ProShares UltraShort Con... (AMEX:SCC)
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Security Capital Corporation (AMEX: SCC) (the "Company")
announced today results for the third quarter and nine months ended
September 30, 2005. Dollar amounts are in thousands, except per share
amounts.
Revenues for the third quarter of 2005 increased 19% to $39,826
compared to $33,446 reported in the third quarter of 2004. Revenues in
the Employer Cost Containment and Health Services segment for the
third quarter of 2005 increased 17% to $35,897 compared to $30,560
reported in the third quarter of 2004 due to the March 31, 2005
acquisition of Caronia Corporation, new customers obtained in 2005 and
the full-year effect of the strong customer growth in 2004. Revenues
in our Educational Services segment for the third quarter of 2005
increased 36% to $3,929 compared to $2,886 reported in the third
quarter of 2004 due to increasing royalty fees and franchise fees.
Royalty fees continue to increase from enrollment increases at
existing schools and the royalties from newly opened schools.
Franchise fees have increased due to the opening of seven schools
during the third quarter of 2005 compared to three in the third
quarter of 2004. For the year, Primrose has opened 18 new schools and
is on target to open 24 schools in 2005. This compares to seven new
schools opened for all of 2004.
Operating income for the third quarter of 2005 increased 10% to
$4,116 compared to $3,750 in the third quarter of 2004. The increase
was driven primarily by operating income growth in the Educational
Services segment of 60% due to the increase in revenue noted above.
Operating income in the third quarter of 2005 for the Employer Cost
Containment and Health Services segment declined 16% due to a one-time
compensation charge of $720 relating to the purchase of WC Holdings,
Inc. ("WC") employee stock options.
Income from continuing operations for the third quarter of 2005
increased 57% to $1,866 compared to $1,185 in last year's third
quarter due to the improvement in operating income and lower interest
expense, primarily due to the repayment of a $30,000 high-coupon,
Senior Subordinated Promissory Note (the "Note") in September 2004.
Income available to common stockholders for the third quarter of
2005 was $1,866, or $0.28 per basic share and $0.26 per diluted share,
compared to loss attributable to common stockholders of $1,799, or
$0.28 per basic share and $0.29 per diluted share, for the quarter
ended September 30, 2004. The loss attributable to common stockholders
for the quarter ended September 30, 2004 included a loss from
discontinued operations of $1,960, or $0.30 per basic and diluted
share, and preferred stock accretion of $1,024, or $0.16 per basic and
diluted share. The Company's 2005 financial statements no longer
include the results of discontinued operations due to their sale
during 2004 or preferred stock accretion due to the redemption of all
outstanding preferred stock in 2004.
During the quarter, the Company acquired 979.88 shares of WC stock
directly from the minority stockholders of WC for total cash
consideration of $3,341. In addition, certain option holders of WC
exercised options to purchase shares of WC and, as a result, an
additional 408.41 shares of WC were issued. The net effect of the
Company's purchase of 979.88 shares of WC and the issuance of 408.41
shares of WC to the option holders increased the Company's ownership
interest in WC from 80% to 84.4%.
Revenues for the nine months ended September 30, 2005 increased
19% to $114,580 compared to $96,635 reported in the nine months ended
September 30, 2004. Revenues in the Employer Cost Containment and
Health Services segment for the nine months ended September 30, 2005
increased 18% to $103,960 compared to $88,252 reported for the nine
months ended September 30, 2004. Revenues in our Educational Services
segment for the nine months ended September 30, 2005 increased 27% to
$10,620 compared to $8,383 reported for the nine months ended
September 30, 2004.
Operating income for the nine months ended September 30, 2005
increased 9% to $12,468 compared to $11,416 in the nine months ended
September 30, 2004. Operating income for the nine months ended
September 30, 2005 includes the one-time compensation charge of $720
noted above and expenses of $2,100 for the internal independent
investigation overseen by the Company's Audit Committee from November
2004 to March 2005 (the "Investigation").
Income from continuing operations for the nine months ended
September 30, 2005 increased 106% to $7,282 compared to $3,536 for the
nine months ended September 30, 2004 due to the improvements in
operating income noted above and lower interest expense due to the
repayment of the Note. Additionally, income from continuing operations
for the nine months ended September 30, 2005 benefited from the
reversal in the second quarter of 2005 of previously provided tax
reserves of $1,684 as management determined that these reserves were
no longer necessary. The reversal of the reserves was recorded as a
reduction of income tax expense, resulting in an effective tax rate
for the nine months ended September 30, 2005 of 25.0% compared to
40.8% for the nine months ended September 30, 2004. The reversal of
these reserves did not impact cash flows for the periods.
Income available to common stockholders for the nine months ended
September 30, 2005 was $7,282, or $1.09 per basic share and $1.05 per
diluted share, compared to loss attributable to common stockholders of
$518, or $0.08 per basic share and $0.12 per diluted share, for the
nine months ended September 30, 2004. The loss attributable to common
stockholders for the nine months ended September 30, 2004 included a
loss from discontinued operations of $2,779, or $0.43 per basic share
and $0.42 per diluted share, and preferred stock accretion of $1,275,
or $0.20 per basic and diluted share.
Cash used in operations was $6,333 for the nine months ended
September 30, 2005 compared to cash provided by operations of $7,721
during the nine months ended September 30, 2004. Contributing to this
decrease was the timing of cash receipts of advance payments on
certain customer contracts and collections of accounts receivables.
Certain contracts require customers to make advance payments; however,
due to the timing of invoicing, the receipt of certain advance
payments was delayed. The collection of accounts receivable was also
lower through September 30, 2005 compared to September 30, 2004 due to
an increase in the aging of our accounts receivable portfolio. Also
contributing to the decrease in cash flows were significant cash
payments made during 2005 for the Investigation and our 2004 year-end
audit. These decreases were partially offset by higher net income.
Management continues to pursue the sale of the Company through a
formal sales process with the assistance of UBS Securities LLC.
Interest from potential buyers has been encouraging, and while the
expectation is that the formal sale process could be concluded during
the first quarter of 2006, no assurances can be given that the formal
sale process will result in the sale of the Company at an acceptable
price.
On October 31, 2005, Robert Bossart, former Chief Executive
Officer of WC and WC's wholly owned subsidiary, CompManagement Inc.
("CMI"), and Paul Miller, former Chief Financial Officer and General
Counsel of WC and CMI (collectively, the "Terminated Executives"),
filed a complaint against WC, CMI, CMI Management Company,
CompManagement Health Systems, Inc. and CompManagement Integrated
Disability Services, Inc. (collectively, the "CMI Companies"),
claiming that the Terminated Executives were not terminated for "just
cause" by the CMI Companies. Each of the Terminated Executives has
filed a single claim for breach of contract of his employment
agreement seeking unspecified damages. As previously disclosed, the
Terminated Executives were terminated for cause after the
Investigation found, among other things, that the Terminated
Executives owned, operated and controlled various entities that had
certain unauthorized and undisclosed transactional, operational and
financial relationships with the CMI Companies, resulting in conflicts
of interest. The Company believes that the Terminated Executives'
claims are without merit and intends to vigorously contest this
matter. Also as previously disclosed, the Company's Board of Directors
and Audit Committee continue to assess whether to take additional
actions with respect to the Terminated Executives.
The Company's two reportable segments are employer cost
containment and health services, and educational services. The
employer cost containment and health services segment consists of WC
Holdings, Inc., which provides services to employers and their
employees primarily relating to industrial health and safety,
industrial medical care, workers' compensation insurance and the
direct and indirect costs associated therewith. The educational
segment consists of Primrose Holdings, Inc., which is engaged in the
franchising of educational child care centers, with related activities
in real estate consulting and site selection services in the
Southeast, Southwest and Midwest.
This release 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: future legislative
changes which could impact the laws governing workers' compensation
and medical malpractice insurance in the various states in which the
Company's employer cost containment and health services segment
operates, the Company's ability to enhance its existing services and
successfully introduce and market new services, new service
developments by the Company's competitors, market acceptance of new
services of both the Company and its competitors, competitive
pressures on prices, the ability to attract and retain qualified
personnel, interest rates, the Company's ability to attract qualified
franchisees or access to financing for these franchisees, the effects
on the Company if a lender to one of the Company's subsidiaries
utilizes remedies available to it upon an event of default on loans at
one of the Company's subsidiaries and decisions relative to and the
outcome of any such decisions regarding strategic alternatives with
respect to maximizing stockholder value and enhancing stockholder
liquidity.