<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 March 31, 2000
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, SUITE M-10, 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 8,124,607
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AS OF
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (AUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 2000 DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 483,000 $ 1,406,000
Securities available-for-sale, at fair value 21,232,000 21,677,000
Investment in limited partnerships
that invest in securities 2,339,000 2,218,000
Other investments 448,000 748,000
Loans receivable, net 5,744,000 5,744,000
Accounts receivable, net of reserve
of $133,000 in 2000 and $127,000 in 1999 4,031,000 3,565,000
Inventories 322,000 183,000
Accrued interest receivable 341,000 398,000
Telephone systems, net -- 269,000
Property and equipment, net 4,218,000 3,397,000
Goodwill, net 10,837,000 11,027,000
Other assets 668,000 508,000
------------------------------ -------------------------------
TOTAL ASSETS $ 50,663,000 $ 51,140,000
============================== ===============================
LIABILITIES AND
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Accounts payable $ 2,479,000 $ 2,140,000
Accrued expenses 3,112,000 2,951,000
Due to sellers -- 1,749,000
Other borrowings 263,000 291,000
Deferred income taxes 8,787,000 8,828,000
Minority interests 1,146,000 1,204,000
------------------------------ -------------------------------
TOTAL LIABILITIES 15,787,000 17,163,000
------------------------------ -------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value: 30,000,000 shares
authorized: 7,835,000 shares issued and
outstanding in 2000 and 1999 7,835,000 7,835,000
Capital in excess of par value 55,943,000 55,943,000
Accumulated deficit (28,858,000) (29,673,000)
Accumulated other comprehensive loss (44,000) (128,000)
------------------------------ -------------------------------
TOTAL SHAREHOLDERS' EQUITY 34,876,000 33,977,000
------------------------------ -------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,663,000 $ 51,140,000
============================== ===============================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3/31/00 ENDED 3/31/99
------------- -------------
<S> <C> <C>
REVENUES:
Interest on loans $ 183,000 $ 261,000
Loan fees 32,000 --
Interest on securities available-for-
sale and money market funds 288,000 296,000
Unrealized gains on limited partnerships that
invest in securities 246,000 211,000
Gain (loss) on sale of securities available-for-sale (3,000) 178,000
Sales to auto dealers 3,912,000 3,682,000
Sales to packaging customers 2,807,000 2,023,000
Equipment rental and sales 2,275,000 --
Gain/(loss) from equity investment 67,000 (19,000)
Other income 527,000 132,000
-----------------------------------------------
Total Revenues 10,334,000 6,764,000
-----------------------------------------------
COSTS AND EXPENSES:
Cost of sales 6,351,000 4,776,000
General and administrative 3,014,000 1,159,000
Depreciation and amortization 438,000 88,000
Interest expense 22,000 12,000
-----------------------------------------------
Total Expenses 9,825,000 6,035,000
-----------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTERESTS 509,000 729,000
INCOME TAX PROVISION (304,000) (284,000)
MINORITY INTERESTS, NET (83,000) (38,000)
-----------------------------------------------
INCOME FROM CONTINUING OPERATIONS 122,000 407,000
DISCONTINUED OPERATIONS:
Loss from Operations, net -- (5,000)
Gain on sale of subsidiary, net 693,000 --
-----------------------------------------------
NET INCOME $ 815,000 $ 402,000
===============================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3/31/00 ENDED 3/31/99
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $ 122,000 $ 407,000
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation, amortization, and accretion, net 438,000 130,000
Loss (gain) on sales of securities available-for-sale 3,000 (178,000)
Unrealized gains on limited partnerships that
invest in securities (246,000) (211,000)
Gain on sale of real estate acquired through foreclosure -- (112,000)
Gain on sale of other investments (450,000) --
(Gain) loss from equity investment (67,000) 19,000
Increase in accounts receivable (577,000) (306,000)
Decrease (increase) in accrued interest receivable 57,000 (73,000)
Net change in inventories (139,000) (126,000)
Net change in income taxes (102,000) 284,000
Net change in other assets (105,000) 9,000
Net change in accounts payable 367,000 556,000
Net change in accrued expenses 161,000 (5,000)
Net change in minority interests 30,000 26,000
------------------------- ------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (508,000) 420,000
------------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of One Source Industries, LLC
net of cash acquired -- (5,125,000)
Purchase of securities (2,170,000) (7,051,000)
Proceeds from sales of securities 2,764,000 11,128,000
Loan originations and purchases -- (64,000)
Proceeds from sale of real estate acquired through foreclosure -- 945,000
Proceeds from liquidation of limited partnership interest 125,000 241,000
Proceeds from liquidation of other investments 750,000 --
Purchases of property and equipment (1,064,000) (45,000)
------------------------- ------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES (405,000) 29,000
------------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in seller financing obligations (1,749,000) --
Repayment of capital leases (28,000) (40,000)
------------------------- ------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,777,000) (40,000)
------------------------- ------------------------
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS (1,880,000) 409,000
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 957,000 (5,000)
------------------------- ------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (923,000) 404,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,406,000 291,000
------------------------- ------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 483,000 $ 695,000
========================= ========================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3/31/00 ENDED 3/31/99
------------- --------------
<S> <C> <C>
Net income $ 815,000 $ 402,000
-------------------------- -----------------------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising
during period 85,000 104,000
Less: reclassification adjustment for gains
included in net income (1,000) (4,000)
-------------------------- -----------------------
Other comprehensive income 84,000 100,000
-------------------------- -----------------------
Comprehensive income $ 899,000 $ 502,000
========================== =======================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. BASIS OF PRESENTATION
In the opinion of Westminster Capital, Inc. and consolidated entities (the
"Corporation"), the accompanying unaudited consolidated financial
statements, prepared from the Corporation's books and records, contain all
adjustments (consisting of only normal recurring accruals) necessary for a
fair presentation of the Corporation's financial condition as of March 31,
2000 and December 31, 1999, and the results of operations, statements of
cash flows and statements of comprehensive income for the periods ended
March 31, 2000 and 1999.
The consolidated financial statements include the accounts of Westminster
Capital, Inc. and its subsidiaries including a 100% interest in Westland
Associates, Inc. ("Westland"), an 80% interest in One Source Industries,
LLC ("One Source"), a 70% interest in Physician Advantage, LLC ("Physician
Advantage") and a 68% interest in Logic Technology Group, Inc., dba Matrix
Visual Solutions ("Matrix").
The Corporation disposed of its assets in Global Telecommunications on
January 31, 2000. The statements of consolidated income, cash flows, and
related notes to consolidated financial statements have been restated to
conform to the discontinued operations presentation (Note 5).
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, statements of cash flows and
statements of comprehensive income in conformity with generally accepted
accounting principles. The material set forth below 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 consolidated
financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of Operations
as of December 31, 1999 and for the year then ended.
6
<PAGE>
2. SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale are carried at estimated fair value. The
amortized cost and estimated fair value of securities available for sale
at March 31, 2000 and December 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Amortized Cost Gains Losses Fair Value
---------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
March 31, 2000:
U.S. Treasury and Agency
Securities $ 21,258 $ -- $ (182) $ 21,076
Equity and Debt Securities 34 146 (24) 156
---------------------- ------------------- ------------------ -------------------
Total $ 21,292 $ 146 $ (206) $ 21,232
====================== =================== ================== ===================
December 31, 1999:
U.S. Treasury and Agency
Securities $ 21,850 $ -- $ (210) $ 21,640
Equity and Debt Securities 34 27 (24) 37
---------------------- ------------------- ------------------ -------------------
Total $ 21,884 $ 27 $ (234) $ 21,677
====================== =================== ================== ===================
</TABLE>
Maturities of U.S. Treasury and Agency Securities were as follows at
March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------------------- ---------------------
<S> <C> <C>
Due within one year $ 20,258 $ 20,088
Due after one year through
five years 1,000 988
====================== =====================
$ 21,258 $ 21,076
====================== =====================
</TABLE>
Gross unrealized gains include the value ascribed to warrants, which
have a readily determinable value, whether detached or attached to
securities.
7
<PAGE>
3. LOANS RECEIVABLE
The Corporation's loans receivable outstanding at March 31, 2000
and December 31, 1999 were comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------------- --------------------------
<S> <C> <C>
Loans, net of loan fees,
secured by trust
deeds or mortgages $ 5,244 $ 5,244
Loans secured by other
collateral 500 500
-------------------------- --------------------------
Total $ 5,744 $ 5,744
========================== ==========================
</TABLE>
4. GOODWILL
The Corporation's investments in operating businesses include purchased
goodwill recorded as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated Amortization Net
Purchased Amortization for 3 months Unamortized
Goodwill at 1/1/00 ended 3/31/00 cost at 3/31/00
------------------ --------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
March 31, 2000:
One Source Industries $ 5,306 $ (240) $ (73) $ 4,993
Matrix Visual Solutions 3,391 (18) (45) 3,328
Physician Advantage 1,577 (99) (39) 1,439
Westland Associates 888 (188) (22) 678
Touch Controls 456 (46) (11) 399
------------------ --------------------- ------------------ ------------------
Total $ 11,618 $ (591) $ (190) $ 10,837
================== ===================== ================== ==================
Accumulated Amortization Net
Purchased Amortization for 12 months Unamortized
Goodwill at 1/1/99 ended 12/31/99 cost at 12/31/99
------------------ --------------------- ------------------ ------------------
December 31, 1999:
One Source Industries $ 5,306 $ - $ (240) $ 5,066
Matrix Visual Solutions 3,391 - (18) 3,373
Physician Advantage 1,577 - (99) 1,478
Westland Associates 888 (100) (88) 700
Touch Controls 456 - (46) 410
------------------ --------------------- ------------------ ------------------
Total $ 11,618 $ (100) $ (491) $ 11,027
================== ===================== ================== ==================
</TABLE>
8
<PAGE>
5. DISCONTINUED OPERATIONS
On January 31, 2000, Global Telecommunications sold substantially all of
its assets for cash consideration of $1,900,000. The Corporation received
$1,418,000, net of closing costs, on account of its 75% interest. In
connection with this sale, the Corporation recorded a gain on disposal of
$693,000, net of estimated income taxes of $461,000.
The results of Global Telecommunications are reported as a discontinued
operation for all periods presented. The statements of consolidated income,
cash flows, and related notes to consolidated financial statements have
been restated to conform to the discontinued operations presentation.
No telephone systems revenues were earned in the current quarter beginning
January 1, 2000 through the date of disposition on January 31, 2000.
Telephone systems revenues were $235,000 for the quarter ended March 31,
1999. The loss from discontinued operations for the quarter ended March 31,
1999 of $5,000 is net of income tax benefits of $5,000 and net of minority
interests of $2,000.
The following table summarizes the disposition of Global Telecommunications
at January 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Approximate
book value
of net assets
sold
-------------------
<S> <C>
Accounts receivable, net $ 111
Property and equipment, net 269
------------------
Total assets 380
------------------
Accounts payable 28
------------------
Total liabilities 28
------------------
Book value of assets sold 352
------------------
Westminster Capital's 75% share of
net assets sold 264
Distribution to Westminster Capital net of
disposition costs 1,418
------------------
Gain on sale of 75% interest in Global $1,154
Applicable income taxes on gain on sale 461
------------------
Gain on sale, net of income taxes $ 693
==================
</TABLE>
9
<PAGE>
6. SEGMENT INFORMATION
Revenues, gross profit and other financial data for continuing operations
of the Corporation's industry segments for the quarters ended March 31,
2000 and 1999, are set forth below. All revenues are earned in the United
States of America. (Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
FINANCE AND GROUP PACKAGING- EQUIPMENT
SECURED PURCHASING DESIGN AND RENTAL AND
LENDING SERVICES MANUFACTURE SALES TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
- ----
Revenues $ 1,266 $ 3,986 $ 2,807 $ 2,275 $ 10,334
Gross Profit 1,266 302 1,147 1,268 3,983
General and administrative 623 787 764 840 3,014
EBITDA (1) 643 (485) 383 428 969
Depreciation, amortization, accretion, net 21 84 102 231 438
Interest expense 0 4 5 13 22
Income (loss) before income taxes (2) 622 (573) 276 184 509
Total assets 33,826 3,096 8,772 4,969 50,663
1999
- ----
Revenues $ 1,059 $ 3,682 $ 2,023 $ 0 $ 6,764
Gross Profit 1,059 245 684 0 1,988
General and administrative 443 308 408 0 1,159
EBITDA (1) 616 (63) 276 0 829
Depreciation, amortization, accretion, net (26) 34 80 0 88
Interest expense 0 9 3 0 12
Income (loss) before income taxes (2) 642 (106) 193 0 729
Total assets 36,160 1,432 6,592 0 44,184
</TABLE>
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization
(2) Income (loss) before income taxes represents income before income taxes and
minority interests
10
<PAGE>
7. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
------------------------- ------------------------
<S> <C> <C>
Supplemental schedule of cash flow information:
Interest paid $ 22,000 $ 12,000
------------------------- ------------------------
Income taxes paid $867,000 $ 0
========================= ========================
Supplemental schedule of non-cash investing
and financing activities:
Conversion of note receivable inclusive of $57,000
of accrued interest into a 50% equity investment $ -- $ 857,000
========================= ========================
Tax effect of increased unrealized gains
On securities available-for-sale $ 61,000 $ 66,000
========================= ========================
</TABLE>
8. NET INCOME PER COMMON SHARE
Net income per common share is computed in accordance with Statement of
Financial Accounting Standards No. 128, EARNING PER SHARE, and is
calculated on the basis of the weighted average number of common shares
outstanding during each period plus the additional dilutive effect of
common stock equivalents. The dilutive effect of outstanding stock options
is calculated using the treasury stock method.
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
------------------------ -------------------------
<S> <C> <C>
Net Income Per Common Share:
Basic:
Income from continuing operations $ .02 $ .05
Income from discontinued operations .08 -
------------------------ -------------------------
Net income $ .10 $ .05
======================== =========================
Diluted:
Income from continuing operations $ .02 $ .05
Income from discontinued operations .08 -
------------------------ -------------------------
Net income $ .10 $ .05
======================== =========================
Weighted Average Shares Outstanding:
Basic 7,835,000 7,835,000
Diluted 7,950,000 7,948,000
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS REGARDING VARIOUS ASPECTS
OF THE CORPORATION'S BUSINESS AND AFFAIRS, INCLUDING STATEMENTS ABOUT THE
ADEQUACY OF COLLATERAL FOR LOANS IN DEFAULT AND THE FUTURE CASH NEEDS OF THE
CORPORATION. THE WORDS "EXPECT," "ESTIMATE," "BELIEVE" AND SIMILAR EXPRESSIONS
AND VARIATIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. THE
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. STATEMENTS ABOUT FUTURE EARNINGS AND REVENUES AND
THE ADEQUACY OF CASH RESOURCES FOR FUTURE NEEDS ARE UNCERTAIN BECAUSE OF THE
UNPREDICTABILITY OF FUTURE EVENTS AFFECTING SUCH STATEMENTS. STATEMENTS ABOUT
THE ADEQUACY OF REAL ESTATE COLLATERAL INVOLVE PREDICTIONS AS TO WHAT A BUYER
WILL BE WILLING TO PAY FOR THE PROPERTY IN THE FUTURE, WHICH CANNOT BE KNOWN
WITH CERTAINTY. READERS ARE CAUTIONED NOT TO PUT UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS. THE CORPORATION UNDERTAKES NO OBLIGATION TO PUBLICLY
REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT
ARISE AFTER THE DATE HEREOF.
RESULTS OF OPERATIONS
REVENUES
Our Revenues were $10,334,000 for the quarter ended March 31, 2000 compared
to $6,764,000 for the quarter ended March 31, 1999. This increase in revenues of
$3,570,000 was related to several factors: the operations of Matrix, acquired in
November 1999, accounted for $2,275,000 in revenues during the current quarter;
sales to packaging customers and auto dealers increased by $784,000 and
$230,000, respectively as compared to the corresponding prior year quarter;
other income in the current quarter includes a gain of $450,000 resulting from
the liquidation of an investment. Also included in other income are revenues of
$75,000 of Physician Advantage, which we acquired in May 1999. We recorded a
gain on our equity interest in Touch Controls of $67,000, compared to a loss of
$19,000 in the quarter ended March 31, 1999. Offsetting these increases in
revenues were declines in gains from the sale of securities available-for-sale
of $181,000 and lower interest income on loans of $78,000, compared to the
corresponding quarter of the prior year.
Revenues of One Source were $2,807,000 during the quarter ended March 31,
2000, compared to $2,023,000 during the quarter ended March 31, 1999. This
increase in revenues of $784,000 was attributable to sales volume increases.
Revenues of Westland were $3,912,000 during the quarter ended March 31,
2000 compared to $3,682,000 during the quarter ended March 31, 1999. This
increase in revenues of $230,000 is due to increased sales volume attributable
to new and existing vendor relationships.
Interest on loans was $183,000 during the quarter ended March 31, 2000 as
compared to $261,000 during the quarter ended March 31, 1999, due to a decrease
in average loans outstanding. Interest on securities available-for-sale and
money market funds was $288,000 during the quarter ended March 31, 2000 as
compared to $296,000 during the quarter ended March 31, 1999, due to lower
average invested funds during the current quarter.
During the quarter ended March 31, 2000, we recorded a loss of $3,000 on
the sale of securities available-for-sale compared to gains of $178,000 during
the quarter ended March 31, 1999 and we
12
<PAGE>
recorded unrealized gains on limited partnerships that invest in securities of
$246,000 compared to $211,000 during the quarter ended March 31, 1999. These
limited partnerships invest in equity and debt securities and the Corporation
records gains and losses on these investments based upon the equity method of
accounting.
GROSS PROFIT
The revenues of $3,912,000 generated by Westland Associates, reported under
the caption "Sales to auto dealers" in the consolidated financial statements,
were offset by direct costs of $3,684,000, included under the caption "Cost of
sales." As a result, Westland Associates generated gross profit before operating
expenses of $228,000, compared to $245,000 in the quarter ended March 31, 1999.
Gross profit was lower despite an increase in sales revenues, and is due to a
change in product mix weighted toward lower margin products in the current
quarter ended March 31, 2000.
The revenues of $2,807,000 generated by One Source, reported under the
caption "Sales to packaging customers" in the consolidated financial statements,
were offset by direct costs of $1,660,000, included under the caption "Cost of
sales." As a result, One Source generated gross profit before operating expenses
of $1,147,000, compared to $684,000 in the quarter ended March 31, 1999. The
gross profit as a percentage of revenues increased from 33.8% to 40.9% over the
corresponding period of the prior year due mainly to an increase in sales of
higher margin product lines.
The revenues of $2,275,000 generated by Matrix, reported under the caption
"Equipment rental and sales" in the consolidated financial statements, were
offset by direct costs of $1,007,000, included under the caption "Cost of
sales." As a result, Matrix generated gross profit before operating expenses of
$1,268,000 for the quarter ended March 31, 2000.
The revenues of $75,000 generated by Physician Advantage and included in
other income in the consolidated financial statements represent net revenues
earned from third party distributors, and as such also represent the gross
profit of Physician Advantage for the quarter ended March 31, 2000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $1,855,000, from
$1,159,000 for the quarter ended March 31, 1999 to $3,014,000 for the quarter
ended March 31, 2000. This increase resulted in part from general and
administrative expenses of $840,000 and $517,000 attributable to Matrix and
Physician Advantage, respectively. General and administrative expenses for One
Source were $764,000 for the quarter ended March 31, 2000, compared to $408,000
for the quarter ended March 31, 1999. The increase in One Source's general and
administrative expenses is attributable to business expansion initiatives,
including compensation for additional staff, expenses attributable to a new
sales office and expenses incurred in connection with the relocation of the
corporate headquarters. Also included in general and administrative expenses are
increased commission expense of One Source resulting from the increased sales
revenues. The general and administrative expenses for the finance and secured
lending segment were $623,000 in the quarter ended March 31, 2000 compared to
$443,000 in the quarter ended March 31, 1999. This increase relates mainly to
increases in compensation and bonuses, an increase in business consulting
expenses, and increased legal expenses. The increases in general and
administrative expenses were offset by a reduction in general and administrative
expenses of $38,000 attributable to Westland Associates. Westland Associates
general
13
<PAGE>
and administrative expenses were $270,000 for the quarter ended March 31, 2000,
compared to $308,000 for the quarter ended March 31, 1999, due to the benefit of
various cost saving initiatives.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased from $88,000 for the quarter ended
March 31, 1999 to $438,000 for the quarter ended March 31, 2000. The increase is
attributable to depreciation and amortization of $84,000 related to the
amortization of goodwill on the acquisitions of Matrix and Physician Advantage
made after the first quarter of 1999, with the balance consisting primarily of
depreciation and amortization on operating assets.
INCOME TAX
An income tax provision of $304,000 was recorded for the quarter ended
March 31, 2000. This provision represents a combined federal and state effective
tax rate of 59.7%. For the quarter ended March 31, 1999 an income tax provision
of $284,000 was recorded, representing a 39% effective tax rate. The current
year quarter reflects a higher effective tax rate due to an increase in
permanent differences between book income and taxable income resulting from
non-deductible goodwill and non-deductible operating losses.
MINORITY INTERESTS
The minority interests in net income increased from $38,000 for the quarter
ended March 31, 1999 to $83,000 for the quarter ended March 31, 2000, due to the
minority interests in the net income of the subsidiaries acquired during 1999.
DISCONTINUED OPERATIONS
In the quarter ended March 31, 2000, we sold Global Telecommunications and
recorded a gain from this sale of $693,000, net of income taxes of $461,000. No
income or loss was recorded from this discontinued operation in the current
quarter beginning January 1, 2000 through the date of disposition on January 31,
2000. The loss from this discontinued operation for the quarter ended March 31,
1999 of $5,000 is net of income tax benefits of $5,000 and net of minority
interests of $2,000.
NET INCOME
Net income for the quarter ended March 31, 2000 was $815,000, as compared
to $402,000 for the quarter ended March 31, 1999. Basic and diluted earnings per
share were $0.10 in 2000 versus $0.05 in 1999. Basic earnings per share from
continuing operations were $0.02 in 2000 versus $0.05 in 1999. Basic earnings
per share from discontinued operations were $0.08 in 2000 versus $0.00 in 1999.
Weighted average basic shares outstanding were 7,835,000 in both 2000 and 1999.
Weighted average diluted shares outstanding were 7,950,000 in 2000 and 7,948,000
in 1999.
14
<PAGE>
FINANCIAL CONDITION
LOANS RECEIVABLE AND PAST DUE LOANS
LOANS RECEIVABLE
The Corporation's loans receivable were $5,744,000 at March 31, 2000 and
December 31, 1999. No advances or principal repayments occurred during the
quarter ended March 31, 2000.
The Corporation originates and, from time to time, purchases loans that are
secured by real estate, personal property or other collateral. In connection
with each loan proposal, the Corporation considers the value and quality of the
real estate or other collateral available to secure the loan compared to the
loan amount requested, the proposed interest rate and repayment terms and the
quality of the borrower. Loan originations occur as opportunities arise which
management believes to be attractive. As a result, the volume of loans
originated may vary from quarter to quarter, and new loan originations may not
occur in every quarter.
PAST DUE LOANS
At March 31, 2000, a loan secured by a mortgage of $1,025,000, net of
discount of $25,000 was in default. The loan was originated in 1996 and was
originally due in 1998. Management believes that the real estate collateral for
this loan will be sufficient to cover the principal and interest owing.
LIQUIDITY
The Corporation's cash and cash equivalents decreased by $923,000 during
the quarter ended March 31, 2000. The Corporation's sources of cash during the
quarter were $2,764,000 from the sale of investment securities, $957,000 from
the sale of discontinued operations, $750,000 from liquidation of an investment
and $125,000 from the liquidation of a partnership interest. The Corporation's
uses of cash during the quarter included $2,170,000 from the purchase of
securities available for sale, $1,749,000 in seller financing repayments,
$1,064,000 for purchases of property and equipment, $508,000 for cash used in
operating activities and $28,000 in other debt repayments. The Corporation held
U.S. government and agency securities with a fair value of $21,076,000 at March
31, 2000.
The Corporation intends to pursue the acquisition of one hundred percent or
substantial interests in additional operating businesses. However, no assurances
can be given that the Corporation will be able to identify attractive
opportunities, or if it does, that it will be able to complete acquisitions on
acceptable terms. As the Corporation acquires interests in other operating
businesses, it intends to liquidate securities available-for-sale as may be
necessary to consummate acquisitions.
In the opinion of management, the Corporation has sufficient cash and
liquid assets to fund its growth and operating plans for the foreseeable future.
15
<PAGE>
MARKET RISK
The Corporation is exposed to certain market risks, which are inherent in
the Corporation's financial instruments and arise from transactions entered into
in the normal course of business. The Corporation has not entered into and does
not enter into derivative financial instruments for speculative purposes. A
discussion of the Corporation's primary market risk disclosure in financial
instruments is presented below and should be read in conjunction with the
forward-looking statement included herein.
The Corporation is subject to interest rate risk on its marketable
securities portfolio and loans receivable. The marketable securities portfolio
matures in less than two years. The loan receivable portfolio comprises both
variable and fixed rate loans, with all fixed rate loans being of a short-term
nature. The Corporation is subject to equity price risk on its investments in
limited partnerships that invest in securities. At March 31, 2000, these
investments represent less than 5% of total assets.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The information required by this item is incorporated herein by reference to the
section entitled "Market Risk" in Management's Discussion and Analysis of
Results of Operations and Financial Condition (Part 1, Item 2).
17
<PAGE>
PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27. Financial Data Schedule
18
<PAGE>
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 15, 2000 WESTMINSTER CAPITAL, INC.
(Registrant)
By /s/ William Belzberg
----------------------------
William Belzberg,
Chairman of the Board of
Directors and Chief
Executive Officer
By /s/ Keenan Behrle
----------------------------
Keenan Behrle
Executive Vice President and
Chief Financial Officer
19
<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 MARCH 31,
2000 (UNAUDITED) AND THE CONSOLIDATED STATEMENTS OF OPERATIONS OF REGISTRANT FOR
THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 483,000
<SECURITIES> 21,232,000
<RECEIVABLES> 9,908,000
<ALLOWANCES> 133,000
<INVENTORY> 322,000
<CURRENT-ASSETS> 0
<PP&E> 5,326,000
<DEPRECIATION> 1,108,000
<TOTAL-ASSETS> 50,663,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,835,000
<OTHER-SE> 27,041,000
<TOTAL-LIABILITY-AND-EQUITY> 50,663,000
<SALES> 8,993,000
<TOTAL-REVENUES> 10,334,000
<CGS> 6,351,000
<TOTAL-COSTS> 9,825,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 22,000
<INCOME-PRETAX> 509,000
<INCOME-TAX> 304,000
<INCOME-CONTINUING> 122,000
<DISCONTINUED> 693,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 815,000
<EPS-BASIC> .10
<EPS-DILUTED> .10
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