SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission File No. 1-8249
LINCORP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2161279
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
250 Park Avenue
New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number,
Including Area Code: (212) 599-0465
____________________________________________________
(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 or each of the issuer's classes of
common stock, as of the latest practicable date.
1,730,559 Shares of Common Stock Outstanding at November 1, 1996
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the registrant from the books of Lincorp Holdings, Inc. without
audit (except for the Balance Sheet as of December 31, 1995), pursuant to the
rules and regulations of the Securities and Exchange Commission. This
information, which is subject to year-end adjustments, reflects all adjustments
which are, in the opinion of management, necessary to present fairly the results
for the interim periods. Although the registrant believes that the disclosures
are adequate to make the information presented not misleading, 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. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the registrant's latest
Annual Report on Form 10-K.
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LINCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
Cash ................................................ $ 244 $ 660
Rent receivable ..................................... 86 --
Investment in real estate assets, net ............... 23,485 15,517
Other assets ........................................ 4 4
--------- ---------
$ 23,819 $ 16,181
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt on real estate, including accrued interest $ 23,583 $ 15,663
Other borrowed funds, including accrued interest 166,442 157,989
Other liabilities .............................. 3,776 4,195
--------- ---------
193,801 177,847
--------- ---------
Commitments and contingent liabilities
Stockholders' deficit:
Preferred stock, Series A;
200 shares authorized;
no shares issued and outstanding ............. -- --
Preferred stock, $.01 par value;
10,000 shares authorized;
no shares issued and outstanding ............. -- --
Common stock, $.01 par value;
1,990,000 shares authorized;
1,730,559 shares issued and outstanding ...... 17 17
Capital contributed in excess of par value ...... 148,434 148,434
Accumulated deficit ............................. (318,433) (310,117)
--------- ---------
(169,982) (161,666)
--------- ---------
$ 23,819 $ 16,181
========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
3
LINCORP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- ---------------------
1996 1995 1996 1995
------- ------- -------- --------
Income:
Rental income ........................................... $ 383 $ 130 $ 882 $ 365
Equity in operating results of real estate joint ventures 50 (44) 137 4
Interest income ......................................... -- 43 23 117
Gain on sale of real estate asset ....................... 1,033 -- 1,033 --
Other income ............................................ 79 202 183 205
------- ------- -------- --------
Total income ..................................... 1,545 331 2,258 691
------- ------- -------- --------
Expenses:
Interest expense ........................................ 3,595 3,385 10,427 10,001
General and administrative expense ...................... 43 61 130 249
------- ------- -------- --------
Total expenses ................................... 3,638 3,446 10,557 10,250
------- ------- -------- --------
Loss before income taxes ................................... (2,093) (3,115) (8,299) (9,559)
Provision for income taxes ................................. 4 6 17 21
------- ------- -------- --------
Net loss ................................................... $(2,097) $(3,121) $ (8,316) $ (9,580)
======= ======= ======== ========
Loss per share of Common Stock outstanding ................. $ (1.21) $ (1.80) $ (4.80) $ (5.53)
======= ======= ======== ========
Weighted average shares of Common Stock outstanding ........ 1,731 1,731 1,731 1,731
======= ======= ======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
4
LINCORP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
OPERATING ACTIVITIES
Net loss ................................................ $(2,097) $(3,121) $(8,316) $(9,580)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Equity in operating results of real estate
joint ventures ............................. (50) 44 (137) (4)
Gain on sale of real estate asset ............. (1,033) -- (1,033) --
Proceeds from sale of real estate assets ...... 6,649 6,930 6,649 6,930
Decrease in marketable securities ............. -- 222 -- 424
Increase in rent receivable ................... (86) -- (86) --
(Increase) decrease in other assets ........... (1) 267 -- 274
Increase (decrease) in accrued interest payable 3,147 (1,226) 9,997 5,184
Increase (decrease) in other liabilities ...... (7) (137) (419) 133
------- ------- ------- -------
Net cash provided by operating activities ............... 6,522 2,979 6,655 3,361
------- ------- ------- -------
INVESTING ACTIVITIES
Investment in real estate assets ........................ (93) (3,228) (422) (3,228)
------- ------- ------- -------
FINANCING ACTIVITIES
Funds borrowed .......................................... -- 6,550 -- 6,550
Repayment of borrowed funds ............................. (6,649) (6,082) (6,649) (6,226)
------- ------- ------- -------
Net cash provided by (used in) financing activities ..... (6,649) 468 (6,649) 324
------- ------- ------- -------
Net increase (decrease) in cash ......................... (220) 219 (416) 457
Cash, beginning of period ............................... 464 363 660 125
------- ------- ------- -------
Cash, end of period ..................................... $ 244 $ 582 $ 244 $ 582
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ..................................... $ 448 $ 4,612 $ 448 $ 4,817
======= ======= ======= =======
Income taxes ................................. $ 4 $ 6 $ 17 $ 21
======= ======= ======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
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LINCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS
Effective January 1, 1995, as a result of an improving real estate market,
the Company reformulated their business plan to focus on such activity.
Accordingly, effective January 1, 1995, the Company restated its balance sheet
to reflect the real estate operations as a continuing operation. The restatement
had no effect on prior period Statements of Operations but effective January 1,
1995, the Company recognized the results of its real estate operations as part
of its results from continuing operations. This included recording its equity in
the operating results of its real estate joint ventures in accordance with the
equity method of accounting as well as recording rental and other income and
expenses from its other real estate activities.
NOTE 2 - LIQUIDITY AND GOING CONCERN
At September 30, 1996, the Company had outstanding $166.4 million of
indebtedness, including interest payable of $61.5 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities. The
Company's parent company, Unicorp Energy Corporation ("UEC"), holds $152.3
million of the Indebtedness and Hees International Bancorp, Inc. ("Hees") which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the indebtedness, $14.1 million. The Company is in payment default
under each of the above mentioned credit facilities. These credit facilities are
secured by a security interest in all of the Company's non real estate assets.
The Company's sources of operating funds during the nine months ended
September 30, 1996, and to date have been primarily funds from rental income.
Unless the Company's lenders are prepared to continue to defer the payment of
the Indebtedness, the Company will be unable to continue as a going concern.
NOTE 3 - REAL ESTATE OPERATIONS
The Company has a 25% limited partnership interest in a commercial building
known as the Colorado State Bank Building. During the first nine months of 1996,
the Company funded its partnership share of capital expenditures and tenant
improvements totaling $.4 million.
Also, during 1996, the owner of the office building at 300 Montgomery St.
in San Francisco exercised his option to purchase the Company's land holdings
which underlies his office building. The Company sold the land to the building
owner on September 30, 1996, for $6.6 million resulting in a gain of $1.0
million. The proceeds from the sale were used to pay down
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LINCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - REAL ESTATE OPERATIONS - CONTINUED
principal on debt payable to UEC.
During 1996, the Company acquired through a wholly owned subsidiary, DB
Holdings, Inc. ("DBH"), a parcel of land (the "DBH Land") underlying a
commercial real estate project in Minneapolis, Minnesota. The DBH Land was
acquired for $13.0 million, with the total purchase price funded from a senior
unsecured obligation (the "Loan") of DBH, payable the earlier of January 2,
1999, or immediately upon the sale, transfer or disposal of the DBH Land by DBH.
Interest on the Loan is payable monthly, starting July, 1996, at a rate equal to
the 180 day Libor rate plus 3%. The DBH Land is leased to a project developer
(the "Project Developer") through February, 2086 and for 1996, has an annual
minimum lease payment of $1.0 million. DBH has an agreement with the Project
Developer that at any time up to January 2, 1999, both DBH and the Project
Developer have the option to cause the transfer of the DBH Land to the other at
a price of $13.0 million plus accrued and unpaid lease payments. Should the
Project Developer exercise its option to purchase the DBH Land, DBH has the
right to sell the DBH Land to the Project Developer for a 25% interest in the
project including the DBH Land.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDlTY AND GOING CONCERN
At September 30, 1996, the Company had outstanding $166.4 million of
indebtedness, including interest payable of $61.5 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities. The
Company's parent company, Unicorp Energy Corporation ("UEC"), holds $152.3
million of the Indebtedness and Hees International Bancorp, Inc. ("Hees") which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the Indebtedness, $14.1 million. The Company is in payment default
under each of the above mentioned credit facilities. These credit facilities are
secured by a security interest in all of the Company's non real estate assets.
The Company's sources of operating funds during the nine months ended
September 30, 1996, and to date have been primarily funds from rental income.
Unless the Company's lenders are prepared to continue to defer the payment of
the Indebtedness, the Company will be unable to continue as a going concern.
RESULTS OF OPERATIONS
Nine Months Ended September 30 1996 Compared to the Nine Months Ended
September 30, 1995
For the nine months ended September 30, 1996, the Company had a net loss of
$8.3 million compared to a $9.6 million net loss for the same period in 1995.
The $1.3 million decrease in the net loss is primarily due to the third quarter
1996, $1.0 million gain on the sale of real estate.
FINANCIAL POSITION
Material Changes Since December 31, 1995
During 1996, the Company acquired through a wholly owned subsidiary, DB
Holdings, Inc. ("DBH"), a parcel of land (the "DBH Land") underlying a
commercial real estate
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
project in Minneapolis, Minnesota. The DBH Land was acquired for $13.0 million
with the total purchase price funded from a senior unsecured obligation (the
"Loan") of DBH, payable the earlier of January 2, 1999, or immediately upon the
sale, transfer or disposal of the DBH Land by DBH. Interest on the Loan is
payable monthly, starting July, 1996, at a rate equal to the 180 day Libor rate
plus 3%. The DBH Land is leased to a project developer (the "Project Developer")
through February, 2086, and for 1996, has an annual minimum lease payment of
$1.0 million. DBH has an agreement with the Project Developer that at any time
up to January 2, 1999, both DBH and the Project Developer have the option to
cause the transfer of the DBH Land to the other at a price of $13.0 million plus
accrued and unpaid lease payments. Should the Project Developer exercise its
option to purchase the DBH Land, DBH has the right to sell the DBH Land to the
Project Developer for a 25% interest in the project including the DBH Land.
Also, during the third quarter of 1996, the Company sold one of its real
estate assets for $6.6 million resulting in a gain of $1.0 million. The proceeds
from the sale were used to pay down principal on debt payable to UEC.
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PART II. 0THER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to litigation.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) At September 30, 1996, the Company had outstanding $166.4 million of
indebtedness, including interest payable of $61.5 million,
(collectively the "Indebtedness") under its Senior, Subordinated and
Junior credit facilities. The Company's parent company, Unicorp
Energy Corporation ("UEC"), holds $152.3 million of the Company's
Indebtedness and Hees International Bancorp, Inc. which currently
owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the Indebtedness, $14.1 million. The Company is in
payment default under each of the above mentioned credit facilities.
These credit facilities are secured by a security interest in all of
the Company's non real estate assets.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable.
(b) None filed.
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SIGNATURE
Pursuant to the requirements ofthe Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LINCORP HOLDINGS, INC.
Dated: November 4, 1996 /s/ Jack R. Sauer
Jack R. Sauer
Chief Financial Officer
11