SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from _________________ to _________________
Commission File Number: 0-24094
LBP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3764357
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Mamaroneck Avenue, White Plains, N.Y. 10601
(Address of principal executive offices)
(Zip Code)
(914) 421-2545
Registrant's Telephone Number including Area Code
(Former name, former address and former fiscal year,
if changed since last year)
Indicate by check marks 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 such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,937,390 shares of common
stock as of August 4, 2000
<PAGE>
LBP, INC.
INDEX TO FINANCIAL STATEMENTS FILED WITH
QUARTERLY REPORT OF REGISTRANT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
(UNAUDITED)
------------------------------------------------------
Page
----
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED BALANCE SHEETS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-10
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11-14
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK 15
PART II - OTHER INFORMATION
Not Applicable
SIGNATURES 16
<PAGE>
LBP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------- ----------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Continuing Operations:
Investment income $ 1,565 $ 1,128 $ 650 $ 390
General and administrative expenses 443 299 157 126
------- -------- -------- -------
Operating income 1,122 829 493 264
Imputed interest expense -- 78 -- 39
------- -------- -------- -------
Income before income taxes 1,122 751 493 225
Provision for income taxes 382 290 168 92
------- -------- -------- -------
Net income $ 740 $ 461 $ 325 $ 133
======= ======== ======== =======
Net income per common share:
Basic $ .15 $ .09 $ .07 $ .03
======= ======== ======== =======
Diluted $ .15 $ .09 $ .07 $ .03
======= ======== ======== =======
Weighted average common shares outstanding:
Basic 4,937 4,910 4,937 4,932
Diluted 4,949 4,931 4,949 4,959
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
LBP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
(In thousands, except shares and per share amounts)
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents (Note 1) $ 8,741 $ 7,326
Investments in securities (Note 2) 20,157 20,525
Prepaid expenses and other current assets 777 1,034
Discontinued operations - Prime Acquisition Corp., net (Note 1) 25 221
-------- ---------
Total assets $ 29,700 $ 29,106
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, accrued expenses and other current liabilities $ 565 $ 153
Discontinued operations - White Metal Rolling and Stamping, Inc., net (Note 4) 337 895
-------- ---------
Total current liabilities 902 1,048
-------- ---------
Commitments and Contingencies (Notes 1 and 4)
Stockholders' equity
Common stock par value $.01 per share: authorized 20,000,000 shares;
issued 5,026,390 shares 50 50
Paid in capital 20,727 20,727
Retained earnings 8,285 7,545
-------- ---------
29,062 28,322
Treasury stock at cost -- 89,000 shares (264) (264)
-------- ---------
Total stockholders' equity 28,798 28,058
-------- ---------
Total liabilities and stockholders' equity $ 29,700 $ 29,106
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
LBP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(In thousands)
Cash flows from operating activities:
Net income $ 740 $ 461
Adjustments to reconcile net income to cash flows
from operating activities:
Imputed interest -- 78
(Gain) loss on sale of investment in trading securities (222) 201
Changes in prepaid expenses and other assets 257 (526)
Changes in accounts payable, accrued expenses and other current liabilities 412 (417)
--------- ---------
Net cash flows provided by (used for) operating activities
of continuing operations 1,187 (203)
--------- ---------
Cash flows from discontinued operations:
Change in unliquidated net liabilities and assets (362) (5,066)
---------- ---------
Net cash flows used for discontinued operations (362) (5,066)
---------- ---------
Cash flows from investing activities:
Proceeds from sale of securities 590
Investments in securities -- (1,204)
--------- ---------
Net cash flows provided by (used for) investing activities 590 (1,204)
--------- ---------
Cash flows from financing activities:
Exercise of employee stock options -- 256
--------- --------
Net cash flows provided by financing activities -- 256
--------- --------
Net increase (decrease) in cash 1,415 (6,217)
Cash and equivalents at beginning of period 7,326 12,981
--------- --------
Cash and equivalents at end of period $ 8,741 $ 6,764
========= ========
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Income taxes $ -- $ 5,659
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
LBP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Treasury Paid-in Retained Stockholders'
Stock Stock Capital Earnings Equity
----------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1999 $ 50 $ (264) $ 20,727 $ 7,545 $ 28,058
Net income for six months ended June 30, 2000 740 740
---- ------- --------- -------- ---------
Balance - June 30, 2000 $ 50 $ (264) $ 20,727 $ 8,285 $ 28,798
==== ======= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
LBP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DISCONTINUED OPERATIONS - PRIME ACQUISITION CORP.
In connection with the sale of substantially all of the assets of the
Company's wholly-owned subsidiary, Leslie-Locke, Inc., the name of Leslie
Building Products, Inc. was changed to LBP, Inc. and the name of Leslie-Locke,
Inc. was changed to Prime Acquisition Corp. ("Prime").
On June 18, 1998, effective as of May 31, 1998, Prime sold substantially
all its net assets and business for approximately $44 million in cash. Prime
realized an after-tax gain of $12.6 million from the sale, and after payment of
its outstanding debt, closing costs and income taxes, Prime had cash and
investments of approximately $28 million.
Prime agreed to indemnify the buyer as follows: (i) for up to $4 million
of losses incurred by the buyer during the two years following the closing
resulting from breaches of representations and warranties made by Prime, (ii)
for up to $4 million of losses incurred by the buyer during the four years
following the closing resulting from certain environmental matters, and (iii)
for losses incurred by the buyer resulting from liabilities of Prime not assumed
by the buyer. In connection with Prime's indemnification obligations, Prime
deposited in escrow an aggregate of $25.4 million for a period of two years
following the closing. On June 20, 2000 the escrow funds were released to Prime,
since there were no claims by the buyer.
Prime was the sole operating subsidiary of the Company, and the Company
and its subsidiaries do not now conduct any operations. The Company will
continue to incur expenses associated with the management of its assets, its
financial reporting obligations, and other administrative functions, as well as
acquisition searches and related costs.
The Board of Directors of the Company adopted a resolution regarding the
Company's intent to be engaged in a business other than that of investing,
reinvesting or trading in securities, as soon as it is reasonably possible, and
that the proceeds from the sale of the assets of Prime be utilized to acquire
other businesses.
The sale did not include the assets and liabilities of White Metal Rolling
and Stamping Corp.("White Metal"), Prime's discontinued ladder manufacturing
subsidiary. See Note 4.
7
<PAGE>
LBP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. INVESTMENT IN SECURITIES
On December 22, 1998, the Company's wholly-owned subsidiary, Prime,
acquired, at a cost of $20 million, 800,000 shares of 10.5 percent Cumulative
Convertible Preferred Stock, having a liquidation preference of $25 per share,
of Impac Mortgage Holdings, Inc., ("Impac"). The shares were originally
convertible into Common Stock of Impac (symbol "IMH") at $4.95 per share, or an
aggregate of 4,040,000 shares. The terms of the acquisition provided for a
downward adjustment of the conversion price if, among other things, certain
earning levels were not attained by Impac through June 30, 1999. Subsequently,
the conversion rate was adjusted to $4.72 per share, or an aggregate of
4,237,288 shares of common stock of IMH, representing approximately 15 percent
of IMH common stock.
In addition, Prime is entitled to receive as a dividend each quarter, in
cash or Impac common stock, the higher of 10.5 percent per annum or the dividend
paid to common stockholders calculated on the shares of common stock into which
the preferred stock is convertible. The Company has recorded this investment at
its cost of $20,157,000. The Company believes that the book value of this
investment does not exceed fair value at June 30, 2000.
At December 31, 1999 the Company owned 90,530 shares of the common stock
of The North Face, Inc. which had been written down to its market value of
$368,000. The original cost of these shares, considered to be trading
securities, was $1.1 million. These shares were sold in February 2000 for
$590,000, resulting in a gain of $222,000 in the first quarter of 2000.
These investments were made in order to enhance stockholder value while
efforts to acquire an operating company continue. In that regard, the Board of
Directors of the Company reaffirmed previously adopted resolutions regarding its
intent to be engaged in a business other than that of investing, reinvesting or
trading in securities, as soon as it is reasonably possible.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Consolidated Financial Statements presented herein have been prepared
by the Company in accordance with the accounting policies described in its
December 31, 1999 Annual Report on Form 10-K and should be read in conjunction
with the Notes to Consolidated Financial Statements which appear in that report.
In the opinion of management, the information furnished in this Form 10-Q
reflects all adjustments necessary for a fair statement of the results of
operations as of and for the three and six month periods ended June 30, 2000 and
1999. All such adjustments are of a normal recurring nature. The Consolidated
Financial Statements have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include some information and notes necessary to
conform with annual reporting requirements.
8
<PAGE>
LBP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Taxes
The Company and its subsidiaries file separate Federal and state income
tax returns. The Company's subsidiaries generally file separate state income tax
returns on the same basis as the Federal income tax returns.
4. DISCONTINUED OPERATIONS - WHITE METAL ROLLING AND STAMPING CORP.
In fiscal 1990, the Company discontinued the operations of White Metal
Rolling and Stamping Corp. ("White Metal"), the Company's ladder manufacturing
subsidiary. All manufacturing operations of White Metal ceased as of January 31,
1991 and substantially all of its remaining assets have since been liquidated.
On September 30, 1994, White Metal filed a voluntary petition seeking
liquidation under the provisions of chapter 7 of the United States Bankruptcy
Code. The liabilities of White Metal were primarily product liability claims,
and related costs, resulting from its discontinued ladder manufacturing
business. While the Company was named as a defendant in certain actions
commenced in connection with these claims, the Company has not been held
responsible, and the Company disclaims any liability for the obligations of
White Metal. There can be no assurance that in the future any claim brought
against White Metal which is also asserted against the Company, will not result
in liability. However, the Company intends to vigorously defend any White Metal
claim asserted against it.
On May 7, 1996, the Company and its subsidiary, Prime, were served with a
summons and complaint in an adversary proceeding commenced by the chapter 7
trustee of White Metal, alleging claims aggregating $10.6 million (the
"Adversary Proceeding"). The Company's former parent company, Drew Industries
Incorporated ("Drew") and its subsidiary Kinro, Inc. ("Kinro") were also served
in the Adversary Proceeding. Pursuant to a Consent Order Settling and
Compromising Claims, dated January 27, 2000 (the "Settlement"), by and among the
trustee, on behalf of White Metal, the Company, Prime, Kinro and Sears Roebuck &
Co., Inc. ("Sears"), White Metal's largest creditor, the parties agreed to
settle the Adversary Proceeding in consideration for payment by the defendants
to White Metal's estate in the aggregate amount of $672,000, of which $485,500
was paid by Prime. The defendants, the trustee and Sears agreed to release each
other, and their respective affiliates. In connection with the Settlement, the
Adversary Proceeding was terminated.
In anticipation of the Settlement, the Company's previously recorded loss
on disposal of White Metal was reduced in the fourth quarter of 1999, resulting
in income from discontinued operations of $3,270,000. Likewise, imputed interest
will no longer be recorded on the outstanding balance of this reserve.
9
<PAGE>
LBP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Weighted Average Common Shares Outstanding
Net income per diluted common share reflects the dilution of the weighted
average common shares by the assumed issuance of common stock pertaining to
stock options. The numerator, which is equal to net income, is constant for both
the basic and diluted earnings per share calculations. Weighted average common
shares outstanding-diluted is calculated as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ --------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding - basic 4,937 4,910 4,937 4,932
Assumed issuance of common stock pertaining to stock options 12 21 12 27
----- ----- ----- -----
Weighted average common shares outstanding - diluted 4,949 4,931 4,949 4,959
===== ===== ===== =====
</TABLE>
10
<PAGE>
LBP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In connection with the sale of substantially all of the assets of the
Company's wholly-owned subsidiary, Leslie-Locke, Inc., the name of Leslie
Building Products, Inc. was changed to LBP, Inc. and the name of Leslie-Locke,
Inc. was changed to Prime Acquisition Corp. ("Prime").
On June 18, 1998, effective as of May 31, 1998, Prime sold substantially
all its net assets and business for approximately $44 million in cash. Prime
realized an after-tax gain of $12.6 million from the sale, and after payment of
its outstanding debt, closing costs and income taxes, Prime had cash and
investments of approximately $28 million.
The Board of Directors of the Company adopted a resolution regarding the
Company's intent to be engaged in a business other than that of investing,
reinvesting or trading in securities, as soon as it is reasonably possible, and
that the proceeds from the sale of the assets of Prime be utilized to acquire
other businesses.
RESULTS OF OPERATIONS
Prime was the sole operating subsidiary of the Company, and the Company
and its subsidiaries do not now conduct any operations. The net proceeds of the
sale of Prime's assets have been invested in certain common and preferred stocks
as well as in liquid U.S. Treasury money market accounts. The Company's income
consists primarily of dividend income from these investments. The Company
continues to incur expenses associated with the management of its assets, its
financial reporting obligations, and other administrative functions. In
addition, costs may periodically be incurred in connection with acquisition
searches and other professional services. For the six months ended June 30,
2000, general and administrative expenses included approximately $73,000
(including $60,000 in the first quarter ended March 31, 2000) incurred in
conducting due diligence relating to possible acquisitions. Most of these
expenses were related to an acquisition target which subsequently accepted a
higher offer. In addition, the Company incurred expenses of approximately
$79,000 (including $60,000 in the first quarter) in connection with an
application made to the Securities and Exchange Commission as described below.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In June 1999, the FASB issued
SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133" which
delays the effective date of SFAS No. 133 to fiscal years beginning after June
15, 2000. In June 2000, the FASB issued SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" which amends some of the
provisions of FASB 133. The Company plans to adopt the provisions of SFAS 133
and SFAS 138 in the first quarter of 2001. The Company is in the process of
determining what the effect of SFAS 133 and SFAS 138 will be on earnings and
financial position.
LIQUIDITY AND CAPITAL RESOURCES
Sale of Assets
In connection with the June 1998 sale of Prime's assets, Prime agreed to
indemnify the buyer as follows: (i) for up to $4 million of losses incurred by
the buyer during the two years following the closing resulting from breaches of
representations and warranties made by Prime, (ii) for up to $4 million of
losses incurred by the buyer during the four years following the closing
resulting from certain environmental matters, and (iii) for losses incurred by
the buyer resulting from liabilities of Prime not assumed by the buyer. In
connection with Prime's indemnification obligations, Prime deposited in escrow
an aggregate of $25.4 million for a period of two years following the closing.
On June 20, 2000 the escrow funds were released to Prime, since there were no
claims by the buyer.
11
<PAGE>
LBP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Investment in Securities
On December 22, 1998, the Company's wholly-owned subsidiary, Prime,
acquired, at a cost of $20 million, 800,000 shares of 10.5 percent Cumulative
Convertible Preferred Stock, having a liquidation preference of $25 per share,
of Impac Mortgage Holdings, Inc., ("Impac"). The shares were originally
convertible into Common Stock of Impac (symbol "IMH") at $4.95 per share, or an
aggregate of 4,040,000 shares. The terms of the acquisition provided for a
downward adjustment of the conversion price if, among other things, certain
earning levels were not attained by Impac through June 30, 1999. Subsequently,
the conversion rate was adjusted to $4.72 per share, or an aggregate of
4,237,288 shares of common stock of IMH, representing approximately 15 percent
of IMH common stock.
In addition, Prime is entitled to receive as a dividend each quarter, in
cash or Impac common stock, the higher of 10.5 percent per annum or the dividend
paid to common stockholders calculated on the shares of common stock into which
the preferred stock is convertible. The Company has recorded this investment at
its cost of $20,157,000. The Company believes that the book value of this
investment does not exceed fair value at June 30, 2000.
At December 31, 1999 the Company owned 90,530 shares of the common stock
of The North Face, Inc. which had been written down to its market value of
$368,000. The original cost of these shares, considered to be trading
securities, was $1.1 million. These shares were sold in February 2000 for
$590,000, resulting in a gain of $222,000 in the first quarter of 2000.
These investments were made in order to enhance stockholder value while
efforts to acquire an operating company continue. In that regard, the Board of
Directors of the Company reaffirmed previously adopted resolutions regarding its
intent to be engaged in a business other than that of investing, reinvesting or
trading in securities, as soon as it is reasonably possible.
Contingent Liabilities
In fiscal 1990, the Company discontinued the operations of White Metal
Rolling and Stamping Corp. ("White Metal"), the Company's ladder manufacturing
subsidiary. All manufacturing operations of White Metal ceased as of January 31,
1991 and substantially all of its remaining assets have since been liquidated.
On September 30, 1994, White Metal filed a voluntary petition seeking
liquidation under the provisions of chapter 7 of the United States Bankruptcy
Code. The liabilities of White Metal were primarily product liability claims,
and related costs, resulting from its discontinued ladder manufacturing
business. While the Company was named as a defendant in certain actions
commenced in connection with these claims, the Company has not been held
responsible, and the Company disclaims any liability for the obligations of
White Metal. There can be no assurance that in the future any claim brought
against White Metal which is also asserted against the Company, will not result
in liability. However, the Company intends to vigorously defend any White Metal
claim asserted against it.
12
<PAGE>
LBP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
On May 7, 1996, the Company and its subsidiary, Prime, were served with a
summons and complaint in an adversary proceeding commenced by the chapter 7
trustee of White Metal, alleging claims aggregating $10.6 million (the
"Adversary Proceeding"). The Company's former parent company, Drew Industries
Incorporated ("Drew") and its subsidiary Kinro, Inc. ("Kinro") were also served
in the Adversary Proceeding. Pursuant to a Consent Order Settling and
Compromising Claims, dated January 27, 2000 (the "Settlement"), by and among the
trustee, on behalf of White Metal, the Company, Prime, Kinro and Sears Roebuck &
Co., Inc. ("Sears"), White Metal's largest creditor, the parties agreed to
settle the Adversary Proceeding in consideration for payment by the defendants
to White Metal's estate in the aggregate amount of $672,000, of which $485,500
was paid by Prime. The defendants, the trustee and Sears agreed to release each
other, and their respective affiliates. In connection with the Settlement, the
Adversary Proceeding was terminated.
In anticipation of the Settlement, the Company's previously recorded loss
on disposal of White Metal was reduced in the fourth quarter of 1999 resulting
in income from discontinued operations of $3,270,000. Likewise, imputed interest
will no longer be recorded on the outstanding balance of this reserve.
Other
Subsequent to the June 1998 sale of Prime's assets and business, the
Company made certain short-term investments in order to enhance stockholder
value while efforts to acquire an operating company continue. The Company did
not register as an investment company, initially relying on (and in compliance
with) the exemption provided by Rule 3a-2, promulgated under the Investment
Company Act of 1940, as amended (the "'40 Act"). The Company believes that it
(i) has always been engaged in a non-investment company business, (ii) will
continue to be primarily engaged in a non-investment company business following
the acquisition of an operating business, and (iii) is not, therefore, an
investment company as defined in the '40 Act. Notwithstanding these facts, the
Company may be deemed to be an investment company required to register under the
'40 Act, in which case its structure and operations would be subject to
substantial changes from its current structure and operations. Moreover, the
Company's ability to acquire a business and to avoid '40 Act regulation could be
affected.
Accordingly, the Company has made application to the Securities and
Exchange Commission for an order pursuant to Section 6(c) of the '40 Act
exempting the Company from all of the provisions of the '40 Act and any rule or
regulation thereunder, for a period of one year. The Company has received
comments from the staff of the Securities and Exchange Commission with respect
to its application and the Company plans to take the actions and to amend its
application, as requested by the staff. This process could continue for several
months and there is no assurance that the requested exemption will be granted.
INFLATION
Future changes from current levels of inflation may be expected to impact
the investment income earned by the Company on its temporary investments.
13
<PAGE>
LBP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
FORWARD LOOKING STATEMENTS AND RISK FACTORS
This report contains certain statements, including the Company's long-term
plans, which could be construed to be forward looking statements within the
meaning of the Securities Exchange Act of 1934. These statements reflect the
Company's current views with respect to future events, financial performance and
plans to acquire an operating company.
The Company has identified certain risk factors which could cause actual
plans and results to differ substantially from those included in the forward
looking statements. These factors include certain contingent indemnification
obligations as described in Note 1 of Notes to Consolidated Financial
Statements, contingencies described in Note 4 of Notes to Consolidated Financial
Statements, interest rates, and the potential availability of suitable
acquisition candidates, acquisition price and terms. These factors also include
general economic conditions, as well as the possibility that the Company may, in
the future, be deemed to be an "investment company" within the meaning of the
Investment Company Act of 1940.
14
<PAGE>
LBP, INC.
Item 3. QUANTITIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk in the normal course of its
investing activities. The Company does not have significant exposure to
fluctuations in interest rates because it has only a modest amount of temporary
investments in money market funds and no debt. The Company does not undertake
any specific actions to cover its exposure to interest rate risk.
The Company is also exposed to changes in the value of its investment in
securities resulting from changes in the operating results of the companies
issuing these equity securities, as well as other conditions which impact the
fair value of such securities, such as general economic conditions and interest
rates. The impact of changes in interest rates and other conditions on the value
of such securities cannot currently be determined.
15
<PAGE>
LBP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LBP, INC.
Registrant
By /s/ Fredric M. Zinn
------------------------
Fredric M. Zinn
Principal Financial Officer
August 11, 2000
