-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OKSbHseZySOM8mx2RJwAlR9cTRgaj5OVsQpBX93S6k2XBqw5AMk3ciszl/TusT1F rdig+3Q5KPDpzSnzcrvAJw== 0000086759-96-000008.txt : 19961118 0000086759-96-000008.hdr.sgml : 19961118 ACCESSION NUMBER: 0000086759-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANTA FE FINANCIAL CORP CENTRAL INDEX KEY: 0000086759 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 952452529 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06877 FILM NUMBER: 96664471 BUSINESS ADDRESS: STREET 1: P O BOX 80037 CITY: SAN DIEGO STATE: CA ZIP: 92138-0037 BUSINESS PHONE: 6192987201 MAIL ADDRESS: STREET 1: PO BOX 80037 CITY: SAN DIEGO STATE: CA ZIP: 92138-0037 10-Q 1 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 September 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 ----- ----- 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 92138-0037 Street Address: 2251 San Diego Avenue, Suite A-151 San Diego, CA 92110-2926 (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 --- --- --- --- The number of shares outstanding of the issuer's common stock as of October 13, 1996: Common Stock, $.10 par value - 638,019 shares Page 1 of 10 2 INDEX SANTA FE FINANCIAL CORPORATION AND SUBSIDIARY
PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Consolidated Balance Sheets--September 30, 1996 (Unaudited) and December 31, 1995 3 Consolidated Statements of Income (Unaudited)--Quarters ended September 30, 1996 and 1995 and for the Nine Months ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flow (Unaudited)--Nine Months ended September 30, 1996 and 1995 5 Notes to Consolidated Financial Statements--September 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 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 10
3 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements SANTA FE FINANCIAL CORPORATION & SUBSIDARY CONSOLIDATED BALANCE SHEET
September 30, December 31, 1996 1995 (Unaudited) -------------- ------------- ASSETS Current assets Cash and cash equivalents $ 2,776,957 $ 7,016,804 Marketable securities 6,563,983 -- Other current assets 5,438 23,245 Deferred income taxes 45,480 45,480 Current portion of notes receivable, net 3,874 15,119 ---------- ---------- Total currents assets 9,395,732 7,100,648 ---------- ---------- Investments Investment in Justice Investors 4,887,259 4,457,850 Other investments 2,431 2,431 ---------- ---------- 4,889,690 4,460,281 ---------- ---------- Property, furniture and fixtures Furniture and fixtures 97,649 94,257 Less allowances for depreciation (81,173) (75,287) ---------- ---------- 16,476 18,970 ---------- ---------- Other assets Notes receivable 230,683 130,636 Deferred income taxes 1,207 1,207 ----------- ----------- Total assets $ 14,533,788 $ 11,711,742 =========== =========== Liabilities and shareholders' equity Current liabilities Accounts payable and accrued expenses $ 113,290 $ 68,163 Income taxes payable 110,200 81,203 ----------- ----------- Total current liabilities 223,490 149,366 Minority interest 3,124,945 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 September 30, 1996 63,802 54,802 Additional paid-in capital 8,277,137 5,856,137 Retained earnings 2,844,414 2,606,077 ----------- ----------- Total shareholders' equity 11,185,353 8,517,016 ----------- ----------- Total liabilities & shareholders' equity $ 14,533,788 $ 11,711,742 =========== =========== See accompanying notes to consolidated financial statements.
4 SANTA FE FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Quarter Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 -------- --------- -------- ----------- Revenues Partnership income $ 630,553 $ 424,913 $1,304,101 $1,034,500 Interest income 167,204 107,813 393,125 320,388 Dividends 5,200 -- 4,000 -- Other income 28,176 23,676 85,400 171,618 -------- -------- --------- --------- 831,133 556,402 1,786,626 1,526,506 -------- -------- --------- --------- Costs and expenses General and administrative 87,912 72,561 310,762 226,010 Audit and legal 16,730 14,700 62,122 83,305 Litigation - GPG 157,060 78,024 321,925 223,400 Depreciation 1,962 1,254 5,885 3,941 -------- -------- --------- --------- 263,664 166,539 700,694 536,656 -------- -------- --------- --------- Income before income taxes and minority interest 567,469 389,863 1,085,932 989,850 Income taxes 249,000 162,000 456,000 360,920 -------- -------- --------- --------- Income before minority interest 318,469 227,863 629,932 628,930 Minority interest 129,681 85,570 254,593 200,919 -------- -------- --------- --------- Net income $ 188,788 $ 142,293 $ 375,339 $ 428,011 ======== ======== ========= ========= Net income per share $ 0.30 $ 0.26 $ 0.61 $ 0.79 ======== ======== ========= ========= Weighted average shares outstanding 638,019 548,019 614,698 544,722 ======== ======== ========= ========= Dividends per share $ -- $ 0.40 $ 0.25 $ 0.90 ======== ======== ========= ========= See accompanying notes to consolidated financial statements.
5 SANTA FE FINANCIAL CORPORATION & SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
Nine Months Ended September 30, 1996 1995 ----------- ----------- OPERATING ACTIVITIES Net income $ 375,339 $ 428,011 Adjustments to reconcile net income to net cash used in operating activities: Equity in net income of limited (1,304,101) (1,034,500) partnership Minority interest 79,585 12,448 Amortization (66,528) (66,528) Depreciation 5,886 3,947 Decrease in other assets 17,761 46,837 Increase in accounts payable and expenses 45,127 9,771 Change in deferred income taxes and income and income taxes payable and receivable 28,997 31,810 ---------- --------- Net cash used in operating activities (817,934) (568,210) INVESTING ACTIVITIES Cash distributions from limited partnership 941,220 941,220 Purchase of other assets (3,392) (9,146) Purchase of securities (6,563,983) - ---------- --------- Net cash provided by (used in) financing activities (5,626,155) 932,074 ----------- ---------- FINANCING ACTIVITIES Sale of stock 2,430,000 2,295,835 Increase notes receivable (100,000) - Dividends paid (137,003) (274,010) Proceeds from receivable 11,245 11,579 ----------- ----------- Net cash provided by financing activities 2,204,242 2,033,404 ----------- ----------- Decrease (increase) in cash & cash equivalents (4,239,847) 2,397,268 Cash & cash equivalents at beginning of period 7,016,804 4,795,954 ----------- ----------- Cash & cash equivalents at end of period $ 2,776,957 $ 7,193,222 =========== =========== See accompanying notes to consolidated financial statements.
6 SANTA FE FINANCIAL CORPORATION AND SUSIDIARY NOTES TO CONSOLIDATED 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 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 nine months ended September 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. 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. 3. Additional Rent --------------- Partnership income for the third quarter ended September 30, 1996 includes an estimated $262,000 relating to additional rents due, as determined on an annual basis, in accordance with the partnership's lease with Holiday Inn. 7 Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Foward-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 estimated additional rents due as discussed below, uncertainties such as general economic conditions, securities markets, litigation and other factors discussed 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 The Company's principal sources of revenue continue to be derived from the investment of its 64.10%-ownwed subsidiary, Portsmouth Square, Inc., in the Justice Investors limited partnership and income received from investment of its cash and securities assets. The partnership derives most of its income from its lease with Holiday Inn and from a lease with Evon Garage Corporation. Quarter Ended September 30, 1996 Compared to the Quarter Ended September 30, 1995 Comparison of the third quarter operating results of 1996 to the third quarter of 1995 shows that total revenues increased 49.4%, costs and expenses increased 58.3%, income before tax and minority interest increased 45.6%, and net income increased 32.7%. The increase in total revenues is primarily attributable to the inclusion of an estimated $262,000 in partnership income for the third quarter of 1996 relating to additional rents due in accordance with the partnership's lease with Holiday Inn which became effective on January 1, 1995. Additional rent is determined on an annual basis and, if applicable, paid once a year. In the prior year, additional rents due of approximately $159,000 were recorded in partnership income for the fourth quarter at which time they became estimatable. The increase in total revenues also reflects a decline in expenses at the partnership level, primarily attributable to the refinanciang of the hotel asset in 1995, an increase in garage revenues and an increase in investment income of 59.9%. The increase in expenses is primarily attributable to rising costs associated with the litigation filed by Guinness Peat Group plc ("GPG"), which is discussed in "Legal Proceedings" in Part II of this report. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED Nine Months Ended September 30, 1996 Compared to the Nine Months Ended September 30, 1995 Comparison of the results of operations for the first nine months of 1996 to the first nine months of 1995 reveals that total revenues increased 17.0%, expenses increased approximately 30.6%, income before taxes and minority interest increased 9.7% and net income decreased 12.3% The increase in total revenues is primarily attributable to the inclusion of an estimated $262,000 in partnership income during the third quarter of 1996 relating to additional rents due in accordance with the partnership's lease with Holiday Inn which became effective on January 1, 1995. Additional rent is determined on an annual basis and, if applicable, paid once a year. In the prior year, additional rents due of approximately $159,000 were recorded in partnership income for the fourth quarter at which time they became estimatable. A comparison of total revenues for the two nine month periods is also impacted by a nonrecurring recovery on a bankruptcy claim in the amount of $95,083 during the first quarter of 1995. The increase in costs and expenses is primarily attributable to the rising costs of the litigation filed by GPG. The increase in general and administrative expenses is due to higher costs associated with the annual meetings of the Company and its subsidiary this year, the payment of director's fees during the second quarter to both incoming and outgoing directors, fees paid to a consultant of the subsidiary and increases in the salary of the Company's Chief Executive Officer. FINANCIAL CONDITION AND LIQUIDITY At September 30, 1996, the Company had cash, cash equivalents and marketable securities of $9,340,940, after the payment of a cash dividend equal to $.25 per common share during the second quarter. The increase in the Company's cash position from year end December 31, 1995, is primarily attributable to The InterGroup Corporation's exercise of its warrants whereby it purchased 90,000 shares of the Company's common stock at $27.00 per share on March 11, 1996. The exercise of those warrants resulted in the investment of $2,430,000 in the Company, which enhanced its liquidity and book value. The Company remains liquid with a current ratio of approximately 42 to 1 and 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. Expenses incurred by the Company as a result of the litigation filed by GPG will continue to impact operating results and the Company's cash resources. From the initiation of the lawsuit to September 30, 1996, those expenses now total $644,084. As a result of the high costs associated with that litigation, the Company believed it prudent to suspend payment of any dividends pending resolution of that action, at which time its Board of Directors will reexamine its dividend policy. 9 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. Discovery and motions in this action are still continuing and the trial date of November 15, 1996 has been vacated by the court with no new date having been set. Motions for summary judgment brought by the director defendants were denied by the court; however, InterGroup received a tentative ruling granting its motion for summary judgment which is awaiting final determination by the court. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the period covered by this report. Item 5. Other Information At a special meeting of the Board of Directors held on July 25, 1996, the Board elected to suspend the payment of all regular and special dividends pending resolution of the derivative suit filed by GPG and AMI. The Board is expected to reexamine the Company's dividend policy following the termination of that litigation. 10 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. SANTA FE FINANCIAL CORPORATION (Registrant) Date: October 14, 1996 by /s/ John V. Winfield - ------------------------------ John V. Winfield, President and Chairman of the Board Date: October 14, 1996 by /s/ L. Scott Sheilds - ----------------------------- L. Scott Shields, Treasurer and Chief Financial Officer EX-27 2
5 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 SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q REPORT. 0000086759 SANTA FE FINANCIAL CORPORATION 9-MOS DEC-31-1996 JAN-1-1996 SEP-30-1996 2776957 6563983 230683 0 0 9395732 97649 81173 14533788 223490 0 0 0 63802 14469986 14533788 1304101 1786626 0 0 700694 0 0 1085932 456000 375339 0 0 0 375339 .61 .61
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