<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________
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 September 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 ____________
Commission File Number 1-4923
WESTMINSTER CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2157201
(State or other jurisdiction of (IRS. Employer Identification No.)
incorporation or organization)
9665 Wilshire Boulevard, Mezzanine, Beverly Hills, CA 90212
(Address of principal executive office) (Zip Code)
310 278-1930
(Registrant's Telephone Number, Including Area Code)
______________________________________________________________________
(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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
ASSETS (UNAUDITED) DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 549,000 $ 845,000
Investment securities available for sale,
at market 19,846,000 25,402,000
Loans receivable, net 3,896,000 716,000
Accounts receivable 302,000 257,000
Income tax refunds receivable 1,954,000 1,954,000
Less: allowance for doubtful receivable (1,954,000) (1,954,000)
----------------------------------------
Income tax refunds receivable, net - -
Accrued interest receivable 499,000 611,000
Investment in limited partnership, at cost 250,000 -
Telephone systems, net 1,394,000 1,579,000
Office furniture and equipment, net 48,000 58,000
Other assets 4,000 5,000
----------------------------------------
TOTAL ASSETS $ 26,788,000 $ 29,473,000
----------------------------------------
----------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------
LIABILITIES:
Deferred income taxes $ 3,367,000 $ 3,099,000
Liabilities and accrued expenses 526,000 4,396,000
Minority interest in limited partnership 484,000 495,000
----------------------------------------
TOTAL LIABILITIES 4,377,000 7,990,000
----------------------------------------
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 (41,353,000) (42,073,000)
Unrealized holding gains (losses) on investment
securities available for sale, net of taxes 3,000 (205,000)
----------------------------------------
TOTAL SHAREHOLDERS' EQUITY 22,411,000 21,483,000
----------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 26,788,000 $ 29,473,000
----------------------------------------
----------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
INCOME: ENDED 9/30/95 ENDED 9/30/94 ENDED 9/30/95 ENDED 9/30/94
- ------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest and fees on loans receivable $ 339,000 $ 387,000 $203,000 $ 76,000
Interest on investment securities available
for sale and money market funds 659,000 467,000 199,000 195,000
Gain on sale of securities 12,000 - 12,000 -
Dividend income 60,000 - 1,000 -
Telephone system revenue 1,176,000 695,000 368,000 352,000
Lawsuit settlement, net 560,000 3,331,000 - 843,000
Refund of litigation costs - 757,000 - -
Other - 103,000 - 10,000
----------------------------------------------------------
Total Revenues 2,806,000 5,740,000 783,000 1,476,000
----------------------------------------------------------
EXPENSES:
Telephone time charges 554,000 332,000 171,000 164,000
General and administrative 1,351,000 1,388,000 381,000 649,000
----------------------------------------------------------
Total Expenses 1,905,000 1,720,000 552,000 813,000
----------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 901,000 4,020,000 231,000 663,000
INCOME TAX PROVISION (130,000) (1,525,000) (30,000) (271,000)
MINORITY INTEREST IN INCOME
OF CONSOLIDATED PARTNERSHIP (51,000) (69,000) (8,000) (37,000)
----------------------------------------------------------
NET INCOME $ 720,000 $ 2,426,000 $193,000 $ 355,000
----------------------------------------------------------
----------------------------------------------------------
Net income per common share:
Primary $ .09 $ .31 $ .02 $ .05
Fully Diluted .09 .31 .02 .05
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----------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED 9/30/95 ENDED 9/30/94
------------- -------------
<S> <C> <C>
CASH FLOWS/OPERATING ACTIVITIES:
Net income $ 720,000 $ 2,426,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses - 31,000
Depreciation and amortization 381,000 231,000
Accretion of discount on purchased loans (81,000) -
Increase in accounts receivable (45,000) (153,000)
Decrease (Increase) in accrued interest receivable 112,000 (283,000)
Increase in deferred income taxes 130,000 1,650,000
Gain on sale of investment securities (12,000) -
Decrease in other assets 1,000 7,000
Decrease in liabilities and accrued expenses (3,870,000) (204,000)
Increase (Decrease) in minority interest (11,000) 343,000
------------------------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (2,675,000) 4,048,000
------------------------------
CASH FLOWS/INVESTING ACTIVITIES:
Purchase of securities (11,752,000) (46,734,000)
Proceeds from maturities of securities 5,000,000 11,725,000
Proceeds from sales of securities 12,480,000 11,300,000
Loan originations (1,097,000) (5,232,000)
Purchase of loans, net of discount (3,551,000) -
Principal collected on loans receivable 1,549,000 5,906,000
Purchase of limited partnership interest (250,000) -
Purchase of telephone systems and office
equipment - (1,145,000)
------------------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 2,379,000 (24,180,000)
------------------------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (296,000) (20,132,000)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 845,000 23,257,000
------------------------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 549,000 $ 3,125,000
------------------------------
------------------------------
Supplemental schedule of non cash investing and financial activities for the period:
Tax effect of unrealized gains on
investment securities $ 138,000 -
------------------------------
------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30,
1995 and December 31, 1994, and the results of operations and statements
of cash flows for the periods ended September 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 September 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
5
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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 nine months ended September 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 primary earnings per share for the quarter and the nine
months ended September 30, 1995 and 7,885,000 shares for fully diluted
earnings per share for the quarter and 7,860,000 shares for the nine
months ended September 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 September 30, 1995 were $783,000 compared
to $1,476,000 for the quarter ended September 30, 1994. The decrease of
$693,000 was primarily due to receiving $843,000 from a lawsuit settlement
during the third quarter of 1994. There was no such settlement revenue during
the third quarter of 1995. The lawsuit settlement represented additional
settlement payments from the litigation against Drexel Burnham Lambert Inc.,
Michael Milken and other related parties which settled in 1993. The
settlement amount is net of court directed attorneys fees of $453,000.
Although the Company expects to receive additional settlement payments in the
future, the timing and amounts of such revenue are not determinable. The
decrease was partially offset by a $127,000 increase in interest and fees on
loans receivable which resulted from the increase in loans outstanding during
the third quarter of 1995.
Revenues for the nine months ended September 30, 1995 were $2,806,000 which
was a $2,934,000 decrease from the $5,740,000 of revenues for the nine months
ended September 30, 1994. The large decrease primarily resulted from the
lawsuit settlement described in the previous paragraph and additional
settlement amounts received in the six month period ended June 30, 1994 which
totalled $3,331,000 for the nine months ended September 30, 1994 compared to
$560,000 received in 1995 or a decrease of $2,771,000. The settlement
amounts were net of court directed attorneys fees of $1,793,000 and $302,000,
respectively.
Revenues also decreased during the nine months ended September 30, 1995 due
to a refund of litigation costs of $757,000, incurred in years prior to 1994
and received in 1994. There was no refund of litigation costs in the nine
month period ended September 30, 1995.
The decreases in revenues discussed in the preceeding two paragraphs were
partially offset by a $481,000 increase in telephone system revenue for the
nine months ended September 30, 1995 compared to the same period in 1994 and
a $192,000 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 $164,000 for the three months ended
September 30, 1994 to $171,000 for the three months ended September 30, 1995.
These charges increased from $332,000 for the nine months ended September
30, 1994 to $554,000 for the same period in 1995. The increases resulted
from the expanded operations of Global Telecommunications during the first
six months of 1994. For the remaining six months of 1994 and the nine month
period ended September 30, 1995 the level of operations remained relatively
consistent. General and administrative expenses decreased from $649,000 for
the three months ended September 30, 1994
7
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to $381,000 for the three months ended September 30, 1995. These expenses
decreased only slightly from $1,388,000 for the first nine months of 1994 to
$1,351,000 for the same period in 1995. The large decrease of $268,000 in
the quarter ended September 30, 1995 was primarily attributable to legal fees
in the 1994 quarter in connection with the Resolution Trust Corporation
matter described in Note 1 of the Notes to Consolidated Financial Statements.
Net income for the three months ended September 30, 1995 was $193,000 or
$.02 per share compared to $355,000 or $.05 per share for the same period in
1994. This decrease resulted from the increases and decreases in revenues
and 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 third quarter 1995
provision for income taxes was 13% of pre tax income compared to 41% for the
same period in 1994. The effective tax rate decreased in 1995 due to a
greater proportion of non taxable interest on municipal securities.
Net income for the nine months ended September 30, 1995 was $720,000 or
$.09 per share compared to $2,426,000 or $.31 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 14%
for the nine months of 1995 compared to 38% for the same period in 1994 due
to a greater proportion of non taxable interest on municipal securities in
1995.
LOANS RECEIVABLE
At September 30, 1995, there were several loans outstanding to a privately
owned dealer in real estate and real estate mortgages in the amount of
$680,000. At September 30, 1995, $480,000 of principal payments were past
due for more than ninety days. In addition, approximately $170,000 of
accrued interest was past due.
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.
During August, 1995 the Company purchased $3,551,000 of loans, net of
discount of $742,000, from a financial institution. The loans are to
automobile leasing companies which act as the lessor in automobile leasing
transactions with lessees. The loans are secured by the underlying leases.
The loans have an average contractual maturity of approximately 18 months and
have a weighted average interest rate of 8%. The yield will be increased by
the discount to be accreted to income over the lives of the loans.
LIQUIDITY
The principal changes in the Company's financial condition at September 30,
1995 as compared to December 31, 1994 are the decrease of approximately $5.6
million in investment
8
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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 during 1995 to the RTC (See Note 1 of Notes to Consolidated
Financial Statements). In addition, some of the funds received on matured
investment securities available for sale were used to fund loans and the
investment in the limited partnership. The remaining $19.8 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 September 30, 1995 remained strong.
Shareholders' equity was $22,411,000 (as compared to $21,483,000 at December
31, 1994), and the Company had no debt, although it did have $3,367,000 in
deferred income tax liabilities. Liabilities and accrued expenses also were
reduced from $4,396,000 at December 31, 1994 to $526,000 at September 30,
1995, which primarily resulted from the $4 million payment to the RTC. (See
Note 1 of Notes to Consolidated Financial Statements).
9
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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
10
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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: November 9, 1995 WESTMINSTER CAPITAL, INC.
(Registrant)
By /s/ WILLIAM BELZBERG
-------------------------
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
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION OF REGISTRANT AS OF SEPTEMBER
30, 1995 (UNAUDITED) AND THE CONSOLIDATED STATEMENTS OF OPERATIONS OF
REEGISTRANT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 549,000
<SECURITIES> 19,846,000
<RECEIVABLES> 4,198,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,823,000
<DEPRECIATION> 381,000
<TOTAL-ASSETS> 26,788,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 7,815,000
0
0
<OTHER-SE> 14,596,000
<TOTAL-LIABILITY-AND-EQUITY> 26,788,000
<SALES> 0
<TOTAL-REVENUES> 2,806,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 901,000
<INCOME-TAX> 130,000
<INCOME-CONTINUING> 720,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 720,000
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
