comprehensive income
Change in unrealized gains
on marketable securities - - - - - -
Comprehensive income
Balance, March 31, 2000 1,635,017 20,000 $16,351 $200 $6,872,454 $(603,675)
</TABLE>
<TABLE>
<CAPTION> Accumulated
Retained other Total
Three Months Ended March 31, 1999 Earnings Comprehensive Shareholders'
(Deficit) Income Equity
<S> <C> <C> <C>
Balance, January 1, 1999
$(1,325,338) $(976) $4,959,016
Net income
Other comprehensive income 2,336,111 - 2,336,111
Change in unrealized gains
on marketable securities
Comprehensive income - (14,822) (14,822)
2,321,289
Balance, March 31, 1999
$1,010,773 $(15,798) $7,280,305
Three Months Ended March 31, 2000
Balance, January 1, 2000
$1,203,303 $350,002 $7,838,635
Net income
Other comprehensive income 302,023 - 302,023
Change in unrealized gains
on marketable securities
Comprehensive income - (348,727) (348,727)
(46,704)
Balance, March 31, 2000
$1,505,326 $ 1,275 $7,791,931
</TABLE>
<PAGE>
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 302,023 $2,336,111
Adjustments to reconcile net income to net cash provided by
(used in) Operating Activities:
Depreciation and amortization 37,677 43,106
Realized gain from sale of BBSI - (2,354,642)
Net realized and unrealized gains from investments (270,362) (54,521)
Cash value of life insurance (8,250) (8,250)
Other 2,550 (4,908)
(Increase) decrease in:
Management, distribution and shareholder administration
fees receivable 53,285 44,561
Interest, dividends and other receivables (40,428) (124,412)
Prepaid expenses and other assets (159,707) 249,529
Deferred tax credits 20,000 -
Other - 43,762
Increase (decrease) in:
Accrued income taxes (1,810,477) (2,640)
Accounts payable (32,133) 88,069
Accrued professional fees (500) (254,301)
Accrued payroll and other related costs (66,739) (56,673)
Accrued other expenses (20,928) 16,374
Total adjustments (2,296,012) (2,374,946)
Net cash used in Operating Activities (1,993,989) (38,835)
Cash Flows from Investing Activities:
Proceeds from sale of BBSI (net of cash in discontinued
operations) - 5,752,254
Proceeds from sales of investments 2,066,338 87,422
Purchases of investments (1,008,653) (65,791)
Purchases of equipment - (13,067)
Capital expenditures (34,046) (9,858)
Net cash provided by Investing Activities 1,023,639 5,750,960
Cash Flows from Financing Activities:
Capitalized lease obligations - (1,822)
Net cash provided by (used in) Financing Activities - (1,822)
Net increase (decrease) in cash and cash equivalents (970,350) 5,710,303
Cash and cash equivalents:
At beginning of period 2,560,093 1,403,931
At end of period $ 1,589,743 $7,114,234
</TABLE>
Supplemental disclosure: The Company paid $1,321,000 and $0 in Federal income
taxes during the three months ended March 31, 2000 or 1999.
The Company paid approximately $0 and $20 in interest during the three
months ended March 31, 2000 and March 31, 1999, respectively.
See accompanying notes to the consolidated financial statements.
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Winmill & Co. Incorporated ("Company") is a holding company. Its
subsidiaries' business consists of providing investment management and
distribution services for the Midas Funds (six open-end funds) and
three closed-end funds as well as real estate investment and
operations.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries. Substantially all intercompany
accounts and transactions have been eliminated.
ACCOUNTING ESTIMATES
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses and other
liabilities approximate fair value because of the short maturity of
these items. Marketable securities are recorded at market value which
represents the fair value of the securities.
CASH AND CASH EQUIVALENTS
Investments in money market funds are considered to be cash
equivalents. At March 31, 2000 and December 31, 1999, the Company and
subsidiaries had invested approximately $1,261,400 and $2,199,800,
respectively, in an affiliated money market fund.
MARKETABLE SECURITIES
The Company and its non-broker/dealer subsidiaries' marketable
securities are considered to be "available-for-sale" and are marked to
market, with the unrealized gain or loss included in stockholders'
equity. Marketable securities for the broker/dealer subsidiary are
marked to market with unrealized gains and losses included in
earnings.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company's customer activities
involve the execution and settlement of customer transactions. These
activities may expose the Company to risk of loss in the event the
customer is unable to fulfill its contracted obligations, in which
case the Company may have to purchase or sell financial instruments at
prevailing market prices. Any loss from such transactions is not
expected to have a material effect on the Company's financial
statements.
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
INCOME TAXES
The Company and its wholly-owned subsidiaries file consolidated income
tax returns. The Company's method of accounting for income taxes
conforms to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting
basis and the tax basis of assets and liabilities.
RECLASSIFICATIONS
Certain reclassifications of the 1999 financial statements have been
made to conform to the 2000 presentation.
REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT
Real estate held for investment is recorded at cost and is depreciated
on a straight-line basis over its estimated useful life. At March 31,
2000 and December 31, 1999, accumulated depreciation amounted to
approximately $181,800 and $166,100, respectively. Equipment,
furniture and fixtures are recorded at cost and are depreciated on the
straight-line basis over their estimated useful lives, 3 to 10 years.
At March 31, 2000 and December 31, 1999, accumulated depreciation
amounted to approximately $808,800 and $796,900, respectively.
EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES
The excess of cost over net book value of subsidiaries is capitalized
and amortized over fifteen and forty years using the straight-line
method. At March 31, 2000 and December 31, 1999, accumulated
amortization amounted to approximately $560,900 and $550,800,
respectively. Periodically, the Company reviews its intangible assets
for events or changes in circumstances that may indicate that the
carrying amounts of the assets are not recoverable.
COMPREHENSIVE INCOME
The Company discloses comprehensive income in the financial
statements. Total comprehensive income includes net income and
unrealized gains and losses on marketable securities, which is
reported as other comprehensive income in shareholders' equity.
SEGMENT INFORMATION
The Company's operating segments were organized around services
provided and are classified into three groups - investment management,
real estate and discount brokerage. Due to the sale of BBSI, the
discount brokerage business is classified as "income from discontinued
operations" on the financial statements (See Note 2). The Company's
remaining business is in two industry segments.
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number
of shares outstanding. Diluted earnings per share is computed using
the weighted average number of shares outstanding adjusted for the
incremental shares attributed to outstanding options to purchase
common stock. The following table sets forth the computation of basic
and diluted earnings per share:
March 31,
2000 1999
Numerator for basic and diluted earnings per share:
Net income $ 302,023 $ 2,336,111
Denominator:
Denominator for basic earnings per share -
weighted-average shares 1,655,017 1,655,017
Effect of dilutive securities:
Employee Stock Options 6,456 39,436
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions 1,661,473 1,694,453
2. DISCONTINUED OPERATIONS
On December 17, 1998, the Company signed an agreement to sell the
outstanding stock of the discount brokerage business, to a subsidiary of
Royal Bank of Canada for $6 million. The sale closed on March 31, 1999. In
connection with the sale, the rights to the name "Bull & Bear" was
transferred to Royal Bank of Canada. In addition, Royal Bank agreed that it
will cause, for the three-year period following the closing, BBSI to offer
exclusively Dollar Reserves to its customers as the sole vehicle into which
cash balances held by BBSI's customers may be swept on a daily basis for so
long as certain conditions are met, including certain performance rankings
by the Fund, in consideration of a monthly fee equal to one-twelfth of
0.25% of the aggregate average daily amount of such balances. At March 31,
2000, the value invested in Dollar Reserves by BBSI's customers was
approximately $38,266,000. Further, the Company has agreed to provide or to
cause its subsidiaries to provide to BBSI for a period of three years
following the closing certain services with respect to the operation of a
securities brokerage business for a monthly administrative fee of
$16,666.67, subject to certain conditions.
Three Months Ended
March 31, 2000 March 31, 1999
Revenues $ - $ 748,786
Expenses - 733,537
Income (loss) from discontinued operations
- 15,249
Gain on sale of discontinued operations:
Proceeds, net of basis - 5,500,000
Professional fees - (222,021)
Closing bonuses - (868,586)
Income taxes - (2,070,000)
Total gain on sale - 2,339,393
Total income (loss) from discontinued
perations $ - $ 2,354,642
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
3. MARKETABLE SECURITIES
At March 31, 2000, marketable securities consisted of:
Securities held by broker/dealer subsidiary - marked to market
Affiliated mutual funds $ 2,044,285
Equity securities 1,273,277
Total broker/dealer securities (cost $3,616,390) 3,317,562
Available-for-sale securities held by other companies- marked to market
Equity securities 28,874
Unaffiliated mutual funds 22,492
Affiliated mutual funds 93,401
Total available-for-sale securities (cost-$143,492) 144,767
$ 3,462,329
At December 31, 1999, marketable securities consisted of:
Securities held by broker/dealer subsidiary - marked to market
Affiliated mutual funds $ 2,063,205
Equity securities 435,875
Total broker/dealer securities(cost-$2,861,134) 2,499,080
Available-for-sale securities held by other companies- marked to market
Unaffiliated mutual funds 23,622
Affiliated mutual funds 2,046,439
Equity securities 31,787
Total available-for-sale securities (cost - $1,751,846) 2,101,848
$ 4,600,928
4. LEASE COMMITMENTS
The Company leases office space under a lease which expires December 31,
2001. The rent is approximately $103,000 per annum including electricity.
5. REAL ESTATE OPERATIONS
The Company owns an office building which is approximately 90% leased to
various tenants. Future minimum lease payment receivables under
noncancellable leasing arrangements as of December 31, 1999 are as follows:
Year ending December 31,
2000 $ 175,500
2001 189,500
2002 176,100
2003 154,900
2004 159,400
2005 - 2008 611,000
Net minimum future lease receipts $1,466,400
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
6. SHAREHOLDERS' EQUITY
The Class A and Class B Common Stock are identical in all respects except
for voting rights, which are vested solely in the Class B Common Stock. The
Company also has 1,000,000 shares of Preferred Stock, $.01 par value,
authorized. As of March 31, 2000 and December 31, 1999, none of the
Preferred Stock was issued.
7. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiary, ISC is a member firm of the
National Association of Securities Dealers, Inc. and is registered with the
Securities and Exchange Commission as a broker/dealer. Under the Uniform
Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), a
broker/dealer must maintain minimum net capital, as defined, of not less
than $25,000, when engaged in the sale of redeemable shares of registered
investment companies, or 6-2/3% of aggregate indebtedness, whichever is
greater; and a ratio of aggregate indebtedness to net capital, as defined,
of not more than 15 to 1. At March 31, 2000, the subsidiary had net capital
of approximately $1,018,500; net capital requirement of approximately
$111,900; excess net capital of approximately $906,600; and the ratio of
aggregate indebtedness to net capital were approximately 1.65 to 1.
8. STOCK OPTIONS
On December 6, 1995, the Company adopted a Long-Term Incentive Plan which
provides for the granting of a maximum of 300,000 options to purchase Class
A Common Stock to directors, officers and key employees of the Company or
its subsidiaries. The plan was amended on February 5, 1996, on October 29,
1997 increasing the maximum number of options to 450,000, and in March 1999
increasing the maximum number of options to 600,000. With respect to
non-employee directors, only grants of non-qualified stock options and
awards of restricted shares are available. Two of the non-employee
directors were granted 10,000 options each on December 6, 1995 and 5,000
options each on October 29, 1997. The new non-employee director was granted
10,000 options on September 8, 1998. In September 1999, the three
non-employee directors were granted 10,000 options each. The option price
per share may not be less than the fair value of such shares on the date
the option is granted, and the maximum term of an option may not exceed ten
years except as to non-employee directors for which the maximum term is
five years.
The Company applied APB Opinion 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost
has been recognized for its stock option plans. Proforma compensation cost
for the Company's plans is required by Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation (SFAS 123)" and has been
determined based on the fair value at the grant dates for awards under
these plans consistent with the method of SFAS 123. For purposes of
proforma disclosure, the estimated fair value of the options is amortized
to expense over the options' vesting period. The Company's proforma
information follows:
Three Months Ended March 31,
2000 1999
Net income As Reported $302,023 $2,336,111
Proforma $300,851 $2,179,092
Earnings per share
Basic As Reported $0.18 $1.41
Proforma $0.18 $1.32
Diluted As Reported $0.18 $1.38
Proforma $0.18 $1.29
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999: expected volatility of 54.31%,
risk-free interest rate of 4.55% and expected life of three years.
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
A summary of the status of the Company's stock option plans as of March 31,
2000 and December 31, 1999 and changes during the periods ending on those
dates is presented below:
Weighted
Number Average
of Exercise
Stock Options Shares Price
Outstanding at December 31, 1998 119,000 $2.05
Granted 280,000 $2.98
Canceled (160,000) $3.28
Outstanding at December 31, 1999 239,000 $2.32
Outstanding at March 31, 2000 239,000 $2.32
There were 239,000 and 239,000 options exercisable at March 31, 2000 and
December 31, 1999 with a weighted-average exercise price of $2.32 and
$2.32, respectively. The weighted-average fair value of options granted was
$1.18 for the year ended December 31, 1999. There were no options granted
during the three months ended March 31, 2000.
The following table summarizes information about stock options outstanding
at March 31, 2000:
__Options Outstanding__
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
$1.75 - $2.375 152,000 2.9 years $2.14
$2.6125 - $3.00 87,000 4.1 years $2.63
In connection with the exercise of the options, the Company received from
certain officers notes with an interest rate of 4.47% per annum payable
December 15, 2003. The balance of the notes at March 31, 2000 and December
31, 1999 was $603,675, which was classified as "notes receivable for common
stock issued."
9. PENSION PLAN
The Company has a 401(k) retirement plan for substantially all of its
qualified employees. Contributions to this are based upon a percentage of
salaries of eligible employees and are accrued and funded on a current
basis. Total pension expense for the three months ended March 31, 2000 and
March 31, 1999 were $18,625 and $8,862, respectively.
10. INCOME TAXES
The provision for income taxes for the three months ended March 31, 2000
and 1999 are as follows:
2000 1999
Current
State and local $ 23,454 $ 866,347
Federal 80,000 1,220,000
103,454 2,086,347
Deferred 20,000 -
====== ======
$ 123,454 $2,086,347
<PAGE>
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
Deferred tax assets are comprised of the following at March 31, 2000 and
December 31, 1999:
2000 1999
Unrealized loss on investments $120,000 $140,000
11. RELATED PARTIES
All management and distribution fees are a result of services provided to
the Funds. All such services are provided pursuant to agreements that set
forth the fees to be charged for these services. These agreements are
subject to annual review and approval by each Fund's Board of Directors and
a majority of the Fund's non-interested directors. During the quarter ended
March 31, 2000 and 1999, the Funds paid approximately $43,315 and $51,441,
respectively, for co-transfer agent services to ISC, which paid such
amounts to certain brokers for performing such services. These
reimbursements for recordkeeping services are included in management,
distribution, service and administrative fees on the income statement.
In connection with investment management services, the Company's investment
managers and distributor waived management and distribution fees and
reimbursed expenses to the Funds in the amount of $76,789 and $72,430 for
the quarter ended March 31, 2000 and 1999, respectively. Certain officers
of the Company also serve as officers and/or directors of the Funds.
Commencing August 1992, the Company obtained a key man life insurance
policy on the life of the Company's Chairman which provides for the payment
of $1,000,000 to the Company upon his death. As of March 31, 2000, the
policy had a cash surrender value of approximately $183,300 and is included
in other assets in the balance sheet.
The former discount brokerage subsidiary of the Company, BBSI received
brokerage commissions of approximately $17,129 from the Funds for the three
months ended March 31, 1999.
12. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The following details selected financial information by business segment.
Investment Real Estate
Management Operations Total
March 31, 2000
Revenues $ 707,703 $ 68,883 $ 776,586
Investment income 377,048 256 377,304
Income (loss) from operations 430,568 (5,091) 425,477
Depreciation and amortization 19,677 18,000 37,677
Capital expenditures - 34,046 34,046
Gross identifiable assets 6,622,794 1,489,754 8,112,548
March 31, 1999
Revenues $ 720,812 $ 41,754 $ 762,566
Investment income 63,681 - 63,681
Income (loss) from operations 3,169 (5,353) (2,184)
Depreciation and amortization 29,550 13,556 43,106
Capital expenditures 13,067 9,858 22,925
Gross identifiable assets 8,952,108 1,332,165 10,284,273
<PAGE>
13. CONTINGENCIES
From time to time, the Company and/or its subsidiaries are threatened or
named as defendants in litigation arising in the normal course of business.
As of March 31, 2000, neither the Company nor any of its subsidiaries was
involved in any litigation that, in the opinion of management, would have a
material adverse impact on the consolidated financial statements.
In July 1994, the Company entered into a Death Benefit Agreement
("Agreement") with the Company's Chairman. Following his death, the
Agreement provides for annual payments equal to 80% of his average annual
salary for the three year period prior to his death subject to certain
adjustments to his wife until her death. The Company's obligations under
the Agreement are not secured and will terminate if he leaves the Company's
employ under certain conditions.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended March 31, 2000 compared to Three Months Ended March 31, 1999
Drastic declines in the securities markets can have a significant effect on
the Company's business. Volatile stock markets may affect management and
distribution fees earned by the Company's subsidiaries. If the market value of
securities owned by the Funds declines, shareholder redemptions may occur,
either by transfer out of the equity Funds and into the money market fund, which
has lower management and distribution fee rates than the equity Funds, or by
transfer out of the Funds entirely. Lower net asset levels in the Funds may also
cause or increase reimbursements to the Funds pursuant to expense limitations as
described in Note 11 of the financial statements. On December 17, 1998, the
Company signed an agreement to sell the outstanding stock of BBSI, the discount
brokerage business, to a subsidiary of Royal Bank of Canada. The transaction,
which was approved by the regulatory authorities in Canada and the United
States, closed on March 31, 1999. The Company received $6 million in proceeds
from the sale. At the time of the sale, BBSI had net equity of $500,000. In
connection with the sale, the rights to the name "Bull & Bear" were transferred
to Royal Bank of Canada, and the Company and certain of its subsidiaries changed
their names. The Company recorded a gain from the sale of $2,354,642, net of
related expenses including professional fees, closing bonuses and income tax
expense.
Total revenues increased $327,643 or 40% which was primarily due to an
increase in net realized and unrealized gain on investments and dividends,
interest and other. The Company had net realized and unrealized gains of
$270,362 on the Company's investments. Dividends, interest and other increased
$99,965 due to higher earnings on the Company's investments. Management,
distribution, service and administrative fees decreased $63,109 or 9% due to
lower net assets in the Funds. Net assets under management were approximately
$258 million at December 31, 1998, $248 million at March 31, 1999, $242 million
at June 30, 1999, $249 million at September 30, 1999, $244 million at December
31, 1999, and $222 million at March 31, 2000. Rental income increased by $27,129
due to additional tenants in 2000. In the first quarter of 2000, the Company
earned $50,000 in consulting fees from BBSI. Total expenses decreased $100,018
or 12% as a result of a decrease in marketing expenses of $72,418 or 49% and a
decrease in subadvisory fees of $42,136. Marketing expenses decreased due to
lower fulfillment and printing expenses. Effective December 1, 1999, the Midas
Fund's subadvisory agreement was discontinued. General and administrative
expenses increased $3,813 or 1%. Expense reimbursements to the Funds increased
$4,359 or 6%. Professional fees increased $11,793 or 60%. Net income from
continuing operations for the period was $302,023 or $.18 per share on a diluted
basis as compared to net loss of $18,531 or $.01 per share on a diluted basis
for 1999. Net gain from discontinued operations for the first three months of
1999 was $2,354,642, which included income from operations of $15,249, or $1.39
per share on a diluted basis. Net income for the period was $302,023 or $.18 per
share on a diluted basis for the period as compared to net income of $2,336,111
or $1.38 per share on a diluted basis for 1999.
Liquidity and Capital Resources
The following table reflects the Company's consolidated working capital,
total assets, long term debt and shareholders' equity as of the dates indicated:
March 31, 2000 December 31, 1999
Working Capital $5,323,496 $5,354,818
Total Assets $8,112,548 $10,090,029
Long Term Debt - -
Shareholders' Equity $7,791,931 $7,838,635
Working capital, total assets and shareholders' equity decreased $31,322,
$1,977,481 and $46,704, respectively for the three months ended March 31, 2000 .
Total assets decreased due to the payment of federal, state, and local
income taxes in the first quarter of 2000. The decrease in working capital and
shareholders' equity was primarily the result of the decrease in other
comprehensive income of $348,727 (marketable securities with unrealized gains
were sold in 2000 and included in realized gains on the income statement) offset
by net income of $302,023.
As discussed previously, significant changes in the securities markets can
have a dramatic effect on the Company's results of operations. Based on current
information available, management believes that current resources are sufficient
to meet its liquidity needs.
Effects of Inflation and Changing Prices
Since the Company derives most of its revenues from acting as the manager
and distributor of investment companies, it is not possible for it to discuss or
predict with accuracy the impact of inflation and changing prices on its revenue
from continuing operations.
Forward Looking Information
Information or statements provided by or on behalf of the Company from time
to time, including those within this Form 10-Q Quarterly Report, may contain
certain "forward-looking information", including information relating to
anticipated growth in revenues or earnings per share, anticipated changes in the
amount and composition of assets under management, anticipated expense levels,
and expectations regarding financial market conditions. The Company cautions
readers that any forward-looking information provided by or on behalf of the
Company is not a guarantee of future performance and that actual results may
differ materially from those in forward-looking information as a result of
various factors, including but not limited to those discussed below. Further,
such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.
The Company's future revenues may fluctuate due to factors such as: the
total value and composition of assets under management and related cash inflows
or outflows in its mutual funds; fluctuations in the financial markets resulting
in appreciation or depreciation of assets under management; the relative
investment performance of the Company's sponsored investment products as
compared to competing products and market indices; the expense ratios and fees
of the Company's sponsored products and services; investor sentiment and
investor confidence in mutual funds; the ability of the Company to maintain
investment management fees at current levels; competitive conditions in the
mutual funds industry; the introduction of new mutual funds and investment
products; the ability of the Company to contract with the Funds for payment for
administrative services offered to the Funds and Fund shareholders; the
continuation of trends in the retirement plan marketplace favoring defined
contribution plans and participant-directed investments; and the amount and
timing of income from the Company's investment portfolio.
The Company's future operating results are also dependent upon the level of
operating expenses, which are subject to fluctuation for the following or other
reasons: changes in the level of advertising expenses in response to market
conditions or other factors; variations in the level of compensation expense
incurred by the Company, including performance-based compensation based on the
Company's financial results, as well as changes in response to the size of the
total employee population, competitive factors, or other reasons; expenses and
capital costs, including depreciation, amortization and other non-cash charges,
incurred by the Company to maintain its administrative and service
infrastructure; and unanticipated costs that may be incurred by the Company from
time to time to protect investor accounts and client goodwill.
The Company's revenues are substantially dependent on revenues from the
Funds, which could be adversely affected if the independent directors of one or
more of the Funds determined to terminate or renegotiate the terms of one or
more investment management agreements.
The Company's business is also subject to substantial governmental
regulation, and changes in legal, regulatory, accounting, tax, and compliance
requirements may have a substantial effect on the Company's business and results
of operations, including but not limited to effects on the level of costs
incurred by the Company and effects on investor interest in mutual funds in
general or in particular classes of mutual funds.
<PAGE>
Part II. Other Information
Items 4. Submission of Matters to a Vote of Security Holders During First
Quarter of the Year Ended December 31, 2000
At the annual meeting of Class B shareholder held March 7, 2000, the
following matters were unanimously approved: the selection of Tait, Weller &
Baker as the independent accountants of the Company and the election of Robert
D. Anderson, Bassett S. Winmill, Charles A. Carroll, Mark C. Jones, Edward G.
Webb, Jr. and Thomas B. Winmill as directors of the Company.
<PAGE>
MANAGEMENT'S REPRESENTATION
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the period.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WINMILL & CO. INCORPORATED
Dated: May 15, 2000 By:/s/ Joseph Leung
Joseph Leung
Treasurer, Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the date indicated.
Dated: May 15, 2000 /s/ Bassett S. Winmill
Bassett S. Winmill
Chairman of the Board,
Director
Dated: May 15, 2000 /s/ Robert D. Anderson
Robert D. Anderson
Vice Chairman, Director
Dated: May 15, 2000 /s/ Thomas B. Winmill
Thomas B. Winmill, Esq.
President,
General Counsel, Director
Dated: May 15, 2000 /s/ Charles A. Carroll
Charles A. Carroll, Director
Dated: May 15, 2000 /s/ Edward G. Webb, Jr.
Edward G. Webb, Jr., Director
Dated: May 15, 2000 /s/ Mark C. Jones
Mark C. Jones, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Winmill & Co. Incorporated Form 10-Q and is qualified in its entirety by
references to such Form 10-Q.
</LEGEND>
<CIK> 0000052234
<NAME> Winmill & Co. Incorporated
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 1,589,743
<SECURITIES> 3,462,329
<RECEIVABLES> 303,372
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<CURRENT-ASSETS> 5,644,113
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<DEPRECIATION> 808,800
<TOTAL-ASSETS> 8,112,548
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0
0
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