<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of
1934
For Quarter Ended JUNE 30, 1995 Commission File No. 1-8249
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LINCORP HOLDINGS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 23-2161279
-------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization
250 Park Avenue
New York, New York 10017
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(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (212) 599-0465
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding or each of the issuer's classes of
common stock, as of the latest practicable date.
1,730,559 Shares of Common Stock Outstanding at August 1, 1995
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<PAGE>
PART 1. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the registrant from the books of Lincorp Holdings, Inc. without audit (except
for the Balance Sheet as of December 31, 1994), pursuant to the rules and
regulations of the Securities and Exchange Commission. This information, which
is subject to year-end adjustments, reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods. Although the registrant believes that the disclosures are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the registrant's latest Annual
Report of Form 10-K.
1
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LINCORP HOLDINGS, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(Unaudited) (See Note 3)
ASSETS
<S> <C> <C>
Cash............................................................. $ 363 $ 125
Investment in marketable securities, at fair value............... 333 535
Investment in real estate joint ventures, net.................... 19,019 -
Other assets..................................................... 271 -
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$ 19,986 $ 660
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Other borowed funds........................................... $ 105,014 $ 97,229
Accrued interest payable on other borrowed funds.............. 46,864 38,912
Mortgage debt, including accrued interest..................... 6,154 -
Note payable, including accrued interest...................... 13,412 -
Net liability of real estate discontinued operations.......... - 10,518
Other liabilities............................................. 3,900 2,900
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175,344 149,559
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Commitments and contingent liabilities
Stockholders' deficit:
Preferred stock, Series A;
200 shares authorized;
no shares issued and outstanding........................... - -
Preferred stock, $.01 par value;
10,000 shares authorized;
no shares issued and outstanding........................... - -
Common stock, $.01 par value;
1,990,000 shares authorized;
1,730,559 shares issued and outstanding.................... 17 17
Capital contributed in excess of par value.................... 148,434 148,434
Accumulated deficit........................................... (303,809) (297,350)
------------ ------------
(155,358) (148,899)
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$ 19,986 $ 660
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LINCORP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ---------------------
1995 1994 1995 1994
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Income:
Rental income.............................................. $ 118 $ - $ 235 $ -
Equity in operating results of real estate joint ventures.. (49) - 48 -
Interest income............................................ 42 8 74 25
Other income............................................... - 2 3 4
--------- -------- --------- --------
Total income........................................... 111 10 360 29
--------- -------- --------- ---------
Expenses:
Interest expense........................................... 3,382 2,680 6,616 5,331
General and administrative expense......................... 129 92 188 169
--------- -------- --------- --------
Total expenses......................................... 3,511 2,772 6,804 5,500
--------- -------- --------- --------
Loss before income taxes...................................... (3,400) (2,762) (6,444) (5,417)
Provision for income taxes.................................... - 75 15 150
--------- ------- --------- --------
Net loss...................................................... $ (3,400) $ (2,837) $ (6,459) $ (5,621)
--------- -------- --------- --------
Loss per share of Common stock outstanding.................... $ (1.96) $ (1.64) $ (3.73) $ (3.25)
--------- -------- --------- --------
Weighted average shares of Common
stock outstanding.......................................... 1,731 1,731 1,731 1,731
---------- -------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
1995 1994 1995 1994
--------- ---------- --------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss..................................... $ (3,400) $ (2,837) $ (6,459) $ (5,621)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Equity in operating results of real estate
joint ventures........................... 49 - (48) -
Decrease in marketable securities......... 216 84 202 137
Decrease (increase) in other assets....... 4 - 7 (5)
Increase in accrued interest payable...... 3,264 2,690 6,410 5,323
Increase in other liabilities............. 270 21 270 108
Operating activities of real estate discontinued
operations............................... - 29 - 50
--------- -------- -------- --------
Net cash provided by (used in) operating activities 403 (13) 382 (8)
--------- -------- -------- --------
FINANCING ACTIVITIES
Repayment of borrowed funds.................. (144) - (144) -
--------- -------- -------- --------
Net cash used in financing activities........ (144) - (144) -
--------- -------- -------- --------
Net increase (decrease) in cash.............. 259 (13) 238 (8)
Cash, beginning of period.................... 104 118 125 113
--------- -------- -------- --------
Cash, end of period.......................... $ 363 $ 105 $ 363 $ 105
--------- --------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................. $ 87 $ - $ 205 $ -
--------- -------- -------- --------
Income taxes.............................. $ - $ 4 $ 15 $ 12
--------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DIVESTITURE OF THE LINCOLN SAVINGS BANK, FSB
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As previously reported, the Lincoln Savings Bank, FSB ("Lincoln" or the
"Bank") was the primary asset of Lincorp Holdings, Inc., ("LHI" or the
"Company"). On January 20, 1993, in connection with the transaction described
below, the Company relinquished control of the Bank by placing the common stock
of Lincoln (the "Lincoln Shares") into a trust for eventual sale, and by filing
a divestiture notice with the Office of Thrift Supervision (the "OTS").
On March 4, 1994, Lincoln entered into a definitive agreement (the
"Acquisition Agreement") with Anchor Savings Bank FSB ("Anchor") whereby Anchor
would acquire all of the assets in the trust, including outstanding preferred
and common stock of Lincoln and a senior secured note, for $80 million in cash.
The transaction was subject to, among other things, regulatory approval of the
OTS and the Federal Deposit Insurance Corporation. Approval of the transaction
was granted on July 12, 1994 and the transaction was completed on August 12,
1994. As anticipated under the Acquisition Agreement, the Company received none
of the proceeds from the sale of Lincoln but two of the Company's lenders
received a total of $6.1 million as repayment of a portion of the principal
amount of debt owed them. This payment to the Company's lenders represents a
reduction in the loss recorded in 1992 relating to the Company's writedown of
its investment in Lincoln. Accordingly, the Company has recorded a $6.1 million
income adjustment in the fourth quarter of 1994 relating to the discontinued
operations of Lincoln.
NOTE 2 - LIQUIDITY AND GOING CONCERN
------------------------------------
At June 30, 1995, LHI had outstanding $151.9 million of indebtedness,
including interest payable of $46.9 million, (collectively the "Indebtedness")
under its Senior, Subordinated and Junior Credit Facilities, of which the
principal amount is included in "Other Borrowed Funds". The Company's parent
company, Unicorp Energy Corporation ("UEC"), holds $138.8 million of the
Company's Indebtedness and Hees International Bancorp, Inc. ("Hees"), which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the Indebtness, $13.1 million. LHI is in payment default under each
of the above mentioned credit facilities. As part of the Agreement, the
Company's lenders agreed to release their liens on the Lincoln Shares and
substitute
5
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LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
therefor an interest in the proceeds from the sale of the Bank. These credit
facilities are secured by a security interest in all of LHI's remaining assets.
LHI's sources of funds during the six months ended June 30, 1995 and to
date have been primarily funds from the sales of marketable securities and
payments received from mortgage receivables. The assets generating the funds
being utilized by LHI are part of the collateral package securing the above
described credit facilities. Unless LHI's lenders are prepared to continue to
defer in realizing on the pledged collateral and allow LHI to utilize the
proceeds from such collateral to fund its ongoing operations, LHI will be unable
to continue as a going concern.
NOTE 3 - CONTINUING OPERATIONS
------------------------------
Effective January 1, 1995, as a result of an improving real estate market, the
Company reformulated their business plan to focus on such activity.
Accordingly, effective January 1, 1995, the Company restated its balance sheet
to reflect the real estate operations as a continuing operation and will
recognize its equity in the operating results of the real estate operations in
accordance with the equity method of accounting. The following is the restated
balance sheet of the Company as of January 1, 1995 (dollars in thousands):
<TABLE>
<S> <C>
Assets
Cash $ 125
Investment in marketable securities 535
Investment in real estate joint ventures, net 18,971
Other assets 278
---------
Total Assets $ 19,909
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Liabilities
Other borrowed funds $ 105,158
Accrued interest payable on other borrowed funds 41,049
Mortgage debt, including accrued interest 5,904
Note payable, including accrued interest 13,067
Other liabilities 3,630
---------
Total Liabilities 168,808
Stockholders' Deficit (148,899)
---------
Total Liabilities and Stockholders' Deficit $ 19,909
---------
</TABLE>
During July 1995, the Company lent $845,000 to a developer to refinance
land previously purchased by the developer for residential home development. The
Company will receive a $60,000 transaction fee, of which $5,000 will be paid up
front, and the balance will be rolled into the loan. The total loan of $900,000
is for one year and carries a 10% interest rate, payable monthly, and is secured
by a first mortgage on the land. In order to make this loan, the Company
borrowed $550,000 from UEC under its existing line of credit.
6
<PAGE>
LINCORP HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DIVESTITURE OF THE LINCOLN SAVINGS BANK, FSB, LIQUIDITY AND GOING CONCERN, AND
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CONTINUING OPERATIONS
---------------------
As previously reported, the Lincoln Savings Bank, FSB ("Lincoln" or the
"Bank") was the primary asset of Lincorp Holdings, Inc., ("LHI" or the
"Company"). On January 20, 1993, in connection with the transaction described
below, the Company relinquished control of the Bank by placing the common stock
of Lincoln (the "Lincoln Shares") into a trust for eventual sale, and by filing
a divestiture notice with the Office of Thrift Supervision (the "OTS").
On March 4, 1994, Lincoln entered into a definitive agreement (the
"Acquisition Agreement") with Anchor Savings Bank FSB ("Anchor") whereby Anchor
would acquire all of the assets in the trust, including outstanding preferred
and common stock of Lincoln and a senior secured note, for $80 million in cash.
The transaction was subject to, among other things, regulatory approval of the
OTS and the Federal Deposit Insurance Corporation. Approval of the transaction
was granted on July 12, 1994 and the transaction was completed on August 12,
1994. As anticipated under the Acquisition Agreement, the Company received none
of the proceeds from the sale of Lincoln but two of the Company's lenders
received a total of $6.1 million as repayment of a portion of the principal
amount of debt owed them. This payment to the Company's lenders represents a
reduction in the loss recorded in 1992 relating to the Company's writedown of
its investment in Lincoln. Accordingly, the Company recorded a $6.1 million
income adjustment in the fourth quarter of 1994 relating to the discontinued
operations of Lincoln.
At June 30, 1995, LHI had outstanding $151.9 million of indebtedness,
including interest payable of $46.9 million, (collectively the "Indebtedness")
under its Senior, Subordinated and Junior Credit Facilities, of which the
principal amount is included in "Other Borrowed Funds". The Company's parent
company, Unicorp Energy Corporation ("UEC"), holds $138.8 million of the
Company's Indebtedness and Hees International Bancorp, Inc. ("Hees"), which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the Indebtness, $13.1 million. LHI is in payment default under each
of the above mentioned credit facilities. As part of the Agreement, the
Company's lenders agreed to release their liens on the Lincoln Shares and
substitute therefor an interest in the proceeds from the sale of the Bank. These
credit facilities are secured by a security interest in all of LHI's remaining
assets.
LHI's sources of funds during the six months ended June 30, 1995 and to
date have been primarily funds from the sales of marketable securities and
payments received from mortgage receivables. The assets generating the funds
being utilized by LHI are part
7
<PAGE>
of the collateral package securing the above described credit facilities.
Unless LHI'slenders are prepared to continue to defer in realizing on the
pledged collateral and allow LHI to utilize the proceeds from such collateral to
fund its ongoing operations, LHI will be unable to continue as a going concern.
Effective January 1, 1995, as a result of an improving real estate market,
the Company reformulated their business plan to focus on such activity.
Accordingly, effective January 1, 1995, the Company restated its' balance sheet
to reflect the real estate operations as a continuing operation and will
recognize its equity in the operating results of the real estate operations in
accordance with the equity method of accounting.
During July 1995, the Company lent $845,000 to a developer to refinance
land previously purchased by the developer for residential home development. The
Company will receive a $60,000 transaction fee, of which $5,000 will be paid up
front, and the balance will be rolled into the loan. The total loan of $900,000
is for one year and carries a 10% interest rate, payable monthly, and is secured
by a first mortgage on the land. In order to make this loan, the Company
borrowed $550,000 from UEC under its existing line of credit.
RESULTS OF OPERATIONS
---------------------
Six Months Ended June 30, 1995 Compared to the Six Months Ended June 30, 1994.
------------------------------------------------------------------------------
For the six months ended June 30, 1995, the Company had a net loss of $6.5
million compared to a $5.6 million net loss for the same period in 1994.
As stated previously, effective January 1, 1995 the Company has reflected
the results of its real estate operations as a continuing operation whereas
these same operations during 1994 were accounted for as a discontinued operation
with no effect on operating results.
The change in the operating results between 1995 and 1994 is primarily
attributable to the accounting for the real estate operations. The $.3 million
increase in income is due to rental income and equity income in real estate
joint ventures and of the $1.3 million increase in expenses, $.8 million
represents an increase in interest expense attributable to the Note and Mortgage
payable on real estate assets.
FINANCIAL POSITION
------------------
Material Changes Since December 31, 1994
----------------------------------------
After recognizing the effect of restating the Company's balance sheet as of
January 1, 1995 to reflect the real estate operations as continuing operations,
there were no other significant changes at June 30, 1995 compared to December
31, 1994.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
There have been no material developments with respect to litigation.
9
<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 thereunto duly authorized.
LINCORP HOLDINGS, INC.
Dated: August 11, 1995 /s/ Jack R. Sauer
----------------------------
Jack R. Sauer
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 363
<SECURITIES> 333
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,986
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> (155,375)
<TOTAL-LIABILITY-AND-EQUITY> 19,986
<SALES> 0
<TOTAL-REVENUES> 360
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,616
<INCOME-PRETAX> (6,444)
<INCOME-TAX> 15
<INCOME-CONTINUING> (6,459)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,459)
<EPS-PRIMARY> (3.73)
<EPS-DILUTED> (3.73)
</TABLE>
