FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-7265
AMBASE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
95-2962743
(I.R.S. Employer Identification No.)
GREENWICH OFFICE PARK, BUILDING 2, 51 WEAVER STREET
GREENWICH, CONNECTICUT 06831-5155
(Address of principal executive offices) (Zip Code)
(203) 532-2000
(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 and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
At March 31, 1996 there were 44,533,519 shares of registrant's common stock,
$0.01 par value per share, outstanding, excluding 126,488 treasury shares.
<PAGE>
AMBASE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
CROSS REFERENCE SHEET FOR
PARTS I AND II PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K *
* Not Applicable.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMBASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED MARCH 31
(UNAUDITED)
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(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
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REVENUE:
Investment management fees $ 146 $ 114
OPERATING EXPENSES:
Compensation and benefits 485 493
Professional and outside services 124 151
Insurance 54 71
Occupancy 25 59
Other operating 59 35
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747 809
Operating loss (601) (695)
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Interest income, net 604 685
Minority interest (9) (7)
Other income - 54
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Income (loss) before income taxes (6) 37
Income tax benefit (expense) 7,548 (56)
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NET INCOME (LOSS) $ 7,542 $ (19)
================================================================================
PER SHARE DATA:
NET INCOME (LOSS) $ 0.17 $ -
================================================================================
AVERAGE SHARES OUTSTANDING 44,534 44,534
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
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AMBASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
1996 1995
(IN THOUSANDS) (UNAUDITED)
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ASSETS
Cash and cash equivalents (includes $2,588
and $550 of restricted cash) $ 8,036 $ 7,752
Investment securities:
Held to maturity (market value $48,547 and $40,086) 48,601 40,055
Available for sale, carried at fair value (cost $213) 31 69
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Total investment securities 48,632 40,124
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Investment management fees receivable 148 146
Receivable from Home Holdings, Inc. 14,526 17,183
Other assets 417 472
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TOTAL ASSETS $ 71,759 $ 65,677
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities $ 239 $ 690
Supplemental retirement plan 4,823 4,798
Postretirement welfare benefits 1,604 1,633
Other liabilities 3,578 3,516
Litigation and contingency reserves 11,656 12,149
Income tax reserves 80,536 81,082
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Total liabilities 102,436 103,868
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Minority interest 92 82
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Commitments and contingencies - -
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STOCKHOLDERS' EQUITY:
Common stock 447 447
Paid-in capital 547,712 547,712
Net unrealized losses on investment securities
- available for sale (182) (144)
Accumulated deficit (578,099) (585,641)
Treasury stock (647) (647)
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Total stockholders' equity (30,769) (38,273)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 71,759 $ 65,677
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
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AMBASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTER ENDED MARCH 31
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(IN THOUSANDS) 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,542 $ (19)
Adjustments to reconcile net income loss)
to net cash provided by (used for)
operations:
Other assets 55 34
Accounts payable and accrued liabilities (451) (436)
Litigation and contingency reserve uses (493) (2,490)
Income tax reserves, net (546) 5
Other, net (485) (1,204)
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Net cash provided by (used for) operating activities 5,622 (4,110)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of investment securities - held to maturity 16,000 42,625
Purchases of investment securities - held to maturity (23,996) (41,795)
Proceeds from Home Holdings, Inc. receivable 2,657 48
Other, net 1 -
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Net cash provided by (used for) investing activities (5,338) 878
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Net increase (decrease) in cash and cash equivalents 284 (3,232)
Cash and cash equivalents at beginning of period 7,752 9,038
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,036 $ 5,806
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The accompanying consolidated financial statements of AmBase Corporation and
subsidiaries (the "Company") are unaudited and subject to year-end adjustments.
All material intercompany transactions and balances have been eliminated. In the
opinion of management, the interim financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the Company's financial position and results of operations. Results for interim
periods are not necessarily indicative of results for the full year. Certain
reclassifications have been made to the 1995 consolidated financial statements
to conform with the 1996 presentation. The financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP").
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions, that it deems reasonable, that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from such estimates and assumptions.
In addition, while the accompanying consolidated financial statements have been
prepared on a going concern basis, circumstances exist which raise substantial
doubt about the ability of the Company to continue as a going concern. The
financial statements do not include adjustments to the carrying value of assets
and liabilities which might be necessary should the Company not continue in
operation. Substantial contingent and alleged liabilities exist against the
Company through various lawsuits and proceedings, see Part II - Item 1. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. In order to continue on a long-term basis, the Company must both
resolve its contingent and alleged liabilities by prevailing upon or settling
these claims for less than the amounts claimed and generate profitable
operations by acquiring existing operations and/or by developing new operations.
The Company continues to evaluate a number of business opportunities to acquire
operating subsidiaries, and is engaged in the management of its remaining assets
and liabilities, including the contingent and alleged tax and litigation
liabilities, as described in Part II - Item 1. The Company intends to
aggressively contest all pending and threatened litigation and contingencies, as
well as pursue all sources for contributions to settlements. The unaudited
interim financial statements presented herein should be read in conjunction with
the Company's consolidated financial statements filed in its Annual Report on
Form 10-K for the year ended December 31, 1995.
In November 1993, the Company acquired 51% of the issued and outstanding stock
of Augustine Asset Management, Inc. ("Augustine"), a Florida based investment
advisory firm. The Company's ownership percentage in Augustine has subsequently
increased to 66%, due to Augustine's repurchase of outstanding shares. Augustine
provides equity and fixed income money management services to both institutional
and private clients. Augustine currently has over $204 million of assets under
management. At the current time, the Company's only source of operating revenue
is investment management fees generated from the Company's majority ownership
interest in Augustine. The Company's main source of non-operating revenue is
interest income earned on investment securities and cash equivalents. The
Company's management expects that operating cash needs for the remainder of 1996
will be met principally by the Company's current financial resources, the
receipt of non-operating revenue consisting of interest income received on
investment securities and cash equivalents, and investment management fees.
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<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - LEGAL PROCEEDINGS
The Company has significant alleged tax liabilities and is a defendant in a
number of lawsuits and proceedings, the ultimate outcome of which could have a
material adverse effect on its financial condition and results of operations.
Because of the nature of the contingent and alleged liabilities described in
Part II - Item 1, and the inherent difficulty in predicting the outcome of the
litigation and governmental proceedings, management is unable to predict whether
the Company's recorded liabilities will be adequate or its resources sufficient
to satisfy its ultimate obligations. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. For a discussion of the alleged tax liabilities, lawsuits
and proceedings, see Part II - Item 1.
At March 31, 1996, the litigation and contingency reserves were $11,656,000. In
addition to the litigation and contingency reserves, the Company has a reserve
for income taxes of $80,536,000 at March 31, 1996. For a further discussion, see
Part II - Item 1 - Legal Proceedings, Disputes with Internal Revenue Service,
Withholding Taxes (Netherlands Antilles) and Fresh Start. Although the basis for
the calculation of the litigation and contingency reserves, and income tax
reserves are regularly reviewed by the Company's management and outside legal
counsel, the assessment of these reserves includes an exercise of judgment and
is a matter of opinion.
NOTE 3 - CASH AND CASH EQUIVALENTS
Highly liquid investments, consisting principally of funds held in short-term
money market accounts, are classified as cash equivalents. Included in cash and
cash equivalents at March 31, 1996 is $2,588,000 of funds held in escrow, to be
applied to the satisfaction of certain liabilities, and in connection with a
legal proceeding, which have been classified as restricted. Included in cash and
cash equivalents at December 31, 1995 is $550,000 of funds held in escrow in
connection with a legal proceeding, which have been classified as restricted.
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<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - INVESTMENT SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("Statement 115"), which requires investment securities to be
classified as Held to Maturity (only permitted for securities with a stated
maturity), Available for Sale or Trading Securities.
Investment securities - held to maturity, at March 31, 1996 and December 31,
1995, consist of U.S. Treasury Bills with original maturities of one year or
less and which are carried at amortized cost based upon the Company's intent and
ability to hold these investments to maturity.
Investment securities - available for sale, at March 31, 1996 and December 31,
1995, consist of investments in equity securities held for an indefinite period
and which are carried at fair value with net unrealized gains and losses
recorded directly in a separate component of stockholders' equity.
Investment securities, at March 31 and December 31, consist of the following:
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1996 1995
----------------------------- ------------------------------
COST OR COST OR
CARRYING AMORTIZED FAIR CARRYING AMORTIZED FAIR
(IN THOUSANDS) VALUE COST VALUE VALUE COST VALUE
- ------------------------------------------------------------------------------
Held to Maturity:
U.S. Treasury Bills
maturing within
one year $48,601 $ 48,601 $ 48,547 $40,055 $40,055 $40,086
Available for Sale:
Equity Securities 31 213 31 69 213 69
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$48,632 $ 48,814 $ 48,578 $40,124 $40,268 $40,155
================================================================================
The gross unrealized gains and losses on investment securities, at March 31 and
December 31, consist of the following:
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(IN THOUSANDS) 1996 1995
- ------------------------------------------------------------------------------
Held to Maturity:
Gross unrealized gains (losses) $ (54) $ 31
================================================================================
Available for Sale:
Gross unrealized losses $ 182 $ 144
================================================================================
No investment securities - available for sale were sold in the first quarter of
1996 or 1995, respectively.
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<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - RECEIVABLE FROM HOME HOLDINGS, INC.
During the first three months of 1996, proceeds of $2,657,000 from the Home
Holdings receivable were collected, a portion of which will be applied to the
satisfaction of certain liabilities. For further information on the Company's
receivable from Home Holdings, Inc. ("Home Holdings"), see the Company's Annual
Report on Form 10-K, Item 8 - Note 4, for the year ended December 31, 1995.
NOTE 6 - MINORITY INTEREST
The Company's consolidated balance sheets include 100% of Augustine's assets and
liabilities at March 31, 1996 and December 31, 1995, and the consolidated
statements of operations include Augustine's results of operations for the first
quarter ended March 31, 1996 and 1995. Minority interest on the Company's
consolidated balance sheets represents Augustine's minority shareholders' share
of the common equity of Augustine at March 31, 1996 and December 31, 1995.
Minority interest on the Company's consolidated statements of operations
represents Augustine's minority shareholders' share of the net income of
Augustine for the periods indicated above.
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Additional information regarding cash flow for the three months ended March 31
is as follows:
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(IN THOUSANDS) 1996 1995
- ------------------------------------------------------------------------------
Cash received (paid) during the period:
Interest expense $ - $ (1)
Income taxes refunded (paid), net 6,979 (41)
================================================================================
Income taxes refunded in 1996 include a 1977 tax refund of $7,613,000.
NOTE 8 - INCOME TAXES
The Company and its 100% owned domestic subsidiaries file a consolidated federal
income tax return. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("Statement 109"). Statement 109 recognizes both the current and deferred
tax consequences of all transactions that have been recognized in the financial
statements, calculated based on the provisions of enacted tax laws, including
the tax rates in effect for current and future years. Statement 109 requires
that net deferred tax assets be recognized immediately when a more likely than
not criterion is met; that is, unless a greater than 50% probability exists that
the tax benefits will actually be realized sometime in the future. Under
Statement 109, the Company has calculated a net deferred tax asset of $28
million and $30 million, as of March 31, 1996 and December 31, 1995,
respectively, arising primarily from the excess of book over tax reserves and
alternative minimum tax credits. A valuation allowance has been established for
the entire net deferred tax asset, as management, at the current time, has no
basis to conclude that realization is more likely than not.
During the first quarter of 1996, the Company received a 1977 income tax refund
of $7,613,000. This amount has been recognized as an income tax benefit in the
accompanying consolidated Statement of Operations, based on management's
continuing review of the overall tax liability position of the Company.
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<PAGE>
NOTE 9 - RELATED PARTIES
Investment management fee revenue includes $47,000 and $36,000 for the first
quarter ended March 31, 1996 and March 31, 1995, respectively, from related
parties.
At March 31, 1996 and December 31, 1995, investment management fees receivable
included $47,000 and $46,000, respectively, from related parties.
NOTE 10 - STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). This statement is effective for the Company's
December 31, 1996 financial statements. Statement 123 encourages companies to
adopt a fair value- based method of accounting for employee stock options, but
allows companies to continue to account for those plans using the accounting
prescribed by APB Opinion 25, "Accounting for Stock Issued to Employees." The
Company will adopt the disclosure requirements of the statement in 1996 and
plans to continue accounting for stock compensation using APB 25, making pro
forma disclosures of net income and earnings per share as if the fair value
based method had been applied.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which follows, should be read in conjunction with the Financial
Statements and related notes, which are contained in Item 1, herein.
FINANCIAL CONDITION
The Company's assets at March 31, 1996 aggregated $71,759,000, consisting
principally of cash and cash equivalents of $8,036,000, investment securities of
$48,632,000 and a $14,526,000 receivable from Home Holdings, Inc. ("Home
Holdings") acquired pursuant to the agreement by which the Company sold The Home
Insurance Company ("The Home") and its subsidiaries to Home Holdings in February
1991. During the first three months of 1996, proceeds of $2,657,000 from the
Home Holdings receivable were collected. At March 31, 1996, the Company's
liabilities, including reserves for contingent and alleged liabilities, as
further described in Part II - Item 1, exceeded total assets by $30,769,000.
The Company contractually assumed the tax liabilities of City Investing Company
("City"), which, prior to September 1985, owned all the outstanding shares of
Common Stock of the Company. During the first quarter of 1996, the Company
received a 1977 income tax refund of $7,613,000; as a result, City no longer
remains open for refunds. This amount has been recognized as an income tax
benefit in the accompanying consolidated Statement of Operations, based on
management's continuing review of the overall tax liability position of the
Company. The Company also contractually assumed certain tax liabilities of The
Home and its subsidiaries from September 1985 through 1989. For all periods
through 1991, the Internal Revenue Service ("IRS") and the Company do not agree
with respect to only two issues, withholding taxes (Netherlands Antilles) and
"fresh start" (an insurance industry issue).
With respect to withholding taxes (Netherlands Antilles), on May 11, 1995, the
IRS issued a notice of deficiency for withholding taxes on interest payments for
the years 1979 through 1985. In the notice of deficiency, the IRS contends that
City's wholly owned Netherlands Antilles finance subsidiary should be
disregarded for tax purposes. The Company vigorously contested the IRS's
position in accordance with the IRS's internal appeals procedures. In January
1992, the National Office of the IRS issued technical advice supporting the
auditing agent's position. In October 1992, the Company appealed this technical
advice to the National Office. The National Office advised the Company that it
expected to issue technical advice supporting the auditing agent's position,
whereupon, the Company advised the IRS that it was withdrawing its technical
advice request.
On June 30, 1995, the Company filed a petition in the United States Tax Court
contesting the notice of deficiency. The IRS filed its answer on August 23,
1995. The Company filed a motion for summary judgment in its favor on February
13, 1996. The IRS filed its response to the Company's motion for summary
judgment on April 18, 1996. If the IRS were to prevail on this issue, the
Company would be liable for taxes and interest in excess of the Company's
financial resources.
In a case dealing with a withholding tax issue similar to the Company's, on
November 6, 1995, the United States Tax Court ("Tax Court") ruled in favor of
the taxpayer, Northern Indiana Public Service Co. ("Northern Indiana"). The Tax
Court rejected the IRS's contention that interest paid to Northern Indiana's
foreign subsidiary were subject to United States tax withholding. The IRS
appealed this decision (Northern Indiana Public Service Co. v. Commissioner, 105
T.C. No. 22) to the United States Court of Appeals for the 7th Circuit. Although
the Northern Indiana case could be beneficial to the Company's case, it is not
necessarily indicative of the ultimate result of the final settlement of the
Netherlands Antilles issue between the Company and the IRS.
Based on an evaluation of the IRS's contention, counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern Indiana case, it is not possible at this
time to determine the final disposition of this issue, when the issues will be
resolved, or their final financial effect. A final disposition of this issue in
the Company's favor would have a material, positive effect on the Company's
Statement of Operations and Balance Sheet.
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<PAGE>
With respect to the "fresh start" issue, on March 13, 1996, the IRS issued a
notice of deficiency to the Company, which asserts an increase in tax for the
year 1987. If the IRS is successful, the amount of the deficiency would be
material. The Company believes that it has meaningful defenses and intends to
file, within 90 days of the date of the deficiency notice, a petition with the
United States Tax Court for redetermination of the tax. See Part II Item 1,
Legal Proceedings, Withholding Taxes (Netherlands Antilles) and Fresh Start for
additional details. See Results of Operations below, for a further discussion of
taxes.
Although the basis for the calculation of the litigation and contingency
reserves and the income tax reserves are regularly reviewed by the Company's
management and outside legal counsel, the assessment of these reserves includes
an exercise of judgment, and is a matter of opinion. Because of the nature of
the contingent and alleged liabilities and the inherent difficulty in predicting
the outcome of the litigation and governmental proceedings, management is unable
to predict whether the Company's recorded liabilities will be adequate or its
resources sufficient to satisfy its ultimate obligations. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties. For a discussion of lawsuits and
proceedings, see Part II - Item 1.
The cash needs of the Company for the first three months of 1996 were
principally satisfied by the receipt of a 1977 tax refund, the continued
collections of the receivable from Home Holdings, interest income received on
investment securities and cash equivalents, and investment management fees
received. Management believes that the Company's cash resources are sufficient
to continue operations for 1996. Because of the nature of the contingent and
alleged liabilities described in Part II - Item 1, and the inherent difficulty
in predicting the outcome of the litigation and governmental proceedings,
management is unable to predict whether the Company's recorded liabilities will
be adequate or its resources sufficient to satisfy its ultimate obligations.
For the three months ended March 31, 1996, cash of $5,622,000 was provided by
operating activities, including the receipt of a 1977 tax refund, collections of
the receivable from Home Holdings, the receipt of interest income partially
offset by payments charged against the litigation and contingency reserves and
the payment of operating expenses. For the quarter ended March 31, 1995, cash of
$4,110,000 was used for operating activities, including payments charged against
the litigation and contingency reserves and the payment of operating expenses
partially offset by interest income and investment management fees received.
The Company continues to evaluate a number of business opportunities to acquire
operating subsidiaries, and is engaged in the management of its remaining assets
and liabilities, including the contingent and alleged tax and litigation
liabilities, as described in Part II - Item 1. Extensive discussions and
negotiations are ongoing with respect to certain of these matters. The Company
intends to aggressively contest all pending and threatened litigation and
contingencies, as well as pursuing all sources of contributions to settlements.
In order to continue on a long-term basis, the Company must both resolve its
contingent and alleged liabilities by prevailing upon or settling these claims
for less than the amounts claimed and generate profitable operations by
acquiring existing operations and/or by developing new operations.
There were no material commitments for capital expenditures as of March 31,
1996.
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<PAGE>
RESULTS OF OPERATIONS
Summarized financial information for the operations of the Company for the
quarter ended March 31 is as follows:
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(IN THOUSANDS) 1996 1995
- ------------------------------------------------------------------------------
REVENUE:
Investment management fees $ 146 $ 114
OPERATING EXPENSES:
Compensation and benefits 485 493
Professional and outside services 124 151
Insurance 54 71
Occupancy 25 59
Other operating 59 35
- ------------------------------------------------------------------------------
747 809
- ------------------------------------------------------------------------------
Operating loss (601) (695)
- ------------------------------------------------------------------------------
Interest income, net 604 685
Minority interest (9) (7)
Other income - 54
- ------------------------------------------------------------------------------
Income (loss) before income taxes (6) 37
Income tax benefit (expense) 7,548 (56)
- ------------------------------------------------------------------------------
NET INCOME (LOSS) $ 7,542 $ (19)
================================================================================
At the current time, the Company's only source of operating revenue is
investment management fees generated from the Company's majority ownership
interest in Augustine. The Company's main source of non-operating revenue is
interest income earned on investment securities and cash equivalents. The
Company's management expects that operating cash needs for the remainder of 1996
will be met principally by the Company's current financial resources, the
receipt of non-operating revenue consisting of interest income earned on
investment securities and cash equivalents, and investment management fees.
The Company recorded net income of $7,542,000 for the first quarter ended March
31, 1996, compared to a net loss of $19,000 in the same 1995 period. As further
described below, the 1996 first quarter includes an additional income tax
benefit of $7,613,000.
The Company recorded pretax loss of $6,000 in the first quarter ended March 31,
1996, compared to pretax income of $37,000 in the respective 1995 period. The
1996 first quarter also includes $18,000 of net income attributable to the
Company's ownership interest in Augustine, compared to $9,000 in the same 1995
period.
Operating expenses declined by $62,000 in the 1996 first quarter, compared with
the first quarter of 1995. The reduced level of expenses in the 1996 period is
the result of management's continuing efforts to reduce and control costs.
Compensation and benefits decreased to $485,000 in the 1996 first quarter,
compared with $493,000 for the comparable 1995 period. The decrease in the 1996
period is principally due to a net reduction in benefit expenses.
Professional and outside services decreased to $124,000 in the first quarter
ended March 31, 1996, compared to $151,000 in the respective 1995 period. This
decrease was the result of an overall decrease in expenses for legal and other
professional and outside services.
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<PAGE>
Insurance, occupancy and other operating expenses in the first quarter ended
March 31, 1996, as compared with the same 1995 period, decreased due to
management's renegotiation of insurance programs and a continuing reduction of
expenses.
Interest income in the first quarter of 1996 decreased to $604,000 from $685,000
in the respective 1995 period. The decrease in the 1996 period, compared to the
1995 period, was attributable to a decreased yield and a lower average level of
cash equivalents and investment securities.
Other income of $54,000 in the first quarter of 1995 represents non-recurring
other income, principally the result of final payments received from management
contracts previously held by an inactive subsidiary of the Company.
During the first quarter of 1996, the Company received a 1977 income tax refund
of $7,613,000, which has been recognized as an income tax benefit in the
accompanying Statement of Operations, based on management's continuing review of
the overall tax liability position of the Company, as further described in
Financial Condition, above. In addition, included in the income tax benefit is a
state tax provision of $65,000 in the 1996 first quarter. The income tax
provision in the first quarter of 1995 is primarily attributable to state taxes.
The 1995 losses before income taxes did not result in a federal income tax
benefit to the consolidated statements of operations. Income taxes applicable to
operating income (loss) are generally determined by applying the estimated
effective annual income tax rates to pretax income (loss) for the year-to-date
interim period. Income taxes applicable to unusual or infrequently occurring
items are provided in the period in which such items occur.
STOCKHOLDER INQUIRIES
Stockholder inquiries, including requests for the following: (i) change of
address; (ii) replacement of lost stock certificates; (iii) Common Stock name
registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on
Form 10-K; (vi) proxy material; and (vii) information regarding stockholdings,
should be directed to:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Shareholder Services
(800) 937-5449 OR (718) 921-8200
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Item 8 - Note 11 in AmBase's Annual Report on Form
10-K for the year ended December 31, 1995 is incorporated by reference herein
and the defined terms set forth below have the same meaning ascribed to them in
such Annual Report. There have been no material developments in such legal
proceedings, except as set forth below.
(a) The Company is a defendant in a number of lawsuits or proceedings,
including, but not limited to, the following:
Withholding Taxes (Netherlands Antilles). The IRS filed its response to the
Company's motion for summary judgment on April 18, 1996.
Fresh Start. On March 13, 1996, the IRS issued a notice of deficiency to the
Company on the "fresh start" issue which asserts an increase in tax for the year
1987. If the IRS is successful, the amount of the deficiency would be material.
The Company believes that it has meaningful defenses and intends to file, within
90 days of the date of the deficiency notice, a petition with the United States
Tax Court for redetermination of the tax.
The actions against the Company, including those identified above, are in
various stages. Nevertheless, the allegations and claims are material and, if
successful, could result in substantial judgments against the Company. To the
extent the aggregate of any such judgments were to exceed the resources
available, these matters could have a material adverse effect on the Company's
financial condition and results of operations. Due to the nature of these
proceedings, the Company and its counsel are unable to express any opinion as to
their probable outcome.
- 13 -
<PAGE>
ITEM 2. CHANGES IN SECURITIES
Does not apply.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Does not apply.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Does not apply.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Form 8-K
None
- 14 -
<PAGE>
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:
AMBASE CORPORATION
Date: May 7, 1996 BY JOHN P. FERRARA
Vice President,
Chief Financial Officer,
Treasurer and Controller
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
- 15 -
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,036
<SECURITIES> 48,632
<RECEIVABLES> 14,674<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,759
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 447
<OTHER-SE> (31,216)
<TOTAL-LIABILITY-AND-EQUITY> 71,759
<SALES> 146
<TOTAL-REVENUES> 146
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6)
<INCOME-TAX> 7,548<F2>
<INCOME-CONTINUING> 7,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,542
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
<FN>
<F1> Receivables include investment management fees receivable of $148 and
a receivable from Home Holdings, Inc. of $14,526.
<F2> Income-tax includes a 1977 income tax refund of $7,613, which has been
recognized as an income tax benefit in the Statement of Operations and a state
tax provision of $65.
</FN>
</TABLE>
