10-Q 1 file001.txt QUARTERLY REPORT 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: September 30, 2002 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 -------------------------------------------------------------------------------- (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 filing requirements for the past 90 days. Yes [X] No [ ] As of November 8, 2002 there were 8,470,715 shares of common stock outstanding. ATALANTA/SOSNOFF CAPITAL CORPORATION INDEX

~~(UNAUDITED)~~Part ~~ASSETS~~I ~~JUNE~~- ~~30,~~Financial ~~2002~~Information ~~DECEMBER~~PAGE ~~31,~~NO. ~~2001~~ ------ --~~-----------~~ ~~-----------------~~Item ~~Assets: Cash and cash equivalents $~~ 1~~,495,724~~ $- ~~1,940,653~~Financial ~~Accounts~~Statements ~~receivable~~Condensed ~~2,625,358~~Consolidated ~~3,071,180~~Statements ~~Due~~of ~~from~~Financial ~~brokers~~Condition ~~3,637,927~~- ~~748,263~~September ~~Investments~~30, at2002 ~~market~~and ~~54,915,774~~December 7331,~~583,683~~ ~~Investments~~2001 in3 ~~limited~~Condensed ~~partnerships~~Consolidated ~~19,386,374~~Statements ~~24,320,671~~of ~~Deferred~~Operations ~~tax~~and ~~asset~~Comprehensive ~~2,176,900~~Income (Loss)- ~~Fixed~~Three ~~assets,~~Months ~~net~~Ended ~~1,023,292~~September 130,~~272,504~~ ~~Exchange~~2002 ~~memberships,~~and at2001 ~~cost~~4 ~~402,000~~Condensed ~~402,000~~Consolidated ~~Other~~Statements ~~assets~~of ~~3,252,767~~Operations ~~4,155,943~~and ~~------------~~Comprehensive Income (Loss)-~~-----------~~ ~~Total~~Nine ~~assets~~Months $Ended ~~88,916,116~~September ~~$109~~30,~~494,897~~ ~~============~~2002 ~~============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable~~ and ~~other~~2001 ~~liabilities~~5 $Condensed ~~825,484~~Consolidated $Statement ~~471,761~~of ~~Accrued~~Changes ~~compensation~~in ~~payable~~Shareholders' ~~183,744 450,540 Income taxes payable~~ Equity- ~~4,951,233~~Nine ~~Due~~Months toEnded ~~broker~~September ~~- 1~~30,~~015,533~~ ~~Securities~~2002 ~~sold~~6 ~~not~~Condensed ~~yet~~Consolidated ~~purchased,~~Statements atof ~~market~~Cash ~~value~~Flows - ~~203,000~~Nine ~~------------~~Months ~~------------~~Ended ~~Total~~September ~~liabilities 1~~30,~~009,228~~ ~~7,092,067~~2002 ~~------------ ------------ Commitments~~ and ~~contingencies~~2001 ~~Shareholders'~~7 ~~equity:~~Notes ~~Preferred~~to ~~stock,~~Condensed ~~par~~Consolidated ~~value~~Financial ~~$1.00~~Statements ~~per~~8 ~~share;~~- ~~5,000,000~~10 ~~shares~~Special ~~authorized;~~Note ~~none~~Regarding ~~issued~~Forward - -Looking ~~Common~~Statements ~~stock,~~11 ~~$.01~~Item ~~par~~2 ~~value; 30,000,000 shares authorized; 8,885,707 shares issued 88,857 88,857 Additional paid~~-in ~~capital~~Management's ~~17,336,028~~Discussion ~~17,336,028~~and ~~Retained~~Analysis ~~earnings~~of ~~76,872,856~~Results ~~83,716,965~~of ~~Accumulated~~Operations ~~other~~and ~~comprehensive~~Financial ~~income~~Condition ~~(loss)~~12 - ~~unrealized~~16 ~~gains~~Item ~~(losses)~~3 ~~from~~- ~~investments,~~Quantitative ~~net~~and ofQualitative ~~deferred~~Disclosures ~~income~~About ~~tax~~Market ~~(credit)~~Risk ~~(3,158,103)~~16 ~~1,260,980~~Item ~~Treasury~~4 ~~stock,~~- atControls ~~cost, 285,000~~ and ~~zero~~Procedures ~~shares,~~16 ~~respectively~~Part ~~(3,232,750)~~II - ~~------------~~Other ~~------------~~Information ~~Total~~Items ~~shareholders' equity 87,906,888 102,402,830~~ 1-~~-----------~~6 ~~------------~~17 ~~Total~~Signatures ~~liabilities~~18 ~~and~~Certification ~~shareholders'~~19 ~~equity~~- $22 ~~88,916,116~~Exhibit ~~$109,494,897~~11 ~~============~~- ~~============~~Computation ~~Book~~of ~~value~~Earnings ~~per~~(Loss) ~~common~~Per ~~share~~Common $Share ~~10.22 $ 11.52 ============ ============~~23

2 ATALANTA/SOSNOFF CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

~~THREE~~(UNAUDITED) ~~MONTHS~~ASSETS ~~ENDED~~SEPTEMBER 30, 2002 DECEMBER 31, 2001 ------ ------------ ~~JUNE 30, 2002 JUNE 30, 2001~~ ------ ------- ----------~~---~~ ~~Revenues~~Assets: ~~Advisory~~Cash ~~fees~~and cash equivalents $ 31,~~269~~310,~~679~~134 $ 1,940,653 Accounts receivable 2,363,076 3,~~464~~071,~~281~~180 ~~Commissions~~Due ~~and~~from ~~other~~broker ~~operating~~2,687,264 ~~revenues~~748,263 ~~329~~Investments,~~879~~ ~~416~~at market 64,~~050~~268,180 ~~Realized~~73,583,683 Investments in limited partnerships 6,533,925 24,320,671 Deferred and ~~unrealized~~other ~~gains~~tax ~~(losses)~~assets ~~from~~6,313,432 ~~principal~~- ~~securities~~Fixed ~~transactions~~assets, net (8945,~~788,480)~~936 21,~~924~~272,~~659~~504 ~~Interest~~Exchange ~~and~~memberships, ~~dividend~~at ~~income~~cost 402,000 ~~net~~402,000 ~~206~~Other assets 3,~~674~~669,253 ~~133~~4,~~417~~155,943 ------------ ------------ Total ~~revenues~~assets (4$ 88,~~982~~493,~~248)~~200 6$109,~~938~~494,~~407~~897 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------ ------------------------ ~~Costs~~Liabilities: Accounts payable and ~~expenses:~~other ~~Employees'~~liabilities ~~compensation~~$ 1,~~932~~152,~~918~~061 3$ 471,~~014,270~~761 ~~Clearing~~Accrued ~~and~~compensation ~~execution~~payable ~~costs 111~~206,~~905~~932 ~~189~~450,~~970~~540 ~~Selling~~Income ~~expenses~~taxes ~~132,962~~payable ~~151~~- 4,~~578~~951,233 ~~General~~Due ~~and~~to ~~administrative~~broker ~~expenses~~211,786 1,~~041~~015,~~337~~533 ~~798,768~~Securities ~~------------~~sold ~~------------~~not ~~Total~~yet ~~costs~~purchased, ~~and~~at ~~expenses~~market 373,~~219,122~~458 4203,~~154,586~~000 ------------ ------------ ~~Income~~Total ~~(loss)~~liabilities ~~before provision for income taxes (benefit) (8~~1,~~201~~644,~~370)~~237 27,~~783~~092,~~821~~067 ~~Provision for income taxes (benefit) (2,518,000) 1,230,000~~ ------------ ------------ ~~Net~~Commitments ~~income~~and ~~(loss)~~contingencies $Shareholders' ~~(5,683,370)~~equity: $Preferred 1stock,~~553,821~~ ~~============~~par ~~============~~value ~~Earnings~~$1.00 ~~(loss)~~ per ~~common~~ share; -5,000,000 ~~basic~~shares $authorized; ~~(0.65)~~none $issued ~~0.17~~- ~~============~~- ~~============~~Common ~~Earnings~~stock, ~~(loss)~~$.01 ~~per~~par ~~common~~value; ~~share~~30,000,000 -shares ~~diluted~~authorized; $8,885,707 ~~N/A~~shares $issued ~~0.17~~88,857 ~~============~~88,857 ~~============~~Additional ~~Net~~paid-in ~~income~~capital ~~(loss)~~17,336,028 as17,336,028 ~~presented~~Retained ~~above~~earnings ~~$ (5~~77,~~683~~553,~~370)~~007 ~~$ 1~~83,~~553~~716,~~821~~965 ~~Comprehensive~~Accumulated other comprehensive income (loss): ~~Net~~- unrealized gains (losses) from investments, net of deferred income tax (credit) (23,~~381~~542,~~484~~357) 21,~~738~~260,~~747~~980 Treasury stock, at cost, 414,992 and zero shares, respectively (4,586,572) - ------------ ------------ ~~Comprehensive~~Total ~~income~~shareholders' ~~(loss)~~equity $86,848,963 (8102,~~064~~402,~~854)~~830 ------------ ------------ Total liabilities and shareholders' equity $ 488,~~292~~493,~~568~~200 $109,494,897 ============ ============ Book value per common share $ 10.25 $ 11.52 ============ ============

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 ATALANTA/SOSNOFF CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

~~SIX~~THREE MONTHS ENDED ------------------ ~~JUNE~~SEPTEMBER 30, 2002 ~~JUNE~~SEPTEMBER 30, 2001 ------------------ ------------------ Revenues: Advisory fees $ 63,~~724~~149,~~020~~712 $ 73,~~072~~505,~~598~~266 Commissions and other operating revenues ~~733~~296,~~684~~926 ~~976~~365,~~529~~246 Realized and unrealized gains (losses) from principal securities transactions, net (113,~~895~~740,~~986~~621) (~~330~~5,~~613~~534,994) Interest and dividend income, net ~~513~~342,~~790~~978 ~~368~~246,~~010~~076 ------------- ------------- Total revenues 48,995 (31,~~924~~418,~~492~~406) ~~8,086,524~~ ------------- ------------- Costs and expenses: Employees' compensation 32,~~926~~002,~~732~~318 52,~~844~~514,~~732~~058 Clearing and execution costs ~~267~~143,~~512~~430 ~~428~~154,~~969~~519 Selling expenses ~~252~~124,~~283~~369 ~~279~~75,~~865~~903 General and administrative expenses 1980,~~928,090~~728 1808,~~717,801~~409 ------------- ------------- Total costs and expenses 63,~~374~~250,~~617~~845 83,~~271~~552,~~367~~889 ------------- ------------- Income (loss) before provision for income taxes (benefit) (103,~~299~~201,~~109~~850) (~~184~~4,~~843~~971,295) Provision for income taxes (benefit) (3,~~455~~882,000) (~~117~~2,175,000) ------------- ------------- Net income (loss) $ (6680,~~844,109)~~150 $ (672,~~843~~796,295) ============= ============= Earnings (loss) per common share - basic $ (0.~~78)~~08 $ (0.0131) ============= ============= Earnings (loss) per common share - diluted $ ~~N/A~~0.08 $ N/A ============= ============= Net income (loss), as presented above $ (6680,~~844,109)~~150 $ (672,~~843~~796,295) Comprehensive income (loss): Net unrealized gains (losses) from investments, net of deferred income tax (credit) (4384,~~419,083~~254) (26,~~056~~237,~~493~~006) ------------- ------------- Comprehensive income (loss) $ ~~(11~~295,~~263,192)~~896 $ (29,~~124~~033,~~336~~301) ============= =============

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 ATALANTA/SOSNOFF CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

~~Accumulated~~NINE ~~other~~MONTHS ~~comprehensive~~ENDED ~~income (loss)~~ - ~~Additional unrealized gains Common Paid~~-~~In Retained (losses) from Treasury Stock Capital Earnings investments, net Stock Total~~ ----- ---------- SEPTEMBER 30, 2002 SEPTEMBER 30, 2001 -------- ---------- ------ ----- ----- ~~Balance~~ -- ~~December~~Revenues: ~~31,~~Advisory ~~2001~~fees $~~88,857~~ ~~$17~~9,~~336~~873,~~028~~732 $83 10,~~716~~577,~~965~~864 $Commissions and other operating revenues 1,~~260~~030,~~980~~611 ~~$ -- $102~~1,~~402~~341,~~830~~775 ~~Purchases~~Realized ofand ~~treasury~~unrealized ~~stock~~gains (3losses) from principal securities transactions,~~232~~ net (15,~~750~~636,607) (35,~~232~~865,~~750~~607) ~~Net~~Interest ~~unrealized~~and ~~losses~~dividend ~~from investments~~income, net of856,767 ~~deferred~~614,086 ~~income~~------------ ~~tax~~------------ ~~benefit~~Total ~~(4,419,083)~~revenues (43,~~419~~875,~~083~~497) ~~Net loss (~~6,~~844~~668,~~109)~~118 ~~(6,844,109)~~ ------------ ------------ Costs and expenses: Employees' compensation 5,929,049 8,358,799 Clearing and execution costs 410,942 583,488 Selling expenses 376,652 360,462 General and administrative expenses 2,908,816 2,533,662 ------------ ------------ Total costs and expenses 9,625,461 11,836,411 ------------ ------------ ~~Balance~~Income -(loss) ~~June~~before ~~30,~~provision ~~2002~~for ~~$88,857~~income ~~$17~~taxes (benefit) (13,~~336~~500,~~028~~958) ~~$76~~(5,~~872~~168,~~856~~293) $Provision for income taxes (3benefit) (7,~~158~~337,~~103~~000) (2,292,000) ------------ ------------ Net income (loss) $ (36,~~232~~163,~~750~~958) $ 87(2,~~906~~876,~~888~~293) ============ ============ Earnings (loss) per common share - basic $ (0.71) $ (0.32) ============ ============ Earnings (loss) per common share - diluted $ N/A $ N/A ============ ============ Net income (loss), as presented above $ (6,163,958) $ (2,876,293) Comprehensive income (loss): Net unrealized gains (losses) from investments, net of deferred income tax (credit) (4,803,337) (8,293,499) ------------ ------------ Comprehensive income (loss) $(10,967,295) $(11,169,792) ============ ============

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 ATALANTA/SOSNOFF CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)

~~2002~~Accumulated ~~2001~~other ~~-------------~~comprehensive ~~------------- Cash flows from operating activities: Net~~ income (loss) $ (6,844,109) $ (67,843) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 274,148 260,681 Amortization of unearned compensation - ~~1,125,204~~Additional ~~Realized and~~ unrealized (gains) ~~losses~~Common ~~from~~Paid-In ~~principal~~Retained ~~securities transactions, net 11,895,986 330,613 Increase~~ (~~decrease~~losses) from ~~changes~~Treasury ~~in:~~Stock ~~Accounts~~Capital ~~receivable~~Earnings ~~445~~investments,~~822~~ ~~806,422~~net ~~Other~~Stock ~~assets~~Total ~~903,176 (129,772) Income taxes payable (4,180,040) (3,626,796) Accounts payable and other liabilities 353,723 586,756 Accrued compensation payable (266,796) (5,198,782)~~ ----- -------- -------- ----- ~~Net cash provided by (used in) operating activities 2,581,910 (5,913,517)~~ ------------- ----- -----~~---~~ ~~Cash~~Balance ~~flows~~- ~~from~~December ~~investing~~31, ~~activities:~~2001 ~~Due~~$88,857 ~~from~~$17,336,028 ~~brokers (3~~$83,~~905~~716,~~197)~~965 3$1,~~104~~260,~~535~~980 ~~Purchases~~$ of-- ~~fixed assets (24~~$102,~~936) (23~~402,~~344)~~830 Purchases of ~~investments~~treasury stock (834,~~492~~586,~~567~~572) (~~120~~4,~~777~~586,~~592~~572) ~~Proceeds~~Net ~~from~~unrealized ~~sales~~losses offrom investments 87,~~628,611~~ ~~126,579,516~~net ~~-------------~~of ~~-------------~~deferred ~~Net~~income ~~cash~~tax ~~provided~~benefit ~~by investing activities 205~~(4,~~911 8~~803,~~883,115~~337) ~~------------- ------------- Cash flows from financing activities: Dividends paid -~~ (24,~~268~~803,~~781~~337) ~~Purchases~~Net ofloss ~~treasury stock~~ (36,~~232~~163,~~750~~958) (16,~~091~~163,~~767~~958) -------~~------~~ ------------- ~~Net cash used in financing activities (3,232,750) (3,360,548)~~ ------------- ------------- ~~Net decrease in cash and cash equivalents (444,929) (390,950) Cash and cash equivalents, beginning of period 1,940,653 988,689~~ ------------- ------------- ~~Cash~~Balance ~~and~~- ~~cash~~September ~~equivalents~~30, ~~end~~2002 of$88,857 ~~period~~$17,336,028 $77,553,007 1$(3,~~495~~542,~~724~~357) $(4,586,572) ~~597~~$ 86,~~739~~848,963 =======~~======~~ ============= ~~Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 35,026 $ 168,820~~ ============= ============= ~~Income taxes $ 474,023 $ 3,509,796~~ ============= =============

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 ATALANTA/SOSNOFF CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7 ATALANTA/SOSNOFF CAPITAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of Atalanta/Sosnoff Capital Corporation (the "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 September 30, 2002, and the results of its operations and cash flows for the three and nine months ended September 30, 2002 and 2001. Certain information normally included in the financial statements and related notes prepared in accordance with accounting principles generally accepted in the United States of America 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, 2001 Annual Report on Form 10-K. Information included in the condensed consolidated balance sheet as of December 31, 2001 has been derived from the audited consolidated financial statements appearing in the Company's Annual Report on Form 10-K. INVESTMENTS, AT MARKET The Company records its investments 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 certain investments held by the Holding Company, Capital and ASCC in equity and debt securities as "available for sale" and, accordingly, recorded these investments at market value with the related unrealized gains and losses net of deferred taxes reported as a separate component of shareholders' equity. ASCC holds certain equity and debt securities as "trading" securities which are recorded at market value, with the related unrealized gains and losses reflected in the consolidated statements of operations and comprehensive income (loss). Investments held by Management are recorded at market value, with the related unrealized gains and losses reflected in the consolidated statements of operations and comprehensive income (loss). Investments are recorded on trade date. The cost of investments sold is determined on the high-cost method. 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 period. 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. Dividends and interest are accrued as earned. 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) INVESTMENTS IN LIMITED PARTNERSHIPS Capital serves as the 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 condensed consolidated financial statements at the Company's share of the respective Partnership's net assets with the unrealized gain or loss recorded in the consolidated statements of operations and comprehensive income (loss). 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. Included in the third quarter of 2002 was a positive adjustment to the Company's estimated provision for income taxes of $3.2 million. NOTE 2: NON-CASH COMPENSATION CHARGES ("NCCC") UNDER 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 of the Company under the terms of the LTIP. Such awards vested over the four-year period ended September 30, 2001. 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 was amortized over a four-year period which commenced with the fourth quarter of 1997 (approximately $563,000 per quarter and $2.25 million annually). Accordingly, NCCC of approximately $563,000 and $1,688,000 was charged to operations in both the three and nine months ended September 30, 2001 compared to none in the three and nine months ended September 30, 2002. NOTE 3: COMPENSATION EXPENSE Effective January 1, 1993, the Company adopted the Management Incentive Plan (the "MIP") for certain senior executives. Under one component of the MIP, each participant is entitled to receive their assigned share of the annual reward pool, which is computed based on operating income performance goals, as defined in the MIP. There was no MIP operating bonus earned and accrued in the three and nine months ended September 30, 2002 and 2001, respectively. Pursuant to another component of the MIP, the President of the Company earns a bonus based upon the pretax operating profits earned by the Company as general partner of one of the Partnerships and the Offshore Fund managed by the President, and an annual bonus based upon the pretax earnings of the Company's investment in the Partnership managed by the President in excess of a base indexed return. There was no MIP bonus earned and accrued for the three and nine months ended September 30, 2002 and 2001, respectively. In addition, under a separate component of the MIP, an annual bonus is earned by the Chief Executive Officer (CEO) based upon the pretax earnings of certain managed assets of the Company in excess of a base indexed return. There was no MIP bonus earned and accrued to the CEO in the three and nine months ended September 30, 2002 and 2001, respectively. 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) NOTE 4: TREASURY STOCK In February and March 2002, the Company purchased an aggregate of 10,000 shares of its common stock at an average market price of $10.41 per share. In April 2002, the Company purchased 60,000 shares of its common stock at an average market price of $12.05 per share. In May 2002, the Company purchased 40,000 shares of its common stock at an average market price of $12.19 per share. In July 2002, the Company purchased 72,000 shares of its common stock at an average market price of $10.95 per share. In May 2002, upon the resignation of the Company's Chief Operating Officer, the Company bought back from him 175,000 shares of its common stock at a price of $10.96 per share, the stock's book value at April 30, 2002. In accordance with the terms of his agreements with the Company entered into in September 1997, the President of the Company sold 57,992 shares of the Company stock back to the Company at a market price of $9.75 per share in September 2002 to satisfy a loan to the President arising from the tax consequences of the 1997 award to him under the LTIP. NOTE 5: EARNINGS (LOSS) PER COMMON SHARE Basic earnings (loss) per common share amounts were computed based on 8,501,837 and 8,907,667 weighted average common shares outstanding in the third quarters of 2002 and 2001, respectively. Diluted earnings per common share amounts were computed based on 8,519,224 weighted average common shares outstanding in the three months ended September 30, 2002. Basic earnings (loss) per common share amounts were computed based on 8,710,910 and 8,956,927 weighted average common shares in the first nine months of 2002 and 2001, respectively. Because the Company reported a loss in the third quarter of 2001 and for the first nine months of 2002 and 2001, respectively, the effect of stock options is antidilutive in determining dilutive earnings per common share. See Exhibit 11 for further details on the computation of earnings (loss) per common share. 10 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. 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. 11 Part I. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. I. GENERAL The assets of the Company totaled $88.5 million at September 30, 2002, compared with $109.5 million at December 31, 2001, and book value per common share totaled $10.25 at September 30, 2002, compared with $11.52 at December 31, 2001. Cash and cash equivalents totaled $1.3 million at September 30, 2002, compared with $1.9 million at December 31, 2001. Net investments (at market) totaled $64.2 million at September 30, 2002, compared with $73.4 million at the end of 2001. Accumulated unrealized losses on investments, net of deferred tax benefit, totaled $3.5 million at September 30, 2002, compared with accumulated unrealized gains, net of deferred taxes, of $1.3 million at December 31, 2001. Assets under management at September 30, 2002 totaled $1.96 billion, or 6% less than at September 30, 2001 and 17% less than at December 31, 2001. Negative performance results of $190 million and lost accounts of $103 million, partially offset by new accounts of $142 million and net positive client cash flows of $17 million, accounted for the $138 million net decrease in assets under management over the twelve months ended September 30, 2002. The Company had net income of $680,000 ($.08 per common share diluted) for the three months ended September 30, 2002, compared with a net loss of $2.8 million ($(.31) per common share) for the same period in 2001. The Company had a net loss of $6.2 million ($(.71) per common share) for the nine months ended September 30, 2002, compared with a net loss of $2.9 million ($(.32) per common share) for the first nine months of 2001. Included in the third quarter of 2002 was a positive adjustment to the Company's estimated provision for income taxes of $3.2 million. After eliminating non-operating charges, pretax operating income totaled $196,000 in the third quarter of 2002, compared with $880,000 in the third quarter of 2001 and $1.3 million for the nine months ended September 30, 2002, compared with $1.8 million for the nine months ended September 30, 2001. II. ASSETS UNDER MANAGEMENT Assets under management totaled $1.96 billion at September 30, 2002, compared with $2.36 billion at December 31, 2001, and $2.09 billion at September 30, 2001. Average assets under management decreased 7% to $2.07 billion in the third quarter of 2002, compared with $2.24 billion in the comparable period a year ago. Average managed assets for the third quarter of 2002 decreased 11% compared with the second quarter of 2002. During the first nine months of 2002, new accounts of $105 million, offset by lost accounts of $86 million and negative performance of $417 million, accounted for the $398 million net decrease in managed assets. In the twelve months ended September 30, 2002, new accounts of $142 million and net positive client cash flows of $17 million, offset by lost accounts of $103 million and negative performance of $190 million, accounted for the $138 million net decrease in managed assets. 12 III. RESULTS OF OPERATIONS QUARTERLY COMPARISON Revenue from advisory fees and commissions ("operating revenue") decreased 11% to $3.4 million in the third quarter of 2002, as compared with $3.9 million in the third quarter of 2001. The Company had a net loss on investments of $3.4 million in the third quarter of 2002, compared with a net loss on investments of $5.3 million in the third quarter of 2001. Expenses for the third quarter of 2002 decreased 9% to $3.3 million, from $3.6 million in the third quarter of 2001. The following table depicts variances in significant statement of operations items for the three months ended September 30, 2002 compared with the same period in 2001. Explanations of the variances follow the table.

o The 10% decrease in advisory fees is primarily due to the difficult market conditions in 2002 and the decrease in average assets under management and thus a decline in advisory fees. o The Company recorded a net realized and unrealized loss from investment transactions of $3.7 million in the third quarter of 2002, compared with a net realized and unrealized loss from investment transactions of $5.5 million for the third quarter of 2001. The net realized gains and unrealized losses from principal securities transactions were $4.2 million and $7.9 million, respectively, for the third quarter of 2002, as compared to net realized gains and unrealized losses of $189,000 and $5.7 million, respectively, for the third quarter of 2001. o The decrease of 20% in employees' compensation is primarily due to non-cash compensation charges of $563,000 included in the second quarter of 2001, compared to none in the second quarter of 2002. In addition, a significant portion of employee's compensation is directly related to operating revenues including bonuses and sales payouts. o Non-compensation expenses increased 20% for the three months ended September 30, 2002 as compared to the 2001 comparable quarter. The increase was primarily related to increases in selling expenses and certain professional fees and related costs included in general and administrative expenses. 13 YEAR-TO-DATE COMPARISON Operating revenue decreased 9% to $10.9 million in the first nine months of 2002, as compared with $11.9 million in the first nine months of 2001. The Company had a net loss on investments of $14.8 million in the nine months ended September 30, 2002, compared with a net loss on investments of $5.3 in the 2001 period. Expenses for the first nine months of 2002 decreased 19% to $9.6 million, from $11.8 million in the first nine months of 2001. The following table depicts variances in significant statement of operations items for the nine months ended September 30, 2002 compared with the same period in 2001. Explanations of the variances follow the table.

o The 7% decrease in advisory fees is primarily due to the difficult market conditions in 2001 and 2002 and the decrease in assets under management and thus a decline in advisory fees. o The Company recorded a net realized and unrealized loss from investment transactions of $15.6 million in the first nine months of 2002, compared with a net realized and unrealized loss of $5.9 million for the first nine months of 2001. The net realized and unrealized losses from principal securities transactions were $728,000 and $14.9 million, respectively, for the first nine months of 2002, as compared to net realized gains and unrealized losses of $1.6 million and $7.5 million, respectively, for the first nine months of 2001. o The decrease of 29% in employees' compensation is primarily due to a decrease in accrued bonus and sales payout compensation as a result of the decline in operating revenues and non-cash compensation charges of $1,688,000 included in the first nine months of 2001, compared with none in the same period for 2002. o Non-compensation expenses increased 6% for the nine months ended September 30, 2002 as compared to the 2001 comparable period. The increase was primarily related to a moderate increase in general and administrative expenses partially offset by a decrease in clearing and execution costs. 14 IV. LIQUIDITY AND CAPITAL RESOURCES Investments Net investments, which includes corporate and convertible debt, U.S. government agency debt instruments, marketable equity securities and the Atalanta/Sosnoff Mutual Funds, aggregated $64.2 million at September 30, 2002, compared with $73.4 million at the end of 2001. Shareholders' equity decreased to $86.8 million at September 30, 2002, from $102.4 million at the end of 2001, primarily from an unrealized loss on investments (net of deferred tax credit) of $4.8 million in the investment portfolio, treasury stock transactions of $4.6 million and a net loss of $6.2 million for the nine months ended September 30, 2002. The Company had a net accumulated unrealized loss on investments of $3.5 million in shareholders' equity at September 30, 2002, compared with a net accumulated unrealized gain on investments of $1.3 million at December 31, 2001. At September 30, 2002, the Company's net investment portfolio at market totaled $72.0 million (cost basis $78.0 million), compared with $99.6 million (cost $83.1 million) at the end of 2001, which was comprised of cash and cash equivalents, net investments described above and investments in company sponsored limited partnerships. At September 30, 2002, the Company was invested primarily in 19 separate large-cap equity securities and corporate bonds, in a more concentrated fashion of what it does for its managed client accounts. If the equity market (defined as the S&P 500 index) were to decline by 10%, the Company might experience unrealized losses of approximately $7 million; if the market were to decline by 20%, the Company might experience unrealized losses of $14 million. However, incurring unrealized losses of this magnitude is unlikely with active management of the portfolio. Since the positions are primarily large-cap equity 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. Cash Flows At September 30, 2002, the Company had cash and cash equivalents of $1.3 million, compared with $1.9 million at the end of 2001. Operating activities generated net cash inflows of $2.9 million in the nine months ended September 30, 2002, compared with $3.5 million of net cash outflows in the same period in 2001, reflecting the changing levels of operating assets and liabilities and net income (loss) over those periods. Net cash provided by investing activities totaled $536,000 in the first nine months of 2002, compared with $4.9 million in the comparable 2001 period. The increase in 2002 and 2001 was primarily the result of net proceeds from investment transactions. Net cash outflows from financing activities was $4.0 million in the first nine months of 2002 compared with $3.6 million in the comparable 2001 period. The cash outflow in 2002 was the result of purchasing treasury stock, as described below. The cash outflow in 2001 was the result of paying dividends accrued at December 31, 2000 and purchases of treasury stock. Equity Transactions In February and March 2002 the Company purchased an aggregate of 10,000 shares of its common stock at an average market price of $10.41 per share. In April 2002, the Company purchased 60,000 shares of its common stock, at an average market price of $12.05 per share. In May 2002, the Company purchased 40,000 shares of its common stock at an average market price of $12.19 per share. In July 15 2002, the Company purchased 72,000 shares of its common stock at an average market price of $10.95 per share. In May 2002, upon the resignation of the Company's Chief Operating Officer, the Company bought back from him 175,000 shares of its common stock at a price of $10.96 per share, the stock's book value of April 30, 2002. In accordance with the terms of his agreements with the Company entered into in September 1997, the President of the Company sold 57,992 shares of the Company stock back to the Company at a market price of $9.75 per share in September 2002 to satisfy a loan to the President arising from the tax consequences of the 1997 award to him under the LTIP. Financing Arrangements At September 30, 2002, there were no liabilities for borrowed money. Item 3. Quantitative and Qualitative Disclosures About Market Risk. None, except as set forth under heading, "Investments", in Part I, Item 2., Subpart IV hereof. Item 4. Controls and Procedures The Chief Executive Officer and Principal Financial Officer of the Corporation, based on their evaluation of the Disclosure Controls and Procedures in place on November 8, 2002, have concluded that they are effective to provide reasonable assurance that the Corporation is able to collect, process and disclose the information required by this Quarterly Report and there were not any significant changes in the Corporation's internal controls or in other factors which could significantly effect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses in such controls and procedures. The Corporation has initiated a program of regular review of its disclosure controls and procedures by a newly formed committee composed of its General Counsel and Chief Financial Officer. 16 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 Holders None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K Exhibit Number Description Page ------ ----------- ---- 2 None. 4 None. 11 Computation of Earnings (Loss) Per Common Share. 23 15 None. 18 None. 19 None. 20 None. 23 None. 24 None. 25 None. 28 None. 17 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: November 8, 2002 /s/ Martin T. Sosnoff --------------------------------- Martin T. Sosnoff Chairman of the Board and Chief Executive Officer Date: November 8, 2002 /s/ Kevin S. Kelly --------------------------------- Kevin S. Kelly Senior Vice President, Chief Financial Officer, Secretary 18 CERTIFICATION I, Martin T. Sosnoff, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Atalanta/Sosnoff Capital Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 19 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 /s/ Martin T. Sosnoff ---------------------------------------- Martin T. Sosnoff, Chairman of the Board and Chief Executive Officer 20 CERTIFICATION I, Kevin S. Kelly, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Atalanta/Sosnoff Capital Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 21 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 /s/ Kevin S. Kelly ----------------------------------------------- Kevin S. Kelly, Senior Vice President, Finance, Chief Financial Officer and Secretary 22

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