<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 March 31, 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
(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 MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARCH 31, 1996
ASSETS (UNAUDITED) DECEMBER 31, 1995
- -------------------------------------------------------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 1,246,000 $ 1,715,000
Securities available for sale, at market 21,194,000 20,247,000
Subordinated convertible debenture,
available for sale 1,250,000 1,250,000
Loans receivable, net 3,101,000 2,513,000
Accounts receivable 385,000 321,000
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 454,000 522,000
Telephone systems, net 1,271,000 1,333,000
Office furniture and equipment, net 42,000 45,000
Other assets 255,000 253,000
============ ============
TOTAL ASSETS $ 29,198,000 $ 28,199,000
============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
LIABILITIES:
Accounts payable $ 79,000 $ 181,000
Accrued expenses 168,000 104,000
Income taxes 4,764,000 4,349,000
Minority interest in limited partnership 448,000 465,000
------------ ------------
TOTAL LIABILITIES 5,459,000 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 (40,126,000) (40,765,000)
Unrealized holding gains on securities
available for sale, net of taxes 104,000 104,000
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 23,739,000 23,100,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 29,198,000 $ 28,199,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
REVENUES: ENDED 3/31/96 ENDED 3/31/95
- --------- ------------- -------------
<S> <C> <C>
Interest on loans $ 310,000 $ 61,000
Loan fees 46,000 --
Interest on securities available for
sale and money market funds 235,000 240,000
Interest on subordinated convertible
debenture, available for sale 28,000 --
Loss on sale of securities available for sale (14,000) --
Lawsuit settlement, net 696,000 --
Telephone system revenue 408,000 425,000
Other 2,000 --
----------- ---------
Total Revenues 1,711,000 726,000
----------- ---------
EXPENSES:
Telephone time charges 192,000 207,000
Other telephone system charges 157,000 139,000
General and administrative 365,000 303,000
----------- ---------
Total Expenses 714,000 649,000
----------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 997,000 77,000
INCOME TAX (PROVISION) BENEFIT (340,000) 58,000
MINORITY INTEREST IN INCOME
OF CONSOLIDATED PARTNERSHIP (18,000) (27,000)
----------- ---------
NET INCOME $ 639,000 $ 108,000
=========== =========
Net income per common share:
Primary $ .08 $ .01
Fully Diluted .08 .01
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3/31/96 ENDED 3/31/95
------------- -------------
<S> <C> <C>
CASH FLOWS/OPERATING ACTIVITIES:
Net income $ 639,000 $ 108,000
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation, amortization, and accretion, net 22,000 122,000
Increase in accounts receivable (64,000) (67,000)
Decrease in accrued interest receivable 68,000 144,000
Loss on sale of securities available for sale 14,000 --
Net change in income taxes 415,000 86,000
Net change in other assets (1,000) 1,000
Net change in accounts payable (102,000) 8,000
Net change in accrued expenses 64,000 (4,078,000)
Net change in minority interest (17,000) 7,000
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 1,038,000 (3,669,000)
----------- -----------
CASH FLOWS/INVESTING ACTIVITIES:
Purchase of investment securities (7,562,000) (2,000,000)
Proceeds from maturities of investment securities 2,010,000 2,000,000
Proceeds from sales of investment securities 4,493,000 4,330,000
Loan originations and purchases (1,250,000) (853,000)
Principal collected on loans receivable 802,000 119,000
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (1,507,000) 3,596,000
----------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (469,000) (73,000)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,715,000 845,000
----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,246,000 $ 772,000
=========== ===========
Supplemental schedule of non cash investing and financing activities:
Tax effect of unrealized loss on
securities available for sale $ -- $ 80,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1996 and
December 31, 1995, and the results of operations and statements of cash
flows for the periods ended March 31, 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").
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
In 1994 the Company received a letter from the Franchise Tax Board stating
its audit findings with respect to the Company's 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.
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 first quarter of 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 for the quarter
ended March 31, 1996 was 7,845,000 for primary earnings per share and
7,848,000 for fully diluted earnings per share. For the quarter ended
March 31, 1995, the number of shares was 7,835,000 for primary earnings
per share and 7,840,000 for 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
Revenues for the quarter ended March 31, 1996 were $1,711,000 compared
to $726,000 for the quarter ended March 31, 1995. The increase was primarily due
to the receipt of $696,000, net of court directed attorneys' fees, from the
Drexel, Milken litigation in the first quarter of 1996. There was no receipt of
such funds in the first quarter of 1995. Although the Company expects to receive
additional settlement payments in the future, the timing and amounts of such
revenues are not determinable. Interest on loans also increased from $61,000 for
the first quarter of 1995 to $310,000 for the first quarter of 1996. This
increase resulted from an increase in average loans outstanding and higher
effective interest rates.
Total expenses for the first quarter of 1996 were $714,000 compared to
$649,000 for the first quarter of 1995. This increase primarily resulted from a
$62,000 increase in general and administrative expenses. General and
administrative expenses increased in many expense categories due to the
continuing increase in the Company's activities.
Net income for the three months ended March 31, 1996 was $639,000 or
$.08 per share compared to $108,000 or $.01 per share for the first quarter of
1995. This increase resulted from the increased revenue which was only partially
offset by increased expenses as discussed in the preceding paragraphs. The
increase in pre tax income was also partially offset by an increase in income
taxes. In 1996, the provision for income taxes was 35% of pre tax income. In
1995, pre tax income of $50,000 resulted in a tax benefit of 116% due to non
taxable interest on municipal securities.
Loans Receivable
At March 31, 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
The $21.2 million of securities available for sale consist primarily of
municipal securities. Since these securities have a weighted average maturity of
approximately 16 months, the Company continues to maintain a very strong
liquidity position.
7
<PAGE> 8
The Company's finanical position at March 31, 1996 remained strong.
Shareholders' equity was $23,739,000 (as compared to $23,100,000 at December 31,
1995), and the Company had no debt, although it did have $4,764,000 in income
tax liabilities.
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: May 10, 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 form the
Consolidated Statements of Financial Condition of Registrant as of March 31,
1996 (Unaudited) and the Consolidated Statements of Operations of Registrant for
the three months ended March 31, 1996 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,246,000
<SECURITIES> 21,194,000
<RECEIVABLES> 3,101,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,823,000
<DEPRECIATION> 510,000
<TOTAL-ASSETS> 29,198,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,815,000
<OTHER-SE> 15,924,000
<TOTAL-LIABILITY-AND-EQUITY> 29,198,000
<SALES> 0
<TOTAL-REVENUES> 1,711,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 997,000
<INCOME-TAX> 340,000
<INCOME-CONTINUING> 639,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 639,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
