<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR TRANSITION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 1-6802
LIBERTE INVESTORS INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 75-1328153
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
600 N. PEARL ST., SUITE 420 75201
DALLAS, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (214) 720-8950
------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X* NO
---- ----
* The registrant's confirmed plan of reorganization under Chapter 11 of the
Bankruptcy code did not provide for the distribution of securities.
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of registrant's common stock, $.01 par value,
as of the close of business on May 13, 1997: 20,256,097 shares.
<PAGE>
LIBERTE INVESTORS INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
March 31, 1997 and June 30, 1996................... 3
Consolidated Statements of Operations
Nine Months Ended March 31, 1997 and 1996.......... 4
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996......... 5
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1997 and 1996.......... 6
Notes to Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................. 14
Item 2. Changes in Securities.............................. 14
Item 3. Defaults upon Senior Securities.................... 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information.................................. 14
Item 6. Exhibits and Reports on Form 8-K................... 14
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------- ------------
<S> <C> <C>
Assets
Unrestricted cash and cash equivalents $ 51,657,737 $ 27,245,594
Restricted cash and cash equivalents 60,456 58,325
------------- ------------
Total cash and cash equivalents 51,718,193 27,303,919
Notes receivable, net 414,036 1,331,390
Foreclosed real estate held for sale 3,435,621 3,475,790
Accrued interest and other receivables 27,856 63,875
Other assets 396,775 1,179,277
------------- ------------
Total assets $ 55,992,481 $ 33,354,251
============= ============
Liabilities and Stockholders' Equity
Liabilities
Accrued and other liabilities $ 246,296 $ 502,078
Stockholders' Equity
Common stock, $.01 par value,
50,000,000 shares authorized,
20,256,097 shares issued and outstanding 202,561 --
Shares of Beneficial Interest, no par value,
unlimited authorization, 12,423,208 shares
issued, 12,153,658 shares outstanding,
net of 269,550 shares held in treasury -- 32,852,173
Additional paid-in capital 309,391,520 --
Retained earnings (253,847,896) --
------------- ------------
Total stockholders' equity 55,746,185 32,852,173
------------- ------------
Total liabilities and stockholders' equity $ 55,992,481 $ 33,354,251
============= ============
</TABLE>
See notes to unaudited consolidated financial statements.
3
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LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Income
Interest-bearing deposits in banks $ 1,715,108 $ 917,002
Notes receivable interest 97,064 370,558
Gains on sales of foreclosed real estate 11,310 552,652
Other 34,146 458,525
----------- -----------
Total income 1,857,628 2,298,737
----------- -----------
Expenses
Insurance 238,677 160,868
Foreclosed real estate operations 166,124 106,952
Legal, audit and advisory fees 155,422 507,400
Franchise tax 113,934 --
Compensation and employee benefits 111,405 512,931
Provision for loan losses 380 --
General and administrative 221,317 196,109
----------- -----------
Total expenses 1,007,259 1,484,260
----------- -----------
Net income $ 850,369 $ 814,477
=========== ===========
Net income per share
of Common Stock (Beneficial Interest in 1996) $ .05 $ .07
Weighted average number of shares
of Common Stock (Beneficial Interest in 1996) 18,895,834 12,153,658
</TABLE>
See notes to unaudited consolidated financial statements.
4
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LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Income
Interest-bearing deposits in banks $ 625,386 $ 305,519
Notes receivable interest 27,325 119,717
Gains on sales of foreclosed real estate -- 106,652
Other 14,250 178,190
----------- -----------
Total income 666,961 710,078
----------- -----------
Expenses
Insurance 78,938 52,831
Foreclosed real estate operations 40,915 16,888
Legal, audit and advisory fees 90,264 52,622
Franchise tax 113,934 --
Compensation and employee benefits 22,597 266,829
Provision for loan losses -- --
General and administrative 84,060 53,150
----------- -----------
Total expenses 430,708 442,320
----------- -----------
Net income $ 236,253 $ 267,758
=========== ===========
Net income per share
of Common Stock (Beneficial Interest in 1996) $ .01 $ .02
Weighted average number of shares
of Common Stock (Beneficial Interest in 1996) 20,256,097 12,153,658
</TABLE>
See notes to unaudited consolidated financial statements.
5
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LIBERTE INVESTORS INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 850,369 $ 814,477
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Amortization of discount on notes receivable (13,166) --
Decrease (increase) in accrued interest and other receivables 36,019 (29,208)
Decrease (increase) in other assets 362,317 (202,897)
(Decrease) increase in accrued and other liabilities (255,782) 80,758
Income from impaired loans -- (444,075)
Gains from sales of foreclosed real estate (11,310 ) (552,652)
Non-cash interest on executive stock option loan -- (14,969)
----------- -----------
Net cash provided by (used in) operating activities 968,447 (348,566)
----------- -----------
Cash flows from investing activities:
Collections on notes receivable 930,520 501,602
Collections on RPI note receivable -- 1,148,144
Proceeds from sales of foreclosed real estate 51,479 759,214
(Increase) decrease in restricted cash investments (2,131) 870
----------- -----------
Net cash provided by investing activities 979,868 2,409,830
----------- -----------
Cash flows from financing activities:
Issuance of newly issued shares
of Common Stock to Hunter's Glen 23,091,951 --
Capitalization of reorganization costs (628,123) --
----------- -----------
Net cash provided by financing activities 22,463,828 --
----------- -----------
Net increase in unrestricted cash and cash equivalents 24,412,143 2,061,264
Unrestricted cash and cash equivalents at beginning of period 27,245,594 20,576,517
----------- -----------
Unrestricted cash and cash equivalents at end of period $51,657,737 $22,637,781
=========== ===========
Schedule of non-cash activities:
Reclassification of reorganization costs to additional
paid-in capital $ 420,185 $ --
Charge-offs to allowance for possible losses, net -- 10,429,640
Sales of foreclosed real estate financed by mortgage loans -- 1,076,800
Write-up of value of impaired note -- 71,950
Write-up of value of long-lived assets to be disposed -- 53,751
</TABLE>
See notes to unaudited consolidated financial statements.
6
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LIBERTE INVESTORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED MARCH 31, 1997)
Note A - Organization
In April 1996, Liberte Investors, a Massachusetts business trust (the "Trust"),
formed Liberte Investors Inc., a Delaware corporation (the "Company"). At a
special meeting of the shareholders of the Trust held on August 15, 1996 (the
"Special Meeting"), the Trust's shareholders approved the reorganization of the
Trust into the Company (the "Reorganization"). To effect the Reorganization,
the Trust contributed its assets to the Company and received all of the
Company's common stock, par value $.01 per share ("Shares" or "Common Stock")
outstanding at the time of the Reorganization, which the Trust then distributed
to its shareholders in redemption of all outstanding shares of beneficial
interest in the Trust (a "Beneficial Share"). The Company assumed all of the
Trust's outstanding liabilities and obligations. Thereafter, the Trust was
terminated.
Unless otherwise indicated, the information contained in the Form 10-Q which
relates to periods prior to August 16, 1996 is information relating to the
Trust, and information relating to periods on and after August 16, 1996 is
information relating to the Company.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X and therefore do not include all of the information and footnotes
necessary for a fair presentation of financial condition, results of operations,
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended March 31, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 1997.
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 and
transactions have been eliminated.
Note C - Stock Purchase Agreement
On January 16, 1996, the Trust entered into a Stock Purchase Agreement (as
amended, the "Stock Purchase Agreement") with Hunter's Glen/Ford, Ltd., a Texas
limited partnership ("Hunter's Glen"), pursuant to which the Trust agreed to
sell 8,102,439 newly issued Shares to Hunter's Glen for $23,091,951,
representing a purchase price of $2.85 per Share (the "Purchase"). The Purchase
was approved by the Trust's shareholders at the Special Meeting and consummated
on August 16, 1996. After the Purchase, Hunter's Glen owns 40% of the
outstanding Shares. Mr. Gerald J. Ford is a general partner of Hunter's Glen
and is the sole shareholder of Ford Diamond Corporation, the only other general
partner of Hunter's Glen.
Immediately prior to the sale of the Shares pursuant to the Stock Purchase
Agreement, the Trust reorganized into the Company, which succeeded to all of the
Trust's assets and liabilities. Upon such reorganization, shareholders of the
Trust became shareholders of the Company on a share for share basis and Mr. Ford
became the Chief Executive Officer and Chairman of the Board of the Company.
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Note D - Registration Rights
In connection with the Purchase, Hunter's Glen and the Company entered into a
Registration Rights Agreement (the "Purchaser Registration Rights Agreement"),
pursuant to which Hunter's Glen and certain subsequent holders of the shares of
Common Stock (the "Hunter's Glen Shares") acquired in the Purchase were granted
certain registration rights with respect to such shares until (i) such shares
have been sold pursuant to a resale registration statement filed with the
Securities and Exchange Commission, (ii) such shares have been sold under the
safe-harbor provision of Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), or (iii) such shares have been otherwise transferred and
the Company has issued new stock certificates representing such shares without a
legend restricting further transfer. The holders of not less than 20% of the
Hunter's Glen Shares may require the Company to file a shelf registration
statement registering their sale of such shares. The Company will be required
to maintain the effectiveness of such registration statement for two years. In
addition, the holders of not less than 20% of the Hunter's Glen Shares may make
two demands upon the Company to register their sale of such shares in
underwritten offerings, provided that the shares to be sold have a fair market
value in excess of $5.0 million. Finally, the holders of the Hunter's Glen
Shares may require the Company to register the sale of their shares if the
Company proposes to file a registration statement under the Securities Act for
its account or the account of its securityholders, other than a registration
statement concerning a business combination, an exchange of securities or an
employee benefit plan. The holders of these registration rights may exercise
them at any time during the period beginning on August 16, 1997 and ending when
the holders of such shares own an aggregate of less than 5% of the outstanding
Shares and are no longer affiliates of the Company under the United States
federal securities laws. The Company will bear all of the expenses of these
registrations, except any underwriters' commissions, discounts and fees, and the
fees and expenses of any legal counsel to the holders of the Hunter's Glen
Shares.
At the closing of the Purchase, Hunter's Glen, the Company and certain other
persons entered into an Agreement Clarifying Registration Rights (the "Agreement
Clarifying Registration Rights"). Under this agreement, the registration rights
that the Trust had previously extended to 400,000 Beneficial Shares owned by the
Enloe Descendants' Trust were extended to the 759,000 Shares that the Enloe
Descendants' Trust, Mr. Robert Ted Enloe, III and his wife owned upon the
consummation of the Reorganization and the Purchase. The Agreement Clarifying
Registration Rights also defined the relationship between these registration
rights and the registration rights extended under the Purchaser Registration
Rights Agreement. The Agreement Clarifying Registration Rights generally
permits Hunter's Glen to require the Company to register the sale of its shares
in connection with any exercise of demand registration rights by the Enloe
Descendants' Trust, and permits the Enloe Descendants' Trust, Mr. Enloe and his
wife to require the Company to register the sale of their shares in connection
with any exercise of demand registration rights by Hunter's Glen. In addition,
this Agreement provides that the Enloe Descendants' Trust, Mr. Enloe, his wife
and Hunter's Glen will not publicly sell their Shares during the period
beginning ten days before the filing of a registration statement in connection
with certain underwritten offerings and ending ninety days after the effective
date of such registration statement. Finally, The Agreement Clarifying
Registration Rights provides that the registration rights with respect to the
Shares held by the Enloe Descendants' Trust, Mr. Enloe and his wife will be
transferable to the subsequent holders of such shares.
NOTE E - Share Transfer Restrictions
The Company's Certificate of Incorporation (the "Charter") contains prohibitions
on the transfer of the Shares 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 Shares, any other subsequently issued voting stock or stock that
participates in the earnings or growth of the Company, and certain options with
respect to such Shares or stock, if the transfer of such Shares or stock would
cause any group or person to own 4.9% or more of the outstanding shares of,
increase the ownership
8
<PAGE>
position of any person that already owns 4.9% or more (by aggregate value) of
the outstanding shares of such stock, or cause any person to be treated like the
owner of 4.9% or more (by aggregate value) of the outstanding shares of such
stock 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 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.
Note F - Foreclosed Real Estate Held For Sale
At March 31, 1997, the Company held assets to be disposed of consisting of
foreclosed real estate in the form of single-family lots and land. The March
31, 1997 carrying amount of these assets was $3,436,000. The carrying value of
the single-family lots was $620,000 at March 31, 1997. The remaining balance of
the Company's foreclosed real estate consists of 14 parcels of land totaling
approximately 603 acres in San Antonio, Texas.
Note G - Reclassifications
Certain reclassifications were made in previously issued financial statements to
conform to the March 31, 1997 presentation.
Note H - Commitments and Contingencies
At March 31, 1997, the Company had commitments for indemnification of
development bond issuers and other guarantees totaling $102,400.
The Company's wholly owned subsidiary, LNC Holdings, Inc., is the owner of
approximately 40 acres of land located in Arlington, Texas which is encumbered
by local property tax liens of $930,000. The Company believes that the tax
liens will ultimately be repaid from the proceeds of the sale of all or a
portion of the encumbered property.
Cash and cash equivalents at March 31, 1997, included restricted cash of $60,456
for unpaid claims related to the Trust's previous bankruptcy. At June 30, 1996,
restricted cash included $58,325 for such claims.
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 financial condition, results of operations, or cash flows.
Note I - Federal Income Taxes
Though the Company had net income for the nine months ended March 31, 1997, no
tax liability has been recognized. At June 30, 1996, the Company had, for
federal tax purposes, net operating loss carryforwards in excess of $225 million
which expire at various times between the years 2005 and 2011 and which are in
sufficient amount to mitigate any significant tax liability for fiscal year
1997.
9
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
NINE MONTHS ENDED MARCH 31, 1997 VERSUS NINE MONTHS ENDED MARCH 31, 1996
Net income for the nine months ended March 31, 1997 was $850,000 compared to net
income of $814,000 for the same period in 1996. The change in operating results
for the nine months was due to various factors discussed below.
Interest income related to interest-bearing deposits in banks increased to
$1,715,000 for the nine months ended March 31, 1997 from $917,000 for the same
period in 1996. This increase is due to a growth in the balance of unrestricted
cash and cash equivalents to $51.7 million on March 31, 1997, from $22.6 million
on March 31, 1996. The increase in unrestricted cash and cash equivalents is
primarily due to the repurchase of the Resurgence Properties, Inc. ("RPI") note
receivable by RPI for $4.1 million on June 27, 1996, the sale of 8,102,439
shares of newly issued Common Stock for $23.1 million to Hunter's Glen on August
16, 1996 (See Note C - Notes to Consolidated Financial Statements), and payments
on the notes receivable of $931,000 during the nine months ended March 31, 1997.
Notes receivable interest income decreased to $97,000 for the nine months ended
March 31, 1997 from $371,000 for the same period in 1996, as a result of a lower
outstanding balance of notes receivable. The notes receivable balance decreased
to $414,000 on March 31, 1997 from $5.6 million on March 31, 1996. The
reduction in notes receivable is primarily due to the repurchase of the RPI note
receivable by RPI for $4.1 million on June 27, 1996 representing 98.75% of the
outstanding balance of the RPI note in a negotiated transaction between the
Trust and RPI, and repayments of indebtedness by borrowers.
The gains on sales of foreclosed real estate decreased to $11,000 for the nine
months ended March 31, 1997 from $553,000 for the same period in 1996. The
gains on sales of real estate represents proceeds received from the sale of
foreclosed real estate in excess of its carrying value. The gain recognized
during the nine months ended March 31, 1997 resulted from the sale of single-
family lots in San Antonio, Texas. The gain during the nine months ended March
31, 1996 was primarily due to the sale of single- family lots in Murrieta,
California.
Other income decreased to $34,000 for the nine months ended March 31, 1997 from
$459,000 for the same period in 1996. Other income for the nine months ended
March 31, 1996 primarily consisted of cash collections on impaired loans which
had no carrying value. There were no such collections during the nine months
ended March 31, 1997.
Insurance expense increased to $239,000 for the nine months ended March 31,
1997, as compared to $161,000 for the same period in 1996. The increase is
primarily due to increased premiums related to Directors' and Officers'
insurance resulting from an increase in the coverage amount as required by the
Stock Purchase Agreement.
Foreclosed real estate operations expense increased $59,000 from $107,000 for
the nine months ended March 31, 1996 to $166,000 for the same period in 1997.
The increase is primarily due to an accrual established for 1996 property taxes
related to the 40 acres of land located in Arlington, Texas held by LNC
Holdings, Inc. and an increase in the accrual for 1997 property taxes.
Legal, audit and advisory fees were $155,000 for the nine months ended March 31,
1997, a decrease of $352,000 from the same period in 1996. Prior period
activity included expenses incurred by the Trust related to potential
acquisitions.
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Franchise tax expense for the nine months ended March 31, 1997 represents
Delaware franchise tax for the 1996 tax year, as a result of the reorganization
of the Trust into the Company, a Delaware corporation. There was no such
expense during the nine months ended March 31, 1996.
Compensation and employee benefits expense decreased by $402,000 from $513,000
during the nine months ended March 31, 1996 to $111,000 for the same period in
1997. The decrease is due to a reduced compensation package for the Trust's
Chief Executive Officer, Robert Ted Enloe III, beginning in the last quarter of
fiscal 1996, as well as, the resignations of six of the Company's employees,
including Mr. Enloe, on August 31, 1996.
General and administrative expense increased by $25,000 from $196,000 during the
nine months ended March 31, 1996 to $221,000 for the same period in 1997. The
increase is attributed to an increase in shareholder services expense for costs
related to the annual stockholder's meeting and to the renewal of the listing of
the Company's Common Stock on the New York Stock Exchange ("NYSE"), offset by a
decrease in trustee's fees and expense. Trustee's fees and expense for the nine
months ended March 31, 1996 included an accrual for trustee retirement benefits,
as well as increased fees for meetings related to potential acquisitions by the
Trust.
THREE MONTHS ENDED MARCH 31, 1997 VERSUS THREE MONTHS ENDED MARCH 31, 1996
Net income for the three months ended March 31, 1997 was $236,000 compared to
net income of $268,000 for the same period in 1996. The change in operating
results for the three months was due to various factors discussed below.
Interest income related to interest-bearing deposits in banks increased to
$625,000 for the three months ended March 31, 1997 from $306,000 for the same
period in 1996. This increase is due to a growth in the balance of unrestricted
cash and cash equivalents to $51.7 million on March 31, 1997, from $22.6 million
on March 31, 1996. The increase in unrestricted cash and cash equivalents is
primarily due to the repurchase of the RPI note receivable by RPI for $4.1
million on June 27, 1996, the sale of 8,102,439 shares of newly issued Common
Stock for $23.1 million to Hunter's Glen on August 16, 1996 (See Note C - Notes
to Consolidated Financial Statements), and principal repayments of $309,000 on
notes receivable.
Notes receivable interest income decreased to $27,000 for the three months ended
March 31, 1997 from $120,000 for the same period in 1996, as a result of a lower
outstanding balance of notes receivable. The notes receivable balance decreased
to $414,000 on March 31, 1997 from $5.6 million on March 31, 1996. The
reduction in notes receivable is primarily due to the repurchase of the RPI note
receivable by RPI for $4.1 million on June 27, 1996 representing 98.75% of the
outstanding balance of the RPI note in a negotiated transaction between the
Trust and RPI, and repayments of indebtedness by borrowers.
The gains on sales of foreclosed real estate for the three months ended March
31, 1996 represents proceeds received from the sale of foreclosed real estate in
excess of its carrying value. The gain during the three months ended March 31,
1996 was primarily due to the sale of single-family lots in Murrieta,
California.
Other income decreased to $14,000 for the three months ended March 31, 1997 from
$178,000 for the same period in 1996. Other income for the three months ended
March 31, 1996 primarily consisted of cash collections on impaired loans, which
had no carrying value. There were no such collections during the three months
ended March 31, 1997.
Insurance expense increased to $79,000 for the three months ended March 31,
1997, as compared to $53,000 for the same period in 1996. The increase is
primarily due to increased premiums related to
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Directors' and Officers' insurance resulting from an increase in the coverage
amount as required by the Stock Purchase Agreement.
Foreclosed real estate operations expense increased $24,000 from $17,000 for the
three months ended March 31, 1996 to $41,000 for the same period in 1997. The
increase is primarily due to an accrual established for 1996 property taxes
related to the 40 acres of land located in Arlington, Texas held by LNC
Holdings, Inc.
Legal, audit and advisory fees were $90,000 for the three months ended March 31,
1997, an increase of $37,000 from the same period in 1996. Current period
activity included expenses incurred by the Company related to potential
acquisitions.
Franchise tax expense for the three months ended March 31, 1997 represents
Delaware franchise tax for the 1996 tax year, as a result of the reorganization
of the Trust into the Company, a Delaware corporation. There was no such
expense during the three months ended March 31, 1996.
Compensation and employee benefits expense decreased by $244,000 from $267,000
during the three months ended March 31, 1996 to $23,000 for the same period in
1997. The decrease is due to a reduced compensation package for the Trust's
Chief Executive Officer, Robert Ted Enloe III, beginning in the last quarter of
fiscal 1996, as well as, the resignations of six of the Company's employees,
including Mr. Enloe, on August 31, 1996.
General and administrative expense increased by $31,000 from $53,000 during the
three months ended March 31, 1996 to $84,000 for the same period in 1997. The
increase is attributed to an increase in shareholder services expense for costs
related to the annual stockholder's meeting and to the renewal of the listing of
the Company's Common Stock on the NYSE.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal funding requirements are operating expenses, including
legal, audit, and advisory expenses expected to be incurred in connection with
evaluation of potential acquisition candidates and other strategic
opportunities. The Company anticipates that its primary sources of funding
operating expenses are principal and interest collections on notes receivable,
proceeds from the sale of foreclosed real estate, income on cash and cash
equivalents, and cash on hand.
As described in Note C to the financial statements, the Trust entered into an
agreement and subsequently consummated the sale of newly issued Shares to
Hunter's Glen. The proceeds from this sale were $23.1 million. Management
believes that the additional cash will assist the Company in its efforts to
expand its business through acquisitions. Hunter's Glen is an affiliate of Mr.
Gerald J. Ford, who became the Chief Executive Officer and Chairman of the Board
of the Company following the Trust's reorganization into the Company and the
sale of the Shares to Hunter's Glen.
Statements contained in this Quarterly Report on Form 10-Q 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, involve a number of risks and
uncertainties, and 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
12
<PAGE>
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.
SHARE TRANSFER RESTRICTIONS
In order to avoid limitations on the use of the Company's tax attributes, the
Company's Certificate of Incorporation prohibits the transfer of the Shares, any
other subsequently issued voting stock or stock that participates in the
earnings or growth of the Company, and certain options with respect to such
Shares or stock, if the transfer of such Shares or stock would cause any group
or person to own 4.9% or more of the outstanding shares, or increase the
ownership position of any person or group that already owns 4.9% or more of the
outstanding shares of such stock, or cause any person or group to be treated
like the owner of 4.9% or more of the outstanding shares of such stock for tax
purposes. For this purpose, "person" is defined broadly to mean any individual,
corporation, estate, debtor, association, company, partnership, joint venture,
or similar organization. See Note E - Notes to Consolidated Financial
Statements.
13
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 Financial Data Schedules (included only in the EDGAR filing).
(b) Reports on Form 8-K:
None
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
LIBERTE INVESTORS INC.
May 13, 1997 By: /s/ Gerald J. Ford
---------------------------------------------------
Gerald J. Ford
Chief Executive Officer and Chairman of the Board
May 13, 1997 By: /s/ Melinda G. Heika
---------------------------------------------------
Melinda G. Heika
Principal Accounting Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS DATED AS OF MARCH 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 51,718,193
<SECURITIES> 0
<RECEIVABLES> 838,667
<ALLOWANCES> 0
<INVENTORY> 3,435,621
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 55,992,481
<CURRENT-LIABILITIES> 246,296
<BONDS> 0
0
0
<COMMON> 202,561
<OTHER-SE> 55,543,624
<TOTAL-LIABILITY-AND-EQUITY> 55,992,481
<SALES> 11,310
<TOTAL-REVENUES> 1,857,628
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,006,879
<LOSS-PROVISION> 380
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 850,369
<INCOME-TAX> 0
<INCOME-CONTINUING> 850,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850,369
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
