<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-4057
PORTSMOUTH SQUARE, INC.
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(Exact Name of Registrant as Specified in its Charter)
California 94-1674111
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
Mailing Address: P.O. Box 80037
San Diego, CA 92138
Street Address: 2251 San Diego Avenue, Suite A-151
San Diego, CA 92110
(619) 298-7201
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(Registrant's Telephone Number, Including Area Code)
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, and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
The number of shares outstanding of the issuer's common stock as of
August 13, 1996: Common Stock, no par value - 750,000 shares
Page 1 of 9
<PAGE> 2
INDEX
PORTSMOUTH SQUARE, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Balance sheets--June 30, 1996 (Unaudited)
and December 31, 1995 3
Income statements (Unaudited)--Quarters ended
June 30, 1996 and 1995 and for the Six Months
ended June 30, 1996 and 1995 4
Statements of cash flow (Unaudited)--Six Months
ended June 30, 1996 and 1995 5
Notes to financial statements--June 30, 1996 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
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<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
Portsmouth Square, Inc.
Balance Sheet
<TABLE>
<CAPTION> June 30, December 31,
1996 1995
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(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 938,976 $ 1,206,138
Marketable securities 204,500 ---
Deferred income taxes 45,480 45,480
Receivable from Justice Investors -- 18,000
Income taxes receivable 3,700
---------- ----------
Total current assets 1,192,656 1,269,618
Investment in Justice Investors 410,327 364,259
Deferred income taxes 1,207 2,041
---------- ----------
Total assets $ 1,604,190 $ 1,635,084
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Amount owed to Santa Fe $ 20,422 $ 35,951
Acccounts payable and accrued expenses 18,041 148
Income taxes payable -- 81,203
---------- ----------
Total current liabilities 38,463 117,302
Shareholders' equity:
Common stock, no par value:
Authorized shares - 750,000
Issued and outstanding shares - 750,000 2,092,300 2,092,300
Additional paid-in capital 1,240,291 1,240,291
Accumulated deficit (1,766,864) (1,814,809)
---------- ----------
Total shareholders' equity 1,565,727 1,517,782
---------- ----------
Total liabilities and shareholders' equity $ 1,604,190 $ 1,635,084
========== ==========
See accompanying notes.
</TABLE>
<PAGE> 4
Portsmouth Square, Inc.
Income Statement
(Unaudited)
<TABLE>
<CAPTION> Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues:
Partnership income $ 340,929 $ 304,928 $ 673,548 $ 609,587
Interest income 15,723 16,243 32,756 33,568
Miscellaneous income 6,000 1,500 12,872 6,000
-------- -------- -------- --------
362,652 322,671 719,176 649,155
-------- -------- -------- --------
Cost and expenses:
General and administrative 65,023 36,329 112,352 79,005
Audit and professional 14,455 9,000 25,580 30,403
-------- -------- -------- --------
79,478 45,329 137,932 109,408
-------- -------- -------- --------
Income before income taxes 283,174 277,342 581,244 536,747
Income taxes 113,661 111,320 233,300 215,440
-------- -------- -------- --------
Net income $ 169,513 $ 166,022 $ 347,944 $ 321,307
======== ======== ======== ========
Net income per share $ 0.23 $ 0.22 $ 0.46 $ 0.43
======== ======== ======== ========
Dividends per share $ -- $ -- $ 0.40 $ 0.35
======== ======== ======== ========
See accompanying notes.
</TABLE>
<PAGE> 5
Portsmouth Square, Inc.
Statement of Cash Flow
(Unaudited)
<TABLE>
<CAPTION> Six Months Ended June 30,
1996 1995
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<S> <C> <C>
Operating activities
Net income $ 347,944 $ 321,307
Adjustments to reconcile net income to net
cas (used in) operating
activities:
Equity in net income of Justice Investors (673,548) (609,587)
Decrease in accounts receivable 18,000 -
Change in accounts payable, accrued
expenses and income taxes (82,538) (18,826)
---------- ----------
Net cash provided by (used in) operating
activities (390,142) (307,106)
---------- ----------
Investing activities
Cash distribution from Justice Investors 627,480 627,480
Purchase of securities (204,500) --
---------- ----------
Net cash provided by investing activities 422,980 627,480
---------- ----------
Financing activities
Dividends paid (300,000) (262,500)
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Net cash used in financing activities (300,000 (262,500)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (267,162) 57,974
Cash and cash equivalents at the beginning
of the year 1,206,138 1,103,421
---------- ----------
Cash and cash equivalents at the end of the
period $ 938,976 $ 1,161,295
========== ==========
See accompanying notes.
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<PAGE> 6
PORTSMOUTH SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
---------------------------------------------------------
The financial statements included herein have been prepared by Portsmouth
Square, Inc. (the "Company"), without audit, according to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes the disclosures that are made are adequate to make the
information presented not misleading. Further, the financial statements
reflect, in the opinion of management, all adjustments (which included only
normal recurring adjustments) necessary to state fairly the financial
position and results of operations as of and for the periods indicated.
It is suggested that these financial statements be read in conjunction with
the audited financial statements and the notes therein included in the
Company's Form 10-K.
The results of operations for the three and six months ended June 30, 1996
are not necessarily indicative of results to be expected for the full fiscal
year ending December 31, 1996.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard No. 121, (Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of). The adoption of the
new standard had no effect on the financial statements.
2. Litigation
----------
On March 26, 1996, a suit was filed in the San Francisco Superior Court
against the Company and more than 60 other defendants alleging injuries
suffered by the plaintiff as a result of exposure to asbestos containing
materials. The Company is named among the "premises defendants" as opposed
to the "manufacturing/distributing defendants". The Complaint seeks an
unspecified amount of damages. The Company is being defended through its
insurance carrier under a reservation of rights. Based on currently
available facts, it is impossible to estimate the amount of the Company's
liability, if any, at this time.
<PAGE> 7
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements and Projections
The Company may from time to time make forward-looking statements and
projections concerning future expectations. When used in this discussion,
the words "estimate," "project," "anticipate" and similar expressions, are
intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties, including those discussed below and in
the Company's Form 10-K for the year ended December 31, 1995, that could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as to the date hereof. The portions of the Form 10-K
referred to in this paragraph are expressly incorporated herein by reference.
The Company undertakes no obligation to publicly release the results of any
revisions to those forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Registrant's major source of revenue continues to be its 49.8% investment in
Justice Investors, a limited partnership, which derives the majority of its
income from a lease with Holiday Inn and a lease with Evon Garage Corporation.
The Company also derives revenue from the investment of its cash and securities
assets.
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
Comparison of the second quarter results of 1996 to the second quarter of 1995
shows that total revenues increased 12.3%, expenses increased approximately
75.3%, income before taxes increased 2.1% and net income increased 2.1%.
The increase in total revenues reflects a decline in expenses at the
partnership level, primarily attributable to the refinancing of the hotel
asset in 1995, and an increase in garage revenues. The increase in total
revenues also reflects an increase in fees received by the Company from the
partnership. The increase in expenses is primarily attributable to higher
costs associated with the Company's annual meeting this year and the payment
of director's fees during the quarter to both incoming and outgoing directors.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Comparison of the results of operations for the first six months of 1996
to the first six months of 1995, reveals that total revenues increased 10.8%,
expenses increased approximately 26.1%, income before taxes increased 8.3%
and net income increased 8.3%. The increase in total revenues reflects a
decline in expenses at the partnership level, primarily attributable to the
refinancing of the hotel asset in 1995, and an increase in garage revenues.
The increase in expenses is attributable to higher costs associated with the
Company's annual meeting this year and the payment of director's fees during
the second quarter to both incoming and outgoing directors.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1996, the Company had cash, cash equivalents and marketable
securities of $1,143,476, after the payment of a cash dividend equal to $.40
per common share during the first quarter.
The Company remains liquid with a current ratio of 31 to 1. Management
believes that its capital resources are currently adequate to meet its short
and long term obligations. The Company is diversifying its investment of its
cash assets in an effort to obtain an overall higher yield while seeking to
minimize the associated increased degree of risk. The Company may also make
limited investments in equities when deemed appropriate.
At its July 25, 1996 meeting of its Board of Directors, the Company declared
a regular dividend of $.25 per common share which will be paid on
September 3, 1996 to shareholders of record as of August 12, 1996.
<PAGE> 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 30, 1996, the Company was served with a personal injury action
entitled, Taylor v. Raybestos-Manhattan, et al., San Francisco Superior
Court Case No. 977148. The suit, which was filed on March 26, 1996, names
more than 60 defendants, including Evon Garage Corporation, and alleges
injuries suffered as a result of exposure to asbestos containing materials.
The Company and Evon Garage Corporation are named among the premises
defendants. The Complaint seeks an unspecified amount of damages. The
Company is being defended through its insurance carrier under a reservation
of rights. Based on currently available facts, it is impossible estimate the
amount of the Company's liability, if any, at this time.
Item 4. Submission of Matters to a Vote of Security-Holders.
The information called for by this item, relating to the Company's Annual
Meeting of Shareholders held on May 7, 1996, was previously reported in the
Company's Form 10-Q Report for the quarter ended March 31, 1996 and is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - the Financial Data Schedule is filed
as an exhibit to this report.
(b) Registrant did not file any Reports on Form 8-K
during the period covered by this report.
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.
PORTSMOUTH SQUARE, INC.
(Registrant)
Date: August 14, 1996
by /s/ John V. Winfield
- -------------------------------------
John V. Winfield, President
and Chairman of the Board
Date: August 14, 1996
by /s/ L. Scott Shields
- -------------------------------------
L. Scott Shields, Treasurer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AND INCOME STATEMENT OF PORTSMOUTH
SQUARE, INC. SET FORTH IN ITS FORM 10-Q REPORT FOR THE QUARTERLY
PERIOD ENDED June 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q REPORT.
<CIK> 0000079661
<NAME> PORTSMOUTH SQUARE, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 938976
<SECURITIES> 204500
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1192656
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1604190
<CURRENT-LIABILITIES> 38463
<BONDS> 0
0
0
<COMMON> 2092300
<OTHER-SE> (488110)
<TOTAL-LIABILITY-AND-EQUITY> 1604190
<SALES> 673548
<TOTAL-REVENUES> 719176
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 137,932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 581244
<INCOME-TAX> 233300
<INCOME-CONTINUING> 347944
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 347944
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
