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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[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 1-6868
SIENA HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 75-1043392
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5068 WEST PLANO PARKWAY, SUITE 300, PLANO TEXAS 75093
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 381-4255
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
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<S> <C>
COMMON STOCK, PAR VALUE $.10 PER SHARE NOT APPLICABLE
PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
</TABLE>
Securities registered pursuant to 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
--- ---
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. [ ]
At September 8, 2000 the aggregate market value of the registrant's common
stock held by non-affiliates: $4,015,000
APPLICABLE ONLY TO REGISTRANTS 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
--- ---
On October 10, 1995, the Registrant and Certain of its subsidiaries filed
bankruptcy proceedings under Chapter 11 of the Federal Bankruptcy Code in the
District of Delaware.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the registrant's Common Stock, par
value $.10 per share, as of September 8, 2000: Common Stock -- 6,000,000 shares.
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SIENA HOLDINGS, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2000
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. BUSINESS.............................................................................................3
Item 2. PROPERTIES...........................................................................................6
Item 3. LEGAL PROCEEDINGS....................................................................................7
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................7
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS...................................................................9
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA................................................................10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..............................................................12
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................................15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................16
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................42
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................................43
Item 11. EXECUTIVE COMPENSATION..............................................................................43
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................44
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................44
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................................45
</TABLE>
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SIENA HOLDINGS, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2000
PART I
ITEM 1. BUSINESS
Siena Holdings, Inc. ("SHI"), formerly Lomas Financial Corporation
("LFC"), was incorporated in Delaware in 1960, and its principal executive
offices are located at 5068 West Plano Parkway, Suite 300 in Plano, Texas.
Unless the context otherwise requires, the "Company," as used herein, refers to
SHI, formerly LFC, and its subsidiaries. The Company is primarily engaged in two
businesses through its wholly-owned subsidiaries: assisted care facility
management through Siena Housing Management Corp. and real estate development
through LLG Lands, Inc. Prior to October 1, 1996, the Company's wholly-owned,
principal subsidiary was Lomas Mortgage USA, Inc. ("LMUSA"), now known as Nomas
Corp. ("Nomas"). As a result of the confirmation of LMUSA's Chapter 11
reorganization plan (see "Item 1. Business -- Reorganization"), the Company's
interest in LMUSA was extinguished effective October 1, 1996. LFC's plan of
reorganization was confirmed on October 4, 1996, but not effective until March
1997.
FINANCIAL INFORMATION AND NARRATIVE DESCRIPTION OF INDUSTRY SEGMENTS
Financial information regarding revenues, operating profit and total
assets of the Company are included in "Item 8. Financial Statements and
Supplementary Data" within this report.
ASSISTED CARE FACILITY MANAGEMENT
The assisted care facility management subsidiary, Siena Housing
Management Corp. ("SHM"), is a wholly-owned subsidiary of the Company, and
conducts business in Houston, Texas pursuant to a management agreement. SHM
manages and maintains an assisted care facility in Houston, Texas under a
management agreement into which it entered on June 27, 1977 with Treemont, Inc.
("Treemont"). SHM is entitled to receive a fee under the agreement which,
subject to a required annual priority distribution of project net income to
Treemont and certain adjustments and expenditures specified by the agreement, is
equal to 3% of the facility's gross receipts and 25% of the facility's net
income.
SHM may terminate the agreement on six months' written notice; however,
the termination date must fall on an anniversary of the date on which the
parties entered into the agreement. Treemont can only terminate the agreement
for cause or if Treemont fails to receive its required annual priority
distribution for two consecutive years. SHM has the right to extend the term of
the agreement from year to year in one-year increments until June 30, 2028.
Unless the agreement is terminated or its term is extended as described above,
the agreement will terminate on June 30, 2003. In the fourth quarter of fiscal
year 1998, the owners of Treemont contacted the Company's management and
requested a legal review of the management agreement as they believed certain
parts of the contract were illegal. The Company's position is that the agreement
is substantially secured at this time by the Treemont property in Houston. The
owners of Treemont have requested the Company consider possible changes to the
contract. Management does not believe the changes, if any are made, will have a
material impact on the Company.
In the fourth quarter of fiscal year 2000, the owners of Treemont advised
the Company that they intended to market and sell the Treemont facility. The
management agreement provides for the Company to receive a negotiated share of
the proceeds. The Company has not negotiated the terms of any contract
termination and has not been advised of any sale by the owners of Treemont.
Although the potential share of sale proceeds may partially offset the future
lost revenue, any sale would have a material impact on the Company's operations.
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The Treemont management agreement is not shown as an asset on the balance
sheet of the Company because there can be no assurance that the contract will
continue in effect for an extended period and the uncertainties inherent in the
projected earnings of the facilities.
INVESTMENT IN REAL ESTATE
The Company's investment in real estate is owned by LLG Lands, Inc.
("LLG"), a wholly-owned subsidiary of the Company. The real property consists of
185.1 acres (approximately 160.9 acres net of flood plain) of unimproved land in
Allen, Texas (the "Allen property"). The southern boundary of the Allen property
is the Exchange Parkway, which provides access to the property from Central
Expressway on the west and from Highway 5 on the east. The Allen property
includes four tracts of land: one tract of approximately 37.6 net acres zoned
multi-family, one tract of approximately 89.6 net acres zoned light industrial
(formerly single-family), two tracts of approximately 29.1 net acres zoned
commercial and one tract of 4.6 net acres zoned residential. Management is
attempting to get the one residential tract rezoned as commercial. The acreage
was increased by a total of 5.7 gross acres and 13.7 net acres in fiscal year
2000 due to management's decision to reclaim a portion of the flood plain
acreage and the results of a new land survey that redefined the boundaries.
The Company attempted to increase the values of the property through the
re-zoning and relocation of zoning in certain tracts. The Company was notified
in fiscal year 1999 that its re-zoning application was approved, relocating its
multi-family tract to a more accessible location and changing the single family
zoning to light industrial. Also in fiscal year 1999, the City of Allen
constructed a city park off Exchange Parkway near the multi-family tract. In
fiscal year 2000, the Company has reviewed the real estate interests held and
has continued to market the property. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an on-going program involving the possible sale of all or part of
the Allen property or its continued development. A concept site plan and related
marketing materials have been developed for the light industrial property.
Management of the Company intends to market and/or develop the property over an
estimated period not to exceed five years.
During fiscal year 1999 and continued into fiscal year 2000, the Company
has held negotiations with third parties for the sale of certain parcels of the
Allen property, including negotiations on the light industrial property and a
portion of one of the commercial properties. Based on these negotiations,
management believes that the Company would be able to sell the Allen property
for a value in excess of the carrying amount. While the Company will continue to
consider any proposals which it, in its best judgement, considers to be
reasonable and in the interests of its shareholders, there is no way to
reasonably predict if any such proposals will ultimately lead to any real estate
transactions and when such transactions might occur.
Due to the change in zoning received on certain tracts and improved market
conditions and based on the negotiations described above, management believes
that the Company would be able to sell the Allen property for a value in excess
of the tax basis. As a result, during the year ended June 30, 1999, the Company
decreased the valuation allowance for deferred tax assets by $1.175 million and
additional paid-in capital was increased by $1.175 million to reflect potential
utilization of a portion of the consolidated net operating loss carryforward. As
a result of the new survey and the change in the flood plain acreage, the
Company decreased the valuation allowance for deferred tax assets by an
additional $266,000 and additional paid-in capital was increased by $266,000 in
fiscal year 2000. The Company reported a net deferred tax asset balance of
$1.441 million and $1.175 million as of June 30, 2000 and 1999, respectively,
included in long term assets on the Company's Consolidated Balance Sheet. Any
tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2000 will be allocated to
additional paid-in capital.
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EMPLOYEES
At June 30, 2000, the Company had two executive officers under contract
and one full-time employee. One of the Company's subsidiaries, SHM, had 143
full-time and 23 part-time employees who provide services at an assisted care
facility in Houston, Texas. The compensation expense and all operating expenses
for SHM's employees are funded directly by the assisted care facility owner and
are not reflected in the Consolidated Statement of Operations, except indirectly
through the management fee income received by SHM based in part on the
facility's net income. The exception is the compensation for the operations
manager of the facility, including commission, bonus and pension benefits
(through December 31, 1997), which is funded directly by SHM and included in
personnel expense on the Company's Consolidated Statement of Operations.
REORGANIZATION
On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA (collectively
the "Debtor Corporations") filed separate voluntary petitions for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the District of Delaware. The
petitioning subsidiaries were Lomas Information Systems, Inc. ("LIS") and Lomas
Administrative Services, Inc. ("LAS"). The Debtor Corporations filed two
separate plans of reorganization with the Bankruptcy Court. An order confirming
the second amended joint plan of reorganization filed on October 4, 1996 for
LFC, LIS and LAS (the "Joint Debtors") and a stipulation and order among the
Joint Debtors and the appointed statutory committee of unsecured creditors of
LFC (the "LFC Creditors' Committee") regarding technical modifications to the
plan of reorganization and confirmation order filed on January 27, 1997 together
with the second amended joint plan of reorganization filed on July 3, 1996 are
collectively referred to herein as the "Joint Plan". The Joint Plan was
confirmed on October 4, 1996, but not effective until March 7, 1997, after
certain conditions were either met or waived by the LFC Creditors' Committee.
The Joint Plan provided for a transfer by the Company of $3 million in
cash to partially fund a litigation trust to pursue third-party claims pursuant
to the LFC/LMUSA joint litigation trust agreement among LFC and its subsidiaries
and LMUSA, dated March 6, 1997 (the "LFC/LMUSA Litigation Trust"). Subject to
certain exceptions, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. In March 2000, the
LFC Creditors' Trust received $7.1 million of net proceeds from the LFC/LMUSA
Litigation Trust resulting from litigation. There can be no assurance that the
LFC/LMUSA Litigation Trust will produce any additional proceeds which will
benefit the Creditors Trust and former creditors.
The Class 3 general unsecured creditors were to receive a combination of
cash and new common stock as settlement of their allowed claim, pursuant to the
Joint Plan. On November 12, 1997, the initial distribution date (the "Initial
Distribution Date"), $12.5 million was disbursed to the distribution agent for
the Class 3 unsecured creditors. Additional cash distributions in the amounts of
$6.2 million, $4.3 million and $8.1 million were disbursed to the distribution
agent for benefit of the Class 3 unsecured creditors on May 11, 1998, April 21,
1999, and April 24, 2000, respectively, bringing the total cash distributed
through June 30, 2000 to $31.1 million. The amounts ultimately distributed to
the former creditors will be solely dependent on the success of the Company, the
amounts realized from the collection of assets and the settlement of liabilities
for both the Creditors' Trust and the LFC/LMUSA Litigation Trust.
As provided for in the Joint Plan and a decision of the LFC Creditors'
Committee, 4,000,000 shares of the new common stock were issued by the stock
transfer agent on the initial distribution date of November 12, 1997. For
balance sheet presentation and earnings (loss) per share, the 4,000,000 shares
were considered issued as of April 1, 1997. As of March 7, 1999, the stock
distribution agent had distributed 3,822,121 shares of the new common stock to
former creditors. In the second quarter of fiscal year 2000, the stock
distribution agent distributed the final 177,879 shares to all allowed creditors
that had received prior stock distributions.
On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved
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by the Company's Board of Directors on September 23, 1998. This transaction
increased the number of outstanding shares of common stock to 6 million. See
"Item 8. Financial Statements and Supplementary Data--Stockholders' Equity"
footnote.
THE 6,000,000 SHARES OF THE NEW COMMON STOCK ARE RESTRICTED IF THE EFFECT
OF A TRANSFER WOULD RESULT IN AN OWNERSHIP INCREASE TO 4.5 PERCENT OR ABOVE OF
THE TOTAL OUTSTANDING SHARES OR FROM 4.5 PERCENT TO A GREATER PERCENTAGE OF THE
TOTAL OUTSTANDING SHARES, WITHOUT PRIOR APPROVAL BY THE BOARD OF DIRECTORS AS
DESCRIBED IN THE RESTATED CERTIFICATE OF INCORPORATION. SEE EXHIBITS TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN.
Reference is made to "III. Background and General Information -- E. The
Chapter 11 Filings" in the Joint Disclosure Statement, a copy of which is filed
as an exhibit to the Company's annual report on Form 10-K for the year ended
June 30, 1996, for more information on the Company's reorganization. The
principal provisions of the Joint Plan are summarized in the Joint Disclosure
Statement. That summary is qualified in its entirety by reference to the Joint
Plan, which is attached as Exhibits I and II to the Joint Disclosure Statement.
CREDITORS' TRUST
The Joint Plan established a creditors' trust (the "Creditors' Trust") for
which the Company serves as trustee. The Creditors' Trust holds the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to creditors in accordance with the terms of the Joint Plan. The
Creditors' Trust is organized for the sole purpose of liquidating the
non-reorganized assets and will terminate on October 4, 2001, unless an
extension is approved by the Bankruptcy Court. The assets and liabilities of the
Creditors' Trust are not reflected in the accompanying Consolidated Balance
Sheet as the Company is not the beneficiary of the Trust. Accordingly, revenues
and expenses related to the Creditors' Trust assets and liabilities since April
1, 1997, are not reflected in the accompanying Statement of Consolidated
Operations. The allocation of costs between the Creditors' Trust and the Company
is based on management's estimate of each entity's proportional share of costs.
Gains and losses from the Creditors' Trust are solely for the former creditors'
benefit and the Company has no risk of loss on the assets or liabilities. The
amounts ultimately distributed to the former creditors will be solely dependent
on the success of the Company, the amounts realized from the collection of
assets, and settlement of liabilities for both the Creditors' Trust and the
LFC/LMUSA Litigation Trust. See "Item 8. Financial Statements and Supplementary
Data - Creditors' Trust" for more information. Stockholders who are not former
creditors of the Joint Debtors are not beneficiaries of the Creditors' Trust.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. See "Item 1. Business --
Reorganization".
ITEM 2. PROPERTIES
The Company's principal executive offices are located in leased
facilities at 5068 West Plano Parkway, Suite 300 in Plano, Texas. The original
lease for six months expired on August 15, 1998, after which the Company is
operating under a month-to-month lease with a 30-day cancellation notice.
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ITEM 3. LEGAL PROCEEDINGS
The assisted care facility management subsidiary, SHM, is a wholly-owned
subsidiary of the Company, and conducts business in Houston, Texas pursuant to a
management agreement. SHM manages and maintains an assisted care facility in
Houston, Texas under a management agreement into which it entered on June 27,
1977 with Treemont. In the fourth quarter of fiscal year 1998, the owners of
Treemont contacted the Company's management and requested a legal review of the
management agreement as they believed certain parts of the contract were
illegal. The Company's position is that the agreement is substantially secured
at this time by the Treemont property in Houston. The owners of Treemont have
requested the Company consider possible changes to the contract. Management does
not believe the changes, if any are made, will have a material impact on the
Company.
In the fourth quarter of fiscal year 2000, the owners of Treemont advised
the Company that they intended to market and sell the Treemont facility. The
management agreement provides for the Company to receive a negotiated share of
the proceeds. The Company has not negotiated the terms of any contract
termination and has not been advised of any sale by the owners of Treemont.
Although the potential share of sale proceeds may partially offset the future
lost revenue, any sale would have a material impact on the Company's operations.
In December 1997, the Company received a letter from the attorney of one
of the insurance companies that carried the former directors and officers
insurance coverage, stating that there was a $1.0 million per claim retention
which must be exhausted before the insurance company was implicated. Management
did not believe that the Company was responsible for this retention amount as a
result of the Joint Plan. During the quarter ended March 31, 2000, a settlement
was consummated in this case with no liability to the Company. The Company also
obtained a release from all parties involved against any further liability.
On September 25, 1998, the Company was advised that it was named as a
Counter-Defendant in the counterclaim filed by the defendants of the LFC/LMUSA
Litigation Trust's lawsuit against certain former officers and directors of
Lomas Financial Corporation and subsidiaries. The counterclaim sought joint and
several liability. The Company responded to the counterclaim denying liability
and preserving the Company's rights and defenses. Separately the Company
initiated litigation in the Delaware Bankruptcy Court to obtain a declaration of
rights and an order to turn over records. During the quarter ended March 31,
2000, a settlement was consummated in this case with no liability to the
Company. The Company also obtained a release from all parties involved against
any further liability.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. See "Item 1. Business--
Reorganization".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on December 13, 1999,
in Wilmington, Delaware for the following purposes:
1. To elect five directors (John P. Kneafsey, Erik M. Bodow, James D.
Kemp, Matthew S. Metcalfe, and Frank B. Ryan) to serve until the
next annual meeting and until their successors are elected and
qualified.
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VOTING
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Number of Shares Number of Shares Number of Shares Number of Broker
For Against Abstained Non-Votes
---------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
3,334,907 0 2,985 0
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2. To approve and authorize the Board of Directors to effect, in its
discretion, a reverse stock split followed by a forward split of the
Company's Common Stock.
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<CAPTION>
VOTING
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Number of Shares Number of Shares Number of Shares Number of Broker
For Against Abstained Non-Votes
---------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
3,334,881 2,198 813 0
</TABLE>
3. To ratify the appointment of KPMG LLP as independent public
accountants for the Company for the fiscal year ended June 30, 2000.
<TABLE>
<CAPTION>
VOTING
---------------------------------------------------------------------------------------------
Number of Shares Number of Shares Number of Shares Number of Broker
For Against Abstained Non-Votes
---------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
3,335,855 1,928 109 0
</TABLE>
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of June 30, 2000 and 1999, the Company had 15,000,000 shares of $.10
par value common stock authorized, with 6,000,000 shares issued and outstanding.
Pursuant to the Joint Plan and a decision by the LFC Creditors' Committee,
4,000,000 shares of common stock were reserved for issuance on April 1, 1997 and
ultimately issued by the stock transfer agent on November 12, 1997. For balance
sheet presentation and earnings (loss) per share, the 4,000,000 shares were
considered issued as of April 1, 1997. The process by the stock distribution
agent resulted in 3,822,121 shares of common stock actually distributed to
former creditors through March 7, 1999, the deadline for exchanging predecessor
company bonds for common stock. In the second quarter of fiscal year 2000, the
stock distribution agent distributed the final 177,879 shares, including shares
held for disputed claims, to all allowed creditors that had received prior stock
distributions. The common stock has no preemptive or other subscription rights
and there are no conversion rights, redemption or sinking fund provisions with
respect to such shares.
On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. See "Item 8.
Financial Statements and Supplementary Data--Stockholders' Equity" footnote.
At the annual meeting on December 13, 1999, the stockholders of SHI (the
"Stockholders") approved a proposal to amend the Company's certificate of
incorporation (a) to effect, as determined by the Board in its sole discretion,
a reverse stock split of the outstanding Common Stock on the effective date of
the amendment (the "Effective Date"), pursuant to which each 100 shares then
outstanding will be converted into one share (the "Reverse Stock Split"), and
(b) to effect a forward split of the Common Stock on the day following the
effective date of the Reverse Split, pursuant to which Common Stock then
outstanding as of such date will be converted into the number of shares of the
Common Stock that such shares represented immediately prior to the Effective
Date (the "Forward Stock Split"). In lieu of issuing less than one whole share
resulting from the proposed stock split to holders of fewer than 100 shares, as
the case may be, the Company would make a cash payment based on the higher of
either the stated book value of the Company on June 30, 1999, or the closing
prices of the Common Stock, as discussed in more detail in the Company's Proxy
Statement dated November 1, 1999. The Board is authorized, in its sole
discretion, to effect the Reverse Stock Split based on factors existing at the
time of determination, including (a) the availability of funds necessary to
consummate the Reverse Stock Split and the cost of such funds; (b) the market
price of the Common Stock; (c) the Board's determination of whether the Reverse
Stock Split will result in a reduction in the Company's administrative expenses;
(d) prevailing market conditions; (e) the likely effect on the market price of
the Common Stock; and (f) other relevant factors.
Consummation of the proposed Reverse Stock Split/Forward Stock Split
will not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further action by the Stockholders. If the Board
determines to consummate a Reverse Stock Split/Forward Stock Split, the
Company will publicly announce the determination at least 10 days prior to the
Effective Date.
SHI's common stock, with a trading symbol of SIEN, is traded in the over
the counter market. During the last two fiscal years, the high and low prices
and dividends declared on common stock per share have been (in dollars):
<TABLE>
<CAPTION>
2000 1999 Dividends Declared
----------------------- ------------------------- -------------------------
High Low High Low 2000 1999
----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter....................... 1-3/8 1-1/32 1-35/64 1-19/64 -- --
Second Quarter...................... 1-3/4 1-1/16 1-3/8 3/4 -- --
Third Quarter....................... 1-5/8 1-1/8 1-7/16 7/8 -- --
Fourth Quarter...................... 1-5/8 1-5/32 1-1/4 1 -- --
</TABLE>
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The Company, as of June 30, 2000 and 1999, had 1,000,000 shares of $1.00
par value preferred stock authorized, with 0 shares issued and outstanding.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997. Using fresh-start accounting, the gain on discharge of debt
resulting from the bankruptcy proceedings was reflected on the predecessor
Company's financial statements for the period ended March 31, 1997. In addition,
the accumulated deficit of the predecessor Company at March 31, 1997, was
eliminated, and, at April 1, 1997, the reorganized Company's financial
statements reflected no beginning retained earnings or deficit. Since April 1,
1997, the Company's financial statements have been prepared as if it is a new
reporting entity and a vertical black line has been placed to separate the
pre-reorganization operating results (the "Predecessor Company") from
post-reorganization operating results (the "Reorganized Company"), since they
are not prepared on a comparable basis.
Under fresh-start accounting, all assets and liabilities were restated to
reflect their reorganization value, which approximated fair value at the date of
reorganization. The Company's management and representatives of the creditors'
committee concluded that, based on the fact that the Company has historically
incurred losses from operations and has projected minimal future operating
profits, the reorganization value of the Company (the fair value of the Company
before considering liabilities) was equivalent to the fair value of the
Company's tangible assets and that no other intrinsic value existed. As a
result, all assets and liabilities were stated at their fair value.
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<PAGE> 11
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
-------------------------------------------------- ------------------------
Three Month Nine Month
Year Ended Year Ended Year Ended Period Ended Period Ended Year Ended
June 30, June 30, June 30, June 30, March 31, June 30,
2000 1999 1998 1997 1997 1996
---------- ---------- ---------- ------------ ------------ ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from operations ......................... $ 872 $ 1,002 $ 1,410 $ 226 $ 3,235 $ 103,347
Income (loss) from operations before
reorganization items and federal income tax ... 82 52 72 (86) (5,464) (229,410)
Reorganization items--net ........................ -- -- -- -- (7,447) (21,181)
Income (loss) from operations before federal
income tax .................................... 82 52 72 (86) (12,911) (250,591)
Federal income tax expense ....................... (29) (18) (25) -- -- --
Income (loss) before extraordinary item .......... 53 34 47 (86) (12,911) (250,591)
Extraordinary gain on discharge of debt .......... -- -- -- -- 135,966 --
Net income (loss) ................................ 53 34 47 (86) 123,055 (250,591)
Basic earnings (loss) per share:
Income (loss) before extraordinary item ...... 0.01 0.01* 0.01* (0.02)* ** **
Net income (loss) ............................ 0.01 0.01* 0.01* (0.02)* ** **
Average number of shares ..................... 6,000 5,304* 4,000* 4,000* ** **
Diluted earnings (loss) per share:
Income (loss) before extraordinary item ...... 0.01 0.01* 0.01* (0.02)* ** **
Net income (loss) ............................ 0.01 0.01* 0.01* (0.02)* ** **
Average number of shares ..................... 6,106 5,333* 4,044* 4,000* ** **
</TABLE>
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------- -------------
As of June 30 As of June 30
2000 1999 1998 1997 1996
--------- --------- --------- --------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash .................................... $ 4,088 $ 4,111 $ 2,475 $ 1,941 $ 197,800
Investment in real estate ............... 4,949 4,879 4,800 4,800 --
Deferred tax assets--net ................ 1,441 1,175 -- -- --
Total assets ............................ 10,632 10,420 7,448 7,051 329,932
Liabilities subject to Chapter 11
proceedings .......................... -- -- -- -- 552,863
Total liabilities ....................... 779 931 1,305 990 592,396
Total stockholders' equity (deficit) .... 9,853 9,489 6,143 6,061 (262,464)
</TABLE>
* Per share amounts for Reorganized Company are based on shares issued or
reserved for issuance to creditors.
** Per share amounts are not meaningful due to reorganization.
-11-
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Statements contained herein that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
but not limited to statements regarding the Company's expectations, hopes,
beliefs, intentions or strategies regarding the future. Actual results could
differ materially from those projected in any forward-looking statements as a
result of a number of factors, including those detailed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
well as those set forth elsewhere herein. The forward-looking statements are
made as of the date of these financial statements and the Company undertakes no
obligation to update or revise the forward-looking statements, or to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997, and since April 1, 1997, the Company's financial statements have
been prepared as if it is a new reporting entity. See "Item 8. Financial
Statements and Supplementary Data - Accounting Policies" footnote.
The operating results of the Company during the years ended June 30, 2000,
1999, and 1998, were as follows (in thousands):
<TABLE>
<CAPTION>
As of June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Operating income (loss):
Assisted care management ................ $ 210 $ 329 $ 272
Real estate ............................. (12) (15) (29)
Other ................................... 510 502 962
-------- -------- --------
708 816 1,205
-------- -------- --------
Expenses:
General and administrative .............. (626) (764) (1,133)
-------- -------- --------
Income (loss) before federal income tax .... 82 52 72
Federal income tax expense ................. (29) (18) (25)
-------- -------- --------
Net income (loss) .................... $ 53 $ 34 $ 47
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS--YEAR ENDED JUNE 30, 2000 COMPARED WITH YEAR ENDED JUNE
30, 1999
Assisted Care Management. SHM manages and maintains an assisted care
facility in Houston, Texas under a management agreement into which it entered on
June 27, 1977 with Treemont. See "Item 1. Business--Assisted Care Facility
Management" for more information on the management agreement. Operating income
from the assisted care management operations decreased from $329,000 for the
year ended June 30, 1999, to $210,000 for the year ended June 30, 2000,
primarily due to a decrease in the management fee received by SHM. In fiscal
year 1999, SHM reported a non-recurring increase in management fee income of
$61,000 partially offset by a related increase in personnel expense of $15,000.
During fiscal year 2000, Treemont experienced lower occupancy and higher
expenses, which resulted in a lower management fee. In addition, SHM reported a
$19,000 decrease in interest income as a result of a decision by management to
maintain a smaller cash balance at the subsidiary company, $22,000 increase in
travel expenses and a $7,000 increase in franchise tax expense over the prior
fiscal year.
-12-
<PAGE> 13
In the fourth quarter of fiscal year 1998, the owners of Treemont
contacted the Company's management and requested a legal review of the
management agreement as they believed certain parts of the contract were
illegal. The Company's position is that the agreement is substantially secured
at this time by the Treemont property in Houston. The owners of Treemont have
requested that the Company consider possible changes to the contract. Management
does not believe the changes, if any are made, will have a material impact on
the Company.
In the fourth quarter of fiscal year 2000, the owners of Treemont advised
the Company that they intended to market and sell the Treemont facility. The
management agreement provides for the Company to receive a negotiated share of
the proceeds. The Company has not negotiated the terms of any contract
termination and has not been advised of any sale by the owners of Treemont.
Although the potential share of sale proceeds may partially offset the future
lost revenue, any sale would have a material impact on the Company's operations.
Real Estate. The Company's investment in real estate is owned by LLG
Lands, Inc. ("LLG"), a wholly-owned subsidiary of the Company. The real property
consists of 185.1 acres (approximately 160.9 acres net of flood plain) of
unimproved land in Allen, Texas (the "Allen property"). The southern boundary of
the Allen property is the Exchange Parkway, which provides access to the
property from Central Expressway on the west and from Highway 5 on the east. The
Allen property includes four tracts of land: one tract of approximately 37.6 net
acres zoned multi-family, one tract of approximately 89.6 net acres zoned light
industrial (formerly single-family), two tracts of approximately 29.1 net acres
zoned commercial and one tract of 4.6 net acres zoned residential. Management is
attempting to get the one residential tract rezoned as commercial. The acreage
was increased by a total of 5.7 gross acres and 13.7 net acres in fiscal year
2000 due to management's decision to reclaim a portion of the flood plain
acreage and the results of a new land survey that redefined the boundaries.
The Company attempted to increase the values of the property through the
re-zoning and relocation of zoning in certain tracts. The Company was notified
in fiscal year 1999 that its re-zoning application was approved, relocating its
multi-family tract to a more accessible location and changing the single family
zoning to light industrial. Also in fiscal year 1999, the City of Allen
constructed a city park off Exchange Parkway near the multi-family tract. In
fiscal year 2000, the Company has reviewed the real estate interests held and
has continued to market the property. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an on-going program involving the possible sale of all or part of the
Allen property or its continued development. A concept site plan and related
marketing materials have been developed for the light industrial property.
Management of the Company intends to market and/or develop the property over an
estimated period not to exceed five years.
During fiscal year 1999 and continued into fiscal year 2000, the Company
has held negotiations with third parties for the sale of certain parcels of the
Allen property, including negotiations on the light industrial property and a
portion of one of the commercial properties. Based on these negotiations,
management believes that the Company would be able to sell the Allen property
for a value in excess of the carrying amount. While the Company will continue to
consider any proposals which it, in its best judgement, considers to be
reasonable and in the interests of its shareholders, there is no way to
reasonably predict if any such proposals will ultimately lead to any real estate
transactions and when such transactions might occur.
Due to the change in zoning received on certain tracts and improved market
conditions and based on the negotiations described above, management believes
that the Company would be able to sell the Allen property for a value in excess
of the tax basis. As a result, during the year ended June 30, 1999, the Company
decreased the valuation allowance for deferred tax assets by $1.175 million and
additional paid-in capital was increased by $1.175 million to reflect potential
utilization of a portion of the consolidated net operating loss carryforward. As
a result of the new survey and the change in the flood plain acreage, the
Company decreased the valuation allowance for deferred tax assets by an
additional $266,000 and additional paid-in capital was increased by $266,000 in
fiscal year 2000. The Company reported a net deferred tax asset balance of
$1.441 million and $1.175 million as of June 30, 2000 and 1999, respectively,
included in long term assets on the Company's Consolidated Balance Sheet. Any
tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2000 will be allocated to
additional paid-in capital.
The real estate operating loss for fiscal year 2000 is consistent with
that for fiscal year 1999. Improvement costs of $70,000 related to developing
the property were capitalized during fiscal year 2000 in accordance with the
-13-
<PAGE> 14
Company's capitalization policy, as compared to $79,000 of costs that were
capitalized during fiscal year 1999. Costs related to the re-zoning, marketing
and developing the property will continue, some of which may be capitalized.
Other Income. The Company reported other operating income of $510,000 for
the year ended June 30, 2000, as compared to $502,000 for the year ended June
30, 1999, including reimbursements from the Creditors' Trust of $210,000 and
$339,000 for fiscal year 2000 and 1999, respectively, for an overhead allocation
based upon management's estimate of resources used by the Creditors' Trust.
The Company reported $80,000 of other income in fiscal year 2000 resulting
from a decrease in the long term accrued medical insurance premiums liability.
In connection with the reorganization in March 1997, the Company agreed to
assume the pre-petition liability to provide certain employees of a former
subsidiary and their spouses with medical insurance. The total amount of the
liability was estimated using a life expectancy age of 90, an annual health care
cost increase rate of approximately 5% and a discount rate of approximately
6.5%. As of June 30, 2000 and 1999, the Company was providing payments to 27 and
30 people, respectively, to be used toward the payment of insurance. During
fiscal year end 2000, the Company experienced a favorable mortality rate and, as
a result, released $80,000 of the long term liability for accrued medical
insurance premiums. Management expects this volatility to continue in the future
due to the relative small number of people covered by this liability.
The remainder of the operating income is primarily interest income of
$214,000 and $155,000 for fiscal year 2000 and 1999, respectively.
Expenses and Other. General and administrative expenses decreased from
$764,000 for the year ended June 30, 1999 to $626,000 for the year ended June
30, 2000. The decrease is primarily attributable to the directors' additional
compensation expense of $98,000 reported in fiscal year 1999 related to success
bonuses paid to the directors. See "Stock and Compensation Plans" footnote for
further information. Additionally, the Company reported decreases from the prior
year in most general and administrative expense accounts, including decreases
totaling $42,000 reported in consulting, corporate insurance and travel expense.
Reverse Stock Split/Forward Stock Split. At the annual meeting on December
13, 1999, the stockholders of SHI (the "Stockholders") approved a proposal to
amend the Company's certificate of incorporation (a) to effect, as determined by
the Board in its sole discretion, a reverse stock split of the outstanding
Common Stock on the effective date of the amendment (the "Effective Date"),
pursuant to which each 100 shares then outstanding will be converted into one
share (the "Reverse Stock Split"), and (b) to effect a forward split of the
Common Stock on the day following the effective date of the Reverse Split,
pursuant to which Common Stock then outstanding as of such date will be
converted into the number of shares of the Common Stock that such shares
represented immediately prior to the Effective Date (the "Forward Stock Split").
In lieu of issuing less than one whole share resulting from the proposed stock
split to holders of fewer than 100 shares, as the case may be, the Company would
make a cash payment based on the higher of either the stated book value of the
Company on June 30, 1999, or the closing prices of the Common Stock, as
discussed in more detail in the Company's Proxy Statement dated November 1,
1999. The Board is authorized, in its sole discretion, to effect the Reverse
Stock Split based on factors existing at the time of determination, including
(a) the availability of funds necessary to consummate the Reverse Stock Split
and the cost of such funds; (b) the market price of the Common Stock; (c) the
Board's determination of whether the Reverse Stock Split will result in a
reduction in the Company's administrative expenses; (d) prevailing market
conditions; (e) the likely effect on the market price of the Common Stock; and
(f) other relevant factors.
Consummation of the proposed Reverse Stock Split/Forward Stock Split will
not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further action by the Stockholders. If the Board
determines to consummate a Reverse Stock Split/Forward Stock Split, the Company
will publicly announce the determination at least 10 days prior to the Effective
Date.
See "Item 8. Financial Statements and Supplementary Data" for more
information.
-14-
<PAGE> 15
RESULTS OF OPERATIONS--YEAR ENDED JUNE 30, 1999 COMPARED WITH YEAR ENDED JUNE
30, 1998
Assisted Care Management. The increase in operating income of the assisted
care management operations from $272,000 for the year ended June 30, 1998, to
$329,000 for the year ended June 30, 1999, was primarily attributable to an
increase in the management fee received by SHM. In fiscal year 1998, Treemont
elected to make significant capital improvements for fire protection that were
funded by operations. These expenditures decreased the quarterly management fee
received by SHM beginning with the second quarter of fiscal year 1998 through
the first quarter of fiscal year 1999. Upon completion of the fire protection
capital improvements, Treemont reduced the accrual to actual cost incurred. As
SHM receives a fee based on Treemont's net income, the elimination of this
accrual resulted in a non-recurring increase to SHM's management fee income in
the amount of $61,000 and a related increase in personnel expense of $15,000,
for the year ended June 30, 1999.
Real Estate. LLG reported an operating loss of $15,000 for the year ended
June 30, 1999, which is slightly less than the $29,000 loss for the year ended
June 30, 1998. Improvement costs of $79,000 related to developing the property
were capitalized during fiscal year 1999 in accordance with the Company's
capitalization policy. This is in contrast to $37,000 of costs that were
expensed during fiscal year 1998.
The decrease in expenses in fiscal 1999 was slightly offset by a decrease
in interest income as a result of a decision by management to maintain a smaller
cash balance at the subsidiary company.
Other Operations. The Company reported other operating income of $502,000
for the year ended June 30, 1999, as compared to $962,000 for the year ended
June 30, 1998, including reimbursements from to the Creditors' Trust of $339,000
and $796,000 for fiscal year 1999 and 1998, respectively. The Creditors' Trust
expense reimbursements included $98,000 and $492,000 of success bonuses paid to
the Company pursuant to additional compensation plans for the directors and
officers (see "Stock and Compensation Plans") for fiscal year 1999 and 1998,
respectively, offset by a corresponding expense in both years as discussed
below. The remainder of the trust expense reimbursement from the Creditors'
Trust for both years consisted of an overhead allocation based upon management's
estimate of resources used by the Creditors' Trust.
The remaining income consisted primarily of interest income of $155,000
and $52,000 for the years ended June 30, 1999 and 1998, respectively. The
increase was due to a decision by management to maintain a larger cash balance
at the parent company and the net increase in cash of $2.102 million as a result
of the issuance of additional common stock on November 5, 1999.
Expenses and Other. General and administrative expenses were $764,000 and
$1,133,000 for the years ended June 30, 1999 and 1998, respectively. The
decrease was primarily attributable to the increased personnel expense of
$492,000 in the prior fiscal year for success bonuses for the officers as
discussed below. Additionally, fiscal year 1999 included the following
significant variances: (1) directors' additional compensation expense of $98,000
approved by the shareholders in the second quarter of fiscal 1999; (2) an
increase in the monthly retainer as a result of the officers' new retention
agreements effective December 1, 1997, for an increase of $48,000 for the year
ended June 30, 1999; and (3) additional directors fees of $25,000 as compared to
the prior year because the fiscal 1998 annual fee was paid and expensed in the
fourth quarter of fiscal 1997.
See "Item 8. Financial Statements and Supplementary Data".
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the only liabilities of the Company were accounts
payable and other accrued expenses which will be paid from current operating
cash available as of June 30, 2000.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
-15-
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Siena Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Siena
Holdings, Inc. and subsidiaries, (the "Company") as of June 30, 2000 and 1999,
and the related statements of consolidated operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended June 30, 2000.
In connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedules, Schedule I -- Condensed
Financial Information of Registrant as of June 30, 2000 and 1999 and for each of
the years in the three-year period ended June 30, 2000 and Schedule III -- Real
Estate and Accumulated Depreciation as of June 30, 2000, 1999 and 1998. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules 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 Siena
Holdings, Inc. and subsidiaries, 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. Also, in our opinion the related
financial statement schedules when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.
KPMG LLP
Dallas, Texas
August 30, 2000
-16-
<PAGE> 17
CONSOLIDATED BALANCE SHEET
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
June 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ...................................... $ 4,088 $ 4,111
Receivables .................................................... 112 138
Prepaid expenses ............................................... 42 117
-------- --------
4,242 4,366
-------- --------
Long Term Assets:
Investment in real estate ...................................... 4,949 4,879
Deferred tax assets--net ....................................... 1,441 1,175
-------- --------
6,390 6,054
-------- --------
Total Assets .............................................. $ 10,632 $ 10,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses .......................... $ 161 $ 230
Long Term Liabilities:
Accrued medical insurance premiums ............................. 516 649
Deferred compensation and fees ................................. 102 52
-------- --------
618 701
-------- --------
779 931
-------- --------
Stockholders' equity:
Preferred stock--($1.00 par value, 1,000 shares authorized,
0 shares issued and outstanding) ........................... -- --
Common stock--($.10 par value, 15,000 shares authorized,
6,000 shares issued and outstanding) ....................... 600 600
Additional paid-in capital ..................................... 9,205 8,894
Accumulated earnings (deficit) ................................. 48 (5)
-------- --------
9,853 9,489
-------- --------
Total Liabilities and Stockholders' Equity ................ $ 10,632 $ 10,420
======== ========
</TABLE>
See notes to consolidated financial statements.
-17-
<PAGE> 18
STATEMENT OF CONSOLIDATED OPERATIONS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Commissions and fees ............................ $ 360 $ 478 $ 394
Interest ........................................ 214 174 101
Trust expense reimbursement ..................... 210 339 796
Gain on sales ................................... -- -- 20
Other ........................................... 88 11 99
-------- -------- --------
872 1,002 1,410
-------- -------- --------
Expenses:
Personnel ....................................... 382 434 846
Other operating ................................. 408 516 492
-------- -------- --------
790 950 1,338
-------- -------- --------
Income from operations before federal income tax .... 82 52 72
Federal income tax expense .......................... (29) (18) (25)
-------- -------- --------
Net income .......................................... $ 53 $ 34 $ 47
======== ======== ========
Basic earnings per share:
Net income ...................................... $ 0.01 $ 0.01* $ 0.01*
Average number of shares ........................ 6,000 5,304* 4,000*
Diluted earnings per share:
Net income ...................................... $ 0.01 $ 0.01* $ 0.01*
Average number of shares ........................ 6,106 5,333* 4,044*
</TABLE>
* Average share and per share amounts are based on shares issued or reserved for
issuance to creditors.
See notes to consolidated financial statements.
-18-
<PAGE> 19
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
SIENA HOLDINGS, INC. AND SUBSIDIARIES
YEARS ENDED JUNE 30, 2000, 1999, AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Additional Accumulated
Shares Common Paid-in Earnings
Outstanding Stock Capital (Deficit) Total
----------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 ................................. 4,000 $ 400 $ 5,747 $ (86) $ 6,061
Net income for year ended June 30, 1998 .................. -- -- -- 47 47
Utilization of tax benefits of pre-reorganization net
operating loss carryforwards and deductible
temporary differences ............................... -- -- 25 -- 25
Issuance of stock options ................................ -- -- 10 -- 10
----------- ------- ---------- ----------- -------
Balance at June 30, 1998 ........................... 4,000 400 5,782 (39) 6,143
Net income for the year ended June 30, 1999 .............. -- -- -- 34 34
Utilization of tax benefits of pre-reorganization net
operating loss carryforwards and deductible
temporary differences ............................... -- -- 18 -- 18
Decrease in valuation allowance attributable to pre-
reorganization net operating loss carryforwards ..... -- -- 1,175 -- 1,175
Issuance of common stock--net ............................ 2,000 200 1,902 -- 2,102
Issuance of stock options ................................ -- -- 17 -- 17
----------- ------- ---------- ----------- -------
Balance at June 30, 1999 ........................... 6,000 600 8,894 (5) 9,489
Net income for the year ended June 30, 2000 .............. -- -- -- 53 53
Utilization of tax benefits of pre-reorganization net
operating loss carryforwards and deductible
temporary differences ............................... -- -- 29 -- 29
Decrease in valuation allowance attributable to pre-
reorganization net operating loss carryforwards ..... -- -- 266 -- 266
Issuance of stock options ................................ -- -- 16 -- 16
----------- ------- ---------- ----------- -------
Balance at June 30, 2000 ........................... 6,000 $ 600 $ 9,205 $ 48 $ 9,853
=========== ======= ========== =========== =======
</TABLE>
See notes to consolidated financial statements.
-19-
<PAGE> 20
STATEMENT OF CONSOLIDATED CASH FLOWS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net income ........................................................ $ 53 $ 34 $ 47
Adjustments to reconcile net income to cash provided (used)
by operations:
Federal income tax expense charged to additional paid-in
capital due to the utilization of pre-reorganization tax
attributes .................................................. 29 18 25
Compensation expense for stock options ......................... 16 17 10
Gain on sale ................................................... -- -- (20)
(Increase) decrease in current accounts receivable and
prepaid expenses ........................................... 101 (82) 137
Increase (decrease) in current accounts payable and accrued
expenses ..................................................... (69) (364) 378
Decrease in long term accrued medical insurance premiums ....... (133) (62) (63)
Increase in long term deferred compensation and fees ........... 50 52 --
-------- -------- --------
Net cash provided (used) by operating activities ............. 47 (387) 514
-------- -------- --------
Investing activities:
Increase in investment in real estate ............................. (70) (79) --
Maturities / sales of investments ................................. -- -- 20
-------- -------- --------
Net cash provided (used) by investing activities ............ (70) (79) 20
-------- -------- --------
Financing activities:
Issuance of common stock--net ..................................... -- 2,102 --
-------- -------- --------
Net cash provided by financing activities .................... -- 2,102 --
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ................ (23) 1,636 534
Cash and cash equivalents at beginning of year ...................... 4,111 2,475 1,941
-------- -------- --------
Cash and cash equivalents at end of year ............................ $ 4,088 $ 4,111 $ 2,475
======== ======== ========
Cash payments for:
Interest ......................................................... $ -- $ -- $ --
Federal income tax ............................................... -- -- --
Non-cash transactions:
Issuance of stock options ....................................... $ 16 $ 17 $ 10
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation. The consolidated
financial statements include the accounts of Siena Holdings, Corp. ("SHI"),
formerly Lomas Financial Corporation ("LFC"), and its subsidiaries
(collectively, the "Company"). SHI's wholly-owned, principal subsidiaries are
Siena Housing Management Corp. and LLG Lands, Inc.. Prior to October 1, 1996,
SHI's wholly-owned, principal subsidiary was Lomas Mortgage USA, Inc. ("LMUSA"),
now known as Nomas Corp.("Nomas"). As a result of the confirmation of LMUSA's
Chapter 11 reorganization plan, the Company's interest in LMUSA was extinguished
effective October 1, 1996. LFC's plan of reorganization was confirmed on October
4, 1996, but not effective until March 1997.
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997, after all material conditions required by the Plan were
satisfied. Since April 1, 1997, the Company's financial statements have been
prepared as if it is a new reporting entity. Under fresh-start accounting, all
assets and liabilities were restated to reflect their own reorganization value,
which approximated fair value at the date of reorganization. The Company's
management and representatives of the creditors' committee concluded that, based
on the fact that the Company has historically incurred losses from operations
and has projected minimal future operating profits, the reorganization value of
the Company (the fair value of the Company before considering liabilities) was
equivalent to the fair value of the Company's tangible assets and that no other
intrinsic value existed. As a result, all assets and liabilities were stated at
their fair value. See the "Reorganization" footnote.
Significant intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents. Cash and cash equivalents include cash on hand
and investments with original maturities of three months or less.
Investment in Real Estate. Real estate is carried at the fresh-start
reporting value as of March 31, 1997, adjusted for improvements capitalized in
accordance with the Company's capitalization policy. The Company continually
monitors the value of the real estate based on estimates of future cash flows.
Any amounts deemed to be impaired are charged, in the period in which such
impairment was determined. For the years ended June 30, 2000, 1999 and 1998,
there were no charges to earnings for impairment of the real estate.
Accrued Medical Insurance Premiums. In connection with the reorganization
in March 1997, the Company agreed to assume the pre-petition liability to
provide certain employees of a former subsidiary and their spouses with medical
insurance. The total amount of the liability was estimated using a life
expectancy age of 90, an annual health care cost increase rate of approximately
5% and a discount rate of approximately 6.5%. The current portion of the accrued
medical insurance premiums is included in accounts payable and accrued expenses
and the long term portion of the accrued medical insurance premiums balance is
listed under long term liabilities, both on the Company's Consolidated Balance
Sheet. The accrual will be reviewed and adjusted, as required, due to either a
change in the health care cost factors used in the accrual calculation or a
decrease in the number of people in the population.
Assisted Care Facility Management Fee. The Company, through its
wholly-owned subsidiary Siena Housing Management Corp. ("SHM"), manages and
maintains an assisted care facility in Houston, Texas under a management
agreement into which it entered on June 27, 1977 with Treemont, Inc.
("Treemont"). SHM is entitled to receive a fee under the agreement which,
subject to a required annual priority distribution of project net income to
Treemont and certain adjustments and expenditures specified by the agreement, is
equal to 3% of the facility's gross receipts and 25% of the facility's net
income.
-21-
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The compensation expense and primarily all operating expenses of SHM's
employees who provide services at the assisted care facility are funded directly
by the assisted care facility owner and are not reflected in the Consolidated
Statement of Operations, except indirectly through the management fee income
received by SHM based in part on the facility's net income. The exception is the
compensation for the operations manager of the facility which is funded directly
by SHM and included in personnel expense on the Company's Consolidated Statement
of Operations.
The Treemont management agreement is not shown as an asset on the balance
sheet of the Company because there can be no assurance that the contract will
continue in effect for an extended period and the uncertainties inherent in the
projected earnings of the facilities.
Federal Income Taxes. Income taxes have been provided in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, the deferred tax assets and liabilities are
determined based on the difference between the financial reporting and tax basis
of assets and liabilities and operating loss and tax credit carry forwards and
enacted tax rates that will be in effect for the years in which the differences
are expected to reverse. Under fresh-start reporting, benefits realized from the
utilization of pre-reorganization net operating loss carryforwards and
recognition of pre-reorganization deductible temporary differences existing at
the date of confirmation of the Joint Plan are reported as direct additions to
additional paid-in capital.
Earnings Per Share. During the fiscal year ended June 30, 1998, the
Company adopted SFAS No. 128, "Earnings Per Share," which replaced the
presentation of primary earnings per share ("EPS") with a presentation of basic
EPS and requires dual presentation of basic and diluted EPS. Adoption of SFAS
No. 128 did not have a material impact on the earnings per share.
Earnings per share were determined using the weighted average shares
issued or reserved for issuance. On November 5, 1998, the Company received $2.2
million from the Company's Chairman of the Board ($2.102 million net of stock
offering expenses) in exchange for 2 million shares of the Company's common
stock, as approved by the Company's Board of Directors on September 23, 1998.
This transaction increased the number of outstanding shares of common stock to 6
million. Effective December 1, 1997, the Company granted stock options under the
Stock Option Plan and the Directors' Stock Option Plan. The effects of
outstanding options are included in the calculation of diluted earnings per
common share to the extent that they are dilutive to earnings. The options
issued to the Directors of the Company were not included in the calculation of
diluted earnings per common share until the second quarter of fiscal year 1999
as they were not approved by the Shareholders until December 16, 1998, with a
retroactive effective date of December 1, 1997.
(remainder of page intentionally left blank)
-22-
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of net income and weighted average
common shares outstanding used to compute basic and diluted earnings per share
for the years presented:
<TABLE>
<CAPTION>
Years Ended June 30
----------------------------------------------
2000 1999 1998
-------------- ------------- --------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME:
Basic net income:
Net income............................................. $ 53 $ 34 $ 47
============== ============= ==============
Diluted net income:
Net income............................................. $ 53 $ 34 $ 47
Income effect of assumed conversions................... -- -- --
-------------- ------------- --------------
Net income + assumed conversions....................... $ 53 $ 34 $ 47
============== ============= ==============
RECONCILIATION OF WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic shares of common stock:
Weighted average common shares outstanding............. 6,000 5,304* 4,000*
Diluted shares of common stock:
Weighted average common shares outstanding............. 6,000 5,304* 4,000*
Plus: Dilutive potential common shares
SHI Non-qualified Stock Option Plans.......... 106 29* 44*
-------------- ------------- --------------
Adjusted weighted average shares outstanding........... 6,106 5,333* 4,044*
============== ============= ==============
</TABLE>
* Average shares outstanding are based on shares issued or reserved for issuance
to creditors.
Stock-Based Compensation. The Company has adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". This
statement provides a choice for the accounting of employee stock compensation
plans. A company may elect to use a fair-value methodology, under which
compensation cost is measured and recognized in the Statement of Consolidated
Operations, or continue to account for these plans under Accounting Principles
Bulletin ("APB") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. The Company has elected to continue to account for these plans
under APB No. 25. The "Stock and Compensation Plans" footnote contains a summary
of the pro forma effects to reported net income and earnings per share for the
years ended June 30, 2000, 1999 and 1998, as if the Company had elected to
account for employee stock compensation plans utilizing the fair value
methodology prescribed by SFAS No. 123.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
REORGANIZATION
On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA (collectively
the "Debtor Corporations") filed separate voluntary petitions for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the District of Delaware. The
petitioning subsidiaries were Lomas Information Systems, Inc. ("LIS") and Lomas
Administrative Services, Inc. ("LAS"). The Debtor Corporations filed two
separate plans of reorganization with the Bankruptcy Court.
-23-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
An order confirming the second amended joint plan of reorganization filed on
October 4, 1996 for LFC, LIS and LAS (the "Joint Debtors") and a stipulation and
order among the Joint Debtors and the appointed statutory committee of unsecured
creditors of LFC (the "LFC Creditors' Committee") regarding technical
modifications to the plan of reorganization and confirmation order filed on
January 27, 1997 together with the second amended joint plan of reorganization
filed on July 3, 1996 are collectively referred to herein as the "Joint Plan".
The Joint Plan was confirmed on October 4, 1996, but not effective until March
7, 1997, after certain conditions were either met or waived by the LFC
Creditors' Committee.
The Joint Plan provided for a transfer by the Company of $3 million in
cash to partially fund a litigation trust to pursue third-party claims pursuant
to the LFC/LMUSA joint litigation trust agreement among LFC and its subsidiaries
and LMUSA, dated March 6, 1997 (the "LFC/LMUSA Litigation Trust"). Subject to
certain exceptions, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. In March 2000, the
LFC Creditors' Trust received $7.1 million of net proceeds from the LFC/LMUSA
Litigation Trust resulting from litigation. There can be no assurance that the
LFC/LMUSA Litigation Trust will produce any additional proceeds which will
benefit the Creditors Trust and former creditors.
The Class 3 general unsecured creditors were to receive a combination of
cash and new common stock as settlement of their allowed claim, pursuant to the
Joint Plan. On November 12, 1997, the initial distribution date (the "Initial
Distribution Date"), $12.5 million was disbursed to the distribution agent for
the Class 3 unsecured creditors. Additional cash distributions in the amounts of
$6.2 million, $4.3 million and $8.1 million were disbursed to the distribution
agent for benefit of the Class 3 unsecured creditors on May 11, 1998, April 21,
1999, and April 24, 2000, respectively, bringing the total cash distributed
through June 30, 2000 to $31.1 million. In addition, as assets in the Creditors'
Trust are liquidated and/or the contingent obligations are favorably resolved,
additional distributions will be made to the Class 3 unsecured creditors.
As provided for in the Joint Plan and a decision of the LFC Creditors'
Committee, 4,000,000 shares of the new common stock were issued by the stock
transfer agent on the initial distribution date of November 12, 1997. For
balance sheet presentation and earnings (loss) per share, the 4,000,000 shares
were considered issued as of April 1, 1997. The process by the stock
distribution agent resulted in 3,822,121 shares of common stock actually
distributed to former creditors through March 7, 1999, the deadline for
exchanging predecessor company bonds for common stock. In the second quarter of
fiscal year 2000, the stock distribution agent distributed the final 177,879
shares, including shares held for disputed claims, to all allowed creditors that
had received prior stock distributions.
The amounts ultimately distributed to the former creditors will be solely
dependent on the success of the Company, the amounts realized from the
collection of assets and the settlement of liabilities for both the Creditors'
Trust and the LFC/LMUSA Litigation Trust.
The LFC Creditors' Trust and any proceeds from the LFC/LMUSA Litigation
Trust are solely for the benefit of the former creditors of the Joint Debtors.
Stockholders will not benefit from these trusts unless they held Class 3 -
general unsecured claims as defined in the Joint Plan.
On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. The 6 million
shares of the new common stock are restricted if the effect of a transfer would
result in an ownership increase to 4.5 percent or above of the total outstanding
shares or from 4.5 percent to a greater percentage of the total outstanding
shares, without prior approval by the board of directors as described in the
restated certificate of incorporation.
-24-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CREDITORS' TRUST
The Joint Plan established a creditors' trust (the "Creditors' Trust") in
which the Company serves as trustee. The Creditors' Trust holds the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to creditors in accordance with the terms of the Joint Plan. The
Creditors' Trust is organized for the sole purpose of liquidating the
non-reorganized assets and will terminate on October 4, 2001 unless an extension
is approved by the Bankruptcy Court. The assets and liabilities of the
Creditors' Trust are not reflected in the accompanying Consolidated Balance
Sheet as the Company is not the beneficiary of the Trust. Accordingly, revenues
and expenses related to the Creditors' Trust assets and liabilities since April
1, 1997, are not reflected in the accompanying Statement of Consolidated
Operations. The allocation of costs between the Creditors' Trust and the Company
is based on management's estimate of each entity's proportional share of costs.
Gains and losses from the Creditors' Trust are solely for the former creditors'
benefit and the Company has no risk of loss on the assets or liabilities. The
amounts ultimately distributed to the former creditors will be solely dependent
on the success of the Company, the amounts realized from the collection of
assets and the settlement of liabilities for both the Creditors' Trust and the
LFC/LMUSA Litigation Trust. Stockholders who are not former creditors of the
Joint Debtors are not beneficiaries of the Creditors' Trust. There can be no
assurance that the LFC/LMUSA Litigation Trust will produce any proceeds which
will benefit the Creditors' Trust and the former creditors.
The Company charged to the Creditors' Trust expenses of $210,000,
$339,000, and $796,000 for the years ended June 30, 2000, 1999 and 1998,
respectively, reported as trust expense reimbursement on the Company's Statement
of Consolidated Operations. The trust expense reimbursement included $98,000 and
$492,000 of success bonuses paid to the Company pursuant to compensation plans
for the directors and officers (see "Stock and Compensation Plans") for fiscal
year 1999 and 1998, respectively. The remainder of the trust expense
reimbursement from the Creditors' Trust consisted of an overhead allocation
based upon management's estimate of resources used by the Creditors' Trust.
The LFC Creditors' Trust and any proceeds from the LFC/LMUSA Litigation
Trust are solely for the benefit of the former creditors of the Joint Debtors.
Stockholders will not benefit from these trusts unless they held Class 3 -
general unsecured claims as defined in the Joint Plan. See "Reorganization"
footnote.
INVESTMENT IN REAL ESTATE
The Company's investment in real estate in the amount of $4.9 million as
of June 30, 2000 and 1999, is owned by LLG Lands, Inc. ("LLG"), a wholly-owned
subsidiary of the Company. For fresh-start reporting, the land was valued by an
independent third party using a discounted cash flow method of future projected
proceeds.
The Company's investment in real estate is owned by LLG Lands, Inc.
("LLG"), a wholly-owned subsidiary of the Company. The real property consists of
185.1 acres (approximately 160.9 acres net of flood plain) of unimproved land in
Allen, Texas (the "Allen property"). The southern boundary of the Allen property
is the Exchange Parkway, which provides access to the property from Central
Expressway on the west and from Highway 5 on the east. The Allen property
includes four tracts of land: one tract of approximately 37.6 net acres zoned
multi-family, one tract of approximately 89.6 net acres zoned light industrial
(formerly single-family), two tracts of approximately 29.1 net acres zoned
commercial and one tract of 4.6 net acres zoned residential. Management is
attempting to get the one residential tract rezoned as commercial. The acreage
was increased by a total of 5.7 gross acres and 13.7 net acres in fiscal year
2000 due to management's decision to reclaim a portion of the flood plain
acreage and the results of a new land survey that redefined the boundaries.
The Company attempted to increase the values of the property through the
re-zoning and relocation of zoning in certain tracts. The Company was notified
in fiscal year 1999 that its re-zoning application was approved, relocating its
multi-family tract to a more accessible location and changing the single family
zoning to light industrial. Also in fiscal year 1999, the City of Allen
constructed a city park off Exchange Parkway near the multi-family tract. In
fiscal year 2000, the Company has reviewed the real estate interests held and
has continued to market the property. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an
-25-
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
on-going program involving the possible sale of all or part of the Allen
property or its continued development. A concept site plan and related marketing
materials have been developed for the light industrial property. Management of
the Company intends to market and/or develop the property over an estimated
period not to exceed five years.
During fiscal year 1999 and continued into fiscal year 2000, the Company
has held negotiations with third parties for the sale of certain parcels of the
Allen property, including negotiations on the light industrial property and a
portion of one of the commercial properties. Based on these negotiations,
management believes that the Company would be able to sell the Allen property
for a value in excess of the carrying amount. While the Company will continue to
consider any proposals which it, in its best judgement, considers to be
reasonable and in the interests of its shareholders, there is no way to
reasonably predict if any such proposals will ultimately lead to any real estate
transactions and when such transactions might occur.
Due to the change in zoning received on certain tracts and improved market
conditions and based on the negotiations described above, management believes
that the Company would be able to sell the Allen property for a value in excess
of the tax basis. As a result, during the year ended June 30, 1999, the Company
decreased the valuation allowance for deferred tax assets by $1.175 million and
additional paid-in capital was increased by $1.175 million to reflect potential
utilization of a portion of the consolidated net operating loss carryforward. As
a result of the new survey and the change in the flood plain acreage, the
Company decreased the valuation allowance for deferred tax assets by an
additional $266,000 and additional paid-in capital was increased by $266,000 in
fiscal year 2000. The Company reported a net deferred tax asset balance of
$1.441 million and $1.175 million as of June 30, 2000 and 1999, respectively,
included in long term assets on the Company's Consolidated Balance Sheet. Any
tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2000 will be allocated to
additional paid-in capital.
RECEIVABLES
The Company reported receivables of $112,000 and $138,000 as of June 30,
2000 and 1999, respectively, consisting primarily of a management fee receivable
from the assisted care facility of $90,000 and $138,000, respectively, as
discussed below. The remainder of the balance as of June 30, 2000 included
$22,000 due from the Creditors' Trust for allocation of expenses (see
"Creditors' Trust" footnote).
The Company, through its wholly-owned subsidiary Siena Housing Management
Corp. ("SHM"), manages and maintains an assisted care facility in Houston, Texas
under a management agreement into which it entered on June 27, 1977 with
Treemont, Inc. ("Treemont"). SHM is entitled to receive a fee under the
agreement which, subject to a required annual priority distribution of project
net income to Treemont and certain adjustments and expenditures specified by the
agreement, is equal to 3% of the facility's gross receipts and 25% of the
facility's net income.
SHM may terminate the agreement on six months' written notice; however,
the termination date must fall on an anniversary of the date on which the
parties entered into the agreement. Treemont can only terminate the agreement
for cause or if Treemont fails to receive its required annual priority
distribution for two consecutive years. SHM has the right to extend the term of
the agreement from year to year in one-year increments until June 30, 2028.
Unless the agreement is terminated or its term is extended as described above,
the agreement will terminate on June 30, 2003. In the fourth quarter of fiscal
year 1998, the owners of Treemont contacted the Company's management and
requested a legal review of the contract as they believed certain parts of the
contract were illegal. The Company's position is that the agreement is
substantially secured at this time by the Treemont property in Houston. The
owners of Treemont have requested the Company consider possible changes to the
contract. Management does not believe the changes, if any are made, will have a
material impact on the Company.
In the fourth quarter of fiscal year 2000, the owners of Treemont advised
the Company that they intended to market and sell the Treemont facility. The
management agreement provides for the Company to receive a negotiated share of
the proceeds. The Company has not negotiated the terms of any contract
termination and has not been advised of any sale by the owners of Treemont.
Although the potential share of sale proceeds may partially offset the future
lost revenue, any sale would have a material impact on the Company's operations.
-26-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Treemont management agreement is not shown as an asset on the balance
sheet of the Company because there can be no assurance that the contract will
continue in effect for an extended period and the uncertainties inherent in the
projected earnings of the facilities.
CURRENT AND LONG TERM LIABILITIES
Accounts payable and accrued expenses consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Accrued medical insurance premiums - current portion .... $ 56 $ 62
Accrued professional fees ............................... 47 45
Accrued compensation - Other ............................ 15 27
Accounts payable - Directors or Officers ................ -- 69
Other accounts payable and accrued expenses ............. 43 27
-------- --------
$ 161 $ 230
======== ========
</TABLE>
In connection with the reorganization in March 1997, the Company agreed
to assume the pre-petition liability to provide certain employees of a former
subsidiary and their spouses with medical insurance. The total amount of the
liability was estimated using a life expectancy age of 90, an annual health care
cost increase rate of approximately 5% and a discount rate of approximately
6.5%. As of June 30, 2000 and 1999, the Company was providing payments to 27 and
30 people, respectively, to be used toward the payment of insurance. As of June
30, 2000 and 1999, the current portion of the accrual for medical insurance
premiums is $56,000 and $62,000, respectively, and the long term liability
amount, included in long term liabilities on the Company's Consolidated Balance
Sheet, is $516,000 and $649,000, respectively. During fiscal year end 2000, the
Company experienced a favorable mortality rate and, as a result, released
$80,000 of the long term liability for accrued medical insurance premiums.
Management expects this volatility to continue in the future due to the relative
small number of people covered by this liability.
On December 16, 1998, the shareholders of SHI (the "Shareholders")
approved an additional compensation plan for the non-officer directors of SHI
(the "Directors' Additional Compensation Plan") with a retroactive effective
date of December 1, 1997. The approval of the Directors' Additional Compensation
Plan authorized success bonuses in the amount of $98,000 to be paid to the
non-officer directors, as a result of transactions that occurred in fiscal year
1998, and is included in other operating expenses on the Company's Statement of
Consolidated Operations for the year ended June 30, 1999. One director was paid
in December 1998, after approval by the Shareholders. Two of the three other
non-officer directors elected to defer a portion or all of the payment pursuant
to the SHI Deferred Compensation Plan (the "Deferred Compensation Plan"),
approved by the Board of Directors on and effective as of December 16, 1998. The
bonus payments not deferred plus other directors' fees and miscellaneous
expenses total $69,000 and are included in accounts payable and accrued expenses
as of June 30, 1999.
The Deferred Compensation Plan allows the members of the Board of
Directors to defer annual director fees, meeting fees, and success bonus
payments for a given calendar year. Interest earned on the cash will be accrued
and paid to the director. A deferred compensation balance of $102,000 and
$52,000, including accrued interest, is included in long term liabilities on the
Company's Consolidated Balance Sheet as of June 30, 2000 and 1999, respectively.
See "Stock and Compensation Plans" footnote.
FEDERAL INCOME TAXES
The Company in prior years filed a consolidated federal income tax return
as the common parent of a group of corporations which included LFC and its
subsidiaries as well as LMUSA and its subsidiaries. The LMUSA Plan of
Reorganization was confirmed by the United States Bankruptcy Court on October 1,
1996 and it immediately emerged
-27-
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
with a new name, Nomas Corp. (see "Reorganization" footnote). As a result of the
LMUSA Plan, the Company ceased to own any common stock of LMUSA and its
subsidiaries as of October 1, 1996. Accordingly, SHI and its subsidiaries
thereafter no longer file a consolidated federal income tax return with Nomas
and its subsidiaries. SHI and its subsidiaries will instead continue to file its
own consolidated federal income tax return for the years ended June 30, 2000,
1999 and 1998. Various tax attributes, including net operating loss
carryforwards, have been allocated between the SHI consolidated group and the
Nomas consolidated group pursuant to Internal Revenue Service consolidated
return regulations and based upon the balances calculated as of the date that
LMUSA and its subsidiaries were deconsolidated from the Company's consolidated
group. All companies included in a consolidated federal income tax return remain
jointly and severally liable for any tax assessments based on such consolidated
returns.
Fresh-start reporting requires SHI and its subsidiaries to report federal
income tax expense when in a taxable position before utilization of any
pre-reorganization net operating loss carryforwards and recognition of any
pre-reorganization deductible temporary differences. Benefits realized in the
consolidated income tax return from utilization of pre-reorganization net
operating loss carryforwards and recognition of pre-reorganization deductible
temporary differences existing at the date of confirmation of the Plan are
reported as direct increases to additional paid-in capital under fresh-start
reporting.
SHI and its subsidiaries reported a tax benefit of $29,000, $18,000 and
$25,000 as an increase to additional paid-in capital for fiscal years ended June
30, 2000, 1999 and 1998, respectively, resulting from utilization of a portion
of the Company's pre-reorganization net operating loss carryforwards and
deductible temporary differences.
SHI and its subsidiaries had no gross deferred tax liabilities and
approximately $95 million and $95 million in gross deferred tax assets as of
June 30, 2000 and 1999, respectively, subject to an offsetting valuation
allowance of approximately $94 million and $94 million, respectively.
Essentially all of this valuation allowance is considered to be attributable to
pre-reorganization tax attributes. Accordingly, future utilization of these
pre-reorganization tax attributes on a consolidated basis will result in
adjustments to additional paid-in capital.
The Company reported a net deferred tax asset balance of $1.441 million
and $1.175 million as of June 30, 2000 and 1999, respectively, included in long
term assets on the Company's Consolidated Balance Sheet. Due to the change in
zoning received on certain tracts and improved market conditions, management
believes that the Company would be able to sell the Allen property for a value
in excess of the tax basis. As a result, during the year ended June 30, 1999,
the Company decreased the valuation allowance by $1.175 million and additional
paid-in capital was increased by $1.175 million to reflect potential utilization
of a portion of the consolidated net operating loss carryforward. As a result of
the new survey and the change in the flood plain acreage, the Company decreased
the valuation allowance for deferred tax assets by an additional $266,000 and
additional paid-in capital was increased by $266,000 in fiscal year 2000. In
addition, an adjustment of $1.5 million was made for the year ended June 30,
1999 to decrease the balance of the deferred tax assets with an equal adjustment
to the offsetting valuation allowance, to reflect the absorption of a portion of
the net operating loss carryforward against cancellation of indebtedness income
and an increase in the net operating loss carryforward attributable to the
allocation of additional loss carryforwards resulting from the deconsolidation
of the former LFC group during the fiscal year ended June 30, 1997.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which these temporary differences become deductible. Management
considers the reversal of any deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Management
believes that it is more likely than not that the Company will realize the
benefit of these deferred tax assets, net of the existing valuation allowance as
of June 30, 2000 and 1999. Any tax benefits recognized related to the valuation
allowance for pre-reorganization deferred tax assets as of June 30, 2000 will be
allocated to additional paid-in capital.
SHI and its subsidiaries had allocable consolidated tax net operating loss
carryforwards at June 30, 2000 totaling approximately $271 million. These net
operating loss carryforwards expire in the years 2003 through 2019.
Approximately $139 million of these net operating losses arose prior to the
previous 1991 reorganization of the LFC group and will therefore remain subject
to the annual limitations of Internal Revenue Code ("IRC") Section 382. At June
-28-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
30, 2000, SHI and its subsidiaries had a cumulative unused Section 382
limitation of approximately $136 million, which represents the portion of the
$139 million of pre-1991 net operating loss carryforwards which may be utilized
currently by SHI and its subsidiaries under the restrictions of Section 382. The
remaining net operating losses of approximately $132 million arose subsequent to
the 1991 reorganization and are considered to come under the "bankruptcy
exception" of Section 382(1)(5) and are therefore not subject to the annual
limitations provided by Section 382(a).
All of the net operating loss carryforwards are subject to applicable
provisions of the IRC, and approximately $263 million of the total of $271
million of net operating loss carryforwards would be limited to zero if it were
determined that SHI underwent an ownership change, within the meaning of Section
382, during the two year period following the October 1, 1996 ownership change
resulting from the Plan of Reorganization. The remaining $8 million of net
operating loss will continue to be subject to the annual limitation of IRC
Section 382, and could be further limited upon any subsequent ownership change.
The difference between actual tax expense and the amount computed by
applying the statutory rate to income from operations before federal income tax
consisted of the following components (in thousands):
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Tax expense at statutory rate ............................ $ 29 $ 18 $ 25
Book/tax difference in loss reserves
attributable to sale of assets ........................ -- -- 1,102
Adjustment to net operating loss
carryforward to reflect actual allocation of
consolidated net operating loss to SHI and
absorption against cancellation of
indebtedness income ................................... -- 1,486 (3,699)
Increase in net operating loss for fiscal years ended
June 30, 2000, 1999 and 1998 (attributable
to realization of pre-reorganization deductible
temporary differences, resulting in an increase
in the pre-reorganization net operating loss
carryover) ............................................ (17) (1,471) (1,077)
Pre-reorganization net operating loss utilized for
fiscal year ended June 30, 2000 ....................... 27 -- --
Change in valuation allowance for deferred
tax assets for current year activity and for
adjustment to net operating loss
carryforward .......................................... 7 12 3,674
Other .................................................... (17) (27) --
-------- -------- --------
Actual tax expense .................................. $ 29 $ 18 $ 25
======== ======== ========
</TABLE>
-29-
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
2000, 1999 and 1998 are presented below (in thousands):
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------------
2000 1999 1998
-------------- ------------- --------------
<S> <C> <C> <C>
Deferred tax assets:
Post-reorganization net operating loss carryover... $ 30 $ 30 $ 30
Pre-reorganization net operating loss carryover.... 94,701 94,711 94,726
Loss reserves...................................... 626 626 626
Deferred compensation.............................. 29 18 --
Non-qualified stock option expense................. 15 9 --
-------------- ------------- --------------
Total gross deferred tax assets................ 95,401 95,394 95,382
Less valuation allowance........................... (93,960) (94,219) (95,382)
-------------- ------------- --------------
Net deferred tax assets..................... $ 1,441 $ 1,175 $ --
============== ============= ==============
Deferred tax liabilities:
Net deferred tax liabilities................ $ -- $ -- $ --
============== ============= ==============
</TABLE>
STOCKHOLDERS' EQUITY
As of June 30, 2000 and 1999, the Company had 15,000,000 shares of $.10
par value common stock authorized, with 6,000,000 shares issued and outstanding.
Pursuant to the Joint Plan and a decision by the LFC Creditors' Committee,
4,000,000 shares of common stock were reserved for issuance on April 1, 1997 and
ultimately issued by the stock transfer agent on November 12, 1997. For balance
sheet presentation and earnings (loss) per share, the 4,000,000 shares were
considered issued as of April 1, 1997. The process by the stock distribution
agent resulted in 3,822,121 shares of common stock actually distributed to
former creditors through March 7, 1999, the deadline for exchanging predecessor
company bonds for common stock. In the second quarter of fiscal year 2000, the
stock distribution agent distributed the final 177,879 shares, including shares
held for disputed claims, to all allowed creditors that had received prior stock
distributions. The common stock has no preemptive or other subscription rights
and there are no conversion rights, redemption or sinking fund provisions with
respect to such shares.
Recognizing the need of the Company for additional working capital, the
Chairman of the Company offered to make a cash investment for a certain number
of shares of the Company's common stock. This offer was considered and accepted
by the Company's Board of Directors at its regularly scheduled quarterly meeting
held in Wilmington, Delaware on September 23, 1998. The Chairman did not
participate in the vote of the Board accepting this offer. On November 5, 1998,
the Company received $2.102 million, net of stock offering expenses of $98,000,
in exchange for 2 million shares of the Company's common stock. This transaction
increased the number of outstanding shares of common stock to 6 million.
During the years ended June 30, 2000 and 1999, the valuation allowance for
deferred tax assets was decreased by $266,000 and $1.175 million, respectively,
resulting in an increase to additional paid-in capital. Any tax benefits
recognized related to the valuation allowance for pre-reorganization deferred
tax assets as of June 30, 1999, will be allocated to additional paid-in capital.
SHI and its subsidiaries reported a tax benefit of $29,000, $18,000 and
$25,000 as an increase to additional paid-in capital for the years ended June
30, 2000, 1999 and 1998, respectively, resulting from the utilization of a
portion of the Company's pre-reorganization net operating loss carryforwards and
deductible temporary differences. Future utilization of these pre-reorganization
tax attributes on a consolidated basis will result in adjustments to additional
paid-in capital. See "Federal Income Taxes" footnote.
-30-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At the annual meeting on December 13, 1999, the stockholders of SHI (the
"Stockholders") approved a proposal to amend the Company's certificate of
incorporation (a) to effect, as determined by the Board in its sole discretion,
a reverse stock split of the outstanding Common Stock on the effective date of
the amendment (the "Effective Date"), pursuant to which each 100 shares then
outstanding will be converted into one share (the "Reverse Stock Split"), and
(b) to effect a forward split of the Common Stock on the day following the
effective date of the Reverse Split, pursuant to which Common Stock then
outstanding as of such date will be converted into the number of shares of the
Common Stock that such shares represented immediately prior to the Effective
Date (the "Forward Stock Split"). In lieu of issuing less than one whole share
resulting from the proposed stock split to holders of fewer than 100 shares, as
the case may be, the Company would make a cash payment based on the higher of
either the stated book value of the Company on June 30, 1999, or the closing
prices of the Common Stock, as discussed in more detail in the Company's Proxy
Statement dated November 1, 1999. The Board is authorized, in its sole
discretion, to effect the Reverse Stock Split based on factors existing at the
time of determination, including (a) the availability of funds necessary to
consummate the Reverse Stock Split and the cost of such funds; (b) the market
price of the Common Stock; (c) the Board's determination of whether the Reverse
Stock Split will result in a reduction in the Company's administrative expenses;
(d) prevailing market conditions; (e) the likely effect on the market price of
the Common Stock; and (f) other relevant factors.
Consummation of the proposed Reverse Stock Split / Forward Stock Split
will not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further action by the Stockholders. If the Board
determines to consummate a Reverse Stock Split / Forward Stock Split, the
Company will publicly announce the determination at least 10 days prior to the
Effective Date.
The Company, as of June 30, 2000 and 1999, had 1,000,000 shares of $1.00
par value preferred stock authorized, with 0 shares issued and outstanding.
STOCK AND COMPENSATION PLANS
Officer's Compensation Plan. Separate retention agreements (the "Retention
Agreements") were approved by the Board of Directors effective December 1, 1997,
for the Company's two executive officers, John P. Kneafsey - Chief Executive
Officer and W. Joseph Dryer - President. The Retention Agreements, with a five
year term, provide for the payment of: (1) a monthly retainer, (2) severance
upon early termination of the contract by the Company, and (3) a success bonus
based upon certain performance criteria of the Company and its subsidiaries and
the Company's results as trustee of the Creditors' Trust.
In accordance with the success bonus defined above, the Board of Directors
approved a bonus payable to the executive officers of the Company in fiscal year
1998 based on cash received by the Creditors' Trust in excess of the book value
upon liquidation of a subordinated promissory note held in the Creditors' Trust.
The Company received $590,000 in May 1998 for the bonus pool from the proceeds
received by the Creditors' Trust. The Board of Directors approved an aggregate
bonus amount of $492,000 for the executive officers. One payment of $197,000 was
made in May 1998 and the remaining officer was paid $295,000 in February 1999.
Officer's Stock Option Plan. The Retention Agreements also awarded stock
options to Mr. Kneafsey and Mr. Dryer pursuant to the SHI Non-qualified Stock
Option Agreements. The plan according to the SHI Non-qualified Stock Option
Agreements (the "Stock Option Plan") granted the officers options to purchase an
aggregate of 434,750 shares of the Company's common stock, with an effective
date of December 1, 1997 (the "Date of Grant").
The options granted under the Stock Option Plan have an exercise price of
$0.92 per common share and vest at a rate of twenty percent per year for five
years on the anniversary of the Date of Grant. The fair market value of the
common stock on the Date of Grant was $1.109. Upon the event of any
change-in-control of the Company (as defined) the stock options shall be 100%
vested. The stock options resulted in compensation expense of $16,000, $17,000
and $10,000, with a corresponding increase in additional paid-in capital, for
the years ended June 30, 2000, 1999 and 1998, respectively. Additional stock
options or other forms of long-term incentive compensation arrangements may from
time to time be granted by the Board of Directors.
-31-
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Director's Compensation Plan. At the annual meeting on December 16, 1998,
the shareholders of SHI (the "Shareholders") approved additional compensation
with a retroactive effective date of December 1, 1997, for the non-officer
members of the Board of Directors (the "Directors' Additional Compensation
Plan"). The Directors' Additional Compensation Plan, with a five year term,
provides for a success bonus for each non-officer director based upon certain
performance criteria of the Company and its subsidiaries and the Company's
results as trustee of the Creditors' Trust. The approval of the Directors'
Additional Compensation Plan authorized success bonuses in the amount of $98,000
to be paid to the non-officer directors, as a result of transactions that
occurred in fiscal year 1998. The expense was included in other operating
expenses on the Company's Statement of Consolidated Operations for the year
ended June 30, 1999. One director was paid in December 1998, after approval by
the Shareholders. Two of the three other non-officer directors elected to defer
a portion or all of the payment pursuant to the SHI Deferred Compensation Plan
(the "Deferred Compensation Plan"), approved by the Board of Directors on and
effective as of December 16, 1998.
The Deferred Compensation Plan allows the members of the Board of
Directors to defer annual director fees, meeting fees, and success bonus
payments for a given calendar year. Interest earned on the cash will be accrued
and paid to the director. During the year ended June 30, 2000, four of the five
directors deferred some or all of directors' fees earned. A deferred
compensation balance of $102,000 and $52,000, including accrued interest, is
included in long term liabilities on the Company's Consolidated Balance Sheet as
of June 30, 2000 and 1999, respectively.
Director's Stock Option Plan. The Non-qualified Stock Option Agreements
for the Board of Directors (the "Directors' Stock Option Plan") were also
approved by the Shareholders on December 16, 1998 (the "Date of Shareholder
Approval"). The Directors' Stock Option Plan granted each of the five directors'
the option to purchase 40,000 shares of the Company's common stock, with an
effective date of December 1, 1997 (the "Date of Grant").
The options granted under the Directors' Stock Option Plan have an
exercise price of $0.92 per common share and vest at a rate of twenty percent
per year for five years on the anniversary of the Date of Grant. The fair market
value of the common stock on the Date of Shareholder Approval was $0.84375. Upon
the event of any change-in-control of the Company (as defined) the stock options
shall be 100% vested.
The following table summarizes data relating to stock options activity for
the years ended June 30, 2000, 1999, and 1998:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------------
2000 1999 1998
-------------- ------------- --------------
<S> <C> <C> <C>
Number of shares subject to option:
Outstanding at beginning of year................ 634,750 434,750 --
Granted......................................... -- 200,000 434,750
Expired / canceled.............................. -- -- --
Exercised....................................... -- -- --
-------------- ------------- --------------
Outstanding at end of year................. 634,750 634,750 434,750
============== ============= ==============
Exercisable at end of year........................ 253,900 126,950 --
============== ============= ==============
</TABLE>
All stock options granted in the years ended June 30, 1999 and 1998 have
an exercise price of $0.92 per common share.
As allowed under the provisions of SFAS No. 123, the Company applies APB
Opinion 25 and related Interpretations in accounting for its stock option plans
and, accordingly, does not recognize compensation cost based on fair value as a
component of net income. The fair value of each option granted pursuant to the
officers' Stock Option Plan was estimated as of the grant date, using the
Black-Scholes multiple options approach prescribed by SFAS No. 123, with the
following assumptions: expected volatility of 58.58%, risk free interest rate of
6.35%, and an expected life of 10 years. The fair value of each option granted
pursuant to the Directors' Stock Option Plan was estimated as of the date of
shareholder approval, also using the Black-Scholes multiple options approach
prescribed by SFAS No. 123, with
-32-
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the following assumptions: expected volatility of 138.53%, risk free interest
rate of 4.58%, and an expected life of 9 years. If the Company had elected to
recognize compensation cost based on the fair value of the options as of the
grant date, the Company's net income as well as earnings per share would have
been reduced by the pro forma amounts (net of income tax effect) indicated in
the following table:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS):
Basic net income (loss):
Net income (As reported) ................................... $ 53 $ 34 $ 47
Pro forma compensation expense--net of tax effect .......... (62) (92) (22)
-------- -------- --------
Pro forma net income (loss) ........................... $ (9) $ (58) $ 25
======== ======== ========
Diluted net income (loss):
Net income (As reported) ................................... $ 53 $ 34 $ 47
Income effect of assumed conversions ....................... -- -- --
-------- -------- --------
Net income + assumed conversions (As reported) ............. 53 34 47
Pro forma compensation expense--net of tax effect .......... (62) (92) (22)
-------- -------- --------
Pro forma net income (loss) + assumed conversion ...... $ (9) $ (58) $ 25
======== ======== ========
EARNINGS (LOSS) PER SHARE ("EPS") INFORMATION:
Basic net income (loss):
Net income (As reported) ................................... $ 0.01 $ 0.01* $ 0.01*
Pro forma compensation expense--net of tax effect .......... (0.01) (0.02)* --
-------- -------- --------
Pro forma net income (loss) .......................... $ 0.00 $ 0.01* $ 0.01*
======== ======== ========
Common shares used in computing basic EPS: .................... 6,000 5,304* 4,000*
======== ======== ========
Diluted net income (loss):
Net income (As reported) ................................... $ 0.01 $ 0.01* $ 0.01*
Income effect of assumed conversions ....................... -- -- --
-------- -------- --------
Net income + assumed conversions (As reported) ............. 0.01 0.01* 0.01*
Pro forma compensation expense--net of tax effect .......... (0.01) (0.02)* --
-------- -------- --------
Pro forma net income (loss) + assumed conversion ...... $ 0.00 $ 0.01* $ 0.01*
======== ======== ========
Common shares used in computing diluted EPS: .................. 6,106 5,333* 4,044*
======== ======== ========
</TABLE>
* Average share and per share amounts are based on shares issued or reserved for
issuance to creditors.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance sheet, for those
that it is practicable to estimate fair value. Fair value estimates are made as
of a specific point in time based on the characteristics of the financial
instruments and the relevant market information. Where available quoted market
prices are used, and in other cases, fair values are based on estimates using
present value or other valuation techniques. These techniques involve
uncertainties and are significantly affected by the assumptions used and the
judgments made regarding risk characteristics of various financial instruments,
discount rates, estimates of future cash flows, future expected loss experience
and other factors. Changes in assumptions could significantly affect these
estimates and the resulting fair values. The derived fair value estimates cannot
be substantiated by comparison to independent markets and could not be realized
in an immediate sale of the instruments.
Under SFAS No. 107 fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. The aggregate fair value amounts presented do not
represent the underlying market value of the Company.
-33-
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Described below are the methods and assumptions used by the Company in
estimating fair values.
Cash and Cash Equivalents. The carrying amounts reported in the
consolidated balance sheet approximate the fair values and maturities are less
than three months.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
June 30,
-----------------------------------------------------------
2000 1999
---------------------------- ----------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents................. $ 4,088 $ 4,088 $ 4,111 $ 4,111
</TABLE>
LEASES
The Company incurred rental expense for office space of $10,000, $10,000
and $12,000 for the years ended June 30, 2000, 1999, and 1998, respectively, and
had no future minimum rental commitments at June 30, 2000 for noncancellable
leases.
The Company also incurred expense of $18,000, $19,000 and $14,000 for the
years ended June 30, 2000, 1999, and 1998, respectively, for the reimbursement
of office space and expenses in Maryland utilized by the Chairman and Chief
Executive Officer of the Company, and is included in other operating expenses on
the Company's Statement of Consolidated Operations. The Company is not a party
to the lease.
LEGAL PROCEEDINGS
The assisted care facility management subsidiary, SHM, is a wholly-owned
subsidiary of the Company, and conducts business in Houston, Texas pursuant to a
management agreement. SHM manages and maintains an assisted care facility in
Houston, Texas under a management agreement into which it entered on June 27,
1977 with Treemont. In the fourth quarter of fiscal year 1998, the owners of
Treemont contacted the Company's management and requested a legal review of the
management agreement as they believed certain parts of the contract were
illegal. The Company's position is that the agreement is substantially secured
at this time by the Treemont property in Houston. The owners of Treemont have
requested the Company consider possible changes to the contract. Management does
not believe the changes, if any are made, will have a material impact on the
Company. See the "Receivables" footnote for more information on the management
agreement.
In the fourth quarter of fiscal year 2000, the owners of Treemont advised
the Company that they intended to market and sell the Treemont facility. The
management agreement provides for the Company to receive a negotiated share of
the proceeds. The Company has not negotiated the terms of any contract
termination and has not been advised of any sale by the owners of Treemont.
Although the potential share of sale proceeds may partially offset the future
lost revenue, any sale would have a material impact on the Company's operations.
In December 1997, the Company received a letter from the attorney of one
of the insurance companies that carried the former directors and officers
insurance coverage, stating that there was a $1.0 million per claim retention
which must be exhausted before the insurance company was implicated. Management
did not believe that the Company was responsible for this retention amount as a
result of the Joint Plan. During the quarter ended March 31, 2000, a settlement
was consummated in this case with no liability to the Company. The Company also
obtained a release from all parties involved against any further liability.
On September 25, 1998, the Company was advised that it was named as a
Counter-Defendant in the counterclaim filed by the defendants of the LFC/LMUSA
Litigation Trust's lawsuit against certain former officers and directors of
Lomas Financial Corporation and subsidiaries. The counterclaim sought joint and
several liability. The Company responded to the counterclaim denying liability
and preserving the Company's rights and defenses. Separately the
-34-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company initiated litigation in the Delaware Bankruptcy Court to obtain a
declaration of rights and an order to turn over records. During the quarter
ended March 31, 2000, a settlement was consummated in this case with no
liability to the Company. The Company also obtained a release from all parties
involved against any further liability.
QUARTERLY RESULTS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the year ended June 30, 2000 (in dollars, except per share
amounts):
<TABLE>
<CAPTION>
Year Ended June 30, 2000
------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues................................... $ 224 $ 223 $ 194 $ 231
Income before federal income tax........... 39 12 5 26
Federal income tax expense................. (14) (4) (2) (9)
Net income............................. 25 8 3 17
Basic earnings per common share:
Net income............................ 0.00 0.00 0.00 0.00
Diluted earnings per common share:
Net income............................ 0.00 0.00 0.00 0.00
</TABLE>
Total revenues were consistent for all quarters in fiscal year 2000,
however, there were fluctuations in specific revenue categories during the year.
Management fees received by the Company's assisted care management subsidiary,
SHM, were $103,000, $107,000, $90,000 and $60,000 for the four quarters,
respectively. The decrease is primarily due to lower occupancy and higher
expenses as reported by Treemont, which resulted in a lower management fee to
SHM. See the "Receivables" footnote for further information on the Company's
assisted care management fee.
The Company reported trust expense reimbursement revenue from the
Creditors' Trust of $62,000, $65,000, $52,000 and $31,000 respectively for the
four quarters of fiscal year 2000. This expected decline in revenue represents a
decrease in the use of the Company's resources for the Creditors' Trust (see the
"Creditors' Trust" footnote). In the fourth quarter, the Company reported a
benefit in the amount of $80,000 resulting from a decrease in the long term
accrued medical premiums liability. As discussed in the "Current and Long Term
Liabilities" footnote, the liability was reduced due to a decrease in the
population of people for whom the Company provides payments to be used for
medical insurance.
Expenses of SHM, primarily personnel and travel expenses, decreased
consistent with the decrease in management fee revenue. The Company also
experienced higher general and administrative expenses in the fourth quarter,
including accounting fees, consulting fees and franchise tax expense.
-35-
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the unaudited quarterly results of
operations, as restated, for the year ended June 30, 1999 (in dollars, except
per share amounts):
<TABLE>
<CAPTION>
Year Ended June 30, 1999
------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues................................... $ 259 $ 346 $ 206 $ 191
Income (loss) before federal income tax.... 36 48 4 (36)
Federal income tax benefit (expense)....... (13) (17) (1) 13
Net income (loss)...................... 23 31 3 (23)
Basic earnings (loss) per common share:
Net income (loss)..................... 0.00* 0.01* 0.00* 0.00*
Diluted earnings (loss) per common share:
Net income (loss)..................... 0.00* 0.01* 0.00* 0.00*
</TABLE>
* Per share amounts are based on shares issued or reserved for issuance to
creditors.
Revenues were significantly higher in the second quarter primarily due
to the recognition of revenue from the Creditors' Trust that was deferred as of
June 30, 1998, pending shareholder approval of certain bonuses for non-officer
directors. Based on shareholder approval in December 1998, trust expense
reimbursement revenue of $98,000 was recognized and an offsetting expense of
$98,000 is included in other operating expense on the Company's Consolidated
Statement of Operations for the director's additional compensation. See the
"Current and Long Term Liabilities" and "Stock and Compensation Plans" footnotes
for further information.
Management fees received by the Company's assisted care management
subsidiary, SHM, were $131,000, $148,000, $116,000 and $83,000 for the first
through fourth quarters, respectively. The second quarter included a non-
recurring increase in revenue of $61,000 as a result of an adjustment to the
management fee received by SHM. The management fee received involves a
calculation based on the gross receipts and net income of the assisted care
facility in Houston, Texas. The billings were low in the fourth quarter related
to a decrease in occupancy. For more information on the management fee, refer to
the "Receivables" footnote.
Consulting, accounting, and public reporting expenses combined were
$5,000, $12,000, $30,000 and $83,000 for each quarter, respectively. The third
and fourth quarters were higher as a result of the tax, audit and financial
accounting services for the calendar year tax return and the fiscal year end
audit, including an accrual for the annual report and SEC filing services. These
expenses were slightly offset by franchise tax and directors' fees expense that
were higher in the first two quarters as compared to the final two quarters of
the fiscal year.
INDUSTRY SEGMENT DATA OF OPERATIONS
In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which requires that
companies disclose segment data on a basis that is used internally by management
for evaluating segment performance and allocating resources to segments. The
Company has two reportable segments: (1) assisted care management, which
receives a fee for managing and maintaining an assisted care facility in
Houston, Texas, and (2) real estate investment and development. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. See the "Significant Accounting Policies"
footnote for more information. The Company's management evaluates performance of
each segment based on profit and loss from operations excluding allocation of
corporate overhead expenses and interest income.
The following table summarizes the Company's identifiable assets by
segment as of June 30, 2000 and 1999 (in thousands):
-36-
<PAGE> 37
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Identifiable assets:
Assisted care facility management (including receivable from
parent company eliminated in consolidation) .................... $ 246 $ 717
Real estate ........................................................ 4,950 4,882
------------- -------------
5,196 5,599
------------- -------------
Reconciling items:
Corporate cash, receivables and prepaid expenses (including
receivable from subsidiary eliminated in consolidation) ..... 4,229 4,231
Deferred tax assets--net ........................................ 1,441 1,175
Elimination of intercompany receivables ......................... (234) (585)
------------- -------------
Total assets per Consolidated Balance Sheet ............................. $ 10,632 $ 10,420
============= =============
</TABLE>
The following table summarizes the Company's segment data of operations
for the years ended June 30, 2000, 1999, and 1998 (in thousands):
<TABLE>
<CAPTION>
Years Ended June 30
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Assisted care management ................................ $ 360 $ 498 $ 423
Real estate ............................................. 2 -- 22
-------- -------- --------
362 498 445
-------- -------- --------
Reconciling items:
Corporate interest income ............................ 214 155 59
Trust expense reimbursement .......................... 210 339 796
Other corporate revenue .............................. 86 10 110
-------- -------- --------
510 504 965
-------- -------- --------
Total revenues per Statement of Consolidated Operations .... $ 872 $ 1,002 $ 1,410
======== ======== ========
Operating income (loss):
Assisted care management ................................ $ 210 $ 329 $ 272
Real estate ............................................. (12) (15) (29)
-------- -------- --------
198 314 243
-------- -------- --------
Reconciling items:
Corporate interest income ............................ 214 155 52
Trust expense reimbursement .......................... 210 339 796
Unallocated corporate expenses ....................... (626) (763) (1,133)
Other ................................................ 86 7 114
-------- -------- --------
(116) (262) (171)
-------- -------- --------
Income from operations before federal income tax
per Statement of Consolidated Operations ............... $ 82 $ 52 $ 72
======== ======== ========
</TABLE>
-37-
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SIENA HOLDINGS, INC.
CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................................ $ 4,085 $ 4,104
Receivables (including $80 and $10, respectively, receivables from
subsidiaries eliminated in consolidation) .............................. 102 10
Prepaid expenses ......................................................... 42 117
-------- --------
4,229 4,231
-------- --------
Long Term Assets:
Investments (including $5,068 and $5,557, respectively, investments
in subsidiaries eliminated in consolidation) .......................... 5,068 5,557
Deferred tax assets--net ................................................ 1,441 1,175
-------- --------
6,509 6,732
-------- --------
Total Assets ...................................................... $ 10,738 $ 10,963
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses (including $154 and $591,
respectively, payables to subsidiaries eliminated in consolidation) .... $ 267 $ 773
Long Term Liabilities:
Accrued medical insurance premiums ....................................... 516 649
Deferred compensation and fees ........................................... 102 52
-------- --------
618 701
-------- --------
885 1,474
-------- --------
Stockholders' equity:
Preferred stock--($1.00 par value, 1,000 shares authorized, 0 shares
issued and outstanding) ............................................... -- --
Common stock--($.10 par value, 15,000 shares authorized, 6,000 shares
issued and outstanding)................................................ 600 600
Additional paid-in capital ................................................ 9,205 8,894
Accumulated earnings (deficit) ............................................ 48 (5)
-------- --------
9,853 9,489
-------- --------
Total Liabilities and Stockholders' Equity ........................ $ 10,738 $ 10,963
======== ========
</TABLE>
-38-
<PAGE> 39
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(CONTINUED)
SIENA HOLDINGS, INC.
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Interest ........................................ $ 214 $ 155 $ 52
Trust expense reimbursement ..................... 210 339 796
Gain on sales ................................... -- -- 20
Other ........................................... 86 11 90
-------- -------- --------
510 505 958
-------- -------- --------
Expenses:
Personnel ....................................... 288 288 727
Other operating ................................. 338 476 406
-------- -------- --------
626 764 1,133
-------- -------- --------
Loss from operations before income from
subsidiaries and federal income tax .......... (116) (259) (175)
Equity in income of subsidiaries ................ 126 311 247
Income from subsidiaries - federal tax share .... 72 -- --
-------- -------- --------
Income before federal income tax .................... 82 52 72
Federal income tax expense .......................... (29) (18) (25)
-------- -------- --------
Net income .................................. $ 53 $ 34 $ 47
======== ======== ========
</TABLE>
Note: Pursuant to an existing tax sharing agreement, the Company began
allocating federal income tax expense to one of its subsidiaries,
Siena Housing Management, on January, 1, 2000.
-39-
<PAGE> 40
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(CONTINUED)
SIENA HOLDINGS, INC.
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net income ........................................................ $ 53 $ 34 $ 47
Adjustments to reconcile net income to cash provided (used)
by operations:
Federal income tax utilization of pre-reorganization tax
attributes ................................................. 29 18 25
Compensation expense for stock options .......................... 16 17 10
Gain on sales ................................................... -- -- (20)
Equity in income of subsidiaries ................................ (126) (311) (247)
Income from subsidiaries - federal tax share .................... (72) -- --
(Increase) decrease in current assets and prepaid expenses -
excluding receivables from subsidiaries ..................... 53 (63) 15
Increase (decrease) in current accounts payable and accrued
expenses - excluding payables to subsidiaries ............... (69) (344) 390
Net (decrease) increase in receivables from and payables
to subsidiaries - net of federal tax share .................... (435) 565 --
Decrease in long term accrued medical insurance
premiums .................................................... (133) (62) (63)
Increase in long term deferred compensation and fees ............ 50 52 --
-------- -------- --------
Net cash provided (used) by operating activities ............. (634) (94) 157
-------- -------- --------
Investing activities:
Net maturities/sales of investments ............................... -- -- 20
Return of capital from investments in subsidiaries ................ 615 -- 1,679
-------- -------- --------
Net cash provided by investing activities ................... 615 -- 1,699
-------- -------- --------
Financing activities:
Issuance of common stock--net ..................................... -- 2,102 --
-------- -------- --------
Net cash provided by financing activities .................... -- 2,102 --
-------- -------- --------
Net increase (decrease) in cash and cash equivalents .................. (19) 2,008 1,856
Cash and cash equivalents at beginning of year ........................ 4,104 2,096 240
-------- -------- --------
Cash and cash equivalents at end of year .............................. $ 4,085 $ 4,104 $ 2,096
======== ======== ========
Non-cash transactions:
Issuance of stock options ......................................... $ 16 $ 17 $ 10
</TABLE>
Note: Pursuant to an existing tax sharing agreement, the Company began
allocating federal income tax expense to one of its subsidiaries, Siena
Housing Management, on January, 1, 2000.
-40-
<PAGE> 41
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
Initial cost to Company Cost capitalized to acquisition
------------------------ -------------------------------
Buildings and
Description Encumbrances Land improvements Improvements Carrying costs
----------------------------- ------------ --------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
185.1 gross acres of
unimproved land in Allen,
Texas (the "Allen
property")................. -- $ 4,800* $ -- $ 149 $ --
----------------------------- ------------ --------- ------------- ------------ --------------
<CAPTION>
Gross amount at which carried
at close of
June 30, 2000(**)
-----------------------------
Life on which
depreciation
in latest
income
Buildings and Accumulated Date of Date statements is
Description Land improvements Total depreciation construction acquired computed
----------------------------- -------- ------------- ------- ------------ ------------ ---------- -------------
185.1 gross acres of <C> <C> <C>
unimproved land in Allen,
Texas (the "Allen
property")................. $ 4,949 $ -- 4,949 $ -- N/A 3/5/97 N/A
----------------------------- -------- ------------- ------- ------------ ------------ ---------- -------------
</TABLE>
The changes in the investment in real estate is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended June 30
---------------------------------------------
2000 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
$ 4,879 $ 4,800 $ 4,800
Additions during the year:
Additions through foreclosure............... -- -- --
Other acquisitions.......................... -- -- --
Improvements, etc. ......................... 70 79 --
Other....................................... -- -- --
------------ ------------- ------------
70 79 --
------------ ------------- ------------
Deductions during the year:
Cost of real estate sold.................... -- -- --
Other....................................... -- -- --
------------ ------------- ------------
-- -- --
------------ ------------- ------------
$ 4,949 $ 4,879 $ 4,800
============ ============= ============
</TABLE>
* The fair market value of the property on the date the Company adopted
fresh-start accounting (see "Item 8. Financial Statements and Supplementary
Data--Significant Accounting Policies" footnote).
** The aggregate cost for Federal income tax purposes of the Allen property at
June 30, 2000, 1999 and 1998 is $6.74 million, $6.67 million and $6.59
million, respectively.
-41-
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-42-
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE REGISTRANT
The Company held its Annual Meeting of Stockholders on December 13, 1999,
and elected the following five directors to serve until the next annual meeting
and until their successors are elected and qualified:
JOHN P. KNEAFSEY -- Chairman and Chief Executive Officer of the Company,
since October 1996; President, Pathfinder Advisory Services, Inc., since
1997; Senior Vice President - Investments, Prudential Securities, Inc.,
from 1980 to 1997. Age 53.
ERIK M. BODOW -- Chief Administration Officer, GEM Capital Management,
Inc., from 1999, Senior Vice President, Sagner/Marks, Inc., from 1992 to
1999; Vice President, First National Bank of Chicago, from 1985 to 1992.
Age 57.
JAMES D. KEMP -- Principal, Antaean Solutions, LLC, since 1997; President
and Chief Executive Officer, The Trust Company, N.A., from 1996 to 1997;
President and Chief Executive Officer, Kemp Consulting, from 1992 to 1997;
President, Ameritrust Texas, N.A., from 1980 to 1992. Age 53.
MATTHEW S. METCALFE -- Chairman and President, Airland Corporation;
Director Emeritus, Amsouth Bancorporation; Member, State of Alabama Oil
and Gas Board; Chairman, Mobile Airport Authority. Age 69.
FRANK B. RYAN -- Professor of Mathematics at Rice University (currently on
leave); Director, Danielson Holding Corporation; Director, Texas Micro,
Inc.; Director, America West Airlines, Inc. Age 64.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following two executive officers were approved by the Board of
Directors and given separate five year retention agreements effective December
1, 1997:
JOHN P. KNEAFSEY -- Chief Executive Officer of the Company. See
information under "Directors of the Registrant" above.
W. JOSEPH DRYER -- President and Chief Accounting Officer of the Company
since October 4, 1996, prior thereto, Senior Vice President from January
1995; President and Director of Russian River Energy Co. from 1992 to
1994; President and Director of Geothermal Resources International, Inc.
since 1994, prior thereto, an officer since 1984; and President of
Worldcorp, Inc. since May, 2000. Age 45.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the information contained in the Proxy Statement relating to the Company's
fiscal year 2000 Annual Meeting of Stockholders which will be filed with the SEC
no later than 120 days after the close of the fiscal year ended June 30, 2000.
-43-
<PAGE> 44
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to the information contained in the Proxy Statement relating to the Company's
fiscal year 2000 Annual Meeting of Stockholders which will be filed with the SEC
no later than 120 days after the close of the fiscal year ended June 30, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
-44-
<PAGE> 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
(i) The following consolidated financial statements are included in
Item 8.
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Consolidated Balance Sheet--June 30, 2000 and 1999.......................................... 17
Statement of Consolidated Operations--Years Ended June 30, 2000, 1999 and 1998.............. 18
Statement of Consolidated Stockholders' Equity--Years Ended June 30, 2000, 1999
and 1998................................................................................. 19
Statement of Consolidated Cash Flows--Years Ended June 30, 2000, 1999 and 1998.............. 20
Notes to Consolidated Financial Statements.................................................. 21
(ii) The following financial statement schedules are included in Item 8:
Schedule I--Condensed Financial Information of Registrant................................... 38
Schedule III--Real Estate and Accumulated Depreciation...................................... 41
All other schedules are omitted as the required information is
inapplicable or the information is presented in the Consolidated
Financial Statements or related notes.
</TABLE>
Financial statements (and summarized financial information) of
unconsolidated subsidiaries and 50-Percent- or-Less-Owned Persons
accounted for by the equity method are not presented because they do not,
individually or in aggregate, constitute a significant subsidiary.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
(21) List of subsidiaries of Registrant.
(27) Financial Data Schedules (submitted to the Securities and Exchange Commission for its
information).
</TABLE>
(c) Reports on Form 8-K:
None.
-45-
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SIENA HOLDINGS, INC.
Registrant
Date: September 26, 2000 /s/ W. JOSEPH DRYER
-------------------------------
W. Joseph Dryer
Principal Accounting Officer
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.
Date: September 26, 2000 /s/ W. JOSEPH DRYER
-------------------------------
W. Joseph Dryer
President
<PAGE> 47
Pursuant to the requirements of the Securities Exchange Act of 1934 and in
response to General Instruction D to Form 10-K, this report has been signed
below on behalf of the registrant by the following directors on the dates
indicated.
Date: September 26, 2000 By /s/ JOHN P. KNEAFSEY
----------------------------------
(John P. Kneafsey, Chairman)
Date: September 26, 2000 By /s/ ERIK M. BODOW
----------------------------------
(Erik M. Bodow)
Date: September 26, 2000 By /s/ JAMES D. KEMP
----------------------------------
(James D. Kemp)
Date: September 26, 2000 By /s/ MATTHEW S. METCALFE
----------------------------------
(Matthew S. Metcalfe)
Date: September 26, 2000 By /s/ FRANK B. RYAN
----------------------------------
(Frank B. Ryan)
<PAGE> 48
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number DESCRIPTION
------- -----------
<S> <C>
(21) List of subsidiaries of Registrant.
(27) Financial Data Schedules (submitted to the Securities and Exchange Commission for its
information).
</TABLE>
