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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
Commission File Number 1-6802
--------------------
Liberte Investors Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1328153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Crescent Court, Suite 1365, Dallas, Texas 75201
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 871-5935
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value per share New York Stock Exchange
Securities registered pursuant of Section 12(g) of the Act:
None
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 [ ]
As of September 25, 2000, there were outstanding 20,256,097 shares of the
registrant's Common Stock. The aggregate market value of the voting stock held
by non-affiliates of the registrant, based on the closing price of these shares
on the New York Stock Exchange on September 25, 2000 was $30,420,132. For the
purposes of this disclosure only, the registrant has assumed that its directors,
executive officers and beneficial owners of 5% or more of the registrant's
common stock are the affiliates of the registrant.
APPLICABLE ONLY TO CORPORATE ISSUERS:
The registrant had 20,256,097 shares of common stock, $.01 per share
par value, outstanding as of September 25, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement to be furnished to
stockholders in connection with its 2000 Annual Meeting of Stockholders
are incorporated by reference in Part III of this Report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
LIBERTE INVESTORS INC.
FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2000
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business..................................................... 3
Item 2. Properties................................................... 4
Item 3. Legal Proceedings............................................ 4
Item 4. Submission of Matters to a Vote of Security Holders.......... 4
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters..................................... 5
Item 6. Selected Financial Data...................................... 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk... 10
Item 8. Financial Statements and Supplementary Data.................. 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 10
PART III
Item 10. Directors and Executive Officers of the Company.............. 11
Item 11. Executive Compensation....................................... 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................... 11
Item 13. Certain Relationships and Related Transactions............... 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................. 12
Signatures ............................................................. 14
Index to Consolidated Financial Statements............................... F-1
2
PART I
Item 1. Business
Liberte Investors Inc. ("LBI" or the "Company") is a Delaware corporation
which was organized in April of 1996 in order to effect the reorganization of
Liberte Investors, a Massachusetts business trust (the "Trust"), pursuant to
which the Trust contributed its assets to the Company and received all of the
Company's outstanding common stock, par value $.01 per share ("Shares" or
"Common Stock"). The Trust then distributed to its shareholders in redemption of
all outstanding shares of beneficial interest in the Trust (the "Beneficial
Shares") the Shares of the Company. The Company assumed all of the Trust's
assets and outstanding liabilities and obligations. Thereafter, the Trust was
terminated.
Since August of 1996, the Company has been actively pursuing opportunities
to acquire one or more operating companies.
Portfolio Review
At June 30, 2000, the Company owned foreclosed real estate totaling $2.5
million. At June 30, 2000, there were no outstanding notes receivables and all
foreclosed real estate was classified as nonearning.
Foreclosed real estate consisted of three properties, all of which are held
for sale. The foreclosed real estate held by the Company at June 30, 2000
consisted of undeveloped land located in Texas. See also Note 2 of Notes to
Consolidated Financial Statements.
At June 30, 2000, the Company had impaired loans from prior foreclosure
related deficiency notes and/or judgments with no carrying value. The face
amounts ranged from $12,000 to $3,118,000. These receivables are unsecured, and
collections are doubtful. Should any amount be collected on these receivables,
the Company would recognize a gain.
Competition
In its ongoing efforts to liquidate its real estate assets, the Company
competes with commercial banks, savings and loan associations, and other
financial institutions that are seeking to sell their own portfolios of
foreclosed real estate. The primary factors affecting competition when selling
real estate are the value of the foreclosed real estate, the price at which the
seller is willing to sell the asset, and the seller's ability and willingness to
provide or arrange financing for the prospective buyer.
With regard to efforts to identify suitable acquisition candidates, the
Company competes with numerous prospective buyers (many of which are much larger
than the Company), including various investment funds, other companies in
similar industries, corporate conglomerates, individual investors, etc. Economic
conditions have resulted in substantial amounts of cash becoming available for
new acquisition activity by both institutional and individual investors.
Consequently, many potential acquisition candidates targeted by the Company have
been pursued by numerous prospective buyers and bidding has been competitive.
3
Federal Income Tax
Effective July 1, 1993, the Trust no longer qualified as a real estate
investment trust as defined by the Internal Revenue Code. Subsequently, the
Company was organized in 1996 as a Delaware corporation in order to effect the
reorganization of the Trust by merging the Trust into the Company. Accordingly,
the Trust and the Company are subject to federal income taxes and adopted
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes".
At June 30, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $223 million, which are available
to offset future federal taxable income. These carryforwards will expire in 2005
through 2011. See also Note 4 of Notes to Consolidated Financial Statements.
Personnel
At June 30, 2000, the Company had one full-time employee and no part-time
employees. The Company engages real estate consultants as needed with regard to
real estate related matters and utilizes independent accountants and legal
advisors as needed when evaluating a potential acquisition.
Item 2. Properties
The Company's principal executive offices are located at 200 Crescent
Court, Suite 1365, Dallas, Texas and are occupied by the Company under a lease
agreement expiring December 31, 2003. See Note 3 of Notes to Consolidated
Financial Statements.
Item 3. Legal Proceedings
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, results of operations, or cash flows without regard to any possible
insurance or third party reimbursement.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
4
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
Price Range of Common Stock
The common stock of Liberte Investors Inc. is listed on the New York Stock
Exchange (the "NYSE") under the symbol "LBI." The following table sets forth the
high and low sales price per share for the common stock as reported on the NYSE
Composite Transaction Tape for the periods indicated:
Fiscal Year High Low
----------- ---- ---
2000
First Quarter............................ $ 3 11/16 $ 3 1/16
Second Quarter........................... 3 5/8 3 1/16
Third Quarter............................ 3 5/8 3 1/16
Fourth Quarter........................... 3 3/8 2 13/16
1999
First Quarter............................ $ 3 13/16 $ 2 5/8
Second Quarter........................... 3 1/2 2 3/4
Third Quarter............................ 3 5/8 3 1/16
Fourth Quarter........................... 3 3/4 3 1/8
The high and low sales price per share of common stock as reported on the
NYSE Composite Transaction Tape on September 25, 2000, was $3.00. The
approximate number of shareholders of Common Stock of the Company as of
September 25, 2000 was 3,800.
Dividend Policy
On June 7, 2000, the Board of Directors of the Company declared a special
cash dividend of $0.094 per share paid to stockholders of record on June 30,
2000. The Company also paid a special cash dividend of $0.06 and $0.031 per
share on June 30, 1999 and 1998, respectively. Although the Company has paid
dividends the past three years, the Company does not anticipate paying cash
dividends in the future but intends to retain earnings for use in acquiring an
operating business.
Stock Transfer Restrictions
The Company's certificate of incorporation (the "Charter") contains
prohibitions on the transfer of its common stock to avoid limitations on the use
of the net operating loss carryforwards and other federal income tax attributes
that the Company inherited from the Trust. The Charter generally prohibits any
transfer of Common Stock, any subsequent issue of voting stock or stock that
participates in the earnings or growth of the Company, and certain options with
respect to such stock, if the transfer of such stock would cause any group or
person to own 4.9% or more of the outstanding shares of, increase the ownership
position of any person that already owns 4.9% or more (by aggregate value) of
the outstanding shares, or cause any person to be treated like the owner of 4.9%
or more (by aggregate value) of the outstanding shares for tax purposes.
Transfers in violation of this prohibition will be void, unless the Board of
Directors consents to the transfer. If void, upon demand by the Company, the
purported transferee must return the shares to the Company's agent to be sold,
or if already sold the purported transferee must forfeit some, or possibly, all
of the sale proceeds. In addition, in connection with certain changes in the
ownership of the holders of the Company's shares, the Company may require the
holder to
5
dispose of some or all of such shares. For this purpose, "person" is defined
broadly to mean any individual, corporation, estate, debtor, association,
company, partnership, joint venture, or similar organization.
Item 6. Selected Financial Data (in thousands, except per share amount)
The following table sets forth selected statement of operations and
statement of financial condition data at and for the five years ended June 30,
2000. This information should be read in conjunction with the Consolidated
Financial Statements and related Notes thereto of the Company and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Form 10-K.
Year Ended June 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(dollars in thousands, except per share data)
Statement of Operations Data:
Revenues $ 2,973 $ 2,662 $ 2,778 $ 2,527 $ 2,784
Provision for loan losses -- -- -- -- 187
Net income 2,218 1,850 1,450 1,309 835
Basic and diluted net income
per common share 0.11 0.09 0.07 0.07 0.07
Cash dividends declared per share 0.094 0.06 0.031 -- --
June 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(dollars in thousands)
Statement of Financial Condition Data:
Total assets $58,475 $58,216 $57,535 $56,445 $33,354
Long-term obligations -- -- -- -- --
Stockholders' equity 58,048 57,735 57,027 56,206 32,852
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements contained in this Annual Report on Form 10-K which are not
historical facts are forward-looking statements. In addition, the Company,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and performance, including
its ability to acquire businesses in the future, and other developments. Such
forward-looking statements are necessarily estimates reflecting the Company's
best judgment based upon current information and involve a number of risks and
uncertainties. There can be no assurance that other factors will not affect the
accuracy of such forward-looking statements. While it is impossible to identify
all such factors, factors which could cause actual results to differ materially
from those estimated by the Company include, but are not limited to, the
uncertainty as to whether the Company will be able to make future business
acquisitions or that any such acquisitions will be successful, the Company's
ability to obtain financing for any possible acquisitions, general conditions in
the economy and capital markets, and other factors which may be identified from
time to time in the Company's Securities and Exchange Commission filings and
other public announcements.
6
General
During the fiscal year ended June 30, 2000, Liberte 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 to
identify quality acquisitions in fiscal 2000, the Company has not yet entered
into any definitive acquisition agreements.
2000 compared with 1999
Net income for the year ended June 30, 2000 increased to $2,218,000 from
$1,850,000 for the year ended June 30, 1999, an increase of 20%. This change in
operating results is discussed below.
Interest income on interest-bearing deposits in banks increased to
$2,854,000 for the year ended June 30, 2000 from $2,530,000 for the year ended
June 30, 1999. This increase is primarily due to an increase in interest rates.
Unrestricted cash increased from $55.3 million at June 30, 1999 to $55.9 million
at June 30, 2000 primarily due to interest earned on unrestricted cash accounts
and proceeds from the sale of foreclosed real estate.
Gains on the sales of foreclosed real estate were $119,000 for the year
ended June 30, 2000 as compared to $120,000 for the year ended June 30, 1999.
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
year ended June 30, 2000 were from the sale of 51.18 acres in San Antonio,
Texas.
Other income decreased to $84 for the year ended June 30, 2000 from $13,000
for the year ended June 30, 1999. Other income for the year ended June 30, 1999
represented primarily dividends on RPI preferred stock. No dividend payments on
RPI preferred stock were received for the year ended June 30, 2000 due to the
liquidation of the 300,000 shares of Resurgence Properties, Inc. ("RPI")
preferred stock in August 1998.
Foreclosed real estate operations expense decreased $8,000 from $145,000
for the year ended June 30, 1999 to $137,000 for the year ended June 30, 2000.
Foreclosed real estate operations expense was lower for the year ended June 30,
2000 due to a reduction in real estate consulting fees and other miscellaneous
real estate costs.
Legal, audit and consulting fees were $122,000 for the year ended June 30,
2000 as compared to $68,000 incurred in the year ended June 30, 1999. Legal and
accounting expenses were higher for the year ended June 30, 2000 due to
additional legal and accounting fees for due diligence on a potential business
transaction and for contracts relating to the sale of foreclosed real estate.
Franchise tax expense decreased from $75,000 in 1999 to $44,000 in 2000 due
to a reduction in Texas franchise tax expense during the year ended June 30,
2000.
Compensation and employee benefits decreased by $21,000 from $107,000
during the year ended June 30, 1999 to $86,000 for the year ended June 30, 2000.
The decrease is due to the Company only having one employee for a majority of
the year ended June 30, 2000 as compared to two employees for a majority of the
year ended June 30, 1999.
General and administrative expense decreased from $232,000 for the year
ended June 30, 1999 to $185,000 for the year ended June 30, 2000. The decrease
is primarily due to a reduction in shareholder
7
relation expenses during the year ended June 30, 2000 and due to the payment of
a search fee for a new employee during the year ended June 30, 1999.
1999 compared with 1998
Net income for the year ended June 30, 1999 increased to $1,850,000 from
$1,450,000 for the year ended June 30, 1998, an increase of 28%. This change in
operating results is discussed below.
Interest income on interest-bearing deposits in banks decreased to
$2,530,000 for the year ended June 30, 1999 from $2,721,000 for the year ended
June 30, 1998. This decrease is due to a decline in interest rates. Unrestricted
cash increased from $54.0 million at June 30, 1998 to $55.3 million at June 30,
1999 primarily due to interest earned on unrestricted cash accounts, proceeds
from the sale of foreclosed real estate and the liquidation of 300,000 shares of
RPI preferred stock.
The Company did not receive any notes receivable interest income for the
year ended June 30, 1999 as compared to $41 for the year ended June 30, 1998.
There were no outstanding balances on notes receivables at June 30, 1999 or
1998.
There were no gains on sales of foreclosed real estate during the year
ended June 30, 1998 as compared to $120,000 for the year ended June 30, 1999.
The gains recognized during the year ended June 30, 1999 are from the sale of
56.6 acres in San Antonio, Texas and from the sale of 55 lots in Fontana,
California.
Other income decreased to $13,000 for the year ended June 30, 1999 from
$57,000 for the year ended June 30, 1998. Other income for the year ended June
30, 1998 consisted primarily of dividends on RPI preferred and common stock and
interest received on property tax refunds. Other income for the year ended June
30, 1999 represented primarily dividends on RPI preferred stock. Such dividend
payments for the year ended June 30, 1999 decreased significantly as compared to
the same period in 1998 due to the liquidation in August 1998 of the 300,000
shares of RPI preferred stock held by the Company.
Insurance expense decreased to $122,000 for the year ended June 30, 1999
from $151,000 for the year ended June 30, 1998. This decrease is primarily due
to decreased premiums related to directors' and officers' insurance coverage.
Foreclosed real estate operations expense decreased $48,000 from $193,000
for the year ended June 30, 1998 to $145,000 for the year ended June 30, 1999.
The decrease is primarily due to lower property tax expense for fiscal 1999
resulting from the sale of 56.6 acres in San Antonio, Texas and from the sale of
55 lots in Fontana, California and additional expenses incurred in fiscal 1998
to foreclose on the 55 lots in Fontana, California.
Loss on write-down of foreclosed real estate was $407,000 for the year
ended June 30, 1998. There were no write-downs of foreclosed real estate for the
year ended June 30, 1999. The write-down for 1998 was made to more accurately
reflect estimated sales proceeds less selling costs of single family lots in
Fontana, California.
Legal, audit and consulting fees were $68,000 for the year ended June 30,
1999 as compared to $73,000 incurred in the year ended June 30, 1998. Legal fees
in 1999 were lower due to the Company having sold 56.6 acres in San Antonio,
Texas and 55 lots in Fontana, California, with no sales contracts pending on the
remaining foreclosed real estate.
8
Franchise tax expense decreased from $96,000 in 1998 to $75,000 in 1999
because the Company accrued less Texas franchise tax expense during the year
ended June 30, 1999 and because fiscal 1998 tax expense was higher because of an
adjustment to record 1997 Delaware franchise tax due to the Company's
reorganization from the Trust to a Delaware corporation.
Compensation and employee benefits increased by $17,000 from $90,000 during
the year ended June 30, 1998 to $107,000 for the year ended June 30, 1999.
Compensation expense is higher for the year ended June 30, 1999 due to the
Company having just one employee for two months during the year ended June 30,
1998.
General and administrative expense decreased from $253,000 for the year
ended June 30, 1998 to $232,000 for the year ended June 30, 1999. The decrease
is primarily due to a reduction in shareholder relations and other general and
administrative expenses during the year ended June 30, 1999.
Liquidity and Capital Resources
The Company's principal funding requirements are operating expenses,
including legal, audit and consulting expenses incurred in connection with the
evaluation of potential acquisition candidates and other strategic
opportunities. The Company anticipates that its primary sources of funding
operating expenses are proceeds from the sale of foreclosed real estate,
interest income on cash and cash equivalents, and cash on hand.
Operating activities for the year ended June 30, 2000 provided $2.1 million
of cash compared to $1.8 million and $2.2 million provided in 1999 and 1998,
respectively. The table below reflects cash flow from operating activities (in
millions):
Year Ended June 30,
--------------------------------
2000 1999 1998
------ ------ ------
Total income $ 3.0 $ 2.7 $ 2.8
Operating expenses (0.8) (0.8) (1.3)
Net change in other receivables,
assets and liabilities (0.1) (0.1) 0.7
------ ------ ------
Net cash provided by operating activities $ 2.1 $ 1.8 $ 2.2
====== ====== ======
Net cash provided by investing activities for the year ended June 30, 2000
was $431,000 compared to net cash provided of $708,000 for the year ended June
30, 1999 and net cash used of $16,000 for the year ended June 30, 1998. Net cash
provided for 2000 was primarily from sales of foreclosed real estate, while net
cash provided in 1999 was primarily from sales of foreclosed real estate,
liquidation of 300,000 shares of RPI preferred stock and liquidation of
restricted cash accounts and net cash used in 1998 was primarily for fixed asset
purchases.
The table below reflects cash flow from investing activities (in millions):
Year Ended June 30,
--------------------------------
2000 1999 1998
------ ------ ------
Liquidation of restricted cash $ -- $ 0.1 $ --
Liquidation of RPI preferred stock -- 0.3 --
Sales of foreclosed real estate 0.4 0.3 --
------ ------ ------
Net cash provided by investing activities $ 0.4 $ 0.7 $ --
====== ====== ======
9
Net cash used in financing activities totaled $1.9 million for the year
ended June 30, 2000 due to a cash dividend paid on June 30, 2000. Net cash used
in financing activities totaled $1.2 million for the year ended June 30, 1999
due to a cash dividend paid on June 30, 1999. Net cash used in financing
activities totaled $0.6 million for the year ended June 30, 1998 due to a cash
dividend paid on June 30, 1998. Total cash and cash equivalents were $55.9
million at June 30, 2000.
The Company plans to finance acquisitions with its cash and cash
equivalents, borrowings and private or public debt and equity financings. On
August 17, 1999, certain restrictions on issuing additional shares of common
stock expired, which allows the Company to issue additional common stock to fund
an acquisition. Prior to August 17, 1999, the Company was effectively precluded
from issuing any additional shares of common stock for three years after the
sale of common stock to Hunter's Glen in order to avoid restricting the use of
its net operating loss carryforwards.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The Company's financial instruments consists primarily of cash and cash
equivalents. As noted in Note 8 to the Consolidated Financial Statements, the
Company has approximately $56 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 it relates to interest income earned from these
financial instruments although the Company's deposits do adjust for interest
rate changes. 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.
Item 8. Financial Statements and Supplementary Data
See "Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K" for a listing of the consolidated financial statements filed with this
report. The response to this item is submitted in a separate section of this
report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
10
PART III
Item 10. Directors and Executive Officers of the Company
The information concerning the directors and executive officers of the
Company is set forth in the Proxy Statement (the "Proxy Statement") to be filed
with the Commission and sent to stockholders in connection with the Company's
Annual Meeting of Stockholders to be held November 10, 2000 under the headings
"DIRECTOR NOMINEES AND EXECUTIVE OFFICERS" and "SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE," which information is incorporated herein by
reference.
Item 11. Executive Compensation
The information concerning executive compensation is set forth in the Proxy
Statement under the headings "MANAGEMENT COMPENSATION," "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION" and "COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION," which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not applicable.
11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Annual Report on Form 10-K.
(1) Consolidated Financial Statements:
See Index to Consolidated Financial Statements on Page F-1.
(2) Exhibits:
Exhibit
Number
2.1 Plan of Reorganization, dated as of April 1, 1996,
between the Trust and the Company (incorporated by
reference to Exhibit 2.1 of Registration Statement
No. 333-07439 on Form S-4, filed by the Company,
which the Securities and Exchange Commission
declared effective on July 3, 1996 (the
"Registration Statement").
2.2 Stock Purchase Agreement, dated as of January 16,
1996, between the Trust and Hunter's Glen/Ford, Ltd.
(the "Purchaser") (incorporated by reference to
Exhibit 4.1 of the Trust's Current Report on Form
8-K filed with the Commission on January 24, 1996),
as amended by the Amendment to the Stock Purchase
Agreement, dated as of February 27, 1996, and the
Second Amendment to the Stock Purchase Agreement,
dated as of March 28, 1996 (incorporated by
reference to Exhibit 2.1 of the Trust's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1996).
3.1 The Company's Charter (incorporated by reference to
Exhibit 3.1 of the Registration Statement).
3.2 The Company's Bylaws (incorporated by reference to
Exhibit 3.2 of the Registration Statement).
4.1 Form of Registration Rights Agreement dated August
16, 1996, between the Company and the Purchaser
(incorporated by reference to Exhibit 4.1 of the
Registration Statement).
4.2 Form of Agreement Clarifying Registration Rights
dated August 16, 1996, between the Company, the
Purchaser, the Enloe Descendants' Trust, and Robert
Ted Enloe, III (incorporated by reference to Exhibit
4.3 of the Registration Statement).
10.1 Form of Indemnification Agreement for the Company's
directors and officers and schedule of substantially
identical documents (incorporated by reference to
Exhibit 10.2 of the Registration Statement).
10.2 Retirement Plan for Trustees of the Trust, dated
October 11, 1988 (incorporated by reference to
Exhibit 10.23 of the Trust's Annual Report on Form
10-K for the year ended June 30, 1993).
12
10.3 Agreement Regarding Registration Rights, Amendment
of Stock Option Agreement, and Ratification of
Pledge Agreement, dated as of November 13, 1995,
among the Trust, Robert Ted Enloe, III, and the
Enloe Descendants' Trust (incorporated by reference
to Exhibit 10.6 of the Registration Statement).
21.1 A list of the subsidiaries of the Company.
27.1 Financial Data Schedule (included only in the EDGAR
filing).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
period covered by this annual report.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATED: September 25, 2000 LIBERTE INVESTORS INC.
/s/ GERALD J. FORD
------------------------------
Gerald J. Ford
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ GERALD J. FORD Chief Executive Officer and September 25, 2000
- ------------------------ Chairman of the Board
Gerald J. Ford (Principal Executive Officer)
/s/ SAMUEL C. PERRY Vice President & Controller September 25, 2000
- ------------------------ (Principal Financial Officer
Samuel C. Perry and Principal Accounting
Officer)
/s/ GENE H. BISHOP Director September 25, 2000
- ------------------------
Gene H. Bishop
/s/ HARVEY B. CASH Director September 25, 2000
- ------------------------
Harvey B. Cash
/s/ JEREMY B. FORD Director September 25, 2000
- ------------------------
Jeremy B. Ford
/s/ EDWARD W. ROSE, III Director September 25, 2000
- ------------------------
Edward W. Rose, III
/s/ GARY SHULTZ Director September 25, 2000
- ------------------------
Gary Shultz
14
Liberte Investors Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of Liberte Investors Inc.
are included in response to Item 8 and Item 14 (a) (1) and 14 (a) (2):
Page
----
Report of KPMG LLP, Independent Auditors................................. F-2
Consolidated Statements of Financial Condition
as of June 30, 2000 and June 30, 1999.............................. F-3
Consolidated Statements of Operations for the years ended
June 30, 2000, 1999 and 1998....................................... F-4
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 2000, 1999 and 1998................................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 2000, 1999 and 1998....................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Separate financial statements relating to the Company's subsidiary are
omitted since it is wholly-owned and such separate financial statements are not
material.
All financial statement schedules have been omitted because the required
information is not material to require submission of the schedule or because the
information required is included in the financial statements, including the
notes thereto.
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Liberte Investors Inc.:
We have audited the consolidated financial statements of Liberte Investors Inc.
and subsidiary as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Liberte Investors
Inc. and subsidiary as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2000, in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
Dallas, Texas
August 4, 2000
F-2
LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, June 30,
2000 1999
------------- -------------
Assets
Cash and cash equivalents $ 55,887,941 $ 55,280,342
Foreclosed real estate held for sale 2,462,445 2,810,267
Accrued interest and other receivables 5,128 3,790
Other assets, net 119,790 121,160
------------- -------------
Total assets $ 58,475,304 $ 58,215,559
============= =============
Liabilities and Stockholders' Equity
Liabilities-accrued and other liabilities $ 427,044 $ 480,728
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 309,392,399 309,392,399
Accumulated deficit (251,546,700) (251,860,129)
------------- -------------
Total stockholders' equity 58,048,260 57,734,831
------------- -------------
Commitments and contingencies
Total liabilities and stockholders' equity $ 58,475,304 $ 58,215,559
============= =============
See notes to consolidated financial statements.
F-3
LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
-------------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Income:
Interest-bearing deposits in banks $ 2,853,503 $ 2,529,537 $ 2,721,150
Notes receivable interest -- -- 41
Gain on sales of foreclosed real estate 119,348 119,593 --
Other 84 12,789 57,012
----------- ----------- -----------
Total income 2,972,935 2,661,919 2,778,203
----------- ----------- -----------
Expenses:
Insurance 121,437 121,828 151,197
Foreclosed real estate operations 136,889 144,591 193,140
Loss on write-down of foreclosed real estate -- -- 407,348
Legal, audit and consulting fees 122,200 68,396 72,847
Directors fees and expenses 60,000 63,000 63,500
Franchise tax 43,965 75,266 96,270
Compensation and employee benefits 85,869 107,302 89,584
General and administrative 185,073 231,940 253,359
----------- ----------- -----------
Total expenses 755,433 812,323 1,327,245
----------- ----------- -----------
Income before income taxes 2,217,502 1,849,596 1,450,958
Income tax expense -- -- 1,456
----------- ----------- -----------
Net Income $ 2,217,502 $ 1,849,596 $ 1,449,502
=========== =========== ===========
Basic and diluted net income
per share of common stock $ 0.11 $ 0.09 $ 0.07
=========== =========== ===========
Weighted average number of shares of
common stock 20,256,097 20,256,097 20,256,097
=========== =========== ===========
See notes to consolidated financial statements.
F-4
LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Additional
Number of Common Paid-In Accumulated
Shares Stock Capital Deficit Total
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1997 20,256,097 202,561 309,392,399 (253,389,281) 56,205,679
Dividends paid ($0.031 per share) -- -- -- (627,939) (627,939)
Net income -- -- -- 1,449,502 1,449,502
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1998 20,256,097 202,561 309,392,399 (252,567,718) 57,027,242
Dividends paid ($0.06 per share) -- -- -- (1,215,366) (1,215,366)
Unclaimed dividends from
bankruptcy reorganization -- -- -- 73,359 73,359
Net income -- -- -- 1,849,596 1,849,596
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1999 20,256,097 202,561 309,392,399 (251,860,129) 57,734,831
Dividends paid ($0.094 per share) -- -- -- (1,904,073) (1,904,073)
Net income -- -- -- 2,217,502 2,217,502
------------- ------------- ------------- ------------- -------------
Balance at June 30, 2000 20,256,097 $ 202,561 $ 309,392,399 $(251,546,700) $ 58,048,260
============= ============= ============= ============= =============
See notes to consolidated financial statements.
F-5
LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 2,217,502 $ 1,849,596 $ 1,449,502
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 12,801 17,448 17,715
Gain from sales of foreclosed real estate (119,348) (119,593) --
Loss on write-down of foreclosed real estate -- -- 407,348
(Increase) decrease in accrued interest and other receivables (1,338) 553 164
Decrease (increase) in other assets 76 (374) 25,842
(Decrease) increase in accrued and other liabilities (28,684) 41,670 267,811
------------ ------------ ------------
Net cash provided by operating activities 2,081,009 1,789,300 2,168,382
------------ ------------ ------------
Cash flows from investing activities:
Collections of notes receivable -- -- 1,693
Additions to fixed assets (11,507) (758) (14,632)
Proceeds from sales and basis reductions of
foreclosed real estate 442,170 331,154 --
Proceeds from sale of fixed assets -- 1,475 --
Proceeds from liquidation of other assets -- 300,000 --
Decrease (increase) in restricted cash investments -- 75,816 (3,073)
------------ ------------ ------------
Net cash provided by (used in) investing activities 430,663 707,687 (16,012)
------------ ------------ ------------
Cash flows from financing activity:
Dividends paid (1,904,073) (1,215,366) (627,939)
------------ ------------ ------------
Net increase in cash and cash equivalents 607,599 1,281,621 1,524,431
Cash and cash equivalents at beginning
of year 55,280,342 53,998,721 52,474,290
------------ ------------ ------------
Cash and cash equivalents at end of year $ 55,887,941 $ 55,280,342 $ 53,998,721
============ ============ ============
See notes to consolidated financial statements.
F-6
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000, 1999 and 1998
(1) Summary of significant accounting policies
(a) Organization - Liberte Investors Inc., a Delaware corporation (the
"Company"), was organized in April of 1996 in order to effect the reorganization
of Liberte Investors, a Massachusetts business trust (the "Trust"). At a special
meeting of the shareholders of the Trust held on August 15, 1996, (the "Special
Meeting"), the Trust's shareholders approved a plan of reorganization whereby
the Trust contributed its assets to the Company and received all of the
Company's outstanding common stock, par value $.01 per share ("Shares" or
"Common Stock"). The Trust then distributed to its shareholders in redemption of
all outstanding shares of beneficial interest in the Trust (the "Beneficial
Shares") the Shares of the Company. The Company assumed all of the Trust's
assets and outstanding liabilities and obligations.
Unless otherwise indicated, the information contained in the consolidated
financial statements which relates to periods prior to August 16, 1996 is
information related to the Trust and information relating to periods on or after
August 16, 1996 is information relating to the Company.
(b) Business - The principal business activity of the Trust was investing
in notes receivable, primarily first mortgage construction notes and first
mortgage acquisition and development notes. Beginning in fiscal 1988, however,
the Trust progressively curtailed its lending activities and reduced the size of
its portfolio of foreclosed real estate in an effort to repay indebtedness.
On October 25, 1993, the Trust filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. On April
7, 1994, the Trust emerged from bankruptcy pursuant to a plan of reorganization
whereby certain assets and liabilities, including remaining senior indebtedness,
were transferred to Resurgence Properties Inc. ("RPI"), and RPI's common stock
was distributed to the holders of the Trust's outstanding subordinated
indebtedness in full satisfaction of such holders' claims against the Trust. The
Trust received shares of preferred stock of RPI and a note receivable which was
subsequently paid. On June 30, 1997, the court issued an Administrative Closing
Order and Final Decree with regard to the bankruptcy case.
After the reorganization of the Trust into the Delaware corporation in
August 1996, management has been pursuing the acquisition of an operating
company in order to utilize the net operating loss carryforwards available to
offset future earnings.
(c) Consolidation - The accompanying financial statements include the
accounts of the Company and LNC Holdings, Inc., a wholly-owned subsidiary whose
sole asset is approximately 40 acres of land located in Arlington, Texas. All
intercompany balances have been eliminated.
(d) Use of estimates - The preparation of consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make certain estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets, liabilities, revenues and expenses at the
date of the consolidated financial statements. Actual results could differ from
those estimates.
F-7
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(e) Recognition of income - Interest income is recorded on an accrual
basis. The Company discontinues the accrual of interest income when
circumstances cause the collection of such interest to be doubtful. Interest
income on impaired loans is recognized on a cash basis only after all principal
has been collected. Collections on impaired loans with no carrying value are
recognized on a cash basis and are recorded as loan income.
(f) Foreclosed real estate - Foreclosed real estate is recorded at the
lower of cost or fair value less estimated costs to sell. Cost is the note
amount at the time of foreclosure net of any allowances. The Company
periodically reviews its portfolio of foreclosed real estate held for sale using
current information including (i) independent appraisals, (ii) general economic
factors affecting the area where the property is located, (iii) recent sales
activity and asking prices for comparable properties and (iv) costs to sell
and/or develop that would serve to lower the expected proceeds from the disposal
of the real estate. Gains (losses) realized on liquidation are recorded directly
to income.
(g) Income taxes - Income taxes are maintained in accordance with SFAS No.
109, "Accounting for Income Taxes," whereby deferred income tax assets and
liabilities result from temporary differences. Temporary differences are
differences between the tax basis of assets and liabilities and operating loss
and tax credit carryforwards and their reported amounts in the consolidated
financial statements that will result in taxable or deductible amounts in future
years.
(h) Basic and diluted net income per share - Basic and diluted net income
per share is based on the weighted average number of shares outstanding during
the year.
(i) Cash and cash equivalents - Cash and cash equivalents include highly
liquid investments with original maturities of three months or less.
F-8
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Foreclosed Real Estate
The following is a summary of the Company's activity in foreclosed real
estate for the years ended June 30, 2000, 1999, and 1998:
2000 1999 1998
----------- ----------- -----------
Balance at beginning of year $ 2,810,267 $ 3,028,273 $ 3,435,621
Write-down in value -- -- (407,348)
Cost of real estate sold (347,822) (218,006) --
----------- ----------- -----------
Balance at end of year $ 2,462,445 $ 2,810,267 $ 3,028,273
=========== =========== ===========
All of the Company's real estate for 2000 and 1999 consists of undeveloped
land located in the state of Texas.
On January 20, 1998, foreclosure of the 55 lots in Fontana, California was
completed, and all right, title, and interest in the property were conveyed to
the Company. This property was sold in September 1998 to a single-family
homebuilder for $229,020, less associated selling costs of $17,020. The 55 lots
were written-down by approximately $407,000 at June 30, 1998 to more accurately
reflect the value of the lots based upon the selling price less costs to
complete. A gain of approximately $2,000 was recognized as a result of this
transaction for the year ended June 30, 1999. The proceeds from the sale of the
55 lots was reduced by $3,689 for property taxes paid by the purchaser, which is
treated as a non-cash item in the statements of cash flows.
In August 1998, the Company sold 56.6 acres of land in San Antonio, Texas
to a single-family homebuilder for $339,700, less associated selling costs of
$34,126. A gain of approximately $117,000 was recognized as a result of this
transaction for the year ended June 30, 1999. The buyer also has an option to
purchase two additional tracts totaling 109 acres of land adjacent to the 56.6
acres and has made a $50,000 deposit to the Company for this option to purchase.
The proceeds from the sale of the 56.6 acres were reduced by $186,420 to be used
by the buyer to extend a road into the property and by $2,756 in property taxes
paid by the purchaser. The sales agreement was established whereby if the option
to purchase the second tract was exercised, the aggregate sales price of the
second tract of land would be increased by $186,420. These amounts are also
treated as non-cash transactions in the statements of cash flows.
In October 1999, the Company sold the second tract totaling 51.18 acres of
land in San Antonio, Texas to a single-family homebuilder for a price of
$307,080. A gain of approximately $119,000 was recognized as a result of this
transaction. The buyer has an option to purchase a third tract totaling 58 acres
of land adjacent to the 51.18 acres and has a $25,000 deposit with the Company
for this option. The proceeds from the sale of the 51.18 acres were increased by
$186,420, which had been deducted from the August 1998 purchase to be used by
the buyer to extend a road into the property. The buyer had previously paid a
$25,000 deposit on the 51.18 acres, which is also treated as a non-cash
transaction in the statements of cash flows.
F-9
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) 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 $1,301,000 including penalties and
interest.
On April 16, 1997, LNC Holdings Inc. received a notice of final judgment
from the City of Arlington with regard to the delinquent taxes. On May 27, 1997,
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 for
calendar years 1996 through 1999 and for the six month period ended June 30,
2000 totaling $173,000. 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.
Cash and cash equivalents at June 30, 1998 included restricted cash of
approximately $64,000 for claims due to bankruptcy. The claims represented
unclaimed dividends from May 1994. Any amount not claimed was voidable after
five years. During May 1999, dividend checks totaling $11,506 had not been
claimed, and all the outstanding dividend checks were voided. In addition, a
liability of $61,853 associated with unpaid dividend amounts was reversed. The
restricted cash accounts were closed and transferred into unrestricted cash
accounts. These amounts were credited to accumulated deficit since the amounts
were previously charged as a dividend to the accumulated deficit and are treated
as a non-cash transaction in the statements of cash flows.
The Company entered into an operating lease dated May 16, 1997 relating to
its principal executive offices. On February 15, 2000, the Company signed a
renewal option on the operating lease regarding its principal executive offices.
The renewal expires December 31, 2003, contains an additional renewal option and
requires the Company to pay a proportionate share of operating expenses of the
building. In addition, the Company has entered into other operating leases for
office equipment.
Rental expense for fiscal 2000, 1999 and 1998 under these leases was
approximately $94,000, $88,000, and $72,000, respectively. Future minimum lease
payments under these leases are as follows:
Fiscal Year Ending
June 30, Amount
------------------ -----------
2001 $ 72,868
2002 72,963
2003 72,963
2004 36,481
-----------
Total future minimum rentals $ 255,275
===========
The Company is involved in routine litigation incidental to its business,
which, in the opinion of management, will not result in a material adverse
impact on the Company's consolidated financial condition, results of operations,
or cash flows, without regard to possible insurance or third party
reimbursement.
F-10
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Federal Income Taxes
Income tax expense attributable to income before income taxes consists of:
June 30,
----------------------------------------
2000 1999 1998
--------- --------- ---------
Federal
Current $ -- $ -- $ 1,456
Deferred -- -- --
--------- --------- ---------
$ -- $ -- $ 1,456
========= ========= =========
The income tax expense for the years ended June 30, 2000, 1999, and 1998
differs from the amounts computed by applying the U.S. Federal corporate tax
rate of 34% to income before income taxes as follows:
June 30,
----------------------------------------
2000 1999 1998
--------- --------- ---------
Computed "expected" income tax expense $ 753,951 $ 628,863 $ 493,326
Increase (decrease) in taxes resulting from:
Adjustment to deferred tax asset and
permanent tax items 66 1,208 (231,233)
Change in the beginning of the year
balance of the valuation allowance
for deferred tax assets allocated
to income taxes (754,017) (630,071) (260,637)
--------- --------- ---------
$ -- $ -- $ 1,456
========= ========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at June 30, 2000 and 1999 are presented
below:
June 30,
-----------------------------
2000 1999
------------ ------------
Deferred tax assets:
Net operating loss carryforwards $ 75,962,199 $ 76,652,292
Basis differences of foreclosed real estate 2,038,682 2,103,969
Capital loss carryforward 1,629,812 1,629,812
Other 1,914,017 1,912,654
------------ ------------
Total gross deferred tax assets 81,544,710 82,298,727
Less: valuation allowance (81,544,710) (82,298,727)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
The net change in the valuation allowance for the years ended June 30,
2000, 1999 and 1998 was a decrease of $754,017, $630,071 and $260,637,
respectively. Based on current business activity and the current status of
business acquisitions, 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.
F-11
Liberte Investors Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $223,418,000, which are available
to offset future federal taxable income. The carryforwards will expire in 2005
through 2011. The Company also has capital loss carryforwards of approximately
$4,794,000 which are available to offset future capital gains, if any, through
2001. In addition, the Company has alternative minimum tax credit carryforwards
of $15,100 which are available to reduce future federal income taxes, if any,
over an indefinite period.
(5) Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition, for which it
is practicable to estimate that value. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts do not represent the underlying
value of the Company.
The fair value of cash and cash equivalents approximates their carrying
value because of the liquidity and short-term maturities of these instruments.
The Company believes that its deficiency notes receivable, which have no
carrying value at June 30, 2000 and 1999, may have some fair value, but such
value cannot be estimated and any potential collections are not measurable as to
timing or amount.
(6) Other Assets
In August 1998, the Company received $300,000 from the liquidation of
300,000 shares of RPI preferred stock as well as $3,514 in accrued dividends. No
gain or loss was recorded as a result of the liquidation.
(7) Concentrations of Credit Risk
At June 30, 2000, the Company had certain concentrations of credit risk
with two financial institutions in the form of cash which amounted to
approximately $56 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) Subsequent Event
In August 2000, the Company sold 6.46 acres of land in San Antonio, Texas
for a price of $114,000. A gain of approximately $45,000 was recorded as a
result of this transaction subsequent to June 30, 2000.