FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For Quarter Ended September 30, 1995
or
[ ] Transition Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period of
to
Commission File Number 0-8016
OLD STONE CORPORATION
(Exact name of registrant as specified in its charter)
Rhode Island 05-0341273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Four Davol Square, Suite 320
Providence, Rhode Island 02903
(Address of Principal Executive Offices) Zip Code
(401) 521-0065
(Registrant's Telephone Number, Including Area Code)
*Indicate by check mark whether the registrant: (1) has
filed all reports required to be
filed by Section 13 or 15(d) of the Securities and 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:
The number of shares outstanding of the registrant's Common
Stock, $1.00 par value, as
of September 30, 1995: 8,246,175
INDEX
PART I - FINANCIAL INFORMATION: PAGE NO.
Item 1. Financial Statements
Consolidated Balance Sheets -
1
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations -
2
For the Three Months and Nine Months Ended
September 30, 1995 and 1994
Consolidated Statements of Changes in Stockholders'
3
Equity (Deficit) -
For the Nine Months Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows -
4
For the Nine Months Ended September 30, 1995 and 1994.
Notes to Financial Statements
5
Item 2. Management's Discussion and Analysis of
7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
8
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OLD STONE CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands)
September 30, December 31,
1995 1994
Unaudited
ASSETS
Cash $29 $32
Short-term investments 468 797
Loans (net of reserve for loan losses of $112 in
1995 and 1994) 115 117
Accrued interest receivable 7 6
Other assets 621 534
TOTAL ASSETS $1,240 $1,486
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Other liabilities $ 1,283 $ 1,319
TOTAL LIABILITIES 1,283 1,319
REDEEMABLE PREFERRED STOCK
Preferred stock, series B, $1.00 par value;
1,046,914 shares authorized, issued and outstanding
(Liquidation value $20,938) 19,858 19,711
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $1.00 par value; 25,000,000 shares
authorized; 8,300,175 shares issued in 1995
and 1994 8,300 8,300
Additional paid-in capital 92,128 92,274
Surplus 30,000 30,000
Accumulated deficit ( 149,186) ( 148,975)
Treasury stock, at cost; 54,000 shares in 1995
and 1994 ( 1,143) ( 1,143)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)( 19,901) ( 19,544)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $1,240 $1,486
The accompanying notes are an integral part of the consolidated
financial statements.
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Thousands except for per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
INCOME:
Interest income $ 8 $ 12 $ 33 $ 34
Securities gains, net 14 12 31 36
Other income 58 38 143 157
TOTAL INCOME 80 62 207 227
EXPENSES:
Salaries and employee benefits 39 54 123
165
Net occupancy expense 7 10 24 25
Equipment expense, including depreciation 1 8
7 22
Other expenses 126 106 263 249
TOTAL EXPENSES 173 178 417 461
(Loss) from continuing operations
before income taxes ( 93) ( 116) ( 210) ( 234)
Income taxes --- -0- 1 1
NET (LOSS) ($ 93) ($116) ($ 211) ($ 235)
NET (LOSS) AVAILABLE FOR
COMMON STOCKHOLDERS ($770) ($793) ($2,242) ($2,266)
AVERAGE SHARES OUTSTANDING 8,246,175 8,246,175
8,246,175 8,246,175
(LOSS) PER SHARE ($ .09) ($ .10) ($ .27) ($
.27)
The accompanying notes are an integral part of the consolidated
financial statements.
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1995 and 1994
($ in Thousands)
(Unaudited)
1995 1994
Operating activities:
Net (loss) ($211) ($235)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
(Increase) in interest receivable ( 1) ( 2)
Other, net ( 123) ( 45)
Net cash provided (used) by operating activities ( 335)
( 282)
Investing activities:
Net decrease in investments 329 332
Net (increase) decrease in loans 3 4
Net cash provided by investing activities 332
336
Increase (decrease) in cash ( 3) 54
Cash at beginning of period 32 18
Cash at end of period $ 29 $ 72
The accompanying notes are an integral part of the consolidated
financial statements.
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
Nine Months Ended September 30, 1995 and 1994
($ in Thousands)
(Unaudited)
Additional
Common Paid-In
Accumulated Treasury
Stock Capital
Surplus (Deficit) Stock Total
December 31, 1993 $ 8,300 $ 92,470 $ 30,000
($148,595) ($1,143) ($18,968)
Net (loss) (235)
(235)
Accretion of discount on
preferred stock, series B ( 147)
(147)
September 30, 1994 $ 8,300 $92,323 $30,000
($148,830) ($1,143) ($19,350)
December 31, 1994 $ 8,300 $92,274 $30,000
($148,975) ($1,143) ($19,544)
Net (loss) ( 211)
( 211)
Accretion of discount on
preferred stock, series B ( 146)
( 146)
September 30, 1995 $ 8,300 $92,128 $30,000
($149,186) ($1,143) ($19,901)
The accompanying notes are an integral part of the consolidated
financial statements.
OLD STONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES:
COMPANY DESCRIPTION AND BASIS OF PRESENTATION
Until January 28, 1993, Old Stone Corporation (the "Company" or
"OSC") was a unitary savings and loan holding company which
conducted substantially all of its business primarily through its
ownership of Old Stone Bank, a Federal Savings Bank and its
subsidiaries (the "Bank" or "Old Stone"). On January 29, 1993,
the Office of Thrift Supervision of the United States Department
of the Treasury (the "OTS") placed the Bank into receivership due
to the Bank being critically undercapitalized. The OTS created a
new institution, Old Stone Federal Savings Bank ("Old Stone
Federal") to assume all deposits and certain assets and
liabilities of Old Stone. The Resolution Trust Corporation (the
"RTC") was appointed Receiver to handle all matters related to
Old Stone and as Conservator of Old Stone Federal.
As a result of the receivership of the Bank, the Company has
undergone material changes in the nature of its business and is
no longer operating as a unitary savings and loan holding
company. As of September 30, 1995 the Company's business
activities included its only surviving subsidiary, Old Stone
Securities Company, a registered securities broker-dealer which
provides brokerage services to retail and institutional clients.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included
and operating results for the nine months ended September 30,
1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and
notes thereto included in the Old Stone Corporation's Annual
Report on Form 10-K for the year ended December 31, 1994. All
material intercompany transactions and balances have been
eliminated. Certain previously reported amounts have been
restated to conform with the current presentation.
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1995 and 1994
($ in Thousands except for per share data)
(Unaudited)
NOTE 2 - (LOSS) PER SHARE
The calculation of loss per share is as follows ($ in thousands,
except for per share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
PRIMARY (LOSS):
Net (loss) ($ 93) ($ 116)($ 211)($ 235)
Deduct accretion of discount on
series B preferred stock and
preferred dividends 677 677 2,031 2,031
Net (loss) applicable to common stock($ 770)($ 793)($ 2,242)
($ 2,266)
ALLOCATION OF PRIMARY (LOSS):
(Loss) from continued operations($ 93) ($ 116)($ 211) ($
235)
Deduct accretion of discount on
series B preferred stock
and preferred dividends 677 677 2,031 2,031
TOTAL NET (LOSS) ($ 770) ($ 793) ($ 2,242)($2,266)
Average shares outstanding8,246,1758,246,1758,246,1758,246,175
PRIMARY (LOSS) PER
COMMON SHARE ($ .09)($ .10)$ .27)
($ .27)
NOTE 3 - REDEEMABLE PREFERRED STOCK:
On October 6, 1991, the annual dividend of $2.40 per share of the
Preferred Series B stock was suspended. As of September 30,
1995, cumulative preferred dividends of $10,050,374 ($9.60 per
share) had not been declared or paid.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Current Operations
As a result of the Bank Closing, the Corporation's present
business activities include its only surviving significant
subsidiary, Old Stone Securities Company, a registered securities
broker-dealer which provides brokerage services to retail and
institutional clients.
Old Stone Securities' loss before income taxes was ($43,000)
for the nine month period ended September 30, 1995, compared to a
loss of ($112,000) for the nine month period ended September 30,
1994.
Management has invested, and intends in the future to invest, the
Corporation's assets on a short-term basis. While the
Corporation's Board of Directors has considered selling Old Stone
Securities, the Board has determined not to do so at the present
time.
Liquidity and Capital Resources
At September 30, 1995, the Corporation had $1.2 million in
assets, $1.3 million in total liabilities, $19.8 million in
redeemable preferred stock, and a stockholders' deficit of
($19.7) million, compared to $1.5 million in assets, $1.3 million
in total liabilities, $19.7 million in redeemable preferred stock
and stockholders' deficit of ($19.5) million at December 31,
1994.
Despite its negative net worth position, the Corporation is not
insolvent under Rhode Island law since it is able to pay its
debts as they become due in the usual course of business. The
Corporation is considering various options with respect to its
financial position during the fourth quarter.
The Corporation's assets are currently being invested short-term,
and expenses have been reduced to a level that management
believes is commensurate with the Corporation's current
activities pending resolution of any potential claims.
Results of Operations
Total income increased $18,000 for the three month period ended
September 30, 1995 as compared to the same period in 1994. This
increase was primarily attributable to an increase in securities
gains of $2,000, and an increase in other income of $20,000 in
the 1995 period over the comparable period in 1994. Total income
year to date decreased by $20,000 as compared to the same period
in 1994. The decrease was primarily attributable to reductions
in other income of $14,000 and a reduction in securities gains of
$5,000 in the 1995 period over the comparable period in 1994.
The decrease in other income is due primarily to a lower fee
income generated by Old Stone Securities.
Interest income was $8,000 and $12,000 respectively, for the
three month periods ended September 30, 1995 and 1994. Other
income was $58,000 for the three month period ended September 30,
1995, compared to $38,000 for the three month period ended
September 30, 1994.
Total expenses decreased $5,000 for the three month period ended
September 30, 1995 as compared to the three month period ended
September 30, 1994. The decrease was primarily attributable to a
reduction in salaries and benefits of $15,000 over the comparable
period in 1994 offset by an increase in all other expenses of
$10,000.
Total expenses year to date decreased $44,000 as compared to the
same period in 1994. The decrease was primarily attributable to
a decrease in salaries and benefits of $42,000.
The Corporation's primary operating expenses have been insurance,
legal and accounting fees as well as the operating expenses of
OSSC. Operating expenses (including salaries and benefits) were
$173,000 for the three month period ended September 30, 1995,
compared to $178,000 for the same period in 1994. Operating
expenses year to date were $417,000 compared to $461,000 for the
same period in 1994.
As a result of the foregoing, the Corporation reported a net loss
of ($93,000) for the three month period ended September 30, 1995
compared to a net loss of ($116,000) for the same period in 1994.
The loss per share available for common stockholders was ($.09)
for the three month period ended September 30, 1995 after the
deduction of preferred dividends of $677,000. The loss per share
available for common stockholders was ($.10) for the three month
period ended September 30, 1994 after the deduction of preferred
dividends of $677,000. No preferred or common dividends have
been paid since the second quarter of 1991 and the Corporation
does not expect to pay dividends in the foreseeable future.
Further, the Corporation is prohibited from paying dividends on
the Common Stock until the aggregate deficiency on the preferred
stock dividends is paid in full. Total loss per share year to
date, as well as for the same period in 1994, was ($.27).
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Corporation discontinued dividends to holders of its
Cumulative Voting Convertible Preferred Stock, Series B (the
Preferred Stock), during 1991 and does not expect to pay any
dividends on such stock for the foreseeable future. As a result
of the failure to pay dividends on the Preferred Stock for more
than four quarters, the holders of the Preferred Stock
collectively are entitled to elect a number of directors of the
Corporation constituting twenty percent (20%) of the total number
of directors of the Corporation at the next meeting of
stockholders at which directors are to be elected. Until the
aggregate deficiency is declared and fully paid on the Preferred
Stock, the Corporation may not declare any dividends or make any
other distributions on or redeem the Common Stock. The total
amount of the arrearage as of September 30, 1995 was $10,050,373.
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.
Date: November , 1995
/s/Geraldine Nelson
Geraldine Nelson
President and Treasurer
(Chief Executive and Chief
Accounting Officer)
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 29,000
<RECEIVABLES> 15,000
<SECURITIES-RESALE> 0
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<INSTRUMENTS-OWNED> 468,000
<PP&E> 13,000
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<PAYABLES> 1,283,000
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19,858,000
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<TOTAL-LIABILITY-AND-EQUITY> 1,240,000
<TRADING-REVENUE> 31,000
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<COMPENSATION> 123,000
<INCOME-PRETAX> (210,000)
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