<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------------------------------
For Quarter Ended:
March 31, 1999 Commission File Number: 1-9137
ATALANTA/SOSNOFF CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3339071
- -------------------------------- --------------------------
(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization)
101 PARK AVENUE, NEW YORK, NEW YORK 10178
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(Address of principal executive offices) (zip code)
(212) 867-5000
- --------------------------------------------------------------------------------
(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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such following
requirements for the past 90 days.
Yes X No
As of May 6, 1999 there were 9,338,401 shares of common stock outstanding.
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
INDEX
Part I - Financial Information PAGE NO.
--------
Item 1 - Financial Statements
Condensed Consolidated Statements
of Financial Condition - March 31, 1999
and December 31, 1998 3
Condensed Consolidated Statements
of Income and Comprehensive Income -
Three Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statement
of Changes in Shareholders' Equity -
Three Months Ended March 31, 1999 5
Condensed Consolidated Statements of
Cash Flows - Three Months Ended
March 31, 1999 and 1998 6
Notes to Condensed Consolidated 7-9
Financial Statements
Special Note Regarding Forward-Looking Statements 10
Item 2 - Management's Discussion and Analysis
of Results of Operations and Financial
Condition 11-15
Part II - Other Information
Items 1-6 16
Signatures 17
Exhibit Index 18
Exhibit 11 - Computation of Earnings Per Share 19
Exhibit 27 - Financial Data Schedule 20
2
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
- ------ -------------- -----------------
<S> <C> <C>
Assets:
Cash and cash equivalents $3,497,603 $3,993,963
Accounts receivable 2,629,528 3,319,185
Receivable from clearing broker 1,202,525 -------
Investments, at market 76,642,430 73,802,294
Investments in limited partnerships 11,222,419 7,565,780
Fixed assets, net 880,643 659,311
Exchange memberships, at cost 402,000 402,000
Other assets 1,691,867 943,870
--------- -------
Total assets $98,169,015 $90,686,403
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and other liabilities $534,070 $773,970
Accrued compensation payable 157,156 648,611
Income taxes payable 9,551,869 6,541,427
Separation costs payable 525,000 700,000
------- -------
Total liabilities 10,768,095 8,664,008
---------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $1.00 per share;
5,000,000 shares authorized; none issued ------- -------
Common stock, $.01 par value; 30,000,000
shares authorized; 9,587,401 shares
issued and outstanding 95,874 95,874
Additional paid-in capital 24,389,499 24,389,499
Retained earnings 61,309,219 58,412,561
Accumulated other comprehensive income -
unrealized gains from investments,
net of deferred tax liabilities 9,413,606 7,494,341
Unearned compensation (5,626,013) (6,188,615)
Treasury stock, at cost, 249,000 shares (2,181,265) (2,181,265)
----------- -----------
Total shareholders' equity 87,400,920 82,022,395
---------- ----------
Total liabilities and shareholders' equity $98,169,015 $90,686,403
=========== ===========
Book value per share $9.36 $8.78
===== =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Advisory fees $3,823,351 $3,996,146
Commissions and other 399,639 447,521
------- -------
Total revenues 4,222,990 4,443,667
--------- ---------
Costs and expenses:
Employees' compensation 2,834,661 2,478,965
Clearing and execution costs 137,317 165,317
Selling expenses 139,087 105,153
General and administrative expenses 695,338 622,582
------- -------
Total costs and expenses 3,806,403 3,372,017
--------- ---------
Operating income 416,587 1,071,650
------- ---------
Other income (expense):
Interest and dividend income 176,674 512,984
Interest expense (21,115) (19,579)
Realized and unrealized gains
from investments, net 4,546,512 1,633,310
--------- ---------
Other income, net 4,702,071 2,126,715
--------- ---------
Income before provision for income taxes 5,118,658 3,198,365
Provision for income taxes 2,222,000 1,408,000
--------- ---------
Net income $2,896,658 $1,790,365
========== ==========
Earnings per common share - basic $0.31 $0.19
===== =====
Earnings per common share - diluted $0.31 $0.19
===== =====
Net income, as presented above $2,896,658 $1,790,365
Other comprehensive income:
Net unrealized gains from investments,
net of deferred income taxes 1,919,265 1,499,706
--------- ---------
Comprehensive income $4,815,923 $3,290,071
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
other
comprehensive
Additional income -
Common Paid-In Retained unrealized Unearned Treasury
Stock Capital Earnings gains, net Compensation Stock Total
----- ------- -------- ------------- ------------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1998 $95,874 $24,389,499 $58,412,561 $7,494,341 ($6,188,615) ($2,181,265) $82,022,395
Amortization of unearned
compensation 562,602 562,602
Unrealized gains from
investments, net of
deferred taxes 1,919,265 1,919,265
Net Income 2,896,658 2,896,658
------- --------- --------- ---------- ---------- ---------- ---------
Balance -
March 31, 1999 $95,874 $24,389,499 $61,309,219 $9,413,606 ($5,626,013) ($2,181,265) $87,400,920
======= =========== =========== ========== ============ ============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,896,658 $1,790,365
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 53,022 46,372
Amortization of unearned compensation 562,602 562,602
Realized and unrealized gains from
investments, net (4,546,512) (1,633,310)
Increase (decrease) from changes in:
Accounts receivable 689,657 310,928
Other assets (747,997) 442,719
Accounts payable and other liabilities (239,900) (108,905)
Accrued compensation payable (491,455) (290,550)
Income taxes payable 1,730,932 275,489
Separation costs payable (175,000) (175,000)
--------- ---------
Net cash provided by (used in) operating activities (267,993) 1,220,710
--------- ---------
Cash flows from investing activities:
Receivable from clearing broker, net (1,202,525) 457,053
Purchases of fixed assets (274,354) (24,936)
Purchases of investments (24,362,311) (36,952,130)
Proceeds from sales of investments 25,610,823 34,679,841
---------- ----------
Net cash used in investing activities (228,367) (1,840,172)
--------- -----------
Net decrease in cash and cash equivalents (496,360) (619,462)
Cash and cash equivalents, beginning of year 3,993,963 3,805,243
--------- ---------
Cash and cash equivalents, end of period $3,497,603 $3,185,781
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $21,115 $19,579
======= =======
Income taxes $491,067 $1,132,511
======== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE>
ATALANTA/SOSNOFF CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Unaudited Information
The accompanying condensed consolidated financial statements include the
accounts of Atalanta/Sosnoff Capital Corporation ("Holding Company") and its
direct and indirect wholly-owned subsidiaries, Atalanta/Sosnoff Capital
Corporation (Delaware) ("Capital"), Atalanta/Sosnoff Management Corporation
("Management"), and ASCC Corporation ("ASCC").
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring accruals) necessary to present fairly the Company's financial position
as of March 31, 1999, and the results of its operations for the three months
ended March 31, 1999 and 1998. Certain information normally included in the
financial statements and related notes prepared in accordance with generally
accepted accounting principles has been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing in the
Company's December 31, 1998 Annual Report on Form 10-K. Information included in
the condensed consolidated balance sheet as of December 31, 1998 has been
derived from the audited consolidated financial statements appearing in the
Company's Annual Report on Form 10-K.
Note 2: Investments, at Market
The Company records its investments in equity and debt securities in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS") No.
115, with the exception of investments held by Management. The Company has
designated those investments held by the Holding Company, Capital and ASCC in
equity and debt securities as "available for sale," and accordingly recorded at
market value with the related unrealized gains and losses net of deferred taxes
reported as a separate component of shareholders' equity. Investments held by
Management are recorded at market value, with the related unrealized gains and
losses reflected in other income on the consolidated statements of income and
comprehensive income.
Investments are recorded on trade date. The cost of investments sold is
determined on the first-in first-out method. Dividends and interest are accrued
as earned. Securities listed on a securities exchange for which market
quotations are available are valued at the last quoted sales price as of the
last business day of the year. Investments in mutual funds are valued based upon
the net asset value of shares held as reported by the fund. Securities with no
reported sales on such date are valued at their last closing bid price.
Capital serves as a general partner for three Company-sponsored investment
partnerships (the "Partnerships") and as the investment manager for a
Company-sponsored offshore investment fund (the "Offshore Fund"). Investments in
limited partnerships are carried in the accompanying financial statements at the
Company's share of the net asset values as reported by the respective
Partnerships. Limited partners whose capital accounts in the aggregate are
two-thirds of the total capital accounts of all limited partners may, at any
time, require Capital to withdraw as the general partner of the Partnerships.
Therefore, the Company is not deemed to have control of the Partnerships and
accordingly, the accounts of the Partnerships are not included in these
condensed consolidated financial statements.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (cont'd)
Note 3: Non-Cash Compensation Charges ("NCCC")
NCCC of approximately $563,000 were charged to operations in both the first
quarter of 1999 and 1998. (See Note 4 below).
Note 4: 1996 Long Term Incentive Plan ("LTIP")
In September, 1997, the Company awarded 775,000 shares of restricted stock at
the issue price of $.01 per share to two senior executives under the terms of
the LTIP. Such awards vest over four years. The difference of $9.0 million
between market value ($11.625 per share) on the date of grant and the purchase
price was recorded as unearned compensation in shareholders' equity and is being
amortized over a four-year period which commenced with the fourth quarter of
1997 (approximately $563,000 per quarter and $2.25 million annually).
Note 5: Senior Vice President Accounts
Certain high net worth accounts subject to the overall supervision and control
of the Company are under the management of a Senior Vice President (the "SVP
Accounts"). Effective October 1, 1998, the Company entered into a new facilities
agreement with the SVP for the period ending December 31, 2000 under which the
SVP is relinquishing the revenues generated by the investment management and
brokerage services provided to the SVP Accounts to the Company.
Pursuant to this Agreement, the Company has or will make payments to the SVP in
three installments in January of 1999, 2000 and 2001 based upon a multiple of
annualized revenues of the SVP Accounts in the fourth quarter of 1998, 1999 and
2000, respectively. The Company estimates that the related compensation will
total approximately $3 million, based on the SVP Accounts' current asset value,
and will be recognized ratably as compensation expense over the term of the
arrangement.
Additionally, the SVP's compensation related to the pre-tax operating income
generated by the SVP Accounts will decline from 100% in the twelve-month period
ended September 30, 1998, to 50% in the comparable 1999 period, and to 25% in
the comparable 2000 period. The SVP will be required to remain an employee of
the Company through 2000, and may remain an employee or consultant thereafter.
Pursuant to this Agreement, in the first quarter of 1999 $375,000 of
compensation expense was recorded.
Note 6: Treasury Stock
On December 9, 1998, the Company repurchased 249,000 shares of its common stock
at a market price of $8.75 per share.
8
<PAGE>
Notes to Condensed Consolidated Financial Statements (cont'd)
Note 7: Net Income Per Share
Basic earnings per share amounts were computed based on 9,338,401 and 9,587,401
weighted average common shares outstanding in the first quarters of 1999 and
1998, respectively.
Diluted earnings per share amounts were computed based on 9,345,123 and
9,607,858 weighted average common shares outstanding in the first quarters of
1999 and 1998, respectively. The shares outstanding have been adjusted to
reflect the impact of in the money options, using the Treasury Stock method.
See Exhibit 11 for further details on the computation of net income per share.
Note 8: Income Taxes
The Company records income taxes in accordance with the provisions of SFAS No.
109. Accordingly, deferred taxes are provided to reflect temporary differences
between the recognition of income and expense for financial reporting and tax
purposes.
9
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition", and elsewhere in this Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; the loss of, or the failure to replace, any significant clients;
changes in the relative investment performance of client or firm accounts and
changes in the financial marketplace, particularly in the securities markets;
the Year 2000 Issue. These forward-looking statements speak only as of the date
of this Quarterly Report. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
10
<PAGE>
Part I. Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
I. General
Assets totaled $98.2 million at March 31, 1999, compared with $90.7
million at December 31, 1998, and book value per share totaled $9.36 at
March 31, 1999, compared with $8.78 at December 31, 1998.
Cash and cash equivalents totaled $3.5 million at March 31, 1999,
compared with $4.0 million at December 31, 1998. Investments (at
market) totaled $76.6 million at March 31, 1999, compared with $73.8
million at the end of 1998. Unrealized gains on investments, net of
deferred taxes, totaled $9.4 million at March 31, 1999, compared with
$7.5 million at December 31, 1998.
Owing to the loss of sizeable institutional accounts in 1997 and 1998,
and some withdrawals from existing accounts, partially offset by
positive performance results in managed accounts over the last year,
assets under management at March 31, 1999 totaled $2.48 billion, 8%
less than a year ago, and 3% greater than year-end 1998. Account losses
have been the result of below market performance for equity accounts in
1996 and 1997.
Net income totaled $2.9 million ($.31 per share diluted) for the three
months ended March 31, 1999, compared with $1.8 million ($.19 per share
diluted) for the same period in 1998. For the 1999 quarter, income from
money management operations before taxes ("operating income") decreased
61% compared with the same period in 1998, while other income increased
121%. Excluding non-cash compensation charges (see Note 3) recorded in
the first quarters of 1999 and 1998, and the 1999 charge related to
payments to a senior officer under a revised facilities agreement
involving certain managed accounts (the "SVP Accounts" - see Note 5),
operating income declined 17% in the 1999 quarter compared with the
first quarter of 1998.
As previously reported, the Company's then second largest account ($311
million in managed assets) terminated at the end of May, 1998. This
account generated 3.8% of operating revenues in 1997, and 2.8% in 1998.
While total operating revenues may decline in 1999, the Company intends
to continue to keep operating expenses under close control.
II. Assets Under Management
Assets under management totaled $2.48 billion at March 31, 1999,
compared with $2.41 billion on December 31, 1998, and $2.70 billion on
March 31, 1998.
Average assets under management decreased 7% to $2.47 billion in the
first quarter of 1999, compared with $2.67 billion in the comparable
period a year ago. However, average managed assets increased 10%
compared with the fourth quarter of 1998. Assets under management at
March 31, 1999 totaled $2.48 billion, or 3% greater than at the end of
1998 and 8% less than a year ago. Net client withdrawals totaling $691
million over the last twelve months more than offset strong performance
results in equity and balanced accounts.
During the first quarter of 1999, new accounts totaled $14 million, net
withdrawals out of client accounts totaled $108 million, and
performance added $163 million to managed assets.
11
<PAGE>
In the twelve months ended March 31, 1999, new accounts totaled $26
million, net withdrawals out of client accounts totaled $717 million,
and performance added $469 million to managed assets.
Account losses and net cash withdrawn from existing accounts are
primarily the result of the 1996 and 1997 below market performance for
equity accounts. Performance over the last fifteen months was strong on
an absolute and relative basis, and the Company's peer group rankings
continue to improve. Net client withdrawals have slowed substantially
since June 30, 1998.
III. Results of Operations
Quarterly Comparison
In the first quarter of 1999 operating revenues totaled $4.2 million,
compared with $4.4 million a year ago, based on the 7% decline in
average managed assets from a year ago.
Operating expenses increased 13% to $3.8 million, compared with $3.4
million a year ago. After adjusting for the non-cash compensation
charges, and SVP charges, operating expenses increased 2% to total $2.9
million, compared with $2.8 million in the 1998 quarter. As a result,
operating income as adjusted declined 17% to $1.4 million (32% margin),
compared with $1.6 million (37% margin) in the 1998 quarter.
Other income totaled $4.7 million in the 1999 quarter, which included
$1.9 million in net realized capital gains and $2.6 million in net
unrealized capital gains. Other income totaled $2.1 million for the
same period a year ago, reflecting net realized and unrealized capital
gains of $1.6 million.
The following table depicts variances in significant income statement
items for the three months ended March 31, 1999 compared with the same
period in 1998. Explanations of the variances follow the table.
<TABLE>
<CAPTION>
(000's)
3 Months Ended March 31
----------------------- Percentage
1999 1998 Change
----- ------ ------
<S> <C> <C> <C>
A. Advisory fees $3,823 $3,996 -4%
B. Employees' compensation 2,835 2,479 +14
C. Non-compensation expenses 971 893 +9
D. Other income, net 4,702 2,127 +121
F. Income taxes 2,222 1,408 +58
</TABLE>
o The 4% decrease in advisory fees is due to the 7% decline in
average assets under management previously discussed, partially
offset by an increase in the weighted fee yield.
12
<PAGE>
o The increase in employees' compensation is the result of $375,000
in SVP charges recorded in the 1999 quarter, compared with none in
the 1998 period. Excluding this charge, compensation expense
decreased 1%.
o Non-compensation expenses increased from a year ago due to a 33%
increase in selling and promotional expenses related to expanded
marketing efforts, and one-time increases in various professional
fees.
o Other income more than doubled from a year ago due to the
increases in net realized and unrealized capital gains previously
discussed.
o Income taxes increased due to the 60% increase in pre-tax income.
IV. Liquidity and Capital Resources
At March 31, 1999 the Company had cash and cash equivalents of $3.5
million, compared with $4.0 million at the end of 1998. Operating
activities generated net cash outflows of $268,000 in the three months
ended March 31, 1999, compared with $1.2 million of inflows in the same
period in 1998, reflecting the changing levels of operating income and
net income over those periods. Net cash used in investing activities
totaled $228,000 in the 1999 period, compared with $1.8 million in the
similar 1998 period.
Investments in marketable securities aggregated $76.6 million at March
31, 1999, compared with $73.8 million at the end of 1998. During 1998,
the Company invested $9.1 million in its new mutual fund, the
Atalanta/Sosnoff Fund, and an additional $3 million in investment
partnerships. At the start of 1999, the Company invested an additional
$3 million in investment partnerships.
Shareholders' equity totaled $87.4 million at March 31, 1999, compared
with $82.0 million at the end of 1998, primarily from net income of
$2.9 million recorded in the first three months of 1999 and unrealized
gains in the investment portfolio. The Company has adopted SFAS No.
115, requiring it to reflect a net unrealized gain of $9.4 million in
shareholders' equity at March 31, 1999, compared with $7.5 million at
December 31, 1998.
At March 31, 1999, the Company's investment portfolio at market totaled
$92.6 million (cost basis $71.0 million), compared with $85.4 million
(cost $70.3 million) at the end of 1998, comprised of cash and cash
equivalents, corporate and convertible debt, large-cap equity
securities, and investments in limited partnerships and the
Atalanta/Sosnoff Fund. At March 31, 1999, the Company was invested in
16 separate large-cap securities, in a more concentrated fashion of
what it does for its managed client accounts. The largest position was
in Microsoft, at 15.6% of the portfolio, with an unrealized gain of
$5.9 million at quarter-end.
If the equity market (defined as the S&P 500 index) were to decline by
10%, the Company might experience unrealized losses of approximately $9
million; if the market were to decline by 20%, the Company might
experience unrealized losses of $18 million. However, incurring
unrealized losses of this magnitude is unlikely with active management
of the portfolio. Since the positions are primarily large-cap holdings,
they can be sold easily on short notice with little market impact.
Ultimately, the Company will raise and hold cash to reduce market risk.
13
<PAGE>
In 1998, Atalanta paid a special dividend of $.25 per share.
Additionally, in December, 1998, the Company repurchased 249,000 shares
of its common stock at a market price of $8.75 per share. At March 31,
1999, there were no liabilities for borrowed money.
V. Year 2000
As all businesses in the securities industry, the Company's operating
businesses are materially dependent on the efficient and continuous
operation of their information technology systems (consisting of
computer software, hardware, local and remote communications networks)
and the imbedded microprocessors in its equipment. Substantially all
aspects of the securities industry's activities are time sensitive,
including the execution, processing, settlement and recording of
securities transactions, the maintenance and transmission of
information about such transactions and the collection and analysis of
information about issuers, markets and economies. Moreover, all of
these functions are highly interdependent and rely on the functioning
of the information technology systems of other organizations in the
securities industry, including counterparties, brokers, clearing agents
and custodians.
Because of the potential impact of the Year 2000 Issue ("Y2K") on the
securities industry, the Securities and Exchange Commission and other
regulatory and self-regulatory securities organizations have monitored
and required reports from their members concerning Y2K and encouraged
planning for system wide function tests. Y2K arises because of concern
that there is widely distributed in information technology systems and
imbedded microprocessors date recognition and processing functions
which designate and recognize a year by the year's last two digits and
therefore would not distinguish a year in the twenty-first century from
one in the twentieth century.
The Company has conducted a full assessment of its information
technology systems and imbedded technology to determine whether they
are Y2K compliant (i.e., that they will recognize and specify dates to
properly function in the year 2000 and thereafter). The remediation and
testing of all existing critical was substantially completed by the end
of 1998. Point-to-point testing with the systems of third parties with
which our existing systems interface is also substantially completed.
While the Company's existing critical systems are mostly Y2K compliant,
to reduce the cost of maintenance associated with such systems, the
Company decided to replace its two core critical systems, trading and
portfolio accounting, with off-the-shelf commercial software packages
that are also Y2K compliant. This process is well under way and we
expect to make a complete conversion to these two new systems by June
30, 1999.
Implementation of remediation and testing of non-critical systems is
substantially complete. Because much of our information technology
systems are proprietary and maintained by its designer and MIS
employees, Y2K compliance has been conducted in the normal course of
business without material incremental expenditures or personnel. In the
cases where external support in the form of software upgrades or
services are required, such support was provided by suppliers in the
fourth quarter of 1998. Based on its progress to date, we do not
believe that the costs of Y2K compliance will have a material effect on
the Company's financial position, results of operations or cash flow.
14
<PAGE>
However, the Company is closely monitoring the progress of third
parties' information technology systems in Y2K compliance on which its
systems are dependent. It has solicited and received assurances of
progress from such third parties and is evaluating their responses. The
Company has developed contingency plans in the event of Y2K compliance
failure by such third parties based on more traditional systems for
securities execution, processing, settlement and record keeping which
it intends to continue to develop based on the results of testing this
year. We are not currently in a position to assess the effect of
critical third parties' ability to achieve Y2K compliance but believe
that the impact of failure would be adverse to our business.
15
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Default upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
At the Company's Annual Meeting of Stockholders held
on May 6, 1999, the election of the Board of
Directors' nominees was approved, the amendment to
the Company's Management Incentive Plan was approved,
and the ratification of the appointment of the
Company's independent auditors was approved.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit
Number Description
------- -----------
2 None.
4 None.
11 Computation of Earnings per Share.
15 None.
18 None.
19 None.
20 None.
23 None.
24 None.
25 None.
27 Financial Data Schedule
28 None.
Reports on Form 8-K: None.
16
<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.
Atalanta/Sosnoff Capital Corporation
Date: May 7, 1999 /s/ Martin T. Sosnoff
----------------------
Martin T. Sosnoff
Chairman of the Board and
Chief Executive Officer
Date: May 7, 1999 /s/ Anthony G. Miller
----------------------
Anthony G. Miller
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
------- ----------- ----
2 None
4 None
11 Computation of Earnings per Share 19
15 None
18 None
19 None
20 None
23 None
24 None
25 None
27 Financial Data Schedule 20
28 None
Reports on Form 8-K: None
18
<PAGE>
EXHIBIT 11
ATALANTA/SOSNOFF CAPITAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Earnings-
Net income $2,896,658 $1,790,365
========== ==========
Basic earnings per share:
Shares - weighted average number of common 9,338,401 9,587,401
shares outstanding
Basic earnings per share: $ 0.31 $ 0.19
========== ==========
Dilutive earnings per share:
Common stock equivalents - options 6,722 20,457
Shares - weighted average number of common shares
and common equivalent shares outstanding 9,345,123 9,607,858
========== ==========
Dilutive earnings per share: $ 0.31 $ 0.19
========== ==========
Antidilutive options as of March 31 200,000 --------
========== ==========
</TABLE>
See Note 7 of the Notes to Condensed Consolidated Financial Statements
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY REPORT ON FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FINANCIAL STATEMENTS IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,498
<SECURITIES> 87,865
<RECEIVABLES> 3,832
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 95,195
<PP&E> 1,345
<DEPRECIATION> (464)
<TOTAL-ASSETS> 98,169
<CURRENT-LIABILITIES> 10,768
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 87,305
<TOTAL-LIABILITY-AND-EQUITY> 98,169
<SALES> 4,223
<TOTAL-REVENUES> 8,946
<CGS> 0
<TOTAL-COSTS> 3,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 5,119
<INCOME-TAX> 2,222
<INCOME-CONTINUING> 2,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,897
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>