<PAGE> 1
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, 1996
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
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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.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Cash and cash equivalents $ 792,000 $ 1,715,000
Securities available for sale, at market 21,762,000 20,247,000
Subordinated convertible debenture,
available for sale 1,250,000 1,250,000
Loans receivable, net 3,427,000 2,513,000
Accounts receivable 304,000 321,000
Income tax refunds receivable 1,954,000 1,954,000
Less: allowance for tax refund receivable (1,954,000) (1,954,000)
--------------- ---------------
Income tax refunds receivable, net -- --
Accrued interest receivable 493,000 522,000
Telephone systems, net 1,142,000 1,333,000
Office furniture and equipment, net 36,000 45,000
Other assets 630,000 253,000
--------------- ---------------
Total Assets $ 29,836,000 $ 28,199,000
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable $ 72,000 $ 181,000
Accrued expenses 130,000 104,000
Income taxes 5,067,000 4,349,000
Minority interest in limited partnership 372,000 465,000
--------------- ---------------
Total Liabilities 5,641,000 5,099,000
=============== ===============
Shareholders' Equity:
Common stock, $1 par value: 30,000,000 shares
authorized: 7,814,607 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 (39,518,000) (40,765,000)
Unrealized gain (loss) on securities
available for sale, net of taxes (48,000) 104,000
--------------- ---------------
Total Shareholders' Equity 24,195,000 23,100,000
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 29,836,000 $ 28,199,000
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE> 3
WESTMINSTER CAPITAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
------------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
INCOME 1996 1995 1996 1995
----------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Interest and fees on loans receivable $ 1,078,000 $ 339,000 $ 244,000 $ 203,000
Interest on securities available for
sale and money market funds 709,000 659,000 290,000 199,000
Telephone system revenue 1,267,000 1,176,000 419,000 368,000
Lawsuit settlement, net 813,000 560,000 -- --
Other 78,000 72,000 25,000 13,000
-------------- ------------- ------------ -------------
Total Income 3,945,000 2,806,000 978,000 783,000
-------------- ------------- ------------ -------------
EXPENSES
Telephone time charges 556,000 554,000 181,000 171,000
Other telephone system charges 464,000 473,000 155,000 174,000
General and administrative 971,000 878,000 270,000 207,000
------------- ------------ ------------ ------------
Total Expenses 1,991,000 1,905,000 606,000 552,000
------------- ------------ ------------ ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,954,000 901,000 372,000 231,000
Income Tax Provision (645,000) (130,000) (139,000) (30,000)
Minority Interest Income
in Limited Partnership (62,000) (51,000) (19,000) (8,000)
------------- ------------ ------------- --------------
NET INCOME $ 1,247,000 $ 720,000 $ 214,000 $ 193,000
============= ============ ============= ==============
Net income per common share:
Primary $ .16 $ .09 $ .03 $ .02
Fully Diluted .16 .09 .03 .02
============= ============ ============= ==============
Weighted average shares outstanding:
Primary 7,846,053 7,840,000 7,848,000 7,840,000
Fully Diluted 7,848,000 7,885,000 7,848,160 7,860,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
WESTMINSTER CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED 9/30/96 ENDED 9/30/95
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,247,000 $ 720,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and accretion, net 55,000 300,000
Gain on sale of securities available for sale (14,000) (12,000)
Change in assets and liabilities:
Accounts receivable 17,000 (45,000)
Accrued interest receivable 29,000 112,000
Income taxes 566,000 130,000
Other assets (377,000) 1,000
Accounts payable (109,000) --
Accrued expenses 26,000 (3,870,000)
Minority interest in limited partnership (93,000) (11,000)
------------ --------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES $ 1,347,000 $ (2,675,000)
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available for sale (42,111,000) (11,752,000)
Proceeds from maturities of securities available for sale 2,010,000 5,000,000
Proceeds from sales of securities available for sale 38,402,000 12,480,000
Loan originations (3,418,000) (1,097,000)
Principal collected on loans receivable 2,847,000 1,549,000
Purchase of loans, net of discount -- (3,551,000)
Purchase of limited partnership interest - (250,000)
------------ --------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (2,270,000) 2,379,000
------------ --------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (923,000) (296,000)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,715,000 845,000
------------ --------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 792,000 $ 549,000
============ ==============
Supplemental schedule of non cash investing and financial
activities for the period:
Tax effect of unrealized (gain) loss on
investment securities $ 152,000 $ 130,000
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
WESTMINSTER CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
In the opinion of Westminster Capital, Inc. and consolidated entities (the
"Company"), the accompanying 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, 1996 and December
31, 1995, and the results of consolidated operations and statements of
cash flows for the periods ended September 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 nine
month periods ended September 30, 1995 to conform with the 1996
presentation.
The accompanying 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 consolidated financial statements have read or have access
to the most recent report on Form 10-K which contains the latest audited
consolidated 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 confident of the ultimate outcome to recover all
or a substantial portion of its refund claim, in 1992 it established a
valuation allowance for the carrying value of the asset of $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.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Income for the quarter ended September 30, 1996 was $214,000 or .03
per share as compared with $193,000 or .02 per share for the quarter ended
September 30, 1995, an increase in earnings of $21,000 or 11%. This change in
net income for the periods was primarily the result of increased interest
income on securities available for sale of $91,000, coupled with an increase in
telephone system revenue of $51,000, offset by increased general and
administrative costs of $63,000 and an increased provision for income taxes of
$109,000.
During the quarter the Company sold approximately $18.5 million par
value, of primarily tax exempt investment securities available for sale for a
gain of $12,000. With the proceeds the Company purchased approximately $ 21.0
million par value, of United States Government obligations with an average
maturity of less than 13 months. This transaction was entered into as a means
to shorten the average maturity of the portfolio and reduce the risk of being
classified as an Investment Company as defined by the Investment Company Act of
1940. As a result of these transactions, interest income on securities
available for sale increased by $91,000.
Also during the Quarter, the Company experienced an increase in
subscribers and corresponding long distance service revenue at one of its site
installations. This increase in revenue of $51,000 in comparing the periods
more closely approximates full subscribership at the five military
installations where telephone hardware and operating personnel are located.
Offsetting its increased revenue, the Company generated additional
general and administrative expenses of $63,000, primarily of a legal nature in
regard to documentation of new investments and continued resolution of its
appeal with the Franchise Tax Board.
Lastly, for the quarter the Company increased its provision for income
taxes by $109,000. This increase was primarily the result of the restructuring
of its investment portfolio as previously discussed, coupled with increased
revenue. For the quarter the Company's effective tax rate increased to 37%
from 13% for the quarter ended September 30, 1995.
Net income for the nine months ended September 30, 1996 was $1,247,000
or $.16 per share as compared with $720,000 or $.09 per share for the quarter
ended September 30, 1995, an increase in earnings of $527,000 or 42%. This
change in net income for the periods presented is primarily the result of
increased interest income and fees recognized on loans outstanding of $739,000,
coupled with an increase in lawsuit settlements of $253,000, partially offset
by an increase in the provision for income taxes of $515,000.
For the nine months ended, the company has benefited from the purchase
of a $3.6 million auto leasing portfolio in August, 1995 at an initial discount
of approximately $610,000 or 17%. For the nine months ended September 30,
1996 The Company has recognized
5
<PAGE> 7
approximately $329,000 in interest income including accretion, as compared
with approximately $50,000 for the same period in 1995, an increase of
$279,000.
In addition, during the period average loans outstanding increased to
approximately $2.7 million from an average of $1.8 million for the same periods
during 1995. This increase of $900,000 in average loans outstanding coupled
with an increase in yield to 27.8% from 12.6% amount to an increase of
approximately $342,000. Included in the 27.8% yield for the nine months ended
September 30, 1996 is approximately $100,000 of gain on common stock received
in satisfaction of loan repayment.
Also, included in net income was a lawsuit settlement of $813,000 net,
which represents an increase of $253,000 as compared to the same period in
1995. These monies represent settlement payment from the Drexel, Milken
litigation settled in 1993. In the third quarter of 1996 management was
informed by outside counsel that while the Company may receive additional
settlements, the amounts and timing of such should not be as great as monies
previously recognized.
Lastly, for the nine months ended the Company increased its provision
for income taxes by $515,000. This increase was primarily the result of the
modification of its investment portfolio as previously discussed, coupled with
increased revenues of approximately $1.1 million. For the quarter the
Company's effective tax rate increased to 33% from 14% for the quarter ended
September 30, 1995.
Loans Receivable
At September 30, 1996, all loans outstanding were current as to
principal and interest. In addition, subsequent to September 30, 1996 the
Company reached a signed agreement in regard to approximately $1,200,000 of
unrecorded loan fees, penalties and interest which were previously past due on
loans where the entire principal balance and corresponding interest had been
paid in full. The final settlement requires the borrower to remit a total of
approximately $702,000, of which $635,280 must be in the form of cash, by
December 31, 1996. The Company will recognize additional fee income when such
cash payment is received.
New Investments
During the Quarter Ended September 30, 1996 the Company made two
equity investments; a $125,000 preferred stock investment in a privately held
fund, and a $500,000 common equity investment in a privately held company in
Los Angeles. In addition, during the Quarter the Company entered into two loan
agreements in the amounts of $500,000 and $520,000, respectfully.
6
<PAGE> 8
Liquidity
There was little change in the Company's financial condition at
September 30, 1996 as compared to December 31, 1995. Of the $21.8 million of
securities available for sale, approximately $21.5 million consists of U.S.
Government securities with an average yield of 6.10% on a fully taxable
equivalent basis. Since these securities have a weighted average maturity of
approximately 13 months, the Company continues to maintain a very strong
liquidity position.
7
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
The company is not aware of any litigation outstanding at
September 30, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the thirteen
weeks ended September 30, 1996.
8
<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.
WESTMINSTER CAPITAL, INC.
Dated: November 8, 1996 By /s/ William Belzberg
------------------------------
William Belzberg,
Chairman of the Board of Directors
Chief Executive Officer
Dated: November 8, 1996 By /s/ Gerald J. Fitch
------------------------------
Gerald J. Fitch
Executive Vice President
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION OF REGISTRANT AS OF SEPTEMBER 30,
1996 (UNAUDITED) AND THE CONSOLIDATED STATEMENTS OF OPERATIONS OF REGISTRANT FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 792,000
<SECURITIES> 21,762,000
<RECEIVABLES> 3,427,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,811,385
<DEPRECIATION> 633,762
<TOTAL-ASSETS> 29,836,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,815,000
<OTHER-SE> 16,380,000
<TOTAL-LIABILITY-AND-EQUITY> 29,836,000
<SALES> 0
<TOTAL-REVENUES> 3,945,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,954,000
<INCOME-TAX> 645,000
<INCOME-CONTINUING> 1,247,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,247,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
