<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 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 0-6877
SANTA FE FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 95-2452529
(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
(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
--- --- --- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding at May 10, 1996
- - ---------------------- ----------------------------
$.10 Par Value 638,019 shares
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
SANTA FE FINANCIAL CORPORATION & SUBSIDARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION> March 31 December 31
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,504,364 $ 7,016,804
Other current assets 2,982 23,245
Deferred income taxes 45,480 45,480
Current portion of notes receivable, net 11,423 15,119
----------- -----------
Total currents assets 9,564,249 7,100,648
Investments
Investment in Justice Investors 4,498,905 4,457,850
Other investments 2,431 2,431
----------- -----------
4,501,336 4,460,281
Property, Furniture and Fixture
Furniture and fixtures 97,649 94,257
Less allowances for depreciation (77,249) (75,287)
----------- -----------
20,400 18,970
Other assets
Notes receivable 130,636 130,636
Deferred income taxes 1,207 1,207
----------- -----------
Total assets $ 14,217,828 $ 11,711,742
=========== ===========
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued expenses $ 70,935 $ 68,163
Income taxes payable 102,000 81,203
---------- ----------
Total current liabilities 172,935 149,366
Minority interest 3,001,720 3,045,360
Shareholders' equity
Common stock - par value $.10 per share;
Authorized 1,500,000 issued & outstanding
548,019 at Dec. 31, 1995, and 638,019 at
Mar 31, 1996 63,802 54,802
Additional paid-in capital 8,277,137 5,856,137
Retained earnings 2,702,234 2,606,077
----------- -----------
Total shareholders' equity 11,043,173 8,517,016
----------- -----------
Total liabilities & shareholders' equity $ 14,217,828 $ 11,711,742
=========== ===========
See accompanying notes
</TABLE>
<PAGE> 3
Santa Fe Financial Corporation & Subsidiary
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION> First Quarter ending March 31
<S> <C> <C>
1996 1995
Revenue
Partnership income $ 332,619 $ 304,659
Interest income 99,294 102,513
Other income 29,048 121,851
--------- ---------
Total income 460,961 529,023
Cost and expenses
Legal and professional 27,250 49,105
Litigation - GPG 68,531 24,041
General and administrative 101,007 85,809
Depreciation 1,962 1,772
--------- ---------
198,750 160,727
Income before income taxes &
minority interest 262,211 368,296
Income taxes 102,000 104,920
--------- ---------
Income before minority interest 160,211 263,376
Minority interest 64,057 55,747
--------- ---------
Net income $ 96,154 $ 207,629
========= =========
Net income per share $ 0.17 $ 0.39
========= =========
Weighted average shares
outstanding 567,799 538,019
========= =========
See accompanying notes.
</TABLE>
<PAGE> 4
SANTA FE FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION> Three months ending March 31
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 96,154 $ 207,629
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Equity in net income of limited (332,619) (304,659)
partnership
Minority interest (43,640) (38,488)
Amortization (22,176) (22,171)
Depreciation 1,962 1,772
Decrease in other assets 20,266 47,749
Increase in accounts payable and
accrued expenses 2,772 18,242
Increase in deferred income taxes
and income taxes payable
taxes payable 20,797 93,865
---------- ----------
Net cash (used in) operating activities (256,484) 3,939
INVESTING ACTIVITIES
Cash distributions from limited partnership 313,740 313,740
Purchase of accounting software (3,392) -
---------- ---------
Net cash provided by financing
activities 310,348 313,740
----------- ----------
FINANCING ACTIVITIES
Sale of stock 2,430,000 2,295,834
Dividends paid - (274,010)
Proceeds from bank loan - 126,000
Proceeds from receivable 3,696 202
----------- -----------
Net cash provided by financing
activities equivalents 2,433,696 2,148,026
Increase in cash & cash equivalents 2,487,560 2,465,705
----------- -----------
Cash & cash equivalents at beginning
of period 7,016,804 4,795,954
----------- -----------
Cash & cash equivalents at end of period $ 9,504,364 $ 7,261,659
=========== ===========
See accompanying notes.
<PAGE> 5
<FN>
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
---------------------------------------------------------
The financial statements included herein have been prepared by Santa Fe
Financial Corporation. (the "Company"), without audit, according to the
rules and regulations of the Securities and Exchange Commission. Certain
information and foot note 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 months ended March 31, 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. Sale of Stock
-------------
On March 11, 1996, the InterGroup Corporation exercised the outstanding
warrants to purchase 90,000 shares of the Company's common stock at $27.00
per share for proceeds of $2,430,000.
</TABLE>
<PAGE> 6
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
For the First Three Months of 1996 Compared to 1995
Gross revenues for the Company for the first three months of 1996 as compared
to the first three months of 1995 declined approximately 12.9% primarily due
to a nonrecurring recovery on a bankruptcy claim in the amount of $95,083.45
during the first quarter of 1995. The increase in costs and expenses of
approximately 23.7% can be attributed to the cost of the litigation filed by
Guinness Peat Group plc ("GPG") which is discussed in "Legal Proceedings" in
Part II of this report. As a result, income before income taxes and minority
interest decreased approximately 28.8% and net income decreased 53.7%.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal sources of revenue continue to be derived from
Portsmouth Square's investment in the Justice Investors limited partnership
and income received from investment of its cash assets. The partnership
derives most of its income from its lease with Holiday Inn.
On March 11, 1996 The InterGroup Corporation exercised its warrants to
purchase 90,000 shares of the Company's common stock at $27.00 per share.
The exercise of those warrants resulted in the investment of $2,430,000
in the Company, which further enhances its liquidity and book value.
Expenses inflicted on the Company as a result of the litigation filed by GPG
will continue to impact operating results. However, management believes
that the resources of the Company are currently sufficient to meet all of
its short and long term obligations.
<PAGE> 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, Guinness Peat Group plc ("GPG") and its subsidiary,
Allied Mutual Insurance Services Limited ("AMI") had filed a shareholders
derivative suit against certain directors of the Company, The InterGroup
Corporation ("InterGroup") and the Company as a nominal defendant. The trial
date in that action has been continued to September 6, 1996.
On May 3, 1996, the Superior Court affirmed its prior telephonic ruling of
April 5, 1996 granting InterGroup's motion for summary judgment, in its
entirety, on the grounds that none of the causes of action asserted against
InterGroup in GPG's first amended complaint had any merit. GPG has filed a
motion to seek leave to amend its complaint which is scheduled to be heard on
May 24, 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on May 7, 1996,
at The Westgate Hotel in San Diego, California. At that meeting all of
management's nominees, John V. Winfield, Janice Braly-Nelsen and William J.
Nance were elected Directors of Santa Fe to serve until the next Annual
Meeting. The shareholders also voted to ratify the appointment of Ernst &
Young LLP as the Company's independent auditor for the year ending
December 31, 1996. A tabulation of the votes is as follows:
<TABLE>
<CAPTION>
Proposal (1) - Directors: VOTES FOR AGAINST ABSTAINED BROKER NONVOTE
<S> <C> <C> <C>
John V. Winfield 432,662 51,020
Janice Braly-Nelsen 432,662 51,020
William J. Nance 432,222 51,460
Proposal (2) - Accountants:
Ernst & Young LLP 439,580 625 43,477 0
</TABLE>
Item 5. Other Information
At a meeting of the Board of Directors held on May 7, 1996, after the Annual
Meeting of Shareholders, the following persons were elected as officers of
the Company: John V. Winfield, President and Chairman of the Board;
William J. Nance, Vice President; and L. Scott Shields, Secretary and
Treasurer.
<PAGE> 8
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 filed the following reports on Form 8-K during the
period covered by this report:
DATE OF REPORT ITEM(S) REPORTED
January 22, 1996 Declaration of dividend and update
on derivative suit
March 11, 1996 Exercise of Warrants by The
InterGroup Corporation
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.
SANTA FE FINANCIAL CORPORATION
(Registrant)
Date: May 13, 1996
by /s/ John V. Winfield
- - ----------------------------------
John V. Winfield, President
and Chairman of the Board
Date: May 13, 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 CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME
OF SANTA FE FINANCIAL CORPORATION AND SUBSIDIARY SET FORTH IN ITS
FORM 10-Q REPORT FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q REPORT.
<CIK> 0000086759
<NAME> SANTA FE FINANCIAL CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 9504364
<SECURITIES> 0
<RECEIVABLES> 142059
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14063154
<PP&E> 97649
<DEPRECIATION> 77249
<TOTAL-ASSETS> 14217828
<CURRENT-LIABILITIES> 172935
<BONDS> 0
0
0
<COMMON> 63802
<OTHER-SE> 13981091
<TOTAL-LIABILITY-AND-EQUITY> 14217828
<SALES> 332619
<TOTAL-REVENUES> 460961
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 198750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 262211
<INCOME-TAX> 102000
<INCOME-CONTINUING> 262211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96154
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
