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 June 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, $1.00
par value, as of June 30, 1995: 8,246,175
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION: PAGE NO.
Item 1. Financial Statements
Consolidated Balance Sheets - 1
June 30, 1995 and December 31, 1994
Consolidated Statements of Operations - 2
For the Three Months and Nine Months Ended
June 30, 1995 and 1994
Consolidated Statements of Changes in Stockholders' 3
Equity (Deficit) -
For the Three Months Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows - 4
For the Three Months Ended June 30, 1995 and 1994.
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 8
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OLD STONE CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands)
March 31, December 31,
1996 1995
Unaudited
ASSETS
<S> <C> <C>
Cash $ 290 $ 272
Short-term investments 380 424
Loans (net of reserve for loan losses of $114 in
1996 and 1995) 75 76
Accrued interest receivable 7 7
Other assets 74 286
------------ -------------
TOTAL ASSETS $ 826 $ 1,065
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Other liabilities 1,200 1,369
------------ -------------
TOTAL LIABILITIES 1,200 1,369
REDEEMABLE PREFERRED STOCK
Preferred stock, series B, $1.00 par value;
1,046,914 shares authorized, issued and outstanding
(Liquidation value $20,938) 19,957 19,908
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 92,029 92,077
Surplus 30,000 30,000
Accumulated deficit ( 149,517) ( 149,446)
Treasury stock, at cost; 54,000 shares in 1996
and 1995 ( 1,143) ( 1,143)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ( 20,331) ( 20,212)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 826 $ 1,065
=========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
($ in Thousands except for per share data)
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
INCOME:
Interest income $ 7 $ 13
Securities gains, net 11 8
Other income 39 32
------------ -------------
TOTAL INCOME 57 53
------------ -------------
EXPENSES:
Salaries and employee benefits 40 39
Net occupancy expense 7 9
Equipment expense, including depreciation 2 3
Other expenses 79 73
------------ -------------
TOTAL EXPENSES 128 124
------------ -------------
Income (loss) from continuing operations before
income taxes ( 71) ( 71)
Income taxes -0- -0-
------------ -------------
NET (LOSS) ($ 71) ($ 71)
========== ===========
NET (LOSS) AVAILABLE FOR COMMON
STOCKHOLDERS ($ 748) ($ 748)
(LOSS) PER SHARE: ( .09) ( .09)
AVERAGE SHARES OUTSTANDING 8,246,175 8,246,175
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 and 1995
($ in Thousands)
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Operating activities:
Net (loss) ($ 71) ($ 71)
Adjustments to reconcile net (loss) to net cash provided (used) by operating
activities:
(Increase) in interest receivable -0- ( 1)
Other, net 44 ( 17)
----------- -------------
Net cash provided (used) by operating activities ( 27) ( 89)
Investing activities:
Net decrease in investments 44 81
Net (increase) decrease in loans 1 1
------------ ------------
Net cash provided by investing activities 45 82
Increase (decrease) in cash 18 ( 7)
Cash at beginning of period 272 32
------------ -------------
Cash at end of period $ 290 $ 25
=========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
Three Months Ended March 31, 1996 and 1995
($ in Thousands)
(Unaudited)
Additional
Common Paid-In Accumulated Treasury
Stock Capital Surplus (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994 $ 8,300 $ 92,274 $ 30,000 ($ 148,975) ($ 1,143) ($ 19,544)
Net (loss) ( 71) ( 71)
Accretion of discount on
preferred stock series B ( 49) ( 49)
-----------------------------------------------------------------------------
March 31, 1995 $ 8,300 $ 92,225 $ 30,000 ($ 149,046) ($ 1,143) ($19,664)
=============================================================================
December 31, 1995 $ 8,300 $ 92,077 $ 30,000 ($149,446) ($ 1,143) ($20,212)
Net (loss) ( 71) ( 71)
Accretion of discount on
preferred stock series B ( 48) ( 48)
-----------------------------------------------------------------------------
March 31, 1996 $ 8,300 $ 92,029 $ 30,000 ($ 149,517) ($ 1,143) ($20,331)
=============================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
OLD STONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 1996 and 1995
(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 March 31, 1996 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 three months ended March 31, 1996
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. 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, 1995. All material
intercompany transactions and balances have been eliminated. Certain previously
reported amounts have been restated to conform with the current presentation.
<PAGE>
<TABLE>
<CAPTION>
OLD STONE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
($ 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
March 31, March 31,
1996 1995
<S> <C> <C> <C> <C>
PRIMARY (LOSS):
Net (loss) ($ 71) ($ 71)
Deduct accretion of discount on series B preferred
stock and preferred dividends 677 677
------------ -------------
Net (loss) applicable to common stock ($ 748) ($ 748)
========== ===========
ALLOCATION OF PRIMARY (LOSS):
Income (loss) from continued operations ($ 71) ($ 71)
Deduct accretion of discount on series B preferred
stock and preferred dividends 677 677
------------ -------------
TOTAL NET (LOSS) ($ 748) ($ 748)
========== ============
AVERAGE SHARES OUTSTANDING 8,246,175 8,246,175
============ ============
PRIMARY (LOSS) PER COMMON SHARE: ($ .09) ($ .09)
========== ==========
</TABLE>
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 March 31, 1996, cumulative preferred
dividends $11,306,671 ($10.80 per share) had not been declared or paid.
<PAGE>
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 $27,058 for the three month
period ended March 31, 1996, compared to a loss of $29,586 for the three month
period ended March 31, 1995.
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 March 31, 1996, the Corporation had $.8 million in assets, $1.2 million in
total liabilities, $19.9 million in redeemable preferred stock, and a
stockholders' deficit of ($20.3) million, compared to $1.1 million in assets,
$1.4 million in total liabilities, $19.9 million in redeemable preferred stock
and stockholders' deficit of ($20.2) million at December 31, 1995.
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 $4,000 for the three month period ended March 31, 1996 as
compared to the same period in 1995. This increase was primarily attributable to
an increase in other income of $7,000 in the 1996 period over the comparable
period in 1995 offset by a decrease in interest income of $5,000.
Interest income was $7,000 for the three month period ended March 31, 1996,
compared to $13,000 for the three month period ended March 31, 1995. Other
income was $39,000 for the three month period ended March 31, 1996, compared to
$32,000 for the three month period ended March 31, 1995. The increase was
primarily due to higher fee income generated by Old Stone Securities Company.
Total expenses increased $4,000 for the three month period ended March 31, 1996
as compared to the three month period ended March 31, 1995. The increase was
primarily attributable to increases in other expenses of $6,000, over the
comparable period in 1995.
<PAGE>
The Corporation's primary operating expenses have been legal and accounting
expenses as well as the operating expenses of Old Stone Securities Company.
Operating expenses (including salaries and benefits) were $128,000 for the three
month period ended March 31, 1996, compared to $124,000 for the same period in
1995.
As a result of the foregoing, the Corporation reported net loss of $71,000 for
the three month period ended March 31, 1996, compared to $71,000 for the same
period in 1995.
The loss per share available for common stockholders was ($.09) for the three
month period ended March 31, 1996 after the deduction of preferred dividends of
$677,000. The loss per share available for common stockholders was ($.09) for
the three month period ended March 31, 1995 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.
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 March 31, 1996 was
$11,306,671.
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: May , 1996
s/Geraldine Nelson
Geraldine Nelson
President and Treasurer
(Chief Executive and Chief
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 290,000
<RECEIVABLES> 7,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 380,000
<PP&E> 11,300
<TOTAL-ASSETS> 826,000
<SHORT-TERM> 0
<PAYABLES> 1,200,000
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
19,957,000
0
<COMMON> 8,300,000
<OTHER-SE> (28,631,000)
<TOTAL-LIABILITY-AND-EQUITY> 826,000
<TRADING-REVENUE> 11,000
<INTEREST-DIVIDENDS> 7,000
<COMMISSIONS> 39,000
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 40,000
<INCOME-PRETAX> (71,000)
<INCOME-PRE-EXTRAORDINARY> (71,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
