<PAGE> 1
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, 1996
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.
-------------------------
(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
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(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> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
JUNE 30, 1996
ASSETS (UNAUDITED) DECEMBER 31, 1995
====================================================================================
<S> <C> <C>
Cash and cash equivalents $ 1,796,000 $ 1,715,000
Securities available for sale, at market 21,317,000 20,247,000
Subordinated convertible debenture,
available for sale 1,250,000 1,250,000
Loans receivable, net 2,845,000 2,513,000
Accounts receivable 348,000 321,000
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 577,000 522,000
Telephone systems, net 1,204,000 1,333,000
Office furniture and equipment, net 39,000 45,000
Other assets 254,000 253,000
--------------------------------
TOTAL ASSETS $ 29,630,000 $ 28,199,000
================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
====================================================================================
LIABILITIES:
Accounts payable $ 80,000 $ 181,000
Accrued expenses 146,000 104,000
Income taxes 4,934,000 4,349,000
Minority interest in limited partnership 405,000 465,000
--------------------------------
TOTAL LIABILITIES 5,565,000 5,099,000
--------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value: 30,000,000 shares
authorized: 7,815,000 shares issued and
outstanding in 1996 and 1995 7,815,000 7,815,000
Capital in excess of par value 55,946,000 55,946,000
Accumulated deficit (39,732,000) (40,765,000)
Unrealized holding gains on securities
available for sale, net of taxes 36,000 104,000
--------------------------------
TOTAL SHAREHOLDERS' EQUITY 24,065,000 23,100,000
--------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 29,630,000 $ 28,199,000
================================
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 3
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months Three Months Three Months
INCOME: Ended 6/30/96 Ended 6/30/95 Ended 6/30/96 Ended 6/30/95
- ------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest and fees on loans receivable $ 763,000 $ 136,000 $ 453,000 $ 75,000
Loan fees 46,000 -- -- --
Interest on securities available for
sale and money market funds 434,000 460,000 199,000 220,000
Interest on subordinated convertible
debenture, available for sale 56,000 -- 28,000 --
Gain on sale of securities
available for sale 2,000 -- 16,000 --
Dividend income -- 59,000 -- 59,000
Telephone system revenue 848,000 808,000 440,000 383,000
Lawsuit settlement, net 813,000 560,000 117,000 560,000
Other 5,000 -- 3,000 --
--------------------------------------------------------------------
Total Income 2,967,000 2,023,000 1,256,000 1,297,000
--------------------------------------------------------------------
EXPENSES:
- ---------
Telephone time charges 375,000 383,000 183,000 176,000
Other telephone system charges 309,000 298,000 152,000 159,000
General and administrative 701,000 672,000 336,000 369,000
--------------------------------------------------------------------
Total Expenses 1,385,000 1,353,000 671,000 704,000
--------------------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,582,000 670,000 585,000 593,000
INCOME TAX PROVISION (506,000) (100,000) (166,000) (158,000)
MINORITY INTEREST IN INCOME
OF CONSOLIDATED PARTNERSHIP (43,000) (43,000) (25,000) (16,000)
--------------------------------------------------------------------
NET INCOME $ 1,033,000 $ 527,000 $ 394,000 $ 419,000
====================================================================
Net income per common share:
Primary $ .13 $ .07 $ .05 $ .05
Fully Diluted .13 .07 .05 .05
====================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED 6/30/96 ENDED 6/30/95
------------- -------------
CASH FLOWS/OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,033,000 $ 527,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and accretion, net 93,000 252,000
Gain on sale of securities available for sale (2,000) --
Increase in accounts receivable (27,000) (47,000)
Increase in accrued interest receivable (55,000) (107,000)
Net change in income taxes 631,000 100,000
Net change in other assets (1,000) 2,000
Net change in accounts payable (101,000) 57,000
Net change in accrued expenses 42,000 (4,000,000)
Net change in minority interest (60,000) 10,000
------------------------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 1,553,000 (3,206,000)
------------------------------
CASH FLOWS/INVESTING ACTIVITIES:
Purchase of securities available for sale (8,386,000) (5,415,000)
Proceeds from maturities of securities available for sale 2,010,000 2,000,000
Proceeds from sales of securities available for sale 4,991,000 6,830,000
Loan originations (2,500,000) (869,000)
Principal collected on loans receivable 2,413,000 150,000
------------------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (1,472,000) 2,696,000
------------------------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS 81,000 (510,000)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,715,000 845,000
------------------------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,796,000 $ 335,000
==============================
Supplemental schedule of non cash investing and financial activities for the
period:
Tax effect of unrealized (gain) loss on
investment securities $ (46,000) $ 125,000
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
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, 1996 and
December 31, 1995, and the results of operations and statements of cash
flows for the periods ended June 30, 1996 and 1995.
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"). Certain re-classifications have been made
to the consolidated statements of operations for the three month and six
month periods ended June 30, 1995 to conform with the 1996 presentation.
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, 1995 and for the year then ended.
2. INCOME TAXES
The Franchise Tax Board continues to deny the refund claim of the Company
for approximately $3.9 million (including accrued interest of $1.2
million). The Company has filed a protest with the California Franchise
Tax Board which sets forth its position with respect to the refund claim.
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. The Company continues to maintain a reserve for this asset
in the consolidated financial statements due to continuing uncertainties
and the anticipated length of time it will take to resolve this matter.
5
<PAGE> 6
3. 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, 1996 and 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 was
7,845,000 for primary earnings per share and 7,848,000 for fully diluted
earnings per share for both the quarter ended June 30, 1996 and the six
months ended June 30, 1996. For the quarter ended June 30, 1995 and the
six months ended June 30, 1995, the number of shares was 7,840,000 for
both primary and fully diluted earnings per share.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Income for the quarter ended June 30, 1996 was $1,256,000 compared to
$1,297,000 for the quarter ended June 30, 1995, which represents a slight
decrease of $41,000. However, interest and fees on loans increased from $75,000
for the second quarter of 1995 to $453,000 for the second quarter of 1996, a
$378,000 increase. This increase resulted from a significant increase in average
loans outstanding and higher effective interest rates for the 1996 quarter. This
increase was primarily offset by a decrease of $443,000 in lawsuit settlements,
net of court directed attorney's fees, which represented additional settlement
payments from the Drexel, Milken litigation settled in 1993. Although the
Company expects to receive additional settlement payments in the future, the
timing and amounts of such income are not determinable.
Income for the six months ended June 30, 1996 was $2,967,000 which was a
$944,000 increase from the $2,023,000 of revenues for the six months ended June
30, 1995. The increase primarily resulted from an increase of $627,000 in
interest and fees on loans from $136,000 for the six months ended June 30, 1995
to $763,000 for the six months ended June 30, 1996. This large increase resulted
from a significant increase in average loans outstanding and higher effective
interest rates. Lawsuit settlements, as discussed in the previous paragraph,
also increased $253,000 from $560,000 for the six months ended June 30, 1995 to
$813,000 for the six months ended June 30, 1996.
Net income for the three months ended June 30, 1996 was $394,000 or $.05
per share compared to $419,000 or $.05 per share for the same period in 1995.
The decrease resulted from lower income of $41,000, increased income taxes of
$8,000 and a $9,000 increase in the minority interest. This decrease was only
partially offset by a reduction of total expenses of $33,000.
Net income for the six months ended June 30, 1996 increased $506,000 to
$1,033,000 compared to $527,000 for the six months ended June 30, 1995. This
increase primarily resulted from the increase of $944,000 in income as described
in paragraph two of this discussion. The large increase was partially offset by
an increase in income taxes resulting from the increased pre tax income and an
increased effective tax rate. The first half 1996 provision for income taxes was
33% of pre tax income compared to 16% for the same period of 1995 due to a
greater proportion of non taxable interest on municipal securities in 1995.
7
<PAGE> 8
Loans Receivable
At June 30, 1996, all loans outstanding were current as to principal and
interest payments. However, there was also approximately $1,200,000 of loan
fees, penalties and interest thereon which were past due on loans where the
entire principal balance and accrued interest had been paid in full. Due to the
past due nature of these fees, penalties and interest and the questionable value
of the remaining collateral, none of these amounts have been recognized in the
consolidated financial statements. Income will only be recognized as cash
payments are received.
Liquidity
There was little change in the Company's financial condition at June 30,
1996 as compared to December 31, 1995. The $21.3 million of securities available
for sale primarily consist of municipal securities with an average yield of 6.2%
on a fully taxable equivalent basis. Since these securities have a weighted
average maturity of approximately 17 months, the Company continues to maintain a
very strong liquidity position.
8
<PAGE> 9
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
<PAGE> 10
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 8, 1996 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
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION OF REGISTRANT AS OF JUNE 30, 1996
(UNAUDITED) AND THE CONSOLIDATED STATEMENTS OF OPERATIONS OF REGISTRANT FOR THE
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,796,000
<SECURITIES> 21,317,000
<RECEIVABLES> 2,845,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,823,000
<DEPRECIATION> 580,000
<TOTAL-ASSETS> 29,630,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,815,000
<OTHER-SE> 16,250,000
<TOTAL-LIABILITY-AND-EQUITY> 29,630,000
<SALES> 0
<TOTAL-REVENUES> 2,967,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,582,000
<INCOME-TAX> 506,000
<INCOME-CONTINUING> 1,033,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,033,000
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
