<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period 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 from to
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Commission File Number 1-4923
WESTMINSTER CAPITAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-2157201
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(State or other jurisdiction of (IRS. Employer
incorporation or organization) Identification No.)
9665 Wilshire Boulevard, Mezzanine, Beverly Hills, CA 90212
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(Address of principal executive office) (Zip Code)
310 278-1930
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(Registrant's Telephone Number, Including Area Code)
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(Former name, former address and former fiscal year,
if changed since last report)
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.
X Yes No
- --- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date 7,814,607
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31,
ASSETS (UNAUDITED) 1994
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<S> <C> <C>
Cash and cash equivalents $ 335,000 $ 845,000
Investment securities available for sale, at market 22,176,000 25,402,000
Loans receivable, net 1,435,000 716,000
Accounts receivable 304,000 257,000
Income tax refunds receivable 1,954,000 1,954,000
Less: allowance for doubtful receivable (1,954,000) (1,954,000)
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Income tax refunds receivable, net -- --
Accrued interest receivable 718,000 611,000
Telephone systems, net 1,456,000 1,579,000
Office furniture and equipment, net 51,000 58,000
Other assets 3,000 5,000
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TOTAL ASSETS $ 26,478,000 $29,473,000
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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LIABILITIES:
Deferred income taxes $ 3,324,000 $ 3,099,000
Liabilities and accrued expenses 453,000 4,396,000
Minority interest in limited partnership 505,000 495,000
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TOTAL LIABILITIES 4,282,000 7,990,000
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SHAREHOLDERS' EQUITY:
Common stock, $1 par value: 30,000,000 shares
authorized: 7,815,000 shares issued and
outstanding in 1995 and 1994 7,815,000 7,815,000
Capital in excess of par value 55,946,000 55,946,000
Accumulated deficit (41,546,000) (42,073,000)
Unrealized holding losses on investment
securities available for sale, net of taxes (19,000) (205,000)
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TOTAL SHAREHOLDERS' EQUITY 22,196,000 21,483,000
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 26,478,000 $ 29,473,000
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</TABLE>
See accompanying notes to consolidated financial statements
2
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WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months Three Months Three Months
INCOME: Ended 6/30/95 Ended 6/30/94 Ended 6/30/95 Ended 6/30/94
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and fees on loans receivable $ 136,000 $ 374,000 $ 75,000 $ 103,000
Interest on investment securities available
for sale and money market funds 460,000 272,000 220,000 230,000
Dividend income 59,000 -- 59,000 --
Telephone system revenue 808,000 343,000 383,000 206,000
Lawsuit settlement, net 560,000 2,488,000 560,000 2,488,000
Refund of litigation costs -- 757,000 -- --
Other -- 24,000 -- 23,000
------------ ------------ ------------ -----------
Total Revenues 2,023,000 4,258,000 1,297,000 3,050,000
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EXPENSES:
Telephone time charges 383,000 169,000 176,000 105,000
General and administrative 970,000 732,000 528,000 489,000
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Total Expenses 1,353,000 901,000 704,000 594,000
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INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 670,000 3,357,000 593,000 2,456,000
INCOME TAX PROVISION (100,000) (1,254,000) (158,000) (897,000)
MINORITY INTEREST IN INCOME
OF CONSOLIDATED PARTNERSHIP (43,000) (33,000) (16,000) (18,000)
------------ ------------ ------------ -----------
NET INCOME $ 527,000 $ 2,070,000 $ 419,000 $ 1,541,000
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net income per common share:
Primary $.07 $.26 $.05 $.20
Fully Diluted .07 .26 .05 .20
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</TABLE>
See accompanying notes to consolidated financial statements
3
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WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
CASH FLOWS/OPERATING ACTIVITIES: ENDED 6/30/95 ENDED 6/30/94
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 527,000 $ 2,070,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses -- 68,000
Depreciation and amortization 252,000 73,000
Increase in accounts receivable (47,000) --
Increase in accrued interest receivable (107,000) (284,000)
Increase in deferred income taxes 100,000 1,254,000
Decrease (Increase) in other assets 2,000 (46,000)
Decrease in liabilities and accrued expenses (3,943,000) (481,000)
Increase in minority interest 10,000 33,000
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (3,206,000) 2,687,000
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CASH FLOWS/INVESTING ACTIVITIES:
Purchase of investment securities (5,415,000) (33,551,000)
Proceeds from maturities of investment securities 2,000,000 10,725,000
Proceeds from sales of investment securities 6,830,000 6,101,000
Loan originations (869,000) (5,232,000)
Principal collected on loans receivable 150,000 2,007,000
Purchase of telephone systems and office equipment -- (604,000)
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 2,696,000 (20,554,000)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (510,000) (17,867,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 845,000 23,290,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 335,000 $ 5,423,000
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Supplemental schedule of non cash investing and financial activities for the period:
Tax effect of unrealized loss on investment securities $ 125,000 --
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</TABLE>
See accompanying notes to consolidated financial statements.
4
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WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
1. BASIS OF PRESENTATION
In the opinion of Westminster Capital, Inc. and consolidated entities
(the "Company"), the accompanying unaudited consolidated financial
statements, prepared from the Company's books and records, contain all
adjustments (consisting of only normal recurring accruals) necessary for a
fair presentation of the Company's financial condition as of June 30,
1995 and December 31, 1994, and the results of operations and
statements of cash flows for the periods ended June 30, 1995 and 1994.
The consolidated financial statements include the accounts of
Westminster Capital, Inc., its wholly owned subsidiaries and a greater
than 50% interest in a limited partnership, Global Telecommunications
Systems, LTD ("Global Telecommunications"). During the latter part of
1993, Global Telecommunications entered into a contract with two military
bases to install and operate telephone network systems which included
long distance telephone service. During 1994, two additional contracts
were entered into with military bases. Telephone system revenue is
generated through the use of the system by the individual subscribers.
This revenue is partially offset by time charges from the long distance
telephone provider.
Minor reclassifications have been made to the June 30, 1994 consolidated
statement of operations to conform with the 1995 presentation. In
addition, a $1,954,000 provision for unresolved tax issues which was
included in accrued expenses and liabilities in 1994 has been reclassified
to an allowance for doubtful receivables.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary to present the
financial position, results of operations and statements of cash flows in
conformity with generally accepted accounting principles. The following
material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is written with the
presumption that the users of the interim financial statements have read
or have access to the most recent report on Form 10-K which contains the
latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1994 and for the year then ended.
On February 14, 1995 a Settlement Agreement and Release was entered into
by and between the Resolution Trust Corporation (the "RTC"), the Company,
and three of its present and
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former directors ("Directors"). The Settlement Agreement provided for
payment of $4 million by the Company to the RTC, requires the RTC to
cooperate with the Company in connection with the pending proceedings
to recover tax payments made by the Company to the State of California,
and releases all claims among the parties. The $4 million settlement was
provided for in the 1994 consolidated financial statements as of and for
the year ended December 31, 1994.
2. CASH & CASH EQUIVALENTS
Cash and cash equivalents are short-term, highly liquid investments with
original maturities of three months or less. They are readily convertible
to known amounts of cash and no significant risk of changes in value
exists because of changes in interest rates.
3. INCOME TAXES
The Company has received preliminary results provided by the Franchise Tax
Board with respect to its refund claim for approximately $3.9 million
(including accrued interest of $1.2 million). Those audit findings propose
to deny the refund claim. The Company has filed a protest with the
California Franchise Tax Board which sets forth its position with respect
to the refund claims. While the Company remains convinced that it will
eventually recover all or a substantial portion of its refund claim, in
1992 the Company established a valuation allowance of 50%, adjusting the
carrying value of this asset to $1,954,000, which reflects the
uncertainties attributable to the California Franchise Tax Board's
position. Due to continuing uncertainties and the length of time it will
take to resolve this matter, management established a provision for
unresolved tax issues of an additional $1,954,000 during the fourth
quarter of 1994.
4. EARNINGS PER SHARE
The Company has outstanding certain employee stock options which have been
determined to be common stock equivalents for purposes of computing
earnings per share. During the six months ended June 30, 1995, the market
price of the Company's common stock exceeded the exercise price of certain
of these common stock equivalents. Under the treasury stock method of
computing earnings per share, the weighted average number of shares of
common stock and common stock equivalents outstanding were 7,840,000 for
both primary earnings per share and fully diluted earnings per share for
the quarter ended June 30, 1995 and the six months ended June 30, 1995.
There were no dilutive common stock equivalents during 1994.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the quarter ended June 30, 1995 were $1,297,000
compared to $3,050,000 for the quarter ended June 30, 1994. The large
decrease of $1,753,000 was primarily due to receiving $1,928,000 less from a
lawsuit settlement during the second quarter of 1995 compared to the second
quarter of 1994. The lawsuit settlements represented additional settlement
payments from the litigation against Drexel Burnham Lambert Inc., Michael
Milken and other related parties which settled in 1993. The settlement
amounts are net of court approved attorneys fees of $302,000 and $1,340,000
in the second quarter of 1995 and 1994, respectively. This decrease was
partially offset by a $177,000 increase in telephone system revenue which
resulted from the expanded operations of Global Telecommunications.
Revenues for the six months ended June 30, 1995 were $2,023,000
which was a $2,235,000 decrease from the $4,258,000 of revenues for the six
months ended June 30, 1994. The large decrease primarily resulted from the
lawsuit settlement described in the previous paragraph and a refund of
litigation costs of $757,000 in the first half of 1994 which were incurred in
prior years. There was no refund of litigation costs in the first half of
1995. In addition, interest and fees on loans receivable decreased by
$238,000 in the first half of 1995 compared to the same period in 1994 as a
result of a large decrease in average outstanding loans.
The decreases in revenues discussed in the proceeding paragraph were
partially offset by a $465,000 increase in telephone system revenue for the
first half of 1995 compared to the same period in 1994 and a $188,000
increase in interest on investment securities available for sale and money
market funds. Telephone system revenues increased because of the expanded
operations of Global Telecommunications and interest on investment securities
available for sale and money market funds increased because of average
increased investing levels and average increased interest rates.
Telephone time charges increased from $105,000 for the three months
ended June 30, 1994 to $176,000 for the three months ended June 30, 1995.
These charges increased from 169,000 for the first half of 1994 to 383,000
for the first half of 1995. The increases resulted from the expanded
operations of Global Telecommunications. General and administrative expenses
increased from 489,000 for the three months ended June 30, 1994 to 528,000
for the three months ended June 30, 1995. These expenses increased form
$732,000 for the first half of 1994 to $970,000 for the first half of 1995.
These increases resulted from an increase in almost all expense categories
due to the increase in the Company's activities which include the expanded
operations of Global Telecommunications.
Net income for the three months ended June 30, 1995 was $419,000 or
$.05 per share compared to $1,541,000 or $.20 per share for the same period
in 1994. This large decrease
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resulted from the decreased revenue and increased expenses discussed in
previous paragraphs. The large decrease was partially offset by a decrease
in income taxes resulting from the decreased pre tax income and a decreased
effective tax rate. The second quarter 1995 provision for income taxes was 27%
of pre tax income compared to 37% for the same period in 1994. The tax rate
decreased in 1995 due to a greater proportion of non taxable interest on
municipal securities.
Net income for the six months ended June 30, 1995 was $527,000 or
$.07 per share compared to $2,070,000 or $.26 per share for the comparable
period in 1994. This decrease was a result of all of the factors discussed
in the previous paragraphs. The effective tax rate on pre tax income was 15%
for the first half of 1995 compared to 37% for the same period in 1994 due to
a greater proportion of non taxable interest on municipal securities in 1995.
LOANS RECEIVABLE
At June 30, 1995, there were several loans outstanding to a
privately owned dealer in real estate and real estate mortgages in the amount
of $1,365,000. At June 30, 1995, $481,000 of principal payments were past
due for more than ninety days. In addition, approximately $208,000 of
accrued but uncollected interest was past due thirty days or more.
These loans are secured by real properties and Management believes
that there is adequate collateral value to cover the principal balance and
all past due interest. Accordingly, no allowance for loan losses has been
established nor has the accrual of interest ceased.
LIQUIDITY
The principal changes in the Company's financial condition at June 30,
1995 as compared to December 31, 1994 are the decrease of approximately
$3.2 million in investment securities available for sale and a decrease of
approximately $3.9 million in liabilities and accrued expenses. These
decreases resulted from the payment of $4 million in the first half of 1995
to the RTC (See Note 1 of Notes to Consolidated Financial Statements). The
remaining $22.2 million of investment securities available for sale consist
of municipal securities. Since these securities have a weighted average
maturity of approximately 10 months, the Company continues to maintain a very
strong liquidity position.
The Company's finanical position at June 30, 1995 remained strong
Stockholder's equity was $22,196,000 (as compared to $21,483,000 at December 31,
1994), and the Company had no debt, although it did have $3,324,000 in
deferred income tax liabilities. Liabilities and accrued expenses also were
reduced from $4,396,000 at December 31, 1994 to $453,000 at June 30, 1995,
which primarily resulted from the $4 million payment to the RTC. (See Note 1
of Notes to Consolidated Financial Statements).
8
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PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
NONE
9
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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.
Dated: August 10, 1995 WESTMINSTER CAPITAL, INC.
(Registrant)
By: /s/ William Belzberg
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William Belzberg,
Chairman of the Board of
Directors and Chief
Executive Officer
By: /s/ Philip J. Gitzinger
---------------------------------
Philip J. Gitzinger
Executive Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statements of Financial Condition of Registrant as of June 30, 1995
(Unaudited) and the Consolidated Statements of Operations of Registrant for the
six months ended June 30, 1995 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 335,000
<SECURITIES> 22,176,000
<RECEIVABLES> 1,739,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,854,000
<DEPRECIATION> 347,000
<TOTAL-ASSETS> 26,478,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 7,815,000
0
0
<OTHER-SE> 14,381,000
<TOTAL-LIABILITY-AND-EQUITY> 26,478,000
<SALES> 0
<TOTAL-REVENUES> 2,023,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 670,000
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 527,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
