SECURITIES AND EXCHANGE COMMISSION 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 December 31, 2001OR |
_____ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For Transition Period From __________ To __________Commission File Number 1-6802 |
Delaware (State or other jurisdiction of incorporation or organization) | 75-1328153 (I.R.S. Employer Identification No.) |
200 Crescent Court, Suite 1365 Dallas, Texas (Address of principal executive offices) | 75201 (Zip Code) |
Registrant’s telephone number, including area code (214) 871-5935 ___________________________________________________________ (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 12 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 _____ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: The number of shares outstanding of registrant’s common stock, $.01 par value, as of the close of business on February 12, 2002: 20,256,097 shares. |
LIBERTÉINVESTORS INC. INDEX |
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PART I - FINANCIAL INFORMATION |
Item 1. | Financial Statements |
LIBERTÉ INVESTORS INC. |
December 31, 2001 | June 30, 2001 | |||||||
---|---|---|---|---|---|---|---|---|
Assets | ||||||||
Cash and cash equivalents | $ | 56,782,240 | $ | 56,102,635 | ||||
Foreclosed real estate held for sale | 2,175,137 | 2,359,334 | ||||||
Accrued interest and other receivables | 906 | 5,239 | ||||||
Other assets, net | 58,464 | 96,323 | ||||||
Total assets | $ | 59,016,747 | $ | 58,563,531 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities-accrued and other liabilities | $ | 529,371 | $ | 530,999 | ||||
Stockholders’ Equity | ||||||||
Common stock, $.01 par value, | ||||||||
50,000,000 shares authorized, | ||||||||
20,256,097 shares issued and outstanding | 202,561 | 202,561 | ||||||
Additional paid-in capital | 309,392,398 | 309,392,398 | ||||||
Accumulated deficit | (251,107,583 | ) | (251,562,427 | ) | ||||
Total stockholders’ equity | 58,487,376 | 58,032,532 | ||||||
Commitments and contingencies | ||||||||
Total liabilities and stockholders’ equity | $ | 59,016,747 | $ | 58,563,531 | ||||
See notes to consolidated financial statements. 3 |
LIBERTÉ INVESTORS INC. |
Six Months Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||||||
Income | |||||||||||
Interest on deposits in banks | $ | 789,922 | $ | 1,648,644 | |||||||
Gain on sales of foreclosed real estate | 138,605 | 44,632 | |||||||||
Other | 15 | 20,840 | |||||||||
Total income | 928,542 | 1,714,116 | |||||||||
Expenses | |||||||||||
Insurance | 50,208 | 61,628 | |||||||||
Compensation and employee benefits | 75,738 | 44,304 | |||||||||
Legal, audit and advisory fees | 59,509 | 49,348 | |||||||||
Franchise taxes | 18,416 | (46,983 | ) | ||||||||
Foreclosed real estate operations | 137,982 | 80,270 | |||||||||
General and administrative | 131,845 | 124,468 | |||||||||
Total expenses | 473,698 | 313,035 | |||||||||
Net Income | $ | 454,844 | $ | 1,401,081 | |||||||
Basic and diluted net income per share of common stock | $ | 0.02 | $ | 0.07 | |||||||
Weighted average number of shares of | |||||||||||
common stock | 20,256,097 | 20,256,097 | |||||||||
See notes to consolidated financial statements. 4 |
LIBERTÉ INVESTORS INC. |
Three Months Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||||||
Income | |||||||||||
Interest on deposits in banks | $ | 334,828 | $ | 831,239 | |||||||
Gain on sales of foreclosed real estate | 138,605 | — | |||||||||
Other | 15 | 840 | |||||||||
Total income | 473,448 | 832,079 | |||||||||
Expenses | |||||||||||
Insurance | 25,334 | 31,173 | |||||||||
Compensation and employee benefits | 37,979 | 22,774 | |||||||||
Legal, audit and advisory fees | 42,709 | 25,750 | |||||||||
Franchise taxes | 9,641 | (55,758 | ) | ||||||||
Foreclosed real estate operations | 72,091 | 50,034 | |||||||||
General and administrative | 69,345 | 63,683 | |||||||||
Total expenses | 257,099 | 137,656 | |||||||||
Net Income | $ | 216,349 | $ | 694,423 | |||||||
Basic and diluted net income per share of common stock | $ | 0.01 | $ | 0.03 | |||||||
Weighted average number of shares of | |||||||||||
common stock | 20,256,097 | 20,256,097 | |||||||||
See notes to consolidated financial statements. 5 |
LIBERTÉ INVESTORS INC. |
Six Months Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2001 | 2000 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 454,844 | $ | 1,401,081 | |||||||
Adjustments to reconcile net income | |||||||||||
to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 2,849 | 4,851 | |||||||||
Gain from sales of foreclosed real estate | (138,605 | ) | (44,632 | ) | |||||||
(Increase) decrease in accrued interest and other receivables | 4,333 | (9,895 | ) | ||||||||
Decrease in other assets | 35,010 | 46,608 | |||||||||
Decrease in accrued and other liabilities | (1,628 | ) | (24,349 | ) | |||||||
Net cash provided by operating activities | 356,803 | 1,373,664 | |||||||||
Cash flows from investing activities: | |||||||||||
Proceeds from sales of foreclosed real estate | 322,802 | 112,134 | |||||||||
Proceeds from sales of fixed assets | — | 720 | |||||||||
Additions to fixed assets | — | (5,424 | ) | ||||||||
Net cash provided by investing activities | 322,802 | 107,430 | |||||||||
Net increase in cash and cash equivalents | 679,605 | 1,481,094 | |||||||||
Cash and cash equivalents at beginning of period | 56,102,635 | 55,887,941 | |||||||||
Cash and cash equivalents at end of period | $ | 56,782,240 | $ | 57,369,035 | |||||||
See notes to consolidated financial statements. 6 |
In May 2001, the Company sold 29.07 acres of land in San Antonio, Texas to a residential homebuilder for a price of $348,818, less associated selling costs of $25,366. A gain of approximately $267,000 was recorded as a result of this transaction. In November 2001, the Company sold 59.39 acres of land in San Antonio, Texas to a developer for a price of $350,340, less associated selling costs of $27,538. A gain of approximately $138,600 was recorded as a result of this transaction. Note D - Commitments and Contingencies The Company’s wholly-owned subsidiary, LNC Holdings Inc., owns approximately 40 acres of land located in Arlington, Texas which is encumbered by property tax liens totaling approximately $1,441,000 including penalties and interest. On April 16, 1997, LNC Holdings Inc. received a notice of judgment from the City of Arlington with regard to the delinquent taxes through that date. On June 28, 2001, LNC Holdings Inc. received an additional notice of judgment from the City of Arlington with regard to the delinquent taxes from 1997 through that date. LNC Holdings Inc. notified the City of Arlington that it would execute a deed without warranty to allow the taxing units to obtain title to the property. No response has been received. LNC Holdings Inc. has accrued property taxes and related penalties and interest for calendar years 1996 through 2001 totaling $287,000. Management believes that resolution of the delinquent tax issue with the taxing authorities will not result in a material adverse impact on the consolidated financial statements. The Company is from time to time involved in routine litigation arising in the normal course of business, which, in the opinion of management, will not result in a material adverse impact on the Company’s consolidated financial condition or results of operations. Note E - Federal Income Taxes Although the Company had taxable income for the three- and six-month periods ended December 31, 2001 and 2000, no tax liability has been recognized due to a reduction in the valuation allowance related to its net operating loss carryforwards. Based on current business activity, management believes it is more likely than not that the Company will not realize the benefits of the loss carryforwards. Therefore, a full valuation allowance has been established. In the event the Company expands its business operations through an acquisition, the ability to use the loss carryforwards may change. Note F - Franchise Taxes During the second quarter of fiscal 2001, the Company adjusted its estimate of franchise taxes owed by reversing previously accrued amounts totaling $65,634 due to the completion and settlement of an audit of Texas franchise tax returns for the years 1997 through 1999. Note G - Concentrations of Credit Risk At December 31, 2001, the Company had certain concentrations of credit risk with two financial institutions in the form of cash, which amounted to approximately $57 million. For purposes of evaluating credit risk, the stability of financial institutions conducting business with the Company is periodically reviewed. If the financial institutions failed to completely perform under the terms of the financial instruments, the exposure for credit loss would be the amount of the financial instruments less amounts covered by regulatory insurance. 8 |
Note H - New Accounting Pronouncement In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), establishing financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of SFAS 144 are effective for fiscal years beginning after December 15, 2001. The Company is currently assessing the impact of such adoption and currently believes the effect, if any, will not be material to the Company’s consolidated financial position or results of operations. 9 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
GeneralDuring the three- and six-month periods ended December 31, 2001, Liberté Investors Inc. continued to explore the potential acquisition of a viable operating company in order to increase value to existing stockholders and provide a new focus and direction for the Company. Although substantial efforts have been made in fiscal 2002 to identify quality acquisitions, the Company has not yet entered into any definitive acquisition agreements. Six Months Ended December 31, 2001 versus Six Months Ended December 31, 2000Net income for the six months ended December 31, 2001 was $455,000 compared to net income of $1,401,000 for the same period in 2000. The change in operating results for the six months was due to various factors discussed below. Interest income related to interest-bearing deposits in banks decreased to $790,000 for the six months ended December 31, 2001 from $1,649,000 for the same period in 2000. This decrease is due to substantially lower interest rates on the Company’s interest-bearing deposits during the six months ended December 31, 2001 versus the six months ended December 31, 2000. Cash and cash equivalents decreased from $57,369,000 at December 31, 2000 to $56,782,000 at December 31, 2001 primarily due to a dividend payment to stockholders during June 2001. Gains on the sales of foreclosed real estate was $139,000 for the six months ended December 31, 2001 as compared to $45,000 for the six months ended December 31, 2000. The gains on sales of real estate represent proceeds received from the sale of foreclosed real estate in excess of carrying value. The gains recognized for the six months ended December 31, 2001 was from the sale of 59.39 acres in San Antonio, Texas and the gains recognized for the six months ended December 31, 2000 were from the sale of 6.46 acres in San Antonio, Texas. Other income for the six months ended December 31, 2000 was $21,000, which was a distribution from a trust regarding an acquisition, development and construction loan made to Village Park Homes, Venture II, which was comprised of 55 lots in Fontana, California. The Company had foreclosed on the 55 lots in January 1998 and sold the 55 lots in September 1998. Compensation and benefit expense was $76,000 for the six months ended December 31, 2001 as compared to $44,000 for the six months ended December 31, 2000. The increase in expense is due to the hiring of a contract employee, offset by the replacement of a full-time employee with a part-time employee. Legal, audit and advisory fees were $60,000 for the six months ended December 31, 2001 as compared to $49,000 for the six months ended December 31, 2000. Legal and accounting expenses were higher for the six months ended December 31, 2001 due to additional legal fees related to the sale of real estate. Franchise tax expense was $18,000 for the six months ended December 31, 2000 as compared to a credit balance of $47,000 for the same period in 2000. The credit balance was due to an adjustment of the State of Texas franchise tax liability during the second quarter of fiscal 2001 totaling $65,634 due to the completion and settlement of an audit of 1997 through 1999 Texas franchise tax returns. Foreclosed real estate operations expense increased from $80,000 for the six months ended December 31, 2000 to $138,000 for the same period in 2001. Foreclosed real estate operations expense was higher for the six months ended December 31, 2001 primarily due to higher property taxes resulting from increased valuations of land owned by the Company, as well as additional spending on real estate consultations and studies. 10 |
General and administrative expense increased from $124,000 during the six months ended December 31, 2000 to $132,000 for the same period in 2001. The increase was due to higher spending for various general and administrative expenses for the six months ended December 31, 2001. Three Months Ended December 31, 2001 versus Three Months Ended December 31, 2000Net income for the three months ended December 31, 2001 was $216,000 compared to net income of $694,000 for the same period in 2000. The change in operating results for the three months was due to various factors discussed below. Interest income related to interest-bearing deposits in banks decreased to $335,000 for the three months ended December 31, 2001 from $831,000 for the same period in 2000. This decrease is due to substantially lower interest rates on the Company’s interest-bearing deposits during the three months ended December 31, 2001 versus the three months ended December 31, 2000. Cash and cash equivalents decreased from $57,369,000 at December 31, 2000 to $56,782,000 at December 31, 2001 primarily due to a dividend payment to stockholders during June 2001. Gain on the sales of foreclosed real estate were $139,000 for the three months ended December 31, 2001. There were no gains on the sales of foreclosed real estate for the three months ended December 31, 2000. The gain on sales of real estate represent proceeds received from the sale of foreclosed real estate in excess of carrying value. The gains recognized for the three months ended December 31, 2001 were from the sale of 59.39 acres in San Antonio, Texas. Compensation and benefit expense was $38,000 for the three months ended December 31, 2001 as compared to $23,000 for the three months ended December 31, 2000. The increase in expense is due to the hiring of a contract employee, offset by the replacement of a full-time employee with a part-time employee. Legal, audit and advisory fees were $43,000 for the three months ended December 31, 2001 as compared to $26,000 for the three months ended December 31, 2000. Legal expenses were higher for the three months ended December 31, 2001 due to additional legal fees for contracts relating to the sale of foreclosed real estate. Franchise tax expense was $10,000 for the three months ended December 31, 2001 as compared to a credit balance of $56,000 for the same period in 2000. The increase was due to an adjustment of the State of Texas franchise tax liability during the second quarter of fiscal 2001 totaling $65,634 due to the completion and settlement of an audit of 1997 through 1999 Texas franchise tax returns. Foreclosed real estate operations expense increased from $50,000 for the three months ended December 31, 2000 to $72,000 for the same period in 2001. Foreclosed real estate operations expense was higher for the three months ended December 31, 2001 primarily due to higher property taxes resulting from increased valuations of land owned by the Company, as well as additional spending on real estate consultations and studies. General and administrative expense increased from $64,000 during the three months ended December 31, 2000 to $69,000 for the same period in 2001. The increase was due to higher spending for various general and administrative expenses for the three months ended December 31, 2001. Liquidity and Capital ResourcesThe Company’s principal funding requirements are operating expenses, including legal, audit, and advisory expenses incurred in connection with evaluation of potential acquisition candidates and other strategic opportunities. The Company anticipates that its primary sources of funding for operating expenses will be proceeds from the sale of foreclosed real estate, interest income on cash and cash equivalents, and cash on hand. 11 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
The Company’s financial instruments consists primarily of cash and cash equivalents. The Company has approximately $57 million of its cash in interest bearing deposits in two financial institutions, which are due on demand. Fair value of these financial instruments approximates carrying value due to the liquidity and short-term nature of these instruments. The Company is subject to interest rate risk should rates fluctuate, as was experienced during the three-and six-month period ended December 31, 2001, as it relates to interest income earned from these financial instruments. It is the intention of management to ultimately acquire a viable operating company in order to increase value to existing shareholders and provide a new focus and direction for the Company. These financial instruments would be used to fund such acquisitions. 12 |
PART II. - OTHER INFORMATION |
Item 4. | Submission of Matters to a Vote of Security Holders |
The Annual Meeting of the Company’s stockholders was held on November 9, 2001 for the purpose of voting on two proposals. The proposals, including the results of the voting, are as follows: |
Proposal No. 1. | Proposal to elect each of Messrs. Gene H. Bishop, Harvey B. Cash, Gerald J. Ford, Jeremy B. Ford, Edward W. Rose, III, and Gary Shultz as directors of the Company until expiration of his term at the 2002 Annual Meeting of stockholders and until his successor is elected and qualified or until his earlier death, resignation or removal from office. |
Number of Shares of Common Stock | |||||||
---|---|---|---|---|---|---|---|
For | Withheld | ||||||
G. Bishop | 19,096,361 | 59,460 | |||||
H. Cash | 19,046,733 | 109,088 | |||||
G. Ford | 19,097,868 | 57,953 | |||||
J. Ford | 19,095,744 | 60,077 | |||||
E. Rose | 19,098,937 | 56,884 | |||||
G. Shultz | 19,099,056 | 56,765 |
Proposal No. 2 | Proposal to approve the ratification of the selection of KPMG LLP ("KPMG") as the Company’s independent accountants for the fiscal year ending June 30, 2002. |
Number of Shares of Common Stock | |||||
---|---|---|---|---|---|
For | 19,144,443 | ||||
Against | 5,233 | ||||
Abstain | 6,145 |
The total number of shares of Common Stock voted on Proposals No. 1 and 2 was 19,155,821, or approximately 94.6% of the outstanding shares of Common Stock. |
Item 6. | Exhibits and Reports on Form 8-K |
(a) | Exhibits: None |
(b) | Reports on Form 8-K: None |
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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 thereunder duly authorized. |
February 13, 2002 | LIBERTÉ INVESTORS INC. By: /s/ Gerald J. Ford —————————————— Gerald J. Ford Chief Executive Officer and Chairman of the Board | |
February 13, 2002 | LIBERTÉ INVESTORS INC. By: /s/ Ellen V. Billings —————————————— Ellen V. Billings Controller and Principal Accounting Officer |
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