10-Q 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 001-12212 DRUMMOND FINANCIAL CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 95-4426690 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17 DAME STREET, DUBLIN 2 IRELAND (Address of principal executive offices) (3531) 679-1688 (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 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 ----- ----- Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: Class Outstanding at February 14, 2002 ----- ------------------------------------ Common Stock, $0.01 2,718,600 par value FORWARD-LOOKING STATEMENTS Statements in this report, to the extent that they are not based on historical events, constitute forward-looking statements. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or other business plans. Investors are cautioned that forward-looking statements are subject to an inherent risk that actual results may vary materially from those described herein. Factors that may result in such variance, in addition to those accompanying the forward-looking statements, include changes in interest rates, prices, and other economic conditions; actions by competitors; natural phenomena; actions by government authorities; uncertainties associated with legal proceedings; technological development; future decisions by management in response to changing conditions; and misjudgments in the course of preparing forward-looking statements. PART I. FINANCIAL INFORMATION ---------------------- ITEM 1. FINANCIAL STATEMENTS DRUMMOND FINANCIAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED) DRUMMOND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. DRUMMOND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these financial statements. DRUMMOND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. DRUMMOND FINANCIAL CORPORATION STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. DRUMMOND FINANCIAL CORPORATION STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. DRUMMOND FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The accompanying financial statements of Drummond Financial Corporation (the "Corporation") are unaudited. However, in the opinion of management, they include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Corporation for the specified periods. All adjustments made during the six months and three months ended December 31, 2001, respectively, were of a normal, recurring nature. The amounts presented for the six months and three months ended December 31, 2001, respectively, are not necessarily indicative of the results of operations for a full year. Additional information is contained in the audited consolidated financial statements and accompanying notes included in the Corporation's annual report on Form 10-K for the fiscal year ended June 30, 2001, and should be read in conjunction with such annual report. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. NOTE 2. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is calculated by dividing the net income or loss available to common shareholders by the weighted average number of common shares outstanding during the six months and three months ended December 31, 2001 and 2000, respectively. The weighted average number of shares outstanding was 2,718,600 for the six months and three months ended December 31, 2001 and 2000, respectively. PART I. FINANCIAL INFORMATION --------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations of Drummond Financial Corporation (the "Corporation") for the six months and three months ended December 31, 2001, respectively, should be read in conjunction with the consolidated financial statements and related notes included elsewhere herein. RESULTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 2001 Revenues for the six months ended December 31, 2001 increased to $1.4 million from $0.5 million for the comparative period of 2000. Revenues from interest decreased to $0.3 million for the six months ended December 31, 2001 from $0.5 million for the six months ended December 31, 2000. Gain on securities was $0.9 million for the current period compared to a loss of $0.2 million for the comparative period in 2000. Revenues from dividends and other activities decreased to $175,000 for the six months ended December 31, 2000 from $220,000 for the six months ended December 31, 2000. Costs and expenses were $1.1 million for the six months ended December 31, 2001 and 2000. General and administrative expenses decreased slightly to $447,000 for the six months ended December 31, 2001 compared to $465,000 for the comparative period in 2000. Interest expense increased slightly to $622,000 for the six months ended December 31, 2001 from $606,000 for the six months ended December 31, 2000. No income tax provision was recognized for the six months ended December 31, 2001 and 2000, respectively, except for the payment of a minimum tax of $1,000 in the fiscal period 2000. The Corporation has deferred tax benefits with respect to net operating loss carry-forwards which have not been recognized as there is no assurance that they will be realized. For the six months ended December 31, 2001, the Corporation reported net income of $1.9 million, or $0.65 per share, compared to a net loss of $0.6 million, or $0.27 per share, for the six months ended December 31, 2000. The Company recognized an extraordinary gain on debt extinguishment of $1.6 million (or $0.59 per share) in the current period. RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 2001 Revenues for the three months ended December 31, 2001 increased to $1.4 million from $0.5 million for the comparative period of 2000. Revenues from interest decreased to $0.2 million for the three months ended December 31, 2001 from $0.3 million for the three months ended December 31, 2000. Gain on securities was $1.1 million the current period compared to $76,000 for the comparative period in 2000. Revenues from dividends and other activities decreased to $75,000 for the three months ended December 31, 2001 from $127,000 for the three months ended December 31, 2000. Costs and expenses for the three months ended December 31, 2001 decreased slightly to $538,000 from $554,000 for the three months ended December 31, 2000. General and administrative expenses decreased to $240,000 for the three months ended December 31, 2001 compared to $250,000 for the comparative period in 2000. Interest expense was $0.3 million for the three months ended December 31, 2001 and 2000, respectively. For the three months ended December 31, 2001, the Corporation reported net income of $2.4 million, or $0.84 per share, compared to a net loss of $0.1 million, or $0.06 per share, for the three months ended December 31, 2000. The Company recognized an extraordinary gain on debt extinguishment of $1.5 million (or $0.56 per share) in the current quarter. LIQUIDITY AND CAPITAL RESOURCES The Corporation's cash and cash equivalents at December 31, 2001 were $2.6 million, a decrease of $3.2 million from June 30, 2001. Cash provided by operating activities for the six months ended December 31, 2001 was $0.2 million, compared to cash used in operating activities of $0.4 million for the six months ended December 31, 2000. An increase in receivables used cash of $73,000 in the six months ended December 31, 2001 compared to $0.2 million in the six months ended December 31, 2000. Investing activities used cash of $0.3 million in the six months ended December 31, 2001 compared to $2.4 million in the six months ended December 31, 2000. Financing activities used cash of $3.1 million in the six months ended December 31, 2001 representing the partial repayment of debt and had no effect on cash flows in the six months ended December 31, 2000. The Corporation anticipates that its cash, investments on hand and interest income will be sufficient to service the Corporation's debt costs and cover the day-to-day general and administrative expenses of the Corporation during the short-term. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to the Corporation's annual report on Form 10-K for the year ended June 30, 2001 for information concerning market risk. PART II. OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS Reference is made to the Corporation's annual report on Form 10-K for the year ended June 30, 2001 for information concerning certain legal proceedings. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS None. (b) REPORTS ON FORM 8-K None. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 14, 2002 DRUMMOND FINANCIAL CORPORATION By: /s/ Michael J. Smith ----------------------------- Michael J. Smith, President, Chief Executive Officer and Chief Financial Officer

DRUMMOND FINANCIAL CORP 10-Q