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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For fiscal year ended July 31, 1997 Commission File No. 0-5767
LINCOLN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky # 61-057092
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite No. 6, 120 Village Square
Louisville, Kentucky 40243
Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (502)245-8814
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each
exchange on which
registered
none none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (no-par) voting
Title of class
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
State the aggregate market value of the voting stock held
by non-affiliates of the Registrant. The aggregate market value
shall be computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a
specified date within 60 days prior to the date of filing.
No regular market exists for the stock.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the July 31, 1997.
Common (no-par) 1,761,145
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report -- 1996-1997
(2) Information Statement -- 1997
Portions of the above Annual Report and Information
Statement to be issued are hereby incorporated by reference into
Parts II and III.
PART I
ITEM 1: BUSINESS
LINCOLN INTERNATIONAL CORPORATION (LINCOLN), incorporated
in 1960, is engaged in the management of agricultural properties
BOURBON STOCK YARDS (Bourbon) located in Louisville, Kentucky.
BOURBON has been in continuous operation for 162 years
and was merged into LINCOLN in 1978.
LINCOLN INTERNATIONAL entered into a lease agreement with
Kentucky Livestock Exchange, a division of Michigan Livestock
Exchange, a Michigan corporation, wherein, LINCOLN leased its
stockyards operations consisting of approximately seven acres with
the term of the lease being for a period of 10 years beginning on
July 15th, 1995, and ending on July 14th, 2005, with provisions for
payment of rent based on monthly pre-tax profits with a minimum
rent provision of $18,000.00 for the first two years.
On October 15, 1996, LINCOLN filed a complaint against
the lessees by which it is alleged that there has been a violation
of the lease agreement, and LINCOLN sought a restraining order,
temporary injunction and compensatory relief which, if not granted,
could cause LINCOLN to lose its prime source of income because of
the increased competition from the operation of the stockyards by
these companies within close proximity of Bourbon's operations.
(See Legal Proceedings Part III). Hearings have been held on
certain portions of this litigation and other hearings have been
set. The lease was amended by agreement and as a partial settlement
of litigation between Lincoln International and Kentucky Livestock
Exchange.
BOURBON is subject to the rules and regulations of and
must file (publicly available) reports with, the Interstate
Commerce Commission (ICC) and the United States Department of
Agriculture (USDA). BOURBON'S disposal of its waste materials is
in compliance with federal, state and local environmental laws.
EMPLOYEES:
As of July 31, 1997, LINCOLN employed three (3)
administrative personnel.
MAJOR BUSINESS SEGMENTS - FINANCIAL DATA
The following is a report of the major business segments
and the corresponding financial data.
Prior to July 31, 1995, the Company considered its
activities to comprise two segments: (1) financial lending and
(2) agribusiness. After July 31, 1995, the company operated only
an agribusiness. Summary data for 1997, 1996 and 1995 is as
follows:
1997 1996 1995
Revenues:
Finance $ 0 $ 0 $ 58,625
Agribusiness 290,428 298,272 1,296,663
Other 2,291 3,357 6,884
Consolidated $ 292,719 $301,629 $1,362,172
Operating profit (loss):
Finance $ -133 $ -2,925 $-15,243
Agribusiness 139,269 86,314 161,081
Total segments 139,136 83,389 145,838
Corporate and other
expenses -292,180 -226,354 -246,312
Loss from operations -153,044 -142,965 -100,474
Nonoperating income 33,065 732,496 123,082
Interest expense -35,138 -80,405 -104,336
Income (loss) before
income taxes $-154,577 $509,126 $-81,728
Total assets:
Finance $ 0 $ 0 $ 491
Agribusiness 1,078,100 1,127,211 1,283,533
Total segments 1,078,100 1,127,211 1,284,024
Corporate and other 158,702 231,574 339,342
Consolidated $1,236,802 $1,358,785 $1,623,366
Capital expenditures:
Finance $ 0 $ 0 $ 0
Agribusiness 5,740 5,000 5,215
Total segments 5,740 5,000 5,215
Corporate and other 0 3,998 695
Consolidated $5,740 $8,998 $5,910
Depreciation and
amortization:
Finance $ 0 $ 0 $ 286
Agribusiness 41,877 52,853 57,118
Total segments 41,877 52,853 57,404
Corporate and other 3,066 3,181 10,423
Consolidated $44,943 $56,034 $67,827
ITEM 2: Properties
The following are the various properties owned or leased by
LINCOLN as of July 31, 1997.
APPROXIMATE LEASE EXPI-
TYPE OF SQUARE FEET RATION DATE
LOCATION PROPERTY FLOOR SPACE (RENEWAL
OPTIONS)
LINCOLN ADMINISTRATIVE OFFICES
Louisville, KY Offices 300 sq. ft. 03/01/98
* * * * * * * * *
BOURBON STOCK YARDS
Louisville, KY Stock yard Owned
real estate 20.5 acres
& buildings
Stock yard
offices10,460 ft. 02/1/2001
Louisville, KY Right-of-way NA 1997 (1)
for stock yard
Louisville, KY Warehouse 4,000.0 ft. Owned
Louisville, KY Warehouse 9,000.0 ft. Owned
* * * * * * * * *
(1) The right-of-way is not essential to Bourbon's operations
but does provide an easier access and egress from the facility.
* * * * * * * * *
The properties listed above are suitable and adequate for the
various needs they supply.
The total fixed annual rental for all of the above leased
facilities (exclusive of taxes and other charges) was $63,585.
ITEM 3: Legal Proceedings
LINCOLN filed a complaint on October 15, 1996, seeking injunctive
and compensatory relief arising from the breach of the lease of
the real estate by Kentucky Livestock Exchange and Michigan
Livestock Exchange, Inc. and sought relief by way of a
Restraining Order and Injunction to prohibit the lessees from
engaging in competitive actions of operating stockyard facilities
within close proximity of Bourbon Stockyards in Louisville,
Kentucky. LINCOLN and Kentucky Livestock Exchange and Michigan
Livestock Exchange, Inc. have reached an agreement on amending
the lease and although there are other portions of the lawsuit
pending, none of the remaining problems will have a material
effect upon the operation of LINCOLN or its business interest.
Neither LINCOLN nor any of its subsidiaries is engaged in any
other material legal proceedings.
ITEM 4: Submission of Matters to a Vote of Security Holders
The items to be voted on at the annual meeting which will be held
on the 5th day of December, 1997, are as follows:
(1) Election of directors and
(2) Reverse stock split.
PART II
ITEM 5: Market for Registrant's Common Stock and Related
Stockholder Matters
(1) There does not exist at the present time any regular market
for any common stock of the Registrant.
(2) There are approximately 1,370 shareholders of record of the
common (no par) stock of LINCOLN.
(3) The Registrant has never paid or declared any dividends.
(4) The Registrant has filed a Schedule 13E-3 with the
Securities and Exchange Commission as a "Tender Offer" wherein it
will propose to purchase a maximum of 1,000,000 shares of the
(no-par) (non-voting) common stock for a tender price of thirty-
five ($.35) cents per share. As a result of the tender offer,
there was acquired 910,144 shares. Reference is made to that
filing for specific information and is incorporated by reference
herein.
ITEM 6: Selected Financial Data
Years ending July 31
1997 1996 1995 1994 1993
Revenues 292719 301629 1362172 1507258 1497505
Income (loss) before
extraordinary items -154577 494735 -87968 -73394 -105336
Net income (loss) -154577 494735 -87968 -73394 -105336
Earnings (loss) per
common share:
Income (loss) before
extraordinary items -.10 .31 -.05 -.04 -.07
Net income (loss) -.10 .31 -.05 -.04 -.07
Cash dividends 0 0 0 0 0
Total assets 1236802 1358785 1623366 1959569 2037796
Long-term obligations 385511 387250 733640 819788 871068
ITEM 7:Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Agri-Business
BOURBON STOCKYARD
During July, 1995, Lincoln International Corporation leased the
Bourbon Stockyard operations to Michigan Livestock Exchange.
Net revenue from leasing the stockyard operations for the fiscal
year ended July 31, 1997 was approximately the same as compared to 1996.
Operating costs for the year ended July 31, 1997 decreased by
approximately $49,000 or 25% as compared to 1996. The decrease resulted
from miscellaneous expenses in 1996 associated with the closing of the
operations of the stockyard.
Net revenue for the fiscal year ended July 31, 1996 decreased
approximately $877,800 or 74% as compared to the year ended July 31,
1995.
Operating costs for the year ended July 31, 1996 decreased by
approximately $807,000 or 80% as compared to the year ended July 31,
1995. The income and expense reductions are the result of leasing the
property to Michigan Livestock Exchange.
There were no accounts payable or capital commitments at July
31, 1997. All funds in excess of expenses are available to the parent.
CONSOLIDATED OPERATIONS
Revenues from consolidated operations in 1997 decreased approxi-
mately $29,000 or 9% as compared to 1996. There were various
miscellaneous items received in 1996 that were nonrecurring.
Operating costs from consolidated operations for the year ended
July 31, 1997 were down approximately $14,000 from the year ended
July 31, 1996. This was due primarily to reduced depreciation for the
year.
Revenues from consolidated operations in 1996 decreased
approximately $1,061,000 or 78% as compared to 1995. This decrease is
primarily the result of the lease of the Bourbon Stockyard operation.
Operating costs for the year ended July 31, 1996, were down
approximately $1,042,000 or 66% as compared to 1995. This decrease is
primarily the result of the lease of the Bourbon Stockyard operation.
Operating costs, which include amortization and depreciation
account for 148%, 174%, and 114% of net sales and operating revenues for
the years 1997 to 1995 respectively.
There were no capital commitments at July 31, 1997.
Working capital at July 31, 1997 was approximately $89,000 as
compared to approximately $144,000 at July 31, 1996. There were no
defaults on loans payable during the year. The liquidity of the company
will depend on the lease arrangements at Bourbon Stockyards and the
development of the remaining property owned by the Company.
ITEM 8: Consolidated Financial Statements and Supplementary Data
The response to this item is contained within a separate section
of this report.
ITEM 9: Changes in and Disagreements with Accountants
None.
ITEM 10:
NAME, PRINCIPAL OCCUPATION
AND OTHER POSITIONS WITH DIRECTORS SHARES OWNED AS OF 07/31/97
LINCOLN FOR LAST 5 YEARS SINCE
Thurman L. Sisney,
Chairman of the Board,
President and CEO
Director, Age 51 1994 50,445(1)
Richard Dolin
Secretary/Treasurer
Director, Age 52 1996 910,144(2)
David W. Barhorst
Director, Age 38 1996
_______
Officers & Directors as a group 960,589
(1) Includes shares held in names of Drivers and Drovers
Diversified, Inc., a Kentucky corporation owned by Thurman L. Sisney.
(2) Includes shares of LTG, Inc., a Kentucky corporation of
which 50% is owned by Mrs. Lee Sisney.
Management has no reason to believe that any of the persons so
named above will be unable or unavailable to accept nominations but
should this occur, votes will be given for such other person or persons,
if any, as the Board of Directors may recommend.
BUSINESS HISTORY OF DIRECTORS
Thurman L. Sisney - Mr. Sisney is President, Chairman of the
Board and Chief Executive Officer of Lincoln International Corporation.
Mr. Sisney has a masters degree in business administration and law
degree from the University of Louisville and has been in private
practice since 1980. He has served as general counsel to the Kentucky
Finance and Administration Cabinet as well as counsel and legislative
liaison to the governor of Kentucky. Mr. Sisney has also served as
General Counsel and Deputy Commissioner of Agriculture and the Kentucky
Department of Agriculture. Mr. Sisney is very active in civic and
charitable organizations in the community including but not limited to
the board of trustees of the Louisville Conference of the United
Methodist Church, Founder and President of the International Association
of Convention and Hospitality and Industry Attorney's Association.
Richard Dolin - Mr. Dolin is a graduate of the University of
Louisville Law School where he obtained his Juris Doctorate degree, is a
graduate of Louisville Presbyterian Theological Seminary where he
obtained a certificate of double competency in law and theology and a
master degree in Business Administration from Bellarmine College and has
done doctoral work in business administration at the University of
Kentucky. Mr. Dolin is associate pastor for the Harvey Browne Memorial
Presbyterian Church in Louisville, Kentucky, and is responsible for
adult education programs and out-reach activities and also serves as
president of Nomos, Ltd., which provides consultation to small and
medium sized profit and non-profit organizations regarding strategic
planning, accounting, budgeting, and related items. Mr. Dolin also was
involved in providing seminars on areas of leadership and management
skills. Mr. Dolin is involved in many community activities including
work for building homes for developmentally disabled adults and is
involved in Chinese and American relationships.
David W. Barhorst - Mr. Barhorst is a graduate of the University
of Kentucky Honors Program having received his Bachelors of Science in
Advertising in 1982. Mr. Barhorst is president and founder of Oertel
Brewing Company, manufacturer of Oertels 92 Beer. He is also president
of Oertel Brewery Complex Incorporated, a real estate management and
development company. Mr. Barhorst has been involved in real estate
investments and has been a financial consultant to Merrill Lynch,
Pierce, Fenner & Smith. Mr. Barhorst is also been involved in all
phases of advertising with various radio stations as well as Courier
Journal and Louisville Times.
ITEM 11:
The directors received compensation of Three Hundred ($300.00)
Dollars per meeting and travel expenses. The directors fees and travel
expense for 1996-1997 was $3,300.
ITEM 12 and ITEM 13:
LINCOLN intends to file an Information Statement pursuant to
Regulation 14(c) which contains all of the information required by
Part III which information is incorporated herein by reference.
PART IV
ITEM 14: Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Part IV which relates to Item 14 concerning exhibits, financial
statement schedules and reports is hereby amended to include the
following items by reference.
(3) Articles of Incorporation and By-Laws: The articles and
by-laws of Lincoln International Corporation were filed as a part of its
Form 10 filing in September of 1971.
(4) Form 8-K filed September, 1991, reporting sale and
disposition of assets of Lincoln Finance Company, Inc. to Kentucky
Finance Co., Inc. of three (3) of the four (4) finance companies
operated by Registrant.
(5) Articles of Merger of majority held subsidiary,
Professional Services, Inc., into Registrant as filed on Form 10K
for fiscal year 1991-1992.
(6) Form 10-K - 1995 (1) A copy of the lease agreement dated
July 15, 1995, between LINCOLN INTERNATIONAL CORPORATION and Kentucky
Livestock Exchange (BOURBON STOCKYARDS OPERATIONS) a division of
Michigan Livestock Exchange, et al.
(7) 8-K - 1997 (1) A copy of the amendment to the Articles of
Incorporation eliminating classes of stock.
Financial data and schedules are submitted separately as a
separate schedule and are attached hereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Lincoln International Corporation has
duly caused this report to be signed on its behalf, by the undersigned,
President and Chief Executive Officer, Thurman L. Sisney, and by its
principal Financial Officer and principal Accounting Officer, Secretary
and Treasurer, Richard Dolin, as thereunto duly authorized in the City
of Louisville, Commonwealth of Kentucky, on the 29th day of October,
1997.
LINCOLN INTERNATIONAL CORPORATION
____________________________
By: Thurman L. Sisney, President
Date: ____________________________
___________________________
By: Richard Dolin, Sec./Treas.
Date: ___________________________
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of LINCOLN INTERNATIONAL CORPORATION in the capacities and on the
date indicated.
SIGNATURE TITLE
(1) Principal Executive Officers
______________________________
Thurman L. Sisney President & Chairman of the
Board
______________________________
Richard Dolin Secretary/Treasurer
(2) Directors
_____________________________
Thurman L. Sisney Director
_____________________________
Richard Dolin Director
_____________________________
David N. Barhorst Director
LINCOLN INTERNATIONAL CORPORATION
ANNUAL REPORT FORM 10-K
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
Lincoln International Corporation
Louisville, Kentucky
We have audited the consolidated balance sheets of Lincoln
International Corporation listed in the accompanying index to
Financial Statements (Item 14(a)) as of July 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended July 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements listed in the accompanying
Index to Financial Statements (Item 14(a)) present fairly, in all
material respects, the consolidated financial position of Lincoln
International Corporation as of July 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each
of the three years in the period ended July 31, 1997, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 4 to the financial statements, there is substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
POTTER & COMPANY, LLP
Louisville, Kentucky
September 10, 1997
LINCOLN INTERNATIONAL CORPORATION
Index to Financial Statements
Item 14(a)
The following consolidated financial statements of Lincoln
International Corporation and subsidiaries are incorporated by
reference in Item 8:
Consolidated balance sheets - July 31, 1997 and 1996
Consolidated statements of operations - years ended July 31,
1997, 1996, and 1995
Consolidated statements of stockholders' equity - years ended
July 31, 1997, 1996, and 1995
Consolidated statements of cash flows - years ended July 31,
1997, 1996, and 1995
Notes to consolidated financial statements
Supporting schedules for the three years ended July 31, 1997, 1996,
and 1995:
I - Condensed financial information (parent company only)
II - Valuation and qualifying accounts and reserves
All other schedules are omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements and notes
thereto.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
July 31, 1997 and 1996
1997 1996
A S S E T S
Current assets:
Cash and cash equivalents $ 156,141 $ 224,743
Accounts receivable, net 9,732 12,409
Total current assets 165,873 237,152
Investments in subsidiaries 575,000 1,140,750
Net property, plant and equipment 1,070,929 1,121,633
Total assets $1,811,802 $2,499,535
L I A B I L I T I E S A N D
S T O C K H O L D E R S' E Q U I T Y
Current liabilities:
Current maturities of long-term debt $ 5,443 $ 9,256
Accounts payable 28,594 11,085
Income taxes payable 0 14,366
Accrued expenses 42,968 57,940
Total current liabilities 77,005 92,647
Long-term debt, less current maturities 385,511 387,250
Advances from subsidiaries 582,921 583,170
Stockholders' equity:
Common stock 1,300,019 1,250,019
Retained earnings (deficit) -533,654 186,449
Total stockholders' equity 766,365 1,436,468
Total liabilities and
stockholders' equity $1,811,802 $2,499,535
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Revenues:
Net service and operating revenues $ 292,719 $300,199$1,194,763
Net product sales 0 0 119,689
Gain (loss) on sale of assets 24,999 715,210 -28,501
Miscellaneous income 8,606 570,834 26,223
326,324 1,586,243 1,312,174
Costs and expenses:
Cost of service and operating
revenues 220,156 230,009 914,457
Cost of products sold 0 0 104,169
Operating, general and
administrative expenses 225,383 211,365 383,117
Interest expense - subsidiaries 0 0 19,399
Interest expense - other 35,138 70,932 104,336
480,677 512,306 1,525,478
Income (loss) before provision for
income tax -154,353 1,073,937 -213,304
Income tax 0 14,366 0
Income (loss) before equity in net
earnings (losses) of subsidiaries -154,353 1,059,571 -213,304
Equity in net earnings (losses)
of subsidiaries -224 -7,232 125,336
Net income (loss) $-154,577 $1,052,339 $-87,968
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Cash flows from operating activities:
Net income (loss) $-154,577$1,052,339 $-87,968
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 44,943 56,034 67,541
Equity in net (earnings) losses of
consolidated subsidiaries 224 7,232 -125,336
(Gain) loss on sale of property,
equipment, and operating assets -24,999 -715,210 28,501
Stock bonus 50,000 0 0
Provision for losses on other
receivables 20,550 19,032 0
Change in assets and liabilities:
Increase in accounts receivables -17,873 -10,190 -8,011
Decrease in inventories 0 0 681
Decrease in other current assets 0 7,091 3,963
Increase (decrease) in accounts
payable 17,509 -49,285 -33,306
Decrease in accrued expenses -14,972 -25,892 -744
Increase (decrease) in income taxes
payable -14,366 14,366 0
Net cash provided by (used in)
operating activities -93,561 355,517 -154,679
Cash flows from investing activities:
Proceeds from disposal of property,
equipment, and operating assets 36,500 807,426 24,440
Purchases of property and equipment -5,740 -8,998 -5,910
Net cash provided by
investing activities 30,760 798,428 18,530
Cash flows from financing activities:
Net repayments under
short-term notes payable 0 0 -90,379
Increase (decrease) in advances from
subsidiaries -249 -729,387 649,259
Proceeds from long-term debt 0 757 1,389
Principal payments on long-term debt -5,552 505,449 -103,963
Purchase of common stock for the treasury 0 -26,570 0
Net cash provided by (used in)
financing activities -5,801-1,260,649 456,306
Net increase (decrease) in cash
and cash equivalents -68,602 -106,704 320,157
Cash and cash equivalents
at beginning of year 224,743 331,447 11,290
Cash and cash equivalents
at end of year $156,141 $224,743 $331,447
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest $36,121 $73,164 $123,629
Cash paid during the year for
income taxes $14,366 $0 $0
Supplemental schedule of noncash
financing activities:
Issuance of common stock for
executive bonus $50,000 $0 $0
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 31, 1997 and 1996
1. Basis of Presentation
In accordance with the requirements of Regulation S-X of the
Securities and Exchange Commission, the financial statements of the
registrant are condensed and omit many disclosures presented in the
consolidated financial statements and the notes thereto.
2. Long-term debt
Long-term debt consists of the following:
1997 1996
Mortgage note payable, interest at 8.75%,
monthly payments of $3,283 including
principal and interest, balloon payment
due February 2001, secured by real
property. Prior to October 1, 1996,
interest was at 9.875% and monthly
payments of principal and interest
were $4,000. $390,954 $396,506
Less current maturities 5,443 9,256
Totals $385,511 $387,250
Scheduled maturities of long-term debt during the five years subsequent
to July 31, 1997 are as follows:
1998 $ 5,443
1999 5,895
2000 6,432
2001 373,184
Total $ 390,954
3. Dividends
Cash dividends paid to Lincoln International Corporation by its
consolidated subsidiaries were $0, $557,605, and $0 for the fiscal
years ended July 31, 1997, 1996 and 1995, respectively. The amounts
are included in miscellaneous income.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 31, 1997 and 1996
4. Going Concern
As shown in the accompanying financial statements, the Company
incurred a net loss of $154,577 during the year ended July 31, 1997.
The ability of the Company to continue as a going concern is
dependent upon future profitable operations. The financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
SCHEDULE II
LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended July 31, 1997, 1996, and 1995
Column Column Column Column Column
A B C D E
Additions
Balance Charged Charged Balance
at to to Other at
Beginning Costs & Accounts Deductions End
Description of Year Expenses Describe Describe of Year
Year ended July 31, 1997
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 19,782 20,550 0 0 40,332
Loans receivable - finance 0 0 0 0 0
19,782 20,550 0 0 40,332
Accumulated amortization -
Franchise license 0 0 0 0 0
19,782 20,550 0 0 40,332
Year ended July 31, 1996
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 750 19,032 0 0 19,785
Loans receivable - finance 0 0 0 0 0
750 19,032 0 0 19,785
Accumulated amortization -
Franchise license 0 0 0 0 0
750 19,032 0 0 19,785
Year ended July 31, 1995
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 4,081 0 0 3,331 A 750
Loans receivable - finance16,515 7,435 0 23,950 A,B 0
20,596 7,435 0 27,281 750
Accumulated amortization -
Franchise license 75,529 6,294 0 81,823 C 0
96,125 13,729 0109,104 750
(A) Write-off of doubtful accounts.
(B) Includes reduction in allowance in the amount of $16,807 due to
sale of finance receivables.
(C) Sold Franchise license May 1, 1995.
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
July 31, 1997, 1996, and 1995
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Lincoln International Corporation
Louisville, Kentucky
We have audited the accompanying consolidated balance sheets of
Lincoln International Corporation as of July 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
July 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Lincoln International Corporation as of July 31, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each
of the three years in the period ended July 31, 1997, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 13
to the financial statements, there is substantial doubt about the
Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
POTTER & COMPANY, LLP
September 10, 1997
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
July 31, 1997 and 1996
A S S E T S
1997 1996
Current assets:
Cash and cash equivalents $ 156,141$ 224,743
Other receivables 9,732 12,409
Total current assets 165,873 237,152
Net property, plant and equipment 1,070,929 1,121,633
Total assets $1,236,802$1,358,785
L I A B I L I T I E S
Current liabilities:
Current maturities of long-term
debt $ 5,443$ 9,256
Accounts payable 28,594 11,085
Income taxes payable 0 14,391
Accrued expenses 42,968 57,940
Total current liabilities 77,005 92,672
Long-term debt, less current maturities385,511 387,250
Total liabilities 462,516 479,922
Commitments
S T O C K H O L D E R S' E Q U I T Y
Stockholders' equity:
Common stock, no par value,
(3,000,000 shares authorized;
1,761,145 and 1,561,145 shares
issued and outstanding in 1997
and 1996, respectively) 1,300,019 1,250,019
Retained earnings (deficit) -525,733 -371,156
Total stockholders' equity 774,286 878,863
Total liabilities and
stockholders' equity $1,236,802$1,358,785
See accompanying notes.
2
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Revenues:
Net service and operating revenues $292,719 $301,629$1,183,858
Net product sales 0 0 119,689
Finance charges and other income
earned on finance receivables 0 0 58,625
Total revenues 292,719 301,6291,362,172
Costs and expenses:
Cost of service and operating revenues220,156 230,009 931,305
Cost of products sold 0 0 104,169
Operating, general and administrative
expenses 225,607 214,585 401,660
Provision for credit losses on finance
receivables 0 0 6,409
Interest expense related to finance
subsidiary 0 0 19,103
Total costs and expenses 445,763 444,5941,462,646
Loss from operations -153,044 -142,965 -100,474
Other income (expense):
Gain on sale of property,
equipment, and operating assets 24,999 715,210 88,640
Interest expense -35,138 -80,405 -104,336
Miscellaneous income 8,606 17,286 34,442
Total other income (expense) -1,533 652,091 18,746
Income (loss) before income taxes-154,577 509,126 -81,728
Provision for income taxes 0 14,391 6,240
Net income (loss) $-154,577 $494,735 $-87,968
Net income (loss) per common share $-.10 $.31 $-.05
See accompanying notes.
3
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended July 31, 1997, 1996, and 1995
Total
Common CommonAdditional Retained Stock-
Stock Stock Paid-in Earnings holders'
Voting Nonvoting Capital (Deficit) Equity
Balance at
July 31, 1994 $50,000 $761,537 $465,052 $-777,923 $498,666
Net loss 0 0 0 -87,968 -87,968
Balance at
July 31, 1995 50,000 761,537 465,052 -865,891 410,698
Purchase of
61,929 shares
of common
stock for the
treasury 0 -30,964 4,394 0 -26,570
Net income 0 0 0 494,735 494,735
Balance at
July 31, 1996 $50,000 $730,573 $469,446 $-371,156 $878,863
Issuance of
200,000 shares
of common stock
for executive
bonus 0 50,000 0 0 50,000
Exchange to a
single class of
stock, no par
value 1,250,019 -780,573 -469,446 0 0
Net loss 0 0 0 -154,577 -154,577
Balance at
July 31, 1997$1,300,019 $0 $0 $-525,733 $774,286
See accompanying notes.
4
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Cash flows from operating activities:
Net income (loss) $-154,577$494,735 $-87,968
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 44,943 56,034 67,827
Provision for credit losses on
finance receivables 0 0 7,435
Provision for losses on other
receivables 20,550 19,032 0
Reduction in allowance for credit
losses due to sale of operating
assets 0 0 -16,807
Gain on sale of property,
equipment, and operating assets-24,999-715,210 -88,640
Stock bonus 50,000 0 0
Change in assets and liabilities:
Increase in other receivables -17,873 -8,733 -7,976
Decrease in inventories 0 0 681
Decrease in prepaid expenses 0 7,091 4,082
Increase (decrease) in accounts
payable 17,509 -49,285 -33,340
Increase (decrease) in income
taxes payable -14,391 8,151 1,842
Decrease in accrued expenses -14,972 -35,669 -4,520
Decrease in deferred insurance
commissions 0 0 -2,435
Net cash used in
operating activities -93,810-223,854 -159,819
Cash flows from investing activities:
Loans originated 0 0 -146,251
Loans repaid 0 0 146,565
Proceeds from sale of loans 0 0 661,951
Proceeds from disposal of property,
equipment and operating assets 36,500 807,426 24,690
Purchases of property and equipment -5,740 -8,998 -5,910
Net cash provided by
investing activities 30,760 798,428 681,045
See accompanying notes.
5
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 1997, 1996, and 1995
1997 1996 1995
Cash flows from financing activities:
Net repayments of short-term notes $ 0$ 0 $-90,379
Proceeds from long-term debt 0 757 1,389
Principal payments on long-term debt -5,552-656,700 -120,792
Purchase of common stock for the
treasury 0 -26,570 0
Net cash used in
financing activities -5,552-682,513 -209,782
Net increase (decrease) in
cash and cash equivalents -68,602-107,939 311,444
Cash and cash equivalents
at beginning of year 224,743 332,682 21,238
Cash and cash equivalents
at end of year $156,141$224,743 $332,682
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest $36,121 $84,924 $124,588
Cash paid during the year for income
taxes $14,366 $6,240 $4,398
Supplemental schedule of noncash
financing activities:
Issuance of common stock for
executive bonus $50,000 $0 $0
See accompanying notes.
6
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Lincoln International
Corporation (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations
of the Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Company's Activities:
Lincoln International Corporation owns property in the state of Kentucky which
is leased to a stock yard operator. The Company operated the stock yard
through July 15, 1995.
Through April 30, 1995, the Company engaged in the operation of ice cream
franchises in the Midwestern United States. On May 1, 1995, the Company sold
its remaining territories and equipment of the ice cream operation.
Through November 30, 1994, the Company engaged in the operation of a small
consumer loan company in the state of Kentucky. On December 1, 1994, the
Company sold all finance receivables and ceased operations at its one remaining
small consumer loan company.
Use of Estimates:
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and the
reported revenues and expenses.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions are
eliminated in consolidation.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers all money market
funds with a maturity of three months or less to be cash equivalents.
Finance Receivables:
All new direct cash loans of the Company have been recorded on the discount-
basis. Income from discount-basis direct cash loans and retail contracts is
7
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
calculated using a method which approximates the interest method. Accrual of
interest income is suspended when a loan is contractually delinquent for ninety
days or more at which time the loan is converted to interest-bearing. Income
from interest-bearing loans is credited to income as and when collections are
made. Extension fees and late charges on discount-basis direct cash loans and
retail contracts are credited to income when collected. Insurance commissions
are recognized over the terms of the related loans based on the straight-line
method which approximates the interest method.
During the year ended July 31, 1995, the Company sold all finance receivables
and ceased operations as a small consumer loan company.
Property, Plant and Equipment:
Property, plant and equipment are recorded at cost. Depreciation is provided
over the following estimated useful lives:
Buildings and improvements 20-40 years
Yard and administration building 10-55 years
Leasehold improvements 3-5 years
Machinery and equipment 3-12 years
The Company uses the straight-line method of computing depreciation for
financial statement purposes and accelerated methods for income tax purposes.
Leasehold improvements are amortized using the straight-line method over the
lease term.
Income Taxes:
The Company files a consolidated federal income tax return. Investment tax
credits are treated as a reduction of the tax provision in the year in which
the benefit is earned (flow-through method). Separate state income tax returns
are filed for the Company and each subsidiary.
Earnings Per Share:
Earnings per share are based on the weighted average number of shares
outstanding during each year.
8
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 2 - FINANCE RECEIVABLES
Changes in the allowance for credit losses were as follows:
Balance as of July 31, 1994 $16,515
Provision for credit losses 7,435
Loans charged off -24,977
Recoveries 1,027
Balance as of July 31, 1995 $ 0
On December 1, 1994, the finance receivables were sold.
NOTE 3 - OTHER RECEIVABLES
Other receivables consist of the following:
1997 1996
Accounts receivable $50,064 $32,191
Less allowance for doubtful accounts 40,332 19,782
Totals $ 9,732 $12,409
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
1997 1996
Land $ 667,504 $ 667,504
Building and improvements 68,250 68,250
Yard and administration building 2,133,365 2,149,593
Machinery and equipment 226,346 331,330
Leasehold improvements 2,800 2,800
3,098,265 3,219,477
Less accumulated depreciation 2,027,336 2,097,844
Net property, plant and equipment $1,070,929 $1,121,633
Depreciation expense for the years ended July 31, 1997, 1996 and 1995 was
$44,943, $56,034 and $61,533, respectively.
9
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
1997 1996
Mortgage note payable, interest at
8.75%, monthly payments of $3,283,
including principal and interest,
balloon payment due February 2001,
secured by real property. Prior
to October 1, 1996, interest was
at 9.875% and monthly payments of
principal and interest were
$4,000. $390,954 $396,506
Less current maturities 5,443 9,256
Totals $385,511 $387,250
Aggregate maturities required on long-term debt at July 31, 1997 are as
follows:
1998 $ 5,443
1999 5,895
2000 6,432
2001 373,184
Total $390,954
NOTE 6 - INCOME TAXES
The provision for income taxes consists of the following:
1997 1996 1995
Federal income taxes $ 0 $ 2,310 $ 0
State and local income taxes 0 12,081 6,240
Provision for income taxes $ 0 $14,391 $6,240
10
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 6 - INCOME TAXES (CONTINUED)
The Company has available at July 31, 1997 unused tax credits and operating
loss carryforwards, which may provide future tax benefits. If not used, the
carryforwards will expire as follows:
Year of Tax Operating Loss
Expiration Credits Carryforwards
2001 $61,247 $ 0
2002 0 0
2003 0 0
2004 0 0
2005 0 60,774
2006 0 216,677
2007 0 0
2008 0 89,623
2009 0 76,331
2010 0 59,836
2011 0 106,248
Total $61,247 $609,489
11
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 6 - INCOME TAXES (CONTINUED)
The difference between the statutory income tax rate and the Company's
effective tax rate is reconciled as follows:
1997 1996 1995
Amount PercentAmount Percent Amount Percent
Federal taxes
(benefit) at
statutory rate $0 0%$173,100 34.0%$-27,800 -34.0%
Surtax exemption 0 0% 0 .0% 0 0.0%
Tax effect of
current
operating
loss available
for carryover 0 0% 0 0.0% 27,800 34.0%
Benefit due to
operating loss
carryforward 0 0%-158,323 -31.1% 0 0.0%
Temporary
differences 0 0%-11,770 -2.3% -851 -1.0%
State and local
income taxes,
net of federal
benefit 0 0% 11,384 2.2% 7,091 8.6%
$0 0%$14,391 2.8% $6,240 7.6%
A deferred tax asset due to the operating loss and tax credit carryforwards has
not been recognized because it is more likely than not that it will not be
realized based on current circumstances.
12
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 7 - MAJOR BUSINESS SEGMENTS
The Company considers its activities to comprise two reportable segments:
financial lending and agribusiness. Summary data is as follows:
1997 1996 1995
Revenues:
Finance $ 0 $ 0 $ 58,625
Agribusiness 290,428 298,272 1,296,663
Other 2,291 3,357 6,884
Consolidated $ 292,719 $301,629 $1,362,172
Operating profit (loss):
Finance $ -133 $ -2,925 $-15,243
Agribusiness 139,269 86,314 161,081
Total segments 139,136 83,389 145,838
Corporate and other
expenses -292,180 -226,354 -246,312
Loss from operations -153,044 -142,965 -100,474
Nonoperating income 33,065 732,496 123,082
Interest expense -35,138 -80,405 -104,336
Income (loss) before
income taxes $-154,577 $509,126 $-81,728
Total assets:
Finance $ 0 $ 0 $ 491
Agribusiness 1,078,100 1,127,211 1,283,533
Total segments 1,078,100 1,127,211 1,284,024
Corporate and other 158,702 231,574 339,342
Consolidated $1,236,802 $1,358,785 $1,623,366
Capital expenditures:
Finance $ 0 $ 0 $ 0
Agribusiness 5,740 5,000 5,215
Total segments 5,740 5,000 5,215
Corporate and other 0 3,998 695
Consolidated $5,740 $8,998 $5,910
13
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 7 - MAJOR BUSINESS SEGMENTS (CONTINUED)
Depreciation and
amortization:
Finance $ 0 $ 0 $ 286
Agribusiness 41,877 52,853 57,118
Total segments 41,877 52,853 57,404
Corporate and other 3,066 3,181 10,423
Consolidated $44,943 $56,034 $67,827
NOTE 8 - SALE OF OPERATING ASSETS
On December 1, 1994, the Company sold all finance receivables and ceased
operations at its one remaining branch of Lincoln Finance Company, Inc., in
Greensburg, Kentucky. Net finance receivables of $559,858 were sold along with
office equipment with a net book value of $1,839 at a gain of $117,060. The
building in Greensburg, Kentucky was sold on July 6, 1995, at a gain of $8,756
in a separate transaction.
On May 1, 1995, a division of the Company, Linco Marketing sold the remaining
territories and equipment of the Ice Cream Churn Franchises for $5,000, at a
loss of $36,285.
NOTE 9 - LEASE COMMITMENTS
The Company and its subsidiaries lease facilities and equipment under written
operating leases.
Total rental expense amounted to $74,765 in 1997, $51,483 in 1996, and $35,711
in 1995. Future minimum rentals at July 31, 1997 are as follows:
Year ending July 31:
1998 $ 54,457
1999 54,457
2000 50,878
2001 25,699
Totals $185,491
14
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 10 - LEASE OF PROPERTY
On July 15, 1995, the Company leased the property associated with the operation
of its stock yard to another stock yard operator. Under the agreement, the
Company will receive rent of $18,000 a month. The agreement expires July 31,
2005, but may be terminated by the company upon six months notice to the
lessee. The lessee is responsible at its expense, for most repairs, insurance,
utilities and property taxes associated with the property.
NOTE 11 - LEASE OF PROPERTY, PLANT AND EQUIPMENT
The company is the lessor of property under operating leases. Following is a
summary of the Company's investment in property, plant and equipment on
operating leases as of July 31, 1997:
Land $ 667,504
Buildings and Improvements 68,250
Yard building 2,133,365
2,869,119
Less accumulated depreciation 1,834,261
$1,034,858
Under the operating method of accounting for leases, the cost of the property,
plant and equipment is recorded as an asset and is depreciated over its
estimated useful life and the rental income is recognized as the lease rental
payments are earned.
All of the leases, except for the lease described in Note 10, are month-to-
month. The minimum future rentals to be received on that lease at July 31,
1997 are as follows:
Year ending July 31:
1998 $ 216,000
1999 216,000
2000 216,000
2001 216,000
2002 216,000
Thereafter 648,000
$1,728,000
15
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1996, and 1995
NOTE 12 - ECONOMIC DEPENDENCY
For the year ended July 31, 1997, the Company received approximately 73.4% of
its operating revenues from the lessee of the stock yard. The amount of
$216,000 was recognized as revenue and received during the year.
NOTE 13 - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred at net
loss of $154,577 during the year ended July 31, 1997. The ability of the
Company to continue as a going concern is dependent upon future profitable
operations. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
NOTE 14 - CAPITAL STOCK
During the year ending July 31, 1997 the company amended the articles of
incorporation and resolved that the corporate capital structure consist of
3,000,000 shares of class A common voting stock, all of no par value. This
replaces 100,000 shares of voting common stock and 2,900,000 shares of
nonvoting common stock, each with $.50 stated value.
16